MasterCraft Boat Holdings, Inc. (MCFT) FY 2026 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
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
| 2026 | 2025 | Change | % Change | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollar amounts in thousands) | ||||||||||||||||
| Consolidated statements of operations: | ||||||||||||||||
| NET SALES | $ | 348,903 | $ | 284,203 | $ | 64,700 | 22.8 | % | ||||||||
| COST OF SALES | 269,124 | 227,338 | 41,786 | 18.4 | % | |||||||||||
| GROSS PROFIT | 79,779 | 56,865 | 22,914 | 40.3 | % | |||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Selling and marketing | 12,854 | 11,740 | 1,114 | 9.5 | % | |||||||||||
| General and administrative | 53,305 | 32,093 | 21,212 | 66.1 | % | |||||||||||
| Amortization of other intangible assets | 4,684 | 1,800 | 2,884 | 160.2 | % | |||||||||||
| Impairments | 10,050 | — | 10,050 | — | ||||||||||||
| Total operating expenses | 80,893 | 45,633 | 35,260 | 77.3 | % | |||||||||||
| OPERATING INCOME (LOSS) | (1,114 | ) | 11,232 | (12,346 | ) | (109.9 | %) | |||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Interest expense | (215 | ) | (1,169 | ) | 954 | (81.6 | %) | |||||||||
| Interest income | 2,747 | 3,472 | (725 | ) | (20.9 | %) | ||||||||||
| Loss on extinguishment of debt | (71 | ) | — | (71 | ) | 0.0 | % | |||||||||
| INCOME BEFORE INCOME TAX EXPENSE | 1,347 | 13,535 | (12,188 | ) | (90.0 | %) | ||||||||||
| INCOME TAX EXPENSE | 2,948 | 2,820 | 128 | 4.5 | % | |||||||||||
| INCOME (LOSS) FROM CONTINUING OPERATIONS | $ | (1,601 | ) | $ | 10,715 | $ | (12,316 | ) | (114.9 | %) | ||||||
| Additional financial and other data: | ||||||||||||||||
| Unit sales volume: | ||||||||||||||||
| Performance and Wake | 1,639 | 1,548 | 91 | 5.9 | % | |||||||||||
| Leisure | 716 | 745 | (29 | ) | (3.9 | %) | ||||||||||
| Recreation and Sport Fishing | 310 | — | 310 | — | ||||||||||||
| Consolidated unit sales volume | 2,665 | 2,293 | 372 | 16.2 | % | |||||||||||
| Net sales: | ||||||||||||||||
| Performance and Wake | $ | 271,177 | $ | 240,763 | $ | 30,414 | 12.6 | % | ||||||||
| Leisure | $ | 44,400 | 43,440 | 960 | 2.2 | % | ||||||||||
| Recreation and Sport Fishing | $ | 33,326 | — | 33,326 | — | |||||||||||
| Consolidated net sales | $ | 348,903 | $ | 284,203 | $ | 64,700 | 22.8 | % | ||||||||
| Net sales per unit: | ||||||||||||||||
| Performance and Wake | $ | 165 | $ | 156 | $ | 9 | 5.8 | % | ||||||||
| Leisure | 62 | 58 | 4 | 6.9 | % | |||||||||||
| Recreation and Sport Fishing | 108 | — | 108 | — | ||||||||||||
| Consolidated net sales per unit | 131 | 124 | 7 | 5.6 | % | |||||||||||
| Gross margin | 22.9 | % | 20.0 | % | 290 bps |
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:
| (Dollar amounts in thousands) | 2026 | 2025 | Change | % Change | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | $ | 271,177 | $ | 240,763 | $ | 30,414 | 12.6 | % | ||||||||
| Operating income | 21,538 | 20,658 | 880 | 4.3 | % | |||||||||||
| Purchases of property, plant and equipment | 6,124 | 7,219 | (1,095 | ) | (15.2 | %) | ||||||||||
| Unit sales volume | 1,639 | 1,548 | 91 | 5.9 | % | |||||||||||
| Net sales per unit | $ | 165 | $ | 156 | $ | 9 | 5.8 | % |
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:
| (Dollar amounts in thousands) | 2026 | 2025 | Change | % Change | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | $ | 44,400 | $ | 43,440 | $ | 960 | 2.2 | % | ||||||||
| Operating loss | (16,027 | ) | (9,426 | ) | (6,601 | ) | 70.0 | % | ||||||||
| Purchases of property, plant and equipment | 1,164 | 1,979 | (815 | ) | (41.2 | %) | ||||||||||
| Unit sales volume | 716 | 745 | (29 | ) | (3.9 | %) | ||||||||||
| Net sales per unit | $ | 62 | $ | 58 | $ | 4 | 6.9 | % |
Net sales increased 2.2 percent during fiscal 2026, when compared to fiscal 2025, as a result of favorable option sales, increased prices, and decreased dealer incentives, partially offset by unfavorable model mix and decreased unit sales volume.
Operating losses increased to $16.0 million during fiscal 2026, compared to $9.4 million in fiscal 2025 The change was a result of non-cash impairment charges of $10.1 million related to the Crest brand intangible assets, partially offset by increased net sales, as discussed above, and effective cost controls. See Note 8 for further information related to impairment charges.
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Recreation and Sport Fishing Segment
The following table sets forth Recreation and Sport Fishing segment results for the fiscal years ended:
| (Dollar amounts in thousands) | 2026 | 2025 | Change | % Change | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | $ | 33,326 | $ | — | $ | 33,326 | — | ||||||||
| Operating loss | (6,625 | ) | — | (6,625 | ) | — | |||||||||
| Purchases of property, plant and equipment | 836 | — | 836 | — | |||||||||||
| Unit sales volume | 310 | — | 310 | — | |||||||||||
| Net sales per unit | $ | 108 | $ | — | $ | 108 | — |
As the segment was newly established in 2026 as a result of the Marine Products Transaction, there are no comparable prior-year results for year-over-year analysis. For the period from May 15, 2026, through June 30, 2026, the segment contributed net sales of $33.3 million and an operating loss of $6.6 million. The operating loss included a $2.6 million inventory step-up charge, $2.9 million of amortization expense for order-backlog and dealer network, and other transaction related costs. See Note 4 to Consolidated Financial Statements for more information on business combinations.
Non-GAAP Measures
EBITDA, Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin
We define EBITDA as income from continuing operations, before interest, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations. For the periods presented herein, these adjustments include share-based compensation, senior leadership transition and organizational realignment costs, Enterprise resource planning (“ERP”) implementation costs, Marine Products Transaction costs, impairments, and inventory step-up as described in more detail below. We define EBITDA margin and Adjusted EBITDA margin as EBITDA and Adjusted EBITDA, respectively, expressed as a percentage of Net sales.
Adjusted Net Income and Adjusted Net Income Per Share
We define Adjusted Net Income and Adjusted Net Income per share as income from continuing operations adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations and reflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate. For the periods presented herein, these adjustments include other intangible asset amortization, share-based compensation, senior leadership transition and organizational realignment costs, ERP implementation costs, Marine Products Transaction costs, impairments, and inventory step-up.
Free Cash Flow
We define Free Cash Flow from continuing operations as net cash flows from operating activities less purchases of property, plant, and equipment.
EBITDA, Adjusted EBITDA, EBITDA margin, Adjusted EBITDA margin, Adjusted Net Income, Adjusted Net Income per share, and Free Cash Flow, which we refer to collectively as the Non-GAAP Measures, are not measures of net income, operating income, or net cash flows as determined under accounting principles generally accepted in the United States, or U.S. GAAP. The Non-GAAP Measures are not measures of performance in accordance with U.S. GAAP and should not be considered as an alternative to net income, net income per share, or operating cash flows determined in accordance with U.S. GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of cash flow. We believe that the inclusion of the Non-GAAP Measures is appropriate to provide additional information to investors because securities analysts and investors use the Non-GAAP Measures to assess our operating performance across periods on a consistent basis and to evaluate the relative risk of an investment in our securities. We use Adjusted Net Income and Adjusted Net Income per share to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with U.S. GAAP, provides a more complete understanding of factors and trends affecting our business than does U.S. GAAP measures alone. We believe Adjusted Net Income and Adjusted Net Income per share assists our Board, management, investors, and other users of the financial statements in comparing our net income on a consistent basis from period to period because it removes certain non-cash items and other items that we do not consider to be indicative of our core and/or ongoing operations and reflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate. The Non-GAAP Measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
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•
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and the Non-GAAP Measures do not reflect any cash requirements for such replacements;
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Certain Non-GAAP Measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
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Certain Non-GAAP Measures do not reflect changes in, or cash requirements for, our working capital needs;
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Certain Non-GAAP Measures do not reflect our tax expense or any cash requirements to pay income taxes;
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Certain Non-GAAP Measures do not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness; and
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Certain Non-GAAP Measures do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our core and/or ongoing operations, but may nonetheless have a material impact on our results of operations.
In addition, because not all companies use identical calculations, our presentation of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies, including companies in our industry.
The following table presents a reconciliation of income from continuing operations as determined in accordance with U.S. GAAP to EBITDA and Adjusted EBITDA, and income from continuing operations margin (expressed as a percentage of net sales) to Adjusted EBITDA margin (expressed as a percentage of net sales) for the periods indicated:
| % of Net | % of Net | % of Net | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollar amounts in thousands) | 2026 | sales | 2025 | sales | 2024 | sales | ||||||||||||
| Income (loss) from continuing operations | $ | (1,601 | ) | -0.5% | $ | 10,715 | 3.8% | $ | 23,243 | 7.2% | ||||||||
| Income tax expense | 2,948 | 2,820 | 6,730 | |||||||||||||||
| Interest expense | 215 | 1,169 | 3,292 | |||||||||||||||
| Interest income | (2,747 | ) | (3,472 | ) | (5,789 | ) | ||||||||||||
| Depreciation and amortization | 13,652 | 9,579 | 8,375 | |||||||||||||||
| EBITDA | 12,467 | 3.6% | 20,811 | 7.3% | 35,851 | 11.1% | ||||||||||||
| Share-based compensation | 4,113 | 2,915 | 2,602 | |||||||||||||||
| Senior leadership transition and organizational realignment costs(a) | 196 | 659 | 1,708 | |||||||||||||||
| ERP implementation costs(b) | 999 | — | — | |||||||||||||||
| Marine Products Transaction costs(c) | 15,249 | — | — | |||||||||||||||
| Impairments(d) | 10,050 | — | — | |||||||||||||||
| Inventory step-up(e) | 2,556 | — | — | |||||||||||||||
| Adjusted EBITDA | $ | 45,630 | 13.1% | $ | 24,385 | 8.6% | $ | 40,161 | 12.5% |
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The following table sets forth a reconciliation of income from continuing operations as determined in accordance with U.S. GAAP to Adjusted Net Income for the periods indicated:
| (Dollar amounts in thousands, except per share data) | 2026 | 2025 | 2024 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Income (loss) from continuing operations | $ | (1,601 | ) | $ | 10,715 | $ | 23,243 | ||||
| Income tax expense | 2,948 | 2,820 | 6,730 | ||||||||
| Amortization of acquisition intangibles | 4,684 | 1,800 | 1,812 | ||||||||
| Share-based compensation | 4,113 | 2,915 | 2,602 | ||||||||
| Senior leadership transition and organizational realignment costs(a) | 196 | 659 | 1,708 | ||||||||
| ERP implementation costs(b) | 999 | — | — | ||||||||
| Marine Products Transaction costs(c) | 15,249 | — | — | ||||||||
| Impairments(d) | 10,050 | — | — | ||||||||
| Inventory step-up(e) | 2,556 | — | — | ||||||||
| Adjusted Net Income before income taxes | 39,194 | 18,909 | 36,095 | ||||||||
| Adjusted income tax expense(f) | 9,014 | 3,782 | 7,219 | ||||||||
| Adjusted Net Income | $ | 30,180 | $ | 15,127 | $ | 28,876 | |||||
| Adjusted Net Income per share: | |||||||||||
| Basic | $ | 1.76 | $ | 0.92 | $ | 1.71 | |||||
| Diluted | $ | 1.76 | $ | 0.92 | $ | 1.69 | |||||
| Weighted average shares used for the computation of(g): | |||||||||||
| Basic Adjusted Net Income per share | 17,162,850 | 16,428,485 | 16,930,348 | ||||||||
| Diluted Adjusted Net Income per share | 17,162,850 | 16,525,773 | 17,038,305 |
The following table presents the reconciliation of income from continuing operations per diluted share to Adjusted net income per diluted share for the periods presented:
| 2026 | 2025 | 2024 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Income (loss) from continuing operations per diluted share | $ | (0.09 | ) | $ | 0.65 | $ | 1.36 | |||||
| Impact of adjustments: | ||||||||||||
| Income tax expense | 0.17 | 0.17 | 0.39 | |||||||||
| Amortization of acquisition intangibles | 0.27 | 0.11 | 0.11 | |||||||||
| Share-based compensation | 0.24 | 0.18 | 0.15 | |||||||||
| Senior leadership transition and organizational realignment costs(a) | 0.01 | 0.04 | 0.10 | |||||||||
| ERP implementation costs(b) | 0.06 | — | — | |||||||||
| Marine Products Transaction costs(c) | 0.89 | — | — | |||||||||
| Impairments(d) | 0.59 | — | — | |||||||||
| Inventory step-up(e) | 0.15 | — | — | |||||||||
| Adjusted Net Income per diluted share before income taxes | 2.29 | 1.15 | 2.11 | |||||||||
| Impact of adjusted income tax expense on net income per diluted share before income taxes(f) | (0.53 | ) | (0.23 | ) | (0.42 | ) | ||||||
| Adjusted Net Income per diluted share | $ | 1.76 | $ | 0.92 | $ | 1.69 |
The following table presents a reconciliation of net cash flows by operating activities of continuing operations as determined in accordance with U.S. GAAP to Free Cash Flow for the periods presented:
| 2026 | 2025 | 2024 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net cash provided by operating activities of continuing operations | $ | 30,404 | $ | 38,222 | $ | 12,200 | ||||||
| Less: | ||||||||||||
| Purchases of property, plant and equipment | (8,124 | ) | (9,198 | ) | (10,525 | ) | ||||||
| Free cash flow | $ | 22,280 | $ | 29,024 | $ | 1,675 |
(a)
Represents amounts paid for legal fees and recruiting costs associated with the CEO and CFO transitions, as well as one-time severance costs incurred as part of the Company’s strategic organizational realignment undertaken in connection with the transitions.
(b)
Represents consulting costs related to the implementation of our enterprise resource planning system.
(c)
Represents non-recurring third-party business development, consulting and legal costs and debt extinguishment costs related to the Marine Products Transaction.
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(d)
Represents non-cash charges recorded in our Leisure segment for impairment of other intangible assets. See Note 8 within Notes to the Consolidated Financial Statements for more information on impairment charges.
(e)
Represents an inventory step-up charge related to the Marine Products Transaction.
(f)
Reflects income tax expense at a tax rate of 23.0% for 2026, and 20.0% for 2025 and 2024.
(g)
Represents the Weighted average shares used for the computation of Basic and Diluted earnings per share as presented on the Consolidated Statements of Operations to calculate Adjusted Net Income per diluted share for all periods presented herein.
Liquidity and Capital Resources
Our primary liquidity and capital resource needs are to finance working capital, fund capital expenditures, service debt, fund potential acquisitions, and fund our share repurchase program. Our principal sources of liquidity are our cash balance, short-term investments, cash generated from operating activities, our revolving credit agreement and the refinancing and/or new issuance of long-term debt. We believe our cash balance, investments, cash from operations, and our ability to borrow, will be sufficient to provide for our liquidity and capital resource needs.
Cash and cash equivalents totaled $43.9 million as of June 30, 2026, an increase of $15.0 million from $28.9 million as of June 30, 2025. There were no short-term investments as of June 30, 2026, compared to $50.5 million as of June 30, 2025. Net changes in Cash and cash equivalents and Short-term investments include certain investment securities maturing with proceeds used in connection with funding the Marine Products Transaction. Refer to Note 4 — Business Combinations in the Notes to Consolidated Financial Statements for further details.
In connection with the Marine Products Transaction, the Company temporarily borrowed approximately $25.0 million under the Revolving Credit Facility to ensure liquidity during the transaction closing process. The outstanding balance was subsequently repaid prior to June 30, 2026. Accordingly, as of June 30, 2026 and 2025, we had no long-term debt outstanding and $75 million and $100.0 million, respectively, available borrowing capacity under the Revolving Credit Facility. Refer to Note 10 – Long-Term Debt in the Notes to Consolidated Financial Statements for further details.
On July 24, 2023, the Board authorized a new share repurchase program under which the Company may repurchase up to $50.0 million of its outstanding shares of common stock. The new authorization became effective upon the completion of the Company’s previously existing $50.0 million share repurchase authorization. As of June 30, 2026, $23.5 million remained available under the new authorization.
During fiscal 2026 and fiscal 2025, the Company repurchased 116,370 shares and 531,970 shares of common stock for $2.3 million and $9.5 million, respectively, in cash, including related fees and expenses.
The following table and discussion below relate to our cash flows from continuing operations for operating, investing, and financing activities:
| (Dollar amounts in thousands) | 2026 | 2025 | 2024 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total cash provided by (used in): | ||||||||||||
| Operating activities | $ | 30,404 | $ | 38,222 | $ | 12,200 | ||||||
| Investing activities | (11,409 | ) | 20,044 | 4,051 | ||||||||
| Financing activities | (4,157 | ) | (60,097 | ) | (23,135 | ) | ||||||
| Net change in cash and cash equivalents from continuing operations | $ | 14,838 | $ | (1,831 | ) | $ | (6,884 | ) |
Fiscal 2026 Cash Flow from Continuing Operations
Net cash provided by operating activities was $30.4 million, primarily due to net loss adjusted for non-cash items and favorable changes in working capital. Working capital is defined as accounts receivable, income tax receivable, inventories, and prepaid expenses and other current assets net of accounts payable, income tax payable, and accrued expenses and other current liabilities as presented in the consolidated balance sheets, excluding the impact of acquisitions and non-cash adjustments. Favorable changes in working capital primarily consisted of an increase in accounts payable and decrease in inventories, partially offset by a decrease in income tax payable and an increase in accounts receivable and prepaid expenses and other current assets. Accounts payable increased due to timing of professional fee payments related to the Marine Products Transaction and timing of purchases at the end of the period compared to the prior-year period. Inventories decreased primarily due to the inventory step-up charge related to the Marine Products Transaction. Income tax payable decreased during the period; refer to Note 11 – Income Taxes in the Notes to Consolidated Financial Statements for further details. Accounts receivable increased due to timing of sales at the end of the period compared to the end of the prior-year period. Prepaid expenses and other current assets increased due to additional prepaid insurance related to the Marine Products Transaction and increased prepaid IT and sales-related expenditures.
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Net cash used in investing activities was $11.4 million, which included $54.1 million for business combinations, net of cash acquired, and $8.1 million in capital expenditures, partially offset by net proceeds of $50.8 million from available-for-sale securities. Our capital spending was primarily focused on tooling, machinery and equipment, and information technology.
Net cash used in financing activities was $4.2 million, which included share repurchases totaling $2.3 million, excluding related fees and expenses. In connection with the Marine Products Transaction, the Company temporarily borrowed approximately $25.0 million under the Revolving Credit Facility to ensure liquidity during the transaction closing process. The outstanding balance was subsequently repaid prior to June 30, 2026.
Fiscal 2025 Cash Flow from Continuing Operations
Net cash provided by operating activities was $38.2 million, primarily due to net income and favorable working capital changes. Favorable changes in working capital primarily consisted of a decrease in inventories, accounts receivable, other assets, prepaid expenses and other current assets, and an increase in income tax payable, partially offset by a decrease in accounts payable. Inventories decreased due to timing of sales at the end of the period compared to the end of the prior-year and planned raw materials reduction due to lower unit production volume. Accounts receivable decreased due to timing of sales at the end of the period compared to the end of the prior-year period. Income tax payable increased due to timing of estimated payments. Prepaid expenses and other current assets decreased mainly due to lower general insurance premiums. Accounts payable decreased due to a reduction in raw material purchases and timing of purchases at the end of the period compared to the prior-year period.
Net cash provided by investing activities was $20.0 million, which included net proceeds of $29.2 million from available-for-sale securities, partially offset by $9.2 million in capital expenditures. Our capital spending was primarily focused on information technology, tooling and machinery and equipment.
Net cash used in financing activities was $60.1 million, which included share repurchases totaling $9.5 million, excluding related fees and expenses, and $49.5 million used to repay outstanding borrowings of the Term Loan. Drawn amounts on the Revolving Credit Facility were fully repaid as of June 30, 2025.
Off-Balance Sheet Arrangements
The Company did not have any off-balance sheet financing arrangements as of June 30, 2026.
Related Party Transactions
See Note 14 – Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for further information.
Contractual Obligations
As of June 30, 2026, the Company’s material cash obligations were as follows:
Long-Term Debt Obligations — See Note 10 – Long-Term Debt in the accompanying Notes to Consolidated Financial Statements for further information.
Purchase Commitments — As of June 30, 2026, the Company is committed to purchasing $1.3 million of engines. See Note 13 in the accompanying Notes to Consolidated Financial Statements for more information.
Repurchase Obligations — The Company has reserves to cover potential losses associated with repurchase obligations based on historical experience and current facts and circumstances. We incurred no material impact from repurchase events during fiscal 2026, 2025, or 2024. An adverse change in retail sales, however, could require us to repurchase boats repossessed by floor plan financing companies upon an event of default by any of our dealers, subject in some cases to an annual limitation. See Note 13 in the accompanying Notes to Consolidated Financial Statements for more information.
In addition to the above, we have unrecognized tax benefits that are not reflected here because the Company cannot predict when open income tax years will close with completed examinations. See Note 11 in Notes to Consolidated Financial Statements for more information.
Critical Accounting Estimates
Significant accounting policies are described in the notes to the consolidated financial statements. In the application of these policies, certain estimates are made that may have a material impact on our financial condition and results of operations. Actual results could differ from those estimates and cause our reported net income to vary significantly from period to period. For additional information regarding these policies, see Note 1 – Significant Accounting Policies in Notes to Consolidated Financial Statements.
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Asset Impairment
Goodwill
The Company reviews goodwill for impairment at its annual impairment testing date, which is June 30, and whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value. As part of the impairment tests, the Company may perform a qualitative, rather than quantitative, assessment to determine whether the fair values of its reporting units are “more likely than not” to be greater than their carrying values. In performing this qualitative analysis, the Company considers various factors, including the effect of market or industry changes and the reporting units’ actual results compared to projected results.
If the fair value of a reporting unit does not meet the “more likely than not” criteria discussed above, the impairment test for goodwill is a quantitative test. This test involves comparing the fair value of the reporting unit with its carrying value. If the fair value exceeds the carrying value, goodwill is not considered impaired. If the carrying amount exceeds the fair value then the goodwill is considered impaired and an impairment loss is recognized in an amount by which the carrying value exceeds the reporting unit’s fair value, not to exceed the carrying amount of the goodwill allocated to that reporting unit.
The Company calculates the fair value of its reporting units considering both the income approach and market approach. The income approach calculates the fair value of the reporting unit using a discounted cash flow method. Internally forecasted future cash flows, which the Company believes reasonably approximate market participant assumptions, are discounted using a weighted average cost of capital (“Discount Rate”) developed for each reporting unit. The Discount Rate is developed using market observable inputs, as well as considering whether or not there is a measure of risk related to the specific reporting unit’s forecasted performance. Fair value under the market approach is determined for each reporting unit by applying market multiples for comparable public companies to the reporting unit’s financial results. The key judgements in these calculations are the assumptions used in determining the reporting unit’s forecasted future performance, including revenue growth and operating margins, as well as the perceived risk associated with those forecasts in determining the Discount Rate, along with selecting representative market multiples.
As of June 30, 2026, the Company had goodwill balances associated with the Performance and Wake reporting unit and the Recreation and Sport Fishing reporting unit. The Company performed a qualitative assessment of each reporting unit, as appropriate, and concluded that the fair value of each exceeded its carrying value.
Other Intangible Assets
The Company’s primary intangible assets other than goodwill are dealer networks and trade names acquired in business combinations. These intangible assets are initially valued using a methodology commensurate with the intended use of the asset. The dealer networks were valued using an income approach, which requires an estimate or forecast of the expected future cash flows from the dealer network through the application of the multi-period excess earnings approach. The fair value of trade names is measured using a relief-from-royalty approach, a variation of the income approach, which requires an estimate or forecast of the expected future cash flows. This method assumes the value of the trade name is the discounted cash flows of the amount that would be paid to third parties had the Company not owned the trade name and instead licensed the trade name from another company. The basis for future sales projections for these methods are based on internal revenue forecasts by reporting unit, which the Company believes represent reasonable market participant assumptions. The future cash flows are discounted using an applicable Discount Rate as well as any potential risk premium to reflect the inherent risk of holding a standalone intangible asset.
The key judgements in these fair value calculations, as applicable, are: assumptions used in developing internal revenue growth and dealer expense forecasts, assumed dealer attrition rates, the selection of an appropriate royalty rate, as well as the perceived risk associated with those forecasts in determining the Discount Rate.
The costs of amortizable intangible assets, including dealer networks, are recognized over their expected useful lives using the straight-line method. The dealer network intangible asset within our Performance and Wake segment is fully amortized. The dealer network intangible assets within our Leisure and Recreation and Sport Fishing that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate long-lived assets as described below. As discussed below, the Company recorded an impairment charge related to the Crest dealer network intangible asset within the Leisure segment during fiscal 2026.
Intangible assets not subject to amortization, including trade names, are assessed for impairment at least annually, at June 30, and whenever events or changes in circumstances indicate that it is more likely than not that an asset may be impaired. As part of the annual test, the Company may perform a qualitative, rather than quantitative, assessment to determine whether each trade name intangible asset is “more likely than not” impaired. In performing this qualitative analysis, the Company considers various factors, including macroeconomic events, industry and market events and cost related events. If the “more likely than not” criteria is not met, the impairment test for indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the asset.
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During the fiscal 2026 fourth quarter, the Company identified indicators of impairment related to the Crest brand intangible assets within the Leisure segment and performed impairment analyses for both the Crest dealer network and Crest trade name. The dealer network was evaluated for recoverability using an undiscounted cash flows analysis and, because the carrying value was not recoverable, its fair value was determined using a discounted cash flow approach. The Crest trade name was tested for impairment by comparing its estimated fair value, determined using the relief-from-royalty method, to its carrying value. Based on these analyses, the Company concluded that the carrying values of both the Crest dealer network and Crest trade name exceeded their respective fair values. As a result, the Company recorded impairment charges of $4.1 million and $6.0 million related to the Crest dealer network and Crest trade name, respectively, reducing the assets to their estimated fair values.
Long-Lived Assets
The Company assesses the potential for impairment of its long-lived assets if facts and circumstances, such as declines in sales, earnings, or cash flows or adverse changes in the business climate, suggest that they may be impaired. A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life will also trigger a review for impairment. The Company performs its assessment by comparing the book value of the asset groups to the estimated future undiscounted cash flows associated with the asset groups. If any impairment in the carrying value of its long-lived assets is indicated, the assets would be adjusted to an estimate of fair value.
During the year ended June 30, 2024, the Company recognized $6.9 million in long-lived asset impairment charges related to its Aviara reporting unit. These charges are included in the loss from discontinued operations.
In conjunction with the impairment assessment as discussed above, the Company determined certain indicators of potential impairment existed for the asset group within the Leisure segment, resulting in an undiscounted cash flow analysis. The analysis concluded the undiscounted cash flows exceeded the carrying value of the asset group, resulting in no impairment.
Business Combinations — We allocate the purchase price of acquired businesses to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. Significant judgment is required in estimating the fair value of acquired intangible assets, including dealer networks and trade names. These valuations are based on discounted cash flow models and other valuation techniques that utilize significant assumptions, including forecasted revenues, customer attrition rates, royalty rates and discount rates. Changes in these assumptions could materially impact the fair value assigned to acquired assets, the amount of goodwill recognized and future amortization and impairment expense.
The Company has evaluated the accounting policies of Marine Products following the acquisition and determined that they are substantially consistent with those of the Company. Certain differences in accounting processes, estimates, and reporting practices identified during the integration process are being conformed to the Company's policies and procedures and are not expected to have a material impact on the Company's consolidated financial statements.
Product Warranties — The Company offers warranties on the sale of certain products generally for periods of between one and ten years from the date of retail sale, and provides a limited lifetime warranty on certain parts, as noted in the warranty. These warranties require us or our dealers to repair or replace defective products during the warranty period at no cost to the consumer. We estimate the costs that may be incurred under our basic limited warranty and record as a liability the amount of such costs at the time the product revenue is recognized. The key judgements that affect our estimate for warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim. We periodically assess the adequacy of the recorded warranty liabilities and adjust the amounts as actual claims are determined or as changes in the obligations become reasonably estimable. We also adjust our liability for specific warranty matters when they become known and exposure can be estimated. Future warranty claims may differ from our estimate of the warranty liability, which could lead to changes in the Company’s warranty liability in future periods.
Income Taxes—Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe our reserves are reasonable, we cannot provide assurance that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest.
Revenue Recognition — The Company’s revenue is derived primarily from the sale of boats and trailers, marine parts, and accessories to its independent dealers. The Company recognizes revenue when obligations under the terms of a contract are satisfied and control over promised goods is transferred to a customer. For substantially all sales, this occurs when the product is released to the carrier responsible for transporting it to a customer. The Company typically receives payment from the floor plan financing providers within 5 business days of shipment. Revenue is measured as the amount of consideration we expect to receive in exchange for a product. The Company offers dealer incentives that include wholesale rebates, retail rebates and promotions, floor plan reimbursement or cash
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discounts, and other allowances that are recorded as reductions of revenues in net sales in the consolidated statements of operations. The consideration recognized represents the amount specified in a contract with a customer, net of estimated incentives the Company reasonably expects to pay. The estimated liability and reduction in revenue for dealer incentives is recorded at the time of sale. Subsequent adjustments to incentive estimates are possible because actual results may differ from these estimates if conditions dictate the need to enhance or reduce sales promotion and incentive programs or if dealer achievement or other items vary from historical trends. Accrued dealer incentives are included in Accrued expenses and other current liabilities in the accompanying consolidated balance sheets.
Rebates and Discounts
Dealers earn wholesale rebates based on purchase volume commitments and achievement of certain performance metrics. The Company estimates the amount of wholesale rebates based on historical achievement, forecasted volume, and assumptions regarding dealer behavior. Rebates that apply to boats already in dealer inventory are referred to as retail rebates. The Company estimates the amount of retail rebates based on historical data for specific boat models adjusted for forecasted sales volume, product mix, dealer and consumer behavior, and assumptions concerning market conditions. The Company also utilizes various programs whereby it offers cash discounts or agrees to reimburse its dealers for certain floor plan interest costs incurred by dealers for limited periods of time, generally ranging up to nine months.
Other Revenue Recognition Matters
Dealers generally have no right to return unsold boats. Occasionally, the Company may accept returns in limited circumstances and at the Company’s discretion under its warranty policy. The Company may be obligated, in the event of default by a dealer, to accept returns of unsold boats under its repurchase commitment to floor plan financing providers, who are able to obtain such boats through foreclosure. The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending institution through the payment date by the dealer, generally not exceeding 30 months. The Company accounts for these arrangements as guarantees and recognizes a liability based on the estimated fair value of the repurchase obligation. The estimated fair value takes into account our estimate of the loss we will incur upon resale of any repurchases. The Company accrues the estimated fair value of this obligation based on the age of inventory currently under floor plan financing and estimated credit quality of dealers holding the inventory. Inputs used to estimate this fair value include significant unobservable inputs that reflect the Company’s assumptions about the inputs that market participants would use and, therefore, this liability is classified within Level 3 of the fair value hierarchy. We incurred no material impact from repurchase events during fiscal 2026, 2025, or 2024. See Note 13 in Notes to Consolidated Financial Statements for more information on repurchase obligations.
New Accounting Pronouncements
See “Part II, Item 8. Financial Statements and Supplementary Data — Note 1 — Significant Accounting Policies — New Accounting Pronouncements.”