MasterCraft Boat (MCFT) 9 Sep 202020 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to Q4 and Fiscal 2020 MasterCraft Boat Holdings, Inc. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. [Operator instructions] Please be advised, today's conference is being recorded. now Tim hand Oxley, would to conference I speakers, your CFO. Instructions] like the to over [Operator Please go ahead.

fourth year Thank you, today MasterCraft's us you for and operator, and welcome as everyone. we XXXX. for fiscal performance Thank joining quarter full discuss

call for As website live and on listening. being will a is webcast be also reminder, archived today's future our

commentary Revenue XXXX Executive for open the on we quarter Fred and George Chairman; Q&A. me today's on and call, I and call for Joining businesses, I'll to before and call the our our are the Officer. Chief will Officer will fourth Fred open Fred back remarks call provide results Brightbill, Chief our turn To Steinbarger, closing discuss then fiscal

that is XXXX. update this historical contained Before to disclaimer we in forward-looking Statements the obligation today's assumes forward-looking begin, information safe statements. statements current harbor and September are X, as that release. we'd call of The today, Company statements, including press to no not participants in any like the are only remind facts subject to

measures Additionally, non-GAAP we our operations. conference include or items call, indicative will ongoing discuss special of on not exclude this or that

our investors over there of listeners call results. the a slide With is turn measure, fiscal earnings a GAAP section comparable most provide summarizing also remind deck financial also measure in these that non-GAAP like fiscal Fred. GAAP of reconciliation our For in the release We'd our results that, our non-GAAP XXXX to each to and we quarter the includes fourth website. directly XXXX which to measures I'll

morning good and Tim, you, Thank everyone.

everyone and us my effects grapple healthy. sincerest today of is As wish COVID-XX pandemic, with safe to it the world remained remains with that continues

closing results XXXX. MasterCraft heading a from Boat fiscal out into momentum of today's in challenging expectations, street press financial As you fourth XXXX fiscal strong quarter saw with ahead the delivered Holdings release,

our decline on by centric systems net revolving million an to EBITDA from quarter facilities to first on practices our a net in after fiscal diluted line million Moreover, model pandemic. faced the For $X a continued back cash Adjusted customer dealer and improving shutdown sales Despite EBITDA a the XXXX operations operational decreased the quarter, execution. fixed XX% million. embraced testament our of enabled pandemic us our adjusted recreational manufacturing XX% $X.XX strategy, new income to highly to pay additional our declined COVID-XX $XX boating. per cost the the to weeks, disruption our on nearly on to various has net $XXX.X at to the XX% per the of fourth principally of industry and decreased positive and and to working and significant. business $XX.X management of fourth our in The eight end quarter. including been strong on partners near the delivered six a execute sales the low XX%, boating driven adjusted year, due the were team share million we impact closely fully to with variable, credit early our In the quality throughout consumer challenge capitalize and to unprecedented our interest headwind year, share, long-term

the dealer unprecedented demand consumers dealer brand resulting pandemic-induced and the across to all channels, social vacations, cancellation retail in a models. summer Even kids and experienced for explore fewer lifestyle, closures, boating new and industry our free due summer and with our brands, alternatives Specifically, websites break found travel during time websites, of renaissance additional and spring sports consumers to their our flock both and the families as used themselves to camps.

XXXX. term, This our to the all we Our boating our returning customers long market growing of March to for in our for retention accounted served percentage retail the internal and medium has a of boating brands as increase well to data experienced suggests and typically sales that addressable new rates. consumer bodes since high

as increased leading our brands exists consumers to participation, opportunity this benefited boating In addition convert these brands from the also over competing have to time.

to to our retail levels we've and safe a MasterCraft turns has we we've the MasterCraft higher the ski by believe For of and generated inventories XXXX, fourth low selling local to ski retail through unprecedented experienced current busy with segment end performance a strong continued from owners, brand, model, the a alone. combined attributable units of we high believe converting first declined family season We months of example, production the August, fiscal and the in a than XX% most our approximately inventory MasterCraft for lower see MasterCraft current trends which believe consolidated boating. retail in more inventory seek dealer our under brand to next directly the dealers sales converting quarter. our the from up the summer's is two enjoyment. resulting the retail new this is trading half owners competing the that brands dealer owners dealer are brand of as shortfall board boat historically basis existing alternatives wake dealer inventory owners annual by This with from world consumers recognizable X,XXX across historically fun, including will of to at retail nearly persist different all wake Driven activity, stay Impressively, strong with historically shutdowns On demand in boat at as prefer inventories of levels. beyond even shortfall its turns.

for our result, high our all time. we Operationally, across and all to quality up growth ramp with receive poised that on production to of in beyond. continue strong facilities, parts brands are fiscal our working a ensure As we XXXX suppliers

in the production our we fiscal plans us second believe our participate fully quarters our the from to stock throughout to and management anticipate we to boating seasonally retail and risks selling scale As experience next low of supply other and third chain increased and summer us season. position appropriately demand the disruption suppliers allow OEMs, dealer inventories in the mitigates efficient momentum,

the than Island, to the access, future will Combined Aviara second quarter, continue in which need retail continue drive a overwhelmingly provide to case earlier brand, we incremental all dedicated grow an partner August XX production on buy for additional facility capacity manufacturing room had production MasterCraft new vertical will meet and and ensuring the is for MarineMax for by positive for water measured across while year space. brands, that growth of capacity, developed Merritt dealers Florida, are as feet fiscal the while believe in building Retail consumers quickest alike. a moving both we performance facility integration. brands our XX, dedicated many we The more a of acres they our MasterCraft, of way best see agreement continuing our strategy, Aviara add strategy into we've quarter Aviara will facility manner, announced competitive will we seen the Aviara. in expectations filled third order Aviara differentiator and water. workforce Having quality new business efficient our with experience get opportunity demand, the purchase for to improvements which the additional of accelerate facility in to At a growth. Situated a a with momentum and up entered provides for all very through its books critical to On our of land fiscal to deliver efficient We access XXX,XXX than serve Simultaneously, to industry, provides boatbuilding most retail the XXXX, across will exceeded the brand boat our a setting we us manufacturing the this also reception capital. of brand. scale, this to square on the providing years order and ramp to element lock X provide Aviara dedicated we the inventory in our experienced Merritt the an well including consumer as future controlled decided dealers at into usual the the Aviara of fiscal completely for of the first slots. dealer Island facility to use up production. facility ample Phase Notably, to provide when

expect the to in the XXXX, in on of close quarter third running purchase We XXXX. with facility October up and fiscal Aviara of production

while believe the August we roles to the new President X Scott Turning NauticStar, executive, automotive seasoned is brand. held leadership as its will serve can in for operating to year. operational financial strong of Womack the driving a a Scott's right brands more XX the results, of for over wealth suppliers past track this processes call we in NauticStar, Scott the on in will drive the financial the segment. lean outboard expectations of leader provide continuous Tim? principles, to now improvement generating long-term for will the the in results one leading back the rest him sustainable We're and the over value appointment generated various having of announced place XXXX, fiberglass unlock role. Scott we performance have will of the confident profitability knowledge, the brings I help growth well by financial and and record turn color and improve Tim brand. our that experience be years. on and for

Thank you.

boating the the for industry times difficult are these broader and noted, Fred As economy.

due and While corresponding or or performance. XX.X the production profit to period. a XX.X off a to quarter globe the the segments. of lower COVID-XX XXX.X significant and X.X decreased principally on period, by as loss on XX.X million sales production ramp we for sales for the the to COVID-XX year result strong result had decrease Net The of note down XX.X% shutdowns for prior for workforce and compared across financial was primarily million million the a spread economic of the year the supplier compared XX.X of as the million decrease and driven prior as up. a fourth volume and operations started reportable a million to XX.X% Gross has were quarter million, the shut impact

decreased the the period XX.X% gross to the year the the to across charges and fourth on decreased Operating quarter for for XX period recognized quarter million absorption compared expenses to Our year for fourth goodwill for of reportable due to impairment XX.X to intangible in prior million asset lower each prior year the prior million period. margins XX compared segment. XX.X% overhead

initiatives charges, operating management X.X response these expenses pandemic. COVID-XX million in our from resulting declined impairment cost during the quarter Excluding the to

compared the to adjusted or tax computed to shares adjusted million was year quarter in using weighted bottom X.X was This shutdowns. fourth Adjusted $X.XX Turning the or loss the average annual the per effective prior a fully fully net XX.X lower in of a diluted Company's $X.XX caused of per income share the principally loss Adjusted was XX.X of the the of year million XX.X quarter net diluted period. X.X% COVID-XX fourth volumes on for period, EBITDA for count compared prior line, million approximately margin share period. rate XX%. the share to sales million million EBITDA from prior by due down XX.X% in X.X to estimated

during Turning steps cash. quarter took to our and liquidity conserve flexibility maintain and to financial balance we sheet, the

on As we XX million cash more of our June than balance XX, sheet. had of

liquidity. quarter, XX we revolver the Since payment first early in more the million year fourth with our mentioned time, with than received XXXX Fred fiscal As quarter. in we've our his $X revolver of ended hand, cash to on our on on that we during down paid additional XX million remarks, make our million combined

unprecedented the and both the prospects Given markets we our liquidity liquidity the term long-term not issues. brands any anticipate current own, backdrop historically near remain outlook, demand. We low combined especially inventory with levels we the with of and of serve on dealer bullish do position we retail

financial withdrew impact of COVID-XX given guidance and onset the the we March retail pandemic that on negative expected in recall demand. You'll the

full are guidance quarter improved the XXXX. has the visibility fiscal year initiating for first both marketplace since that the time Our remain, we of in in while uncertainties

operate throughout related to the able shutdown. Our our fiscal of that year guidance assumes COVID-XX were without any facilities all we

year growth, from to year-over-year. XX% overhead production of profitability loss production mid Island, growth incremental sales the as our XX% range future we Tennessee Aviara's facilitate We segments is in with guidance Florida of the year-over-year Aviara, adjusted XXXX, mid XX% Aviara workforce of to our facility. For shifting result the earnings moderate XX% anticipate support and to in fiscal our ramp within mid-year the in full to consolidated expected adding EBITDA all adjusted integration facility low to year. per to with and in range net up exception share new Merritt across for and disruption, adjusted grow margins a This assumes revenue range, the the the growth in

will XXXX, three capacity generate We sales With a driving next new fiscal the brand, are profitable year brand we in the XX team the years. in in full be to confident the product that and Aviara is a within producing dedicated facility. first million new expect than more net Aviara manufacturing

For to be mid-teens adjusted down mid to sales range. consolidated net range to XX% margins with percent the down XX% high expected the the quarter XX% range in in fiscal EBITDA first year-over-year share and to in adjusted earnings per low

ensure retail into need throughout will season, call for ramp to XX% Heading As Fred Fred measured into continue will mentioned historically remarks. the season, seasonally I'll seasonally selling now summer in selling to low in of manner. up the retail. to dealers production low get production our they annual inventory year demand, meet controlled his season, cadence selling a the Fred? remarks, turn we retail XX% for which that heading the to accounts closing this back

Tim. Thanks,

the we headwinds and quarter While in over and plan fiscal XXXX, the Company through COVID-XX near-term the challenges presented to implemented position for manage for many the a MasterCraft fourth success long-term.

number and is the employees. of Our safety one priority our health

are ramp tracing the and to facilities, best committed and our use personal across contact cleaning enhanced certification, our at we protocols, of We're continue temperature screening all distancing, including maintaining hygiene, scans, health locations. we health up rigorous As physical safety heightened practices all masks, production standards. following to

guidelines We will government closely monitor this and the period. and continue consider federal to throughout sites transition local

With for and our a resilient Operator? and to we'll in boating and retail is and committed brands. in share go inventories long-term Our drive that, quarter our our questions. line backdrop from the market strong I'm and demand employees plan value. and business foundation dealers, dealer particular, improved much outlook Depleted open model ago. the ahead confident grow an industry, shareholder leading strengthened for provide attractive

Instructions] comes Riley. Eric from [Operator our first And B. question with Wold

open. is line Your

questions. kind the then that's of I all XX% within I guess of major inventory assuming at brands. two from being -- lowers that range on brands Any the below obviously in I've between average across an XX% variations year-end, there? August. kind the one, am June, three to XX% three since and average

brands. the average, range isn't That across the actually that's the

much, XX%. as So, they And, were all between than lower XX% that and now. it's you alluded, much

being, for with Obviously, opportunity gone Crest how bit potentially to an out start, And level slower acquisition, that us give little share? you in of environment segments. off the one then there given that. we've update follow-up crafts recently, the on a the take following the of seen competitors Maybe pontoon the inventory frame on reasons what and

highest retail doing Chris year-over-year has has seen we've been well. our been the amongst among very brands. There

themselves great and putting they they and are the is a positioned for pedal bounced again. production the strongly. ramp of accelerating in and what So it that their shape year inventory was process to and a in segments bounce back floor back their It's up. fraction of Their previously very great

that is also boaters because the time add use of the of of the relative the from would the pontoon value pontoon ease I boats. benefiting segment and first

So, happy we're participate very that to in segment.

first some the the brand. pontoon think, more in of other in time So segment boaters, I and

your Any full get about you know plus last change Tim. talked chance could digital I year production years? facility production three how you of commentary, and ahead some to up the could the over ultimately need capacity you lastly, on what idea facility the Aviara Aviara, ended facility, Thanks of do And One, in gave on this sales that two, year? you at start? And And kind next spent be think what next that years. can million $XX be acquired. few then where new there you the will

past. we to going XX as certainly it's capacity the that's plant successful be as goes, a in Well, both far been think million worth

us to impact and costs up back up we're in will XXXX. but profitability in QX, fiscal to ramp Our certainly get starting going

to past at we we still million from end that year, that, but start revenue XX the recall, in standpoint guided due to XX low of of million were a the Aviara Eric, hit And to impacted will year, COVID for this range. the you the

So year. Aviara revenue for around call of this it million $XX

thinking cost ram I going? it up new operating get hope not to the cost costs CapEx at just facility

Yes, where across CapEx on to it the we and purchase like NauticStar production million and of $XX levels would of the million, property another to to high and facility our run is to and running we $X Crest. $X And kind million estimate up of that that be normal MasterCraft we top back intend there. need get

year, full to CapEx low the mid in. all $XX the for looking So in somewhere range, probably we're million

Thank from Swartz Swartz Mike you. And Securities. our next question with comes

Your line is open.

Maybe thanks starting that. just for providing guidance, 'XX the with fiscal

there's imply it that think it do XX be would levels, I fiscal below the XX year costs year would I but revenue says us Aviara. to I fiscal inefficiencies and what 'XX of get that in know some back between 'XX. we EBITDA the if you saw with million million walk than start-up maybe obviously the would and why math, 'XX? profitability lower be And through Can

on. the first it me you top let Well, line, commented with start

If year. at the 'XX heavy end regards that very you inventory with was came in of heavy remember, -- very

normal situation benchmark. And big there or you know over. a not carry so, a was one That's a is good that

I is all the standpoint. of from on our diluting numbers overall the say our that's but the factors they're would worth full the included that in a in Crest to comp revenue With of unfortunately also at you're margin. one regard looking the So, margin, costs, year

diluted margins Crest, in nine because Yes, comparing of fiscal we're worth months XX.

facility. have the at you cost So the mentioned, new start-up as we

got the with really getting pace and a to up measured on throughout speed trains costs and you've new at MasterCraft, In associated since employees forth. so ramping year addition, up we're

what of And is you X,XXX you based was I And when state you're I under that is right but outlook retail want guess -- around what number think going your that right sure, it what kind I Or just that assume? your now. believe I on? you demand forward? what's to would units number, then maybe for the make heard Fred, said, inventory

two consider that. in say just would I things to

inventory a us. think been we average much I then in that's or because have the estimate for segment our higher historically use conservative turns

fast conservative regard we're to in use So, we increase retail assumptions. inventory our very be able how addition expectation to to going turn and with dealer

you. Thank

comes Our with Andress KeyBanc. next Brett from question

Your open. line is

a could holding the sales expectations, you growing If just shipments that decline we I help us think about with mid-teens are more factors little back from you brand? XQ? there I specific any how in XQ mean, And low-to guess, should by

Well, as mode we quarter. mentioned, ramp first we're the throughout up in

mode. And so, bit. is could that's in backend more holding for us up little we ramp The to cadence since back are, be a going the I loaded a year say,

holding same going come far As to we're maintain have speed at standards us up as our time. suppliers back, to to and quality the

So, kind items those of QX. are the for gating

then, like the got since of inventory quarter. lighter sounds end the it And

So on the and your August for here brand demand retail of September? just any in color level

Yes, Brett, this is George.

the So momentum July-August tell for the you brands. July range anywhere What up continue that across retail. and the to all retail we XX% August, see was from a up from strong brands to XX% we three is across

market restock for the XX% So, so get positioned selling you positioned September April XX% to share we next rest to year season, summer the period which retail certainly the through continued summer. and take were next by additional certainly dealers momentum accounts retail and for of in pleased well to that that about very know as and of and

MasterCraft, the challenging in particular in year quarter. we last first Keep fiscal in have mind for comps

up we're even that's than comps. So, from those more remarkable

on be I exclude, last I then, XXXX, what start-up expectation math excluding there, my and can we guess would if cost margin guess, And the facility. Aviara question. your the in ramp the Aviara? headwinds you as do But I that EBITDA for

little at moderate Brett. range what here front the would all negative a -- EBITDA of at million loss, year, more a million I that's pencil loss the of those $X the that I that said looking But a to $X I kind guidance, of you, in right when for kind just give Aviara we don't know in costs. were we of would negative to have bakes you in we math of

you I do think can math, that don't in have information, So, I the front me. but it with of

you. Thank

Craig comes Baird. question next Our with Kennison from

Your line open. is

I Great. comment on question the morning. have guidance of your Thanks good a X,XXX you units revenue and made inventory. and on

roughly units reconcile Just can't boats, shipping X,XXX don't be know, and that, a XXX XXXX, fully XX% you'd boats, you flattish almost, if in that's inventory I X,XXX retail you shipped of environment, replenished in growth. fiscal

for. impact calling ASP revenue XX%-ish much no better than guess So you're I that growth

more Is Can't that So, what less restocking pessimistic or function a I that? quite am of there? missing retail? reconcile

shortfall that inventory mean, take we channel. just I XX fill longer the to Craig, fiscal going No, believe I X,XXX think, to certainly than in is

So, we're visibility we're -- comfortable out see. the we putting obviously with guidance

And we're than height continue in to going and watch going retail confident terms We're higher healthy, going stays and that environment so, historically track. sure to stuff have channel. our we're manage make guide the number, this the that to dealers on with to business not keep to we where, but just we're

X,XXX pipeline that long-term in we're a And growth So, we'll as sure make XXXX. filling controlled us the set way. up we certainly for the very growth a significant beyond and opportunity view measured for

really that's answer of kind there. what would so, And I

you dealer historically if and good intend the normalizing we seen, us think, I at good XXXX, of and the that's for pipeline we've we also the well. sometime inventory to in as and dealers terms, Sure, operate and hired a think fiscal think for Company

limit to even capacity that. looking you it is from in there XXXX? have produce you do standpoint, catch for what up could fiscal a that? And to sufficient capacity Thanks maybe just Or fully a to at

again, capacity. for MasterCraft the years. consuming Aviara amount than constraint not that with Because master many capacity, up foresee have moving regard substantial freeze we once terminal a capacity. a ramp up, do of other we Well, And to additional don't

board what's fourth across in the Thank relative embedded quarter, revenue ASP expectations, looking at our growth you. the ASP then very to guidance? strong your in expectation results the And

that XXXX, keep low of ASPs disproportionate sold traditionally growth our the were of have larger fiscal boats options in and in fiscal expecting mind was what drove it a we quarter they retail producing of We're in load selected. four and number

mentioned again? have Fred, think I metrics the who share finally, percentage may those time people you I buyers And first you've missed boating. new are actual to or there. Could

we I Well, people. returning say essentially are those what said other just new we in boating a say, ranges. would XX% the And are new seen we've Currently, terms roughly either the voting XX% just to historical seen boaters in of doubling boating. to the and or are kind of we've

those on So, our deliver to our it's them that and to focus we're getting entrants and for sure they're keep loyal brand. experience continue looking making the we

So, it's We phenomenon. a situation to last for expand one-time it's to not we think think is and that years. it's market a the wonderful opportunity a going

Our line Joe comes Altobello the next James. of question from with Raymond

Your line is open.

up first Curious impact Just they're sold buying? as seeing average buyers? boat that retail well comment and boats. a boats of want what they to the from lot bringing to regarding whistles bells on the you're ASPs go and your from time the Are back with

way seen the we've the different opinion, think totally than we've first the from because up and it's Crest all time, time end. price time think points. my buyers range, those I MasterCraft at of high at range. way brands across to our you all in the the buyers seen different first We've first entry seen, level the what They're

it's -- it's spreads. in opinion, So, been my

what very or if in terms it when approach to you July you just I'm start Typically, trends still we curious mentioned, August. start did quote retail was of I'm to -- does saw slow in in see strong you and as then, to normalize unquote, retail normalize did if holiday? of and year you Labor Day. time curious, the And the

that the think inventory. quote was a remember normalize. that's heavy But to in year, previous I starting a also carryover there it's correct characterization of

quarter, was lot a those move promotion of that was certainly it for time Day that holiday Labor of throughout that a And votes. around very there first our active some so, ourselves took And place and the to competitors. promotional

normal So last were. what a results basis, your necessarily on comp not is year's

growth couple I year-over terms the of normalizing Yes, meant in growth last in versus months?

it's Well, off finally down. we're winding selling the coming season,

last, much And can that about with to a of of asked that how it to, those of those pros you're event? are guess address you think channel. X,XXX under XXXX just inventory your do more this the one goes Greg year? you the How I much questions And back

going in And very shape, I and we be give probably inventory negative this Should why feel are going able year, that think good in environment? but we're a impacts there to felt exiting guidance. being provides be lean cushion. still to the we that any be to us on really just that's we comfortable

Haimes our And you. Management. last Asset Barry Thank question comes Sage from with

Your line is open.

your is a basis, capacity? I the edition, So, Merritt on One couple. had Island just that increase a square footage how does much

Aviara. to footage more allocated XXX,XXX That of we've quadruple that to here Aviara That is will the feet than dedicated amount facility that square square is be got a today.

$XX there's within So, at to or capacity as three we've ample grow there million hopefully, that above stated, brand, years.

us to positive. MasterCraft, allows expand important, for very are Equally those both so our the it capacity

question second percent what will facility? to increase is, get That once Aviara MasterCraft my was that vacates be capacity going

on order XX%. think the I to of XX%

I up next if in plant million, had, Okay, items everything answer get X an talked, X running. cost moves in costs capital expense that the addition to well. I question you or and to in and to as And, missed this, was think great costs earlier then million I question, about to the

expense little that of terms and a what's what's through capital around, us give going just you could help change process? in So

as, million million $X CapEx be number. to was operational start-up we that that costs shared, call expected we and on guided addition the a capital loss, getting but which $X number the was won't as referenced The up of not of the all number, to, includes to -- and ramp facility itemized we've in we EBITDA

'XX you're results my if, the in then this When expect should quarterly final And your year, the $X of Thanks. Is fiscal half to doing a line the so be Okay. there where the wouldn't second question in first half that transition again, 'XX, fiscal more of get of the share year. any with you fiscal kind you in sort years the we to were level run to look of year? reason doing a of rate? back is, $X the fiscal we half second of to kind

-- not second have half don't I guidance. we're give going to Yes,

and can what point. think as half with we've that we this second QX year, you at of given kind of to but historical full implied I look feel years, the as kind that's compare at comfortable and on for

And Thank turn this to you. And I'd speakers. the your I'm to not like now showing call any time. questions further back at

want to your and joining us you. MasterCraft interest support you I everybody thank your appreciate Thank all We today. for safe. hope stay of and

Ladies this call. concludes today's Thank gentlemen, participation. you your and conference for

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