~~Parts and other sales—~~consists of sales of replacement and aftermarket boat parts and accessories to our dealer network; and consists of royalty income earned from license agreements with various boat manufacturers, including Nautique, Chaparral, Mastercraft, and Tige related to the use of our intellectual property.


•	Boat and trailer sales—consists of sales of boats and trailers to our dealer network. Nearly all of our boat sales include optional feature upgrades purchased by the consumer, which increase the average selling price of our boats; and


•	Parts and other sales—consists of sales of replacement and aftermarket boat parts and accessories to our dealer network; and consists of royalty income earned from license agreements with various boat manufacturers, including Nautique, Chaparral, Mastercraft, and Tige related to the use of our intellectual property.

Net sales are net of:

~~Sales returns~~—consists primarily of contractual repurchases of boats either repossessed by the floor plan financing provider from the dealer or returned by the dealer in limited circumstances and at our discretion under our warranty program; and

~~Rebates, free flooring and discounts~~—consists of incentives, rebates and free flooring, we provide to our dealers based on sales of eligible products. For our Malibu and Axis models, if a dealer meets its monthly or quarterly commitment volume based on tier, as well as other terms of the rebate program, the dealer is entitled to a specified rebate tied to each tier. Cobalt dealers are entitled to volume-based discounts taken at the time of invoice. For our Pursuit models, if a dealer meets its quarterly or annual retail volume goals, the dealer is entitled to a specific rebate tied to each tier and applied to their wholesale volume purchased from Pursuit. For Malibu and Cobalt models and select Pursuit 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.


•	Sales returns—consists primarily of contractual repurchases of boats either repossessed by the floor plan financing provider from the dealer or returned by the dealer under our warranty program; and

•

Rebates, free flooring and discounts—consists of incentives, rebates and free flooring, we provide to our dealers based on sales of eligible products. For our Malibu and Axis models, 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. Cobalt dealers are entitled to volume-based discounts taken at the time of invoice. For our Pursuit models, 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 from Pursuit. For Malibu and Cobalt models and select Pursuit 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.

Cost of Sales

Our cost of sales includes all of the costs to manufacture our products, including raw materials, components, supplies, direct labor and factory overhead. For components and accessories manufactured by third-party vendors, such costs represent the amounts invoiced by the vendors. Shipping costs and depreciation expense related to manufacturing equipment and facilities are also included in cost of sales. Warranty costs associated with the repair or replacement of our boats under warranty are also included in cost of sales.

Operating Expenses

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

Other (Income) Expense, Net

Other (income) expense, net consists of interest expense and other income or ~~(expense),~~expense, net. Interest expense consists of interest charged ~~on our term loan and borrowings~~ under our ~~revolving credit facility,~~outstanding debt, interest on our interest rate swap arrangement and change in the fair value of our interest rate swap we entered into on July 1, 2015, and amortization of deferred financing costs on our ~~amended and restated~~ credit ~~agreement and~~facilities. Other income expense, net consists mostly of adjustments to our tax receivable agreement liability.

Income Taxes

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Malibu Boats, Inc. is subject to U.S. federal and state income tax in multiple jurisdictions with respect to our allocable share of any net taxable income of the LLC. The LLC is a pass-through entity for federal purposes but incurs income tax in certain state jurisdictions. The provision for income taxes reflects an estimated effective income tax rate attributable to Malibu Boats, Inc.'s share of income. The estimated effective income tax rate used to determine the provision for income taxes typically differs from the statutory federal income tax rate due to the impact of state taxes, our ability to utilize certain tax credits and the impact of the non-controlling interests in the LLC. Our effective tax rate also reflects the impact of our share of the LLC's permanent items such as stock compensation expense attributable to profits interests.

Net Income Attributable to Non-controlling Interest

As of ~~March 31,~~September 30, 2019 and 2018, we had a ~~96.2%~~96.1%, controlling economic interest, in both periods, and 100% voting interest in the LLC and, therefore, we consolidate the LLC's operating results for financial statement purposes. Net income attributable to non-controlling interest represents the portion of net income attributable to the non-controlling LLC members.

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Results of Operations

The table below sets forth our unaudited interim consolidated results of operations, expressed in thousands (except unit volume and net sales per unit) and as a percentage of net sales, for the periods presented. Our unaudited interim consolidated financial results for these periods are not necessarily indicative of the consolidated financial results that we will achieve in future periods. Certain totals for the table below will not sum to exactly 100% due to rounding.


	Three Months Ended March 31,										Nine Months Ended March 31,										Three Months Ended September 30,
	2019					2018					2019					2018					2019					2018
	$			% Revenue		$			% Revenue		$			% Revenue		$			% Revenue		$			% Revenue		$			% Revenue
Net sales	199,918			100.0	%	140,429			100.0	%	489,194			100.0	%	358,343			100.0	%	172,080			100.0	%	123,483			100.0	%
Cost of sales	150,196			75.1	%	104,066			74.1	%	370,656			75.8	%	271,541			75.8	%	132,079			76.8	%	92,982			75.3	%
Gross profit	49,722			24.9	%	36,363			25.9	%	118,538			24.2	%	86,802			24.2	%	40,001			23.2	%	30,501			24.7	%
Operating expenses:
Selling and marketing	5,273			2.6	%	3,263			2.3	%	13,372			2.7	%	9,974			2.8	%	5,066			2.9	%	3,498			2.8	%
General and administrative	12,324			6.2	%	7,862			5.6	%	32,527			6.6	%	22,371			6.2	%	10,668			6.2	%	8,971			7.3	%
Amortization	1,563			0.8	%	1,291			0.9	%	4,381			0.9	%	3,903			1.1	%	1,584			0.9	%	1,280			1.0	%
Operating income	30,562			15.3	%	23,947			17.1	%	68,258			14.0	%	50,554			14.1	%	22,683			13.2	%	16,752			13.6	%
Other expense, net:
Other income, net	(712		)	(0.4	)%	(17		)	—	%	(746		)	(0.2	)%	(27,753		)	(7.7	)%	(10		)	—	%	(17		)	—	%
Interest expense	1,750			0.9	%	923			0.7	%	4,765			1.0	%	4,136			1.2	%	1,167			0.7	%	1,171			0.9	%
Other (income) expense, net	1,038			0.5	%	906			0.6	%	4,019			0.8	%	(23,617		)	(6.6	)%
Other expense, net																					1,157			0.7	%	1,154			0.9	%
Income before provision for income taxes	29,524			14.8	%	23,041			16.4	%	64,239			13.2	%	74,171			20.7	%	21,526			12.5	%	15,598			12.6	%
Provision for income taxes	7,321			3.7	%	6,245			4.4	%	15,023			3.1	%	56,545			15.8	%	4,844			2.8	%	3,583			2.9	%
Net income	22,203			11.1	%	16,796			12.0	%	49,216			10.1	%	17,626			4.9	%	16,682			9.7	%	12,015			9.7	%
Net income attributable to non-controlling interest	1,104			0.6	%	1,124			0.8	%	2,562			0.5	%	2,452			0.7	%	823			0.5	%	717			0.6	%
Net income attributable to Malibu Boats, Inc.	21,099			10.5	%	15,672			11.2	%	46,654			9.6	%	15,174			4.2	%	15,859			9.2	%	11,298			9.1	%

	Three Months Ended March 31,										Nine Months Ended March 31,										Three Months Ended September 30,
	2019					2018					2019					2018					2019					2018
	Unit Volumes			% Total		Unit Volumes			% Total		Unit Volumes			% Total		Unit Volumes			% Total		Unit Volumes			% Total		Unit Volumes			% Total
Volume by Segment
Malibu U.S.	1,233			58.9	%	1,109			62.1	%	3,091			57.6	%	2,769			60.4	%
Malibu																					1,014			58.7	%	933			61.6	%
Cobalt	645			30.8	%	615			34.4	%	1,773			33.0	%	1,594			34.8	%	570			33.0	%	583			38.4	%
Pursuit	143			6.8	%	—			—	%	254			4.7	%	—			—	%
Australia	73			3.5	%	62			3.5	%	252			4.7	%	221			4.8	%
Total units	2,094					1,786					5,370					4,584

Volume by Brand
Malibu	869			41.5	%	823			46.1	%	2,288			42.6	%	2,112			46.1	%
Axis	437			20.9	%	348			19.5	%	1,055			19.7	%	878			19.1	%
Cobalt	645			30.8	%	615			34.4	%	1,773			33.0	%	1,594			34.8	%
Pursuit	143			6.8	%	—			—	%	254			4.7	%	—			—	%
Pursuit¹																					143			8.3	%	—			—	%
Total units	2,094					1,786					5,370					4,584					1,727					1,516

Net sales per unit	$	95,472				$	78,628				$	91,098				$	78,173				$	99,641				$	81,453

(1) We acquired substantially all of the assets of Pursuit on October 15, 2018.

Comparison of the Three Months Ended ~~March 31,~~September 30, 2019 to the Three Months Ended ~~March 31,~~September 30, 2018

Net Sales

Net sales for the three months ended ~~March 31,~~September 30, 2019 increased ~~$59.5~~$48.6 million, or ~~42.4%~~39.4%, to ~~$199.9~~$172.1 million as compared to the three months ended ~~March 31,~~September 30, 2018. Unit volume for the three months ended ~~March 31,~~September 30, 2019, increased ~~308~~211 units, or ~~17.2%~~13.9%, to ~~2,094~~1,727 units as compared to the three months ended ~~March 31,~~September 30, 2018. The increase in net sales and unit volumes were driven primarily by our acquisition of Pursuit in October 2018, as well as increased demand for our Malibu and Axis brands coupled with year-over-year price increases across our Malibu, Axis and Cobalt brands.

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Net sales attributable to our Malibu ~~U.S.~~ segment increased ~~$15.9~~$10.7 million, or ~~18.6%~~14.2%, to ~~$101.6~~$85.9 million for the three months ended ~~March 31,~~September 30, 2019, compared to the three months ended ~~March 31,~~September 30, 2018. Unit volumes attributable to our Malibu ~~U.S.~~ segment increased ~~124~~81 units for the three months ended ~~March 31,~~September 30, 2019, compared to the three months ended ~~March 31,~~September 30, 2018. The increase in net sales and unit volume for Malibu ~~U.S.~~ was driven primarily by strong demand for new models and optional features, which led to a higher net sales per unit for Malibu and Axis models. Net sales was also impacted by year-over-year price increases on all of our Malibu and Axis models.

Net sales from our Cobalt segment increased ~~$6.1~~$1.9 million, or ~~12.3%~~3.9%, to ~~$56.0~~$50.2 million for the three months ended ~~March 31,~~September 30, 2019, compared to the three months ended ~~March 31,~~September 30, 2018. Unit volumes attributable to Cobalt ~~increased 30~~decreased 13 units for the three months ended ~~March 31,~~September 30, 2019 compared to the three months ended ~~March 31,~~September 30, 2018. The increase in Cobalt net sales ~~and unit volume~~ was driven ~~primarily by strong demand for our R series models. Net sales was also impacted~~ by year-over-year price increases on all of our Cobalt models.

~~Since our acquisition of Pursuit on October 15, 2018, net~~Net sales and unit volume contributed by Pursuit were ~~$36.5~~$36.0 million and 143 units, respectively, for the three months ended ~~March 31,~~September 30, 2019.

~~Net sales from our Malibu Australia segment increased $1.0 million, or 20.6%, to $5.8 million for~~ We acquired the ~~three months ended March 31, 2019, compared to the three months ended March 31,~~assets of Pursuit on October 15, 2018.

Overall consolidated net sales per unit increased ~~21.4%~~22.3% to ~~$95,472~~$99,641 per unit for the three months ended ~~March 31,~~September 30, 2019, compared to the three months ended ~~March 31,~~September 30, 2018. Net sales per unit for our Malibu ~~U.S.~~ segment increased ~~6.7%~~5.0% to ~~$82,401~~$84,695 per unit for the three months ended ~~March 31,~~September 30, 2019, compared to the three months ended ~~March 31,~~September 30, 2018, driven by strong demand for new models and optional features and year-over-year price increases. Net sales per unit for our Cobalt segment increased ~~7.0%~~6.3% to ~~$86,885~~$87,984 per unit for the three months ended ~~March 31,~~September 30, 2019, compared to the three months ended ~~March 31,~~September 30, 2018, driven by ~~a favorable mix of R series models which have a higher average selling price as well as~~ year-over-year price increases. Net sales per unit for Pursuit for the three months ended ~~March 31,~~September 30, 2019 was ~~$254,951.~~$252,091 per unit.

Cost of Sales

Cost of sales for the three months ended ~~March 31,~~September 30, 2019 increased ~~$46.1~~$39.1 million, or ~~44.3%~~42.0%, to ~~$150.2~~$132.1 million as compared to the three months ended ~~March 31,~~September 30, 2018. The increase in cost of sales was driven primarily by incremental costs contributed by Pursuit since its acquisition in October 2018 and an increase in unit volumes at our Malibu ~~U.S. and Cobalt businesses.~~business.

Gross Profit

Gross profit for the three months ended ~~March 31,~~September 30, 2019 increased ~~$13.4~~$9.5 million, or ~~36.7%~~31.1%, to ~~$49.7~~$40.0 million compared to the three months ended ~~March 31,~~September 30, 2018. The increase in gross profit was due mainly to higher unit volumes. Gross margin for the three months ended ~~March 31,~~September 30, 2019 decreased ~~100~~150 basis points from ~~25.9%~~24.7% to ~~24.9%~~23.2% over the same period in the prior fiscal year primarily due to the integration of Pursuit. ~~Our gross margins increased year-over-year for our comparable businesses primarily as a result of our operational efficiency initiatives.~~

Operating Expenses

Selling and marketing expenses for the three ~~month period~~months ended ~~March 31,~~September 30, 2019, increased ~~$2.0~~$1.6 million or ~~61.6%~~44.8% compared to the three months ended ~~March 31,~~September 30, 2018 due primarily to the incremental expenses ~~incurred as a result of the acquisition of~~attributable to Pursuit. As a percentage of sales, selling and marketing expenses increased 3010 basis points compared to the same period in the prior fiscal year. General and administrative expenses for the three months ended ~~March 31,~~September 30, 2019, increased ~~$4.5~~$1.7 million, or ~~56.8%~~18.9%, to ~~$12.3~~$10.7 million as compared to the three months ended ~~March 31,~~September 30, 2018, largely due to incremental general and administrative expenses attributable to ~~Pursuit, integration related expenses for our acquisition of Pursuit and higher legal expenses related to intellectual property litigation.~~Pursuit. As a percentage of sales, general and administrative expenses ~~increased 60~~decreased 110 basis points to 6.2% for the three months ended ~~March 31,~~September 30, 2019 compared to the three months ended ~~March 31,~~September 30, 2018. Amortization expense for the three ~~month period~~months ended ~~March 31,~~September 30, 2019, increased $0.3 million, or ~~21.1%~~23.8% to $1.6 million compared to the three months ended ~~March 31,~~September 30, 2018 due to additional amortization expense related to intangibles acquired as part of the Pursuit acquisition.

Other (Income) Expense, Net

Other (income) expense, net for the three ~~month period~~months ended ~~March 31,~~September 30, 2019 ~~changed by $0.1~~remained flat at $1.2 million as compared to the three months ended ~~March 31, 2018 from $0.9 million~~September 30, 2018. Other expense, net, consisted primarily of ~~expense to $1.0 million of expense. The change is due to higher~~ interest expense on ~~loans because~~our outstanding debt for each of ~~an overall higher average principal balance for~~ the three ~~month period~~months ended ~~March 31,~~September 30, 2019 compared to the same prior year period, as a result of our $50.0 million of borrowing under our revolving credit facility to finance a portion of the purchase price for Pursuit. This increase was partially offset by other income we recognized from an adjustment in our tax receivable agreement liability as a result of a decrease in the estimated tax rate used in computing our future tax obligations and ~~in turn, a decrease in the future tax benefit we expect to pay under our tax receivable agreement with pre-IPO owners.~~2018.

Provision for Income Taxes

Our provision for income taxes for the three months ended ~~March 31,~~September 30, 2019, increased ~~$1.1~~$1.3 million, to ~~$7.3~~$4.8 million compared to the three months ended ~~March 31,~~September 30, 2018. This increase was primarily due to ~~the recording of an adjustment for U.S. state taxes and the remeasurement of deferred taxes.~~increased consolidated earnings, including Pursuit. For the three months ended ~~March 31,~~September 30, 2019, our effective tax rate of ~~24.8% differed from~~22.5% exceeded the statutory federal income tax rate of 21% primarily due to the impact of U.S. state ~~taxes and remeasurement of deferred~~ taxes. This increase was partially offset by the benefits of the foreign derived intangible income deduction, the research and development tax credit and the impact of non-controlling

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interests in the LLC. For the three months ended ~~March 31,~~September 30, 2018, our effective tax rate of ~~27.1% differed from~~23% exceeded the ~~blended~~ statutory federal income tax rate of ~~approximately 28% primarily~~21% due to the ~~remeasurement~~impact of ~~deferred taxes,~~U.S. state taxes. This effect was partially offset by a windfall benefit generated by certain stock based compensation during the quarter and the impact of non-controlling interests in the LLC, a ~~pass through~~passthrough entity for U.S. federal ~~income~~ tax ~~purposes, state income taxes attributable to the LLC, and the benefit of deductions under Section 199 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code").~~purposes.

Non-controlling Interest

Non-controlling interest represents the ownership interests of the members of the LLC other than us and the amount recorded as non-controlling interest in our unaudited interim condensed consolidated statements of operations and comprehensive income is computed by multiplying pre-tax income for the ~~three month~~applicable period, ~~ended March 31, 2019,~~ by the percentage ownership in the LLC not directly attributable to us. For the three months ended ~~March 31,~~September 30, 2019 and 2018, the weighted average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was ~~3.9%~~3.8% and ~~5.0%~~4.7%, respectively.

~~Comparison~~

Table of ~~the Nine Months Ended March 31, 2019 to the Nine Months Ended March 31, 2018~~Contents

~~Net Sales~~

Net sales for the nine months ended March 31, 2019 increased $130.8 million or 36.5%, to $489.2 million as compared to the nine months ended March 31, 2018. Unit volume for the nine months ended March 31, 2019, increased 786 units, or 17.1%, to 5,370 units as compared to the nine months ended March 31, 2018.

Net sales attributable to our Malibu U.S. segment increased $38.9 million, or 18.1%, to $253.6 million for the nine months ended March 31, 2019, compared to the nine months ended March 31, 2018. Unit volumes attributable to our Malibu U.S. segment increased 322 units for the nine months ended March 31, 2019, compared to the nine months ended March 31, 2018. The increase in net sales and unit volume for Malibu U.S. was driven primarily by strong demand for new models and optional features, which led to a higher net sales per unit for Malibu and Axis models. Net sales was also impacted by year-over-year price increases on all of our Malibu and Axis models.

Net sales from our Cobalt segment increased $23.9 million, or 19%, to $150.1 million for the nine months ended March 31, 2019, compared to the nine months ended March 31, 2018. Unit volumes attributable to Cobalt increased 179 units for the nine months ended March 31, 2019 compared to the nine months ended March 31, 2018. The increase in Cobalt net sales and unit volume was driven primarily by strong demand for our R series models. Net sales was also impacted by year-over-year price increases on all of our Cobalt models.

~~Since our acquisition of Pursuit on October 15, 2018, net sales and unit volume contributed by Pursuit were $66.4 million and 254 units, respectively, for the nine months ended March 31, 2019.~~

~~Net sales from our Malibu Australia segment increased $1.6 million, or 9.1%, to $19.1 million for the nine months ended March 31, 2019, compared to the nine months ended March 31, 2018.~~

Overall consolidated net sales per unit increased 16.5% to $91,098 for the nine months ended March 31, 2019, compared to the nine months ended March 31, 2018. Net sales per unit for our Malibu U.S. segment increased 5.8% to $82,029 for the

nine months ended March 31, 2019, compared to the nine months ended March 31, 2018, driven by strong demand for new models and optional features and year-over-year price increases. Net sales per unit for our Cobalt segment increased 7.0% to $84,685 for the nine months ended March 31, 2019, compared to the nine months ended March 31, 2018, driven by a favorable mix of R series models which have a higher average selling price as well as year-over-year price increases. Net sales per unit for Pursuit for the three months ended March 31, 2019 was $261,358.

~~Cost of Sales~~

Cost of sales for the nine months ended March 31, 2019 increased $99.1 million, or 36.5%, to $370.7 million as compared to the nine months ended March 31, 2018. The increase in cost of sales was driven primarily by incremental costs contributed by Pursuit and an increase in unit volumes at our Malibu U.S. and Cobalt businesses.

~~Gross Profit~~

Gross profit for the nine months ended March 31, 2019 increased $31.7 million, or 36.6%, to $118.5 million compared to the nine months ended March 31, 2018. The increase in gross profit was due mainly to higher unit volumes. Gross margin for the nine months ended March 31, 2019 remained flat at 24.2% over the same period in the prior fiscal year due to costs associated with the integration and acquisition of Pursuit, offset by our operational efficiencies gained in our Cobalt business.

~~Operating Expenses~~

Selling and marketing expenses for the nine month period ended March 31, 2019, increased $3.4 million or 34.1%, compared to the nine months ended March 31, 2018 due primarily to the incremental expenses incurred as a result of the acquisition of Pursuit. As a percentage of sales, selling and marketing expenses decreased 10 basis points compared to the same period in the prior fiscal year. General and administrative expenses for the nine months ended March 31, 2019, increased $10.2 million, or 45.4%, to $32.5 million as compared to the nine months ended March 31, 2018, largely due to incremental general and administrative expenses attributable to Pursuit, integration related expenses for our acquisition of Pursuit and higher legal expenses related to intellectual property litigation. As a percentage of sales, general and administrative expenses increased 40 basis points to 6.6% for the nine months ended March 31, 2019 compared to the nine months ended March 31, 2018. Amortization expense for the nine months ended March 31, 2019, increased $0.5 million or 12.2% to $4.4 million compared to the nine months ended March 31, 2018 primarily due to additional amortization related to intangibles acquired as part of the Pursuit acquisition.

~~Other (Income) Expense, Net~~

Other (income) expense, net for the nine months ended March 31, 2019 changed by $27.6 million as compared to the nine months ended March 31, 2018 from income of $23.6 million for the nine months ended March 31, 2018 to expense of $4.0 million for the nine months ended March 31, 2019. The change was primarily due to a $27.7 million reduction in our tax receivable agreement liability for the nine months ended March 31, 2018, which resulted in us recognizing a corresponding amount as other income during the same period. The reduction of our tax receivable agreement liability primarily resulted from a decrease in the estimated tax rate used in computing our future tax obligations as a result of the Tax Act, which, in turn, decreased the future tax benefit we expect to pay under our tax receivable agreements with our pre-IPO owners. For the nine months ended March 31, 2019, we recognized higher interest expense on our loans because of an overall higher average principal balance compared to the same prior year period, as a result of our $50.0 million of borrowing under our revolving credit facility to finance a portion of the purchase price for Pursuit. This higher interest expense was partially offset by other income we recognized from an adjustment in our tax receivable agreement liability as a result of a decrease in the estimated tax rate used in computing our future tax obligations and, in turn, a decrease in the future tax benefit we expect to pay under our tax receivable agreement with pre-IPO owners.

~~Provision for Income Taxes~~

Our provision for income taxes for the nine months ended March 31, 2019, decreased $41.5 million, to $15.0 million compared to the nine months ended March 31, 2018. For the nine months ended March 31, 2018, we recorded a non-cash increase to income tax expense of $47.2 million for the remeasurement of deferred taxes on the enactment date of the Tax Act and deferred tax impact related to the reduction in the tax receivable agreement liability. For the nine months ended March 31, 2019, our effective tax rate of 23.4% differed from the statutory federal income tax rate of 21% primarily due to the impact of U.S. state taxes and remeasurement of deferred taxes. This increase was partially offset by the benefits of the foreign derived intangible income deduction, the research and development tax credit and the impact of non-controlling interests in the LLC. For the nine months ended March 31, 2018, our effective tax rate of 76.2% differed from the blended statutory federal income tax rate of approximately 28% primarily due to the impact of the Tax Act previously mentioned and the impact of the additional jurisdictions in which we were taxed as a result of the Cobalt acquisition in July 2017. Our effective tax rate was also impacted

to a lesser extent, by the noncontrolling interests in the LLC, state income taxes attributable to the LLC, and the benefit of deductions under Section 199 of the Internal Revenue Code. Our effective tax rate also reflects the impact of our share of the LLC's permanent items such as stock compensation expense attributable to profits interests.

~~Non-controlling Interest~~

Non-controlling interest represents the ownership interests of the members of the LLC other than us and the amount recorded as non-controlling interest in our unaudited condensed consolidated statements of operations and comprehensive income is computed by multiplying pre-tax income for the nine months ended March 31, 2019, by the percentage ownership in the LLC not directly attributable to us. For the nine months ended March 31, 2019 and 2018, the weighted average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was 4.1% and 5.5%, respectively.

GAAP Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA

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

We define adjusted EBITDA as net income before interest expense, income taxes, depreciation, amortization and non-cash, non-recurring or non-operating expenses, including certain professional fees, acquisition and integration related expenses, ~~non-cash~~non- cash compensation expense, and expenses related to our engine development ~~initiative, and adjustments to our tax receivable agreement liability.~~initiative. We define adjusted EBITDA margin as adjusted EBITDA divided by net sales. Adjusted EBITDA and adjusted EBITDA margin are not measures of net income as determined by GAAP. Management believes adjusted EBITDA and adjusted EBITDA margin allow investors to evaluate the company’s operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance. Management uses Adjusted EBITDA to assist in highlighting trends in our operating results without regard to our financing methods, capital structure and non-recurring or non-operating expenses. We exclude the items listed above from net income in arriving at adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures, the methods by which assets were acquired and other factors. Adjusted EBITDA has limitations as an analytical tool and should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our liquidity. Certain items excluded from adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historical costs of depreciable assets. Our presentation of adjusted EBITDA and adjusted EBITDA margin should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our computations of adjusted EBITDA and adjusted EBITDA margin may not be comparable to other similarly titled measures of other companies.

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


	Three Months Ended March 31,						Nine Months Ended March 31,						Three Months Ended September 30,
	2019			2018			2019			2018			2019			2018
Net income	$	22,203		$	16,796		$	49,216		$	17,626		$	16,682		$	12,015
Provision for income taxes ¹	7,321			6,245			15,023			56,545			4,844			3,583
Interest expense	1,750			923			4,765			4,136			1,167			1,171
Depreciation	2,744			1,685			7,102			5,102			3,097			1,863
Amortization	1,563			1,291			4,381			3,903			1,584			1,280
Professional fees ²	189			—			572			26			335			—
Acquisition and integration related expenses ³	1,051			144			4,960			2,281			—			1,357
Stock-based compensation expense ⁴	735			560			1,866			1,410			677			476
Engine development ⁵	932			899			2,871			3,486			—			1,152
Adjustments to tax receivable agreement liability ⁶	(707		)	—			(707		)	(27,702		)
Adjusted EBITDA	$	37,781		$	28,543		$	90,049		$	66,813		$	28,386		$	22,897
Adjusted EBITDA Margin	18.9		%	20.3		%	18.4		%	18.6		%	16.5		%	18.5		%



(1)	Provision for income taxes for the ~~nine~~three months ended ~~March 31, 2018~~September 30, 2019 reflects an increase to income tax expense of ~~$47.2~~$1.3 million ~~for the remeasurement of deferred taxes on the enactment date of the Tax Act adopted in December 2017 and deferred tax impact related~~primarily due to ~~the reduction in the tax receivable agreement liability.~~increased consolidated earnings, including Pursuit. See Note 1314 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
(2)	For the three ~~and nine~~ months ended ~~March 31,~~September 30, 2019, represents legal and advisory fees related to our litigation with Skier's Choice, Inc. ~~For the nine months ended March 31, 2018, represents legal and advisory fees related~~See Note 17 to our ~~litigation with MasterCraft Boat Company, LLC ("MasterCraft") which was settled in May 2017. See Note 16 to our~~ unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
(3)	For the three ~~and nine~~ months ended ~~March 31, 2019,~~September 30, 2018, represents ~~integration costs and~~ legal and advisory fees incurred in connection with our acquisition of Pursuit on October 15, ~~2018. For the three~~2018 and ~~nine months ended March 31, 2018 represents~~ integration costs ~~and legal and advisory fees incurred in connection with~~related to our acquisition of Cobalt on July 6, 2017. Integration related expenses for the nine months ended March 31, 2019 include post-acquisition adjustments to cost of goods sold of $0.9 million for the fair value step upacquisitions of Pursuit inventory acquired, most of which was sold during the second quarter of fiscal 2019. Integration related expenses for the nine months ended March 31, 2018 include post-acquisition adjustments to cost of goods sold of $1.5 million for the fair value step up of Cobalt inventory acquired, most of which was sold during the first quarter of fiscal 2018.and Cobalt.
(4)	Represents equity-based incentives awarded to key employees under the Malibu Boats, Inc. Long-Term Incentive Plan and profit interests issued under the previously existing limited liability company agreement of the LLC. For more information, see Note 1415 to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
(5)	Represents costs incurred in connection with our vertical integration of engines including product development costs and supplier transition performance incentives.
~~(6)~~	For the three and nine months ended March 31, 2019 we recognized other income from an adjustment in our tax receivable agreement liability as a result of a decrease in the estimated tax rate used in computing our future tax obligations and in turn, a decrease in the future tax benefit we expect to pay under our tax receivable agreement with pre-IPO owners. For the nine months ended March 31, 2018, we recognized other income as a result of a decrease in our estimated tax receivable agreement liability. The reduction in our tax receivable agreement liability resulted from the adoption of the Tax Act, which decreased the estimated tax rate used in computing our future tax obligations and, in turn, decreased the future tax benefit we expect to pay under our tax receivable agreement with pre-IPO owners. Refer to Note 11 of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Table of Contents

Adjusted Fully Distributed Net Income

We define Adjusted Fully Distributed Net Income as net income attributable to Malibu Boats, Inc. (i) excluding income tax expense, (ii) excluding the effect of non-recurring or non-cash items, (iii) assuming the exchange of all LLC units into shares of Class A Common Stock, which results in the elimination of non-controlling interest in the LLC, and (iv) reflecting an adjustment for income tax expense on fully distributed net income before income taxes at our estimated effective income tax rate. Adjusted Fully Distributed Net Income is a non-GAAP financial measure because it represents net income attributable to Malibu Boats, Inc., before non-recurring or non-cash items and the effects of non-controlling interests in the LLC.

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

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

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

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


	Three Months Ended March 31,						Nine Months Ended March 31,						Three Months Ended September 30,
	2019			2018			2019			2018			2019		2018
Reconciliation of numerator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock:
Net income attributable to Malibu Boats, Inc.	$	21,099		$	15,672		$	46,654		$	15,174		$	15,859	$	11,298
Provision for income taxes ¹	7,321			6,245			15,023			56,545			4,844		3,583
Professional fees ²	189			—			572			26			335		—
Acquisition and integration related expenses ³	2,217			870			8,015			4,393			1,073		2,110
Fair market value adjustment for interest rate swap ⁴	93			(137		)	225			(340		)	38		3
Stock-based compensation expense ⁵	735			560			1,866			1,410			677		476
Engine development⁶	932			899			2,871			3,486			—		1,152
Adjustments to tax receivable agreement liability ⁷	(707		)	—			(707		)	(27,702		)
Net income attributable to non-controlling interest ⁸	1,104			1,124			2,562			2,452
Net income attributable to non-controlling interest ⁷													823		717
Fully distributed net income before income taxes	32,983			25,233			77,081			55,444			23,649		19,339
Income tax expense on fully distributed income before income taxes ⁹	7,949			5,854			18,577			15,914
Income tax expense on fully distributed income before income taxes ⁸													5,558		4,661
Adjusted fully distributed net income	$	25,034		$	19,379		$	58,504		$	39,530		$	18,091	$	14,678



(1)	Provision for income taxes for the ~~nine~~three months ended ~~March 31, 2018~~September 30, 2019 reflects an increase to income tax expense of ~~$47.2~~$1.3 million ~~for the remeasurement of deferred taxes on the enactment date of the Tax Act adopted in December 2017 and deferred tax impact related~~primarily due to ~~the reduction in the tax receivable agreement liability.~~increased consolidated earnings, including Pursuit. See Note 1314 to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
(2)	For the three ~~and nine~~ months ended ~~March 31,~~September 30, 2019, represents legal and advisory fees related to our litigation with Skier's Choice, Inc. ~~For the nine months ended March 31, 2018, represents legal and advisory fees related~~See Note 17 to our ~~litigation with MasterCraft which was settled in May 2017. See Note 16 to our~~ unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
(3)	For the three ~~and nine~~ months ended ~~March 31,~~September 30, 2019, represents ~~integration costs~~amortization of intangibles acquired in connection with the acquisition of Pursuit and Cobalt. For the three months ended September 30, 2018, represents legal and advisory fees incurred in connection with our acquisition of Pursuit on October 15, ~~2018. For the three~~2018 and ~~nine months ended March 31, 2018 represents~~ integration costs related to our acquisitions of Pursuit and legal and advisory fees incurred in connection with our acquisition of Cobalt on July 6, 2017. Integration related expenses for the nine months ended March 31, 2019 include post-acquisition adjustments to cost of goods sold of $0.9 million for the fair value step up of inventory acquired, most of which was sold during the second quarter of fiscal 2019.Cobalt. In addition for the three ~~and nine~~ months ended ~~March 31, 2019, integration related expenses~~September 30, 2018, includes ~~$0.4 million and~~ $0.8 million ~~respectively, in depreciation and~~ amortization associated with our fair value step up of property, plant and equipment and intangibles acquired in connection with the acquisition of Pursuit. Integration related expenses for the nine months ended March 31, 2018 include post-acquisition adjustments to cost of goods sold of $1.5 million for the fair value step up of inventory acquired, most of which was sold during the first quarter of fiscal 2018. In addition, for the three and nine months ended March 31, 2018, integration related expenses includes $0.7 million and $2.1 million, respectively, in depreciation and amortization associated with our fair value step up of property, plant and equipment and intangibles acquired in connection with the acquisition of Cobalt.
(4)	Represents the change in the fair value of our interest rate swap entered into on July 1, 2015.
(5)	Represents equity-based incentives awarded to certain of our employees under the Malibu Boats, Inc. Long-Term Incentive Plan and profit interests issued under the previously existing limited liability company agreement of the LLC. See Note 1415 to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
(6)	Represents costs incurred in connection with our vertical integration of engines including product development costs and supplier transition performance incentives.
(7)	For the three and nine months ended March 31, 2019 we recognized other income from an adjustment in our tax receivable agreement liability as a result of a decrease in the estimated tax rate used in computing our future tax obligations and in turn, a decrease in the future tax benefit we expect to pay under our tax receivable agreement with pre-IPO owners. For the nine months ended March 31, 2018, we recognized other income as a result of a decrease in our estimated tax receivable agreement liability. The reduction in our tax receivable agreement liability resulted from the adoption of the Tax Act, which decreased the estimated tax rate used in computing our future tax obligations and, in turn, decreased the future tax benefit we expect to pay under our tax receivable agreement with pre-IPO owners. Refer to Note 11 of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
~~(8)~~	Reflects the elimination of the non-controlling interest in the LLC as if all LLC members had fully exchanged their LLC Units for shares of Class A Common Stock.
~~(9)~~(8)	Reflects income tax expense at an estimated normalized annual effective income tax rate of 23.5% and 24.1% ~~for the three and nine months ended March 31, 2019, 23.2%~~of income before income taxes for the three months ended ~~March 31,~~September 30, 2019 and 2018, ~~and 28.7% for the nine months ended March 31, 2018, in each case,~~respectively, assuming the conversion of all LLC Units into shares of Class A Common Stock. The estimated normalized annual effective income tax rate for ~~the three and nine months ended March 31, 2019~~fiscal year 2020 is based on the federal statutory rate plus a blended state rate adjusted for the research and development tax credit, the foreign derived intangible income deduction, and foreign income taxes attributable to our Australian ~~based~~ subsidiary. The estimated normalized effective tax rate for the three months ended March 31, 2018 is based on the federal statutory rate plus a blended state rate adjusted for deductions under Section 199 of the Internal Revenue Code , state taxes attributable to the LLC, and foreign income taxes attributable to our Australian based subsidiary. The estimated normalized effective income tax rate for the nine months ended March 31, 2018 is based on the federal statutory rate plus a blended state rate adjusted for deductions under Section 199 of the Internal Revenue Code, state taxes attributable to the LLC, and foreign income taxes attributable to our Australian based subsidiary. The increase in the normalized annual effective income tax rate to 24.1% for the three months ended March 31, 2019 compared to 23.2% for the three months ended March 31, 2018 is primarily the result of estimated effective state taxes as a result of our anticipated state filings following our acquisitions. The decrease in the rate for the nine months ended March 31, 2019 compared to the nine months ended March 31, 2018 is primarily the result of the Tax Act which was effective for periods after January 1, 2018, lowering the corporate tax rate to 21%, as well as an updated blended state rate, which considers the impacts of the Cobalt acquisition and a recent law change in Tennessee.
~~(10)~~	The difference in weighted average shares outstanding for the three and nine months ended March 31, 2018 relates to the difference in the weighting of shares outstanding of Class A common stock during this period for the calculation of basic net income per share for our financial statements and basic net income per share for adjusted fully distributed net income.
~~(11)~~(9)	Represents the weighted average shares outstanding of LLC Units held by non-controlling interests assuming they were exchanged into Class A Common Stock on a one-for-one basis.
~~(12)~~(10)	Represents the weighted average unvested restricted stock awards included in outstanding shares during the applicable period that were convertible into Class A Common Stock and granted to members of management.
~~(13)~~(11)	Reflects impact of increased share counts assuming the exchange of all weighted average shares outstanding of LLC Units into shares of Class A Common Stock and the conversion of all weighted average unvested restricted stock awards included in outstanding shares granted to members of management.



Delaware	5075 Kimberly Way,	Loudon,	Tennessee	37774	46-4024640
(State or other jurisdiction of incorporation or organization)	(Address of principal executive offices, including zip code)				(I.R.S. Employer Identification No.)

		~~(865) 458-5478~~

(865)	458-5478
(Registrant’s telephone number, including area code)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01	MBUU	Nasdaq Global Select Market



Large ~~accelerated filer~~Accelerated Filer	¨☑	Accelerated filer	þ☐

Non-accelerated filer	¨☐	Smaller reporting company	¨☐

		Emerging growth company	þ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. þ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No þ	☐	No	☑



~~Title of each class~~	~~Trading Symbol(s)~~	~~Name of each exchange on which registered~~
~~Class A Common Stock, par value $0.01~~	~~MBUU~~	~~Nasdaq Global Select Market~~



(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Class A Common Stock, par value $0.01, outstanding as of ~~May 8,~~November 5, 2019:	~~20,851,097~~20,465,064	shares
Class B Common Stock, par value $0.01, outstanding as of ~~May 8,~~November 5, 2019:	15	shares




		Page
PART I	FINANCIAL INFORMATION	2
Item 1.	Financial Statements	2
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)	2
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2322
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4336
Item 4.	Controls and Procedures	4336

PART II	OTHER INFORMATION	4537
Item 1.	Legal Proceedings	4537
Item 1A.	Risk Factors	4537
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4537
Item 3.	Defaults Upon Senior Securities	4537
Item 4.	Mine Safety Disclosures	4537
Item 5.	Other Information	4537
Item 6.	Exhibits	4638

SIGNATURES		4739


	March 31, 2019			June 30, 2018			September 30, 2019			June 30, 2019
Assets
Current assets
Cash	$	15,489		$	61,623		$	32,345		$	27,392
Trade receivables, net	38,811			24,625			22,962			27,961
Inventories, net	74,043			44,268			75,286			67,768
Prepaid expenses and other current assets	4,979			3,298			6,075			4,530
Income tax receivable	137			100
Total current assets	133,459			133,914			136,668			127,651
Property, plant and equipment, net	61,515			40,845			72,978			65,756
Goodwill	51,474			32,230			51,160			51,404
Other intangible assets, net	147,655			94,221			144,415			146,061
Deferred tax assets	62,078			64,105			58,926			60,407
Other assets	251			453			15,658			35
Total assets	$	456,432		$	365,768		$	479,805		$	451,314
Liabilities
Current liabilities
Accounts payable	$	31,815		$	24,349		$	29,240		$	21,174
Accrued expenses	46,232			35,685			48,907			49,097
Income taxes and tax distribution payable	1,067			1,420			3,280			1,469
Payable pursuant to tax receivable agreement, current portion	3,932			3,932			3,592			3,592
Total current liabilities	83,046			65,386			85,019			75,332
Deferred tax liabilities	232			341			113			145
Other liabilities							17,099			1,689
Payable pursuant to tax receivable agreement, less current portion	53,082			51,114			50,162			50,162
Long-term debt	128,769			108,487			113,735			113,633
Other long-term liabilities	1,405			569
Total liabilities	266,534			225,897			266,128			240,961
Commitments and contingencies (See Note 16)
Commitments and contingencies (See Note 17)
Stockholders' Equity
Class A Common Stock, par value $0.01 per share, 100,000,000 shares authorized; 20,851,097 shares issued and outstanding as of March 31, 2019; 20,555,348 issued and outstanding as of June 30, 2018	207			204
Class B Common Stock, par value $0.01 per share, 25,000,000 shares authorized; 15 shares issued and outstanding as of March 31, 2019; 17 shares issued and outstanding as of June 30, 2018	—			—
Preferred Stock, par value $0.01 per share; 25,000,000 shares authorized; no shares issued and outstanding as of March 31, 2019 and June 30, 2018	—			—
Class A Common Stock, par value $0.01 per share, 100,000,000 shares authorized; 20,465,064 shares issued and outstanding as of September 30, 2019; 20,852,640 issued and outstanding as of June 30, 2019							203			207
Class B Common Stock, par value $0.01 per share, 25,000,000 shares authorized; 15 shares issued and outstanding as of September 30, 2019; 15 shares issued and outstanding as of June 30, 2019							—			—
Preferred Stock, par value $0.01 per share; 25,000,000 shares authorized; no shares issued and outstanding as of September 30, 2019 and June 30, 2019							—			—
Additional paid in capital	112,286			108,360			102,400			113,004
Accumulated other comprehensive loss	(2,656		)	(1,984		)	(3,451		)	(2,828		)
Accumulated earnings	74,441			27,789			108,008			93,852
Total stockholders' equity attributable to Malibu Boats, Inc.	184,278			134,369			207,160			204,235
Non-controlling interest	5,620			5,502			6,517			6,118
Total stockholders’ equity	189,898			139,871			213,677			210,353
Total liabilities and stockholders' equity	$	456,432		$	365,768		$	479,805		$	451,314



	Class A Common Stock			Class B Common Stock				Additional Paid In Capital			Accumulated Other Comprehensive Loss			Accumulated Earnings			Non-controlling Interest in LLC			Total Stockholders' Equity
	Shares	Amount		Shares		Amount		Additional Paid In Capital			Accumulated Other Comprehensive Loss			Accumulated Earnings			Non-controlling Interest in LLC			Total Stockholders' Equity
Balance at June 30, 2018	20,555	$	204	17		$	—	$	108,360		$	(1,984	)	$	27,789		$	5,502		$	139,871
Net income	—	—		—		—		—			—			46,654			2,562			49,216
Stock based compensation, net of withholding taxes on vested equity awards	53	1		—		—		667			—			—			—			668
Issuances of equity for services	—	—		—		—		729			—			—			—			729
Issuance of equity for exercise of options	29	—		—		—		749												749
Increase in payable pursuant to the tax receivable agreement	—	—		—		—		(2,676		)	—			—			—			(2,676		)
Increase in deferred tax asset from step-up in tax basis	—	—		—		—		3,321			—			—			—			3,321
Exchange of LLC Units for Class A Common Stock	214	2		—		—		1,136			—			—			(1,136		)	2
Cancellation of Class B Common Stock	—	—		(2	)	—		—			—			—			—			—
Distributions to LLC Unit holders	—	—		—		—		—			—			(2		)	(1,277		)	(1,279		)
Foreign currency translation adjustment	—	—		—		—		—			(672		)	—			(31		)	(703		)
Balance at March 31, 2019	20,851	$	207	15		$	—	$	112,286		$	(2,656	)	$	74,441		$	5,620		$	189,898


	Three Months Ended March 31, 2019										Nine Months Ended March 31, 2019										Three Months Ended September 30, 2019
	Malibu US		Cobalt		Pursuit		Malibu Australia		Consolidated		Malibu US		Cobalt		Pursuit		Malibu Australia		Consolidated		Malibu		Cobalt		Pursuit		Consolidated
Revenue by product:
Boat and trailer sales	$	98,836	$	55,619	$	36,276	$	5,545	$	196,276	$	245,944	$	148,418	$	66,128	$	18,226	$	478,716	$	82,083	$	49,300	$	35,806	$	167,189
Part and other sales	2,764		422		182		274		3,642		7,607		1,729		257		885		10,478		3,797		851		243		4,891
Total revenue	$	101,600	$	56,041	$	36,458	$	5,819	$	199,918	$	253,551	$	150,147	$	66,385	$	19,111	$	489,194	$	85,880	$	50,151	$	36,049	$	172,080

Revenue by geography:
North America	$	96,394	$	53,820	$	34,711	$	—	$	184,925	$	246,534	$	141,965	$	61,544	$	—	$	450,043	$	78,917	$	48,758	$	32,251	$	159,926
International	5,206		2,221		1,747		5,819		14,993		7,017		8,182		4,841		19,111		39,151		6,963		1,393		3,798		12,154
Total revenue	$	101,600	$	56,041	$	36,458	$	5,819	$	199,918	$	253,551	$	150,147	$	66,385	$	19,111	$	489,194	$	85,880	$	50,151	$	36,049	$	172,080



	Three Months Ended September 30, 2018
	Malibu		Cobalt		Pursuit		Consolidated
Revenue by product:
Boat and trailer sales	$	71,911	$	47,439	$	—	$	119,350
Part and other sales	3,312		821		—		4,133
Total revenue	$	75,223	$	48,260	$	—	$	123,483

Revenue by geography:
North America	$	67,858	$	44,974	$	—	$	112,832
International	7,365		3,286		—		10,651
Total revenue	$	75,223	$	48,260	$	—	$	123,483



	As of September 30, 2019			As of June 30, 2019
	Units	Ownership %		Units	Ownership %
Non-controlling LLC Unit holders ownership in Malibu Boats Holdings, LLC	830,152	3.9	%	830,152	3.8	%
Malibu Boats, Inc. ownership in Malibu Boats Holdings, LLC	20,465,064	96.1	%	20,852,640	96.2	%
	21,295,216	100.0	%	21,682,792	100.0	%



	As of March 31, 2019			As of June 30, 2018
	Units	Ownership %		Units	Ownership %
Non-controlling LLC Unit holders ownership in Malibu Boats Holdings, LLC	830,152	3.8	%	1,043,186	4.8	%
Malibu Boats, Inc. ownership in Malibu Boats Holdings, LLC	20,851,097	96.2	%	20,555,348	95.2	%
	21,681,249	100.0	%	21,598,534	100.0	%



	Estimates of Fair Value		Estimated Useful Life (in years)
Definite-lived intangibles:
Dealer relationships	$	25,400	20
Total definite-lived intangibles	25,400
Indefinite-lived intangible:
Trade name	32,500
Total intangible assets	$	57,900



	Estimates of Fair Value		Estimated Useful Life (in years)
Definite-lived intangibles:
Dealer relationships	$	56,300	20
Patent	2,600		15
Total definite-lived intangibles	58,900
Indefinite-lived intangible:
Trade name	31,000
Total intangible assets	$	89,900



	As of September 30, 2019		As of June 30, 2019
Raw materials	$	50,852	$	45,910
Work in progress	12,944		10,839
Finished goods	11,490		11,019
Total inventories	$	75,286	$	67,768



	As of March 31, 2019		As of June 30, 2018
Raw materials	$	51,798	$	28,851
Work in progress	12,933		6,164
Finished goods	9,312		9,253
Total inventories	$	74,043	$	44,268



Consideration:
Cash consideration paid	$	100,073

Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:
Inventories	$	8,332
Other current assets	350
Property, plant and equipment	17,454
Identifiable intangible assets	57,900
Current liabilities	(3,488		)
Fair value of assets acquired and liabilities assumed	80,548
Goodwill	19,525
Total purchase price	$	100,073



Consideration:
Cash consideration paid	$	129,525
Equity consideration paid	1,000
Fair value of total consideration transferred	$	130,525

Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:
Cash	$	3,973
Accounts receivable	2,329
Inventories	14,343
Other current assets	363
Property, plant and equipment	12,934
Identifiable intangible assets	89,900
Current liabilities	(13,108		)
Fair value of assets acquired and liabilities assumed	110,734
Goodwill	19,791
Total purchase price	$	130,525



	As of September 30, 2019			As of June 30, 2019
Land	$	2,194		$	2,194
Building and leasehold improvements	29,476			28,957
Machinery and equipment	48,941			46,618
Furniture and fixtures	6,850			6,734
Construction in process	17,079			9,764
	104,540			94,267
Less: Accumulated depreciation	(31,562		)	(28,511		)
Property, plant and equipment, net	$	72,978		$	65,756



Goodwill as of June 30, 2019	$	51,404
Effect of foreign currency changes on goodwill	(244		)
Goodwill as of September 30, 2019	$	51,160



Goodwill as of June 30, 2018	$	32,230
Addition related to the acquisition of Pursuit	19,525
Effect of foreign currency changes on goodwill	(281		)
Goodwill as of March 31, 2019	$	51,474



Fiscal years ending June 30:
	Remainder of 2020	$	4,545
	2021	6,052
	2022	4,551
	2023	4,414
	2024	4,414
	Thereafter	56,939
		$	80,915



Fiscal years ending June 30:
	Remainder of 2019	$	1,576
	2020	6,139
	2021	6,059
	2022	4,558
	2023	4,421
	Thereafter	61,402
		$	84,155



	As of September 30, 2019		As of June 30, 2019
Warranties	$	25,034	$	23,820
Dealer incentives	9,028		7,394
Accrued compensation	8,473		13,122
Current operating lease liabilities	1,978		—
Accrued legal and professional fees	750		740
Accrued interest	110		161
Other accrued expenses	3,534		3,860
Total accrued expenses	$	48,907	$	49,097



	As of September 30, 2019			As of June 30, 2019
Term loans	$	75,000		$	75,000
Revolving credit loan	40,000			40,000
Less unamortized debt issuance costs	(1,265		)	(1,367		)
Total debt	113,735			113,633
Less current maturities	—			—
Long-term debt less current maturities	$	113,735		$	113,633



Classification		As of September 30, 2019
Assets
Right-of-use assets	Other assets	$	15,622

Liabilities
Current operating lease liabilities	Accrued expenses	$	1,978
Long-term operating lease liabilities	Other liabilities	15,412
Total lease liabilities		$	17,390



Classification		Three months ended September 30, 2019
Operating lease costs ⁽¹⁾	Cost of sales	$	477
	Selling, general and administrative	223

Sublease income	Other income (expense)	10

Cash paid for amounts included in the measurement of operating lease liabilities	Cash flows from operating activities	647



	Amount
2020 (nine months remaining)	$	1,932
2021	2,495
2022	2,358
2023	2,422
2024	2,563
2025 and thereafter	8,321
Total	20,091
Less imputed interest	(2,701		)
Present value of lease liabilities	$	17,390



	Amount
2020	$	2,552
2021	2,541
2022	2,432
2023	2,489
2024	2,649
2025 and thereafter	8,577
Total	$	21,240



	Fair Value Measurements at Reporting Date Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of September 30, 2019:
Assets
Interest rate swap not designated as cash flow hedge	$	30	$	—	$	30	$	—
Total assets at fair value	$	30	$	—	$	30	$	—

As of June 30, 2019:
Assets
Interest rate swap not designated as cash flow hedge	$	68	$	—	$	68	$	—
Total assets at fair value	$	68	$	—	$	68	$	—



	Shares	Weighted Average Exercise Price/Share
Total outstanding options as of June 30, 2019	185,473	$	32.51
Options granted	—	—
Options exercised	—	—
Outstanding options as of September 30, 2019	185,473	32.51
Exercisable as of September 30, 2019	51,000	$	31.07



	March 31, 2019
	Shares		Price or range per share	Weighted Average Exercise Price/Share
Total outstanding options at June 30, 2018	144,000		$27.24	$	27.24
Options granted	69,973		37.55 - 42.13	40.82
Options exercised	(28,500	)	(25.85) - (30.87)	(26.29		)
Outstanding options at end of period	185,473		25.85 - 42.13	32.51
Exercisable at end of period	7,500		$30.87	$	30.87



	Number of Restricted Stock Units and Restricted Stock Awards Outstanding		Weighted Average Grant Date Fair Value
Total Non-vested Restricted Stock Units and Restricted Stock Awards as of June 30, 2019	226,240		$	29.64
Granted	1,411		38.85
Vested	(33,667	)	(23.67		)
Forfeited	—		—
Total Non-vested Restricted Stock Units and Restricted Stock Awards as of September 30, 2019	193,984		$	30.75



	Payments Due by Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years

Bank debt ¹	$	130,000	$	—	$	—	$	130,000	$	—
Interest expense ²	17,490		5,285		10,873		1,332		—
Operating leases ³	21,840		2,530		4,973		5,095		9,242
Purchase obligations ⁴	74,962		74,962		—		—		—
Payments pursuant to tax receivable agreement ⁵	57,014		3,932		7,307		7,675		38,100
Total	$	301,306	$	86,709	$	23,153	$	144,102	$	47,342



~~(1)~~	Principal payments on our outstanding bank debt per terms of our Credit Agreement, which is comprised of a $110.0 million term loan and $85.0 million revolving credit facility, of which $20.0 million was outstanding as of March 31, 2019. Assumes no additional borrowings or repayments under our revolving credit facility prior to its maturity. Both the term loan and revolving credit facility mature on July 1, 2022.
~~(2)~~	Interest payments on our outstanding term loans and borrowings under our revolving credit facility under our Credit Agreement. Our term loan and revolving credit facility bear interest at variable rates. We have calculated future interest obligations based on the interest rate as of March 31, 2019.
~~(3)~~	We sold our two primary manufacturing and office facilities for a total of $18.3 million in 2008, which resulted in a gain of $0.7 million. Simultaneous with the sale, we entered into an agreement to lease back the buildings for an initial term of 20 years. The net gain of $0.2 million has been deferred and is being amortized in proportion to rent charged over the initial lease term.
~~(4)~~	As part of the normal 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 2019.
~~(5)~~	Reflects amounts owed under our tax receivables agreement that we entered into with our pre-IPO owners at the time of our IPO. 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.



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan⁽¹⁾
July	—	$	—	—	$	35,000
August	—	—		—	35,000
September	383,404	29.01		383,404	23,877
Total	383,404	$	29.01	383,404	$	23,877