[Management View]
MasterCraft Boat Holdings delivered strong Q1 FY2026 results, exceeding expectations despite retail market headwinds. Key metrics include a 5.6% YoY increase in net sales to $69 million, driven by pricing, favorable option sales, and lower dealer incentives. Gross margin improved by 420 basis points to 22.3%, and adjusted EBITDA rose to $6.7 million, reflecting disciplined cost management and favorable sales mix. Dealer pipeline inventory improved 27% YoY, aligning with pre-COVID levels. Strategic priorities include launching innovative products like the X24 and refreshed Crest pontoon offerings, maintaining a debt-free balance sheet, and executing share repurchases.

[Outlook]
Management raised full-year guidance, projecting consolidated net sales of $295-$310 million, adjusted EBITDA of $30-$35 million, and adjusted EPS of $1.18-$1.43. Capital expenditures are expected to be approximately $9 million. Production cadence will focus on new product introductions in the first half, with ramped-up production in the second half to meet seasonal demand. Strategic partnerships, such as the collaboration with the World Wake Association, aim to enhance brand positioning and showcase product innovation. M&A opportunities are being evaluated with a focus on maintaining balance sheet flexibility and prioritizing shareholder returns.

[Financial Performance]
- Net sales: $69 million (+5.6% YoY)
- Gross margin: 22.3% (+420 basis points YoY)
- Adjusted EBITDA: $6.7 million (+76.3% YoY)
- Adjusted net income: $4.5 million ($0.28 per diluted share, up from $1.9 million or $0.12 per share YoY)
- Operating expenses: $11.6 million (+$800,000 YoY due to leadership transition costs and compensation timing)
- Cash & liquidity: $67.3 million in cash and short-term investments, no debt
- Share repurchases: Over 100,000 shares repurchased for $2.3 million in Q1, cumulative 3.2 million shares and $76.5 million since inception

[Q&A Highlights]
Question 1: Can you provide insights into the current marine consumer behavior and retail trends this quarter, especially with interest rates moving lower but uncertainty persisting?

Answer: Management noted that lower interest rates are a positive for the industry, benefiting both dealers and consumers. However, macroeconomic factors like job growth and sustained retail momentum remain critical. Early SSI data for Q1 showed the industry slightly down, but MasterCraft gained market share due to new product launches and dealer network improvements. Retail is expected to decline 5%-10% for FY2026, consistent with prior guidance.

Question 2: How do dealer network additions impact your retail outlook, and are they embedded in the 5%-10% decline forecast?

Answer: Dealer network changes and new product innovations are contributing to market share gains and are factored into the 5%-10% retail decline forecast. Dealers remain cautiously optimistic, with no significant canceled orders or failures reported. Sustained retail momentum is needed for further optimism.

Question 3: Can you update us on the cadence of retail progression through FY2026 and the impact of rate cuts on guidance?

Answer: Retail is expected to ramp in the second half of FY2026, driven by new product launches like the X24. While lower interest rates are beneficial, only rates already implemented are factored into guidance. Longer-term consumer rates may take time to adjust, limiting immediate impact.

Question 4: What is your comfort level with leverage for potential M&A opportunities, and how would you balance this with share repurchases?

Answer: Management emphasized maintaining a flexible balance sheet to evaluate M&A opportunities while prioritizing shareholder returns through share repurchases. Specific leverage levels were not disclosed, but the company remains disciplined in assessing inorganic growth opportunities.

[Sentiment Analysis]
Analysts displayed cautious optimism, focusing on retail trends, interest rate impacts, and dealer network performance. Management maintained a confident tone, emphasizing strong execution, product innovation, and strategic flexibility despite macroeconomic uncertainties.

[Quarterly Comparison]
| Metric | Q1 FY2026 | Q1 FY2025 | YoY Change |
|-----------------------|-----------|-----------|------------|
| Net Sales | $69M | $65.4M | +5.6% |
| Gross Margin | 22.3% | 18.1% | +420 bps |
| Adjusted EBITDA | $6.7M | $3.8M | +76.3% |
| Adjusted Net Income | $4.5M | $1.9M | +136.8% |
| Adjusted EPS | $0.28 | $0.12 | +133.3% |
| Operating Expenses | $11.6M | $10.8M | +7.4% |

[Risks and Concerns]
- Retail softness in the pontoon category due to elevated interest rates and promotional activity.
- Continued macroeconomic uncertainty and geopolitical factors impacting consumer sentiment.
- Competitive pressures in the marine industry, particularly in the pontoon segment.

[Final Takeaway]
MasterCraft Boat Holdings delivered robust Q1 FY2026 results, showcasing revenue growth, margin expansion, and strategic product launches despite retail market challenges. The company raised its full-year guidance, reflecting confidence in its operational execution and new product momentum. Dealer network improvements and disciplined production planning position MasterCraft to navigate macroeconomic uncertainties effectively. While risks persist, the company's debt-free balance sheet, share repurchase program, and focus on innovation provide a solid foundation for sustainable growth and shareholder value creation.