Q1 2020 Earnings Call
Good morning, and welcome to Malibu boats conference calls to discuss the first quarter fiscal year 2020 years old.
At this time.
Participants are another set of only mode.
Later, we will conduct a question answer session and instructions will follow at that time.
Please be advised that for production. This this call in whole or in sport is not for me that's without written authorization definitely the books.
As a reminder, this call is being recorded.
On the call today for management or Mr. Jack Springer, Chief Executive Officer.
Mr. Wayne Wilson, Chief Financial Officer, Mr. Ritchie Anderson.
Operating officer, I will turn to call over to Mr. Wilson to get started please go ahead Sir.
Thank you and good morning, everyone on coal Jack will provide commentary on the business and I will discuss our first quarter financials and outlook for fiscal 2020 I.
Well that Dan him call back over Jack for closing remarks.
Open call for questions.
A press release covering the company's first quarter fiscal year 2020 results was issued today a copy of the press release can be found in 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 the actual results could differ materially from those projected on todays 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 about.
Factors that might affect future results are discussed in our filings with FCC and we encourage you to review our SEC filings for more detailed description of these risk factors.
Please also note that we will be referring to certain non-GAAP financial measures on todays call.
<unk> 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 Oregon through.
Now turn the call over to Jack Springer.
Thank you Wayne and thank you for joining the call today.
First quarter was another exceptional quarter for Malibu is we continue to deliver strong results and exceeded expectations for the quarter net sales increased 39% to $172.1 million adjusted EBITDA increased 24% to $28.4 million and adjusted fully distributed earnings increased 24% to 83 cents per share.
Sure.
Our industry, leading new product innovation and unwavering commitment to operational excellence continue to set us apart from the competition.
Our multiyear 2020 products had been incredibly well received by both our dealers and our customers and our care already clear example over the best in class performance and technology that we continue to bring to market through our robust product portfolio.
The agility of our business and team has enabled Malibu the mitigate some of the industry noise created by our channel inventories at a choppy retail environment and a vertical integration strategy and strings of our supplier network has enabled us to mobilize quickly when unforeseen events like the U.S.W. struck materialize with GM.
I personally because I'd be proud of our organization that our team as it continues to demonstrate the market leadership. So you have come to expect for Malibu.
Moving to our results for the quarter as I mentioned on our last call. The Malibu and axis brands are brought to market for completely new boats. This model year showcasing the innovation of the brand.
As you recall, the Malibu Wakesetter 23, M. exit the perfect mix of luxury in water sports performance was introduced in July while a new Malibu Wakesetter 20, VTX the greatest selling crossover boat in water sports history, and they actually say 20 in engineering, Marvel, which provides an impressive combination of value in performance were announced in introducing.
Argus.
In October we announced the release of our new flagship model. The Malibu M. 40. This vote was engineered with innovation throughout starting at the bound with the new design for enhanced passenger comfort.
This model exudes luxury and also includes an incredible amount of convenience features from the all New Malibu Command center to our patented flip downswing himself.
As you know our ability to deliver uncompromising performance to our customers is what truly differentiates our brands, which is why the M. 40 is powered by the new Malibu monsoon LT for supercharge be eight engine and contains a number of innovative performance features.
One of these features as our new Stern turn which allows for incredible control of the boat at the touch of about as it provides maneuverability through tight spaces in the ability to stop quickly.
This feature integrated with our proprietary power wedge three allows for tighter turns or reduce the time. It takes a pick up a rider, 5% to 30%, providing greater fuel efficiency and delivering more time for action on the water.
This boat truly exemplifies the innovative and iconic Malibu brand.
Global also continues to perform very well, while there has been a contraction in the overall Sterndrive segment cobalt has continued to outperform the 23. The 30 foot segment link and remains the market share leader in the comprehensive 20 to 40 foot Sterndrive segment.
In fact, we've grown our market share in every segment and into critical 23 foot to 30 foot segment, our market shares now nearly 35%.
As we continue to work towards integrating our highly successful Malibu new product development model at cobalt, we will bring a large number of new boats to market over the next 30 months in the focus categories Sterndrive surfing and outboards.
Does that in we introduced the a 29 the newest model in or a series of cobalt boat.
This boat provides a suite of advanced technology, and convenience features including a fully powered and patent pending splash and still in play doubles management system that will be a huge yet families.
Splashing Stow enables owners to readily deploy retrieved in the store in their water recreation devices and is it convenient way to enjoy the latest generation of inflatable wraps paddleboards imploding cabanas.
In addition to the a 29, we also have another new boat coming out in the second half of the year, which we will be excited to tell you about very soon.
Our production capacity it expansion that cobalt remains on track as we recently brought additional square footage online in October and continue to be on schedule with each of our capacity expansion initiatives there.
Pursued continues to exceed our expectations as you will recall one of our initial objectives was to maximize value or pursuit in expanding the manufacturing capacity I'm very pleased with the progress. We have made on that initiative, just breaking ground on or about 182000 square foot facility in August we.
Made tremendous progress and remain on schedule to bring the new factory online and begin producing boast about early fiscal 2021.
This will allow us to expand production and distribution, thereby maximizing unit sold and margins.
Given the additional manufacturing capability in the expanded dealer network that our production capacity initiative will bring to pursue we're rapidly moving toward implementing the new Malibu product development process have pursued.
This will consistently bring three to four new boast a market every year. We know the product development was one of the critical pillars to our success and we remain focused on integrating our industry, leading innovation and operational expertise at pursuit.
As you've heard me say many times, our vertical integration strategy sets Malibu, apart, allowing us to control the entire supply chain control quality generate synergies across our brands and drive overall growth and profitability in July we brought to market our latest vertical integration initiative, which incorporates our own flooring into all of our.
Malibu and axis boats.
This integration has gone incredibly well and will eventually make its way to cobalt and pursue providing further evidence of our ability to cross integrate our dynamic innovation within <unk> within each of our brands.
While it is not our largest vertical integration initiative by scale. Our flooring integration project provides a very attractive profitability profile and gives the customer greater optionality and flexibility.
In addition to our flooring vertical integration our Malibu monsoon engine initiative is also substantially competitive differentiator for our brand and has been completely integrated into 100% of our Malibu and axis boat sense do out of the first that said the manufacturing of our monthly the engines was recently impacted by the you eight.
W. strike, which far out lasted anyone's expectations as the longest GM related strike in 50 years.
We successfully navigated through it with no impact to our annual production plan.
As many of you know Jim supplies the engine blocks for monsoon engines and as a result, we moved quickly to mitigate any impact on our production capabilities.
Pleased to say that due to our teams agility and strong supplier relationships, we were able to secure additional engines without missing a beat.
We view this as an important insurance policy to protect our company our dealers and our employees as a result of our efforts Malibu is prepared to withstand a prolonged struck.
There will be a cost of that the engines were source at a premium and we will be aggressive to work through that inventory the spot because we believe that our ability to procure the supply demonstrates our operational prowess to present, our business for the long term.
Further our strategic view the execution allowed us to strategically address the slightly elevated inventories we talked about last quarter. We moved quickly in late August in early September to accelerate sales, bringing our inventories down to appropriate levels and positioning positioning us incredibly well for model year 2020 in the.
Coming boat shows.
Our prudent inventory management is also a strong tailwinds for our model year 2020 product portfolio as our dealers have sold through much of their 2019 inventory and are positioned very well for the boat show season.
Well, we remain very well positioned to continue to execute through any changes in our environment. We're aware of the continuous noise in the market from retail choppiness to concerns of a potential cycle change.
As we've stated previously we do not believe a downturn is eminent we continue to believe that the 2020 election cycle plus one year is a next potential down cycle, depending on whether we have a pro business environment or not.
The key economic indicators, we monitor continues to support our view of the strength of the U.S. consumer today as the unemployment rate in September fell to 50 year low of 3.5% signifying an increasingly strong labor market, even more telling is that all 50 states continue to have a positive GDP with.
Many solid marine states, leading the way.
While our outlook for the marine industry and broader economy remains constructive I would like to reiterate our covenants in our ability to maintain our margin structure through a normal downturn scenario and the economic downturns, we experienced prior to the great recession in 2008, the industry experienced a 20% to 30% unit decrease which quickly recover.
Third within two to three years from that decline.
In a normal downturn of a similar nature. We believe we will be able to maintain gross margins in the range of 20% to 24% in EBITDA margins in the mid teens with a quick acceleration to above 24% gross margins and near 20% EBITDA margin upon a cycle recovery.
Additionally, our industry, leading vertical integration strategy, which brings more of our manufacturing in house and provides a competitive cost advantage drives confidence in our ability to outperform our competitors in the event over the economic slowdown.
Summary, we're confident in our ability to drive superior performance as we move through fiscal year 2020 and beyond.
Our product innovation and strong execution continue to set us apart from the pack, we believe that we're in an excellent position to drive value for all of our stakeholders.
In summary of our quarter, our first quarter was another very strong quarter for our business new product development and operational excellence initiatives enabled us to outperform and set us apart from the competition.
We will position our channel inventory at an attractive level for upcoming boat shows.
Our unparalleled vertical integration strategy continues to drive innovation and increasing competitive differentiation across all of our brands. The agility of our team our operational expertise and focus on superior execution will allow us to continue to further our leading positions in each of the markets we serve.
While an ongoing level of uncertainty remains was within the macroeconomic environment, we remain bullish on the strength of the U.S. consumer today.
Ill be remains strongly position going forward to continue to drive growth and increasing profitability and deliver long term value to our shareholders I will now turn the call over to wanting to take you through the quarterly results in more detail.
Thanks Jack.
In the first quarter net sales increased 39.4% to $172.1 million and unit volume increased 13.9% to 1727 Bucks.
The Malibu and Axis brands represented approximately 58.7% of unit sales were 1014 boat.
Cobalt represented 33% or 570 boats and pursuit made up the remaining 143 boats.
Consolidated net sales per unit increased 22.2% to approximately $99600 driven by the addition of pursuit models, which carry a higher average selling price compared to our other brands as well as year over year price increases and the increase mix of larger boats across or Malibu and axis brand.
Gross profit increased 31.1% to $40 million and gross margin was 23.2%. This compares the gross margin of 24.7% in the prior year period decrease in gross margin is primarily attributable to the inclusion of pursuit for the quarter. This is the last quarter, where we won't happen.
And pursuit for the prior year period next quarter, there will be an additional two weeks included in this fiscal year as compared to last year.
Selling and marketing expenses increased 44.8% or $1.6 million in the first quarter as a percentage of sales selling and marketing expense increased by about 10 basis points.
General and administrative expenses increased 18.9% for $1.7 million increase was predominantly driven by incremental expenses attributable. The addition of pursue both as a percentage of sales.
<unk> expenses, excluding amortization decreased 110 basis points to 6.2%.
Net income for the quarter increased 38.8% $16.7 million.
Adjusted EBITDA for the quarter increased 24% to $28.4 million, an adjusted EBITDA margin decreased 200 basis points to 16.5% attributable to the inclusion of pursuit.
non-GAAP adjusted fully distributed net income per share increased 23.9% to 83 cents per share since it's calculated using a normalized C corp tax rate of 23.5% and a fully distribute weighted average share count of approximately 21.8 million shares.
For a reconciliation of adjusted EBITDA adjusted fully distributed net income per share to GAAP metrics. Please see the tables in our earnings release.
In addition, we purchased approximately 383000 shares of our stock in the quarter at average price of about $29 per share. This represent approximately 1.7% of our market capitalization.
Our consolidated outlook for fiscal 2020 remains unchanged and updated with additional color as follow.
In addition to our original guidance, we expect to incur costs of up to approximately $3 million over the course of the year associated with you ADW strike. We believe these costs will primarily impacted second fiscal quarter.
For Malibu and cobalt for the full year, a low single digit percentage decrease in unit volume.
Q2 volumes will be negatively impacted by the you ADW strike and be down 5% to 10% year over year with growth in back half the year to reach our annual TARP.
For pursue.
Unit volume growth should approach, 40% for the fiscal year.
As expected net sales growth in the first quarter was strong consolidated net sales is still expected to grow at a mid to high single digit percentage for the full year.
However, Q2 will likely be down low single digit percentage year over year, driven by the decrease volume related to the you ADW strike.
Consolidated gross margin is expected to be up slightly year over year, excluding the impact that you ADW strike.
When adjusted Q2 margins will likely be down slightly year over year in increasing in the second half of the year.
Consolidated adjusted EBITDA margin is expected to be down slightly year over year, excluding the impact you ADW strike.
EBITDA margin for the second fiscal quarter will be down about the same amount as in Q1.
Year over year, driven by the lighter volume and will recover well in the back half of the year.
Consolidated capital expenditures.
Continue to be expected.
Between $40 million billion dollars, driven by our expansion of our facilities that pursuit and global.
In closing fiscal year 2020 is off to a great start as we delivered another quarter very strong financial results. We remain laser focused on continuing to execute on our strategic investments to drive meaningful growth and profitability across the business.
We're confident in the strong market positions that each of our brands and are optimistic about the economy in the marine industry with that I'd like to hand, the call back over to Jack for some closing remarks.
Now you had yet another strong quarter is off to a great start to the fiscal year, each where brands are very well positioned to continue to capitalize on are exceptional model year 2020 product portfolio and we continue to execute very well on our initiatives I will now open up the call for questions.
Ladies and gentlemen, if you have a question at this time. Please press the star and then the number one on your touched on telephone.
Again that as far as the number one on your touched on telephone.
If your question that's been with answered already reached as we move yourself from the Q. Please press the patzke.
Your first question comes from the line the breadth of interests from Keybanc capital markets. Your line is open.
Good morning.
Good morning.
Jack I was hoping you could elaborate and put some numbers around your retail trends obviously the industry is.
Coming off of this off first half, but I guess, how did the quarter.
Progress for you and then building off that I guess, how much of the retail increase do you think was promotional driven versus pent up demand from earlier in here.
We had a phenomenal quarter from a retail standpoint, we were substantially up in substantially grew our market share during that quarter, it's really difficult bridge to ascertain where.
How much of that was promotion versus how much of that was new demand I do think there was pent up demand just simply from what we saw in that June timeframe, but if you will get the entire quarter beginning with July if started right off the bat offsetting what we saw in June continue three through August September with our.
Being in front of our competition and driving inventories down for our dealers certainly had an impact.
It has that continued into October .
Yes as to what we're hearing.
Got it. Thank you and then and then Wayne can you just elaborate a little more on the GM strike impact I mean, it sounds like something impacting your second quarter is.
Is it simply a gross margin impact.
Did you have any impact in the first quarter are you back to a steady supply just any how to really think about that.
Going forward.
Yeah.
Going forward basis I it did not impact the first quarter I'm in terms of first quarter came in right on top of where we are expecting the numbers.
And it is primarily impacting the second quarter in the sense that.
It's a look it's driven by all the Jack said, it's a little bit of price.
Price premium to acquire that insurance policy.
And our desire to make sure we move through those as quickly as possible and so maybe a little bit of.
Yes, discounting a little bit and efficiency around the factory just given the.
The duration of the strike, but but but I mean, where it should not impact as well we are getting blocks now and so we tend to have our arms completely wrapped around it the things done and we know what the impacts going to be and most of that most of that will flow into Q2, there maybe a little trail into Q3.
Thank you.
Thank you.
Your next question comes the line, Mike Swartz from Suntrust. Your line is open.
Hi, good morning, guys.
Good morning.
Could you maybe give us.
Just a little more detail or granularity on some of the inventory levels you're seeing out.
[noise], India in the in the retail channel me by brand or geography, just anything that stands out and then maybe.
From what you can ascertain.
The inventory levels or some of the competitive brands out there as well that that'd be very helpful.
No my we've been very focused on where we were at and what we did over call. It a three week period in that August September timeframe, as we focused on moving for our dealers, while you're not taking inventory. Our goal was to be would be very clean coming into the boat shows having model year 2020 product primarily.
For dealers to sell we know that there have been other promotions that are out there, but I can't say that I know where competitors or add I hope that they are now.
Don't know that.
I think you still have some segments and I'll speak to it on a segment level.
Still are pretty heavy in inventory.
Point, specifically, what I'm hearing about pontoons us still a pretty heavy environment from an inventory standpoint.
My overall sense, though is that the performance sports boat segment is better at the end of September then it was at the end of June I do hope that's the case.
Okay.
Thanks for that then then maybe anything that we've had some some larger boat shows last month or so.
Maybe give us a little bit of color on what you've seen maybe high level and then also around maybe go early orders retail transfer for some of your your product coming out of those shows.
The I think the best way to worded is surprisingly strong so I'll go back to Atlantic City very good boat show ahead of last year.
Ample which as you probably know is delayed around a month or so much month and a half was also another very strong show.
So, especially for pursued which we would expect that to be the primary carrier.
But they were substantially up in multiples of units over last year. The most recent show, which is a huge pursuit show and lesser for cobalt, but they also participated Fort Lauderdale.
And pursued had the best Fort Lauderdale show I believe that they've ever had but it was substantially over last year.
It blew away what our expectations would be for pursued and what is really interesting for US is there was a lot of concentration on our new product from pursue as well as larger boats, which is fantastic on the cobal side. They are slightly exceeded what they did at the excuse me Fort Lauderdale show last.
Sure. So we consider that to be successful as well.
Okay, great. Thanks for the color.
Thank you.
Your next question comes from the line that Tim Conder from Wells Fargo. Your line is open.
Hey, good morning, that's room are turning on for Tom just a few questions for it.
Oh I wanted to dig into the inventory situation a little more it sounds like you've made good progress made there'll be some work.
Side.
Could you maybe walk through some of the dynamics at play shipments were up strong and quarter, while you're still clearing inventory.
Hello.
So is it really just a function of needing to clear the model year 19 product and I guess, what does that imply for production cadence.
Yeah.
We're not changing our production cadence, we think they will be saying, we had said yeah on our last call that the first quarter would be up slightly so we we executed exactly what we said that we would do as I look at the inventories. We think we are in very good position I will tell you that I believe.
I think we all believe that our inventories are clean are by far than any other competitor out there. So they are set up to our dealers are set up to sell model year, 20 inventory, which I would always rather have or dealer settling the current your inventory versus trying to get rid of old inventory. So we think that we're better positioned than any other competitor.
Out there yeah, I mean, mark what I would say is that the you know that this has always been the plan we have always over the years manage our production schedule the factories running really smoothly at the throughput that we've been running it and so we made the decision or you know as as we walked into the year to continue to run it at that high efficiency.
And so.
The plan all along as you Yeah, we've had some growth, but we've got really meaningful growth at retail in Q3 or a calendar Q3, and so that has led to some the inventory, but given that the implied guidance that we have.
For those wholesale shipments.
And where retail that that will just continue to keep it healthier and frankly positions up the us if anything for upside.
Okay. Okay makes sense and then you repurchase a good amount insurance during the quarter you saw some availability under your authorization.
How are you thinking about deploying into that going forward.
I think we're going to continue to be opportunistic with respect to it I think we saw a great opportunity to buy stock at $29 a share and.
And so I think we'll continue to look we are focused on.
Deploying capital and opportunities that are unique to us and that that mantra has not changed and.
But that was an incredible opportunity to invest in this company and his team that we have here.
Okay, Thanks, guys great quarter.
Thank you.
Your next question comes from the line of Joe Altobello.
From Raymond James Your line is open.
Hey, guys good morning.
First question I'll say on the dealer inventory a topic for a second I think last quarter you guys had said that.
Back to.
Clear out whatever extra weeks of inventory, where the channel by the end of December delayed it and this morning.
It looks like thing by fiscal yearend was there it seems there or am I misreading that.
No I don't think you misreading to say, but with when we looked at it we knew at the time well we were going to do in terms of trying to move that while you're not taking inventory I think as we continue to move through the rest of the first half of the fiscal year. The the inventories will continue to build.
Old for boat shows, but not in an abnormal fashion.
We had.
We did better than we expected with our.
Promotional activity in terms of moving inventory go I would tell you that coming into Q2, we are clearly cleaner than we anticipated that we would have been.
Okay.
And then secondly on gross margin, obviously pursued a skew the numbers this quarter and I guess this is probably the last quarter I'll get the assets, but what was the base Malibu cobalt gross margin is a quarter or at least the your change in that gross margin.
Yes. It was it was it was close to flat in the quarter.
Okay.
Just one last one if I could Wayne you gave us the Malibu axis you to breakout.
We did not.
Okay can we did not I mean look I think we've kinda consolidated the segment reporting but I.
I think for the most part you know you it's pretty predictable you guys have seen it over time.
Can you really those are being a model distinctions and so it's it's literally about 30.
It all it ranges from 30% to 35%. So many of you plug in the middle and you're going to be right about the number.
Okay, great. Thank you guys.
Yes. Thank you.
Your next question comps of Atlanta, Eric Wold from B. Riley Your line is open.
Thank you good morning.
I'm going to pursue I guess.
Now you have you know a full year under your belt. Some of the early boat shows now from from this season to kind of gauge kind of price appetites, how should we think about.
Where are you thinking of baseline average selling price received its going to kind of you know.
Trend out and then what's your ability you think enough to move that higher over the next.
A couple of years.
I think the.
What we're seeing Eric is a very strong ASV average selling price is primarily being driven I think from two factors. One we continue to see an appetite for larger boats and then secondly, the features and options that are being put on the both are driving that asap.
Saying that will continue we we've not seen.
Any degradation in terms of the number of features options being taken in the early part of this year and I think Fort Lauderdale last week was another example of that in terms of continuing to drive ASP. We have entered a new products that are coming out features that are competitors don't have it's who we believe that we'll continue to drive ASV.
And then the larger boats that focus on doing from a 26 foot or two at 29, Twitter to 32 motor and so forth.
No that's not that's not.
Starting to slow down and we think those are the drivers.
I know the first quarter aggregate was a little wonky after the acquisition given pursued given kind of what they had when we're going to last few quarters, it's kind of range from.
Below 240000 kind of on the wholesale side to Ohio to 55, maybe.
How much how much higher than that can that go into moving in the larger boats.
Yes look I think that's that's been a strong outperformance that number's going to fluctuate a bit just given mix ready because he's the with the breadth of the offering.
Yes, when you when you start flexing mix around it even if we start getting a whole bunch more volume as we bring this plant online if that mix shifts down a little bit you could actually see a little pressure on that ASP, but you're going to be getting a lot more volatile. So I think you really I think one when you think about modeling that business really think need to think about the red.
The new opportunity at you know at as opposed to trying to isolate that ASP because you may have some impacts of of mix.
And don't want to disappoint folks on on the ASP rated the reality is we're trying to make is as much money as possible and if that brings down that ASP pressures that if he grew up a little bit.
Because there's no earnings to be harvested with a little bit smaller mix than we're probably going to think about.
Okay. That's helpful and wants question.
Yeah, I'm, assuming it's still.
Relatively early coming out of.
The June call, an inversion seem just beginning but kind of where do you. What do you think kind of dealer sentiment news right now given the now they've got.
A few months no four months or so plus of a better buying patterns inventories coming down going to work or is there sentimental ultimately you've heard it kind of their desire as you move into next year to hold inventory and on a lot experiences.
Where are you may have spot.
And this year.
No I'm fortunate to be able to answer that question after having our dealer meeting last week in spending on entire week with our dealers.
There has been a fantastic position and going through that late August early September promotional period, and helping them move that 2019. The inventory has put them in a very very optimistic pattern and thought process. So I think they're looking at the boat show season welcoming it believing that they have.
The raw product from a mile. Your 2020 standpoint without a model you're not seeing overhang and so I would say I would simplify typically typically say rather that they are more optimistic than they have been in quite a while just from that standpoint.
Perfect. Thanks, guys.
Your next question comes on line of Gerrick Johnson from BMO capital markets. Your line is open.
Hey, good morning, I'm, just gonna go back and clarify a few things you don't mind.
First on the Tucuman, Patrick you W to be clear you won't be seeing slow down to Q deliveries just the 3 million dollar.
Packed or will you be shipping more slowly than you previously thought.
But we indicated the so 5% to 10% decrease on the COBOL Malibu combined volume for for the quarter.
That is a little bit slower than what we had anticipated where did that operations teams working hard to make that up and units you relatively quickly and but but but that is we're saying a little bit lower volume in Q2, Yeah and Garik I think I is probably pretty safe to assume that lower volume in Q2 will be made up in.
Q3 was absolutely safe to assume and I think I said it all.
On the call today that our production plan will be it for the year.
Okay. So it's not necessarily that you can't get the engines. It's just that did it costs a little bit of disruption your process.
Exactly.
Okay, and then getting back to Joe's question on the disconnect between your verbal comments on channel inventory, what we see on page six in the marketing pack.
Maybe we need to know or maybe could define what healthy means that might be might be helpful.
Yeah. So I I don't think there's a big disconnect trade. They get the reality is that they're a little bit higher than they've been in years past really that you'd like but.
If you look at what we said on the and been consistent about is that their wholesale shipments will be strong and you had stronger in Q1.
And it but for Malibu and COBOL. The answer is they'd be down low single digit volumes year over year, which would imply that in Q2 Q3 Q4, So theres no pressure on those volumes.
For the remaining portion of the year that in a growing market. If you have negative <unk> negative year over year comps that the reality of the situation and you're taking it down the reality is your de Inventorying even more.
Right.
Relatively basic math, so that I think the issue is they're not really a disconnect. It's been the plan all along and you to answer is I don't know the saying Hey look we're going to be in a position by December I think the thing that's probably being misunderstood is that by December we would be in a position to feel like.
That plan was going to workout and what Jack's comments were along the lines of Hey look we got that cleaned up faster than we even thought right, but but the plan all along if you go back and looked at the call was a little bit stronger Q1, because on how we're running the plant and let it naturally bleed down over the course the year.
Sure with lower shipment growth in a growing market. So.
Does that make sense.
Well kind of you know.
I think it's just the surprise for everyone.
Please turn me I will speak for everyone, but for me to see that you're expecting healthy.
Well inventory by the end of the fiscal year, just seems like that's longer than we anticipated that to be.
I mean, we pick up volumes, a whole bunch and gotten to get even cleaner and then sat there and you know started growing more wholesale in the back half of the year and run the plant more efficiently.
But I don't think people want that.
Okay understood. Thank you.
I'm showing no further questions at this time I would now like to turn the conference back to Mr. Jack Springer.
Thank you Malibu performed very well, we executed the spot surprises like the you a w. struck in the quarter.
We're now, though we expect our performance to continue as guided on our last call I want to thank you for your continued support Malibu and for being on the call today have a great day.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating and have a wonderful day you may all disconnect.