Malibu Boats, Inc. (NASDAQ:MBUU) Q3 2024 Earnings Call Transcript

Malibu Boats, Inc. (NASDAQ:MBUU) Q3 2024 Earnings Call Transcript May 2, 2024

Malibu Boats, Inc. misses on earnings expectations. Reported EPS is $-3.27619 EPS, expectations were $0.46. MBUU isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to the Malibu Boats Conference Call to discuss Third Quarter Fiscal Year 2024 Results. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] And as a reminder, today’s call is being recorded. On the call today from management are Mr. Jack Springer, Chief Executive Officer; Mr. Michael Hooks, Chief Chair, our Executive Chair; Mr. Bruce Beckman, Chief Financial Officer; and Mr. Ritchie Anderson, Chief Operating Officer. I will now turn the call over to Mr. Beckman to get started. Please go ahead, sir.

Bruce Beckman: Thank you, and good morning, everyone. A press release covering the company’s fiscal third quarter 2024 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 and 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 GAAP financial measures are included in our earnings release. I will now turn the call over to Michael Hooks, Executive Chairman of Malibu Boats. Michael?

Michael Hooks : Thanks, Bruce. As you have seen from today’s earnings release, we have several topics to discuss, including our results for the third quarter of fiscal year 2024. As Jack and I will discuss in more detail, and as usual, Bruce will guide you through the financials. But first, I’d like to hand the mic over to Jack, who will be participating in his final earnings call with us today. Jack?

Jack Springer: Thank you, Michael, and good morning, everyone. Thank you for joining the call. By now, you know that I’m stepping down as Chief Executive Officer of Malibu Boats in the coming weeks. This was not a step I took lightly because my connection with and passion for Malibu Boats, our customers, and our teams run very deep. As CEO, I wanted to reflect on my journey with this incredible company. My career in Malibu has spanned a decade and a half through both great and challenging times. When I joined Malibu in 2009, we were in the depths of the Great Recession with volumes off by 70% and EBITDA less than breakeven. While it was a risk at the time for me, the opportunity, the brand, and the people made the difference in my decision to join Malibu.

We began our journey of professionalization of the company, focusing on compelling new products, embarking on vertical integration, and improving our distribution network. These initiatives, among others, have driven the dividends that we have all realized. I thank Michael for the opportunity and his support through the years. I have tremendous appreciation for all of the team members who have worked side by side with me over 15 years. And I specifically want to express my thanks to Ritchie Anderson, Debbie Kent, and Wayne Wilson who have made MBI success possible and who have made me better. Finally, it always comes back to the people who make the company. They have been tremendous for 15 years and I thank the many thousands who have spent part of their lives making MBI what it is today.

It has truly been an honor for me to serve as the CEO of Malibu Boats and shape its strategic course that led to our IPO in 2014, as well as the significant growth and profitability that followed. What we have achieved is only possible with the trust of our customers, our incredible dealers, the terrific work of our team members, and the support of our shareholders. I am immensely grateful. I want to thank all of you for your confidence in MBI. This team, under the guidance of Michael, Ritchie, Bruce, and the rest of the executive leadership team, will continue to deliver results and position the company to execute through the uncharted waters ahead. With that, I will now move on to our third quarter results. Malibu Boats executed despite another challenging quarter amidst ongoing macroeconomic uncertainty as retail activity has remained weak during the selling season.

For the third fiscal quarter, net sales decreased 46% to $203.4 million compared to the prior year. Adjusted EBITDA fell 69% to $24.4 million. Gross margins decreased 650 basis points to 20% and adjusted EBITDA margin to 12% from 21.1%. Similar to last quarter, we experienced a weakened retail environment characterized by lingering uncertainty and softened retail demand. The customer continues to be very patient. They know inventory is available as they search for the best deal possible. In addition, credit buyers remain on the sidelines as interest rate pressures impact purchase decisions for entry-level boats. As we enter the peak selling season for fresh water, we will be monitoring the situation very closely. Historically, we know that the market can correct on a dime, and we will be ready to support this growth as the tide turns.

We have stated that during the downturn, we expect the strength of our product development and distribution to be manifested in increased market share. We saw this occur in 2009 and 2010 when we increased Malibu’s market share by almost 50%. We are seeing share gains in our brands again today. In their respective competitive segments, Cobalt has gained 400 basis points of share in the last 12 months and now commands a 35% share in the sterndrive market. Pursuit has gained 220 basis points of share on a trailing 12-month basis, and Pathfinder has realized over 400 basis points of market share increase in its competitive segment. Both Malibu and Cobia are equal to last year on a trailing 12-month basis, and we expect both brands’ market share to grow over the coming months.

As channel inventory decreases and competitors with higher weeks on hand of inventory come back to normal, the strength of our product and distribution will shine through. For example, the timing of our new product introductions for Cobia will be a prime catalyst in driving market share gains in that brand. We are also seeing some pockets of strength coming out of the boat sale season with strong ASPs across all of our brands, but even more so within our Saltwater and Cobalt segments which are leading the way. This strong ASP performance, which is better than anticipated, further indicates that the premium buyer is still there, driving retail as the desire for larger boats and insatiable demand for features and options continue. Despite these signs of resiliency within our brand portfolio, the reality is that we are currently navigating market conditions that have continued to deteriorate across the industry.

Growth rates have decelerated in our key categories, notably ski wakes and saltwater fishing, while inventories have remained stubbornly high, making dealers reluctant to bring on additional inventory. This has contributed to an increasingly promotional environment. As a response to these heightened pressures, we have had to lower our Q3 and Q4 production and increase our promotional spending more than we previously anticipated, both of which are primary drivers in our adjusted outlook for the full year. While we are currently in our selling season, we do expect the see the decline and inventories accelerate during the peak selling season, which is a positive. Viewers are now delivering boats sold over the last few months, and the selling season is in swing, each accelerating the decrease of channel inventory.

We are actively monitoring the situation very closely and have taken the necessary steps to right-size production levels and are prepared to take them down even further to reach our goals of continuing to optimize the channel inventory. In addition, promotional activity is increasing. We believe this will be the case through the remainder of the 2024 fiscal year. While we are not prepared to discuss our plans for the upcoming 2025 fiscal year, we believe with our focus on channel inventory reductions through the remainder of fiscal year ’24, we will be in a better position to match wholesale to retail demand in fiscal year ’25. Going forward, this will position MBI to accelerate our recovery as retail demands regain momentum. Our commitment to right-sizing channel inventory levels underscores our proactive approach in navigating market fluctuations, ensuring resilience and agility in the face of an evolving industry dynamic.

Despite the challenges, MBI remains primed to navigate short-term fluctuations and emerge from any downturn with swiftness and strength. As we have spoken about in the past, our cost structure is highly variable, and we are demonstrating it again in this environment. Our variable cost of sales is down in the upper 80% range. This is relative to the rate of sales decline in Q3, which is in line with our expectations of an 80% to 90% variable cost structure above the gross margin line. Lastly, I would like to provide an update on the progress we have made to further streamline our production capabilities. In the third quarter, the Roane County facility experienced a significant ramp-up, marking a pivotal moment for Cobalt. As we enter the fourth quarter, we anticipate to further expand operations by adding more models as we execute our strategy to consolidate Cobalt’s small production in Tennessee while concurrently expanding cruiser capacity at our Kansas facility.

This consolidation not only streamlines our operations, but also positions us strategically to optimize future growth and margins by capitalizing on economies of scale. Once these expansions are completed, we will be able to reduce our level of capital expenditures, thus increasing free cash flow. I will now turn the call over to Michael.

Michael Hooks: Thanks, Jack. Before I get started, I would like to once again thank you for your 15 years of leading Malibu. It’s been a privilege to work with you. Echoing Jack, I want to reiterate that our priority has been to get channel inventories to a healthy level, and that we’ve been working diligently to do just that. We believe this benefits Malibu, our dealers, and our shareholders. And while fiscal ’24 has been a challenging operating environment, we are taking the difficult steps needed to put us in that position. While we are not prepared to provide guidance, we are confident that our actions to close out the year put us in a position to realize a meaningful recovery as the retail environment stabilizes. Assuming a flat retail environment next year, we would see substantial improvement in Malibu’s financial performance and continued free cash flow generation.

Notably, we expect to end this year with zero debt and a positive cash position. It is worth highlighting, we were able to achieve this all while investing approximately $64 million in CapEx in the first nine months of fiscal ’24, as well as having a one-time net outflow of $55 million in connection with the settlement of the Batchelder litigation during the fiscal year. As we look ahead, it is important not to overlook the strength of our economic model. Despite the short-term headwinds that circle the nature of the marine industry and some recent events at MBI over the last few months, the fundamentals are still here. Malibu is well-positioned with strong margins and the ability to generate substantial free cash flow in almost all environments.

As of the end of Q3, we’ll have a positive net cash balance of $32 million. Given where we sit in the industry cycle, we’d like to remind and illustrate for you the level of profitability and cash generation capacity of our business in more normal times. Once the industry recovers to unit volumes at the average level seen in 2017 to 2019, with our current cost structure, market position, and brand model mix, we would anticipate revenues of approximately $1.3 billion with robust adjusted EBITDA margins of 17.5% resulting in a free cash flow of approximately $130 million. This substantial cash generation complemented by our strategic capital allocation priorities positions us favorably to deliver strong total shareholder returns as the market recovers.

As a reminder, our capital allocation priorities remain unchanged as we have consistently communicated. One, invest in high ROI internal investments. Two, pursue accretive acquisitions. Three, pay down debt and deleverage. And four, return capital to shareholders. So at this time, and keeping with these priorities, we anticipate returning substantially more cash to our shareholders on a regular basis. Our $100 million share repurchase authorization remains in place. While we have opportunistically repurchased shares in the past, we intend to return capital more predictably going forward. Commencing with this quarter and running through at least the end of fiscal ’25, we plan to return at least $10 million per quarter or a minimum of $40 million annually in the form of share buybacks and/or dividends.

And we are implementing a trading plan to effectuate. Additionally, we remain focused on building our M&A pipeline and given our cash flow profile and unlevered balance sheet, we remain primed and ready to pursue accretive acquisitions as they become available. Finally, I’d like to briefly address the lawsuit filed by Tommy’s. Given the litigation, we are unable to provide much detail beyond what we have previously communicated. But we are encouraged by the progress we are making in establishing new dealers in the markets formerly served by Tommy’s and we expect minimal disruption in these markets into our family of Malibu end users. I will now turn the call over to Bruce for further remarks on the quarter.

Bruce Beckman : Thanks, Michael. Third quarter results were largely in line with our expectations. Net sales decreased 45.8% to $203.4 million and unit volume decreased 51.9% to 1,269 units. The decrease in net sales was driven primarily by decreased unit volume across all segments resulting from elevated channel inventories, a soft retail demand environment and lower wholesale shipments. The volume impact was partially offset by a favorable model mix across all segments and inflation-driven year-over-year price increases. The Malibu and Axis brands represented 35.6% of unit sales. Saltwater Fishing represented 30.0% and Cobalt made up the remaining 34.4%. Consolidated net sales per unit increased 12.7% to $160,299 per unit, primarily driven by inflation-driven year-over-year price increases and favorable model mix within our Saltwater Fishing segment.

Gross profit decreased 59.1% to $40.3 million and gross margin decreased 650 basis points to 19.8%, driven primarily by lower volume and an unfavorable segment mix. Cost of sales decreased 41% in a period where our revenue decreased 46%, demonstrating our operational excellence and highly variable cost structure. Selling and marketing expense decreased 8.7% to $6.6 million in the third quarter. The decrease was driven primarily by decreased travel and marketing spending. As a percentage of sales, selling and marketing expenses increased 130 basis points to 3.2% compared to 1.9% in the prior year. General and administrative expenses decreased 4.4% to $18.6 million. The decrease was driven primarily by a decrease in personnel-related expenses.

As a percentage of sales, G&A expenses increased 390 basis points to 9.1%. During the quarter, we also recognized a $88.4 million non-cash impairment of goodwill and intangible assets from our acquisition of the Maverick Boat Group in 2021. This non-cash write-down is largely due to the vastly different industry landscape we find ourselves in from when this acquisition was completed in 2021. We have gained over 100 basis points of market share under our ownership and remain confident about the future of the MBG business, anchored by our focus on new product, operational efficiency and distribution expansion and our opportunities to drive growth and value from the business as markets recover. GAAP net income for the quarter decreased 226.8% to a net loss of $67.8 million, inclusive of the aforementioned $88.4 million non-cash impairment charges relating to Maverick Boat Group.

Adjusted EBITDA for the quarter decreased 69.2% to $24.4 million and adjusted EBITDA margin decreased to 12% from 21.1% in the prior year. Adjusted fully distributed net income per share decreased 75.7% to $0.63 per share. This is calculated using the normalized C corp tax rate of 24.5% and a fully distributed weighted average share count of approximately 21 million shares. For a reconciliation of adjusted EBITDA and adjusted fully distributed net income per share to GAAP metrics, please see the tables in our earnings release. Turning our attention to cash flow, we generated $12 million of free cash flow in Q3. It is notable that we were able to generate this much cash in a quarter where our revenue is down over 40%, demonstrating the resilience of our business model.

Capital expenditures were $12 million in the quarter of which $6.3 million was associated with our new Cobalt facility in Roan County, Tennessee. For the year, we expect CapEx to be between $65 million and $75 million dollars with $45 million for Roan County. As Jack mentioned, with our progress at Roan County largely, we expect tooling and maintenance CapEx of $30 million to $35 million per year going forward. Our strong net cash position and ample liquidity positions MBI to deliver on our capital allocation priorities with the dry powder necessary to execute strategic acquisitions while returning cash to our shareholders. In Q4, we will be renewing our shelf registration statement with the SEC to replace our current shelf which is set to expire in August.

We consider this to be good housekeeping and have no existing plans to utilize this renewed authorization. As Jack and Michael mentioned earlier, the retail environment has softened as broader economic uncertainty and the prolonged interest rate environment continue to pressure the marine industry. Getting dealer inventories healthy by the end of the fiscal year is our top priority. As we enter the peak selling season, we are increasing promotional support and further reducing our production to proactively help our dealer partners reduce their inventories. Again, getting dealer inventories right by the end of the fiscal year is the key to enabling next year’s wholesale demand to track with retail demand, which in turn is the key to making next fiscal year a growth year.

With this in mind, we are revising our fiscal 2024 outlook. We anticipate a year-over-year decline in annual net sales ranging from a 40 percentage point to 41 percentage point decline. We expect Q4 revenues to be between $150 and $165 million. Consolidated adjusted EBITDA margin for the full fiscal year is expected to be between 10.1% and 10.5%, with Q4 running essentially at breakeven. While we expect Q4 to be a challenging quarter, the silver lining is we have the financial strength to meet the moment and do what is necessary to reduce dealer inventories during the peak selling season and position us to return to growth next year. Cutting through the noise, despite our near-term challenges, I remain optimistic about the growth potential of Malibu.

Our strong balance sheet provides us with stability and flexibility as we navigate through the current environment. Our unwavering commitment to innovation, premium product portfolio, expanded production footprint, and robust dealer and distribution network position us to achieve great success in capturing market share and driving profitable growth in the years ahead. We have a business model that generates strong cash flow in almost all industry environments. And today’s announcement that we will be consistently returning $10 million of cash to shareholders beginning this quarter is tangible evidence of the confidence we have in the power of our cash generation engine, despite the uncertainties in the macro environment. While we will all miss Jack, I’m excited to collaborate with Michael, Richie, and the entire Malibu team, leveraging their industry-leading expertise as we collectively drive the company forward and deliver strong returns for our shareholders.

With that, I’d like to open up the call for questions.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from Eric Wold with B. Riley Securities. Please go ahead.

Eric Wold: Thanks, and good morning, everyone. Just a couple of questions on the same topic, I guess it sounds like from the guidance, your commentary, and kind of the reduced guidance for Q4 in the year, is the goal is to kind of almost do anything necessary on the discounting to end the year in a better inventory position? I guess how far would you be willing to go to kind of stretch that discounting promotional activity to make sure that happens, and then what is the risk that we get into an environment where consumers kind of increasingly expect an elevated level of inventory in ’25, even if kind of the demand environment improves? How difficult will it be to kind of decouple those expectations and get back to whatever you would consider to be more normalized discounting?

Michael Hooks: Yeah, hi, it’s Michael. Thanks for the question. So just you touched on a lot of things. Number one, our assumptions for this quarter is that we’re being aggressive on promotions and also conservative on production, so we are moving both of those levers in an effort to bring our inventories to an appropriate level. So I think you correctly assume that’s the prime directive. And our guidance assumes we’re both aggressive on promotions and conservative on production, so we’ll see if that’s all necessary. With respect to consumer expectations for next year, I think the — look, the consumer is aware today, as Jack said, that there’s excess inventory on the channel from us and from others, and they are expecting deals.

I think, as you know, in the industry, a lot of our promotional activities are done by providing incentives to the dealer and not reducing the headline price of our units. I think that will mitigate a fair amount any anticipation of further discounting. I think the consumer is smart enough to realize and our dealers realize that inventories have got out of whack to an unusual position, so there’s an opportunity. But we’re not reducing the headline and nor are our dealers, the headline price on these models. I think that covers everything you asked, but if not, fire away.

Eric Wold: No, that’s very helpful. Thank you. Appreciate it.

Operator: Our next question comes from Joe Altobello with Raymond James. Please go ahead.

Martin Mitela: Good morning. This is actually Martin on for Joe. I was looking at the EBITDA margin for the quarter. It was a bit better than expected. I believe you got it to below 10.9%. I was wondering what drove that EBITDA margin, the outperformance of it?

Bruce Beckman: Yeah, what I would say was a strong performance in our operations. We talk about our cost structure being 80% to 90% variable with above the gross margin line, and we were — you know, we operated at the upper end of that range in Q3. That’s the large amount there.

Martin Mitela: Got it. Thank you. And just a quick question about sort of the dealer network. You know, outside of Tommy’s, how would you characterize it? Is it healthy, and are you confident that Tommy’s is sort of a one-off situation?

Bruce Beckman: I would say yes. I mean, we monitor the health of our dealer networks very closely with our floor plan finance providers. So I’m talking about them and with them all the time on monitoring the health of the network, and as of now, outside of a couple very isolated, small situations, we feel very good about the overall health of the dealer network.

Martin Mitela: Great. Thank you.

Operator: And the next question comes from Craig Kennison with Baird. Please go ahead.

Craig Kennison: Hey, good morning. Thanks for taking my questions, and, Jack, best wishes to you. I certainly enjoyed working with you.

Jack Springer: Thank you, Craig.

Craig Kennison: Curious about fiscal 2025, is there any dynamic whereby dealers are simply saying, I don’t want anything in 2024 because we’ve worked so hard to get rid of 2023, I’ll just wait until the 2025 product arrives later this year?

Michael Hooks: Craig, we are saying, because of the — what is happening in retail with the promotions, there are some boats that are starting to move and that channel inventory is going down. And quite frankly, one of the things that we’ve done in the past, what we’re doing this year, is we’ll be bringing out ’25 models into that June timeframe, which will help propel dealers taking that inventory. So there may be some of that, but we also have some dealers in certain areas, large dealers, that are actually needing inventory right now. Most of them were on the phone yesterday with someone. So I think it’s going to be a challenging environment, but with the ’25 coming, we have appropriately adjusted our production levels to where they need to be, is what we believe.

Craig Kennison: Okay, thanks. And maybe a follow-up on the capital allocation decision, I guess your philosophy behind it. It certainly makes sense in some ways to say, look, we’re going to be consistent in the market, buy $10 million worth of stock every quarter, but your stock’s not the same price every quarter and it’s been crushed recently. Why not be more proactive when it presumably is cheap versus trying to buy at an average price over time?

Michael Hooks: Yeah, sure, fair question. I think what we’ve said consistently, Craig, is we have capital allocation priorities. We just reiterated those. Occasionally over the years, we have tried to be opportunistic in repurchasing stock and we’ve bought a fair amount in, but we’ve also consistently heard from investors and others is consistency is key with respect to capital allocation. We will be in the market virtually immediately as soon as we are able to start buying stock. We are commenting on the pace per quarter but not the pace within the quarter, and we’ll see how that unfolds.

Jack Springer: Craig, the one thing I’ve added to what Michael just said, in his commentary, he said that we would return at least $10 million, so that’s kind of the bottom level. I would expect from an opportunistic aspect that it could be certainly more than $10 million.

Craig Kennison: Do more. Thanks, and I guess the last question on capital allocation, I mean you guys have had some outstanding deals, Cobalt in pursuit among them, but also with this Maverick announcement, why does it make sense to allocate capital to more acquisitions and what’s the bar for you to consider that as a better priority than your own stock given where your own stock is trading?

Bruce Beckman: You know, if you look at the acquisitions we’ve done historically, and these are rough numbers, but with Cobalt we doubled EBITDA in approximately two years, and with Pursuit we doubled EBITDA in approximately three years, and we think those have been really compelling uses of capital. So I’d say it’s a high bar on acquisitions, which I think is what you said. We think our stock, the ability to buy Malibu at these levels is compelling, and to your point, it would have to be a very attractive acquisition, we’re not going to stretch to do a deal. But in this environment, attractive acquisitions may become available, and we are ready to pursue those if they do.

Craig Kennison: Okay, thanks a lot. Thank you.

Operator: Our next question comes from Fred Wightman of Wolfe Research, please go ahead.

Fred Wightman : Hey, guys. Good morning. There’s a comment in the release and I think you made it in the prepared remarks as well, just about retail getting worse throughout the rest of the fiscal year. And I’m wondering if that’s sort of a company specific comment, if that’s sort of a broader marine market comment? And maybe if you could give us a way of the way and this far is what you are seeing in retail more recently?

Jack Springer: Yeah, let me go about being worse. They’re looking bad and comparative to what we’re experiencing, we are going to, say, heavy selling season. So we’re in a range of — I’ll kind of carry out it by just saying it this way, Q4 is certainly going to be better that what we’ve seen in Q3 and Q2. But if we compare that against previous years, just worse than [prior months], and it’s not specific just to our company. Like we are seeing it across the board as we look at the retailers that are out there as well as the OEMs, it’s just a very challenging environment and there are lots of elements that operate there.

Fred Wightman : Okay, just to clarify, when you are saying 4Q is going to be better than 3Q, you are just talking about the sequential retail unit volumes or are you talking about the year-over-year rate of change or year-over-year decline?

Jack Springer: The sequential volumes, competitively speaking, prior to this year, every quarter that it’s out.

Fred Wightman : Okay. And then Jack, I think last quarter, just to sort of contextualize the dealer inventory levels, I think you said things were five weeks too high. You guys have talked about some progress but I’m wondering if you could sort of give us where you think inventories versus target or versus plan?

Jack Springer: So, Fred, at this point in time we are still thinking they are high, it’s more in that four week range. You know, too high right now, relative to where we like them to be and we are still targeting to bring them down to that 22-weeks on hand by the end of the fiscal year.

Fred Wightman : Okay, perfect. Thank you.

Operator: I’m not showing any further questions at this time, I would now like to turn the call back over to Jack Springer for any closing remarks.

Jack Springer: Thank you very much. In summary, Malibu Boats navigated a continued softened retail environment in Q3 with tow boat and value boats markets experiencing notable weakness while Cobalt and Pursuit performed better. Reducing the week on hand of inventory has been our primary focus for all our brands and will continue to be for the remainder of fiscal 2024. ASP’s for all of our brands has been surprisingly robust, conforming that premium buyers are still active in purchasing. We will focus on our dealer network and have taken the steps necessary for reduced channel inventory levels. We will continue to leverage promotional activities to stimulate consumer demand while closely monitoring dealer health. While there continue to be ambiguity surrounding the impact of macro factors on the timing of customer decisions, we have established a strong foundation and demonstrated resilience in prior cycles and are poised to support market growth as things correct.

And finally, we remain confident in our ability to execute our long-term strategy, particularly in a normalized cycle where we see ample opportunity to showcase the efficiencies of our cash generative business model and deliver a strong shareholder return. For me, it has been a fantastic 15 years and 10 years as a publicly held company. I treasure the relationship that I have made with many of you and I greatly appreciate your spot at Malibu over the years. I wish you the very best. Have a great day and God bless.

Operator: This conference has now concluded. Thank you for participating. You may now disconnect.