MarineMax Inc (HZO) 2017 Q2 法說會逐字稿

Good day, and welcome to the MarineMax, Inc. Second Fiscal Quarter 2017 Earnings Call. Today's conference is being recorded.

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

Thank you, operator, and good morning. Thank you for joining this discussion of MarineMax's 2017 fiscal second quarter results. I'm sure that you have all received a copy of the release that went up this morning. But if you've not, please call Linda Cameron at (727) 531-1700, and she will e-mail you one right away.

I would now like to introduce the management team of MarineMax, Mr. Bill McGill, Chairman, 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. While I am quite proud of our team effort of producing sales that grew over 23% on top of our strong December quarter sales of 33%, we did expect when we generate even more revenue during the March quarter. With our very strong boat show performance in almost all of our winter shows, including the late March West Palm Beach show as well as solid trends each month, we anticipate closing additional sales in the quarter.

Given our backlog with business and trends, we believe most of the business will be captured in this quarter. Industry trends and our customers' outlook are healthy. Therefore, we have built MarineMax for larger overall sales growth. We turned our incremental profitability in the quarter due to the timing of the closings.

Having said this, our 13% same-store sales increase, combined with our December quarter performance, has produced a first half start to the year with 20% same-store sales growth and 70% improvement in net income. Given a strong start to fiscal 2017, which is on top of many years of sustained sales growth, it is clear that the industry is continuing its recovery. It is also clear that consumers are embracing the new innovative products and the benefits of boating with MarineMax.

Our first half same-store sales growth for the last 3 years is 20%, 12% and 35%. Additionally, our same-store sales increase of 28% in the December quarter followed by 13% this quarter, illustrate the difficulty in forecasting one quarter versus another based on the timing in the business, which is why we have always focused on annual results. Today, we did reaffirm our annual guidance based on trends in business we see. And Mike will give you more detail later.

The takeaway is that while there will be volatility and earnings quarter-to-quarter, over the course of the year, we have delivered not only industry-leading, but some of the strongest sales and earnings results as it relates to many other consumer-related businesses.

To that point, let me thank our MarineMax team for producing such sustained strong results, while ensuring that our customers are happy. Our stores and our team continue to deliver the boating dream, while helping our customers enjoy the boating lifestyle. As we move forward, we should be well positioned to build upon the first half start to 2017.

The March quarter results included the addition of 9 stores that we operate as a result to the April 2016 and January 2017 acquisitions of Russo Marine and Hall Marine. Fundamentally, both acquisitions are going very well. However, seasonally, the March quarter is one where their expenses rise as a percentage of sales as they get ready for this boating season.

Beyond the addition of these stores based on the sustained growth the last 3 years, we have invested in the future as we added team members in both sales and service. And this quarter, we increased our marketing efforts. We believe these investments should enable us to capture additional business and market share gains for the long term.

Once again, we believe our results outpaced that of the industry as we gain market share in the categories that we participate. We continue to also benefit from the consolidated brand and segment expansion we executed upon, which started back in 2008. We now carry more complementing brands and segments in our stores than before, offering our customers a one-stop shopping experience. This, coupled with the increasing strength and improved outboard propulsion demand is helping us to drive our growth.

With the healthy trends in the industry, demand for products from our manufacturing partners and improved aging, we did see margins rise in the quarter in many categories and brands we carry. This led to improved consolidated margins in the quarter.

We expect to continue to build on our position as the largest retailer in the industry given our customer-centric approach and its many attributes, which include our experienced leadership at our stores and at boat shows, our unique offerings with premium manufacturers, our getaway and events with our customers as well as ongoing training and education for our team and our customers.

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 March quarter, revenue grew almost 23% to $245 million, which is on top of 33% growth and $227 million in the December quarter.

In addition to the revenue added from the 2 acquisitions, we also had a very healthy 13% increase in same-store sales, which was on top of 16% in the March quarter last year.

What is intriguing about a 13% growth this quarter is it was virtually 100% driven by units. Our unit growth implies we are gaining market share as the unit growth in the industry was not that strong. It also says the new models for our manufacturing partners are hitting the mark with the consumers.

Lastly, it clearly indicates that we saw great growth trends in the quarter and that the industry is doing well. Geographically, Florida, again, was strong but we saw good improvement at most boat shows in the many regions across the country.

From a cadence perspective, building on a strong first quarter, January started and ended strong. February was solid, but due to the timing of boat shows, it was not as strong as January.

March, although it finished lighter than we were expecting, was still a strong month. One additional data point is that we ended the March quarter with one of the highest levels of customer deposits we have ever had at this time of year. While, we always caution that a deposit line can be lumpy, it does at least provide a bit of a window into trends.

Our gross profit dollars increased 24.5% as our gross margin percentage also improved 35 basis points to 24.9%. On a brand-by-brand basis, gross margins generally did well on the quarter. Selling, general and administrative expenses as mentioned earlier are elevated by the addition of the 9 stores we added from the 2 acquisitions and the investments we have made based on our expectations of greater revenue.

Specifically, we've added costs in payroll and marketing to accommodate and drive demand. We continue to review each line item and look for savings as we move forward, but we do feel these investments are needed in the current growth environment. Interest expense increased to $2 million due to the additional borrowings to support our inventory required by our growth.

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. Based on trends and our expectations, we do think that the NOLs will be absorbed before the end of 2017 and we will face some leveling taxes.

We do provide for an income tax provision, and our annual ongoing rate should be about 38.5% until any corporate tax reform that may happen. For the March quarter, pretax profit increased to $4.2 million, while earnings per diluted share were $0.11.

Turning to our balance sheet. We ended the quarter with about $52 million in cash, and we had substantial cash in the form of unlevered inventory. Our inventory was about $405 million, which was up 17% from last year, which is below our year-to-date overall growth of 28% and our same-store sales growth of 20%, which means the returns are improving.

The age and mix of our inventory remains at appropriate and improving levels. Our property and equipment increased due to investments in certain of the marinas that we own, normal maintenance CapEx and the 2 acquisitions we completed since last March.

Turning to liabilities. Our short-term borrowings were up about 21% to $266 million, which was primarily due to the increased inventory and the timing of payoffs. As mentioned earlier, our customer deposits continue to be substantially up year-over-year, up over 31% at quarter end.

We ended the quarter with a current ratio of 1.43 and total liabilities of tangible net worth ratio of 1.19. Both of these are very strong ratios. Our tangible net worth is about $295 million or $11.74 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.

Now lets turn to guidance. Let me remind everybody that we only give annual guidance. Clearly, we started the year off well and produced a very profitable December quarter, even though it is historically our smallest quarter and a loss quarter at that. We increased guidance following that quarter.

While the March quarter came in with less revenue than we anticipated, we believe based on our backlog, customer deposits, industry feedback and trends, that we should deliver same-store sales growth for the full fiscal year in the range of 13% to 16%, which is up from the 10% to 11% range we last indicated. This does imply second half internal growth in addition to the remaining added revenue from the Hall acquisition.

As a reminder, we are up against the 44% comp growth in the June quarter and a 12% comp growth in the September quarter. Our second half internal growth would more likely be September quarter-weighted. We are not assuming any gross margin or leverage improvement in the back half versus the back half of fiscal year '16 and '15. The main variable is our revenue assumption.

Given these assumptions, we are reiterating that we still expect fully tax diluted earnings per share to range from $1.14 to $1.24, which was up from our initial 2017 guidance for $1.04 to $1.14. This compares to a non-GAAP adjusted but fully tax diluted per share of $0.87 in fiscal '16 and $0.47 in fiscal '15.

A word or 2 about current trends. Given that each month and last year's June quarter was strong and with overall 44% same-store sales growth, we are up against the tough comp in April. Today, April is projected to be up. And we have a solid backlog moving into May. Having said this, we have much business to create as the busy summer selling season is upon us.

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

Thank you, Mike. As we look ahead, we have great opportunities to welcome new boaters to the MarineMax family and to find new boats for many longtime customers that are ready to try out some of our new innovative products that are coming to market.

This historically is our busiest 3 months of the year. And thus far, we have seen a lot of enthusiasm in our showroom and at our events. Our team is getting many seasoned boaters and new boaters out on the water as we focus on driving our customer-centric approach to enhance lives by delivering the boating dream to our customers.

To that end, last weekend, we had 2 major events: the Sarasota, Florida Boat Show and an Azimut Yachting event in Southeast Florida. The boat show, a major selling event for that market, saw considerable unit and dollar growth.

The Azimut events, which had record RSVPs from customers, had a very strong turnout despite some bad weather. MarineMax through the strength of our balance sheet remains in discussions with dealers about potential acquisitions.

As we have done in the past, we will maintain our disciplined acquisition strategy and expand when the terms and the culture are aligned. In the interim, we will focus on the continued brand and segment expansions that have curtailed our revenue growth through this recovery.

Underlying the execution of our business is our ongoing commitment to building our team's talent effectively. As you have heard me say, it's all about the people, delivering the boating dream to our family of customers. And we have the best team in the industry executing on our strategies.

We must continue to evolve our strategy as the markets and the consumers' desires change, ensuring that our manufacturing partners are continuing to innovate and deliver new products while maintaining a balance sheet that will support our growth initiatives.

For 2017, MarineMax remains well-positioned to produce industry-leading sales growth and results. This is supported by the strength of the industry, positive boat show results, a growing backlog and building entries from our customers. We have the right inventory and our team is poised to continue to build on our past successes and further enhance our profitability as we work to create additional value for our shareholders.

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

(Operator Instructions) And we'll take our first question from Seth Woolf with Northcoast Research.

So very solid results. You guys continue to comp against tough comps. But I just wanted to first thank you for the color you gave on the cadence of first quarter same-store sales trends. I was wondering if we could dive a little bit deeper. Specifically, you said that you thought they were going to be a little bit higher than we actually ended up seeing. I was wondering if they lagged your expectations in every month of the quarter. Or was it something that kind of popped up in March?

I would say it's really more of a March lag. January was strong. We figured February will be light because of the timing of the shows. And then March was -- March is normally a crescendo effect in the quarters. It's always as big as January, February, combined. And it was again this year.

And Seth, I think, we were -- the December quarter, we were a little surprised at some of the business pulled ended the December quarter, that perhaps could have occurred in the March quarter. So -- and I don't think we realized maybe how much in the very beginning. But at the end of the day, as we said, it's based upon a few boats here and there to make all of the difference in the world. And when a few boats, which they did, got pushed into April, that's when we found ourselves coming up a little short on the earnings for this quarter.

Okay, that's helpful. And then just going forward, you talked about being able to realize some of these sales that for whatever reason, they probably will take place in April as opposed to March. Can you kind of give us a sense for between how many sales are being pushed forward between the deferrals that you kind of have been able to identify and then if you think about the Palm -- I'm not mistaken, the Palm Beach show took place a little later in the month. And I'm assuming you write some deals and then you get residual benefits as the weeks go on. So is there any sense for what the magnitude of sales shift into the June quarter might be?

Bill talked about a handful of boats shipped and its a handful of boats that's shipped. And also, there are some large ones, some smaller ones. We don't typically quantify what actually shifted from one month to another from our own expectations. But I'll just give you an example. This is an example. It's not trying to say what the -- what actually shifted, but $12 million to $13 million additional revenue in March, which we certainly were expecting at least that. And our earnings look a lot better, and actually our SG&A leverage ratio looks a lot better all of that. But -- and given the strength we've seen in April right now, which has certainly benefited from some of the deals that shifted from March into April, that's helping.

But then -- and your point about the Palm Beach show is exactly right. We're a little bit later, and we had a very good show. And if it had been a week earlier, perhaps there would have been even more sales into the March quarter.

Okay. Well, thanks for the additional color. I guess, if I could sneak one last one in. Can you just talk about some of the OpEx? It sounds like you made some investments to support a larger company and then the seasonality with Russo and Hall have an impact in the March quarter. Is -- does it look more normalized going forward? And then I'll hop back in the queue.

Yes, I think based on our expectations for growth in the industry, other than perhaps some of the additional marketing spend that we did in the quarter, I would think our operating expenses are more normalized subject to the marketing costs that they spiked in the quarter. As we said in the press release and I think we've said in our prepared remarks, we do feel pretty good about where the industry is going from a growth perspective.

And I'll comment on the marketing. We're feeling very good about where business is right now and how the consumers are responding and their confidence that they have in us moving forward with the economy and everything. And as such, our boat show expenses, we've committed more to them because we're seeing the dividends being paid. And so that's part of that spend.

For our next question, we'll go to James Hardiman with Wedbush Securities.

So I just wanted to clarify, you're actually raising the same-store sales guidance for the year. You're at 10% to 11%. Now you're at 13% to 16%, and yet the EPS guidance is unchanged. So I should take that to mean that the investments that you made as of 3 months ago weren't anticipated and that they're basically offsetting the better sales outlook. How should I think in all that?

Yes, I think some of that is true in our guidance. And we also recognized that we're below where TheStreet was. Again, we don't give any -- a quarterly guidance, but we're below where TheStreet was. But we feel very good about the industry overall and our ability to drive sales based on our backlog and trends.

Okay. And then one clarification, and then I wanted to ask about ASP. 13% to 16% same-store sales growth. What does that translate into for overall top line given the incremental Russo and Hall stuff that we're going to see?

So there's no more incremental Russo stuff. The incremental Hall stuff is $35 million. I actually don't have the -- handy the total number. When you add it all together, it gets close to $1 billion or $2 billion, though, overall.

Got it. And then on ASPs, so you talked about ASP being basically nothing in the quarter or flat year-over-year. In the first quarter, in the December quarter if memory serves, you got a really big lift, a double-digit ASP lift in that quarter. Help us understand what's going on there that's a pretty massive swing over the course of just 3 months. And I guess more importantly, how should we think about pricing over the second half of the year?

I think the ASP growth that we had in the December quarter was primarily because we had a handful of very large boats that closed in what historically is a small quarter. Bill said if some of those boats were to close in the March quarter, we probably would have had an ASP increase right now. I think, fundamentally, what you want to look for is unit growth. And so I -- when we look at all the new models that we have coming out, I do think our same-store sales growth is going to be weighted to units. You know exactly what it is, like this quarter is basically 100% units. The December quarter wasn't. On an annual basis, its probably going to be something like 60% unit growth, 40% ASP. It is a little bit difficult to predict on a quarter by quarter basis. But I think fundamentally, units will be the main driver of our same-store sales growth.

Okay. Just to clarify, the 60-40 units to ASP, we've already gotten the majority of that delta in the December quarter, so it should be almost all units in the back half? Is that how I should think about that?

Well, typically, it is in the back half. Typically, the summertime is more of a -- it's not when real large product sells, which is what drove the ASP growth in the December quarter. There'll be some natural ASP growth just from the migration of product as well. But I would believe that in the summertime, its going to be more weighted to unit growth as well, balancing out the whole year to something like 60-40.

(Operator Instructions) We'll take our next question from Jimmy Baker with B. Riley & Co.

First, just -- I actually just have a few follow-ups as most of my questions were asked. Was your new boat revenue growth in the quarter pretty comparable to the same-store sales growth?

Yes, yes. Yes.

Okay, okay. So -- and then just flipping to the guidance provision, so not to belabor this point but just following up to your response to James' question. Let me ask it differently. If I'm doing the math right, the same-store sales guidance is about a $38 million increase to your top line expectations. So I guess why is the incremental margin on that $38 million effectively 0?

So when we started the year, we talked about using what I'll call relatively low leverage in our guidance numbers, which is what we stuck with from a guidance perspective. And so we feel pretty good about the top half of the year. I'm sorry, the revenue line for the second half of the year based on the trends. We -- you could argue it probably maybe a little conservative until we see all of our investments pay off. But we just finished the March quarter. We had increased investments without the best flow through. And so we're sticking to a low leverage ratio in the back half of the year. My comments in the prepared marks were that we're not changing the leverage from what we had experienced in fiscal '15 and '16, which if you do all that math, you'll get between about 14% to about 24%.

Okay, understood. And then maybe you could just remind us by month where you're facing the toughest comps within the June quarter. And if you exclude these deals that slipped from March to April, the sales that ended up closing in April, would you still be up in the month of April?

Sitting here today, based on what's projected to close, we would still be up in April. The comps are very hard at really every month of the quarter. We had very strong months, April, May and June last year. Size-wise, April's the smallest and then May, and then May and June are similar. But June's usually the biggest. So percentage-wise, they're all going to be tough. Dollar-wise, it gets tougher as we move into the quarter.

Okay, last one and I'll pass it off. You just -- you saw some gross margin improvement in the quarter. I was just hoping you could speak to product margins, mix factors that contributed. How you're thinking about that for the balance of the year?

I made a comment that, really, on a brand-by-brand basis, our products did pretty well. We've got a great line of new models for manufacturers, and we have -- there's good demand in the marketplace and we've been able to incrementally make more gross margins.

We will go next to Joe Altobello with Raymond James.

First question, I just want to go back to incremental margins for this year. I mean, obviously, a little bit of a tough quarter here on that front. But it doesn't sound like you're expecting much in a way of improvement at least year-over-year in the back half. And I'm curious why not given the shift in revenue that you saw plus the timing of investments, which seem to have been earlier in the year?

We're really sticking consistent with our guidance. When we came out with our guidance for fiscal 2017, we had 2 back-to-back years of fiscal '15 and '16 with suboptimal leverage in the business. And yes, we're all working real hard to get leverage in the business. But until we actually start seeing it, we're not going to bake that into our results and into our guidance. And so again, we just finished the March quarter with suboptimal leverage. Although, we would have been better if we got these deals but they were in the quarter. And so we're sticking with basically the back half leverage that we incurred in '16 and '15 combined, which is about the same type of flow-through. And that's how we're coming up with our guidance range of about 14% to 24%. Now obviously, we're all, as a management team, doing all we can to get more into the gross margin line, to get more from the investments that we make and to improve the leverage. But until we see it, we're going to keep our guidance using the same philosophy that we started the year.

Okay. Okay. And you also mentioned that marketing spend was up in the quarter. Maybe if you could quantify how much it was up and what you're expecting the increase to be for the full year. And what does that say to sort of the environment in terms of competition and promotion, et cetera?

Yes, I'll tell you. So when we left the December quarter, which was a great quarter, yes, we had some big units that helped drive sales. But also, just fundamentally, units were good. We said, let's get out to the boat shows. So incrementally, we spent a little bit more at just about every major show. The dollar amounts over $1 million, $1.2 million or something like that. I feel very confident that on an annual basis, when we get to the end of 2017, marketing as a percentage of revenue will come in line. And I'd say that we've -- this is -- we've done this before over our -- over the time that we've been here and we've invested heavy in boat shows. You generate all the leads. You generate all the deposits. You generate the backlog. And by the way, the March quarter is the single biggest spent quarter because of all the boat shows. And over the course of the summertime, marketing comes in line as a percentage of sales, which I think will be the same thing of what happened this year, especially with our outlook for the back half of the year.

And then June is all about getting the customers out on water and doing demonstrations and getting them into stores and much less about boat shows.

Just one last one if I could. You did mention that the second half in terms of comps will be September quarter-weighted, and you're obviously aware that you're lapping up pretty tough compare in the June quarter. So would you expect comps to be up this quarter?

That's always our goal. I can say that's always our goal. My cautionary language was as your modeling the business and thinking about expectations, I would weight it heavy towards September from an expectation perspective. Everybody in our stores and everybody at MarineMax is going to do all they can to drive a positive comp. But I would say that most retailers would say it's going to be negative following the 44% same-store sales growth. But negative is not really in our DNA.

We'll go next to David MacGregor with Longbow Research.

Good morning, this is Brandon Rolle on for David MacGregor. I was just going to ask you what was your breakdown between new and used boats during the quarter? And the follow-up on that, could you also talk about used boat pricing trends that you're seeing?

Yes. The exact percentage, I don't have in front of me, Brandon. But it was -- we did have a good used boat quarter as well, maybe even slightly higher than new boat sales in the quarter. As you probably know, in the industry used boats are in short supply, late models. So pricing is rising, which is giving people a better ability to trade into a new boat. And so margins from an industry perspective are improving on used boats. I will comment, we've had a topic on these calls before about the amount of wholesale boats that we take in on trade, that we then wholesale out to a third party right away which has 0 margin. That's still elevated from historical levels. It is incrementally coming down from where it was in 2015, 2016. But it's still elevated from historical levels, which does pressure our consolidated used margin versus where we may have operated historically. But that's getting better and better with each month that goes on.

A little explanation on that is what we do for our customers as far as after the sale with events and mobile service and all the benefits that we offer them. It's hard to do that on a much older boat. So these trades that are older, we typically will wholesale them because we really can't deliver the right experience to the customer with the age of the product.

Right. And just one more, could also talk about the progress you're seeing with the Galeon yachts and kind of that, I guess, luxury yacht segment there?

We remain very excited about the brand. It's doing very well for us. The quality and warranty is very low -- high on the quality and very low on the warranty issues. So customers are happy and we're pleased with the brand. It's a great addition to our portfolio.

We'll take our next question from Greg Badishkanian with Citi.

Hey, guys. This actually Fred on for Greg. Just 2 quick follow-ups. I don't remember if you actually addressed the competitive and promotional environment in response to one of the earlier questions. And then just as you're thinking about the broader industry, where do you sort of see that shaking out for the year?

I'd say it's a healthy environment and there's not a lot of deep discounting or incentives or so forth out there. It's a good time to be in the business that we're in. I'd say from purely competitive perspective, I think we're seeing, as you guys already know about more and more people from Europe over here trying to sell their products. That typically is going to impact the larger product. But overall it's still a healthy environment in the industry.

We'll take our next question from Mike Swartz with SunTrust.

Just wanted to touch on the backlog commentary and understanding you had a bit of revenue shift from March into the third fiscal quarter. Could you just -- maybe give us a sense of what the backlog stands at. I mean, if I look at consumer deposits, they're up 30% plus and I know all the puts and takes to that statistic. But should we think of backlog being up a similar amount?

Our backlog is -- has increased year-over-year even without the deals that shifted from March to April. The point is we talk a lot about the backlog because it's a trend indicator. And the fact the backlog is up, which is somewhat -- you kind of see that through our customer deposits. It's very, very good. However, as we start any quarter, the amount of our backlog is usually a small fraction of what the overall quarter is. So I think talking about the dollar level of it isn't real meaningful. I think what's more meaningful is the -- it's up materially. It gives us very good feelings about the business, gives us good feelings about the June quarter.

And at this point in time, we're feeling very good about April. So that's an indicator as well.

Correct.

Okay, great. And then just I think one of the points you touched on and one of the things in the quarter that elevated SG&A was -- a bit was just the -- some of these acquisitions and maybe our modeling of them. But just understanding some of the seasonality there with Russo and Hall and understanding is if Russo now were calendarizing that transaction. But how do we think about the seasonality from both the revenue and maybe a cost perspective with those 2 acquisitions relative to the legacy business?

Good point. I would say that 60% of the revenue comes from April through September and probably about 60% of their costs come from April through September as well, maybe not like that. In a quarter like March -- a quarter like December, northern dealers would typically lose a little bit of money. And a quarter like March, they probably breakeven. And so they really make all their money in the June quarter and the September quarter. I could tell you specifically for Hall because that's new to everybody as you're modeling that. Hall in the back half of the year is -- I think we disclosed is about a $50 million dealership. So if I just said 60%, so lets say there's $30 million to $35 million of additive revenue coming in the back half of the year. And that's probably going to be weighted 60-40 for the June quarter. So $30 million to $35 million, 60% in the June quarter, 40% in the September quarter, something like that would be probably in the ballpark.

Okay. So more of the leverage from the acquisitions and I guess just one acquisition that hasn't been calendarized will be in the third quarter?

That's correct.

For our next question, we'll go to Steve Dyer with Craig-Hallum.

It's Greg Palm on for Steve today. So wanted to ask about the same-store sales, you are coming off of back-to-back years of 20-plus percent. You're guiding 13% to 16% this year. I guess the question is how sustainable is this sort of level? I mean, you're outperforming industry sales by obviously a pretty wide margin. So would be interested in getting your thoughts there.

I could -- I can comment, again, because we have history on our side. If you could go back to the formation of the company back in 1998, I mean, we had a long track record of double-digit same-store sales growth, which was definitely outperforming the industry. If the industry is projected to be a 5% to 6% unit grower, we're going to grow more than that in units for sure because of our strategies, our team, our products, our markets, all of that stuff. So let's say you get up into the high single-digit, you put some AUP on there, you -- right away, you're getting into the low teens. And given our track record already to-date, it's going to be harder not to be in the 13% to 16% range on an annual basis. So we've consistently shown that we can do it and outperform the industry, and we are continuing to do that right now.

And for the March quarter specifically, it doesn't even seem like ASPs contributed that much. I mean, still outperformed by a pretty wide margin. Can you sort of bucket the various factors what's most important?

I'll tell you, so we talked about the marketing spend. I'll say a chunk of it was probably our success at the boat shows, which is why we feel the spend has benefited us now but also into the futures. Great product coming from our manufacturing partners, outstanding high-performing team. I mean, all of the above, really.

And our inventory turns are looking real good, so we feel comfortable about our inventory within -- and Mike mentioned the new products and new sales. And so we're getting it from almost all of our manufacturers, and that's contributing to give the customers a reason to jump in. And speaking with many of our store managers, in fact, most of our store managers and regional presidents, they're feeling good about the consumer right now and their desire to make a purchase in the future. So we put all that together and we're going to continue to outperform the market as far as gains, and that means market share.

As it relates to inventory, any comment there specifically as it relates to your availability of some of the newer models?

Greg, we feel very comfortable with the inventory level and the mix. The aging is in line, in fact improved. And so everything is very positive. We see ourselves at a competitive advantage by having some of the inventory, especially the larger products. And as such, when people are hot, they are hot. And when they want it, they want it now. And so we have that product and it's fresh and new in many, many, many cases.

Got it. Last one on gross margin. It was the best quarterly amount in quite some time. So I guess the question is, is this a good level going forward? And I think historically, this kind of 25% to 26% has been high end of the range. Is that still the case? Or is there wiggle room to maybe improve beyond that?

So I'll go back to our guidance comment. Our guidance does not have gross margin improvement baked into it for the back half. It's similar to -- I refer to fiscal '15 and '16 kind of combined. We certainly think there's opportunities for gross margins to head north in the current environment with the product that we have with our manufacturers, the aging of our inventory, all of that. But until we, again, have more than a quarter like March, we have to have several back-to-back quarters then we can start talking about putting the -- our guidance higher to reflect that. But there certainly is opportunity, which was -- is what your question was that margins have the ability to go higher.

We'll take our last questions from Seth Woolf with Northcoast Research.

Appreciate you sneaking me in here at the end again. Just wanted to follow up on the answer you gave to Jimmy about the first 4 weeks of April. I think you said it was still positive. So if we just think about the normal seasonality within the June quarter, would that not imply that those sales you expect to shift from March into April, your comps are running up mid -- low double digits at the very least maybe even into the mid-teens? Did I get the math right?

You always got to be careful and sometimes --

You always got to be careful about how much you say about current trends sitting here today. Sitting here today, we feel very, very good about the June quarter.

Thank you, Mike, you saved me.

You're -- the math that you're doing and what you're saying is mathematically I think -- I understand -- I noticed at how you're getting there. But the point that I'll remind everybody on the call is we got a lot of boats to sell, a lot of business to create in the next 2 months and 1 week, whatever's left in April. So we got a lot to -- a lot of deals to close, a lot of revenue to book, a lot of margins to create and so forth.

We have one more to come in. We'll take our next question from James Hardiman with Wedbush Securities.

Thanks for taking my follow-up, and I don't think you've answered this. If you have, I apologize. But just wanted to make sure we're all in the same page in terms of what happened between revenues and costs in the March quarter versus the outlook. The quarter was worse than -- on the top line, the quarter was worse than you expected. And yet, for the year, your guidance is going up. And I get the timing of why the first quarter was worse than expected. But what are you seeing that gives you confidence to say that your revenue outlook is going to be even better than it was 3 months ago?

Our performance to date is better than it was 3 months ago. We're 20% same-store sales growth through 6 months. When the year started, we were -- 10% plus or minus was our first guidance. The second guidance after December was 10% to 11%. We're 20% for 6 months. Because of the (inaudible), this quarter was -- which is higher than where TheStreet had modeled. Not to talk too much about TheStreet, we had anticipated it to be even higher. And that -- our anticipation grew into the quarter. And so based on boat show traffic, just about every boat show was hitting record, as Bill said, including the West Palm Beach Boat Show. Based on the boat show traffic, our boat show sales, our contracts written, our customer deposits, our backlog trends today, April trends that Seth just mentioned, it's almost -- you almost have to have a significant decline in the back half of the year to not increase your same-store sales guidance for the full year.

Right.

Okay. So although you expected that, it was too early to bake it into your guidance. Is that right? Basically if you hit your expectations, you expected that you...

Yes. When we gave our guidance last, we were feeling better but we had not gone into the Miami Boat Show, which is a massive show and some of the other big shows. I think we were about to enter into New York as an example, which ended up being a modern era record show. So a lot of those big shows were post our guidance, and the level of sales and the level of activity following that has been fairly strong especially around units, which fundamentally is what tells you the industry is doing well.

Okay. And then, secondly, is the increased same-store sales number dependent on the increased investment spend? I guess, I'm trying to figure out if the earnings impact is neutral, why is it necessarily worth it to ramp up your costs? And maybe the answer is that you're sizing your business for potential even more upside to revenues. But how should I think about all that?

You just answered it.

Yes.

Yes, we're -- we believe that we're looking at a -- we've already delivered -- we've already grown the business quite substantially. We believe we needed that technicians, sales team members, other folks into the organization to capture as much market share and -- given the demand that is out there.

That concludes today's question-and-answer session. At this time, I'll turn the conference back to Mr. McGill for any closing remarks.

Thank you, operator. You've all heard me say that it's all about the people. And in our business, its relationship selling. And so, therefore, having the right people in place is absolutely essential. So 25 years ago, I made a hiring decision, brought someone in our company, that's now our Chief Revenue Officer, Chuck Cashman. So I'd like to thank Chuck for his 25 incredible years and what he's doing to drive revenues in our company and marketing and so doing a super job.

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.

This does conclude today's conference. Thank you for your participation. You may now disconnect.