investor presentation · 2020-03-05 · our presentation of these nongaap financial measures should...

FOUR ICONIC BRANDS, ONE GREAT COMPANYMALIBU BOATS INC.

INVESTOR PRESENTATIONMarch 2020

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THREE ICONIC BRANDS, ONE GREAT COMPANYFOUR ICONIC BRANDS, ONE GREAT COMPANYFOUR ICONIC BRANDS, ONE GREAT COMPANYMALIBU BOATS INC.

• This presentation 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 statements in this press release regarding the expected benefits of our engine and flooring vertical integration initiatives; the anticipated timing of our expansion of our Cobalt facilities; the adequacy of our inventory levels; our outlook on opportunities ahead; and our ability to deliver long-term value to our shareholders.

• 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: general industry, economic and business conditions; our ability to grow our business through acquisitions and integrate such acquisitions to fully realize their expected benefits; our reliance on our network of independent dealers and increasing competition for dealers; our large fixed cost base; intense competition within our industry; increased consumer preference for used boats or the supply of new boats by competitors in excess of demand; the successful introduction of new products; our ability to execute our manufacturing strategy successfully; 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.

FORWARD-LOOKING STATEMENTS

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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, litigation related expenses, acquisition and integration 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. Adjusted EBITDA and Adjusted EBITDA Margin are not measures of net income as determined by GAAP. Management believes Adjusted EBITDA and Adjusted EBITDA Margin allow investors to evaluate our 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 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".

USE AND DEFINITION OF NON-GAAP FINANCIAL MEASURES

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MBUU AT A GLANCE

1982YEAR MALIBU

WAS FOUNDED

2014INITIAL PUBLIC

OFFERING

>1,800EMPLOYEESWORLDWIDE

4ICONIC BRANDS:MALIBU, COBALT, PURSUIT & AXIS

6MANUFACTURING

LOCATIONS

45+MODELS OF

WORLD-CLASSBOATS

300+DEALER

LOCATIONSWORLDWIDE

40+COUNTRIES

MALIBU PRODUCTS SOLD

3 ACQUISITIONS

3 START UPSIN 4+ YEARS

#28 FORTUNE’S 100-FASTEST GROWING COMPANIES LIST

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PRISTINE TRACK RECORD OF DELIVERING ON STATED OBJECTIVES

ATTRACTIVE GROWTH COMPANY WITH CLEAR DIFFERENTIATION

Consistently delivered superior returns for shareholders

Top-tier performance, not only in marine, but in all of powersports

The INNOVATOR – brings more new boats and innovations than any other competitor

History of prudent inventory management and strong dealer relationships

Strong track record of acquisitions performing better than expectations

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$190.9 $228.6 $253.0 $281.9

$497.0

$684.0

$37.3 $43.7 $48.2 $55.7

$92.7

$125.9

$10$30$50$70$90$110$130$150

$100$200$300$400$500$600$700

2014 2015 2016 2017 2018 2019

Net Revenue Adjusted EBITDA(1)

Net Revenue and Adjusted EBITDA(1) FYE June 30th

Adjusted EBITDA Margin(1)

19.5% 19.1% 19.1% 19.8% 18.7% 18.4%

SUPERIOR PERFORMANCE AND GROWTH

1. Adjusted EBITDA, EBITDA Margin and AFDNI per Share are non-GAAP measures. See “Use and Definition of Non-GAAP Financial Measures” and Appendix for a reconciliation to net income.

• Consistently delivered record Net Revenue and Adjusted EBITDA(1) annually and quarterly on a year-over-year basis since our IPO in 2014

• Malibu and Axis Adjusted EBITDA margins are in excess of our originally stated 20% goal

Adjusted Fully Distributed Net Income Per Share(1)

• Malibu has grown AFDNI per share substantiallyo 44.6% growth in FY2019o 66.7% growth in FY2018o 18.2% growth in FY2017

$0.78 $1.11 $1.32 $1.56 $2.60

$3.76

$1.53 $1.76

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY2019 6 mthsFY19

6 mthsFY20

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THREE ICONIC BRANDS, ONE GREAT COMPANYFOUR ICONIC BRANDS, ONE GREAT COMPANYFOUR ICONIC BRANDS, ONE GREAT COMPANYMALIBU BOATS INC.MALIBU BOATS INC. FOUR ICONIC BRANDS, ONE GREAT COMPANY

Our Markets and Brands

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Length 20 – 25 ft.11 Models

Premium Performance / Recreational BoatsRetail Price $60K – $190K

Entry-level Performance / Recreational BoatsRetail Price $60K – $110K

Length 20 –24 ft.5 Models


Outboard Recreational BoatsRetail Price $90K – $230K


Sterndrive Recreational BoatsRetail Price $60K – $770K

DIVERSE PRODUCT OFFERINGOutboard Recreational BoatsRetail Price $80K – $800K


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THREE ICONIC BRANDS, ONE GREAT COMPANYFOUR ICONIC BRANDS, ONE GREAT COMPANYFOUR ICONIC BRANDS, ONE GREAT COMPANYMALIBU BOATS INC. FOUR ICONIC BRANDS, ONE GREAT COMPANYMALIBU BOATS INC.

2018 NMMA POWERBOAT MARKET SUMMARYPowerboats

$10.5B; 276K UNITS; CY18 UNIT GROWTH OF 4%

Inboard / Sterndrive$3.5B; ~23K UNITS; CY18 UNIT GROWTH ~2%

Outboard$7B; ~178K UNITS; CY18 UNIT GROWTH OF 3%

33% PONTOON; 17% CENTER CONSOLE; 13% BASS BOATS8

Fiberglass$3.5B; ~23K UNITS; CY18 UNIT

GROWTH ~2%

AluminumVery small

Fiberglass$4.2B; ~57K UNITS;

CY18 UNIT GROWTH 3%; >19’ 79%

Aluminum$2.7B; ~121K UNITS; CY18 UNIT GROWTH

3%; <21’ 61%

Cruiser~2K UNITS; CY18 UNITS

FLAT

Sterndrive~11K UNITS; CY18 UNIT

DECLINE 5%

Ski/Wake~11K UNITS; CY18 UNIT

GROWTH 10%

Bass Boat

Other~62K UNITS

Pontoon~59K UNITS OtherOther

FishCenter

Console

MBUU IS THE MARKET LEADER IN MULTIPLE SUB-SEGMENTS; MANY FUTURE GROWTH OPPORTUNITIES REMAIN IN OVERALL POWERBOAT MARKET

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PSB MARKET CONTINUES TO GROW

• U.S. performance sport boat sales ~9% growth in CY2018; Malibu/Axis market share now over 32%

• 2018 sales remain 20% below the new units sold at the market peak in 2006

• If peak is reached, at Malibu’s current market share, that represents 850 additional units for Malibu and Axis brands

• We expect continued growth in the 23’ – 30’ foot sterndrive lengths where the vast majority of Cobalt’s unit volume is positioned

o Weakness in sterndrive has almost entirely been in lengths 20’ and less

• Pursuit’s outboard saltwater markets remains one of the fastest growing in all of marine

NEW UNITS U.S. PERFORMANCE SPORT BOAT RETAIL SALES(1)

1. Source: 2001 – 2018 NMMA, specific to PSB’s only

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THREE ICONIC BRANDS, ONE GREAT COMPANYFOUR ICONIC BRANDS, ONE GREAT COMPANYFOUR ICONIC BRANDS, ONE GREAT COMPANYMALIBU BOATS INC.MALIBU BOATS INC. FOUR ICONIC BRANDS, ONE GREAT COMPANY

Our Competitive Strengths and Growth Opportunities

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MALIBU IS STRATEGICALLY POSITIONED

#1 MARKET SHARE

IN GROWING SEGMENTS

WAKE SURFING PHENOMENA

ENTRY INTO FAST GROWING, HIGH VOLUME

OUTBOARD MARKET WITH COBALT AND

PURSUIT

LONG TERM RELATIONSHIPS WITH

BEST DEALERS

LEADING WITH INNOVATION AND PRODUCTS

DISCIPLINEDSTRATEGIC

ACQUISITIONS OF PREMIUM BRANDS

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• Vertical integration allows us to control from product inception and design to production

• This means we are able to ensure the design, quality and safety meet our high standards

• This meaningful competitive advantage allows us to control about 1/3 of the total material cost in an average boat, which is more than double our competitors

COMPETITIVE STRENGTHS

PRODUCT / INNOVATION

VERTICAL INTEGRATION

OPERATIONAL EXCELLENCE

• We produce more new models and features each year at Malibu/Axis than any of our competitors

• We are expanding this strategy to Cobalt and Pursuit

• Facilitates control from product conception through customer delivery allowing management of design, quality and cost

• Malibu controls up to $25K of material costs in a Malibu/Axis boat (more than double our competitors), versus external procurement

• Design for manufacturability allows our highly efficient labor force to produce more boats at an industry leading cost

• World class quality supported by an integrated quality system that includes efficiently managed sourcing and procurement

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CULTURE OF INNOVATION

Monsoon engines are fully integrated into Axis and Malibu boats

Malibu introduces Command Wheel

with steering wheel controls

Command Center is released featuring two touchscreens that puts control of everything at

the driver’s fingertips

Malibu MXZ series of premium picklefork

boats introduced

Malibu introduces the re-engineered, performance

enhancing Integrated Surf Platform (ISP) featuring

Power Wedge II

Malibu releases the Surf Band which

allows riders to control the wave from their

wrist

Malibu introduces the ultra-premium M235

Launch Axis brand of boats to attract entry-

level consumers

Malibu vertically integrates towers and board racks

Introduce Surf Gate technology that revolutionizes the control of waves and wakes

Malibu introduces the fully-powered

Gx tower

2009 2012 2014 2015 2016 2018 2019

Malibu introduces backup camera

Malibu introduces docking camera

Malibu vertically integrates the Cobalt Flip-Down Swim Step feature onto Malibu models

Malibu introduces Stern Turn, providing dynamic maneuverability in combination with the innovative Power Wedge III

Malibu introduces waterproof wireless charging

Malibu introduces brand new luxury flagship model, the Malibu M240

Malibu begins integrating its own flooring into all Malibu and Axis boats

Monsoon engines are fully integrated into Axis and Malibu boats

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• Vertical integration allows us to control from product inception and design to production

• This means we are able to ensure the design, quality and safety meet our high standards

• This meaningful competitive advantage allows us to control about 1/3 of the total material cost in an average boat, which is more than double our competitors

UNPARALLELED VERTICAL INTEGRATION

MONSOON ENGINE

FLOORING

CROSS-BRAND INTEGRATION

• Powerful engines; innovative performance features deliver a world-class boating experience

• Received 5-Star Award for Best Emissions Rating in 2019; compliant with the ISO 9001 standard

• Completely integrated into 100% of Malibu and Axis boats at start of FY 2020

• Successfully integrated our own flooring into all Malibu and Axis boats as of July 1, 2019

• Will eventually expand into Cobalt and Pursuit boats• Provides customer great optionality and flexibility and offers an attractive

profitability profile

• Leveraging industry-leading technology and capabilities across brands, unlocking maximum value from portfolio

• Patented swim step, Cobalt feature, now featured in Malibu models• More opportunities to generate new synergies across brands in FY 2020 and

beyond

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• Culture centered on superior employees building the highest quality products in the most efficient manner

• Provides an unmatched value to our dealers and customers

• Vertical integration supports operational excellence

• Allows us to encounter and overcome operating issues out of our control quickly

• Implementing the same strategy at Cobalt and ultimately Pursuit

• Drives margin expansion over the long-term

OPERATIONAL EXCELLENCE

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MALIBU’S GROWTH STRATEGY

InnovationProduct andDistribution

White SpacesVertical

Integration

Strategic Acquisitions of Premium Companies

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CLEAR PATH FOR CONTINUED GROWTH

Market Growth

Vertical Integration

PerformanceOptimization

Operational Improvements

Vertical Integration

Surf Segment & Outboard

Product

Remove Operational Constraints

New Product

Distribution Expansion

WITH AN INCREASING FOCUS

ON THE $4.2 BILLION FIBERGLASS OUTBOARD

MARKET(1)

STRONG ANNUAL MID-SINGLE DIGIT GROWTH

ACROSS ALL ADDRESSABLE MARKETS(2) –

MALIBU / AXIS, COBALT AND PURSUIT

1. Source: NMMA 20182. Source: SSI

THREE ICONIC BRANDS, ONE GREAT COMPANY

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MALIBU BOATS INC. THREE ICONIC BRANDS, ONE GREAT COMPANYFOUR ICONIC BRANDS, ONE GREAT COMPANYFOUR ICONIC BRANDS, ONE GREAT COMPANYMALIBU BOATS INC.

COBALT GROWTH OPPORTUNITIES

Dealer Improvement

Outboard Product

30 - 40 ft Day Cruiser Segment

Surf Product

International Distribution

Operational Excellence


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PURSUIT GROWTH OPPORTUNITIES

• Malibu will eliminate capacity constraints through a combination of footprint expansion and operational efficiencies

Fast-Growing Saltwater Outboard Market

• Product development opportunities in whitespace and adjacent marketsRobust Product Portfolio

• Leverage Pursuit experience to accelerate Cobalt outboard growth• Combine purchasing power with Cobalt for outboard engines

Leveraging Pursuit Engineering

• Use Malibu’s strong operational playbook to enhance margin through process efficiency and vertical integration Operational Excellence

• Multi-brand distribution opportunities with Cobalt• Expansion into additional saltwater markets and freshwater lakesDistribution


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COBALT AND PURSUIT FACILITY EXPANSION

• Phase 1 – North Building (5,000 Sq. Ft.)• Phase 2 – East Building (10,000 Sq. Ft.)• Increased capacity enhances the overall margin profile• Opportunity to further drive operational efficiencies

• Provides one plant for the larger +32’ boats and one for smaller boats, enhancing build efficiencies

• Brings our two largest boats, which are contract built, to Florida from Michigan; significantly improving margins on both models

• Unlocks production expansion in a currently constrained capacity environment:o Allows for the increase in dealers; Ship more product to existing

dealers; Add new product faster; Double production capacity over time

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• Leader in the growing marine industry

• Strong track record of financial performance and market share gains

• Positioned to capitalize on continuing U.S. growth and prepared for growth in international markets

• Culture of innovation leveraged across market-leading brands provides competitive advantage; transforming Cobalt and Pursuit into that same mindset

• Vertical integration and acquisition strategies provide opportunities to accelerate earnings growth

• Expanding product line with multiple avenues for growth

INVESTMENT SUMMARY

1. Adjusted EBITDA and EBITDA Margin are non-GAAP measures. See “Use and Definition of Non-GAAP Financial Measures” and Appendix for a reconciliation of Adjusted EBITDA and EBITDA Margin to net income.2. Source: SSI

GROWTH COMPANY WITH CONSISTENT, STRONG PERFORMANCE

28%ADJUSTED EBITDA

CAGRFY2014-2019(1)

#1OVERALL

MARKET SHARE IN PERFORMANCE SPORTS BOATS(2)

#1MARKET SHARE

IN 20’ – 40’ STERNDRIVE SEGMENT(2)

29%NET REVENUE

CAGRFY2014-2019

THREE ICONIC BRANDS, ONE GREAT COMPANYTHREE ICONIC BRANDS, ONE GREAT COMPANYFOUR ICONIC BRANDS, ONE GREAT COMPANYFOUR ICONIC BRANDS, ONE GREAT COMPANYMALIBU BOATS INC.

FINANCIAL PERFORMANCE


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• Outstanding financial and operating results

• Net sales are up 21.7% year-over-year

• Net sales per unit increased 13.0%

• Y/Y price increases

• Mix of larger models

• Gross profit increased 16.1% and gross margin was 22.7%

SIX MONTHS ENDED FISCAL Q2 2020

AFDNI per Share(1)

1. See Appendix for a reconciliation of Net Income to Adjusted Fully Distributed Net Income.2. See Appendix for a reconciliation of Non-GAAP Adjusted EBITDA to Net Income.

Adjusted EBITDA(2)

$1.53

$1.76

6 mths FY19 6 mths FY20

$52.3

$59.1

6 mths FY19 6 mths FY20


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• Our stated and achieved goal at the IPO(1) was to reach Adjusted EBITDA margins >20%

• The acquisitions of Cobalt and Pursuit reset our margin baseline

• Our FY19 Adjusted EBITDA(2) margin was 18.4%

• Our path forward to >20% includes:

• Applying the same blueprint we used for Malibu at Cobalt and ultimately Pursuit

• Pursuit capacity expansion

• Continued focus on vertical integration and operational excellence

MARGIN EXPANSION GOALS

(1) Our IPO was completed on February 5th, 2014.

(2) Adjusted EBITDA Margin is a non-GAAP measure. See “Use and Definition of Non-GAAP Financial Measures” and Appendix for areconciliation of Adjusted EBITDA Margin to net income.


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CAPITAL ALLOCATION PRIORITIES

2. DEBT PAYDOWN 3. RETURN OF CAPITAL TO SHAREHOLDERS(1)

1. ORGANIC INVESTMENT / STRATEGIC ACQUISITIONS

TECHNOLOGY / INNOVATION / BRAND

EXPANSION

PROCESS ENGINEERING / OPERATIONAL

ENHANCEMENTS

VERTICAL INTEGRATION

(1) MBUU aggressively bought shares back in September 2019; Total capital deployed of $11.1 million


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FY20 FULL YEAR OUTLOOK

METRIC TARGET(1)

Unit Volume Malibu/Cobalt – approaching flatPursuit – up slightly over 40%

Consolidated Net Sales High-single digit % growth

Gross Margin % Up slightly, excluding UAW strike impact

Adjusted EBITDA Margin % Approaching flat, excluding UAW strike impact

Capital Expenditures $40-45 million

UAW Strike Impact Less than $3 million

(1) Outlook as of 2/6/2020


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LONG-TERM FINANCIAL TARGETS

METRIC TARGET

Annual Net Sales Growth ~10%

Adjusted EBITDA Margin % >20%

Long-term EPS Annual Growth >15%

FOUR ICONIC BRANDS, ONE GREAT COMPANYMALIBU BOATS INC.

APPENDIX

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The following table sets forth a reconciliation of net income as determined in accordance with GAAP to Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow for the periods indicated (dollars in thousands):

RECONCILIATION OF NET INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA,ADJUSTED EBITDA MARGIN AND FREE CASH FLOW

($ in 1000s) Fiscal Year Ended June 30, Six Months Ended Dec 31,

2013 2014 2015 2016 2017 2018 2019 2018 2019

Net (Loss) Income $ 17,984 $ (1,188) $ 23,183 $ 20,295 $ 31,075 $ 30,969 $ 69,701 $ 27,013 $ 34,280

(Benefit) Provision for Income Taxes 1 - (2,220) 8,663 11,801 17,593 58,418 22,096 7,702 9,885

Acquisition and Integration Related Expenses 2 - - 1,676 401 3,056 2,859 5,245 3,909 -

Interest Expense 1,334 2,962 954 3,884 1,559 5,385 6,464 3,015 2,124

Depreciation & Amortization 6,268 6,777 4,890 5,524 6,748 12,854 15,960 7,176 9,223

Severance & Relocation 3 192 - - - - - - - -

Management Fees & Expenses 4 2,896 4,584 - - - - - - -

Professional Fees & Nautique Litigation 5 2,957 2,219 2,654 1,111 1,038 26 739 383 376

PCMW Litigation Settlement 6 - 20,000 - - - - - - -

Marine Power Litigation Judgement 7 - - - 3,268 (1,093) - - - -

Non-cash Compensation Expenses 8 127 2,577 1,467 1,947 1,396 1,973 2,607 1,131 1,490

Offering Related Expenses 9 - 1,561 161 - - - - - -

Engine Development 10 - - - - 2,489 4,871 3,186 1,939 -

UAW Strike Impact - - - - - - - - 1,687

Adjustments to Tax Receivable Agreement 11 - - - - (8,140) (24,637) (103) - -

Adjusted EBITDA $ 31,758 $ 37,272 $ 43,648 $ 48,231 $ 55,721 $ 92,718 $ 125,895 $ 52,268 $ 59,065

% Margin 19.0% 19.5% 19.1% 19.1% 19.8% 18.7% 18.4% 18.1% 16.8%

Capital Expenditures (2,878) (5,915) (5,366) (6,176) (9,262) (10,449) (17,938) (6,837) (19,313)

Free Cash Flow $ 28,880 $ 31,357 $ 38,282 $ 42,055 $ 46,459 $ 82,269 $ 107,957 $ 45,431 $ 39,752

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RECONCILIATION OF NET INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA,ADJUSTED EBITDA MARGIN AND FREE CASH FLOW

1. Provision for income taxes for the Twelve months ended June 30, 2018 reflects an increase to income tax expense of $44.5 million for the remeasurement of deferred taxes on the enactment date of the Tax Act adopted inDecember 2017 and deferred tax impact related to the reduction in the tax receivable agreement liability.

2. Represents legal and advisory fees as well as integration related costs incurred in connection with acquisition activities, including our acquisition of Malibu Boats Pty. Ltd. completed on October 23, 2014 for fiscal year2015 and legal and advisory fees as well as integration costs incurred in connection with our acquisition of Cobalt, which was completed on July 6, 2017 for fiscal years 2017 and 2018 and the nine months ended March31, 2018. Fiscal year 2016 included legal and advisory fees as well as integration related costs incurred in connection with certain other acquisition activities. For the twelve months ended June 30, 2019, represents legaland advisory fees incurred in connection with our acquisition of Pursuit on October 15, 2018. Integration related expenses for the twelve months ended June 30, 2019 include post-acquisition adjustments to cost of goodssold of $0.9 million for the fair value step up of Pursuit inventory acquired, most of which was sold during the second quarter of fiscal 2019. Integration related expenses for the twelve months ended June 30, 2018 includepost-acquisition adjustments to cost of goods sold of $1.5 million for the fair value step up of inventory acquired, most of which was sold during the first quarter of fiscal 2018.

3. Represents one-time employment related expenses, including a severance payment to a former executive, and costs to relocate certain departments from California to our Tennessee facility.

4. Represents management fees and out-of-pocket expenses paid pursuant to our management agreement with Malibu Boats Investor, LLC, an affiliate, which was terminated upon the closing of the IPO. Upon termination ofthe agreement, we paid a one-time termination fee of $3.75 million.

5. Represents legal and advisory fees related to our refinancing activities and legal expenses associated with our litigation with Pacific Coast Marine Windshields Ltd. (“PCMW”) in fiscal years 2014 and 2015, Nautique BoatCompany (“Nautique”) in fiscal year 2015, offset by the portion of the $2.3 million settlement received from Nautique for past infringement claims under the Nautique Settlement Agreement entered into on February 6, 2015and legal and advisory fees related to our litigation with Mastercraft offset by the settlement received from them in connection with the Mastercraft Settlement and License Agreement entered into on May 2, 2017 for fiscalyears 2016, 2017 and 2018. For the twelve months ended June 30, 2019 and the three months ended September 30, 2019, represents legal and advisory fees related to our litigation with Skier's Choice, Inc.

6. Represents a one-time charge related to the settlement of litigation with PCMW on September 15, 2014.

7. Represents a charge recorded in fiscal 2016 related to a judgment rendered against us in connection with a lawsuit by Marine Power, a former engine supplier, on August 18, 2016 and the reduction of that charge to $2.2million in fiscal 2017, the amount ultimately settled and paid in the fourth quarter of fiscal 2017.

8. Represents equity-based incentives awarded to certain of our employees under the Malibu Boats, Inc. Long-Term Incentive Plan and profit interests issued under the previously existing limited liability company agreementof the LLC. During the second quarter of fiscal year 2014, we recorded a $1.8 million stock compensation charge as a result of the modification of certain profits interest awards previously granted in 2012 under the firstamended and restated limited liability company agreement of the LLC, as amended, in connection with our IPO.

9. Includes legal, professional and advisory costs incurred in connection with our equity offerings, equity tender offer and IPO completed in fiscal years 2015 and 2014, respectively. There were no such offering costs for fiscalyear 2016, 2017 or 2018 or the twelve months ending June 30, 2019.

10. Represents costs incurred in connection with our vertical integration of engines including product development costs and supplier transition performance incentives.

11. For the Twelve months ended June 30, 2019 we recognized other income from an adjustment in our tax receivable agreement liability as a result of a decrease in the estimated tax rate used in computing our future taxobligations and in turn, a decrease in the future tax benefit we expect to pay under our tax receivable agreement with pre-IPO owners. For the twelve months ended June 30, 2019, we recognized other income as a resultof a decrease in our estimated tax receivable agreement liability. The reduction in our tax receivable agreement liability resulted from the adoption of the Tax Act, which decreased the estimated tax rate used in computingour future tax obligations and, in turn, decreased the future tax benefit we expect to realize related to increased tax basis from previous sales and exchanges of LLC Units by our pre-IPO owners. Represents a decrease inthe estimated tax receivable agreement liability stemming from tax legislation enacted during the fourth quarter of fiscal 2017 which reduced the tax rate applied in computing the future benefit expected to be realized by uson increased tax basis from previous sales and exchanges of LLC Units by the pre-IPO owners.

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The following table sets forth a reconciliation of net income attributable to Malibu Boats, Inc. to Adjusted Fully Distributed Net Income for the periods presented (dollars in thousands, except per share data):

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK TO ADJUSTED FULLY DISTRIBUTED NET INCOME OF CLASS A COMMON STOCK (UNAUDITED):

($ in 1000s) Fiscal Year Ended June, 30 Six Months Ended Dec 31,

2013 2014 2015 2016 2017 2018 2019 2018 2019

Net income attributable to Malibu Boats, Inc. $ - $ (4,676) $ 14,661 $ 18,042 $ 28,358 $ 27,613 $ 66,066 $ 25,555 $ 32,581

Income tax provision1 - (2,220) 8,663 11,801 17,593 58,418 22,096 7,702 9,885

Management fees and expenses 2 2,896 4,584 - - - - - - -

Professional fees 3 2,957 2,219 2,654 1,111 1,038 26 739 383 376

PCMW litigation settlement 4 - 20,000 - - - - - - -

Marine Power litigation judgment 5 - - - 3,268 (1,093) - - - -

Acquisition and integration related expenses 6 - - 1,676 401 3,056 5,719 9,506 5,798 2,147

Fair market value adjustment for interest rate swap 7 - - - 863 (912) (369) 350 132 58

Stock based compensation expense 8 127 2,577 1,467 1,947 1,396 1,973 2,607 1,131 1,490

Offering related expenses 9 - 1,561 161 - - - - - -

Engine development 10 - - - - 2,489 4,871 3,186 1,939 -

UAW strike impact11 - - - - - - - - 1,687

Adjustment to tax receivable agreement 12 - - - - (8,140) (24,637) (103) - -

Net income attributable to non-controlling interest 13 17,984 3,488 8,522 2,253 2,717 3,356 3,635 1,458 1,699

Fully distributed net income before income taxes 23,964 27,533 37,804 39,686 46,502 76,970 108,082 44,098 49,923

Income tax expense on fully distributed income before income taxes 14 8,627 9,912 13,420 14,089 16,508 20,908 26,048 10,628 11,732

Adjusted Fully Distributed net income $ 15,337 $ 17,621 $ 24,384 $ 25,597 $ 29,994 $ 56,062 $ 82,034 $ 33,470 $ 38,191

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RECONCILIATION OF NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK TO ADJUSTED FULLY DISTRIBUTED NET INCOME OF CLASS A COMMON STOCK (UNAUDITED):

1. Provision for income taxes for the three-month periods ended June 30, 2019 and 2018 and fiscal year 2019 and 2018 reflects the impact of the Tax Act adopted in December 2017, which among other items, lowered the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018. For fiscal year2018, we recorded an increase to income tax expense of $44.5 million for the remeasurement of deferred taxes on the enactment date of the Tax Act and the deferred tax impact related to the reduction in the tax receivable agreement liability. For the three months ended June 30, 2018, we recorded a decrease inour state deferred tax expense as a result of our estimated state tax rate for our tax receivable agreement liability.

2. Represents management fees and out-of-pocket expenses paid pursuant to our management agreement with Malibu Boats Investor, LLC, an affiliate, which was terminated upon the closing of the IPO. Upon termination of the agreement, we paid a one-time termination fee of $3.75million.

3. Represents legal and advisory fees related to our refinancing activities and legal expenses associated with our litigation with Pacific Coast Marine Windshields Ltd. (“PCMW”) in fiscal years 2014 and 2015, Nautique Boat Company (“Nautique”) in fiscal year 2015, offset by the portionof the $2.3 million settlement received from Nautique for past infringement claims under the Nautique Settlement Agreement entered into on February 6, 2015 and legal and advisory fees related to our litigation with Mastercraft offset by the settlement received from them in connectionwith the Mastercraft Settlement and License Agreement entered into on May 2, 2017 for fiscal years 2016, 2017 and 2018. For the twelve months ended June 30, 2019 and the three months ended September 30, 2019, represents legal and advisory fees related to our litigation withSkier's Choice, Inc.


5. Represents a charge recorded in fiscal 2016 related to a judgment rendered against us in connection with a lawsuit by Marine Power, a former engine supplier, on August 18, 2016 and the reduction of that charge to $2.2 million in fiscal 2017, the amount ultimately settled and paid inthe fourth quarter of fiscal 2017.

6. Represents legal and advisory fees as well as integration related costs incurred in connection with acquisition activities, including our acquisition of Malibu Boats Pty. Ltd. completed on October 23, 2014 for fiscal year 2015 and legal and advisory fees as well as integration costsincurred in connection with our acquisition of Cobalt, which was completed on July 6, 2017 for fiscal years 2017 Integration related expenses for fiscal year 2019 include post-acquisition adjustments to cost of goods sold of $0.9 million for the fair value step up of inventory acquired,most of which was sold during the second quarter of fiscal year 2019 and $1.3 million in depreciation and amortization associated with our fair value step up of property, plant and equipment and intangibles acquired in connection with the acquisition of Pursuit. In addition, for fiscalyear 2019 integration related expenses includes $3.0 million in amortization associated intangibles acquired in connection with the acquisition of Cobalt. Integration related expenses for the three months ended June 30, 2018 includes $0.7 million in amortization associated withintangibles acquired in connection with the acquisition of Cobalt. Integration related expenses for fiscal year 2018 include post-acquisition adjustments to cost of goods sold of $1.5 million for the fair value step up of inventory acquired, most of which was sold during the first quarter offiscal year 2018. In addition, for fiscal year 2018 integration related expenses includes $2.9 million in depreciation and amortization associated with our fair value step up of property, plant and equipment and intangibles acquired in connection with the acquisition of Cobalt. For thethree months ended September 30, 2019, represents amortization of intangibles acquired in connection with the acquisition of Pursuit and Cobalt.

7. Represents the change in the fair value of our interest rate swap entered into on July 1, 2015.

8. Represents equity-based incentives awarded to certain of our employees under the Malibu Boats, Inc. Long-Term Incentive Plan and profit interests issued under the previously existing limited liability company agreement of the LLC. During the second quarter of fiscal year 2014, werecorded a $1.8 million stock compensation charge as a result of the modification of certain profits interest awards previously granted in 2012 under the first amended and restated limited liability company agreement of the LLC, as amended, in connection with our IPO.

9. Includes legal, professional and advisory costs incurred in connection with our equity offerings, equity tender offer and IPO completed in fiscal years 2015 and 2014, respectively. There were no such offering costs for fiscal year 2016, 2017 or 2018 or 2019.


11. For the three and six months ended December 31, 2019, represents costs incurred in connection with interruption to our engine supply during the UAW strike against General Motors. We purchase engines from General Motors LLC that we then prepare for marine use for our Malibuand Axis boats. During the UAW strike, General Motors suspended delivery of engine blocks to us and we incurred costs by entering into purchase agreements with two suppliers for additional engines to supplement our inventory of engine blocks for Malibu and Axis boats.

12. For fiscal year 2019, we recognized other income from an adjustment in our tax receivable agreement liability as a result of a decrease in the estimated tax rate used in computing our future tax obligations and in turn, a decrease in the future tax benefit we expect to pay under our taxreceivable agreement with pre-IPO owners. The rate decrease was mainly offset by an increase to other expense for tax receivable agreement liability derived by future tax benefits from Tennessee net operating losses at Malibu Boats Inc. for the three months ended June 30, 2019.For fiscal year 2018, we recognized other income as a result of a decrease in our estimated tax receivable agreement liability. The reduction in our tax receivable agreement liability resulted from the adoption of the Tax Act, which decreased the estimated tax rate used in computingour future tax obligations and, in turn, decreased the future tax benefit we expect to realize related to increased tax basis from previous sales and exchanges of LLC Units by our pre-IPO owners This was offset by other expense as a result of an increase in our estimated state tax ratefor the three months ended June 30, 2018.

13. Reflects the elimination of the non-controlling interest in the LLC as if all LLC members had fully exchanged their LLC Units for shares of Class A Common Stock. Earnings (loss) prior and up to our IPO on February 5, 2014 were entirely allocable to members of the LLC, as such weupdated our historical presentation to attribute these earnings (loss) to the non-controlling interest LLC Unit holders.

14. Reflects income tax expense at an estimated normalized annual effective income tax rate of 28.0% of income taxes for fiscal year 2018 and 35.5% of income before income taxes for the fiscal years ended June 30, 2017, 2016, 2015 and 2014, assuming the conversion of all LLCUnits into shares of Class A Common Stock. The estimated normalized annual effective income tax rate is based on the federal statutory rate plus a blended state rate adjusted for deductions under Section 199 of the Internal Revenue Code of 1986, as amended, state taxesattributable to the LLC, and foreign income taxes attributable to our Australian based subsidiary. Reflects income tax expense at an estimated normalized annual effective income tax rate of 24.1% and 33.3% of income before income taxes for the nine months ended March 31, 2019and 2018, respectively, assuming the conversion of all LLC Units into shares of Class A Common Stock. The decrease in the normalized annual effective income tax rate to 24.1% for the twelve months ended June 30, 2019, is primarily the result of the Tax Act which was effective forperiods after January 1, 2018, lowering the corporate tax rate to 21%, as well as an updated blended state rate, which considers the impacts of the Cobalt acquisition and a recent law change in Tennessee.

34


The following table sets forth a reconciliation of denominator for net income attributable to Class A Common Stock per share to Adjusted Fully Distributed Net Income per share of Class A Common Stock for the periods presented:

RECONCILIATION OF DENOMINATOR FOR NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK PER SHARE TO ADJUSTED FULLY DISTRIBUTED NET INCOME PER SHARE OF CLASS A COMMON STOCK

(UNAUDITED):

2013 2014 2015 2016 2017 2018 2019 2018 2019

Weighted average shares outstanding of Class A Common Stock used for basic net income per share(1)

Adjustments to weighted average shares of Class A Common Stock:

Weighted-average LLC units held by non-controlling unit holders(2)

Weighted-average unvested restricted stock awards issued to management(3)

Total restricted stock units granted to directors(4)

Adjusted weighted average shares of Class A Common Stock outstanding used in computing Adjusted Fully Distributed Net Income per Share of Class A Common Stock:

Six Months Ended Dec 31,

20,710,681

830,152

20,758,095

925,963

129,850

0

21,670,683

128,491

0

21,812,549

Reconciliation of 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:

11,373,737 11,373,737 6,194,270 1,407,311 1,338,907

17,844,77411,055,310 11,055,310 15,732,531 17,934,580

19,390,357 19,296,54022,498,631 22,498,631 21,926,801

– – – 48,466 112,859

69,584 69,584 0 0 0

1,138,917

132,673

0

21,461,469

20,189,879

21,843,109

20,832,445

Fiscal Year Ended June, 30

880,144

130,520

0

35


1. The difference in the weighted average shares outstanding for all periods, relates to the difference in the weighting of shares outstanding of Class A common stock during this period for the calculation of the basic net income per share for our financial statements and basic net income per share for adjusted fully distributed net income.

2. Represents the weighted average shares outstanding of LLC Units held by non-controlling interests assuming they were exchanged into Class A Common Stock on a one-for-one basis.

3. Represents the weighted average unvested restricted stock awards included in outstanding shares during the applicable period that were convertible into Class A Common Stock and granted to members of management.

4. Represents the total restricted stock awards included in outstanding shares granted to directors

RECONCILIATION OF DENOMINATOR FOR NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK PER SHARE TO ADJUSTED FULLY DISTRIBUTED NET INCOME PER SHARE OF CLASS A COMMON STOCK

(UNAUDITED):

36


RECONCILIATION OF NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK PER SHARE TO ADJUSTED FULLY DISTRIBUTED NET INCOME PER SHARE OF CLASS A COMMON STOCK (UNAUDITED):

The following table sets forth a reconciliation of net income attributable per share to Malibu Boats, Inc. to Adjusted Fully Distributed Net Income per share for the periods presented:

Reconciliation of net income available to Class A Common Stock per share of AFDNI per Share of Class A Common Stock

Fiscal Year Ended June 30, Six Months Ended Dec 31,

2013 2014 2015 2016 2017 2018 2019 2018 2019

Net income attributable to Malibu Boats, Inc. $ - $ (0.42) $ 0.93 $ 1.01 $ 1.59 $ 1.37 $ 3.17 $ 1.23 $ 1.57

Income tax provision 1 - (0.20) 0.55 0.66 0.99 2.89 1.06 0.37 0.48

Management fees and expenses 2 0.26 0.41 - - - - - - -

Professional fees 3 0.27 0.20 0.17 0.06 0.06 - 0.04 0.02 0.02

PCMW litigation settlement 4 - 1.81 - - - - - - -

Marine Power litigation judgment 5 - - - 0.18 (0.06) - - - -

Acquisition and integration related expenses 6 - - 0.11 0.02 0.17 0.28 0.46 0.28 0.10

Fair market value adjustment for interest rate swap 7 - - - 0.05 (0.05) (0.02) 0.02 0.01 -

Stock based compensation expense 8 0.01 0.23 0.09 0.11 0.08 0.10 0.13 0.05 0.07

Offering related expenses 9 - 0.14 0.01 - - - - - -

Engine development 10 - - - - 0.14 0.24 0.15 0.09 -

Adjustment to tax receivable agreement 11 - - - - (0.46) (1.22) - - -

Net income attributable to non-controlling interest 12 1.63 0.32 0.54 0.13 0.15 0.17 0.17 0.07 0.08

Fully distributed net income before income taxes 2.17 2.49 2.40 2.21 2.61 3.81 5.20 2.12 2.40 Income tax expense on fully distributed income before income taxes 13 (0.78) (0.90) (0.85) (0.79) (0.92) (1.04) (1.25) (0.51) (0.57)

Impact of increased share count 14 (0.71) (0.81) (0.44) (0.11) (0.13) (0.17) (0.19) (0.08) (0.07)

Adjusted Fully Distributed net income $ 0.68 $ 0.78 $ 1.11 $ 1.32 $ 1.56 $ 2.60 $ 3.76 $ 1.53 $ 1.76

37


1. Provision for income taxes for the three-month periods ended June 30, 2019 and 2018 and fiscal year 2019 and 2018 reflects the impact of the Tax Act adopted in December 2017, which among other items, lowered the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018. For fiscal year2018, we recorded an increase to income tax expense of $44.5 million for the remeasurement of deferred taxes on the enactment date of the Tax Act and the deferred tax impact related to the reduction in the tax receivable agreement liability. For the three months ended June 30, 2018, we recorded a decrease inour state deferred tax expense as a result of our estimated state tax rate for our tax receivable agreement liability.

2. Represents management fees and out-of-pocket expenses paid pursuant to our management agreement with Malibu Boats Investor, LLC, an affiliate, which was terminated upon the closing of the IPO. Upon termination of the agreement, we paid a one-time termination fee of $3.75million.

3. Represents legal and advisory fees related to our refinancing activities and legal expenses associated with our litigation with Pacific Coast Marine Windshields Ltd. (“PCMW”) in fiscal years 2014 and 2015, Nautique Boat Company (“Nautique”) in fiscal year 2015, offset by the portionof the $2.3 million settlement received from Nautique for past infringement claims under the Nautique Settlement Agreement entered into on February 6, 2015 and legal and advisory fees related to our litigation with Mastercraft offset by the settlement received from them in connectionwith the Mastercraft Settlement and License Agreement entered into on May 2, 2017 for fiscal years 2016, 2017 and 2018. For the twelve months ended June 30, 2019 and the three months ended September 30, 2019, represents legal and advisory fees related to our litigation withSkier's Choice, Inc.


5. Represents a charge recorded in fiscal 2016 related to a judgment rendered against us in connection with a lawsuit by Marine Power, a former engine supplier, on August 18, 2016 and the reduction of that charge to $2.2 million in fiscal 2017, the amount ultimately settled and paid inthe fourth quarter of fiscal 2017.

6. Represents legal and advisory fees as well as integration related costs incurred in connection with acquisition activities, including our acquisition of Malibu Boats Pty. Ltd. completed on October 23, 2014 for fiscal year 2015 and legal and advisory fees as well as integration costsincurred in connection with our acquisition of Cobalt, which was completed on July 6, 2017 for fiscal years 2017 Integration related expenses for fiscal year 2019 include post-acquisition adjustments to cost of goods sold of $0.9 million for the fair value step up of inventory acquired,most of which was sold during the second quarter of fiscal year 2019 and $1.3 million in depreciation and amortization associated with our fair value step up of property, plant and equipment and intangibles acquired in connection with the acquisition of Pursuit. In addition, for fiscalyear 2019 integration related expenses includes $3.0 million in amortization associated intangibles acquired in connection with the acquisition of Cobalt. Integration related expenses for the three months ended June 30, 2018 includes $0.7 million in amortization associated withintangibles acquired in connection with the acquisition of Cobalt. Integration related expenses for fiscal year 2018 include post-acquisition adjustments to cost of goods sold of $1.5 million for the fair value step up of inventory acquired, most of which was sold during the first quarter offiscal year 2018. In addition, for fiscal year 2018 integration related expenses includes $2.9 million in depreciation and amortization associated with our fair value step up of property, plant and equipment and intangibles acquired in connection with the acquisition of Cobalt. For thethree months ended September 30, 2019, represents amortization of intangibles acquired in connection with the acquisition of Pursuit and Cobalt.

7. Represents the change in the fair value of our interest rate swap entered into on July 1, 2015.

8. Represents equity-based incentives awarded to certain of our employees under the Malibu Boats, Inc. Long-Term Incentive Plan and profit interests issued under the previously existing limited liability company agreement of the LLC. During the second quarter of fiscal year 2014, werecorded a $1.8 million stock compensation charge as a result of the modification of certain profits interest awards previously granted in 2012 under the first amended and restated limited liability company agreement of the LLC, as amended, in connection with our IPO.

9. Includes legal, professional and advisory costs incurred in connection with our equity offerings, equity tender offer and IPO completed in fiscal years 2015 and 2014, respectively. There were no such offering costs for fiscal year 2016, 2017 or 2018 or 2019.


11. For fiscal year 2019, we recognized other income from an adjustment in our tax receivable agreement liability as a result of a decrease in the estimated tax rate used in computing our future tax obligations and in turn, a decrease in the future tax benefit we expect to pay under our taxreceivable agreement with pre-IPO owners. The rate decrease was mainly offset by an increase to other expense for tax receivable agreement liability derived by future tax benefits from Tennessee net operating losses at Malibu Boats Inc. for the three months ended June 30, 2019.For fiscal year 2018, we recognized other income as a result of a decrease in our estimated tax receivable agreement liability. The reduction in our tax receivable agreement liability resulted from the adoption of the Tax Act, which decreased the estimated tax rate used in computingour future tax obligations and, in turn, decreased the future tax benefit we expect to realize related to increased tax basis from previous sales and exchanges of LLC Units by our pre-IPO owners This was offset by other expense as a result of an increase in our estimated state tax ratefor the three months ended June 30, 2018.

12. Reflects the elimination of the non-controlling interest in the LLC as if all LLC members had fully exchanged their LLC Units for shares of Class A Common Stock. Earnings (loss) prior and up to our IPO on February 5, 2014 were entirely allocable to members of the LLC, as such weupdated our historical presentation to attribute these earnings (loss) to the non-controlling interest LLC Unit holders.

13. Reflects income tax expense at an estimated normalized annual effective income tax rate of 28.0% of income taxes for fiscal year 2018 and 35.5% of income before income taxes for the fiscal years ended June 30, 2017, 2016, 2015 and 2014, assuming the conversion of all LLCUnits into shares of Class A Common Stock. The estimated normalized annual effective income tax rate is based on the federal statutory rate plus a blended state rate adjusted for deductions under Section 199 of the Internal Revenue Code of 1986, as amended, state taxesattributable to the LLC, and foreign income taxes attributable to our Australian based subsidiary. Reflects income tax expense at an estimated normalized annual effective income tax rate of 24.1% and 33.3% of income before income taxes for the nine months ended March 31, 2019and 2018, respectively, assuming the conversion of all LLC Units into shares of Class A Common Stock. The decrease in the normalized annual effective income tax rate to 24.1% for the twelve months ended June 30, 2019, is primarily the result of the Tax Act which was effective forperiods after January 1, 2018, lowering the corporate tax rate to 21%, as well as an updated blended state rate, which considers the impacts of the Cobalt acquisition and a recent law change in Tennessee.

14. Reflects impact of increased share counts assuming the exchange of all weighted average shares outstanding of LLC Units into shares of Class A Common Stock and the conversion of all weighted average unvested restricted stock awards included in outstanding sharesgranted to members of management.

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO CLASS A COMMON STOCK PER SHARE TO ADJUSTED FULLY DISTRIBUTED NET INCOME PER SHARE OF CLASS A COMMON STOCK (UNAUDITED):

investor presentation · 2020-03-05 · our presentation of these nongaap financial measures should...

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