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MasterCraft Boat Holdings, Inc. Reports Record Results for Fiscal 2023 Second Quarter

VONORE, Tenn., Feb. 08, 2023 (GLOBE NEWSWIRE) -- MasterCraft Boat Holdings, Inc. (NASDAQ: MCFT) today announced financial results for its fiscal 2023 second quarter ended January 1, 2023.

Highlights:

Unless otherwise indicated, the highlights and commentary provided herein relate to our continuing operations, which exclude the NauticStar segment. Results for NauticStar are reported as discontinued operations.

  • Net sales, diluted adjusted earnings per share, and Adjusted EBITDA were all the highest for any second quarter in the Company's history
  • Ninth consecutive year-over-year record-setting quarter
  • Record net sales for the second quarter increased to $159.2 million, up 10.2% from the prior-year period
  • Record net income from continuing operations was $20.0 million, or $1.12 per diluted share, up 11.9% and 19.1%, respectively, from the prior-year period
  • Record Diluted Adjusted Net Income per share, a non-GAAP measure, was $1.20, up 18.8% from the prior-year period
  • Record Adjusted EBITDA, a non-GAAP measure, increased to $29.8 million, up 9.8% from the prior-year period
  • Share repurchases of $4.8 million during the quarter
  • Record operating cash flow, driven by record earnings and diligent working capital management

Fred Brightbill, Chief Executive Officer and Chairman, commented, “Our business has performed extremely well through the first half of fiscal 2023, delivering record financial results which have exceeded expectations. Our diligent approach to business planning and our best-in-class operating model have allowed us to operate efficiently and have provided us with the confidence and agility to respond to a range of potential retail demand scenarios. Our robust portfolio of innovative products, healthy dealer inventory levels, and our flexible production capabilities position us well to capitalize on the boat show and summer selling seasons.”

Brightbill continued, “Net sales, diluted adjusted earnings per share, and Adjusted EBITDA were all the highest for any second quarter in the Company’s history, and it is our ninth consecutive year-over-year record-setting quarter. Strong operating results and diligent working capital management also allowed us to generate the most cash flow from operations and free cash flow in the Company’s history. This exceptional operational and financial performance was enabled by our strategic focus on the consumer, and through investments in people and operations.”

Second Quarter Results

Unless otherwise indicated, the financial results provided herein relate to our continuing operations, which excludes the NauticStar segment. Results for NauticStar are reported as discontinued operations.

For the second quarter of fiscal 2023, MasterCraft Boat Holdings, Inc. reported consolidated net sales of $159.2 million, up $14.8 million from the second quarter of fiscal 2022. The net sales increase reflects higher prices, partially offset by decreased sales volume and increased dealer incentives. Dealer incentives include higher floor plan financing costs and other incentives as dealer inventories recover.

Gross profit increased $1.9 million and gross profit margin decreased 120 basis points to 24.0 percent in the second quarter of fiscal 2023 from 25.2 percent in the second quarter of fiscal 2022. The decreased margin was mainly due to higher costs from inflationary pressures, changes in model mix, higher dealer incentives, and increased warranty costs, partially offset by higher prices and improved production efficiencies.

Operating expenses decreased $1.0 million for the second quarter of fiscal 2023, compared to the prior-year period primarily as a result of decreased variable compensation costs.

Net income from continuing operations was $20.0 million for the second quarter of fiscal 2023, compared to $17.9 million in the prior-year period. Diluted net income from continuing operations per share was $1.12, compared to $0.94 for the second quarter of fiscal 2022.

Adjusted Net Income increased to $21.3 million for the second quarter of fiscal 2023, or $1.20 per diluted share, compared to $19.2 million, or $1.01 per diluted share, in the prior-year period.

Adjusted EBITDA was $29.8 million for the second quarter of fiscal 2023, compared to $27.2 million in the prior-year period. Adjusted EBITDA margin was 18.7 percent for the second quarter, down from 18.8 percent for the prior-year period.

See “Non-GAAP Measures” below for a reconciliation of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Net Income per share to the most directly comparable financial measures presented in accordance with GAAP.

Outlook

Concluded Brightbill, “Looking forward, we are raising our guidance for the full year based on our strong performance and incremental retail demand visibility. We will continue to monitor the strength of retail demand and adjust our production plans as appropriate to maintain healthy dealer inventories. Our guidance continues to reflect the potential for a range of retail demand scenarios as we approach the all-important summer selling season.”

The Company’s outlook is as follows:

  • For full year fiscal 2023, consolidated net sales is now expected to be between $620 million and $640 million, with Adjusted EBITDA between $111 million and $118 million, and Adjusted Earnings per share of between $4.40 and $4.66. We continue to expect capital expenditures to be approximately $30 million for the full year.
  • For the third quarter of fiscal 2023, consolidated net sales is expected to be approximately $158 million, with Adjusted EBITDA of approximately $26 million, and Adjusted Earnings per share of approximately $1.04.

Conference Call and Webcast Information

MasterCraft Boat Holdings, Inc. will host a live conference call and webcast to discuss fiscal second quarter 2023 results today, February 8, 2023, at 8:30 a.m. EDT. Participants may access the conference call live via webcast on the investor section of the Company’s website, Investors.MasterCraft.com, by clicking on the webcast icon. To participate via telephone, please register in advance at this link. Upon registration, all telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number along with a unique passcode and registrant ID that can be used to access the call. A replay of the conference call and webcast will be archived on the Company's website.

About MasterCraft Boat Holdings, Inc.

Headquartered in Vonore, Tenn., MasterCraft Boat Holdings, Inc. (NASDAQ: MCFT) is a leading innovator, designer, manufacturer and marketer of recreational powerboats through its three brands, MasterCraft, Crest, and Aviara. Through these three brands, MasterCraft Boat Holdings has leading market share positions in two of the fastest growing segments of the powerboat industry – performance sport boats and pontoon boats – while entering the large, growing luxury day boat segment. For more information about MasterCraft Boat Holdings, and its three brands, visit: Investors.MasterCraft.com, www.MasterCraft.com, www.CrestPontoons.com, and www.AviaraBoats.com.

Forward-Looking Statements

This press release includes forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Forward-looking statements can often be identified by such words and phrases as “believes,” “anticipates,” “expects,” “intends,” “estimates,” “may,” “will,” “should,” “continue” and similar expressions, comparable terminology or the negative thereof, and include statements in this press release concerning the resilience of our business model; and our intention to drive value and accelerate growth.

Forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including, but not limited to: changes in interest rates, the potential effects of supply chain disruptions and production inefficiencies, general economic conditions, demand for our products, inflation, changes in consumer preferences, competition within our industry, our reliance on our network of independent dealers, our ability to manage our manufacturing levels and our fixed cost base, the successful introduction of our new products, and geopolitical conflicts. These and other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, filed with the Securities and Exchange Commission (the “SEC”) on September 9, 2022, and our Quarterly Report on Form 10-Q for the fiscal quarter ended January 1, 2023, filed with the SEC on February 8, 2023, could cause actual results to differ materially from those indicated by the forward-looking statements. The discussion of these risks is specifically incorporated by reference into this press release.

Any such forward-looking statements represent management's estimates as of the date of this press release. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release. We undertake no obligation (and we expressly disclaim any obligation) to update or supplement any forward-looking statements that may become untrue or cause our views to change, whether because of new information, future events, changes in assumptions or otherwise. Comparison of results for current and prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

Use of Non-GAAP Financial Measures

To supplement the Company’s consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP financial measures used in this release to the most comparable GAAP measures for the respective periods can be found in tables immediately following the consolidated statements of operations. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for the Company’s financial results prepared in accordance with GAAP.

Results of Operations for the Three and Six Months Ended January 1, 2023

MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

  Three Months Ended  Six Months Ended 
  January 1,  January 2,  January 1,  January 2, 
  2023  2022  2023  2022 
          
Net sales $159,188  $144,400  $328,704  $275,050 
Cost of sales  120,961   108,039   244,504   208,107 
Gross profit  38,227   36,361   84,200   66,943 
Operating expenses:            
Selling and marketing  3,042   3,056   6,821   6,949 
General and administrative  8,235   9,197   17,718   17,917 
Amortization of other intangible assets  489   489   978   978 
Goodwill impairment           1,100 
Total operating expenses  11,766   12,742   25,517   26,944 
Operating income  26,461   23,619   58,683   39,999 
Other income (expense):            
Interest expense  (666)  (357)  (1,228)  (739)
Interest income  621      772    
Income before income tax expense  26,416   23,262   58,227   39,260 
Income tax expense  6,433   5,403   13,609   9,169 
Net income from continuing operations  19,983   17,859   44,618   30,091 
Loss from discontinued operations, net of tax  (300)  (2,457)  (20,867)  (4,303)
Net income $19,683  $15,402  $23,751  $25,788 
             
Net income (loss) per share            
Basic            
Continuing operations $1.13  $0.95  $2.51  $1.60 
Discontinued operations  (0.02)  (0.13)  (1.18)  (0.23)
Net income $1.11  $0.82  $1.33  $1.37 
             
Diluted            
Continuing operations $1.12  $0.94  $2.49  $1.59 
Discontinued operations  (0.01)  (0.13)  (1.16)  (0.23)
Net income $1.11  $0.81  $1.33  $1.36 
             
Weighted average shares used for computation of:            
Basic earnings per share  17,669,645   18,722,386   17,807,853   18,786,343 
Diluted earnings per share  17,774,329   18,899,136   17,903,027   18,951,627 
                 

MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

  January 1,  June 30, 
  2023  2022 
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $29,061  $34,203 
Held-to-maturity securities  59,744    
Accounts receivable, net of allowances of $36 and $214, respectively  6,745   22,472 
Inventories, net  50,298   58,595 
Prepaid expenses and other current assets  5,754   7,232 
Current assets associated with discontinued operations     23,608 
Total current assets  151,602   146,110 
Property, plant and equipment, net  63,973   55,823 
Goodwill  28,493   28,493 
Other intangible assets, net  36,440   37,418 
Deferred income taxes  16,891   21,525 
Deferred debt issuance costs, net  355   406 
Other long-term assets  2,003   1,290 
Non-current assets associated with discontinued operations     5,987 
Total assets $299,757  $297,052 
LIABILITIES AND STOCKHOLDERS' EQUITY      
CURRENT LIABILITIES:      
Accounts payable $13,637  $23,375 
Income tax payable  2,389   4,600 
Accrued expenses and other current liabilities  60,983   54,437 
Current portion of long-term debt, net of unamortized debt issuance costs  3,627   2,873 
Current liabilities associated with discontinued operations     7,887 
Total current liabilities  80,636   93,172 
Long-term debt, net of unamortized debt issuance costs  51,486   53,676 
Unrecognized tax positions  5,988   6,358 
Operating lease liabilities  1,825   198 
Total liabilities  139,935   153,404 
COMMITMENTS AND CONTINGENCIES      
STOCKHOLDERS' EQUITY:      
Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 17,776,299 shares at January 1, 2023 and 18,061,437 shares at June 30, 2022  178   181 
Additional paid-in capital  89,010   96,584 
Retained earnings  70,634   46,883 
Total stockholders' equity  159,822   143,648 
Total liabilities and stockholders' equity $299,757  $297,052 
         

Supplemental Operating Data

The following table presents certain supplemental operating data for the periods indicated:

  Three Months Ended Six Months Ended
  January 1,  January 2,     January 1,  January 2,    
  2023  2022  Change 2023  2022  Change
  (Dollars in thousands)
   
   
Unit sales volume:                  
MasterCraft  776   886   (12.4)%  1,557   1,669   (6.7)%
Crest  776   690   12.5%  1,622   1,406   15.4%
Aviara  34   23   47.8%  66   42   57.1%
Consolidated  1,586   1,599   (0.8)%  3,245   3,117   4.1%
Net Sales:                  
MasterCraft $108,665  $106,773   1.8% $221,685  $198,788   11.5%
Crest  36,665   29,718   23.4%  80,226   62,498   28.4%
Aviara  13,858   7,909   75.2%  26,793   13,764   94.7%
Consolidated $159,188  $144,400   10.2% $328,704  $275,050   19.5%
Net sales per unit:                  
MasterCraft $140  $121   15.7% $142  $119   19.3%
Crest  47   43   9.3%  49   44   11.4%
Aviara  408   344   18.6%  406   328   23.8%
Consolidated  100   90   11.1%  101   88   14.8%
Gross margin  24.0%  25.2%  (120) bps   25.6%  24.3%  130 bps 
                     

Non-GAAP Measures

EBITDA, Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin

We define EBITDA as net income from continuing operations, before interest, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations. For the periods presented herein, these adjustments include share-based compensation and goodwill impairment. We define EBITDA margin and Adjusted EBITDA margin as EBITDA and Adjusted EBITDA, respectively, each expressed as a percentage of net sales.

Adjusted Net Income and Adjusted Net Income per share

We define Adjusted Net Income and Adjusted Net Income per share as net income from continuing operations, adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations and reflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate. For the periods presented herein, these adjustments include other intangible asset amortization, share-based compensation, and goodwill impairment.

EBITDA, Adjusted EBITDA, EBITDA margin, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Net Income per share, which we refer to collectively as the Non-GAAP Measures, are not measures of net income or operating income as determined under accounting principles generally accepted in the United States, or U.S. GAAP. The Non-GAAP Measures are not measures of performance in accordance with U.S. GAAP and should not be considered as an alternative to net income, net income per share, or operating cash flows determined in accordance with U.S. GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of cash flow. We believe that the inclusion of the Non-GAAP Measures is appropriate to provide additional information to investors because securities analysts and investors use the Non-GAAP Measures to assess our operating performance across periods on a consistent basis and to evaluate the relative risk of an investment in our securities. We use Adjusted Net Income and Adjusted Net Income per share to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with U.S. GAAP, provides a more complete understanding of factors and trends affecting our business than does U.S. GAAP measures alone. We believe Adjusted Net Income and Adjusted Net Income per share assists our board of directors, management, investors, and other users of the financial statements in comparing our net income on a consistent basis from period to period because it removes certain non-cash items and other items that we do not consider to be indicative of our core and/or ongoing operations and reflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate. The Non-GAAP Measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and the Non-GAAP Measures do not reflect any cash requirements for such replacements;
  • The Non-GAAP Measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
  • The Non-GAAP Measures do not reflect changes in, or cash requirements for, our working capital needs;
  • The Non-GAAP Measures do not reflect our tax expense or any cash requirements to pay income taxes;
  • The Non-GAAP Measures do not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness; and
  • The Non-GAAP Measures do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our core and/or ongoing operations, but may nonetheless have a material impact on our results of operations.

In addition, because not all companies use identical calculations, our presentation of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies, including companies in our industry.

Beginning in the first quarter of fiscal 2023, due to the effects of discontinued operations, as discussed above, the Company's non-GAAP financial measures are presented on a continuing operations basis, for all periods presented.

We do not provide forward-looking guidance for certain financial measures on a U.S. GAAP basis because we are unable to predict certain items contained in the U.S. GAAP measures without unreasonable efforts. These items may include acquisition-related costs, litigation charges or settlements, impairment charges, and certain other unusual adjustments.

The following table presents a reconciliation of net income from continuing operations as determined in accordance with U.S. GAAP to EBITDA and Adjusted EBITDA, and net income from continuing operations margin to EBITDA margin and Adjusted EBITDA margin (each expressed as a percentage of net sales) for the periods indicated:

  Three Months Ended Six Months Ended
  January 1,  % of Net January 2,  % of Net January 1,  % of Net January 2,  % of Net
  2023  sales 2022  sales 2023  sales 2022  sales
  (Dollars in thousands) (Dollars in thousands)
Net income from continuing operations $19,983  12.6% $17,859  12.4% $44,618  13.6% $30,091  10.9%
Income tax expense  6,433     5,403     13,609     9,169   
Interest expense  666     357     1,228     739   
Interest income  (621)         (772)       
Depreciation and amortization  2,610     2,364     5,211     4,823   
EBITDA  29,071  18.3%  25,983  18.0%  63,894  19.4%  44,822  16.3%
Share-based compensation  745     1,171     1,865     2,033   
Goodwill impairment(a)                 1,100   
Adjusted EBITDA $29,816  18.7% $27,154  18.8% $65,759  20.0% $47,955  17.4%
                             

(a) Represents a non-cash charge recorded in the Aviara segment for impairment of goodwill.

The following table sets forth a reconciliation of net income from continuing operations as determined in accordance with U.S. GAAP to Adjusted Net Income for the periods indicated:

 Three Months Ended  Six Months Ended 
 January 1,  January 2,  January 1,  January 2, 
 2023  2022  2023  2022 
 (Dollars in thousands, except per share data)  (Dollars in thousands) 
Net income from continuing operations$19,983  $17,859  $44,618  $30,091 
Income tax expense 6,433   5,403   13,609   9,169 
Amortization of acquisition intangibles 462   462   924   924 
Share-based compensation 745   1,171   1,865   2,033 
Goodwill impairment(a)          1,100 
Adjusted Net Income before income taxes 27,623   24,895   61,016   43,317 
Adjusted income tax expense(b) 6,353   5,726   14,034   9,963 
Adjusted Net Income$21,270  $19,169  $46,982  $33,354 
            
Adjusted net income per common share           
Basic$1.20  $1.02  $2.64  $1.78 
Diluted$1.20  $1.01  $2.62  $1.76 
Weighted average shares used for the computation of (c):           
Basic Adjusted net income per share 17,669,645   18,722,386   17,807,853   18,786,343 
Diluted Adjusted net income per share 17,774,329   18,899,136   17,903,027   18,951,627 
                

(a) Represents a non-cash charge recorded in the Aviara segment for impairment of goodwill.
(b) Reflects income tax expense at an income tax rate of 23.0% for each period presented.
(c) Represents the Weighted Average Shares used for the computation of Basic and Diluted earnings per share as presented on the Consolidated Statements of Operations to calculate Adjusted Net Income per diluted share for all periods presented herein.

The following table presents the reconciliation of net income from continuing operations per diluted share to Adjusted Net Income per diluted share for the periods presented:

 Three Months Ended  Six Months Ended 
 January 1,  January 2,  January 1,  January 2, 
 2023  2022  2023  2022 
Net income from continuing operations per diluted share$1.12  $0.94  $2.49  $1.59 
Impact of adjustments:           
Income tax expense 0.36   0.29   0.76   0.48 
Amortization of acquisition intangibles 0.03   0.02   0.05   0.05 
Share-based compensation 0.04   0.06   0.10   0.11 
Goodwill impairment(a)          0.06 
Adjusted Net Income per diluted share before income taxes 1.55   1.31   3.40   2.29 
Impact of adjusted income tax expense on net income per diluted share before income taxes(b) (0.35)  (0.30)  (0.78)  (0.53)
Adjusted Net Income per diluted share$1.20  $1.01  $2.62  $1.76 
                

(a)   Represents a non-cash charge recorded in the Aviara segment for impairment of goodwill.
(b)   Reflects income tax expense at an income tax rate of 23.0% for each period presented.

Investor Contact:
MasterCraft Boat Holdings, Inc.
George Steinbarger
Chief Revenue Officer
Email: investorrelations@mastercraft.com


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