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, 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.

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 six months of fiscal year 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 Boats subsequently filed for bankruptcy protection. We subsequently entered into dealer agreements with dealers in 14 of the 15 markets previously served by Tommy's Boats. During the six months ended December 31, 2024, we repurchased 22 units that were subject to repurchase agreements, including 19 boats from the inventory of Tommy's Boats that were subject to our repurchase agreement with M&T Bank, the floor plan financing lender for Tommy's Boats. Those repurchases were reflected in our June 30, 2024 consolidated financial statements and those boats were subsequently resold during the three months ended September 30, 2024 above cost. With respect to boats held by Tommy's Boats and not subject to the Repurchase Agreement, the bankruptcy trustee retained Gordon Brothers to sell the remaining inventory as part of the liquidation of Tommy's inventory. As of December 31, 2024, we believe none of our new model year 2023 and 2024 boats were remaining in the inventory of Tommy's Boats.

Previous 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.”

Current wording

On a consolidated basis, we achieved second quarter fiscal 2025 net sales, gross profit, net income and Adjusted EBITDA of $200.3 million, $37.4 million, $2.4 million and $16.9 million, respectively, compared to $211.1 million, $37.5 million, $10.1 million and $22.9 million, respectively, for the second quarter of fiscal 2024. For the second quarter of fiscal 2025, net sales decreased 5.1%, gross profit decreased 0.2%, net income decreased 76.1% and Adjusted EBITDA decreased 26.3% as compared to the second quarter of fiscal 2024. For the definition of Adjusted EBITDA and a reconciliation to net income, see “GAAP Reconciliation of Non-GAAP Financial Measures.”

Previous wording

The recreational power boat industry continues to be challenged by macro-economic factors, including high interest rates, that have taken many interest rate sensitive buyers out of the market. Additionally, COVID related demand fluctuations and supply disruptions have dramatically impacted dealer inventory levels over the past couple of years. In fiscal 2023, the restocking of dealer inventories coincided with a larger than expected drop in consumer demand caused dealer inventories to exceed historical levels. We took actions in fiscal 2024 to reduce production and increase promotional support to reduce dealer inventories.

Current wording

The recreational power boat industry continues to be challenged by macro-economic factors, including high interest rates, that have taken many interest rate sensitive buyers out of the market. Additionally, COVID related demand fluctuations and supply disruptions have dramatically impacted dealer inventory levels over the past couple of years. In fiscal 2023, the restocking of dealer inventories coincided with a larger than expected drop in consumer demand and caused dealer inventories to exceed historical levels. We took actions in fiscal 2024 to reduce production and increase promotional support to reduce dealer inventories.

Previous wording

Current dealer inventory levels are now back to historical seasonal levels across all of our segments due to our actions, in particular at the end of the last model year. Due to high dealer flooring costs and a continued soft retail environment, we expect our dealers to reduce their inventories further in fiscal 2025. Additionally, we expect the retail market to continue to decline in fiscal 2025, albeit at a slower rate than fiscal 2024.

Current wording

Due to high dealer flooring costs and a continued soft retail environment, we expect our dealers to reduce their inventories further in fiscal 2025 to below historical seasonal levels. Additionally, we expect the retail market to continue to decline in fiscal 2025.

Previous wording

We aim to increase our market share across the boating categories in which we compete through new product development, improved distribution, new models, and innovative features. Our industry, however, is highly competitive, and our competitors have become more aggressive in their product introductions, expanded their distribution capabilities, and launched surf systems competitive with our patented Surf Gate system. We believe our strong brands, new product pipeline, strong dealer network and ability to increase production will allow us to maintain, and potentially expand, our leading market position in performance sports boats. We also believe that our track record of expanding our market share with our Malibu and Axis brands is directly transferable to our Cobalt, Pursuit and Maverick Boat Group brands.

Current wording

We aim to increase our market share across the boating categories in which we compete through new product development, improved distribution, new models, and innovative features. Our industry, however, is highly competitive, and our competitors have become more aggressive in their product introductions, expanded their distribution capabilities, and launched surf systems competitive with our patented Surf Gate system. We believe our strong brands, new product pipeline, strong dealer network and ability to increase production will allow us to maintain, and potentially expand, our leading market position in performance sports boats.

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, 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. For instance, we’ve recently been advised by one of our suppliers that we will likely receive fewer engines than originally anticipated during the second half of fiscal year 2025. If we receive less engines than our revised expectations and are unable to mitigate the reduction in supply, it could impact our production levels and our financial results for the second half of fiscal year 2025. 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

•Rebates and free flooring—consists of incentives, rebates and free flooring, we provide to our dealers based on sales of eligible products. For our Malibu and Cobalt segments, if a domestic dealer meets its monthly or quarterly commitment volume, as well as other terms of the dealer performance program, the dealer is entitled to a specified rebate. For our Saltwater Fishing segment, if a dealer meets its quarterly or annual retail volume goals, the dealer is entitled to a specific rebate applied to their wholesale volume purchased. For Malibu, Cobalt and select Saltwater Fishing models, our dealers that take delivery of current model year boats in the offseason, typically July through April in the U.S., are also entitled to have us pay the interest to floor the boat until the earlier of (1) the sale of the unit or (2) a date near the end of the current model year, which incentive we refer to as “free flooring.” From time to time, we may extend the flooring program to eligible models beyond the offseason period.

Current wording

•Discounts, rebates and free flooring—consists of discounts, rebates and free flooring, we provide to our dealers based on sales of eligible products. For our Malibu, Cobalt and Saltwater Fishing segments, if a domestic dealer meets its quarterly commitment volume, as well as other terms of the dealer performance program, the dealer is entitled to a specified discount off invoice for eligible wholesale volume purchased during the period. If a dealer meets its semi-annual or annual retail volume goals, the dealer is entitled to a specific rebate applied to their wholesale volume purchased. For Malibu, Cobalt and select Saltwater Fishing models, our dealers that take delivery of current model year boats may also be entitled to have us pay the interest to floor the boat for a period of time, which incentive we refer to as "free flooring". From time to time, we may extend the flooring program to eligible models beyond the offseason period.

Previous wording

Net (Loss) Income Attributable to Non-controlling Interest

Current wording

Net Income (Loss) Attributable to Non-controlling Interest

Previous 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.

Current wording

As of each of December 31, 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 income (loss) attributable to non-controlling interest represents the portion of net income (loss) attributable to the non-controlling LLC members.

Previous 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.

Current wording

Net sales attributable to our Malibu segment decreased $2.3 million, or 3.0%, to $74.1 million for the three months ended December 31, 2024, compared to the three months ended December 31, 2023. Unit volumes attributable to our Malibu segment decreased 81 units for the three months ended December 31, 2024, compared to the three months ended December 31, 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 $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.

Current wording

Net sales attributable to our Saltwater Fishing segment decreased $12.6 million, or 15.2%, to $70.2 million, for the three months ended December 31, 2024, compared to the three months ended December 31, 2023. Unit volumes attributable to our Saltwater Fishing segment decreased 88 units for the three months ended December 31, 2024 compared to the three months ended December 31, 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 favorable model mix and inflation-driven year-over-year price increases.

Previous 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.

Current wording

Overall consolidated net sales per unit increased 6.6% to $163,895 per unit for the three months ended December 31, 2024, compared to the three months ended December 31, 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 offset by an unfavorable segment mix. Net sales per unit for our Malibu segment increased 12.0% to $141,141 per unit for the three months ended December 31, 2024, compared to the three months ended December 31, 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 8.3% to $221,303 per unit for the three months ended December 31, 2024 driven by inflation-driven year-over-year price increases, partially offset by increased dealer incentive costs. Net sales per unit for our Cobalt segment increased 2.7% to $147,442 per unit for the three months ended December 31, 2024, compared to the three months ended December 31, 2023, driven by inflation-driven year-over-year price increases.

Previous 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.

Current wording

Selling and marketing expenses for the three months ended December 31, 2024 increased $0.4 million, or 6.7% to $6.0 million compared to the three months ended December 31, 2023. The increase was driven primarily by an increase in certain personnel expenses and marketing events. As a percentage of sales, selling and marketing expenses increased 30 basis points to 3.0% for the three months ended December 31, 2024 compared to 2.7% for the three months ended December 31, 2023. General and administrative expenses for the three months ended December 31, 2024 increased $11.1 million, or 71.9%, to $26.5 million as compared to the three months ended December 31, 2023 driven primarily by legal fees, incentive pay, salaries and stock-based compensation expense. As a percentage of sales, general and administrative expenses increased 6% to 13.3% for the three months ended December 31, 2024 compared to 7.3% for the three months ended December 31, 2023. Amortization expense remained flat at $1.7 million for the three months ended December 31, 2024.

Previous 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.

Current wording

Other expense, net for the three months ended December 31, 2024 decreased by $0.1 million, or 13.0% to $0.6 million, compared to the three months ended December 31, 2023. The decrease in other expense resulted primarily from decreased interest expense during the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

Previous 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.

Current wording

Our provision (benefit) for income taxes for the three months ended December 31, 2024, decreased $3.7 million, or 95.4%, to $0.2 million compared to the three months ended December 31, 2023. The decrease primarily resulted from decreased pre-tax earnings and associated net operating losses. For the three months ended December 31, 2024 and 2023, our effective tax rate was 6.9% and 27.8%, respectively. For the three months ended December 31, 2024, our effective tax rate was reduced by net operating losses and research tax credits. These reductions were partially offset by shortfall expense generated by certain stock-based compensation, certain federal tax code limitations, and the impact of U.S. state taxes. For the three months ended December 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. For the three months ended December 31, 2023, the increase in the effective tax rate was also driven by a shortfall expense generated by certain stock-based compensation.

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 (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.

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 income (loss) for the applicable period, by the percentage ownership in the LLC not directly attributable to us. For the three months ended December 31, 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

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

Current wording

Net sales for the six months ended December 31, 2024 decreased $95.0 million, or 20.4%, to $371.9 million as compared to the six months ended December 31, 2023. The decreased 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 six months ended December 31, 2024, decreased 825 units, or 26.9%, to 2,246 units as compared to the six months ended December 31, 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 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.

Current wording

Net sales attributable to our Cobalt segment decreased $3.3 million, or 3.0%, to $106.8 million for the six months ended December 31, 2024, compared to the six months ended December 31, 2023. Unit volumes attributable to Cobalt decreased 45 units for the six months ended December 31, 2024 compared to the six months ended December 31, 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

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.

Current wording

Cost of sales for the six months ended December 31, 2024 decreased $66.4 million, or 17.8%, to $306.2 million as compared to the six months ended December 31, 2023. The decrease in cost of sales was primarily driven by a 20.4% decrease in net sales due to lower unit volumes, partially offset by higher per unit material and labor costs of $9.5 million, $11.0 million and $3.8 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 and inflationary pressures.

Previous 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.

Current wording

Gross profit for the six months ended December 31, 2024 decreased $28.6 million, or 30.4%, to $65.6 million compared to the six months ended December 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 six months ended December 31, 2024 decreased 2.6% basis points from 20.2% to 17.6% driven primarily by fixed cost deleverage due to lower sales.

Previous 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.

Current wording

We define Adjusted EBITDA as net income (loss) 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 income (loss) 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 (loss) 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 (loss) 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 (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):

Current wording

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

Previous 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.

Current wording

We define Adjusted Fully Distributed Net Income as net income (loss) attributable to Malibu Boats, Inc. (i) excluding income tax expense (benefit), (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 (benefit) on fully distributed net income (loss) before income taxes at our estimated effective income tax rate. Adjusted Fully Distributed Net Income (Loss) is a non-GAAP financial measure because it represents net income (loss) 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 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.

Current wording

We believe Adjusted Fully Distributed Net Income assists our board of directors, management and investors in comparing our net income (loss) 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

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):

Current wording

The following table shows the reconciliation of the numerator and denominator for net income (loss) 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

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:

Current wording

The following table shows the reconciliation of net income (loss) 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

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.

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 $14.3 million through the first six 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. 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.

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 December 31, 2024, we had $23.0 million outstanding under our revolving credit facility and $1.7 million in outstanding letters of credit, with $325.3 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 December 31, 2024, our interest payments would be approximately $1.8 million within the next 12 months based on the interest rate at December 31, 2024 of 7.75%. 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

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.

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 $2.7 million and our total committed lease payments are $9.1 million as of December 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.

Previous 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.

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 December 31, 2024, we had purchase orders in the amount of $83.4 million due within the next 12 months.

Previous 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.

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 and six months ended December 31, 2024, we repurchased 240,981 and 519,466 shares of Class A Common Stock for $10.1 million and $20.2 million, respectively, 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. On October 23,

Previous wording

During fiscal year 2024, we had a one-time payment of $100.0 million with respect to a settlement agreement entered in connection with the settlement of all Batchelder-related product liability matters. We borrowed $75.0 million under the revolving credit facility to fund a portion of that payment. We maintain liability insurance applicable to the Batchelder-related matters with coverage up to $26.0 million. As of October 31, 2024, we had received approximately $21.0 million in insurance coverage proceeds, subject in certain cases to reservation of rights by the insurance carriers. We contend that the insurance carriers are responsible for the entirety of the $100.0 million settlement amount and related expenses, and therefore the insurers’ payments to date are well below what they should have tendered to Boats LLC. Accordingly, on July 3, 2023, Boats LLC filed a complaint against Federal Insurance Company and Starr Indemnity & Liability Company alleging that the insurers unreasonably failed to comply with their obligations by refusing, negligently and in bad faith, to settle covered claims within their available policy limits prior to trial. We intend to vigorously pursue our claims against our insurers to recover the full $100.0 million settlement amount and expenses (less any monies already tendered without reservation by the carriers). However, we cannot predict the outcome of such litigation.

Current wording

During fiscal year 2024, we had a one-time payment of $100.0 million with respect to a settlement agreement entered in connection with the settlement of all Batchelder-related product liability matters. We borrowed $75.0 million under the revolving credit facility to fund a portion of that payment. We maintain liability insurance applicable to the Batchelder-related matters with coverage up to $26.0 million. As of January 30, 2024, we had received approximately $21.0 million in insurance coverage proceeds, subject in certain cases to reservation of rights by the insurance carriers. We contend that the insurance carriers are responsible for the entirety of the $100.0 million settlement amount and related expenses, and therefore the insurers’ payments to date are well below what they should have tendered to Boats LLC. Accordingly, on July 3, 2023, Boats LLC filed a complaint against Federal Insurance Company and Starr Indemnity & Liability Company alleging that the insurers unreasonably failed to comply with their obligations by refusing, negligently and in bad faith, to settle covered claims within their available policy limits prior to trial. On April 8, 2024, the court dismissed Starr, noting that only Chubb had the contractual right and duty to settle the Batchelder matters prior to trial. We intend to vigorously pursue our claims against our insurers to recover the full $100.0 million settlement amount and expenses (less any monies already tendered without reservation by the carriers). However, we cannot predict the outcome of such litigation.

Previous wording

Our future capital requirements beyond the next 12 months will depend on many factors, including the general economic environment in which we operate and our ability to generate cash flow from operations, which are more uncertain as a result of inflation, increasing interest rates, increasing fuel prices. Our liquidity needs during this uncertain time will depend on multiple factors, including our ability to continue operations and production of boats, the performance of our dealers and suppliers, the impact of the general economy on our dealers, suppliers and retail customers, the availability of sufficient amounts of financing, and our operating performance.

Current wording

Our future capital requirements beyond the next 12 months will depend on many factors, including the general economic environment in which we operate and our ability to generate cash flow from operations, which are more uncertain as a result of inflation, changing interest rates and volatile fuel prices. Our liquidity needs during this uncertain time will depend on multiple factors, including our ability to continue operations and production of boats, the performance of our dealers and suppliers, the impact of the general economy on our dealers, suppliers and retail customers, the availability of sufficient amounts of financing, and our operating performance.

Previous 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).

Current wording

Net cash provided by operating activities was $20.0 million for the six months ended December 31, 2024, compared to $15.7 million for the six months ended December 31, 2023, an increase of $4.3 million. The increase in cash from operating activities resulted from a net increase in operating assets and liabilities of $45.1 million. This increase 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 six months ended December 31, 2023, offset by $21.0 million in insurance coverage proceeds received during the six months ended December 31, 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 $40.8 million in net income (after consideration of non-cash items included in net income (loss), primarily related to depreciation, amortization, deferred tax assets and non-cash compensation).

Previous 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.

Current wording

Net cash used in investing activities was $13.9 million for the six months ended December 31, 2024, compared to net cash used in investing activities of $52.1 million for the six months ended December 31, 2023, a decrease in net cash used of $38.2 million. The decrease in net cash used in investing activities for the six months ended December 31, 2024 was primarily related to decreased capital expenditures compared to the six months ended December 31, 2023.

Previous 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.

Current wording

Net cash provided by financing activities was $2.3 million for the six months ended December 31, 2024 compared to net cash provided by financing activities of $13.2 million for the six months ended December 31, 2023, a decrease of $10.9 million. During the six months ended December 31, 2024, we borrowed $23.0 million, net of repayments, under our revolving credit facility and repurchased $20.2 million of our Class A Common Stock under our current stock repurchase program. During the six months ended December 31, 2023, we borrowed $35.0 million, net of repayments, under our revolving credit facility and repurchased $19.7 million of our Class A Common Stock under our prior stock repurchase program.

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 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.

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 December 31, 2024, the Company had $23.0 million outstanding under its revolving credit facility and $1.7 million in outstanding letters of credit, with $325.3 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. 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.

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 six months ended December 31, 2024, we repurchased 22 units that were subject to repurchase agreements, including 19 boats that were related to the ongoing bankruptcy with Tommy's Boats totaling $2.5 million. The repurchases of the boats in the inventory of Tommy's Boats was reflected in our June 30, 2024 consolidated financial statements and those boats were subsequently resold during the three months ended September 30, 2024 above cost. With respect to boats held by Tommy's Boats and not subject to the repurchase agreement, the Trustee retained Gordon Brothers to sell the remaining inventory as part of liquidation sales. As of December 31, 2024, we believe none of our new model year 2023 and 2024 boats were remaining in the inventory of Tommy's Boats. For fiscal year 2023, we did not repurchase any boats 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. Refer to Note 15 to the unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report for further information on repurchase commitments.