MBUU - Earnings call transcript Q1 2018

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Operator

Good day ladies and gentlemen, and welcome to Malibu Boats Conference Call to discuss our First Quarter Fiscal Year 2018 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 of Malibu Boats. And as a reminder, this call is being recorded.

from Mr. today call the management are On Jack Executive Officer; Mr. Springer, Chief Chief Wayne Mr. Officer; and Wilson, Financial Anderson, Ritchie Officer. Operating Chief I will now turn the call over to Mr. started. get to Wilson Please go ahead, sir.

Wayne Wilson

good and everyone. you, Thank afternoon

on will On business fiscal XXXX. financials provide Jack the for commentary call, and outlook and our discuss I first quarter will the

Investor on I on We open be also that estimates certain including found today management's that from issued and want for copy to today's might remind of projected, the could section expectations, questions. forward-looking, considered covering be press everyone release Relations was forward-looking call. this will company's that XXXX remarks first company's results the results or release predictions, that the then press materially actual contain call in information and other can may the quarter call differ statements, website. A fiscal of year a those

to these margin, turn Please EBITDA these Jack over I will financial and measures to measures certain adjusted earnings on should SEC You of discussed included release. we these distributed in statements, Factors future are of non-GAAP non-GAAP factors. review events. in update as which affect also you with adjusted undue future a measures will are only fully to information obligation or risk detailed income. them speak more the the no financial adjusted results on not we our that Springer. to as SEC today's that our note, be encourage place for might and undertakes now new of Reconciliations EBITDA, to our referring GAAP the call financial any net for and filings forward-looking today, description reliance call such filings company

Jack Springer

the share per and everyone Thank history makes in you, was to the the quarters net Axis additive history Cobalt Wayne, consecutive first just when best thank Malibu in quarter quarter had revenue, our same performance. we adjusted with the years. our company This for all quarter AFDNI had XXth for best and quarter that for joining first in Malibu call. you previous compared the performance. have EBITDA, to our and in

our progress The Malibu boat lead expected, performing perform business is to on satisfied and we our we we $XX.X to XX.X% Cobalt track. we is EBITDA were share. quarter results the increased expectations. and in to and increased XX.X%, playbook Net of Fiscal is It early what adjusted with and performance improve brands to plan million, in process, but exceeded We the pleased the XX.X% business with financial XXXX continues is year. each off fully or the earnings the fold. increased this about quarter. our it are thought Malibu is million exactly core first distributed positive $X.XX adjusted our apply well this integration As per the segment. or great is cobalt to Cobalt first sports very year our own the in as a performance and with sales $XXX.X be. start would are Cobalt

its that performance. outstanding of to in brands cash with both leader are One a the strongest complementary Malibu’s that profile in industry, the is built and a quality, segment,

At category, Cobalt where where glass about Cobalt very X%. provide to X% in has segment strong categories boats, down to business of forward. nearly which to drive view Combining X% decrease Comprehensively, is substantial XX-foot have seen distribution, boats, also for market growth and the Cobalt registrations is and well the the share want that in glass discussion Cobalt relates and levels SSI sterndrive Year all the to market to results great combined to is of on excellence, going XX-foot have. sterndrive XXXX, fiber us but represents with we down grown with Cobalt. it on that operational which in under date inventory product XX% in X% one in X.X% the category, and this low total it as We but of been fiber about the segment, lot industry has Cobalt about focus segment. almost of to is know are four the XX% In the this of many X.X%, by recovery. innovation, the and performance what category. and competes development sterndrive some as categories allow quarters XX-feet all boats boats has Malibu’s markets XX-foot XX subject of XX-foot X In X.X% we building We as the only Cobalt, to year-to-date. a The up and is well feet-which according year-to-date a down winning. dealers, XXXX aggressive is segment in color primary this XX have we opportunity This important in will sales, of XX-foot to has XX their have XX interestingly sterndrive lack see year-over-year what positioned we critical retail under year-to-date have this since up data come. and as recession, XX There we as we grown to the Cobalt in at segment. boat to XX as shrinking leading

and have the outboard marine is U.S. market, interest to been addition, which grow. into strong market the healthy just and continues has In begun growing. The we

calendar on high grow brands and boat into there coming in We and and industry policy the Malibu, mid-to-high will market. benefits entice product potential confidence in across expect innovation are and XXXX. environmental tax upgrade At customers at existing reform, policy. the energy continuing is year Consumer XX-year we a the focus boat new performance easing drive sports all to segment owners to new introductions to digits

Coast, all as industry little us. into domestic the areas perform. There a the on specifically marine to of about in Gulf performance been has impact of impact the and whole continue in We US market Almost the and wholesale There Texas foreseeable to was Florida. expect sports much for hurricanes discussion no shipments boats future. in healthy growth on the

retail, registrations sports that September either impact in Gulf been that positive, believe not to serves. Recent that been Malibu as Axis and Cobalt the boats leads market by for significant on have has far to or As sterndrive which impacts manufacturers the us was potential overblown. the commentary marine performance states serves also performance other public the

excelled growth at Texas nation. registrations is Malibu in over is XXXX X.X% Texas know, year you nearly leading is the As to in Since XXXX state grown in Texas up that the XX%. for performance XX.X%, and sports has XXXX, boat largest date registration. by

by been has has In growth, only addition dealer recovered to from slight nicely there the Houston our and the hurricane the damage. very area affected

is Malibu less While XXXX our begun spot year-to-date by is California to impact in registrations I recovery impact short-term be upside. in than Nevada, The we Overall, remains years. US five Axis recover, long once point led years by damaged was be be XX% Compared time. it for that it we has marine previous represents Malibu's the two share, and also out states, growth Western for and growth an has drought believe XX% always California, have the weaker X% cycle experienced Houston western continue for well a will negative is growth largest volumes. presents slow significant over driven to the conditions others. And significant. accelerated Arizona in continues and Utah, up in XXXX, that market from an bright a California international sport to but among state boats. industry. that topic those including believe large that south-west in offset state The is XXXX, will opportunity a on will and the a Cobalt The growth for area run is replacement reservation markets given since boats. and narrow down California The versus any market participation the process. been in over peak to to the relatively a below to region's

We in a that strength direction. assist of the the to the change are first volumes the help US in currencies wholesale Canada stagnancy. years a currency strength moving the saw Australia and that continues but the International has US of largest point, At at to get in three international participate Canadian quarter about to we dollar. $X.XX market seen shipments offset forward. long are markets, International not equipped right way to the to Malibu, The Canada recovery in well but of two relative we to signs drive this this are Marine the than in more at of ago, back the have substantial optimistic heading recovery. particular and majority our will seeing

aggressive features, to will top and has on and the the excited product boat, paced pay about focus special. the details Our look, sports in LSV our in selling and performance new has and this XX history boat new introduction a taken history cycle marine off. industry Dealers off. Malibu customers best make are fast The continued design new the it

still have been heading we have excellent and XXXX should models year in and drive are and years Axis is new XXXX new brand. that We new are boats month. and first into two growth this be to Axis have one well-received well performing feature the season. Malibu more introduced year performance. boat Fiscal the that all Both the edgy Our in three models, introduced and two AXX designs this the TXX for show

year We we for Cobalt show, are SC introduced orders two Sand Fort the introducing models calendar boats. Cobalt Lauderdale Last at three and new for them. week XX The XXXX. XX new we took the outboard

In significantly introduced which and Tampa orders for generated over and two also very well shows Cobalt. increased also orders. a Fort far, received Lauderdale have was thus new Florida last We AXX, year the

be process process of We the Malibu although the excited about putting Cobalt's brought time, are already take we the And it will started in market have development. coming what will product years. to on

and our quarterly We and growth. it performance operational sustain capability proud of are to consistent continues excellence

we to taken for operations, excellence As improve we look operational philosophy Malibu always Cobalt. have ways to our

We results, but the to beginning seen of over be already term. the results medium expected majority see are will

innovation we our more leading be the key will in However, with strategies but integration initial from operating Cobalt new and are engaging only the year also our bringing for progress. prowess, found very vertical industry every Cobalt. benefit will Not new product are pleased advantages out

timeline's, return goals Our along nicely marinization financial moving project and same. the and engine is our remain objectives,

our and to healthy strong expect are level for at engines XXXX calendar sometime we are for Dealer start. inventory will companies. than for competition three-year better year be Fiscal are in realized orders a those last Cobalt also strong inventories first levels is a came believe Malibu orders period. produce position and year. a Cobalt, our during We off both orders. Malibu with we and fiscal are in to into XXXX Mariners' boats the payback Malibu over XXXX well well of and year half in ahead the

Assuming season, continues should the year. be this good very into fiscal year show XXXX boat a

continue a our Malibu summary, exceeded expectations XXXX. In be our targets. quarter We on internal for first and to fiscal year bullish had record

quarter fiscal second strong also quarter. will Our be a performing

but and pleased at initial Cobalt the X% progress the there with US continues category Cobalt has grown boat more so sports market in it healthy. is stages is are marine The year-to-date. early to our We domestic realized grow over opportunity, registrations is much to be time. where performance is there substantial

the states. affected seen that very Gulf of impact and coast We from little have east hurricanes any the

We wholesale signs of in there have a positive seen early are a not significant but recovery. international the shipments, increase

will Our Operationally, Cobalt to our operating in Cobalt generating to is product over we continue efficiency. extended excitement at well. efficiency performing be Axis, high That excel and for new Malibu, time. and

on Wayne, started to engine call lastly, the on good schedule the to in you Our has strong now is and progressing initiative and I XXXX through expect take we year. and quarterly will results another budget. turn And detail. more over

Wayne Wilson

decreased to Cobalt first Net X,XXX In by Consolidated Thanks Axis boats. the quarter XXX XX% sales $XXX.X quarter, acquisition XX.X% per first is our from Malibu XX.X% $XX.X Cobalt included or XX XX.X% represented as increased to $XX,XXX. new net to in XXX Cobalt. XX% profit XX at increase driven of expense margin part unit driven AXX, volume sales approximately sales year-over-year brand gross financials. our XX% Jack. by in million The increase Selling price approximately of and well million. boats. X.X% increases represented a higher and mix XX.X%, and $X.X increased inventory boats year. approximately the increased that consolidated Unit LSV XX.X% as Malibu completed and of models quarter. acquisition well. the and million, are to of primarily was as approximately represented the The XX.X% MXZ purchase in step-up to Cobalt. were by XX Malibu of increased introduced in million increased XXX or $X.X our their all our or unit marketing performed from or of accounting boats, driven impact brands MXZ Axis that the results last and the was Gross and of

due As offset a million. expense. sales, integration expense decreased by and points. excluding percentage cobalt XX.X% acquisition increased the engine The or reduced marketing of of and to and administrative basis about increase selling expenses, initiatives, $X was XX General boats amortization vertical litigation

EBITDA assumptions acquisition, Corp $X.X by quarter distributed income negatively adjusted expensed to increased exposure. our for adjustments the of estimated tax to amortization purchase for per count and close Tennessee Cobalt approximately including per liability margin for basis to a diluted using XX.X% about margin the increased share decreased of decreased to the the XX.X% business about to accounting quarter. As points step-up $X.X in about subsequent of share. increased to fully to weighted our based $X.X related rate XX.X%. calculated we X.X%. estimated XXX impacted state Net of to tax we share Cobalt. C XXX Adjusted basis million the acquisition, Furthermore, normalized $X.XX points Please EBITDA tax balance million inventory the state basis in X.X%. increased shares. $XX.X XX.X% a was average Non-GAAP income G&A future rate percentage is distributed Cobalt net XX million, that tax while expenses, and note, for million to XX.X% updated XX.X was and quarter TRA related a income the points the million of long by fully sales, This have and acquisition adjusted changes on of excluding in earnings term increased our the Net

of our XXXX do but reconciliation felt adjusted approximately detailed to million including adjusted Acquisition out the to guidance, is tables based pretty expenses adjustments a the Adjusted factors. GAAP margin net release. An inclusion low-to-mid increase Consolidated year. see on and the XX% please earnings $X not For the fiscal outlook margin metrics, unit is full are following in increase provide in to for income EBITDA earnings our from with the about is single fully distributed in with Cobalt higher. expected We for fairly will be of year. not is represent consistent in With be rest per approximately throughout be of net the Cobalt unit the where perspective, to volume of the mix decreases it of exception be XX%. fairly consistent purchase respect be expected will volume QX cadence, a approach year. to it of then approximately year to little asset unit be is From evenly should a one-third volume. the step-ups. expected be digits to million throughout sales and It to the accounting Gross XX%. QX highest throughout expected to EBITDA engine year-over-year the expected for $X

exceeded In in quarter closing, capital currently project. are $XX engine $X expenditures, million regarding our million expectations. and planning to million for our our outstanding we including results expenditures, $XX capital were Finally, approximately first

opportunity performed acquisition. our we Our Malibu there very Cobalt business is and has believe well significant in

up provide that, Operator? are the With open we like the of and financial strong to about to it are excited believe to to your we’d year continue questions. call rest set We the performance.

Operator

comes question SunTrust. line sir. [Operator Instructions] from the from Swartz Mike of first Yes Our

You may begin.

Mike Swartz

evening. good guys Hi

Jack Springer

Good evening.

Wayne Wilson

Good evening.

Mike Swartz

range, on what’s had think change? are initially or much EBITDA, I to better wanted that that you - guidance, XX%, guidance was just the you I behind that expected it at previously said, quickly adjusted guess then you the I maintaining leverage like else just in everything I XX%, think is operating really pretty looks

Wayne Wilson

we the that sales the those net how to not as little take think those really operating say pushing us we that towards range some that account into leverage higher if XX% top ranges strong and talk you unit that’s bit, well we quarter, of to volume moving unit so bit of pushing looking a language, get a as or you so mid, ranges per that’s just knowing those but about be might provided, XX%. low I you on more you’re this net at see that say when that about your - it little a items when Yes, in very various up was number approximately can where

Mike Swartz

your Okay, then I just I it looks some unit about think brands, the the in terms in or year-over-year previously X% those with pretty you and is have that? the products, volume would we some timing strong been us, you quarter, about core thus seen of like great. that what split new of around talking production far can just Axis for should you and [indiscernible] you And help books had reiterate business had up the Malibu commentary think how order and think or a

Jack Springer

is of Yes, a it production. Mike, timing

where for really the the have boatloads it’s at out of have and the are shipments having the loads you and always dependent package you're dealers just the when how upon that going multiple and trucks together. come we You quarter end can

like probably second in that quarter. the just not yet we week extra [indiscernible] out few out of in a had door have the that did so, gone And went this of loads first the

Mike Swartz

then… Okay and helpful that’s

Wayne Wilson

basis. pretty is I in just the day many terms how year-over-year out that we further cadence, consistent per And on of building point would a are boats

we've plan working that years and So, of from plan annual manage on right annual a about talked top our past, production so I to this how in perspective. annual that we’re in and we volume plan think that we’re

we So, just how that we - are is managing cadence. really it operating

Mike Swartz

me, there think quarter, backed EPS said adjusted step-up I and excluding you've think is and a the $X.X final the million to right? I the Cobalt in around relating gross in line, from XX.X% is then great, that gross out EBITDA, Okay with inventory and the think you margin, margin in that question I from but that charge adjusted

Wayne Wilson

Yes.

Mike Swartz

Okay, great, thanks.

Operator

question Wells Thank Tim of Conder our comes next from from And the you. Fargo Securities. line

You may begin.

Tim Conder

you, Thank congrats. gentlemen, and

QX, sure combined in Canada that wholesale the Australia to couple here, shipments picked - Axis to just you alluded Jack well, where that was collectively any maybe units make then that the Malibu a wholesale to wanted but Just looking ex-Cobalt, want shipments much, just selectively flat, on at are the a in a mid-single color those there? range? really but international fairly up haven't were doing back on for to here, digits is fair a still global the just little get Malibu up into roughly up basis, Axis, color And we again

Jack Springer

Yes. little question, Tim, were To shipments a bit the wholesale first up the slightly. international

I performance think a had Asian the we Europe little side. and on of bit the

continues slightly. flattish to Canada remain to up think I

what see will happens season we currency approach in the as the first show quarter. with We boat the

saw Wayne question. said, end has what $X.XX will let the As happens that quarter. see we answer to we And the then, around second I’ll I variance of a the so since $X, it increased at

Wayne Wilson

digits? is the up implied for Yes, so essentially your the Malibu in Time coming retail mid-single to years activity be going is - that question

Tim Conder

it? that mid-single I so retail up of to think equals about mean sort digits wholesale, Wayne. fair a Yes, is way assuming

Wayne Wilson

be the expectations give from take little a in our perspective inventories from than little that our for would we is goal a more up range retail our that little bit, and bit or yet domestically the maybe in think inboards a versus levels, bit that be to closely, X%, in markets if is at their attractive X% more shipped that boat I number Yes, acceptable. that a X.X%, matching registration and would so US pretty

Tim Conder

XXXX or the that range? Okay. and so together And combined still in was then maybe Malibu reasonable bips for that again gets XX Axis share FY to of

Jack Springer

an - a think, annual I would bips would the XX increase about we outcome. to be over that good averages long see term share that like

Tim Conder

effective back just assume how through appreciate again, that to and done greatly see would Wayne that you then and tax not, reform but change then pending through could if if or your review then XX% comment, that that you if we’ll pass rate? And just corporate Okay. tax it go it, gets

Wayne Wilson

We that reduction states. rate $X and specific fiscal a into I So, elect XXXX Kansas. impacted think, that I with million and XXXX, that us tax in looking made tax rate well In we lower Cobalt income methodology taxes, state as to fully time. of respect the exposure. coming the allowed have adjusted at with obviously various TRA that TRA portion potentially off that is in tax to we their election in distributed and on fiscal reduces Tennessee impact a DTA taxes obviously our reflected the acquisition making in Subsequent based again various in April, the to provision the over readjust the Tennessee commentary those of we’re tax net that operations closed was that and to at the QX to closing in to payer liability, effective to needed manufacturers rates to various tax states, and we now specifically, attribution P&L that makes lower a passed Tennessee-based normalized

and to on amount that would proportionately. would to down income state-level liability for would the that and income statement couldn’t we needed that those liability pretty book it brought our be rate, that tax of not so we reform is in quarter but XX% in haven’t corporate we assumptions closed linear as federal or the of going teams you the of tax deductions before little into that not, that the which an through add that between XX% into be over generally time QX reduce the question a lot have see or reduction spent a of needed $X.X XX% modelling specifics there we rates. to whether So, adjustment to to on TRA all of because million based book and the TRA In to tax QX, the tax worked acquisition we into is

Tim Conder

then related Okay, it that thank tax advantages last you should be very the reform, ought some potential much to you and as of to proposed? one to depreciation relates one passed as take anything

Wayne Wilson

at We have specific time. this not identified anything

Tim Conder

you. thank Gentlemen, Okay.

Operator

And of Joe from our James. comes question next Altobello from line the Raymond

You may begin.

Joe Altobello

Hi guys, good afternoon.

ASP obviously to versus you I’m little bit I a the first be stronger quarter, first had first in bit, just obviously So, curious, this back stronger little ASP's you the are here go second and half shift looking expected to this half, mix a in year? up wanted had to guys you guys a we’re think so for question, second the past in feeling little but half ASP bit a how of quarter, the versus about I

Wayne Wilson

that I in we that in on is a the as with than the it feature XX just a LSV. mix think strong. options in new was stronger QX, saw ASP uptake we I Malibu lot on the and and new thought, was that than come well mean boat There thought, growth we XX XX MXZ stronger very, as but very actually optional the bit came the side some little on meaningfully stronger.

basis that probably it’s be as the are we’ve the end we also up easier year from towards still strongly think within moving that. it here Mike of and what my range we or also guided be the in to we of for didn't we think, think earlier think means that an comment the that I did, So, we higher with of a on year-over-year rest but I we QX as comp would had

Jack Springer

is and a out a which of as that is and a has color been of surprising little that just you commands premium good we the XX we continual know is higher supplement well on the then doubt. been seen you MXZ And a as than ASP mentioned generating on is last I out XX our in Joe, $XXX,XXX look has all-time XX gate. new from on demand boat the when that additional boat And Wayne, substantial under without the this customers The the that in that the on put Wedge a in Axis have a is board. boat regard. it and to MXXX LSV, XX-foot bit it the is the entire quarter. expected side bestselling we AXX the would on product side, decide lastly, market first Axis strong did in uptake the have innovation very only That point then grabbing we has and Power it and were most year, year the standpoint, Wayne that been boat boat feature and at to strengthening.

Joe Altobello

a big Great. exactly into And Cobalt obviously secondly, few and positive just as sounds very far? picture, Thanks it anything was, then it you it’s guys. thought going what months we surprised so are well you the it integration, like Jack you mentioned is all, at negative or

Jack Springer

and not XX% been and the react overly that out fit acquisitions I of remarkable and the when see we the acquisitions. about culture most happen, will to T-shirts meeting are how have employees. employees surprised by had just A wearing concern the shirts do have make positively that in you in the thing morning passed over dealers employee we the you meeting of you when our know, in always You acceptance them that.

the by by then that by naturally Cobalt So, had And just Malibu employees excitement well accepted dealer has questions, the acceptance Cobalt as of of dealers been a acquisition well. the been has but the lot base and very the at heartwarming.

Joe Altobello

Okay helpful. that’s

engine cost in of this there one for where Just modelling quarter? goods cost any purposes, for last Wayne, one development

Wayne Wilson

is in $XXX,XXX of in of cost Yes. - goods. There development about cost

Joe Altobello

Thank Okay. guys. Great. you,

Wayne Wilson

Thank you.

Operator

Mr. call Springer, And I'm showing for no back turn further to questions at closing any to remarks. Jack this Chief now time. Executive I like the would Officer

Jack Springer

very you much. thank right, All

with As call the to bullish want fiscal second and you joining year. on fiscal we’re Have and a for remainder supporting have quarter our you XXXX thank and year evening. for heard, the our we very first are We the very Malibu. outlook happy of nice the quarter

Operator

Ladies and and you great today's conference. Everyone may conclude gentlemen, thank you have This disconnect. the for participating a all day. does in program

Malibu Boats (MBUU) 7 Nov 172018 Q1 Earnings call transcript