Q2 2023 Malibu Boats Inc Earnings Call
Good morning, and welcome to Malibu boats conference call to discuss second quarter fiscal year 2023 results.
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 in part is not permitted without written authorization I thought it would be better.
And as a reminder, today's call is being recorded on.
On the call today from management are Mr. Jack Springer, Chief Executive Officer, and Mr. Wayne Wilson, Chief Financial Officer, and Mr. Ritchie Anderson, Chief operating Officer, I would now turn the call over to Mr. Wilson to get started please go ahead Sir.
Thank you and good morning, everyone.
On the call Jack will provide commentary on the business and I will discuss our fiscal second quarter 2023 financials. We will then open the golf for questions.
A press release covering the Companys fiscal second quarter 2023 results was issued today and a copy of that press release can be found in the Investor Relations section of the company's website.
I also want to remind everyone that management's remarks on this call may contain certain forward looking statements, including predictions expectations estimates or other information that might be considered forward looking and that actual results could differ materially from those projected on today's call you should not place undue rely.
And so 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 filings with 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 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 will now turn the call over to Jack Springer. Thank you Wayne and thank you for joining the call. We delivered another great quarter as we move through the first half of our fiscal year, the retail environment remains resilient with strong demand carrying the tide.
For our premium boats.
While we see no worsening of our expected outlook, we are paying close attention to the evolving macroeconomic conditions during the quarter, we have seen incremental improvements in lingering supply chain disruptions and are optimistic about our production capabilities and normalizing dealer inventories.
We have a multiyear track record of strong execution during periods of uncertainty and remain confident in our ability to execute in any macro environment.
Through our unmatched operational capabilities vertical integration efforts and visionary team, we look to deliver profitable growth and long term value for our shareholders.
For the second fiscal quarter, we posted strong net sales of $339 million, increasing nearly 28% over the prior year with adjusted EBITDA growing approximately 20% to $58 million and net income growing 18% to $36 million.
Since the beginning of Covid and all of the issues with the supply chain labor and inflation.
M B a team in all brands have navigated a difficult never before seen environment and have continued to produce stellar results.
I want to thank every team member for their focus on the M. B a their diligence their hard work and capability in overcoming obstacles, you've been fantastic and I commend you for it.
For the second quarter gross margin declined 180 basis points to 22, 3%, while adjusted EBITDA margin declined 120 basis points to 17%.
As I mentioned, the inflationary pressures and supply chain disruptions have impacted the availability and prices on parts and components during the quarter.
Despite these challenges we maintained a stable margin profile in line with our expectations through improved unit volumes and strong Isps across all of our brands.
While inflationary pressures have begun to lessen as of right now we expect that we will see a more normalized cost increase structure for FY 2020 for pricing.
Historically, our second quarter fiscal quarter has been a slower season, but we are seeing positive results coming out of our recent boat shows, which bolsters our confidence and demand remaining strong.
Boat show results for 2020 three are up considerably over last year, which was the first year back after shows were canceled in 'twenty 2021.
Cobalt and pursuit are performing very well and shows are up and sales by over double for cobalt in about 39% for pursuit when measuring unit itself. We also measure revenue dollars for pursuit in 2023 revenue dollars are up 55% versus 2022 shows.
To date shows of note include Portland, Minneapolis, Detroit Fort Lauderdale, Newport in Toronto, all of which had good attendance with shows appearing to be back to historical norms.
Two weeks ago, The New York show took place and it was fantastic with great crowds and sales.
Cobalt saw a record sales number for that show and pursuit outpaced the New York show results for the previous five years.
All boat shows we are also seeing a return to normal discounting.
As I said, a year ago and have been consistent in saying since then marine will and he is returning to a normal environment and cadence dealers must be in boat shows because they are back we all need to return to tried and true sales techniques and lead follow up.
<unk> had better be inline and if a dealer does not have adequate inventory they will lose it.
It is important to note that while retail demand has disproportionately affected more entry level aluminum based lower length boats, our customers remain in place.
Speaking for <unk> brands and for what we're generally seeing it shows the premium buyers looking to purchase and has not really been affected by economic conditions or interest rates.
They are more measured in comparing moms and brands because there's not a shortage of inventory that we have seen in the past 18 months.
My strong conviction continues to be the household wealth creation over the past three years and the stock market continuing to be strong is sustaining our consumer.
That is why our objective of building a business on premium brands. We know we can improve has served us so well and we will continue to drive our being the top marine company in existence.
Conversely, we are hearing of weakness in the smaller foot linked segments in the entry level price boats.
This consumer profile has been impacted the most by inflation and interest rates thankfully that is not our model and we remain positive on our premium business.
Meeting existing demand and building channel inventories continues to be a primary focus and a major tailwind in the quarters to come.
While we have seen incremental improvement with lead times, decreasing and the ability to source greater quantities of parts.
The current supply chain environment is still far from running like Clockwork disruptions are still prevalent for our engine and whimsy windshield manufacturers as well as our electronic supplier base generating inefficiencies in our plants.
However, as these headwinds abate, we are confident in our ability to ramp up production volumes if necessary.
Charting a course through these choppy waters, we've made great progress over the quarter to mitigate these challenges our unit volumes continue to climb and we see promising signs for our vertical integration efforts and our production capacity in Ham and Smiths in our Maverick plant.
Today, we are building more boats and more large bows out of this facility and then we expect greater output as we entered the second half of the fiscal year.
As a result of these initiatives and the gradual improvement across the supply chain, we have begun the normalized channel inventory across all segments to varying degrees.
Absent a major shift in demand for our retail customers, we expect freshwater channel inventories to be near normal by the end of this fiscal year.
Our saltwater brands remain a bit further behind due to pent up demand and lower production volumes and will likely reach normalized levels in the first half of fiscal year 2024.
I will now provide an upgrade update on our integration of the businesses. We have acquired as you hopefully no cobalt as well down the path and has performed extremely well we acquired a fantastic brand from a magnificent family. The St. Clears, we have improved the brand modernized it and then it has grown tremendously in all financial metrics.
The model lineup is almost completely new and paying huge dividends, we continue to be the largest stern drive manufacturer in the linked space, we compete with about 30% market share and then we have grown our outboard offerings from oblivion at 4% share to the number two player in the foot linked segment, we compete in around the 16%.
Sure.
Cobalt equals a homerun.
Pursuit is built upon success every year, we have own them. The addition of the new plant in 'twenty 'twenty has allowed us to expand the number of both we build as well as the size of the both the rebuild.
We have driven the margin profile is higher and higher and we see significant opportunity to grow them. Further again, we have significantly expanded the introduction of new models and that will continue.
An area, we have not yet been able to capitalize on is the expansion of the dealer network.
Our commitment is to supply existing dealers with sufficient channel inventory first and then look to expansion.
As a result, we have not yet begun our distribution expansion and it has been laid throughout the Covid era.
Currently I expect to begin expanding distribution in fiscal year 'twenty 'twenty four and how soon we have adequate inventory in our current dealers will determine the rapidity of the expansion part.
<unk> has equaled a homerun.
The Maverick brands Cobia, Pathfinder, Maverick and Hughes have really come into their own. This fiscal year integration of an acquisition is an evolution and as you recall, we acquired <unk> at the very end of 2020.
Our first step was increasing throughput and efficiency and adding the additional capacity additional capacity with the plant. Two addition that allowed us to build more in larger boats. Those objectives have really matured in fiscal 'twenty two 'twenty three and we are having a fantastic year with N B G.
Despite the supply chain, we are setting new production and shipping records almost every month.
The new Pathfinder product is performing better than even we expected and is in high demand. We have now turned our attention to cobia and will aggressively bring new product, which will further enhance our market share and growth.
Lack pursuit, we have a distribution growth roadmap that we have not yet been able to execute but that is coming in fiscal year 2024 as well.
M B G today equals a triple but the ball is in the corner. We're rounding third base and we are confident we will have a home run with M. B G.
In summary, our integration acquisition of acquisition has gone as well as we expected and the dividends have been better than we expected the great thing about all of them as we have additional at-bats coming to score even more we are very very good at acquisitions and integrating them and we will entertain any acquisition of a premium asset.
That we can improve at any point in time.
Overall Malibu is again in a great position to execute as we entered the second half of the fiscal year with strong tailwind across our business as.
Our supply chains continue to improve inflationary pressures subside and labor shortages lessens. Our teams are prepared to execute our strategic priorities, our vertically integrated business model and operational prowess set us apart and with the resilient nature of our customer base strong dealerships and battle tested teams we are optimistic.
Mystic about our future.
With that I will now turn the call over to wanting to take you through our financial performance in more detail.
Thanks Jack.
In the second quarter net sales increased 28, 4% to a record $338 $7 million and unit volume increased 17, 7% to a record 2000 and 439 votes.
The increase in net sales was driven primarily by increased unit volumes generated by resilient wholesale demand across all three segments and strong asps.
The Malibu and Axis brands represented approximately 54% of unit sales or 1318 boats saltwater fishing represented 24, 3% or 593 boats and cobalt made up the remaining 21, 7% or 528 bus.
Consolidated net sales per unit increased nine 1% to approximately 138.
<unk> thousand $880 per unit.
Primarily driven by inflation driven year over year price increases and favorable mix.
Gross profit increased 19% to $75 $7 million and gross margin was 22, 3%.
This compares to a gross margin of 24, 1% in the prior year period. The decline in gross margin was driven primarily by an increase in dealer flooring program costs.
An increased mix of cobalt in saltwater sales and partially offset by improved saltwater margins.
Selling and marketing expense increased nine 5% or zero point $5 million in the second quarter. The increase was driven primarily by promotional events as sales efforts returned to normalized pre COVID-19 levels as a percentage of sales selling and marketing.
<unk> expenses decreased by 30 basis points over the prior year period.
General and administrative expenses increased 19, 2% or $3 $1 million in the second quarter.
The increase was driven primarily by compensation and personnel related expenses and professional fees.
As a percentage of sales G&A expenses, excluding amortization decreased 50 basis points to five 6% compared to six 1% for the prior year period.
[laughter].
Net income for the second fiscal quarter increased 17, 5% to a record $36 $4 million adjusted EBITDA for the quarter increased 19, 7% to a record $57 $6 million and adjusted EBITDA margin decreased 120 basis points to 17%.
non-GAAP adjusted fully distributed net income per share increased 22% to $1 83 per share. This is calculated using a normalized C Corp tax rate.
24, 3% and a fully distributed weighted average share count of approximately 21 3 million shares of class a common stock.
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.
We continued our momentum throughout the first half of fiscal year 2023, and operated to our expectations market conditions have continued to be largely consistent with our expectation for the fiscal year and varying by brand. We expect channel inventory normalization sometime in calendar 2023, we remain optimistic about.
Our path forward as we look to the back half of the year and beyond.
There's no doubt that we continue to be the industry leader in the marine space repeatedly exceeding expectations. Despite persistent headwinds from a challenging supply chain, an inflationary environment as Jack mentioned earlier demand for them premium boat buyers remains as evidenced by the performance at our recent boat shows overall Malibu is in an enviable position as we.
Continue to capitalize on this resilient demand environment and normalize our channels, all while maintaining strong growth and a stable margin profile.
Based on our current operating plan our expectations for fiscal year 2023 remain unchanged and are as follows.
We anticipate revenue to grow mid to high single digit year over year.
We expect Q3 year over year growth to be about flat.
Solidago adjusted EBITDA margin is expected to decline slightly year over year.
We expect Q3 EBITDA margins of approximately 21%.
In closing Malibu continues to perform at a high level in fiscal year 2023, despite an uncertain macro environment.
We believe our strategic positioning and our historically proven operational prowess provide us with the ability to deliver a strong fiscal year 2023 performance.
And an attractive set up to drive long term shareholder value.
With that I'd like to open the call up for questions.
Thank you and as a reminder to ask a question you will need to press Star then one on your Touchtone telephone.
If your question has been answered or you wish to withdraw your question. Please press Star then two please.
Please standby, while we compile the Q&A roster.
And our first question today will come from Jamie Katz with Morningstar. Please go ahead.
Hi, good morning.
It would be helpful to understand what you guys see that you have available to Paul you can mitigate some of the expenses that you're seeing on the inflationary side. It seems like that's a pretty impactful.
You know the primary levels levers that we and everybody have used in the past has been the pricing and increasing pricing I think those days are over Jamie.
From what we're seeing where you know when I made the comment we're looking at a more normalized cost environment. As we started our budgeting process in the second half of this year. So I think we'll be back to more of a norm and largely the inflationary era that we've been under is starting to this space.
Okay, and then can you just add any additional color you might have on the floor plan financing commentary and sort of how the dealers are feeling right now might be thank you anticipate any sort of commitment on that looks like over the rest of the fiscal year. Thanks.
Yeah, the floorplan financing and I'll lead off the floor plan financing is coming back and I think a natural human reaction is if you've not had it for a couple of years and it starts back up again.
Cause you to step back and take a pause and I think that did occur when the floor plan started kicking in for the dealers.
It's become more normalized now I think it is that getting back to normal scenario. So I do think the dealers are becoming more accustomed to it but they are certainly like we are watching inventories very closely.
And from a financial impact perspective, Jamie the impact.
Of flooring expense on our P&L was actually primarily felt in the first half of the fiscal year. There is a much more modest impact or incremental impact that occurs in the second half and so the implication from the guidance is that we will have margins relatively consistent with last year.
Here in the back half of the year.
And that should because there's some more pricing being taken in and less of an impact of flooring.
Thank you.
Youre welcome.
And our next question will come from Michael Swartz with true security.
Go ahead.
Hey, guys good morning.
Thank you I wanted to touch on the on the on the saltwater business I think.
The two acquisitions you've made there.
And you made the acquisition they were something 13, 14% EBITDA margins. So maybe just give us an update of maybe where we stand today and I guess, what's what's embedded in guidance I mean, maybe maybe think about go forward into fiscal year 'twenty four and beyond.
Yeah.
In terms of what's embedded in guidance look where we stand today, I think you're probably being a little bit generous on a blended basis in calling it a 13 or 14.
And so I think what I would tell you is that we've.
Embedded in guidance is a modest expansion from where they were at.
I would tell you that maverick is gonna be a more in a neutral position.
More in a neutral position, but larger and yet.
Pursuits has expanded meaningfully and that will have provided the uplift to the aggregate saltwater EBITA margin.
In the longer term, we think that Theres, a real opportunity to continue to expand those margins is as we expand distribution and expand the product portfolio and drive further efficiencies.
Okay, Great and then.
Your commentary around the boat shows and you eat throughout some fairly large numbers for cobalt and pursuit I just wanted to clarify that what you were saying I think it was mostly on a volume basis and year over year.
I didn't hear any commentary around the Malibu business, maybe just provide some color on what youre seeing there just in terms of boat show activity.
Yeah, I think on the Malibu side and really on the towboat.
As a whole is spotty from market to market. There are some markets that have been pretty strong and we've had good uplift and there are others that had been a little bit weaker.
You know what my observation is is that there's been more of a holding of price on the Malibu side of the equation and the competition at the boat shows and I think that's probably having a little bit of impact overall.
That's about flat with last year, and if a rate them certainly the saltwater shows are doing better.
There's a lot of strength it seems to be a lot of strength in saltwater shows cobalt is doing very well and then on the Malibu side is more flattish.
Okay perfect. Thank you.
And our next question will come from Fred Wightman with Wolfe Research. Please go ahead.
Hey, guys I just wanted to follow up on the comment about the market performance. I think you said it was largely in line with your plan, but has your underlying or the embedded retail outlook for the rest of the fiscal year changed or is that still in line with what you were thinking last quarter.
Just in line with what our outlook has been the comment that I'll make is really more on the channel inventory side, we do think that from a Malibu cobalt side of the equation it'll be by the end of this model year or fiscal year, the channel inventories will be where they need to be but it will continue to be in the fiscal year 'twenty for before.
Saltwater pursuit in Maverick get there.
And just to follow up on the inventory comment that is.
Targeted dealer inventory levels right youre, not assuming it's back to pre COVID-19 type levels here, it's a bit of a haircut to where that one.
Yes, Fred the way, we look at it in two weeks on hand of inventory and as we know it's a very cyclical nature within the year. So there are points in time it needs to be higher than other points in time it needs to be lower and so we're looking at it more on that what is needed to.
Propel the market share and propel the retail sales that we need.
Perfect and then just lastly, the hurricane related impacts that you guys had outlined last quarter to those windup.
I think it was $5 million on revenue and a million and half dollars on profit was that where it sort of wound up for the quarter. Yes. We did recover that what we have not seen and I think it's due to the insurance checks for both have been slow in coming we do think that there's tail winds that are coming related to the hurricane of people that have not yet.
Replace a boat.
Perfect. Thank you.
Yeah.
And our next question will come from Craig Kennison with Baird. Please go ahead.
Hey, good morning, Thanks for taking my questions as well I wanted to unpack guidance, a little bit when you look at your fiscal 'twenty three.
Revenue guidance, what's the embedded shipment volume assumption there and then maybe you can comment on the embedded kind of retail assumption you need to get there.
Yeah. So.
The we don't give unit volume.
Functions, but it.
Ultimately you can back into the implied guide it from a revenue perspective in the back half is obviously down rated and so.
That's going to probably I would guess a range.
Depending on what ASP assumption that you're going to use is probably a down 5% to down 12% in unit volumes in the back half of the year.
Got it. Thank you and then just as we look further ahead, Jack I think you said.
Something about.
The era of pricing and <unk>.
Getting significant price increases may be over.
Just wondering what that means for asps.
As we look at fiscal 2024 could we could we actually see prices come down.
On like for like units.
And then just looking at the restocking opportunity in 2024, I'm, assuming you still have some restock lapsed maybe in the first half as you mentioned, but we won't see the same level of restock benefit in fiscal 2024 as well.
So the answer to the latter first I think thats exactly correct and it really is going back to that normal environment and I'm going to bifurcate between wholesale and retail as we talk about the pricing dynamic for.
For Malibu it becomes like it was in 2019 2020 timeframe, where you look at it in an overall increase in the Isps and it's going to be about a third price driven a third product driven the third feature driven.
As it relates to that the environment of pricing.
And prices coming down at the retail level prices I do think we will come down next year and the rationale and the reason is because prices have been in the MSRP for two years or more and the dealers have got to bring the pricing down so it's not necessarily going to be on the wholesale side, but that retail.
We will see pricing degradation.
Okay.
Got it hey, thank you.
And our next question will come from Joe <unk> with Raymond James Please.
Go ahead. Thanks.
Thanks, Hey, guys. Good morning, just wanted to follow up on Craig's question regarding units, he said weighing down 5% to 12%.
In the second half I assume that's mostly Malibu right since you're still filling the channel to a large degree on salt water fishing and cobalt.
I would I would tell you that that's the that's the bigger portion of our business I don't have it off the air.
The tip of my fingers, but it's got to be in and I was just doing that based off of the implied revenue guide and in some generic ASP assumptions, but I would tell you to do the math and put your ASP assumption in there to get your your volume number Okay. And then in terms of second half margins I think when he said.
Do you expect the second half to be roughly flat with last year. I think you just got it to a <unk> number of 21% versus 23 in the base period, and then in the fourth quarter, you're lapping a 'twenty one so it sounds like you expect EBITDA margins to improve.
Fairly significantly in Q4, what's what's driving that.
The <unk> really it's the timing of how that price flows in and various mix elements, but the the impact of flooring.
Has a very negligible effect in Q4.
Has a but.
A small impact in Q3.
But the impact of year over year price increases in the Q4 period as we waited on the Malibu wine is going to have more of impact in Q4.
Okay, great. Thank you.
And our next question will come from Garrick Johnson with BMO capital markets. Please go ahead.
Hey, good morning.
A couple here first the impact of discounting in the quarter the impact on gross net sales or gross margin and your outlook.
Discounting for the balance of the year also was curious about the engine comments you made about engine constraints, where you see the most limited supply and then I'm not sure. If you answered I think it was Craig's question about your outlook for the industry.
And how that's embedded in your guidance. Thanks.
Yeah with respect to discounting garik. It really is not a meaningful factor incrementally from a boat show or year end sales event perspective.
You're not seeing an incremental discount drag versus what we've seen historically on a year over year basis, there's probably a little bit, but we anticipated that.
I'll, let you I'll punt on the engine constraints to Jack here in a second but with respect to the outlook.
What we had initially said with our guidance.
Back in the August timeframe was a down high single digit percentage for the market as a whole.
We continue to have that as our primary driver in the model. If you look at the domestic registration data for our primary segments Youre down about.
12% on a blended basis and Youre seeing a decelerating decrease.
So kind of second derivative function, but.
And ultimately when you look at on a six month basis.
So we think that.
The current est.
Estimate that we have in terms of a high single digit down market for the fiscal year still is still is appropriate and.
<unk> is the embedded assumption in our guidance.
Gary coming back coming.
Coming back to engines.
We continue to see all of the engine companies struggle to one level or another and is to varying degrees. There hasnt been improvement I will tell you. The Yamaha has improved and they seem to be getting more products to us. They are getting the parts that we need to us. So there is some catch up going on but part of the equation there.
There is we were way behind and so we're not fully caught up yet, although we see improvement.
Stern drive on the cobalt side on the Stern drive and also the forward facing engine, we've seen improvement there as well so not out of the woods, but we have seen improvement. So if I put it in an overall nutshell the engines are improving but still not where we need them to be we don't necessary.
We get all of the parts and all the engines that we need when we need them on the line, but that is improving.
Okay. Thank you guys.
Thank you.
And our next question will come from Brandon Rolle with D. A Davidson. Please go ahead.
Good morning, Thank you for taking my questions.
First just on the ski wake category it seemed like the.
The category was underperforming the broader industry. The last few months of the year could you comment on anything that might be going on specifically within your category and your outlook for the industry in calendar 2023, specifically for those ski wake category.
Yes, I think generally you've had a better scenario of putting inventory into the channel as it relates to that ski Wade category.
Not only from us, but that would be from all competitors, but the main thing that absolutely. We have lacked pontoons have had a very strong for a five year period of time and so it may be a little bit of a pause and then the third thing I would point to is the dealers need to take pricing down.
The other thing I would add to that is that if you look at the details of those monthly numbers that youre talking about youre talking about comps that are.
Still really really high if you look at them in a.
Historical context, when you <unk>.
Elongate the period that you're looking at that.
And you look at the first half of the fiscal year performance. It's in line with the entirety of the market and so I don't think it's something that's.
A symptom of a broader disease for that segment. It really is a function of a very short window of time in a really high comp in a historical context, and when you spread it out over six months, it's very much in line with the industry.
Okay, Great and you know you had commented on dealers needing to cut prices.
It's solely on them to cut prices or would you guys potentially lower pricing to get pricing more in line with the consumer demand is.
They've been carrying MSRP for.
Two or three years, and we've gone back to our normal support related to the programs that we have but what I've seen the boat shows is there still holding pricing too huh.
Okay, and just lastly on the boat shows.
How much of the year over year increase retail it was driven by improved inventory availability versus actual stronger consumer demand I feel like last year. There wasn't a lot of inventory in the channel to show or sell at these boat shows.
No I think that's very accurate and one of the things that we're seeing is people are not in that hurry there not being told that if you don't place your order youre not going to get a boat by the beginning by memorial day or the beginning of summer whenever route B. So there is more price comparison, there's more.
What I would call kicking into the towers tire excuse me. So I think that that absolutely plays into the decision point I'll put it. This way is taking longer than it did last year because people were afraid they would not get a boat that may pay dividends as we go forward.
Instead of buying at the boat show as they might have last year. It may be more of a 234 week long process.
Okay, great. Thank you.
Thank you.
And our next question will come from Eric Wold with B Riley Securities. Please go ahead.
Thanks, Good morning, two quick questions hopefully I guess.
First off.
Thinking back to when the.
Supply chain issue was was first popping up.
In a year and change ago, you kind of talked about.
How much that was keeping you from going to optimal efficient levels of production, 20% plus.
From where you want to be as you think about now where we are with inventory and getting back to more normalized levels within the next year or so.
The three categories, where where do you see demand shaping up.
Do you think about production versus where you'd want to be on an optimal levels. It's still.
Data center was before or is it going to have to come down a little bit just to.
Given where we are.
What I would tell you is that our capacity is increasing.
So the capacity, whereas in the past capacity has been the issue in terms of keeping up with demand that is becoming less and less of an issue, but Eric what it comes down to is what are the channel inventories looking like where are the weeks on hand of inventory for our various brands and within the segments and we're going to be very responsible.
And I can only hope our competition will be responsible not irresponsible.
Got it and then second question last question.
You kind of went through the various successes you've had with the acquisitions you completed in talk and mentioned that definitely would be interested in something else had quality out there to acquire the situations.
Situations right does that.
Seem to indicate that that's more of a priority that we're launching something greenfield internally or would you still consider launching another brand or another kind of extension internally.
We have to have those options open for both at all times.
It's easier and it's more us quicker if you make an acquisition, but it also cost a lot more.
But if you look at the acquisitions, we made were immediately in the business we were immediately unemployment of improving it.
And so I'm not going to say, that's the desired path, but is that easier quicker path, but we would keep the option of an acquisition or a greenfield open in the right circumstance.
Got it hey.
Hey, Jack.
Thank you.
And I'm not showing any further questions at this time I'd like to turn the call back over to Jack Springer for any further remarks.
Thank you in summary, our first half results, yet again demonstrates the inherent strength and capabilities of our brands, we remain confident in our ability to deliver value to our shareholders, while maintaining our guidance for fiscal year 2023.
We continue to capitalize on the resilient retail environment, particularly across our saltwater segment as evidenced by the success of our recent boat shows.
While supply chain disruptions continue to impact production, we're seeing incremental signs of improvement and have increased unit volumes year over year.
Our channel inventories have begun to normalize across all segments to varying degrees led by our freshwater segment, specifically Malibu and cobalt.
Our strategic planning operational excellence and supply chain management continues to support our outperformance and we remain confident in our ability to execute in any macro environment. As we will continue to leverage the horsepower of our unmatched operational capabilities vertical integration efforts and visionary team to deliver profitable growth as all.
Always I want to thank you for your support and for joining US. This morning, as we look to deliver on our strategic objectives and grow our leading brands through the second half of fiscal year 2023 have a great day.
And this concludes today's conference call. Thank you for participating you may now disconnect.
Yeah.
[music].