Brad Cohen - Investor Relations for MarineMax William McGill - Chairman and Chief Executive Officer Brett McGill - President and Chief Operating Officer Michael McLamb - Chief Financial Officer.

Joe Altobello - Raymond James Greg Badishkanian - Citi Seth Woolf - Northcoast Research James Hardiman - Wedbush Michael Swartz - SunTrust Eric Wold - B. Riley David MacGregor - Longbow Research.

Good day and welcome to the MarineMax Incorporated Fiscal Fourth Quarter 2017 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to 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's 2017 fiscal fourth quarter and full fiscal year results.

I am sure that you have all received a copy of the press release that went out this morning, but if you have not, please call Linda Cameron at 727-531-1700 and she will e-mail one to you right away. I would now like to introduce the management team of MarineMax, Mr. Bill McGill, Chairman and Chief Executive Officer; Mr.

Brett McGill, President and Chief Operating Officer 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 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 would like to turn the call over to Bill..

Thank you, Mike, and good morning everyone. I’d like to start by thanking our MarineMax team for all their efforts and focus on producing an exceptionally strong close to the fiscal year. I’d say the word exceptionally largely due to our team’s ability to overcome the major disruptions caused by hurricanes Harvey and Irma.

While both Harvey and Irma were bad for each affected geographic area, Irma had the greatest impact on MarineMax.

Irma virtually shutdown Florida, our largest market with over 50% of our business for two to four weeks in September , as we first prepared our stores and customers for the approaching storm, and then we had to clean up and repair damage while simultaneously responding the customers urgent needs.

We had some damage in just about every facility in the State. Our team members had their own families and properties to tend to, but amazingly, within 24 hours of the storm passing, almost every store was in clean up mode. Equally exceptional was our customer’s passion for the boating lifestyle.

While being sensitive to our customer’s personal issues, we were reluctant to reach out to them regarding upcoming deliveries. Of course we were very proactive in helping address their post storm service needs. However, shortly after the storm passed, our phones began to ring about deliveries and the status of their boats.

Truly a testament to the strength and relationship formed between MarineMax and our customers, as well as the benefits accounting the boating lifestyle. Our insurers were amazed at how we medicated damage with our stores and inventories and they complemented our teams for their preparedness.

Clearly we had significant financial impact for both storms in the quarter. But we believe that our results ended up much better than otherwise should have been expected. In the quarter, we grew revenue over 10% through a 5% increase in same store sales and the addition of stores we acquired due to Hall Marine acquisition.

Gross margins expanded to 26.5% and we produced one of our better leverages or flow through quarters in recent memories, over 10% while heading back the Irma related cost. For the quarter our team produced a comparable pre-tax earnings growth of 38%, despite the adversity and in comparable of 22% growth in earnings per share.

We believe our growth is continuing to drive market share gains. As we have discussed on past calls, the brand that new model development over the past few years along with our customer centric strategies continues to be a strong contributor to our growth.

Likewise, the significant brand and segment expansions we completed over the past several years is a major factor of our success as the brands growing maturity in a given market. For the full fiscal year, we ended with revenue closing in on $1.1 billion.

Gross margins climbed over a 120 basis points compared to our pre-tax grew about 17% and adjusted earnings per share increased 15%. Let me comment on our charter operation in the British Virgin Islands. Well, the business is not material to overall results, it is been growing in terms of our brand. Clearly, Irma had a massive impact on the Islands.

Having passed right over with the Category 5 storm and the strongest recorded Caribbean hurricane. Thankfully our entire team and their families survived, while many had major home damage, they were all largely helping us clean up and reassemble our base in the following days.

Like our stores in the States, our team did an outstanding job protecting our boats and assets. So much so, we thank we are far better off than most charter operations. We have clearly received enquiries from customers who have booked other charter companies to see if they can switch to MarineMax, encouraging on many fronts.

While it’s still too early to determine the near term prospect for the operations long-term, we remained well positioned. And with that overview, I’ll turn it over to Brett McGill, our President and COO for some additional comments and color.

Brett?.

Thank you Bill, and good morning, everyone. Overall, our results for the quarter in fiscal 2017 were solid, but as we discussed last quarter, the bigger boat sales began to be challenged midway through the year. The choppiness in that category did lead to elevated inventory levels.

We have been working closely with each of our manufacturing partners’ overtime to align our inventory with our sales outlook. Fortunately, our manufacturers continue launching new models with innovative technology and design, which positions us with very fresh inventory.

From a trend perspective, I would add that except for larger boat choppiness, the industry generally seems healthy. Most of our fall boat shows had been up year-over-year, which is another encouraging sign. The strong increases in our boat powered product continues to help our overall results, especially in our Coastal markets.

Certainly Pontoon, Ski and Wakeboard boats are driving growth in the markets in which we carry them. Our decision to expand in this new segments and brands over the past several years continues to show positive results. We are far more diversified today and better able to serve a broader customer base.

Let me now add a little more color around the gross margin improvement we have achieved. As I mentioned, we have great models to sell which helps demand a higher margin. We also continue to execute better on market pricing to ensure we are addressing specific competitive factors, which vary by market.

Additionally, we are not seeing signs that the industry is in a discounting mode. Another key driver for our margin gain is a continued growth of our higher margin businesses, such as service and F&I, which are incrementally improving overall. Operationally we are committed to doing a better job aligning expenses with sales.

As discussed on prior calls, we made a decision to invest early in fiscal 2017 to strengthen our team with the anticipation of additional growth. While we remain confident that growth will come, the pressure on larger boat sales have certainly provided a pause.

While we anticipated additional expenses from the acquisitions of Russo and Hall Marine, the largest component of increased cost was our investment in personnel and expanded boat shows. We have challenged our team and ourselves to dig deeper to better align our cost structure with anticipated sales.

From an integration perspective, our two relatively recent acquisition continue to progress ahead of schedule. We’re very happy having both organizations as part of the MarineMax family, and has already seen many benefits and synergies. We also remain in discussions with other dealers and will work to execute additional accretive acquisitions.

We will only do so when the terms, culture and target markets are aligned, and we are certain they can add value to MarineMax. 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. For the quarter our revenue grew to more than $250 million, driven by same store sales growth of 5% which is on top of 12% last year. Overall in the same store basis, we saw about an 8% decline in units during the quarter, which is largely due to Irma’s impact on Florida.

Irma also caused a relatively high unit show in Tampa to be moved from September to October. Industry data indicates that units in Florida fell over 30% in September. Our unit decline would imply about a 13% increase of average unit selling price to arrive at the overall 5% increase in same store sales.

With a 10% increase in overall revenue, it was encouraging that we grew gross profit dollars over 17%. We produced one of our better September quarterly margins of 26.5%, up over a 160 basis points. This marks the fourth quarter in a row with increased product margins, generally we made progress across each brand and segment in which we operate.

Selling, general and administrative expenses were $58.6 million for the quarter. However, when removing the $2.9 million of Irma related costs, our SG&A was about $55.7 million. About $3 million of the year-over-year increase is due to the Hall Marine acquisition.

I would comment that the Irma costs are actual hard costs like asset write-offs or damage we incurred. That bucket excludes all the inefficiencies which we definitely incurred with our Florida stores and shutdown our clean up mode for an extended period.

The remaining increase in SG&A is the additional cost that we added in expectation of greater growth which Brett discussed. For the quarter, it’s expense increased 790,000 as a result of increased borrowings from higher inventory levels, share repurchase and a rise in interest rates.

After removing the cost associated with Irma, we grew pre-tax earnings 38% quite strong considering the obstacles we were up against. From an income tax perspective as we stated on prior calls, our effective tax rate should be around 39%.

The rate in the fourth quarter was less than that primarily because of deductions that were allowed due to the recent change in tax status of our charter company from foreign to US. Additionally as expected, we have now absorbed the bulk of NOLs, as such our income tax rate will be about 39% until any corporate tax reform that may happen.

Additionally in the fourth quarter last year, we had a deferred tax asset valuation allowance reverse of $1.1 million or $0.04 per diluted share.

In the quarter, excluding the onetime cost associated with hurricane Irma and the tax related items in both periods, and applying a pro forma tax provision of 39% to both, our comparable non-GAAP diluted earnings per share rose more than 22% to $0.22 per diluted share in fiscal 2017 compared to $0.18 last year.

For our balance year to fiscal yearend, we had approximately $42 million in cash. As a reminder, we have substantial cash in the form of unlevered inventory. Our inventory yearend was about $401 million which is up about 25% over last year, primarily due to the choppiness in larger boat segments.

As Brett mentioned, we are focused on efficiently working through the inventory and managing our purchases to better align inventory of sales. Turning to our liabilities, our short-term borrowings were about $254 million at yearend, which was up due to the increased inventory and timing of payments on our line.

Well not the best predictor of the year term sales, customer deposits were down 30%, due primarily to the lumpiness of deposits, deposit timing and a softer close to the year due to Irma. But let me get to the current trend section so you get a better understanding of what we’re seeing at retail.

While we invested a repurchasing about 2.4 million shares in the quarter, we ended the year with a strong balance sheet. Our current ratio stands at 1.42 and our total liabilities liabilities tangible net worth ratio of 1.22, all very good metrics. Our tangible net worth is 276 million or $11.71 per diluted share.

We own about half of our locations which are all debt free and we had no additional long-term debt. Turning to guidance, we were initiating earnings per share guidance for fiscal 2018 about 10 to about 20. Our guidance takes into account that we were up against a solid three year stake, same store sales growth of about 49%.

Currently most in the industry believe the unit growth will continue to be in the mid single digit and most field the choppiness and larger boats will work itself out with greater progress in Washington.

Without giving much credit to the later, our guidance currently assumes we will grow same store sales 5% to 10% and we will have leverage in line with the last few years. We obviously will strive to do better on both fronts, but we feel misguidance is proper considering current trends and other factors.

Our guidance uses the share account of around 23 million shares. The guidance excludes the impact from many potential acquisitions that the company may complete. Let me provide some additional context for 2018. Marine dealers including MarineMax, most often lose money in the December quarter.

As an example, since 2000, two-thirds of our December quarters produce losses. Additionally, we were up against three consecutive profitable December quarters with an 81% stacked same store sales basis.

This combined with the two recent northern acquisitions should create the expectation that we will likely report a loss for the upcoming December quarter. Of course again, we will do all we can to overcome that, but produce would suggest otherwise. Turning to current trends, October looks like it will finish with solid same store sales growth.

Additionally our backlog, which means total boats under contract the metric we often referred to is up year-over-year. This further illustrates while we historically have noted that our customer deposit line is one metric, but not the best predictor of near term activity.

Lastly the Fort Lauderdale Boat Show, which starts tomorrow is a meaningful contributor to the December quarter, and our team is poised and ready for a great show. With that update, I’ll turn the call over to Bill..

Thank you, Mike. Let me again thank the team for their efforts last year and a continued focus in this upcoming year.

As Mike mentioned, the Fort Lauderdale Boat Show is one of the largest boat shows in the world and we will be represented as the largest dealer of that event, enthusiasm and attendants of this show and others continues to build which is exciting as we enter fiscal 2018.

With price inventory marked by innovative new products together with our positive consumer confidence, we are well positioned to drive growth. Our teams are energized. We have initiatives in place to not only drive sales in gross margins but to align cost.

Together MarineMax is positioned to drive cash flow and earnings as we dive into another year of boating led by our passionate and determined team, and our customers that all believe in the boating lifestyle.

We remain encouraged and committed to the understanding that boating changes people’s lives by connecting them with their inner emotions, with their families and their friends, while making memories of a life time. And with that operator, we’d like to open the call out for questions..

[Operator Instructions] We first go to Joe Altobello with Raymond James..

Hey guys, good morning..

Good morning, Joe..

Good morning, Joe..

Just a couple of questions.

I want to dwell more into the trends through the quarter, obviously Irma had a big impact in Florida in September but could you tell us first what comps were for July and August?.

We were trending positive Joe, we had good – a good July and a good August, I don’t have that data right in front of me as to exactly what the number was, but we were positive comp in July and August, and then good momentum heading into September..

For sure better within..

Yeah, okay..

And what we did for the quarter..

Yeah..

And that’s units up as well, not just total comp right?.

Units and dollars, that’s right..

Right..

Okay, okay.

And then secondly on the boat replacement cycle or potential boat replacement cycle post Irma, is that baked into your guidance and do you have any anecdotal estimates as to the damage that Irma may have caused to the boat infrastructure in Florida?.

It’s definitely not baked into our guidance. We’re still waiting on some data that will come out from the insurers that will talk about exactly how much was damaged in the State. Obviously southwest and southeast Florida will be the most heavily impacted, but there is even damage up here at Tampa Bay..

Correct..

So there will – in the 04 and 05 hurricanes when the state was hit by several, there was a replacement cycle, it typically took anywhere from six to 12 months back in that time period. Like the way you see this when it works itself out..

Okay, great. And then just one last one if I could. When you guys talk about large boats, you’re still talking about 60 feet and above, right? Not 40 foot….

Yeah, so great question. So, we – our comments today because of the, we were often referred to the industry choppiness in larger boats, that would be what the industry is saying which is essentially 40 and bigger.

And so the choppiness that we began to see in the June quarter as an industry, which is still been chopping in September quarter with more 40 and bigger..

Okay, great. Thank you guys..

Okay, thank you Joe..

Next question comes from Greg Badishkanian with Citi..

Great, thanks. Just to follow-up on the 2004, 2005 hurricanes.

That six to 12 months before you began seeing replacements come in or is that what you meant by the six to 12 months?.

Yeah. It takes a while for the underwriters to get out there, assess what’s happened, process checks, individuals have other things that maybe working through whether it’s on their home or their business. So it takes about that long..

But Sandy was very damaging, Greg, to the infrastructure in New Jersey and parts of New York. And so, people had their vacation homes totally destroyed. Now we’re seeing that in the key’s where we have an operation in Ocean Reef and it impacts some of our Miami business as well.

But there is still areas in the Key’s without power, just to give you an example. And so, it takes a while for people to first – first of all take care of their home and business before they start talking about getting their next boat or replacing the boat or et cetera.

In New Jersey, we are still replacing boats for people that had damage and say just to give you an example. But that was a much more damaged dating store as far as infrastructure and to people’s homes and to their families and businesses than this was. The BVI was a different – is a different story.

I was down and met with the premier of the British Virgin Islands and about 30% of the British Virgin Islands has power and not much more than that number have water.

And so it’s going to be a while, but that being said, as I arrived at Tortola in the British Virgin Islands, the water was beautiful and the sands were beautiful and I stayed on one of our boats while I was there and it was like, oh my gosh, I got to get my family down here.

That being said, before a lot of the infrastructure gets rebuilt in the British Virgin Islands, consumers will be down chartering boats with us. And they – we've already booked the entire month of December and I think most of January with a reduced fleet because we did have a lot of damage.

But there will be a lot of opportunity, but to Mike’s point, we haven't baked it into our numbers..

Okay.

And then so, when you had mentioned earlier solid October same-store sales with backlog up year-over-year, that's not really – is that part of that replenishment or that – is that just underlying demand?.

Yeah, that’s….

…during the first half..

It’s underlying demand, and understand, when it's announced that there's a huge storm going into Saint Martin, going into the British Virgin Islands scaling by potentially going over Puerto Rico and that’s Irma. And by the way, it looks like it's going to head to Florida, our business pretty well stops.

People are in a let me get prepared type mode, we're doing that in our stores. Additionally, the consumer is not focused on – let me go ahead and do that demo right, let me go ahead and get my new boat, insurance starts to shut down. So you can't even deliver boats if people want them.

And then here comes the storm and we thank the Lord every day that it came up through the state and not off the West Coast or it would have been very devastating. But now, people are in that mode, then they’re in the cleanup mode.

I drive home every day, and you wouldn’t believe the stockpiles of trees and lambs that are being created to deal with trees and lambs in Tampa that are still on the side of the road and next to people’s homes. So, it takes a while for things to get back to normal.

But as I mentioned in the call here, I mentioned that the phone was ringing off the hook.

And it was, is my boat okay? Can I still take delivery of my new boat house? How is it that everything is survived? But then we heard something else how can I help? And we had people offering their jets and in some cases we took them up and then taking generators to the keys, they can generators to the BBIs offering to help and any way to gain.

Donations being made to the British Virgin Islands is an example to help our team. So, it takes a while, Greg, but at the end of the day this ramp up of business that we’re seeing increase the business that we’re seeing for this month, which this is the last day. And so, we still got a little bit more to come.

Our business is up, but it’s not people replacing boats, it’s people – hey I would have maybe made this decision and taken delivery last month if it hadn’t hit by the hurricanes..

Yeah. Okay. Yeah, that makes sense. Thanks for explaining it. So it sound like we have a big hurricanes fortunately every, every year. So this is helpful.

And then, finally, if you think about the 5% to 10%, what’s your expectation for the industry that what’s your expectation for the industry that the same-store sales for 2018? What’s your expectation for the overall industry versus part of that coming from share gains and then sort of your outlook for the bigger boats segment?.

Yeah. I can tell you in the guidance, so we assume that there was going to be some level of choppiness in the bigger and the larger boats which – and when I define larger boats that’s 40 feet and bigger, which is what the industry sort of looks at.

So we assume there will be maybe to somewhat of what it is now, not getting much better, obviously we're hopeful that it does. The industry's unit growth is largely expected to be in that 4%, 5% or 6% range, and that’s baked into our guidance.

So on the low-end, we're our AUP would be close to zero or flat and we would you know keep up or maybe exceed the industry units to gain incremental share.

And then on the higher end we're getting some benefit perhaps from the larger boat choppiness subsiding or at least leveling out again market share gains and you get 5% to 10% overall growth at this point..

And if you talk about the larger boats, and the softness in the industry, the fact that it slowed down, and we've said this before, but it’s primarily due, I think a lot of business owners and wealthy people are waiting to see what's going to happen with the tax cuts. And so it's kind of a wait and see as to whether that’s going to come through.

And if it does and we're all hopeful that people get off of fake news and get on the must keep this economy growing and businesses prospering more and doing better for the citizens of United States. We're all hopeful that it will take off like maybe like a rocket ship that will get this thing through.

And so I think that's the thing that as people kind of let’s wait and see more than anything. The interest has not declined. Our events, our getaway events are an all time high.

The interest that we’re seeing from our customers and the excitement is still there in the larger boats but their willingness to jump and pull the trigger has been slowed down a little bit because of hey, what’s going to happen here..

Right. Thank you very much. I appreciate it..

Thank you, Greg..

Thanks, Greg..

Next question comes from Seth Woolf with Northcoast Research..

Hey. Good morning, guys. Thanks for taking my questions, excellent quarter too. Just want to start off with – I know it’s been asked a couple different ways and maybe I’ll give it a shot. If you look at same-store sales outside of the State of Florida, which I think, is where the majority of the Irma impact would have been.

Can you give us a sense for what comps were looking like during the period?.

Yeah just about every region outside of Florida had positive comps for the quarter and certainly heading into September they were positively swell, as was Florida. Florida, you got to keep in mind a couple of things, we got 50% of our business here. We tend to be very coastal.

So when the coastline is being evacuated, both coasts were evacuated during the storm, our impact and our exposure was greater than you otherwise may have thought. Our unit decline in Florida was much greater than 8% of decline because of our – two things.

One, our coastal exposure; and then two, our – the Tampa boat show which is a meaningful show to the industry but also to us in particular got moved because of Irma from September to October. And so, we had the show at the beginning of October it was a good show.

And so, we had kind of – it’s all due to Irma, but we had a larger unit decline in Florida than you otherwise would have expected overall..

And we had Harvey the month before..

In Houston, right..

In Houston and that impacted business not only in Houston, also in the northern Florida even in the Panhandle, I mean, there was belief there for a while that it was going to head into that market. And also there was a lot of rain and everything associated in the Panhandle. So, you know, we got a double whammy when it came to hurricanes..

Okay. And then just a little clarification on your response to Greg's question. It has to do with the boat ASP. So I think you said you think ASPs will be flat and I guess for the big boats have been a little bit of a drag this year.

So when we think about next year, is sales are still lower year-over-year for the first half? And then does that imply, do you think they’re going to be positive in the back half of next year kind of working out too – it's going to be like a net neutral? And then there's been a lot of talk about channel inventory in reducing inventories in some of these categories.

Do you feel like you're already at a good spot now as we sit here today or do you think there is more adjustments in the offing?.

So my comment to Greg was on the low-end of our range of 5%. We obviously don't plan on losing market share. So if the industry has grown in the 4%, 5% or 6% range, our units are going to grow in that same 4%, 5% or 6% which means our average unit selling price is going to be very close to flat. That’s on the low-end of our guidance range.

On the higher end of our guidance range, you would start seeing some migration up of the average unit selling price as perhaps the bigger boat recovery or bigger boats recover slightly, there's no – there's no real baked in you know big swing in bigger boats. As for inventory I mean Brett said on the call, we’re….

Yeah, we’ve been for a while and continue to work with our manufacturers getting the inventory in the right place and making sure the hot models get here when we need them and giving the inventory in line with where we see the forecast..

Okay.

But so as we – as we sit here today, you're happy with where things are sitting?.

We're – we're I think we started on the call – the call, we’re a little heavier inventory than ideal, if our inventories up 25% and if our overall revenue is up 12%, we’re little heavier than we'd like ideally. You know however, we've got big boat shows coming up, all the fall boat shows are coming up.

We work very closely with our manufacturers to right size our inventory..

Yeah..

Fort Lauderdale Boat Show and then a big expo event in December is coming up, and we were seeing lots of good appointments and registrations early for those. So we're seeing good signs on that right now..

Okay. Thank you. I'm just trying to you know shift through the noise, the timing and then the hurricane, and how that impacted everything. All right, I guess the last question then is Mike you know you talked about the flow through rate being similar to what we've seen in the last couple of years.

And you know if I think back part of the reason I think it's safe to say that part of the reason you’ve kind of had reduced your expectations a little bit for the flow through has been some of the gross margin pressures that we've seen.

So now you know we're looking at a couple of quarters in a row, I think four straight quarters where we've seen gross margin has been positive.

Looking at next year, how are we – you know how – what's the best way to think about gross margin, and then with the delta between what used to guide to you flow through between what you used to guide to flow through rate and what you're talking about now, is that a function of the SG&A investments you’ve made? Thank you..

So, we ended the year with a pretty good flow through of double-digit of little over – of over 10% which is among the better flow through rates we've had in the last recent memory. Our margins are making nice progress, North are increasing.

We didn't think it was prudent to bake into our guidance a different flow through rate than we've actually achieved in the last three years, we just basically took it in an average date, which is a low mid single-digit flow through rate.

Again, we just ended the year with 10% which is good, I think the three of us that’s we’re striving to get there or higher, certainly margins are a big impact of that.

And we talked on the call about trying to manage expenses going forward also, because we had – we did invest in expenses or personnel and resources starting this year in anticipation of higher revenue. So, if we can right size expenses with the sales forecast, there's an opportunity to do better than what our flow through has been.

But we think it's prudent to get out there and do it before baking into our guidance..

Excellent. Thank you..

Thanks, Seth..

Thank you. Seth..

Next question comes from James Hardiman with Wedbush..

Hi, James..

Good question. We had a couple successful very big boat sales during throughout the quarter, which has spiked our overall unit selling price. And so those would be far greater than let's say 65 feet maybe larger – larger product..

Okay. And then Bill, the comments, I think you had on the big boat customer, I think we’re really important because I think a lot of us are scratching our heads and trying to figure out what’s going on there. I guess my question is, is it more about the uncertainty with respect to tax reform because it’s not like taxes have gone up in the past year.

I guess another way of asking that question, what if we don’t get tax reform do you think at least if there were certainty then people would at least go back to normal and you might get some of that back.

And then how should I even think about what we should be looking in terms of tax reform or what are your customers, would they benefit more from a corporate rate deduction or reduction I should say which seems more likely relative to maybe the individual rates certainly for higher income consumers..

Well, James, uncertainty – you described it very well. And to answer the – the question a little better, if people know where they are and what’s happening, the uncertainty goes away and of course they adjust to it and the desire for boating and lifestyle of boating has not diminished. If anything it’s accelerating. And so that’s all good.

I say it is on corporate tax rate, we’re one of the highest nations in the world. And a lot of the money is off shore for some of these larger corporations, which should be in our economy working here.

And so, I think if those – if the corporate tax rates can change, understanding it, it’d be nice to help some people with the personal tax rates as well because that will create spending, and which helps everybody’s business even more. But uncertainty is what’s driving it and we’re hearing it from customers.

I wish we’d – stop all this silliness and get on with – with running the country and doing what’s right, and stop all this – and – and I’m with the President, it’s fake, disgusting news.

And I know, I’m not supposed to get political, but it makes me angry, and it should make all American – Americans angry, and I’m telling you, it makes our customers angry of all this silliness that’s going on that goes – we need to be draining the swamp or a cesspool, not trying to destroy everything that our President is trying to do.

So uncertainty is there and our customers will adjust whatever it is because they haven’t lost their passion for the boats. We – we’ve – we were making deliveries a week after the storm and there were still cleanup and infrastructure issues in Southeast Florida. So getting out on that water and – and with what boating does is everything..

But just – just so we’re clear with the tax issue, obviously, anything that helps our economy is going to help the boat industry, and it’s going to help your business.

I guess, my question is specifically your customers, if we get a lower corporate rate, but the individual rate is unchanged, or significant being about your customers, is the corporate rate essentially their personal rate such that even if the broader economy doesn’t take-off that – that they specifically would – would see a big benefit there?.

Yeah. Thanks James. I mean so many, if you look at who drives our revenue, right, the number one driver of our revenue in terms of the demographic is the small business owner. It could be an S-Corp, it could be a C-Corp, we don't know all those details but they're small business owners.

They have 10 McDonald's, 50 McDonald's restaurants, they’ve cleaners, they’ve manufacturing operations, that are all successful.

And so a relief around the corporate area would be a meaningful driver to our customer base in terms of their additional capital that they can then deploy in their business, deploy elsewhere, deploy how they want, perhaps even upgrade or both..

Got it. And then my last question – I think this is my last question. So, I guess the concern with respect to big boats is the notion that the last time around, meaning I think it was 2006 that 40 plus foot or 40 foot to 60 foot category turned negative in 2006.

And then obviously in 2007, some of the other segments followed and we were in a freefall essentially in 2008 and 2009. I guess it did you guys think back to that time.

Does this feel different than that, a year when most other segments were up but big boats were down?.

James, there is a bit difference. If you go back to 2006 and 2007, financing for boats and equity requirements to purchase larger boats, it was a pretty [inaudible] almost. And that people were looking into their home equity as a big asset and being able to finance larger boats. And that's pretty well gone away today, and the banks are more cautious.

But at the same time, that equity in the home is that equity in the home is almost not a factor today and considering someone for a loan.

So the loans are much better and there were people that were buying larger boats back in 2006 and 2005 that were stretching in a major way to do, just like they were doing with their home purchases with the mortgages. And so that’s a huge difference from where it is today. I think things are a lot more stable than they were back then..

And I think choppiness is probably the key word there that we still have some models that are so hot. There is several months if not more backlog in order to get those. So we’re seeing a kind of a tale of two cities there..

Got it..

James....

And then I know, I said – you go ahead..

No go ahead, James. That’s good..

No, I said that was my last question, but that was actually not true. I apologize. So, with respect to the bigger boats, let’s stay on that topic. It sounds like you’re assuming that that flattens. I guess it begs the question what if bigger boats decline again this coming year.

Do you think you’ll be able to absorb that? And then just maybe size the charter operations. Obviously that’s, that’s problematic right now, I think it’s a rounding error essentially.

But just give us the size of that?.

Yeah. On a – on bigger boats, we’re not assuming that it gets worse from where it is today. But if we all start seeing that it’s getting worse that would be a potential challenge for us..

But we’re seeing no signs of that or whatever..

No, in fact if you look at the industry data I mean the September quarter if you take Florida out, was better overall for boats over 40 feet incrementally better than it was in the June quarter. So for one sequential quarter to another it improved.

So, hopefully, we keep seeing some stability in that and we have a big to a whole lot of improvement at all into – into our guidance either.

The charter operation – do you have a question James?.

Just when you say incrementally better, was it down less or was it up year-over-year in the September quarter that the bigger boats?.

So it would be down less and it also was – I used the word less choppy..

Right..

I think we had two months with generally good data, one month with bad data as opposed in the June quarter I think it was two would bad, one would good and then the month of March was down. So four of the last seven months basically has shown bad data, three have been positive, two were in the September quarter. So that’s….

Right..

…make a plan. The….

But if that’s less, you would need that to flatten out essentially, is basically what your 2018 guidance assumes..

2018 guidance is not getting worse from where it is through basically in the September quarter data..

Right. Okay..

Yeah, so the - and the charter operations, Bill, said the word it’s not a material part of our business. I think in last year's 10-K it was less than 2% of our revenue from memory. But as Bill said, it's - we've had thousands and thousands and thousands of customers go through there and enjoy charters.

So it's establishing and helping to create the MarineMax brand overall..

Of course the boats which we designed and have manufactured for our charter fleet, we are selling retail within our – not only in the United States, but other areas of the world.

And of course you know, Mike said it but at the end of the day you wouldn't believe the number of our customers who are taking advantage of going on charters whether it’s into BVI, not only with their family but also with their family or friends and on getaway events if we do.

So it’s one of the – it’s one of the getaway events that we offer to most all of our stories in order to keep our customers connected during those cold winter months up north..

Excellent. Thanks for all the color, guys..

Okay. Thank you, James..

Thank you..

Next question comes from Michael Swartz with SunTrust..

Hey, good morning, guys..

Good morning..

Hey, Mike..

Hey, I just wanted to follow-up on the commentary about the Tampa show and the impact from shifting from September to October.

Could you give us a sense of maybe, size it maybe revenue percentage revenue or volume that you would do out of that show and maybe how that’s impacting what Mike, what you said about October and the backlog thus far?.

Yeah. We don’t like to disclose like one show versus another on a year-over-year basis. But it’s – Tampa is becoming more meaningful show for us probably for the industry. And so it is helping. So my backlog comment was really when the month started which is even before Tampa.

So Tampa would be contributing to the stronger same-store sales that we’re seeing here for October, although, not all those deals are closing in October. I think the reason why I bring up Tampa is to explain that our unit decline, besides the Irma impact on the coasts which were largely coastal in Florida which impacted us.

Tampa which got moved because of Irma had a another whammy in terms of units and to a degree revenue. If Tampa had been – if we had the show in the month of September, we would be had a better quarter than we had. So it is incrementally positive for September and for our December quarter at this point..

Okay. That’s helpful. And then, just a clarification I think, Mike, you said inventory was up 25% year-over-year.

How much of that is just from Hall Marine not being in the base last year?.

So yeah, a good chunk of it probably 10%-ish something like that and our sales growth is up.

So, I don't want to overstate any concerns on inventory because you could – your work your way out of inventory with working with your manufacturers which we've already done, takes time when you're a seasonal company like we are but we – plus and I think Brett said on the call, we have – we're very loaded with fresh product.

We have great models from all our manufacturers. It's not like it was, let's say, in 2011 or 2012 we’re models were all – we've got good models that are generally in demand by consumers. So we feel good about where we're at and working closely with our manufacturing partners..

Okay great. That's helpful. And then just trying to size the bigger boat piece of your business.

Any, just sense of how much of your revenue comes from boats that are over 40 feet and maybe just help us understand the gross margin differential between those boats and maybe sub 40-foot boats?.

Margins, except for when we start talking about 70s, 80s, 90s and 100s the margins on everything we saw was – is similar, with very few exceptions. So it's not really a margin challenge as you go between 40 feet and 65 feet.

As a percentage of our business, so last – on last call I talked about over 65 feet above 40 feet would be a very meaningful part of our business. I’d be guessing I throw out a number right now, so I’ll have to – take it, put it out there. But it’s very meaningful for us. That’s a percentage of our revenue..

Okay. Thanks. That’s all for me..

Thanks..

Next question comes from Eric Wold with B. Riley..

Thanks. Good morning. Most of my questions have been answered at this point, but just a couple. One and not to beat the large horse – a large boat horse here. But can you talk about kind of the activity you're seeing with potential buyers.

You’re still seeing strength in discussions, test drives are coming in, looking at the product and just the function of getting them over the goal line to complete the purchase or has there been any change in kind of the initial activity before that point?.

Yeah I think I'd mentioned a little earlier, but we have the Lauderdale show starting tomorrow. We have a big yacht expo event at the beginning in December and we're seeing – we measure our team by how many appointments are coming at these shows and we're seeing a larger level of appointments and for Yacht expo event.

And even some small events we're putting on at stores where we’re featuring a real nice new large model, we're seeing a lot better turnout than before and demo rides and activity looks to be good..

I know it was probably difficult, but is there any way to frame kind of what that pent up demand could be if we do get some kind of tax change?.

I think we’d be guessing at that one. Yeah. It’ – it’s tough to tell. You would think it’d be material, but a lot of small business owners as Mike said, is our customer base. So it would – it's definitely going to help..

And then on the guidance, I know there's nothing in there for potential acquisitions, anything in there for organic store openings.

And then on the acquisition front, can you frame kind of potential size of acquisitions you're considering in terms of store count?.

Yeah, most of the people that – most of the independent dealers that are out there are going to be, there is a handful over a hundred million. But really most are below $50 million and there's some between $50 million and a $100 million. They’re going to be anywhere from one to three stores and for most of them. A few that have more but….

And we are in active discussions..

Correct..

It takes a while to cross all the T's and dot all the I's and make sure that what we're getting is a similar work culture as Brett mentioned. So, but we’re staying very active where it makes sense and given markets and as well as bringing in the right team into our Company..

Anything for organic openings for that slab?.

In the existing markets, so we look at how do we best serve our existing markets and with our physical locations where they're at, with the power of the Internet and our team.

We don't have plans to really increase our cost structure in our existing markets, where we've been – we've been proven that and we're able to grow share right from where we're at today and that's a pretty profitable model. So, share count or store count would grow through most likely acquisitions that we do..

Okay, and then final question.

Any initial thoughts on potential proceeds for business or [inaudible] insurance?.

We - you know what, I don't, that's a great question following the storm that we had. Our team is working and I don't know what the dollars are going to be. We will get something here in fiscal 2018 for sure on it..

Perfect. Thanks guys..

Okay. Thank you..

We'll take our final question from David MacGregor with Longbow Research..

Yeah. Thanks for squeezing me in.

I guess on the big boats, could you just talk about how growth in the value segments of big boats compares with what's happening in the main tier and the premium tier?.

For us, in particular, I’ll just start, but I’ll have Bill or Brett wants to chime in, but we're seeing in very strong growth with the Galeon brand..

Yeah. We launched the Galeon brand quite some time ago. It continues to grow and we continue to have – it’s one of the products where we have a strong backlog on it. So that – it’s – I don’t know how to compare to the maybe the higher premium brands but those are still doing well. As we said the choppiness is there.

There is some new models that all of these manufacturers have come out with or they just continue to be very well accepted in the market..

As an example, [inaudible] will have several new models at Fort Lauderdale boat show. Sea Ray will have some new models, Boston Whaler, Scout. So they’re all doing it. Galeon is a real success story from us. And from our standpoint, we got a quality product with a lot of innovation and a good price and that’s a kind of a winning formula..

Great.

I guess I’m just wondering it’s kind of industry-wide, if you’re seeing a stronger performance as much as big boats is doing across the category perhaps but if value just industry-wide is so performing the premium?.

No. You know what it’s not. It’s choppy which would point to the uncertainty question that someone did asked earlier because it’s not choppy just in premium products, it’s also impacted some of the value brands for us in particular, because we are continue to expand with Galeon. It’s been up nicely..

It has been some value brands that are really not on – and are also lower quality that we did in the United States that catches up and kind of starts coming in on the manufacturers. I gave you an example.

One of our customers is heading to the keys with their boat and their buddy as asked one of these value price boats, that you saved a lot of money buying foreign brand and on the way to the keys could not continue with the value brand both boat, it wouldn’t take the seas and the ride, and the comfort, and concerns about the boat itself or an issue versus the premium product, quality product that basically go through anything.

So – and the prices of a lot of these manufacturers that have come to the U.S. to buy their way in, their prices are increasing. So the gap is becoming less than it was before..

Okay. Thanks for the question. And just a couple of other quick questions and follow-ups because I know we’re running out of time.

But you talked about extended backlogs in some models, where are you seeing the greatest backlogs, where within the line structure?.

The most recent models that have been introduced to be honest with you is kind of a consistent theme that we started seeing several years ago with strong demand. Some of the new Sea Rays that have come out, sea rays to actually launch a new product at this show, but….

Some of the larger outboard day boat product has been very, very successful. So….

Okay. That’s good to hear.

And can you talk about outboard repower market, and just what you’re expecting there in 2018?.

It’s not a real material a part of our business, we’re growing with it. And it’s an opportunity for us in terms of service and parts, and accessories..

And then just finally on used boats.

I guess could you talk about the percentage of mix, was it up in your business, was it down? I’m guessing from what looks like the gross margin it may have been down as percent of your business, but if you could comment on that, and then just the gross margin realization on the used boats, was that up or down?.

For used boats, because we’re a dealer, so we take a trade in, and what we take the type of boats we take on trade don’t typically alter from one-year to another too much. So used as a percentage of our overall business usually is within the same general range of, call it, 17% to 21% of our overall revenue.

I don’t have exact numbers this year, but it’s probably in that same range. Margins unused are doing fine. The used boat market out there is still in short supply, late model boats are highly sought after which makes it easier for people to trade.

So, I think incrementally we probably had some improvement, on our used margin year-over-year as well as the other product margins. And I would circle back while I have you on the phone David. I would actually circle back to the question that someone asked about boats over 40 feet and the percentage of business that they are.

Michael, I’m not sure, James or Michael who asked that. But it's in that 30% to 35% range. I don't want people to get off the call thinking it was 60% our exposure of large boats. So it's about a third of our business give or take a little bit..

Good. Thanks. That's all for me..

Okay. Thank you..

Thank you..

And ladies and gentlemen, that does conclude our question-and-answer session for today. I’d like to turn the conference back over to Bill McGill for closing remarks..

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

Ladies and gentlemen, that does conclude today's conference. We thank you for your participation. And you may now disconnect..