Malibu Boats Sales Drop 5.8% as Costs and Margins Sour

Date of Call: Feb 5, 2026

Financials Results

• Revenue: $188.6 million, decreased 5.8% YOY
• EPS: Adjusted net loss per share of $0.02 compared to adjusted net income of $0.32 per share in the prior year
• Gross Margin: 13.3%, a decrease of 540 basis points versus the prior year period

Guidance:

• Full fiscal year sales expected to be flat to down mid-single digits YOY.
• Full fiscal year adjusted EBITDA margin expected to be in the range of 8% to 9%.
• Q3 net sales expected to be in the range of $198 million to $202 million.
• Q3 adjusted EBITDA margin expected to be approximately 8.5%.
• Expect markets to decline in the range of mid- to high single digits for the fiscal year.

Business Commentary:

Sales Performance and Market Challenges:

• Malibu Boats reported net sales of $188.6 million for Q2 2026, representing a 5.8% decrease year-over-year, with a 9.5% decline in unit volumes.
• The decrease was driven by lower wholesale shipments, unfavorable segment mix, and higher per unit labor and material costs.

Profitability and Cost Pressures:

• The company's gross margin decreased to 13.3%, down 540 basis points compared to the prior year period, with a 32.9% decrease in gross profit to $25.1 million.
• This decline was primarily due to fixed cost deleverage across all segments and increased labor and material costs per unit.

Inventory and Dealer Health:

• Malibu Boats noted that their model year '26 boats are in a healthy inventory position, presenting well across the dealer network.
• The company is focused on managing channel inventories and protecting dealer health amidst a broader industry overhang on noncurrent inventory.

Strategic Initiatives and Financial Outlook:

• The company expanded its share repurchase program to $70 million, reflecting confidence in its long-term strategy, and completed $20.8 million of share repurchases in Q2.
• Looking ahead, Malibu Boats expects sales to be flat to down mid-single digits year-over-year for the full fiscal year, with adjusted EBITDA margin anticipated to be between 8% to 9%.

Sentiment Analysis:

Overall Tone: Neutral

• Management reported results 'slightly above our expectations' but acknowledged a 'continued challenging retail environment' and 'modest direct impact' from tariffs. The outlook is described as unchanged, with 'disciplined execution' and 'prudent deployment of capital' emphasized.

Q&A:

• Question from Martin Mitela (Raymond James & Associates, Inc.): 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?
  Response: Promotional costs related to year-end sales events pressured margins by about 50 basis points for the quarter.

• Question from Martin Mitela (Raymond James & Associates, Inc.): 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?
  Response: The industry overall is healthy, with some pockets of elevated weeks on hand; the company's inventory position is appropriate and healthy from a historical perspective.

• Question from Michael Albanese (The Benchmark Company, LLC): 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?
  Response: It's too early to establish a trend, but early feedback from dealers on the MBI Acceptance program is positive, with a higher take rate on the 3.99% offer and some help in closing sales.

• Question from Michael Albanese (The Benchmark Company, LLC): 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?
  Response: Centralized sourcing benefits are starting to appear on the P&L and are expected to drive a meaningful portion of margin growth in the back half of the fiscal year.

• Question from Kevin Condon (Robert W. Baird & Co. Incorporated): 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?
  Response: Dealer feedback remains consistent, with a positive overall trend from boat shows resulting in additional custom orders; guidance is unchanged as expectations are met.

• Question from Kevin Condon (Robert W. Baird & Co. Incorporated): 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?
  Response: Given expectations for a declining market, some level of destocking is implied for the fiscal year, but inventory is expected to stabilize in the back half, with potential to match retail and wholesale if the market trend continues positively.

• Question from Brandon Rollé (Loop Capital Markets LLC): 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?
  Response: Focus is on operational effectiveness; labor cost benefits along with centralized sourcing are expected to flow through into margins in the remainder of the year.

• Question from Brandon Rollé (Loop Capital Markets LLC): 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?
  Response: No bounce back seen yet; all OEMs are executing efforts to push growth in the segment, with continued collaboration expected.

• Question from Jaime Katz (Morningstar Inc.): 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?
  Response: Confidence comes from three drivers: sequential top-line growth providing fixed cost leverage, benefits from centralized sourcing not yet fully in the P&L, and a return to normalized promotional cadence as the year progresses.

• Question from Jaime Katz (Morningstar Inc.): 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?
  Response: The recent promotional spend is viewed as a return to normal, with a successful year-end sales event driving some costs; pre-pandemic seasonal margin growth is expected to resume.

• Question from Jaime Katz (Morningstar Inc.): 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?
  Response: No comment on competitor decisions; the company will continue to focus on its own capital allocation priorities and strategic vision.

• Question from Griffin Bryan (D.A. Davidson & Co.): 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?
  Response: The company is continuing its due diligence and looking for opportunities; any future deals will be reported in the market.

Contradiction Point 1

Promotional Expense Cadence and Impact

It involves differing narratives on whether promotional spending is normalizing or was an anomaly, impacting expectations of future expenses and margins.

Have there been any noteworthy developments in the cadence of promotions recently? - Jaime Katz (Morningstar Inc.)

2026Q2: The promotional cadence is more of a return to normal. The higher promotional spend in Q2 was partly due to a successful year-end sales event. - David Black(CFO)

Are the higher dealer incentives for Malibu aimed at clearing inventory, and will they continue? - Martin Mitela (Raymond James & Associates, Inc.)

2026Q1: A competitive promotional environment is expected to continue but not at recent high levels. - Bruce Beckman(CFO)

Contradiction Point 2

Inventory Management and Market Expectations

Contradiction on inventory trajectory and alignment with market decline, affecting production and shipment planning.

Are there plans to keep inventory flat or reduce it by removing boats from the channel as we move from one fiscal year to the next? - Kevin Condon (Robert W. Baird & Co. Incorporated)

2026Q2: Given the expectation of a mid-to-high single-digit market decline, some level of destocking is implied for the fiscal year. ... as the market stabilizes, the company expects to begin matching retail with wholesale shipments. - David Black(CFO)

Is the retail sales decline consistent throughout the year or front-loaded? - Kevin Condon (Robert W. Baird & Co. Incorporated)

2026Q1: Production is being paced to align with market expectations of a decline in Q2 and H2. - Steven Menneto(CEO)

Contradiction Point 3

Promotional Cadence and Expectations

Contradiction on whether promotions are a normalized part of business or tied to aggressive inventory reduction, impacting margin expectations.

Have there been any noteworthy changes in the cadence of promotions compared to the last quarter? - Jaime Katz (Morningstar Inc.)

2026Q2: The promotional cadence is more of a return to normal. The higher promotional spend in Q2 was partly due to a successful year-end sales event. Historically, margins and promotional spend normalized in the back half of the year. - David Black(CFO)

Does the 2026 guidance assume interest rate cuts, and would dealers increase promotions if rates fall? How much rate relief is needed to drive affordability? - Eric Christian Wold (Texas Capital Securities)

2025Q4: Promotional activity is now a normalized consumer incentive, not aggressive inventory reduction. - Steven D. Menneto(CEO), Bruce W. Beckman(CFO)

Contradiction Point 4

Inventory Health and Destocking Outlook

Contradiction on the health of dealer inventory and the expected level of destocking for the upcoming year, affecting channel inventory management.

What's the difference between your inventories and current industry trends? - Martin Mitela (Raymond James & Associates, Inc.)

2026Q2: The industry as a whole is in a healthy position... Malibu Boats’ weeks on hand are appropriate from a historical perspective, and the company has addressed any elevated inventory concerns. - David Black(CFO)

What is the embedded retail outlook in fiscal 2026 guidance, and should we expect further channel inventory reduction or impacts from recent dealer network upgrades on stocking plans? - Craig R. Kennison (Robert W. Baird & Co.)

2025Q4: Destocking is expected to be slightly higher than in 2025 due to softer-than-anticipated Q4 retail. - Steven D. Menneto(CEO), Bruce W. Beckman(CFO)

Contradiction Point 5

Dealer Inventory Targets

Contradiction on the target for dealer inventory reduction by the end of the selling season, impacting inventory planning and expectations.

Will inventory levels be maintained or reduced between fiscal years? - Kevin Condon (Robert W. Baird & Co. Incorporated)

2026Q2: Given the expectation of a mid-to-high single-digit market decline, some level of destocking is implied for the fiscal year. However, as the market stabilizes, the company expects to begin matching retail with wholesale shipments. - David Black(CFO)

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

2025Q3: The goal is to end the Q4 selling season with dealer inventories down in the mid-teens percent, which will place them below historical levels and below last year's levels, as desired by dealers. - Bruce Beckman(CFO), Steve Menneto(CEO)