SOURCE: Malibu Boats

Malibu Boats

May 03, 2017 07:00 ET

Malibu Boats, Inc. Announces Third Quarter Fiscal 2017 Results

LOUDON, TN--(Marketwired - May 03, 2017) - Malibu Boats, Inc. (NASDAQ: MBUU) today announced its financial results for the third quarter of fiscal 2017 ended March 31, 2017.

Highlights for the Third Quarter of Fiscal 2017

  • Net sales increased 12.6% to $77.1 million compared to the third quarter of fiscal 2016.
  • Unit volume increased 10.4% to 1,054 boats compared to the third quarter of fiscal 2016.
  • Net sales per unit increased 2.0% to $73,196 and net sales per unit in the U.S. increased 1.2% to $72,749 compared to the third quarter of fiscal 2016.
  • Gross profit increased 16.1% to $21.4 million compared to the third quarter of fiscal 2016.
  • Net income increased 35.9% to $8.8 million, or $0.45 per share compared to the third quarter of fiscal 2016.
  • Adjusted EBITDA increased 19.0% to $16.8 million compared to the third quarter of fiscal 2016.
  • Adjusted fully distributed net income increased 22.2% to $9.4 million compared to the third quarter of fiscal 2016.
  • Adjusted fully distributed net income per share increased 22.5% to $0.49 on a fully distributed weighted average share count of 19.3 million shares of Class A Common Stock as compared to the third quarter of fiscal 2016.

Jack Springer, Chief Executive Officer, stated, "We continue to experience strong growth and performance at Malibu. Our unit sales, revenue, gross profit, net income and Adjusted EBITDA are all company records for our fiscal third quarter. Our business in the United States continues to experience good growth while Canada is performing slightly better than last year and Australia remains consistently strong for Malibu. Our market share remains at record levels and our best-in-class operations continue to drive strong margins.

"Malibu's leadership delivering new product to market continues, led by the strength of demand for our new boats for 2017 as well as innovations and features that surpass the competition. In addition, our new product platform is generating demand and we have every confidence this trend will continue into the foreseeable future."

Mr. Springer continued, "We are pleased to see the slight rebound in Canada this year despite currency rates being high and the oil and gas environment still soft. Demand in other parts of the world remains soft and we expect that those areas will remain flat. However, we are confident that North America will continue to grow, with the U.S. domestic market leading the way."

  
Results of Operations for the Third Quarter of Fiscal 2017 
  
  Three Months Ended March 31,  Nine Months Ended March 31, 
  2017  2016  2017  2016 
  (In thousands, except unit and per unit data) 
Net sales  $77,149   $68,539   $206,831   $186,285  
Cost of sales   55,787    50,133    151,833    137,290  
  Gross profit   21,362    18,406    54,998    48,995  
Operating expenses:                     
Selling and marketing   1,789    1,574    6,362    5,998  
General and administrative   5,997    4,462    15,514    13,281  
Amortization   550    545    1,649    1,637  
 Operating income   13,026    11,825    31,473    28,079  
Other expense, net:                     
Other income   41    40    116    64  
Interest expense   (416 )  (1,249 )  (883 )  (2,927 )
 Other expense, net   (375 )  (1,209 )  (767 )  (2,863 )
Income before provision for income taxes   12,651    10,616    30,706    25,216  
Provision for income taxes   3,805    4,109    9,897    9,011  
  Net income   8,846    6,507    20,809    16,205  
Net income attributable to non-controlling interest   833    731    2,115    1,767  
  Net income attributable to Malibu Boats, Inc. $8,013  $5,776   18,694   14,438 
                 
Unit volumes   1,054    955    2,811    2,647  
Net sales per unit  $73,196   $71,769   $73,579   $70,376  
                 

Comparison of the Third Quarter Ended March 31, 2017 to the Third Quarter Ended March 31, 2016

Net sales for the three months ended March 31, 2017 increased $8.6 million, or 12.6%, to $77.1 million as compared to the three months ended March 31, 2016. Included in net sales for each of the three months ended March 31, 2017 and March 31, 2016 were net sales of $5.5 million, attributable to our Australian business. Unit volume for the three months ended March 31, 2017 increased 99 units, or 10.4%, to 1,054 units as compared to the three months ended March 31, 2016 driven by demand for our new models such as the Malibu Wakesetter 21 VLX and 22 and 24 MXZs. Net sales per unit increased 2.0% to $73,196 per unit for the three months ended March 31, 2017 compared to the three months ended March 31, 2016, primarily driven by year over year price increases and lower discount activity, offset by a mix shift to our new Response and 21 VLX models. Net sales per unit in the U.S. increased 1.2% to $72,749 for the three months ended March 31, 2017 compared to the three months ended March 31, 2016.

Cost of sales for the three months ended March 31, 2017 increased $5.7 million, or 11.3%, to $55.8 million as compared to the three months ended March 31, 2016. The increase in cost of sales was driven primarily by increased volumes, higher labor costs per unit, and an increase in warranty expense. Included in cost of sales were $0.1 million in costs related to our engines vertical integration initiative.

Gross profit for the three months ended March 31, 2017 increased $3.0 million, or 16.1%, to $21.4 million compared to the three months ended March 31, 2016. The increase in gross profit was due mainly to higher volumes. Gross margin for the three months ended March 31, 2017 increased 80 basis points from 26.9% to 27.7% over the same period in the prior fiscal year. The increase in gross margin was driven primarily by lower material cost per unit, offset by increases in labor and warranty expense.

Selling and marketing expenses for the three month period ended March 31, 2017 increased $0.2 million or 13.7%, compared to the three months ended March 31, 2016. As a percentage of sales, selling and marketing expenses were flat over the same period. General and administrative expenses for the three months ended March 31, 2017 increased $1.5 million, or 34.4%, to $6.0 million as compared to the three months ended March 31, 2016, largely due to an increase in legal expenses incurred in connection with ongoing litigation matters as well as higher incentive compensation and development costs associated with our engines vertical integration initiative which we initiated in fiscal year 2017.

Operating income for the third quarter of fiscal 2017 increased to $13.0 million from $11.8 million in the third quarter of fiscal 2016. Net income for the third quarter of fiscal 2017 increased 35.9% to $8.8 million while net income margin increased to 11.5% from 9.5% in the third quarter of fiscal 2016. Adjusted EBITDA in the third quarter of fiscal 2017 increased 19.0% to $16.8 million from $14.1 million, while Adjusted EBITDA margin increased to 21.8% from 20.6% in the third quarter of fiscal 2016.

Webcast and Conference Call Information

The Company will host a webcast and conference call to discuss third quarter fiscal 2017 results on Wednesday, May 3, 2017, at 8:30 a.m. Eastern Time. Investors and analysts can participate on the conference call by dialing (855) 433-0928 or (484) 756-4263 and using Conference ID #10710106.

Alternatively, interested parties can listen to a live webcast of the conference call by logging on to the Investor Relations section on the Company's website at http://investors.malibuboats.com. A replay of the webcast will also be archived on the Company's website for twelve months.

About Malibu Boats, Inc.

Malibu Boats is a leading designer, manufacturer and marketer of performance sport boats, with the #1 market share position in the United States since 2010. The Company has two brands of performance sport boats, Malibu and Axis Wake Research (Axis). Since inception in 1982, the Company has been a consistent innovator in the powerboat industry, designing products that appeal to an expanding range of recreational boaters and water sports enthusiasts whose passion for boating and water sports is a key aspect of their lifestyle.

Forward Looking Statements

This press release includes forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Forward-looking statements can be identified by such words and phrases as "believes," "anticipates," "expects," "intends," "estimates," "may," "will," "should," "continue" and similar expressions, comparable terminology or the negative thereof, and includes the statement in this press release regarding the expected demand and outlook for our product.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including, but not limited to: general industry, economic and business conditions, demand for our products, changes in consumer preferences, competition within our industry, our reliance on our network of independent dealers, our ability to manage our manufacturing levels and our large fixed cost base, the successful introduction of our new products, and other factors affecting us detailed from time to time in our filings with the Securities and Exchange Commission. Many of these risks and uncertainties are outside our control, and there may be other risks and uncertainties which we do not currently anticipate because they relate to events and depend on circumstances that may or may not occur in the future. Although we believe that the expectations reflected in any forward-looking statements are based on reasonable assumptions at the time made, we can give no assurance that our expectations will be achieved. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation (and we expressly disclaim any obligation) to update or supplement any forward-looking statements that may become untrue because of subsequent events, whether because of new information, future events, changes in assumptions or otherwise. Comparison of results for current and prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

Use and Definition of Non-GAAP Financial Measures

This release includes the following financial measures defined as non-GAAP financial measures by the SEC: Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted Fully Distributed Net Income. These measures have limitations as analytical tools and should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historical costs of depreciable assets. Our presentation of these non-GAAP financial measures should also not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our computations of these non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.

We define Adjusted EBITDA as earnings before interest expense, income taxes, depreciation, amortization and non-cash, non-recurring or non-operating expenses, including certain professional fees, acquisition and integration related expenses, non-cash compensation expense and certain product development costs. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net sales. Adjusted EBITDA and Adjusted EBITDA Margin are not measures of net income as determined by GAAP. Management believes Adjusted EBITDA and Adjusted EBITDA Margin are useful because they allow management to evaluate our operating performance and compare the results of our operations from period to period and against our peers without regard to our financing methods, capital structure and non-recurring or non-operating expenses. We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures, the methods by which assets were acquired and other factors.

We define Adjusted Fully Distributed Net Income as net income attributable to Malibu Boats, Inc. (i) excluding income tax expense, (ii) excluding the effect of non-recurring or non-cash items, (iii) assuming the exchange of all Units ("LLC Units") of Malibu Boats Holdings, LLC (the "LLC") into shares of Class A Common Stock, which results in the elimination of non-controlling interest in the LLC, and (iv) reflecting an adjustment for income tax expense on fully distributed net income before income taxes (assuming no income attributable to non-controlling interests) at our estimated effective income tax rate. Adjusted Fully Distributed Net Income is a non-GAAP financial measure because it represents net income attributable to Malibu Boats, Inc, before non-recurring or non-cash items and the effects of non-controlling interests in the LLC. We use Adjusted Fully Distributed Net Income to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with GAAP, provides a more complete understanding of factors and trends affecting our business than GAAP measures alone. We believe Adjusted Fully Distributed Net Income assists our board of directors, management and investors in comparing our net income on a consistent basis from period to period because it removes non-cash or non-recurring items, and eliminates the variability of non-controlling interest as a result of member exchanges of LLC Units into shares of Class A Common Stock. In addition, because Adjusted Fully Distributed Net Income is susceptible to varying calculations, the Adjusted Fully Distributed Net Income measures, as presented in this press release, may differ from and may, therefore, not be comparable to similarly titled measures used by other companies.

A reconciliation of our net income as determined in accordance with GAAP to Adjusted EBITDA and Adjusted EBITDA Margin, and of our net income attributable to Malibu Boats, Inc. to Adjusted Fully Distributed Net Income is provided under "Reconciliation of Non-GAAP Financial Measures".

  
MALIBU BOATS, INC. AND SUBSIDIARIES 
  
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) 
(In thousands, except share and per share data) 
  
  Three Months Ended March 31,  Nine Months Ended March 31, 
  2017  2016  2017  2016 
Net sales  $77,149   $68,539   $206,831   $186,285  
Cost of sales   55,787    50,133    151,833    137,290  
Gross profit   21,362    18,406    54,998    48,995  
Operating expenses:                     
 Selling and marketing   1,789    1,574    6,362    5,998  
 General and administrative   5,997    4,462    15,514    13,281  
 Amortization   550    545    1,649    1,637  
Operating income   13,026    11,825    31,473    28,079  
Other expense, net:                     
 Other income   41    40    116    64  
 Interest expense   (416 )  (1,249 )  (883 )  (2,927 )
Other expense, net   (375 )  (1,209 )  (767 )  (2,863 )
Income before provision for income taxes   12,651    10,616    30,706    25,216  
Provision for income taxes   3,805    4,109    9,897    9,011  
 Net income  $8,846   $6,507    20,809    16,205  
Net income attributable to non-controlling interest   833    731    2,115    1,767  
  Net income attributable to Malibu Boats, Inc.  $8,013   $5,776   $18,694   $14,438  
                      
Comprehensive income:                     
Net income  $8,846   $6,507   $20,809   $16,205  
Other comprehensive income, net of tax:                     
 Change in cumulative translation adjustment   867    686    378    37  
Other comprehensive income, net of tax   867    686    378    37  
 Comprehensive income, net of tax   9,713    7,193    21,187    16,242  
Less: comprehensive income attributable to non-controlling interest, net of tax  $923   $808    2,153    1,774  
  Comprehensive income attributable to Malibu Boats, Inc., net of tax  8,790   6,385   19,034   14,468 
                   
Weighted average shares outstanding used in computing net income per share: 
Basic  17,877,152   17,975,714   17,799,221   17,968,106 
Diluted  17,962,286   18,002,858   17,887,266   18,022,339 
Net income available to Class A Common Stock per share: 
Basic $0.45  $0.32  $1.05  $0.80  
Diluted $0.45  $0.32  $1.05  $0.80  
                 
  
MALIBU BOATS, INC. AND SUBSIDIARIES 
  
Condensed Consolidated Balance Sheets (Unaudited)  
(In thousands, except share data) 
   
   March 31, 2017   June 30, 2016  
Assets           
Current assets           
 Cash  $32,295   $25,921  
 Trade receivables, net   14,724    14,690  
 Inventories, net   27,365    20,431  
 Prepaid expenses and other current assets   2,311    2,707  
 Income tax receivable   -    965  
  Total current assets   76,695    64,714  
Property and equipment, net   21,954    17,813  
Goodwill   12,654    12,470  
Other intangible assets, net   10,133    11,703  
Deferred tax asset   113,480    115,594  
Other assets   108    32  
 Total assets  $235,024   $222,326  
Liabilities           
Current liabilities           
 Current maturities of long-term debt  $-   $8,000  
 Accounts payable   18,979    16,158  
 Accrued expenses   21,414    19,055  
 Income taxes and tax distribution payable   1,803    427  
 Payable pursuant to tax receivable agreement, current portion   4,360    4,189  
  Total current liabilities   46,556    47,829  
Deferred tax liabilities   609    685  
Payable pursuant to tax receivable agreement   90,612    89,561  
Long-term debt   55,152    63,086  
Other long-term liabilities   275    1,136  
 Total liabilities   193,204    202,297  
Stockholders' Equity           
Class A Common Stock, par value $0.01 per share, 100,000,000 shares authorized; 17,930,617 shares issued and outstanding as of March 31, 2017; 17,690,874 issued and outstanding as of June 30, 2016   179    176  
Class B Common Stock, par value $0.01 per share, 25,000,000 shares authorized; 19 shares issued and outstanding as of March 31, 2017; 23 shares issued and outstanding as of June 30, 2016   -    -  
Preferred Stock, par value $0.01 per share; 25,000,000 shares authorized; no shares issued and outstanding as of March 31, 2017 and June 30, 2016   -    -  
Additional paid in capital 1   50,545    45,947  
Accumulated other comprehensive loss   (2,093 )  (2,471 )
Accumulated deficit   (9,585 )  (28,302 )
 Total stockholders' equity attributable to Malibu Boats, Inc.   39,046    15,350  
Non-controlling interest   2,774    4,679  
 Total stockholders' equity 1   41,820    20,029  
  Total liabilities and stockholders' equity  $235,024   $222,326  
         
(1) For fiscal year 2016, we identified an immaterial error related to the understatement of deferred tax assets and paid in capital attributable to a book to tax difference in our investment in the LLC. The correction of this error resulted in an increase in deferred tax assets of $1,796 with a corresponding increase for the same amount in additional paid in capital within stockholder's equity on the audited consolidated balance sheet as of June 30, 2016.
   
 
MALIBU BOATS, INC. AND SUBSIDIARIES
 
Reconciliation of Non-GAAP Financial Measures
 

Reconciliation of Net Income to Non-GAAP Adjusted EBITDA and Adjusted EBITDA Margin (Unaudited):

The following table sets forth a reconciliation of net income as determined in accordance with GAAP to Adjusted EBITDA and Adjusted EBITDA Margin for the periods indicated (dollars in thousands):

  
  Three Months Ended March 31,  Nine Months Ended March 31, 
  2017  2016  2017  2016 
Net income  $8,846   $6,507   $20,809   $16,205  
Provision for income taxes   3,805    4,109    9,897    9,011  
Interest expense   416    1,249    883    2,927  
Depreciation   1,050    833    3,044    2,449  
Amortization   550    545    1,649    1,637  
Professional fees 1   1,159    404    3,145    622  
Marine Power litigation judgment 2   -    -    (1,330 )  -  
Acquisition and integration related expenses 3   -    -    -    401  
Stock-based compensation expense 4   325    459    1,070    1,464  
Engine development 5   630    -    1,090    -  
 Adjusted EBITDA  $16,781   $14,106   $40,257   $34,716  
 Adjusted EBITDA margin   21.8 %  20.6 %  19.5 %  18.6 %
(1) Represents legal and advisory fees related to our litigation with MasterCraft Boat Company, LLC ("MasterCraft").
(2) Represents the reduction in a one-time charge related to a judgment rendered against us in connection with a lawsuit by Marine Power Holdings, LLC ("Marine Power") where the court amended the judgment to $1.9 million.
(3) Represents legal and advisory fees as well as integration related costs incurred in connection with certain acquisition activities.
(4) Represents equity-based incentives awarded to key employees under the Malibu Boats, Inc. Long-Term Incentive Plan and profit interests issued under the previously existing limited liability company agreement of the LLC.
(5) Represents costs incurred in connection with our vertical integration of engines including product development costs and supplier transition performance incentives.
   

Reconciliation of Non-GAAP Adjusted Fully Distributed Net Income (Unaudited):

The following table sets forth a reconciliation of net income attributable to Malibu Boats, Inc. to Adjusted Fully Distributed Net Income for the periods presented (dollars in thousands, except share and per share data):

     
  Three Months Ended March 31, Nine Months Ended March 31,
  2017  2016 2017  2016
Net income attributable to Malibu Boats, Inc. $8,013  $5,776 $18,694  $14,438
Provision for income taxes   3,805    4,109   9,897    9,011
Professional fees 1   1,159    404   3,145    622
Acquisition and integration related expenses 2   -    -   -    401
Fair market value adjustment for interest rate swap 3   (116 )  510   (941 )  685
Stock-based compensation expense 4   325    459   1,070    1,464
Marine Power litigation judgment 5   -    -   (1,330 )  -
Engine development 6   630    -   1,090    -
Net income attributable to non-controlling interest 7   833    731   2,115    1,767
Fully distributed net income before income taxes   14,649    11,989   33,740    28,388
Income tax expense on fully distributed income before income taxes 8  5,201   4,256  11,978   10,078
Adjusted fully distributed net income  9,448   7,733 $21,762  $18,310
               
Adjusted Fully Distributed Net Income per share of Class A Common Stock 9:              
Basic $0.49  $0.40 $1.13  $0.94
Diluted $0.49  $0.40 $1.13  $0.94
               
Weighted average shares of Class A Common Stock outstanding used in computing Adjusted Fully Distributed Net Income 10:              
Basic  19,343,738   19,380,638  19,289,438   19,375,330
Diluted  19,343,738   19,380,638  19,289,438   19,375,330
               
(1) Represents legal and advisory fees related to our litigation with MasterCraft.
(2) Represents legal and advisory fees as well as integration related costs incurred in connection with certain acquisition activities.
(3) Represents the change in the fair value of our interest rate swap entered into on July 1, 2015.
(4) Represents equity-based incentives awarded to certain of our employees under the Malibu Boats, Inc. Long-Term Incentive Plan and profit interests issued under the previously existing limited liability company agreement of the LLC.
(5) Represents the reduction in a one-time charge related to a judgment rendered against us in connection with a lawsuit by Marine Power where the court amended the judgment to $1.9 million.
(6) Represents costs incurred in connection with our vertical integration of engines including product development costs and supplier transition performance incentives.
(7) Reflects the elimination of the non-controlling interest in the LLC as if all LLC members had fully exchanged their LLC Units for shares of Class A Common Stock.
(8) Reflects income tax expense at an estimated normalized annual effective income tax rate of 35.5% of income before income taxes for the three and nine months ended March 31, 2017 and 2016, assuming the conversion of all LLC Units into shares of Class A Common Stock. The estimated normalized annual effective income tax rate is based on the federal statutory rate plus a blended state rate adjusted for deductions under Section 199 of the Internal Revenue Code of 1986, as amended, state taxes attributable to the LLC, and foreign income taxes attributable to our Australian based subsidiary.
(9) Adjusted fully distributed net income divided by the shares of Class A Common Stock outstanding in (10) below.
(10) Represents the weighted average shares outstanding during the applicable period calculated as (i) the weighted average shares outstanding during the applicable period of Class A Common Stock, (ii) the weighted average shares outstanding of LLC Units held by non-controlling interests assuming they were exchanged into Class A Common Stock on a one-for-one basis and (iii) the weighted average fully vested restricted stock units outstanding during the applicable period that were convertible into Class A Common Stock and granted to directors for their services.
   

Contact Information

  • Investor Contacts
    Malibu Boats, Inc.
    Wayne Wilson
    Chief Financial Officer
    (865) 458-5478

    Zac Lemons
    Investor Relations
    (865) 458-5478
    InvestorRelations@MalibuBoats.co