MarineMax Inc (HZO) 2011 Q2 法說會逐字稿

(Operator Instructions). Good day, everyone, and welcome to the MarineMax Inc. second quarter 2011 earnings conference call. Please note today's conference is being recorded. At this time for opening remarks and introductions I will turn the conference over to Ms. Kate Messmer. Please go ahead, ma'am

Thank you, operator. Good morning, everyone, and thank you for joining this discussion of MarineMax 2011 fiscal second quarter results. I'm sure you have all receive a copy of the press release that went out this morning, but if you have not, please call into Cameron at 727-531-1700 and she will fax or email one to you. I would now like to introduce the management team of MarineMax Inc.

. Bill McGill, Chairman, President and CEO, and Mike McLamb, CFO of the Company. Management will make some comments and then it will be available for your questions. Mike.

Thank you, Kate. Good morning, everyone. And thank you for joining this call. Before I turn the call over to Bill, I would like to tell you that certain of our comments are forward-looking statements as defined in the Private Securities Litigation Reform Act. These statements involve risks and uncertainties that may 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 Commissions with that in mind I would like to turn the call over to

Thank you, Mike. And good morning, everyone. We are pleased to be reporting our second quarter in a row with positive growth in new boat sales. While most reports still show that the industry experiences declining unit sales for the quarter overall, recent reports are starting to show that the industry appears to be beginning to turn the corner.

We view our trend in these recent reports as another positive sign that the industry has indeed reached bottom, and is in the early stages of recovery. Our product margins improved compared to the prior year due to several factors including the decrease in pressure from bank repos our improved inventory aging and our streamline one price selling process. These combined with a focus on expense allowed us to report a smaller loss in the prior year, as we worked towards regaining profitability.

Preliminary industry reports for the March quarter specifically those that track state registrations suggest that in the segment in which we operate, D-unit sales were down in the high single digits as consumer confidence remains choppy. However, our new unit sales are up more than 10%, which again signals our progress in gaining market share. We believe this has been achieved not only through our leading retailing strategy, but also the additions we have made over the past years to strengthen and broaden our portfolio, to appeal to a wider segment of customers.

As a reminder, since the beginning of 2009, despite industry challenges, we expanded with Azimut in Florida, Tennessee, Georgia, and the Carolinas. We added Meridian in Baltimore and San Diego, we added Nautique in Minnesota and Atlanta and Malibu and Arizona. We also added Cabo in Hatteras in New Jersey, and New York, and Boston Whaler to our Naples and Fort Meyers markets.

During the March-quarter, we announced several key developments to even further improve our brand offering and expand our geographic footprint. First we added Bayliner to our product offerings in many of our markets. We also form add strategic aligns with marinas international an operator of 27 marinas with over 15,000 slips across the country, which will provide us with the opportunity to establish sales brokerage offices in their marinas while supplying them with increased traffic and occupancy.

We also announced strategic partnerships with Sea Tow and Marinalife who have partnered with us in our MarineMax reward club offering. Additionally, we expanded our geographic footprint for the first time since 2006, adding our 57th location with the acquisition of Treasure Island Marina retail sales and brokerage operation in Panama City, Florida, this is a market we have wanted to be into for a long time.

We can't continue to evaluate additional opportunities to further expand, but we will remain selective in opportunistic in our approach. Moving over to the discussion of our March-quarter results, we experienced a modest decline in used boat sales, due to less available inventories. Keep in mind that the bulk of a dealers used inventory or boats are the trade that they take on their new sales. Accordingly, with 2-quarters in a row of increased new unit sales, we are moving down the road towards re-establishing the more typical revenue pattern that we in the Industry have experienced for years.

Last quarter, we discussed how the Industry was facing a situation where the availability of late model used boat inventory at attractive prices had diminished. The stabilization of the used boat market is also a positive for new boat sales. As the pricing of used inventory has increased with tighter inventory levels, consumers are increasing their consideration of new boats, when making their purchase, and they are also more willing to trade in their boats, when they can realize higher trade in values.

Turning to inventory, we ended March with $190 million in inventory. Which is roughly where we ended in December. Typically, March is representative of the seasonal high point for inventory levels.

Our inventories were up on a year-over-year basis, which largely reflects the brand additions I mentioned that we made to expand our product portfolio. Despite the year-over-year increasing, the age of the inventory continues to improve. It is important to note, that inventory levels across the industry especially larger boats and yachts, appear to be in very much in line and also continue to show improved aging. Which is helped support a more rational pricing environment.

Our gross margin was up compared to the prior year as we recently relaunched our pricing strategy and improved the aging of our inventory. And it helped us to maintain healthy products margins. As a result, last quarter we reintroduced our long standing pricing strategy for our boats and yachts, which includes the equipment and services that we believe are needed by our customers.

This includes moving back to our one price strategy, which has been and is well received in the past, and its embraced by our customers and team today as it was in the past. Our gross margin was down for the December and September-quarters, primarily due to a mixed shift towards larger boats that carry a lower margin on average. While there are always mixed shifts that can impact our gross margins from quarter- to-quarter, we continue to believe that we can maintain margins in the mid 20% range on an annual bases as we have both this quarter and the past few quarters.

In addition to expanding our gross margins on a year-over-year basis we were able to further improve our conversion by holding down our expenses. Which we do not detract from our customer experience. And achieve some SGNA leverage on our sales increase. We continue to believe that we can substantially grow our earnings without a significant addition to fixed costs.

We have mentioned the past that 56 of our 57 stores that we operate today collectively generate more than $1 Billion in sales during 2006 and 2007. We are considering very selective opportunities for expansion, such as the new store that we acquired in Panama City during the quarter. But we do not expect to significantly grow our store base from its current level, as we believe we can achieve greater throughput to our existing stores.

With this I'll now ask Mike to provide more detailed comments on the quarter. Mike.

Thank you, Bill. And good morning again, everyone. For the three months ended March 31, 2011, our revenue was $115.8 million up approximately 5%, or $5.6 million for the prior year. Our same stores increased by more than 5% compared to a 5% decrease in the prior year.

As Bill mentioned, this increase was primarily due to growth in our new boat sales. Used boat sales were down, but not as significantly as the December-quarter. The strength we have seen in new boat sales over the past 2-quarters has continued to be fairly widespread across the country, and across the size segments that we carry.

Gross profit as a percentage of revenue was 23.1% in the second quarter, up about 120 basis points for the prior year. The year-over-year improvement was driven by higher margins on both our new and used boat sales, with the increase in boat sales, our gross profit mix did shift slightly away from a higher margin businesses, like service, parts and accessories and finance and insurance, which limited some of the overall increase in gross margins.

On a sequential basis, our margins were down compared to the past few quarters due to a slight increase in large boats as a percentage of our revenue. As you may recall, larger boats carry smaller gross margins. As market conditions continue to recover, our margins still have significant opportunity to expand, our product margins while improved are still running 300 basis points to 400 basis points below historical levels.

We were still pleased to drive an 11% improvement in gross profit dollars on a 5% increase in revenue during the quarter. Our selling general and administrative expenses increased slightly compared to the prior year, the dollar increase was primarily related to higher commissions as a result of our growth in boat and brokerage sales and some additional costs incurred at boat shows related to the new brands we have expanded with. Generally, the March-quarter had higher marketing costs then the December-quarter, associated with the numerous boat shows that we participate in during the March-quarter.

SGNA as a percentage of revenue was still down approximately 60 basis points compared to the prior yore. Interest expense decreased by about 21%, $836,000 due to lower rates on our lines of credit. Regarding income taxes, as has been the case for quite some time, we did not recognize any material income tax expense or benefit during the quarter, and we are likely not to do so until we return to sustained annual profitable.

The net loss of the second quarter of fiscal 2011 was $4.5 million or $0.20 per share. This is an improvement of $6.4 million of $0.29 per share last year. Turning to our balance sheet, at quarter end we had approximately $21 million in cash, up from $17 million last year.

As we have mentioned in the past, our cash balance is a function of how much we want to leverage our inventory. We have substantial cash in the form of unlevered inventory. Our inventory at quarter end was $190 million which is relatively flat with where we ended the December-quarter. As Bill mentioned the year-over-year increase in our inventory largely relates to new product lines that we have added over the past year, as well as the timing of the receipt of boats.

Turning to our liabilities, our short term borrowing were $90 million at the end of March, down 4% from $94 million at December 31, 2010, keep in mind, that in the past we operated with the financing facility that was a true line of credit. Meaning, manufacturers would bill and ship boats to us and we would eventually pay for them by drawing on our line.

Today, however, we have a line that functioned more like a floor plan, as such, when the boat leaves the manufacturer, it goes on our line. Accordingly, our accounts payable with manufacturers is basically nonexistence these days. That is one reason why our line is up over the prior year, and our accounts payable are down.

We ended the quarter with the current ratio of 1.73, and total liabilities of tangible net worth ratio 0.73. Both of these are very strong balance sheet ratios and are far better than our required covenant levels of 1.20 to one for the current ratio and the current 2.75 to one for the tangible networth ratio.

Our tangible networth stands at approximately $195 million, as we have mentioned in the past, we own more than half our locations, all of which are debt free. We believe that these attractive locations are leading brand offering, our capable team, and strong financial position leads us well positioned as conditions continue to improve.

I will close by reiterating how encouraged we are to have been able to drive an increase in new boat sales at healthy margins over the past 2-quarters. Further, I will add that the quarter finished much stronger than it started, which is in contrast to the last few March-quarters. We do believe weather impacted the first two months of the quarter, which may have shifted business to March.

April, also looks like it will show a nice increase in new boat sales over the prior year. However, I will caution that we need to see strength through the entire summer selling season, not just a month or two. While recovery is not likely to be fast, and or at a sharp incline, we will benefit from any improvement and trends and are looking forward to see what the spring and summer selling seasons will bring. I will now turn the call back over to Bill for closing comments.

Thank you, Mike. While it is still a little early to read how the spring and summer selling seasons will shape up, early indications suggest that the boating industry is starting to improve as we head into the key selling and boating season. Retail financing is easier to obtain compared to the same time last year. And our results have suggested that buyers are starting to turn to the market.

Keep in mind that last year at this time, most of the headlines involved the elections and statuses of Bush tax cuts as well as the oil disaster in the Gulf. With the exception of rising fuel costs the headlines are much more in the favor of the consumer this year. However, consumer confidence is something we watch, and it unfortunately it declined in March, but rose slightly in April. Accordingly, we are cognizant of the fact that any recovery is likely to be somewhat uneven.

The good news is that we are well positioned for any type of increases, given our passionate team, our product offerings, the market share gains, our leading retail strategy, improving our products margins, and our lower cost structure. While we need additional volume to get back to the point where we can achieve the profitability we want, the actions that we have taken are allowing us to maximize a flow through of each incremental sale.

Finally, it is important to note that participation by our customers remains as strong as ever. Our customers are out on the water, enjoying this (inaudible), and family bonding aspects of boating as part of the MarineMax family. We look forward to continuing to serve their needs as they decide it is time to upgrade to their boat of choice. Additionally, we are seeking more and more family -- we are seeing more and more families getting into boating after realizing that at MarineMax we are focused on helping them select the right boat. We are focusing on teaching their entire family how to enjoy their boat, and operate the systems, we are focused on providing their servicing that needs of their boat, at our facilities, and also at their docks. And we are facilitating their enjoyment on the water, with our numerous get away events.

And with that, operator, will open the call up for questions.

(Operator Instructions). We will take our question from James Hardiman with Longbow Research.

Hi. Good morning. Thanks for taking my questions. First, I just want to be clear on how you are slicing and dicing the Industry data. You are saying that the segments that you participate in down sort of high-single digit levels. Is that a certain level of price points a certain type of boat, can you just shed light on that?

Yeah, it is generally fiberglass pleasure boats. And as you know, James, the data on the industry is always somewhat tough to get and it moved around, but based on the data that is available to you and everybody out there, in the segments that we operate, it looks like for the whole March-quarter it was down in the -- high-single digits. I have heard -- there are reports that it is higher than that. But that sounds about right to us from what we are hearing from our stores and what we are seeing at boat shows and so forth.

Okay. Yeah, I mean the number that -- I don't know how close you follow Brunswick's calls but the number they threw out there for the Industry they said stern-drive, and in-board fiberglass were down 25%, and that out-board fiberglass was down, I think, 2%, and my assumption was that you guys probably sell more in-board fiberglass than out-board, certainly, is that fair?

We do more stern-drive and in-board than we do out-board for sure.

So if those numbers are right it sort of sounds like you are saying your business is up, so your out performing the Industry by even more? By healthy margin is that safe to say?

That's what we believe. The market share data is not out yet, but we believe we are taking share.

Okay. And within that, it sounds like -- I mean you are saying your boat sales are up, and you also made the commentary that at least sequentially and you talked about this in the mix section of things but sequentially large boats sound like they are bouncing back as well? That seems to be contrary to some of the small boat/big boat dynamics that a lot of other people are talking about. But is that the correct take away that your large boats are picking up?

Yes. That is. James, that is the correct take away. we are -- we believe it's due to a couple of factors. Number one is we do have the inventory, and there is a lot of dealers out in the Industry right now that are challenged to have larger boats in particular, because of constraints on wholesale financing. We have a good mix of the right product and of focus on it.

And the other reason is that we really have kept the pedal to the metal so to speak, as far as keeping our customers excited about boating and out on the water. And so with our get away events that we haven't backed off on, we have actually increased. And participation has gone up, what is happening is the excitement for this season in the northern markets and the get-away-events we have in the summer markets and even in Florida, is that the anticipation of that is very high, and of course we believe that resulted in some larger boat sales as well.

We also have not backed off and when it comes to experiences, there is a couple of things that we set for the long term we absolutely would not back off on, and that is we will not back off on what we are doing with our customers to keep them excited. And we will not back off on making sure that they are very happy with all the services we provide including maintenance and service itself. So our customers satisfaction which we measure weekly, with net promoter score, actually we have grown our net promoter score to world class type numbers here even in this last year -- challenging year. So our customers that are happy and very pleased with what we are doing, and they are exciting and out on the water, and that is probably the one thing that's making the big difference. So that pin up demand that is there, we are starting to see some of it come back in the bigger boats. So a long winded question answered it but --

No. That's very helpful. And then I just want to make sure I understand the momentum within the quarter. You are saying overall first quarter new boat sales up 10%, March sounds like it is meaningfully better than that, and then your commentary on April saying it is likely to show a nice increase over last year, I'm assuming that's for your guys you aren't making an Industry assumption, but that's a you guys.

Yeah, that's us. And you characterized the quarter right. March was very strong, those of you on the call in January remember me saying that January was I think up slightly over the prior year, following the offenses quarter were new boat sales were up 25%. But the quarter finished very strong for us. And then we will have a nice increase in new boat sales for April.

Okay, and then just last question, I'm sure you guys have gotten this question plenty, but everybody wants to talk about what the impact of higher oil is on boat sales, have you ever -- have you done any work? I'm sure majority of this is anecdotal but it seems clear that higher oil prices potentially hurt boat participation, and people may take the boat out less, is there any evidence that at least evidence you have seen that would suggest that that really enters into the purchasing decision over and above the obvious impact on the broader economy?

I think the largest impact is probably the -- as you mentioned the impact on the overall larger economy. As far as our customers are concerned, we hear from our customers and we truly believe this, that as oil prices climb, you know they are $9 a gallon in Europe. You go to France or Germany, it is the equivalent of $9 a gallon, so still a bargain here in the U.S. But that being said, it is a very small percentage of the overall expense to the customer. And the customer has the ability to adjust what they are spending on the fuel costs by adjusting how they boat. And so perhaps they turn off that generator when they are out swimming, or just running the boat, and down not in the cabin, or they decide to do a little shorter trips, or not run it as hard. You know if you take some of these larger boats and you reduce the speed, you know from running it 32 knots and down to 22 knots, you know you can save perhaps 30% in the overall fuel costs.

And so our customers will adjust, and what we are really seeing, James, is we just keep hearing more and more from them that hey, I'm going to boat. I don't care what. If I have to adjust a little bit, as the fuel prices go up, we will. Now, as fuel prices climb, we believe that it will be more and more in the headlines and the thoughts of all consumers, but I think once it is stabilizes, that hey, life is going to go on and be fine. And we don't think anything of the $3-gallon price right now, and boy, we were petrified of it when we were $1.50 a gallon as an example. So we don't think our business will be significantly impacted by the oil prices, other than the external impacts.

Overall economy.

And the overall economy.

Great, that's really helpful, thank you, guys.

Thank you, James.

Thank you.

Our next question comes from Gregory McKinley with Dougherty.

Thank you. Mike, when you were talking about -- I just want to dig into your expense structure a little bit more. You had mentioned maybe some incremental expenses this year tied to your brand extensions in certain markets. In particular as it relates to the winter boat shows, winter and spring boat show season. How should we think about operating expenses for this fiscal year in relation to what we saw from the Company last year? I know you had closed a bunch of stores, you talked about some variability with commissions which makes sense. But is it -- have you tightened the belt enough where you actually would expect some leverage in that? Even amidst modest revenue increases? It looks like GNA is essentially flat as a percentage of sales for the first six months of the year.

Yeah, I think the brand we have expanded with, what they are doing is adding some costs which some of it is to be expected like boat shows, marketing, some training, a little bit of travel. And you are not really getting the benefit of it yet. We recognize very little revenue during the quarter from these new brands. That can start coming during the season. So that's part of what happened in this quarter. I would think overall with the exception of variable compensation which is commissions, you shouldn't expect any increase in expenses I'll be it unless GP rises and sales rises then you get the variable component of experiences coming in.

For the remainder of the year, for the next couple of quarters, the incremental costs associated with the new brands I don't have a schedule in front of me to show what that is projected to be, but it is not very significant in the next couple of quarters. It is more significant in the March-quarter. And I can tell you that we certainly haven't sat back and said okay, we are done looking at expenses. We are constantly revisiting contracts, leases, anything we can in the Company to figure out how to keep costs down. And the one thing that we are very very committed and focused to is keeping our locations down. We think with the marketing that we are doing now, and with the team we have got, and other things that we can really gain big leverage as the revenues come back. Because when you open a store, it isn't just the cost of the lease of the store, it is everything that goes along with it. You will add team members, data lines and all that stuff. And so that is where I think you will see the big leverage as revenue comes back.

And we are also investing in a lot more into training. If you're -- if the season is the Super Bowl, there is not -- or the NBA playoffs, we are heading into the NBA playoffs and Super Bowl here with the season, and there is not a team out there that doesn't practice, practice, practice, even more. Before the big games and so we have got every single one of our sales team members in the Company here in Clearwater that are going through basically a 3-day Re/Max University, on our one price selling which we call this boat is low as type price, and also the culture, and focus on the customer strategy that we have. We are seeing the results as they start to return back to the stores. And so we will have most of all them through there by the end of this -- middle of May, and a little bit later. So we are investing in that in a huge way, because at the end of the day, that's what it is about.

I wonder if you could just give office little more color on your view on the used boat markets? So you talked ant how you think leaner inventories in used boats are now resulting for that incremental boat transaction, maybe a little less competition for a new boat sale versus a used boat sale, because those inventories have been right sized and those used boats are no longer selling at huge discounts, so there is not that perceived value difference for the customer that there may have been a year ago. When did you begin to feel like used boat values were beginning to recover and the glut of inventories was stabilizing? Is that something that just happened in the last month or two, or would you say maybe at were six months into that trend?

Yeah, Greg, it began to happen we began seeing signs of it late last summer, and it's only got better and better. we are actively looking to see if there is used boats out there that we should be buying, as an example, so we go to auctions across the country that type of thing. And we aren't buying many because we are seeing the values are up. Which is very very positive it doesn't mean that we don't buy a few, and we do where they make sense. But we are hearing from other dealers, we are also seeing it ourselves, that the true value of that used boat that we are taking in on trade, or to the customers trying to sell is actually increasing. Which is the biggest benefit, I think we will see from that more than anything.

We were disappointed we didn't have more used boats to sell this quarter, March-quarter, because we would have sold them, because the demand was there. But what that equated to was increases in new boat sales. And so -- what the biggest benefit is going to be is that we can now allow the customer more than we were historically, because the values are worth more. And of course that was one of the difficulties in trying to put deals together with our customers six months ago, or even three months ago, is that the values were still low because they were driven by what was going out in the used boat market. But it is getting better.

Thank you.

Thank you, Greg.

Thank you, next we will hear from Christian Buss withThinkEquity

Hi there. Wondering if you can talk a little bit more about the margin structure of used verses new, large boats verses small boats and kind of walk us through what led to that gross margin not being in line with what you were able to do in the first quarter? And in a little more detail.

Yeah -- a couple of things, Christian, first of all when boats for good or for bad are the lowest margin product we sell. So when you have an increase in boat sales which we have seen, it does put pressure on the contribution from the other segments of our business, service, parts and accessories, FNI and so forth. So in a world where boat sales start ramping back up, it is going to pressure margins, however, what we have said, and what we believe is at a future point in time, when our revenue is what is it is going to be, $600 million, $700 million, $800 million, our margins should be higher then they were historically when we were $600 million, $700 million, $800 million, because of the expansion that we are doing in service, parts and accessories and these other things. So we will still get a margin benefit.

And then larger product, some of the Hatteras, Azimuts and so forth that we carry usually have a high -- excuse me, low double-digit margin, like in the 10%, 11%, 12%, 13% range from a gross margin prospective but there operating margin is typically about the same as our other product because they are carried in fewer stores, fewer people are working on them, and so forth. If you exclude those categories of brands, the rest of what we sell generally has roughly the same margin for the most part. Used margins tend to be lower than new margins by a couple hundred basis points. And I think the comment that we made is it kind of gets all put into a whole big kettle of soup here, Christian. But what happened in the quarter was we saw used boat margin drive we saw new boat margin drives, we saw a slight increase in mix. And I do want to say slight, it wasn't that significant, in the growth in our larger product, which pressures the new margins a little bit of a comparable quarter to the December-quarter. And then we saw an increase in boat sales. So when you put those components together, you get a margin that's a little bit less than what it was in the December-quarter, or even then in the September-quarter.

Okay, so how do you get to mid 20s margins for the balance of the year? What are your expectations for that commentary?

Product margins continuing to come back, and mixed shift in the business on an annual bases, where you have a normal mix of -- let's say large product to small product. So you won't hear us say large products were up a whole lot. If large products gain more strength than small product, it could be hard to be in the mid 20's, but our revenue will be higher than, you follow me.

Yeah, absolutely.

But I think given the trends that we have got, and that we have seen, we do believe that in that mid 20 range, is a reasonable margin for the Company on an annual basis.

Okay, and then helicoptering up a little bit, can you walk us through at what point do you expect to be break even? At what point do you expect from a top line standpoint assuming certain margins, can you walk us through the model there?

Yeah, what, we haven't given guidance for a number of years, but I think it is -- just from a mathematical exercise, I have done this once before on the call, if we are doing what we are supposed to be doing, let's say we hold our experience structure, something around $120 million. And we are working to get it down, we are working to keep expenses in line, if margins go to 27%, right? On $400 million in sales you start getting close to breaking even. And that's where they were heading at sales were at fall and they kept going higher and higher the quarters. You can do the same type of math, if we are up to $500 million in revenue, let's say that expenses are around a $120 million maybe a little north of there, and margins are around 23%, 24% those macro figures get you close to breaking even, in either scenario.

So part of it depends on what is the margin assumption, does management do a good job on monitoring and getting leverage out of the business from an expense prospective. And so in essence, I think we are most -- I think we are Christian, with you and the other folks that the Company modeled, it is around those revenue figures of $450 million to $500 million in that range the Company is what I call around breakeven Which is slightly profitable or slight loss. But I think in any scenario the Company is producing cash.

That's very helpful, thank you, and best of luck in the selling season.

Thank you very much.

Appreciate it.

Thank you, next we will hear from Joe Hovorka with Raymond James.

Thanks, guys, just a couple of questions and clarifications. On the market share, I think James was asking the question earlier. He asked what you define it from a (inaudible) but would you define it different from a geographic standpoint? Are you talking just about the states you competing in.

Yes, our market.

It is only our markets, Jeff.

Our markets for the segments that we operate.

Right, so that would be a wide variance. Brunswick was talking about the whole market.

That would be correct, yep.

And then the brands like Bayliner, can you kind of talk about how you expect that to ramp in June, September, quarters and into fiscal 2012? Are you fully inventoried yet? When will you be fully inventoried? That kind of commentary.

I think in the March-quarter we were not fully inventoried. I think going into right now, we probably have the product we need,subject to maybe a couple markets are a little bit light, but I think inventory won't be an issue for us here in the June-quarter. And then as it -- from a ramping perspective, we are pretty excited about having that product, Bayliner in most markets where we have it, historically, has been in the top three from the market share perspective, below 24 feet. So we are expecting good things from a unit perspective. They are smaller boats so it is not like it is going to drive $50 million of revenue overnight, it is going to grow. And we have the ability with them to get more product if it is more successful than we had anticipated early on, or even to curtail if it is not as successful as we think it is going to be.

And additionally, we are seeing, Joe, that the team is not only excited, but it seems that it is working very well with the Bayliner and Sea Ray brands in the same store. And understanding that they are really two different type of products as far as content is concerned. But quality of the Bayliner product is still excellent. And it fits with our business model, so it is not like we are getting a cheap product into our stores it has issued.

And so the team is very excited. And pleased with the way it is working and it gives us the ability to take the customers that just don't want to step up in price, and for a Sea Ray purchase. And say hey, we can get you out boating. And of course, customers have change a little bit, and especially in the blue collar segment. And so it is an opportunity to get them out on the water and bring them into the family, and then as times get better bring them back into the larger boats we sell also.

Have you ever disclosed what Bayliner was doing in those markets prior to you taking it over?

No. We -- No, we haven't. But generally Bayliner, again, in the side segments that they primarily operate has had decent market share. It's not to say in each of the markets that we took over because in some cases as you know, dealers have gone out of business, so there was a void in the marketplace for a period of time. But it's a product that's well received by the segment that it goes after. And they know who they are going after, and so forth. So it will do well in the marketplace we expect.

All right, and then last question --

Part training, Joe, is we are teaching our team with we brought them in here, we are doing a lot of education on how you handle both brands within our store. That's part of the education we are doing as well.

And then just one last question on gross margin for the June-quarters, specially, almost 30% last year. And obviously that was because of the mix of new boats were low, and the mix of your high margins services FNL was high. How should we think about that in June? Obviously we expect the margins to go down, but can you give us any more detail? Specifically as to how mix is going to impact that?

You know, the obvious I will state the obvious, if our revenue is about the same, subject to us having an unusual mixed shift to some of the mega yachts that we sell, our margin should be pretty good. I don't know that they would hit 30, that was a record for us, but they should be pretty good. We will work like heck to have our revenue higher than that, and we will see how things pan out from that perspective. But -- so as boat sales would grow, Joe, then you would have some compression of that on the margin side. And I know I'm kind of stating the obvious, but that's -- I would tell you that 30% margin was very good, I probably wouldn't expect that. I would expect something less than 30%, thinking that maybe the boat sales could help drive that.

But what you are saying if you had a $115 million revenue like you did last year in the June quarter that the composition of that revenue would not be materially different than the margin of that $115 million would be somewhere in the range what you did last year?

Yeah, I don't have the June-quarter data in front of me to see if there is any unusual mix. I don't remember any. It seemed like it was just probably more of a small boat driven quarter than a large boat driven quarter, and so if that's the case, then margins would have the opportunity to be pretty decent, again.

Right.

It wasn't anything unusual that effected margins in that quarter. It may have been void of large mega yachts perhaps.

Great, that's all I have.

Thank you, Joe.

Our next question comes from Jimmy Baker with B. Riley and Company.

Good morning and thanks for taking my questions. I'm interesting to hear what kind of traction you are gaining in the tournament tow boat market. Can you remind us how many of your 57 dealers are carrying the Nautique or Malibu lines and if there are opportunities to grow that number without infringing on established partners of those OEMs? And then maybe any color on how you did in the tow boat market during the boat show season would be helpful.

Well, we handle Nautique in Minnesota where we have three locations. The initial results are showing that it's a very quality high end product, and I have owned a bunch of them personally myself over the years. But we are real excited about that opportunity, in Minnesota, and we also have it in Georgia.

Yeah.

And it's being well received by the customers and the team. Albeit we are heading into that season, and it's been a little weather challenged in both of markets. Typically in Minnesota it always is. And then in Malibu, we are out in Arizona and Tempe with it, and that market is has been pretty pressured by the housing.

And so I think we are gaining market share at the end of the day there, even though the sales are not very many for everything we sell in that market. And then we have a partner/dealer arrangement in Missouri for the Malibu brand. So two very, very good brands and we are excited about the future and understanding that there was a little bit of a learning curve getting the team in place, and the manufacturers have been very good, and supporting us at the boat shows and helping our team to get on the page, and that type of thing. So we are excited about the future.

It is going about as we expected it to be going.

Yep.

In this environment.

Okay, would you say it is a fair characterization to say those lines can be sold at higher than corporate average? And do you see opportunities above and beyond the norm to sell accessories --

I am sorry you are breaking up.

Jimmy you are breaking up.

Sorry, can you hear me better now?

I don't know. Hey, operator, is that his line?

I don't hear any background noise on my end.

Okay.

I can hear you all right, Bill, can you hear me?

Yeah, maybe on our end. We are hearing about every other word of the question.

Yeah.

All right I will try again here. I'm interesting to know if those lines are above corporate average? In terms of margin, contribution, and then separately if you have noticed that those customers might be interested more so than your typical customer in accessories and related items?

We will have to apologize. We are are having -- must be a technical issue on our line or something. We are hearing about every other word. I think what Jimmy is asking is the margin contribution greater or less or what? I'm not sure if that is right, but the margins in that product tend to be similar to other products.

Correct.

I don't know if that is answering it properly, is that your question, Jimmy?

Yes, that was my question. I will just move on. So aside from the comments you already made on Bayliner in general, are you comfortable with your inventory on a per dealership level? I guess there is kind of two parts to that. I'm speaking not just about the dollar amount, are you confident you have the right inventory at the right dealerships or is there room for improvement there?

Hey, operator,.

Yes, sir.

We are having an issue on our end, I think. We aren't able to hear properly Jimmy's questions. So we apologize for this, it's coming through like every other word. Must be something locally in the phone lines down here.

Hello?

We apologize Mr. Baker, that they are unable to take your question at this time.

Sure, I will take my questions off line.

We'll take our last --

If anyone can hear us, we have an issue with our phone line down here, we apologize. We will have to sign off on the call. And Bill and I are here this afternoon for questions or comments if there is something we haven't addressed.

And we thank you for your continued interest in supporting MarineMax, and I would also like to thank our team members for their hard work and passion for business, and it is truly their efforts that make the difference, and we look forward to any additional questions and Jimmy, if you want to call back in, we would be happy to take your call. So thank you, everyone, and have a good day.

Thank you, and this concludes our conference. We thank you all for your participation.