# MasterCraft Boat Holdings, Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [MasterCraft Boat Holdings, Inc.](/companies/mcft.md) (CIK 1638290)
- Form: 10-Q
- Filed: 2024-05-08
- Accepted by EDGAR: May 8, 2024, 12:38 ET
- Period: 2024-03-31
- Accession: 0000950170-24-055297
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1638290/000095017024055297/mcft-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1638290/000095017024055297/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $95.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-07-01 to 2024-03-31 | $299.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $77.4m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-07-01 to 2024-03-31 | $240.5m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $18.3m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-07-01 to 2024-03-31 | $58.9m | us-gaap:GrossProfit |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | $4.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-07-01 to 2024-03-31 | $19.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $762.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-07-01 to 2024-03-31 | $2.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $806.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-07-01 to 2024-03-31 | $4.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $3.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-07-01 to 2024-03-31 | $15.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.22 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-07-01 to 2024-03-31 | $0.93 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.22 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-07-01 to 2024-03-31 | $0.93 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 16,965,624 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-07-01 to 2024-03-31 | 17,093,958 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-07-01 to 2024-03-31 | $22.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-07-01 to 2024-03-31 | $12.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-07-01 to 2024-03-31 | $11.7m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-03-31 | $22.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $175.0m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $340.9m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $86.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $143.8m | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $46.0m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-03-31 | $4.4m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-03-31 | $196.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 31,842 characters.

*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 2023 Annual Report and in this Quarterly Report on Form 10-Q. 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.*

### Discontinued Operations

The Company's results for all periods presented, as discussed in Management's Discussion and Analysis, are presented on a continuing operations basis. Results related to our former NauticStar business that was sold on September 2, 2022 are reported as discontinued operations for all periods presented. See Note 3 in Notes to Unaudited Condensed Consolidated Financial Statements for more information on Discontinued Operations.

### Overview

As anticipated, general market volatility and economic headwinds continue to create uncertainty and softness in the retail environment. As previously disclosed, because of the anticipated softness in retail demand, the Company has approached its wholesale production plan for fiscal 2024 with a prudent level of caution and a focus on rebalancing dealer inventories consistent with the expected retail demand. As a result, net sales decreased and gross margin declined as a result of lower cost absorption due to decreased sales volumes.

On March 4, 2024, Frederick Brightbill, Chief Executive Officer ("CEO") and Chairman of the Board of Directors announced his retirement as CEO of the Company, effective March 18, 2024, and as Chairman of the Company’s Board of Directors (the “Board”), effective June 30, 2024, at which time, Mr. Brightbill will serve as a consultant through June 30, 2025. In connection with Mr. Brightbill’s retirement, the Company appointed Brad Nelson as CEO, effective March 18, 2024. Mr. Nelson also joined the Board at that time, with the size of the Board increasing from eight members to nine. Rock Lambert, the Company’s Lead Independent Director, will assume the role of Chairman of the Board, effective July 1, 2024.

During the three and nine months ended March 31, 2024, we recognized $1.2 million and $1.7 million, respectively, of CEO transition costs in General and administrative expense within the condensed consolidated statements of operations. CEO transition costs include amounts paid to the former CEO under the terms of his retirement and consulting agreement and related legal fees. Also included are recruiting and relocation costs related to the new CEO.

### Results of Continuing Operations

### Consolidated Results

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

*(Dollar amounts in thousands)*

| Consolidated statements of operations: | Three Months Ended March 31, 2024 | April 2,% 2023 | 2024 vs. 2023 Change | Change | Nine Months Ended March 31, 2024 | April 2,% 2023 | 2024 vs. 2023 Change | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| NET SALES | $95,708 | $166,776 | $(71,068) | (42.6%) | $299,406 | $495,480 | $(196,074) | (39.6%) |
| COST OF SALES | 77,360 | 124,178 | (46,818) | (37.7%) | 240,493 | 368,682 | (128,189) | (34.8%) |
| GROSS PROFIT | 18,348 | 42,598 | (24,250) | (56.9%) | 58,913 | 126,798 | (67,885) | (53.5%) |
| OPERATING EXPENSES: |  |  |  |  |  |  |  |  |
| Selling and marketing | 3,924 | 3,927 | (3) | (0.1%) | 10,538 | 10,748 | (210) | (2.0%) |
| General and administrative | 9,978 | 9,156 | 822 | 9.0% | 27,446 | 26,874 | 572 | 2.1% |
| Amortization of other intangible assets | 450 | 489 | (39) | (8.0%) | 1,362 | 1,467 | (105) | (7.2%) |
| Total operating expenses | 14,352 | 13,572 | 780 | 5.7% | 39,346 | 39,089 | 257 | 0.7% |
| OPERATING INCOME | 3,996 | 29,026 | (25,030) | (86.2%) | 19,567 | 87,709 | (68,142) | (77.7%) |
| OTHER INCOME (EXPENSE): |  |  |  |  |  |  |  |  |
| Interest expense | (762) | (695) | (67) | 9.6% | (2,494) | (1,923) | (571) | 29.7% |
| Interest income | 1,398 | 1,195 | 203 | 17.0% | 4,164 | 1,967 | 2,197 | 111.7% |
| INCOME BEFORE INCOME TAX EXPENSE | 4,632 | 29,526 | (24,894) | (84.3%) | 21,237 | 87,753 | (66,516) | (75.8%) |
| INCOME TAX EXPENSE | 806 | 6,744 | (5,938) | (88.0%) | 4,408 | 20,353 | (15,945) | (78.3%) |
| NET INCOME FROM CONTINUING OPERATIONS | $3,826 | $22,782 | $(18,956) | (83.2%) | $16,829 | $67,400 | $(50,571) | (75.0%) |
| **Additional financial and other data:** |  |  |  |  |  |  |  |  |
| Unit sales volume: |  |  |  |  |  |  |  |  |
| MasterCraft | 468 | 900 | (432) | (48.0%) | 1,453 | 2,457 | (1,004) | (40.9%) |
| Crest | 298 | 722 | (424) | (58.7%) | 1,025 | 2,344 | (1,319) | (56.3%) |
| Aviara | 39 | 34 | 5 | 14.7% | 92 | 100 | (8) | (8.0%) |
| Consolidated unit sales volume | 805 | 1,656 | (851) | (51.4%) | 2,570 | 4,901 | (2,331) | (47.6%) |
| Net sales: |  |  |  |  |  |  |  |  |
| MasterCraft | $69,783 | $117,630 | $(47,847) | (40.7%) | $218,319 | $339,315 | $(120,996) | (35.7%) |
| Crest | 14,194 | 36,369 | (22,175) | (61.0%) | 49,713 | 116,595 | (66,882) | (57.4%) |
| Aviara | 11,731 | 12,777 | (1,046) | (8.2%) | 31,374 | 39,570 | (8,196) | (20.7%) |
| Consolidated net sales | $95,708 | $166,776 | $(71,068) | (42.6%) | $299,406 | $495,480 | $(196,074) | (39.6%) |
| Net sales per unit: |  |  |  |  |  |  |  |  |
| MasterCraft | $149 | $131 | $18 | 13.7% | $150 | $138 | $12 | 8.7% |
| Crest | 48 | 50 | (2) | (4.0%) | 49 | 50 | (1) | (2.0%) |
| Aviara | 301 | 376 | (75) | (19.9%) | 341 | 396 | (55) | (13.9%) |
| Consolidated net sales per unit | 119 | 101 | 18 | 17.8% | 117 | 101 | 16 | 15.8% |
| Gross margin | 19.2% | 25.5% | (630) bps |  | 19.7% | 25.6% | (590) bps |  |

Net sales decreased $71.1 million and $196.1 million during the third quarter and first nine months of fiscal 2024 when compared with the same prior-year periods. The decreases in net sales were due to lower unit volume and an increase in dealer incentives, partially offset by higher prices and favorable model mix and options. Dealer incentives include measures taken by the Company to assist dealers as the retail environment remains competitive.

Gross margin percentage declined 630 basis points and 590 basis points during the third quarter and first nine months of fiscal 2024, respectively, when compared with the same prior-year periods. Lower margins were the result of lower cost absorption due to planned decreased unit volume and higher dealer incentives, partially offset by higher prices and favorable model mix and options.

Operating expenses increased $0.8 million and $0.3 million during the third quarter and first nine months of fiscal 2024, respectively, when compared to the same prior-year periods. The increases in operating expenses were a result of CEO transition and related share-based compensation costs, which were $1.9 million and $2.4 million during the third quarter and first nine months of fiscal 2024, respectively.

Segment Results

### MasterCraft Segment

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

*(Dollar amounts in thousands)*

|  | Three Months Ended March 31, 2024 | April 2,% 2023 | 2024 vs. 2023 Change | Change | Nine Months Ended March 31, 2024 | April 2,% 2023 | 2024 vs. 2023 Change | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $69,783 | $117,630 | $(47,847) | (40.7%) | $218,319 | $339,315 | $(120,996) | (35.7%) |
| Operating income | 7,616 | 25,298 | (17,682) | (69.9%) | 28,202 | 72,269 | (44,067) | (61.0%) |
| Purchases of property, plant and equipment | 2,591 | 3,151 | (560) | (17.8%) | 6,207 | 8,434 | (2,227) | (26.4%) |
| Unit sales volume | 468 | 900 | (432) | (48.0%) | 1,453 | 2,457 | (1,004) | (40.9%) |
| Net sales per unit | $149 | $131 | $18 | 13.7% | $150 | $138 | $12 | 8.7% |

Net sales decreased $47.8 million during the third quarter of fiscal 2024 when compared with the same prior-year period. The decrease was driven by lower unit volume and increased dealer incentives, partially offset by favorable model mix and options and higher prices. Dealer incentives include rebate programs and other measures taken by the Company to assist dealers as the retail environment remains competitive.

Net sales decreased $121.0 million during the first nine months of fiscal 2024 when compared with the same prior-year period. The decrease was driven by lower unit volume and increased dealer incentives, partially offset by higher prices and favorable model mix and options. Dealer incentives include higher floor plan financing costs as a result of increased dealer inventories and interest rates, and other incentives as the retail environment remains competitive.

Operating income decreased $17.7 million and $44.1 million during third quarter and first nine months of fiscal 2024, respectively, when compared with the same prior-year periods. The decreases were driven by decreased sales volume, higher dealer incentives, and CEO transition and related share-based compensation costs, partially offset by higher prices and favorable model mix and options.

### Crest Segment

The following table sets forth Crest segment results for the three and nine months ended:

*(Dollar amounts in thousands)*

|  | Three Months Ended March 31, 2024 | April 2,% 2023 | 2024 vs. 2023 Change | Change | Nine Months Ended March 31, 2024 | April 2,% 2023 | 2024 vs. 2023 Change | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $14,194 | $36,369 | $(22,175) | (61.0%) | $49,713 | $116,595 | $(66,882) | (57.4%) |
| Operating income (loss) | (864) | 4,962 | (5,826) | (117.4%) | (133) | 17,576 | (17,709) | (100.8%) |
| Purchases of property, plant and equipment | 584 | 2,089 | (1,505) | (72.0%) | 1,761 | 6,292 | (4,531) | (72.0%) |
| Unit sales volume | 298 | 722 | (424) | (58.7%) | 1,025 | 2,344 | (1,319) | (56.3%) |
| Net sales per unit | $48 | $50 | $(2) | (4.0%) | $49 | $50 | $(1) | (2.0%) |

Net sales decreased $22.2 million and $66.9 million during the third quarter and first nine months of fiscal 2024, respectively, when compared to the same prior-year periods, due to decreased volume and unfavorable model mix and options, partially offset by higher prices.

Operating income for the third quarter of fiscal 2024 decreased $5.8 million when compared to the same prior-year period. The decrease was primarily the result of decreased net sales, as discussed above.

Operating income for the first nine months of fiscal 2024 decreased $17.7 million when compared to the same prior-year period. The decrease was primarily the result of decreased net sales, as discussed above, and increased dealer incentives.

### Aviara Segment

The following table sets forth Aviara segment results for the three and nine months ended:

*(Dollar amounts in thousands)*

|  | Three Months Ended March 31, 2024 | April 2,% 2023 | 2024 vs. 2023 Change | Change | Nine Months Ended March 31, 2024 | April 2,% 2023 | 2024 vs. 2023 Change | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $11,731 | $12,777 | $(1,046) | (8.2%) | $31,374 | $39,570 | $(8,196) | (20.7%) |
| Operating loss | (2,756) | (1,234) | (1,522) | 123.3% | (8,502) | (2,136) | (6,366) | 298.0% |
| Purchases of property, plant and equipment | 1,329 | 1,716 | (387) | (22.6%) | 4,654 | 4,145 | 509 | 12.3% |
| Unit sales volume | 39 | 34 | 5 | 14.7% | 92 | 100 | (8) | (8.0%) |
| Net sales per unit | $301 | $376 | $(75) | (19.9%) | $341 | $396 | $(55) | (13.9%) |

Net sales decreased $1.0 million during the third quarter of fiscal 2024 when compared to the same prior-year period, due to unfavorable model mix and options, partially offset by favorable volume and higher prices.

Net sales decreased $8.2 million for the first nine months of fiscal 2024 when compared to the same prior-year period, due to unfavorable model mix and options, decreased volume and higher dealer incentives, partially offset by higher prices.

Operating losses increased $1.5 million for the third quarter of fiscal 2024 when compared to the same prior-year period, due to unfavorable model mix and options and inefficiencies related to the ramp up of new product launches, partially offset by higher prices and favorable volume.

Operating losses increased $6.4 million for the first nine months of fiscal 2024 when compared to the same prior-year period, due to inefficiencies related to the ramp up of new product launches, higher dealer incentives, unfavorable model mix and options and decreased volume, partially offset by higher prices and reduced warranty costs.

### Non-GAAP Measures

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

We define EBITDA as net 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, these adjustments include share-based compensation, business development consulting costs, and CEO transition 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 net 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, business development consulting costs, and CEO transition costs.

EBITDA, Adjusted EBITDA, EBITDA margin, 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 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 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 of directors, 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;
- The Non-GAAP measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
- The 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
- The 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 net income from continuing operations as determined in accordance with U.S. GAAP to EBITDA, and Adjusted EBITDA, and net 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:

*(Dollar amounts in thousands)*

|  | Three Months Ended March 31, 2024 | % of Net sales | April 2, 2023 | % of Net sales | Nine Months Ended March 31, 2024 | % of Net sales | April 2, 2023 | % of Net sales |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| **Net income from continuing operations** | $3,826 | 4.0% | $22,782 | 13.7% | $16,829 | 5.6% | $67,400 | 13.6% |
| Income tax expense | 806 |  | 6,744 |  | 4,408 |  | 20,353 |  |
| Interest expense | 762 |  | 695 |  | 2,494 |  | 1,923 |  |
| Interest income | (1,398) |  | (1,195) |  | (4,164) |  | (1,967) |  |
| Depreciation and amortization | 2,842 |  | 2,622 |  | 8,327 |  | 7,833 |  |
| **EBITDA** | 6,838 | 7.1% | 31,648 | 19.0% | 27,894 | 9.3% | 95,542 | 19.3% |
| Share-based compensation(a) | 1,583 |  | 1,026 |  | 2,531 |  | 2,892 |  |
| Business development consulting costs(b) | — |  | 312 |  | — |  | 312 |  |
| CEO transition costs(c) | 1,241 |  | — |  | 1,677 |  | — |  |
| **Adjusted EBITDA** | $9,662 | 10.1% | $32,986 | 19.8% | $32,102 | 10.7% | $98,746 | 19.9% |

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

*(Dollar amounts in thousands, except per share data)*

|  | Three Months Ended March 31, 2024 | April 2, 2023 | Nine Months Ended March 31, 2024 | April 2, 2023 |
| --- | ---: | ---: | ---: | ---: |
| **Net income from continuing operations** | $3,826 | $22,782 | $16,829 | $67,400 |
| Income tax expense | 806 | 6,744 | 4,408 | 20,353 |
| Amortization of acquisition intangibles | 450 | 462 | 1,362 | 1,386 |
| Share-based compensation(a) | 1,583 | 1,026 | 2,531 | 2,892 |
| Business development consulting costs(b) | — | 312 | — | 312 |
| CEO transition costs(c) | 1,241 | — | 1,677 | — |
| **Adjusted Net Income before income taxes** | 7,906 | 31,326 | 26,807 | 92,343 |
| Adjusted income tax expense(d) | 1,581 | 7,205 | 5,361 | 21,239 |
| **Adjusted Net Income** | $6,325 | $24,121 | $21,446 | $71,104 |
| Adjusted Net Income per share: |  |  |  |  |
| Basic | $0.38 | $1.37 | $1.26 | $4.01 |
| Diluted | $0.37 | $1.36 | $1.25 | $3.98 |
| Weighted average shares used for the computation of(e): |  |  |  |  |
| Basic Adjusted Net Income per share | 16,844,440 | 17,559,920 | 17,003,616 | 17,725,208 |
| Diluted Adjusted Net Income per share | 16,965,624 | 17,748,910 | 17,093,958 | 17,851,655 |

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

|  | Three Months Ended March 31, 2024 | April 2, 2023 | Nine Months Ended March 31, 2024 | April 2, 2023 |
| --- | ---: | ---: | ---: | ---: |
| **Net income from continuing operations per diluted share** | $0.23 | $1.28 | $0.98 | $3.78 |
| Impact of adjustments: |  |  |  |  |
| Income tax expense | 0.05 | 0.38 | 0.26 | 1.14 |
| Amortization of acquisition intangibles | 0.03 | 0.03 | 0.08 | 0.08 |
| Share-based compensation(a) | 0.10 | 0.06 | 0.15 | 0.16 |
| Business development consulting costs(b) | — | 0.02 | — | 0.02 |
| CEO transition costs(c) | 0.07 | — | 0.10 | — |
| **Adjusted Net Income per diluted share before income taxes** | $0.48 | $1.77 | $1.57 | $5.18 |
| Impact of adjusted income tax expense on net income per diluted share before income taxes(d) | (0.11) | (0.41) | (0.32) | (1.20) |
| **Adjusted Net Income per diluted share** | $0.37 | $1.36 | $1.25 | $3.98 |

(a) Included in share-based compensation are the impacts of accelerating expense recognition for equity awards related to the CEO transition.

(b) Represents non-recurring third-party costs associated with business development activities, primarily relating to consulting costs for evaluation and execution of internal growth and other strategic initiatives.

(c) Represents amounts paid to the Company’s former CEO upon his departure under the terms of his transition agreements, including consulting payments and legal fees incurred with the transition. Also included are recruiting and relocation costs related to the new CEO.

(d) For fiscal 2024 and 2023, income tax expense reflects an income tax rate of 20.0% and 23.0%, respectively, for each period presented.

(e) Represents 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 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 our debt, fund potential acquisitions, and fund our share repurchase program. Our principal sources of liquidity are our cash balance, held-to-maturity securities, 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, held-to-maturity securities, 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 $22.5 million as of March 31, 2024, an increase of $2.7 million from $19.8 million as of June 30, 2023. Held-to-maturity securities totaled $83.2 million as of March 31, 2024, a decrease of $8.4 million from $91.6 million as of June 30, 2023. Total debt as of March 31, 2024 and June 30, 2023, was $50.4 million and $53.7 million, respectively.

As of March 31, 2024, we had no amounts outstanding under the Revolving Credit Facility, leaving $100.0 million of available borrowing capacity. Refer to Note 10 — Long Term Debt in the Notes to Unaudited Condensed Consolidated Financial Statements for further details.

On June 24, 2021, the board of directors of the Company authorized a share repurchase program that allowed for the repurchase of up to $50.0 million of our common stock during the three-year period ending June 24, 2024. While having $1.6 million of availability as of June 30, 2023, this program was fully utilized during the first quarter ended October 1, 2023.

On July 24, 2023, the board of directors of the Company authorized a new share repurchase program under which the Company may repurchase up to $50 million of its outstanding shares of common stock. The new authorization became effective upon the completion of the Company's prior $50 million stock repurchase authorization.

During the nine months ended March 31, 2024, the Company repurchased 529,545 shares of common stock for $11.7 million in cash, excluding related fees and expenses under both plans.

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

*(Dollar amounts in thousands)*

| Total cash provided by (used in): | Nine Months Ended March 31, 2024 | April 2, 2023 |
| --- | ---: | ---: |
| Operating activities | $22,923 | $107,365 |
| Investing activities | (2,841) | (92,380) |
| Financing activities | (16,787) | (18,831) |
| **Net change in cash and cash equivalents from continuing operations** | $3,295 | $(3,846) |

#### Nine Months Ended March 31, 2024 Cash Flows from Continuing Operations

Net cash provided by operating activities for the nine months ended March 31, 2024 was $22.9 million, primarily due to net income, partially offset by working capital usage. 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, accounts payable and income tax payable and an increase in prepaid expenses and other current assets. Partially offsetting the working capital usage was a decrease in inventories. Inventories decreased as we continue to rebalance inventory levels to align with lower production levels, partially offset by increased materials costs from inflation. Accrued expenses and other current liabilities decreased primarily due to payment of dealer incentives and lower compensation related accruals, partially offset by an increase in repurchase obligations. Accounts payable decreased as a result of decreased production levels. Income tax payable decreased due to the lower earnings compared to the prior year.

Net cash used in investing activities was $2.8 million, which included $12.6 million in net capital expenditures, partially offset by net changes of $9.8 million in held-to maturity securities. Our capital spending was primarily focused on tooling, facility enhancements and information technology.

Net cash used in financing activities was $16.8 million, which included net payments of $3.4 million on long-term debt and stock repurchases totaling $11.7 million.

#### Nine Months Ended April 2, 2023 Cash Flows from Continuing Operations

Net cash provided by operating activities for the nine months ended April 2, 2023 was $107.4 million, primarily due to net income and cash provided by favorable changes in working capital. 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, excluding the impact of acquisitions and non-cash adjustments. Favorable changes in working capital primarily consisted of an increase in accrued expenses and other current liabilities and accounts payable, and a decrease in accounts receivable and inventories. Partially offsetting favorable changes in working capital was an increase in prepaid expenses and other current assets. Accrued expenses and other current liabilities primarily increased due to increased warranty, floor plan interest, and retail rebate costs. Accounts payable increased mainly due to increased payables related to capital spending. Accounts receivable decreased primarily as a result of lower sales at the end of the period compared to the end of the prior-year period. Inventories decreased as we maintain rebalanced inventory levels after the prior summer selling season, partially offset by increased materials costs from inflation. Prepaid expenses and other current assets increased due to payment of annual general insurance premiums which have increased since the prior-year period.

Net cash used in investing activities was $92.4 million, due to net investments in held-to-maturity securities of $73.5 million and $18.9 million of capital expenditures. Our capital spending was focused on maintenance capital, which includes tooling, expanding our capacity, and information technology.

Net cash used in financing activities was $18.8 million, which included net payments of $2.3 million on long-term debt and $16.0 million of stock repurchases.

### Off Balance Sheet Arrangements

The Company did not have any off balance sheet financing arrangements as of March 31, 2024.

### Critical Accounting Estimates

As of March 31, 2024, there were no significant changes in or changes to the application of our critical accounting policies or estimation procedures from those presented in our 2023 Annual Report.

### SEC Climate Disclosure Rule

In March 2024, the SEC issued its final climate disclosure rule, which requires the disclosure of material Scope 1 and Scope 2 greenhouse gas emissions and other climate-related topics in annual reports and registration statements. For accelerated filers, disclosure requirements will begin phasing in for fiscal years beginning on or after January 1, 2026, or fiscal 2027 for the Company. On April 4, 2024, the SEC announced to voluntarily delay the implementation of climate disclosure regulations while going through certain legal challenges filed to vacate the proposed rules. The Company is currently evaluating the impact these rules will have on its consolidated financial statements and related disclosures.

## Market risk

As filed, 157 characters.

Refer to our 2023 Annual Report for discussion of the Company’s market risk. There have been no material changes in market risk from those disclosed therein.

## Controls and procedures

As filed, 1,601 characters.

#### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) (of the Exchange Act) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2024.

#### Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 1,632 characters.

Except as noted below, there have been no material changes to the risk factors disclosed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

**Our financial results could be adversely affected if we are unable to maintain effective distribution.**

We rely on third-party dealers to sell our products. Maintaining a reliable network of dealers is essential to our success. We face competition from other manufacturers in attracting and retaining independent boat dealers. A significant deterioration in the number or effectiveness of our dealers could have a material adverse effect on our financial results.

Weakening demand for marine products could hurt our dealers’ financial performance. In particular, reduced cash flow from decreases in sales and tightening credit markets could impair dealers' ability to fund operations. Inability to fund operations can force dealers to cease business, and we may be unable to obtain alternate distribution in the vacated market. An inability to obtain alternate distribution could unfavorably affect our net sales through reduced market presence. If economic conditions deteriorate, we anticipate that dealer failures or voluntary market exits would increase, especially if overall retail demand materially declines. Additionally, the deterioration in the health of competitors' dealers can negatively impact the marketplace, including our dealers, by causing boat inventories at those dealers to be deeply discounted or relocated to other geographical areas, resulting in elevated inventories our dealers are competing against.

Filed May 8, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-055297. Last ingested by Listed: Oct 26, 2026, 06:02 ET. No prices; not investment advice.