Business context and reporting period
Malibu Boats, Inc. designs, manufactures and sells recreational powerboats under eight brands, across performance sport, saltwater fishing and sterndrive/outboard markets. This 10-K covers the fiscal year ended June 30, 2021—not fiscal 2020; it also reports the June 2021 quarter. Malibu acquired Maverick Boat Group on December 31, 2020, adding Cobia, Pathfinder, Maverick and Hewes to its portfolio.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net sales | $926.5 million | $653.2 million |
| Gross profit / margin | $236.5 million / 25.5% | $149.3 million / 22.8% |
| Operating income | $149.8 million | $85.3 million |
| Net income | $114.3 million | $64.7 million |
| Net income attributable to Malibu Boats, Inc. | $109.8 million | $61.6 million |
| Diluted EPS | $5.23 | $2.95 |
| Adjusted EBITDA / margin | $190.1 million / 20.5% | $110.9 million / 17.0% |
| Operating cash flow | $131.3 million | $94.1 million |
| Cash at year-end | $41.5 million | $33.8 million |
FY2021 unit volume rose 27.0% to 8,185 boats; net sales per unit increased 11.7% to $113,197. In the June 2021 quarter, sales were $276.7 million and net income was $35.0 million, versus $118.7 million and $6.5 million in the June 2020 quarter.
At June 30, 2021, total assets were $742.8 million and total stockholders’ equity was $381.2 million. Debt principal outstanding was $144.4 million ($99.4 million term loans and $45.0 million revolver borrowings); the balance-sheet debt carrying amount, net of issuance costs, was $143.3 million. The $170 million revolver had $123.8 million available after outstanding borrowings and letters of credit. Current assets were $212.8 million versus current liabilities of $134.4 million. The company reported covenant compliance and said existing cash and operating cash flows should fund operations for the next 12 months.
Material changes versus prior year
- Sales increased 41.9% and net income increased 76.8%, reflecting higher wholesale demand, recovery from FY2020 COVID-related shutdowns, favorable model mix and six months of Maverick Boat Group results.
- Gross margin improved 270 basis points to 25.5%; adjusted EBITDA margin rose 350 basis points to 20.5%.
- Saltwater Fishing sales nearly doubled to $242.9 million, substantially reflecting the Maverick acquisition and increased Pursuit volume. Malibu sales rose 36.3% to $483.5 million; Cobalt sales rose 14.5% to $200.1 million despite lower unit volume.
- Operating cash flow increased, but investing cash outflow rose to $181.1 million, primarily due to the $150.7 million Maverick acquisition. Capital expenditures were $30.7 million.
- Debt increased to finance the acquisition; the company added a $25 million term loan and expanded revolver capacity from $120 million to $170 million.
Outlook, risks and unusual items
Management expected dealer restocking to support wholesale shipments and financial performance through FY2022, with strength potentially continuing into FY2023. It said more than 90% of new boat orders were expected to retail-sell in the first quarter of FY2022. These expectations were subject to demand, supply-chain and economic conditions; the filing does not provide numerical revenue or earnings guidance.
COVID-19-related shutdowns and supply constraints affected production and shipments. Strong retail demand, lower production and prior-year shutdowns left dealer inventories below prior-year levels. Management cited continuing labor, logistics and supplier-input constraints, as well as rising material and transportation costs, as risks to planned production and restocking.
Other material risks include discretionary and seasonal demand, interest-rate sensitivity, dependence on independent dealers and key engine suppliers (GM for Malibu/Axis engines and Yamaha for most outboard models), warranty and product-liability exposure, acquisition integration, and debt covenant and refinancing risk. All $144.4 million of debt principal used floating rates; a 1 percentage-point rate increase was estimated to add about $1.4 million of annual interest expense. The existing $75 million term loan balance was due July 1, 2022; other term debt and the revolver mature in 2024.
Unusual and contingent items include the Maverick acquisition and associated integration expenses; $5.8 million of professional fees, primarily related to Skier’s Choice patent litigation; and a product-liability case that was on trial at the filing date, for which the company could not estimate the likelihood or range of loss. In the patent litigation, the jury found certain claims not infringed or invalid and one claim infringed; Malibu did not appeal, while Skier’s Choice sought attorney fees and costs. The company recorded a $35.0 million warranty liability; estimates for certain brands involve limited historical experience under current longer warranty terms. Management’s internal-control assessment excluded Maverick, representing about 27% of consolidated assets and 8% of FY2021 sales; management planned to include it in the following year’s assessment. The auditor issued unqualified opinions on the financial statements and on internal controls within the stated scope.
Important facts for investors to verify
- Whether production and supplier capacity can meet dealer-restocking demand, and whether input, labor and freight cost pressures will constrain margins.
- Whether strong retail demand persists as boating activity normalizes and dealer inventories recover.
- Maverick integration progress, acquisition-related returns and the integration of its internal controls.
- Updates on the product-liability case, patent-related fee motion, warranty claims and any resulting costs.
- Debt repayment and refinancing plans, floating-rate exposure, covenant headroom and the timing and amount of tax receivable agreement payments.
- How reported GAAP results compare with adjusted EBITDA, a non-GAAP measure that excludes specified expenses and should not be treated as a substitute for GAAP earnings or liquidity.