MCFT - Earnings call transcript Q2 2021 | MasterCraft Boat Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Second Quarter 2021 MasterCraft Boat Holdings, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to one of your speakers today, Mr. Tim Oxley, CFO. ahead. go please Sir,

Tim Oxley

and we Thank performance discuss XXXX. operator, us for for today as MasterCraft’s welcome, you, you everyone. joining fiscal Thank second quarter

a listening. live being archived As our call also on future will be webcast for website today’s reminder, and is

today’s will with Fred Brightbill, on our strategic I’ll our on an XXXX Fred Chairman; overview Officer Chief Officer. Revenue priorities are discuss our for our our call we second I Q&A. call performance from quarter. see Steinbarger, of the open to George Chief we call quarter then for operational and before shaping Fred the financial for me Executive closing back and and Joining turn and will remarks how the some highlights Then, review up. begin the progress

update begin, The to we call this February current Before that participants the like assumes release. not and statements. remind disclaimer today’s historical company safe contained are no press statements, XX, we’d the forward-looking of subject in facts in information to statements Statements that only any today, XXXX. including are as harbor forward-looking is to obligation

conference discuss that or indicative non-GAAP special we on include not call, operations. of or measures items ongoing Additionally, exclude our this will

of also non-GAAP over that, a GAAP the Fred. that the deck section turn results listeners results. XXXX reconciliation GAAP comparable our which like measures our the there’s slide For fiscal of I’ll remind We’d to With to each also non-GAAP to call measure, we in Investors these measure release, in a summarizing website. financial provide includes our most directly second earnings our quarter

Fred Brightbill

quarter. remained challenging who in today. be successful dynamic appreciate and such a want employees Tim, to you, have sincerely our and healthy us everyone. and a I have we continues and safe. to been also joining to our ability and you I deliver families good thank hope This your very Thank you time, morning, instrumental

about employees this it top rigorous MasterCraft talked of repeating, culture for bears and and and performance have delivered in quarter are and environment. the priority, and before, safety Holdings Jumping our all record monitoring results dynamic quarter. financial committed our health drivers last the key strong into We facilities. safety are guidance health Their to it we but our our Boat results, quarter. maintaining second closely provided our we standards remain exceeding production

momentum are our this testament executing performance continued and most profitable our quarter brands. growth history, all Our strategy. continued our strategic second the execution the experiencing results on across in The are and value-enhancing we of demand quarter, retail MasterCraft’s consumer-centric the plan a implementing demonstrates robust to

on drive is to reminder, a centered sustainable, one to achieve X our As overarching accelerated pillars designed strategy growth. objective: key

digital pillars: experience, During marketing, we these against excellence execute development. continued human the quarter, X each consumer capital of operational and to

First, our growth of in investments These and will our financial we be component and investments and top-grading team. important market continued share expanding our engineering product an plan. development

we continue growing on allowed as our further refine engineering to relentless development product build team product has over Our our our needs of to and us the the consumers’ and more development focus learning remainder about year. process expectations

Most expand continue of the a sales and to across Aviara increase We drive brands that January a share ultimately activate recently, market, several in about digital learn experiences for earlier the strategy Experience month. in to brand we and the marketing with XXX-degree launched launch our and up our consumers a this and Crest generation experiences launched awareness, of digital immersive followed environment. organization digital we lead Second, our community to create improve interest, market consumer-driven gains. target MasterCraft

their safe, addressed seen manner distanced in research this each homes showrooms show. needs flexibility a launching truly brands in of to of experiences, a with Since digital digital leads, days. and they to approach allow we consumers time. to immerse unique. traditional brands new deployed the boat our in a in a within we have believe dealers to and ensure have is experience development These The of final themselves while which socially digital these stages our in-person is in in our dynamic dramatic consumers be do traffic unique during a creative connecting NauticStar increase the Our properties would validate matter of in the taken consumers consumers’ way our will typically we to safety are

and market consumers will We investment new in gains. invest drive our will bring brands, this and awareness to share continue to increasingly that digital solutions

chain quarter margins the meet the all demand. dynamic to our constraints record running at chain basis throughout demand, the than shipments while rates, ramp-up. meet brands, across retail margins gross year. labor COVID-XX labor production robust unit turnaround XX.X% X% ramp-up, environment of supply all to enhance Despite Third, supply The production realized the NauticStar to costs, in aggressive increasing facilities, second up prior we acceleration for and an XXX and Across continued now and quarter, the production facilities of to with increased manufacturing versus gain the throughput issues we’ll programs each basis we sustained during momentum. our company managed year-over-year. and the points the NauticStar our year we XXX pandemic up executing to quality. related At inefficiencies the year-over-year of continue more drive delivered to the retail production points up expertly operational improvements throughput wholesale are increase the and excellence gross

long-run work remain the a capital develop retain we strengthening on still framework to attract, of and fourth, skilled workforce. do, and focused And confident specialized brand. our in the are NauticStar human While highly prospects there’s to we

meet We our continue facilities. labor to skilled all recruiting successfully at needs our

we most cost increase management gross We overhead our been labor we rate the this our some have performance, volumes But superior have increase. seen to by me, due absorption material excuse margin to mitigate market. and some tight seen evidenced through labor inflation have as -- able labor as growing of

Looking more quarter. the closely at

adapt priorities, X we’ll continue encouraged and are to seeing by to are growth around We business momentum proactively our the the all strategy environment. we strategic the

our As across our of brands, plans wholesale committed. production remain today, fully

the remain order us Dealer In before our dynamic greater growth dealer fiscal levels and demand historically optimal already in the XXXX than we wholesale this with growing. low past. levels. last visibility at with book current the and at believe any be inventories inventories record sold percentage consistent is the our at that of levels. Combined reach in provides industry, quarter, it retail is time supply will addition, message And with recent

to relatively consumer-focused strategic are value season. our promotional for Against greater to we although on are seeing and promotional our we plan, show the outperform to well shareholders. competition positioned continue activity backdrop, activity As as we remained benign, execute we has boat relative tremendous generate this enter

some discussed, deployed and We and are alternatives our show digital of relatively our and early share seeing very we have us the previously boat believe provide sophisticated marketing higher dealer quality network mature advantage. brands, and competitive our nontraditional I As wins. leading market position a capabilities

At across Let performance of brands. latest Aviara, developments exceed the expectations. retail me briefly some to now our review continues our

in appreciate year the continue book control, comfort order elevated remainder luxury quality to dayboat Aviara’s modern details, is sold MarineMax progressive the segment. of completely Our its and and are style, as the for out unmatched customers which

within Merritt Florida facility growth. performance, to extraordinary accelerate phase next remain fully purchased new recall, we Merritt dedicated our Island, a transitioned third quarter. facility will to you the Aviara given to As Island on Vonore, Aviara’s have We out facility of this track MasterCraft’s Aviara in of Tennessee fiscal

fiscal and We to increase expect the into year remainder fiscal XXXX. the wholesale volumes sequentially of throughout

increase additional the dilutive new years up impact in capacity and the will profit. we set Merritt due brand in for have on will many the While near-term and future facility margins to believe profitability, overhead of the growth Island sales a

quarter and for exceptional delivers the Crest’s addition, up Aviara during beyond. second our At with attractiveness strength XXXX Crest’s ultra-luxury wholesale launches we and With been facility than in MasterCraft of strategic quarter. continued easy-to-use outstanding development XXX already underscores year model volumes of and are XXXX boater-friendly performance the In received, for additional redesign, experienced extremely has Savannah well capacity price priorities financially, the product and in refreshes attainable of recent pontoon unit out year. moving gross and and and retail model model fiscal up execution nearly engineering, XX% the out another at for point the Crest, the Crest basis MasterCraft. it value year-over-year. the brand, frees delivered of sold it its of model, operating most development is segment. new an This in nature much-needed investment and more points increase model margin the the

second low the achieving are on goal retail to way fiscal We continued at gross in in momentum range. experienced NauticStar, quarter. our delivering well of the margins Similarly, our we XX%

its margin by sequentially XXX As previously production improved more gross NauticStar improved in year-over-year. than basis stated, quarter points throughput the and

Our turnaround quality to remains ramp improve product in enhance track plan initiatives overall further on and with production, up offering. place the

season. to to that third as time. the we production record and ahead confident the full provide benefits year Our expectation improvement the the to meaningful performance aggressively was next we efforts, are at facility At profitability upcoming will sustainable fiscal retail see to on MasterCraft, quarter are take with is inventory quarter, these the until the continue NauticStar over but current we production fiscal remains boating of it MasterCraft up phenomenal. that of track Entering at rates running during dealers critical ramp deliver

differentiate emphasize Importantly, continue we quality to will competition. from the to MasterCraft further

take books to the for MasterCraft to on XXXX market of orders order On with the selling the growth. dealership unit primed heading quarter, begun last sales the excluding net saw through have a the model Combined the to with boats. is wholesale highlighted take increased summer and Aviara, financial we incremental selling ASP are season. needed of basis, visibility the remainder heavy MasterCraft inventory to Our dealers we brand provide impact into continue sold already out year, and year changes wholesale share

margin second Additionally, exceptional to levels, the features gross by continuing and orders. fiscal add driven options their consumers brand achieved quarter to

which throughout look ramp inefficiencies year, heading We expect some the better stock us in up to to the the season. meet demand to into up term, our summer as to in short continue labor dealers selling allow result the they from will would wholesale production

XXXX. strategic this setting We Importantly, building committed long-term further categories by our outstanding our deliver year remain value, through to fiscal an on up and position, progress guided progress investments grow business competitive strengthen are our fundamentals shareholder priorities. to our and for us

now we more Looking who color we at to over that months call on and X us deliver gives have confidence Tim, profit. the provide continue in will I will the will results. Tim? superior our sales growth over come turn how far past the to financial

Tim Oxley

Thanks, Fred.

an and million, of the $XXX.X top line, or and period. of volumes, a the $XX.X increase for the higher at second were The million Looking due sales to lower higher-priced prior to higher-contented primarily mix was models favorable for compared incentives. $XX net dealer year million quarter sales XX.X% increase

As favorable offset most Fred mix compared partially in was and compensation higher higher-contented increased facility. volumes to costs $XX.X the the principally Island favorability history. and $X.X dealer was and sales a models, Merritt our mentioned, higher-priced This lower of new with Aviara the million profitable second costs to profit by $XX.X the of to driven period. transition million higher associated increase incentives. million This year for this Gross quarter prior was company’s by

principally by to has higher was million related XX.X% prior which cost. COVID-XX the additional absorption, year margin was from of or the second due year. gross materials until prices, dealer basis an million and by for increase in This labor higher delayed by sales pandemic attributable product year the administrative XX.X% period, period. the anticipated compared quarter, expenses higher driven offset and costs, incentive XXX to $X.X cost primarily increase prior of development. marketing compared by favorable general the second to of overhead higher expenses, driven containment, quarter, expenses volume, and fiscal partially lower compensation offset partially Operating to been points the costs $XX.X resulting higher and increase primarily by incentives Our later was an increase were selling to The lower timing investments the for

period. approximately compared to increased computed year Turning $X.XX net XX.X% income year income points or effective prior This rate $X.X quarter from diluted an per of XXX annual the the XX%. was year $X.XX per estimated tax million prior EBITDA XX.X% compared second share million diluted company’s share, of XX.X%, adjusted increase to $XX.X $XX.X in the the period. represents the net in or bottom to period. EBITDA in million basis margin the million Adjusted Adjusted was of for to line. up prior Adjusted using $XX.X

liquidity our and Turning balance sheet. to

our our trends, raising With had we historically book quarter our the of inventory, are than fully $XX.X with our of of strength across dealer in the the X, facility revolving balance segment on million more cash delivered Due in the quarter, credit to we As the strong brands million January low retail each liquidity. we rates ended demand continuation fiscal repaid, sheet. for of and XXXX. our order increasing the production guidance we over of course $XX

Importantly, we any our guidance COVID-XX-related can our the assumes without facilities that all operate disruptions. year throughout

XXX% fiscal with XX% EBITDA net grow to sales year-over-year. and the earnings consolidated For to approaching in XX% XXXX, low range in range share the year-over-year, expected full high mid- is adjusted growth the per adjusted margins

the is EBITDA approaching XX%. per year-over-year, net consolidated quarter, and mid-XX% in approaching third growth the margins range adjusted XX% up expected earnings to adjusted be with share For sales

with commented Fred we’re and the aggressively up as addition new investments short we Aviara digital in term. across the combined remarks, or adjusted marketing, for prepared our will including product talent inefficiencies of production our ramp in EBITDA new production facilities, making in growth, investments department with the margins development As overhead engineering future his the and experiencing and facility impact all we’re

the to efficiencies and up ramp the investments Aviara the see call the operating these we this bottom and Fred. meaningful leverage beyond, turn to benefits drive back over to year in we plant As and I’ll expect gain production line. of strategic later new

Fred Brightbill

fiscal consumer my our reiterate pleased X brands during have each first are the half To quarter made of the we first accelerate our you, meet to supply chain and fiscal by comments, increased and Tim. record of XXXX generate demand we of manage the earlier progress Thank efficiently the quarters across earnings production, to XXXX. in

for seeking from to remain and We our meaningful continue retail consumers best mission experience. experienced laser-focused on the momentum the will to the boating increased the long-term believe brands We we lifestyle our have growth lead and endure deliver to company. consumer

in belief with reason is MasterCraft steadfast brings the us. to our that people they We our and remain this are what differentiator and

unprecedented long-term and remain business value As shareholders to term, environment for we manage through an stakeholders. near committed creation we all dynamic our

continue you and line will a people. We may now be dealer committed open the partners business, to our for consumers, our up to Operator, vendor purpose-driven questions. our and

Operator

with from Our line Instructions] [Operator the comes first James. question Altobello of Joe Raymond

Joe Altobello

what picture, kind So lot a come lower it from EBITDA of in looking first back better. which that came I little dealer the the sales most at quarter, we looks like how things better are of big just the you expected. quarter? question, much than might year? a margins surprised like incentives, were guess, next And

Tim Oxley

and a It efficiencies the that delivered our particular was think of they doesn’t expectations. not exceeded dealing our mean we’re than ramp-up our expected. issues across with supplier on I facilities basis, better but day-to-day

Fred Brightbill

as increase I goes do would point, some time I second incentives in say, Joe, your yes, expect to on.

supply-demand into our expect have I pipeline -- replenished discounts less XXXX, expectation that However, they again, than and historically. to still really would won’t dynamic the be been be given it the

Joe Altobello

it? implies it. Is guidance, Got of Fred. deterioration you’re quarter. helpful, on the the Island? particularly EBITDA that significant of it How at And terms overhead That’s half, that your all much the a margins of Merritt in is just taking in in in second it fourth

Tim Oxley

big chunk a that’s say I’d of it.

G&A have half we In timed second half. expenses and into pushed the events have that, due they into had were addition, from COVID, marketing additional second sales some the to half. We that first

in spend additional second normal. than see more half you’ll the So

Fred Brightbill

digital marketing continued the the And initiative. investment in

Operator

of next Wold Eric the Riley our line B. with And Securities. from comes question

Eric Wold

in comments a and where to segment cetera, higher-contented mix questions. the the MasterCraft sync transition? just QX. guess, kind seeing QX of to where et terms is purely models, the within between in shift models, MasterCraft? of of ASPs it just one, kind in trying with of QX, Aviara do higher-priced the in was anything Or that I Has with sequential couple A it decline that is the in production

Fred Brightbill

it? Are looking you at

George Steinbarger

production, Eric, -- to obviously to I shift. we’re dealers as what need. it’s our mean, are up Yes, we a ramp obviously continue we mix building

where offer will run through. any today. So there’s depending that the we the on XX in lineup quarter, models impact We models different demand, given in that

add you features in just some a seeing you model -- particular if lineup model. to any -- across there. continue we variability look But each quarter, So more more it see are on on consumers a can we even at ASPs to higher as basis, and the

Tim Oxley

in Keep at mind, prior up double Yes. MasterCraft. QX, versus year we’re digit

Eric Wold

No, definitely.

the that in? in just out So coming what books seeing shipping were you’re of it’s versus order more what quarter you

George Steinbarger

Absolutely.

You a dealers boats stock That’s are And in historically is to they where taking intend quarter. are that lineup. correct. remember, QX stocking their

of seeing certainly it shipments, a just While are percentage that quarter standpoint. from -- still higher consumer into we a plays retail-sold there’s

Eric Wold

Okay. it’s until be you to Is inventories are take first, dealer to -- needs to optimal of How you dealer share? inventory it expanding network to an environment? you reach does until take that about in care opportunity And how the Or dealers? levels. thinking spreading then do around new there -- talked about versus it existing likely dealers going fiscal their ‘XX what your need

Fred Brightbill

dealer take essentially would dealer have by network. network, expanding. dealers and, brand. of course, more a continue our care and MasterCraft much is of But some there top-grading plans of more brands it to Yes, we varies to been it’s much existing expand first mature their than

George Steinbarger

very That more that Crest, not after is efficiently look,, particularly there’s as as continued expansion. you go to up, allows space. at mature dealer MasterCraft, if as network -- And tremendous to dealer aggressively ramp Yes. they’ve white us so

at the continue as And to will increase turnaround plan NauticStar, that. do to to that continue develop we’ll production. So continues

But existing ahead the grow first said, think be growing we’re we’re already to be brands the as thinking do meet future to what possible. we do ensure capacity to the will efficiently will So therefore, demands of priority dealers. and demand as we then and, how Fred our that network as

Operator

next from the our of question comes with Craig Baird. And line Kennison

Craig Kennison

mentioned into a surprising on a little some which, given the Fred, going is there creeping discounting Maybe color you please? there, what’s you’re environment, was add I little to guess, that soldout. that just

Fred Brightbill

call, listen year-end just the they Well, ran the Malibu example. to about you an program as if talked they

said substantial And I to us may and environment, it’s So as lowest we’ve ever expect don’t used. have to we price. competitive programs. to incentive are Having think resort utilizing incentives, necessary expect add that prudent there -- brands we don’t minimal the we just will the I plans that react to that, be some for

Craig Kennison

of Okay. And at each then no the through at you for way where to there out It brands? sold feels least you demand of basically made several fiscal Is though, as good for how matter several the most or are several maximum year. your your comments brands, production. capacity models, capacity are a frame is,

looking Is those the so because And revenue of that fair? upside at expect units. shouldn’t you us trends, ability just produce much you to those your have don’t

Fred Brightbill

categorically I untrue. think that’s

to continuing are ramp ramp and the plan next year. year to to up We continue throughout

constrained. So nowhere near we are capacity

to dramatically. significant runway. is up ramping to MasterCraft. tremendous us so at capacity think square even today allow space no. mean XX% MasterCraft without that here ability least facility, I up Tennessee, foot, another allows that XXX,XXX to Vonore We to dedicated its add us have the from still the then reconfigure plant facility in runway grow of that And it Vonore, own to and frees very capacity, moving And to Aviara the gives

to supply have today, very But as only a have the not those balancing runway as And constraints our place, at need today. ramp have capacity, and again, well are ahead of and every plant. as we of chain physical we’ll and brands capacity the in to to and labor one continue plans we’re underway plans We us of that. long continue

our So would longer ability that no, constraint on categorically term. produce I disagree there’s based any to

Craig Kennison

I you by Yes. My what out. mistake, meant sold misunderstood

rolls change I among big outbreak you the supply stoppages, really, COVID within seeing out as mentioned as behavior in that had vaccine spotty the suppliers just work Are the shutdowns? you your own with just a chain any or imagine, well. risk is fewer your community. there Just

Fred Brightbill

day. deal yet all. no, dodge pop and and not Actually, chain we mean one systemic. we at not another around They continue issues with supply I to to them, have They’re every pops and manipulate up. up,

it’s the vaccines stabilize. But out fully expectation So stabilizes. unfortunately, going as one United to time only still year. the supply would that the I in around think the there, my some into hope, will we not be next world, get States, as but chain go That’s before

Operator

line And with Mike Securities. our Truist from Swartz of the next question comes

Mike Swartz

I’m little color looks doing margin dig Fred, into for bit that commentary, there correct, XXX, that. of or thanks is provided Tim, just just to segment gross somewhere the Aviara the you points of associated I’m inefficiencies are one, math MasterCraft wondering, two, it some And If wanted margins were number? in up the included basis XXX that any then year-over-year. a the in costs your gross correct? and like

Tim Oxley

Aviara know, you Mike, As now. the part for segment is of MasterCraft

included in So headwind associated there having with Aviara segment. is that some

So list MasterCraft Aviara the results. when segment, the includes it we

Mike Swartz

Right.

So quarter. headwind in some there the was

helpful. how about That’s issues. couple right at year volumes I but then think, over I units -- know quarter quarter. least can’t you that and production remember think maybe next it, in X? some the MasterCraft, per you’ve I you were are next we of we Fred, production XXX chain quarter back should over XXX about the way as But there’s to quarters? to if between highs, fiscal just look think said think that the ‘XX, doing supply third maybe the the or all-time mentioned Okay. Is And volumes I

Fred Brightbill

third quarter. year. success the up much to seeing more I able the we would in that into would next increase and ramp think but the already be to our sequentially -- hope the progress stable, continue to remainder to production enter the about fourth and through volume I year And will year, we and as sequentially of continuing quarter, hold we’re

of in So these. we continue each one step-up will to

Operator

call. question-and-answer as this participating. Ladies today’s well conference for Thank today’s as session gentlemen, thank you. and And conclude you does

great Everyone, disconnect. have You now may a day.

MasterCraft Boat (MCFT) 10 Feb 212021 Q2 Earnings call transcript