MasterCraft Boat Holdings, Inc.

ladies and gentlemen thank you for standing by and welcome to the second quarter 2021 mastercraft boat holdings inc earnings conference call at this time all participants are in a listen-only mode after the speaker's presentation there will be a question and answer session to ask a question during this session you will need to press star 1 on your telephone please be advised that today's conference is being recorded if you require any further assistance please press star then zero i would now like to hand the conference over to one of your speakers today Mr. Tim Oxley, CFO. Sir, please go ahead.

Thank you, operator, and welcome, everyone. Thank you for joining us today as we discuss Mastercraft's second quarter performance for fiscal 2021. As a reminder, today's call is being webcast live and will also be archived on our website for future listening. Joining me on today's call are Fred Brightbill, Chief Executive Officer and Chairman, and George Steinbarger, our Chief Revenue Officer. Fred will begin with an overview of our progress on our strategic priorities and review our operational highlights from the quarter. I will then discuss our financial performance for the second quarter and how we see 2021 shaping up. I'll turn the call back to Fred for some closing remarks before we open the call for Q&A. Before we begin, we'd like to remind participants that the information contained in this call is current only as of today, February 10, 2021. The company assumes no obligation to update any statements, including forward-looking statements. Statements that are not historical facts are forward-looking statements and subject to the safe harbor disclaimer in today's press release. Additionally, on this conference call, we will discuss non-GAAP measures that include or exclude special or items not indicative of our ongoing operations. For each non-GAAP measure, we also provide the most directly comparable GAAP measure in our fiscal 2021 second quarter earnings release, which includes a reconciliation of these non-GAAP measures to our GAAP results. We'd also like to remind listeners that there's a slide deck summarizing our financial results in the investor section of our website. With that, I'll turn the call over to Fred.

Thank you, Tim, and good morning, everyone. I appreciate you joining us today. This continues to be a very dynamic and challenging time, and we sincerely hope you and your families have remained healthy and safe. I also want to thank our employees. who have been instrumental in our ability to deliver such a successful quarter. We have talked about it before, but it bears repeating. Our culture and employees are key drivers of our strong performance in this dynamic environment. Their health and safety remain our top priority, and we are committed to maintaining rigorous health and safety standards and closely monitoring all our production facilities. Jumping into our results for the quarter, Mastercraft Boat Holdings delivered record second quarter financial results. exceeding the guidance we provided last quarter. Our performance this quarter, the most profitable second quarter in Mastercraft's history, demonstrates continued momentum on implementing and executing our consumer-centric strategic plan and the robust retail demand we are experiencing across all our brands. The results are a testament to the continued execution of our value-enhancing growth strategy. As a reminder, Our strategy is centered on four key pillars designed to achieve one overarching objective, to drive sustainable, accelerated growth. During the quarter, we continued to execute against each of these four pillars, consumer experience, digital marketing, operational excellence, and human capital development. First, we continued our investments in expanding and top-grading our product development and engineering team. These investments will be an important component of our market share and financial growth plans. Our relentless focus on learning more about our consumers' growing needs and expectations has allowed us to further refine our product development process as we continue to build our product development and engineering team over the remainder of the year. Second, we continue to activate a consumer-driven digital marketing strategy across our organization to increase brand awareness, create a community of interest, expand our target market, improve lead generation, and ultimately drive sales and market share gains. Most recently, we launched several immersive digital experiences for consumers to learn about our brands in a 360-degree digital environment. We launched the Mastercraft experience in January and followed that up with the launch of the Crest and Aviara experiences earlier this month. A Nautic Star experience is in the final stages of development and will be deployed to consumers within a matter of days. These unique digital showrooms allow consumers to immerse themselves in each of our brands in a way they would typically do in a traditional in-person boat show. The flexibility to research our brands and the safety of their homes while connecting consumers with our dealers in a safe, socially distanced manner is truly unique. Since launching these digital experiences, we have seen a dramatic increase in traffic to our digital properties and new leads, which we believe validate the creative approach we have taken to ensure consumers' needs are addressed during this dynamic time. We will continue to invest in digital solutions that bring awareness and new consumers to our brands, and this investment will increasingly drive market share gains. Third, we sustain the acceleration of operational excellence programs across all our manufacturing facilities to drive throughput improvements and enhance quality. Across all our brands, we expertly manage supply chain issues related to the COVID-19 pandemic and labor constraints while executing an aggressive production ramp-up. At each of our facilities, we are now running at record production rates and will continue to increase production throughout the year to meet the robust retail demand. Despite the inefficiencies realized during a production ramp-up, the dynamic supply chain environment, and increasing labor costs, the company delivered gross margins of 24.7 percent in the second quarter, up 340 basis points versus the prior year. The Nautic Star turnaround continued to gain momentum. NauticStar increased throughput to meet retail demand, with wholesale unit shipments for the quarter up 5% year over year, and gross margins up more than 200 basis points year over year. While there's still work to do, we are confident in the long-run prospects of the NauticStar brand. And fourth, we remain focused on strengthening our human capital framework to attract, develop, and retain a highly skilled and specialized workforce. We continue to successfully meet our skilled labor recruiting needs at all our facilities. We have seen some labor rate inflation due to the tight labor market, but as evidenced by our growing gross margin performance, we have been able to mitigate most of this increase through our superior material cost management and overhead absorption as volumes increase. Looking more closely at the quarter, we are encouraged by the momentum we are seeing all around the four strategic growth priorities and will continue to proactively adapt our strategy to the business environment. As of today, across our brands, our wholesale production plans remain fully committed. In addition, the percentage of our order book that is already retail sold is at record levels and growing. Dealer inventories remain at historically low levels. And consistent with our message last quarter, we believe it will be fiscal 2022 before dealer inventories reach optimal levels. Combined with the current supply and demand dynamic in the industry, this provides us with wholesale growth visibility greater than at any time in the recent past. As we continue to execute on our consumer-focused strategic plan, we are well-positioned to outperform relative to our competition and generate tremendous value for shareholders. Against this backdrop, promotional activity has remained relatively benign. although we are seeing greater promotional activity as we enter the boat show season. As I previously discussed, we have deployed non-traditional boat show alternatives and are seeing some very early wins. We believe the higher quality and leading market share position of our brands, our relatively mature and sophisticated dealer network, and our digital marketing capabilities provide us a competitive advantage. Let me now briefly review some of the latest developments across our brands. At Aviara, our retail performance continues to exceed expectations. Our order book is completely sold out for the remainder of the year, as MarineMax and its customers continue to appreciate Aviara's progressive style, elevated control, modern comfort, and quality details, which are unmatched in the luxury day boat segment. As you will recall, Given this extraordinary performance, we purchased a dedicated Aviara facility in Merritt Island, Florida, to accelerate Aviara's next phase of growth. We remain on track to have Aviara fully transitioned out of Mastercraft's Vanora, Tennessee facility to the new Merritt Island facility within our fiscal third quarter. We expect wholesale volumes to increase sequentially throughout the remainder of the fiscal year and into fiscal 2022. While the increase in overhead due to the new Merritt Island facility will have a dilutive near-term impact on margins and profitability, we believe the additional capacity will set the brand up for many years of future growth in sales and profit. In addition, moving Naviera out of the Mastercraft facility frees up much-needed capacity for Mastercraft. At Crest, we experienced continued strength in retail performance during the fiscal second quarter. This underscores the attractiveness of the Crest brand the value it delivers at an attainable price point, and the easy-to-use and new boater-friendly nature of the pontoon segment. Crest's most recent model redesign, the Ultra Luxury Savannah model, has been extremely well received, and it is already sold out for the 2021 model year. With our investment in product development and engineering, additional model refreshes and launches are in development for model year 2022 and beyond. Crest's exceptional execution of its operating and strategic priorities delivered another outstanding quarter financially, with wholesale unit volumes up nearly 37% and gross margin increase of more than 800 basis points year over year. We are well on our way to achieving our goal of delivering gross margins in the low 20% range. Similarly, at NauticStar, we experienced continued retail momentum in the second fiscal quarter, As previously stated, Nautic Start improved production throughput sequentially in the quarter and improved its gross margin by more than 200 basis points year over year. Our turnaround plan remains on track, with initiatives in place to further ramp up production, improve overall quality, and enhance the product offering. Our expectation remains that it will take until next year to see the full benefits of these efforts. but we are confident that NauticStar is on track to deliver meaningful and sustainable profitability improvement over time. At Mastercraft, the retail performance during the fiscal quarter was phenomenal. Entering the current fiscal third quarter, we are running at record production rates at the Mastercraft facility as we continue to aggressively ramp up production to provide dealers with critical inventory ahead of the upcoming boating season. Importantly, we will continue to emphasize quality to further differentiate Mastercraft from the competition. Our wholesale order books are sold out through the remainder of the year, and we have already begun to take orders for model year 2022 to provide dealers with the inventory visibility needed to continue selling boats. Combined with the incremental dealership changes we highlighted last quarter, Mastercraft is primed to take market share heading into the heavy summer selling season. On a financial basis, Excluding the impact of Aviara, the Mastercraft brand saw increased net sales on wholesale unit and ASP growth. Additionally, the brand achieved exceptional fiscal second quarter gross margin levels, driven by consumers continuing to add features and options to their orders. We expect to continue to ramp up production throughout the year, which will result in some labor inefficiencies in the short term, but allow us to better meet the wholesale demand from our dealers as they look to stock up heading into the summer selling season. Importantly, our progress and business fundamentals are setting us up for an outstanding fiscal year 2021. We remain committed to building on this progress through investments to further strengthen our competitive position, grow our categories, and deliver long-term shareholder value guided by our strategic priorities. Looking at how far we have come over the past six months gives us the confidence that we will continue to deliver superior growth in sales and profit. I will now turn the call over to Tim, who will provide more color on our financial results.