Malibu Boats, Inc. Announces Third Quarter Fiscal 2017 Results
LOUDON, TN -- (Marketwired) -- 05/03/17 -- 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 Nine Months Ended
March 31, 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 Nine Months Ended March
31, 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, June 30,
2017 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 Nine Months Ended
March 31, 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 Nine Months Ended
March 31, 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.
Investor ContactsMalibu Boats, Inc.Wayne WilsonChief Financial Officer(865) 458-5478Zac LemonsInvestor Relations(865) [email protected]
Source: Malibu Boats