Q4 2021 Malibu Boats Inc Earnings Call
[music].
Yeah.
Good morning, and welcome to Malibu boats conference call to discuss the fourth quarter and full fiscal year 'twenty 'twenty. One results at this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. Please be please be advised that reproduction of this call in whole or in part.
It is not permitted without written authorization from Malibu boats. 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 will now turn the call over to Mr. Wilson to get started please go ahead Sir.
Thank you and good morning.
On the call Jack will provide commentary on the business and I will discuss our fiscal fourth quarter and full year 2021 financials. We will then open the call for questions.
Yes release, covering the company's fiscal fourth quarter and full year 2021 results was issued today and a copy of that.
That 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 that.
<unk> results could differ materially from those projected on today's call.
You should not place undue reliance on these forward looking statements, which speak only as of today and the company undertakes no obligation to update them for any new information or future events factors that might affect future results are discussed in our <unk>.
Actual to the SEC and we encourage you to review our SEC filings for a more detailed description of these risk factors.
Please also note that we will be referring to certain non-GAAP financial measures on today's call.
Such as adjusted EBITDA adjusted EBITDA margin adjusted fully distributed net income.
Filings 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'd now like to turn the call over to Jack for his commentary.
Thank you Wayne and thank you all for joining the call we delivered another.
Record year for Malibu boats, which included fiscal fourth quarter results demolished expectations.
Our performance was underscored by outperformance against the broader industry, a testament to Malibu has market, leading innovation unraveled strategic and operational excellence and a best in class team that has continues to navigate the global supply.
Another risk strengths, which are weighing on almost every industry and the global economy.
For fiscal year 2021, net sales increased nearly 42% to $927 million gross margin expanded to 25, 5% adjusted EBITDA grew 71% to $190 million.
The change in adjusted EBITDA margin increased 350 basis points to 25%.
From the onset of our initial full year guidance for fiscal year 2021 by all accounts, we crushed it.
Malibu continues to be a premier force in the marine industry and the entire leisure space and were setting the tone for continued strength and.
And as we move beyond fiscal 2021.
All of our brands performed exceptionally well as retail demand maintained its breathtaking pace the trend toward large feature and option rich both because continues which had supported robust asp's and attractive margins in particular for Malibu and axis.
<unk> hundred 40, <unk> hundred 28, 24% and 23, LSP, which were all larger boats are performing well ahead of what we expected.
New models at pursuit, the <unk> hundred 28 D C $2.46, and <unk> 68 delivered strong sales and cobalt completely renovated.
Our series with the new <unk> six and our eight models replace older models generating improved pricing and higher margins.
Our backlog is unprecedented for every Malibu brand, we estimate that over 90% of new boat orders will be retail sold in the first quarter of fiscal 2022 and within.
The envoy levels, where they are consumers are not buying both they are buying slots to have the both that they want built we expect retail demand for wholesale slots to continue at elevated levels through the remainder of fiscal year 2022.
Inventory remains at historically low levels and we now believe any meaningful increase in channel inventory.
Within did not begin until fiscal year 2023 at the earliest.
In our view, we have an unprecedented 24 to 36 month ramp taking us to fiscal 2024 before we see more normalized inventory levels.
There has been a lot of focus on the new boat buyers coming into the market.
The composition of this group and the ultimate.
One of these new customers recently, there were several reports by respected marine sources to put these buyers into clearer focus for everyone.
From 2011 until 2000 and that pain. The number of first time boat buyers or FTB has averaged 42400 per year in 2020. This number was just.
Just shy of 64000, an increase of 50%.
Another way the percentage of first time boat buyers increased 300 basis points in 2020 versus the average year in the time period between 4030.
We also have new data on the attrition of first time buyers.
Exciting to say the lease.
In the past, we estimated that about 40% to 50% of new buyers for us the new boats will stay in building long term and purchase a second or a third boat. However, the new data shows that when a consumer buys a boat for the first time approximately 80% of them depending on the segment are still in boating.
Five years later.
Further going all the way back in 2011 over 60% in the first time boat buyers still on a boat.
<unk> in and of itself reinforces our confidence that many of the new buyers in the last year are here to stay and we think our breath of offerings in the industry, leading innovation and customer service will keep them with.
Voting for their next boat.
What is even more intriguing is the demographic of first time buyers historically only 12% of first time boat buyers were women.
Spot. This we know that women have a tremendous influence in deciding the boat there will be purchase even if they are not the primary bar.
But in 2021st.
E Mail boat buyers rose to 23% from the average of 12% fueling what has been our focus since 2012, expanding the addressable market by targeting women through our marketing and ultimately putting more boats into their hands.
The foundation of Malibu business industry, leading innovation a.
Vertical integration structure and operational excellence remains intact.
Each and every day, we see the positive impact of our strategic decisions coming to fruition.
Our innovation allows us to build deliver and sell more both on our competitors or vertical integration allows us to maintain better control of our supply chain.
Well to be an input costs and our operational excellence consistently allows us to raise the production bar as consumers demand more and more boats.
These elements are extremely critical in the current environment and it's obvious that we are pulling all the right levers to grow this business at an aggressive pace.
While we continue to put the pedal to the metal we.
While I recognize the tightening supply chain over the last year and in particular, the past few weeks as opposed to the near term risk to our production capabilities. We are working diligently to put as many both on the water as possible and based on our fourth quarter and 2021 fiscal year results. We have done a tremendous job navigating these headwinds to date.
That said the supply chain challenges continues to evolve daily from raw material inputs, such as resin foam in metals to persistent labor shortages that are suppliers to trans Pacific and domestic logistic delays and backups, while we had hoped to supply chain will be better by now it is not and it remains a challenge.
<unk>.
As a management team and an organization, we proud ourselves on delivering the most innovative highest quality both in the industry. While at the same time, maintaining our strong employee first culture is a differentiator further we are uniquely positioned in the marketplace, given our strategic planning capabilities operational excellence initiatives and vertical.
Patient strategy.
This has been the secret sauce, so through our long term success through play and we will continue to be our guiding principles. Therefore, we are looking at our production across our brands and Recalibrating based on the supply chain to ensure we maintain production levels that support the highest standards our dealers and customers.
And the growth, we expect for Malibu brands, while ensuring the safety and well being of our employees.
This near term decision will adversely impact our fiscal first quarter of 2022.
Right now it is not possible to predict the improvement of the supply chain and the availability of parts and raw materials, but I have no doubt that as the supply chain.
And constraints resolved our team's commitment to innovation hard work and delivering results will allow us to eclipse the competition deliver more both to our customers and maintain our track record of incredible results.
Shifting to our new model year 2022 product lineup, we remain in an enviable position.
Have come through our suite of boat offerings.
I can confidently say Malibu brands delivered the finest most modern products in the marine industry. This may come out will be stronger and it makes our dealer stronger.
For Malibu and Axis, we have some exciting new products, we're bringing four new both to our customers again this year.
All are brand new.
A feature rich and set to drive demand even further in July we already introduced the new Malibu <unk> 25, LSP the newest model in the world's best selling cobalt family.
And the brand new Malibu, <unk> 21, <unk> or go to 21 foot boat for multi sport boaters, who seek performance versatility.
<unk> and value.
<unk> replaces our 20, <unk> and 21, the <unk> with a completely new look that bridges the traditional bell in the Pickle Fork Bell. We also welcomed with access to <unk> 'twenty into the mix. This is the premier 22 foot wake surf and wakeboarding boat in the marketplace and in just a few days.
Dave the largest access ever produced the <unk> hundred 50 will debut adding to our rich margin profile and product suite.
Turning to pursuit, we continue the torrid pace of product development and new boat launches, we will be introducing three new boat all of which are filling out product quiet spaces that we identified when we acquired pursuit.
Pursuit.
Two of these both are in the over 35 foot category and our brand New S..358 Sport model has just a view that the pursuit dealer meeting earlier this month.
The number of dealers, who told me this boat fills a blind spot for them and will allow them to compete and win against the competition was pervasive.
With cobalt.
Overall, we introduced six new models in fiscal year 2021, and the demand is off the charts.
Looking into fiscal year 2022, we are introducing five more both between now and the Miami boat show that we are very excited about.
The Rollouts include the brand, new <unk> Stern, and our <unk>, which will replace the <unk> equivalents.
Once the Sterne and served in addition to our board outboard model will be a new release of the R series coming into 'twenty, three 'twenty four foot length.
We believe that our <unk> model will only enhance the strong legacy of this luxury brand. We will also introduce a larger both that will exceed 30 foot and both the stern and.
<unk> Board version.
These terms will be featured at the Miami boat show this upcoming February and we can't wait to share more details with you as they become available.
By February 15th it is also exciting to point out that in the span of 15 months cobalt will have transitioned from having three outboard models to seven outboard models with more to.
Come.
The cruising outboard segment remains a significant growth opportunity for cobalt.
Lastly, our newest brand Maverick continues to earn its dropped in our Malibu family of brands. The integration has been smoother than butter and we are already seeing the positive results from our dependable approach to integration, while identifying many more opportunities.
Opportunities for growth to come <unk>.
<unk> is putting into place Malibu is world class product development model, and we will be sharing more on new product for Maverick brands in the near future.
Similar to cobalt there is an opportunity to replace outdated product and lack pursuit.
Product quiet spaces, we will feel that will drive growth.
On the facility side the expansion of our Maverick plant two facility is progressing as we expected and we're excited to say that we will be building gorgeous both in that new facility in the second half of fiscal year 2022.
Additionally, at Maverick Theater meeting in June dealers were very excited about the Maverick at Maverick acquisition by.
Malibu, and what Malibu professionalism and laser focus on growth will bring to their businesses.
I am extremely proud of the Malibu team as we have navigated through one of the most volatile periods in history, we continue to lean on our differentiating vertical integration and operational prowess as these principles allow us to time and again.
Again enhance our leadership position in the market.
Together, we are focused on making sure our dealers have only the best products and that they can sell them at the highest margins.
Either they are Malibu axis Maverick.
Cobalt or pursuit dealers, we are committed to ensuring they're set up for success and.
And as always our prudent.
<unk> approach to M&A and integration offers us a competitive advantage in the market.
I want to express my deep gratitude to our teams that every brand they are working very hard and persevering through this complicated time.
Our people are the reason, we surpassed expectations and record setting fashion quarter after quarter.
After quarter, and we plan to maintain our winning recipe and continue achieving unraveled success and everything that we do.
Doing so will allow us to deliver the financial performance shareholder value and market growth that our shareholders have come to expect of us.
At this point I will now turn.
The call over to wanting to take you through our financial performance in more detail.
Thanks Jack.
In the fourth quarter net sales increased 133, 2% to $276.7 million and unit volume increased 110, 7% to 2300.
Third 54 boats. This increase was primarily driven by normalized production levels relative to the COVID-19 induced operational shutdowns in the fourth quarter of fiscal year 2020, and increased unit volume stemming from the acquisition of Maverick Poker.
The Malibu and Axis brands represented approximately 56, 2% of.
<unk> unit sales or 1324 boats.
Saltwater fishing represented 24% or 565 boats and cobalt made up the remaining 19, 8% or 465 boats.
Consolidated net sales per unit increased 10.
1% to approximately $117600, primarily driven by demand for our new larger models within the Malibu and cobalt segments.
Gross profit increased 193, 9% to $69.2 million and gross margin was 25 zero.
What percent. This compares to a gross margin of 19, 8% in the prior year period.
Selling and marketing expense increased 45, 6% or $1.6 million in the fourth quarter as a percentage of sales selling and marketing expense decreased by 110 basis points.
Selling and administrative expenses increased 76, 7% or $7.3 million and.
The increase was driven primarily by acquisition and integration related costs.
Compensation higher level of legal expenses.
And incremental G&A expenses due to the acquisition of Maverick boat group.
Generally as a percentage of sales G&A expenses, excluding amortization decreased 190 basis points to six 1%.
Net income for the quarter increased 437, 1% to $35 million adjusted EBITDA for the quarter increased 272, 2% to $57 six.
And adjusted EBITDA margin increased 770 basis points to 28%.
Non-GAAP adjusted fully distributed net income per share increased 360% to $1.84 per share.
This is calculated using a normalized C corp tax rate of 23, 5%.
Six monthly distributed weighted average share count of approximately $21.7 million shares.
For 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 finished fiscal year 2021 strong as we continued to deliver.
Industry, leading innovative boats to our customers by successfully executing on our key strategic initiatives, our integration of Maverick into Malibu fleet of premium brands has already begun to bear fruit and will continue to drive performance as we develop new products and complete our facility expansion we remain.
<unk> focused on delivering high quality.
The products at healthy margins and we believe we are well positioned to advance our long term growth plans in fiscal year 2022.
Looking at full year numbers net sales increased 41, 9% and unit volume increased 27%.
Consolidated net sales per unit increased 11, 7% to approximately 113.
<unk> thousand $200, driven mainly by higher sales of new more expensive models and optional features within the Malibu and cobalt segments.
Gross profit increased 58, 4% to $236.5 million net income for the year increased 76, 8% to $114 three.
And adjusted EBITDA increased 71, 3% to $190.1 million for the full year.
For the year non-GAAP adjusted fully distributed earnings per share increased 82, 7% to $6 <unk> per share.
We remain.
Main well positioned heading into fiscal year, 'twenty 'twenty, two given historically low inventory levels and insatiable customer demand, while short term supply chain headwinds are persisting, we're doing what we do best and implementing our tried and true playbook that leverages, our operational excellence and vertical integration, we are thoughtfully recalibrating production.
<unk> to ensure we maintain our track record of industry, leading innovation and quality, while prioritizing our employee first culture.
The unprecedented consumer demand coupled with the introduction of new model year products will support continued momentum over the long term.
Based on our current operating plan.
Our expectations for fiscal year 2022.
Are as follows we anticipate revenue growth to be in the high teens percentage year over year in terms of cadence, we anticipate first half revenue growth aided by the inclusion of Maverick boat group north of 30%.
Consolidated adjusted EBITDA margin is expected to be approximately.
<unk>, 20% for the full year.
This is obviously impacted by the inclusion of Maverick for the entirety of the year and.
And the reintroduction of many COVID-19 pause costs with respect to cadence EBITDA margins will improve over the course of the year.
But we will see year over year headwinds in the first half.
We anticipate first quarter year over year headwinds of over 300 basis points as Maverick is included.
Reintroduce COVID-19 pause cost and we invest in enhanced infrastructure to support our rapid growth.
Lastly, I want to acknowledge that as of this morning, we have submitted an S. Three filing with the SEC to replace the upcoming exploration.
<unk> of our shelf registration statement.
In closing, we continue to outperform expectations across nearly all metrics, we remain on track to execute on our proven strategy led by our operational excellence, our best in class product portfolio positions us to benefit from the overwhelming retail demand and historic.
<unk> channel restocking opportunity, we're excited about the future and our ability to drive further market share and profitability growth in each of the markets. We serve with that I'd like to open the call up for questions.
Ladies and gentlemen, do you have a question or a comment at this time. Please press. The Star then the one key on your Touchtone telephone.
Question.
<unk> has been answered or you wish to move yourself from the queue. Please press the pound key.
Our first question comes from Joe <unk> with Raymond James.
Thanks, Hey, guys. Good morning, a quick question on the on the revenue guidance for this year.
What does that assume in terms of the pace at which supply chain improves are you assuming.
Sumit.
So things are the pick up in Q2 or do you think youre going to see constraints throughout the.
The entire fiscal year.
Really it's.
The bigger pickups in the back half as evidenced by kind of the cadence that we gave.
And so.
There's a little bit I think what I would describe it.
Catch up right now.
And so we anticipate a little bit of incremental improvement in Q2, and then being more meaningfully in the back half of the year.
Okay, Okay and in terms of the EBITDA margin guidance of 20.
1% I think you've said in the past that Maverick is about a 50 basis point drag.
How should we think about the resumption of certain.
Costs that you guys obviously.
It did not happen in cohort one.
The drag from that resumption.
Yes, I would describe that drag.
As probably in that 20% to 35 basis points right. So there's a couple of things that we highlighted with respect to.
A little bit more drag there one is the COVID-19 pause costs and the other is just.
<unk>, our infrastructure investing in the business given given the growth that we've had.
Combined I would say those are north of 30 basis points.
And that's mostly Q1 it sounds like.
Some of it.
Yes, youre going to see more of an impact specifically around the COVID-19 pause cost probably in Q1.
Thats what you.
We're seeing in those numbers.
Okay, great. Thanks, guys.
Yes.
Our next question comes from Craig Kennison with Baird.
Hey, good morning, Thanks for taking my questions.
Jack you mentioned that 90% to new boat orders are retail sold.
Does that number normally look like.
At this time of year.
This several years normally right around 50% or maybe even a little bit less than that.
Okay. Thanks.
And then with respect to the dealer inventory shortage is there any way to frame. How many units short you believe you may be relative to what you.
You would target if you could get everything produced.
Not necessarily on a unit basis, we looked at things we do look at US. We also look at it a weeks on hand, one of the things that Wells Fargo said is.
Based upon the lower through this ever been as five weeks lower than.
In the history since they've been measured.
Measuring it and I think between segments that may be a little bit different.
I think the point, what I would point to is that.
Regardless of the segment regardless of the dealer.
They are very very short on inventory.
And so if you were to say that inventories need to be built up.
Just pick a number 75% that would be off at all.
Yes, Craig This is Wayne last year, we said it was north of a 1000 units.
Maverick is one of those situations so let's ignore maverick for a second that number has gone up.
The course of this year.
So retail demand has outpaced wholesale over the course of the year.
In addition.
When you add maverick into the mix that business has been chronically under inventoried. So.
It is a meaningful number that could be approaching a couple of avenues.
That's very helpful. Thank you.
And then.
With respect to the supply chain issues I imagine that's leading to some.
Cost inflation, and maybe you're considering some price increases how is that dynamic unfolding point.
Yes.
What I'm, saying itself is really more about efficiency and building boats and that's part of the reason, we're recalibrating that first quarter to make sure that we're putting boats down the line in the proper order.
I think there are inflationary measures that we built into our model year 2022 pricing.
As most companies did so that's.
Really baked at this point.
And the interesting thing Greg is related to the pricing pressures that you referred to.
Both on our side and then pass it along because the consumer is not having any impact in demand, we continue to see that demand and the acceptance of the new pricing.
Great. Thank you.
Thank you.
Our next question comes from Brent <unk> with Keybanc.
Hey, good morning, guys.
You said the supply chain. Good morning, you said the supply chain really tightened up the last few weeks can you just maybe put some context or.
Or color around that just so we have more of an idea of maybe what exactly you are facing a started to face.
Yes, I think it's become more expensive. So if we go back to the fourth quarter and when we had our last call we talked a lot about resin and rather than being the primary culprit from a supply chain standpoint.
Endpoint, along with engines outboard engines and that those are the two things that we were watching and managing on an extremely close level as time has gone on <unk> seen inventory reserves dissipate somewhat so they are lower than what they were a quarter ago, two quarters ago or three quarters ago and.
A lot of our suppliers they continue to struggle with the labor side are getting.
Raw materials from China, or Asia and so.
<unk> has expanded beyond just the resin or a.
Outboard engine scenario resin is largely improved too great.
Great extent.
Have the issues that we had with rather than that we did in the third and the fourth quarters, but there are a lot of other issues and I'll point to a couple of you you run into issues with phone, which is also a petroleum base you run into issues with other small players. They can it can change from week to week and I think the best way to describe it.
Is we're managing through it we're getting product, but rather than getting a large shipment of 150 different parts. We may be getting a shipment of 15% to 20 parts at a given time that gets us through a particular set of days or a particular week and so there are more parts and it's.
But more to manage and so we want to make sure that we.
We're careful in how that were consuming our production. We do believe it will be improved and as Wayne pointed out we're looking more towards that second quarter that we'll start seeing that improvement.
I would tell you that our guide is conservative.
A little bad if the supply chain improves.
And that's the that's the predecessor to everything if the supply chain improves we can be better.
Other than what we've predicted.
Got it. Thank you for that and then so you have a lot of new models coming to market over the next year.
And then some.
Expansion on the capacity side.
I guess, where do you see unconstrained capacity right is it 10000 units 12000.14000.
Just trying to frame up or get a sense of what you think you could do on the production and if some of these challenges work.
You've done it right now.
We work pretty diligently over the last 12 to 18 months to put every brand in a position to build more product.
With our pursuit plant that we added that added a significant amount of capacity the three phases of cobalt.
<unk> added significant capacity, what we're doing at Maverick today with that phase II plant to add significant capacity. We built here in the Malibu, we've made some changes and different focus areas as we have more capacity at Malibu. So.
If the supply chain or to cooperate.
We could easily.
The equation go over that 11000 rate.
Got it thank you guys.
Our next question comes from Jamie Katz with Morningstar.
Hi, Good morning, Thank you for taking my question.
Sure I think you had mentioned infrastructure spend and then.
And in that time.
The Covid capex would be more in 4042.
Can you maybe frame the magnitude of that increase given that some of the.
Cassidy investments could be sizable.
Yes.
What I would tell you is.
Capex can be a little bit of a <unk>.
Moving target as we develop additional plans that arent necessarily set yet.
And so it could be.
Right now I would tell you that it's <unk>.
On a trajectory and the $60 million range.
As we add capacity and do do some initiatives.
But it has the potential to move around as we decided to do whether it be more vertical integration initiatives or whatever and we'll update folks accordingly.
Okay. That's helpful and then the <unk>.
Pipeline.
Wine for new innovation for Maverick product.
I think it was touched upon and I think you guys might be maybe reassessing, what's out there and what the opportunity set is there any way that you guys might be able to elaborate on what we.
We can expect to see out of Maverick.
Maverick brands this year. Thanks.
You know Jamie we're right in the middle of that and I think we're going to be a lot better suited to be able to address that.
Call it the next quarter or the quarter after that but I will tell you. This is very very similar to.
Both cobalt and pursuit there are a number of white spaces, we call them product class.
This is where we just don't have a product.
And once we put a product there we're going to be able to capture share we're going to be able to capture more sales.
Second is that the product that we've inherited in NPG.
Somewhat aged long in the tooth.
Space Theyre going to revitalize that every time you bring out a new product every time and we've seen this with the R. Series every time, you bring out a new product or a new series that is replacing an old one you have an exponential leap in sales and we expect that to occur at <unk> as well.
Yes, Jamie this is Wayne.
I would just add that.
When it comes to the product cycle.
The thing that is probably the longest in the tooth in terms of being able to.
Needing to take time.
You Havent youre developing that team growing that team in building that process and making sure you do it in the right way.
<unk>.
And youre going to see more of an impact sooner from our capital expenditures frankly, then that new product.
Helpful. Thanks.
Yes.
Our next question comes from Tristan Thomas with BMO.
Good morning.
Last quarter, I think you called out for model year 'twenty two we've got about 80% of your first half order book was already sold could you update us.
It's different by brand, but I think you captured all of the orders it would be well into the third or fourth quarter Bye now.
Okay perfect.
And then just.
Two part question about your capacity expansion has there been any issues getting either raw materials or labor for the cobalt and Maverick plants and then if so has that impacted any of your timelines to get to full production.
No. That's a good question. His question I would ask it's been it's been very positive surprise in that.
In regard because.
We have not seen we're ahead of schedule I would probably say on maverick versus what we thought that it could be.
And we've not what I would have anticipated to be the problems in raw materials. As you mentioned in labor, we have not seen that so that's been a very positive surprise.
Okay. Thank you.
Thank you.
Our next question comes from Rudy Gang Brennan Barry.
Hey, good morning, guys. Thanks for taking my question.
So going back to the EBITDA margin guidance for next year, a little bit how are you thinking about how benefits from the cobalt and maverick extensions of those back.
And throughout the course of next year.
Yes, I think.
With respect to this year's guide.
There is probably some of the uplift right. So if we're doing the math and we're bridging this year's performance.
Okay.
I'd say this year 2021 fiscal year performance to 2022.
Yes, if you start at 25%.
We've talked a bit about maverick being about a 50.50 or 60 basis point drag and then we have the reintroduction of COVID-19 parts costs and some investment in some infrastructure.
Structure that that creates another drag I would tell you that.
A bit of the uplift is kind of broad based structural across the business. That's offsetting that if you do that math you are getting into the mid 19th.
Of EBITDA margin.
Arjun and if you if you think about just increased increases in sales and volume on a year over year basis.
That's that's getting some of that back Mavericks margin profile, given the limited incremental volume that youre going to see flowing through that business.
<unk>.
And it is probably not going to be meaningfully uplifted cobalt is the place where youre going to see some benefit.
And that would kind of bridge back to the 20% target we put out there.
Great. That's super helpful. And then it seems like the amount of retail sold.
Waters for next quarter. It continues to remain extremely high at above 90%.
So you mentioned this will continue throughout fiscal year 'twenty, two but I'm. Just wondering if you would now believe this number will continue to be above that 90% or do you expect it to kind of incrementally declined over the course of next year.
I think I think it's going to be around.
So we will see a pan out over the course of the year, but if you think about the heavy selling season when you get into the boat shows those we're going to all be retail sold orders at some point.
I think he is going to remain very very high.
Other breaches that 90% threshold for the entire year, we will see but it could.
Thank you.
Our next question is a follow up question for Brett Andrus with Keybanc.
Hi, yes, thanks for taking the question sorry, if you've already addressed this.
Yes.
Missed it but I mean, just looking at my model I'm going to easily have you in a net cash.
Physician early next year, I guess, where do you and the board.
Stand from a capital allocation standpoint understand.
M&A is lumpy, but kind of more of a.
Suboptimal.
Capital structure here next year.
Yes look I think Brett.
We've always kind of been in this position where did the business does generate a lot of cash we obviously.
Always have a predisposition to really find incredibly high return strategic initiatives.
Initiatives for us to invest that cash.
We are in that position Hasnt changed.
So we try and stay dynamic with respect to that and I think we've done that pretty successfully since.
Frankly, you almost the entirety of being public and so.
That that primary focus whether it be around vertical integration, we talked a little bit about the potential for.
For a range of Capex, depending on where we go with vertical integration plans.
Or frankly, an M&A opportunity absent those.
Types of opportunities in those situations can be dynamic and evolving.
We probably have a number.
A number of months before there is.
Any decision made because we'd like to maintain that optionality for the high return strategic investments.
Is there any consideration for <unk>.
Supply side M&A.
You mean.
To vertically integrate.
Into.
<unk>.
Into our suppliers more.
Yes.
Well look we've obviously been vertically integrated into engines over time and different things so.
We are constantly.
Trying to balance financial returns strategic returns around.
Supply chain related M&A.
And theirs.
I can't think of a time, where we haven't been thinking about something with respect to that so.
I don't foresee a broad.
Broader strategic push.
That is.
Broad based vertical integration across the supply chain to own a bunch of.
A bunch of it I think we're going to focus it on very strategic assets.
With appropriate returns.
Okay.
Excellent thanks for the color.
Yes.
And I'm not showing any further questions at this time I'd like to turn the call back to Jack for any closing remarks.
Thank you summarizing our call this morning.
<unk> continues to make history, not only smashing our fourth quarter expectations, but continuing a pattern of outperformance on almost every financial and operating metrics for fiscal year.
Year 2021.
We are in a unique and favorable position with our suite of premium brands and both.
Historically low inventory levels provide an incredible opportunity for continued success for at least the next two to three years.
Our strategic planning operational excellence and supply chain management further supports our outperformance.
The broader industry and it will remain a key differentiator in this environment going forward, while at the same time, continuing to drive profitability and unlocking maximum value from Malibu product portfolio.
For Malibu and axis to Maverick to cobalt and pursuit, we are thoughtfully looking at production levels to ensure we not only meet.
Customer consumer demand, but do it in a way that allows us the main town paying their industry, leading innovation and quality.
One thing that can be said enough.
<unk> is unprecedented for every Malibu brand, we will continue to capitalize on the soaring demand environment and take advantage of the attractive trends that have materialized.
We remain.
We remain optimistic these tail winds will remain elevated as we move into fiscal year, 2022, and beyond which will undoubtedly support further growth and strong earnings.
Lastly, with our eyes on the horizon or more apply the wake ahead, our fiscal year 2022 looks brought supported by unprecedented customer demand the introduction of our.
Our new model year, 'twenty to Prada products, historically, low inventories and a culture of operational excellence, which we believe will position us to drive substantial growth and profitability to deliver long term value to our shareholders.
I would like to thank you for your continued support and I look forward to Malibu has industry, leading success and building.
Two year 'twenty to 2022 into the best year, yet for Malibu as always we hope you and those around you continue to remain safe and healthy have a great day.
Sure.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
Yeah.
<unk>.
[music].
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Yeah.
[music].
Okay.
Good morning, and welcome to Malibu boats conference call to discuss the fourth quarter and full fiscal year 2021 results. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.
Instructions will follow at that time. Please be please be advised that reproduction of this call and hold the report is not permitted without written authorization from Malibu boats. 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, Mr. Ritchie Anderson, Chief operating Officer I will.
And all 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 our fiscal fourth quarter and full year 2021 financials. We will then open the call for questions.
A press release covering the company's fifth.
Now I'll turn the quarter and full year 2021 results was issued today and a copy of that press release can be found in the Investor Relations section of the company's website.
Also want to remind everyone that management's remarks on this call may contain certain forward looking statements, including predictions expectations.
Gulfport estimates or other information that might be considered forward looking and that actual results could differ materially from those projected on today's call.
You should not place undue reliance on these forward looking statements, which speak only as of today and the company undertakes no obligation to update them for any new information.
Information or future events factors that might affect future results are discussed in our filings with SEC and we encourage you to review our SEC filings for a more detailed description of these risk factors.
Please also note that we will be referring to certain non-GAAP financial measures on today's call.
<unk> 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 would now like to turn the call over to Jack.
His commentary thank.
Thank you Wayne and thank you all for joining the call. We delivered another record year for Malibu boats, which included fiscal fourth quarter results demolished expectations.
Our performance was underscored by outperformance against the broader industry, a testament to Malibu has market, leading innovation unraveled strategic.
T J and operational excellence and a best in class team that has continued to navigate the global supply chain constraints, which are weighing on almost every industry and the global economy.
For fiscal year 2021, net sales increased nearly 42% to $927 million gross margin expanded to 25.
5% adjusted EBITDA grew 71% to $190 million and adjusted EBITDA margin increased 350 basis points to 25%.
From the onset of our initial full year guidance for fiscal year 2021 by all accounts, we crushed it Malibu continues to be a premier for.
In the marine industry, and the entire leisure space and were setting the tone for continued strength and agility as we move beyond fiscal 2021.
All of our brands performed exceptionally well as retail demand maintained its breathtaking pace the trend toward large feature and option rich. Both has continued which is supported.
<unk> robust asp's and attractive margins in particular for Malibu and Axis <unk> hundred 40, <unk> 'twenty eight 'twenty four and 'twenty three LSC, which were all larger boats are performing well ahead of what we expected.
New models at pursuit, the <unk> hundred 28 D C $2.40.
46, and <unk> 68 have delivered strong sales and cobalt completely renovated our series with the new <unk> six and <unk> models replace older model generating improved pricing and higher margins.
Our backlog is unprecedented for every Malibu brand, we estimate that over 90%.
Boat orders will be retail sold in the first quarter of fiscal 2022, and with inventory levels, where they are consumers are not buying boats. They are buying slots to have the boat that they want built.
We expect retail demand for wholesale slots to continue at elevated levels through the remainder of fiscal year 2022.
Inventory.
A new mains at historically low levels and we now believe any meaningful increase in channel inventory will not begin until fiscal year 2023 at the earliest in our view we have an unprecedented 24 to 36 month ramp taking us to fiscal 2024 before we see more normalized inventory levels.
There has been.
Been a lot of focus on the new boat buyers coming into the market. The composition of this group and the ultimate retention of these new customers recently there were several reports by respected marine sources put these buyers into clearer focus for everyone.
From 2011 until 2000 and that pain, the number of first time boat buyers or FTB.
<unk> averaged 42400 per year in 2020. This number was just shy of 64000, an increase of 50%.
Put another way the percentage of first time boat buyers increased 300 basis points in 2020 versus the average year in the time period between 2011 and two.
Is the pain.
We also have new data on the attrition of first time buyers and it is exciting to say the lease in the past, we estimated that about 40% to 50% of new buyers for us the new boats will stay in building long term and purchase a second or a third boat.
However, the new data shows that when a consumer buys.
For the first time, approximately 80% of them depending on the segment are still in boating five years later.
Further going all the way back to 2011 over 60% in the first time boat buyers still own about this.
<unk> in and of itself reinforces our confidence that many of the new buyers in the last year are here to.
Stay and we think our breadth of offerings and industry, leading innovation and customer service will keep them with us for their next boat.
What is even more intriguing is the demographic a first time boat buyers historically only 12% of first time boat buyers were women. Despite this we know that women have a tremendous influence in deciding.
Those are both there will be purchase even if they are not the primary bar.
But in 2021st time female boat buyers rose to 23% from the average of 12% fueling what has been our focus since 2012, expanding the addressable market by targeting women through our marketing and ultimately putting more boats into their hands.
The boat.
Foundation of Malibu business industry, leading innovation, a well developed vertical integration structure and operational excellence remains intact.
Each and every day, we see the positive impact of our strategic decisions coming to fruition.
Our innovation allows us to build deliver and sell more both.
Competitors or vertical integration allows us to maintain better control of our supply chain quality and input costs and our operational excellence consistently allows us to raise the production bar as consumers demand more and more boats.
These elements are extremely critical in the current environment and it's obvious that we are pulling all the right levers to.
A grow this business at an aggressive pace.
While we continue to put the pedal to the metal. We also recognize the tightening supply chain over the last year and in particular in the past few weeks as opposed to the near term risks through our production capabilities.
We are working diligently to put as many both on the water as possible and based on our fourth quarter and 2000.
Our fiscal year results, we have done a tremendous job navigating these headwinds to date.
That said the supply chain challenges continue to evolve daily from raw material inputs, such as resin foam in metals to persistent labor shortages at our suppliers to trans Pacific and domestic logistic delays and backups.
While we had hoped to supply chain will be better by now it is not and it remains a challenge.
As a management team and an organization, we proud ourselves on delivering the most innovative highest quality both in the industry. While at the same time, maintaining our strong employee first culture is a differentiator further we are uniquely positioned in.
The marketplace, given our strategic planning capabilities operational excellence initiatives and vertical integration strategy. This has been the secret sauce to our long term success through play and we will continue to be our guiding principles. Therefore, we are looking at our production across our brands and Recalibrating based on the supply chain.
To ensure we maintain production levels that support the highest standards, our dealers and customers have come to expect from Malibu brands, while ensuring the safety and wellbeing of our employees.
This near term decision will adversely impact our fiscal first quarter of 2022.
Now it is not possible to predict the improvement of the supply chain.
And the availability of parts and raw materials, but I have no doubt that as the supply chain constraints resolved our team's commitment to innovation hard work and delivering results will allow us to eclipse the competition deliver more both to our customers and maintain our track record of incredible results.
Shifting.
Our new model year 2022 product lineup, we remain in an enviable position. Thanks to our suite of boat offerings I can confidently say Malibu brands delivered the finest most modern products in the marine industry. This may come out will be stronger and it makes our dealer stronger.
For Malibu and Axis, we have some exciting new products.
We're bringing four new boats to our customers again this year.
All our brand new feature rich and set to drive demand even further in July we already introduced the new Malibu Lakes that are 25, LSP the newest model in the world's best selling cobalt family and.
And the brand new Malibu <unk> 20, <unk> our go.
B 21 foot boats for multi sport boaters, who seek performance versatility and value.
<unk> replaces our 20, <unk> and 21 ml acts with a completely new look that bridges the traditional bell in the Pickle Fork Bell. We also welcomed with access to 220 into the mix. This is the premier.
<unk> two foot wake surf and wakeboarding boat in the marketplace and in just a few days the largest access ever produced the <unk> hundred 50 will debut adding to our rich margin profile and product suite.
Turning to pursuit, we continue the torrid pace of product development and new boat launches, we will be introducing three.
<unk>, both all of which are filling out product quiet spaces that we identified when we acquired pursuit.
Two of these both are in the over 35 foot category and our brand New S$..3.58 Sport model has just debuted at the pursuit dealer meeting earlier. This month the number of dealers, who told me this boat fills a blind spot for them.
Renewable allow them to compete and win against the competition was pervasive.
With cobalt, we introduced six new models in fiscal year 2021, and the demand is off the charts looking into fiscal year 2022, we are introducing five more both between now and the Miami boat show that we are very excited about.
The rollout.
I'll conclude the brand new <unk>, Sterne, and <unk>, which will replace the <unk> equivalent to the Sterne and served in addition to the our forward outboard model will be a new release for the R series coming into 'twenty, three 'twenty four foot length.
We believe that our <unk> model will only enhance the strong legacy of this luxury brands.
We will also introduce a larger boat that will exceed 30 foot and both the stern and outboard version.
These milestones will be featured at the Miami boat show this upcoming February and we can't wait to share more details with you as they become available.
By February 15. It is also exciting to point out that in the span of 15 months.
Cobalt will have transitioned from having three outboard models to seven outboard models with more to come.
The cruising outboard segment remains a significant growth opportunity for cobalt.
Lastly, our newest brand Maverick continues to earn its dropped in our Malibu family of brands. The integration has been smoother than butter and we are already.
Positive results from our dependable approach to integration, while identifying many more opportunities for growth to come.
Maverick is putting into place Malibu is world class product development model, and we will be sharing more on new product for Maverick brands in the near future.
Similar to cobalt there is an opportunity to replace App daily products.
<unk> pursuit their product white spaces, we will feel that will drive growth on the facility side. The expansion of our Maverick plant two facility is progressing as we expected and we're excited to say that we will be building gorgeous both in that new facility in the second half of fiscal year 2022.
Additionally at Maverick.
In lighting in June dealers were very excited about the Maverick at Maverick acquisition by Malibu, and Malibu professionalism and laser focus on growth will bring to their businesses.
I am extremely proud of the Malibu team as we have navigated through one of the most volatile periods in history, we continue to lean on our differentiating.
Theater mutual integration and operational prowess as these principles allow us to time and again enhance our leadership position in the market.
Together, we are focused on making sure our dealers have only the best products and then they can sell them at the highest margins.
Whether they are Malibu axis, maverick cobalt or pursuit dealers.
In <unk>, we are committed to ensuring they're set up for success.
And as always our prudent approach to M&A and integration offers us a competitive advantage in the market.
I want to express my deep gratitude to our teams that every brand they are working very hard and persevering through this complicated time.
Our.
For the reason, we surpassed expectations and record setting fashion quarter after quarter after quarter, and we plan to maintain our winning recipe and continue achieving unraveled success and everything that we do.
Doing so will allow us to deliver the financial performance shareholder value and market growth that.
Our shareholders have come to expect of us.
At this point I will now turn the call over to wanting to take you through our financial performance in more detail.
Thanks, Jack in the fourth quarter net sales increased 133, 2% to $276.7 million and unit volume.
People increased 110, 7% to 2354 boats. This increase was primarily driven by normalized production levels relative to the COVID-19 induced operational shutdowns in the fourth quarter of fiscal year 2020, and increased unit volume stemming from the acquisition of Maverick broker.
<unk>.
The Malibu and Axis brands represented approximately 56, 2% of unit sales or 1324 boats.
Saltwater fishing represented 24% or 565 boats and cobalt made up the remaining 19, 8% or 400.
65 boats.
Consolidated net sales per unit increased 10, 7% to approximately $117600, primarily driven by demand for our new larger models within the Malibu and cobalt segments.
Gross profit increased 193, 9%.
To $69.2 million and gross margin was 25, 3%. This compares to a gross margin of 19, 8% in the prior year period.
Selling and marketing expense increased 45, 6% or $1.6 million in the fourth quarter as a percentage of sales.
Selling and marketing expense decreased by 110 basis points.
General and administrative expenses increased 76, 7% or $7.3 million. The increase was driven primarily by acquisition and integration related costs.
Compensation higher level of legal expenses.
And incremental G&A expenses due to the acquisition of Maverick boat group.
As a percentage of sales G&A expenses, excluding amortization decreased 190 basis points to six 1%.
Net income for the quarter increased 437, 1% to $35 million.
Adjusted EBITDA for the quarter increased 272, 2% to $57.6 million and adjusted EBITDA margin increased 770 basis points to 28%.
Non-GAAP adjusted fully distributed net income per share increased 360% to $1.84.
<unk> 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 $21.7 million shares.
For 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 finished fiscal year 2021 strong as we continued to deliver industry, leading innovative boats to our customers by successfully executing on our key strategic initiatives, our integration of Maverick into Malibu fleet of premium brands has already begun to bear fruit and we will continue to drive performance as we develop new products.
And complete our facility expansion.
We remain focused on delivering high quality products at healthy margins and we believe we are well positioned to advance our long term growth plans in fiscal year 2022.
Looking at full year numbers net sales increased 41, 9% and unit volume increased 27%.
Consolidated net sales per unit increased 11, 7% to approximately $113200 driven mainly by higher sales of new more expensive models and optional features within the Malibu and cobalt segments.
Gross profit increased 58, 4% to $236.5 million netting.
Net income for the year increased 76, 8% to $114.3 million and adjusted EBITDA increased 71, 3% to $190.1 million for the full year.
For the year non-GAAP adjusted fully distributed earnings per share increased 80.
Two 7% to $6 <unk> per share.
We remain well positioned heading into fiscal year 'twenty 'twenty, two given historically low inventory levels and insatiable customer demand, while short term supply chain headwinds are persisting, we're doing what we do best and implementing our tried and true playbook.
That leverages, our operational excellence and vertical integration, we are thoughtfully recalibrating production to ensure we maintain our track record of industry, leading innovation and quality, while prioritizing our employee first culture.
The unprecedented consumer demand coupled with the introduction of new model year products will support continued momentum over the long term.
Based on our current operating plan or.
Our expectations for fiscal year 2022 are as follows we anticipate revenue growth to be in the high teens percentage year over year in terms of cadence.
We anticipate first half revenue growth aided by the inclusion of Maverick boat group.
North.
3%.
Consolidated adjusted EBITDA margin is expected to be approximately 20% for the full year. This.
This is obviously impacted by the inclusion of Maverick for the entirety of the year.
And the reintroduction of many COVID-19 pause costs with respect to cadence EBITDA margins will.
Improve over the course of the year.
But we will see year over year headwinds in the first half we.
We anticipate first quarter year over year headwinds of over 300 basis points as Maverick is included.
Reintroduce COVID-19 pause costs, and we invest in enhanced infrastructure to support our rapid growth.
Lastly, I want to ask.
Knowledge that as of this morning, we have submitted an S. Three filing with the SEC to replace the upcoming exploration of our shelf registration statement.
In closing, we continue to outperform expectations across nearly all metrics, we remain on track to execute on our proven strategy led by our operational excellence our best.
In class product portfolio positions us to benefit from the overwhelming retail demand and historic channel restocking opportunity. We're excited about the future and our ability to drive further market share and profitability growth in each of the markets. We serve with that I'd like to open the call up for questions.
Ladies and gentlemen.
Do you have a question or a comment at this time. Please press. The Star then the one key on your Touchtone telephone.
<unk> has been answered or you wish to move yourself from the queue. Please press the pound key.
Our first question comes from Joe <unk> with Raymond James.
Thanks, Hey, guys. Good morning, a quick question on the revenue guidance for this year.
What.
Assume in terms of the pace at which supply chain improves are you assuming that.
Things like the pick up in Q2, or do you think youre going to see constraints throughout the.
The entire fiscal year.
Really it.
It's the bigger pickup.
In the back half as evidenced by kind of the cadence that we gave.
And so.
There's a little bit I think what I would describe it.
Catch up right now.
And so we anticipate a little bit of incremental improvement in Q2, and then more meaningfully in the back half.
Half of the year.
Okay. Okay, and then in terms of the EBITDA margin guidance of 20% I think you've said in the past that Maverick is about a 50 basis point drag.
How should we think about the resumption of certain.
Costs that you guys obviously.
It did not happen in cohort one.
Whats the drag from that resumption.
Yes, I would describe that drag.
As you're probably in that 20% to 35 basis points right. So there's a couple of things that we highlighted with respect to.
Yes.
Little bit more drag there one is the COVID-19 podcast and the other is just <unk>.
Hansen.
Our infrastructure investing in the business given given the growth that we've had.
Combined I would say those are north of 30 basis points.
And Thats, mostly Q1 it sounds like.
Some of it.
Sure.
Yes, youre going to see more of an impact specifically.
Around the Covid pause cost probably in Q1.
And Thats, what youre seeing in those numbers.
Okay, great. Thanks, guys.
Yep.
Our next question comes from Craig Kennison with Baird.
Hey, good morning, Thanks for taking my questions.
Jack you mentioned that 90%.
New boat orders are retail sold what does that number normally look like at this time of year.
Several years normally right around 50% or maybe even a little bit less than that.
Okay.
And then with respect to the dealer inventory shortage is there any way to frame.
How many units short you believe you may be relative to what you would target if you could get everything produced.
Not necessarily on a unit basis, we looked at things we do look at US. We also look at it a weeks on hand, one of the things that Wells Fargo set is.
Based upon the loss of this ever been at Fab.
Lower than the history since they've been been measuring it and I think between segments. It may be a little bit different but.
I think the point that what I would point to is that.
Regardless of segment, regardless of the dealer.
They are very very short on inventory.
And so.
Weeks, if you were to say that inventories need to be built up.
Just pick a number 75% that would be off at all.
Yes, Craig This is Wayne last year, we said it was north of a 1000 units.
Maverick is one of those situations, so let's ignore maverick for a second.
So that number has gone up over the course of this year.
So if retail demand has outpaced wholesale over the course of the year.
In addition, when.
You add maverick into the mix that business has been chronically under inventoried so.
It is a meaningful.
Second number that could be approaching a couple of thousand units.
That's very helpful. Thank you.
And then.
With respect to the supply chain issues I imagine that's leading to some.
Cost inflation, and maybe you're considering some price increases.
Now how is that dynamic unfolding point.
The supply chain itself is really more about efficiency and building boats and that's part of the reason, we're recalibrating that first quarter to make sure that we're putting both down the line in the proper order.
I think there are inflationary measures that we built into our model.
2022 pricing.
As most companies did so thats really baked at this point.
And the interesting thing Greg is related to the pricing pressures that you referred to both on our side and then pass along because the consumer.
Is not having any impact in demand, we continue to see that demand.
And the acceptance of the new pricing.
Great. Okay. Thank you.
Thank you.
Our next question comes from Brett interest with Keybanc.
Hey, good morning, guys.
You said the supply chain. Good morning, you said this.
Man <unk> really tightened up the last few weeks can you just maybe put some context or.
Or color around that just so we have more of an idea of maybe what exactly you are facing or started to face.
Yes, I think it's become more expensive. So if we go back to the fourth quarter and when we had our last call we talked a lot about.
Resin.
The supply chain being the primary culprit from a supply chain standpoint.
Along with engines outboard engines and that those are the two things that we were watching and managing on an extremely close level.
Jim has gone on you have seen inventory reserves dissipate somewhat so theyre lower than what they.
Rather a quarter ago, two quarters ago or three quarters ago.
And a lot of our suppliers they continue to struggle with the labor side are getting.
Raw materials from China, or Asia and so.
<unk> has expanded beyond just the resin or a.
Outboard engine scenario resin.
They were largely improved too great.
Great extent, we don't have the issues that we had with rather than that we did in the third and the fourth quarters, but there are a lot of other issues, you know and I'll point to a couple of years you run into issues with phone, which is also a petroleum base you run into issues with other small part in it can they can.
From week to week, and I think the best way to describe it is we're managing through it we're getting product.
But rather than getting a large shipment of 150 different parts, we may be getting a shipment of 15 to 20 parts at a given time that gets us through.
<unk> set a days.
Or a particular week and so there are more parts and it's a little bit more to manage and so we want to make sure that we.
We're careful in how that were consuming our production. We do believe it will be improved and as Wayne pointed out we're looking more towards the second quarter that we'll start seeing that improvement.
<unk>.
I would tell you that our guide is conservative and that is the supply chain improves.
And that's the that's the predecessor to everything if the supply chain improves we can be.
Better than what we predicted.
Got it thank you for that.
And then so you have a lot of new models coming to market over the next year you have done some.
Expansion on the capacity side.
Where do you see unconstrained capacity right is it 10000 units 12000.14000.
I'm, just trying to frame up or get a sense of what you think.
You could do on the production and if some of these challenges work in the equation right now.
We work pretty diligently over the last 12 to 18 months to put every brand and are positioned to build more product.
With our pursuit plant that we added that added.
A significant amount of capacity the three phases of cobalt added significant capacity, what we're doing in maverick today with that phase II plant to add significant capacity. We built here in the Malibu, we've made some changes and different focus areas as we have more capacity at Malibu. So.
The supply chain or to cooperate.
We could easily go over that 11000 rate.
Got it thank you guys.
Our next question comes from Jamie Katz with Morningstar.
Hi, Good morning, Thank you for taking my question.
Yes sure.
Sure I think you had mentioned infrastructure spend and then in the 10-K.
Okay.
That would be more in 2022, if I may 2021.
Could you maybe frame the magnitude of that increase.
Some of the capacity investments could be sizable.
Yes.
What I would tell you is.
Capex can be a little bit of a moving target as we develop additional plans that arent necessarily set yet.
And so it could be.
Right now I would tell you it's.
On a trajectory and the $60 million range.
As we add capacity and do some do some initiatives.
But it has the potential to move around as we decided to do whether it be more vertical integration initiatives or whatever and we will update folks accordingly.
Probably okay. That's helpful and then the <unk>.
Pipeline for new innovation for Maverick product.
I think it was touched upon and I think you guys might be maybe reassessing without there and what the opportunity set is there any way.
Guys might be able to elaborate on what.
We could expect to see.
Yes.
Branch this year.
Thanks.
Jamie we're right in the middle of that and I think we're going to be a lot better suited to be able to address that.
The next quarter or the quarter after that but I will tell you. This it's very very similar to.
Both cobalt and pursuit.
There are a number of flat space as we call them product class spaces, where we just don't have a product and once we put a product there we're going to be able to capture share we're going to be able to capture.
More cells the SEC.
Is that the product that.
That we have.
Inherent in <unk>.
<unk> is somewhat aged long in the tooth and so we're going to revitalize that every time you bring out a new product every time and we've seen this with the R. Series every time, you bring out a new product or a new series that is replacing an old one you have an exponential leap in sales and we expect that to occur at <unk> as well.
Yes, Jamie this is Wayne.
I would just add that.
When it comes to the product cycle.
The thing that is probably the longest in the tooth in terms of being able to.
Needing to take time.
Youre developing that team growing that team in building that.
And making sure you do it in the right way.
And youre going to see more of an impact sooner from our capital expenditures frankly, then that new product.
Helpful. Thanks.
Yes.
Our next question comes from Tristan Thomas with BMO.
That problem.
Morning.
Good morning.
Last quarter, I think you called out for model year 'twenty, two that about 80% of your first half order book was already sold could you update us.
It's different by brand, but I think you captured all of the orders it would be well into the third or fourth quarter Bye now.
Okay perfect.
And then just two part question about your capacity expansion.
Any issues getting either raw materials or labor for the cobalt and Maverick plants and then if so has that impacted any of your timelines to get to full production.
No. That's a good question. This question I would ask it's been it's been very.
The positive surprise in that regard because.
We have not seen we're ahead of schedule I would probably say on maverick versus what we thought that it could be.
And we've not what I would have anticipated to be the problems in raw materials. As you mentioned in labor, we have not seen that so that's been a very positive surprise.
<unk>.
Okay. Thank you.
Thank you.
Our next question comes from Rudy Gang Brennan Berg.
Hey, good morning, guys. Thanks for taking my questions.
So going back to the EBITDA margin guidance for next year, a little bit.
Are you thinking about how benefits from the Covid.
And that extension so look back throughout the course of next year.
Yes, I think.
With respect to this year's guide.
There is probably some of the uplift right. So if we're doing the math and we're bridging this year's performance.
Okay.
I would say this year 2021 fiscal year performance to 2022.
Yes, if you start at 25%.
We've talked a bit about maverick being about a 50.50 or 60 basis point drag and then we have the reintroduction of Covid.
<unk> costs and some investment in some infrastructure.
Did that creates another drag I would tell you that.
A bit of the uplift is kind of broad based structural across the business. That's offsetting that if you do that math, you're getting into the mid 19.
Teens.
Of EBITDA margin and if you. If you think about just increased increases in sales and volume on a year over year basis.
That's that's getting some of that back Mavericks margin profile, given the limited incremental volume that youre going to see.
See flowing through that business.
And it is probably not going to be meaningfully uplifted cobalt is the place where youre going to see some benefit.
And that would kind of bridge back to the 20% target we put out there.
Great that's super helpful.
And then it seems like the amount of retail sold orders for next quarter extension remained extremely high at above 90%.
So you mentioned this will continue throughout fiscal year 'twenty two I'm just wondering if you would now believe this number will continue to be above that 90%.
Or if you expect it to kind of incrementally declined over the course of next year.
I think I think it's going to be around that we will see a pan out over the course of the year, but if you think about the heavy selling season when you get into the boat shows those we're going to all be retail sold orders at some point.
I think he is going to remain very very high whether breaches that 90% threshold for the entire year.
We will see but it could.
Thank you.
The next question is a follow up question for Brett Andrus with Keybanc.
Hi, yes, thanks for taking the question sorry, if you've already addressed this I may have missed it but I mean, just looking at my model I mean that easily.
And a net cash position early next year, I guess, where do you and the board.
Stand from a capital allocation standpoint understand.
M&A is lumpy, but kind of more of a.
Suboptimal.
Capital structure here next year.
Yes look I think Bret we've always kind of been in this position where did the business does generate a lot of cash we obviously.
Always have a predisposition to really find incredibly high return strategic.
Initiatives.
It's for us to invest that cash.
And that position hasn't changed and so we try and stay dynamic with respect to that and I think we've done that pretty successfully since.
Yes.
Frankly, almost the entirety of being public and so.
That that primary focus whether it be around vertical integrate.
Integration, we talked a little bit about the potential for a range of capex, depending on where we go with vertical integration plans.
Or frankly.
M&A opportunity absent those.
Types of opportunities in those situations can be dynamic and evolving.
Yes.
We probably have a number.
A number of months before there is.
Any decision made because we like to maintain that optionality for the high return strategic investments.
Is there any consideration for.
Supply side M&A.
You mean to vertically integrate.
Into yet.
Hmm.
Into our suppliers more.
Yes.
Yes.
Well look we've obviously being vertically integrated into engines over time and different things So theres Ian.
We are.
Secondly, you're trying.
Trying to balance financial returns strategic returns around.
Supply chain related M&A.
And theirs.
I can't think of a time, where we haven't been thinking about something with respect to that so.
I don't foresee.
Broader strategic push.
That is.
Broad based vertical integration across the supply chain to own a bunch of.
A bunch of it I think we're going to focus it on very strategic assets with.
With appropriate returns.
Okay.
Thanks.
Thanks for the color.
Sure.
And I'm not showing any further questions at this time I'd like to turn the call back to Jack for any closing remarks.
Thank you summarizing our call this morning.
Malibu continues to make history, not only smashing our fourth quarter expectations, but continuing a pattern of outperformance on almost every financial.
A metric for fiscal year 2021.
We are in a unique and favorable position with our suite of premium brands and both.
Historically low inventory levels provide an incredible opportunity for continued success for at least the next two to three years.
Our strategic planning operational excellence and supply chain management further.
And operator, it's our outperformance of the broader industry and it will remain a key differentiator in this environment going forward, while at the same time, continuing to drive profitability and unlocking maximum value from Malibu product.
Polio.
For Malibu and axis to Maverick to cobalt and pursuit, we are thoughtfully looking at production levels to.
We have not only meet customer consumer demand, but do it in a way that allows us the main town paying our industry, leading innovation and quality.
One thing that can be said enough.
Backlog is unprecedented for every Malibu brand, we will continue to capitalize on the soaring demand environment and take advantage of the attractive trends that have materials.
We remain optimistic these tail winds will remain elevated as we move into fiscal year, 2022, and beyond which will undoubtedly support further growth and strong earnings.
Lastly, with our eyes on the horizon or more apply the wake ahead, our fiscal year 2022 looks brought supported by unprecedented customer demand.
Ma'am the introduction of our new model year, 'twenty to Prada products, historically, low inventories and a culture of operational excellence, which we believe will position us to drive substantial growth and profitability to deliver long term value to our shareholders.
I would like to thank you for your continued support and I look forward to Malibu.
Material, leading success and building fiscal year 'twenty to 2022 into the best year, yet for Malibu as always we hope you and those around you continue to remain safe and healthy have a great day.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.