MarineMax Inc (HZO) 2018 Q4 法說會逐字稿

Good morning, and welcome to the MarineMax Corporate Fiscal Fourth Quarter 2018 Earnings Conference Call. Today's conference is being recorded.

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

Thank you, operator. Good morning, everyone, and thank you for joining this discussion of MarineMax' 2018 Fiscal Fourth Quarter and Full Fiscal Year Results. I'm sure that you've all received the copy of the press release that went out this morning. But if you've not, please call Linda Cameron at (727) 531-1712, and she will email one to you right away.

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

And 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 Brad, 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 could 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 Brett.

Thank you, Mike, and good morning, everyone. Before I recap our great quarter, I need to thank Bill for well over 20 years of guidance and leadership and for his continued support in my role as CEO. He will comment later on his role for the future.

As for the quarter, what a fantastic end to a very strong year. Our impressive results were entirely due to an energized team performing at a very high level. I'm very proud of the hard work and extra effort that undoubtedly saw our market share continue to expand as we excelled in most categories during the quarter.

Our fourth quarter results were quite impressive as we delivered 23% revenue growth to $309 million, driven by very strong same-store sales growth of 22%. Gross margins were healthy from a brand-by-brand perspective, but a greater mix of traditionally lower-margin large yacht sales compressed our consolidated margin.

After adjusting the fourth quarter expenses in both periods for items mentioned in the press release, the team did a pretty good job managing cost. We produced an impressive 56% increase in normalized pretax earning and adjusted earnings per share growth of 105% to $0.45 per share. I will add that in addition to strong boat sales in the quarter, we generated solid growth in most of our higher-margin businesses such as service, brokerage, F&I and parts and accessories.

For the full fiscal year, revenue approached $1.2 billion. Gross margin dollars grew by almost $33 million, and we again modestly grew our gross margin percentage for the third year in a row. Given our revenue growth and absent a meaningful spike in health care claims, our year-over-year expense growth was reasonable. This resulted in adjusted pretax earnings growth of 30% and adjusted earnings per share growth of 70%.

Switching topics, let me provide a brief comment on the status of Sea Ray's discontinuance of their sport yacht and yacht models. Our inventory was around 60-plus boats when the news was announced in June. As expected, Brunswick has been in the marketplace supporting the sales and continued warranty of the products.

As a testimony to the strength and legacy of the brand, the demand to give one of the latest new Sea Ray sport yachts and yachts has been strong. At the end of our fiscal year, we were down to below 20 boats that were not otherwise sold or under contract. We will likely carry a few into the March quarter given seasonality, which is less than we originally projected.

Providing a quick update on our charter operations in the British Virgin Islands, sales are still recovering from last year's Hurricane Irma, and we are rebuilding the fleet. We were recently there with some of our top-performing team members, and it was great to see that the islands have made an amazing progress in rebounding from Irma. The best support that can be given to them is to plan your family's vacation down there. It's such a great experience.

Since I've just mentioned Irma, I can let you know that we have limited issues specific to Hurricane Florence, with only our Wrightsville Beach, North Carolina store needing repairs due to flooding. As for Hurricane Michael, our operation in Panama City was hit pretty hard, while other locations west of there were fine. I'm sure you have all seen the extensive damage in the Panama City and surrounding areas. Please keep the people and communities in the hardest hit areas in your thoughts and prayers as the recovery will take some time. When named storms approach, our team is very seasoned and does an outstanding job in preparation, as they did in both of these storms, which limited the financial and operational impact.

Let me switch back to our year-end results. We finished 2018 very strong, and we did it while successfully reducing our inventory levels as we said we would over a year ago. As we enter fiscal 2019, our overall mix and inventory are very well positioned.

Given my recent promotion to CEO, I want to take a moment to communicate a few important messages. To start, we do not need to make many wholesale management or operational changes. I assume responsibility of the executive leadership team and will continue my prior responsibilities as President and COO. MarineMax is committed to building upon our past success by maintaining consistent improvement in performance on an annual basis.

MarineMax approach and strategy remains intact and includes the following: to drive additional market share gains by working with manufacturers to continue to develop and produce new, exciting and innovative models; maintain and continue to enhance our customer-centric strategy to drive meaningful recurring business while maintaining the highest levels of customer satisfaction; further develop and build out our digital strategy; operationally, we will not let up on our efforts to align expenses with sales; and finally, continue to leverage our industry-leading balance sheet as we actively look for attractive, accretive acquisition opportunity or brand expansion.

I'd like to provide a few thoughts on the industry trends. Thus far, reports from fall boat shows indicate that attendance is up. This is very positive for 2019. Also, any boat that is outboard-powered continues to lead the way in the industry, and that trend is not likely to shift any time soon. The enhancements made to outboard engines over the last several years have made us the desired power of choice.

We are gearing up for the important winter boat show season in Fort Lauderdale Boat Show kicking things off. Mike and I and our team head down tomorrow to kick off the show. Fort Lauderdale remains one of the largest and most important boat shows in the world. Our team has traditionally done an outstanding job at the show, and we are confident in our preparation and training for successful effort this year.

We expect a great amount of time with our manufacturers providing them with feedback from our customers to help drive innovation and create new models, marked by state-of-the-art technology and design. As we enter 2019, we have the right inventory, a team that is highly motivated and a customer base that is excited about new models and the boating lifestyle. This, combined with positive consumer confidence, should position us to grow our revenue and earnings in fiscal 2019.

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

Thank you, Brett, and good morning, again, everyone. Let me also thank our team for an outstanding close to a strong 2018. It was impressive. The strength in the quarter allowed us to achieve the top end of our original same-store sales range for the full year and exceed the high end of our earnings guidance range.

For the quarter, revenue increased $58 million to $309 million, driven, as Brett said, by a very strong same-store sales growth of 22%. While Florida led our growth, we saw a growth in just about all of our markets. The same-store sales growth was comprised of about 1/3 unit growth and 2/3 price growth, primarily due to the mix shift to larger products.

From a gross margin standpoint, the mix to larger product compressed our consolidated margins. From time to time, we do experience stronger growth in larger product, which does consistently have this effect. But when it happens, it usually produces meaningful earnings growth like it did this quarter.

Selling, general and administrative expenses rose to $63 million for the quarter after removing the gain outlined in our press release. Beyond some elevated health care claims and costs associated with stores being shut down for Hurricane Florence, expenses were reasonably in line in the quarter.

Let me now touch on the contingent consideration gain we had in the quarter. Under GAAP, companies need to use third-party valuation professionals to estimate and accrue the fair value of what will likely be paid out under earnout scenarios at the end of the earnout. While the acquisitions that we have completed are performing quite well and we are making earnout payments, the most recent valuation of fair value did reduce the original estimate.

For the quarter, interest expense was basically flat despite a rising rate environment due to our efforts to reduce our inventory and related line of credit.

Excluding the adjustments discussed in the press release for the September quarter, pretax revenues increased 56% to more than $13 million, and our adjusted earnings per diluted share rose 105% to $0.45 per share.

Briefly, for the full fiscal year, revenue is now approaching $1.2 billion, driven by strong 10% same-store sales growth. Gross margins rose again, adjusted pretax earnings expanded more than 30% and adjusted diluted EPS grew more than 70%, a very strong year overall.

For our balance sheet, at year-end, we had about $49 million in cash. As a reminder, we have substantial cash in the form of unlevered inventory. Our inventory levels at year-end improved to $377 million, as we expected it would. As a reminder, we felt we ended last year with modestly elevated levels of the inventory. Given our growth this year and our reduced inventory levels, we are well positioned as we move into fiscal 2019.

Turning to our liabilities, our short-term borrowings were reduced 16% to about $213 million at year-end, reflecting lower inventor levels and timing of payments on our line. Customer deposits, while not the best predictor of near-term sales because they can be lumpy due to the size of deposits and whether trade is involved or not, were down 19%.

When I discuss current trends shortly, it will provide a better understanding of what we're seeing at retail. Our current ratio stands at 1.63 and our liabilities to tangible net worth is at 0.88, both outstanding balance sheet metrics. Our tangible net worth jumped to $326 million or $14.14 per share compared to $11.19 last year. We own about half of our locations, which are all debt-free, and we have no additional long-term debt.

Turning to guidance. We are initiating earnings per share guidance for fiscal 2019 of $1.85 to $1.95. Our guidance takes into account that we're up against the solid 3-year stack same-store sales growth of about 36%. Currently, most in the industry believe that unit growth will continue to be in the mid-single-digit range.

Our guidance assumes we will grow same-store sales 5% to 10%, and that we will have leverage in line with the last few years. Our guidance use the share count of around 23.5 million shares. Our guidance also uses an expected 2019 tax rate of 27% and excludes the impact from any potential acquisitions that we may complete.

Let me provide some additional context for 2019. Marine dealers, including MarineMax, most often lose money in the December quarter. As an example, since 2000, about 2/3 of our December quarters produced losses. Additionally, we are up against 4 consecutive profitable December quarters with an 80% stacked same-store sales basis, which is sizable.

As we have in the past few years, we will work to produce a positive quarter results. But when it comes to modeling the business, it would be prudent to expect a loss to breakeven. This is not meant to express any concern over business, it's just a reminder of the seasonal industry we are in. As you think through the rest of the quarters, keep in mind how strong the September quarter was, as it will certainly be a challenge to comp 22% growth. But as we always do, we will try our best to outperform.

Turning to current trends. Despite the 80% stacked 4-year same-store sales growth I just mentioned, October looks like it will finish with positive same-store sales, and our backlog, as we started the December quarter, was up. This further illustrates why we historically have noted that our customer deposit line is only one metric, but not the best predictor of near-term activity.

Let me now turn the call over to Bill McGill, our Executive Chairman, to make a few comments before opening the call for questions. Bill?

Thank you, Mike and Brett. I'd like to add my congratulations to Brett and the team for producing an impressive 2018 capped by a very impressive September quarter. Simply put, wow. Also, I want to say how honored I have been to serve as your CEO for the first 20-plus years of MarineMax. It has been very rewarding, fun and inspiring. Nothing makes me happier than seeing our teams strengthened and grow.

In my new role as Executive Chairman, I will work closely with Brett, Mike and the rest of our team through this important transition. But given their years of experience, I expect the transition to be smooth. I will also work with the board and Brett on our various strategies for the future. So while my role has changed, I will stay actively involved and excited about our future, our future successes and performance.

And with that, I'll open up the call for your questions.

(Operator Instructions) We will now take our first question from Joe Altobello from Raymond James.

So first before I ask a question, I wanted to wish you, Bill, good luck as well as Brett going forward. Mike, I want to go back to your comment that you made just now about December quarter. You said -- you did point out that, historically, that's been a breakeven-ish quarter for the boat industry. You guys have had positive earnings the last 4 December quarters, so I'm curious why this quarter might be different.

You know what, I think, probably all 4 of those years, I reminded everybody about the seasonality. When you just look at what typically happens in the industry, it typically is the smallest and the lowest of all the quarters. And so seasonally, I think, as people are modeling the business, you just got to keep all that in mind. Obviously, everyday we're coming into work trying to be positive again. It's just as you're laying out your model, I think, it's prudent to remember, let's say, for 2018 quarters, and 2/3 of them have been a loss. We have had a nice run of late, and we're going to continue to try to do that. But it's just as you're modeling the business, just remember that's seasonal. There's no concern, I wanted to make that clear. Our backlog is up. We feel good. We're 1 month into the quarter. We've got November and December in front of us. It's just a reminder of how our industry is.

Okay, understood. We're now a year of move from Irma. Any signs of replacement cycle, and have you seen any impact or should there be any impact from Michael on the boat stock at the Panhandle?

I think with -- Joe, this is Brett. With Irma, I think we continue to see kind of a steady pace of replacement, but no spikes or jumps or anything that really stands out at us. And with Michael, we're still trying to assess the losses and boat damage. So it'd be hard for us to understand that at this point.

We will now take our next question from Greg Badishkanian from Citi.

It's actually Fred Wightman on for Greg. The commentary first for -- the commentary for the Sea Ray inventory seemed pretty positive. But I'm wondering if you could just talk about from a higher level how that transition is playing out versus your expectations. I think in the past, you talked about some potential margin pressure as a result. Just wondering if that's played out in line with how you guys were thinking about it.

Yes, Fred. As we noted in the script there, the Sea Ray cadence was excellent. With good support by Sea Ray, not only on the sales side, on the warranty side, the brands, the confidence in the consumer, so we felt really good how things went. We are cautioned by what margin pressure has crept in or what might come in. But the cadence has been good on selling products. We're down to really candidly very few and don't anticipate a big problem with that.

Okay, great, and...

Go ahead, Fred.

Sure. And then last quarter, you guys had talked about some supply constraints from Mercury and Yamaha. Just wondering if you've seen any improvement in the availability in the channel, and if that's translating to retail yet.

Yes, I think there are still some supply constraints from both. It gets better each month, each week, each quarter. I don't have what the impact was in our current quarter. But I think as we continue to move through the December quarter to the March quarter, it should be -- should subside, I would believe.

We will now take our next question from Eric Wold from B. Riley.

It's a follow-up question on the Sea Ray. Obviously nice to see less than 20 left of the 60 plus. Anything different of the kind of the inventory composition of those remaining 20 versus the 60 that -- why they may have not moved versus the others? Or it's just -- it's kind of the same as those ones that haven't moved yet?

Yes. It's just they haven't moved. There's no difference. It's just what's left out of the remaining models. All great boats. I suspect we'll carry them into -- probably into the March quarter sometime.

It's a fairly broad range of the model, it's not stacked in one area that gives us big concern or anything. Seems to be just -- yes.

And then the transition into more Galeon and Azimut of the 40-foot and above moving inventory, how has that transition played out so far been received well by boat buyers?

Yes. So far, along with the success of the Sea Ray model selling, we've seen a good cadence of the Galeon and Azimut sales, and then we've seen a good success, taking some people that maybe wanted something different moving them to Azimut, where maybe before they would have considered something else. So we're seeing a good sign there. It's going to -- we've put in a lot of training. We took our team, did some special events with training. We're getting our top sales team members to the factory, so they can understand the products better. So we're trying to do everything we can to make that -- some of these customers have bought 3, 4, 5, 10 boats from us over their lifetime of boating, and we want to keep that going.

Perfect. And just final question. Underlying trends you're seeing kind of in boat financing. Any changes in kind of consumer behavior around just rates starting to creep up? And what are your thoughts if they do continue to move higher?

No. I mean, our unit growth is pretty strong in the September quarter, and that was a quarter that certainly saw rising rates. Just as a reminder, when you look at the marine industry and plot it over time, rising rate environments are most often the strongest periods. Obviously, the raising rates try to cool the economy. As the economy is heated up, our typical buyers are making more money, either in their small businesses or were -- in their paychecks. So it traditionally is a good time for our industry.

We will now take our next question from Scott Stember from CL King.

Just going back to the Azimut and Galeon moves that you talked about. Obviously, this quarter, there was a good benefit from moving out the Sea Ray product. Just a couple of things, maybe just talk about how the rest of the Sea Ray line is doing. Meaning the stuff that you will continue to be selling as well as your guidance for 2019. How does that incorporate or what level of success of transfer to the Galeon and Azimut's brand does that include? Meaning, Is there upside to that if you were to see a bit better success?

We -- the success of the Sea Ray sport yachts and yachts, as we noted, was great. We still have a huge backlog on some of the hot Sea Ray models below 40 feet, the 400 SLX (sic) [SLX 400] and many of their other models still in very, very high demand. Again, just met with Sea Ray recently, excited about the products they have come, and our team is excited. And we see a very good backlog and cadence there.

I'd say on the guidance, we're assuming being reasonably successful, certainly not overly successful. So like any company, when they give guidance out there, they would like to think there's upside to their numbers. So the manufacturers, both Galeon and Azimut, have stepped it up and made available models for us and product for us to fill the void from Sea Ray. We have good visibility to that. In many cases, the product is either on the ground or coming. So we feel good that we definitely have the tools to achieve and potentially exceed our guidance, depending on the success of that transition.

Yes. And then last question on health care. Can you maybe just frame out for us what the level of the chart was, what the increase in the quarter? And how do you bake health care into your guidance for '19? And that's all I have.

Yes. So I can. So in the quarter, health care costs were up around $0.5 million. I'll also add that hard cost associated with Hurricane Florence was around $0.5 million. That doesn't include any efficiencies, stores being closed. For the full year, our health care claims were up about $3.5 million, and those are claims. We've not assumed any reduction in that in 2019. So obviously, when you look at how the actuaries look at our company, we're trending higher than we probably should be. Hopefully, the actuaries tend to be right over time. And hopefully, we can get some benefit, perhaps, in '19 or soon, on the rising claims. But hopefully, that answers your questions on what we did with guidance and also on the current quarter health care question.

We will now take our next question from James Hardiman from Wedbush Securities.

This is Matt Mccartney on for James. Just had a couple questions for you. Just firstly, on the industry data, it seemed to show pretty significant deceleration over the course of the quarter. Just wondering if that's what you're seeing as well.

We actually had good cadence, July, August and September. The industry data has been certainly the topic of discussion. You remember, July was up, I don't know, like 45%, and then August was down 25%. I mean, obviously, that's not what's happening in the industry, not to that degree. So we had a pretty good unit growth right through the quarter and, obviously, very good dollar growth. That could be obviously -- that's probably our strategy, some of that's our brand, some of that's our markets continuing to outperform the industry.

I was going to add that with our strategy all through the summer months of getaway and getting our customers out on the water, the more premium products that we tend to focus on, it's just that provides a lot of growth by doing those events, and they were at an all-time high this summer.

Okay, thanks. That's really helpful. And then on just kind of outside the big yacht sales, they're, obviously, somewhat unpredictable and helped your ASP in the quarter. Can you talk about sales trends in terms of boat size, features, horsepower, et cetera, that might affect ASP going forward? And then how should we think about the mix between pricing and ASP in the context of your guidance for FY '19 speaking on same-store sales?

I can tell you, Brett commented that anything with an outboard has been very strong, and that's true. That can start at 20-footer and go all the way up these days to 53-footer or even bigger. So really, when I think about ASP, the shift to outboard doesn't really reduce ASP. It probably, if anything, may increase ASP some as people put more engines on the back of boats. So that's probably a positive from a same-store sales perspective. I just think, in general, I know based on our customer base and our type of products that we deal with, I mean, people like -- if they're going to spend their recreational dollars, they want to get a fully equipped product, which also increases ASP. So I think in general, we're probably in an environment where the industry is selling more loaded boats with more toys and technology that probably does incrementally increase ASPs. And then specifically, as I think what you'd asked about just what's hot in outboard products, and really, anything new continues to be hot.

Okay, great. And then just lastly, are you seeing any evidence, maybe anecdotal or otherwise, that tax cuts are helping current boat sales? Or do you think that's something we're going to have to wait until tax return season to see or maybe just a nonfactor overall?

Well, we just say that business has been good and consumer confidence is good. And so it must have some impact, but I don't know if we have the actual data to tell us why it is, but the business is good.

We will now take our next question from Michael Swartz from SunTrust.

Just quickly on -- I guess, as it relates to Sea Ray, is there any way to isolate maybe the impact? The clearance activity, obviously, was very strong in the quarter, maybe the impact that, that actually had on gross margin. I'm just trying to get a sense of maybe what gross margin would have looked like if we didn't have that activity going on.

I don't have that, Mike, in front of me to try to quantify it. I think, overall, margins would be a little bit better without it. But like Brett said, the demand for the last built sport yachts and yachts has been better than probably anybody anticipated.

And the other models, the order brands, Azimut and whatnot, were pretty darn strong in the quarter.

Okay. And then I guess, sticking on gross margin, as we think about your '19 guidance, Mike, I mean, how should we be thinking about that? Maybe you can frame it in terms of puts and takes as we go into the new fiscal year.

Yes. So we can assume much of the way of gross margin expansion. Obviously, we're going to try to continue to grow our gross margins like we have the last 3 years, but that's not in our guidance. Our guidance is really top line story of 5% to 10% same-store sales growth and then leverage in line with what we've had the last couple of years. I think there's upside in both of those because our leverage last couple of years has been improving, but I think there's still opportunities there, as Brett said. And then I think there's opportunities on the gross margin side. So our guidance is really -- the question is, does it seem about right in the top line? If the industry grows 5% in units, we ought to be 5% to 10% top line, just given ASP expansion. And achieving leverage similar to what we've had, we ought to be in that $1.85 to $1.95 range with potential upside from that. Obviously, we got many months ahead of us to show that we can get the upside and we can get the sales and all that stuff. But there's no incremental benefit baked in on expectations around expansions of margins.

And just one final question. This is more of a 30,000-foot question, just around maybe some of that incremental demand you've seen stimulated around larger boats and specifically at Sea Ray in the quarter. I mean, does that tell you anything about the level of maybe pent-up demand in some of these larger boat segments, to the extent you can? And also, just I guess in terms of maybe the cost of the price inflation we've seen in those boats, going back to, gosh, even 5, 10 years, I mean, when a boat is priced right, it seems like it's moving. So does that -- I guess, just could you help us understand again the wrinkles of price and -- on that -- I guess, on that larger boat business?

Again, I go back to when a boat's equipped the way people want it, which on a larger boat, it's equipped very, very luxurious, the price -- obviously, the price matters. But they will pay for how the boat is equipped, and that's the way we bring our product in. I think you're right about pent-up demand. I think there's been a -- with the increasing wealth in the country and maybe a number of years when people didn't buy big boats following the financial crisis, there does seem to be some additional strength, driven by the wealth that's been created out there, plus new models that are coming. Manufacturers are building bigger boats and nicer boats.

Yes. As the cadence of boats slowed over those last 10 years and then new models came out with new innovation, yes, there weren't as many yachts quickly, so it just, I think, lengthened the cycle of that. But there's still a good demand. When we come out with a model with some innovation or a layout hit, and it's a competitive world out there in the pricing and when we get that price dialed and when we get our team trained, the boats sell.

Mike, I know you're going to be down in Fort Lauderdale this week. And when you look at -- if you go by our booths, our Azimut booth, our Ocean Alexander booths and others, I mean, all the bigger stuff there, at least most of it, is new models. There's a lot of new models coming either right now or the foreseeable future, which should help to continue to stimulate that type of activity.

We will now take our next question from Brandon Rolle from Longbow Research.

I guess a lot of my questions have been asked. I guess, one, could you speak to the used boat sale trends you've seen? If anything, we've been hearing things like it's mostly new product out there or used boat inventory is scarce. And then also just looking at 2019 and the mix of boats, with the stronger U.S. dollar, do you think you'll continue to see strength in Ocean Alexander and Azimut and boats that are larger than 70 to 80 feet throughout 2019?

Yes. As far as the used boat sales, it is scarce to get good used product in our inventory. And when we do, they move quickly. So that I'd say the used trends are good. And we don't see as many trades maybe as we did many, many years ago. So it's hard to get the inventory -- used boat inventory. And the mix of the boats we see -- when we look out at Azimut's current boats and their boats that will be coming, and then Ocean Alexander, many of the other -- like Mike said, they're all new models, and they're very exciting stuff coming that really hits a point that the market right now is looking for.

I'd say the dollar helps. But I think even if the dollar wasn't as strong as it is, the demand for the new models, because they're new, would still propel the sales of Galeon and Azimut, Ocean Alexanders, because it's all new stuff coming in. And as we've always learned over the years, new sells. That's what people want.

We will now take our next question from Joe Altobello, Raymond James.

On that topic, Mike, in terms of Galeon and Azimut, Ocean Alexander, sort of, making up the roughly $100 million hit from the loss of the Sea Ray sport yacht and yacht business. It sounds like you guys are assuming that you're not going to miss a beat there, and that they're able to sort of soak up that demand. Is there a manufacturing capacity issue with those brands?

Good question, and the answer is no, that we've already worked with both manufacturers, and we expected, no matter what was going to happen with Sea Ray back before the announcement came on, that whether they were sold or something that there was going to be some time period where the new buyer was going to have to rejig your models and perhaps production would come down. So we had already increased orders prior to the announcement for both Azimut and Galeon. And then when the announcement came out, we obviously had a little bit additional work to do with both manufacturers. Both of them had been very flexible and have, in some cases, changed propulsion and changed models to better align their product with the U.S. market. And they've done it very rapidly, which has been fantastic and kept quality up and everything else that you would expect. But they both have laid out their production capabilities and, like I said, in many cases, products on the ground now are coming.

Okay, perfect. And on customer deposits, I know you tell us every quarter, it's -- not that you'll lend all in terms of a predictive or future sales. But if you look at your customer deposits, at the end of fiscal '16, it was $30 million. At the end of last year, it was -- at the end of fiscal '17, it was $21 million. Now we're at $17 million. Is that an indication that more of your sales include trade-ins? And if so, does that imply that the supply of used boats is starting to creep up a little bit?

I think what it's implying is there's less trades because trades are very big dollars. So less trades at a point in time is what I mean. Customers are holding onto their boats until their new boat comes in. And so we may have a cash deposit that's, let's call it, $100,000. They have a $2 million boat that they're using. They have a new boat on order. The new boat -- I can think of a boat right now as I'm talking about this, but new boat's already here. They will take delivery of it in November, and we'll take the trade in at that point in time. And at that point in time, it's no longer called a customer deposit, it's called a used boat inventory. It's I think what it is. There's people out there enjoying their boats, not trading the boat to us pre the new boat coming in, and I think it's a big chunk of it because during all those periods, we've grown the business. And it's a line item that gets attention for the reason that we've all talked about, but I think the bigger comments are what's going on in our backlog and what's going on in retail business today, which has been generally good for a long time.

We will now take our next question from John Lawrence from Coker Palmer (sic) [Coker & Palmer].

Would you -- Mike, would you comment just a little bit about the relationship with Sea Ray, as you continue to work with them on the other products? Anything that they talk about, delivery schedules, design? I guess, just some of those things that might have changed in the relationship since they made the decision? And how do you look at that going forward?

I'd say, our relationship with all of our manufacturers has always been very strong, and our relationship with Sea Ray is very strong. We work with them very closely on thoughts around new models, price points, options. We continue to do that. Obviously, we're an important partner to them, so they work with us as well. With the product below 40 feet, with the leadership in that part of the organization, I'd say it's been -- it's great.

We just had our forum where we brought a lot of our managers in, so that Sea Ray could talk about where they're at and how things are going and the future plans. And it looks like they're going to be able to meet our forecast. They are building some great models, and all that appears to be online and our relationship appears to be as strong as ever.

Great. And secondly, any changes to the boat show schedule as we look through the quarters and all of that? Anything shifting around? Or is it pretty much the same as '18?

The only thing that was brought up to me earlier today, so in the December quarter last year, the Tampa Boat Show got moved into October because of Irma -- Hurricane Irma. So it was in September this year, so we had some incremental benefit. Although it wasn't a real big driver in the quarter, but it was an incremental benefit for the September quarter. That's the only thing I can think of. Other than that, boat shows -- yes, they are all about the same timing that we can think of with -- kind of kicking off right now.

It appears there are no further questions. At this time, I would like to turn the conference back to you for any additional or closing remarks.

Thank you for joining us today. Mike and I will be around today for any of your questions. Thank you for your support and belief in MarineMax. Have a good day.

This concludes today's call. Thank you for your participation. You may now disconnect.