We are a leading designer, manufacturer and marketer of performance sport boats,
having the #1 market share position in the United States since 2010. Our boats
are used for water sports, including water skiing, wakeboarding and wake surfing,
as well as general recreational boating. Since inception in 1982, we believe
we have been a consistent innovator in the powerboat industry, designing products
that appeal to an expanding range of recreational boaters and water sports enthusiasts
whose passion for boating and water sports is a key aspect of their lifestyle.
We believe many of our innovations, such as our proprietary Surf Gate technology
launched in 2012, expand the market for our products by introducing consumers
to new and exciting recreational activities. We believe that our boats are increasingly
versatile, allowing consumers to use them for a wide range of activities that
enhance the experience of a day on the water with family and friends. While
there is no guarantee that we will achieve market share growth in the future,
we believe that the performance, quality, value and multi-purpose features of
our boats position us to achieve our goal of increasing our market share in
the expanding recreational boating market.
We sell our high performance boats under two brands-Malibu and Axis Wake Research,
or Axis. Our flagship Malibu brand boats offer our latest innovations in performance,
comfort and convenience, and are designed for consumers seeking a premium boating
experience. Retail prices of our Malibu boats typically range from $60,000 to
$130,000. We launched our Axis brand of boats in 2009 to appeal to consumers
who desire a more affordable product but still demand high performance, functional
simplicity and the option to upgrade key features. Retail prices of our Axis
boats typically range from $45,000 to $85,000.
Our boats are constructed of fiberglass, equipped with inboard propulsion systems
and available in a range of sizes and hull designs. We employ experienced product
development and engineering teams that enable us to offer a range of models
across each of our brands while consistently introducing innovative features
in our product offerings. Our engineering team closely collaborates with our
manufacturing personnel in order to improve product quality and process efficiencies.
The results of this collaboration are reflected in our receipt of numerous industry
awards, including the Watersports Industry Association’s Innovation of
the Year in 2010 and 2013.
We sell our boats through a dealer network that we believe is the strongest
in the performance sport boat category. Our distribution channel consisted of
114 independent dealers in North America operating in 154 locations in North
America and we had 64 independent dealer locations across 44 countries outside
of North America, including Australia. Our boats are the exclusive performance
sport boats offered by the majority of our dealers. Additionally, we believe
that our Australia segment is the largest performance sport boat manufacturer
in that country. Our dealer base is an important part of our consumers’
experience, our marketing efforts and our brands. We devote significant time
and resources to find, develop and improve the performance of our dealers and
believe our dealer network gives us a distinct competitive advantage.
Our product development strategy consists of a two-pronged approach. First,
we seek to introduce new boat models to target unaddressed or underserved segments
of the performance sport boat category, while also updating and refreshing our
existing boat models regularly. For example, we introduced Axis-branded boats
starting in 2009 to address the entry-level segment of our category, and we
launched the Malibu Wakesetter MXZ product line in 2012 to enter the premium
“picklefork” bow design segment of our market. Second, we seek to
develop and integrate innovative new features into our boats, such as Surf Gate,
Malibu Touch Command and Power Wedge. Over the past two years, we have continued
these strategies by introducing seven new models, including four in the Axis
line, and enhanced its optional feature offerings with the new Power Wedge II
and the industrys first 12-inch touchscreen dash system. For the 2016 model
year, which began July 1, 2015, we released the Wakesetter 25 LSV, the Wakesetter
20 VTX and the Axis A20. In addition, on our model year 2016 products, we offer
an improved Surf Gate system with hydraulic actuators, our patented rider controlled
Surf Band technology, new windshields, new vinyl and backup cameras. Furthermore,
at the end of fiscal 2015 we began production of trailers for the model year
2016 product, continuing our vertical integration strategy focused on delivering
better quality and value to our consumers while enhancing margins. We intend
to continue releasing new products and features multiple times during the year,
which we believe enhances our reputation as a leading-edge boat manufacturer
and provides us with a competitive advantage.
Our manufacturing efforts are led by our Chief Operating Officer, who brings
30 years of experience in the manufacture of performance sport boats. We manufacture
our boats at both our Tennessee and Australia facilities, and we manufacture
towers, tower accessories and stainless steel and aluminum billet at our California
facility. Beginning with model year 2016, we began manufacturing our own trailers
at our Tennessee facility.
Our boats are built through a continuous flow manufacturing process that encompasses
fabrication, assembly, quality management and testing. Each boat is produced
over a seven-day cycle that includes the fabrication of the hull and deck through
gelcoat application and fiberglass lamination, grinding and hole cutting, installation
of components, rigging, finishing, detailing and on-the-water testing. Trailers
are also produced in a continuous flow manufacturing process involving cutting
and bending of the main frame from raw top grade carbon steel, painting using
our state of the art system and installation of components. We manufacture certain
components and subassemblies for our boats, such as upholstery, stainless steel
and aluminum billet and towers. We procure other components, such as engines
and electronic controls, from third-party vendors and install them on the boat.
We acquired our tower and tower accessory manufacturing capability in 2009 through
the acquisition of certain assets of Titan Wake Accessories, which had been
one of our suppliers. Tower-related manufacturing occurs in our Merced-based
machine shop, where we use multiple computer-controlled machines to cut all
of the aluminum parts required for tower assembly. We are the only performance
sport boat company that manufacturers towers in-house. We believe that the vertical
integration of these components is a distinct competitive advantage that allows
us to control key design elements of our boats and generate higher margins.
We are committed to continuous improvement in our operations, and our efforts
in this regard have resulted in higher gross margins. Specifically, we have
increased labor efficiency, reduced cost of materials and reduced warranty claims.
Our production engineers evaluate and seek to optimize the configuration of
our production line given our production volumes and model mix. We use disciplined
mold maintenance procedures to maintain the usable life of our molds and to
reduce surface defects that would require rework. We have instituted scrap material
reduction and recovery processes, both internally and with our supplier base,
helping to manage our material costs. Finally, we have implemented a quality
management system to ensure that proper procedures and control measures are
in place to deliver consistent, high-quality product, especially as our production
volumes have increased.
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