Q2 2022 Malibu Boats Inc Earnings Call
Good morning, and welcome to Malibu boats conference call to discuss second quarter fiscal year 2022 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 advised that.
Reproduction of this call in whole or part is not permitted without written authorization from Malibu boats and as a reminder, today's 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.
Officer, I will now turn the call over to Mr. Wilson to get started please go ahead Sir.
Thank you and good morning, everyone on.
On the call Jack will provide commentary on the business and I will discuss our fiscal second quarter 2022 financials. We will then open the call for questions.
A press release covering the Companys fiscal second quarter 2022 results.
It 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 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 or future events factor.
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 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 the call over to Jack Springer.
Thank you Wayne and thank you all for joining the call. We again delivered a tremendous quarter exceeding expectations across the board as demand for both remained off the chart and showed no signs of slowing while supply chain pressures have persisted during the quarter, our unmatched operational capabilities, our dedicated team and the industry leading brands continue.
To pave the way for another history, making year.
We proud ourselves on providing the highest quality most innovative boats to our loyal customer base and our.
We're excited to continue and hopefully increase our pace of production as we pushed through the second half of fiscal year 2020.
For the second fiscal quarter, we posted record net sales, increasing nearly 35% to $264 million over the prior year with adjusted EBITDA growing 23% to $48 million and net income growing 40% to $31 million.
Our margins during the quarter proved resilient and lot of the lingering supply chain issues associated labor costs and material pricing pressures for the second quarter gross margin declined 120 basis points to 21.
24, 1%, while adjusted EBITDA margin declined by 180 basis points to 18, 2% during the quarter.
We were able to offset many supply chain labor and material pricing headwinds through improved volumes and Unpredicted predictably strong asps across all of our brands, which is a further testament to the insatiable demand for our boats, helping solidify yet another record setting quarter.
As our pricing surcharge becomes prevalent in all boats in January margins will be further stabilize for the second half of the year.
As I mentioned demand continued at a prolific pace as the thirst for our feature rich larger boats remains incredibly strong even during what is historically a slower season in October through December .
Demand has been broad based across all brands and all model.
This has been underscored by data reports our year end sales event for Malibu axis and the excellent performance at recent boat shows.
During the Malibu axis year end sales event, we nearly doubled our sales versus fiscal year 2020, resulting in the second largest number of orders ever for this event.
This year was behind only last year when consumers new all boat shows are being canceled.
Malibu success was realized despite higher higher asp's.
Limited promotions being the reality.
Importantly, as boat shows return this year, we are maintaining the torrid pace of customer orders. In addition to the demand for all brands of boat shows is white Hot Fort Lauderdale was at a record pace of both sales for many brands, including our pursuit cobalt and <unk> brands.
At the Denver boat show in January we set records for the Malibu and Axis brands and in Portland in our dealer met their planned sales targets.
The Minnesota show held a couple of weeks ago also experienced very strong sales for that show for Malibu axis and cobalt.
Since Fort Lauderdale, there have been some small saltwater boat shows and each one pursuit of Maverick brands have had sales performance much better than in previous years.
As we head down to Miami next week, we expect this momentum will continue.
Our dealers have also remain agile in this ever evolving environment.
Orders have held extremely well as customers look pass price increases to maintain their slot for a new boat with long lead times, playing a heavy factor in the decision making process.
There is also a recognition that we are now in an inflationary environment environment that extends to all types of products and it will likely continue therefore, the best prices are now to buy a boat.
Our new model year 2022 product lineup is once again underscoring what Malibu is known for quality and innovation we.
We are seeing exceptional broad based demand and while new product is highly sought after the environment has placed abnormal demand on every boat that we sell.
For Malibu and axis customers have responded overwhelmingly to our exciting new products with the all new Malibu <unk> 25, <unk> and the brand new Malibu, <unk> 21, <unk> as well as the axis <unk> to 'twenty and pay $2 50, all passed the point of being able to build to demand.
At cobalt with the rollout of the <unk> variance of boats in the first half we have nine new boats in the 23 foot to 28 foot segment in just 15 months completely transforming the R series lineup.
In Miami, we will introduce a new 30, plus foot boat and both the stern drive and outboard variance everyone who has been on an experienced these new both have marveled at the space and the performance of these new models.
<unk> continues our consistent pace of product development.
The brand New S $3 58, which debuted in November will be in the water for consumers to experience in Miami.
We will also be a new offshore model that will be brought to market in late March.
Maverick is now on a pace to begin introducing new models in early fiscal year 2023.
Similar to cobalt there is an opportunity to replace outdated products and lack pursuit there are product white spaces, we will fill and drive additional growth.
There has not been a meaningful build of channel inventory over the last quarter and given the demand for all of our brands most of our production in the second half will be for retail sold orders it.
It will be fiscal year 2023, before we began to see any build of channel inventory and well into fiscal year 2024 before channel inventories can begin to normalize.
Malibu is also stayed ahead of the curve on inflationary pressures.
In October 2021, we announced the implementation of Prost surcharges to help offset rising costs and maintain our healthy margin profile. These price increases began to take effect on a limited basis in December and there is so no impact on the resilient demand across our full product suite.
The supply chain continues to be the limiting factor on production.
Just on our estimates we could easily build at least 20% more boats and every brand when you layer lack of component availability with an amplified labor shortages suppliers, because the flu season and the spread of <unk> production volumes continue to be limited during the second quarter as most manufacturers to reduce counts to meet the availability.
We have parts.
The shortage of parts needed to build new both is highly unpredictable supplier issues tend to vary on a weekly basis. It.
It is important to note. These lower production levels are solely due to these supply chain issues in our brands remain in a position to flip the switch and increased production capabilities as the environment begins to normalize.
Frankly, the challenges we are facing are a little lock your golf ball hitting a payable on the way of the Cup.
It is frustrating because of the opportunity for that hole, but it is temporary and doesn't affect the long term opportunity of result.
We remain focused with a proper grip intention on the powder as we leverage our operational prowess across the full product lifecycle persistently looking for ways to predict our margin profile. During these volatile times.
Our initiatives are initiatives solidly focus are solidly focused on providing customers with the best both in the market, while maintaining a strong value proposition for our shareholders.
While we can't predict when the supply chain will improve rest assured as things normalize we have the team in place to remain ahead of the game.
Vertical integration has always been a competitive advantage for Malibu.
In a volatile macroeconomic environment. It is only highlighted highlighted our operational resiliency.
We have a long track record of advancing the vertical integration efforts from towers to trailers the engines to floors and I am pleased to announce our latest acquisition also fits into our vertical integration Foundation.
On February of the first Malibu acquired the marine assets of a company called Amtech, We acquired these assets under our new subsidiary Malibu Electronics LLC.
Amtech has been a key supplier of complex wiring harnesses for our Malibu brands for years and is one of several suppliers we use.
Wiring harnesses had been a primary supply constrained over the past nine months and we saw a clear opportunity to bring this capability into our vertical integration fold.
As we bring this Alabama based manufacturing operation in house, we will be better positioned to control our own destiny and alleviate supply constraints in the near term and provide a runway for growth for all of our brands longer term.
The assets included a 130000 plus square foot manufacturing facility that historically had approximately 50% of its production devoted to customers in non marine segments.
We will continue full operations in Alabama, but there will be no external sales opening capacity for all of our brands. As a result, this transaction solves a problem immediately for Malibu by being able to provide the volume of harnesses the Malibu needs.
This improvement will alleviate constraints at other suppliers shared between our brands and ultimately enhance our ability to produce more units across all of our brands.
In addition to improving our vertical integration, we remain on pace to further enhance our production capacity through the Maverick plant two expansion the double the production footprint of that plant.
It is on schedule and we expect to start seeing results soon as we began to bring boats to market from that facility during the second half of fiscal year 2022.
This expansion will allow us to build more boats larger boats and increase the margin profile of the both that are built at Maverick now and into the future.
Many people just don't see the EMEA opportunity, an almost perfect setup for Malibu.
Never have I seen a company so well positioned for success, regardless of what may come the.
The historically low channel inventories dictate that we have a long runway of solid production opportunity despite any economic environment.
Is it supply chain improve with the demand that we have we are positioned to absolutely rip and grow production and profitability significantly the lack of channel inventory also greatly softens any deteriorating economic environment as we have a solid two plus years to get channel inventory back to where it should be.
We are in a most enviable position that dictate solid substantial performance over a multiyear period of time.
In the short term or long term Malibu remains incredibly well positioned despite supply chain challenges and inflationary pressures that are impacting the industry. We strongly believe there is no better team to execute on our strategic priorities, then our tried and true Malibu family, our team's operational capabilities hard work and commitment.
Quality is what makes us truly unique.
Fiscal year 2022 is positioned to be another incredible year, and Malibu 40 year history with record revenue and record earnings as.
As we set ourselves on the second half of the year Malibu remains in a unique and enviable position to dominate the marketplace by developing our cross brand vertical integration, we are confident in our ability to generate new synergies across our powerhouse brands in fiscal year 2022 and beyond.
We will continue to drive innovation and be the first to market with compelling new products and features we are optimistic about our future and Furthermore, we are missing proud over Malibu brands as they continue to navigate this volatile and unprecedented environment.
We will continue to support our absolute outperformance in the industry and ultimately create greater shareholder value for all of our investors.
With that I will now turn the call over to Wayne to take you through our financial performance in more detail.
Thanks Jack.
In the second quarter net sales increased 34, 9% to $263 $9 million and unit volume increased 19% to a record 2073 boats.
The increase in net sales was driven primarily by increased unit volumes due to the acquisition of Maverick boat group and a favorable model mix across our brands.
The Malibu and Axis brands represented approximately 56, 9% of unit sales or 1179 boats saltwater fishing represented 22, 6% or 469 votes and cobalt made up the remaining 25% or 425 boats.
Consolidated net sales per unit increased 13, 3% to approximately 127.
$300 per unit.
Primarily driven by year over year price increases and a greater mix of larger boats for Malibu and cobalt segments.
Gross profit increased 28, 4% to $63 $6 million and gross margin was 24, 1%. This compares to a gross margin of 25, 3% in prior year period. The decline in gross margin was driven by the inclusion of Maverick.
Selling and marketing expenses increased 41, 4%.
$1 7 million in the second quarter as a percentage of sales selling and marketing expenses increased slightly by 10 basis points over the prior year period.
The increase was driven primarily by incremental costs associated with the Maverick acquisition compensation personnel related expenses and promotional events that have since resumed after being suspended due to COVID-19 in the prior year period.
General and administrative expenses increased six 3% or $1 million in the second quarter.
The increase was driven primarily by an uptick in compensation personnel related expenses infrastructure expenses and incremental G&A expenses due to the acquisition of Maverick.
As a percentage of sales G&A expenses, excluding amortization decreased 160 basis points to six 1% compared to seven 7% for the prior year period.
Net income for the quarter increased 39, 9% to a record $31 million adjusted EBITDA for the quarter increased 23% to a record $48 1 million and adjusted EBITDA margin decreased 180 basis points to 18, 2%.
non-GAAP adjusted fully distributed net income per share.
Increased 23%.
To $1 50 per share. This is calculated using a normalized C corp tax rate of 23, 8% 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 table in our earnings release.
In addition to strong operating performance as always we look to and successfully deployed our capital Opportunistically in recent months, our acquisition of the marine assets of Amtech that enhances our vertical integration strategy, while modest in size positions us to increase production by taking greater control.
All of our supply chain.
In addition.
Given the strength of our business, we opportunistically repurchased $5 $2 million of the company's shares during the fiscal second quarter under our existing $70 million share repurchase program.
As Jack mentioned earlier we.
We maintained our momentum throughout the first half of fiscal year 2022, and exceeded expectations. Despite continued headwinds from a volatile supply chain an inflationary environment.
Consumer demand was unfazed and March forward at a robust pace, helping to drive asps to.
To unforeseen levels Malibu remains incredibly well positioned to capitalize on this robust demand environment, while maintaining our strong growth and margin profile despite ongoing macro challenges.
Based on our current operating plan our expectations for fiscal year 2022 are as follows.
We anticipate revenue to grow in the 22% to 24% range year over year with growth accelerating slightly from Q3 to Q4.
Consolidated adjusted EBITDA margin is expected to exceed 19, 5%.
In Q3, adjusted EBITDA margins should be approximately 20%.
Yeah.
Malibu is undoubtedly the industry leader blazing the trail and consistently outperforming against our peers over the long term.
We've continued to invest to drive growth into the future and with the Maverick plant two expansion opening are harnessed vertical integration or simply the robust wholesale restocking tailwind we believe our prospects are bright.
We are incredibly well positioned to capture robust growth opportunities as demand for our larger feature rich boats continues.
At a record setting pace.
We look forward to continuing to deliver even greater value to our stakeholders in fiscal year 2022 and beyond.
With that I'd like to open the call up for questions.
As a reminder to ask a question you will need to press star one on your Touchtone telephone. If your question has been answered or you wish to withdraw your question press. The pankey. Please standby, while we compile the Q&A roster.
And our first question comes from the line of Joe <unk> with Raymond James Your line is open. Please go ahead.
Thanks, Hey, guys good morning.
Questions around around the guide I guess, starting with the sales guide largely unchanged.
Maybe narrowed a little bit toward the middle of your of your prior range, but directionally. How are you guys thinking about units and Asps.
Going forward in the second half of the year I know the last quarter or last earnings call you talked about potentially approaching call. It 2500 units per quarter at some point it sounds like supply chain issues are kind of pushing that back. So can you help us think about.
The impact of tariffs.
Units and Asps on that sales number in the second half.
Yes, Joe look I think from the guide perspective.
We're not really.
From a unit volume perspective moving much.
From what we said that that 2500 ish type type number that's been thrown around on a quarterly basis.
It's still kind of the ballpark for the back half, we talked about a little bit more acceleration on a year over year basis.
The cadence of the revenue guide.
And so what's that mean for net sales per unit there is not a big <unk>.
<unk> move in net sales per unit.
Ian.
That would draw down that volume number that we talked about previously.
Okay. Okay. That's helpful. And then maybe on the EBITDA margin line sounds like things are getting a little bit better is that all of the surcharge going into effect in the second half.
Going into effect in the second half or are there other items that are helping your margins.
Yes.
I would tell you.
Look we're seeing.
We're seeing some flow through on the surcharge kind of comes in slowly right and so there's elements.
That impact Q3.
<unk> Q4, a little bit more even more so but that's also meant to align with.
With those costs coming in so.
What we're really seeing across our businesses is that the margins are performing pretty well.
That it is not meant to be the surcharge is not meant to be the margin additive right.
Really seeing there is ultimately that the businesses are performing as you as we are increasing volume on a year over year basis.
That we are going to have strong performance. So it is not it.
It's not really the surcharge, it's really about just how the businesses are performing sequentially, yes. The point that I'd make Joe is that the cost increases come first followed by the surcharge. So we're playing catch up on that to Wayne's point is enough of amount of margin additive factor as to the key if all things being <unk>.
We will keep the margins where they should be so.
In the second half the margin improvement if any that you see will come from the operation that will come from the supply chain, improving and we do see some windows of that supply chain improvements of our hope is that we'll be able to build a few more boats than what we had.
Predicted last quarter.
Okay. Thank you guys.
Thank you and our next question comes from the line of Mike Alright with Securities. Your line is open. Please go ahead.
Hey, guys good morning.
One quick clarification, you are saying a surcharge as went into place in December and I guess, you start to see more of the benefit of that going forward, but being a surcharge does that mean.
And we'll be rescinded at some point I'm, just trying to understand how that.
It works.
So the way surcharges work Mark is it to be rescinded.
Could be maintained and you found its way into a price increase it could be decrease from whatever it was to a lesser amount or we could come back and increase the surcharge in the spring. So the reason we went this route was to be very flexible based on the environment. So we've really captured every conceivable event that could occur.
Sure.
Yeah.
Okay, Okay, great. Thanks, Jack.
And then just a second question on the cobalt business.
Just looking at production volume there you're still well below where you were I think pre Covid can you maybe talk about has anything changed in that business or is this just a factor of mixing towards larger lower unit volume boats.
I think you hit the nail on the head based on the environment number one you look at the units they have been impacted without a doubt by the supply chain and.
Absent the supply chain issues, there would've been more volume coming out of cobalt, but secondly, as with the Isps that you've seen.
The customers are buying larger boats, they are buying the mortgage expensive boats and.
So that's why we see the revenue offset.
Because of what's happened with the.
The volume of both at that higher level and we have some boats that are coming out frankly in the second half I mentioned that that are going to improve that even further.
Okay, great. Thanks, guys.
Sure.
Thank you and our next question comes from the line of Jamie Katz with Morningstar. Your line is open.
Please go ahead.
Hi, Good morning, I, just wanted to Dan cobalt for a minute I think cobalt.
Sure Carl.
And just maybe more.
Surely impacted by supply chain issues and the commentary by segment is there something different in their supply chain that blade impact them differently.
And.
Also was there any impact this year from some of the recent storms across the Midwest or southwest Robert Kansas is.
That may be constrained from production, which I know happened last year.
Yes, I'll answer the second question first there really have not been any impact from storms until last week. When the storm went through Kansas last week, we did have some impact and some a couple of short dated but nothing major.
The thing that I would point to a little bit different on cobalt is all of our brands, we will use different product from potentially different suppliers and in the case of cobalt because of different power plants, we buy engines from multiple parties.
All parties have all struggled frankly, whether it would be Yamaha and mercury volatile they are all struggling on that basis.
The other area is cobalt is pretty dependent on a supplier related windshields and that windshield supplier has struggled greatly.
Covid has impacted them and so our hope is that they begin working out of that in this third quarter and from a supply chain perspective, it'll be better what I'll point to is and this is probably important to understand our acquisition of amtech, we will alleviate some of the burden from a wiring harness perspective on the.
<unk> suppliers and I think that we'll see very quickly the ability of now Malibu electronics to begin.
Subsidizing the wiring harnesses for cobalt, so that we expect that to play supply chain issue for cobalt go away.
Okay, that's really helpful and then.
You think about the new 30 foot.
But that are coming out at Miami is there a new customer segment, you might be trying to target with this or is it just sort of a customer led.
It is that consumers are looking for something in the size range. Thanks.
It's not new to argue that is customer led so if we think about the products that exist. Today, you have <unk> 33, and <unk> 35, or a little bit older.
Have an <unk> hundred 29 that we came out with a couple of years ago. So it was a propagation of that people were continuing to buy a larger boats. They wants to boats with more features and more ergonomics and we believe that.
On this particular boat that both the Stern drive version and the outboard version delivers that for that net either next cobalt customer are the cobalt customer this ready to purchase a next vote.
Thank you.
Thank you and our next question comes from the line of Fred Wightman with Wolfe Research. Your line is open. Please go ahead.
Hey, guys. Good morning. Thanks for the question just a follow up on the EBITDA guidance. I think you guys were expecting a 300 basis point decline this quarter and you came in a little bit better than that are there some costs that sort of shifted from <unk> into the back half of the year or is it just sort of lingering uncertainty about the supply chain.
Sort of a modest tweak to the outlook. There is there anything else that we should be expecting.
Yes.
No it absolutely did come in better.
<unk>.
Actual manifestation of the price increases didn't hit as quickly.
As we had model or anticipated combined with the fact that our.
Our team there.
Three components to that.
The operations team has done an incredible job in a really.
Dynamic environment.
To run as efficiently as possible.
And then three.
There is cost that we budgeted that.
Whether that be they've been deferred or you are trying to hire people and those people are hard to find so those are the three.
Three components of it.
Operations is number one the price.
Manifestation in the cost line items is number two and then kind of some deferral on the G&A side or just delay in the realization of that as number three in terms of order of magnitude.
Okay, Great and then just high level thoughts on the buyback here I know you guys did $5 million in the quarter I think that $70 million authorization expires in November of this year, but how are you thinking about leaning into that buyback just given where shares are trading and also the offset there from an M&A perspective, you guys are still buying stuff.
The puts and takes.
Yes.
The puts and takes are that.
Look the stock got incredibly weak there in December for a little bit and has continued to be.
What we think is attractive valuation we have not been a.
What I would describe as programmatic repurchase serve that just deploys capital, regardless and evaluation agnostic.
And I think that's that's been our ammo for a long time, and we will continue to be our ammo.
We deployed only $5 million in the quarter.
But I think we will continue to look at it.
In a similar fashion, we're very positive on the direction of our business.
In terms of the wholesale restocking and the duration of that tailwind, what we're seeing with the margins of our business and the strength and its prospects.
You all shouldnt be surprised if it continues to be weak.
If we continue to buy back shares.
We think we have plenty of liquidity plenty of capacity that capacity.
There was an incredible M&A deal.
We haven't done anything that would preclude us from from.
Executing on a transaction an attractive transaction.
Became available to us.
Great. Thanks, guys.
Okay.
Thank you and our next question comes from the line of Eric Wold with B Riley.
Riley Securities. Your line is open. Please go ahead.
Thanks.
Good morning, So a couple of questions kind of follow up to prior questions I guess.
If you think about the supply chain.
Issues across kind of all three brands.
You see light at the tunnel in certain areas the range of uncertainties and kind of Wacko malls you described previously.
We remain as wide as it has been or the somewhat narrow in and some of the areas that we're uncertain before.
Not as uncertain as it had been.
No Eric I think it has narrowed a little bit.
And I think the other thing that I would point out is that.
Richie told me. This earlier before you had a scenario where the supply chain.
They couldnt give you any problems with it will be we don't know when we're going to be able to get the product to you. We'll do the best we can.
And that's become a little bit more of we have some coming to you and we will get back with you as soon as possible and so that's why I say that we see a window of improvement and there's a little bit predictive to what we had said about two quarters ago that we think in the second half it will stop.
Start improving and it will continue that improvement across calendar year 2022. So we are definitely seeing improvement gives us some confidence that we'll be able to produce more than what we had maybe originally projected in the second half.
Got it and then.
Yes, I know the price surcharges and increase their kind of.
You talked about.
The hope is to kind of maintain margin given supply chain inefficiencies and kind of.
Input cost increase and whatnot, but.
Assuming that the current kind of trend towards larger.
More feature rich higher ASP boats moving into the order book continues.
And some of those production and efficiencies Wayne.
Coming quarters, or so if we think about that.
Nathan the order, but holding at those higher levels.
How would that translate into kind of.
Gross margins kind of on the other side versus kind of historical levels.
Class that coherent way.
Yes look I think.
If I understand your question correctly look is there as a potential tailwind to the margin profile of the business.
And what's that potentially look like if you can release.
One incremental volume, but also to.
The mix that you are seeing.
Yes.
Is that.
Is that kind of the question, yes, yes, yes, yes.
Yes.
I think it's a really good question.
The reality is that.
Versus our <unk>.
Last year, when we were talking about our guidance and there was limited upside I think we do feel like this year from guidance there is incremental upside.
And versus being an.
Where it's potentially.
Potentially more constrained in terms of what that upside is and so on.
Look if those.
Scenarios come to fruition Youre, probably looking.
A lot more like what we thought at the beginning of the year.
Which was kind of in the.
<unk> kind of low Twenty's type number.
Yes.
You have the mix impact and you have some incremental volume beyond what's embedded in the guide.
Youre, probably start stepping up in terms of the adjusted EBITDA margins into the low <unk> is probably not getting all the way back to last year.
<unk> 25, because of the inclusion of Maverick, but.
On a apples to apples basis up year over year.
Helpful. Thanks, guys.
Yes.
Thank you and again if you have a question at this time. Please press Star then one and our next question comes from the line of Rudy Yang Bahrenburg. Your line is open. Please go ahead.
Hey, guys. Thanks for taking my questions.
First one just a clarification for me on the price surcharge I guess can you just clarify the expectation of when that will fully take effect and just regarding the continuing rollout of new models and they're going to be kind of planned price increases for those models.
Surcharge, you've announced kind of going to represent all of the price increases over the medium term.
Yes. The last question first the surcharge. This in place we will have already been planned for the new model, So theres not going to be a separate surcharge for them.
We it was a limited basis December I think your question was when does it become fully baked that we'll start seeing the fully baked part of that probably this month in February a little bit less so in January but largely the full price increases in effect now.
Thanks, that's really helpful. And secondly can you just comment on any thoughts on rising rates and any effect that could potentially have on your business. This upcoming year and I guess just that as well as how you believe the industry as a whole has kind of historically performed in a rising rate environment.
In terms of this fiscal year, I think rising rates will have.
Probably no impact the wholesale restocking need is immense.
That combined with the strength that we're seeing at retail.
Look if the fed raises a quarter point in March on.
That flowed through.
Two the retail consumer probably isn't actually impacting retail this year in my opinion.
Belief is that.
The financing sources have a reasonable about of NIM of net interest margin.
When it comes to the products to finance at retail here.
And may absorb some of that first and secondly, there is other elements of that distribution of that retail financing product that have the potential.
Two to absorb the initial rate increases.
And those are likely to occur before theres really any meaningful impact.
When it comes to the interest rate that people are paying at retail for boats and so we don't foresee that.
Impacting us this fiscal year.
At least and maybe even this calendar year.
Because of those because of those factors.
Great. Thanks, so much.
Okay. Thank you I'm showing.
I'm showing no further questions at this time I would like to turn the conference back to Jack Springer for any further remarks.
Thank you very much we continue to capitalize on scorching retail environment and unprecedented backlog and we don't see any signs of it slowing while we are limited to increasing production counts right. Now every brand is well positioned to ramp up production once parts and systems are available from our suppliers in the meantime, we are taking matters into.
Our own hands to control, what we can which we highlighted by our acquisition of Amtech. This acquisition further enhances our vertical integration strategy and the long term and addresses the supply chain challenge in the short term our strategic planning operational excellence and supply chain management continues to support our outperformance our teams.
Continued to push boundaries through the introduction of new product models that exemplify innovation in luxury and draw customers into the Malibu cobalt and pursuit of Maverick lifestyles.
Historically low channel inventories unprecedented demand and rising asps create a near perfect setup that positions Malibu extremely well for multiple years of growth and increasing profitability. Our first half results yet again demonstrates the inherent strength and capabilities of Malibu's brands, we remain confident.
And our ability to deliver value to our shareholders and we are increasing our guidance for fiscal year 2022.
As always we thank you for your continued support and for joining us in.
In our journey towards growth and continued excellence in fiscal year 2020 to have a fantastic day.
This concludes today's conference call. Thank you for participating you may now disconnect.
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