What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-08-25 compared with 2021-08-26 · 267 added, 290 removed, 442 unchanged (56% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Acquisition of Maverick Boat Group, Inc.

and Related Financing

Impact of the COVID-19 Pandemic

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Liquidity and Capital Resources

Off-Balance Sheet Arrangements

Contractual Obligations and Commitments

Critical Accounting Policies

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We are the market leader in the United States in the performance sport boat category through our Malibu and Axis Wake Research boat brands.

Our Axis boats appeal to consumers who desire a more affordable performance sport boat product but still demand high performance, functional simplicity and the option to upgrade key features.

Our Axis boats appeal to consumers who desire a more affordable performance sport boat product but still demand high performance,

functional simplicity and the option to upgrade key features.

Retail prices of our Malibu and Axis boats typically range from $70,000 to $225,000.

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Our Pursuit boats expand our product offerings into the saltwater outboard fishing market and include center console, dual console and offshore models.

As noted below, we recently acquired Maverick Boat Group and added Maverick, Cobia, Pathfinder and Hewes to our brands.

We recently acquired Maverick Boat Group in December 2020 and added Maverick, Cobia, Pathfinder and Hewes to our brands.

Our Maverick Boat Group family of boats are highly complementary to Pursuit, expanding our saltwater outboard offerings with a strong focus in length segments under 30 feet.

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We achieved fiscal year 2022 net sales, net income and adjusted EBITDA of $1,214.9 million, $163.4 million and $246.5 million, respectively, which were an increase from $926.5 million, $114.3 million and $190.1 million, respectively, for fiscal year 2021.

The increase from 2020 to 2021 resulted primarily from an increase in wholesale demand for our products, limited production caused by COVID related plant shutdowns during fiscal 2020, and the inclusion of the Maverick Boat Group since its acquisition on December 31, 2020.

For the definition of adjusted EBITDA and a reconciliation to net income, see “GAAP Reconciliation of Non-GAAP Financial Measures.”

Acquisition of Maverick Boat Group, Inc.

and Related Financing

On December 31, 2020, we acquired all of the outstanding shares of Maverick Boat Group from its existing stockholders for a purchase price of $150.7 million.

The purchase price was subject to customary adjustments for the amounts of cash, indebtedness and working capital in the business at the closing date and subject to adjustment for certain capital expenditures made by Maverick Boat Group prior to closing at our request.

With two manufacturing facilities located in Fort Pierce, Florida, Maverick Boat Group designs and manufactures center console, dual console, flats and bay boats under four brand names -- Cobia, Pathfinder, Maverick, and Hewes.

We paid the purchase price with cash on hand and $90.0 million of borrowings under our credit facilities following an amendment to increase the amount available under the credit facilities as described below.

On December 30, 2020, our subsidiary, Malibu Boats, LLC, as the borrower, entered into the Third Incremental Facility Amendment and Third Amendment to its existing Second Amended and Restated Credit Agreement dated as of June 28, 2017 with Truist Bank, as the administrative agent, swingline lender and issuing bank.

The third amendment added a $25.0 million incremental term loan facility with a maturity date of July 1, 2024 and increased the borrowing capacity available under the revolving credit facility by $50.0 million from $120.0 million to $170.0 million.

The $25.0 million incremental term loan made pursuant to the third amendment is subject to quarterly amortization at a rate of 5.0% per year through December 31, 2022 and at a rate of 7.5% per year through June 30, 2024 and accrues interest at the same rate as other loans under the credit agreement.

Impact of the COVID-19 Pandemic

Our operations have continued to be impacted by a variety of external factors.

The COVID-19 pandemic has impacted our operations and financial results since the third quarter of fiscal year 2020 and continues to have an impact on us.

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As a result, we were not able to ship boats to our dealers during the period of shut-down, which negatively impacted our net sales for the second half of fiscal year 2020.

During the first half of fiscal 2021, we constrained our production levels in an attempt to allow our supply chain to more fully recover from the impacts of COVID-19 in preparation of higher wholesale manufacturing volumes that we planned for the second half of fiscal 2021.

While our net

sales for fiscal year 2021 were impacted by our lower production levels, retail sales improved during fiscal year 2021 as consumers turned to boating as a form of outdoor, socially distanced recreation during the COVID-19 pandemic.

The increase in retail sales during fiscal year 2021 combined with our lower wholesale shipment levels during the second half of fiscal year 2020 and constrained production in the first half of fiscal year 2021 resulted in lower inventory levels at our dealers as of June 30, 2021 compared to last year.

We expect these lower inventory levels, while having the potential to impact retail sales in the near-term, will provide us strong order flow for our model year 2022 product, unless broader economic activity meaningfully contracts and negatively impacts customer demand.

In addition to our operations, the COVID-19 pandemic has impacted and continues to impact the operations of our dealers and suppliers.

While some of our dealers and suppliers had to suspend their operations during the pandemic, many continued to operate and we are not aware of any of our dealers or suppliers that have closed permanently.

Our suppliers have been impacted by COVID-19 and continue to ramp production to meet increased demand for their products.

As mentioned, we have successfully managed our production levels to ensure that challenges related to parts procurement have minimal impact on our operations and we have not experienced any significant shortages related to COVID-19.

The future impact of COVID-19 on our financial condition and results of operations, however, will depend on a number of factors, including factors that we may not be able to forecast at this time.

In addition, a resurgence of COVID-19 in certain parts of the world, including the United States and parts of Europe, may lead to more restrictions being implemented again to reduce the spread of COVID-19.

These measures could result in further interruptions to our operations and potentially a decrease in consumer spending.

See the risk factor “Our operations and sales have been adversely impacted by the COVID-19 pandemic, and we must successfully manage the demand, supply, and operational challenges associated with the actual or perceived effects of COVID-19 and the related widespread public health crisis..” under Part I.

During the first half of fiscal 2021, we constrained our production levels to allow our supply chain to more fully recover from the impacts of COVID-19 in preparation of higher wholesale manufacturing volumes that we planned for the second half of fiscal 2021.

While our net sales for fiscal year 2021 were impacted by our lower production levels, retail sales improved during fiscal year 2021 as consumers turned to boating as a form of outdoor, socially-distanced recreation during the COVID-19 pandemic.

Fiscal year 2022 retail demand continued at a strong pace, albeit at lower levels than the record fiscal year 2021 levels, and in spite of limited inventory.

Increases in fiscal year 2022 wholesale production combined with lower retail demand levels, as compared to fiscal year 2021, have combined to increase inventory levels modestly at our Malibu and Cobalt segment dealers at the end of fiscal year 2022.

Saltwater Fishing segment dealers remain low on inventory.

Dealer inventories continue to be well below historical levels and a full recovery to historical inventory levels will depend on the ability of our supply chain to provide materials to us timely and the level of retail demand during the upcoming year.

Additionally, we experienced supply chain disruptions throughout fiscal year 2022 that we believe were driven by numerous factors, including labor shortages, ongoing domestic logistical constraints, West Coast port challenges and rising prices to our suppliers, in part due to inflationary pressures.

Such supply chain disruptions along with increased costs for raw materials, parts and components, shipping and labor, are having industry-wide impacts affecting us and our suppliers, dealers and customers.

The future impact of COVID-19 and ongoing supply chain disruptions on our financial condition and results of operations may result in further constrained production and increased costs and will depend on a number of factors, including factors that we may not be able to forecast at this time.

See the risk factors around COVID-19 impact, supply chain disruptions and increases in costs under Part I.

of this Form 10-K

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While the market for sterndrive propulsion, particularly in lower foot length products, has been challenged, Cobalt’s performance continues to be helped by the higher foot length product market it serves, which has grown, and through gains in market share by Cobalt.

While retail growth in powerboats was negatively impacted by weak retail sales in March and April 2020 due to COVID-19, domestic retail demand growth for powerboats accelerated during calendar year 2020, in part because consumers turned to boating as a form of outdoor, socially distanced recreation during the COVID-19 pandemic.

Despite the impact of COVID-19 early in 2020, the increased demand during 2020 was broad based across recreational powerboat categories.

Year-over-year domestic retail growth rates for 2020 in the performance sport boat, fiberglass outboard and sterndrive segments were approximately 22%, 10% and 9%, respectively.

The first half of 2021 saw continued strong year-over-year retail growth, however, in May 2021 we saw lower growth and in certain markets year-over-year decreases in retail registrations driven by the lack of available inventory at our dealers and the high growth in those months during 2020.

We believe retail registration activity will decline during the third calendar quarter of 2021 versus the comparable period in 2020 given the limited available inventory and the strong sales activity and resulting destocking in 2020.

Notwithstanding the impact of limited inventory levels, we believe total 2021 retail registrations will remain strong given the current retail activity.

Of new boat orders, we believe over 90% will be retail sold in the first quarter of fiscal 2022, and we anticipate a robust pace to continue throughout the remainder of the year.

As noted, the combination of continued strong retail market activity through 2020 and into early 2021 and the temporary suspension of our operations from March and into May 2020 depleted inventory levels at our dealers below prior year levels.

Our planned ramp in manufacturing throughput during the third quarter of fiscal 2021 was well supported by our supply chain.

However, our second half performance was negatively impacted by operational challenges and supply chain constraints created by severe winter weather, further delaying our ability to add to depleted inventory levels.

As a result of these lower dealer inventory levels, we expect to see meaningful wholesale demand to restock our dealer inventories through fiscal year 2022 and beyond.

We expect lower dealer inventory levels will support our wholesale shipments and financial performance through fiscal year 2022.

We believe that strength is likely to continue into fiscal year 2023.

The duration of our dealer restocking demand may be extended by our suppliers' ability to increase production to match our desired wholesale production targets.

We are currently experiencing supply chain disruptions that we believe are driven by numerous factors, including labor shortages,

logistical disruptions and limited inputs and rising prices to our suppliers.

The length and duration of these challenges is unknown and they may meaningfully impact our ability to restock our dealers inventories in a timely manner.

Although retail growth in powerboats was negatively impacted by weak retail sales in March and April 2020 due to COVID-19, domestic retail demand growth for powerboats accelerated during calendar year 2020, in part because consumers turned to boating as a form of outdoor, socially-distanced recreation during the COVID-19 pandemic.

Despite the impact of COVID-19 early in 2020, the increased demand during 2020 was broad based across recreational powerboat categories leading to the highest growth rate the industry has seen in decades.

We continued to see strong year-over-year retail growth during the first half of 2021.

However, beginning in May 2021, we experienced lower growth and in certain markets year-over-year decreases in retail registrations driven by the lack of available inventory at our dealers and the high growth in those months during 2020.

Retail registration activity declined meaningfully during the second half of calendar 2021 versus the comparable period in 2020 given the limited available inventory and the strong sales activity and resulting destocking in 2020 and the first half of 2021.

The domestic retail market decreased year-over-year during calendar 2021 for the performance sport boat segment by 2%, while the fiberglass outboard and sterndrive segments were down a combined 7%, in line with expectations given the prior year retail environment.

However, when compared to the pre-COVID market conditions of calendar year 2019, the performance sport boat segment and the combined fiberglass outboard and sterndrive segments increased 21% and 3%, respectively, in calendar year 2021 despite depleted channel inventory levels.

The first half of calendar 2022 has continued to show year over year decreases in retail registration activity, much of which are in the double digits against significantly high comparative periods due to increased retail demand in the first half of calendar 2021.

We believe that despite recent retail registration declines, retail activity at our dealers continued to be strong during much of fiscal year 2022 and but for a lack of inventory may have been higher.

We believe the second half of 2022 will show year over year increases as the second half of calendar 2021 was significantly affected by decreased retail demand due to the lack of available dealer inventory.

The combination of strong retail market activity through 2020 and into early 2021 and supply chain disruptions experienced in 2021 and continuing through 2022 have depleted our inventory levels at our dealers below pre-COVID levels throughout 2021 and 2022.

Operational challenges and supply chain constraints created by severe winter weather delayed our ability to add to depleted inventory levels in the second half of fiscal 2021.

We experienced an increase in supply chain disruptions throughout fiscal 2022 that we believe were driven by numerous factors, including labor shortages, ongoing domestic logistical constraints, West Coast port challenges and rising prices to our suppliers, in part due to inflationary pressures.

The duration of these challenges is unknown, and they may meaningfully impact our ability to restock our dealers’ inventories in a timely manner.

We believe supply chain disruptions will continue to challenge wholesale production output through at least the remainder of calendar 2022.

As a result of lower dealer inventory levels and lower wholesale production volumes due to the foregoing factors, we expect to see meaningful wholesale demand to restock our dealer inventories into fiscal 2023 and potentially beyond, but the primary driver of restocking timing will be retail activity.

We expect lower dealer inventory levels will support our wholesale shipments and financial performance in the first half of fiscal year 2023 and retail activity will be the key driver of wholesale production in the second half of fiscal 2023.

The duration of such heightened dealer restocking demand may be extended by our suppliers' inability to increase production to match our desired wholesale production targets, however, it may alternatively be reduced if retail activity deteriorates materially from existing levels.

We have also experienced elevated raw material, components and transportation costs, partly due to inflationary pressures, and we anticipate those costs to remain at elevated levels for the remainder of calendar year 2022 and likely beyond.

To combat this, we implemented a surcharge across all brands effective December 1, 2021.

We do not believe the surcharges impacted our wholesale shipments in fiscal 2022.

We believe our competitors have increased prices at similar rates to us and we have therefore not been at a competitive disadvantage from a pricing perspective.

At the beginning of fiscal 2023, we made our surcharges permanent price changes and have worked aggressively to minimize incremental price increases to lessen any volume impact associated with increased prices.

Numerous other variables also have the potential to impact our volumes, both positively and negatively.

For example, we believe a substantial increase or decrease in the price of oil, strength or weakness of the U.S.

For example, increasing interest rates that we are currently experiencing could reduce retail consumer appetite for our product or reduce the appetite or availability for credit for our dealers and retail consumers.

Further, we believe

a substantial increase or decrease in the price of oil, strength or weakness of the U.S.

dollar and tariffs can result in greater or reduced demand for our boats in certain markets.

To date, growth in our domestic market has offset the significantly diminished demand from economies that are driven by the oil industry and international markets.

Consumer confidence, expanded or eroded, is a variable that can also impact demand for our products in both directions.

Other challenges that could impact demand for recreational powerboats include higher interest rates reducing retail consumer appetite for our product, the availability of credit to our dealers and retail consumers, fuel costs, a meaningful reduction in the value of global or domestic equity markets, the continued acceptance of our new products in the recreational boating market, our ability to compete in the competitive power boating industry, and the costs of labor and certain of our raw materials and key components.

Other challenges that could impact demand for recreational powerboats include, fuel costs, a meaningful reduction in the value of global or domestic equity markets, the continued acceptance of our new products in the recreational boating market, our ability to compete in the competitive power boating industry, and the costs of labor and certain of our raw materials and key components.

Retail demand may be negatively impacted in the second half of calendar year 2022 as a result of rising gas prices (albeit falling the past several months), increasing interest rates and continuing concerns over inflation, all of which are outside of our control.

Since 2008, we have increased our market share among manufacturers of performance sport boats with new product development, improved distribution, new models, and innovative features.

Our market remains highly competitive however and our competitors have become more aggressive in their product introductions, increased their distribution and launched surf systems competitive with our patented Surf Gate system.

However, our market remains highly competitive and our competitors have become more aggressive in their product introductions, increased their distribution and launched surf systems competitive with our patented Surf Gate system.

Notwithstanding this increasingly competitive environment, we expanded our market share lead in 2019 in the performance sport boats category over our nearest competitors.

However, we believe decreased dealer inventory levels driven by strong retail growth in the second half of 2020 led to a reduction in our market share for 2020;

We believe decreased dealer inventory levels driven by strong retail growth and competitive new product introductions led to a reduction in our market share through 2021;

however, we continue to maintain the leading market share in the performance sport boat category.

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We believe our new product pipeline, strong dealer network and ability to increase production will allow us to maintain and potentially expand our industry leading market position in performance sports boats.

We believe our track record of expanding our market share with our Malibu and Axis brands due to new product development, improved distribution, new models, and innovative features is directly transferable to our Cobalt, Pursuit and Maverick Boat Group acquisitions.

We believe that our track record of expanding our market share with our Malibu and Axis brands due to new product development, improved distribution, new models, and innovative features is directly transferable to our Cobalt, Pursuit and Maverick Boat Group acquisitions.

We have seen the impact of this strategy at Cobalt as we have realized growing market share with the introduction of ten new products in the last twenty-one months.

While Cobalt, Pursuit and the Maverick Boat Group brands are market leaders in certain areas, we believe our experience positions us to execute a strategy to drive enhanced share by expanding the Cobalt, Pursuit and Maverick Boat Group product offerings with different foot lengths, different boat types and different propulsion technologies.

Our new product development efforts at Cobalt, Pursuit and Maverick Boat Group will take time and our ability to influence near-term model introductions is limited, but we have already begun to execute on this strategy.

With respect to Cobalt, we introduced five new models of boats during the first half of fiscal year 2021 and we have included Splash and Stow and a new electronic flip down Swim Step for model year 2021 boats.

For the Pursuit brand, our focus has been on expanding the award-winning Dual Console, Sport and Offshore product offerings that continue to combine innovative features and dependable performance in refined designs that accommodate a broad array of activities on the water, including the Electric Sliding Entertainment Center on the new S 378.

Our new product development efforts at Pursuit and Maverick Boat Group will take time and our ability to influence near-term model introductions is limited, but we have already begun to execute on this strategy.

With respect to Cobalt, we introduced four new models during fiscal year 2022 and six new models of boats during fiscal year 2021.

Our newest acquisition, Maverick Boat Group, is in the very early stages of integration into the business and meaningful product and innovation changes will be developed for coming years.

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The recreational powerboat industry has shown continued growth from 2010 through 2021 ba sed on retai l sales .

While there is still some uncertainty surrounding the COVID-19 pandemic we believe we are well positioned strategically in the recreational powerboat market with brands that are market leaders in their segments.

While there is still some uncertainty surrounding the COVID-19 pandemic, on-going supply chain disruptions, and rising prices to our suppliers, in part due to inflationary pressures, we believe we are well positioned strategically in the recreational powerboat market with brands that are market leaders in their segments.

Inflation has impacted the prices of our materials and our labor costs, which has had a negative impact on our gross margin and our operations.

In particular, the market prices of certain materials and components used in manufacturing our products, especially resins that are made with hydrocarbon, feedstocks, copper, aluminum and stainless steel, are increasing.

To combat this, we implemented a surcharge across all brands effective December 1, 2021.

These surcharges could have negatively impacted retail demand, but we do not believe they have impacted our wholesale shipments in fiscal 2022.

Further, new boat

buyers often finance their purchases.

Efforts to stop or limit inflation are resulting in higher interest rates that translate into an increased cost of boat ownership.

We have seen increased interest rates for our customers in the first half of calendar year 2022.

We expect higher than recent years’ levels of inflation to persist for the foreseeable future.

Should inflation and increased interest rates continue at elevated rates, we may experience less retail demand because prospective consumers may choose to forgo or delay their purchases or buy a less expensive or used boat.

We intend to minimize the effect of inflation through selective price increases, cost reductions and improved productivity.

New Product Development and Innovation

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Developing and introducing new boat models and features that deliver improved performance and convenience are essential to leveraging the value of our brands.

By introducing new boat models,

we are able to appeal to a new and broader range of consumers and focus on underserved or adjacent segments of the broader powerboat category.

By introducing new boat models, we are able to appeal to a new and broader range of consumers and focus on underserved or adjacent segments of the broader powerboat category.

To keep product fresh and at the forefront of technological innovation in the boating industry, we aim to introduce a number of new boat models per year.

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We are continuously monitoring and reviewing our manufacturing processes to identify improvements and create additional efficiencies.

During fiscal year 2020, we expanded our facilities in Kansas and Florida for our Cobalt and Pursuit operations, respectively.

We are currently working on expansion projects at Maverick Boat Group in Florida.

Our ability to maintain production is dependent upon our suppliers delivering sufficient amounts of components, raw materials and parts to manufacture our products and on time to meet our production schedules.

Historically, we have not entered into long-term agreements with suppliers of our raw materials and components other than for our engines and outboard motors.

Any number of factors, including labor disruptions, weather events, the occurrence of a contagious disease or illness, contractual or other disputes, unfavorable economic or industry conditions, delivery delays or other performance problems or financial difficulties or solvency problems, could disrupt our suppliers’ operations and lead to uncertainty in our supply chain or cause supply disruptions for us, which could, in turn, disrupt our operations.

We have experienced supply chain disruptions since fiscal year 2020 related to numerous factors, including COVID-19, severe weather events, labor shortages, ongoing domestic logistical constraints, West Coast port challenges and rising prices to suppliers, in part due to inflationary pressures.

If we continue to experience supply disruptions or they intensify, we may not be able to develop alternate sourcing quickly or at all.

Any material disruption of our production schedule caused by an unexpected shortage of components, raw materials or parts could cause us not to be able to meet customer demand, to alter production schedules or suspend production entirely, which could cause a loss of revenues, which could materially and adversely affect our results of operations.

We completed the expansion of our facility in Florida for Maverick Boat Group in the last quarter of fiscal year 2022.

We expect this expanded facility will allow us to continue improving the manufacturing process and increase volume at this location.

We rely on our insights into the market gleaned from dealer inventory levels, industry reports about anticipated demand for our products in the upcoming sales cycle and our own estimates and assumptions in formulating our manufacturing plan for the following fiscal year.

plan for the following fiscal year.

Throughout our consumer sales cycle, which reaches its peak from March through August of each year, we adjust our manufacturing activities in order to adapt to variability in demand.

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Vertical Integration

We have vertically integrated a number of key components of our manufacturing process, including the manufacturing of boat trailers, towers and tower accessories, machined and billet parts, and soft grip flooring.

We began producing our own engines, branded as Malibu Monsoon engines, in our Malibu and Axis boats for model year 2019.

We believe our engine

marinization initiative will reduce our reliance on our previous engine suppliers for our Malibu and Axis brands while reducing the risk that a change in cost or production from any engine supplier for such brands could adversely affect our business.

Recently we began producing soft grip flooring for our Malibu, Axis and new Cobalt models.

We believe our vertical integration initiatives will reduce our reliance on third-party suppliers while reducing the risk that a change in cost or production from any third-party supplier could adversely affect our business.

In fiscal year 2022, we acquired a facility to begin manufacturing our own wiring harnesses.

As a result of this acquisition, we reduced the risk of production delays due to delays in receipt of wiring harnesses from third-party suppliers.

Vertical integration of key components of our boats gives us the ability to increase incremental margin per boat sold by reducing our cost base and improving the efficiency of our manufacturing process.

Additionally, it allows us to have greater control over design, consumer customization options, construction quality, and our supply chain.

We believe our engine marinization initiative will reduce our reliance on our previous engine suppliers for our Malibu and Axis brands while reducing the risk that a change in cost or production from any engine supplier for such brands could adversely affect our business.

We continually review our manufacturing process to identify opportunities for additional vertical integration investments across our portfolio of premium brands.

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Operating Expenses

Our operating expenses include selling and marketing, and general and administrative costs.

Our operating expenses include selling and marketing, general and administrative costs and amortization costs.

Each of these items includes personnel and related expenses, supplies, non-manufacturing overhead, third-party professional fees and various other operating expenses.

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General and administrative expenses include, among other things, salaries, benefits and other personnel related expenses for employees engaged in product development, engineering, finance, information technology, human resources and executive management.

Other costs include outside legal and accounting fees, investor relations, risk management (insurance)

and other administrative costs.

General and administrative expenses also include product development expenses associated with our engines vertical integration initiative and acquisition or integration related expenses.

Other costs include outside legal and accounting fees, investor relations, risk management (insurance) and other administrative costs.

General and administrative expenses also include product development expenses associated with our vertical integration initiative and acquisition or integration related expenses.

Amortization expenses are associated with the amortization of intangibles.

Other (Income) Expense, Net

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Interest expense consists of interest charged under our outstanding debt, interest on our interest rate swap arrangement and change in the fair value of our interest rate swap we entered into on July 1, 2015, which matured on March 31, 2020, and amortization of deferred financing costs on our credit facilities.

Other income or expense includes ad justments to our tax receivable agreement liability.

Other income or expense includes ad justments to our tax receivable agreement liability and sublease income.

Malibu Boats, Inc.

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Net Income Attributable to Non-controlling Interest

As of June 30, 2021 and 2020, we had a 97.2% and 96.6% controlling economic interest and 100% voting interest in the LLC.

We consolidate the LLC's operating results for financial statement purposes.

Net income attributable to non-controlling interest represents the portion of net income attributable to the LLC members.

As of June 30, 2022 and 2021, we had a 97.2% controlling economic interest and 100% voting interest in the LLC and, therefore, we consolidate the LLC's operating results for financial statement purposes.

Net income attributable to non-controlling interest represents the portion of net income attributable to the non-controlling LLC members.

Results of Operations

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Operating income 213,823 17.6 % 149,775 16.2 % 85,310 13.0 %

Other (income) expense:

Other (1,015) (0.1) % (2,310) (0.4) % (149) — %

Other expense (income), net:

Other expense (income), net 983 0.1 % (1,015) (0.1) % (2,310) (0.4) %

Interest expense 2,875 0.2 % 2,529 0.3 % 3,888 0.6 %

Other (income) expense, net 1,514 0.2 % 1,578 0.2 % 6,315 0.9 %

Net income before provision for income taxes 148,261 16.0 % 83,732 12.8 % 91,797 13.4 %

Income tax provision 33,979 3.7 % 19,076 2.9 % 22,096 3.2 %

Other expense (income), net 3,858 0.3 % 1,514 0.2 % 1,578 0.2 %

Income before provision for income taxes 209,965 17.3 % 148,261 16.0 % 83,732 12.8 %

Provision for income taxes 46,535 3.8 % 33,979 3.7 % 19,076 2.9 %

Net income 163,430 13.5 % 114,282 12.3 % 64,656 9.9 %

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Net sales per unit $ 131,267 $ 113,197 $ 101,360

(1) We acquired all of the outstanding stock of Maverick Boat Group on December 31, 2020 and substantially all of the assets of Pursuit on October 15, 2018.

(1) We acquired all of the outstanding stock of Maverick Boat Group on December 31, 2020.

Comparison of the Fiscal Year Ended June 30, 2022 to the Fiscal Year Ended June 30, 2021

Net sales for fiscal year 2022 increased $288.4 million, or 31.1%, to $1,214.9 million, compared to fiscal year 2021.

The increase in net sales was driven primarily by increased unit volumes across all three segments, year-over-year price increases and a favorable model mix.

We recognized an increase in net sales and volumes across all three segments during fiscal year 2022.

Unit volume for fiscal year 2022 increased 1,070 units, or 13.1%, to 9,255 units compared to fiscal year 2021.

Net sales attributable to our Malibu segment increased $124.0 million, or 25.6%, to $607.6 million for fiscal year 2022 compared to fiscal year 2021.

Unit volumes attributable to our Malibu segment increased 332 units for fiscal year 2022 compared to fiscal year 2021.

The increase in net sales was driven by year-over-year price increases, a favorable model mix and increased volume resulting from strong demand for our Malibu and Axis model boats.

Net sales from our Saltwater Fishing segment increased $99.0 million, or 40.8%, to $341.9 million for fiscal year 2022 compared to fiscal year 2021.

Unit volumes increased 607 units for fiscal year 2022 compared to fiscal year 2021.

The increase in net sales was driven primarily by the acquisition of Maverick Boat Group on December 31, 2020, year-over-year price

increases and a favorable model mix.

The increase in unit volumes resulted primarily from our addition of the Maverick Boat Group.

Net sales from our Cobalt segment increased $65.4 million, or 32.7%, to $265.4 million for fiscal year 2022 compared to fiscal year 2021.

Unit volumes attributable to Cobalt increased 131 units for fiscal year 2022 compared to fiscal year 2021.

The increase in net sales was driven primarily by a favorable model mix, year-over-year price increases and increased volume.

We experienced increased volume at Cobalt as a result of our prior year investments in the Cobalt facilities to optimize efficiency and expand capacity.

Our overall net sales per unit increased 16.0% to $131,267 per unit for fiscal year 2022 compared to fiscal year 2021.

Net sales per unit for our Malibu segment increased 17.6% to $117,445 per unit for fiscal year 2022 compared to fiscal year 2021, primarily driven by year-over-year price increases and a favorable model mix.

Net sales per unit for our Saltwater Fishing segment decreased 1.2% to $168,025 per unit for fiscal year 2022 compared to fiscal year 2021, primarily driven by mix of models due mostly to the inclusion of lower priced models from our acquisition of Maverick Boat Group on December 31, 2020.

Net sales per unit for our Cobalt segment increased 24.2% to $129,655 per unit for fiscal year 2022 compared to fiscal year 2021, driven primarily by a favorable model mix and year-over-year price increases.

Cost of Sales

Cost of sales for fiscal year 2022 increased $214.8 million, or 31.1%, to $904.8 million compared to fiscal year 2021.

The increase in cost of sales was driven by higher costs related to higher net sales in all our segments and increased prices due to supply chain disruptions and inflationary pressures that have impacted prices on parts and components.

In the Malibu segment, higher per unit material and labor costs contributed $66.7 million to the increase in cost of sales and were driven by an increased mix of larger products that corresponded with higher net sales per unit.

Within our Saltwater Fishing segment, higher per unit material and labor costs contributed $87.3 million to the increase in cost of sales and were driven by the acquisition of Maverick Boat Group on December 31, 2020 and an increased mix of larger products that corresponded with higher net sales per unit.

In the Cobalt segment, higher per unit material and labor costs contributed $44.8 million to the increase in cost of sales and were driven by an increased mix of larger products that corresponded with higher net sales per unit.

Gross profit for fiscal year 2022 increased $73.6 million, or 31.1%, compared to fiscal year 2021.

The increase in gross profit was driven primarily by higher sales revenue with a more favorable product mix and the contribution of Maverick Boat Group partially offset by the increased cost of sales for the reasons noted above.

Gross margin remained flat at 25.5% in fiscal year 2022.

Operating Expenses

Selling and marketing expense for fiscal year 2022 increased $5.4 million, or 30.6% to $22.9 million compared to fiscal year 2021.

The increase was driven primarily by incremental selling and marketing expenses from the acquisition of Maverick Boat Group, increased compensation and personnel-related expenses, increased travel and promotional events that resumed in fiscal year 2022 after being suspended for COVID-19 during the early portion of fiscal year 2021.

As a percentage of sales, selling and marketing expense remained flat at 1.9% for fiscal year 2022.

General and administrative expense for fiscal year 2022 increased $4.5 million, or 7.2%, to $66.4 million compared to fiscal year 2021.

The increase in general and administrative expenses was driven primarily by an increase in compensation and personnel-related expenses, travel related expenses, information technology infrastructure expenses, incremental general and administrative expenses due to the acquisition of Maverick Boat Group, facility maintenance expenses and insurance expenses partially offset by lower professional fees and a decrease in acquisition expenses related to the acquisition of Maverick Boat Group on December 31, 2020.

As a percentage of sales, general and administrative expenses decreased 120 basis points to 5.4% for fiscal year 2022 compared to 6.6% for fiscal year 2021.

Amortization expense for fiscal year 2022 decreased $0.3 million, or 4.1%, to $7.0 million compared to fiscal year 2021, due to a decrease of amortization expense related to fully amortized intangibles.

Other Expense (Income), Net

Other expense, net for fiscal year 2022 increased by $2.3 million, or 154.8% to $3.9 million as compared to fiscal year 2021.

In fiscal year 2022, we increased our tax receivable agreement liability by $1.0 million that resulted in a corresponding amount being recognized as other expense during the same period, compared to fiscal year 2021, when we reduced our tax receivable agreement liability by $0.1 million that resulted in a corresponding amount being recognized as other income during fiscal year 2021.

Our interest expense increased by $0.3 million during fiscal year 2022 compared to fiscal year 2021 due to higher average interest rates on outstanding debt.

Provision for Income Taxes

Our provision for income taxes for fiscal year 2022 increased $12.6 million, or 37.0% to $46.5 million compared to fiscal year 2021.

This increase was primarily driven by higher pre-tax earnings and increased U.S.

For fiscal year 2022, our effective tax rate of 22.2% differed from the statutory federal income tax rate of 21% primarily due to the impact of U.S.

This increase in tax rate was partially offset by a windfall benefit generated by certain stock-based compensation, as well as the benefits of the research and development tax credit, and the impact of non-controlling interests in the LLC.

For fiscal year 2021, our effective tax rate of 22.9% differed from the statutory federal income tax rate of 21% primarily due to the impact of U.S.

state taxes, and partially offset by the impact of non-controlling interests in the LLC.

Non-controlling interest

Non-controlling interest represents the ownership interests of the members of the LLC other than us and the amount recorded as non-controlling interest in our consolidated statements of operations and comprehensive income is computed by multiplying pre-tax income for the applicable fiscal year by the percentage ownership in the LLC not directly attributable to us.

For fiscal years 2022 and 2021, the weighted average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 2.8% and 3.1%, respectively.

Comparison of the Fiscal Year Ended June 30, 2021 to the Fiscal Year Ended June 30, 2020

Net sales for fiscal year 2021 increased $273.4 million, or 41.9%, to $926.5 million, compared to fiscal year 2020.

Unit volume for fiscal year 2021 increased 1,741 units, or 27.0%, to 8,185 units compared to fiscal year 2020.

The increase in net sales was driven primarily by a favorable model mix in our Malibu and Cobalt segment and increased unit volume in our Malibu and Saltwater fishing segments.

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Within our Saltwater Fishing segment, higher volumes, primarily related to the acquisition of Maverick Boat Group, drove $83.7 million of increase in cost of sales which was also modestly impacted by higher per unit costs.

In the Cobalt segment, higher material and labor costs contributed $14.7 million to the increase in cost of sales and were driven by an increased mix of larger product that corresponded with higher net sales per unit.

In the Cobalt segment, higher material and labor costs contributed

$14.7 million to the increase in cost of sales and were driven by an increased mix of larger product that corresponded with higher net sales per unit.

Gross profit for fiscal year 2021 increased $87.2 million, or 58.4%, compared to fiscal year 2020.

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For fiscal years 2021 and 2020, the weighted average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 3.1% and 3.8%, respectively.

Comparison of the Fiscal Year Ended June 30, 2020 to the Fiscal Year Ended June 30, 2019

Net sales for fiscal year 2020 decreased $30.9 million, or 4.5%, to $653.2 million, compared to fiscal year 2019.

Unit volume for fiscal year 2020 decreased 918 units, or 12.5%, to 6,444 units compared to fiscal year 2019.

The decrease in net sales and unit volumes was driven primarily by the temporary shutdown of our facilities in the second half of fiscal year 2020 as a result of the COVID-19 pandemic.

As a result of our suspension of operations, we were not able to ship boats to our dealers during the period of shut-down, which negatively impacted our net sales for the second half of fiscal year 2020.

In addition to the pandemic, but to a lesser effect, we also had planned lower production rates at Cobalt to reduce wholesale shipments and dealer inventories that negatively impacted sales versus the prior year period.

This decrease in net sales was partially offset by a higher average selling price due to model mix and an increase in sales at Pursuit from a full year of results in fiscal year 2020 compared with nine months in fiscal year 2019 since its acquisition date on October 15, 2018.

Net sales attributable to our Malibu segment decreased $19.9 million, or 5.3%, to $354.8 million for fiscal year 2020 compared to fiscal year 2019.

Unit volumes attributable to our Malibu segment decreased 567 units for fiscal year 2020 compared to fiscal year 2019.

The decrease in net sales and unit volumes was driven by the temporary shutdown of our Loudon, Tennessee facility in the second half of fiscal year 2020 as a result of the COVID-19 pandemic.

This decrease in Malibu net sales was partially offset primarily by our product mix of new, larger Malibu and Axis models.

Net sales from our Saltwater Fishing segment increased $20.8 million, or 20.3%, to $123.6 million for fiscal year 2020 compared to fiscal year 2019.

Unit volumes attributable to Saltwater Fishing increased 102 units for fiscal year 2020 compared to fiscal year 2019.

The increase in Saltwater Fishing net sales resulted from a full year of sales from Pursuit in fiscal year 2020 compared to a partial nine months in fiscal year 2019 since our acquisition of Pursuit on October 15, 2018.

The increase in net sales and unit volumes were partially offset by the lower average selling price due to the mix of models sold and the temporary shutdown of our Fort Pierce, Florida facility in the second half of fiscal year 2020 as a result of the COVID-19 pandemic.

Net sales from our Cobalt segment decreased $31.8 million, or 15.4%, to $174.8 million for fiscal year 2020 compared to fiscal year 2019.

Unit volumes attributable to Cobalt decreased 453 units for fiscal year 2020 compared to fiscal year 2019.

The decrease in net sales and unit volumes was driven primarily by the temporary shutdown of our Neodesha, Kansas facility in the second half of fiscal year 2020 as a result of the COVID-19 pandemic.

The decrease was partially offset by year-over-year price increases on our Cobalt models.

Our overall net sales per unit increased 9.1% to $101,360 per unit for fiscal year 2020 compared to fiscal year 2019.

Net sales per unit for our Malibu segment increased 8.2% to $89,138 per unit for fiscal year 2020 compared to fiscal year 2019, primarily driven by higher sales for new, more expensive models and optional features.

Net sales per unit for our Saltwater Fishing segment decreased 3.9% to $243,358 per unit for fiscal year 2020 compared to fiscal year 2019, primarily driven by lower average selling price due to the mix of models sold.

Net sales per unit for our Cobalt segment increased 4.2% to $89,350 per unit for fiscal year 2020 compared to fiscal year 2019, driven by year-over-year price increases.

Cost of Sales

Cost of sales for fiscal year 2020 decreased $13.9 million, or 2.7%, to $503.9 million compared to fiscal year 2019.

The decrease in cost of sales resulted primarily from lower unit volumes for Malibu, Axis and Cobalt.

The decrease in costs of sales was partially offset by incremental costs contributed by Pursuit for the full year of fiscal year 2020 compared to only nine months for fiscal year 2019 since its acquisition in October 2018 and increased costs incurred to replace engines during the United Auto Workers’ strike against General Motors.

Gross profit for fiscal year 2020 decreased $17.0 million, or 10.2%, compared to fiscal year 2019.

The decrease in gross profit was due mainly to lower unit volumes in fiscal year 2020 as described above and increased costs incurred to replace engines during the United Auto Workers’ strike against General Motors.

Gross margin decreased 150 basis points from 24.3% in fiscal 2019 to 22.8% in fiscal year 2020.

Operating Expenses

Selling and marketing expense for fiscal year 2020 remained flat at $17.9 million compared to fiscal year 2019.

As a percentage of sales, selling and marketing expense increased 20 basis points from 2.6% for fiscal year 2019 to 2.8% for fiscal year 2020.

General and administrative expense for fiscal year 2020 decreased $4.3 million, or 9.8%, to $39.9 million compared to fiscal year 2019.

The decrease in general and administrative expenses was largely due to expenses related to the acquisition of Pursuit in fiscal year 2019 that were not incurred during fiscal year 2020, partially offset by incremental general and administrative expenses attributable to Pursuit during fiscal year 2020.

As a percentage of sales, general and administrative expenses decreased 40 basis points to 6.1% for fiscal year 2020 compared to 6.5% for fiscal year 2019.

Amortization expense for fiscal year 2020 increased $0.2 million, or 2.9%, compared to fiscal year 2019, due to additional amortization from intangible assets acquired as a result of the Pursuit acquisition for the full year in fiscal year 2020.

Other (Income) Expense, Net

Other expense, net for fiscal year 2020 decreased by $4.7 million, or 75.0% to $1.6 million as compared to fiscal year 2019.

The decrease was primarily due to decreased interest expense of $2.6 million and a $1.7 million adjustment to our tax receivable agreement liability, which resulted in us recognizing a corresponding amount as other income during fiscal year 2020.

Interest expense decreased due to a lower interest rate and lower average outstanding debt during fiscal year 2020 compared to fiscal year 2019.

The adjustment to our tax receivable agreement liability was the result of a decrease in the estimated tax rate used in computing our future tax obligations and, in turn, a decrease in the future tax benefit we expect to pay under our tax receivable agreement to our pre-IPO owners.

Provision for Income Taxes

Our provision for income taxes for fiscal year 2020 decreased $3.0 million, to $19.1 million compared to fiscal year 2019.

This decrease was primarily driven by lower pre-tax earnings and reduced U.S.

For fiscal year 2020, our effective tax rate of 22.8% differed from the statutory federal income tax rate of 21% primarily due to the impact of U.S.

state taxes, and partially offset by the impact of non-controlling interests in the LLC.

For fiscal year 2019, our effective tax rate of 24.1% differed from the statutory federal income tax rate of 21% primarily due to the impact of U.S.

This increase was partially offset by the benefits of the foreign derived intangible income deduction, the research and development tax credit and the impact of non-controlling interests in the LLC.

Non-controlling interest

For fiscal years 2020 and 2019, the weighted average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 3.8% and 4.1%, respectively.

GAAP Reconciliation of Non-GAAP Financial Measures

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Adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures that are used by management as well as by investors, commercial bankers, industry analysts and other users of our financial statements.

We define adjusted EBITDA as net income before interest expense, income taxes, depreciation, amortization and non-cash, non-recurring or non-operating expenses, including certain professional fees, acquisition and integration-related expenses, non-cash compensation expense, expenses related to interruption to our engine supply during the labor strike by United Auto Workers ("UAW") against General Motors, expenses attributable to our engine vertical integration initiative and adjustments to our tax receivable agreement liability.

We define adjusted EBITDA as net income before interest expense, income taxes, depreciation, amortization and non-cash, non-recurring or non-operating expenses, including certain professional fees, acquisition and integration-related expenses, non- cash compensation expense, expenses related to interruption to our engine supply during the labor strike by United Auto Workers ("UAW") against General Motors and adjustments to our tax receivable agreement liability.

We define adjusted EBITDA margin as adjusted EBITDA divided by net sales.

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Acquisition and integration related expenses 2

5,112 — 5,245

Stock-based compensation expense 3.

1 unchanged sentence

UAW strike impact 4

Engine development 5

Adjustment to tax receivable agreement liability 5

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Integration related expenses for fiscal year 2021 include post-acquisition adjustments to cost of goods sold of $0.9 million for the fair value step up of inventory acquired from Maverick Boat Group, which was sold during the third quarter of fiscal year 2021.

For fiscal year 2019, represents integration costs and legal, professional and advisory fees incurred in connection with our acquisition of Pursuit on October 15, 2018.

Integration related expenses for fiscal year 2019 include post-acquisition adjustments to cost of goods sold of $0.9 million for the fair value step up of Pursuit inventory acquired, most of which was sold during the second quarter of fiscal year 2019.

(3) Represents equity-based incentives awarded to certain of our employees under the Malibu Boats, Inc.

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For more information, refer to Note 15 of our consolidated financial statements included elsewhere in this Annual Report.

(4) Represents costs incurred in connection with interruption to our engine supply during the UAW strike against General Motors.

(4) For fiscal year ended June 30, 2020, represents costs incurred in connection with interruption to our engine supply during the UAW strike against General Motors.

We purchase engines from General Motors LLC that we then prepare for marine use for our Malibu and Axis boats.

During the UAW strike, General Motors suspended delivery of engine blocks to us and we incurred costs by entering into purchase agreements with two suppliers for additional engines to supplement our inventory of engine blocks for Malibu and Axis boats.

(5) Represents costs incurred in connection with our vertical integration of engines including product development costs and supplier transition performance incentives.

(5) For fiscal year 2022, we recognized other expense from an adjustment in our tax receivable agreement liability due to an increase in the state tax rate used in computing our future tax obligations and in turn, an increase in the future benefit we expect to pay under our tax receivable agreement with pre-IPO owners.

For fiscal years 2021 and 2020, respectively, we recognized other income from an adjustment in our tax receivable agreement liability as a result of a decrease in the estimated tax rate used in computing our future tax obligations and in turn, a decrease in the future tax benefit we expect to pay under our tax receivable agreement with pre-IPO owners.

For fiscal year 2019, the rate decrease was mainly offset by an increase to other expense for tax receivable agreement liability derived by future tax benefits from Tennessee net operating losses at Malibu Boats, Inc.

Refer to Note 12 of our consolidated financial statements included elsewhere in this Annual Report.

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6,342 5,581 3,042

Engine development 5

UAW strike impact 5

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Professional fees 1

0.28 0.05 0.04

Acquisition and integration related expenses 2

3 unchanged sentences

0.31 0.27 0.15

Engine development 5

UAW strike impact 5

Adjustment to tax receivable agreement liability 6

0.05 — (0.08)

Net income attributable to non-controlling interest 7

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For more information, refer to Note 17 of our consolidated financial statements included elsewhere in this Annual Report.

(2) For fiscal year 2022, represents amortization of intangibles acquired in connection with the acquisition of Maverick Boat Group, Pursuit and Cobalt.

For fiscal year 2021, represents legal and advisory fees incurred in connection with the acquisition of Maverick Boat Group and amortization of intangibles acquired in connection with the acquisition of Maverick Boat Group, Pursuit and Cobalt.

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For fiscal year 2020, represents amortization of intangibles acquired in connection with the acquisition of Pursuit and Cobalt.

For fiscal year 2019, represents integration costs and legal, professional and advisory fees incurred in connection with our acquisition of Pursuit on October 15, 2018 and amortization of intangibles acquired in connection with the acquisition of Pursuit and Cobalt.

Integration related expenses for fiscal year 2019 include post-acquisition adjustments to cost of goods sold of $0.9 million for the fair value step up of inventory acquired, most of which was sold during the second quarter of fiscal year 2019 and $1.3 million in depreciation and amortization associated with our fair value step up of property, plant and equipment and intangibles acquired in connection with the acquisition of Pursuit.

(3) Represents the change in the fair value of our interest rate swap entered into on July 1, 2015.

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For more information, refer to Note 15 of our consolidated financial statements included elsewhere in this Annual Report.

(5) Represents costs incurred in connection with our vertical integration of engines including product development costs and supplier transition performance incentives.

(6) Represents costs incurred in connection with interruption to our engine supply during the UAW strike against General Motors.

(5) For fiscal year ended June 30, 2020, represents costs incurred in connection with interruption to our engine supply during the UAW strike against General Motors.

We purchase engines from General Motors LLC that we then prepare for marine use for our Malibu and Axis boats.

(6) For fiscal year 2022, we recognized other expense from an adjustment in our tax receivable agreement liability due to an increase in the state tax rate used in computing our future tax obligations and in turn, an increase in the future benefit we expect to pay under our tax receivable agreement with pre-IPO owners.

Refer to Note 12 of our consolidated financial statements included elsewhere in this Annual Report.

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Liquidity and Capital Resources

Our primary sources of funds are cash provided by operating activities and borrowings under our credit agreement.

Our primary use of funds has been for capital investments, repayments under our debt arrangements, acquisitions, cash distributions to members of the LLC and cash payments under our tax receivable agreement.

Overview and Primary Sources of Cash

Our primary uses of cash have been for funding working capital and capital investments, repayments under our debt arrangements, acquisitions, cash distributions to members of the LLC, cash payments under our tax receivable agreement and stock repurchases under our stock repurchase program.

For both the short term and the long term, our sources of cash to meet these needs have primarily been operating cash flows, borrowings under our revolving credit facility and short and long-term debt financings from banks and financial institutions.

We believe that our cash on hand, cash generated by operating activities and funds available under our revolving credit facility will be sufficient to finance our operating activities for at least the next twelve months and beyond.

Material Cash Requirements

Capital Expenditures.

For fiscal year 2022, we incurred approximately $55.1 million in capital expenditures related to the expansion of our Florida facility used for Maverick Boats Group as well as new models, capacity enhancements and vertical integration initiatives.

We expect capital expenditures between $65.0 million and $70.0 million for fiscal year 2023 primarily for investments in new models, capacity enhancements and vertical integration initiatives.

Other investment opportunities, such as potential strategic acquisitions, may require additional funding.

Principal and Interest Payments.

In June 2022, we fully repaid the $72.0 million of outstanding term loans that matured on July 1, 2022 by drawing on our existing revolving credit facility.

As of June 30, 2022, we maintained a revolving credit facility with a borrowing capacity of $170.0 million, of which, $97.0 million was outstanding.

On July 8, 2022, we entered into a Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”) that amended and restated our second amended and restated credit agreement dated as of June 28, 2017 (the “Prior Credit Agreement”).

The Amended Credit Agreement provides us a revolving credit facility in an aggregate principal amount of up to $350.0 million (of which $121.7 million was drawn on July 8, 2022 to refinance the loans under our Prior Credit Agreement as well as to pay certain fees and expenses related to entering into the Amended Credit Agreement) with a maturity date of July 8, 2027.

Assuming no additional repayments or borrowings on our revolving credit facility after July 8, 2022, our interest payments would be approximately $3.3 million for fiscal year 2023 based on the interest rate at July 8, 2022 of 2.75%.

See below under “Revolving Credit Facility” for additional information regarding our revolving credit facility, including the interest rate applicable to any borrowing under such facility.

Tax Receivable Agreement.

We entered into a tax receivable agreement with our pre-IPO owners at the time of our initial public offering.

Under the tax receivables agreement, we pay the pre-IPO owners (or any permitted assignees) 85% of the amount of cash savings, if any, in U.S.

federal, state and local income tax or franchise tax that we actually realize, or in some circumstances are deemed to realize, as a result of an expected increase in our share of tax basis in LLC’s tangible and intangible assets, including increases attributable to payments made under the tax receivable agreement.

These obligations will not be paid if we do not realize cash tax savings.

We estimate that approximately $4.0 million will be due under the tax receivable agreement within the next 12 months.

In accordance with the tax receivable agreement, the next payment is anticipated to occur approximately 75 days after filing the federal tax return which is due on April 15, 2023.

Operating Lease Obligations.

Lease commitments consist principally of leases for our manufacturing facilities.

For fiscal year 2023, our expected operating lease payments will be $2.5 million and our total committed lease payments are $13.4 million as of June 30, 2022.

Additional information regarding our operating leases is available in Note 11, Leases, of the Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Purchase Obligations.

In the ordinary course of business, we enter into purchase orders from a variety of suppliers, primarily for raw materials, in order to manage our various operating needs.

The orders are expected to be purchased throughout fiscal year 2023.

We or the vendor can generally terminate the purchase orders at any time.

These purchase orders do not contain any termination payments or other penalties if cancelled.

As of June 30, 2022, we had purchase orders in the amount of $139.1 million due within the next 12 months.

Stock Repurchase Program .

On November 3, 2021, our Board of Directors authorized a stock repurchase program to allow for the repurchase of up to $70.0 million of our Class A Common Stock and the LLC's LLC Units (the “Repurchase Program”) for the period from November 8, 2021 to November 8, 2022.

During the fiscal year ended June 30, 2022, we repurchased 554,995 shares of Class A Common Stock for $34.6 million in cash including related fees and expenses.

As of June 30, 2022, $35.4 million was available to repurchase shares of Class A Common Stock and LLC Units under the Repurchase Program.

We may repurchase shares of our common stock at any time or from time to time, without prior notice, subject to market conditions

and other considerations.

We have no obligation to repurchase any shares of our common stock under the share repurchase program.

Our future capital requirements beyond the next 12 months will depend on many factors, including the general economic environment in which we operate and our ability to generate cash flow from operations, which are more uncertain as a result of inflation, increasing interest rates, increasing fuel prices, ongoing supply chain disruptions and the continuing impact of COVID-19.

Our liquidity needs during this uncertain time will depend on multiple factors, including our ability to continue operations and production of boats, the performance of our dealers and suppliers, the impact of the general economy on our dealers, suppliers and retail customers, the availability of sufficient amounts of financing, and our operating performance.

In addition, as noted elsewhere, a jury recently found that our subsidiary, Malibu Boats, LLC, and another entity that was the manufacturer of the boat at question, Malibu Boats West, Inc., negligently failed to warn of a hazard posed by the relevant boat and that such failure was a proximate cause of the death of a passenger in the boat.

Based on the jury’s finding of successor liability, the trial court entered judgment for the full amount of the verdict against Malibu Boats, LLC, with a potential maximum liability to Malibu Boats, LLC of $140 million, plus post-judgment interest at a rate of 6.25% per annum.

Malibu Boats, LLC may also be required to pay an award of reasonable attorney’s fees to the plaintiffs, which the plaintiffs claim should be approximately $56 million.

The trial court has postponed any ruling on the plaintiffs' contested motion for attorney’s fees pending the resolution of our post-trial motions and related appeals.

On July 17, 2022, the trial court denied the post-trial motions of Malibu Boats, LLC, and we have since filed a notice of appeal.

Pending resolution of the appeals process, the payment of any damages in this matter is expected to be stayed.

While we maintain product liability insurance applicable to this case, such insurance coverage may be limited to $26 million.

Further, while we have other claims that we may decide to pursue with respect to this matter, we cannot provide any assurance that we will pursue those claims or be successful if we do.

If the outcome of the case is ultimately unfavorable to us after appeal, we would need to pay for any final judgment in excess of the amount paid by our insurance providers.

The following table summarizes the cash flows from operating, investing and financing activities (dollars in thousands):

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Operating activities $ 164,846 $ 131,314 $ 94,141

Investment activities (181,095) (40,394) (118,011)

Investing activities (61,621) (181,095) (40,394)

Financing activities (60,380) 57,346 (47,323)

Impact of currency exchange rates on cash balances (580) 127 (29)

Increase (decrease) in cash $ 7,692 $ 6,395 $ (34,231)

Increase in cash $ 42,265 $ 7,692 $ 6,395

Comparison of the Fiscal Year Ended June 30, 2022 to the Fiscal Year Ended June 30, 2021

Operating Activities

Net cash from operating activities was $131.3 million for fiscal year 2021, compared to $94.1 million for the same period in 2020, an increase of $37.2 million.

Net cash provided by operating activities was $164.8 million for fiscal year 2022, compared to $131.3 million for the same period in 2021, an increase of $33.5 million.

The increase in cash provided by operating activities primarily resulted from an increase of $51.7 million in net income (after consideration of non-cash items included in net income, primarily related to depreciation, amortization, deferred tax assets and non-cash compensation) and a net decrease in operating assets and liabilities of $18.2 million related to the timing of collections of accounts receivables, payments for accruals and payables, and purchases of inventory.

Investing Activities

Net cash used for investing activities was $181.1 million for fiscal year 2021 compared to $40.4 million for the same period in 2020, a increase of $140.7 million.

The increase in cash used for investing activities was primarily related to the acquisition of Maverick Boat Group on December 31, 2020, partially offset by a reduction in capital expenditures compared to the capital outlays for our expansion activities at our Pursuit and Cobalt plants in fiscal year 2020.

Net cash used in investing activities was $61.6 million for fiscal year 2022 compared to $181.1 million for the same period in 2021, a decrease of cash used in investing activities of $119.5 million.

The decrease in cash used in investing activities was primarily related to the acquisition of Maverick Boat Group on December 31, 2020, partially offset by an increase in capital expenditures and capital outlays related to our expansion activities at our Maverick facility in fiscal year 2022 compared to the capital expenditures in fiscal year 2021.

Financing Activities

Net cash provided by financing activities was $57.3 million for fiscal year 2021 compared to net cash used by financing activities of $47.3 million for fiscal year 2020, a change of $104.6 million.

Net cash used in financing activities was $60.4 million for fiscal year 2022 compared to net cash provided by financing activities of $57.3 million for fiscal year 2021, a change of $117.7 million.

During fiscal year, 2022, we received proceeds of $72.0 million from additional borrowings under our revolving credit facility to fully repay the $72.0 million of outstanding term

loans that matured on July 1, 2022.

Also during fiscal year 2022, we repaid $20.0 million of borrowings under our revolving credit facility, we repaid a total of $76.3 million on our term loans, repurchased $34.6 million of our Class A Common Stock under our previously announced stock repurchase program, paid $2.1 million on taxes for shares withheld upon the vesting of restricted stock awards, paid $2.7 million in distributions to LLC unit holders and received $3.3 million in proceeds from the exercise of stock options.

During fiscal year, 2021, we received proceeds of $25.0 million from a new incremental term loan and $65.0 million from additional borrowings under our revolving credit facility to fund the acquisition of Maverick Boat Group.

During fiscal year 2021, we also repaid $28.8 million of borrowings under our revolving credit facility, we repaid $0.6 million on our term loan, paid $1.2 million on taxes for shares withheld upon the vesting of restricted stock awards, paid $0.6 million in deferred financing costs, paid $1.8 million in distributions to LLC unit holders and received $0.3 million in proceeds from the exercise of stock options.

During fiscal year 2020, we received $103.8 million in proceeds from our credit facility primarily to provide financial flexibility in light of the uncertainty resulting from the COVID-19 pandemic.

During fiscal year 2020, we repaid $135 million of borrowings under our revolving credit facility, repurchased $13.8 million of our Class A Common Stock under our previously announced stock repurchase program, paid $0.8 million on taxes for shares withheld on restricted stock vestings, paid $1.8 million in distributions to LLC unit holders and we received $0.4 million in proceeds from the exercise of stock options.

Comparison of the Fiscal Year Ended June 30, 2021 to the Fiscal Year Ended June 30, 2020

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Net cash from operating activities was $131.3 million for fiscal year 2021, compared to $94.1 million for the same period in 2020, an increase of $37.2 million.

The increase in cash provided by operating activities primarily resulted from a net increase in operating assets and liabilities of $13.0 million related to the timing of collections of accounts receivables, payments for accruals and payables, and purchases of inventory and an increase of $4.6 million in non-cash items primarily related to depreciation, amortization, deferred tax assets and non-cash compensation offset by a $5.0 million decrease in net income.

The increase in cash provided by operating activities primarily resulted from an increase of $56.4 million in net income (after consideration of non-cash items included in net income, primarily related to depreciation, amortization, deferred tax assets and non-cash compensation) and a net decrease in operating assets and liabilities of $19.2 million related to the timing of collections of accounts receivables, payments for accruals and payables, and purchases of inventory.

Investing Activities

Net cash used for investing activities was $40.4 million for fiscal year 2020 compared to $118.0 million for the same period in 2019, a decrease of $77.6 million.

The decrease in cash used for investing activities was primarily related to the purchase price paid for Pursuit in October 2018, partially offset by an increase in capital expenditures in fiscal year 2020 consisting of normal purchases for manufacturing infrastructure, molds, and equipment and expansion activities at Cobalt and Pursuit.

Net cash used for investing activities was $181.1 million for fiscal year 2021 compared to $40.4 million for the same period in 2020, an increase of $140.7 million.

Financing Activities

Net cash used by financing activities was $47.3 million for fiscal year 2020 compared to net cash provided by financing activities of $2.4 million for fiscal year 2019, a change of $49.7 million.

During fiscal year 2020, we received $103.8 million in proceeds from our credit facility primarily to provide financial flexibility in light of the current uncertainty resulting from the COVID-19 pandemic.

We repaid $135 million of revolving debt and we repurchased $13.8 million of our Class A Common Stock under our previously announced stock repurchase program.

We also paid $1.8 million in distributions to LLC unit holders and $0.8 million on taxes for shares withheld on restricted stock vestings and we received $0.4 million in proceeds from the exercise of stock options during fiscal year 2020.

During fiscal year 2019, we received $55.0 million in proceeds from our credit facility primarily to fund the acquisition of Pursuit, which we subsequently repaid.

We also converted $35.0 million from term debt to our revolving credit facility in May 2019.

We also paid $1.8 million in distributions to LLC unit holders and $1.2

million on taxes for shares withheld on restricted stock vestings and we received $0.7 million proceeds from the exercise of stock options.

Loans and Commitments

We amended our existing credit agreement on December 30, 2020 in connection with our acquisition of Maverick Boat Group.

As a result of that amendment, we currently have a revolving credit facility with borrowing capacity of up to $170.0 million and a $99.4 million term loan outstanding.

As of June 30, 2021, we had $45.0 million outstanding under our revolving credit facility and $1.2 million in outstanding letters of credit, with $123.8 million available for borrowing.

Our revolving credit facility matures on July 1, 2024, the incremental term loan made on December 30, 2020 in a principal amount of $25.0 million, of which $24.4 million is outstanding as of June 30, 2021, (which we refer to as the incremental term loan) matures on July 1, 2024, and the remaining $75.0 million of term loans (which we refer to as the existing term loans, and together with the incremental term loan, the term loans) mature on July 1, 2022.

The revolving credit facility and term loans are governed by a credit agreement with Boats LLC as the borrower and Truist Bank, as the administrative agent, swingline lender and issuing bank.

The obligations of Boats LLC under the credit agreement are guaranteed by the LLC and, subject to certain exceptions, the present and future domestic subsidiaries of Boats LLC, and all such obligations are secured by substantially all of the assets of the LLC, Boats LLC and such subsidiary guarantors.

Net cash provided by financing activities was $57.3 million for fiscal year 2021 compared to net cash used by financing activities of $47.3 million for fiscal year 2020, a change of $104.6 million.

During fiscal year 2020, we received $103.8 million in proceeds from our credit facility primarily to provide financial flexibility in light of the uncertainty resulting from the COVID-19 pandemic.

Revolving Credit Facility

On July 8, 2022, we entered into our Amended Credit Agreement with Truist Bank, as the administrative agent, swingline lender and issuing bank, that amended and restated our Prior Credit Agreement.

The Amended Credit Agreement provides us a revolving credit facility in an aggregate principal amount of up to $350.0 million (of which $121.7 million was drawn on July 8, 2022 to refinance the loans under the Prior Credit Agreement as well as to pay certain fees and expenses related to entering into the Amended Credit Agreement) with a maturity date of July 8, 2027.

Prior to entering into the Amended Credit Agreement, we repaid $72.0 million of outstanding term loans under the Prior Credit Agreement in June 2022 by drawing on our revolving credit facility under the Prior Credit Agreement.

Our indirect subsidiary, Malibu Boats, LLC is the borrower under the Amended Credit Agreement and its obligations are guaranteed by the LLC and, subject to certain exceptions, the present and future domestic subsidiaries of Malibu Boats, LLC, and all such obligations are secured by substantially all of the assets of the LLC, Malibu Boats, LLC and such subsidiary guarantors.

Malibu Boats, Inc.

is not a party to the credit agreement.

All borrowings under the credit agreement bear interest at a rate equal to either, at our option, (i) the highest of the prime rate, the Federal Funds Rate plus 0.5%, or one-month LIBOR plus 1% (the “Base Rate”) or (ii) LIBOR, in each case plus an applicable margin ranging from 1.25% to 2.25% with respect to LIBOR borrowings and 0.25% to 1.25% with respect to Base Rate borrowings.

The applicable margin will be based upon the consolidated leverage ratio of the LLC and its subsidiaries calculated on a consolidated basis.

As of June 30, 2021, the interest rate on the term loans and revolving credit facility wa s 1.35%.

We are required to pay a commitment fee for any unused portion of the revolving credit facility which will range from 0.20% to 0.40% per annum, depending on the LLC’s and its subsidiaries’ consolidated leverage ratio.

The credit agreement permits prepayment of the term loans without any penalties.

The existing term loans require an amortization payment of approximately $3.0 million on March 31, 2022 and the balance of the existing term loans are due on the scheduled maturity date of July 1, 2022.

The incremental term loan of $25.0 million is subject to quarterly amortization at a rate of 5.0% per year through December 31, 2022, 7.5% per year through June 30, 2024 and the balance of the incremental term loan is due on the scheduled maturity date of July 1, 2024.

The credit agreement also requires prepayments from the net cash proceeds received by Boats LLC or any guarantors from certain asset sales and recovery events, subject to certain reinvestment rights, and from excess cash flow, subject to the terms and conditions of the credit agreement.

The credit agreement contains certain customary representations and warranties, and notice requirements for the occurrence of specific events such as the occurrence of any event of default, or pending or threatened litigation.

The credit agreement also requires compliance with certain customary financial covenants, including a minimum ratio of EBITDA to fixed charges and a maximum ratio of total debt to EBITDA.

The credit agreement contains certain restrictive covenants, which, among other things, place limits on certain activities of the loan parties under the credit agreement, such as the incurrence of additional indebtedness and additional liens on property and limit the future payment of dividends or distributions.

For example, the credit agreement generally prohibits the LLC, Boats LLC and the subsidiary guarantors from paying dividends or making distributions, including to us.

The credit facility permits, however, (i) distributions based on a member’s allocated taxable income, (ii) distributions to fund payments that are required under the LLC’s tax receivable agreement, (iii) purchase of stock or stock options of the LLC from former officers, directors or employees of loan parties or payments pursuant to stock option and other benefit plans up to $3.0 million in any fiscal year, and (iv) share repurchase payments up to $35.0 million in any fiscal year subject to one-year carry forward and compliance with other financial covenants.

In addition, the LLC may make dividends and distributions of up to $10.0 million in any fiscal year, subject to compliance with other financial covenants.

As of June 30, 2021, we believe we were in compliance in all material respects with the covenants contained in the credit agreement.

Potential Impact of LIBOR Transition

The Chief Executive of the U.K.

Financial Conduct Authority (the “FCA”), which regulates the London Interbank Offered Rate, or LIBOR, has announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021.

However, for U.S dollar LIBOR, the relevant date has been deferred to at least June 30, 2023 for certain tenors (including overnight and one, three, six and 12 months), at which time the LIBOR administrator has indicated that it intends to cease publication of U.S.

dollar LIBOR.

Despite this deferral, the LIBOR administrator has advised that no new contracts using U.S.

dollar LIBOR should be entered into after December 31, 2021.

These actions indicate that the continuation of U.S.

LIBOR on the current basis cannot and will not be guaranteed after June 30, 2023.

Moreover, it is possible that U.S.

LIBOR will be discontinued or modified prior to June 30, 2023.

All of our $144.4 million of debt outstanding under our credit agreement as of June 30, 2021 bears interest at a floating rate that uses LIBOR as the applicable reference rate to calculate the interest.

Our credit agreement provides that, if it is publicly announced that the administrator of LIBOR has ceased or will cease to provide LIBOR, if it is publicly announced by the applicable regulatory supervisor that LIBOR is no longer representative or if either the administrative agent or lenders holding 50% of the aggregate principal amount of our revolving commitments and term loans elect, we and the administrative agent may amend our credit agreement to replace LIBOR with an alternative benchmark rate.

This alternative benchmark rate may include a forward-looking term rate that is based on the secured overnight financing rate, also known as SOFR, published by the Federal Reserve Bank of New York.

In addition, our tax receivable agreement provides that, if for any reason the LLC is not able to make a tax distribution in an amount that is sufficient to make any required payment under the tax receivable agreement or we otherwise lack sufficient funds, interest would accrue on any unpaid amounts at LIBOR plus 500 basis points until they are paid.

Our tax receivable agreement, however, does not provide for an alternative reference rate to LIBOR and, while we do not currently anticipate

failing to pay any amounts owed under our tax receivable agreement, it is unclear how we would determine interest on any such amounts should we fail to pay as required under our tax receivable agreement.

If the rate used to calculate interest on our outstanding floating rate debt under our credit agreement that currently uses LIBOR were to increase by 1.0% either as a result of an increase in LIBOR or the result of the use of the alternative benchmark rate, we would expect to incur additional interest expense on such indebtedness as of June 30, 2021 of approximately $1.4 million on an annualized basis.

While we do not expect the potential impact of any LIBOR transition to have a material effect on our financial results based on our currently outstanding debt, uncertainty as to the nature of potential changes to LIBOR, fallback provisions, alternative reference rates or other reforms could adversely impact our interest expense on our floating rate debt that currently uses LIBOR as the applicable reference rate.

In addition, any alternative reference rates to LIBOR may result in interest that does not correlate over time with the payments that would have been made on our indebtedness if LIBOR was available in its current form.

Further, the discontinuance or modification of LIBOR and uncertainty of an alternative reference rate may result in the increase in the cost of future indebtedness, which could have a material adverse effect on our financial condition, cash flow and results of operations.

We intend to closely monitor the financial markets and the use of fallback provisions and alternative reference rates in anticipation of the discontinuance or modification of U.S.

LIBOR by June 30, 2023.

Future Liquidity Needs and Capital Expenditures

Management believes that our existing cash and cash flows from operations will be sufficient to fund our operations for the next 12 months.

We estimate that approximately $3.8 million will be due under the tax receivable agreement within the next 12 months.

In accordance with the tax receivable agreement, the next payment is anticipated to occur approximately 75 days after filing the federal tax return which is due on April 15, 2022.

Our future capital requirements will depend on many factors, including the general economic environment in which we operate and our ability to generate cash flow from operations, which are more uncertain as a result of the COVID-19 pandemic and its impact on the general economy.

Our liquidity needs during this uncertain time will depend on multiple factors, including our ability to continue operations and production of boats, the COVID-19 pandemic’s effects on our dealers, suppliers and retail customers, the availability of sufficient amounts of financing, and our operating performance.

Stock Repurchase Program

On August 27, 2020, our Board of Directors authorized a stock repurchase program for the repurchase of up to $50.0 million of Class A Common Stock and the LLC Units for the period from September 2, 2020 to July 1, 2021.

No shares were repurchased under the share repurchase program and it expired on July 1, 2021.

Capital Resources

Management expects our capital expenditures for fiscal year 2022 to be more than our capital expenditures for fiscal year 2021 primarily driven by expansion projects at our Maverick Boat Group facility, investments in new models, capacity enhancements and vertical integration initiatives.

Off-Balance Sheet Arrangements

was not a party to the Prior Credit Agreement and is not a party to the Amended Credit Agreement.

All borrowings under the Amended Credit Agreement bear interest at a rate equal to either, at our option, (i) the highest of the prime rate, the Federal Funds Rate plus 0.5%, or one-month Term SOFR plus 1% (the “Base Rate”) or (ii) SOFR, in each case plus an applicable margin ranging from 1.25% to 2.00% with respect to SOFR borrowings and 0.25% to 1.00% with respect to Base Rate borrowings.

The applicable margin will be based upon the consolidated leverage ratio of the LLC and its subsidiaries.

We are required to pay a commitment fee for the unused portion of the revolving credit facility, which will range from 0.15% to 0.30% per annum, depending on the LLC’s and its subsidiaries’ consolidated leverage ratio.

The Amended Credit Agreement contains certain customary representations and warranties, and notice requirements for the occurrence of specific events such as the occurrence of any event of default or pending or threatened litigation.

The Amended Credit Agreement also requires compliance with certain customary financial covenants consisting of a minimum ratio of EBITDA to interest expense and a maximum ratio of total debt to EBITDA.

The Amended Credit Agreement contains restrictive covenants regarding indebtedness, liens, fundamental changes, investments, restricted payments, disposition of assets, transactions with affiliates, negative pledges, hedging transactions, certain prepayments of indebtedness, accounting changes and governmental regulation.

The Amended Credit Agreement also contains customary events of default.

Events of default under the Amended Credit Agreement include (subject to grace periods in certain instances):

(i) the failure by any Loan Party to timely make payments due under the Amended Credit Agreement;

(ii) material misrepresentations or misstatements in any representation or warranty by any Loan Party when made;

(iii) failure by any Loan Party to comply with the covenants under the Amended Credit Agreement and other related agreements;

(iv) certain defaults under a specified amount of other indebtedness of Loan Parties;

(v) insolvency or bankruptcy-related events with respect to the Loan Parties;

(vi) certain undischarged, non-appealable judgments against Loan Parties;

(vii) certain ERISA- related events reasonably expected to result in liability above a specified threshold to Loan Parties taken as a whole;

(viii) any loan documents or a material part of the liens under the loan documents ceasing to be, or being asserted by any Loan Party not to be, in full force and effect;

(ix) any obligations under the loan documents ceasing to constitute senior indebtedness;

and (x) the occurrence of a change of control.

If an event of default has occurred and continues beyond any applicable cure period, the Administrative Agent may (i) accelerate all outstanding obligations under the Amended Credit Agreement or (ii) terminate the commitments, amongst other remedies.

Additionally, the lenders are not obligated to fund any new borrowing under the Amended Credit Agreement while an event of default is continuing.

Repurchase Commitments

In connection with our dealers’ wholesale floor plan financing of boats, we have entered into repurchase agreements with various lending institutions.

The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending institution through payment date by the dealer, generally not exceeding two and a half years.

Such agreements

are customary in the industry and our exposure to loss under such agreements is limited by the resale value of the inventory which is required to be repurchased.

Refer to Note 17 to the audited consolidated financial statements included elsewhere in this Annual Report for further information on repurchase commitments.

Contractual Obligations and Commitments

As of June 30, 2021, our contractual obligations were as follows:

Payments Due by Period

Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years

(In thousands)

Long-term debt 1

$ 144,375 $ 4,250 $ 74,969 $ 65,156 $ —

Interest expense 2

3,793 1,961 1,832 — —

Operating leases 3

15,943 2,503 5,113 4,568 3,759

Purchase obligations 4

141,443 141,443 — — —

Payments pursuant to tax receivable agreement 5

48,214 3,773 8,006 8,581 27,854

Total $ 353,768 $ 153,930 $ 89,920 $ 78,305 $ 31,613

(1) Principal payments on our outstanding bank debt per terms of our Credit Agreement, which is comprised of a $100.0 million term loan, of which $99.4 million is outstanding as of June 30, 2021 and $170.0 million revolving credit facility, of which $45.0 million was outstanding as of June 30, 2021.

Assumes no additional borrowings or repayments under our revolving credit facility prior to its maturity.

The balance of the existing term loans matures on July 1, 2022, the incremental term loan matures on July 1, 2024 and the revolving credit facility matures on July 1, 2024.

(2) Interest payments on our outstanding term loans and revolving credit facility under our credit agreement.

Our term loans and revolving credit facility bear interest at variable rates.

We have calculated future interest obligations based on the interest rate for our term loan and revolving credit facility as of June 30, 2021.

(3) Pursuant to the adoption of ASC Topic 842, Leases , as of July 1, 2019 our lease liability for all leases with terms greater than 12 months as represented on the balance sheet respective of maturity.

(4) As part of the normal course of business, we enter into purchase orders from a variety of suppliers, primarily for raw materials, in order to manage our various operating needs.

The orders are expected to be purchased throughout fiscal year 2022.

(5) Reflects amounts owed under our tax receivables agreement that we entered into with our pre-IPO owners at the time of our IPO.

Under the tax receivables agreement, we pay the pre-IPO owners (or any permitted assignees) 85% of the amount of cash savings, if any, in U.S.

These obligations will not be paid if we do not realize cash tax savings.

Our dealers have arrangements with certain finance companies to provide secured floor plan financing for the purchase of our products.

Our dealers have arrangements with certain finance companies to provide secured floor plan financing for the purchase of our boats.

These arrangements indirectly provide liquidity to us by financing dealer purchases of our products, thereby minimizing the use of our working capital in the form of accounts receivable.

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For fiscal year 2022, we did not repurchase any boats under our repurchase agreements.

For fiscal year 2021, we did not repurchase any boats under our repurchase agreements.

For fiscal year 2020, we repurchased two units from a lender of one of our former dealers and those units were subsequently resold in fiscal year 2020 above their cost and at a minimal margin loss.

For fiscal year 2019, we repurchased eight units from a lender of two of our former dealers and those units were subsequently resold in fiscal year 2020 above their cost and at minimal margin loss .

An adverse change in retail sales could require us to repurchase repossessed units upon an event of default by any of our dealers, subject to the annual limitation.

Our dealers experience seasonality in their business.

Retail demand for boats is seasonal, with a significant majority of sales occurring during peak boating season, which coincides with our first and fourth fiscal quarters.

In order to minimize the impact of this seasonality on our business, we manage our manufacturing processes and structure dealer incentives to tie our annual volume rebates program to consistent ordering patterns, encouraging dealers to purchase our products throughout the

In this regard, we may offer free flooring incentives to dealers from the beginning of our model year through April 30 of each year.

Further, in the event that a dealer does not consistently order units throughout the year, such dealer’s rebate is materially reduced.

We may offer off-season retail promotions to our dealers in seasonally slow months, during and ahead of boat shows, to encourage retail demand.

The market prices of certain materials and components used in manufacturing our products, especially resins that are made with hydrocarbon feedstocks, copper, aluminum and stainless steel, can be volatile.

Historically, however, inflation has not had a material effect on our results of operations.

Significant increases in inflation, particularly those related to wages and increases in the cost of raw materials, could have an adverse impact on our business, financial condition and results of operations.

New boat buyers often finance their purchases.

Inflation typically results in higher interest rates that could translate into an increased cost of boat ownership.

Should inflation and increased interest rates occur, prospective consumers may choose to forgo or delay their purchases or buy a less expensive boat in the event credit is not available to finance their boat purchases.

Critical Accounting Policies

Refer to Note 17 to the audited consolidated financial statements included elsewhere in this Annual Report for further information on repurchase commitments.

Potential Impact of LIBOR Transition

Malibu Boats, Inc.

is required to make a good faith effort to ensure that it has sufficient cash available to make any required payments under the tax receivable agreement.

The limited liability company agreement of the LLC requires the LLC to make “tax distributions” which, in the ordinary course, will be sufficient to pay the actual tax liability of Malibu Boats, Inc.

and to fund required payments under the tax receivable agreement.

If for any reason the LLC is not able to make a tax distribution in an amount that is sufficient to make any required payment under the tax receivable agreement or we otherwise lack sufficient funds, interest would accrue on any unpaid amounts at LIBOR, plus 500 basis points until they are paid.

Recent actions taken by the Chief Executive of the U.K.

Financial Conduct Authority (the “FCA”), which regulates LIBOR, indicate that the continuation of U.S.

LIBOR on the current basis cannot and will not be guaranteed after June 30, 2023.

Moreover, it is possible that U.S.

LIBOR will be discontinued or modified prior to June 30, 2023.

Our tax receivable agreement, however, does not provide for an alternative reference rate to LIBOR and, while we do not currently anticipate failing to pay any amounts owed

under our tax receivable agreement, it is unclear how we would determine interest on any such amounts should we fail to pay as required under our tax receivable agreement.

Critical Accounting Policies and Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP.

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We include the results of operations of the acquired business in the consolidated financial statements beginning on the acquisition date.

We recognized goodwill of $19.8 million as a result of our acquisition of Cobalt in July 2017, goodwill of $19.5 million as a result of our acquisition of Pursuit in October 2018 and goodwill of $49.2 million as a result of our acquisition of Maverick Boat Group in December 2020.

We recognized goodwill of $49.2 million as a result of our acquisition of Maverick Boat Group in December 2020 and goodwill of $0.3 million as a result of our acquisition of AmTech, LLC in February 2022.

We had goodwill outstanding of $100.8 million as of June 30, 2022.

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From time to time, however, we may accept returns in limited circumstances and at our discretion under our warranty policy, which generally limits returns to instances of manufacturing defects.

We may be obligated, in the event of default by a dealer, to accept returns of unsold boats under our repurchase

commitment to floor financing providers, who are able to obtain such boats through foreclosure.

We may be obligated, in the event of default by a dealer, to accept returns of unsold boats under our repurchase commitment to floor financing providers, who are able to obtain such boats through foreclosure.

We accrue returns when a repurchase and return, due to the default of one of our dealers, is determined to be probable and the return is reasonably estimable.

Historically, product returns resulting from repurchases made under the floorplan financing program have not been material and the returned boats have been subsequently resold above their cost.

Our financial exposure is limited to the difference between the amount paid to the finance companies and the amount received on the resale of the repossessed product.

Refer to Note 9 and Note 17 related to our product warranty and repurchase commitment obligations, respectively.

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Revenue associated with sales to the independent representative responsible for international sales is recognized in accordance with free on board shipping point terms, the point at which the risks of ownership and loss pass to the representative.

A fixed percentage discount is earned by the independent representative at the time of shipment to the representative as a reduction in the price of the boat and is recorded in our consolidated statement of operations as a reduction in sales.

A fixed percentage discount is earned by the independent representative at the time of shipment to the representative as a reduction in the price of the boat and is recorded in

our consolidated statement of operations as a reduction in sales.

We earn royalties on boats shipped with our proprietary wake surfing technology under licensing agreements with various marine manufacturers.

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Product Warranties

Our Malibu and Axis brand boats have a limited warranty for a period up to five years.

Our Cobalt brand boats have (1) a structural warranty of up to ten years which covers the hull, deck joints, bulkheads, floor, transom, stringers, and motor mount, and (2) a five year bow-to-stern warranty on all components manufactured or purchased (excluding hull and deck structural components), including canvas and upholstery.

Gelcoat is covered up to three years for Cobalt and one year for Malibu and Axis.

Pursuit brand boats have (1) a limited warranty for a period of up to five years on structural components such as the hull, deck and defects in the gelcoat surface of the hull bottom and (2) a bow-to-stern warranty of two years (excluding hull and deck structural components).

Maverick, Pathfinder and Hewes brand boats have (1) a limited warranty for a period of up to five years on structural components such as the hull, deck and defects in the gelcoat surface of the hull bottom and (2) a bow to stern warranty of one year (excluding hull and deck structural components).

Cobia brand boats have (1) a limited warranty for a period of up to ten years on structural components such as the hull, deck and defects in the gelcoat surface of the hull bottom and (2) a bow to stern warranty of three years (excluding hull and deck structural components).

For each boat brand, there are certain materials, components or parts of the boat that are not covered by our warranty and certain components or parts that are separately warranted by the manufacturer or supplier (such as the engine).

Engines that we manufacture for Malibu and Axis models have a limited warranty of up to five years or five-hundred hours.

Our standard warranties require us or our dealers to repair or replace defective products during the warranty period at no cost to the consumer.

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A hypothetical change of a 10% increase or decrease to our estimate of the warranty liability as of June 30, 2022 would have affected net income for the fiscal year ended June 30, 2022 by approximately $3.9 million.

Refer to Note 9 to the audited consolidated financial statements included elsewhere in this Annual Report for further information on warranties.

New Accounting Pronouncements

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis