Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MasterCraft Boat Holdings Inc (MCFT, Financial) delivered results ahead of expectations despite a challenging economic environment.
- Field inventories improved by approximately 20% from fiscal 2023, nearing the low end of the targeted range.
- The launch of the new premium Pontoon brand Balise has been well-received, with 11 new dealers onboarded in 26 markets.
- The company generated $33 million of adjusted EBITDA, excluding Aviara, which amounted to $40 million.
- MasterCraft Boat Holdings Inc (MCFT) maintains a strong balance sheet with more than $86 million in cash and short-term investments, and no net debt.
Negative Points
- Net sales for the fiscal year decreased by $295.5 million or 45% from the prior year, primarily due to lower unit sales volume and increased dealer incentives.
- Gross margin declined to 18.3% from 25.6% in the prior year due to lower cost absorption and higher dealer incentives.
- Operating expenses increased by $6.7 million, largely due to a $9.8 million non-cash impairment related to the Aviara business.
- The company expects continued destocking trends in fiscal 2025 due to economic and industry headwinds.
- Adjusted EBITDA margin dropped to 9% from 19.9% in the prior year, reflecting the challenging market conditions.
Q & A Highlights
Q: I'm was just looking at the guide and trying to understand a little bit better we're looking at the lower EBITDA margin, is that largely coming from the volume deleverage? Or do you anticipate that the promotional environment is going to get a little bit worse?
A: It's primarily from a lower volume on the debt deleveraging from the overhead absorption. There is additional G&A expenses as we fund bonuses at 100%. So we have both those headwinds. (Timothy Oxley, CFO)
Q: Just to better understand sort of the guide, would you mind providing the adjusted EBITDA and EPS [ex] Aviara for the year? I believe in your prepared comments, he said $40 million.
A: For fiscal 2024, that is correct, $40 million for -- without the effect of Aviara. (Timothy Oxley, CFO)
Q: In on your guidance again, you laid out a range of scenarios in terms of retail demand. What are you assuming or how you're assuming that trends as the year progresses?
A: You know, we're off to a decent start a little bit ahead of our expectations but it is on Tommy's inventory. You know, that continues to be reach in the hands of retail customers. We expect that to be a significant headwind for dealers. (Timothy Oxley, CFO)
Q: Would you expect things to get better as the year progresses or it's just too early to tell?
A: I think it's too early to say we're off to a good start but it is really early. (Timothy Oxley, CFO)
Q: Based on those experiences of adding new brands, whether it's organically or through acquisitions, still an important part of the strategy. And if so, is the company refining its approach to portfolio management?
A: On the decision with Aviara relative to other forward-looking ventures. Obviously, that's a careful decision we made after a thorough strategic review, as you know that that business was challenged with volumes truly absorbed costs in a start-up facility that was dedicated to that unit. There were some losses there for quite some time and never was able to be profitable pretty much due primarily due to volume issues. (Bradley Nelson, CEO)
Q: I think on the call, you mentioned that you finished fiscal '24 with inventory 20% lower year over year. Is that true? And I guess, when you think about your guidance and the retail outlook, is there a similar target that you might have to finish fiscal 2025?
A: Yes. In speaking of the raw numbers, we were planning on the year being down between 600 and 1,000 units in fiscal '24, and it was at the lower end of that range. So we did have significant destocking in '24, but the market has been soft. So we anticipate also destocking in '25, probably in that same kind of range between 600 and 1,000 boats. (Timothy Oxley, CFO)
Q: Is there any way to think through the Balise impact of your ramping up there? Does that -- I mean I guess that's all in the Pontoon segment now. But would you still expect that overall segment to destock?
A: Yes. Keep in mind the Balise units are significantly higher AUSP and so the destocking will be on Crest as opposed to Balise. (Timothy Oxley, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
