MasterCraft reports 12 percent sales increase for quarter
MasterCraft on Thursday announced financial results for its fiscal 2016 second quarter, ended December 27, 2015.
Highlights:
- Net sales, excluding the terminated Hydra-Sports manufacturing contract, increased 12.2 percent versus the year-earlier period
- Total second-quarter net sales rose 4.5 percent over the prior-year second quarter to $55.2 million
- Fully diluted, pro forma, adjusted net income per share increased 57.1 percent to $0.33
- Fiscal 2016 second-quarter adjusted EBITDA increased 31.3 percent to $10.5 million compared to $8.0 million for the year-earlier period
- Gross margin increased to 27.8 percent, a 380 basis point improvement versus the year-earlier period
- Adjusted EBITDA margin increased to 19.1 percent, a 280 basis point improvement versus the year-earlier period
“We continue to deliver outstanding top- and bottom-line increases and unit volume growth,” said MasterCraft president and CEO Terry McNew. “These gains are driven by continued demand for performance sport boats across all models, in particular overwhelming demand for our X23, growth in our MasterCraft NXT line of entry-level models and our newly released X26. Additionally, our relentless focus on operational excellence and continuous improvement continues to yield notable gross margin and adjusted EBITDA gains.”
Second-quarter results
MasterCraft-only net sales for the three months ended December 27, 2015, which exclude the terminated Hydra-Sports manufacturing contract, increased $6.0 million, or 12.2 percent, versus the prior year. The net sales gain was primarily due to a rise in MasterCraft unit volume of 48 units, or 7.4 percent. Net sales per MasterCraft unit grew by 3.9 percent, chiefly stemming from greater adoption of higher-end option packages, new product launches and price increases. Net sales for the three months ended December 27, 2015, were $55.2 million, up $2.4 million, or 4.5 percent, compared to $52.8 million for the three months ended December 28, 2014.
“Domestically, demand for MasterCraft boats remains solid, and we expect that to continue,” said McNew. “Like most marine manufacturers, international headwinds, particularly in Canada, are partially offsetting U.S. results. However, we expect to maintain our sales momentum as MasterCraft continues to drive sustainable, profitable market share gains.”
Gross profit for the three months ended December 27, 2015, increased $2.7 million, or 21.3 percent, to $15.4 million, compared to $12.7 million a year earlier. Gross margin rose to 27.8 percent for the fiscal 2016 second quarter, from 24.0 percent for the prior-year period. The 380 basis point increase primarily stemmed from cost reductions driven by a culture focused on eliminating waste, sales of higher-end content option packages and new innovative features, and robust value added/value engineering cost reduction programs. In addition, the company replaced its Hydra-Sports volume with higher-margin MasterCraft volume.
Selling and marketing expense rose to $2.9 million for the three-month period, compared to $2.0 million for the year-earlier second quarter, primarily due to investments in marketing. General and administrative expense totaled $9.6 million, versus $2.6 million for the fiscal 2015 three-month period. This planned increase resulted mainly from $6.8 million of stock-based compensation and higher costs associated with being a public company.
Net income for the fiscal 2016 second quarter was $1.9 million, up 26.7 percent from $1.5 million in the year-earlier quarter.
Fiscal 2016 second-quarter adjusted EBITDA was $10.5 million, up 31.3 percent from $8.0 million for the year-earlier quarter.
Fiscal 2016 second-quarter adjusted net income increased 59.0 percent to $6.2 million, or $0.33 per share, on a pro-forma, diluted weighted average share count of 18.9 million shares. This compares with $3.9 million, or $0.21 per share a year earlier. See “Non-GAAP Measures” below for a reconciliation of adjusted EBITDA and adjusted net income to net income.
Key Milestones
In the fiscal 2016 first quarter, MasterCraft unveiled the new X26, the latest addition to its innovative 2016 boat line. The company began ramping up production on this model to meet demand in the second quarter.
Said McNew, “Everything we’re hearing from both dealers and consumers about the X26 is overwhelmingly positive. The X26, since its release, has sold 150 percent more boats than the prior-year model it replaced. All production slots for this model are fully allocated for the remainder of the model year.”
Outlook
“MasterCraft has delivered a solid fiscal 2016 first half, and we expect to continue to drive strong organic growth for the remainder of fiscal 2016,” McNew said. “Additionally, we remain committed to our five-pronged growth strategy:
- Developing new and innovative products in core markets;
- Further penetrating the entry-level segment of the performance sport boat category;
- Capturing share from adjacent boating categories;
- Strengthening our dealer network; and
- Driving margin expansion through continuous operational excellence.”
For the fiscal 2016 year ending June 30, 2016, MasterCraft reiterates its expectations for MasterCraft sales and unit volume growth, compared to fiscal 2015 sales and unit volume excluding Hydra-Sports, in the high-single to low-double digit range. Gross margin and adjusted EBITDA margin are both expected to increase at least 200 basis points from fiscal year 2015, with contributions from higher net sales and continued operating efficiency gains offsetting the absorption of public company costs following the company’s July 2015 IPO. Adjusted net income is expected to grow faster than adjusted EBITDA, while GAAP net income will be impacted, primarily in the first half of the year, by charges related to changes in the fair value of the company’s common stock warrants, as well as stock compensation expense related primarily to restricted stock and options granted prior to, and in connection, with the IPO.
