What changed in this filing

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Item 1. Business

2024-08-29 compared with 2023-08-29 · 70 added, 61 removed, 357 unchanged (27% of the section changed)

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and its consolidated subsidiaries;

• We use the term "Boats, LLC" to refer to the LLC's subsidiary Malibu Boats, LLC;

• We refer to the owners of membership interests in the LLC immediately prior to the consummation of the IPO, collectively, as our “pre-IPO owners”;

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• References to certain market and industry data presented in this Form 10-K are determined as follows:

boat sales and unit volume for the overall powerboat industry and any powerboat category during any calendar year are based on retail boat market data from the NMMA;

market share and unit volume for the overall powerboat industry and any powerboat category during any fiscal year ended June 30 or any calendar year ended December 31 are based on comparable same-state retail boat registration data from SSI, as reported by the 50 states for which data was available as of the date of this Form 10-K;

and (3) market share among U.S.

manufacturers of exports to international markets of boats in any powerboat category for any period is based on data from the Port Import Export Reporting Service, available through March 31, 2023, and excludes such data for Australia and New Zealand.

boat sales and unit volume for the overall powerboat industry and any powerboat category during any calendar year are based on retail boat market data from the NMMA and (2) U.S.

market share and unit volume for the overall powerboat industry and any powerboat category during any fiscal year ended June 30 or any calendar year ended December 31 are based on comparable same-state retail boat registration data from SSI, for which data was available for all 50 states as of the date of this Form 10-K.

This Annual Report on Form 10-K includes our trademarks, such as “ Monsoon,” “Surf Gate,” “Wakesetter,” “Surf Band,” and “Swim Step,” which are protected under applicable intellectual property laws and are the property of Malibu Boats, Inc.

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We are a leading designer, manufacturer and marketer of a diverse range of recreational powerboats, including performance sport boats, sterndrive and outboard boats under eight brands—Malibu, Axis, Pursuit, Maverick, Cobia, Pathfinder, Hewes and Cobalt.

We have the #1 market share position in the United States in the performance sport boat category through our Malibu and Axis brands and the #1 market share position in the United States in the 24’—29’ segment of the sterndrive category through our Cobalt brand, and we are among the leading market share positions in the fiberglass outboard fishing boat market with our Pursuit and Maverick Boat Group brands.

Our product portfolio of premium brands are used for a broad range of recreational boating activities including, among others, water sports such as water skiing,

wakeboarding and wake surfing, as well as general recreational boating and fishing.

As of June 30, 2024, we had the #1 market share position in the United States in the performance sport boat category through our Malibu and Axis brands and the #1 market share position in the United States in the 24’—29’ segment of the sterndrive category through our Cobalt brand, and we are among the leading market share positions in the fiberglass outboard fishing boat market with our Pursuit and Maverick Boat Group brands.

Our product portfolio of premium brands are used for a broad range of recreational boating activities including, among others, water sports such as water

skiing, wakeboarding and wake surfing, as well as general recreational boating and fishing.

Our passion for consistent innovation, which has led to propriety technology such as Surf Gate, has allowed us to expand the market for our products by introducing consumers to new and exciting recreational activities.

We design products that appeal to an expanding range of recreational boaters and water sports enthusiasts whose passion for boating and water sports is a key aspect of their lifestyle and provide consumers with a better customer-inspired experience.

With performance, quality, value and multi-purpose features, our product portfolio has us well positioned to broaden our addressable market and achieve our goal of increasing our market share in the expanding recreational boating industry.

Our flagship Malibu boats are designed for consumers seeking a premium performance sport boat experience and offer our latest innovations in performance, comfort and convenience.

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The results of this collaboration are reflected in our receipt of numerous industry awards.

We sell our boats through a dealer network that we believe is the strongest in the recreational powerboat industry.

We sell our boats through a dealer network that we believe is among the strongest in the recreational powerboat industry.

As of June 30, 2024, our distribution channel consisted of over 400 dealer locations globally.

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We maintain a leading market share position in a number of recreational boating categories with our various brands.

According to SSI, in 2022 we held the number one market share position in the United States for performance sport boats with our Malibu and Axis brands, the number one market share position in the United States for the 24’—29’ segment of the sterndrive boat category through our Cobalt brand, and we are among the leading market share positions in the outboard fiberglass fishing market that our Pursuit and Maverick Boat Group brands serve, in each case based on unit volume.

According to SSI, as of June 30, 2024, we held the number one market share position in the United States for performance sport boats with our Malibu and Axis brands, the number one market share position in the United States for the 24’—29’ segment of the sterndrive boat category through our Cobalt brand, and we are among the leading market share positions in the outboard fiberglass fishing market that our Pursuit and Maverick Boat Group brands serve, in each case based on unit volume.

We have grown our U.S.

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Some of our other notable innovations include Power Wedge III, G5 and the power actuated G10+ Tower, Electronic Dashboard Controls, Flip Down Swim Step, Tower Mister, Splash and Stow and Cobalt's TruWave Technology.

Pursuit also has introduced the industry first Electric Sliding Entertainment Center and sliding second row center console seating.

Pursuit also has introduced the industry first Electric Sliding Entertainment Center and sliding second row center

console seating.

Maverick Boat Group has introduced first of its kind "Hybrid" and "Open" Bay Boat designs in recent years.

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Malibu Trailers took the coveted NMMA Innovation Award at the Miami International Boat Show in 2022.

The Malibu Wakesetter 23 LSV has won Wakeworld “Readers Choice” Wakeboard and Wakesurf Boat of the Year three years running in 2022, 2021 and 2020.

The Malibu Wakesetter 23 LSV has won Wakeworld “Readers Choice” Wakeboard and Wakesurf Boat of the Year four years running in 2023, 2022, 2021 and 2020.

We also offer an array of less technological, but nonetheless value-added boat features such as gelcoat upgrades, upholstery upgrades, engine drivetrain enhancements (such as silent exhaust tips, propeller upgrades and closed cooling engine configuration), sound system upgrades, bimini tops, boat covers and trailers which further increase the level of customization afforded to consumers.

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represented approximately 23.7% , 17.2% and 16.8% of consolidated net sales in fiscal years 2024, 2023 and 2022, respectively, including approximately 9.2%, 38.8% and 19.5% of consolidated sales in fiscal year 2024 for Malibu, Saltwater Fishing and Cobalt, respectively.

Sales to our dealers under common control of Tommy's Boats represented approximately 10.7%, 9.4% and 7.3% of our consolidated net sales in the fiscal years ended June 30, 2023 , 2022 and 2021 respectively, including approximately 23.3%, 0.0% and 0.9% of consolidated sales in fiscal year 2023 for Malibu, Saltwater Fishing and Cobalt, respectively.

We consistently review our distribution network to identify opportunities to expand our geographic footprint and improve our coverage of the market.

Sales to our former dealers under common control of Tommy's Boats represented approximately 2.4%, 10.7% and 9.4% of our consolidated net sales in the fiscal years ended June 30, 2024, 2023 and 2022, respectively, including approximately 6.7%, 0.0% and 0.5% of consolidated sales in fiscal year 2024 for Malibu, Saltwater Fishing and Cobalt, respectively.

During fiscal year 2024, we informed Tommy's Boats that we would not be renewing any of their agreements that had expired as of June 30, 2023 and we terminated two agreements in Texas that had not expired.

Tommy's Boats subsequently filed for bankruptcy protection and is in the process of liquidating its inventory.

We have since entered into dealer agreements with dealers in 14 of the 15 markets previously served by Tommy's Boats.

As of August 29, 2024, we believe fewer than 280 of our new model year 2023 and 2024 boats were remaining in the inventory of Tommy's Boats.

M&T Bank, the lender under the floor financing plan for Tommy's Boats, has a security interest in those boats.

During the period from July 1, 2024 to August 29, 2024, we have repurchased 19 new model year 2024 boats totaling $2.5 million subject to our repurchase agreement with M&T Bank.

With respect to boats not subject to the repurchase agreement, the bankruptcy trustee has retained Gordon Brothers to sell the remaining inventory as part of liquidation sales that are ongoing.

We have been in discussions with the trustee regarding the inventory being liquidated.

If the boats previously held by Tommy's Boats are sold at prices significantly below market value or in a manner that creates excess supply in a short period of time, it could have an adverse impact on our brands and create a downward pressure on our selling prices.

We consistently review our distribution network to evaluate the financial health of our dealers, identify opportunities to expand our geographic footprint and improve our coverage of the market.

We believe that our diverse product offering and strong market position in each region of the United States helped us capitalize on growth opportunities as our industry recovered from the economic downturn.

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Each dealer agreement has a finite term lasting between one and three years.

Our dealer agreements also are typically terminable without cause by the dealer with 60 days’ prior notice and by us for a dealer failing to meet performance criteria.

We may also generally terminate these agreements immediately for cause upon certain events.

Our dealer agreements also are typically terminable without cause by the dealer with 60 days prior

notice and by us for a dealer failing to meet performance criteria.

We also may terminate these agreements immediately for cause upon certain events.

Pursuant to our dealer agreements, the dealers typically agree to, among other things:

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• promote and demonstrate our products to consumers;

• place a specified minimum number of orders of our products during the term of the agreement in exchange for rebate or discount eligibility that varies according to the level of volume they commit to purchase;

• meet or exceed mutually agreed performance standards during the term of the agreement in exchange for rebate or discount eligibility that varies according to the level of volume they commit to purchase;

• provide us with regular updates regarding the number and type of our products in their inventory;

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Our sales teams operate using a semi-annual dealer review process involving our senior management team.

Each individual dealer is reviewed semi-annually with a broad assessment across multiple key elements, including the dealer’s geographic region, market share and customer service ratings, to identify underperforming dealers for remediation and to manage the transition process when non-renewal or termination is a necessary step.

Each individual dealer is reviewed semi-annually with a broad assessment across multiple key elements, including the dealer’s geographic region, market share, customer service ratings, and financial health to identify underperforming dealers for remediation and to manage the transition process when non-renewal or termination is a necessary step.

We have developed a system of financial incentives for our dealers based on customer satisfaction and achievement of best practices.

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Our exposure under repurchase agreements with third-party lenders is mitigated by our ability to reposition inventory with a ne w dealer in the event that a repurchase event occurs.

The primary cost to us of a repurchase event is any margin loss on the resale of a repurchased unit.

Historically, we have been able to resell repurchased boats at an amount that exceeds our cost.

In addition, the historical margin loss on the resale of repurchased units has often been below 10% of the repurchased amount.

Historically, the primary cost to us of a repurchase event has been margin loss on the resale of a repurchased unit but we have generally been able to resell repurchased boats at an amount that exceeds our cost.

We repurchased 17 units under our repurchase agreements during fiscal year 2024, and those units were subsequently resold during fiscal year 2024 above their cost.

Additionally, during the period from July 1, 2024, to August 29,

2024, we repurchased 19 units totaling $2.5 million that were subject to our repurchase agreement with M&T Bank, the floor plan financing lender for Tommy's Boats.

Pursuant to an order of the bankruptcy court, we agreed to repurchase those boats that were the subject of a repurchase agreement with M&T Bank and that had not otherwise been sold to customers.

For fiscal years 2023 and 2022, we did not repurchase any boats under our repurchase agreements.

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Malibu, Axis, Pursuit, Maverick Boat Group and Cobalt enjoy strong brand awareness, as evidenced by our substantial market share in their respective categories.

Our marketing strategy focuses on building brand awareness and loyalty in the inboard towboat market with Malibu and Axis brands and the outboard and sterndrive markets with Pursuit, Maverick Boat Group and Cobalt brands.

Activating the marketing strategy involves creating custom content to be utilized in outbound marketing campaigns and social media to engage

owners and prospects.

Our marketing strategy focuses on building brand awareness and loyalty in the performance sport boat market with Malibu and Axis brands and the outboard and sterndrive markets with Pursuit, Maverick Boat Group and Cobalt brands.

Activating the marketing strategy involves creating custom content to be utilized in outbound marketing campaigns and social media to engage owners and prospects.

In addition to retail websites developed for each of those brands and their unique consumers, the brands also manage all other aspects of marketing including traditional print advertising and trade shows.

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We are strategically and financially committed to innovation, as reflected in our dedicated product development and engineering teams located in Tennessee, Kansas, California, and Florida and evidenced by our track record of new product introduction.

As of June 30, 2023, our product development and engineering team consisted of nearly 60 professionals.

As of June 30, 2024, our product development and engineering team consisted of approximately 70 professionals.

These individuals bring to our product development efforts significant expertise across core disciplines, including boat design, trailer design, computer-aided design, electrical engineering and mechanical engineering.

They are responsible for execution of all facets of our new product strategy, including designing new and refreshed boat models and new features, engineering these designs for manufacturing and integrating new features into our boats.

In addition, our Chief Executive Officer and Chief Operating Officer are actively involved in the product development process and integration into manufacturing.

They are responsible for execution of all facets of our new product strategy, including identifying industry trends, designing new and refreshed boat models and new features, engineering these designs for manufacturing and integrating new features into our boats.

In addition, our Chief Executive Officer and President have historically been actively involved in the product development process and integration into manufacturing.

Our product development strategy consists of a two-pronged approach.

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Second, we seek to develop and integrate innovative new or enhanced optional feature offerings into our boats.

We intend to release new products and features multiple times during a year, which we believe enhances our reputation as a leading innovator in boat manufacturing and provides us with a competitive advantage.

We intend to release new products and features each model year, which we believe enhances our reputation as a leading innovator in boat manufacturing and provides us with a competitive advantage.

We take a disciplined approach to the management of our product development strategy.

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Extensive testing and coordination with our manufacturing group are important elements of our product development process, which we believe enable us to minimize the risk associated with the release of new products.

Our phase gate process also facilitates our introduction of new boat models and features throughout the year, which we believe provides us with a competitive advantage in the marketplace.

Our phase gate process also facilitates our introduction of new boat models and features each model year, which we believe provides us with a competitive advantage in the marketplace.

Finally, in addition to our process for managing new product introductions in a given fiscal year, we also engage in longer-term product life cycle and product portfolio planning.

Manufacturing

We have eight manufacturing facilities located in five U.S.

We have eight manufacturing facilities located in four U.S.

states and Australia.

We produce performance sport boats through our Malibu and Axis brands at our Tennessee and Australia manufacturing facilities;

we produce sterndrive and outboard boats through our Cobalt brand at our Kansas manufacturing facility;

we produce sterndrive and outboard boats through our Cobalt brand at our Kansas and Tennessee manufacturing facilities;

and we produce saltwater outboard boats under our Pursuit and Maverick Boat Group brands, as well as tooling parts, in Fort Pierce, Florida.

We completed expansion projects at one of our Florida facilities (Maverick Boat Group) in fiscal year 2022 and at our other Florida facility (Pursuit Tooling) in fiscal year 2023.

We also recently purchased a 260,000 square foot manufacturing facility near our Tennessee campus that we expect to fully finish constructing in fiscal year 2024.

We also purchased a 260,000 square foot manufacturing facility near our Tennessee campus that we completed construction of in fiscal year 2024.

For our Malibu and Axis brands, we manufacture towers, tower accessories and stainless steel and aluminum billet at our California facility and engines and trailers at our Tennessee facility.

For our Malibu, Axis and Cobalt brands, we produce wiring harnesses at our Alabama facility.

Our boats are built through a continuous flow manufacturing process that encompasses fabrication, assembly, quality management and testing.

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We have vertically integrated key components of our manufacturing process, including the manufacturing of our own engines, boat trailers, towers and tower accessories, machined and billet parts, soft grip flooring, and most recently, wiring harnesses.

We began including our engines, branded as Malibu Monsoon engines, in our Malibu and Axis boats for model year 2019, and in fiscal year 2024 we plan to begin offering Monsoon sterndrive engines to our Cobalt dealers and customers.

We began including our engines, branded as Malibu Monsoon engines, in our Malibu and Axis boats for model year 2019, and in fiscal year 2024 we began offering Monsoon sterndrive engines to our Cobalt dealers and customers.

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

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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.

In fiscal year 2024, we relocated manufacturing of our own wiring harnesses to our Roane County, Tennessee facility.

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 also gives us the ability to increase incremental margin per boat sold by reducing our cost base and improving the efficiency of our manufacturing process.

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The engine supply agreement will expire at the end of production of model year 2026, unless terminated earlier by either party as permitted under the terms of the agreement, including by General Motors due to market conditions with at least eighteen (18) months’ advanced written notice.

We had joint marketing agreements with Yamaha Motor Corporation, U.S.A., or Yamaha, that required us to supply a significant percentage of our Pursuit, Cobalt and Maverick Boat Group branded boats that are pre-rigged for outboard motors with Yamaha outboard motors in exchange for certain incentives.

Those agreements expired on June 30, 2023.

We are currently in discussions with Yamaha and expect to extend our agreement with Yamaha to supply outboard motors to a significant percentage of our Pursuit, Cobalt and Maverick Boat Group branded boats that are pre-rigged for outboard motors.

Yamaha has continued to supply outboard motors to us since our prior agreements expired.

We experienced supply chain disruptions during 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 for our suppliers, in part due to inflationary pressures that continued into fiscal year 2023 and that we expect to continue into fiscal year 2024.

With the exception of inflationary pressures, we believe that the systemic supply chain disruptions that we have experienced over the past several years have been largely rectified.

We have a marketing agreement with Yamaha Motor Corporation, U.S.A., or Yamaha, that requires us to equip a significant percentage of our Pursuit, Cobalt and Maverick Boat Group branded boats that are pre-rigged for outboard motors with Yamaha outboard motors in exchange for certain incentives.

The agreement expires on June 30, 2027.

We also obtain engines and sterndrive assemblies from Volvo for our Cobalt branded boats.

We experienced supply chain disruptions during fiscal year 2022 that we believe were driven by numerous factors, including labor shortages, ongoing domestic logistical constraints, and rising prices for our suppliers, in part due to inflationary pressures that continued into fiscal year 2023 and fiscal year 2024.

We believe that the systemic supply chain disruptions that we have experienced over the past several years have been largely rectified.

Insurance and Product Warranties

We carry various insurance policies, including policies to cover general products liability, workers’ compensation and other casualty and property risks, to protect against certain risks of loss consistent with the exposures associated with the nature and scope of our operations.

We carry various insurance policies, including policies to cover general products liability, workers’ compensation, director and officer liability, and other casualty and property risks, to protect against certain risks of loss consistent with the exposures associated with the nature and scope of our operations.

Our policies are generally based on our safety record as well as market trends in the insurance industry and are subject to certain deductibles, limits and policy terms and conditions.

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.

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.

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Our boat patent rights relate to boat design, features and components that we feel are important to our competitive position in our business.

Some of our well-known patents include our Surf Gate and Swim Step for our Malibu and Cobalt segments and Power Wedge for our Malibu segment.

Our trademarks which are registered in the U.S.

Some of our well-known patents include our Surf Gate system and Swim Step for our Malibu and Cobalt segments and Power Wedge for our Malibu segment.

Our trademarks, many of which are registered in the U.S.

and various countries around the world, generally may endure in perpetuity on a country-by-country basis, provided that we comply with all statutory maintenance requirements, including continued use of each trademark in each such country.

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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 year.

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 and discounts program to consistent ordering patterns, encouraging dealers to purchase our products throughout the year.

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

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Our operations and products are subject to extensive environmental and health and safety regulation under various federal, commonwealth, state, and local statutes, ordinances, rules and regulations in the United States and Australia where we manufacture our boats, and in other foreign jurisdictions where we sell our products.

We believe we are in material compliance with those requirements.

We believe that we are in material compliance with those requirements.

However, we cannot be certain that costs and expenses required for us to comply with such requirements in the future, including for any new or modified regulatory requirements, or to address newly discovered environmental conditions, will not have a material adverse effect on our business, financial condition, operating results, or cash flow.

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Our manufacturing facilities can be subject to on-site compliance evaluation inspections (CEIs) or targeted enforcement actions.

The handling, storage, release, treatment and recycling or disposal of these substances and wastes from our operations are regulated in Australia by the Australian Department of Climate Change, Energy, the Environment and Water, the New South Wales Environmental Protection Authority and other state and

local authorities.

Failure by us to properly handle, store, release, treat, recycle or dispose of our hazardous materials and wastes could result in liability for us, including fines, penalties, or obligations to investigate and remediate any contamination originating from our operations or facilities.

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With our many awards and honors, we cultivate a culture of excellence and premier boat building.

We conducted our first annual engagement survey of all employees in 2023 as an opportunity to gather feedback from employees on their experience and overall satisfaction to identify areas for organizational improvement.

Outside of formal surveys, we allow employees to continuously share any comments, questions or concerns with our leadership team, which are addressed as needed by our executive team.

We conducted our first annual engagement survey of all employees in 2023 and again in 2024 as an opportunity to gather feedback from employees on their experience and overall satisfaction to identify areas for organizational improvement.

Outside of formal surveys, we encourage employees to continuously share any comments, questions or concerns with our leadership team, which are addressed as needed by our executive team.

Diversity and Inclusion

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We are dedicated to protecting the well-being of our employees and creating a culture that promotes inclusivity, acceptance, equality and diversity.

Our employees bring a blend of diverse backgrounds, and we promote an inclusive workforce and the opportunity for career growth for all employees.

Our employees bring a blend of

diverse backgrounds, and we promote an inclusive workforce and the opportunity for career growth for all employees.

We seek to hire the best-qualified individuals and do not discriminate on the basis of race, creed, color, religion, national origin, citizenship status, age, disability, marital status, sexual orientation, gender, gender identity and similar classification.

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Each year, we partner with community organizations where our facilities are located and support local schools.

In Tennessee, we partner with Toys for Tots and Angel Tree each holiday season.

In Tennessee, we have partnered with Toys for Tots, Angel Tree and local food banks to help families within the community during the holiday season.

Our corporate sponsorship with the local Kiwanis Club has allowed us to give back to children with disabilities while also helping students prepare for the upcoming school year.

We partner with the local

Family Resources center each year to assist local students with cold-weather clothing fund and participate in additional local school initiatives to promote manufacturing trade jobs.

In Kansas, we support our community through recreational leagues as well as donations to local libraries, events and school fundraisers, among other initiatives.

In Florida, we give back to our local communities through the Treasure Coast Food Bank, Pet Food Drive for the Humane Society, Ready to Work Boot Camp, and the Everglades Foundation, Recreational Fishing Alliance and Coastal Conservation Association.

Additionally, we are proud participants in and sponsors of the Making Strides Against Breast Cancer walk every year.

We partner with the local Family Resources center each year to assist local students with cold-weather clothing fund and participate in additional local school initiatives to promote manufacturing trade jobs.

In Kansas, we support our community through recreational leagues as well as donations to local foundations, events and school fundraisers, among other initiatives.

In Florida, we give back to our local communities through the Treasure Coast Food Bank, Pet Food Drive for the Humane Society, Ready to Work Boot Camp, Everglades Foundation, Recreational Fishing Alliance and Coastal Conservation Association.

Additionally, we are proud participants in and sponsors of the annual Making Strides Against Breast Cancer walk.

We are proud of our partnerships with these outstanding organizations, and of the funds raised by our employees for children and families in the communities within which we operate.

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Exchanges and Other Transactions with Holders of LLC Units

In connection with our IPO and the recapitalization we completed in connection with our IPO, we entered into an exchange agreement with the pre-IPO owners of the LLC under which (subject to the terms of the exchange agreement) each pre-IPO owner (or its permitted transferee) has the right to exchange its LLC Units for shares of our Class A Common Stock on a one-

for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications, or, at our option, except in the event of a change in control, for a cash payment equal to the market value of the Class A Common Stock.

option, except in the event of a change in control, for a cash payment equal to the market value of the Class A Common Stock.

The exchange agreement provides, however, that such exchanges must be for a minimum of the lesser of 1,000 LLC Units, all of the LLC Units held by the holder, or such amount as we determine to be acceptable.

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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 1. Business