MasterCraft announces Q4 FY19 results

MasterCraft Boat Holdings, Inc. (NASDAQ: MCFT) today announced financial results for its fiscal 2019 fourth quarter and full year ended June 30, 2019.

Net Sales for the fourth quarter were $122.8 million, reflecting an increase of $27.4 million, or 28.7%, compared to $95.4 million for the prior-year period. The increase was primarily due to an increase at MasterCraft of $6.0 million, or 8.1%, primarily due to an increase in unit sales volume, favorable product mix and price increases; the inclusion of Crest, which incrementally added net sales of $23.3 million; and partially offset by a decrease at NauticStar of $1.9 million, or 8.8%, primarily due to a reduction in volume as production was slowed to match wholesale shipments with retail demand, partially offset by favorable product mix and price increases.

Gross profit increased $3.6 million, or 12.9%, to $31.5 million compared to $27.9 million for the prior-year period. The increase was primarily due to the increases in MasterCraft unit sales volumes, price increases, and favorable product mix, partially offset by a year-over-year increase in warranty expense resulting from the favorable one-time warranty adjustment taken in the fourth quarter of 2018; the inclusion of Crest, which contributed $4.3 million to gross profit; and partially offset by a $1.1 million decrease in gross profit for NauticStar, principally due to the decrease in volume.

Given the above-mentioned factors, gross margin decreased to 25.6% for the fourth quarter compared to 29.2% for the prior-year period.

Operating expenses increased $34.1 million, or 381%, to $43.0 million for the fourth quarter compared to $8.9 million for the prior-year period. This increase resulted mainly from the NauticStar Charge and the inclusion of Crest, which increased operating expenses by $1.8 million.

 “MasterCraft Boat Holdings delivered strong operational results in the fourth quarter, closing out our fiscal 2019 on a strong note,” Terry McNew, president and chief executive officer said.  Despite many headwinds faced throughout the year, including import tariffs, adverse weather throughout the country during the selling season – especially in June – and macroeconomic uncertainty, our team once again generated record levels of net sales and adjusted earnings. Moreover, our strong cash management practices enabled us to significantly reduce our total debt.”

Operating expenses, as a percentage of net sales, increased by 25.6 percentage points to 35% for the fourth quarter compared to 9.4% for the prior-year period. This impact resulted primarily from the NauticStar Charge. Excluding this non-cash impairment charge, acquisition-related and integration costs, and start-up costs for the company’s new Aviara brand, operating expenses as a percentage of sales decreased 0.2 percentage points to 9% for the fourth quarter compared to 9.2% for the prior-year period.

Net Income (loss) for the fourth quarter was $(10.1) million, reflecting a decrease of $23.2 million, or 176.5%, compared to $13.1 million for the prior-year period. The decrease was primarily due to the NauticStar Charge. Adjusted Net Income of $16.1 million, or $0.85 per share, on a fully diluted, weighted average share count of 18.9 million shares, was computed using the company’s estimated annual effective tax rate of approximately 22.5%. This compares to Adjusted Net Income of $12.8 million, or $0.68 per fully diluted share, in the prior-year period.

Adjusted EBITDA was $23.8 million for the fourth quarter, compared to $19.8 million in the prior-year period. Adjusted EBITDA margin was 19.4%, down from 20.8% in prior-year period principally due to the dilutive effect of Crest.

Fiscal 2019 Results

Net Sales for fiscal 2019 were $466.4 million, an increase of $133.7 million, or 40.2%, compared to $332.7 million for fiscal 2018. The gain was primarily due to an increase at MasterCraft of $45.5 million, or 17.1%, primarily driven by an increase in unit sales volume, favorable product mix and price increases, offset by higher discounts to support our Canadian and European Union dealers impacted by retaliatory import tariffs; the inclusion of Crest, which grew net sales by $76.6 million; and a net $11.6 million increase in net sales for NauticStar, driven by the inclusion of NauticStar in our fiscal 2019 first quarter results, partially offset by a decrease in volume due to softness in NauticStar’s core market.

Gross profit increased $22.8 million, or 25.2 percent, to $113.1 million compared to $90.4 million for fiscal 2018. The increase was primarily due to an increase in MasterCraft unit sales volumes, price increases, and favorable product mix, offset by increased warranty costs and higher discounts to support Canadian and European Union dealers impacted by retaliatory import tariffs; the inclusion of Crest, which contributed $13.6 million to gross profit; and partially offset by a net $1.2 million decrease in gross profit for NauticStar, driven by a decrease in volume, partially offset by the inclusion of NauticStar in our fiscal 2019 first quarter results.

Given the above-mentioned factors, gross margin decreased to 24.3% for fiscal 2019 compared to 27.2% for fiscal 2018.

Operating expenses increased $45.5 million, or 132.3%, to $79.9 million for fiscal 2019 compared to $34.4 million for fiscal 2018. This increase resulted mainly from the NauticStar Charge; the inclusion of Crest, which increased operating expenses by $6.5 million; an increase of $2.3 million in startup costs related to Aviara; the incremental inclusion of NauticStar in our fiscal 2019 first quarter results, which added $1.9 million; and an increase of $1.9 million in intangible asset amortization, which includes the effects of both the NauticStar and Crest acquisitions, principally for dealer networks.

Operating expenses, as a percentage of net sales, increased by 6.8 percentage points to 17.1% for fiscal 2019 compared to 10.3% for fiscal 2018. This increase resulted primarily from the NauticStar Charge. Excluding this non-cash impairment charge, acquisition-related and integration costs, and start-up costs for Aviara, operating expenses as a percentage of sales decreased 0.1 percentage points to 9.5% for fiscal 2019 compared to 9.6% for fiscal 2018.

Net Income for fiscal 2019 was $21.4 million, reflecting a decrease of $18.3 million, or 46.1%, compared to $39.7 million for fiscal 2018. The decrease was primarily due to the NauticStar Charge. Adjusted Net Income of $53.0 million, or $2.81 per share, on a fully diluted, weighted average share count of 18.8 million shares, was computed using the company’s estimated annual effective tax rate of approximately 22.5%. This compares to Adjusted Net Income of $40.4 million, or $2.15 per fully diluted share, in the prior-year period.

Adjusted EBITDA was $79.3 million for fiscal 2019, compared to $64.0 million in the prior-year period. Adjusted EBITDA margin was 17 percent, down from 19.2% in fiscal 2018 principally due to the dilutive effect of NauticStar and Crest.

“We remain bullish on the long-term prospects of both the markets we serve and the brands we own, irrespective of any near-term fluctuations,” McNew said. “We firmly believe our long-tenured, industry-veteran leadership team and seasoned and dedicated employees, together with our low-fixed cost, highly-variable cost structure, best-in-class net working capital management, and strong balance sheet, position the company to perform in all economic environments.