Malibu Boats - Earnings Call - Q1 2026

Executive Summary

• Q1 FY2026 delivered a top-line beat with net sales up 13.5% year over year to $194.7M, while adjusted EPS reached $0.15; gross margin compressed 210 bps to 14.3% on higher unit labor/material costs and dealer incentives.
• Consensus was exceeded: revenue $194.7M vs $182.2M*, and EPS $0.15 vs $0.095*; management called the quarter “modestly above expectations” and maintained full-year guidance.
• Guidance: FY2026 sales flat to down mid-single digits and adjusted EBITDA margin 8–9%; Q2 FY2026 sales guided to $175–$185M and adjusted EBITDA margin 3–5%, reflecting boat show costs and deleverage as volumes step down.
• Strategic catalysts: new product launches across brands at FLIBS (Pathfinder 2600 TRS, Cobalt R31 OB), continued innovation, and rollout of MBI Acceptance financing to support retail; the Malibu Wakesetter 23 LSV won Boat of the Year for the sixth consecutive season.

What Went Well and What Went Wrong

What Went Well

• Revenue beat and volume growth: Net sales +13.5% YoY to $194.7M on unit volume +10.3% to 1,129; consolidated net sales per unit +2.9% to ~$172.5K.
• Malibu segment momentum: Malibu net sales +40.4% to $78.6M on higher shipments; Malibu/Axis constituted ~47.7% of unit mix.
• Strategic execution and innovation: “We delivered strong results… Prioritizing dealer health remains central to our strategy,” CEO Steve Menneto; new models drew strong dealer/customer feedback and financing partner called MBI Acceptance “one of the strongest programs” they have seen.

What Went Wrong

• Margin compression: Gross margin fell 210 bps to 14.3% on higher per-unit labor/material costs and increased dealer incentives, particularly in Malibu.
• QoQ step-down: Versus Q4 FY2025, sales (-6%), gross margin (-150 bps), and adjusted EBITDA margin (-340 bps) declined amid normal seasonal expense phasing and show costs.
• Competitive promotions and soft retail: Management expects a “competitive promotional environment” to persist as retail remains soft; dealer incentives weighed on Malibu segment.

Transcript

Speaker 1

Good morning and welcome to the Malibu Boats Conference call to discuss first quarter fiscal 2026 results. At this time, all participants are in 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. As a reminder, today's call is being recorded. On the call today from management are Mr. Steve Menneto, Chief Executive Officer, and Mr. Bruce Beckman, Chief Financial Officer. I will now turn the call over to Mr. Beckman to get it started. Please go ahead, sir.

Speaker 0

Thank you and good morning everyone. Joining me on today's call is our CEO Steve Menneto. On the call, Steve will provide commentary on the business and I will discuss our first quarter of fiscal year 2026 financials. We will then open the call for questions. A press release covering the company's fiscal first quarter 2026 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, and 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 these 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, and adjusted net income per share. Reconciliations of these GAAP financial measures to non-GAAP financial measures are included in our earnings release. Finally, during today's prepared remarks, comparisons are to Q1 of fiscal 2025 unless otherwise noted. I will now turn the call over to Steve.

Speaker 2

Thank you, Bruce, and good morning, everyone. We're excited to be hosting today's call from the Fort Lauderdale International Boat Show as we officially kick off the boat show season. It's always energizing to be here alongside our dealers, customers, and partners, showcasing our newest models and celebrating innovation across our brands. Turning to our results for the first quarter, we delivered a solid start to the fiscal year with revenue growth above our expectations. Despite what remains a soft retail backdrop, net sales increased approximately 13% year over year, and adjusted EBITDA margins were in line with the plan. These results underscore our ability to execute and outperform the market while maintaining discipline around dealer health and channel inventories. As expected, retail activities remained soft, and inventories entering the quarter were slightly elevated.

We remain focused on working closely with our dealer partners to support rightsized inventory levels through targeted, market-appropriate promotions. These programs are part of our normal seasonal activity and consistent with our approach of maintaining dealer health. That said, we feel very good about where we are positioned today. Our dealers are healthy, our brands are strong, and we have conviction in the mid-cycle outperformance opportunities. At our investor day, we also outlined our strategy to drive growth and long-term value creation through our Build, Innovate, and Grow framework. This strategy builds on the foundation we have created as the leading premium fiberglass boat manufacturer and expands our capabilities beyond boat building into parts and accessories and marine services. Within marine services, we recently launched MBI Acceptance, a new financing partnership that extends our 360-degree marine ecosystem and provides an important tool to help drive retail at the dealer level.

Early feedback from our financing partner has been extremely positive, describing MBI Acceptance as one of the strongest programs they have seen, noting exceptional dealer engagement and early success in the rollout. Dealer participation continues to build momentum, and we look forward to providing additional updates as we expand the program throughout the year. Turning to product innovation, model year 2026 is off to a great start. Dealer and customer feedback on our newest launches have been extremely encouraging. The new Cobia models continue to generate strong excitement and validate our investments in innovation within the saltwater segment. The Malibu 21 LX and the Axis A200 were well received by both dealers and customers, offering accessible performance and versatility.

Earlier this month we introduced the Cobalt R31 Outboard, delivering up to 800 horsepower in coastal-ready luxury, and debuting this week at Fort Lauderdale, it is the all-new Pathfinder 2600 which delivers both hardcore fishability and family-ready functionality. I'd also like to take a moment to recognize Pursuit for being honored with the National Boating Safety Award in the Marine Manufacturers category from the Seato Foundation. Selected out of the hundreds of boat manufacturers across the country, this recognition underscores Pursuit's leadership in our owner education and safety through its Confidence on the Water program, a partnership with the Chapman School of Seamanship that provides hands-on training for new owners. It's a great example of how our brands not only innovate in design and performance, but also lead the industry in promoting safe, confident boating experiences.

Overall, we are encouraged by the excitement surrounding our new model year lineup and the steps we are taking to drive retail activity and improve the customer experience. At our recent dealer meetings, the energy and optimism among our partners is clear even as retail remains soft. Our dealers are energized by our innovation both in products and in retail tools. They see the strength of our brand, the quality of our products, and the value of our partnership as key advantages that will drive success as market conditions improve. Looking ahead, we will continue to remain realistic about the broader marine environment. While we have yet to see a clear inflection signaling a broader market recovery, our focus remains unchanged: protect dealer health, manage production with precision, and continue to push the pace of innovation and execute on our strategic growth priorities outlined at our Investor Day last month.

We are maintaining our full year guidance and remain confident in our ability to outperform the market while continuing to build for the next up cycle. With that, I'll turn the call over to Bruce for the detailed review of our financial results.

Speaker 0

Thanks, Steve. Our results in the first quarter were modestly above our expectations. Net sales increased 13.5% to $194.7 million and unit volume increased 10.3% to 1,129 units. The increase in net sales was driven primarily by increased unit volumes in the Malibu segment, a favorable model mix in our Cobalt segment, and inflation-driven year-over-year price increases, partially offset by decreased unit volumes in the Cobalt and saltwater fishing segments and an unfavorable segment mix. The Malibu and Axis brands represented approximately 47.7% of unit sales. Saltwater fishing represented 25.5% and Cobalt made up the remaining 26.8%. Consolidated net sales per unit increased 2.9% to $172,500 per unit, primarily driven by a favorable model mix in our Cobalt and saltwater fishing segments and inflation-driven year-over-year price increases, partially offset by an unfavorable segment mix and increased dealer incentive costs.

In the Malibu segment, gross profit decreased 1% to $27.9 million and gross margin as a percent of sales was 14.3%. This represents a decrease of 210 basis points compared to the prior year period. The decrease in gross margin was driven primarily by higher unit labor and material costs and increased dealer incentive costs. In the Malibu segment, selling and marketing expenses increased $1.4 million in the first quarter. The increase was driven primarily by an increase in marketing event costs as a percentage of sales. Selling and marketing expenses increased 40 basis points to 3.2%. General and administrative expenses decreased 23.8% or $6.5 million. The decrease was driven primarily by a more favorable year-over-year comparison due to a $3.5 million legal settlement in the prior year along with good corporate expense management. As a percentage of sales, G&A expenses were 10.7%.

GAAP net loss for the quarter decreased 86.2% versus the prior year to a loss of $700,000. Adjusted EBITDA for the quarter increased 19.1% to $11.8 million and adjusted EBITDA margin increased to 6.1% from 5.8% in the prior year. Q1 non-GAAP adjusted net income per share was $0.15, up $0.08 from prior year. This is calculated using a normalized C Corp. tax rate of 24.5% and a basic distributed weighted average share count of approximately 19.3 million shares. For a reconciliation of GAAP metrics to adjusted EBITDA and adjusted net income per share, please see the tables in our earnings release. Turning our attention to cash flow, we generated $2.5 million of free cash flow during Q1 inclusive of $4.3 million of capital expenditures. It is worth noting that Q1 is typically a challenging cash flow quarter, and we are encouraged by the positive start to the year.

As stated at our Investor Day last month, we look to maintain a prudent approach to our capital deployment, and with our capacity expansions behind us, we anticipate strong free cash flow generation as the industry returns to mid-cycle levels. Turning our attention to the full year, our view of the market has not changed. We continue to anchor our outlook with the expectation that our markets will decline in the range of mid to high single digits for the year, with a continuation of the high single digit to low double digit decline through the second quarter. With that said, we are keeping our fiscal year 2026 outlook unchanged. For the full fiscal year, we continue to expect sales to be flat to down mid single digit percentage points. For Q2, we expect sales between $175 to $185 million.

We anticipate consolidated adjusted EBITDA margin for the full year ranging from 8% to 9%. For Q2, we expect adjusted EBITDA margins ranging from 3% to 5%. This guidance incorporates a modest direct impact to our fiscal year 2026 cost structure due to tariffs, which we continue to estimate between 1.5% to 3% of cost of sales. Assuming current tariff rates, we will continue to proactively mitigate impacts through our strategic supply chain management initiatives and vertical integration capabilities, which will help us minimize associated price increases. To close, we are off to a solid start with results that modestly exceeded expectations, reflecting disciplined execution and operating focus. Our strong balance sheet, operational excellence, and resilient business model give us the flexibility to scale production with retail and leverage our capacity we have put in place.

Looking ahead, we are confident in our ability to deliver on our strategic objectives, outpace the market, and deploy capital prudently to drive long term value. With that, I'd like to open up the call for questions.

Speaker 1

As a reminder to ask a question, you will need to press star and 1 on your touchtone telephone. If your question has been answered or you wish to withdraw your question, press star then 2. Please stand by while we compile the Q&A roster. The first question from Joe Altobello, Raymond James, please go ahead.

Speaker 0

Hey, good morning, this is Martin on for Joe. Congrats on the quarter. I just wanted to quickly touch on interest rates. Have you seen them sort of come down from consumers, and is this having an effect whether it's getting people to go ahead and buy, or is it affecting mix in any way?

Speaker 2

When you look at the rate cut of yesterday, I think where we see it show up is a few places. One is first, consumer sentiment. Right. I think it's just better for consumers to see those rates come down. They're still, you know, they're down about 100 basis points from the peak Covid, but they're not down to where they used to be, you know, prior. That helps consumer sentiment. Where we see it show up though, the dealer floor plan cost will come down because it's tied to SOFR. They'll see an immediate cost there. The consumer gets encouraged, the dealer gets encouraged. When you're looking at what will it do to retail finance rates, that will take a little bit of time to manifest itself into the marketplace.

Speaker 0

Got it, thank you. Just quickly touching on higher dealer incentives, you mentioned for Malibu brand. Is this just to clear inventory and is this something that we can expect to continue for the next couple quarters? I guess what I would say there is some of that is relating to the comparison period. Last year in the first quarter was a year of relatively light promotional activity in the Malibu segment. We were just coming off a very heavy promotional period in Q4 of 2024. Yes, the overall industry, as you know, had a soft Q4 and we were no exception to that. We started the year with a little bit higher inventory and we did some promotional activity to help our dealers work through that in the first quarter. Going forward, we expect it to be a competitive promotional environment, but not anything like we've seen here recently.

Great, thank you and good luck. Thank you. Hi guys, this is Kevin on for Craig. Thanks for taking our question. Wanted to follow up on inventory a little bit just in terms of how you're thinking about that going forward. I think now is normally a seasonal low point. Just as you think about building into next year, given your outlook, are there weeks on hand metrics or turns metrics that you target and any insight across your segments about is it healthy everywhere? Are there areas where you see more potential to stock dealers into next year? Yeah, we're constantly in contact with our floor plan finance providers monitoring inventory levels and overall dealer health. Like I mentioned a moment ago, the industry came into the year with a little bit heavier dealer inventory, but it's not very far out of line.

We would expect that will continue to work itself down here as we go through the first half. As we think about our production levels and managing dealer inventory, we're really trying to align that with our expectations for the market. In the second quarter and the second half, we're expecting the markets to be down and we're going to pace our production in line with those expectations. Maybe a follow up on the retail expectation. Is it fair to say that rate of decline is fairly consistent through the year? I know it's such a seasonal business, but would you expect retail to be down each quarter consistently, or is it like a bigger front half weighted down, but then Q4 up? Any help on the shape of the year? Sure, yes.

What we said in the last call is what we still are expecting today, which is the first half to be down more than the second half of the year. For the full year, we've said that our expectation is market will be down mid to high single digits and that the first half of the year will be down high single digit, low double digit, with the second half a lesser rate of decline. That is essentially exactly what we're seeing so far this year. The year is playing out in line with that expectation thus far.

Speaker 2

Yeah. Mark, it allows us to, as we shared with everyone on investor day, it allows us to keep focusing on driving our lean manufacturing, our quality. All the things we talked about at MBI Advantage, our central sourcing category management, our go to market capability. As Bruce outlined, where retail is, we're taking full advantage of this time to continue to work on our business and make those improvements. As those volumes return, we'll be pretty excited and firing on all cylinders to keep moving forward.

Speaker 0

Gotcha. That all makes sense. Thank you so much for taking the question. Thank you.

Speaker 1

The next question from Bruce Beckman, B. Riley, please go ahead. Hey, good morning guys. Thanks for taking my question. I'd like to turn to the commentary on the second quarter margin. Just wondering the cost impacts being contemplated there and anything to note, maybe show costs or things like that that are being contemplated. Thanks.

Speaker 0

Yeah, I mean what I would say is there is a midpoint of that guidance is below where our revenue was in Q1. There's a modest amount of deleverage that you can expect, and that's embedded in that guidance. We're seeing normal expense phasing throughout the year. We are starting the boat show season, and some of those expenses do ramp up as we get into season.

Speaker 1

Got it. On the saltwater fish and Cobalt, should we expect, can you touch on kind of dealer inventories in those segments and if we should start to see more in line retail and wholesale balance throughout the year?

Speaker 0

What I would say is, overall we still expect this to be a year of reduction in dealer inventories. Just overall, as we don't really see a massive difference, I would say, between our segments in terms of the market environment. We're expecting that our dealer inventories will come down in all segments.

Speaker 1

Great, thanks guys.

Speaker 0

All right, thank you.

Speaker 1

The next question from Eric Wold, Texas Capital Securities, please go ahead.

Speaker 0

Thanks. Good morning guys. Couple questions. I guess I want to get back to the MBI Acceptance and maybe see if you could dig in a bit more on that. I know it's been only about a month or a little less than a month since you launched that with the Malibu brand, but maybe some initial read in terms of how fast that was able to be rolled out across the dealer network. Maybe how penetrated that is so far. Any additional thoughts in terms of maybe what you've seen has worked versus hasn't worked. Maybe any addition to that would be helpful.

Speaker 2

A lot there, Eric. We're excited about how it rolled out. If you recall, we said it was going to pilot in Malibu Access first and that's where we're seeing that work. We are getting a lot of our dealers signed up. We're excited about that. Actually, our partners have said, like we said in our remarks, we're pretty excited about the overall adoption from our dealer base. They're seeing that as the strength to help retail boats. We're excited about that. Anecdotally, we're early in, we've seen, as you know, we've done some promotional 4.99% financing. There are some dormant customers that came back because our dealers have reached out to them and said we have a new offer and they actually bought boats. We're still in the anecdotal phase, to be honest.

We have to let this thing start to incubate, go through its pilot, then we'll start looking at the data. Everything is from launch to where we are today, pretty exciting and energizing for our dealer base.

Speaker 0

The plan for the other brands is still unchanged, or the timeframe of when that would roll out, correct.

Speaker 2

will continue to our Q1 plan to roll it to our other brands still remains intact.

Speaker 0

Perfect. And then just last question, dovetailer and just discounting in general. Just give us a sense of the level of discounting that's still out there that you're seeing both, I guess with both your brands and maybe you're seeing with competitor brands and kind of when you feel that may start to cool off in the market vis a vis kind of channel inventories declining, rates declining. When we see that kind of discounting kind of, I don't want to get back to normal but maybe kind of cool off from current levels. Yeah, I guess what I would say, Eric, is certainly it has cooled off from the period where there was considerable excess inventory in the industry. It has cooled off from that, but it remains competitive. It is still a soft retail environment and the brands and our dealers have to compete for deals.

As long as consumer sentiment is what it is, it probably will be a competitive environment, but not what it was. Got it. Thank you guys.

Speaker 1

The next question from Noah Vatskin, KeyBanc Capital Markets. Please go ahead.

Speaker 0

Hi.

Speaker 2

Thanks for taking my questions. I guess first, could you give any?

Speaker 0

Color on how you're thinking about ASPs across segments? Maybe how model year 2026 pricing plays into that as well as mix would be helpful, thanks. Yeah, what I would say is we have modest year over year price increases. I would say the trend towards larger, more feature rich boats will continue, maybe not at the pace that they have the last couple years, but that macro trend is likely going to continue for the foreseeable future. Thanks. Maybe just kind of any updates on how you're thinking about M&A or greenfielding would be helpful. Thanks.

Speaker 2

Yeah, as we said, M&A and greenfielding, of course, is part of our capital deployment strategy. No changes on that front to announce. We're still looking at opportunities, as we say, we're open for business and we'll continue to consider opportunities that make sense and create value for our shareholders.

Speaker 1

The next question from Jaime Katz, Morningstar. Please go ahead. Good morning, guys. I'm hoping you guys can help us think about what sort of top line growth or perhaps declines we need to see to start to get a little bit of expense leverage to surface here, given that absorption should improve as improvements have been made to the manufacturing process. Do we need to just get to low single digit declines to start to see a little bit of improvement, or does that have to turn positive again?

Speaker 0

We focus on maintaining good expense control and really focus on keeping our cost structure highly variable to enable us to adjust to the market conditions that we find ourselves in. I think having the market declines shallow out will certainly be helpful. Obviously, to get real leverage, you have to see the markets turn. We're prepared. We're driving our innovation, we're driving our outperformance initiatives. We're not waiting for the market to return to growth, but I think to see large scale volume leverage, you probably will need to see the market return to growth.

Speaker 1

Okay. As we look at the back half of this fiscal year, I'm trying to think of whether there might be a little bit of resilience in the gross margin line, given that I think we saw some tariffs already in the final quarter of fiscal 2025. Maybe a little bit of a discussion between the benefit or the lack of input or lack of impact to gross profit at the end of the year this year versus last year. Were there any one-time items at the end of the year in G&A that might make the G&A ratio a little bit more competitive this year in the back half?

Speaker 0

I don't remember if there were any comparison items in last year, so that's probably not the case. I mean, I think we expect the tariff kind of headwinds to build, as well as our tariff mitigations to take hold as the year plays out. Of course, we're always working initiatives to drive margin performance.

Speaker 2

So.

Speaker 0

We are expecting higher margins in the second half embedded in our guidance, and certainly gross margin is a part of that overall equation.

Speaker 1

Thanks. The next question from Michael Albanese, Benchmark, please go.

Speaker 0

Mike.

Speaker 1

Mr. Albanese, your line is open.

Speaker 0

Sorry, guys. Can you hear me?

Speaker 2

Hey Mike.

Speaker 0

Yep, good morning. Thanks for taking my question. I just want to dive into the consumer a little bit more. Curious if you're seeing any updates to consumer behavior as it relates to payment buyer, cash buyer, what that mix has looked like. I know it's early, but I'm assuming MBI Acceptance will give you or does it give you a little bit more visibility into that?

Speaker 2

I think two things, Mike, on that. One, no change from what we were talking about earlier about where that cash buyer, payment buyer dynamic has landed over the last few quarters and still seems to be persisting through this quarter. The MBI Acceptance, from a data point, it's early on. We're trying to see where that starts to feed us more information and to be smarter about how we go to market with some of our tools. We're just getting into mining some of the opportunities there. Nothing really to share yet, but that we will have a look into.

Speaker 0

What.

Speaker 2

The consumers' purchasing habits are, and some of the data around that. I think that will be later down the road once you can get enough data in to create some trends. We'll get the advantage of that.

Speaker 0

Yeah, I would just add, Mike, I mean as you know, the consumer finance rates tend to be tied to longer term treasury markets, not really the short term interest rate. It will take a little while, I think, for the short term cuts to work their way through to the consumer finance rates, and that's really probably what's going to be required to see a shift in that cash buyer to payment buyer ratio. Thanks, guys.

Speaker 1

I'm not showing any further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect your lines. Goodbye.

Speaker 0

Thank you.