MarineMax Inc (HZO) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the MarineMax 2015 fiscal year-end, fourth-quarter earnings conference call. Today's call is being recorded. And now for opening remarks and introductions, I'd like to turn the conference over to Mr. Brad Cohen. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining this discussion of MarineMax's 2015 fiscal-year and fourth-quarter results. I am sure that you have all received a copy of the press release that went out this morning. But if you have not, please call Linda Cameron at 727-531-1700, and she will email 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 Mr. Mike McLamb. Mike?

Thank you, Brad. 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 by 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 in the level of consumer spending, the Company's ability to capitalize on opportunities or grow its market share, and numerous other factors identified in our Form 10-K and other filings with the Securities and Exchange Commission.

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

Thank you, Mike, and good morning, everyone. As we look back on physical 2015, our team did an outstanding job driving top-line and earnings growth. The improvement came from steady market share gains and from the significant brand and segment expansions which we completed during the downturn. I am very proud of the hard work our team does every day exceeding our customers' expectations as they vote with family and friends. This customer-centric approach is fundamental to our core operating philosophy and is ultimately what drove the growth and will keep propelling us ahead in the future.

We ended the year with a strong fourth quarter as same-store sales increased over 17%. This strong double-digit increase follows a 10% increase last year. The growth, coupled with strong expense management, resulted in comparable pre-tax earnings increasing of over 50%. Margins were impacted mostly by greater used boat sales. Additionally, with the rise in new boat sales, our higher-margin businesses shrank modestly as a percentage of revenue. However, consolidated margins sequentially improved again, and we believe that margins have the potential to improve on an annual basis as more new models arrive, coupled with generally improving industry conditions.

As we have stated throughout this economic recovery, new innovative product sells. As our manufacturers get us new models, the demand continues to be robust. All of our manufacturing partners are stepping up their new-product development efforts after years of limited investment. It is great to see the products and the demand the new models are generating and giving customers with aged boats a reason to trade.

Certainly, the new models are contributing to our growth in market share gains. Together with our customer-centric approach, pricing strategy, our focus on premium brands, the training we provide our team and customers, and our various fun boating events we provide for our customers, we produced another quarter and year of industry-leading results.

The date of the industry and the key segments we operate in was mixed in the quarter but seemed to end a strong note. The stern drive segment continues to be pressured, but we believe it is due to day boaters in certain markets switching to outboard power. This is certainly true in coastal markets where we have more outboard-focused customers.

The expansion we executed during the downturn to add more outboard power products like Boston Whaler among others is helping us overcome the challenges the stern drive segment has been facing. And now Sea Ray is producing outboard-powered day boats that are certainly resonating in the marketplace. This is also helping us capture business as customers migrate to this power choice. We are pleased with 22% same-store sales growth and profits doubling for the fiscal year, which validates that our strategies are truly working. Certainly, we gained market share this past physical year.

For the last several quarters, I have commented on the success we are starting to see from MarineMax Vacations, which is our charter business we launched a few years ago in the British Virgin Islands. Also, we are experiencing success from the private sales of the power catamarans that we contract-manufacture for that business. While combined, the revenue is still immaterial to MarineMax on a consolidated basis, the business was GAAP profitable this year and certainly cash flows positive.

On a related note, while we are likely the newest and smaller charter company in the BDIs, we won a prestigious award that named our operation the best charter company in the islands. Our team there follows the same customer-centric focus that our store has here in the States.

And with that update, I'll ask Mike to provide more detailed comments on the quarter. Mike?

Thank you, Bill, and good morning again, everyone. For the September quarter, our revenue increased to just over $189 million, driven by strong same-store sales growth of 17%, which is on top of 10% same-store sales growth last year.

The quarter started with a strong July and ended with an even stronger September relative to the prior year. The same-store sales growth was over 80% unit driven, with a modest contribution from average unit selling price.

As far as geographic comments, Florida, New York, Texas and the Midwest were the strongest. For the quarter, we grew gross profit dollars over $5 million, but our gross margin decreased from last year, as Bill mentioned.

Let me add that our new-boat margins did increase year over year for the second consecutive quarter, but the impact from mix led to the year-over-year consolidated margin decline. Selling, general and administrative expenses were over $41 million for the quarter. Excluding the $1.6 million gain in last year's fourth quarter, comparable SG&A as a percentage of revenue improved to 22% from 23.4%.

For the quarter, interest expense was up slightly year over year as a result of increased borrowings from additional inventory to support the growth in sales.

As for taxes, given our increased earnings and the improving industry conditions, we concluded that most of our deferred tax assets that were fully reserved in the downturn would be realizable. The accounting for this reversal of the reserve results in a tax benefit of over $27 million. Another implication of this is a very large increase to our tangible net worth, as the asset is now reflected again on our balance sheet.

Further, it's important to note that MarineMax will be providing a tax provision or expense in the future. However, we are not expecting to pay significant dollars until we absorb about $50 million of NOLs and other deductions. We expect that the tax rate we would use for the expense will be in the range of 38.5% to 39%. After considering the tax benefit, our net income for the quarter was $32.8 million, or $1.32 per diluted share.

However, for comparison purposes, we believe the best way to evaluate our results is to ignore the tax benefit and a $1.6 million gain from last year's fourth quarter. As such, for the 2015 fourth quarter, our earnings increased over 50% to $5.4 million, or $0.22 per diluted share, as compared to $3.6 million, or $0.15 per diluted share last year.

For the year, I will highlight a few items. Revenue increased to over $751 million, driven by 22% same-store sales growth, of which about two-thirds was unit driven also. On a pre-tax basis, excluding the unusual tax benefit and gains in both periods, our earnings grew over 98% to $19.3 million, or $0.77 per diluted share, as compared to $9.7 million, or $0.40 per diluted share last year.

On to our balance sheet, at year end we had over $32 million in cash. Keep in mind we have substantial cash in the form of unlevered inventory. Our inventory at year end was about $274 million, which is up modestly from last year. The aging and mix of our inventory also continues to be at a healthy level.

As we start the December quarter, we do not have an elevated level of used boats like we did as we started the June quarter and the September quarter.

Turning to our liabilities, our short-term borrowings were about $137 million at year end, which was up due to the increased inventory given improved conditions.

While not the best predictor of near-term sales, customer deposits continue to be up meaningfully year over year with a 16% increase, which is the highest September balance in many years. Generally, we believe larger boat sales should remain strong for the foreseeable future.

Based all this, our balance sheet is extremely well-positioned. We ended the year with a higher current ratio of 1.84 and stronger total liability to tangible net worth ratio of 0.65. Both of these are very strong ratios.

Also, given the benefit of recognizing our deferred tax asset, our tangible net worth is now over $282 million, or more than $11 per diluted share. We own over half of our locations, which are all debt-free, and we have no additional long-term debt.

Turning to guidance, we are providing earnings-per-share guidance for the full fiscal year ending September 30, 2016. This guidance is intended to provide investors an understanding of management's expectations for the full fiscal year. Our guidance does take into account that we are up against a strong 22% same-store sales growth from fiscal 2015. Generally, industry sources believe we are likely to see mid-single-digit unit growth in 2016. Our guidance assumes we will experience more than that given our long track record of performing better than the industry. This, coupled with a modest contribution from average unit selling prices, should yield top-line growth in the neighborhood of 9% to 10%, with the potential to realize more.

With our historical earnings flow through expectations of 12% to 17% as well as other factors, we expect diluted after-tax earnings per share to be in the range of $0.60 to $0.70. This is a significant increase from our adjusted but fully taxed earnings per share of $0.47 in fiscal 2015. The adjustments to 2015 eliminate the gains in the deferred tax asset reserve reversal.

A few other thoughts as you think about 2016. We are up against a profitable December quarter with same-store sales growth of 45%. Historically, MarineMax and other marine dealers lose money in that quarter due to winter setting in and the holidays. A more normal December quarter than last year would result in negative same-store sales growth and a small loss for the quarter.

Of course, the team will try to do better than that, but I wanted to set prudent expectations given our past experience with the December quarter.

Lastly, I will comment on current trends. We ended the year on a strong note. And October is poised to finish ahead of last year's October. Consistent with what we have been seeing for a while, our backlog is greater today than a year ago. That said, we certainly have our work cut out for us this quarter.

With that update, I'll turn the call back over to Bill.

Thank you, Mike. Another positive fiscal year is complete, and our team worked very hard to drive the results and position us to capture additional growth in earnings as we move forward into physical 2016. To that point, typically one of the largest shows in our industry starts this Thursday in Fort Lauderdale, and you can be sure that we have a large presence with over 100 units displayed in 11 different venues. Crowds and sales at the earlier shows in September and October have been encouraging, so we look forward to great weather and sales at Fort Lauderdale.

Looking back at the last few years, our revenue is gaining significant momentum with no material acquisitions to speak of. We talked about the brand expansions that are paying off. Our new-unit growth has been very strong over an extended period of time, and we expect that to continue with the increased momentum of new product investment.

We're more bullish today about a steady and sustained recovery than a year ago; thus, the return to earnings guidance for 2016.

Overall, the response to the brand and segments that we operate within have been positive and the customer continues to seek new products, which is a driver of the ongoing recovery. That said, it is critical that consumer confidence remains positive and innovation from the manufacturers continues as we progress our way to historical levels of revenue and earnings.

At MarineMax, we continue to work to stimulate consumer interest and ultimately sales. We remain focused on driving repeat business while attracting new customers with broad and diverse range of products. Our approach is the key differentiator for us and will continue to drive our growth to the selective expansion of brands and accretive opportunities as they emerge. We also have a well-funded balance sheet to support our growth.

As we look ahead, we are excited by the increasing demand that is building, evidenced by our sales backlog and a positive reaction we saw at the start of the fall boat show season. With appropriate inventory levels, a balance sheet that is the strongest it has been in the past 10 years and a highly motivated team, we are positioned to create additional value as we focus on building upon our strong results.

We continue to evaluate potential retail dealers and marina acquisitions and will add them to our family when justified from a market, their team and financial perspective. Earlier in the year, as an example, we purchased a strategic operation in Fort Myers, Florida, which is starting contributing meaningful right out of the gate.

We've been active buying back our shares pursuant to the authorized in terms we announced. We have repurchased around half of the authorized million shares to date, and we'll keep doing so accordingly. With our one-price approach, our commitment to customer service and our one-stop solution for boaters' needs, we are well-positioned to capture additional share.

Our team is committed to not only driving profitable sales but also ensuring the MarineMax experience is provided to each and every customer. We thank our team for their efforts, and we look forward to building on our earnings in physical 2016.

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

(Operator Instructions) Ben Bienvenu, Stephens.

Nice quarter.

Thank you.

Mike, in light of your commentary around October being ahead of last year, is that in reference to units or total revenue? And then can you remind us of the cadence of sales in Q1 of this last year?

Yes, it being both units and total revenue would -- are ahead for October last year. Last year's December quarter was one pretty atypical momentum built all the way through the December quarter. So, usually our business drops significantly around the holidays. And last year, it plowed right through to 12/31 and then right through to New Year's. So we were up against the tough quarter.

Certainly, October is a great month out of the gate. We are ahead. We have positive same-store sales growth. But we need to really perform in November and December. And the team is going to do all they can to do it, but I think it's prudent to think that comps would be down in the quarter and we probably lose little bit of money in the quarter.

Fair enough. And then, Bill, I think on the last call you'd referenced some of the new Sea Ray 65 starting to show up. How is that product making its way to your dealers? What's the velocity of that? And is your outlook for the lion's share of the new units making its way to your dealers still for the back half of FY 2016?

We are encouraged by the new products, and the sales have been strong. And we do have a backlog of the 65s and 59s, and we're seeing progress towards getting the product earlier to the customers.

We're also having great success with Azimut with some of their new products. And you know, Ocean Alexander is important to us now, and they've got a new 70-footer that's coming out. So I think there's a lot of encouraging things for next year.

You know, the Fort Lauderdale show, which starts day after tomorrow, is a pretty important show for us because that is normally larger products that are sold there. And so it will help set the stage for 2016. So we still have that ahead of us, so we'll know better after next Monday exactly how that went. But, all in all, consumer confidence being over 100, and hopefully that will continue to progress. I think there's some very good signs for next year.

Great. And then maybe just lastly, looking at some of the non-boat sales service warranty, can you talk about your expectation for the attach rate and sales growth of those categories and maybe what that looked like in the most recent quarter?

Yes, I can comment. All of those businesses are doing fine; they're healthy. Some more directly increase or decrease with sales like F & I or brokerage or things like that. Service and parts and accessories have a hard time keeping up with a 22% annual growth rate, which is a good thing. It tells you that the product quality is pretty good. You wouldn't want your service and parts to necessarily keep up. And so that does pressure margins, mix just a little bit. But, generally, those businesses are healthy and doing what they're supposed to be doing.

All right. Great. Thanks. Best of luck.

Jimmy Baker, B Riley.

Good morning. This is Austin on for Jimmy. When do you guys expect to get back to the gross margin percentage range posted 2012 through 2014, and how does your outlook on new-boat margins or mix change that view?

You know, I've commented, the last two quarters our new margins have actually been up year over year. Our issue, I think, of late has been when you look at the first half of this year, we had 35% same-store sales growth in the December quarter and the March quarter. Those are quarters -- Bill just said it, those are quarters that are hinged on big boats because of the Fort Lauderdale boat show and the Miami boat show.

So we had -- which means we are taking more trades. When you're selling bigger boats, you're taking more trades.

So as we started the season, which is the June quarter to the September quarter, we had an elevated level of used boats. And maybe Bill and I should've guided a little bit to, hey, we're going to have an increase in used-boat sales, which carry a lower margin but it's hard to predict when things sell.

And then you could also add to that, Austin, that used boat inventory that we had are normally older than they would have been historically. So you're getting trades that are eight, 10, 12, 15 years old because of the downturn. They weren't traded earlier. And then a lot of cases, we wholesale them out. So we recognize the revenue, but there's very little --

Zero.

Very little income if any on it. But it's the prudent thing to do because a 15-year-old product is harder for us to support with everything that we do for the customer. So that's probably the biggest impact that hit us this last year on the used margin was the fact that we wholesaled a lot of boats. And, as such, it was because of the aging of the trade-ins.

So, fundamentally, new is going in the right direction, which it is. As we work through some of the challenges Bill mentioned around wholesale, I think the opportunity is there in 2016 to have the margin tailwind that we would all expect.

Our guidance does not assume a whole lot of that, and I think prudently, we're -- we haven't had -- in the last four quarters in a row, gross margins consolidated have come down on a year-over-year basis. So until we actually start seeing things going in the right direction, we are not going to change our guidance until we see that. So that's what is baked into our guidance. It's not a whole lot of improvement in the gross margin on a year-over-year basis yet.

Okay, that's helpful. And then when do you think the net impact of lower fuel prices have been or will be to your new boat sales?

Well, obviously, lower fuel prices helps us. And it's a positive as far as the feeling that customers get that, hey, I can -- I'm paying less for fuel, I can take a little longer trips, do that type of thing. I don't think it impacts the decision a whole lot. I think it helps the consumer feel a little bit better. But at the end of the day, the cost of fuel is not the deciding factor on boating or the purchase.

But, for sure, it's good news, and I think on some of the smaller boats in particular, it's aided in some of the sales. But hopefully it will continue to stay low. But more important than that is consumer confidence. And the feeling that the consumer has about the future is really the biggest driver of our success and with our discretionary item thing called boating.

Okay. And then just one more from me. Can you give us an update on your acquisition outlook? And are you in any active discussions that you might expect to lead to a deal this off-season?

Yes, we've been in active discussions for quite a while. And, you know, it's -- acquisition, I almost hate the word because it's really you're merging a company in. You are acquiring them. But at the end of the day, what we're looking for is the market and the people more than any other single thing. In doing that, when the acquisition is complete, everybody has got to feel good about it. And even though there's compromises perhaps on each side a little bit, there can't be a lot. And so it's got to be right for both the people joining us and also the right for MarineMax and our shareholders.

So it's delayed us doing some acquisitions that perhaps we could have done in 2015 or earlier. And so we are in active discussions is probably the best way to describe it, and we'll announce them when they make sense.

As their earnings come up, Austin, just like ours is coming up, it makes it easier to get deals done versus when they are close to breakeven. So the further away from 2008, 2009, the more likely we'll get back to our acquisition cadence.

All right. Thank you very much, and congrats on the quarter.

Thank you, Austin.

James Hardiman, Wedbush Securities.

Thanks for taking my (multiple speakers) -- good quarter. Really appreciate the guidance here. I'm assuming you took that step based on looking at consensus numbers. So just help me understand, Mike. I am sure you have seen the consensus numbers. The Street is looking for about 10% growth. It seems like you are guiding pretty close to that. And then you threw out an operating leverage number. Maybe help us translate that.

The Street is looking for about 25% gross margin SG&A in that $170 million range. Somewhere on the margin front, it seems like the Street is maybe a little bit too optimistic. Which of those do you think is too aggressive?

And then on the tax front, just so I understand, 38.5% to 39% is what your $0.60 to $0.70 is based on. But do we -- is that going to be the actual tax rate, or do we have to sort of wait and see to see how that plays out?

Thanks, James. I would -- on an annual basis, that should be our tax rate. In any given quarter it can move around a little bit. But on an annual basis, that should be -- and it shouldn't move around a whole lot in any given quarter. And keep in mind, we're not going to pay taxes until we absorb all those NOLs and deductions.

What's baked into our guidance -- so we have generalized and generally said, hey, if you generate $1 of revenue you ought to have about 15% of that dollar should flow through to the pre-tax line. But that 15% is sort of a target or a middle. There's a range; 12%, 17%. In the current year, our flow-through was a lot worse than that -- or less than that, I should say.

And so you take that range of 12% to 17%, you know, MarineMax coming off the year we just came off of, which wasn't the best flow-through year, we are on the lower end of that range for our guidance. The Street is going to be closer to the middle of the range. That's the primary difference between us and the Street. Plus, I'm not sure everybody in the Street has a fully taxed number yet. I think everybody is close, but I'm not sure if they are all fully taxed. So that's the difference between where our numbers are and where the analysts are, James.

That's very helpful. Then, you know, over the last four quarters you've given us all of this. But maybe so that we're all on the same page, can you maybe call out in some of the quarters which were the items that affected -- were sort of unusual items that affected that flow-through number? If I recall, were there some healthcare costs earlier in the year, then there was some promotional costs in the March quarter, if I recall correctly? Can you just remind us so where that we're all on the same page as we think about quarters?

Yes, I can. Let me start by saying on an annual basis -- or on 12 months, if you look at 2015 to 2014, we actually had pretty darn good operating cost leverage. Using that 15% target, if you look at our growth in the revenue and if you take out the gains from last year and the gains from this year, our operating costs were pretty good. In any individual quarter, there may have been an increase or a reduction in cost. But on an annual basis the operating cost was pretty good. Where we had struggled is the gross margin line on an annual basis. And then really throughout the year, that's where we struggled.

In the December quarter, we had a spike in big-boat sales. And when I say big boat -- above 75 feet, 80 feet or bigger. Those carry low double-digit margins -- 10%, 11%, 12%. So that drove our margins down. That's what we talked about in that quarter.

In the March quarter, we had elevated marketing costs and elevated healthcare costs, to your point. Now, I will tell you on an annual basis we've made up those costs basically. But in the March quarter, we had elevated costs. And then we also had a mix of older Sea Ray product -- to-be-replaced Sea Ray product selling, which drove down gross margins. So now that's the second quarter where margins dropped and expenses were higher in that quarter.

In the June quarter, it was a lot of these trades selling that we talked about from the December and the March quarter growth that we added 35%. Those then sold in the June quarter, which hurt our consolidated margins because used boats and also wholesale boats, to Bill's point, carry lower margins than new boat sales or than our other margin businesses. Cost leverage in that quarter was pretty decent in the June quarter.

In the September quarter, we got a little bit of a tail of the used boats selling through. Costs were pretty good. We had some elevated marketing costs, some elevated commissions, but generally costs were pretty decent, and that kind of wraps up the year.

If you look at 2014, we had good margins and very good flow-through. So we've had some challenges here in 2015 that we certainly are working hard to overcome.

That is extremely helpful. And then I guess last question on the ASP front, once again, over the course of last year, it was extremely choppy. First quarter -- so the December quarter, you got a huge ASP benefit -- or ASP growth, I guess I should say -- from the big boats. You've guided to some ASP growth this year. Is it safe to say that December ASPs should be down, just given the huge influx of big boats in last year's December quarter? And then we'll sort of make that back up and more over the remaining three quarters? Or how should we think about that?

Yes, that's what I would expect. Because you're right. Our 45% growth we had in the December quarter, if I remember right, about half was unit driven and half was ASP driven, which that would be a big bump on ASP if you think about half of 45%.

I would say on an annual basis -- and I said it in the prepared remarks -- our 22% same-store sales growth is close to 70%, maybe just slightly less, unit driven.

So we've had a very strong unit year, very strong unit fourth quarter, which is -- to me, that's really, really good news, especially as our manufacturing partners are coming out with new models including new smaller boats from Sea Ray. And it's nice to see the health of the industry because I see the health of the industry more in units than in a handful of big-boat sales.

Got it. Great color. Thanks, guys.

Thank you, James.

Joe Hovorka, Raymond James.

Just one question. If your inventory that you have at the end of the year took $270 million or whatever was, how much of that is used inventory now? And then what was that same number last year at this time?

You know what, Joe, I don't remember the exact dollar. I do know used inventory is down. I wanted to point that out. So it's down year over year. If I was an educated guess, I'm going to say it's $35 million to $30 million, something like that.

I think that's about right. It's in the 30s.

Yes, but I don't remember exactly.

And it is fresher inventory than probably we've had in the long, long time.

You mean the used inventory specifically is fresher?

Both. Both new and used.

Okay, great. Thanks, guys.

Mike Swartz, SunTrust.

Just wanted to ask a question on the guidance. Maybe asking it in a little different way than James did, but -- and Mike, I think you said your EPS range is kind of predicated on the lower end of your -- kind of that long-range flow-through assumption we've talked about in the past. And I guess the question is, is there a reason structurally we should think about it being at the lower end maybe in 2016 and going forward? Or is -- are you just being a little conservative after some of the issues or items that we've seen in the past year?

Well, our flow-through rate in 2015, if you do all the math, was 8%. So we're -- 12% would be a 50% increase to 8%. So, we've got to improve the business. But fundamentally, Mike, no, nothing should've changed fundamentally. We ought to have the ability over time to get back to the right flow-through. Just sitting here today coming out with guidance, we think it's prudent thing to be on the lower end of the range, especially given it's a massive increase from where we just finished 2015. But that's not a signal that fundamentally there's something that's changed in the business.

And then are you assuming any uses of cash in that guidance? Share buybacks, anything like that?

No, we have our normal CapEx and stuff like that, but there's no material change to the denominator of stock. There's no acquisitions, stuff like that.

Okay, that's helpful. And then on the commentary around what you have seen thus far in October, maybe how we should think about December, does the timing of Fort Lauderdale being a week later this year have any impact on kind of either of those items?

It's kind of funny; I meant to bring that up when Bill was talking. Because October, while we probably didn't closed many deals last year in October, we would have closed some. And the fact that our backlog is up this year with Fort Lauderdale being a week later is interesting. So I think that would be maybe a more positive comment potentially.

Still, we've got a lot of work cut out for us. We're up against a tough quarter. But that is interesting.

For those on the call who don't know what Mike is indicating, October -- or Lauderdale's normally held before Halloween every year right around it. This year, it moved out eight or 10 days. So last year when we closed October, we would have potentially had some revenue and also backlog related to Lauderdale, which we don't have this year.

But we have one less week in order to deliver boats that we perhaps sell at the Fort Lauderdale boat show. So it could impact the December quarter a little bit by being delayed.

Got you. And then just finally on this whole aspect of the used boat mix and understanding that it's lower ending this year, I guess what kind of visibility do have into that over the next couple of quarters? Is it predicated on what you see coming out of Fort Lauderdale and Miami? Is that something you will have a better sense of in, say, February?

Fort Lauderdale and Miami definitely are major, major shows that will drive our used inventory availability, as are like a New York show and some other ones. We have very limited visibility, Mike, until we get through it. And for good or for bad, we never have. You know, I suspect because of the success we've had the last several years beginning to sell models, we'll have less and less of the wholesale boats that Bill talked about. And it will be more on a more normal percentage of wholesale versus maybe slightly elevated levels that we've seen of late.

Okay, great. I will stop there. Thank you, guys.

(Operator Instructions) David MacGregor, Longbow Research.

Congratulations on the quarter. Just looking back to last call, Bill, you had thought that from a timing standpoint getting a lot of the new product in 2016, you would start to come through in March and you would have a heavier presence of new product in the June quarter. Is that outlook changing now? And if so, how?

Yes, David, it is. What happened -- what I predicted did happen. We started to get more new product, and it helped. Especially with some of the smaller product with Sea Ray, which really helped our unit growth. But, you know, we also saw it from Whaler, and there's backlog right now of the Whaler 42s and same with the Scouts, the larger Scout product, et cetera.

It still has to come through, but -- so, we're not getting product at the cadence we'd like to still get it. I mean, obviously, we would like to get it and deliver it that week. But it's getting better and better. So I think we'll have less of a challenge going forward in 2016 as the manufacturers have ramped up and are starting to get now.

But the demand for the new product -- and this is really the important point, the demand for new product is very, very strong. And that's great news. But, ideally, we'd like to get it sooner if we could. And, of course, the manufacturers are working on that.

I realize there's a seasonal pattern here, obviously. But are you now expecting maybe a slightly better March quarter than you might have a quarter ago?

Yes, understanding that maybe December won't be what it was last year, which I think we have said. Because maybe timing of some bigger boats, with Lauderdale being delayed a week, and just who knows when some of these products will close. They significantly get impacted in the December quarter. But at the end of the day, you'll make up for it in the March quarter.

Okay. And then also just kind of reflecting back on the last quarter, you made the observation that indicated that promotional expense, speaker marketing expense, would not be picking up in the fourth quarter. And now it seems like maybe you did a little bit. Can you just talk about what might've changed there and why?

Well, some of it is more products. We are displaying different brands. Scarab is a bigger presence. So those are expenses that we put into boat shows as well as -- we know Ocean Alexander, and we've had a 72 Ocean Alexander that's been traveling the Northeast at the shows and dealerships and events and that type of thing. And so those run up expenses some. So the expansion of the brands has impacted some of our marketing costs.

I mentioned that we are in 11 different displays in Fort Lauderdale this year, and those are extra expenses that go along with it. But hopefully the sales more than offset that, which historically they have and will continue to.

And David, on an annual basis, as we said in the March quarter, our marketing costs have come in line. Despite being modestly up here a little bit as we close the year, they are in line on an annual basis.

Right.

Right, okay. Last question is just -- and if you said this already and I missed it, I apologize. But can you -- the used boats that you're actually selling at retail as opposed to wholesaling, is there anything changing significantly in terms of the profitability of that volume?

No, it's following historical trends.

Okay. Thanks very much.

Okay. Thank you, David.

Greg McKinley, Dougherty.

Just, I guess, a shorter-term question. How does the December quarter typically play out from a seasonality standpoint? Which months? Is it a third, a third, a third; October, November, December? Or which month tends to represent the larger share of sales? I wonder if you could give us some context for that.

Yes. It's November typically would be the bigger primarily because of all the Lauderdale deals that are closing in that quarter are going to be more likely closed in November than December because everybody's traveling and so forth. So it would be, number one, November; number two, October; number three, in terms of size would be the smallest would be December historically.

However, last year, December was (multiple speakers).

Last year was different, yes.

December was the strongest month (multiple speakers) larger boats.

December was very strong last year.

Yes, okay. Thank you. And then in terms of gross margins that we should think about shorter-term, how impactful is this comment you've made around we now have seen normalization, our used both inventories? Is that something that we can then expect to almost start showing up real-time around your December quarter margins where we'd even look for sequential improvement? Or, I guess, how should we think about that impacting shorter-term margins?

I think the December quarter is such a small quarter. It's hard to really -- when I say that relative to the year, it's hard to give a whole lot of predictability around the December quarter. But I do think as we go into the back half of 2016, the potential is there to begin to have the margin growth that we've all talked about on this call. And part of that could come from more normalized used as a percentage of our overall business because of how we're starting the year.

Yes, okay. Very good. Thank you.

Thank you. And with no additional questions, I'd like to turn the conference back over to Mr. McGill for any additional or closing remarks.

Thank you, operator. And in closing, I'd like to again thank our team for their passion and efforts and all of you for your continued interest in support of MarineMax. Mike and I are available today if you have any additional questions, and we are off tomorrow to Fort Lauderdale. Thank you.

Thank you. And ladies and gentlemen, that does conclude today's conference. Thank you all again for your participation.