Good morning and welcome to the Malibu Boats conference call to discuss fourth quarter and full 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 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. Ritchie 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 fourth quarter and full year 2022 financials. We will then open the call for questions. A press release covering the company’s fiscal fourth quarter and full year 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 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. Fiscal year 2022 was another record year for Malibu Boats, which included fantastic fourth quarter results that surpassed expectations. Despite persistent supply chain and inflationary headwinds impacting the broader marine industry, our differentiated operating model, vertical integration capabilities and strategic leadership continues to shine through, helping us persevere and be the market leader. For fiscal year 2022, net sales increased nearly 31% to a record $1.2 billion. Gross margin remained strong at 25.5% and adjusted EBITDA grew 30% to a record $247 million, while adjusted EBITDA margin remained relatively consistent at 20.3%. During the fiscal year, we have met unwavering demand by ramping up our production capabilities through our vertically integrated model. As a result, we supported strong order volumes that ultimately exceeded our full year guide. Malibu continues to set the tone led by our operational excellence, premium brands, and unmatched manufacturing capabilities across our differentiated portfolio. We look to carry this momentum forward into the 2023 fiscal year supported by our new model year product. Retail demand remained very strong and has continued to support extremely robust ASPs across all brands. During the fiscal year, we did a masterful job of optimizing price in a difficult supply-constrained environment compared to the broader marine industry. With many competitors across our segments raising prices into the double digits year over year, we are proud to deliver our industry-leading innovation with minimal price increases comparatively, which will be a competitive advantage. As many boat manufacturers experienced, we did see a slight pause with the delayed spring; however, retail demand bounced back with dealers seeing a quick recovery around Memorial Day that carried through the quarter end. As a result, we have orders extending well into the first half of fiscal…

Thanks Jack. In the fourth quarter, net sales increased 27.6% to $353.2 million, and unit volume increased 10.3% to 2,596 boats. The increase in net sales was driven primarily by year-over-year price increases, a favorable model mix, and increased unit volumes primarily in our Malibu and Cobalt segments. Malibu and Axis brands represented approximately 56.9% of unit sales or 1,478 boats, Cobalt represented 22.7% or 588 boats, and saltwater fishing represented the remaining 20.4% or 530 boats. Consolidated net sales per unit increased 15.7% to approximately $136,000 primarily driven by year-over-year price increases and a favorable model mix. Gross profit increased 29.5% to $89.6 million and gross margin was 25.4% - this compares to a gross margin of 25.0% in the prior year period. Selling and marketing expense increased 1.7% or $0.1 million in the fourth quarter. As a percentage of sales, selling and marketing expense decreased by 40 basis points. General and administrative expenses increased 2% or $0.3 million. The increase was driven primarily by an increase in compensation and personnel-related expenses, increases in information technology expenses and travel, which were slightly offset by a decrease in professional fees. As a percentage of sales, G&A expenses excluding amortization decreased 120 basis points to 4.9%. Net income for the quarter increased 42.1% to $49.7 million. Adjusted EBITDA for the quarter increased 28.3% to $73.9 million, and adjusted EBITDA margin increased 10 basis points to 20.9%. Non-GAAP adjusted fully distributed net income per share increased 32.1% to $2.43 per share. This is calculated using a normalized C-corp tax rate of 23.8% and a fully distributed weighted average share count of approximately 21.3 million shares. For a reconciliation of adjusted EBITDA and adjusted fully distributed net income per share to GAAP metrics, please see the tables in our earnings release. As Jack…

[Operator instructions] Our first question comes from Brett Andress with Keybanc. Your line is now open.

Hey, good morning guys. I was hoping to get your thoughts on the July SSI data, or really any of the data we follow, for the last few months. You did mention that spring pause. Has there been any difference there in that data versus how you guys were expecting it to play out, or are you seeing anything different in your own warranty registrations? Just trying to make sense of some of it.

Yes, we’re trying to make sense of it too, Brett. The SSI data is more problematic than it’s ever been. The caution I’ll give is that we have said since we went public that if you look at any one given month, it’s going to be wrong. First of all, at best it’s 55%, 60% of the states that are reporting. It’s not until it matures over that quarter that it begins to have some semblance of truth to it, and so we really wait for that. The thing I’ll point out, though, and this even goes back to the June data that came out, there were three states that were missing, and so the disarray right now that’s going on with SSI just doesn’t give us any confidence. We are looking very closely at our internal warranty numbers, which do indicate a different story.

Got it, and if you want to elaborate on that story, that would be helpful; but my second question is just on the channel restock opportunity. I think you’ve given us some numbers in the past - you know, the total units needed to restock the channel. Where are we with that today, and if your 2023 guide plays out like you expect, how much progress would you expect to make there?

I think from the standpoint of the channel inventory, we’ve always talked in weeks on hand, and it’s still double digit weeks on hand - that’s low - across the board more so in the saltwater than the freshwater, as we talked about. I think as the year progresses, we will continue to see a better channel inventory build, first of all on Malibu, secondly in Cobalt, so that freshwater segment, and then it will follow in saltwater, but that won’t even, I don’t think, begin taking place until the second half of the year. If we look at cumulatively all of our brands, it’s easily--you know, when we get within that three to five weeks on hand, I believe easily it’s going to be the end of fiscal year ’23 and then fully getting up to speed on channel inventory is going to be at the end of ’23 or the beginning of ’24.

Got it, all right. Thanks guys.

Thank you.

Our next question comes from Jaime Katz with Morningstar. Your line is now open.

Hi, good morning. I’m curious to hear what you guys are seeing from an economic perspective. Obviously the demand from a shipment perspective is pretty good, but is there any cutting back anywhere - accessories, obviously we see the ASP numbers, is there any weakness that can be alluded to, or anything different, maybe, in the new boat buyers relative to the historical buyers that would indicate any sort of trend shift?

Yes Jaime, that’s a good question and it’s something that we’re following very closely, and I’ll talk about it on two different planes. From the standpoint--I’m talking a lot to dealers, anybody that I can talk to, Wells Fargo, whoever it may be, and this is a great time of year for me because we have four dealer meetings in a period of three months, so I’m able to communicate directly one-on-one with the dealers and get an understanding of what’s happening. Speaking to our brands and what we have, we are not seeing any type of a shift change. We continue to see people come out and buy the larger boats. I think the last year’s brand new T250 model is a great example of that - the largest Axis ever built, it outperformed expectations, so they continue to buy the larger boats, they continue to option up boats and buy every conceivable feature that would make sense for a given customer, and that’s across all of our brands. I’ll point to really one thing, and that’s our demographic. We have a unique, very strong demographic that, in my opinion, is the last demographic that’s ever affected by economic conditions. If you look at our annual income across the board of our demographic, it’s very, very high, the net worth is very, very high, and when you combine that with the fact that over the last three years, $43 trillion of additional wealth has been created, and I use the term resilient, I think it makes our consumer very resilient. Now moving to the second plane, what we are seeing is that across the marine industry, those smaller units, call it 22-foot and under, are being impacted. Last year, as an example, for the full year calendar 2021, that 22-foot and under market was down 13.8%, whereas the rest of the industry was pretty well flat versus 2020, which we know was a humongous year. I think our demographic is extremely strong and is carrying forward, and it’s that smaller demographic, that less expensive demographic that is probably feeling some pain at this point in time.

Excellent, and then just as a follow-up, I guess, given the cadence of acquisitions you’ve had historically, I’m curious where you guys are seeing valuations in the boat space, whether there could be opportunities or if it seems like maybe interest is too high across the board, where valuations are running a little bit heated. Thanks.

Since the first of the year, there’s not been a lot of assets come to market. It’s been a pretty slow time. I do believe as the economy potentially wanes, that’s going to pick up some. I will say that what we have seen have not been necessarily assets that we would want to pursue and they have been at higher multiples, but again if we’re entering any type of softening phase, I think that more assets will come to market, number one; and number two, I think it will be not as frothy and people will be more realistic in their expectations.

Thank you.

Our next question comes from Gerrick Johnson with BMO. Your line is now open.

Great, thank you. I have two questions, please. First, in the past you’ve given us the percent of production as dealers sold and retail pre-sold. Wayne, maybe if you could give us those numbers?

I actually don’t have those specific numbers. The amount of presales that are occurring in the saltwater segment is higher at this time. Jack, you may have some more specifics and have been the source of that in the past.

No, not in terms of presales. I would say it still in the saltwater remains in that 80% to 90% range, at a minimum, we’re just not creating any channel inventory, whereas we talked in terms of historical trends and it’s normally in that 50% level for the freshwater market. It’s still elevated a little bit but it’s coming back more toward a normal, maybe 60% or so, but that’s just really a guess on my part, Gerrick.

Okay, great. Perhaps you could give us a retail demand expectation for your fiscal year?

Yes, so the--we haven’t necessarily given forecasts of the specific number. We obviously, Gerrick, are modeling that out and looking at different scenarios, especially in the environment that we’re in today where there’s a channel inventory opportunity. What I would tell you is that the primary model or scenario that we used to come to our forecast was a down high single digit percentage for our fiscal year and a modest amount of channel inventory.

Okay, great. Thank you Wayne, thanks Jack.

The next question comes from Martin Mitela with Raymond James. Your line is now open.

Hey guys, it’s actually Joe. Can you hear me okay?

Yes, Joe Martin? Good to have you.

Good morning. My first question--I just have a couple questions on the guidance. First, EBITDA margin is expected to be down this year, but you said it’s going to be up in the first quarter. Help us understand some of the puts and takes there and maybe why that would get worse over time.

Yes, look - the EBITDA margin down, I’ll talk specifically about just the down slightly guide. The reality is our plan calls for increased mix in saltwater and businesses that are a little less mature than Malibu, and so on a mix adjusted basis or a mix neutral basis, we’re actually seeing margin expansion, and so that’s kind of the aggregate view of what’s going on, on margin for the year. In terms of the cadence, if you look at the timing of when that mix change is impacting the P&L, it’s more in the second half of the year, and so you’re seeing better performance in the first half. There’s actually less of an impact of that mix in that first quarter, and that’s what we’re trying to let you all know is going to happen, as opposed to surprising you later on.

Okay, that’s helpful. [Indiscernible] the high singles, could you break that down between units and pricing? I ask that only because if I look at your website, it says no price increases on model year ‘23s, so maybe if you could break that number down for us and maybe your thinking on why no price increases.

Yes, we haven’t been giving a big breakout in terms of the volume versus ASP. You’re going to see a number that is going to be split pretty evenly between volume and ASP.

And ASPs would be all mix?

Yes--go ahead, Joe?

No, I was going to say, the ASP increase is going to be all mix and [indiscernible], it sounds like, mostly?

Well, keep in mind, Joe, that what you’re--you know, you’re comparing something that’s hey, this is what’s happening with prices between a date certain and another date. There are embedded as prices have risen throughout the fiscal year ’22, there is--you know, we took into account there is absolutely a natural uplift that’s going to be happening relative to that, so if you go back to the mid-year and how we modified prices, and so not all boats in the year were at the price that we ended the year at, and so there is a modest uplift that’s associated with that. Actually, we think we would see a little bit higher uplift on ASP but for some of the mix that we’ve talked about.

Okay, perfect. Thanks guys.

The other thing I’ll point out, Joe, a couple things--and you cut out a little bit, but a couple things I do want to point out is you were looking at the website relating to Malibu, so that is specific to the Malibu and Axis products and not necessarily the other brands. The other thing is that is the beginning of the year from a price increase standpoint, so that does not say, you know, we want to do that. We think that gives us a competitive advantage, but that doesn’t say we will not re-evaluate that at the beginning of the calendar year.

Okay, thanks for clarifying, Jack. Appreciate it.

Our next question comes from Brett Andress with Keybanc. Your line is now open.

Just to follow up, is there any way--I think Jack, you mentioned this earlier, to frame up how much price your competitors have taken since, I guess COVID, and how much you’ve taken? I’m just trying to frame up what you think that gap is right now going into model year ’23.

It’s a little bit more unclear when you get to companies that are not public, but generally we believe that we are at the--you know, I’ll put in the framework of we’re at the lower end of the spectrum, regardless of whether it’s public or private. We are aware of some public companies, as an example, that 12.9% was the price increase that came out, so a pretty staggering price increase on top of all of the COVID price increase that occurred. We’re really confident that regardless of what brand we’re dealing with, what segment we’re dealing with, we’re at the lower end of the spectrum of the price increases.

Got it, thank you.

I’m not showing any further questions at this time. I would now like to turn the call back to Jack Springer for any further remarks.

Thank you very much. In summary, we have a massive quarter in a massive year that we’re very proud of. Malibu Boats continues its dynastic run, delivering another great quarter and outstanding year. Our daily backlog remains exceptionally strong, supported by the unprecedented consumer appetite for larger, feature-rich boats, and it will drive ASP growth across the board. We are capitalizing on the strong demand environment and taking advantage of the attractive trends that have materialized over the past few years. We are the boating leaders offering the finest, most modern products in the marine industry. From Malibu and Axis to Cobalt, to Pursuit, to the Maverick brands, we are in a unique and favorable position with our suite of premium brands and boats and our model year 2023 line-up is sure to make waves among consumers. Our recent acquisition of Malibu Electronics has already proven to be a critical differentiator, enabling us to increase volume at Malibu and Cobalt all the while generating a significant return on investment. We managed price increases masterfully in fiscal year 2022 and we have continued to tailor inflationary costs to this day. This will provide increased competitive advantage and further stretch our industry dominance. Lastly, channel inventory remains at historical lows, providing an incredible opportunity for our continued success for the next two to three years as the supply chain normalizes. As always, I would like to thank you for your unrelenting support, and I look forward to our continued victories together as we strive to make fiscal year 2023 the best year yet for Malibu. Have a great day.

This concludes today’s conference call. Thank you for participating. You may now disconnect.