USF Student Managed Investment Fund November 21, 2019

Malibu Boats Inc.

Rev per FTE $422,580 P/E Ratio 11.29 Beta 1.38 1-Year Change -21.14% Short Interest: 4.34% Next Earnings Date 2/5/2020

SMIF Research Team:

Timothy Davis

tdavis20@mail.usf.edu

Dylan MacFarquhar

dmacfarquhar@mail.usf.edu

Samuel Steck

ssteck@mail.usf.edu

$38.12 As of 11/19/2019 4 pm EST

Recreational Consumer Goods Loudon, Tennessee US https://investors.malibuboats.com/investor-relations/default.aspx Employees: 1,835 CEO: Jack Springer CFO: Wayne Wilson 10K Filing 2019

NASDAQ: MBUU

2019 Revenue $684 MM 52 wk Range $24.79 – 49.20 EPS $3.36 Avg. Volume 267,610 Market Cap $777.69 MM Dividend Yield N/A

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Recent News:

• Malibu’s Q1 earnings beat expectations due to continued momentum driven by industry-leading innovation and operational execution - quarterly earnings of $0.83 per share, beating the analysts’ estimates by 17%.

• Sports and outdoor space revenues are expected to witness a compound annual growth rate of 4% from 2019 to 2023.

• Unparalleled vertical integration strategy supports manufacturing flexibility and agility to respond quickly to macro dynamics.

• United Auto Workers strikes seem to have little effect on Malibu’s bottom line.

Investment Thesis

• Leading and expanding market share position among performance sport boat manufacturers in the US since 2010.

• Accretive acquisitions of Pursuit and Cobalt have given Malibu a strong foothold in the growing center console market, poising the company for continued success.

• Malibu’s unique vertical integration strategy allows the company to capitalize on all facets of the recreational boating market and separates them from other recreational boating manufacturers. In addition, such fluency within their operations allows the company to react quickly to changes in demand, thus maintaining stable operating margins.

• The company has a significant share of the recreational powerboat market, which is expected to grow at a CAGR of 4% through 2024.

• Patented technology such as Wake Skate has changed the water sports industry, allowing Malibu to build on a growing market of recreational and professional water sports athletes.

Company Overview:

Malibu Boats Inc. is a recreational boat manufacturer based out of Tennessee.

Malibu's primary line of business is the production of water sport and leisure boats.

Malibu has four product lines: Axis, Cobalt, Malibu, and Pursuit - ranging from 20-

foot wakeboarding boats to 43-foot offshore recreational vessels. In the past three

years, Malibu acquired Cobalt Boats and Pursuit Boats, using these acquisitions, not

as a primary growth strategy but as a means of expanding their presence in the

recreational boating space, expanding margins, and diversifying their product mix.

Malibu's patented wake technology has made their Malibu and Axis brands

immensely popular among water sport athletes for both professional and

recreational purposes. Malibu has a strong dealer network and an international

presence in Asia, Europe, and Australia. Their vertical integration strategy, which

includes boat parts, trailers, and hitches, separates Malibu from its competitors and

allows the company to maximize their operating efficiency, thus improving margins

year-over-year. All in all, Malibu is primed to lead the growing recreational boating

industry for the coming years as a result of their diverse and unmatched offerings.

Recommendation:

BUY Two-Year Price Target: $59.74

Table of Contents:

3. Investment Thesis

4. Valuation -

DCF

EBITDA & EV Calculation

P/E EPS Sensitivity Schedule

Bull – Base - Bear

6. Revenue Assumption Justification

7. Investment Risks

8. Relevant Macro Conditions/Catalyst

9. Segment Breakdown

10. Sub-Industry Outlook

11. Notable Acquisitions

12. Management Overview

13. Appendices

Income Statement

Balance Sheet

Ratio Analysis

Common Size Income Statement

Comparable Company Analysis

Malibu Boats Inc. – NASDAQ: MBUU – USF SMIF Stock Report – November 21, 2019

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Investment Thesis

Industry Leading Market Share and a Positive Industry Outlook Set to Drive Sales: Malibu claims the top spot in

market share for manufacturers of performance sport boats in the United States. Their Malibu, Axis, and Cobalt brands each

rank first in market share for their respective categories, with their Pursuit brand ranking second in their respective market.

Market share has increased year-over-year for their long-standing Malibu and Axis brands and is up to 31.3% from 24.5% in

2010. The recently acquired Cobalt and Pursuit brands have also shown strong growth in market share during the same time

period.

Highly Profitable Acquisitions in Growing Markets Add to Strong Organic Growth: Over the last two years, Malibu has

completed the acquisition of two industry power players. In October 2018, Malibu acquired Pursuit in an attempt to expand

their selection of outboard models. The outboard market accounts for more than 85% of the recreational powerboat industry

and has shown average year-over-year revenue growth of 18.91% for the past five years. This acquisition expands Malibu’s

market share to include saltwater models used more commonly for fishing and leisure purposes. In July 2017, Malibu

completed the acquisition of Cobalt. This acquisition has given Malibu the #1 market share in the United States for the

sterndrive segment of the recreational powerboat industry for models ranging between 24’-29’, growing from 14.2% to 32.3%

since 2010.

Vertical Integration and Innovative Technology Unmatched by Competitors: Malibu manufactures a wide assortment

of products and parts to complement their boat offerings. Operating efficiency brought forth by this vertical integration has

allowed Malibu to increase margins per boat sold. Proprietary engine manufacturing for Malibu and Axis models is expected

to be fully integrated by the end of fiscal year 2020, lowering engine outsourcing costs and further improving operating

efficiency. In addition, Malibu has patented several technologies which have separated them from their competition. Their

Integrated Surf Platform which utilizes their Surf Gate and Power Wedge technology give Malibu boats a variety of uses

ranging from leisure to sporting activities. Customers are able to customize their boats and add on features most closely

aligning with their desired purpose of use.

Malibu 5 Year Historical Stock Performance – Price Per-Share

Malibu Boats Inc. – NASDAQ: MBUU – USF SMIF Stock Report – November 21, 2019

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Discounted Cash Flows

EBITDA Calculation:

EV Calculation:

EBITDA CALCULATION - USD (in Millions) FY2014 FY2015 FY 2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

Net Income (4.7) 14.7 18.0 28.4 27.6 66.1 78.6 86.1 95.4 105.9 118.0

Tax Expense (2.2) 8.7 11.8 17.6 58.4 22.1 21.9 23.9 26.4 29.2 32.4

Intrest Expense 3.0 1.0 3.9 1.6 5.4 6.5 5.2 5.3 5.2 5.1 5.0

EBIT (3.9) 24.3 33.7 47.5 91.4 94.6 105.7 115.3 126.9 140.2 155.4

Amortization 5.2 2.5 2.2 2.2 5.2 6.0 6.5 6.9 7.3 7.7 8.1

EBITA 1.2 26.7 35.9 49.7 96.6 100.6 112.2 122.2 134.2 147.9 163.5

Depreciation - - - - - - - - 1 2 3

EBITDA 1.2 26.7 35.9 49.7 96.6 100.6 112.2 122.2 135.2 149.9 166.5

Enterprise Value USD (in Millions) FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020E FY2021E FY2022E FY2023E FY2024E

End of Year Price 19.25 19.31 13.64 28.61 37.59 38.85 41.76$ 46.78$ 52.39$ 58.68$ 65.72$

Shares outstanding 15.4 17.9 17.7 20.3 20.6 20.9 20.7 21.3 21.9 22.5 23.2

Market Capitalization 297.1 345.3 241.4 580.4 772.7 810.1 866.3 996.3 1,148.1 1,321.8 1,521.7

Short-Term Debt - 6.5 8.0 - - - - - - - -

Long-Term Debt - 70.8 63.1 53.4 108.5 113.6 116 118 116 114 111

Total Debt - 77 71 53 108 114 116 118 116 114 111

Cash Equivalents and Short-Term Investments 12.2 8.4 25.9 32.8 61.6 27.4 160 264 381 501 635

Enterprise Value 285$ 414$ 287$ 601$ 820$ 896$ 823$ 851$ 883$ 934$ 998$

Malibu Boats Inc. – NASDAQ: MBUU – USF SMIF Stock Report – November 21, 2019

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P/E EPS Sensitivity Schedule

Target Price: Bull, Bear, Base Forecast

Malibu Boats Inc. – NASDAQ: MBUU – USF SMIF Stock Report – November 21, 2019

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-10%

0%

10%

20%

30%

40%

50%

2015FY 2016FY 2017FY 2018FY 2019FY 2020E 2021E 2022E 2023E 2024E

Sales Volume Growth by Product Vertical

Malibu Axis Cobalt Pursuit

Revenue Assumption Justification

Sales Volume Expectations: Sales volume forecast complimented by price per unit for each product segment enables

accurate predictions of future revenues. Pursuit Boats is the most rapidly growing product vertical that acts as the main driver

for overall volume growth, with an average sale volume growth of 17.1% from 2020 to 2024. All other product verticals

maintain fairly consistent growth of ~6% over the same period, as we conservatively predict that volume will stabilize, driven

by an emerging addressable market, pre-existing customer product replacement, further expansion of the outdoor recreation

space, and realizing growth from innovate technology and design encompassed in their diversified product mix that attracts a

new market of pre-existing boaters.

Addressable Market: Over 141.6 million U.S. adults participate in recreational boating, using a boat for activities such as

fishing, water skiing, and/or travel. The total value of recreational boats sold reached over 3.6 billion U.S. dollars in 2016. The

greatest portion of this value came from sales of boats with a length between 36 and 45 feet. In total, 11.87 million recreational

boating vessels were registered in the U.S. in 2015. While most high-end recreational boats are purchased by higher net-worth

individuals or businesses, 62% of boat owners have an annual gross household income of less than $100k, those with AGHI

of less than $100k typically target boats under 26 feet for fishing, recreation, or sport.

Pricing Power and Competitive Advantage: Malibu has held the number one market share position, based on unit volume,

in the United States among manufacturers of performance sport boats for each calendar year since 2010 including 2018.

Malibu has grown their U.S. market share in this category through our Malibu and Axis brands from 24.5% in 2010 to 31.3%

in 2018. Malibu also holds the number one market share position in the 24ft – 29ft segment of the Cobalt boat category.

Cobalt has expanded its market share in this segment from 14.2% in 2010 to 32.3% in 2018. With their Pursuit brand they

hold the number two market share position in the offshore boat category for calendar year 2018. Pursuit has expanded their

market share in this segment from 17.7% in 2010 to 19.0% in 2018. With such resilient market share comes the responsibility

for constant innovation to remain a market leader and not lose market share to any incoming manufacturers. Malibu’s

patented technology, innovative design, and vertical integration strategy lead to Malibu generating a widening economic moat,

these considerations were all factored into overall revenue growth assumption.

Further Strengthening Dealer Network

In order to maintain market share Malibu continually assess their distribution network and believe they take the actions

necessary to achieve their goal. Malibu intends to strengthen our current footprint by selectively recruiting market-leading

dealers who currently sell their competitors’ products. In addition, Malibu plan to continue expanding their dealer network in

certain geographic areas to increase consumer access and service in strategic markets. Malibu believes their targeted initiatives

to enhance and grow their dealer network across all of their brands will increase unit sales in the future.

Malibu Boats Inc. – NASDAQ: MBUU – USF SMIF Stock Report – November 21, 2019

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Investment Risks

• The primary risk for Malibu is the demand for boats throughout different periods of the economic cycle. We are

currently in the longest economic expansion in history. However, many consider the economy to be in the later

innings of the economic cycle which poses a risk for consumer discretionary products such as boats. Times of low

consumer confidence, high unemployment, and increased market volatility could significantly decrease demand of

Malibu’s products.

• Malibu has a majority foothold in several of their markets. The company accounted for 8.9% of new powerboat sales

in the United States during 2018, while the market as a whole totaled $10.7bn in sales. This market share has allowed

Malibu to report impeccable growth since 2014, but also leaves the company vulnerable to disruption. Malibu’s sales

growth is largely dependent on the industry’s growth as a whole. Newly innovative technology and trends in favor of

Malibu’s competitors could cause a large reduction in Malibu’s sales and market share.

• Although Malibu is in the process of transitioning their engine manufacturing to be proprietary, they still retain a

supplier network which carries risk. General Motors is their main supplier of engines and have seen setbacks during

the last few months as a result of the United Auto Workers strike. Malibu expects to see a $3 million decrease to net

income as a result of the strikes. Any further hiccups in their supply network could add to this loss.

• The acquisitions of Pursuit in 2018, and Cobalt in 2017, have been successful thus far. However, it is possible that

Malibu is unable to maximize the potential benefits of these acquisitions. Unanticipated challenges may arise during

the integration of these acquisitions, thus lowering the expected revenue from these product lines.

• An increasing interest rate environment also has the potential to impact Malibu’s sales. While interest rates have been

consistently lowered during 2019, an increase in rates may deter many consumers from Malibu’s financing options.

That being said, we do not believe an increasing interest rate environment will significantly increase Malibu’s high-line

flagship products as we do not believe this market will see interest rate hikes as a roadblock in such large purchases.

• The majority of Malibu’s sales come from their independent dealer network. This network is often met with increased

competition which adversely impact sales. Malibu’s top ten dealers accounted for a majority of sales for their Malibu,

Cobalt, and Pursuit models. Pursuit led the pack with 83% of sales coming from their top ten dealers. Malibu’s

inability to secure strong relationships with this network could lead to a significant reduction in sales. The typical

dealer agreement for Malibu is for a period of one-year, but some deals extend as long as three years. The relatively

short time frame on these dealer agreements could leave Malibu open to gaps in their dealer network.

• The demand for new recreational powerboats as opposed to used models can also hinder Malibu’s financial

performance. During the financial crisis in 2008, the industry shifted towards more affordable used boats rather than

retail models. A change in preference, likely sparked by an economic downturn, could reduce demand for Malibu’s

products.

• Recreation powerboat manufacturers typically have a large fixed cost base. A significant decrease in sales would

decrease profit margins and reduce production rates. However, the company has systems in place to reduce

operations in the event demand decreases substantially.

Malibu Boats Inc. – NASDAQ: MBUU – USF SMIF Stock Report – November 21, 2019

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Relevant Macro Conditions/Catalyst

Economic Downturns:

The most significant concern investors have regarding Malibu stock is the fact that during a recession, consumers naturally

respond by reducing spending. Usually, the first discretionary to be dropped are luxury items that cost money to upkeep, like

boats. While this is a consideration, we have factored in a recessionary period in more ways than one. Malibu’s current growth

is so expansive; in a recessionary period, we uphold a conservative estate of low-mid single-digit growth. Our calculated beta

of 1.38 takes into account the riskiness of Malibu when compared to the market, with our discounted cash flows analysis

reflecting the same conservatism – using a low terminal growth rate and conservative free cash flow estimates. Investors

undermine Malibu’s resilience to uphold quality and consistent earnings in a time of economic uncertainty, allowing the stock

to be traded at a significant discount, of which it is now.

Weather:

As climate change becomes a more addressed topic, further concerns arise regarding unpredictable weather patterns, more

radical high and low temperatures, and more tropical storms and hurricanes, which could affect the boating industry as a

whole. If the US, particularly the boating states or states near the southeast coast, start to see more frequent rain, this could

also negatively affect boating trends and in turn, boat sales. We don’t foresee rising sea levels as a substantial factor in Florida

coast living individuals to acquire a boat.

Interest Rate Environment:

People will be less likely to buy high ticket items when interest rates return to a reasonable level. This is because lending

becomes more expensive, but we don’t see this as a significant factor, as the majority of individuals who are purchasing a boat,

particularly the higher-end pursuit models, are not concerned about interest rates and the cost of borrowing.

Emerging Markets:

Based on their U.S. leadership position, brand recognition, diverse, innovative product offering, and distribution strengths,

Malibu believes that they are well-positioned to increase their international sales. Malibu believes they can six increase their

global sales both by promoting products in developed markets where they have a well-established dealer base, such as Western

Europe and by penetrating new and emerging markets where they expect rising consumer incomes to increase demand for

recreational products, such as Asia and South America

Aging Population:

As people retire, people want to spend their time boating. 10,00 retire every day, and those people want to cash in their 401k’s

regardless of the macro environments.

Recreational Trends:

The sports and recreation space has an estimated CAGR from 3.6% - 4.5% through 2023. As the industry grows, sport and

recreation businesses can expand and need equipment that facilitates the growing customer need. Patented technology such as

Wake Skate attracts avid water sports professionals to Malibu, allowing Malibu to capitalize on an ever-increasing market of

recreational and professional water sports athletes. Malibu has also done a great job capturing the growing segment of

recreation users as well as new recreational boaters through their quality manufacturing and varying price points.

Oil Prices:

Any rise in oil price could adversely yet indirectly affect long term boat sales, particularly for larger boats that use more fuel

during trips. Many motorboats use between 20 and 30 gallons of fuel per hour when cruising at speed; average that to 25

gallons per hour, and a five-hour trip could cost you more than $300 per outing. Assuming you use your boat once a week,

that's more than $16,000 in gasoline alone. While that number is much lower for all Malibu models expect for the Pursuit, it is

still an essential factor. Any drop-in oil prices could positively affect the boating market.

Malibu Boats Inc. – NASDAQ: MBUU – USF SMIF Stock Report – November 21, 2019

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Segment Breakdown

For the first quarter of FY20, Malibu’s revenue was broken down with 58.7%

generated from their Malibu/Axis brands, 33% from Cobalt brand, and 8.3%

from their Pursuit brand.

Malibu and Axis both cover the performance sport boat segment

with Malibu being their premium models and Axis being their

Entry-level brand. Both have models beginning at retail of $55k

with Malibu models reaching $180k and Axis models reaching

$105k. Malibu consists of 10 models ranging from 20-25ft in length

with Axis brands carrying 5 models ranging from 20-24ft in length.

Both brands are wake surfing boats with the average sales price

among this segment being ~75k with a volume of over 4,000 units.

Cobalt covers the Entry and Premium Sterndrive segment, the

Outboard segment and the Watersports segment. The product

portfolio consists of 24 models ranging from 20’ to 40’ with retail

and average sale price of ~$80k and an annual boat volume of over

2,000 units. Cobalt’s key sales are in their Premium and Entry

Sterndrive models, with premium sterndrives being roughly 60%

of sales and Entry Sterndrives making up roughly 15% of sales

followed by Watersports models then Outboard models at 15%

and 10% respectively.

The Pursuit brand has 15 product offerings spanning from 23’ to

43’ models in Center Console, Offshore, and Dual Console

configurations designed for Cruising and Saltwater Sports fishing.

Of Pursuit sales, 2% are Sports Coupe models, 30% are Center

Console / Sport models, 33% are Offshore models, and 35% are

Dual Console models with Average Sales prices of $250k, $320k,

and $170k with market shares of 2.2%, 18%, and 9.5%

respectively. The segments generate a sales volume of over 400

units annually with a total ASP of $225k.

Malibu Boats Inc. – NASDAQ: MBUU – USF SMIF Stock Report – November 21, 2019

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Sub-Industry Outlook

The US recreational boating industry is expected to grow at an annual industry forecasted compounded rate of 4% between

2019 and 2024, based on heightened demand and the growing number of registered boaters. This forecast is open to

fluctuations in the event of market downturns, causing consumer discretionary products to be viewed as less attractive by

consumers. The recreational boating market for the 12-months ending June, 30 2019 accounted for 206,900 units sold with

revenues totaling $10.7 billion. The market consists of five reportable sub-categories which include outboards, sterndrives,

performance sport boats, jet boats, and cruisers. Each category showed revenue growth during the year with performance

sport boats, jet boats, and outboards leading the pack at 18.74%, 18.26%, and 11.61% respectively. Unit sales also increased

mid-to-high single digits for four of the five categories, with sterndrives falling 4.35%. Overall, the industry has shown strong

growth over the past several years with performance sport boats and outboards showing the most consistent growth. We

expect that this trend will continue in the coming years as demand for center console units in the outboard market show

industry-leading growth and a movement towards higher-priced models support revenue growth in the performance sport

boat and outboard divisions.

Industry Outlook: Recreational Powerboats Competitors: Vista Outdoor, Nautilus, MasterCraft Boat

Holdings, Johnson Outdoors, Marine Products

Corporation

The fundamental outlook for the US recreational boating

market is that the industry will continue to grow, but at a

decreasing rate. Growth has skyrocketed over the last

several years to a rate that will be difficult to sustain. As

we approach late-cycle, most companies within the

recreational boating industry believe that growth will slow

post-2019. However, it is possible that strong economic

conditions combat these expectations and sustain

demand.

Malibu Boats Inc. – NASDAQ: MBUU – USF SMIF Stock Report – November 21, 2019

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Notable Acquisitions

Pursuit Boats – October 15, 2018

Segment: Saltwater Outboard Fishing and Recreational Boats Deal Size: $100mm Dealer Network: 40 Locations

The acquisition of Pursuit enables Malibu to enter into one of the largest and fastest growing segments in the marine industry

with a premium, proven brand and immediately improved FY19 EPS. The strategic acquisition expanded Malibu’s premium

brand offering into the Saltwater outboard fishing market, broadening its boat offerings, diversified end markets and boosting

growth profile. Pursuit is a leader in Saltwater Outboard Fishing Boat Market with numerous opportunities for growth and

profitability enhancement to increase margins. Pursuit has product offerings in 23’ to 43’ boat size range among the Center

Console / Sport segment with an Average selling price of $250k, the offshore segment with an ASP of $320k, and the Dual

Console Segment with an ASP of $170k with market positions of #15, #2, and #4 respectively.

Cobalt Boats LLC – June, 28, 2017

Segment: Watersport Boats, Cruisers, Bowriders & Outboard boats Deal Size: $130mm

Dealer Network: 132 Locations Number of Employees: 600

Cobalt Boats is a market leading manufacturer in its segment with ~$140mm in sales LTM March 31, 2017. The acquisition is

an attractive target with a unique opportunity to acquire a meaningfully sized industry leader producing a world-class brand

known for exceptional quality over 50 years. The acquisition also presents growth opportunities and strengthens Malibu’s

position in the powerboat industry. The acquisition also presented opportunities for margin improvements and product

similarities presented leveraging opportunities in vertical integration while product differences allow for market expansions. New

product portfolio with 24 models ranging from 20’ to 40’ ranging in retail price from $50k-$700k with the average being $80k.

Malibu Boats Inc. – NASDAQ: MBUU – USF SMIF Stock Report – November 21, 2019

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Management Overview

Jack D. Springer: Director and Chief Executive Officer

Mr. Springer has been CEO since February 2010 and served as interim CEO and Director since May 2009.

Mr. Springer’s experience is extensive, having served as Managing Director of Qorval LLC from June 2003

to February 2010 and served as a partner also. He served as an Operational Partner at Boyne Capital

Partners, LLC, and Chief Executive Officer at Diamondback Tactical LLP, Chief Restructuring Officer of

American Plastics, Inc. and as interim Chief Executive Officer of Allen White Inc. accumulating 27 years

of experience in the manufacturing, distribution and retail industries. He holds a B.A. in Accountancy from

the University of Texas

Ritchie L. Anderson: Chief Operating Officer

Mr. Ritchie L. Anderson has been the Chief Operating Officer at Malibu Boats, Inc. since September 2013.

Mr. Anderson joined Malibu Boats in July 2011 as Vice President of Operations. Prior to joining Malibu

Boats, he served as Vice President of Operations at MasterCraft Boat Company, where he spent 28 years

in production management. While at MasterCraft, he held various roles in operations that included

management responsibility for manufacturing, supply chain, quality, customer service, environmental and

safety. He has 30 years of experience in the boat manufacturing industry.

Wayne R. Wilson: Chief Financial Officer

Mr. Wilson has been the Chief Financial Officer of Malibu Boats, Inc. since November 2009 and serves as

its Principal Accounting Officer and Secretary. From September 2008 to November 2009, Mr. Wilson

served on the LLC’s executive board. Mr. Wilson also served as the Vice President at Black Canyon Capital

LLC. Prior to joining the Black Canyon Capital in 2004, he was an Investment Banker at Credit Suisse First

Boston in Los Angeles where he focused on general corporate finance and arranged numerous public and

private financings. Mr. Wilson received a B.A. in Business Economics from the University of California at

Los Angeles.

Dan L. Gasper: Vice President of Product Design

Mr. Gasper has been the Vice President of Product Design at Malibu Boats, Inc., since September 2013.

Mr. Gasper has been with Malibu Boats for 24 years and has also served as Director of Product

Development at Malibu Boats, LLC. He joined Malibu in 1988 and has worked in manufacturing, quality,

engineering and design. He has been designing products for nearly 25 years and has led design efforts for

over a decade.

Deborah S. Kent: Vice President of Human Resources

Ms. Deborah S. Kent has been Vice President of Human Resources at Malibu Boats, Inc. since September

2013. Ms. Kent joined Malibu Boats in January 2011 as Director of Human Resources. Prior to that, Ms.

Kent served as Vice President of Human Resources at IdleAire, Inc., where she began serving as the

Director of Employment and Employee Relations since 2004. Ms. Kent received a B.S. in Education from

East Central University and a M.S. in Adult Education from the University of Central Oklahoma.

Donna Tallent: Vice President of Manufacturing

Ms. Tallent has served as Vice President of Manufacturing since January 2019 and has been with Malibu

Boats since Febraury 2010 as a Manager of Process Engineering and Environmental, Health, and Safety.

Ms. Tallent has worked in the marine industry for over 20 years, holding management positions in

operations for Sea Ray Boats. She worked as an EHS Supervisor for nearly 12 years at Sea Ray Boats

between 1998 to 2010.

Malibu Boats Inc. – NASDAQ: MBUU – USF SMIF Stock Report – November 21, 2019

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Appendices

Income Statement:

Common-Size Income Statement:

Consolidated Income Statement 2014FY 2015FY 2016FY 2017FY 2018FY 2019FY 2020E 2021E 2022E 2023E 2024E

For the Fiscal Period Ending

In Millions of USD, except per share items.

12 months

Jun-30-2014

12 months

Jun-30-2015

12 months

Jun-30-2016

12 months

Jun-30-2017

12 months

Jun-30-2018

12 months

Jun-30-2019

12 months

Jun-30-2020

12 months

Jun-30-2021

12 months

Jun-30-2022

12 months

Jun-30-2023

12 months

Jun-30-2024

Total Revenue 190.9 228.6 253.0 281.9 497.0 684.0 755.9 795.4 839.9 890.1 947.1

Cost Of Goods Sold 140.1 168.2 186.1 206.9 376.7 517.7 572.2 597.7 626.3 658.5 695.0

Gross Profit 50.8 60.4 66.8 75.0 120.3 166.3 183.7 197.7 213.6 231.6 252.1

Selling and Marketing 6.1 7.0 7.5 8.6 13.7 17.9 19.6 20.8 21.9 23.1 24.5

General and Administrative 40.0 19.8 21.3 24.8 31.4 44.3 48.4 51.2 53.9 57.0 60.4

R & D Exp. - - - - - - - - - - -

Amort. of Goodwill and Intangibles 5.2 2.5 2.2 2.2 5.2 6.0 6.5 6.9 7.3 7.7 8.1

Other Operating Expense/(Income) (0.0) (1.7) (0.1) (10.8) (24.7) (0.1) (0.2) (0.2) (0.2) (0.2) (0.2)

Operating Exp., Total 51.2 27.6 30.8 24.8 25.6 68.0 74.3 78.8 82.9 87.6 92.8

Operating Income (0.4) 32.8 36.0 50.2 94.8 98.3 109.4 119.0 130.7 144.1 159.3

Net Interest Exp. 3.0 1.0 3.9 1.6 5.4 6.5 5.2 5.3 5.2 5.1 5.0

Earnings Before Tax (3.4) 31.8 32.1 48.7 89.4 91.8 104.2 113.7 125.5 138.9 154.3

Income Tax Expense (2.2) 8.7 11.8 17.6 58.4 22.1 21.9 23.9 26.4 29.2 32.4

Earnings from Cont. Ops. (1.2) 23.2 20.3 31.1 31.0 69.7 82.3 89.8 99.2 109.8 121.9

Minority Int. in Earnings 3.5 8.5 2.3 2.7 3.4 3.6 3.7 3.7 3.8 3.8 3.9

Net Income (4.7) 14.7 18.0 28.4 27.6 66.1 78.6 86.1 95.4 105.9 118.0

Margins

Gross Profit Margin 26.6% 26.4% 26.4% 26.6% 24.2% 24.3% 24.3% 24.9% 25.4% 26.0% 26.6%

Operating Margin -0.23% 14.35% 14.22% 17.81% 19.07% 14.37% 14.47% 14.96% 15.56% 16.18% 16.82%

Net Margin -2.45% 6.41% 7.13% 10.06% 5.56% 9.66% 10.18% 11.01% 11.69% 12.36% 13.04%

Revenue Assumptions

YoY Revenue Growth 19.74% 10.65% 11.45% 76.28% 37.63% 10.51% 5.22% 5.59% 5.98% 6.40%

Operating Expense Growth -50.45% 7.30% 16.59% 26.53% 41.13% 9.27% 5.97% 5.24% 5.63% 6.05%

Effective Tax Rate % 36% 27% 37% 36% 27% 21% 21% 21% 21% 21% 21%

Per Share Items

Basic EPS ($0.42) $0.93 $1.01 $1.59 $1.37 $3.27 $3.79 $4.04 $4.35 $4.71 $5.09

Weighted Avg. Basic Shares Out. 11.1 15.7 17.9 17.8 20.2 20.2 20.7 21.3 21.9 22.5 23.2

Common Size Income Statement 2014FY 2015FY 2016FY 2017FY 2018FY 2019FY 2020E 2021E 2022E 2023E 2024EFor the Fiscal Period Ending

In Millions of USD, except per share items.

12 months

Jun-30-2014

12 months

Jun-30-2015

12 months

Jun-30-2016

12 months

Jun-30-2017

12 months

Jun-30-2018

12 months

Jun-30-2019

12 months

Jun-30-2020

12 months

Jun-30-2021

12 months

Jun-30-2022

12 months

Jun-30-2023

12 months

Jun-30-2024

Total Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Cost Of Goods Sold 73.4% 73.6% 73.6% 73.4% 75.8% 75.7% 75.7% 75.1% 74.6% 74.0% 73.4%

Gross Profit 26.6% 26.4% 26.4% 26.6% 24.2% 24.3% 24.3% 24.9% 25.4% 26.0% 26.6%

Selling and Marketing 3.2% 3.1% 3.0% 3.1% 2.8% 2.6% 2.6% 2.7% 2.7% 2.6% 2.6%

General and Administrative 20.9% 8.7% 8.4% 8.8% 6.3% 6.5% 6.5% 6.6% 6.5% 6.5% 6.5%

R & D Exp. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Amort. of Goodwill and Intangibles 2.7% 1.1% 0.9% 0.8% 1.0% 0.9% 0.9% 0.9% 0.9% 0.9% 0.9%

Other Operating Expense/(Income) 0.0% -0.7% 0.0% -3.8% -5.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Operating Exp., Total 26.8% 12.1% 12.2% 8.8% 5.1% 9.9% 10.0% 10.1% 10.0% 10.0% 10.0%

Operating Income -0.2% 14.3% 14.2% 17.8% 19.1% 14.4% 14.3% 14.8% 15.4% 16.0% 16.6%

Net Interest Exp. 1.6% 0.4% 1.5% 0.6% 1.1% 0.9% 0.7% 0.7% 0.7% 0.6% 0.6%

Earnings Before Tax -1.8% 13.9% 12.7% 17.3% 18.0% 13.4% 13.6% 14.0% 14.7% 15.4% 16.1%

Income Tax Expense -1.2% 3.8% 4.7% 6.2% 11.8% 3.2% 3.3% 3.4% 3.6% 3.7% 3.9%

Earnings from Cont. Ops. -0.6% 10.1% 8.0% 11.0% 6.2% 10.2% 10.3% 10.6% 11.1% 11.7% 12.2%

Minority Int. in Earnings 1.8% 3.7% 0.9% 1.0% 0.7% 0.5% 0.5% 0.5% 0.5% 0.4% 0.4%

Net Income -2.4% 6.4% 7.1% 10.1% 5.6% 9.7% 9.8% 10.2% 10.7% 11.2% 11.8%

Malibu Boats Inc. – NASDAQ: MBUU – USF SMIF Stock Report – November 21, 2019

14

Balance Sheet:

Statement of Cash Flows:

Statement of Cash Flows 2014FY 2015FY 2016FY 2017FY 2018FY 2019FY 2020E 2021E 2022E 2023E 2024EFor the Fiscal Period Ending

In Millions of USD, except per share items.

12 months

Jun-30-

12 months

Jun-30-

12 months

Jun-30-

12 months

Jun-30-

12 months

Jun-30-

12 months

Jun-30-

12 months

Jun-30-

12 months

Jun-30-

12 months

Jun-30-

12 months

Jun-30-

12 months

Jun-30-

Operating Activities

Net (Loss) Income (1.2) 23.2 20.3 31.1 31.0 69.7 82.3 86.1 95.4 98.3 109.6

Depreciation & Amortization 3.2 5.0 5.8 7.0 14.1 16.5 39.8 20.7 25.8 32.1 39.9

Non-cash Compensation Expense 2.6 1.8 2.7 2.1 2.8 3.4 3.0 3.0 3.0 3.0 3.0

Deferred Income Taxes (2.7) 7.9 5.2 9.6 45.8 6.8 7.0 7.0 7.0 7.0 7.0

Other Items, Net - 0.9 - (0.9) (0.8) (0.5) (0.7) (0.7) (0.7) (0.7) (0.7)

Accounts Receivable 1.2 (2.2) (5.2) 4.9 (12.2) (3.0) 4.3 4.3 4.3 4.3 4.3

Inventories (1.3) (2.9) (0.1) (3.3) (6.3) (15.4) 4.7 7.2 11.6 13.2 15.0

Accounts Payable (4.1) (0.4) 7.0 (5.0) 4.6 (2.8) 9.1 (0.2) (0.2) (0.2) (0.2)

Income Taxes Receivable/Payable 0.1 (0.8) (4.7) (12.1) (27.2) (3.9) (4.0) (4.0) (4.0) (4.0) (4.0)

Prepaid Expense and Other Assets (1.3) 0.9 (0.9) (0.0) (0.4) (0.8) (0.8) (0.22) (0.23) (0.25) (0.26)

Accrued Expenses 2.1 (0.0) 1.4 5.8 6.5 9.6 - - - - -

Litigation Settlement - (20.0) - (1.9) - - - - - - -

Cash Flow from Operating Activities 23.8 12.6 35.6 35.9 58.5 81.5 144.7 123.2 141.9 152.8 173.7

Investing Activities

PP&E (5.9) (5.4) (6.0) (9.2) (10.3) (17.9) (43.6) (22.4) (28.0) (35.0) (43.7)

Payments for Acquisitions-net of Cash Acquired - (11.8) - - (125.6) (100.1) - - - - -

Cash Flow from Investing Activities (5.9) (17.1) (6.0) (9.2) (135.9) (118.0) (43.6) (22.4) (28.0) (35.0) (43.7)

Financing Activities

Revolving Credit Facility, Net - - - - - 40.0 - - - - -

Long-Term Borrowings (23.6) 78.5 (6.5) (17.0) 55.0 (35.0) - - - - -

Net proceeds Common Stock 99.5 62.0 (4.0) - 55.3 0.7 - - - - -

Cash Paid for Tax Withholdings - - (0.2) (0.3) (0.7) (1.2) - - - - -

Payment of Deferred Financing Costs(1.1) (1.2) - (0.9) (1.1) (0.4) (0.5) (0.5) (0.5) (0.5) (0.5)

Net proceeds LLC Unit Holding Activities(95.0) (137.0) (1.4) (1.5) (1.6) (1.8) - - - - -

Payments of Costs Directly Associated with Public Offering (1.6) (1.5) - - (0.7) (0.7) (0.7) (0.7) (0.7) (0.7) (0.7)

Cash Flow from Financing Activities (21.6) 0.7 (12.0) (19.7) 106.2 2.4 (1.2) (1.2) (1.2) (1.2) (1.2)

Other Adjustments

Foreign Exchange Rate Effect on Cash and Cash Equivalents - 0.0 (0.1) 0.0 - (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)

Cash Flow Net Changes in Cash (3.8) (3.8) 17.5 6.9 28.8 (34.2) 99.9 99.6 112.7 116.6 128.8

Malibu Boats Inc. – NASDAQ: MBUU – USF SMIF Stock Report – November 21, 2019

15

Ratios Analysis:

Comparable Company Analysis:

Key Ratios 2014FY 2015FY 2016FY 2017FY 2018FY 2019FY 2020FY 2021FY 2022FY 2023FY 2024FYFor the Fiscal Period Ending

In Millions of USD, except per share items.

12 months

Dec 31, 2014

12 months

Dec 31, 2015

12 months

Jun-30-2016

12 months

Jun-30-2017

12 months

Jun-30-2018

12 months

Jun-30-2019

12 months

Jun-30-2020

12 months

Mar-31-2021

12 months

Jun-30-2022

12 months

Jun-30-2023

12 months

Jun-30-2024

Current 0.80 1.18 1.35 1.79 2.05 1.69 2.92 4.24 5.67 7.06 8.51

Quick 0.50 0.57 0.93 1.18 1.37 0.79 2.03 3.24 4.57 5.84 7.16

Cash 0.35 0.21 0.40 0.47 0.46 0.21 0.54 0.65 0.71 0.74 0.77

Total Asset Turnover 1.18 0.88 0.93 1.28 1.27 1.13 0.95 0.83 0.74 0.67

Average Total Assets 142.56$ 211.32$ 222.99$ 294.72$ 408.54$ 508.10$ 628.49$ 750.07$ 887.74$ 1,035.72$

Inventory Turnover 10.11 9.12 9.35 11.06 9.24 8.16 7.56 7.08 6.53 6.05

Average Inventory 16.64$ 20.41$ 22.13$ 34.05$ 56.02$ 70.14$ 79.06$ 88.45$ 100.83$ 114.95$

Days in Inventory 36.11 40.02 39.05 33.00 39.49 44.74 48.28 51.55 55.89 60.37

Liability Equity Ratio 3.40 -77.66 13.48 3.73 1.72 1.21 0.82 0.61 0.46 0.37 0.30

Long Term Debt to Equity 0.00 -27.11 4.11 1.13 0.81 0.56 0.37 0.28 0.21 0.16 0.13

Long Term Debt to Assets Ratio 0.00 0.35 0.28 0.24 0.30 0.25 0.21 0.17 0.14 0.12 0.10

Liabilities to Assets 0.77 1.01 0.93 0.79 0.63 0.55 0.45 0.38 0.32 0.27 0.23

Equity Multiplier 4.40 -76.66 14.48 4.73 2.72 2.21 1.82 1.61 1.46 1.37 1.30

Average Equity (in mm) 8.33$ 6.37$ 31.32$ 90.83$ 169.30$ 102.12$ 367.00$ 491.50$ 629.00$ 777.00$

Average Total Assets (in mm) 142.56$ 211.32$ 222.99$ 294.72$ 408.54$ 508.10$ 628.49$ 750.07$ 887.74$ 1,035.72$

EM using Averages 17.12 33.18 7.12 3.24 2.41 4.98 1.71 1.53 1.41 1.33

Gross Profit Margin 26.6% 26.4% 26.4% 26.6% 24.2% 24.3% 24.3% 24.9% 25.4% 26.0% 26.6%

Operating Profit Margin -0.2% 14.3% 14.2% 17.8% 19.1% 14.4% 14.5% 15.0% 15.6% 16.2% 16.8%

Net Profit Margin -2.4% 6.4% 7.1% 10.1% 5.6% 9.7% 10.4% 10.8% 11.4% 11.9% 12.5%

Return on Average Assets 0.10$ 0.09$ 0.13$ 0.09$ 0.16$ 0.15$ 0.14$ 0.13$ 0.12$ 0.11$

ROA - EBIT 23.0% 17.0% 22.5% 32.2% 24.1% 21.5% 18.9% 17.4% 16.2% 15.4%

Return on Average Equity -24.3% -561.1% 117.5% 60.0% 20.6% 32.3% 25.4% 20.3% 17.1% 15.2% 13.8%

Company Comp Set

Company Name EV/Total Rev LTM EV/EBITDA LTM EV/EBIT LTM P/Diluted EPS LTM

Callaway Golf Company 1.6x 16.0x 19.8x 24.0x

MasterCraft Boat Holdings, Inc. 0.9x 5.7x 6.3x 14.5x

Johnson Outdoors Inc. 0.8x 6.5x 7.7x 14.4x

Brunswick Corporation 1.1x 7.9x 10.1x NM

Acushnet Holdings Corp. 1.6x 12.9x 15.6x 20.2x

Nautilus, Inc. 0.2x NM NM NM

Marine Products Corporation 1.5x 12.2x 12.9x 16.7x

YETI Holdings, Inc. 3.4x 19.2x 23.5x 37.2x

Escalade, Incorporated 0.9x 10.8x 14.9x 19.9x

Vista Outdoor Inc. 0.6x 13.7x 78.0x NM

Malibu Boats, Inc. 1.1x 6.4x 7.3x 10.7x

Summary Statistics

High 3.4x 19.2x 78.0x 37.2x

Low 0.2x 5.7x 6.3x 14.4x

Mean 1.3x 11.7x 21.0x 21.0x

Median 1.0x 12.2x 14.9x 19.9x