Q3 2025 MasterCraft Boat Holdings Inc Earnings Call
Ladies and gentlemen, thank you for standing by, and welcome to the MasterCraft Boat Holdings Inc. Fiscal Third Quarter 2025 Earnings Conference Call.
Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference call over to your speaker today, Scott Kent, Vice President Finance and Incoming Chief Financial Officer. Please go ahead, sir Thank you very much.
Speaker Change: Thank you, Operator, and welcome everyone. Thank you for joining us today as we discuss Mastercrash Fiscal Third 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.
Speaker Change: With me on this morning's call is Brad Nelson, Chief Executive Officer and Tim Oxley, Chief Financial Officer. We will begin with an overview of our operational performance from the third quarter. After that, Tim will discuss our financial performance. Brad will then provide some closing remarks before we open the call for questions.
Speaker Change: Before we begin, we would like to remind participants that the information contained in this call is current only as of today, May 7th, 2025. The company assumes no obligation to update any statements, including forward-looking statements [inaudible]
Speaker Change: statements that are not historical facts are forward-looking statements and subject to the safe harbor disclaimer in today's press release.
Speaker Change: Additionally on this conference call, we will discuss non-GAAT measures that include or exclude items not indicative of our ongoing operations.
Speaker Change: For each non-GAAP measure, we also provide the most directly comparable gap measure in today's press release, which includes a reconciliation of these non-GAAP measures to our gap results. There's also a slide deck summarizing our financial results and the investor section of our website.
Speaker Change: As a reminder, unless otherwise noted, the following commentary is made on a continuing operation to basis. With that, I will turn the call over to Bren.
Brad Nelson: Thank you, Scott, and good morning, everyone. I want to start by acknowledging that this will be Tim Oxley's final earnings call. As we announced last month, Tim will be retiring a CFO at the end of June , and will remain in an advisory role through December .
Speaker Change: Scott Kent, who you just heard from, will assume the CFO role on July 1st.
Speaker Change: Tim Oxley has had a tremendously successful career with nearly 35 years in the powerboat industry, including 18 years here at MasterCraft. He has played a key role in the evolution of our company.
Speaker Change: Tim's leadership and guidance have been invaluable and I'm incredibly grateful for a partnership.
Speaker Change: He leaves mastercraft in outstanding financial shape and with a strong finance team. On behalf of everyone at mastercraft, I thank him for his service to the company and wish him all of best as he transitions towards retirement.
Speaker Change: Looking to the future, I'm pleased to have Scott succeed Tim as Chief Financial Officer. He has over 25 years of power vote experience, including more than six years of proven leadership here at MasterCraft.
Speaker Change: His appointment reflects our depth of talent and careful succession planning. I look forward to working closely with Scott and the rest of the team to deliver long-term growth for our stakeholders to deliver long-term growth for our stakeholders.
Speaker Change: Now, turning to our third-pointer results. We delivered results that exceeded expectations despite the dynamic industry and macroeconomic backdrop.
Speaker Change: Sequentially, profitability improved due to higher volumes, operating efficiencies, and a favorable mix over fiscal Q2, driven largely by the rampant production of our premium X-star model.
Speaker Change: We continue to focus on what's in our control, including discipline cost, cash, and pipeline management. Our renewed focus on product development and proven destocking over the past two plus years has positioned our dealers well for the selling season.
Speaker Change: Our flexible operating model and ability to generate cashflow, even at these low volumes, combined with our fortress balance sheet, a force of the ability to navigate near-term uncertainty while positioning the business for sustainable long-term growth.
Speaker Change: During the quarter, spring boat show results were up from last year and generated strong energy heading into the critical summer selling season. That said, persistent macroeconomic headwinds and tariff uncertainty continued to put pressure on the marine sector.
Speaker Change: We continue to monitor and take proactive action to mitigate the impact from these external factors To reflect the evolving macro conditions and the challenging demand environment, we are revising our full year guidance, which will detail later in the call.
Speaker Change: We continue to make meaningful progress in managing dealer health and reducing inventory levels. Over the last year, dealer inventories across our brands have decreased by 30%.
Speaker Change: Compared to the same pre-pandemic period in fiscal 2019, dealer inventories are lower by more than 45%
Speaker Change: This highlights the effectiveness of our careful production planning, dealer support programs, and strength of our products and brands.
Speaker Change: Despite broader economic turbulence, we remain confident in achieving our fiscal year inventory reduction target of 600 to 1,000 units, assuming retail expectations hold through the summer selling season.
Speaker Change: Turning to the evolving trade and tariff environment. While we anticipate a modest impact from tariffs on fiscal 2025 costs, we continue to work diligently with key suppliers to mitigate risk. We're also closely monitoring broader demand implications.
Speaker Change: Regardless of market dynamics, our intent is to keep our dealers healthy and ensure inventories are closely aligned with retail demand.
Speaker Change: Our capital allocation priorities remain disciplined and consistent despite the external pressures. We have a solid balance sheet with no debt. We are generating cash and our strategic growth initiatives are fully funded.
Speaker Change: We continue to prioritize our share repurchase program to return Capitol to share voters.
Speaker Change: Given the suppressed marine environment, we remain opportunistic and highly selective with respect to inorganic growth.
Shifting to recent developments across our brands.
Speaker Change: In February , the X-Star MasterCrafts flagship model was awarded the prestigious National Marine Manufacturer's Association Innovation Award in the Towelc category at the Miami International
Speaker Change: Additionally, the NMMA recognized both mastercraft and crests with marine industry customer satisfaction index awards for 2024. This recognition underscores our continued focus on quality and innovation.
Speaker Change: MasterCraft has a longstanding track record of winning CSI awards, and Crest has now received the honor for six consecutive years, every year under our ownership.
Speaker Change: Within our Mastercraft segment, our team supported dealers at Key Boat Shows, where we showcased our X-Star product.
Speaker Change: Its Hable Effect has been particularly positive for the mastercraft brand globally.
Speaker Change: Consumer Interest remains strong and we wrapped up X-Star production in the third quarter to meet demand.
We continue to identify growth opportunities within our distribution network.
Speaker Change: Recently, Mastercraft Strengthen is dealer presence in Dallas, the largest ski weight market in the United States We've also announced dealer expansion in Southern Utah and Lake of the Ozarks in Missouri. As such, we're experiencing early momentum in these key markets.
Speaker Change: We'll continue to explore additional opportunities to enhance our dealer network.
Speaker Change: Turning to our pontoon segment, which includes crest and belief brands, dealer inventories across the broader pontoon market remain challenged, which has created a more promotional and competitive environment.
Speaker Change: Overall, we continue to proactively adjust production levels to right-size field inventories as evidence by a 40% year-over-year unit reduction in this segment.
Speaker Change: As announced in February , Michael Connell has been appointed president of the pontooning business and he's hit the ground running joining the team in a wasle [inaudible]
Speaker Change: The team's priorities are centered on product enhancements, dealer and pipeline management and operational improvement through this dynamic tonning.
Speaker Change: With that, I'll now turn the call over to Tim to provide additional commentary on the report and walk through our financials.
Tim Oxley: Jim, thanks Brad, to start I want to sincerely thank all of you for your support and interest in the company over the years.
Tim Oxley: Our team will closely work together over the coming months to ensure a smooth transition. I'll certainly miss Masscraft and working alongside this strong team, but I'm looking forward to retirement and spending more time with my family.
Tim Oxley: Now, turning to our Q3 financial results, focusing on the top line that sales for the quarter were 76 million, a decrease of 8 million or 10 percent from the prior year period. This was primarily due to a lower unit sales volume, partially offset by fable mitts.
Tim Oxley: For the quarter, our gross margin was 20.8% compared to 23.3% in the prior year period. The Lord margins were the result of lower cost absorption from the production decrease, partially offset by favorable mix.
Tim Oxley: Operating expenses were 11.7 million foot quarter, a decrease of 1.2 million compared to the prior year period, primarily due to lower general administrative expenses, as a reminder of the prior period includes CEO transition cost.
Tim Oxley: On the bottom line as yesterday who come for the quarter was 5 million or 30 cents per
Tim Oxley: Calculated using a tax rate of 18%. This compares to just an income of $8.5 million or $0.50 per deleted share for the prior year period. Calculated using a tax rate of 20%.
Tim Oxley: Adjusted EBITDA with $7.5 million for the Corps compared to $11.7 million in the prior year period. Adjusted EBITDA's margin was 9.9% compared to 13.9% in the 3.4 fiscal 2024.
Tim Oxley: Our balance sheet remains incredibly strong. We entered the quarter of nearly 167 million of total liquidity, including nearly 67 million of cash and short-term investments. And 100 million availability under our evolving credit facility.
Tim Oxley: Wiener the Corps with no debt. Year-to-date, we generated nearly 19 million of operating cash flow.
Tim Oxley: Our balance sheet positions us exceptionally well, provides us with ample liquidity and financial strength to perform through the business cycle. With my strategic growth initiatives and current capitalist shareholders.
Tim Oxley: During the quarter, we spent nearly $750,000 to re-purchase more than 41,000 shares of Brutal
Tim Oxley: We expect to repurchase shares at an accelerated pace in our fiscal fourth court, particularly given our recent valuation. In fact, fourth quarter to date, we've already spent more than $1.8 million to repurchase over 115,000 shares.
Tim Oxley: Despite ongoing macroeconomic and trade uncertainty, we remain within the range of our previously
Tim Oxley: That said, Proficial 2025, consolidated net sales as now expected to be approximately $275 million with electricity but I have approximately $20 million. And Justin Rames per share of $7.1
Brad Nelson: We also now expect top expenditures to be approximately 9 million for a full year as we closely manage cash flow. I'll now turn the call back to Bradford's closing remarks.
Thanks, Kim.
Brad Nelson: Our business performed well during the third quarter against the backdrop of economic and demand uncertainty With our strong financial foundation, we are well positioned to mitigate near-term risks [inaudible]
and pursuer strategic growth initiatives.
Brad Nelson: We continue to utilize a disciplined approach to capital allocation, including returning approximately $70 million of excess cash to our shareholders through our share repurchase program since 2021.
Brad Nelson: Looking ahead, given the fluid trade environment and limited demand visibility, we remain focused on what's in our control, managing production levels, driving innovation, and delivering operating efficiencies all while maximizing cash flow and aggressively managing costs.
Brad Nelson: Our flexible operating model allows us to adjust production to both mitigate near-term risk and capitalize on potential upside.
Brad Nelson: We have taken a proactive approach to production planning and dealer incentives to capitalize on retail demand during the upcoming selling season. In this dynamic environment, we are focused on continuing to provide value for our stakeholders while positioning mastercraft to capitalize on the next market recovery.
Operator, please open the line for questions.
Speaker Change: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone for your name to be announced.
To withdraw your question, please press star 11 again.
Speaker Change: Our first question comes from Joe Altobello of Raymond James. Your line is now open.
Speaker Change: Good morning, this is Martin on for Joe. I'll let you mention the tariff impact. You may have a modest impact. Can we get a little bit of quantification around that and an idea about what a potential price increase might be from Model Year 26?
Speaker Change: You know, it seems like it changes almost on a daily basis, so we have not yet determined the effect on pricing. We do expect to have some inflationary impact on our prices, and we have our modest impact on fiscal Q4 embedded in our guidance already.
Speaker Change: God, and then just kind of quickly thinking about retail, I believe you said down 5-10% prior, but that changed in any way.
Speaker Change: I expect it to be closer to 10 than 5 right now, but because Q4s are easiest cop, we'll know better at the end of June and not really before then.
Speaker Change: God, thank you very much and congratulations on your retirement.
Thank you.
Thank you.
[inaudible]
Speaker Change: Our next question comes from Craig Kennison, Abaird, your line is now open.
Craig Kennison: Hey, good morning. Thanks for taking my question, Tim. Congratulations. It's really been a pleasure.
Speaker Change: working with you. You probably did it a quarter too late because I have a fair of question for you. But what are if you could...
Speaker Change: Just to help us understand, you know, the kind of direct exposure you think you have, I mean, primarily.
Speaker Change: U.S.-based production footprint. And then if you've done any work to understand what indirect exposure you might have through some of your suppliers that have.
Speaker Change: You know, Terrific Exposure. I know it's a tough question, but
Speaker Change: We've had a discussion with all of our significant suppliers, so we do think we have a good handle on what
I'm going to call them the parts of parts. [inaudible]
Speaker Change: So oftentimes, you know, even our engines, I think, you know, for one variety of engine, the block comes from Canada. So I think we're, we have a good spreadsheet that we use to determine those costs.
Speaker Change: and as the changes occur, we drop them into the spreadsheet.
Speaker Change: What we don't know is exactly how much is in the pipeline, how much is in the warehouses in the US and so there will be a modest impact on Q4 but that's continuing to evolve as it relates to fiscal 26.
Speaker Change: Okay, thanks. And then Brad, you mentioned some dealer network expansion wins. Just talk about what's working in the sense of your ability to add dealerships in some of these key markets. It feels like you've made...
Pretty significant progress there.
Speaker Change: Yeah, we feel good about progress and that's always going to be a work in motion. There's things are constantly changing. You know, we look at it really in two ways.
Speaker Change: Geography coverage, and there's still white space out there that's nothing covered or only getting modest coverage from Adela perspective and then within territories. We're in Florence.
We have tremendous dealers. Sure, highly sophisticated.
Speaker Change: But in some pockets, we've got territories where our density and our store and our rooftop coverage has opportunity for expansion. So we're really pleased with progress in some of our larger markets, in particular pointing detectives.
Speaker Change: and Utah. Those two markets alone are needle movers from a national perspective. So as we drive, as we get up to national market share in those markets, it's really helpful for us.
Speaker Change: and our dealers, just to shout out to our dealers and their focus is going through a turbulent period of time. We're proud of our partnership there, both dealers, long-established as well as new ones.
Speaker Change: Yeah, I guess that's my last question if it's okay. Tim, you've done an amazing job with your own balance sheet and your...
very well positioned .
Speaker Change: The Fund of Buyback, as you've said, but how would you frame the balance sheet of your dealer network overall and do you see any pockets of stress?
Speaker Change: Craig is one of the areas that really particularly pleased in the fact that we've been able to navigate this difficult environment without having any significant dealer failures.
Speaker Change: So, we have a number of tools in our toolkit, if you will, and knock on wood, we feel good about the health of our dealers and we continue to monitor closely with our four planned suppliers.
Great. Thanks, Tim. Congratulations.
Thank you.
Thank you.
Speaker Change: Our next question comes from Michael Schwartz of True Securities. Your line is now open.
Speaker Change: Yeah, hey guys, good morning. This is Adam on from Mike. First just wondering how the early response has been to Belize. And if you guys still think that could add 10 million in revenue for this school year.
Speaker Change: The police product, we're in conscious low rate production, we ramp up that brand and doing it amidst the challenging market. I think we all know dealer credit lines are under pressure right now in some areas.
Speaker Change: But we are anticipating that sales in the neighborhood of what we previously stated in that $10 million ballpark for fiscal 25. We've signed dealers in the top 10 BTA, top 10 markets.
We now have 20 plus dealers, net new dealers.
Speaker Change: So far, interest in the product is high, very favorable and positive response rate to the product fit and function.
Speaker Change: as well as quality of the product. It just, we knew it would take some time launching a product in the down part of the market and that's proving out as per plan.
Speaker Change: Got it. The other thing because we have such a concentration in the upper Midwest, we think as those folks are seen out on the waterways, it's going to spur some additional demand. So we remain optimistic about police.
Speaker Change: Okay, got it. And any way to think about fiscal year 26.
Speaker Change: Not ready to talk about fiscal 26 at this point time.
Speaker Change: Okay, got it. If I could just one more any trend, so you guys have been seeing it retail in April and May so far, just given everything going on in the macro and tariff environment. Thank you.
Yeah, I think, you know, we're
Speaker Change: As I mentioned on my prepared remarks, Q4s or easiest cops [inaudible]
Speaker Change: and we're looking at it on a daily weekly basis.
Speaker Change: and you know, our easiest cop in Q4 is Jim. So we still have a lot of sight to be in down in that, you know, 10% range.
Speaker Change: and we really won't know until it all concludes, but our dealers remain optimistic. The sun's coming out and
We're going to make hay while the sun shines [inaudible]
Speaker Change: I would add, we're dealing well with premium buyers, the market is skewing to the premium right now, and that's nice with the launch of our new premium X-Star product.
Speaker Change: in MasterCraft helps us, it will help us even more with police as the summer-shelling season unfolds here as Tim mentioned.
Speaker Change: But there's there's we tell momentum there with X star that we've seen coming out of boat shows.
Speaker Change: and through with crests and pontoons, of course, that's more of a compressed selling season in the summer. It's more even more seasonal than in the tow-awake market, but we haven't seen sustained.
Speaker Change: Vibrant Retail Momentum yet, but as Tim mentioned, we are seeing some signs of life and green shoots from many of our dealers.
Speaker Change: You know, as evidence of the strong Masscraft brand internationally, we sold eight of the X-tars in Europe at the Doosworld both shows. So, you know, Masscraft has a strong brand, not only U.S., but you know, Canada and the rest of the world as well.
Awesome. Thanks, guys.
Thank you, one moment for our next question.
Eric Wold: Our next question comes from Eric Wold of Texas Capital Securities. Your line is now open.
Eric Wold: Thanks. Good morning, and thanks to my questions, and I'll also echo our congrats Tim on the on the retirement of the great working with you over the years. I guess taking up the guidance, so you took the height of the guidance range, you have 275 to 295. I'm a last call down to 275 now. Was that 295?
Speaker Change: Uprend, previously, was that more of an assumption that things improved to get there? Or would you characterize it as more that things have degradated since that last guidance was given?
Speaker Change: I think that if retail were turning to be in down 5%, I think the high end of the range would have been more appropriate.
Speaker Change: As is now, you know, there's a lot more caution out there not only from retail perspective, but from a dealer stocking perspective and so that's the reason you see us moving moving range down a little bit.
Okay.
and then, so I'm at last for it, on deal-stopping.
Speaker Change: You've got, you know, a bunch and almost two months left in the quarter.
Speaker Change: and you still feel comfort with the 600,000 inventory units coming out of the channel.
Speaker Change: Assuming things don't materially change from here, I know June's a big, big question mark, you know, I guess what takes you to the higher that range versus the lower of the range? Is it really kind of dependent on June or something else that plays one way or the other?
Speaker Change: Yeah, because we've been judicious with our production, I expect us to be in the upper end of that range as far as you've taken out of, you know, and I'd be more likely to be a thousand than 600 now.
Got it. Very helpful. Thanks, guys. Appreciate it.
Thank you.
Speaker Change: Our next question comes from Anna Glaskin of Be Riley Securities. Your line is now open.
Anna Glaskin: the face of care. I'm not trying to get specific numbers, but would you be looking to react with a consistent price increase or give credence to maybe some variable elasticity across the pricing architecture to any thoughts there?
Speaker Change: Yeah, the morning, Anna, balancing three things is our every day volume.
Speaker Change: Price and Cost. With the variability with tariffs and the trade environment, we remain proactive on balancing the three of those. It's likely what we'll see going forward is a traditional
Speaker Change: Market Base Price Adjustment, and then we may be moving into more of a variable pricing model looking forward. We've not made any adjustments nor are we communicated. That will proactively modeling those things, and our goal ultimately always is to cover our input costs.
Speaker Change: The Challenge with Terrorists, which I think everyone can understand and appreciate, it is sometimes as a latency and there's a lot of change happening there every day.
Speaker Change: and with that, when we finally snap and make decisions on this stuff, there could be lag time in there that's difficult to balance. But we're modeling all those activities proactively while also working with suppliers to mitigate. Okay.
Speaker Change: Cost Impact as opposed to just accepting and passing a long cost impact.
Speaker Change: I guess have you already spoken to dealers about the potential for more variable pricing?
Speaker Change: We've not unfolded our full model year fiscal year pricing yet for 26.
Speaker Change: But we had discussed with them the variable nature of these costs and we certainly hope that the tariffs are temporary and so that lead us more toward a variable pricing model going forward.
Father, please guys.
Thank you.
Speaker Change: This now concludes the question and the session. I would now like to...
Speaker Change: Thank you for participating in today's conference. This does conclude the program. You may now disconnect.