MasterCraft Boat Holdings, Inc.

Good morning, ladies and gentlemen. Thank you for standing by. And welcome to the first quarter 2022 Mastercraft Boat Holdings and Earnings Conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the star, then the one key on your touch-tone telephone. Please be advised that today's conference is being recorded. If you recall operating systems, please press star, then zero. I would now like to... Turn the conference over to your speaker host today, Mr. Tim Oxley, CFO. Please go ahead, sir.

Thank you, operator, and welcome, everyone. Thank you for joining us today as we discuss Mastercraft's first quarter performance for fiscal 2022. 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 Brightbell, Chief Executive Officer and Chairman, and George Steinbarger, our Chief Revenue Officer. Fred will begin with a review of our operational highlights for the first quarter. I will then discuss our financial performance for the quarter. Then 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, November 10, 2021. The company assumes no obligation to update any statements, including forward-looking statements. statements that are not historical facts or forward-looking statements and subject to a safe harbor disclaimer in today's press release. Additionally, on this conference call, we will discuss non-GAAP measures that include or exclude special items not indicative of our ongoing operations. For each non-GAAP measure, we also provide the most directly comparable GAAP measure in our fiscal 2022 first quarter earnings release, which includes a reconciliation of these non-GAAP measures to our GAAP results. We would 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.

Good morning, everyone. Thank you for joining us today. Our business performed extremely well during the first quarter in a very challenging and dynamic environment. These results reflect a continuation of exceptional execution against our strategic and operational priorities as we delivered a record-setting performance for the fourth consecutive quarter. Net sales, gross profit, diluted adjusted earnings per share, and adjusted EBITDA were all the highest for any first quarter in the company's history. Despite the many challenges we faced, we grew net sales organically by nearly 39%, and we grew diluted adjusted earnings per share by nearly 16% year over year. When compared to our previous first quarter record in fiscal 2020, net sales were higher by more than 31%. This performance was driven by year-over-year unit increases at each of our segments, which resulted in the most wholesale units ever sold by the company in a first quarter. The credit goes for this to our more than 1,500 employees who continue to execute at a high level in the face of adversity. Although we achieved another record quarter, our growth in net sales and earnings has been significantly constrained, primarily due to supply chain disruptions. Logistics challenges combined with supplier shutdowns, labor shortages, capacity constraints have caused widespread but largely intermittent component delays and scarcity across the industry. These disruptions combined with labor challenges associated with the COVID Delta variant limited our unit shipments and created significant production inefficiencies during the quarter. Constrained production when coupled with continuing record retail demand for our products drove dealer inventories to new historic lows. We have managed through this challenging supply chain environment better than our competitors, and we expect to continue to leverage our operational prowess in the coming quarters. Historically low inventory levels at dealers are resulting in lower retail sales across the industry. At the end of the first quarter, we estimate that our dealers were under-inventoried by more than 2,500 units on a consolidated basis, with half of the shortfall at Mastercraft alone For additional context, when compared to the first quarter of fiscal 2021, average dealer inventories across all our brands were down approximately 30% during the quarter. Although we believe retail sales are being limited by product availability, we remain very optimistic about the sustainability of consumer demand due to the continuation of secular consumer trends that accelerated during the COVID pandemic. We believe structural changes in where and how people choose to live, work, and recreate have generated a tailwind of consumer demand for the boating lifestyle that will persist. As we have discussed previously, the industry experienced a surge of new consumers entering the boating market over the last two years. Based on our internal survey data, we saw the proportion of new to boating consumers continue to increase from last year. At our Mastercraft brand, survey respondents who identify as first-time boaters increased by more than 40% in the first quarter when compared to the strong first quarter 2021. In addition, recent studies show that people are increasingly choosing to live in areas of the country with comparatively high levels of boating consumers. This view is supported by our internal analysis, which shows that of the top 25 states for the ski weight category, most are benefiting from very positive demographic trends, including high levels of net migration. As more people move to boating-friendly states and cities, our addressable market grows and drives additional consumer demand. At the recent Fort Lauderdale International Boat Show, we saw strong consumer interest for our Aviara and NauticStar brands. Aviera saw an increase of nearly 30% in units sold compared to the prior year show. And NauticStar sold out of every unit it brought to the show, plus took additional orders for future delivery. The results have been similar at other fall shows. Not only do we believe there is pent-up demand from voting consumers, importantly, we believe our consumers are very stable financially. Favorable economic dynamics, including the strong stock and housing markets, high levels of personal savings, the growing economy, and the robust job market provide our consumers with the ability and confidence to continue to purchase. As a result of continuing robust consumer demand and production rates constrained by supply chain disruption, we now believe it will be sometime in fiscal year 2024 before dealer inventories reach optimal levels. This provides us with an unprecedented confidence in our wholesale growth visibility, subject to the uncertainty and of supply chain and labor dynamics. As we look to increase production to improve dealer inventory levels and satisfy consumer demand, each of our facilities is currently at significant capacity above and beyond what they are producing. As we stated during our last earnings call, we have 25% more capacity than we are able to utilize due to supply chain constraints. Nevertheless, we are committed to aggressive long-term growth plans, which is why we have identified and are pursuing targeted capital projects at Mastercraft, NauticStar, and Crest to allow us to ramp up production past current unconstrained capacity levels as the supply chain improves. Once completed, these production expansion projects will give us an additional 20% to 25% of capacities. Turning to inflation and pricing, in July we implemented our annual model year price increases, which were higher than our historical norms to mitigate the impact of anticipated inflationary pressures. Since then, our cost inflation estimates have increased significantly, driven by unrelenting demand and a worsening of the supply chain. In response, we have announced additional mid-year price increases that will be implemented for each of our brands starting during the second quarter. We do not expect to see the full benefit of these price increases on our financial results until the second half of fiscal 2022 as we have price protected certain retail sold boats. We believe the combined benefit from these adjustments will offset the impact of material and labor inflation for the full year. Because of our strategic focus on the consumer, leading quality, and the premium positioning of many of our products, especially our MassCraft and Naviera brands, we do not expect a degradation in consumer demand as a result of our pricing strategy. Supported by these differentiators and the strength of consumer demand for our products, we will continue to compete by offering superior products to the consumer, not promotional pricing. As such, we expect a limited promotional environment this year. We continue to progress in the pursuit of our overarching objective of driving sustainable accelerated growth by becoming the most consumer-focused boating company. We remain determined to execute against each of the four strategic priorities, consumer experience, digital marketing, operational excellence, and human capital development. Let me now briefly review some of the latest developments across our brands. Our Mastercraft brand, which is now being reported without our Aviera brand, performed exceptionally well during the quarter and grew net sales to a first quarter record of 92 million. This tremendous result is due to the extraordinary efforts of the Mastercraft team and the continued success of Mastercraft's best-in-class operating model, which we leveraged to mitigate supply chain disruption and increase year-over-year shipments by 22% or 143 units. We believe this ability to outproduce our largest competitors combined with our uncompromising quality standards is key to taking market share today and in the long run. According to the official SSI market share data, as of the rolling 12-month period ended June 30th, 2021, Mastercraft increased market share over each of its closest three competitive brands by between 130 and 220 basis points. This performance solidifies Mastercraft as the number one fastest growing and highest margin category in the boating industry. And while the official rolling 12-month September data is not out yet, preliminary data for the quarter ended September 30th reflects further market share gains versus our closest three competitive brands. For model year 2022, Mastercraft unveiled one of the most aggressive model year changes in its history. The model year changeover included three new boats and a myriad of consumer folks' performance, styling, and convenience features. The new lineup has been incredibly well received by our dealers and consumers alike. We plan to follow up on that success by launching another all-new MasterCraft model later this month. Importantly, we will continue to emphasize quality and consumer experience to further differentiate MasterCraft from the competition. Dealer commitments continue to exceed our aggressive expectations. All model year 2022 production slots are sold out. As you know, in September, we revised our first quarter guidance largely due to the potential to miss shipments at Mastercraft by a significant number of units because of a temporary engine component supply disruption near the end of the quarter. Our revised guidance assumed a shift of units out of the first quarter and into the second quarter, so it was strictly a timing issue. Fortunately, our operations team and our engine supply partner worked diligently to mitigate the number of units missed in the first quarter. This better than expected shipment timing at Mastercraft, combined with better than expected top line results from our other segments, resulted in outperformance of our revised first quarter guidance. However, the inefficiencies created because of this engine component supply disruption had a negative impact on our Mastercraft margins in the quarter. As supply chain issues abate in the future, we believe our operating excellence will allow us to once again generate best-in-class margins at our Mastercraft brand. Now on to Crest, which continued to execute its operating and strategic priorities by delivering another record-setting performance for the third consecutive quarter. Crest shipped the most units of any first quarter in the company's history. Crest also set a record quarter for net sales which increased by an astounding 82% year over year, primarily driven by a 58% increase in units. Crest's ability to increase unit volume in this production environment and drive impressive top-line growth demonstrates the value of its business and the strength of its operating team. Although limited by product availability, Crest's retail demand is proving durable as consumers continue to be impressed with Crest's performance, comfort, and value. At Aviera, which is now being reported as a separate segment, we continue to optimize production and ramp up the Merritt Island facility to meet continued strong consumer demand. Aviera's ramp-up was heavily impacted in the first quarter by a surge of the COVID-19 Delta variant in Florida, which lasted for most of July and August. Despite the temporary growing pains associated with starting up a new facility and the impact of COVID-19, net sales were up by more than 55%. driven by a 48% increase in units. While the increase in overhead due to the new Merritt Island facility will continue to have a dilutive near-term impact on Aviera's margins and profitability, we believe the excess capacity at the facility will support at least a $100 million annual sales volume over time. We expect Aviera's production to steadily increase and margins to improve over the course of the year. Furthermore, The introduction of new models beginning in fiscal 2023 will position the brand for accelerated revenue growth. Aviar showcased its new flagship model, the AV40, at the just-completed Fort Lauderdale International Boat Show, and we were very pleased with the sales results. We have begun shipping the first AV40s, which will allow dealers to complete delivery of these remarkable boats to eager consumers. Aviera's retail performance continues to exceed our expectations with almost all the units produced since the brand's inception having already been sold at retail. As such, dealer inventory as of the end of the first quarter is very low as Aviera's unmatched styling and uncompromising quality continue to impress consumers in the prestigious luxury day boat category. At NauticStar, supply chain disruption, most notably engine shortages and labor constraints, heavily impacted the first quarter production ramp-up plans and limited shipments. Although production has been temporarily impeded, we continue to leverage our investment in product development and to introduce new and innovative products for the brand. NauticStar launched two all-new models at the Fort Lauderdale International Boat Show, the 24 Legacy and the 24XS. These two new models combine innovation, reliability, and comfort to provide consumers with an exceptional offshore experience at an incredible value. We believe our turnaround plan continues to progress with initiatives in place to further increase production, continue to improve overall quality, and enhance the product offering. We look forward to achieving these results as the business and supply chain environment continue to normalize. Overall, despite the many challenges, we had a strong start to fiscal 2022. We achieved industry-leading organic growth, and we look to continue to build upon that success during the remainder of the year. Guided by our consumer-centric strategy and facilitated by our best-in-class operating model, recent third-party industry data confirms we have outperformed our top competitors to take meaningful market share. We remain committed to making investments to further strengthen our competitive position, grow our brands, and deliver shareholder value guided by our long-term focus and strategic priorities. I will now turn the call over to Tim, who will provide more color on our financial results. Tim.