MALIBU BOATS, INC. SEC 10-Q Report
Malibu Boats, Inc., a leading manufacturer of recreational powerboats, has released its Form 10-Q report for the quarter ended September 30, 2024. The report highlights significant declines in financial performance, strategic initiatives to strengthen market position, and the challenges faced in a competitive and economically pressured environment.
Financial Highlights
Malibu Boats, Inc. reported a substantial decline in key financial metrics for the quarter ended September 30, 2024:
- Net Sales: $171.6 million, a decrease of 32.9% compared to the same period last year, primarily due to decreased unit volumes across all segments.
- Gross Profit: $28.2 million, a decrease of 50.3% compared to the same period last year, driven by lower net sales and increased per unit material and labor costs.
- Operating (Loss) Income: $(5.6) million, compared to $28.6 million in the same period last year, primarily due to lower net sales and increased general and administrative expenses.
- Net (Loss) Income: $(5.1) million, compared to $20.8 million in the same period last year, reflecting decreased pre-tax earnings and increased general and administrative expenses.
- Net (Loss) Income Per Share - Basic: $(0.25), compared to $0.98 in the same period last year, reflecting the overall decrease in net income.
- Net (Loss) Income Per Share - Diluted: $(0.25), compared to $0.98 in the same period last year, reflecting the overall decrease in net income.
Business Highlights
Operational performance across Malibu Boats' segments showed significant declines:
- Revenue Segments: The company reports its results under three segments: Malibu, Saltwater Fishing, and Cobalt.
- Malibu Segment Performance: Net sales decreased by 46.7% to $56.0 million, primarily due to lower wholesale shipments driven by decreased retail activity and dealers' desire to hold less inventory. Unit volumes decreased by 420 units.
- Saltwater Fishing Segment Performance: Net sales decreased by 30.1% to $64.8 million, primarily due to lower wholesale shipments driven by decreased retail activity and dealers' desire to hold less inventory. Unit volumes decreased by 191 units.
- Cobalt Segment Performance: Net sales decreased by 12.7% to $50.8 million, primarily due to lower wholesale shipments driven by decreased retail activity and dealers' desire to hold less inventory. Unit volumes decreased by 63 units.
- Sales Units: Overall unit volume decreased by 39.7% to 1,024 units compared to the same period in 2023.
- Net Sales Per Unit: Consolidated net sales per unit increased by 11.2% to $167,559 per unit, driven by favorable model mix and inflation-driven year-over-year price increases.
- Geographical Performance: North America remains the primary market, contributing $159.2 million in net sales. International sales contributed $12.3 million.
- Future Outlook: The company expects the retail market to continue to decline in fiscal 2025, albeit at a slower rate than fiscal 2024. The company aims to increase its market share through new product development, improved distribution, new models, and innovative features.
- Operational Adjustments: Actions have been taken to reduce production and increase promotional support to manage dealer inventories, which are now back to historical seasonal levels across all segments.
Strategic Initiatives
Malibu Boats, Inc. has undertaken several strategic initiatives to strengthen its market position and operational efficiency:
- Dealer Network Expansion: Malibu has entered into dealer agreements in 14 of the 15 markets previously served by Tommy's Boats, following the latter's bankruptcy.
- Capital Management: The company entered into a Third Amended and Restated Credit Agreement, providing a revolving credit facility of up to $350 million, with $28 million outstanding as of September 30, 2024. Additionally, Malibu repurchased and retired 278,485 shares of Class A Common Stock and authorized a new stock repurchase program of up to $50 million, effective from November 8, 2024, to June 30, 2025.
- Future Outlook: Malibu plans to continue its strategic focus on increasing market share through new product development, improved distribution, and innovative features. The company anticipates further reductions in dealer inventories in fiscal 2025 due to high dealer flooring costs and a continued soft retail environment.
Challenges and Risks
Malibu Boats, Inc. faces several challenges and risks:
- Market Risks:
- Macroeconomic Factors: High interest rates have reduced the number of interest rate-sensitive buyers. COVID-related demand fluctuations and supply disruptions have significantly impacted dealer inventory levels.
- Dealer Inventory Levels: Dealer inventories exceeded historical levels due to a larger-than-expected drop in consumer demand. High dealer flooring costs and a continued soft retail environment are expected to lead to further inventory reductions in fiscal 2025.
- Retail Market Decline: The retail market is expected to continue to decline in fiscal 2025, albeit at a slower rate than in fiscal 2024.
- Competitive Landscape: The industry is highly competitive, with competitors becoming more aggressive in product introductions and expanded distribution capabilities.
- Operational Risks:
- Inflationary Pressures: Rising prices for suppliers and labor shortages have impacted the company's financial results and operations.
- Dealer Network Changes: The termination of dealer agreements with Tommy's Boats has led to the liquidation of its inventory. The company has since entered into dealer agreements with new dealers in 14 of the 15 markets previously served by Tommy's Boats.
- Production Adjustments: Actions taken to reduce production and increase promotional support to manage dealer inventories have impacted financial results.
- Financial Performance:
- Decreased Sales and Profitability: Net sales decreased by 32.9%, gross profit decreased by 50.3%, net income decreased by 124.8%, and Adjusted EBITDA decreased by 74.6% compared to the first quarter of fiscal 2024.
- Increased Costs: Higher per unit material and labor costs due to fixed cost deleverage, a model mix that corresponds to higher cost per unit, and inflationary pressures have increased the cost of sales.
- Legal and Settlement Costs: A $3.5 million legal settlement and related legal fees, along with increased stock compensation expense, have increased general and administrative expenses.
- Liquidity and Capital Resources:
- Cash Flow Management: The company has used cash for funding working capital, capital investments, debt repayments, acquisitions, cash distributions, and stock repurchases. The company believes that cash on hand, cash generated by operating activities, and funds available under the revolving credit facility will be sufficient to finance operating activities for at least the next twelve months and beyond.
- Repurchase Commitments: The company has repurchased boats related to the ongoing bankruptcy with Tommy's Boats and has agreed to repurchase boats subject to a repurchase agreement with M&T Bank.
SEC Filing: MALIBU BOATS, INC. [ MBUU ] - 10-Q - Oct. 31, 2024