Yahoo Finance MasterCraft Boat Holdings Inc (MCFT) Q3 2024 Earnings Call Transcript Highlights: Navigating ...
Net Sales: $95.7 million, down 43% year-over-year.
Gross Margin: 19.2%, decreased by 630 basis points from previous year.
Operating Expenses: $14.4 million, increased by $0.8 million year-over-year.
Adjusted Net Income: $6.3 million, down from $24.1 million year-over-year.
Earnings Per Share: $0.37 per diluted share, down from $1.36 year-over-year.
Adjusted EBITDA: $9.7 million, down from $33 million year-over-year.
Total Liquidity: Nearly $206 million, including cash and credit availability.
Net Debt: Zero, with net cash and short-term investments of $55 million.
Cash Flow from Operations: Over $23 million year-to-date.
Share Repurchases: $1.6 million spent to buy back nearly 74,000 shares this quarter.
Full Year Guidance: Net sales expected between $360 million and $365 million; Adjusted EBITDA between $28 million and $30 million; EPS between $0.95 and $1.05.
Capital Expenditures: Expected to be approximately $17 million for the full year.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
MasterCraft Boat Holdings Inc (NASDAQ:MCFT) reported a strong balance sheet with nearly $206 million in total liquidity, including nearly $106 million in cash and short-term investments.
The company has a flexible operating model that allows it to adjust production to mitigate near-term risks and capitalize on growth opportunities when conditions improve.
MasterCraft Boat Holdings Inc (NASDAQ:MCFT) has continued its share repurchase program, spending approximately $1.6 million to repurchase nearly 74,000 shares during the quarter.
The introduction of the Balise brand, a new luxury pontoon line, is expected to diversify product offerings and potentially increase market share.
MasterCraft Boat Holdings Inc (NASDAQ:MCFT) received the 2023 Marine Industry Customer Satisfaction Index Award for all three eligible brands, indicating high levels of customer satisfaction.
Negative Points
Net sales for the quarter were significantly down by 43% year-over-year, primarily due to lower unit sales volume and increased dealer incentives.
Gross margin decreased by 630 basis points compared to the prior year period, impacted by lower cost absorption and higher dealer incentives.
The company faces a highly competitive and uncertain retail environment, which has led to cautious dealer ordering and increased promotional activities.
Inventory levels across the industry, including MasterCraft's brands, remain higher than optimal, leading to elevated inventory carrying costs for dealers.
MasterCraft Boat Holdings Inc (NASDAQ:MCFT) has revised its full-year guidance downwards due to ongoing challenges, including macroeconomic uncertainty and competitive pressures.
Q & A Highlights
Q: First, welcome, Brad, looking forward to working with you. I just want to try to understand the 4Q guide or implied 4Q guide a little bit better given the 3Q beat. Did demand get worse? Did the promotional environment actually get worse? Are you expecting it to or just expecting it to? Or did dealers get more cautious? Or was it sort of all of the above? A: Timothy M. Oxley - MasterCraft Boat Holdings, Inc. - VP, CFO, Treasurer & Secretary: I think the dealer caution is largely driven by the distress in one of our competitors' channels. That has caused our dealers to pause and really reassess their stocking risk. And then the interest rates are not coming down as we had hoped and the macroeconomic uncertainty. So when you combine all 3 of those, I think it's what's causing us to take production down significantly in Q4.
Q: Okay. But have you seen the higher promotion levels yet? Or are you just anticipating that? A: Timothy M. Oxley - MasterCraft Boat Holdings, Inc. - VP, CFO, Treasurer & Secretary: Both. We're seeing it now, and we anticipate it to continue.
Q: My second question on your last call, I think you estimated that you'll be pulling somewhere between 600 and 800 units out of the channel this year. Is that still the right number? And does your revised guide assume the channel is clean heading into model year '25? A: Timothy M. Oxley - MasterCraft Boat Holdings, Inc. - VP, CFO, Treasurer & Secretary: We anticipate pulling the inventory down even further, Joe, upwards of 1,000 units. And with that kind of reduction -- but that's our planned reduction based on retail assumptions. We expect the channel to be very healthy at the end of June. And hopefully, that will drive additional increases in fiscal '25.
Q: As far as the competitive pressures that were cited in the press release in your preamble, is this leading to reductions to production for the MasterCraft brand specifically? Or is it across your entire portfolio? And is this something that's limited or isolated to fiscal 4Q this year? Or do you think it lingers and bleeds into fiscal '25? And then I've a follow-up. A: Timothy M. Oxley - MasterCraft Boat Holdings, Inc. - VP, CFO, Treasurer & Secretary: Sure. We certainly hope that this drastic reduction in Q4 is going to get our dealers healthy. And then for fiscal '25, assuming we take as many boats out of the pipeline as we plan, I think there will be opportunities even though we do intend for our dealers to operate with lower levels of inventory, higher returns than they've in the past in recognition of the higher carrying costs.
Q: On the Balise product, any financials you can share with us, margins, sales expectations, time to breakeven, et cetera. A: Bradley M. Nelson - MasterCraft Boat Holdings, Inc. - CEO & Director: We're excited about Balise. That -- we're taking orders now. So far, market interest from dealers and consumers have been very positive. That model is set really for launch to impact model year '25. We're not providing guidance for '25 at this juncture. But from a unit perspective and from a margin perspective, we expect accretive levels of margin contribution. The unit level might be less than the broader Crest business, but this is approaching a premium, an ultra-premium part of the segment, which we're very intrigued with.
Q: Maybe just on kind of the ASP front, just any early thoughts around model year '25 pricing kind of given the dynamics going on in the industry right now? A: Timothy M. Oxley - MasterCraft Boat Holdings, Inc. - VP, CFO, Treasurer & Secretary: Sure. Our plan for model year pricing is to make it as small as we possibly can in recognition of the headwinds in the marketplace.
Q: Maybe just one follow-up. Maybe if you could kind of talk through whether it's changes to the new model year or any levers that you've in terms of incenting kind of dealers to take inventory when the changeover does happen? Just any kind of controllables, would be great. A: Timothy M. Oxley - MasterCraft Boat Holdings, Inc. - VP, CFO, Treasurer & Secretary: Sure. We've some nice enhancements to a number of our models. And so there will be some cosmetic changes, which I think will be well received, and there's always kind of renewed interest when you've a model year changeover.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
