Malibu Boats

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Nov 24, 2024

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1 Financial Analysis of Malibu Boats Inc: A Five-Year Review Name Institution Course Date

2 Introduction Since 2010, Jack Springer, CEO of Malibu Boats, has been looking out for Louden, Tennessee's primary production plant. During his ten years at the helm, he transformed the Tennessee boat company from a market leader in high-performance tow boats to a diverse corporation that included high-performance fishing boats. Malibu's $130 million purchase of Cobalt Boats in 2017 and $100 million purchase of Pursuit Boats in 2018 were significant aspects of this transformation. The impact of the COVID-19 epidemic on the global economy and the boating industry was unknown at the time of purchase. During the COVID-19 pandemic, customers began using boats as an outdoor, socially isolating recreation during the pandemic. Domestic retail demand for recreational powerboats surged to the highest levels seen by the industry in decades. But in the second half of 2021, retail registration activity in the recreational powerboat market started to decline significantly due to a lack of inventory due to the vigorous sales activity during the pandemic and supply chain disruptions that started to affect production levels. Retail registration activity decreased steadily year over year during the first six months of the calendar year 2022, and supply chain issues prolonged output levels. The recreational powerboat sector saw double-digit reductions in retail registration activity during the first half of the year (Malibu Boats Inc., n.d.). But in the second half of the calendar year 2021, retail registration activity in the recreational powerboat market started to decline significantly due to a lack of inventory due to the vigorous sales activity during the pandemic and supply chain disruptions that started to affect production levels. Retail registration activity decreased steadily year over year during the first six months of the calendar year 2022, and supply chain issues prolonged output levels. The higher retail demand in the first half of 2021 contributed to the double-digit reductions in retail

3 registration activity in the recreational powerboat market during the first half of 2022, creating an abnormally high comparative period. Due to higher retail sales in the fiscal year 2021, limited production in the first half of the fiscal year 2021, and lower wholesale shipment levels in the second half of the fiscal year 2020, dealer inventories were lower than historical levels throughout fiscal years 2021 and 2022. Despite low inventories, the fiscal year 2022 retail demand remained strong, albeit at lower levels than the record fiscal year 2021 levels. Inventory levels at our Malibu and Cobalt sector dealers towards the conclusion of the fiscal year increased significantly due to year-over- year increases in wholesale production. They decreased retail demand levels compared to the fiscal year 2021. Dealer inventories remain considerably below historical levels. A total return to historical levels will depend on our supply chain's ability to deliver materials on schedule and the degree of retail demand in the coming year. Year-Over-Year Changes In Ratios For Malibu Boats Inc (NMS: MBUU) Over The Past Five Years, Along With A Comparison To Industry Competitors: 1. Profitability Ratios: Gross Profit Margin: The gross profit margin for Malibu Boats Inc has remained relatively stable over the past five years, with an improvement from 2018 from 6.23% to 13.45 % in 2022. This is above its industry competitors, Brunswick Corp. and Marine Products Corp., over the same period. 2. Asset Utilization Ratios: Total Asset Turnover: The total asset turnover for Malibu Boats Inc has remained relatively stable over the past five years, averaging around 1.4. This is similar to its industry competitor, Brunswick Corp., which has an average total asset turnover of 1.1

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4 over the same period. Marine products have asset turnover higher than both companies over the same period. 3. Inventory Turnover: The inventory turnover for Malibu Boats Inc has reduced from 11.23 in 2018 to 7.12 in 2022. This improvement can be attributed to the company's efforts to manage its inventory levels better and reduce its carrying costs. Comparatively, Marine Products Corp., a rival in the sector, has experienced an inventory turnover rate of 4.4 over the previous five years. 4. Ratios of Liquidity: Current Ratio: Malibu Boats Inc.'s current ratio, which has been averaging approximately 1.8 over the previous five years, has been very consistent. This is comparable to Marine Products Corp, a rival in the same industry, which had an average current ratio of 1.8 over the same time period. Quick Ratio: Malibu Boats Inc.'s quick ratio, which has been averaging at 0.7 over the previous five years, has likewise been very consistent. This is marginally less than Brunswick Corp., a rival in the same sector, which had an average quick ratio of 0.8 over the same time period. 5. Debt Utilization Ratios: Debt-to-Assets Ratio: Malibu Boats Inc.'s debt-to-assets ratio has maintained a relatively steady average of 0.4 during the preceding five years. This is comparable to Brunswick Corp., a company in the same industry, which over the same time period had an average debt-to-assets ratio of 1.4. The Times Interest Earned Ratio increased for Malibu Boats Inc. from 13.01 in 2018 to 74.37 in 2022. The company's initiatives to reduce interest expenses and increase profitability are

5 what led to this achievement. A firm in the same industry with a five-year average times interest earned ratio of 23.5 is Marine Products Corp. With noticeable advances in both operating and net profit margins as well as inventory turnover over the past five years, Malibu Boats Inc. has continuously demonstrated outstanding profitability and asset utilization. With a current ratio above two during the previous five years, the company has maintained a strong liquidity position. Through the course of the last five years, the company has maintained a sound liquidity position, with a current ratio above two. This indicates that the company has enough assets to cover its liabilities. However, it is essential to note that there has been a slight decline in the current ratio from 2018 to 2022, which may suggest that the company is facing challenges in managing its short-term liquidity. In terms of debt-to-equity ratios, Marine Products Corp. has a comparatively low value, indicating a low level of financial leverage for the company. This is encouraging because it shows that the business is not unduly dependent on debt funding. Over the past five years, the company has kept its debt-to-equity ratio largely constant. New products, a robust dealer network, and innovation give brands a competitive advantage. Malibu has created a significant advantage in the market. An industry-leading (and envious) product is the Integrated Surf Platform (ISP) patented Surf Gate. Like other boat brands, the dealership network is crucial to Malibu Boats and the client experience. As a result, Malibu invests a lot of money in finding, growing, and improving dealerships. Three hundred fifty dealer locations were part of the distribution channels as of July 2019 across the globe. With the introduction of Stern Turn in 2020, innovation will continue making navigating easier by giving the driver the agility of a stern drive or outboard boat (Malibu Boats, 2019).

6 Malibu Boats has a higher level of vertical integration than its rivals. Many of the parts used by Malibu are produced in-house, including towers, stainless steel, trailers, and, more recently, engines. CEO Jack Springer builds up to 25% more internally than his competitors (Malibu Boats inc., n.d). Malibu's Class A common stock, MBUU, is traded on the NASDAQ Global Market index. Net sales reached a new high of $684 million in 2019 after rising 37.6%. Malibu Boats continued to experience growth, ranking twenty-eight on Fortune Magazine's list of the fastest-growing companies at the end of 2019. Malibu has a modest but significant global presence. Through a licensee arrangement, the business developed its name and a manufacturing plant in Australia at the beginning of the 1990s. After Malibu's successful IPO, the business bought out all of the shares in Malibu Boats Australia and guaranteed that it would continue to operate there. Malibu Boats Inc. has made it known that Malibu Australia may become the company's leading supplier to the entire Asian market. Malibu Boats Inc. also has access to places in Canada and abroad thanks to the acquisition of Cobalt boats and its dealer network (Malibu Boats Inc., n.d). Overall, Marine Products Corp has demonstrated solid financial performance over the past five years, with consistent profitability, vital asset utilization, healthy liquidity, and prudent debt utilization. Compared to industry competitors, Marine Products Corp generally performs well, with higher profitability ratios and lower debt utilization ratios. However, the company's asset utilization and liquidity ratios are generally lower than the industry averages, indicating potential areas for improvement.

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7 Reference Malibu Boats Inc. (n.d.). Malibu Boats - The Worlds Best Wakesurfing, Wakeboarding & Water Skiing Towboats, #1 in Quality, Luxury & Performance.

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