MasterCraft Boat Holdings, Inc. beat its own forecast for net sales in its fiscal third quarter, posting revenues of $95.7 million, down 42.6 percent, or $71.1 million, from the prior-year Q3 period. The decrease in net sales for the quarter ended March 31 was said to be due to lower unit volume and an increase in dealer incentives, partially offset by higher prices and favorable model mix and options. Dealer incentives include measures taken by the company to assist dealers as the retail environment remains competitive.

The company had previously forecast third quarter net sales of approximately $92 million, with Adjusted EBITDA of approximately $7 million and Adjusted earnings per share of approximately 23 cents a share.

Gross margin declined 630 basis points in Q3, when compared to the prior-year Q3 period. Lower margins were said to be the result of lower cost absorption due to planned decreased unit volume and higher dealer incentives, partially offset by higher prices and favorable model mix and options.

Operating expenses increased $0.8 million in fiscal Q3, compared to in the prior-year Q3 period. The increase in operating expenses was explained as a result of CEO transition and related share-based compensation costs, which were $1.9 million.

Net income from continuing operations was $3.8 million for the third quarter of fiscal 2024, compared to $22.8 million in the prior-year Q3 period. Diluted net income from continuing operations per share was 23 cents a share, compared to $1.28 a share for the third quarter of fiscal 2023.

Adjusted Net Income decreased to $6.3 million for the third quarter, or 37 cents per diluted share, compared to $24.1 million, or $1.36 per diluted share, in the prior-year Q3 period.

Adjusted EBITDA was $9.7 million for fiscal Q3, compared to $33.0 million in the prior-year Q3 period. Adjusted EBITDA margin was 10.1 percent for the third quarter, down from 19.8 percent for the prior-year period.

The company ended the quarter with cash and investments of $105.7 million, and total debt of $50.4 million.

“We delivered results ahead of our expectations in what remains a dynamic and challenging environment for the marine industry,” offered Brad Nelson, CEO, MasterCraft Boat Holdings, Inc. “My first six weeks with our team has been energizing, and it is clear to me that our capabilities and opportunities are even greater than I anticipated. Since I joined the company, I have been on the road meeting with and getting to know our team, our customers, dealers and business partners. The headline takeaways, are highly encouraging – the foundation of the business is strong, MasterCraft is home to iconic and leading brands, customers and dealers love our products, and the long-term outlook for the industry is bright. We are laser focused on and well-positioned to navigate the near-term challenges in our industry as we evolve our long-term growth strategy.”

Outlook
As a result of a planned decrease in production, Mastercraft revised its guidance for the full year.

Consolidated net sales are now expected to be between $360 million and $365 million, with Adjusted EBITDA between $28 million and $30 million, and Adjusted Earnings per share between 95 cents and $1.05 per share. Capital expenditures are now expected to be approximately $17 million for the full year.

“As we enter the prime retail selling season, macroeconomic uncertainty continues to limit demand visibility,” explained Nelson. “This has been exacerbated by the news that a competitor’s largest dealer is in financial distress, which has heightened competitive pressure with the potential for higher-than-normal competitor discounting. Dealer inventories remain higher-than-optimal and inventory carrying costs are elevated. Consequently, dealers are taking a cautious approach to ordering ahead of the annual model year changeover. We continue to focus on balancing dealer inventories with retail demand to prioritize dealer health, therefore, we plan to reduce planned production for the remainder of our fiscal year. We have taken a proactive approach to production planning, inventory management, and dealer incentives to best position our dealers to capitalize on retail demand during the upcoming selling season, and end the fiscal year with improved inventory levels.”

Mastercraft had previously narrowed its guidance range for the full fiscal year 2024 when reporting its fiscal second quarter results, calling for consolidated net sales between $400 million and $412 million, Adjusted EBITDA forecasted between $42 million and $47 million, and Adjusted earnings per share between $1.53 and $1.78. The company forecast capital expenditures to be approximately $20 million for the full year at that time.

Image courtesy Mastercraft Boat Holdings