Malibu’s next act
An exclusive interview with Malibu CEO Jack Springer about taking the company public, launching a new boat brand and the company’s next phase
By Tom Kaiser
Malibu Boats, the builder of the Malibu and Axis Wake inboard sport boats, recently went public and began trading on the NASDAQ at a price of $14 a share, giving the 30-plus-year-old Tennessee-based boat builder company an initial market capitalization of more than $300 million.
In the subsequent two months, its share price has topped $20, a sign of the marine market’s improving health and general faith in the company’s future. An analyst from The Motley Fool recently rated Malibu Boats as the top stock to buy in the entire marine market.
Boating Industry spoke with CEO Jack Springer who has been at the helm since joining on an interim basis in June of 2009. In the five years of Springer’s tenure, the company has weathered one of the worst economic slowdowns in history, created an entirely new, value-oriented boat brand, paid off the company’s debt and unleashed several significant technologies into the water sports market.
With its recent IPO, Malibu is set for yet another period of significant investment in its products, accessories and technologies in the years ahead.
Boating Industry: Why did Malibu decide to go public?
Jack Springer: An IPO made the most sense for us, and we believe it has less of an impact on our employees and dealers. A complete ownership change through a sale process can be very stressful … for employees and dealers.
Boating Industry: How will this benefit the company going forward?
Jack Springer: This will provide an avenue for capital for investments we believe make sense. We believe that our ability to develop and introduce new and innovative products provides us with a competitive edge. For example, we are the only company that designs and manufactures our own towers and produces its stainless and aluminum billet for our boats. We believe that the vertical integration of our tower and accessory manufacturing gives us a competitive advantage, as we can control key design elements of our boats and keep our costs lower than that of our competitors. We will continue to look for opportunities to vertically integrate. We may be even more aggressive with product development if we choose, more aggressive with worldwide expansion or other strategic objectives.
Boating Industry: Your IPO raised an impressive amount of money. How do you plan to use it?
Jack Springer: Proceeds were used primarily to pay off all debt, becoming a debt-free company.
Boating Industry: Having to satisfy investors can change a company. How does Malibu plan to avoid the negatives of that scenario?
Jack Springer: Unless a company is individually owned, there are always investors. In fact, some of the nastiest situations I have seen are family-owned companies in which various members of the family are investors. At Malibu, we have been satisfying investors since before I arrived on the scene. I really do not see any negatives as long as we continue to do what we have done and serve our customers well. If we don’t, we will have pressure, just as we would have before.
Boating Industry: How would you characterize Malibu’s recent success?
Jack Springer: We’ve grown our market share about 10 points from 23 to 33 percent since 2008, and we’ve done that through a couple of different ways. One is we’ve been extremely aggressive with new product and innovation. For example, we’re the only ones in the entire industry much less our segment that manufacturers our own towers, and we do that in California. It gives us the ability to control the design, manufacture and the cost of all of that. Towers would be an example, Surf Gate, which we added to the boats in 2012 has just been absolutely huge for us … so the product and then our distribution. We’ve added in the neighborhood of 35 new dealers since 2010, so that in turn has driven our distribution substantially.
Boating Industry: Malibu continued to dedicate significant resources to R&D during the downturn. Was it scary to make that bet on the future?
Jack Springer: We didn’t know how soon it would come back, that was the scary part. I am from the school that in a down time that is a time to invest in product, and what the great majority of companies do is they retract and they start cutting those cap-ex dollars, so from our view … we invest in new product, in the new boats. In 2009, we brought out our Axis Wake brand, which is our entry-level brand. Very few companies will come out with a whole new brand during the worst possible economic time. We did that because, even if the economy did not come back, I believe that we could capture the market share — and we did.
Boating Industry: Is that recent level of investment set to continue?
Jack Springer: Our model has changed as of 2010, and what we try to do is bring out product year round. We launched three boats a year and we’ll do that at model year, we’ll do it again at Surf Expo … so whereas other people were introducing one maybe two products, we’re introducing three new products in the form of boats, plus new innovations.
Boating Industry: How is your new brand Axis Wake doing?
Jack Springer: It was launched with one model and then we added a second model in 2010 and this year we’ve introduced two more, but with those two models it quickly grew to #6 market share. It’s at about a 6.2 [percent] market share. We believe with the two models we’ve introduced, plus this year we’ve put Surf Gate on Axis Wake, we think that market share can continue to grow.
Boating Industry: What’s next for Axis Wake?
Jack Springer: We can continue to broaden the product line. In the Axis Wake example, our first three models that came out were all pickle forks. This new model that we’ve just introduced, the Axis Wake T22, is a traditional bow so we have additional length sizes that we can introduce in the Axis and that’s where we’ll probably primarily focus, because what we do is we try to leverage that … exciting, high-performance boat. It just doesn’t have all of the electronics and bells and whistles that a Malibu does, but as people’s income levels increase as they enter their late 30’s and 40’s … there’s a natural step-up into the Malibu brand.
Boating Industry: How do ballast technologies differ between your brands?
Jack Springer: You control [the Malibu Power Wedge] through the helm … with the electronics. The Axis has a manual wedge, so this controls manually from the back of the boat. That would be a difference between a Malibu and an Axis Wake, because we’re trying to keep that cost down [and] we want Malibu to be that premium brand. But what the wedge does … is it creates additional ballast, so it can create the effect of up to 1,200 pounds of additional ballast. The Power Wedge deploys down and it will deploy in four different segments, and each segment … will pull the boat down and create additional ballast.
Boating Industry: Do you foresee any competitors following suit their own value-oriented sport boat brands?
Jack Springer: We think that there will be one or two. There is a competitor that we know is working on a product. The difference is, and this is why in my opinion we were so successful, we built Axis Wake from the ground up. We didn’t take an old Malibu hull and then try to de-content a Malibu. We took Axis Wake and we had a whiteboard essentially and we said, “What do we want out of this brand?” From the hull all the way to the cockpit, to the deck, etc., we built it from the ground up so we were able to keep the costs down. I’m just not a believer that de-contenting any existing boat will ever work.
Boating Industry: Looking at the entire United States, where do you see areas of opportunity?
Jack Springer: One area that’s strong and seems to be always strong is Texas. Texas and that southwestern area is an area that we focus on. We have #1 market share there. If we look at the West Coast and specifically California, it used to be the #1 state in our segment and it dropped off by well over 60 percent. It still has not come back as other areas of the country have, so as a result, because of our market share in California, we see a huge opportunity on the West Coast.
Boating Industry: What do you think we’ll be talking about a year from now in the marine industry?
Jack Springer: I think we will be seeing that the market has come back further. If we can continue to sustain the 6- to 10-percent a year overall comeback in our market, that’s good. I think we’ll be talking about the fact that Malibu has continued to increase its market share, because of our new models and innovations. We won’t see the impact of them for another [few] months or so. We won’t see the impact of [Surf Gate on Axis Wake] until after this coming boat show season. I think that additional market share for Malibu is in the cards. Another area of focus for us is international, and so I think we’ll be talking about how, hopefully, Europe has come back from their doldrums and then other areas like Asia, South Africa and South America have started generating some additional sales.