MasterCraft Boat Holdings, Inc. reports fiscal 2020 second quarter results

MasterCraft Boat Holdings, Inc © MasterCraft Boat Company

MasterCraft Boat Holdings, Inc. (NASDAQ: MCFT) today announced financial results for its fiscal 2020 second quarter ended December 29, 2019.

Second Quarter Highlights:

• Net sales for the second quarter decreased to $99.6 million, down 18.0 percent from $121.5 million in the prior-year period.
• GAAP net income was $6.9 million, down 32.5 percent from $10.2 million in the prior-year period.
• GAAP diluted earnings per share decreased in the second quarter by $0.17, or 31.5 percent to $0.37, from the prior year period.
• Diluted Adjusted Net Income per share, a non-GAAP measure, was $0.43 compared to $0.64 in the prior-year period.
• Adjusted EBITDA, a non-GAAP measure, declined 27.2 percent to $13.6 million from $18.6 million in the prior-year period.
• The second Aviara model, the AV36, was launched and began selling during the second quarter.
• During the quarter, the company paid down $8.3 million in long-term debt, including $6.0 million of voluntary prepayments.

Fred Brightbill, Chief Executive Officer, commented, "MasterCraft delivered results slightly ahead of our expectations for the fiscal second quarter as we continued to make progress across a number of our operational focus areas, including efficiently managing our production around the GM strike, further right-sizing our dealer inventory, executing operational excellence initiatives and advancing the start-up of our new Aviara brand. The combination of wholesale production decreases across our segments and strategic retail rebates, in what is the slowest retail quarter of the year, resulted in dealer pipeline right-sizing in-line with our plan. We believe the actions we are taking, coupled with our diverse portfolio of brands and commitment to delivering differentiated, best in class products and experiences for our customers, position us well in the current environment and set us up for renewed growth in fiscal 2021."

Brightbill continued, "I am excited about the opportunity to lead MasterCraft as CEO. As part of my transition to the permanent CEO role, I spent time collecting valuable feedback from our customers, dealers, employees, business partners, and investors to hear directly from them about their perspectives on MasterCraft's strengths and future opportunities. With these insights and following a thorough top-to-bottom evaluation of the business, we have implemented a new strategic growth plan with a relentless focus on improving the customer experience, expanding brand awareness, further advancing operational excellence and developing a customer-focused culture, all at minimal incremental cost to the Company. I am confident that with a renewed focus on these initiatives, MasterCraft will be better positioned to increase our share of the boating market across all our brands and generate significant value for the Company and our shareholders."

Second Quarter Results

Net Sales for the second quarter were $99.6 million, a decrease of $21.9 million, or 18.0 percent, compared to $121.5 million for the prior-year period. The decrease was primarily due to:

• a reduction in unit sales volumes across each of our reportable segments to allow our dealers to right-size pipeline inventory levels after the weather-impacted summer selling season and continuing softness in the saltwater category;
• partially offset by the addition of our new Aviara brand.

Gross profit decreased $5.9 million, or 21.9 percent, to $21.1 million compared to $27.1 million for the prior-year period, principally driven by the lower unit sales volumes for each reportable segment.

The decrease in consolidated gross margin percentage is primarily attributable to a decrease in overhead absorption due to the lower unit sales volumes across each reportable segment.

Operating expenses decreased $1.5 million, or 12.5 percent, to $10.8 million for the second quarter compared to $12.4 million for the prior-year period. The decrease was primarily due to a reduction in transaction expenses attributable to the Crest acquisition in fiscal 2019, and a reduction in compensation expenses.

Net Income for the second quarter was $6.9 million, or $0.37 per share, reflecting a decrease of, $0.17 or 31.5 percent, compared to $10.2 million, or $0.54 per share, for the prior-year period. Adjusted Net Income of $8.2 million, or 0.43 per share, on a fully diluted, weighted average share count of 18.9 million shares, was computed using the company's estimated annual effective tax rate of approximately 23.0 percent. This compares to Adjusted Net Income of $12.1 million, or 0.64 per fully diluted share, in the prior-year period.

Adjusted EBITDA was $13.6 million for the second quarter, compared to $18.6 million in the prior-year period. Adjusted EBITDA margin was 13.6 percent, down from 15.3 percent in prior-year period principally due to decreased operating leverage on lower unit sales volumes.

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

Said Brightbill, "As we look to the second half of the year, we continue to be pleased by the retail momentum we experienced in the first half of the year, early boat show results and the successful roll-out of our new Aviara brand. Aviara's strong retail performance to-date reinforces our bullish prospects for the brand this year and beyond. While we are encouraged by the improved industry retail trends to-date, and the progress we see across all our brands, visibility will remain limited until we are further into the retail selling season. Longer-term, we are confident in the strength of our brands and believe the new strategy we are implementing will unlock opportunities to drive profitable growth and increased value creation."

Given the above-mentioned factors, the company is maintaining its consolidated fiscal 2020 outlook, which is as follows:

• Net Sales - down low-single digit percent
• Adjusted EBITDA Margin - down 50 to 100 basis points
• Adjusted Earnings per Share - down high-single digit percent

Conference Call and Webcast Information

MasterCraft Boat Holdings, Inc. will host a live conference call and webcast to discuss second quarter 2020 results today, February 5, 2020, at 8:30 a.m. EST. To access the call, dial (800) 219-6861 (domestic) or (574) 990-1024 (international) and provide the operator with the conference ID 9142949. Please dial in at least 10 minutes prior to the call. To access the live webcast, go to the investor section of the company's website, mastercraft.com, on the day of the conference call and click on the webcast icon.

For an audio replay of the conference call, dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and enter audience passcode 9142949. The audio replay will be available beginning at 12 p.m. EST on Thursday, February 5, 2020, through 11:59 p.m. EST on Thursday, February 19, 2020.