MasterCraft Boat Holdings, Inc. (MCFT)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read together with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. In addition, the statements in this discussion and analysis regarding our expectations concerning the performance of our business, anticipated financial results, liquidity and the other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Cautionary Note Regarding Forward-Looking Statements” above and in “Risk Factors” set forth in our 2025 Annual Report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Certain statements in the following discussions are based on non-GAAP financial measures. A “non-GAAP financial measure” is a numerical measure of a registrant’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP in the statements of operations, balance sheets or statements of cash flows of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Non-GAAP financial measures do not include operating and statistical measures. The Company includes non-GAAP financial measures in Management’s Discussion and Analysis, as the Company’s management believes that these measures and the information they provide are useful to users of the financial statements, including investors, because they permit users of the financial statements to view the Company’s performance using the same tools that management utilizes and to better evaluate the Company’s ongoing business performance. In order to better align the Company’s reported results with the internal metrics used by the Company's management to evaluate business performance as well as to provide better comparisons to prior periods and peer data, non-GAAP measures exclude the impact of purchase accounting amortization related to business acquisitions.

Overview

The Company’s results for all periods presented, as discussed in Management’s Discussion and Analysis, are presented on a continuing operations basis, which consists of our MasterCraft and Pontoon segments.

Marine Products Transaction

On February 5, 2026, the Company announced that it had entered into the Marine Products Transaction. The Marine Products Transaction is expected to close shortly after our special meeting of shareholders, scheduled May 12, 2026, subject to approval by both the Company's and Marine Products’ shareholders and the satisfaction of other customary closing conditions.

Results of Operations

Despite recent geopolitical and macroeconomic uncertainty, the Company delivered increased net sales of $2.2 million and increased gross margin of 420 basis points for the third quarter of fiscal 2026, when compared with the same prior-year period. These increases were primarily driven by favorable model mix and option sales, increased prices, and decreased dealer incentives, while maintaining effective cost controls, partially offset by lower unit volumes.

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Results of Continuing Operations

Consolidated Results

The table below presents our consolidated results of operations for the three and nine months ended:

Net sales increased $2.2 million during the third quarter of fiscal 2026, when compared with the same prior-year period. The increase in net sales was driven by favorable model mix and option sales, increased prices, and decreased dealer incentives, partially offset by lower unit volumes.

Net sales increased $14.3 million during the first nine months of fiscal 2026, when compared with the same prior year period, due to favorable model mix and option sales, increased prices, and decreased dealer incentives.

Gross margin percentage increased 420 basis points during both the third quarter and first nine months of fiscal 2026, when compared with the same prior year periods. Higher margins were primarily the result of increased net sales, as discussed above, combined with effective cost controls.

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Operating expenses increased $9.2 million and $12.1 million during the third quarter and first nine months of fiscal 2026, respectively, when compared with the same prior year periods, due to business development and consulting costs related to the Marine Products Transaction, increased selling and marketing costs, and ERP implementation costs.

Segment Results

MasterCraft Segment

The following table sets forth MasterCraft segment results for the three and nine months ended:

Net sales increased $2.5 million and $11.8 million during the third quarter and first nine months of fiscal 2026, respectively, when compared with the same prior year periods. The increase was driven by favorable model mix and option sales, increased prices, and decreased dealer incentives, partially offset by lower unit volumes.

Operating income decreased $5.5 million and $2.0 million during third quarter and first nine months of fiscal 2026, respectively, when compared with the same prior year periods. The change was primarily the result of increased operating expenses, partially offset by increased net sales, as discussed above.

Pontoon Segment

The following table sets forth Pontoon segment results for the three and nine months ended:

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read together with the sections entitled “Risk Factors” and the financial statements and the accompanying notes included elsewhere in this Form 10-K. In addition, the statements in this discussion and analysis regarding the performance expectations of our business, anticipated financial results, liquidity and the other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Cautionary Note Regarding Forward-Looking Statements” and in “Risk Factors” above. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

This section generally discusses 2026 and 2025 items and year-to-year comparisons between 2026 and 2025. Discussions of 2024 items and year-to-year comparisons between 2025 and 2024 are not included in this Annual Report on Form 10-K and can be found in Item 7 of the Company’s Annual Report on Form 10-K for the year ended June 30, 2025, which was filed with the SEC on August 27, 2025.

Key Performance Measures

From time to time we use certain key performance measures in evaluating our business and results of operations and we may refer to one or more of these key performance measures in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These key performance measures include:

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Unit sales volume — We define unit sales volume as the number of our boats sold to our dealers during a period.

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Net sales per unit — We define net sales per unit as net sales divided by unit sales volume.

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Gross margin — We define gross margin as gross profit divided by net sales, expressed as a percentage.

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Net income margin — We define net income margin as income from continuing operations divided by net sales, expressed as a percentage.

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Adjusted EBITDA — We define Adjusted EBITDA as income from continuing operations, before interest, income taxes, depreciation, and amortization (“EBITDA”), as further adjusted to eliminate certain non-cash charges and unusual items that we do not consider to be indicative of our core/ongoing operations. For a reconciliation of EBITDA to Adjusted EBITDA, see “Non-GAAP Measures” below.

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Adjusted EBITDA margin — We define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales, expressed as a percentage. For a reconciliation of Adjusted EBITDA margin to net income margin, see “Non-GAAP Measures” below.

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Adjusted Net Income — We define Adjusted Net Income as income from continuing operations, adjusted to eliminate certain non-cash charges and other items that we do not consider to be indicative of our core/ongoing operations and adjusted for the impact to income tax expense related to non-GAAP adjustments. For a reconciliation of income from continuing operations to Adjusted Net Income, see “Non-GAAP Measures” below.

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Free cash flow — We define Free cash flow from continuing operations as net cash from operating activities less purchases of property, plant, and equipment. For a reconciliation of net cash provided by operating activities of continuing operations to Free cash flow, see “Non-GAAP Measures” below.

Overview

Discontinued Operations

In fiscal 2025, the Company completed the Aviara Transaction and the Aviara Facility Sale. In fiscal 2023, the Company sold its NauticStar business. The Company’s results for all periods presented, as discussed in Management’s Discussion and Analysis, are presented on a continuing operations basis. Results related to our Aviara and NauticStar reporting units are reported as discontinued operations for all periods presented. See Notes 1 and 3 in Notes to Consolidated Financial Statements for more information on discontinued operations.

Business Combination

On May 15, 2026, the Company completed the merger with Marine Products, pursuant to which each share of Marine Products common stock, par value $0.10 per share, was converted into the right to receive 0.232 shares of the Company’s common stock, par value $0.01 per share and $2.43 in cash, representing total merger consideration of approximately $284.2 million. The transactions of the merger are referred to herein as the “Marine Products Transaction.” Through the transaction, the Company acquired the Chaparral and Robalo brands and established a new Recreation and Sport Fishing reportable segment. The results of Marine Products have been included in

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the Company’s consolidated financial statements since May 15, 2026. See Note 4 to Consolidated Financial Statements for more information on business combinations.

Results of Operations

Amid an evolving geopolitical and macroeconomic landscape, the Company delivered increased net sales of $64.7 million and increased gross margin of 290 basis points for fiscal 2026, as discussed below.

We derived the consolidated statements of operations for the fiscal years ended June 30, 2026 and 2025 from our audited consolidated financial statements and related notes included elsewhere in this Form 10-K. Our historical results are not necessarily indicative of the results that may be expected in the future.

Consolidated Results

Net Sales. Net Sales increased 22.8 percent for fiscal 2026 when compared to fiscal 2025. The increase was a result of incremental net sales of $33.3 million sales generated in our Recreation and Sport Fishing segment as a result of the Marine Products Transaction, increased unit volumes, increased prices, favorable model mix and option sales, and decreased dealer incentives.

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Gross Margin. Gross Margin percentage increased 290 basis points during fiscal 2026 when compared to fiscal 2025. Higher margins were primarily the result of increased net sales, as discussed above, combined with effective cost controls in our Performance and Wake and Leisure segments, partially offset by a $2.6 million inventory step-up charge related to the Marine Products Transaction.

Operating Expenses. Operating expenses increased 77.3 percent during fiscal 2026 when compared to the same prior year period primarily due to Marine Products Transaction costs, incremental costs incurred in our Recreation and Sport Fishing segment as a result of the transaction, order-backlog and dealer network amortization related to the transaction, non-cash impairment charges related to intangible assets in our Leisure segment as discussed below, ERP implementation costs, and increased variable compensation costs.

Interest Expense. Interest expense decreased $1.0 million, primarily reflecting the repayment of all borrowings under the 2021 Credit Agreement during the first six months of fiscal 2025. While the Company borrowed under its Revolving Credit Facility in connection with the Marine Products Transaction during fiscal 2026, those borrowings were subsequently repaid during the year.

Interest Income. Interest income decreased $0.7 million during fiscal 2026 primarily due to certain investment securities maturing with proceeds used in connection with funding the Marine Products Transaction.

Income Tax Expense. Our consolidated effective income tax rate was 22.6 percent for fiscal 2026, up from 20.8 percent for fiscal 2025. See Note 11 in Notes to Consolidated Financial Statements for more information.

Segment Results

Performance and Wake Segment

The following table sets forth Performance and Wake segment results for the fiscal years ended:

Net sales increased 12.6 percent during fiscal 2026, when compared to fiscal 2025. The increase was primarily driven by increased unit volumes, favorable model mix and option sales, increased prices, and decreased dealer incentives.

Operating income increased 4.3 percent during fiscal 2026, when compared to fiscal 2025, driven by increased net sales, as discussed above, partially offset by increased operating and transaction costs of $13.5 million, primarily related to Marine Products Transaction.

Leisure Segment

The following table sets forth Leisure segment results for the fiscal years ended:

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