MarineMax Inc (HZO) 2015 Q1 法說會逐字稿

Good day, everyone and welcome to the MarineMax Incorporated First Quarter 2015 Earnings Conference. Just a reminder that today's call is being recorded.

And at this time, it is my pleasure to turn the conference over to Shannon Devine. Shannon, please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining this discussion of MarineMax's 2015 fiscal first quarter results. I'm sure that you've all received a copy of the press release that we announced this morning. But if you have not, please call Linda Cameron at 727-531-1700, and she will then fax or e-mail one to you right away.

I would now like to introduce the management team of MarineMax. Bill McGill, Chairman, President, and Chief Executive Officer; and Mike McLamb, Chief Financial Officer of the company. Management will make some comments about the quarter and then be available for your questions.

With that, let me turn the call over to Mike McLamb. Mike?

Thank you, Shannon. Good morning, everyone, and thank you for joining this call. Before I turn the call over to Bill, I'd 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 in weather, general economic conditions and the level of consumer spending, the company's ability to capitalize on opportunities or grow its market share and numerous other factors identified in our Form 10-K and other filings with the Securities and Exchange Commission.

With that in mind, I would like to turn the call over to Bill.

Thank you, Mike, and good morning, everyone. Let me start by thanking the MarineMax team for producing our first profitable December quarter since 2005. As we have stated for several years, the marine industry is in a long-term period of recovery. The strength seeing in the December quarter is clear proof that the recovery is underway and broadening into more of the key categories and segments that are critical for MarineMax. With more than 45% growth in same-store sales for the quarter, which was on top of 9% same-store sales growth for the same quarter last year, devoting enthusiasts is letting us know that they are even more committed to enjoying the boating lifestyle and purchasing boats. Most industry-wide reports were encouraging during the quarter, specifically the December data shows that the industry ended 2014 on a positive note, with most categories showing increases for the month. That said, we believe our growth outpaced that of the industry, resulting in continued market share gains for MarineMax.

During the quarter, we saw strength in just about every segment in almost all of our markets. As in the past quarters, Florida continues to be the bright spot of activity, especially in a seasonal quarter like December. However, New York and other northern markets also showed strong growth. The quarter was highlighted by an increase in our large boat activity as they surged and then continued to contribute to the growth, which we saw. Specifically we saw big increases in larger Azimut and Hatteras yachts, as well as Ocean Alexander yachts, which we started representing in April last year.

Since boats carry the lowest margin of all of our products and services which we offer, when boat sales rise as fast as they did, our gross margins are pressured. That coupled with a spike in larger boat sales, which traditionally carry lower margins caused our consolidated margins to drop. However, when we look brand by brand, and model by model, our product margins are doing quite well.

As manufacturers introduce new models where you're seeing generally strong demand, as we have been saying for a while, just about any boat that is relatively new is selling well. During the downturn, we expanded with several key brands and entered new industry segments. With the industry showing broadening signs of a recovery, those expansion efforts are paying off, as evidenced with our 45% same-store sales growth.

Most of the new and expanded brands helped to drive the growth along with our existing brands like Sea Ray. Sea Ray introduced several new models during the quarter and each new model was very well received and is selling at a healthy rate. As Sea Ray continues its new model introductions, this should only add a potential tailwind to our same-store sales opportunities.

Since the beginning of January, which represents the start of the winter boat show season, we have completed several boat shows. Most shows are reporting increased attendance. And so far, each show we have completed has shown increasing contracted dollars and units year-over-year. This trend is very encouraging. The shows have also allowed us to expose our manufacturers' new models to an even wider audience. And again, the new models are being well received.

Our one price strategy has simplified the pricing message and conveys to our customers that we respect their right to our best price. This approach reduces negotiation and enables us to deliver the best price to the consumer. We believe the pricing strategy has contributed positively to both our margins and the volume of boats, which we are selling.

We continue to see the Internet playing a larger role in the sale of new products allowing greater research and competitor comparisons for the consumer. A larger and larger portion of our market efforts are focused online, which we also believe is helping to drive interest and ultimately generate sales.

MarineMax Vacations our charter business that we launched a little over two years ago, continues to make progress. The charter portion of the business is doing very well. Bookings are exceeding our expectations. As a reminder, the power catamarans in our MarineMax Vacations fleets were designed by MarineMax and they are contract manufactured for us in China. We have worldwide distribution rights for these boats excluding China.

About a year ago, we began to see increasing interest for the power catamaran yachts for private ownership as opposed to just for charter. As we have shown the boats to a wider audience at boat shows, we are finding they are being well received. In addition to United States, we have now sold the boats into a handful of other countries. Currently, the revenue from the brand is insignificant to our overall revenues, but we believe that upside exists to our top line as we continue to rollout the brand known as Aquila.

With our customer centric focus, we understand the importance of always taking care of the customer and that will never change. We also continue to seek ways to leverage the improved sales and drive even greater profitability as we move forward.

And with that insight, I ask Mike to provide some detailed comments on the quarter. Mike?

Thank you, Bill. And good morning again, everyone. For the December quarter, our revenue was over $158 million, up more than $48 million from the previous year, the very strong growth was driven by same-store sales growth of more than 45%. Bill mentioned that we saw growth in all segments. I think it's important to note that we again saw solid increases in the sterndrive segment. This segment has been the slowest and the last segment to recover for the industry. We believe that as new models are introduced, this segment should continue to progress through the recovery.

As far as cadence during the quarter, the quarter started off well and ended even stronger. Typically sales drop-off during the holidays, but this year momentum increased right through the end of the month. This was really good to see. For the quarter, we grew gross profit dollars over $7.5 million. But as Bill mentioned, our gross margin fell to 23.7%. Each of our higher margin businesses dropped meaningfully as a percentage of revenue due to the extreme growth in boat sales, which pressures our consolidated margins. Couple this with the increase in larger boat sales and the result is lower overall margins but increased profits. Fundamentally all is well on the product margin front.

We did a good job managing costs. SG&A dramatically improved by almost 700 basis points as a percentage of sales as we effectively leveraged our cost structure. As sales and gross profit dollars rise, certain expenses like payroll and commissions typically increase as well as a few other areas that are tied to sales. However, we were able to gain leverage in fixed costs in other areas of the business. It's important to remember that 50 of the 54 stores we operate today did over $1 billion of revenue in 2006 and 2007. As such, we believe we can experience considerable revenue growth before we need to significantly increase our fixed cost associated with the stores.

For the December quarter, we had no income tax provision. Our effective income tax rate will remain essentially zero for the near-term, primarily due to the availability of substantial net operating loss carry forwards, which are fully offset by a valuation reserve. As more certainty unfolds for our industry through this recovery, we will record a tax provision once our valuation reserve is removed. Encouragingly, we were able to produce a December quarter profit for the first time since December 2005, with significant year-over-year improvement. To put this in perspective, historically before the great recession, it was hit or miss, if we'd be profitable in the December quarter, we had some years of profits and some years of losses. Since those years, we have become even more seasonal through acquisitions of large dealers in Missouri, New York, and Connecticut. As such, it's even more challenging for us to be profitable in December quarter due to increased seasonality.

Combine this with an industry, whose units are more than 50% below the pre-great recession levels, and you get a much better perspective for how well our team performed in the December quarter. This also provides a sense of the efforts we undertook to right-size the business in a manner that should yield even greater future profits at lower industry unit levels than before.

Turning to our balance sheet, at quarter-end we had approximately $18 million in cash, however, we have substantial cash and liquidity in the form of unlevered inventory. Inventories were up about 17% to $278 million, given the growth we saw, we wanted to be sure we have the right product heading into boat shows in the two largest quarters of the year.

Turning to our liabilities, our short-term borrowings increased year-over-year due to the increase in inventory. Sequentially, customer deposits increased 15% from September and they increased 9% on a year-over-year basis. As we have said many times, this line item can be lumpy and it's tough to get a good read on our business by the percentage increase or decrease. As an example, customer deposits may be smaller when there is a trade involved, yet the future sale could be significant.

We are one of the best capitalized companies in the marine industry, and our well-positioned balance sheet is supported by increasing cash flow from an improving sales and profit environment. We ended the quarter with a current ratio of 1.67 and total liabilities to tangible net worth ratio of 0.79. Both of these are very strong ratios. Our tangible net worth stands at over $240 million. We own more than half of our locations, which are all debt free and we have no other debt other than our inventory financing.

If you look at current trends, we already mentioned that the December quarter ended with a good momentum. That momentum has continued into the month of January and into the boat shows that we're participating in so far. January will show year-over-year growth. Having said this, historically in the March quarter, March is usually as big as January and February combined. So while we are encouraged by current trends, I would remind you that we had good trends last year followed by a weak month of March due to weather. While we did not give formal guidance, I think it's prudent for me to point out that the December quarter, while very exciting and encouraging is the smallest for us in the industry.

For MarineMax to produce meaningful earnings, we need to perform in the seasonally larger quarters. Given the issues we have had with weather the last few years and the volatility that this recovery has had especially for the key segments that we participate in, we believe earnings expectations should remain muted until we are able to fully ascertain if the type of growth we reproduce is sustainable. Once we get through the March and June quarter, we can conclude if what we're seeing so far continues.

And with that, I'll turn the call back over to Bill.

Thank you, Mike. We've entered our prime selling season energized by the positive impact new boats are having on sales. We are also finally seeing our traditional segments starting to gain some traction, which should help us drive growth in our sales as core segments finally start to participate in the industry recovery. Our customers' enthusiasm and energy about the upcoming boating season is definitely growing. And this is where our team can and should excel in getting seasoned boaters and new boaters on the water in a boat sold by MarineMax.

With our selection of new products and our one-stop solution for all of our customers' needs combined with our commitment to putting customers and their families on the water to positively impact their lives, we know we truly have a great effect on improving their quality of life. This approach continues to provide us with a competitive advantage.

Our team is very busy this quarter with boat shows across the country. We are encouraged by the increasingly positive signs in our economy such as the stock market unemployment, housing recovery, and yes, low oil prices. Couple these external factors with the new products and fundamentally a healthy boating lifestyle and the aging fleet of boats that are out there among the many customers, one can understand why we in the industry are seeing better results.

While we have stayed disciplined and will continue to heed this approach, we are always in discussions with dealers to join our family. With 54 stores today, we will look to augment and complement our stores by adding strong market locations. However, we will only do this if the terms are compelling. And we believe that the additional stores will contribute sustained levels of profitability.

MarineMax is the industry leader, and we are committed to building and strengthening our presence within this rebounding industry. Let me again thank our team for their efforts, for their ongoing commitment, and their passion for our customers, which ultimately drives our success.

And with that, operator, we'd like to open the call up for questions.

Thank you. (Operator Instructions) We'll go first to James Hardiman at Wedbush Securities.

Hi, this is Sean Wagner on for James today. Just got a quick question. What was the growth of new boat sales in the quarter?

So our same-store sales growth, which was up 45% was - units were more than 50% of that growth. So, say that we were up 25% in units, 23% in units. We saw good growth in new boat sales. So, new boat sales will be up about that same percentage overall.

Yes, pretty close.

Yes. What we did -- we had big boat sales during the quarter, but we certainly had small boat sales during the quarter as well.

Okay. And how do you anticipate ASPs trending over the next few quarters?

I think as our main - as one of our primary supplier Sea Ray is introducing some smaller products a 19 and a 21, we should sell enough of those that the potential for the ASP to actually come down exists. But that's a good thing, we're just selling more units overall.

And the success thus far at the shows was Sea Ray's 19 and 21 has been very encouraging. So they didn't have smaller boats that were new for quite a while. And so they're being very well received. So I would echo Mike's comments there.

Okay. And how is the availability of the new products specifically from Sea Ray? I know you've spoken in the past about shortages.

Yeah. The larger yachts continue to be a challenge, they're starting to come in. But they open up the Sykes Creek Plant to help augment that, although it will take a little while to get that up and running. The smaller boats, I think they're doing a very good job getting them to us and I expect that demand will exceed supply here as we go through the shows, but it's very encouraging with the new products.

Okay. I appreciate that.

Thanks, John.

Thanks, John.

And we'll go next to Jimmy Baker at B. Riley & Company.

Hi. Good morning, guys. And congratulations on an exceptional quarter here.

Thank you, Jimmy.

So it seems like a very exciting time here for your business, earlier this week, I saw your big announcement that you're looking to add a full 100 people to your sales force, that strikes me as a fairly significant increase, not to say you don't have the demand to support it. But thus far, you continue to show really nice expense leverages as comps improve, clearly the case in fiscal 2014 looks like you're off to that same kind of start here. How should we think about any change to the SG&A structure, the model and in terms of incremental flow through from your hiring needs?

Well, first of all Jimmy, hiring 100 additional sales team members are primarily it's a long-term focus, long-term being over the next 12 months to two years, three years, I mean we're always looking for good team members. But as business starts to improve, we need the additional team members and it takes a while to get them onboard, get them trained and get them producing. So the SG&A expense for most of them is a small base salary and they are on commissions. And so as they start producing, that's not a problem for SG&A.

Yeah. I wouldn't expect that the way you model the business traditionally is going to change because of that, I think honestly it will give us more potential add backs, if you will, and potentially could help the top line as well.

Okay, great. And then you called out strength in Azimut, Hatteras and Ocean Alexander on the big boat side. And we've heard from a few other yacht OEMs that are telling us they've been able to take advantage of -- I don't want to call it delays, but let's just say long lead times to get some of these new Sea Ray L-Class yachts. Would you say that dynamic partly explains the strength you're seeing in the brands you outlined? And I guess to take that one step further, just to the extent buyers are choosing something else due to the Sea Ray lead time, do you see an opportunity to kind of recapture that trade-in once availability improves?

Jimmy, the strength -- when we call out larger the Azimuts, Hatteras and Ocean Alexanders, those really don't compete with what Sea Rays bring into the marketplace. We're talking 70 feet and above. And so our specific comments would not impact or correlate with the strength or the cadence of product coming out of Sea Ray from the 65s or the 59s. We may be addressing your point, we certainly see very strong interest in customers for those models. And once the models are fully integrated and out in the field, we think Sea Ray is going to have dramatic share growth in that -- with really any of the new models that are bringing out. That's what the story has been so far. So we think whatever share they've lost, they'll gain that share back.

Okay. And then just lastly, I recognize the need to manage expectations here and that a plus 45 comp is probably not sustainable. But that said, you're up against a very easy comparison here in the March quarter. And you talked about really back-to-back bad years of weather for the industry. Do you think you pulled forward any sales out of the March quarter. And I guess just given your backlog and what you've gathered from the boat shows so far, how would you characterize mix in the March quarter to sort of tie this all back in the margins?

Obviously the backlog is more normal of our normal backlog, not heavily weighted or not weighted disproportionally to some of the larger product that we saw in the December quarter. That's not to say we won't end up having more of those larger sales as the quarter progresses. But the backlog is more normalized. So I wouldn't expect based on that any type of margin erosion from a mix perspective.

We're encouraged by what we're seeing at the boat shows, Jimmy, and but we're also very cautious, as an example, Boston got hammered, you all missed it, everybody missed it in New York with the blizzard that - a few events like that can have a dramatic impact on the March quarter, as we've seen in the last couple of years. So with bigger boat sales that contributed to our performance this quarter, we need to get through the March quarter and the June quarter and we'll know a lot better.

Okay. Fair enough. Well, thanks very much for the time and good luck in the selling season.

Thanks, Jimmy.

And we'll go next to David MacGregor at Longbow Research.

Yeah. Hi, this is Shane Rourke sitting in for David this morning. Thanks for taking my call. On the last call, we were talking a little bit about how you're making some efforts to clear out some non-current inventory and I didn't think it was a big problem, but I was wondering if that has changed at all, if progress has been made sort of where we stand there at this point?

We continue to understand that as new models in particular come out, you've got to clear the decks for the older models. And so some of the reduction in margin that we saw this quarter was attributed to basically pricing the product right that is being replaced. And we feel very comfortable right now with our inventory level and the aging is not something that really has us worried, and in fact I'd say we're probably in better shape than we've been in a bunch of years.

So we'll keep the focus there, at the end of the day when a model is being replaced or it gets to be a year older or thereabouts, that erodes the margin because the buyer is looking to more of a discount. And so it's a focus in our company and we understand that we've got to keep our eye on the ball there and keep moving out the older products, or those products which are going to get replaced. And so we made substantial progress this quarter and have been continuing to make progress.

Okay. That's helpful. And just switching gears quick. You've said you're definitely still sort of in the market for acquisitions and so forth. I'm just curious do you see anything different in the market in calendar 2015 that could either sort of speed that up or slow that down anything going on there that we should know about?

Well, there's a couple of things, Shane. One is the earnings of some of the dealers that we're interested in becoming part of our family, their earnings are looking better or looked better for 2014 than they did in previous years. And additionally, with the many brands we have today especially if you take Azimut and Ocean Alexander and the ability to leverage those brands into potential acquisitions in markets that we're not in right now, offers an opportunity to them as well as to us. So we'll continue to make sure that what we do is right for our shareholders that we'll get future earnings out of it, then it makes sense. But at the end of the day, it's looking more attractive for not only potential acquisition, but also for us as the shareholders.

Okay. Thanks a lot.

Thank you, Shane.

(Operator Instructions) And we'll go next to Mike Swartz at SunTrust.

Hi. Good morning, guys.

Hi. Good morning.

Hi, Mike.

Hi. I just wanted to talk about and you mentioned it earlier in your commentary just about Sea Ray bringing out some of these smaller deck boats, I think the 19 and the 21 you mentioned. And where did they have or they're offering these in both outboard and inboard propulsion systems? Could you just kind of talk about what you've seen thus far as far as maybe consumer interest in one propulsion versus the other? And maybe looking forward how you would expect that to impact you in terms of market share, margins or any of that good stuff?

Well, as you mentioned Mike, the 19, 21, the 27 are available in outboard not only just sterndrive. And for a lot of the markets, take the Northern markets, there is still a preference for the stern drive and we'll continue to have very good sales with the sterndrive market with these new products and we're seeing that. But if you take the coastal markets, especially Florida, and even parts of Texas it's more outboard focused and so to be able to have outboard product with Sea Ray will absolutely help our market share and will open up the doors to many buyers that we wouldn't get when they were just strictly sterndrive. So we're very excited about the outboard product but it doesn't fit in every market and there's still advantages and disadvantages to both. And so we're very cognizant of that and take markets like Minnesota it's still a sterndrive market. But yet if you look at the East Coast to Florida it's very outboard focus, so to have that product is very important to us. So we thank Brunswick for that and we're very excited to be able to grow market share with it.

And then one question. You also kind of touched on the charter business and namely the Aquila catamarans, if I said that right, getting into selling those to private customers. I mean as you think about an understanding it's not material now. I mean how should we expect that to maybe show up in the P&L? Is that something that will be included in same-store sales or is that more of a direct sale that will flow through differently?

No. It'll show up in same-store sales as we go forward, but please understand that we're having to ramp up production. We first had to supply the charter fleet, and we're still growing the charter fleet down to be the eyes with the products. So the manufacturer, we're just now starting to get in their new 443, which is a 44 foot, three cabin boat with a full beam-master that's up. And so having that product available for our stores it's been a challenge right now, but they'll start ramping up as we go forward. And same way the new 48, that's either a three or four cabin yacht, but it's got its place. It gives a lot of volume, a lot of space, a lot of accommodations and there is a retail market for it but it's going to be very slow coming because it's 30 days across the ocean and it's also - they can only ramp up production so far and maintain the quality, which is what we want to do.

Mike, in the transactions that we end up doing in other countries, we're setting up, call it dealer or distributor relationships and that type of a transaction would not go through same store sales. And that would end up being more of a fee based business between us and the manufacturer. So we've done some of that today, but that's certainly not material either.

Okay. Great. Thanks, guys.

Thanks.

Thank you.

Our next question today is from Greg McKinley at Dougherty.

Yes. Thank you. So I wanted to talk about product level margins. You've indicated they're healthy. But I wonder if you can maybe give us a little more color there? How are they shaping up, what you saw in the December quarter versus either maybe the last peak cycle or what you experienced in 2014?

Historically, when we look at brand-by-brand and model-by-model, our margins have been approaching peak for the last probably a year. And then when you look at some of the new models, they're exceeding peak. The demand, the pent-up demand is so strong that they're transacting at even higher than we historically had transacted. So the new models that we sold in the December quarter were transacting above what we normally sell boats for. The existing models were transacting at not always at peak, but certainly comparable with where they were in 2014 or where we would've expected them to transact during the quarter. So margins were fundamentally sound and on track with what we expected.

And then the larger yachts obviously are lesser margin.

Yeah, the larger yachts, you're going to get 10%, 11%, 12% margins on some of those larger yachts in that neighborhood.

Yes. But taking sales mix out of the equation, product margins sound to me like they will improve later in the year as more of your sales come from - you'll just have more fresh new models from Sea Ray?

Correct.

Yeah, so if we would have stripped out any of the mix from the -- I'd say the explosion of boat sales and then the larger boats, our margins would have probably been down a little bit because of us moving out some of the models that are being replaced, which is what we had told our bay to expect. But not a lot, they would be down just a little bit kind of in line with where we would have expected.

Okay.

Yeah.

Okay. So, we called out Azimut, Hatteras, Ocean Alexander. Can you give us a sense for what kind of dollars we're talking about related to those products in relation to what you may have experienced a year ago.

I think big picture.

-- for products that fit those description?

It's probably better to think about what drove our same-store sales growth. So if we're up 45%, the unit growth was near 25% for boat sales and new boat sales were around that same number. And then the difference would be just an expansion of the average unit selling price because of a handful of the -- and it is a handful. It doesn't take too many $5 million or $6 million yachts to add a fair amount of revenue in a small quarter like December quarter.

Yes. Okay. Now you talked about sales momentum accelerating as the quarter progressed and that January has continued to demonstrate that. So I guess just by definition, December must have comped more than 45%, maybe 50% some percent. Is January literally comping 50% to 60% then?

January is going to be a good month. But I got to repeat that January is a small month in the quarter. So I think the key point is if you look at January and February and combine them, March is as big as the two of those combined and so our cautionary language while - certainly trends right now are encouraging.

Yes.

Our cautionary language is we need to really get through the boat show season, and get through the month of March, let's see if what we saw in the December quarter and January here has sustained and if it is we'll have a nice quarter and if it isn't obviously we'll talk about that. But then obviously the June quarter is just critical for us to - we have high earnings expectations for ourselves and certainly there are decent earnings expectations out there for the company, I think more than doubling from last year. And I think just my prudent cautionary language is let's stay muted until we get through this, at least this quarter, then take a look at what's going on in the June quarter. Right.

Yes, okay. Thank you. And then you talked a little bit about the regional preferences for different propulsion systems. Can you give us some context for what drives those?

If you look at the outboard market, it's so full of product that is outboard focused like fishing boats and pontoons et cetera. And there is a mentality that goes around, well, I want an outboard because it's mounted to the back of the boat, it must be easier to work on and all of those things that go with it. And so there is just a preference for outboard power. However, if you go up into the Northern markets, the advantages of a stern drive, you don't have it hanging out at the back of the boat and you've -- it's not in your way at the swim platform and that type of thing, people prefer the sterndrive to the outboard.

Okay.

Especially when it comes to rotor boats, deck boats and that type of thing. So there is a place for both and as I said before, we're just really excited that we now have Sea Ray outboard powered product to offer because there is a lot of people that just are not aligned with buying the sterndrive.

Yeah, okay. Thank you.

Thank you, Greg. Thank you.

Moving next to Seth Woolf at Northcoast Research.

Hi, guys. Congrats on the fantastic quarter.

Thanks, Seth.

Thank you. So, just two quick questions, I guess first, it sounds like you guys are ahead of plans with moving the older inventory. So, I guess as we think about gross margin throughout the year, I was hoping you could remind us the cadence of the new product introductions and when you guys will actually be getting these to the store, so that we can kind of put everything together and think about the gross margin in the right way?

Well, obviously, as the new product set becomes more available and please do not misunderstand, we could use a lot more of the Sea Ray new product, especially the 65s and the new 59 as an example, and some of the deck boats. So, I think the supply and demand will - the demand will outpace the supply. So, it's not like we can get everything we need right now. What's encouraging is we are starting to get what we need. And, as such margins should continue to rise as we're able to introduce more and more of the new product. But - so, as far as gross margins are concerned, I wouldn't get too aggressive that they're going to just jump up immediately, because we've got to get the product first. And we are clearing the deck, and we've made a lot of progress, and we feel good about where we are right now. But, at the end of the day, it's a lesser margin on a boat that's being replaced and for sure one that's got a little bit of beige on it. So, we're pushing hard in that direction.

Okay. And then the second question is, if we look at some of the categories you've had - for a number of quarters now, you've called out the strength in some of the bigger boats. And, I want to say maybe the last two quarters, you've seen some improvements in the smaller boats, the 30-foot boats? And then to follow up on an earlier question, I was just kind of - I was hoping you could share somewhat the consumer responses to those new SPX lines and then additionally at what point are you going to feel comfortable that these -- the growth is going to be more sustained in these categories because a lot of the bigger boats, it sounds like they're already basically sold through the supply that you're going to get this year. So the delta in any of the sales upside is probably going to come from the smaller boats, that's fair.

Yeah. I think that's correct Seth. To answer your question on the 19 and 21 SPX very - being very well received, both outboard and sterndrive and we think that will continue. We're in some - we're in Baltimore show this weekend and we follow that Dallas next week and New York last week and so, Atlantic City in two weeks and then we move into Miami and so some pretty big shows still ahead of us and I think that product will continue to be very, very strong. And to have that back into the portfolio is very important for us. And I think we'll start saying this the advantages of it.

But now if you look at the larger product, 65s continue to be very strong, 59s and of course see even the larger Azimuts above that are still lots of opportunity and that market is very vibrant. So take the 27 through the new 36, I mean 30 foot SLX, I mean it's still very, very strong. And so that means higher margin that means, low lease or sale for us and at the end of the day, it will remain market share.

Great. Thanks guys.

Thank you.

You bet.

And we'll go next to Joe Hovorka at Raymond James.

Good morning, Joe.

It looks like Joe's line has disconnected.

We must have answered his question.

And we'll take our last question today from Jimmy Baker at B. Riley.

Well thanks for the follow-up. Just had a couple here. So, earlier I think you mentioned that you're seeing strengthen Azimut above 65 feet. Any reason why you're not experiencing strength there in kind of the 40 foot to 65 foot range or particularly, may be you could speak to their reception of their new 50? And then separately just to follow up to the question on your acquisition strategy. I know you've been a very disciplined buyer but as your confidence in the industry, recovery is improving, might you be willing to step up your valuation range, it just seems like especially if you're able to use your stock as currency or structure it in some sort of earn out that you have a real opportunity to present a valuation arbitrage to your shareholders here?

Well, I mean your first question, we're doing very well with the smaller Azimut yachts and Atlanta's product which is built by Azimut, in less than 65 feet. But - so our comments were that the market above 65 foot is still very strong for the product as well. So, but other smaller products are doing well and we do not have a new 50 from Sea Ray as an example, it will be coming. And so, in the 40 foot, 50 foot range, we're still struggling some of the older product. And Azimut is a great opportunity understanding that in some cases, they are different buyers, but in some cases, when someone wants a new 50, and we don't have it with Sea Ray, they'll buy the Azimut.

As far as acquisitions, we don't really see stepping up the range, we don't - we're the only dealer out there that's making any acquisitions. And at the end of the day, it's becoming part of the family as to whether we would use stock.

It's possible.

It's possible, but at the end of the day, the discussions are going very well, and when they makes sense, we'll do it. But we're just not going to get ahead of ourselves and get too far beyond what the model is that we've stayed consistent with since we formed our company.

And we have entertained earn-outs with some people, obviously, the people we're talking to believe the future is a lot brighter than the past. So that helps them to get rewarded to if they're able to produce in the future.

Okay, excellent. Thanks for the color.

Thank you, Jimmy.

Thank you, Jimmy.

And as we have no further questions at this time, Mr. McGill, I'll turn things back over to you for any additional remarks.

Thank you, operator. And in closing, I'd like to again thank all of you for your continued support and interest in MarineMax. Mike and I are available today, if you have any additional questions, and again thank you our team for a great quarter.

Ladies and gentlemen, once again, that does conclude today's conference. And, again, I'd like to thank everyone for joining us.