MasterCraft Boat Holdings, Inc. Reports Record Earnings for Fiscal 2021 First Quarter
Highlights:
- Most profitable first quarter in the Company’s history
- Purchase of
Merritt Island, Florida facility completed onOctober 26, 2020 , increasing production capacity for the MasterCraft and Aviara brands - Net sales for the first quarter decreased to
$103.7 million , down 5.5 percent from$109.8 million in the prior-year period - Net income was
$9.6 million or$0.51 per diluted share, a 10.9 percent increase from$0.46 in the prior-year period - Diluted Adjusted Net Income per share, a non-GAAP measure, was
$0.58 , a 7.4 percent increase from$0.54 in the prior-year period - Adjusted EBITDA, a non-GAAP measure, grew 6.8 percent to
$17.0 million from$15.9 million in the prior-year period - Revolving credit facility was fully repaid, and the Company ended the quarter approaching
$45.0 million of liquidity - Current production rates exceed pre-COVID levels at all brands
- Guidance for full-year fiscal 2021 raised on strength of retail demand and wholesale production ramp up
Brightbill continued, “While our results are a testament to the strong retail demand for our leading brands, they are also a function of our continued execution on our strategy to drive sustainable, accelerated growth. The strength of our order book and increased consumer interest in recreational boating give us confidence in our outlook and ability to create shareholder value.”
First Quarter Results
Gross profit increased
Gross margin was 25.3 percent for the first quarter, an increase of 200 basis points compared to the prior-year period. The increase was primarily attributable to lower dealer incentives, price increases, and a richer product mix driven by continuing strong retail demand, partially offset by lower overhead absorption driven by lower sales volume and higher labor costs.
Operating expenses were
Net income for the first quarter increased 10.9 percent to
Adjusted EBITDA was
See “Non-GAAP Measures” below for a reconciliation of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Net Income per share to the most directly comparable financial measures presented in accordance with GAAP.
Outlook
Concluded Brightbill, “Due to a continuation of strong retail demand trends, historically low dealer inventory, the strength of our order book across our brands, and the increasing production rates we delivered in each segment over the course of the quarter, we are raising our guidance for fiscal 2021. Importantly, our guidance assumes that we are able to operate all of our facilities throughout the year without any COVID-19 related shutdowns.”
The Company’s outlook is as follows:
- For full year fiscal 2021, consolidated net sales is expected to grow in the mid 30 percent range year-over-year, with Adjusted EBITDA margins approaching 15 percent, and Adjusted Earnings per share growth in the mid 80 percent range year-over-year.
- For the fiscal second quarter, consolidated net sales is expected to be up in the mid-teens percent range year-over-year, with Adjusted EBITDA margins in the mid 13 percent range, and Adjusted Earnings per share growth approaching 20 percent.
Conference Call and Webcast Information
For an audio replay of the conference call, dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and enter audience passcode 7780229. The audio replay will be available beginning at 11:30 a.m. EST on Wednesday, November 11, 2020, through 11:30 a.m. EST on
About
Headquartered in
Forward-Looking Statements
This press release includes forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Forward-looking statements can often be identified by such words and phrases as “believes,” “anticipates,” “expects,” “intends,” “estimates,” “may,” “will,” “should,” “continue” and similar expressions, comparable terminology or the negative thereof, and include statements in this press release concerning the resilience of our business model; our intention to drive value and accelerate growth; and the potential impact of COVID-19 on our operating results and liquidity.
Forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including, but not limited to: the potential effects of the coronavirus (COVID-19) pandemic on the Company, general economic conditions, demand for our products, changes in consumer preferences, competition within our industry, our reliance on our network of independent dealers, our ability to manage our manufacturing levels and our large fixed cost base, changes to
Any such forward-looking statements represent management's estimates as of the date of this press release. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release. We undertake no obligation (and we expressly disclaim any obligation) to update or supplement any forward-looking statements that may become untrue or cause our views to change, whether because of new information, future events, changes in assumptions or otherwise. Comparison of results for current and prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.
Use of Non-GAAP Financial Measures
To supplement the Company’s condensed consolidated financial statements prepared in accordance with
Results of Operations for the Three Months Ended October 4, 2020
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Three Months Ended | |||||||||
October 4, | September 29, | ||||||||
2020 | 2019 | ||||||||
Net sales | $ | 103,745 | $ | 109,789 | |||||
Cost of sales | 77,515 | 84,256 | |||||||
Gross profit | 26,230 | 25,533 | |||||||
Operating expenses: | |||||||||
Selling and marketing | 2,907 | 4,064 | |||||||
General and administrative | 8,932 | 7,785 | |||||||
Amortization of other intangible assets | 987 | 987 | |||||||
Total operating expenses | 12,826 | 12,836 | |||||||
Operating income | 13,404 | 12,697 | |||||||
Other expense: | |||||||||
Interest expense | 1,019 | 1,344 | |||||||
Income before income tax expense | 12,385 | 11,353 | |||||||
Income tax expense | 2,818 | 2,730 | |||||||
Net income | $ | 9,567 | $ | 8,623 | |||||
Earnings per share: | |||||||||
Basic | $ | 0.51 | $ | 0.46 | |||||
Diluted | $ | 0.51 | $ | 0.46 | |||||
Weighted average shares used for computation of: | |||||||||
Basic earnings per share | 18,774,336 | 18,723,845 | |||||||
Diluted earnings per share | 18,866,826 | 18,770,756 |
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
October 4, | June 30, | |||||||
2020 | 2020 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 8,858 | $ | 16,319 | ||||
Accounts receivable, net of allowances of |
12,993 | 6,145 | ||||||
Income tax receivable | 2,804 | 4,924 | ||||||
Inventories, net | 32,601 | 25,636 | ||||||
Prepaid expenses and other current assets | 3,644 | 3,719 | ||||||
Total current assets | 60,900 | 56,743 | ||||||
Property, plant and equipment, net | 40,659 | 40,481 | ||||||
29,593 | 29,593 | |||||||
Other intangible assets, net | 62,861 | 63,849 | ||||||
Deferred income taxes | 16,121 | 16,080 | ||||||
Deferred debt issuance costs, net | 392 | 425 | ||||||
Other long-term assets | 694 | 752 | ||||||
Total assets | $ | 211,220 | $ | 207,923 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 15,675 | $ | 10,510 | ||||
Accrued expenses and other current liabilities | 35,891 | 35,985 | ||||||
Current portion of long-term debt, net of unamortized debt issuance costs | 8,943 | 8,932 | ||||||
Total current liabilities | 60,509 | 55,427 | ||||||
Long-term debt, net of unamortized debt issuance costs | 87,426 | 99,666 | ||||||
Operating lease liabilities | 221 | 277 | ||||||
Unrecognized tax positions | 4,141 | 3,683 | ||||||
Total liabilities | 152,297 | 159,053 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS' EQUITY: | ||||||||
Common stock, |
189 | 189 | ||||||
Additional paid-in capital | 116,668 | 116,182 | ||||||
Accumulated deficit | (57,934 | ) | (67,501 | ) | ||||
Total stockholders' equity | 58,923 | 48,870 | ||||||
Total liabilities and stockholders' equity | $ | 211,220 | $ | 207,923 |
Supplemental Operating Data
The following table presents certain supplemental operating data for the periods indicated:
Three Months Ended | |||||||||||||
October 4, | September 29, | ||||||||||||
2020 | 2019 | Change | |||||||||||
(Dollars in thousands) | |||||||||||||
Unit sales volume: | |||||||||||||
MasterCraft | 653 | 741 | (11.9 | %) | |||||||||
NauticStar | 286 | 396 | (27.8 | %) | |||||||||
Crest | 453 | 526 | (13.9 | %) | |||||||||
Consolidated | 1,392 | 1,663 | (16.3 | %) | |||||||||
MasterCraft | $ | 73,364 | $ | 72,913 | 0.6 | % | |||||||
NauticStar | 12,342 | 17,995 | (31.4 | %) | |||||||||
Crest | 18,039 | 18,881 | (4.5 | %) | |||||||||
Consolidated | $ | 103,745 | $ | 109,789 | (5.5 | %) | |||||||
Net sales per unit: | |||||||||||||
MasterCraft | $ | 112 | $ | 98 | 14.3 | % | |||||||
NauticStar | 43 | 45 | (4.4 | %) | |||||||||
Crest | 40 | 36 | 11.1 | % | |||||||||
Consolidated | 75 | 66 | 13.6 | % | |||||||||
Gross margin | 25.3 | % | 23.3 | % | 200 bps |
Non-GAAP Measures
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin
We define EBITDA as earnings before interest expense, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations. For the periods presented herein, these adjustments include Aviara transition costs and Aviara (new brand) startup costs, and non-cash share-based compensation. We define Adjusted EBITDA margin as Adjusted EBITDA expressed as a percentage of Net sales.
Adjusted Net Income and Adjusted Net Income per share
We define Adjusted Net Income and Adjusted Net Income per share as net income adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations and adjusted for the impact to income tax expense (benefit) related to non-GAAP adjustments. For the periods presented herein, these adjustments include Aviara transition costs, Aviara (new brand) startup costs, and certain non-cash items including other intangible asset amortization and share-based compensation.
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Net Income per share, which we refer to collectively as the Non-GAAP Measures, are not measures of net income or operating income as determined under accounting principles generally accepted in
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements;
- Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
- Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
- Adjusted EBITDA does not reflect our tax expense or any cash requirements to pay income taxes;
- Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness; and
- Adjusted Net Income, Adjusted Net Income per share, and Adjusted EBITDA do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our core and/or ongoing operations, but may nonetheless have a material impact on our results of operations.
In addition, because not all companies use identical calculations, our presentation of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies, including companies in our industry.
We do not provide forward-looking guidance for certain financial measures on a
The following table presents a reconciliation of net income as determined in accordance with
Three Months Ended | ||||||||
2020 | 2019 | |||||||
(Dollars in thousands) | ||||||||
Net income | $ | 9,567 | $ | 8,623 | ||||
Income tax expense | 2,818 | 2,730 | ||||||
Interest expense | 1,019 | 1,344 | ||||||
Depreciation and amortization | 2,739 | 2,371 | ||||||
EBITDA | 16,143 | 15,068 | ||||||
Share-based compensation | 640 | 512 | ||||||
Aviara start-up costs(a) | — | 308 | ||||||
Aviara transition costs(b) | 178 | — | ||||||
Adjusted EBITDA | $ | 16,961 | $ | 15,888 | ||||
Adjusted EBITDA margin | 16.3 | % | 14.5 | % |
(a) Represents start-up costs associated with Aviara, a completely new boat brand in an industry category previously not served by the Company. We began selling the brand’s first two models, the AV32 and the AV36, during the first and second quarters of fiscal 2020, respectively. We expect to begin selling one additional model, the AV40, after the Aviara transition of production to the new
(b) Represents costs to transition production of the Aviara brand from
The following table presents a reconciliation of net income as determined in accordance with
Three Months Ended | |||||||||
2020 | 2019 | ||||||||
(Dollars in thousands, except per share amounts) | |||||||||
Net income | $ | 9,567 | $ | 8,623 | |||||
Income tax expense | 2,818 | 2,730 | |||||||
Amortization of acquisition intangibles | 960 | 960 | |||||||
Aviara start-up costs(a) | — | 308 | |||||||
Aviara transition costs(b) | 178 | — | |||||||
Share-based compensation | 640 | 512 | |||||||
Adjusted Net Income before income taxes | 14,163 | 13,133 | |||||||
Adjusted income tax expense(c) | 3,257 | 3,021 | |||||||
Adjusted Net Income | $ | 10,906 | $ | 10,112 | |||||
Adjusted net income per common share | |||||||||
Basic | $ | 0.58 | $ | 0.54 | |||||
Diluted | $ | 0.58 | $ | 0.54 | |||||
Weighted average shares used for the computation of: | |||||||||
Basic Adjusted net income per share | 18,774,336 | 18,723,845 | |||||||
Diluted Adjusted net income per share | 18,866,826 | 18,770,756 |
(a) Represents start-up costs associated with Aviara, a completely new boat brand in an industry category previously not served by the Company. We began selling the brand’s first two models, the AV32 and the AV36, during the first and second quarters of fiscal 2020, respectively. We expect to begin selling one additional model, the AV40, after the Aviara transition of production to the new
(b) Represents costs to transition production of the Aviara brand from
(c) Reflects income tax expense at an income tax rate of 23.0% for each period presented.
The following table presents the reconciliation of net income per diluted share to Adjusted net income per diluted share for the periods presented:
Three Months Ended | |||||||||
2020 | 2019 | ||||||||
Net income per diluted share | $ | 0.51 | $ | 0.46 | |||||
Impact of adjustments: | |||||||||
Income tax expense | 0.15 | 0.15 | |||||||
Amortization of acquisition intangibles | 0.05 | 0.05 | |||||||
Aviara startup costs(a) | — | 0.02 | |||||||
Aviara transition costs(b) | 0.01 | — | |||||||
Share-based compensation | 0.03 | 0.03 | |||||||
Adjusted Net income per diluted share before income taxes | 0.75 | 0.71 | |||||||
Impact of adjusted income tax expense on net income per diluted share before income taxes(c) | (0.17 | ) | (0.17 | ) | |||||
Adjusted Net Income per diluted share | $ | 0.58 | $ | 0.54 |
(a) Represents start-up costs associated with Aviara, a completely new boat brand in an industry category previously not served by the Company. We began selling the brand’s first two models, the AV32 and the AV36, during the first and second quarters of fiscal 2020, respectively. We expect to begin selling one additional model, the AV40, after the Aviara transition of production to the new
(b) Represents costs to transition production of the Aviara brand from
(c) Reflects income tax expense at an income tax rate of 23.0% for each period presented.
Change in Non-GAAP Financial Measure
Prior to fiscal year-end 2020, the Company’s calculation of a diluted per share amount of Adjusted Net Income included an adjustment to fully dilute this non-GAAP measure for all outstanding share-based compensation grants. This additional dilution was incorporated by adjusting the GAAP measure, Weighted Average Shares Used for the Computation of Basic earnings per share, as presented on the Consolidated Statements of Operations, to include a dilutive effect for all outstanding RSAs, PSUs, and stock options. Beginning with the fiscal year-end 2020 presentation and for all subsequent periods, the Company will no longer include this additional dilution impact in its calculation of Adjusted Net Income per diluted share. The Company has instead utilized the Weighted Average Shares Used for the Computation of Basic and Diluted earnings per share as presented on the Consolidated Statements of Operations to calculate Adjusted Net Income per diluted share for all periods presented herein.
The Company believes that, because its outstanding share-based compensation grants no longer result in a material amount of dilution of its earnings as was the case nearer to the date of our IPO, the adjustment methodology previously used no longer provides meaningful information to management or other users of its financial statements. This change resulted in an increase of
Investor Contact:
Chief Revenue Officer
Email: investorrelations@mastercraft.com
Source: MasterCraft Boat Holdings, Inc.