Malibu Boats, Inc.

Good morning, everyone, and welcome to Malibu Boats Conference Call to discuss second quarter fiscal year 2024 results. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. 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 of Malibu Boats. As a reminder, today's conference call is being recorded. On the call today for management are Mr. Jack Springer, Chief Executive Officer, Mr. Bruce Beckman, Chief Financial Officer, and Mr. Ritchie Anderson, Chief Operating Officer. I'll now turn the call over to Mr. Beckman 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 second quarter of fiscal year 2024 financials. We will then open the call for questions. A press release covering the company's fiscal second quarter 2024 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, would 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 FDC 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 Sprang.

Thank you, Bruce, and thank you all for joining the call. The NBI navigated a challenging quarter driven by continued economic uncertainty as retail remained suppressed and channel inventories were reverting to historical norms. For the second fiscal quarter, net sales decreased 38% to $200. and $11.1 million compared to the prior year. Net income decreased 62 percent to $13.8 million, while adjusted EBITDA fell 60 percent to $22.9 million. Gross margins decreased 460 basis points to approximately 18 percent, and adjusted EBITDA margin decreased by 610 basis points to approximately 11 percent. We continue to experience soft retail demand as we enter our slowest time of the year. The confluence of events in coming off a pandemic retail high, channel inventories have built much quicker than anyone imagined, a return to seasonal norms, and economic uncertainty due to a prolonged elevated interest rate environment have resulted in channel inventories higher than we or our dealers would like to see. It is a tough market to say the least, but it is important to keep things in perspective and level set versus historical norms. While the retail environment is compressed, the biggest factor contributing to a tough year-over-year comparison is the normalization of channel inventory. Over the last two fiscal years, we have been focused on rebuilding our channels from historically low levels, brought on by lingering supply chain challenges and unprecedented demand during the pandemic. Today, these dynamics have shifted, and a level setting is going on as the inventory channels have fully recovered. We are back to natural market dynamics, and MBI is highly focused on recalibrating to match wholesale production to retail demand. We are very, very committed to reducing channel inventories to lower levels that set up the dealer and MBI brands to recover more quickly once retail begins growing again. We expect channel inventories to move downward as the selling season kicks in and reduce to normal levels by the end of calendar Q2. The NBI will continue to monitor the channel and take an aggressive approach with production levels as we head into the southern seas. We do not shy from a downturn or a recession. We welcome the opportunities that are presented with it. Our variable cost structure and world-class operational capabilities set us up extremely well to execute and drive the most profitability possible and continue to invest in the business. The investment in the business, whether it be new product and features, Vertical integration or capacity will drive market share increases and the realization of higher revenues and margins quickly once retail comes back. The investment in the Rome County, Tennessee expansion for Cobalt is a great example of this commitment. Demand for our 30-foot and over cruisers has consistently outpaced our production capability, and with the addition of new models over the past couple of years and more coming, this expansion positions Cobalt to be able to build to demand as we exit the downturn and see demand growth. Had we waited until after the downturn, we would be sacrificing one to two years of revenue growth as we added to capacity. MDI will be well-positioned to exit this downturn more quickly and be even stronger than we were when entering it for all of our brands. From the retail lens, the sense of urgency from customers to buy a boat has largely disappeared. The consumer is being very patient, They know inventory is available, and they are looking for the best deal. To address this latter retail environment, we introduced a program earlier this month, which we've been working on since early 2023, to introduce a Malibu and an Axis at entry-level pricing. The Malibu LXR is offered at $99,995, the first time that a 21-foot or larger Malibu can be purchased for under $100,000 in many years. The Axis T220R is a 22-foot boat with a nationally advertised price of $89,995. We expect pricing on these two boats will draw customers who have been waiting for lower prices to dealers. The goal is to have this customer exit the sidelines, go to the boat shows or dealerships, and purchase. With these boats, we are also targeting smaller and less optimal jet boats for the cost-conscious wake sports enthusiasts. Finally, we believe this is a great opportunity for a consumer to get a malware access at a price less than a Tier 2 or a Tier 3 late brand. We also believe that we will not only sell these boats, but they will lead to further opportunities to upsell by our dealers into other models, driven by the consumer's desires for more features and options. We have already seen this occurring in the January boat shows that have taken place thus far. A customer segment that has remained strong is the premium segment. cash buyers who are looking for larger, feature-rich premium boats. We have several new offerings targeting these consumers that we are excited about. Our brands through both shows are focusing on the new M242 Malibu, the most premium boat in the Malibu line. Cobalt has introduced the new R33 Surf Cruiser, and Pursuit will leverage the new OS405 and DC306, both premium boats over 30 feet. As you see by their names, these models are targeting the imported offshore and dual console segments in the saltwater outboard category for pursuit. As always, the boat show season is very important and will be the measuring stick for the rest of fiscal year 24. While the general consensus is that we are at or near the bottom for retail demand, as sentiment shifts and as interest rate pressures are forecasted to subside, data from the selling season will be the first sign of the trajectory. We are already seeing positive signs following our year-end sales event for Malibu. This event, which we have been doing for the last decade and a half, saw Malibu and Axis performing better than we had expected. This further demonstrates the strength and resiliency of our premium suite of brands. As we reported on our last call, Fort Lauderdale was a fantastic show for Pursuit, setting all-time records, and was also a very good show for Cobalt, exceeding last year. That position, the focus of the Calgary Year 2024 shows, began the first week of January. The Atlanta Boat Show was the first weekend of January, and it is always an important guidepost. That show, which is run by our partner, OneWater, through their Singleton Marine Group, was a bright spot for Malibu and was well ahead of last year for Cobalt. Minneapolis was another good show, especially for Malibu and Axis. Last weekend, the New York Boat Show took place. This is both a freshwater and saltwater show. Looking back at the results over the previous five years, this was a very good show for MBI brands. All brands were at the higher end of sales compared to the previous five years, and Cobalt had an excellent show. Not only was the volume of sales for Cobalt very good, but the composition included a preponderance of the 30-foot and overcruisers that are due to the market. In summary, both shows have been decent. They have not been record-breaking shows, but they have also not been bad shows. After the first three weeks, we were on a par with unit sales for all of our brands for 2003. Miami, of course, will be the bellwether show for our saltwater brands, and we are placing a lot of focus on making Miami the best show possible. Looking ahead, we are optimistic about the outlook for the marine industry. Cost increases are stabilizing, creating a more favorable pricing environment. as we look at fiscal year 2025. Overall, this coupled with a lower interest rate environment, which is predicted to occur, will relieve pressure on the entry-level buyer and help drive a recovery in marine. Despite the macro conditions we are faced with today, we remain in an optimal position to deliver results. As we have said many times and proved in the fourth quarter of 2020, we are confident that even in a 25% to 30% down revenue environment, we can maintain 15% or above EBITDA margins. While we are projecting revenue will finish down more than 30% per year, the relationship remains intact. This is due to our highly variable cost structure that flexes in line with market conditions. In addition, we have spent the past couple of months ensuring cost efficiencies throughout our organization. Based on our forecast, despite lower than anticipated revenue, we maintain our conviction that we will continue to deliver operationally with our strong margin profile. Our winning strategy and durable business model are what truly differentiates us. We will continue to stay nimble, advance our innovation and product development, leverage our vertical integration footprint, capitalize on market opportunities, and enhance operational excellence initiatives to ensure we remain on top as market conditions improve. I will now turn the call over to Bruce. For further remarks on the quarter.