Malibu Boats, Inc.

Good morning and welcome to Malibu Boats conference call to discuss third 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 a reproduction of this call in whole or in part is not permitted without written authorization of Malibu Boats. 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 turn the call over to Mr. Wilson to get it 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 third quarter 2022 financial results. We will then open the call for questions. A press release covering the company's fiscal third 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 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 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 an exceptional quarter, a record-setting quarter, which was particularly extraordinary given the supply chain environment the industry continues to face. During our record-setting quarter, we exceeded nearly all metrics as our demand for large, feature-rich boats continues at a rampant pace. While supply chain challenges persist, limiting our unit growth, we were able to navigate this difficult environment and achieve more volume than we anticipated. Led by our unmatched operational prowess and manufacturing capabilities, we continue to provide the most innovative, highest quality boats to our loyal customer base. For the third fiscal quarter, we posted record net sales increasing 26% to $344 million, record adjusted EBITDA growing 40% to approximately $80 million, and record net income growing 56% to nearly $55 million. Despite the headwinds in the supply chain and the persistent material pricing pressures, our margins displayed incredible strength and resilience. For the third quarter, gross margins increased 180 basis points to 28.2%, while adjusted EBITDA margin increased by 230 basis points to 23.2% during the quarter. Extremely strong ASPs and our approach to operational excellence paved the way for outperformance over the quarter. as we were able to increase volumes through our differentiated vertical integration strategy and strategic acquisition of Malibu Electronics to meet the insatiable demand for our boats. As mentioned earlier, demand for our boats remains incredibly strong across all models and brands. We continue to see a strong backlog as dealers are noting an unwavering appetite for our boats with orders holding up extremely well. Last week, Our largest dealer partner across all of our brands announced a very stout retail sales quarter, and same store sales were up 8% year over year. One of our North Carolina dealers reported that leads have been on pace with 2021, which was a record year, and lead conversion to sales has occurred at a much higher than normal rate with an even greater uptick in the month of April. Elevated demand from first-time boat buyers continues to support this trend. We recently received the statistics from 2021. Now, the 2020 number of first-time boat buyers totaling 63,000 was viewed as a COVID-induced ceiling, with 19,000 more first-time boat buyers versus the decade-long average of about 44,000 first-time boat buyers each year. New data for calendar year 2021 remained elevated, showing 12,000 or 26% more first-time boat buyers compared to the decade-long annual average. Further, in 2021, all first-time boat buyers, which would include new and used boat buyers, surpassed 415,000 buyers for only the second time in 15 years. This represents almost 360,000 first-time used boat buyers, of which a significant percentage will purchase a new boat as their next boat in the coming years. Our 2022 model year boats are thriving with high ASPs across the board as dealers have seen numerous buyers waiting to get their hands on our boats at boat shows and at their dealerships. For Malibu and Axis, customers continue to seek our larger, more expensive boats. For Axis, our brand new T250 is doing very well, setting a torrid pace for new orders for this newly released model. As a reminder, The T250 is the largest Axis ever built and confirms that customers want bigger boats at every turn. The brand-new 25 LSV is also setting the market with new orders. Sales for Pursuit and Cobia also outperformed as we were well ahead of last year's sales numbers heading into our successful West Palm Boat Show for these brands. The new R-Series at Cobalt, consisting of nine new models over the last 18 months, has created significant market demand and transformed the R-Series with the addition of stern, surf, and outboard variants offered in three different lengths. While our product success continues to be like flapjacks flying off the griddle at an IHOP, supply chain constraints remain our biggest hurdle to ramping production. Even though we experienced some improvement to the supply chain in the third quarter, which supported more volume out the door, this does not signal a permanent recovery. The supply chain remains volatile. limiting component availability across the brand for all brands, coupled with the ongoing unavailability of outboard and stern drive engine and parts, our ability to produce as desired for our Pursuit, Cobalt, and Maverick brands and build channel inventory will remain impacted for the foreseeable future. While these supply chain issues have been trying, we remain focused on controlling our destiny and executing our strategic initiatives to help combat rising costs and increase our production. As you have all seen for many years, if we can control it and manage it, MBUU performs exceptionally well. A recent example was our acquisition of Malibu Electronics. We announced the acquisition last quarter, and it has proved to be a major win. We saw an immediate improvement in our ability to produce harnesses and alleviate supply constraints for our Malibu and Cobalt brands. We are encouraged by the long-term potential of vertically integrating Malibu electronics across all of our brands. While we cannot predict when the supply chain issues will abate, rest assured we have the pieces in place to combat future bottlenecks and provide operational resiliency across the board. Inflated costs have been another challenge that has led to the need for price increases across the marine industry. Our approach to price increases through a surcharge has been spot on and has covered the inflationary cost to this point. Looking at channel inventory throughout the marine industry, weeks on hand inventory continues to be about 13 weeks lower than previous historic lows, which is consistent with what we are seeing with our brands. While we believe there will be a slight increase in channel inventories for fiscal year 2022, we will largely see supply continue to mirror demand as retail sold orders are immediately captured. Our expectations remain unchanged as we look ahead to fiscal year 2023 when we will begin to see a build in channel inventory and potentially into fiscal year 2024 before we have normalization of channel inventories. This provides us with a favorable runway to reach further historic levels of performance. No matter which direction the tide turns, Malibu is perfectly positioned for success with a long runway to ramp up production and reach normalized channel inventories. With demand continuing to run hot and considering our prolific operational capabilities, we take advantage of every opportunity to grow our business and our margin profiles. Our entire Malibu family is what sets us apart from the competition. Through our unwavering execution on our strategic priorities, our planning, hard work, and commitment to quality, we will continue to push the pace as we look ahead. A perfect example is our Maverick plan expansion. In this environment, riddled with delayed timelines from the unavailability of materials and labor, it is rare that a project meets expectations to a T. I am pleased to announce that our Plant 2 expansion, which significantly increases our production square footage at Maverick, was squarely on time and we began producing our first boats out of that facility in early April. Much like Pursuit a couple of years ago, this will allow Maverick to produce more boats, larger boats, and increase the margin profile of the MBG brand. With a quarter left in fiscal year 2022, we are in a great position to deliver a historic and record-setting year. We have reached significant milestones through our cross-brand vertical integration efforts, acquisition of Malibu Electronics, and the Maverick plant expansion. Each has helped us successfully navigate rough waters in a challenging environment and allowed us to continue our momentum and close out the year strong. We look forward to releasing our 2023 product lineup in the next quarterly call, which will further showcase our industry-leading innovation with compelling new products and features, and as always, deliver the greatest value for our shareholders. I will now turn the call over to Wayne for further remarks on the quarter.