Good morning, and welcome to Malibu Boats Conference Call to discuss Second Quarter 2026 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. Steve Menneto, Chief Executive Officer, and Mr. David Black, Chief Financial Officer. I will now turn the call over to Mr. Black to get it started. Please go ahead, sir.

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 2026 financials. We will then open up the call for questions. A press release covering the company's fiscal second quarter 2026 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 each 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 loss 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 2025, unless otherwise noted. I will now turn the call over to Steve.

Thank you, David. Good morning, everyone. Before I get into the business update, I want to take a moment to formally introduce David Black as our Chief Financial Officer on his first earnings call in that role. As many of you know, David was appointed CFO in November after serving in several key financial leadership roles with Malibu Boats. David has already played an instrumental part in our financial organization and strategic planning. And he's been deeply involved in shaping the financial priorities that support our long-term growth and disciplined capital allocation approach. I'm confident you'll appreciate his insights as he walks through the quarter and our outlook shortly. I'm pleased to have him alongside as we continue to execute our strategy and drive shareholder value. Now turning to the quarter. We are pleased to report solid second quarter results as we enter the early boat show season. Net sales of $188.6 million came in ahead of our expectations despite what remains a continued challenging retail environment. And adjusted EBITDA margin was in line with our plan. While the retail environment is tracking as expected, through the first two quarters of the year, our Malibu year-end sales event was successful and outperformed the prior year. Serving as an effective tool to drive December retail activity. The promotional environment remains competitive. But during both the sales event and the early boat shows, we were encouraged by the strong customer response for our new model year boats and the continued momentum across our brands. Looking ahead, we're excited to debut two additional model introductions at the Miami International Boat Show next week, we will unveil the new Pursuit 286 and the Pathfinder 2800. We look forward to connecting with many of you there and showcasing our differentiated state-of-the-art products. Underscoring that differentiation,…

Thanks, Steve. Our results in the second quarter were slightly above our expectations. Net sales decreased 5.8% to $188.6 million and unit volume decreased 9.5% to 1,106 units. The decrease in net sales was driven primarily by decreased unit volumes across all segments resulting primarily from lower wholesale shipments and driven by unfavorable segment mix and unfavorable model mix in our Malibu segment, partially offset by a favorable model mix in our cobalt, saltwater fishing segments and inflation-driven year-over-year price increases. From a mix perspective, Malibu and Axis represented approximately 46.4% of unit sales. Saltwater fishing represented 25.5%. And cobalt made up the remaining 28.1%. Consolidated net sales per unit increased 4.1% to $170,544 per unit. The increase in overall consolidated net sales per unit was driven primarily 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 model mix in our Malibu segment and an unfavorable segment mix overall. We expect segment mix to remain unfavorable, pressuring ASPs throughout the fiscal year. This is primarily driven by a challenging year-over-year comparison influenced by timing of production cuts across segments and the ongoing seasonal segment mix shift. Turning to profitability. Gross profit decreased 32.9% to $25.1 million and gross margin as a percentage of sales was 13.3%. This represents a decrease of 540 basis points compared to the prior year period. The decrease in gross margin was driven primarily by fixed cost deleverage across all segments, due to lower sales and higher per unit labor and material costs across all segments. Selling and marketing expenses increased 1.4% year over year driven primarily by higher personnel-related expenses. As a percentage of sales, selling and marketing expenses increased 20 basis points to 3.2%. General and administrative expenses decreased 21.5% or…

As a reminder, to ask a question, you will need to press 1 on your touch-tone telephone. If your question has been answered or you wish to withdraw your question, please press the 2 keys. The first question comes from Joe Altobello with Raymond James. Please go ahead.

Hey. Good morning. This is Martin on for Joe. Was wondering if you can quantify how much the higher boat show expenses weighed on EBITDA margin, whether that's year over year or quarter over quarter? Yes. When we think about the year-over-year promo related to year-end sales events and kind of the normal cadence for Q2, it's about 50 bps cost pressure that we saw for the quarter. Right. I think that's helpful. And, Eva, you kinda mentioned a little bit about

inventories. It sounds like the industry will have a little bit of overhang, but you're a little better off. We get an idea about the delta between your inventories and kind of what's going on in the industry?

Yeah. I think the industry as a whole is in a healthy position. There are pockets as usual of kind of elevated weeks on hand. But from our perspective, we've done the, you know, the appropriate thing to address those, and we feel good about kind of where our weeks on hand are from a historical perspective.

Great. Thank you, and best of luck.

Thanks.

The next question comes from Michael Albanese with Benchmark. Please go ahead.

Yes. Thank you. Good morning, guys.

Hey, Mike. Just was wondering if you could maybe elaborate I know it's early, but, you know, I believe you wanted to get the MBI acceptance program rolled out for the boat shows. Could you just talk about any incremental lift you're getting there or whether you're seeing that translate to improved conversion?

Or is it just too early to tell?

It's early. No question. It's early. We just got out, you know, in our other brands. But we did see a couple of boat shows a higher take rate on our 3.99 So it's encouraging. You know? So not enough to make a trend and start reporting trends and so forth, but early early you know, feedback from our dealers was very positive from a driving traffic to the booths at the at the boat shift as well as it did help close handfuls.

Awesome. Thank you. And then if I could just kinda ask the same question regarding your on the centralized sourcing. You know, if you could just kind of elaborate on on maybe any cost savings

you're getting out of that thus far.

Yeah. No. And and if you if you look at our guide and what that implies from a margin growth on the back portion of the year, The way we're thinking about that, a big portion of that is going to come from the centralized sourcing efforts that we've undertaken as you as you indicated. We're starting to see that hit the p and l, and we expect that to to continue on the back where of the year. So so we think there's a meaningful benefit to to be seen as as we move through the remainder of of this fiscal year and then and then beyond. Awesome. Thank you, guys.

The next question comes from Kevin Condon with Baird. Please go ahead.

Hi, good morning and thanks for taking my question as well. I wanted to ask if you've seen any shift or since any change in dealer sentiment amongst your dealer group just as we get a few boat shows, in in 2026 and just any any shift in terms of attitude towards taking on inventory ahead of the season?

The, you know, the feedback from the dealer has been, you know, as you've been seeing all along Mixed retail, there's been shows that have been positive other shows that that have been a little weaker. But overall, it's been a positive trend. It has resulted in in additional orders, of course, because we do sell some, you know, custom boats and so on. So you know, again, we're we're we're happy about where the boat shows are going. It's meeting our expectations. And, you know, we have a lot more in front of us, so more to come as we get to the early part of the season here and, you know, of course, Miami next week. So we're encouraged and, you know, that's why, you know, like we talked about in our prepared remarks is, you know, we have our guidance unchanged.

And then apologies if this was a a metric you gave last quarter or not. But in terms of the guide, is there a thought about keeping inventory flat or taking boats out of the channel

as you look like end of fiscal year to end of fiscal year?

Yes. No, I think just given the fact that we expect the market to decline, you would expect there to be some level of destocking. That being said, you know, as the as we move through the back portion of the year, we expect that to stabilize. And to the extent that the market continues on that trend from a positivity then we have the chance to begin matching retail with wholesale. But but we do imply some level of destocking for for this fiscal year.

Thanks.

The next question comes from Brandon Rollé with Loop Capital. Please go ahead. Go ahead. Brandon Rollé: Just on the higher labor costs, could you talk about your outlook for labor costs moving forward? And if you see if there's any material relief as well on that side. Thank you.

Yeah. I think we're always focused on operational effectiveness and and excellence. And so, you know, we expect as we move through the remainder of the year, not only from a labor per unit cost, but from the centralized sourcing efforts that we talked about, we'll start seeing those benefits flow through into into margin into those quarters. Brandon Rollé: Okay. Great. And

on the competitive landscape, just in terms of the ski weight category as a whole, are you seeing any bounce back for the category versus the broader industry? And is there anything that you feel like you could do as a OEM to get people reinvigorated in in the category? Thank you. Seeing for the same. And as far as what we can yeah. You know, there is a lot of effort amongst you know, what we're at at Malibu access and also our competitive

group.

At other, you know, on e way in segment. You know, we're all trying to need to put you know, the segment or get back to growth in the segment. And, you know, we'll continue those efforts and and on our own end as we work together in some of our you know, some of our marine groups that we that we team up you know, and execute those efforts. Great. Thank you.

The next question comes from Jaime Katz with Morningstar. Please go ahead. I guess when I

look at the third quarter EBITDA margin guidance of 8.5 it looks like it implies the fourth quarter is going to have some pretty significant EBITDA margin expansion. And I understand that there are these sourcing benefits that you're getting and gains from MBI, maybe that go into that. But what gives you guys, I guess, confidence that you can extract that much operating leverage out of the business when the industry is still sort of flattish?

Yes, Jaime. Hey, this is David. So I think, you know, I break it into three different buckets from a lever perspective. So the biggest portion of that, we expect sequential growth on top line. And so as we move through Q3 and Q4, we expect to get fixed cost leverage, you know, benefit. And then centralized sourcing, we've been working on that, you know, since Steve started here, and, you know, we're seeing some pretty significant benefits. But they haven't made it their way into the p and l yet. And so we're working through that higher cost inventory and we expect that to to to be a big driver in in the back portion of the year. And then obviously, as inventories stabilize, we promotional dollars to decrease as well. So I think those three things collectively together are are the main drivers from a margin growth perspective in the back portion of the year.

Yeah. I think it's it's sounds like the promotions were not mentioned as problematic in the last quarter. So is there anything that you guys have seen in the cadence of promotions that's noteworthy?

No. I you know, actually, as we think about it, this is more of a return to normal. We had a more successful, you know, year in event than what we were anticipating, and that kind of drove some of that promotional dollars. But as we move into the back portion of the year, you know, if you look back pre pandemic, the cadence was always margin would grow over the back portion as long with as long with top line. And so we expect that to return, as we move into kind of a more normalized environment.

Okay. And if I can ask one last one. Any initial thoughts on the tie up that was announced this morning and how that impacts you guys competitively and maybe why or why

not

that that would be a good type of strategic effort for you guys to to look for.

Yeah. Yeah. Jamie, you're you're

Go ahead. Go ahead, David. No. I was say, yeah, I I think

from our perspective, we don't typically comment on competitors' strategic decisions. But from from our perspective, you know, we're gonna continue to focus on our capital allocation priorities and growing the business according to our strategic vision. And so we look forward to the future under those pretenses.

Thank you. The next question comes from Griffin Bryan with D. A. Davidson. Please go ahead.

Yeah. Thanks. Most of my questions have been answered already. I guess kind of piggybacking on the M and A front, can you just kind of give us an update on what your pipeline looks like and if you're seeing anything else out there in terms of potential deals that you look on, maybe some other boat segments you might be trying to get into?

Thanks.

Yeah. I Yeah. I mean, we'll And what are

like, all of just say we

we're really diligent

doing it, you know, and we talked about today. We'll continue to do that. And we're looking for opportunities

for our system.

You know, looking for those opportune and working those opportunities and so forth. And if there's any future report, we'll definitely, we'll be there in the market. Thanks.

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