MarineMax (HZO) Q2 2020 Earnings Call Transcript

MarineMax (HZO 5.06%)
Q2 2020 Earnings Call
Apr 23, 2020, 9:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the MarineMax, Inc. second-quarter 2020 earnings call. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Cohen, investor relations for MarineMax.

Thank you, Mr. Cohen. You may begin.

Brad Cohen -- Investor Relations

Thank you, operator. Good morning, everyone, and thank you for joining this discussion of MarineMax's 2020 second-quarter earnings conference call. I'm sure that you've all received a copy of the press release that went out this morning. But if not, please call Linda Cameron at (727) 521-1712, and she will email one to you right away.

I would now like to introduce the management team of MarineMax, Mr. Brett McGill, president and chief executive officer; Mr. Mike McLamb, chief financial officer of the company. Management will make a few comments about the quarter and then be available for your questions.

With that, let me turn the call over to Mr. Mike McLamb. Mike?

Mike McLamb -- Chief Financial Officer of the Company

Thank you, Brad. Good morning, everyone, and thank you for joining this call. Before I turn the call over to Brett, I'd like to tell you that certain of our comments are forward-looking statements as defined by the Private Securities Litigation Reform Act. These statements involve risks and uncertainties that could cause actual results to differ materially from expectations.

These risks include, but are not limited to, the impact of seasonality and weather, general economic conditions and the level of consumer spending, the company's ability to capitalize on opportunities or grow its market share and numerous other factors identified in our Form 10-K and other filings with the Securities and Exchange Commission. With that in mind, I'd like to turn the call over to Brett. Brett?

Brett McGill -- President and Chief Executive Officer

Thank you, Mike, and good morning, everyone. I want to start by saying how proud I am of our team's ability to evaluate the impact, act quickly and implement changes in how we operate our business during this global pandemic. There are so many stories of how our team's agility and grit to overcome the challenges we faced as the impact of the virus expanded across the country and world. It's worth noting that we lost very few sales that we were contracting before the virus and continue to sell boats after the virus set in.

We had to think differently and develop a new approach to achieve these results. I am humbled and proud to be able to lead such an outstanding, passionate and devoted team. We understand that we have a responsibility to both our local communities and the boating community at large, including the health and well-being of our team, their families and our customers, as well as the welfare of our local economy. While we are taking additional health and safety actions, we stand by our commitment to provide our customers and their families the best possible boating experience.

In support of this, we are offering multiple approaches for our customers to continue to safely and comfortably enjoy their experience on the water. We have also clearly seen a very strong desire for those in warmer markets to get out on the water, enjoy time with their families safely and away from crowd. We saw a very similar trend following the events of 9/11. However, that desire seems even stronger now.

We believe this will be replicated in all parts of the country as warmer weather moves in. We think boating could be one of the beneficiaries from this changed new world in which we now live. People will likely travel less in the near term and instead, stay close to home. Boating is a great way to escape the stresses of everyday life and strengthen the bonds of family and friends while avoiding crowd.

Even with the impact of COVID-19, we still generated positive same-store sales in the March quarter. We experienced strong performance across all lines of business in January and February, while starting to feel the impact of the virus in March. As I sit here today, the majority of our 59 locations are partially or fully operational. We are now offering private, personal showings, as well as virtual appointments.

We've also increased the frequency of professional cleaning crews to provide further deep cleaning of our stores and inventory. Importantly, our digital platform is fully operational and available 24/7, with our full selection of boats and yachts, as well as our expert team online to answer customers' questions and help them find a boat virtual. New tools are available to hold their dream boat and complete the process from the comfort and safety of their home. In the quarter, we saw growth across many brands and segments, and we are proud to have driven same-store sales increase of 12% in the first six months of the year, on top of the 7% a year ago.

It was strength in just about all key categories. Let me give some additional color on our business in the quarter. Our strategy of investing in high-margin businesses and best-in-class technology served us well. We once again significantly expanded our gross margins for another quarter.

This was due to the growth in our higher-margin businesses. Our strength in higher-margin businesses, such as finance, insurance, brokerage, marina and service operations, uniquely allows us to be incrementally more aggressive in boat margins as we were in March. The majority of our higher-margin success is due to the combination of the Fraser acquisition in July of '19 and our continued focus and training in these areas of our business. As a reminder, Fraser is a super yacht services company and a world leader in yacht brokerage, yacht charter, yacht management, crew placement and new build consultations operating all over the world.

We also continue to benefit from our best-in-class, fully integrated CRM systems and data analytics platform, creating a seamless experience for our customers. When the stay-at-home orders were mandated across the country, we were able to quickly migrate from a store-based retailer to a virtual retailer, thanks to these prior system investment. Our team continues to hone its skill set doing virtual demonstrations of boats and remote closings needed to purchase a boat. We even execute streaming virtual christenings when our customers take delivery.

We are also continuing our online boat shows, as well as our digital events for customers. These investments position us well for the current environment and obviously the future. As optimizing cash flow remains a top priority, our team is focused on managing the controls, including inventory and expenses. As a reminder, we significantly improved our inventory in the December quarter, especially given the dollars and number of units we delivered.

With the onset of COVID-19, we reacted swiftly and proactively worked with our manufacturing partners to further align future orders. As we head into the important June quarter, the age and mix of our inventory is in a good position. In this uncertain environment, we're able to make further adjustments to ensure we are generating cash and moving inventory, but believe the environment overall is at a rational point. As a result of the virus, we have also taken actions to reduce expenses, including furloughing team members in areas where dictated by local guidelines.

As we closely monitor industry conditions in the coming months, we will continue to review our expense structure and make additional adjustments as needed. There's no question we are in uncertain times. However, our cycle tested management team has demonstrated through past challenged economic times that our business model and customers are resilient. Our balance sheet is stronger today with our significant unencumbered real estate holding, flexible leases, cost reductions and unleveraged inventory.

We believe we can both overcome and potentially capitalize on expanding share or other opportunities that may arise during the current situation. We are confident that as COVID-19 recedes and demand stabilizes, our customers will value more now than ever. Time spent on the water with family and friends and boating as an aspirational lifestyle will be in greater demand. And with that update, I will ask Mike to provide more detailed comments on the quarter.

Mike?

Mike McLamb -- Chief Financial Officer of the Company

Thank you, Brett, and good morning again, everyone. Let me also thank our team for their performance in the quarter, especially during the onset of the virus. For the quarter, revenue grew to over $308 million. The growth was driven by an increase of 1% in same-store sales, which was on top of 12% last year.

I would add that January and February were up considerably over the prior year. However, as the virus impact began in March with the start of government mandates, our store traffic and sales were obviously impacted. From a trend perspective, March revenue was down about 11% from last year, which, given the news and the need to close or partially close stores, speaks to the strength of our team and our customers' passion for boating. Our gross margins expanded 110 basis points to 25.5%.

As Brett said, the increase in margins was driven by our higher-margin businesses, including the Fraser acquisition, offset by reduced new and used boat gross margins as we remain incrementally more aggressive driving sales. Excluding Fraser, gross margins would have been close to flat due to the growth at our other higher-margin businesses. Selling, general and administrative expenses increased to $69 million, primarily due to the 2019 acquisitions of Fraser and Sail & Ski. Excluding those two additions, SG&A would have declined in absolute dollars.

We have taken additional actions to reduce expenses as a result of the coronavirus, including furloughing team members, rent abatements, and other cost-reduction initiatives where appropriate. We remain proactive and will make adjustments as required by industry conditions. Our pre-tax earnings were $6.7 million, compared to $7.2 million last year. Our net income was $5.1 million with flat earnings per diluted share of $0.23.

Turning to our balance sheet. At quarter-end, we had about $64 million in cash. However, as a reminder, we have a substantial cash in the form of unlevered inventory. Our inventory levels at quarter-end were up 12% to $507 million.

Absent the sales demerger, the increase was about 8%, which is below our year-to-date same-store sales growth of 12%. As we have communicated in prior quarters, managing our inventory is our main priority. With the onset of the virus, we continue to be proactive and work with our manufacturers to align our inventory. We do expect inventory to decline during the June quarter.

The exact degree depends on many factors, including sales and the timing of our manufacturers starting to build and ship again. Looking at our liabilities, our short-term borrowings increased about $65 million due primarily to the growth in inventory. Customer deposits, while not the best predictor of near-term sales because they can be lumpy due to the size of deposits and whether trade is involved or not, are down 20%. This is partly due to the material Palm Beach Boat Show being canceled in late March because of the virus.

Our current ratio stands at 1.38%, and our total liabilities-to-tangible net worth ratio is 1.51%, both are strong balance sheet metrics. Our tangible net worth was $322 million or about $14.66 per share. We own about half of our locations, which are all debt-free, and we have no additional long-term debt. Many of our properties are located in high traffic, highly desirable locations.

As our press release stated, combining our cash with our leverage available on our line, provides us with $90 million of liquidity today. This is before we tap into the remaining $100 million of unlevered inventory or the considerable real estate we own. Our balance sheet has always been a formidable strategic advantage that allows us to capitalize on opportunities as they arise and protects us at uncertain times such as now. As previously disclosed, we withdrew our 2020 guidance given the continued uncertainties related to COVID-19.

I will make a few comments on current trends. Some of these comments may be surprising. When the virus first hit, we did see a significant deceleration of contracts written in our stores. However, toward the end of March, we were fighting our way back from those declines.

Thus far in April, our trend has turned positive. While our day-to-day sales trend shows positive signs, we still see this period as uncertain. However, the activity we are seeing gives us confidence to state that as summer approaches, we expect the boating lifestyle will be alive and well throughout the country. With those comments, I'll now turn the call back over to Brett for some closing comments.

Brett?

Brett McGill -- President and Chief Executive Officer

Thank you, Mike. Again, I want to thank our teams for their efforts in servicing our customers as their needs continue to change in the current environment. We acted swiftly, introducing new ways to reach our customers in order to solve their boating needs. As the COVID-19 pandemic is complex and evolving rapidly, we will continue to monitor ongoing developments to take action to best position MarineMax for both the short and long term.

Our differentiated customer-centric approach ensures MarineMax will be there to meet the needs of boating enthusiasts who now, more than ever, will be spending time out on the water close to home. And with that, operator, let's open up the call for questions.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Eric Wold of B. Riley FBR. Sir, your line is now live.

Eric Wold -- B. Riley FBR -- Analyst

A couple of questions. I guess, one, you talked about obviously wanting to reduce inventories from -- manage inventories given the uncertainty and expect inventory to decline in the June quarter. How do you balance that with OEMs clearly wanting to kind of start shipping again after restarting their plants from the COVID shutdown? Any kind of indication that required purchasing at this point to have outstanding orders that need to be filled? Or how are you going to manage both those sides?

Brett McGill -- President and Chief Executive Officer

Yes. Hey, Eric. Yes, we've been talking to our manufacturer, probably in some cases, twice a week, just trying to coordinate with them, what it looks like since they've shut down, when do they think they'll be open, what does their supply chain look like and kind of getting dates, trying to prioritize boats that we have sold to customers that are being built and trying to get those pushed up in the front. So it's hard to answer exactly how that's all going to line up until they're fully operational.

And we see it coming, but we have been working on planning that in detail.

Mike McLamb -- Chief Financial Officer of the Company

Yes. I'd tell you, Eric, they're looking at trends as closely as we are. And I mean no manufacturer wants to overproduce boats. They want to try to have a good balance with what the industry is seeing at retail.

And I'd say we work very close with our manufacturing partners to try to get to the right answer. So it's gone fairly well, all the dialogue we've had with our manufacturing partners.

Eric Wold -- B. Riley FBR -- Analyst

And you mentioned that -- I know it's still uncertain how the trend really had turned positive in April from the downturn in March. Has that been driven more by the digital virtual buying offering, or is it still mostly in-person traffic? And I guess maybe give a little more color on kind of what you've seen from the use of a digital virtual offering in terms of your -- maybe a percentage of interactions, how you want to frame it. And how does that impact your buying behavior, time to close, those kind of things?

Brett McGill -- President and Chief Executive Officer

Yes. I think commenting on store traffic from a walk-up, so to speak, almost went to nothing. People stopped walking up to the front of our stores. Now everybody's always used digital tools to reach out and make an inquiry ahead of time.

I think that's just been highly amplified. And we've been working for several years now on some more advanced tools. We were able to launch those early. And so I'd say it's both.

It's walk-in traffic almost nonexistent unless it's a private appointment under safety precautions, all of the generation of that traffic has been digital.

Eric Wold -- B. Riley FBR -- Analyst

OK. And then lastly for me. On the real estate position, what are your options with them assuming you wouldn't look to sell those outright or sale leasebacks given your desire to kind of maintain the uses of those kind of longer term? Is that more kind of a mortgage finance option? Or maybe kind of give us a sense of what you could do there if need be?

Mike McLamb -- Chief Financial Officer of the Company

Yes. Good question. Our desire is always to own this property. It always has been.

So sale-leaseback, you eventually lose control of it. So while that's an option, I don't see its exercise. I don't think we need to. I think putting mortgages on the property would be potentially a smart thing to do depending on the rate -- where the rates are in the rate environment.

I'll remind you, this team managed the business through 2008. And in 2008, we had something like $44 million of mortgages when Lehman collapsed and within -- it seems like three or four months, we paid those off because we generated so much cash. And we never needed to mortgage any more properties back then. We're exploring all options as the press release says, we're looking at different things that we could do along the real estate line, but something like a mortgage would make the most sense.

Eric Wold -- B. Riley FBR -- Analyst

Perfect. Thanks, guys.

Mike McLamb -- Chief Financial Officer of the Company

Thank you.

Brett McGill -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Joe Altobello with Raymond James. You may proceed with your question.

Joe Altobello -- Raymond James -- Analyst

Thanks. Hey, guys, good morning.

Brett McGill -- President and Chief Executive Officer

Hey, Joe.

Joe Altobello -- Raymond James -- Analyst

Just want to follow-up on Eric's first question regarding the trends in March and April. Obviously, March down 11% and April slipped to positive here. Curious how that compares to the rest of the industry. I would imagine you guys are probably taking some share given your investments in technology over the past few years.

But I was wondering if the rest of the industry is also seeing the same positive trends in April or are you guys more of an outlier.

Brett McGill -- President and Chief Executive Officer

Yes. It's hard to say. I mean, you hear about some industry activity. You do see a lot of people out on the water, a lot of people are boating.

We hope that our technologies and our execution is helping us gain some share, but the boating community is out. So I would imagine it's probably pretty decent for most. Now weather and conditions in states, it's going to vary.

Joe Altobello -- Raymond James -- Analyst

Got it. OK. And just a follow-up on that. In terms of categories where you're seeing strength.

I think the March SSI data seemed to indicate that. On the aluminum side, we're seeing a bit better trends, for example, pontoon, aluminum fish versus fiberglass. Did you guys see that as well? Or has the strength that you've seen in April or improvement in April has been largely broad-based?

Mike McLamb -- Chief Financial Officer of the Company

So I'll tell you, Joe, if you look at the March data, where the key categories that we participate in were down, gosh, 20% was the best one. They were all the way up to like 65% down or 55% down. Obviously, we did not experience that. So to your point on shares, I do think in the month of March, we did take market share.

I'd tell you what we're seeing in April, which -- my comments are year-over-year comparisons, but they're not sequential. They are year over year, which is pretty encouraging. We're seeing pretty good trends really across the board. It could be one week, premium center console seemed a little stronger.

It could be the next week, recreational runabout boat seems stronger. But generally, there's a pretty good desire to get out in the water right now, but as Brett said, especially more in warmer markets.

Joe Altobello -- Raymond James -- Analyst

I was just going to ask that question. Is that mostly Florida, or is that pretty spread out geographically as well?

Brett McGill -- President and Chief Executive Officer

There's some good trends up north as well.

Mike McLamb -- Chief Financial Officer of the Company

Yes.

Brett McGill -- President and Chief Executive Officer

The harder-hit regions of the country clearly are going to be a little slower to, first of all, get people out on the water, and the lockdowns are at varying levels.

Joe Altobello -- Raymond James -- Analyst

Got it. OK. Thank you, guys. Appreciate it.

Mike McLamb -- Chief Financial Officer of the Company

Thank you, Joe.

Operator

Thank you. Our next question comes from Ryan Sigdahl with Craig-Hallum. Sir, you may proceed with your question.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Thanks, guys, for taking my questions. Congrats on the positive trends here in April. That's, I think, shocking to many, so nice work. Maybe just that we haven't talked much about the cost side.

You mentioned you've done some furloughing, but any way to quantify how much operating expenses have been taken out temporarily here now that the shelter placed restrictions?

Mike McLamb -- Chief Financial Officer of the Company

Yes, we haven't quantified it, Ryan, to state it publicly. We've obviously furloughed. Our intention is to bring as many people back as fast as we can as the stores operate and open. So we don't want to throw a number out there because it's a little bit uncertain as to how long a certain store may be experiencing furloughs versus another store.

But I mentioned on the call, furloughing, rent abatements. We have spoken to a number of our landlords. And we're trying to be a good steward, if you will, asking for support and help where we really need it and if we really need it. Given our balance sheet strength and the business that we're seeing, we're being measured in that approach.

I did mention on the call that if you look at the SG&A specifically in the quarter, we would be down in absolute dollars, if it wasn't for the acquisitions we did at Fraser and Sail & Ski. So you can kind of see the efforts we did in 2019, specifically in the summer of 2019, where we did reduce some duplicated stores and other things long before the virus has helped. It's paid off. So our expense structure is lower today than it was a year ago, absent the acquisitions.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

And then maybe month-to-date for April or over the past few weeks, however you want to refer to it, but what have you guys seen from a promotional environment and how have margins held up relative to kind of pre-COVID?

Brett McGill -- President and Chief Executive Officer

Yes. I think I mentioned in the script that we were -- it still seems pretty rational. It seems like kind of normal discounting, demand is good. We're putting a lot of efforts into marketing, and we are looking at our inventory very strategically and placing some products right where it needs to be.

We want to keep our inventory healthy, and there is uncertainty ahead. So moving inventory right now is good, but no excessive pressure out there that we see right now.

Mike McLamb -- Chief Financial Officer of the Company

Ryan, it's probably worth commenting. It wasn't in the prepared remarks, but it's such a different time right now than it was in 2008. I mean, most of the wholesale lenders who finance the inventory, if not all of them, have voluntarily waived curtailments for dealers in our industry and probably all industries, for that matter. I mean, that did not happen in 2008.

And then the retail lending environment is still pretty darn healthy right now. And in 2008, that shut off for a period of time. So there's a couple of distinct differences between right now, between other dark days for our industry that are -- it's much different today and I'd say much better today, at least currently. So that's -- we're not seeing the massive jump in repossessions and other things like that that we saw in 2008.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Good. One more question for me, and then I'll hop back in the queue. Impressive that April can flip positive virtually all online. Do you think given your technology investments, what you're hearing from customers and kind of going digital route now, do you think this will have a structural shift on the industry or an acceleration kind of in the digital online buying of boats? And then I presume you guys are -- seem relatively better positioned there going forward than others.

But how do you think about that from a competition and potential market share standpoint? Thanks. Good luck, guys.

Brett McGill -- President and Chief Executive Officer

Thanks. Well, that's a good question. I think everybody's -- we've been planning and looking at that shift. All industries are seeing that shift, and we've been working toward that direction.

This unfortunate event has probably been a little bit of a catalyst to jump-start that for all of us. But we're still a relationship business, getting people face to face and really engaging with them. But our tools and digital tools to get them further down the pipeline and more comfortable with MarineMax and our products, we feel like is a clear advantage, and I think it will reshape the way the business is conducted going forward.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

That's it from me, guys. Thank you. Good luck.

Brett McGill -- President and Chief Executive Officer

Ryan, appreciate it.

Operator

Thank you. Our next question comes from Mike Swartz with SunTrust. Please proceed with your question.

Mike Swartz -- SunTrust Robinson Humphrey -- Analyst

Hey, guys, good morning.

Brett McGill -- President and Chief Executive Officer

Good morning.

Mike Swartz -- SunTrust Robinson Humphrey -- Analyst

A quick question for you, Mike. I apologize if I missed this, but did you say just the breakdown of price versus units during the quarter?

Mike McLamb -- Chief Financial Officer of the Company

Actually, I did not. Good question. So our units were down in the mid-single digit in the quarter. So it would be skewed toward prices, what drove the 1%.

And really, it's like all because of the month of March, whereas I think for our segments, you know the industry well, for our segments. I mean, 20% to 55% is what they were down in the month of March, and we were down something like in the mid-teens, something like that in a month.

Mike Swartz -- SunTrust Robinson Humphrey -- Analyst

OK. That's great. Thanks for the color. And then just wanted to touch on the impact of West Palm Beach.

The decent size shows moving from March or not moving from March, I guess, canceled this year. Any quantification on how that impacted the quarter, how that impacts backlogs? And maybe any cost that you had in the quarter that obviously you won't be able to leverage through sales?

Mike McLamb -- Chief Financial Officer of the Company

Yes. I don't have the cost data in front of me. We obviously had some costs with those sales. It's a material show, though.

It's a double-digit millions of dollars worth of business. Now not all that would happen in March. Probably, most of it would happen after March. Some would come in the month.

It clearly would have an impact on our customer deposit line. It would clearly have an impact on our trend data. So when we're talking trend in April, that's a year-over-year basis of what's contracted, and we did not have the Palm Beach Boat Show, and we commented that we're tracking positive. And so I think it speaks to the digital tools that we've invested in that Brett mentioned and also the -- our team and our customers' passion for being on the water right now.

Because it is a meaningful show, as you know, Mike, so -- that did not happen this year.

Mike Swartz -- SunTrust Robinson Humphrey -- Analyst

OK. And safe to say the backlog going into -- or I guess, where they stand today, would be down? Is that the right way to think about that?

Mike McLamb -- Chief Financial Officer of the Company

Yes. So our backlog is the -- what I'm talking about in terms of April trends in terms of the contracts we're writing on a year-over-year basis are tracking higher today. Now that could change in a week, but they are tracking higher today.

Mike Swartz -- SunTrust Robinson Humphrey -- Analyst

OK, great. Thank you for that. And then just with some of the steps that the floor plan lenders have taken to help out the dealers. When are you taking an advantage of that right now? And then is there any way to think about the cash savings monthly while that's going on?

Mike McLamb -- Chief Financial Officer of the Company

Yes. Good question, Mike. It kind of ties to the same comments that I made a little while ago about being a good steward and asking people for help where we think we need it. We have not asked to have the curtailments waived as of now.

We can. We talked to our lenders about it. Just given the trends that we're seeing, given our financial statement strength, our liquidity growing in the March quarter, we've not asked for that. So we will if we think we need to, but as of today, we don't think we need to.

Mike Swartz -- SunTrust Robinson Humphrey -- Analyst

OK, great. Thanks. That's it for me.

Operator

Thank you. Our next question comes from Scott Stember of CL King. Please proceed with your question.

Scott Stember -- C.L. King and Associates -- Analyst

Good morning, and thanks for taking my questions.

Brett McGill -- President and Chief Executive Officer

No problem.

Scott Stember -- C.L. King and Associates -- Analyst

Mike, can you frame out the level of business being up in April, just to give us a sense of how positive we are, just so we have an idea? Obviously, the June quarter is always going to be difficult to model just given everything that you're hearing about the economy, but now we hear that sales are actually up or trending up in April. Just give us a sense maybe of how up they were or how up they are.

Brett McGill -- President and Chief Executive Officer

Well, I'll comment in general. One thing we're able to do is with some of our tools back to some of the analytics we have, we can literally look at by day, three-day sales trends. Year over year, the exact same three days, seven days, 14 days. And like Mike said, end of March was harsh, and it started to climb back.

And as of now, we're actually seeing some three- and seven-day trends that are pointing upward and positive.

Mike McLamb -- Chief Financial Officer of the Company

It's probably best that we not disclose the actual percentage of things that we're tracking up right now until we see a longer period of trends, I would also say, Scott.

Scott Stember -- C.L. King and Associates -- Analyst

Got it. OK. And just following up on the non-boat sales now that you guys have effectively gone to a virtual platform. How is the non-boat sales? How are they performing now that you do not have really customers coming into the showroom? Has there been any falloff, or has it actually gone up?

Brett McGill -- President and Chief Executive Officer

Yes. I think it's been a -- some of it's the time of year has lined up OK, meaning up north, the service activity or -- not in every state are we putting people back in the water. So for people coming in for service and those sort of things, some of the P&A business that you were getting walk-in or during delivery time is not there. So it's definitely put a strain on the other parts of the business.

I'll call that service and parts because not as many people are coming in and not as many people are there, but it seems to be running pretty good and will continue to grow as the summer comes upon it.

Scott Stember -- C.L. King and Associates -- Analyst

All right. And the comment that you made, just to be clear about running up in April, was that everything, or was that just for boats?

Mike McLamb -- Chief Financial Officer of the Company

We were commenting specifically on boats.

Scott Stember -- C.L. King and Associates -- Analyst

OK. Got it. That's all I have. Thank you.

Brett McGill -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from James Hardiman with Webush Securities. Please proceed with your question.

James Hardiman -- Wedbush Securities -- Analyst

Hey, good morning, guys, and congrats on getting things turned around here in April. That's no easy feat in this environment.

Brett McGill -- President and Chief Executive Officer

Thanks, James.

James Hardiman -- Wedbush Securities -- Analyst

Sure. So couple of questions for me. Brett, you talked about in your prepared remarks something about other opportunities that may arise over the course of this pandemic. Seemed like that was sort of an open-ended comment that maybe you wanted to get asked about.

But what could that look like? Obviously, since the last downturn, you guys have both expanded your dealer base and expanded the brands that you carry. What are the opportunities this time around?

Brett McGill -- President and Chief Executive Officer

Well, I think you kind of answered it with the open-ended piece. So we're looking at all those things, brands and various markets, marina opportunities that may or may not come up in various markets. And so I'd say it's kind of the same pattern we've had over the years. We'll continue to look at that.

And since our balance sheet is strong, when the timing is right, of course, and things are a little more stable, and there's a little less uncertainty about what next week looks like, we'll look to capitalize on opportunities that come up.

James Hardiman -- Wedbush Securities -- Analyst

Makes sense. And then you touched on a little bit of this, but would you, to the extent you feel comfortable, just talk us through some of the geography around the country? I mean, we have -- it seems like we're working with some very different restrictions in certain states. Some geographies, recreational boating is essentially shut down right now. I don't know how much that's impacting boat sales and ultimately, your ability to deliver boats.

But maybe just walk us region by region or even more granular than that how the various restrictions you think are impacting your business and what this all looks like as we slowly open back up again.

Brett McGill -- President and Chief Executive Officer

Yes, it's a great question. And every day it changes. For a while there, it was changing very rapidly, and we had literally a response team working on what that day held for us and looking at the local regulations. And really, the lay of the land was boating was allowed to be open, and then that slowly changed in a few markets where they restricted boating activity.

And actually, if you go out there and look at it, it's only a very few set of markets where boating itself is restricted. But most of Florida, people can get out on a boat. There's a handful of marinas closed. Obviously, you get closer to areas like Miami, and it's much more restrictive.

Baltimore, New York, but just recently, they've announced boating is open in the tri-state area up there. Some real northern markets even if boating was open, it wasn't time to go boating. But I would say more leaning toward most areas that we operate in are open for boating with limitations on that, of course, and people are boating in a responsible fashion. We're marketing that, other industry arms are marketing safe boating and so on.

So when we start opening up the other parts of the economy, I think that will help, but boating is somewhat open, and it will just be more about what less restrictions are there.

James Hardiman -- Wedbush Securities -- Analyst

OK. And just to be clear, it sounds like there isn't really anywhere in the U.S. where, obviously, you can do a lot of the search and even a purchase presumably online. There aren't any places that are restricting delivery, right, that the final sale is in any way, is it?

Brett McGill -- President and Chief Executive Officer

There might be a couple, but a lot of -- like if up north, you bought a boat right now, you may not be going far with that. So I'd say we can do a proper delivery with social distancing and all the safety requirements in place kind of one on one, and it's happening that way for the markets we operate in.

James Hardiman -- Wedbush Securities -- Analyst

OK. And then just lastly for me, I mean, everything sounds pretty upbeat. I mean, obviously, it's very limited data in terms of things turning around here. So I know you don't want to extrapolate too much, but do you feel comfortable saying that you're going to make money in the second half of the year? First half was pretty good.

You made $0.64. What are the odds that we see a loss during the back half? And then along those same lines, I don't know -- the last recession, you had to track your dealer base pretty meaningfully. It doesn't seem like we're anywhere near being in a position where you would have to go through those sorts of steps again.

Mike McLamb -- Chief Financial Officer of the Company

I would use your opening statement about we have limited data right now. I think it would be premature for us to be talking about what our profit thoughts are. Obviously, you've kind of heard our comments, we feel better today. And I'll tie my comment into the 2008 period.

Those of you who followed the company back in '08, the conference calls did not sound like this. They sounded a little more dramatic and the actions we were taking were more dramatic. Given what we see today, from an industry perspective, I don't think the industry is going to experience what it experienced in 2008.

Brett McGill -- President and Chief Executive Officer

Yes. But there is uncertainty, and what I will say is based on what we've seen, we've taken the right actions both on cost and marketing efforts and execution that seem to be lined up. And we'll take further action, if needed, depending on what changes or try to get back to normal sooner than later.

James Hardiman -- Wedbush Securities -- Analyst

All right. Good stuff. Really appreciate, guys.

Brett McGill -- President and Chief Executive Officer

Thank you.

Mike McLamb -- Chief Financial Officer of the Company

Thank you very much.

Operator

Thank you. Our next question comes from David MacGregor with Longbow Research. Please proceed with your question.

David MacGregor -- Longbow Research -- Analyst

Yes. Good morning, everyone. Hope you're well.

Mike McLamb -- Chief Financial Officer of the Company

Thank you.

David MacGregor -- Longbow Research -- Analyst

You did, in your prepared remarks, say that it was still a relatively rational environment. But at the same time, you also mentioned that you've seen more promotional activity. So I wonder if you could just talk about sort of where within those opposing dynamics you think the second half of April or the second half of the quarter is going to play out. And I have a couple of follow-ups after that.

Brett McGill -- President and Chief Executive Officer

Yes. The additional promotional activity is just probably really centered around the fact that trying to generate more interest remotely or digitally than you would when you have normal walk-in traffic in the normal spring time. So you might have to offer -- do more marketing, maybe offer a few more promotional ideas to get people to raise their hands. It's really more about trying to change people's -- not being able to walk in the stores, what can you do to create their interest.

David MacGregor -- Longbow Research -- Analyst

Right. Is that essentially discounting? Or are there other forms of promotions that aren't as impactful to the gross margin line?

Brett McGill -- President and Chief Executive Officer

There's marketing efforts. There is some discounting. Because we're looking at the uncertainty and deciding if inventory has some aging to it, we're going to be much more aggressive there to try to get ahead of things. So yes, there is some of that.

David MacGregor -- Longbow Research -- Analyst

OK. And just can you remind us again just the mix as it stands today between both sales and service revenues?

Mike McLamb -- Chief Financial Officer of the Company

Yes. Boat sales, new and used are going to be close to 80% of our total revenues. Then service parts, marina, brokerage, the other businesses that we have are roughly 20% of our total revenue.

David MacGregor -- Longbow Research -- Analyst

About 20%. OK. That's helpful. And then can you talk about your ability to flex SG&A, if in fact, this good news that we're seeing here in early April doesn't extend and you end up having to deal with a more negative environment over the next couple of quarters?

Mike McLamb -- Chief Financial Officer of the Company

Yes. Generally, I can talk that about a third of our expenses are pretty fixed. About a third, just for easy math, are what I'd call semi fixed. I mean, you can start cutting them.

And the third that are fixed are pretty much the store operations, and then roughly a third is not quite ready. It's a little bit greater than that is personnel. And obviously, we've done some furlough and taken some actions around our team members. But I should comment within the semi-fixed and the personnel, there's some level of that that's variable, like commissions and our pay plans and all of that type of stuff.

Given what we're seeing today, we don't think there's a whole lot of stressing that we need to do to those models though, other than what we've already done today.

Brett McGill -- President and Chief Executive Officer

And right now, we're trying to keep our team working, and our furloughs are kind of related to good business sense but also just where we're restricted only so many people can operate in a store. So where we had to make some furloughs, but we're doing our best to keep our team working.

David MacGregor -- Longbow Research -- Analyst

Sure. Yes, that makes sense. And then last question. I just guess I'm trying to think about how this extends out.

You've got, as you pointed out, very little traffic coming through the stores. Most of it's online. How does the close rate on a store sale differ from an online sale?

Brett McGill -- President and Chief Executive Officer

I don't think we have that data readily available this quickly, looking at the data. Generally, when you get an online digital engagement, you're taking all the same actions after that's just how you get the person engaged and get him comfortable with how to do it. So I don't know if I have that answer right now.

Mike McLamb -- Chief Financial Officer of the Company

I'm not sure there's going to be a whole lot different or fallout. I mean, the amount of activity remotely with the customer and the discussions with the customer, it's probably a great question for as we get into the June quarter, we'll have better data on that, David.

David MacGregor -- Longbow Research -- Analyst

Yes. I would just expect it's more extrapolated to sales process. And to that extent, though it might be a better opportunity to forecast. If you could come up with some sense of what historically the close rate's been, but I guess there's not much history around this, so...

Mike McLamb -- Chief Financial Officer of the Company

Right.

David MacGregor -- Longbow Research -- Analyst

Yeah. OK. All right. Well, thanks very much.

Good luck.

Brett McGill -- President and Chief Executive Officer

Thank you very much.

Operator

Thank you. We have no further questions at this time. I would now like to turn the floor back over to Mr. McGill for closing remarks.

Brett McGill -- President and Chief Executive Officer

Thank you. Thank you for joining the call today, and we hope you and your families are all safe and doing well. We'd also like to thank our first responders and medical professionals working to keep us all safe. And with the summer approaching, we hope you can get out on the water, enjoy some boating.

And Mike and I are available today, so please reach out if you have any additional questions, and we'll look forward to updating you on our progress on our next call. Thank you.

Operator

[Operator signoff]

Duration: 45 minutes

Call participants:

Brad Cohen -- Investor Relations

Mike McLamb -- Chief Financial Officer of the Company

Brett McGill -- President and Chief Executive Officer

Eric Wold -- B. Riley FBR -- Analyst

Joe Altobello -- Raymond James -- Analyst

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Mike Swartz -- SunTrust Robinson Humphrey -- Analyst

Scott Stember -- C.L. King and Associates -- Analyst

James Hardiman -- Wedbush Securities -- Analyst

David MacGregor -- Longbow Research -- Analyst

More HZO analysis

All earnings call transcripts