MarineMax Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
April 24, 2025

There are 11 speakers on the call.

Operator

Good morning, and welcome to the MarineMax Incorporated Fiscal twenty twenty five Second Quarter Conference Call. Today's call is being recorded. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. I would now like to turn the call over to Scott Solomon of the company's Investor Relations firm, Sharon Merrill Advisors.

Operator

Please go ahead, sir.

Speaker 1

Good morning and thank you for joining us. Hosting today's call are Brett McGill, MarineMax's Chief Executive Officer and President and Mike McLamb, the company's Chief Financial Officer. Brett will begin the call by discussing MarineMax's operating highlights. Mike will review the financial results. Brett will make some concluding comments and then management will be happy to take your questions.

Speaker 1

The earnings release and supplemental presentation associated with today's announcement can be found at investor.marinemax.com. With that, I'll turn the call over to Mike. Mike?

Speaker 2

Thank you, Scott. Good morning, everyone, and thank you for joining this call. I'd like to start by reminding you that certain of our comments are forward looking statements as defined by the Private Securities Litigation Reform Act of 1995. Any forward looking statements speak only as of today. These statements involve risks and uncertainties that could cause actual results to differ materially from expectations.

Speaker 2

These risks include, but are not limited to, the impact of seasonality and weather, global 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 ks and other filings with the Securities and Exchange Commission. Also on today's call, we will make comments referring to non GAAP financial measures. We believe that the inclusion of these financial measures helps investors gain a meaningful understanding of the changes in the company's core operating results. These measures can also help investors who wish to make comparisons between MarineMax and other companies on both a GAAP and a non GAAP basis. The reconciliation to non GAAP financial measures to the most directly comparable GAAP measures is available in today's earnings release.

Speaker 2

With that, let me turn the call over to Brett. Brett?

Speaker 3

Thank you, Mike, and good morning, everyone. Despite continued soft retail demand across the industry and an uncertain economic climate, we remain focused on our strategic plan with a team committed to our customer centric approach. Our record March revenue of more than $631,000,000 reflects exceptional execution by our team in leveraging our digital marketing tools and data analytics. Technology is one of the areas that creates a distinct competitive advantage for MarineMax. Our digital tools enable our team members across retail locations to enhance engagement, anticipate customer preferences and personalize the buying experience.

Speaker 3

Our digital investments combined with the best team and industry leading premium brands and strong execution enable us to achieve record March revenue. Even more importantly, I am proud of the exceptional customer service we offer in a tough environment as evidenced by our world class net promoter scores. Following Q1 in which hurricane disruptions and weak demand impacted same store sales, we rebounded strongly in Q2. Comparable store sales grew 11% benefiting from more aggressive pricing and targeted promotional initiatives in collaboration with our manufacturing partners. However, hurricane impacted customers are still dealing with home and other related issues.

Speaker 3

The aggressive pricing led to historically low new and used boat margins and with the resulting growth in same store sales skewed our overall revenue mix towards boat revenue, our lowest margin source. However, our successful diversification into higher margin businesses over the past several years has helped shield us from cyclical volatility. Year to date through March, our gross margin is down by only 30 basis points as high value products and services such as marinas, superyacht services and finance and insurance continue to perform well. Reducing expenses has been a key priority for us and we are now seeing these efforts contribute to improved profitability. Our focus on controlling costs along with sales growth and the resilience provided by our higher margin business strategy has resulted in adjusted EBITDA growth compared with last year even during what is clearly a more challenging period for the industry.

Speaker 3

As part of our strategic initiatives, we continue to selectively close, consolidate or expand locations to align our retail footprint with growth opportunities and allocate those resources to stronger performing stores where appropriate. One such example is Treasure Island Marina in Panama City Beach, Florida. During the quarter, we strengthened our long term partnership with the marina by extending our lease and acquiring its service and parts departments. This expansion enables us to provide enhanced service and support to boaters throughout the growing Panhandle region of Florida. Additionally, during the second quarter, we expanded our marina portfolio with the acquisition of Shelter Bay Marine, a full service marina and storage facility in Marathon, Florida.

Speaker 3

This is our forty second location. Shelter Bay is a great asset that enhances our ability to serve boaters in the Florida Keys by offering our selection of premium boats, diverse dry and wet storage options and quick access to the Gulf and the Atlantic. IGY continues to expand its reputation as a global leader in the superyacht marina industry. About fourteen months after the project was announced, the IGY Savannah Harbor Marina is fast approaching its grand opening. Centrally located on Hutchinson Island near downtown Savannah, this state of the art marina will feature about 100 slips with capabilities of storing roughly 20 mega yachts while offering fueling, shore power and marina concierge services.

Speaker 3

Also during the quarter, IGY announced the renewal of its management agreement at the prestigious Porta Cervo Marina and shipyard in Northern Sardinia, Italy. Renewing the agreement with Porta Cervo Marina is a testament to our commitment to fostering strategic partnerships that enhance our global super yacht and marina presence and elevate the yachting experience for our customers. As part of our long term strategy, we are committed to building relationships and iconic destinations like Porto Cervo while driving innovation and setting new standards of excellence across the industry. The number of superyachts being built worldwide continues to outpace the construction of new marinas by a wide margin. IGY and the rest of our higher margin businesses provide us with more durable long term earnings power and solid growth potential.

Speaker 3

I also am proud to mention that for the second year in a row, MarineMax has been recognized as a great place to work. As an organization, we have incredible tenure within our team at all levels and across all functions. We take a great deal of effort trying to create a culture and atmosphere where people like to work. So it's nice to get the recognition from an organization like Great Places to Work. Before I turn the call over to Mike, I want to briefly address our recovery from the two hurricanes in September and October and also touch on the tariff situation.

Speaker 3

As for the storm recovery, most stores are generally back up to speed with only minor repairs remaining that need to be completed. Our Sarasota Marina and store which was the hardest hit is and has been operational. But the scope of storage and service are limited until repairs are fully completed over the next eighteen months or so. Having said that, the team there continues to amaze me with how well they are operating in a difficult environment. As for tariffs, like many other companies, we are working hard to fully understand the frequently changing landscape.

Speaker 3

With the current tariff levels and the availability of other mitigating factors as well as manufacturing partner support, we are less concerned about managing the actual tariff. While an increase in price may have some degree of impact on volume, we and our premium partners are best positioned to tackle this challenge. The uncertainty created by the tariffs is affecting consumers and this impact has already been widely reported across many sectors and industries. Nonetheless, regardless of the environment, I am confident that our strategy, team, technology tools and premium brands will enable us to outperform and gain market share. This will position us even better when the industry rebounds.

Speaker 3

So now let me turn the call back over to Mike for a financial review. Mike?

Speaker 2

Thank you, Brett. Good morning again, everyone, and thank you for joining this call. Before I discuss our financial results, I want to take a moment to thank our team for their incredible effort this quarter in helping to drive such strong results. In this very challenging retail environment, delivering record March revenue, double digit same store sales growth and an increase in adjusted EBITDA is a significant accomplishment. For the quarter, our same store sales grew by 11%, resulting in revenue of more than $631,000,000 Although our overall unit volume declined year over year, the same store sales growth was driven by a shift in our sales mix toward higher average price point products, presumably partly due to Florida making up for some of the storm related lower sales in the December.

Speaker 2

However, most areas of the country showed improvement. Much of the unit decline was led by pontoon and more value oriented segments, while premium categories performed better. We expected the March to be very promotional given the inventory strain that many dealers are feeling combined with higher interest rates and seasonality. To successfully drive sales and manage inventories in such environment resulted in among the lowest boat gross margins in our history. Consolidated gross margin was 30% in the quarter, but with the help from our higher margin businesses was basically flat with fiscal twenty twenty four on a year to date basis.

Speaker 2

Despite the significant growth in revenue, adjusted SG and A expenses declined on an absolute dollar basis and fell meaningfully as a percentage of revenue, reflecting the benefits of our ongoing cost reduction initiatives. During the quarter, we benefited from locations closed in prior periods while also enjoying revenue growth. Although we are seeing some inflationary pressures across several key areas, we remain committed to enhancing our operational profile by maintaining a disciplined and targeted approach to expense management. GAAP net income for the quarter was $3,300,000 or $0.14 per diluted share, an improvement of $07 from last year's second quarter. Adjusted net income for the quarter was $5,400,000 or $0.23 per diluted share compared with $4,100,000 or $0.18 per diluted share last year.

Speaker 2

Second quarter adjusted EBITDA of $30,900,000 was up 5% over last year. Our balance sheet remains strong. Cash and cash equivalents exceeded $2.00 $3,000,000 a significant increase from December. Inventories declined sequentially to roughly $973,000,000 As I have noted on our prior calls, our floor plan lenders tell us that we compare favorably with the industry from an aged inventory perspective. Floorplan financing was up modestly from the December quarter.

Speaker 2

Consistent with the increased availability of product, customer deposits as of March 31 were down from the same period in 2024, but encouragingly did increase sequentially from December. At quarter end, our net debt to adjusted EBITDA ratio improved meaningfully from December and was approximately 1.2 times, underscoring our continued financial strength. This strong position reflects our ongoing focus on optimizing inventory levels and managing aging, which has helped us maintain a healthy balance sheet. Looking ahead, our significant financial flexibility, including substantial unencumbered inventory and access to approximately $200,000,000 in available credit lines positions us well to invest in growth opportunities and navigate changing market conditions. Turning to capital allocation, during the quarter and to date, we have bought back over 1,200,000.0 shares of our stock under our share repurchase plan.

Speaker 2

We will remain opportunistic with respect to such share repurchases while also focusing on prudent balance sheet management. Turning to guidance, in light of the recent uncertain market environment due to growing concern about the actual effects to the economy from the tariffs, we are taking the prudent step of lowering fiscal twenty twenty five guidance. We now expect fiscal year twenty twenty five adjusted net income in the range of $1.4 to $2.4 per diluted share and fiscal year twenty twenty five adjusted EBITDA in the range of $140,000,000 to $170,000,000 The main drivers of the change are expected pressure on both the top line and potential margins from the weakened environment. Of course, the tea leaves are very hard to read right now and seemingly can worsen quickly or improve quickly subject to announcements from Washington. Our revised expectations do not consider or give effect for, among other things, material acquisitions that may be completed by the company during fiscal twenty twenty five or other unforeseen events, including changes in global economic conditions.

Speaker 2

Before I turn the call over to Brett, I will comment on April trends. For starters, recall that last year we spoke of some March sales that fell into April and made April trends stronger than usual. Having said that, as alluded to by our prior comments, we do expect April to be down from last year. In channel checks with lenders and other dealers and manufacturers, there is a consistent theme of general consumer softness caused by the uncertainties related to the tariffs. Obviously, as Brett mentioned, undoubtedly we will perform better than the industry like we consistently do.

Speaker 2

Now let me turn the call back over to Brett for closing comments. Brett?

Speaker 3

Thank you, Mike. Given the increasing level of market uncertainty about future economic conditions because of the tariffs, we are approaching the spring selling season with increased caution. As a result, we are tempering our expectations for near term growth and recognize that the pace of industry recovery may be slower and more uneven than previously anticipated. Despite these challenges, we continue to believe that over the long term, our strategic position within the premium segment and the diverse nature of our portfolio provides us with a degree of resilience. While we remain committed to innovation and expanding our higher margin businesses, we acknowledge that the near term is less predictable and we will proceed prudently as we assess the impact of ongoing economic and policy developments.

Speaker 3

And with that, Mike and I will be happy to take your

Operator

A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. In the interest of time, we ask that you please limit to one question. Our first question comes from James Hardiman with Citi. Please proceed with your question.

Speaker 4

Good morning. As always, would love a little color as I think about disaggregating the plus 11% terms of same store sales units versus price. And I guess that's particularly important as we sort of roll that forward into April, which I think you said is is likely to to to finish down. And so, you know, just from the look of things, we're going from a plus 11 to something negative. And so within that, maybe I don't know if things had already begun to slow by the end of Q1.

Speaker 4

Just trying to fully understand that drop off from what was a double digit growth number in Q1 to what seems like it's negative at least I'm sorry, in Q2 to what's negative early Q3. Really curious what's happening specifically with units as we go from March to April. Thanks.

Speaker 2

Hey James, it's Mike. I'll take a stab at that. Just keep in mind in the March for the key segments that we operate in, most of them were down double digits in units. And so while we always outperform the industry, it's kind of hard to make up double digits. So our units were in fact down in the quarter, the mid single digit range, something like that, which would tell you that our same store sales in terms of the 11% would have been driven by premium product mix shift, larger product, which often drives a big piece of our same store sales growth.

Speaker 2

What we're seeing in April and one, I expect the industry to be down again in April. But I think what we're seeing in April is under the backdrop of a strong April, we are so number one, it's a tough comp because of the business that fell into April. But even with that, we are just sensing uncertainties with the consumers. And it does admittedly change subject to the news cycle and what's happening. It can look a little better one day, look a little worse one day, but we just think it's more likely that there's some underlying impact going on besides just the tough comparison to April, which is what we tried to communicate in the prepared remarks, James.

Speaker 2

But good question.

Speaker 4

And so just to clarify there, if I just do the math, it seems like ASPs during the first quarter would have then been up, call it 15%, roughly if units were down mid singles and same store sales were up 11%. Should we expect that same sort of ASP benefit in April, which would suggest that units from down mid single digits would be down something like 20%? Or did that ASP sort of tail end dissipate to some degree in April?

Speaker 2

I think in my prepared it's a good question, James. I think in my prepared remarks, I was talking about how when I look at the ASP increase in March, which is that's a big individual quarter ASP. I think part of it was some business that obviously came into the March probably from the weakened December because of the hurricanes in Florida. And by no means have we made up all that business yet. But Florida tends to have larger boat sales, which could help to skew a quarter versus the prior year.

Speaker 2

So I could get a little bit of a mix shift because of that. And so I would not expect that same type of an increase necessarily in April. It's always possible subject to what the products we end up selling.

Speaker 4

Okay. But we should assume that units got worse in April, but not 15% worse.

Speaker 2

Yes. I yes. Think industry wide, I think what you're probably hearing from all the different public companies in the industry is the outlook has changed. Really, starting here in April, it's changed for what everybody thought about the second half of the year or for us our next two quarters, just given the uncertainty caused by the tariffs. And again, who knows how long the uncertainty lasts and who knows, again, the new cycle that can influence that pretty quickly one way or another.

Speaker 4

Got it. Thanks for the color, Mike.

Speaker 2

Thanks, James.

Operator

Our next question comes from Mike Swartz with Truist Securities. Please proceed with your question.

Speaker 5

Hey, guys. Good morning. Maybe just a couple of questions on the guidance. I guess I'm trying to understand it sounds like most of the guidance reduction that you've outlined is due to macro consumer concerns relative to tariffs. But are there any direct tariff costs that we should be aware of?

Speaker 5

I know you do some sourcing Europe, Asia for boats, but is there anything quantifiable around potential tariffs?

Speaker 2

On the guidance comment, Mike, updated guidance is really solely because of the change in the outlook as you alluded to. I think before we were commenting that the industry would be flattish. We would probably be flattish in that neighborhood. I think now the industry is going to be probably down in our fiscal year, low single digit, we'll probably be down in that range from a same store sales growth. There's some possibility we won't be, but that's kind of what's baked into our numbers and maybe a little bit additional margin pressure.

Speaker 2

There isn't anything specifically built in as a tariff impact. We obviously do import some boats, but by and large, we can as Brett alluded to in his comments, that'd be more of a potential volume issue down the road. And Mike, I'll add that

Speaker 3

the amount of inventory, the right amount of inventory we have going into our height of our selling season here kind of shields us against any of those immediate impacts. Correct.

Operator

Okay. Okay. That's helpful.

Speaker 5

And then on the on just the boat margin side, Mike, think you made the comment in your prepared commentary around this quarter being one of the softest from a margin standpoint for new boats, would presume. Any way to frame what exactly that means, what that looks like year over year? And then should we assume that there's some level of improvement if you're pulling back maybe a bit on level of promotion going forward?

Speaker 2

Yes, I would tell you really because of the macro that's going on with the industry, I would believe industry wide margins are probably a couple of hundred basis points below would be a normal level and they would be below last year's level. Also probably not quite a couple of hundred basis points, but 150 basis points or so from lower than last year's level. And I think just given the current environment with the increased uncertainty, I would expect margins to be somewhat under pressure more so than perhaps dealers had originally thought for the at least for the foreseeable future, which is also what's baked into our guidance.

Speaker 5

Okay, perfect. Thank you.

Speaker 3

Thank you.

Operator

Our next question comes from Joe Altobello with Raymond James. Please proceed with your question.

Speaker 6

Thanks. Hey, guys. Good morning. I wanted to talk about the promotional environment a little bit. Maybe just to follow-up on Mike's question.

Speaker 6

Obviously, coming into the quarter, you guys thought it would be a pretty promotional environment. It was probably worse than you thought. And now it sounds like you expect that promotional environment to persist. Has the industry made any progress on clearing out this aged inventory at this point? And if not, what happens in June, July when we have the model year changeover?

Speaker 2

Yes. I think the industry has made progress. I think it's continuing to improve primarily because the builders are just not building very much product right now. And so it does give the opportunity even with weakened boat sales, it gives the opportunity for the aged product to continue to improve. And speaking to the major floor plan lenders in our industry, they still continue to think that in the summertime, and maybe this has moved out a month or so because of the current environment.

Speaker 2

But in the summertime, industry inventory levels should be below normal levels in terms of weeks on hand. There probably still could be a little bit of an aging problem, but overall, dealers should start feeling much better about what they're stocking in the environment as they look forward to 2026. It's again, that's probably gotten extended a little bit because of current environment, but they still generally think it's going to

Speaker 3

get better. And Joe, going forward, the promotional activity, the pressure there might just be the uncertainty in the markets trying to give people a reason to kind of get off the couch and come in and buy a boat less so than just inventory levels.

Speaker 6

Got it. Okay, which is a good segue to my next question, which is pertaining to April, how do door swings look like? Are people coming in looking for boats? Or they're just, to your point, sitting on the couch waiting for the uncertainty to dissipate?

Speaker 3

I would say that our our comments about April on how we see April finishing, but the uncertainties and let's call it

Speaker 2

the April were,

Speaker 3

you know, people were pausing, you know, slow to to make a decision, thinking about it. But, you know, let's even call it the last couple of days with just some light at the end of the tunnel possibly. You you you believe it or not, you get some more store traffic, Internet leads. So, know, there there's the first half I'd say was a little more stagnant than the April.

Speaker 2

I I would comment though. I think in Brett's prepared remarks, Joe, he commented that the interest in boating like the really the front door of a dealership anymore is really your website and your online presence. And the amount of activity that we have in our online presence is still very, very high. It hasn't dropped. And so that's encouraging.

Speaker 2

I think the desire to enjoy the boating lifestyle remains very high.

Speaker 6

Okay. Super. Thank you, guys.

Speaker 3

Thank you, Jeff.

Operator

Our next question comes from Eric Wold with Texas Capital Securities. Please proceed with your question.

Speaker 4

Hey, good morning Brett and Mike.

Speaker 2

Good morning Eric. Hammer

Speaker 7

on April just one more time. I guess, little bit lighter than the last couple of days. But just in general, net softness across all price points, was it did it get worse on the value side? Did you see creep into the premium side? And then was it at a level that the promotional activity you did in Q2 wasn't enough to counter it?

Speaker 7

And is it at a level that maybe you, the OEMs aren't willing to boost promotion to solve?

Speaker 3

I'll I'll talk about the first part, the on the segments. The the lower end has been under pressure now for quite some time, you know, just a tougher segment. The higher end though was clearly affected, you know, a, we had a really good, you know, q two here ending March out, but there was definitely some softness, I would say, across all segments. Right, Mike? Oh, I think that's kind of first comment there.

Speaker 2

Yeah. It's across all segments really for the last couple of quarters. Well, longer than that. You've seen it across all segments. Less so on the premium product, but still softer.

Speaker 2

I think what we were experiencing in, you know, in April and for sure early April, but what we were experiencing was it it wasn't so much a I mean, you could probably solve for a price point. It was really just there was so much noise and so much uncertainty back and forth. I think people wanted to kinda get an idea of what the heck's happening.

Speaker 3

Yeah. I'd say, you know, my comments about getting people off the couch, promotional, you know, that's in a, you know, general, not in the uncertainty we had, let's say, in the April, which was kind of wild and crazy as far as what information was coming out, the uncertainty about what does the tariff mean. So I think any promotion we threw at that may not have been effective. Now that there's maybe a little bit of, you know, folks settling down promotional activity, let's say, larger yachts, it can be much more effective.

Speaker 7

No. It's good. That was kinda my my my my second question was kind of, I know that the value buyer probably needed some help recently and maybe the cash buyer had been a little bit more resilient, the higher end guy. Are the higher end buyers obviously, everyone always wants a deal, but are they being increasingly you know, in need of promotions and really kind of

Operator

pushing that envelope? And is

Speaker 7

that is that something you think is if that is the case, that's something that's short term or could be could be a longer term, you know, driver?

Speaker 3

I think I I comment on just, we had a really good Palm Beach boat show. Margins as you saw were under pressure. I'd say it's a little bit

Speaker 2

more of a buyer's market right now and we've commented on that before and that's kind of how I would summarize the answer. Yeah. I if I followed your question right there too, Eric, I do think there's light at the end of the tunnel, especially in the current environment. I think once there's some clarity with tariffs and there's some deals struck with countries and, you know, all that stuff, which everybody is expecting at some point. I think all that will make everybody feel better.

Speaker 2

We will probably have a little bit of potential margin tailwind if the industry inventory levels do in fact improve as some of the floorplan letters are expecting. So there's usually upside when you're coming off of low numbers at some point. Appreciate the questions there.

Speaker 4

Perfect. Thank

Speaker 3

you.

Operator

Our next question comes from Anna Glassman with B. Riley Securities. Please proceed with your question.

Speaker 8

Hi, good morning. Thanks for taking my question.

Operator

First,

Speaker 8

I'd like to start on April again, but I understand you talked about, obviously demand slowing, but have you seen any change or pickup in cancellations of existing orders or people trying to get out of existing commitments?

Speaker 3

You know, simply put, no, we haven't. We've, you know, Mike was just saying that I commented on it. You know, people it's it's right now they're ready to go boating in the in the more, you know, seasonal environment. So we really haven't seen anything that's the cause concern on, hey, I don't want to boat anymore. No.

Speaker 8

Got it. Thanks. And then secondly, in the prepared remarks, you noted, with tariffs, price increases would be contemplated, but you feel confident you're well positioned in light of that. As we think about next year, I would assume price increases would probably be pushed through on the next model year. So really not impacting this fiscal year as much.

Speaker 3

Yeah. First of all, like we said, we have a good inventory level to carry us through the selling season. And we're working really well with our some of the best manufacturers in the world, where they're trying to figure out how to mitigate expense and offset any tariff. And really candidly, still trying to understand what that tariff will

Speaker 9

be. Mhmm.

Speaker 3

And, clear it feels like, I think they're thinking it's gonna be less than maybe what they originally thought of, you know, you know, fifteen days ago. Yeah. So and, you know, so we're trying

Speaker 2

to mitigate how much price goes into the new product, the new model year, which equates to a price increase. Manufacturers are working hard on that. It is nice to keep in mind also that we do focus on the premium end to begin with. And over time, there have been other whether it's inflationary environments during COVID where we did successfully pass price increases on and continue to today successfully pass it on is you don't want it. But I think given what the likely outcome is of the tariffs, I think we feel reasonably comfortable with our future outlook in 2026 and beyond.

Speaker 8

Great. Thanks.

Speaker 2

Thank you.

Operator

Our next question comes from Mike Albanese with The Benchmark Company. Please proceed with your question.

Speaker 10

Hey, good morning, guys. Thanks for taking my First one, just a quick clarification if you could quantify really any of the delta between Florida and I guess, know, national in terms of your comps there.

Speaker 2

Mike, in terms of the comps, I actually don't have that handy. I what I can tell you, though, is Florida did well, but every region in the country in the March did really pretty well. We didn't have any major outliers on the negative side, and there was a lot of increases, which would tell you that even though Florida did well, it wasn't an outside driver. I mean, would have driven the average unit selling price a little higher, excuse me, because of the larger product. But we had good growth in all the different parts of the country during the quarter.

Speaker 3

Seemed to follow our normal seasonal trends by market.

Speaker 2

Midwest was yeah, that's exactly right.

Speaker 10

Okay. That's helpful. Thanks. And you know, I guess just to go back to consumer demand quickly, you know, we talked about kind of the value spectrum premium consumer, value consumer. Can you just comment maybe quickly on the demand environment in the superyacht division and and really that that specific consumer?

Speaker 3

Yes. Just a couple of comments that seem it's still a very solid business. When we entered into that business several years ago, one of the reasons we did is because it's a much more resilient segment. It's a services business. And so just for example, we see the bookings right now for the summer season in the Mediterranean and it's looking very strong, you know, in in light of everything that's going on.

Speaker 3

That's a very strong indicator that kind of flows through to our marinas and the income it slips and then also for the superyacht divisions, Fraser, Northrop, Johnson and others. So it looks to resilient and solid.

Speaker 10

Okay, thank you. So when I think about kind of softening demand, you're not really seeing it in that part of your business. That fair?

Speaker 2

I'd say our comments are really focused on the boat sales here in The States probably more is what we were referring to.

Speaker 7

Yes.

Speaker 10

Okay, great. That's helpful. And then just the last one, I can, I want to ask about capital allocation? You know, we we have kind of a shifting or dynamic macro environment. I mean, does that change how you think about maybe your m and a strategy?

Speaker 10

I mean, kind of if you could comment on what the pipeline looks like and and I mean, are you just you lean into your services in this environment? Do you think about maybe getting aggressive on the traditional dealer side? I'll I'll let you opine.

Speaker 3

Yeah. Just generally, we always have a good pipeline of, you know, of acquisitional opportunities that come to us and we evaluate them. Obviously, in a time like this, we're being much more prudent or as we're always prudent. But right now, you know, focusing on the synergies between all of these businesses, our long term strategy with these higher margin businesses and the operational excellence at each of these divisions to help us grow. There's a big opportunity there.

Speaker 3

So you can we've commented on that before, but we'll continue to focus on developing the synergies between all of these companies.

Speaker 10

Got it. That's helpful. Thank you. Thanks, guys. Thanks, Mike.

Operator

Our next question is from David MacGregor with Longbow Research. Please proceed with your question.

Speaker 9

Hey, good morning. This is Joe Nolan on for David. Just had one Hey, Joe. Hey, guys. Just within the gross margin line, how much of the year over year decline was related to mix versus price cost versus leverage?

Speaker 9

And just maybe how to think about those factors as we get into the third quarter?

Speaker 2

Yes, it's a great question, Joe. It's primarily the boat margins themselves. It's what's impacting the overall consolidated margin, probably like two thirds of it's that. I'd say a third of it is mix shift to a greater percentage of boat sales. So when you sell a lot of boats, which happens to be the lowest margin product we sell, even if they were great margins, it's going to reduce your consolidated margin on a year over year basis if you sold them a lot more than the prior year.

Speaker 2

So it's primarily boat margins combined with the increase in boat sales and the overall mix. Good clarifying comment.

Speaker 9

Okay. And expect that trend to continue into the third quarter as well most likely?

Speaker 2

You know what, it all obviously all subject to how strong same store sales are. We currently expect increased promotional environment, which is we're ready for that. That's in our guidance numbers. And then just depends on the strength of sales here in the back half of the year.

Speaker 9

Got it. All right. Thanks, guys.

Speaker 2

Thank you, Joe.

Operator

We have reached the end of the question and answer session. I'd now like to turn the call back over to Mr. McGill for closing comments.

Speaker 3

Well, thank you everybody for joining us this morning. We're very confident in our long term strategy and we'll look forward to keeping you updated on our next call.

Operator

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

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Earnings Conference Call
MarineMax Q2 2025
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