MALIBU BOATS INC

Previous wording

We sell our boats through a dealer network that we believe is the strongest in the recreational powerboat category. As of June 30, 2023, our worldwide distribution channel consisted of over 400 dealer locations globally. Our dealer base is an important part of our consumers’ experience, our marketing efforts and our brands. 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.

Current wording

We sell our boats through a dealer network that we believe is the strongest in the recreational powerboat category. As of June 30, 2023, our worldwide distribution channel consisted of over 400 dealer locations globally. Our dealer base is an important part of our consumers’ experience, our marketing efforts and our brands. 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. On April 10, 2024, fifteen dealerships operated under common control of Tommy’s Boats (“Tommy’s Boats”) filed a complaint against Malibu Boats, Inc. and Boats, LLC in the United States District Court for the Eastern District of Tennessee. The complaint alleges that we breached our 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. We intend to vigorously defend against claims alleged by Tommy’s Boats. Sales to locations under common control of Tommy's Boats represented approximately 9.4%, 10.7% and 3.0% of our consolidated net sales for fiscal year 2022, fiscal year 2023 and the first nine months of fiscal year 2024, respectively, including approximately 23.3% and 8.3% of consolidated sales in fiscal year 2023 and the first nine months of fiscal year 2024, respectively, for our Malibu segment. We do not currently have dealership agreements in effect with Tommy’s Boats, and we are actively engaged with our dealer network to mitigate any marketplace disruption and to provide a strong dealer partner in each of our markets served by Tommy’s Boats. Boats LLC has a repurchase agreement with M&T Bank, the floor financing lender to Tommy’s Boats, with respect to approximately $5.2 million of Malibu/Axis boats based on recent reporting by M&T Bank, the financing provider to Tommy’s Boats.

Previous wording

On a consolidated basis, we achieved second quarter fiscal 2024 net sales, gross profit, net income and adjusted EBITDA of $211.1 million, $37.5 million, $10.1 million and $22.9 million, respectively, compared to $338.7 million, $75.7 million, $36.4 million and $57.6 million, respectively, for the second quarter of fiscal 2023. For the second quarter of fiscal 2024, net sales decreased 37.7%, gross profit decreased 50.5%, net income decreased 72.1% and adjusted EBITDA decreased 60.2% as compared to the second quarter of fiscal 2023. For the definition of adjusted EBITDA and a reconciliation to net income, see “GAAP Reconciliation of Non-GAAP Financial Measures.”

Current wording

On a consolidated basis, we achieved third quarter fiscal 2024 net sales, gross profit, net (loss) income and adjusted EBITDA of $203.4 million, $40.3 million, $(67.8) million and $24.4 million, respectively, compared to $375.1 million, $98.6 million, $53.5 million and $79.3 million, respectively, for the third quarter of fiscal 2023. For the third quarter of fiscal 2024, net sales decreased 45.8%, gross profit decreased 59.1%, net (loss) income decreased 226.8% and adjusted EBITDA decreased 69.2% as compared to the third quarter of fiscal 2023. For the definition of adjusted EBITDA and a reconciliation to net (loss) income, see “GAAP Reconciliation of Non-GAAP Financial Measures.”

Previous wording

Current inventory levels are now above pre-pandemic levels across most of our segments as retail activity slowed at a more rapid pace than wholesale shipments. Now, as channel inventory is slightly above normalized levels, we believe wholesale demand will be directly dependent on the underlying retail activity for our products in the second half of fiscal year 2024. We have experienced a softening in retail demand during the first half of fiscal year 2024, in particular in entry level and lower priced boats, which we expect will continue into the second half of fiscal year 2024. In response, we are recalibrating our wholesale production to match retail demand.

Current wording

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 in the last quarter of fiscal year 2024 and into fiscal year 2025. While we expect a gradual decline in inventory levels as we enter into spring and summer months, we experienced a progressive decline in retail demand during the first three quarters of fiscal year 2024, with a significant decrease the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023, in particular in entry level and lower priced boats. We expect that this softening in retail demand will continue for remainder of fiscal year 2024 and into fiscal year 2025. In response, we have reduced our wholesale production.

Previous wording

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, supply chain disruptions, 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 and expect to continue to experience in the near term, has reduced retail consumer appetite for our product and reduced the appetite and availability for credit for our dealers and retail consumers.

Current wording

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, supply chain disruptions, 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 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.

Previous wording

mix, our ability to manage manufacturing costs, sales cycles and inventory levels, the strength of our dealer network, our ability to offer dealer financing and incentives and our vertical integration efforts. We discuss each of these factors in more detail under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations--Factors Affecting Our Results of Operations” in our Form 10-K for the year ended June 30, 2023. While we do not have control of all factors affecting our results from operations, we work diligently to influence and manage those factors which we can impact to enhance our results of operations.

Current wording

We believe that our results of operations and our growth prospects are affected by a number of factors, such as the economic environment and consumer demand for our products, our ability to develop new products and innovate, our product mix, our ability to manage manufacturing costs, sales cycles and inventory levels, the strength of our dealer network, our ability to offer dealer financing and incentives and our vertical integration efforts. We discuss each of these factors in more detail under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations--Factors Affecting Our Results of Operations” in our Form 10-K for the year ended June 30, 2023. While we do not have control of all factors affecting our results from operations, we work diligently to influence and manage those factors which we can impact to enhance our results of operations.

Previous wording

Our operating expenses include selling and marketing, general and administrative costs and amortization costs. Each of these items includes personnel and related expenses, supplies, non-manufacturing overhead, third-party professional fees and various other operating expenses. Further, selling and marketing expenditures include the cost of advertising and various promotional sales incentive programs. General and administrative expenses include, among other things, salaries, benefits and other personnel related expenses for employees engaged in product development, engineering, finance, information technology, human resources and executive management. Other costs include outside legal and accounting fees, investor relations, risk management (insurance) and other administrative costs. General and administrative expenses also include product development expenses associated with our vertical integration initiative and acquisition or integration related expenses. Amortization expenses are associated with the amortization of intangibles.

Current wording

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. Further, selling and marketing expenditures include the cost of advertising and various promotional sales incentive programs. General and administrative expenses include, among other things, salaries, benefits and other personnel related expenses for employees engaged in product development, engineering, finance, information technology, human resources and executive management. Other costs include outside legal and accounting fees, investor relations, risk management (insurance) and other administrative costs. General and administrative expenses also include product development expenses associated with our vertical integration initiative and acquisition or integration related expenses. Amortization expenses are associated with the amortization of intangibles.

Previous wording

Net Income Attributable to Non-controlling Interest

Current wording

Net (Loss) Income Attributable to Non-controlling Interest

Previous wording

As of each of December 31, 2023 and 2022, we had a 97.8% and a 97.1%, 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.

Current wording

As of each of March 31, 2024 and 2023, we had a 98.5% and a 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 (loss) income attributable to non-controlling interest represents the portion of net (loss) income attributable to the non-controlling LLC members.

Previous wording

Net sales for the three months ended December 31, 2023 decreased $127.7 million, or 37.7%, to $211.1 million as compared to the three months ended December 31, 2022. The decrease in net sales was driven primarily by decreased unit volumes across all segments resulting primarily from decreased retail demand and increased dealer flooring program costs across all segments resulting from higher interest rates and increased inventory levels, partially offset by a favorable model mix in our Malibu and Saltwater Fishing segments and inflation-driven year-over-year price increases. Unit volume for the three months ended December 31, 2023, decreased 1,066 units, or 43.7%, to 1,373 units as compared to the three months ended

Current wording

Net sales for the three months ended March 31, 2024 decreased $171.7 million, or 45.8%, to $203.4 million as compared to the three months ended March 31, 2023. The decrease in net sales was driven primarily by decreased unit volumes across all segments resulting primarily from decreased wholesale shipments and increased dealer flooring program costs across all segments resulting from higher interest rates and elevated channel inventory levels, partially offset by a favorable model mix in

Previous wording

Net sales attributable to our Malibu segment decreased $81.8 million, or 51.7%, to $76.4 million for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. Unit volumes attributable to our Malibu segment decreased 712 units for the three months ended December 31, 2023, compared to the three months ended December 31, 2022, primarily due to lower wholesale shipments driven by lower retail activity during the period and elevated dealer channel inventory levels. 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.

Current wording

Net sales attributable to our Malibu segment decreased $112.4 million, or 65.1%, to $60.2 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Unit volumes attributable to our Malibu segment decreased 886 units for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily due to lower wholesale shipments driven by lower retail activity during the period and elevated dealer channel inventory levels. 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.

Previous wording

Net sales attributable to our Saltwater Fishing segment decreased $22.9 million, or 21.6%, to $82.7 million, for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. Unit volume decreased 188 units for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. 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.

Current wording

Net sales attributable to our Saltwater Fishing segment decreased $41.4 million, or 33.8%, to $81.2 million, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Unit volume decreased 337 units for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to lower wholesale shipments driven by lower retail activity during the period and elevated dealer channel inventory levels. 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.

Previous wording

Net sales attributable to our Cobalt segment decreased $23.0 million, or 30.7%, to $52.0 million for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. Unit volumes attributable to Cobalt decreased 166 units for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. The decrease in net sales was driven primarily by a decrease in units and increased dealer flooring program costs, partially offset by inflation-driven year-over-year price increases.

Current wording

Net sales attributable to our Cobalt segment decreased $17.9 million, or 22.4%, to $62.0 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Unit volumes attributable to Cobalt decreased 145 units for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to lower wholesale shipments driven by lower retail activity during the period and elevated dealer channel inventory levels. The decrease in net sales was driven primarily by a decrease in units and increased dealer flooring program costs, partially offset by inflation-driven year-over-year price increases.

Previous wording

Overall consolidated net sales per unit increased 10.7% to $153,732 per unit for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. Net sales per unit for our Malibu segment increased 5.0% to $126,056 per unit for the three months ended December 31, 2023, compared to the three months ended December 31, 2022, driven by a favorable model mix and inflation-driven year-over-year price increases, partially offset by increased dealer flooring program costs. Net sales per unit for our Saltwater Fishing segment increased 14.7% to $204,279 per unit for the three months ended December 31, 2023 driven by a favorable model mix and inflation-driven year-over-year price increases, partially offset by increased dealer flooring program costs. Net sales per unit for our Cobalt segment increased 1.1% to $143,511 per unit for the three months ended December 31, 2023, compared to the three months ended December 31, 2022, driven by inflation-driven year-over-year price increases, partially offset by increased dealer flooring program costs and unfavorable model mix.

Current wording

Overall consolidated net sales per unit increased 12.7% to $160,299 per unit for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Net sales per unit for our Malibu segment increased 3.3% to $133,173 per unit for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, driven by inflation-driven year-over-year price increases, partially offset by increased dealer flooring program costs. Net sales per unit for our Saltwater Fishing segment increased 24.8% to $213,184 per unit for the three months ended March 31, 2024 driven by a favorable model mix and inflation-driven year-over-year price increases, partially offset by increased dealer flooring program costs. Net sales per unit for our Cobalt segment increased 3.4% to $142,206 per unit for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, driven by inflation-driven year-over-year price increases, partially offset by increased dealer flooring program costs.

Previous wording

Cost of sales for the three months ended December 31, 2023 decreased $89.5 million, or 34.0%, to $173.6 million as compared to the three months ended December 31, 2022. The decrease in cost of sales was primarily driven by a 37.7% decrease in net sales due to lower unit volumes, partially offset by higher per unit material and labor costs of $4.2 million and $7.0 million for the Malibu and Saltwater Fishing segments, respectively. The increase in per unit material and labor costs was primarily driven by increased prices due to inflationary pressures and a model mix that corresponds to higher cost per unit in our Malibu and Saltwater Fishing segments.

Current wording

Cost of sales for the three months ended March 31, 2024 decreased $113.5 million, or 41.0%, to $163.1 million as compared to the three months ended March 31, 2023. The decrease in cost of sales was primarily driven by a 45.8% decrease in net sales due to lower unit volumes, partially offset by higher per unit material and labor costs of $4.8 million, $9.5 million and $2.0 million for the Malibu, Saltwater Fishing, and Cobalt segments, respectively. The increase in per unit material and labor costs was primarily driven by increased prices due to inflationary pressures, fixed cost deleverage and a model mix that corresponds to higher cost per unit in our Malibu and Saltwater Fishing segments.

Previous wording

Gross profit for the three months ended December 31, 2023 decreased $38.2 million, or 50.5%, to $37.5 million compared to the three months ended December 31, 2022. The decrease in gross profit was driven primarily by lower net sales partially offset by decreased cost of sales for the reasons noted above. Gross margin for the three months ended December 31, 2023 decreased 450 basis points from 22.3% to 17.8% driven primarily by fixed cost deleverage due to lower sales, primarily by increased mix of the Saltwater Fishing segment and increased dealer flooring program costs.

Current wording

Gross profit for the three months ended March 31, 2024 decreased $58.2 million, or 59.1%, to $40.3 million compared to the three months ended March 31, 2023. The decrease in gross profit was driven primarily by lower net sales partially offset by decreased cost of sales for the reasons noted above. Gross margin for the three months ended March 31, 2024 decreased 650 basis points from 26.3% to 19.8% driven primarily by fixed cost deleverage due to lower sales, an increased mix of the Saltwater Fishing segment, and increased dealer flooring program costs.

Previous wording

Selling and marketing expenses for the three months ended December 31, 2023 decreased $0.6 million, or 9.5% to $5.6 million compared to the three months ended December 31, 2022. The decrease was driven primarily by a decrease in marketing events. As a percentage of sales, selling and marketing expenses increased 90 basis points to 2.7% for the three months ended December 31, 2023 compared to 1.8% for the three months ended December 31, 2022. General and administrative expenses for the three months ended December 31, 2023 decreased $3.6 million, or 19.0%, to $15.4 million as compared to the three months ended December 31, 2022 driven primarily by a decrease in personnel-related expenses, partially offset by increased information technology costs and professional fees. As a percentage of sales, general and administrative expenses increased 170 basis points to 7.3% for the three months ended December 31, 2023 compared to 5.6% for the three months ended December 31, 2022. Amortization expense remained flat at $1.7 million for the three months ended December 31, 2023.

Current wording

The decrease was driven primarily by a decrease in travel and marketing events. As a percentage of sales, selling and marketing expenses increased 130 basis points to 3.2% for the three months ended March 31, 2024 compared to 1.9% for the three months ended March 31, 2023. General and administrative expenses for the three months ended March 31, 2024 decreased $0.8 million, or 4.4%, to $18.6 million as compared to the three months ended March 31, 2023 driven primarily by a decrease in personnel-related expenses, partially offset by increased information technology cost. As a percentage of sales, general and administrative expenses increased 390 basis points to 9.1% for the three months ended March 31, 2024 compared to 5.2% for the three months ended March 31, 2023. Amortization expense remained flat at $1.7 million for the three months ended March 31, 2024.

Previous wording

Other expense, net for the three months ended December 31, 2023 decreased by $0.4 million, or 40.0% to $0.7 million, compared to the three months ended December 31, 2022. The decrease in other expense resulted primarily from decreased interest expense during the three months ended December 31, 2023 compared to the three months ended December 31, 2022.

Current wording

Other expense, net for the three months ended March 31, 2024 decreased by $0.3 million, or 47.7% to $0.3 million, compared to the three months ended March 31, 2023. The decrease in other expense resulted primarily from decreased interest expense during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Previous wording

Our provision for income taxes for the three months ended December 31, 2023, decreased $7.3 million, or 65.1%, to $3.9 million compared to the three months ended December 31, 2022. The decrease primarily resulted from decreased pre-tax earnings. For the three months ended December 31, 2023 and 2022, our effective tax rate of 27.8% and 23.5%, respectively, exceeded the statutory federal income tax rate of 21% primarily due to the impact of U.S. state taxes. For the three months ended December 31, 2023, this increase in the effective tax rate was also driven by a shortfall expense generated by certain stock-based compensation. For the three months ended December 31, 2022, the increase in the effective tax rate over the statutory federal income tax rate was partially offset by a windfall benefit generated by certain stock-based compensation as well as the benefits from the foreign derived intangible income deduction, the research and development tax credit, and the impact of non-controlling interests in the LLC.

Current wording

Our (benefit) provision for income taxes for the three months ended March 31, 2024, decreased $23.7 million, or 145.6%, to $(7.4) million compared to the three months ended March 31, 2023. The decrease primarily resulted from decreased pre-tax earnings, including the impairment charges related to our Maverick Boat Group reporting unit. For the three months ended March 31, 2024 and 2023, our effective tax rate of 9.9% and 23.3%, respectively. For the three months ended March 31, 2024, our effective tax rate was reduced by the impairment charges related to our Maverick Boat Group reporting unit. For the three months ended March 31, 2023, our effective tax rate exceeded the statutory federal income tax rate of 21% primarily due to the impact of U.S. state taxes. The increase in the effective tax rate over the statutory federal income tax rate was partially offset by a windfall benefit generated by certain stock-based compensation as well as the benefits from the foreign derived intangible income deduction, the research and development tax credit, and the impact of non-controlling interests in the LLC.

Previous wording

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 unaudited interim condensed consolidated statements of operations and comprehensive income is computed by multiplying pre-tax income for the applicable period, by the percentage ownership in the LLC not directly attributable to us. For the three months ended December 31, 2023 and 2022, the weighted-average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 2.2% and 2.9%, respectively.

Current wording

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 unaudited interim condensed consolidated statements of operations and comprehensive income is computed by multiplying pre-tax income for the applicable period, by the percentage ownership in the LLC not directly attributable to us. For the three months ended March 31, 2024 and 2023, the weighted-average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 1.7% and 2.5%, respectively.

Previous wording

Comparison of the Six Months Ended December 31, 2023 to the Six Months Ended December 31, 2022

Current wording

Comparison of the Nine Months Ended March 31, 2024 to the Nine Months Ended March 31, 2023

Previous wording

Net sales for the six months ended December 31, 2023 decreased $174.0 million, or 27.2%, to $466.9 million as compared to the six months ended December 31, 2022. The decrease in net sales was driven primarily by decreased unit volumes across all segments resulting primarily from decreased retail demand and increased dealer flooring program costs across all segments resulting from higher interest rates and increased inventory levels, partially offset by a favorable model mix across all segments and inflation-driven year-over-year price increases. Unit volume for the six months ended December 31, 2023, decreased 1,605 units, or 34.3%, to 3,071 units as compared to the six months ended December 31, 2022. Our unit volume decreased primarily due to lower wholesale shipments across all segments driven by lower retail activity during the period.

Current wording

Net sales for the nine months ended March 31, 2024 decreased $345.7 million, or 34.0%, to $670.3 million as compared to the nine months ended March 31, 2023. The decrease in net sales was driven primarily by decreased unit volumes across all segments resulting primarily from decreased wholesale shipments and increased dealer flooring program costs across all segments resulting from higher interest rates and elevated channel inventory levels, partially offset by a favorable model mix in our Saltwater Fishing segment and inflation-driven year-over-year price increases. Unit volume for the nine months ended March 31, 2024, decreased 2,973 units, or 40.7%, to 4,340 units as compared to the nine months ended March 31, 2023. Our unit volume decreased primarily due to lower wholesale shipments across all segments driven by lower retail activity and elevated channel inventories during the period.

Previous wording

Net sales attributable to our Malibu segment decreased $121.9 million, or 40.2%, to $181.4 million for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. Unit volumes attributable to our Malibu segment decreased 1,126 units for the six months ended December 31, 2023, compared to the six months ended December 31, 2022, primarily due to lower wholesale shipments driven by lower retail activity during the period and elevated dealer channel inventory levels. 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.

Current wording

Net sales attributable to our Malibu segment decreased $234.3 million, or 49.2%, to $241.6 million for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. Unit volumes attributable to our Malibu segment decreased 2,012 units for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, primarily due to lower wholesale shipments driven by lower retail activity during the period and elevated channel inventory levels. 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.

Previous wording

Net sales attributable to our Saltwater Fishing segment decreased $22.5 million, or 11.4%, to $175.4 million, for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. Unit volume decreased 245 units for the six months ended December 31, 2023 compared to the six months ended December 31, 2022. The decrease in net sales was driven by a decrease in units and increased dealer flooring program costs, partially offset by favorable model mix and inflation-driven year-over-year price increases.

Current wording

Net sales attributable to our Saltwater Fishing segment decreased $63.9 million, or 19.9%, to $256.6 million, for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. Unit volume decreased 582 units for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023, primarily due to lower wholesale shipments driven by lower retail activity during the period and elevated channel inventory levels. The decrease in net sales was driven by a decrease in units and increased dealer flooring program costs, partially offset by inflation-driven year-over-year price increases.

Previous wording

Net sales attributable to our Cobalt segment decreased $29.6 million, or 21.2%, to $110.2 million for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. Unit volumes attributable to Cobalt decreased 234 units for the six months ended December 31, 2023 compared to the six months ended December 31, 2022. The decrease in net sales was driven primarily 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.

Current wording

Net sales attributable to our Cobalt segment decreased $47.5 million, or 21.6%, to $172.2 million for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. Unit volumes attributable to Cobalt decreased 379 units for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023, primarily due to lower wholesale shipments driven by lower retail activity during the period and elevated channel inventory levels. The decrease in net sales was driven primarily by a decrease in units and increased dealer flooring program costs, partially offset by inflation-driven year-over-year price increases.

Previous wording

Overall consolidated net sales per unit increased 10.9% to $152,036 per unit for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. Net sales per unit for our Malibu segment increased 7.6% to $128,648 per unit for the six months ended December 31, 2023, compared to the six months ended December 31, 2022, driven by a favorable model mix and inflation-driven year-over-year price increases, partially offset by increased dealer flooring program costs. Net sales per unit for our Saltwater Fishing segment increased 12.9% to $195,710 per unit for the six months ended

Current wording

Overall consolidated net sales per unit increased 11.2% to $154,452 per unit for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. Net sales per unit for our Malibu segment increased 5.6% to $129,747 per unit for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, driven by a favorable model mix and inflation-driven year-over-year price increases, partially offset by increased dealer flooring program costs. Net sales per unit for our Saltwater Fishing segment increased 16.5% to $200,923 per unit for the nine months ended March 31, 2024 driven by a favorable model mix and inflation-driven year-over-year price increases, partially offset by increased dealer flooring program costs. Net sales per unit for our Cobalt segment increased 3.1% to $143,344 per unit for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, driven inflation-driven year-over-year price increases and a favorable model mix, partially offset by increased dealer flooring program costs.

Previous wording

Cost of sales for the six months ended December 31, 2023 decreased $118.0 million, or 24.1%, to $372.6 million as compared to the six months ended December 31, 2022. The decrease in cost of sales was primarily driven by a 27.2% decrease in net sales due to lower unit volumes, partially offset by higher per unit material and labor costs of $11.3 million, $13.4 million, and $2.0 million for the Malibu, Saltwater Fishing and Cobalt segments, respectively. The increase in per unit material and labor costs was primarily driven by increased prices due to inflationary pressures and a model mix that corresponds to higher cost per unit across all of our segments.

Current wording

Cost of sales for the nine months ended March 31, 2024 decreased $231.5 million, or 30.2%, to $535.7 million as compared to the nine months ended March 31, 2023. The decrease in cost of sales was primarily driven by a 34.0% decrease in net sales due to lower unit volumes, partially offset by higher per unit material and labor costs of $15.7 million, $23.5 million, and $4.0 million for the Malibu, Saltwater Fishing and Cobalt segments, respectively. The increase in per unit material and labor costs was primarily driven by increased prices due to inflationary pressures, fixed cost deleverage and a model mix that corresponds to higher cost per unit across all of our segments.

Previous wording

Gross profit for the six months ended December 31, 2023 decreased $56.0 million, or 37.3%, to $94.3 million compared to the six months ended December 31, 2022. The decrease in gross profit was driven primarily by lower net sales due to lower unit volumes partially offset by the decreased cost of sales for the reasons noted above. Gross margin for the six months ended December 31, 2023 decreased 320 basis points from 23.4% to 20.2% driven by fixed cost deleverage due to lower sales, increased mix of the Saltwater Fishing segment and increased dealer flooring program costs.

Current wording

Gross profit for the nine months ended March 31, 2024 decreased $114.2 million, or 45.9%, to $134.6 million compared to the nine months ended March 31, 2023. The decrease in gross profit was driven primarily by lower net sales due to lower unit volumes partially offset by the decreased cost of sales for the reasons noted above. Gross margin for the nine months ended March 31, 2024 decreased 440 basis points from 24.5% to 20.1% driven by fixed cost deleverage due to lower sales, an increased mix of the Saltwater Fishing segment and increased dealer flooring program costs.

Previous wording

Selling and marketing expenses remained flat at $11.4 million for the six months ended December 31, 2023 As a percentage of sales, selling and marketing expenses increased 60 basis points to 2.4% for the six months ended December 31, 2023 compared to 1.8% for the six months ended December 31, 2022. General and administrative expenses for the six months ended December 31, 2023 decreased $2.1 million, or 5.6%, to $36.1 million as compared to the six months ended December 31, 2022 driven primarily by a decrease in personnel-related expenses partially offset by increased information technology expenses. As a percentage of sales, general and administrative expenses increased 170 basis points to 7.7% for the six months ended December 31, 2023 compared to 6.0% for the six months ended December 31, 2022. Amortization expense remained flat at $3.4 million for the six months ended December 31, 2023.

Current wording

We recognized an impairment charge of $88.4 million during the nine months ended March 31, 2024 related to our Maverick Boat Group reporting unit. During the nine months ended March 31, 2024, we determined certain indicators of impairment existed, including a decline, in the fourth quarter of 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. Selling and marketing expenses decreased $0.6 million, or 3.5%, to $17.9 million for the nine months ended March 31, 2024. As a percentage of sales, selling and marketing expenses increased 90 basis points to 2.7% for the nine months ended March 31, 2024 compared to 1.8% for the nine months ended March 31, 2023. General and administrative expenses for the nine months ended March 31, 2024 decreased $3.0 million, or 5.2%, to $54.8 million as compared to the nine months ended March 31, 2023 driven primarily by a decrease in personnel-related expenses partially offset by increased information technology expenses. As a percentage of sales, general and administrative expenses increased 250 basis points to 8.2% for the nine months ended March 31, 2024 compared to 5.7% for the nine months ended March 31, 2023. Amortization expense remained flat at $5.1 million for the nine months ended March 31, 2024.

Previous wording

Other expense, net for the six months ended December 31, 2023 decreased by $0.9 million, or 37.5% to $1.5 million, compared to the six months ended December 31, 2022. The decrease in other expense resulted primarily from decreased interest expense during the six months ended December 31, 2023 compared to the six months ended December 31, 2022.

Current wording

Other expense, net for the nine months ended March 31, 2024 decreased by $1.2 million, or 39.3% to $1.8 million, compared to the nine months ended March 31, 2023. The decrease in other expense resulted primarily from decreased interest expense during the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023.

Previous wording

Our provision for income taxes for the six months ended December 31, 2023, decreased $11.3 million, or 51.0%, to $10.9 million compared to the six months ended December 31, 2022. The decrease primarily resulted from decreased pre-tax earnings. For the six months ended December 31, 2023 and 2022, our effective tax rate of 26.0% and 23.4%, respectively, exceeded the statutory federal income tax rate of 21% primarily due to the impact of U.S. state taxes. For the six months ended December 31, 2023, this increase in the effective tax rate was also driven by a shortfall expense generated by certain stock-based compensation. For the six months ended December 31, 2022, the increase in the effective tax rate over the statutory federal income tax rate was partially offset by a windfall benefit generated by certain stock-based compensation as well as the benefits from the foreign derived intangible income deduction, the research and development tax credit, and the impact of non- controlling interests in the LLC.

Current wording

2024 and 2023, our effective tax rate was (10.4)% and 23.4%, respectively. For the nine months ended March 31, 2024, our effective tax rate was reduced by the impairment charges related to our Maverick Boat Group reporting unit, as well as a Section 162(m) limitations on stock based compensation and the impact of U.S. state taxes. For the nine months ended March 31, 2023, the effective tax rate exceeded the statutory federal income tax rate of 21% primarily due to the impact of U.S. state taxes. The increase in the effective tax rate over the statutory federal income tax rate was partially offset by a windfall benefit generated by certain stock-based compensation as well as the benefits from the foreign derived intangible income deduction, the research and development tax credit, and the impact of non- controlling interests in the LLC.

Previous wording

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 unaudited interim condensed consolidated statements of operations and comprehensive income is computed by multiplying pre-tax income for the applicable period, by the percentage ownership in the LLC not directly attributable to us. For the six months ended December 31, 2023 and 2022, the weighted-average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 2.2% and 2.9%, respectively.

Current wording

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 unaudited interim condensed consolidated statements of operations and comprehensive income is computed by multiplying pre-tax income for the applicable period, by the percentage ownership in the LLC not directly attributable to us. For the nine months ended March 31, 2024 and 2023, the weighted-average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 2.0% and 2.7%, respectively.

Previous wording

We define adjusted EBITDA as net income before interest expense, income taxes, depreciation, amortization and non-cash, non-recurring or non-operating expenses, including certain professional fees and non-cash compensation expense. 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. 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. 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. Our presentation of adjusted EBITDA and adjusted EBITDA margin should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our computations of adjusted EBITDA and adjusted EBITDA margin may not be comparable to other similarly titled measures of other companies.

Current wording

We define adjusted EBITDA as net (loss) income before interest expense, income taxes, depreciation, amortization, impairment expense and non-cash, non-recurring or non-operating expenses, including certain professional fees and non-cash compensation expense. We define adjusted EBITDA margin as adjusted EBITDA divided by net sales. 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 (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. Our presentation of adjusted EBITDA and adjusted EBITDA margin should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our computations of adjusted EBITDA and adjusted EBITDA margin may not be comparable to other similarly titled measures of other companies.

Previous wording

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):

Current wording

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):

Previous wording

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.

Current wording

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 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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

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 Quarterly Report, may differ from and may, therefore, not be comparable to similarly titled measures used by other companies.

Previous wording

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):

Current wording

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):

Previous wording

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:

Current wording

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:

Previous wording

Our primary uses of cash have been for funding working capital and capital investments, repayments under our debt arrangements, acquisitions, cash distributions to members of the LLC, cash payments under our tax receivable agreement and stock repurchases under our stock repurchase program. For both the short term and the long term, our sources of cash to meet these needs have primarily been operating cash flows, borrowings under our revolving credit facility and short and long-term debt financings from banks and financial institutions. We believe that our cash on hand, cash generated by operating activities and funds available under our revolving credit facility will be sufficient to finance our operating activities for at least the next twelve months and beyond. In the first quarter of 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. We borrowed $75.0 million under the revolving credit facility to fund a portion of that payment and, subsequently, repaid $10.0 million and $30.0 million under the revolving credit facility during the first quarter and second quarter, respectively, of fiscal year 2024. See Note 15 to our unaudited interim condensed consolidated financial statements for more information about the settlement of the product liability matters.

Current wording

Our primary uses of cash have been for funding working capital and capital investments, repayments under our debt arrangements, acquisitions, cash distributions to members of the LLC, cash payments under our tax receivable agreement and stock repurchases under our stock repurchase program. For both the short term and the long term, our sources of cash to meet these needs have primarily been operating cash flows, borrowings under our revolving credit facility and short and long-term debt financings from banks and financial institutions. We believe that our cash on hand, cash generated by operating activities and funds available under our revolving credit facility will be sufficient to finance our operating activities for at least the next twelve months and beyond. In the first quarter of 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. We borrowed $75.0 million under the revolving credit facility to fund a portion of that payment and, subsequently, repaid $10.0 million, $30.0 million and $20.0 million under the revolving credit facility during the first quarter, second quarter and third quarter, respectively, of fiscal year 2024. See Note 15 to our unaudited interim condensed consolidated financial statements for more information about the settlement of the product liability matters.