Michael McLamb: I think you heard the margin question, right, about the first quarter versus other quarters. The support that we’re getting from the manufacturers in some — it kind of depends by manufacturer by segment, by model. In some cases, it’s right back at historical percentages of invoices. In some cases, it’s not there yet, but it’s made good progress. I think in all cases, it’s helping to drive retail activity.
John Healy: Got it. I just wanted to ask a question just on you’re seeing in the market means to how you respond to kind of going into next year, really. When you look at the landscape with margins kind of correcting in the industry, I have to imagine there’s going to be some competitors of yours that are not as well positioned to kind of deal with that as you guys are. Do you see yourself kind of creating a playbook for more aggressive M&A plans, dealer consolidation? Kind of now that this process is starting or is it too early to think that, that would be something you guys start to tinker with?
William McGill: I think we’re always keeping our eye on any of those type of opportunities that come up. I mean, of course, you would think that dealers that aren’t well capitalized could pop — if they’re not set up right and they’ll definitely struggle a little more than others, and that could create some opportunities for us. So we’re definitely looking at that, but nothing right at the moment.
Operator: Our next question is from Eric Wold with B. Riley Securities.
Eric Wold: A couple of questions. I guess, one, just following up on margins, kind of thinking about the other businesses other than new and used boat sales, what are your thoughts on pricing power if we get into a lower rate environments later this year and the next year in terms of ability to drive margins there to help essentially offset core margin pressure.
Michael McLamb: If I understand you right, like Eric, like in terms of like slip revenue, service revenue, all of that, I think.
Eric Wold: I think, management alike that hopefully.
Michael McLamb: Yes, I think we have reasonable pricing power there. I think while we’ve expanded the higher-margin businesses, right? I think that we ended last year with roughly 25% of our revenues coming from non-boat sales, and that means 75% came from boat sales, and that’s generally true heading into 2024, the boat margins of the business still can weigh heavily on the overall gross margins of the business. The operating margins obviously have improved nicely. They were improved nicely last year and are projected to be improved nicely this year, but so the pricing pressure helps. It helps to offset it, I guess, to answer your question.
Eric Wold: Got it. Okay. And then on the boat shows, obviously, making the comment that you’re seeing some positive kind of indications so far, maybe unpack that a little bit in terms of what are you seeing from those reads in terms of leads coming out of the shows sales cycles to complete something, kind of what — obviously, demand, I guess margins are being pressured by the need for promotions and kind of buyers looking for incentives. But kind of what are you seeing from that that’s kind of giving you at least some optimism on more of the consumer lands?
William McGill: Yes. I mean the shows are tougher. I mean they’re not what they were over the last — just the — but demand is still good. It’s just people entering at the higher in the funnel. So it’s taken more work, taking longer to get them there. Incentives, we hate to talk about it. I mean, but it’s — people are needing an urgency. It’s not just an urgency. There’s probably a feeling in their minds of prices were at the top, is it adjusted down a little bit. And so that creates the business there. But I’ll tell you, we come out of the shows. We measure it in a very detailed way. We know how many leads we got our follow-ups at the weekend, events at our stores after the show have proven to be very productive. So like Mike has said, the consumers are still wanting to go boating.
We haven’t seen that in many — over our 25-plus years here doing this, we’ve seen when there’s no demand. We know what that feels like. That’s not what we’re seeing here. There’s just — we’ve got to navigate some of the ins and outs here of what’s going on.
Operator: Our next question is from Brandon Rollé with D.A. Davidson.
Brandon Rollé: Just a couple of quick ones on guidance. One, what gives you confidence you’ve properly reset guidance for the remainder of the year? And two, does your guidance bake in any improvement within retail fundamentals throughout the rest of the year? Or is this kind of a reset saying what we saw throughout the first quarter continues throughout the remainder of the year?
Michael McLamb: Thank you, Brandon. Good questions. Our retail outlook is kind of what I walked through on the call, which we think the industry is up against generally easy comparisons on a unit basis month-over-month. And actually, if you look at the unit growth we drove in a negative quarter with any break or with any luck from an industry perspective, I think our unit growth still stands, and we’ll have positive same-store sales growth. On the guidance side, we believe that we’ve lowered guidance low enough given what we know today, that should hopefully give us an opportunity to come back and talk to you guys about better performance like every company hopes. But time will tell ultimately, but we think around the margins, which was probably the risk area, we’ve lowered that far enough to some of the questions that we’re asked today.
