Company's Q1 2026: Contradictions Emerge on Inventory, Rate Relief, and Sales Outlook

Date of Call: October 30, 2025

Financials Results

• Revenue: $194.7M, up 13.5% YOY
• EPS: $0.15 per share (adjusted), up $0.08 YOY; GAAP net loss $0.7M, down 86.2% YOY
• Gross Margin: 14.3%, down 210 basis points YOY

Guidance:

• Fiscal 2026 sales expected to be flat to down mid-single-digit percentage points; market decline anchored mid- to high-single-digits.
• Q2 sales expected $175M–$185M.
• Consolidated adjusted EBITDA margin expected 8%–9% for the full year; Q2 adjusted EBITDA margin 3%–5%.
• Tariffs estimated to add a 1.5%–3% headwind to cost of sales; mitigation and vertical integration actions underway.
• Expect H1 down high-single to low-double digits, H2 less severe; maintaining full-year guidance.

Business Commentary:

* Revenue Growth and Market Share: (Sales Performance) - Malibu Boats reported a 13.5% increase in net sales to $194.7 million for Q1, with unit volume up 10.3% to 1,129 units. - Growth was driven by higher unit volumes in the Malibu segment, favorable model mix in the Cobalt segment, and inflation-driven price increases.

• Inventory Management and Dealer Health: (Inventory and Channel Health)
• The company managed slightly elevated inventories entering Q1, emphasizing dealer health and channel inventory control through targeted promotions.

• This approach aims to maintain market-appropriate inventory levels and support dealer health, as retail activities remain soft.

• Innovation and Product Launches: (Product Strategy)

• Malibu's 2026 models, including new products like the Kobia, Malibu 21 LX, X-axis A200, and Cobalt R31, received positive dealer and customer feedback.

• The focus on innovation has validated strategic investments, particularly in the saltwater segment, and supports future growth.

• Financial Performance and Guidance: (Financial Performance and Outlook)

• Adjusted EBITDA for the quarter increased 19.1% to $11.8 million, with adjusted EBITDA margin rising to 6.1%.

• The company maintained its full-year guidance, anticipating sales to be flat to down mid-single-digit percentage points, with adjusted EBITDA margins of 8% to 9% for the full year.

• Capital Deployment and Strategic Initiatives: (Capital Strategy and Strategic Investments)

• Malibu Boats continues to evaluate M&A and greenfielding opportunities as part of its capital deployment strategy.
• The focus remains on leveraging current capacity and maintaining a strong balance sheet to scale production with retail demand.

Sentiment Analysis:

Overall Tone: Positive

• Management: "We delivered a solid start to the fiscal year with revenue growth above our expectations...Net sales increased approximately 13% year‑over‑year" and "results modestly exceeded expectations." They reiterated "we are maintaining our full‑year guidance and remain confident" and highlighted "adjusted EBITDA margins were in line with the plan."

Q&A:

• Question from Martin Mitela (Raymond James & Associates, Inc., Research Division): Have you seen interest rates come down for consumers and is this affecting buying or mix?
  Response: Rate cuts modestly improve consumer sentiment and will reduce dealer floor‑plan costs immediately (tied to SOFR); consumer retail finance rates will take longer to decline.

• Question from Martin Mitela (Raymond James & Associates, Inc., Research Division): On higher dealer incentives in the Malibu brand — is this just to clear inventory and will it continue?
  Response: Elevated Malibu incentives reflect heavier starting inventory and a tough comparison to prior light promotions; expect continued competitive promotions but not at prior peak levels.

• Question from Kevin Condon (Robert W. Baird & Co. Incorporated, Research Division): Thoughts on inventory going forward — weeks on hand/turns targets and segment differences?
  Response: Dealer inventories are modestly elevated industrywide but not far out of line; we will pace production to market and expect inventories to decline through H1.

• Question from Kevin Condon (Robert W. Baird & Co. Incorporated, Research Division): Is the rate of retail decline consistent through the year or more front‑half weighted?
  Response: Expect first half down more (high single to low double digits) and a lesser rate of decline in H2; full year mid‑ to high‑single‑digit decline.

• Question from Anna Glaessgen (B. Riley Securities, Inc., Research Division): On Q2 margin commentary — what cost impacts are being contemplated?
  Response: Q2 margin guidance embeds modest deleverage versus Q1 (midpoint below Q1 revenue) plus normal seasonal expense phasing (boat show ramp).

• Question from Anna Glaessgen (B. Riley Securities, Inc., Research Division): Dealer inventories in Saltwater Fishing and Cobalt — will retail/wholesale balance normalize?
  Response: We expect dealer inventories to come down across all segments; no major segment disparities anticipated.

• Question from Eric Wold (Texas Capital Securities, Research Division): Can you provide more detail on MBI Acceptance rollout, penetration and early results?
  Response: Pilot in Malibu/Axis has strong dealer sign‑ups and early anecdotal retail lift (including $499 financing reactivating dormant buyers); still early in data collection.

• Question from Eric Wold (Texas Capital Securities, Research Division): Is the plan/timing to roll MBI Acceptance to other brands unchanged?
  Response: Yes — rollout to other brands remains on schedule per our Q1 plan.

• Question from Eric Wold (Texas Capital Securities, Research Division): Thoughts on current discounting levels and when they may cool off?
  Response: Discounting has cooled from the period of excess inventory but remains competitive; it will likely persist until consumer sentiment and retail improve.

• Question from Noah Zatzkin (KeyBanc Capital Markets Inc., Research Division): Any color on ASPs across segments and model‑year '26 pricing/mix?
  Response: Modest year‑over‑year price increases; ongoing trend toward larger, more feature‑rich boats continues but likely at a slower pace.

• Question from Noah Zatzkin (KeyBanc Capital Markets Inc., Research Division): Any updates on M&A or greenfielding plans?
  Response: M&A and greenfielding remain part of capital allocation strategy; actively evaluating opportunities but no changes or announcements.

• Question from Jaime Katz (Morningstar Inc., Research Division): What top‑line level is needed to surface expense leverage — low single‑digit decline or must it turn positive?
  Response: Operating leverage is limited until market growth returns; cost structure is intentionally variable and under tight control, but meaningful volume leverage requires market recovery.

• Question from Jaime Katz (Morningstar Inc., Research Division): Any back‑half gross margin resilience vs. last year and one‑time G&A comparisons?
  Response: Tariff headwinds may build but mitigation actions should take hold; we expect higher margins in H2 as embedded in guidance, with gross margin contributing to improvement.

• Question from Michael Albanese (The Benchmark Company, LLC, Research Division): Any changes in cash vs. payment buyer mix and will MBI Acceptance provide visibility?
  Response: No material change yet in cash vs. payment mix; MBI Acceptance is still early but should provide consumer‑behavior data over time; consumer finance rates tied to long‑term treasuries will lag short‑term cuts.

Contradiction Point 1

Inventory Levels and Market Conditions

It highlights a change in the company's perspective on inventory levels and market conditions, which can impact sales strategies and financial expectations.

Can you discuss dealer inventories in these segments and whether retail and wholesale balances will become more aligned throughout the year? - Anna Glaessgen (B. Riley Securities, Inc., Research Division)

2026Q1: We expect overall dealer inventories to reduce throughout the year in all segments, as we don't see a significant difference in market environments. - Bruce Beckman(CFO)

Could you discuss inventory levels and this year's destocking plans? - Unidentified Analyst (Raymond James)

2025Q4: Inventory levels were elevated at year-end, but not significantly, roughly 1 to 2 weeks of excess. The macroeconomic uncertainty affected all segments. - Bruce W. Beckman (Chief Financial Officer)

Contradiction Point 2

Rate Relief and Industry Recovery

It involves differing expectations regarding the impact of interest rate cuts on the industry's recovery, which can influence sales projections and market sentiment.

Have you noticed a decrease in consumer interest rates and its impact on purchasing behavior or product mix? - Martin Mitela (Raymond James & Associates, Inc., Research Division)

2026Q1: When you look at the rate cut of yesterday, consumer sentiment improves as rates come down, but they're still not at pre-COVID levels. - Steven Menneto(CEO, President & Director)

Does your fiscal '26 guidance include assumptions about interest rate cuts? Are promotions planned for the boat show season? - Eric Christian Wold (Texas Capital Securities)

2025Q4: Our guidance does not assume any rate cuts, and we are focused on capturing sales with new models. If rate relief comes, it could help drive demand during the boat show season. - Steven D. Menneto (CEO, President and Director)

Contradiction Point 3

Dealer Inventories and Inventory Reduction Strategy

It involves differing expectations and strategies regarding dealer inventory levels and the pace of inventory reduction, which impact sales and market positioning.

Can you discuss dealer inventories in those segments and whether retail and wholesale balances will align throughout the year? - Anna Glaessgen (B. Riley Securities, Inc., Research Division)

2026Q1: We expect overall dealer inventories to reduce throughout the year in all segments, as we don't see a significant difference in market environments. - Bruce Beckman(CFO)

What is the target for dealer inventory by June compared to last June? - Craig Kennison (Baird)

2025Q3: Dealer inventories are expected to decrease by mid-teens percent by the end of June, placing them below last year's levels. - Bruce Beckman(CFO)

Contradiction Point 4

Consumer Sentiment and Interest Rate Impact

It highlights differing views on the impact of interest rates on consumer sentiment, which can influence buying behavior and sales.

Are lower interest rates influencing consumer behavior, specifically driving purchases or altering product mix? - Martin Mitela (Raymond James & Associates, Inc., Research Division)

2026Q1: When you look at the rate cut of yesterday, consumer sentiment improves as rates come down, but they're still not at pre-COVID levels. Dealer floor plan costs will decrease as they are tied to SOFR. - Steven Menneto(CEO, President & Director)

What cost levers are available in the event of further deterioration? - Ryan Williams (KeyBanc Capital Markets)

2025Q3: Interest rates shouldn't be a material input into our business at this point. - Steven Menneto(CEO, President & Director)

Contradiction Point 5

Market Recovery and Sales Expectations

It indicates differing expectations about market recovery and sales performance, impacting investor expectations and strategic planning.

Is the retail decline consistent across all quarters, or is it front-loaded with a potential rebound in Q4? - Kevin Condon (Robert W. Baird & Co. Incorporated, Research Division)

2026Q1: We expect the first half to be down more than the second half. For the full year, we continue to expect sales to be flat to down mid-single-digit percentage points. - Bruce Beckman(CFO)

How much visibility do you have for the second half, given the guidance indicating mid-20s growth? - Joseph Altobello (Raymond James)

2025Q2: For the full year, we still expect sales to finish up mid-teens percentage wise. - Steven Menneto(CEO, President & Director)