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Good day, and thank you for standing by. Welcome to the Q4 2023 MasterCraft Boat Holdings, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Tim Oxley, Chief Financial Officer. Please go ahead.

Thank you, operator, and welcome everyone. Thank you for joining us today as we discuss MasterCraft's fiscal fourth quarter and full year performance for 2023. As a reminder, today's call is being webcast live and will also be archived on our website for future listening. With me on this morning's call are Fred Brightbill, Chief Executive Officer and Chairman; George Steinbarger, President of Crest; and Bobby Potter, Vice President of Strategy, Investor Relations. Fred will begin with a review of our operational highlights from the fourth quarter and full year. I will then discuss our financial performance. 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 currently as -- only as of today, August 30, 2023. 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 2023 fourth quarter earnings release, which includes a reconciliation of these non-GAAP measures to our GAAP results. There is also a slide deck summarizing our financial results in the Investors section of our website. As a reminder, unless otherwise noted, the following commentary is made on a continuing operation basis. With that, I'll turn the call over to Fred.

Thank you, Tim, and good morning, everyone. We concluded fiscal year 2023 by delivering a record performance of $662 million in net sales, more than $131 million of adjusted EBITDA and $5.35 of adjusted earnings per share for the full year. These outstanding results represent a third consecutive record setting year for net sales and earnings. Our strong operating performance resulted in the highest cash flow for any year in the company's history, as we generated more than $136 million of operating cash flow, driven by strong earnings and diligent working capital management. We are proud of our team and their outstanding work. Fiscal 2023 was a dynamic year for our businesses. We began the year in an environment of very low dealer inventories, uncertain retail demand, continuing but easing supply chain disruption, and emerging economic headwinds. We were early to identify and discuss this changing environment beginning with our initial guidance last September. Our goals for the year included fully restocking our dealers in advance of the summer selling season, maintaining healthy dealer inventories, and maximizing our financial performance. As the year progressed, we closely monitored the environment and adjusted production plans accordingly. By the fiscal third quarter, we've succeeded in recycling dealer inventories to what we considered optimal levels. Through the fiscal third quarter, retail activity performed closer to the upper end of our range of potential outcomes. Prevailing expectation for a return to more historical seasonal demand patterns provided us with cautious optimism for retail sales in the all-important fiscal fourth quarter and summer selling season. Historically, 40% to 50% of annual retail sales occur in our fiscal fourth quarter. Weather adversely impacted retail sales early in quarter and sales did not recover by the end of the quarter. As a result, retail sales for our fiscal fourth quarter fell short of the historical pattern and we trimmed our production plans in response. Recall that on our fiscal third quarter earnings conference call, we estimated that consolidated wholesale unit sales would exceed projected retail sales by approximately 1,400 units for fiscal 2023, representing a one-time pipeline refill. Based on our expectations for fiscal fourth quarter 2023 and fiscal year 2024 retail sales, this reflected the production that we believed we needed to replenish dealer inventories and end fiscal 2023 at optimal levels. However, because the expected retail level of demand activity for our fiscal fourth quarter did not materialize, wholesale unit sales exceeded retail sales by more than our 1,400 unit estimate. As a result, dealer inventories ended fiscal 2023 at levels higher than we would now consider optimal. Even so, dealer inventories ended the fiscal year about 10% lower than at the end of fiscal year 2019. Additionally, the average number of units per dealer location is lower by approximately 20% for MasterCraft and 37% for Crest, as we've expanded distribution networks since fiscal year 2019. Macroeconomic factors, including elevated interest rates as well as tightening credit standards and availability, are creating significant uncertainty, which is limiting our retail demand visibility. In addition, the general expectation for an economic downturn in fiscal 2024 will likely be a headwind for the industry. This backdrop of economic uncertainty has caused us to approach our wholesale production plan for fiscal 2024 with a prudent level of conservatism, and we have developed plans for a range of potential retail demand scenarios. Because of the lower-than-expected retail sales in our fiscal fourth quarter and the uncertain outlook for retail sales, wholesale unit sales for fiscal 2024 will be lower-than-projected retail sales. Our production plans will allow us to rebalance dealer inventories with anticipated retail demand and keep our dealer pipeline healthy. Our cyclical industry requires periodic rebalancing of wholesale unit sales to retail demand. We've experienced this before and our industry veteran management team is well prepared to navigate through a challenging economic environment. Based on our current outlook for retail demand, we anticipate returning to net sales growth in fiscal 2024. Moving on to supply chain. The general environment, including cost inflation and delivery disruption, continues to improve. Limited supplies and longer-than-normal lead times in certain components, including those that utilize microchips and some propulsion components, could continue to intermittently affect our operational efficiency and production schedules. However, we do not expect supply chain disruption to be a constraint on our fiscal year 2024 production. Given the uncertain macroeconomic environment, our fortress balance sheet is a significant competitive advantage and provides us with abundant financial flexibility. Despite the cyclical headwinds facing the industry, we are well positioned to pursue our capital allocation priorities. First and foremost of which is investment in growth. We have ability to grow through multiple approaches, including organically through our existing brands, internal new brand development and acquisitions. We have been laying the foundation for long-term growth by actively investing in targeted initiatives that will take advantage of the industry's positive underlying secular trends. These investments will continue into fiscal 2024, as we prioritize long-term growth and value creation through product line expansion, relentless innovation and an unyielding focus on the consumer. Let me now briefly summarize some of the developments across our brands. At our MasterCraft brand, net sales were $129 million for the quarter, down 12% from the record prior year. Compared to fiscal 2019, however, MasterCraft's net sales were more than 60% higher for the quarter and 50% higher for the year. MasterCraft recently announced its model year 2024 lineup, including a range of new features and enhancements, including the first-ever introduction of power board racks. An underwater exhaust now comes standard on the XT, X and XSTAR S models, while the XT Series received some upgraded dashes and the standard touchscreen. With the most models available on the market, including the all-new XT25 released in June, MasterCraft offers a boat to meet a wide range of consumer needs. The expansive 16 model lineup delivers unsurpassed wave performance, the most wave adjustability, exceptional handcrafted quality, unmatched comfort and innovative connectivity through telematics. At Crest, net sales were nearly $25 million for the quarter, down 37% from the prior-year period. Compared to fiscal 2019, Crest net sales were up 6% for the quarter and more than 44% higher for the full year. Crest recently announced its 2024 model lineup, which redefined excellence within its premium series by focusing on the details that matter most to consumers. The 2024 lineup includes a completely redesigned Caribbean model, featuring a refreshed helm with upgraded electronics navigation and audio components, all new tower, and a new convenient boarding ladder. George Steinbarger was recently appointed President of Crest, having previously served as our Chief Revenue Officer. We look forward to George leading the next phase of Crest growth. At Aviara, net sales were nearly $13 million for the quarter, up more than 19% compared to the prior-year period, driven by a 17% increase in units and a higher average unit price. Aviara continues to build on its pillars of progressive style, elevated control, modern comfort and quality details by launching the all new AV28. The AV28 represents the next phase of Aviara's product evolution, and will expand the brand's addressable market. In addition to sterndrive and outboard options, the AV28 Series includes the impressive surf-centric forward-facing drive variant, the AV28S. The AV28S utilizes MasterCraft's proprietary SurfStar technology to create the most refined surfing experience on the water. Aviara's introduction of surf capabilities and consumer-centric features such as an innovative folding power hardtop, convenient submersible swim platform, are just a few examples of how Aviara continues to offer luxury without limits. Aviara is also expanding distribution to additional North American and international markets. This portfolio and distribution expansion positions the brand for long-term net sales and earnings growth. I will now turn the call over to Tim, who'll provide more detailed discussion of our financial results. Tim?

Thanks, Fred. Focusing on the top-line, net sales for the full year were $662 million, an increase of $20.4 million or 3.2%. This increase was primarily due to higher prices, partially offset by decreased unit volumes, increased dealer incentives, and changes in model mix. Dealer incentives include higher floor plan financing cost as a result of increased dealer inventories and interest rates and other incentives as the retail environment becomes more competitive. For the year, our gross margin was 25.6%, a decrease of 60 basis points when compared to the prior year. Lower margins were mainly due to higher costs from inflationary pressures, higher dealer incentives, lower cost absorption due to decreased production volumes and changes in model mix, partially offset by higher prices and improved production efficiencies. Operating expenses were $52.8 million for the year, up $800,000 from the prior year. SG&A expenses as a percentage of net sales remained relatively flat as we prudently managed cost. Turning to the bottom-line. Adjusted net income for the year increased 1.8% to $95 million, compared to adjusted net income of $93.3 million for the prior year. Adjusted net income per share increased 6.8% to $5.35, compared to $5.01 for the prior year, and was computed using the company's estimated annual effective tax rate of 23%. The increase in adjusted net income per share was primarily due to higher short-term investment income and reduced share count as a result of our share repurchase program. Adjusted EBITDA increased about 1% to $131.5 million for the year compared to $130.5 million in the prior year. Adjusted EBITDA margin was 19.9%, down 40 basis points from 20.3% in the prior-year period. As for the fourth quarter results, net sales were $166.6 million, a decrease of $30.7 million or 15.5% compared to the prior-year period. The net sales decrease reflects lower unit sales volumes, changes in model mix and increased dealer incentives, partially offset by higher prices. Gross profit for the fourth quarter was $42.9 million and gross margin was 25.8%, a year-over-year decrease of 320 basis points. Gross margin decreased year-over-year mainly due to higher dealer incentives, higher costs from inflationary pressures, changes in model mix and lower cost absorption due to decreased production volumes, partially offset by higher prices. Adjusted net income for the quarter was $23.9 million, or $1.37 per diluted share, computed using the company's estimated annual effective tax rate of 23%. This compares to adjusted net income of $34.8 million, or $1.92 per diluted share, for the prior-year period. Our balance sheet remains incredibly strong as we ended the year with more than $211 million of total liquidity, including more than $111 million of cash and short-term investments and $100 million of availability under our revolving credit facility. We ended the year with no net debt as cash and short-term investments totaled more than twice our outstanding debt balance. Strong earnings and working capital management translated to record cash flow from operations. Cash flow from continuing operations was a record $136 million for the year, an increase of 66% from the prior year. Our balance sheet positions us exceptionally well and provides us with ample financial flexibility to ensure sound operations through the business cycle and the ability to fund strategic growth initiatives. During the year, we spent nearly $23 million to repurchase more than 870,000 shares of our common stock. At the end of fiscal 2023, we had spent 96% of our initial $50 million program authorized in June of 2021. The $48 million of cumulative share repurchase during -- since the inception of our share repurchase program provided a 10% benefit to our fiscal fourth quarter adjusted net income per share and an 8% benefit to our full year adjusted net income per share. We recently announced that our Board of Directors approved a new $50 million share repurchase authorization. This new authorization permits us to continue to prudently return excess cash to shareholders while prioritizing financial flexibility and high-return investments in the business that generate growth and long-term shareholder value. And now, on to our outlook for fiscal 2024. We expect consolidated net sales to be between $390 million and $420 million, with adjusted EBITDA of between $42 million and $52 million, and adjusted earnings per share of between $1.46 per share and $1.88. We expect capital expenditures to be approximately $22 million for the full year. For the first quarter of fiscal 2024, consolidated net sales is expected to be approximately $98 million, with adjusted EBITDA of approximately $11 million and adjusted earnings per share of approximately $0.41. Importantly, this guidance reflects our view that industry retail unit sales could be down as much as mid-teens percent for fiscal 2024. Although our guidance reflects a significant decline in earnings from fiscal 2023, we expect to generate positive cash flow, which is a testament to our flexible, highly variable cost structure and proactive cost control efforts. I'll now turn the call back to Fred for his closing remarks.

Thanks, Tim. Our business performed extremely well during fiscal 2023, delivering a third consecutive record setting year for net sales and earnings. We generated nearly $136 million of operating cash flow, the highest-ever cash flow in the company's history. We've returned 46 -- $48 million of excess cash to our shareholders over the course of the last two fiscal years using our share repurchase program, and we have authorized an additional $50 million program. Our strong brands recently announced exciting and innovative model year 2024 product lineups. We have an enviable balance sheet providing us with financial flexibility to ensure sound operations through the business cycle and affording us with the opportunity to pursue our strategic initiatives. In short, we are executing well despite the dynamic and uncertain macroeconomic environment. We look forward to delivering strong results while maintaining the commitment to the pursuit of long-term growth opportunities and thereby generating exceptional shareholder returns. Operator, you may now open the line for questions.

[Operator Instructions] The first question comes from Craig Kennison with Baird. Your line is now open.

Hey, good morning, and thank you for taking my question. You had talked very clearly about inventory and the opportunity to restock the channel. Last year, I think you said 1,400 units. How much -- or how many units do you think you're heavy by at this point? And are there categories where you think you're particularly heavy?

Craig, let me frame it this way, maybe. As you think forward next year in terms of retail versus wholesale, and that differential, I would expect us to pull down inventory by 900 units, kind of split between almost evenly between Crest and MasterCraft. In terms of particular categories, it's not concentrated in any particular area. We do -- we very carefully manage our retail distribution and sold units. So, really don't have any particular area where there's been any accumulation.

And I guess I'm curious what your dealer feedback is. I imagine they're facing elevated floor plan costs. Are they telling you they want to reduce inventory? Or is this more based on what looks like a conservative retail forecast on your part?

Oh, you've been in the industry long enough to know, we finished the summer selling season and nobody really wants to take on significant inventory in that second fiscal quarter. We do it through our programs, right? So that's an area where dealers carry that and we're able to level production. And then, as we get into the following selling season, right, then that's typically what ideally, if they had their druthers, they'd like to ramp up their inventory availability. We smooth it out with our program and we're very, very sensitive to our dealers as partners' long run and their financial health. So, that's why we eased off the throttle very early and leveled out our production throughout the year, take some pressure off of them.

And I guess if I could squeeze in one more. Tim, as we think about lower production, to what extent does that lower production weigh on your gross margin outlook?

Yes, it's significant. It's probably in the neighborhood of just on overhead absorption, 400 basis points. And obviously, we do leverage some on our operating expenses as well.

That helps a lot. Great. Thank you.

Please stand by for the next question. The next question comes from Joe Altobello with Raymond James. Your line is open.

Good morning. This is Martin Mitela on for Joe Altobello. I was wondering if we can get a little bit more color around the tightening credit standards and how that's affecting. Is it the consumers or is it also the dealers as well?

Hey, Martin. It's George. I think it's -- principally when we talk about this credit standards, we're really talking about the consumer. We've seen the tightening standards, both increasing pricing and then also limiting people's ability to actually get financing to close on some boat deals. So, it's a combination of both the pricing, and that's impacting the monthly payments that consumers are getting quoted from the banks and the dealers based on the rate they're getting, but also, in some cases, we've seen some consumers not be able to get financing due to lenders being more aggressive with their underwriting standards.

Got it. And just moving on to Aviara. I know you have a new model out. How does that expand its addressable market? And how is the pricing compared to some of the competitors?

It'll be priced competitively with the premium offerings in that category, the luxury day boat, and in this case, the expanded surf-centric capabilities. In terms of addressable market, I mean, it's a [permeated] (ph) volume typically within boating as size decreases. So, as we move down into lower size ranges, there are many more units down there available. We're very excited about that market and the opportunity. It's a big part of Aviara's growth for this year, particularly in the second half of the year.

Got it. Thank you very much, guys.

Please standby for the next question. The next question comes from Drew Crum with Stifel. Your line is open.

Okay, thanks. Hey, guys, good morning. So, you noted a variety of retail scenarios, including units being down in the mid-teens range. Can you address how you're approaching price this year? And then, I guess just from a phasing perspective, what does your forecast assume? Are you assuming things get progressively worse as you move through the year, or they moderate? And then I have a follow-up.

Let me start with pricing. Think about low- to mid-single digits as a range of price increases, pretty similar, pretty tight across our brands. So, back to kind of pre-COVID type levels of price increase for us. I'm sorry, the second question was?

Yes. Fred, just what you're assuming from a phasing perspective as you move through the fiscal year as far as retail is concerned?

Yes, I think that's important. We're looking at this current environment and the uncertainty and the headwinds and assuming the current conditions continue. So, what's really important here is how you think about the next summer selling season. And if that -- if in fact, we're through the worst of the economy, and there's some uptick, if we're through with rate increases and potentially, there's even a rate decrease by then, I think we've got upside, but we did not build that into our plan. Our plan assumes kind of this continuing malaise, if you will, of not better and not dramatically worse, just kind of continuing to slug along as we are.

Got it. Okay. That's helpful. And then just a quick follow-up. Can you comment on your share performance with the MasterCraft brand over the last 12 months in the most recent quarter, if you have that available? Thanks.

Hey, Drew. So, the June data is still preliminary, but based on the preliminary data on a rolling 12 basis, MasterCraft is flat, if not, maybe slightly down a couple of basis points there. We think that will improve as more states report and the June official data comes out. Our view on market share is we try to take a more long-term view. And if you look more long-term historical, the MasterCraft brand has actually been the leading brand in the ski/wake category for the last six years. So, we're pretty proud of that sustainability. And I think when you look at some of the competitors that are seeing market share growth, in some cases, they're actually coming off with market share losses over the last couple of years. So we're looking at market share more on a long-term sustainable and profitable nature, which has been consistent with our view of market share since we've gone public.

Yeah. Okay. All right, thanks, guys.

Please standby for the next question. The next question comes from Eric Wold with B. Riley Securities. Your line is open.

Thank you. Good morning. A couple of questions. I guess one kind of a follow-up on prior comments kind of around demand levels and consumers' kind of inability to get some credit financing returns they want. Are you able to tinker around with any kind of promotional activity or discounting kind of throughout the quarter or into this quarter that could give you some, I don't say confidence, but just some insight into if you discounted enough or got prices down at a certain level, you could actually drive demand, it could have really boost demand at a level that was still profitable for you? Or is it really just -- it's tough to get down to a level right now where consumers are that really can drive that level of interest?

No, I mean, I would say, Eric, we have certainly utilized discount or programs with our dealers and partner with our dealers to help them move inventory. And I would say we've seen pockets of strength where we've seen that really help move the needle in retail. We've seen other areas where we haven't seen it move the needle as much. And I think part of that is where a lot of it depends on where the competitors, what their positions are in certain geographies and how aggressive they're being. So, you really have to look at it on a market-by-market basis and really adjust to what the competitors and the local dealers are doing. So, we will continue to utilize programs as an avenue to help our dealers sell through the inventory they have and help them enter into the next selling season in a more healthy position and, obviously, willing to take more boat orders. And so, we'll continue to tinker with those. I think interest rates right now is probably the biggest opportunity where we can get more creative and try to help our consumers with finding a monthly payment price that suits our budgetary needs, and that's certainly something that we've -- we'll continue to look into and have an opportunity.

Thanks, George. And then last question. you mentioned some opportunity to expand Aviara domestically and internationally, enter the distribution. Given your outlook for the retail demand environment for fiscal '24, what is your desire to expand the dealership network for Crest this year? And kind of what's baked in there for either Crest and Aviara, given that malaise for the fiscal year?

Yes. So Eric, on the Crest front, we're still seeing strong interest from dealers to add the Crest brand. We added about 25 dealers last year -- last fiscal year, and our plan this year is to continue to add distribution. Some of that's distribution we've been talking to for a while and others, we continue to have discussions. Obviously, some dealers are coming into the new relationship with Crest, with maybe a little heavy inventory on some of their other products. So, we're working through that, but still seeing really positive willingness to take on the brand and we're excited for getting into some markets where we've not previously had distribution or strong distribution. On Aviara, I would say the interest level remains very strong. We've gotten a lot of interest from dealers internationally and in some domestic markets where MarineMax doesn't have a location. And so, we're pursuing those aggressively. We think the product that we're offering at Aviara, there's nothing like it in the marketplace. And with the introduction of the new 28 product, that only further expands the addressable market of new dealers that are interested in carrying the brand. So, very excited about the growth opportunities we have in distribution with Aviara.

That was launched recently and extremely well received. We are -- I couldn't be more optimistic about that product offering and the expansion.

Perfect. Thank you, both.