Malibu Boats [MBUU] Conference call transcript for 2021 q4
2022-02-08 11:54:03
Fiscal: 2022 q2
Operator: Good morning, and welcome to Malibu Boats Conference Call to discuss Second Quarter Fiscal Year 2022 results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. Please be advised that reproduction of this call in whole or part is not permitted without written authorization from Malibu Boats. And as a reminder, today's call is being recorded. on the call today from management, are Mr. Jack Springer, Chief Executive Officer, Mr. Wayne Wilson, Chief Financial Officer, and Mr. Ritchie Anderson, Chief Operating Officer. I will now turn the call over to Mr. Wilson to get started. Please go ahead, sir.
Wayne Wilson: Thank you and good morning, everyone. On the call Jack will provide commentary on the business, and I will discuss our fiscal second quarter 2022 financials. We will then open the call for questions. A press release covering the company's fiscal second-quarter 2022 results was issued today, and a copy of that press release can be found in the Investor Relations section of the company's website. I also want to remind everyone that management's remarks on this call may contain certain forward-looking statements, including predictions, expectations, estimates, or other information that might be considered forward-looking and that actual results could differ materially from those projected-on today's call. You should not place undue reliance on these forward-looking statements which speak only as of today, and the company undertakes no obligation to update them for any new information or future events. Factors that might affect future results are discussed in our filings with the SEC. And we encourage you to review our SEC filings for a more detailed description of these risk factors. Please also note that we will be referring to certain non-GAAP financial measures on today's call, such as adjusted EBITDA, adjusted EBITDA margin, adjusted fully distributed net income, and adjusted fully distributed net income per share. Reconciliations of these non-GAAP financial measures to GAP financial measures, are included in our earnings release. I will now turn the call over to Jack Springer.
Jack Springer: Thank you, Wayne and thank you all for joining the call. We again delivered a tremendous quarter exceeding expectations across the board, as demand for our boats remained off the charts and showed no signs of slowing. While supply chain pressures have persisted during the quarter, our unmatched operational capabilities, our dedicated team in industry-leading brands continue to pave the way for another history-making year. We pride ourselves on providing the highest quality, most innovative boats to our loyal customer base, and are excited to continue and hopefully increase our pace of production as we push through the second half of FY2022. For the second fiscal quarter, we posted record net sales increasing nearly 35% to $264 million over the prior year. With adjusted EBITDA growing 23% to $48 million, and net income growing 40% to $31 million. Our margins during the quarter proved resilient in lot of the lingering supply chain issues associated labor costs and material pricing pressures. For the second quarter, gross margin declined 120 basis points to 24.1% while adjusted EBITDA margin declined by 180 basis points to 18. 2% during the quarter. We were able to offset mainly supply chain, labor, and material pricing headwinds through improved volumes and unpredictably strong ASPs across all of our brands, which is a further testament to the insatiable demand for our boats, helping solidify yet another record-setting quarter. As our pricing surcharge becomes prevalent and all boats in January, margins will be further stabilized for the second half of the year. As I mentioned, demand continued at a prolific pace as the thirst for our feature-rich, larger boats remains incredibly strong, even during what is historically a slower season in October through December. Demand has been broad based across all brands and all models. This has been underscored by dealer reports, our year-end sales event for Malibu - Axis, and the excellent performance at recent boat shows, during the Malibu - Axis year-end sales event, we nearly doubled our sales versus fiscal year 2020, resulting in the second largest number of orders ever for this event. This year with behind only last year when consumers new all boat shows are being canceled. Malibu success was realized despite higher ASPs, limited promotions being the reality. Importantly, as boat shows return this year, we have maintained the torrid pace of the customer orders. In addition to demand for all brands at boat shows is white-hot. Fort Lauderdale was at a record pace of boat sales for many brands, including our Pursuit, Cobalt and Cobia brands. At the Denver Boat Show in January, we set records for the Malibu and Axis brands, and in Portland our dealer met their plan sales target. The Minnesota Show held a couple of weeks ago, also experienced very strong sales for that show for Malibu, Axis and Cobalt. Since Fort Lauderdale there have been some small saltwater boat shows. In each one Pursuit and Maverick brands have had sales performance much better than in previous years. As we head down to Miami next week, we expect this momentum will continue. Our dealers have also remained agile in this ever-involving environment. Orders have held extremely well as customers look past price increases to maintain their slot for a new boat, with long lead times playing a heavy factor in the decision-making process. There's also a recognition that we're now in an inflationary environment that extends to all types of products and it will likely continue, therefore, the best prices are now to buy a boat. Our new model year 2022 product lineup is once again underscoring what Malibu's known for; quality and innovation. We are seeing exceptional broad-based demand and while new product is highly sought after, the environment has placed abnormal demand on every boat that we sell. For Malibu and Axis, customers have responded overwhelmingly to our exciting new products with the all-new Malibu Wakesetter 25 LSV, and the brand-new Malibu Wakesetter 21 LX, as well as the Axis T220 and T250 all past the point of being able to build through demand. At Cobalt with a rollout of the R4 variance of boats in the first half, we have nine new boats in the 23-foot to 28-foot segment in just 15 months, completely transforming the R-Series lineup. At Miami we will introduce a new 30-plus foot boat in both the sterndrive and outboard variants. Everyone who has been on and experienced these new boats have marveled at the space and the performance of these new models. Pursuit continues consistent pace of product development. The brand new S358 was debuted in November will be in the water for consumers to experience in Miami. There will also be a new offshore model that will be brought to market in late March. Maverick is now on a pace to begin introducing new models in early fiscal year 2023. similar to Cobalt, there's an opportunity to replace outdated products, and like Pursuit, there are product white spaces we will fill and drive additional growth. There has not been a meaningful build of channel inventory over the last quarter, and given the demand for all of our brands, most of our production in the second half will be for retail-sold orders. It will be in fiscal year 2023 before we began to see any build of channel inventory, and well into fiscal year 2024 before channel inventories can begin and normalized. Malibu has also stayed ahead of the curve on inflationary pressures. In October 2021, we announced the implementation of price surcharges to help offset rising costs and maintain our healthy margin profile. These price increases began to take effect on a limited basis in December, and have shown no impact on the resilient demand across our full product suite. The supply chain continues to be the limiting factor on production. Based on our estimates, we could easily build at least 20% more boats in every brand. When you layer lack of component availability with an amplified labor shortage as suppliers because the flu season and the spread of Omicron, production volumes continue to be limited during the second quarter as most manufacturers reduce count to meet the availability of parts. The shortage of parts needed to build new boats is highly unpredictable as supplier issues tend to vary on a weekly basis. It is important to note these lower production levels are solely due to these supply chain issues, and our brands remain in a position to flip the switch and increase production capabilities as the environment begins to normalize. Frankly, the challenges we are facing are a little like your golf ball hitting a pebble on the way to the cup. It is frustrating because of the opportunity for that hole, but it is temporary and doesn't affect the long-term opportunity or results. We remain focused with the proper grip and tension on the putter as we leverage our operational prowess across the full product life cycle, while persistently looking for ways to predict our margin profile during these volatile times. Our initiatives solidly focused -- are solidly focused on providing customers with the best boats in the market while maintaining a strong value proposition for our shareholders. While we can't predict when the supply chain will improve, rest assured as things normalize, we have the team in place to remain ahead of the game. Vertical integration has always been a competitive advantage for Malibu. And in a volatile macroeconomic environment, it has only highlighted our operational resiliency. We have a long track record of advancing this vertical integration efforts from towers, to trailers, to engines, to floors, and I am pleased to announce our latest acquisition also fits into our vertical integration foundation. On February 1 Malibu acquired the marine assets of a company called Amtech. We acquired these assets under a new subsidiary, Malibu Electronics, LLC. Amtech has been a key supplier of complex wiring harnesses for our Malibu brands for years, and is one of several suppliers we use. Wiring harnesses has been a primary supply constraint over the past 9 months, and we saw a clear opportunity to bring this capability into our vertical integration fold. As we bring this Alabama based manufacturing operation in-house, we will be better positioned to control our own destiny and alleviate supply constraints in the near term and provide a runaway for growth for all of our brands longer-term. The assets included a 130,000 plus square foot manufacturing facility that historically had approximately 50% of its production devoted to customers in non-marine segments. We will continue full operations in Alabama. But there will be no external sales opening capacity for all of our brands. As a result, this transaction solves a problem immediately for Malibu by being able to provide the volume of harnesses that Malibu needs. This improvement will alleviate constraints in other suppliers shared between our brands and ultimately enhance our ability to produce more units across all of our brands. In addition to improving our vertical integration, we remain on pace to further enhance our production capacity through the Maverick Plant 2 expansion that doubles the production footprint of that plant. It is on schedule and we expect to start seeing results soon, as we began to bring boats to market from that facility during the second half of fiscal year 2022. This expansion will allow us to build more boats, larger boats, and increase the margin profile of the boats that are built at Maverick now and into the future. Many people just don't see the immense opportunity and almost perfect setup for Malibu. Never have I seen a company's so well-positioned for success, regardless of what may come. The historically low channel inventories dictate that we have a long runway of solid production opportunity despite any economic environment. As the supply chain improves with the demand that we have, we are positioned to absolutely rip and grow production and profitability significantly. The lack of channel inventory also greatly softens any deteriorating economic environment, as we have a solid 2-plus years to get channel inventory back to where it should be. We are in a most enviable position that dictates solid substantial performance over a multiyear period of time. In the short-term or long-term, Malibu remains incredibly well-positioned despite supply chain challenges and inflationary pressures that are impacting the industry. We strongly believe there's no better team to execute on our strategic priorities than our tried-and-true Malibu family. Our team's operational capabilities, hard work, and commitment to quality is what makes us truly unique. Fiscal year 2022 is positioned to be another incredible year in Malibu's 40-year history with record revenue and record earnings. As we set ourselves on the second half of the year, Malibu remains in a unique and enviable position to dominate the marketplace. By developing our cross-brand vertical integration, we are confident in our ability to generate new synergies across our powerhouse brands in fiscal year 2022 and beyond. We will continue to drive innovation and be the first-to-market with compelling new products and features. We are optimistic about our future and furthermore, we are immensely proud of our Malibu brands as they continue to navigate this volatile and unprecedented environment. We will continue to support our absolute outperformance in the industry and ultimately create greater shareholder value for all of our investors. With that, I will now turn the call over to Wayne to take you through our financial performance in more detail.
Wayne Wilson: Thanks, Jack. In the second Quarter, net sales increased 34.9% to $263.9 million and unit volume increased 19% to a record 2,073 boats. The increase in net sales was driven primarily by increased unit volumes due to the acquisition of Maverick Boat Group and a favorable model mix across our brands. The Malibu and Axis brands represented approximately 56.9% of unit sales, or 1179 boats. Saltwater Fishing represented 22.6% or 469 boats. And Cobalt made up the remaining 20.5% or 425 boats. Consolidated net sales per unit increased 13.3% to approximately $127,300 per unit, primarily driven by year-over-year price increases and a greater mix of larger boats for our Malibu and Cobalt segments. Gross profit increased 28.4% to $63.6 million, and gross margin was 24.1%. This compares to a gross margin of 25.3% in the prior year period. The decline in gross margin was driven by the inclusion of Maverick. Selling and marketing expenses increased 41.4% or $1.7 million in the second quarter as a percentage of sales, selling, and marketing expenses increased slightly by 10 basis points over the prior year period. The increase was driven primarily by incremental costs associated with the Maverick acquisition, compensation personnel-related expenses, and promotional events that have since resumed after being suspended due to COVID-19 in prior year period. General and administrative expenses increased 6.3% or 1 million in the second quarter. The increase was driven primarily by an uptick in compensation personnel-related expenses, IT infrastructure expenses, and incremental G&A expenses due to the acquisition of Maverick. As a percentage of sales G&A expenses, excluding amortization, decreased 160 basis points to 6.1%, compared to 7.7% for the prior-year period. Net income for the quarter increased 39.9% to a record $31 million. Adjusted EBITDA for the quarter increased 23% % to a record $48.1 million, and adjusted EBITDA margin decreased a 180 basis points to 18.2%. Non-GAAP adjusted fully distributed net income per share increased 23% to $1.50 per share. This is calculated using a normalized C Corp tax rate of 23.8%, and a fully distributed, weighted average share count of approximately 21.7 million shares. For a reconciliation of adjusted EBITDA and adjusted fully distributed net income per share to GAAP metrics, please see the table in our earnings release. In addition to strong operating performance, as always, we have looked to and successfully deployed our capital opportunistically in recent months. Our acquisition of the marine assets of Amtech that enhances our vertical integration strategy, while modest in size, positions us to increase production by taking greater control of our supply chain. In addition, given the strength of our business, we opportunistically repurchased $5.2 million of the company's shares during the fiscal second quarter under our existing $70 million share repurchase program. As Jack mentioned earlier, we maintained our momentum throughout the first half of fiscal year 2022 and exceeded expectations despite continued headwinds from a volatile supply chain and inflationary environment, consumer demand was unfazed and march forward at a robust pace, helping to drive ASPs to unforeseen levels. Malibu remains incredibly well-positioned to capitalize on this robust demand environment while maintaining our strong growth and margin profile despite ongoing macro challenges. Based on our current operating plan, our expectations for fiscal year 2022 are as follows. We anticipate revenue to grow in the 22% to 24% range year-over-year, with growth accelerating slightly from Q3 to Q4. Consolidated adjusted EBITDA margin is expected to exceed 19.5%. In Q3, adjusted EBITDA margins should be approximately 20%. Malibu is undoubtedly the industry leader, blazing the trail and consistently outperforming against our peers over the long term. We've continued to invest to drive growth into the future. And with the Maverick Plant 2 expansion opening, our harness vertical integration, or simply the robust wholesale restocking tailwind, we believe our prospects are bright. We are incredibly well-positioned to capture robust growth opportunities as demand for our larger, feature-rich boats continues at a record-setting pace. We look forward to continuing to deliver even greater value to our stakeholders in fiscal year 2022 and beyond. With that, I'd like to open the call up for questions.
Operator: Please stand by while we compile the Q&A roster. And our first question comes from the line of Joe Altobello with Raymond James. Your line is open. Please go ahead.
Joe Altobello: Thanks, guys. Good morning. Couple of questions around the guide. I guess starting with the sales guide largely unchanged. I guess you maybe narrow it a little bit toward the middle of your prior range, but directionally, how are you guys thinking about units and ASPs going forward in the second half of the year. And I know the last quarter -- last earnings call you talked about potentially approaching, unit call, at 2500 units per quarter at some point, it sounds like supply chain issues are kind of pushing that back. So maybe help us think about the impact in terms of units in ASPs on that sales number in the second half.
Wayne Wilson: Yeah, Joe look, I think from the guide perspective, we're not really from a unit volume perspective moving much from what we said that 2,500ish type number that's been thrown around on a quarterly basis, it's still the ballpark for the back-half we talked about a little bit more acceleration on a year-over-year basis in the cadence for the revenue guide. And so what's that mean for net sales per unit. There's not a big move in net sales per unit up that would draw down that volume number that we talked about previously.
Joe Altobello: Okay. Okay. That's helpful. And maybe on the EBITDA margin line, sounds like things are getting a little bit better. Is that all the surcharge going into effect in the second half? Or fully into effect in the second half, or are there other items, they're helping your margins?
Wayne Wilson: I would tell you, look, we're seeing some flow-through on -- the surcharge comes in slowly, and so there's elements that impact Q3 and it impacts Q4 a little bit more so, but that's also meant to align with those costs coming in. What we're really seeing across our business is that the margins are performing pretty well. It's not meant to be -- the surcharge is not meant to be the margin additive. What you're really seeing there is it is ultimately that the businesses are performing as we are increasing volume on a year-over-year basis, that we are going to have strong performance. So it's not really the surcharge, it's really about just how the businesses are performing sequentially.
Jack Springer: Yeah. The point that I'd make Joe is that, the cost increases come first followed by the surcharge. So we're playing catch-up on that. So to Wayne's point is not a margin additive factor is to keep -- if all things being relative, keep the margins where they should be. In the second half, the margin improvement, if any that you see, will come from the operation. It will come from the supply chain improving. And we do see some windows of that supply chain improvements. So our hope is that we'll be able to build a few more boats than what we have predicted last quarter.
Joe Altobello: Okay. Thank you, guys.
Operator: Thank you. Our next question comes from the line of Mike Swartz with Truist Securities. Your line is open. Please go ahead.
Mike Swartz: Hey, guys. Good morning. I just -- one quick clarification. You are saying a surcharge as went into place in December and I guess you start to see more of the benefit of that going forward, being a surcharge, does that mean that it couldn't be rescinded at some point I'm just trying to understand how that works.
Jack Springer: So the way surcharges work Mark, is it to be rescinded, to be maintained and you find its way into a price increase. It could be decreased from whatever it was to a lesser amount, or we could come back and increase the surcharge in the spring. So the reason we went this route was to be very flexible based on the environment. So we've really captured every conceivable event that could occur.
Joe Altobello: Okay, great. Thanks, Jack. Just a second question on the Cobalt business. Just looking at production volume there. You're still well below where you were I think pre -COVID. So maybe talk about, has anything changed in that business? Or is this just a factor of mixing towards larger lower unit volume boats?
Jack Springer: I think you hit the nail on the head based on the environment. Number one; you look at the units, they have been impacted without a doubt by the supply chain. And absent supply chain issues, there would have been more volume coming out of Cobalt. But secondly, as with ASPs that you've seen, we the customers are buying larger boats. They are buying the more expensive boats. So that's why we see the revenue offset because of what's happened with the volume of boats at that higher level. And we have some boats that are coming out frankly, in the second-half, I mentioned it that are going to improve that even further.
Joe Altobello: Okay. Great. Thanks, Jack.
Jack Springer: Sure.
Operator: Thank you. And our next question comes from the line of Jamie Katz with Morningstar. Your line is open. Please go ahead.
Jamie Katz: Hi. Good morning. I just wanted to stay on Cobalt for a minute. I think Cobalt was called out as maybe more disproportionately impacted by supply chain issues in the commentary by segment. Is there something different in their supply chain that would impact them differently? And also, was there any impact this year from some of the recent storms across the Midwest or south Midwest, wherever Kansas is, that maybe constrained some production, which I know happened last year? Thanks.
Jack Springer: Yeah, I'll answer the second question first, there really have not been any impact from storms until last week when the storm went through Kansas last week, we did have some impact and a couple of short days, but nothing major. The thing that I would point to a little bit different on Cobalt is all of our brands that will use different products from potentially different suppliers. And in the case of Cobalt, because of different power plants, we buy engines from multiple parties, and those parties have all struggled, frankly. Whether it'd be Yamaha, Mercury, Volvo, they've all struggled in that basis. The other area is Cobalt is pretty dependent on a supplier related to windshields and that windshield supplier has struggled greatly. COVID has impacted them and so our hope is that they begin working out of that in this third quarter and from a supply chain perspective, it will be better. What I'll point to is, and this is probably important to understand. Our acquisition of Amtech will alleviate some of the burden from a wiring harness perspective on the existing suppliers. I think that we'll see very quickly the ability of now Malibu Electronics to begin subsidizing the wiring harnesses for Cobalt so that we expect that supply chain issue for Cobalt to go away.
Jamie Katz: That's really helpful. And then as you think about the new 30-foot boats that are coming out at Miami. Is there a new customer segment you might be trying to target with this or is it just sort of a customer lead initiative that consumers were looking for something in the size range? Thanks.
Jack Springer: It's not a new target. It is customer led. So if we think about the products that exist today, you have an R33, an R35 that are a little bit older. You have an 829 that we came out with a couple of years ago. So there's a propagation that people were continuing to buy larger boats. They want the boats with more features and more ergonomics. And we believe that on this particular boat, both the Stern drive version and the outboard version delivers that for that either next Cobalt customer or the Cobalt customer that's ready to purchase the next boat.
Jamie Katz: Thank you.
Operator: Thank you. And our next question comes from the line of Fred Wightman with Wolfe Research. Your line is open. Please go ahead.
Fred Wightman: Hey, guys. Good morning. Thanks. For the question, just to follow up on the EBITDA guidance. I think you guys were expecting a 300-basis point decline this quarter and you came in a little bit better than that. Are there some costs that sort of shifted from 2Q into the back half of the year, or is that just sort of lingering uncertainty about the supply chain, just sort of a modest tweak to the outlook there? Is there anything else that we should be expecting?
Wayne Wilson: Yeah. No. Look, it absolutely did come in better. The actual manifestation of the price increases didn't hit as quickly as we had modeled or anticipated, combined with the fact that our team -- there's really three components. Look, the operations team has done an incredible job in a really dynamic environment to run as efficiently as possible. And then 3, there's cost that we've budgeted whether that be they've been deferred or you're trying to hire people and those people are hard to find. Those are the three components of it. I'd put operations as number 1, the price manifestation in the cost line items as number 2, and then some deferral on the G&A side or just delay in the realization of that as number 3 in terms of order of magnitude.
Fred Wightman: Okay, great. And then just high-level thoughts on the buyback here. I know you guys did 5 million in the quarter; I think that 70 million authorization expires in November of this year. But how are you thinking about leaning into that buyback just given more shares are trading and also the offset there from an M&A perspective if you guys are still buying stuff. So what are the puts and takes?
Wayne Wilson: The puts and takes are that -- look the stock got incredibly weak there in December for a little bit, and has continued to be what we think is attractive valuation. We have not been a -- what I would describe as programmatic repurchaser that just deploys capital regardless, and its valuation agnostic. And I think that's been our MO for a long time and will continue to be our MO. We deployed only $5 million in the quarter. But I think we will continue to look at it in a similar fashion. We're very positive on the direction of our business in terms of the wholesale restocking and the duration of that tailwind, what we're seeing with the margins of our business, and the strength, and its prospects. So you all shouldn't be surprised if that continues to be weak, that if we continue to buy back shares. We think we have plenty of liquidity, plenty of capacity, debt capacity. If we -- there was an incredible M&A deal, we haven't done anything that would preclude us from executing on a transaction -- an attractive transaction if it became available to us.
Fred Wightman: Great, thanks guys.
Operator: Thank you. And our next question comes from the line of Eric Wold with B. Riley Securities. Your line is open. Please go ahead.
Eric Wold: Thanks. Good morning. So a couple of questions, follow-up to a prior question, I guess. If you think about the supply chain issues across all three brands, are you seeing a light at the tunnel in certain areas meet the range of uncertainties and described previously is that remained as wide as it has been or is it somewhat narrowed in some of the areas that we're uncertain before or not as uncertainty there had been?
Jack Springer: No, Eric, I think it has narrowed a little bit. And I think those things I would point out is that -- and Ritchie told me this earlier. Before you had a scenario where the supply chain would -- they couldn't give you any problems. It would be, "We don't know when we're going to be able to get the product, we'll do the best that we can. " And that's become a little bit more of, "We have some coming to you and we'll get back with you as soon as possible. " And so that's why I say that we see a window of improvement, and it's a little bit predictive to what we had said about two quarters ago, that we think in the second half, it will start improving, it will continue that improvement across calendar year 2022. So we are definitely seeing improvement. It gives us some confidence that we'll be able to produce more than what we have maybe originally projected in the second half.
Eric Wold: Got it. And then I know that the price surcharges increases are kind of, you talked about the hope it's going to maintain margins given supply chain and efficiencies and input costs increase and whatnot. But assuming that the current trend towards larger, higher, more feature-rich, higher ASP boats moving into the order book continues. And some of those production and efficiencies, Wayne, in the coming quarters or so, if we think about that mix in the order, but holding at those higher levels, how would that translate into gross margins on the other side versus historical levels? If I asked that in a coherent way.
Wayne Wilson: Yes. Look, I think if I understand your question correctly, look, is there a potential tailwind to the margin profile of the business if and what's that potentially look like if you can release one incremental volume, but also to the mix that you're seeing. Is that the question?
Eric Wold: Yes. Yes. Yes, Wayne.
Wayne Wilson: Yes. Look, hey, I think it's a really good question. The reality is that versus our last year when we were talking about our guidance and there was limited upside. I think we do feel like this year from guidance, there is incremental upside versus being in an environment where it's potentially more constrained in terms of what that upside is. And so I -- look, if those scenarios come to fruition, you're probably looking, a lot more like what we thought at the beginning of the year, which was kind of in the -- kind of a low 20s type number. You have the mix impact, and you have some incremental volume beyond what's embedded in the guide. You're probably stepping up in terms of the adjusted EBITDA margins into the low 20's, probably not getting all the way back to last year was 20.5 because of the inclusion of Maverick. But on a apples-to-apples basis, up year-over-year.
Fred Wightman: Helpful. Thanks, guys.
Operator: Thank you. And our next question comes from the line of Rudy Yang with Nirenberg. Your line is open. Please go ahead.
Rudy Yang: Hey guys, thanks for taking my questions. Just wanted that clarification for me on the price surcharge, I guess, can you just clarify the expectation of when that will fully take effect, and just regarding the continued roll out of new models? Are there going to be planned price increases for those models, or is the surcharge you've announced going to represent all the price increases over the medium-term?
Jack Springer: Your last question first, the surcharge that's in place has already been planned for the new model, so there's not going to be a separate surcharge for them. We -- it was a limited basis December. I think your question was, when does it become fully baked? We'll start seeing the fully baked part of that probably this month in February, a little bit less so in January, but largely the full price increase is in effect now.
Rudy Yang: Great. That's really helpful. And secondly, can you just comment to any stops on rising rates and any effect it could potentially have on your business this upcoming year? And I guess just as well as how you believe the industry as a whole has historically performed in a rising rate environment?
Wayne Wilson: Yes. In terms of this fiscal year, I think rising rates will have probably no impact to the -- the wholesale restocking need is immense, and that combined with the strength that we're seeing at retail, look the Fed rates as the quarter point in March I mean that flow through to the retail consumer probably isn't actually impacting retail this year. In my opinion, our belief is that the financing sources have a reasonable about of NIM; of net interest margin, when it comes to the products to finance at retail here, and may absorb some of that, first. And secondly, there is other elements of that distribution of that retail financing products that have the potential to absorb the initial rate increases. And those are likely to occur before there's really any meaningful impact when it comes to the interest rate that people are paying at retail for boats. And so we don't foresee that impacting us this fiscal year, at least and maybe even this calendar year because of those factors
Rudy Yang: Thank so much.
Jack Springer: Thank you.
Operator: I'm showing no further questions at this time, and I would like to turn the conference back to Jack Springer for any further remarks.
Jack Springer: Thank you very much. We continue to capitalize on scorching retail environment and unprecedented backlog, and we don't see any signs of it slowing. While we are limited in increasing production counts right now, every brand is well positioned to wrap -- ramp-up production once parts and systems are available from our suppliers. In the meantime, we're taking matters into our own hands to control what we can, which we highlight by our acquisition of Amtech. This acquisition further enhances our vertical integration strategy in the long term and addresses a supply chain challenge in the short term. Our strategic planning, operational excellence, and supply chain management continues to support our outperformance. Our teams continue to push boundaries through the introduction of new product models that exemplify innovation and luxury and draw customers into the Malibu, Cobalt, Pursuit, and Maverick lifestyles. Historically low channel inventories, unprecedented demand, and rising ASPs, create a near-perfect setup that positions Malibu extremely well for multiple years of growth and increasing profitability. Our first-half results, yet again, demonstrate the inherent strength and capabilities of Malibu's brands. We remain confident in our ability to deliver value to our shareholders, and we are increasing our guidance for fiscal year 2022. As always, we thank you for your continued support and for joining us in our journey towards growth and continued excellence in fiscal year 2020. Have a fantastic day.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
