Malibu Boats, Inc. (MBUU) Earnings Call Transcript & Summary

Hello, and good morning. I'm Bruce Beckman, Chief Financial Officer. And on behalf of the entire Malibu Boats team, I'd like to welcome you to our 2025 Investor Day. We have a great lineup of presentations for you today, followed by a 30-minute Q&A session. We have QR codes for those of you in the room to log your questions, and we'll also be taking questions from those joining us virtually. For those in the room, our team will pass around the mic for you to ask your questions. And for those attending virtually, our team will be moderating. So please log your questions during the presentation. And again, the question-and-answer session will be at the end. For those of you in the room and following along, before I start, I want to remind you that as stated in the safe harbor statement behind me, during today's presentations, we will be making forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements. For a full discussion of potential risks and uncertainties, please refer to the risk factors listed in our most recent SEC filings. During these presentations, we will also be referring to certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP are included in the presentation at the end of today's slides, and they can also be found in the Investor Relations section of the company's website. With that, I'd like to welcome Steve Menneto, Chief Executive Officer of Malibu Boats.

Thank you. Good morning, everyone. I think we're off to a good start. No one fell in the water in the docks, right? No boats crashed, so it was a good morning and the rain kind of held off for us. So welcome those joining us virtually. We have a good day for you planned today. But the question came up is why are we doing this? So the reason why we picked now to do this is we have a new management team in place. We want to be able to make sure that everyone can meet those people that, the ones presenting as well as the ones in the room who will be joining us for lunch. You'll be able to interact with the new management team here. And we also want to share where are we going. We haven't done one of these since 2018, and so we want to be able to talk where are we going to take the company over the near to midterm to long term as we kind of look at Malibu Boats, Inc. and its future. So that's what we're going to do today. We've got a great roster of speakers for you and the agenda you can all see, we'll go through the major parts of the businesses. You may have met some of these folks out on the docks, but I'll be speaking Bruce. And then the 3 leaders of our businesses, Rachael, Jason and Chris will come up and talk about their areas that they lead, and we'll go into some real interesting stuff today. So we'll get going here with the overall, where are we taking the company? What's our strategy? what's the overall path forward? But before we do that, we want to start with the foundation of the company. We started in 1982 out in California, building Malibu Boats. We moved over here to Tennessee kind of where a lot of boats are being made, and a very skilled workforce, very experienced labor market as well as a lot of other brands here. So it's kind of that area to do fiberglass boats. And through that time period in 2009, we added the access line. We came out with Surf Gate in 2012/2013 model year, really kind of leaped the market with that technology. And then through -- we went public in '14 and really became an accelerator through a lot of M&A where we brought on the Cobalt line in '18, then Pursuit to follow and then MBG after that. So our business has grown, and you could see the stats on it, 8 manufacturing locations, over 300 dealers around the globe that support our brands. And we have a lot of models that we work with across our 85 models that we are able to satisfy the market in a bunch of different segments, 2,000 people working for us, we're the #1 manufacturer of fiberglass boats with our 8 iconic brands that we go to market with. So right now, that's kind of the history of the company and where we've been. So where we want to go, it starts with what are our enablers. And of course, it always comes back with being customer-obsessed. Our customers are enablers, and we have to make sure that we're getting that voice of customer back into the business to create a better experience for them. We have a new strategy, build, innovate and grow. We'll talk to you what does that mean? What does that mean in each of our businesses as we go forward. We have the scalability to really -- as that up cycle returns, we can really leverage our infrastructure to be able to meet that demand and capitalize on that growth. We've been disciplined in our M&A practices. That's another enabler. We've shown a great history of being able to acquire premium brands. And then not only once we acquire them, but make them better and have them grow and gain share. And of course, our model, our robust cash flow, the ability of a strong balance sheet that allows us more opportunity for the future. So that's the enablers that we're going to take as we move forward. It starts with our people. And what we're trying to assemble here is the best team in marine to really drive this business forward. But what we think about is the boater at the center of our business. How are we going to satisfy that boater? How are we going to give them a great on-the-water experience? What are we going to do for that person that keeps coming back to our premium brands, that family that wants to spend time together. Even though we have young kids who want to do social media, tell me one thing. Is it better to do social media sitting on your couch, or sitting in a boat, right? So that's where families start trying to spend time together, and that's what we want to be able to accomplish. That boater at the center of our business. We follow our values, the [ PACE ] values, where it's people, accountability, customer experience and then execution and excellence. That's how we drive our business as we go forward. So our build, innovate and grow strategy. What does that really mean? How do we build a culture that is putting that customer at the center of our business? How do we get a deeper relationship with our dealers as we going to grow this business, and we want to move forward? We're going to tighten up those relationships, support them better. As we've shown, here in the past when we're working through their inventory, making sure that we have them rightsized in a down cycle. We also want to be able to drive the local markets with them, and we'll talk about that as we go forward. And then operational excellence. How do we have that continuous improvement driving the quality, driving the efficiency, making sure we're chasing better margins all the time. Part of your business, that's how we want to -- we act. And what we need to do is a constant building of our business, right? It never stops in that kind of bucket. That move to innovation. When you look at innovation, there's a lot of good things in our history that we've done. There's a lot more to come. We're going to focus on that innovation, how do we drive new things in our boats to satisfy customers, to make that family experience better. We'll continue to introduce not only just product innovations, but services as well. right? We want to focus on how is that total 360 ecosystem of boating for the family and that person, how do we do that? How do we make that better through innovation of products and services? And then finally, growth. We look at what we have already in our portfolio. We have great brands in our portfolio, great products. We can continue to gain share, find those ways to grow our business with what we have now and look at opportunities in the M&A space to continue to add to our portfolio that drives value creation, premium brands, keep with that. We've been successful with those brands. We're going to continue to do that. So that's our build, innovate and grow strategy. We want to keep it simple, but powerful for us as we move forward. So when you look at that, where are the focus areas that we want to play in. It's in marine, okay? We're not looking to go in a different space. We're going to stay in marine, but 4 places in marine we'll talk about, one, where we're very core to our business, building boats, right? We know how to build boats. We know how to build premium boats. You saw that if you were here with us today, those boats are beautiful, well appointed, high-quality boats for a discerning customer. We're going to continue to do that but we have the opportunities to expand geographically, more segments with our current brands and with future brands, okay? So we're excited about being boat builders. We're going to continue to do that but we see a bigger ecosystem. We see the opportunity to grow beyond just being a boat builder. And what we want to be able to grow is in technology and connectivity. The technology around the boats are going to continue to drive upgrading boats, new customers coming to the marketplace, we want to make sure we're a leader in that space. When you look at parts and accessories, an opportunity for us to go even deeper, right, into our boats, what we offer, how do we appoint better boats, more usability, more favorability from the families when they're using our boats and then finally marine services. How do we offer more services to create that 360 experience around owning a boat with our customers. We're going to continue to follow those opportunities and drive our business in these 4 focus areas, okay? So let's take a deeper look. What's the size of the prize? Current boat building is about a $6 billion total addressable market. When you start to add the total ecosystem, it more than doubles. So there's an opportunity for us to play in a market that's huge that we haven't played in previously. So how do we go do that? While we're building capabilities, and we formed 2 newly formed businesses and our own overall portfolio, marine components and MBI acceptance. They're just getting launched right now. So marine components. It's taken the vertical integration. Those things that we do well, trailers, flooring, engines, towers, wiring harnesses, things like that, that we can continue to not only utilize our brands, but also sell to other OEMs. And there's opportunities as you go to end users. We're going to explore opportunities as how do we actually offer through our dealers to our end customers, more parts and accessories and grow our components business. MBI acceptance. It's another -- it's a strategic alliance between MBI, Wells and Aqua Finance. So it's not a captive, but it's a strategic alliance where we can offer financial products. So we're going to go out testing with Malibu right here, and we're going to test low rate financing, maybe deferred financing, extended service contracts, things like that, that help our dealers close more sales, gain more market share and satisfy our customers in the total ownership of their boat. How do we drive forward on our strategy, on our build, innovate, growth strategy is our MBI Advantage? It's why we were able to acquire businesses and make them better. So the 7 items on the left is what we do really well, right? Lean manufacturing, vertical integration, innovation and our balance sheet, the strength, the financial strength of the company. We've talked to you about that before. The 3 highlighted in blue are some of the new areas that we're adding, right, central sourcing, category management, pulling all of our volume together to really work with our suppliers for more efficiency, higher quality more, delivery on time, becoming a better manufacturer, brand management and go-to-market capabilities. We've talked about that's really an opportunity for us. We have amazing brands, but you got to be able to communicate those brands and then bring tools to be able to drive local market share gains and talk to your customers and support your customers and dealers in a better way. And then our premium dealer network and customer experience. We have the envy of the industry and our dealer network, and we want to get closer to them, support them, so we have that dominance in those local markets to drive our brands forward. When you look at what gives us the right to win, we're not going to go through all the words on the page. We're pretty confident that we've shown our ability to do this, and then we're going to take those attributes that we've had and the value that we've created with our dealers and bring them forward as we go into the marketplace and expand our business. So when you look at the MBI Advantage, what does that mean financially. For about the last year, we've talked to you about the mid-cycle, right? If the market returns back to that 2017 to 2019 period, and we do not add more market share, do not add more products or brands. We look at our opportunity to be about $1.3 billion. You can see 17.5% EBITDA margin, $130 million of free cash flow. So that's if we just return to those time frames. What we want to show is when we really focus on the MBI Advantage and really drive execution and excellence in our own business, there is an outperformance opportunity that we have. we can move that mid-cycle to even better results. So about $1.5 billion, 20% EBITDA margin with over $200 million of free cash flow. And that takes us executing better as a company. That's what we're focused on right now. So if the mid-cycle is delayed or it doesn't materialize to the level that it was in '17 and '19, that improvement is still there for us to go get and that's what we're focused on as a team. And it will take us the mid to -- the near term to midterm to get there on that improvement, but we're working on it. We're focused on it, and we're going to drive towards those results. So going a little deeper, lean manufacturing, quality, we have the ability to move forward with scale in our business. So this central sourcing category management. How do you control the inflow of your materials better, how do you become a higher quality, more efficient at what you do. The vertical integration won't stop. It's been a cornerstone of our business. We'll continue to have that as a cornerstone of our business. There's more opportunity. And then we have capacity in place. Over the last few years, we've put capacity in place. You'll see that when the business leaders come up and we have the ability to scale to grow. So we can meet the needs of the next upturn without having to go spend a lot of money, a lot of CapEx on driving more infrastructure in our business. So we're ready for those opportunities in front of us. The continuous improvement is really a day-to-day grind on how do you make your day -- business better. So this is where we're seeing as a company we're dual sourcing, quality screening, right, rationalization of suppliers and products, design to value, all the different things that a company can do that can drive better margins, more efficiency and make manufacturing a powerhouse more than what it is today and have the opportunity to expand our margins. That's what we're chasing, but that is a daily work that every good manufacturer should be in and that we're adopting in our business and leveraging what's already been here and then amping it up to the next level as we go forward. When you look at brand management go-to-market, it's really enabling retail execution. So the MBI acceptance is cool -- it's a really good tool to have for our dealers to provide tools to test things that what's going to help a person buy a boat, right? So we're all open ears on that, working with our dealers, working with our financial partners. We're returning back co-op. It was here prior but we're bringing that back on as a tool to help our dealers drive retail in their local markets and then how we engage with them with events, the dealers doing customer events and getting more people in boats to test our boats and to get them on the water to enjoy our product before purchase. So a lot of opportunities there. I can go to the next level of detail about what we're going to do is turn it over and let the dealers talk to you. [Presentation]

It's great to hear from our dealers where -- there is a change of how the management team looks at dealers and how we can partner with them and how we can drive success in the future. That's what we're bringing here with the new management team. That's why we wanted to share that video with you. They did a great job. So moving on, we'll talk about our innovations. We continue to be the brands that refresh the portfolio, the fastest in the market than any other competition -- competitor. We are always on the forefront of trying to bring new boats to market. It helps us drive the market share. It helps us satisfy customers. It gives a reason for those long-term customers to repurchase, right trade in and repurchase. We're going to continue our commitment to engineering growth. Even in the down cycle, we have not gotten off the innovation throttle. We're continuing to invest in new boats, new opportunities for us to grow our business, satisfy new customers. And as we came here, we're launching an innovation team. So we're grabbing all the engineers across all of our business working together and say, what are the big challenges in marine that we can solve together as a collective team. We've kicked that off since we've joined the company here. So we're pretty excited about our future and where we go in product. And you could see that in some of the products that we've already brought to market to satisfy customers, the Splash & Stow option on Cobalt, the movable second seat in Pursuit. And when you look at our command center on Malibu, all things that drive that allegiance to our brand that better experience for our customer and it helps our dealers retail more boats when we're always upgrading our boats and bringing new technologies. When you do that, you make that all happen, we can accelerate the growth of this business. So when we look at market growth, where should we be in new segments, where can we be in new geographies and so forth. We'll continue to go there. Share growth, bring that innovation, new boats to market to continue to drive share and then, of course, strategic M&A creating value, not just grabbing any business out there. It has to fit in our strategy, it has to fit in our focus areas, and it has to be that premium brand that drives the value for our shareholders and for our dealers. When we do that, like I said, we kind of showed you this is, a, when the mid-cycle returns and we work to that opportunity to outperformance with our capacity in place, our premium channel, that innovation, the strong supplier partnerships that we're building and the vertical integration that we've been, been a cornerstone of our business. We can drive these results, and we're pretty excited about where we can go. So the last slide is, we're going to continue our discipline. We've been disciplined in our M&A strategy. We've been disciplined in how we invest our capital, our CapEx into new products and so forth? And how do we manage the cost of our teams as we're in the down cycles. We're going to continue to do that. We're going to follow our growth enablers, as I've outlined here in the beginning, really look for does those opportunities fit our strategic criteria as we look forward. Now as a company, we have a plan to move forward, right? Build, innovate and grow in our 4 focus areas in marine. That is where we're going to take this company. That's where our opportunities have. And we have our disciplined financial guidelines that are in place to make sure that we're always doing this well managed and well disciplined as we go forward. So thanks for the time. I'm going to hand it over to Rachael, she will take you through Malibu/Axis.

All right. Well, thank you, everybody, and good morning. I've had the privilege of working at Malibu for over 13 years. I've led departments from -- been part of our product development team, a part of our engine development, process improvements and more recently with vertical integration. Currently, I'm leading the Malibu and Axis segment as our SVP. And outside of that, I'm not just -- this isn't just a profession for me, it's also a passion. It's something that's a lifestyle for myself and my family. You saw the picture of me with the dog. I mean, the dog's name is Malibu. It is a part of our family. So this is -- I've owned 3 Malibu's prior to working here. And so I'm really excited today to walk you through the product because this is something that's near and dear to me. So I want to kick things off, I want to start by setting the framework and the presentation outlined and some of the key takeaways and the themes that you're going to hear here today. So Axis and Malibu, we're premium brands, we're recognized in the industry for our leading in innovation and in supporting the robust and highly engaged dealer network. Our premium brands are in the ski and wake market, and they differentiate us. Innovation is in our DNA, and that's something that year after year, we pride ourselves in meaningful product and enhancements. So introducing new features to the market and offering consumer-driven performance. That's something that we're best-in-class in solutions. We continue to steepen our dealer partnerships every single day, and we deliver on efficiencies and create value through our vertical integrations and our operational excellence. Vertical integration. This is not something that just allows us to bring the cost down, but it allows us to be first to market, control the supply chain and have better control over the quality and the features that we're bringing to you. These Key enablers allow us to further penetrate the market and maintain our market leadership position. They serve as our guiding principles and drive the strategies and actions that enable us to deliver the results that you see. So at a snapshot, Malibu and Axis account for 39% of Malibu's total revenue in fiscal '25 and then the EBITDA of roughly $60 million. We have a really deep, strong relationships with our dealers, as you see, over 100 dealer locations worldwide, and those partnerships are lasting over 12 years. That's unprecedented. You won't hear that anywhere else out there. 18 models are in our portfolio. It's a wide variety of models. We're coming out with 4 of those new ones -- are just new for just this year, and we continue that cadence again year after year. So we're continually pushing innovation, the pace. You won't find that anywhere else where people are coming out with models -- that many new models every single year. We're keeping the product fresh. We're keeping that portfolio new. In addition to that, we have 3 facilities ranging from Tennessee, the California, Australia, over 625,000 manufacturable square feet collectively across those. And we're supporting our innovation in all 3 of those facilities. So the depth and breadth of our portfolio is unmatched. We touch every part of the consumer demand needs for these types of boats. Throughout the presentation, you're going to hear us talk about consumer-centric focus and that we like to meet the customers where they're at in their buyer's journey, so everything from the entry-level Axis all the way up to the premium, ultra-premium Malibu M-Series. We're multisport. So we're covering anyone that wants to come in if they want to ski, if they want to go out and go wake boarding, if they want to wakesurfing, you probably saw some of that today, some of the foiling out on the water. Those are all the multi-sports that you can do by the way in the boat. We're split, as you see here between the 2 different product segments. You have the Axis line, which is a great product for those entry-level buyers that are coming in and wanting to get into the product. It covers the skiing. It covers the wakeboarding. It covers surfing. You can do all of that behind the boat for a very -- good competitive price. Then on the Malibu side, 45 years of legacy there. We've been doing this. It's a name -- a brand that you recognize in this industry. It's a wide variety of models that we have there. again, covering everything from skiing, surfing, wakeboarding to the crossover industry. It's a great value that's driven through its legacy and through that name that you see. All right. The current addressable market is estimated to be roughly $1 billion. And Malibu and Axis hold the majority of the market -- they're one of the market share leaders in this industry. When the market improves, we will return to mid-cycle, and we are positioned for 50% revenue growth. The things that are going to get us here are a well-balanced mix of buyers in that shape and drive our market, ranging from customers who finance their boats to those who buy outright with disposable income. This diverse buyer base provides a natural level of insulation against the market fluctuations. With the rise of the disposable income, we're also seeing a trend of first-time buyers that are more sports and activity focused. I was one of those. They see boats that align with their active lifestyle. This makes our product especially attractive to first-time buyers in our target financial demographic as they offer recreation tailored for their specific interest. While this is all happening, Malibu will continue to be innovating and leading in that industry. So let's set the table with the 3 elements that Steve laid out previously with build, innovate and growth. First, we'll talk about building. Vertical integration remains a key priority for us as we seek new opportunities. Our recent sheet metal was one of those prime examples. We're committed to being strong partnerships with our dealers and engaging directly with customers to understand what matters most to them. Next is innovation. Our next-gen LT4, our Malibu touchscreens, year after year, we're coming out with exciting products and features, all the while making sure we are focused on the customer and identifying what they need and where they want to be and medium where they are in their journey. Lastly is Grow. We're going to continue to create new market opportunities, addressing white spaces in the market and answering customers' needs before they even realize what they are. We're going to meet them. We've had proven success over the years with this and entering some new white spaces like the T250 and the 26 LSV, and we're going to continue to seek opportunities. So vertical integration is a part of who we are. Throughout our history, we're continually expanding our in-house capabilities, strengthening margins, enhancing quality, improving our supply chain. It is all reflected in the time line that you see here. For us, vertical integration means managing the entire value of the supply chain and the manufacturing process from start to finish. And we do just that. Vertical integration started back with Towers and billet in California, and we continue to build on top of that. We're designing into -- we're still today designing the Towers in Tennessee and manufacturing those in California. We work closely in parallel with those 2 team. We recently started to pick up momentum in 2016 with trailers and then shortly after that, with engines and then harnesses and sheet metal. So we realized it was a great opportunity, not only for Malibu, but across our portfolio. So you'll see soft grip flooring inside of Maverick or Cobalts. And also in 2022, we acquired wiring harnesses and moved that up from Alabama to Tennessee to our Tennessee headquarters, and you'll get the chance to see that later today. All of this has given greater control over the supply chain process, allowing us to be on the front end of innovation and shaping the technologies that really set us apart. Vertical integration delivers enhanced quality control. It reduces the supply chain risk, accelerated time to market, greater cost efficiencies and faster innovation speeds. Our dealer relationships are essential to our success, and we pride ourselves with really strong relationships across the country. As I noted earlier, 180 dealer locations worldwide, and these partnerships run deep. We have over 12 years of -- on the average of those partnerships with our dealers. That's one of the things that really sets us apart. You'll see, as I noted here, 86% of the markets, we're #1 or #2 in market share in those areas. Whenever possible, we're going to pursue exclusive partnerships with our dealers to protect against dealer saturation. But they continually come back to us as a partner of choice because of the robust portfolio that we offer, the high quality and listening to the customers and delivering on what those demands are. So double-clicking into that, I wanted to unpack a recent case study we had. We had an opening in the Detroit market and Club Royale, jumped on that opportunity. This was a great opportunity for them and for us as well, and it's proven in a matter of 12 months, we grew 8% market share in the Detroit area, going from 20% all the way up to 28%. And Rob Davis is one of the gentlemen in the video that you just watched, and he was a testament to he talked about the quality we have and the customer-centric focus that we have on these customers. And I think that just goes to show this great partnership that we have with our dealers. As an innovative company, it's table stakes that we keep our portfolio fresh and consistently coming out with new models. On your way in, you probably passed by the 22 LSV and the T250 in the parking lot. That's just 2 of the 4 new models that we came out with just this year, and we do this every single year. We're coming out with 4 new models over -- every single year for the past 10 years. That's 44 new models since 2015. And no other towboat in the market can match this pace. You won't find that with any other towboat manufacturers out there. More importantly, we're utilizing the real-time customer data and the voice of the customer to feed our engineering team and that directly supports the needs of our customers and a continuous feedback loop we provide the best results, the best features on the boat. Everything from the 360 camera to e-steering is all meant to make that experience more smooth on the water and easier for the customer to operate and that comes from us listening to the customers and taking that feedback loop back to our engineering team. So innovation runs deep in our history. From being the first to introduce the onboard computer to our recent launch of the next-gen LT4, those are just the most powerful engine in the market. We pride ourselves in these relationships with our partnerships with strong partners such as GM, marine that was 1 that we came out with the most powerful engine in the market, the NextGen LT4 that was just released this year. And then you have other features like the NextGen -- like the touchscreen, the Malibu touchscreens, which is one of the largest screens out there. 15.8-inch display, is something that we power -- we're proud of this relationship that we have with them. And so when you partner with people like GM, they have a dedicated team of calibrators that are on staff that we worked with that come out with custom engine calibrations, that allow us to have smooth cruise control and smooth shifting in throttle. All of that comes from our strong partnerships with these suppliers and allows us to be first to market with some of the best features that really deliver on meeting where the customer is and those needs that they have on water. This has allowed us to accelerate our innovation, grow faster. And on the flip side, our resource has created a relationship that is synergistic in nature, allowing true performance to come to life. So to wrap this up, I want to leave you with the Malibu and Axis segment growth strategy. We are well positioned to capture growth as the market recovers with the mid-cycle baseline of $460 million and 20% adjusted EBITDA margin. In addition to that, we also see this opportunity to provide incremental growth through whitespace opportunities, and we're going to continue to capitalize on them. We're particularly looking at larger, higher model boats, customer centricity is at the heart of everything that we do, not only meeting existing needs but in creating entirely new opportunities. We're analyzing trends and identifying what customers want. We don't just listen to our customers, but we observe their behaviors through their entire boating life cycle. And on top of that, we're looking at trends in the industry, everything from agriculture to textile, we're monitoring those trends and incorporating that into everything that we do. You've heard me highlight the depth of our engineering team. It's embedded in our factory alongside our products that help us build. And our team has a deep understanding of the operations that enable us to design for manufacturing and quickly scale through our vertical integration opportunities. So with those incremental opportunities, we think we can get an additional 300 basis points to take us to a 29% adjusted EBITDA margin. So with that, I'm very excited. Our team is focused right now on where our strategy is headed to build. We're going to continue to lean into innovation. It's something that we're known for, and we're going to grow and capitalize on these vertical integration opportunities. And with that, I'm going to hand it over to Jason. Thank you.

Good morning, everybody. My name is Jason Turner. I've been in the marine industry, gosh, for 25 years. It's the only thing I've ever done. And worked on boats a long time before that. And I've had the pleasure of being at Cobalt now for about 8 years. So about the time that the acquisition happened I came on board at Cobalt in engineering as the VP of Engineering. And since about 2021, I've been leading the brand in the position that I'm in today. So similar to the other presentations, just kind of setting the table here, what are our key enablers. And these 4 themes we'll touch on throughout the next few slides. But first, our best-in-class dealer network. We've mentioned that a couple of times. That really remains a cornerstone of our success. It not only supports the market share and leadership, but it also provides a powerful and compelling advantage through its reach, right? It's customer engagement and the alignment with our brand. And number two, we just completed a facility expansion, which will tour later today. but it's really meaningfully increased our capacity. So this advancement enhances our operational agility and positions us to scale throughput in response to the market, both anticipated and current. Number three, innovation continues to be a defining capability for us. Our -- we have a pretty disciplined forward-looking product development process and it enables consistent delivery of those new models, that's going to meet those ever-evolving customer needs, which we consistently see. And last there, number four, the integration into the broader portfolio, it's really yielding those clear benefits. So we're unlocking operational efficiencies and leveraging those shared resources and expanding margins, all while strengthening that long-term profitability profile for the business. Just a snap of Cobalt as a business. Last year, we were about $215 million, and that makes up about 27% of total MBI revenue. Our segment adjusted EBITDA is $18 million. But during the next few slides, we'll see some info and some plans on how we're going to bring those -- grow those margins and really improve that number. We've got about 130 unique dealers in 177 different locations. And with the average dealer relationship over a decade, but I'll tell you we just got back from our national dealer meeting and there's at least a dozen that are 40 and 50 years. So there's a big range in our dealership age. And then we have 2 facilities now. Total square footage and roof is about 750,000 square feet, we're building 24 models and 4 of those were just introduced in the last 12 months or so. Quick product overview. I think dividing Cobalt into 3 main segments is probably the easiest way to look at that. The first we'll call sterndrive. So that's your traditional, versatile boats. You can use those for a very adaptable day on the water. General cruising, light water sports. We've got 10 different models in those ranging from small to large, as you see there. Second, we'll call our Surf segment, which would be anything with a forward-facing drive and our Surf wave generating technology, which is Surf Gates and Ballast. So with that, we're pretty proud of that segment. We created an industry-leading surf wave. We currently have about 7 models in there, ranging from 23 to 35 feet. So we hold a very commanding share leadership position in the runabout surf market. And that's a clear testament to the strength of that offering. And lastly, our outboard segment, which represents our largest growth opportunity really. So today, we offer 7 models ranging from 24 to 35 and that includes the R31 Outboard that was released just earlier this week that you guys saw at the dock this morning. So taking a look at where the market is going, the dynamics that are shaping our growth strategy at Cobalt in the center. Total addressable market, and you can see the section of the pie there of how much of that market that Cobalt has. And looking ahead, we see a compelling opportunity for approximately 90% mid-cycle revenue growth, and that's driven really by 3 main initiatives: One, we're very well positioned to capture that market recovery, thanks to that additional capacity that we've just added. We plan to grow share in both outboards and Sterndrive Surf through those product introductions innovation and we're going to be targeting white space opportunities. So segments that we don't currently play in or have limited exposure to, but see a strong potential for growth. And doing that, there's -- or how we're going to do that, those market drivers. Our customers often live on or near the water, so boating's really a natural lifestyle for them, a natural fit. They value versatility, whether it's leisure cruising or water sports, and we see consistent repeat buyers for those. And maybe most importantly, our customers have a clear preference for premium products. So that very much aligns with our brand identity. You've heard us talk about build, innovate and grow strategy throughout today's presentation and for good reason, right, that's the foundation for how we're going to drive that impact across the entire brand portfolio. So for Cobalt in the Build segment, we're expanding our footprint to support that vertical integration. So access to a broader talent pool and future growth. On the dealer side, we're implementing more data-driven processes to enhance performance, including ongoing dashboard developments to better understand share by dealership and by territory. And we're enhancing the order process and dealer marketing tools to elevate that overall customer experience. The beta version of our new boat builder website was actually rolled out last week at our dealer meeting. That will be an industry or certainly a segment best when that rolls out and certainly a great step forward for our brand. On the Innovate section, we've got a robust pipeline of new product development with 4 new models that were just recently released, and we're going to have continued momentum with the Monsoon surf integration. We're gaining strong traction and making real impacts with those products. Commercially, we're deepening those relationships with our technology partners like Garmin and some of our engine suppliers and that's going to allow us to stay aligned with those customer priorities and lead in innovation with some of the horsepower that those companies bring. We're also strengthening the voice of the customer through recently formed dealer councils and giving us visibility into market trends and product feedback while expanding our customer insights capabilities. And then in the growth segment, the outboard and sterndrive surf, we're going to drive market share through new products and new innovations in those segments. White space, the boats or the areas, the segments that we don't currently play in, really capitalizing on the manufacturing footprint that we have now to bring in those new models and new segments, very interested in larger boats per se. And then operational excellence, just the margin growth through those operational initiatives. So looking at improving material costs and labor efficiencies is a big part for how we're going to take the margins to the next level. So we're very proud to introduce our new state-of-the-art facility in Roane County here in East Tennessee. So outside of Florida, East Tennessee is actually probably one of the bigger boat building centers in the country. So the facility here, yes, it eliminates about 700 miles from all of the East Coast dealerships, which is good, but maybe more importantly, it gives us access to a skilled labor market that's approximately 6 times what we had in Kansas. So the facility is multipurpose built to optimize production while upholding those high manufacturing standards. And with that built-in capacity for future market share growth, it positions us to meet rising demand without compromising quality. Speaking of quality, our production ramp-up at the new facility has been carefully designed, right, to support both flexibility and long-term scalability. So that site upholds exceptionally high manufacturing standards and it's engineered to accommodate future model additions as demand grows. So you'll see that on the tour today. There's ample space for expansion. The infrastructure is already in place for that additional capacity when needed. Now equally important is the team that we're building here. I mentioned that East Tennessee is one of the bigger boat building or most populated building regions for boat builders and marine component suppliers. So that gives us access to a significant broader talent pool than we had in the past. This enables us to attract and develop a skilled workforce, essentially to maintain quality standards and driving those operational excellence projects. And then vertical integration, that strategy puts a key role in this success. It gives us greater control over cost and quality and supply chain all while streamlining our manufacturing processes to better respond to the market recovery and the production ramp-up when it happens. So 1 example you'll see Rachael touched on it, was today, when we go to the tour, our wiring harness shop, is moved to the Roane County facility. So that really exemplifies how we're bringing those critical capabilities under one roof. So a great example of the MBI Advantage that Steve was speaking of is at Cobalt is the integration of Monsoon engines. A lot of you that know Malibu know that the Malibu has been building Monsoon engines for a while now several years. So we successfully brought that engine package into the Cobalt engine portfolio. So that move really reflects a broader strategy for vertical integration and complements our other engine brand offerings to add some flexibility and responsiveness. So by developing those in-house capabilities, we gained greater control over performance tuning and customization and speed to market. It also allows us to better alignment -- align with customer expectations and deliver a much more tailored experience. The Monsoon engine gives us a stronger horsepower to dollar ratio, which is important in the latest boating environment. It's going to enhance the value for the customers while improving cost control and supply chain resilience. So ultimately, this initiative is reducing complexity and shortening lead times, and it's enabling us to respond quickly to market needs, all while continuing to work collaboratively with our external partners where it makes sense. So we've talked about our strong dealer network a few times now, but it's worth taking a minute to underscore just how foundational they are to our success. We're consistently the partner of choice as a best-selling sterndrive brand. We've got deep penetration into the key markets and long-standing relationships with our dealers. Our dealers are almost always right on the water, there -- that gives customers a chance to see the boats first hand, similar to what you experienced today, imagine lining that up next to a competitor model. So it's powerful in understanding the Cobalt difference by having that. And it also gives them a good point of service after the sale and being in that setting as most of our customers or a lot of our customers live on or near to water. So what sets us apart is the discipline behind our dealer strategy. So we take a highly data-driven approach to identifying untapped markets and apply rigorous criteria when selecting those partners. So we prioritize high-performing dealers, of course, who deliver exceptional service and align with the premium service experience that our customers really expect from the Cobalt brand. Whenever possible, we'll pursue exclusivity relationships with those dealers. And obviously, that avoids oversaturation and entrenched competition, really ensure that those dealers have the best support and opportunity to win. We've established a dealer advisory council to amplify that voice of the customer and voice of the dealer and that's going to ensure that we remain tightly aligned with those market needs. This collaboration really strengthens our role as a true strategic partner to our dealers, many of whom see us as the top of their revenue ladder. These aspects make Cobalt appealing, right, when partnering with new dealers, especially in that outboard segment, which we identified as growth and we'll reinforce that market share in those East regions where most of the outboards would be sold. Product development. So if we look at the Innovate pillar of our build Innovate growth strategy, we recently launched those 4 new models that you see here, one of those being at the dock earlier this morning. And those all address different areas of the market, all the boats that were recently launched. We've introduced new features that allow for greater convenience and improved comfort, greater enjoyment on the water. We invest millions in R&D spending. We've got numerous projects in the IP pipeline right now, and we've launched 28 new models since MBI acquired Cobalt in 2017. So that's a greater rate than any of our competitors. So all this to say, we're deeply committed to innovation. We continually invest in new technologies, design advancements, performance enhancements. And all that keeps us ahead of the evolving customer expectations and industry trends. And that's going to really ensure that Cobalt stays on top. The Monsoon, so this is another good case for innovation is our surf system. So the challenge we faced with this was having third-party surf control technology that put limitations on everything that we thought we could do or wanted to do for wave-shaping features because the system itself didn't have enough, call it, digital inputs to control extra surface shaping technology. So to address that, our team engineered some proprietary control system that allowed for the installation of additional, call it, dynamic tabs on the bottom of the boat that really amplify the effect of the Surf Gate, which Malibu brought over with the acquisition. And that has been pretty profound in wave shaping technology and is really taking the waves that we have that we're already industry leading really to the next level. So like I said, not only did this innovation allow for a better performance, it's much more affordable with the Monsoon package and address those needs and the surf market for continuously improving the surf wave. So shifting to the growth pillar. Looking ahead, we're very well positioned to capitalize on the market recovery. The expanded output capacity is already in place across both facilities. And when the time is right, we are ready to go and return to those historical margins and revenues, which is just the first tab here. This is just when the market recovers. So on top of that, in addition to when that market returns, we intend to gain traction in that outboard segment. We built strong capabilities and have a really killer lineup of exciting new products on the horizon. Innovations, we believe will reignite share growth in that space, especially along the East Coast area. We're -- we continue to lead in the market for sterndrive surf performance. So that's driven by our ongoing enhancements and improvements and we're committed to investing in that space to really maintain our strength in an already dominant share position. And then we're focused on expanding those white space models. Those segments that we don't currently play, but we see a lot of opportunity for growth. So underpinning all that is the focus on operational excellence, executing growth initiatives through improved material cost management and labor efficiencies and just generally overall smart operational strategies that are going to support that long-term profitability and share growth. So I'll wrap this up by noting that with our growth strategies clearly defined and momentum literally building in every single category, we're very excited about the future and where it goes for us. So with that, I think we are going to take a break, right, Chris? [Break]

All right. Good morning. We'll go ahead and get started. My name is Christopher Gratz. I'm the Saltwater Vice President. And a little bit about myself. I like to joke that my career at Pursuit started when I was in third grade. Family got a well-loved Pursuit when I was in third grade, and I grew up boating on that. But on a more serious note, I started with the brand 20 years ago. I've been in the saltwater segment, my entire professional career, and I'm certainly fortunate because it really aligns with my passions. So as we look at saltwater and the key enablers that we see as unlocking growth, they're here in front of us. And the first and foremost is the diversity of the product line, and we'll touch on that in a minute, but we really have a very broad scope, especially when you look at our peers in the industry on the amount of -- the diversity in our portfolio in the different markets we serve. Second, we've got a very strong acquisition history. When Pursuit was onboarded, the investment and the strategy and the ability to unlock growth was very strong for the Pursuit brand. And we continue to work on that and that runway and trajectory with the MPG brand under the Saltwater Group. Within Saltwater, certainly have a house of iconic brands, very highly sought after in the dealer network. They seek doing business with us, again, because of the brand recognition, the brand history, the quality we provide and the margins and the contributions to their business and how it supports them. Within that, though, we certainly have opportunity to optimize within our dealer network. We're focused on that. And we also have opportunity to expand our geographic footprint. And then the last component you've heard as a through line throughout the day is our facility investments have been strong. We have capacity in place, and we're well poised for that mid-cycle growth and the additional growth we've been talking about throughout the morning. So the segment snapshot overall. Again, Saltwater is a very important component of MBI revenue overall at about 35%, $280 million. EBITDA in the $27 million range. Our geographic footprint on dealer locations, we've got about 150 locations, so a very strong footprint there and very deep-rooted dealer relationships that are over a decade at that 12-plus range on average. I already touched on the iconic brands. Our capacity is very impressive at just under 1 million square feet amongst the plants within Saltwater. And then we've got a portfolio of 44 models within the different brands when 7 -- we introduced 7 new models this past model year. One of those being the S 328, which you can see pictured there. And a lot of the brands -- all the 44 models, we certainly have a lot of award-winning models like this 328 that received the Boating Industry Top Products Award this past year. So again, that scope and breadth of the portfolio is significant, and this helps to highlight it. And hopefully, some of you guys got to see a small piece of that at the water this morning. But the portfolio ranges from 16 feet all the way up to 46 feet. And that's a pretty broad range. And if you look at the markets that, that serves, it's certainly notable as well. From a retail price standpoint, we enter the market in that $45,000 range, but we extend all the way up into the $1.4 million range of starting price with our products. If we look at Pursuit first, the differentiators there, certainly a luxury product. The quality expectation is very high. The quality appointments are certainly notable. But ultimately, that cross-functionality is a pillar and strength within the brand. And within Pursuit, we participate in 3 main categories within Saltwater, the center console, which we call sport category, the offshore cabin boat category as well as the dual console category. And then we shift over to Cobia, really focused on quality and functionality, but at a more reasonable level for the consumer base. And we participate with Cobia in both dual console segment and that center console segment. Both the Cobia and Pursuit product are considered offshore product. And then when we shift to Pathfinder, that's really termed nearshore. So lower freeboard, lower [indiscernible], easy boats to operate, easy boats to get out, enjoy the water, fish. They are certainly at their DNA. They're good fishing vessels, but they also have a lot of blend function, which is in line with consumer expectations for that multifunction and use and enjoyment on the water. And then as we shift to Hewes and Maverick, those are our skiff products. And Hewes and Maverick are designed for shallow water inshore use with Maverick being the most technical poling skiff where you actually go in the back country and you pol and you fish off of that product. But ultimately, the through line throughout the product is exceptional quality, diverse features, innovation and ultimately driving to deliver ultimate value to our consumer base. So taking a look at the overall total addressable market within Saltwater, it's certainly notable here at $4 billion. You can see a representation of our share in that fiberglass outboard segment. It shouldn't be a surprised probably most in this room within fiberglass outboard, certainly, a lot of builders and models fall within that overall envelope. Grounding the discussion back to the mid-cycle we've been talking about this morning. If we baseline that off of fiscal year '25, we see about 40% growth within the Saltwater division on that mid-cycle recovery. And we're positioned very well to capture that volume with the capacity we have in place throughout our facilities. What we see unlocking that mid-cycle growth and turning that dial in the market are listed as our key drivers there. And certainly, the stability in overall economic macros are big. That certainly ties into shift in interest rate pressure. But new product, new technology that we've talked about, those unlock that growth as well and certainly a key focus. And then the last piece is, a long-term and sustained shift in this -- into outboard product has been a long trend and seems to continue. So taking advantage of that trend within our portfolio. So all that combined, certainly opportunity to grow within our market-leading position in this space. The build, innovate and grow components and how they relate to Saltwater. So under the build pillar, vertical integration is also key within our business. We've recently launched the tooling facilities within in the Saltwater -- on our Saltwater campus. And that product development is the lifeblood of all of what we do within all the brands. And so that's fundamentally important. So in that facility, we're building the [ molds ] that drive that new product development cycle. And it's really unlocked a lot of in-house capability for us. So we're not relying on third-party vendors for that process, which is key. And at this time, we're actually extended that, and we're building tooling across all brands within MBI. We're building on customer experience programs, again, driving that unmatched customer experience in the industry is important to us. We've got a lot of customer programs that have targeted delivering that experience. We're continuing to grow and build on what those programs are and how we engage with our customers. And then from a dealer engagement standpoint, we're building on a pretty proven playbook within part of our Saltwater group. We're extending that across the Saltwater divisions to drive that dealer engagement, that dealer feedback and really feed that into how we build and innovate within the portfolio. On the innovation front, our product development pace is, again, certainly notable in the industry. We've released 7 new models within Saltwater in model year 2025. If we shift that focus over to MBG, we're working to evolve and create a next-gen portfolio within those brands, and I'll talk about that a little bit more later. And then we're also very focused on voice of customer, leveraging our long-standing processes, implementing new processes across the brands to ensure we hit the markets where the customers are at and with where their expectations are at. The growth pillar, we see growth within our share through dealer network expansion and optimization. Those are really key. We also see opportunities in white space, and that could look like white space internal to our existing product lanes or in adjacent spaces to our portfolio. And the last piece is really leveraging our operational excellence initiatives through efficiency, through supply chain management, Steve touched on earlier and continuing to improve the business on our operations. So taking a look at an MBI Advantage point here. As MBI acquired Pursuit, you can see in that picture that in the [ foreground ] Plant 1, that was the extent of our footprint upon acquisition. And we were capacity constrained at that point. So if we then look over to the bar chart, you can see represented in gray there, that was actually contract build. So we certainly had margin pressure on that, and we weren't able to build to the marketplace. And so very quickly upon acquisition, we purchased 80 acres adjacent to our property. We set a pretty comprehensive strategic plan to build out 200,000 square feet on that space to introduce 3 new models and invest in the portfolio to create good ROI on that investment. And you can see we're able to capture that volume and capture that growth through the subsequent years. And all that, again, lines up to having that capacity in place for that mid-cycle to return. Taking a look at the operating efficiencies across Saltwater. If you think about building a 16-foot boat and a 46-foot boat, certainly, very different scale. So we are very strategic in how we lay out our production. We have deep production lines throughout all of Saltwater and we're very flexible with how we do that and it also creates lots of operational efficiencies within that. One thing that allows us to do is really leverage and align to markets as the market moves and consumer demand and preference moves, we can align to that and leverage ASP opportunities and growth opportunities within Saltwater because of our flexibility there. How we've laid out that new facility, I referenced earlier was really focused around large boats and growing the portfolio within the Pursuit brand, and also enabled us to be one of the industry leaders in our cycle time to build large boats and be able to produce demand as that emerging market on larger outboards has grown. I talked -- touched on vertical integration relative to tooling earlier, but it extends deeper within our brands as well. We also built all of our interior cabinetry on our cabin boats, wood and veneered surfaces, floors, all that furniture is built in-house at our facilities. We also build all of our exterior furniture, the poly, the cabinetry, the things that are on top sides of the boats. That's all built within our walls as well. We're vertically integrated in electrical harnesses, a key component to the construction. And then we also have canvas and upholstery capabilities in-house. All that's underpinned by a very passionate team. We're actually the largest manufacturing employer within the county, which creates a very, very large talent pool across our 5 plants. And we have the privilege and advantage that all 5 plants are actually very close in proximity. They're all within 1.5 mile to each other at our facilities in Fort Pierce, Florida. So the capacity is in place. The operational pieces are in place to really capture that mid-cycle demand that we're outlining here this morning. Again, product development, the lifeblood of the business. You can see a handful of new model introductions there and a pretty broad range and where they target the market all the way from a 245 cc all the way up to a 388 sport on the Pursuit side. And then 305, hopefully, some of you guys got to get out and see trial earlier this morning. But one thing to highlight with how we think about new product development is we invest really from bow to stern and we invest kind of on full-scale projects. And so what that enables us to do with that level of investment is really take what we learn about the customer, what we learned about the markets and really embed that as we work from keel all the way to the top sides of the boats and make sure that we're addressing those consumer needs. Focusing on premium features has been key across Saltwater and expectations are very high there and be very strategic with how we set up those options, and we're able to unlock growth potential there with those options as we work on the development projects. But all in all, this comprehensive approach really allows us to target products and align with that customer base, which is critical. If you look at our new product development pace, since with respective to acquisitions, which for Pursuit was in '18 and for MBG it was in 2020, we've released 28 new models to the market in that time frame. And we continue to have a very robust new product development pipeline as well. So if we take a look at MBG and the integration of MBG, there were certainly some runway for the portfolio upon acquisition. And that first focus was within the Pathfinder brand and really working on the products and aligning with current consumer preferences and that multifunction and put a lot of investment in that area and certainly saw some good returns there. We've seen market share growth within Pathfinder, and we dropped the average age of that portfolio by 30% since acquisition. Then we started to shift focus in the last 12 to 18 months really to more pointedly at Cobia and again, same thing, making sure that we've got that multifunction, making sure we've got those fishing characteristics, bringing those technologies up to date, within that product line, and we've dropped the average age of that portfolio by 50%. And then the last piece, again, is leveraging. Again, I talked about the proximity of our facilities and the capabilities we have across all the lines. We're able to leverage those operational facilities across the teams, adopt best practices, adopt best processes and really help drive efficiencies across the Saltwater brands and the efficiencies that come with those. The dealer network already touched on as well. That's certainly an opportunity as we work on that dealer network. And then all these are coming together on the operational efficiency front, we've seen actually a 30% reduction in our on-time delivery which has been fantastic, and that's in the recent history in the second half of '25. So leveraging this MBI advantage, evolving the portfolio, driving that innovation, certainly are all going to continue to help propel MBG as we look forward. Shifting to the Pursuit product development strategy. Again, consumer insights have been key within this brand for a long time. We got a small picture there of one of our dealer council meetings. You can kind of see some snippets of renderings. But behind that, there's actually a full-scale mockup, that vessel was significant length. So it doesn't matter if it's a 20-foot or 44-foot, we build the entire thing out of plywood and cardboard. We bring focus groups in. We bring our dealer councils in, we use that as a platform for feedback. So really understanding the consumer and targeting the consumer is key. Also doing deep dives into the market and understanding white space. And the white space might come in different forms. Like I said, it could come internal to the portfolio. It could come in adjacent areas of the portfolio, some white space. You've got to make other portfolio moves to create and unlock that -- unlock those markets. So that's a key component to the product development strategy for Pursuit. And all that coming together with a very strong portfolio in those 3 categories that I mentioned earlier between sports, dual consoles and offshores. And within the competitive set, we have an industry-leading average portfolio age for that Pursuit product. So if we think about the growth strategy to get to that mid-cycle recovery, again, with that capacity in place to meet the demand, $400 million revenue over the 2025 targets. We've got a 16% EBITDA at that baseline. But then the team is laser-focused on the outperformance initiatives, and that strategy that combine that share growth, those white space initiatives and our operational excellence initiatives that would drive that to an incremental 300 basis point increase on the EBITDA and a $520 million revenue point. So amongst Saltwater, certainly excited. We've got a bright outlook in front of us, and we're hard at work driving these overperformance initiatives and executing on what we discussed this morning. And with that, I will turn it over to Bruce Beckman, our CFO.

So hello again. I'm Bruce Beckman, CFO of Malibu. I've been at Malibu for nearly 2 years. I've been kind of working in public manufacturing companies for over 30 years, companies that are known for their innovation, their quality people, premium brands, operational excellence and value creation. And I joined Malibu because I see all of these capabilities and core strengths and I see the potential that we have for growth going forward, and I'm excited to share that with you today. So I'm excited to discuss the power of our business model to demonstrate how we are poised for significant growth and value creation. We have several key growth enablers that I'll unpack for you today. The first one is the return of the market to mid-cycle levels represents a significant growth opportunity from where we stand today. Second, we have numerous opportunities to outperform on both market share and margin. Three, our past investments in capacity and our dynamic business model will enable increasing levels of free cash flow generation. And our disciplined approach to capital allocation combined with our proven M&A track record, provide us with additional growth and value creation opportunities that go beyond the numbers that we'll be discussing today. It's no secret to any of you that the last few years have been a challenging period with the marine industry in the fifth year of a down cycle. There are many macroeconomic factors contributing to this down cycle, principal among them high interest rates. However, we are encouraged that participation and interest in boating remains high, and we are also encouraged by the recent Fed rate cut. In our 40 years, in the industry, we've seen this movie before, and we are confident that the industry will turn. When we think about a more normalized environment, we think about the average of the pre-COVID 2017 to 2019 period. During that period of time, the market was roughly 196,000 units, about 40% higher from where we stand today. So we have a -- definitely have a strong opportunity for growth as the company or as the industry returns to mid-cycle. There are several phases to every market cycle. And with the industry in decline over the last couple of years, we've been in the phase where our wholesale shipments have needed to be below retail demand in order to maintain dealer health. We were among the first in the industry to respond in fiscal '24 and have remained clearly focused on dealer health since that time. The blue checked box in the center of the slide really highlights where we find ourselves today. And I think I'll take this moment to reaffirm the guidance that we gave a month ago for fiscal year '26. We are expecting the markets in which we compete to be down mid- to high single digits and for our revenue to be flat to down mid-single digits and our adjusted EBITDA to be between 8% and 9%. And the next phase of the market is when the market flattens when the retail market flattens out. At this point, we no longer need to continue to reduce channel inventories and are able to return the company to growth simply by allowing our wholesale volumes to track with retail. The last and the most exciting phase, of course, is when the market returns to growth. At this point, our wholesale volumes will benefit from not only the increased retail activity but also a restocking of the channel essentially the reverse of what we've been experiencing for the last couple of years. We are excited by the growth potential of our company and this illustrative revenue bridge brings that to life. First, a return of the market to mid-cycle levels at our current market share, will enable us to grow our revenue to $1.3 billion, and that represents 60% growth over where we are today. At mid-cycle, these initiatives provide a second -- our division leaders described for you moments ago, how many initiatives they have in place to drive served market expansion and market share gains. And in mid-cycle, these initiatives provide a framework for our performance, enabling our revenue to achieve $1.5 billion, over 80% growth from our current levels. And even more compelling, these revenue figures do not include any revenue from future capital allocation, I'll talk about that more in a minute. So these are really kind of the business that we have today. So very compelling growth opportunity. And importantly, we already have the capacity in place to support this growth with upside remaining. Over the last 5 years, we've done the hard work of expanding our production facilities, first in Pursuit then in the Maverick Boat Group and most recently in Cobalt. These capacity expansions have put us in position to support a mid-cycle market as well as the outperformance framework that division leaders shared with you with additional capacity to remain -- remaining to support an even stronger market. But 1 of the lessons from COVID was you can't always predict the next surge of market demand. and you can't fight for market share when you're out of capacity. So we really have made that a focus and are excited to have that capacity in place to support. And with these capacity expansions behind us, it will be a key enabler of increasing our free cash flow conversion rate, and I'll discuss that a little bit more in a second as well. So in addition to available capacity, we have a very flexible business model ready to support growth. Our cost structure is highly variable, 80% to 90% variable with the vast majority of that being in materials and direct labor. Our factories are also capital efficient, and our manufacturing processes do not rely on expensive robots or automation equipment. This flexibility allows us to scale up to support growth and scale down to preserve profitability and cash in a downturn. Operational efficiency on the right-hand side of the page has long been a strength of our company and the reason for our industry-leading margins. We intend to build on that strength by adding centralized sourcing and supply chain management as a new vector of efficiency while maintaining our focus on vertical integration and continuous improvement. Simply put, our business is built to achieve profitable growth. Our revenue and operational efficiency is a powerful combination as this illustrative margin bridge demonstrates. A return of the market to mid-cycle levels will enable our business model to generate adjusted EBITDA margins of 17.5% by simply leveraging our current cost structure, including the outperformance framework, divisional efficiency and market share initiatives shared earlier, the margin opportunity grows by 250 basis points. In combination, a return to mid-cycle market and our outperformance framework will enable our business model to achieve adjusted EBITDA levels of 20%. Before I leave this slide, it's important for you to know that we are not waiting for the mid-cycle market to begin capitalizing on the 250 basis points of outperformance opportunities. Turning our attention to cash flow. And on this slide, specifically CapEx. Since fiscal year '20, we have invested roughly $100 million in facility expansions as indicated by the dark blue boxes on these bars. With the facility expansions behind us and the capacity in place, we can support our ongoing growth initiatives and innovation with a much lower level of CapEx. In the near term, we are expecting CapEx to be between $30 million to $35 million per year. And longer term, we'd expect CapEx to sustain at roughly 3% of sales per year. Our history of strong and consistent free cash flow is a testament to our resilient and capital-efficient business model. Even in the challenging markets of the last couple of years, we've continued to generate healthy levels of free cash flow, thanks to our highly variable cost structure and working capital efficiency. While past is impressive, the future is even more exciting. The combination of volume leverage, margin expansion, moderating CapEx is a winning formula for increasing free cash flow conversion. In combination, a return to a mid-cycle market and our divisional outperformance initiatives will enable our business model to support $200 million of free cash flow at a 65% free cash flow conversion rate. Let me say that again, $200 million of free cash flow and a 65% free cash flow conversion rate. We have weathered the recent market challenge as well and have a very strong financial foundation. We are net cash positive and with over $300 million of available liquidity. And as you can tell from the previous page, we are poised to generate significant amounts of cash. We have a well-established and very disciplined approach to capital allocation. First, we will continue to prioritize organic investment. And as we've been discussing today, we have many exciting initiatives to invest in. Second, we will continue to look for value-creating acquisition opportunities. I'll discuss that more in a minute. Third, when we have debt, we will prioritize paying that debt down as quickly as possible. And lastly, we will not allow cash to build up on our balance sheet as we have done with $65 million of stock buybacks that we've executed over the last 2 fiscal years. Digging a little deeper into M&A. MBI has a proven track record of successful M&A. As you can see on the right-hand side of the page, we -- the premium brands that we have acquired over the last 10 years are among the most respected names in the industry. We have generated strong returns since making those acquisitions with EBITDA far exceeding the purchase price of those businesses. And these acquisitions have made us a much stronger company. with more scale advantages and growth opportunities. Many of the MBI advantages that Steve discussed earlier, particularly those in procurement and dealer network, are directly related to the enhanced scale provided by these acquisitions. And as you heard earlier from Jason and Chris, their businesses have benefited from becoming part of the MBI company. We are stronger together truly a win-win. So we have a high bar for M&A. While the M&A market has been slow recently, we're actively looking for value-creating opportunities and have the dry powder available to execute. We are looking for M&A opportunities with strong growth potential. Companies that give us the opportunity to expand into new markets and enhance our MBI Advantage. We are looking for companies that are a good strategic fit and specifically premium brands with strong synergy potential. And most importantly, we have clear financial guidelines for M&A. While we are willing to take on additional leverage up to 2.5x for the right acquisition, we will immediately prioritize debt pay down. And second, we are highly focused on value creation and ensuring returns above the cost of capital. To repeat, we have a high bar for M&A. The illustrative framework slide here summarizes the opportunities well. And since we've already discussed everything on this page, I won't take you through it again. But I will take a moment to highlight a couple of the key numbers on this page. First of all, a $1.5 billion revenue opportunity, 20% adjusted EBITDA opportunity and $200 million free cash flow opportunity. We are poised to create significant returns for our shareholders and are very excited about the future of our company. I want to thank everyone for joining us today. And now I'd like to turn it back over to Steve for some closing remarks.

Thanks, Bruce. I get asked all the time. That's not my kids, and I don't have a dog and so forth. But the kids -- we were out surfing Sunday night with the whole family, so it's always fun to enjoy your product. Let me close it up 1 slide. We have a simple, yet powerful strategy, right? Build, innovate and grow. It's going to drive our company into the future. And when you think about reasons to believe, you just look over to the right in having that market leader in our brands with the capacity to really leverage the mid-cycle and beyond, having that constant pace of innovation driving that, listening to customers, driving that voice of customer into our products, doing the right things to continue to grow there, white space opportunities across all our brands we're excited about. We're going to continue to control our controls with operational excellence, vertical integration, really look to that. And as Bruce just said, right, a high bar for acquisitions to make sure we add a premium brand when it's time, when it's right, for our business, we'll add those premium brands and then continue that strong cash flow and balance sheet. So we're excited about the future in our company. We have a great team. I want to thank the team, all the folks, the boat drivers, the team, Teresa, Kathy, [ Christine ], who put this all in everyone who helped them, they did a phenomenal job this morning. And we're not done yet. We still have a Q&A to go then lunch and then a tour, right? So great job by the team. Thank you for that. So we're going to set up here for about 5 minutes, and I get the chairs up, and then we'll open up the Q&A session. So thanks, everyone. [Break]

All right. Thank you. We'll go ahead and get started with Q&A portion. So we'll have about 20 to 30 minutes on Q&A. I think lunch will be served at 12:15. So we can probably break early for that. So as a reminder, please leverage the QR code and also for those attending virtually as well, you can submit questions. We'll be passing mics around so you're unable to access the QR code. We'll take questions live as well. [Operator Instructions] So with that, let's go ahead and get kick-started. So first question comes from Gerrick Johnson at Seaport.

Well, my actual first question is, can you talk about the logo? What does that mean? But the other question I want to ask you is about central sourcing. I guess that means across all of your categories? And would that require more standardization and manufacturing reengineering. What are the financial opportunities...

So I'll take that one. First off, the logo is water -- [ alchemy ] for water. So there's actually a connection to answer that question. And then yes, central sourcing, we've actually centralized the team there. We've actually installed category managers in. So the expertise in a vertical, right? So it could be resins and plastics and so forth, electronics and so on. So we're building that internally and the team, and we're continuing to build that out. So that just got underway here in January. And we're pooling all of the volume of all of our businesses together, and we'll continue to do that. As far as what will that return to us, we're working through that right now and looking for those opportunities as we kind of gain that scale and that team comes together. So more to come on that when we look at how that will help our margins, but it will definitely help our margins. We're just getting our hands around the size and think about 4 different companies coming together and trying to centralize that. So we're on the path the right way of setting the foundation, and then we'll be able to leverage that as we move to the future.

Scott Stringer from Wolfe Research. There's a lot of talk on the white space across every category. So wondering like what is the lowest hanging fruit there or maybe like the nearest term tailwind to that specifically?

Sure. The guys in each division and Rachael, you want to talk about some areas that you're thinking about in terms of white space, some segments maybe.

Yes. I'll start with saying in the Malibu segment, I'll point back to some of the things we had up on the slide there, some of the successes we've had in our recent white spaces, the 26 LSV and the Axis T250. They were both some of the largest and one of the first into those segments. And we saw great success with that. In those categories, we were seeing some of the highest market share for those categories, the 26-foot premium and then the 25 foot Axis entry category. So we're continuing to look for opportunities like that, not just in the new boats, but in also on new products and features as well. And so we're going to lean into those categories, into the successes we've had and continue to look for -- identify and translate that as we go forward.

Yes. For Cobalt, some similarities there, we're still kind of exploring what those segments are, but interested in larger boats and also looking at some of the different lifestyle segments that are going on right now to see if our brand could support a different style in a different segment.

And then in Saltwater, if you think about the lowest hanging fruit, it's kind of those opportunities that lie kind of within your existing product categories or immediately adjacent. So there are certainly opportunities in both of those areas across all Saltwater and those are the ones that we're focused on first and foremost.

Next question is from Tim Abbott at Twin Lions.

Yes, I was just wondering if you guys could share any more details on the MBI acceptance initiative and then specifically for -- I think you mentioned low interest or deferred interest type promotions that you might be offering through that. Curious kind of how the economics work there and how the cost of those promotions is shared with the financing partner.

Sure. We go deeper into that section. So it is, like I said, a strategic alliance between Wells that we will be helping on the wholesale side and Aqua on the retail side, working with our dealer partners and helping them be more efficient and so forth. The tools that we can offer, and we're testing right now, we're going to go out and test with Malibu only, and then we'll propagate across our other brands. but there are going to be things like no payment for 6 months, $499 financing, see how that works. So think about financing for those who are close to it, right? There are rates that drive floor traffic, there are closing rates. There are 2 different things. You can offer a 0% financing, not many people get closed on that rate, but it does drive traffic to your stores. So we have marketing opportunities with some of the financial products. We have closing opportunities with some of the financial products. We have extended service contracts that we can play, extended warranties and so on. So we're going to test all of those, Tim, and see where we can kind of find where the consumers are at and so forth. But that is a new capability opportunity that we haven't had before that we can help with our dealers, and we'll listen to our dealers and get that feedback. But it's an array of opportunities that you see other companies offer that we can start offering now.

And we have surveyed some of our customers, of like their interest in getting financing from the manufacturer. Would that be something that they would would value, and we've gotten pretty positive survey results and things like that. So then it becomes, again, another tool for the dealers to leverage to drive traffic and closing.

And just so you're aware, as you see it in the marketplace, it will be branded by the brand. So it will be Cobalt acceptance or Cobalt Financing and so on, Malibu and so on. You won't see MBI acceptance out in the marketplace. That was only for us to talk about it here today, but we want to make sure it's branded as we go to market.

Perfect. Next question is from Anna at B. Riley.

Can you speak to the difference in upside opportunity to get to those mid-cycle revenue growth targets by segment? Is it a function of submarket segment growth opportunity as you get to a more mid-cycle growth rate? Is it speaking to kind of the various elements that have affected those segments through macro and maybe some are less macro sensitive and thus have less upside? Just anything there?

Yes. There's -- it's really a function of 2 things. It was what was the average market size in those years. And then what was -- what is our current market share. And you do see some differences between the businesses. First of all, Saltwater didn't go up as much during COVID and then it did -- it hasn't declined as much afterwards. That's a difference. But also like in our Cobalt business, since we acquired Cobalt was kind of at the beginning of that 2017 to 2019 period, we've increased our market share by over 500% since then. So higher market share of a market that returns to those levels also yields more opportunities. So that's why you see some of those differences across businesses.

Joe, I see you struggling with the QR code. Did you have a question?

Joe Altobello, Raymond James. Steve, you mentioned expanding the ecosystem to parts and accessories and technology and services earlier. I guess one, if we dream the dream, how big could that party ecosystem be for you as a percentage of revenue? And two, does that require incremental investment somewhere on the P&L?

Sure. the market, like we said, is it really doubles for our total available market. When we look at opportunities for us, we can partner. We've talked to a lot of partners. There's a lot of opportunities for us to bring products to market through partnerships, through strategic alliances, our own development. So we're looking at all opportunities to how to enter the market. We're going to start with what we know right now, vertical integration. We already have a smaller manufacturer that actually signed with us, and we're testing out how to be a good partner and supplier to them as well as we go. So those are all good. As we kind of look at opportunities to invest, we will be investing in certain areas to add more products to our portfolio. But again, as Bruce pointed out, it's a pretty high bar as we kind of build that business and we want to make sure we're doing the right things, we can control the quality, be a good supplier as well as propagate that across our products as well. So we create that leverage and that scale advantage for the people who are going to buy from us. So think about when you have an embedded base like we do and we're starting to offer those parts, you're already starting with getting the scale of MBI in those components. So we're pretty excited about that.

Anyone else have an issue with the QR code, just feel free to raise your hand and we'll get the mic over your hands.

Going old school?

Yes. We've doing the old school way.

It's Craig from Baird. Maybe address the acquisition criteria that you have, Bruce and it never seems like the right time. You might be at the bottom of the cycle and people don't want to sell or you're at the top of the cycle, and you might not want to buy. So when is the right time to buy a brand? What are the criteria? And are there any specific boat categories that are particularly appealing?

Well, I mean, you can want to buy companies all day long when you have to have somebody willing to sell a company to use. So there is -- it really -- it's it's hard to dictate that. You can't really dictate that to the seller. So you have to find that happy medium of when it makes sense for you and it makes sense for them. When we think about it, we think about what is the value creation opportunity, where do we have synergy opportunities like we've talked a lot about centralized sourcing and some of those initiatives. Well, those are initiatives that we have that opportunity because we've done some of these acquisitions, we have more scale and that gives us the opportunity to create more synergy on the next deal. Similarly, we have a dealer network that's the envy of the industry. So there are companies that we could potentially use that dealer network to drive significant revenue synergies. So it really is what is the value creation opportunity what is the value of the brand that we might be talking about and where can we add value to it.

I think like for folks that are learning our business, we've added a corporate development department. We're out talking to people on a consistent basis that makes sense. So we're actively working, meeting new people in the current businesses, creating relationships and so forth.

We have a question from the online audience. Can you speak more about your vertical integration strategy and sheet metal capabilities within Malibu Boats?

Sure. We've had quite a bit of success in the vertical integration. As I noted, all the way, going all the way back to Towers and then [ soft grip and engines ]. But most recently was in the sheet metal capability. That's the facility or a site that we used some of our facility and we're able to use the components that are coming out of there and everything from our trailers, our engines and even into our boats. This allowed us to control supply chain, reduce any risk there, also control the cost and quicker design evolution cycle so that we can get to market faster with some of these features. So it's provided quite a bit of benefit, not only from the supply chain, but from the design and the quality side of it as well.

Next question is from -- go ahead.

Eric Wold, Texas Capital. Bruce, you made the comment on the margin slide that the 250 basis points, you didn't have to wait to get back to mid-cycle to realize that. Maybe dive a little bit more into that, your ability to do that, how quickly you could and what components of that can be realized without getting back to volume.

Sure. I mean we talked about operational excellence and some of our initiatives around margin expansion. That was roughly half of that 250 basis point opportunity and we can -- we're actively going after that now. Certainly, at a mid-cycle market, you probably get a little lift there. That's really on the market share, the market share component of that was based on a mid-cycle market. So if the market is better, maybe that bar is a little bit bigger if the market is a little bit lower, maybe it's a little bit lower, but it's roughly half and half.

Next question is from Noah at KeyBanc in the back.

Maybe to kind of follow on there. And in some ways, this is like maybe the million-dollar question, but kind of how do you think about what needs to happen for the industry to get back towards kind of 2017 to '19 volume levels? And then within that, what gives you I guess, comfortability that that's kind of the right level to think about in terms of mid-cycle?

Yes. Well, I mean, there's a number of -- it's not 1 factor that put the industry into a 5-year down cycle, and it probably won't be one factor that gets it out. But I would say if there's one to highlight, I would say interest rates is probably the 1 to highlight. We track what percentage of our boat sales are made and primarily purchased with cash versus primarily finance, and we've seen that pendulum swing towards cash. So we know in our own business that we've seen the payment buyers step back. So we -- consumer rates need to fall more than they have. I mean they're not where they were at the peak, but they need to fall more. We think to bring that payment buyer back. We're excited about this MBI acceptance. It's a tool for us to give to our dealers to reach out to their payment-sensitive buyers and give them something to get excited about and hopefully, a new tool to close sale with them and something that's not available to all of our competitors. The industry is not within our control. I mean, the last time we had an industry decline of this length and time was right after the Great Recession. And the market went on basically a 10-year growth run after that. And I know -- I mean, you guys were -- some of you were probably in this industry then, I certainly wasn't. But when people predicted the industry is about to go on a 10-year run back in 2012. So many factors we'll see. But we're prepared to support it. And frankly, we don't need it to actually grow to actually return our company to growth. We just needed to stop declining.

Next question is from Andy, Laird Group.

I was wondering if you could talk about cross-pollination of dealers. I mean in the videos, they talked about improvements in their business when they were a Cobalt dealer and then became a Malibu dealer or some of the instances of getting Maverick Boat group and Pursuit together. Is there anything like qualitatively or quantitatively, you can share that the improvements that either Malibu sees from a margin or growth perspective or the dealer themselves when they cross-pollinate different brands amongst dealership?

I'll start and they can add to it is when we first interact with from an MBI perspective, what are the tools that we're actually using in all the brands when they were -- when each brand was individual, they didn't have the breadth of tools. They didn't have the support that's necessary. So all of our brands are getting returned to co-op, right? So that's -- that sharing cost sharing model, right, where you get the dealers' marketing in the local market. When we look at CSIs, how do you handle service CSI, sales CSI, training, all the things that we can do. So MBI brings a level of tools and professionalism to our brands. And then when you start seeing the dealers mingle Malibu to co-op or the Saltwater brands, those best practice sharing in those retail best practice sharing that start to go across each brand and you start seeing some leverage there in the local markets as well as they're only dealing with that us as one supplier versus multiple suppliers or OEMs and you start to get the confidence in the OEMs, the support of the OEMs. If you look at how that really works, think about all the second and third-tier brands, they were able to come alive through COVID, but now are getting shed, right, because of the lack of focus on those brands. And now they can refocus on the premium brands like we have, and that's what we're leveraging to make sure that if a dealer has multiple brands of MBI, they're getting all the tools, the full suite of tools and a full suite of support from the overall organization.

Yes, I certainly echo that. Zach at [ Route 113 ] made that comment about Maverick Group and Pursuit. And I think the other thing it does is the scope and breadth amongst Malibu lets them address this market in ways that he couldn't before, with a backer and a partner that's got his scope and breadth of tools that he's used to that business relationship with, that he has confidence in and lets them like quickly expand this business. And I think that's how we highlighted in that [indiscernible].

Our next question from the virtual audience. Can you speak more about your expansion into outboard within the Cobalt segment? How do you view that market? And what initiatives are you taking?

Cobalt probably got started in the outboard segment a little bit later than the competition and establishing our brand name in the outboard market is still something that we're working to do. I think there's a lot of upside, like I mentioned in the slides on some of the products and innovations that we have on the horizon to better capture that space as well as some other dealer opportunities on the on the East Coast. So those are all things that we're looking into that we think will take us to that next level and grow share.

Any other questions in-person, in audience? With that, I think we'll wrap up here. We have lunch served here at 12:15 in the next room. So you guys can feel free to make your way there. And then we have desert outside by the boats. So feel free to after lunch take a tour and get to see some of the boats live.

All right. Thank you.

Thanks guys.