Q2 2020 Earnings Call
Oh skis and they said you're dependent shows the operator today's conference is scheduled to begin momentarily until that time your life. So they can't be placed on music old <unk> patients.
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Welcome to Malibu boats conference call to discuss second quarter fiscal year 2020 result at this time all participants are not 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.
It's not permit it without written authorization and Malibu boats and as a reminder, this call is being recorded.
On the call today from management are Mr., Jack Springer, Chief Executive Officer, Mr., Wayne Wilson, Chief Financial Officer, and Mr. Ritchie Anderson, Chief operating officer.
I would now turn the call over to Mr. Wilson to get started please go ahead Sir.
Thank you and good morning, everyone.
On the call Jack will provide commentary on the business and I will discuss source discussed our second quarter financials and outlook for fiscal 2020, I will then hand the call back over to.
For some remarks, and we will open the call for questions. A press release covering the company second quarter fiscal year 2020 results was issued today and a copy of the 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.
Paul may contain certain forward looking statements, including predictions expectations estimates for other information that might be considered forward looking and that 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.
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 does he see 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 todays call such as adjusted EBITDA adjusted EBITDA margin adjusted fully distributed net income adjusted fully distributed net income per share reconciliations of these non-GAAP financial measures to GAAP financial measures are included in our earnings release I will.
Now I'll turn the call over to Jack Springer.
He Wayne and thank you all for joining the call. The second quarter was another outstanding quarter for Malibu.
Strength of our brands industry, leading product innovation continued success of our acquisition and our teams tremendous operational execution enabled us to drive robust topline growth and success.
Yes, we overcome headwinds presented by the way W. strike that impacted our engines.
For the quarter net sales increased 9% 280, 80.1 billion adjusted EBITDA increased 4% to $30.7 million.
Adjusted fully distributed earnings increased 8% to 93 cents per share.
I want to congratulate the entire it'd be you you team for a job very well done.
The momentum we have experienced in the last several years underscores the strength of our strategy that we are executing every day.
Our commitment to a rapid thoughtful pace of new product introductions, both new boats and features robust investment in R&D effort and best in class.
Last vertical integration initiative have supported further market share gains while at the same time mitigating the impact of macro events, such as a pair of situation and you ADW strike through this we have driven margin expansion.
Another very important part of our momentum and performance is our acquisition strategy we've been proven.
And only acquired premium brands are reasonable valuations and through our operational expertise, we have made them better more profitable and quarterly contributors of our growth and profitability acquiring great brands combined with our flawless execution to make them more efficient is it demonstrated core competency for Malibu.
In our last earnings call, we indicated the second quarter would experience headwinds and there would be an impact as we fully recovered from the U.S. that'd be struck a G.M., which impacted engine supply.
Hi, I'm very pleased to tell you that with GE I'm coming back online quicker than we anticipated and more importantly, the fantastic performance of the Malibu operations team.
We were covered faster than we had projected as a result, we caught up shipments in the quarter and we mitigated the cost impact. This is a testament to our planning agility and ability to quickly recalibrate, which maximize our performance in the quarter.
You will recall that in the first quarter, we aggressively address channel inventories which were slightly.
In play that at the end of fiscal year 2000 that thing not only where we quick to move in addressing it will also be <unk> competitors to the punch. The program. We initiate it was more successful than we had planned this place Malibu and our dealers and a great position our dealers that have been able to concentrate this fall the boat show season on selling.
Model year 2020 products.
Conversely, our competitions dealers are focused on old product that reduce margins well. They also play for pay floor plan interest on those older models.
As a result, our dealers are more profitable and they've been able to concentrate their boat show activities around new exciting product.
A question we've been asking.
Whether our fall program just pulled forward demand.
The answer is a very strong no not only did we exceeded expectations in the August September period, what are your him. So that it was better than last year and our boat show performance is significantly up over 2000 lapping boat shows.
As you know boat show performance is a lot.
Adding indicator of demand trends heading into the retail selling season.
Preliminary results from the boat shows in January had been good as the unparalleled performance in technology over a multiyear 2020 products in our best in class dealers are driving solid result.
The winter boat show foremost fall was very strong fall season for pursued in the to happen.
In Fort Lauderdale shows in round percentages Malibu is up double digits and pursue there's also up double digits. Even more impressive is the boat show revenues up significantly more than 2000, not paying due to the larger higher I.S.P. both being so.
Cobalt, while not as strong as Malibu in pursuit is performing well.
Well.
Now we look at key boat shows as Bill whether shows Lear, usually indicative of the consumer appetite there will extend through the rest of the year. Those bellwether shows thus far have been in Atlanta, Minnesota, New York, and Seattle, and they have all been strong performers and bode well for the rest of the show in fiscal year.
In fact hit a 10 year.
For units sold for Malibu.
In addition to spot bad weather Toronto was a strong showing exceeded our expectations selling more units than in 2000 not thing.
Well, we are seeing and hearing that boat show, a tennis, maybe flat to down based on playoff games and the weather the number of active.
Good bars is up over previous years, leading to a strong season, thus far.
Given this activity we continue to believe that are markets remain attractive.
The new product line up for Malibu, and Axis has bolstered our leadership position in the key markets those brands or our recently announced 23 MFC has been a tremendous success with the.
Customers as the design of the water pickup work Bell maximized space and then everybody should make it the perfect mix of luxury in water sports performance further our own move flagship mildly M. 40 has commanded the market since its launch in October. The M. 40 is a prime example of our product strategy coming to lot, bringing a new.
New level of luxury convenience technology in performance to our iconic Malibu brand.
Paring the exceptional performance of the M 40 is our Malibu monsoon LT for V. Eight supercharged engine. This engine is not only one of the most powerful engines available but it is also one of the most environmentally brings the engine friendly.
Engines on the market today were 6.2 liters of displacement 607 horsepower and 605 pounds of.
605 football's of toward the premium high performance be eight engine is the only supercharged inboard engine in the market to make carbs forestar emissions writing.
The feedback from dealers has been overwhelmingly positive on the unparalleled quality design and performance of our Malibu monsoon engines, well innovation is critical to our long term growth product quality and safety is equally important to support our long term relationship with our dealers and our customers.
As such we were pleased to.
We've also global certification for quality, environmental and safety management processes across production and product development systems for our engines.
At pursuit and Cobal, we've made great strides in leveraging the product phase gate, well developed my mouth Malibu.
We know that our ability to consistently deliver innovative.
With cutting edge technology at a rate that out passes Arca outpaces. Our competitors is one of the key competitive differentiators for our business.
This is highlighted by the recent announcement of our S 378 sport that pursued the latest addition to our sport line of luxury center console, both which will officially debut.
At the Miami boat show next week.
The S 370, a features advanced innovation throughout including a patent ended automated entertainment center that moves into place at the touch of a button. This impressive new boat joins a pair of already introduced highly regarded model year 2020 boats. The DC 326.
And the DC to 66.
The D. C 26 is the latest models would be introduced into <unk> pursuits award winning dual console family.
This boat bills I want to four popular Bose.
On one popular both the DC 325 by adding several innovative features including a fully integrated fiberglass.
Our topic Tempur glass windshield thoughtfully designed storage in a starboard whole side door. The DC to 66, introducing the early fall awful is generated how demand has been very well received as a boat provides a miss versatility for leisure cruising or casual fishing, making an ideal for really.
He is on the water.
The cobalt a 29 is capturing substantial attention that the early boat shows as well the patent pending splashing stope features a must have feature for families. As it is the first inflatable management system of its kind, enabling owners to readily deployable retrieved and store their water devices. This.
Feature completely changes the traditional method of caring handling a storing water recreation devices and is yet. Another example of Malibu Nowadays intubation, improving the experience where customers have on the water.
In addition to the a 29, we have new product being introduced by cobalt to the market in Q4. This will quickly be followed by more.
Models in Q1 fiscal year 21, or the July through September time.
More broadly speaking our brands were continuing to gain share the Malibu brand catcher, 62% of the growth in the performance sports boat segment in calendar year 2000 that thing.
Increasing our market share by 100.
20 basis points for the trailing 12 month period as of December not 2000 that they.
As we've stated many times our expectation in a given years 10 to 30 basis points of Marketshare change. So this huge increases a resounding confirmation of our best in class dealers and our product.
Pursuit is performing very well.
As our production capacity expansion remains on track and will position us bring production online at the new facility with the beginning of model year 2021.
This initiative will enable us to nearly double our production volume overtime, allowing us to expand or dealer network can unlock tremendous value out of this powerful brand.
<unk> remains a market share leader in the comprehensive 20 to 40 foot Sterndrive segment and an increase this market share by 250 basis points for the trailing 12 month period as of December 20, not team on unheard of gain in one year.
It is also outperforming the end industry in the crucial 24 to 29 foot segment.
Worth market share is an historic 35%.
Our market share growth is supported by ongoing operational enhancements in production capacity expansion initiative, all which continued to progress on schedule. In addition, our expanded manufacturing capacity of cruiser and small bodes is up and running and will enable us to accelerate new ERP.
Product development cobalt.
We also remain optimistic about the strength of the broader economy as recent announcements, including the U.S.M.C.J. agreement and the China trade deal will prove beneficial for the marine industry.
Is pending deals were two anchors, creating challenges for the marine industry and broader retail environment.
And should positively impact customer sentiment going forward. We believe this is already being seen as of January consumer confidence index Rose 3.4 percents to up.
<unk> points to 131.6.
In December the U.S. employment rate held steady at 3.5% the lowest that it's been in 50 years.
Irrs and new housing starts jumped nearly 17% in December to the highest level in 13 years. Additionally for the first time in 26 years every U.S. Metropolitan area experienced per capita income gains in 20 that thing.
These key economic indicators are important to us as we evaluate the strength of our.
Our markets and ultimately the consumers and gives us confidence that we remain poised to benefit from healthy market conditions.
The economic news healthy channel inventory levels, new product all play into dealers optimism our backlog remains very healthy with surplus orders extending into Q4 for Malibu.
Other than axis, and Prime Minister three for pursuit and cobalt.
In summary ever quarter, the second quarter marks the 20 onest consecutive quarter, we have delivered year over year revenue and EBITDA growth. Our second quarter continue that stellar trend was another strong quarter for our business new product development and operational excellence.
Enable us to outperform and set us apart from the competition our channel inventories are healthy and right on top of historical comfort levels.
Our unparalleled vertical integration strategy continues to drive innovation and increasing competitive differentiation across all of our brands.
The agility of our teams are operational expertise.
You can focus on superior execution will allow us to continue to further are leading position in each of the markets that we serve.
We remain bullish on the strength of the U.S. consumer today as well as the the marine industry dynamics and importantly, Malibu remains very strongly position going forward to continued.
Driving growth in increasing pop profitability and delivering long term value to our shareholders I will now I'll turn the call back over to wanting to take you through the quarterly result in more detail.
Thanks Jack.
In the second quarter net sales increased 8.6% to $180.1 million.
Others and unit volume increased 2.5% to 1804 boats.
Malibu and Axis brands represented approximately 61% of unit sales were 1101 units.
Cobalt represented 31.1% or 561 units and pursuit made up.
The remaining 142 units.
Consolidated net sales per unit increased 6% to over $99800 driven by year over year price increases an increase and increased mix of larger boats [noise] across our Malibu and axis brands.
Gross profit increased.
4.1% to $39.9 million and gross margin was 22.1%. This compares to gross margin of 23.1% in the prior year period. The decrease in gross margin is primarily attributable to expenses related to the way W. strike and when adjusted for 1.7 million in cost associated with.
Great I mean, you strike would've been approximately flat.
Selling and marketing expense increased 1.4%.
Or.
Zero point $1 million in the second quarter as a percentage of sales selling and marketing expense decreased 20 basis points general and administrative expenses decreased 10.3% or 1.2 million.
Dollars. The decrease was predominantly driven by acquisition related expenses.
Were attributable. The addition of pursuit in the prior year period as a percentage of sales DNA expenses, excluding amortization decreased 120 basis points to 5.6%.
Net income for the quarter increased 17.3%.
To $17.6 million.
Adjusted EBITDA for the quarter increased 4.5% to $30.7 million and adjusted EBITDA margin decreased 70 basis points to 17% non-GAAP adjusted fully distributed net income per share increased 8.1% to 93 cents per share. This is.
Actually using a normalized C corp tax rate of 23.5% and fully distributed weighted average share kind of approximately 21.6 million shares for a reconciliation of adjusted EBITDA and adjusted fully distributed net income per share to GAAP metrics. Please see the table in our earnings release.
Our operational.
Team did a fantastic job in recovering from the impacts of the way W. strike and we were able to catch a falling more quickly than we had anticipated leading us to outperform our second quarter financial expectations. In addition, the underlying metrics within our businesses are quite strong given our stronger than expected results in the second quarter, we're revising our.
Look for fiscal 2020 as follows for Malibu and cobalt unit volumes are expected to approach flat over the last year up from our previous expectation of a low single digit decline year over year performance is likely to be slightly more challenged in Q3 when compared to Q4.
For pursuit unit volume.
Growth is expected to be up slightly over 40% for the fiscal year, an increase from our previous outlook of approaching 40% growth.
Consolidated net sales are expected to grow at a high single digit percentage for the full year.
Oh from our previous expectation of mid to high single digit growth.
Consolidated.
The gross margin is expected to be up slightly year over year, excluding the impact of you weigh w. strike unchanged from our previous outlook consolidated adjusted EBITDA margin is expected to be approaching flat year over year, excluding the impact of you a w. strike.
Improved from our previous outlook of down slightly.
Generally speaking year over year margin increases should expand over the course of the second half of the year.
Consolidated capital expenditures are expected to be between 40 million and $45 million driven by our expansion of our facilities at pursuit and COBOL unchanged from our previous expectation.
Impact of the way W. strike will be under $3 million.
In closing we delivered another quarter of outstanding financial results. Despite headwinds from the way W. strike each of the brands are very well position heading into <unk> retail selling season in the near term we remain confident in our ability to.
Continue growing our business.
Profitability in the second half of fiscal year 2020, our production capacity expansion initiatives at cobalt and pursuit remain on track and will enable us to continue expand a robust product portfolio and drive enhanced efficiency in margins into 2021.
With that.
I'd like to open the call up for questions.
At this time, if you like to ask a question. Please press Star then number one and your telephone keypad.
And your first question comes from Brett Andress with Keybanc capital markets.
Hey, good morning.
Morning Corning.
Just looking.
Your retail data for Malibu and axis in the back half of the year.
June to December I'm, showing 25.
Type growth and I know, sometimes that can differ from your warranty registration. So I guess is that the correct way to think about how your retail trended.
Really in the back half of this year.
Back half Oh, you're speaking of the calendar 2019, yes, the calendar yes.
All right. So repeat the question plays as I was looking at the fiscal calendar.
Sorry about that yes, no just how because if you look from June to December I'm, showing retail, 25% for Malibu and axis.
So I guess, sometimes the warranty registrations.
Can be different from that.
Your internal warranty registration so is that kind of a correct retail trends that you guys had in the back half of the calendar.
Yeah, I think that's pretty corrective matches for the most far what we saw on warranty and as I've said earlier on the call no. The August September timeframe in which we were trying to move in.
Inventory outperform.
And the year end sales event also outperformed last year. So it's been a very very strong second our well I'll call. It. So you have the calendar year.
Got it and then just kind of building off that so so your comment earlier about.
Promotions not pulling forward demand.
I mean is encouraging and so just outside of the boat shows is there anything.
Listen the consumer behavior that you're seeing that is kind of leading you to that conclusion.
Yeah, I mean first of all just go back to we outperformed in August September period, we exceeded last year and ourselves of.
And boat shows our double digits up so that says and that's part of the reason I think you see just such a but we would call an astronomical growth and market share.
I think the other side of the equation is we are selling and this is it comes back to the consumer larger boats with a lot more features.
As an options driving that Asap.
Got it that's helpful. And then just one last one.
How are you guys thinking about Australia.
Fiscal year and next fiscal year really given the fires and disruption there what are your dealer seen just.
Just any thoughts on.
On that market.
No year over year, Australia is really pretty flat it'll it'll run about the same I think we've seen a little bit of a blip up and what's going on in Australia.
To the tune of call it 5% or so right now, but we believe that as a fires resolve themselves when we come into that bodes.
So season, because they're at the end of their summer season now so as we come into the boat show season, we expect it to pick back up.
Hi, Thank you.
Thank you.
Your next question comes from Tim Conder with Wells Fargo Securities.
Hi, good morning, and.
Thank you gentlemen.
Congratulations first of all in the Ritchie congrats on a continuing to ramp the pursuit well.
A couple of items Jack Wayne whoever wants to take this what are your expectations. As you look here to calendar 2020 on the Oh the retail.
Look for for Malibu collective and let's just say North America in Europe.
And then also.
Maybe going back a Jackie commented that we continue to see you know the upward migration of price points and content.
I know its question's been.
Before but just wanted to revisit it or how are you guys thinking about it and planning managing that at some point there that will not continue and just to make sure you don't start losing people coming in at the lower end of the funnel so to speak.
If you any color on that.
Yeah on the retail so we expect that continue to be.
Pretty consistent we've had some pretty strong growth.
I would expect that to moderate a little bit I think the Malibu and co mall COBOL will remain somewhere in those levels that they're currently yen.
Pursued you know is going to be flattish I think for now from a market share standpoint, simply because of our capacity constraints.
And then as we bring that product new new product online in the new plant online I think we have significant opportunity for market share gains there going forward not necessarily in the back half of this fiscal year.
Meaning additional gum do there you know I mean, I think you look the performance sports boat.
Grew domestically it for.
4% last year that was negatively impacted by weather. So we're looking at that is kind of that near to mid single digit ish.
In rate grower, you have the potential for some headwinds coming out of Canada in terms of <unk>.
Luxury tax.
And you obviously.
Have the tariff situation in Europe, which I think we've been addressing a done some boats out of Australia. So.
I think that's where our heads that we've seen really positive momentum in the back half of calendar 19.
And we feel good about what we're seeing today.
Out of boat shows so.
Yes.
We think that our guidance in what we've kind of embedded there and what our plan for the businesses.
Appropriately conservative for uncertainty in the world, but me, but but definitely achievable, yes to your second question, we are constantly monitoring what the.
Tumor in the dealer base is thinking in terms of pricing.
We've had this every single year come up as a question and we've not seen that topline, but I think is also important to understand that we just don't continue to drive that pricing upward by bringing out new both from the adding features the both we have.
I've been very very prudent and that we have that entry level are called entry level position. Several years ago. We introduced two models at a nationally advertised for us that allowed people that had may become from in 2678 timeframe to get into a boat at a better price we retain that this year, where there are a 20.
We have introduced that pricing that is probably lower than what a lot of people expected. So I believe that we can play both ends of that market very well and we've done that.
Okay and from a I guess another Avenue along that line is first continue to expand the market how much of your business.
In a calendar 19, or however, you want to frame. It here is with rentals. The boat club tight market and then what's your outlook for that as a percentage of your business here over the next in calendar 2020.
You know that's a really good question and I were right now involved with.
Three in terms of VIX journals Threed their front both club top program to rental programs. In addition to that there are a number of dealers that were involved with that and so we see that as a growing segment is now probably a segment that we're going to get in and own I think the financial profile is quite a bit different but.
As we continue those partnership with dealers and external sources I think that will grow overtime and I think that ultimately is the theater into the Malibu cobalt pursued system.
Okay, and lastly, gentlemen, you've been very disciplined in your approach to M&A and thank you for that.
So just just your outlook at this point from that perspective, and relative to other capital allocation opportunities with with the stock with any anything else that you may or may evaluate on the capital allocation side.
Yeah, I think I think you know this one of the great things that we have.
Is the amount of cash that we generate we generate a lot of cash, which we think sustains us in good times and bad.
It's now approaching 18 months since we acquired pursuit and we've been I think you use a great term discipline, we've been very disciplined not only in what we've looked at and what we've acquired we've made sure they.
Great brands that we could improve but we've also been very disciplined and making sure that internally we had the team in place to make that next acquisition and so we have been building that team.
You have cobalt is approaching three years under our umbrella pretty stable pursued has a great management team.
And we're about to bring that plant online in a matter of a couple of months if not a week and so the that's going to be a stabilizing factor in all through that time, we brought in.
New people that can help us with that next acquisition, but the key always comes back to this and that is the acquisition and does it fit our model.
And as we've said before we've looked at over 40 different potential acquisitions, we've acquired too. So when that next asset comes if his tomorrow or a year from now we're ready and we're going to use our cash today to pay down leverage and be ready to make that next acquisition.
[noise].
Okay. Thank you.
Your next question comes from Gerrick, Johnson with BMO capital markets.
Hey, good morning to fairly easy ones first of all on the you weigh W engine impact you said less than 3 million, while 1.7 is less than three seems like there but.
I might be some more coming through so so what else comes through the second quarter and why and then on the capacity expansions and then capital projects you have ongoing.
Can you give us a DNA for 2020 and then how much do you think these expansions will add to that next year and then maybe offset.
Kind of startup costs go away. Thank you.
Derek you said there were easy question.
[laughter], yes, so on the first one you ADW.
Yeah, we still have some.
Some impact flowing through as we work through some of that safety stock engines, and you know I would estimate that that's going to be between.
700000 in a million dollars, probably in the third fiscal quarter and that'll be the end of it and then with respect to DNA well, there's not going to be a ton of DNA incrementally that hits in this fiscal year Oh.
Jack said weeks.
You know months in terms of when the pursuit factories unit potentially coming online, but I think it's a little bit.
It's on the longer tail of that and so ultimately.
Theres, just not going to be a lot of DNA impacting this year.
Low hundreds of thousands of dollars in terms of incremental depreciation this year and then if.
You look at Indian into next year.
It's probably going to be to the tune of <unk> million.
A millionaire half you know incremental DNA.
Flowing through.
Okay. Thanks, any any period expenses going away.
From the start up.
In terms of you and I think I think we'll kind a give some more guidance that need to any of those expenses are kind of embedded in the guide. This year. So when we give fiscal 21 guidance.
So we'll either.
Indicate that are just embedded in the guidance and exactly what the those start up costs.
I'm going away are doing to our margins.
We have we haven't system called any of those out but it but but I think that's a good question and there's a little bit of that friction embedded in it today, we do have people.
On staff were training them into the building is fully skin and removed and you know, it's it's getting close.
And we have people on staff and we're training. So so there is a little bit of a drag there right now.
Alright, Thank you and.
Yep.
Your next question comes from Joe Altobello with Raymond James.
James.
Thanks, guys. Good morning. So I guess first question is talking about pursued I guess I'll start there. The guide for this year or the units up slightly over 40% looks like it implies a flat.
Growth in the second half in terms of shipments is that intentional I had.
The the expansion completion.
Yeah. It is intentional Joe simply is what we've been talking about for a long time, we can only build a certain number of both until we get this new plant online and so we are controlled by that so it is going to be flat in the second half, but what we're saying and I alluded to this in the script.
You look at the New York Boat show as an example, even though units were basically equivalent the because of the size of the both quarters being put on the Bose. The revenue volume was up significantly so unit flattish, but we think that the revenue has an opportunity to grow certainly.
Over the future.
Absolutely and then secondly on dealer inventories I think Jackie said earlier that they're right on top of where they were at this time last year when you're talking about you were turned our turns flat year over year.
We don't measure turns I mean, we focus on weeks of weeks of inventory.
Sit on our dealers law.
And so I mean, if if somebody wants to do the math to invert that are.
But but ultimately it's it's right on track for where it needs to be.
Okay, what's the point being that all that excess coming out of the summer seems to be God.
Yeah I mean.
At Malibu and Axis if you.
Retail domestically up nearly 25 in your year over year growth number is the antibodies is very small you're clearly the inventory meaningfully.
And is it fair to say that you guys are.
Fairly well ahead of the competition.
And your category.
In terms of burning off that excess inventory.
Very fair to say in especially related to aged inventory.
Okay, great. Thank you guys.
Your next question comes from Alex last year with Berenberg.
Hey, good morning, guys. So can you talk about.
The 12% drop we saw an ASP is among the pursuit brand, which but styles are getting hit the hardest and what's is really due to you guys just focusing on moving volume versus pushing price given some of the capacity constraints.
Yeah, but really it's driven by the fact that you have lumpiness when when it comes.
To the contract manufactured boats that come out of Holland, and so those are the two highest price boats and so you know you have some amount of lumpiness yet the beginning of the year, we guided that ASP down year over year, because we knew that mix was going to mix down.
And we're going to see less <unk> contribution from those boats overall, you know over the course of the year. So it has has less to do with kind of the mix that we see within our factory in Florida.
Which actually has the fixed the mix is actually outperformed our expectations a little bit this year.
But.
But more to do with the mix between the boats that we've been able to get out of the S to folks.
And the boats that we build out of the Port Pierce facility, So and that's really the function of and it was as anticipated.
Okay got it and then second.
On its balance sheet related now that we kind of a full year run rate on the pursuit brand being included in the portfolio days payables were down by four days can you just explain what you're seeing in a supplier market, that's driving it bit more aggression from them and get you to pay them.
You know I.
Thank you know from an 80 perspective look we we try and look at that can fluctuate just based off of the data we run weekly.
Payables. So yeah, we we kind of payer bills on time and have a philosophy that that's the right way to do business and so you're going to see a.
Little bit of fluctuation, but we don't see that is a big use of cash and that's probably just normal variation that you're seeing.
Okay got it actually help.
Yep.
Your next question comes from Michael Swartz with Suntrust Robinson Humphrey.
Hi, good morning, guys.
Just wanted to follow up on on some things Jakone and Wayne you. Both said this but <unk>, regardless the pursuit facility.
You're not talking about this thing opening in weeks versus month I think we had all been under the assumption that this was June to July timeframe. So I'm, just a little more clarity on that comment.
Well, what we've said all along is that we will be up and running at the beginning of model year 2021, which is July you actually have to open before that you just don't turn on the spigot walk in the door and serve building votes at full scale. So I look at it from a 12 week aspect 12 week equal three months. So I think we're saying the same thing.
Gotcha, that's that's all I need it I appreciate that and then [noise].
Just the.
I guess what Canada.
Actual luxury tax I know, you've called out and it's something you're watching could you give us a little more color on maybe what you're hearing from your dealers and how they're thinking about bringing.
On inventory maybe mix of inventory this year.
We really have not hurdle.
As I think is out there and there you think that as a reason to potentially push cells I'm right, now, but but little bit surprising to us Toronto was stronger and maybe this factors into.
It was stronger this year than it was last year, we had a very good boat show up in Toronto.
But but largely we're just not hearing a lot about it.
Okay.
And then just one final one way and I think you said you know relative to expectations you did a little better getting around the you eight.
You issue and you had some catch up I guess catch up revenue is what you put it in the quarter anyway to quantify.
Our.
Large that was that catch apart.
No I mean look I think what what I alluded to there was in terms I just.
Just the magnitude of the performance in the quarter versus what we see guided you to last quarter was yeah. We yeah. It was a very fluid and dynamic situation operations as managing it I mean, you whether it was sales are right T or the operations team it was and if we wanted to.
Make sure that we delivered on what we said to you guys and that the team really pulled together very very very well and so in terms of the magnitude I.
It's kind of split right. If you look at the is the guidance raise and the expectation raise I think.
It's something you know.
The the beat isn't totally flowed through in the guidance raise and I think that's kinda indication of that was the move between kind acute Q3 in Q2.
Okay wonderful thanks, guys.
Yes.
Again for any questions. Please press Star then our number one on your telephone.
On keypad and your next question is a follow up I'm Gerrick Johnson with BMO capital markets.
Hey, I can I, just wanted to clarify and channel inventory, you're talking about it being comparable last year, but on the last quarterly call. You said it would take until the end of the fiscal year DPP fours kind about an optimal level I, even mix of new and.
Aged was with the right ratio, so where are we now on that on that progression. Thank you.
I work. We're here, we're ahead of where we expected that we've seen more strength that you know and so.
I think we feel like it's the optimal for where we want it to be at this time.
It it pulled down faster given given the outperformance you know in in the retail.
Alright. Thanks.
Yes.
At this time there are no further questions I now hand, the call back to Jack Springer for closing remarks.
Thank you very.
Much Malibu delivered another strong performance in the quarter, achieving profitable growth across our brands and demonstrating our operational excellence by successfully overcoming the headwinds we face our industry, leading operational execution in the acquisition strategy continues to differentiate us from our competitors and coupled with the strength of our compelling mile.
Full year 2020 products position us well delivered continued stellar performance in the second half of fiscal year 2020.
Want to thank everyone today for joining us on the call and for your continued support of Malibu have a fantastic.
That concludes today's conference. Thank you for your participation you may now disconnect.
Right.