Martin Mitela

Martin Mitela (Raymond James) inquired about the impact of higher boat show expenses on EBITDA margin and the difference between Malibu Boats' inventory levels and the broader industry's inventory overhang.

Answer

CFO David Black stated that promotional expenses, including year-end sales events and Q2 boat shows, resulted in approximately 50 basis points of cost pressure on EBITDA margin year-over-year. Regarding inventory, Mr. Black noted that while the industry has some elevated weeks on hand in pockets, Malibu Boats feels good about its historical weeks on hand due to proactive management.

Martin Mitela asked about the impact of higher boat show expenses on EBITDA margin and the difference between Malibu Boats' inventory levels and the broader industry's inventory overhang.

Answer

CFO David Black quantified the year-over-year promotional and year-end sales event costs as approximately 50 basis points of cost pressure on EBITDA margin for the quarter. Regarding inventory, David Black stated that while the industry has pockets of elevated weeks on hand, Malibu Boats has proactively managed its inventory and feels confident in its current weeks on hand from a historical perspective.

Martin Mitela of Raymond James inquired about dealer inventory levels, asking if they were elevated and if further destocking was expected in fiscal 2026. He also asked how potential tariffs would be reflected in pricing, whether through MSRP increases or a surcharge.

Answer

CFO Bruce Beckman confirmed that dealer inventory is modestly elevated by one to two weeks across all segments due to macroeconomic uncertainty, which will be addressed in the fiscal 2026 plan. Regarding tariffs, Beckman stated that while the exact mitigation strategy is undecided, the company is exploring supply chain adjustments to minimize price increases, though the anticipated cost impact is already factored into the guidance.

Martin Mitela, on behalf of Joseph Altobello at Raymond James, asked for commentary on demand trends, specifically regarding sell-in versus sell-through. He also inquired about the factors that would drive a return to growth in the Asian markets.

Answer

David Maher, President & CEO, stated that strong sell-in results and normalized channel inventory levels indicate healthy sell-through, with the dedicated golfer remaining engaged despite macro concerns. Regarding Asia (Japan and Korea), Maher differentiated between the steady equipment business and the softer apparel and footwear segments, which are undergoing a market correction after a COVID-era boom. He expects the region to stabilize in the second half of the year as the market rationalizes.

Martin Mitela, on for Joseph Altobello, asked for an update on inventory sell-through versus sell-in, given the $9 million inventory reduction. He also sought clarification on the free cash flow bridge, questioning if the relationship between pricing contributions and net pricing/volume figures implied lower volumes in the second half.

Answer

CFO Jesse Weaver reported strong sell-out numbers from distribution partners, indicating healthy end-user demand. He clarified that the strategic pricing revenue and the net pricing/volume figure on the cash flow bridge are separate metrics. He confirmed that the guidance reflects a conservative view on back-half volumes due to macroeconomic factors, but current demand is holding up and is on track to meet guidance.

Martin Mitela, on for Joe Pocciabello of Raymond James & Associates, Inc., asked about the potential back-half ramp-up for the energy drink rollout and if there was a target for door count. He also questioned the reason for the slight shortfall in reported gross margin compared to the preliminary figure released earlier.

Answer

CEO Chris Mondzelewski reiterated that the energy drink rollout will remain in its current limited geographies for the rest of the year, with significant expansion planned for next year. CFO Matthew Amigh explained the gross margin difference was due to a non-material reserve taken for obsolete raw material inventory, identified during the final stages of the quarterly close process.

Martin Mitela, on behalf of Joe Altobello at Raymond James, asked for more details on the trend of retailers shifting their replenishment activities to better align with the POS curve and inquired about the current state of retail inventories.

Answer

President & COO Nate Baxter explained that retailers are reverting to a pre-pandemic '50/50' first-half/second-half load-in schedule, a move the company supports as it helps level-load its supply chain. He noted that underlying consumer demand remains healthy. EVP & CFO Mark Scheiwer added that a reduction in retail inventory was anticipated in their annual plan and that future timing shifts are expected to occur between Q2 and Q3 rather than impacting the full year.

Martin Mitela, on for Joe Altobello, asked if the quarter's member growth was within expectations and inquired about churn trends, separate from the 'Click to Cancel' initiative, particularly in light of the recent price increase.

Answer

CFO Jay Stasz confirmed that member growth was within their expectations and that the company felt good about the result. He stated that churn continues to run in line with expectations and historical norms, having normalized quickly after last year's price increase, and remains pretty consistent year-over-year.

Martin Mitela of Raymond James & Associates, on for Joe Altobello, asked for quantification of the expected impact from tariffs, the potential for price increases in model year 2026, and for an update on the company's retail sales outlook.

Answer

CEO Bradley Nelson explained that the tariff situation is highly fluid, making it difficult to determine the effect on model year '26 pricing, though some inflationary impact is expected. He confirmed a modest impact for fiscal Q4 is already included in the revised guidance. CFO Timothy Oxley added that the full-year retail outlook is now expected to be closer to down 10% rather than the previous 5% to 10% range.

Martin Mitela inquired about the primary drivers for the lower fiscal 2025 EBITDA margin guidance, asking if it was due to volume deleverage or a worsening promotional environment. He also requested the fiscal 2024 adjusted EBITDA and EPS figures excluding the divested Aviara business.

Answer

Executive Timothy Oxley clarified that the margin pressure is primarily from lower volume deleveraging overhead and increased G&A expenses from funding bonuses at 100%. He confirmed the fiscal 2024 adjusted EBITDA excluding Aviara was $40 million but did not have the adjusted EPS figure readily available.