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Manufacturing

Mastercraft Boat Holdings Inc.

11/06/2025 | Press release | Distributed by Public on 11/06/2025 11:49

Quarterly Report for Quarter Ending September 28, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read together with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. In addition, the statements in this discussion and analysis regarding our expectations concerning the performance of our business, anticipated financial results, liquidity and the other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in "Cautionary Note Regarding Forward-Looking Statements" above and in "Risk Factors" set forth in our 2025 Annual Report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Certain statements in the following discussions are based on non-GAAP financial measures. A "non-GAAP financial measure" is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP in the statements of operations, balance sheets or statements of cash flows of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Non-GAAP financial measures do not include operating and statistical measures. The Company includes non-GAAP financial measures in Management's Discussion and Analysis, as the Company's management believes that these measures and the information they provide are useful to users of the financial statements, including investors, because they permit users of the financial statements to view the Company's performance using the same tools that management utilizes and to better evaluate the Company's ongoing business performance. In order to better align the Company's reported results with the internal metrics used by the Company's management to evaluate business performance as well as to provide better comparisons to prior periods and peer data, non-GAAP measures exclude the impact of purchase accounting amortization related to business acquisitions.

Overview

The Company's results for all periods presented, as discussed in Management's Discussion and Analysis, are presented on a continuing operations basis, which consists of our MasterCraft and Pontoon segments.

Results of Operations

Despite ongoing macroeconomic uncertainty and retail softness, the Company delivered increased net sales of $3.6 million and increased gross margin of 420 basis points, when compared with the same prior-year period. This increase was primarily driven by increased prices, higher unit volumes, and decreased dealer incentives, while maintaining effective cost controls.

Results of Continuing Operations

Consolidated Results

The table below presents our consolidated results of operations for the three months ended:


	Three Months Ended						2026 vs. 2025
	September 28,			September 29,						%
	2025			2024			Change			Change
(Dollar amounts in thousands)
Consolidated statements of operations:
NET SALES	$	69,002		$	65,359		$	3,643			5.6	%
COST OF SALES		53,606			53,561			45			0.1	%
GROSS PROFIT		15,396			11,798			3,598			30.5	%
OPERATING EXPENSES:
Selling and marketing		2,907			2,874			33			1.1	%
General and administrative		8,261			7,470			791			10.6	%
Amortization of other intangible assets		450			450			-			0.0	%
Total operating expenses		11,618			10,794			824			7.6	%
OPERATING INCOME		3,778			1,004			2,774			276.3	%
OTHER INCOME (EXPENSE):
Interest expense		(1	)		(987	)		986			(99.9	%)
Interest income		770			1,192			(422	)		(35.4	%)
INCOME BEFORE INCOME TAX EXPENSE		4,547			1,209			3,338			276.1	%
INCOME TAX EXPENSE		891			193			698			361.7	%
INCOME FROM CONTINUING OPERATIONS	$	3,656		$	1,016		$	2,640			259.8	%
Additional financial and other data:
Unit sales volume:
MasterCraft		377			374			3			0.8	%
Pontoon		188			177			11			6.2	%
Consolidated unit sales volume		565			551			14			2.5	%
Net sales:
MasterCraft	$	58,145		$	55,533		$	2,612			4.7	%
Pontoon		10,857			9,826			1,031			10.5	%
Consolidated net sales	$	69,002		$	65,359		$	3,643			5.6	%
Net sales per unit:
MasterCraft	$	154		$	148		$	6			4.1	%
Pontoon		58			56			2			3.6	%
Consolidated net sales per unit		122			119			3			2.5	%
Gross margin		22.3	%		18.1	%	420 bps

Net sales increased $3.6 million during the first quarter of fiscal 2026, when compared with the same prior-year period. The increase in net sales was driven by increased prices, higher unit volumes, favorable option sales, and decreased dealer incentives, partially offset by unfavorable model mix.

Gross margin percentage increased 420 basis points during the first quarter of fiscal 2026, when compared with the same prior-year period. Higher margins were primarily the result of increased net sales, as discussed above, combined with effective cost controls.

Operating expenses increased $0.8 million during the first quarter of fiscal 2026, when compared with the same prior-year period due to senior leadership transition costs and timing of commercial activities.

Segment Results

MasterCraft Segment

The following table sets forth MasterCraft segment results for the three months ended:


	Three Months Ended				2026 vs. 2025
	September 28,		September 29,				%
(Dollar amounts in thousands)	2025		2024		Change		Change
Net sales	$	58,145	$	55,533	$	2,612		4.7	%
Operating income		5,468		3,693		1,775		48.1	%
Purchases of property, plant and equipment		2,493		1,453		1,040		71.6	%

Unit sales volume		377		374		3		0.8	%
Net sales per unit	$	154	$	148	$	6		4.1	%

Net sales increased $2.6 million during the first quarter of fiscal 2026, when compared with the same prior-year period. The increase was driven by increased prices, increased unit volumes, and decreased dealer incentives.

Operating income increased $1.8 million during first quarter of fiscal 2026, when compared with the same prior-year period. The change was primarily the result of increased net sales, partially offset by increased operating expenses, as discussed above.

Pontoon Segment

The following table sets forth Pontoon segment results for the three months ended:


	Three Months Ended						2026 vs. 2025
	September 28,			September 29,						%
(Dollar amounts in thousands)	2025			2024			Change			Change
Net sales	$	10,857		$	9,826		$	1,031			10.5	%
Operating loss		(1,690	)		(2,689	)		999			(37.2	%)
Purchases of property, plant and equipment		587			752			(165	)		(21.9	%)

Unit sales volume		188			177			11			6.2	%
Net sales per unit	$	58		$	56		$	2			3.6	%

Net sales increased $1.0 million during the first quarter of fiscal 2026, when compared to the same prior-year period, mainly due increased unit volumes and favorable option sales, partially offset by unfavorable model mix.

Operating loss for the first quarter of fiscal 2026 decreased $1.0 million, compared to the same prior-year period. The change was driven by increased net sales, as discussed above, and effective cost controls.

Non-GAAP Measures

EBITDA, Adjusted EBITDA, EBITDA margin, and Adjusted EBITDA margin

We define EBITDA as income from continuing operations, before interest, 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, the adjustments are for share-based compensation, and senior leadership transition and organizational realignment costs. We define EBITDA margin and Adjusted EBITDA margin as EBITDA and Adjusted EBITDA, respectively, each 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 income from continuing operations, 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 reflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate. For the periods presented herein, these adjustments include other intangible asset amortization, share-based compensation, and senior leadership transition and organizational realignment costs.

Free Cash Flow

We define Free Cash Flow from continuing operations as net cash flows from operating activities less purchases of property, plant, and equipment.

EBITDA, Adjusted EBITDA, EBITDA margin, Adjusted EBITDA margin, Adjusted Net Income, Adjusted Net Income per share, and Free Cash Flow, which we refer to collectively as the Non-GAAP Measures, are not measures of net income, operating income, or net operating cash flows as determined under accounting principles generally accepted in the United States, or U.S. GAAP. The Non-GAAP Measures are not measures of performance in accordance with U.S. GAAP and should not be considered as an alternative to net income, net income per share, or net operating cash flows determined in accordance with U.S. GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of cash flow. We believe that the inclusion of the Non-GAAP Measures is appropriate to provide additional information to investors because securities analysts and investors use the Non-GAAP Measures to assess our operating performance across periods on a consistent basis and to evaluate the relative risk of an investment in our securities. We use Adjusted Net Income and Adjusted Net Income per share to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with U.S. GAAP, provides a more complete understanding of factors and trends affecting our business than does U.S. GAAP measures alone. We believe Adjusted Net Income and Adjusted Net Income per share assists our Board, management, investors, and other users of the financial statements in comparing our net income on a consistent basis from period to period because it removes certain non-cash items and other items that we do not consider to be indicative of our core and/or ongoing operations and reflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate. The Non-GAAP Measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

•

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and the Non-GAAP measures do not reflect any cash requirements for such replacements;

•

Certain Non-GAAP measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

•

Certain Non-GAAP measures do not reflect changes in, or cash requirements for, our working capital needs;

•

Certain Non-GAAP measures do not reflect our tax expense or any cash requirements to pay income taxes;

•

Certain Non-GAAP measures do not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness; and

•

Certain Non-GAAP measures 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.

The following table presents a reconciliation of income from continuing operations as determined in accordance with U.S. GAAP to EBITDA, and Adjusted EBITDA, and income from continuing operations margin (expressed as a percentage of net sales) to EBITDA margin and Adjusted EBITDA margin (each expressed as a percentage of net sales) for the periods indicated:


	Three Months Ended
	September 28,			% of Net	September 29,			% of Net
(Dollar amounts in thousands)	2025			sales	2024			sales
Income from continuing operations	$	3,656		5.3%	$	1,016		1.6%
Income tax expense		891				193
Interest expense		1				987
Interest income		(770	)			(1,192	)
Depreciation and amortization		2,038				2,074
EBITDA		5,816		8.4%		3,078		4.7%
Share-based compensation		791				430
Senior leadership transition and organizational realignment costs(a)		98				334
Adjusted EBITDA	$	6,705		9.7%	$	3,842		5.9%

The following table presents a reconciliation of income from continuing operations as determined in accordance with U.S. GAAP to Adjusted Net Income for the periods indicated:


	Three Months Ended
	September 28,		September 29,
(Dollar amounts in thousands, except per share data)	2025		2024
Income from continuing operations	$	3,656	$	1,016
Income tax expense		891		193
Amortization of acquisition intangibles		450		450
Share-based compensation		791		430
Senior leadership transition and organizational realignment costs(a)		98		334
Adjusted Net Income before income taxes		5,886		2,423
Adjusted income tax expense(b)		1,354		485
Adjusted Net Income	$	4,532	$	1,938

Adjusted Net Income per share:
Basic	$	0.28	$	0.12
Diluted	$	0.28	$	0.12
Weighted average shares used for the computation of(c):
Basic Adjusted Net Income per share		16,177,634		16,544,941
Diluted Adjusted Net Income per share		16,255,397		16,544,941

The following table presents the reconciliation of income from continuing operations per diluted share to Adjusted Net Income per diluted share for the periods indicated:


	Three Months Ended
	September 28,			September 29,
	2025			2024
Income from continuing operations per diluted share	$	0.22		$	0.06
Impact of adjustments:
Income tax expense		0.05			0.01
Amortization of acquisition intangibles		0.03			0.03
Share-based compensation		0.05			0.03
Senior leadership transition and organizational realignment costs(a)		0.01			0.02
Adjusted Net Income per diluted share before income taxes		0.36			0.15
Impact of adjusted income tax expense on net income per diluted share before income taxes(b)		(0.08	)		(0.03	)
Adjusted Net Income per diluted share		0.28		$	0.12

The following table presents a reconciliation of net cash flows by operating activities of continuing operations as determined in accordance with U.S. GAAP to Free Cash Flow for the periods presented:


	Three Months Ended
	September 28,			September 29,
	2025			2024

Net cash used in operating activities of continuing operations	$	(7,047	)	$	(502	)
Less:
Purchases of property, plant and equipment		(3,080	)		(2,205	)
Free cash flow	$	(10,127	)	$	(2,707	)

(a)

Represents amounts paid for legal fees and recruiting costs associated with the CEO and CFO transitions, as well as non-recurring severance costs incurred as part of the Company's strategic organizational realignment undertaken in connection with the transitions.

(b)

For fiscal 2026 and 2025, income tax expense reflects an income tax rate of 23.0% and 20.0%, respectively.

(c)

Represents the Weighted Average Shares used for the computation of Basic and Diluted earnings (loss) per share as presented on the Consolidated Statements of Operations to calculate Adjusted Net Income per basic and diluted share for all periods presented herein.

Liquidity and Capital Resources

Our primary liquidity and capital resource needs are to finance working capital, fund capital expenditures, service debt, fund potential acquisitions, and fund our share repurchase program. Our principal sources of liquidity are our cash balance, short-term investments, cash generated from operating activities, our revolving credit agreement and the refinancing and/or new issuance of long-term debt. We believe our cash balance, short-term investments, cash from operations, and our ability to borrow will be sufficient to provide for our liquidity and capital resource needs.

Cash and cash equivalents totaled $31.8 million as of September 28, 2025, an increase of $2.9 million from $28.9 million as of June 30, 2025. Available-for-sale securities totaled $35.6 million as of September 28, 2025, a decrease of $14.9 million from $50.5 million as of June 30, 2025. As of September 28, 2025, and June 30, 2025, we had no long-term debt outstanding and $100.0 million available borrowing capacity under the Revolving Credit Facility.

On July 24, 2023, the Board of the Company authorized a share repurchase program under which the Company may repurchase up to $50 million of its outstanding shares of common stock. During the three months ended September 28, 2025, the Company repurchased 116,370 shares of common stock for $2.3 million in cash, excluding related fees and expenses.

The following table and discussion below relate to our cash flows from continuing operations from operating, investing, and financing activities:


	Three Months Ended
	September 28,			September 29,
(Dollar amounts in thousands)	2025			2024
Total cash provided by (used in):
Operating activities	$	(7,047	)	$	(502	)
Investing activities		12,012			8,391
Financing activities		(2,341	)		(3,951	)
Net change in cash and cash equivalents from continuing operations	$	2,624		$	3,938

Three Months Ended September 28, 2025 Cash Flows from Continuing Operations

Net cash used in operating activities for the three months ended September 28, 2025 was $7.0 million, primarily due to working capital usage, partially offset by net income. Working capital is defined as accounts receivable, income tax receivable, inventories, and prepaid expenses and other current assets net of accounts payable, income tax payable, and accrued expenses and other current liabilities as presented in the condensed consolidated balance sheets. Working capital usage primarily consisted of a decrease in accrued expenses and other current liabilities, an increase in accounts receivable, inventories, and prepaid expenses and other current assets, partially offset by an increase in accounts payable. Accrued expenses and other current liabilities decreased due to payment of dealer incentives and variable compensation. Accounts receivable increased due to timing of sales and collections at the end of the period compared to the end of the prior-year period. Inventories increased due to timing of raw material purchases and production at the end of the period compared to the end of the prior-year period. Prepaid expenses and other current assets increased due to increased payments for future expenses. Accounts payable increased due to timing of purchases at the end of the period compared to the prior-year period.

Net cash provided by investing activities was $12.0 million, which included $15.1 million of net proceeds in available-for-sale securities, partially offset by $3.1 million in capital expenditures. Our capital spending was primarily focused on tooling, information technology, and machinery and equipment.

Net cash used in financing activities was $2.3 million, primarily due to share repurchases totaling $2.3 million, excluding related fees and expenses.

Three Months Ended September 29, 2024 Cash Flows from Continuing Operations

Net cash used in operating activities for the three months ended September 29, 2024 was $0.5 million, primarily due to working capital usage, partially offset by net income. Working capital usage primarily consisted of a decrease in accrued expenses and other current liabilities and an increase in accounts receivable. Partially offsetting the working capital usage was an increase in accounts payables and a decrease in prepaid expenses and other current assets. Accrued expenses and other current liabilities decreased due to payment of dealer incentives and variable compensation. Accounts receivable increased due to timing of sales and collections at the end of the period compared to the end of the prior-year period. Accounts payables increased due to increased production compared to the prior-year period. Prepaid and other current assets decreased due to amortization of insurance premiums.

Net cash provided by investing activities was $8.4 million, which included $10.6 million of proceeds in short-term investments, partially offset by $2.2 million in capital expenditures. Our capital spending was primarily focused on information technology, machinery and equipment, and tooling.

Net cash used in financing activities was $4.0 million, which included share repurchases totaling $3.5 million and $49.5 million used to repay outstanding borrowings of the Term Loan, which was offset by $49.5 million of borrowings under the Revolving Credit Facility.

Off Balance Sheet Arrangements

The Company did not have any off balance sheet financing arrangements as of September 28, 2025.

Critical Accounting Estimates

As of September 28, 2025, there were no significant changes in or changes to the application of our critical accounting policies or estimation procedures from those presented in our 2025 Annual Report.

Mastercraft Boat Holdings Inc. published this content on November 06, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 06, 2025 at 17:49 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]