MasterCraft Boat Q2 2025 Earnings Report

MasterCraft Boat EPS Results

• Actual EPS: $0.05
• Consensus EPS: $0.01
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: N/A

MasterCraft Boat Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $60.79 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

MasterCraft Boat Announcement Details

• Quarter: Q2 2025
• Date: 2/6/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, February 6, 2025
• Conference Call Time: 8:30AM ET

MasterCraft Boat (NASDAQ:MCFT), through its subsidiaries, designs, manufactures, and markets recreational powerboats. It operates through MasterCraft, Crest, and Aviara segments. The MasterCraft segment produces premium recreational performance sport boats primarily used for water skiing, wakeboarding, wake surfing, and general recreational boating. Crest segment provides pontoon boats for use in general recreational boating. The Aviara segment produces luxury day boats for use in general recreational boating. The company also offers ski/wake, outboard, and sterndrive boats, as well as various accessories, including trailers and aftermarket parts. It sells its boats under the MasterCraft, Crest, and Aviara brands through a network of independent dealers in North America and internationally. The company was formerly known as MCBC Holdings, Inc. and changed its name to MasterCraft Boat Holdings, Inc. in November 2018. MasterCraft Boat Holdings, Inc. was incorporated in 2000 and is headquartered in Vonore, Tennessee.

MasterCraft Boat Q2 2025 Earnings Call Transcript

Presentation

[Operator]

Good day and thank you for standing by. Welcome to the Q2 twenty twenty five MasterCraft Boat Holdings Inc. Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer To ask a question during the session, you will need to press 11 on your telephone.

[Operator]

You will then hear an automated message advising that your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tim Oxley, Chief Financial Officer. Please go ahead.

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

Thank you, operator, and welcome, everyone. Thank you for joining us today as we discuss MasterCraft's fiscal second quarter performance for 2025. As a reminder, today's call is being webcast live and will also be archived on our website for future listening. With me on this morning's call is Brad Nelson, Chief Executive Officer. We will begin with an overview of our operational performance from the second quarter.

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

I will then discuss our financial performance. Brad will then provide some closing remarks before we open the call for questions. Before we begin, we would like to remind participants that the information contained in this call is current only as of today, 02/06/2025. The company assumes no obligation to update any statements, including forward looking statements. Statements that are not historical facts are forward looking statements and subject to a safe harbor disclaimer in today's press release.

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

Additionally, on this conference call, we will discuss non GAAP measures that include or exclude items not indicative of our ongoing operations. For each non GAAP measure, we also provide the most directly comparable GAAP measure in today's press release, which includes a reconciliation of these non GAAP measures to our GAAP results. There is also a slide deck summarizing our financial results in the Investors section of our website. As a reminder, unless otherwise noted, the following commentary is made on a continuing operations basis. With that, I'll turn the call over to Brad.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

Thank you, Tim, and good morning, everyone. MasterCraft delivered fiscal second quarter results that exceeded expectations. Our robust destocking efforts over the past twenty four months have given our dealers the confidence to place new orders ahead of boat show season. Additionally, our portfolio of consumer centric brands, highly variable cost structure and free cash flow generation provides us with the ability to continue investing in the business to drive long term growth. Our flexible operating model and strategic production planning allows us to mitigate near term risk and deliver strong fiscal twenty twenty five results as we position the business for sustained growth in the periods ahead.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

Our purposeful lower production through the first half of our fiscal year puts us well ahead of schedule in reducing field inventories. Assuming current retail trends continue through the summer selling season, destocking of filled inventories should largely be in the rearview mirror. We are narrowing our full year guidance range as a result of our second quarter performance and the promising launch of the MasterCraft X Star product line. We will discuss this in greater detail later on. Looking at the overall retail environment, mixed economic conditions and geopolitical uncertainty amplified typical second quarter seasonality.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

Despite softer retail, our aggressive inventory management and lower production levels led to a reduction of dealer inventories by more than 30% year over year. As we gear up for the summer selling season, despite retail uncertainty, there is still cautious optimism throughout our MasterCraft dealer network. Before discussing recent brand developments, I wanted to briefly address the topic of tariffs. At this point, we're expecting cost implications for fiscal twenty twenty five to be modest. While the vast majority of our materials are currently sourced from U.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

S. Suppliers, ongoing trade and tariff variability could affect certain components. We have strong supplier relationships and an experienced supply chain team proactively working to mitigate risk. We will continue to monitor and act on the implications of trade dynamics on the broader economy and potential impact on retail customer sentiment. Now turning to our brands.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

For our MasterCrafts segment, our team is actively supporting our dealer partners at the various boat shows worldwide. MasterCrafts has performed particularly well at the Salt Lake City, Minneapolis and Dusseldorf, Germany shows. As a reminder, we recently launched our new flagship X Star lineup. Initial consumer reaction has been overwhelmingly positive and has generated a noticeable buzz throughout our network and the industry. The product is in high demand from our dealers and retail customers alike.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

We are experiencing a strong halo effect on the MasterCraft brand since the launch, resulting in ramped up interest across our product portfolio. We are optimistic that this positive momentum will carry into remaining boat shows and into the summer. Now let me discuss more specifics related to the new X Star. Production commenced in our second quarter with the first wholesale shipments in our third quarter. As early rate production steadily ramps, the X Star's premium price point will drive significant earnings and free cash flow in our second half, particularly in the fourth quarter.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

The Ultra Premium X Star lineup consists of a redesigned 23 foot model and a brand new 25 foot offering. This lineup sets a new benchmark in wake and wave performance through its all new hull and ballast design. Utilizing the industry leading SurfStar system, the X Star creates the most powerful and versatile waves with automated control. All X Stars come standard with premium features, including a supercharged 6.2 liter engine, a revolutionary transom audio system, an exclusive Z100 tower, a stern thruster and an innovative DASH interface. Our team's renewed focus on innovation, performance and luxury is showcased throughout this lineup.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

We hope that you're able to stop by our booth at an upcoming boat show. Turning to our pontoon segment. For some time now, the pontoon industry has experienced softening retail as payment buyers have been deterred by higher interest rates and other macroeconomic pressures. This softening retail combined with a more pronounced seasonality for these types of products has contributed to elevated aged inventory levels across the pontoon industry in a challenging retail environment. Reducing filled inventories has been a key focus for our Crest brand.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

Fiscal year to date, we have successfully reduced pipeline levels at Crest through the off peak season. As we near the all important summer selling season, our top priority continues to be selling through aged inventory and pipeline management. Early boat show results for our Crest brand have been mixed. We've been encouraged by Crest's performance at the all important Minneapolis and Chicago boat shows. For our Belize brand, the early consumer response to our Horizon and Helix models have been promising as we ramp up brand visibility and continue adding strong dealers in targeted locations.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

Lastly, as we announced in December, the sale of our Merritt Island facility and related plant assets closed as expected. The net cash proceeds of over $26,000,000 bolsters our balance sheet and adds to our financial flexibility and ability to invest in our key long term growth initiatives.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

I will now turn the call over to Tim, who will provide additional commentary on the quarter and a detailed discussion of our financial results. Tim?

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

Thanks, Brad. As we turn to our fiscal second quarter results, keep in mind that our financial results reflect historically low production volumes. Although retail uncertainty persists, we are optimistic that we are near the bottom of this prolonged market down cycle.

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

Focusing on the top line, net sales for the quarter were $63,400,000 a decrease of $26,400,000 or 29% from the prior year period. This decrease was primarily due to the planned lower volume and unfavorable model mix. For the quarter, gross margin was 17.2% compared to the prior year period of 23.3. The decrease was primarily attributed to lower cost absorption from the production decrease. Operating expenses were $10,700,000 for the quarter compared to $10,200,000 in the prior year period.

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

Operating expenses increased primarily due to higher share based compensation. On the bottom line, adjusted net income for the quarter was $1,700,000 or $0.1 per diluted share. This compares to adjusted net income of $99,500,000 or $0.55 per diluted share for the prior year period calculated using a tax rate of 20% for both periods. Adjusted EBITDA was $3,500,000 for the quarter compared to $12,900,000 in the prior year period. Adjusted EBITDA margin was 5.6% compared to 14.4% in the second quarter of fiscal twenty twenty four.

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

Our balance sheet positions us well as we ended the quarter with nearly $63,000,000 in cash and short term investments. We have no debt as we paid off our revolving credit facility balance early in the quarter, resulting in 100,000,000 of revolver availability at the end of Q2. Despite low cycle volumes, we generated nearly $11,000,000 of free cash flow during the quarter. Our ample liquidity and financial strength enables us to fund key growth initiatives and return capital to shareholders. During the quarter, we spent nearly $750,000 to repurchase approximately 40,000 shares of our common stock.

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

We repurchased shares at a slower pace as planned. Since initiating our share repurchase program in June of twenty twenty one, we have allocated nearly $69,000,000 to repurchase more than 2,800,000.0 shares. Our robust balance sheet and strong free cash flow generation reinforces our financial stability through the business cycle. We remain committed to growth through innovation, product and brand development and highly selective inorganic opportunities given the currently suppressed marine environment. As Brad alluded to earlier, we are narrowing our full year guidance range.

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

For fiscal twenty twenty five, consolidated net sales are now expected to be between $275,000,000 and $295,000,000 with adjusted EBITDA between $19,000,000 and $24,000,000 dollars and adjusted earnings per share between $0.64 and $0.86 We continue to expect capital expenditures to be approximately $12,000,000 for the year. For the third quarter of fiscal twenty twenty five, consolidated net sales are expected to be approximately $75,000,000 with adjusted EBITDA of approximately $5,000,000 and adjusted earnings per share of approximately $0.17 As a reminder, our second half is expected to have a favorable model mix, which includes the ramp up of FXSTAR production. I'll now turn the call back to Brad for his closing remarks.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

Thank you, Tim. Our business executed well during our fiscal second quarter by delivering better than expected results despite ongoing macroeconomic uncertainty and a highly competitive retail environment. Improving dealer health as we approach the summer selling season combined with lower short term rates and prudent production levels positions our business well for sustained long term success. Our first half performance provides a solid foundation for the back half of fiscal twenty twenty five and into 2026. With a strong balance sheet and robust cash flow generation, we remain we maintain the financial flexibility to pursue our key growth initiatives.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

As we move beyond inventory rebalancing, we are highly focused on positioning the business to capitalize on the upcoming market recovery. Operator, you may now open the line for questions.

[Operator]

Certainly. And our first question will be coming from Joe Altobello of Raymond James. Your line is open, Joe.

[Joseph Altobello, Managing Director at Raymond James Financial]

Thank you. Hey, guys. Good morning. First question, I want to talk about channel inventory. You mentioned you made further progress.

[Joseph Altobello, Managing Director at Raymond James Financial]

So I was hoping you could give us some numbers around that. I think you said or have said previously that you're targeting roughly 600 to 1,000 boats coming out of the channel this year. And I think Q1 you did 500. So maybe update us on where we are through Q2 and what you expect to do by the end of the year?

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

We had some very modest channel increase in Q2, which is the typical cadence for us. The increase going from Q1 to Q2 was the lowest increase we've had in since we've been a public company. So we're making good progress on the inventory reduction that we called out earlier. So we still expect to end up in that range.

[Joseph Altobello, Managing Director at Raymond James Financial]

Okay, super. And then just to shift gears over to MasterCraft, it looks like the ASPs were were down pretty significantly for that brand, for that business. Can you shed a little light on that for us?

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

Really, it's a mix issue that we alluded to earlier, and we'll be seeing the mix grow substantially in both Q3 and Q4 as we ramp up the X Star production. I think we had a mix going toward more of the NXTs and XTs as the dealers await for the promising X Star launch. And so now that's out, we'll see that the ASPs going back up.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

And Joe, you probably recall for NXT and XT models, we adjusted pricing on some of those downward actually to address the affordability issue. We didn't do that across the board on the entire portfolio. That all starts to come back in balance here in the second half with the launch of our new Ultra Premium stuff.

[Joseph Altobello, Managing Director at Raymond James Financial]

Got it. Okay. Thank you, guys.

[Operator]

Thank you. One moment for our next question. Our next question will be coming from Craig Kennison of Baird. Your line is open, Craig.

[Craig Kennison, Director of Research Operations & Senior Research Analyst at Baird]

Hey, good morning. Thanks for taking my question. And kudos on the work to build a strong balance sheet in this market. You mentioned buybacks, but also strategic growth initiatives. Is there any way to frame what fits into that strategic bucket?

[Craig Kennison, Director of Research Operations & Senior Research Analyst at Baird]

I mean, is it brand startups like you've done in the past? Could it be brand acquisitions, vertical integration? And I'm just based on conversations we have investors, like how do you compare the ROI of investments in acquisitions versus your own stock?

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

Yes. Thanks for the question, Craig. In the short term, our focus is on executing within our brands and of course increasing overall shareholder value while we do that. As we look at what to do with our cash, how to leverage the balance sheet, we're working in parallel, simplifying our business, focused innovation, products and brand development and improving distribution. Those are more execution related, while also returning capital to shareholders.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

We're going to continue to bolster and strengthen a fortress balance sheet. I mean, that's a capital allocation priority. We will continue to fully fund our strategic and operating initiatives on just improving the business overall and returning cash to shareholders. That's how we balance those things. Of course, we track returns on all of our investments and return on investment capital internally, and we're pleased with our progress in doing that.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

But we also maintain flexibility. I mean, we all know we're in a pretty variable market right now. So having some padding there is helpful, but that flexibility will help us really as we position for the recovery that's bound to happen soon.

[Craig Kennison, Director of Research Operations & Senior Research Analyst at Baird]

Thanks, Brad. And maybe just a follow-up, could you frame the opportunity you see in distribution?

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

Yes. I mean, it really starts of course with geographic coverage. There's a big world out there and it goes beyond The United States. Domestically in The United States, boating markets are pretty highly concentrated in certain areas and it's highly competitive out there in distribution. We have great dealer partners, but we also have pockets geographic pockets of opportunity for growth with expanding and partnering with our dealers for more presence, more stores, more rooftops and positioning, especially as we fill out white space in our portfolio, that product thrust together with distribution improvements happen in parallel and that's where we get the energy.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

That lines up well-to-do that in the down part of the cycle, because when the market and retail starts to pop, then it's easier for dealers to get a return on that investment as well. So it's really about geographic coverage and just hitting consumers in the path in the areas of growth. And then with affordability, there's certain demographic profiles in certain geographies that are more important than others. So as the world continues to turn there, we need to be constantly vibrant in changing and enhancing, improving our distribution coverage.

[Craig Kennison, Director of Research Operations & Senior Research Analyst at Baird]

Thanks, Brett.

[Operator]

And one moment for our next question. Our next question will be coming from Noah Zadzkin of KeyBanc Capital Markets. Noah, your line is open.

[Noah Zatzkin, Vice President & Equity Research Analyst at KeyBanc Capital Markets]

Hi. Thanks for taking my question. Just in general, I guess, have you guys mentioned kind of what industry retail assumptions are baked into the guide? And then as it relates to kind of the early boat shows, just anything to call out in terms of any changes you've noticed in maybe consumer sentiment or appetite? Any green shoots you could point to would be helpful.

[Noah Zatzkin, Vice President & Equity Research Analyst at KeyBanc Capital Markets]

Thanks.

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

So we guided at the beginning of the year that we thought retail was going to be down between 510%. And we still think that is the case and we're within that range on a year to date basis. As far as boat shows, it was a very much a pleasant surprise to see how much demand there is for the X Star. It's an expensive boat, the Ultra Premium. We had outstanding reception on that boat in Europe.

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

And so in spite of economies being down in Europe and so forth, there are still wealthy people that like their toys and we're taking full advantage of that worldwide.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

I would just to build on that with Boat Show and consumer sentiment, even though we're sort of at or near the bottom of the cycle and also off peak season, the seasonality, that double negative, there is increasing, we call it just cautious optimism amongst what we're hearing from dealers about the potential for retail here as the season starts to turn on. In particular, we had strong shows in Salt Lake City. Tim mentioned Dusseldorf and Minneapolis. There's a nice halo effect with new product, of course. So this X Star product lineup is drawing a lot of eyeballs, a lot of attention and solid energy.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

We've taken a lot of deposits on that boat. We're back half loaded in our production planning there, but we're excited about that. And then on the pontoon side, although the shows have been more mixed there as those buyers are typically a credit buyer and interest rates still remain elevated, this is the first time in this boat show season to get our new Belize product line, which is also premium offering in front of customers and in some cases some dealers to see the product and product feedback on that product is also very favorable. And we knew with Belize launching in a low part of the market that it's going to take some time, but we're encouraged with the Belize product as well. And we're looking forward to the Miami show next week.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

Thank you.

[Operator]

And our next question will be coming from Griffin Bryant of D. A. Davidson.

[Griffin Bryan, Senior Equity Research Associate at D.A. Davidson Companies]

So it seems like you guys are doing fairly well with destocking overall. Can you just speak to what you're seeing from categories you operate in and if overall dealer inventories are also seeing this level of destocking?

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

We think I mean, let's talk about the boat shows first. You get some sense of how competitors are doing. We think we've had a more successful boat show season than our competitors. I'm sure that varies from show to show, but overall, we're very pleased with how we've how competitive we've been. It continues to be an environment that has a fair amount of discounting.

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

So we've been judicious with those retail rebates to drive sales. But it's a and on the pontoon side, it's a tough market out there. And so we do a hand to hand combat every show and try to make sure that we don't lose a deal within reason.

[Griffin Bryan, Senior Equity Research Associate at D.A. Davidson Companies]

Got you. And we've heard from dealers that clients that continues to be the biggest weight on consumer shoulders toward kind of on the sense of purchasing a unit. Is there a certain rate hurdle that you think would help get retail back a positive or at least kind of influence more purchasing?

[Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary at MasterCraft Boat]

It's pure speculation on my part, but I think it's probably got to go down another 50 to 100 basis points. Keep in mind, these consumer rates are largely tied to the long term interest rates as opposed to the short term. Short term gets all the publicity, affects our carrying costs and the dealers carrying costs, but long term rates are I think more closely aligned with our retail lending environment.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

Some of this can be, of course, psychological too just for dealer and consumer sentiment. Any improvement is positive. On the MasterCraft side, I mean, roughly half of our buyers are cash buyers. And so MasterCraft is less impacted. It has some impact, of course, but less impacted by interest rates and the pontoon space much more impacted.

[Brad Nelson, CEO & DIrector at MasterCraft Boat]

So we would expect to see more positive input there as interest rates ease.

[Griffin Bryan, Senior Equity Research Associate at D.A. Davidson Companies]

Got it. Thanks guys.

[Operator]

I'm showing no further questions. This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Tim Oxley, Vice President, Chief Financial Officer, Treasurer and Secretary
• Brad Nelson, CEO & DIrector

Analysts

• Joseph Altobello, Managing Director at Raymond James Financial
• Craig Kennison, Director of Research Operations & Senior Research Analyst at Baird
• Noah Zatzkin, Vice President & Equity Research Analyst at KeyBanc Capital Markets
• Griffin Bryan, Senior Equity Research Associate at D.A. Davidson Companies