MasterCraft Boat Holdings, Inc. reported consolidated net sales of $166.6 million for the fiscal fourth quarter ended June 30, down 15.5 percent from the fourth quarter of fiscal 2022. The company said the net sales decrease reflected decreased sales volumes, less favorable model mix and increased dealer incentives, partially offset by higher prices. Dealer incentives include higher floor plan financing costs due to increased dealer inventories and interest rates and increased other incentives as the retail environment becomes more competitive.

Company Chairman and CEO Fred Brightbill commented, “As our fiscal fourth quarter progressed, retail sales slowed significantly and fell short of our expectations. Although we reduced production plans in response, dealer inventories ended fiscal 2023 at levels higher than we would now consider optimal.”

Gross profit margin decreased 320 basis points year-over-year in the fourth quarter. The decreased margin was mainly due to higher dealer incentives, higher costs from inflationary pressures, lower cost absorption due to decreased sales volumes, and a less favorable model mix, partially offset by higher prices.

Operating expenses increased $1.1 million for Q4, compared to the prior-year period, primarily due to increased product development expenses in the quarter.

Net income from continuing operations fell 32.1 percent to $23.1 million for the fourth quarter, compared to $33.5 million in the prior-year period. Diluted net income from continuing operations per share was $1.32, compared to $1.85 for the fourth quarter of fiscal 2022.

Adjusted Net Income was $23.9 million for Q4, or $1.37 per diluted share, compared to $34.8 million, or $1.92 per diluted share, in the prior-year period.

Adjusted EBITDA was $32.7 million for the fourth quarter of fiscal 2023, a 31.3 percent decline from $47.6 million posted in the prior-year period. The adjusted EBITDA margin was 19.6 percent for the fourth quarter, down from 24.1 percent for the prior year period.

“Our business performed extremely well during fiscal 2023, delivering a third consecutive record-setting year for net sales and earnings. Our strong operating performance resulted in the highest cash flow for any year in the company’s history as we generated nearly $134 million of operating cash flow, driven by strong earnings and diligent working capital management. We are proud of our team and their outstanding work.”

Full-year net sales increased to $662.0 million in fiscal 2023, up 3.2 percent from the prior year. The net sales increase reflects higher prices, partially offset by decreased sales volumes, increased dealer incentives, and a less favorable model mix. Dealer incentives include higher floor plan financing costs due to increased dealer inventories and interest rates and other incentives as the retail environment becomes more competitive.

Full-year gross profit margin decreased 60 basis points in fiscal 2023 from fiscal 2022. The decreased margin was mainly due to higher costs from inflationary pressures, higher dealer incentives, lower cost absorption due to decreased sales volumes, a less favorable model mix, and increased warranty costs, partially offset by higher prices and improved production efficiencies.

Net income from continuing operations was $90.5 million, or $5.09 per diluted share, for the year, up 2.9 percent and 7.8 percent, respectively, from the prior year.

Diluted Adjusted Net Income per share, a non-GAAP measure, was $5.35 for fiscal 2023, up 6.8 percent from the prior year. Adjusted EBITDA, a non-GAAP measure, was $131.5 million, up 0.7 percent from the prior year.

“Macroeconomic factors, including elevated interest rates as well as tightening credit standards and availability, are creating significant uncertainty, which is limiting our retail demand visibility,” Brightbill suggested. “In addition, the general expectation for an economic downturn during fiscal 2024 will likely be a headwind for the industry. This backdrop of economic uncertainty has caused us to approach our wholesale production plan for fiscal 2024 with a prudent level of conservatism, and we have developed plans for a range of potential retail demand scenarios. Because of the lower-than-expected retail sales results in our fiscal fourth quarter of 2023 and the uncertain outlook for retail sales, wholesale unit sales for fiscal 2024 will be lower than projected retail sales. Our production plans will allow us to rebalance dealer inventories with anticipated retail demand and keep our pipeline healthy.”

For full year fiscal 2024, the company expects consolidated net sales between $390 million and $420 million, with Adjusted EBITDA of between $42 million and $52 million and Adjusted Earnings per share of between $1.46 and $1.88. Mastercraft expects capital expenditures to be approximately $22 million for the full year.

For fiscal first quarter 2024, consolidated net sales are expected to be approximately $98 million, with Adjusted EBITDA of approximately $11 million and Adjusted Earnings per share of approximately 41 cents.
The guidance reportedly reflects the company’s view that industry retail unit sales could be down as much as mid-teens percent for fiscal year 2024. Although the guidance reflected a significant decline in earnings from fiscal 2023, the company expects to generate positive free cash flow, which it said is a testament to its “flexible, highly variable cost structure and proactive cost control efforts.”

“Despite cyclical headwinds facing the industry, our fortress balance sheet is a significant competitive advantage and provides us with abundant financial flexibility to pursue our capital allocation priorities, first and foremost of which is investment in growth,” Brightbill said. “We have been laying the foundation for long-term growth by actively investing in targeted initiatives that will take advantage of the industry’s positive, underlying secular trends. These investments will continue into fiscal 2024 as we prioritize long-term growth and value creation through product line expansion, relentless innovation, and an unyielding focus on the consumer.”

Photo courtesy MasterCraft