MasterCraft Boat Holdings, Inc. Reports Results for Fiscal 2024 Third Quarter

Source: GlobeNewswire
MasterCraft Boat Holdings, Inc. Reports Results for Fiscal 2024 Third Quarter

VONORE, Tenn., May 08, 2024 (GLOBE NEWSWIRE) -- MasterCraft Boat Holdings, Inc. (NASDAQ: MCFT) today announced financial results for its fiscal 2024 third quarter ended March 31, 2024.

The overview, commentary, and results provided herein relate to our continuing operations.

Overview:

  • Net sales for the third quarter were $95.7 million, down 42.6% from the prior-year period
  • Net income from continuing operations was $3.8 million, or $0.23 per diluted share
  • Diluted Adjusted Net Income per share, a non-GAAP measure, was $0.37, down 72.8% from the prior-year period
  • Adjusted EBITDA, a non-GAAP measure, was $9.7 million, down 70.7% from the prior-year period
  • Share repurchases of $1.6 million during the quarter
  • Ended the quarter with cash and investments of $105.7 million, and total debt of $50.4 million

Brad Nelson, Chief Executive Officer, commented, “We delivered results ahead of our expectations in what remains a dynamic and challenging environment for the marine industry. My first six weeks with our team has been energizing, and it is clear to me that our capabilities and opportunities are even greater than I anticipated. Since I joined the Company, I have been on the road meeting with and getting to know our team, our customers, dealers and business partners. The headline takeaways, are highly encouraging - the foundation of the business is strong, MasterCraft is home to iconic and leading brands, customers and dealers love our products, and the long-term outlook for the industry is bright. We are laser focused on and well-positioned to navigate the near-term challenges in our industry as we evolve our long-term growth strategy.”

Nelson continued, “We recently announced the launch of an all-new luxury pontoon brand, Balise. Balise will further diversify our product offerings, expand our addressable market, and grow our portfolio of strong brands. The Balise product will be built by our experienced team at Crest’s manufacturing facility in Owosso, Michigan, which is a capital-efficient use of existing capacity. Balise production has already commenced, and product will be available to consumers for model year 2025. The launch of Balise Pontoon Boats is the latest example of our unwavering commitment to growth and innovation.”

Third Quarter Results

For the third quarter of fiscal 2024, MasterCraft Boat Holdings, Inc. reported consolidated net sales of $95.7 million, down $71.1 million from the third quarter of fiscal 2023. The decrease in net sales was due to lower unit volume and an increase in dealer incentives, partially offset by higher prices and favorable model mix and options. Dealer incentives include measures taken by the Company to assist dealers as the retail environment remains competitive.

Gross margin percentage declined 630 basis points during the third quarter of fiscal 2024, when compared to the same prior-year period. Lower margins were the result of lower cost absorption due to planned decreased unit volume and higher dealer incentives, partially offset by higher prices and favorable model mix and options.

Operating expenses increased $0.8 million for the third quarter of fiscal 2024, compared to the prior-year period. The increase in operating expenses was a result of CEO transition and related share-based compensation costs, which were $1.9 million.

Net income from continuing operations was $3.8 million for the third quarter of fiscal 2024, compared to $22.8 million in the prior-year period. Diluted net income from continuing operations per share was $0.23, compared to $1.28 for the third quarter of fiscal 2023.

Adjusted Net Income decreased to $6.3 million for the third quarter of fiscal 2024, or $0.37 per diluted share, compared to $24.1 million, or $1.36 per diluted share, in the prior-year period.

Adjusted EBITDA was $9.7 million for the third quarter of fiscal 2024, compared to $33.0 million in the prior-year period. Adjusted EBITDA margin was 10.1 percent for the third quarter, down from 19.8 percent for the prior-year period.

See “Non-GAAP Measures” below for a reconciliation of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Net Income per share to the most directly comparable financial measures presented in accordance with GAAP.

Outlook

Concluded Nelson, “As we enter the prime retail selling season, macroeconomic uncertainty continues to limit demand visibility. This has been exacerbated by the news that a competitor’s largest dealer is in financial distress, which has heightened competitive pressure with the potential for higher-than-normal competitor discounting. Dealer inventories remain higher-than-optimal and inventory carrying costs are elevated. Consequently, dealers are taking a cautious approach to ordering ahead of the annual model year changeover. We continue to focus on balancing dealer inventories with retail demand to prioritize dealer health, therefore, we plan to reduce planned production for the remainder of our fiscal year. We have taken a proactive approach to production planning, inventory management, and dealer incentives to best position our dealers to capitalize on retail demand during the upcoming selling season, and end the fiscal year with improved inventory levels.”

The Company’s outlook is as follows:

  • As a result of the planned decrease in production, we are revising our guidance for the full year. Consolidated net sales is now expected to be between $360 million and $365 million, with Adjusted EBITDA between $28 million and $30 million, and Adjusted Earnings per share between $0.95 and $1.05. We also now expect capital expenditures to be approximately $17 million for the full year.

Conference Call and Webcast Information

MasterCraft Boat Holdings, Inc. will host a live conference call and webcast to discuss fiscal third quarter 2024 results today, May 8, 2024, at 8:30 a.m. EDT. Participants may access the conference call live via webcast on the investor section of the Company’s website, Investors.MasterCraft.com, by clicking on the webcast icon. To participate via telephone, please register in advance at this link. Upon registration, all telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number along with a unique passcode and registrant ID that can be used to access the call. A replay of the conference call and webcast will be archived on the Company's website.

About MasterCraft Boat Holdings, Inc.

Headquartered in Vonore, Tenn., MasterCraft Boat Holdings, Inc. (NASDAQ: MCFT) is a leading innovator, designer, manufacturer and marketer of recreational powerboats through its four brands, MasterCraft, Crest, Aviara and Balise. Through these four brands, MasterCraft Boat Holdings has leading market share positions in two of the fastest growing segments of the powerboat industry – performance sport boats and pontoon boats – while entering the large, growing luxury day boat segment. For more information about MasterCraft Boat Holdings, and its four brands, visit: Investors.MasterCraft.com, www.MasterCraft.com, www.CrestPontoons.com, www.AviaraBoats.com, and www.BalisePontoonBoats.com

Forward-Looking Statements

This press release includes forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Forward-looking statements can often 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 include statements in this press release concerning the resilience of our business model; and our intention to drive value and accelerate growth.

Forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including, but not limited to: the potential effects of supply chain disruptions and production inefficiencies, general economic conditions, demand for our products, inflation, changes in consumer preferences, competition within our industry, our ability to maintain a reliable network of dealers, our ability to manage our manufacturing levels and our fixed cost base, the successful introduction of our new products, geopolitical conflicts, such as the conflict between Russia and Ukraine and the conflict in the Gaza Strip and general unrest in the Middle East, and financial institution disruptions. These and other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023, filed with the Securities and Exchange Commission (the “SEC”) on August 30, 2023, and our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024, could cause actual results to differ materially from those indicated by the forward-looking statements. The discussion of these risks is specifically incorporated by reference into this press release.

Any such forward-looking statements represent management's estimates as of the date of this press release. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release. We undertake no obligation (and we expressly disclaim any obligation) to update or supplement any forward-looking statements that may become untrue or cause our views to change, whether because of new information, future events, changes in assumptions or otherwise. Comparison of results for current and prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

Use of Non-GAAP Financial Measures

To supplement the Company’s consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP financial measures used in this release to the most comparable GAAP measures for the respective periods can be found in tables immediately following the consolidated statements of operations. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for the Company’s financial results prepared in accordance with GAAP.

Results of Operations for the Three and Nine Months Ended March 31, 2024

MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

  Three Months Ended  Nine Months Ended 
  March 31,  April 2,  March 31,  April 2, 
  2024  2023  2024  2023 
          
Net sales $95,708  $166,776  $299,406  $495,480 
Cost of sales  77,360   124,178   240,493   368,682 
Gross profit  18,348   42,598   58,913   126,798 
Operating expenses:            
Selling and marketing  3,924   3,927   10,538   10,748 
General and administrative  9,978   9,156   27,446   26,874 
Amortization of other intangible assets  450   489   1,362   1,467 
Total operating expenses  14,352   13,572   39,346   39,089 
Operating income  3,996   29,026   19,567   87,709 
Other income (expense):            
Interest expense  (762)  (695)  (2,494)  (1,923)
Interest income  1,398   1,195   4,164   1,967 
Income before income tax expense  4,632   29,526   21,237   87,753 
Income tax expense  806   6,744   4,408   20,353 
Net income from continuing operations  3,826   22,782   16,829   67,400 
Loss from discontinued operations, net of tax  (71)  (272)  (993)  (21,139)
Net income $3,755  $22,510  $15,836  $46,261 
             
Net income (loss) per share            
Basic            
Continuing operations $0.23  $1.30  $0.99  $3.80 
Discontinued operations  (0.01)  (0.02)  (0.06)  (1.19)
Net income $0.22  $1.28  $0.93  $2.61 
             
Diluted            
Continuing operations $0.23  $1.28  $0.98  $3.78 
Discontinued operations  (0.01)  (0.01)  (0.05)  (1.19)
Net income $0.22  $1.27  $0.93  $2.59 
             
Weighted average shares used for computation of:            
Basic earnings per share  16,844,440   17,559,920   17,003,616   17,725,208 
Diluted earnings per share  16,965,624   17,748,910   17,093,958   17,851,655 
                 

MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

  March 31,  June 30, 
  2024  2023 
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $22,509  $19,817 
Held-to-maturity securities  83,183   91,560 
Accounts receivable, net of allowances of $96 and $122, respectively  13,473   15,741 
Inventories, net  41,432   58,298 
Prepaid expenses and other current assets  14,414   10,083 
Total current assets  175,011   195,499 
Property, plant and equipment, net  79,593   77,921 
Goodwill  28,493   28,493 
Other intangible assets, net  34,100   35,462 
Deferred income taxes  14,377   12,428 
Deferred debt issuance costs, net  306   304 
Other long-term assets  9,002   3,869 
Total assets $340,882  $353,976 
LIABILITIES AND EQUITY      
CURRENT LIABILITIES:      
Accounts payable $15,216  $20,391 
Income tax payable  1,022   5,272 
Accrued expenses and other current liabilities  66,164   72,496 
Current portion of long-term debt, net of unamortized debt issuance costs  4,371   4,381 
Total current liabilities  86,773   102,540 
Long-term debt, net of unamortized debt issuance costs  45,982   49,295 
Unrecognized tax positions  8,174   7,350 
Operating lease liabilities  2,855   2,702 
Total liabilities  143,784   161,887 
COMMITMENTS AND CONTINGENCIES      
EQUITY:      
Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 17,018,448 shares at March 31, 2024 and 17,312,850 shares at June 30, 2023  170   173 
Additional paid-in capital  65,072   75,976 
Retained earnings  131,656   115,820 
MasterCraft Boat Holdings, Inc. equity  196,898   191,969 
Noncontrolling interest  200   120 
Total equity  197,098   192,089 
Total liabilities and equity $340,882  $353,976 
 

Supplemental Operating Data

The following table presents certain supplemental operating data for the periods indicated:

  Three Months Ended Nine Months Ended
  March 31,  April 2,     March 31,  April 2,    
  2024  2023  Change 2024  2023  Change
  (Dollars in thousands)
Unit sales volume:                  
MasterCraft  468   900  (48.0)%  1,453   2,457  (40.9)%
Crest  298   722  (58.7)%  1,025   2,344  (56.3)%
Aviara  39   34  14.7%  92   100  (8.0)%
Consolidated  805   1,656  (51.4)%  2,570   4,901  (47.6)%
Net sales:                  
MasterCraft $69,783  $117,630  (40.7)% $218,319  $339,315  (35.7)%
Crest  14,194   36,369  (61.0)%  49,713   116,595  (57.4)%
Aviara  11,731   12,777  (8.2)%  31,374   39,570  (20.7)%
Consolidated $95,708  $166,776  (42.6)% $299,406  $495,480  (39.6)%
Net sales per unit:                  
MasterCraft $149  $131  13.7% $150  $138  8.7%
Crest  48   50  (4.0)%  49   50  (2.0)%
Aviara  301   376  (19.9)%  341   396  (13.9)%
Consolidated  119   101  17.8%  117   101  15.8%
Gross margin  19.2%  25.5% (630)bps  19.7%  25.6% (590)bps

Non-GAAP Measures

EBITDA, Adjusted EBITDA, EBITDA margin, and Adjusted EBITDA margin

We define EBITDA as net income from continuing operations, before interest, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations. For the periods presented herein, these adjustments include share-based compensation, business development consulting costs, and CEO transition costs. We define EBITDA margin and Adjusted EBITDA margin as EBITDA and Adjusted EBITDA, respectively, each expressed as a percentage of Net sales.

Adjusted Net Income and Adjusted Net Income per share

We define Adjusted Net Income and Adjusted Net Income per share as net income from continuing operations, adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations and reflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate. For the periods presented herein, these adjustments include other intangible asset amortization, share-based compensation, business development consulting costs, and CEO transition costs.

EBITDA, Adjusted EBITDA, EBITDA margin, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Net Income per share, which we refer to collectively as the Non-GAAP Measures, are not measures of net income or operating income as determined under accounting principles generally accepted in the United States, or U.S. GAAP. The Non-GAAP Measures are not measures of performance in accordance with U.S. GAAP and should not be considered as an alternative to net income, net income per share, or operating cash flows determined in accordance with U.S. GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of cash flow. We believe that the inclusion of the Non-GAAP Measures is appropriate to provide additional information to investors because securities analysts and investors use the Non-GAAP Measures to assess our operating performance across periods on a consistent basis and to evaluate the relative risk of an investment in our securities. We use Adjusted Net Income and Adjusted Net Income per share 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 U.S. GAAP, provides a more complete understanding of factors and trends affecting our business than does U.S. GAAP measures alone. We believe Adjusted Net Income and Adjusted Net Income per share assists our board of directors, management, investors, and other users of the financial statements in comparing our net income on a consistent basis from period to period because it removes certain non-cash items and other items that we do not consider to be indicative of our core and/or ongoing operations and reflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate. The Non-GAAP Measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and the Non-GAAP Measures do not reflect any cash requirements for such replacements;
  • The Non-GAAP Measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
  • The Non-GAAP Measures do not reflect changes in, or cash requirements for, our working capital needs;
  • Certain Non-GAAP Measures do not reflect our tax expense or any cash requirements to pay income taxes;
  • Certain Non-GAAP Measures do not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness; and
  • The Non-GAAP Measures do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our core and/or ongoing operations, but may nonetheless have a material impact on our results of operations.

In addition, because not all companies use identical calculations, our presentation of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies, including companies in our industry.

We do not provide forward-looking guidance for certain financial measures on a U.S. GAAP basis because we are unable to predict certain items contained in the U.S. GAAP measures without unreasonable efforts. These items may include acquisition-related costs, litigation charges or settlements, impairment charges, and certain other unusual adjustments.

The following table presents a reconciliation of net income from continuing operations as determined in accordance with U.S. GAAP to EBITDA and Adjusted EBITDA, and net income from continuing operations margin to EBITDA margin and Adjusted EBITDA margin (each expressed as a percentage of net sales) for the periods indicated:

(Dollars in thousands) Three Months Ended Nine Months Ended
  March 31,  % of Net April 2,  % of Net March 31,  % of Net April 2,  % of Net
  2024  sales 2023  sales 2024  sales 2023  sales
Net income from continuing operations $3,826  4.0% $22,782  13.7% $16,829  5.6% $67,400  13.6%
Income tax expense  806     6,744     4,408     20,353   
Interest expense  762     695     2,494     1,923   
Interest income  (1,398)    (1,195)    (4,164)    (1,967)  
Depreciation and amortization  2,842     2,622     8,327     7,833   
EBITDA  6,838  7.1%  31,648  19.0%  27,894  9.3%  95,542  19.3%
Share-based compensation(a)  1,583     1,026     2,531     2,892   
Business development consulting costs(b)       312          312   
CEO transition costs(c)  1,241          1,677        
Adjusted EBITDA $9,662  10.1% $32,986  19.8% $32,102  10.7% $98,746  19.9%

The following table sets forth a reconciliation of net income from continuing operations as determined in accordance with U.S. GAAP to Adjusted Net Income for the periods indicated:

(Dollars in thousands, except per share data)Three Months Ended  Nine Months Ended 
 March 31,  April 2,  March 31,  April 2, 
 2024  2023  2024  2023 
Net income from continuing operations$3,826  $22,782  $16,829  $67,400 
Income tax expense 806   6,744   4,408   20,353 
Amortization of acquisition intangibles 450   462   1,362   1,386 
Share-based compensation(a) 1,583   1,026   2,531   2,892 
Business development consulting costs(b)    312      312 
CEO transition costs(c) 1,241      1,677    
Adjusted Net Income before income taxes 7,906   31,326   26,807   92,343 
Adjusted income tax expense (d) 1,581   7,205   5,361   21,239 
Adjusted Net Income$6,325  $24,121  $21,446  $71,104 
            
Adjusted net income per common share           
Basic$0.38  $1.37  $1.26  $4.01 
Diluted$0.37  $1.36  $1.25  $3.98 
Weighted average shares used for the computation of (e):           
Basic Adjusted net income per share 16,844,440   17,559,920   17,003,616   17,725,208 
Diluted Adjusted net income per share 16,965,624   17,748,910   17,093,958   17,851,655 


(a) Included in share-based compensation are the impacts of accelerating expense recognition for equity awards related to the CEO transition.
(b) Represents non-recurring third-party costs associated with business development activities, primarily relating to consulting costs for evaluation and execution of internal growth and other strategic initiatives.
(c) Represents amounts paid to the Company’s former CEO upon his departure under the terms of his transition agreements, including consulting payments and legal fees incurred with the transition. Also included are recruiting and relocation costs related to the new CEO.
(d) For fiscal 2024 and 2023, income tax expense reflects an income tax rate of 20.0% and 23.0%, respectively, for each period presented.
(e) Represents the Weighted Average Shares used for the computation of Basic and Diluted earnings per share as presented on the Consolidated Statements of Operations to calculate Adjusted Net Income per diluted share for all periods presented herein.
   

The following table presents the reconciliation of net income from continuing operations per diluted share to Adjusted Net Income per diluted share for the periods indicated:

(Dollars in thousands, except per share data)Three Months Ended  Nine Months Ended 
 March 31,  April 2,  March 31,  April 2, 
 2024  2023  2024  2023 
Net income from continuing operations per diluted share$0.23  $1.28  $0.98  $3.78 
Impact of adjustments:           
Income tax expense 0.05   0.38   0.26   1.14 
Amortization of acquisition intangibles 0.03   0.03   0.08   0.08 
Share-based compensation(a) 0.10   0.06   0.15   0.16 
Business development consulting costs(b)    0.02      0.02 
CEO transition costs(c) 0.07      0.10    
Adjusted Net Income per diluted share before income taxes 0.48   1.77   1.57   5.18 
Impact of adjusted income tax expense on net income per diluted share before income taxes(d) (0.11)  (0.41)  (0.32)  (1.20)
Adjusted Net Income per diluted share$0.37  $1.36  $1.25  $3.98 


(a) Included in share-based compensation are the impacts of accelerating expense recognition for equity awards related to the CEO transition.
(b) Represents non-recurring third-party costs associated with business development activities, primarily relating to consulting costs for evaluation and execution of internal growth and other strategic initiatives.
(c) Represents amounts paid to the Company’s former CEO upon his departure under the terms of his transition agreements, including consulting payments and legal fees incurred with the transition. Also included are recruiting and relocation costs related to the new CEO.
(d) For fiscal 2024 and 2023, income tax expense reflects an income tax rate of 20.0% and 23.0%, respectively, for each period presented.

Investor Contact:
MasterCraft Boat Holdings, Inc.
John Zelenak
Email: investorrelations@mastercraft.com