UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑

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

For the quarterly period ended September 30, ~~2020~~2021

☐

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

For the transition period from to

Commission file number: 001-36290

MALIBU BOATS, INC.

(Exact Name of Registrant as specified in its charter)

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
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” ~~“smaller~~

“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☑


Class A Common Stock, par value $0.01, outstanding as of November ~~3, 2020:~~2, 2021:	~~20,720,683~~20,839,687	shares
Class B Common Stock, par value $0.01, outstanding as of November ~~3, 2020:~~2, 2021:	1310	shares

Table of Contents

TABLE OF CONTENTS



		Page
PART I	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)	1
	Condensed Consolidated Balance Sheets (Unaudited)	2
	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1821
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3337
Item 4.	Controls and Procedures	3438

PART II	OTHER INFORMATION	3539
Item 1.	Legal Proceedings	3539
Item 1A.	Risk Factors	3539
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3539
Item 3.	Defaults Upon Senior Securities	3539
Item 4.	Mine Safety Disclosures	3539
Item 5.	Other Information	3539
Item 6.	Exhibits	3640

SIGNATURES		3741

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Form 10-Q are forward-looking statements, including statements regarding the effects of the COVID-19 pandemic on us; demand for our products and expected industry trends, our business strategy and plans, our prospective products or products under development, our vertical integration initiatives, our acquisition strategy and management’s objectives for future operations. In particular, many of the statements under the heading “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” constitute forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” the negative of these terms, or by other similar expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements. These statements are only predictions, involving known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Such factors include, but are not limited to: the effects of the COVID-19 pandemic on us; ~~general industry, economic~~our ability to execute our manufacturing strategy successfully; our large fixed cost base; increases in the cost of, or unavailability of, raw materials, component parts and ~~business conditions; significant fluctuations~~transportation costs; disruptions in our annual and quarterly financial results; unfavorable weather conditions, policies impacting access to waterways and shelter-in-place orders; our reliance on our network of independent dealers and increasing competition for dealers; the financial health of our dealers and their continued access to financing; our obligation to repurchase inventory of certain dealers; the success of our engine integration strategy; our reliance on certain suppliers for our engines and outboard motors;suppliers’ operations; our reliance on third-party suppliers for raw materials and components and any interruption of our informal supply arrangements; our reliance on certain suppliers for our engines and outboard motors; our ability to meet our manufacturing workforce needs; exposure to workers' compensation claims and other workplace liabilities; our ability to grow our business through acquisitions and integrate such acquisitions to fully realize their expected benefits; our growth strategy which may require us to secure significant additional capital; our ~~large fixed cost base;~~ability to protect our intellectual property; disruptions to our network and information systems; our success at developing and implementing a new enterprise resource planning system; risks inherent in operating in foreign jurisdictions; a natural disaster, global pandemic or other disruption at our manufacturing facilities; increases in income tax rates or changes in income tax laws; our dependence on key personnel; general industry, economic and business conditions; our ability to enhance existing products and market new or enhanced products; the continued strength of our brands; the seasonality of our business; intense competition within our industry; increased consumer preference for used boats or the supply of new boats by competitors in excess of demand; ~~the successful introduction of new products;~~ competition with other activities for consumers’ scarce leisure time; the continued strength of our brands; our ability to execute our manufacturing strategy successfully; our exposure to claims for product liability and warranty claims; our dependence on key personnel; our ability to protect our intellectual property; disruptions to our network and information systems; risks inherent in operating in foreign jurisdictions; rising concern regarding international tariffs; changes in currency exchange rates; an increase in energy and fuel costs; our reliance on our network of independent dealers and increasing competition for dealers; the financial health of our dealers and their continued access to financing; our obligation to repurchase inventory of certain dealers; our exposure to claims for product liability and warranty claims; changes to U.S. trade policy, tariffs and import/export regulations; any failure to comply with laws and regulations including environmental, workplace safety and other regulatory requirements; ~~a natural disaster, global pandemic or other disruption at~~ our ~~manufacturing facilities; increases in income tax rates or changes in income tax laws;~~holding company structure; covenants in our credit agreement governing our revolving credit facility and term loan which may limit our operating flexibility; our variable rate indebtedness which subjects us to interest rate risk; our obligation to make certain payments under a tax receivables agreement; and any failure to maintain effective internal control over financial reporting or disclosure controls or procedures. We discuss many of these factors, risks and uncertainties in greater detail under the heading “Item 1A. Risk Factors” in our Form 10-K for the year ended June 30, ~~2020,~~2021, filed with the Securities and Exchange Commission on August ~~31, 2020,~~26, 2021, as such disclosures may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission, including subsequent annual reports on Form 10-K and quarterly reports on Form 10-Q.

You should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from those suggested by the forward-looking statements for various reasons. Except as required by law, we assume no obligation to update forward-looking statements for any reason after the date of this Form 10-Q to conform these statements to actual results or to changes in our expectations.

Table of Contents

Part I - Financial Information

Item 1. Financial Statements

MALIBU BOATS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(In thousands, except share and per share data)


		Three Months Ended September 30,					Three Months Ended September 30,
		2020		2019					2021		2020
Net sales	Net sales	$	180,984	$	172,080			Net sales	$	253,497	$	180,984
Cost of sales	Cost of sales	135,243		132,079				Cost of sales	193,745		135,243
Gross profit	Gross profit	45,741		40,001				Gross profit	59,752		45,741
Operating expenses:	Operating expenses:							Operating expenses:
Selling and marketing	Selling and marketing	3,612		5,066				Selling and marketing	5,117		3,612
General and administrative	General and administrative	11,654		10,668				General and administrative	16,091		11,654
Amortization	Amortization	1,524		1,584				Amortization	1,856		1,524
Operating income	Operating income	28,951		22,683				Operating income	36,688		28,951
Other (income) expense, net:
Other expense, net:								Other expense, net:
Other income, net	Other income, net	(10)		(10)				Other income, net	(13)		(10)
Interest expense	Interest expense	556		1,167				Interest expense	684		556
Other (income) expense, net		546		1,157
Other expense, net								Other expense, net	671		546
Income before provision for income taxes	Income before provision for income taxes	28,405		21,526				Income before provision for income taxes	36,017		28,405
Provision for income taxes	Provision for income taxes	6,367		4,844				Provision for income taxes	8,084		6,367
Net income	Net income	22,038		16,682				Net income	27,933		22,038
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	945		823				Net income attributable to non-controlling interest	989		945
Net income attributable to Malibu Boats, Inc.	Net income attributable to Malibu Boats, Inc.	$	21,093	$	15,859			Net income attributable to Malibu Boats, Inc.	$	26,944	$	21,093

Comprehensive income:	Comprehensive income:					Comprehensive income:
Net income	Net income	$	22,038	$	16,682			Net income	$	27,933	$	22,038
Other comprehensive income (loss), net of tax:
Other comprehensive (loss) income:								Other comprehensive (loss) income:
Change in cumulative translation adjustment	Change in cumulative translation adjustment	630		(623)				Change in cumulative translation adjustment	(835)		630
Other comprehensive income (loss), net of tax		630		(623)
Comprehensive income, net of tax		22,668		16,059
Less: comprehensive income attributable to non-controlling interest, net of tax		972		792
Comprehensive income attributable to Malibu Boats, Inc., net of tax		$	21,696	$	15,267
Other comprehensive (loss) income								Other comprehensive (loss) income	(835)		630
Comprehensive income								Comprehensive income	27,098		22,668
Less: comprehensive income attributable to non-controlling interest								Less: comprehensive income attributable to non-controlling interest	959		972
Comprehensive income attributable to Malibu Boats, Inc.								Comprehensive income attributable to Malibu Boats, Inc.	$	26,139	$	21,696

Weighted average shares outstanding used in computing net income per share:	Weighted average shares outstanding used in computing net income per share:					Weighted average shares outstanding used in computing net income per share:
Basic	Basic	20,651,929		20,830,121				Basic	20,849,981		20,651,929
Diluted	Diluted	20,864,646		20,928,741				Diluted	21,132,902		20,864,646
Net income available to Class A Common Stock per share:	Net income available to Class A Common Stock per share:							Net income available to Class A Common Stock per share:
Basic	Basic	$	1.02	$	0.76			Basic	$	1.29	$	1.02
Diluted	Diluted	$	1.01	$	0.76			Diluted	$	1.28	$	1.01

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements (Unaudited).

Table of Contents

MALIBU BOATS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except share and per share data)


		September 30, 2020		June 30, 2020			September 30, 2021		June 30, 2021
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash	Cash	$	52,438	$	33,787	Cash	$	29,500	$	41,479
Trade receivables, net	Trade receivables, net	31,031		13,767		Trade receivables, net	41,217		49,844
Inventories, net	Inventories, net	80,053		72,946		Inventories, net	138,743		116,685
Prepaid expenses and other current assets	Prepaid expenses and other current assets	5,925		3,954		Prepaid expenses and other current assets	9,109		4,775

Total current assets	Total current assets	169,447		124,454		Total current assets	218,569		212,783
Property, plant and equipment, net	Property, plant and equipment, net	95,741		94,310		Property, plant and equipment, net	141,561		132,913
Goodwill	Goodwill	51,511		51,273		Goodwill	100,765		101,033
Other intangible assets, net	Other intangible assets, net	138,421		139,892		Other intangible assets, net	233,455		235,363
Deferred tax assets	Deferred tax assets	51,075		52,935		Deferred tax assets	47,339		48,022
Other assets	Other assets	14,023		14,482		Other assets	12,230		12,670
Total assets	Total assets	$	520,218	$	477,346	Total assets	$	753,919	$	742,784
Liabilities	Liabilities					Liabilities
Current liabilities	Current liabilities					Current liabilities

Current maturities of long-term obligations						Current maturities of long-term obligations	$	76,250	$	4,250
Accounts payable	Accounts payable	$	31,292	$	15,846	Accounts payable	51,216		45,992
Accrued expenses	Accrued expenses	58,316		50,485		Accrued expenses	71,346		77,179
Income taxes and tax distribution payable	Income taxes and tax distribution payable	4,088		243		Income taxes and tax distribution payable	8,332		3,209
Payable pursuant to tax receivable agreement, current portion	Payable pursuant to tax receivable agreement, current portion	3,589		3,589		Payable pursuant to tax receivable agreement, current portion	3,773		3,773
Total current liabilities	Total current liabilities	97,285		70,163		Total current liabilities	210,917		134,403
Deferred tax liabilities	Deferred tax liabilities	0		14		Deferred tax liabilities	27,850		27,869
Other liabilities	Other liabilities	17,451		16,727		Other liabilities	15,394		15,892
Payable pursuant to tax receivable agreement, less current portion	Payable pursuant to tax receivable agreement, less current portion	46,406		46,076		Payable pursuant to tax receivable agreement, less current portion	44,441		44,441
Long-term debt	Long-term debt	74,141		82,839		Long-term debt	46,861		139,025
Total liabilities	Total liabilities	235,283		215,819		Total liabilities	345,463		361,630
Commitments and contingencies (See Note 15)
Commitments and contingencies (See Note 16)						Commitments and contingencies (See Note 16)	0		0
Stockholders' Equity	Stockholders' Equity					Stockholders' Equity
Class A Common Stock, par value $0.01 per share, 100,000,000 shares authorized; 20,630,438 shares issued and outstanding as of September 30, 2020; 20,595,969 issued and outstanding as of June 30, 2020		204		204
Class B Common Stock, par value $0.01 per share, 25,000,000 shares authorized; 13 shares issued and outstanding as of September 30, 2020; 15 shares issued and outstanding as of June 30, 2020		0		0
Preferred Stock, par value $0.01 per share; 25,000,000 shares authorized; 0 shares issued and outstanding as of September 30, 2020 and June 30, 2020		0		0
Class A Common Stock, par value $0.01 per share, 100,000,000 shares authorized; 20,839,687 shares issued and outstanding as of September 30, 2021; 20,847,019 issued and outstanding as of June 30, 2021						Class A Common Stock, par value $0.01 per share, 100,000,000 shares authorized; 20,839,687 shares issued and outstanding as of September 30, 2021; 20,847,019 issued and outstanding as of June 30, 2021	207		207
Class B Common Stock, par value $0.01 per share, 25,000,000 shares authorized; 10 shares issued and outstanding as of September 30, 2021; 10 shares issued and outstanding as of June 30, 2021						Class B Common Stock, par value $0.01 per share, 25,000,000 shares authorized; 10 shares issued and outstanding as of September 30, 2021; 10 shares issued and outstanding as of June 30, 2021	—		—
Preferred Stock, par value $0.01 per share; 25,000,000 shares authorized; no shares issued and outstanding as of September 30, 2021 and June 30, 2021						Preferred Stock, par value $0.01 per share; 25,000,000 shares authorized; no shares issued and outstanding as of September 30, 2021 and June 30, 2021	—		—
Additional paid in capital	Additional paid in capital	105,228		103,797		Additional paid in capital	112,094		111,308
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(2,502)		(3,132)		Accumulated other comprehensive loss	(2,474)		(1,639)
Accumulated earnings	Accumulated earnings	174,804		153,711		Accumulated earnings	290,496		263,552
Total stockholders' equity attributable to Malibu Boats, Inc.	Total stockholders' equity attributable to Malibu Boats, Inc.	277,734		254,580		Total stockholders' equity attributable to Malibu Boats, Inc.	400,323		373,428
Non-controlling interest	Non-controlling interest	7,201		6,947		Non-controlling interest	8,133		7,726
Total stockholders’ equity	Total stockholders’ equity	284,935		261,527		Total stockholders’ equity	408,456		381,154
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	520,218	$	477,346	Total liabilities and stockholders' equity	$	753,919	$	742,784

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements (Unaudited).

Table of Contents

MALIBU BOATS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

(In thousands, except number of Class B shares)

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
Balance at June 30, 2020 20,596 $ 204 15 $ 0 $ 103,797 $ (3,132) $ 153,711 $ 6,947 $ 261,527
Net income — — — — — — 21,093 945 22,038
Stock based compensation, net of withholding taxes on vested equity awards (3) — — — 658 — — — 658
Issuances of equity for services — — — — 59 — — — 59
Issuances of equity for exercise of stock options 9 — — — 300 — — — 300
Increase in payable pursuant to the tax receivable agreement — — — — (330) — — — (330)
Increase in deferred tax asset from step-up in tax basis — — — — 480 — — — 480
Exchange of LLC Units for Class A Common Stock 28 — (2) — 264 — — (264) 0
Distributions to LLC Unit holders — — — — — — — (449) (449)
Foreign currency translation adjustment — — — — — 630 — 22 652
Balance at September 30, 2020 20,630 $ 204 13 $ 0 $ 105,228 $ (2,502) $ 174,804 $ 7,201 $ 284,935

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
Balance at June 30, 2019 20,853 $ 207 15 $ 0 $ 113,004 $ (2,828) $ 93,852 $ 6,118 $ 210,353
Net Income — — — — — — 15,859 823 16,682
Stock based compensation, net of withholding taxes on vested equity awards (5) — — — 435 — — — 435
Issuances of equity for services — — — — 80 — — — 80
Repurchase and retirement of common stock (383) (4) — — (11,119) — — — (11,123)
Cumulative-effect transition adjustment for ASC 842 — — — — — — (1,703) — (1,703)
Distributions to LLC Unit Holders — — — — — — — (399) (399)
Foreign currency translation adjustment — — — — — (623) — (25) (648)
Balance at September 30, 2019 20,465 $ 203 15 $ 0 $ 102,400 $ (3,451) $ 108,008 $ 6,517 $ 213,677


	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
Balance at June 30, 2021	20,847	$	207	10	$	—	$	111,308	$	(1,639)	$	263,552	$	7,726	$	381,154
Net income	—	—		—	—		—		—		26,944		989		27,933
Stock based compensation, net of withholding taxes on vested equity awards	(7)	—		—	—		728		—		—		—		728
Issuances of equity for services	—	—		—	—		58		—		—		—		58





Distributions to LLC Unit holders	—	—		—	—		—		—		—		(558)		(558)
Foreign currency translation adjustment	—	—		—	—		—		(835)		—		(24)		(859)
Balance at September 30, 2021	20,840	$	207	10	$	—	$	112,094	$	(2,474)	$	290,496	$	8,133	$	408,456


	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
Balance at June 30, 2020	20,596	$	204	15	$	—	$	103,797	$	(3,132)	$	153,711	$	6,947	$	261,527
Net income	—	—		—	—		—		—		21,093		945		22,038
Stock based compensation, net of withholding taxes on vested equity awards	(3)	—		—	—		658		—		—		—		658
Issuances of equity for services	—	—		—	—		59		—		—		—		59
Issuances of equity for exercise of stock options	9	—		—	—		300		—		—		—		300

Increase in payable pursuant to the tax receivable agreement	—	—		—	—		(330)		—		—		—		(330)
Increase in deferred tax asset from step-up in tax basis	—	—		—	—		480		—		—		—		480
Exchange of LLC Units for Class A Common Stock	28	—		(2)	—		264		—		—		(264)		—
Distributions to LLC Unit holders	—	—		—	—		—		—		—		(449)		(449)
Foreign currency translation adjustment	—	—		—	—		—		630		—		22		652
Balance at September 30, 2020	20,630	$	204	13	$	—	$	105,228	$	(2,502)	$	174,804	$	7,201	$	284,935

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements (Unaudited).

Table of Contents

MALIBU BOATS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


		Three Months Ended September 30,					Three Months Ended September 30,
		2020		2019			2021		2020
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	22,038	$	16,682	Net income	$	27,933	$	22,038
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:

Non-cash compensation expense	Non-cash compensation expense	811		677		Non-cash compensation expense	1,258		811
Non-cash compensation to directors	Non-cash compensation to directors	210		207		Non-cash compensation to directors	218		210
Depreciation	Depreciation	3,486		3,097		Depreciation	4,918		3,486
Amortization	Amortization	1,524		1,584		Amortization	1,856		1,524
Deferred income taxes	Deferred income taxes	2,325		1,454		Deferred income taxes	660		2,325

Other items, net	Other items, net	439		696		Other items, net	502		439
Change in operating assets and liabilities:	Change in operating assets and liabilities:					Change in operating assets and liabilities:
Trade receivables	Trade receivables	(17,247)		4,817		Trade receivables	8,608		(17,247)
Inventories	Inventories	(6,939)		(7,626)		Inventories	(22,209)		(6,939)
Prepaid expenses and other assets	Prepaid expenses and other assets	(3,032)		(1,728)		Prepaid expenses and other assets	(4,677)		(3,032)
Accounts payable	Accounts payable	16,001		8,378		Accounts payable	5,518		16,001
Income taxes payable	Income taxes payable	4,228		1,979		Income taxes payable	5,399		4,228
Accrued expenses	Accrued expenses	8,184		(2,029)		Accrued expenses	(5,778)		8,184
Other liabilities	Other liabilities	734		(475)		Other liabilities	(520)		734
Net cash provided by operating activities	Net cash provided by operating activities	32,762		27,713		Net cash provided by operating activities	23,686		32,762
Investing activities:	Investing activities:					Investing activities:
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(5,432)		(10,704)		Purchases of property, plant and equipment	(13,892)		(5,432)

Net cash used in investing activities	Net cash used in investing activities	(5,432)		(10,704)		Net cash used in investing activities	(13,892)		(5,432)
Financing activities:	Financing activities:					Financing activities:

Principal payments on long-term borrowings						Principal payments on long-term borrowings	(313)		—
Payments on revolving credit facility	Payments on revolving credit facility	(8,800)		0		Payments on revolving credit facility	(20,000)		(8,800)

Proceeds received from exercise of stock option		300		0
Proceeds received from exercise of stock options						Proceeds received from exercise of stock options	—		300
Cash paid for withholding taxes on vested restricted stock	Cash paid for withholding taxes on vested restricted stock	(148)		(239)		Cash paid for withholding taxes on vested restricted stock	(516)		(148)
Distributions to LLC Unit holders	Distributions to LLC Unit holders	(104)		(568)		Distributions to LLC Unit holders	(687)		(104)
Repurchase and retirement of common stock		0		(11,123)

Net cash used in financing activities	Net cash used in financing activities	(8,752)		(11,930)		Net cash used in financing activities	(21,516)		(8,752)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	73		(126)		Effect of exchange rate changes on cash	(257)		73
Changes in cash	Changes in cash	18,651		4,953		Changes in cash	(11,979)		18,651
Cash—Beginning of period	Cash—Beginning of period	33,787		27,392		Cash—Beginning of period	41,479		33,787
Cash—End of period	Cash—End of period	$	52,438	$	32,345	Cash—End of period	$	29,500	$	52,438

Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Cash paid for interest	Cash paid for interest	$	454	$	1,169	Cash paid for interest	$	535	$	454
Cash paid for income taxes	Cash paid for income taxes	53		597		Cash paid for income taxes	2,024		53

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements (Unaudited).

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MALIBU BOATS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

(Dollars in thousands, except per unit and per share data)

1. Organization, Basis of Presentation, and Summary of Significant Accounting Policies

Organization

Malibu Boats, Inc. (together with its subsidiaries, the “Company” or "Malibu"), a Delaware corporation formed on November 1, 2013, is the sole managing member of Malibu Boats Holdings, LLC, a Delaware limited liability company (the "LLC"). The Company operates and controls all of the LLC's business and affairs and, therefore, pursuant to Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 810, Consolidation, consolidates the financial results of the LLC and its subsidiaries, and records a non-controlling interest for the economic interest in the Company held by the non-controlling holders of units in the LLC ("LLC Units"). ~~Malibu Boats Holdings,~~The LLC was formed in 2006. The LLC, through its wholly owned subsidiary, Malibu Boats, LLC, (“Boats LLC”), is engaged in the design, engineering, manufacturing and marketing of innovative, high-quality, recreational powerboats that are sold through a world-wide network of independent dealers. The Company ~~currently~~ sells its boats under ~~four~~8 brands -- Malibu, Axis, Pursuit, Maverick, Cobia, Pathfinder, Hewes and Cobalt ~~and Pursuit.~~brands. The Company reports its results of operations under 3 reportable segments -- Malibu, ~~Cobalt~~Saltwater Fishing and ~~Pursuit.~~

~~COVID-19 Pandemic~~

The COVID-19 pandemic has impacted the Company’s operations and financial results since the third quarter of fiscal year 2020 and continues to impact the Company. The Company elected to suspend operations at all of its facilities on March 24, 2020. The shut-down continued into the fourth quarter 2020 with operations resuming between late April and early May, depending on the facility. As a result, the Company was not able to ship boats to its dealers during the period of shut-down, which negatively impacted its net sales for the second half of fiscal year 2020. In addition, the COVID-19 pandemic has impacted and may continue to impact the operations of the Company’s dealers and suppliers. The future impact of COVID-19 on the Company’s financial condition and results of operations will depend on a number of factors, including factors that we may not be able to forecast at this time.Cobalt.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim condensed financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and disclosures of results of operations, financial position and changes in cash flow in conformity with GAAP for complete financial statements. Such statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Malibu ~~Boats, Inc.~~ and subsidiaries for the year ended June 30, ~~2020,~~2021, included in the Company's Annual Report on Form 10-K. In the opinion of management, ~~the accompanying unaudited interim condensed consolidated financial statements reflect~~ all adjustments (consisting of normal recurring accruals) considered necessary ~~to present fairly the Company’s financial position at September 30, 2020, and the results of its operations~~ for the three month periods ended September 30, 2020 and 2019, and its cash flows for the three month periods ended September 30, 2020 and 2019. Operating results for the three months ended September 30, 2020, are not necessarily indicative of the results that may be expected for the full year ending June 30, 2021.a fair presentation have been included. Units and shares are presented as whole numbers while all dollar amounts are presented in thousands, unless otherwise noted.

Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements include the operations and accounts of the Company and all subsidiaries thereof. All intercompany balances and transactions have been eliminated upon consolidation.

Recent ~~Accounting~~Accounting Pronouncements

In ~~June 2016,~~March 2020, the FASB issued Accounting Standards Update ("ASU") ~~2016-13,~~2020-04, ~~Financial Instruments - Credit Losses~~Reference Rate Reform (Topic ~~326)~~848): ~~Measurement~~Facilitation of ~~Credit Losses~~Effects of Reference Rate Reform on Financial ~~Instruments~~Reporting,, which provides practical expedients and ~~in November 2018 issued~~exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The elective amendments provide expedients to contract modification, affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by this guidance apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a ~~subsequent amendment, ASU 2018-19,~~ ~~Codification Improvements~~result of reference rate reform. This guidance is not applicable to ~~Topic 326, Financial Instruments - Credit Losses. ASU 2016-13 significantly changes how entities~~contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The guidance can be applied immediately through December 31, 2022. The Company will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. ASU 2018-19 will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of this amendment that have the contractual right to receive cash. On July 1, 2020, the Company

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~~adopted~~adopt this standard when LIBOR is discontinued and ~~the adoption did~~does not ~~have~~expect a material impact ~~on the Company’s consolidated~~to its financial ~~position,~~condition, results of operations ~~equity~~ or ~~cash flows.~~disclosures based on the current debt portfolio and capital structure.

There are no other new accounting pronouncements that are expected to have a significant impact on the Company's consolidated financial statements and related disclosures.

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2. Revenue Recognition

The following ~~table disaggregates~~tables disaggregate the Company's revenue by major product type and geography:


		Three Months Ended September 30, 2020								Three Months Ended September 30, 2021
		Malibu		Cobalt		Pursuit		Consolidated				Malibu		Saltwater Fishing		Cobalt		Consolidated
Revenue by product:	Revenue by product:										Revenue by product:
Boat and trailer sales	Boat and trailer sales	$	93,994	$	43,405	$	36,403	$	173,802		Boat and trailer sales	$	113,611	$	76,409	$	57,833	$	247,853
Part and other sales	Part and other sales	5,837		1,077		268		7,182			Part and other sales	4,641		318		685		5,644
Total revenue	Total revenue	$	99,831	$	44,482	$	36,671	$	180,984		Total revenue	$	118,252	$	76,727	$	58,518	$	253,497

Revenue by geography:	Revenue by geography:										Revenue by geography:
North America	North America	$	95,918	$	43,953	$	35,750	$	175,621		North America	$	103,219	$	73,712	$	54,639	$	231,570
International	International	3,913		529		921		5,363			International	15,033		3,015		3,879		21,927
Total revenue	Total revenue	$	99,831	$	44,482	$	36,671	$	180,984		Total revenue	$	118,252	$	76,727	$	58,518	$	253,497


		Three Months Ended September 30, 2019								Three Months Ended September 30, 2020
		Malibu		Cobalt		Pursuit		Consolidated				Malibu		Saltwater Fishing		Cobalt		Consolidated
Revenue by product:	Revenue by product:										Revenue by product:
Boat and trailer sales	Boat and trailer sales	$	82,083	$	49,300	$	35,806	$	167,189		Boat and trailer sales	$	93,994	$	36,403	$	43,405	$	173,802
Part and other sales	Part and other sales	3,797		851		243		4,891			Part and other sales	5,837		268		1,077		7,182
Total revenue	Total revenue	$	85,880	$	50,151	$	36,049	$	172,080		Total revenue	$	99,831	$	36,671	$	44,482	$	180,984

Revenue by geography:	Revenue by geography:										Revenue by geography:
North America	North America	$	78,917	$	48,758	$	32,251	$	159,926		North America	$	95,918	$	35,750	$	43,953	$	175,621
International	International	6,963		1,393		3,798		12,154			International	3,913		921		529		5,363
Total revenue	Total revenue	$	85,880	$	50,151	$	36,049	$	172,080		Total revenue	$	99,831	$	36,671	$	44,482	$	180,984

Boat and Trailer Sales

Consists of sales of boats and trailers to the Company's dealer network, net of sales returns, discounts, rebates and free flooring incentives. Boat and trailer sales also includes optional boat features. Sales returns consist of boats returned by dealers under our warranty program. Rebates, free flooring and discounts are incentives that the Company provides to its dealers based on sales of eligible products.

~~Part~~Parts and Other Sales

Consists primarily of parts and accessories sales, royalty income and clothing sales. Parts and accessories sales include replacement and aftermarket boat parts and accessories sold to the Company's dealer network. Royalty income is earned from license agreements with various boat manufacturers, including Nautique, Chaparral, Mastercraft, and Tige related to the use of the Company's intellectual property.

3. Non-controlling Interest

The non-controlling interest on the unaudited interim condensed consolidated statement of operations and comprehensive income represents the portion of earnings or loss attributable to the economic interest in the Company's subsidiary, ~~Malibu Boats Holdings,~~the LLC, held by the non-controlling LLC Unit holders. Non-controlling interest on the unaudited interim condensed

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consolidated balance sheets represents the portion of net assets of the Company attributable to the non-controlling LLC Unit holders, based

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on the portion of the LLC Units owned by such Unit holders. The ownership of ~~Malibu Boats Holdings,~~the LLC is summarized as follows:

As of September 30, 2020 As of June 30, 2020
Units Ownership % Units Ownership %
Non-controlling LLC Unit holders ownership in Malibu Boats Holdings, LLC 702,869 3.3 % 730,652 3.4 %
Malibu Boats, Inc. ownership in Malibu Boats Holdings, LLC 20,630,438 96.7 20,595,969 96.6
21,333,307 100.0 % 21,326,621 100.0 %


	As of September 30, 2021			As of June 30, 2021
	Units	Ownership %		Units	Ownership %
Non-controlling LLC Unit holders ownership in Malibu Boats Holdings, LLC	600,919	2.8	%	600,919	2.8	%
Malibu Boats, Inc. ownership in Malibu Boats Holdings, LLC	20,839,687	97.2		20,847,019	97.2
	21,440,606	100.0	%	21,447,938	100.0	%

Issuance of Additional LLC Units

Under the first amended and restated limited liability company agreement of the LLC, as amended (the "LLC Agreement"), the Company is required to cause the LLC to issue additional LLC Units to the Company when the Company issues additional shares of Class A Common Stock. Other than in connection with the issuance of Class A Common Stock in connection with an equity incentive program, the Company must contribute to the LLC net proceeds and property, if any, received by the Company with respect to the issuance of such additional shares of Class A Common Stock. The Company must cause the LLC to issue a number of LLC Units equal to the number of shares of Class A Common Stock issued such that, at all times, the number of LLC Units held by the Company equals the number of outstanding shares of Class A Common Stock. During the three months ended September 30, ~~2020,~~2021, the Company ~~caused the LLC to~~did not issue ~~a total of~~ ~~37,408 LLC Units to the Company in connection with (i) the issuance of~~any Class A Common Stock ~~to LLC Unit holders~~resulting in ~~exchange of their~~no LLC Units ~~and (ii) the issuance of Class A Common Stock for the exercise of options granted under the Malibu Boats, Inc. Incentive Plan.~~ to be issued. During the three months ended September 30, ~~2020, 2,939~~2021, 7,332 LLC Units were canceled in connection with the vesting of share-based equity awards to satisfy employee tax withholding requirements and the retirement of ~~2,939 treasury~~7,332 treasury shares in accordance with the LLC Agreement.

Distributions and Other Payments to Non-controlling Unit Holders

Distributions for Taxes

As a limited liability company (treated as a partnership for income tax purposes), ~~Malibu Boats Holdings,~~the LLC does not incur significant federal, state or local income taxes, as these taxes are primarily the obligations of its members. As authorized by the LLC Agreement, the LLC is required to distribute cash, to the extent that the LLC has cash available, on a pro rata basis, to its members to the extent necessary to cover the members’ tax liabilities, if any, with respect to their share of LLC earnings. The LLC makes such tax distributions to its members based on an estimated tax rate and projections of taxable income. If the actual taxable income of the LLC multiplied by the estimated tax rate exceeds the tax distributions made in a calendar year, the LLC may make true-up distributions to its members, if cash or borrowings are available for such purposes. As of September 30, ~~2020~~2021 and June 30, ~~2020,~~2021, tax distributions payable to non-controlling LLC Unit holders were ~~$449 and $104,~~ $558 and $687, respectively. During the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, tax distributions paid to the non-controlling LLC Unit holders were ~~$104~~ $687 and ~~$568,~~$104, respectively.

Other Distributions

Pursuant to the LLC Agreement, the Company has the right to determine when distributions will be made to LLC members and the amount of any such distributions. If the Company authorizes a distribution, such distribution will be made to the members of the LLC (including the Company) pro rata in accordance with the percentages of their respective LLC ~~units.~~Units.

4. ~~Inventories~~ Acquisition of Maverick Boat Group

~~Inventories, net consisted~~On December 31, 2020, the Company completed its acquisition of all the outstanding stock of Maverick Boat Group. The aggregate purchase price for the transaction was $150,675, funded with cash and borrowings under the Company's credit facilities. The aggregate purchase price was subject to certain adjustments, including customary adjustments for the amount of cash, indebtedness and working capital in the business at the closing date and subject to adjustment for certain capital expenditures made by Maverick Boat Group prior to closing at the Company’s request. The Company accounted for the transaction in accordance with ASC Topic 805, Business Combinations.

The total consideration given to the stockholders of Maverick Boat Group has been allocated to the assets acquired and liabilities assumed based on estimates of fair value as of the ~~following:~~

As of September 30, 2020 As of June 30, 2020
Raw materials $ 55,140 $ 52,530
Work in progress 14,758 10,778
Finished goods 10,155 9,638
Total inventories $ 80,053 $ 72,946
date of the acquisition. The measurements of fair value were determined based upon estimates utilizing the assistance of third party valuation specialists.

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The following table summarizes the purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:


Consideration:
Cash consideration paid	$	150,675

Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:
Cash	$	248
Accounts receivable	3,204
Inventories	7,756
Other current assets	194
Property, plant and equipment	22,618
Identifiable intangible assets	102,600
Other assets	4,410
Current liabilities	(6,611)
Deferred tax liabilities	(28,528)
Other liabilities	(4,405)
Fair value of assets acquired and liabilities assumed	101,486
Goodwill	49,189
Total purchase price	$	150,675

The fair value estimates for the Company's identifiable intangible assets acquired as part of the acquisition are as follows:


	Estimates of Fair Value		Estimated Useful Life (in years)
Definite-lived intangibles:
Dealer relationships	$	47,900	20
Total definite-lived intangibles	47,900
Indefinite-lived intangible:
Trade name	54,700
Total other intangible assets	$	102,600

The value allocated to inventories reflects the estimated fair value of the acquired inventory based on the expected sales price of the inventory, less an estimated cost to complete and a reasonable profit margin. The fair value of the identifiable intangible assets were determined based on the following approaches:

Dealer Relationships - The value associated with Maverick Boat Group's dealer relationships is attributed to its long standing dealer distribution network. The estimate of fair value assigned to this asset was determined using the income approach, which requires an estimate or forecast of the expected future cash flows from the dealer relationships through the application of the multi-period excess earnings approach. The estimated remaining useful life of dealer relationships is approximately twenty years.

Trade Name - The value attributed to Maverick Boat Group's trade names was determined using a variation of the income approach called the relief from royalty method, which requires an estimate or forecast of the expected future cash flows. The trade name has an indefinite life.

The fair value of the definite-lived intangible assets are being amortized using the straight-line method to amortization expenses over their estimated useful lives. Indefinite-lived intangible assets are not amortized, but instead are evaluated for potential impairment on an annual basis in accordance with the provisions of ASC Topic 350, Intangibles—Goodwill and Other. The weighted average useful life of identifiable definite-lived intangible assets acquired was 20 years. Goodwill of $49,189 arising from the acquisition consists of expected synergies and cost savings as well as intangible assets that do not qualify for separate recognition.

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Pro Forma Financial Information (unaudited):

The following unaudited pro forma consolidated results of operations for the three months ended September 30, 2021 and 2020, assumes that the acquisition of Maverick Boat Group occurred as of July 1, 2020. The unaudited interim pro forma financial information combines historical results of Malibu and Maverick Boat Group, with adjustments for depreciation and amortization attributable to fair value estimates on acquired tangible and intangible assets for the respective periods. Non-recurring pro forma adjustments associated with the fair value step up of inventory were included in the reported pro forma cost of sales and earnings. The unaudited interim pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal year 2021 or the results that may occur in the future:


	Three Months Ended September 30,
	2021		2020
Net sales	$	253,497	$	208,303
Net income	27,933		23,213
Net income attributable to Malibu Boats, Inc.	26,944		22,237
Basic earnings per share	$	1.29	$	1.08
Diluted earnings per share	$	1.28	$	1.07

5. Inventories

Inventories, net consisted of the following:


	As of September 30, 2021		As of June 30, 2021
Raw materials	$	109,456	$	92,324
Work in progress	20,269		15,862
Finished goods	9,018		8,499
Total inventories	$	138,743	$	116,685

6. Property, Plant and Equipment

Property, plant and equipment, net consisted of the following:

As of September 30, 2020 As of June 30, 2020
Land $ 2,540 $ 2,540
Building and leasehold improvements 56,597 54,318
Machinery and equipment 54,806 55,831
Furniture and fixtures 7,344 7,031
Construction in process 10,750 10,470
132,037 130,190
Less: Accumulated depreciation (36,296) (35,880)
Property, plant and equipment, net $ 95,741 $ 94,310


	As of September 30, 2021		As of June 30, 2021
Land	$	4,731	$	4,600
Building and leasehold improvements	74,688		74,622
Machinery and equipment	71,915		66,792
Furniture and fixtures	9,997		9,600
Construction in process	29,815		22,005
	191,146		177,619
Less: Accumulated depreciation	(49,585)		(44,706)
Property, plant and equipment, net	$	141,561	$	132,913

Depreciation expense was ~~$3,486~~$4,918 and ~~$3,097~~$3,486 for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, substantially all of which was recorded in cost of sales.

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7. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the three months ended September 30, ~~2020~~2021 were as follows:


	Malibu		Saltwater Fishing		Cobalt		Consolidated
Goodwill as of June 30, 2021	$	12,528	$	68,714	$	19,791	$	101,033

Effect of foreign currency changes on goodwill	(268)		—		—		(268)
Goodwill as of September 30, 2021	$	12,260	$	68,714	$	19,791	$	100,765


~~Goodwill as of June 30, 2020~~	$	~~51,273~~

~~Effect of foreign currency changes on goodwill~~	~~238~~
~~Goodwill as of September 30, 2020~~	$	~~51,511~~

The components of other intangible assets were as follows:


	As of September 30, 2021		As of June 30, 2021		Estimated Useful Life (in years)	Weighted Average Remaining Useful Life (in years)
Definite-lived intangibles:

Dealer relationships	$	131,908	$	159,394	15-20	17.3
Patent	2,600		3,986		15	10.8
Trade name	100		24,667		15	8.7
Non-compete agreement	50		53		10	3.1
Total	134,658		188,100
Less: Accumulated amortization	(19,403)		(70,937)
Total definite-lived intangible assets, net	115,255		117,163
Indefinite-lived intangible:
Trade name	118,200		118,200
Total other intangible assets, net	$	233,455	$	235,363

As of September 30, 2020 As of June 30, 2020 Estimated Useful Life (in years) Weighted Average Remaining Useful Life
(in years)
Definite-lived intangibles:
Dealer relationships $ 111,377 $ 111,293
8-20
17.0
Patent 3,986 3,986 12-15 11.8
Trade name 24,667 24,667 15 1.2
Non-compete agreement 50 48 10 4.1
Total 140,080 139,994
Less: Accumulated amortization (65,159) (63,602)
Total definite-lived intangible assets, net 74,921 76,392
Indefinite-lived intangible:
Trade name 63,500 63,500
Total other intangible assets, net $ 138,421 $ 139,892

Amortization expense recognized on all amortizable intangibles was ~~$1,524~~$1,856 and ~~$1,584~~$1,524 for the three months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively.

The estimated future amortization of definite-lived intangible assets is as follows:


Fiscal years ending June 30:		Amount
	Remainder of 2022	$	5,100
	2023	6,819
	2024	6,819
	2025	6,815
	2026	6,814
	2027 and thereafter	82,888
		$	115,255

810

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Fiscal years ending June 30: Amount
Remainder of 2021 $ 4,536
2022 4,559
2023 4,422
2024 4,422
2025 4,419
2026 and thereafter 52,563
$ 74,921

7.8. Accrued Expenses

Accrued expenses consisted of the following:

As of September 30, 2020 As of June 30, 2020
Warranties $ 29,077 $ 27,500
Dealer incentives 11,201 7,777
Accrued compensation 9,347 9,885
Current operating lease liabilities 1,983 2,006
Accrued legal and professional fees 2,181 1,055
Other accrued expenses 4,527 2,262
Total accrued expenses $ 58,316 $ 50,485


	As of September 30, 2021		As of June 30, 2021
Warranties	$	35,697	$	35,035
Dealer incentives	7,992		12,479
Accrued compensation	15,429		19,965
Current operating lease liabilities	2,025		2,027
Accrued legal and professional fees	1,687		1,440
Customer deposits	5,689		3,449
Other accrued expenses	2,827		2,784
Total accrued expenses	$	71,346	$	77,179

8.9. Product Warranties

Malibu and Axis brand boats have a limited warranty for a period up to five ~~years for both Malibu and Axis brand boats. The Company’s~~years. Cobalt brand boats have (1) a structural warranty of up to ten years which covers the hull, deck joints, bulkheads, floor, transom, stringers, and motor mount and (2) a five year bow-to-stern warranty on all components manufactured or purchased (excluding hull and deck structural components), including canvas and upholstery. Gelcoat is covered up to three years for Cobalt and one year for Malibu and Axis. Pursuit brand boats have (1) a limited warranty for a period of up to five years on structural components such as the hull, deck and defects in the gelcoat surface of the hull bottom and (2) a bow to stern warranty of two years (excluding hull and deck structural components). Maverick, Pathfinder and Hewes brand boats have (1) a limited warranty for a period of up to five years on structural components such as the hull, deck and defects in the gelcoat surface of the hull bottom and (2) a bow to stern warranty of one year (excluding hull and deck structural components). Cobia brand boats have (1) a limited warranty for a period of up to ten years on structural components such as the hull, deck and defects in the gelcoat surface of the hull bottom and (2) a bow to stern warranty of three years (excluding hull and deck structural components). For each boat brand, there are certain materials, components or parts of the boat that are not covered by the Company’s warranty and certain components or parts that are separately warranted by the manufacturer or supplier (such as the engine). Engines that the Company manufactures for Malibu and Axis models have a limited warranty of up to five years or five-hundred hours.

The Company’s standard warranties require it or its dealers to repair or replace defective products during the warranty period at no cost to the consumer. The Company estimates warranty costs it expects to incur and records a liability for such costs at the time the product revenue is recognized. The Company utilizes historical claims trends and analytical tools to develop the estimate of its warranty obligation on a per boat basis, by brand and warranty year. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim. The Company assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Beginning in model year 2016, the Company increased the term of its limited warranty for Malibu brand boats from three years to five years and for Axis brand boats from two years to five years. Beginning in model year 2018, the Company increased the term of its bow-to-stern warranty for Cobalt brand boats from three years to five years. As a result of these changes, all of the Company’s Malibu, Axis and Cobalt brand boats with historical claims experience that are no longer covered under warranty had warranty terms shorter than the current warranty term of five years. Accordingly, the Company has little to no historical claims experience for warranty years four and five, and as such, these estimates give rise to a higher level of estimation uncertainty. Future warranty claims may differ from the Company’s estimate of the warranty liability, which could lead to changes in the Company’s warranty liability in future periods.

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Changes in the Company’s product warranty liability, which is included in accrued expenses on the unaudited interim condensed consolidated balance sheets, were as follows:

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		Three Months Ended September 30,				Three Months Ended September 30,
		2020		2019				2021		2020
Beginning balance	Beginning balance	$	27,500	$	23,820		Beginning balance	$	35,035	$	27,500
Add: Warranty expense	Add: Warranty expense	4,855		3,906			Add: Warranty expense	4,742		4,855

Less: Warranty claims paid	Less: Warranty claims paid	(3,278)		(2,692)			Less: Warranty claims paid	(4,080)		(3,278)
Ending balance	Ending balance	$	29,077	$	25,034		Ending balance	$	35,697	$	29,077

9.10. Financing

Outstanding debt consisted of the following:

As of September 30, 2020 As of June 30, 2020
Term loan $ 75,000 $ 75,000
Revolving credit loan 0 8,800
Less unamortized debt issuance costs (859) (961)
Total debt 74,141 82,839
Less current maturities 0 0
Long-term debt less current maturities $ 74,141 $ 82,839


	As of September 30, 2021		As of June 30, 2021
Term loan	$	99,063	$	99,375
Revolving credit loan	25,000		45,000
Less unamortized debt issuance costs	(952)		(1,100)
Total debt	123,111		143,275
Less current maturities	76,250		4,250
Long-term debt less current maturities	$	46,861	$	139,025

Long-Term Debt

~~The~~As of September 30, 2021, the Company ~~currently~~ has a revolving credit facility with borrowing capacity of up to ~~$120,000~~$170,000 and ~~a $75,000~~ term ~~loan~~ loans with an aggregate principal amount of $99,063outstanding. As of September 30, ~~2020,~~2021, the Company had ~~0 amounts~~$25,000 outstanding under its revolving credit facility and ~~$1,185~~$1,284 in outstanding letters of ~~credit. The Company repaid $8,800 on the revolving~~ credit, ~~facility in September 2020.~~with $143,716 available for borrowing. The revolving credit facility matures on July 1, 2024, ~~and the~~a term loan made on December 30, 2020 in a principal amount of $25,000, of which $24,063 is outstanding as of September 30, 2021, (the “Incremental Term Loan”) matures on July 1, 2024 and term loans in a principal amount of $75,000 (the “Existing Term Loans,” and together with the Incremental Term Loans, the “Term Loans”) mature on July 1, 2022.

On December 30, 2020, Boats LLC entered into the Third Amendment to its Credit Agreement. The Third Amendment added a $25,000 Incremental Term Loan facility with a maturity date of July 1, 2024 and increased the borrowing capacity of the revolving credit facility by $50,000 from $120,000 to $170,000. The Incremental Term Loan is subject to quarterly amortization at a rate of 5.0% per annum through December 31, 2022 and ~~term loan are governed by~~at a ~~credit agreement (the “Credit Agreement”) with Malibu Boats, LLC (“Boats LLC”)~~rate of 7.5% per annum through June 30, 2024 and accrues interest at the same interest rate applicable to other loans under the Credit Agreement as ~~the borrower and Truist Financial Corp., as the administrative agent, swingline lender and issuing bank.~~ described below.

The obligations of Boats LLC under the Credit Agreement are guaranteed by the LLC, and, subject to certain exceptions, the present and future domestic subsidiaries of Boats LLC, and all such obligations are secured by substantially all of the assets of the LLC, Boats LLC and such subsidiary guarantors. Malibu Boats, Inc. is not a party to the Credit Agreement.

Borrowings under the Credit Agreement bear interest at a rate equal to either, at the Company's option, (i) the highest of the prime rate, the Federal Funds Rate plus 0.5%, or one-month ~~LIBOR~~London Inter-bank Offered Rate ("LIBOR") plus 1% (the “Base Rate”) or (ii) LIBOR, in each case plus an applicable margin ranging from 1.25% to 2.25% with respect to LIBOR borrowings and 0.25% to 1.25% with respect to Base Rate borrowings. The applicable margin will be based upon the consolidated leverage ratio of the LLC and its subsidiaries calculated on a consolidated basis. As of September 30, ~~2020,~~2021, the interest rate on the Company’s term ~~loan~~loans and revolving credit facility was ~~1.40%~~1.33%. The Company is required to pay a commitment fee for any unused portion of the revolving credit facility which will range from 0.20% to 0.40% per annum, depending on the LLC’s and its subsidiaries’ consolidated leverage ratio.

The Credit Agreement permits prepayment of the ~~term loan~~Term Loans without any penalties. ~~On August 17, 2017 the Company made a voluntary principal~~The Existing Term Loans require an amortization payment on the term loan in the amount of $50,000 with a portion of the net proceeds from its equity offering completed on August 14, 2017. The Company exercised its option to apply the prepayment in forward order to principal installments on its term loan through December 31, 2021 and a portion of the principal installments due on March 31, 2022. As a result, the term loan is subject to a quarterly installment of approximately $3,000 on March 31, 2022 and the balance of the ~~term loan~~Existing Term Loans is due on the scheduled maturity date of July 1, ~~2022.~~2022, each reflected as current maturities of long-term obligations. The Incremental Term Loan of $25,000 is subject to quarterly amortization at a rate of 5.0% per year through December 31, 2022, resulting in $1,250

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being reflected as current maturities of long-term obligations, 7.5% per year through June 30, 2024 and the balance of the Incremental Term Loan is due on the scheduled maturity date of July 1, 2024. The Credit Agreement is also ~~subject to~~requires prepayments from the net cash proceeds received by Boats LLC or any guarantors from certain asset sales and recovery events, subject to certain reinvestment rights, and from excess cash flow, subject to the terms and conditions of the Credit Agreement. ~~As of September 30, 2020, the outstanding principal amount of the Company’s term loan and revolving credit facility was $75,000.~~

The Credit Agreement contains certain customary representations and warranties, and notice requirements for the occurrence of specific events such as the occurrence of any event of default, or pending or threatened litigation. The Credit Agreement also requires compliance with certain customary financial covenants, including a minimum ratio of EBITDA to fixed charges and a maximum ratio of total debt to EBITDA. The Credit Agreement contains certain restrictive covenants, which, among other things, place limits on certain activities of the loan parties under the Credit Agreement, such as the

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incurrence of additional indebtedness and additional liens on property and limit the future payment of dividends or distributions. For example, the Credit Agreement generally prohibits the LLC, Boats LLC and the subsidiary guarantors from paying dividends or making distributions, including to the Company. The credit facility permits, however, (i) distributions based on a member’s allocated taxable income, (ii) distributions to fund payments that are required under the LLC’s tax receivable agreement, (iii) purchase of stock or stock options of the LLC from former officers, directors or employees of loan parties or payments pursuant to stock option and other benefit plans up to ~~$2,000~~$3,000 in any fiscal year, and (iv) share repurchase payments up to $35,000 in any fiscal year subject to ~~one-year~~one year carry forward and compliance with other financial covenants. In addition, the LLC may make dividends and distributions of up to $10,000 in any fiscal year, subject to compliance with other financial covenants.

In connection with entering into the Credit Agreement in fiscal year 2017, the Company capitalized $2,074 in deferred financing costs during fiscal 2017. In connection with Third Amendment entered into in December 2020, the Company capitalized $638 in deferred financing costs during the three months ended March 31, 2021. These costs, in addition to the unamortized balance related to costs associated with the Company's previous credit facility of $671, are being amortized over the term of the Credit Agreement into interest expense using the effective interest method and presented as a direct offset to the total debt outstanding on the consolidated balance sheet.

~~As described above, the~~The Company used proceeds from an offering on August 24, 2017 to repay $50,000 on its ~~term loan~~Existing Term Loans under the Credit Agreement and exercised its option to apply the prepayment to principal installments through December 31, 2021, and a portion of principal installments due on March 31, 2022. ~~Accordingly, no principal payments are required under the Credit Agreement until March 31, 2022, and as such, all borrowings as of September 30, 2020 and June 30, 2020, are reflected as noncurrent.~~ The $50,000 repayment resulted in a write off of deferred financing costs of $829 in fiscal year 2018, which was included in amortization expense on the consolidated statement of operations and comprehensive income.

Covenant Compliance

As of September 30, ~~2020,~~2021, the Company was in compliance with the financial covenants contained in the Credit Agreement.

~~Interest Rate Swap~~

~~On July 1, 2015, the Company entered into a~~ ~~five~~ year floating to fixed interest rate swap with an effective start date of July 1, 2015. The swap was based on a one-month LIBOR rate versus a 1.52% fixed rate on a notional value of $39,250, which under terms of the previously existing credit agreement, was equal to 50% of the outstanding balance of the term loan at the time of the swap arrangement. Under ASC Topic 815, ~~Derivatives and Hedging,~~ all derivative instruments are recorded on the unaudited interim condensed consolidated balance sheets at fair value as either short term or long term assets or liabilities based on their anticipated settlement date. The Company has elected not to designate its interest rate swap as a hedge for accounting purposes; therefore, changes in the fair value of the derivative instrument were being recognized in earnings in the Company's unaudited interim condensed consolidated statements of operations and comprehensive income. The swap matured on March 31, 2020. For the three months ended September 30, 2019, the Company recorded a loss of $38 for the change in fair value of the interest rate swap, which was included in interest expense in the unaudited interim condensed consolidated statements of operations and comprehensive income.

~~10.~~11. Leases

The Company leases certain manufacturing facilities, warehouses, office space, land, and equipment. The Company determines if a contract is a lease or contains an embedded lease at the inception of the agreement. ~~The Company recorded right-of-use assets, included in other assets on the balance sheet, totaling $16,142 as of July 1, 2019.~~ Leases with an initial term of 12 months or less are not recorded on the unaudited interim condensed consolidated balance sheet. The Company does not separate non-lease components from the lease components to which they relate, and instead accounts for each separate lease and non-lease component associated with that lease component as a single lease component for all underlying asset classes. The Company's lease liabilities do not include future lease payments related to options to extend or terminate lease agreements as it is not reasonably certain those options will be exercised.

Other information concerning the Company's operating leases accounted for under ASC Topic 842, Leases is as ~~follows (in thousands):~~follows:


Classification		As of September 30, 2021		As of June 30, 2021
Assets
Right-of-use assets	Other assets	$	12,088	$	12,606

Liabilities
Current operating lease liabilities	Accrued expenses	$	2,025	$	2,027
Long-term operating lease liabilities	Other liabilities	11,659		12,198
Total lease liabilities		$	13,684	$	14,225

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Classification As of September 30, 2020 As of June 30, 2020
Assets
Right-of-use assets Other assets $ 13,867 $ 14,315
Liabilities
Current operating lease liabilities Accrued expenses $ 1,983 $ 2,006
Long-term operating lease liabilities Other liabilities 13,568 14,013
Total lease liabilities $ 15,551 $ 16,019


Classification	Classification		Three Months Ended September 30, 2020		Three months ended September 30, 2019		Classification		Three Months Ended September 30, 2021		Three Months Ended September 30, 2020
Operating lease costs (1)	Operating lease costs (1)	Cost of sales	$	508	$	477	Operating lease costs (1)	Cost of sales	$	642	$	508
		Selling, general and administrative	214		223			Selling and marketing, and general and administrative	216		214

Sublease income	Sublease income	Other income (expense)	10		10		Sublease income	Other income, net	10		10

Cash paid for amounts included in the measurement of operating lease liabilities	Cash paid for amounts included in the measurement of operating lease liabilities	Cash flows from operating activities	656		647		Cash paid for amounts included in the measurement of operating lease liabilities	Cash flows from operating activities	628		656

(1) Includes short-term leases, which are insignificant, and are not included in the lease liability.

The lease liability for operating leases that contain variable escalating rental payments with scheduled increases that are based on the lesser of a stated percentage increase or the cumulative increase in an index, are determined using the stated percentage increase.

The weighted average remaining lease term ~~for the three months ended~~as of September 30, 2021 and 2020 was 6.22 years and ~~2019 was~~ 7.17 years, respectively. As of September 30, 2021 and ~~7.97 years, respectively . The~~2020, the weighted average discount rate determined based on the Company's incremental borrowing rate is 3.63% and 3.65%, ~~as of September 30, 2020 and 2019.~~respectively.

Future annual minimum lease payments for the following fiscal years as of September 30, ~~2020~~2021 are as follows:

Amount
Remainder of 2021 $ 1,904
2022 2,403
2023 2,454
2024 2,582
2025 2,310
2026 and thereafter 6,014
Total 17,667
Less imputed interest (2,116)
Present value of lease liabilities $ 15,551


	Amount
Remainder of 2022	$	1,863
2023	2,502
2024	2,585
2025	2,310
2026	2,255
2027 and thereafter	3,759
Total	15,274
Less: imputed interest	(1,590)
Present value of lease liabilities	$	13,684

~~11.~~12. Tax Receivable Agreement Liability

The Company has a ~~tax receivable agreement~~Tax Receivable Agreement with the pre-IPO owners of the LLC that provides for the payment by the Company to the pre-IPO owners (or their permitted assignees) of 85% of the amount of the benefits, if any, that the Company is deemed to realize as a result of (i) increases in tax basis and (ii) certain other tax benefits related to the Company entering into the ~~tax receivable agreement,~~Tax Receivable Agreement, including those attributable to payments under the ~~tax receivable agreement.~~Tax Receivable Agreement. These contractual payment obligations are obligations of the Company and not of the LLC. The Company's ~~tax receivable agreement~~Tax Receivable Agreement liability was determined on an undiscounted basis in accordance with ASC ~~Topic~~ 450, Contingencies, since the contractual payment obligations were deemed to be probable and reasonably estimable. ~~The tax receivable agreement further provides that, upon certain mergers, asset sales or other forms of business combinations or other changes of control, the Company (or its successor)~~

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would owe to the pre-IPO owners of the LLC a lump-sum payment equal to the present value of all forecasted future payments that would have otherwise been made under the tax receivable agreement that would be based on certain assumptions, including a deemed exchange of LLC Units and that the Company would have sufficient taxable income to fully utilize the deductions arising from the increased tax basis and other tax benefits related to entering into the tax receivable agreement. The Company also is entitled to terminate the tax receivable agreement, which, if terminated, would obligate the Company to make early termination payments to the pre-IPO owners of the LLC. In addition, a pre-IPO owner may elect to unilaterally terminate the tax receivable agreement with respect to such pre-IPO owner, which would obligate the Company to pay to such existing owner certain payments for tax benefits received through the taxable year of the election.

For purposes of the ~~tax receivable agreement,~~Tax Receivable Agreement, the benefit deemed realized by the Company ~~will be~~is computed by comparing the actual income tax liability of the Company (calculated with certain assumptions) to the amount of such taxes that the Company would have been required to pay had there been no increase to the tax basis of the assets of the LLC as a result of the purchases or exchanges, and had the Company not entered into the ~~tax receivable agreement.~~Tax Receivable Agreement.

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The following table reflects the changes to the Company's tax receivable agreement liability:


	As of September 30, 2021		As of June 30, 2021
Beginning fiscal year balance	$	48,214	$	49,665
Additions (reductions) to tax receivable agreement:
Exchange of LLC Units for Class A Common Stock	—		2,142
Adjustment for change in estimated tax rate	—		(88)
Payments under tax receivable agreement	—		(3,505)
	48,214		48,214
Less: current portion under tax receivable agreement	(3,773)		(3,773)
Ending balance	$	44,441	$	44,441

As of September 30, 2020 As of June 30, 2020
Payable pursuant to tax receivable agreement $ 49,665 $ 53,754
Additions (reductions) to tax receivable agreement:
Exchange of LLC Units for Class A Common Stock 330 1,041
Adjustment for change in estimated tax rate 0 (1,672)
Payments under tax receivable agreement 0 (3,458)
49,995 49,665
Less current portion under tax receivable agreement (3,589) (3,589)
Payable pursuant to tax receivable agreement, less current portion $ 46,406 $ 46,076
The Tax Receivable Agreement further provides that, upon certain mergers, asset sales or other forms of business combinations or other changes of control, the Company (or its successor) would owe to the pre-IPO owners of the LLC a lump-sum payment equal to the present value of all forecasted future payments that would have otherwise been made under the Tax Receivable Agreement that would be based on certain assumptions, including a deemed exchange of LLC Units and that the Company would have sufficient taxable income to fully utilize the deductions arising from the increased tax basis and other tax benefits related to entering into the Tax Receivable Agreement. The Company also is entitled to terminate the Tax Receivable Agreement, which, if terminated, would obligate the Company to make early termination payments to the pre-IPO owners of the LLC. In addition, a pre-IPO owner may elect to unilaterally terminate the Tax Receivable Agreement with respect to such pre-IPO owner, which would obligate the Company to pay to such existing owner certain payments for tax benefits received through the taxable year of the election.

When estimating the expected tax rate to use in order to determine the tax benefit expected to be recognized from the Company’s increased tax basis as a result of exchanges of LLC Units by the pre-IPO owners of the LLC, the Company continuously monitors changes in its overall tax posture, including changes resulting from new legislation and changes as a result of new jurisdictions in which the Company is subject to tax.

As of September 30, ~~2020~~2021 and June 30, ~~2020,~~2021, the Company had deferred tax assets on each date of ~~$111,991 and $111,511, respectively,~~$114,242 associated with basis differences in assets upon acquiring an interest in ~~Malibu Boats Holdings,~~the LLC and pursuant to making an election under Section 754 of the Internal Revenue Code of 1986 (the "Internal Revenue Code"), as amended. The aggregate tax receivable agreement liability represents 85% of the tax benefits that the Company expects to receive in connection with the Section 754 election. In accordance with the tax receivable agreement, the next annual payment is anticipated approximately 75 days after filing the federal tax return due by April 15, ~~2021.~~2022.

~~12.~~13. Income Taxes

~~Malibu Boats, Inc.~~The Company is taxed as a C corporation for U.S. income tax purposes and is therefore subject to both federal and state taxation at a corporate level. The LLC continues to operate in the United States as a partnership for U.S. federal income tax purposes.

Income taxes are computed in accordance with ASC Topic 740, Income Taxes, and reflect the net tax effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and the corresponding income tax amounts. The Company has deferred tax assets and liabilities and maintains valuation allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, such deferred tax assets will be adjusted through the Company’s provision for income taxes in the period in which this determination is made.

As of September 30, ~~2020~~2021 and June 30, ~~2020,~~2021, the Company maintained a total valuation allowance on each date of ~~$14,650 and $14,582, respectively,~~$15,279 against deferred tax assets related to state net operating losses and future amortization deductions (with respect to the Section 754 election) that are reported in the Tennessee corporate tax return without offsetting income, which is taxable at the LLC. This also includes a valuation allowance in the amount of $580 related to foreign tax credit carryforward that is not expected to be utilized in the future.

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The Company’s consolidated interim effective tax rate is based upon expected annual income from operations, statutory tax rates and tax laws in the various jurisdictions in which the Company operates. Significant or unusual items, including those related to the change in U.S. tax law as well as other adjustments to accruals for tax uncertainties, are recognized in the quarter in which the related event occurs. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

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was signed into law. The CARES Act contains significant business tax provisions, including modifications to the rules limiting the deductibility of net operating losses (NOLs), expensing of qualified improvement property (QIP) and business interest in Internal Revenue Code Sections 172(a) and 163(j), respectively. The effects of the new legislation are recognized upon enactment. The Company did not recognize any significant impact to income tax expense for the three months ended September 30, 2021 and 2020, respectively, relating to the CARES Act.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company's effective tax rate on each date was 22.4% ~~and 22.5%, respectively.~~. For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company's effective tax rate exceeded the statutory federal income tax rate of 21% primarily due to the impact of U.S. state taxes. This increase in tax rate in both periods was partially offset by the benefits offrom the foreign derived intangible income deduction, the research and development tax credit, and the impact of non-controlling interests in the LLC.

~~13.~~14. Stock-Based Compensation

The Company adopted a long term incentive plan which became effective on January 1, 2014, and reserves for issuance up to 1,700,000 shares of Malibu Boats, Inc. Class A Common Stock for the Company’s employees, consultants, members of its board of directors and other independent contractors at the discretion of the compensation committee. Incentive stock awards authorized under the Incentive Plan include unrestricted shares of Class A Common Stock, stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent awards and performance awards. As of September 30, ~~2020, 716,050~~2021, 611,998 shares remain available for future issuance under the long term incentive plan.

The following is a summary of the changes in the Company's stock options for the three months ended September 30, ~~2020:~~2021:



	Shares	Weighted Average Exercise Price/Share
Total outstanding options as of June 30, 2021	161,723	$	32.64
Options granted	—	—
Options exercised	—	—

Outstanding options as of September 30, 2021	161,723	32.64
Exercisable as of September 30, 2021	134,237	$	31.46

Shares Weighted Average Exercise Price/Share
Total outstanding options as of June 30, 2020 173,348 $ 32.61
Options granted 0 0
Options exercised (9,625) 31.14
Outstanding options as of September 30, 2020 163,723 32.70
Exercisable as of September 30, 2020 77,744 $ 31.50

The following is a summary of the changes in non-vested restricted stock units and restricted stock awards for the three months ended September 30, ~~2020:~~

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, 2020 277,696 $ 35.43
Granted 1,125 51.95
Vested (13,187) 18.72
Forfeited (890) 34.30
Total Non-vested Restricted Stock Units and Restricted Stock Awards as of September 30, 2020 264,744 $ 36.34
2021:


	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, 2021	314,916	$	44.46
Granted	6,919	80.70
Vested	(23,796)	37.83
Forfeited	(3,123)	56.52
Total Non-vested Restricted Stock Units and Restricted Stock Awards as of September 30, 2021	294,916	$	45.72

Stock compensation expense attributable to the Company's share-based equity awards was $1,258 and $811 ~~and $677~~ for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Stock compensation expense attributed to share-based equity awards issued ~~under~~under the Incentive Plan is recognized on a straight-line basis over the terms of the respective awards and is included in general and administrative expense in the Company's unaudited interim condensed consolidated ~~statement~~statements of operations and comprehensive income. Awards vesting during the three months ended September 30, ~~2020~~2021 include ~~1,125~~796 fully vested restricted stock units issued to non-employee directors for their service as directors for the Company.

~~14.~~15. Net Earnings Per Share

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Basic net income per share of Class A Common Stock is computed by dividing net income attributable to the Company's earnings by the weighted average number of shares of Class A Common Stock outstanding during the period. The weighted average number of shares of Class A Common Stock outstanding used in computing basic net income per share includes fully

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vested restricted stock units awarded to directors that are entitled to participate in distributions to common shareholders through receipt of additional units of equivalent value to the dividends paid to Class A Common Stock holders.

Diluted net income per share of Class A Common Stock is computed similarly to basic net income per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents using the treasury method, if dilutive. The ~~Company’s~~Company's LLC Units and non-qualified stock options are considered common stock equivalents for this purpose. The number of additional shares of Class A Common Stock related to these common stock equivalents and stock options are calculated using the treasury stock method.

Stock awards with a performance condition that are based on the attainment of a specified amount of earnings are only included in the computation of diluted earnings per share to the extent that the performance condition would be achieved based on the current amount of earnings, and only if the effect would be dilutive.

Stock awards with a market condition that are based on the performance of the Company's stock price in relation to a market index over a specified time period are only included in the computation of diluted earnings per share to the extent that the shares would be issued based on the current market price of the Company's stock in relation to the market index, and only if the effect would be dilutive.

Basic and diluted net income per share of Class A Common Stock has been computed as follows (in thousands, except share and per share amounts):

Three Months Ended September 30,
2020 2019
Basic:
Net income attributable to Malibu Boats, Inc. $ 21,093 $ 15,859
Shares used in computing basic net income per share:
Weighted-average Class A Common Stock 20,435,866 20,635,978
Weighted-average participating restricted stock units convertible into Class A Common Stock 216,063 194,143
Basic weighted-average shares outstanding 20,651,929 20,830,121
Basic net income per share $ 1.02 $ 0.76
Diluted:
Net income attributable to Malibu Boats, Inc. $ 21,093 $ 15,859
Shares used in computing diluted net income per share:
Basic weighted-average shares outstanding 20,651,929 20,830,121
Restricted stock units granted to employees 133,213 98,620
Stock options granted to employees 36,928 0
Market performance awards granted to employees 42,576 0
Diluted weighted-average shares outstanding 1
20,864,646 20,928,741
Diluted net income per share $ 1.01 $ 0.76


	Three Months Ended September 30,
	2021		2020
Basic:
Net income attributable to Malibu Boats, Inc.	$	26,944	$	21,093
Shares used in computing basic net income per share:
Weighted-average Class A Common Stock	20,620,623		20,435,866
Weighted-average participating restricted stock units convertible into Class A Common Stock	229,358		216,063
Basic weighted-average shares outstanding	20,849,981		20,651,929
Basic net income per share	$	1.29	$	1.02

Diluted:
Net income attributable to Malibu Boats, Inc.	$	26,944	$	21,093


Shares used in computing diluted net income per share:
Basic weighted-average shares outstanding	20,849,981		20,651,929
Restricted stock units granted to employees	140,674		133,213
Stock options granted to employees	87,557		36,928
Market performance awards granted to employees	54,690		42,576
Diluted weighted-average shares outstanding 1	21,132,902		20,864,646
Diluted net income per share	$	1.28	$	1.01

1 The Company excluded ~~776,592~~ 607,042and ~~1,102,975~~776,592 potentially dilutive shares from the calculation of diluted net income per share for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, as these units would have been antidilutive.

The shares of Class B Common Stock do not share in the earnings or losses of Malibu Boats, Inc. and, therefore, are not included in the calculation. Accordingly, basic and diluted net earnings per share of Class B Common Stock ~~has~~have not been presented.

~~15.~~16. Commitments and Contingencies

Repurchase Commitments

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In connection with its dealers’ wholesale floor plan financing of boats, the Company has entered into repurchase agreements with various lending institutions. The reserve methodology used to record an estimated expense and loss reserve in each accounting period is based upon an analysis of likely repurchases based on current field inventory and likelihood of repurchase. Subsequent to the inception of the repurchase commitment, the Company evaluates the likelihood of repurchase and adjusts the estimated loss reserve accordingly. When a potential loss reserve is recorded it is presented in accrued liabilities in

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the accompanying unaudited interim condensed consolidated balance sheet. If the Company were obligated to repurchase a significant number of units under any repurchase agreement, its business, operating results and financial condition could be adversely affected. The total amount financed under the floor financing programs with repurchase obligations was ~~$101,476~~$83,370 and ~~$161,356~~$79,599 as of September 30, ~~2020~~2021 and June 30, ~~2020,~~2021, respectively.

Repurchases and subsequent sales are recorded as a revenue transaction. The net difference between the repurchase price and the resale price is recorded against the loss reserve and presented in cost of sales in the accompanying unaudited interim condensed consolidated statements of operations and comprehensive income. During the three months ended September 30, ~~2020,~~2021, there were no repurchases and as of September 30, ~~2020,~~2021, the Company has not been notified about any probable repossessions. Therefore, the Company did not carry a reserve for repurchases as of September 30, ~~2020~~2021 consistent with June 30, ~~2020.~~2021.

The Company has collateralized receivables financing arrangements with a third-party floor plan financing provider for European dealers. Under terms of these arrangements, the Company transfers the right to collect a trade receivable to the financing provider in exchange for cash but agrees to repurchase the receivable if the dealer defaults. Since the transfer of the receivable to the financing provider does not meet the conditions for a sale under ASC Topic 860, Transfers and Servicing, the Company continues to report the transferred trade receivable in other current assets with an offsetting balance recorded as a secured obligation in accrued expenses in the Company's unaudited condensed consolidated balance sheets. As of September 30, ~~2020 and June 30, 2020,~~2021, the Company had no financing receivables of ~~$44~~ and ~~$375, respectively,~~at June 30, 2021, the Company had $95 recorded in other current assets and accrued expenses related to these arrangements.

Contingencies

Product Liability

The Company is engaged in a business that exposes it to claims for product liability and warranty claims in the event the Company’s products actually or allegedly fail to perform as expected or the use of the Company’s products results, or is alleged to result, in property damage, personal injury or death. Although the Company maintains product and general liability insurance of the types and in the amounts that the Company believes are customary for the industry, the Company is not fully insured against all such potential claims. The Company may have the ability to refer claims to its suppliers and their insurers to pay the costs associated with any claims arising from the suppliers’ products. The Company’s insurance covers such claims that are not adequately covered by a supplier’s insurance and provides for excess secondary coverage above the limits provided by the Company’s suppliers.

The Company may experience legal claims in excess of its insurance coverage or claims that are not covered by insurance, either of which could adversely affect its business, financial condition and results of operations. Adverse determination of material product liability and warranty claims made against the Company could have a material adverse effect on its financial condition and harm its reputation. In addition, if any of the ~~Company~~Company's products are, or are alleged to be, defective, the Company may be required to participate in a recall of that product if the defect or alleged defect relates to safety. These and other claims that the Company faces could be costly to the Company and require substantial management attention. Refer to Note 89 for discussion of warranty claims. The Company insures against product liability claims and except as disclosed below, believes there are no ~~material~~ product liability claims as of September 30, ~~2020~~2021 that will have a material adverse impact on the Company’s results of operations, financial condition or cash flows, after considering available insurance coverage.

Litigation

Certain conditions may exist which could result in a loss, but which will only be resolved when future events occur. The Company, in consultation with its legal counsel, assesses such contingent liabilities, and such assessments inherently involve an exercise of judgment. If the assessment of a contingency indicates that it is probable that a loss has been incurred, the Company accrues for such contingent loss when it can be reasonably estimated. If the assessment indicates that a potentially material loss contingency is not probable but reasonably estimable, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed. If the assessment of a contingency deemed to be both probable and reasonably estimable involves a range of possible losses, the amount within the range that appears at the time to be a better estimate than any other amount within the range would be accrued. When no amount within the range is a better estimate than any other amount, the minimum amount in the range is accrued even though the minimum amount in the range is not necessarily the amount of loss that will be ultimately determined. Estimates of potential legal fees and other directly related costs associated with contingencies are not accrued but rather are expensed as incurred. Except as disclosed below, management does not believe there are any pending claims (asserted or unasserted) that would have a material adverse impact on the Company's results of operations at September 30, 2021.

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Legal Proceedings

Batchelder Matter

The Company and its indirect subsidiary Malibu Boats, LLC (“Boats LLC”) are defendants in the product liability case Batchelder et al. v. Malibu Boats, LLC, f/k/a Malibu Boats, Inc.; Malibu Boats West, Inc., et. al., Superior Court of Rabun County, Georgia, Civil Action Case No. 2016-CV-0114-C, brought by Stephen Paul Batchelder and Margaret Mary Batchelder, individually, and as Administrators of the Estate of Ryan Paul Batchelder, deceased (“Plaintiffs”). Plaintiffs also sued the manufacturer of the boat at issue in the case, Malibu Boats West, Inc. (“West”). West is not, and has never been, a subsidiary of the Company but was a separate legal entity whose assets were purchased by Boats LLC in 2006. The case involves a personal injury accident in 2014 involving a 2000 model year boat that was manufactured by West. On August 28, 2021, the jury rejected the Plaintiffs’ design defect claims and found that the driver of the boat was 75% at fault for the accident. Notwithstanding those findings, the jury found that Boats LLC and West negligently failed to warn of a hazard posed by the relevant boat and that such failure was a proximate cause of the death of the decedent. The jury also found that Boats LLC is a legal successor of, and responsible for the liabilities of, West. The jury awarded compensatory damages of $80 million and apportioned 15% of such damages to Boats LLC and 10% of such damages to West. The jury also awarded $80 million of punitive damages against Boats LLC and $40 million of punitive damages against West. Based on the jury’s finding of successor liability, which Boats LLC contends is erroneous, immediately after the verdict the trial court entered judgment against West and Boats LLC, with a potential maximum liability to Boats LLC of $140 million, plus post-judgment interest. The Plaintiffs have also alleged that they have the right to receive pre-judgment interest and a portion of their attorney fees, which the Company disagrees with and intends to oppose. While the Company and Boats LLC maintain product liability insurance applicable to this case, such insurance coverage may be ~~covered by our insurance.~~limited to $26 million.

~~Legal Proceedings~~The Company has filed post-trial motions with the trial judge. In addition, the Company intends to appeal in the event that its post-trial motions are unsuccessful. Pending resolution of the post-trial and appeals process, the payment of any damages in this matter is expected to be stayed. Based on the current status of the process, the Company believes a loss is reasonably possible and that the potential range of loss could be from $0 to $140 million, plus post-judgment interest. As noted above, the Plaintiffs have also alleged that they have the right to receive pre-judgment interest and a portion of their attorney fees, which the Company disagrees with and intends to oppose. The Company did not carry a reserve for loss as of September 30, 2021.

Skier's Choice Matter

On January 12, 2018, the Company filed suit against Skier’s Choice, Inc., or "Skier’s Choice," in the U.S. District Court for the Eastern District of Tennessee, seeking monetary and injunctive relief. The Company's complaint alleges Skier’s Choice’s infringement of ~~three~~3 utility patents - U.S. Patent Nos. 9,260,161, 8,578,873, and 9,199,695 - related to wake surfing technology. Skier’s Choice denied liability arising from the causes of action alleged in the Company's complaint and filed counterclaims alleging invalidity of the asserted patents. On June 19, 2019, the Company filed a second action against Skier’s Choice in the U.S. District Court for the Eastern District of Tennessee, seeking monetary and injunctive relief. The Company’s complaint alleges Skier’s Choice’s surf systems on its Moomba and Supra lines of boats infringe U.S. Patent No. 10,322,777, a patent related to wake surfing technology. Skier’s Choice denied liability arising from the causes of action alleged in the Company's complaint and filed counterclaims alleging invalidity of the asserted patents. On June 27, 2019, Skier’s Choice filed a motion to consolidate these 2 actions, and to continue deadlines in the earlier case for nine months, which the Company

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opposed. On August 22, 2019, the motion for consolidation was referred by Judge Thomas Varlan to Magistrate Judge Bruce Guyton, and the 2 cases were stayed pending resolution of that motion. On November 27, 2019, Judge Guyton ordered the 2 cases to be consolidated. On January 7, 2020, the consolidated cases were reassigned to Judge Jon McCalla. On January 23, 2020, Judge McCalla issued a Scheduling Order, scheduling trial on the consolidated cases to begin on September 29, 2020. On July 23, 2020, the Company moved to dismiss its allegations of infringement of U.S. Patent No. 9,199,695, which Skier’s Choice opposed. On August 25, 2020, Judge McCalla issued a claim construction order and set a scheduling conference for August 27, 2020, for purposes of resetting the pretrial calendar and trial dates. On September 11, 2020, the Court issued a Scheduling Order resetting the trial for the consolidated cases to begin on January 25, 2021. On December 11, 2020, the Court issued an Order resetting the trial for the consolidated cases to begin on May 10, 2021. During the trial, the Court found that Skier’s Choice did not infringe 1 claim of the ’873 Patent, and also found that Skier’s Choice did infringe 1 claim of the ’777 Patent. On May 21, 2021, a jury returned a verdict finding that Skier’s Choice did not infringe 3 claims from the ’777 and ’161 Patents, and also found 4 claims from the ’777 and ’161 Patents to be invalid. Malibu did not pursue an appeal of the verdict. On June 4, 2021, Skier’s Choice filed a motion seeking an award of attorney’s fees and costs. Malibu opposed Skier’s Choice’s motion.

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17. Segment Reporting

The Company ~~intends~~has 3 reportable segments, Malibu, Saltwater Fishing and Cobalt. The Malibu segment participates in the manufacturing, distribution, marketing and sale of Malibu and Axis performance sports boats throughout the world. The Saltwater Fishing segment participates in the manufacturing, distribution, marketing and sale throughout the world of Pursuit boats and the Maverick Boat Group brand boats (Maverick, Cobia, Pathfinder and Hewes). The Cobalt segment participates in the manufacturing, distribution, marketing and sale of Cobalt boats throughout the world.

There is no country outside of the United States from which we (a) derived net sales equal to ~~vigorously pursue this litigation~~10% of total net sales, or (b) attributed assets equal to ~~enforce its rights in its patented technology and believes that Skier’s Choice’s counterclaims~~10% of total assets. Net sales are ~~without merit.~~attributed to countries based on the location of the dealer.

~~16. Segment Information~~

The following tables present financial information for the Company’s reportable segments for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and the Company’s financial position at September 30, ~~2020~~2021 and June 30, ~~2020,~~2021, respectively:


	Three Months Ended September 30, 2021
	Malibu		Saltwater Fishing		Cobalt		Consolidated
Net sales	$	118,252	$	76,727	$	58,518	$	253,497



Income before provision for income taxes	$	21,109	$	6,992	$	7,916	$	36,017




	Three Months Ended September 30, 2020
	Malibu		Saltwater Fishing		Cobalt		Consolidated
Net sales	$	99,831	$	36,671	$	44,482	$	180,984



Income before provision for income taxes	$	17,555	$	6,074	$	4,776	$	28,405

Three Months Ended September 30, 2020
Malibu Cobalt Pursuit Total
Net sales $ 99,831 $ 44,482 $ 36,671 $ 180,984
Income before provision for income taxes $ 17,555 $ 4,776 $ 6,074 $ 28,405
Three months ended September 30, 2019
Malibu Cobalt Pursuit Total
Net sales $ 85,880 $ 50,151 $ 36,049 $ 172,080
Income before provision for income taxes $ 11,461 $ 5,907 $ 4,158 $ 21,526


		As of September 30, 2020		As of June 30, 2020			As of September 30, 2021		As of June 30, 2021
Assets	Assets					Assets
Malibu	Malibu	$	216,690	$	194,502	Malibu	$	229,643	$	211,510
Saltwater Fishing						Saltwater Fishing	355,376		360,481
Cobalt	Cobalt	166,570		153,820		Cobalt	168,900		170,793
Pursuit		136,958		129,024
Total assets	Total assets	$	520,218	$	477,346	Total assets	$	753,919	$	742,784

~~17.~~18. Subsequent Event

On November 3, ~~2020,~~2021, the Company's ~~Compensation Committee granted approximately~~ ~~33,000~~ ~~restricted~~Board of Directors authorized a stock ~~units, 25,000 restricted stock awards, and~~repurchase program to allow for the repurchase of up to ~~a maximum~~$70,000 of ~~64,000 restricted stock awards with performance or market conditions to certain key employees. The closing price of our~~its Class A Common Stock and the LLC's LLC Units (the “Repurchase Program”) for the period from November 8, 2021 to November 8, 2022. The Company intends to fund repurchases under the Repurchase Program from cash on ~~the date of the grant was $54.47 per share.~~

hand.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the unaudited interim condensed consolidated financial statements and notes thereto included herein.

Malibu Boats, Inc. is a Delaware corporation with its principal offices in Loudon, Tennessee. We use the terms “Malibu,” the “Company,” “we,” “us,” “our” or similar references to refer to Malibu Boats, Inc., its subsidiary, Malibu Boats Holdings, LLC, or the LLC, and its subsidiary Malibu Boats, LLC, or Boats, LLC and its consolidated subsidiaries, including Cobalt Boats, LLC, ~~and~~ PB Holdco, LLC, through which we acquired the assets of ~~Pursuit.~~Pursuit, and MBG Holdco, Inc., through which we acquired all of the outstanding stock of Maverick Boat Group, Inc.

Overview

We are a leading designer, manufacturer and marketer of a diverse range of recreational powerboats, including performance sport boats, sterndrive and outboard boats. We are the market leader in the United States in the performance sport boat category through our Malibu and Axis Wake Research boat brands, the market leader in the United States in the 20’ - 40’ segment of the sterndrive boat category through our Cobalt brand and are among the market leaders in the fiberglass outboard fishing boat market with our Pursuit brand. Our product portfolio of premium brands are used for a broad range of recreational boating activities including, among others, water sports, general recreational boating and fishing. Our passion for consistent innovation, which has led to propriety technology such as Surf Gate, has allowed us to expand the market for our products by introducing consumers to new and exciting recreational activities. We design products that appeal to an expanding range of recreational boaters and water sports enthusiasts whose passion for boating and water sports is a key component of their active lifestyle and provide consumers with a better customer-inspired experience. With performance, quality, value and multi-purpose features, our product portfolio has us well positioned to broaden our addressable market and achieve our goal of increasing our market share in the expanding recreational boating industry.

We currently sell our boats under ~~four~~eight brands—(Malibu; Axis; ~~Cobalt;~~Pursuit; Maverick; Cobia; Pathfinder; Hewes; and ~~Pursuit.~~Cobalt), and we report our results of operations under three reportable segments, (Malibu, Saltwater Fishing and Cobalt), as shown in the table below. See Note 17 to our unaudited interim condensed consolidated financial statements for more information about our reporting segments.


		% of Total Revenues
Segment	Brands	Three Months Ended September 30, 2021	Fiscal year ended June 30, 2021
Malibu	Malibu	46.6%	52.2%
	Axis

Saltwater Fishing	Pursuit	30.3%	26.2%
	Maverick
	Cobia
	Pathfinder
	Hewes

Cobalt	Cobalt	23.1%	21.6%

Our Malibu segment participates in the manufacturing, distribution, marketing and sale throughout the world of Malibu and Axis performance sports boats. Our flagship Malibu boats offer our latest innovations in performance, comfort and convenience, and are designed for consumers seeking a premium performance sport boat experience. ~~Retail prices of~~We are the market leader in the United States in the performance sport boat category through our Malibu ~~boats typically range from $60,000 to $210,000.~~and Axis Wake Research boat brands. Our Axis boats appeal to consumers who desire a more affordable performance sport boat product but still demand high performance, functional simplicity and the option to upgrade key features. Retail prices of our Malibu and Axis boats typically range from $65,000 to ~~$115,000.~~$215,000.

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Our Saltwater Fishing segment participates in the manufacturing, distribution, marketing and sale throughout the world of Pursuit boats and the Maverick Boat Group family of boats (Maverick, Cobia, Pathfinder and Hewes). Our Pursuit boats expand our product offerings into the saltwater outboard fishing market and include center console, dual console and offshore models. We recently acquired Maverick Boat Group and added Maverick, Cobia, Pathfinder and Hewes to our brands. Our Maverick Boat Group family of boats are highly complementary to Pursuit, expanding our saltwater outboard offerings with a strong focus in length segments under 30 feet. We are among the market leaders in the fiberglass outboard fishing boat category with the brands in our Saltwater Fishing segment. Retail prices for our Saltwater Fishing boats typically range from $45,000 to $1,200,000.

Our Cobalt segment participates in the manufacturing, distribution, marketing and sale throughout the world of Cobalt boats. Our Cobalt boats consist of mid to large-sized luxury cruisers and bowriders that we believe offer the ultimate experience in comfort, performance and quality. We are the market leader in the United States in the 20’ - 40’ segment of the sterndrive boat category through our Cobalt brand. Retail prices for our Cobalt boats typically range from ~~$60,000~~$65,000 to $450,000. Our Pursuit boats expand our product offerings into the saltwater outboard fishing market and include center console, dual console and offshore models. Retail prices for our Pursuit boats typically range from $80,000 to $800,000.$500,000.

We sell our boats through a dealer network that we believe is the strongest in the recreational powerboat category. As of July 1, ~~2020,~~2021, our worldwide distribution channel consisted of over ~~350~~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.

OnOur operations have continued to be impacted by a ~~consolidated basis, we achieved first quarter fiscal 2021 net sales, gross profit, net income and adjusted EBITDA~~variety of $181.0 million, $45.7 million, $22.0 million and $36.3 million, respectively, compared to $172.1 million, $40.0 million, $16.7 million and $28.4 million, respectively, for the first quarter of fiscal 2020. For the first quarter of fiscal 2021, net sales increased 5.2%, gross profit increased 14.3%, net income increased 32.1% and adjusted EBITDA increased 28.0% as compared to the first quarter of fiscal 2020. For the definition of adjusted EBITDA and a reconciliation to net income, see “GAAP Reconciliation of Non-GAAP Financial Measures.”

We currently report our results of operations under three reportable segments, Malibu, Cobalt and Pursuit. The Malibu segment participates in the manufacturing, distribution, marketing and sale of Malibu and Axis performance sports boats throughout the world. The Cobalt and Pursuit segments participate in the manufacturing, distribution, marketing and sale of Cobalt and Pursuit boats, respectively, throughout the world. Malibu is our largest segment and represented 55.2% and 49.9% of our net sales for the three months ended September 30, 2020 and 2019, respectively. Cobalt represented 24.6% and 29.1% of our net sales for the three months ended September 30, 2020 and 2019, respectively. Pursuit represented 20.2% and 21.0% of our net sales for the three months ended September 30, 2020 and 2019, respectively. See Note 16 to our unaudited interim condensed consolidated financial statements for more information about our reporting segments.

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~~Impact of the COVID-19 Pandemic~~

external factors. The COVID-19 pandemic has impacted our operations and financial results since the third quarter of fiscal year 2020 and continues to have an impact on us. ~~On March 24, 2020, we~~We elected to suspend operations at all of our ~~facilities. The shut-down continued into the fourth quarter of fiscal year~~facilities from March 2020 ~~with operations resuming between~~until late April and early May 2020, depending on the facility. As a result, we were not able to ship boats to our dealers during the period of ~~shut-down,~~shut- down, which negatively impacted our net sales for the second half of fiscal year 2020. ~~In addition,~~During the first half of fiscal 2021, we ~~have been managing~~constrained our production levels in ~~anticipation of~~an attempt to allow our supply chain ~~constraints, which~~to more fully recover from the impacts of COVID-19 in preparation of higher wholesale manufacturing volumes that we ~~have begun to experience in recent weeks. While our net sales were negatively impacted during~~planned for the second half of fiscal 2021. While our net sales for fiscal year ~~2020 because of~~2021 were impacted by our lower production levels, retail sales improved during ~~the summer months~~fiscal year 2021 as consumers turned to boating as a form of outdoor, socially distanced recreation during the COVID-19 pandemic. The increase in retail sales during ~~the summer months~~fiscal year 2021 combined with our lower wholesale shipment levels during the second half of fiscal year 2020 and constrained production in the first half of fiscal year 2021 has resulted in lower inventory levels at our ~~dealers as of September 30, 2020 compared to last year. We expect these lower inventory levels, while having the potential to impact retail sales~~dealers.

Additionally, we experienced an increase in ~~the near-term, will provide us strong order flow for~~supply chain disruptions during our ~~model year 2021 product, unless broader economic activity meaningfully contracts~~first quarter that we believe were driven by numerous factors, including labor shortages, ongoing domestic logistical constraints, West Coast port challenges and ~~correspondingly impacts consumer demand meaningfully.~~

~~In addition~~rising prices to our ~~operations, the COVID-19 pandemic has impacted~~suppliers, in part due to inflationary pressures. Such supply chain disruptions along with increased costs for raw materials, shipping and ~~continues to impact the operations of~~labor, are having industry-wide impacts affecting us and our suppliers, dealers and suppliers. While some of our dealers and suppliers had to suspend their operations during the pandemic, many continued to operate and we are not aware of any of our dealers or suppliers that have closed permanently. Our suppliers have been impacted by COVID-19 and continue to ramp production to meet increased demand for their products. As mentioned, we have successfully managed our production levels to ensure that challenges related to parts procurement do not impact operations and and we have not experienced any significant shortages.customers.

We believe we are well-positioned to withstand any further disruptions that may occur as result of the ongoing pandemic. We have approximately $52.4 million of cash on hand as of September 30, 2020 and approximately $120.0 million available for borrowing under our revolving credit facility as of September 30, 2020. Further, we have a flexible cost structure that allows us to more closely align our costs with wholesale shipments. The future impact of COVID-19, ongoing supply chain disruptions and increases in costs on our financial condition and results of operations, however, will depend on a number of factors, including factors that we may not be able to forecast at this time. In addition, a recent resurgence of COVID-19 in certain parts of the world, including the United States and parts of Europe, has resulted in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19. These measures could result in further interruptions to our operations and potentially a decrease in consumer spending. See the risk ~~factor “The~~factors around COVID-19 ~~pandemic is adversely affecting,~~impact, supply chain disruptions and ~~is expected to continue to adversely affect, our operations, and those of our dealers and suppliers, thereby adversely affecting our business, financial condition and results of operations.”~~increases in costs under Part I. Item 1A. ofon our Form ~~10-K~~10- K for the year ended June 30, ~~2020.~~2021.

On a consolidated basis, we achieved first quarter fiscal 2022 net sales, gross profit, net income and adjusted EBITDA of $253.5 million, $59.8 million, $27.9 million and $44.7 million, respectively, compared to $181.0 million, $45.7 million, $22.0 million and $36.3 million, respectively, for the first quarter of fiscal 2021. For the first quarter of fiscal 2022, net sales increased 40.1%, gross profit increased 30.6%, net income increased 26.7% and adjusted EBITDA increased 23.1% as compared to the first quarter of fiscal 2021. For the definition of adjusted EBITDA and a reconciliation to net income, see “GAAP Reconciliation of Non-GAAP Financial Measures.”

Outlook

Industry-wide marine retail registrations continue to recover from the years following the global financial crisis. According to Statistical Surveys, Inc., domestic retail registration volumes of performance sport boats, fiberglass sterndrive and fiberglass outboards increased at a compound annual growth rate of approximately ~~5.2%~~5.8% between 2011 and ~~2019,~~2020, for the 50 reporting states. ~~While domestic retail registration volumes for new~~Within the recreational ~~powerboats decreased in 2019, total retail sales dollars increased in 2019, according to National Marine Manufacturers Association. These increases have been led by growth in our core market,~~powerboat categories, the performance sport boats category, which we primarily serve with our Malibu and Axis brands, has produced a double-digit compound annual growth rate between 2011 and ~~2019.~~2020. Outboard boats and fiberglass sterndrive boats have seen their combined market grow at a 5.0% compound annual growth rate between 2011 and 2020. This combined growth has been driven primarily by the outboard market. We target the outboard market with our Pursuit, Cobia, Pathfinder, Maverick and Hewes brands, as well as our Cobalt brand, which is a new entrant to the outboard market, and we plan to meaningfully expand our share of the fiberglass outboard category in the future. We cater to the sterndrive market through our Cobalt brand. While the market for sterndrive propulsion, particularly in lower foot length

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products, has been challenged, Cobalt’s performance continues to be helped by the higher foot length product market it serves, which has grown and through gains in market share by Cobalt. While retail growth ~~rate~~in powerboats was negatively impacted by weak retail sales in March and April 2020 due to COVID-19, ~~we believe~~ domestic retail demand growth ~~has otherwise continued in performance sport boats~~ for powerboats accelerated during calendar year 2020, in part because consumers ~~have~~ turned to boating as a form of outdoor, socially distanced recreation during the COVID-19 pandemic. ~~Fiberglass~~Despite the impact of COVID-19 early in 2020, the increased demand during 2020 was broad based across recreational powerboat categories. Year-over-year domestic retail growth rates for 2020 in the performance sport boat, fiberglass outboard and sterndrive segments were approximately 22%, 10% and ~~outboard boats, the target~~9%, respectively. The first half of 2021 saw continued strong year-over-year retail growth, however, in May 2021, we saw lower growth and in certain markets ~~for our Cobalt and Pursuit branded products, have seen their combined market grow at a 4.5% compound annual growth rate between 2011 and 2019. That growth has been~~year-over-year decreases in retail registrations driven by the ~~outboard market where Pursuit is focused~~lack of available inventory at our dealers and ~~Cobalt is a new entrant~~the high growth in those months during 2020. Retail registration activity declined meaningfully during the third calendar quarter of 2021 versus the comparable period in 2020 given the limited available inventory and ~~where we plan to meaningfully expand~~the strong sales activity and resulting destocking in 2020 and the first half of 2021. We believe that despite recent retail registration declines, retail activity at our ~~market share in the future. While Cobalt’s primary market for sterndrive propulsion has been challenged, their performance~~dealers continues to be ~~helped by market share gains~~strong and ~~they continue to see registration growth. During 2019, the fiberglass outboard market was approximately flat year-over-year,~~ but ~~in foot lengths 23 feet and greater, where Pursuit and Cobalt compete, the market continues to grow. We expect the growing demand~~ for ~~our products to continue, albeit at~~ a ~~lower pace than the past 8 years.~~lack of inventory would be meaningfully higher.

~~Regardless of retail market growth rates, the~~The combination of continued strong retail market activity ~~this summer and the temporary suspension of our operations from March~~through 2020 and into ~~May 2020, has~~early 2021 and supply chain disruptions we have experienced in 2021 have depleted our current inventory levels at our dealers below prior year levels. Operational challenges and supply chain constraints created by severe winter weather delayed our ability to add to depleted inventory levels in the second half of fiscal 2021, and we experienced increased challenges with our supply chain in the first quarter of fiscal 2022 that we believe will continue to challenge our ability to meet our wholesale production goals for fiscal 2022. As a result of these lower dealer inventory levels and lower wholesale production volumes, we expect to see meaningful wholesale demand to restock our dealer inventories through the remainder of fiscal year ~~2021~~2022 and beyond. ~~While we~~We expect lower dealer inventory levels will support our wholesale shipments and financial performance through fiscal year ~~2021 financial performance~~2022. We believe that strength is likely to continue into fiscal year 2023. The duration of our dealer restocking demand may be extended by our suppliers' ability to increase production to match our desired wholesale production targets.

We experienced an increase in supply chain disruptions during our first quarter that we believe were driven by numerous factors, including labor shortages, ongoing domestic logistical constraints, West Coast port challenges and ~~likely into 2022, numerous~~rising prices to our suppliers, in part due to inflationary pressures. The length and duration of these challenges is unknown and they may meaningfully impact our ability to restock our dealers inventories in a timely manner. We anticipate raw material, components and transportation costs will remain at inflated levels through at least the remainder of the calendar year, and, to combat this, we have announced price increases across all brands that take effect on December 1, 2021. These higher prices could negatively impact retail demand, but we believe will not impact our wholesale shipments in fiscal 2022. Numerous other variables also have the potential to impact our volumes, both positively and negatively. For example, we believe ~~the~~a substantial increase or decrease in the price of oil, ~~broad~~ strength or weakness of the U.S. dollar and ~~recently implemented~~ tariffs ~~has~~

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~~resulted~~can result in greater or reduced demand for our boats in certain markets. To date, growth in our domestic market has offset the significantly diminished demand from economies that are driven by the oil industry and international markets. Consumer confidence, expanded or eroded, is a variable that can also impact demand for our products in both directions. Other challenges that could impact demand for recreational powerboats include higher interest rates reducing retail consumer appetite for our product, the availability of credit to our dealers and retail consumers, fuel costs, a meaningful reduction in the value of global or domestic equity markets, the continued acceptance of our new products in the recreational boating market, our ability to compete in the competitive power boating industry, and the costs of labor and certain of our raw materials and key components.

Since 2008, we have increased our market share among manufacturers of performance sport boats ~~due to~~with new product development, improved distribution, new models, and innovative features. ~~As the~~Our market ~~for our product has recovered~~remains highly competitive however and our competitors have become more aggressive in their product introductions, increased their distribution and launched surf systems competitive with our patented Surf Gate system. ~~This~~Notwithstanding this increasingly competitive environment, ~~has continued throughout the past few years, but strong performance from Malibu and Axis in 2019 and year-to-date 2020 has~~we expanded our market share lead ~~over our nearest competitor~~in 2019 in the performance sport boats ~~category. We~~category over our nearest competitors. However, we believe decreased dealer inventory levels driven by strong retail growth in the second half of 2020 led to a reduction in our ~~new product pipeline, strong dealer network and ability to manage our business through the COVID-19 pandemic leaves us well positioned~~market share for 2020; however, we continue to maintain ~~and potentially expand our industry~~the leading market ~~position~~share in the performance ~~sports boats.~~sport boat category. In addition, we continue to be the market share leader in both the premium and value-oriented product ~~sub-categories.~~sub- categories for performance sports boats, we continue to maintain the number one market share position in the United States for the 24’—29’ segment of the sterndrive boat category, and we have the number two market share position in the outboard fiberglass fishing market. Our ability to continue to increase inventory levels at our dealers will be important to maintain and grow our market share across our brands. We believe our new product pipeline, strong dealer network and ability to increase production will allow us to maintain and potentially expand our industry 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 due to new product development, improved distribution, new models, and innovative features is directly transferable to our Cobalt, Pursuit and ~~Pursuit~~Maverick Boat Group acquisitions. We have seen the impact of this strategy at Cobalt as we have realized consistent and growing market share with the introduction of nine new products in the last fifteen months. While Cobalt, Pursuit and ~~Pursuit~~the

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Maverick Boat Group brands are market leaders in certain areas, we believe our experience positions us to execute a strategy to drive enhanced share by expanding ~~both~~ the Cobalt, Pursuit and ~~Pursuit~~Maverick Boat Group product offerings with different foot lengths, different boat types and different propulsion technologies. Our new product development efforts at ~~Cobalt~~Pursuit and ~~Pursuit~~Maverick Boat Group will take time and our ability to influence near-term model introductions is limited, but we have already begun to execute on this strategy. With respect to Cobalt, we introduced six new models of boats during fiscal year 2021 and we have included Splash and Stow and a new electronic flip down Swim Step for model year 2021 boats. For the Pursuit brand, our focus has been on expanding the ~~award winning~~award-winning Dual Console, Sport and Offshore product offerings that continue to combine innovative features and dependable performance in refined designs that accommodate a broad array of activities on the water, including the Electric Sliding Entertainment Center on the new S 378. Our newest acquisition, Maverick Boat Group, is in the very early stages of integration into the business and meaningful product and innovation changes will be developed for coming years. We believe enhancing new product development combined with diligent management of the Cobalt, Pursuit and ~~Pursuit~~Maverick Boat Group dealer networks ~~positions~~will position us to meaningfully improve our share of the sterndrive and outboard markets over time.

Factors Affecting Our Results of Operations

We believe that our results of operations and our growth prospects are affected by a number of factors, such as the economic environment and consumer demand for our products, our ability to develop new products and innovate, our product mix, our ability to manage manufacturing costs, ~~including through our vertical integration efforts,~~ sales cycles and inventory levels, the strength of our dealer network, ~~and~~ our ability to offer dealer financing and ~~incentives.~~incentives and our vertical integration efforts. We discuss each of these factors in more detail under the heading “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations--Factors Affecting Our Results of Operations” in our Form 10-K for the year ended June 30, ~~2020.~~2021. While we do not have control of all factors affecting our results from operations, we work diligently to influence and manage those factors which we can impact to enhance our results of operations.

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Components of Results of Operations

Net Sales

We generate revenue from the sale of boats to our dealers. The substantial majority of our net sales are derived from the sale of boats, including optional features included at the time of the initial wholesale purchase of the boat. Net sales consists of the following:

•Gross sales from:

•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 under our warranty program; and

•Rebates and 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,~~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 Cobalt models, 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 rebate. For our Pursuit models,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 from Pursuit.~~purchased. For Malibu, ~~and~~ Cobalt ~~models~~ and select ~~Pursuit~~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.

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

Other (Income) Expense, Net

Other (income) expense, net consists of interest expense and other income or expense, net. Interest expense consists of interest charged under our 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, which matured on March 31, 2020,~~ and amortization of deferred financing costs on our credit facilities.

~~Income Taxes~~ Other income or expense includes adjustments to our tax receivable agreement liability.

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Income Taxes

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. Maverick Boat Group is separately subject to U.S. federal and state income tax with respect to its net taxable income.

Net Income Attributable to Non-controlling Interest

As of September 30, ~~2020~~2021 and ~~2019,~~2020, we had a ~~96.7%~~97.2% and ~~96.1%~~96.7% controlling economic interest, respectively, 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 September 30,
2020 2019
$ % Revenue $ % Revenue
Net sales 180,984 100.0 % 172,080 100.0 %
Cost of sales 135,243 74.7 132,079 76.8
Gross profit 45,741 25.3 40,001 23.2
Operating expenses:
Selling and marketing 3,612 2.0 5,066 2.9
General and administrative 11,654 6.5 10,668 6.2
Amortization 1,524 0.8 1,584 0.9
Operating income 28,951 16.0 22,683 13.2
Other (income) expense, net:
Other income, net (10) — (10) —
Interest expense 556 0.3 1,167 0.7
Other (income) expense, net 546 0.3 1,157 0.7
Income before provision for income taxes 28,405 15.7 21,526 12.5
Provision for income taxes 6,367 3.5 4,844 2.8
Net income 22,038 12.2 16,682 9.7
Net income attributable to non-controlling interest 945 0.5 823 0.5
Net income attributable to Malibu Boats, Inc. 21,093 11.7 % 15,859 9.2 %
Three Months Ended September 30,
2020 2019
Unit Volumes % Total Unit Volumes % Total
Volume by Segment
Malibu 1,031 63.1 % 1,014 58.7 %
Cobalt 458 28.0 570 33.0
Pursuit 146 8.9 143 8.3
Total units 1,635 100 % 1,727 100 %
Net sales per unit $ 110,694 $ 99,641


	Three Months Ended September 30,
	2021				2020
	$		% Revenue		$		% Revenue
Net sales	253,497		100.0	%	180,984		100.0	%
Cost of sales	193,745		76.4	%	135,243		74.7	%
Gross profit	59,752		23.6	%	45,741		25.3	%
Operating expenses:
Selling and marketing	5,117		2.0	%	3,612		2.0	%
General and administrative	16,091		6.4	%	11,654		6.5	%
Amortization	1,856		0.7	%	1,524		0.8	%
Operating income	36,688		14.5	%	28,951		16.0	%
Other expense, net:
Other income, net	(13)		—	%	(10)		—	%
Interest expense	684		0.3	%	556		0.3	%
Other expense, net	671		0.3	%	546		0.3	%
Income before provision for income taxes	36,017		14.2	%	28,405		15.7	%
Provision for income taxes	8,084		3.2	%	6,367		3.5	%
Net income	27,933		11.0	%	22,038		12.2	%
Net income attributable to non-controlling interest	989		0.4	%	945		0.5	%
Net income attributable to Malibu Boats, Inc.	26,944		10.6	%	21,093		11.7	%

	Three Months Ended September 30,
	2021				2020
	Unit Volumes		% Total		Unit Volumes		% Total
Volume by Segment
Malibu	1,059		52.3	%	1,031		63.1	%
Saltwater Fishing	485		24.0	%	146		8.9	%
Cobalt	480		23.7	%	458		28.0	%
Total units	2,024		100.0	%	1,635		100.0	%

Net sales per unit	$	125,246			$	110,694

Comparison of the Three Months Ended September 30, ~~2020~~2021 to the Three Months Ended September 30, ~~2019~~2020

Net Sales

Net sales for the three months ended September 30, ~~2020~~2021 increased ~~$8.9~~$72.5 million, or ~~5.2%~~40.1%, to ~~$181.0~~$253.5 million as compared to the three months ended September 30, ~~2019.~~2020. The increase in net sales was driven primarily by a favorable model mix in our Malibu ~~segment~~and Cobalt segments, year over year price increases and increased unit volumes primarily due to the acquisition of Maverick Boat Group on December 31, 2020. We recognized an increase in ~~our Malibu~~net sales and ~~Pursuit segments.~~unit volumes across all three segments during the three months ended September 30, 2021. Unit volume for the three months ended September 30, ~~2020, decreased 92~~2021,

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increased 389 units, or ~~5.3%~~23.8%, to ~~1,635~~2,024 units as compared to the three months ended September 30, ~~2019.~~2020. Our unit volume ~~decreased because we have been managing our production levels in anticipation~~increased primarily due to the acquisition of ~~supply chain constraints,~~Maverick Boat Group on December 31, 2020.

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~~which we have begun to experience in recent weeks, and to adjust for the rapid introduction of new models and plant expansions at Cobalt and Pursuit.~~

Net sales ~~attributable~~attributable to our Malibu segment increased ~~$14.0~~$18.4 million, or ~~16.2%~~18.5%, to ~~$99.8~~$118.3 million for the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019.~~2020. Unit volumes attributable to our Malibu segment increased 1728 units for the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019.~~2020. The increase in net sales ~~and unit volumes~~ was driven primarily by ~~strong demand~~a favorable model mix and year over year price increases.

Net sales attributable to our Saltwater Fishing segment increased $40.1 million, or 109.2%, to $76.7 million, for ~~our new, larger models~~the three months ended September 30, 2021, compared to the three months ended September 30, 2020. Unit volume increased 339 units for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase in net sales was driven primarily by the acquisition of Maverick Boat Group on December 31, 2020 and ~~optional features.~~year over year price increases.

Net sales attributable to our Cobalt segment ~~decreased $5.7~~increased $14.0 million, or ~~11.3%~~31.6%, to ~~$44.5~~$58.5 million for the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019.~~2020. Unit volumes attributable to Cobalt ~~decreased 112~~increased 22 units for the three months ended September 30, ~~2020~~2021 compared to the three months ended September 30, ~~2019.~~2020. ~~Our unit volumes, and as a result our~~The increase in net sales for our Cobalt segment decreased during the three months ended September 30, 2020 driven by our lower production levels for our Cobalt segment at the end of fiscal year 2020. The planned lower production rates were driven by our investment in the plant to optimize efficiency and expand capacity, the introduction of three new Cobalt models during the quarter, and challenges around labor and supply as a result of the pandemic. While we are ahead of our planned production levels, we do not expect unit volume in this segment will result in year-over-year gains until the second half of this fiscal year. The decrease in our net sales for Cobalt was partially offset by a favorable product mix of our Cobalt models.

Net sales attributable to our Pursuit segment increased $0.6 million, or 1.7%, to $36.7 million, for the three months ended September 30, 2020, compared to the three months ended September 30, 2019. The increase was driven primarily by ~~unit volumes which increased three units for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.~~a favorable model mix and year over year price increases.

Overall consolidated net sales per unit increased ~~11.1%~~13.1% to ~~$110,694~~$125,246 per unit for the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019.~~2020. Net sales per unit for our Malibu segment increased ~~14.3%~~15.3% to ~~$96,829~~$111,664 per unit for the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019,~~ 2020, driven primarily by ~~higher~~a favorable model mix and year over year price increases. Net sales per unit for our Saltwater Fishing segment decreased 37.0% to $158,200 per unit for the three months ended September 30, 2021 driven primarily by mix of ~~new, more expensive~~ models ~~and optional features.~~ due mostly to the inclusion of lower priced models from our acquisition of Maverick Boat Group on December 31, 2020, partially offset by year over year price increases. Net sales per unit for our Cobalt segment increased ~~10.4%~~25.5% to ~~$97,122~~$121,913 per unit for the three months ended September 30, ~~2020,~~2021, compared to the three months ended September 30, ~~2019,~~ 2020, driven primarily by ~~higher sales of larger, more expensive models. Net sales per unit for our Pursuit segment decreased 0.4% to $251,171 per unit for the three months ended September 30, 2020.~~a favorable model mix and year over year price increases.

Cost of Sales

Cost of sales for the three months ended September 30, ~~2020~~2021 increased ~~$3.2~~$58.5 million, or ~~2.4%~~43.3%, to ~~$135.2~~$193.7 million as compared to the three months ended September 30, ~~2019.~~ 2020. The increase in cost of sales was driven ~~primarily~~ by higher costs related to higher net sales in all our segments, increased prices due to limited supply from supply chain disruptions and inflationary pressures that have increased prices on parts and components (as discussed above in "Outlook"). In the Malibu segment, higher per unit material and labor costs contributed $10.9 million to the increase in cost ~~associated~~of sales and were driven by an increased mix of larger product that corresponded with ~~producing new,~~higher net sales per unit. Within our Saltwater Fishing segment, higher volumes, primarily related to the acquisition of Maverick Boat Group, drove $29.9 million of increase in cost of sales which was also modestly impacted by higher per unit costs. In the Cobalt segment, higher per unit material and labor costs contributed $9.7 million to the increase in cost of sales and were driven by an increased mix of larger ~~models,~~product that corresponded with ~~expanded optional features which experienced increased demand during the three months ended September 30, 2020.~~higher net sales per unit.

Gross Profit

Gross profit for the three months ended September 30, ~~2020~~2021 increased ~~$5.7~~$14.0 million, or ~~14.3%~~30.6%, to ~~$45.7~~$59.8 million compared to the three months ended September 30, ~~2019.~~ 2020. The increase in gross profit was driven primarily by higher sales revenue ~~with a more favorable product mix~~ partially offset by the increased cost of ~~sales.~~sales for the reasons noted above. Gross margin for the three months ended September 30, ~~2020 increased 210~~2021 decreased 170 basis points from ~~23.2%~~25.3% to ~~25.3%.~~23.6% driven primarily by mix of models due mostly to the inclusion of lower priced models from the Maverick Boat Group, which we acquired on December 31, 2020.

Operating Expenses

Selling and marketing expenses for the three months ended September 30, ~~2020, decreased~~2021 increased $1.5 million, or ~~28.7%~~41.7% to ~~$3.6~~$5.1 million compared to the three months ended September 30, ~~2019~~2020. The increase was driven primarily ~~driven~~ by ~~decreased~~incremental selling and marketing expenses from the acquisition of Maverick Boat Group and by increased travel and promotional events ~~due mostly to restrictions imposed by COVID-19.~~that have since resumed in the three months ended September 30, 2021 after being suspended for COVID-19 during the three months ended September 30, 2020. As a percentage of sales, selling and marketing expenses ~~decreased 90 basis points~~remained flat compared to the same period in the prior fiscal year. General and administrative expenses for the three months ended September 30, ~~2020,~~2021 increased ~~$1.0~~$4.4 million, or ~~9.2%~~38.1%, to ~~$11.7~~$16.1 million as compared to the three months ended September 30, ~~2019~~2020 driven primarily by ~~higher legal~~an increase in compensation and personnel related expenses, travel related expenses, information technology infrastructure expenses and incremental general and administrative expenses due to ~~intellectual property litigation.~~ the acquisition of Maverick Boat Group offset by lower professional

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fees. As a percentage of sales, general and administrative expenses ~~increased~~decreased 10 basis points to 6.4% for the three months ended September 30, ~~basis points~~2021 compared to 6.5% for the three months ended September 30, ~~2020 compared to the three months ended September 30, 2019.~~2020. Amortization expense for the three months ended September 30, ~~2020 remained flat at $1.5~~2021 increased $0.3 million, or 21.8% to $1.9 million compared to the three months ended September 30, ~~2019.~~2020. The increase is due to amortization of intangibles acquired as part of the acquisition of Maverick Boat Group on December 31, 2020.

Other ~~(Income)~~ Expense, Net

Other ~~(income)~~ expense, net for the three months ended September 30, ~~2020 decreased~~2021 increased by ~~$0.6~~$0.1 million, or ~~52.8%~~22.9% to expense of ~~$0.5~~$0.7 million, compared to $0.6 million for the three months ended September 30, 2020 . The increase in other expense resulted primarily from increased interest expense due higher average outstanding debt during the three months ended September 30, 2021 compared to the three months ended September 30, ~~2019 primarily due to decreased interest expense.~~

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~~Interest expense decreased due to a lower interest rate and lower average outstanding debt during the quarter ended September 30, 2020 compared to the quarter ended September 30, 2019.~~

Provision for Income Taxes

Our provision for income taxes for the three months ended September 30, ~~2020,~~2021, increased ~~$1.5~~$1.7 million, or ~~31.4%~~27.0%, to ~~$6.4~~$8.1 million compared to the three months ended September 30, ~~2019.~~2020. The increase primarily resulted from increased pre-tax earnings. For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, our effective tax rate on each date of 22.4% ~~and 22.5%, respectively,~~ exceeded the statutory federal income tax rate of 21% primarily due to the impact of U.S. state taxes. This increase in tax rate 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.

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 applicable period, by the percentage ownership in the LLC not directly attributable to us. For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the weighted average non-controlling interest attributable to ownership interests in the LLC not directly attributable to us was ~~3.4%~~2.8% and ~~3.8%~~3.4%, respectively.

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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 and ~~non- cash~~non-cash compensation expense.We define adjusted EBITDA margin as adjusted EBITDA divided by net sales. Adjusted EBITDA and adjusted EBITDA margin are not measures of net income as determined by GAAP. Management believes adjusted EBITDA and adjusted EBITDA margin allow investors to evaluate the ~~company’s~~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 presentation of net income margin and adjusted EBITDA margin for the periods indicated (dollars in thousands):

Three Months Ended September 30,
2020 2019
Net income $ 22,038 $ 16,682
Provision for income taxes 6,367 4,844
Interest expense 556 1,167
Depreciation 3,486 3,097
Amortization 1,524 1,584
Professional fees 1
1,565 335
Stock-based compensation expense 2
811 677
Adjusted EBITDA $ 36,347 $ 28,386
Adjusted EBITDA Margin 20.1 % 16.5 %


	Three Months Ended September 30,
	2021			2020
Net income	$	27,933		$	22,038
Provision for income taxes	8,084			6,367
Interest expense	684			556
Depreciation	4,918			3,486
Amortization	1,856			1,524


Professional fees 1	—			1,565


Stock-based compensation expense 2	1,258			811




Adjusted EBITDA	$	44,733		$	36,347
Net Sales	$	253,497		$	180,984
Net Income Margin 3	11.0		%	12.2		%
Adjusted EBITDA Margin 3	17.6		%	20.1		%


(1)			~~Represents~~For the three months ended September 30, 2020, represents legal and advisory fees related to our litigation with Skier's Choice, Inc. See Note 1516 to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.

(2)			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 1314 to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.


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

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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~~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 September 30,
2020 2019
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. $ 21,093 $ 15,859
Provision for income taxes 6,367 4,844
Professional fees 1
1,565 335
Acquisition and integration related expenses 2
1,073 1,073
Fair market value adjustment for interest rate swap 3
— 38
Stock-based compensation expense 4
811 677
Net income attributable to non-controlling interest 5
945 823
Fully distributed net income before income taxes 31,854 23,649
Income tax expense on fully distributed income before income taxes 6
7,518 5,558
Adjusted fully distributed net income $ 24,336 $ 18,091


	Three Months Ended September 30,
	2021		2020
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.	$	26,944	$	21,093
Provision for income taxes	8,084		6,367
Professional fees 1	—		1,565
Acquisition and integration related expenses 2	1,677		1,073

Stock-based compensation expense 3	1,258		811





Net income attributable to non-controlling interest 4	989		945
Fully distributed net income before income taxes	38,952		31,854
Income tax expense on fully distributed income before income taxes 5	9,271		7,518
Adjusted fully distributed net income	$	29,681	$	24,336

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		Three Months Ended September 30,		Three Months Ended September 30,
		2020	2019			2021	2020
Reconciliation of denominator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock:	Reconciliation of denominator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock:				Reconciliation of denominator for net income available to Class A Common Stock per share to Adjusted Fully Distributed Net Income per Share of Class A Common Stock:
Weighted average shares outstanding of Class A Common Stock used for basic net income per share:	Weighted average shares outstanding of Class A Common Stock used for basic net income per share:	20,651,929	20,830,121		Weighted average shares outstanding of Class A Common Stock used for basic net income per share:	20,849,981	20,651,929
Adjustments to weighted average shares of Class A Common Stock:	Adjustments to weighted average shares of Class A Common Stock:				Adjustments to weighted average shares of Class A Common Stock:
Weighted-average LLC units held by non-controlling unit holders 7		714,261	830,152
Weighted-average unvested restricted stock awards issued to management 8		179,048	126,516
Weighted-average LLC Units held by non-controlling unit holders 6					Weighted-average LLC Units held by non-controlling unit holders 6	600,919	714,261
Weighted-average unvested restricted stock awards issued to management 7					Weighted-average unvested restricted stock awards issued to management 7	224,165	179,048
Adjusted weighted average shares of Class A Common Stock outstanding used in computing Adjusted Fully Distributed Net Income per Share of Class A Common Stock:	Adjusted weighted average shares of Class A Common Stock outstanding used in computing Adjusted Fully Distributed Net Income per Share of Class A Common Stock:	21,545,238	21,786,789		Adjusted weighted average shares of Class A Common Stock outstanding used in computing Adjusted Fully Distributed Net Income per Share of Class A Common Stock:	21,675,065	21,545,238

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

Three Months Ended September 30,
2020 2019
Net income available to Class A Common Stock per share $ 1.02 $ 0.76
Impact of adjustments:
Provision for income taxes 0.31 0.23
Professional fees 1
0.08 0.02
Acquisition and integration related expenses 2
0.05 0.05
Fair market value adjustment for interest rate swap 3
— —
Stock-based compensation expense 4
0.04 0.03
Net income attributable to non-controlling interest 5
0.05 0.04
Fully distributed net income per share before income taxes 1.55 1.13
Impact of income tax expense on fully distributed income before income taxes 6
(0.36) (0.27)
Impact of increased share count 9
(0.06) (0.03)
Adjusted Fully Distributed Net Income per Share of Class A Common Stock $ 1.13 $ 0.83


	Three Months Ended September 30,
	2021		2020
Net income available to Class A Common Stock per share	$	1.29	$	1.02
Impact of adjustments:
Provision for income taxes	0.39		0.31
Professional fees 1	—		0.08
Acquisition and integration related expenses 2	0.08		0.05

Stock-based compensation expense 3	0.06		0.04





Net income attributable to non-controlling interest 4	0.05		0.05
Fully distributed net income per share before income taxes	1.87		1.55
Impact of income tax expense on fully distributed income before income taxes 5	(0.44)		(0.36)
Impact of increased share count 8	(0.06)		(0.06)
Adjusted Fully Distributed Net Income per Share of Class A Common Stock	$	1.37	$	1.13

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(1)			~~Represents~~For the three months ended September 30, 2020, represents legal and advisory fees related to our litigation with Skier's Choice, Inc. See Note 1516 to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
(2)			For the three months ended September 30, ~~2020 and 2019,~~2021, represents amortization of intangibles acquired in connection with the ~~acquisition~~acquisitions of Maverick Boat Group, Pursuit and Cobalt. For the three months ended September 30, 2020, represents amortization of intangibles acquired in connection with the acquisitions of Pursuit and Cobalt.

(3)			~~Represents the change in the fair value of our interest rate swap entered into on July 1, 2015. The swap matured on March 31, 2020.~~
~~(4)~~			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 1314 to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.


~~(5)~~(4)			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.
~~(6)~~(5)			Reflects income tax expense at an estimated normalized annual effective income tax rate of ~~23.6%~~23.8% and ~~23.5%~~23.6% of income before income taxes for the three month periods ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, assuming the conversion of all LLC Units into shares of Class A Common Stock. The estimated normalized annual effective income tax rate for fiscal year ~~2021~~2022 is based on the federal statutory rate plus a blended state rate adjusted for the research and development tax credit, the foreign derived intangible income deduction, and foreign income taxes attributable to our Australian subsidiary.
~~(7)~~(6)			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.
~~(8)~~(7)			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.
~~(9)~~(8)			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.

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Liquidity and Capital Resources

Our primary sources of funds are cash provided by operating activities and borrowings under our credit agreement. Our primary use of funds has been for capital investments, repayments under our debt arrangements, acquisitions ~~cash distributions~~

~~to members of the LLC~~ and cash payments under our tax receivable agreement. The following table summarizes the cash flows from operating, investing and financing activities (dollars in thousands):

Three Months Ended September 30,
2020 2019
Total cash provided by (used in):
Operating activities $ 32,762 $ 27,713
Investing activities (5,432) (10,704)
Financing activities (8,752) (11,930)
Impact of currency exchange rates on cash balances 73 (126)
Increase in cash $ 18,651 $ 4,953


	Three Months Ended September 30,
	2021		2020
Total cash (used in) provided by:
Operating activities	$	23,686	$	32,762
Investing activities	(13,892)		(5,432)
Financing activities	(21,516)		(8,752)
Impact of currency exchange rates on cash balances	(257)		73
(Decrease) increase in cash	$	(11,979)	$	18,651

Comparison of the Three Months Ended September 30, ~~2020~~2021 to the Three Months Ended September 30, ~~2019~~2020

Operating Activities

Net cash provided by operating activities was $23.7 million for the three months ended September 30, 2021, compared to $32.8 million for the three months ended September 30, 2020, ~~compared to $27.7 million for the three months ended September 30, 2019, an increase~~a decrease of ~~$5.0~~$9.1 million. The ~~increase~~decrease in cash provided by operating activities primarily resulted from a net decrease in operating assets and liabilities of $15.6 million related to the timing of collections of accounts receivables, payments for accruals and payables, and purchases of inventory offset by an increase of ~~$6.4~~$6.5 million ~~due to an increase~~ in net income (after consideration of non-cash items included in net income, primarily related to depreciation, amortization, deferred tax assets and non-cash compensation) partially offset by a net decrease in operating assets and liabilities of $1.4 million related to the timing of collections of accounts receivables, payments for accruals and payables, and purchases of inventory..

Investing Activities

Net cash used in investing activities was $13.9 million for the three months ended September 30, 2021, compared to $5.4 million for the three months ended September 30, 2020, ~~compared to $10.7 million for the three months ended September 30, 2019, a decrease~~an increase of ~~$5.3~~$8.5 million. The ~~decrease~~increase in cash used for investing activities was primarily related to ~~a reduction in~~increased capital expenditures compared to ~~the capital outlays for our expansion activities at our Pursuit and Cobalt plants in~~ the three months ended September 30, ~~2019.~~2020.

Financing Activities

Net cash used in financing activities was $21.5 million for the three months ended September 30, 2021, compared to net cash used by financing activities of $8.8 million for the three months ended September 30, 2020, ~~compared to net cash used in financing activities~~a change of ~~$11.9 million for~~$12.7 million. During the three months ended September 30, ~~2019, a decrease~~2021, we repaid $20 million of ~~$3.1 million.~~borrowings under our revolving credit facility, we repaid $0.3 million on our term loan, paid $0.5 million on taxes for shares withheld upon the vesting of restricted stock awards, and paid $0.7 million in distributions to LLC Unit holders. During the three months ended September 30, 2020, we repaid $8.8 million of revolving debt and we paid $0.1 million in distributions to LLC unit holders and $0.1 million on taxes for shares withheld on restricted stock vestings and we received $0.3 million in proceeds from the exercise of stock options. During the three months ended September 30, 2019, we repurchased $11.1 million of our Class A Common Stock under our previously announced stock repurchase program, which expired on July 1, 2020. We paid $0.6 million in distributions to LLC unit holders and $0.2 million on taxes for shares withheld on restricted stock vestings during the three months ended September 30, 2019.

Loans and Commitments

We amended our existing credit agreement on December 30, 2020 in connection with our acquisition of Maverick Boat Group. As a result of that amendment, we currently have a revolving credit facility with borrowing capacity of up to ~~$120.0~~$170.0 million and ~~a $75.0~~$99.1 million aggregate principal amount of term ~~loan~~loans outstanding. As of September 30, ~~2020,~~2021, we had ~~no amounts~~$25.0 million outstanding under our revolving credit facility and ~~$1.2~~$1.3 million in outstanding letters of ~~credit. We repaid $8.8~~credit, with $143.7 million ~~on our revolving credit facility in September 2020. The~~available for borrowing. Our revolving credit facility matures on July 1, 2024, our term loan in a principal amount of $25.0 million, of which $24.1 million is outstanding as of September 30, 2021 (which we refer to as the incremental term loan) matures on July 1, 2024 and our term loans in a principal amount of $75.0 million (which we refer to as the existing term loans, and together with the incremental term loan, the term ~~loan matures~~loans) mature on July 1, 2022. The revolving credit facility and term ~~loan~~loans are governed by a credit agreement with ~~Malibu~~ Boats LLC ~~(“Boats LLC”)~~ as the borrower and Truist ~~Financial Corp.,~~Bank, as the administrative agent, swingline lender and issuing bank. The obligations of Boats LLC under the credit agreement are guaranteed by ~~Malibu Boats Holdings,~~the LLC and, subject to certain exceptions, the present and future domestic subsidiaries of Boats LLC, and all such obligations are secured by substantially all of the assets of the ~~Malibu Boats Holdings~~ LLC, Boats LLC and such subsidiary guarantors. Malibu Boats, Inc. is not a party to the credit agreement.

Borrowings under our credit agreement bear interest at a rate equal to either, at our option, (i) the highest of the prime rate, the Federal Funds Rate plus 0.5%, or one-month LIBOR plus 1% (the “Base Rate”) or (ii) LIBOR, in each case plus an

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applicable margin ranging from 1.25% to 2.25% with respect to LIBOR borrowings and 0.25% to 1.25% with respect to Base

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Rate borrowings. The applicable margin will be based upon the consolidated leverage ratio of ~~Malibu Boats Holdings,~~the LLC and its subsidiaries calculated on a consolidated basis. As of September 30, ~~2020,~~2021, the interest rate on our term ~~loan~~loans and revolving credit facility was ~~1.40%~~1.33%. We are required to pay a commitment fee for the unused portion of the revolving credit facility, which will range from 0.20% to 0.40% per annum, depending on ~~Malibu Boats Holdings,~~the LLC’s and its subsidiaries’ consolidated leverage ratio.

The credit agreement permits prepayment of the term ~~loan~~loans without any penalties. ~~On August 17, 2017, we made a voluntary principal~~The existing term loans require an amortization payment on the term loan in the amount of $50.0 million with a portion of the net proceeds from our equity offering completed on August 14, 2017. We exercised our option to apply the prepayment in forward order to principal installments on our term loan through December 31, 2021 and a portion of the principal installments due on March 31, 2022. As a result, the term loan is subject to a quarterly installment of approximately $3.0 million on March 31, 2022 and the balance of the existing term loans are due on the scheduled maturity date of July 1, 2022. The incremental term loan of $25.0 million is subject to quarterly amortization at a rate of 5.0% per year through December 31, 2022, 7.5% per year through June 30, 2024 and the balance of the incremental term loan is due on the scheduled maturity date of July 1, ~~2022.~~2024. The credit agreement is also ~~subject to~~requires prepayments from the net cash proceeds received by Boats LLC or any guarantors from certain asset sales and recovery events, subject to certain reinvestment rights, and from excess cash flow, subject to the terms and conditions of the credit agreement. ~~As of September 30, 2020, the outstanding principal amount of our term loan and revolving credit facility was $75.0 million.~~

The credit agreement contains certain customary representations and warranties, and notice requirements for the occurrence of specific events such as the occurrence of any event of default, or pending or threatened litigation. The credit agreement also requires compliance with certain customary financial covenants, including a minimum ratio of EBITDA to fixed charges and a maximum ratio of total debt to EBITDA. The credit agreement contains certain restrictive covenants, which, among other things, place limits on certain activities of the loan parties under the credit agreement, such as the incurrence of additional indebtedness and additional liens on property and limit the future payment of dividends or distributions. For example, the credit agreement generally prohibits ~~Malibu Boats Holdings,~~the LLC, Boats LLC and the subsidiary guarantors from paying dividends or making distributions, including to us. The credit facility permits, however, (i) distributions based on a member’s allocated taxable income, (ii) distributions to fund payments that are required under the LLC’s tax receivable agreement, (iii) purchase of stock or stock options of the LLC from former officers, directors or employees of loan parties or payments pursuant to stock option and other benefit plans up to ~~$2.0~~$3.0 million in any fiscal year, and (iv) share repurchase payments up to $35.0 million in any fiscal year subject to one-year carry forward and compliance with other financial covenants. In addition, the LLC may make dividends and distributions of up to $10.0 million in any fiscal year, subject to compliance with other financial covenants.

~~Potential~~Potential Impact of LIBOR Transition

The Chief Executive of the U.K. Financial Conduct Authority (the “FCA”), which regulates the London Interbank Offered Rate, or LIBOR, has announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. ~~That announcement indicates~~However, for U.S dollar LIBOR, the relevant date has been deferred to at least June 30, 2023 for certain tenors (including overnight and one, three, six and 12 months), at which time the LIBOR administrator has indicated that it intends to cease publication of U.S. dollar LIBOR. Despite this deferral, the LIBOR administrator has advised that no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021. These actions indicate that the continuation of U.S. LIBOR on the current basis cannot and will not be guaranteed after ~~2021.~~June 30, 2023. Moreover, it is possible that U.S. LIBOR will be discontinued or modified prior to ~~2021.~~June 30, 2023.

All of our ~~$75.0~~$124.1 million of debt outstanding under our credit agreement as of September 30, ~~2020~~2021 bears interest at a floating rate that uses LIBOR as the applicable reference rate to calculate the interest. Our credit agreement provides that, if it is publicly announced that the administrator of LIBOR has ceased or will cease to provide LIBOR, if it is publicly announced by the applicable regulatory supervisor that LIBOR is no longer representative or if either the administrative agent ~~has determined that adequate means do not exist for ascertaining LIBOR~~ or ~~that LIBOR does not adequately and fairly reflect~~lenders holding 50% of the ~~cost to lenders for making, funding or maintaining their loans, then all~~aggregate principal amount of our ~~outstanding~~revolving commitments and term loans ~~under~~elect, we and the credit agreement will be converted into loans that accrue interest at the alternative Base Rate described above under “Loans and Commitments” on the last day of such interest period that determination is made. Further, the lenders underadministrative agent may amend our credit agreement ~~will no longer be obligated~~ to ~~make loans using~~replace LIBOR with an alternative benchmark rate. This alternative benchmark rate may include a forward-looking term rate that is based on the secured overnight financing rate, also known as SOFR, published by the ~~applicable reference rate.~~ Federal Reserve Bank of New York.

In addition, our tax receivable agreement provides that, if for any reason the LLC is not able to make a tax distribution in an amount that is sufficient to make any required payment under the tax receivable agreement or we otherwise lack sufficient funds, interest would accrue on any unpaid amounts at LIBOR plus 500 basis points until they are paid. Our tax receivable agreement, however, does not provide for an alternative reference rate to LIBOR and, while we do not currently anticipate failing to pay any amounts owed under our tax receivable agreement, it is unclear how we would determine interest on any such amounts should we fail to pay as required under our tax receivable agreement.

If the rate used to calculate interest on our outstanding floating rate debt under our credit agreement that currently uses LIBOR were to increase by 1.0% either as a result of an increase in LIBOR or the result of the use of the alternative ~~Base Rate,~~benchmark rate, we would expect to incur additional interest expense on such indebtedness as of September 30, ~~2020~~2021 of approximately ~~$0.8~~ $1.2 million on an annualized basis. While we do not expect the potential impact of any LIBOR transition to have a material effect on our financial results based on our currently outstanding debt, uncertainty as to the nature of potential changes to LIBOR,

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fallback provisions, alternative reference rates or other reforms could adversely impact our interest expense on our floating rate debt that currently uses LIBOR as the applicable reference rate. In addition, any alternative reference rates to LIBOR may result in interest that does not correlate over time with the payments that would have been made on our indebtedness if LIBOR

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was available in its current form. Further, the discontinuance or modification of LIBOR and uncertainty of an alternative reference rate may result in the increase in the cost of future indebtedness, which could have a material adverse effect on our financial condition, cash flow and results of operations. We intend to closely monitor the financial markets and the use of fallback provisions and alternative reference rates in anticipation of the discontinuance or modification of U.S. LIBOR by ~~the end of 2021.~~June 30, 2023.

Future Liquidity Needs and Capital Expenditures

Management believes that our existing cash ~~borrowing capacity under our revolving credit facility~~ and cash flows from operations will be sufficient to fund our operations for the next 12 months. We estimate that approximately ~~$3.6~~$3.8 million will be due under the tax receivable agreement within the next 12 months. In accordance with the tax receivable agreement, the next payment is anticipated to occur approximately 75 days after filing the federal tax return which is due on April 15, ~~2021.~~2022.

Our future capital requirements 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 the COVID-19 pandemic and ~~its~~ongoing supply chain disruptions and the impact on the general economy. Our liquidity needs during this uncertain time will depend on multiple factors, including our ability to continue operations and production of boats, the COVID-19 pandemic’s effects on our dealers, suppliers and retail customers, the availability of sufficient amounts of financing, and our operating performance.

Stock Repurchase Program

On ~~August 27, 2020,~~November 3, 2021, our Board of Directors authorized a stock repurchase program to allow for the repurchase of up to ~~$50.0~~$70.0 million of our Class A Common Stock and the LLC's LLC Units (the “Repurchase Program”) for the period from ~~September 2, 2020~~November 8, 2021 to ~~July 1, 2021.~~November 8, 2022. We intend to fund repurchases under the Repurchase Program from cash on hand. We did not repurchase any shares of our Class A Common Stock during the three months ended September 30, 2020. As of September 30, 2020, we may repurchase up to $50.0 million in shares of Class A Common Stock and LLC Units under the program.

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Contractual Obligations and Commitments

As of September 30, ~~2020,~~2021, our continuing contractual obligations were as follows:

Payments Due by Period
Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years
Bank debt 1
$ 75,000 $ — $ 75,000 $ — $ —
Interest expense 2
2,181 1,257 924 — —
Operating leases 3
17,667 2,509 4,897 4,810 5,451
Purchase obligations 4
78,616 78,616 — — —
Payments pursuant to tax receivable agreement 5
49,995 3,589 7,579 8,094 30,733
Total $ 223,459 $ 85,971 $ 88,400 $ 12,904 $ 36,184


	Payments Due by Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Bank debt 1	$	124,063	$	76,250	$	47,813	$	—	$	—
Interest expense 2	2,503		1,402		1,101		—		—
Operating leases 3	15,274		2,482		5,086		4,511		3,195
Purchase obligations 4	197,494		197,494		—		—		—
Payments pursuant to tax receivable agreement 5	48,214		3,773		8,006		8,581		27,854
Total	$	387,548	$	281,401	$	62,006	$	13,092	$	31,049


(1)			Principal payments on our outstanding bank debt per terms of our credit agreement, which is comprised of a ~~$75.0~~$100.0 million term loan, of which $99.1 million is outstanding as of September 30, 2021 and ~~$120.0~~$170.0 million revolving credit facility, of which ~~no amount~~$25.0 million was outstanding as of September 30, ~~2020.~~2021. Assumes no additional borrowings or repayments under our revolving credit facility prior to its maturity. The balance of outstanding term loans matures on July 1, 2022, the incremental term loan matures on July 1, ~~2022~~2024 and the revolving credit facility matures on July 1, 2024.
(2)			Interest payments on our outstanding term loans under our credit agreement. Our term loan bears interest at variable rates. We have calculated future interest obligations based on the interest rate as of September 30, ~~2020.~~2021.
(3)			Pursuant to the adoption of ASC Topic 842, Leases, as of July 1, 2019 our lease liability for all leases with terms greater than 12 months as represented on the balance sheet respective of maturity.
(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 ~~2021.~~2022 and 2023.
(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.

Off Balance Sheet Arrangements

In connection with our dealers’ wholesale floor plan financing of boats, we have entered into repurchase arrangements with various lending institutions. The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending institution through payment date by the dealer, generally not exceeding two and a half years. Such arrangements are customary in the industry and our exposure to loss under such arrangements is limited by the resale value of the inventory which is required to be repurchased. Refer to Note 1516 of our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report for further information on repurchase commitments.

Seasonality

Our dealers experience seasonality in their business. Retail demand for boats is seasonal, with a significant majority of sales occurring during peak boating season, which coincides with our first and fourth fiscal quarters. In order to minimize the impact of this seasonality on our business, we manage our manufacturing processes and structure dealer incentives to tie our annual volume rebates program to consistent ordering patterns, encouraging dealers to purchase our products throughout the year. In this regard, we may offer free flooring incentives to dealers from the beginning of our model year through April 30 of each year. Further, in the event that a dealer does not consistently order units throughout the year, such dealer’s rebate is materially reduced. We may offer off-season retail promotions to our dealers in seasonally slow months, during and ahead of boat shows, to encourage retail demand.

Critical Accounting Policies

As of September 30, ~~2020,~~2021, there were no other significant changes in the application of our critical accounting policies or estimation procedures from those presented in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2020.~~2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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Refer to our Annual Report on Form 10-K for the year ended June 30, ~~2020,~~2021, for a complete discussion on the Company’s market risk. There have been no material changes in market risk from those disclosed in the Company's Form 10-K for the year ended June 30, ~~2020.~~2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As of the end of the period covered by this Quarterly Report, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, ~~2020.~~2021.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended September 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II - Other Information

Item 1. Legal Proceedings

The discussion of legal matters under the section entitled "Legal Proceedings" is incorporated by reference from Note 1 516 of our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.

Item 1A. Risk Factors

During the quarter ended September 30, ~~2020,~~2021, there were no material changes to the risk factors discussed in Part I, Item 1A. "Risk Factors” of our Annual Report on Form 10-K for the year ended June 30, ~~2020.~~2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

On July 29, 2020, in connection with the exchange of limited liability company interests of the LLC by a member of the LLC, the Company issued a total of 12,772 shares of its Class A Common Stock, par value $0.01 per share for nominal consideration to such member in reliance on the exemption under Section 4(a)(2) of the Securities Act.

On August 12, 2020, in connection with the exchange of limited liability company interests of the LLC by a member of the LLC, the Company issued a total of 12,011 shares of its Class A Common Stock, par value $0.01 per share for nominal consideration to such member in reliance on the exemption under Section 4(a)(2) of the Securities Act.

On September 1, 2020, in connection with the exchange of limited liability company interests of the LLC by a member of the LLC, the Company issued a total of 3,000 shares of its Class A Common Stock, par value $0.01 per share for nominal consideration to such member in reliance on the exemption under Section 4(a)(2) of the Securities Act.

~~Repurchase of Class A Common Stock~~

On August 27, 2020, our Board of Directors authorized a new stock repurchase program for the repurchase of up to $50.0 million of Class A Common Stock and the LLC Units for the period from September 2, 2020 to July 1, 2021. No shares have been repurchased under our New Repurchase Program during the quarter ended September 30, 2020. As of September 30, 2020, we may repurchase up to $50.0 million in shares of Class A Common Stock and LLC Units under the program.

In September 2020, the Company repurchased 2,939 shares of Class A Common Stock at $50.25 per share from employees to satisfy tax withholding obligations incurred in connections with the vesting of restricted stock.None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

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Item 6. Exhibits


Exhibit No.						Description
3.1						Certificate of Incorporation of Malibu Boats, Inc. 1
3.2						Bylaws of Malibu Boats, Inc. 1
3.3						Certificate of Formation of Malibu Boats Holdings, LLC 1
3.4						First Amended and Restated Limited Liability Company Agreement of Malibu Boats Holdings, LLC, dated as of February 5, 2014 2
3.4.1						First Amendment, dated as of February 5, 2014, to First Amended and Restated Limited Liability Company Agreement of Malibu Boats Holdings, LLC 3
3.4.2						Second Amendment, dated as of June 27, 2014, to First Amended and Restated Limited Liability Company Agreement of Malibu Boats Holdings, LLC 4
4.1						Description of Class A Common Stock 5
4.2						Form of Class A Common Stock Certificate 1
4.3						Form of Class B Common Stock Certificate 1
4.4						Exchange Agreement, dated as of February 5, 2014, by and among Malibu Boats, Inc. and Affiliates of Black Canyon Capital LLC and Horizon Holdings, LLC 2
4.5						Exchange Agreement, dated as of February 5, 2014, by and among Malibu Boats, Inc. and the Members of Malibu Boats Holdings, LLC 2
4.6						Tax Receivable Agreement, dated as of February 5, 2014, by and among Malibu Boats, Inc., Malibu Boats Holdings, LLC and the Other Members of Malibu Boats Holdings, LLC 2
31.1						Certificate of the Chief Executive Officer of Malibu Boats, Inc. pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certificate of the Chief Financial Officer of Malibu Boats, Inc. pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32						Certification of the Chief Executive Officer and Chief Financial Officer of Malibu Boats, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101						The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2020~~2021 were formatted in Inline XBRL: (i) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2020,~~2021, formatted in Inline XBRL (Included as Exhibit 101).

(1) Filed as an exhibit to Amendment No. 1 to the Company’s registration statement on Form S-1 (Registration No. 333-192862) filed on January 8, 2014.

(2) Filed as an exhibit to the Company’s Current Report on Form 8-K (File No. 001-36290) filed on February 6, 2014.

(3) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q/A (File No. 001-36290) filed on May 13, 2014.

(4) Filed as an exhibit to the Company's Current Report on Form 8-K (File No. 001-36290) filed on June 27, 2014.

(5) Filed as an exhibit to the Company’s Annual Report on Form 10-K (File No. 001-36290) filed on August 29, 2019.

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


November ~~6, 2020~~4, 2021	MALIBU BOATS, INC.

	By:	/s/ Jack Springer
		Jack Springer, Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Wayne Wilson
		Wayne Wilson, Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

3741


Fiscal years ending June 30:		Amount
	Remainder of 2021	$	4,536
	2022	4,559
	2023	4,422
	2024	4,422
	2025	4,419
	2026 and thereafter	52,563
		$	74,921


	Amount
Remainder of 2021	$	1,904
2022	2,403
2023	2,454
2024	2,582
2025	2,310
2026 and thereafter	6,014
Total	17,667
Less imputed interest	(2,116)
Present value of lease liabilities	$	15,551