Malibu Boats, Inc.

Good morning and welcome to Malibu Boats conference call to discuss second 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 that time. Please be advised that reproduction of this call in whole or part is not permitted without written authorization from Malibu Boats. And as a reminder, today's call is being recorded. On the call today from 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.

Thank you, and good morning, everyone. On the call, Jack will provide commentary on the business, and I will discuss our fiscal second quarter 2022 financials. We will then open the call for questions. A press release covering the company's fiscal second 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. 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 all for joining the call. We again delivered a tremendous quarter, exceeding expectations across the board, as demand for our boats remained off the charts and showed no signs of slowing. While supply chain pressures have persisted during the quarter, our unmatched operational capabilities, our dedicated team, and industry-leading brands continue to pave the way for another history-making year. We pride ourselves on providing the highest quality, most innovative boats to our loyal customer base. and are excited to continue and hopefully increase our pace of production as we push through the second half of fiscal year 2022. For the second fiscal quarter, we posted record net sales, increasing nearly 35% to $264 million over the prior year, with adjusted EBITDA growing 23% to $48 million and net income growing 40% to $31 million. Our margins during the quarter proved resilient in light of the lingering supply chain issues associated labor costs and material pricing pressures. For the second quarter, gross margin declined 120 basis points to 24.1%, while adjusted EBITDA margin declined by 180 basis points to 18.2% during the quarter. We were able to offset many supply chain, labor, and material pricing headwinds through improved volumes and unpredictably strong ASPs across all of our brands, which is a further testament to the insatiable demand for our boats, helping solidify yet another record-setting quarter. As our pricing surcharge becomes prevalent in all boats in January, margins will be further stabilized for the second half of the year. As I mentioned, demand continued at a prolific pace as the thirst for our feature-rich, larger boats remains incredibly strong. even during what is historically a slower season in October through December. Demand has been broad-based across all brands and all models. This has been underscored by dealer reports, our year-end sales event for Malibu Access, and the excellent performance that recent boats shows. During the Malibu Access year-end sales event, we nearly doubled our sales versus fiscal year 2020, resulting in the second largest number of orders ever for this event. This year was behind only last year when consumers knew all boat shows were being canceled. Malibu's success was realized despite higher ASPs, limited promotions being the reality. Importantly, as boat shows returned this year, we have maintained a torrid pace of customer orders. In addition, the demand for all brands at boat shows is white hot. Fort Lauderdale was at a record pace of boat sales for many brands, including our Pursuit, Cobalt, and Cobia brands. At the Denver Boat Show in January, we set records for the Malibu and Axis brands, and in Portland, our dealer met their planned sales targets. The Minnesota show held a couple of weeks ago also experienced very strong sales for that show for Malibu, Axis, and Cobalt. Since Fort Lauderdale, there have been some small saltwater boat shows. In each one, Pursuit and Maverick brands have had sales performance much better than in previous years. As we head down to Miami next week, we expect this momentum will continue. Our dealers have also remained agile in this ever-involving environment. Orders have held extremely well as customers look past price increases to maintain their slot for a new boat, with long lead times playing a heavy factor in the decision-making process. There is also a recognition that we are now in an inflationary environment that extends to all types of products, and it will likely continue. Therefore, the best prices are now to buy a boat. Our new model year 2022 product lineup is once again underscoring what Malibu is known for, quality and innovation. We are seeing exceptional broad-based demand, and while new product is highly sought after, the environment has placed abnormal demand on every boat that we sell. For Malibu and Axis, customers have responded overwhelmingly to our exciting new products, with the all-new Malibu Wake Center 25 LSV and the brand-new Malibu Wake Center 21 LX, as well as the Axis T220 and T250, all past the point of being able to build to demand. At Cobalt, with the rollout of the R4 variants of boats in the first half, we have nine new boats in the 23-foot to 28-foot segment in just 15 months, completely transforming the R series lineups. At Miami, we will introduce a new 30-plus-foot boat in both the stern drive and outboard variants. Everyone who has been on and experienced these new boats have marveled at the space and the performance of these new models. Pursuit continues her consistent pace of product development. The brand-new S358, which debuted in November, will be in the water for consumers to experience in Miami. There will also be a new offshore model that will be brought to market in late March. Maverick is now on a pace to begin introducing new models in early fiscal year 2023. Similar to Cobalt, there is an opportunity to replace outdated products and lack pursuit. There are product quiet spaces we will fill and drive additional growth. There has not been a meaningful build of channel inventory over the last quarter, and given the demand for all of our brands, Most of our production in the second half will be for retail sold orders. It will be fiscal year 2023 before we begin to see any build of channel inventory and well into fiscal year 2024 before channel inventories can begin to normalize. Malibu has also stayed ahead of the curve on inflationary pressures. In October 2021, we announced the implementation of price surcharges to help offset rising costs and maintain our healthy margin profile. These price increases began to take effect on a limited basis in December and have shown no impact on the resilient demand across our full product suite. The supply chain continues to be the limiting factor on production. Based on our estimates, we could easily build at least 20% more boats in every brand. When you layer lack of component availability with an amplified labor shortage at suppliers because of flu season and the spread of Omicron, Production volumes continue to be limited during the second quarter as most manufacturers reduce counts to meet the availability of parts. The shortage of parts needed to build new boats is highly unpredictable as supplier issues tend to vary on a weekly basis. It is important to note these lower production levels are solely due to these supply chain issues and our brands remain in a position to flip the switch and increase production capabilities as the environment begins to normalize. Frankly, the challenges we are facing are a little like your golf ball hitting a pebble on the way to the cup. It is frustrating because of the opportunity for that hole, but it is temporary and doesn't affect the long-term opportunity or results. We remain focused with a proper grip and tension on the putter as we leverage our operational prowess across the full product lifecycle while persistently looking for ways to protect our margin profile during these volatile times. Our initiative's Our initiatives are solidly focused on providing customers with the best boats in the market while maintaining a strong value proposition for our shareholders. While we can't predict when the supply chain will improve, rest assured as things normalize, we have the team in place to remain ahead of the game. Vertical integration has always been a competitive advantage for Malibu, and in a volatile macroeconomic environment, it has only highlighted our operational resiliency. We have a long track record of advancing these vertical integration efforts from towers to trailers to engines to floors, and I am pleased to announce our latest acquisition also fits into our Vertical Integration Foundation. On February the 1st, Malibu acquired the marine assets of a company called Amtech. We acquired these assets under a new subsidiary, Malibu Electronics LLC. Emtek has been a key supplier of complex wiring harnesses for our Malibu brands for years and is one of several suppliers we use. Wiring harnesses have been a primary supply constraint over the past nine months, and we saw a clear opportunity to bring this capability into our vertical integration fold. As we bring this Alabama-based manufacturing operation in-house, we will be better positioned to control our own destiny and alleviate supply constraints in the near term and provide a runway for growth for all of our brands longer term. The assets included a 130,000 plus square foot manufacturing facility that historically had approximately 50% of its production devoted to customers in non-marine segments. We will continue full operations in Alabama, but there will be no external sales, opening capacity for all of our brands. As a result, This transaction solves a problem immediately for Malibu by being able to provide the volume of harnesses that Malibu needs. This improvement will alleviate constraints that other suppliers shared between our brands and ultimately enhance our ability to produce more units across all of our brands. In addition to improving our vertical integration, we remain on pace to further enhance our production capacity through the Maverick Plant 2 expansion that doubles the production footprint of that plant. It is on schedule and we expect to start seeing results soon as we begin to bring boats to market from that facility during the second half of fiscal year 2022. This expansion will allow us to build more boats, larger boats, and increase the margin profile of the boats that are built at Maverick now and into the future. Many people just don't see the immense opportunity and almost perfect setup for Malibu. Never have I seen a company so well positioned for success, regardless of what may come. The historically low channel inventories dictate that we have a long runway of solid production opportunity despite any economic environment. As the supply chain improves with the demand that we have, we are positioned to absolutely rip and grow production and profitability significantly. The lack of channel inventory also greatly softens any deteriorating economic environment as we have a solid two plus years to get channel inventory back to where it should be. We are in a most enviable position that dictates solid, substantial performance over a multi-year period of time. In the short term or long term, Malibu remains incredibly well positioned despite supply chain challenges and inflationary pressures that are impacting the industry. We strongly believe there is no better team to execute on our strategic priorities than our tried and true Malibu family. Our team's operational capabilities, hard work, and commitment to quality is what makes us truly unique. Fiscal year 2022 is positioned to be another incredible year in Malibu's 40-year history, with record revenue and record earnings. As we set ourselves on the second half of the year, Malibu remains in a unique and enviable position to dominate the marketplace. By developing our cross-brand vertical integration, we are confident in our ability to generate new synergies across our powerhouse brands, in fiscal year 2022 and beyond. We will continue to drive innovation and be the first to market with compelling new products and features. We are optimistic about our future, and furthermore, we are immensely proud of our Malibu brands as they continue to navigate this volatile and unprecedented environment. We will continue to support our absolute outperformance in the industry and ultimately create greater shareholder value for all of our investors. With that, I will now turn the call over to Wayne to take you through our financial performance in more detail. Thanks, Jack.