MCBC Holdings, Inc. reports 4Q, full year 2018 results

MCBC Holdings, Inc. the parent entity of MasterCraft Boat Co. and NauticStar, LLC, today announced financial results for its fiscal 2018 fourth quarter and full year ending June 30, 2018.

Net sales for the fourth quarter increased to $95.4 million, up 63.6 percent from $58.3 million in the prior-year period due to improvements in MasterCraft’s core business and the inclusion of NauticStar. Net sales for the fiscal year rose to $332.7 million, up from $228.6 million.

Gross profit for the fourth quarter increased to $27.9 million, a 69.5 percent gain from $16.5 million in the prior-year period. Gross profit for the fiscal year rose to $90.4 million, up from $63.5 million.

Fourth quarter gross margin grew 100 basis points to 29.2 percent, from 28.2 percent in the prior-year period. MasterCraft’s standalone margin increase, mainly from a favorable product mix, was partially offset by the inclusion of NauticStar. Fiscal year gross margin decreased 60 basis points, primarily due to the impact of NauticStar.

Net income totaled $13.1 million for the 2018 fourth quarter, a gain of $6.8 million, or 108.1 percent, from the prior-year period. Fiscal year net income rose $20.1 million to $39.7 million.

Fourth quarter diluted earnings per share increased by $0.36, or 105.9 percent to $0.70, up from $0.34 in the prior-year period. Fiscal year diluted earnings per share grew to $2.12, versus $1.05 in fiscal 2017.

During the year, the company reported strong cash flow enabled debt repayments of $39.3 million, which represents almost half of the $80 million borrowed for the purchase of NauticStar.

“We ended fiscal 2018 delivering record sales and net income for both the fourth quarter and fiscal year," said Terry McNew, MCBC Holdings, Inc. president and chief executive officer. "Continued growth in retail demand and our unwavering focus on operational efficiency drove results. Moreover, our strong cash management practices enabled us to significantly reduce our total debt.”

Retail activity with regard to MasterCraft strengthened throughout fiscal 2018, resulting in improved dealer inventory turns and the largest June retail sales in MasterCraft’s history, McNew reported, setting the stage for continuing healthy dealer inventory levels and activity in fiscal 2019.

"At NauticStar we have added nearly 20 dealer locations since the beginning of calendar year 2018 and are excited about driving growth and looking forward to working with our strong dealer network to maximize their opportunities over the coming year," McNew said.

Selling and marketing expense increased $0.8 million, or 38.0 percent, to $3.0 million for the fourth quarter ended June 30, 2018, compared to $2.2 million for the year earlier period. This increase resulted mainly from the inclusion of NauticStar, which added $0.6 million in selling and marketing expenses.

Fourth quarter general and administrative expense increased by $1.7 million, or 46.9 percent, to $5.4 million, compared to $3.7 million for the prior-year period.

This increase resulted mainly from the inclusion of NauticStar, a litigation settlement charge, startup costs for a new brand in a different boat segment and higher compensation costs.

Fourth quarter net income was driven by the inclusion of NauticStar, lower warranty costs, reduced retail rebate activity and reduced tax rates from the enactment of the Tax Cuts and Jobs Act.

Net sales for the fiscal year increased 45.5 percent, or $104.1 million, to $332.7 million from $228.6 million in the prior year. The inclusion of NauticStar represented $66.4 million, or 29.0 percent, of the increase while MasterCraft grew $37.7 million, or 16.5 percent.

The MasterCraft increase stemmed from an increase in sales volume, reduced retail rebate activity, favorable product mix and price increases.

Fiscal year gross profit increased $26.9 million, or 42.4 percent, to $90.4 million, compared to $63.5 million for fiscal 2017. MasterCraft contributed $14.6 million to the gain primarily due to growth in MasterCraft unit sales volume, lower warranty costs and reduced retail rebate activity.

The inclusion of NauticStar contributed $12.3 million to the increase in gross profit. Gross margin decreased to 27.2 percent for fiscal 2018, versus 27.8 percent for fiscal 2017. The decrease was primarily due to inclusion of the dilutive effect of NauticStar’s gross margin..

Net income totaled $39.7 million for the fiscal year, up from $19.6 million in fiscal 2017, which was driven by the inclusion of NauticStar, reduced retail rebate activity, lower warranty costs and reduced tax rates from the enactment of the Tax Cuts and Jobs Act.

Adjusted Net Income totaled $39.4 million, or $2.09 per share, for fiscal 2018, on a fully diluted, weighted average share count of 18.8 million shares, and was computed using the company’s estimated normalized annual effective tax rate of approximately 29 percent. This compares with Adjusted Net Income of $24.3 million, or $1.30 per share, in fiscal 2017.

“We’re nearing our one-year anniversary of welcoming NauticStar to the MasterCraft family," McNew said. "In that time, we’ve leveraged our industry-leading strengths in operational excellence and financial management to further improve NauticStar’s output, quality and margin. Daily production volume is up and we’ve made strides in improving both safety and quality. In fiscal 2019, we look forward to building on the operational and financial improvements begun over the past nine months, while executing additional dealer network expansion and new product development strategies to drive further market share in the high-growth fiberglass outboard category.”

Since the beginning of the fiscal 2018 year, MasterCraft has continued to be at the forefront of product introductions and innovation in the performance sport boat category, as exemplified by the company's recent introduction of the X24 model, and our previously released XT25, XStar, and XT22 models, McNew said.

New wake-specific technologies work in concert on the X24 to operationally speed up the boat’s wake-specific functions. A premium 2018 feature, the new FastFill Ballast System, speeds time to towing by filling the X24’s ballast tanks in under three minutes. Once full, the X24 debuts the new Switchback Ballast Tank that instantly shifts ballast from side-to-side to suit the rider’s preference.

The X24 has room for 18 passengers and was thoughtfully designed with new surf-friendly storage features that allow friends and families to have more people, gear and fun on the water.

The X24’s Pickle Fork bow and U-shaped seating layout create a spacious and comfortable configuration for spectating and lounging. Optional transom lounge and reserve seating scenarios create more options for owners to customize their interior. Storage on the X24 is considerable at 106 cubic feet, including storage compartments above the ballast tanks.

“With the X23 and iconic XStar setting the bar for wakeboarding, surf and performance, it was tough to outdo ourselves. But we delivered,” McNew said. “With the new X24, we’ve created an exceptional wakesurfing experience while providing the ultimate in on-the-water durability, reliability and performance.”

For full fiscal year-end June 30, 2019 guidance, MCBC Holdings now expects net sales percentage growth to be up in the low- teens. Adjusted EBITDA margins are expected to be in the mid-18 percent range. Adjusted EPS is expected to grow in the high-teens.

The guidance above is adjusted for startup costs of approximately $2.5 million associated with a completely new boat brand in a segment of the market neither MasterCraft nor NauticStar currently serves.

For the first fiscal quarter ending in September net sales percentage growth is expected to be in the high 30 percent range with Adjusted EBITDA margins in the mid-sixteen percent range.

Adjusted EPS percentage growth is expected to be in the mid-teens. Recall NauticStar was acquired during our fiscal second quarter last year

MCBC Holdings, Inc. will host a live conference call and webcast to discuss fiscal fourth quarter results today at 5 p.m. ET. To access the call, dial (800) 219-6861 (domestic) or (574) 990-1024 (international) and provide the operator with the conference ID 9893806.

Please dial in at least 10 minutes prior to the call. To access the live webcast, go to the investor section of the company’s website, www.mastercraft.com, and click on the webcast icon.

For an audio replay of the conference call, dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and enter audience passcode 9893806. The audio replay will be available beginning at 8 p.m. ET on Thursday, Sept. 6, 2018, through 11:59 p.m. ET on Thursday, Sept. 20, 2018.

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