Malibu Boats, Inc.

Good morning and welcome to Malibu Boats conference call to discuss third quarter fiscal year 2021 results. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. Please be advised that the reproduction of this call in whole or in part is not permitted without written authorization of Malibu Boats. And as a reminder, this call is being recorded. On the call today for management are Mr. Jack Springer, Chief Executive Officer, Mr. Wayne Wilson, Chief Financial Officer, and Mr. Richie Anderson, Chief Operating Officer. I will turn the call over to Mr. Wilson to get started. Please go ahead, sir.

Thank you, and good morning, everyone. On the call, Jack will provide commentary on the business, and I will discuss our third quarter financials. We will then open the call for questions. A press release. covering the company's fiscal third quarter 2021 results was issued today, and a copy of that press release can be found in the investor relations section of the company's website. I also want to remind everyone that management's remarks on this call may contain certain forward-looking statements, including predictions, expectations, estimates, or other information that might be considered forward-looking and that actual results could differ materially from those projected on today's call. You should not place undue reliance on these forward-looking statements, which speak only as of today, and the company undertakes no obligation to update them for any new information or future events. Factors that might affect future results are discussed in our filings with SEC. and we encourage you to review our SEC filings for a more detailed description of these risk factors. Please also note that we will be referring to certain non-GAAP financial measures on today's call, such as adjusted EBITDA, adjusted EBITDA margin, adjusted fully distributed net income, and adjusted fully distributed net income per share. Reconciliations of these non-GAAP financial measures to GAAP financial measures are included in our earnings release. I will now turn the call over to Jack Springer.

Thank you, Wayne, and thank you for joining the call. We delivered another record-setting quarter, marking the best quarter in the company's history from a unit ship, revenue, gross profit, and earnings perspective. Simply put, an exceptional quarter as the retail environment remains on fire, and we continue to perform very well. Importantly, Maverick was icing on the cake, adding additional growth on top of an already outstanding quarter. Our results once again highlight the agility of our team and strength of our flexible business model, which allowed us to post breakneck production levels for Malibu and Pursuit that significantly exceeded historical levels. Further, we wasted no time igniting our newest addition, Maverick Boat Company, as they scored their fourth best production month in their history in the month of March. All of this was achieved despite the unique set of supply chain constraints and logistics issues resulting from COVID repercussions, the Texas winter storm, and the Kansas record-setting freeze. For the fiscal third quarter, net sales increased nearly 50 percent to $273 million. Gross margin increased to 26.4 percent. Adjusted EBITDA increased 57 percent to $57 million. And adjusted EBITDA margin increased 90 basis points to 20.9 percent. We fully anticipate reaching our fiscal year 2021 guidance we raised last quarter, and we are increasing our guidance again this quarter. As the boating industry continues to experience blistering consumer demand, we are committed to delivering as many boats as possible to our sustainable and loyal customer base. In addition, the magnitude of new customers we are seeing enter the marine space is ice cream on the apple pie. The foundation of our business, industry-leading innovation, a well-developed vertical integration infrastructure, and operational excellence will power our steadfast path toward continued industry domination. Customers continue to place custom orders, flocking toward larger, more expensive boats, and invariably selecting additional features and options which command higher ASPs and fuel the margin profile per boat. Demand has continued its unprecedented trajectory with approximately 90 percent of all boats being built in our fiscal fourth quarter being retail sold. This is unprecedented. By relying on our proven operational excellence initiatives, we remain confident that we will be able to maintain this record momentum throughout the remainder of our fiscal year 2021 and into 2022. However, while we continue to post production work rates well ahead of historic levels during the third quarter, the supply chain remains fragile as a result of COVID-related challenges, which to date we have been able to expertly navigate. The corridor brought additional unique supply chain challenges with the Texas winter storms and Kansas freeze that tempered our growth somewhat at cobalt. During a period of February record low temperatures in Kansas, we paused cobalt operations in the Otishe for three days to conserve power for the town. As the largest user of power in the town, we felt it was necessary to support our surrounding communities during this trying time and make sure citizens had the power to heat their homes. Petroleum-related plants in Texas were also significantly hampered by the Texas storms, affecting the availability of key materials, primarily resin, that is needed to build boats. The storm's direct impact resulted in Malibu and cobalt production being curtailed at various points during the quarter. I am extremely proud of our teams at each of our brands to quickly navigate the resulting supply constraints and still deliver a record-setting quarter. During the quarter, we did not let off the accelerator as we sped toward our production, development, and expansion targets. More specifically, during the quarter, we completed the final phase of COBOS expansion and improvement project, allowing further increases in production count that we will begin to see in fiscal 2022. This expansion and improvement of the gelcoat and lamination areas, along with our footprint expansions for small boats and cruisers, already completed in Phases 1 and 2, will enable up to a 50% revenue capacity increase over time. At the end of the third quarter, we broke ground to begin our 110,000 square foot addition at Maverick. This project is expected to take about 12 months and positions Maverick to increase production by 30% to 40% in units, and even more in revenue as we will be able to build a greater number of larger boats with higher margin profiles. This expansion will enable us to seize additional untapped demand. This formula may sound familiar, as it is almost exactly what we did at Pursuit, and this year we are seeing that huge payback as Pursuit has outperformed even our expectations for every financial metric. As summer approaches, we are selling more boats than roasted peanuts at a baseball game. The lack of boat shows has had exactly zero impact on orders. Given the virtual environment, we had a state-of-the-art virtual boat show format for Malibu and Axis, which generated a huge increase in leads. We hosted VIP events for Pursuit and Cobalt, showcasing our new models and engaging with prospects and purchasers alike in a very healthy control environment. Lastly, we place an increased emphasis on our digital marketing for all brands, ultimately driving substantial lead generation and reducing the sales cycle. As a result, all brands are sold out for the rest of model year 2021. Once model year 2022 is open for orders, we fully expect the first half of the year to be booked, confirming the insatiable thirst for innovative and industry-leading boats. Maverick is proving to be another home run and a perfect fit with our Malibu family of brands. The integration has gone very smoothly, and we are already seeing positive results from our demonstrated integration methodology while identifying many opportunities for growth to come. As we mentioned before, orders in-house for Maverick provide a 12- to 18-month runway without taking another order. While we have a strong opportunity to expand distribution for Maverick products, We will not act on this opportunity until we can supply existing dealers with all of the boats that they need. Whether it be Maverick, Pursuit, or our other brands, we are committed to servicing our current dealers first. This will likely put any dealer expansion plans on hold until fiscal 2023. Channel inventories remain at their lowest historical levels ever, and when 90% of boats produced in the fourth quarter are already retail sold, It means there will be very little provision for stock inventory at dealers. We see most orders continuing to be retail sold well into fiscal 2022 and now believe any meaningful increase in channel inventory will not be until fiscal 2023 at some point. We also believe that inventory in the channel will not reach historically acceptable levels until fiscal 2024. In our view, we have an unprecedented 24 to 36-month ramp period to get back to normal levels based on the current retail environment. Had it not been for the unique supply chain disruptions in the third quarter, sales and growth production rates would have been even stronger. We have seen a continuation of supply chain constraints in April, specifically with resin and some outboard engines, which are either in port on the West Coast or waiting to be accepted into the West Coast ports. We expect to continue to manage through supply chain issues through the fourth quarter, and I have the utmost confidence in our team's ability to navigate any additional headwinds as demonstrated by our revised outlook for the fiscal year that we increased today. Looking ahead, our team's unwavering commitment to our growth strategy will enable us to continue progressing on our strategic initiatives and advancement of innovation within the marine industry. We view this as a great opportunity for our brands to sustain growth, allowing dealers to have only the newest and the best models. Aged inventory and promotions are almost nonexistent, allowing dealers to command high margins, making them stronger as well. We continue to see gross margin benefit from our operational excellence efficiencies and our unparalleled vertical integration strategy, which allows us to take control of a greater portion of our supply chain, further differentiating Malibu from our competition. And as always, our proven acquisition strategy of acquiring premium companies with improvement opportunities remains the focus. As we wrap up fiscal year 2021, I could not be prouder of our teams at each brand. They have been the reason that we were able to report such record-setting results quarter after quarter. Our team's commitment to leading the boating industry is our recipe for consistent victory and our largest catalyst for future growth. The people on our team and our dealers make this happen. We are achieving long-term sustainable success, and I am confident we will continue to be the clear winner in the voting space to deliver value to our shareholders. I will now turn the call over to Wayne to take you through our financial performance in more detail.