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IXFE

MBUU by the numbers

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Sunscape fan

Pretty sure the 247 is getting a makeover. And I think axis is releasing a 23' traditional bow boat

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oceanbu

That begs the question if MBUU is not as profitable as we thought and you have shut down businesses healthier than Malibu, what is the end game or exit strategy for the venture capitalists that took over Malibu. Based on what you said I would have trouble believing that they would be in this for the long haul.

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teamerickson

Thanks for the write up.

Who knows what invoice really is. This site has some guesses. http://www.seedealercost.com/boats

I was looking at buying one of the 23's at said dealer about 3 weeks ago. I figured their cost was about $74 according to the see dealer cost website.

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tnsatbhs

Interesting to hear that out in terms that I can make sense of. I heard about the three new models this year a little while ago. Besides the VLX I have no idea what they are taking about. Will be interesting to see what that's all about.

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RTS

I wonder how they were paying no taxes through Q2'14.

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TenTwentyOne

Total towboat industry is 6000 units??? Malibu puts out like 3200 a year, MC built a little over 2200 2014 boats, and everybody else only built 600 boats combined??? Nautique built almost 1100 g series boats alone. I think there is more than 6000 built a year....... More like 12,000 I would guess.

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Afun

great post IXFE! Although your verbosity always surprises me (how you type so much bro?), you write very clearly. A skill that is lost on most.

Call him one day and he will blow your mind!!

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302Zapper

Talking with a dealer, he has to pay for each boat he orders, full dealer cost paid by the time it lands on his lot. Compare that to a car dealers that pays a small financing fee as the car sits on the lot and pays out the manufacturer when it sells.

How important do you think it is for a dealer to take a deposit on a sale that hasn't been built yet at the boat show?

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Cipro

I have found a little cash on the spot..gets you big discounts with the dealer...margins are tiny in this world..

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IXFE

That begs the question if MBUU is not as profitable as we thought and you have shut down businesses healthier than Malibu, what is the end game or exit strategy for the venture capitalists that took over Malibu. Based on what you said I would have trouble believing that they would be in this for the long haul.

Well... don't read too much into my statement about closing businesses. The company I work for has many businesses; we also enjoy very rich margins and high market share. So our motivation for closing a business has more to do with putting the resources to work on higher margin ventures. I made the statement only to demonstrate that while profitable, Malibu is not raking in crazy profits at our expense.

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IXFE

great post IXFE! Although your verbosity always surprises me (how you type so much bro?), you write very clearly. A skill that is lost on most.

Thanks, Shawn. That means a lot coming from you. I apologize for being so long winded. That's what happens when I put down Tapatalk and start posting from my new laptop!

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SkiBumPMC

I did not know Malibu went public and, frankly, that is a shame and may very well lead to the demise of Malibu, as we know it.

Big companies & Big Money have never understood the inboard specialty market for Ski Boats & now Wakeboard Boats. There have been several failed examples of big companies coming into the market and then falling flat on their face.

  • Century Boats - Acquired by Yamaha
    • Legendary inboards like the Resorter & Coronado are now extinct
  • Epic Ski Boats - Developed by Toyota
    • Epic Failure
  • Ski Ray - Sea Ray's attempt at the market

What these big money people don't get it that these are limited production boats, that serve a niche part of the market. These boats have always been pricey (for the times), but you got was a boat that was extremely well made, lasted for years (decades), retained its resale value and served the specialty watersports market. To expand the market to the masses, just isn't realistic. The average person isn't going to be an intermediate to advances waterskier, barefooter or wakeboarder...They may dabble in it and enjoy it, but they may never advance to the point where they "really" need or benefit from these types of boats.

The push more profits and selling more boats will likely lead to cheaper boats, made by cheaper laborers and not the craftsmen who've built these fine boats for decades.

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oldjeep

So you think that going public was worse than being owned by a private equity company?

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IXFE

I don't know guys. I've listened to the CEO and CFO on the earnings calls. They actually did a great job in the Q2'14 call (their first as a public company) of educating the analysts that this is a niche market geared around families and watersports. And while they do expect the company to grow they also admit that growth comes in relatively small numbers (e.g. two dozen extra boats is material growth!). I think these guys get it.

There are other small, publicly traded recreation companies bouncing around with unimpressive financials... Callaway Golf comes to mind.

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IXFE
I wonder how they were paying no taxes through Q2'14.

They gave some sort of explanation for that on the earnings call... it had to do with the corporate structure they chose... something about it being an LLC with a parent company. I didn't entirely follow but the rational was lower taxes. I'll have to go and play it back slower. Maybe Shawn can explain as it's been decades since I studied business law.

It's interesting to note that while the financials I posted are what we call GAAP (generally accepted accounting principles), Malibu also releases and speaks to a "pro forma" P&L to better demonstrate what the company would look like if they were a traditional C-corp. The principle difference is they show a charge for 35% tax (mind you, it's not real). Needless to say, this view only makes the profitability look lower.

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Indyxc

I'm not a finance guy but if you exclude there recent and first quarter their net profit margin is more like 12% which is killer for manufacturers . They do take a hit on their R&d years which is interesting they don't spread out the spending more.

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wakebrdr94

I didn't see all the figures, but the name of the game is show the least amount of profit, right? It's a public company, but the same investment group is still in control.

I'm in the retail biz and a 26% margin in our arena is awesome!

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IXFE
I didn't see all the figures, but the name of the game is show the least amount of profit, right? It's a public company, but the same investment group is still in control.

I'm in the retail biz and a 26% margin in our arena is awesome!

Not sure I follow you there? Showing low profits is definitely the name of the game for a small biz (tax avoidance), but it's the opposite for a public company with stock holders. The stock price is what enriches the new owners, and stock price rises with increased earnings. As previously discussed, Malibu already has a corp structure that minimizes tax liability. There is zero incentive for them to make it appear like they are less profitable than they actually are.

Last point. And this is something at my company we take super serious. Public company financials are audited by public accounting firms and submitted to the SEC. Furthermore, both the CEO and CFO have to personally sign the financials every quarter. If fraud is ever found, those two get to go to prison. This is something called Sarbains Oxley, a law that was Enron's little gift to the world.

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wakebrdr94

I'm not insinuating fraud, nor is Malibu a big company. (A least by my standards). Everything is a tax game. You just have to know every loop hole and rule and use it to your advantage.

I'm not going to go into detail as I'm not a CPA, but the way the IRS has rules set up with loop holes just astonishes me.

Besides, black canyon (or who ever it is) still holds the controlling stake, I'm pretty sure they are making their money somewhere. If the Jack is making his, they are certainly making theirs.

Edited by wakebrdr94

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MalibuTime

Not sure I follow you there? Showing low profits is definitely the name of the game for a small biz (tax avoidance), but it's the opposite for a public company with stock holders. The stock price is what enriches the new owners, and stock price rises with increased earnings. As previously discussed, Malibu already has a corp structure that minimizes tax liability. There is zero incentive for them to make it appear like they are less profitable than they actually are.

Last point. And this is something at my company we take super serious. Public company financials are audited by public accounting firms and submitted to the SEC. Furthermore, both the CEO and CFO have to personally sign the financials every quarter. If fraud is ever found, those two get to go to prison. This is something called Sarbains Oxley, a law that was Enron's little gift to the world.

This is why they are taking 2-1/2 months to release financials.

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IXFE
I'm not insinuating fraud, nor is Malibu a big company. (A least by my standards). Everything is a tax game. You just have to know every loop hole and rule and use it to your advantage. I'm not going to go into detail as I'm not a CPA, but the way the IRS has rules set up with loop holes just astonishes me.Besides, black canyon (or who ever it is) still holds the controlling stake, I'm pretty sure they are making their money somewhere. If the Jack is making his, they are certainly making theirs.

Sorry, I guess I misunderstood. What were you insinuating?

And I didn't mean to say that Malibu was big. My employer is, but that's really irrelevant. Big or small, all public companies are subject to the same regulations.

I agree with you, Malibu wants to pay less taxes. All companies want that. But publicly traded companies typically don't employ tactics to understate earnings. They will find other tax loop holes, sure... but not undercalling earnings. It's like cutting off your nose to spite your face. Earnings are EVERYTHING to these guys. If anything they'd be inclined to overstate, not understate (not saying they do that).

And sure... the owners are getting paid. That goes without saying. A portion of the very earnings we speak of go back to the owners (typically not all since it's typically reinvested in the business... have to look at the cash flow statement to be sure). The real payday is in the appreciation of the stock. That's what they're all betting on.

Bottom line... owners seek to get paid in all companies, public and private. The only difference is who the owners are.

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Pnwrider

Great write up! I must have missed the last line where you mentioned if this was a buy or sell opportunity. Don't make me call Cramer!

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