MCFT - Earnings call 2 2024 | MasterCraft Boat Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Q2 2024 MasterCraft Boat Holdings, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would like now to turn the conference over to Bobby Potter, Vice President of Strategy and Investor Relations. ahead. go Please

Bobby Potter

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

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

performance call morning's second discuss Chief Officer our Oxley, some Fred Brightbill, Officer. operational the review quarter. of Fred then will for highlights this and on for Chief financial we Fred and the Chairman; Q&A. Tim Then me will will our remarks are closing With a open from Tim Financial call Executive quarter. the begin with provide before

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

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

provide also non-GAAP summarizing financial reconciliation most measures our of each results our non-GAAP the of will There includes in the release. deck we measure, measure these directly comparable a results. GAAP Investors Section to a today's press slide For is GAAP This in our website.

to continuing As a over reminder, basis. With operations is a I unless following that turn on the otherwise call Fred. noted, made will the commentary

Frederick Brightbill

and Bobby, good you, Thank everyone. morning,

we uncertainty better-than-expected a environment. in business retail during Our quarter despite results highly performed well macroeconomic continuing second delivered the competitive as

continue our of sheet our invest structure the in health growth variable highly with inventories rebalancing consumer-centric to Despite ensure brands, we long-term to the provide and of near-term to remain a network. term, Near on with confidence balance demand dealer focused our initiatives. us strong portfolio dealer challenges, cost anticipated

and to investing approach us shareholders to flexibility to sheet future, capital a cash to retail for balance the return the limiting repurchase demand views economic which share and addition program, In allows are is allocation maintaining visibility. regarding the uncertain, mixed through resilient our our disciplined outlook

some growth. cautious expectation observed relatively GDP rates, for and strong we Recently, indications including that improving optimism, consumer lower unexpectedly the positive sentiment interest favor

monitor and continue business and We results the environment. assess retail economic overall to

flexible are us will confident and We that return risk growth. upside model mitigate on near-term when allow our the operating to to capitalize we

modestly during increased Although quarter, periods. less increase pre-COVID was in inventories than seasonal the typical

in to enter participants We transition the historical prioritized softening production build pipeline XXXX demand us we rebalancing the now pattern cases. action fiscal we to a destock. decisive some took industry significantly has allowed believe are dealer and fiscal and Other of while plan of inventory to signaling as health We expectations start from their XXXX. our more pairing rightsize

during declining normally our peak a units the selling inventory season. relative throughout third to before quarter increased summer Dealer fiscal

dealer While fiscal improve levels to by we the remain the higher inventories than of expect we year. optimum, end consider

participants competitive. retail As -- to other become other increasingly as the react excuse demand, lower industry begin environment inventory to me, has

and reduce expectations. levels our many although Dealers support are plan pressuring increase the promotional is retail inventory shows to range in floor shows early of industry. to from the expectations. have latest activity focus anticipate will mixed, of continue across destocking The dealer on -- costs. Results manage to activity that exceeded boat manage resulting margins We wholesale

consumers news choices. good very has improved providing The is competitive buyers. more inventory is with that there are environment as The availability

However, promotional activity. of a urgency to lack contributing is increased general

dealers on production position plans season. and the shows dealer selling remaining our inventory levels to upcoming the boat in Our capitalize summer

growth. allocation cyclical quarters. to priorities, well through our we our long-term demand facing pursue retail are third and a positioned expect Despite the have to in industry, as We clear headwinds capital progress fourth of the including picture investment we

investing are that industry's targeted take positive trends. We initiatives of will underlying advantage prudently secular the in

brands. our secured the such our continue will results operational one growth to free of repurchase review flow briefly of initiative position discuss to expect funded, our cash I accretive allocate and financial as most year initiatives our our for to fully the EPS With we program. I current strategic share

balance to allocation depending framework and cycle. provides our cautious view Our of to on sheet our us capital from the stance flexibility with adjust optimistic,

and Given will the approach we in M&A. currently suppressed grow uncertainty, near-term to through our opportunistic marine remain environment,

was brands. net sales quarter, our decrease from our decrease given Let XX% million me The dealer sales lower rebalance inventories with the $XX line expectations some year net retail developments the demand. now response review brand, down were latest for to period. in briefly of the our production to the in across MasterCraft prior in record planned

from team expected due shows. in At Crest, period is net align well year retail partners performed the across to the and dealer boat the MasterCraft occurring for million down supporting City as and at quarter, shows globally. at prior with Seattle MasterCraft our to country actively were a Salt XX% demand. production Atlanta, particularly Lake pullback the $XX sales

consumer Early has encouraging mixed, interest been as boat been results better pontoons show than in but have anticipated.

pontoon urgency is along taking the However, than Chicago, consumers in show, at Atlanta shows. well the in sales performed lack the Detroit Minneapolis particularly Crest longer U.S., the expected a few years. cycle and market sense the with largest and of last

our will planning pontoon launching focused On with the through affluent year on will strategic and and new customer to be on-water new our targeting conceived This strategic a was XXXX that brand we experience. built in model elevated consumer-centric facility. be approach an for we'll brand be front, Crest in-water

Aviara, for prior on the forward to earnings growth brand the At call. the sales were We on $XX initiative more investors exciting this look net our will and with million spring XX% down be next in year sharing compared to period. information launching quarter consumers to the

focused consisting an During AVXX, model X platform the product the on of ramp-up distinct Aviara variants. the was quarter, impressive of all-new

international has fiscal year-to-date. also We expanded some its but York points Aviara by encouraged to and shows, year. to the including New results continue expect for X the adding distribution at AVXX show by mixed, been the up remainder distribution of for Seattle. the production Aviara are Boat and results have network new domestic we ramp of

Mike O'Connell, a be boat execute that of several Aviara, hired gives knowledge will growth at President to senior improve its a of experience to manufacturers roles and leverage leadership recently operational strategy. and he wealth XX-year veteran him industry We performance Aviara's Mike's

financial I will who detailed to discussion the over more Tim? of Tim, now provide turn results. call will a our

Timothy Oxley

Thanks, Brad.

the an million, offset the and million sales unit due record higher partially on prices was quarter by incentives decrease net top sales to the period. XX% in year lower dealer mix. $XX.X decrease for primarily from $XX.X or This favorable a Focusing of were line, increase volume and prior

higher as dealer Dealer incentives very a floor retail rates, include interest other as incentives result plan competitive. of and remains environment and the financing increased costs inventories

quarter, period. For the gross to was prior compared fourth the XX.X%, margin a our when year of points decrease basis XXX

absorption offset were lower of the overhead cost Operating to production higher the margins to higher by of expenses the decreased result period. prior material Lower volume, labor compared were and inflation related incentives and due fiscal quarter second year dealer relatively planned for prices. XXXX partially costs to higher consistent

initiatives, development and In we product continue in invest marketing. pursuit to growth of

the estimated for net the using income for to or rate computed $X.XX share, to net XX%. per Turning effective year $X.XX $XX.X income using $X.X a This XX%. tax adjusted of million diluted annual line, adjusted decreased prior of million year computed the bottom period, to tax rate or compares of

prior Adjusted the the XXX to prior year from million the in period. compared points XX.X% period. margin EBITDA was $XX.X million down to $X.X Adjusted decreased for basis in quarter EBITDA year X.X%,

total Our credit balance sheet we incredibly quarter million including short-term million cash of $XXX investments our revolving strong under of and availability the ended nearly remains of liquidity, $XXX as $XXX and facility. million nearly with

with investments Year-to-date, debt we cash operations. exceed our short-term and generated as from the no have than balance. outstanding $XX cash flow million ended We quarter more of debt

provides and Our operations ensure us ability balance flexibility cycle to the growth ample strategic financial to positions initiatives. through sound sheet the us with exceptionally and business fund well

During we share. our our than per for spent to Since more than in second of provided X.X to common over a income repurchases quarter million more program cumulative the shares adjusted our repurchase XX% $X.X fiscal $XX June shares. million XXX,XXX repurchase the spent These we XXXX, of million stock. net quarter, initiating share repurchase approximately benefit

continue while in flexibility that financial prioritizing high business return expect value. and shareholder return to the investments shareholders to long-term cash to generate We growth and

adjusted guidance narrowing full million and for range and net year. earnings now share expected and $X.XX. adjusted million $X.XX per the Looking million of $XX our is are between be forward, Consolidated EBITDA with between sales $XXX we $XX $XXX and to million

approximately expect also flow We expenditures million the $XX cash to year. now be full for

$X.XX. approximately approximately third quarter share with to expected net and adjusted adjusted per of earnings consolidated the of is fiscal be million $XX approximately of XXXX, sales million $X EBITDA For

flow, Although positive decline structure testament cash efforts. fiscal cost our to we and expect guidance cost reflects control a earnings variable which is from in our to significant generate proactive a XXXX, flexible, highly free

now the I'll for call remarks. to turn his back closing Fred

Frederick Brightbill

Tim. Thanks,

competitive dealer the despite uncertainty business our continuing second a As economic on we continued results our performed environment. by well better-than-expected during quarter inventories, retail delivering focus the in rebalancing highly

disciplined capital continue We to approach exercise to a allocation.

to more the through repurchase million returned our our Over program. past share of X shareholders excess we've than cash years, $XX

affords Our strategic financial our sheet opportunity initiatives. provides strong us balance flexibility the and us pursue with growth to

for our pontoon why launch example is in The confident new our long-term deliver upcoming shareholders. an our growth of brand are exciting of we to ability

determined to deliver strong returns. move opportunities leverage generate we brands, inventory of shareholder our exceptional As are and and our pursue on rebalancing, we portfolio commitments, long-term growth beyond growing

for Operator, you may now open the questions. line

Operator

[Operator Instructions]

Altobello first comes Joe The from with James. question Raymond

Joseph Altobello

in other EBITDA to that on from that about I all there decline QX, question is to promotional dynamics or the activity heightened unusual. a implies first ask is and wanted due QX sales going -- the are in guidance. So sequential to It business? Is which

Timothy Oxley

There Joe. dynamics, are other

were production down snow production known Tennessee, affected a full instance, storm due Crest shut well. here at we ice to for week of in For as

clear dealers breathing The sure their in making we -- QX. the for clear decks room doing is other to thing decks allow inventory our some additional we're

Joseph Altobello

units in Okay. that inventories That's XX%. expectation where year-end. if this down And the least to of field need I so, get case? does that the still X And by units maybe fiscal at Is year, months would was be to think Tim. helpful, be over terms them ago you

Timothy Oxley

expecting, what are That's we Joe.

Joseph Altobello

Okay.

you sounds an like the will clean, fiscal perspective. it guys exit will, if you from year inventory so And

Timothy Oxley

our determine land. retail fourth in keep will the quarter exactly And we where Absolutely. mind

Operator

comes question next with Baird. Kennison from The Craig

Craig Kennison

I just characterize perspective We dealer a and lot you network? excess of Fred, health wanted the of costs, on the question, with margins skinny start strain network. under they're of but a on your plan dealer your would health your with how know to floor

Frederick Brightbill

they're not it's as but been and We here there, as there very be which at isn't costs, are, an additional indicated, a don't good. long-term it and them very or you've expect tight I to but issue not say selling that long sustainable margins, term. that's dealers would sporadic characterize certainly, situation overall heavily that situation. And very general, isolated, in inventoried, incurring is to occasional in

to get this expect to be We to through conditions. more normal and return able

Timothy Oxley

very add, would been we We've I Craig, the watching closely. dealers monitor health. it

We companies plan sure warning have floor to signs duress, no meeting and with are we'll the early that the make season. of a through monthly there continue

Craig Kennison

you way Is to inventory frame of which the target exceed maybe in there levels number a the units channel? by

Frederick Brightbill

Well, about is out we're year, it, the this between to XXX at and expect we to the up way think of end pull trying where we units. year. the still XXX somewhere again And end Craig,

Timothy Oxley

and between MasterCraft evenly Crest brands. fairly Split

Craig Kennison

to within decision helpful. the And brand I Crest one pontoon a That's more then really add on the guess facility. question

if Just vision brands would, for any what's about having entails? of of broader And instead the capital X one. that sort just requirements talk you

Frederick Brightbill

the be in terms on in fiber pontoon have requirements minimal XXX all, expansion, the expansion this same able produce as capital directly to expense, of to of completed would business, to you within that that last the provides year molds, facility was facility recently no glass the First product. don't the related capability

to look So as made new there made, but forward, significant been capital don't And investment some brand. historically. the any allocation I it was has we expect

the to specifically, spec brand touch positioning we the consumers it of it appropriate because be to in almost premium, it brand. able have price of will to regard of the those terms offering to target upper and the the was positioning, ultra-premium on its end points Crest With of felt

the some it's to there's in than minor overlap, brand. be differently but So general, positioned Crest going

Operator

from Eric B. with Riley The next comes Securities. question Wold

Eric Wold

seeing kind follow-up. you, if said you about low Thank a Frederick boat margins sales. this, just I one, questions. talked can't I dealers extraordinary X on now when remember the guess, of right

margins take to are levels If extra seeing are to out the higher from an take plan interest pressure you floor of floor pre-pandemic with the get pre-pandemic kind costs purely of apples-to-apples plan because basis try cost? out, equation or lower rates the of to to the promotions than

Frederick Brightbill

Eric. a their addition the competitive addition price plan in the floor market In costs, to it's now, margins costs. down has floor believe the in I plan driven competition such to

Timothy Oxley

plan And noncurrents. but margin doesn't the on book dealers competitive And than very the so the different case, it's is it there. cost typically, the . in G&A, noncurrents that's so out floor affect And typical. on product margin, is they current their been margin significantly their have more always their than

typically for margins case, now are the dealers, the think in you'll I that's than noncurrent remaining So they've and And the had down but current pretty coming past. see steady. more margins there the noncurrents

Eric Wold

Or that now? kind in is channel And really place a even get inventories to because out more after environment the Is healthier of it different to do there? you environment right levels? of higher expect inventories the remain competitive

Frederick Brightbill

remain of do clear answer. discounting, Hopefully, it competition. to on think expect same we my the but don't to I normal level I'm it revert will aggressive at being

I peak think a more pre-COVID I it's like of think I be in near it COVID but will revert a situations, will it much don't think anywhere currently, period. competitiveness

Eric Wold

hold guidance. are to floors they're in question, some any And on hope environment, early it's may. 'XX you in degree interest next down what dealers what know to given if of it. the terms uncertainty. of I But do the just not looking terms guess rates for 'XX, their over from and a then come to I so. interest Got or competitive inventory hearing there's XX necessarily that I final as months guess I now they're willing level rates, of looking macro model indications fiscal

to you mean then? compared seen If you think back willing versus hold much to are lower do prepandemic. that I have at what they may look inventory you how

Frederick Brightbill

project demand way work inventories bounce to I and with retail think dealers -- the we their the accordingly. dealers is

annual so the a year, And years period in business is. to and terms all enter what limited going our And going as we we're is look know, it's what like. the now you outlook as really to depend what are on of of plan Eric, in next visibility right

of that regard will in with will financing cetera. And rates more overall described those for the will be rates reductions -- with is we're extent see a the degree certainty May will consumers opine it's I and out you reductions encourages to to those next So that costs, on if be progress take to et we it than year rate know will that reduction June, can't set play how finish and any see versus signal longer-term what reductions, to following terms other we to But will as for say interest addition the summer. My we benefits active boost through activity or going how personal and year opinion significant the more of then how short-term other in confidence level initial rate we we to their happen? that's up -- consumer of in retail and consumers. financing

Operator

comes Zatzkin The KeyBanc. Noah next from with question

Noah Zatzkin

environment, what first, promo And second it just just forward fourth of inventory quarter I not But component kind competitive the quarter to terms the I place the anything incentives today, of to changing to that there's of to guess obviously in seasonal to a is inventory relative kind push? in quarter. exiting inventory relatedly, you clean third And or a progress you're in is of took to via death. then inventory as more second what looking guess help I make on expect know the quarter. about thinking up would or beat

Frederick Brightbill

in cetera, to I and then that's in we'll model, terms third our competition, in in the for seasonally quarter peaks of outlook off. regard kind margins, reflected third With worked and see increased discounting of third competitiveness. the et increasingly is quarter the think it quarter inventory

and you're starts forecast with retail of underestimate, But what for, to not you builds. and boat be is trying really to and fourth XX% shows and that then XX% quarter overestimate. demand, So ready predict know not as well that's

it's So quarter quarter, you big sales as fourth in movement. you accelerate see really see when some but the third the movement the

Noah Zatzkin

brand. some and it. Got just would helpful. be And positioning relative the pontoon why on color additional thoughts now maybe new Any Crest then around kind helpful. just on That's of to

Frederick Brightbill

given if given super it's it -- stunning it being and of its as you Think we and going will. as be differentiation. a premium, its and of premium, felt a it attention very unique like style, Think positioning to specific deserved uniqueness and

the is range line enhanced roll will be a continue points, forward, significant. as be models will there a as positioning product a differentiation they that's and still have the covers and very of styling So to but you models, broad, brands Crest luxury those between X price and we know, wide

Operator

The next with Michael comes Swartz question Truist Securities. from

Michael Swartz

initial when I a guidance I year. retail mid-teens for think gave for was it in, it you 'XX fiscal was think back upon demand August, late the decline in based

I digits. been something of more in think industry down low the single range the since then, has

maybe into out update a the your you're But out. on do rates. just playing just an about retail interest know from year And guidance playing you see visibility thinking as as give year what's the have I how standpoint? today, lot a So how of us you on embedded far maybe today? contingent

Timothy Oxley

view at the to going are certainly just sale. retail to going every we're to year, segment fiscal the hard it dealers work it's brand for Mike, have little our of than vary is hard going to of more to optimistic have start by and market. the really a But work was

Michael Swartz

maybe follow-up then Aviara. just And on Okay. a

discuss it have but like change bit, some a in that little We there. sounds to leadership, in

are we where standpoint. on from backdrop a of bit little a a us give maybe profitability Just

is ago . standpoint in with line today that still the the be corporate target guess profitability brand was a I would this average. the I think that view years from

Timothy Oxley

and leader with expect we of XX point that changed, positive to new the inflection a up we and be the getting model X between this hasn't go-forward things on expect target we both a for believe down be things variance Our to a an those speed, new basis. there leader to

kind to low opportunity I point, only within we climb the the second a going of in But think QX do long our term, to portfolio. that. that MasterCraft there was and margin expect we're of to be out

Operator

session. conference show will conclude the this question-and-answer concludes I further no and for call. participating. you questions, And this Thank today's

great a Have disconnect. now may day. You

MasterCraft Boat (MCFT) 7 Feb 242024 Q2 Earnings call transcript