Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the MasterCraft Boat Holdings, Inc. Fiscal Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Scott Ken, Chief Financial Officer. Please go ahead, sir.

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 2025. As a reminder, today's call is being webcast live, and we will also be archived on our website for future listening. With me on this morning's call is Brad Nelson, Chief Executive Officer. We will begin with an overview of our operational performance. After that, I will discuss our financial performance, Brad will then provide some closing remarks before we open the call for questions. Before we begin, we would like to remind participants that the information contained in this call is current only as of today, August 27, 2025. 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 a safe harbor disclaimer in today's press release. Additionally, on this conference call, we will discuss non-GAAP measures that include or exclude items not indicative of our ongoing operations. For each non-GAAP measure, we will also provide the most directly comparable GAAP measure in today's press 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 operations basis and all references to specific quarters and periods will be on a fiscal basis. With that, I will turn the call over to Brad.

Thank you, Scott, and good morning, everyone. We closed fiscal 2025 with a strong fourth quarter, outperforming expectations in what remains a challenging geopolitical and retail environment. This performance was driven by robust demand for our ultra-premium products and disciplined cost control. Q4 net sales increased $25 million or 46% year-over-year and adjusted EBITDA rose nearly $8 million. I would like to thank each of our team members and dealers for their dedication and execution as we continue to navigate through this dynamic industry cycle. From the outset of the year, our priorities were clear: to control what is most meaningful, such as optimizing channel inventory; championing innovation; and positioning us for the next up cycle. We have strengthened dealer health, advanced new product and brand initiatives, returned capital to shareholders and maintained a strong balance sheet by maximizing earnings and cash flow. Recall that our initial guidance range for fiscal '25 reflected the uncertain demand environment. We carefully plan for multiple scenarios. Over the course of the year, the marine industry faced continued pressure for macroeconomic uncertainty, persistent elevated interest rates and a volatile trade environment. Consumer sentiment stayed cautious and unit retail performance for our brands ended within the lower end of our projected range. Even so, our operational execution allowed us to deliver results near the high end of our original earnings guidance. Despite recent headwinds and low cycle volumes, we maintained focus on our strategic and operational priorities. Across our MasterCraft and Crest brands, we removed more than 900 units from dealer inventories near the high end of our targeted range. Our production discipline delivered the largest Q3 to Q4 field inventory reduction in our history, excluding the pandemic. These actions strengthened dealer health. We also expanded distribution in key markets. Our MasterCraft brand launched its…

Thanks, Brad. In Q4, net sales were $79.5 million, up $25 million or 46% year-over-year, driven by favorable mix, higher volumes and lower dealer incentives. Gross margins improved 740 basis points to 23.2%. Adjusted net income rose to $6.6 million or $0.40 per share, up from $0.04 per share last year. Adjusted EBITDA increased by $8 million to $9.5 million. Turning to our full year fiscal '25 financial results. We concluded with net sales of $284.2 million, a decrease of $38 million or 12% from the prior year. This was primarily due to the planned reduction in unit sales volume, partially offset by favorable mix and options. For the year, our gross margin was 20% compared to the prior year of 22.2%. These margins were primarily the result of lower cost absorption and price adjustments, partially offset by favorable mix and options. Operating expenses were $45.6 million for the year, an increase of $1.5 million when compared to the prior year due to the return of variable compensation and commercial launch activities. We continue to tightly manage discretionary spend and operating expenses remain well controlled. Turning to the bottom line. Adjusted net income for the year was $15.1 million or $0.92 per diluted share. This compares to adjusted net income of $28.9 million or $1.69 per share in the prior year, calculated using an effective tax rate of 20% for both periods. We generated $24.4 million of adjusted EBITDA for the year compared to $40.2 million in the prior year. Adjusted EBITDA margin was 8.6% compared to 12.5% in fiscal '24. As Brad stated, we generated $29 million of free cash flow during fiscal '25. Our ability to generate cash even in a down market allows us to continue to invest in innovation and other long-term growth initiatives. This execution…

Thank you, Scott. Our business executed well during fiscal 2025 as we advance product innovation, improved dealer health and maintain capital and operational discipline. Since 2021, we've returned more to $74 million of excess cash to our shareholders. Our strong balance sheet provides us with the financial flexibility to pursue our strategic growth initiatives. As we look ahead to fiscal 2026, our plans are built for a range of demand scenarios and our track record shows we can execute through various market conditions. Our focus remains on supporting our dealers and optimizing the business for the long term. Our flexible operating model and brand equity remains a competitive advantage, and we are poised to capitalize on the next market recovery. As we navigate this dynamic environment, we are well positioned to leverage our strong portfolio of brands and explore long-term growth opportunities, while maintaining the flexibility to return capital to shareholders. Operator, you may now open the line for questions.

[Operator Instructions] And our first question will come from Joe Altobello with Raymond James.

I guess, first, couple of questions on retail. Maybe kind of walk us through what you saw in terms of cadence throughout the quarter and what you're seeing here in Q1? Is it within that sort of 5% to 10% decline that you kind of laid out for the full year?

So our fourth quarter for us was a pretty good quarter on the MasterCraft side, a little weaker on the Pontoon side. Obviously, we don't index completely on the current short-term months and just starting the season, but we still believe the 5%, 10% with how we're starting out the year is still possible.

Also, Joe, I mean, despite those lower retail assumptions, we still believe we can see wholesale growth this year due to proactive measures that we've taken in '25 and we'll continue to take throughout '26 as far as lowering inventory, the pipeline and inventory levels, that helps us on the wholesale side. Really positioning for that next market upswing.

Okay. And just kind of a follow-up on that. You mentioned that you took out over 900 units out of the channel this year. Where do dealer turns stand today since you're implying, I think, that you might need to take out more units out of the channel this year. So where do dealer turns stand today? And how does that compare to historical norms.

We don't typically quote our turns. But obviously, the dealer inventories are in a healthier place because we took so many boats out. Really, the destocking next year would really be more because we expect retail to be down a little bit more. So we need to continue to be -- make sure our channels stay healthy and bring those down. But at the end of the day, the amount of destocking will really depend on how retail shakes out.

We don't think it will be as extreme in '26 as '25. It's more fine-tuning at this point, certainly dependent on retail.

And the next question will come from Craig Kennison with Baird.

I just wanted to maybe dig into the consumer dynamic this summer. We had the tariff headwinds, which clearly impacted consumer sentiment in your category. And then we've had some relief lately. I think there's some optimism around your consumer today. But I'm wondering how you see it, given all these cross headwinds and tailwinds.

Craig, the way we look at that right now is like everybody out there in the discretionary space, we're looking for something sustained. And it's been stops and starts. At the consumer level, the market, as we see it, is leaning premium, and we expect that to continue. That helps us. We're in a good position there because of our brand strength and our premium offerings as well as the premium nature of our dealer network. Some of the tariff overlay, certainly has some impact and continued uncertainty. We expect that to continue. It's just been chugging along. We definitely would like to see more sustained retail activity moving forward.

And maybe just thinking about the price surcharge that you mentioned and thinking about that in the broader context of affordability. I hear you that the premium consumer is definitely hanging in there better than that payment-sensitive buyer. But I suspect you're going to want that payment-sensitive buyer to come back to really fuel your cyclical recovery. And what are you doing, I guess, to get after that affordability trend that has been elusive in marine?

Yes. Thanks, Craig. As a reminder, recall that our pricing in MasterCraft during model year '25 was flat to even down. We lowered prices on some of our more entry-level products, the NXT line and even some of our XT midline product, which is helping. Certainly, the more entry-level products do require more of the mass market to be healthy at the consumer level. And in an elevated interest rate environment, that continues to unfold. We use discounting where needed. Certainly, lower interest rates could help spur things, and we'll see what happens there for finance buyers. And for '26 it's challenging to have 2 years in a row of lowering prices just due to tariff inflations, but we're controlling costs to give us flexibility there and then use programs and discounting on a spot basis where needed.

If I could sneak one more in. Just on the dealer network, I wonder if you could give us an update on some of your wins and maybe the net gains that you've had from a dealer perspective?

Yes. We've been working on and we'll continue to work on strengthening distribution. And we look at that in 2 areas. There's white space coverage that still needs, needs more coverage out there. That's one angle. The second angle is just really increasing and fine- tuning density within existing geographies with existing dealers, which means adding rooftops in growing markets. There's always shifting demographics, traffic patterns, buying patterns, even weather can shape this weather trends. So we've seen some -- I'd highlight a couple of examples. We've made changes in the #1 ski/tow/wake market in the United States, which is Dallas, Texas, and we've made some dealer changes there. Houston is another one that I'd like to highlight. And another example would be in Southern Utah, in St. George, where we've got a great dealer out there that added a rooftop there in a great demographic market. Coeur d'Alene, Idaho is another example. So there's always a handful of these that we're working on. And so far, we're seeing those benefit us.

And our next question will come from Eric Wold with Texas Capital Securities.

A couple of questions. I guess 2 questions. I guess one, within the fiscal '26 guidance, given your comments around your retail sales expectations and continued destocking that may be needed in the channel. Is the assumption for fiscal '26 revenue or net sales guidance growth, assuming kind of continued uptick in ASPs for both the MasterCraft and Pontoon segments kind of driving that growth with both kind of the launch of the new brands in both the segments? Is that kind of a part of that -- the driver behind that revenue growth is kind of a continued uptick in ASPs as part of that, given that you expect overall net retail sales and destocking exceed have moved lower a little bit?

Well, really, units are probably the bigger driver as we manage the inventories well this year, we're able to have a wholesale growth despite the retail growth. On the ASP front, for the full year, you can sort of expect ASPs overall are going to be fairly flat. MasterCraft should be up a little bit while pontoons will be a little flatter and then we got a little bit of mix going on between the 2 segments. So you can kind of expect relatively flat for the full year. Now keep in mind that this year, we had a higher ASP in the second half than the first half, and that is going to happen again this year. Those X Series launches within starting shipping in Q2, our ASPs are going to be a little lower in the first half and a little higher in the second half. And so we're going to have kind of that again, a theme of second half is going to be a little stronger than first half from an ASP's perspective.

Got it. And then...

And for the year, ASP is up across the board.

Okay. And then last question, going back to a follow-up on one of the prior questions kind of on the payment buyer, the lower end buyer. I know we'll get to a kind of a 2-part question, we get to a period where hopefully, rates do start to come down. Where do you think the inflection is for rates to kind of -- from what you've heard from your dealers to kind of get that payment buyer more comfortable in terms of the cost of ownership to kind of get them over the line to maybe want to buy again. I know it's -- we're going to be getting into the point probably when rates start to tick lower as you get into boat show season. They'll probably start happening somewhat simultaneously, maybe not enough of rate coming down as boat show season starts. Do you think you kind of have to kind of prod those buyers maybe with another season of promotional help kind of maybe not lose another boat show season as rates start to tick lower, maybe get another season of discounting, kind of get those guys across the line maybe a little bit earlier than they may want to be?

Yes, Eric, difficult to predict. We do see pockets where it seems like consumers and dealers alike are getting used to a higher interest rate environment in general compared to almost free money for a long period of time prior. And there's evidence of some potential downticks out there. That's any of those things help. And obviously, there's impact here at the consumer level for purchases for a payment buyer as well as dealer holding costs for floor planning. So we've seen pockets where it's less impactful. But overall, it does provide still somewhat of a drag on consumer sentiment. And we expect that uncertainty to continue, and we'll see what happens with rates, but certainly, any downward tick would be an improvement. Now we have not built into our current guidance any interest rate downtick. So if that were to move favorable, that could potentially drive some upside for us.

And the next question will come from Anna Glaessgen with B. Riley Securities.

Just a follow-up on Eric. You spoke to retail expectations to be down 5% to 10% and then spoke to destocking, but it sounds like the guidance is assuming units are up. So I just want to clarify how we're getting there...

That was a little hard to hear, Anna. What I heard was, maybe a question on -- maybe more color on destocking? Could you please restate?

Yes, sorry. I was just asking on -- given the expectation for retail decline in fiscal '26 plus potential destocking in response to that, how does that get to units ending up, up for the year?

I don't think we're going to talk about a range this year because it's really going to depend on where retail shakes out and what kind of destocking. But as Brad mentioned, it's going to be fairly modest this year. So it's not going to be as much of a major driver to us as it was last year.

Yes. In general, on inventory, broadly speaking, we're comfortable with inventory levels as well as the improvement in the aging profile of existing channel inventory. What we're talking about here in '26, as we sit here today, is we do -- we would like to see an increase in turns with dealers. Why? Well, that's really driven by market uncertainty at the retail level. Now when we start to see sustained retail spiking, then that's better. But it is more of a fine-tuning adjustment in the cycle or in the channel as far as inventory levels.

Got it. And then on the pacing of that destocking, it sounds like it would be consistent throughout the year in response to retail movements. It doesn't seem like it would be front loaded in the first half or the first quarter, right? I mean it's not in response to -- you feel pretty good about inventories as we sit today.

Yes. It will be more across the year as opposed to all happening in a single quarter. I mean our Q1, we are still being a little careful with shipments just to make sure we don't put too much into the field. But we're not necessarily looking to start destocking. We don't expect destocking to immediately start happening right out of Q1. So it's really going to be based on where retail heads for the full year.

And the next question comes from Noah Zatzkin with KeyBanc Capital Markets.

I guess, first, just would love to get your thoughts on kind of the health of the broader industry dealer base as well as any insight into kind of broader industry inventory levels and how that dynamic impacts you?

So obviously, pulling out 31% of the dealers' inventory this year really helped the dealers for sure and helped our channel. It's always better to have a little less inventory, especially in uncertain times, as Brad kind of mentioned there. That also means as we enter the year that our noncurrent inventories are lower than they were a year ago as well, and that also really helped with the dealer health side of things. That doesn't mean the dealer aren't continuing to be cautious as they probably should in this environment, because we would, as Brad mentioned, love to see the dealers continuing to be able to have higher turns. I think it's good for them and it's good for us. But until we see something to give us a little bit more confidence in a sustained recovery, I expect our dealers are going to remain a little cautious out there.

We're not hearing a lot about canceled orders right now, Noah, and we track dealer health as well very closely in partnership with floor plan providers, very disciplined about that. And we don't see a giant risk right now as far as dealer failures. And then across the industry, we're seeing better health this year projected forward than the prior year on overall channel inventory. The Pontoon market is lagging behind the ski/tow/wake category with inventory health. There's still a couple of competitors out there that are working through challenges there that does have impact for us and really anyone in that space.

The other thing that will help dealer health is if we do start seeing some interest rate declines as well as it helps us on the cost side, but it also really helps the dealers, and it will certainly add to dealer health if their interest rates can be a little lower going into the year as well.

Very helpful. Maybe just one more, obviously, a challenging environment, but just any thoughts kind of around how you're thinking about M&A?

You bet. Thanks, Noah. We're continuing our approach, which is very careful, very selective and opportunistic from an inorganic growth perspective. We're very proud of our organic strategic growth initiatives that we continue to fully fund internally. And then our strong balance sheet that we've been disciplined with does give us flexibility there with M&A, but we will continue to be highly selective.

And I am showing no further questions at this time. And I would like to thank you for participating, and this does conclude today's conference call. You may now disconnect, and have a great day.