Earnings Call Transcript - HZO Q2 2023

Operator, Operator

Good morning, and welcome to the MarineMax, Inc. Fiscal 2023 Second Quarter Conference Call. Today’s conference call is being recorded. Please follow the operator's instructions. At this time, I would like to turn the call over to Scott Solomon of the company’s Investor Relations firm, Sharon Merrill. Please go ahead, sir.

Scott Solomon, Investor Relations

Thank you, and good morning, everyone. Thank you for joining us. Hosting today’s call are Brett McGill, Chief Executive Officer and President of MarineMax, and Mike McLamb, the company’s Chief Financial Officer. Brett will discuss the company’s operating highlights. Mike will take you through the financial results, Brett will make some concluding comments, and then management will be happy to take your questions. By now, you should have received a copy of the earnings release issued today. If not, please e-mail our IR team at hboinvestorrelations.com and a copy will be e-mailed to you. With that, I will turn the call over to Mike McLamb.

Mike McLamb, CFO

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. 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-K 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. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is available in today’s earnings release. With that, let me turn the call over to Brett.

Brett McGill, CEO

Thank you, Mike. Good morning, everyone, and thank you for joining us. Let me begin by thanking our exceptional team, more than 3,900 strong around the globe. We are consistently delivering on our mission to provide customers with the world’s best pleasure boating experience. While the industry buying cycle is looking different than it was over the past couple of years, what’s abundantly clear is that the passion for being on the water has never been stronger than it is today. A little more on this later. Turning to our results. This morning, we reported second quarter revenue of $570 million. This was the second best March quarter top line in our history, surpassed only by the record $610 million achieved in last year’s fiscal second quarter. After the exceptionally strong results we saw in fiscal 2022, our revenue performance this past quarter reflects the boating industry’s return to seasonality amid growing macroeconomic uncertainty, fueled in part by the crisis that hit the U.S. banking sector last month. Traditionally, March is the strongest month of the second quarter, often as big as January and February combined. This year, however, despite March being a good month with positive same-store sales growth, it was weaker than what was projected, leading to a larger decrease in same-store sales for the quarter. Same-store sales increases of 7% and 45% in the prior two March quarters contributed to an especially challenging comparable this year. Based on our performance to date and with the level of macroeconomic uncertainty worsening as the second quarter progressed, we are bringing down our adjusted earnings and adjusted EBITDA guidance for the full year. Mike will address our fiscal 2023 outlook in more detail in his remarks. Although our second quarter performance was not what we had anticipated, it’s important to keep the results in context. Fiscal 2022 was a record year for MarineMax and by and large, for the industry as a whole, which benefited from a confluence of factors, including supply chain shortages, reduced inventories, a low interest rate environment, and robust consumer spending. By contrast, inventories are beginning to return to more normalized levels, interest rates are up, and consumers are exhibiting a bit more caution. While those factors create a tough comparison for this year, we continue to focus on delivering results for our stakeholders over the long term. And it is through that lens that our performance this year demonstrates the changes we have made to position MarineMax for the future. From time to time, there may be some greater-than-expected variances in our performance based on what’s going on at the macro level, but we are confident in the underlying strength of the business. That strength becomes evident when comparing the more dynamic business we are operating today with the company we were several years ago. As we noted in this morning’s earnings release, compared with the first six months of fiscal 2019, our revenue through the same period this year has nearly doubled to $1.1 billion. Gross margin has climbed more than 1,000 basis points to 36%, and diluted EPS has increased more than five-fold to $2.23. The initiatives we have taken have enabled us to build scale in new and exciting areas of the market that over time have the ability to dramatically increase both our recurring revenue and our earnings power, reducing our exposure to normal seasonal trends. IGY Marinas, which we acquired in October, continues to perform well. IGY has a global portfolio of premium yachting destinations of 23 marinas in 12 countries. These properties serve as a resilient platform for expansion and profitable growth, as do many of our other higher-margin revenue streams, including super yacht brokerage and luxury yacht services. Bolstered by the addition of IGY, revenue from higher margin maintenance, repairs, storage, rental and parts and accessories in our marina locations has increased dramatically, and Mike will provide more color on this later. We are also pleased with the growth of our Manufacturing segment comprised of Intrepid power boats and cruisers yachts, both of which we acquired in 2021. Intrepid, a premier manufacturer of power boats recently launched its new flagship model, the 51 Panathea. This new model, which was on display at the Palm Beach boat show, is selling very well. Cruisers, one of the world’s premier manufacturers of premium yachts, offers innovative and crafted yachts that fill a unique and growing demand in the market for American-made sport yacht and yacht models. Now let me update you on the continued momentum of our technology platform, which fueled customer engagement and created value-added services to help achieve our business objectives. We continue to rapidly add boat dealers to the Boatzon platform, our innovative online digital product for the boat and marine retail marketplace. Boatzon connects consumers who are looking for boats, finance, insurance and other products to a network of dealers across the country. We are very excited about the capability of the technology to propel the growth of our higher-margin businesses as more dealers and boaters continue to leverage the product. Our technology portfolio also includes Boatyard, a subscription-based product that targets the service side of the market, enhancing the ownership experience. Boatyard is being well received by the dealer community, furthering our reputation for service excellence. Together, Boatzon and Boatyard are key components within our recently created New Wave Innovations business. We expect New Wave to play an integral role as we leverage our technology, innovation, and marketing capabilities to expand our higher-margin businesses. I started this call with a comment on the demand for the boating lifestyle. Based on our digital traffic, participation in our customer events, marina traffic, and boat show traffic, the demand for the boating lifestyle remains very strong. Over the last few years, the industry added a meaningful layer of new boating participants that are enjoying their boats, and many are already beginning to trade up. To sum up, we remain extremely confident in the underlying fundamentals of our business and our ability to outperform the market over the long term. We continue to focus on balancing prudent expense management with investments to generate sustained profitable growth. As we head into the traditionally strong summer selling season, our historically high backlog reflects the growing worldwide enthusiasm for boating, as well as the demand for the high-quality products and services we are delivering to this global market. And with that update, I will ask Mike to provide more detailed comments on the quarter.

Mike McLamb, CFO

Thank you, Brett, and good morning again, everyone. I’d also like to thank our team for their continued hard work during the quarter. For the quarter, revenue declined about 7% to $570 million, largely due to a 13% decrease in same-store sales, partially offset by the addition of IGY, which we acquired on October 1. As Brett noted, the decrease in same-store sales reflected the boating industry’s return to seasonality amid what continues to be an uncertain economic climate, which contributed to a double-digit decline in units in the quarter. While units were lower across most categories, our premium brands continue to meaningfully outperform the value segment of the market. Geographically, our locations in Florida and other coastal areas have performed ahead of those in the Midwest and other interior regions of the country, which tend to be more seasonal. Average unit selling price continues to grow with the relative strength in premium versus value and the migration to larger products. It’s worth noting that same-store sales were down in January, improved in February, and they were positive in March. Gross profit dollars were down modestly to $201 million, while gross margin grew about 150 basis points to 35.2%, a new March quarter record. The increase was primarily driven by the acquisition of IGY, as well as strong performance in many of our higher-margin businesses. Excluding IGY, gross margin in the second quarter was down slightly compared with the prior year, which does indicate that product margins, while down modestly, were relatively healthy. To provide more context on the performance of our higher-margin businesses, beginning with our second quarter 10-Q, we are taking a step to increase disclosures around our marina-related business, as well as our higher-margin businesses in general. We will add tables that show the percentage of revenue by specific categories for both our retail operations and product manufacturing segments, as well as all our revenue categories on a quarterly basis, like we have done annually in our 10-K. We will also be providing revenue in aggregate from maintenance, repair, storage, rental, and parts and accessories from our combined marina locations as opposed to non-marina locations. Specific to the marina-sourced revenue, for the first half of fiscal 2023 we generated $126 million in revenue from maintenance, repair, storage, rental, and parts and accessories. That represents a 120% increase from the same period last year, largely due to IGY. Marina-sourced revenue is considered stickier, and those figures exclude all boat sales, as well as brokerage and F&I. We hope this information is incrementally beneficial as you think about the performance of our higher-margin businesses. Moving down to the income statement. SG&A expenses rose $12 million, primarily attributable to the addition of IGY, partially offset by a decrease in commissions on lower sales volume. SG&A was also impacted by the timing of internal sales of Cruiser Yachts to our stores versus retail buyers. This means that while internal sales are eliminated at the revenue and margin line until they are retail sold, the SG&A is expensed currently. Like other companies in this environment, we are reviewing expenses for opportunities while staying focused on the long term. Additionally, consistent with the dealership model, a significant portion of our team is on performance or commission-based pay plans, which rise and fall based on the company’s performance. Interest expense increased by $12.6 million reflecting higher interest rates, as well as the increase in long-term debt related to the IGY Marina acquisition and higher inventory. Adjusted EBITDA for the quarter was $57 million compared with $80 million in last year’s second quarter, primarily due to lower revenue and higher floor plan interest expense this year. On a year-to-date basis, adjusted EBITDA was $110 million compared with $135 million last year, with floor plan interest making up close to half of that difference. On the bottom line, we generated GAAP net income of $30 million or $1.35 per diluted share. On an adjusted net income basis, net income for the quarter was $27.4 million or $1.23 per diluted share. These amounts reflect adjustments for the change in fair value of contingent consideration and intangible asset amortization. We also removed two gains in the quarter to arrive at $1.23 per share. Moving on to the balance sheet. We ended the quarter with cash and cash equivalents of more than $204 million, down modestly from last year primarily due to the acquisition of IGY. As Brett highlighted in his remarks, supply chain constraints are easing and inventories are beginning to return to more normalized levels. Our inventory at quarter end was up 116% from last year to $711 million and up 17% from December, which is typical for historical seasonal patterns. But with plenty of inventory delays over the past few years, it is nice to be able to have product available to deliver as we head into the selling season. Having said that, same-store unit inventories are still well below March 2019 levels. Looking at liabilities, our short-term borrowings at March 31 rose $440 million from last year, largely due to increased inventories. Although customer deposits have decreased year-over-year, sequentially they are close to flat to December levels and remain historically very high as we enter the summer selling season. Consistent with past calls, debt-to-EBITDA net of cash was less than 1x at quarter end, and we have additional liquidity in the form of unlevered inventory plus available lines of credit that totaled $200 million. Turning to guidance. Based on our year-to-date results as well as recent trends, including March industry results, reflecting softer retail than we anticipated, we believe that it is prudent to lower our 2023 guidance. Admittedly, this has been a challenging year to forecast given the industry’s rapid return to seasonality combined with the FED-driven macroeconomic uncertainty. The challenges we saw in March, despite it being ahead of last year, demonstrated to us that the macroeconomic environment may weigh more heavily on the industry than the strength of seasonality. As such, we are lowering our full year same-store sales assumptions from a modest decline to a decline in the high single-digit range. This would imply that industry units during our fiscal year will be down double digits. For our first six months, the industry is down something like 20% to 25% in units. As we have seen to date, our premium product concentration should continue to benefit us. We expect margins to be generally consistent with our past guidance, which was a modest decline from 2022, but still in the mid-30s. We do expect product margin pressure to increase due to rising industry inventory, but such pressure should be offset by IGY. SG&A is expected to be elevated as a percentage of revenue given the same-store sales decline. We are also assuming interest expense is elevated due to higher-than-anticipated inventories given the revised sales outlook as well as rates. With declining U.S.-based pretax income, combined with generally consistent international trends, and the addition of IGY, which is exceeding expectations, our tax rate will increase to around 28% due in part to higher international tax rates. Interestingly, floor plan interest and the tax rate change account for over $1.70 of the change from last year's earnings per share performance. On the bottom line, we now expect our full year 2023 adjusted earnings per share guidance to be in the range of $4.90 to $5.50. This assumes a share count of 22.4 million shares. In addition, we are forecasting 2023 adjusted EBITDA to be in the range of $220 million to $245 million. Looking at current trends, April same-store sales are expected to be modestly down from last year’s April, which was a good month. With that, I will turn the call back over to Brett for closing comments.

Brett McGill, CEO

Thanks, Mike. We look ahead with enthusiasm as we advance into the second half of fiscal 2023 and beyond. Strategic acquisitions such as IGY give our business model the resilience and diversification to address the opportunities and challenges of any economic cycle. New technology offerings such as Boatzon and Boatyard are key differentiators that will help provide us with a competitive advantage and continue to grow market share. We are aligned with the best partners across our retail locations and are well positioned to achieve profitable growth over the long term. At MarineMax, customer experience is at the center of everything we do. Our world-class Net Promoter scores, which measure a customer’s likelihood to recommend our products and services, speak both to the exceptional level of service our team delivers and to the strength of our customer relationships. And with that, operator, please open up the line for questions.

Operator, Operator

Our first question comes from Joe Altobello with Raymond James.

Joe Altobello, Analyst

Thanks, guys. Good morning. A couple of questions on the comp. I guess, first, you mentioned obviously units down pretty significantly. Was the pricing or average pricing up in the quarter?

Mike McLamb, CFO

Yes, it was up high single digit in the quarter, and I think close to double digit year-to-date. But yes, reflecting the trend of premium and also the larger product, Joe.

Joe Altobello, Analyst

I want to revisit your comment, Mike, about the comp trends throughout the quarter because I am not sure if I heard you correctly, but it seems you mentioned March was up. Can you help us understand what took place in January and February leading into March?

Mike McLamb, CFO

Thank you, Joe. During our quarterly call in January, we mentioned that we anticipated a decline for that month. While we had decent expectations for February, they weren't exceptional. However, we initially expected even stronger performance for March than what we ultimately experienced. Despite that, March did show positive comparisons. Our only disappointment was that we expected margins to be better than they actually were.

Joe Altobello, Analyst

Okay. So March comp positive. April is going to be down modestly, it sounds like, but it seems like it didn’t reflect as much as you would have hoped.

Mike McLamb, CFO

That’s right. We expect that March is usually as significant as January and February combined. You've heard us mention that before. This March was a good month overall, better than last year, but not quite equal to January and February combined. We noticed some softness as we discussed it throughout the month.

Joe Altobello, Analyst

Okay. And one last one. In terms of your guide, it looks like you are assuming trends kind of stay pretty consistent in the back half versus the first half in types of comps.

Mike McLamb, CFO

That’s correct. And if you think about the next two quarters, the June quarter, in theory, has an easier comp because it was negative last year in September would be tougher because it was positive last year. Thanks, Joe.

Operator, Operator

Our next question comes from Fred Wightman with Wolfe Research.

Fred Wightman, Analyst

Hi, guys. I just wanted to follow up on the March commentary again. I think, Brett, in your prepared remarks, you made a comment about the banking impact in March specifically. Is that something that you saw impact either financing availability or approval rates or consumer skittishness? Was that something that impacted you guys specifically?

Brett McGill, CEO

Yes, Fred, how are you doing? Yes. In fact, I think March started off really strong and it just felt like it paused. I’d kind of go with your last comment about skittishness a little bit. It just kind of slowed down, created a pause in the consumer towards that second half of March. Mike?

Mike McLamb, CFO

Yes. No, just on your comments around financing, though, Fred, we haven’t felt any structural fallout or any changes in how banks approach retail financing in terms of the creditworthiness, things of that nature. Obviously, rates are higher, although they haven’t really raised a whole lot in a little while, but the rates are higher, but no real fallout from the banking crisis with the folks who buy the retail paper.

Fred Wightman, Analyst

Okay. That’s fair. And then on the industry outlook, I think you guys said that you are expecting that to be down double digits now. I mean that’s a really wide range, right? The double digit. So do you sort of think it’s going to be better, similar to the down 20%? I guess that’s kind of a calendar number, but do you think things are going to get better or worse or stay the same from here?

Mike McLamb, CFO

Yes. So it’s really interesting. I know you know the industry real well. When you look at the month-over-month comparisons, we go into kind of a little tougher comparisons in the summertime and then easier comparisons right near the end of our fourth quarter. So I think months are going to vary based on what they are going up against last year. If I remember right, April is probably the toughest month between now through July. And then the industry months get easier. But we think overall, so I think if you listen to what we are saying, if the industry is down 20%, 25% now, we are saying double digit, probably overall, it’s going to get better than down 20% to 25%, but it’s still going to be down double-digit negatives.

Fred Wightman, Analyst

Helpful. Thank you, guys.

Operator, Operator

Our next question comes from Drew Crum with Stifel.

Drew Crum, Analyst

Okay. Thanks. Hi, guys. Good morning. I know it’s still early in the season, but are you seeing any change in usage behavior? And would you anticipate specifically lower fuel costs relative to where they were a year ago, driving any parts of your business tied to usage?

Brett McGill, CEO

One thing we examine is everything from fuel sales at our marinas, customer activity on the water, service trends, and the getaway events we host. All of them continue to be sold out. Recently, we had a significant Galleon event in Key West, and customers are actively boating. While they may not be as frantic as during the peak weekends of COVID, they remain quite engaged in boating activities.

Drew Crum, Analyst

Got it. Okay. And then you touched on the record gross margin for fiscal 2Q and address some of the puts and takes on that line. I think you are suggesting mid-30s range for the balance or for all of fiscal ‘23. Any callouts or anything to note in the second half of fiscal ‘23 that would move that line?

Mike McLamb, CFO

I will share some insights, and Brett can add his thoughts if he wants. We anticipate an increase in margin pressure on the products we sell as inventory levels rise slightly in the industry. However, we don't foresee this being significantly impactful, and we believe margins will remain healthy. Specifically for MarineMax, the addition of IGY this year, which was not included in the June or September quarters, is expected to counterbalance this issue, with our full-year margin projected in the mid-30s. Our other businesses, which we frequently discuss, such as finance and insurance, service, and our marina operations, including IGY and our locations in the States, are performing well. These flourishing sectors, especially in a potentially moderate same-store sales environment, contribute further to supporting and enhancing our margins.

Drew Crum, Analyst

All right. Okay. Thanks guys.

Mike McLamb, CFO

Thanks Drew.

Operator, Operator

Our next question comes from James Hartman with Citigroup.

Sean Wagner, Analyst

Hi, this is Sean Wagner on for James. I am wondering if you could give us maybe just trying to figure out the split between ASPs and units in that March growth and then the, I guess, modest decline expected for April and even the high single-digit decline for the full year. How do ASPs and units compare in those numbers? Is the ASP growth similar? And then the units is what’s driving the March growth? Or I guess, how should we...

Mike McLamb, CFO

Yes. ASPs in the quarter, I think I commented we are up high single digits, which would tell you our units were down something like 20% across the board. But yes, in our forecast, we are expecting also ASPs to continue to be up probably in the mid- to high single-digit range, and that’s what reconciles to our unit commentary for the year.

Sean Wagner, Analyst

Okay. And so in March, the growth was driven by units and the same for the April decline.

Mike McLamb, CFO

In March, the same-store sales saw a decline. If you were specifically asking about the month of March, I don’t have the average unit price for that month, but I can tell you that it would have increased for our same-store sales growth.

Sean Wagner, Analyst

Okay. I guess do you know if units were down in March or up?

Mike McLamb, CFO

I am going to tell you that units were down in March as they were for the industry, but we had several brands that did well in the month of March, meaning they were up themselves year-over-year.

Sean Wagner, Analyst

Okay. And piggybacking off of that, are you seeing any differences in demand as far as like low-end or high-end product or income-related differences among consumers or anything like that?

Brett McGill, CEO

You know one thing we have been consistent on is we skew towards a very premium and with our average unit selling price being close to $300,000. And so the premium product continues to do better in the industry than the value product. And we see that within our own business as well.

Mike McLamb, CFO

I would add kind of the macroeconomic pressures seem to have kind of moved up in that price scale more so than let’s say six months ago when we started talking about smaller cheaper boats being under pressure because of interest grades. It’s creeping. The pressures are creeping up. Creating pause with consumers, they have taken longer to make decisions, I would say, you could even call that they are getting back to kind of the older buying cycle. They are coming into the funnel earlier, they are excited about going boating, they either already have a boat, they are looking for a boat, and they are actively shopping. But the last two years, there was no active shopping, there were people who walked in and bought. So the buying is there.

Sean Wagner, Analyst

Okay. Thank you very much.

Mike McLamb, CFO

Thanks, Sean.

Operator, Operator

Our next question comes from Eric Wold with B. Riley Securities.

Eric Wold, Analyst

Thanks. A couple of follow-up questions. I guess a follow-up on the gross margin comments and questions. I know you talked about having the higher-margin businesses offset some of the pressures you may be seeing on product sales as inventory comes back. Maybe take that a complete step further and talk about if you took margins on new and used boat sales completely back to ‘19 levels, even a little bit more if it worsens, what does that look like right now with what you see with IGY and everything else in terms of a pro forma gross margin if you assume it got a lot worse.

Mike McLamb, CFO

It’s a good question, Eric. I actually have not done that exact math. What I have said on some of these calls is that the product margin benefit has been something like 1/3 of the overall improvement of margins prior to adding IGY. So if you look at 2022 versus 2019, I think we are up roughly 1,000 points or thereabouts. So call it, $300 million to $330 million or something would be due to product margins. IGY would offset a lot of that if it actually fell all the way back to 2019 levels, which we don’t think that’s going to happen. But I don’t have the exact math for you, but it’s a good question.

Brett McGill, CEO

Healthy inventory, good models, and stock all help with that pressure as well.

Mike McLamb, CFO

We don’t agree with the way the industry is managing inventory. While we've discussed rising inventory levels extensively, all our manufacturing partners and we are focused on maintaining healthier long-term inventory levels with higher turnover rates. The specific outcomes of this effort are still to be determined, but I don't have the exact figures at this time; however, I believe it will help offset a lot of the issues.

Eric Wold, Analyst

That’s helpful, Mike. And just safe to assume that maybe not an exact number, but you feel confident going to keep margins above 30% and kind of the low 30s even if it returns back on product.

Mike McLamb, CFO

Yes. That’s our objective, obviously. And adding companies like IGY really helps that, and continuing to work on higher-margin businesses, just to force that even further.

Eric Wold, Analyst

Got it. And then on the inventory, you said you are still light on a same-store sales basis. Maybe kind of talk about what areas you are light on heading into the selling season and kind of at risk, or do you have kind of other products that could be replacements from buyers coming in?

Mike McLamb, CFO

We are the latest on larger product and larger center console type product, which is generally consistent in the industry also is where we are light.

Brett McGill, CEO

Yes, I believe that as we enter the season, we have plenty of excellent models available for sale. This should not hinder anyone who is ready to buy a boat. We should have the appropriate range of products available, or they will be arriving soon.

Eric Wold, Analyst

Got it. And then just final question, if I may. I know there's been some increasing discussions around your real estate portfolio and kind of underappreciated that may be. And I know you guys have taken some actions to take mortgages at least take some capital out of that over the past couple of years. I know it may be difficult to comment, but any thoughts on if there's additional thoughts on possibly looking around that real estate and what the board is looking to do something to maybe realize that value or at least make it that you realized out there?

Brett McGill, CEO

We have a strong portfolio of real estate that is highly strategic to our operations and adds significant value to our revenue streams and their growth. We are pleased with the properties and are exploring ways to enhance revenue from them, although there are currently no active initiatives underway.

Mike McLamb, CFO

It’s a question that comes up as cycles occur like this cycle. And often, it’s a defensive type. And I am not suggesting you are asking this, but is often sometimes defensive about what if liquidity gets tight or something like that in the company’s cash and liquidity position is very strong right now. And our ability, if we ever need to leverage the real estate to use the cash for strategic reasons or acquisitions, whatever we need, still exists like we have done historically.

Eric Wold, Analyst

Helpful. Thanks. Appreciate it.

Mike McLamb, CFO

Thank you, Eric.

Operator, Operator

Our next question comes from John Healy with Northcoast Research.

John Healy, Analyst

Thank you. Just wanted to ask a big picture question. Obviously, this business is continuing to evolve in many different ways. So I’d love to hear your thoughts just about the new disclosure and how we could think about maybe, I don’t know, I want to call it a recurring revenue or recurring EBITDA level of the business just associated with maybe the parts and service and the Marina business. Is there any way to think about that number that you guys have maybe come up with that’s maybe a percentage of revenue or percentage of EBITDA, which is kind of not tied to retail in any given year?

Mike McLamb, CFO

That's a great question, John. I've mentioned that we're starting to increase disclosures regarding our various businesses, particularly the higher-margin ones related to Marinas. The 10-Q is set to be filed today, and it will include new tables that reveal how much revenue we generate from our Marina properties, both internationally and in the U.S. The $126 million I referred to for the first half of the year is considered more stable revenue. We haven't calculated EBITDA for the property yet because we're still looking into how intertwined our marinas are with our retail operations and how to segregate the P&Ls to determine EBITDA at that level. We'll start with revenue first. There are several REITs that own marinas that investors can reference to understand typical revenue from a marina, which can help estimate our potential EBITDA. This has been suggested to us as a way to approach the question. Until we provide our own EBITDA figure, which will take some time for us to finalize, that’s one way to think about it. It's a good question and something we're aiming to clarify.

John Healy, Analyst

Okay. And just one follow-up question, one housekeeping question. You mentioned the REIT structure or the REIT comparable. Is that ever something that you guys have kind of spent time evaluating if you could structure an operating company and a property company and does it maybe make sense to think about that? And then secondly, the gain on the equity investment in the quarter, where did you guys have that kind of net against? Is it in SG&A or COGS?

Mike McLamb, CFO

I will start with the second one. It’s in SG&A. It’s netted down in SG&A. And I can...

Brett McGill, CEO

Yes. As far as REIT structures, we just closed on the acquisition of IGY, getting to know the team, the platform that is an amazing platform with some revenue streams in addition to just renting boat slips. And we are just trying to maximize all that and get our arms around it and find ways to grow that platform or there are already ways to grow. We are just trying to maximize that. That’s our main focus right now.

John Healy, Analyst

Understood. Thanks, guys.

Brett McGill, CEO

Thank you, John.

Operator, Operator

Our next question comes from Brandon Rollé with D.A. Davidson.

Brandon Rollé, Analyst

Good morning. Thank you for taking my questions. First, just on what you are seeing in the market right now. It seems to be a little more cautious than one of your major suppliers that reported this morning, they indicated you are seeing a resilient consumer and not seeing a slowdown. Do you feel like you guys are underperforming the broader market? Or what would change their view on the market versus yours? Thanks.

Mike McLamb, CFO

I could comment and Brett can join in. I apologize for my chuckle. This company has been public for 25 years, and in that time, we have outperformed the industry every single quarter. There are occasional data disconnects between us and some of our partners, but over time, the data always aligns. I believe that both companies can be correct based on the data they are observing, and I anticipate that there will be a convergence of data for both organizations as well.

Brandon Rollé, Analyst

Okay. Great. And then just a quick question on the used market. I guess, what are you seeing there in terms of used inventory availability and also maybe the used versus new pricing spread now that inventories have normalized on the new side?

Brett McGill, CEO

Yes, the used boat market is still strong, and we are getting inventory on used boats in stock now, a little bit more inventory available for the customer. But nothing dramatic, used products holding strong. Obviously, from a year or two ago, the pricing has kind of made some adjustments more normalized, but nothing that’s not the ordinary used is healthy and new is healthy, just a different backdrop out there right now.

Operator, Operator

Our next question comes from David MacGregor with Longbow Research.

Joe Nolan, Analyst

Hi, good morning. This is Joe Nolan on for David. I just had one quick one for you. Just kind of on promotional environment. Just wondering what you are seeing in terms of promotions in the quarter and how you see that evolving through the year?

Brett McGill, CEO

There has been some discussion regarding boat shows. Participation was higher than in recent years, and there has been increased promotional activity around the products. We are collaborating with our manufacturers to develop promotions to manage inventory. However, the situation is stable, and the level of promotion seems appropriate to encourage consumers to act quickly without undermining the perceived value of the product pricing.

Joe Nolan, Analyst

Got it. And just a follow-up on that. How would you compare it to pre-pandemic levels at this point?

Mike McLamb, CFO

The promotional level is significantly lower than it was before the pandemic.

Joe Nolan, Analyst

Okay. Got it. Thanks. That’s all I got.

Operator, Operator

There are no further questions at this time. I would like to turn the floor back over to Mr. McGill for closing comments. Please go ahead.

Brett McGill, CEO

Well, thank you for joining the call today, and thank you for all the great questions. We will look forward to updating you on our next report. Have a good day.

Operator, Operator

This concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation.