MarineMax Inc (HZO) 2016 Q2 法說會逐字稿

Good day, everyone, and welcome to the Marine Max Incorporated second-quarter 2016 fiscal earnings conference call. Today's call is being recorded. And now your host for today's conference, Mr. Brad Cohen with ICR. Mr. Cohen, please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us for this discussion of MarineMax's 2016 fiscal second-quarter results. I'm 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 like now to introduce the management team of MarineMax, Mr. Bill McGill, Chairman, President and Chief Operating Officer; and Mr. Michael 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, Brad. 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 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 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. We are very energized by the performance our team delivered for the March quarter. In our March quarter last year, we produced unusually strong same-store sales growth of 27%, which is an impressive and meaningful quarter for March.

As we laid out our plan for fiscal 2017, we put in place actions and a strategy that would enable us to build upon that success. Our team executed the strategy to a high level and produced double-digit same-store sales growth of 16% for the March quarter this year.

Of course, what is even more exciting is that we increased our pretax profit by about 10 times. We were able to produce good leverage in the quarter despite some anticipated elevated costs associated with launching the brand Galleon, a new brand we discussed last quarter.

Our 12% same-store sales growth in the first half of fiscal 2016 combined with reasonable cost leverage has propelled very strong year-to-date pretax earnings growth of almost 10 times as well. What is also noteworthy is, this first-half double-digit same-store sales growth was up against a very tough comparison of 35% in the first half last year. Looking forward, we have an easier, comparison as we move through our second half of 2016.

Before continuing I would like to thank our MarineMax team for producing such strong results and doing an outstanding job of making our customers happy. The first half of 2016 should set up a strong year of earnings and cash flow growth.

Underlying our team's execution is our strong commit to delivering the boating dream by exceeding our customers' expectations. Beyond our own strategy, our manufacturing partners are innovating and delivering the right products that are stimulating demand. The new models renew excitement and enthusiasm for boating and contribute to our unit and same-store sales growth. Ultimately, these combined factors are resulting in our strong performance.

While I believe our results outpaced that of the industry in the categories we participate, the industry recovery is clearly making progress with MarineMax continuing to make market share gains. Furthermore, in certain categories it seems to be accelerating.

For example, our outboard powered products like center-console fishing boats or recreational day boats in general all seem to be gaining momentum. This would also be true for larger products that are newer to the marketplace, which are also fairly strong. This is all very good for the boating industry and MarineMax.

Another big driver of our growth is the considerable brand and segment expansion we executed following 2008 and 2009 economic crisis. We now carry more complementary brands in our stores than before, offering our customers a one-stop shopping experience.

This is allowing us to drive greater revenue. To this point we efficiently launched Galleon Yachts during the March quarter, as we mentioned in our December quarter call. The initial launch has been very successful in the Galleon segment and has been complementary to our other brands that we carry. We are excited about the future of Galleon in our lineup.

Even more exciting is the news we announced last week of our largest acquisition since 2006. We announced that we acquired Russo Marine, the largest private dealership in the Northeast with 2015 revenues of more than $35 million. Russo has a 100% brand alignment with MarineMax and is contiguous to our northern markets, allowing us to leverage inventory, leverage our marketing, our teams and customer services.

Furthermore, the coastal Rhode Island and Massachusetts markets are a great expansion and tie in naturally from a boater's perspective with adjacent markets down the Eastern Seaboard and Florida.

Additionally, the best part of the combination is the Russo team. Starting with the Russo family, who will continue to run the day-to-day operations, we have known the entire Russo team for many years and have been working very well together for many years at boat shows in various marketing events. While culture is usually the biggest challenge in any merger, in this case we think our cultures are aligned, which will mitigate risks associated with combination.

We look forward to the future with the addition of Larry Russo, Sr., his family and their team to Marine Max.

As we have stated previously, at the appropriate time we will begin to make accretive acquisitions and target markets that we believe will increase the growth profile of the Company. We believe Russo Marine is a great example of the type of marketing business we will continue to pursue as we move forward.

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. I also want to thank our team for producing a strong first-half start to the year. For the March quarter, our revenue increased by $27 million to almost $200 million. Our growth was driven by strong same-store sales growth of 16%, which was on top of a significant 27% increase in the same quarter last year. Our growth was approximately 50-50, driven by unit growth and an increase in average unit selling price.

The average unit price growth was driven by strength in larger product. Our consolidated gross margins improved slightly. However, our new boat gross margins expanded for the fourth quarter in a row, fueled by newer product. The growth in larger product and a modest mix shift away from our higher-margin businesses due to increased boat sales otherwise stunted greater gross margin growth.

As we move ahead, the opportunity for margin expansion continues as new boat margin trends develop.

Selling, general and administrative expenses decreased as a percentage of revenue to 21.8%. As we anticipated, our costs were up modestly due to the Galleon brand expansion, which includes investments for such items as additional boat show displays of advertising. We are certain such costs will be leveraged in the second half of the year as deliveries of incoming product increases.

Overall, our focus on expenses enable us to effectively leverage our cost structure.

Interest expense was up $329,000 year-over-year as a result of increased borrowings to finance our inventory.

For the March quarter, income tax expense increased to $1.6 million compared to know income tax expense last year. As we noted last quarter, MarineMax has returned to providing an income tax provision. However, we are not expecting to pay significant dollars until we absorb about $50 million of NOLs and other deductions. We expect that our fiscal year tax rate for the expense will be in the range of 38.5% to 39%.

For the quarter we generated pretax income of $4 million, an increase of 10 times over last year, which resulted in $0.10 per diluted share. Briefly, I want to add a comment on our year-to-date results.

To produce double-digit same-store sales growth on top of last year's very strong growth of 35% is an impressive feat for any retailer. It is clear evidence that our strategies are correct, and despite choppy economic statistics new products prevail and are sought by consumers.

On to our balance sheet, at quarter end, we had approximately $44 million in cash. But keep in mind we had substantial cash in the form of unlevered inventory. Our inventory increased about 25% year over year to $346 million, while it was up only modestly from the December quarter. Part of the increase in inventory is simply having new models in stock that we did not have last year like new Sea Ray yachts, which are in demand, plus better timing of deliveries of product as we head into the busiest season.

The age and mix of our inventory remains at very healthy levels, which we believe can effectively support the business. The rise in property and equipment year over year is due primarily to the marina we acquired in Pensacola, Florida, which is already yielding better results for that marketplace.

Turning to our liabilities, our short-term borrowings were about $219 million at quarter end, which was up, primarily due to the additional inventory. Our customer deposits, while not a perfect indicator of the future due to the size differences at deposits and the impact large trays can have on this line item, increased 15% over last year, which is nice to see.

We ended the quarter with a current ratio of 1.53 and total liabilities of tangible net worth ratio of 1.01. Both of these are very strong ratios.

Also, our tangible net worth is now about $286 million or $11.55 per diluted share. We own over half of our locations, which are all debt-free, and we have no additional debt other than our inventory financing.

Turning to guidance, we are raising our earnings per share guidance for the full fiscal year. Based on our performance in the first half of fiscal 2016 and our expectations for the balance of the year, we now believe we will deliver same-store sales growth for the full fiscal year of approximately 10% to 12% with the potential to exceed that if sales continue to outperform. Adding in the recent acquisition of Russo Marine, which should contribute about 65% of its annual revenue of $35 million, we now expect diluted earnings per share to range from $0.68 to $0.75, up from our previous guidance of $0.60 to $0.70.

This compares to our adjusted but fully taxed diluted earnings per share of $0.47 in fiscal 2015. The adjustments to 2015 eliminate certain gains and a deferred tax asset reserve reversal.

Given the seasonality in our industry, we so far have produced $0.13 per share, and while our confidence is certainly building, so much is dependent on the June quarter. Accordingly, we will continue to update guidance as dictated by our performance.

Lastly, I will comment on current trends. We ended the March quarter on a very strong note.

April should also be a very strong month, but keep in mind April is the smallest month of the quarter with June being the greatest. While we started the June quarter with a large backlog -- actually, it is the largest backlog since the recovery began -- we still have many boats to sell and close in order to produce the results we need for the June quarter. Accordingly, we are clearly enthused yet tempered as we focus on the work ahead of us.

With that update I will turn the call back over to Bill.

Thank you, Mike. We are pleased to have started 2016 with a strong foundation. Our positive revenue, our margins, earnings and cash flow growth should position us for a solid year as our industry continues its recovery. We are now in full swing for the summer's boating season and are encouraged by what we are seeing. We are well-positioned to capture additional market share and to expand on the progress we have produced today.

Supported by the new products with innovative designs and technology, the inertia and excitement continues to grow at the customer level. Our inventory levels are in good shape for this time of year and we have greater percentage of new models in stock than we did a year ago.

Ultimately, the new products are making boating even easier and desirable with features such as joystick-controlled improved electronics, creative design and innovative materials. As I mentioned earlier, with the addition of Russo Marine in the Northeast we have taken another step forward in strengthening our geographic presence and another important boating market. We will continue our disciplined acquisition approach in the pursuit of growth through targeting companies that have historically produced strong cash flows and sales of industry-leading brands.

We remain resolute in our approach of having the very best team and brands in place to serve our customers while maintaining a very healthy balance sheet to support our growth. We know we change and improve people's lives with the best form of family and friend recreation called boating. This is what drives us every day as we pursue the creation of long-term value for our shareholders. We look forward to building on this in the coming years.

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

(Operator Instructions) James Hardiman, Wedbush Securities.

Congrats on a strong start to the year here. So I wanted to peel back the layers a little bit.

Mike, I think you talked about 50-50 units in ASP. I seem that was speaking specifically to the new boat sales number. What was that new boat sales growth number in the quarter? I'm assuming it was better than the 16%, just having the mix commentary that you had.

No, it wasn't better than 16%, not in terms of units. It would have been around 10%, something like that, James, for the quarter. Part of the driver is some larger units that we also sold in the quarter.

Okay. So --

And my commentary of the 50-50 -- I apologize. My commentary of the 50-50 -- that's new and used units merged together is what makes up the 50-50 growth. New was stronger than that overall.

Okay. And so new boat sales were up approximately 10% in units and then ASP would get you to, what, 20% in revenues or something like that?

No, it's still closer to 16%.

Okay, got it. And then in terms of weather it's always difficult to really say what the impact might have been. But maybe speak about some of the trends you're seeing in the different geographies in which you do business. And maybe speak to the issue of pull forward. It's been a while since we've had favorable weather, certainly in the March quarter. I just want to make sure that we are not getting overly excited about a March quarter number and then getting disappointed in some of the months to come.

Yes, a couple things. Geographically -- so if you look at trends in the March quarter, our strongest growth regions in terms of the top line would have been like mid-Atlantic, Northeast and New York/New Jersey, that area, although just about every area did decent. But those two were the stand-out ones. Florida did well. The rest of the regions [did] well.

It's hard to really gauge pull forward. What I would tell you is if you listen to our comments on backlog and how we started the June quarter and how April is going to be, I commented we have the largest backlog we've had since these recoveries began as we started the June quarter. It would tell you that we probably had some benefit, as the industry probably has, in the March quarter, but that there's just generally positive trends around boat sales in the industry right now.

And to that point, James, we did an [Azimut] event down at the Pompano Yacht Center and we had entertainment there and food and demo rides, and about 400 people showed up for the event, for a two-day event. So the excitement about boating right now is very, very high. We are seeing it with our trips, our getaway events that we do, that they are full. And customers are out on the water.

We had what I would call a fabulous weekend here in the West Coast of Florida, where Mike and I live. And the Gulf of Mexico and the bays and the lakes were packed. So boating is very, very active.

That's really helpful. And just lastly from me, if memory serves just looking through some of my notes from last year, you had a really big April last year as well because it seemed like there was a backlog. So you talk about April being up meaningfully. It sounds like this April was even better than last April, but then things slowed down for you in May, maybe picked up in June. And then from a margin perspective you had a lot of trade-ins in the March quarter, which hurt your margin in the June quarter, as you sold a lot of those used boats and they were a bigger portion of the mix. Walk us through how you think about comping against some of the idiosyncratic portions of the third quarter of last year.

You nailed it dead on. We did have a good April. We're going to have a better April this year. We did have some challenges in May and the first part of June last year, but seemed to pull the quarter together reasonably well at the end of June.

We do have an easier comparison that we've had, so the June quarter is an easier comparison than either the March are the December quarter from the top line perspective. It's also an easier comparison from a gross margin perspective for the points you mentioned about used.

We are not starting the June quarter with an elevated level of used. Used is in decent shape. I wouldn't say it's down a ton but it's not elevated like it was last year. It's always hard to predict what's going to sell but I think we are in a better position as we head into the June quarter, given everything we know today, than last year.

That's perfect. Thanks for the color, guys, and good luck.

[Brendan Grolet], Longbow Research.

This is Brandon [Roulet] on for David MacGregor. Congratulations on a great quarter. I wanted to dig in on Galleon Yachts a little. We had a great reception for the Galleon Yachts this quarter. And I was seeing what impact to the EPS that Galleon Yachts had this quarter. And to follow up on that I wanted to know what your plans were for expansion within Galleon in 2017 and what that could possibly mean to EPS. Thank you.

We haven't quantified the EPS impact in the March quarter. We did sell and deliver some boats. I guess you could argue it contributed some, but when you take out the elevated marketing costs and setup of the brand, it would be negligible in the quarter. It's really more of a future opportunity for the Company and not a massive driver of EPS in 2016, moreso a contributor in 2017 and certainly in 2018.

And an interesting point about Galleon, David, is we do not see it as being cannibalistic to our core brands of Azimut and Sea Ray. And actually what we're seeing is that the sales that we are making and the boats that are sold that are on order are really hurting the competition. And so we are taking share from others that had taken it away.

So it's a complementary brand that is in addition to our stores, and I mentioned in the script that it makes it a one-stop shop. So as people come in we've eliminated some of the competition out there and so they are buying from MarineMax, and so products are different from the Sea Ray or an Azimut, and so as such they are staying with MarineMax and we are taking share as a result of it. It will show up in the market share reports as they start to come in, in future dates.

Thank you.

Jim Baker, B. Riley & Co.

Congrats on the quarter and on the Russo acquisition. Can you start maybe by framing the proportion of trade-in buyers versus cash down payment you are seeing so far this year, not only on how that looks on a year-over-year basis but also in the context of historical norms? And then, can you just talk about the average age of trades that you are taking in right now, again comparing that to some historical context?

I'll take a stab at it, maybe Bill can add into it. What we are taking in on trade -- being a new boat dealer you tend to take trades on anything that's in the high 20s or above 30 feet. And that's true today, it's true last year or the year before. We are certainly bringing more new people into boating with the introduction of some of the new smaller Sea Rays, which -- by definition, someone buying a 19- or 20-foot may be new to boating. And we're selling a lot of those and taking share, which is good.

And the percentages really haven't changed. If you look at the larger boats, probably 75-80% are given as a trade. You look at the smaller boats and it's a much smaller percentage.

As far as average age is concerned of the trades, we are seeing some newer boats that are trading, especially like with Sea Ray, where we have got some hot new models, with the SLXs and the 40-footers and the 45s and, of course, the 59s and 65s. And so it's bringing some of the people that bought boats two or three years ago back to say, hey, I like this new boat that they've just come out with.

So I don't think we'll have as much of the ageing issue we had where people were trading 15- , 18-year-old notes to us for the last 10 years. They haven't been trading up until just more recently. So we are a little more encouraged than we were at this time last year.

And as Mike mentioned, we feel very comfortable with our used and the quality that's there. And we are in a better position than we have been historically.

That's helpful. And then, have you changed your margin assumptions in the guidance at all? It looks to us, just back of the envelope, like the uptick in EPS guidance is purely a function of the increased same-store sales in the Russo contribution.

Thanks, Jim, a good question -- no, we have not changed the leverage assumptions. So we typically say we get 15% leverage out of the pretax line. Of course, that's a range of 12% to 17%. It can be higher. We are using more like the 12% range until we get through this June quarter. So no, we have not modified that at all.

So just help me square that with given your commentary that the outlook for more favorable age of trades and gross margins are already up a little over 40 basis points year to date -- is there something you are seeing in your new boat backlog or otherwise that suggests you will endure some gross margin pressure in the back half of the year? Or is this just kind of conservatism on your part pre-peak season?

I'd say that if the things that we can control in looking at our Company, we feel pretty optimistic about this year. But there's so much external that we just don't have the control over. We are in an election year. You've got the noise going on with the Feds, etc., etc., etc.

And so we just don't want to try to predict the future, based upon what we are seeing and hearing from the customers because it could change pretty rapidly, depending on what happens with all the noise that's on the news and going on in the world and the economy.

But, all in all, we are encouraged by what we're seeing. We understand we've only delivered a small part of the year, even though it has been very positive. And we've still got a lot of runway ahead of us and we are -- as we mentioned, April is a bigger month than March, and May gets larger and June is our largest month and right in the peak of the season.

So, we've still got some time ahead of us and we've got a bunch of boats to get delivered and see how it goes.

Okay, that's great. Just lastly, and I'll get back in the queue, just in terms of inventory planning going forward, should we assume that the Russo inventory will approximate [euros] on an inventory per location basis? And then as we further digest inventory, should we assume that there's very little Galleon in there so far, so as we move through the year your inventory position will actually maybe continue to grow in excess of same-store sales as you build in some of these incremental lines?

I think, ultimately, when you get through the full year, our inventories should not grow in excess of same store sales. We should be looking at modestly improving terms throughout the year.

There's very little Galleon in our inventory today. There's some but very little. And your commentary around Russo is accurate. That's a good way to estimate what their inventory levels are. But the elevated amount -- I won't even say elevated. The amount of inventory we have today -- it's really driven by Sea Ray, Azimut and Whaler inventory that we strategically worked with the manufacturers to have in place in time for the season.

So, in the back half of the year, that begins to taper down a little bit as you and our fiscal year.

If you look at 2015, we needed more new product from Sea Ray and Boston Whaler, and so, when we got the ability to build a little bit of an inventory, especially in some of our regions, and didn't see the new inventory last year, we've taken this opportunity to do something.

And so, that's probably the biggest increase as to why the inventory is up is we want to give our other regions and stores the opportunity to sell some of this new product. To do that, you've got to have it.

Very helpful. Thanks for the color, guys.

Mike Swartz, SunTrust.

Just on the backlog I know, Mike, in your prepared comments you said that April backlog is larger than last year's backlog at this time. Could you just give us a little more context around that? Are we looking at an increase in backlog similar to the same-store sales we saw this quarter? And maybe in terms of brands within the backlog, where are you seeing most of the strength?

My commentary was around the backlog when we started the June quarter, which would obviously include April, May, June. There is some sales all the way out into the future, going all the way out into January of 2017 in there. And as a percentage it's much more meaningfully up than what our same-store sales is up, which is a very good sign. And you see our customer deposits up. The backlog trend has been tracking higher since 2012, maybe even late 2011. And so it's definitely good to see.

In terms of brands, and it's really all of our brands are contributing to the backlog. I hate to be such a generalist like that, but Sea Ray is doing well. We've got a lot of sold on order in Sea Ray, sold available products, stuff that we have in inventory. Azimut is doing well, Alexander, Whaler, Galleon -- anything that is relatively new is selling well in our backlog.

Great. And then just with your operating costs or operating leverage framework that you give us, and I think you were commenting on it earlier, how do we think about near-term and longer term, with Russo coming on board? Should we see some near-term cost associated with that that are more one-time in nature?

And then as we roll out and look at it maybe in fiscal year 2017 should we start to see some of the leverage from just geographic coverage, brands, back-office costs, things like that?

I don't think in the near term there will be much of a drag. I think, number one, they run a good business. We are very glad to have them onboard. I think in the future you're going to see the ability to expand their topline by selling inventory that we have other places in the country and helping even grow share further, which will then leverage their cost structure more.

There are certainly some synergistic costs along the way, whether it's interest or insurance or things of that nature that we always have. We always focus more on just that topline growth that we think we can help them with.

But the ability to offer to the good customers and clients that they have in the Boston market, Ocean Alexander and larger Azimuts -- that's all a wonderful opportunity and it adds to their business and our business at the same time.

Good. Just real quick, last question -- did you quantify how much the cost related to the Galleon launch were in the quarter?

We did not, but it's several hundred thousand dollars. If you do the Miami boat show display, West Palm Beach project is, some marketing materials --

Training.

-- Yes, training, stuff like that, it would be upwards of $500,000.

And I would assume that that doesn't repeat going forward or at least at a much lower level?

Well, you would have sales to offset. You would have more leverage. And you are right; you would not have that big of a chunk repeating itself. So you have both -- one, reductions; and then, two, you start having more deliveries coming in.

Okay, great. That's it for me. Thanks, guys.

Seth Woolf, Northcoast Research.

Congrats on a good quarter. We talked about the cadence of trends last year that you are going to be comping against. It's almost like a horseshoe pattern.

I was wondering if you could give me a quick reminder on what contribution each month has and how it builds as the northern markets come online. I think in round numbers it's 20% in the quarter, 30% in the quarter and 50%. I think that's what I have in my notes but I wanted to verify if that was how we should be thinking about it.

For the June quarter, yes, I'd say those are pretty good estimates of how the June quarter falls. It may not be quite 50% anymore at June and I think may pick up a little bit more. But June is the biggest month. April would typically be the smallest. And then it has a crescendo effect just before July 4.

Okay, thanks for that. And then just on acquisitions, you just made a really nice acquisition, just recently announced. And I was wondering if -- a couple things.

First, could you talk about some of the ways that you could leverage your existing services and products to improve the productivity of the boxes you buy? And then, can you quantify this impact and talk about how long it takes to achieve this?

And then the other thing I would have is, if you come in and you bring in new brands or you are able to carry more inventory at the locations and you can improve -- like you have a meaningful step up in sales and profits, if there are any earn-outs associated with the deal, would the earn-outs include the increase productivity from you guys being involved?

Yes, the earn-out would include increased productivity from us being involved. They have still got to sell the product, take care of the consumer and do all that stuff with each of the opportunities that we would bring to the table.

And if you look at real synergies and the ability to access to the inventory, both new and used, all across MarineMax for Russo is a huge synergy. We may have a 42-foot Boston Whaler that is available four to six months earlier than it would be that it would be if they could do as a private dealership.

Obviously, leveraging the brands primarily initially here, the larger Azimuts and (multiple speakers) Ocean Alexander will be huge. If you look at finance and insurance, we have New Coast Finance as well as the finance and insurance operations within our stores.

And so the ability to get customers financed -- we have a real competitive advantage over almost any dealer that's out there in the marketplace today. And of course, that becomes an advantage for Russo.

I can tell you that they have some business practices and things that they are doing which will be an advantage to all of MarineMax. There's things that they are doing that we will learn from, and so they will be part of our team. And as we get our general managers, which are our store managers, and regional presidents together, which is actually occurring in a couple weeks, they will be part of that. And one plus one equals three when you get good minds together.

So, there's a lot of synergistic opportunities. And we can't say it enough; there is no culture change that's needed here. They are very good people. They take excellent care of your customers. They understand that boating changes people's lives as well as our team does.

So it's a great addition to the family with almost no hiccups. We installed our computer system because they were on a different computer system, and that happened prior to the acquisition occurring. And we had our team in counting inventories and doing that due diligence and training and HR, etc., etc. And it was all part of the family. So we are very excited.

Moving forward, there's others that we are in discussion with, and similar type cultures and in some great markets. And when the time is right we will add them to the family as well. And we could do something almost immediately with a couple of them, but at the end of the day they're in the peak of the season, too. So we don't want to disrupt business with the transition into being part of the MarineMax family as well.

So we will keep looking at opportunities, and when it makes sense we will deliver.

Okay. Well, that's encouraging. It sounds like you are talking to a couple dealers maybe more than just beyond the initial due diligence. But bigger picture, when it comes to the acquisitions you have been pretty consistent in that you want to maintain the methodology of paying three to six times trailing earnings.

So, when you look at the pace of the recovery and given the fact that with the Sea Ray model really starting to impact the business, starting with the SLX, with the 350, is it safe to say that any of the independent dealers that you could potentially be talking to or just now reaching -- starting to become profitable for the first time or, say, last year was the first year of profitability in a while?

They are getting to be more meaningfully profitable coming out of the downturn. That was a crucial thing that had to occur to have more robust discussions with the different levers that we are talking to. Just like our own earnings have doubled from last year and maybe doubled the year before that, the other dealers are seeing that as well. So when you start to put a multiple on something there's at least something you can discuss about from a payment perspective, which results in healthier discussions, quite frankly.

And everybody we are talking to believes the future is much brighter than the past. We all do, with the models that are coming out and with what's going on in the industry. So there are different discussions around an earnout or some future like an earnout in some of the acquisition discussions that we have going on right now.

But first and foremost, the thing that we look for in an acquisition is the team, the people, because it doesn't work that way. If you've got the right people with the right culture and it is a good market, it works. There's acquisitions that we could go and do that wouldn't truly be a merger into MarineMax.

But those can take a long time to fix. So we're going to stay true to this is about long term, not about short term. And so if it doesn't make sense we wait a little bit until it does make sense or we look elsewhere.

So we are being very careful because a bad acquisition is not good. But what we are paying, it's accretive the first year in almost every case. So we are going to keep doing our due diligence. And at the end of the day it's about the people more than anything. And you'll see that with Russo if you were to visit their stores or talked to some of their customers or when Mike and I are on roadshows and we're visiting Boston, most everybody we talk to is very familiar with Russo Marine. And of course now, it's MarineMax Russo Marine.

Okay. All right. Well, thank you very much. Congrats on the quarter, and I'll hop back in the queue.

Steve Dyer, Craig Hallum.

Congratulations, guys. Most of mine have been answered. Maybe just, if you could, touch a little bit more on the product cadence, the new stuff from manufacturers.

I don't know if you want to use the baseball analogy, where are you with that, not just Sea Ray but others? And what has the feedback been and how do you look at it going forward?

With Sea Ray, we are probably in the fourth or fifth inning, maybe. And as far as refresh of the product they are a little further than that. But availability of that product still has some opportunities but they are coming out with it. Azimut has been giving us new product all along, and they are well on track with fresh, new products and are really outstanding. And Boston Whaler -- wow -- knocked the cover off the ball, and they are ramping up the hot boats. And they have quite a few, coming out with new models as well.

The same with Scout and Nautique. I'm an avid water skier every weekend, and my boat is the old fart type of boat where you are out slalom tricking and bare footing. And that model is being refresh this year. I haven't seen it yet, but I plus all the other competitive skaters are going to be running to it when it does come out.

So it's new that sells, whether it's Sailfish or Harris or Crest. And we are getting it from pretty well all of our manufacturers. And so -- a very exciting times because it's really what was missing. And if you look at the downturn in 2008 and 2009, the thing that we were missing as a company from our primary supplier, Brunswick, was fresh new product. And it hurt.

If we had had fresh new product during that time, they would have sold even in the downturn. So, if we have another one or when we have another one, having fresh product at our stores that are hot and fresh and new will serve us well because people are boating and they're going to continue to boat. Boating is growing. We are encouraged by what's happening with the manufacturers.

All right, great. Thanks, guys.

And with that, ladies and gentlemen, we will turn the conference back over to Mr. McGill for any closing remarks.

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

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