Malibu Boats, Inc. Announces First Quarter Fiscal

LOUDON, TN --(Marketwired - November 07, 2017) - Malibu Boats, Inc. ( NASDAQ : MBUU ) today announced its financial results for the first quarter of fiscal 2018 ended September 30, 2017.

Highlights for the First Quarter of Fiscal 2018

• Net sales increased 66.9% to $103.5 million compared to the first quarter of fiscal 2017.
• Unit volume increased 57.1% to 1,309 boats compared to the first quarter of fiscal 2017.
• Net sales per unit increased 6.2% to $79,099 and net sales per unit for Malibu U.S. increased 6.1% to $79,348 compared to the first quarter of fiscal 2017.
• Gross profit increased 44.9% to $22.9 million compared to the first quarter of fiscal 2017.
• Net income increased 51.8% to $6.4 million, or $0.31 per share compared to the first quarter of fiscal 2017.
• Adjusted EBITDA increased 79.2% to $17.7 million compared to the first quarter of fiscal 2017.
• Adjusted fully distributed net income increased 76.5% to $8.7 million compared to the first quarter of fiscal 2017.
• Adjusted fully distributed net income per share increased 61.5% to $0.42 on a fully distributed weighted average share count of 20.6 million shares of Class A Common Stock as compared to the first quarter of fiscal 2017.

Jack Springer, Chief Executive Officer, stated, "We had an excellent first quarter and continue to experience strong growth and performance. Reflective of continued Malibu growth and our acquisition of Cobalt Boats, our unit sales, revenue, gross profit, net income and Adjusted EBITDA were substantially higher year over year. Our business in the United States is strong at the wholesale and retail levels and we expect this momentum to continue. Canada continues to make slight gains and the recent strengthening of the Canadian dollar is assisting that improvement. Australia continues to perform well for Malibu. Our market share leadership at Malibu and Cobalt is solid with operating proficiencies continuing to drive strong margins.

In fiscal 2018, Malibu continues to lead in new products with fast-paced and aggressive product introductions. In fiscal 2018, Malibu has or will deliver two new Malibu boats and two new Axis boats, while Cobalt will deliver three new models - a pace that will quicken over the next few years. We believe our new boats and product innovations will deliver strong demand during the upcoming boat show season."

Mr. Springer continued, "Malibu is solid and strong, delivering record-setting results each quarter. Cobalt has proven to be the acquisition we wanted and thought it would be, and we expect it to strengthen performance over time. We are very pleased with our financial and operating results and are optimistic for continued growth and economic recovery."

Results of Operations for the First Quarter of Fiscal 2018

Comparison of the First Quarter Ended September 30, 2017 to the First Quarter Ended September 30, 2016

Net sales for the three months ended September 30, 2017, increased $41.5 million, or 66.9%, to $103.5 million as compared to the three months ended September 30, 2016. Unit volume for the three months ended September 30, 2017, increased 476 units, or 57.1%, to 1,309 units as compared to the three months ended September 30, 2016. The increase in net sales and unit volumes was driven primarily by our acquisition of Cobalt in July 2017. Net sales and unit volumes attributable to Cobalt were $36.9 million and 469 units, respectively, for the three months ended September 30, 2017. Net sales attributable to our Malibu U.S. segment increased $4.3 million, or 7.7%, to $60.9 million for the three months ended September 30, 2017, compared to the three months ended September 30, 2016. Unit volumes attributable to our Malibu U.S. segment increased 11 units for the three months ended September 30, 2017, compared to the three months ended September 30, 2016. The increase in net sales and unit volume was driven primarily by strong demand for our new models such as the Malibu Wakesetter 23 LSV and Axis A24, as well as Wakesetter 22 and 24 MXZ, which were introduced for model year 2017. Net sales from our Malibu Australia segment increased $0.3 million, or 4.9%, to $5.8 million for the three months ended September 30, 2017, compared to the three months ended September 30, 2016. Our overall net sales per unit increased 6.2% to $79,099 per unit for the three months ended September 30, 2017, compared to the three months ended September 30, 2016. Net sales per unit for our Malibu U.S. segment increased 6.1% to $79,348 per unit for the three months ended September 30, 2017, compared to the three months ended September 30, 2016, driven by year over year mix of Malibu's, strong demand for optional features, and year over year price increases.

Cost of sales for the three months ended September 30, 2017, increased $34.4 million, or 74.5%, to $80.6 million as compared to the three months ended September 30, 2016. The increase in cost of sales was driven primarily by our acquisition of Cobalt in July 2017.

Gross profit for the three months ended September 30, 2017, increased $7.1 million, or 44.9%, to $22.9 million compared to the three months ended September 30, 2016. The increase in gross profit was due mainly to higher unit volumes attributable to our acquisition of Cobalt mentioned above. Gross margin for the three months ended September 30, 2017 decreased 340 basis points from 25.5% to 22.1% over the same period in the prior fiscal year related, in part, to a $1.5 million adjustment related to the fair value step up of inventory acquired and sold during the period at Cobalt.

Selling and marketing expenses for the three month period ended September 30, 2017, increased $1.2 million or 48.1%, compared to the three months ended September 30, 2016. As a percentage of sales, selling and marketing expenses decreased 44 basis points over the same period in the prior fiscal year. General and administrative expenses for the three months ended September 30, 2017, increased $1.0 million, or 16.7%, to $7.1 million as compared to the three months ended September 30, 2016, largely due to higher general and administrative expenses attributable to Cobalt, which we acquired in July 2017, and higher development costs associated with our engines vertical integration initiative, partially offset by a decrease in legal expenses incurred in connection with previously ongoing litigation matters that were settled in the fourth quarter of fiscal 2017. Amortization expense for the three month period ended September 30, 2017, increased $0.8 million or 138.0% when compared to the three months ended September 30, 2016, due to additional amortization from intangible assets acquired as a result of the Cobalt acquisition.

Operating income for the first quarter of fiscal 2018 increased to $11.0 million from $6.8 million in the first quarter of fiscal 2017. Net income for the first quarter of fiscal 2018 increased 51.8% to $6.4 million while net income margin decreased to 6.2% from 6.8% in the first quarter of fiscal 2017. Adjusted EBITDA in the first quarter of fiscal 2018 increased 79.2% to $17.7 million from $9.9 million, while Adjusted EBITDA margin increased to 17.1% from 15.9% in the first quarter of fiscal 2017.

Webcast and Conference Call Information

The Company will host a webcast and conference call to discuss first quarter fiscal 2018 results on Tuesday, November 7, 2017, at 5:00 p.m. Eastern Time. Investors and analysts can participate on the conference call by dialing (855) 433-0928 or (484) 756-4263 and using Conference ID #2496798.

Alternatively, interested parties can listen to a live webcast of the conference call by logging on to the Investor Relations section on the Company's website at http://investors.malibuboats.com . A replay of the webcast will also be archived on the Company's website for twelve months.

About Malibu Boats, Inc.

Based in Loudon, Tennessee, Malibu Boats is a leading designer, manufacturer and marketer of a diverse range of recreational powerboats, including performance sport boats, sterndrive and outboard boats. Malibu Boats has the #1 market share position in the United States in the performance sport boat category through its Malibu and Axis Wake Research brands. After Malibu Boats' recent acquisition of Cobalt Boats, LLC, Malibu Boats has the #1 market share position in the United States in the 24' - 29' segment of the sterndrive category. Since inception in 1982, Malibu Boats has been a consistent innovator in the powerboat industry, designing products that appeal to an expanding range of recreational boaters and water sports enthusiasts whose passion for boating and water sports is a key aspect of their lifestyle.

Forward Looking Statements

This press release includes forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Forward-looking statements can be identified by such words and phrases as "believes," "anticipates," "expects," "intends," "estimates," "may," "will," "should," "continue" and similar expressions, comparable terminology or the negative thereof, and includes the statement in this press release regarding the expected demand and acceptance for our new model year 2018 offerings, the expected performance of Cobalt and the expected continuing performance of the U.S. market.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including, but not limited to: the successful integration of Cobalt into our business; general industry, economic and business conditions; demand for our products; changes in consumer preferences; competition within our industry; our reliance on our network of independent dealers; our ability to manage our manufacturing levels and our large fixed cost base; the successful introduction of our new products; the success of our engines integration strategy and other factors affecting us detailed from time to time in our filings with the Securities and Exchange Commission. Many of these risks and uncertainties are outside our control, and there may be other risks and uncertainties which we do not currently anticipate because they relate to events and depend on circumstances that may or may not occur in the future. Although we believe that the expectations reflected in any forward-looking statements are based on reasonable assumptions at the time made, we can give no assurance that our expectations will be achieved. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation (and we expressly disclaim any obligation) to update or supplement any forward-looking statements that may become untrue because of subsequent events, whether because of new information, future events, changes in assumptions or otherwise. Comparison of results for current and prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

Use and Definition of Non-GAAP Financial Measures

This release includes the following financial measures defined as non-GAAP financial measures by the SEC: Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Fully Distributed Net Income and Adjusted Fully Distributed Net Income per Share. These measures have limitations as analytical tools 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. Our presentation of these non-GAAP financial measures should also not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our computations of these non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.

We define Adjusted EBITDA as net income before interest expense, income taxes, depreciation, amortization and non-cash, non-recurring or non-operating expenses, including certain professional fees, acquisition related expenses, non-cash compensation expense, expenses related to our engine development initiative and adjustments to our tax receivable agreement liability. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net sales. Management believes Adjusted EBITDA and Adjusted EBITDA Margin allow investors to evaluate the company's operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of core operating performance. Management uses Adjusted EBITDA to assist in highlighting trends in our operating results without regard to our financing methods, capital structures, 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.

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.

We define Adjusted Fully Distributed Net Income as net income attributable to Malibu Boats, Inc. (i) excluding income tax expense, (ii) excluding the effect of non-recurring or non-cash items, (iii) assuming the exchange of all LLC Units into shares of Class A Common Stock, which results in the elimination of non-controlling interest in the Malibu Boats Holdings, LLC (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 release, may differ from and may, therefore, not be comparable to similarly titled measures used by other companies.

A reconciliation of our net income as determined in accordance with GAAP to Adjusted EBITDA and Adjusted EBITDA Margin, and of our net income attributable to Malibu Boats, Inc. to Adjusted Fully Distributed Net Income is provided under "Reconciliation of Non-GAAP Financial Measures".

MALIBU BOATS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) (In thousands, except share and per share data)

MALIBU BOATS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share data)

MALIBU BOATS, INC. AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures

Reconciliation of Net Income to Non-GAAP Adjusted EBITDA and Adjusted EBITDA Margin (Unaudited): The following table sets forth a reconciliation of net income as determined in accordance with GAAP to Adjusted EBITDA and Adjusted EBITDA Margin for the periods indicated (dollars in thousands):

Reconciliation of Non-GAAP Adjusted Fully Distributed Net Income (Unaudited):

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):

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: