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

Tim Conder - Wells Fargo Securities Joe Hovorka - Raymond James Mike Swartz - SunTrust.

Good afternoon and welcome to the Malibu Boats Conference Call to Discuss First Quarter Fiscal 2015 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. And as a reminder, this call is being recorded. On the call today from management are Mr. Jack Springer, Chief Executive Officer and Mr. Wayne Wilson, Chief Financial Officer. I will turn the call over to Mr.

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

Thank you, and good afternoon, everyone. Ritchie Anderson, the company's Chief Operating Officer is also on the call today. Jack will provide commentary on the business and I will discuss the first quarter results. We will then provide some commentary on the Australian acquisition and our outlook for fiscal 2015.

Before we get started, I wanted to remind everyone that a press release covering the company's first quarter fiscal 2015 financial results was issued this afternoon 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 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 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. And welcome, everyone, to our call. We had another very solid quarter and this represents the fourth consecutive quarter since our IPO that we have delivered on results inline or better than our plan.

Given the late start to the boating season this year because of weather, we did see an extended selling season which befitted the quarter, however this was offset by a couple of global crisis events and weak currency evaluations in Canada. Now all factors were great in the quarter, but Malibu continues to perform at very high levels.

We face another difficult comparison in the first fiscal quarter but our results were right inline with our expectations and our outlook for the full year is unchanged.

We are tracking right in line with our full year budget and believe we are very well positioned to continue delivering against the annual targets that we have laid out to the investment community. The first fiscal quarter is always a challenging time of the year.

Dealers are focussed on moving previous Malibu inventory and many are not accustomed to looking at new boats and planning for the next model year. This year Malibu did an exceptional job of getting dealers acclimated to and knowledgeable about the new boats and the new features early and this has translated into dealer adoption very quickly.

Initial demand for our new Malibu 22 VLX and the Axis A 22 model has been great and we have also been seeing continued strength in the Malibu 23 LSV. There has also been a high level of excitement for our new features including the Power Wedge II and the G4 tower as well as several other of our new features.

The new Viper 2 technology base dash in control system with redesigned dash and the 12 inch screen is an absolute home run for us. Our innovation for Malibu in 2015 have translated into higher than expected [ISPs] for the first quarter. As you know we go through an extensive planning and budgeting process every fiscal year.

We look at the industry trends, inventory in the channel, new models, features, production capacity and a number of other items and setting our annual budget in our operating plan. As a part of setting our annual budget we build a quarterly production schedule.

We look at a lot of factors when building each quarterly production schedule for the new fiscal year which all roll into the annual production schedule. We look at inventory in this channel, the number of new boats and the number of new features we’ll be rolling out. We look at the timing of when these new boats will be hitting the market.

We look at the seasonality of the industry, plant maintenance down time within our Malibu plant and the timing of major holidays. With all of these factors and our annual production target in mind, we then lay out our quarterly production schedules. This is an arduous process, the one that we have optimized and mastered over the years.

This is also how we maximize productivity across our supply chain and deliver industry leading operating margins. Since I arrived in Malibu, we have engaged this disciplined process and it is a best practice for us.

On our last earnings call, we told you that we’ll be launching four new or completely remodelled boats this year, two on the Malibu brand, and two on the Axis brand.

The Malibu 22 VLX and the Axis A 22 boats went into production in the first quarter, and we will begin producing the third and the fourth boats in time for the boat show season which begins in January. In fact, at a national dealer meeting Sunday night, we unveiled the brand new Axis T23.

Based on this plan, we also told you we were planning our fiscal 2015 production schedule around the mid to high single digit increase in unit volume. And we expected unit volume growth to accelerate through the third fiscal quarter peaking in the low to mid double digits.

This is how we have built our production plan for the year, our internal budgets and our annual guidance. In accordance with this plan, we set our first quarter production schedule at 14 boats per day, and we maintain that schedule throughout the quarter.

Factoring and holidays and annual maintenance downtime this equated the planned shipping of approximately 693 boats in the first quarter and we produced exactly to that amount.

Then there is always going to be some slippage or overage in deliveries in any given quarter, either due to weather, due to pickups or some external factors that are outside of our control. Since we do not book a sale and recognize revenue on a boat until the unit leaves our plant, this can add some minor volatility to our quarterly sales and units.

However, this is merely timing of when we recognize revenue because everyone of the boats that we make are pursuant to a purchase order from a dealer. We don’t build a single boat that doesn’t have a firm commitment by one of our dealers and we don’t carry any speculative inventory.

In the first fiscal quarter we built 693 boats according to the plan, and we delivered 673 of these boats. There were 20 boats that slipped into the first or the second week of the second quarter due to typical logistical issues like dealer pickups occurring after the quarter. Now let me explain dealer pickup for just a moment.

Some dealers as far away as Arkansas will choose to drive to the plant and pick up one or more boats and transport the boats back to their dealer location. This can be a cost savings for some dealers. In addition, the scheduling of international shipments can contribute to delays.

We may finish international boats the last week or so of the quarter but the recognition of the sell will dependent upon when the next sailing to a particular country will occur which maybe as much as two weeks after the end of the quarter. The 20 boats will ship and be recognized as revenue in our second quarter.

Early in the second fiscal quarter our production plant moved 16 boats per day from 14 and that transition has gone very smoothly. In the second quarter, we will also be producing boats on a couple of Fridays. We factored the holidays into the quarter which includes the plant wide shutdown for Christmas.

All in all, this equates to a shipping plan in the second fiscal quarter. As we move closer to the end of the calendar year and with the launch of our third and fourth new boats we will finalize the production schedule for a third fiscal quarter which will include additional Fridays as needed for any increased demand that we have confirmed.

We are constantly accessing demand and inventory in the channel and we can flex the production schedule up or down at any given point in the quarter. Now we will not adjust our production schedule on a week to week basis, or even a month to month basis because it impacts the productivity of the supply chain and it can hurt our margins.

Based on the first quarter results and everything that we can see right now, we are tracking exactly in line with our full year volume target of being up, mid to high single digits and slightly ahead of our net sales per unit target of being up low to mid single digits. In addition, demand out of Australia has also been very good.

As you may have seen from our 8-K filing last week, we closed the acquisition of our Australia licensed business on October the 23rd. Wayne will speak to you in a little bit about more of the details of this transaction and the consolidated company going forward. But let me just say that we are very excited about this acquisition.

Australia is an important region to the boating industry because of the size of the market and its proximity to Southeast Asia. Outside of the U.S. and Canada, it is the world’s next largest market for our boats.

The acquisition represents an important next step in our international growth strategy by giving us ownership of our brand worldwide in a platform in which to continue growing our Australian and New Zealand business and build a stronger presence in Asia.

Lastly, I wanted to take a moment to update you on our market share and how we plan to speak to this going forward. As you know we are the leading market share player in the performance sports boat category and we believe we are well positioned to continue gaining share over the long term.

This is what we said during the IPL and this is what we strive to deliver. Of course these market share gains will naturally decelerate overtime, but nonetheless this is our goal to grow the business ahead of the market and continue taking share each year.

We look at the retail sales and registration data and calculate our market share on a trailing 12 month basis. We believe this is the most accurate, consistent and effective way to practise data because it removes the monthly and seasonal volatility from the number and its based on full actual data.

As many of you know the retail and registration data reported by SSI on the 15th of every month is preliminary and partial data that only contains a certain number of states.

Depending on the time of the year, this data can also be very small and extremely volatile, for that reason we calculate our market share using the full and accurate data for the trailing 12 months and we hold ourselves accountable to this figure every quarter. In doing this, through June 30, our market share is up to 32.8%.

Now you need to keep in mind that the SSI data only tracks registrations in the United States and therefore this is a U.S. only market share figure. We also sell to Canada and the rest of the world which we track separately to the best information that we can receive.

Canada and the international market data is not available monthly and there are some questions around the accuracy of the international data because it is based upon shipments in the countries rather than retail sold boats.

However, by our analysis Canada approaches at least a 50% market share for Malibu and the remainder of the world approaches a 40% market share. Like I said earlier, its’ our goal to grow market share overtime and we take this objective very seriously.

We hold ourselves accountable to this goal and we will continue to report our market share figures in this manner so that all of our shareholders can have a clear and accurate picture as well. Earlier I mentioned, our national dealer meeting, that started Sunday and it will conclude to not. It’s really one of my favourite times of the year.

We spend three days educated our dealers on product, preparing them for the boat show season, conducting under water trails with our new product, and engaging in detail competitive analysis. It will correlate to now with our dealer awards banquet.

I’ve been reminded again this year, just how passionate and how fantastic our dealers are, and why along with our product we have over one-third of North American market and continue to post outstanding results.

In closing, let me just reiterate that we are pleased with our first quarter results and these results were exactly in line with our internal plans and our full year outlook remains unchanged. We believe we have very compelling lineup of new models and features to drive the demand in fiscal 2015.

Without the doubt, we have the best dealers in performance sports boat segment and together we believe we will continue to delivery sustainable profitable growth I’ll now turn the call over to Wayne to take you through the first results in more detail on the Austria acquisition..

Thank Jack. Net sales in the first quarter increased 10.1% to 47.7 million. Unit volume increased 1.8% to 673 units. And net sales per unit increased 8.1% to 79,815 per unit.

As Jack said we plant to ship 693 boats in the quarter and they were approximately 20 boats that did not get picked up by the dealer make international shipping schedules for the quarter. And therefore the sale of these boats moved into the second quarter.

Both Malibu and Axis performs well in the quarter, and unit breakdown was 215% excess boats and 458 Malibu Boats. Gross profit in the quarter increased 8.7% to $12.1 million and gross margin decline 8 basis points, but remained strong at 25.4%.

This was consistent with our expectation given the modest volume increase and increase depreciated associated with our recent capital Investment. Increased Australian sales and Axis mix were slight headwind to gross margin in the quarter with higher optional feature selection helping to offset that pressure.

We continue to expect slight year-over-year gross margin expansion that will be driven by year-over-year volume gains. First quarter selling and marketing expenses increased 14.4% to $1.6 million from $1.4 million last year. As a percentage of sales, selling and marketing expenses increased 10 basis points to 3.4%.

The increase was primarily the results of increased sales volume, and timing of numerous promotional events. First quarter general and administrative expenses excluding amortization were $66.4 million. However this included $2.9 million of non-operating expenses related to litigation, the Australian acquisition and follow-on offering.

Excluding these non-operating expenses, G&A expenses increase to $3.4 million from $2.0 million [15:25]-- and officers, insurance and additional professional fees. First quarter adjusted EBITDA decrease $100,000 to 8.1 million and adjusted EBITDA decreased to 119 basis points to 16.9%.

This result was consistent with our expectations given the incremental spend associated with being public. If you adjust for those cost, adjusted EBITDA grew in the mid single-digits on limited volume growth. We maintain for expectation for modest adjusted EBITDA margin expansion for the full year.

First quarter non-GAAP adjusted fully distributed net income totaled $4.3 million or $0.19 per share. This is calculating using a normalized C Corp tax rate of 36% and fully distributed diluted share count of approximately 22.5 million shares.

For reconciliation of adjusted EBITDA and adjusted fully distributed net income to GAAP metrics, please see the tables in our earnings release. Our first quarter results were right in line with our internal projections and our outlook for the full year is unchanged.

While we do not provide detail earnings guidance, this fiscal year outlook is predicated on number of factors that we initially laid out on our fourth quarter call and we are reiterating today. First, an increase in unit volume in the mid to high single-digit range for the full fiscal year.

Secondly, we expect unit volume growth to accelerate sequentially through the third fiscal quarter peaking in the low to mid double digits. Jack indicated in his remarks that we produced 14 boats per day in the first quarter, and we set that up to 16 boats per in the second quarter.

This equates to double-digit volume growth in the second quarter versus the prior year. We shift and sold 673 boats in the first quarter, which means, the remaining 20 boats we’ll moved in the second quarter, all things to be an equal. From a mix perspective, the split between Malibu and Access was expected to around 70% to 30% access in fiscal 2015.

We now expect Axis to be slightly higher than 30% for the year. This unit mix combined with our standard price increases and increased in selection of optional features like G4 tower should continue to benefit average selling prices.

We expect to see some moderation in net sales per unit growth over the coming quarters and we continue to think net sales per unit will likely up somewhere in the low to mid single-digit range this year. We’ve been pleased with the strength in this number and we’ll closely monitor this over the coming months.

For the full year, we expect to see a slight improvement in gross margin driven by productivity gain in the quarters with the highest year-over-year volume growth. Sponsorship of the WWA, CancunPro tournament in early October will shift some marketing dollars and SG&A expenses to the first and second fiscal quarters versus last year.

Legal expenses relating to the PCMW and Nautique litigation are expected to be in $3.5 million to $5 million range and these are expected to be higher in the first and third quarters of the year, with the first quarter being peak.

Since our IPO occurred late January of 2014 we will not fully anniversary the incremental expenses of being the public company until the fiscal third quarter. Net-net we expect adjusted EBITDA margin to be up slightly for the fiscal year. This is despite the fact that this will be the first – be our first year with the complete 12 months public cost.

On a quarterly basis we expect year-over-year adjusted EBITDA margin to decline in Q1 due to the incremental company cost. You relatively flat in the second and then improve sequentially in third and four quarters.

The acquisition of our Australia license business closed on October 23 and the consolidation of this business into our financials is expect to add approximately 180 units, $8 million in net sales, over a $1 million to adjusted EBITDA and a couple of pennies to fully distribute net income per share in fiscal 2015.

In closing, I just want to reiterate that we’re pleased with our first quarter results. These results were in line with our expectations and outlook for the fiscal 2015 is unchanged. We feel very good about the trends both across the industry and in our business and we believe we are off to an excellent start to the new fiscal year.

With that, we’d like to open the call to your questions.

Operator?.

(Operator Instructions). Our first question comes from the line of Tim Conder from Wells Fargo Securities. Your line is now open..

Thank you, gentlemen. Can you hear me, okay..

Yeah. Hello Tim..

First of all, thank you for the slide deck, it is helpful answering some of the questions and your explanation also so far has been very good.

Couple of clarifications if I may regarding as you’ve pulled in Australia, how does that change the cadence of what you’ve outlined regarding the sales ramp and then the margin – the margin commentary that you had there?.

The margin commentary it’s not going to change dramatically. In terms of the sales ramp, the first -- our first fiscal quarter is the largest quarter for the Australian business, and so that’s the quarter ended September. The rest of the three quarters historically for Australia have been pretty consistent.

So they’ll be spread pretty evenly across each of those quarters. And so from margin perspective it’s not going to play the [recap] on the guidance that we gave, the guidance that we gave more specific to your models of the U.S business and the other, the Australian stuff is meant to be added up on top of that..

Okay. We’ll follow-up on that. And then Jack if you can just maybe give us an update on Nautique and the potential for some rejudgment very going to trial, and then embedded with your legal guidance any -- you had the settlement clearly on the windshield side which saved you some trial expenses.

I guess if you do not go to trial should we anticipate that that $3.5 million to $5 million for fiscal 2015 and legal could high by $1.5 million or so?.

Yeah. I’ll address your first question, Tim, as it relates to where we’re at with Nautique, our best guess on the summary judgment motions would be that they could occur as early as December. Currently, we are in the process deposition that I started in the month of October.

They continued in the month of November, and then the trial remains schedule for February. So, certainly the summary judgment motion gets towards [indiscernible]..

Okay..

In terms of the spend, yeah, there is definitely the potential for our guidance for our annual cost to come in inside of what’s out there if there were a settlement and that could easily be a seven figure number..

Okay. And then if I may gentlemen, lot of consternation given the strength of the U.S. dollar versus other currencies. Now you’ve added on currency here, any color Wayne as to how that will be handle and whether we’ll see a material increase here in your currency exposure or should we think of you guys are still so a fairly pure dollar play..

I think you should think of us still as a fairly curved U.S. play. There is a little of exposure there, but the business has dealt with it over the years in Australia and we don’t see that changing..

Great. Thank you, gentlemen. Appreciate it..

Thank you..

Thank you. Our next question comes from the line Joe Hovorka from Raymond James. Your line is open..

Thanks guys. Just a couple of quick questions, first, can you talk a bit about what your retailer growth was in September quarter..

What we’ve seen – so retail for the September quarter, the numbers that are available from SSI are obviously September number that’s flashed out there is really attractive high number that’s easy to member in the 30% range.

The July and August numbers came in the single-digits, so when you blend those out, because the July and August growth rates were in the single-digits and those months are lot more valuable. We expect that quarter to come in the very low double-digits, just north of 10%.

And so for us, we think that our retail registration growth was matching the market there in that low double-digit range..

And on the last call you talked about your EBITDA margins potentially being down slightly in this quarter, and you ended up down a bit more than 190 basis points, what’s the delta between down slightly and down to 190s? Is there something that you didn’t contemplate, because I wouldn’t think 190 was down slightly?.

I think there were some more – there were definitely incremental cost that going through our first reporting cycle with the 10-K and the proxy and all of those items especially what we went through after the last earnings call, and revamping the 10-K at that point.

Those probably were little bit higher and negatively impacted that adjusted EBITDA margin..

Okay.

And it sounds like that would just come out of some -- it would have been a timing cost until you’ve changed the overall kind of thoughts from a guidance standpoint from an EBITDA margin?.

That’s correct..

Okay. And then on your guidance, you talked about your mid to high digit unit volume for the full year.

What kind of industry unit volume that retail is implied in that number?.

I think what we’re hearing and seeing is there’s still going to be somewhere around 10% or so..

And I think its important to look at, so if our expectations for that September quarter is that its in the – I mean, just given the mathematical waiting we’ve done so far to put it in that 11% ish range.

I think we need to keep in mind that that’s the domestic market and when you look at what’s going on Canada and rest of the world that that’s a drag on that domestic growth rate. So I think when we try to paint the full picture, we’re not trying to be heroes and say, the U.S.

markets going to accelerate or we aren’t trying to say its going to massively decelerate, but we also are not making huge assumptions around the growth rate outside of United States either..

Okay. I guess I’m trying to out. So if I think your mid to high-single as just 6% to 8% right, that’s kind of mid to high single. And so that imply taking what you just said, saying okay, U.S.

is going to grow maybe 10%, Canada maybe grow something slower and the other international number maybe slower than that, what would your blended kind of retail number, like I’m trying to say is that if you think you’re going to up 6% to 8% you think the market is up 5% to 7% and so you’re grown a little bit of percent, little bit of market share and if the market only grows for, that number comes down a little bit off the market actually grows blended 9% to 10% that your mid to high goes up?.

I think what you’re – we’re looking at the market as a whole and I think that the projection that we have out there is likely really closed to what we expect the market to do.

And incremental moves in market share are only going to move that growth rate and adjust ever so slightest, because what the markets doing is just so much more impactful in that overall growth relative to smaller market share moves that we’re expecting..

Right.

So your mid to high single-digit volume would anticipate in industry that was at mid to high?.

Yeah, pretty much mid to high, maybe just a slight discount to that..

Right. Okay. That’s all I have for now. Thanks guys..

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

Hello, Mike..

Pardon Mr. Swartz, if you please check your mute button..

Sorry, about that.

Could you maybe provide some more context around the commentary in your prepared remarks, Canada, Europe and what you’re seeing there, are you seeing the market decelerated, is it more of a currency issue or macro economic?.

For Canada there is a currency issue. We’ve seen a little bit deceleration, nothing alarming. But I think that currency is under [90 to the dollar] and so we’ve seen a little, although the Canadian dealers do not seem to that effected by, so that’s a positive.

On the Europe side, it really comes back to a lot of news coming out of Europe and it continues to be what we’ve heard over the last 12 to 18 months. So we’re not seeing growth out of Europe, but we’re seeing it for the most part remained flat..

Okay. That’s helpful. Can you remind just what percentage of your business or unit volume done in Canada? Are you selling those boats into that market in U.S.

dollars?.

Yes we are it is an U.S. dollars and that Canadian market for us is somewhere in the 12% to 15% range..

Okay. Great. That’s helpful. Thank guys..

Thank you. Operator Thank you. And at this I’m not showing any further and I’d like to turn the call back over to Jack Springer for any closing remarks..

Great. Thank you very much. I want to thank everyone again on behalf of the management team for joining the Malibu earnings call today. And we wish you a very good evening. Thank you very much..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a great day..