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

May, 08 2024 07:30 AM MasterCraft Boat Holdings Inc.

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