Malibu Boats, Inc. — FY2022 Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2022, with FY2021 comparisons. This is an annual report, not a standalone 2021 Q4 filing; the filing separately reports the quarter ended June 30, 2022. All dollar amounts below are in millions unless stated otherwise.
Business context
Malibu designs, manufactures and sells recreational powerboats through eight brands, reported in three segments: Malibu and Axis performance sport boats; Saltwater Fishing, including Pursuit and Maverick Boat Group brands; and Cobalt. It sells primarily through independent dealers. The company reported more than 400 dealer locations globally as of July 1, 2022.
Financial performance
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Net sales | $1,214.9 | $926.5 | +31.1% |
| Gross profit / margin | $310.1 / 25.5% | $236.5 / 25.5% | +31.1% profit; margin flat |
| Operating income / margin | $213.8 / 17.6% | $149.8 / 16.2% | +42.8% |
| Net income | $163.4 | $114.3 | +43.0% |
| Net income attributable to Malibu Boats, Inc. | $157.6 | $109.8 | +43.5% |
| Diluted EPS | $7.51 | $5.23 | +43.6% |
| Adjusted EBITDA (non-GAAP) / margin | $246.5 / 20.3% | $190.1 / 20.5% | +29.7%; margin down 0.2 points |
| Operating cash flow | $164.8 | $131.3 | +$33.5 |
| Capital expenditures | $55.1 | $30.7 | +$24.4 |
Revenue growth reflected higher unit volumes, price increases and favorable product mix; Maverick Boat Group, acquired in December 2020, also contributed to the comparison. Units increased 13.1% to 9,255, while revenue per unit rose 16.0% to $131,267. Cost inflation and supply disruptions increased material, labor, component and transportation costs. Gross margin held at 25.5%; operating margin improved as general and administrative expense fell as a share of sales.
| Segment | FY2022 revenue | Year-over-year change |
|---|---|---|
| Malibu | $607.5 | +25.6% |
| Saltwater Fishing | $341.9 | +40.8% |
| Cobalt | $265.4 | +32.7% |
For the quarter ended June 30, 2022, net sales were $353.2, gross profit $89.6, operating income $65.4 and net income $49.7. Basic and diluted EPS were $2.34 and $2.31, respectively.
Cash, debt and liquidity
- Cash was $83.7 at June 30, 2022, versus $41.5 a year earlier. Current assets were $298.5 and current liabilities $139.3.
- Net cash provided by operating activities was $164.8. Investing activities used $61.6, including $55.1 of capital expenditures; financing activities used $60.4. Cash increased $42.3 during the year.
- Balance-sheet debt was $119.6, net of unamortized issuance costs, comprising $97.0 outstanding on the revolving facility and $23.1 of term loans. The company reported $71.6 of available borrowing capacity under its then-current facility at June 30, 2022.
- On July 8, 2022, the company entered a new revolving credit agreement with capacity up to $350.0 million and maturity in July 2027; $121.7 was drawn at closing to refinance prior-facility loans and pay fees and expenses. Borrowings bear variable rates tied to SOFR or a base rate, plus leverage-based margins.
- Management said cash, operating cash flow and facility availability should fund operations for at least the next 12 months. FY2023 capital expenditures were expected to be $65–$70 million. About $4.0 million was estimated due under the tax receivable agreement within 12 months.
Outlook, commentary and material risks
- Management anticipated supply-chain disruptions would constrain wholesale production through at least the remainder of calendar 2022. It expected dealer restocking to support FY2023 wholesale shipments, with retail activity a key driver later in the year; no specific revenue or earnings guidance was provided.
- Dealer inventories remained below historical levels; Malibu and Cobalt inventories increased modestly by year-end, while Saltwater Fishing dealers remained low on inventory. Retail demand was strong in FY2022 but below record FY2021 levels.
- Elevated input, freight and labor costs were expected to persist into calendar 2022 and potentially beyond. Price surcharges introduced in December 2021 became permanent price changes at the start of FY2023. Management cited rising interest rates, fuel prices, inflation and uncertain consumer confidence as potential demand headwinds.
- Significant litigation contingency: In the Batchelder I product-liability case, a judgment against subsidiary Malibu Boats, LLC could result in liability of up to $140 million plus 6.25% post-judgment interest; plaintiffs also claim about $56 million in attorney fees. The company appealed after post-trial motions were denied on July 17, 2022; payment was expected to be stayed during appeals. Management described a reasonably possible loss range of $0–$140 million, plus interest, and did not record a reserve. Applicable insurance coverage may be limited to $26 million.
- Other risks include dependence on key engine suppliers (GM agreement for Malibu/Axis engines and Yamaha agreements for many outboard models were due to expire in 2023), dealer concentration and floor-plan financing exposure, variable-rate debt, warranty estimation uncertainty, and execution of a new ERP system. The warranty liability was $38.7 million; management noted limited historical claims experience for some current five-year warranty periods.
- The company repurchased 554,995 shares for $34.6 million during FY2022; $35.4 million remained authorized under the program at year-end. It had not paid cash dividends and did not anticipate doing so in the foreseeable future.
Most important facts for investors to verify
- Progress and final outcome of the Batchelder appeals, potential attorney-fee award, insurance recoveries and any resulting cash or accounting impact.
- Whether supply availability improves enough to support planned production and dealer restocking, and whether retail demand holds up as rates, fuel costs and prices rise.
- Realized pricing versus higher material, labor and freight costs, and the resulting effect on gross margin and adjusted EBITDA margin.
- Debt outstanding, facility capacity, variable interest expense and compliance with credit-agreement covenants following the July 2022 refinancing.
- Actual FY2023 capital spending, warranty claims relative to the $38.7 million reserve, and cash required for the tax receivable agreement.
The financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting as of June 30, 2022.