Malibu Boats, Inc.

Good morning and welcome to Malibu Boats' conference call to discuss the fourth quarter and full 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 reproduction of this call in whole or in part is not permitted without written authorization from Malibu Boats. 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 now turn the call over to Mr. Wilson to get started. Please go ahead, sir.

Mr. Thank you, and good morning, everyone. On the call, Jack will provide commentary on the business, and I will discuss our fiscal fourth quarter and full year 2021 financials. We will then open the call for questions. A press release covering the company's fiscal fourth quarter and full year 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'd now like to turn the call over to Jack for his commentary.

Thank you, Wayne, and thank you all for joining the call. We delivered another record year for Malibu Boats, which included fiscal fourth quarter results that demolished expectations. Our performance was underscored by our performance against the broader industry. a testament to Malibu's market-leading innovation, unrivaled strategic and operational excellence, and a best-in-class team that has continued to navigate the global supply chain constraints, which are weighing on almost every industry and the global economy. For fiscal year 2021, net sales increased nearly 42% to $927 million. Gross margin expanded to 25.5%. Adjusted EBITDA grew 71% to $190 million, An adjusted EBITDA margin increased 350 basis points to 20.5%. From the onset of our initial full-year guidance for fiscal year 2021, by all accounts, we've crushed it. Malibu continues to be a premier force in the marine industry and the entire leader space, and we're setting the tone for continued strength and agility as we move beyond fiscal 2021. All of our brands performed exceptionally well as retail demand maintained its breathtaking pace. The trend toward large, feature, and option-rich boats has continued, which has supported robust ASPs and attractive margins. In particular, for Malibu and Axis, the M240, the M220, A24, and 23 LSV, which were all larger boats, are performing well ahead of what we expected. New models that pursuit the S428, DC246, and S268 have delivered strong sales. And Cobalt's completely renovated R series with the new R6 and R8 models replaced older models, generating improved pricing and higher margins. Our backlog is unprecedented for every Malibu brand. We estimate that over 90% of new boat orders will be retail sold in the first quarter of fiscal 2022. And with inventory levels where they are, consumers are not buying boats. They're buying slots to have the boat that they want built. We expect retail demand for wholesale slots to continue at elevated levels through the remainder of fiscal year 2022. Inventory remains at historically low levels, and we now believe any meaningful increase in channel inventory will not begin until fiscal year 2023 at the earliest. In our view, we have an unprecedented 24- to 36-month ramp taking us to fiscal 2024 before we see more normalized inventory levels. There has been a lot of focus on the new boat buyers coming into the market, the composition of this group, and the ultimate retention of these new customers. Recently, there were several reports by respected marine sources that put these buyers into clearer focus for everyone. From 2011 until 2019, the number of first-time boat buyers, or FTBBs, has averaged 42,400 per year. In 2020, this number was just shy of 64,000, an increase of 50%. Put another way, the percentage of first-time boat buyers increased 300 basis points in 2020 versus the average year in the time period between 2011 and 2019. We also have new data on the attrition of first-time boat buyers, and it is exciting to say the least. In the past, we estimated that about 40% to 50% of new buyers for used and new boats would stay in boating long-term and purchase a second or a third boat. However, the new data shows that when a consumer buys a boat for the first time, approximately 80% of them, depending on the segment, are still in boating five years later. Further, going all the way back to 2011, over 60% of first-time boat buyers still own a boat. This, in and of itself, reinforces our confidence that many of the new buyers in the last year are here to stay, and we think our breadth of offerings and industry-leading innovation and customer service will keep them with us for their next boat. What is even more intriguing is the demographic of first-time boat buyers. Historically, only 12% of first-time boat buyers were women. Despite this, we know that women have a tremendous influence in deciding the boat that will be purchased, even if they are not the primary buyer. But in 2020, first-time female boat buyers rose to 23% from the average of 12%, fueling what has been our focus since 2012, expanding the addressable market by targeting women through our marketing, and ultimately putting more boats into their hands. The foundation of Malibu's business, industry-leading innovation, a well-developed vertical integration structure, and operational excellence remains intact. Each and every day, we see the positive impact of our strategic decisions coming to fruition. Our innovation allows us to build, deliver, and sell more boats than our competitors. Our vertical integration allows us to maintain better control of our supply chain, quality, and input costs. And our operational excellence consistently allows us to raise the production bar as consumers demand more and more boats. These elements are extremely critical in the current environment, and it's obvious that we are pulling all the right levers to grow this business at an aggressive pace. While we continue to put the pedal to the metal, we also recognize the tightening supply chain over the last year, and in particular the past few weeks, as it poses a near-term risk to our production capabilities. We are working diligently to put as many boats on the water as possible, and based on our fourth quarter and 2021 fiscal year results, we have done a tremendous job navigating these headwinds to date. That said, the supply chain challenges continue to evolve daily, from raw material inputs such as resin, foam, and metals, to persistent labor shortages at our suppliers, to transpacific and domestic logistic delays and backups. While we had hoped the supply chain would be better by now, It is not, and it remains a challenge. As a management team and an organization, we pride ourselves on delivering the most innovative, highest-quality boats in the industry while at the same time maintaining our strong employee-first culture as a differentiator. Further, we are uniquely positioned in the marketplace given our strategic planning capabilities, operational excellence initiatives, and vertical integration strategy. This has been the secret sauce to our long-term success souffle. and will continue to be our guiding principles. Therefore, we are looking at production across our brands and recalibrating based on the supply chain to ensure we maintain production levels that support the highest standards our dealers and customers have come to expect from Malibu brands while ensuring the safety and well-being of our employees. This near-term decision will adversely impact our fiscal first quarter of 2022. Right now, it is not possible to predict the improvement of the supply chain and the availability of parts and raw materials, but I have no doubt that as the supply chain constraints resolve, our team's commitment to innovation, hard work, and delivering results will allow us to equip the competition, deliver more boats to our customers, and maintain our track record of incredible results. Shifting to our new Model Gear 2022 product lineup, We remain in an enviable position thanks to our suite of boat offerings. I can confidently say Malibu brands deliver the finest, most modern products in the marine industry. This makes Malibu stronger, and it makes our dealers stronger. For Malibu and Axis, we have some exciting new products. We are bringing four new boats to our customers again this year. All are brand new, feature rich, and set to drive demand even further. In July, we already introduced the new Malibu Wake Center 25 LSV, the newest model in the world's best-selling towboat family, and the brand-new Malibu Wake Center 21LX, our go-to 21-foot boat for multi-sport boaters who seek performance, versatility, and value. The LX replaces our 21VLX and 21MLX with a completely new look that bridges the traditional bow and the pickle fork bow. We also welcome the Axis T220 into the mix. This is the premier 22-foot wake surf and wakeboarding boat in the marketplace. And in just a few days, the largest Axis ever produced, the T250, will debut, adding to our rich margin profile and product suite. Turning to pursuit, we continue the torrid pace of product development and new boat launches. We will be introducing three new boats, all of which are filling out product quiet spaces that we identified when we acquired Pursuit. Two of these boats are in the over 35-foot category, and our brand-new S358 Sport model has just debuted at the Pursuit dealer meeting earlier this month. The number of dealers who told me this boat fills a blank spot for them and will allow them to compete and win against the competition was pervasive. With Cobalt, we introduced six new models in fiscal year 2021, and the demand is off the charts. Looking into fiscal year 2022, we are introducing five more boats between now and the Miami Boat Show that we are very excited about. The rollouts include the brand-new R4 Stern and R4 Surf, which will replace the R3 equivalents of the Stern and Surf. In addition, the R4 Outboard model will be a new release to the R-Series, coming in the 23- to 24-foot length. We believe that our R4 models will only enhance the strong legacy of this luxury brand. We will also introduce a larger boat that will exceed 30 foot in both the stern and outboard versions. These models will be featured at the Miami Boat Show this upcoming February, and we can't wait to share more details with you as they become available. By February 15th, it is also exciting to point out that in the span of 15 months, Cobalt will have transitioned from having three outboard models to seven outboard models with more to come. The cruising outboard segment remains a significant growth opportunity for Cobalt. Lastly, our newest brand, Maverick, continues to earn its stripes in our Malibu family of brands. The integration has been smoother than butter, and we are already seeing the positive results from our dependable approach to integration, while identifying many more opportunities for growth to come. Maverick is putting into place Malibu's world-class product development model, and we will be sharing more on new product from Maverick brands in the near future. Similar to COBOL, there's an opportunity to replace outdated products, and like Pursuit, there are product quiet spaces we will fill that will drive growth. On the facility side, the expansion of our Maverick Plant 2 facility is progressing as we expected, and we're excited to say that we will be building gorgeous boats in that new facility in the second half of fiscal year 2022. Additionally, at Maverick's dealer meeting in June, dealers were very excited about the Maverick acquisition by Malibu, and what Malibu's professionalism and laser focus on growth will bring to their businesses. I am extremely proud of the Malibu team as we have navigated through one of the most volatile periods in history. We continue to lean on our differentiating vertical integration and operational prowess as these principles allow us to time and again enhance our leadership position in the market. Together, we are focused on making sure our dealers have only the best products and that they can sell them at the highest margins. Whether they are Malibu, Axis, Maverick, Cobalt, or Pursuit dealers, we are committed to ensuring they are set up for success. And as always, our prudent approach to M&A and integration offers us a competitive advantage in the market. I want to express my deep gratitude to our teams at every brand. They are working very hard and persevering through this complicated time. Our people are the reason we surpass expectations in record-setting fashion quarter after quarter after quarter. And we pledge to maintain our winning recipe and continue achieving unraveled success in everything that we do. Doing so will allow us to deliver the financial performance, shareholder value, and market growth that our shareholders have come to expect of us. At this point, I will now turn the call over to Wayne to take you through our financial performance in more detail.