Malibu Boats Inc Class A Stock

Good morning and welcome to Malibu Boats conference call to discuss the three months ended September 30, 2026 results. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. 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 it started. Please go ahead, sir.

Welcome to Malibu Boats Earnings Conference Call for the three months ended September 30th, 2026. I am David Black, Chief Financial Officer, and joining me today is Steve Minero, our President and Chief Executive Officer. Before we begin, as you may have seen in our press release today, our Board approved a change in our fiscal year from June 30th to December 31st. As a result, the quarter we are reporting today, ended September 30th, 2026, is the first quarter of a six-month transition period and is compared to the quarter ended September 30, 2025. The press release covering these results was issued today and can be found in the investor relations section of our website. Today's Outlook covers the three months ended December 31st, 2026, and the six-month transition period, which I will discuss in more detail later in the call. I also want to remind everyone that remarks on the 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, adjusted net income per share, and free cash flow. Reconciliations of these GAAP financial measures to non-GAAP financial measures are included in an earnings release. I will now turn the call over to Steve.

Thank you, David. Good morning, everyone. Our results for the September quarter reflect a retail environment that softened over the summer and our decision to manage wholesale shipments with discipline to protect dealer health. Net sales increased 29.9% to $252.9 million. Modestly plus. our guided range and adjusted EBITDA increased 21.7% to 14.3 million at the low end of our outlook. Cobalt and our saltwater brands grew volume and Pursuit contributed meaningfully to growth, which was partially offset by a softer ski wake category and lower profitability at Malibu, which I'll come back to. Looking across the portfolio, Cobalt and the saltwater brands both grew volume as they lapped last year's dealer inventory reset. The softer retail environment showed up most in the ski wake boat category, which was under pressure across the industry through the summer.

To be clear, this is a category dynamic, not a Malibu specific issue. We continue to gain share across our portfolio, including at Malibu, even as the category has softened. As a result, we shipped fewer boats and leaned into the support of our dealers, consistent with the guiding principle we have spoken to for the last few years. And it is how we will keep running the business through this part of the cycle. Saxdor contributed 51.1 million of net sales in the quarter. The brand is tracking to our plan with margins consistent with the fourth quarter. As we said in August, Saxdor's margins in the July through December period reflect our investment in the production ramp, and we expect them to step up in the first half of calendar year 2027.

As domestic manufacturing scales and our mix shifts towards larger, more margin accretive models. The real highlight this quarter was Fort Pierce, where U.S. production of SACSTOR is now well underway. We are tracking ahead of schedule. Production began in July, and our first U.S.-built SACSTOR 320 GTO was successfully completed, ahead of our original goal for this fall. In fact, we are now in the process of completing the SACSTOR 320 GTO. Serial production is underway. Right now the focus is on efficient assembly and I want to commend our team for their focus on this seamless ramp. We continue to see a runway to 200 SACSTOR builds a year in Fort Pierce before investing in plant expansion.

Going back to our rationale behind the acquisition, having SACSTOR built in the U.S. puts the brand much closer to its North American dealers and customers and it is where the investment we have made in the platform really starts to work for us. We are also widening Saksdoor's reach, adding new dealers across the Americas, and working with Marine Max to expand distribution in the U.S. and the team continues to bring new products to market, including the 460 GTS, which made its debut in Cannes Yachting Festival in September. Last week, we kicked off the boat show season in Fort Lauderdale with seven of our brands on display. And it is always a great week to be on the docks with our dealers and customers. Cobalt officially launched a completely redesigned 265 Coastal Edition, a luxury runabout built with big water and coastal lifestyle in mind. And several of our newest models were at the show for the first time, including the Pursuit S288 and the newly refined OS 445, Pursuit's flagship, and the all-new Cobia 250DC, which expands Cobia's dual-console offering. Saxdor brought the 460 GTC, the largest and most advanced model in the range, and the brand's entry into the 45-foot to 50-foot category, along with the 350 GTW, alongside our partners at Marine Max. everything together really shows the breadth of this portfolio.

From family runabouts to offshore center consoles to luxury day boats, each built for the different kind of boater. Turning to the backdrop, although the industry retail environment got tougher over the summer, it's important to note that we haven't seen any changes in the fundamentals. Based on the preliminary SSI data, industry powerboat registrations were down approximately 11% for the July through September period with the fiberglass segments where we compete. And Ski Wake in particular, more pressured than the broader market. September was the best month of the year for the industry, down only 2%. have outperformed the industry for several consecutive months with our towboat brands combined seeing growth in September. Elevated finance costs and a cautious consumer continue to keep the payment buyer on the sidelines. And that buyer coming back is ultimately what will drive the broader inflection in industry unit volumes and the cycle overall.

Recent interest rate increases don't help. We haven't seen much change in the buyer behavior. The pressure is most visible in the ski-wake category, where promotional activity and dealer incentive costs increased across the industry. We expect incentives to remain elevated relative to historical levels, and we will continue to align Malibu shipments with retail demand, both on which are reflected in our outlook for the December quarter. Where we can help that buyer, we are. MBI acceptance gives our dealers financing and extended service tools to close the sale with a payment-sensitive customer. And it is one of the most practical levers we have until rates and confidence start working in our favor.

Looking ahead, our dealers are heading into the winter in good shape, with inventories healthier than a year ago and aged inventory low across the portfolio, which is right where we want them as the show season builds. In a market like this, the work that matters most is the work we control, and the MBI Advantage was built for exactly this kind of environment. We continue to push it further. deeper vertical integration, centralized sourcing, and category management across our brands, and now bringing Saxdor into the sourcing organization so it gets the benefit of our scale. Beyond sourcing, we are controlling what we can on cost. Our cost structure is 80% to 90% variable, made up mostly of materials and direct labor, which lets us flex with demand and protect profitability and cash through the cycle. We continue to work the levers we outlined at Investor Day, including lean manufacturing, vertical integration, dual sourcing, and supplier rationalization. And we are not waiting for the mid-cycle market to go after the 250 basis points of outperformance opportunity we identified.

As we reinvest behind new models and ramp production, we would expect some of those dynamics to shift.

but our approach to cost is not changing. We are operating in a market that is not giving us much help right now, and we are managing the business accordingly. At the same time, we are making tangible progress on our long-term priorities, from U.S. production of Saxdor at Fort Pierce to the new models we just brought to market. We remain intentional about our outlook until we see more durable evidence of a broader recovery. But our conviction in build, innovate, and grow and the mid-cycle. opportunity in front of us remain strong. With that, I'll turn the call over to David for the detailed review of our financial results. David? Thanks, Steve. The takeaway for the quarter, we navigated a softer ski wear category with discipline.

The cash we used was seasonal and inventory driven. Throughout my remarks, I'll make select references to both consolidated results and and legacy results, which excludes StackStore, to provide a clear view of underlying sales drivers and year-over-year comparability. For the quarter ended September 30th, 2026, net sales increased 58.2 million or 29.9% to 252.9 million compared to the prior year inclusive of 51.1 million from our StackStore segment. On a legacy basis, net sales were approximately 201.8 million, an increase of approximately 3.6%, driven by increased unit volumes at Cobalt and saltwater fishing segments, a favorable model mix in our Cobalt segments, and a favorable segment mix in year-over-year price increases, partially offset by D. decreased unit volumes in the Malibu segment, and increased dealer incentive costs in the Malibu and saltwater fishing segments. Total unit volume increased 15.1% to 1,299 units. This was composed of our legacy unit volume, which increased approximately 2.7% to 1,160 units. While Pursuit contributed 139 units in the quarter.

By segment, net sales attributable to Malibu decreased 9.1% to 71.5 million on their lower wholesale shipments driven by lower retail activity during the period and increased dealer incentive costs. Saltwater fishing net sales increased 7.1% to 68.9 million on higher wholesale shipments against a prior year period impacted by elevated dealer inventory levels. Cobalt net sales increased 18.8% to 61.5 million, also on higher wholesale shipments against a prior year comparison, along with a favorable model mix. From a mix perspective, on a legacy basis, Malibu represented approximately 43% of unit sales. Saltwater Fishing represented 27%, and Cobalt made up the remaining approximately 30%. Net sales per unit increased 12.9% to $194,720 per unit on a consolidated basis. driven by incremental increase related to our new SAC store segment, a favorable segment mix, and year-over-year price increases. On a legacy basis, net sales per unit increased approximately 1% to $174,000.

While not included in this metric for the sake of comparability, SAC Store's net sales per unit was approximately $368,000 for the quarter. Turning to profitability, gross profit increased 35.5% to 37.8 million and gross margin as a percent of sales was 15%. This represents an increase of approximately 70 basis points compared to the prior year period. The increased gross margin was driven primarily by the gross margin of newly acquired SACSTOR. For some further context on SACSTOR's performance, the segment delivered adjusted EBITDA margin of 8% during the period, as we continued investing in the production ramp at Fort Pierce. Selling and marketing expenses increased 32.4% in the three-month period. The increase was driven primarily by higher personnel-related expenses and an incremental increase due to the new SACSTOR segment.

As a percentage of sales, selling and marketing expenses was relatively consistent with prior year at 3.3%. General and administrative expenses decreased 43.9% or 9.1 million. The decrease was driven primarily by 15 million reduction resulting from the de-recognition of a liability related to the insurance proceeds previously received from Star Indemnity and Liability Company that are no longer subject to reservation of rights, as well as decreased incentive pay, partially offset by acquisition and related expenses, incurred due to the new Saks store acquisition and an incremental increase due to the new Saks store segment. As a percentage of sales, G&A expenses were 4.6%. Gap net income for the period was 6.1 million, or $0.30 per diluted share, which includes the 15 million G&A benefit I just described. Adjust EBITDA increased 21.7% to 14.3 million, and Adjust EBITDA margin was 5.7%. Included in this amount was SAC Store segment Adjust EBIT of approximately 4.1 million.

Excluding SAC store, adjusted EBITDA was approximately 10.3 million compared to 11.8 million last year, with the decline driven by Malibu, as described earlier. Adjusted net income per share remained consistent at $0.15 on a basic weighted average share count of approximately 19.7 million. million shares. Both adjusted EBITDA and adjusted net income exclude the 15 million benefit from the star insurance proceeds, which is reflected in the professional and fees line of our reconciliation. Turning to the balance sheet and cash flow for the three-month period ended September 30th, 2026. We ended the period with 40.3 million of cash, 172.9 million of debt, and approximately 213.5 million of total available liquidity, giving us ample flexibility to support the business through this cycle. Net cash used in operating activities was 31.1 million compared to 6.5 million of cash provided in the prior year. As a reminder, the September quarter is seasonably our heaviest working capital quarter, and we also rebuilt inventory of approximately 32 million after ending fiscal 2026 with an unusually lean balance.

The rebuild is our own inventory, not dealer inventory, and we continue to align wholesale shipments for the retail demand. We also paid annual compensation and dealer incentives during the period. We expect working capital needs to decrease through the first half of calendar 2027. We also invested 8.4 million in capital expenditures, resulting in a negative free cash flow of 39.5 million for the quarter, compared to free cash flow of 2.5 million. 2.3 million in the prior year period. The change was more than accounted for by the inventory rebuild and the annual compensation and dealer incentive payments. For context, free cash flow was negative 17 million in the September quarter of fiscal 2025 and positive for that full year. In fiscal 2026, we generated approximately 43 million of free cash flow and roughly 58% of adjusted EBITDA.

As a reminder, the refinancing we completed in July extended our maturity to 2031 and enhanced our financial flexibility with no change in our capital allocation priorities. On capital allocation, during the three month period, we did not repurchase any shares. And our 70 million share repurchase authorization, which runs through June 30th, 2027 remains in place. Net leverage was approximately one and a half times at September 30th on a pro forma basis up from approximately one times at June 30th, reflecting the seasonal use of cash and well within our stated maximum of two and a half times. We remain balanced and disciplined in allocating capital and well-positioned to keep investing in the business alongside returning capital to shareholders. Turning to our outlook, as I mentioned at the start of the call, on November 3rd, our board approved a change in our fiscal year end from June 30th to December 31st. As a result, the six-month from July through December 31st, 2026, will be a transition period, which we will report on a transition report on Form 10-KT.

And our first full fiscal year under the new calendar will be the 12 months ended December 31, 2027. Because the 12 months ended June 30, 2027 will not be a reporting period, the outlook we provided on August 27 is superseded by the outlook we issued today. For the three months ended December 31st, we anticipate net sales of 236 million to 248 million and adjusted EBITDA of 13 million to 15 million. For the six-month transition period, which includes our September quarter net sales of 252.9 million and adjusted EBITDA, of 14.3 million as reported, we anticipate net sales of 489 million to 501 million and adjusted EBITDA of 27.3 million to 29.3 million. outlook takes a prudent view of the industry retail demand given the macro backdrop. It also reflects tariff costs embedded at the currently enacted rates and the pricing actions we have already taken in the market. July through December is a seasonally lower volume period for our business, so the results for the transition period should not be annualized. And as we noted in August, margins in this period will be lower than in the following six months, primarily driven by our investment in ramp at Sax Store.

That is playing out as we expected, and it includes Saxdor production mix that is weighted towards smaller boats today. on the transition period, as domestic manufacturing scales and the broader revenue mix shifts towards larger, more margin-accretive models, we continue to expect SAC store margins to ramp up towards the 10% to 11% range we discussed in August and also expect SAC store growth to remain in the mid-teens range through the year. the first half of the calendar 2027. Our thinking on that has not changed. We expect to provide our initial calendar year 2027 outlook in March when we report our December quarter and transition period results As always, reconciliations of our guidance measures are addressed in our earnings release. To close, our September quarter reflected a softer retail environment and our decision to protect dealer health with Saks Store, Cobalt, and Saltwater Brands helping offset the softer skiway category. Legacy operations executed with discipline through the demanding environment, the Saks Store integration is progressing well with U.S. production now underway at Fort Pierce, sheet gives us the flexibility to support the business through the cycle. With a refinanced credit facility, our buyback authorization, and a differentiated portfolio, we are well positioned to execute through the transition period and into calendar 2027 and to capture the mid-cycle opportunity we framed for you at the investor day. We will keep aligning shipments with retail demand, and we look forward to providing our calendar 2027 outlook in March.

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

Thank you and as a reminder to ask a question you will need to press star one on your touch tone telephone. If your question has been answered or you wish to withdraw your question, please press star one again. Please stand by while we compile the Q&A roster. And your first question comes from the line of Joe with Raymond James. Please go ahead.

Hey, everyone. Mitchell Engel is on for Joe Altobello. My first question is, can you help us bridge from the September quarter to the December quarter on your guidance, particularly for the legacy side? How should we think about the sequential revenue decline in terms of normal seasonality? And what's your view on retail demand and wholesale shipments and how demand trends perform quarter to date?.

Yes, hey, this is David. Yes, so the way that I would think about that, you know, as we talked about in our original guide, we expected the first half to be lower than the second half. If you look at prior year from a cadence perspective, I would expect it to follow a similar trajectory. From a retail perspective, we expect the conditions currently to continue right through the first half of our transition period. And so, you know, we're expecting somewhere in the neighborhood of a mid to high single-digit decline from the market perspective with the towboat segment being kind of on the lower end of that or the higher end of that decline.

That's helpful, thanks. And then on the ski wake demand, can you provide some additional color on what you're seeing for that category? I know the industry has been soft and you're gaining share. So what are you seeing on the affordability financing side? any difference between the income cohorts and how would you describe a retail trends right now?.

Yes, Mitchell, we're still seeing, you know, kind of the same trend persist where payment buyers still on the sideline, you know, for the most part. We're trying to help them out with our MBI acceptance and with better, you know, better financing rates and so forth. But we do see the feature-rich boats still in play, the custom orders coming in from consumers and dealers and so forth. So we still see that K-economy effect moving forward in the towboat segment. Appreciate the call. Thanks a lot.

And your next question comes from the line of Jamie Katz with Morningstar. Please go ahead.

Hey, good morning guys. Can you talk a little bit about inventory reduction expectations? I guess a lot of other companies are talking about wholesale matching retail, but it sounds like we have maybe further reductions to go at Malibu, so I guess where are we in the You talked a little bit about inventory reduction, and I guess a lot of other companies are talking about wholesale mode, but it sounds like we've made some MOMS. and what does that sort of look like over the next year?.

over the course of the forward quarters. Jamie, we... Go ahead, David. Yes, no, hey, Jamie. I think what we said is we expected inventory to modestly decrease on a year-over-year basis. for the quarter ended September 30th, we actually saw low double digit decline on versus the prior year from a dealer inventory perspective. I think you're right from its category specific. I think as the market continues to be weak on the towboat side of things, we'd expect inventory to decline as you know kind of the value of the week decreases in tandem with that. But we think as the year progresses, right, and as we said originally, we expect retail to match wholesale on a more equilibrium basis. But right now, for the transition period, we expect the decline to continue.

Okay. And then how do you think about the cadence of the buybacks from authorization, the share price down and compelling versus a difficult environment and maybe holding on to more dry powder? How do you have sort of the thought about when the time to buy back is? And how should we be thinking about the cadence of inventory reduction? You know, we have the down comping versus the difficult comps, the timing to.

back shares changed at all? Yes, no change there. I think Q1 is typically our seasonably higher working capital use quarter. And so we will still continue to be opportunistic as we move through kind of the remainder of the year. And as we have working capital needs, we'll focus on on those as well and pay down debt and invest organically. So no real change there, and I'd expect us to be opportunistic as we continue to move forward. Great, thanks. And your next question,.

from the line of Mike Albanese with StoneX. Please go ahead.

Hey, good morning guys. Thanks for taking my question. I was just wondering if you could add a little bit of color on early season boat show trends, kind of, you know, what you saw versus prior years or versus expectations. you know, ordering patterns, deposit activity, traffic, just, you know, really anything you could add would be helpful. Hey, Mike, Steve, thanks.

We just got back from Flibs and it's only one data point of Flibs, but we were really excited about Flibs. We year over year outpaced last year at Flibs in terms of retail sales. sold boats the ASPs were up so the model mix was rich and so it was a really compelling flibs for us across the seven brands that we had there so we're walking away with one data point of and that's a good start to the boat show season.

Thank you. And your next question comes from the line of Anna Glaessgen with B Riley Securities, please go ahead.

Hi, good morning, thanks for taking my questions. I wanted to follow up on some of the questions on retail. I wanted to bridge some of your comments in the prepared remarks. On the one hand, we saw retail, it sounds like it a little bit softer over the summer, but then you're saying fundamentally things haven't changed and then we saw a much better September. I guess if you could connect the dots there and maybe share some perspective on October following that relatively stronger September. Thanks.

Yes, sure. Hey, Anand. So, to kind of bridge the difference there, we really saw kind of the, the weakness more than we expected, right, in the towboat segments. I think other segments are operating the way that we originally expected. And so, you know, that coupled with a little bit more competitiveness on the promotional side is really kind of what's changed, right, from kind of the previous remarks that we had had. And as we continue to move forward, we expect that trend to continue on the towboat side of things. But as Steve said, we had some very strong positivity coming out of FLIBS. And so we expect that to translate into kind of the back half of the year as we move back into the selling season. Thank you.

Got it, and as you're setting expectations for the coming fiscal year, Given that, we still see pressure with the payment buyer, potentially another rate hike in December. In the near to medium term period, are you baking in any improvement to that buyer or expecting things to continue as they are now?.

Yes, we're going to continue to expect to see the same as we said in our prepared remarks. You know, we're prepared if we see a change in that consumer. We're doing, you know, using all of our tools that we can with MBI acceptance, supporting the dealers and being competitive with promo to help that buyer out. But our, you know, we're going to continue. to operate in that mode in fiscal 27 or calendar 27. And, David, you can add from the what's in the guide.

Yes, no, and as I said, I expected that, you know, in the guide that we'd be that mid to high single digit for the transition period. And so no change there from kind of the payment makeup, you know, from, you know, financing versus, you know, payment buyer.

Thanks. And your next question comes from the line of Derek Johnson with Seaport Research. Please go ahead.

Thank you. Good morning. Hey, can you talk about the period expense that you had in a quarter owing to the startup of Saks Door in the U.S., and what kind of expense incremental expense you're expecting over the next several quarters as that ramp continues?.

Yes, hey, Derek. So, you know, I think what we talked about is, you know, margins will get a little bit better as we move through for SAC stores. We moved through the first half of the year. And you saw that kind of with SAC Store for the first quarter. As we continue to ramp up production, we expect that will continue to decrease the investment piece of it and our margins will continue to grow. And so if you recall, we said kind of lower margins in the first half versus the second half. And so we expect that to follow suit.

All right. Okay. And then maybe on gross margin, is there any perhaps bridge you can provide us, you know, scale, SAC store, promo, sourcing, efficiencies, commodities?.

Yes, so from a year-over-year with 70 basis points up, what I would tell you is about half of that was SAC Store's contribution, and the other portion of that is the legacy business on the incremental revenue offset by higher promotional costs at Malibu and lower revenue at Malibu. Okay, and you also talked about incentives in saltwater. What brands were you putting some promos on there? So I think the promo environment just on a year-over-year basis was up, but it wasn't as significant as on the Malibu side. I would tell you it's very normal at this time of year as you think about the boat show season coming in for promos to be kind of a little bit more elevated in the saltwater group. So I think it's just a smaller piece of that of that pie. Okay. All right. Thank you.

And I'm showing no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.

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[Call has ended.]

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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.