MALIBU BOATS INC

Previous wording

Our Malibu segment participates in the manufacturing, distribution, marketing and sale throughout the world of Malibu and Axis performance sports boats. 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. Our Axis boats appeal to consumers who desire a more affordable performance sport boat product but still demand high performance, functional simplicity and the option to upgrade key features. Retail prices of our Malibu and Axis boats typically range from $80,000 to $300,000.

Current wording

Our Malibu segment participates in the manufacturing, distribution, marketing and sale throughout the world of Malibu and Axis performance sports boats. 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. As of September 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. Retail prices of our Malibu and Axis boats typically range from $80,000 to $300,000.

Previous wording

Our Cobalt segment participates in the manufacturing, distribution, marketing and sale throughout the world of Cobalt boats. 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. Retail prices for our Cobalt boats typically range from $75,000 to $625,000.

Current wording

Our Cobalt segment participates in the manufacturing, distribution, marketing and sale throughout the world of Cobalt boats. 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. As of September 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.

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. 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.

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, 2024, 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. We had one dealer that represented more than 10% of our consolidated net sales in fiscal year 2024 and the first fiscal quarter of 2025, 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 dealer agreements that had expired as of June 30, 2023 and we terminated two dealer 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 September 30, 2024, we believe fewer than 40 of our new model year 2023 and 2024 boats were remaining in the inventory of Tommy's Boats. During the three months ended September 30, 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. This repurchase was reflected in our June 30, 2024 consolidated financial statements and these boats were subsequently resold during the three months ended September 30, 2024 above cost. 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.

Previous 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.”

Current wording

On a consolidated basis, we achieved first quarter fiscal 2025 net sales, gross profit, net (loss) income and Adjusted EBITDA of $171.6 million, $28.2 million, $(5.1) million and $9.9 million, respectively, compared to $255.8 million, $56.8 million, $20.8 million and $39.0 million, respectively, for the first quarter of fiscal 2024. For the first quarter of fiscal 2025, net sales decreased 32.9%, gross profit decreased 50.3%, net (loss) income decreased 124.8% and Adjusted EBITDA decreased 74.6% as compared to the first quarter of fiscal 2024. For the definition of Adjusted EBITDA and a reconciliation to net (loss) income, see “GAAP Reconciliation of Non-GAAP Financial Measures.”

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 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, 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

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.

Current wording

As of each of September 30, 2024 and 2023, we had a 98.4% 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 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.

Current wording

Net sales for the three months ended September 30, 2024 decreased $84.3 million, or 32.9%, to $171.6 million as compared to the three months ended September 30, 2023. The decrease in net sales was driven primarily by decreased unit volumes across all segments resulting primarily from decreased wholesale shipments, 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 September 30, 2024, decreased 674 units, or 39.7%, to 1,024 units as compared to the three months ended

Previous wording

our Saltwater Fishing segment and inflation-driven year-over-year price increases. Unit volume for the three months ended March 31, 2024, decreased 1,368 units, or 51.9%, to 1,269 units as compared to the three 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.

Current wording

September 30, 2023. Our unit volume decreased primarily due to lower wholesale shipments across all segments driven by lower retail activity and our dealers' desire to hold less inventory.

Previous 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.

Current wording

Net sales attributable to our Malibu segment decreased $49.0 million, or 46.7%, to $56.0 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. Unit volumes attributable to our Malibu segment decreased 420 units for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to lower wholesale shipments driven by lower retail activity during the period and our dealers' desire to hold less inventory. The decrease in net sales was driven by a decrease in units, 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 $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.

Current wording

Net sales attributable to our Saltwater Fishing segment decreased $27.9 million, or 30.1%, to $64.8 million, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. Unit volumes attributable to our Saltwater Fishing segment decreased 191 units for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to lower wholesale shipments driven by lower retail activity during the period and our dealers' desire to hold less inventory. The decrease in net sales was driven by a decrease in units, partially offset by inflation-driven year-over-year price increases and a favorable model mix.

Previous 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.

Current wording

Net sales attributable to our Cobalt segment decreased $7.4 million, or 12.7%, to $50.8 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. Unit volumes attributable to Cobalt decreased 63 units for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to lower wholesale shipments driven by lower retail activity during the period and our dealers' desire to hold less inventory. The decrease in net sales was driven primarily by a decrease in units, partially offset by inflation-driven year-over-year price increases.

Previous 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.

Current wording

Overall consolidated net sales per unit increased 11.2% to $167,559 per unit for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase in overall consolidated net sales per unit was driven primarily by favorable model mix in our Malibu and Saltwater Fishing segments and inflation-driven year-over-year price increases. Net sales per unit for our Malibu segment increased 11.7% to $145,883 per unit for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, driven by favorable model mix, inflation-driven year-over-year price increases and non-boat related customer service parts sales. Net sales per unit for our Saltwater Fishing segment increased 14.4% to $215,837 per unit for the three months ended September 30, 2024 driven by a favorable model mix and inflation-driven year-over-year price increases, partially offset by increased dealer incentive costs. Net sales per unit for our Cobalt segment increased 3.5% to $149,441 per unit for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, driven by inflation-driven year-over-year price increases.

Previous 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.

Current wording

Cost of sales for the three months ended September 30, 2024 decreased $55.7 million, or 28.0%, to $143.4 million as compared to the three months ended September 30, 2023. The decrease in cost of sales was primarily driven by a 32.9% decrease in net sales due to lower unit volumes, partially offset by higher per unit material and labor costs of $5.3 million, $6.8 million and $2.6 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 fixed cost deleverage, a model mix that corresponds to higher cost per unit in our Malibu and Saltwater Fishing segments and inflationary pressures.

Previous 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.

Current wording

Gross profit for the three months ended September 30, 2024 decreased $28.6 million, or 50.3%, to $28.2 million compared to the three months ended September 30, 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 September 30, 2024 decreased 580 basis points from 22.2% to 16.4% driven primarily by fixed cost deleverage due to lower sales and an increased mix of the Saltwater Fishing segment.

Previous 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.

Current wording

Selling and marketing expenses for the three months ended September 30, 2024 decreased $0.9 million, or 15.4% to $4.9 million compared to the three months ended September 30, 2023. The decrease was driven primarily by a decrease in certain personnel expenses and marketing events. As a percentage of sales, selling and marketing expenses increased 60 basis points to 2.8% for the three months ended September 30, 2024 compared to 2.2% for the three months ended September 30, 2023. General and administrative expenses for the three months ended September 30, 2024 increased $6.5 million, or 31.6%, to $27.2 million as compared to the three months ended September 30, 2023 driven primarily by a $3.5 million legal settlement along with other related legal fees and increased stock compensation expense. As a percentage of sales, general and administrative expenses increased 780 basis points to 15.9% for the three months ended September 30, 2024 compared to 8.1% for the three months ended September 30, 2023. Amortization expense remained flat at $1.7 million for the three months ended September 30, 2024.

Previous 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.

Current wording

Other expense, net for the three months ended September 30, 2024 decreased by $0.5 million, or 55.8% to $0.4 million, compared to the three months ended September 30, 2023. The decrease in other expense resulted primarily from decreased interest expense during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Previous 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.

Current wording

Our (benefit) provision for income taxes for the three months ended September 30, 2024, decreased $7.8 million, or 112.2%, to $(0.9) million compared to the three months ended September 30, 2023. The decrease primarily resulted from decreased pre-tax earnings. For the three months ended September 30, 2024 and 2023, our effective tax rate of 14.2% and 25.1%, respectively. For the three months ended September 30, 2024, our effective tax rate was reduced by deferred tax impacts of pre-tax losses and U.S. state taxes. For the three months ended September 30, 2023, our effective tax rate exceeded the statutory federal income tax rate of 21% primarily due to the impact of U.S. state taxes. For the three months ended September 30, 2023, this increase in tax rate was partially offset by the benefit of the foreign derived intangible income deduction.

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 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.

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 (loss) income is computed by multiplying pre-tax (loss) income for the applicable period, by the percentage ownership in the LLC not directly attributable to us. For the three months ended September 30, 2024 and 2023, the weighted-average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 1.6% and 2.2%, respectively.

Previous 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.

Current wording

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 certain professional fees, litigation settlements 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

Adjusted Fully Distributed Net (Loss) Income

Current wording

Adjusted Fully Distributed Net Income

Previous 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.

Current wording

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

Previous 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.

Current 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.

Previous 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.

Current wording

We believe Adjusted Fully Distributed Net 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 (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.

Current 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.

Previous 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):

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 Income per Share of Class A Common Stock for the periods presented (in thousands except share and per share data):

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, $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.

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.

Previous wording

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 $65.0 million and $75.0 million for fiscal year 2024, (of which we have incurred approximately $64.1 million through the first nine months of 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.

Current wording

Capital Expenditures. For fiscal year 2024, we incurred approximately $76.0 million in capital expenditures primarily related to the purchase and completion of our Roane County, Tennessee facility as well as new models, capacity enhancements and vertical integration initiatives. We expect capital expenditures between $30.0 million and $35.0 million for fiscal year 2025, (of which we have incurred approximately $8.6 million through the first three months of fiscal year 2025), primarily for investments in new models, capacity enhancements and vertical integration initiatives. Other investment opportunities, such as potential strategic acquisitions, may require additional funding.

Previous wording

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 March 31, 2024, we had $15.0 million outstanding under our revolving credit facility and $1.6 million in outstanding letters of credit, with $333.4 million available for borrowing. The revolving credit facility matures on July 8, 2027. Assuming no additional repayments or borrowings on our revolving credit facility after March 31, 2024, our interest payments would be approximately $1.0 million within the next 12 months based on the interest rate at March 31, 2024 of 6.47%. See below under “Revolving Credit Facility” for additional information regarding our revolving credit facility, including the interest rate applicable to any borrowing under such facility.

Current wording

Principal and Interest Payments. 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 September 30, 2024, we had $28.0 million outstanding under our revolving credit facility and $1.7 million in outstanding letters of credit, with $320.3 million available for borrowing. The revolving credit facility matures on July 8, 2027. Assuming no additional repayments or borrowings on our revolving credit facility after September 30, 2024, our interest payments would be approximately $2.3 million within the next 12 months based on the interest rate at September 30, 2024 of 8.25%. See below under “Revolving Credit Facility” for additional information regarding our revolving credit facility, including the interest rate applicable to any borrowing under such facility.

Previous wording

Tax Receivable Agreement. We entered into a tax receivable agreement with our pre-IPO owners at the time of our initial public offering. Under the tax receivables agreement, we pay the pre-IPO owners (or any permitted assignees) 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize, or in some circumstances are deemed to realize, as a result of an expected increase in our share of tax basis in LLC’s tangible and intangible assets, including increases attributable to payments made under the tax receivable agreement. These obligations will not be paid if we do not realize cash tax savings. We estimate that approximately $4.1 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 was filed on March 15, 2024.

Current wording

Tax Receivable Agreement. We entered into a tax receivable agreement with our pre-IPO owners at the time of our initial public offering. Under the tax receivables agreement, we pay the pre-IPO owners (or any permitted assignees) 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize, or in some circumstances are deemed to realize, as a result of an expected increase in our share of tax basis in LLC’s tangible and intangible assets, including increases attributable to payments made under the tax receivable agreement. These obligations will not be paid if we do not realize cash tax savings. We estimate that 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.

Previous wording

Operating Lease Obligations. Lease commitments consist principally of leases for our manufacturing facilities. Our expected operating lease payments due within the next 12 months are $2.5 million and our total committed lease payments are $9.1 million as of March 31, 2024. Additional information regarding our operating leases is available in Note 10 of our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.

Current wording

Operating Lease Obligations. Lease commitments consist principally of leases for our manufacturing facilities. Our expected operating lease payments due within the next 12 months are $2.3 million and our total committed lease payments are $7.8 million as of September 30, 2024. Additional information regarding our operating leases is available in Note 10 of our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.

Previous wording

throughout fiscal year 2024 and 2025. We or the vendor can generally terminate the purchase orders at any time. These purchase orders do not contain any termination payments or other penalties if cancelled. As of March 31, 2024, we had purchase orders in the amount of $73.5 million due within the next 12 months.

Current wording

Purchase Obligations. In the ordinary course of business, we enter into purchase orders from a variety of suppliers, primarily for raw materials, in order to manage our various operating needs. The orders are expected to be purchased throughout fiscal year 2025. We or the vendor can generally terminate the purchase orders at any time. These purchase orders do not contain any termination payments or other penalties if cancelled. As of September 30, 2024, we had purchase orders in the amount of $69.1 million due within the next 12 months.

Previous wording

Stock Repurchase Program. Our Board of Directors authorized a stock repurchase program (the"2022 Repurchase Program") to allow for the repurchase of up to $100.0 million of our Class A Common Stock and the LLC's LLC Units for the period from November 8, 2022 to November 8, 2023. Between July 1, 2023 and November 8, 2023, we repurchased 261,962 shares of Class A Common Stock for $12.4 million in cash including related fees and expenses under the 2022 Repurchase Program which expired on November 8, 2023. On October 26, 2023, our Board of Directors authorized a new stock repurchase program (the"2023 Repurchase Program") to allow for the repurchase of up to $100.0 million of our Class A Common Stock and the LLC's LLC Units for the period from November 8, 2023 to November 8, 2024. Between November 8, 2023 and March 31, 2024, we repurchased 163,445 shares of Class A Common Stock for $7.3 million in cash including related fees and expenses under the 2023 Repurchase Program. As of March 31, 2024, $92.9 million remained available under the 2023 Repurchase Program. We may repurchase shares of our common stock at any time or from time to time, without prior notice, subject to market conditions and other considerations. As noted above, we intend to return capital of at least $10.0 million per quarter from May 2024 through May 2025 through either the repurchase of common stock or dividend payments. We intend to fund stock repurchases from cash on hand.

Current wording

Return of Capital/Stock Repurchase Program. We previously announced that we intend to return capital of at least $10.0 million per quarter through May 2025 through either the repurchase of Class A Common Stock or through 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 three months ended September 30, 2024, we repurchased 278,485 shares of Class A Common Stock for $10.1 million in cash including related fees and expenses under our 2023 Repurchase Program. 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 September 30, 2024, $72.6 million was available to repurchase shares of Class A Common Stock and LLC Units under the 2023 Repurchase Program. On October 23, 2024, our Board of Directors authorized a new stock repurchase program for the repurchase of up to $50.0 million of our Class A Common Stock and the LLC's LLC Units for the period from November 9, 2024 to June 30, 2025. We may repurchase shares of our common stock at any time or from time to time, without prior notice, subject to market conditions and other considerations. We have no obligation to repurchase any shares of our common stock under the share repurchase program. We intend to fund repurchases under the repurchase program from cash on hand.

Previous wording

Net cash provided by operating activities was $39.2 million for the nine months ended March 31, 2024, compared to net cash provided by operating activities of $108.0 million for the nine months ended March 31, 2023, a decrease of $68.8 million. The decrease in cash provided by operating activities resulted from a decrease of $75.2 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, depreciation, amortization, deferred tax assets and non-cash compensation) which was partially offset by a net increase in operating assets and liabilities of $6.4 million. This increase was related to a reduction in working capital, resulting from lower sales and was partially offset by a one-time payment of $100.0 million with respect to a settlement agreement entered in connection with all Batchelder-related product liability matters.

Current wording

Net cash used in operating activities was $8.4 million for the three months ended September 30, 2024, compared to net cash used in operating activities of $48.4 million for the three months ended September 30, 2023, a decrease of $40.0 million. The decrease in cash used in operating activities resulted from a net decrease in operating assets and liabilities of $69.9 million. This decrease was primarily driven by a one-time payment of $100.0 million with respect to a settlement agreement entered in connection with all Batchelder-related product liability matters during the three months ended September 30, 2023, offset by $21.0 million in insurance coverage proceeds received during the three months ended September 30, 2023 that are subject in certain cases to reservations of rights by the insurance carriers, as well as the timing of collections of accounts receivables, payments for accruals and payables, and purchases of inventory. The increase in operating assets and liabilities was partially offset by a decrease of $29.9 million in net income (after consideration of non-cash items included in net (loss) income, primarily related to depreciation, amortization, deferred tax assets and non-cash compensation).

Previous wording

Net cash used in investing activities was $64.1 million for the nine months ended March 31, 2024, and $43.5 million for the nine months ended March 31, 2023. Net cash used for investing activities for the nine months ended March 31, 2024 was primarily related to increased capital expenditures compared to the nine months ended March 31, 2023.

Current wording

Net cash used in investing activities was $8.6 million for the three months ended September 30, 2024, compared to net cash used in investing activities of $39.5 million for the three months ended September 30, 2023, a decrease in net cash used of $30.9 million. The decrease in net cash used in investing activities for the three months ended September 30, 2024 was primarily related to decreased capital expenditures compared to the three months ended September 30, 2023.

Previous wording

repurchased $19.7 million of our Class A Common Stock under our current stock repurchase program. We also paid $1.2 million on taxes for shares withheld upon the vesting of restricted stock awards and paid $0.9 million in distributions to LLC Unit holders. During the nine months ended March 31, 2023, we repaid $23.1 million on our term loans, repaid $75.3 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 $2.9 million on taxes for shares withheld upon the vesting of restricted stock awards, paid $2.4 million in distributions to LLC Unit holders and paid $1.4 million in deferred financing costs.

Current wording

Net cash provided by financing activities was $17.5 million for the three months ended September 30, 2024 compared to net cash provided by financing activities of $54.6 million for the three months ended September 30, 2023, a decrease of $37.1 million. During the three months ended September 30, 2024, we borrowed $28.0 million, net of repayments, under our revolving credit facility and repurchased $10.5 million of our Class A Common Stock under our current stock repurchase program. During the three months ended September 30, 2023, we repaid $65.0 million, net of borrowings, under our revolving credit facility and repurchased $9.6 million of our Class A Common Stock under our prior stock repurchase program. We also paid $0.8 million in distributions to LLC Unit holders.

Previous wording

On July 8, 2022, Boats LLC entered into a Third Amended and Restated Credit Agreement (the “Credit Agreement”) which provides Boats LLC with a revolving credit facility in an aggregate principal amount of up to $350.0 million. As of March 31, 2024 the Company had $15.0 million outstanding under its revolving credit facility and $1.6 million in outstanding letters of credit, with $333.4 million available for borrowing. The revolving credit facility matures on July 8, 2027. Boats LLC has 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.

Current wording

On July 8, 2022, Boats LLC entered into a Third Amended and Restated Credit Agreement (the “Credit Agreement”) which provides Boats LLC with a revolving credit facility in an aggregate principal amount of up to $350.0 million. As of September 30, 2024, the Company had $28.0 million outstanding under its revolving credit facility and $1.7 million in outstanding letters of credit, with $320.3 million available for borrowing. The revolving credit facility matures on July 8, 2027. Boats LLC has 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.

Previous wording

Our dealers have arrangements with certain finance companies to provide secured floor plan financing for the purchase of our boats. These arrangements indirectly provide liquidity to us by financing dealer purchases of our products, thereby minimizing the use of our working capital in the form of accounts receivable. A majority of our sales are financed under similar arrangements, pursuant to which we receive payment within a few days of shipment of the product. We have agreed to repurchase products repossessed by the finance companies if a dealer defaults on its debt obligations to a finance company and the boat is returned to us, subject to certain limitations. 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. During the nine months ended March 31, 2024, we repurchased 17 units under our repurchase agreements. During the nine months ended March 31, 2023, we did not repurchase any units under our repurchase agreements. 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.

Current wording

Our dealers have arrangements with certain finance companies to provide secured floor plan financing for the purchase of our boats. These arrangements indirectly provide liquidity to us by financing dealer purchases of our products, thereby minimizing the use of our working capital in the form of accounts receivable. A majority of our sales are financed under similar arrangements, pursuant to which we receive payment within a few days of shipment of the product. In most cases, we have agreed to repurchase products repossessed by the finance companies if a dealer defaults on its debt obligations to a finance company and the boat is returned to us, subject to certain limitations. 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. During the three months ended September 30, 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. This repurchase was reflected in the Company's June 30, 2024 consolidated financial statements and these boats were subsequently resold during the three months ended September 30, 2024 above cost. 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. For fiscal year 2023, 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. Refer to Note 15 to the unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report for further information on repurchase commitments.