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Item 1A. Risk Factors

2024-08-29 compared with 2023-08-29 · 298 added, 151 removed, 310 unchanged (59% of the section changed)

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Risks Related to our Business and Operations

We have a large fixed-cost base that will affect our profitability when our sales decrease.

The fixed cost levels of operating a recreational powerboat manufacturer can put pressure on profit margins when sales and production decline.

Our profitability depends, in part, on our ability to spread fixed costs over a sufficiently large number of products sold and shipped, and if we make a decision to reduce our rate of production or otherwise experience lower revenues, gross margins will be negatively affected.

For instance, our consolidated net sales decreased by 40.3% for fiscal year 2024 compared to fiscal year 2023 while our expenses only decreased by 34.2% during the same period.

As a result, our gross margin decreased from 25.3% for fiscal year 2023 to 17.7% for fiscal year 2024 and our net income decreased from $107.9 million for fiscal year 2023 to a $56.4 million net loss for fiscal year 2024.

Consequently, decreased demand or the need to reduce production can lower our ability to absorb fixed costs and materially impact our financial condition or results of operations.

We may not be able to execute our manufacturing strategy successfully, which could cause the profitability of our products to suffer.

Our manufacturing strategy is designed to improve product quality and increase productivity, while reducing costs and increasing flexibility to respond to ongoing changes in the marketplace.

Our manufacturing strategy is designed to produce high quality products, while reducing costs and increasing flexibility to respond to ongoing changes in the marketplace.

To implement this strategy, we must be successful in our continuous improvement efforts, which depend on the involvement of management, production employees and suppliers.

Any inability to achieve our objectives under our manufacturing strategy could adversely impact the profitability of our products and our ability to deliver desirable products to our consumers.

We have a large fixed cost base that will affect our profitability if our sales decrease.

The fixed cost levels of operating a recreational powerboat manufacturer can put pressure on profit margins when sales and production decline.

Our profitability depends, in part, on our ability to spread fixed costs over a sufficiently large number of products sold and shipped, and if we make a decision to reduce our rate of production, gross or net margins could be negatively affected.

Consequently, decreased demand or the need to reduce production can lower our ability to absorb fixed costs and materially impact our financial condition or results of operations.

Our financial results may be adversely affected by our third-party suppliers ’ increased costs or inability to meet required production levels due to changing demand or global supply chain disruptions.

In addition, we have made strategic capital investments in capacity expansion activities to successfully capture growth opportunities and enhance product offerings, including plant expansions.

For example, we recently purchased a production facility in Roane County, Tennessee and moved production of certain models of our Cobalt boats from Kansas to Tennessee.

Moving production to a different plant and expanding capacity at an existing facility involves risks, including difficulties initiating production within the cost and timeframe estimated, supplying product to customers when expected, integrating new products, and attracting sufficient skilled labor to handle additional production demands.

If we fail to meet these objectives, it could adversely affect our ability to meet customer demand for products and increase the cost of production versus projections, both of which could result in a significant adverse impact on our operating and financial results.

Additionally, plant expansion can result in manufacturing inefficiencies, additional expenses, including higher wages or severance costs, and cost inefficiencies, which could negatively impact financial results.

We may not be able to accurately forecast demand for our products, which could impact our ability to manage our inventory and have a material adverse effect on our business and results of operations.

We forecast demand for our products to manage our production of boats.

In forecasting demand and setting production levels, we consider dealer inventory levels and anticipated consumer demand.

In addition to the seasonal nature of our business, demand for our products can fluctuate due to the impacts of macroeconomic conditions on dealers and consumers, such as increased interest rates and inflation.

Our forecasting also considers possible production delays that could result from supply chain disruptions, adverse weather events and labor shortages, among other factors.

Consequently, forecasting future demand for our products can be challenging due to the many uncertainties that could impact expected dealer and consumer demand or create unanticipated production delays.

If we are not able to forecast accurately and must change production levels quickly, our business may be adversely impacted.

For instance, if we need to increase production of boats because we underestimated demand or suffered unanticipated production delays, our suppliers may not be able to deliver sufficient quantities of parts and components to match our increased production levels and we may not be able to recruit or maintain sufficient skilled labor to meet our increased production needs.

As a result, our dealers may experience inventory shortages while we work to replenish inventory levels, resulting in missed sales and/or lost revenues.

Alternatively, if we overestimate demand and our dealers reduce their inventories in response to weakness in retail demand, we could be required to reduce our production, resulting in lower rates of absorption of fixed costs in our manufacturing and therefore lower margins.

Additionally, if we overestimate demand, our dealers will incur additional costs as a result of increased promotional activities to sell their inventory.

Our financial results may be adversely affected by our third-party suppliers ’ increased costs or inability to adjust for our required production levels due to changing demand or global supply chain disruptions.

We rely on a global supply chain of third parties to supply raw materials used in our manufacturing process, including resins, fiberglass, and vinyl, as well as parts and components.

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Substantial increases in the prices of raw materials, parts, and components would increase our operating costs, and could reduce our profitability if we are unable to recoup the increased costs through higher product prices or improved operating efficiencies.

For instance, during fiscal year 2024, we experienced rising prices for our suppliers, in part due to inflationary pressures and rising interest rates.

Our profitability in recent years has been, and in the future may be, affected by significant fluctuations in the prices of the raw materials and commodities that we use in our products and in the cost of freight and shipping of source materials, commodities, and other component parts necessary to assemble our products.

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

Supply chain disruptions could occur for any number of factors, including facility closures due to labor disruptions, weather events, cyber intrusions, the occurrence of a contagious disease or illness, such as COVID-19, contractual or other disputes, unfavorable economic or industry conditions, political instability, delivery delays, performance problems, or financial difficulties of suppliers.

Supply chain disruptions could occur for any number of factors, including facility closures due to labor disruptions, weather events, natural disasters, cyber intrusions, the occurrence of a contagious disease or illness, contractual or other disputes, unfavorable economic or industry conditions, political instability, global conflicts, delivery delays, performance problems, or financial difficulties of suppliers.

These events 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.

For example, we have experienced supply chain disruptions beginning in 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 for our suppliers, in part due to inflationary pressures.

For example, we experienced supply chain disruptions from fiscal year 2020 through first half of fiscal 2023.

related to numerous factors, including the COVID-19 pandemic, severe weather events, labor shortages, ongoing domestic logistical constraints, and West Coast port challenges.

Also, decisions by our suppliers to decrease production of their components or parts, production delays of such suppliers, work stoppages by the employees of such suppliers, or price increases could also have a material adverse effect on our ability to produce our products and ultimately, on our results of operations, financial condition, and cash flows.

For example, in fiscal year 2020 we experienced interruption to our engine supply as a result of the United Auto Workers’ strike against General Motors.

During the UAW strike, General Motors suspended delivery of engine blocks to us and we incurred $2.6 million in costs by entering into purchase agreements with two suppliers for additional engines to supplement our inventory of engine blocks for Malibu and Axis boats.

For some of the components used in production, we depend on a small group of suppliers and the loss of any of these suppliers could affect our ability to obtain components timely or at competitive prices, which would decrease our results of operations, financial condition, and cash flows.

In some instances, we purchase components, raw materials and parts that are ultimately derived from a single source or geographic area or a limited number of suppliers and we may therefore be at an increased risk for supply disruptions.

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Some components used in our manufacturing processes, including engines, boat windshields, certain electrical components and gel coats are available from a sole supplier or a limited number of suppliers.

We currently purchase engines from General Motors LLC, or General Motors, that we then prepare for marine use for certain Malibu, Axis and Cobalt boats, and we purchase outboard engines from Yamaha Motor Corporation, U.S.A., or Yamaha, for a significant percentage of our Cobalt, Pursuit and Maverick Boats Group branded boats that are pre-rigged for outboard motors.

We had agreements with Yamaha for the supply of outboard motors that expired on June 30, 2023.

We are in discussions with Yamaha to extend those agreements and Yamaha has continued to supply outboard motors to us since those agreements expired.

If we are required to replace either General Motors or Yamaha as an engine supplier for any reason, it could cause a decrease in boats available for sale or an increase in our cost of sales, either of which could adversely

affect our business, financial condition and results of operations.

In fiscal year 2020 we experienced interruption to our engine supply as a result of the United Auto Workers’ strike against General Motors.

We currently purchase engines from General Motors LLC, or General Motors, that we then prepare for marine use for certain Malibu, Axis and Cobalt boats.

Our agreement with General Motors will continue through model year 2026.

We purchase outboard engines from Yamaha Motor Corporation, U.S.A., or Yamaha, for a significant percentage of our Cobalt, Pursuit and Maverick Boats Group branded boats that are pre-rigged for outboard motors.

Our agreement with Yamaha is scheduled to expire on June 30, 2027.

We also purchase inboard engines from Volvo.

We have agreements with Yamaha for the supply of outboard motors that expires on June 30, 2027.

If we are required to replace General Motors, Yamaha or Volvo as an engine supplier for any reason, it could cause a decrease in boats available for sale or an increase in our cost of sales, either of which could adversely affect our business, financial condition and results of operations.

Termination or interruption of informal supply arrangements could have a material adverse effect on our business or results of operations.

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.

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

Instead, we have informal supply arrangements with many of our suppliers of components, raw materials and parts.

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If we need to enter into supply arrangements on unsatisfactory terms, or if there are any delays to our supply arrangements, it could adversely affect our business and operating results.

Climatic events, including hurricanes, tornadoes, or other disruptions, may adversely impact our operations and financial condition, disrupt the business of our suppliers, and may not be adequately covered by insurance.

Climatic events in the areas where we operate have caused, and future climatic events may cause, disruptions and in some cases delays or suspensions in our operations that may adversely impact our business.

We rely on the continuous operation of our facilities in Tennessee, Florida, Kansas, California, and Australia.

Any natural or environmental disaster to our facilities due to fire, flood, hurricanes, earthquake, or other severe climatic events could adversely affect our business, financial condition and results of operations.

For example, we have plants located in regions of the United States, such as Florida and Kansas, that have been and may be exposed to extreme weather, such as tropical storms, hurricanes, and tornadoes.

An increased frequency and/or severity of storms, hurricanes, or tornadoes could impair our ability to operate by severely damaging our facilities and restricting our ability to deliver products to our customers.

The occurrence of any disruption at any of our facilities, even for a short period of time, may have an adverse effect on our productivity and profitability, during and after the period of the disruption, including by causing delays in receiving supplies from our vendors and creating logistical challenges for delivery of our product to our dealers and customers.

These disruptions may also cause personal injury and loss of life, severe damage to or destruction of property and equipment and environmental damage.

Although we maintain property, casualty and business interruption insurance of the types and in the amounts that we believe are customary for the industry, we are not fully insured against all potential natural disasters or other disruptions to our facilities.

Our ability to meet our manufacturing workforce’s needs is crucial to our results of operations and future sales and profitability.

We rely on the existence of an available hourly workforce to manufacture our boats.

We cannot assure you that we will be able to attract and retain qualified employees to meet current or future manufacturing needs at a reasonable cost, or at all.

We rely on the existence of a sufficient available hourly workforce to manufacture our boats.

We may not be able to attract and retain qualified employees to meet current or future manufacturing needs at a reasonable cost, or at all.

For instance, even when there are high unemployment rates in the regions where we have manufacturing facilities, we have had difficulty retaining skilled employees and could experience such difficulties in the future.

Although none of our employees are currently covered by collective bargaining agreements, we cannot assure you that our employees will not elect to be represented by labor unions in the future.

Although none of our employees are currently covered by collective bargaining agreements, there can be no assurance that our employees will not elect to be represented by labor unions in the future.

Additionally, competition for qualified employees could require us to pay higher wages to attract a sufficient number of employees.

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We may be unable to maintain insurance for these potential liabilities on acceptable terms or such insurance may not provide adequate protection against potential liabilities.

We are dependent on attracting and retaining key management employees and the transition to our new Chief Executive Officer will be critical to our success.

Our success depends in significant part upon the continued service of our senior management and our continuing ability to attract, assimilate, and retain highly qualified and skilled managerial, product development, manufacturing, marketing and other personnel.

The loss of services of any members of our senior management or key personnel or the inability to hire or retain qualified personnel in the future could adversely affect our business, financial condition, and results of operations.

Management transition may also create uncertainty among employees, suppliers and customers or impact public or market perception, any of which could negatively impact our ability to operate effectively or execute on our strategies and result in an adverse impact on our business.

In particular, our future success will depend, in part, on the effectiveness of the transition to our new Chief Executive Officer, Mr.

Menneto, who will be critical in executing on and achieving our vision, strategic direction, culture and products.

We have grown our business through acquisitions;

however we may not be successful in completing future acquisitions or integrating future acquisitions in a way that fully realizes their expected benefits to our business.

A key part of our growth strategy, as shown by our acquisition of Maverick Boat Group in 2020, Pursuit in 2018, Cobalt in 2017 and our Australian licensee in 2014, has been to acquire other companies that expand our consumer base, enter new product categories or obtain other competitive advantages.

A key part of our growth strategy, as shown by our acquisition of Maverick Boat Group in 2020, Pursuit in 2018, and Cobalt in 2017, has been to acquire other companies that expand our consumer base, enter new product categories or obtain

other competitive advantages.

We expect to continue to acquire companies as an element of our growth strategy;

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Our failure to successfully do so could have a material adverse effect on our financial condition and results of operations.

For example, we determined that our estimated fair value for the Maverick Boat Group reporting unit was less than its carrying value as of March 31, 2024 and we recognized an impairment charge of $88.4 million for the three months ended March 31, 2024 related to our Maverick Boat Group reporting unit.

Further, our inability to successfully integrate future acquisitions within the intended time frames or at all could impede us from realizing all of the benefits of those acquisitions and could severely weaken our business operations.

The integration process with any acquisition may disrupt our business and, if implemented ineffectively, may preclude realization of the full benefits expected by us and could harm our results of operations.

In addition, the overall integration of the combining

companies may result in unanticipated problems, expenses, liabilities and competitive responses and may cause our stock price to decline.

In addition, the overall integration of the combining companies may result in unanticipated problems, expenses, liabilities and competitive responses and may cause our stock price to decline.

Even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition, including the synergies, cost savings or growth opportunities that we expect.

Our growth strategy may require us to secure significant additional capital, the amount of which will depend upon the size, timing, and structure of future acquisitions or vertical integrations and our working capital and general corporate needs.

Our growth strategy includes the possible acquisition of other businesses, such as our acquisitions of Cobalt, Pursuit and Maverick Boat Group, and the potential integration of new product lines or related products to our boats, such as our initiatives to integrate the production of engines and trailers for our Malibu and Axis models, our Monsoon engines into some of our Cobalt models and our new Tooling Design Center.

Our growth strategy includes the possible acquisition of other businesses and the potential integration of new product lines or related products to our boats, such as our initiatives to integrate the production of engines and trailers for our Malibu and Axis models, our Monsoon engines into some of our Cobalt models and our new Tooling Design Center.

These actions may require us to secure significant additional capital through the borrowing of money or the issuance of equity.

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Our inability to use our Class A Common Stock as consideration, to generate cash from operations, or to obtain additional funding through debt or equity financings in order to pursue our strategic initiatives could materially limit our growth.

If we are unable to continue to enhance existing products and develop and market new or enhanced products that respond to customer needs and preferences, we may experience a decrease in demand for our products and our business could suffer.

Market acceptance of our products depends on our technological innovation and our ability to implement technology in our boats.

Our failure to introduce new technologies and product offerings that our customers desire could adversely affect our business, financial condition and results of operations.

Also, we believe that we have been able to achieve higher margins in part as a result of the introduction of new features or enhancements to our existing boat models.

If we fail to introduce new features or those we introduce fail to gain market acceptance, our margins may suffer.

In addition, some of our direct competitors and indirect competitors may have significantly more resources to develop and patent new technologies.

Our competitors have developed and patented similar technologies and products that compete with ours.

We cannot be certain that our products or technologies have not infringed or will not infringe on the proprietary rights of others, including our competitors.

They may assert these patents against us and we may be required to license these patents on unfavorable terms or cease using the technology covered by these patents, either of which would harm our competitive position and may materially adversely affect our business.

Our reliance upon patents, trademark laws and contractual provisions to protect our proprietary rights may not be sufficient to protect our intellectual property from others who may sell similar products and may lead to costly litigation.

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If the outcome of any litigation challenging our patents is unfavorable to us, our business, financial condition and results of operations could be adversely affected.

We are subject to stringent and evolving U.S.

and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and security.

Our actual or perceived failure to comply with such obligations could lead to

regulatory investigations or actions;

We and the third parties with whom we work are subject to stringent and evolving U.S.

and foreign laws, regulations, rules, and rules, contractual obligations, industry standards, policies and other obligations related to data privacy and security.

Our (or the third parties with whom we work) actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions;

litigation (including class claims) and mass arbitration demands;

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loss of revenue or profits;

and other adverse business consequences.

In the ordinary course of business, we process personal data and other sensitive information.

Our data processing activities subject us to numerous data privacy and security obligations, which arise out of various laws, regulations, guidance, industry standards, representations made in privacy and security policies, marketing materials and other statements, contractual requirements, and other obligations relating to data privacy and security.

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws that are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws).

For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (collectively, “CCPA”), applies to personal information of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.

The CCPA provides for administrative fines of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages.

Other states have also passed comprehensive privacy laws, and similar laws are being considered in several other jurisdictions.

Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security.

For example, under European Union’s General Data Protection Regulation (“EU GDPR”), companies may face temporary or definitive bans on data processing and other corrective actions;

fines of up to 20 million Euros under the EU GDPR or 4% of annual global revenue, whichever is greater.

loss of customers or sales and other adverse business consequences.

In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, process) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, and sensitive third-party data (collectively, sensitive information).

Our data processing activities subject us to numerous data privacy and security obligations, such as laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws).

In the past few years, numerous U.S.

states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data.

As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making.

Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments.

These state laws allow for statutory fines for noncompliance.

For example, the California Consumer Privacy Act of 2018, ( “CCPA”) applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.

The CCPA provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages.

Similar laws are being considered in several other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future.

Outside the United States, an increasing number of laws, regulations, and industry standards govern data privacy and security.

For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”) (collectively, “GDPR”), and Australia’s Privacy Act impose strict requirements for processing personal data.

For example, under the GDPR, companies may face temporary or definitive bans on data processing and other corrective actions;

fines of up to 20 million Euros under the EU GDPR, 17.5 million pounds sterling under the UK GDPR or, in each case, 4% of annual global revenue, whichever is greater.

In the ordinary course of business, we may transfer personal data from Europe and other jurisdictions to the United States or other countries.

Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries.

In particular, the European Economic Area (EEA) and the United Kingdom (UK) have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally believes are inadequate.

Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws.

Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S.

Data Privacy Framework and the UK extension thereto (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.

If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.

Additionally, companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups.

Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations.

Additionally, under various privacy laws and other obligations, we may be required to obtain certain consents to process personal data.

For example, some of our data processing practices may be challenged under wiretapping laws, if we obtain consumer information from third parties through various methods, including chatbot and session replay providers, or via third-party marketing pixels.

These practices may be subject to increased challenges by class action plaintiffs.

Our inability or failure to obtain consent for these practices could result in adverse consequences, including class action litigation and mass arbitration demands.

In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups and, we are, or may become subject to such obligations in the future.

For example, we are/may be subject to the Payment Card Industry Data Security Standard (“PCI DSS”).

The PCI DSS requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access.

Noncompliance with PCI-DSS can result in penalties ranging from $5,000 to $100,000 per month by credit card companies, litigation, damage to our reputation, and revenue losses.

We are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.

We publish privacy policies, marketing materials and other statements, regarding data privacy and security.

If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.

Obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming increasingly stringent, and creating uncertainty.

Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions.

We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations.

Moreover, despite our efforts, our personnel or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business operations and we could face significant consequences, including but not limited to:

Moreover, despite our efforts, our personnel or third parties with whom we work may fail to comply with such obligations, which could negatively impact our business operations.

If we or the third parties with whom we work fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to:

government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar);

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additional reporting requirements and/or oversight;

bans on processing personal data;

bans or restrictions on processing personal data;

and orders to destroy or not use personal data.

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loss of customers;

interruptions or stoppages in our business operations;

inability to process personal data or to operate in certain jurisdictions;

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adverse publicity;

or substantial changes to our business model or operations.

Our business operations could be negatively impacted by an outage or breach of our information technology systems or operational technology systems (or those of the third parties upon which we rely), our sensitive data, or a cybersecurity event.

We manage our business operations through a variety of information technology (IT) and operational technology systems (“IT Systems”).

We depend on these systems for commercial transactions, customer interactions, manufacturing, branding, employee tracking, processing sensitive data and other applications.

New system implementations, across the enterprise also pose risks including without limitation those in connection with future or past business transactions, to our IT systems, including risks of outages or disruptions, which could affect our suppliers, commercial operations, and customers.

We continue to upgrade, streamline, and integrate these systems but, like those of other companies, our systems and data, and those of the third parties we rely on, are susceptible to outages due to natural disasters, power loss, computer viruses, and worms, malware, personnel misconduct or error, ransomware attacks, supply-chain attacks, security breaches, hardware or software vulnerabilities, disruptions, and similar events.

In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations (including without limitation, our manufacturing, marketing and financial operations), loss of sensitive data, revenue and income loss, reputational harm and loss of customers, and diversion of funds.

or changes to our business model or operations.

If our information technology systems or those of third parties with whom we work or our data, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions;

fines and penalties;

disruptions of our business operations;

reputational harm;

loss of revenue or profits;

loss of customers or sales;

and other adverse consequences.

In the ordinary course of our business, we and the third parties with whom we work, process sensitive information.

Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties with whom we work.

Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.

Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.

During times of war and other major conflicts, we, the third parties with whom we work, and our customers, may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our products.

We and the third parties with whom we work are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, attacks enhanced or facilitated by AI, and other similar threats.

In particular, severe ransomware attacks are becoming increasingly prevalent – particularly for companies like ours that are engaged in critical infrastructure or manufacturing – and can lead to significant interruptions in our operations, ability to provide our products, loss of sensitive information and income, reputational harm, and diversion of funds.

Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

We exchange information with many trading partners across all aspects of our commercial operations through our IT systems.

A breakdown, outage, malicious intrusion, breach, random attack, or other disruption of communications could result in erroneous or fraudulent transactions, disclosure of confidential or other sensitive information, loss of reputation and confidence, and may also result in legal claims or proceedings, penalties, and remediation costs.

We have experienced cyber-attacks, but to our knowledge, we have not experienced any material disruptions or breaches of our information technology systems or connected products.

It may be difficult and/or costly to detect, investigate, mitigate, contain, and remediate a security incident.

Our efforts to do so may not be successful.

Actions taken by us or the third parties with whom we work to detect, investigate, mitigate, contain, and remediate a security incident could result in outages, data losses, and disruptions of our business.

Threat actors may also gain access to other networks and systems after a compromise of our networks and systems.

Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

We rely on third parties to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation, commercial transactions, customer interactions, manufacturing, branding, employee tracking, and other functions.

We also rely on third parties to provide other products, services, parts, or otherwise to operate our business.

Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place.

If the third parties with whom we work experience a security incident or other interruption, we could experience adverse consequences.

While we may be entitled to damages if the third parties with whom we work fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.

In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or that of the third parties with whom we work have not been compromised.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.

We take steps to detect and remediate vulnerabilities, but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature.

Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident

has occurred.

These vulnerabilities pose material risks to our business.

Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.

Threats of system-related events and security breaches are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.

If our security measures are breached or fail, unauthorized persons may be able to obtain access to or acquire personal or other confidential data, or we may need to temporarily suspend production or operations in order to restore security.

Depending on the nature of the information compromised, we may also have obligations to notify consumers and/or employees about the incident, and we may need to provide some form of remedy, such as a subscription to a credit monitoring service, for the individuals affected by the incident.

This could negatively affect our relationships with customers or trading partners, lead to potential claims against us, and damage our image and reputation.

Moreover, the amount and scope of insurance we maintain against losses resulting from any such events or security breaches may not be sufficient to cover our losses or otherwise adequately compensate us for any disruptions to our businesses that may result, and the occurrence of any such events or security breaches could have a material adverse effect on our business and results of operations.

Additionally, our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations

We have started the design and implementation of a new enterprise resource planning (ERP) system and if we are not able to successfully develop and manage that implementation, it could adversely affect our business or results of operations.

We have begun the process of designing and implementing a new ERP system.

This project will require significant capital and human resources, the re-engineering of many processes of our business, and the attention of our management and other personnel who would otherwise be focused on other aspects of our business.

The implementation may be more expensive and take longer to fully implement than we originally plan, resulting in increased capital investment, higher fees and expenses of third parties, delayed deployment scheduling, and more on-going maintenance expense once implemented, and, as such, it will be difficult for us to estimate the ultimate costs and schedules.

If for any reason portions of the implementation are not successful, we could be required to expense rather than capitalize related amounts.

We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties with whom we work).

We may not, however, detect and remediate all such vulnerabilities including on a timely basis.

Further, we may experience delays in deploying remedial measures and patches designed to address identified vulnerabilities.

Vulnerabilities could be exploited and result in a security incident.

Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties with whom we work.

A security incident or other interruption could disrupt our ability (and that of third parties with whom we work) to provide our products.

Additionally, if we experience a security incident impacting the electronic components embedded into our products, such as the navigation or operating systems, this could prevent or cause customers to stop using our products, deter new customers from using our products, adversely affect the reputation of our business, or cause us to experience other similar harms.

We may expend significant resources or modify our business activities to try to protect against security incidents.

Certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive information.

Applicable data privacy and security obligations may require us, or we may voluntarily choose, to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents, or to take other actions, such as providing credit monitoring and identity theft protection services.

Such disclosures and related actions can be costly, and the disclosure or the failure to comply with such applicable requirements could lead to adverse consequences.

If we (or a third party with whom we work) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections);

additional reporting requirements and/or oversight;

litigation (including class claims);

indemnification obligations;

negative publicity;

reputational harm;

monetary fund diversions;

diversion of management attention;

interruptions in our operations (including availability of data);

financial loss;

and other similar harms.

Security incidents and attendant consequences may prevent or cause customers to stop using our products, deter new customers from using our products, and negatively impact our ability to grow and operate our business.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.

We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

Our operations and sales in international markets require significant management attention, expose us to difficulties presented by international economic, political, legal and business factors, and may not be successful or produce desired levels of sales and profitability.

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Several factors, including weakened international economic conditions and the strength of the U.S.

dollar, could adversely affect our international growth.

Expansion in our existing international operations and entry into new international markets require significant management attention.

dollar, could adversely affect our international operation and growth.

Expansion in our existing international markets and entry into new international markets require significant management attention.

Some of the countries in which we market and our distributors sell our products are, to some degree, subject to political, economic or social instability.

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As a result of doing business in foreign countries and with foreign partners, we are exposed to a heightened risk of violating anti-corruption and trade control laws and sanctions regulations.

Catastrophic events, including natural or environmental disasters, pandemics, such as the COVID-19 pandemic or other disruptions at our facilities could adversely affect our business, financial condition and results of operations.

We rely on the continuous operation of our facilities in Tennessee, Florida, Kansas, California, Alabama, and Australia.

Any natural or environmental disaster, pandemic or other serious disruption to our facilities due to fire, flood, earthquake, acts of terrorism, civil insurrection or social unrest or any other unforeseen circumstances could adversely affect our business, financial condition and results of operations.

For example, as a result of the COVID-19 pandemic, we experienced a temporary shutdown of our facilities, which negatively impacted our net sales and production levels and created supply chain disruptions, which led to lower inventory levels at our dealers for a period of time.

If there is a disruption in our business it could result in a reduction of production and cause delays in our ability to meet consumer demand or receive supplies from our vendors.

We cannot assure you that we will not have to suspend our operations again, whether voluntarily or as a result of federal, state or local mandates, and such closures could extend for a longer term than the prior shutdown of our facilities relating to COVID-19.

Changes in climate could also adversely affect our operations by limiting or increasing the costs associated with equipment or fuel supplies.

In addition, adverse weather conditions, such as increased frequency and/or severity of storms, or floods could impair our ability to operate by damaging our facilities and equipment or restricting product delivery to customers.

The occurrence of any disruption at our facilities, even for a short period of time, may have an adverse effect on our productivity and profitability, during and after the period of the disruption.

These disruptions may also cause personal injury and loss of life, severe damage to or destruction of property and equipment and environmental damage.

Increases in income tax rates or changes in income tax laws or enforcement could have a material adverse impact on our financial results.

Changes in domestic and international tax legislation could expose us to additional tax liability and could impact the amount of our tax receivable agreement liability.

For example, in August 2022, the U.S.

Congress passed the Inflation Reduction Act of 2022.

The key tax provisions applicable to us include a 1% excise tax on stock repurchases effective January 1, 2023.

We currently do not expect these changes to have a material impact on our financial position;

however, we will continue to evaluate the impact as further information becomes available.

Although we monitor changes in tax laws and work to mitigate the impact of proposed changes, such changes may negatively impact our financial results.

Expected changes in current tax law beyond fiscal 2023 could impact our financial results in a material way.

In addition, any increase in individual income tax rates would negatively affect our potential consumers’ discretionary income and could decrease the demand for our products.

We depend on key personnel and we may not be able to retain them or to attract, assimilate, and retain highly qualified employees in the future.

Our future success will depend in significant part upon the continued service of our senior management and our continuing ability to attract, assimilate, and retain highly qualified and skilled managerial, product development, manufacturing, and marketing and other personnel.

For instance, we are currently conducting a search process to identify and appoint a new permanent Chief Financial Officer.

If we are unable to attract and retain a qualified candidate to become our Chief Financial Officer, it could have an adverse impact on our business, including impacting our ability to meet financial and operation goals and implementing our strategic plans.

Actual or potential public health emergencies, epidemics, or pandemics, such as the COVID-19 pandemic, could

have a material adverse effect on our business, results of operations, or financial condition.

The impact of actual or potential public health emergencies, epidemics, or pandemics on us, our suppliers, dealers, and consumers, and the general economy could be wide-ranging and significant, depending on the nature of the issue, governmental actions taken in response, and the public reaction.

The impact of such events could include employee illness, quarantines,

cancellation of events and travel, business and school shutdowns, reduction in economic activity, widespread unemployment, and supply chain interruptions, which collectively could cause significant disruptions to global economies and financial markets.

In addition, these events could result in future significant volatility in demand, positively or negatively, for our products.

Demand volatility may be caused by, among other things:

the temporary inability of consumers to purchase our products due to illness, quarantine, or other travel restrictions;

dealership closures due to illness or government restrictions;

a reduction in boating activity as a result of governmental actions or self-quarantine measures;

shifts in demand away from discretionary products;

and reduced options for marketing and promotion of products.

If such events occur over a prolonged period, they could increase our costs and difficulty of operating our business, including accurately planning and forecasting for our operations and inventory levels, which may adversely impact our results.

Risks Related to Our Markets and the Recreational Powerboat Industry

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In addition, fiscal and monetary policy could have a material adverse impact on worldwide economic conditions, the financial markets, and availability of credit and, consequently, may negatively affect our industry, businesses, and overall financial condition.

Consumers often finance purchases of our boats, and as interest rates rise, the cost of financing the purchase also increases.

Consumers often finance purchases of our boats, and as interest rates rise, as they have over the last few years, the cost of financing the purchase also increases.

If credit conditions worsen, and adversely affect the ability of consumers to finance potential purchases at acceptable terms and interest rates, it could result in a decrease in sales or delay improvement in sales of our products.

Market acceptance of our products depends on our technological innovation and our ability to implement technology in our boats.

Our failure to introduce new technologies and product offerings that our markets desire could adversely affect our business, financial condition and results of operations.

Also, we believe we have been able to achieve higher margins in part as

a result of the introduction of new features or enhancements to our existing boat models.

If we fail to introduce new features or those we introduce fail to gain market acceptance, our margins may suffer.

In addition, some of our direct competitors and indirect competitors may have significantly more resources to develop and patent new technologies.

It is possible that our competitors will develop and patent equivalent or superior technologies and other products that compete with ours.

We cannot be certain that our products or technologies have not infringed or will not infringe on the proprietary rights of others, including our competitors.

Our continued success is dependent on the positive perception of our brands, which, if impaired, could adversely affect our sales.

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Negative incidents, such as quality and safety concerns, product recalls, severe incidents or injuries related to our products or actions, or statements or actions of our employees or dealers or the athletes associated with our products, could lead to tangible adverse effects on our business, including lost sales or employee retention and recruiting difficulties.

Also, public concerns about the environmental impact of our products could result in diminished public perception of our brands.

Also, public concerns about the environmental impact of our products, or our environmental, social and governance practices generally, could result in diminished public perception of our brands.

Government, media, or activist pressure to limit emissions could also negatively impact consumers’ perceptions of our boats.

Any decline in the public acceptance of our boats could negatively impact their sales or lead to changes in laws, rules and regulations that prevent access to certain locations or restrict use or manner of use in certain areas or during certain times, which could also negatively impact sales.

If the popularity of the sports and activities for which we design, manufacture and sell our boats were to decrease as a result of these risks or any negative publicity, sales of our products could decrease, which could have an adverse effect on our net revenue, profitability and operating results.

Our sales may be adversely impacted by increased consumer preference for used boats or the supply of new boats by competitors in excess of demand.

In the past, we have observed a shift in consumer demand toward purchasing more used boats during economic downturns, primarily because prices for used boats are typically lower than retail prices for new boats.

Our sales may be adversely impacted by the sale of boats previously held in inventory by our former dealer, Tommy’s Boats.

During fiscal year 2024, Tommy’s Boats filed for bankruptcy protection and is in the process of liquidating its inventory.

As of August 29, 2024, we believe fewer than 280 of our new model year 2023 and 2024 boats were in the inventory of Tommy’s Boats, of which we repurchased 19 units totaling $2.5 million that were 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.

Our sales may be adversely impacted by increased consumer preference for used boats, electric boats, alternative fuel-powered boats, or the supply of new boats by competitors in excess of demand.

In the past, and during this recent economic cycle, we have observed a shift in consumer demand toward purchasing more used boats during economic downturns, primarily because prices for used boats are typically lower than retail prices for new boats.

If consumer demand shifts toward purchasing more used boats, it could have the effect of reducing demand among retail purchasers for our new boats.

Also, while we have taken steps designed to balance production volumes for our boats with demand, our competitors could choose to reduce the price of their products, which could have the effect of reducing demand for our new boats.

In addition, a shift from traditional fuel-powered boats to electric boats, alternative fuel-powered boats, or other technologies could reduce demand for our boats.

Reduced demand for new boats could lead to reduced sales by us, which could adversely affect our business, results of operations or financial condition.

An increase in energy and fuel costs may adversely affect our business, financial condition and results of operations.

Higher energy costs result in increases in operating expenses at our manufacturing facility and in the expense of shipping products to our dealers.

Prices for crude oil, natural gas and other energy supplies have been increasing and have been subject to high volatility, including as a result of geopolitical factors or otherwise.

Further, the global clean energy movement may also reduce the availability of fossil fuels, which may in turn cause increases to energy costs.

Higher energy costs result in increases in operating expenses at our manufacturing facilities and in the expense of shipping products to our dealers.

In addition, increases in energy costs may adversely affect the pricing and availability of petroleum based raw materials, such as resins and foams, that are used in our products.

Higher fuel prices may also have an adverse effect on demand for our boats, as they increase the cost of boat ownership and possibly affect product use.

Higher fuel prices may also have an adverse effect on demand for our boats, as they increase the operating costs associated with boat ownership and possibly affect product use.

Retail demand for our boats is seasonal and unfavorable weather conditions just before and during spring and summer can have a negative effect on our revenues.

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The recreational powerboat industry, and in particular the performance sport boat category, is highly competitive for consumers and dealers.

Competition affects our ability to succeed in the markets we currently serve, including the saltwater

outboard fishing boat market that we recently entered with our acquisitions of Pursuit and Maverick Boat Group, and new markets that we may enter in the future.

Competition affects our ability to succeed in the markets we currently serve, including the saltwater outboard fishing boat market that we entered with our acquisitions of Pursuit and Maverick Boat Group, and new markets that we may enter in the future.

Competition is based primarily on brand name, price, product selection and product performance.

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dollar, we have experienced a corresponding negative impact on our financial results with respect to our foreign operations.

We also maintain a portion of our manufacturing operations in Australia which partially mitigates the impact of a strengthening U.S.

We also maintain a portion of our manufacturing

operations in Australia which partially mitigates the impact of a strengthening U.S.

dollar in that country.

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We do not currently use hedging or other derivative instruments to mitigate our foreign currency risks.

Inflation could adversely affect our financial results.

Inflation and rising interest rates could adversely affect our financial results.

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.

While, historically, 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, recently have had, and may continue to have, an adverse impact on our business, financial condition, and results of operations.

Inflation has recently had an adverse impact on our business, particularly related to wages and increases in the cost of raw materials and transportation, and may continue to have, an adverse impact on our business, financial condition, and results of operations.

In addition, 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 forego or delay their purchases or buy a less expensive boat in the event credit is not available to finance their boat purchases.

During the past year, inflation, along with rising interest rates, has translated into an increased cost of boat ownership.

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

Risks Related to our Dealers

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Substantially all of our sales are derived from our network of independent dealers.

Maintaining a reliable network of dealers is essential to our success.

Our agreements with dealers in our network typically provide for one-year terms, although some agreements have longer terms.

Our top ten dealers represented 40.4%, 41.1% and 39.9% of our net sales for fiscal year 2024, 2023 and 2022, respectively.

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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.

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.

The loss of a significant number of these dealers could have a material adverse effect on our financial condition and results of operations.

We have agreements with the dealers in our network that typically provide for one-year terms, although some agreements have a term of up to three years.

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 6.7%, 0.0% and 0.5% of our 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 the two agreements in Texas that had not expired.

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

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

The loss of additional significant dealers or a significant number of other dealers could have a material adverse effect on our financial condition and results of operations.

The number of dealers supporting our products and the quality of their marketing and servicing efforts are essential to our ability to generate sales.

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In addition, independent dealers in the recreational powerboat industry have experienced significant consolidation in recent years, which could result in the loss of one or more of our dealers in the future if the surviving entity in any such consolidation purchases similar products from a competitor.

A significant deterioration in the

number or effectiveness of our dealers could have a material adverse effect on our business, financial condition and results of operations.

A significant deterioration in the number or effectiveness of our dealers could have a material adverse effect on our business, financial condition and results of operations.

Our success depends, in part, upon the financial health of our dealers and their continued access to financing.

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Their financial health may suffer for a variety of reasons, including a downturn in general economic conditions, rising interest rates, higher rents, increased labor costs and taxes, compliance with regulations and personal financial issues.

Our dealers also require adequate liquidity to finance their operations, including purchases of our boats.

During fiscal year 2024, we informed one of our former dealers, 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 subsequently filed for bankruptcy protection and is in the process of liquidating its inventory.

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

Pursuant to an order of the bankruptcy court and our repurchase agreement with M&T Bank, we repurchased 19 new model year 2024 from Tommy's Boats.

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.

Our dealers require adequate liquidity to finance their operations, including purchases of our boats.

Dealers are subject to numerous risks and uncertainties that could unfavorably affect their liquidity positions, including, among other things, continued access to adequate financing sources on a timely basis on reasonable terms.

These sources of financing are vital to our ability to sell products through our distribution network.

These sources of financing are vital to our ability to sell products to our dealers through our distribution network.

Access to floor plan financing generally facilitates our dealers’ ability to purchase boats from us, and their financed purchases reduce our working capital requirements.

If floor plan financing were not available to our dealers, our sales and our working capital levels would be adversely affected.

If floor plan financing were not available to our dealers, our sales and our working capital levels would be adversely affected as dealers may shift the timing of certain purchases and otherwise reduce the total number of boats that they purchase during any given period.

In addition, rising interest rates could also incentivize dealers to reduce their inventory levels in order to reduce their interest exposure, which may further adversely impact the sales of our boats and our results of operations.

We may be required to repurchase inventory of certain dealers.

Many of our dealers have floor plan financing arrangements with third-party finance companies that enable the dealers to purchase our products.

In connection with these agreements, we may have an obligation to repurchase our products from a finance company under certain circumstances, and we may not have any control over the timing or amount of any repurchase obligation nor have access to capital on terms acceptable to us to satisfy any repurchase obligation.

This obligation is triggered if a dealer defaults on its debt obligations to a finance company, the finance company repossesses the boat and the boat is returned to us.

Our obligation to repurchase a repossessed boat for the unpaid balance of our original invoice price for the boat is subject to reduction or limitation based on the age and condition of the boat at the time of repurchase, and in certain cases by an aggregate cap on repurchase obligations associated with a particular floor plan financing program.

If boats are returned to us, it would have an adverse impact on our net sales and could result in downward pressure on pricing of our boats.

Since fiscal year 2020, we have repurchased a total of two units from lenders to former dealers and those units were subsequently resold above their cost and at a minimal margin loss.

One or more dealers may default on the terms of a credit line in the future.

In addition, applicable laws regulating dealer relations may also require us to repurchase our products from our dealers under certain circumstances, and we may not have any control over the timing or amount of any repurchase obligation nor have access to capital on terms acceptable to us to satisfy any repurchase obligation.

If we are required to repurchase a significant number of units under any repurchase agreement or under applicable dealer laws, our business, operating results and financial condition could be adversely affected.

Risks Related to our Regulatory, Accounting, Legal and Tax Environment

The manufacture and sale of boats exposes us to product liability risks and a significant adverse determination in any material claim against us could adversely affect our operating results or financial condition.

The manufacture and sale of our boats expose us to significant risks associated with product liability, economic loss, and other claims.

Many of our dealers have floor plan financing arrangements with third-party finance companies that facilitate the dealers purchasing our products.

In connection with such floor plan financing agreements, in certain instances we agree to repurchase our products from the third-party finance company.

Generally, this obligation is triggered if a dealer defaults on its debt obligations to a finance company, the finance company repossesses the boat and the boat is returned to us.

In addition, applicable laws regulating dealer relations may also require us to repurchase our products from our dealers under certain circumstances.

In such circumstances, we may not have any control over the timing or amount of any repurchase obligation nor have access to capital on terms acceptable to us to satisfy any repurchase obligation.

If we are required to repurchase a significant number of units under any repurchase agreement or under applicable dealer laws, it could have an adverse impact on our business, operating results, financial condition and cash flows.

Since fiscal year 2020, we have repurchased a total of 36 units from lenders to former dealers and those units were subsequently resold above their cost and at a minimal margin loss.

This number includes 19 boats we repurchased pursuant to our repurchase agreement with M&T Bank related to the bankruptcy of our former dealer, Tommy’s Boats.

Future declines in marine industry demand could cause an increase in repurchase activity or could require us to incur losses in excess of established reserves.

In addition, our cash flow and loss experience could be adversely affected if repurchased inventory is not successfully distributed to other dealers in a timely manner, or if the recovery rate on the resale of the product declines.

The finance companies could require changes in repurchase terms that would result in an increase in our contractual obligations.

Risks Related to Litigation and our Regulatory, Accounting and Tax Environment

The nature of our business exposes us to risks associated with litigation, investigation and regulatory proceedings and a significant adverse determination with respect to any material claim against us could adversely affect our operating results or financial condition.

We currently are facing, and will likely continue to face, legal, administrative and regulatory proceedings, claims, demands and/or investigations relating to dealer or consumer matters, shareholder matters and/or other matters relating to our business.

Litigation and regulatory proceedings are inherently uncertain, and adverse rulings could occur, including monetary damages or fines, or an injunction stopping us from manufacturing or selling certain products, engaging in certain business practices, or requiring other remedies.

We are currently defending against a securities class action lawsuit.

The class action complaint alleges violations of the Securities Exchange Act of 1934, as amended, in connection with allegedly false and misleading statements made by us related to our business, operations and prospects during the period from November 4, 2022 through April 11, 2024.

The complaint alleges, among other things, that we violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 by not disclosing alleged material adverse facts related to our inventory and relationship with one of our former dealers, Tommy’s Boats, and accordingly, that any positive statements made during the class period about our business, operations, and prospects were materially misleading and/or lacked a reasonable basis.

Prior to the filing of the securities class action lawsuit, one of our former dealers, Tommy’s Boats, filed a claim alleging that Malibu Boats, Inc.

and Malibu Boats, LLC breached obligations under dealership agreements with Tommy’s Boats, quantum meruit, unjust enrichment, promissory estoppel and intentional and negligent misrepresentations relating to the parties’ commercial relationship.

Tommy’s Boats is seeking monetary damages.

On July 3, 2024, the trustee appointed in the chapter 11 bankruptcy cases for Tommy’s Boats voluntarily dismissed the claims filed by Tommy’s Boats without prejudice.

In addition, pursuant to an order of the bankruptcy court, we have agreed to cooperate in good faith to mediate with the Chapter 11 trustee.

On August 16, 2024, Matthew Borisch, the principal owner of Tommy’s Boats, filed a complaint against Malibu Boats, Inc., Malibu Boats, LLC, and Jack Springer in the United States District Court

for the Eastern District of Tennessee alleging similar allegations to those of the dismissed complaint against Malibu Boats, Inc.

and Malibu Boats, LLC filed by Tommy’s Boats.

The manufacture and sale of boats also exposes us to significant risks associated with product liability, economic loss, and other claims.

If our products are found to be defective or used incorrectly by our customers, bodily injury, property damage or other injury, including death, may result and this could give rise to additional product liability or economic loss claims against us and adversely affect our brand image or reputation.

For instance, we recently settled certain product liability matters for $100.0 million after a jury found that our subsidiary, Malibu Boats, LLC, and another entity that was the manufacturer of the boat at issue, Malibu Boats West, Inc., negligently failed to warn of a hazard posed by the boat and that such failure was a proximate cause of the death of a passenger in the boat.

During fiscal year 2023, we settled certain product liability matters for $100.0 million after a jury found that our subsidiary, Malibu Boats, LLC, and another entity that was the manufacturer of the boat at issue, Malibu Boats West, Inc., negligently failed to warn of a hazard posed by the boat and that such failure was a proximate cause of the death of a passenger in the boat.

Malibu Boats West, Inc.

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See Note 17 of our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

As noted, we maintain product and general liability insurance policies, including excess insurance coverage for product liability claims.

We are also currently defending a customer class action lawsuit.

The class action complaint alleges violations of the Magnusson-Moss Warranty Act, breach of express and implied warranties, and violation of California’s Consumer Legal Remedies Act based on guidance issued to customers of certain older model boats related to riding in the bow area of those boats.

We continue to defend against the class action claims.

We maintain product and general liability insurance policies, including excess insurance coverage for product liability claims.

However, we are not fully insured against all potential claims and we may experience legal claims in excess of our insurance coverage or claims that are not covered by insurance, either of which could adversely affect our business, financial condition and results of operations.

Any losses that we may suffer from any such claims, including any unanticipated adverse determination of a material product liability claim or other material claim (particularly an uninsured matter), could materially and adversely affect our financial condition, and the effect that any such liability may have upon the reputation and marketability of our products may have a negative impact on our business and operating results.

We have in the past, and may be required in the future, to pay significant amounts to settle litigation and regulatory proceedings and, regardless of the outcome, litigation and regulatory proceedings can be costly, time-consuming and disruptive to our business and operations.

An impairment in the carrying value of goodwill, trade names, and other long-lived assets could negatively affect

our consolidated results of operations and net worth.

Goodwill and indefinite-lived intangible assets, such as our trade names, are recorded at fair value at the time of acquisition and are not amortized, but are reviewed for impairment at least annually or more frequently if impairment indicators arise.

In evaluating the potential for impairment of goodwill and trade names, we make assumptions regarding future operating performance, business trends, and market and economic conditions.

Such analyses further require us to make certain assumptions about sales, operating margins, growth rates, and discount rates.

Uncertainties are inherent in evaluating and applying these factors to the assessment of goodwill and trade name recoverability.

We could be required to evaluate the recoverability of goodwill or trade names prior to the annual assessment if we experience business disruptions, unexpected significant declines in operating results, a divestiture of a significant component of our business, or declines in market capitalization.

We recognized an impairment charge of $88.4 million for the three months ended March 31, 2024 related to our Maverick Boat Group reporting unit.

We determined certain indicators of potential impairment existed with respect to our Maverick Boat Group reporting unit during the three months ended March 31, 2024, warranting an interim impairment assessment of goodwill as of March 31, 2024.

These indicators included a decline in the fiscal year 2024 and fiscal year 2025 forecasts, in the outlook for sales and operating performance relative to our business plan and a deterioration in general macroeconomic conditions, including rising interest rates and inflationary pressures on labor and supply costs.

As a result of these macroeconomic factors, specifically a decline in the fiscal year 2024 and fiscal year 2025 forecast, we performed a goodwill impairment analysis as of March 31, 2024 and based on such analysis, we determined an impairment charge was appropriate.

We continually evaluate whether events or circumstances have occurred that indicate the remaining estimated useful lives of our definite-lived intangible assets and other long-lived assets may warrant revision or whether the remaining balance of such assets may not be recoverable.

We use an estimate of the related undiscounted cash flow over the remaining life of the asset in measuring whether the asset is recoverable.

As of June 30, 2024, the balance of total goodwill and indefinite-lived intangible assets was $130.4 million, which represents approximately 17.6% of total assets.

If the future operating performance of either the Company or individual operating segments is not sufficient, we could be required to record non-cash impairment charges.

Impairment charges could substantially affect our reported earnings in the periods such charges are recorded.

In addition, impairment charges could indicate a reduction in business value which could limit our ability to obtain adequate financing in the future.

Significant product repair and/or replacement costs due to product warranty claims or product recalls could have a material adverse impact on our results of operations.

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There is significant uncertainty with respect to future trade regulations, including the imposition by the U.S.

of tariffs and penalties on products manufactured outside the U.S., and existing international trade agreements, as shown by Brexit in Europe.

of tariffs and penalties on products manufactured outside the U.S., and with respect to existing international trade agreements.

The institution of global trade tariffs, trade sanctions, new or onerous trade restrictions, embargoes and other stringent government controls have the potential to adversely impact the U.S.

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Our facilities are also regularly inspected by OSHA and by state and local inspection agencies and departments.

Any of these laws, rules, or regulations may cause us to incur significant expenses to achieve or maintain compliance, require us to modify our products, or modify our approach to our workforce, adversely affecting the price of or demand for

some of our products, and ultimately affect the way we conduct our operations.

Further, in October 2023, California passed climate disclosure laws that, among other requirements, will require public and private companies that do business in California with total annual revenues exceeding certain thresholds to make disclosures

including GHG emission data and climate-related financial risks.

The implementing regulations for the law have not yet been drafted and the requirements are currently set to begin taking effect in 2026, with additional requirements phasing in through 2030.

While we are still assessing the impact of these requirements, additional reporting obligations could cause us to incur increased costs.

Failure to comply with any of these laws, rules, or regulations could result in harm to our reputation and/or could lead to fines and other penalties, including restrictions on the importation of our products into, and the sale of our products in, one or more jurisdictions until compliance is achieved.

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During the past year, interest rates have been increasing, which results in increased debt service obligations under our revolving credit facility even if our amount borrowed remains the same.

Borrowings under our revolving credit facility bear interest at a variable 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.

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may have an obligation to make tax receivable agreement payments for a certain amount while receiving distributions from the LLC in a lesser amount, which would negatively affect our liquidity.

The payments under the tax receivable agreement are not conditioned upon the pre-IPO owners’ (or any permitted assignees’) continued ownership of us.

The payments under the

tax receivable agreement are not conditioned upon the pre-IPO owners’ (or any permitted assignees’) continued ownership of us.

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.

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, discontinued U.S.

LIBOR after June 30, 2023.

Our tax receivable agreement does not provide for an alternative reference rate to LIBOR.

Although LIBOR was discontinued after June 30, 2023, our tax receivable agreement does not provide for an alternative reference rate to LIBOR.

Therefore, pursuant to the Adjustable Interest Rate (LIBOR) Act (the “ LIBOR Act ”), 12 U.S.C.

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Risks Related to our Common Stock

Inefficient or ineffective allocation of capital could adversely affect our operating results and/or stockholder value.

We strive to allocate capital in a manner that enhances stockholder value, lowers our cost of capital, or demonstrates our commitment to return excess capital to stockholders, while maintaining our ability to invest in strategic growth opportunities.

In October 2023, our Board of Directors authorized a stock repurchase program to allow for the repurchase of up to $100.0 million of our Class A Common Stock and the LLC’s LLC Units for the period from November 8, 2023 to November 8, 2024.

As of June 30, 2024, $82.7 million remained available under the stock repurchase program.

We have also announced that we intend to return capital of at least $10.0 million per quarter from May 2024 through May 2025 through either the repurchase of common stock or dividend payments.

We intend to purchase shares under the repurchase authorization from time to time on the open market at the discretion of management, subject to strategic considerations, market conditions, and other factors.

Repurchases under our share repurchase program will reduce the market liquidity for our stock, potentially affecting its trading volatility and price.

Future share repurchases will also diminish our cash reserves, which may impact our ability to pursue attractive strategic opportunities.

Therefore, if we do not properly allocate our capital or implement a successful cash management strategy, including with respect to returning value to our stockholders through this share repurchase authorization, we may fail to produce optimal financial results and experience a reduction in stockholder value.

Our stock price may be volatile and stockholders may be unable to sell shares at or above the price at which they purchased them.

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These and other provisions in our certificate of incorporation, bylaws and under Delaware law could discourage potential takeover attempts, reduce the price that investors might be willing to pay for shares of our Class A Common Stock in the future and result in the market price being lower than it would be without these provisions.

Unresolved Staff Comments

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 1A. Risk Factors