Malibu Boats, Inc. (MBUU) Q1 2027 Earnings Report, Transcript and Summary

Good morning, and welcome to Malibu Boats Conference Call to discuss the 3 months ended 09/30/2026 results. At this time, all 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 authorization of Malibu Boats. And as a reminder, today's call is being recorded. On the call today from management are Mr. Steven Menneto, chief executive officer and Mr. David Black, chief financial officer. Will now turn the call over to Mr. Black to get it started. Please go ahead, sir.

Welcome to Malibu earnings conference call for the 3 months ended 09/30/2026. I am David Black, Chief Financial Officer, and joining me today is Steven Menneto, our president and chief executive officer. Before we begin, as you may have seen in our press release today, our Board approved a change in our fiscal year end from June 30 to December 31. As a result, the quarter we are reporting today ended 09/30/2026 is the first quarter of a 6 month transition period. And is compared to the quarter ended 09/30/2025. A press release covering these results was issued today, and can be found in the Investor Relations section of our website. Today's outlook covers the 3 months ended 12/31/2026, and the 6 month transition period, which I will discuss in more detail later in the call. I also want to remind everyone that a remarks on the 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 these 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, adjusted EBITDA margin, adjusted net income, adjusted net income per share, and free cash flow. Reconciliations of these non-GAAP financial measures to non GAAP financial measures are included in the earnings release. I will now turn the call over to Steven.

Thank you, David. Good morning, everyone. Our results for the September quarter reflect a retail environment that softened over the summer and our decision to manage wholesale shipments with discipline to protect dealer health. Net sales increased 29.9% to $253 million modestly below our guided range. And adjusted EBITDA increased 21.7 to $14.3 million at the low end of our outlook. Cobalt in our saltwater brands grew volume and Saxdor contributed meaningfully to growth. Which is partially offset by a softer ski-wake category and lower profitability at Malibu, I will come back to. Looking across the portfolio, Cobalt and Saltwater brands both grew volume as they lapped last year's dealer inventory reset. The softer retail environment showed up most in the ski-wake boat category. Which was under pressure across the industry through the summer. To be clear, this is a category dynamic. Not a Malibu specific issue. We continue to gain share across our portfolio, including at Malibu. Even as the category has softened. As a result, we shipped fewer boats and leaned into the support of our dealers. Consistent with the guiding principle we have spoken to for the last few years. And it is how we will keep running the business through this part of the cycle. Saxdor contributed 51.1 million of net sales in the quarter, The brand is tracking to our plan. With margins consistent with the fourth quarter. As we said in August, Saxdor's margins in the July through December period were reflect our investment in the production ramp. And we expect them to step up in the first half of calendar year 27. As domestic manufacturing scales and our mix shifts towards larger, more margin accretive models. David will walk you through that in more detail. The real highlight this quarter was Fort Pierce. Where U. S. Production of Saxdor is now well underway. We are tracking ahead of schedule. Production began in July, and our first U. S.-built Saxdor 23 GTO was successfully completed. Ahead of our original goal for this fall. And serial production is underway. Right now, the focus is on efficient assembly and I want to commend our team for their focus on this seamless ramp. We continue to see a runway to 200 Saxdor bills a year in Fort Pierce before investing in plant expansion. Going back to our rationale behind the acquisition, having Saxdor built in The U. S. Puts the brand much closer to its North American dealers and customers. And it is where the investment we have made in the platform really starts to work for us. We are also widening Saxdor's reach adding new dealers across The Americas and working with MarineMax to expand distribution in The U. S. And the team continues to bring new products to market, including the 64 GTS, which made its debut in Cannes Yachting Festival. In September. Last week, we kicked off the boat show season in Fort Lauderdale with 7 of our brands on display. It is always a great week to be on the docks with our dealers and customers. Cobalt officially launched a completely redesigned 265 Coastal Edition a luxury runabout built with big water and coastal lifestyle in mind. And several of our newest models were at the show for the first time, including the Pursuit S288 and the newly refined OS445. Pursuit's flagship. And the all new Cobalt 250 DC which expands Covia's dual console offering. Saxdor brought the 460 GTC the largest and most advanced model in the range and the brand's entry into the 45-foot to 50-foot category. Along with the 320 GTW alongside our partners at MarineMax. Seeing everything together really shows the breadth of this portfolio. From family runabouts to offshore center consoles to luxury dayboats, each built for a different kind of boater. Turning to the backdrop, although the industry retail environment got tougher over the summer, it is important to note that we have not seen any changes in the fundamentals. Based on the preliminary SSI data, industry powerboat registrations were down approximately 11% for the July through September period. With the fiberglass segments we compete in, and ski-wake, in particular, more pressured than the broader market. September was the best month of the year for the industry down only 2%. And our brands have outperformed the industry for several consecutive months with our towboat brands combined seeing growth in September. Elevated finance costs and a cautious consumer continue to keep payment buyers on the sidelines. And that buyer coming back is ultimately what will drive the broader inflection in industry unit volumes and the cycle overall. Recent interest rate increases do not help, but we have not seen much change in the buyer behavior. The pressure is most visible in the ski-wake category. Where promotional activity and dealer incentive cost increased across the industry. We expect incentives to remain elevated relative to historical levels. And we will continue to align Malibu shipments with retail demand. Both of which are reflected in our outlook for the December quarter. Where we can help that buyer, we are. MBI Acceptance gives our dealers a financing and extended service tools to close the sale with a payment sensitive customer. It is 1 of the most practical levers we have until rates and confidence start working in our favor. Looking ahead, our dealers are heading into the winter in good shape. With inventories healthier than a year ago and aged inventory low across the portfolio. Which is right where we want them as the show season builds. In a market like this, the work that matters most is the work we control. The MBI Advantage was built for exactly this kind of environment. We continue to push it further. With deeper vertical integration centralized sourcing and category management across our brands, and now bringing Saxdor into the sourcing organization so it gets the benefit of our scale. Beyond sourcing, we are controlling what we can on cost. Our cost structure is 80% to 90% variable, made up mostly of materials and direct labor. Which lets us flex with demand and protect profitability and cash through the cycle. We continue to work the levers we outlined at Investor Day, including lean manufacturing, vertical integration, dual sourcing and supplier rationalization. And we are not waiting for the mid cycle market to go after the 250 basis points of outperformance opportunity we identified. As we reinvest behind new models and ramp production, we would expect some of those dynamics to shift, but our approach to cost is not changing. We are operating in a market that is not giving us much help right now. And we are managing the business accordingly. At the same time, we are making tangible progress on our long term priorities from U. S. Production of Saxdor at Fort Pierce to the new models we just brought to market, we remain intentional about our outlook until we see more durable evidence of a broader recovery. But our conviction in build, innovate and grow and the mid cycle opportunity in front of us remains strong. With that, I will turn the call over to David for the detailed review of our financial results. David?

Thanks, Steven. The takeaway for the quarter, we navigated the softer ski weight category with discipline. Saxdor drove top line growth, and the cash we used was seasonal and inventory driven. Throughout my remarks, I will make select references to both consolidated results and legacy results. Which exclude Saxdor, to provide a clear view of underlying sales drivers and year over year comparability. For the quarter ended 09/30/2026, net sales increased $58.2 million or 29.9%, to 253 million. Compared to the prior year, inclusive of $51.1 million from our Saxdor segment. On a legacy basis, net sales were approximately 202 million increase of approximately 3.6% driven by increased unit volumes at Cobalt and Saltwater Fishing segments a favorable model mix in our Cobalt segment, and a favorable segment mix and year over year price increases. Partially offset by decreased unit volumes in the Malibu segment and increased dealer incentive costs in the Malibu and Saltwater Fishing segments. Tow unit volume increased 15.1% to 1.3 thousand units This was composed of our legacy unit volume, which increased approximately 2.7% to 1.16 thousand units. While Saxdor contributed 139 units in the quarter. By segment, net sales attributable to Malibu decreased 9.1% to $71.5 million on a lower wholesale shipments driven by lower retail activity during the period and increased dealer incentive costs. Saltwater fishing net sales increased 7.1% to $68.9 million on higher wholesale shipments against a prior year period impacted by elevated dealer inventory levels. Cobalt's net sales increased 18.8% to $61.5 million also on higher wholesale shipments against a prior year comparison along with a favorable model mix. From a mix perspective, on a legacy basis, Malibu represented approximately 43% of unit sales. Saltwater fishing represented 27%. And cobalt made up the remaining approximately 30%. On a legacy basis, net sales per unit increased 12.9% to $195 thousand per unit on a consolidated basis. Primarily driven by incremental increase related to our new Saxdor segment a favorable segment mix and year over year price increases. On a legacy basis, net sales per unit increased approximately 1% to $174 thousand. While not included in this metric for the sake of comparability, Saxdor's net sales per unit was approximately $368 thousand for the quarter. Turning to profitability. Gross profit increased 35.5% to $37.8 million and gross margin as a percent of sales was 15%. This represents an increase of approximately 70 basis points compared to the prior year period. The increased gross margin was driven primarily by the gross margin of newly acquired Saxdor. For some further context on Saxdor's performance, the segment delivered adjusted EBITDA margin of 8% during the period. As we continued investing in the production ramp at Fort Pierce. Selling and marketing expenses increased 32.4% in the 3-month period. The increase was driven primarily by higher personnel related expenses and an incremental increase due to the new Saxdor segment. As a percentage of sales, selling and marketing expenses was relatively consistent with the prior year at 3.3%. General and administrative expenses decreased 43.9% or $9.1 million The decrease was driven primarily by $15 million resulting from the derecognition of a liability related to the insurance proceeds previously received from STARR Indemnity & Liability company that are no longer subject to reservation of rights. As well as decrease incentive pay partially offset by acquisition and transaction-related expenses incurred due to the new Saxdor acquisition and an incremental increase due to the new Saxdor segment. As a percentage of sales, G&A expenses were 4.6%. GAAP net income for the period was $6.1 million or $0.30 per diluted share, which includes the 15 million G&A benefit I just described. Adjusted EBITDA increased 21.7% to $14.3 million and adjusted EBITDA margin was 5.7%. Included in this amount was Saxdor segment adjusted EBITDA of approximately $4.1 million Excluding Saxdor, adjusted EBITDA was approximately $10.3 million compared to $11.8 million last year with a decline driven by Malibu as described earlier. Adjusted net income per share remained consistent at $0.15 on a basic weighted average share count of approximately 19.7 million shares. Both adjusted EBITDA and adjusted net income exclude the $15 million benefit from the STARR insurance proceeds which is reflected in the professional and fees line of our reconciliation. Turning to the balance sheet and cash flow for the 3 month period ended 09/30/2026. We ended the period with $40.3 million of cash, $173 million of debt, and approximately $214 million of total available liquidity giving us ample flexibility to support the business through the cycle. Net cash used in operating activities was $31.1 million compared to $6.5 million of cash provided in the prior year. As a reminder, the September quarter is seasonally our heaviest working capital quarter, and we also rebuilt inventory of $32 million after ending fiscal 26 with an unusually lean balance. The rebuild is our own inventory, not dealer inventory, and we continue to align wholesale shipments with the retail demand. We also paid annual compensation dealer incentives during the period. We expect working capital needs to decrease through the first half of calendar 2027 We also invested $8.4 million in capital expenditures resulting in a negative free cash flow of $39.5 million for the quarter. Compared to free cash flow of $2.3 million in the prior year period, The change was more than accounted for by the inventory rebuild and the annual compensation and dealer incentive payments. For context, free cash flow was negative $17 million in the September quarter of fiscal 25, and positive for the. For that full year. In fiscal 26, we generated approximately $43 million of free cash flow roughly 58% of adjusted EBITDA. As a reminder, the refinancing we completed in July extended our maturity to 2031, and enhanced our financial flexibility with no change in our capital allocation priorities. On capital allocation, during the 3 month period, we did not repurchase any shares. In our 70 million share repurchase authorization, which runs through 06/30/2027, remains in place. Net leverage was approximately 1.5x at September 30 on a pro forma basis, up from approximately 1x at June 30. Reflecting the seasonal use of cash and well within our stated maximum of 2.5x. We remain balanced and disciplined in allocating capital, and well positioned to keep investing in the business alongside returning capital to shareholders. Turning to our outlook. As I mentioned at the start of the call, on November 3, our Board approved a change in our fiscal year end from June 30 to December 31. As a result, the 6 month from July through December 31, 2026 will be a transition period, which we will report on a transition report on Form 10-KT. In our first full fiscal year, under the new calendar will be the 12 months ended December 31, 2027. Because the 12 months ended June 30, 2027 will not be a reporting period, the outlook we provided on August 27 is superseded by the outlook we issued today. For the 3 months ended December 31, we anticipate net sales of $236 million to $248 million and adjusted EBITDA of $13 million to $15 million For the 6 month transition period, includes our September quarter net sales of 253 million and adjusted EBITDA of $14.3 million as reported, we anticipate net sales of $489 million to $501 million and adjusted EBITDA of $27.3 million to $29.3 million Our outlook takes a prudent view of the industry retail demand given the macro backdrop. It also reflects tariff costs embedded at the currently inactive rates and the pricing actions we have already taken in the market. July through December is a seasonally lower volume period for our business, so the results for the transition period should not be annualized And as we noted in August, margins in this period will be lower than in the following 6 months. Primarily driven by our investment in the ramp at Saxdor. That is playing out as we expected. And it includes Saxdor production mix that is weighted towards smaller boats today. Beyond the transition period, as domestic manufacturing scales, and the broader revenue mix shifts towards larger, more margin accretive models, we continue to expect Saxdor margins to ramp up towards the 10% to 11% range we discussed in August and also expect Saxdor growth to remain in the mid teens range through the first half of the calendar 27. Our thinking on that has not changed. We expect to provide our initial calendar year 2027 outlook in March, when we report our December quarter and transition period results As always, reconciliations of our guidance measures are addressed in our earnings release. To close, our September quarter reflected a softer retail environment and our decision to protect dealer health with Saxdor, Cobalt, and Saltwater brands helping offset the softer ski-wake category. Our legacy operations executed with discipline, through the demanding environment, the Saxdor Integration is progressing well, with U.S. production now underway at Fort Pierce and our balance sheet gives us the flexibility to support the business through the cycle. With a refinance credit facility, our buyback authorization, and a differentiated portfolio, we are well positioned to execute through the transition period and into calendar 2027 and to capture the mid cycle opportunity we framed for you at the Investor Day. We will keep aligning shipments with retail demand, and we look forward to providing our calendar 2027 outlook in March. With that, I would like to open the call up to questions.

Thank you. And 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 *1 again. Please stand by while we compile the Q&A roster. And your first question comes from the line of Joe Altobello with Raymond James. Please go ahead.

Hey, everyone. Mitchell Ingall on for Joe Altobello. My first question is, you help us bridge from the September quarter to the December quarter? On your guidance, particularly for the legacy side? How should we think about the sequential revenue decline in terms of normal seasonality? And what is your view on retail demand and wholesale shipments? And how demand trends performed quarter to date?

Yeah. Hey, this is David. Yeah. So the way that I would think about that, as we talked about in our original guide, we expected the first half to be lower than the second half. If you look at prior year from a cadence perspective, would expect it to follow a similar trajectory. From a retail perspective, we expect the conditions currently to continue right through the first half of the, our transition period. And so we are expecting somewhere in the neighborhood of a mid to high single digit decline from the market perspective with the towboat segment being kind of on the lower end of that or the higher end of that decline.

that is helpful. Thanks. And then on the, ski wake demand, can you provide some additional color on what you are seeing in that category? I know the industry has been soft and you are gaining share. So what are you seeing on the affordability financing side? Any difference between the income cohorts and how would you describe, resale trends right now?

Yeah, Mitchell. So we are still seeing, you know, kind of the same trend per persist where payment buyers still on the sidelines for the most part, we are trying to help them out with our MBI acceptance. And with better you know, better financing rates and so forth. But we do see the feature rich boats still in play. The custom orders coming in you know, from consumers and dealers and so we still see that K-economy effect moving forward in the towboat segment. Appreciate the color. Best of luck.

And your next question comes from the line of Jaime Katz with Morningstar. Please go ahead.

Hey, good morning, guys. Can you talk a little bit about inventory reduction expectations? I guess a lot of other companies are talking about wholesale matching retail, but it sounds like we have maybe further reduction to go at Malibu. So I guess where are we in the process? And, you know, what does that sort of look like over the course of the forward quarters?

Hey, Jaime. I think what we have said is we expected inventory to modestly decrease on a year over year basis. For the quarter, ended September 30, we actually saw low double digit decline on, versus the prior year from a dealer inventory perspective. I think you are right from a category-specific. I think as the market continues to be weak, on the towboat side of things, we would expect to inventory to decline as the value of the weak decreases in tandem with that. But we think as the as the year progresses, right, and as we said originally, you know, we expect retail to match wholesale on a more, equilibrium basis. But right now, you know, for the transition period, we expect the, the decline to continue.

Okay. And then how should we be thinking about the cadence of the buybacks from the authorization? We have the share price down and compelling versus an environment and maybe holding on to more dry powder, has the thought about when the timing to buy back shares changed at all?

Yeah. No, no change there. I think Q1, is typically our seasonally higher working capital use quarter. And so, you know, we are, we will still continue to be opportunistic, as we move through kind of the remainder of the year. And as we, you know, have working capital needs. We will focus on those as well and, you know, pay down debt and, and invest So no real change there, and I would expect us to be, you know, opportunistic as we continue to move forward. Okay, great. Thanks.

And your next question comes from the line of Michael Albanese with StoneX. Please go ahead.

Hey, good morning, guys. Thanks for taking my question. I was just wondering if you could add a little bit of color on early season boat show trends, kind of, you know, what you saw versus prior years or versus expectations. You know, ordering patterns, deposit activity, traffic, just really anything you could add? Would be helpful.

Yeah. Hey, Michael. it is Steven. We just got back from FLIBS, and, it was-- you know, it is only 1 data point of FLIBS, but we were really excited about FLIBS. We, year over year, outpaced last year FLIBS in terms of retail sales. Actual sold boats, the ASPs were up, so the model mix was rich. And so it was a really compelling FLIBS for us across the 7 brands that we had there. So, we are walking away with 1 data point of hey. that is a good start to the boat show season. Thank you.

And your next question comes from the line of Anna Glaessgen with B. Riley Securities. Please go ahead.

Hi. Good morning. Thanks for taking my questions. Wanted to follow-up on some of the questions on retail. Wanted to bridge some of your comments in the prepared remarks. On the 1 hand, we saw retail, it sounds like, get a little bit softer over the summer. But then you are saying, you know, fundamentally, things have not changed, and then we saw a much better September. I guess if you could, connect the dots there maybe share some perspective on October following that relatively stronger September? Thanks.

Yeah, sure. Hey, Anna. So from-- to kind of bridge the difference there, we really saw kind of the weakness more than we expected, right, in the towboat segments. I think other segments are operating the way that we originally expected. And so, you know, that coupled with a little bit more competitiveness on the promotional side is really kind of the what is changed right, from kind of the previous remarks that we had. As we continue to move forward, we expect that trend to continue on the towboat side of things. But as Steven said, we had some very strong positivity coming out of FLIBS. And so we expect that to translate into kind of the back half of the year. As we move back into the into the selling season.

Got it. And as your selling for the coming fiscal year, given that we still see pressure with the payment buyer potentially another rate hike in December, in the near to medium term period, are you baking in any improvement to that buyer Or expecting things to continue as they are now? Thanks.

Yeah. We are going to, and we are gonna continue to expect to see the same as we said in our prepared remarks. We are prepared if we see a change in that consumer. We are doing, you know, using all of our tools that we can with MBI Acceptance supporting the dealers. And being competitive with promo to help that buyer out. But our, you know, our we are gonna continue to operate in that mode in, in fiscal 2027 or calendar 2020.

And, David, you can ask add from the what is in the guide Yeah. And as I said, I expected that in the guide that would be that mid to high single digit for the transition period. And so no change there from kind of the payment makeup from financing versus payment buyer. Thanks.

And your next question comes from the line of Gerrick Johnson with Seaport Research. Please go ahead.

Thank you. Good morning. Hey, can you talk about the period expense that you had in the quarter owing to the startup of Saxdor in the U.S.? And what kind of expense incremental expense you are expecting over the next several quarters as that ramp continues?

Yes. Hey, Gerrick. So I think what we talked about is margins will get a bit better as we move through for Saxdor as we move through the first half of the year. And you saw that, kind of with Saxdor for the first quarter. As we continue to ramp up production, we expect that will continue to decrease, right, the investment piece of it, and our margins will continue to grow. And so if you recall, we said, you know, kind of lower margins the first half versus the second half, and so we expect that to follow suit. Alright. Okay. And then maybe on gross margin, is there any perhaps bridge you can provide us, scale, Saks store, promo, sourcing, commodities? Yeah. So from a year over year, it was 70 basis points up. What I would tell you is about half of that was Saxdor's contribution, and the other portion of that is, the legacy business on the, incremental revenue. Offset by higher promotional costs at Malibu and lower revenue at Malibu.

Okay. And you also talked about incentives in saltwater. What brands were you putting some promos on there?

So I think the promo environment just on a year over year was up, but it was not as significant as on the Malibu side. I would tell you it is very normal at this time of year as you go into the boat show season coming in for promos to be kind of a little bit more elevated in the saltwater group. And so I think it is just a, a smaller piece of that, that pie. Okay. Alright. Thank you.

And I am showing no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.