Good morning and welcome to Malibu Boats Conference to discuss Fourth Quarter and Full Fiscal Year 2024 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. [Operator Instructions] And as a remainder today’s call is being recorded. On the call today from management are Mr. Steve Menneto, Chief Executive Officer, Mr. Michael Hooks, Executive Chair; Mr. Bruce Beckman, Chief Financial Officer; and Mr. Ritchie Anderson, President. And 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, Michael will provide a brief update and introduce our new CEO, Steve Menneto. I will provide commentary on the business and discuss the fiscal fourth quarter and full year 2024 financials and Steve will provide an update on the new model year and near-term growth priorities. We will then open the call for questions. Our press release covering the company's fiscal fourth quarter and full year 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 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 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 and 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 Michael Hooks Chair of Malibu Boats. Michael?

Thanks, Bruce, and good morning, everyone. I would like to start the call to welcoming Steve Menneto as our new CEO. And as you know, the Board conducted a comprehensive search process, and we are thrilled to have Steve at the helm. The depth of experience and track record of success makes him an excellent fit to lead Malibu Boats through the cycle and into its next phase of growth. I also want to take this opportunity to thank the entire MBI team for their passion and dedication, particularly during this transition period. Your hard work and commitment have been instrumental in navigating this change and we are all grateful for your continued efforts. You will hear more from Steve in a few moments, but first, let me turn it back over to Bruce to walk us through the fiscal year and quarterly results.

Thank you, Michael. As we closed out fiscal 2024, we showcased the resilience of Malibu Boats and executed on our strategic goals despite a challenging retail environment. As anticipated, our financial results during the quarter were impacted by the necessary steps we go to reduce channel inventories, including reducing production levels and increasing promotional support. As discussed on our prior call, this was our top priority during the quarter and we made significant progress, with MBI dealer inventories now aligning with historical weeks on hand level. Our dealer partners have executed well in a very competitive promotional environment and we appreciate the support. The resilience of our business model was evident in our results. As we have discussed many times in the past, our cost structure is highly variable and we demonstrated this throughout fiscal 2024. For the year, cost of sales decreased 34%, while revenues declined 40% demonstrating our operational excellence and highly variable cost structure in line with our historical range of 80% to 90%. Our variable cost structure and focus on working capital enabled us to generate positive free cash flow during the fourth quarter. A remarkable accomplishment in the quarter where revenue was down over 50%. As a result, we were able to repay all remain debt and repurchased $10 million of stock in the quarter. The ability for MBI to execute our capital allocation priorities in the face of industry headwinds only increases our confidence in our business model as the cycle normalizes. We continue to streamline our operations and make great strides ramping our Roan County facility in the quarter. In addition to producing Cobalt small boats, we have integrated our Malibu electronics wiring harness operation into the facility. As a result, we are able to consolidate our manufacturing footprint in Tennessee as well…

Thank you, Bruce, and good morning, everyone. I'm very excited to step into the role of CEO at Malibu Boats and build on our growth trajectory in what is already a very strong foundation. Over the quarter, we achieved several milestones despite a challenging year, impacted by retail uncertainty, which positions us well for the future success as cycles normalize. As Bruce mentioned earlier, we made strong progress reducing dealer inventories to historical healthy levels. We added new dealers up to our successfully serve our freshwater customers, while maintaining our pace of innovation and our market-leading presence. Malibu has a stellar reputation for innovation, quality and performance and I'm honored to be part of its future. Before we jump into the new model year updates, I'll share my background, why I joined Malibu at near-term actions of our team that our team is taking to position us for success. By way of introduction, I came to Malibu Boats after nearly three decades at Polaris. More recently, I had the privilege of leading the largest business, the off-road vehicle division to significant revenue growth, nearly doubling its revenue to approximately $7 billion over the last five years. This included planning, developing and building a gold manufacturing footprint that supplies hundreds of thousands of vehicles worldwide. My journey also includes spearheaded the commercialization efforts on the on-road division, driving the launch and expansion of the Indian motorcycle business. Throughout my career, I have learned the importance of innovation, customer focus and operational excellence, values that are deeply ingrained within the Malibu Boats culture today. My history of advancing high-impact opportunities meshes well with the values of Malibu Boats. And together, I'm confident we can drive aggressive growth in this fast paced dynamic consumer-facing industry. Now that I've been here for about a…

[Operator Instructions] And the first question comes from Craig Kennison with Baird.

Steve, I'm curious as you've had conversations with dealers in this channel, how you would compare that dynamic with what you've experienced in power sports and what you can say to investors who are concerned that inventory bubbles tend to creep up in these industries and create a really difficult investment environment?

Over the last month, I've been able to get out to a few dealers as well as attend the Pursuit dealer meeting. And there's -- there are some similarities to both industries and there's some other things that are not similar. Of course, the price points on the units here are a lot higher. The velocity is a little slower. So you have to really pay attention to get the inventories right. We've been focused on that, as Bruce alluded to over the last quarter and we'll continue to keep that in our sites is to get -- continue to match the inventory to the retail the best we can.

And I'm wondering with respect to 2025, the fiscal guidance you offered, what's the retail assumption embedded in that? And where do you expect inventory to be at the end of fiscal 2025 relative to fiscal 2024?

In terms of the market growth, we expect that the headwinds will continue for a while longer. We're expecting mid-single-digit down market in our guidance. We're also hearing from our dealers as well as our floor plan finance partners that the dealers are going to want to take the dealer inventories below historical just because of the high flooring costs that they're experiencing. And so, we're expecting dealer inventories to contract below this 15% -- or off down by 15%.

And then just, I guess, with your -- how do you reconcile that with guidance, anticipating sales growth? Is that a mix or price dynamic? It sounds like you would expect units to be down.

So we expect units will be flattish, I would say and we're seeing -- we're expecting lower promotional spend next year. So we expect to get a little bit of that as well as from some product base and share. We're on a multi-year trend of gain share and we expect gain market share.

And I'm sorry to keep monopolizing this. I didn't intend to do that. But I'm maybe confused if you're saying retail is going to be down and dealers are going to have less inventory, how do you ship more units?

Well, again, this year, we had a huge destock this year, our stocking or our wholesale shipments were far below our retail on.

And the next question is from Joe Altobello with Raymond James.

Steve, congrats and welcome aboard. So I just wanted to follow up on Craig's question in terms of the guidance, maybe the cadence. Obviously, Q1 is going to be a bit of a challenge here, but it sounds like you expect to return to growth later in the year. Are you guys assuming that the demand environment does improve in the spring, you're assuming -- or is the growth really coming from just lapping easier compares as we progress throughout the year?

It's really, Joe, we have our most difficult comp in Q1 versus last year. Last year, production was still elevated in Q1. And we've been conscious to keep our production level low here throughout the summer. We don't want to refill a channel that we just spend all that time and effort lowering. So we have a reactive capacity to support the market if this drives us to the good. And so we're being cautious here as we start the year.

Just a follow-up on the acquisition strategy. Obviously, given where your balance sheet is, as you mentioned, you've got plenty of dry powder here. You've talked about pontoons in the past. Is that still top of mind? Or are there other categories you might be looking into at this point?

Joe, we had previously mentioned that we finished in the pontoon sector. And then we're also looking at other ones that make sense to fit our portfolio. And as those arise, we'll entertain them.

And the next question comes from Noah Zatzkin with KeyBanc Capital Markets.

We've heard a lot from dealers, just concerns around affordability. So I was just wondering if you could kind of talk through kind of some of the new products that you mentioned rolling out for model year '25. And just any thoughts around addressing maybe some affordability concerns here.

Well, yes, affordability is certainly issue based in the industry. We have addressed that over the years by being trying to be more efficient and keep our pricing lower than our competitors and in particular, in the segue segment. We -- our prices are generally $20,000 to $30,000 a unit lower than the competition. We also have been focused on in driving efficiencies in our cost structure to minimize our pricing actions for 2025, and we've taken very modest pricing on -- in aggregate. And in some of our product lines, we've actually held up flat or taken them down slightly.

And just so I'm clear, for the model year '25, like it's kind of a low to mid-single-digit price increase as typical or how should we kind of think about that?

I'd say lower than typical. I'd say it's been in the low-single-digit.

And the next question comes from Mike Albanese with the Benchmark Company.

Steve, welcome and congratulations. Most of my questions answered at this point, but just a quick one as it relates to Tommy's. I think you said you completed and I want to confirm the repurchase of 19 units, which was far fewer than previous estimates. And can you just kind of refresh our memory here on what the original estimates were.

So we issued an 8-K back a few months back in the dollar amount of the repurchase would be $5.2 million. And the repurchase that we executed, I think was around $2.5 million, so a little less than half both in terms of dollar amount and units of what we were expecting at least initially. And I think they have moved through more units than we have anticipated and that that's encouraging to us actually.

And the next question comes from Fred Wightman with Wolfe Research.

Just to come back to the dealer inventories. I think last quarter you said you felt like they were four weeks too high. I'm wondering if you could just give us an update on maybe where that stands versus target.

So we said there were four to five weeks high coming into the quarter, and we exited the quarter in line with historical trends. We made up a lot of ground in the fourth quarter. What we said earlier, I'm not sure if you caught it, but we do expect that dealers will continue to be looking to take their inventories level historical to '25, so we're expecting them to take their dealer inventories down, roughly 15% kind of mid-teen-ish percent, and that's implied in our guidance.

And then just on the 4Q results, the sales were sort of in line with implied guide, but it looks like EBITDA was maybe a little bit light on the margin side. Was the delta just more promo than you had sort of factored in or expected? Or was it something else?

No. That's what it was. And yes, we were below our guidance range, but only slightly as and our revenue team came right in the middle of the range.

And then I guess, just strategically, if we do start to see rate cuts, I know you guys mentioned that you're expecting the market challenges to persist near-term, but how quickly do you think that consumers would start to respond to potential rate cuts? Is it immediately? Is it going to take a couple of cuts in a couple of quarters? How quickly do you think that will show up on the consumer side?

Fred, we were going to ask you few questions seriously, we know it's going to be a positive for the long-term, deciphering the inflection point is going to be a challenge. And we're sitting here back in January talking with excitement about pending rate cuts and here we are. So we're hopeful. We think they will be beneficial the exact inflection point pretty hard to call. You probably have better than we do.

And the next question comes from Jamie Katz Morningstar.

I guess my first question is on this normalized industry environment slide. And while we have some time to get there, I think historically, it's been such that even in a difficult environment, the EBITDA margins that would be generated are probably higher than what we're seeing in fiscal 2025. So I guess, what kind of macro fundamentals and maybe top line fundamentals do we need to get back to that sort of mid-teen EBITDA margin? And if you can walk us back how you get there, that would be really helpful.

In the past when we talked about that 15% EBITDA, it's been off of a down 25% to down 30% revenue picture off of ‘20 -- fiscal year '23 base. So it gets you roughly in that $1 billion revenue range. And so the difference between our guide -- the midpoint of our guidance that and that dollar amount is the revenue logs roughly $150 million. So the leverage between that point and our guide is really what's despite the difference.

And then as we think about consumer behavior, has there been any different trend on cash versus finance purchases or anything like that, that you guys have been seeing?

We haven't seen a change in that. And we're not surprised that we have given that rates have yet to move, but we expect that to rebalance once the rates come down and not to bring those credit buyers back in.

And then lastly, I guess it would be interesting to hear since the rhetoric out of the Fed is that rate cuts are coming. Has there been sort of an incremental pause as consumers wait for those to come in the last maybe month or two relative to what we saw before?

I don't think so. I mean I think our retail activity -- we've been fairly pleased with it here through the summer. So I don't see a pullback from that.

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