Nov 3, 2015
Executives
Brad Cohen - Investor Relations, ICR Mike McLamb - Chief Financial Officer Bill McGill - Chairman, President and Chief Executive Officer
Analysts
Ben Bienvenu - Stephens Inc. Austin Drake - B.
Riley & Co. James Hardiman - Wedbush Securities Joe Hovorka - Raymond James Mike Swartz - SunTrust David MacGregor - Longbow Research Greg McKinley - Dougherty
Operator
Good day ladies and gentlemen, and welcome to the MarineMax 2015 Fiscal Year and Fourth Quarter Earnings Conference Call. Today's call is being recorded.
And now for opening remarks and introductions, I'd like to turn the conference over to Mr. Brad Cohen.
Please go ahead Sir.
Brad Cohen
Thank you, operator. Good morning, everyone and thank you for joining this discussion of MarineMax’s 2015 fiscal year and fourth quarter results.
I’m 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 email one to you right away.
I would now like to introduce the management team of MarineMax, Bill McGill, Chairman, President and Chief Executive Officer; Mike McLamb, Chief Financial Officer of the company. Management will make some comments about the quarter and then be available for your questions.
With that, let me turn the call over to Mike McLamb. Mike?
Mike McLamb
Thank you, Brad. Good morning, everyone and thank you for joining this call.
Before I turn the call over to Bill, I’d like to tell you that certain of our comments are forward-looking statements as defined by the Private Securities Litigation Reform Act. These statements involve risks and uncertainties that may cause actual results to differ materially from expectations.
These risks include, but are not limited to, the impact of seasonality and weather, general economic conditions and the level of consumer spending, the company’s ability to capitalize on opportunities or grow its market share and numerous other factors identified in our Form 10-K and other filings with the Securities and Exchange Commission. With that in mind, I’d like to turn the call over to Bill.
Bill McGill
Thank you, Mike and good morning everyone. As we look back on fiscal 2015, our team did an outstanding job drawing top line earnings growth.
The improvement came from steady market share gains and from the significant brand and segment expansions, which we completed during the downturn. I am very proud of the hard work our tem does every day, exceeding our customer’s expectations as they work with family and friends.
This customer centric approach is fundamental to our core operating philosophy and is ultimately what drove the growth and will keep propelling us ahead in the future. We ended the year with a strong fourth quarter as same-store sales increased over 17%.
This strong double-digit increase follows a 10% increase last year. The growth coupled with strong expense management resulted in comparable pre-tax earnings increasing of over 50%.
Margins were impacted mostly by greater used boat sales. Additionally, with the rise in new boat sales our higher margin businesses strike modestly as a percentage of revenue.
However, consolidated margins sequentially improved again and we believe that margins have the potential to improve on an annual basis as more new models arrive coupled with generally improving industry conditions. As we have stated throughout this economic recovery, new innovative product sells as our manufacturers get us new models, the demand continues to be robust.
All of our manufacturing partners are stepping up their new product development efforts after years of limited investment. It is great to see the products and the demand the new models are generating in giving customers with age boats a reason to trade.
Certainly, the new models are contributing to our growth in market share gains. Together with our customer centric approach, pricing strategy, our focus on premium brands, the training we provide our team and customers and our various fun boating events we provide for our customers we produced another quarter in year of industry leading results.
The date of the industry and the key segments we operate was mixed in the quarter, but seem to end on a strong note. The stern drive segment continues to be pressured, but we believe it is due to day boaters and certain markets switching to outboard power.
This is certainly true in coastal markets where we have more outboard focused customers. The expansion we executed during the downturn to add more outboard power products like Boston Whaler among others is helping us overcome the challenges this stern drive segment has been facing.
And now Sea Ray is producing outboard power day boats that are certainly resonating in the marketplace. This is also helping us capture business as customers migrate to this power choice.
We are pleased with 22% same-store sales growth and profits doubling for the fiscal year, which validates that our strategies are truly working. Certainly, we gain market share this past fiscal year.
For the last several quarters, I have commented on the success we are starting to see for MarineMax vacations, which is our charter business we launched a few years ago in the British Virgin Islands. Also, we are experiencing success from the private sales of the power catamarans that we contract manufacturer for that business.
While combined, the revenue is still immaterial to MarineMax on a consolidated basis, the business was gap profitable this year and certainly cash flow is positive. On a related note, while we’re likely the newest and smaller charter company in the BVIs, we won a prestigious award that named our operation the best charter company in the islands.
Our team there follows the same customer centric focus that our store has here in the state. And with that update, I’ll ask Mike to provide more detail comments on the quarter.
Mike?
Mike McLamb
Thank you, Bill, and good morning again everyone. For the September quarter our revenue increased to just over $189 million, driven by strong same-store sales growth of 17%, which is on top of 10% same-store sales growth last year.
The quarter started with a strong July and ended with an even stronger September relative to the prior year. The same-store sales growth was over 80% unit driven with a modest contribution from average unit selling price.
As far as geographic comments, Florida, New York, Texas and the Midwest were the strongest. For the quarter, we grew gross profit dollars over $5 million, but our gross margin decreased from last year as Bill mentioned.
Let me add that our new boat margins did increase year-over-year for the second consecutive quarter, but the impact from mix led to the year-over-year consolidated margin decline. Selling, general, and administrative expenses were over $41 million for the quarter.
Excluding the $1.6 million gain in last year’s fourth quarter comparable SG&A as a percentage of revenue improved to 22% from 23.4%. For the quarter interest expense was up slightly year-over-year as a result of increased borrowings from additional inventory to support the growth in sales.
As for taxes, given our increased earnings and the improving industry conditions we concluded that most of our deferred tax assets that were fully reserved in the downturn would be realizable. The accounting for this reversal of the reserve results in a tax benefit of over $27 million.
Another implication of this is a very large increase to our tangible network as the asset is now reflected again on our balance sheet. Further, it’s important to note that MarineMax will be providing a tax provision or expense in the future.
However, we’re not expecting to face significant dollars until we absorb about $50 million of NOLs and other deductions. We expect that the tax rate we will use for the expense will be in the range of 38.5% to 39%.
After considering the tax benefit, our net income for the quarter was $32.8 million or $1.32 per diluted share. However, for comparison purposes, we believe the best way to evaluate our results is to ignore the tax benefit and $1.6 million gain from last year’s fourth quarter.
As such, for the 2015 fourth quarter, our earnings increased over 50% to $5.4 million or $0.22 per diluted share as compared to $3.6 million or $0.15 per diluted share last year. For the year, I will highlight a few items.
Revenue increased to over $751 million, driven by 22% same-store sales growth, of which about two thirds was unit driven also. On a pre-tax basis, excluding the unusual tax benefit and gains in both periods our earnings grew over 98% to $19.3 million or $0.77 per diluted share, as compared to $9.7 million or $0.40 per diluted share last year.
On to our balance sheet, year-end we had over $32 million in cash. Keep in mind; we have substantial cash in the form of unlevered inventory.
Our inventory at year-end was about $274 million, which is up modestly from last year, the ageing and mix of our inventory also continues to be at a healthy level. As we start the December quarter, we do not have an elevated level of used boats like we did as we started the June quarter and September quarter.
Turning to our liabilities, our short-term borrowings were about $137 million at year-end, which was up due to increased inventory given improved conditions. While not the best predictor of near-term sales, customer deposits continue to be up meaningfully year-over-year with a 16% increase, which is the highest September balance in many years.
Generally, we believe larger boat sales should remain strong for the foreseeable future. Based on all this, our balance sheet is extremely well positioned.
We ended the year with a higher current ratio of 1.84 and stronger total liabilities to tangible net worth ratio of 0.65, both of these are very strong ratios. Also given the benefit of recognizing our deferred tax asset, our tangible net worth is now over $282 million or more than $11 per diluted share.
We own over half of our locations, which are all debt free and we have no additional long-term debt. Turning to guidance, we are providing earnings per share guidance for the full fiscal year ending September 30, 2016.
This guidance is intended to provide investors an understanding of management’s expectations for the full fiscal year. Our guidance does take into account that we are up against a strong 22% same-store sales growth from fiscal 2015.
Generally, industry sources believe we are likely to see mid-single digit unit growth in 2016. Our guidance assumes we will experience more than that given our long track record of performing better than the industry.
This, coupled with a modest contribution from average unit selling prices, should yield top line growth in the neighborhood of 9% to 10% with the potential to realize more. With our historical earnings flow through expectations of 12% to 17%, as well as other factors, we expect diluted after tax earnings per share to be in the range of $0.60 to $0.70.
This is a significant increase from our adjusted, but fully taxed earnings per share of $0.47 in fiscal 2015. The adjustments to 2015 eliminate the gains in the deferred tax asset reserve reversal.
A few other thoughts as you think about 2016, we are up against a profitable December quarter with same-store sales growth of 45%. Historically, MarineMax and other marine dealers lose money in that quarter due to winter sitting in, in the holidays.
A more normal December quarter than last year would result in negative same-store sales growth and a small loss for the quarter. Of course, the team will try to do better than that, but I wanted to set prudent expectations given our past experience with the December quarter.
Lastly, I will comment on current trends. We ended the year on a strong note and October is poised to finish ahead of last year’s October, consistent with what we have been seeing for a while, our backlog is greater today than a year ago.
That said, we certainly have our work cut out for us this quarter. With that update, I’ll turn the call back over to Bill.
Bill McGill
Thank you, Mike. Another positive fiscal year is complete and our team worked very hard to drive the results and positioned us to capture additional growth in earnings as we move forward into fiscal 2016.
To that point, typically one of the largest shows in our industry starts this Thursday in Fort Lauderdale and you can be sure that we have a large presence with over 100 units displayed in 11 different venues. Crowds and sales at the earlier shows in September and October had been encouraging.
So, we look forward to a great weather and sales at Fort Lauderdale. Looking back at the last few years, our revenue is gaining significant momentum with no material acquisitions to speak up.
We talked about the brand expansions that are paying off. Our new unit growth has been very strong over an extended period of time and we expect that to continue with the increased momentum of new product investment.
We are more bullish today about a steady and sustained recovery than a year ago, thus return to earnings guidance for 2016. Overall, the response to the brand and segments that we operate within had been positive and the customer continues to seek new products, which is the driver of the ongoing recovery.
That said it is critical that consumer confidence remains positive and innovation from the manufacturers continues as we progress our way to historical levels of revenue and earnings. At MarineMax, we continue to work to stimulate consumer interests and ultimately sales.
We remain focused on driving repeat business, while attracting new customers with broad and diverse range of products. Our approach is the key differentiator for us and we will continue to drive our growth to just selective expansion of brands and accretive opportunities as they emerge.
We also have a well-funded balance sheet to support our growth. As we look ahead, we’re excited by the increasing demand that is building evidence by our sales backlog and a positive reaction we saw at the start of the fall boat show season.
With appropriate inventory levels, our balance sheet that is the strongest it has been in the past 10 years and a highly motivated team, we are positioned to create additional value as we focus on building upon our strong results. We continue to evaluate potential retail dealers and marina acquisitions and we’ll add them to our family when justified from a market, their team, and financial perspective.
Earlier in the year as an example, we purchased a strategic operation in Fort Myers, Florida, which has started contributing meaningful right out of the gate. We’ve been active buying back our shares pursuant to the authorized in terms we announced.
We have repurchased around half of the authorized million shares to date and we’ll keep doing so accordingly. With our one price approach, our commitment to customer service and our one-stop solution for boaters’ needs we are well positioned to capture additional share.
Our team is committed to not only driving profitable sales, but also ensuring that MarineMax experience is provided to each and every customer. We thank our team for their efforts and we look forward to building on our earnings in fiscal 2016.
And with that operator, we’d like to open the call up for questions.
Operator
Thank you. [Operator Instructions] We’ll go to Ben Bienvenu with Stephens.
Ben Bienvenu
Yeah, thanks, good morning guys, nice quarter.
Mike McLamb
Hey, Ben.
Bill McGill
Thank you.
Ben Bienvenu
Mike, in light of your commentary around October being ahead of last year is that in reference to units or total revenue and then can you remind us of the cadence of sales in 1Q of this last year?
Mike McLamb
Yeah, it’d be both units and total revenue are ahead for October last year. Last year’s December quarter was one pretty atypical momentum build all the way through the December quarter.
So, usually, our business drops significantly around the holidays and last year it ploughed right through to 12/31 and then right through to New Year, so we are up against the tough quarter. Certainly, October is a great month out of the gate, we are ahead, we have positive same-store sales growth, but we need to really perform in November and December and the team is going to do all they can to do it, but I think it’s prudent to think that comps would be down in the quarter and we’d probably lose a little bit money in the quarter.
Ben Bienvenu
Fair enough. And then Bill, I think on the last call you’d referenced some of the new Sea Ray 55 starting to show up, how is that product making its way to your dealers?
What’s the velocity of that and is your outlook for the lion’s share of the new units making its way to your dealers still through the back half of FY16?
Bill McGill
We are encouraged by the new products and the sales have been strong and we do have a backlog of 65’s and 59’s, and we’re seeing progress towards getting the product earlier to the customers. We are also having great success with Azimut with some of their new products and Ocean Alexander is important to us now and they've got a new 70 footer that's coming out, So, I think there is a lot of encouraging things for next year.
The Ft. Lauderdale Show, which starts day after tomorrow, is a pretty important show for us because that is normally larger products that are sold there and so it will help set the stage for 2016.
So, we still have that ahead of us, so we will know better after next Monday exactly how that win, but all in all on consumer confidence being over 100 and hopefully that will continue to progress. I think there is some very good signs for next year.
Ben Bienvenu
Great and then maybe just lastly, looking at some of the non-sales service warranty, can you talk about your expectation for the tax rate and sales growth, are those categories and maybe what that looks like in the most recent quarter?
Mike McLamb
Yeah, I can comment, I mean all those businesses are doing fine, they are healthy. Some more directly increase or decrease with sales like F&I or brokerage or things like that service and parts and accessories have a hard time keeping up with a 22% annual growth rate, which is a good thing, it tells you the product quality is pretty good, you would want your service and parts necessarily keep up.
And so that does pressure margins mix just a little bit, but generally those businesses are healthy and doing what you're supposed to be doing.
Ben Bienvenu
All right great, thanks, best of luck.
Mike McLamb
Thank you, Ben.
Operator
Thank you. We will continue on to Jimmy Baker with B.
Reilly.
Austin Drake
Hi good morning this is Austin on for Jimmy. When do you guys expect to get back to the gross margin percentage range posted 2012 to 2014 and how is your outlook on new boat margins or mix change that view?
Mike McLamb
I have commented that the last quarter our new margins have actually been up year-over-year. Our issue, I think of late has been, when you look at the first half of this year we had 35% same-store sales growth in the December quarter and the March quarter.
Those are quarters Bill just said it those are quarters that are hinged on big boats because of the Ft. Lauderdale Boat Show and the Miami Boat Show.
So we had, which means we are taking more trades, when you are selling bigger boats you are taking more trades. So, as we started the season, which is the June quarter, the September quarter we had an elevated level of used boats and maybe Bill and I should have guided a little bit, hey we're going to have an increase in used boat sales, which carry a lower margin, but it’s hard to predict when things sell.
Bill McGill
And then you could also add to that Austin that used boat inventory that we had are normally older than they would have been historically and so you are getting trades that are 8, 10, 12, 15 years old because of the downturn they weren't traded earlier. And in a lot of cases we wholesale them out.
So we recognize the revenue, but there is very little income if any on it. But it is the prudent thing to do because a 15-year-old product is harder for us to support with everything whether we do for the customer.
So that’s probably the biggest impact that hit us this last year on the used margin was the fact that we wholesaled a lot of boats and as such it was because of the ageing of the trade ends.
Mike McLamb
So, fundamentally it’s of news going in the night right direction, which it is. As we work through some of the challenges, Bill mentioned wholesale, I mean, I think the opportunity is there in 2016 to have the margin tailwind that we would all expect.
Our guidance does not assume a whole lot of that and I think prudently we haven’t had - the last four quarters in a row gross margins consolidated have come down on a year-over-year basis. So, until we actually start seeing things go in the right direction we are not going to change our guidance until we see that.
So that’s what making to our guidance, there’s not a whole lot of improvement in the gross margin on a year-over-year basis yet.
Austin Drake
Okay and that's helpful. And then what you think then the net impact of lower fuel prices have been or will be to your new boat sales?
Bill McGill
Well I mean obviously lower fuel prices helps us and it’s a positive, as far as the feeling that customers get that hey I can, I’m paying less for fuel, I can take a little longer trips do that type of thing, I don't think it impacts the decision a whole lot, I think it helps the consumer feel a little bit better, but at the end of the day the cost of fuel is not the deciding factor on boating or the purchase, but for sure it’s good news and I think on some of the smaller boats in particular it’s aided in some of the sales, but hopefully it will continue to stay low, but more important than that is consumer confidence and the feeling that the consumer has about the future is really the biggest driver of our success and with our discretionary item thing called boating.
Austin Drake
Okay and then just one more from me. Can you give us an update on your acquisition outlook and are you in any active discussions that you might expect to lead to a deal this off-season?
Bill McGill
Yeah, we’ve been in active discussions for quite a while and it’s, acquisition, I almost take the word because it’s really you’re merging a company and you are acquiring them, but at the end of the day what we are looking for is the market and the people more than any other single thing and so in doing that when the acquisition is complete, everybody has got to feel good about it and even though there is compromises perhaps on each side a little bit there can’t be a lot and so it’s got to be right for both the people joining us and also the right for MarineMax and our shareholders. So it’s delayed us doing some acquisitions and perhaps we could have done in 2015 or earlier and so we are in active discussions is probably the best way to describe it and we’ll announce when they make sense.
Mike McLamb
As their earnings come up Austin, just like ours has come up it makes it easier to get deals done versus when they are close to breakeven. So, they are further away from 2008, 2009 the more likely we will get back to our acquisition cadence.
Austin Drake
All right, thank you very much and congrats on the quarter.
Bill McGill
Okay.
Mike McLamb
Thank you, Austin
Operator
Thank you. And we will go to James Hardiman with Wedbush Securities.
James Hardiman
Hi good morning.
Mike McLamb
Hi, James.
James Hardiman
Thanks for taking my, how are you doing?
Mike McLamb
Good.
James Hardiman
Good quarter.
Mike McLamb
Thank you.
James Hardiman
Really appreciate the guidance here, I’m assuming you took that step based on just looking at consensus numbers, so just help me understand Mike, I’m sure you have sort of seen the consensus number, this tree is looking for about 10% growth, it seems like you are guiding pretty close to that. And then you threw out an operating leverage number, [indiscernible] help us translate that Street is looking for about 25% gross margin SG&A in that $170 million range, somewhere on the margin front it seems like the Street is, maybe a little bit too optimistic, which of those do you think is too aggressive and then on the tax front just to understand 38.5% to 39% is what your $0.60 or $0.70 is based on, but do we, is that going to be the actual tax rate or do we have to sort of a wait-and-see to see how that plays out?
Mike McLamb
No, thanks James. I would, on an annual basis that should be a tax rate.
In any given quarter it can move around a little bit, but on an annual basis that should be it, and it shouldn’t more around a whole lot in any given quarter and keep in mind we’re not going to pay taxes until we absorb all those NOLs and deductions. What’s baked into our guidance, so we have generalized and generally said if you generate a dollar of revenue you ought to have about 15% of that dollar to flow through to the pre-tax line, but that 15% is sort of a target or in the middle there is a range, it is 12%, 17% - in the current year our flow through was a lot worse than that or less than that I should say.
And so if you take that range of 12% to 17% MarineMax coming out of the year we just came off of which wasn’t the best flow through year we’re on the lower end of that range for our guidance. The Street is going to be closer to the middle of the range.
That’s the primary difference between us and the Street, plus I’m not sure everybody in the Street is a fully taxed number yet. I think everybody is close, but I’m not sure if they’re all fully taxed, so that’s the difference between what our numbers are and where the analyst are James.
James Hardiman
That’s very helpful and then, over the last four quarters, you’ve given us all this, but just maybe sort of we are all on the same page, can you maybe call out in some of the quarters, which were the items that affected all sort of unusual items that affected that flow through number, where there some healthcare cost earlier in the year and then there were some promotional cost in the March quarter, if I recall correctly, can you just remind us so that we’re on the same page as we think about quarters?
Mike McLamb
Yeah I can, let me start by saying on an annual basis, on 12 months if you look at 2015 to 2014 we actually had pretty doing good operating cost leverage. Using that 15% target, if you look at our growth in revenue and then if you take out the gains from last year and the gains from this year our operating costs were pretty good.
In any individual quarter there may have been an increase or a reduction in cost, but on annual basis the operating cost was pretty good, where we have struggled is the gross margin line on an annual basis and then really throughout the year that’s where we struggled. In the December quarter, we had a spike in big boat sales and when I say big boat, above 75 feet, 80 feet or bigger those carry low double-digit margins, 10%, 11%, 12%, so that drove our margins down that’s what we talked about in that quarter.
In the March quarter, we had elevated marketing costs and elevated healthcare costs to your point. Now, I will tell you on an annual basis we’ve made up those costs basically, but in the March quarter we had elevated costs.
Then we also had a mix of older Sea Ray product to be replaced Sea Ray products selling which drove down gross margins. So, now that’s the second quarter where margins dropped and expenses were higher in that quarter.
In the June quarter, it was a lot of these trade selling that we talked about from the December and the March quarter growth that we had a 35%, those then sold in the June quarter, which hurt our consolidated margins because used boats and also wholesale boats to Bill’s point carry lower margins than new boat sales or than our other margin businesses. Cost leverage in that quarter was pretty decent in the June quarter.
In the September quarter, we got a little bit of the tail of the used boats selling through, costs were pretty good, we had some elevated marketing costs, some elevated commissions but generally costs were pretty decent and that kind of wraps up the year. If you look at 2014, we had good margins and very good flow through.
So, we’ve had some challenges here in 2015 that we certainly are working hard to overcome.
James Hardiman
That is extremely helpful. And then I guess last question on the ASP front, once again over the course of last year was extremely choppy first quarter, so the December quarter you got a huge ASP benefit or ASP growth I guess I should say from the big boats, you’ve guided to some ASP growth this year.
Is it safe to say that December ASP should be down just given the huge influx of big boats in last year’s December quarter and then we’ll sort of make that backup and more over the remaining three quarters or how should we think about that?
Mike McLamb
Yeah, that’s what I would expect because you’re right. Our 45% growth we had in the December quarter if I remember right about half was unit driven and half was ASP driven, which had the big bump on ASP if you think about half of 45%, I would say on an annual basis and I’ve said it in the prepared remarks, our 22% same-store sales growth is close to 70%, maybe just slightly less unit driven.
So we’ve had a very strong unit year, a very strong unit fourth quarter, which is to me that’s really, really good news, especially as our manufacturing partners are coming out with new models including new smaller boats from Sea Ray and it’s nice to see the health of the industry. I see the health of the industry more in units than in a handful of big boat sales.
James Hardiman
Got it. Great color, thanks guys.
Mike McLamb
Yeah. Thank you.
Bill McGill
Thank you, James.
Operator
Thank you. And we will go to our next caller, Joe Hovorka with Raymond James.
Joe Hovorka
Thanks guys. Just one question, so if your inventory that you have at the end of the year to $270 million or whatever it was, how much of that is used inventory now and then what was that same number last year at this time?
Mike McLamb
You know what Joe, I don’t remember the exact dollar. I do know used inventory is down, I wanted to point that out.
So it’s down year-over-year, if I was a educated guess I’m going to say it’s $35 million to $30 million, something like that.
Bill McGill
I think, it is about right, it is in the 30s.
Mike McLamb
Yeah, but I don’t remember exactly.
Joe Hovorka
Okay.
Bill McGill
And its fresher inventory than probably we’ve had in a long, long time.
Joe Hovorka
You mean the used inventory specifically is fresher?
Bill McGill
Both, new and used.
Joe Hovorka
Okay. Great, thanks guys.
Mike McLamb
Thank you, Joe.
Bill McGill
Thank you, Joe.
Operator
Thank you. We’ll continue on to Mike Swartz with SunTrust.
Mike Swartz
Hey, good morning guys.
Mike McLamb
Hey Mike.
Mike Swartz
Just wanted to ask a question on the guidance, maybe asking in a little different way than James did, but and Mike I think you said your EPS range is predicated on the lower end of that long range flow through assumption we’ve talked about in the past and I guess the question is, is there a reason structurally we should think about it being at the lower end maybe in 2016 and going forward or are you just being a little conservative after some of the issues or items that we’ve seen in the past year?
Mike McLamb
Well, so our flow through rate in 2015, if you do all the math was 8%. So, 12% would be a 50% increase to 8%.
So, we’ve got to improve the business, but fundamentally Mike no, nothing should have changed fundamentally. We ought to have the ability over time to get back to the right flow through, just sitting here today coming out with guidance, we think it’s the prudent thing to be on the lower end of the range, especially given it’s a massive increase from where we just finished 2015 and that’s not a single, but fundamentally there is something that’s changed in the business.
Mike Swartz
And then are you assuming any uses of cash in that guidance, share buybacks anything like that?
Mike McLamb
No, I mean we have our normal CapEx and stuff like that, but there’s no material change to the denominator of stock, there’s no acquisition stuff like that.
Mike Swartz
Okay, okay that’s helpful and then on the commentary around the - what you have seen thus far in October and maybe how we should think about December, does the timing of Ft. Lauderdale being a week later this year have any impact on either of those items?
Mike McLamb
It’s kind of funny. I meant to bring that up when Bill was talking.
Bill McGill
Yeah.
Mike McLamb
Because October, while we probably didn’t close many deals last year in October, we would have closed some and the fact that our backlog is up this year with Ft. Lauderdale being a week later is interesting.
So, I think that may be a more positive comment potentially, still we got a lot of work cut out for us, we are up against the tough quarter, but that is interesting. For those on the call who don’t know what Mike’s indicating October or Lauderdale’s normally held before Halloween every year right around it, this year moved out eight or 10 days and so last year when we closed October we would have potentially had some revenue and also backlog related to Lauderdale, which we don’t have this year.
Bill McGill
But we have one less week in order to deliver boats that we perhaps sell it to Fort Lauderdale Boat Show. So, it could impact the December quarter a little bit by being delayed.
Mike Swartz
Got you. And then just finally on this whole aspect of the used boat mix and understanding that it’s lower ending this year, I guess what kind of visibility do you have into that over the next couple of quarters?
I mean is it predicated on what you see coming out of Ft. Lauderdale in Miami?
Is that something we’ll have a better sense of in say February?
Mike McLamb
Ft. Lauderdale and Miami definitely are major, major shows that will drive our used inventory availability as like our New York show and some other ones.
We have very limited visibility Mike until we get through it for good or for bad that we never have. So, I suspect because of the success we’ve had the last several years beginning to sell models, we’ll have less and less of the wholesale boats that Bill talked about and we move on a more normal percentage of wholesale versus maybe slightly elevated levels that we’ve seen off late.
Mike Swartz
Okay. Great, I’ll stop there.
Thank you guys.
Mike McLamb
Thank you Mike.
Bill McGill
Thank you Mike.
Operator
[Operator Instructions] We’ll go to David MacGregor with Longbow Research.
David MacGregor
Yeah, good morning thanks for taking the questions, congratulations on the quarter.
Mike McLamb
Thank you.
David MacGregor
Just looking back to last call Bill, you had thought from a timing standpoint getting a lot of the new product in 2016 would start to come through in March and you’d have a heavier presence in new product in the June quarter, is that what’s changing now and if so how?
Bill McGill
Yes, David it is, what I predicted did happen that we started to get more new product and it helped especially with some of the smaller product with Sea Ray, which really helped our unit growth, but we also saw it from Whaler and there is a backlog right now the Whaler 42s and same with the Scouts, the larger Scout product etcetera that it still has to come through but so, we’re not getting product, the cadence we’d like to still get it. I mean obviously we’d like to get it and deliver it that week, but it’s getting better and better.
So, I think we’ll have less of a challenge going forward in 2016 as the manufacturers have ramped up and are starting to get it out, but the demand for the new product and this is really the important point, the demand for new, new product is very, very strong and that’s great news, but ideally we would like to get it sooner if we could and of course the manufacturers are working on that.
David MacGregor
So, I realize the seasonal pattern here obviously, but are you now expecting maybe slightly better March quarter than you might have a quarter ago?
Bill McGill
Yes, understand that maybe December won’t be what it was last year, which I think we’ve said, because maybe timing of some bigger boats with Lauderdale being delayed a week and just two no’s when some of these products will close and they significantly did impact the December quarter, but at the end of the day we will make up for it in the March quarter.
David MacGregor
Okay and then also just kind of reflecting back on the last quarter, you made the observation that you indicated that promotional expense so to speak or marketing expense would not be picking up in fourth quarter. And now it seems like maybe it did a little bit, can you just talk about what might have changed there and why?
Bill McGill
Well some of it is more products, we’re displaying different brands, Scarab is a bigger presence, so those are expenses that we put into boat shows, as well as we know Ocean Alexander and we’ve had a 72 Ocean Alexander that’s been travelling the Northeast, you know at the shows and dealerships and events and that type of thing and so, those run out expenses on, so the expansion of the brands has impacted some of our marketing cost and I mentioned that we are in 11 different displays in Ft. Lauderdale this year and those are extra expenses that go along with it, but hopefully the sales more than offset that, which historically they have and will continue to.
Mike McLamb
David on an annual basis, as we said in the March quarter, our marketing costs have come in line despite being modestly up here a little bit as we close the year. They are in line on an annual basis.
Bill McGill
Right.
David MacGregor
Okay. Last question is just and if you have said this already, I missed and I apologize, but can you, the used boats that you are actually selling at retail as opposed to wholesaling is there anything changing significantly in terms of the profitability of that volume?
Mike McLamb
No, it is following historical trends.
David MacGregor
Okay. Thanks very much.
Bill McGill
Okay, thank you David.
Operator
Thank you. And ladies and gentlemen, our final question comes from Greg McKinley with Dougherty.
Greg McKinley
Yes, thank you. So, just, I guess a shorter term question, how does the December quarter typically play out from a seasonality standpoint, which months, is it a third or third to third, October, November, December or which months tends to represent the larger share sales, wonder if you can give us some context for that?
Mike McLamb
Yeah, it is November typically will be the bigger, primarily because of all the Lauderdale deals that are closing in that quarter are going to be more likely closed in November than December because everybody is travelling and so forth. So, it would be number one November, number two October, number three in terms of size would be, the smallest would be December historically.
Bill McGill
However, last year December was the strongest month [with some] larger boats.
Mike McLamb
Last year was different. December was very strong last year.
Greg McKinley
Yeah, okay, thank you. And then in terms of gross margins we should think about shorter term, how impactful is this comment you’ve made around, we now have seen normalization on used boat inventories, is that something that we can then expect to almost start showing real time around your December quarter margins where we’d even look for sequential improvement or I guess how should we think about that impacting shorter term margins?
Mike McLamb
I think the December quarter is such a small quarter and it’s hard to really, when I say that relative to the year it’s hard to give a whole lot of predictability around the December quarter, but I do think as we go into the back half of 2016, the potential is there that begin to have the margin growth that we’ve all talked about in this call and part of that could come from in a more normalized use that’s a percentage of our overall business because of how we’re starting the year.
Greg McKinley
Yeah, okay. Okay, very good, thank you.
Mike McLamb
Thank you.
Bill McGill
Thank you, Greg.
Operator
Thank you. And with no additional questions I’d like to turn the conference back over to Mr.
McGill for any additional or closing remarks.
Bill McGill
Thank you, operator. And in closing I would like to again thank our team for their passion and efforts and all of you for your continued interest and support at MarineMax.
Mike and I are available today, if you have any additional questions and we’re off tomorrow to Ft. Lauderdale.
Thank you.
Operator
Thank you. And ladies and gentlemen, that does conclude today's conference.
Thank you all again for your participation.