MarineMax, Inc. (FL)

Good morning and welcome to the Marine Max Inc. 2020 Fiscal Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Dawn Frankfurt, Investor Relations for Marine Max. Please go ahead.

Thank you, Operator. Good morning, everyone, and thank you for joining this discussion of Marine Max's 2020 Third Quarter. I'm sure that you've all received a copy of the press release that went out this morning, but if 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. Brett McGill, President and Chief Executive Officer, and Mike McLam, Chief Financial Officer of the company. Management will make a few comments about the quarter and then be available for your questions. And with that, let me turn the call over to Mike McLam. Mike?

Thank you, Don. Good morning, everyone, and thank you for joining this call. Before I turn the call over to Brett, 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. Brett?

Thank you, Mike, and good morning, everyone. I want to start by giving a large shout-out to the entire organization at Marine Max. Producing same-store sales growth of 37% and generating record earnings would be an amazing accomplishment in a normal environment, but to achieve these results while navigating a global pandemic is just outstanding. I'm very proud of our team for staying safe and also thank them for their hard work during the quarter, all while keeping our customers safe so that they can enjoy their passion for the boating lifestyle. The positive trends we saw in April built as we moved through the balance of the quarter. Our trusted brands and digital capabilities made it easy for our customers to conduct business quickly and remotely, and we capitalized on the dramatic lifestyle change of consumers wanting a safe recreational environment with family and friends. The health and well-being of our team, their families, and our customers, as well as the welfare of our local economies, continues to be a top priority. During the quarter, we enhanced our offerings to provide multiple approaches for our customers to continue to enjoy their experience on the water. Demand was driven by the strong desire of consumers to get out of their home and find an activity that could be enjoyed with family away from the crowds. As weather improved, we saw this demand spread from our warmer markets to all of our markets. Boating is a great way to escape the stresses of everyday life And MarineMax allows customers to maximize their benefits given the full service solutions we offer. Our 37% increase in same-store sales was driven by strong unit growth. Our record quarter illustrates the strength and flexibility of our business model. We experienced strong performance across most lines of business and in all key categories. Importantly, our digital platform was once again a competitive advantage during the quarter. Online, we are available 24-7 and can offer our full selection of boats, yachts, and charters, as well as our expert team that is available to answer customers' questions and help them find a boat virtually. We also continue to benefit from our best-in-class, fully integrated CRM system and data analytics platform, creating a seamless experience for our customers. New tools enhanced our lead visibility and created significant efficiency in our sales efforts, resulting in record lead generation in the quarter. Importantly, we added new customers to boating, which will drive future growth over the long term. The next comment is an important one. It's been reported several times in marine industry publications that the industry is attracting and adding a new foundational layer of customers to the boating lifestyle. It is a combination of new buyers and perhaps people that have not owned a boat in a while which should help support future growth as they migrate to larger or different types of products in the coming years. Undoubtedly, many of today's call participants know friends who or two have bought a boat recently. It's truly an exciting time for our industry. Our strategy of investing in high-margin, asset-light businesses and best-in-class technology continues to serve us well. Our higher margin businesses increased due to the Frazier acquisition, as well as an increased focus and training on our F&I and Marina businesses. Due to the tremendous increase in both sales during the quarter, our overall gross margin was down due to mix. With the strength of our balance sheet, we remain well capitalized to grow the business. whether investing in strategic accretive acquisitions to further enhance our geographic presence or adding to our marina and other higher margin businesses, we ultimately are committed to expanding our gross margins. To that point, we were pleased to recently add Superyacht Powerhouse, Northrop & Johnson, one of the largest superyacht brokerage and yacht service companies with offices around the world. Together with Fraser Yachts, this unified combination provides us unrivaled global scale while further diversifying MarineMax into higher margin, digitally focused businesses. Our team continues to focus on managing the controllables. As a reminder, we entered the June quarter with the age and mix of our inventory in a good position. Although the entire industry is lean on inventory due to the stronger demand for boating lifestyle, Our deep manufacturer relationships, flexible inventory management, and valuable real estate locations positions us well to continue to take share. No doubt there continues to be uncertainty due to the pandemic in the fiscal fourth quarter and into the fiscal 2021. However, our cycle-tested management team has demonstrated through past challenged economic times that our business model and customers are resilient. And with that update, I'll 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 their outstanding performance in the quarter, especially during these uncertain times. For the quarter, revenue grew to a new record level of over $498 million. The growth was driven by an impressive increase of 37% in same-store sales. Brett mentioned it briefly, but our same-store sales growth was fueled entirely from unit growth. We saw strength in all categories of products and across all geographic regions. From a trend perspective, momentum began building in April and never slowed. I would add that our results were produced without the benefit of the West Palm Beach and Sarasota boat shows, which usually contribute measurably to the June quarter. Given our technology and our ability to mine the data we have amassed over the years, we can generate very qualified leads online, allowing us to outperform without these boat shows. Our gross profit dollars increased to over $123 million for the quarter, while our gross margin declined about 70 basis points. The decline in margin was primarily due to the tremendous increase in boat sales which carry the lowest margin of all products we sell. Our Frazier acquisition continues to benefit gross margins, and excluding Frazier, gross margins would have been down over 100 basis points, again, due to mix. Historically, with such strong same-store sales, margins do compress, but profits improved dramatically like they did this quarter. Selling, general, and administrative expenses increased to over $74 million. However, excluding Frasier and the increase in sales commissions from the rise in sales, SG&A would have been down year over year. Again, this is due to the hard work of our team and their ability to think and work differently and more digitally in this new world. It's also due to the cost initiatives we implemented last year, which included closing eight duplicative stores. Because of our proactive approach and other efforts, our flow-through in the quarter was 18%, which led to our strong earnings growth. Our pre-tax earnings reached a new quarterly record of $46.5 million compared to $25.8 million last year. Our record June quarter net income grew 83% to almost $35 million, with earnings per share increasing over 88% to $1.58. For the nine months through June, I will only make a few comments. Our 65 million pre-tax earnings ties our record annual earnings, and we still have one quarter left. Our same-store sales is tracking at a strong 22%. We've had strong double-digit flow through, and our earnings per share has increased 77% to $2.23. These are all very impressive nine-month results. Turning to our balance sheet, At quarter end, we had almost $87 million in cash. However, as a reminder, we have substantial cash in the form of unlevered inventory. Inventory decreased approximately 28% to $314 million. As we indicated last quarter, we expected inventory to be down and that the extent of the decline was dependent on sales and the timing of manufacturers ramping production. The strong sales we generated in the quarter, combined with manufacturers closing, drove the decline in inventory. For some color, our key manufacturers have been back up and building for a while. Because of our deep manufacturer relationships and how material we are to them, we are in better position than most when it comes to inventory. Also, because of our stores carrying the same brands, we were able to share inventory across all of our stores. As such, our sales team has the deepest inventory selection of any organization in the industry. This is another competitive advantage for MarineMax that should yield market share gains as we move through the next few quarters. Because the industry is seasonal, inventories should be able to rebuild in the fall and winter. Looking at our liabilities, our short-term borrowings decreased 49% due largely to decreased inventories and the considerable cash we generated. Customer deposits, while not the best predictor of near-term sales because they can be lumpy due to the size of the deposits and whether a trade is involved or not, increased 24%. Our current ratio stands at 1.77, and our total liabilities to tangible net worth ratio is 0.86. Both of these are very strong balance sheet metrics. Our tangible net worth was $360 million, or $16.31 per share. As a reminder, we own about half of our locations, which are all debt-free, and we have no additional long-term debt. Our balance sheet has always been a formidable strategic advantage that allows us to capitalize on opportunities as they arise and protects us in uncertain times. As previously disclosed, we withdrew our 2020 guidance given the uncertainties related to COVID-19. We will continue to watch trends and consider reinitiating guidance at a later date. I will make a few comments on current trends. Trends for the industry remain strong, and we continue to add new boaters to our family. July will be up year over year, which is likely not surprising. Seasonally, we do expect normal patterns to emerge in northern markets. While our sales trends show positive signs, we still see this period as uncertain. However, safe outdoor recreation with your family and friends supports our belief that there should be sustained growth as we move ahead. This gives us the confidence to state that we expect the boating lifestyle will continue to be alive and well throughout the country. With those comments, I'll turn the call back over to Brett for some closing comments. Brett?

Thank you, Mike. Again, I want to thank our teams for their efforts in acting swiftly to keep our communities safe and our customer service during these unprecedented times. As the COVID-19 pandemic continues to evolve, we will monitor ongoing developments and take action to best position MarineMax for both the short and the long term. Our strategic digital investments supported the surge in voting demand, and we are now more efficient with better visibility. we will emerge from these challenging times even stronger. Our record lead generation has created a foundational layer of new buyers, which will drive growth over the long term. And with that, operator, let's open up the call for questions.

Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Joe Altabello with Raymond James. Please proceed with your question.

Thanks. Hey, guys. Good morning. Morning. Morning. So I wanted to start sort of big picture, you know, given the very strong quarter and the very strong year-to-date numbers. Are you guys at all concerned that what we're seeing is a bit of a pull forward in sales, maybe not from later this year, but perhaps from next year, particularly given the increase in first-time boat buyers that may have been buying boats next year and the year after?

Yeah, Joe, it's Brett here. Good question. You know, obviously there probably is some sort of element of pull forward, whatever that might be in sales. from whatever. The real thing is, you know, we talked about in the script the foundational layer that we think is being added. When we see as many new customers into our database that are buying boats, good things happen from that. I know I've said it before, but they tell friends, they get a boat behind their house, their neighbor sees that they've never had a boat, now they put one there. So it doesn't feel like it's a lot of pull forward. It feels like there's new people to boating that may be weren't even considering it for next year or the year after that just decided, you know, boating, I live on the water, why not get into it? So while there probably is an element of that, along with the frenzy of just wanting to get out there, overall it doesn't feel like it's pulled forward. It feels like it's just a higher demand and a new recreation for people.

Joe, I tell you, over the years, every time we have real strong same-store sales growth, someone asks that question. And, you know, when you just go back and look over time, you know, last summer was a little choppy in the industry. You know, September trends were pretty robust for the industry. You know, we had a 24% same-store sales growth in the December quarter, which was unit-driven. January and February were going great. COVID hits. I mean, the industry was on a pretty good trajectory previous to COVID. You add in now people who are new to boating to the former trajectory, and you get pretty good results. Combined with our digital tools and our team and our brands, you get outperformance by us. At least that's what the data begins to show. It's real hard to see, you know, did you pull something forward or not.

Got it. Okay, that's very helpful. And maybe if I could ask a follow-up on inventories. You mentioned that you guys are pretty lean. The industry is very lean. Are you concerned at all? about the ability of your OEMs to replenish that inventory over the next few quarters, and maybe as a follow-up to that, how are you thinking about inventory levels going forward? Are you going to operate at lower levels and higher turns, or are you going to sort of revert back to normalized turns?

I'll say a couple things maybe before Mike does. The deep manufacturing relationships I think we said a couple times is pretty powerful, and we've been working – you know, week in, week out with our manufacturers, and we really feel like they're getting us the products we need in a pretty darn timely manner. So, yes, inventory is lower. It's lean. But our team is trained to sell ordered boats. And, you know, with the scale we have and the brands that we have across all the stores, it allows, you know, to sell somebody an ordered boat where a typical dealer might take, let's say, six weeks to get a boat or eight weeks, We might be able to do that in a week or two because we have it coming in in another region. So we feel good about where we're at. Clearly, if we had more inventory right now, you might be able to get some quicker sales, but I think it's in a good place.

Yeah, we got through the two biggest quarters, right? The March quarter and June are traditionally the biggest. You have seasonality begins to set in in northern markets. We also have 314 million of inventory, so it's not like we have zero. I mean, we have products to sell and we are selling products. This is also the time of year where, you know, we begin and the industry and the customers start thinking about larger and larger product for the fall when you sell larger yachts and so forth. And we're in a pretty good position there. We know it's coming in from our partners. And so we, you know, we feel good. I think to answer your question, turns will be higher in the industry for sure. you know, all the way through probably a year from now as the manufacturers ramp up and as seasonality kicks in, we'll rebuild, but we'll probably take all the way through about this time next year.

Got it. Okay. Thank you, guys.

Thank you.

Our next question comes from the line of Mike Schwartz with SunTrust. Please proceed with your question. Hey, good morning, guys.

Morning. I just wanted to touch on maybe your thoughts around the boat show calendar over the next 12 months. Obviously, you guys made it to the second quarter unscathed despite West Palm and Sarasota not occurring this year. So maybe how do you think about that? There's a lot of uncertainty which shows are going to happen, which won't, and which may not. And then maybe give us a sense of how much you invest annually in those boat shows and maybe how you'd look at reallocating those funds.

Yeah, Mike, both shows in the near term here as these fall shows start approaching, it's looking like more and more many of the shows are canceling. It doesn't appear Fort Lauderdale will be, which is a big show. It's more of an industry event and more international. Now, it may not be as international as it was before because of travel, but many of the shows are starting to cancel. We're redirecting. you know, those funds towards other digital marketing efforts, which are clearly paying off. So we're, you know, we feel very good about navigating the next year of whatever boat shows look like, including, like you said, unscathed, you know, through Sarasota and Palm Beach. You know, we put some real efforts on making sure we came out of that unscathed, and I think we'll just continue to do the same thing. It's the need for these boat shows, like we did in the past, This may be a little bit of something that, you know, kicks this into gear where maybe the amount of shows and the expenditures needed for those shows may lessen in the future altogether. It could be good for our industry.

And just in terms of the operating leverage this quarter, I know we probably can't count on 37% comp store growth quarter in, quarter out. But just maybe give us a sense with the 18% flow through this quarter, I guess I'm trying to understand how much of that was a factor of just the same store performance versus some of the cost structure initiatives you've taken over the past 12 months versus, you know, some of these acquisitions of yacht service oriented companies, which tend to be a bit higher margin. So maybe help us think about what that flow through looks like in maybe a steady state environment going forward.

You know, it's a little bit of all of the above. I hate to say it like that, Mike, but the cost-cutting that we did at the end of last year, closing those eight duplicated stores, when you look at the December quarter flow-through and really our year-to-date flow-through, that was really the beginning of everything that we put in place. And certainly in this COVID era, we've gone through and revisited everything that we spent. And do we need to spend it anymore? Is it something that's a temporary reduction or a permanent reduction? I think it's a little bit of both. You mentioned boat shows, but we spend double-digit millions of dollars on boat shows. We don't really know exactly how that's going to play out next year, but that could be an opportunity for additional leverage. The model, though, hasn't, I mean, I don't think fundamentally, I don't think it's changed yet, that that 12% to 17% flow-through is what we'd be looking for, and we obviously beat that this quarter. You know, Fraser contributed. It is a smaller quarter for Fraser. Their September quarter tends to be a bigger quarter seasonally. So it was a contributor, but it wasn't a very big driver of the overall leverage. It was really all the other elements that came with it.

I would add that the measures we took at the end of last fiscal year with those stores and some restructuring have played out very well. We're a big contributor to our SG&A controls.

And maybe just one final question. Mike, I think you said the July sales are trending up year over year. Maybe give us a sense, how much of the fiscal fourth quarter is July to revenue?

That's a great question. So July and September are normally about the same size. They're the biggest. They're the bookends of the quarter. August is traditionally a smaller month as school starts back up and all that. So July is a meaningful month.

Okay, thank you. Our next question comes from the line of Scott Stember with CL Kings. Please proceed with your question.

Good morning, and thanks for taking my questions. Morning, Scott. Can you maybe talk about, obviously, with the COVID pandemic, dealership traffic is going to be down versus, you know, online types of business. Can you talk about how that's shifted and how that shift is impacting your non-boat sales, notably parts and accessories and things like that?

Yeah, I think that, you know, less people just walking into the store on a regular basis and more appointment-based, you know, probably has had a little impact. But we, you know, typically our parts and accessory sales, by and large, happen around a boat sale. We clearly have stores where people walk in and buy parts and accessories, but the bulk of what happens is you buy both and you buy extra things with it. So with the rise in sales, that's gone well. I think from the service business, it's been a little bit more challenging to, you know, service people, get them there, first of all, the high demand. And, you know, I think there's some pent-up service demand out there, candidly, because A lot of people, if there was some minor repair with their boat, they wanted to keep it this summer and use it versus just get it into our store. A lot of times people would bring their boat in for a regular maintenance the week before July 4th, whereas this time they may say, I'm going to wait until the end of the season to get that regular maintenance done. So we think that we'd like maybe the future pipeline on service business.

Got it. And then just circling back to July, I know you said, things are up and I know you're not giving guidance, but could you just maybe just talk about the tender of July? Is it kind of the same of what we've been seeing, um, throughout the quarter? You did say that things picked up nicely in April and continued all the way through the end of the quarter, but maybe just frame out how strong things are so far in July.

Yeah, I think the, I think July's trends are good. They're very healthy. They're good. Um, we're expecting to have a strong July. Um, And, of course, we've got work cut out for us for August and September ahead of us. And, as you said, we're not giving guidance right now.

All right. Fair enough. And just lastly on interest expense, was this just a function of having lower inventories throughout the quarter, a lot more flow through, or was there any debt repayment?

It's both. I mean, you generate as much cash as we did. When the 10-Q gets filed here in a week, If you look at the cash from operations, we generated a lot of cash during the quarter, which is what happens with the balance sheet strength. So that does pay down the line of credit, plus interest rates are very low. So you kind of get both things happening, which reduces the interest expense, which is nice. Got it. That's all I have. Thank you. Yeah, thank you.

Our next question comes from the line of James Hardiman with Wentworth Securities. Please proceed with your question.

Hi, good morning. And congrats on a really strong quarter, especially given the circumstances, but really under any condition. Any way to speak to your backlog? It seems to me that we're sort of at a point where there might be a meaningful difference between what sales you're going to be able to report and what the underlying demand is just given where we are from an, from an inventory perspective. I think it's, you know, from everything that I'm hearing, it's probably safe to say that you can't sustain, you know, 37% same store sales in the fourth quarter, but is there the demand there to continue that pace? I guess is the ultimate question.

James, we've known you for a long time. That sounds like a challenge. It is. It is. Um, I don't think anyone should be thinking that we're going to have 37% quarter after quarter. Our backlog is very healthy. You can see it in our customer deposit lines. I think big picture trends for the industry are good. I think they're going to continue to be good. I think there's a lot of people. Brett mentioned it. This new foundational layer of people that are coming in that maybe had thought about boating but had not bought a boat or maybe had not thought about it, but then because of the the COVID pandemic, they, they said, Hey, that is a good way to escape, you know, the crowds and be safe with your family and friends. I think it's going to be a really good and beneficial thing for everyone in the industry for years to come. And, and, uh, You know, it's not going to be like a hockey stick, but I think it's going to add those future boat sales that the industry needs. So it's really unique to see it happen, really rewarding.

We still see people getting out on the water every weekend or every day they can, and we still see very solid demand and lead generation coming in. So those trends still look good.

And, you know, I'll remind you, I know there's a lot of focus on inventory. I mean, we have 314 million boats. I said it in the prepared remarks, we're very material to our manufacturers. We have phenomenal relationships with them. We're getting product coming in. A lot of what's coming in is indeed sold, which is your backlog question. We actually asked the manufacturers to focus on that when they shut down. We said, hey, when you come back online, build what has a name on it, and they've all done that, which is great. Actually, we have very good visibility as to what's coming. And, you know, we feel that we're going to be in good shape for sure over time.

Awesome. And then a couple just clarification questions with respect to the top line. One, so you had 37% of same-store sales. The overall revenue number was up 30. What are the puts and takes, the delta there? I'm assuming that some of your dealerships were closed. in early April, would that not have been included in the same store sales numbers, even though they're – help us understand how that works. Obviously, you also closed down some dealerships.

Yeah, yeah. James, real quick. It has nothing to do with COVID. It has to do with us closing those eight stores a year ago in September. Okay. Yeah, that's all it is. The COVID stores did not leave our store count if they were closed in early April.

They didn't. Okay. That's helpful. And then you talked about mix being a negative to the overall gross margin number. I'm assuming that mix is probably a negative from an AFC perspective as well. But maybe just how do we think about the various sales categories? Obviously, new boats is the biggest. It's also the lowest margin category. But maybe, you know, it sounds like new boat sales were probably up meaningfully more than that 37%. And then just maybe speak to sort of comparable gross margins, given that there was that negative mixed impact on the gross line. How do we think about life for life gross margins?

Yeah, if you kind of compare model to model, brand to brand, gross margins were pretty healthy in the quarter. I think as we said when we were talking about the March quarter, we were a little promotional during March because of COVID, started seeing trends improve. We were still promotional when the June quarter started, so there may be a brand or a model here or there that's down on a year-over-year basis. But margins generally held up really pretty well. It's not a promotional environment and really – New boat sales did great in the quarter. Used boat sales did great in the quarter. And really, ASPs will continue to grow in Marine Max, I think, just given the type of products we sell, the content that's being added to products, the larger products. I think in a normal period, a normal same-store sales growth period, you'd probably expect same-store sales are growing. In this case, units were 37% up also, which is new and used. Just like they were in the December quarter, they were 24% up, which equaled our same-store sales growth. So when we have that many units growing the denominator, any modest increase in ASP just kind of gets washed out.

One follow-up for me, because we talked about the new and the used. Can we speak to new and used inventory at your dealer's? it sounds like from the people that we're talking to, the available late model year used inventory has really dried up. Can you speak to that?

It's lean. Yeah, it's lean and it's turning quickly, but there's still definitely some used boat inventory out there that we continue to drive traffic on and sell. But I'd say it's at a good level right now.

So it's at a level where margins will continue to do well. It allows us to take trades easier as the people move into new. There's a lot of good things that come out of, you know, healthy used inventory for sure.

Sure. But I guess the question is, is used inventory down even more than used, less than used? How do we compare it to new versus used inventory?

I don't actually have that number in front of me, but it doesn't jump out that used is down that much more than new. Okay. Both are down about the same. Yeah.

Okay.

Got it. Appreciate it, guys.

Good luck. Thanks, James.

Our next question comes from the line of Ryan Singall with Craig Callum Capital Group. Please proceed with your question.

Good morning, guys, and congrats on the strong quarter.

Thanks, Ryan.

Thank you. You guys have talked a lot about kind of new buyers, adding the foundational layer. Anything? data or any way to quantify how much of the recent demand or volume is from that new buyer group and then how that maybe compares to prior years?

You know, I don't think we've really ever put that type of data out there. However, we're up over prior years of new people into boating, and we're still kind of studying some of that information. And are they new to our database, new to boating? Have they been out of boating for a few years or 10 years? It's a little bit of a tougher answer than meets the eye to just drill down to find out, is this person a first-time boat owner, or are they kind of back into boating after 10 years off or whatever? But it's definitely increased, and it's a good new addition. I think you're hearing the rest of the industry share that same thought.

And then, you know, more technology certainly helping you guys in this environment. Anyway, you know, what's the qualitative feedback you're getting from customers of using more technology and doing more online, kind of more or less at the traditional store? Do you think that's a trend that continues? Are they happy with that process, or is it kind of out of necessity and they want to vote now and things will go back to kind of how they were, you know, pre-COVID?

Yeah, this just gave everybody the invitation and the – the okay to say, yeah, it's fine to do business like this. I don't have to drive down to the store right away to look at that 40-foot boat. And we get a fans or a quality survey on how we're doing with our customers, and I read every single one of them. And I would say in the last several months, there has been multiple comments from consumers that have purchased from us who have said the online experience was great, You made it simple. You made it easy. I could go on and on. But there's very clear stories from customers thanking us for how easy and simple. And we're a trusted brand, and we carry trusted brands. And I think that helps them through the process.

Good. One more for me, and then I'll turn it over. But M&A environment, what are you seeing? Where do you plan to focus? Is it dealerships, technology? You guys have recently gotten more kind of into services and expanding the platform. But where's kind of the focus? What are you seeing? Any detail there would be helpful. Thanks.

Yeah, all of those areas are actually, you know, active right now, and there's a lot of interest, and we're looking at all of those different types of categories. You know, we've stated that we clearly want to focus on our higher margin businesses, so there are opportunities out there, and we're looking at them.

Great. Thanks, guys, and good luck. Thank you, Ryan.

Our next question comes from the line of Derek Johnson with BMO Capital Markets. Please proceed with your question.

Great. Thank you for taking my questions. I have two here. First, if you don't have a stock boat available for a walk-in customer, and the only way they can get that boat is to order it for post-season delivery, are they willing to do that, or are they looking at a different model, or are they leaving for – competitor, dealer? What are they doing in that sort of situation?

We're having really good success there, actually. And part of the reason I mentioned is Marine Max, we have a pretty good advantage there that, you know, we have a huge backlog of orders with all of our manufacturers with both specced, you know, in the right ways for the various markets. And so what happens is a customer may come in So to order a boat may not mean that they're ordering a boat that a manufacturer has to start building and then get produced and then get shipped. We can present to a customer that, hey, I have a boat just like what you want. It happens to be red, and it was supposed to be slotted to come to our Connecticut store, but we can reroute that to Wrightsville Beach and get the boat for you in a week and a half. So ordering a boat has two terms. You can custom order a boat and wait to have it built, or you can grab one of the slots that we already have coming in. So that's been a big success for us to sell those and get them to them quickly. And like we say, you know, you're going to have a lifetime of boating and fun. You know, what's another week or two or three to wait to get the right boat for you and your family?

And the good news, Derek, is this is not a – You know, a Marine Max lean on inventory issue, this is an industry issue, so your ability to go down the street and get something else is not going to be easily fulfilled.

Okay, well, I'm kind of curious about the immediacy of demand right now. Are they willing, if a boat's not a slot or a production boat won't be available until next May, are they willing to do that or do they need it right now?

Yeah, we've actually been surprised that we've been able to, you know, so-called delay some folks from that immediacy just to do exactly what I said. You know, we were worried that was going to be the case that somebody would say, well, I just can't wait a week. But it appears that at this point in the summer, I think that works for us also.

Okay, okay. And one more I have. Since Florida has now become the new COVID epicenter, How has that affected performance there? Has that actually helped or has it hurt retail?

It hasn't measurely had an impact. Obviously, we're watching things carefully, but it hasn't measurely had an impact. I tell you, outdoor activities here, particularly boating, is very prevalent and very popular. People are getting on the water and swimming. We've been doing it since early, since mid-March, to be honest with you. The waterways have been busier. And thankfully, boaters have gotten the message, and boaters are social distancing and following all the right protocol, which is great. So we haven't seen any impact from the rise in COVID in Florida.

Okay, okay. Thank you.

Yep, thank you.

Our next question comes from the line of Brandon Roll with North Coast Research. Please proceed with your question.

Hey, good morning. Congrats on a very strong quarter. Thanks, Brandon. No problem. I just had a few questions. One, just could you touch on the profile of the new buyer, maybe what you're seeing in terms of credit score, I guess, annual salary, or are these more fluent customers coming in? And then, two, on the parts and accessories side, We know inventory of boats is challenged, but is inventory of parts and accessories challenged as well, given the strength in boat sales recently? Thanks.

I can make a comment on the credit score and all that stuff. I mean, the new buyers, and Brett can comment deeper on this, but it's across the board. Number one, it's not across the board with credit score. It's all going to be pretty good credit score, but you may have – wealthy people in their 40s and 50s that have never bought a boat. You also have a lot of young executives and young families. Actually, that's what I've seen when I'm out boating. I see a lot of young families. It reminds me of me and my family years ago out there on the water in a new boat. We sold them, which is pretty cool because then you're introducing all the kids to boating and they'll eventually trade up, which is pretty neat. But specific on the P&A side, there's no shortage of supply.

It's actually been pretty impressive that our various partners in the land and sea and Brunswick and others that have been able to really keep up with what we've needed. There's obviously challenges here and there, but they've been able to fulfill P&A pretty well for our stores. Really, there's not a big profile change in our customer that we can see.

Okay, great. Thank you.

Thank you, Ray.

Our final question comes from the line of Tim Condor with Wells Fargo Securities. Please proceed with your question.

Hey, good morning. This is actually Mark Tarantion for Tim. Thank you for taking our question. Just building off the last one, with the increase in first-time buyers, could you maybe remind us in what the typical trade-up cycle you've historically seen and anything else different that you could call out in terms of, that first-time buyer's purchasing behavior that you're seeing now?

You know, the trade-up cycle that we've stated over the years is that it seems like about every two years someone gets, we call it footitis, where they have to get a larger product. So that doesn't seem like it's changed. So every couple years you get into boating, you want to get something bigger. You see what your neighbors have or your friends have, and so you – you end up trading up.

Yeah, typical in this segment of boat and week area. I think if you look at the broader, you know, marine industry, it's going to be many more years than that. That's right. Yeah.

Yeah.

Okay, great.

Go ahead. I'm sorry.

And then just also wanted to ask, it sounded like the sales strength was pretty broad-based. Just wondering if there's any additional color you could add to that. Underlying trends, any segments or regions that initially led the rebound or any that are outperforming now?

Kind of all lines and all segments really felt like they were pretty strong, and we like the building momentum kind of this time of the year towards bigger boats, which we have a good inventory for. But nothing jumps out as being a trend in a certain model or segment that was well above others.

Okay, great, guys.

Thank you. Thank you, Mark.

That does conclude our question and answer session. I'd like to hand the call back to Brett McGill for closing remarks.

Well, thank you for joining the call today, and we hope you and your families are all safe and doing well. We also want to thank the various first responders in each of our communities that have worked tirelessly to keep us safe and provided needed help. With the summer in full swing, we hope you have the opportunity to get out on the water and enjoy some boating yourself. Mike and I are both available today, so please reach out if you have any additional questions. And with that, we look forward to updating you on our progress on our next call.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.