Malibu Boats, Inc.

Good morning and welcome to Malibu Boats Conference call to discuss first quarter fiscal year 2022 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 the time. Please be advised that 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 Spinger, Chief Executive Officer, and 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 first quarter of fiscal year 2022 financials. will then open the call for questions a press release covering the company's fiscal first quarter 2022 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. The factors that might affect future results are discussed in our filings with the 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 gap financial measures are included in our earnings release. I will now turn the call over to Jack Springer.

Jack Springer Thank you, Wayne, and thank you all for joining the call. We once again demonstrated our dominant leadership in the marketplace as we delivered sustained momentum in the first quarter of fiscal year 2022, supported by continuing strength in retail demand even as we enter the off-season. While inflationary and supply chain pressures intensified, Our team's unparalleled commitment and execution, coupled with our industry-leading brands and inherent operational strengths, were next to none, driving our outperformance in the quarter. Malibu continues to be a premier force in the marine industry and the entire leisure space, setting the tone for continued growth and agility as we navigate through fiscal year 2022 and beyond. For the fiscal first quarter, we posted strong top-line growth as net sales increased nearly 40%, to $254 million over the prior year, with adjusted EBITDA growing 23% to $45 million. Adjusted gross margin declined by 170 basis points to 23.6% and adjusted EBITDA margin declined by 250 basis points to 17.6% during the quarter. The decrease in margins was better than anticipated and was primarily generated from the inclusion of Maverick in fiscal 2022 the restart of COVID policy costs, and the realization of supply chain issues that increased labor costs. Against consensus, all financial metrics were met or exceeded expectations. In addition, we saw an increase in material pricing pressures that accelerated in the first quarter that impacted margins. During the quarter, we continued to capitalize on very strong retail demand, and in particular, larger, more feature-rich boats with our innovative best-in-class brands. For Malibu, sales for our new 25 LSV and T250 models and our premium M-series boats are booming, driving enhanced margins for the business despite the negative impact of the supply chain on volumes. Also, our new Cobalt R-series, consisting of nine new models in the last year, remains highly sought after by consumers. These Cobalt models are inclusive of stern, surf, and outboard variants for the R4, R6, and R8. Related to retail demand, the unlimited cheeseburger picnic continues, and we are now offering soft serve ice cream for dessert. Our order book remains unprecedented for every Malibu brand, and we are not seeing any meaningful increase in dealer inventory levels as most boats are either retail sold or sold as soon as they hit the dealer's lot. To put a finer point on it, we continue to estimate over 90% of new boat orders will be retail sold in the second quarter of fiscal 2022. At the same time, channel inventory levels remain at historically low levels, driven by the high retail demand but also the increasing supply chain pressures affecting the entire power sports industry and global economy. Again, to contextualize, we estimate we have nearly half a billion dollars of channel inventory to fill. That is nearly six months of production without selling another boat at retail. With that in mind, even if the economy softens, it will be at least two years before the channel is rebuilt. Underscoring the retail demand, the Fort Lauderdale Boat Show concluded last weekend. Attendance was very strong and sales for our brands were well above expectations. We were pleased and surprised with the strength from the 2020 Lauderdale Show and last week substantially exceeded the 2020 numbers. Pursuit sales at the show were up substantially over almost any previous year. The Cobia brand under our Maverick umbrella saw sales numbers more than four times last year's numbers at the Fort Lauderdale show, and cobalt was also increased versus the 2020 show. The strength of retail is further substantiated with the fact that our recent price increase was in effect, and it was a very limited promotional environment. Despite record-setting demand and a strong executable backlog of orders, Supply chain pressures continue to affect production as the number of parts impacted have proliferated throughout the first quarter. Production volume for many has declined over the fiscal first quarter as manufacturers in the marine space have reduced production counts to meet parts availability. Shortages are across the board, unlike previous quarters where resin and outboard engines were the primary pain points. There are now a number of parts in short supply on any given day, which has caused Malibu brands to reduce production counts. This approach helps us preserve efficiency and ensures our customers receive the highest quality boats as we focus our efforts on in-process builds. While our volume expectations have moderated since August, we believe that the price increases we are implementing will help offset this volume decline, supporting our overall margin profile in the long term. However, at this time, we are reducing our guidance for margins for the year given the abundance of retail sold units that will be produced in the face of these increasing input costs. Malibu remains a step ahead of the competition given our industry-leading innovation, vertical integration, and operational excellence. We are well positioned to flip the switch at any moment and ramp up production as supply chain headwinds subside. All brands have at least 25% of additional capacity we can use to increase boat production once the supply chain returns to some normality. In addition, we remain on pace to execute on our strategic initiatives to help further enhance our production capabilities. We are ahead of schedule on our Maverick Plant 2 expansion that doubles the production footprint of that plant, and we expect to start building boats in that new facility during the second half of fiscal 2022. We have no doubt that our team's operational capabilities, hard work, and commitment to quality will help us stand out amongst the competition. In that vein, I am incredibly proud that we've maintained our talented workforce despite the labor shortages taking place across the industry as federal programs on social distancing and vaccinations impact an individual's decision regarding returning to work. In the short term, Our efficiencies and gross margins are impacted as we are carrying more labor than needed based off current daily run rates. We are doing this while operating under the assumption that when the supply chain improves, we will be able to increase production counts quickly rather than having to wait weeks or months due to short labor supplies, hiring, and training delays. While we cannot predict when the supply chain will improve, we fully expect a return to normal. Our new Model Year 2022 product lineup is, again, underscoring Malibu's lineup of premium brands as a preferred choice for a customer's boating need. For Malibu and Axis, we continue to deliver exciting new products. In addition to the debut of the all-new Malibu Wake Center 25 LSV and the brand-new Malibu Wake Center 21 LX, we recently welcomed the Axis T220, a premier 22-foot wake surf and wakeboarding boat during the quarter. The T220 traditional bow for Axis replaces the T22, and the new name highlights that this new model is bigger and better than its predecessor with an enhanced on-water performance. Furthermore, we also introduced the largest Axis ever produced, the T250, in the first quarter, which only adds to our rich margin profile and product suite. The T250 makes history as the first 25-foot boat produced by the cutting-edge Axis brand and will set a new standard for performance, convenience, style, and value in the 25-foot class. As we mentioned last quarter, we are running at a high-velocity pace of product development and new boat launches within the Pursuit brand. In this fiscal year, we will be introducing three new boats, all of which are filling out product watch spaces that we identified when we acquired Pursuit. For Cobalt, we are in the process of 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 the R4 Surf, which replace the previous R3 versions. 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 debut a larger boat that will exceed 30 feet in both the Stern and Outboard versions at the Miami Boat Show. Our newest brand, Maverick, continues to smoothly integrate with Malibu's world-class product development model, and we will soon be sharing more new product for Maverick. Similar to Cobalt, there is an opportunity to replace outdated products and, like Pursuit, there are product watch spaces that we will fill to drive growth. Looking ahead, Malibu is in a unique and enviable position to meet expectations for fiscal year 2022. notwithstanding a tightening supply chain and inflationary concerns. Our team has so much to be proud of as Malibu continues to navigate one of the most volatile and unprecedented periods in history. Their commitment to operational excellence, best-in-class products, and distribution will enable us to continue to deliver on our strategic vision. As a result, we remain incredibly well positioned in the marketplace. Our foresight has enabled us to remain resilient, quickly dodging and overcoming many of the obstacles our competitors are facing. We are already off to an incredibly strong start to fiscal year 2022, and we believe our sustainable, long-term competitive advantages will result in market share gains and increased profitability. Together, this will support continued outperformance in the industry and value creation for our shareholders. At this time, I will now turn the call over to Wayne to take you through our financial performance in more detail.