Craig Kennison: Hey, good morning. Thanks for taking my questions as well. I wanted to unpack guidance a little bit. When you look at your fiscal 2023 revenue guidance, what’s the embedded shipment volume assumption there? And then maybe you can comment on the embedded kind of retail assumption you need to get there?
Wayne Wilson: Yes. So the €“ we don’t give unit volume assumptions. But ultimately, you can back into the implied guide from a revenue perspective in the back half is obviously down, right? And so that’s going to probably €“ I would guess a range depending on what ASP assumption that you’re going to use is probably down 5% to down 12% in unit volumes in the back half of the year.
Craig Kennison: Got it. Thank you. And then just as we look further ahead, Jack, I think you said something about the era of pricing and getting significant price increases maybe over. I’m just wondering, what that means for ASPs as we look at fiscal 2024? Could we actually see prices come down on like-for-like units? And then just looking at the restocking opportunity in 2024. I’m assuming you still have some recycle left maybe in the first half, as you mentioned, but we won’t see the same level of restock benefit in fiscal 2024 as well.
Jack Springer: To answer the latter first. I think that’s exactly correct. It really is going back to that normal environment. And I’m going to bifurcate between wholesale and retail as we talk about the pricing dynamic. For Malibu, it becomes like it was in 2019, 2020 time frame where you look at an overall increase in the ASPs and it’s going to be about one-third price driven or one-third product driven or one-third feature driven. As it relates to that €“ the environment of pricing and prices coming down at the retail level, prices I do think will come down next year. And the rationale and the reason is because prices have been in the MSRP for two years or more, and the dealers have got to bring the pricing down. So it’s not necessarily going to be on the wholesale side, but that retail customer will see pricing degradation.
Craig Kennison: Got it. Hey, thank you.
Operator: And our next question will come from Joe Altobello with Raymond James. Please go ahead.
Joe Altobello: Thanks. Hey guys, good morning. Just want to follow up on Craig’s question regarding units. You said laying down 5% to 12% in the second half. I assume that’s mostly Malibu, right, since you’re still filling the channel to a large degree, on Saltwater Fishing and Cobalt?
Jack Springer: I would tell you that, that’s the bigger portion of our business. I don’t have it off the €“ at the tip of my fingers, but it’s got to be €“ and I was just doing that based off of the implied revenue guide and some generic ASP assumption. So €“ but I would tell you to do the math and put your ASP assumption in there to get your volume number.
Joe Altobello: Okay. And then in terms of second half margins, I think when you said you expect the second half to be roughly flat with last year. And I think you just guided to a 3Q number of 21% versus 23% in the base period. And then in the fourth quarter, you’re lapping a 21%. So it sounds like you expect EBITDA margins to improve fairly significantly in Q4. What’s driving that?
Wayne Wilson: The €“ really, it’s the timing of how that price flows in various mix elements. But the impact of flooring has a very negligible effect in Q4. It has a smaller impact in Q3, but the impact of year-over-year price increases in the Q4 period as we waited on the Malibu line is going to have more of an impact in Q4.
Joe Altobello: Okay, great. Thank you.
Operator: And our next question will come from Gerrick Johnson with BMO Capital Markets. Please go ahead.
Gerrick Johnson: Hey, good morning. A couple here. First, the impact of discounting in the quarter, the impact on gross net sales or gross margin and your outlook on discounting for the balance of the year. Also I was curious about the engine comments you made about engine constraints where you see the most limited supply. And then I’m not sure if you answered, I think it was Craig’s question about your outlook for the industry and how that’s embedded in your guidance? Thanks.
Wayne Wilson: Yes. With respect to discounting Gerrick, it really is not a meaningful factor incrementally from a boat show or year-end sales event perspective, it’s €“ you’re not seeing an incremental discount drag versus what we’ve seen historically. On a year-over-year basis, there’s probably a little bit, but we anticipated that. I’ll let €“ I’ll punk on the engine constraints to Jack here in a second. But with respect to the outlook, what we had initially said with our guidance back in the August time frame was a down high single-digit percentage for the market as a whole. And we continue to have that as our primary driver in the model. If you look at the domestic registration data for our primary segments, you’re down about 12% on a blended basis, and you’re seeing a decelerating decrease.
So kind of second derivative function, but €“ and ultimately, when you look at on a six month basis. So, we think that the current estimate that we have in terms of a high single-digit down market for the fiscal year is still as appropriate and is the embedded assumption in our guidance.
Jack Springer: Gerrick, coming back to engines. We continue to see all of the engine companies struggle to one level or another, and it’s to varying degrees. There has been improvement. I will tell you that Yamaha has improved, and they seem to be getting more product to us. They’re getting the parts that we need to us. So there is some catch-up going on. But part of the equation there is we were way behind. And so we’re not fully caught up yet, although we see improvement. On sterndrive, on the Cobalt side, on the sterndrive and also that forward-facing engine, we’ve seen improvement there as well, still not out of the woods, but we have seen improvement. So if I put it in an overall nutshell, the engines are improving, but still not where we need them to be. We don’t necessarily get all of the parts and all the engines that we need when we need them on the line, but that is improving.
Gerrick Johnson: Okay, thank you guys.
Jack Springer: Thank you.
Operator: And our next question will come from Brandon Rolle with D.A. Davidson. Please go ahead.
Brandon Rolle: Good morning. Thank you for taking my questions. First, just on the ski way category, it seems like the category was underperforming the broader industry in the last few months of the year. Could you comment on anything that might be going on specifically within your category and your outlook for the industry in calendar 2023, specifically for the ski way category?
Jack Springer: Yes. I think generally, you’ve had a better scenario of putting inventory into the channel as it relates to that ski way category. And that’s not only from us, but that would be from all competitors. But the main thing that I’ve seen, we have black pontoons, have had a very strong four, five-year period of time. And so it may be a little bit of a pause. And then the third thing I would point to is the dealers need to take pricing down.
Wayne Wilson: The other thing I would add to that is that if you look at the details of those monthly numbers that you’re talking about, you’re talking about comps that are still really, really high, if you look at them in a historical context, when you elongate the period that you’re looking at that and you look at the first half of the fiscal year performance, it’s in line with the entirety of the market. And so I don’t think it’s something that’s a symptom of a broader disease for that segment. It really is a function of a very short window of time and a really high comp in a historical context. And when you spread it out over six months, it’s very much in line with the industry.
