MarineMax Inc (HZO) 2017 Q1 法說會逐字稿

Good day and welcome to the MarineMax, Inc. first-quarter 2017 earnings call. Today's conference is being recorded.

At this time I would like to turn the conference over to Mr. Brad Cohen. Please go ahead, sir.

Thank you, operator. Good morning, everyone. Thank you for joining this discussion of MarineMax's 2017 fiscal first-quarter results. I'm sure that you have all received a copy of the release that went out this morning; but if you have not, please dial Linda Cameron at 727-531-1700, and she will email one to you right away.

I would now like to introduce the management team (technical difficulty) MarineMax, Mr. Bill McGill, Chairman and President and Chief Executive Officer; and Mr. 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 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'd like to turn the call over to Bill.

Thank you, Mike, and good morning, everyone. What a great way to start our [physical] year. Not only did our team produce sales growth exceeding 33%, we also achieved our second-best December quarterly pre-tax earnings. Furthermore, despite increased seasonality resulting from our Northeast acquisition of Russo Marine last April, our December quarter profit more than tripled last year's bottom line. This is the third consecutive year MarineMax has produced a profitable December quarter. I would like to thank the MarineMax team for all their hard work and continued commitment to our customer-centric approach, which as evidenced by our results, is resonating with boating enthusiasts.

Our 33% revenue growth was driven by very strong 28% same-store sales growth, which is on top of 8% last year and 45% the prior year. While the December quarter is the smallest quarter of the year, our robust growth should serve as substantial support that the marine industry recovery is continuing, and the boating lifestyle is being sought by consumers. We attribute the continued strength in our business to a combination of our team's talent and focus on our strategies, the flow of innovation into new products, and our balance sheet that can support the growth initiatives we have in play.

Furthermore, at the heart of the business is the fundamental execution of the MarineMax strategy that delivers the boating dream by exceeding our customers' expectations as we enhance their life through boating. Our stores continue to excel at taking care of our customers and helping them to enjoy the boating lifestyle. Our growth was fueled by an increase in larger yachts from partners like Ocean Alexander and Azimut. As we have indicated historically, these larger yachts traditionally carry lower margins which do compress our consolidated margins. But every time that this happens, our pre-tax earnings have jumped meaningfully, like in this quarter.

We continue to believe that, in all our segments, MarineMax is taking incremental market share, as we are poised to build on that trend going forward. The continued strength in new boat sales has been aided by innovations like joystick docking, improvements to outboard power, electronics, and enhanced styling. We are well positioned with the greatest number of new models in our inventory than at any point during the recovery. As we have said in the past, the brand and segment expansion we executed in the last several years has been a key factor in our strong revenue growth. An example of this expansion is Galleon Yachts, a European-built brand, which we added in early 2016. It has proven to be an excellent addition to the MarineMax family and should become even more material in the coming years.

In addition to the brand and segment expansion, the acquisitions we have completed continue to perform well. In particular, the Russo acquisition in New England is exceeding our expectations on all fronts. Likewise, the Hall Marine Group acquisition we announced earlier this month is expected to contribute meaningfully, now and in the future. We are really excited to add the Hall team to our family. Similar to the Russo acquisition, we added considerable talent with the addition of Jeff and Rick Hall and their strong team.

Let me add a few additional comments about Hall Marine. They were founded in the mid-1970s, and they operate through six locations. Last year their revenue exceeded $50 million. And their locations serve Charlotte, North Carolina; Lake Wylie, Greenville, Columbia, and Charleston, South Carolina; and Savannah, Georgia. The locations include two large marinas and four highway stores. We are now able to better serve the many boaters that migrate along the Atlantic seaboard, as we are now United by Water. As evidenced by our actions, MarineMax will continue to [main] our disciplined approach to acquisitions, focused on accretive dealers in strong markets with strong teams; and, most important, similar cultures.

Our ability to continually increase market share and drive industry-leading results as the largest retailer in a highly fragmented industry is due to our experienced and proven management team, our customer-centric approach, exclusive agreements with premium manufacturers, and ongoing training and education for our team and customers, all coupled with our high-energy marketing events that communicate and support the virtues of the MarineMax boating lifestyle.

Let me acknowledge that last week, MarineMax Vacations, located in the BVI, celebrated its fifth anniversary. From its initial start with 13 sailboats, we now have approximately 60 boats available for charter, and we have helped over 15,000 people enjoy an incredible vacation. The Aquila power catamarans that we designed for the fleet continue to see increased sales privately as well.

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 want to also thank our team for producing a strong December quarter and outstanding start to 2017. For the December quarter, we grew revenue almost 34% to $227 million. The growth was driven by very strong double-digit same-store sales growth of 28%. Our same-store sales growth was aided by larger products and was driven about two-thirds by an increase in average unit selling price, and one-third by unit growth. Geographically most markets showed growth, but Florida, with a larger boat emphasis, led the charge.

I would add each month was pretty good; and the quarter grew in strength right through December 31, which is unusual, given the holidays. Our gross profit dollars increased 28% year-over-year while our gross margin percentage contracted. As Bill mentioned, the gross margin contraction was primarily due to the sales of larger yachts which traditionally carry lower margins. On a brand-by-brand basis, gross margins generally did well in the quarter.

Selling, general, and administrative expenses meaningfully improved as a percentage of revenue as we leveraged our cost structure. Keep in mind, last year, we did not have the expenses associated with the Russo acquisition in the December quarter. Additionally, while we have all their expenses, you can imagine it's not necessarily a strong revenue quarter in the Northeast, to Bill's earlier point about increasing our seasonality.

Interest expense increased to $1.6 million due to additional borrowings to support our inventory. However, interest expense as a percentage of revenue modestly improved. From an income tax perspective, as we said last call, we do not expect to pay any material taxes until we absorb our remaining NOLs and other deductions, which approximated $21 million when fiscal 2017 started. However, we are required to provide a tax provision, and our ongoing annual rate should be about 38.5%.

The December quarter is typically the smallest quarter of the year and usually results in a loss for most marine dealers, including MarineMax. Nonetheless, for the third year in a row, we've produced a profitable first quarter. We produced pre-tax profit of almost $4.5 million, which equates to $0.11 per diluted share, which was over a threefold increase compared to last year's pre-tax profit of $1.4 million, which also equates to $0.03 per diluted share.

I should note that last year we reported EPS of $0.04. The difference of $0.01 is due to the equity compensation accounting standard we adopted last year. While the standard had an immaterial impact on 2016, it does result in minor EPS differences like this.

The fact that we've been profitable for three consecutive December quarters, while the industry is 40% below its 20-year average, is strong proof of the success of our brand and segment expansions and our cost containment efforts. It also illustrates the point that we can and should be much more profitable on lower industry volumes than in the past.

On to our balance sheet, we ended the quarter with about $37 million in cash and we have substantial cash in the form of unlevered inventory. Our inventory was about $364 million, which was up 11% from last year. Our revenue growth, however, is much stronger, meaning we continue to make incremental progress in improving our inventory turns. The age and mix of our inventory remains at very healthy levels, which we believe can effectively support the business. Our property and equipment has increased due to the marinas we acquired in Pensacola and St. Petersburg, Florida as well as investments at our other properties, including our Fort Myers, Florida, marina; plus the Russo acquisition.

Turning to liabilities, our short-term borrowings were up about -- were $214 million, excuse me, at quarter end, which was up primarily due to increased inventory and the timing of payoffs. While our customer deposits are not a perfect indicator of the future due to the size differences of deposits and the impact large trades can have, they continue to be substantially up year-over-year, now up 76%.

We ended the quarter with a current ratio of 1.60, and total liabilities to tangible net worth ratio of 0.89. Both of these are very strong ratios. Our tangible net worth is now about $306 million or $12.26 per diluted share. We own almost half of our locations, which are all debt-free, and we have no additional debt other than our inventory financing.

Let me also comment on the impact of the Hall Marine acquisition. They produced sales of about $50 million in their fiscal year that ended September 2016. Given the timing of the acquisition, we should be able to get about 80% of that going forward in this fiscal year. Using a pre-tax percentage similar to MarineMax, you will see that they should contribute about $0.05 to our fiscal 2017.

With that understanding, and turning to guidance, let me remind everybody that we give annual guidance. Clearly, we started the year off well; but it's only one quarter, and our smallest one, at that. Given seasonality, we still technically have more than three quarters of the year ahead of us in terms of the revenue we need to generate.

That said, we are raising our earnings per share guidance for fiscal 2017. We now expect to deliver same-store sales growth for the full fiscal year of approximately 10% to 11%, with the potential to exceed that. This is up from the 10% plus-or-minus range we provided in our prior earnings call.

We now also expect fully taxed diluted earnings per share, including the impact from the Hall Marine acquisition, to range from $1.14 to $1.24 from our previous guidance of $1.04 to $1.14. This compares to a non-GAAP adjusted but fully taxed diluted earnings per share of $0.87 in fiscal 2016, and $0.47 in fiscal 2015.

As we complete the March quarter, which will provide us additional perspective on the balance of the year, if we believe our performance results in a material change in our outlook, we most certainly will update our annual guidance like we have in the past.

Lastly, let me now comment on current trends. As we started the quarter, our backlog continues to be up significantly over last year. Our traffic and interest in new boats remains strong. Looking at the early boat shows as well as third-party dealer surveys, optimism is strong among both consumers and dealers.

Having said this, it's early in what is historically one of our larger quarters and is one whereby March is usually as big as January and February combined. As such, we certainly have a lot more work ahead of us as we move through the winter boat show season and the rest of the quarter.

We are also up against a tough comp again in the March quarter, with same-store sales growth of 16%. Of course I'm confident our team will do all they can to deliver strong results.

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

Thank you, Mike. We have now entered the busy boat show season and our first quarter earnings results have certainly set a positive tone for 2017. As we have previously mentioned, new models, innovative designs, and technology are being introduced to the industry, and we could not be more excited to share these with our customers. Our customers' enthusiasm and energy we are experiencing at our early boat shows 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 out on the water. We could not be more proud of the hard work our team does every day, as our customer-centric approach enhances life through delivering the boating dream to our customers.

MarineMax remains an industry leader. And we will continue to strengthen our balance sheet and presence in the market as we remain committed to building long-term value for our shareholders.

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

(Operator Instructions). James Hardiman, Wedbush Securities.

Congrats on a really strong quarter here. So, I'm sure you've been getting this question quite a bit: can we just walk through maybe some of the potential Trump impacts to your business? Maybe walk us through the tax math. Obviously you're not paying any cash taxes, but you've got a nominal rate in the high 30s, I believe. Let's say the corporate rate goes to 20%. Where does your high 30s number go to? And what type of an earnings impact would that be? And then how should I think about how much of your product is imported as we think about potential import taxes going forward?

I could talk on taxes just for a second. Obviously with the federal rate at 35%, plus all the states, we get up close to 39%. So if the corporate rate goes to 20%, just take 15 points off of us, and we'd be down near 25% or something like that, which would be obviously huge to a company like ours, since we're already at the top tax rate. We have one material supplier today, material in that we disclose it in our 10-K, which we import, and that's the Azimut brand, which by my memory, we were a little over $100 million in 2016. Of course all the discussions around that border-adjusted tax, it is unclear exactly what's going to happen from that perspective (multiple speakers)

The Azimut brand is not a US manufacturer producing offshore.

Right, so (multiple speakers)

So we don't believe that --

Good point.

-- that will be a tax impact at all.

Purely a foreign build that we import.

Very helpful. And then just real quickly on the guidance here. You raised your guidance $0.10. I think you said, Mike, that about half of that was the Hall acquisition. Did Hall benefit the first quarter at all? If so, can you quantify that? And ultimately it sounds like what I'm hearing is you had probably more of a benefit in the first quarter than you thought; or you beat expectations in the first quarter maybe more than you thought. Obviously you don't give quarterly guidance. But you are remaining pretty conservative on the remaining three quarters, just given the magnitude of those quarters relative to the December quarter. Is that fair?

Yes. So Hall Marine, we acquired them in mid-January, so it had no impact on our first quarter, ending December. Clearly we started the year off strong. It is the smallest quarter. We need to work through the March quarter. And we believe we're being conservative with our numbers, but time ultimately will tell that. Just in our business out there creating it every day -- and technically we still have more than three quarters of it left -- we thought it was prudent to just raise it $0.05, plus $0.05 from Hall, which is the $0.10 increase in the guidance.

And we still have a lot of large shows ahead of it. The shows we've been in thus far, James, have been up in general.

Positive, yes.

But we begin New York boat show tomorrow. Mike and I are here today. In fact, we're actually -- this call is coming from the New York Stock Exchange -- and to launch the show, beginning tomorrow morning. And then we have the real large show ahead of us called Miami, which is in February. So there's still a lot of runway ahead of us.

Perfect. Thank you.

Steve Dyer, Craig-Hallum.

Congratulations, guys. Sorry if I missed this, but did you break out unit growth between new and used in the prepared remarks?

We did not. What I did is I said our same-store sales growth was roughly two-thirds average selling price, and one-third unit growth, which gets you to a high-single-digit 9%, a little bit over 9%. There's not a whole lot of difference between our new and used. Our new growth was pretty good throughout the December quarter, as was used; they both were.

Great. And then as it relates to inventory, how do you feel about that? Are you constrained anywhere, new versus used? Maybe some color on that.

All the new hot models, we can always use more of. But, yes, I think in general we feel pretty good with our inventory. Our used inventory is actually down a little bit over the prior year. I know that's something that people had asked about over the years. But that's just timing, I think. I think with the boat show seasons coming up and the trades we'll be taking, we'll be fine on used.

And we're -- the important brand is Sea Ray. We're starting to get their SLX models. And we're having great success with them at the boat shows, primary shows. So we're encouraged that we will be able to get enough product this year (multiple speakers) in the hot new models that will help us even further in the year.

Got it, okay. And then lastly for me, can you talk a little bit about the cadence of the quarter, I guess pre-election, post-election? Any real difference that stood out from prior years?

Well, I think, Steve, we went into the Fort Lauderdale boat show, which was the week before election day.

It ended on that Monday.

Yes. And we were scratching our heads, saying, I wonder if people are going to wait and see. And what we saw at the show is they didn't wait; in fact, that we had a record show. And following the show, we're -- or the election, excuse me, what we're hearing from the majority of our customers -- truly not all, but the majority of our customers -- is a big thumbs up. And they are excited about the change. They are excited about the tax changes that may be occurring for business and also for individuals to help stimulate the economy. So I'd say they're a lot more optimistic. And I think we're seeing it at our shows.

We just finished Minneapolis boat show on Sunday, and it was a record show for us. And it's sure making us feel a little more encouraged. We went through the election time, and all the news and confusion and everything that was going on, and did quite well and delivered an outstanding quarter. And now we got to keep it going. So we're going to try to trump this next quarter against the one we just had.

Got it. Okay, very helpful. Thanks, guys.

Joe Altobello, Raymond James.

First question, sort of big-picture, how you guys are thinking about the US powerboat industry for 2017. Obviously coming off a year of mid-single-digit growth, are you assuming any material change to that, or another year of roughly mid-single-digit growth in terms of units?

I think until we get a little further through it, I don't think the industry is going to change its outlook. And I don't think we're going to change it until we get maybe through the March quarter to see if there's stronger trends happening out there. We certainly saw some pretty solid trends right through the December quarter. And as Bill said, early boat shows are encouraging. December is the smallest quarter. March is a very meaningful quarter. And actually the month of March is a very important part of that quarter; and also set up for the year, as it begins to get warmer in places and our foot traffic begins to pick up in March.

So, we will have a better idea when that quarter ends. But I think to some of the points that Bill made -- there does seem to be a little bit of increased enthusiasm in the marketplace today.

Well, since you mentioned the March quarter, you guys have a fairly tough compare when it comes to weather, particularly in the Midwest and Northeast. Is that something that we should be thinking about as we think about the cadence of the quarters for this year?

We're up against a tougher comp of 16%. I think the -- it's possible for watching weather that weather doesn't unfold quite as nice as it did last year, as an example; that it could impact us in those regions. It's just hard to tell right now. I think generally weather is pretty reasonable everywhere today. But we will have to watch that through the quarter, to your point.

Okay. Just one last one, if I could. In terms of the incremental margin that you guys saw in the quarter, I guess a little bit of an improvement. Was curious what the impact that Russo was on incremental margins and how much better it would have been ex-Russo.

You know what? I did not actually do that math. MarineMax would have had a little bit better pre-tax margin overall than Russo would have had. They were -- I will say they were profitable. So one of the things I said on the last call is they typically don't make money. But Russo did make money in the December quarter, partly because of the -- honestly how well we're all working together in leveraging our inventory, and so forth, in their normally highly seasonal quarters. So the fact that they were able to eke out some profit helped a lot. But MarineMax's bottom line as a percentage would have been better.

Okay, great. Thank you, guys.

Jimmy Baker, B. Riley and Company.

Great quarter. Just wanted to start with a question on the industry data. So, it seems maybe throughout 2016 -- calendar year 2016, that is -- more difficult than usual to triangulate with your business. So one of the segments I wanted to talk about in particular, the high-end yacht market, 66 feet and larger, is the worst-performing segment for the industry, down double-digits. Can you help us understand that in the context of your business? Is it outperformance for the brands that you carry; outperformance in the geographies that you are most concentrated? Or just you are out there gaining loads of market share against competitors in your same region, even within your brands?

I can say in general we're gaining market share in all segments and all brands in just about all geographies. Maybe not 100% all the time, but we do pretty well. I am a little perplexed by the data myself. You wind the clock back five years ago, the data wasn't very useful. It sure has been useful the last five years, up until this year. And I don't know exactly what's going on in it; or if it is simply just our outperformance with our brands, just quarter after quarter continues to exceed it.

We have obviously a very strong team, strong brands; some of the best markets out there, better markets out there, which I think are all contributing to our growth. But when you look at the data like for December, the industry data showed 41% down in yachts. We were not 41% down in yachts. Or 18% down in October; we were not. We will spend more time trying to dig into it with the folks from SSi than we have, Jimmy, just to get a better understanding to help you guys out.

The sale of a small boat and a large yacht is still relationship selling. And people are -- especially in the larger yachts, want to do business with a company that they know is healthy financially, and that has a team that's passionate about what they're doing. And in some cases, the larger yachts that are out there today are -- it's a factory direct model, in some cases. So what do you get there as the individual is the -- do you get the support? We run to the problems if there are any problems, or when they occur. Because if a customer has a problem, whether they created it or the manufacturer created it or we helped create it, it's our problem, and we run to it.

And you don't necessarily get that from brokers that are selling larger boats, or even the manufacturer, in some cases, that have representation doing it, especially from some foreign countries. The support that we give to our customers for Ocean Alexander, for Azimut, for Galleon, for Sea Ray, for Boston Whaler, is second to none. And at the end of the day, that's -- you're buying a lifestyle, not necessarily just a product that you need some help with. So we're there to do it. And I think that's the big differentiating thing between MarineMax and most of the industry that's out there today.

And we've got dedicated people that are focused on taking care of that customer second to none, from not only a service perspective but also having fun with them, out enjoying the boat on the water. And that's really what makes the difference, Jimmy.

So that's helpful, and actually could turn into my next question. As you have improved that new boat inventory position, new boat availability, are you seeing any change in the sales cycle? You just talked about the service element that you provide and the competitive differentiation that offers you versus someone on a factory direct model. And I realize this may seem a little counterintuitive, given the soaring customer deposits you have, but are more of your sales coming from product on hand, where that availability of inventory and your balance sheet are a more important competitive weapon for you as we move deeper into the cycle?

It's interesting; but as long as I've been in the business, when people are hot, they're hot. And when they're not, they're not. And most of our customers, they want it right away. And so being able to have it in inventory, to your point, Jimmy, really helps us. Having boats in production in Italy, as an example, that our customer can say, well, I don't have to wait a year, or year and a half, and I can get it exactly the way I want it, in some cases. Or I'll take it the way you've got it because, wow, I want it and you did a good job in speccing it out.

So we believe it is a differentiator and will continue to be so. But probably more important than anything is we are there to take care of the customer as they're part of our family, and that is huge. Because no one wants to buy a headache; they want to buy a wonderful lifestyle.

Sure, understood. And then just lastly, had a couple questions on Hall. When you think about their business -- or can you speak to it on an inventory per location and floor plan expense, versus what you see in your corporate average on a per-store basis? Should we assume that it's a little greater than half of maybe what you have on a per location basis just given that's where their revenue was? And then after Hall and Russo, do you still have an active M&A pipeline, or might we see that activity slow going forward?

Jimmy, clarify your question on Hall. What are you asking about inventory and --?

Sure. Just if their inventory per location and floor plan expense is, let's say, roughly half of what MarineMax's was previously. In other words, I think their revenue per location was just a little better than half of the average MarineMax revenue per location. I'm just trying to understand if that works all the way through (multiple speakers).

Yes, I'm sorry. The answer is yes. I apologize; I was misunderstanding it. But Hall, just like Russo, one of the benefits that they are already realizing is the strength of MarineMax's balance sheet and the fact that we do inventory product, to Bill's point; and to your point, really. And so, in the boat shows that the Hall team, which is now the MarineMax team, are moving into in those markets, they've got much more product available to them, including, in some cases, bigger product -- whether it's bigger Whalers, bigger Sea Rays, et cetera -- for those marketplaces than they currently have in stock.

When we were out visiting with the team, Jimmy, we said to them, you now have $300 million plus worth of inventory to sell. And their eyes get as big as watermelons, because that's a real opportunity. And they're not -- in some cases, they wouldn't be stocking an L-class 65, as an example; or maybe they sold it and they're waiting on one coming, and we have them in the Company. And so we're able to meet that customer's need right now.

As far as your question, are there others in the pipeline? Yes. We're working with them. We take a lot of time making sure that the cultures are right, because culture is everything. And perfect proof of that is Russo is part of our family. And it's like you just threw a switch, and all of a sudden it's MarineMax-Russo, and they've been in the family forever. But we made sure of that before we made the acquisition. And we did the same thing with the Hall group. And that's exactly what we've got; we've got a passionate team that care about the customers, that do everything pretty well the way we do.

And we will learn some things from them, so this is not all about us helping them totally. We have learned some things from Russo. We will continue to do the same from the Hall group. But culture is everything. We're not out doing acquisitions just for territory, or to grow the Company. We want to make sure that it's a business that will continue and that the people will continue. So we're interested in the senior people in the company and their management.

I would just add to that. So the mass of MarineMax and how big we're becoming, again, assuming the industry keeps its cadence of 5%, 6%, 7% unit growth -- which I think people feel better about that today than maybe even before the election -- the earnings power, at least in theory from the Company, is much bigger than any reasonable pace of acquisitions that we can go on. So while the acquisitions is certainly part of the story and an important one, the underlying earnings coming from MarineMax are going to continue to drive a greater percentage of our upside for the foreseeable future.

Understood. Thanks very much for the color.

Mike Swartz, SunTrust.

Mike or Bill, just a question regarding used inventory, and relative to what we saw this quarter with big yacht sales really driving the sales growth. I know we've had some quarters in the past where we had these big, large yacht-driven quarters where we saw some gross margin compression -- not only from just the gross margins that those boats carried, but also from the trade, which would -- some of those, I believe, had to be wholesaled at very low margins. So could you just help us understand, is it a similar dynamic we should expect for the next quarter, just given the large yacht sales this past quarter?

Actually, great question, because we did have that issue a couple of years ago. Technically today our used boat inventory is actually down a little bit over the prior December, which only means some of the large yachts that we did, did not have trades. Otherwise it should be up, to your point. So, I don't think that should be an issue going forward. And I think what we've said -- also, even last year, a couple times -- is the amount of deals that we're wholesaling is incrementally getting better and better as the raw age of the products -- as you're no longer -- or you are taking fewer and fewer 12-year-old boats. You are now taking 8-year-old boats, which you are more comfortable selling those through your normal process. And so that's continuing to drop, and it should continue to drop this year. I would sure hope that we wouldn't have to have that discussion again this year.

Okay. And how do we look at just -- embedded within your 2017 guidance, gross margin -- are we still thinking maybe flattish year-over-year versus 2016?

Yes. It's another good question. We did not change anything in our assumptions around our guidance, meaning fairly low flow through, around 8%-ish. We took same-store sales growth up a little bit and we added Hall. Until we begin to show in a -- this quarter obviously had the spike in the big boats, which contracted margins. Absent that, gross margins on a brand-by-brand basis were pretty good. Let us get through another quarter, a big quarter like March, and let's see how we're able to perform from a flow through and from a gross margin perspective. We hope that would be potential upside. But we need to get out there and make it happen before we are comfortable putting that in our guidance numbers.

Understood. And then just on the M&A front, just two questions here. One, how much do you have in availability at current to make acquisitions? And then the second piece is are you seeing more competition for deals out there? I know there's been a lot of M&A activity going on in this space, both on the marina and the dealership side, so maybe just a little color on what you're seeing there.

On the marina side, you are 100% right. There's a lot of people chasing marinas today. I shouldn't say a lot; there's a couple big organizations out looking at marinas today. And we've never -- we've always stayed pretty true when we buy a marina. We've got to buy them for the long-term purpose of operating a marina, but also having a boat store on it; not having some other plan to maybe flip it into a condo or something else down the road, which some people are having those ideas today.

On the acquisition front, we haven't run into competition for the dealers that we are talking to. There is a little bit of increased activity out there. But I think for the type of dealers we're looking at and with the succession planning they're doing, and the planning for their teams and who they want their teams to be working for, and so forth, we haven't run into any competition for the dealers that we're talking to.

And then just availability?

In terms of cash?

Yes.

Yes, we have plenty of firepower on our balance sheet, either just in cash or in -- what we do is we make money throughout a given year because we're a net debtor with our floor plan. We have the unique ability to pay down our floor plan, which can always be reborrowed. So we have a lot of equity in our inventory today which can be tapped to make -- really, for any reason. There's no restrictions on what it's for.

And most dealers, including people like AutoNation, don't have the ability to reduce -- to pay down their floor plan then reborrow against the same vehicle. Ours happens to, because we negotiated it in there years ago, so we have a lot of capital right there if we need it.

Okay, great. Thanks.

David MacGregor, Longbow Research.

Great quarter, guys. Congratulations. Can you just talk about what you're seeing in terms of marine lending patterns, and where in the mix this is having the greatest positive impact?

Yes, I'll tell you, from a retail financing perspective, the marine industry is one that's attracting more and more lenders. I think primarily the spreads on the auto side have been so compressed that they're looking at marine and RV. And more lenders are getting in, either regionally or -- actually, I should say regionally; there's probably not any change in the national players, which is a positive thing. And the terms are fairly favorable today. We have never had crazy liquidity because there's never been a securitization on marine loans. All the banks hold them. So things are favorable and fine today from a lending perspective.

And their loss ratios are very low.

Very low.

Are there new banks coming in, or is it the same group that have been there in the past? When you say that there's a little more support, I'm just trying to gauge that out.

Yes, I would tell you regionally around the country, there's regional banks that are increasingly getting into the boat business; and also into RV, recreational lending. Really I'll say all over the country.

Yes, okay. And then just last question. It sounds like there is an awful lot of positive outlook sentiment here right now. Deposits are up; backlog; boat show registrations, attendance; all pointing positively. I guess the question is just what do you perceive right now as the biggest risk in terms of your business for 2017? And as you were formulating your guidance, notwithstanding -- I appreciate that this is a quiet quarter and you want to get into March before you have a lot more conviction in your outlook. But what's the biggest risk in terms of the outlook at this point?

I'd say it's external. There's a lot of change occurring in the US. And we're all believing it's going to be quite positive, but no one ever knows. The media continues to try to make everything look bad. But I think what's being -- what's happening in our country right now is very, very positive. But we've got to see it happen and see it executed on. And boy, it's happening at a fast pace, as we're all aware.

Bill, earlier in response to a question from James, you were talking about the distinction between foreign boat manufacturers shipping into the United States, or sending product into the United States, versus US companies manufacturing abroad and bringing that in. You felt because Azimut was a European company that that would leave you unimpacted. In a more total look at this, is there something you are seeing unfold anywhere in the whole discussion around tariffs or duties that would result in any way in a shift in your business in favor of the domestically manufactured brands?

Well, what I've heard from Mr. Trump, listening to what he and some of his people have said, is that if you take jobs offshore you're going to pay a penalty to bring the product back in. And so, number one, that's the manufacturer. And number two, take a company like Azimut or Galleon, they are not a US company that's taking jobs offshore. And if you look at it, forget boats for just a minute -- take TVs or cell phones or whatever it may be. You couldn't put a tariff on everything in the country; we'd have a real problem on everything that's imported. So we don't see that as something that's realistic or would happen.

I think his concern, which I applaud him for, is why take the job offshore if it can be done here in the US? And if you do, then you're going to have to pay a penalty to do it. So, we've got to see what unfolds, but I can't imagine that wouldn't -- that it's not just what he says.

Well, congratulations on all the progress.

Thank you very much.

I'd now like to turn it back over to Mr. McGill for any additional or closing remarks.

Thank you, operator. And in closing, I'd like to thank all of you for your continued support and your interest in MarineMax. Mike and I are available today, and if you have any additional questions please give us a call. If not, we hope to see you at the New York boat show. Thank you.

Ladies and gentlemen, that does conclude today's presentation. Thank you for all your participation. You may now disconnect.