Q2 2024 MarineMax Inc Earnings Call
Operator: Good morning, and welcome to MarineMax Inc.'s fiscal 2024 second quarter conference call. Today's call is being recorded. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. At this time, I would like to turn the call over to Scott Solomon of the company's investor relations firm, Sharon Merrill Advisors.
Good morning, and welcome to Marine Max Inc. Fiscal 'twenty 'twenty full second quarter conference call.
Today's call is being recorded.
At this time all participants are in a listen only mode.
Brief question and answer session will follow the formal presentation.
At this time I would like to turn the call over to Scott Sullivan of the company's Investor Relations fault, Sharon Madden advises piece.
Scott M. Solomon: Good morning, and thank you for joining us. Hosting today's call are Brett McGill, MarineMax's president and chief executive officer, and Mike McLamb, the company's chief financial officer. Brett will begin the call by discussing MarineMax's operating highlights. Mike will review the financial results, and then management will be happy to take your questions. The earnings release and supplemental presentation can be found at investor.marinemax.com. With that, I'll turn the call over to Mike.
Scott M. Solomon: Please go ahead Sir.
Scott M. Solomon: Good morning, and thank you for joining us.
Scott M. Solomon: Hosting todays call are Brett Mcgill Marine Max as President and Chief Executive Officer, and Mike Mclamb, The company's Chief Financial Officer.
Scott M. Solomon: Greg will begin the call by discussing marine Max's operating highlights Michael.
Michael H. McLamb: Mike will review the financial results and then management will be happy to take your questions.
Scott M. Solomon: The earnings release and supplemental presentation can be found at investors got marine Max that come.
Scott M. Solomon: With that I'll turn the call over to Mike.
Michael H. McLamb: Thank you, Scott. Good morning, everyone, and thank you for joining this call. I'd like to start by reminding you that certain of our comments are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Therefore, any forward-looking statements speak only as of today. 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, global 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.
Mike: Thank you Scott good morning, everyone and thank you for joining this call.
Michael H. McLamb: I'd like to start by reminding you that certain of our comments are forward looking statements as defined by the private Securities Litigation Reform Act of $19 95.
Michael H. McLamb: Any forward looking statements speak only as of today. These statements involve risks and uncertainties that could cause actual results to differ materially from expectations.
Michael H. McLamb: These risks include but are not limited to the impact of seasonality and weather global economic conditions and the level of consumer spending the companys 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.
Michael H. McLamb: Also on today's call, we will make comments referring to non-GAAP financial measures. We believe that the inclusion of these financial measures helps investors gain a meaningful understanding of the changes in the company's core operating results. These metrics can also help investors who wish to make comparisons between MarineMax and other companies on both a GAAP and a non-GAAP basis. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is available in today's earnings release. With that, let me turn the call over to Brett. Brett said:
Mike: Also on today's call, we will make comments, referring to non-GAAP financial measures. We believe that the inclusion of these financial measures helps investors gain a meaningful understanding of the changes in the company's core operating results.
Mike: These metrics can also help investors, who wish to make comparisons between marine Max and other companies on both a GAAP and a non-GAAP basis.
Mike: A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is available in today's earnings release with that let me turn the call over to Brett Brett.
William Brett McGill: Thank you, Mike. Good morning, everyone, and thanks for joining us.
William Brett McGill: Thank you Mike Good morning, everyone and thanks for joining us.
William Brett McGill: Before we get into the specifics of the quarter, let me acknowledge the dedication and commitment of our team in what continues to be a challenging period for the marine industry and, indeed, for the outdoor recreation market in general. Across our retail dealerships, superyacht operations, marinas, and manufacturing locations, our team has worked hard to deliver on our high standards for product and service excellence, ensuring customers experience all of the terrific benefits of the boating lifestyle.
William Brett McGill: Before we get into the specifics of the quarter, let me acknowledge the dedication and commitment of our team and what continues to be a challenging period for the marine industry and indeed for the outdoor recreation market in general.
William Brett McGill: Across our retail dealerships Super yacht operations marinas and manufacturing locations. Our team has worked hard to deliver on our high standards for product and service excellence, ensuring customers experience all of the terrific benefits at the boating lifestyle.
William Brett McGill: Moving to our March quarter, we posted solid revenue of more than $582 million driven mainly by higher boat sales and positive contributions from the <unk> portfolio and the other marinas in our network.
William Brett McGill: Moving to our March quarter, we posted solid revenue of more than $582 million, driven mainly by higher boat sales and positive contributions from the IGY portfolio and the other marinas in our network. However, our gross margin, while historically high, came in a bit below where we expected.
William Brett McGill: Gross margin, while historically high came in a bit below where we expected. This was primarily driven by more aggressive promotional activity designed to create consumer urgency given the economic environment and increased seasonality.
William Brett McGill: This was primarily driven by more aggressive promotional activity designed to create consumer urgency given the economic environment and increased seasonality. However, from an industry perspective, demand was weaker than we had anticipated, with U.S. powerboat registrations posting year-over-year declines through the first three months of the calendar year. That being said, our strategy around premium brands, combined with our promotional initiatives and customer focus, enabled us to drive positive same-store sales growth and modest unit growth in Q2.
William Brett McGill: From an industry perspective demand was weaker than we had anticipated with U S power boat registrations posting year over year declines through the first three months of the calendar year.
William Brett McGill: That being said our strategy around premium brands combined with our promotional initiatives and customer focus enabled us to drive positive same store sales growth and modest unit growth in Q2.
William Brett McGill: Although we were not able to close all of the revenue we had anticipated in the quarter, we performed well on the top line in comparison with the industry as a whole.
William Brett McGill: Although we were not able to close all of the revenue we had anticipated in the quarter, we performed well on the top line in comparison with the industry as a whole. We are continuing to receive increasing support from our manufacturing partners, both from the perspective of incentives and in moderating production levels in response to the retail environment. Our industry is cyclical, but we have a track record of emerging from these troughs even stronger than when we went into them, and I am confident that will continue to be the case. Despite the sluggishness of near-term retail demand, interest in boating is robust, as evidenced by online activity at our events and boat shows.
William Brett McGill: We are continuing to receive increasing support from our manufacturing partners. Both from the perspective of incentives and in moderating production levels in response to the retail environment.
William Brett McGill: Our industry is cyclical, but we have a track record of emerging from these troughs, even stronger than when we went into them and I am confident that we'll continue to be the case.
William Brett McGill: Despite the sluggishness of near term retail demand interest in boating is robust as evidenced by online activity at our events and boat shows.
William Brett McGill: Miami International boat show in February in the West Palm Beach International Boat show in March were both strong events for us generating positive momentum as we move into the summer selling season.
William Brett McGill: We continue to prioritize growth through the addition of strong businesses that fit our acquisition criteria during the quarter. We completed the acquisition of Williams tenders USA. This grants marine Max distribution exclusivity in the United States and the Caribbean for the world's leading brand of rigid inflatable jet tender.
William Brett McGill: As for the luxury yacht market.
William Brett McGill: This transaction is consistent with our strategy of investing in brands products and services that improve the customer experience and increase our margin profile.
William Brett McGill: The Miami International Boat Show in February and the West Palm Beach International Boat Show in March were both strong events for us, generating positive momentum as we move into the summer selling season. We continue to prioritize growth through the addition of strong businesses that fit our acquisition criteria. During the quarter, MarineMax completed the acquisition of Williams Tenders USA. This grants MarineMax distribution exclusivity in the United States and the Caribbean for the world's leading brand of rigid, inflatable jet tenders for the luxury yacht market.
William Brett McGill: In March we also announced the expansion of our footprint in the Florida keys with native Marine a Boston whaler and Mercury Marine dealer and island Marotta, we're excited to provide the dealerships customers with our broad range of products and services, including maintenance repairs boating accessories and events.
William Brett McGill: Let me address two items that occurred since we spoke with you on our Q1 call in January.
William Brett McGill: First as previously disclosed in March we determined that the company had experienced a cyber security incident I'm.
William Brett McGill: I am extremely proud of our technology team and the efficiency with which they handled the incident.
William Brett McGill: Although the containment measures that we put in place resulted in some disruption to a portion of our business. We quickly initiated our incident response and business continuity protocols and took immediate steps to contain the incident the.
William Brett McGill: This transaction is consistent with our strategy of investing in brands, products, and services that improve the customer experience and increase our margin profile. In March, we also announced the expansion of our footprint in the Florida Keys with Native Marine, a Boston whaler and mercury marine dealer in Isla Morada. We're excited to provide the dealership's customers with our broad range of products and services, including maintenance, repairs, boating accessories, and events.
William Brett McGill: The training and preparedness of our team played a significant role in the effectiveness of their response, while our investigation into the incident continues to date. There has been no material long term impact on our operations. Secondly last week, we filed an 8-K regarding what we consider to be the unlawful taking of our.
William Brett McGill: Marine operations in Cabo San Lucas Mexico.
William Brett McGill: The Marine has been operated by a subsidiary of I G Y for more than 20 years. Our <unk> team was in the process of finalizing a new renewal agreement with Mexican officials when the Marina was taken without notice.
William Brett McGill: Let me address two items that have occurred since we spoke with you on our Q1 call in January. First, as previously disclosed, in March, we determined that the company had experienced a cyber security incident. I'm extremely proud of our technology team and the efficiency with which they handled the... Although the containment measures that we put in place resulted in some disruption to a portion of our business, we quickly initiated our incident response and business continuity protocols and took immediate steps to contain the incident. The training and preparedness of our team played a significant role in the effectiveness of the response.
William Brett McGill: In light of the ongoing situation, we can't comment beyond the information contained in the 8-K, except to say that we are pursuing the appropriate remedies. The cabo Marina accounted for less than 4% of assets and 1% of revenue in fiscal 2023.
William Brett McGill: Before I conclude let me touch on some very important operational improvement plans, we are working on.
William Brett McGill: While we have taken steps in recent months to reduce expenses in areas that do not directly impact our customer experience. We believe it's prudent to take additional actions to align our cost structure with the current environment and improve our operating leverage.
William Brett McGill: We began taking more significant actions, which cover a broad range of expense reductions. We continue to maintain a strong cash position and a healthy balance sheet positioning our business well as industry conditions improve.
William Brett McGill: While our investigation into the incident continues, to date, there has been no material long-term impact on our operations. Secondly, last week, we filed an 8K regarding what we consider to be the unlawful taking of our marina operations in Cabo San Lucas, Mexico. The marina has been operated by a subsidiary of IGY for more than 20 years. Our IGY team was in the process of finalizing a new renewal agreement with Mexican officials when the marina was taken without notice.
William Brett McGill: And with that I'll turn the call over to Mike for comments on our financial performance in the quarter Mike.
Michael H. McLamb: Thank you Brett.
Michael H. McLamb: Brett noted the overall decline in boat registration study the first calendar quarter of 'twenty 'twenty four we.
Michael H. McLamb: We had anticipated registrations coming in flat or perhaps up slightly as noted on prior calls given the rather easy year over year comparisons, which is in Stark contrast to the nearly 16% decline in fiberglass boat registrations for the period.
William Brett McGill: In light of the ongoing situation, we can't comment beyond the information contained in the 8k, except to say that we are pursuing the appropriate remedy. The Cabo Marina accounted for less than 4% of assets and 1% of revenue in fiscal 2023.
Michael H. McLamb: Having said that our own data suggest that seasonality may be partly contributing to recent industry trends.
Michael H. McLamb: As an example in the first half of fiscal 2020 for the sales mix between our Florida, and non Florida retail locations closely resembled the mix, we experienced prior to 2020, indicating more seasonal patterns in northern markets.
William Brett McGill: Before I conclude, let me touch on some very important operational improvement plans we are working on. While we have taken steps in recent months to reduce expenses in areas that do not directly impact our customer experience, we believe it's prudent to take additional actions to align our cost structure with the current environment and improve our operating performance. We began taking more significant actions that cover a broad range of expense reductions. We continue to maintain a strong cash position and a healthy balance sheet, positioning our business well as industry conditions improve. And with that, I'll turn the call over to Mike for comments on our financial performance in the quarter. Mike?
Michael H. McLamb: Overall revenue grew 2% to more than $582 million, primarily reflecting a 2% increase in same store sales.
Michael H. McLamb: Our same store sales growth was driven mostly by modest unit growth our manufacturing businesses of cruisers yachts and intrepid powerboats experienced revenue declines as they adjusted production like other manufacturers in the industry.
Michael H. McLamb: Gross profit margin declined to 32, 7% while.
Michael H. McLamb: While we did expect a decline around this magnitude the final results were lower than expected given the discounting needed to drive sales.
Michael H. McLamb: SG&A increased to $169 million in the quarter.
Michael H. McLamb: Excluding transaction costs changes in contingent consideration weather events and other nonrecurring items in both periods SG&A increased approximately $16 million or 11%.
Michael H. McLamb: The increase in expenses as in a number of areas including compensation.
Michael H. McLamb: Inventory maintenance marketing insurance and other factors related to the current inflationary environment at.
Michael H. McLamb: Brett noted the overall decline in boat registrations through the first calendar quarter of 2024. We had anticipated registrations coming in flat or perhaps up slightly, as noted on prior calls given the rather easy year-over-year comparisons, which is in stark contrast to the nearly 16% decline in fiberglass boat registrations for the period. Having said that, our own data suggest that seasonality may be partly contributing to recent industry trends. As an example, in the first half of fiscal 2024, the sales mix between our Florida and non-Florida retail locations closely resembled the mix we experienced prior to 2020, indicating more seasonal patterns in northern markets.
Michael H. McLamb: Also roughly $3 million of the increase was from entities, we did not own last March quarter.
Michael H. McLamb: These entities are also seasonally slowest in the winter quarters.
Michael H. McLamb: However, as Bret noted, we're taking more aggressive steps to offset those increases and the scope of what we're considering is broad the goal was to improve our SG&A operating leverage and ultimately improve our operating margin.
Michael H. McLamb: Some of our actions will be near term reductions by others will take more time.
Michael H. McLamb: We are still working through our actions we plan to talk in more detail about these initiatives on our third quarter call.
Michael H. McLamb: Interest expense increased to $19 4 million as a result of higher rates and increased inventory.
Michael H. McLamb: Floor plan interest in the quarter was close to $12 million compared to $6 $5 million last year on.
Michael H. McLamb: On the bottom line GAAP net income was $1 6 million or <unk> <unk> per diluted share compared with net income of $30 million or $1 35 per diluted share last year.
Michael H. McLamb: Adjusted net income was $4 $1 million or <unk> 18 per diluted share compared with $27 4 million.
Michael H. McLamb: Or $1 23 per diluted share last year.
Michael H. McLamb: Overall, revenue grew 2% to more than $582 million, primarily reflecting a 2% increase in same-store sales. Our same-store sales growth was mostly driven by modest unit growth. Our manufacturing businesses of cruisers, yachts, and intrepid powerboats experienced revenue declines as they adjusted production, like other manufacturers in the industry. Gross profit margin declined to 32.7%. While we did expect a decline around this magnitude, the final results were lower than expected given the discounting needed to drive sales.
Michael H. McLamb: Adjusted EBITDA for the quarter was $29 6 million compared with $57 4 million last year, primarily reflecting lower gross margins higher SG&A and higher floorplan interest expense.
Michael H. McLamb: Moving onto the balance sheet, we ended the quarter with nearly $217 million in cash.
Michael H. McLamb: Inventories of $933 million were up about 6% from calendar year and generally in line with historical trends, but a bit higher than we expected given some revenue that we were unable to close in the quarter.
Michael H. McLamb: On a same store basis unit inventories are over 26% below 2019 levels.
Michael H. McLamb: Turning to liabilities, our short term borrowings, which is our floor plan financing were up largely due to increased inventories.
Michael H. McLamb: Customer deposits were up modestly as expected from calendar year end as we move into the seasonal selling period.
Michael H. McLamb: Debt to EBITDA net of cash was a little over one times at quarter end as we continue to maintain a strong liquidity position.
Michael H. McLamb: We have additional liquidity in the form of Unlevered inventory and available lines of credit totaling close to $200 million.
Michael H. McLamb: Turning to guidance based on our year to date results and expectations for the remainder of the year. We are adjusting our 2024 guidance are.
Michael H. McLamb: SG&A increased to $169 million in the quarter. Excluding transaction costs, changes in contingent consideration, weather events, and other non-recurring items in both periods, SG&A increased approximately 16 million, or 11 percent. The increase in expenses is in a number of areas, including compensation, inventory maintenance, marketing, insurance, and other factors related to the current inflationary environment. Also, roughly $3 million of the increase was from entities we did not own last March quarter. These entities are also seasonally slowest in the winter quarters.
Michael H. McLamb: Our expectations are based on an incrementally improving second half of the year with increased seasonality playing a role.
Michael H. McLamb: Although we are now forecasting industry volume to be down on a unit basis for our fiscal year we.
Michael H. McLamb: We expect our volume to be up modestly for the period consistent with what we've experienced through the first half of the fiscal year.
Michael H. McLamb: For the year, we anticipate same store sales growth in the low to mid single digit range and gross margins remaining in the low <unk> on a percentage basis.
Michael H. McLamb: We expect SG&A expenses to be elevated above our 2023 level given our year to date performance.
Michael H. McLamb: But with the year over year increase moderating in the back half as we implement additional cost reduction actions.
Michael H. McLamb: Interest expense will be on a run rate basis generally consistent with the first two quarters of this fiscal year.
Michael H. McLamb: Based on those drivers we now expect our adjusted net income per share to be in the range of $2 20.
Michael H. McLamb: However, as Brett noted, we're taking more aggressive steps to offset those increases, and the scope of what we are considering is broad. The goal is to improve our SG&A operating leverage and ultimately improve our operating margin. Some of our actions will be near-term reductions, while others will take more time.
Michael H. McLamb: To $3 20 for fiscal 2024 with adjusted EBITDA to be in the range of 155 million to $190 million.
Michael H. McLamb: We are using an annual expected tax rate of just over 27% and a share count of $23 1 million in our assumptions.
Michael H. McLamb: The wider range on EPS versus EBITDA is because our noncash items like stock based comp and depreciation and amortization grow more meaningfully as a percentage.
Michael H. McLamb: Because we are still working through our actions, we plan to talk in more detail about these initiatives on our third quarter call. Interest expense increased to $19.4 million as a result of higher rates and increased inventory. Floor plan interest in the corridor was close to $12 million, compared to $6.5 million last year. On the bottom line, GAAP net income was $1.6 million, or $0.07 per diluted share, compared with net income of $30 million, or $1.35 per diluted share last year.
Michael H. McLamb: Looking at current trends, we commented a few times that we did not close all the business we expected in March.
Michael H. McLamb: That does set up for a strong April but we have a lot of work to do to get things wrapped up.
Michael H. McLamb: And trends in general have picked up presumably in part due to seasonality.
Michael H. McLamb: With that I'll turn the call back over to Brad for closing comments Brett.
Brad: Thank you Mike.
Brad: Although our industry continues to experience near term challenges combined with a return to seasonality we have outperformed the market and are focused on the strategic steps necessary to maintain our historically strong margin profile and the financial flexibility to deliver on our strategic priorities.
Michael H. McLamb: Adjusted net income was $4.1 million, or $0.18 per diluted share, compared with $27.4 million, or $1.23 per diluted share last year. Adjusted EBITDA for the quarter was $29.6 million, compared with $57.4 million last year, primarily reflecting lower gross margins, higher SG&A, and higher floor plan interest expense. Moving on to the balance sheet, we ended the quarter with nearly $217 million in cash, and inventories of $933 million were up about 6% from calendar year end, generally in line with historical trends, but a bit higher than we expected, given some revenue that we were unable to close in the quarter.
Speaker Change: With that Mike and I will be happy to answer your questions. Operator, Please open the line for Q&A.
Speaker Change: Thank you.
Brad: Ladies and gentlemen, we will now be conducting a question and answer session.
Brad: If you would like to ask a question. Please press star and one on your telephone keypad.
Brad: A confirmation tone will indicate your line is in the question queue.
Brad: You May press Star two if you would like to remove your question from the queue.
Brad: All participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock east.
Brad: Ladies and gentlemen to ensure all participants have an opportunity to ask questions. During the Q&A session. Please limit yourself to one question and one follow up.
Brad: Ladies and gentlemen, Viva <unk>.
Speaker Change: For a moment, while we poll for questions.
Speaker Change: Our first question is from drew Crum with Stifel. Please go ahead.
Andrew Edward Crum: Okay. Thanks, Hey, guys. Good morning, So Mike you address the the variance in terms of guidance for earnings and EBITDA can you talk about why the updated guidance range for those two metrics has widened versus three months ago, and then I have a follow up.
Michael H. McLamb: On a same-store basis, unit inventories are over 26% below 2019 levels. Turning to liabilities, our short-term barrings, which is our floor plan financing, were up largely due to increased inventory. Customer deposits were up modestly, as expected from calendar year end as we move into the seasonal selling period. Debt to EBITDA net of cash was a little over one times a quarter end as we continue to maintain a strong liquidity position. We have additional liquidity in the form of unlevered inventory and available lines of credit totaling close to $200 million.
Speaker Change: Thanks drew and good question as our earnings as our GAAP earnings.
Michael H. McLamb: We are lowering the noncash items don't lower they stay virtually flat year over year stock based not year over year, but they stay virtually flat in the guidance are depreciation and amortization.
Michael H. McLamb: And stock based comp so those two items are growing as a percentage of the overall earnings so that's what's driving that.
Speaker Change: Okay. Okay, maybe shifting gears just on gross margin you talked a little bit about this but wanted to get a sense as to the level of promo spend youre anticipating for the selling season, how you see that impacting gross margin over the balance of fiscal 'twenty, four and kind of related do you believe boat margins.
Michael H. McLamb: Turning to guidance, based on our year-to-date results and expectations for the remainder of the year, we are adjusting our 2024 guidance. Our expectations are based on an incrementally improving second half of the year with increased seasonality playing a role. However, we are now forecasting industry volume to be down on a unit basis for our fiscal year. We expect our volume to be up modestly for the period, consistent with what we've experienced in the first half of the fiscal year.
Speaker Change: Bottoms here, yes.
Speaker Change: Yes drew I'll comment this is Brett.
William Brett McGill: Yes, I think that the promotional activity the discounting the extra level of.
William Brett McGill: Actions at boat shows.
William Brett McGill: I think we're going to see we're going to keep pressing the pedal and kind of see that same thing running into the selling season here.
Speaker Change: Obviously, keeping an eye on the products that we need to move in some boats are still in high demand and maybe.
Speaker Change: Maybe not much in inventory so take advantage of those opportunities we do feel like we are.
Michael H. McLamb: For the year, we anticipate same-store sales growth in the low to mid single-digit range and gross margins remaining in the low 30s on a percentage basis. We expect SG&A expenses to be elevated above their 2023 level, given our year-to-date performance, but with the year-over-year increase moderating in the back half as we implement additional cost reduction actions. Interest expense will be on a run rate basis, generally consistent with the first two quarters of this fiscal year.
William Brett McGill: <unk> like the margins are have found their bottom.
William Brett McGill: We want to continue to work with our manufacturers to get the right support from them and they are all working towards that but yeah.
William Brett McGill: Maybe a little more margin pressure on some units, but we feel like we've found kind of the historical norm. Mike do you want to comment yes, no margins are back at historical levels.
Michael H. McLamb: In the industry at least based on what we're seeing and drew just to be just to help you from a guidance perspective.
Michael H. McLamb: Based on those drivers, we now expect our adjusted net income per share to be in the range of $2.20 to $3.20 for fiscal 2024, with adjusted EBITDA to be in the range of $155 million to $190 million. We are using an annual expected tax rate of just over 27% and a share count of $23.1 million in our assumption. The wider range on EPS versus EBITDA is because our non-cash items like stock-based comp and depreciation and amortization grow more meaningfully as a percentage.
Speaker Change: Last quarter, we said low to mid <unk> is where we expect that our our gross margin to settle this quarter, we are saying low thirties and.
Speaker Change: Watson.
Michael H. McLamb: Splitting hairs as what we just posted as that low to mid <unk> or is that closer to lower so you can call. It closer to lower which is why we kind of brought it down a little bit for the back half of the year.
Speaker Change: Okay, Alright, thanks, guys.
Speaker Change: Thank you <unk>.
Speaker Change: Question is from the line of James Hardiman with Citigroup. Please go ahead.
Speaker Change: Hi, This is Sean Wagner on for James I'm kind of piggybacking on that last question in that last answer.
Sean Wagner: Can you give us some color on how much the Oems are contributing to the or helping you out with the promotional environment.
Speaker Change: Do you think margins have bottomed when do you.
William Brett McGill: See the promotional environment.
William Brett McGill: Subsiding or is this kind of here to stay.
William Brett McGill: Yeah.
Michael H. McLamb: Looking at current trends, we commented a few times that we did not close all the business we expected in March. That does set up for a strong April, but we have a lot of work to do to get things wrapped up, and trends in general have picked up, presumably in part due to seasonality. With that, I'll turn the call back over to Brett for closing comments. Thank you, Mike.
William Brett McGill: Emotional standpoint.
Speaker Change: We're always pressing hard with the manufacturers and we have our pulse right on the frontline of the retail and so that's our job to get to them and say Hey, we're seeing some softness on this model we need a little more help and there are always responding but sometimes the the lag between what you see in retail in their ability, but theyre all very cooperative, we're working hard I would say that there is.
Speaker Change: The right levels, maybe a little more than a little quicker as we enter the selling season here.
William Brett McGill: But margin comments, Mike go ahead.
William Brett McGill: Although our industry continues to experience near-term challenges combined with a return to seasonality, we have outperformed the market and are focused on the strategic steps necessary to maintain our historically strong margin profile and the financial flexibility to deliver on our strategic priorities. With that, Mike and I will be happy to answer your questions. Operator, please open the line for Q&A.
William Brett McGill: I would tell you with just with the industry data. So I think we've been on record expecting.
William Brett McGill: The industry to a positive year.
Speaker Change: Year over year.
Speaker Change: Comps you know October November December January February March of those six months only one has been positive which was October if I remember right.
William Brett McGill: I mean that if that's the case, that's gotta be making other dealers out there not feel all of that good probably putting pressure on their manufacturers to increase incentives.
Speaker Change: Assume that while I think all manufacturers are doing.
Operator: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 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 start key.
William Brett McGill: They're all doing what they need to be doing with the trend in March and the trends in the March quarter, So they'll probably get a little more aggressive as we go into the summer selling season, they they want dealers to being a very good inventory position.
William Brett McGill: As we get in midpoint of the summer because they are thinking about model year 2025, which starts for most manufacturers July one.
Operator: And if dealers have too much inventory they won't work order as much product as a manufacturer and want them to order so.
William Brett McGill: I guess there could be some increased promotional activity given the recent industry data by by a lot of manufacturers out there.
Operator: Okay.
Operator: Ladies and gentlemen, to ensure all participants have an opportunity to ask questions during the Q&A session, please limit yourselves to one question and one follow-up. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question is from Drew Crum with Stifo. Please go ahead.
Operator: Tacking onto that in.
William Brett McGill: In the segments that you guys are focused on.
William Brett McGill: Where do you see the most kind of across the industry. The most.
Andrew Edward Crum: I guess inventory overhang or or or need for support like that.
Andrew Edward Crum: I'd comment from an industry perspective, I think it's been well documented around tow boats in the industry and even pontoon boats in the industry, but I'd, probably say just given the softness in the last six months, it's broader than that I would I would tell you. It's it's no longer a.
Andrew Edward Crum: Okay, thanks. Hey, guys. Good morning. So, Mike, you addressed the variance in terms of guidance for earnings and EBITDA. Can you talk about why the updated guidance range for those two metrics has widened versus three months ago? And then I have a follow-up.
Andrew Edward Crum: <unk> type discussion in the industry has experienced softer retail than I think most people expected.
Michael H. McLamb: Yeah, thanks, Drew, and good question. As our earnings, as our gap earnings... are lowering, the non cash items don't lower; they stay virtually flat year over year, stock-based not year over year, but they stay virtually flat the guidance of depreciation, amortization, and StockBaseComp. So those two items are growing as a percentage of the overall earnings. So that's what's driving that.
Andrew Edward Crum: So the the the elevated.
Michael H. McLamb: <unk> inventory is across most categories in the in the industry. There's exceptions on a brand by brand basis for sure. There are some brands that we carry that are in phenomenal shape theres. Some brands that we carry that we're working closely with the manufacturers on them both promotional activity as well as on order. So the good news is this.
Michael H. McLamb: As a comment on our manufacturers, but I think it's also a comment across the industry. The manufacturers really all want to see a healthy industry and a healthy inventory levels. So I think they have gold congruency with the dealers.
Andrew Edward Crum: Okay. Um, maybe shifting gears just on gross margin, you talked a little bit about this, but I want to get a sense as to the level of promotion spend you're anticipating for the selling season, how you see that impacting gross margin over the balance of fiscal 24, and kind of related, do you believe boat margins have bottomed here?
Andrew Edward Crum: They are probably little surprised by the retail activity in the last six months also.
Speaker Change: Okay. Thanks, a lot guys.
Speaker Change: Thank you.
William Brett McGill: Yes.
Speaker Change: Next question is from the line of Joel Alta Bello with Raymond James.
Speaker Change: Hey, guys. Good morning, just wanted to go back to the promo environment and I know, it's been it's been awhile since we've seen a normal you know promotion season. If you will but is this kind of normalized is this what the industry. It looked like you know really before COVID-19 and it doesn't appear.
William Brett McGill: Yeah, Drew, I'll comment. This is Brett.
William Brett McGill: Yeah, I think that the promotional activity, the discounting, the extra level of, you know, actions at the boat shows, I think we're going to see, we're going to keep pressing the pedal and kind of see that same thing running into the selling season here. You know, obviously, keep an eye on the products that we need to move, and some boats are still in high demand and maybe not in inventory. So, take advantage of those opportunities.
William Brett McGill: <unk>.
William Brett McGill: Lot more aggressive given where we've come off a period, where there was very little promotion going on.
Speaker Change: Yes, I think it's probably yes, probably right a little little memory, we always had programs at certain times of the year, we're seeing that same thing.
William Brett McGill: Probably just feels like we havent seen them in a few years, but I would say this feels historically normal to us.
Speaker Change: Got it Okay and then in terms of SG&A you talked about the the items that kind of drove that increase year over year. I guess first you know whats the price you on yesterday, maybe second where do you see and I know youre going to talk about some of the savings I guess on the next call but.
William Brett McGill: You know, we want to continue to work with our manufacturers to get the right support from them, and they are all working towards that, but, you know, maybe a little more margin pressure on some units, but we feel like we've found, you know, kind of the historical norm. Mike, do you want to comment? Yeah, no, margins are back at historical levels in the industry, at least based on what we're seeing. And Drew, just to help you from our guidance perspective, you know, last quarter we said the low to mid-30s was where we expected our gross margin to settle.
Mike: Where do you see the biggest opportunities on the SG&A front.
Mike: I guess I guess, if I'd say, it's a surprise I would say the inflationary environment.
Mike: <unk> continues to ripple through bigger than we were expecting whether again its property and casualty insurance renewals, our health insurance continues to run hot other elements.
Mike: He even mentioned something a smaller or like audit fees I mean everything out there is.
Speaker Change: Everybody is feeling increased inflation still even at the served well at all but all those are just mentioned at the services level.
Mike: And then I.
Mike: Your second point, Joe was was more on what we're doing in the future is that right yeah, the biggest opportunities kind of high level.
William Brett McGill: This quarter, we are saying low 30s, and, you know, it's a question of, you know, splitting hairs is, you know, what we just posted, is that low to mids, or is that closer to lower? So, you can call it closer to lower, which is why we kind of brought it down a little bit for the back half of the year. Okay. All right. Thanks, guys.
Mike: I think we're going to be looking at.
William Brett McGill: I mentioned payroll and payroll related items.
William Brett McGill: Marketing spend inefficiency there for sure location optimization, just all different aspects of the business much broader than we had.
William Brett McGill: Originally started looking at and part of that is just the reality of where the industry is today.
William Brett McGill: The industry.
William Brett McGill: Softness is greater than we anticipated when we started this fiscal year.
Speaker Change: Thank you.
Speaker Change: Thank you.
James Lloyd Hardiman: Thank you. Our next question is from the line of James Hardiman with Citigroup. Please go ahead.
William Brett McGill: Our next question is from the line of Fred Wightman with Wolfe Research. Please go ahead.
Sean Wagner: Hey, this is Sean Wagner for James. Kind of piggybacking on that last question and that last answer. Can you give us some color on how much the OEMs are contributing to or helping you out with the promotional environment? If you think its margins have bottomed, when do you kind of see the promotional environment subsiding?
Speaker Change: Hey, guys just to follow up on that last question I mean, you.
Sean Wagner: <unk> had to cut the outlook a few different times from a top line and an earnings perspective, when you look at sort of the retail environment coming in softer than expected you've talked a few times about the margin pressure that you're seeing and expecting to continue like what gives you confidence at this point in the selling season that you've been conservative enough with the port outlook could afford assumptions.
Sean Wagner: Or is this kind of...
William Brett McGill: From a promotional standpoint, we're always pressing hard with the manufacturers. We have our pulse right on the front line of retail, and so that's our job to get to them and say, hey, we're seeing some softness on this model; we need a little more help. And they're always responding, but sometimes there is a lag between what you see in retail and their ability. But they're all very cooperative; we're working hard. I'd say that they're at the right levels, maybe a little more and a little quicker as we enter this selling season here. But margin comments, Mike, go ahead.
William Brett McGill: <unk>.
William Brett McGill: Okay.
Mike: Tell you.
Speaker Change: Number one we don't like cutting guidance twice, let's let's let's go on record to say that I I I will reiterate again that the outlook that we had for the industry was much different than how the industry is trending we expected a flat to up slightly unit industry through the first six months.
William Brett McGill: We saw what happened in December in the December quarter, where it was down worse than we expected.
Mike: We didn't think it would happen again in the March quarter. So.
Mike: You know what.
Mike: Brad you put in your best outlook, you put in your best assumptions, which I think were doing that here again, you lower your numbers to where you think theyre going to be achievable.
Speaker Change: Every company wants to have upside in the numbers. So you always strive to do that.
Michael H. McLamb: Yeah, I would tell you it was just with the industry data. So, you know, I think we've been on record expecting the industry to have positive year-over-year comps for the past six months. Of those six months, only one has been positive, which was October, if I remember right. I mean, if that's the case, that's got to be making other dealers out there not feel all that good, probably putting pressure on their manufacturers to increase incentives.
William Brett McGill: The issue is is ultimately in the industry you are playing in whereas it subtle and are we finding the right place for it to settle and Fred I'll add that we have data that Mike alluded to in her said in his comments about the return to seasonality. It just kind of is.
Michael H. McLamb: Taken.
Michael H. McLamb: Think that last year, we said there is a return to seasonality, but it's still continuing to ship that way, where the bulk of your business really starts hitting in that selling season.
Michael H. McLamb: That does that date those data points helped guide us for the next two quarters also.
Speaker Change: That's fair and there was a comment that the things that picked up in April I wasn't sure. If that was a sequential comment maybe reflecting more of that normal seasonality or has had a year over year comment what exactly you guys meeting there.
Michael H. McLamb: I would assume that while I think all manufacturers are doing, you know, they're all doing what they need to be doing with the trend in March and the trends in the March quarter, they'll probably get a little more aggressive as we go into the summer selling season. They want dealers to be in a very good inventory position as we get, you know, in the midpoint of the summer because they're thinking about model year 2025, which starts for most manufacturers on July 1st.
Speaker Change: I can comment on that so if you go all the way back to last year. We did say that April was a little softer during the month of April that was following the banking crisis. So we're up against a pretty easy comparison in April and April data. It does as I mentioned it does look like seasonality could be playing a bigger role with just the mix of business between Florida and non Florida.
Michael H. McLamb: The March quarter.
Michael H. McLamb: And then looking whats kind of get an active in April. It's obviously, Florida is always pretty good for us, but the northern markets really seem to become alive. So April does seem poised to be a <unk>.
Michael H. McLamb: And if dealers have too much inventory, they won't order as much product as the manufacturers want them to order. So my guess is there could be some increased promotional activity given the recent industry data by a lot of manufacturers out there.
Michael H. McLamb: Solid month for US obviously, we got to get everything closed and drag it across.
Michael H. McLamb: The finish line next week, but.
Michael H. McLamb: And so that was a seasonal comment as much as anything for it.
Speaker Change: Okay and then just lastly is there.
Sean Wagner: Okay, and kind of tacking on to that, in the segments that you guys are focused on, where do you see, kind of across the industry, the most, I guess, inventory overhang or need for support like that?
Michael H. McLamb: Is the the Williams acquisition is that reflect I assume it's reflected in the new EPS guidance I don't think it was last quarter or is there a specific call out from a from an EPS perspective for that.
Speaker Change: So thanks for bringing it up it is in our guidance and it is a.
William Brett McGill: You know, I'd comment from an industry perspective. I think it's been well documented around tow boats in the industry and even pontoon boats in the industry, but I'd probably say, just given the softness in the last six months, it's broader than that. I would tell you it's... It's no longer a segment-type discussion.
William Brett McGill: Tastic company to merge we're happy to get them on the team.
William Brett McGill: And the size and scope of marine Max anymore.
William Brett McGill: A lot of acquisitions that really doesn't move the needle when it comes to revenue and EPS in a meaningful way to to really call. It out. It is accretive it is a high margin business. It's got a fantastic management team with a great product. So we're really happy to bring them on board.
William Brett McGill: Okay, but specifically not enough to move the needle.
William Brett McGill: It's it's adding to it so the guidance reflects some contribution from them, but just not a real big dollar amount from them.
Michael H. McLamb: The industry's experienced softer retail than I think most people expected, so the elevated inventory is across most categories in the industry. There are exceptions on a brand-by-brand basis for sure. There are some brands that we carry that are in phenomenal shape. There are some brands that we carry that we're working closely with the manufacturers on both promotional activity as well as orders. And this is a comment on our manufacturers, but I think it's also a comment across the industry that the manufacturers really all want to see a healthy industry and a healthy inventory level. So I think they have goal congruity with the dealers. And they're probably a little surprised by the retail activity in the last six months also. Okay, thanks a lot, guys.
Speaker Change: Okay fair enough thanks, guys.
Michael H. McLamb: Yeah.
Speaker Change: Thank you.
Michael H. McLamb: Our next question is from the line of Mike Swartz, but truth Securities. Please go ahead.
Speaker Change: Hey, guys good morning.
Speaker Change: Maybe maybe just a little color on inventory and I think Mike or Brett you had mentioned that inventories, maybe a little more dependent on brand or category, but maybe at a high level just give us a sense of where where are your turns today and maybe where do they need to be overcome.
Michael H. McLamb: Got you know the next three or six months before you feel a little more comfortable.
Michael H. McLamb: Yes.
Michael H. McLamb: I actually don't have that data handy, but I'm fairly certain if you do the turns on our you know like Rolling 12 were in the two four to two five range something like that where I think the industry industry historically would be about one eight times. We were we were usually better than that.
Michael H. McLamb: Our our inventory itself is not in.
Sean Wagner: Okay, thanks a lot guys. Yeah.
Sean Wagner: And what I'd call bad shape at all I mean, we have some pockets of opportunities like probably most people do but I think we've been more proactive that moving product.
Joseph Nicholas Altobello: Next question is from the line of Joe Altobello with Raymond James.
Joseph Nicholas Altobello: Hey guys, good morning. I just want to go back to the promo environment. And I know it's been a while since, you know, we've seen a normal promotion, season, if you will. But is this kind of normal? Is this what the industry looked like, you know, really before COVID? And it just feels a lot more aggressive, given we've come off a period where there was very little promotion going on?
Joseph Nicholas Altobello: Our non current percentages and all that are you know.
Joseph Nicholas Altobello: Better than other dealers out there by a long shot that we've seen.
Joseph Nicholas Altobello: And for US, we would love to see inventory, we'd like to see our turns you know north of three times.
Joseph Nicholas Altobello: It's going to take a lot of work to get there over time.
Joseph Nicholas Altobello: For Covid, we would be two and a half sometimes a little bit higher than that.
Speaker Change: I don't know if that's answering your question, Mike, but it's.
William Brett McGill: Yeah, I think it's probably right. A little memory. We always had programs at certain times of the year. We're seeing that same thing. It probably just feels like we haven't seen them in a few years, but I'd say this feels historically normal to us.
Joseph Nicholas Altobello:
Joseph Nicholas Altobello: We have some opportunities for sure in inventory, but.
William Brett McGill: We've been also aggressive moving like we were in the March quarter too.
William Brett McGill: That's helpful. I appreciate that and maybe there's been a lot of talk about the you know the.
William Brett McGill: No our regulations on offshore.
William Brett McGill: Speed and in maybe just you know if you want to go on for security and give US maybe your quick quick thoughts about those regulations as proposed and any impact that might have on your business.
Joseph Nicholas Altobello: Got it. Okay.
Michael H. McLamb: And then, in terms of SG&A, you talked about the items that kind of drove that increase year over year. I guess, first, you know, what surprised you on the SG&A front? And maybe second, what do you see? And I know you're going to talk about some of the savings, I guess, on my next call. Where do you see the biggest opportunities?
Michael H. McLamb: Yeah, we haven't studied the direct impact on our exact stores and locations.
Michael H. McLamb: Yet, we're still trying to learn more about what it means in and kind of relying on some industry information. There. So we haven't studied it exactly for our stores and business.
Michael H. McLamb: It potentially in some locations that could be not very impactful at all because of the seasonality of where those restrictions are in their stores kind of the seasonality is okay, but it will have an impact on.
Michael H. McLamb: I guess if I'd say a surprise, I'd say the inflationary environment just continues to ripple through bigger than we were expecting, whether it's, you know, property and casualty insurance renewals, or our health insurance continues to run hot. You know, other elements, you know, hate to even mention something as small as a service or audit fees. I mean, everybody's feeling increased inflation still at the service level. Well, all those that I just mentioned at the service level.
Michael H. McLamb: I think when you read and Theres a lot of commercial industry impact.
Michael H. McLamb: I'm getting most of the media I'm not at all trying to under estimate that it couldnt have a recreational impact but.
Michael H. McLamb: For sure on the commercial.
Michael H. McLamb: And the final rules are not out yet like I think you know that but so were I think the industry is waiting to see the final rules to really understand what the impact is.
Michael H. McLamb: So it's something that we're all we're all watching.
Speaker Change: That help Mike.
Michael H. McLamb: Hello. Thank you okay. Thank you. Our next question is from the line of Eric Wold with B Riley's Securities. Please go ahead.
Speaker Change: Thank you.
Michael H. McLamb: And then your second point, Joe, was more on what we're doing in the future. Is that right? Yeah, the biggest opportunity is kind of high. You know what? I think we're going to be looking at, as I mentioned, payroll and payroll-related items.
Speaker Change: Hey, guys I guess I wanted to go back to kind of the guidance.
Michael H. McLamb: Change I know, obviously, you don't like to change guidance a lot of moving parts in there, but just wanted to get a better sense of the key drivers I know that.
Michael H. McLamb: If I recall correctly, you were not assuming any rate.
Michael H. McLamb: I'll tell you, number one, we don't like cutting guidance twice. Let's, let's, let's go on record to say that I will reiterate again that the outlook that we had for the industry was much different than how the industry trended. We expected a flat to slightly up unit industry through the first six months.
Michael H. McLamb: Rate cuts them.
Michael H. McLamb: In the previous guidance in terms of drivers of demand and whatnot, its obviously that that hasn't changed.
Michael H. McLamb: Q2 was the Miss versus your expectations is it more reflection of.
Michael H. McLamb: Increased seasonality or seasonality coming back into the market and you're seeing possibly having to back kind of on the reverse side in April.
Michael H. McLamb: How much of the remaining countries a year I know, it's probably all of these things or can you kind of rank it.
Joseph Nicholas Altobello: taken a look at last year we said there was a return to seasonality, but it's still continuing to shift that way where the bulk of your business really starts hitting in that selling season.
Michael H. McLamb: Is it increased.
Michael H. McLamb: Increased concern and trying to underlying demand pressures in general even if rates don't change them you know.
Joseph Nicholas Altobello: Increased competition for mother, and the need to drive more promotional activity to get people cross lines or it's all of those play into it but how do you kind of rank those seasonality wise kind of probably the bigger driver for the Miss in Q2 versus what you would've thought going into it.
Joseph Nicholas Altobello: That's fair, and there was a comment that things picked up in April. I wasn't sure if that was a sequential comment maybe reflecting more of that normal seasonality, or is that a year-over-year comment? What exactly do you guys mean there?
Joseph Nicholas Altobello: Yeah, I would rank them as a tougher industry environment granted where there are signs that maybe seasonality is going to play a role here in.
Joseph Nicholas Altobello: Help with the summer selling season, but but.
Joseph Nicholas Altobello: We're assuming that we're going to be the tougher retail environment and we're gonna.
Joseph Nicholas Altobello: Keep kind of both feet on the gas pedal and including being more aggressive on margin. So number one it's going to be the tougher environment combined with margins is probably the biggest driver of the change in the back half combined with were we commented a couple of times. We did expect additional revenue in the March quarter the March quarter.
Joseph Nicholas Altobello: Okay. And then just lastly, is there... Is the Williams acquisition reflected, I assume it's reflected in the new EPS guidance? I don't think it was last quarter.
Joseph Nicholas Altobello: We were up against a negative 13%.
Michael H. McLamb: Is there a specific call out from an EPS perspective for that? So thanks for bringing that up. It is in our guidance, and it is a fantastic company to merge with. We're happy to get them on the team. In the size and scope of MarineMax anymore, there's not a lot of acquisitions that really just move the needle when it comes to revenue and EPS in a meaningful way to really call it out. It is a creative, and it is a high-margin business. It's got a fantastic management team and a great product, so we're really happy to bring them on board.
Joseph Nicholas Altobello: Comps, so we expected higher than 2% same store sales growth.
Michael H. McLamb: And so we we had some revenue that didn't close without getting into all the specifics of that.
Michael H. McLamb: We are inventories elevated a little bit which means our interest expense is going to be a little elevated in the June quarter, Although it will start coming down as we get close to the end of the June quarter.
Michael H. McLamb: And then a little bit higher interest also in the September quarter, as we said on the call. So it's really margin.
Michael H. McLamb: Tougher environment and then.
Speaker Change: Interest Eric if that answers your question.
Speaker Change: It does and just to follow up on inventories, obviously ending quarter higher.
Michael H. McLamb: Because the only came in below it and said that you're going to you know.
Michael H. McLamb: The Oems are being a little more accommodating of adjusting production where do you.
Speaker Change: You ended.
Michael H. McLamb: Yeah, you know, I actually don't have that data handy, but I'm fairly certain if you do the turns on our, you know, like rolling 12, we're in the 2.4 to 2.5 range, something like that, where I think the industry, industry historically would be about 1.8 times. We were, we were usually better than that.
Michael H. McLamb: September of last year 813 million of inventories, where do you expect inventories to end September would you expect them to be higher than last fiscal year and lower in line and then kind of <unk>.
Michael H. McLamb: Assuming we get into a better environment in fiscal 'twenty, five and demand improves.
Michael H. McLamb: There's a good inventory level.
Michael H. McLamb: A.
Michael H. McLamb: Yes exactly.
Michael H. McLamb: The inventory at the end of this current quarter kind of 100 and change at the end of it.
Michael H. McLamb: Is that a good inventory level for a while.
Michael H. McLamb: Oh single digit.
Michael H. McLamb: Retail increase environment or would you need to move higher than that.
Michael H. McLamb: Our inventory itself is not in what I'd call bad shape at all. I mean, we have some pockets of opportunities like probably most people do, but I think we've been more proactive at moving product. Our non-current percentages and all that are, you know, better than other dealers out there by a long shot that we've seen. And, you know, for us, we would love to see inventory; we'd like to see our turns, you know, north of three times.
Michael H. McLamb: Inventories will move higher in dollars than they ended last summer last summer inventories were building, but there were still some brands that had not.
Michael H. McLamb:
Michael H. McLamb: <unk> gotten product out to a reasonable level compared to prior times because of supply chain issues or manufacturing issues or whatever it may be so I would expect inventory levels to be higher I don't I don't recall. These are exact estimate where it's going to be but it's going to be higher end and then within that the devil is always in the detail.
Michael H. McLamb: By brand and by segment and how do we work with the manufacturers on on what do we think about 2025 and production and incentives I think most people in the industry I know Brunswick got a couple of slides on this where theyre looking at.
Michael H. McLamb: 2024 kind of being a low point and then model year 2025, the industry begins to pick up from there, which makes a lot of sense. We just we got to get to that point to see that that's actually playing out that way.
Michael H. McLamb: It's going to take a lot of work to get there over time. You know, before COVID, we would be two and a half, sometimes a little bit higher than that. I don't know if that's answering your question, Mike, but it is. We have some opportunities for sure in inventory, but we've also been aggressive moving like we were in the March quarter too.
Mike: Got it thanks, Eric.
Speaker Change: Thank you.
David: Our next question is from the line of David Mike did I call with Longbow Research. Please go ahead.
Michael H. McLamb: Hey, Good morning. This is Joe Nolan on for David.
Michael H. McLamb: Okay.
Speaker Change: Hi, most of my questions have been answered at this point, but I just wanted to ask whether obviously first quarter you always have some sort of weather impact, but it seems maybe a little bit worse than a typical first quarter. So I was just wondering if you could talk a little bit about the cadence of sales through the quarter as we saw weather improve a bit.
Michael H. McLamb: for sure on the commercial. And the final rules are not out yet, Mike, I think you know that, but so we're, I think the industry is waiting to see the final rules to really understand what the impact is.
Michael H. McLamb: Yeah.
Michael H. McLamb: Yes, I'd say weather did probably play a little bit of a role believe it or not I mean, we live here in Florida, and Florida had a wet windy.
Eric Christian Wold: Thank you. Our next question is from the line of Eric Wold with Be Riley Securities. Please go ahead.
Michael H. McLamb: Cold.
Michael H. McLamb: March quarter, a lot of folks up north don't feel sorry for us, but I, usually boat a fair amount in the March quarter, and I was not up much at all so.
Michael H. McLamb: And so we had some revenue that didn't close, but getting into all the specifics of that, our inventory is elevated a little bit, which means our interest expense is going to be a little elevated in the June quarter, although it will start coming down as we get close to the end of the June quarter. And then a little bit higher interest also in the September quarter, as we said in the call. So it's really just a margin.
Michael H. McLamb: April weather pretty shaping up pretty nicely here, which you know you can kind of see that in our comments about April being strong. So the price is some play on weather.
Michael H. McLamb: No.
Michael H. McLamb: We are probably experiencing now including here in northern markets too.
Speaker Change: Got it.
Michael H. McLamb: And then obviously, we're seeing the step up in promotions can you just talk about the success level that you've seen with the promotions and driving really retail activity, whether that's been maybe better or worse than you originally would have expected.
Michael H. McLamb: Assuming we get into a better environment in fiscal 25 and demand improves.
Michael H. McLamb: Yeah. It's you know when we partner with a manufacturer we put a full program together.
Michael H. McLamb: Inventories will move higher in dollars than they did last summer. Last summer, inventories were building, but there were still some brands that had not.
Michael H. McLamb: Consumer facing and offers them more and creates urgency we can help create more urgency it's absolutely working that's the key.
Eric Christian Wold: Got it. Thanks, Mike. Thanks, Eric.
Michael H. McLamb: Okay.
Speaker Change: Got it okay. Thanks, guys.
Joseph Nicholas Altobello: Hey Joe. Hey Joe.
Speaker Change: You're welcome Thanks, Joe.
Unknown Executive: You know, March quarter; a lot of folks up north don't feel sorry for us, but I usually vote a fair amount in the March quarter, and I was not out much at all.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, I now hand, the conference silver.
Unknown Executive: Mr. Tom Mcgill for his closing comments. Please go ahead.
Speaker Change: Well, we appreciate everybody joining the call. This morning, and we look forward to updating you on our progress in the next quarterly call have a great day.
Unknown Executive: April weather is shaping up pretty nicely here, which you can kind of see in our comments about April being strong.
Joseph Nicholas Altobello: Got it. Okay. Thanks, guys.
Speaker Change: Thank you.
Speaker Change: The conference off Marine Max has now concluded. Thank you for your participation you may now disconnect your lines.
William Brett McGill: Ladies and gentlemen, I now hand the conference over to Mr. McGill for his closing comments. Please go ahead.
Operator: The MarineMax conference has now concluded. Thank you for your participation. You may now disconnect your line.
Operator: Okay.
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