Q4 2022 MarineMax Inc Earnings Call
[music].
Good morning, and welcome to the Marine Max Inc, 2022 fiscal fourth quarter and year end Conference call. Today's conference call is being recorded at this time I would like to turn the call over to Don Frankfurt.
Please go ahead.
Thank you operator, good morning, everyone and thank you for joining this discussion of Marine Max This fiscal fourth quarter and year end 2022 conference call.
Sure that you've all received a copy of the press release that went out this morning, but if not please call Linda Cameron at seven to 75311712, and she will email one to you right away.
I would now like to introduce the management team of Marine Max Mr. Brett Mcgill Chief Executive Officer and President.
And Mr. Mike Mclamb, Chief Financial Officer of the company.
Management will make a few comments about the quarter and then be available for your questions.
And with that in mind, let me turn the call over to Mike. Please go ahead Mike.
Thank you Don good morning, everyone and thank you for joining this call before I turn the call over to Brett I'd like to tell you that certain of our comments are forward looking statements as defined by the private Securities Litigation Reform Act. These statements involve risks and uncertainties that could cause actual results to differ materially from.
Expectations. These risks include but are not limited to the impact of seasonality and weather general economic conditions and the level of consumer spending the company's ability to capitalize on opportunities or grow its market share and numerous other factors identified in our Form 10-K, and other filings with the securities and.
Exchange Commission.
With that in mind I'd like to turn the call over to Brett Brian .
Thank you Mike Good morning, everyone and thank you for joining this call I have to start by thanking the marine Max team for their extraordinary achievements in fiscal 2022.
We achieved record revenue of more than $2 3 billion and expanded our gross margin to a record 35% as customers continue to seek the boating lifestyle through marine there.
Our exceptional team generated outstanding adjusted earnings per share growth of 33% to $9, which greatly exceeded the high end of our initial fiscal year 2022 guidance.
We successfully navigated ongoing supply chain headwind broad macroeconomic pressures of rising interest rates and record inflation, along with the devastation caused by hurricane Ian at the end of the fourth quarter.
On that point, our stores are operational all of our team members and their families are safe and they are already rebuilding.
Our thoughts and prayers are with all of those in the communities affected by the storm, we remain committed to engaging with our customers and the communities that require much needed assistance, our team and the southwest Florida community are resilient and both will come back stronger than before.
Okay, I'd like to share highlights from our fourth quarter and full year, followed by a discussion of the results relative to our strategic growth plan.
And then Mike will discuss our financial results in more detail and provide color on our fiscal 2023 outlook.
For the quarter, we generated 16% revenue growth gross margins of 36, 7% and record earnings per share of $1 90. This is a very strong quarter and more noteworthy when you consider that we along with many other businesses had to overcome the hurricane shutdown of our biggest market.
In the last week of the quarter.
Our same store sales for the quarter grew 11%.
Demand remains strong, which is driven by our marketing and sales team members, who are supported by industry, leading technology and digital tools to expand existing and new customer engagement across our premium brands and experiences.
Additionally, we drove meaningful expansion across essentially all brand category and geographic region.
This strong demand environment as highlighted by our customer deposits, which again increased year over year.
Based on available industry data and internal insight. We believe we also continue to gain market share.
From a supply chain perspective, it remains challenging but gradually improving we continue to work closely with our manufacturing partners to ensure we are properly communicating with our customers and getting them into their both as quickly as possible.
Based on current trends, we still expect the lean inventory through 2023. However, we are starting to build inventory in certain select models and category.
For the full year, we delivered over $2 $3 billion in revenue with gross margins expanding to a record, 35% and we delivered over $201 million and adjusted net earnings $49 and adjusted earnings per share another powerful achievement.
While the financial results are the best in our history I'm, even more proud of our team's ability to service and take care of our customers as shown by record net promoter scores. Our team did an outstanding job, ensuring our customers stay out on the water boating with family and friends.
I'd like to underscore our strategic growth plan, which drive sustained market share gains and revenue growth and the expansion of company wide margin.
By building out higher margin businesses that generate even greater profitability. We are continuing to execute on our previously communicated strategic plan that we began accelerating in 2019.
We have transformed marine Max into a more diversified business model, which has created greater resiliency across ever changing economic cycles.
Our record results are due to the successful implementation of our long term plan.
This quarter, we again increased our operating margin to over 10% and we also finished the fiscal year with an operating margin of 11, 7%.
Our growth strategy has been focused on acquiring great companies with strong management and high margin profile.
These strategic acquisitions combined with ongoing growth in our legacy high margin businesses have resulted in a structural increases in our gross margin.
These include finance and insurance service brokerage Super Yacht services and the more recent expansion of our substantial Marina and storage operations as well as our two highly seasoned well known manufacturers intrepid and cruisers.
Additionally, as we integrate our acquisition they continue to perform above historical averages and are aligned with our margin expansion strategy.
Earlier this month, we closed on our largest acquisition <unk> Marina.
<unk> owns and operates a collection of iconic Marina asset that were assembled over many years and highly desired key global yachting destination.
Acquiring <unk> is consistent with our strategic plan to grow our high margin businesses expand our product offerings and increase our geographic reach and leverage our customer bases across the many services and products. We now provide.
The future power of the brand and platform is remarkable we.
We are very excited that <unk> CEO , Tom <unk> and his management team will join the Marine Max family.
We plan to support their accelerating growth strategy momentum.
To that point since the beginning of 2022 <unk> has secured the iconic Marina can one of the most famous harbors in the world as well as marinas that need visa in central PA.
They also have many other growth initiatives in the works and other key yachting and boating destination.
It is important to reiterate that <unk> is well managed growth platform.
With a very strong organization driving significant expansion through new locations products and synergy.
We will execute on the clear synergy and growth opportunities for Frazier and North Dakota, Jonathan to leverage the <unk> platform.
Now, let me discuss the growing confidence we have in our overall growth strategy.
We have very strong visibility in terms of our strong backlog and we are well positioned to serve our customers.
The foundational pillars of our strategy are creating exceptional customer experiences through the best team services products and technology or.
Our team is committed to our mission and is delivering strong execution that is yielding record high net promoter scores and increased sales and margin.
Supported by one of the strongest balance sheets in the industry. We will continue to pursue opportunistic strategic acquisition in a disciplined manner.
As a direct result of our strategic growth plan global presence dedicated team members and loyal customers, we are positioned with a higher margin growth platform.
The combination of robust operating leverage significant cash flow and strong consumer demand led to record results in the past few years, which continued into fiscal 2022.
Even more exciting is that we believe our platform will drive long term shareholder value in 2023 and beyond.
We are a different business today versus past economic cycles, our mix of revenue has shifted to a more premium more exclusive tier and we have greater control over our markets that have historically low inventory levels. We.
We have over 120 locations worldwide and collectively with the <unk> acquisition, we owner operate 57 Marina driving more recurring revenue with higher margin, we have industry, leading technology and digital tools driving new customer engagement.
Later experiences for our customers and strategic high margin growth.
Simply put our business model is more resilient and diversified.
And with that update I'd like to ask Mike to provide more detailed comments on the quarter Mike.
Thank you Brett and good morning, again, everyone. I'd also like to start by thanking our team for their strong efforts that produced another record quarter and outstanding year for.
For the quarter revenue grew over 16% to $537 million due to same store sales growth of approximately 11% and contributions from recent acquisitions.
Our same store sales growth was driven by an increase in our average unit selling price, mostly due to the migration to more premium or larger product as well as price increases.
Our units were up in the mid single digit range due primarily to less aluminum boat sales.
Lack of product and unit implications in Florida due to the inability to deliver boats caused by hurricane Ian.
It is noteworthy that we were able to drive strong same store sales growth and margins, despite the hurricane and remaining supply chain challenges.
Speaks to the demand for the boating lifestyle, the strength of the premium segment and our team's ability to find ways to persevere and outperform.
For the quarter, our gross profit dollars increased by over $22 million and our margin stood at a very strong 36, 7% or.
Our margins overall continue to benefit from our higher margin businesses. However, the year over year change as a percentage was entirely driven by mix with.
When both sales increase as strong as they did 11% on a same store basis, it's a challenge for our higher margin segments to keep up.
So on a relative basis margin as a percentage often declines.
But it typically results in strong profits as we showed in the quarter interestingly product margins actually expanded in the quarter another great sign and testimony to the strength of our team and strategies to.
To be clear, our higher margin businesses keep performing well.
Regarding SG&A the majority of the dollar increase was once again due to rising sales margins and related commissions combined with the recent acquisitions.
Our SG&A improved as a percentage of revenue given the leverage obtained through the revenue growth.
However, we continue to monitor costs in this inflationary environment.
Our adjusted pre tax margin expanded approximately 100 basis points to over 10% in the quarter from a strong level last year.
Our record September quarter saw adjusted net income grow over 28% and adjusted diluted earnings per share rise over 31% generating $1 90, this year versus $1 45, a year ago.
For the full year I'll make a few comments the acquisitions. We completed were all successfully integrated producing significant earnings growth versus their pre acquisition results.
During the year, we added significantly to the strength of our balance sheet.
While continuing to make long term investments in our real estate portfolio, our digital capabilities and our team for.
For the full year, our revenue topped $2 3 billion, our adjusted EBITDA approached 300 million, our operating leverage was 25%.
And our adjusted EPS of $9 was significantly above the high end of our initial guidance range of $7 50.
Moving on to our industry, leading balance sheet, we continue to build cash with over 228 million at quarter end.
Our inventory shows a 97% increase but excluding the acquisitions year over year.
Thus an increase in deposits paid to manufacturers, which are generally associated with our customer deposits and sold boats in transit, but unable to be delivered inventory was up a little over 40% in dollars.
To give you a sense of how our stores are positioned in terms of units excluding all acquisitions since the beginning of 2020 and just looking at the stores. We owned at the end of fiscal 2019.
Those stores have 36% of the units on the ground today versus September of 2019. So by example, a store that had 100 boats in 2019 has 36 boats today.
This lean inventories should provide support for margins in 2023.
As noted on our last call our balance sheet reflects a sizeable increase in property. In addition to the growth due to acquisitions.
Most of the growth is attributable to our purchase of several marinas and the development of other marinas on properties we own.
Looking at our liabilities short term borrowings rose $108 million due to inventory and timing of payments customer.
Deposits grew 43% year over year to a new September quarter record of $144 million.
They also increased sequentially from the June quarter.
This is particularly noteworthy and speaks again to the premium nature of the product we offer as well as the resiliency of the premium buyer.
Our current ratio was 183 and our total liabilities to tangible net worth ratio was just over one.
Both of these are very impressive balance sheet metrics, our tangible net worth exceeded $536 million or over $24 per diluted share.
Our balance sheet has always been a formidable strategic advantage and today more than ever it continues to protect us in uncertain times, while providing the capital for expansion as opportunities arise.
Before speaking about guidance I wanted to mention our new credit facilities.
We used $400 million of the term debt to finance <unk>.
Our debt to EBITDA net of cash is less than one post merger.
Additionally, we expanded our inventory floor plan to $750 million.
We also added to enhance liquidity mechanisms a $100 million operating revolver.
$100 million mortgage facility, both of which are Undrawn, we have modeled the debt at various increasing rates and while not preferred rising rates do not have a material negative impact to our earnings.
Now turning to our outlook for fiscal 2023 fiscal 2022 in the September quarter generated robust operating leverage and profitability and industry demand trends remain healthy, especially for premium product.
Having said that recent data does show the industry retail trends have softened modestly more so and value segments.
And the industry is likely returning more to seasonality like it operated historically.
It is also clearly the mission of the fed to slow the economy.
That will likely have an impact on a sub segment of buyers, but less so to the premium buyer.
However, given the supply driven unit shortfalls in 2021 and supply and economic unit shortfalls for 2022.
The industry retail units for 2022 are already forecasted to come far off the peak of 2020 and be down below 2017 levels.
Accordingly, we do not think a significant decline in units is reasonable from these already depressed levels.
However, difficult to predict it's prudent to expect a modest industry unit decline in 2023 in the mid single digit range, mostly in value segments.
We do expect some dealers would be more concerned than others about the economic outlook, leading to modest pricing erosion, but we expect the premium end to be far more resilient and product margin should remain well above historical levels, albeit modestly down from today.
Given that lead and the continued supply chain challenges, which we believe will impact the larger and more premium segment for fiscal 2023, keeping our overall unit inventory levels below historical levels, along with a modest impact due to southwest, Florida recovery, we think it's prudent to <unk>.
Specced, our 2023 same store sales to be flattish.
This implies a unit decline offset by a migration to more premium product and price increases.
<unk> will add a little more than $100 million of Marina revenue, along with just shy of $40 million of EBITDA.
Or after interest on the financing and depreciation roughly 10 cents of EPS This year.
We assume overall gross margins will stay in the mid Thirty's down modestly from 2020.
We assume a share count of about $22 7 million shares.
And a tax rate of 25%.
This results in our fiscal 2023 guidance of $7 90 per share to $8 40 per share.
While our team always looks to outperform as we have done so many times historically.
Given the economic uncertainty in timing related to inventory being fulfilled we believe our range is appropriate to start the year and we look forward to updating you as we progress throughout the year.
Turning to current trends recall that last December quarter was strong with same store sales growth of 9%.
Given that I'm encouraged to report that October is forecasted and with positive same store sales growth and our backlog remains very healthy.
As we've said industry demand remains healthy, especially for the premium segment and we have outperformed these elevated levels.
I'll now turn the call back over to Brett for some closing comments Bret.
Thank you Mike.
As I stated at the beginning of this call our teams performance in fiscal 2022 demonstrates outstanding execution as our diversified model and exceptional customer service generate sustainable growth.
The original vision for Marine Max was to create a better customer experience by building a team that is dedicated to the passion and lifestyle of the boating community.
This is the basis of the success of our model and we will continue to work hard to deliver on this vision.
Today Marine Max is a highly diversified marine business focusing on a high network resilient customer base.
The higher gross margin profile has elevated marine Max's earnings power to withstand a choppy economic cycle.
We remain committed to the long term financial strength of the company and creating sustainable shareholder value.
With that operator, let's open up the call for questions.
And at this time, we will be conducting a question and answer session. If you would.
To ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
And our first question comes from the line.
Fred Wightman with Wolfe Research. Please proceed with your question.
Hey, guys. Thanks for the question just on the Hurricane related impact that you called out in the quarter can you just explain what exactly is in that number and then looking forward, how we should sort of.
The relative impact from the fiscal fourth quarter relative to the fiscal first quarter and beyond.
Yeah, Hey, Fred Thanks for the question.
The $4 8 million in the press release is literally just the estimated damages from the storm it is not.
Clearly we had some boats that we cannot deliver because the state was shutdown for the week. The last week of September so the $4 8 million as only only costs.
The weighting from the store in terms of weighting it through each quarter, there is going to be an impact as fort Myers and that area rebuilds.
My guess is that gets less so as the year goes on and maybe a little more significant early on.
Course earlier on we get the benefit of the delayed sales coming in obviously to this quarter.
Which probably just about may offset the impact of the Fort Myers store operations, a little bit hard to tell but I think as the year goes on down there and the infrastructure rebuild there'll be better opportunities for for that area to recover even faster.
It makes sense and then on the.
The unit outlook that you guys gave for 2003 I just want to make sure confirm that that's a fiscal 'twenty three persons of calendar 'twenty three comment and then maybe just walk through how you sort of got to that mid single digit.
Industry number.
Yes. It is.
But we always start off is what's the industry going to do based on best estimates incur in trends. So we started by saying what's going to likely happen into 2023 and with the units.
I tried to explain what's happened in 2020, the industry sold through inventory, we had a real high unit retail number 2021, the industry was really starved for product. So the units that were registered dropped 2022.
Again dropped largely at least in the first half of the year because of lack of product.
Maybe now in the second half of <unk>.
Industry calendar year second half could be a little bit of economic issues, along with still product available available issues.
So the industry is going to drop down below are about 2017 levels.
We just don't think it can drop a whole lot further than that but but where the risk is we think is in the value segments and there's a lot of units sold in the value segments.
Our best estimate is the industry is going to be down in that.
Mid single digit range, probably above 5%, but not at 10% in terms of units and that's an estimate.
It is it could have some impact on us and so then we convert that to our fiscal year basis.
And with the migration to larger product higher price points, plus inflation, we're going to be in the flattish same store sales for 2023 is our is our best outlook today.
Great. Thank you guys.
Yes.
And our next question comes from the line of James Hardiman with Citi. Please proceed with your question.
Hey, good morning.
So maybe just picking up where we left off.
With respect to sort of units versus ASP.
We continue to see really good AFP or continued to see really good ASP in the fourth quarter.
Low double digit number.
It seems like.
Actually I guess, maybe closer to two.
Mid double digits to mid teens.
How do we get from from here to there.
Assume sort of a.
Slowing ASB contribution as we work our way through the year.
Where do we finished the year or does it sort of flat by the end of the year or do you think we're going to continue to be in sort of growth mode. There.
And I guess more broadly how do you think about the promotional environment. Obviously the last couple of years, you haven't had to promote and discount very much is there any evidence that that is.
<unk> introducing itself into the industry.
And do you expect that to remain the case going forward.
Yeah, James I will try to explain it on the quarter you Ray for the fourth quarter, we had a very strong contribution from migration and larger product on the full year is not as strong we were up 5% same store sales overall the contribution from.
The price point and migration is probably more in the high single digit maybe double digit range I don't have that right here in front of me, but.
It's very likely that AEP will continue to expand for us, especially at the premium segment keeps doing better. We just felt it was prudent today to stick with the.
Probably have less.
<unk> contribution in 2023 from that then May play out as the year progresses.
Yes.
Talk about promotional activity I think it's going to be.
Very selective or within certain segments, our models or you're seeing some softness in.
And the date out there are uncertain.
Lines of both I think that's where we'll see a little bit of it but and.
Canada.
The upper end more premium stuff, we're just not seeing it right now.
Makes sense and then just one follow up.
Talked about October being up on a same store sales basis.
Maybe using the fourth quarter.
Base line rate units down mid single digits pricing up mid teens.
Similar trends that we're seeing in October better worse.
Are those categories.
How are you thinking about October .
Yeah.
<unk> not actually studied it to that level of detail I would tell you that the we are clearly seeing.
Premium larger.
Most a lot of what we sell by the way is premium, but what we're seeing.
Strength in the premium segment, which which could imply that.
Tober could be continued in the fourth quarter with.
Got it really helpful. Thanks, guys. Yeah. Thank you James Thank you Jay.
Sure.
Our next question comes from the line of Joe <unk> with Raymond James. Please proceed with your question. Thanks.
Thanks, Hey, guys good morning.
First question on why Mike I want to make sure I heard the numbers right. So you think <unk> gonna do well over $100 million of revenue roughly 40 million of EBITDA, but just 10 cents of EPS accretion in 'twenty three.
Is that 10% number larger I guess, that's my question.
Well you baked on baking in financing on the $400 million.
Of that.
<unk>.
It takes a chunk of the earnings away.
And then also the depreciation when you level set all of the assets and allocate the purchase price.
Got to revalue, all the docs at all the facilities and all of that and so it's part of the charter purchase price accounting work. So you get a higher depreciation charge.
So I think in the future what will be doing because we've amassed so many marinas as well.
Trying to give you guys a little more color around how that Marina business is trending and whether we get to an EBITDA number going forward or whether we start showing you.
Some additional statistics on that on that business will be breaking that out for you. It's obviously a.
It's a great strategic merger for us touches so many pieces of marine Max and some of these synergies.
And obviously as we work the debt down the interest goes away, which is nice but.
That's why it gets down to a relatively low EPS contribution, but a strong EBITDA contribution.
Got it Okay, and then maybe on gross margin.
I think you mentioned, you're looking for sort of a mid <unk> gross margin in 2023.
Kind of help us walk through the puts and takes on that it sounds like youre going to be some mix shift toward larger product, which tends to have a lower margin. So what are some of the good guys a bad guy from margin perspective perspective that you're seeing this year.
Yes, you know what it's pretty simple the one youre going to get a nice benefit from <unk>. So.
Most marina businesses their gross margins run.
No.
Low 60 to low <unk> or mid mid <unk> that low 70, something like that from a gross margin perspective, which is great. So we get a benefit of that <unk> as big as it is relative to the size of marine Max is going to have a positive impact.
But it does mesh into our numbers.
Nicely, so we'll get a little bit of benefit from <unk>.
But then we're just assuming some modest price erosion.
Driven primarily coming from the value segment, but obviously, we assume that may creep up a little bit from a prudent perspective, we think our higher margin businesses are going to keep doing great and there's probably some upside there, but there's not a whole lot of other moving pieces in our modeling for 2023 other than just removing a.
A little bit of a price increase that we've seen in these last.
Several years on product.
So basically gross margins flat year over year with some growth in SG&A.
This is a little bit yeah, theres, a little growth in SG&A. You also have to take <unk> out for a minute, which has its interest on its financing. The core companies interest is also going to go up we've been operating for the last couple of years very low of inventory very low rates inventories going awry. So the interest expense for the rest of the marine Max is going.
To go up in 2023.
Percentage is going to go up significantly.
Absolute dollars to us anymore, it's not all that material, but it is going to go up and a little bit of an uptick you are right on the on the SG&A line.
Okay. Thank you guys.
Thank you your next year.
Our next question comes from the line, Eric Wold with B Riley. Please proceed with your question.
Thanks, Good morning, guys.
Just a couple of questions one kind of a follow up.
On the.
Yes, the value category of boats are we starting to see some weakness can you frame that.
But can you frame the percentage of units or revenues.
Those have historically represented or how we should think about that kind of a fiscal 'twenty three and then.
For those customers.
Are looking to finance.
Has there been any change in approval rates within your target demographic.
Yes, there is.
Mentioned and I'll answer the last question first there has not been any change in approval rates. You mean, obviously interest rates have gone up but the way the banks approach underwriting and the way they approach the business.
Is basically the same as it's been.
And obviously the industry has been stricter when it comes to underwriting for years and years now. So they are just following the.
The dissimilar approach and your question on value value units are going to be a greater percentage of $1.
Be taken a educated guess at <unk>.
15% to 20% I don't know if not most of our business is not what you'd call value yet.
Eric I think some of what we're trying to get our arms around to where theres a little bit of more of a return to.
A seasonal buying pattern.
In a way during that Spike where people are just buying all year long pretty flat purchasing and now maybe some return, let's say in the Midwest people kind of get back to maybe more purchasing in the spring.
So we're trying to get our arms around that as well.
Got it and then just last question.
Following the <unk>.
Have you given any thought as to kind of how much of the business. The overall company want to eventually come from from non boat sales in the higher margin recurring businesses over time, maybe it's that you're kind of internal goals towards eight a percentage or is it more.
Just opportunistic I think I'm alone.
Yes, I think no we haven't put a specific percentage in our strategy that we want to get too, but we have for now several years said, we want to keep growing these higher margin businesses and they are performing well for us, but I will say that the.
We kind of use the words in there the platform <unk> as a new growth platform for.
For our company and we will continue to look at.
I would say, maybe even less than opportunistic we'll be looking at growth opportunities there as well as our other growth platforms. So yes.
Don't have a number but we.
Do have a new platform to grow the company.
Alright, Thank you Bob.
Thanks, Eric.
Okay.
Our next question comes from the line of Mike Swartz with Securities. Please proceed with your question.
Hey, guys good morning.
Maybe one.
Maybe.
Look at margins from a longer term perspective.
As Nick and mix has changed quite considerably over the past three or four years. So.
The assumption that we go back to new and used product margins.
We saw him maybe 17 18 19.
<unk> frame.
I think your gross margin would look like in that scenario given all given some of the exchanges.
Yeah.
I've said through a lot of these Mike first of all thanks for the question I have set a lot on these calls the impact of the product margin expansion.
As a mix to our overall margin growth and tip and just on average it's been probably about a third responsible for our product margin growth. So if you take like the current year were up call. It 35 points, 35%, we used to be 25%. So let's say, we're up 10 basis.
10 points of margin overall.
So a third of that generally is because of the elevated new and used margin. So.
Almost seven of those 10 points would be because of the structural changes.
By adding Frazier, Northrop and Johnson, adding the businesses, we've added including even like skipper buzzard stores, but business that we've had <unk> storage business now <unk> plus focusing on <unk>.
Growing our.
Finance and insurance business and our our inter.
Internal Marina business in the other parts of our business, which are higher.
All of that.
All of those businesses are operating at normal margins for those segments. So it's not like those margins have been elevated whereas boat margins have been elevated.
It helps us to get our head around if margins were to return the business overall has a much higher margin profile, which is what Brad said, a little while ago and that's been our that's been our focus so and we're not necessarily onboard with margins return it back to the way they used to be.
So Mike I was going to add that.
With a reset to zero inventory, which we've never had in the history of the boating industry.
We don't want we don't think there is a need to model back to those margin levels for new and used boat. So that's our goal working with our manufacturers and in the right inventory levels.
We don't think we need to return to that by any stretch.
Okay. That's helpful and it sounds like worst case scenario is probably low.
Does that sound.
Generally correct.
Yes, I mean, that's how the math would work out that's how you get you get to a much different margin profile company by design.
Gotcha.
Just second question on inventory levels, and I think Mike you gave some good color on maybe the like for like or comparable store inventory units versus pre pandemic I think if I read that right youre down about 63% or so.
Yes on a like for like stores. So you take the stores we opened in September 19, they have.
They have one third of the product today, or 63% or 66% less yes.
And is there a way of looking at that from the standpoint of maybe smaller boats are lower end boats will be sub 30 feet versus.
Over 30 feet like what that was.
Looks like I mean I.
That.
That number is a little bit.
Heavier on the on the smaller side, but just any color you have on that.
Yes, it's going to be skewed towards smaller product pontoon products. Some smaller fiberglass product, that's maybe easier to build for the manufacturers are building more per week, so it's easier to get into our stores.
The larger product and again the more premium product is still very much in.
In short supply I think for us and likely for the industry.
Okay, great. Thank you.
Mike.
Yes.
And our final question comes from the line of David Macgregor with Longbow Research. Please proceed with your question.
Hey, Good morning. This is Joe Nolan on for David.
Hey, Joe Hey, Joe.
Alright.
Most of my questions have been answered I was just kind of wondering what youre seeing in terms of used boat values right now and just how that market.
Market is trending in terms of inventories as well.
Yeah. Good question I'll take a quick stab and Brent can chime in but I think you'd book values are holding up.
Really pretty nicely and late model used boats are hard to find.
We probably see a little bit more availability than we would have a year or two ago, but its still the market is holding up really strong.
Got it okay.
And then also just on capital allocation. It sounds like you guys are still open to M&A and still actively searching the pipeline there, but just given where the stock prices at currently and just wondering how youre thinking about share repurchase and then on acquisitions is there any change to your priorities going forward.
One is I think we've said a couple times on the calls.
We'd love to buy great companies with Great management.
That a reasonable and fair valuation, we think that makes a lot of sense for the long term growth, we clearly recognize that sometimes the stock price gets disjointed from a also a reasonable valuation and so companies put <unk> in place, which we have one in place so.
We have the strength in the balance sheet that affords us the ability to keep investing into our our facilities our team our technology.
Acquisitions as they arise with the right teams and also buy back some stock so we'll be looking at all of those.
Okay, great. Thanks for taking my questions. Thank you.
And we have reached the end of the question actually I will now turn the call back over to management for closing remarks.
Well. Thank you everybody for joining the call today are both Mike and I are down here at the Fort Lauderdale boat show looking for a great show and will be available. If you have any other questions.
Have a great day.
Yeah.
And this concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
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