Malibu Boats Inc Class A Aktie

Thank you. Good morning, and welcome to Malibu Boats conference call to discuss fourth quarter and annual fiscal 2026 results. [Operator Instructions] Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Malibu Boats. As a reminder, today's call is being recorded. On the call today from management are Mr. Steven Menneto, Chief Executive Officer, and Mr. David Black, Chief Financial Officer. I will now turn the call over to Mr. Black to get it started. Please go ahead, sir.

Thank you, Operator, and good morning, everyone. Welcome to Malibu Boats' fourth quarter fiscal year 2026 earnings conference call. I am David Black, Chief Financial Officer, and joining me today is Steven Menneto, our President and Chief Executive Officer. A press release covering the company's fourth quarter and fiscal year 2026 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 our remarks on this call may contain certain forward-looking statements, including predictions, expectations, estimates, and 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 these 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 net income, and free cash flow. Reconciliations of these GAAP financial measures to non-GAAP financial measures are included in our earnings release. I will now turn the call over to Steve.

Thank you, David. Good morning, everyone. Our fourth quarter marked a strong finish to fiscal 2026 and demonstrated the power of our strategic execution. Net sales increased 42.7% to $295.5 million, and adjusted EBITDA increased 72.7% to $33.9 million, with margins expanding 200 basis points versus the prior year. Importantly, that strength showed up in our legacy business before layering in Saxdor's full quarter contribution. This is a direct result of the MBI Advantage operating framework, which is the operational excellence, central sourcing, and channel discipline we've been building into this company over the past year. Zooming out to the full fiscal year, net sales came in at $914.6 million, roughly $29 million above the top end of the range we raised in May, driven by better-than-expected performance across the portfolio and the addition of Saxdor. We also delivered adjusted EBITDA of $73.9 million in the upper half of our guided range.

In addition to a strengthened financial performance in nearly all aspects, fiscal 2026 was also a year filled with milestones, and it's worth walking through some of the highlights along the way. In September, we hosted our first Investor Day since 2018, where we introduced the Build, Innovate, Grow framework that is anchoring our strategy. We laid out the four focus areas where we intend to compete in marine, and we named the mid-cycle opportunity in front of us, roughly $1.5 billion of revenue at a 20% adjusted EBITDA margin and over $200 million of free cash flow. In that same month, we announced a six-year global partnership with the International Waterski & Wakeboard Federation, naming Malibu the exclusive official towboat partner beginning this past January. In November, David stepped into the CFO role, leading the finance team with focus and discipline, and most importantly, setting forth expectations that we know we can deliver.

At the Miami International Boat Show in February, we were recognized with the NMMA Customer Satisfaction Index Awards across five of our brands. On March 2nd, we closed the acquisition of Saxdor Yachts, the most significant milestone in our company's history that reinforces our premium positioning and expands our portfolio to the adventure dayboat segment and provides international growth opportunities for our legacy brands. And just last month, we celebrated 50 years of Pursuit Boats, one of the founding brands of our Saltwater Fishing segment. Congratulations to that whole team on five decades and an amazing legacy of building award-winning sport fishing boats. Here's to the next 50. It's worth pausing on the backdrop this represents. This time last year, the marine industry was still working through one of the most difficult stretches in its history. And our own results reflected that, with legacy volumes under pressure across the portfolio.

This quarter tells a different story. We saw unit volume growth in both our Cobalt and Saltwater Fishing segments, consolidated gross margin expansion of 190 basis points, and a meaningful, stronger bottom line. This is the kind of finish to a demanding year that reinforces our conviction in the Build, Innovate, Grow framework. On Build, we are deepening vertical integration and scaling centralized sourcing and category management, which contributed to our strong margin performance this year. On Innovate, we are holding a pace of new product introduction no one else in the industry matches. And on Grow, we are not only growing with what we already have and taking share in our legacy businesses, but also adding to our portfolio in ways that drive value creation through M&A. Which brings me to the second part, Saxdor.

The integration is progressing well in these first four months, and our early experience continues to reinforce the thesis we laid out when we announced the transaction. It has opened a new category, a new geography, and access to a younger, affluent buyer profile that we believe is highly attractive in the current environment and can compound for decades as conditions improve. The adventure dayboat category that Saxdor competes in is one of the fastest growing in the industry, and families are drawn to it because it functions like a living room on the water built for spending the day together rather than any single activity. Our first domestically built Saxdor boat remains on schedule to be completed at our Fort Pierce, Florida facility later this fall in the first half of this fiscal year. This is an important step in unlocking that facility's capacity and extending Saxdor's reach into North America.

We are also laying the operational foundation underneath the brand, bringing Saxdor into our sourcing organization, giving that business the benefit of our procurement scale. In just the first few months of ownership, Saxdor has cleared the high bar for acquisitions we described at Investor Day, where we can add real value through our scale, our centralized sourcing, and a dealer network that is the envy of the industry. On the product side, Saxdor will introduce two new models at the Cannes Yachting Festival in September, continuing to build out that brand's lineup. And in April, the Saxdor 460 GTC was named winner in the Motor Yacht 14 to 16 meter category at the Yacht Style Awards 2026 in Singapore, recognition that reflects Saxdor's continued commitment to innovation and design excellence. We also invested meaningfully in innovation this year across all of our brands, and it starts with the voice of the customer feeding directly into our engineering teams.

Our model year 2026 lineup added 11 new models across the portfolio, bringing new features as well as value to our product line, and continuing the innovation pipeline that has been the hallmark of this platform. Looking ahead to model year '27, we are already executing against that plan. Malibu launched the all-new 20 VTX in July. Axis introduced the T220 and T235 in July. Cobalt launched the new R26 and R26 Surf in August, and Pursuit launched the S288 and the OS 445 refresh in late July. We also rolled out a new console design across the Pathfinder 2600 and 2400 Hybrid models. For Pursuit, our award-winning dual console lineup transitioned to the Denali series for model year '27, reconnecting with a name that played an important role in the brand's history while establishing a distinctive identity as Pursuit's premier family adventure platform. And in May, the Pursuit S388 Sport Center Console was recognized as a top product of 2026 by Boating Industry.

In total, we plan to bring 13 new models to market across our legacy brands in fiscal '27, and we have more to share on the remaining new products as we get closer to the boat show season. Zooming back out, while we're seeing early signs of stabilization across the industry, we are contending with macro disruptions that continue to pressure the payment buyer, which is a key link to drive an inflection in this cycle. That said, we have not seen a correlation between rising fuel prices and our retail boat sales at the upper end of the market, and usage has stayed strong. Our MBI customers are still on the water, still buying parts, still spending time at the dock, and that tells us the experience of boating with family remains the priority for our core buyer, even at a higher cost per gallon.

For the payment-sensitive buyer, who has been slower to return, we continued rolling out MBI Acceptance, giving our dealers financing and extended service tools to help close sales. Applications have grown steadily since launch, including through the periods when we were not running promotional rate programs, which we think speak volumes about the broader sensitivity of today's consumer. And in marine components, the team continued to build external customer engagement and won additional business during the year, another proof point that the build pillar creates value well beyond just our own boats. With respect to the channel, dealer inventories decreased over the course of the year, reflecting our disciplined approach on managing wholesale shipments all year. That is the right way to protect our dealers and our brands through a soft cycle. And it is why we enter fiscal '27 with a healthier channel than we started with.

On summer retail, the industry improved modestly as we moved through our fourth quarter. Registrations were down roughly 3% for the April through June period, an improvement from the mid-single-digit decline in the March quarter. With that, the fiberglass segments where we compete remain more pressured than the broader market, though they improve sequentially as well. That backdrop is consistent with what we've been describing all year, and it is the environment our fourth quarter results were delivered against. We like how we are positioned relative to the industry heading into fiscal '27. And we expect to build on the momentum we established this year, while remaining intentional about our outlook until we see more durable evidence of a broader recovery. As we set up Investor Day, our capacity is already in place, so we can meet recovery demand when it comes without a step up in capital spending, and we do not need to rely on the market inflection to return our company to growth. With that, I'll turn the call over to David for a detailed review of our fourth quarter and full year financial results. David?

Thanks, Steve. Our fourth quarter and full year results reflect strong execution across both our legacy business and our first full quarter of Saxdor's contribution following the March 2nd close. Throughout my remarks, I'll make select references to both consolidated results and legacy results, which excludes Saxdor, to provide a clear view of underlying sales drivers and year-over-year comparability. Net sales for the fourth quarter increased $88.5 million, or 42.7%, to $295.5 million, compared to the fourth quarter of fiscal year 2025, inclusive of $61.2 million from our new Saxdor segment, ahead of the $57 million to $59 million from the first quarter of fiscal year 2025 of Saxdor revenue we guided to in May. On a legacy basis, net sales were $234.3 million, an increase of approximately 13.2%, driven by increased unit volumes in our Cobalt and Saltwater Fishing segments, a favorable model mix across all three existing segments, and year-over-year price increases partially offset by decreased unit volumes in our Malibu segment.

Total unit volume increased 19.2% to 1,456 units. This was composed of our legacy unit volume, which increased approximately 4.5% to 1,276 units, while Saxdor contributed 180 units in its first full quarter in our results. By segment, net sales attributable to Malibu increased 3.2% to $82.9 million. Saltwater Fishing net sales increased 11.1% to $80.9 million on higher wholesale shipments as dealer inventory levels firmed in pockets of the portfolio. Cobalt net sales increased 31% to $70.5 million, also on higher wholesale shipments and firming dealer inventory. From a mix perspective, on a legacy basis, Malibu represented approximately 43% of unit sales, Saltwater Fishing represented 26%, and Cobalt made up the remaining approximately 31%. Saxdor is reported as a new fourth segment, and we intend to build upon the disclosure going forward.

Net sales per unit on a consolidated basis increased 19.7% to $203,000, driven by favorable mix, including the addition of Saxdor, and year-over-year price increases across the legacy segments. On a legacy basis, net sales per unit increased approximately 8.3% to approximately $184,000. While not included in this metric for the sake of comparability, Saxdor's net sales per unit was $340,000 in the quarter. Turning to profitability, gross profit increased 59.4% to $52.2 million, and gross margin expanded 190 basis points to 17.7%, driven by an increased mix of models that carry higher gross margin. For some further context on Saxdor's performance, the segment delivered fourth quarter adjusted EBITDA margin below the 10% to 11% range we guided to in May. Two things drove that. First, we deliberately added resources ahead of the higher volumes we expect this year, including the accelerated ramp of domestic manufacturing in Fort Pierce. Second, we have higher input costs in the quarter.

The first of those is best characterized as an investment where we are waiting a return once we start turning that inventory into production ramps. It is the key to meeting North American demand, and we are very excited about the speed at which our team is moving to get the units to market. Selling and marketing expenses increased 25.7% to $6.8 million, driven primarily by entire personnel related expenses, expenses associated with our new Saxdor segment. However, as a percentage of sales, we are pleased to see selling and marketing expenses actually decrease 30 basis points to 2.3%. General administrative expenses increased 68.8% to $31.8 million, driven primarily by acquisition and related expenses associated with Saxdor, incremental costs of the new Saxdor segment, and increases in incentive pay. Amortization expense increased $2.6 million to $4.3 million, reflecting the additional intangibles acquired in the Saxdor transaction.

GAAP net income for the quarter increased 53.7% to $7.4 million, or $0.37 per diluted share. And net income margin improved 2.5% compared to 2.3% in the prior year period. Adjusted EBITDA increased 72.7% to $33.9 million, and adjusted EBITDA margin increased to 11.5% from 9.5% in the prior year period. Included in this amount was Saxdor's adjusted EBITDA contribution of approximately $4 million. Non-GAAP adjusted net income per share was $0.90, an increase of 114.3% on a weighted average share count of approximately 19.7 million shares of Class A common stock. Turning to the full year, net sales increased 13.3% to $914.6 million, including $84.3 million of revenue from Saxdor since the March 2nd close. On a legacy basis, net sales were $830.3 million, an increase of approximately 2.8%. Unit volume increased 0.9% to 4,944 units, as 246 units from Saxdor more than offset the decline in legacy unit volume.

Legacy unit volume was approximately 4,698 units, down approximately 4.1% across our three legacy segments, consistent with the lower wholesale shipments we discussed earlier in the year. Gross margin for the year was 16% compared to 17.8% in fiscal 2025, a decline of 180 basis points driven primarily by higher per unit material and labor costs. Adjusted EBITDA for the year was $73.9 million, a decrease of 1.1%, and adjusted EBITDA margin was 8.1% compared to 9.3% in fiscal 2025. GAAP net income for the year decreased 88.8% to $1.7 million, or $0.09 per diluted share, primarily reflecting the acquisition and integration related expenses tied to Saxdor. Adjusted net income per share for the year was $1.52 on a weighted average share count of approximately 19.3 million shares.

Turning to the balance sheet and cash flow, we ended the fiscal year with $74.4 million of cash and $162 million of liquidity, $65 million of long-term debt, giving us ample flexibility to support continued investment and return of capital to shareholders. For the full year, we generated $67.5 million from cash from operations, an increase of approximately $11 million year-over-year, and invested $24.7 million in capital expenditures, resulting in free cash flow of approximately $43.2 million, and roughly 58% of adjusted EBITDA. Subsequent to year end, on July 10th, we completed a refinancing of our credit facility, extending the maturity date to July of 2031 and enhancing our financial flexibility. The new structure includes a $100 million term loan facility alongside a $250 million revolving credit facility, replacing our $350 million revolving credit facility and adds multi-currency capability that directly supports our Saxdor European operations.

This strengthens our liquidity position and gives us increased capacity to support our investment in the business, the Saxdor integration, and disciplined growth opportunities. It was a proactive step that extends our duration and adds flexibility with no change in our capital allocation priorities. On capital allocation, during fiscal 2026, we completed a repurchase program for the year, buying back approximately 1.24 million shares for approximately $33.9 million at an average price of $27.34, which is well below where we trade today and our 200-day moving average. We chose to pause our open market purchases during the lender negotiations. Our board authorized a new $70 million share repurchase program for fiscal 2027 in June, and we closed our refinancing in July. This reflects our confidence in the business and our continued commitment to returning capital to shareholders. Net leverage finished the year approximately 1.2x and trends towards 1x on a pro forma basis, well inside our stated maximum of 2.5x, even after financing the Saxdor acquisition.

With that flexibility back in place, we remain opportunistic on capital allocation and well positioned to keep investing in the business as we move through fiscal 2027. Turning to our outlook for fiscal '27, for the full fiscal year, we anticipate net sales of $1.080 billion to $1.120 billion and adjusted EBITDA of $101 million to $109 million. This returns us to a single consolidated outlook as we committed to in May, and includes a full-year ownership of Saxdor. The macro backdrop in fiscal 2027 while still contemplating that MBI continues to outpace the broader powerboat market with low to mid-single-digit growth across our legacy brands and mid-teens growth at Saxdor. Following the investments we made into the brand over the last four months, we expect Saxdor segment's adjusted EBITDA margin to improve throughout the year as domestic manufacturing scales and this year's investment in the platform annualizes.

More broadly, our outlook also reflects tariff costs embedded at the currently enacted rates and the pricing actions we have already in market. As always, reconciliations of our guidance measures are addressed in our earnings release. For the first quarter of fiscal '27, we anticipate net sales of $255 million to $265 million and adjusted EBITDA of $14 million to $16 million. Please note, first half margins will be lower than the second half primarily driven by our investment and ramp at Saxdor. To close, we delivered a strong finish to fiscal 2026 on both sides of the business. Our legacy operations executed with discipline through a demanding environment. The Saxdor integration is progressing well in its first four months, and we ended the year with a stronger balance sheet and renewed capacity to return capital to shareholders. With a refinanced credit facility, a new buyback authorization, and a differentiated portfolio, we are well positioned to execute through fiscal 2027 and to capture the mid-cycle opportunity we framed for you at the Investor Day.

With that, I'd like to open the call up for questions. [Operator Instructions] Please stand by while we compile the Q&A roster. Our first question comes from Craig Kennison with Baird. Please go ahead.

Hey, good morning, Steve and David. Question on Saxdor. Appreciate the breakout, David. Wondering if you can maybe shed more light on the Saxdor impact on all of fiscal 2027 revenue and adjusted EBITDA guidance.

Yes, sure, Craig. So, as we think about next year, you know, having a full year's worth of Saxdor in the numbers, the way that we're thinking about the top line is a growth rate in kind of the low teens on the revenue side of things and working a ramp up to that 10% to 11% range that we talked about on the EBITDA front. I think the first quarter, as you saw, will be a little bit weighted down, just given the investment that we're making on the higher volumes that we're expecting through the remainder of the year. But if you take that piece and then consider our expectation for the legacy brands, which is around low-single-digit to mid-single-digit growth on a year-over-year basis, gets you the building blocks to see where our guidance is coming out for fiscal year '27.

Thanks, David. Could you just give me the base on which you expect to grow low-teens revenue?

Yes, so if you look at our year this year for Saxdor, we're looking at a $180 million number on a full year pro forma basis.

Okay, perfect. And then on Saxdor in Fort Pierce, I know you have a lot of capacity there and you plan to ramp production. What's the right level of unit production out of Fort Pierce for Saxdor when you're fully ramped?

I think what we've said, Craig, in the past is that we could do upwards of 200-plus units out of that facility without any incremental CapEx investment. And so I think that will be our first goal post that we'll be working for. Obviously, mix has some determination associated with that. Bigger boats take more space. But I think that's the original kind of number we've set we'll be working with.

Perfect. Thank you.

Our next question comes from Joseph Altobello with Raymond James. Please go ahead.

Hey guys, good morning. I guess first question on fiscal '27, the outlook here. I appreciate the breakout between legacy and Saxdor, but could you tell us what you're thinking in terms of retail growth for the legacy business within that guidance?

Yes, we're expecting the market to be flat to down next year. I think it's going to be a similar cadence to what we've seen this year, where it's going to be a little softer in the first half and progressively getting closer to a flattish year as we move into the back half of that. And so as you think about kind of the year-over-year comp, that's kind of what we're faking into our guidance for next year.

Okay, so if we think about the low-single-digit growth for Malibu, it sounds like you're thinking all of that and then some is going to come from ASPs with volumes probably down.

Part of it will be ASP, but part of it is also the destocking that we've had this year, right? So you're going to get some of that benefit back next year just as the market, you know

stabilizes as we move along. Okay. But I guess in terms of volumes, in terms of absolute units, you think wholesale and retail roughly in line for this fiscal year?

That's right.

Okay. And just one quick one on the input cost pressures you mentioned at Saxdor. Maybe talk about that a little bit more and why you didn't see that in the legacy business.

I think we saw some of that in the legacy business. I think it was known the centralized sourcing has been well underway, and we've been able to offset a lot of that in kind of the legacy business. Obviously, one of the work streams that we are focused on on the integration side of things is the sourcing components as it relates to Saxdor, so we'll continue to focus on that and start to see some of those benefits, albeit later in the year.

Okay, great. Thank you.

Our next question comes from Michael Albanese with StoneX. Please go ahead.

Hey, good morning, guys. Can we just lift up the hood a little bit more on Cobalt? Volume's up 19%. Can you just remind us, were we comping some production cuts in that segment, or is this kind of results of some of your initiatives within MBI Advantage? What's kind of underlying that volume growth?

Yes, I think, you know, obviously we did take production down in the prior year as we were managing through dealer of inventory, but that brand continues to perform well from a market share perspective. And so you're seeing some of that translate through as the retail has continued to be strong and the demand is there for those brands.

Okay, got it. Okay, thanks. And then can we just bifurcate a little bit on the margin improvement regarding kind of, you know, some of the, you know, maybe absorption leverage with some of your volumes being up here versus, you know, your centralized sourcing and kind of procurement initiatives and things of that nature?

Yes, I mean, as you think about it, for the quarter, I would say it's about half and half, right, as you think about the breakout, right? There's some volume levers that you're getting just by just kind of the pure units piece of that. But then also, as we think about the centralized sourcing and it running through the P&L that's been sitting on the inventory side of things, that's how I would characterize it for the quarter.

Perfect. Thank you. Thanks, guys.

Sure.

Our next question comes from Gregory Miller with Truist. Please go ahead.

Good morning, Steve and David. First, I'd like to ask about Saxdor. Have you made any changes to the plant operations in Finland and Poland from your due diligence post ownership?

No, Greg, we haven't made any plant changes. We're still manufacturing in Poland and in Larsmo. We've introduced the 460 production, so of course, standing up a large boat such as that and with the amount of orders that we have, we're working hard to be able to satisfy those. And as we've said before, the Fort Pierce is, I guess you can consider that a new operating line, but we're well underway in that integration work stream. Already down the path of doing pilot boats so we're on schedule for that, so no major changes to the production side of Saxdor.

Okay. Switching gears, you mentioned the earnings release about firming dealer inventory levels in pockets of the portfolio specific to Cobalt and Saltwater Fishing. I was hoping if you could elaborate on what you're seeing lately in trends.

Yes, I mean, on inventory as a whole, I think, you know, as the year progressed, you know, inventories have decreased on a year-over-year basis. What's very important is the health of that inventory. And aged inventory across the portfolio, all the portfolio is in one of the best spots that we've seen in some time. So there's not a ton of inventory that we're concerned out there that's going to have to be cleared because of aging and required promotional dollars. Pretty good about where we're landing at this time of the year.

Great. Thank you both.

Our next question comes from [ Anna Glaessgen ] with B. Riley. Please go ahead.

Hi, good morning. First, I'd like to follow up on Greg's question on dealer inventory. Seems like we're in a much healthier place than maybe entering the prior fiscal year, but as we look to fiscal '27, are we assuming that wholesale and retail are fairly aligned with maybe some pockets for retail given how depleted inventories got in certain areas?

Yes, I mean, I think as we move along through the year, yes, and I think the market, we've set some softness still to be in that first half of the year. So I think by the end of the year, yes, we're in a kind of matching retail to wholesale environment as we progress along.

Got it, thanks. And then I wanted to ask a margin in 4Q here, pretty meaningful step down, or a step down in selling and marketing sequentially despite a ramp in sales. Is that a function of Saxdor being layered on? Do they have a lower selling and marketing percentage of sales in the legacy business, and should we expect leverage throughout the year there as that business is layered on? Thanks.

Yes, a couple things there. Yes, some of that is kind of the leverage by incremental taxable revenue that we have included into the mix, but then also as we think about the drivers that we talked about in the earnings release, we did see lower compensation and just program-related expenses as well. And so, I think the run rate that you see kind of in that Q4 is a relatively consistent one that you would expect to see carried forward as we.

Got it. Thanks.

Our next question comes from Noah Zatzkin with KeyBanc Capital. Please go ahead.

Hi. I guess first, any anecdotes or green shoots you could share in terms of MBI Acceptance uptake where it's available? Are you seeing it convert incremental payment buyers versus prior? Thanks.

Yes, what we're seeing is momentum behind that. The dealers are really accepting that and using it to retail boats. So we are seeing it on the payment side. We're seeing momentum in the number of applications coming in, as we stated in our remarks. Even when it's non-promotional, it's still a tool that's being used, and it's still a tool that helps the payment buyer, you know, be able to enter the market with one of our boats. So we're happy with where the program is going so far, and it's, you know, basically still only nine months in existence.

Is there any way to kind of frame whether it's like innings or percentage of kind of dealers it's available in?

Not sure. So the percentage of dealers that are utilizing it or kind of rephrase that question?

Yes.

Yes, we're signing on our dealers, so we're not at 100% of the dealer base across all of our brands. So we're continuing to sign on. We're continuing to work that and get all the dealers on to the program. And the dealers themselves have multiple tools that they can utilize per the buyer. And so we continue to sell this tool into our dealer base. So more work to be done. Probably a third of the way, 40% of the way there on getting our dealer base signed up. Maybe the only thing I'd add there is we are seeing that it's touching on that lower price point. As you think about the dealer makeup, it's going to be those dealers that carry the lower price point brands that we offer today. Hopefully, that's helpful context.

Yes, very helpful. Maybe just one more, and this is kind of a longer dated question. Are you thinking about the opportunity to grow legacy MBI brands in Europe and kind of where are you today? Thanks.

Yes, we're excited about the opportunity of growing our legacy brand. So where we sit today, international retail for us and shipments are below 5% historically. And now with Saxdor, I think we said before, we're going to take a first step, let's try sell boats that are manufactured in the states internationally at a higher pace than 5%. And then eventually, as we build that business in Saxdor's greater dealer network, who have already been inquiring about carrying our legacy brands, how do we build that up? And eventually, if there's enough volume there, should we manufacture in Europe? That's way down the line, but it's an opportunity that we are looking at.

Thank you. Our next question comes from Jaime Katz with Morningstar. Please go ahead.

Hey, good morning. I'm hoping you guys will maybe elaborate a little bit more on the order of your capital allocation priorities just between your return to shareholders through share buybacks or other investment opportunities, be it acquisitions or white space expansion.

Yes, hey Jamie, this is David. No real change there. I think our priorities are the same. We're going to continue to invest in the business. Obviously we have some debt on the balance sheet now, so we'll pay that down as we have free cash flow as well. Also, as the share price, and we're going to be opportunistic in where we think the intrinsic value is, we'll always consider that as one of our priorities. And then finally, M&A, but discipline M&A. The bar is high, especially when you think about the context of all the other priorities that I just listed for you. So, no real change. What I would tell you is we're not going to look at one thing individually and we showed that this year. We completed one of the largest acquisitions that we had in our history. We've refinanced our debt, and we also repurchased 1.24 million shares to our returning value to our shareholders. So as you can see, we'll continue to keep that same philosophy as we move forward.

Okay. And then can you give us a little insight as to what you are incorporating for input cost inflation? It seems like in some of the earnings calls that have recently occurred that inflation is kicking up. And I am wondering what percentage you guys are thinking about as you think about what to your EBITDA outlook?

Yes, right now, embedded, we're in that low to mid-single-digit range from an input cost perspective. Obviously, there's a lot of determining factors and things change on a daily basis, it feels like, but that's kind of what we're assuming at this point, given the information we have in front of us.

Awesome. Thank you.

You're welcome.

Our next question comes from Gerrick Johnson with Seaport Research Partners. Please go ahead.

Good morning. You discussed Saxdor EBITDA margins and mentioned they were a little bit lower because of the build-out in Fort Pierce. Is that because it's more expensive than you thought or happening earlier than you thought, or am I just off on that?

Yes, no, it's just more earlier. We're speeding up the process, right? And so, you know, we're taking the position that we need to invest now because there's enough demand out there that we want to be able to capture. And so that's more of it. It's more of a timing thing there, Gerrick, than anything.

Okay, and then on Fort Pierce, do you have any metrics for us, perhaps how much more quickly you can get a boat to market, or perhaps how much more profitable each boat could be coming out of Fort Pierce going to the U.S.?

Not yet, Gerrick. It's pretty early. I mean, we're just running pilot boats and just building. I was down there two weeks ago with the team when we did the initial builds, and so a lot of that is being worked out, standard work, setting up stations and so on. Until that's all completed, we won't really have dialed in numbers on what the costs are and advantages. More to come on that, but like David said, we're trying to go faster than what we had in the plan, and that's what's driving a little bit of the early costs.

Got you. Okay, if I could just ask one more. You mentioned optimizing the dealer network. I think it was in a press release. What have you guys done recently in the dealer network to optimize it?

Yes, when we talk about that, it's tools that we deliver to the dealer network, how we support them, when we talk about optimization. So we have our co-op program, we have our financing program, we're changing the way we do some of our marketing and trying to drive support with our dealer base. When we talk about optimization, it's a lot about how do we support the retail on an ongoing basis and what tools they need to be successful.

Okay, great. Thanks for the clarification. I wasn't sure if I meant you were expanding the dealer network, consolidating, but this is good. Thank you.

I'm not showing any further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good morning, and welcome to Malibu Boats conference call to discuss third quarter 2026 results. [Operator Instructions] Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Malibu Boats. And as a reminder, today's call is being recorded.

On the call today from management are Mr. Steven Menneto, Chief Executive Officer; and Mr. David Black, Chief Financial Officer. I will now turn the call over to Mr. Black to get it started. Please go ahead.

Thank you, and good afternoon, everyone. Joining me on today's call is our CEO, Steve Menneto. On the call, Steve will provide commentary on the business, and I will discuss our third quarter fiscal year 2026 financials. We will then open the call up for questions.

A press release covering the company's fiscal third quarter 2026 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 and 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.

Factors that may 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 net income and free cash flow. Reconciliations of these GAAP financial measures to non-GAAP financial measures are included in our earnings release.

I will now turn the call over to Steve.

Thank you, David. Good afternoon, everyone. This was a defining quarter for MBI. We delivered revenue and adjusted EBITDA that exceeded our guidance on a legacy base, and we closed on the acquisition of Saxdor Yachts, the most significant strategic milestone in our company's history and a decisive step in executing the build, innovate and grow strategy we outlined at our September Investor Day.

The core business is performing. Our integration is underway and our conviction in the long-term opportunity in front of us has never been higher. This is particularly notable given the backdrop. Since we last spoke with you, the broader consumer environment has grown more uncertain with geopolitical developments impacting gas prices and thereby sentiment, exacerbating affordability pressures that are weighing on the more value-orientated buyers who tend to utilize financing. But we are seeing a clear bifurcation in the market. The premium cash-driven buyers continue to engage, and that is the consumer our portfolio is built around. Our brands, our ASPs and our customer demographics skew meaningfully towards buyers who have historically demonstrated greater resilience through periods of macro dislocation. We believe that our positioning differentiates us and is showing up in our results.

Turning first to the selling season. Boat show season has largely played out as we expected, and bolstered with pockets of strength across our portfolio. At the Miami International Boat Show in February, we debuted the new Pursuit DC 286 and Pathfinder 2800 Hybrid, which represents 2 of the 11 new models that were launched across our portfolio over the past year since last year's Miami show, reflecting the continued investment in our innovation pipeline.

The reaction to both has been tremendous. We saw a strong immediate reception to the Pursuit 286 launch with several customer conversions and the momentum created at the show with the Pathfinder 2800 has continued building into the week since. This has bolstered wholesale orders from dealers for both models, which have exceeded forecast throughout the end of the fiscal year.

Additionally, our commitment to designing and manufacturing the highest quality boats was recognized by the NMMA with Customer Satisfaction Index awards across 5 of our brands during the Miami Show, Malibu and Axis in ski, wake and surf boats and Cobalt, Pursuit and Pathfinder in fiberglass outboard boats. These awards are determined by verified boat owner feedback and being recognized across 5 brands in 2 segments is a powerful external validation of the product quality, dealer experience and ownership support that define our portfolio.

In general, boat show performance remained resilient year-over-year and outpaced broader market trends, demonstrating continued consumer engagement and demand for our brands in a challenging retail environment. Most recently, at the Palm Beach International Boat Show, both Pursuit and our Maverick Boat Group brands delivered year-over-year sales growth, a clear reflection of the premium consumer dynamic I just described, which is a meaningful data point in a show environment where broader industry traffic is subdued. Across our towboat segment, dealer and consumer feedback on the Malibu and Axis lineup continues to reinforce the leadership position we have built in that category.

David will take you through the financials in detail shortly, but the headline on the legacy business is that our team continues to deliver against the priorities we laid out at the start of the year and the centralized sourcing work we've been discussing for several quarters is now meaningfully contributing to margin. We continue to work in close partnership with our dealers, guided by our established playbook of prioritizing dealer health and tightly managing channel inventories.

Our dealers entered the selling season with healthy current model year '26 inventory, and we have maintained that disciplined posture throughout the quarter. Dealer inventories are in line with historical weeks on hand norms, a position we have earned by being deliberate on wholesale shipments throughout the year, even when the discipline pressure near-term volumes. While the broader industry continues to work through pockets of noncurrent inventory, our channel is positioned to support retail as the market stabilizes, not to clear stale product.

Turning to our strategic initiatives. MBI acceptance continues to gain traction across our network. What began as a pilot within our Malibu and Axis brands is now deployed and available across all brands, with early feedback actively shaping how we think about the next phase of programming. During the quarter, we saw encouraging engagement from both dealers and customers, underscored by application volume increasing by over 200% from January to February as adoption broadened at the point of sale. The program is doing exactly what we designed it to do, drive showroom traffic, give our dealers a competitive retail financing tool and create another touch point in the ownership life cycle.

Our marine components business also continued to progress during the quarter. While we are still in early innings, the operating systems and processes we put in place last year are now enabling us to move faster and engage more customers, and that's exactly what we are seeing with active external customer engagements to work through application engineering and quoting across our entire portfolio, including engines, trailers and flooring.

On operational excellence, we continue to leverage the MBI advantage to drive quality, efficiency and consistency across the business. Our centralized sourcing initiative is now meaningfully contributing to margin, consistent with what we communicated last quarter. As the higher cost inventory we discussed previously has worked its way through the P&L, the benefit of our sourcing work are showing up clearly in our results.

I also want to touch briefly on tariffs. The trade policy environment has continued to evolve, but our position remains consistent. We expect our total fiscal 2026 tariff exposure to fall within the range we communicated at the start of the year. Importantly, our expectation is that the Section 232 related impacts on our business will be de minimis.

Our vertically integrated U.S. manufacturing footprint, combined with the central sourcing capabilities we have built out, gives us meaningful flexibility to manage this environment. And with Saxdor now part of MBI, we have manufacturing capabilities on both sides of the Atlantic, which provides incremental flexibility as we think about serving customers in each region and managing evolving trade policy over time.

Let me now turn to Saxdor. We closed the acquisition on March 2, and we are thrilled to welcome the Saxdor team to MBI. The integration is progressing well, and our early experience has reinforced every element of the thesis we laid out on our acquisition call, particularly in today's consumer environment. Recall that Saxdor's customer demographic skews young, affluent and adventure orientated with an average household income of approximately $375,000.

That profile was a core part of our rationale for the acquisition, and it's proving even more relevant in the current macro. At the Palm Beach International Boat Show, Saxdor debuted the new 460 GTC flagship to exceptional customer response and our full planned production for the model this year is effectively spoken for. Importantly, that reflects a deliberate approach. We are pacing production of the 460 to protect the brand's premium positioning to ensure a world-class delivery experience for our customers and to scale thoughtfully in partnership with our dealer network.

The 400 GTS continues to perform well following its Miami debut, and our combined product pipeline remains robust. Beyond the product, we have made meaningful progress on integration planning since close. During our acquisition call, we discussed our ability to meaningfully expand Saxdor's North American manufacturing capacity by leveraging the existing Fort Pierce footprint, which operates today at approximately 65% utilization. That capability is a strategic unlock. It allows us to grow Saxdor's North American presence on our own time line without capital-intensive greenfield investment while simultaneously relieving demand pressure on Saxdor's European facilities in Finland and Poland.

Our focus in these first several months has been straightforward: protect what makes Saxdor special and begin laying the operational foundation for value creation opportunities we outlined like procurement scale, North American manufacturing utilization and extending our service platform across the combined customer base.

Looking ahead, our expectations for the broader marine industry remain largely unchanged. We are managing the business for the long term, guided by our priorities, protecting dealer health, maintaining operational discipline and driving innovation across the expanded global portfolio. With Saxdor now part of MBI, we have significantly broadened our runway for growth into new categories, new geographies and a younger consumer demographic that can compound for decades.

With that, I'll turn the call over to David for the detailed review of our financial results.

Thanks, Steve. Our third quarter results reflect strong execution across both our legacy business and 1 month's contribution from Saxdor following the March 2 close. Throughout my remarks, I will make select references to both consolidated results and legacy results, which exclude Saxdor, to provide a clear view of underlying sales drivers and year-over-year comparability.

Net sales increased 3.1% to $235.7 million, inclusive of $23.1 million from Saxdor. On a legacy basis, net sales were $212.6 million, exceeding our guidance range of $198 million to $202 million. Legacy unit volume decreased 17.1% to 1,187 units, primarily due to lower wholesale shipments consistent with our disciplined approach to channel management.

Saxdor contributed 66 units in its partial quarter contribution. From a mix perspective, on a legacy basis, Malibu and Axis represented approximately 46% of unit sales, Cobalt represented approximately 28% and saltwater Fishing represented the remaining 26%. Saxdor is being reported as a new fourth segment, and we intend to build upon this disclosure going forward.

Consolidated net sales per unit increased 12.1% to $179,000 on a legacy basis, driven by a favorable model mix across all segments and a favorable segment mix and year-over-year price increases. While not included in this metric for the sake of comparability, Saxdor had net sales per unit of $350,000 and is expected to drive net sales per unit higher in subsequent periods.

Turning to profitability. Gross profit decreased 9.7% to $41.3 million and gross margin as a percentage of sales was 17.5%. On a sequential basis, gross margin expanded 420 basis points from Q2, reflecting the tangible benefit of our centralized sourcing initiative as higher cost inventory worked through the P&L, along with improved segment mix and normalization of promotional activity. This is consistent with the trajectory we laid out on our last call.

On a year-over-year basis, gross margin compressed 250 basis points, driven primarily by fixed cost deleverage from lower legacy unit volumes and higher per unit material and labor costs across our legacy segments. Selling and marketing expenses increased 22.1% year-over-year to $8.3 million. The increase was driven primarily by higher personnel-related expenses, marketing events and incremental increase in selling and marketing expenses due to the new Saxdor segment. As a percentage of sales, selling and marketing expenses increased versus the prior year to 3.5%.

General and administrative expenses increased 60% or $11.9 million, driven primarily by $10.6 million of acquisition and integration-related expenses associated with the Saxdor transaction, which are excluded from adjusted EBITDA. Excluding those items, G&A was broadly in line with the prior year. Amortization expense was $3.1 million, which includes partial period impact of intangibles acquired in the transaction.

GAAP net loss for the quarter was $2.4 million compared to GAAP net income of $13.2 million in the prior year. The year-over-year decline is primarily explained by the acquisition and integrated-related expenses I just mentioned, along with lower legacy operating income. Adjusted EBITDA for the quarter was $22.7 million and adjusted EBITDA margin was 9.6%. Included in this consolidated results is approximately 1 month of Saxdor contribution or approximately $1.4 million of adjusted EBITDA since we closed the transaction on March 2.

Non-GAAP adjusted net income per share was $0.56 per share, calculated using a normalized C-corp tax rate of 22.1% and a basic weighted average share count of approximately 19 million shares. For a reconciliation of GAAP metrics to adjusted EBITDA, adjusted net income per share, please see the tables in our earnings release.

Turning to the balance sheet and cash flow. We ended the quarter with approximately $50 (sic) [ $50.2 ] million in cash and $165 million in long-term debt, reflecting the financing of the Saxdor acquisition. Pro forma leverage of approximately 1.5x net debt to trailing 12-month adjusted EBITDA remains well below our stated maximum target of 2.5x, preserving meaningful flexibility for continued investment and return of capital to shareholders.

We generated $16 million of free cash flow during Q3, inclusive of $5.9 million of capital expenditures. Looking ahead, we will continue to be thoughtful and opportunistic in our capital deployment, balancing investments for growth with actions that prioritize shareholder value. On capital allocation, our actions during the quarter demonstrated the discipline of our framework that we have talked about consistently. As partial consideration for the Saxdor acquisition, we issued roughly 1.5 million shares of Malibu stock priced using the 10-day volume-weighted average price of $30.98 per the deal terms. At closing, those shares were recorded at a GAAP fair value of $27.37, which you'll see reflected on our cash flow statement. During the same quarter, we repurchased approximately 492,000 shares at an average of $26.24, a discount to both figures I mentioned, partially offsetting the acquisition dilution at favorable prices. Our $70 million share repurchase authorization remains in effect with meaningful capacity going forward.

Before moving to our outlook, I wanted to briefly flag a few modeling considerations related to Saxdor that will be helpful as you think about the combined business going forward. First, Saxdor's quarterly revenue profile differs from our legacy business. Approximately half of Saxdor's revenue is generated in Europe, where the boating season and production cadence follow a different calendar than our North American operations.

Second, with Saxdor, we now have meaningful euro-denominated revenue for the first time, which introduces foreign currency translation exposure that did not previously exist in our reported results. Going forward, we expect to address FX impact in our quarterly commentary as relevant.

Third, we expect to continue calling out acquisition and integration-related expenses as adjustments to adjusted EBITDA through the course of our integration work, and we will continue to see modest margin impacts in the coming quarters from purchase accounting. Both of these items will be clearly identified so the underlying performance remains transparent.

Turning to our outlook for the full fiscal year. On a combined basis, legacy plus Saxdor, we expect full year fiscal 2026 net sales of approximately $880 million to $886 million and adjusted EBITDA of approximately $72 million to $74 million.

Let me walk through the components. On the legacy business, we are raising our full year net sales outlook to reflect Q3's outperformance, while our Q4 expectation on the legacy business is unchanged from the cadence we embedded in our prior annual framework. That brings full year legacy revenue to down slightly versus fiscal 2025, an improvement from the flat to down mid-single digits range we communicated previously. On the legacy adjusted EBITDA margin, we expect to finish towards the lower end of the previously communicated range of 8% to 9%. Q3 benefited from a more favorable mix tailwind that we expect to be less pronounced in Q4.

Shifting to fourth quarter. On the Saxdor business, we expect fourth quarter net sales of approximately $57 million to $59 million and adjusted EBITDA margin of 10% to 11%, a meaningful sequential step from Q3 and consistent with the near-term margin expectation we communicated when we announced the transaction. Note, Saxdor's Q3 margin reflected only 1 month of revenue against its full fixed cost structure, while Q4 is a full quarter that captures the peak of Saxdor's European sales season.

On a combined basis for Q4, we expect consolidated net sales of $261 million to $267 million and adjusted EBITDA of $29 million to $31 million or roughly 11% to 12% margin. Our intent is to return to a single consolidated outlook when we provide fiscal 2027 guidance in August. To close, we delivered a strong third quarter on both sides of the business. Our legacy operations exceeded expectations. Our centralized sourcing initiative is meaningfully contributing to margin as we planned, and we closed and began integrating a transformational acquisition while continuing to return capital at an attractive price. With healthier dealer inventories, a differentiated product portfolio and a strong balance sheet, we are well positioned to execute through the remainder of the fiscal 2026 and into fiscal 2027.

With that, I'd like to open the call up for questions.

[Operator Instructions] Your first question is from Joe Altobello with Raymond James.

This is Martin on for Joe. I kind of want to quickly touch on your guide for Saxdor next quarter. Trying to get an idea of how many units we can expect. Just trying to get an idea of what ASPs might look like for next quarter and next year as well.

Yes. This is David. I think we don't typically guide on ASP and volume. But if you look at our ASP for Saxdor for Q3, I think that would be a pretty good proxy and you should put it back into the volume expectation for Q4.

Great. And would you mind sort of touching on why you're trending toward the bottom range of the legacy EBITDA margin of 8% to 9%?

Yes. It's really just a function of the higher mix impact that we had in Q3 that we don't expect to continue into the following quarter. So it's really just a positive mix impact for that quarter.

Your next question is from Gerrick Johnson with Seaport Research Partners.

A couple of Saxdor questions here. First, on your comment about your shipments to Europe being different than they are to the North American market. So can you talk about the phasing between the quarters and how that is different?

Yes, Gerrick, it's still early on, but the way that I would characterize it is the back half of our fiscal year is heavier from the sales side than the first half with Q1 being the lowest on the sales side of things. So it's really a ramping into that back half of the year with it being about 60% of the revenue at that point in that quarter.

Okay. And then on Saxdor, there are about 5 models, I think, from 27 to 46 feet. Is there room for more models? Or is that a full portfolio for Saxdor?

No, Gerrick, I think we have -- we're pretty excited about the about the product plan that we have in place over the next 3 to 5 years. So we think there's a lot more opportunity in their model plan as we go forward. So pretty excited about it.

Your next question is from Jaime M. Katz with Morningstar.

There was a pretty good uptick in gross margin compression this quarter. So when we would expect that to maybe flatten out or turn positive given the cost initiatives that you guys have already undertaken.

Jaime, this is David. So I think if you're looking in the context on quarter-over-quarter or year-over-year, I think the way to think about it is sequential. So quarter-over-quarter, we're up 420 basis points versus the previous quarter. And so that really translates from the centralized sourcing initiatives that we've been talking about, plus the other cost savings actions that we've been taking across the business. So as you think about moving into Q4, I think you'll see sequential increase as well on a flow-through basis from those initiatives.

Okay. And then is there any insight you guys have to sort of what you expect for input cost inflation over the next couple of quarters? Just do you expect that to slow, maybe be a little bit easier to manage? Or are we looking at sort of levels of input cost growth that we've seen in recent quarters?

Yes. No, that's definitely an evolving topic. I think from the cost savings initiatives that we've taken, we're able to manage through all of those. Right now, we're not seeing significant uptick in input costs, but we are keeping our eye on it as things change in this geopolitical world we live in.

I'm not showing any further questions at this time. With that, we'll conclude today's conference call. Thank you for participating. You may now disconnect.

Good morning, and welcome to the Malibu Boats Conference Call. [Operator Instructions] Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Malibu Boats. And as a reminder, today's call is being recorded.

On the call today from management are Mr. Steve Menneto, Chief Executive Officer; and Mr. David Black, Chief Financial Officer. I will now turn the call over to Mr. Black to get us started. Please go ahead, sir.

Thank you, and good morning, everyone. Joining me on today's call to discuss the acquisition of Saxdor is our CEO, Steve Menneto. A question-and-answer session will follow our prepared remarks. A press release covering the transaction was issued earlier this morning, and a copy of that press release as well as the supplemental presentation to this transaction can be found in the Investor Relations section of the company's website.

I also want to remind everyone that the management's remarks on this call may contain certain forward-looking statements, including predictions, expectations, estimates and other information that may 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.

Factors that might affect future results are discussed in the press release covering the transaction, which contains information regarding our presentation of non-GAAP measures and our filings with the SEC, and we encourage you to review the press release and our SEC filings for a more detailed description of each of these risk factors.

I will now turn the call over to Steve.

Good morning, everyone, and thank you for joining us. Today marks a monumental milestone for MBI as we announced the acquisition of Saxdor Yachts, a strategic transaction that accelerates our build, innovate and grow strategy in a meaningful way. Our ambition is clear: to build the world's leading global recreational boating company, and today's announcement is a meaningful step toward that goal.

Before I dive into the details, let me frame why this moment is so significant. At our Investor Day in September, we laid out our bold vision for Malibu's future, one focused on becoming a global marine solution provider, not just simply a North American boat manufacturer, but an organization that serves customers across the full life cycle through our brands, our components business, our financing platform and our service infrastructure.

Saxdor is the first major step toward that global vision, and it's a great one. It meets the framework we laid out at our Investor Day and positions us to continue building from here while allowing us to maintain our commitment of returning capital to shareholders. Guided by our build, innovate and grow framework, we set a high bar for acquisitions and Saxdor Yachts clears it with industry-leading growth and a highly accretive margin profile.

What Saxdor's Founder and Chief Designer, Sakari Mattila, and his team have built over the past 5 years is remarkable. The products are world-class. The innovation engine is unlike anything else in our industry, and the bold brand resonates with a very attractive consumer demographic, one that is younger, affluent and adventure-orientated, who want performance, high-quality design and functional luxury at a competitive value.

Let me walk you through why this acquisition is so strategic for Malibu. First, Saxdor is one of the world's fastest-growing boat brands, disrupting the $2.5 billion adventure dayboat category, which we believe is one of the most dynamic segments in global recreational boating, growing at a 15% CAGR according to the data from SSI. This is a segment where we didn't have a presence, and now we are entering it with a category leader.

And this isn't a brand that's just riding a rising tide. Saxdor is redefining the category and dramatically outpacing the market and its segment. In the most recent calendar year 2025, Saxdor achieved year-over-year growth of approximately 65% with revenue of more than $210 million.

In the U.S. alone, Saxdor's registrations have grown 378% over the last 2 years versus approximately 15% for the broader adventure dayboat category. They've produced and delivered over 2,000 boats worldwide since founding in 2019 and are now producing more than 500 units annually across facilities in Finland and Poland. To achieve that growth and scale globally in the 5 short years is unprecedented in our industry.

The adventure dayboat segment represents exactly the kind of white space opportunity we've been talking about. It's an exciting, rapidly growing category that attracts a consumer looking for versatility in how they experience their boats.

Up to 40% of Saxdor's customers are first-time boat buyers, 48% are under the age of 44. Average household income is approximately $375,000. These are affluent consumers who are new to boating and are choosing Saxdor as their entry point into the lifestyle. Because these buyers are young and early in their boating life cycle, they represent a long runway for deepening customer relationships through service and subsequent purchases across our broader portfolio.

The compounding effect of the value is really attractive. These are customers we weren't reaching through our existing portfolio, and now we have a direct path to them. And think about where these customers are concentrated. North America is home to 2/3 of the world's high net worth adults and is the fastest-growing major wealth market globally. Yet it represents just 1/3 of Saxdor's geographical revenue mix today. That gap represents a significant growth opportunity for Saxdor, which we believe we can accelerate and capture.

And Saxdor has cracked the code on reaching these consumers. Their brand positioning is built around 3 pillars: exceptional design, performance and price. And their team has delivered a premium product that feels aspirational while maintaining competitive price points, thus creating a unique value proposition for this attractive consumer demographic.

Second, this acquisition expands and enhances our MBI portfolio in a way we've been working toward for some time. Saxdor fills the strategic gap between Cobalt's luxury sterndrive positioning and Pursuit's offshore capability.

Think about it this way. We now have a comprehensive offering from wake sports with Malibu and Axis to luxury runabouts with Cobalt to adventure boats with Saxdor to offshore fishing with Pursuit, Cobia and our Maverick Boat Group brands. Each brand has its own identity, its own consumer, its own use case. But together, they give us unmatched breadth across the segments and the consumer demographics that matter most in recreational boating. And importantly, Saxdor doesn't cannibalize any of our existing brands.

The adventure dayboat buyer is typically not cross-shopping a Cobalt or a Pursuit. These are different use cases, different water conditions, different purchase motivations. Cobalt is about luxury on the water. Pursuit is about serious offshore capability. Saxdor is about versatile design forward coastal exploration, day cruising, island hopping, social boating. It's additive in the truest sense and extends our consumer reach into saltwater lifestyle use cases in international markets where our legacy brands have had limited penetration to date.

Third, this transaction creates a global distribution platform that neither company could build on its own. Let me walk you through both sides of that. Starting internationally, Saxdor distributes through a dedicated network of over 100 dealers across 5 continents in more than 50 countries.

Europe represents approximately 50% of their revenue today. For context, Europe is less than 5% of our current business. We've talked at prior Investor Days about our ambition to become a truly global marine company, but we didn't have the infrastructure to do it. Now we do.

Saxdor gives us the established dealer relationships, brand credibility and manufacturing footprint in the European market. And over time, we see a clear path to introduce Cobalt and Pursuit in markets where those brands have had virtually no presence. That's an opportunity we're very excited about.

Turning to North America. Since its U.S. launch in 2022, Saxdor has built a meaningful momentum here, but North America only represents approximately 1/3 of their business today. We see a long runway for growth given the favorable demographic backdrop and this consumers' demonstrated propensity to invest in experiences. We'll be thoughtful and disciplined about how we approach that expansion. We want to protect the brand's premium positioning and ensure our dealer partners are set up for success.

From an operational perspective, we see multiple value creation opportunities through what we call the MBI Advantage. We'll drive incremental value and operating efficiencies through procurement scale. Remember, we've been building our centralized sourcing capabilities and category management expertise and Saxdor's significant annual spend across propulsion, marine electronics, harnesses and raw materials creates immediate opportunities to leverage that infrastructure.

We'll expand vertical integration through marine components, where the addition of Saxdor's volume strengthens the rationale for continued investments in capabilities like fiberglass parts, electrical, upholstery and harnesses. And importantly, we have an opportunity to meaningfully increase our North American manufacturing utilization.

Our facility in Fort Pierce today operates at approximately 65% utilization across 530,000 square feet. We believe we can produce well north of 100 Saxdor units annually in that facility, leveraging existing capacity, existing labor and existing infrastructure with no significant incremental capital investment.

That does 3 things for us. It improves our fixed cost absorption. It reduces Saxdor's exposure to the complexity of tariff policies, transatlantic shipping costs and currency fluctuation. And over time, it positions us to serve North American customers with shorter lead times and a more responsive supply chain.

Meanwhile, Saxdor's European facilities in Finland and Poland will benefit from a rebalancing of our combined global manufacturing network, creating incremental capacity in their home markets and allowing for continued growth of the European and international markets.

Beyond manufacturing and procurement, over time, we also expect to extend MBI acceptance and our dealer service capabilities to Saxdor's growing customer base. This is an important part of our thesis. Every lever we add beyond boat building makes the combined organizations more diversified, more durable across market cycles and more valuable on a per customer basis. That's the holistic marine solutions model we've been building towards.

The innovation story here is equally compelling. Saxdor has pioneered modular boat design that allows for customization at scale, something we've been working toward across our portfolio. Their twin-step lightweight hull design optimizes for coastal durability while delivering best-in-class speed and fuel efficiency and their design philosophy of functional luxury aligns perfectly with where we see the market heading. Young, high net worth consumers want boats that look amazing, but are also incredibly versatile in how they can be used.

Beyond the product itself, Saxdor is a digital-first organization and has developed an AI-powered customer experience platform that guides buyers from a virtual showroom through purchase, delivery and ongoing ownership. They recently became the first boat builder outside the U.S. to integrate the Fathom e-power system, an intelligent lithium-ion auxiliary power management solution built into the Mercury outboard engines.

And their pace of product development is among the fastest in the industry, 8 model platforms in 5 years with additional models already in the pipeline. That combination of design, innovation and technology leadership is something we believe can benefit our broader organization over time.

Supporting this effort is the Saxdor operating team that is expected to maintain their brand identity and operational autonomy as a subsidiary of MBI. Sakari Mattila, who has founded 5 boat brands over a nearly 5-decade career and is recognized as a pioneer of the adventure dayboat category, and the existing management and operating teams are joining Malibu to ensure continuity and continue driving the brand's innovation and growth agenda. This is a lean entrepreneurial group of professionals that fits well within our decentralized brand structure and retaining them was a priority throughout this process.

I want to emphasize something important. This transaction demonstrates our disciplined approach to capital allocation. We're building for the long term while continuing to return capital to our shareholders. Those priorities are not mutually exclusive. We've structured this deal in a way that allows us to accelerate our global growth strategy while maintaining our commitment to shareholders through our recently expanded $70 million share repurchase program.

With Saxdor, we are taking a major step towards our vision of becoming a global marine solutions provider, one with the brands, the manufacturing scale, the solutions platform and now the international reach to serve customers across their full life cycle. We believe we are creating a more resilient model that generates value across market cycles, not just when the tide is rising.

We've said consistently that we're positioning this company for when the market returns to mid-cycle levels. And having Saxdor in the portfolio as that recovery takes shape means we capture growth not just from the broader market, but from new segments, new geographies and a younger consumer franchise that can compound for decades.

With that, let me turn it over to David, and he'll walk you through the financial details.

Thanks, Steve. We acquired Saxdor Yachts for approximately EUR 150 million or USD 175 million, paid through a combination of EUR 110 million in cash and newly issued shares of Malibu common stock having approximately value of EUR 40 million. That represents an unsynergized valuation of approximately 7.2x Saxdor's adjusted EBITDA for the 12 months ended March 2026, which is a multiple we believe reflects our investment discipline given the growth profile of this business and where we are in the cycle.

Additionally, Saxdor shareholders may earn up to EUR 72 million or USD 84 million in additional consideration tied to the operating and financial growth targets across calendar years 2026, 2027 and 2028. The earn-out structure aligns incentives, ensures the team that builds the business remains focused on its continued growth and profitability.

From a financial perspective, as Steve mentioned, this transaction fits the framework laid out in our September Investor Day. Saxdor's growth engine is extremely attractive. Revenue grew approximately 65% in calendar 2025 and the business is expected to generate revenue of USD 225 million to USD 235 million and adjusted EBITDA margins of 10% to 11% for the 12 months ended March 31, 2026. To put that into perspective, the adventure dayboat segment grew roughly 15% over the same period despite the broader boating industry experiencing cyclical softness.

Europe represents 50% of their revenue with North America at 33% and the balance from other international markets where they are building presence. That geographical diversity is a meaningful addition to our revenue mix and provides multiple vectors for growth independent of any market cycle.

Saxdor's expanding profit margins will be immediately accretive to our adjusted EBITDA margin profile and will accelerate the long-term margin expansion trajectory we have outlined for investors. The transaction is expected to be also highly accretive to EPS in the first full year of ownership ending June 30, 2027.

In terms of outlook, we are reaffirming our existing fiscal third quarter guidance as well as our full year fiscal 2026 guidance for the legacy MBI business. Importantly, these expectations do not reflect any assumption for M&A activity, including today's announcement.

While we aren't in a position to provide specific forward guidance for the Saxdor business at this time, we can tell you that Saxdor has a powerful product pipeline that we aim to build upon, which we expect to support the strong double-digit growth rates in the near term and outperform the recent category growth rate of 15% that we spoke to today.

We also expect Saxdor's operating margins to expand further as the business continues to scale and we implement our MBI Advantage operating framework. We look forward to providing you with additional details during our next quarterly update in May.

Our balance sheet remains strong. Pro forma leverage stands at approximately 1.5x net debt to LTM December 2025 adjusted EBITDA, well below our stated maximum target of 2.5x. And we believe the strong cash flow profile of the combined company preserves flexibility for future opportunities, and we continue to return capital to our shareholders.

Our $70 million share repurchase program, which we expanded in December 2025, remains fully in effect. As a reminder, we repurchased approximately $20.8 million in shares during the fiscal second quarter alone.

In summary, we expect this deal to be highly accretive to EPS in year 1 while keeping leverage conservative and continuing our commitment to returning capital. And longer term, Saxdor broadens our customer reach and gives us multiple operational levers to drive value. We're confident this transaction fits the financial framework we've communicated and supports meaningful long-term shareholder value.

Before we open the call up for questions, given the timing and nature of today's call, we ask that you limit your questions to the transaction and its strategic and financial implications. We'll address any questions related to our stand-alone quarterly performance on the next scheduled earnings call.

With that, operator, please open the call up for questions.

[Operator Instructions] Our first question today will come from Craig Kennison of Baird.

I wanted to, I guess, understand the manufacturing footprint and the implications for tariffs. I think you're primarily building these boats in Europe. But to the extent you have success in the U.S. and want to ship those products here, what is the tariff regime that we should contemplate? And then to what extent could you build these boats in the United States if it were to grow?

Craig, I'll take the manufacturing. David, you can talk about tariffs. They build currently in Elk, Poland and in Larsmo, Finland. So -- and they're shipping into the U.S. from there. So as we said in our prepared remarks, we can -- we have the capacity to build those here in Fort Pierce.

Our manufacturing teams have reviewed that. It's a boat that we can build. And that would help us tremendously, like we said, in servicing the market, servicing our main dealer here. And we're looking forward to being able to do that in the future as we work out with the logistics and planning for that.

As far as tariffs go, David, you can handle that.

Yes. And maybe just adding to that, having manufacturing on both sides of the Atlantic gives us real flexibility regardless of what happens with trade policy. And so as we think about this on a go-forward basis, European production could serve the European and international markets. And that's a natural hedge.

Over time, I think this dual continent manufacturing footprint reduces our exposure to any single trade policy regime. And as we think about tariffs, the current tariff environment is already contemplated in our underwriting and integration planning. So this isn't a super surprise, and it's something we've explicitly planned for.

That's very helpful. And then if I look at Malibu adjusted EBIT margin historically, it's been in that high teens range, even above 20% for several years before this correction phase. Does this transaction have that potential as well? Is there any cyclical juice in the margin here?

Yes. Craig, I'll take that one. So their current margin profile benefits from a lean and efficient operating model, but we do expect their EBITDA margin for the next 12 months to be in the range of 10% to 11%. But going forward, we expect their margins will continue to expand as further business continues to scale and they introduce new and larger boat models. So we think that there is a runway to a higher margin profile. We're just not ready to kind of talk about that on a forward-looking basis yet.

Our next question today will come from Gregory Miller of Truist Securities.

I'd like to ask about the labor model, the labor availability for the plants in Finland and Poland and just if you could compare that against the United States.

Sure. In both locations, marine building is actually a very prominent type of work in those cities and the greater areas there. So there are skilled labors here that work on the Saxdor business as well as other brands in the marine space. So there is available labor. It's well-trained labor, similar to what you see in Eastern Tennessee. So we like that. It mirrors what we're used to seeing in our own legacy business. It has a similar characteristics as that, Greg.

And I'd like to ask about just the timing of the deal. How long has this been in the works, if you could say? Or has this been considered for some time? Have you looked at some of their competitors in the adventure boating space?

Yes. We -- like anything in our -- we've talked about at Investor Day and our M&A efforts, we have a -- we cast a wide net. We continue to work the funnel in our M&A structure. So we've been always looking at opportunities across the world to fulfill our strategy. This is one of them.

So in terms of how long we've been doing it, it's what we do every day. And this is clearly one that rose to the top that made sense for our business, and we looked at as an accretive opportunity. So we're going to continue to do that post this deal. We're going to have the same discipline of our capital allocation structure, continue to monitor more M&A activity and make sure that we remain disciplined as we run that play. So we feel good about this one.

The next question today will come from Jaime Katz of Morningstar.

I hope you guys can give us a little bit of insight as to why you decided to partially finance this with equity rather than debt given where the share price is right now. And then as we think about what the shares look like at year-end, does the potential for share buybacks imply that you should have flattish shares outstanding at fiscal year-end?

Yes. I mean I think when we look at the mix of consideration, we feel like it was the good balance between kind of using our balance sheet and giving a little bit of upside, right, for those in the business that will stay with the operations.

And as we talk about on a go-forward basis, we'll continue to consider share repurchases as part of our capital allocation priorities. And we -- at 1.5x from a leverage perspective, we'll have the capacity to do that. So not ready to talk about kind of share counts as we get into kind of year-end, but it is going to be one of our considerations as we continue to move forward there.

Okay. And then as you put this into your P&L, what segment are you guys putting this in? I'm just trying to think about how to model it the right way and what that means for ASPs? Because I think when you look at the 2,000 roughly boats that they make every year and the projected revenue, we're looking at $115,000 unit average. So I just want to make sure I'm modeling that out right.

Yes. I think as we think about segment reporting, [ Kraken ] will be just a month into our Q3 and 4 months into our Q4. So we're evaluating the right segment reporting structure. Most likely, it rolls into potentially one of our current segments. But either way, we'll be sure to provide transparency so that you understand kind of how this should be modeled on a go-forward basis.

The next question will come from [ Mike Albanese ] at [indiscernible].

Obviously, some nice growth rates here. I think 50% of the business in Europe. So I was wondering if you could just comment on some of the demand trends you're seeing specifically in the North American markets for this type of category, the Scandinavian stay boats. I think there's a couple of other brands out there that have kind of been greenfielded as of late. So I'm just curious what you're seeing in the North American market versus Europe where it's -- the demand has been, I don't know, around longer.

Yes. Mike, like we said, Saxdor has about 33% of their volume here in the States. They run through MarineMax, a really great dealer who's doing a lot for the brand there. Registration has been up 378% over the last 2 years in the U.S. So when you look at the growth it's having here, we're just getting up to speed, keep in mind that everything has to get shipped over. So that's where we think working with our dealer partners that we start manufacturing boats over here, we can accelerate some of that share gain and get that growth up to what they're seeing outside of the U.S. right now.

Our next question today will come from Anna Glaessgen of B. Riley.

I guess I'd like to touch on the expectation for U.S. expansion. I guess, to what extent do you expect to leverage the current dealer base that you have in the U.S. with your legacy brands? And is there anything structural that would prevent expansion into the majority of your existing dealer network?

Yes. We're going to go through and evaluate that as we go forward. We have a partner already, like I said, in MarineMax. We're working with them on, as we go forward, what's our plan, how are we going to structure it and so on. These are bigger boats. It's kind of similar to the saltwater business where you have to have -- dealers have to have the infrastructure to be able to handle bigger boats and so on.

So we're going to take a little bit of time here to make sure that we map that out correctly. And basically, our first opportunity is working with MarineMax as we go forward and seeing how we can maximize the support they need to grow the brand and really drive share in the U.S. market.

Great. And then I'd love your perspective, they do really well with the first-time boat buyer. Maybe what is drawing -- attracting the first-time buyer to that category and that brand specifically? And as you think longer term about the replacement cycle, would you expect them to stay within the category or potentially cross shop to your other brands?

Yes. I think the thing that draws first-time buyers, as we said, is the design structures of the boat, the versatility of the boat. The Saxdor team has been talking about it's like a living room on water, which allows it to be a really fun, relaxing, versatile boat. I think that's what attracts a lot of the people, the styling and so forth.

As we go -- as we start to expand offerings and our current MBI legacy business, we think we have a pretty nice mix to offer consumers across the board, be it Saxdor, Cobalt, Pursuit, all the other Malibus, all the other products that we sell, brands that we sell. I think it lends itself for the right opportunities to grow our business here in the U.S. as well as globally, and that's why we're pretty excited about it.

But that design that Sakari really has driven allows us to also look at our current models that we have in our legacy brands and start to look at how do we design boats more versatilely, how do we design boats a little edgier and so on. So we'll see where our future goes, but we're pretty excited about it.

Our next question will come from Noah Zatzkin of KeyBanc.

I guess on the international front, you mentioned, I guess, capacity being opened up in Europe via making Saxdor's in the U.S. And then I think you also touched on the fact that about 5% of the legacy business is international. So could this be an opportunity to expand the legacy brands internationally? And I guess, relatedly, how are you thinking about your approach to international and the unlocks that this deal gives you?

Yes. As we said, Noah, we do think that's an opportunity for us in multiple ways. On the international side, like we said, if we can relieve a little stress in the factories right now in Poland and Finland, that allows us to continue to increase volume. Right now, they're constrained in that manner. So moving Saxdor over to the U.S., that will be extremely helpful and help us, like we said, in our plants when we're currently running at 65% down at Fort Pierce. So that's the obvious one.

The next one we got to work on is how do we take our brands in the U.S. over to Europe, where does it make sense to build them in the future, what's the capacity need to build them in the future, what's all the brand work, sales work, dealer work that needs to happen for those brands. That's what we're excited about.

The infrastructure is already there, and we have to just make sure that we land the right plan, execute sharply and really drive that growth internationally with our current legacy brands. So we're excited about that. That's going to take a lot of work, but it's a great opportunity for us to unlock volume globally for the Cobalts, Pursuits, Malibus and MBG brands. And a lot of work in front of us, but pretty excited about the opportunities.

Our next question today will come from Griffin Bryan of D.A. Davidson.

Can you provide a little bit more color on the additional earn-out consideration of $84 million over '26 through '28? What do those operating, financial targets look like? And how would that additional capital be paid out?

This is David. We negotiated the flexibility to pay a portion of the earn-outs in either shares or stock, but we would expect to use cash depending on the balance sheet capacity and capital allocation priorities.

And so we feel like with the way that we structured this, it's designed to retain and incentivize the management that's created this great business. And so we would be -- and the one thing I want to be clear about is we would be very happy to make those future earn-out payments. This becomes an even better economic outcome for MBI and our shareholders if Saxdor is hitting those performance targets.

Got it. And then are there any synergies that you're seeing here related to SG&A costs specifically?

Yes. I think from a synergy perspective, we're not thinking of this in the context of taking cost out of the business. I think we're thinking more from kind of opportunities from a manufacturing and operational perspective. For example, Kraken spends about $100 million in, call it, propulsion and other raw materials goods.

And as we've been talking about with our centralized sourcing strategic initiatives, we think that's a real opportunity as we go forward. We're not going to provide specific synergy targets today, but we think that those opportunities are real, and we look forward to talk about them in the future.

Our next question today will come from Gerrick Johnson of Seaport Research Partners.

Of the 65% growth this past fiscal year, what -- how much of that came from the U.S. market?

How much of that came from the U.S. market? They were up -- I don't know the exact percent, David, but right now, 1/3 of it, I would say, by natural numbers, Gerrick, because that's what the volume that they've been doing. They've also done a lot more of the latest boat offerings that they just came to market with, with the 400 and the 460. They have not gotten to the States yet.

So we've seen more kind of -- so it plays out that 2/3 Europe, 1/3 U.S. in that growth rate because some of those boats also haven't gotten here yet. So we just announced the 400 GTS at Miami and then the 460 will be debuted at PBIBS. So those boats are yet to hit the market. So more to come in the growth in the U.S.

Okay. So the 65% growth was evenly split between international and U.S., I could think of it that way.

Correct. Yes.

Okay. Now if you were to transition manufacturing to the United States to Fort Pierce, how long would that take?

Haven't laid out the plans in that. But when we look at building normal line, that we've gone through, that's a big undertaking that's normally within a 12-month period. So give or take, as we learn this boat and so forth, those are the larger boats that would come across as well. We have that capacity and that capability. We know how to do that.

So we got to work out all the details. But normally, when you put up a normal line, it's usually a 12-month getting it all right, getting it laid out, doing your prototype builds and so on. So we would go with what we're normally used to and see how we adjust from there with the new Saxdor boats.

Okay. And then distribution in the United States, are you exclusive to MarineMax?

As we stand right now, we are exclusive to MarineMax.

And how long does that last for?

I'm not sure what the contract is on that one there, but we're working with MarineMax on what opportunities they see and what they want to do and how do we work together and how do we support -- how does MBI support them. So more to come on that one.

Okay. I'm not sure if I'm the last on Q&A here, but I'm going to throw one more in there. First-time buyers with income over $300,000, I mean, realistically, how big is that market?

Globally, I think it's a growing market. For us, it's an opportunity. We just got to make sure that we're hitting all the geographies and maximizing that. So we continue to look at where we can penetrate those types of buyers. And what's nice about this opportunity is we no longer just have to focus on the U.S. We can focus on global growth and find those buyers and be able to market to them and drive the excitement with our boats into their lifestyle. So we're pretty excited about it and continue to work on it.

This will conclude our question-and-answer session and also conclude the Malibu Boats conference call. We thank you for attending today's presentation, and you may now disconnect your lines.

Good morning, and welcome to Malibu Boats conference call to discuss second quarter 2026 results. [Operator Instructions] Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Malibu Boats. As a reminder, today's call is being recorded. On the call today from management are Mr. Steve Menneto, Chief Executive Officer; and Mr. David Black, Chief Financial Officer.

I will now turn the call over to Mr. Black to get it started. Please go ahead, sir.

Thank you, and good morning, everyone. Joining me on today's call is our CEO, Steve Menneto. On the call, Steve will provide commentary on the business, and I will discuss our second quarter of fiscal year 2026 financials. We will then open up the call for questions. A press release covering the company's fiscal second quarter 2026 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 and 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.

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 each 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 net loss income per share. Reconciliations of these GAAP financial measures to non-GAAP financial measures are included in our earnings release. Finally, during today's prepared remarks, comparisons are to Q2 of fiscal 2025, unless otherwise noted.

I will now turn the call over to Steve.

Thank you, David, and good morning, everyone. Before I get into the business update, I want to take a moment to formally introduce David Black as our Chief Financial Officer, on his first earnings call in that role. As many of you know, David was appointed CFO in November of last year after serving in several key financial leadership roles with Malibu Boats. David has already played an instrumental part in our financial organization and strategic planning, and he's been deeply involved in shaping the financial priorities that support our long-term growth and disciplined capital allocation approach. I'm confident you'll appreciate his insights as he walks through the quarter and our outlook shortly. I'm pleased to have him alongside as we continue to execute our strategy and drive shareholder value.

Now turning to the quarter. We are pleased to report solid second quarter results as we enter the early boat show season. Net sales of $188.6 million came in ahead of our expectations despite what remains a continued challenging retail environment, and adjusted EBITDA margin was in line with our plan. While the retail environment is tracking as expected through the first 2 quarters of the year, our Malibu year-end sales event was successful and outperformed the prior year, serving as an effective tool to drive December retail activity.

The promotional environment remains competitive. But during both the sales event and the early boat shows, we were encouraged by the strong customer response for our new model year boats and the continued momentum across our brands. Looking ahead, we're excited to debut 2 additional model introductions at the Miami International Boat Show next week, where we will unveil the new Pursuit 286 and the Pathfinder 2800. We look forward to connecting with many of you there and showcasing our differentiated state-of-the-art products.

Underscoring that differentiation, the Malibu 23 LSV is once again recognized by WakeWorld's Riders Choice Award (sic) [ WakeWorld Riders Choice Awards ] as Surf Boat of the Year, marking the sixth consecutive year we have received this honor. This recognition reflects our long track record of delivering performance, quality and innovation and reinforces our leadership position in the towboat segment. Customer-driven innovation remains central to our strategy and deeply embedded in how we operate.

Regardless of the market environment, we continue to invest in our people, our partnerships and our capabilities to push the pace of innovation and to elevate the entire ownership experience. Guided by our build, innovate and grow framework, we are focused on putting the boater at the center of everything we do from performance, safety and personalization on the water to technology, connectivity and support throughout the ownership life cycle. While much of this work happens behind the scenes, we are laying the foundation for future product introductions and expanded partnerships that we believe will further differentiate our brands, strengthen our dealer network and position us to capture share and drive long-term value as the market normalizes.

Turning to our dealers. We continue to work in close partnership with them as we navigate the current market environment, guided by our established playbook of prioritizing dealer health and tightly managing channel inventories. We are encouraged by the healthy and current inventory position of our model year '26 boats, which are presenting well across our dealer network. While the broader industry continues to work through a modest overhang on noncurrent inventory, this disciplined approach allows us to introduce new products with confidence, support our dealers in meeting retail demand and position ourselves to capture share as the market stabilizes.

In addition, our dealers continue to be encouraged by the early traction we are seeing with MBI acceptance as we work closely with our financing partners to thoughtfully roll out this tool across our network. Program provides a competitive retail financing option, including rates as low as 3.99% and gives dealers another effective way to engage customers and close sales. What began as a pilot within our Malibu and Axis brands is gaining momentum as we expand the program across our broader portfolio.

We are also continuing to build OEM to OEM relationships through our newly announced marine components business, which represents a natural extension of our vertically integrated business model. Our initial focus has been on putting the right business systems and processes in place. And as the foundation comes together, we are beginning to see early traction with our soft grip flooring and trailer offerings, including engagement with 2 new customers, which provides an early proof point of adoption. While these initiatives remain in the early stages, we are focused on applying these learnings to further strengthen our capabilities, refine our approach and thoughtfully expand this platform over time.

We will provide updates as these efforts progress. Finally, I want to touch on our operational excellence and continuous improvement initiatives, which remain a hallmark of our organization regardless of the market environment. We continue to leverage the MBI Advantage to drive quality, efficiency and consistency across the business. During the quarter, we made further progress on our centralized sourcing initiatives, where we are seeing benefits across our brands as we leverage our scale to improve supply chain management, lower direct costs and enhance quality controls.

These efforts ultimately support a better customer experience and position us well to mitigate potential tariff impacts as we look to minimize price increases passed on to the consumer. Looking ahead, our expectations for the broader marine industry remain unchanged. We will continue to monitor signals for broader market recovery and manage the business guided by our priorities: protecting dealer health, maintaining operational discipline and driving innovation.

With that, I'll turn the call over to David for a detailed review of our financial results.

Thanks, Steve. Our results in the second quarter were slightly above our expectations. Net sales decreased 5.8% to $188.6 million and unit volume decreased 9.5% to 1,106 units. The decrease in net sales was driven primarily by decreased unit volumes across all segments, resulting primarily from lower wholesale shipments and driven by unfavorable segment mix and unfavorable model mix in our Malibu segment, partially offset by a favorable model mix in our Cobalt and Saltwater Fishing segments and inflation-driven year-over-year price increases.

From a mix perspective, Malibu and Axis represented approximately 46.4% of unit sales, Saltwater Fishing represented 25.5% and Cobalt made up the remaining 28.1%. Consolidated net sales per unit increased 4.1% to $170,544 per unit. The increase in overall consolidated net sales per unit was driven primarily by a favorable model mix in our Cobalt and Saltwater Fishing segments and inflation-driven year-over-year price increases, partially offset by an unfavorable model mix in our Malibu segment and an unfavorable segment mix overall. We expect segment mix to remain unfavorable, pressuring ASPs throughout the fiscal year. This is primarily driven by a challenging year-over-year comparison influenced by timing of production cuts across segments and the ongoing seasonal segment mix shift.

Turning to profitability. Gross profit decreased 32.9% to $25.1 million and gross margin as a percentage of sales was 13.3%. This represents a decrease of 540 basis points compared to the prior year period. The decrease in gross margin was driven primarily by fixed cost deleverage across all segments due to lower sales and higher per unit labor and material costs across all segments. Selling and marketing expenses increased 1.4% year-over-year, driven primarily by higher personnel-related expenses. As a percentage of sales, selling and marketing expenses increased 20 basis points to 3.2%.

General and administrative expenses decreased 21.5% or $5.7 million. The decrease was driven primarily by a decrease in legal fees, incentive pay and stock-based compensation expense. As a percentage of sales, G&A expenses were 11%, which represents a 230 basis point decline versus the prior year. GAAP net loss for the quarter was $2.5 million compared to GAAP net income of $2.4 million in the prior year. Adjusted EBITDA for the quarter decreased 52.5% to $8 million and adjusted EBITDA margin decreased to 4.3% from 8.4% in the prior year.

Non-GAAP adjusted net loss per share was $0.02 compared to adjusted net income of $0.32 per share in the prior year. This is calculated using a normalized C-Corp tax rate of 24.5% and a basic weighted average share count of approximately 19.1 million shares. For a reconciliation of GAAP metrics to adjusted EBITDA and adjusted net loss income per share, please see the tables in our earnings release.

Turning our attention to cash flow. We generated $8.4 million of free cash flow during Q2, inclusive of $4.4 million of capital expenditures. During the quarter, we expanded our share repurchase program to $70 million, reflecting our Board's confidence in our long-term strategy, strong financial position and commitment to disciplined capital allocation. Consistent with that approach, we completed $20.8 million of share repurchases, representing 751,000 shares repurchased during the quarter, taking advantage of what we viewed as an attractive market conditions. We believe this was prudent use of capital alongside our ongoing investments in the business. Looking ahead, we will continue to be thoughtful and opportunistic in our capital deployment, balancing investments for growth with actions that prioritize shareholder value.

Turning to our outlook for the full fiscal year. Our markets are performing as expected, and our view has not changed. We continue to anchor our outlook with the expectation that our markets will decline in the range of mid- to high single digits for our fiscal year. With that said, for the full fiscal year, we expect sales to be flat to down mid-single digits year-over-year. For Q3, we expect net sales to be in the range of $198 million to $202 million. We anticipate consolidated adjusted EBITDA margin for the full fiscal year to be in the range of 8% to 9%.

As we mentioned last quarter, this guidance incorporates a modest direct impact to our fiscal 2026 cost structure due to tariffs, which we continue to estimate between 1.5% and 3% of cost of sales, assuming the current tariff rates. For Q3, we expect adjusted EBITDA margins of approximately 8.5%. To close, we have delivered year-to-date results consistent with our expectations. Retail trends are tracking with our outlook for the year.

And with dealer inventories in a healthy position, we are well positioned to execute through the back half of the fiscal year. We are closely monitoring market conditions. And if demand improves, we have the capacity and operational flexibility to scale production in line with retail. In the meantime, our business model remains resilient, and we continue to generate positive free cash flow despite a softer market. Our focus remains on disciplined execution, operational excellence and the prudent deployment of capital to drive long-term value for our shareholders.

With that, I'd like to open the call up for questions.

[Operator Instructions] The first question comes from Joe Altobello with Raymond James.

This is Martin on for Joe. I was wondering if you can quantify how much the higher boat show expenses weighed on EBITDA margin, whether that's year-over-year or quarter-over-quarter?

Yes. When we think about the year-over-year promo related to year-end sales event and kind of the normal cadence for Q2, it's about 50 bps of cost pressure that we saw for the quarter.

Great. That's quite helpful. And you kind of mentioned a little bit about inventories. It sounds like the industry has a little bit of an overhang, but you're a little bit better off. Can we get an idea about the delta between your inventories and kind of what's going on in the industry?

Yes. I think the industry as a whole is in a healthy position. There are pockets as usual, of kind of elevated weeks on hand. But from our perspective, we've done the appropriate thing to address those, and we feel good about kind of where our weeks on hand are from a historical perspective.

The next question comes from Mike Albanese with Benchmark.

Just was wondering if you could maybe elaborate, I know it's early, but I believe you wanted to get the MBI Acceptance program rolled out for the boat shows. Could you just talk about any incremental lift you're getting there or whether you're seeing that translate to improved conversion? Or is it just too early to tell?

It's early. No question. It's early. We just got out in our other brands. But we did see a couple of the boat shows a higher take rate on our 3.99%. So it's encouraging. So not enough to make a trend and start reporting trends and so forth, but early feedback from our dealers was very positive from a driving traffic to the booths at [ this early ] boat shows as well as it did help close handful.

Awesome. And then if I could just kind of ask the same question regarding your initiatives on the centralized sourcing. If you could just kind of elaborate on maybe any cost savings you're getting out of that thus far?

Yes. No. And if you look at our guide and what that implies from a margin growth on the back portion of the year, the way we're thinking about that, a big portion of that is going to come from the centralized sourcing efforts that we've undertaken, as you indicated. We're starting to see that hit the P&L, and we expect that to continue on the back portion of the year. So we think there's a meaningful benefit to be seen as we move through the remainder of this fiscal year and then beyond.

The next question comes from Kevin Condon with Baird.

I wanted to ask if you've seen any shift or sense any change in dealer sentiment amongst your dealer group just as we get a few boat shows in 2026? And just any shift in terms of attitude towards taking on inventory ahead of the season?

See, the feedback from the dealers has been as we've been seeing all along. In mixed retail, there have been shows that have been positive, other shows that have been a little weaker. But overall, it's been a positive trend. It has resulted in additional orders, of course, because we do sell some custom boats and so on. So again, we're happy about where the boat shows are going. It's meeting our expectations. And we have a lot more in front of us. So more to come as we get to the early part of the season here and of course, Miami next week. So we're encouraged. And that's why like we talked about in our prepared remarks, we have our guidance unchanged.

And then apologies if this was a metric you gave last quarter or not. But in terms of the guide, is there a thought about keeping inventory flat or taking boats out of the channel just as you look like end of fiscal year to end of fiscal year?

Yes. No, I think just given the fact that we expect the market to decline, you would expect there to be some level of destocking. That being said, as we move through the back portion of this year, we expect that to stabilize. And to the extent that the market continues on that trend from a positivity perspective, then we have the chance to begin matching retail with wholesale. But we do imply some level of destocking for this fiscal year.

The next question comes from Brandon Roll� with Loop Capital.

Just on the higher labor costs, could you talk about your outlook for labor costs moving forward? And if you see if there's any material relief as well on that side?

Yes. I think we're always focused on operational effectiveness and excellence. And so we expect as we move through the remainder of the year, not only from a labor per unit cost, but from the centralized sourcing efforts that we talked about, we'll start seeing those benefits flow through into margin into those quarters.

Okay. Great. And just on the competitive landscape, just in terms of the ski/wake category as a whole, are you seeing any bounce back for the category versus the broader industry? And is there anything that you feel like you could do as an OEM to get people reinvigorated in the category?

We're still seeing more of the same. And as far as what we can [Technical Difficulty], there is a lot of effort amongst what we're executing at Malibu and Axis and then also our competitive groups [ that are ] on ski/wake -- in segment. We're all trying to continue to push growth in the segment or get back to growth in the segment. And we'll continue those efforts on our own and as we work together in some of our marine groups that we team up [Technical Difficulty] and execute those efforts.

The next question comes from Jaime Katz with Morningstar.

I guess when I look at the third quarter EBITDA margin guidance of 8.5%, it looks like it implies the fourth quarter is going to have some pretty significant EBITDA margin expansion. And I understand that there are these sourcing benefits that you're getting and gains from MBI maybe that go into that. But what gives you guys, I guess, confidence that you can extract that much operating leverage out of the business when the industry is still sort of flattish?

Yes, Jaime, this is David. So I think I break it into 3 different buckets from a lever perspective. So the biggest portion of that, we expect sequential growth on top line. And so as we move through Q3 and Q4, we expect to get fixed cost leverage benefit. And then the centralized sourcing, we've been working on that since Steve started here, and we're seeing some pretty significant benefits, but they haven't made their way into the P&L yet.

And so we're working through that higher cost inventory, and we expect that to be a big driver in the back portion of the year. And then obviously, as inventory stabilize, we expect promotional dollars to decrease as well. So I think those 3 things collectively together are the main drivers from a margin growth perspective in the back portion of the year.

Yes. I think it sounds like the promotions were not mentioned as problematic in the last quarter. So is there anything that you guys have seen in the cadence of promotions that's noteworthy?

No. Actually, as we think about it, this is more of a return to normal. We had a more successful year-end sales event than what we were anticipating, and that kind of drove some of that promotional dollars. But as we move into the back portion of the year, if you look back pre-pandemic, the cadence was always margin would grow over the back portion along with top line. And so we expect that to return as we move into kind of a more normalized environment.

Okay. And if I can ask one last one. Any initial thoughts on the tie-up that was announced this morning and how that impacts you guys competitively? And maybe why or why not that would be a good type of strategic effort for you guys to look for?

Yes. I think from our perspective, we don't typically comment on competitor strategic decisions. But from our perspective, we're going to continue to focus on our capital allocation priorities and growing the business according to our strategic vision. And so we look forward to the future under those pretenses.

The next question comes from Griffin Bryan with D.A. Davidson.

Most of my questions have been answered already. I guess kind of piggyback on the M&A front. Can you just kind of give us an update on what your pipeline looks like and if you're seeing anything else out there in terms of potential deals that you look on maybe some other boat segments that you might be trying to get into?

Yes. [Technical Difficulty] Like, I'll just say we [Technical Difficulty] the due diligence that we are doing, and we talked about it in our Investor Day, we'll continue to do that. And we're looking for opportunities [Technical Difficulty] looking for those opportunities and working on those opportunities and so forth. And if there's anything in the future to report, we'll definitely -- we'll be there in the market. Thanks.

I'm not showing any further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good morning, and welcome to the Malibu Boats conference call to discuss first-quarter fiscal 2026 results. [Operator Instructions] Please be advised that the reproduction of this call in all or in part is not permitted without written authorization of Malibu Boats. And as a reminder, today's call is being recorded.

On the call today from management are Mr. Steve Menneto, Chief Executive Officer; and Mr. Bruce Beckman, Chief Financial Officer.

I will now turn the call over to Mr. Beckman to get it started. Please go ahead, sir.

Thank you, and good morning, everyone. Joining me on today's call is our CEO, Steve Menneto. On the call, Steve will provide commentary on the business, and I will discuss our first quarter of fiscal year 2026 financials. We will then open the call for questions.

A press release covering the company's fiscal first quarter 2026 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, and 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.

Factors that might affect future results are discussed in our filings with the SEC, and we encourage you to review these 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, and adjusted net income per share. Reconciliations of these GAAP financial measures to non-GAAP financial measures are included in our earnings release.

Finally, during today's prepared remarks, comparisons are to Q1 of fiscal 2025, unless otherwise noted.

I will now turn the call over to Steve.

Thank you, Bruce, and good morning, everyone. We're excited to be hosting today's call from the Fort Lauderdale International Boat Show as we officially kick off the boat show season. It's always energizing to be here alongside our dealers, customers, and partners, showcasing our newest models and celebrating innovation across our brands. Turning to our results for the first quarter.

We delivered a solid start to the fiscal year with revenue growth above our expectations despite what remains a soft retail backdrop. Net sales increased approximately 13% year-over-year, and adjusted EBITDA margins were in line with the plan. These results underscore our ability to execute and outperform the market while maintaining discipline around dealer health and channel inventories. As expected, retail activities remain soft, and inventories entering the quarter were slightly elevated. We remain focused on working closely with our dealer partners to support rightsized inventory levels through targeted market-appropriate promotions. These programs are part of our normal seasonal activity and consistent with our approach of maintaining dealer health.

That said, we feel very good about where we are positioned today. Our dealers are healthy, our brands are strong, and we have conviction in the mid-cycle outperformance opportunities.

At our Investor Day, we also outlined our strategy to drive growth and long-term value creation through our build, innovate, and grow framework. This strategy builds on the foundation we have created as the leading premium fiberglass boat manufacturer and expands our capabilities beyond boat building into parts and accessories and marine services.

Within Marine Services, we recently launched MBI Acceptance, a new financing partnership that extends our 360-degree marine ecosystem and provides an important tool to help drive retail at the dealer level. Early feedback from our financing partner has been extremely positive, describing MBI Acceptance as one of the strongest programs they have seen, noting exceptional dealer engagement and early success in the rollout. Dealer participation continues to build momentum, and we look forward to providing additional updates as we expand the program throughout the year.

Turning to product innovation. Malibu's year 2026 is off to a great start. Dealer and customer feedback on our newest launches have been extremely encouraging. The new Kobia models continue to generate strong excitement and validate our investments in innovation within the saltwater segment. The Malibu 21 LX and the X-axis A200 were well received by both dealers and customers, offering accessible performance and versatility. Earlier this month, we introduced the Cobalt R31 outboard, delivering up to 800 horsepower and coastal-ready luxury. And debuting this week in Fort Lauderdale is the all-new Pathfinder 2600, which delivers both hardcourt fishability and family-ready functionality.

I'd also like to take a moment to recognize Pursuit for being honored with the National Boating Safety Award in the Marine Manufacturers category from the STO Foundation. Selected out of the hundreds of boat manufacturers across the country, this recognition underscores Pursuit's leadership in owner education and safety through its Confidence on the Water program, a partnership with the Chapman School of Seamanship. That provides hands-on training for new owners. It's a great example of how our brands not only innovate in design and performance, but also lead the industry in promoting safe, confident boating experiences.

Overall, we are encouraged by the excitement surrounding our new model year lineup and the steps we are taking to drive retail activity and improve the customer experience. At our recent dealer meetings, the energy and optimism among our partners is clear. Even as retail remains soft, our dealers are energized by our innovation, both in products and in retail tools. They see the strength of our brand, the quality of our products, and the value of our partnership as key advantages that will drive success as market conditions improve.

Looking ahead, we will continue to remain realistic about the broader marine environment. While we have yet to see a clear inflection signaling a broader market recovery, our focus remains unchanged: protect dealer health, manage production with precision, and continue to push the pace of innovation and execute on our strategic growth priorities outlined at our Investor Day last month. We are maintaining our full-year guidance and remain confident in our ability to outperform the market while continuing to build for the next up cycle.

With that, I'll turn the call over to Bruce for the detailed review of our financial results.

Thanks, Steve. Our results in the first quarter were modestly above our expectations. Net sales increased 13.5% to $194.7 million, and unit volume increased 10.3% to 1,129 units. The increase in net sales was driven primarily by increased unit volumes in the Malibu segment, a favorable model mix in our Cobalt segment, and inflation-driven year-over-year price increases, partially offset by decreased unit volumes in the Cobalt and saltwater fishing segments and an unfavorable segment mix.

The Malibu and Axis brands represented approximately 47.7% of unit sales. Saltwater Fishing represented 25.5% and Cobalt made up the remaining 26.8%. Consolidated net sales per unit increased 2.9% to $172,500 per unit, primarily driven by a favorable model mix in our Cobalt and Saltwater Fishing segments and inflation-driven year-over-year price increases, partially offset by an unfavorable segment mix and increased dealer incentive costs in the Malibu segment. Gross profit decreased 1% to $27.9 million, and gross margin as a percent of sales was 14.3%. This represents a decrease of 210 basis points compared to the prior year period. The decrease in gross margin was driven primarily by higher unit labor and material costs and increased dealer incentive costs in the Malibu segment.

Selling and marketing expenses increased $1.4 million in the first quarter. The increase was driven primarily by an increase in marketing event costs. As a percentage of sales, selling and marketing expenses increased 40 basis points to 3.2%. General and administrative expenses decreased 23.8% or $6.5 million. The decrease was driven primarily by a more favorable year-over-year comparison due to a $3.5 million legal settlement in the prior year, along with good corporate expense management.

As a percentage of sales, G&A expenses were 10.7%. GAAP net loss for the quarter decreased 86.2% versus the prior year to a loss of $700,000. Adjusted EBITDA for the quarter increased 19.1% to $11.8 million, and adjusted EBITDA margin increased to 6.1% from 5.8% in the prior year.

Q1 non-GAAP adjusted net income per share was $0.15, up $0.08 from prior year. This is calculated using a normalized C-Corp tax rate of 24.5% and a basic distributed weighted average share count of approximately 19.3 million shares. For a reconciliation of GAAP metrics to adjusted EBITDA and adjusted net income per share, please see the tables in our earnings release.

Turning our attention to cash flow. We generated $2.5 million of free cash flow during Q1, inclusive of $4.3 million of capital expenditures. It is worth noting that Q1 is typically a challenging cash flow quarter, and we are encouraged by the positive start to the year. As stated at our Investor Day last month, we look to maintain a prudent approach to our capital deployment. And with our capacity expansions behind us, we anticipate strong free cash flow generation as the industry returns to mid-cycle levels.

Turning our attention to the full year. Our view of the market has not changed. We continue to anchor our outlook with the expectation that our markets will decline in the range of mid- to high single digits for the year, with a continuation of the high single-digit to low double-digit decline through the second quarter. With that said, we are keeping our fiscal year 2026 outlook unchanged. For the full fiscal year, we continue to expect sales to be flat to down mid-single-digit percentage points. For Q2, we expect sales between $175 million to $185 million. We anticipate consolidated adjusted EBITDA margin for the full year ranging from 8% to 9%.

For Q2, we expect adjusted EBITDA margins ranging from 3% to 5%. This guidance incorporates a modest direct impact to our fiscal 2026 cost structure due to tariffs, which we continue to estimate between 1.5% to 3% of cost of sales, assuming current tariff rates. We will continue to proactively mitigate impacts through our strategic supply chain management initiatives and vertical integration capabilities, which will help us minimize associated price increases.

To close, we are off to a solid start with results that modestly exceeded expectations, reflecting disciplined execution and operating focus. Our strong balance sheet, operational excellence, and resilient business model give us the flexibility to scale production with retail and leverage our capacity we have put in place. Looking ahead, we are confident in our ability to deliver on our strategic objectives, outpace the market, and deploy capital prudently to drive long-term value.

With that, I'd like to open up the call for questions.

[Operator Instructions] The first question is from Joe Altobello, Raymond James.

This is Martin on for Joe. Congrats on the quarter. I just wanted to quickly touch on interest rates. Have you seen them sort of come down from consumers? And is this having an effect, whether it's getting people to go ahead and buy, or is it affecting mix in any way?

Well, when you look at the rate cut of yesterday, I think where we see it show up is a few places. One is, first, consumer sentiment, right? I think it's just better for consumers to see those rates come down. They're still -- they're down about 100 basis points from the peak COVID, but they're not down to where they used to be prior. So that helps consumer sentiment. Where we see it show up, though, the dealer floor plan costs will come down because it's tied to SOFR. So they'll see an immediate cost there. So the consumer gets encouraged, the dealer gets encouraged. But when you're looking at what will it do to retail finance rates, that will take a little bit of time to manifest itself into the marketplace.

And just quickly touching on higher dealer incentives. You mentioned it for Malibu brand. Is this just a clear inventory? And is this something that we can expect to kind of continue for the next couple of quarters?

I guess what I would say there is some of that is relating to the comparison period. So last year in the first quarter was a year of relatively light promotional activity in the Malibu segment. We were just coming off a very heavy promotional period in Q4 of 2024. And then yes, the overall industry, as you know, had a soft Q4, and we were no exception to that. So we started the year with a little bit higher inventory, and we did some promotional activity to help our dealers work through that in the first quarter. Going forward, we expect it to continue to be a competitive promotional environment, but not anything like we've seen here recently.

The question from [indiscernible].

This is Kevin on for Craig. I wanted to follow up on inventory a little bit, just in terms of how you're thinking about that going forward. I think now is normally a seasonal low point. So just as you think about building into next year, given your outlook, are there weeks-on-hand metrics or turns metrics that you target? And then any insight across your segments about -- is it healthy everywhere? Are there areas where you see more potential to stock dealers into next year?

Yes. So we're constantly in contact with our floor plan finance providers, monitoring inventory levels and overall dealer health. And like I mentioned there a moment ago, I mean, the industry came into the year with a little bit heavier dealer inventory and -- but it's not very far out of line. And so we would expect that that will continue to work itself down here as we go through the first half. As we think about our production levels and managing dealer inventory, we're really trying to align that with our expectations for the market. So in the second quarter and the second half, we're expecting the markets to be down, and we're going to pace our production kind of in line with those expectations.

So just -- I mean, maybe a follow-up on the retail expectation. Is it fair to say that the rate of decline is fairly consistent through the year? I know it's such a seasonal business. But would you expect retail to be down, I guess, each quarter consistently? Or is it like a bigger front half weighted down, but then Q4 up -- just any help on the shape of the year?

Sure. Yes. What we said in the last call is what we still are expecting today, which is the first half to be down more than the second half of the year. So for the full year, we've said that our expectation is market will be down mid- to high single digits and that the first half of the year will be down high single digit, low double digit, with the second half a lesser rate of decline. And that is essentially -- that's exactly what we're seeing so far this year. And so the year is playing out in line with that expectation thus far.

Yes. And Mark, it allows us to -- as we shared with everyone at Investor Day, it allows us to keep focusing on driving our lean manufacturing, our quality, all the things we talked about at MBI Advantage, our central sourcing category management, our go-to-market capabilities. So we're -- as Bruce outlined, where retail is, we're taking full advantage of this time to continue to work on our business and make those improvements. As those volumes return, we'll be pretty excited and firing on all cylinders to keep moving forward.

The next question is from Anna Glaessgen, B. Riley.

I'd like to turn to the commentary on the second quarter margin. Just wondering the cost impacts being contemplated there? And anything to note, maybe show costs or things like that, that are being contemplated?

Yes. I mean what I would say is there is the midpoint of that guidance is below where our revenue was in Q1. So there's a modest amount of deleverage that you can expect, and that's embedded in that guidance. And then we're seeing normal expense phasing throughout the year. We are starting the boat show season, and some of those expenses do ramp up as we get into season.

And then on the Salt Waterfish and Cobalt, should we expect -- can you touch on kind of dealer inventories in those segments, and if we should start to see more in line retail and wholesale balance throughout the year?

What I would say is overall, we still expect this to be a year of reduction in dealer inventories just overall, as we don't really see a massive difference, I would say, between our segments in terms of the market environment. We're expecting that our dealer inventories will come down in all segments.

The next question from Eric Wold, Texas Capital.

A couple of questions. I guess, I want to get back to the MBI acceptance and maybe see if you could dig in a little bit more on that. I know it's been only about a month or a little less than a month since you launched that with the Malibu brand. But maybe some initial read in terms of how fast that was able to be rolled out across the dealer network, maybe kind of how penetrated that is so far? Any initial thoughts in terms of maybe what you've seen has worked versus hasn't worked? Maybe any additional detail would be helpful.

A lot there, Eric. So we're excited about how it rolled out. If you recall, we said it was going to pilot in Malibu Axis first, and that's where we're seeing that work. We are getting a lot of our dealers signed up. We're excited about that. Actually, our partners have said -- like we said in our remarks, we're pretty excited about the overall adoption from our dealer base. So they're seeing that as the strength to help retail boats. So we're excited about that. Anecdotally, we're early in. We've seen -- as you know, there's been some -- we've done some promotional $499 financing. There are some dormant customers that came back because our dealers have reached out to them and said we have a new offer, and they actually bought both.

So we're still in the anecdotal phase, to be honest. We have to let this thing start to incubate, go through its pilot. They all start looking at the data. But everything is from launch to where we are today, pretty exciting and energizing for our dealer base.

And the plan for the other brands is still unchanged, or the time frame of when that would roll out?

Correct. We'll continue to -- our Q1 plan to roll it to our other brands still remains intact.

And then just last question, dovetailing that discounting in general. Just give us a sense of the level of discounting that's still out there that you're seeing both, I guess, both with your brands and maybe you're seeing with competitor brands and kind of when you feel that may start to cool off in the market vis-a-vis kind of channel inventories declining, rates declining, when we start to see that kind of normal discounting kind of -- I don't want to get back to normal, but maybe kind of cool off from current levels?

Yes. I guess what I would say, Eric, is certainly, it has cooled off from the period where there was considerable excess inventory in the industry. Yes. And so it has cooled off from that. But it remains competitive. I mean it is still a soft retail environment, and the brands and our dealers have to compete for deals. So as long as consumer sentiment is what it is, it probably will be a competitive environment, but not what it was.

The next question is from Noah Zatzkin, KeyBanc Capital Markets.

I guess, first, could you give any color on how you're thinking about ASPs across segments, maybe how model year '26 pricing plays into that, as well as mix would be helpful.

Yes. What I would say is modest year-over-year price increases. And then I would say the trend towards larger, more feature-rich boats will continue, maybe not at the pace that they have the last couple of years, but that macro trend is likely going to continue for the foreseeable future.

And maybe just kind of any updates on how you're thinking about M&A or greenfielding would be helpful.

Yes. We -- as we said, M&A and greenfielding, of course, is part of our capital deployment strategy. No changes on that front to announce there. We're still looking at opportunities. As we say, we're open for business, and we'll continue to consider opportunities that make sense and create value for our shareholders.

The next question is from Jaime Katz, Morningstar.

I'm hoping you guys could help us think about what sort of top-line growth or perhaps declines we need to see to start to get a little bit of expense leverage to surface here, given that absorption should improve as improvements have been made to the manufacturing process. So do we need to just get to like low single-digit declines to start to see a little bit of improvement? Or does that have to turn positive again?

Well, I mean, we focus on maintaining good expense control and really focus on keeping our cost structure highly variable to enable us to adjust to the market conditions that we find ourselves in. I think having the market declines shallow out will certainly be helpful. And -- but obviously, to get real leverage, you have to see the markets turn. So we're prepared. We're driving our innovation. We're driving our outperformance initiatives. We're not waiting for the market to return to growth, but I think to see large-scale volume leverage, you probably will need to see the market return to growth.

And then as we look at the back half of this fiscal year, I'm trying to think of whether there might be a little bit of resilience in the gross margin line, given that I think we saw some tariffs already in the final quarter of fiscal 2025. So maybe a little bit of a discussion between the benefit or the lack of input or lack of impact to gross profit at sort of the end of the year this year versus last year? And then were there any like one-time items at the end of the year in G&A that might make the G&A ratio a little bit more competitive this year in the back half?

I don't remember if there were any comparison items in last year. So that's probably not the case. I mean, I think we expect the tariff kind of headwinds to build, but as well as our tariff mitigations to take hold as the year plays out. So -- and then, of course, we're always working initiatives to drive margin performance. So we are expecting higher margins in the second half embedded in our guidance. And certainly, gross margin is a part of that overall equation.

The next question from Michael Albanese, Benchmark.

I just want to dive into the consumer a little bit more. Curious if you're seeing any updates to consumer behavior as it relates to payment buyer, cash buyer, what that mix has looked like? And then I know it's early, but I'm assuming MBI Acceptance will give you -- or does it give you a little bit more visibility into that?

I think 2 things, Mike, on that one. No change from what we were talking about earlier about where that cash buyer, payment buyer dynamic has landed over the last few quarters, and still seems to be persisting through this quarter. The MBI acceptance from a data point, it's early on. We're trying to see where that starts to feed us more information to be smarter about how we go to market with some of our tools. So we're just getting into mining some of the opportunities there. Nothing really to share yet, but that we will have a look into what the consumers' purchasing habits are and some of the data around that. So I think that will be later down the road, once you can get enough data in to create some trends, we'll get the advantage of that.

Yes. I would just add, Mike. I mean, as you know, the consumer finance rates tend to be tied to longer-term treasury markets, so not really the short-term interest rates. So while it will take a little while, I think, for the short-term cuts to work their way through to the consumer finance rates. And that's really probably what's going to be required to see a shift in that cash buyer to payment buyer ratio.

I'm not showing any further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect your lines. Goodbye.

Thank you.

Hello, and good morning. I'm Bruce Beckman, Chief Financial Officer. And on behalf of the entire Malibu Boats team, I'd like to welcome you to our 2025 Investor Day. We have a great lineup of presentations for you today, followed by a 30-minute Q&A session. We have QR codes for those of you in the room to log your questions, and we'll also be taking questions from those joining us virtually. For those in the room, our team will pass around the mic for you to ask your questions. And for those attending virtually, our team will be moderating. So please log your questions during the presentation. And again, the question-and-answer session will be at the end.

For those of you in the room and following along, before I start, I want to remind you that as stated in the safe harbor statement behind me, during today's presentations, we will be making forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements. For a full discussion of potential risks and uncertainties, please refer to the risk factors listed in our most recent SEC filings. During these presentations, we will also be referring to certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP are included in the presentation at the end of today's slides, and they can also be found in the Investor Relations section of the company's website.

With that, I'd like to welcome Steve Menneto, Chief Executive Officer of Malibu Boats.

Thank you. Good morning, everyone. I think we're off to a good start. No one fell in the water in the docks, right? No boats crashed, so it was a good morning and the rain kind of held off for us. So welcome those joining us virtually. We have a good day for you planned today. But the question came up is why are we doing this? So the reason why we picked now to do this is we have a new management team in place. We want to be able to make sure that everyone can meet those people that, the ones presenting as well as the ones in the room who will be joining us for lunch. You'll be able to interact with the new management team here. And we also want to share where are we going. We haven't done one of these since 2018, and so we want to be able to talk where are we going to take the company over the near to midterm to long term as we kind of look at Malibu Boats, Inc. and its future. So that's what we're going to do today. We've got a great roster of speakers for you and the agenda you can all see, we'll go through the major parts of the businesses. You may have met some of these folks out on the docks, but I'll be speaking Bruce. And then the 3 leaders of our businesses, Rachael, Jason and Chris will come up and talk about their areas that they lead, and we'll go into some real interesting stuff today.

So we'll get going here with the overall, where are we taking the company? What's our strategy? what's the overall path forward? But before we do that, we want to start with the foundation of the company. We started in 1982 out in California, building Malibu Boats. We moved over here to Tennessee kind of where a lot of boats are being made, and a very skilled workforce, very experienced labor market as well as a lot of other brands here. So it's kind of that area to do fiberglass boats. And through that time period in 2009, we added the access line. We came out with Surf Gate in 2012/2013 model year, really kind of leaped the market with that technology. And then through -- we went public in '14 and really became an accelerator through a lot of M&A where we brought on the Cobalt line in '18, then Pursuit to follow and then MBG after that. So our business has grown, and you could see the stats on it, 8 manufacturing locations, over 300 dealers around the globe that support our brands. And we have a lot of models that we work with across our 85 models that we are able to satisfy the market in a bunch of different segments, 2,000 people working for us, we're the #1 manufacturer of fiberglass boats with our 8 iconic brands that we go to market with. So right now, that's kind of the history of the company and where we've been. So where we want to go, it starts with what are our enablers. And of course, it always comes back with being customer-obsessed. Our customers are enablers, and we have to make sure that we're getting that voice of customer back into the business to create a better experience for them. We have a new strategy, build, innovate and grow. We'll talk to you what does that mean? What does that mean in each of our businesses as we go forward. We have the scalability to really -- as that up cycle returns, we can really leverage our infrastructure to be able to meet that demand and capitalize on that growth. We've been disciplined in our M&A practices. That's another enabler. We've shown a great history of being able to acquire premium brands. And then not only once we acquire them, but make them better and have them grow and gain share. And of course, our model, our robust cash flow, the ability of a strong balance sheet that allows us more opportunity for the future. So that's the enablers that we're going to take as we move forward. It starts with our people. And what we're trying to assemble here is the best team in marine to really drive this business forward. But what we think about is the boater at the center of our business. How are we going to satisfy that boater? How are we going to give them a great on-the-water experience? What are we going to do for that person that keeps coming back to our premium brands, that family that wants to spend time together. Even though we have young kids who want to do social media, tell me one thing. Is it better to do social media sitting on your couch, or sitting in a boat, right? So that's where families start trying to spend time together, and that's what we want to be able to accomplish. That boater at the center of our business. We follow our values, the [ PACE ] values, where it's people, accountability, customer experience and then execution and excellence. That's how we drive our business as we go forward. So our build, innovate and grow strategy. What does that really mean? How do we build a culture that is putting that customer at the center of our business? How do we get a deeper relationship with our dealers as we going to grow this business, and we want to move forward? We're going to tighten up those relationships, support them better. As we've shown, here in the past when we're working through their inventory, making sure that we have them rightsized in a down cycle. We also want to be able to drive the local markets with them, and we'll talk about that as we go forward. And then operational excellence. How do we have that continuous improvement driving the quality, driving the efficiency, making sure we're chasing better margins all the time. Part of your business, that's how we want to -- we act. And what we need to do is a constant building of our business, right? It never stops in that kind of bucket. That move to innovation. When you look at innovation, there's a lot of good things in our history that we've done. There's a lot more to come. We're going to focus on that innovation, how do we drive new things in our boats to satisfy customers, to make that family experience better. We'll continue to introduce not only just product innovations, but services as well. right? We want to focus on how is that total 360 ecosystem of boating for the family and that person, how do we do that? How do we make that better through innovation of products and services? And then finally, growth. We look at what we have already in our portfolio. We have great brands in our portfolio, great products. We can continue to gain share, find those ways to grow our business with what we have now and look at opportunities in the M&A space to continue to add to our portfolio that drives value creation, premium brands, keep with that. We've been successful with those brands. We're going to continue to do that. So that's our build, innovate and grow strategy. We want to keep it simple, but powerful for us as we move forward. So when you look at that, where are the focus areas that we want to play in. It's in marine, okay? We're not looking to go in a different space. We're going to stay in marine, but 4 places in marine we'll talk about, one, where we're very core to our business, building boats, right? We know how to build boats. We know how to build premium boats. You saw that if you were here with us today, those boats are beautiful, well appointed, high-quality boats for a discerning customer. We're going to continue to do that but we have the opportunities to expand geographically, more segments with our current brands and with future brands, okay? So we're excited about being boat builders. We're going to continue to do that but we see a bigger ecosystem. We see the opportunity to grow beyond just being a boat builder. And what we want to be able to grow is in technology and connectivity. The technology around the boats are going to continue to drive upgrading boats, new customers coming to the marketplace, we want to make sure we're a leader in that space. When you look at parts and accessories, an opportunity for us to go even deeper, right, into our boats, what we offer, how do we appoint better boats, more usability, more favorability from the families when they're using our boats and then finally marine services. How do we offer more services to create that 360 experience around owning a boat with our customers. We're going to continue to follow those opportunities and drive our business in these 4 focus areas, okay? So let's take a deeper look. What's the size of the prize? Current boat building is about a $6 billion total addressable market. When you start to add the total ecosystem, it more than doubles. So there's an opportunity for us to play in a market that's huge that we haven't played in previously. So how do we go do that? While we're building capabilities, and we formed 2 newly formed businesses and our own overall portfolio, marine components and MBI acceptance. They're just getting launched right now. So marine components. It's taken the vertical integration. Those things that we do well, trailers, flooring, engines, towers, wiring harnesses, things like that, that we can continue to not only utilize our brands, but also sell to other OEMs. And there's opportunities as you go to end users. We're going to explore opportunities as how do we actually offer through our dealers to our end customers, more parts and accessories and grow our components business. MBI acceptance. It's another -- it's a strategic alliance between MBI, Wells and Aqua Finance. So it's not a captive, but it's a strategic alliance where we can offer financial products. So we're going to go out testing with Malibu right here, and we're going to test low rate financing, maybe deferred financing, extended service contracts, things like that, that help our dealers close more sales, gain more market share and satisfy our customers in the total ownership of their boat. How do we drive forward on our strategy, on our build, innovate, growth strategy is our MBI Advantage? It's why we were able to acquire businesses and make them better. So the 7 items on the left is what we do really well, right? Lean manufacturing, vertical integration, innovation and our balance sheet, the strength, the financial strength of the company. We've talked to you about that before. The 3 highlighted in blue are some of the new areas that we're adding, right, central sourcing, category management, pulling all of our volume together to really work with our suppliers for more efficiency, higher quality more, delivery on time, becoming a better manufacturer, brand management and go-to-market capabilities. We've talked about that's really an opportunity for us. We have amazing brands, but you got to be able to communicate those brands and then bring tools to be able to drive local market share gains and talk to your customers and support your customers and dealers in a better way. And then our premium dealer network and customer experience. We have the envy of the industry and our dealer network, and we want to get closer to them, support them, so we have that dominance in those local markets to drive our brands forward. When you look at what gives us the right to win, we're not going to go through all the words on the page. We're pretty confident that we've shown our ability to do this, and then we're going to take those attributes that we've had and the value that we've created with our dealers and bring them forward as we go into the marketplace and expand our business. So when you look at the MBI Advantage, what does that mean financially. For about the last year, we've talked to you about the mid-cycle, right? If the market returns back to that 2017 to 2019 period, and we do not add more market share, do not add more products or brands. We look at our opportunity to be about $1.3 billion. You can see 17.5% EBITDA margin, $130 million of free cash flow. So that's if we just return to those time frames. What we want to show is when we really focus on the MBI Advantage and really drive execution and excellence in our own business, there is an outperformance opportunity that we have. we can move that mid-cycle to even better results. So about $1.5 billion, 20% EBITDA margin with over $200 million of free cash flow. And that takes us executing better as a company. That's what we're focused on right now. So if the mid-cycle is delayed or it doesn't materialize to the level that it was in '17 and '19, that improvement is still there for us to go get and that's what we're focused on as a team. And it will take us the mid to -- the near term to midterm to get there on that improvement, but we're working on it. We're focused on it, and we're going to drive towards those results. So going a little deeper, lean manufacturing, quality, we have the ability to move forward with scale in our business. So this central sourcing category management. How do you control the inflow of your materials better, how do you become a higher quality, more efficient at what you do. The vertical integration won't stop. It's been a cornerstone of our business. We'll continue to have that as a cornerstone of our business. There's more opportunity. And then we have capacity in place. Over the last few years, we've put capacity in place. You'll see that when the business leaders come up and we have the ability to scale to grow. So we can meet the needs of the next upturn without having to go spend a lot of money, a lot of CapEx on driving more infrastructure in our business. So we're ready for those opportunities in front of us. The continuous improvement is really a day-to-day grind on how do you make your day -- business better. So this is where we're seeing as a company we're dual sourcing, quality screening, right, rationalization of suppliers and products, design to value, all the different things that a company can do that can drive better margins, more efficiency and make manufacturing a powerhouse more than what it is today and have the opportunity to expand our margins. That's what we're chasing, but that is a daily work that every good manufacturer should be in and that we're adopting in our business and leveraging what's already been here and then amping it up to the next level as we go forward. When you look at brand management go-to-market, it's really enabling retail execution. So the MBI acceptance is cool -- it's a really good tool to have for our dealers to provide tools to test things that what's going to help a person buy a boat, right? So we're all open ears on that, working with our dealers, working with our financial partners. We're returning back co-op. It was here prior but we're bringing that back on as a tool to help our dealers drive retail in their local markets and then how we engage with them with events, the dealers doing customer events and getting more people in boats to test our boats and to get them on the water to enjoy our product before purchase. So a lot of opportunities there. I can go to the next level of detail about what we're going to do is turn it over and let the dealers talk to you.

[Presentation]

It's great to hear from our dealers where -- there is a change of how the management team looks at dealers and how we can partner with them and how we can drive success in the future. That's what we're bringing here with the new management team. That's why we wanted to share that video with you. They did a great job. So moving on, we'll talk about our innovations. We continue to be the brands that refresh the portfolio, the fastest in the market than any other competition -- competitor. We are always on the forefront of trying to bring new boats to market. It helps us drive the market share. It helps us satisfy customers. It gives a reason for those long-term customers to repurchase, right trade in and repurchase. We're going to continue our commitment to engineering growth. Even in the down cycle, we have not gotten off the innovation throttle. We're continuing to invest in new boats, new opportunities for us to grow our business, satisfy new customers. And as we came here, we're launching an innovation team. So we're grabbing all the engineers across all of our business working together and say, what are the big challenges in marine that we can solve together as a collective team. We've kicked that off since we've joined the company here. So we're pretty excited about our future and where we go in product. And you could see that in some of the products that we've already brought to market to satisfy customers, the Splash & Stow option on Cobalt, the movable second seat in Pursuit. And when you look at our command center on Malibu, all things that drive that allegiance to our brand that better experience for our customer and it helps our dealers retail more boats when we're always upgrading our boats and bringing new technologies. When you do that, you make that all happen, we can accelerate the growth of this business. So when we look at market growth, where should we be in new segments, where can we be in new geographies and so forth. We'll continue to go there. Share growth, bring that innovation, new boats to market to continue to drive share and then, of course, strategic M&A creating value, not just grabbing any business out there. It has to fit in our strategy, it has to fit in our focus areas, and it has to be that premium brand that drives the value for our shareholders and for our dealers. When we do that, like I said, we kind of showed you this is, a, when the mid-cycle returns and we work to that opportunity to outperformance with our capacity in place, our premium channel, that innovation, the strong supplier partnerships that we're building and the vertical integration that we've been, been a cornerstone of our business. We can drive these results, and we're pretty excited about where we can go.

So the last slide is, we're going to continue our discipline. We've been disciplined in our M&A strategy. We've been disciplined in how we invest our capital, our CapEx into new products and so forth? And how do we manage the cost of our teams as we're in the down cycles. We're going to continue to do that. We're going to follow our growth enablers, as I've outlined here in the beginning, really look for does those opportunities fit our strategic criteria as we look forward. Now as a company, we have a plan to move forward, right? Build, innovate and grow in our 4 focus areas in marine. That is where we're going to take this company. That's where our opportunities have.

And we have our disciplined financial guidelines that are in place to make sure that we're always doing this well managed and well disciplined as we go forward. So thanks for the time. I'm going to hand it over to Rachael, she will take you through Malibu/Axis.

All right. Well, thank you, everybody, and good morning. I've had the privilege of working at Malibu for over 13 years. I've led departments from -- been part of our product development team, a part of our engine development, process improvements and more recently with vertical integration. Currently, I'm leading the Malibu and Axis segment as our SVP. And outside of that, I'm not just -- this isn't just a profession for me, it's also a passion. It's something that's a lifestyle for myself and my family. You saw the picture of me with the dog. I mean, the dog's name is Malibu. It is a part of our family. So this is -- I've owned 3 Malibu's prior to working here. And so I'm really excited today to walk you through the product because this is something that's near and dear to me.

So I want to kick things off, I want to start by setting the framework and the presentation outlined and some of the key takeaways and the themes that you're going to hear here today. So Axis and Malibu, we're premium brands, we're recognized in the industry for our leading in innovation and in supporting the robust and highly engaged dealer network. Our premium brands are in the ski and wake market, and they differentiate us. Innovation is in our DNA, and that's something that year after year, we pride ourselves in meaningful product and enhancements. So introducing new features to the market and offering consumer-driven performance. That's something that we're best-in-class in solutions. We continue to steepen our dealer partnerships every single day, and we deliver on efficiencies and create value through our vertical integrations and our operational excellence. Vertical integration. This is not something that just allows us to bring the cost down, but it allows us to be first to market, control the supply chain and have better control over the quality and the features that we're bringing to you. These Key enablers allow us to further penetrate the market and maintain our market leadership position. They serve as our guiding principles and drive the strategies and actions that enable us to deliver the results that you see. So at a snapshot, Malibu and Axis account for 39% of Malibu's total revenue in fiscal '25 and then the EBITDA of roughly $60 million. We have a really deep, strong relationships with our dealers, as you see, over 100 dealer locations worldwide, and those partnerships are lasting over 12 years. That's unprecedented. You won't hear that anywhere else out there. 18 models are in our portfolio. It's a wide variety of models. We're coming out with 4 of those new ones -- are just new for just this year, and we continue that cadence again year after year. So we're continually pushing innovation, the pace. You won't find that anywhere else where people are coming out with models -- that many new models every single year. We're keeping the product fresh. We're keeping that portfolio new. In addition to that, we have 3 facilities ranging from Tennessee, the California, Australia, over 625,000 manufacturable square feet collectively across those. And we're supporting our innovation in all 3 of those facilities. So the depth and breadth of our portfolio is unmatched. We touch every part of the consumer demand needs for these types of boats. Throughout the presentation, you're going to hear us talk about consumer-centric focus and that we like to meet the customers where they're at in their buyer's journey, so everything from the entry-level Axis all the way up to the premium, ultra-premium Malibu M-Series. We're multisport. So we're covering anyone that wants to come in if they want to ski, if they want to go out and go wake boarding, if they want to wakesurfing, you probably saw some of that today, some of the foiling out on the water. Those are all the multi-sports that you can do by the way in the boat. We're split, as you see here between the 2 different product segments. You have the Axis line, which is a great product for those entry-level buyers that are coming in and wanting to get into the product. It covers the skiing. It covers the wakeboarding. It covers surfing. You can do all of that behind the boat for a very -- good competitive price. Then on the Malibu side, 45 years of legacy there. We've been doing this. It's a name -- a brand that you recognize in this industry. It's a wide variety of models that we have there. again, covering everything from skiing, surfing, wakeboarding to the crossover industry. It's a great value that's driven through its legacy and through that name that you see.

All right. The current addressable market is estimated to be roughly $1 billion. And Malibu and Axis hold the majority of the market -- they're one of the market share leaders in this industry. When the market improves, we will return to mid-cycle, and we are positioned for 50% revenue growth. The things that are going to get us here are a well-balanced mix of buyers in that shape and drive our market, ranging from customers who finance their boats to those who buy outright with disposable income. This diverse buyer base provides a natural level of insulation against the market fluctuations. With the rise of the disposable income, we're also seeing a trend of first-time buyers that are more sports and activity focused. I was one of those. They see boats that align with their active lifestyle. This makes our product especially attractive to first-time buyers in our target financial demographic as they offer recreation tailored for their specific interest. While this is all happening, Malibu will continue to be innovating and leading in that industry. So let's set the table with the 3 elements that Steve laid out previously with build, innovate and growth. First, we'll talk about building. Vertical integration remains a key priority for us as we seek new opportunities. Our recent sheet metal was one of those prime examples. We're committed to being strong partnerships with our dealers and engaging directly with customers to understand what matters most to them.

Next is innovation. Our next-gen LT4, our Malibu touchscreens, year after year, we're coming out with exciting products and features, all the while making sure we are focused on the customer and identifying what they need and where they want to be and medium where they are in their journey. Lastly is Grow. We're going to continue to create new market opportunities, addressing white spaces in the market and answering customers' needs before they even realize what they are. We're going to meet them. We've had proven success over the years with this and entering some new white spaces like the T250 and the 26 LSV, and we're going to continue to seek opportunities.

So vertical integration is a part of who we are. Throughout our history, we're continually expanding our in-house capabilities, strengthening margins, enhancing quality, improving our supply chain. It is all reflected in the time line that you see here. For us, vertical integration means managing the entire value of the supply chain and the manufacturing process from start to finish. And we do just that. Vertical integration started back with Towers and billet in California, and we continue to build on top of that. We're designing into -- we're still today designing the Towers in Tennessee and manufacturing those in California. We work closely in parallel with those 2 team. We recently started to pick up momentum in 2016 with trailers and then shortly after that, with engines and then harnesses and sheet metal. So we realized it was a great opportunity, not only for Malibu, but across our portfolio. So you'll see soft grip flooring inside of Maverick or Cobalts. And also in 2022, we acquired wiring harnesses and moved that up from Alabama to Tennessee to our Tennessee headquarters, and you'll get the chance to see that later today. All of this has given greater control over the supply chain process, allowing us to be on the front end of innovation and shaping the technologies that really set us apart.

Vertical integration delivers enhanced quality control. It reduces the supply chain risk, accelerated time to market, greater cost efficiencies and faster innovation speeds. Our dealer relationships are essential to our success, and we pride ourselves with really strong relationships across the country. As I noted earlier, 180 dealer locations worldwide, and these partnerships run deep. We have over 12 years of -- on the average of those partnerships with our dealers. That's one of the things that really sets us apart. You'll see, as I noted here, 86% of the markets, we're #1 or #2 in market share in those areas. Whenever possible, we're going to pursue exclusive partnerships with our dealers to protect against dealer saturation. But they continually come back to us as a partner of choice because of the robust portfolio that we offer, the high quality and listening to the customers and delivering on what those demands are.

So double-clicking into that, I wanted to unpack a recent case study we had. We had an opening in the Detroit market and Club Royale, jumped on that opportunity. This was a great opportunity for them and for us as well, and it's proven in a matter of 12 months, we grew 8% market share in the Detroit area, going from 20% all the way up to 28%. And Rob Davis is one of the gentlemen in the video that you just watched, and he was a testament to he talked about the quality we have and the customer-centric focus that we have on these customers. And I think that just goes to show this great partnership that we have with our dealers. As an innovative company, it's table stakes that we keep our portfolio fresh and consistently coming out with new models. On your way in, you probably passed by the 22 LSV and the T250 in the parking lot. That's just 2 of the 4 new models that we came out with just this year, and we do this every single year. We're coming out with 4 new models over -- every single year for the past 10 years. That's 44 new models since 2015. And no other towboat in the market can match this pace. You won't find that with any other towboat manufacturers out there. More importantly, we're utilizing the real-time customer data and the voice of the customer to feed our engineering team and that directly supports the needs of our customers and a continuous feedback loop we provide the best results, the best features on the boat. Everything from the 360 camera to e-steering is all meant to make that experience more smooth on the water and easier for the customer to operate and that comes from us listening to the customers and taking that feedback loop back to our engineering team.

So innovation runs deep in our history. From being the first to introduce the onboard computer to our recent launch of the next-gen LT4, those are just the most powerful engine in the market. We pride ourselves in these relationships with our partnerships with strong partners such as GM, marine that was 1 that we came out with the most powerful engine in the market, the NextGen LT4 that was just released this year. And then you have other features like the NextGen -- like the touchscreen, the Malibu touchscreens, which is one of the largest screens out there. 15.8-inch display, is something that we power -- we're proud of this relationship that we have with them. And so when you partner with people like GM, they have a dedicated team of calibrators that are on staff that we worked with that come out with custom engine calibrations, that allow us to have smooth cruise control and smooth shifting in throttle. All of that comes from our strong partnerships with these suppliers and allows us to be first to market with some of the best features that really deliver on meeting where the customer is and those needs that they have on water. This has allowed us to accelerate our innovation, grow faster. And on the flip side, our resource has created a relationship that is synergistic in nature, allowing true performance to come to life.

So to wrap this up, I want to leave you with the Malibu and Axis segment growth strategy. We are well positioned to capture growth as the market recovers with the mid-cycle baseline of $460 million and 20% adjusted EBITDA margin. In addition to that, we also see this opportunity to provide incremental growth through whitespace opportunities, and we're going to continue to capitalize on them. We're particularly looking at larger, higher model boats, customer centricity is at the heart of everything that we do, not only meeting existing needs but in creating entirely new opportunities. We're analyzing trends and identifying what customers want. We don't just listen to our customers, but we observe their behaviors through their entire boating life cycle. And on top of that, we're looking at trends in the industry, everything from agriculture to textile, we're monitoring those trends and incorporating that into everything that we do. You've heard me highlight the depth of our engineering team. It's embedded in our factory alongside our products that help us build. And our team has a deep understanding of the operations that enable us to design for manufacturing and quickly scale through our vertical integration opportunities. So with those incremental opportunities, we think we can get an additional 300 basis points to take us to a 29% adjusted EBITDA margin.

So with that, I'm very excited. Our team is focused right now on where our strategy is headed to build. We're going to continue to lean into innovation. It's something that we're known for, and we're going to grow and capitalize on these vertical integration opportunities. And with that, I'm going to hand it over to Jason. Thank you.

Good morning, everybody. My name is Jason Turner. I've been in the marine industry, gosh, for 25 years. It's the only thing I've ever done. And worked on boats a long time before that. And I've had the pleasure of being at Cobalt now for about 8 years. So about the time that the acquisition happened I came on board at Cobalt in engineering as the VP of Engineering. And since about 2021, I've been leading the brand in the position that I'm in today.

So similar to the other presentations, just kind of setting the table here, what are our key enablers. And these 4 themes we'll touch on throughout the next few slides. But first, our best-in-class dealer network. We've mentioned that a couple of times. That really remains a cornerstone of our success. It not only supports the market share and leadership, but it also provides a powerful and compelling advantage through its reach, right? It's customer engagement and the alignment with our brand. And number two, we just completed a facility expansion, which will tour later today. but it's really meaningfully increased our capacity. So this advancement enhances our operational agility and positions us to scale throughput in response to the market, both anticipated and current. Number three, innovation continues to be a defining capability for us. Our -- we have a pretty disciplined forward-looking product development process and it enables consistent delivery of those new models, that's going to meet those ever-evolving customer needs, which we consistently see. And last there, number four, the integration into the broader portfolio, it's really yielding those clear benefits. So we're unlocking operational efficiencies and leveraging those shared resources and expanding margins, all while strengthening that long-term profitability profile for the business.

Just a snap of Cobalt as a business. Last year, we were about $215 million, and that makes up about 27% of total MBI revenue. Our segment adjusted EBITDA is $18 million. But during the next few slides, we'll see some info and some plans on how we're going to bring those -- grow those margins and really improve that number. We've got about 130 unique dealers in 177 different locations. And with the average dealer relationship over a decade, but I'll tell you we just got back from our national dealer meeting and there's at least a dozen that are 40 and 50 years. So there's a big range in our dealership age. And then we have 2 facilities now. Total square footage and roof is about 750,000 square feet, we're building 24 models and 4 of those were just introduced in the last 12 months or so.

Quick product overview. I think dividing Cobalt into 3 main segments is probably the easiest way to look at that. The first we'll call sterndrive. So that's your traditional, versatile boats. You can use those for a very adaptable day on the water. General cruising, light water sports. We've got 10 different models in those ranging from small to large, as you see there. Second, we'll call our Surf segment, which would be anything with a forward-facing drive and our Surf wave generating technology, which is Surf Gates and Ballast. So with that, we're pretty proud of that segment. We created an industry-leading surf wave. We currently have about 7 models in there, ranging from 23 to 35 feet. So we hold a very commanding share leadership position in the runabout surf market. And that's a clear testament to the strength of that offering.

And lastly, our outboard segment, which represents our largest growth opportunity really. So today, we offer 7 models ranging from 24 to 35 and that includes the R31 Outboard that was released just earlier this week that you guys saw at the dock this morning.

So taking a look at where the market is going, the dynamics that are shaping our growth strategy at Cobalt in the center. Total addressable market, and you can see the section of the pie there of how much of that market that Cobalt has. And looking ahead, we see a compelling opportunity for approximately 90% mid-cycle revenue growth, and that's driven really by 3 main initiatives: One, we're very well positioned to capture that market recovery, thanks to that additional capacity that we've just added. We plan to grow share in both outboards and Sterndrive Surf through those product introductions innovation and we're going to be targeting white space opportunities. So segments that we don't currently play in or have limited exposure to, but see a strong potential for growth. And doing that, there's -- or how we're going to do that, those market drivers. Our customers often live on or near the water, so boating's really a natural lifestyle for them, a natural fit. They value versatility, whether it's leisure cruising or water sports, and we see consistent repeat buyers for those. And maybe most importantly, our customers have a clear preference for premium products. So that very much aligns with our brand identity.

You've heard us talk about build, innovate and grow strategy throughout today's presentation and for good reason, right, that's the foundation for how we're going to drive that impact across the entire brand portfolio. So for Cobalt in the Build segment, we're expanding our footprint to support that vertical integration. So access to a broader talent pool and future growth. On the dealer side, we're implementing more data-driven processes to enhance performance, including ongoing dashboard developments to better understand share by dealership and by territory. And we're enhancing the order process and dealer marketing tools to elevate that overall customer experience. The beta version of our new boat builder website was actually rolled out last week at our dealer meeting. That will be an industry or certainly a segment best when that rolls out and certainly a great step forward for our brand.

On the Innovate section, we've got a robust pipeline of new product development with 4 new models that were just recently released, and we're going to have continued momentum with the Monsoon surf integration. We're gaining strong traction and making real impacts with those products. Commercially, we're deepening those relationships with our technology partners like Garmin and some of our engine suppliers and that's going to allow us to stay aligned with those customer priorities and lead in innovation with some of the horsepower that those companies bring.

We're also strengthening the voice of the customer through recently formed dealer councils and giving us visibility into market trends and product feedback while expanding our customer insights capabilities. And then in the growth segment, the outboard and sterndrive surf, we're going to drive market share through new products and new innovations in those segments. White space, the boats or the areas, the segments that we don't currently play in, really capitalizing on the manufacturing footprint that we have now to bring in those new models and new segments, very interested in larger boats per se.

And then operational excellence, just the margin growth through those operational initiatives. So looking at improving material costs and labor efficiencies is a big part for how we're going to take the margins to the next level. So we're very proud to introduce our new state-of-the-art facility in Roane County here in East Tennessee. So outside of Florida, East Tennessee is actually probably one of the bigger boat building centers in the country. So the facility here, yes, it eliminates about 700 miles from all of the East Coast dealerships, which is good, but maybe more importantly, it gives us access to a skilled labor market that's approximately 6 times what we had in Kansas. So the facility is multipurpose built to optimize production while upholding those high manufacturing standards. And with that built-in capacity for future market share growth, it positions us to meet rising demand without compromising quality. Speaking of quality, our production ramp-up at the new facility has been carefully designed, right, to support both flexibility and long-term scalability. So that site upholds exceptionally high manufacturing standards and it's engineered to accommodate future model additions as demand grows. So you'll see that on the tour today. There's ample space for expansion. The infrastructure is already in place for that additional capacity when needed. Now equally important is the team that we're building here. I mentioned that East Tennessee is one of the bigger boat building or most populated building regions for boat builders and marine component suppliers. So that gives us access to a significant broader talent pool than we had in the past. This enables us to attract and develop a skilled workforce, essentially to maintain quality standards and driving those operational excellence projects.

And then vertical integration, that strategy puts a key role in this success. It gives us greater control over cost and quality and supply chain all while streamlining our manufacturing processes to better respond to the market recovery and the production ramp-up when it happens. So 1 example you'll see Rachael touched on it, was today, when we go to the tour, our wiring harness shop, is moved to the Roane County facility. So that really exemplifies how we're bringing those critical capabilities under one roof. So a great example of the MBI Advantage that Steve was speaking of is at Cobalt is the integration of Monsoon engines. A lot of you that know Malibu know that the Malibu has been building Monsoon engines for a while now several years. So we successfully brought that engine package into the Cobalt engine portfolio. So that move really reflects a broader strategy for vertical integration and complements our other engine brand offerings to add some flexibility and responsiveness. So by developing those in-house capabilities, we gained greater control over performance tuning and customization and speed to market. It also allows us to better alignment -- align with customer expectations and deliver a much more tailored experience. The Monsoon engine gives us a stronger horsepower to dollar ratio, which is important in the latest boating environment. It's going to enhance the value for the customers while improving cost control and supply chain resilience. So ultimately, this initiative is reducing complexity and shortening lead times, and it's enabling us to respond quickly to market needs, all while continuing to work collaboratively with our external partners where it makes sense.

So we've talked about our strong dealer network a few times now, but it's worth taking a minute to underscore just how foundational they are to our success. We're consistently the partner of choice as a best-selling sterndrive brand. We've got deep penetration into the key markets and long-standing relationships with our dealers. Our dealers are almost always right on the water, there -- that gives customers a chance to see the boats first hand, similar to what you experienced today, imagine lining that up next to a competitor model. So it's powerful in understanding the Cobalt difference by having that. And it also gives them a good point of service after the sale and being in that setting as most of our customers or a lot of our customers live on or near to water. So what sets us apart is the discipline behind our dealer strategy. So we take a highly data-driven approach to identifying untapped markets and apply rigorous criteria when selecting those partners. So we prioritize high-performing dealers, of course, who deliver exceptional service and align with the premium service experience that our customers really expect from the Cobalt brand. Whenever possible, we'll pursue exclusivity relationships with those dealers. And obviously, that avoids oversaturation and entrenched competition, really ensure that those dealers have the best support and opportunity to win. We've established a dealer advisory council to amplify that voice of the customer and voice of the dealer and that's going to ensure that we remain tightly aligned with those market needs. This collaboration really strengthens our role as a true strategic partner to our dealers, many of whom see us as the top of their revenue ladder. These aspects make Cobalt appealing, right, when partnering with new dealers, especially in that outboard segment, which we identified as growth and we'll reinforce that market share in those East regions where most of the outboards would be sold.

Product development. So if we look at the Innovate pillar of our build Innovate growth strategy, we recently launched those 4 new models that you see here, one of those being at the dock earlier this morning. And those all address different areas of the market, all the boats that were recently launched. We've introduced new features that allow for greater convenience and improved comfort, greater enjoyment on the water. We invest millions in R&D spending. We've got numerous projects in the IP pipeline right now, and we've launched 28 new models since MBI acquired Cobalt in 2017. So that's a greater rate than any of our competitors. So all this to say, we're deeply committed to innovation. We continually invest in new technologies, design advancements, performance enhancements. And all that keeps us ahead of the evolving customer expectations and industry trends. And that's going to really ensure that Cobalt stays on top.

The Monsoon, so this is another good case for innovation is our surf system. So the challenge we faced with this was having third-party surf control technology that put limitations on everything that we thought we could do or wanted to do for wave-shaping features because the system itself didn't have enough, call it, digital inputs to control extra surface shaping technology. So to address that, our team engineered some proprietary control system that allowed for the installation of additional, call it, dynamic tabs on the bottom of the boat that really amplify the effect of the Surf Gate, which Malibu brought over with the acquisition. And that has been pretty profound in wave shaping technology and is really taking the waves that we have that we're already industry leading really to the next level. So like I said, not only did this innovation allow for a better performance, it's much more affordable with the Monsoon package and address those needs and the surf market for continuously improving the surf wave.

So shifting to the growth pillar. Looking ahead, we're very well positioned to capitalize on the market recovery. The expanded output capacity is already in place across both facilities. And when the time is right, we are ready to go and return to those historical margins and revenues, which is just the first tab here. This is just when the market recovers. So on top of that, in addition to when that market returns, we intend to gain traction in that outboard segment. We built strong capabilities and have a really killer lineup of exciting new products on the horizon. Innovations, we believe will reignite share growth in that space, especially along the East Coast area. We're -- we continue to lead in the market for sterndrive surf performance. So that's driven by our ongoing enhancements and improvements and we're committed to investing in that space to really maintain our strength in an already dominant share position. And then we're focused on expanding those white space models. Those segments that we don't currently play, but we see a lot of opportunity for growth. So underpinning all that is the focus on operational excellence, executing growth initiatives through improved material cost management and labor efficiencies and just generally overall smart operational strategies that are going to support that long-term profitability and share growth.

So I'll wrap this up by noting that with our growth strategies clearly defined and momentum literally building in every single category, we're very excited about the future and where it goes for us. So with that, I think we are going to take a break, right, Chris?

[Break]

All right. Good morning. We'll go ahead and get started. My name is Christopher Gratz. I'm the Saltwater Vice President. And a little bit about myself. I like to joke that my career at Pursuit started when I was in third grade. Family got a well-loved Pursuit when I was in third grade, and I grew up boating on that. But on a more serious note, I started with the brand 20 years ago. I've been in the saltwater segment, my entire professional career, and I'm certainly fortunate because it really aligns with my passions. So as we look at saltwater and the key enablers that we see as unlocking growth, they're here in front of us. And the first and foremost is the diversity of the product line, and we'll touch on that in a minute, but we really have a very broad scope, especially when you look at our peers in the industry on the amount of -- the diversity in our portfolio in the different markets we serve. Second, we've got a very strong acquisition history. When Pursuit was onboarded, the investment and the strategy and the ability to unlock growth was very strong for the Pursuit brand. And we continue to work on that and that runway and trajectory with the MPG brand under the Saltwater Group. Within Saltwater, certainly have a house of iconic brands, very highly sought after in the dealer network. They seek doing business with us, again, because of the brand recognition, the brand history, the quality we provide and the margins and the contributions to their business and how it supports them. Within that, though, we certainly have opportunity to optimize within our dealer network. We're focused on that. And we also have opportunity to expand our geographic footprint. And then the last component you've heard as a through line throughout the day is our facility investments have been strong. We have capacity in place, and we're well poised for that mid-cycle growth and the additional growth we've been talking about throughout the morning. So the segment snapshot overall. Again, Saltwater is a very important component of MBI revenue overall at about 35%, $280 million. EBITDA in the $27 million range. Our geographic footprint on dealer locations, we've got about 150 locations, so a very strong footprint there and very deep-rooted dealer relationships that are over a decade at that 12-plus range on average. I already touched on the iconic brands. Our capacity is very impressive at just under 1 million square feet amongst the plants within Saltwater. And then we've got a portfolio of 44 models within the different brands when 7 -- we introduced 7 new models this past model year. One of those being the S 328, which you can see pictured there. And a lot of the brands -- all the 44 models, we certainly have a lot of award-winning models like this 328 that received the Boating Industry Top Products Award this past year. So again, that scope and breadth of the portfolio is significant, and this helps to highlight it. And hopefully, some of you guys got to see a small piece of that at the water this morning. But the portfolio ranges from 16 feet all the way up to 46 feet. And that's a pretty broad range. And if you look at the markets that, that serves, it's certainly notable as well. From a retail price standpoint, we enter the market in that $45,000 range, but we extend all the way up into the $1.4 million range of starting price with our products. If we look at Pursuit first, the differentiators there, certainly a luxury product. The quality expectation is very high. The quality appointments are certainly notable. But ultimately, that cross-functionality is a pillar and strength within the brand. And within Pursuit, we participate in 3 main categories within Saltwater, the center console, which we call sport category, the offshore cabin boat category as well as the dual console category. And then we shift over to Cobia, really focused on quality and functionality, but at a more reasonable level for the consumer base. And we participate with Cobia in both dual console segment and that center console segment. Both the Cobia and Pursuit product are considered offshore product. And then when we shift to Pathfinder, that's really termed nearshore. So lower freeboard, lower [indiscernible], easy boats to operate, easy boats to get out, enjoy the water, fish. They are certainly at their DNA. They're good fishing vessels, but they also have a lot of blend function, which is in line with consumer expectations for that multifunction and use and enjoyment on the water. And then as we shift to Hewes and Maverick, those are our skiff products. And Hewes and Maverick are designed for shallow water inshore use with Maverick being the most technical poling skiff where you actually go in the back country and you pol and you fish off of that product. But ultimately, the through line throughout the product is exceptional quality, diverse features, innovation and ultimately driving to deliver ultimate value to our consumer base.

So taking a look at the overall total addressable market within Saltwater, it's certainly notable here at $4 billion. You can see a representation of our share in that fiberglass outboard segment. It shouldn't be a surprised probably most in this room within fiberglass outboard, certainly, a lot of builders and models fall within that overall envelope. Grounding the discussion back to the mid-cycle we've been talking about this morning. If we baseline that off of fiscal year '25, we see about 40% growth within the Saltwater division on that mid-cycle recovery. And we're positioned very well to capture that volume with the capacity we have in place throughout our facilities. What we see unlocking that mid-cycle growth and turning that dial in the market are listed as our key drivers there. And certainly, the stability in overall economic macros are big. That certainly ties into shift in interest rate pressure. But new product, new technology that we've talked about, those unlock that growth as well and certainly a key focus. And then the last piece is, a long-term and sustained shift in this -- into outboard product has been a long trend and seems to continue. So taking advantage of that trend within our portfolio. So all that combined, certainly opportunity to grow within our market-leading position in this space. The build, innovate and grow components and how they relate to Saltwater. So under the build pillar, vertical integration is also key within our business. We've recently launched the tooling facilities within in the Saltwater -- on our Saltwater campus. And that product development is the lifeblood of all of what we do within all the brands. And so that's fundamentally important. So in that facility, we're building the [ molds ] that drive that new product development cycle. And it's really unlocked a lot of in-house capability for us. So we're not relying on third-party vendors for that process, which is key. And at this time, we're actually extended that, and we're building tooling across all brands within MBI.

We're building on customer experience programs, again, driving that unmatched customer experience in the industry is important to us. We've got a lot of customer programs that have targeted delivering that experience. We're continuing to grow and build on what those programs are and how we engage with our customers. And then from a dealer engagement standpoint, we're building on a pretty proven playbook within part of our Saltwater group. We're extending that across the Saltwater divisions to drive that dealer engagement, that dealer feedback and really feed that into how we build and innovate within the portfolio. On the innovation front, our product development pace is, again, certainly notable in the industry. We've released 7 new models within Saltwater in model year 2025. If we shift that focus over to MBG, we're working to evolve and create a next-gen portfolio within those brands, and I'll talk about that a little bit more later. And then we're also very focused on voice of customer, leveraging our long-standing processes, implementing new processes across the brands to ensure we hit the markets where the customers are at and with where their expectations are at. The growth pillar, we see growth within our share through dealer network expansion and optimization. Those are really key. We also see opportunities in white space, and that could look like white space internal to our existing product lanes or in adjacent spaces to our portfolio. And the last piece is really leveraging our operational excellence initiatives through efficiency, through supply chain management, Steve touched on earlier and continuing to improve the business on our operations.

So taking a look at an MBI Advantage point here. As MBI acquired Pursuit, you can see in that picture that in the [ foreground ] Plant 1, that was the extent of our footprint upon acquisition. And we were capacity constrained at that point. So if we then look over to the bar chart, you can see represented in gray there, that was actually contract build. So we certainly had margin pressure on that, and we weren't able to build to the marketplace. And so very quickly upon acquisition, we purchased 80 acres adjacent to our property. We set a pretty comprehensive strategic plan to build out 200,000 square feet on that space to introduce 3 new models and invest in the portfolio to create good ROI on that investment. And you can see we're able to capture that volume and capture that growth through the subsequent years. And all that, again, lines up to having that

capacity in place for that mid-cycle to return.

Taking a look at the operating efficiencies across Saltwater. If you think about building a 16-foot boat and a 46-foot boat, certainly, very different scale. So we are very strategic in how we lay out our production. We have deep production lines throughout all of Saltwater and we're very flexible with how we do that and it also creates lots of operational efficiencies within that.

One thing that allows us to do is really leverage and align to markets as the market moves and consumer demand and preference moves, we can align to that and leverage ASP opportunities and growth opportunities within Saltwater because of our flexibility there. How we've laid out that new facility, I referenced earlier was really focused around large boats and growing the portfolio within the Pursuit brand, and also enabled us to be one of the industry leaders in our cycle time to build large boats and be able to produce demand as that emerging market on larger outboards has grown.

I talked -- touched on vertical integration relative to tooling earlier, but it extends deeper within our brands as well. We also built all of our interior cabinetry on our cabin boats, wood and veneered surfaces, floors, all that furniture is built in-house at our facilities. We also build all of our exterior furniture, the poly, the cabinetry, the things that are on top sides of the boats. That's all built within our walls as well. We're vertically integrated in electrical harnesses, a key component to the construction. And then we also have canvas and upholstery capabilities in-house. All that's underpinned by a very passionate team. We're actually the largest manufacturing employer within the county, which creates a very, very large talent pool across our 5 plants. And we have the privilege and advantage that all 5 plants are actually very close in proximity. They're all within 1.5 mile to each other at our facilities in Fort Pierce, Florida. So the capacity is in place. The operational pieces are in place to really capture that mid-cycle demand that we're outlining here this morning.

Again, product development, the lifeblood of the business. You can see a handful of new model introductions there and a pretty broad range and where they target the market all the way from a 245 cc all the way up to a 388 sport on the Pursuit side. And then 305, hopefully, some of you guys got to get out and see trial earlier this morning. But one thing to highlight with how we think about new product development is we invest really from bow to stern and we invest kind of on full-scale projects. And so what that enables us to do with that level of investment is really take what we learn about the customer, what we learned about the markets and really embed that as we work from keel all the way to the top sides of the boats and make sure that we're addressing those consumer needs.

Focusing on premium features has been key across Saltwater and expectations are very high there and be very strategic with how we set up those options, and we're able to unlock growth potential there with those options as we work on the development projects. But all in all, this comprehensive approach really allows us to target products and align with that customer base, which is critical. If you look at our new product development pace, since with respective to acquisitions, which for Pursuit was in '18 and for MBG it was in 2020, we've released 28 new models to the market in that time frame. And we continue to have a very robust new product development pipeline as well.

So if we take a look at MBG and the integration of MBG, there were certainly some runway for the portfolio upon acquisition. And that first focus was within the Pathfinder brand and really working on the products and aligning with current consumer preferences and that multifunction and put a lot of investment in that area and certainly saw some good returns there. We've seen market share growth within Pathfinder, and we dropped the average age of that portfolio by 30% since acquisition. Then we started to shift focus in the last 12 to 18 months really to more pointedly at Cobia and again, same thing, making sure that we've got that multifunction, making sure we've got those fishing characteristics, bringing those technologies up to date, within that product line, and we've dropped the average age of that portfolio by 50%.

And then the last piece, again, is leveraging. Again, I talked about the proximity of our facilities and the capabilities we have across all the lines. We're able to leverage those operational facilities across the teams, adopt best practices, adopt best processes and really help drive efficiencies across the Saltwater brands and the efficiencies that come with those. The dealer network already touched on as well. That's certainly an opportunity as we work on that dealer network. And then all these are coming together on the operational efficiency front, we've seen actually a 30% reduction in our on-time delivery which has been fantastic, and that's in the recent history in the second half of '25. So leveraging this MBI advantage, evolving the portfolio, driving that innovation, certainly are all going to continue to help propel MBG as we look forward.

Shifting to the Pursuit product development strategy. Again, consumer insights have been key within this brand for a long time. We got a small picture there of one of our dealer council meetings. You can kind of see some snippets of renderings. But behind that, there's actually a full-scale mockup, that vessel was significant length. So it doesn't matter if it's a 20-foot or 44-foot, we build the entire thing out of plywood and cardboard. We bring focus groups in. We bring our dealer councils in, we use that as a platform for feedback. So really understanding the consumer and targeting the consumer is key.

Also doing deep dives into the market and understanding white space. And the white space might come in different forms. Like I said, it could come internal to the portfolio. It could come in adjacent areas of the portfolio, some white space. You've got to make other portfolio moves to create and unlock that -- unlock those markets. So that's a key component to the product development strategy for Pursuit. And all that coming together with a very strong portfolio in those 3 categories that I mentioned earlier between sports, dual consoles and offshores. And within the competitive set, we have an industry-leading average portfolio age for that Pursuit product. So if we think about the growth strategy to get to that mid-cycle recovery, again, with that capacity in place to meet the demand, $400 million revenue over the 2025 targets. We've got a 16% EBITDA at that baseline. But then the team is laser-focused on the outperformance initiatives, and that strategy that combine that share growth, those white space initiatives and our operational excellence initiatives that would drive that to an incremental 300 basis point increase on the EBITDA and a $520 million revenue point.

So amongst Saltwater, certainly excited. We've got a bright outlook in front of us, and we're hard at work driving these overperformance initiatives and executing on what we discussed this morning. And with that, I will turn it over to Bruce Beckman, our CFO.

So hello again. I'm Bruce Beckman, CFO of Malibu. I've been at Malibu for nearly 2 years. I've been kind of working in public manufacturing companies for over 30 years, companies that are known for their innovation, their quality people, premium brands, operational excellence and value creation. And I joined Malibu because I see all of these capabilities and core strengths and I see the potential that we have for growth going forward, and I'm excited to share that with you today.

So I'm excited to discuss the power of our business model to demonstrate how we are poised for significant growth and value creation. We have several key growth enablers that I'll unpack for you today. The first one is the return of the market to mid-cycle levels represents a significant growth opportunity from where we stand today. Second, we have numerous opportunities to outperform on both market share and margin. Three, our past investments in capacity and our dynamic business model will enable increasing levels of free cash flow generation. And our disciplined approach to capital allocation combined with our proven M&A track record, provide us with additional growth and value creation opportunities that go beyond the numbers that we'll be discussing today. It's no secret to any of you that the last few years have been a challenging period with the marine industry in the fifth year of a down cycle. There are many macroeconomic factors contributing to this down cycle, principal among them high interest rates. However, we are encouraged that participation and interest in boating remains high, and we are also encouraged by the recent Fed rate cut. In our 40 years, in the industry, we've seen this movie before, and we are confident that the industry will turn. When we think about a more normalized environment, we think about the average of the pre-COVID 2017 to 2019 period. During that period of time, the market was roughly 196,000 units, about 40% higher from where we stand today. So we have a -- definitely have a strong opportunity for growth as the company or as the industry returns to mid-cycle. There are several phases to every market cycle. And with the industry in decline over the last couple of years, we've been in the phase where our wholesale shipments have needed to be below retail demand in order to maintain dealer health. We were among the first in the industry to respond in fiscal '24 and have remained clearly focused on dealer health since that time. The blue checked box in the center of the slide really highlights where we find ourselves today. And I think I'll take this moment to reaffirm the guidance that we gave a month ago for fiscal year '26. We are expecting the markets in which we compete to be down mid- to high single digits and for our revenue to be flat to down mid-single digits and our adjusted EBITDA to be between 8% and 9%. And the next phase of the market is when the market flattens when the retail market flattens out. At this point, we no longer need to continue to reduce channel inventories and are able to return the company to growth simply by allowing our wholesale volumes to track with retail. The last and the most exciting phase, of course, is when the market returns to growth. At this point, our wholesale volumes will benefit from not only the increased retail activity but also a restocking of the channel essentially the reverse of what we've been experiencing for the last couple of years. We are excited by the growth potential of our company and this illustrative revenue bridge brings that to life.

First, a return of the market to mid-cycle levels at our current market share, will enable us to grow our revenue to $1.3 billion, and that represents 60% growth over where we are today. At mid-cycle, these initiatives provide a second -- our division leaders described for you moments ago, how many initiatives they have in place to drive served market expansion and market share gains. And in mid-cycle, these initiatives provide a framework for our performance, enabling our revenue to achieve $1.5 billion, over 80% growth from our current levels. And even more compelling, these revenue figures do not include any revenue from future capital allocation, I'll talk about that more in a minute. So these are really kind of the business that we have today. So very compelling growth opportunity. And importantly, we already have the capacity in place to support this growth with upside remaining. Over the last 5 years, we've done the hard work of expanding our production facilities, first in Pursuit then in the Maverick Boat Group and most recently in Cobalt. These capacity expansions have put us in position to support a mid-cycle market as well as the outperformance framework that division leaders shared with you with additional capacity to remain -- remaining to support an even stronger market. But 1 of the lessons from COVID was you can't always predict the next surge of market demand. and you can't fight for market share when you're out of capacity. So we really have made that a focus and are excited to have that capacity in place to support. And with these capacity expansions behind us, it will be a key enabler of increasing our free cash flow conversion rate, and I'll discuss that a little bit more in a second as well.

So in addition to available capacity, we have a very flexible business model ready to support growth. Our cost structure is highly variable, 80% to 90% variable with the vast majority of that being in materials and direct labor. Our factories are also capital efficient, and our manufacturing processes do not rely on expensive robots or automation equipment. This flexibility allows us to scale up to support growth and scale down to preserve profitability and cash in a downturn.

Operational efficiency on the right-hand side of the page has long been a strength of our company and the reason for our industry-leading margins. We intend to build on that strength by adding centralized sourcing and supply chain management as a new vector of efficiency while maintaining our focus on vertical integration and continuous improvement. Simply put, our business is built to achieve profitable growth. Our revenue and operational efficiency is a powerful combination as this illustrative margin bridge demonstrates. A return of the market to mid-cycle levels will enable our business model to generate adjusted EBITDA margins of 17.5% by simply leveraging our current cost structure, including the outperformance framework, divisional efficiency and market share initiatives shared earlier, the margin opportunity grows by 250 basis points. In combination, a return to mid-cycle market and our outperformance framework will enable our business model to achieve adjusted EBITDA levels of 20%. Before I leave this slide, it's important for you to know that we are not waiting for the mid-cycle market to begin capitalizing on the 250 basis points of outperformance opportunities.

Turning our attention to cash flow. And on this slide, specifically CapEx. Since fiscal year '20, we have invested roughly $100 million in facility expansions as indicated by the dark blue boxes on these bars. With the facility expansions behind us and the capacity in place, we can support our ongoing growth initiatives and innovation with a much lower level of CapEx. In the near term, we are expecting CapEx to be between $30 million to $35 million per year. And longer term, we'd expect CapEx to sustain at roughly 3% of sales per year. Our history of strong and consistent free cash flow is a testament to our resilient and capital-efficient business model. Even in the challenging markets of the last couple of years, we've continued to generate healthy levels of free cash flow, thanks to our highly variable cost structure and working capital efficiency. While past is impressive, the future is even more exciting. The combination of volume leverage, margin expansion, moderating CapEx is a winning formula for increasing free cash flow conversion. In combination, a return to a mid-cycle market and our divisional outperformance initiatives will enable our business model to support $200 million of free cash flow at a 65% free cash flow conversion rate. Let me say that again, $200 million of free cash flow and a 65% free cash flow conversion rate. We have weathered the recent market challenge as well and have a very strong financial foundation. We are net cash positive and with over $300 million of available liquidity. And as you can tell from the previous page, we are poised to generate significant amounts of cash. We have a well-established and very disciplined approach to capital allocation. First, we will continue to prioritize organic investment. And as we've been discussing today, we have many exciting initiatives to invest in. Second, we will continue to look for value-creating acquisition opportunities. I'll discuss that more in a minute. Third, when we have debt, we will prioritize paying that debt down as quickly as possible. And lastly, we will not allow cash to build up on our balance sheet as we have done with $65 million of stock buybacks that we've executed over the last 2 fiscal years.

Digging a little deeper into M&A. MBI has a proven track record of successful M&A. As you can see on the right-hand side of the page, we -- the premium brands that we have acquired over the last 10 years are among the most respected names in the industry. We have generated strong returns since making those acquisitions with EBITDA far exceeding the purchase price of those businesses. And these acquisitions have made us a much stronger company. with more scale advantages and growth opportunities. Many of the MBI advantages that Steve discussed earlier, particularly those in procurement and dealer network, are directly related to the enhanced scale provided by these acquisitions. And as you heard earlier from Jason and Chris, their businesses have benefited from becoming part of the MBI company. We are stronger together truly a win-win. So we have a high bar for M&A. While the M&A market has been slow recently, we're actively looking for value-creating opportunities and have the dry powder available to execute. We are looking for M&A opportunities with strong growth potential. Companies that give us the opportunity to expand into new markets and enhance our MBI Advantage. We are looking for companies that are a good strategic fit and specifically premium brands with strong synergy potential. And most importantly, we have clear financial guidelines for M&A. While we are willing to take on additional leverage up to 2.5x for the right acquisition, we will immediately prioritize debt pay down. And second, we are highly focused on value creation and ensuring returns above the cost of capital. To repeat, we have a high bar for M&A. The illustrative framework slide here summarizes the opportunities well. And since we've already discussed everything on this page, I won't take you through it again. But I will take a moment to highlight a couple of the key numbers on this page. First of all, a $1.5 billion revenue opportunity, 20% adjusted EBITDA opportunity and $200 million free cash flow opportunity. We are poised to create significant returns for our shareholders and are very excited about the future of our company. I want to thank everyone for joining us today. And now I'd like to turn it back over to Steve for some closing remarks.

Thanks, Bruce. I get asked all the time. That's not my kids, and I don't have a dog and so forth. But the kids -- we were out surfing Sunday night with the whole family, so it's always fun to enjoy your product. Let me close it up 1 slide. We have a simple, yet powerful strategy, right? Build, innovate and grow. It's going to drive our company into the future. And when you think about reasons to believe, you just look over to the right in having that market leader in our brands with the capacity to really leverage the mid-cycle and beyond, having that constant pace of innovation driving that, listening to customers, driving that voice of customer into our products, doing the right things to continue to grow there, white space opportunities across all our brands we're excited about. We're going to continue to control our controls with operational excellence, vertical integration, really look to that. And as Bruce just said, right, a high bar for acquisitions to make sure we add a premium brand when it's time, when it's right, for our business, we'll add those premium brands and then continue that strong cash flow and balance sheet. So we're excited about the future in our company. We have a great team. I want to thank the team, all the folks, the boat drivers, the team, Teresa, Kathy, [ Christine ], who put this all in everyone who helped them, they did a phenomenal job this morning. And we're not done yet. We still have a Q&A to go then lunch and then a tour, right? So great job by the team. Thank you for that. So we're going to set up here for about 5 minutes, and I get the chairs up, and then we'll open up the Q&A session. So thanks, everyone.

[Break]

All right. Thank you. We'll go ahead and get started with Q&A portion. So we'll have about 20 to 30 minutes on Q&A. I think lunch will be served at 12:15. So we can probably break early for that. So as a reminder, please leverage the

QR code and also for those attending virtually as well, you can submit questions. We'll be passing mics around so you're unable to access the QR code. We'll take questions live as well. [Operator Instructions]

So with that, let's go ahead and get kick-started.

So first question comes from Gerrick Johnson at Seaport.

Well, my actual first question is, can you talk about the logo? What does that mean? But the other question I want to ask you is about central sourcing. I guess that means across all of your categories? And would that require more standardization and manufacturing reengineering. What are the financial opportunities...

So I'll take that one. First off, the logo is water -- [ alchemy ] for water. So there's actually a connection to answer that question. And then yes, central sourcing, we've actually centralized the team there. We've actually installed category managers in. So the expertise in a vertical, right? So it could be resins and plastics and so forth, electronics and so on. So we're building that internally and the team, and we're continuing to build that out.

So that just got underway here in January. And we're pooling all of the volume of all of our businesses together, and we'll continue to do that. As far as what will that return to us, we're working through that right now and looking for those opportunities as we kind of gain that scale and that team comes together. So more to come on that when we look at how that will help our margins, but it will definitely help our margins. We're just getting our hands around the size and think about 4 different companies coming together and trying to centralize that. So we're on the path the right way of setting the foundation, and then we'll be able to leverage that as we move to the future.

Scott Stringer from Wolfe Research. There's a lot of talk on the white space across every category. So wondering like what is the lowest hanging fruit there or maybe like the nearest term tailwind to that specifically?

Sure. The guys in each division and Rachael, you want to talk about some areas that you're thinking about in terms of white space, some segments maybe.

Yes. I'll start with saying in the Malibu segment, I'll point back to some of the things we had up on the slide there, some of the successes we've had in our recent white spaces, the 26 LSV and the Axis T250. They were both some of the largest and one of the first into those segments. And we saw great success with that. In those categories, we were seeing some of the highest market share for those categories, the 26-foot premium and then the 25 foot Axis entry category. So we're continuing to look for opportunities like that, not just in the new boats, but in also on new products and features as well. And so we're going to lean into those categories, into the successes we've had and continue to look for -- identify and translate that as we go forward.

Yes. For Cobalt, some similarities there, we're still kind of exploring what those segments are, but interested in larger boats and also looking at some of the different lifestyle segments that are going on right now to see if our brand could support a different style in a different segment.

And then in Saltwater, if you think about the lowest hanging fruit, it's kind of those opportunities that lie kind of within your existing product categories or immediately adjacent. So there are certainly opportunities in both of those areas across all Saltwater and those are the ones that we're focused on first and foremost.

Next question is from Tim Abbott at Twin Lions.

Yes, I was just wondering if you guys could share any more details on the MBI acceptance initiative and then specifically for -- I think you mentioned low interest or deferred interest type promotions that you might be offering through that. Curious kind of how the economics work there and how the cost of those promotions is shared with the financing partner.

Sure. We go deeper into that section. So it is, like I said, a strategic alliance between Wells that we will be helping on the wholesale side and Aqua on the retail side, working with our dealer partners and helping them be more efficient and so forth. The tools that we can offer, and we're testing right now, we're going to go out and test with Malibu only, and then we'll propagate across our other brands. but there are going to be things like no payment for 6 months, $499 financing, see how that works. So think about financing for those who are close to it, right? There are rates that drive floor traffic, there are closing rates. There are 2 different things. You can offer a 0% financing, not many people get closed on that rate, but it does drive traffic to your stores. So we have marketing opportunities with some of the financial products. We have closing opportunities with some of the financial products. We have extended service contracts that we can play, extended warranties and so on. So we're going to test all of those, Tim, and see where we can kind of find where the consumers are at and so forth. But that is a new capability opportunity that we haven't had before that we can help with our dealers, and we'll listen to our dealers and get that feedback. But it's an array of opportunities that you see other companies offer that we can start offering now.

And we have surveyed some of our customers, of like their interest in getting financing from the manufacturer. Would that be something that they would would value, and we've gotten pretty positive survey results and things like that. So then it becomes, again, another tool for the dealers to leverage to drive traffic and closing.

And just so you're aware, as you see it in the marketplace, it will be branded by the brand. So it will be Cobalt acceptance or Cobalt Financing and so on, Malibu and so on. You won't see MBI acceptance out in the marketplace. That was only for us to talk about it here today, but we want to make sure it's branded as we go to market.

Perfect. Next question is from Anna at B. Riley.

Can you speak to the difference in upside opportunity to get to those mid-cycle revenue growth targets by segment? Is it a function of submarket segment growth opportunity as you get to a more mid-cycle growth rate? Is it speaking to kind of the various elements that have affected those segments through macro and maybe some are less macro sensitive and thus have less upside? Just anything there?

Yes. There's -- it's really a function of 2 things. It was what was the average market size in those years. And then what was -- what is our current market share. And you do see some differences between the businesses. First of all, Saltwater didn't go up as much during COVID and then it did -- it hasn't declined as much afterwards. That's a difference. But also like in our Cobalt business, since we acquired Cobalt was kind of at the beginning of that 2017 to 2019 period, we've increased our market share by over 500% since then. So higher market share of a market that returns to those levels also yields more opportunities. So that's why you see some of those differences across businesses.

Joe, I see you struggling with the QR code. Did you have a question?

Joe Altobello, Raymond James. Steve, you mentioned expanding the ecosystem to parts and accessories and technology and services earlier. I guess one, if we dream the dream, how big could that party ecosystem be for you as a percentage of revenue? And two, does that require incremental investment somewhere on the P&L?

Sure. the market, like we said, is it really doubles for our total available market. When we look at opportunities for us, we can partner. We've talked to a lot of partners. There's a lot of opportunities for us to bring products to market through partnerships, through strategic alliances, our own development. So we're looking at all opportunities to how to enter the market. We're going to start with what we know right now, vertical integration. We already have a smaller manufacturer that actually signed with us, and we're testing out how to be a good partner and supplier to them as well as we go. So those are all good. As we kind of look at opportunities to invest, we will be investing in certain areas to add more products to our portfolio. But again, as Bruce pointed out, it's a pretty high bar as we kind of build that business and we want to make sure we're doing the right things, we can control the quality, be a good supplier as well as propagate that across our products as well. So we create that leverage and that scale advantage for the people who are going to buy from us. So think about when you have an embedded base like we do and we're starting to offer those parts, you're already starting with getting the scale of MBI in those components. So we're pretty excited about that.

Anyone else have an issue with the QR code, just feel free to raise your hand and we'll get the mic over your hands.

Going old school?

Yes. We've doing the old school way.

It's Craig from Baird. Maybe address the acquisition criteria that you have, Bruce and it never seems like the right time. You might be at the bottom of the cycle and people don't want to sell or you're at the top of the cycle, and you might not want to buy. So when is the right time to buy a brand? What are the criteria? And are there any specific boat categories that are particularly appealing?

Well, I mean, you can want to buy companies all day long when you have to have somebody willing to sell a company to use. So there is -- it really -- it's it's hard to dictate that. You can't really dictate that to the seller. So you have to find that happy medium of when it makes sense for you and it makes sense for them. When we think about it, we think about what is the value creation opportunity, where do we have synergy opportunities like we've talked a lot about centralized sourcing and some of those initiatives. Well, those are initiatives that we have that opportunity because we've done some of these acquisitions, we have more scale and that gives us the opportunity to create more synergy on the next deal. Similarly, we have a dealer network that's the envy of the industry. So there are companies that we could potentially use that dealer network to drive significant revenue synergies. So it really is what is the value creation opportunity what is the value of the brand that we might be talking about and where can we add value to it.

I think like for folks that are learning our business, we've added a corporate development department. We're out talking to people on a consistent basis that makes sense. So we're actively working, meeting new people in the current businesses, creating relationships and so forth.

We have a question from the online audience. Can you speak more about your vertical integration strategy and sheet metal capabilities within Malibu Boats?

Sure. We've had quite a bit of success in the vertical integration. As I noted, all the way, going all the way back to Towers and then [ soft grip and engines ]. But most recently was in the sheet metal capability. That's the facility or a site that we used some of our facility and we're able to use the components that are coming out of there and everything from our trailers, our engines and even into our boats. This allowed us to control supply chain, reduce any risk there, also control the cost and quicker design evolution cycle so that we can get to market faster with some of these features. So it's provided quite a bit of benefit, not only from the supply chain, but from the design and the quality side of it as well.

Next question is from -- go ahead.

Eric Wold, Texas Capital. Bruce, you made the comment on the margin slide that the 250 basis points, you didn't have to wait to get back to mid-cycle to realize that. Maybe dive a little bit more into that, your ability to do that, how quickly you could and what components of that can be realized without getting back to volume.

Sure. I mean we talked about operational excellence and some of our initiatives around margin expansion. That was roughly half of that 250 basis point opportunity and we can -- we're actively going after that now. Certainly, at a mid-cycle market, you probably get a little lift there. That's really on the market share, the market share component of that was based on a mid-cycle market. So if the market is better, maybe that bar is a little bit bigger if the market is a little bit lower, maybe it's a little bit lower, but it's roughly half and half.

Next question is from Noah at KeyBanc in the back.

Maybe to kind of follow on there. And in some ways, this is like maybe the million-dollar question, but kind of how do you think about what needs to happen for the industry to get back towards kind of 2017 to '19 volume levels? And then within that, what gives you I guess, comfortability that that's kind of the right level to think about in terms of mid-cycle?

Yes. Well, I mean, there's a number of -- it's not 1 factor that put the industry into a 5-year down cycle, and it probably won't be one factor that gets it out. But I would say if there's one to highlight, I would say interest rates is probably the 1 to highlight. We track what percentage of our boat sales are made and primarily purchased with cash versus primarily finance, and we've seen that pendulum swing towards cash. So we know in our own business that we've seen the payment buyers step back. So we -- consumer rates need to fall more than they have. I mean they're not where they were at the peak, but they need to fall more. We think to bring that payment buyer back. We're excited about this MBI acceptance. It's a tool for us to give to our dealers to reach out to their payment-sensitive buyers and give them something to get excited about and hopefully, a new tool to close sale with them and something that's not available to all of our competitors. The industry is not within our control. I mean, the last time we had an industry decline of this length and time was right after the Great Recession. And the market went on basically a 10-year growth run after that. And I know -- I mean, you guys were -- some of you were probably in this industry then, I certainly wasn't. But when people predicted the industry is about to go on a 10-year run back in 2012. So many factors we'll see. But we're prepared to support it. And frankly, we don't need it to actually grow to actually return our company to growth. We just needed to stop declining.

Next question is from Andy, Laird Group.

I was wondering if you could talk about cross-pollination of dealers. I mean in the videos, they talked about improvements in their business when they were a Cobalt dealer and then became a Malibu dealer or some of the instances of getting Maverick Boat group and Pursuit together. Is there anything like qualitatively or quantitatively, you can share that the improvements that either Malibu sees from a margin or growth perspective or the dealer themselves when they cross-pollinate different brands amongst dealership?

I'll start and they can add to it is when we first interact with from an MBI perspective, what are the tools that we're actually using in all the brands when they were -- when each brand was individual, they didn't have the breadth of tools. They didn't have the support that's necessary. So all of our brands are getting returned to co-op, right? So that's -- that sharing cost sharing model, right, where you get the dealers' marketing in the local market. When we look at CSIs, how do you handle service CSI, sales CSI, training, all the things that we can do. So MBI brings a level of tools and professionalism to our brands. And then when you start seeing the dealers mingle Malibu to co-op or the Saltwater brands, those best practice sharing in those retail best practice sharing that start to go across each brand and you start seeing some leverage there in the local markets as well as they're only dealing with that us as one supplier versus multiple suppliers or OEMs and you start to get the confidence in the OEMs, the support of the OEMs. If you look at how that really works, think about all the second and third-tier brands, they were able to come alive through COVID, but now are getting shed, right, because of the lack of focus on those brands. And now they can refocus on the premium brands like we have, and that's what we're leveraging to make sure that if a dealer has multiple brands of MBI, they're getting all the tools, the full suite of tools and a full suite of support from the overall organization.

Yes, I certainly echo that. Zach at [ Route 113 ] made that comment about Maverick Group and Pursuit. And I think the other thing it does is the scope and breadth amongst Malibu lets them address this market in ways that he couldn't before, with a backer and a partner that's got his scope and breadth of tools that he's used to that business relationship with, that he has confidence in and lets them like quickly expand this business. And I think that's how we highlighted in that [indiscernible].

Our next question from the virtual audience. Can you speak more about your expansion into outboard within the Cobalt segment? How do you view that market? And what initiatives are you taking?

Cobalt probably got started in the outboard segment a little bit later than the competition and establishing our brand name in the outboard market is still something that we're working to do. I think there's a lot of upside, like I mentioned in the slides on some of the products and innovations that we have on the horizon to better capture that space as well as some other dealer opportunities on the on the East Coast. So those are all things that we're looking into that we think will take us to that next level and grow share.

Any other questions in-person, in audience? With that, I think we'll wrap up here. We have lunch served here at 12:15 in the next room. So you guys can feel free to make your way there. And then we have desert outside by the boats. So feel free to after lunch take a tour and get to see some of the boats live.

All right. Thank you.

Thanks guys.