Executive Summary / Key Takeaways

• Malibu Boats, Inc. ($MBUU) is a leading premium powerboat manufacturer across performance sport, saltwater fishing, and sterndrive segments, leveraging a diverse brand portfolio and a strong dealer network.
• The company is navigating a challenging recreational boating market marked by high interest rates and macroeconomic uncertainty, which has suppressed retail demand and led to elevated dealer inventories.
• MBUU has proactively adjusted production to align with lower retail activity and dealer inventory reduction goals, successfully bringing channel inventories closer to historical levels by the end of fiscal year 2024.
• Innovation remains a core focus, with new models and proprietary technology like the Malibu Command Center driving favorable product mix and market share gains, particularly in the Cobalt and Pathfinder segments.
• Despite near-term headwinds and a revised outlook for fiscal year 2025 net sales (down 3-5%) and Adjusted EBITDA margin (9-10%), MBUU maintains a strong balance sheet, robust cash flow generation, and is positioned for sequential improvement and potential growth when the market recovers.

The Premium Fleet in Choppy Waters

Malibu Boats, Inc. stands as a prominent designer, manufacturer, and marketer in the recreational powerboat industry, commanding leadership positions across multiple segments through its diverse portfolio of eight premium brands: Malibu, Axis, Pursuit, Maverick, Cobia, Pathfinder, Hewes, and Cobalt. Structured as the sole managing member of Malibu Boats Holdings, LLC since its incorporation in 2013, MBUU has strategically expanded its footprint through key acquisitions, notably integrating Cobalt, Pursuit, and the Maverick Boat Group brands to broaden its offerings from performance sport boats into saltwater fishing and luxury sterndrives. This deliberate expansion has positioned MBUU as the market leader in U.S. performance sport boats (Malibu, Axis), a leader in fiberglass outboard fishing boats (Saltwater Fishing segment), and the market leader in the U.S. 20-40 foot sterndrive segment (Cobalt).

The company's strategy is fundamentally built upon continuous innovation, operational excellence, and cultivating a strong, independent dealer network, which management views as a distinct competitive advantage. This network, exceeding 400 locations globally as of June 30, 2024, is crucial for consumer experience, marketing, and brand strength.

However, the recreational boating market currently faces significant headwinds. High inflation and elevated interest rates have increased the cost of ownership and dampened consumer sentiment, particularly impacting interest-rate-sensitive buyers. This has resulted in a challenging retail environment and pressure on dealers to reduce inventory levels built up during periods of higher demand. Management expects the retail market to be down double digits for the full fiscal year 2025.

In this environment, MBUU's competitive positioning is tested. While larger, diversified players like Brunswick Corporation (BC) leverage scale and a broad product ecosystem including engines, and niche competitors like MasterCraft Boat Holdings (MCFT) focus on high-end customization and digital features, MBUU differentiates itself through its premium brands, innovation pace, and operational efficiency. MBUU's prices in the core ski-wake segment are generally $20,000 to $30,000 per unit lower than some competitors, reflecting a focus on value within the premium space. The company's operational structure, with 80% to 90% variable costs above the gross margin line, provides resilience in downturns, as demonstrated by the fact that cost of sales decreased 34% in fiscal year 2024 while revenues declined 40%.

Technological Edge and Operational Strength

A cornerstone of Malibu's competitive advantage lies in its proprietary technology and manufacturing capabilities. The company's performance sport boats feature innovations like Surf Gate and Power Wedge, designed to create superior wakes and waves for water sports. The all-new Malibu Command Center, integrated into models like the M230, exemplifies this focus, offering a state-of-the-art driver experience with advanced operating systems for seamless wave control and watersport presets. Detailed quantifiable performance metrics comparing these systems directly to competitors were not discussed, but management highlights that these features drive substantial customer engagement and enthusiasm, contributing to favorable model mix and market share gains.

Beyond product features, MBUU has invested significantly in vertical integration and manufacturing optimization. The completion of the Roane County, Tennessee facility is a key operational milestone. This facility not only produces certain Cobalt models, contributing to market share gains in that segment (over 250 basis points in 22-24ft models produced there on a trailing 12-month basis through June), but also consolidates manufacturing by housing the Malibu Electronics wiring harness production, which moved from Alabama. This integrated footprint is expected to enhance operational efficiency and positions the company with sufficient capacity across all brands to support the next industry growth cycle, while also reducing future capital expenditure levels (expected to drop to $30 million to $35 million in fiscal year 2025, down from $76 million in fiscal year 2024). The completed tooling development center at Pursuit further supports vertical integration and speed to market for new models across all brands.

Recent Performance and Financial Health

The challenging market environment significantly impacted MBUU's recent financial performance, particularly in fiscal year 2024 and the first half of fiscal year 2025, as the company deliberately reduced wholesale shipments to help dealers manage inventory. For the nine months ended March 31, 2025, net sales decreased 10.4% to $600.5 million compared to the prior year, driven primarily by a 15.3% decrease in unit volumes across all segments due to lower wholesale shipments. This volume decline, coupled with higher per unit material and labor costs and fixed cost deleverage, resulted in a 160 basis point decrease in gross margin to 18.5% for the nine-month period. General and administrative expenses increased substantially, impacted by a $3.5 million legal settlement related to the Tommys Boats situation and other legal/compensation costs. Net income attributable to Malibu Boats, Inc. for the nine months ended March 31, 2025, was $10.2 million, down from $36.7 million in the prior year period.

However, the third quarter of fiscal year 2025 showed signs of sequential improvement and year-over-year growth, albeit against an easier comparison base from the prior year's inventory correction efforts. Net sales for the three months ended March 31, 2025, increased 12.4% to $228.7 million, and unit volume increased 12.8% to 1,431 units. This growth was primarily driven by increased unit volumes in the Malibu segment, a favorable model mix across all segments, and inflation-driven price increases. Gross profit increased 13.4% to $45.7 million, and gross margin saw a modest 20 basis point increase to 20.0%, benefiting from fixed cost leveraging and strong operational performance. Net income attributable to Malibu Boats, Inc. for the quarter was $12.9 million, a significant improvement from a loss of $66.8 million in the prior year quarter, which included substantial impairment charges.

Despite the revenue decline over the nine-month period, MBUU demonstrated resilient cash flow generation. Net cash provided by operating activities was $35.5 million for the nine months ended March 31, 2025. The company ended the period with $38.7 million in cash and $320.3 million available under its revolving credit facility, with only $28.0 million outstanding. This strong liquidity position, coupled with having paid off remaining debt in fiscal year 2024, provides significant financial flexibility. The company remains committed to its capital allocation priorities, including investing in high ROI initiatives, pursuing accretive acquisitions, and returning capital to shareholders, with a commitment to repurchase at least $10 million of stock per quarter through May 2025.

Outlook and Risks

Management's outlook for the remainder of fiscal year 2025 reflects the continued challenging retail environment and the strategic priority of maintaining healthy dealer inventories. The latest guidance for the full fiscal year 2025 anticipates net sales to be down 3% to down 5% year-over-year, with consolidated Adjusted EBITDA margins between 9% and 10%. This outlook assumes the retail market will be down double digits for the full year. While this represents a downward revision from earlier guidance in the fiscal year, it implies a meaningful improvement in performance in the fourth quarter compared to the prior year period, which was heavily impacted by inventory reduction efforts. Management expects sequential improvement in the top and bottom lines throughout the year as wholesale shipments pick up in alignment with retail demand.

Key risks to this outlook include the persistence of macroeconomic headwinds, particularly elevated interest rates, which could further suppress retail demand and pressure dealer inventories. The company is also monitoring the potential impact of recently introduced tariffs, noting that 18% to 20% of its cost of sales are sourced from outside the U.S., although no material impact is anticipated for the remainder of fiscal year 2025. Litigation, including ongoing matters related to the Batchelder settlement, Tommys Boats, and securities/derivative lawsuits, poses potential financial and reputational risks, although the likelihood and potential loss are currently uncertain. Repurchase commitments related to dealer floor plan financing also present a potential exposure if retail sales deteriorate significantly.

Conclusion

Malibu Boats is navigating a difficult period for the recreational boating industry, marked by macroeconomic pressures and a necessary correction in dealer inventory levels. The company's strategic focus on prioritizing dealer health through disciplined production, coupled with its strong balance sheet and resilient, variable cost structure, positions it to weather the current downturn. MBUU's commitment to innovation and operational excellence, highlighted by new product introductions and vertical integration efforts like the Roane County facility, continues to drive market share gains in key segments and supports its premium brand positioning. While the near-term outlook reflects ongoing market challenges, the company's financial strength and strategic initiatives provide a foundation for sequential improvement and the potential to capitalize effectively when retail demand eventually recovers. The ability to generate cash flow, maintain investment in innovation, and pursue capital allocation priorities, including potential accretive acquisitions, underscores the long-term investment thesis despite the current choppy waters.