MasterCraft Boat Holdings, Inc. (ticker: NASDAQ:MCFT) has reported its fiscal fourth-quarter and full-year results for 2024, surpassing expectations despite economic and industry challenges. The company has taken proactive steps to adjust production and reduce inventory, which has paid off in a difficult retail landscape.
While demand slowed during the summer, MasterCraft's divestiture of Aviara and the launch of the new Balise brand are strategic moves aimed at focusing on core brands and tapping into new market segments. The company's financial health remains robust with positive free cash flow and a strong balance sheet, even as it braces for a potential downturn in retail unit sales for fiscal 2025.
Key Takeaways
- MasterCraft exceeded expectations in a challenging economic environment by adjusting production and managing inventory levels.
- The divestiture of Aviara allows a focus on the MasterCraft, Crest, and new Balise brands.
- Fiscal 2024 saw a decline in net sales, but the company maintained a strong balance sheet with positive free cash flow.
- For fiscal 2025, retail unit sales are expected to drop by 5% to 15%, with net sales, adjusted EBITDA, and adjusted earnings per share provided in guidance.
- Net income for fiscal 2024 was $20.9 million, with adjusted EBITDA at $32.9 million.
Company Outlook
- Retail unit sales forecasted to decrease by 5% to 15% in fiscal 2025.
- Consolidated net sales expected to be between $265 million and $300 million for fiscal 2025.
- Adjusted EBITDA projected to range from $15 million to $26 million.
- Adjusted earnings per share anticipated to be between $0.36 and $0.87.
- Capital expenditures estimated at approximately $12 million for the year.
Bearish Highlights
- Demand from retail customers slowed during the summer selling season.
- Dealers exhibited caution, contributing to a destocking trend.
- Net sales declined in fiscal 2024 compared to the previous year.
- The marine industry faces economic and industry headwinds.
Bullish Highlights
- The launch of the Balise brand has been positively received by the market.
- Balise is expected to be profitable in its first year of operation.
- The company has a strong balance sheet with over $86 million in cash and short-term investments and no net debt.
- Continued investment in key growth initiatives and capital return to shareholders.
Misses
- Adjusted EBITDA margin decreased to 9% in fiscal 2024 from 19.9% in the prior year.
- Significant destocking occurred in fiscal '24 and is expected to continue in fiscal '25, especially in the Crest segment.
Q&A Highlights
- The company discussed its strategic decision to divest Aviara and focus on profitable growth through its core and new brands.
- Management expressed confidence in navigating potential market scenarios and adjusting to demand changes.
- The expectation for the marine industry to rebound from the recession was addressed.
MasterCraft Boat Holdings has demonstrated resilience in the face of a tough economic climate, managing to surpass financial expectations. The company's strategic decisions, such as the divestiture of Aviara and the introduction of the Balise brand, indicate a commitment to refining its brand portfolio and capitalizing on market opportunities. With a cautious yet optimistic outlook for fiscal 2025, MasterCraft is positioning itself to weather industry headwinds while continuing to invest in growth and shareholder returns.
InvestingPro Insights
MasterCraft Boat Holdings, Inc. (MCFT) has shown a commendable performance amidst market pressures, as evidenced by their recent fiscal reports. Delving into the InvestingPro data, several metrics stand out that align with the company's current narrative and future outlook.
InvestingPro Data highlights a P/E ratio of 8.5, which is lower than the adjusted P/E ratio for the last twelve months as of Q3 2024 at 7.9. This suggests that the company is trading at a relatively low earnings multiple, which could be appealing to value investors considering the company's robust balance sheet and strategic initiatives.
The company's market capitalization stands at $324.17 million, reflecting its size and market value within the industry. Despite the challenges faced, MasterCraft's cash position, as indicated by an InvestingPro Tip, holds more cash than debt, providing them with financial flexibility. This is a critical factor considering the anticipated sales decline and the expected drop in net income for the current year.
MasterCraft's gross profit margin for the last twelve months as of Q3 2024 is reported at 21.85%, which, while healthy, may need to be watched closely given the revenue decline of -32.73% over the same period. This contraction in revenue growth underscores the importance of the company's strategic focus on its core brands and market segments.
InvestingPro Tips further reveal that management has been aggressively buying back shares, a sign of confidence in the company's valuation and future prospects. Additionally, it's worth noting that while the stock price has experienced volatility, the company's liquid assets exceed short-term obligations, underscoring the company's financial stability.
For readers interested in a deeper analysis of MasterCraft Boat Holdings, Inc., InvestingPro offers additional insights. There are 11 more InvestingPro Tips available, including predictions on profitability and dividend policies, which can be found on the dedicated InvestingPro page for MasterCraft (https://www.investing.com/pro/MCFT).
By incorporating these InvestingPro Insights into the overall assessment of MasterCraft, investors can gain a more nuanced understanding of the company's financial health and market position as they navigate the economic landscape ahead.
Full transcript - Mastercraft Boat Holdings Inc (MCFT) Q4 2024:
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the MasterCraft Boat Holdings, Inc. Fiscal Fourth Quarter and Full Year 2024 Earnings Conference Call. 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, sir.
Tim Oxley: Thank you, operator, and welcome, everyone. Thank you for joining us today as we discuss MasterCraft fiscal fourth quarter and full year performance for 2024. 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 fourth quarter and full year. I will then discuss our financial performance. Then Brad will provide some closing remarks before we open the call for questions. Before we begin, we'd like to remind participants that the information contained in this call is current only as of today, August 29, 2024. 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 the safe harbor disclaimer in today’s press release. Additionally, on this conference call, we will discuss non-GAAP measures that include or exclude items not indicative of our ongoing operations. To 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's 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: Thank you, Tim, and good morning, everyone. MasterCraft delivered results ahead of our latest expectations, while continuing to navigate a challenging economic environment and a highly competitive retail landscape. Entering fiscal 2024, our focus was to proactively navigate market headwinds and execute our strategic and operational priorities to generate value for our stakeholders. Our efforts were centered-around destocking field inventory levels, advancing consumer and dealer-centric initiatives and returning capital to shareholders, while optimizing profitability and cash flow. Throughout the year, market conditions put downward pressure on retail and wholesale demand. In anticipation of this softness, we took early action to adjust production plans. Our proactive approach to wholesale proved to be prudent as we work to alleviate pressures our dealers are facing. In the summer selling season, we experienced a general slowdown in demand from retail customers across our brands, consistent with the majority of the marine industry. This, combined with continued economic uncertainty, elevated interest rates and lingering competitor dealer disruptions has driven up inventory carrying costs for dealers, contributing to caution throughout the dealer network. Field inventories have improved by approximately 20% from fiscal 2023, which was near the low end of our targeted range. We're pleased with our progress to date but field inventories remain higher than optimal based on recent retail trends. We continue to incentivize our dealers to sell through inventory in a judicious manner. Although these conditions have short-term implications for wholesale shipments, our inventory rebalancing efforts are positive for long-term dealer health. Pipeline management remains a primary focus as we move forward, positioning us well for the market recovery ahead. Before we turn to fiscal 2025, I would like to discuss the announcement we issued earlier this month relating to the divestiture of the Aviara business. After a thorough review of our strategic plans, we determined that exiting this business would best position us to extend our leadership position in our MasterCraft, Crest and Balise brands. This focus also allows us to optimize our cost structure and direct resources towards other long-term initiatives to drive sustainable and profitable long-term growth. As part of the asset exchange agreement, we are transferring the rights of the Aviara brand to Cruisers yachts, a subsidiary of MarineMax, the brand's primary retail partner. We anticipate the transaction to close during our fiscal first quarter. We are winding down operations at our Merritt Island, Florida facility and have begun marketing the site for sale. In Q1 of fiscal 2025, we will begin reporting the financial results of the Aviara segment as discontinued operations. The hard work and dedication of our strong Aviara team quickly enabled this product line to become a blue-chip brand in boating. Decisions that impact our employees are always difficult, but we are fully committed to supporting them through this transition. We appreciate the contributions of all who have been involved with the operation. As we turn our focus to next year, we are encouraged by the market response to the launch of our new premium pontoon brand, Balise. Through cross-collaborative efforts of our experienced MasterCraft and Crest teams, Balise will allow us to reach an affluent and resilient customer base in the pontoon segment. These products will be manufactured at Crest's existing facility in Michigan, requiring minimal capital investment and leveraging an experienced team. The Balise lineup is being sold through a diverse and largely incremental dealer network. This brand brings accretive margins for our pontoon segment and will be profitable in year 1. To date, the team has already onboarded 11 dealers -- new dealers with locations in 26 expensive markets. We will provide more details on this brand later in the call. As we enter fiscal 2025, we will continue to prioritize a healthy distribution network across all brands. Our production schedule aligns with current dealer sentiment and credit availability. And consequently, we plan to ship a higher number of boats in the second half of fiscal 2025 compared to the first half. The industry will benefit as other OEMs also take the necessary measures to rebalance dealer inventories in this challenging environment. We appreciate the support of our dealers and we will work closely with them to capitalize on the opportunities ahead. Due to the economic and industry headwinds, combined with the cautious dealer ordering patterns and elevated carrying costs, we expect the destocking trend to continue in fiscal 2025. To align with our production plans, we have taken measures to right-sized our cost structure, while maintaining a healthy balance of continued investment in our key long-term growth initiatives. Given our refined portfolio of strong brands and proactive cost control, we expect to generate positive free cash flow in fiscal 2025. This is particularly notable while being at or near the bottom of the cycle. Supported by our strong balance sheet and free cash flow generation, we have the flexibility to continue to fund long-term growth initiatives. This includes focused innovation and product and brand development. Given near-term uncertainty in the marine environment, we will take a selective and disciplined approach to M&A. In addition to maintaining a resilient balance sheet and investing for the future, we will also maintain the flexibility to continue funding our share repurchase program. Turning to our full year fiscal 2024 financial results, we concluded with net sales of $367 million declining from last year's record of $662 million, primarily due to lower volume in a challenging market environment. Despite the net sales decline and the dilutive impact of Aviara, we generated $33 million of adjusted EBITDA. Excluding Aviara, we generated $40 million of adjusted EBITDA and positive free cash flow during the year. Our ability to proactively adjust to market conditions allows us to optimize profitability through planning and cost control efforts, while also maintaining investments in our long-term growth initiatives. This execution provides us with a strong financial position as we continue to navigate through the current cycle. Let me now briefly review some of the latest developments across our brands. MasterCraft's model year 2025 lineup, which includes a range of new features and enhancements has been well received by our dealers. The X -- NXT Series received upgraded dashes and new software and the XT Series now has a stern thruster upgrade option, allowing maximum maneuverability. The new Ilmor 5.3-liter GDI high output engine is now standard on NXT and XT, coupled with underwater exhaust delivering powerful, reliable, more fuel-efficient and quieter experience. Our diverse product lineup delivers top performance, superior comfort unmatched quality and reliability and industry-leading technology. With a renewed focus on innovation, our team is preparing for an exciting product launch later in the year that will enhance our premium lineup. Turning to our pontoon segment, which includes both the Crest and Balise brands. Crest's model year 2025 lineup includes 2 redesigned models, an all-new high-performance Triton and a streamlined product portfolio. The redesigned classic model features a refreshed helm, all new interior and superior styling. The lineup also includes a redesigned Caribbean model featuring a new luxury interior, new color options and an updated exterior. Our Triton have received upgrades, including an extended rear deck that comes standard improved handling and performance and an all-around better building experience. For our luxury pontoon brand, Balise, advance shipping our innovative Horizon and Helix models to dealers in targeted markets across the country in our fiscal fourth quarter. Both models offer differentiated style and detail as well as high-end standard features that prioritize on-water entertainment and relaxation. The Balise models offer the industry's most refined finishes, high-tech features, and luxurious comfort. Although standard boats come well equipped, upgradable options are available to take each model to the next level. Both models offer the ability to upgrade to the industry's first in-water power cooler, tube lighting and underwater lighting. The ultra-premium Helix model, both an innovative gas assist tower, an integrated premium [belly] and dual-raised helms. The market response from dealers and consumers for both innovative pontoon brands have been encouraging, and we're confident in the future of this segment. I'll now turn the call over to Tim, who will provide additional commentary on the year and a detailed discussion of our financial results. Tim?
Tim Oxley: Thanks, Brad. Focusing on the top line. Net sales for the fiscal year were $366.6 million, a decrease of $295.5 million or 45% from the prior year. This decrease was primarily due to lower unit sales volume and an increase in dealer incentives, partially offset by higher prices. For the year, our gross margin was 18.3% compared to the prior year of 25.6%. The lower margins were the result of lower cost absorption from the planned decrease in unit volume and higher dealer incentives, partially offset by higher prices. Operating expenses were $59.5 million for the year, an increase of $6.7 million when compared to the prior year. This increase was predominantly due to a $9.8 million noncash impairment related to the Aviara business was partially offset by lower general and administrative expenses. Excluding the noncash impairment, operating expenses decreased during the year as we prudently manage cost. Turning to the bottom line. Adjusted net income for the year was $20.9 million or $1.22 per diluted share, calculated using an estimated annual effective tax rate of 20%. This compares to adjusted EBITDA, adjusted net income of $95 million or $5.35 for the prior year, calculated using the tax rate of 23%. Adjusted EBITDA was $32.9 million for the year compared to $131.5 million for the prior year. Adjusted EBITDA margin was 9% compared to 19.9% in the prior year. Our balance sheet positions us well as we ended the year with more than $86 million of cash and short-term investments. We have no net debt as our cash and short-term investments exceeded our debt by nearly $37 million. We maintain ample liquidity and financial strength to prioritize funding key growth initiatives and returning capital to shareholders. During the year, we spent approximately $16.3 million to repurchase more than 750,000 shares of our common stock. Since initiating our share repurchase program in June of 2021, we allocated nearly $65 million to repurchase approximately 2.6 million shares. These cumulative repurchases provided a 13% benefit to our full year adjusted net income per share. At the end of fiscal 2024, we had more than $35 million remaining on our $50 million program authorized in July 2023. Now turning to our expectations for fiscal 2025 and which consist of continuing operations only, we have developed plans for a wide range of potential market scenarios. Our guidance reflects an assumption of retail unit sales being down between 5% and 15%. This cautious approach is indicative of market uncertainties as we exit the summer selling season. Our guidance also considers that our dealers are competing with those things sold at liquidation prices due to certain competitive dealer disruptions. For fiscal year 2025, we expect consolidated net sales to be between $265 million and $300 million, with adjusted EBITDA between $15 million and $26 million and adjusted earnings per share between $0.36 and $0.87 per share. We expect capital expenditures to be approximately $12 million for the year. It is typical for us to have more wholesale shipments in the second half of our fiscal year compared to the first half. This dichotomy will be more pronounced this year as we prioritize dealer health coming out of the summer selling season. For the first quarter of fiscal 2025, consolidated net sales is expected to be approximately $61 million with adjusted EBITDA of approximately $2 million and adjusted earnings per share of approximately $0.04. I'll now turn the call back to Brad for his closing remarks.
Brad Nelson: Thanks, Tim. Despite the uncertain macroeconomic environment and the industry headwinds faced during the fourth quarter and fiscal year 2024, we executed well against our strategic priorities and reduce dealer inventories. We continue to exercise a disciplined approach to capital allocation. For the past 3 years, we have returned nearly $65 million of excess cash to our shareholders through our share repurchase program. Our strong balance sheet provides us with the financial flexibility to pursue our strategic growth initiatives. The launch of the Balise brand and product enhancements at MasterCraft and Crest are examples of our forward commitment to innovation. As we look forward to fiscal 2025, we have developed business plans for a range of potential retail demand scenarios. Our highly variable business model allows us to proactively adjust to changes in demand. With a strong emphasis on pipeline management, we are positioning the business well for the market upswing that lies ahead. As we navigate this dynamic environment, we are well positioned to leverage our strong portfolio of brands and drive long-term growth opportunities while maintaining the flexibility to return capital to shareholders. Operator, you may now open the line for questions.
Operator: [Operator Instructions] Our first question comes from Joseph Altobello with Raymond James.
Martin Mitela: This is Martin on for Joe. I was looking at the guide and trying to understand a little bit better. We're looking at the lower EBITDA margin. Is that largely coming from the volume deleverage? Or do you anticipate that the promotional environment is going to get a little bit worse?
Tim Oxley: It's primarily from a lower volume deleveraging from the overhead absorption. There is additional G&A expenses as we fund bonuses at 100%. So we have both those headwinds.
Martin Mitela: Got it. And just to better understand sort of the guide, would you mind providing the adjusted EBITDA and EPS -- ex Aviara for the year? I believe in your prepared comments, you said $40 million?
Tim Oxley: For fiscal 2024, that is correct, $40 million for -- without the effect of Aviara.
Martin Mitela: And would you have the adjusted EPS?
Tim Oxley: I don't have that in front of me, sorry.
Operator: [Operator Instructions] Our next question comes from Drew Crum with Stifel.
Drew Crum: Just on your guidance, again, you laid out a range of scenarios in terms of retail demand. What are you assuming or how are you assuming that trend as the year progresses? And then I have a follow-up.
Tim Oxley: We're off to a decent start, a little bit ahead of our expectations. But as Tommy's inventory continues to be reaching the hands of retail customers. We expect that to be a significant headwind for our dealers.
Drew Crum: Got it. So Tim, would you expect things to get better as the year progresses? Or it's just too early to tell?
Tim Oxley: I think it's too early to tell. We're off to a good start, but it is really early.
Drew Crum: Okay. Okay. Fair enough. And then maybe more big picture. Go ahead, Brad.
Brad Nelson: Drew, just to add to that, of course, we're going to continue to work with our dealers from an incentive perspective in balance with their participation, of course, to help that through the selling season, primarily through the winter. We all remain hopeful that the retail environment is going to approve. And at some point, this protracted recession in marine is going to rebound, and we're positioned well for that.
Drew Crum: Got it. Okay. And then maybe more big picture, but it's [indiscernible] and now Aviara, the company has moved on from 2 brands that seem promising, at least initially, but this didn't work out. So based on those experiences, is adding new brands, whether it's organically or through acquisitions, still an important part of the strategy? And if so, is the company refining its approach to portfolio management?
Tim Oxley: Yes. Drew, on the decision with Aviara relative to other forward-looking ventures, obviously, that's a careful decision we made after a thorough strategic review. As you know, that business was challenged with volume to truly absorb cost in a start-up facility that was dedicated to that unit. There's -- we [summit] losses there for quite some time. It never was able to be profitable pretty much due primarily due to volume issues. Let me just remind you, too, that deal is not closed yet. We do expect it to close in our fiscal Q1 here. But going forward, there are some big differences in a brand launch like Balise, which is underway compared to Aviara. In fact, in some ways, it's opposite. I would just remind you that the Balise is being manufactured in our existing Crest facility where we currently produce pontoon side by side with the same experienced team. There's open capacity in that factory. So it helps us actually with utilization on day one and producing those new units. A couple of other things I would highlight the Balise product line is largely going to an incremental new dealer network in exciting markets with strong dealers, whereas Aviara, we had a strong dealer with the retailer but it was largely exclusive to that retailer. So it's much more diverse channel strategy, and we're really excited about that. So from a margin perspective, it's accretive to the segment as well, we expect it to be profitable in year one, very different scenario and circumstances from Aviara.
Operator: Our next question comes from Kevin Condon with Baird.
Kevin Condon: I think on the call, you mentioned that you finished fiscal '24 with inventory 20% lower year-over-year. Is that true? And I guess, when you think about your guidance and the retail outlook, is there a similar target that you might have to finish fiscal 2025?
Tim Oxley: Yes. And speaking of the raw numbers, we were planning on the year being down between 600 and 1,000 units in fiscal '24, and it was at the lower end of that range. So we did have significant destocking in '24, but the market has been soft. So we anticipate also destocking in '25, probably in that same kind of range between 600 and 1,000 boats.
Brad Nelson: And that is between MasterCraft and Crest.
Tim Oxley: Correct. And probably a little more weighted towards the Crest as we look at those numbers.
Kevin Condon: Is there any way to think through the Balise impact of you're ramping up there? Does that -- I mean I guess that's all in the pontoon segment now. But would you still expect that overall segment to destock?
Tim Oxley: Yes. Keep in mind the Balise units are significantly higher AUSP and so the destocking will be on Crest as opposed to Balise.
Operator: Thank you. As there are no further questions, this does conclude the question-and-answer session. You may now disconnect. Everyone, have a great day.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.