What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-08-29 compared with 2023-08-29 · 238 added, 200 removed, 433 unchanged (50% of the section changed)

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We currently sell our boats under eight brands as shown in the table below, and we report our results of operations under three reportable segments, Malibu, Saltwater Fishing and Cobalt.

We revised our segment reporting effective December 31, 2020 to account for our acquisition of Maverick Boat Group and to conform to changes in our internal management reporting based on our boat manufacturing operations.

Prior to December 31, 2020, we had three reportable segments, Malibu, Pursuit and Cobalt.

All segment information in the accompanying consolidated financial statements has been revised to conform to our current reporting segments for comparison purposes.

Additional segment information is contained in Note 19 - Segment Reporting, in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

% of Total Revenues

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

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

As of June 30, 2024, we are the market leader in the United States in the performance sport boat category through our Malibu and Axis boat brands.

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

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In December 2020, we acquired Maverick Boat Group and added Maverick, Cobia, Pathfinder and Hewes to our brands.

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

Our Maverick Boat Group family of boats are highly complementary to Pursuit, expanding our saltwater outboard offerings with a

strong focus in length segments under 30 feet.

We are among the market leaders in the fiberglass outboard fishing boat category with the brands in our Saltwater Fishing segment.

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Our Cobalt boats consist of mid to large-sized luxury cruisers and bowriders that we believe offer the ultimate experience in comfort, performance and quality.

We are the market leader in the United States in the 20’ - 40’ segment of the sterndrive boat category through our Cobalt brand.

As of June 30, 2024, we are the market leader in the United States in the 20’ - 40’ segment of the sterndrive boat category through our Cobalt brand.

Retail prices for our Cobalt boats typically range from $75,000 to $625,000.

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We devote significant time and resources to find, develop and improve the performance of our dealers and believe our dealer network gives us a distinct competitive advantage.

We achieved fiscal year 2023 net sales, net income and adjusted EBITDA of $1,388.4 million, $107.9 million and $284.0 million, respectively, compared to $1,214.9 million, $163.4 million and $246.5 million, respectively, for fiscal year 2022.

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

We had one dealer that represented more than 10% of our consolidated net sales in fiscal year 2024, OneWater Marine, Inc.

In fiscal year 2023, we had two dealers that represented more than 10% of our consolidated net sales, OneWater Marine, Inc.

and Tommy's Boats.

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

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

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

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

During the period between July 1, 2024 and August 29, 2024, we repurchased 19 of those boats that were subject to our repurchase agreement with M&T Bank, the floor plan financing lender for Tommy's Boats.

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

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

We achieved fiscal year 2024 net sales, net (loss) income and adjusted EBITDA of $829.0 million, $(56.4) million and $82.2 million, respectively, compared to $1,388.4 million, $107.9 million and $284.0 million, respectively, for fiscal year 2023.

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

During the COVID-19 pandemic, domestic retail demand for recreational powerboats increased to the highest levels seen by the industry in decades as consumers turned to boating as a form of outdoor, socially-distanced, recreation.

Retail registration activity in the recreational powerboat market, however, began declining meaningfully in the second half of calendar year 2021 as a result of limited available inventory due to the strong sales activity during the pandemic and supply chain disruptions that began impacting production levels.

During calendar year 2022, retail registration activity continued to decline at a lower year-over-year rate than the second half of calendar year 2021.

The declines in retail registration activity in the recreational powerboat market during calendar year 2022 were also impacted by the increased retail demand in calendar year 2021, resulting in an abnormally high comparative period.

We and our dealers have experienced similar impacts in retail demand, supply chain disruption and resulting low inventory levels as the industry.

The combination of strong retail market activity in calendar years 2020 and 2021 along with supply chain disruptions in calendar year 2021 that continued through calendar year 2022 depleted inventory levels at our dealers in calendar year 2022 below pre-COVID levels

Some of the operational challenges and supply chain disruptions we experienced included labor shortages, domestic logistical constraints, West Coast port challenges and rising prices for our suppliers, in part due to inflationary pressures.

These operational challenges and supply chain constraints delayed our ability to add to depleted inventory levels throughout fiscal year 2022.

While retail activity at our dealers was strong during much of fiscal year 2022, it may have been higher but for a lack of inventory.

Current inventory levels at our Malibu and Cobalt dealers have returned to pre-pandemic levels and at our Saltwater Fishing dealers are continuing to normalize to pre-pandemic levels.

While retail activity at our dealers trended lower during fiscal year 2023, given low inventory levels at the beginning of the fiscal year, we continued to experience strong wholesale demand throughout the first three quarters of fiscal year 2023.

As channel inventory becomes more normalized, we believe wholesale demand will become more directly dependent on the underlying retail activity for our products.

As a result, we believe our wholesale demand in the upcoming quarters will largely be driven by the retail activity for our products into the first half of fiscal year 2024.

Current inventory levels are now above pre-pandemic levels across all of our segments as retail activity has slowed at a more rapid pace than wholesale shipments.

Because channel inventory is above normalized levels, we expect wholesale demand will be below the underlying retail activity for our products into fiscal year 2025.

We experienced a progressive decline in retail demand during fiscal year 2024, in particular in entry level and lower priced boats.

We expect that this softening in retail demand will continue into fiscal year 2025.

In response, we have reduced our wholesale production.

We aim to increase our market share across the boating categories in which we compete through new product development, improved distribution, new models, and innovative features.

Our industry, however, is highly competitive, and our competitors have become more aggressive in their product introductions, expanded their distribution capabilities, and launched surf systems competitive with our patented Surf Gate system.

Further, our ability to maintain inventory levels at our dealers will be important to sustain and grow our market share across our brands.

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

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

We also believe that our track record of expanding our market share with our Malibu and Axis brands is directly transferable to our Cobalt, Pursuit and Maverick Boat Group brands.

As discussed above, our financial results and operations have been, and could continue to be, impacted by events outside of our control, including COVID-19 and supply chain disruptions that we believe were driven by numerous factors, such as labor shortages, ongoing domestic logistical constraints, West Coast port challenges and rising prices for our suppliers, in part due to inflationary pressures.

As discussed above, our financial results and operations have been, and could continue to be, impacted by events outside of our control, including inflationary pressures, rising prices for our suppliers and labor shortages.

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

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

For instance, elevated interest rates, which we are currently experiencing and expect to continue to experience in the near term, has reduced retail consumer appetite for our product and reduced the appetite for credit for our dealers and retail consumers.

Factors Affecting Our Results of Operations

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Consumer spending, especially purchases of discretionary items, tends to decline during recessionary periods and tends to increase during expansionary periods.

While there is still some uncertainty surrounding current macroeconomic conditions, and rising prices to our suppliers, in part due to inflationary pressures, we believe we are well positioned strategically in the recreational powerboat market with brands that are market leaders in their segments.

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

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

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

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

For example, in recent years 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, have increased.

Further, new boat buyers often finance their purchases.

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

We have seen increased interest rates for our customers throughout calendar year 2022 and the first half of calendar year 2023.

We have seen increased interest rates for our customers throughout calendar year 2023 and calendar year 2024.

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

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

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

Historically, we have not

entered into long-term agreements with suppliers of our raw materials and components other than for our engines and outboard motors.

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

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

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

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

We completed the build-out of our new Tooling Design Center at our Pursuit facility in Florida in March 2023.

The Tooling Design Center is a vertical integration initiative that will first focus on the tooling needs for our Pursuit boats, with the goal to build the majority of tooling across all of our brands at this site.

The Tooling Design Center is a vertical integration initiative focusing on the tooling needs for our Malibu, Maverick and Pursuit boats and is expanding rapidly to all other brands at this site.

This vertical integration initiative is part of a multi-year plan to bring our product tooling in-house, which has the potential to help us better control capital expenditures, improve tooling quality, and increase volumes.

On July 25, 2023, we completed the purchase of a 260,000 square-foot facility in Lenoir City, Tennessee.

This new facility provides for the opportunity to expand production of boats and provides additional opportunities for vertical integration initiatives.

Dealer Network, Dealer Financing and Incentives

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

Starting in fiscal year 2024, we plan to begin offering Monsoon sterndrive engines to our Cobalt dealers and customers.

As we move into the second half of fiscal year 2024, we plan to continue the roll out of our Monsoon engines into Cobalt’s surf boats.

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

could adversely affect our business.

Starting in fiscal year 2024, we began offering Monsoon sterndrive engines to our Cobalt dealers and customers.

In the second half of fiscal year 2024, we rolled out of our Monsoon engines into Cobalt’s surf boats.

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

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

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The Tooling Design Center has potential to help us better control capital expenditures, improve tooling quality, and increase volumes.

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

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

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

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Operating Expenses

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

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

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

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

Other costs include outside legal and accounting fees, investor relations, risk

management (insurance) and other administrative costs.

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

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

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federal and state income tax with respect to its net taxable income.

Net Income Attributable to Non-controlling Interest

Net (Loss) Income Attributable to Non-controlling Interest

As of each of June 30, 2024 and 2023, we had a 98.4% and 97.8%, respectively, controlling economic interest and 100% voting interest in the LLC and, therefore, we consolidate the LLC's operating results for financial statement purposes.

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

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

Results of Operations

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General and administrative 76,323 9.2 % 175,694 12.7 % 66,371 5.4 %

Goodwill and other intangible asset impairment 88,389 10.7 % — — % — — %

Abandonment of construction in process 8,735 1.1 % — — % — — %

Amortization 6,811 0.8 % 6,808 0.5 % 6,957 0.6 %

Operating income 144,784 10.4 % 213,823 17.6 % 149,775 16.2 %

Other expense (income), net:

Operating (loss) income (55,947) (6.7) % 144,784 10.4 % 213,823 17.6 %

Other expense (income), net:

Other (income) expense, net (4) — % 331 — % 983 0.1 %

Interest expense 1,842 0.2 % 2,962 0.2 % 2,875 0.2 %

Other expense (income), net 3,293 0.2 % 3,858 0.3 % 1,514 0.2 %

Income before provision for income taxes 141,491 10.2 % 209,965 17.3 % 148,261 16.0 %

Provision for income taxes 33,581 2.4 % 46,535 3.8 % 33,979 3.7 %

Net income 107,910 7.8 % 163,430 13.5 % 114,282 12.3 %

Net income attributable to non-controlling interest 3,397 0.3 % 5,798 0.5 % 4,441 0.5 %

Net income attributable to Malibu Boats, Inc.

Other expense, net 1,838 0.2 % 3,293 0.2 % 3,858 0.3 %

(Loss) income before provision for income taxes (57,785) (7.0) % 141,491 10.2 % 209,965 17.3 %

(Benefit) provision for income taxes (1,342) (0.2) % 33,581 2.4 % 46,535 3.8 %

Net (loss) income (56,443) (6.8) % 107,910 7.8 % 163,430 13.5 %

Net (loss) income attributable to non-controlling interest (531) (0.1) % 3,397 0.3 % 5,798 0.5 %

Net (loss) income attributable to Malibu Boats, Inc.

(55,912) (6.7) % 104,513 7.5 % 157,632 13.0 %

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Saltwater Fishing 1,633 30.3 % 2,585 26.2 % 2,035 22.0 %

2,585 26.2 % 2,035 22.0 % 1,428 17.5 %

Cobalt 1,571 29.2 % 2,151 21.8 % 2,047 22.1 %

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Net sales per unit $ 153,953 $ 140,765 $ 131,267

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

Comparison of the Fiscal Year Ended June 30, 2024 to the Fiscal Year Ended June 30, 2023

Net sales for fiscal year 2024 decreased $559.3 million, or 40.3%, to $829.0 million, compared to fiscal year 2023.

The decrease in net sales was d riven primarily by decreased unit volumes across all segments resulting primarily from decreased wholesale shipments and increased promotional costs across all segments resulting from elevated channel inventory levels and increased flooring costs for the Saltwater Fishing and Cobalt segments, partially offset by a favorable model mix in our Saltwater Fishing segment and inflation-driven year-over-year price increases .

Unit volume for fiscal year 2024 decreased 4,478 units, or 45.4%, to 5,385 units compared to fiscal year 2023.

Our unit volume decreased primarily due to lower wholesale shipments across all segments.

The decrease in wholesale shipments were driven by our efforts to address elevated channel inventory resulting from weakening retail demand experienced throughout the fiscal year.

Net sales attributable to our Malibu segment decreased $357.1 million, or 56.1%, to $279.1 million for fiscal year 2024 compared to fiscal year 2023.

Unit volumes attributable to our Malibu segment decreased 2,946 units for fiscal year 2024 compared to fiscal year 2023.

The decrease in net sales was primarily due to lower wholesale shipments driven by lower retail activity during the period, increased promotional costs and elevated dealer channel inventory levels.

Net sales attributable to our Saltwater Fishing segment decreased $121.6 million, or 27.1%, to $327.5 million for fiscal year 2024 compared to fiscal year 2023.

Unit volumes decreased 952 units for fiscal year 2024 compared to fiscal year 2023.

The decrease in net sales was driven by a decrease in units and increased dealer flooring program costs, partially offset by a favorable model mix and inflation-driven year-over-year price increases.

Net sales attributable to our Cobalt segment decreased $80.6 million, or 26.6%, to $222.4 million for fiscal year 2024 compared to fiscal year 2023.

Unit volumes attributable to Cobalt decreased 580 units for fiscal year 2024 compared to fiscal year 2023.

The decrease in net sales was driven primarily by a decrease in units, increased dealer flooring program costs and unfavorable model mix, partially offset by inflation-driven year-over-year price increases.

Overall consolidated net sales pe r unit increased 9.4% to $153,953 per unit for fiscal year 2024 compared to fiscal year 2023.

Net sales per unit for our Malibu segment increased 3.1% to $127,983 per unit for fiscal year 2024 compared to fiscal year 2023, driven by an increased mix of higher optioned boats and inflation-driven year-over-year price increases, partially offset by increased promotional costs and increased dealer flooring program costs.

Net sales per unit for our Saltwater Fishing segment increased 15.4% to $200,577 per unit f or fiscal year 2024 compared to fiscal year 2023, driven by a favorable model mix and inflation-driven year-over-year price increases, partially offset by increased promotional activities and increased dealer flooring program costs .

Net sales per unit for our Cobalt segment increased 0.5% to $141,542 per unit for fiscal year 2024 compared to fiscal year 2023, driven by inflation-driven year-over-year price increases, partially offset by increased promotional activities, unfavorable model mix, and increased dealer flooring program costs.

Cost of Sales

Cost of sales for fiscal year 2024 decreased $355.1 million, or 34.2%, to $681.9 million compared to fiscal year 2023.

The decrease in cost of sales was primarily driven by a 45.4% decrease in volumes, partially offset by increasingly normalized inflationary pressures.

In the Malibu segment, per unit material and labor costs increased $24.3 million driven by an increased mix of larger models that corresponded with higher net sales per unit, fixed-cost deleveraging due to lower volumes and increased prices due to inflationary pressures.

In the Saltwater Fishing segment, per unit material and labor costs increased $31.7 million driven by an increased mix of larger models that corresponded with higher net sales per unit, fixed-cost deleveraging due to lower volumes and increased prices due to inflationary pressures.

In the Cobalt segment, per unit material and labor costs increased $5.8 million driven by fixed-cost deleveraging due to lower volumes and increased prices due to inflationary pressures.

Gross profit for fiscal year 2024 decreased $204.2 million, or 58.1%, compared to fiscal year 2023.

The decrease in gross profit was driven primarily by lower sales revenue along with fixed-cost deleveraging.

Gross margin for fiscal year 2024 decreased from 25.3% to 17.7% driven primarily by an increased mix of the Saltwater Fishing segment and increased dealer flooring program costs.

Operating Expenses

Selling and marketing expense for fiscal year 2024 decreased $1.2 million, or 5.1% to $22.8 million compared to fiscal year 2023.

The decrease was driven primarily by a decrease related to boat show and related events.

As a percentage of sales, selling and marketing expense increased 100 basis points to 2.7% for fiscal year 2024 compared to 1.7% for fiscal year 2023.

General and administrative expense for fiscal year 2024 decreased $99.4 million, or 56.6%, to $76.3 million compared to fiscal year 2023.

The decrease in general and administrative expenses was primarily driven by the $100.0 million settlement of product liability cases in June 2023 (refer to Note 17 of our audited consolidated financial statements included in this Annual Report on Form 10-K for more details).

Additionally, there was a decrease in compensation and personnel-related expenses partially offset by increases in legal and professional fees, licenses and permits, and IT infrastructure expenses.

As a percentage of sales, general and administrative expenses decreased 350 basis points to 9.2% for fiscal year 2024 compared to 12.7% for fiscal year 2023.

Amortization expense for fiscal year 2024 remained flat at $6.8 million.

Other Expense, Net

Other expense, net for fiscal year 2024 decreased by $1.5 million, or 44.2% to $1.8 million as compared to fiscal year 2023.

Our interest expense decreased by $1.1 million during fiscal year 2024 compared to fiscal year 2023 due to lower average outstanding debt.

(Benefit) Provision for Income Taxes

Our (benefit) provision for income taxes for fiscal year 2024 decreased $34.9 million, or 104.0% to ($1.3 million) compared to fiscal year 2023.

This decrease was primarily driven by lower pre-tax earnings, including impairment charges related to our Maverick Boat Group reporting unit.

For fiscal year 2024, our effective tax rate of 2.3% was reduced by the impairment charges related to our Maverick Boat Group reporting unit.

For fiscal year 2023, our effective tax rate of 23.7% differed from the statutory federal income tax rate of 21% primarily due to the impact of U.S.

This increase in the effective tax rate was partially offset by the benefit of the research and development tax credit as well as the impact of non-controlling interests in the LLC.

Non-controlling interest

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

For fiscal years 2024 and 2023, the weighted average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 1.9% and 2.6%, respectively.

Comparison of the Fiscal Year Ended June 30, 2023 to the Fiscal Year Ended June 30, 2022

Net sales for fiscal year 2023 increased $173.5 million, or 14.3%, to $1,388.4 million, compared to fiscal year 2022.

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Net sales attributable to our Cobalt segment increased $37.6 million, or 14.2%, to $303.0 million for fiscal year 2023 compared to fiscal year 2022.

Unit volumes attributable to Cobalt increased 104 units for fiscal year 2023 compared to fiscal year 2022.

Unit volumes attributable to Cobalt increased 104 units for fiscal year 2023 compared to fiscal

The increase in net sales was driven by increased volume, inflation-driven year-over-year price increases and a favorable model mix, partially offset by increased dealer flooring program costs.

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This increase in the effective tax rate was partially offset by the benefit of the research and development tax credit as well as the impact of non-controlling interests in the LLC.

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

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

Non-controlling interest

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

For fiscal years 2023 and 2022, the weighted average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 2.6% and 2.8%, respectively.

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

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

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

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

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

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

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

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

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

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

The increase in net sales was driven primarily by the acquisition of Maverick Boat Group on December 31, 2020, year-over-year price increases and a favorable model mix.

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

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

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

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

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

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

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

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

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

Cost of Sales

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

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

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

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

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

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

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

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

Operating Expenses

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

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

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

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

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

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

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

Other Expense (Income), Net

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

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

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

Provision for Income Taxes

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

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

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

For fiscal year 2022, our effective tax rate of 22.2% differed from the statutory federal income

tax rate of 21% primarily due to the impact of U.S.

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

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

Non-controlling interest

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

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

For fiscal years 2023 and 2022, the weighted average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 2.6% and 2.8%, respectively.

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

We define adjusted EBITDA as net income before interest expense, income taxes, depreciation, amortization and non-cash, non-recurring or non-operating expenses, including settlement of litigation claims, certain professional fees, acquisition and integration-related expenses, non- cash compensation expense and adjustments to our tax receivable agreement liability.

We define adjusted EBITDA as net (loss) income before interest expense, income taxes, depreciation, amortization and non-cash, non-recurring or non-operating expenses, including goodwill and other intangible asset impairment expense, abandonment of construction in process, litigation settlements, certain professional fees, non-cash compensation expense and adjustments to our tax receivable agreement liability.

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

Adjusted EBITDA and adjusted EBITDA margin are not measures of net income as determined by GAAP.

Adjusted EBITDA and adjusted EBITDA margin are not measures of net (loss) income as determined by GAAP.

Management believes adjusted EBITDA and adjusted EBITDA margin allow investors to evaluate the Company’s operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance.

Management uses adjusted EBITDA to assist in highlighting trends in our operating results without regard to our financing methods, capital structure and non-recurring or non-operating expenses.

We exclude the items listed above from net income in arriving at adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures, the methods by which assets were acquired and other factors.

Adjusted EBITDA has limitations as an analytical tool and should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our liquidity.

We exclude the items listed above from net (loss) income in arriving at adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures, the methods by which assets were acquired and other factors.

Adjusted EBITDA has limitations as an analytical tool and should not be considered as an alternative to, or more meaningful than, net (loss) income as determined in accordance with GAAP or as an indicator of our liquidity.

Certain items excluded from adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historical costs of depreciable assets.

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Our computations of adjusted EBITDA and adjusted EBITDA margin may not be comparable to other similarly titled measures of other companies.

The following table sets forth a reconciliation of net income as determined in accordance with GAAP to adjusted EBITDA and presentation of net income margin and adjusted EBITDA margin for the periods indicated (dollars in thousands):

The following table sets forth a reconciliation of net (loss) income as determined in accordance with GAAP to adjusted EBITDA and presentation of net (loss) income margin and adjusted EBITDA margin for the periods indicated (dollars in thousands):

Fiscal Year Ended June 30,

2024 2023 2022

Net income $ 107,910 $ 163,430 $ 114,282

Provision for income taxes 33,581 46,535 33,979

Net (loss) income

$ (56,443) $ 107,910 $ 163,430

(Benefit) provision for income taxes (1,342) 33,581 46,535

Interest expense 1,842 2,962 2,875

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Amortization 6,811 6,808 6,957

Goodwill and other intangible asset impairment 1

Abandonment of construction in process 2

Litigation settlement 3

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3,096 4,781 —

Acquisition and integration related expenses 3

Stock-based compensation expense 5

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Adjustment to tax receivable agreement liability 6

188 1,025 (88)

Adjusted EBITDA $ 82,237 $ 284,036 $ 246,529

Net Sales $ 829,035 $ 1,388,365 $ 1,214,877

Net Income Margin 6

Net (Loss) Income Margin 7

(6.8) % 7.8 % 13.5 %

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9.9 % 20.5 % 20.3 %

(1) Represents impairment of goodwill and trade names related to our Maverick Boat Group reporting unit in the amounts of $49.2 million and $39.2 million, respectively.

(2) For the three and twelve months ended June 30, 2024, we recorded a non-cash charge of $8.7 million associated with the abandonment of the ERP project.

The abandonment pertains to long-lived assets including software and other capitalized costs specifically tied to the project and is captured in the Abandonment of construction in process of our Consolidated Statements of Operations and Comprehensive (Loss) Income.

(3) Represents settlement of product liability cases in June 2023 for $100.0 million.

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

(2) For fiscal year 2023, represents legal and advisory fees related to product liability cases that were settled for $100.0 million in June 2023.

For fiscal year 2021, represents legal and advisory fees related to our litigation with Skier's Choice, Inc.

(4) Represents legal and advisory fees related to ongoing litigation related to Batchelder matters for fiscal year 2024 and legal and advisory fees related to product liability cases that were settled for $100.0 million in June 2023.

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

(3) For fiscal year ended 2021, represents legal and advisory fees incurred in connection with our acquisition of Maverick Boat Group on December 31, 2020.

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

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

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

(6) For fiscal year 2024, we recognized other expense from an adjustment in our tax receivable agreement liability due to an increase in the state tax rate used in computing our future tax obligations and in turn, an increase in the future benefit we expect to pay under our tax receivable agreement with pre-IPO owners.

For fiscal year 2023, we recognized other expense from an adjustment in our tax receivable agreement liability mainly derived by future benefits from Tennessee net operating losses at Malibu Boats, Inc.

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

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

For more information, refer to Note 12 of our consolidated financial statements included elsewhere in this Annual Report.

(6) We calculate net income margin as net income divided by net sales and we define adjusted EBITDA margin as adjusted EBITDA divided by net sales.

Adjusted Fully Distributed Net Income

We define Adjusted Fully Distributed Net Income as net income attributable to Malibu Boats, Inc.

(i) excluding income tax expense, (ii) excluding the effect of non-recurring or non-cash items, (iii) assuming the exchange of all LLC units into shares of Class A Common Stock, which results in the elimination of non-controlling interest in the LLC, and (iv) reflecting an adjustment for income tax expense on fully distributed net income before income taxes at our estimated effective income tax rate.

Adjusted Fully Distributed Net Income is a non-GAAP financial measure because it represents net income attributable to Malibu Boats, Inc., before non-recurring or non-cash items and the effects of non-controlling interests in the LLC.

We use Adjusted Fully Distributed Net Income to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with GAAP, provides a more complete understanding of factors and trends affecting our business than GAAP measures alone.

We believe Adjusted Fully Distributed Net Income assists our board of directors, management and investors in comparing our net income on a consistent basis from period to period because it removes non-cash or non-recurring items, and eliminates the variability of non-controlling interest as a result of member owner exchanges of LLC Units into shares of Class A Common Stock.

In addition, because Adjusted Fully Distributed Net Income is susceptible to varying calculations, the Adjusted Fully Distributed Net Income measures, as presented in this Annual Report, may differ from and may, therefore, not be comparable to similarly titled measures used by other companies.

The following table shows the reconciliation of the numerator and denominator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock for the periods presented (in thousands except share and per share data):

(7) We calculate net (loss) income margin as net (loss) income divided by net sales and we define adjusted EBITDA margin as adjusted EBITDA divided by net sales.

Adjusted Fully Distributed Net (Loss) Income

We define Adjusted Fully Distributed Net (Loss) Income as net (loss) income attributable to Malibu Boats, Inc.

(i) excluding income tax expense, (ii) excluding the effect of non-recurring or non-cash items, (iii) assuming the exchange of all LLC Units into shares of Class A Common Stock, which results in the elimination of non-controlling interest in the LLC, and (iv) reflecting an adjustment for income tax (benefit) expense on fully distributed net (loss) income before income taxes at our estimated effective income tax rate.

Adjusted Fully Distributed Net (Loss) Income is a non-GAAP financial measure because it represents net (loss) income attributable to Malibu Boats, Inc., before non-recurring or non-cash items and the effects of non-controlling interests in the LLC.

We use Adjusted Fully Distributed Net (Loss) Income to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with GAAP, provides a more complete understanding of factors and trends affecting our business than GAAP measures alone.

We believe Adjusted Fully Distributed Net (Loss) Income assists our board of directors, management and investors in comparing our net (loss) income on a consistent basis from period to period because it removes non-cash or non-recurring items, and eliminates the variability of non-controlling interest as a result of member owner exchanges of LLC Units into shares of Class A Common Stock.

In addition, because Adjusted Fully Distributed Net (Loss) Income is susceptible to varying calculations, the Adjusted Fully Distributed Net (Loss) Income measures, as presented in this Annual Report, may differ from and may, therefore, not be comparable to similarly titled measures used by other companies.

The following table shows the reconciliation of the numerator and denominator for net (loss) income available to Class A Common Stock per share to Adjusted Fully Distributed Net (Loss) Income per Share of Class A Common Stock for the periods presented (in thousands except share and per share data):

Fiscal Year Ended June 30,

2024 2023 2022

Reconciliation of numerator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock:

Net income attributable to Malibu Boats, Inc.

Reconciliation of numerator for net (loss) income available to Class A Common Stock per share to Adjusted Fully Distributed Net (Loss) Income per Share of Class A Common Stock:

Net (loss) income attributable to Malibu Boats, Inc.

$ (55,912) $ 104,513 $ 157,632

Provision for income taxes 33,581 46,535 33,979

(Benefit) provision for income taxes (1,342) 33,581 46,535

Litigation settlement 1

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4,935 5,894 6,342

Goodwill and other intangible asset impairment 5

Abandonment of construction in process 6

Adjustment to tax receivable agreement liability 7

188 1,025 (88)

Net income attributable to non-controlling interest 6

Net (loss) income attributable to non-controlling interest 8

(531) 3,397 5,798

Fully distributed net income before income taxes

54,078 259,008 223,985

Income tax expense on fully distributed income before income taxes 9

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2024 2023 2022

Reconciliation of denominator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock:

Weighted average shares outstanding of Class A Common Stock used for basic net income per share:

Reconciliation of denominator for net (loss) income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock:

Weighted average shares outstanding of Class A Common Stock used for basic net (loss) income per share:

20,439,449 20,501,844 20,749,237

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21,101,534 21,317,869 21,602,291

The following table shows the reconciliation of net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock for the periods presented:

The following table shows the reconciliation of net (loss) income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock for the periods presented:

Fiscal Year Ended June 30,

2024 2023 2022

Net income available to Class A Common Stock per share $ 5.10 $ 7.60 $ 5.29

Net (loss) income available to Class A Common Stock per share

$ (2.74) $ 5.10 $ 7.60

Impact of adjustments:

Provision for income taxes 1.64 2.24 1.64

(Benefit) provision for income taxes (0.07) 1.64 2.24

Litigation settlement 1

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0.24 0.29 0.31

Goodwill and other intangible asset impairment 5

Abandonment of construction in process 6

Adjustment to tax receivable agreement liability 7

Net income attributable to non-controlling interest 6

Net (loss) income attributable to non-controlling interest 8

(0.03) 0.17 0.28

Fully distributed net income per share before income taxes

2.63 12.64 10.80

Impact of income tax expense on fully distributed income before income taxes 9

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

(2) For fiscal year 2023, represents legal and advisory fees related to our product liability cases that were settled in June 2023 for $100.0 million.

For fiscal year 2021, represents legal and advisory fees related to our litigation with Skier's Choice, Inc.

(2) Represents legal and advisory fees related to ongoing litigation related to Batchelder matters for fiscal year 2024 and legal and advisory fees related to product liability cases that were settled for $100.0 million in June 2023.

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

(3) For fiscal years 2024, 2023 and 2022, represents amortization of intangibles acquired in connection with the acquisition of Maverick Boat Group, Pursuit and Cobalt.

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

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

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

(5) For fiscal year 2023, we recognized other expense from an adjustment in our tax receivable agreement liability mainly derived by future benefits from Tennessee net operating losses at Malibu Boats, Inc..

(5) Represents impairment of goodwill and trade names related to our Maverick Boat Group reporting unit in the amounts of $49.2 million and $39.2 million, respectively.

(6) For the three and twelve months ended June 30, 2024, we recorded a non-cash charge of $8.7 million associated with the abandonment of the ERP project.

(7) For fiscal year 2024, we recognized other expense from an adjustment in our tax receivable agreement liability due to an increase in the state tax rate used in computing our future tax obligations and in turn, an increase in the future benefit we expect to pay under our tax receivable agreement with pre-IPO owners.

For more information, refer to Note 12 of our consolidated financial statements included elsewhere in this Annual Report.

(8) Reflects the elimination of the non-controlling interest in the LLC as if all LLC members had fully exchanged their LLC Units for shares of Class A Common Stock.

(7) Reflects income tax expense at an estimated normalized annual effective income tax rate of 24.3% of income before taxes for fiscal year 2023, 23.8% of income before taxes for fiscal year 2022 and 23.6% of income before taxes for fiscal year 2021, in each case assuming the conversion of all LLC Units into shares of Class A Common Stock.

(9) Reflects income tax expense at an estimated normalized annual effective income tax rate of 24.5% of income before taxes for fiscal year 2024, and 24.3% of income before taxes for fiscal year 2023 in each case assuming the conversion of all LLC Units into shares of Class A Common Stock.

The estimated normalized annual effective income tax rate for fiscal years 2024 and 2023 is based on the federal statutory rate plus a blended state rate adjusted for the research and development tax credit, the foreign derived intangible income deduction, and foreign income taxes attributable to our Australian subsidiary.

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Material Cash Requirements

Capital Expenditures.

For fiscal year 2023, we incurred approximately $54.8 million in capital expenditures related to the completion of our Tooling Design Center as well as new models, capacity enhancements and vertical integration initiatives.

We expect capital expenditures between $70.0 million and $80.0 million for fiscal year 2024 primarily for the outfitting of our Roane County property and investments in new models, capacity enhancements and vertical integration initiatives.

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

Roane County Property Purchase and Related Improvements .

On March 28, 2023, we entered into a Purchase and Sale Agreement (the “Purchase Agreement”) to purchase certain real property, improvements and other assets from the seller for a cash purchase price of approximately $33.3 million.

As of June 30, 2023, we had deposited approximately $7.8 million in escrow pursuant to the Purchase Agreement.

On July 25, 2023, the transaction closed and we paid the $25.5 million balance of the purchase price.

We expect to incur additional capital expenditures of approximately $15.0 million to make changes to the facility to meet our operational needs.

Settlement of Batchelder Matters.

On June 30, 2023, Malibu Boats, Inc.

and Boats LLC entered into a Confidential General Release and Settlement Agreement (the “Settlement Agreement”) with the Batchelder I Plaintiffs and the Batchelder II Plaintiffs in settlement of each of the Batchelder Matters.

Pursuant to the Settlement Agreement, among other things, Malibu Boats, Inc.

or Boats LLC, as the case may be, paid (or caused to be paid) to the Batchelder Plaintiffs and their agents a total of $100.0 million, of which (a) $40.0 million was paid to the Batchelder Plaintiffs and their agents promptly following the execution of the Settlement Agreement and (b) $60.0 million was placed in an escrow account and held by the Escrow Agent pursuant to the terms of an Escrow Agreement.

All conditions for releasing the $60.0 million placed in the escrow account have now been satisfied.

We expect that all amounts paid under the Settlement Agreement should be tax deductible for federal and state income tax purposes.

We maintain liability insurance applicable to the Batchelder Matters with coverage up to $26.0 million.

Our typical uses of cash are for capital expenditures, debt service obligations, payments under our tax receivables agreement, our lease obligations and return of capital to our stockholders, which has typically been accomplished through our stock repurchase programs.

During fiscal year 2024, we had a one-time payment of $100.0 million with respect to a settlement agreement entered in connection with the settlement of all Batchelder-related product liability matters and we purchased our new Roane County, Tennessee facility for a cash purchase price of approximately $33.3 million.

For the litigation settlement, we borrowed $75.0 million under the revolving credit facility to fund a portion of that payment.

We also maintain liability insurance applicable to the Batchelder Matters with coverage up to $26.0 million.

As of August 26, 2024, we had received approximately $21.0 million in insurance coverage proceeds, subject in certain cases to reservation of rights by the insurance carriers.

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However, we cannot predict the outcome of such litigation.

Capital Expenditures.

For fiscal year 2024, we incurred approximately $76.0 million in capital expenditures primarily related to the completion of our Roane County, Tennessee facility as well as new models, capacity enhancements and vertical integration initiatives.

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

Principal and Interest Payments.

On July 8, 2022, we entered into a Third Amended and Restated Credit Agreement (the “Credit Agreement”).

The Credit Agreement provides us with a revolving credit facility in an aggregate principal amount of up to $350.0 million.

As of June 30, 2023, we had no outstanding balance under our revolving credit facility and $1.6 million in outstanding letters of credit, with $348.4 million available for borrowing.

On July 7, 2023, in connection with the settlement of the Batchelder Matters, we borrowed $75.0 million under the revolving credit facility, with $273.4 million remaining available for borrowing.

Our Third Amended and Restated Credit Agreement (the “Credit Agreement”) provides us with a revolving credit facility in an aggregate principal amount of up to $350.0 million.

As of June 30, 2024, we had no outstanding borrowings under our revolving credit facility, with $348.4 million available for borrowing.

The revolving credit facility matures on July 8, 2027.

As of August 26, 2024, we had outstanding borrowings of $28.0 million under our revolving credit facility.

Assuming no additional repayments or borrowings on our revolving credit facility with an outstanding balance of $28.0 million after August 26, 2024, our interest payments would be approximately $2.6 million within the next 12 months based on the interest rate at August 26, 2024 of 8.75%.

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

federal, state and local income tax or franchise tax that we actually realize, or in some

circumstances are deemed to realize, as a result of an expected increase in our share of tax basis in LLC’s tangible and intangible assets, including increases attributable to payments made under the tax receivable agreement.

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

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

We estimate that approximately $4.1 million will be due under the tax receivable agreement within the next 12 months.

In accordance with the tax receivable agreement, the next payment is anticipated to occur approximately 75 days after filing the federal tax return which is due on April 15, 2024.

We estimate that no amounts will be due under the tax receivable agreement within the next 12 months.

In accordance with the tax receivable agreement, the next payment is anticipated to occur once net operating losses are utilized and there is sufficient taxable income.

Operating Lease Obligations.

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As of June 30, 2024, we had purchase orders in the amount of $48.0 million due within the next 12 months.

Stock Repurchase Program .

During the fiscal year ended June 30, 2023, we repurchased 143,759 shares of Class A Common Stock for $7.9 million in cash including related fees and expenses under our prior repurchase program which expired on November 8, 2022.

On November 3, 2022, 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 (the “2022 Repurchase Program”) for the period from November 8, 2022 to November 8, 2023.

Return of Capital/Stock Repurchase Program .

We previously 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 stock or dividend payments.

To date, we have returned capital to our stockholders through the repurchase of our stock and have not declared any dividends.

During the fiscal year ended June 30, 2024, we repurchased 699,958 shares of Class A Common Stock for $29.8 million in cash including related fees and expenses under our 2022 and 2023 Repurchase Programs.

Our Board of Directors authorized a stock repurchase program 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 was available to repurchase shares of Class A Common Stock and LLC Units under the 2023 Repurchase Program.

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Cash Flows From Operating Activities

Net cash provided by operating activities was $55.6 million for fiscal year 2024, compared to $184.7 million for the same period in 2023, a decrease of $129.2 million.

The decrease in cash provided by operating activities primarily resulted from a decrease of $51.4 million in net income (after consideration of non-cash items included in net (loss) income, primarily related to the Maverick impairment of goodwill and other intangible assets, abandonment of construction in process, depreciation and deferred tax assets) and net decrease in operating assets and liabilities of $77.8 million.

This decrease was related to a reduction in working capital, resulting from lower sales and a one-time payment of $100.0 million with respect to a settlement agreement entered in connection with all Batchelder-related product liability matters.

Net cash provided by operating activities was $184.7 million for fiscal year 2023, compared to $164.8 million for the same period in 2022, an increase of $19.9 million.

The increase in cash provided by operating activities primarily resulted from a net increase in operating assets and liabilities of $94.8 million related to the timing of collections of accounts receivables, payments for accruals and payables, and purchases of inventory, and partially offset by a decrease of $74.9 million in net income (after consideration of non-cash items included in net income, primarily related to depreciation, amortization, deferred tax assets and non-cash compensation).

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

The increase in cash provided by operating activities primarily resulted from an increase of $51.7 million in net income (after consideration of non-cash items included in net income, primarily related to depreciation, amortization, deferred tax assets and non-cash compensation) and a net decrease in

operating assets and liabilities of $18.2 million related to the timing of collections of accounts receivables, payments for accruals and payables, and purchases of inventory.

Cash Flows From Investing Activities

Net cash used in investing activities was $75.8 million for fiscal year 2024 compared to $54.6 million for the same period in 2023, a increase of cash used in investing activities of $21.2 million.

The increase in cash used in investing activities was primarily related to increased capital expenditures compared to same period in 2023.

Net cash used in investing activities was $54.6 million for fiscal year 2023 compared to $61.6 million for the same period in 2022, a decrease of cash used in investing activities of $7.0 million.

The decrease in cash used in investing activities was primarily related to the acquisition of certain assets of AmTech, LLC and BTR, LLC in fiscal year 2022 for $6.6 million.

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

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

Cash Flows From Financing Activities

Net cash used in financing activities was $134.6 million for fiscal year 2023 compared to net cash used in financing activities of $60.4 million for fiscal year 2022, a change of $74.2 million.

During fiscal year, 2023, we repaid $23.1 million on our term loans, repaid $97.0 million, net of borrowings under our revolving credit facility and repurchased $7.9 million of our Class A Common Stock under our prior stock repurchase program.

Net cash used in financing activities was $31.7 million for fiscal year 2024 compared to net cash used in financing activities of $134.6 million for fiscal year 2023, a decrease of $102.9 million.

During fiscal year 2024, we repurchased 699,958 of our Class A Common Stock under our stock repurchase program.

We also paid $1.5 million on taxes for shares withheld upon the vesting of restricted stock awards and paid $0.9 million in distributions to LLC Unit holders.

Net cash used in financing activities was $134.6 million for fiscal year 2023 compared to net cash provided by financing activities of $60.4 million for fiscal year 2022, a change of $74.2 million.

During fiscal year 2023, we repaid $23.1 million on our term loans, we repaid $97.0 million, net of borrowings under our revolving credit facility and repurchased $7.9 million of our Class A Common Stock under our prior stock repurchase program.

We also paid $3.1 million on taxes for shares withheld upon the vesting of restricted stock awards, paid $3.4 million in distributions to LLC Unit holders and paid $1.4 million in deferred financing costs.

During fiscal year 2023, we received proceeds of $1.3 million from the exercise of stock options.

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

During fiscal year, 2022, we received proceeds of $72.0 million from additional borrowings under our revolving credit facility to fully repay the $72.0 million of outstanding term loans that matured on July 1, 2022.

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

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

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

Revolving Credit Facility

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As of June 30, 2024, we had no outstanding balance under our revolving credit facility and $1.6 million in outstanding letters of credit, with $348.4 million available for borrowing.

On July 7, 2023, we borrowed $75.0 million under the revolving credit facility, with $273.4 million remaining available for borrowing.

We have the option to request that lenders increase the amount available under the revolving credit facility by, or obtain incremental term loans of, up to $200.0 million, subject to the terms of the Credit Agreement and only if existing or new lenders choose to provide additional term or revolving commitments.

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

The Credit Agreement also requires compliance with certain customary financial covenants consisting of a minimum ratio of EBITDA to

interest expense and a maximum ratio of total debt to EBITDA.

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

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

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Our financial exposure under these agreements is limited to the difference between the amounts unpaid by the dealer with respect to the repossessed product plus costs of repossession and the amount received on the resale of the repossessed product.

For fiscal years 2023, 2022 and 2021, we did not repurchase any boats under our repurchase agreements, respectively.

We repurchased 17 units under our repurchase agreements during fiscal year 2024 which boats were subsequently resold during fiscal year 2024 above cost.

Additionally, during the period between July 1, 2024 and August 28, 2024, we repurchased 19 new model year 2024 units related to the ongoing bankruptcy with Tommy's Boats totaling $2.5 million.

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

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.

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

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

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These principles require us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses and cash flows, and related disclosure of contingent assets and liabilities.

Our estimates include those related to business combinations, revenue recognition, income taxes, tax receivable agreement liability, and warranty claims.

Our estimates include those related to business combinations, revenue recognition, warranty claims, goodwill, intangible assets and long lived assets.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

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Revenue from boat part sales is recorded as the product is shipped from our location, which is free on board shipping point.

Revenue associated with sales of materials, parts, boats or engine products sold under our exclusive manufacturing and distribution agreement with our Australian subsidiary are eliminated in consolidation.

Revenue associated with sales of materials, parts, boats or engine products sold under our exclusive manufacturing and

distribution agreement with our Australian subsidiary are eliminated in consolidation.

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

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

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

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Beginning in model year 2018, we increased the term of our bow-to-stern warranty for Cobalt brand boats from three years to five years.

Accordingly, we have less historical claims experience for warranty year five, and as such, these estimates give rise to a higher level of estimation uncertainty.

Future warranty claims may differ from our estimate of the warranty liability, which could lead to changes in the Company’s warranty liability in future periods.

A hypothetical change of a 10% increase or decrease to our estimate of the warranty liability as of June 30, 2023 would have affected net income for the fiscal year ended June 30, 2023 by approximately $4.2 million.

A hypothetical change of a 10% increase or decrease to our estimate of the warranty liability as of June 30, 2024 would have affected net (loss) income for the fiscal year ended June 30, 2024 by approximately $3.8 million.

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

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

Goodwill amounts are not amortized, but rather are evaluated for potential impairment on an annual basis, as of June 30, in accordance with the provisions of ASC Topic 350, Intangibles—Goodwill and Other .

Under the guidance, we may assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If this assessment indicates the possibility of impairment, the income approach to test for goodwill impairment would be used.

Under the income approach, our management calculates the fair value of its reporting units based on the present value of estimated future cash flows.

If the fair value of an individual reporting unit exceeds the carrying value of the net assets including goodwill assigned to that unit, goodwill is not impaired.

If the carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit, then our management determines the implied fair value of the reporting unit’s goodwill.

If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference.

During the three months ended March 31, 2024, we determined certain indicators of potential impairment existed, 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 consistent with our approach for annual impairment testing, including similar models and inputs.

Based on such analysis, we determined that its estimated fair value for the Maverick Boat Group reporting unit is less than its carrying value as of March 31, 2024 and recognized an impairment charge of $49.2 million for the three months ended March 31, 2024.

For the fiscal year ended June 30, 2024, we performed a qualitative assessment on the remaining reporting units which indicated that the fair value of its reporting units more likely than not exceeded their respective carrying amounts.

For the fiscal year ended June 30, 2023, we performed a quantitative assessment on the Maverick Boat Group reporting unit which indicated that the fair value of its reporting unit more likely than not exceeded its carrying amount.

For the fiscal year ended June 30, 2023, we performed a qualitative assessment on the remaining reporting units which indicated that the fair value of its reporting units more likely than not exceeded their respective carrying amounts.

We did not recognize any goodwill impairment charges in the fiscal years ended June 30, 2023 and 2022.

Intangible Assets

Intangible assets consist primarily of dealer relationships, product trade names, legal and contractual rights surrounding a patent and a non-compete agreement.

These assets are recorded at their estimated fair values at the acquisition dates using the income approach.

Definite-lived intangible assets are being amortized using the straight-line method based on their estimated useful lives ranging from 10 to 20 years.

The estimated useful lives of dealer relationships consider the average length of dealer relationships at the time of acquisition, historical rates of dealer attrition and retention, the Company’s history of renewal and extension of dealer relationships, as well as competitive and economic factors resulting in a range of useful lives.

The estimated useful lives of the Company’s trade names are based on a number of factors including the competitive environment.

The estimated useful lives of legal and contractual rights are estimated based on the benefits that the patent provides for its remaining terms unless competitive, technological obsolescence or other factors indicate a shorter life.

The useful life of the non-compete agreement is based on a ten-year agreement entered into by the Company and former owner of the Licensee as part of the acquisition.

In addition, the Company has indefinite-lived intangible assets for acquired trade names.

Management, assisted by third-party valuation specialists, determined the estimated fair values of separately identifiable intangible assets at the date of acquisition under the income approach.

Significant data and assumptions used in the valuations included cost, market and income comparisons, discount rates, royalty rates and management forecasts.

Discount rates for each intangible asset were selected based on judgment of relative risk and approximate rates of returns investors in the subject assets might require.

The royalty rates were based on historical and projected sales and profits of products sold and management’s assessment of the intangibles’ importance to the sales and profitability of the product.

Management provided forecasts of financial data pertaining to assets, liabilities and income statement balances to be utilized in the valuations.

While management believes the assumptions, estimates, appraisal methods and ensuing results are appropriate and represent the best evidence of fair value in the circumstances, modification or use of other assumptions or methods could have yielded different results.

The carrying amount of definite-lived intangible assets are reviewed whenever circumstances arise that indicate the carrying amount of an asset may not be recoverable.

The carrying value of these assets is compared to the undiscounted future cash flows the assets are expected to generate.

If the asset is considered to be impaired, the carrying value is compared to the fair value and this difference is recognized as an impairment loss.

Intangible assets not subject to amortization are assessed for impairment at least annually and whenever events or changes in circumstances indicate that it is more likely than not that an asset may be impaired.

The impairment test for indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying amount.

An impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the asset.

During the Company's interim impairment evaluation of indefinite-lived intangibles, the Company recorded an impairment charge to trade names of $39.2 million for the three months ended March 31, 2024 related to the Maverick Boat Group reporting unit.

The impairment was principally a result of a decline, in the fiscal year 2024 and fiscal year 2025 forecast, in the outlook for sales and operating performance relative to our business plan.

This charge was included in Goodwill and other intangible asset impairment on the consolidated statements of operations and comprehensive (loss) income.

No other intangible asset impairment loss was recorded.

There was no impairment loss recognized on intangible assets for the fiscal years ended June 30, 2023 and 2022.

Long-Lived Assets Other than Intangible Assets

The Company assesses the potential for impairment of its long-lived assets if facts and circumstances, such as declines in sales, earnings, or cash flows or adverse changes in the business climate, suggest that they may be impaired.

A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life will also trigger a review for impairment.

The Company performs its assessment by comparing the book value of the asset groups to the estimated future undiscounted cash flows associated with the asset groups.

If any impairment in the carrying value of its long-lived assets is indicated, the assets would be adjusted to an estimate of fair value.

The Company recognized $8.7 million for abandonment of construction in process charges related to the ERP (Enterprise resource planning) project during the year ended June 30, 2024.

The charges pertains to long-lived assets including software and other capitalized costs specifically tied to the project and is captured in the abandonment of construction in process line of the Company's Consolidated Statements of Operations and Comprehensive (Loss) Income (see Note 6).

New Accounting Pronouncements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis