Malibu Boats Inc (MBUU) 2020 Q2 法說會逐字稿

Good morning and welcome to Malibu Boats' conference call to discuss second quarter fiscal year 2020 results.

(Operator Instructions) Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Malibu Boats.

And as a reminder, this 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.

Thank you, and good morning, everyone.

On the call, Jack will provide commentary on the business, and I will discuss our second quarter financials and outlook for fiscal 2020.

I will then hand the call back over to Jack for some remarks, and we will open the call for questions.

A press release covering the company's second quarter fiscal year 2020 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 GAAP financial measures are included in our earnings release.

I will now turn the call over to Jack Springer.

Thank you, Wayne, and thank you all for joining the call.

The second quarter was another outstanding quarter for Malibu, as the strength of our brands, industry-leading product innovation, continued success of our acquisitions and our team's tremendous operational execution enabled us to drive robust top line growth and successfully overcome headwinds presented by the UAW strike that impacted our engine supply.

For the quarter, net sales increased 9% to $180.1 million.

Adjusted EBITDA increased 4% to $30.7 million, and adjusted fully distributed earnings increased 8% to $0.93 per share.

I want to congratulate the entire MBUU team for a job very well done.

The momentum we have experienced in the last several years underscores the strength of our strategy that we are executing every day.

Our commitment to a rapid, thoughtful pace of new product introductions, both new boats and features, robust investment in R&D efforts and best-in-class vertical integration initiatives have supported further market share gains, while at the same time mitigating the impact of macro events such as the tariff situation and UAW strike.

Through this, we have driven margin expansion.

Another very important part of our momentum and performance is our acquisition strategy.

We have been prudent and only acquired premium brands at reasonable valuations.

And through our operational expertise, we have made them better, more profitable and quarterly contributors of our growth and profitability.

Acquiring great brands, combined with our flawless execution to make them more efficient, is a demonstrated core competency for Malibu.

In our last earnings call, we indicated the second quarter would experience headwinds, and there would be an impact as we fully recovered from the UAW strike at GM, which impacted engine supply.

I am very pleased to tell you that with GM coming back online quicker than we anticipated, and more importantly, the fantastic performance of the Malibu operations team, we recovered faster than we had projected.

As a result, we caught up shipments in the quarter and we mitigated the cost impact.

This is a testament to our planning, agility and ability to quickly recalibrate, which maximize our performance in the quarter.

You will recall that in the first quarter, we aggressively addressed channel inventories, which were slightly inflated at the end of fiscal year 2019.

Not only were we quick to move in addressing it, we also beat our competitors to the punch.

The program we initiated was more successful than we had planned.

This placed Malibu and our dealers in a great position.

Our dealers have been able to concentrate this fall on the boat show season on selling model year 2020 products.

Conversely, our competition's dealers are focused on old product that reduce margins, while they also play for -- pay floor plan interest on those older models.

As a result, our dealers are more profitable and they've been able to concentrate their boat show activities around new and exciting products.

A question we have been asked is whether our fall programs just pulled forward demand.

The answer is a very strong no.

Not only did we exceed expectations in the August-September period, but our year-end sales event was better than last year, and our boat show performance is significantly up over 2019 boat shows.

As you know, boat show performance is a leading indicator of demand trends heading into the retail selling season.

Preliminary results from the boat shows in January have been good, as the unparalleled performance and technology of our model year 2020 products and our best-in-class dealers are driving solid results.

The winter boat show performance follows a very strong fall season for Pursuit in the Tampa and Fort Lauderdale shows.

In round percentages, Malibu is up double digits and Pursuit is also up double digits.

Even more impressive is the boat show revenue is up significantly more than 2019 due to the larger, higher ASP boats being sold.

Cobalt, while not as strong as Malibu and Pursuit, is performing well.

Now we look at key boat shows as bellwether shows, and they're usually indicative of the consumer appetite that will extend through the rest of the year.

Those bellwether shows thus far have been in Atlanta, Minnesota, New York and Seattle, and they have all been strong performers and bode well for the rest of the show in fiscal year.

Seattle, in fact, hit a 10-year high per units sold for Malibu.

In addition, despite bad weather, Toronto was a strong show and exceeded our expectations, selling more units than in 2019.

While we are seeing and hearing that boat show attendance may be flat to down based on playoff games and the weather, the number of active interested buyers is up over previous years, leading to a strong season thus far.

Given this activity, we continue to believe that our markets remain attractive.

The new product lineup for Malibu and Axis has bolstered our leadership position in the key markets those brands serve.

Our recently announced 23 MXZ has been a tremendous success with the customers, as the design of the wider pickle-fork bow, maximized space and innovation make it the perfect mix of luxury and water sports performance.

Further, our all-new flagship model, the M240, has commanded the market since its launch in October.

The M240 is a prime example of our product strategy coming to life, bringing a new level of luxury, convenience, technology and performance through our iconic Malibu brand.

Powering the exceptional performance of the M240 is our Malibu Monsoon LT4 V8 supercharged engine.

This engine is not only one of the most powerful engines available, but it is also one of the most environmentally engine -- friendly engines on the market today.

With 6.2 liters of displacement, 607-horsepower and 605 pounds -- 605 foot-pounds of torque, the premium high-performance V8 engine is the only supercharged inboard engine in the market to meet CARB's 4 star emissions rating.

The feedback from dealers has been overwhelmingly positive on the unparalleled quality, design and performance of our Malibu Monsoon engines.

While innovation is critical to our long-term growth, product quality and safety is equally important to support our long-term relationships with our dealers and our customers.

As such, we are pleased to have achieved ISO Global certifications for quality, environmental and safety management processes across production and product development systems for our engines.

At Pursuit and Cobalt, we have made great strides in leveraging the product's phase-gate model developed by Malibu.

We know that our ability to consistently deliver innovative products with cutting-edge technology at a rate that outpasses our -- outpaces our competitors is one of the key competitive differentiators for our business.

This is highlighted by the recent announcement of our S 378 Sport at Pursuit, the latest addition to our Sport line of luxury center console boats, which will officially debut at the Miami Boat Show next week.

The S 378 features advanced innovation throughout, including a patent-pending automated entertainment center that moves into place at the touch of a button.

This impressive new boat joins a pair of already introduced, highly regarded, model year 2020 boats, the DC 326 and the DC 266.

The DC 326 is the latest model to be introduced into Pursuit's award-winning dual console family.

This boat builds on 1 of 4 popular boats -- on 1 popular boat, the DC 325, by adding several innovative features, including a fully integrated fiberglass hardtop with tempered glass windshield, thoughtfully designed storage and a starboard hull side door.

The DC 266, introduced in the early fall, also has generated high demand and has been very well received, as the boat provides immense versatility for leisure, cruising or casual fishing, making it ideal for any experience on the water.

The Cobalt A29 is capturing substantial attention at the early boat shows as well.

The patent-pending Splash & Stow feature is a must-have feature for families, as it is the first inflatable management system of its kind enabling owners to readily deploy, retrieve and store their water devices.

This feature completely changes the traditional method of carrying, handling and storing water recreation devices and is yet another example of Malibu's innovation improving the experience our customers have on the water.

In addition to the A29, we have new products being introduced by Cobalt to the market in Q4.

This will quickly be followed by more new models in Q1 of fiscal year '21 or the July through September time.

More broadly speaking, our brands are continuing to gain share.

The Malibu brand captures 62% of the growth in the performance sports boat segment in calendar year 2019, increasing our market share by 120 basis points for the trailing 12-month period as of December 9, 2019.

As we've stated many times, our expectation in a given year is 10 to 30 basis points of market share change.

So this huge increase is a resounding confirmation of our best-in-class dealers and our product.

Pursuit is performing very well, as our production capacity expansion remains on track and will position us to bring production online at the new facility with the beginning of model year 2021.

This initiative will enable us to nearly double our production volume over time, allowing us to expand our dealer network and unlock tremendous value out of this powerful brand.

Cobalt remains a market share leader in the comprehensive 20- to 40-foot stern drive segment and increased its market share by 250 basis points for the trailing 12-month period as of December 2019, an unheard-of gain in 1 year.

It is also outperforming the industry in the crucial 24- to 29-foot segment, where its market share is an historic 35%.

Our market share growth is supported by our ongoing operational enhancements and production capacity expansion initiatives, all of which continue to progress on schedule.

In addition, our expanded manufacturing capacity of cruiser and small boats is up and running and will enable us to accelerate new product development at Cobalt.

We also remain optimistic about the strength of the broader economy, as recent announcements, including the USMCA agreement and the China trade deal, will prove beneficial for the marine industry.

These pending deals were 2 anchors creating challenges for the marine industry and broader retail environment and should positively impact customer sentiment going forward.

We believe this is already being seen, as the January consumer confidence index rose 3.4 points to 131.6.

In December, the U.S. employment rate held steady at 3.5%, the lowest that it's been in 50 years, and new housing starts jumped nearly 17% in December to the highest level in 13 years.

Additionally, for the first time in 26 years, every U.S. metropolitan area experienced per capita income gains in 2019.

These key economic indicators are important to us as we evaluate the strength of our markets and, ultimately, the consumers and give us confidence that we remain poised to benefit from healthy market conditions.

The economic news, healthy channel inventory levels, new product all play into dealer's optimism.

Our backlog remains very healthy with surplus orders extending into Q4 for Malibu and Axis and trimester 3 for Pursuit and Cobalt.

In summary of our quarter, the second quarter marks the 21st consecutive quarter we have delivered year-over-year revenue and EBITDA growth.

Our second quarter continued that stellar trend with another strong quarter for our business.

New product development and operational excellence initiatives enabled us to outperform and set us apart from the competition.

Our channel inventories are healthy and right on top of historical comfort levels.

Our unparalleled vertical integration strategy continues to drive innovation in increasing competitive differentiation across all of our brands.

The agility of our teams, our operational expertise and focus on superior execution will allow us to continue to further our leading position in each of the markets that we serve.

We remain bullish on the strength of the U.S. consumer today as well as the marine industry dynamics.

And importantly, Malibu remains very strongly positioned going forward to continue driving growth and increasing profitability and delivering long-term value to our shareholders.

I will now turn the call back over to Wayne to take you through the quarterly results in more detail.

Thanks, Jack.

In the second quarter, net sales increased 8.6% to $180.1 million, and unit volume increased 2.5% to 1,804 boats.

The Malibu and Axis brands represented approximately 61% of unit sales or 1,101 units.

Cobalt represented 31.1% or 561 units, and Pursuit made up the remaining 142 units.

Consolidated net sales per unit increased 6% to over $99,800, driven by year-over-year price increases and increased -- an increased mix of larger boats across our Malibu and Axis brands.

Gross profit increased 4.1% to $39.9 million, and gross margin was 22.1%.

This compares to a gross margin of 23.1% in the prior year period.

The decrease in gross margin is primarily attributable to the expenses related to the UAW strike and, when adjusted for $1.7 million in costs associated with the UAW strike, would have been approximately flat.

Selling and marketing expense increased 1.4% or $0.1 million in the second quarter.

As a percentage of sales, selling and marketing expense decreased 20 basis points.

General and administrative expenses decreased 10.3% or $1.2 million.

The decrease was predominantly driven by acquisition-related expenses that were attributable to the addition of Pursuit in the prior year period.

As a percentage of sales, G&A expenses, excluding amortization, decreased 120 basis points to 5.6%.

Net income for the quarter increased 17.3% to $17.6 million.

Adjusted EBITDA for the quarter increased 4.5% to $30.7 million, and adjusted EBITDA margin decreased 70 basis points to 17%.

Non-GAAP adjusted fully distributed net income per share increased 8.1% to $0.93 per share.

This is calculated using a normalized C corp tax rate of 23.5% and a fully distributed weighted average share count of approximately 21.6 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.

Our operational team did a fantastic job in recovering from the impacts of the UAW strike, and we were able to catch up volume more quickly than we had anticipated, leading us to outperform our second quarter financial expectations.

In addition, the underlying metrics within our businesses are quite strong.

Given our stronger-than-expected results in the second quarter, we are revising our outlook for fiscal 2020 as follows: For Malibu and Cobalt, unit volumes are expected to approach flat over last year, up from our previous expectation of a low single-digit decline.

Year-over-year performance is likely to be slightly more challenged in Q3 when compared to Q4.

For Pursuit, unit volume growth is expected to be up slightly over 40% for the fiscal year, an increase from our previous outlook of approaching 40% growth.

Consolidated net sales are expected to grow at a high single-digit percentage for the full year, up from our previous expectation of mid- to high single-digit growth.

Consolidated gross margin is expected to be up slightly year-over-year, excluding the impact of the UAW strike, unchanged from our previous outlook.

Consolidated adjusted EBITDA margin is expected to be approaching flat year-over-year, excluding the impact of UAW strike, improved from our previous outlook of down slightly.

Generally speaking, year-over-year margin increases should expand over the course of the second half of the year.

Consolidated capital expenditures are expected to be between $40 million and $45 million, driven by our expansion of our facilities at Pursuit and Cobalt, unchanged from our previous expectation.

Impact of the UAW strike will be under $3 million.

In closing, we delivered another quarter of outstanding financial results despite headwinds from the UAW strike.

Each of the brands are very well positioned heading into peak retail selling season.

In the near term, we remain confident in our ability to continue growing our business' profitability in the second half of fiscal year 2020.

Our production capacity expansion initiatives at Cobalt and Pursuit remain on track and will enable us to continue to expand our robust product portfolio and drive enhanced efficiency and margins into 2021.

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

(Operator Instructions) And your first question comes from Brett Andress with KeyBanc Capital Markets.

So just looking at your retail data for Malibu and Axis in the back half of the year, so June to December.

I'm showing 25% type growth, and I know sometimes that can differ from your warranty registration.

So I guess, is that the correct way to think about how your retail trended really in the back half of this year?

Back half of -- oh, you're speaking to the calendar 2019?

Sorry.

Yes.

The calendar, yes.

All right.

So repeat the question, please?

I was looking at the fiscal calendar.

Sorry about that.

Yes.

No, just how -- because if you look from June to December, I'm showing retail of 25% for Malibu and Axis.

So I guess, sometimes the warranty registrations can be different from that, your internal warranty registration.

So is that kind of a correct retail trend that you guys had in the back half of the calendar?

Yes.

I think that's pretty correct.

It matches for the most part what we saw in the warranty.

And as I said earlier on the call, the August-September time frame in which we were trying to move inventory outperformed, and the year-end sales event also outperformed last year.

So it's been a very, very strong second -- or what I'll call the second half of the calendar year.

Got it.

And then just kind of building off that.

So your comments earlier about promotions not pulling forward demand, I mean, is encouraging.

And so just outside of the boat shows, is there anything else in the consumer behavior that you're seeing that is kind of leading you to that conclusion?

Yes.

I think, first of all, I'll just go back to we outperformed in that August-September period.

We exceeded last year-end sales events, and boat shows are double digits up.

So that's that, and that's part of the reason I think you see just such a -- what we would call an astronomical growth in market share.

I think the other side of the equation is we are selling, and this is -- comes back to the consumer, larger boats with a lot more features and options driving that ASP.

Got it.

That's helpful.

And then just one last one.

How are you guys thinking about Australia this fiscal year and next fiscal year really, given the fires and the disruption there?

What are your dealers seeing?

Just any thoughts on that market.

Year-over-year, Australia is really pretty flat.

It will run about the same.

I think we've seen a little bit of a blip in what's going on in Australia to the tune of, call it, 5% or so right now.

But we believe that as the fires resolve themselves and we come into that boat show season, because they're at the end of their summer season now, so as we come into the boat show season, we expect it to pick back up.

Your next question comes from Tim Conder with Wells Fargo Securities.

Congratulations, first of all.

And Ritchie, congrats on continuing to ramp the Pursuit well.

A couple of items.

Jack, Wayne, whoever wants to take this, what are your expectations as you look here to calendar 2020 on the retail outlook for Malibu collective in, let's just say, North America and Europe?

And then also, maybe going back, Jack, you commented that we continue to see the upward migration of price points and content.

I know this question has been asked before but just want to revisit it.

How are you guys thinking about in planning, managing, that at some point there, that will not continue and just to make sure you don't start losing people coming in at the lower end of the funnel, so to speak?

If -- any color on that.

Yes.

On the retail side, we expect that to continue to be pretty consistent.

We've had some pretty strong growth.

I would expect that to moderate a little bit.

I think that Malibu and Cobalt will remain somewhere in those levels that they're currently in.

Pursuit is going to be flattish, I think, for now from a market share standpoint simply because of our capacity constraints.

And then as we bring that product, new product online and the new plan online, I think we have significant opportunity for market share gains there going forward, not necessarily in the back half of this fiscal year.

Any additional commentary there?

Yes.

No, I mean, I think, look, the performance sport boat segment grew domestically 4% last year.

That was negatively impacted by weather.

So we're looking at that as kind of that mid-single-digit-ish rate grower.

You have the potential for some headwinds coming out of Canada in terms of the luxury tax.

And you obviously have the tariff situation in Europe, which I think we've been addressing by building some boats out of Australia.

So I think that's where our head's at.

We've seen really positive momentum in the back half of calendar '19, and we feel good about what we're seeing today out of boat shows.

So we think that our guidance and what we've kind of embedded there and what our plan for the businesses is appropriately conservative for uncertainty in the world but definitely achievable.

Yes.

And Tim, to your second question, we are constantly monitoring what the consumer and the dealer base is thinking in terms of pricing.

We've had this every single year come up as a question, and we've not seen that top line.

But I think it's also important to understand that we just don't continue to drive that pricing upward by bringing on new boats and adding features to both.

We have been very, very prudent in that.

We have that entry-level or call it entry-level position.

Several years ago, we introduced 2 models at a nationally advertised price that allowed people that had maybe come from 2006, '07, '08 time frame to get into a boat at a better price, and we've retained that.

This year with our A20, we have introduced that at pricing that is probably lower than what a lot of people expected.

So I believe that we can play both ends of that market very well, and we've done that.

Okay.

And from, I guess, another avenue along that line as far as continuing to expand the market.

How much of your business in calendar '19, or however you want to frame it here, is with the rentals, the boat club-type market?

And then what's your outlook for that as a percentage of your business here over the next -- in calendar 2020?

That's a really good question.

And we're right now involved with 3 in terms of externals, 3 different boat club-type program to rental programs.

In addition to that, there are a number of dealers that were involved with that.

And so we see that as a growing segment.

It's not probably a segment that we're going to get in and own.

I think the financial profile is quite a bit different.

But as we continue those partnerships with dealers and external sources, I think that'll grow over time.

And I think that ultimately, it's a feeder into that Malibu, Cobalt, Pursuit system.

Okay.

And lastly, gentlemen, you've been very disciplined in your approach to M&A, and thank you for that.

So just your outlook at this point from that perspective and relative to other capital allocation opportunities with the stock, with anything else that you may evaluate on the capital allocation side.

Yes.

I think you know this.

One of the great things that we have is the amount of cash that we generate.

We generate a lot of cash, which we think sustains us in good times and bad.

It's now approaching 18 months since we acquired Pursuit.

And we've been -- I think you use a great term, disciplined.

We've been very disciplined not only in what we've looked at and what we've acquired, we've made sure they were great brands that we could improve.

But we've also been very disciplined in making sure that internally, we have the team in place to make that next acquisition.

And so we had been building that team.

You have Cobalt.

It's approaching 3 years under our umbrella, pretty stable.

Pursuit has a great management team, and we're about to bring that plant online in a matter of a couple of months, if not weeks.

And so that's going to be a stabilizing factor.

And all through that time, we have brought in new people that can help us with that next acquisition.

But the key always comes back to this, and that is the acquisition and does it fit our model.

And as we've said before, we've looked at over 40 different potential acquisitions, and we've acquired 2. So when that next asset comes, if it's tomorrow or a year from now, we're ready and we're going to use our cash today to pay down the leverage and be ready to make that next acquisition.

Your next question comes from Gerrick Johnson with BMO Capital Markets.

Two fairly easy ones.

First of all, on the UAW engine impact, you said less than $3 million -- well, $1.7 million is less than $3 million.

It seems like there might be some more coming through.

So what else comes through in the second quarter and why?

And then on the capacity expansions and the capital projects you have ongoing.

Can you give us a D&A for 2020?

And then how much do you think these expansions will add to that next year?

And then maybe offset, what kind of start-up costs go away?

Gerrick, you said they were easy questions.

Yes.

So on the first one on UAW, we still have some impact flowing through as we work through some of that safety stock engines.

And I would estimate that that's going to be between $700,000 and $1 million probably in the third fiscal quarter, and that will be the end of it.

And then with respect to D&A, look, there's not going to be a ton of D&A incrementally that hits in this fiscal year.

I know Jack said weeks or month in terms of when the Pursuit factory's potentially coming online, but I think it's a little bit -- it's on the longer tail of that.

And so ultimately, there's just not going to be a lot of D&A impacting this year, below hundreds of thousands of dollars in terms of incremental depreciation this year.

And then if you look at into next year, it's probably going to be to the tune of $1 million and -- to $1.5 million incremental D&A flowing through.

Any period expenses going away from the start-up?

In terms of -- I think we'll kind of give some more guidance that any of those expenses are kind of embedded in the guide this year.

So when we give fiscal '21 guidance, we'll either communicate that or just embed it in the guidance exactly what those start-up costs going away are doing to our margins.

And we haven't specifically called any of those out, but I think that's a good question.

And there's a little bit of that friction embedded in it today.

We do have people on staff.

We're training them.

The building is fully skinned and roofed, and it's getting close.

And we have people on staff and we're training them.

So there is a little bit of a drag there right now.

Your next question comes from Joe Altobello with Raymond James.

So I guess, first question, since we're just talking about Pursuit, I guess I'll start there.

In the guide for this year, in terms of units up slightly over 40%, it looks like it implies flattish growth in the second half in terms of shipments.

Is that intentional ahead of the expansion completion?

Yes.

It is intentional, Joe.

It's simply -- this is what we've been talking about for a long time.

We can only build a certain number of boats until we get this new plant online.

And so we are controlled by that.

So it is going to be flat in the second half.

But what we're seeing, and I alluded to this in the script, you look at the New York boat show as an example, even though units were basically equivalent, the -- because of the size of the boats, what is being put on the boats, the revenue volume was up significantly.

So unit-wise, flattish, but we think that the revenue has an opportunity to grow certainly over the future.

Yes.

Absolutely.

And then secondly, on dealer inventories, I think, Jack, you said earlier that they're right on top of where they were at this time last year.

Were you talking about dealer turns?

Are turns flat year-over-year?

We don't measure turns.

I mean, we focus on weeks of inventories sitting on dealers' lots.

And so I mean, if somebody wants to do the math to invert that or -- but ultimately, it's right on track for where it needs to be.

Okay.

But the point being that all that excess coming out of the summer seems to be gone at this point?

Yes.

I mean, at Malibu and Axis, if you retail domestically up into 25 and your year-over-year growth number is very small, you're clearly deinventory-ing meaningfully.

Okay.

And is it fair to say that you guys are fairly well ahead of the competition in your categories in terms of burning off that excess inventory?

Very fair to say and especially related to aged inventory.

Your next question comes from Alex Maroccia with Berenberg.

So can you talk about the 12% drop we saw in ASPs?

Among the Pursuit brand, which boat styles are getting hit the hardest?

And was this really due to you guys just focusing on moving volume versus pushing price given some of the capacity constraints?

Yes.

Really, it's driven by the fact that you have lumpiness when it comes to the contract manufacturer boats that come out of Holland.

And so those are the 2 highest priced boats.

And so you have some amount of lumpiness.

At the beginning of the year, we guided that ASP down year-over-year because we knew that, that mix was going to mix down.

And we're going to see less contribution from those boats overall over the course of the year.

So it has less to do with kind of the mix that we see within our factory in Florida, which actually is the -- the mix has actually outperformed our expectations a little bit this year, but more to do with the mix between the boats that we've been able to get out of the S2 folks and the boats that we build out of the Fort Pierce facility.

So that's really the function of it, and it was as anticipated.

Okay.

Got it.

And then second one is balance sheet-related.

Now that we kind of have a full year run rate on the Pursuit brand being included in the portfolio, days payables were down by 4 days.

Can you just explain what you're seeing in the supplier market that's driving a bit more aggression from them and getting you to pay them?

I think from an AP perspective, look, we try and look at that.

That can fluctuate just based off of the day of the week.

We run weekly payables.

So we kind of pay our bills on time and have a philosophy that that's the right way to do business.

And so you're going to see a little bit of fluctuation, but we don't see that as a big use of cash.

And that's probably just normal variation that you're seeing.

Your next question comes from Michael Swartz with SunTrust Robinson Humphrey.

Just wanted to follow up on some things.

Jack and Wayne, you both said this.

But with regards to the Pursuit facility, is that -- you're not talking about this thing opening in weeks versus months.

I think we had all been on the assumption that this was June to July time frame, so just a little more clarity on that comment.

What we've said all along is that we will be up and running at the beginning of model year 2021, which is July.

You actually have to open before that.

You just don't turn on the spigot, walk in the door and start building boats at full scale.

So I look at it from a 12-week aspect, 12-week equal 3 months.

So I think we're saying the same thing.

Got you.

That's all I needed.

I appreciate that.

And then just the -- I guess with Canada and this potential luxury tax, and I know you've called it out as something you're watching, could you give us a little more color on maybe what you're hearing from your dealers and how they're thinking about bringing on inventory, maybe mix of inventory this year?

We really have not heard a lot, Mike.

It is -- I think it's out there, and they're using that as a reason to potentially push sales right now.

But a little bit surprising to us, Toronto was stronger and maybe this factors into it, but Toronto was stronger this year than it was last year.

We had a very good boat show up in Toronto.

But largely, we're just not hearing a lot about it.

Okay.

And then just one final one.

Wayne, I think you said relative to your expectations, you did a little better getting around the UAW issue, and you had some catch-up -- I guess catch-up revenues is what you put it, in the quarter.

Any way to quantify how large that was, that catch-up part?

No.

I mean, look, I think what I alluded to there was in terms of just the magnitude of the performance in the quarter versus what we guided you to last quarter was we -- it was a very fluid and dynamic situation.

Operations is managing it.

I mean, whether it was sales or IT or the operations team, it was -- and we wanted to make sure that we delivered on what we said to you guys, and that the team really pulled together very, very, very well.

And so in terms of the magnitude, it's kind of split, right?

If you look at the guidance raise and the expectation raise, I think it's the beat isn't totally flowed through in the guidance raise, and I think that's kind of the indication of that was the move between kind of Q3 and Q2.

(Operator Instructions) And your next question is a follow-up from Gerrick Johnson with BMO Capital Markets.

I just wanted to clarify on channel inventory.

You're talking about it being comparable last year.

But on the last quarterly call, you said it would take until the end of the fiscal year before it's kind of at an optimal level, i.e., the mix of new and aged was at the right ratio.

So where are we now on that progression?

We're ahead of where we expected.

We've seen more strength.

And so I think we feel like it's optimal for where we want it to be at this time.

It pulled down faster given the outperformance in the retail.

At this time, there are no further questions.

I will now hand the call back to Jack Springer for closing remarks.

Thank you very much.

Malibu delivered another strong performance in the quarter, achieving profitable growth across our brands and demonstrating our operational excellence by successfully overcoming the headwinds we faced.

Our industry-leading operational execution and acquisition strategy continues to differentiate us from our competitors and, coupled with the strength of our compelling model year 2020 products, position us well to deliver continued stalwart performance in the second half of fiscal year 2020.

I want to thank everyone today for joining us on the call and for your continued support of Malibu.

Have a fantastic day.

That concludes today's conference.

Thank you for your participation.

You may now disconnect.