Jack Springer - Chief Executive Officer Wayne Wilson - Chief Financial Officer Ritchie Anderson - Chief Operating Officer.

Joe Hovorka - Raymond James Mike Swartz - SunTrust Tim Conder - Wells Fargo Securities Gerrick Johnson - BMO Capital.

Good morning, ladies and gentlemen. Welcome to the Malibu Boats Conference Call to Discuss Fourth Quarter and Fiscal 2014 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.

Please be advised that the reproduction of this call in whole or in part is not permitted without written authorization of Malibu Boats. As a reminder, this call is being recorded. On the call today from management are Jack Springer, Chief Executive Officer and Wayne Wilson, Chief Financial Officer. I will turn the call over to Mr.

Wilson to get started. Please go ahead, sir..

Thank you. Good morning. Welcome to Malibu's earnings call covering the fourth quarter and fiscal year ended June 30, 2014. Also, here with is, Ritchie Anderson, the company's Chief Operating Officer. Jack will provide commentary on the business and I will discuss the fourth quarter and fiscal year results.

We will then provide some commentary on fiscal 2015 and open the call to question.

Before we get started, I wanted to remind everyone that a press release covering the company's fourth quarter and fiscal 2014 financial results was issued this morning and a copy of that press release can be found in the Investor Relations section of the company's website at www.malibuboats.com.

I also want to remind everyone that management's remarks on this call may contain certain forward-looking statements including predictions, expectations, estimates or 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 our filings with SEC, and we encourage you to review our SEC filings for a more detailed description of these risk factors.

Please 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 fully distributed net income. Reconciliations of these non-GAAP financial measures to GAAP financial measures are included in our earnings release. Now, let me turn the call over to Jack Springer..

Thank you, Wayne. Welcome, everyone, to our call. We had another very strong quarter which capped off a remarkable year for Malibu Boats. Our fourth quarter results are particularly noteworthy given the strength in the business last year and the challenging comparison that we were up against.

Nonetheless, we delivered on every metric and we were very pleased with the way the business performed and for our momentum into the New Year. As we have discussed before, we are committed to driving profitable growth through a balanced approach to managing volume, mix, productivity, expenses and inventory.

Our fourth quarter results were another example of this. We drove strong sales growth of 9% through solid increases in both, unit volume and average selling price. This also benefited our margins and drove the strong adjusted EBITDA margin of 19.4%, which remains at the top of our peer group.

Both, our Malibu and Axis brands performed very well in the quarter and for the full year and our new product introductions continue to create a lot of excitement in the market.

With the launch of two new Axis boats in fiscal 2014, the A24 and the T22, along with the offering of Surf Gate on all Axis products, we have seen significant growth in the Axis brand. Axis sales were phenomenal in the fourth quarter outperforming our expectations and driving a lot of momentum in the brand.

In just three years from the period 2010 through 2012, Axis became the number six market share leader. We believe with the new models and Surf Gate, we will propel Axis to the number four or number five market leader position in the near future.

Our dealers continue to tell us that the ability to offer both Malibu and Axis is a powerful combination, which allows them to sell to just about any customer in the marketplace, whether it's a first time buyer on a budget or a long-time boater looking for the best performance sports boat that money can buy, our two brands cover the entire spectrum of buyers.

Our fiscal fourth quarter runs from April through June. As you know, that is the peak of the boat buying season. This is when customers want to get their boats on the water and begin to live the Malibu lifestyle.

It is a critical time of the year, because the industry is moving very quickly and we and our dealers are doing so many different things to service our customer base.

Malibu is shipping our highest volume of boats for the year during this time, monitoring inventory levels in the channel, finalizing new product introductions, evaluating dealers and working through budgets and plans for the next year. As you know, new product development and innovation is one of the key variables that drive our organization.

We have always led the industry when it comes to innovation and we know how to drive demand through the continuous flow of new products. We are very excited about our lineup for fiscal 2015. For starters, we will be offering four new or completely redesigned boats this year, two on the Malibu side and two on the Axis side.

In July, the first of those boats began manufacturing and it was Malibu 22 VLX. This boat replaces the 21 VLX, but is a completely new boat. It is 22-feet in length and everything from the hull to the deck, to the dashboard and the gel schemes are all brand new.

Annually the VLX is our second best selling boat behind the 23 LSV which as you know we redesigned last year. On August the 1st, we began manufacturing our new Axis A22. The A22 was our flagship Axis boat and it has been our best selling Axis model.

This has been our third best selling boat between Malibu and Axis since 2010 and we expect the redesign to be very popular. We previewed the new 22 VLX and the A22 at a top-10 dealer meeting in early June and both boats were extremely well received. The feedback from our regional dealer meetings that we held in mid-August was also very positive.

This was the first opportunity for sales personnel from dealerships to be in the new boats and experience the rich new features that we are offering. They and we are very excited about the new models this year.

We will also have two additional boats one Axis and one Malibu launching right before the boat show season and we look forward to sharing more information with you on our later call regarding those boats. Including the new Axis boat to launch later this year, we will have five different models in the Axis line up.

In just 15 months, we will have taken the Axis brand from just two models and developed it into a full brand covering the full spectrum of lengths and styles. In addition to the new models, we have a number of new features and innovations that we will be launching this year.

In fact, we will be launching more features and innovations than any other year in the company's history. These features and innovations are not just small changes either. We had introduced cutting-edge new features that impact the performance of the boats, the aesthetics and the reliability of every boat.

Let me just touch upon a few of the biggest new features for this year. First, we are launching brand new towers for both, Malibu and Axis. The G4 is the new Malibu tower and it is unlike any other tower in the market. It's 100% machined aluminum with an internal honeycomb design and contains no tubes or welded parts.

It is without a doubt the most advanced tower in our segment today and could be lowered in raised with 30 pounds of pressure. It also features a new state-of-the-art latching system. The G4 will be an optional feature on all Malibu boats this year.

Dealer feedback on the new G4 tower has been overwhelmingly positive and we expect this to be a popular option, we have also upgraded the standard G3 tower this year and added its own latching system which been requested by a number of our customers. As you know we have a history of launching industry changing technology and features.

In 2006, we launched the Power Wedge, which gave boaters the ability to customize the size and shape of the wake by adding 1,200 pounds of simulated [bow] [ph]. In 2012, we launched Surf Gate, the industry's first and best dedicated surf technology that allows the user to surf either side of the wake and transfer the wake with the touch of a button.

For the fiscal 2015 model year, we will be launching our most advanced surfing and wakeboarding technologies yet for an integrated solution that is totally unique to the marketplace and keeps us well ahead of the competition.

The system features a new hydraulic power wedge called the Power Wedge II that uses the larger reengineered foil to create an additional 300 pound of simulated ballast. This will create a total of 1,500 pounds of wake creating water displacement, making for the biggest and smoothest boarding wake in the industry.

In addition to a larger wake, the new Power Wedge reduces the planning time of a fully loaded boat by more than half to as little as four or five seconds. Now this is very important to our customers, because getting a boat on plane allows activities to occur more quickly and substantially reduces fuel burn.

I am very excited with how the Power Wedge II and Surf Gate systems are now integrated and work together with our versatile hulls to create the most advanced wake control system across the industry.

The integration of the two systems for wake surfing allows for the ultimate customizable wake for both wakeboarding and wake surfing allowing users to adjust the size and the shape of the wake. When you have the convenience of being able to lock in a rider's preference with our preset feature surfing has never been easier nor better.

No one offers such an integrated surfing solution and without a doubt this is the best surfing experience on the market. We will also be introducing and have introduced a new dash with Viper 2 technology platform this year. This is an outstanding achievement by our team and we are very proud and our dealers are ecstatic about it.

Features of this dash system include the market's first 12-inch swivel touch screen that has LED-like quality.

Unlike previous screens, this large state-of-the-art screen can be seen from almost any angle is not impacted by ambient light as with previous screens, unlocking it to the visibility improvement having a plasma screen on a TV and skipping all other versions directly to an LED-type of quality.

In addition, it has a completely redesigned user face that allows the driver control every major function from the home screen. This compares to our competitors, which will require you to scroll through many screens and many paths to adjust a particular feature.

People who have sat in our Wakesetter 2015 models have raved about the intuitiveness and the ease of use. The new dash also uses what I call Viper 2 technology. This is the technology platform. This platform has new features available for the first time this year and it will allow us to add features to the system for years to come with minimal cost.

We also have an optional sport package on our new dash that we believe will be a high demand feature. It replicates major functions with manual [bow] [ph] and includes an adjustable cell phone holder for easy access and play of music from your phone. This year we will also be advancing our dual engine strategy.

If you recall, this was an important strategic initiative that we began last year. In 2015, we have two suppliers delivering our proprietary monsoon engines versus a single supplier two years ago. Indmar will be supplying engines for Malibu and PCM will be supplying the Axis and Response Series engines, both under the Monsoon proprietary brand.

In July, we completed the second phase of our planned expansion in Loudon, Tennessee. We added a new mezzanine and moved all of our upholstery, cutting and sewing into that mezzanine area. This completed the build out and we also completed the build out of our brand-new distribution center.

The third and final phase now that distribution has been moved will be to enlarge the capacity of our rigging and final detail lines by expanding into the previous distribution footprint.

We are on schedule to complete the project by year end and our manufacturing capacity at that time will be raised from 4,000 boats per year to a capacity of 5,000 boats per year. We continue to work on the closing of our Australian license business. Internal due diligence has been satisfactorily completed.

External due diligence is on schedule and there have been no revelations that would preempt our planned close of this acquisition. The acquisition represents an important next step in our international growth strategy.

Australia is an important region to the boating industry, not only because of the size of the market, but because of its proximity to Southeast Asia and its ability to serve that region of the world.

This acquisition will give us ownership of our brand worldwide and take our international distribution to approximately 15% providing a platform with which to continue to grow our Australian and New Zealand business. Another advantage is that it will allow us to build a stronger presence in Asia.

We also continue to expand our grassroots marketing across the globe. A new event that we will be sponsoring in a couple of weeks is a brand-new wakeboarding competition that will feature top ranking professional men and women competing for huge prize money and celebrating the 25th Anniversary of the World Wakeboard Association.

It's called The WWA CancunPro and it will take place in Puerto Cancun, Mexico from October 3rd through October 5th. We are the leading sponsor and all the competitors will be pulled by the 2015 Malibu Wakesetter 23 LSV. The CancunPro will be the industry's biggest event of the year and it will pay tribute to the sport wakeboarding.

This even will have a large reach and prominence in Mexico, the United States and South America, and it should generate a lot of attention. At this point, I want to turn the call over to Wayne and I will come back for some final commentary..

Good morning, everyone. We had a very strong fourth quarter and fiscal year. Net sales in the quarter increased 9% to $53.4 million. The increase was again driven by solid increases in both, unit volume and net sales per unit. Unit volume increased 5.8% to 799 units and net sales per unit increased 3% to nearly $67,000 per unit.

Both, Malibu and Axis performed well in the quarter. As we discussed previously, we expected Axis sales to make up 28% to 30% of unit volume mix in the back half of the year. Axis sales were very strong in the quarter and ran slightly ahead of the second half expectation at 247 units and 30.9% of unit volume mix.

Strong demand for our two new Axis models and the introduction of Surf Gate as an optional feature to the Axis line continue to propel the Axis brand.

In addition, as we mentioned on the last quarter's earnings call, we purposely limited shipment volumes on Axis in the fourth quarter of fiscal 2013 to reduce channel inventories prior to the introduction of Surf Gate on Axis line.

This skewed the unit volume mix towards Malibu in the fourth quarter last year and benefitted average selling prices and margins. Gross profit in the quarter increased 5.3% to $14.7 million and gross margin remained very strong at 27.5%. Gross margin was above our expectation and what we discussed on the third quarter earnings call.

If you recall, we expected gross margin to be relatively flat with third quarter and down year-over-year on a year-over-year basis as a result of the difficult unit mix comparison the last year. Partially offsetting the negative impacts of the mixed shift were higher volumes and higher average selling prices in the quarter.

Fourth quarter selling and marketing expense increased to $1.6 million from $1.1 million last year. As a percentage of sales, selling and marketing increased 80 basis points to 3.1%. The increase was primarily the result of shift in timing of marketing expenditures within the year and marketing related events.

Fourth quarter general and administrative expenses excluding amortization increased $1.8 million to $4.7 million on a GAAP basis. The increase was primarily related to public company costs and higher litigation expenses. Fourth quarter adjusted EBITDA was $10.3 million.

Adjusted EBITDA margin was again very strong at 19.4% and was above our expectations. Fourth quarter non-GAAP adjusted fully distributed net income totaled $5.5 million or $0.24 per share. This is calculated using the normalized C Corp tax rate of 36% and fully distributed diluted share count of approximately 22.5 million shares.

Just touching on the full year numbers quickly, unit volumes increased 9% and net sales increased over 14%. Margins increased across the board with adjusted EBITDA increasing 17.4% and the company achieving adjusted EBITDA margins of 19.5%, a record for any Malibu full fiscal year.

For reconciliation of adjusted EBITDA and adjusted fully distributed net income to GAAP metrics, please see the tables in our earnings release. With that, I want to hand the call back over to Jack and I will then finish up with some commentary on our outlook for fiscal '15..

Thank you, Wayne. We have a couple of updates regarding our ongoing litigation with Nautique and PCMW. We are obviously very limited in what we can say here given the ongoing nature of both of these cases. In the Nautique litigation, there are a couple of summary judgment motions that are before the quarter this time.

In addition to that, depositions are scheduled to begin in October and the trial is scheduled for February of 2015.

Regarding the PCMW our [P] litigation as a part of the court order on August 22, denying the company's summary judgment motion, the District Court ruled that is successful at trials in proving that the company infringes on the design pattern PCMW would be allowed to seek recovery of Malibu's profits from the sale of the boats using the alleged infringing windshield and not merely the profits from the windshield.

The company has estimated that its total profits on those sales were approximately $8.6 million, excluding prejudgment interest and PCMW has alleged that such profits or approximately $155 million including prejudgment interest.

As of the 2014 modeled year introduced in mid-2013, the company's product lines no longer include boats using the alleged infringing windshield. Notwithstanding the foregoing, the company believes that PCMW's claims are without merit and intends to continue to vigorously defend the lawsuit.

I know there may be some questions around these two cases, but we are not at liberty to comment on this any further and we appreciate your understanding to the sensitivity of this matter. As you know, at the end of each fiscal year, we go through an extensive planning and budgeting process for the upcoming fiscal year.

This is where we look at the industry trends, inventory in the channel, new models and features, production capacity and a number of other items to finalize the detailed annual budget. We then use this budget to plan the productions schedule and we are very disciplined with this process.

Our goal is to drive profitable growth and market share gains over the long-term and we take a very balanced and calculated approach to doing this. Our operating margin is one of the highest in the industry and this can only be achieved by maximizing productivity across the entire supply chain and executing against a rigorous balanced operating plan.

Fiscal 2015 is no different. We have been very disciplined in developing our plan. We are very optimistic about our business and our positioning within the industry. The boating Industry as a whole continues to recover and the Powerboat segment continues to gain market share in this turned around segment.

We are number one and the market share leader in the powerboat sector as we continue to benefit from these trends. We have the best dealers in the performance sports boats segment and together we believe we are well positioned to continue to grow profitably and gain additional market share over time.

I will now turn the call back over to Wayne for a few details on our outlook for this year..

Thanks Jack. As you know, we do not provide detailed earnings guidance. Like Jack said, however, we do go through a rigorous planning process and look to execute throughout the year against the theory detailed operating plans.

This plan is finalized and which preceding then to the fiscal year and may vary from materials we had initially laid out earlier this year with our IPO. Let me provide some basic commentary on few things that may be helpful in thinking through your models for this fiscal year.

First, we are initially planning our annual production schedule around the mid-to-high single-digit increase in unit volume. As Jack mentioned, we will be launching four new remodeled boats this year. Two on Malibu brand and two on Axis brand.

The Malibu 22 VLX and Axis A22 boats are both, in production now and we will begin production of the third and fourth boats later in the calendar year. For this reason, we expect unit volume growth to accelerate through the third fiscal quarter, peaking in the low-to-mid double digits.

From a mix perspective, the split between new Malibu and Axis boats will not be as skewed this year and Axis should be in the low 30% range of our total volume. This year's mix combined with our standard price increases an increased selection of optional features like the G4 tower should continue to benefit average selling prices.

We think net sales per unit will likely be up somewhere in the low-to-mid single-digit range this year. For the full year, we expect to see a modest improvement in gross margin, driven by productivity gains in the quarters with the highest year-over-year volume growth.

On the expense side of the business, we are preparing to possibly to go to trial on two different core cases and could incur a substantial increase in legal and professional related fees. We are limited to what we can say here, but I hope to put these cases behind us and for professional fees to begin moderating later this year.

At the moment, we believe professional fees could be $1 million $2 million higher in fiscal 2015 than they were in fiscal 2014 or the $3.5 million to $5 million range.

Based on the current trial days, we think professional fees could be much higher than the first and third fiscal quarters in the second or fourth fiscal quarter, with first quarter being the highest at over $2 million. As Jack discussed, we will be the lead sponsor of the WWA CancunPro tournament in industry celebration October 3rd through the 5th.

This will shift some additional marketing dollars in SG&A expenses to the first and second fiscal quarters versus last year. Net-net, we expect adjusted EBITDA margin to be up slightly for the fiscal year. This is despite the fact that this will be our first year with the complete 12 months in public company cost.

On quarterly basis, we think adjusted EBITDA margin could decline slightly in Q1 due to the incremental public company costs, be relatively flat in the second quarter and then to prove sequentially on a year-over-year basis in the third and fourth quarters.

As far as Australia is concerned, we will look to provide you with some commentary on how to model this business after the acquisition closes. However, to give you some perspective here, Australia sold approximately 300 units in the latest fiscal year. In closing, we are very pleased with our fourth quarter and full year results.

We feel very good about the trends, both across the industry and in our business. We believe, we have a compelling lineup of new model and features to drive demand in fiscal 2015 and we expect to continue gaining market share. With that we would like to open the call to your questions.

Operator?.

Thank You. (Operator Instructions). Our first question comes from the line of Joe Hovorka of Raymond James. Your line is now open..

Thanks, guys. A couple of quick questions.

One, did you guys give a retail sales number for the June quarter, what the increase was?.

Repeat the question, Joe?.

Did you give a retail sales increase number for the June quarter?.

No. We did not..

Could you?.

I don’t think that we have final numbers yet..

Okay..

The retails sales number for the quarter in terms of what you are seeing for registration perspective domestically is in the mid-double digit range..

Mid-double, like mid-teens?.

Mid-teens, Yes..

Okay. The couple of the options that you have announced, the new tower which is you said it was an option.

What’s going to be the price to the consumer and your idea on what percent uptake you will get on something like that?.

Approximate retail price that the consumer is going to be about $5,000. We planned for fairly small uptake in the 25% range. I believe it's worth that just to go forward with that. So far the demand with the demand coming in has been about at that rate..

Okay.

The Power Wedge II, is that also an option?.

It is not. I mean, it is an option. The Power Wedge II is an option, but we expect that that take rate to be very, very high..

The Power Wedge II replaced the Power Wedge as the option and our take rate on the Power Wedge has historically has been in the high 90%..

Okay. I think that is what I had for now. That is all I got for now, guys. Thanks..

Thank you..

Thank you. (Operator Instructions) Our next question comes from the line of Mike Swartz of SunTrust. Your line is now open..

Hey, good morning, guys. .

Good morning, Mike..

Good Morning..

I think you made some commentary in your prepared remarks about Axis and seeing that maybe go from the number six brand to number four or five over the next, I don't know what the time horizon was, but as you think about the business, I mean, what does that mean for incremental sales? Is that going to be cannibalistic at all to the Malibu business or are you planning for that to be entirely incremental - that additional unit base?.

We are not planning for it to be cannibalistic. We have not seen that with Axis since its inception.

There are some specific competitors that we have targeted and I will say that just based on the preliminary numbers, we are seeing that as Axis grows, those competitors are decreasing market share and number of units, which would be what we would want out of Axis..

Okay. Great.

Then just with the Australian acquisition, I know there is little you are going to say right now until that deal closes, but just as we think about that business and kind of its startup as you get in there, assuming it does go forward, is there any heavy lifting or investments that are needed in that market? I guess, how quickly can you start manufacturing some of the larger models out of that facility?.

It's not really going to be around equipment or investment. They manufactured the 23 LSV today, so as we receive demand for those larger models, I think it is just a matter of training and doing things somewhat a little bit differently. Day one, this would be accretive for us.

This is a business and this is one of the reasons that it makes so much sense, it's a business that manufactures our boats and does exactly what we do. From day one point of view, we can just go in and continue business as usual and that's very, very attractive..

From a capital investment standpoint, they have invested substantially in their infrastructure over the past 12 months and it's actually pretty impressive the amount of money that has been put into the infrastructure that exists and we have been pleasantly surprised by that capital investment..

Just to clarify, your guidance or the general view of the fiscal year ’15 that you laid out for us at the end of the prepared remarks that does not include the Australian business.

Correct?.

Correct..

Okay. Wonderful. Thanks, guys..

Thank you. Our next question comes from the line of Tim Conder of Wells Fargo Securities. Your line is now open..

Thank you. Thank you, gentlemen, for the good explanation during your preamble there. Just if you could revisit where - I know the final second quarter calendar numbers are not in from SSI for the industry, but revisit where you think your market share is specifically for Malibu and Axis.

Then the closure date, are you still anticipating here at the end of September on the Australia acquisition?.

The numbers are not in yet. Tim, we really don't want to share the difference between Malibu and Axis. What I will say based on the indication that we are seeing and we look at it again over the 12-month period. It's very important to look at it on that trailing 12 months. Malibu as a company has continued to grow its market share in that TTM scenario..

Okay.

Then the closure date on Australia, gentlemen?.

Still projecting toward the beginning of the second quarter, so in the October 1st timeframe..

Okay. Thank you. I look forward to seeing you guys early next week..

Thank you..

Thank you. (Operator Instructions) Our next question comes from the line of Gerrick Johnson of BMO Capital. Your line is now open..

Thank you. Good morning, guys. Just a quick question on payables, it looks little low. I wonder why are they low..

Payables were low, because of our capital investment projects here. We actually took - our plan was to have a longer shutdown this year in terms of the number of days that the factory was down, so that we could instead of trying to cohabitate with a production with a capital investment project.

We took some days out of that production schedules, so we shutdown few production days earlier and what that resulted in was payables decreasing and you saw a little bit of same phenomenon on the AR side..

Okay. That makes sense. Thank you. Then, Wayne, if you could just comment on inventory in the channel.

Where do we stand in the channel?.

Inventory in the channel is when we look at compared to our historical levels, they are very consistent with prior year's that we think are healthy - not similar to other years and how we manage the business, there is always pockets of its strength and weakness and dealers that you are managing situations whether it's dealer performance something specific to their local economy or whatever but nothing out of the norm and consistent with what we have seen in the past couple of years..

Okay.

Is your dealer count higher this year than it was last year at this time?.

It is approximately the same number. We have added a couple of Axis dealers..

Okay. Just to squeeze one more in there. The June quarter still saw some weather-related issues that I am thinking rain in some markets in the Midwest.

Did that have a big impact on your retail sales? Can you just talk about that real quick?.

No. It didn't. I would put the weather-related impact more than April-May timeframe. Once the June period hit, we saw very strong retail demand in that June, July, August timeframe and we are very pleased with the sell-through..

Okay. Great. Thank you, guys..

Thank you..

Thank you. I am showing no further questions at this time. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Have a great day, everyone..