MasterCraft Boat Holdings, Inc. Q2 FY2025 earnings call

• MasterCraft delivered fiscal second quarter results exceeding expectations with robust destocking efforts and a flexible operating model.
• Aggressive inventory management reduced dealer inventories by over 30% year-over-year despite mixed retail environment.
• Launch of MasterCraft XStar product line has been well-received, generating buzz and high demand, with production ramping up and expected to drive earnings in the second half.
• Sale of Merritt Island facility provided net cash proceeds to strengthen the balance sheet and financial flexibility.

MasterCraft Segment

• Net sales for the quarter were $63.4 million, a decrease of $26.4 million or 29% compared to the prior year period. Gross margin was 17.2% compared to 23.3% in the prior year period. The XStar product line launch is expected to drive earnings and free cash flow in the second half.

Pontoon Segment

• Retail environment for pontoons has been soft due to higher interest rates and seasonality, leading to elevated aged inventory levels. Crest brand has mixed boat show results but showed promise at Minneapolis and Chicago boat shows.

Balise Brand

• Early consumer response to Horizon and Helix models has been promising as the brand increases visibility and adds dealers in targeted locations.

Other Highlights

• Sale of Merritt Island facility closed, generating net cash proceeds of over $26 million, bolstering the balance sheet.

• For fiscal 2025, consolidated net sales are expected to be between $275 million and $295 million, adjusted EBITDA between $19 million and $24 million, and adjusted earnings per share between $0.64 and $0.86.
• Third quarter fiscal 2025 consolidated net sales expected to be approximately $75 million, adjusted EBITDA approximately $5 million, and adjusted earnings per share approximately $0.17.
• Second half expected to have favorable model mix with ramp-up of XStar production.

• Ongoing trade and tariff variability could affect certain components, although cost implications for fiscal 2025 are expected to be modest; strong supplier relationships and supply chain team work to mitigate risk.

Q: Joe Altobello asked about channel inventory progress and MasterCraft ASPs.

A: Brad Nelson said there was a modest channel increase in Q2, and Tim Oxley noted ASPs were affected by model mix with NXTs and XTs, but expected improvement in Q3 and Q4 with XStar production ramp-up. Brad also mentioned pricing adjustments on NXT and XT models were to address affordability.

Q: Craig Kennison inquired about strategic growth initiatives and distribution.

A: Brad Nelson stated focus on executing within brands, increasing shareholder value, simplifying business, focused innovation, product and brand development, and improving distribution while returning capital to shareholders.

Q: Noah Zatzkin asked about industry retail assumptions and boat show consumer sentiment.

A: Tim Oxley said retail was expected to be down 5-10% year-to-date and aligned with guidance. Brad Nelson noted strong demand for XStar in Europe and cautious optimism from dealers, with favorable feedback on Balise models and excitement for the Miami show.

Q: Griffin Bryan asked about competitors and interest rates.

A: Tim Oxley said MasterCraft had a more successful boat show season than competitors and noted consumer rates likely need to decrease another 50-100 basis points. Brad Nelson added MasterCraft is less impacted by interest rates due to many cash buyers, while pontoon space is more impacted.