Good morning, and welcome to Malibu Boats conference call to discuss fourth quarter and full fiscal year 2025 results. [Operator Instructions] On the call today from management are Mr. Steve Menneto, Chief Executive Officer; and Mr. Bruce Beckman, Chief Financial Officer. I'll now turn the conference call over to Mr. Beckman to get started. Please go ahead, sir.

Thank you, and good morning, everyone. Joining me on today's call is our CEO, Bruce Beckman. On the call, Steve will provide commentary on the business and an update on the new model year, and I will then discuss our fourth quarter and full year 2025 financials. We will then open the call for questions. A press release covering the company's fiscal fourth quarter and full year 2025 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 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 Q4 of fiscal 2025, unless otherwise noted. I will now turn the call over to Steve.

Thanks, Bruce. Good morning, everyone. Fiscal year 2025 was a challenging period for the marine industry, shaped by a difficult retail environment and heightened tariff uncertainty. Despite these headwinds, I'm proud of our team's ability to navigate the landscape and deliver strong results for our customers and partners. We outpaced the market while remaining disciplined in protecting the health of our dealers, which remains a North Star for our organization. As a reminder, we led the charge, supporting our dealers' efforts to bring their inventory into alignment back in fiscal 2024. This set up -- set us up nicely for our outperformance of the market in fiscal year 2025, and we are well positioned to repeat that success in fiscal 2026. The organization is ready to execute despite a softer retail backdrop. At the same time, we continue investing in our people and kept our foot on the gas with innovation. We will be introducing 11 new model year '26 boats while maintaining our industry-leading commitment to quality and safety. I'm excited to share details on some of these new models with you in just a moment. In addition, we generated another strong year of free cash flow, producing $29 million. This consistent generation of free cash flow demonstrates both our discipline and the resilience of our business model regardless of the market conditions. As anticipated, we also reduced CapEx spending as we have the capacity in place to support the next upturn in retail demand when the market normalizes. And lastly, we executed on our capital allocation strategy, returning $36 million to shareholders through share repurchases. Turning to our dealers, as we noted in fiscal Q3, we expected dealers to continue trimming inventory. Elevated interest rates, ongoing macroeconomic uncertainty and the timing of trade policy changes weighed on the…

Thanks, Steve. In the fourth quarter, results were generally in line with our expectations. Net sales increased 30.4% to $207 million, and unit volume increased 16.8% to 1,221 boats. The increase in net sales was driven primarily by increased unit volumes in the Malibu segment, a favorable model mix across all segments and decreased promotional costs from elevated year-ago levels. The Malibu and Axis brands represented approximately 46.6% of unit sales. Cobalt represented 26.9% and Saltwater Fishing representing the remaining 26.5%. Consolidated net sales per unit increased 11.6% to $169,565 per unit, primarily driven by inflation- driven year-over-year price increases, decreased promotional costs and favorable model mix. Gross profit increased 162.1% to $32.7 million, and gross margin was 15.8%. This compares to a gross margin of 7.9% in the prior- year period. The increased gross margin was driven by decreased promotional costs across all segments and favorable model mix. Selling and marketing expenses increased 10.7% to $5.4 million. The increase was driven primarily by an increase in compensation and higher marketing activity. As a percentage of sales, selling and marketing expenses decreased 50 basis points to 2.6%. General and administrative expenses decreased 12.7% to $18.8 million. The decrease was driven primarily by a decrease in legal and professional fees and a onetime IT item in the comparable period. As a percentage of sales, G&A expenses were 9.1%. Q4 adjusted EBITDA increased to $19.7 million, and Q4 adjusted EBITDA margin increased 1,210 basis points to 9.5%. Q4 GAAP net income increased to $4.8 million. In an effort to evolve and simplify our financial metrics, we have replaced the adjusted fully distributed net income per share metric with adjusted net income per share. In the fourth quarter, adjusted net income per share increased by 205% to $0.42 per share. This is calculated…

[Operator Instructions] Our first question today comes from Joe Altobello from Raymond James.

This is Martin on for Joe. I wanted to quickly touch on sort of inventory levels, which I believe you said were elevated at year end. Just trying to get an idea of how much is that we expect further destocking this year. And sort of is it across the board? Or is it mostly in the Saltwater and Cobalt segments?

Yes. What I would say is it's across the board, it's not in any one given segment. I think all the segments were affected by the macroeconomic uncertainty that we experienced. And it's not a, I would say, a large amount of excess inventory, it's more modest, it's in the 1 to 2 weeks range. But certainly something as we maintain our focus on dealer health and dealer inventories, is something that we are going to address in our fiscal '26 guidance.

Great. And I just want to really quickly touch on tariffs and how that might affect pricing. Will that just go directly into MSRP? Or could you be looking at a surcharge?

We haven't necessarily decided on exactly which mitigation and how exactly we're going to mitigate it. We're looking at multiple forms of mitigation from supply chain strategies, changing sourcing patterns and a number of potential mitigations in an attempt to minimize the need for price increases. But we have incorporated to get that increase in cost and -- into our guidance.

Our next question comes from Eric Wold from Texas Capital Securities.

One quick kind of just a clarification question on the guidance and then kind of a follow-up on that. I guess, one, does your guidance assume any interest rate cuts during the fiscal year? And then should we start to see some interest rate relief this fall as is now kind of more widely anticipated? You mentioned that you kind of -- your promotional and kind of discounting is kind of -- you're kind of leaning back on it a little bit. If we start to see some promotion or some interest rate relief around the boat show, would you expect to kind of lean more or dealers to lean more into promotions to kind of jump-start demand during that important kind of boat show season and to get people into boats to kind of maybe not "miss" a boat show season before next year? And then kind of how much rate -- from talking to your dealers, how much rate relief do you think those payment buyers really need at this point to kind of drive affordability into your key segments?

Thanks for the question. No, our guidance did not include any rate cuts. That was your first question. Your second question around where are the dealers feeling -- how are the dealers feeling, what's our promo and so forth? Like we said, we're kind of in that normalized consumer discount versus an inventory reduction phase, right? So with our dealers, we're working to make sure that we can capture every sale that we can drive market share. We have the new models. Like we said, we've only introduced about 5 of the 11 new models. We have new models coming out that will help us through the boat show season. As well as if there are rate cuts to happen, that could provide some wind to our back as we go through the boat show season.

Yes. I think that's well said, Steve. I mean there'll probably be some lag between when a Fed rate cut happens and when that transitions into consumer financing rates. We'll get the benefit right away from a floor plan financing standpoint. That will be helpful to our dealers and to us, but likely take a little bit of a while to trickle through. We do think that's an important -- will be an important factor of getting this industry back to growth, is getting those consumer rates to come down. We have seen the payment buyers pull back, and we have not seen them come back to the market as of yet. So looking forward to that future point when those buyers are back in the market, and that will likely help the industry get back to growth.

And our next question comes from Craig Kennison from Baird.

Wanted to understand the retail outlook that is embedded in your fiscal '26 guidance.

I think the easiest way, Craig, is to think about it is at this point, we're kind of seeing more of the same. There's nothing that says there's going to be this wild ride up yet that we're at the beginning of the next up cycle. So we've kind of looked at it and positioned it as more of the same. So it's still the focus on how do we gain share in a mid-single to upper single digit down market. So we're going to be focused on the new products, how do we work with our dealers to be better retailers and what we can do to support that. So that's kind of where we continue to see the market until we see some point that says, "Hey, this thing is going to turn for the better."

If you were to summarize it, Craig, we we're kind of expecting next year to play out very similarly to the way this year played out. And if there's an inflection change in the market, we'll be ready to capitalize on that inflection change. But as of right now, it's probably more prudent to assume it's going to be similar to last year.

That's helpful. And so fiscal '25 included retail being down, but then also some destocking activity. Would you say you would also expect, again, you made the comment on retail, but then you would also reduce inventory in the channel?

Exactly, yes. And it would likely be a little bit more destocking than we had this year because again, we've got a little bit heavier coming into the year than we would have anticipated 3 months ago just because of how soft retail was in Q4.

Got it. That's helpful. And then just thinking about your dealer network, you've made some changes and upgrades. Does that have any impact on your stocking plans? Or is it fairly immaterial, given the size of your whole network?

I would say it's fairly immaterial, Craig.

Our next question comes from Noah Zatzkin from KeyBanc Capital Markets.

I guess first, just hoping you could kind of comment on the health of the dealer base, both for you guys and for the broader industry. And then in terms of inventory levels, like what's your sense of, from an industry perspective, how inventory levels are?

Yes. From the health of our dealer network, and I think we've said this on ongoing basis, we check in with our floor plan supplier every month, we have our fingers on the pulse of what's going on. They're pretty healthy, no big issues. However, as Bruce stated, with the softer Q4, maybe 1 or 2 weeks heavier than inventory than we wanted. And as we kind of look at '26, we want to be prudent and making sure we continue to stay disciplined to watching our dealer health. So I think our MBI dealers are in good shape, Like any other manufacturer, we'll have a pocket here or there that we're always cleaning up regionally or so forth. So always got our eye on that. Industry-wise, I think the overall industry got better in inventory. I know some of our competitors are still working through, we were the first ones to kind of go. So there's still some folks working through their inventory challenges. But we're going to remain disciplined and continue to have that finger on the pulse to really support our dealers.

The other thing I would add to that is just the level of noncurrent in the system for us is in a healthy spot and better than what we understand the industry to be. So we feel good about that. And again, that's, I think, a result of the focus that we've put on dealer health.

Got it. Very helpful. And maybe just one more, again on kind of how you're thinking about pricing. I think you made the comment, and correct me if I'm wrong, but the tariffs would represent about 1.5 to 3 points of additional COGS. So in terms of the guide, like how are you thinking about -- how -- what kind of offsets are embedded, if any, versus those kind of additional costs? And then just any mitigation efforts or opportunities that you could kind of expand on would be great.

So maybe the first thing I'll say is that some of the mitigation activity took place in last fiscal year, where we did some advanced purchases. We had roughly $10 million of additional working capital on the balance sheet at the end of the year that we wouldn't have had, had it not been for those advanced purchases. So that was, I would say, mitigation, number one. And then we have a number of supply chain efficiency initiatives underway, we always do. And those, we expect to help us. And then we likely will have some price increases that will be necessitated by these additional costs, and those have been factored into the guidance that we have provided.

And our next question comes from Jaime Katz from Morningstar.

I did notice there was some long-term debt on the balance sheet this morning. I'm not sure that is the change in how you guys are thinking about capitalizing the balance sheet or if there was something else I missed. But can you talk to that first?

No. There's no long-term change, Jaime. I mean we have a credit facility. And from time to time, we pull on that credit facility to be able to ensure that we have the working capital to run our business. We ended up in a good spot from a net cash position. I mean, we have $19 million of net cash. So still strong positive cash. And that's after returning $36 million to shareholders in the form of share repurchases. So no change in the strategy there.

Okay. And then I understand we're in this really difficult period. But could you give us or walk us through maybe a sensitivity analysis on how we get back to a double-digit EBITDA margin? What sort of sales growth would we need to get there? And has the promotional cadence changed as we have gone through the last 2 months, I guess? Or does that give us some hope that maybe there is some upside to the initial EBITDA margin we're looking at for the year ahead?

Well, maybe the first thing I'll say, Jaime, is that if we can get the market to stabilize, then we no longer have to destock to keep the dealers healthy from a weeks-on-hand standpoint. So we've been in the process of destocking now for the last 2 fiscal years. It would be great if we could get that in the rearview mirror, and that alone would allow us to post a revenue unit, stabilize our units and allow us to drive revenue and profit growth. So that would be the first thing. We have seen promotions, I would say, normalize, where you see the spike in promotional activity is when there is a high level of dealer inventories, noncurrents, and there's problems to be cleaned up. And that's not just for us, it's for the industry. And as Steve mentioned, the industry is getting healthier. So I think that will help the industry normalize those promotions going forward. And then, of course, I mean, we are undershipping as an industry kind of the long-term kind of replacement level of units for the industry. So this industry will bounce back. And when it does, we have the capacity and the team in place to be able to support that next upturn in the market. Steve...

Go ahead.

No, go ahead.

I was curious to, like as you go through this, I don't think there was anything mentioned about like CapEx spend this year and whether you guys are still constraining that or maybe constraining it more, given where we are?

Well, I mean, I think last year, we gave guidance of $30 million to $35 million, and we finished below that level in fiscal '25. So we have been very disciplined and prudent in those capital investment levels. And again, that's well below where we were in the prior year because we've completed our capacity expansions and we have that capacity in place. So I would say, this year, we're expecting similar levels to what we had last year, which is, again, a more normalized post-capacity expansion level of CapEx.

And ladies and gentlemen, with that being our final question, I would like to conclude today's conference call. Thank you for participating. You may now disconnect your lines.