Ladies and gentlemen, thank you for standing by, and welcome to the MasterCraft Boat Holdings, Inc. Fiscal First Quarter 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Alec Harmon, Director, Strategy and Investor Relations. Please go ahead, sir.

Thank you, Stephanie, and welcome, everyone. Thank you for joining us today as we discuss MasterCraft's fiscal first quarter performance for 2026. 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 is Brad Nelson, Chief Executive Officer; and Scott Kent, Chief Financial Officer. Brad will begin with an overview of our operational performance. After that, Scott 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, November 6, 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 the 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, Alec, and good morning, everyone. We delivered results that exceeded our expectations despite continued geopolitical uncertainty and a dynamic retail environment. Our team continues to execute our key operating initiatives and maintain disciplined cost controls, which contributed to our performance in the quarter. Pipeline inventory levels improved year-over-year, reflecting our balanced approach to dealer health and focus on driving sustainable growth. Q1 net sales increased $3.6 million or 6% year-over-year, and adjusted EBITDA rose nearly $3 million, a margin improvement of 380 basis points. As always, I want to thank each of our team members and dealers for their focus and partnership, which has provided us with a solid foundation from which to build for the rest of our fiscal year. Regarding channel inventory, we maintained the progress made over the past year with pipeline levels ending the quarter 27% improved from prior year. Dealer inventory levels are on track with our expectations, and inventory turns remain aligned with pre-COVID levels at this point in the year, supported by disciplined production planning and proactive pipeline management. From a distribution perspective, we continue to fine-tune our presence in key markets, consistently evolving our network and capitalizing on opportunities to add strong partners globally. While retail variability continues, early industry indicators have not changed our expectations for the year of down between 5% and 10% for our MasterCraft segment. The Pontoon category remains highly competitive with retail softness persisting due to elevated interest rates and promotional activity. Overall, while near-term interest rate cuts provide us with cautious optimism, continued macroeconomic strengthening and sustained breakout in demand would further support meaningful order growth. Our flexible operating model and targeted dealer support programs position us well to respond to evolving retail dynamics and deliver on the full year. Now turning to our…

Thank you, Brad. We are pleased with this quarter's performance, delivering results above our expectations for both net sales and earnings due to the strong operating performance of both of our segments. Focusing on the top line, net sales for our fiscal first quarter were $69 million, up $3.6 million or 5.6% year-over-year. The increase was primarily driven by pricing, favorable auction sales, lower dealer incentives and in alignment with our planned production cadence for the first half of the year. Gross margin improved 420 basis points over prior year to 22.3%, a result of strong cost management and operating performance across both segments, pricing and favorable mix. Operating expenses were $11.6 million for the quarter, an increase of $0.8 million when compared to the prior year due to senior leadership transition costs and timing of compensation and commercial activities. We continue to tightly manage discretionary spend and operating expenses remain well controlled. Turning to the bottom line. Adjusted net income for the quarter was $4.5 million or $0.28 per diluted share. This compares to adjusted net income of $1.9 million or $0.12 per share in the prior year, calculated using an effective tax rate of 23% in fiscal '26 compared to 20% for the prior year period. We generated $6.7 million of adjusted EBITDA for the quarter compared to $3.8 million in the prior year. Adjusted EBITDA margin was 9.7% compared to 5.9% in fiscal '25, a 380-basis-point improvement over the prior-year period. We ended the quarter with $67.3 million in cash and short-term investments, no debt and ample liquidity. We expect to deliver positive free cash flow for the year. We believe our debt-free balance sheet remains one of the strongest in the industry and will continue to benefit us as we progress through fiscal '26. We repurchased…

Thanks, Scott. Our team executed well during the quarter despite retail uncertainty. We delivered solid results supported by disciplined production planning, dealer engagement and the early success of our new product launches, including the X24 and the refreshed Conquest lineup. These innovations reinforce our commitment to quality, performance and delivering the best consumer experiences in our industry. From a capital allocation standpoint, we are in a strong position, fully funded for our strategic initiatives and continuing to return capital to shareholders through our share repurchase program. Our flexible operating model and highly variable cost structure remain key advantages, allowing us to adjust production as needed to support dealer success and align with retail demand. We are managing the business for the long term. And while near-term uncertainty persists, underlying trends continue to move in our favor. As the market stabilizes, we are well positioned to capitalize on any future upswing and drive sustainable growth across our brands and continued value creation for shareholders. Operator, you may now open the line for questions.

[Operator Instructions] Our first question comes from the line of Craig Kennison with Baird.

I wanted to ask about the current marine consumer. Any details you can shed on -- any light you can shed on the retail trends this quarter and into October? And then just I'm really looking for a sense of how the consumer is behaving in this market with rates moving lower, but still a lot of uncertainty in the year.

Yes. You mentioned rates. Obviously, rates, I think, is a positive thing for the industry as we see them go down. We'll obviously have the backdrop of some of the macroeconomic and job growth, et cetera, that we'll have to pay attention to. Early SSI for Q1 has obviously showed the industry a little bit down. I think we performed really well in Q1. Initial views are we are gaining share in that quarter. I think it's a reflection of all of the focus we've had on new product and as well as some of the dealer growth we've had and changes we've made there. So we still are in line for -- assuming that we'll be down in the 5% to 10% range for retail for the full year. So Q1 didn't change any of our opinions about where the full year comes in. And frankly, I just need to kind of perform generally speaking, how we perform in Q1 for the rest of the year to stay within that 5% to 10%.

Also, Craig, we're still doing pretty well with premium buyers out there, and we're seeing that in our portfolio demand. And we're just looking for that sustained retail momentum, and we're hearing the same thing from our dealer network.

Yes. And regarding your dealer network and then your retail outlook, have the additions you've made to that network, will that result in maybe outperforming the industry? And is that embedded in the 5% to 10% decline you expect?

Yes. I would -- yes to all of that. Yes, we certainly believe that the dealer changes we made are helping us gain the share. It's that along with our new products and product innovations, and we do think that should continue. I mean, we have certainly had that as part of our strategy to make those changes, and I think we're finally starting to see some of the results.

Dealers remain cautiously optimistic. I don't think that comes as a surprise to anyone. Some of the macroeconomic conditions can dampen sentiment somewhat, but overall, cautiously optimistic remaining. We're not hearing a lot about canceled orders, and we've not seen significant dealer failures to this point. But again, until we see more sustained retail momentum, we expect some continued cautiousness.

Our next question is from Eric Wold of Texas Capital Securities.

A couple of questions. I guess, first question, kind of following up on the last one. Can you just give us kind of update on your sense of kind of the cadence of how you expect kind of retail to progress through your fiscal year? And kind of on the kind of the rate cut question, I recall from the last call, you were not embedding any benefit from rate cuts in your guidance. Is that still the case? And is that kind of based on you kind of want to see the benefits of how those are flowing through to dealers and consumers before you kind of make that assumption or kind of maybe kind of update your thoughts on that? And then I have a follow-up.

On interest rates, we -- obviously, there's a benefit to both us and our dealer on lower interest rate costs from a financial perspective. And we only embed in our forecast and planning the rates that have already happened. So the rate cuts that have already occurred are certainly factored in, but not necessarily future rate cuts. And obviously, the longer in the year those go, the less impactful they'll be for our P&L anyway. Obviously, love that interest rates are coming down. I think it's a great thing for the industry. It's certainly a psychological, I think, benefit to our customers when interest rates go down. But do keep in mind, a lot of the rates that the consumers actually pay are really more based on longer-term rates and will probably take a little longer to come down than the short-term Fed rates.

And Eric, on the cadence of the year, we're pleased with the results from the fiscal first quarter, and Q1 is one of our tougher comps year-over-year, so even better. Scott mentioned projecting down, retail being down in the 5% to 10% range. We still see that. But the way our revenue ramps throughout the year, of course, we're in a low seasonal pattern now. And until boat shows, it's a little bit dark in terms of how we're going to sense the market. But in the second half of our fiscal year, we're confident in a nice ramp there, driven by the launch of our new X Series products, starting with the X24. We are in early low-rate production in that model. So far, dealer sentiment and hunger for that product is high, and we anticipate strong consumer demand, which will ramp into our second half, which is embedded into our outlook.

Got it. Appreciate it. And then kind of the last question. You mentioned you're kind of obviously looking at M&A opportunities out there while still pursuing the share repurchase program. Can you talk about your comfort level with leverage now that you've got obviously a clean balance sheet. How high would you be willing to go in the short term to pursue an acquisition? And then how quickly would you need to or kind of want to work that leverage back down? Or would you be willing to kind of keep a certain level of leverage kind of on the balance sheet kind of longer term?

Sure. Thanks for the question. We work really hard to keep a balance sheet that gives us flexibility. And of course, we're going to direct capital within our capital allocation framework and our strategy there for the highest returns for shareholders. So that, of course, includes share buyback. That includes maximizing results in our core business. And certainly, it includes evaluating with high scrutiny inorganic M&A. We do have flexibility to do that. We do have open processes there as we evaluate opportunities. In terms of the scale and the trigger points there, that's something we won't comment on, but we do maintain activity in that arena.

At this time, we're not showing any further questions in the queue. [Operator Instructions] Okay. I'm showing no further questions in the queue. This now concludes our question-and-answer session. Thank you for your participation in today's conference call. This does conclude the program. You may now disconnect.