OneWater & Marine Boat Retailing through the Cycle

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My first question is about MarineMax and what you view to be the strengths and weaknesses of that company? How is the business likely to do in the next five to 10 years?

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I think they’ve just had a windfall of profit because they sold off every bit of their inventory over the last 18 months. Not only did they sell it off, but they sold it off for a gross profitability that they’ve never even dreamed of. From what I know, they did a good job with utilizing that capital to make some good purchases. They bought some boat manufacturers and some marinas, so they did a good job, but as far as what I think is going to happen, all the indicators are that I don’t believe it’s going to continue like this.

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What do you view in the market as MarineMax’s strengths and weaknesses over a longer period, over a good and a bad cycle?

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MarineMax’s biggest strength is that they are just gargantuan. The number of stores and their network and diversity in owning both manufacturing and distribution and having the infrastructure of all the brokers, no one is ever going to be able to really be able to compete with that. OneWater is the only one really giving them a run but they are not even close, if you look at top line revenue. They’re getting there, they’re trying but I think that MarineMax’s position is a little better because of the product that they have. I’m not just talking about the brands; I’m talking more about the size and how it caters to the American boating wealth here in the US. Think about some of the boats they sell and the size of them. I know OneWater is trying to grow and have put in all these stores but they are still known for a smaller boat. They’ve sold a number of the Cobalts and some of the smaller boats, whereas MarineMax, at one time, was just a huge Sea Ray dealer. Now that they’ve moved into big super yachts and with the marinas they’ve bought around the Bahamas, they’ve just moved into a much bigger arena. I think it’s going to be hard to catch them up.

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I’m just trying to figure out the strengths and weaknesses of the different players over a longer period of time. Everyone I’ve talked to in the industry talks about how MarineMax have diversified their business in a number of ways, but if you bought their stock 17 years ago you would have made no money. So my question is, why is that? What’s gone wrong? Of course, I know that the financial crisis hit this industry extremely hard, but the industry has been recovering for a decade and it puzzles me why MarineMax investors have done so badly. I’m curious about your thoughts on that?

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They’ve been re-investing though, lately, is all I can say. I never would have dreamed that they were going to buy the boat manufacturers. When I was at MarineMax, it really wasn’t a boat company, it was really a real estate company. That’s the way I always viewed it. They had 96 stores nationwide and I looked at all the numbers with every GM every week and, basically, they put in these key locations of prime, coastal real estate, from New York all the way down the east coast and Florida, Texas and they used the boats for a long time as a model to service the debt on their real estate.

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