Q4 2020 Malibu Boats Inc Earnings Call
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Later, we will conduct a question and answer session and instructions will follow with it.
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Reproduction of this coal and a whole are in park is not permit it without reading authorization Malibu boats.
And as a reminder, this call is being recorded.
On the call today from management or just missed the Jack Springer Chief Executive Officer, Mr., Wang Wilson, Chief Financial Officer.
Mr. Ritchie Anderson, Chief operating Officer I.
I would now I'll turn the call over to Mr. Wilson to get started please go ahead Sir.
Thank you and good afternoon, everyone on the call Jack will provide commentary on the business and I will discuss our fourth quarter and full year 2020 financials. We we'll then open the call for questions.
Yes release, covering the Companys fiscal fourth quarter and year end 2020 results was issued today and a copy of that press release can be found in the Investor Relations section of the company's website.
I also want to remind everyone that management's remarks on this call may contain certain forward looking statements, including predictions expectations estimates or other information that might be considered forward looking and 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 for future events.
Factors that might affect future results are discussed in our filings with the FCC 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 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 our earnings release.
I'll now turn call over to Jeff.
Thank you Wayne and thank you all for joining the call our fiscal fourth quarter results exceeded expectations driven by the strength of our brands industry, leading innovation foresight in dealing with a co would not seen impacts in our strategic and operational expertise.
Our team was able to immediately and effectively ramp up production to the same pre should appreciate down production levels to meet the increase demand seen across the entire marine industry.
This resulted in significant market share improvement, which has yet to be fully real realized and outperformance against broader industry to close out fiscal year 2020 strong.
Well revenues during the fourth quarter decline given the headwinds driven by the pandemic, we were able to deliver to resolve ahead of guidance that we had provided during our last earnings call more importantly, our superior execution allowed us to maintain the EBITDA margins approaching mid teens, despite the 39% decline in revenues.
This outperformance in the very volatile operating environment is a testament to the strength of our premium portfolio agility of our team in variable cost structure.
As a result, we believe we are well positioned and we'll continue to drive market share gains.
For fiscal year, 2020, net sales decreased 4.5% to $653.2 million.
Adjusted EBITDA decreased 11.9% $210.9 million and adjusted EBITDA margin decreased 140 basis points to 17%.
Our number one priority has always been the health and safety of our employees are strong employee first call through a Malibu is a competitive <unk> competitive advantage for us as a result during the shutdown in the fourth quarter. We continue to pair employees for the first two weeks of the shutdown and maintain their regular benefits package throughout the entire period.
Included supplementing our employees portion in health care contributions, we're very proud to say that we did not laid off one team member not one we believe this was a key factor in our ability to returned to pre shutdown daily production rates immediately to meet the accelerated demand levels in the marine industry.
Further unlike many of our competitors, we have not experienced supply chain issues prior to or following the production shutdowns. This allowed us to maximize cash generation during the quarter well off of setting us up to capitalize on the historically low channel inventories.
Shifting to our new multiyear 2021 product lineup, we made a strategic decision to move up the model year launch by one month to the first of June.
This allowed our brands that have the freshest products on the market in this incredibly hot retail environment, while also reducing 2020 inventory even more quickly.
One of our largest dealers commented that the decision was and I quote genius on our part and really position them extremely well against our competition.
By moving up our multiyear 2021 product in combination with the White house retail environment I can confidently say M.B. you brands are at the very top here if not the top brands that have the precious most current product in the marine industry. This makes malibu stronger interdealer stronger.
Early 2021, your introduction will support what should be an extraordinary fiscal year as we introduce new innovations and products to strengthen strengthen our market leading portfolio.
Disgusting, Malibu and axis, new product for a moment in July we introduced the all new Malibu Wakesetter 23, LSV, the best selling cobalt in the history of performance sports boat.
For 2021 to 23 LSB has the same proven versatility and customer centric designed the customers love that incorporates a number of our new cutting edge patented technologies and features.
We're confident that 23, lsbs blend of luxury and enhance performance grab the legacy of its predecessors and drive sales volume in fiscal year 21.
Building off our image Z series of both we announced a new Malibu Wakesetter 24 him exactly the ultimate pickup important boat.
It offers even more space luxury and superior performance than previous model.
New for 2021 is our new fast feel ballast system and then nobody to feature that delivers a build time improvement of over 150%. So that you could spend less time filling up your balance things more time out on the water.
After generating an overwhelmingly positive response from dealers and consumers in fiscal year 2020, with our new M. 40, we will be expanding the M series model line up and introducing the brand new M 220, as a new addition to our successful him series of Malibu boats.
The new M twinning complements our most luxurious feature rich boat. The M 40, it will share some of the same innovative concepts and features that are on the M 40, but at a lower price point.
From the access point of view, the actually say 24 launched at the end of July and has been well received by dealers and customers. Our team work hard to design. This new model improving all of the components of the boat from its size maneuverability technology and versatile waking way to this clean and customizable design, resulting in a 24 foot boat and as.
Far ahead of the competition and offered a tremendous value.
And of course overall year 2021 product that Malibu and axis are powered by our Malibu monsoon engines.
The Malibu monsoon engine, both direct injection technology and working alongside our latest innovations to make the highest performing most reliable and cleanest engines in the water sports World.
We gained significant market share with our Malibu and axis brand in the fourth quarter driven by our new product.
Numbers are still preliminary but in June our unit growth was up 69% over last June while the total performance sports boat market was up 40%. We expect this to improve even further because key strong states for us like California in Minnesota.
Not reported June registrations as of yet.
July's currently showing a similar trend with unit growth up over 70% and again without the key states of California, Minnesota, Utah in Tennessee.
Further the trailing 12 month shares approaching historic highs up 220 basis points as of July 32020.
We believe this year, maybe even higher when comprehensive numbers are reported in September as we have seen or June warranty registrations more than double last year June over June.
Turning to our other stellar brands cobalt captured 35% share in the critical 24 to 29 foot segment for the trailing 12 month period for the full 20 to 40 foot segment cobalt as market share leader commands a 20% share in in two years. Since June of 2018, we have grown share about 300 and pin based.
This points.
In the outboard segment, we continue to gain share in the 23 to 30 plus segment that we compete in in two years, we've grown our share in the 23 to 30 foot outboard segment about 360 basis points gifts our direct competition.
As we prepare to bring seven new both to market in fiscal year 2021, including four new outboard boats over the next 15 months, we expect market share to continue to grow it cobalt.
To that end, we introduced the our six the newest model in the R series of Cobalt boats. This bow provides a suite of luxurious and convenient features including maximum interior space enhanced audio output and the cobalt patented swims that technology for easy water access.
Related to this we are excited that we announced our new automated each step just two days ago on Tuesday of this week. This takes our patented flip downswing step in electronically automates it for even easier usage and deployment.
We introduced the brand new Arssix standard with a lot of reveal in early July leaves. It cobalt were up over 1600, 50% following the our six reveal and they are six lab reveal videos now cobalt most viewed bit video of all time.
This showcases the effectiveness of our digital marketing strategies in this more virtual environment.
The next new boat up is the aboard version of the our six and it will debut in early September.
The expansion of our cruiser plant and small both plant that cobalt is complete the third and last phase of our plant improvement is now underway. This third phase is the expansion and modernization of our Jelko elimination departments. Once complete this will finalize our capability of building more product with even better quality, while improving efficiency.
Pursued also continues to perform very well and the product development engine is hitting on all cylinders.
Pursuit introduced for new both in fiscal year, 2020, and we will introduce another four new both in fiscal year 2021.
Yes, 378 was introduced at the Miami boat show in the U.S. for 28 will be brought to market in the next few weeks.
As you May recall, there predecessor models were contract built in Michigan, limiting gross margin and profitability per boat.
These new models are infused with pursuit DNA and are expected to significantly drive profitability as we successfully doubled the gross margin profile, both both by designing and building on that pursuit.
As of mid June the new pursuit large boat plant is up and running.
This is where we're manufacturing the new Asthree hundred 78, and other larger models over 32 feet again. This greenfield build a new plant in just 12 months was another confirmation of our capabilities.
Although pursue was shut down for six weeks, we opened the plan to production two weeks earlier that is almost beyond belief with a testament to our planning execution and relationship with our building partner.
The expansion that pursuit, not only helps us to increase our capacity, but it also enhances our distribution as well further increasing the value of this already powerful brand.
The new plant in additional capacity it creates will allow us to grow pursuits market product and geographic position in the saltwater outboard segment overtime.
Turning to our operational excellence initiatives, our vertical integration strategy continues to be a competitive differentiator across all of our brands driving overall growth and profitability. It provides us with the ability to control a greater portion of our supply chain quality and input costs like we did with Malibu and axis, our own flooring will they.
View Echo ball in fiscal year 2021, this will provide an attractive profitability profile and gives the customer greater optionality and flexibility.
There are two to three other vertical integration projects in work right now and they will be introduced over the coming quarters. We will continue to look for competitive cost advantages in new ways to generate synergies across brands and advance our vertical integration initiatives in fiscal year 2021.
While our fiscal fourth quarter ushered in a significant amount of uncertainty the retail demand we have experienced in the marine space in such a short time period is unprecedented.
This has been a welcome surprise to everyone in the marine industry the shift in our culture. As a result of the coated pandemic has fundamentally changed how people are spending their time boating provides a great opportunity for them to still get out and enjoy a for maintaining social distancing with their inner circles.
Had many many parents.
Me that after we normalize that they probably will not get back into select ball, sending their kids the camps and reverting back to the Gogo go laughs, though they have enjoyed the time with their families and specifically Tom with their families on the water in fact, many of the dealers that we've spoken to in throughout the country or selling many boasts the first time voters are those return.
Turning to voted for the first time and 10 to 15 years.
Estimates I had been given or about 30% to 40% or new buyers. We're proud to say we have successfully captured a large percentage of these first time voters do the strength of our brands, which was a clear contributor to driving market share gains.
The influx of new boaters at is favorable to our long term growth plans as it expands the number of consumers and creates opportunities for more people to become lifelong boaters and recurring customers.
Fourth quarter beginning in mid April saw retail accelerate every single week, leading to a June that was in saying that retail normally after July 4th weekend retail begins to moderate substantially but July remains strong as it did in the first half of August in the latter half of August retail began slowing somewhat but the pace was still more than most.
Most years, our expectation is that post labor day, it will be normalized and channel inventories will seasonally build from that point forward.
Looking to full fiscal year 2021, we were up a tree and out on a high branch feeling the comfort of the refreshing cells breezes.
Channel inventory levels are at historic lows cells books at all of our brands are completely full through the first half and extending into our fiscal Q3 2021.
It is our belief that channel inventories will likely not be caught up until the end of model year 2021 at the very early us and depending on demand consistent with historical trends. It may very well extend deep in the fiscal 20 to 22 before channel inventories are at normal levels. Our approach for all of our brands is consistency.
Just as we remain consistent in production after the shutdown we are following our proven plan.
We will likely increase production somewhat in the first half, but we will limit. This for two reasons first we are always sensitive to our supply chain partners in what they are capable of delivering while internally we could increase unit production more our supply chain partners are dealing with the kobin repercussions and cannot produce to the demand that the entire marine instead.
He is placing on them so.
Secondly, the worst action in this uncertain in this uncertain environment would be a knee jerk reaction that bills too much inventory in puts our brands in a bad channel position because of factors that we cannot control.
Let me be clear, though as it relates to our dealers having sufficient inventory we are in far better positioned than anyone else because we've been building at the same production capacity as we were building pre shutdown for four months and we will continue to do so many of our competitors due to supply chain issues laying people off during their shutdown.
Having trouble and scaling back up our eking up 50% to 70% of the production that they were producing pretty shutdown.
There are a couple of questions that had been asset I would like to take the time to answer today. The first question is can the industry sustain this high growth environment next year, what everyone needs to keep in mind is in calendar year 2020 will not be an abnormal sales growth year when the entire years observe using performance sports boat.
Most as an example as of March the growth growth rate was that negative 6.7%.
Preliminary information shows that year to date 2020 as of July is a positive growth rate of 10.9% I fully expect that when we reached a December when we reached December the annual 2020 growth rate will be in that 8% to 10% range that is not significantly larger than previous years and there's less than a few years go when we were registered.
And growth rates annually of 14% and 16%.
The year, we'll certainly be choppy, but 2020 will not have an outsize unattainable growth rate to me in 2021.
The second question, we have been ask is about the number of new boat barge, we've seen in 2020 and the potential of retaining them as customers no doubt the pies grown which is great to see we believe the number of new boat buyers or customers that have returned to boating after being away for a number of years is about 30% to 40% of the purchases since April.
There will be some customers that made a decision to Bob boat for any number of reasons, who will not remaining boating.
Every recreational industry has customers that trial, but those stick with it.
We will see this and boating, but a large majority of the 30% to 40% of the new and returning buyers have seen the impact on their relationships and with their families. They have enjoyed it and they will remain in boating and eventually make that next per purchase.
One area that we as Oems have not even realize yet are the number of people who bought used boats in the last three to four months. Some percentage of then we'll buy new boat over the next couple of years I personally think that percentage will be significant my complete answer to this question is we will retain a large percentage of these new customers and.
And use both customers will also by new boats. This is not a short runway is an elongated runway, which is great for industry.
We believe it could be a prolific year for Malibu as is set up for the full year is extraordinary with strong wholesale demand for the entire first half driving a positive outlook for the fiscal year.
However, a lot of uncertainty still exists related to kobin that team and whether a short shutdown will occur at any point as well as the upcoming us presidential election.
It remains to be seen what percentage of boat shows will take place in fall 2020 in winter 2021, but we're continuing to identify ways to effectively engage with our dealer network and consumer base virtually.
As a result of the boat show uncertainty our brands are creating alternative strategies, we're exploring a number of creative ideas that allow our dealers to engage with customers and sell boats.
Moreover, the strength of our balance sheet combined with our variable cost structure and current liquidity position to ensure that we will be able to continue executing on our long term growth strategy and effectively navigate through any type of demand environment.
In June we pay back a $110 million on our revolver over $11 million more than the proceeds we previewed previously drew down in March.
Today, we have over $40 million of cash on hand in our operated with net operating with net debt of roughly $45 million.
Our financial strength and flexibility along with our new innovative model year, and our 2021 product line up vertical integration strategy brand strength and experienced management team have us well position heading into fiscal year 2021, I will now I'll turn the call over to Wayne can take you through our financial performance in more detail.
Thanks Jack.
In the fourth quarter net sales decreased 39.1% to $118.7 million and unit volume decreased 43.9% to 1117 boats. This decrease was driven by the production shutdowns started before.
Malibu and axis brands represented approximately 65% of unit sales or 726 boats cobalt represented 27.2% or 304 boats and pursuit made up the remaining 87 boats.
Solid dated net sales per unit increased 8.6% to approximately $106200.
Primarily driven by a greater mix of larger more expensive boats.
Gross profit decreased 50.7% to 23.6 million.
Dollars in gross margin was 19.8%. This compares to gross margin of 24.5% in the prior year period.
Selling and marketing expense decreased 21% or $1 million in the fourth quarter as a percentage of sales selling and marketing expense increased by 70 basis points.
General and administrative expenses decreased 18.8% or $2.2 million.
The decrease was primarily driven by cost reduction initiatives, we implemented in response to covert 19 to better align our cost structure to the current operating environment as rich as a percentage of sales DNA expenses, excluding amortization.
Increased 200 basis points to 8%.
Net income for the quarter decreased 68.2% to $6.5 million adjusted EBITDA for the quarter decreased 56.8% to $15.5 million and adjusted EBITDA margin decreased 530 basis points to 13.1%.
Non-GAAP adjusted fully distributed net income per share decreased 63% to 40 cents per share. This is calculated using a normalized C corp tax rate of 23.5% and a fully distributed weighted average share count of approximately 21.5 million shares.
A reconciliation of adjusted EBITDA and adjusted fully distributed net income per share to GAAP metrics. Please see the tables in our earnings release.
As Jack mentioned earlier, we were extremely proud of how we were able to manage the business through the fourth quarter.
As many of you know we've discussed the variability of our cost structure in the past and this quarter was an opportunity for us to deliver on what we had described our ability posted EBITDA margin. The teams in the face of 40% reduction in revenue further confirms our conviction of how we can operate this business to meaningful profitability in the face.
We have adverse conditions.
While we were happy to demonstrate that capability, we were even happier to see the strength that retail strong cash flow generation and a robust future demand picture.
These conditions supported our decision to pay back $110 million on a revolver, while maintaining ample liquidity with cash on hand today in excess of $40 million. This leaves us well positioned to continue pursuing strategic investment opportunities and advance our long term growth plan in fiscal year 2021 and beyond.
Looking at full year numbers net sales decreased 4.5% and unit volume decreased 12.5%.
Consolidated net sales per unit increased 9.1% to approximately $101400 largely driven by higher mix of pursuit sales.
Gross profit decreased 10.2% to $149.3 million net income for the year decreased 7.2% to $64.7 million and adjusted EBITDA decreased 11.9% to $110.9 million for the full year.
For the year non-GAAP adjusted fully distributed earnings per share decreased 12.5% to $3.29 per share.
As Jack mentioned, we remain well positioned heading into the first half of fiscal year 2021, and are optimistic that full year fiscal 2021 will be an outstanding year formaldehyde.
However, given the uncertainty related to the cobot 19 pandemic and this year's boat shows we will not be providing full year guidance at this time.
Jack stated we are focused on consistent execution across at and be you. You. This includes maintaining operational discipline and steadily growing dealer inventories back to appropriate levels with our operational shut down impacting the third and fourth quarters of fiscal 2020, the preponderance of growth in fiscal 2021.
And we'll come in the back half of the year.
Based on our current operating plan as we manage through the dynamics of the coded 19 pandemic. Our expectation is for an essentially flat first quarter year over year.
As Jack stated, we continue to aggressively manage the business in fact, it's changing environment. At this time, we have the benefit of a seasonally slower retail sales environment to ensure we do not put undue stress on our operations to deliver units that are likely to sit on dealer lots through the winner.
This allows us to apply our disciplined operational approach to increase throughput to me increased wholesale demand.
To put our position in context, we believe our dealers are under inventoried in excess of 1000 units at this time.
With nearly all of that shortfall coming from decreased production driven by Cobot 19 during fiscal 2020. The implication of this is that retail activity hasn't meaningfully changed from our original plan. Despite volatile changes in monthly growth rates.
Looking through a longer term lance industry growth is marginally higher that said, we believed our fundamental shifts and how people are living that will sustain the market at the slightly higher levels and position that for further growth regardless with the inventory shortage that currently exist, we see a meaningful opportunity to grow our wholesale.
Allowed us to respond quickly and effectively to the rapidly changing environment to meet the heightened demand and deliver superior results. We continue to see strong demand our retail markets and are confident in our strategic initiatives operating plan and robust product portfolio will drive further market share growth and profitability in each of the markets.
We serve.
With that I'd like to open the call up for questions.
Thank you.
Ladies and gentlemen to ask the question at this time you will need to press Star then one on your telephone to.
To withdraw your question first apparently.
Again that star one to ask the question.
Please standby all while we compile the Tonight.
Our first question comes from.
Brett Andrews with Keybanc capital Your line is open.
Hey, good afternoon.
So given the.
Given the low inventory we've.
Started hearing.
In the channel Theres, a high level of pre sales hit the dealer level right now for the next few months is there any numbers you can share just maybe on what your order book looks like at this point in the season going forward.
Well the order book going forward in the first as completely.
And so if we look at it today from on where we're at today in August all the way through December 30, Onest. This pool that extends into the third quarter.
So is the strongest order book that across all the brands, we've probably seen in a number of years.
Got it.
You for that and then I'm just trying to reconcile in the slides and your comments ski wake market.
It's tracking up I think 11% year to date, I think you expected to be up high singles.
For calendar 2020.
It seems like there was strong demand in August so it mean.
I guess, what do we kind of expecting really for the last few months as their DSL.
That that might hit the industry.
There's a natural seasonal deceleration the one thing I would point out rather than last year. If you recall in that May June timeframe, we have had significant weather and so July August and even September were stronger than normal. So I think it could be equivalent of where that if we're I think I said, we were 10.9.
You said, 11% right now it could drop back a little bit, but I don't think is going to be a huge drop back we're in our slower selling season anyway coming up.
Got it Okay and then just the last one can you remind us of the capacity.
That you now have online both at cobalt in pursuit I guess what percent increase does that represent for your total capacity.
At COBOL you know awarded this one and keep in mind, we run all of our plants on one ship it keeps quality much better we're much more efficient that way and so on a one shift operation at Malibu, we always strive to have that 20% to 25% additional capacity available.
That cobalt with the changes in the additions we've just made were higher than that probably in that 30% range.
And pursue proud quite honestly with their brand new plant once we get that up and running is going to significantly and I have to be careful with this because we've talked about units in my Malibu, but our pursuit, we need to talk about revenue because of the size of the bonus in the range of the boat sizes and so what we've said and we still stand by then.
Yes that overtime, we can double that revenue.
Alright, thank you.
Thank you.
Our next question comes from the line Craig Kennison with Baird. Your line is open.
Hey, good afternoon. Thanks for taking my questions. Jack you took all the good ones.
Wanted to ask about the comment you made weighing about thousand units of inventory.
Maybe short in the channel could you get to filling all of those by the end of fiscal 2021.
And let's say.
Flat marine environment.
Yes.
Could you right.
Really depends right is really dig it gets to the question of yes in one of the reasons why you don't have full year guidance, which is the environments pretty dynamic and so.
In a perfect world.
I'd love to say.
We could get it.
I think it's a it's a it's a little bit of a stretch.
But in a perfect world, it's potentially tivo in all reality as you can tell from our comments.
We don't think it's going to be a perfect world.
And even if that retails flat.
We're going to just be managing through challenges in trying to.
Make sure we do it in a consistent controlled way so.
I think it'd be stretch.
Thanks, and then I had a question on your dealer relationships I imagine historically, you've been able to add dealers in markets, where are you a lack of those dealers so you've been able to grow the base.
Is it more difficult this time around given you've got dealers partners today, who really don't have enough inventory just would limit your ability to I guess.
Stock a new dealer.
On on then I'll address pursued first.
Craig because of the new player and the additional capacity we have there I think that's the biggest area of potential dealer additions and we can expand the distribution base because we have a considerable amount of additional capacity.
If we look at cobalt the largely have everywhere covers that's normally going to be a replacement situation. We have a dealer this not operating as well as we would lock or not capturing the market share as well as we would like and it's a situation. They can be fixed so we would make a replacement so that really doesn't impinge necessarily on our ability to.
Bill bone to produce boats.
Malibu is very much the same way now I will tell you that what we've seen on the Malibu side and cobalt frankly is that there are competitors that are struggling and we have converted several.
Dealers that were competitive dealers over to Malibu and over to cobalt.
Hey, Thank you so much.
Thank you.
Thank you.
Next question comes from the Lama, Mike Swartz with choice Securities. Your line is open.
Hey, good evening guys.
Just wanted to touch on the price points in the quarter Asps were up I think like 9% pretty strong across Malibu and cobalt it'll take a lot of the commentary out there right now as you know with new first time buyers coming in it really driving a lot of what we've seen I guess can you can you kind of linked.
Those two are we seeing on these new or first time boaters actually going towards more premium brands I would think that more entry level, but maybe give us a little more color there.
Yeah, we are seeing a growth in access without a now.
Yeah. So we've seen the newer customer come in and look at that ACA some parts that access.
But we're also seeing consumers that are taking the opportunity and they're saying I have whether it be access or Malibu, we have a.
22 foot boat and we're going to go through the 24 foot boat. So we're seeing a little bit of a mix in both realms.
On the perceived side, we've seen the swing to larger both in this part of the reason you're seeing that I must be pretty high higher than what we normally have projected on the proceeds out in the cobalt there.
It's across the board, we're having very good sales out of our TM series was your smaller less expensive boat, but we're also having very good sales of the R series, the a series and even after that a 36.
Okay. That's helpful and I think Jackie just in terms of August trends I think you said that you saw a lot of the strength in June and July carry over to mid August and then I think you said in mid August things soften, but I'm trying to understand is that are you, saying or you're seeing retail decline or you just.
Saying the rate of growth has slowed a bit.
Right a growth has slowed the again normally you get to a July 4th after July 4th and you're going to have a seasonal slowdown we did not see that July and so I think we're just now beginning to start seeing that seasonal slowdown, but it is not a scenario in which it has slowed down far more than.
Normally it's getting back to normality in my opinion.
Okay. That's helpful and maybe just once one final question for me just so that you resolve some litigation recently just remind US is is there any more outstanding litigation regarding your any of your pure serve patent.
There is litigation on one of our competitors win with Malibu and that's advancing we feel very good we had a we had a really strong victory earlier this week as it related to the court. So we feel very good about that we have recently signed a another licensee.
He that carry that they actually furnished to multiple brands and so they have come online and I think that puts us up close to 25 different last into these at this point and there's someone else that we do expect to converted in the next month or so.
Okay, great. Thank you.
Thank you.
Our next question comes from.
The line of Joe Altobello with Raymond James Your.
Your line is open.
Thanks, guys good afternoon.
Couple of quick one for me I guess first on channel inventories you mentioned.
Housing.
Shortfall here and the fact that you may not get caught up.
Until fiscal 2020.
Does that assume turns are unchanged what do you expect turns to go up because the ones that we see quit.
Tend to hold less inventory than normal going forward.
Yes, I think it's important yet of the implicit question answered. The question that was asked was hey in a in a consistent environment.
Yes, there's a lot of variables that obviously go into that and so.
Yes, well dealers may expect to hold less I like I'm not that much less right you know in generally speaking when we come out with you to.
Guidance or numbers, you know, they're pretty conservative so embedded in that thousand number you could probably I imagine there, there's a little bit of a reduction in in terms embedded in that and.
So in a flat environment and the reason why I would say that it's tough to make up that thousand is we also underproduce last year. So really the growth rate that you're talking about at wholesale unit would imply that thousand plus.
Whatever the shortfall that we union produced this year. So then you are talking up like 30 plus percent on volume.
Thats why it it becomes more of a stretch.
Okay and secondly.
You mentioned a couple of times today uncertainty there.
If we work to have any in person boat shows this year.
Her bad.
Well I think naturally.
I was worried this way Joe is you have a norm you have a standard that people were used to and so would it have some impact yeah. I think that it would I don't think that we're not going to have any mojo Fort Lauderdale is still on schedule Fort Lauderdale has said they are going.
Will we have heard anything about Miami not going so I think there will be shows that absolutely go.
What I believe how you accommodate that or how you attack that you have alternative strategies right. Now we are developing strategies on a brand by brand basis that we believe will actually get customers to the dealers or get them to a virtual boat show top of side and we will.
Have success with that.
So I think by virtue of the back of not having boat shows it's out of the norm is now what you regularly do but beyond that it's up to us come up with new ways to entice that customer.
Okay. Thank you guys.
Thank you.
Thank you.
Our next question comes from a lot of Alex.
Rosiak Baird.
Your line is open.
Good afternoon, guys. Thanks for taking my questions. If I heard correctly earlier, you mentioned that the new pursuit plant can double margins on those larger boats are you able to discuss the seismic set off we can get a sense or on a longer on margin expansion opportunity there.
Okay.
Can you clarify the question in terms of this size mix.
Just a pursuit to the if you got doubled margins on the larger boats I'm trying to get a sense around what the impacted that would be in terms of the total business.
Yes, so I mean, it's only on the two boats that were contract manufactured which you know you're measuring in the $20 million to $30 million range.
Got you that's helpful.
Yes.
Okay, and secondly, given the financial position currently versus where we were on your last earnings call have you changed your thinking at all around the capital allocation in the coming quarters, especially as it pertains to the acquisition strategy.
No from an acquisition standpoint, we're pretty consistent and that is about the brand that comes to market are they that premium brand that fits into our portfolio. So the where we're at from an individual cycle standpoint, really doesnt affect us if that next great asset comes we will be all.
All over them.
Okay. Thanks, guys.
Thank you.
Our next question comes from Milan.
With B. Riley your line is open.
Thank you good afternoon guys.
Couple of questions I guess, one that you knowing you restarted production footwear the focus on the to both did it already been sold and you talked about obviously a backlog in Q.
Fiscal Q3 is that that indicated if someone came into it.
Dealer now and want to buy a new custom boat.
In order it they're looking out to that Q3 period or is there something else there.
Now how soon do you want it.
The situation.
[laughter].
We've taken stock slot, so dealer will come in and they'll say I'm going to order this stock boat and let's just use 23 unless they.
What would happen in that point is that customer would say I'd really like to have this by mid September or end of September and so that dealer analyst would convert that stock order to a customer retail somo.
Got it okay.
And then.
Obviously.
We're not giving guidance for the year you obviously, you've got some you noted some hesitancy around uncertainty using Kobe and your lunch and all that and then you're going to comments around the dealers, possibly look into whole less inventory is is that solely to dealers, possibly a little more conservative kind of given what happened last year.
You know with.
Inventory getting behind the first half year, along with the answer is it that you share or there's something else there isn't it assembled the first two.
I'm going to tell you straight up the commitments that we have from our dealers. This year are not they're not scaling back on the inventory. They they have given us the commitments that we've asked for.
Perfect and final question I'm pursuit.
What is your timeframe to get to a potential doubling revenue out of facility and of everything going well and what would that due to.
Kind of the contribution margin out of that Brent King.
Yeah, We think it's probably I'll say 36 months to get that doubling of the revenue scenario and in terms of the margin you know in terms of the contribution margin, we talked a little bit about just but I I think of as the fundamental shift from the contract build to the in house build.
<unk> of the boats that were being produced in Holland, Michigan.
And so.
Absent that impact Yeah, I think you know, it's still a little bit TBD, but you're going to end up with a a profile on its a little less vertically integrated business than the Malibu and axis businesses.
So the contribution margin will be a little bit less.
Then that but booked but not.
Great degree.
Perfect. Thanks, guys.
Thank you.
Thank you.
I'm showing no further questions in the queue I would now like to turn the call to Jack Springer for closing remarks.
Thank you very much in summary of our quarter in full fiscal year 2020. Despite this code 19 impacts and the plant shutdowns our fourth quarter was a good one and it exceeded our initial projections handling.
Very strong market share gains have been driven by our capability. The resumed post shut down production at the same levels as before the shutdown. This allowed us to build deliver and sell more both in our competitors. In addition, our culture of innovation continues to drive consumers through our brands.
Our strategic planning operational excellence and supply chain management supported our outperformance of the broader industry and we'll continue to be a differentiator in this environment going forward.
All brands immediately returned to pre shutting down production levels to deliver better than expected fourth quarter performance in EBITDA margins in the mid teens.
Production capacity expansion initiatives that cobalt pursuit facilities are up and running providing opportunities for increased distribution capacity.
Our financial position is very strong we have limited debt and over $150 million of liquidity.
The first half of fiscal year 2021 looks to be very promising with the introduction of our new model year 2021 products historically low dealer inventories and strong wholesale demand throughout the first half and into Q3.
Well a lot of uncertainty remains we're confident that the areas of the business that we can control a vertical integration strategy, our production innovation initiatives premium product portfolio and operational expertise will continue to drive growth and deliver long term value to our shareholders I.
I want to thank each of you for your continued support of Malibu for joining our call today I Hope you in those around your all staying safe and healthy have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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