Q4 2025 MasterCraft Boat Holdings Inc Earnings Call
Speaker #1: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the MasterCraft Boat Holdings, Inc. fiscal fourth quarter and full year 2025 earnings conference call.
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the MasterCraft Boat Holdings, Inc. Fiscal Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advise your hand is raised, and to withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Scott Kent, Chief Financial Officer. Please go ahead, sir.
Speaker #1: At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone; you will then hear an automated message advising your hand is raised, and to withdraw your question, please press star 11 again.
Speaker #1: Please be advised that today's conference is being recorded. I would now like to turn the conference over to Scott Kent, Chief Financial Officer. Please go ahead, sir.
Speaker #2: Thank you, operator, and welcome, everyone. Thank you for joining us today as we discuss MasterCraft's fiscal fourth quarter and full-year performance for 2025.
Scott Kent: Thank you, Operator, and welcome everyone. Thank you for joining us today as we discuss MasterCraft's Fiscal Fourth Quarter and Full Year Performance for 2025. As a reminder, today's call is being webcast live, and we 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. After that, I will 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, August 27th, 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.
Speaker #2: As a reminder, today's call is being webcast live, and it will also be archived on our website for future listening. With me on this morning's call is Brad Nelson, Chief Executive Officer.
Speaker #2: We will begin with an overview of our operational performance. After that, I will discuss our financial performance. Brad will then provide some closing remarks before we open the call for questions.
Speaker #2: Before we begin, we would like to remind participants that the information contained in this call is current only as of today, August 27, 2025.
Speaker #2: The company assumes no obligation to update any statements, including forward-looking statements, statements that are not historical facts, or forward-looking statements and subject to a safe harbor disclaimer in today's press release.
Speaker #2: 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 will also provide the most directly comparable GAAP measure in today's press release.
Scott Kent: 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 will 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 investor section of our website. As a reminder, unless otherwise noted, the following commentary is made on a continuing operations basis, and all references to specific quarters and periods will be on a fiscal basis. With that, I will turn the call over to Brad.
Speaker #2: Which includes a reconciliation of these non-GAAP measures to our GAAP results. There is also a slide deck summarizing our financial results and the investors' section of our website.
Speaker #2: As a reminder, unless otherwise noted, the following commentary is made on a continuing operations basis, and all references to specific quarters and periods will be on a fiscal basis.
Speaker #2: With that, I will turn the call over to Brad.
Speaker #1: Thank you, Scott, and good
Brad Nelson: Thank you, Scott, and good morning, everyone. We close Fiscal 2025 with a strong fourth quarter, outperforming expectations in what remains a challenging geopolitical and retail environment. This performance was driven by robust demand for our ultra-premium products and disciplined cost control. Q4 net sales increased $25 million, or 46% year over year, and adjusted EBITDA rose nearly $8 million. I would like to thank each of our team members and dealers for their dedication and execution as we continue to navigate through this dynamic industry cycle. From the outset of the year, our priorities were clear: to control what is most meaningful, such as optimizing channel inventory, championing innovation, and positioning us for the next upcycle. We have strengthened dealer health, advanced new product and brand initiatives, returned capital to shareholders, and maintained a strong balance sheet by maximizing earnings and cash flow.
Speaker #3: Morning, everyone. We close fiscal 2025 with a strong fourth quarter, outperforming expectations in what remains a challenging geopolitical and retail environment. This performance was driven by robust demand for our ultra-premium products and disciplined cost control.
Speaker #3: Q4 net sales increased $25 million, or 46% year-over-year, and adjusted EBITDA rose nearly $8 million. I would like to thank each of our team members and dealers for their dedication and execution as we continue to navigate through this dynamic industry cycle.
Speaker #3: From the outset of the year, our priorities were clear: to control what is most meaningful, such as optimizing channel inventory, championing innovation, and positioning us for the next upcycle.
Speaker #3: We have strengthened dealer health, advanced new product and brand initiatives, returned capital to shareholders, and maintained a strong balance sheet by maximizing earnings and cash flow.
Speaker #3: Recall that our initial guidance range for fiscal 2025 reflected the uncertain demand environment. We carefully planned for multiple scenarios. Over the course of the year, the marine industry faced continued pressure from macroeconomic uncertainty, persistent elevated interest rates, and a volatile trade environment.
Brad Nelson: We call that our initial guidance range for Fiscal 25 reflected the uncertain demand environment. We carefully planned for multiple scenarios. Over the course of the year, the marine industry faced continued pressure from macroeconomic uncertainty, persistent elevated interest rates, and a volatile trade environment. Consumer sentiment stayed cautious, and unit retail performance for our brands ended within the lower end of our projected range. Even so, our operational execution allowed us to deliver results near the high end of our original earnings guidance. Despite recent headwinds and low cycle volumes, we maintained focus on our strategic and operational priorities. Across our MasterCraft and Crest brands, we removed more than 900 units from dealer inventories near the high end of our targeted range. Our production discipline delivered the largest Q3 to Q4 sales inventory reduction in our history, excluding the pandemic. These actions strengthened dealer health.
Speaker #3: Consumer sentiment remained cautious, and unit retail performance for our brands ended within the lower end of our projected range. Even so, our operational execution allowed us to deliver results near the high end of our original earnings guidance.
Speaker #3: Despite recent headwinds and low cycle volumes, we maintained focus on our strategic and operational priorities. Across our MasterCraft and Crest brands, we removed more than 900 units from dealer inventories, near the high end of our targeted range.
Speaker #3: Our production discipline delivered the largest Q3 to Q4 filled inventory reduction in our history, excluding the pandemic. These actions strengthened dealer health. We also expanded distribution in key markets.
Brad Nelson: We also expanded distribution in key markets. Our MasterCraft brand launched its flagship X-Star product in Fiscal 2025, once again establishing our leadership in the ultra-premium ski weight category, creating a positive halo effect across the lineup. Our team is already preparing another major premium launch for model year 26, which we will detail later. The least, our premium pontoon brand made progress in its first full year, contributing modest incremental volume as production ramped in our Owasso, Michigan facility, where Crest has successfully operated for nearly 70 years. We've stayed disciplined in our capital allocation approach. Fiscal 2025 free cash flow was $29 million, despite low cycle volumes.
Speaker #3: Our MasterCraft brand launched its flagship X-Star product in Fiscal 2025, once again establishing our leadership in the ultra-premium ski weight category, creating a positive halo effect across the lineup.
Speaker #3: Our team is already preparing another major premium launch for model year 2026, which we will detail later. The Leafs, our premium pontoon brand, made progress in its first full year, contributing modest incremental volume as production ramped in our Owasso, Michigan facility where Crest has successfully operated for nearly 70 years.
Speaker #3: We have stayed disciplined in our capital allocation approach. Fiscal 2025 free cash flow was $29 million, despite low cycle volumes. This cash flow, in addition to the $26 million proceeds from the sale of our Merritt Island facility, enabled us to fully repay all outstanding debt.
Brad Nelson: This cash flow, in addition to the $26 million proceeds from the sale of our Merritt Island facility, enabled us to fully repay all outstanding debt, strengthen our balance sheet, and reduce interest expense, while deploying nearly $10 million to our share repurchase program. As a result, net cash and investments grew by more than $42 million to $79 million, leaving us debt-free with one of the strongest balance sheets in the industry. This gives us the resilience to withstand a prolonged downcycle while continuing to invest in product innovation, channel development, and operational excellence. We are well positioned for long-term growth. Looking ahead to Fiscal 2026, we're expecting some uncertainty to continue, and we are prepared for a range of demand and inventory scenarios. Consistent across the leisure sector, we are partnering with our dealers to fine-tune inventories, which may result in some modest restocking in 2026.
Speaker #3: Strengthened our balance sheet and reduced interest expense while deploying nearly $10 million to our share repurchase program. As a result, net cash and investments grew by more than $42 million to $79 million, leaving us debt-free with one of the strongest balance sheets in the industry.
Speaker #3: This gives us the resilience to withstand a prolonged downcycle while continuing to invest in product innovation, channel development, and operational excellence. We are well-positioned for long-term growth.
Speaker #3: Looking ahead to fiscal 2026, we're expecting some uncertainty to continue, and we are prepared for a range of demand and inventory scenarios. Consistent across the leisure sector, we are partnering with our dealers to fine-tune inventories, which may result in some modest stocking in 2026.
Speaker #3: Additionally, we expect retail units in our markets to decline by 5% to 10% in fiscal 2026. Our cost control discipline and tight working capital management should allow us to generate positive free cash flow again this year, underscoring the flexibility of our variable operating models.
Brad Nelson: Additionally, we expect retail units in our markets to decline 5 to 10% in Fiscal 2026. Our cost control discipline and tight working capital management should allow us to generate positive free cash flow again this year, underscoring the flexibility of our variable operating model. Over the longer term, we see favorable underlying secular trends across the industry. Our brands are well positioned in key markets, and demographic and migration patterns continue to favor boating-friendly, high-income states. Interest in outdoor recreation remains strong across all age groups, benefiting all of our product lines and brands. MasterCraft remains the top-selling brand in the high-margin ski weight space, a testament to our brand strength, strong dealers, and loyal customers. The category leans premium, and our product innovation strategy supports sustained leadership.
Speaker #3: Over the longer term, we see favorable underlying secular trends across the industry. Our brands are well-positioned in key markets, and demographic and migration patterns continue to favor boating-friendly, high-income states.
Speaker #3: Interest in outdoor recreation remains strong across all age groups, benefiting all of our product lines and brands. MasterCraft remains the top-selling brand in the high-margin ski weight space, a testament to our brand strength, strong dealers, and loyal customers.
Speaker #3: The category leans premium, and our product innovation strategy supports sustained leadership. In our pontoon segment, we continue to refine our Crest lineup to expand our market reach and presence over the long term.
Brad Nelson: In our pontoon segment, we continue to refine our Crest lineup to expand our market reach and presence over the long term. This positions us well to weather short-term industry and macro headwinds, including elevated interest rates and inventory levels across the category, and capitalize on the next market recovery. Our new ultra-premium Belize product brings a new level of customer and dealer base, offering a differentiated pontoon experience. Despite near-term market challenges, our segments have outperformed the broader Powerboat market over the past decade, and our brands are positioned for long-term growth. Our strong balance sheet supports ongoing investment in innovation, selective and disciplined feminine, and continued shareholder return. We expect share repurchases in Fiscal 2026 to exceed last year's levels. Innovation continues to be the lifeblood of the MasterCraft brand.
Speaker #3: This position is well to weather short-term industry and macro headwinds, including elevated interest rates and inventory levels across the category, and capitalize on the next market recovery.
Speaker #3: Our new ultra-premium Belize product brings a new level of customer and dealer base, offering a differentiated pontoon experience. Despite near-term market challenges, our segments have outperformed the broader powerboat market over the past decade.
Speaker #3: And our brands are positioned for long-term growth. Our strong balance sheet supports ongoing investment in innovation, selective and disciplined M&A, and continued shareholder return.
Speaker #3: We expect share repurchases in fiscal 2026 to exceed last year's levels. Innovation continues to be the lifeblood of the MasterCraft brand. Our broader model year 2026 lineup includes a range of new features and enhancements.
Brad Nelson: Our broader model year 26 lineup includes a range of new features and enhancements, such as our advanced stern thruster with proportional control for effortless maneuvering, Meridian Audio for a premium on-water listening experience, and keyless ignition for safe, convenient startups. Building on the momentum of last year's successful X-Star launch, we are excited to announce the all-new, redesigned MasterCraft X family. This cornerstone of the MasterCraft legacy has been re-engineered, delivering more power, precision, and presence than ever before, combining elite performance with refined luxury. In July, we again sponsored the American Century Championship in Lake Tahoe, showcasing the X-Star 23 and X-Star 25, which was met with strong dealer and consumer response. Crest's new Conquest series and Conquest SE expand and enhance our value offering in pontoons.
Speaker #3: Such as our advanced stern thruster with proportional control for effortless maneuvering, Meridian audio for a premium on-water listening experience, and keyless ignition for safe, convenient startups.
Speaker #3: Building on the momentum of last year's successful X-Star launch, we are excited to announce the all-new redesigned MasterCraft X family. This cornerstone of the MasterCraft legacy has been re-engineered, delivering more power, precision, and presence than ever before, combining elite performance with refined luxury.
Speaker #3: In July, we again sponsored the American Century Championship in Lake Tahoe, showcasing the X-Star 23 and X-Star 25, which were met with strong dealer and consumer response.
Speaker #3: Crest's new Conquest series and Conquest SE expand and enhance our value offering in pontoons. For model year 2026, we are expanding the Belize family with the launch of our new Halo series, twin-engine configurations, and broader customization options, along with expanded dealer coverage.
Brad Nelson: For model year 2026, we are expanding the Belize family with the launch of our new Halo series, twin engine configurations, and broader customization options, along with expanded dealer coverage. With that, I'll turn it back to Scott to review the financials.
Speaker #3: With that, I'll turn it back to Scott to review the financials.
Speaker #2: Thanks, Brad. In Q4, net sales were $79.5 million, up $25 million, or 46% year-over-year, driven by a favorable mix, higher volumes, and lower dealer incentives.
Scott Kent: Thanks, Brad. In Q4, net sales were 79.5 million, up 25 million, or 46% year over year, driven by favorable mix, higher volumes, and lower dealer incentives. Gross margins improved 740 basis points to 23.2%. Adjusted net income rose to 6.6 million, or 40 cents per share, up from 4 cents per share last year. Adjusted EBITDA increased by $8 million to 9.5 million. Turning to our full year Fiscal 25 financial results, we concluded with net sales of 284.2 million, a decrease of 38 million, or 12% from the prior year. This was primarily due to the planned reduction in unit sales volume, partially offset by favorable mix and options. For the year, our gross margin was 20% compared to the prior year of 22.2%. These margins were primarily the result of lower cost absorption and price adjustments, partially offset by favorable mix and options.
Speaker #2: Gross margins improved 740 basis points to 23.2%. Adjusted net income rose to $6.6 million, or $0.40 per share, up from $0.04 per share last year.
Speaker #2: Adjusted EBITDA increased by $8 million to $9.5 million. Turning to our full-year fiscal 2025 financial results, we concluded with net sales of $284.2 million, a decrease of $38 million or 12% from the prior year.
Speaker #2: This was primarily due to the planned reduction in unit sales volume, partially offset by a favorable mix and options. For the year, our gross margin was 20% compared to the prior year of 22.2%.
Speaker #2: These margins were primarily a result of lower cost absorption and price adjustments, partially offset by a favorable mix and options. Operating expenses were $45.6 million for the year, an increase of $1.5 million compared to the prior year due to the return of variable compensation and commercial launch activities.
Scott Kent: Operating expenses were 45.6 million for the year, an increase of 1.5 million when compared to the prior year due to the return of variable compensation and commercial launch activities. We continue to tightly manage discretionary spend, and operating expenses remain well controlled. Turning to the bottom line, adjusted net income for the year was 15.1 million, or 92 cents per diluted share. This compares to adjusted net income of 28.9 million, or $1.69 per share in the prior year, calculated using an effective tax rate of 20% for both periods. We generated 24.4 million of adjusted EBITDA for the year compared to 40.2 million in the prior year. Adjusted EBITDA margin was 8.6% compared to 12.5% in Fiscal 24. As Brad stated, we generated $29 million of free cash flow during Fiscal 25.
Speaker #2: We continue to tightly manage discretionary spend, and operating expenses remain well controlled. Turning to the bottom line, adjusted net income for the year was $15.1 million, or $0.92 per diluted share.
Speaker #2: This compares to adjusted net income of $28.9 million, or $1.69 per share in the prior year, calculated using an effective tax rate of 20% for both periods.
Speaker #2: We generated $24.4 million of adjusted EBITDA for the year compared to $40.2 million in the prior year. The adjusted EBITDA margin was 8.6% compared to 12.5% in fiscal 2024.
Speaker #2: As Brad stated, we generated $29 million of free cash flow during fiscal 2025. Our ability to generate cash, even in a down market, allows us to continue to invest in innovation and other long-term growth initiatives.
Scott Kent: Our ability to generate cash, even in a down market, allows us to continue to invest in innovation and other long-term growth initiatives. This execution has provided us with a strong financial position as we continue to navigate through the current cycle. We ended the year with $79 million in cash and short-term investments, no debt, and ample liquidity. We repurchased over 530,000 shares, totaling 9.5 million in Fiscal 25, bringing cumulative repurchases to 3.1 million shares and 74 million since we started the share repurchase program, a 14% benefit to full-year adjusted EPS. Turning to the volatile trade and tariff environment, the impact of our Fiscal 25 results was marginal. In Fiscal 26, we anticipate offsetting most direct costs with temporary price surcharge and expect the profit impact to be negligible.
Speaker #2: This execution has provided us with a strong financial position as we continue to navigate through the current cycle. We ended the year with $79 million in cash and short-term investments, no debt, and ample liquidity.
Speaker #2: We repurchased over 530,000 shares, totaling $9.5 million in fiscal 2025, bringing cumulative repurchases to 3.1 million shares and $74 million since we started the share repurchase program.
Speaker #2: A 14% benefit to full-year adjusted EPS. Turning to the volatile trade and tariff environment, the impact of our fiscal 2025 results was marginal.
Speaker #2: In fiscal 2026, we anticipate offsetting most direct costs with a temporary price surcharge and expect the profit impact to be negligible. The broader tariff impact on volume and overall sentiment from the uncertain macro environment is more difficult to estimate.
Scott Kent: The broader tariff impact on volume and overall sentiment from the uncertain macro environment is more difficult to estimate. The potential impact is embedded in our retail projections for the year. Now turning to our expectations for Fiscal 26, as discussed earlier, our guidance reflects an assumption of retail unit sales being down between 5% and 10%. This cautious approach is indicative of macro and market uncertainties as we exit the summer selling season. Despite another year of projected retail decline, we expect net sales to increase over Fiscal 25 to between 295 and 310 million and adjusted EBITDA between 29 million and 34 million. We expect diluted earnings per share to be between $1.15 and $1.40. We expect capital expenditures to be approximately $9 million for the full year.
Speaker #2: The potential impact is embedded in our retail projections for the year. Now turning to our expectations for fiscal 2026, as discussed earlier, our guidance reflects an assumption of retail unit sales being down between 5% and 10%.
Speaker #2: This cautious approach is indicative of macro and market uncertainties as we exit the summer selling season. Despite another year of projected retail decline, we expect net sales to increase over fiscal 2025 to between $295 million and $310 million, and adjusted EBITDA to be between $29 million and $34 million.
Speaker #2: We expect diluted earnings per share to be between 1 dollar and 15 cents, and 1 dollar to 1 dollar and 40 cents. We expect capital expenditures to be approximately 9 million for the full year.
Speaker #2: Q1 net sales are expected to be near $69 million or $67 million, with adjusted EBITDA of $4 million and adjusted earnings per share of approximately $0.16.
Scott Kent: Q1 net sales are expected to be near $69 million or $67 million with adjusted EBITDA of $4 million and adjusted earnings per share of approximately $0.16. The Q1 guidance reflects a lower Q1 ASP as we transition to the next generation of our X Series product line, which will begin shipping in our second fiscal quarter. With that, I'll turn the call back to Brad for his closing remarks.
Speaker #2: The Q1 guidance reflects a lower Q1 ASP as we transition to the next generation of our X-Series product line, which will begin shipping in our second fiscal quarter.
Speaker #2: With that, I'll turn the call back to Brad for his closing remarks.
Speaker #3: Thank you, Scott. Our business executed well during fiscal 2025, as we advanced product innovation, improved dealer health, and maintained capital and operational discipline. Since 2021, we've returned more than $74 million of excess cash to our shareholders.
Brad Nelson: Thank you, Scott. Our business executed well during Fiscal 2025 as we advanced product innovation, improved dealer health, and maintained capital and operational discipline. Since 2021, we've returned more than $74 million of excess cash to our shareholders. Our strong balance sheet provides us with the financial flexibility to pursue our strategic growth initiatives. As we look ahead to Fiscal 2026, our plans are built for a range of demand scenarios, and our track record shows we can execute through various market conditions. Our focus remains on supporting our dealers and optimizing the business for the long term. Our flexible operating model and brand equity remain a competitive advantage, and we are poised to capitalize on the next market recovery.
Speaker #3: Our strong balance sheet provides us with the financial flexibility to pursue our strategic growth initiatives. As we look ahead to fiscal 2026, our plans are built for a range of demand scenarios, and our track record shows we can execute through various market conditions.
Speaker #3: Our focus remains on supporting our dealers and optimizing the business for the long term. Our flexible operating model and brand equity remain a competitive advantage, and we are poised to capitalize on the next market recovery.
Speaker #3: As we navigate this dynamic environment, we are well positioned to leverage our strong portfolio of brands and explore long-term growth opportunities while maintaining the flexibility to return capital to shareholders.
Brad Nelson: As we navigate this dynamic environment, we are well positioned to leverage our strong portfolio of brands and explore long-term growth opportunities while maintaining the flexibility to return capital to shareholders. Operator, you may now open the line for questions.
Speaker #3: Operator, you may now open the line for questions.
Speaker #1: Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again.
Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. And to withdraw your question, please press star one one again. And our first question will come from Joe Autobello with Raymond James. Your line is open.
Speaker #1: And our first question will come from Joe Altobello with Raymond James. Your line is open.
Speaker #4: Thank you. Hey guys, good morning. I guess the first couple of questions are on retail. Maybe you could walk us through what you saw in terms of cadence throughout the quarter, and what you're seeing here in Q1.
Joseph Altobello: Thank you. Hey, guys. Good morning. I guess first couple of questions on retail. Maybe kind of walk us through what you saw in terms of cadence throughout the quarter and what you're seeing here in Q1. Is it within that sort of 5% to 10% decline that you kind of laid out for the full year?
Speaker #4: Is it within that sort of 5% to 10% decline that you kind of laid out for the full year?
Speaker #2: So, our fourth quarter for us was a pretty good quarter on the MasterCraft side, a little weaker on the pontoon side. You know, obviously we don't index completely on the current short-term months and just starting the season, but we still believe that the 5 to 10 percent growth with how we're starting out the year is still possible.
Scott Kent: So our fourth quarter for us was a pretty good quarter on the MasterCraft side, a little weaker on the pontoon side. You know, obviously, we don't index completely on the current short-term months and just starting the season, but we still believe the 5% to 10% with how we're starting out the year is still possible.
Speaker #3: Also, Joe, I mean, despite those lower retail assumptions, we still believe we can see host cell growth this year due to proactive measures that we've taken in 2025, and we'll continue to take throughout 2026 as far as lowering pipeline and inventory levels.
Brad Nelson: Also, Joe, I mean, despite those lower retail assumptions, we still believe we can see wholesale growth this year due to proactive measures that we've taken in 25 and will continue to take throughout 26. As far as lowering inventory, the pipeline and inventory levels, that helps us on the wholesale side, really positioning for that next market upswing.
Speaker #3: That helps us on the wholesale side, really positioning for that next market upswing.
Speaker #4: Okay, and just kind of to follow up on that, you mentioned that you took out over 900 units out of the channel this year.
Joseph Altobello: Okay. And just kind of to follow up on that, you mentioned that you took out over 900 units out of the channel this year. Where do dealer turns stand today since you're implying, I think, that you might need to take out more units out of the channel this year? So where do dealer turns stand today, and how does that compare to historical norms?
Speaker #4: What do dealer turns stand at today? Since you're implying that you might need to take out more units out of the channel this year, where do dealer turns stand today and how does that compare to historical norms?
Speaker #2: We don't typically quote our turns, but obviously the dealer inventories are in a healthier place because we took so many boats out. You know, really the destocking next year would really be more because we expect retail to be down a little bit more, so we need to continue to make sure our channels stay healthy and bring those down.
Scott Kent: We don't typically quote our turns, but obviously, the dealer inventories are in a healthier place because we took so many boats out. You know, really, the destocking next year would really be more because we expect retail to be down a little bit more. So we need to continue to make sure our channels stay healthy and bring those down. You know, but at the end of the day, the amount of destocking will really depend on how retail shakes out.
Speaker #2: You know, and, but at the end of the day, the amount of destocking will really depend on how retail shakes out.
Speaker #3: We don't think it'll be as extreme in 2026 as in 2025. It's more fine-tuning at this point, certainly dependent on retail.
Brad Nelson: We don't think it'll be as extreme in 26 as 25. It's more fine-tuning at this point, certainly dependent on retail.
Speaker #4: Okay. Understood. Thank you.
Joseph Altobello: Okay. Understood. Thank you.
Speaker #1: And the next question will come from Craig Kennison with Bayard. Your line is open.
Operator: And the next question will come from Craig Kennison with Bayer. Your line is open.
Speaker #5: Yeah, thanks for taking my question as well. I just wanted to maybe dig into the consumer dynamic. This summer, you know, we had tariff headwinds, which clearly impacted consumer sentiment in your category, and then we've had some relief lately.
Craig Kennison: Yeah. Thanks for taking my question as well. I just wanted to maybe dig into the consumer dynamic this summer. You know, we had a tariff headwind, which clearly impacted consumer sentiment in your category, and then we've had some relief lately. I think there's some optimism around your consumer today, but I'm wondering how you see it given all these cross headwinds and tailwinds. You know.
Speaker #5: I think there's some optimism around your consumer today, but I'm wondering how you see it, given all these cross currents, headwinds, and tailwinds.
Speaker #3: You know, I, I morning, Craig. The way we look at that right now is, like everybody out there in the discretionary space, we're looking for something sustained.
Brad Nelson: Morning, Craig. The way we look at that right now is, like everybody out there in the discretionary space, we're looking for something sustained, and it's been stops and starts. At the consumer level, the market, as we see it, is leaning premium, and we expect that to continue. That helps us. We're in a good position there because of our brand strength and our premium offerings, as well as the premium nature of our dealer network. Some of the tariff overlay certainly has some impact and continued uncertainty. We expect that to continue. It's just been chugging along. We definitely would like to see more sustained retail activity moving forward.
Speaker #3: And it's been stops and starts. If the consumer level, the market, as we see it, is leaning premium. And we expect that to continue.
Speaker #3: That helps us. We're in a good position there because of our brand strength and our premium offerings, as well as the premium nature of our dealer network.
Speaker #3: Some of the tariff overlay certainly has some impact, and continued uncertainty is expected to continue. It's just been chugging along. We definitely would like to see more sustained retail activity.
Speaker #3: moving forward.
Speaker #5: Thanks. And maybe just thinking about the, the price surcharge that you mentioned and, and thinking about that in the broader context of affordability, I hear you that the premium consumer is definitely hanging in there better than that payment-sensitive buyer, but I, I, I suspect you're going to want that payment-sensitive buyer, to come back to really fuel your, your cyclical recovery and, and, and what are you doing, I guess, to get after that, affordability trend that has been elusive in marine?
Craig Kennison: Thanks. And maybe just thinking about the price surcharge that you mentioned and thinking about that in the broader context of affordability, I hear you that the premium consumer is definitely hanging in there better than that payment-sensitive buyer. But I suspect you're going to want that payment-sensitive buyer to come back to really fuel your cyclical recovery. And what are you doing, I guess, to get after that affordability trend that has been elusive in marine?
Speaker #4: Yeah, thank, thanks Craig.
Brad Nelson: Yeah. Thanks, Craig. You know, as a reminder, recall that our pricing in MasterCraft during model year 25 was flat to even down. We lowered prices on some of our more entry-level products, the NXT line, and even some of our XT midline product, which is helping. Certainly, the more entry-level products do require more of the mass market to be healthy at the consumer level, and in an elevated interest rate environment, that continues to unfold. We use discounting where needed. Certainly, lower interest rates could help spur things, and we'll see what happens there for finance buyers. And for 26, it's challenging to have two years in a row of lowering prices just due to tariff inflations, but we're controlling costs to give us flexibility there and then use programs and discounting on a spot basis where needed.
Speaker #3: You know, as a reminder, recall that our pricing in MasterCraft during model year '25 was flat to even down. We lowered prices on some of our more entry-level products, the NXT line, and even some of our XT mid-line products.
Speaker #3: Which is helping. Certainly, the more entry-level products do require more of the mass market to be healthy at the consumer level. In an elevated interest rate environment, that continues to unfold.
Speaker #3: We use discounting where needed. Certainly, lower interest rates could help spur things, and we'll see what happens there for finance buyers. For 2026, it's challenging to have two years in a row of lowering prices just due to tariffs.
Speaker #3: Inflation is a concern, but we're controlling costs to give us flexibility there. We'll also use programs for discounting on a spot basis where needed.
Speaker #5: And if I could sneak one more in, just on the dealer network, I wonder if you could give us an update on some of your wins and maybe the net gains that you've had from a dealer perspective.
Craig Kennison: And if I could sneak one more in, just on the dealer network, I wonder if you could give us an update on some of your wins and maybe the net gains that you've had from a dealer perspective.
Speaker #3: Yeah, we've been working on, and will continue to work on strengthening distribution. And we look at that in two areas. There's white space coverage that still needs more coverage out there.
Brad Nelson: Yeah. We've been working on and will continue to work on strengthening distribution, and we look at that in two areas. There's white space coverage that still needs more coverage out there. That's one angle. The second angle is just really increasing and fine-tuning density within existing geographies with existing dealers, which means adding rooftops and growing markets. There's always shifting demographics, traffic patterns, buying patterns. Even weather can shape this, weather trends. So we've seen some, you know, I'd highlight a couple of examples. We've made changes in the number one ski tow weight market in the United States, which is Dallas, Texas, and we've made some dealer changes there. Houston is another one that I'd like to highlight. And, you know, another example would be in southern Utah, in St. George, where we've got a great dealer, though, that added a rooftop there in a great demographic market.
Speaker #3: That's one angle. The second angle is just really increasing and fine-tuning density within existing geographies with existing dealers, which means adding rooftops and growing markets.
Speaker #3: There's always shifting demographics, traffic patterns, buying patterns, and even weather can shape this—weather trends. So, we've seen some, you know, I'd highlight a couple of examples.
Speaker #3: We've made changes in the number one ski tow wake market in the United States, which is Dallas, Texas. We've also made some dealer changes there.
Speaker #3: Houston is another one that I'd like to highlight. And, you know, another example would be in Southern Utah, in St. George, where we've got a great deal out there that added a rooftop in a great demographic market.
Speaker #3: Coeur d'Alene, Idaho, is another example. So there, there's always a handful of these that we're working on, and so far, we're seeing those benefit us.
Brad Nelson: Coeur d'Alene, Idaho is another example. So there's always a handful of these that we're working on, and so far, we're seeing those benefit us.
Speaker #5: Thanks, Brad.
Craig Kennison: Thanks, Brad.
Speaker #2: And.
Speaker #1: And our next question will come from Eric Wold with Texas Capital Securities. Your line is open.
Operator: And our next question will come from Eric Wold with Texas Capital Securities. Your line is open.
Speaker #6: Thank you. good morning, guys. a couple questions. I have two questions. I guess one, within the fiscal 26 guidance, given your comments around, you know, retail sales expectations and, continued, you know, destocking that, that may be needed, in the channel, is the assumption, for fiscal 26, revenue or net sales, guidance growth, assuming kind of continued uptick in ASPs for both the MasterCraft and, and pontoon segments kind of driving that, that, that growth, you know, with, with both kind of the launch of, you know, the, the new brands of both the segments.
Eric Wold: Thank you. Good morning, guys. A couple of questions, two questions, I guess. One, within the Fiscal 26 guidance, given your comments around your retail sales expectations and continued destocking that may be needed in the channel, is the assumption for Fiscal 26 revenue or net sales guidance growth, assuming kind of continued uptick in ASPs for both the MasterCraft and pontoon segments, kind of driving that growth, you know, with both kind of the launch of the new brands in both the segments? Is that kind of a part of that, that the driver behind that revenue growth is kind of a continued uptick in ASPs as part of that, given that you expect overall net, you know, retail sales and destocking to continue to move lower a little bit?
Speaker #6: Is that kind of a part of that, that, that, the, the driver behind that revenue growth is kind of a continued uptick in, in ASPs as part of that, given, that you expect overall net, you know, retail sales and, and, and destocking to continue to kind of move lower a little bit?
Speaker #2: Well, really units are probably the bigger driver as we, you know, as we manage the inventory as well this year, we're able to have a wholesale growth despite the retail growth.
Scott Kent: Well, really, units are probably the bigger driver. As we, you know, as we manage the inventories well this year, we're able to have a wholesale growth despite the retail growth. On the ASP front for the full year, you can sort of expect ASPs overall are going to be fairly flat. MasterCraft should be up a little bit, while pontoons will be a little flatter, and then we got a little bit of mix going on between the two segments. So you can kind of expect relatively flat for the full year. Now, keep in mind that, you know, this year we had a higher ASP in the second half than the first half, and that is going to happen again this year.
Speaker #2: On the, on the ASP front for the full year, you can sort of expect ASPs overall are going to be fairly flat. MasterCraft should be up a little bit, while pontoons will be in, in a little flatter, and then we got a little bit of mix going on between, between the two, the two segments.
Speaker #2: So, you can kind of expect relatively flat for the full year. Now, keep in mind that this year we had a higher ASP in the second half than the first half, and that is going to happen again this year.
Speaker #2: Those X-series launches, with them starting and shipping in Q2, our ASPs are going to be a little lower in the first half and a little higher in the second half.
Scott Kent: Those X Series launches with them starting shipping in Q2, our ASPs are going to be a little lower in the first half and a little higher in the second half. And so we're going to have kind of that, again, a theme of second half is going to be a little stronger than first half from an ASP's perspective.
Speaker #2: And so we're going to have, again, a theme of the second half being a little stronger than the first half.
Speaker #2: From an ASP's perspective,
Speaker #6: Got it. And for the year, ASPs are up.
Eric Wold: Got it.
Brad Nelson: And for the year, ASPs up across the board.
Speaker #3: across, across the board.
Speaker #6: Okay. And then the last question is going to go back to follow up on one of the prior questions kind of on that payment by the lowering buyer.
Eric Wold: Okay. And then the last question, kind of going back to follow up on one of the prior questions, kind of on that payment buyer, the lowering buyer. I noticed we'll get to a kind of a two-part question as we get to a period where you know hopefully rates do start to come down. Where do you think the inflection is for rates to kind of, you know, from what you've heard from your dealers, to kind of get that payment buyer more comfortable in terms of the cost of ownership, to kind of get them over the line to maybe want to buy again? And I know it's we're going to be getting into the point probably where rates start to tick lower as we get into boat show season.
Speaker #6: And those we'll get to a kind of a two-part question to get to a period where, you know, hopefully rates do start to come down.
Speaker #6: Where do you think the inflection is for rates to kind of, you know, from what you've heard from your dealers, to kind of get that payment by more comfortable, in terms of the cost of ownership, to kind of get them over the line to maybe want to buy again?
Speaker #6: And I know it's, we're going to be getting into the point probably where rates start to tick lower as we get into both show season.
Speaker #6: They'll probably start happening somewhat simultaneously. You know, you know, but maybe not enough of the rate coming down as both show seasons start. Do you think you kind of have to prod those buyers maybe with another season of promotional help, you know, to kind of, you know, maybe not lose another boat show season?
Eric Wold: They'll probably start happening somewhat simultaneously, you know, but maybe not enough of rate coming down as boat show season starts. Do you think you kind of have to kind of prod those buyers maybe with another season of of promotional help? You know, to kind of think maybe not lose another boat show season as rates start to tick lower to maybe get another season of discounting to kind of, you know, get those guys across the line maybe a little bit earlier than they may, you know, want to be?
Speaker #6: As rates start to tick lower, maybe we get another season of discounting. Kind of, you know, get those guys across the line, maybe a little bit earlier than they may, you know, want to be?
Speaker #2: Yeah, Eric,
Brad Nelson: Yeah, Eric, difficult to predict. You know, we do see pockets where it seems like consumers and dealers alike are getting used to a higher interest rate environment in general compared to, you know, almost free money for a long period of time prior. And you know, there's evidence of some potential downticks out there. That's where any of those things help. And obviously, there's impact here at the consumer level for purchases for a payment buyer, as well as dealer holding costs for floor planning. So we've seen pockets where it's less impactful, but overall, it does provide still somewhat of a drag on consumer sentiment. And we expect that uncertainty to continue, and we'll see what happens with rates, but certainly, any downward tick would be an improvement. Now, we have not built into our current guidance any interest rate downtick.
Speaker #3: Difficult to predict. You know, we do see pockets where it seems like consumers and dealers alike are getting used to a higher interest rate environment in general, compared to, you know, almost free money for a long period of time prior.
Speaker #3: And, you know, there's evidence of some potential downticks out there. That's for any of those things held. And, obviously, there's an impact here at the consumer level for purchases, for a payment buyer.
Speaker #3: As well as dealer holding costs for floor planning. So we've seen pockets where it's less impactful, but overall, it does provide somewhat of a drag.
Speaker #3: On consumer sentiment, we expect that uncertainty will continue. We’ll see what happens with rates, but certainly any downward tick would be an improvement.
Speaker #3: Now, we have not built into our current guidance any interest rate downtick. So, if that were to move favorable, that could potentially drive some upside for us.
Brad Nelson: So if that were to move favorable, that could potentially drive some upside for us.
Speaker #2: Perfect. Thanks, guys.
Eric Wold: Perfect. Thanks, guys.
Speaker #1: And the next question will come from Anna Glaskin with B. Rally Securities. Your line is open.
Operator: And the next question will come from Anna Glasgate with B Raleigh Securities. Your line is open.
Speaker #7: Hey, good morning, guys. Thanks for taking my question. I just have a follow-up on Eric's. You spoke to retail expectations being down 5% to 10% and then mentioned destocking, but it sounds like the guidance is assuming units are up.
Anna Glaessgen: Hey, good morning, guys. Thanks for taking my question. Just a follow-up on Eric's. You spoke to, you know, retail expectations to be down 5 to 10 and then spoke to destocking, but it sounds like the guidance is assuming units are up. So I just want to clarify how we're getting there. Thanks.
Speaker #7: So I just want to clarify how we're getting there. Thanks.
Speaker #3: That was a little hard to hear, Anna. What I heard was maybe a question on more color on destocking. Could you please restate?
Brad Nelson: That was a little hard to hear, Anna. What I heard was maybe a question on maybe more color on destocking. Could you please restate?
Speaker #7: Oh, yeah. Sorry. I was just asking on, given the expectation for retail decline in fiscal 2026, plus potential destocking in response to that.
Anna Glaessgen: Oh, yeah. Sorry. I was just asking on given the expectation for retail decline in Fiscal 26 plus potential destocking in response to that, you know, how does that get to units ending up up for the year?
Speaker #7: You know, how does that get to units? Ending up for the year.
Speaker #2: Yeah, I don't think we're going to talk about a range this year because it's really going to depend on where retail shakes out and what kind of destocking. As Brad mentioned, it's going to be fairly modest this year.
Scott Kent: Yeah, I don't think we're going to talk about a range this year because it's really going to depend on where retail shakes out on what kind of destocking. But as Brad mentioned, it's going to be fairly modest this year. So it's, you know, so it's not going to be as much of a major driver to us as it was last year.
Speaker #2: So it's not going to be as much of a major driver to us as it was last year.
Speaker #3: Yeah, in general, on inventory, broadly speaking, we're comfortable with inventory levels as well as the improvement in the aging profile of existing channel inventory.
Brad Nelson: Yeah, in general, on inventory, broadly speaking, we're comfortable with inventory levels as well as the improvement in the aging profile of existing channel inventory. And what we're talking about here in 26, as we sit here today, is we do, we would like to see an increase in turns with dealers. Why? Well, that's really driven by market uncertainty at the retail level. Now, when we start to see sustained retail spiking, then that's better. But it is more of a fine-tuning adjustment in the cycle or in the channel as far as inventory levels.
Speaker #3: You know, what we're talking about here in Q4 is, as we sit here today, we would like to see an increase in turns.
Speaker #3: With dealers, why? Well, that's really driven by market uncertainty at the retail level. Now, when we start to see sustained retail spiking, then that's better.
Speaker #3: But it is more of a fine-tuning adjustment in the cycle or in the channel as far as inventory levels.
Speaker #7: Got it. And then on the pacing of that destocking, it sounds like it would be consistent throughout the year in response to retail movements.
Anna Glaessgen: Got it. And then on the pacing of that destocking, it sounds like it would be consistent throughout the year in response to retail movement. It doesn't seem like it would be front-loaded in the first half or the first quarter, right? I mean, it's not in response to, you know, you feel pretty good about inventory as they sit today.
Speaker #7: It doesn't seem like it would be front-loaded in the first half or the first quarter, right? I mean, it's not in response to, you know, you feel pretty good about inventory as they sit today.
Speaker #2: Yeah, it will be more across the year as opposed to all happening in a single quarter. I mean, our Q1, we are still proceeding a little careful with shipments, just to make sure we don't put too much into the field. But we're not necessarily looking to start destocking; you know, we don't expect destocking will immediately start happening right out of Q1.
Scott Kent: Yeah, it'll be more across the year as opposed to all happening in a single quarter. I mean, our Q1, we are still being a little careful with shipments just to make sure we don't put too much into the field, but we're not necessarily looking to start, you know, we don't expect destocking will immediately start happening right out of Q1. So it's really going to be based on where retail heads for the full year.
Speaker #2: So, it's really going to be based on where retail heads for the full year.
Speaker #7: Great. Thanks, guys.
Anna Glaessgen: Great. Thanks, guys.
Speaker #1: And the next question comes from Noah Zetskin with KeyBank Capital Markets. Your line is open.
Operator: And the next question comes from Noah Zetskin with KeyBank Capital Markets. Your line is open.
Speaker #4: Hi, thanks for taking my questions. I guess first, I would love to get your thoughts on the health of the broader industry dealer base.
Joseph Altobello: Hi. Thanks for taking my questions. I guess first, I just would love to get your thoughts on kind of the health of the broader industry dealer base, as well as any insight into kind of broader industry inventory levels and how that dynamic impacts you. Thanks.
Speaker #4: As well as any insight into kind of broader industry inventory levels and how that dynamic impacts you. Thanks.
Speaker #2: So, obviously, pulling out 31% of the dealers' inventory this year really helped the dealers for sure and helped our channel. It's always better to have a little less inventory, especially in uncertain times, as Brad kind of mentioned there.
Scott Kent: So obviously, pulling out the 31% of the dealer's inventory this year really helped the dealers for sure and helped our channel. It's always better to have a little less inventory, especially in uncertain times, as Brad kind of mentioned there. That also means as we enter the year that our non-current inventories are lower than they were a year ago as well, and that also really helps with the dealer health side of things. That doesn't mean the dealers aren't continuing to be cautious, as they probably should in this environment, because we would, as Brad mentioned, love to see the dealers continuing to be able to have higher turns. I think it's good for them and it's good for us.
Speaker #2: That also means as we enter the year that our non-current inventories are lower than they were a year, but a year ago as well, and that also really helps with the dealer health side of things.
Speaker #2: That doesn't mean the dealers aren't continuing to be cautious, as they probably should in this environment. Because we would, as Brad mentioned, love to see the dealers continuing to be able to have higher turns.
Speaker #2: I think it's good for them, and it's good for us. But, you know, until we see something to give us a little bit more confidence in a sustained recovery, I expect our dealers are going to remain a little cautious out there.
Scott Kent: But, you know, until we see something to give us a little bit more confidence in a sustained recovery, I expect our dealers are going to remain a little cautious out there.
Speaker #3: We're not hearing a lot about canceled orders right now. Noah, we track dealer health as well very closely in partnership with floor plan providers.
Brad Nelson: We're not hearing a lot about canceled orders right now, Noah, and we track dealer health as well very closely in partnership with floor plan providers, very disciplined about that. And we don't see a giant risk right now as far as dealer failures. And then across the industry, we're seeing better health this year projected forward than the prior year on overall channel inventory. You know, the pontoon market is lagging behind the ski tow weight category with inventory health. There's still a couple of competitors out there that are working through challenges there that do have impact for us and really anyone in that space.
Speaker #3: Very, very disciplined about that. We don't see a giant risk right now as far as dealer failures. Across the industry, we're seeing better health this year, projected forward than the prior year.
Speaker #3: On, on, on overall channel inventory. You know, the pontoon market is lagging behind the ski tow wake category with inventory health. There are still a couple of competitors out there that are working through challenges there.
Speaker #3: That does have impact for us. And, and really anyone in that space.
Speaker #2: The other thing that will help dealer health is if we do start seeing some interest rate declines as well. It helps us on the cost side, but it also really helps the dealers, and it'll certainly add to dealer health if their interest rates can be a little lower going into the year as well.
Scott Kent: The other thing that will help dealer health is if we do start seeing some interest rate declines as well. It helps us on the cost side, but it also really helps the dealers, and it'll certainly add to dealer health if their interest rates can be a little lower going into the year as well.
Speaker #3: Very helpful. And maybe just, just one more, you know, obviously challenging environment, but just any thoughts, kind of around how you're thinking about M&A?
Joseph Altobello: Very helpful. And maybe just one more, you know, obviously, challenging environment, but just any thoughts kind of around how you're thinking about M&A? Thanks.
Speaker #3: Thanks.
Speaker #4: You You bet. Thanks, Noah.
Brad Nelson: You bet. Thanks, Noah. We're continuing our approach, which is very careful, very selective, and opportunistic from an inorganic growth perspective. We're very proud of our organic strategic growth initiatives that we continue to fully fund internally. And then our strong balance sheet that we've been disciplined with does give us flexibility there with M&A, but we will continue to be highly selective.
Speaker #3: We're continuing our approach, which is very careful, very selective, and opportunistic from an inorganic growth perspective. We're very proud of our organic strategic growth initiatives that we continue to fully fund internally.
Speaker #3: And then our strong balance sheet that we've been disciplined with does give us flexibility there with M&A, but we will continue to be highly selective.
Speaker #4: Great. Thank you.
Joseph Altobello: Great. Thank you.
Speaker #1: Thank you. I am showing no further questions at this time. I would like to thank you for participating, and this does conclude today's conference call.
Operator: Thank you. And I am showing no further questions at this time. And I would like to thank you for participating, and this does conclude today's conference call. You may now disconnect and have a great day.