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Thank you for standing by and welcome to the MasterCraft Boat Holdings, Inc. Fiscal Fourth Quarter and Full Year 2026 Earnings Conference Call. Please be advised that today's call is being recorded.

[Operator Instructions]

I will now hand the conference over to Alec Harmon, Senior Director, Strategy and Investor Relations. Please go ahead.

Thank you, Rebecca, and welcome, everyone. Thank you for joining us today as we discuss the fiscal fourth quarter and full year 2026 performance of MasterCraft Boat Holdings. 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 offer 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, September 10, 2026. 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 will include a reconciliation of these non-GAAP measures to our GAAP results.

Before turning to our results, I would like to provide some important context for the quarter and year. On May 15, we completed our combination with Marine Products Corporation, welcoming the Chaparral and Robalo brands to the MasterCraft Boat Holdings or MCBH family. As a result, our fourth quarter and full year results include a partial 6-week contribution from these brands. To help frame the underlying performance of our business and for comparative purposes, we will speak to our full year results on both a total combined company basis and on a legacy basis.

In connection with the combination, we have also realigned our reportable segments. Our former MasterCraft segment is now our Performance and Wake segment. Our former Pontoon segment is now our Leisure segment, and the newly combined Chaparral and Robalo brands are reported within our Recreation and Sport Fishing segment.

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. Because we are changing to a December fiscal year-end, today's outlook will cover the 6-month transition period from July 2026 through December 2026, which Scott will discuss in greater detail later in the call. With that, I will turn the call over to Brad.

Thank you, Alec, and good morning, everyone. Fiscal 2026 was a defining year for MasterCraft Boat Holdings. Strong execution across our legacy business drove results to significantly outperform expectations despite a challenging macroeconomic and retail environment. We grew net sales, expanded adjusted EBITDA nearly 80%, a margin improvement of more than 500 basis points year-over-year, and completed the transformational combination with Chaparral and Robalo.

These results reflect the durability of our foundation and our disciplined execution against the priorities we established at the beginning of the year, which were aligning production with demand, strengthening dealer health, improving operational efficiency, and delivering differentiated innovation that resonates with dealers and consumers. Those actions positioned us to outperform the broader market while building an even stronger foundation for the future.

On a legacy basis, fiscal 2026 net sales were $315.6 million, and adjusted EBITDA was $43.8 million. These results exceeded the increased guidance we issued last quarter and demonstrate the earnings power of our legacy business in a challenging market. The MasterCraft brand was at the center of that success. Strong retail performance and the successful rollout of the next-generation X-Series drove favorable premium mix, strengthened brand momentum, and improved profitability. This more than offset lower industry volumes and served as a primary driver of growth across our business.

Including the initial contribution from Chaparral and Robalo, total company net sales were $348.9 million, up 22.8% year-over-year, and adjusted EBITDA was $45.6 million, up 87.1% year-over-year.

Turning to the fourth quarter. Our performance was particularly encouraging given the difficult prior year comparison, which benefited from the launch of the ultra-premium XStar. Against that backdrop, our legacy business delivered 21.5% year-over-year net sales growth and expanded adjusted EBITDA margin 730 basis points to 19.3% from 12.0% in the prior year period. These results reflect the strength of MasterCraft's premium product portfolio, continued momentum across the lineup, healthy dealer inventories, and disciplined cost management.

Including the 6-week contribution from Chaparral and Robalo, total company fourth quarter net sales were $129.9 million, up 63.4% year-over-year. And adjusted EBITDA was $20.5 million, up 114.9% year-over-year. The new Recreation and Sport Fishing segment contributed $33.3 million of revenue and $1.8 million of adjusted EBITDA during the abbreviated 6-week window of ownership. We do not believe the segment's initial reported profitability is representative of its underlying earnings power or long-term potential. Scott will provide additional detail on these items shortly.

On a consolidated basis, a key reason for our outperformance was disciplined channel management. Dealer health remains a significant competitive advantage for MCBH. Field inventory in our legacy business finished the year down approximately 30% year-over-year with turns improving to better than pre-pandemic levels. Chaparral and Robalo also ended the year with lower inventory levels and higher turns.

The broader retail environment remained mixed throughout the year. Premium and core customers remained relatively resilient, while value-oriented customers faced pressure from higher interest rates, inflation, and broader economic uncertainty. Even in that environment, our differentiated products, disciplined execution, and strong dealer health enabled us to outperform the broader market.

MasterCraft's retail performance is a clear example of that dynamic. Entering the year, we expected category retail to decline 5% to 10%, with the market finishing slightly lower than our estimated range. We significantly outperformed that expectation with MasterCraft retail finishing up low-single digits and outperforming both the ski/wake category and the broader powerboat market.

In our Recreation and Sport Fishing segment, Robalo was another standout performer, delivering retail growth in the high-single digits and continuing to benefit from strong product momentum within the attractive sport fishing category. Together, MasterCraft and Robalo helped MCBH outperform a broader powerboat industry that declined mid- to high-single digits.

Looking ahead, we continue to plan prudently and currently expect retail market demand to be down approximately 5% to 10% over the next 6 months following current calendar year-to-date trends. As we evaluate conditions across the portfolio, retail dynamics remain challenged across marine categories, especially within the entry-level pontoon and runabout markets. Consistent with our disciplined approach to channel management, we continue to expect to align wholesale production with retail demand. That assumption is incorporated into the guidance Scott will discuss later in the call.

Alongside pipeline management and dealer health, differentiated innovation continues to be one of our most important competitive advantages. Within MasterCraft, the X-Series continued to gain momentum throughout the year. With the reintroduction of the X23 alongside the X22 and X24, and building on the success of the XStar, dealer and consumer response has been outstanding. The X-Series drove significant revenue and profitability growth throughout both the fourth quarter and full year, and we believe this product expansion has further strengthened our leadership position in the premium ski/wake category.

Within Leisure, we improved segment profitability this year through disciplined cost management and operational efficiencies. Looking ahead to the new model year, we have responded directly to dealer feedback by improving performance across the lineup through meaningful enhancements in both speed, design, and handling.

We also introduced the new Crest Conquest SE Tritoon and announced an industry-first integration of Apple CarPlay and Android Auto with on-water navigation directly from the factory. These initiatives improve the ownership experience and provide consumers with compelling reasons to choose our brands.

Within our newly acquired brands, we are encouraged by the product and innovation road maps alongside the strength of the existing portfolio. Chaparral recently introduced the all-new SSX4 OB, expanding the brand's premium outboard bowrider offering. Separately, our sterndrive lineup now features the new E-Z Step, an innovative water entry design that received a 2026 NMMA Innovation Award.

Robalo continues to build momentum in the dual console category with products such as the R277 and new R237, both filling strategic white space and expanding Robalo's ability to attract incremental customers.

As we deepen our understanding of these newly acquired businesses, our approach is clear: protect what makes each brand strong in its market, invest behind the products and categories where we see the greatest opportunity to create value, and use the scale and capabilities of MCBH to accelerate that value creation.

One early example of how we are creating value across the portfolio is the Chaparral Surf platform. We have temporarily paused production in these models while we enhance the technology and overall customer experience. By combining Chaparral's strength in ride, design, and layout with MasterCraft's deep wake and surf expertise, we believe we can deliver an even stronger product offering for consumers and dealers. This is an early example of how we intend to leverage the capabilities of the combined company to drive product innovation and long-term value creation.

Since closing the transaction, we've spent significant time with the Chaparral and Robalo teams, dealers, and products. Our conviction in the long-term opportunities created by the combination has only increased. These are strong brands with talented teams, loyal customers, and attractive market positions.

Our integration and synergy efforts are underway with structured work streams in place. In the near term, we are prioritizing and investing in attractive opportunities to enhance innovation, expand dealer relationships with our robust product set, share technologies, and leverage manufacturing and sourcing best practices.

Our capital allocation priorities remain unchanged: maintain a strong balance sheet, invest in innovation and growth, which includes synergy work, returning capital to shareholders through share repurchases, and maintaining a disciplined approach to M&A. Overall, we executed well in a challenging market, delivered results that exceeded expectations, expanded profitability, and completed a transformational acquisition that strengthens the future of MCBH. With that, I'll turn the call over to Scott.

Thanks, Brad, and good morning, everyone. Fiscal 2026 was a strong year -- was a year of strong execution and meaningful transformation for our company. I'll start by reviewing our fourth quarter and full year results, then provide additional details regarding the impact of the Marine Products acquisition, and finish with our outlook for the 6-month transition period.

For the fourth quarter, legacy net sales were $96.6 million, an increase of $17.1 million or 21.5% compared to the prior year period. The increase was driven by higher volumes of our premium X-Series models, disciplined pricing, and lower discounts. Including $33.3 million of net sales from Chaparral and Robalo during the 6-week ownership period, consolidated fourth quarter net sales were $129.9 million, an increase of $50.4 million or 63.4% compared to the prior year period.

These same factors impacting net sales also supported strong margin performance across our legacy business. Gross margins expanded approximately 690 basis points to 30%, driven by improved fixed cost absorption on higher unit volumes, lower discounts, and strong operating execution. Including Chaparral and Robalo, consolidated gross margin declined 60 basis points compared to the prior year period, primarily reflecting purchase accounting impact associated with the Marine Products combination.

As part of our year-end -- year-end impairment assessment, we recorded a non-cash impairment charge of $10.1 million in our Leisure segment related to certain Crest brand intangible assets. This charge reflects current conditions within the pontoon category, is excluded from our adjusted results, has no impact on our liquidity or cash flows. We continue to view pontoons as an attractive long-term category and remain focused on strengthening the segment through disciplined inventory management, targeted product innovation, and improved execution as retail and market conditions stabilize.

The non-cash impairment charge, together with acquisition-related purchase accounting impact and transaction costs, resulted in a GAAP net loss for the quarter. Loss from continuing operations was $7 million or a loss of $0.35 per diluted share compared to income from continuing operations of $5.5 million or $0.33 per diluted share in the prior year period. Due to the extent of the one-time acquisition-related and non-cash items affecting GAAP results this quarter, we believe our adjusted results better reflect the underlying strength and operating performance of the business, which I will cover now.

On a legacy basis, adjusted EBITDA for the quarter was $18.6 million, an increase of $9.1 million or 95.6% compared to the prior year period. Adjusted EBITDA margin expanded 730 basis points to 19.3%, up from 12% a year ago, reflecting strong performance across our legacy businesses. In the partial period contribution -- including the partial period contribution from Chaparral and Robalo, consolidated adjusted EBITDA was $20.5 million with an adjusted EBITDA margin of 15.8%. Consolidated adjusted net income was $13.5 million or $0.67 per diluted share compared to $6.6 million or $0.40 per diluted share a year ago.

Turning to the full year. Legacy net sales were $315.6 million, up $31.4 million or 11% compared to fiscal 2025. Including the impact of the Chaparral and Robalo businesses, net sales were $348.9 million, an increase of $64.7 million or 22.8%. Profitability also improved meaningfully for the year. Legacy gross margins expanded 520 basis points to 25.2%, supported by the same operating drivers that benefited our fourth quarter results.

Including Chaparral and Robalo, consolidated gross margin was 22.9%, an increase of 290 basis points compared to fiscal 2025, despite the purchase accounting impacts related to Marine Products combination. Legacy adjusted EBITDA increased 79.6%, up $43.8 million compared to $24.4 million in fiscal 2025, with margins expanding 530 basis points to 13.9%, up from 8.6% in the prior year. Including the partial period contribution from Chaparral and Robalo, consolidated adjusted EBITDA increased 87.1% to $45.6 million. Consolidated adjusted net income was $30.2 million or $1.76 per diluted share compared to $15.1 million or $0.92 per diluted share in the prior year.

Turning to the balance sheet. We remain disciplined and continue to generate cash through a transformational year. We generated $22.3 million of free cash flow for the year after funding $8.1 million of capital expenditures and absorbing transaction-related costs associated with the Marine Products combination. We ended the year with $43.9 million in cash, no debt outstanding, and full availability under our $75 million revolving credit facility.

Before discussing the consolidated outlook, I want to highlight a few items related to the Chaparral and Robalo acquisition, including the impact of purchase accounting. In the fourth quarter, we reported $2.8 million for a step-up in inventory value, of which $2.6 million was recognized as cost of sales expense in Q4 with the remainder being recognized in Q1.

Q4 intangible amortization expense was $2.9 million, including $2.6 million for a short-lived backlog intangible that fully amortized in fiscal year '26. We expect amortization to normalize at approximately $0.6 million per quarter. Depreciation included in the gross margin was $1.1 million in Q4 and is expected to normalize at approximately $2.7 million per quarter.

A couple of items of note on Chaparral and Robalo volumes versus our prior market recovery and growth assumptions. Due to delayed retail recovery, we are moderating production levels to align wholesale and retail demand, which will result in holding shipments and average selling prices near our Q4 exit rate. Additionally, as Brad mentioned, we have also temporarily paused production of the Chaparral Surf Series to further enhance the platform. While timing of market recovery is delayed, our confidence in the long-term opportunity is grounded in our proven ability to create value through strong execution and meaningful product innovation.

Now turning to our consolidated results or consolidated outlook. As Alec mentioned earlier, we are transitioning our fiscal year to align with calendar year. And today, we are providing guidance for the 6-month transition period covering July through December 2026. This guidance reflects the combined company, including Chaparral and Robalo, and covers a seasonally low volume period for our business.

For the upcoming September quarter, we expect net sales of approximately $147 million, adjusted EBITDA of approximately $16 million, and adjusted earnings per share of approximately $0.40. For the 6-month transition period, we expect net sales of between $287 million and $291 million, adjusted EBITDA between $29 million and $32 million, and adjusted earnings per share between $0.66 and $0.76. We expect capital expenditures of approximately $9 million in the period.

These results reflect strong growth from our legacy brands despite our expectations that the retail environment will decline approximately 5% to 10%. Our ability to grow in a down market reflects consistent execution against proven core strategies. The MasterCraft X-Series is a clear example of this strategy in action. During the first quarter of the prior year, we paused X-Series production to support dealer sell-through of outgoing models and facilitate a disciplined transition to the next-generation lineup.

In the upcoming September quarter, all 3 new X-Series models will be in full production. While this production timing creates an unusual year-over-year comparison, it also positions us with a complete premium product lineup and strong momentum entering the transition period. Looking ahead, we will continue to evaluate market conditions, dealer inventory levels, and product launch timing as we closely align wholesale production with retail demand and focus on executing our strategic priorities.

We have the balance sheet and cash flows to invest not only in the synergy opportunities created by the acquisition, but also in our ongoing focus on new differentiated products that will continue -- that will continue to win in the marketplace. We remain confident in the strength of our portfolio, the long-term earnings power of the combined company, and our ability to create value despite challenging market conditions. With that, I'll turn it back to Brad for closing remarks.

Thanks, Scott. We executed well and delivered results that exceeded our expectations while expanding profitability and broadening our growth platform. What gives me confidence is that these results were earned, not market-driven. Our teams executed with discipline, remained focused on the fundamentals, and consistently delivered against our priorities. As a result, we strengthened dealer health, gained retail share, and expanded our platform for future growth.

There is real energy and excitement across the organization as we enter our next chapter as a larger, more diversified company. With our 5 brands, we now have a broader portfolio spanning attractive recreational boating categories, expanded reach across inland and coastal markets, and greater opportunity to serve dealers and customers with differentiated products and a wider range of price points.

The macroeconomic and retail environment remains challenging. However, our long-term view and execution-minded focus has not changed. We believe our portfolio of leading brands, established dealer network, strong balance sheet, and flexible operating model position us well to navigate near-term uncertainty, drive growth, and create value as market conditions stabilize.

I want to thank our team members, dealer partners, suppliers, and shareholders for their support this year. And once again, welcome the Chaparral and Robalo teams to the company. We are excited about what we are building together, and we remain confident in the long-term value creation potential of MCBH. Operator, you may now open the line for questions.

[Operator Instructions]

Your first question comes from Craig Kennison with Baird.

Regarding your guidance for the next 6-month stub period, could you help us unpack the contribution of Chaparral and Robalo to those results?

Sure. So I guess I'll start by reminding you, we are kind of at a low point in the market, and this is also our low season as we go into the next 6-month stub period. But as you think about the results for the 6-week period of Chaparral and Robalo, just keep in mind, they are impacted by purchase accounting items in that 6-week period, most of which is the inventory step-up, which was $2.6 million.

So our public gross margins in the K are going to show 0.9% for the gross margins for the Chaparral and Robalo business for that 6-week ownership period. Those margins would actually be 9% without the inventory step-up. The margins are also impacted by higher depreciation as we wrote up all of our fixed assets in the purchase accounting process.

So the depreciation in that 6-week period was $1.1 million, and that will obviously have an ongoing impact in the future as well. But we approximate $2.7 million on a go-forward quarterly basis for what the depreciation will run for the Chaparral and Robalo businesses.

Now all of that ultimately led to an adjusted EBITDA, which excludes both the depreciation as well as the inventory step-up that came in at about 5.5% for that 6-week period.

As we look forward into that business, I think you can think of the margins, at least for the adjusted EBITDA are going to be somewhere in that same range on a go-forward basis until we get through some of our synergies and some of the initial investments we're putting into the brands.

That's very helpful. Just thinking about the revenue contribution over the next 6 months embedded in your guidance for those 2 brands, how should we think about that?

So as I was trying to say in my sort of prepared remarks, we're keeping the volumes fairly flat, the run rate volume fairly flat and how we exited Q4 for that business as well. Just keep in mind that it was 6 weeks' worth of activity in that fourth quarter period for us, but the run rate of that should continue into the 6-month or 6-month transition period as well.

Craig, which also really aligns production and wholesale with retail generally.

Got it. That makes sense. And maybe, Brad, if I could just ask you, curious, any early surprises or challenges associated with the Marine Products? I'm sure there are many surprises as you dig in deeper?

Not many. I mean the only thing that's really changed from our early assumptions is the retail environment and recovery of the retail environment has just been pushed out some here as we continue to bounce at the low part of the market. But in general, on the fundamentals of the business from an addressable market perspective that more than doubles our participation with a wide range of price points now with a larger platform for product channel and even operational leverage, we've been really thrilled with that.

We've got active synergy plans in place that we're excited, accelerating value creation there. But in general, our conviction and confidence around this has only increased.

Your next question comes from Noah Zatzkin with KeyBanc Capital Markets.

I guess, first, just kind of on the industry retail commentary. What did you kind of see play out through the quarter? And maybe what are you seeing now? Any kind of change in retail performance for you guys or the broader industry as things progressed?

As I think we mentioned, the 5% to 10% we're sort of assuming for the industry across really all of our segments was really a reflection of kind of the current calendar year trend that's been going on across our segments. Some are a little better, some are a little worse in that 5% to 10% range. But we're just assuming that, that sort of continues through the rest of the season.

Keep in mind, the rest of the 6-month period is the low point of retail. So it's harder on a calendar year basis to catch up much. So we still believe in the quarter as well as for the calendar year, we'll still be in that 5% to 10% range.

Got it. Very helpful. And then maybe just now kind of exiting selling season, just any comments on what you're seeing in terms of inventory positions kind of across the industry and how you're feeling?

I do think that over the last 2 years, the entire industry has been trying to bring down inventory levels coming out of the kind of COVID highs of retail. That certainly has continued. I think the entire industry is healthier than it used to be, and we're certainly in that way -- in that as well.

So I think as we kind of mentioned, the legacy brands for our pipeline are down about 20% or 30% on the legacy side and about 20%, including our new Chaparral and Robalo brands. So we think we've done what we need to do to bring down inventories. And as we've kind of tried to say, as you think forward, we're going to do a lot better trying to align wholesale to retail and not really focus on trying to get any further pipeline reductions unless the market just continues to go down, and we have to follow the market. So...

Also, Noah, just to build on that a little bit, on the positive front, as Scott mentioned, dealer inventory is clean. Promotional intensity is healthier than it's been. Premium customers remain engaged in our brands and boating participation supports the long term.

So although we're managing relatively conservatively today through this period with retail recovery delay, when that broadens, we're prepared for upside there. So that delayed retail recovery is really a timing issue in our view, not a change in any long-term fundamentals in the marine space.

Your next question comes from Gregory Miller with Truist Securities.

You mentioned a number of items that you're working on in the Recreation and Sport Fishing segment, innovation, dealer relations and manufacturing. I thought to focus on dealer relations, and I'm just curious what changes you're working and implementing post acquisition.

Well, across the board, as we accelerate value creation of a larger group here with presence with 5 brands in all these categories, first of all, let me just say we're protecting what makes our brands special. And that includes Chaparral, Robalo, keeping them strong while we use scale and process and cross-company expertise to drive even more value.

So with synergy plans in general as it relates to dealers, you can imagine with that added scale, product diversity, brand leverage, there's all kinds of discussions happening. We've already seen successes of dealers picking up new brands within our portfolios, of which there are also numerous other discussions ongoing as that unfolds. Every one of those conversations creates value opportunity for the future. It's one of our core synergy items that we're deeply engaged in right now today, and that will continue to unfold over time.

Okay. And I think you may have addressed this a little bit in the call already, but from a manufacturing or plant operations context, have you made any changes to the Georgia plant since you finished acquisition?

Well, the teams are working together on all kinds of best practice sharing, and that goes in all directions. It's not just MasterCraft injection into the Georgia facility. There's best practices there that we're applying in reverse. There's a handful of high-priority operational items at play there. We have structured integration and synergy teams very disciplined working through that. And in time, that will prove out as we look at -- and that also includes purchasing synergies as well on the sourcing side.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for standing by and welcome to the MasterCraft Boat Holdings, Incorporated Fiscal Third 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, Senior Director of Strategy and Investor Relations. Please go ahead, sir.

Thank you, operator, and welcome, everyone. Thank you for joining us today as we discuss MasterCraft's fiscal third 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 Kemp, 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 up for questions.

Before we begin, we'd like to remind participants that the information contained in this call is current only as of today, May 7, 2026. 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 disclosure or 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. 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. Today's outlook also excludes any impact from the proposed combination with Marine Products Corporation.

With that, I will turn the call over to Brad.

Thank you, Alec, and good morning, everyone. We delivered third quarter results that exceeded our expectations driven by disciplined execution across the business and continued new product momentum. In a dynamic market environment, we remain focused on our strategy and core strength driving operational efficiencies, aligning production with demand and delivering differentiated innovation that is resonating with customers and dealers. Our team's ability to stay agile and extend our premium product leadership continues to be a competitive advantage and a key driver of momentum across our brands.

As we move into the heart of the selling season, we remain focused on dealer health and pipeline discipline, keeping our wholesale plans measured and flexible while continuing to build momentum across our brands. As always, I want to thank our team members and dealer partners for their focus and dedication as we move through the remainder of this fiscal year. Now turning to results. Q3 net sales increased $2.2 million or 3% year-over-year and adjusted EBITDA rose more than $3 million, a margin improvement of approximately 380 basis points. This year's progress and performance are a direct outcome of our continued innovation and focused execution.

As a result, we are raising our full year guidance, which Scott will cover shortly. During the quarter, spring boat show results were encouraging and improved from prior year with particularly strong results at large shows in Salt Lake City, Dallas-Fort Worth and Atlanta for our MasterCraft brand. Feedback from both dealers and consumers reflect the impact of our premium product innovation and targeted commercial actions in key regions. Customers are rewarding us as we are winning on product design, performance and quality and premium value.

At the same time in the broader market, recent geopolitical and broader macroeconomic developments have weighed on consumer sentiment and we are factoring that into our outlook. Reflecting our balanced approach to dealer health, we've continued to maintain healthy pipeline inventory levels ending the quarter with a 28% year-over-year improvement with inventory turns better than pre-pandemic levels. This is providing both us and our dealers with confidence and flexibility to navigate the current environment and generally align wholesale to retail demand moving forward.

Our ability to generate cash flow at these volumes and our flexible operating model combined with our strong balance sheet position us well to manage near-term uncertainty while supporting sustainable long-term growth. Our capital allocation priorities remain disciplined and consistent. We have a solid balance sheet with no debt, strong cash flow and liquidity, providing flexibility and leaving our strategic growth initiatives fully funded. Now turning to our core brands.

Within MasterCraft, premium product momentum continues to build across the lineup. Last month we announced the reintroduction of the X23 marking the return of a historic name in our portfolio and completing the next-generation X Series. Building on the momentum of our flagship XStar, we're seeing strong market engagement and share gains that reinforce our leadership position in the premium ski wake category. With positive dealer and consumer feedback and production ramping as planned, the X Series will further improve product mix sequentially in the fourth quarter.

We expect MasterCraft brand and product momentum to continue through the summer as we showcase our product portfolio through opportunities for consumers to experience our newest models firsthand. As discussed in prior calls, our original assumption for MasterCraft retail for the year was to be down approximately 5% to 10%. Based on current product momentum and year-to-date solid retail performance, we are more optimistic and now anticipate retail for MasterCraft to be roughly flat to prior year as we exit the fourth quarter selling season.

Looking ahead, we have an exciting lineup of on-water events planned throughout the summer designed to showcase innovation and deepen consumer engagement. These events are intended to expand our reach among new and aspiring riders supported in part by our continued partnership with the WWA, including events such as Rider Experience and Rule the Water. In parallel, we are expanding owner meet-ups and dealer-hosted events nationwide, reinforcing our culture while strengthening our direct connection with customers and the broader boating community.

Turning to our Pontoon segment. The Pontoon category remains highly competitive with elevated promotional activity and cautious retail behavior across the industry. In this environment, we're staying disciplined, prioritizing dealer health, aligning production with demand and continuing to drive operational improvements. Across both our Pontoon brands, our focus remains on supporting dealers through the selling season, managing pipeline levels and executing our product and commercial plans in a way that positions the segment for sustainable progress and growth.

Before turning the call over to Scott, I'd like to share a brief update on our proposed combination with Marine Products Corporation, which includes the history Chaparral and Robalo brands. Our conviction in the strategic rationale and long-term value creation of this combination remains strong. Our integration and synergy planning efforts continue to progress with detailed work streams in place driving confidence. We are progressing towards closing, including advancing our regulatory and disclosure processes as planned.

We will hold a special meeting of stockholders 5 days from now at 8:00 a.m. Eastern Time on May 12, 2026, and expect to officially close the transaction shortly thereafter subject to formal approval by MasterCraft and Marine Products shareholders and the satisfaction of customary closing conditions. As we move forward, I want to thank our team members and dealer partners for their continued focus and commitment as we head into the final quarter of our fiscal year and beyond. We're excited about the opportunity to strengthen our partnership with the Chaparral and Robalo teams and begin to realize the value creation potential of the combination.

Now I'll hand it to Scott to review the quarter's financials and forward guidance.

Thanks, Brad. Before turning to results, I'd like to echo Brad's comments regarding the progress we have made towards closing the proposed combination with Marine Products Corporation. We continue to see compelling scale, diversification and earnings power in the combined company. With dedicated teams, structured work streams and capital ready to be deployed; we are fully resourced to execute identified synergies and look forward to providing further updates and combined company guidance in our next quarterly call.

Turning to our fiscal third quarter results. We are pleased with this quarter's performance delivering results above our expectations for both net sales and earnings due to the strong operating execution across our business. Retail and boat show results within the quarter performed well. Our efforts to return pipeline inventories to healthy levels and maintain a strong balance sheet leave us operating from a position of strength and well-equipped to manage fluctuations in market activity. Focusing on the top line, net sales for our third quarter were $78.2 million, up $2.2 million or 3% year-over-year.

The increase was primarily driven by favorable model mix and options, pricing and discounts, partially offset by unfavorable volume, which is in alignment with our planned production cadence for the second half of the year. Gross margins improved 420 basis points over prior year to 25%, a result of strong operating performance across both segments, pricing and favorable options. Operating expenses were $20.8 million for the quarter, an increase of $9.2 million when compared to the prior year due to the business development and advisory costs related to the Marine Products Corporation transaction.

Adjusted net income for the quarter was $7.2 million or $0.45 per diluted share. This compares to adjusted net income of $5 million or $0.30 per share in the prior year calculated using an effective tax rate of 23% in fiscal year '26 compared to 20% for the prior year period. We generated $10.7 million of adjusted EBITDA for the quarter compared to $7.5 million in the prior year, a 43% increase. Adjusted EBITDA margin was 13.7% compared to 9.9% in fiscal '25, a 380 basis point improvement over the prior year period. We ended the quarter with $84.6 million in cash and short-term investments, no debt and ample liquidity.

Before moving to guidance, I'd like to provide an update on the pro forma financials for the combined company following close. Last quarter we provided a cash range of $40 million to $60 million. Costs associated with the transaction have been slightly higher than expected, but we still expect to finish fiscal year '26 at or near the bottom of this range. A strong balance sheet following the combination remains a strategic priority and with $75 million revolver availability, no debt and strong cash flow generation; we expect to be fully funded with ample flexibility to fund strategic growth initiatives.

Our capital allocation priorities have not changed. We maintain a healthy balance sheet while pursuing organic growth first followed by share repurchases when valuation is attractive and disciplined M&A where it makes sense. Now turning to guidance for the remainder of the year. As a reminder, today's outlook excludes any impact from the proposed combination with Marine Products Corporation. As we look ahead, based on our fiscal Q3 performance and current expectations, we are raising the net sales, earnings and adjusted earnings per share guidance for the full year.

For fiscal 2026, consolidated net sales are now expected to be $312 million with adjusted EBITDA now expected to be $40 million and adjusted earnings per share to be $1.65. We now expect capital expenditures to be approximately $8 million for the year. The strong fourth quarter implied in the full year guidance reflects the strategic debut and launch of new products, which will continue to have mix improvement sequentially over Q3.

I'll turn it back to Brad for closing remarks.

Thank you, Scott. As we reflect on the quarter, what stands out most is our team's credibility and discipline in executing our strategy and the fundamentals of our business. In a dynamic environment: we remain grounded in maximizing what we can control, aligning production with demand, supporting dealer health and continuing to invest in premium differentiated product innovation. That focus has translated into solid operating performance and meaningful margin improvement during the quarter. Across the portfolio, we're seeing the benefit of this approach.

At MasterCraft, completing the next-generation X Series with the reintroduction of the X23 alongside the X22 and X24 building on the momentum of our flagship XStar reinforces the strength of our premium product road map and our leadership position in the category. In pontoons, we're managing with discipline, keeping focused on execution and positioning the business for the long term. We remain confident in our strategy and ability to navigate market variabilities by staying disciplined, agile and focused on our core strengths.

With a strong balance sheet, flexible operating model and a premium product portfolio that continues to resonate; we believe we are well positioned regardless of foreseeable market dynamics as we move through the remainder of the fiscal year. Looking ahead, we will continue to deploy capital to drive both organic and inorganic growth. With market momentum and the timely combination with Marine Products Corporation on the horizon, we are well positioned to capitalize on the market upswing moving forward.

Operator, you may now open the line for questions.

[Operator Instructions] Our first question comes from the line of Joe Altobello from Raymond James.

This is Martin on for Joe. Congrats on the strong quarter. First of all, I want to quickly touch on the MPX combination. Now that you're further along with the process, is there any updates to the synergies expected?

I think as we kind of alluded in the prepared remarks there, we've created work streams. We're frankly seeing the progress being made on those and we're probably more convicted towards the numbers we've put out in the proxy in the last quarter than we were even before. So things are progressing along pretty well.

Okay. Great. I just really want to quickly touch on retail cadence. Would you mind providing what it looked like for the quarter and just exiting the quarter as well?

So obviously as Brad kind of mentioned in the call, we are a little bit more proactive or confident in our retail assumptions than we were even a quarter ago. So on the MasterCraft front, I think we've been saying we thought we'd be down 5% to 10% for the year. We're now saying we should be closer to flat on retail. Really the boat show results as we went through boat shows have remained pretty solid and given us a lot more confidence as we go out of the -- as we exit the year.

The other thing that gives us a little confidence is I know we talk about our X Series launch and all of the X Series boats that are coming out. Going to be very heavily weighted in our fourth quarter towards that X Series product and largely, most of the X Series product that we're going to generate in wholesale is actually already retail sold as well. So again this gives us a little more confidence that our fourth quarter is going to hold up pretty well to give us that flattish retail for the full year for MasterCraft.

Our next question comes from the line of Kevin Condon from Baird.

I wanted to ask as we look out and you start to lap all this destocking activity, I think you noted dealer inventory was down 28% year-over-year so imagining this year fiscal '26 ends with wholesale well below retail. But just is there any way to think as we kind of roll into a more one-to-one wholesale to retail environment in terms of units, what that would look like in terms of the lift to wholesale shipments in your revenue growth?

So we're not prepared to give '27 guidance, but I think you've got the gist of the philosophy going into next year. We will end the year a little bit wholesale under retail again this year largely because retail is a little overperformed where we expected it to be. So next year -- as we go into next year, our goal is to certainly align wholesale and retail a lot closer. So we'll certainly need to get through the rest of the selling season, see how it ends, and then we'll be prepared to give guidance on that as we go into the '27 year.

Also, Kevin, this is Brad. We've got a lot to learn with the upcoming selling season. But coming out of boat show season and here in early spring, we've been generally pleased with the results. One thing I'd like to highlight is not only is our inventory better than pre-COVID traditional levels, inventory turns are also below those levels. So that together with the momentum coming out of boat shows, continued lean in from customers and dealers on our new products gives us that confidence as well as the visibility into our production model that Scott referenced earlier.

Got you. And then I had 1 quick follow-up. Just the closer to flat retail assumption, is that for like total company retail or is that a ski wake MasterCraft brand-specific comment?

That's a MasterCraft specific comment.

Our next question comes from Anna Glaessgen of B. Riley Securities.

I'd like to ask on the gross margin performance in the quarter, really nice expansion, I think reached the highest level since 2023 in the quarter despite a lower sales growth. Could you maybe unpack the mix benefit or the contributors to that expansion and just generally how we should be thinking about gross margin as we assume greater parity between retail and wholesale?

There are several drivers to our margin. They are really more or less consistent that we've had through the entire year, but certainly affecting us in the Q3 as well. So in Q3, our margins are certainly improved a little bit by discounts. Our discounts have generally been lower as we go into -- have been all year. But certainly as we go into Q3, our margins are certainly impacted by that. We do have a little bit of segment mix as well as the Pontoons wholesale went down a little bit more than the MasterCraft units did as well. So we get a little benefit from the extra MasterCraft sales there.

We've also been having really good operations improvements really throughout the year as we've had some cost improvements there. Our Pontoon business has had fairly flat sales for the year, but our margin improvement on the Pontoon business has been about $1.9 million of adjusted EBITDA. So that's helping our overall margins as well. Along with some quality improvements, we've been having a little bit of favorable warranty really throughout the entire year and that continued into the Q3 as well. So lots of things ultimately chipping away and adding to that margin improvement as we've gone through the quarter and the year.

Okay. And then secondly, I know the acquisition hasn't closed, but anything you could share on MPX's retail this quarter and potentially into April, May?

Yes. Obviously I think you can go out on their website and you can see their kind of results for the quarter. I think they're publishing today as well. I'll leave the quarter to them to talk through. But you can certainly go out and look at that on their own website.

Okay. And then 1 more follow-up on guidance. I believe in the prepared remarks, you said something to the effect of incorporating the current uncertainty into the guidance. I guess could you expand on what you're thinking there and how that's impacting the guidance?

Anna, that's really just driven around some of the macroeconomic and geopolitical issues that are happening. And there has been a little bit of a pausing or a downdraft at retail across the broader industry and broader categories. We've been generally pleased with our outperformance at the retail level inside of that, but it's more geopolitical in nature and which we view as temporary.

Our next question comes from Brandon Rolle from Loop Capital.

First, just on general and administrative cost. It seems like that ticked up a little bit in the quarter. Is that expected to continue throughout 4Q and into fiscal year '27?

I realized that most of the pickup was really the onetime costs associated with the acquisition. So I think of the $9.2 million in the quarter, if you looked into our adjustments there, about $8.4 million of that was related to the acquisition. We also have some continued costs related to our ERP implementation for a couple of hundred thousand dollars as well. And then we do have some timing between quarters as well as just a little increase year-over-year in sales and marketing. I think those are the 3 main drivers that kind of are impacting that. Obviously the acquisition costs will go away, the ERP costs will go away and the sales and marketing are kind of timing related.

Okay. Great. And then just on the Pontoon category, I think you gave more optimistic retail expectations for the MasterCraft brand. Any update on kind of recent trends within the Pontoon segment and any updated retail expectations there?

Yes. Pontoon in general hasn't really got going yet. Of course that business traditionally is more of a payment buyer highly compressed in the summer selling season, of which we're just in the early rounds of that. We view '26 for us as really a stabilization year as we fight through just macroeconomic pressure and a promotional environment out there that's still elevated from traditional levels. And our brand -- using Crest as an example, that's a very proud brand with 68 years of brand equity.

We're working hard on this business with discipline, aligning inventory, strengthening our dealer network. So overall, that category it's giant. It's the biggest subsegment within marine. We've got good tradition and history there, strong brands as well as a good dealer network. So as we stabilize going forward through the summer selling season, we do need to see sustained retail in that market. What we think will drive that is more macroeconomic attitude in general that would apply to the entire marine category as well.

So just remember, that stabilization was really done what we plan to do this year, right, and we really have seen that happening. So on a year-to-date basis, the adjusted EBITDA for the Pontoon segment has gone up about $1.9 million on relatively flat wholesale. So this year has done exactly what we wanted it to do, get that stabilization and now we've really got a platform set for the growth in the future.

Our next question comes from Gerrick Johnson of Seaport Research Partners.

Piggybacking on Anna's question, you did not mention anything about commodities. Wondering how those are trending for you, how you lock in price or hedge and what you're seeing and experiencing going forward on those commodities, resins and aluminum in particular.

So on the fuel petroleum-based products; resins, gels and really foam; it's still a relatively small portion of our entire bill of material. So we do have some implied increases coming into that in our fourth quarter guidance or our full year guidance. It's not significant. I think you can think of like 1% of our entire gross margin are material costs. It's just not that significant overall. We are doing what we can to work with our suppliers to mitigate that as best as possible, but not having a huge impact necessarily on our full year profitability. But again we do have some of that embedded in our guidance and margins assumptions for the full year.

On the aluminum front, that's really more impacted by tariffs and the tariff -- even the past tariffs. As you might recall, we have at the MasterCraft level been putting a surcharge on our invoices for tariffs and that is largely doing exactly what we planned. We are offsetting the cost of those tariffs on an almost dollar-for-dollar basis through what we've been charging through that extra surcharge. So we have been kind of netting out the effect of the aluminum increases.

Okay. Got you. And then on your pro forma, thank you for the pro forma examples. But you are issuing shares to consummate this deal. So are you able to provide us depreciation, tax rate and pro forma shares to help us get to an EPS?

We will give you more of that guidance when we get into the '27 year. Obviously the proxy that we sent out has some of that data in it and you can get a little bit of that data. But just keep in mind that there's going to be a lot of purchase accounting adjustments. So anything you see even in MPX's past numbers is going to change a bit as we move into getting finalized on purchase accounting and moving forward. So we'll give you a little bit more of that guidance when we finalize some of those entries going into '27.

Okay. Got you. And 1 last one. You mentioned retail has overperformed. You've been launching new models particularly MasterCraft, the X Series. the X22 in November, the X24 in January, now the X23. Just wondering how much more of the market can you get with that 1 foot difference? Do you cannibalize from the X22 and X24 or can you get incremental customers? Just the rationale behind the X22, X23 and X24; 1 foot each.

Gerrick, in general our momentum there from dealers at the consumer level isn't just new products. This is about a customer experience and unrivaled support, quality products in general which are surging, a catalyst with new products certainly is helping. The new lineup, recall last year we launched the XStar at the top end, ultra-premium end of the space, which is garnering share. And now with X24, X22 and X23, as you mentioned, same thing is happening.

What we're hearing from dealers and consumers alike is that these products are winning on 3 fronts: design, performance and quality and premium value. And we like how they're positioned against the competition and they're winning incremental share. Now the market continues to lean premium. That's an advantage for us with our premium brands. We expect that to continue especially until the mass market starts to recover. But there's no doubt that with our share capture momentum that we're pleased with, we're winning incremental business, but it's not just all on the backs of new products. We're seeing surges in pretty much all of our product lines.

And Gerrick, we do work really closely with our dealers and actually the dealers are the ones that requested to have a X23 in the lineup. They believe we believe that we will get -- by having all 3 of those products in the lineup, we will get incremental share and incremental sales from the combine of the 3 models combined. It gives us a really nice price point. Certain markets are better with a X23, certain markets are better with a X22 and some markets can sell the X24. So it does make a difference to our dealers. They have certainly requested it and we listened to them and put it back in the lineup.

Thank you. I am showing no further questions at this time. I'd like to thank you all for your participation in today's conference. This does conclude the program. You may disconnect.

Ladies and gentlemen, thank you for standing by, and welcome to the MasterCraft Boat Holdings Fiscal Second 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 of Strategy and Investor Relations. Please go ahead, sir.

Thank you, operator, and welcome, everyone. Thank you for joining us today as we discuss MasterCraft's fiscal second 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. We will begin with a summary of our second quarter results, followed by an overview of the transaction we announced this morning with Marine Products Corporation.

There is a slide deck summarizing our financial results as well as the transaction in our Investors section of our website, which we will reference throughout today's call. Following prepared remarks, we will open the line for questions. Before we begin, we would like to remind participants that this information contained in this call is current only as of today, February 5, 2026. 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 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. 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. Today's outlook also excludes any impact from the combination with Marine Products Corporation. With that, I will turn the call over to Brad.

Thank you, Alec, and good morning, everyone. Today marks an important step in our company's journey. Alongside our strong second quarter results, we're excited to announce that MasterCraft Boat Holdings has entered into a definitive agreement to combine with Marine Products Corporation, a move that strengthens our marine platform through complementary market-leading brands and an expanded dealer network and a more capable advanced product development and manufacturing platform. I'll share more details about the combination in a moment. First, we'll start with our second quarter results.

We delivered results that exceeded our expectations, and we are building momentum as we head into boat shows and the spring selling season. We're entering this window with rightsized dealer inventories and a team that continues to deliver on key initiatives, bringing leading-edge innovation to market, executing on operational and cost efficiencies and maintaining disciplined production management. As always, I want to thank each of our team members and our dealers for their focus and execution as we carry this momentum into the back half of the fiscal year.

Now turning to results. Q2 net sales increased $8.4 million or 13% year-over-year, and adjusted EBITDA rose nearly $4 million, a margin improvement of approximately 480 basis points. This year's progress and performance is a direct outcome of our continued innovation and focused execution. As a result, we are raising our full year guidance for net sales, earnings and adjusted earnings per share, which Scott will cover shortly. Due to our balanced approach to dealer health, pipeline inventory levels ended the quarter 25% improved from prior year. While we have yet to see sustained breakout in consumer demand, our early boat show engagement and dealer feedback have been encouraging.

We have not changed our original full year assumption of retail being down 5% to 10%. However, recent trends are tracking toward the better end of that range for our MasterCraft segment. While we are encouraged by our Q2 retail results, we remain grounded in our flexible operating model, which allows us to optimize across a range of possible demand scenarios. Turning to our brands. Within MasterCraft, momentum continues to build across the portfolio as we usher in the next generation of premium products with high margins and advanced technology, continuing our mission of bringing luxury, performance and precision to the forefront of our lineup.

Early boat show results have been encouraging with particularly strong engagement at the Salt Lake City, Atlanta, Toronto, Cincinnati and Kansas City shows to date. Introduced recently, the completely redesigned X24 and XStar are leading our boat show presence and generating strong demand signals across the network. Building on that momentum, we recently announced the all-new X22, which broadens choice within the X product family, bringing the same premium experience to a more compact offering. Feedback on recent models has been positive, and we expect the X family to improve product mix through the back half of the year.

Turning to our pontoon segment. We are executing with discipline, delivering year-over-year operational improvements, enhancing margin performance and sharpening our pipeline. We continue to align the business to current conditions, positioning the segment for sustainable growth through assertive actions, including portfolio enhancement, leadership changes and boosting dealer support. Our luxury pontoon brand, Balise, extended its reach this year with the all-new Halo model, which is making its debut at upcoming boat shows. Now I'll hand it to Scott to review the quarter's financials and forward guidance, after which I will provide more details on the Marine Products Corporation transaction.

Thanks, Brad. Focusing on the top line, net sales for our fiscal second quarter were $71.8 million, up $8.4 million or 13.2% year-over-year. The increase was primarily driven by favorable model mix and options, higher volumes and pricing, which is in alignment with our planned production cadence for the first half of the year. Gross margin improved 440 basis points over the prior year to 21.6%, a result of strong operating performance across both segments, favorable model mix and options along with pricing. Operating expenses were $12.8 million for the quarter, an increase of $2.1 million when compared to the prior year due to costs related to the implementation of our new ERP system, business development and consulting costs related to the Marine Products transaction as well as increased selling and marketing costs.

Adjusted net income for the quarter was $4.7 million or $0.29 per diluted share. This compares to adjusted net income of $1.7 million or $0.10 per share in the prior year, calculated using an effective tax rate of 23% in fiscal year '26 compared to 20% for the prior year period. We generated $7.5 million of adjusted EBITDA in the quarter compared to $3.5 million in the prior year. Adjusted EBITDA margin was 10.4% compared to 5.6% in fiscal '25, a 480 basis point improvement over the prior year period. We entered the quarter with $81.4 million of cash and short-term investments, no debt and ample liquidity.

As we look ahead, based on our fiscal Q2 performance and current expectations, we are raising the net sales, earnings and adjusted earnings per share ranges of our full year guidance. As a reminder, today's outlook excludes any impact from the proposed combination with Marine Products Corporation. For fiscal '26, consolidated net sales are now expected to be between $300 million and $310 million, with adjusted EBITDA now between $36 million and $39 million and adjusted earnings per share between $1.45 and $1.60. We continue to expect capital expenditures to be approximately $9 million for the year. For the third quarter of fiscal '26, consolidated net sales are expected to be approximately $75 million with adjusted EBITDA of approximately $9 million and adjusted earnings per share of approximately $0.35. As we move into the back half of the fiscal year, we expect production to accelerate in support of our new product initiatives to ensure that we are well positioned for seasonal demand. I'll turn it back to Brad for more on the transaction.

Thank you, Scott. Our proposed combination with Marine Products Corporation represents the start of an exciting next chapter and one that we are confident will open new avenues of growth and value creation. We have long admired Chaparral and Robalo, their talented teams and the success they have achieved in creating proven market-leading brands in both recreation and sport fishing. Together, we expand our geographic reach across both coastal and inland markets, unlocking growth through complementary, well-established dealer networks as well as advanced product development and manufacturing platforms. The result is a stronger diversified marine platform, delivering incremental categories with a clear path to sustained profitable growth.

As our results demonstrate, there is meaningful momentum underway. With focused execution, disciplined inventory and production management and a capital allocation strategy focused on value creation, we are successfully navigating this dynamic market environment and operating from a position of strength. Like us, over many decades, Chaparral and Robalo have also built a strong foundation through its disciplined approach, leading brands and strong dealer relationships. The transaction will deliver compelling and sustainable financial benefits, which Scott will touch on in more detail.

For our customers and dealers, this means a broader lineup across more price points and boat lengths, meeting a wider range of needs while preserving brand identities and premium positioning. Our combined network will comprise of more than 500 dealers globally, enhancing customer coverage and improving the efficiency of market entry across key regions. Both companies value the strong relationships we've established with dealers and maintaining those long-standing relationships and driving our collective success will remain a top priority.

Operationally, we're unlocking efficiency with a unified manufacturing footprint across Tennessee, Michigan and Georgia with nearly 2 million square feet of production capacity, including one of the largest single-site sport boat production plants in the United States. At the core of this combination is utilizing our respective powerful product development and technology platforms. Through leveraging the strengths of both, we expect to deliver differentiated and innovative new products to customers while also accelerating launches of new models that extend the leadership of our brands. We will preserve our distinct brand identities and keep our focus on quality, delivery, safety and culture. Integration will protect the front line, dealers and consumers while we harmonize processes where it matters and move quickly to focus on clear value opportunities.

On Slide 14 of the accompanying presentation, we provide a high-level view of what our combined company will represent. Together, MasterCraft, Crest, Balise, Chaparral and Robalo make up a diverse portfolio containing 5 powerful brands offering 65 models ranging from boat lengths of 16 to 36 feet across 4 distinct categories. Our business is built on 3 fundamentals: strong brands, robust distribution and compelling products. With Chaparral, we add a storied legacy and brand equity that few in the industry can match. With Robalo, we enter one of the fastest-growing categories in marine with a leader already recognized for performance and reliability in sport fishing.

Moving to the structure of the transaction with more detail provided on Slide 12 of the accompanying presentation. Upon close, Marine Products Corporation shareholders are expected to receive 0.232 shares of MasterCraft Boat Holdings stock and $2.43 of cash consideration per Marine Products Corporation share, representing a total cash consideration of $86 million. Current MasterCraft shareholders will own 66.5% and current Marine Products shareholders will own 33.5% of the combined company. Based on MasterCraft Boat Holdings closing share price of $23.12 on Wednesday, February 4, this consideration implies a value of $7.79 per Marine Products Corporation share.

The corresponding transaction value of $232.2 million represents approximately 7.2x Marine Products Corporation's expected EBITDA for the 12 months ending June 30, 2026, after adjusting for the elimination of approximately $6 million of public company costs and corporate overhead. The combined company will be named MasterCraft Boat Holdings, Inc. and continue to trade on NASDAQ under the ticker MCFT. We intend to fund the transaction with combined cash on hand, keeping us debt-free with ample liquidity following the transaction.

MasterCraft Holdings Board of Directors will expand from 7 to 10 directors and include 3 new Board members with Roch Lambert continuing to serve as Board Chair. Scott Kent will be CFO of the combined company, and I will serve as CEO. The combined company will be headquartered in Vonore, Tennessee and will maintain Chaparral and Robalo's operating facilities in Nashville, Georgia. The transaction has been unanimously approved by the Board of Directors of both companies. We are expected to close in calendar Q2 of 2026, subject to customary closing conditions, including regulatory approvals and the approval of both companies' shareholders. Scott will now frame the financial profile of the transaction.

Thanks, Brad. I would like to reemphasize our shared excitement surrounding this transaction and the opportunities we believe it will provide. Maintaining a strong balance sheet has been a key priority for us, and we expect to maintain that focus as a combined company. We will be supported by a pro forma balance sheet with no debt and significant liquidity, well positioned to support the continued execution of our strategic initiatives. We have provided a summary pro forma snapshot of the combined company on Slide 17 of the accompanying earnings presentation. At close, we expect a cash balance in the range of $40 million to $60 million, liquidity in the range of $115 million to $135 million and no debt while continuing to be cash flow positive.

As Brad previously outlined, we have identified several layers of opportunity to enhance value through synergies. Specifically, we expect to achieve approximately $6 million in annual cost savings by eliminating Marine Products public company costs and corporate overhead. After adjusting for these expenses, we anticipate that the transaction will be accretive to adjusted EPS in fiscal '27. We've also identified opportunities to achieve incremental revenue and cost synergies over time as we bring our 2 companies together by leveraging strengths across innovation platforms, complementary dealer networks and operational capabilities. We believe our financial position post close will provide us with the flexibility to pursue growth investments while maintaining a disciplined capital allocation framework, all of which will support our focus on value creation and returning capital to shareholders. Brad, back to you to close.

Thank you, Scott. We're doing exactly what we said we would, innovating, executing with discipline, supporting our dealers and building a stronger platform to drive long-term shareholder value. The combination with Marine Products Corporation unites proven market-leading brands, dealer networks and product development and manufacturing capabilities. We look forward to welcoming the Chaparral and Robalo teams to our family and continuing to deliver world-class experiences to boaters everywhere. Operator, you may now open the line for questions.

[Operator Instructions] Our first question comes from Joseph Altobello with Raymond James.

Congratulations on the transaction here. Scott, I want to go back to your comments earlier about synergies. I guess there's some cost synergies you outlined this morning, the $6 million in public company and corporate overhead costs and possibly some revenue synergies. And I don't know how much detail you want to give on this morning's call, but maybe can you dive into some of the additional synergies either on the cost or revenue side that you see from maybe expanded distribution. It sounds like there's not a lot of overlap from a dealer standpoint, for example, and how this might accelerate the innovation pipeline, for example?

Yes. I think if you look on Page 18 of our investor presentation, we kind of list out some of the areas for synergies beyond just the corporate overhead costs. So we will certainly have some innovation platforms and some of the pace of new product, we believe we can add, invest in and get a little bit faster there to get some additional certainly revenue synergies. We've got manufacturing best practices across both groups that we already have identified some opportunities on both sides to adjust on both sides of the company. We certainly are going to be larger in scale. So we're going to have a little bit more opportunities on the sourcing and procurement side.

We've got some vertical integration activities between both of us, some things we do differently between the 2 companies that we can certainly do better together and as well as the dealer network that you mentioned and certainly gives us a lot of opportunity over time to leverage. So the good side of all of our synergies is through our diligence process, we've already got a plan and we already have actions outlined and we're going to have people resourcing all of these initiatives. And there's certainly going to be more, especially in the SEC documents that we come out that will get a little more specific on these.

Got it. Okay. That's helpful. And then just switching gears a little bit on inventories. You mentioned earlier the progress that you guys have made. So I guess 2 questions here. One, is there still more destocking that has to be done here in the back half of fiscal '26? And two, what does Marine Products field inventories look like?

So I think we've been saying for the last couple of quarters, really the destocking for us is largely over. I mean, obviously, it has a little bit of what happens during the selling season and how much retail is to -- through that period. But we really don't have plans for further destocking at MasterCraft. We're really happy with where the inventory levels are today. And as we go into the next year, I think we'll start seeing wholesale and retail being a little bit more equal. But Obviously, we're still planning on the markets to be down at retail slightly. So that may drive a little bit less pipeline by the time we get to the end of the year, but it's certainly not something we're driving to do any longer. And like us, the Marine Products group manages their brands really tightly with inventory as well, and they're sitting in fine shape as well from a pipeline perspective. So not a lot of changes we have to make once we finally get past closing on the way they manage their pipeline because it's pretty complementary to ours.

Our next question comes from Craig Kennison with Baird.

I had a question on the process itself. Obviously, you're paying a price that is below the closing price of Marine Products yesterday. Can you shed any light on the process that led to that outcome?

I do think we have a compelling case of how we are going to work together as a company and how -- and I think the other side believes in the vision as well as the ability to shepherd those brands because they've been around for a long time. Chaparral is actually even older than MasterCraft. So the mix of both cash and stock, I think, was interesting to them in the process, and it gives them also an opportunity to participate in the upside when the 2 companies actually consolidate.

Also, Craig, this is Brad. We obviously consider a range of options with capital allocation, and we've been pretty vocal about keeping an always-on pipeline with pretty tight criteria. We're really excited because this meets that criteria. And there's just strategic operational and financial benefits that come with this that's in the interest of shareholders. Expanded geographic reach. It's highly complementary. There's 0 cannibalization with this and product development and manufacturing platforms. This deal really -- the new company will have the scale, reach and product offerings to more than double existing market reach with a robust balance sheet that Scott described. Long-term strength and stability and proven time-tested brands and operational excellence, we just really admire from Chaparral and Robalo.

And then if I could ask on the innovation front, at your scale prior to the deal, like there's probably some limited investments you can make on technology if you can't use it across a broad portfolio of products. Does having a larger portfolio unlock some innovation as it relates to technology and vertical integration that maybe you felt like you couldn't pursue at your prior scale?

No doubt about it, Craig. I mean we really have a boat for everyone now. So when you look at the various boat lengths, purpose-driven innovation from the ground up for these to maximize the boaters experience in each of these specific categories. Of course, MasterCraft now gets access to a broad and vast recreation boat market in addition to sport fish and salt fish and Chaparral Robalo now get access to performance and ski tow wake environments that are attractive. On the innovation front, in particular, just the added scale provides commonization opportunities as we integrate tech stacks. And that includes working with great suppliers and third-party partners. And as we aggregate those volumes and design with purpose, there's no doubt efficiencies. And also, Scott said it before, which is speed of innovation, which is a cornerstone of this combination.

And if I could just go back to my first question, Brad, on the deal process itself. Was this a competitive process that was initiated by Marine Products looking to sell the business and accepting offers? Or did it come about in a different way?

I really don't want to get into the details of the mechanics of how that came about other than we're a company that constantly evaluates opportunities as are they. And as we look at the market cycle right now and project forward, we're in an attractive spot as are they. Coming together with more scale and diversity right now, which is at or near the bottom of the current cycle, projecting that forward is really attractive for both parties. Mechanically, of how it came together, of course, it's tight partnership and high scrutiny on both sides to ensure that we're focused on shareholders, and that's exactly what we did and what the Boards of both companies did.

I think there's also a lot of similarities between the 2 companies, which is why I think both of us were interested in entering this deal. You think of another public company in the boating space that has no debt as well. They probably own the other one. So it is a nice combination. They treat their dealers the same way we do, and everything is pretty complementary between both groups, which just makes it a really nice fit from both sides.

Our next question comes from Eric Wold with Texas Capital Securities.

A couple of questions on the planned combination. I guess, one, I know it's early, but you've done your diligence. Any early expectations for potential kind of shifts in Marine Products model mix or model focus once integrated into MasterCraft that you feel may be more appropriate for the market? Or do you feel where they are now makes the most sense?

So they certainly have a tremendous portfolio now as does MasterCraft as well as the same thing in our pontoon business. And we have identified opportunities there to add some special sauce in all directions to quicken the pace of innovation, et cetera, that we know dealers and consumers will love. We do have a plan. It's not ready to be revealed yet, and that's both on the synergy side from a growth perspective, the innovation side that we just spoke about, including strengthening our dealer network. But there's a vast road map of 65 models together in each category that gives us ample opportunity.

We are going to have that as a separate independent segment running on their own. So the same leadership that has run the brands for many years is going to be continuing with us. And so I think you'll see that we're going to just accelerate a lot of what they've already been doing and hopefully add to on top of what they already have.

Perfect. And then just a follow-up question on the combined dealer network. With the 500-plus combined dealers, what is the opportunity to expand distribution for both brands? I guess of that 500-ish dealer network, what percentage of those or a number of those make sense to take the other side brands in-house?

Yes. As you -- as we evaluate that on the macro, certainly, there's opportunity. On the micro, it's market by market, Eric, as you can appreciate. And as we look at the competitor slate, existing slate, dynamics of each market, water type, water access, we've identified a pretty thorough plan already and have identified areas of opportunity for cross synergy for growth. And that means addition of brands in certain areas. We're not ready to unveil that yet, but we're confident that those growth opportunities are there.

Our next question comes from Anna Glaessgen with B. Riley Securities.

I'd love to dig into the pro forma math here for the combined entity, $560 million in sales and roughly $60 million in EBITDA. If we take out the guidance for MasterCraft itself of roughly $30 million, that gets to roughly $30 million from Marine Products. For the most recent year, they reported $17 million or so as of the press release this morning. Obviously, a little bit difference of fiscal year-ends here. But could you bridge -- help us bridge the gap to that $17 million to $30 million that's contemplated in the pro forma EBITDA?

Obviously, some of it is forward-looking from their perspective as well. So that's part of it. There are some differences in how we typically do that EBITDA adjustment. So we factor some of that in as well. And then obviously, we're sure to get to $6 million of synergies really almost immediately because those corporate costs and public company costs are going to go away pretty quickly.

Got it. So a little bit of adjustments and then the corporate costs and basically the lift as you get further into this fiscal year.

Yes.

Okay. Got it. And then you talked about in the press release in the prepared comments, opportunities for -- to increase margin or get more efficient presumably with the Marine Products business. Could you expand a little bit on maybe what MasterCraft does differently that you could apply to Marine Products to lift that margin over time?

Both companies exhibit proven time-tested operational excellence. So although that's true, there's always opportunities in all direction. What the added scale and diversity gives us is the ability to share best practices at a minimum. And that's across the board on the front end of the business as well as the back end of the business, including sourcing and manufacturing. Sharing innovation platforms is another one that can help drive that. As we continue to innovate products and do it with scale in mind, that's where we can really get margin gains. We've done it in the MasterCraft business. They've done it in theirs as well. We see high opportunity there. We've already identified work streams and eager to get going post close on those items as we continue to plan. There are vertical integration opportunities in pockets of the operation that MasterCraft does that they may not do. And same thing in reverse. And that's true within all of the brands.

Our next question comes from Gregory Miller with Truist Securities.

Going back to the U.S. dealer footprint and looking at the map of Marine Products locations, there's a heavy concentration in places you're less represented within the Gulf Coast of Florida as well as the U.S. East Coast. And I'm curious when we think about what's going on in the macro economy today, how much the regional geography of Marine Products plays into your decision-making?

Well, it's certainly an added strength. I believe every good marine business is built on brand, distribution and product. And our partners here bring strength in all of those. On the second item of distribution, there's no doubt geographically, there are opportunities in all directions. And in pockets of Florida, it's go to where the water is and where the access is and also weather advantages and types of water. There are certainly opportunities in the coastal areas that will advantage our business. And then we're strong in some of the inland markets. And so that dealer penetration is a geographic advantage, it's a partnering advantage, and it just brings added reach. This deal through this distribution more than doubles our market reach. And this is upwards of a $12 billion addressable market opportunity for us that we're very excited about.

And sort of follow-up, this is perhaps similar to Anna's question. If I were to walk into a Marine Products plant, how similar or different is their manufacturing process compared to yours today?

There's a lot of similarities, but there are some differences. One good thing operationally is we're not going from a boat length of -- these are small to midsized boats in both -- in all areas. So we're able to leverage those best practices. The types of materials, the sourcing strategies, the sourcing partners present opportunities. And they're just -- there are best practices in every operation that can be unleashed. And when we come together, sharing of those ideas will then spur additional ideas. And both companies have a track history of that. And we're excited to share that. And this is not new. There's nothing about Chaparral and Robalo that is a fixer upper. And of course, we would say the same of our MasterCraft, Crest and Balise brands as well. This is strength on strength.

Our next question comes from Noah Zatzkin with KeyBanc Capital Markets.

I guess, first, if you think about it kind of in terms of maybe the TAM that you had in terms of industry units in the kind of planned legacy MasterCraft business. And then you think about kind of the TAM that's provided by Robalo and Chaparral, is there any way that you'd kind of break that down in terms of like the incremental industry unit volume that this kind of unlocks for you?

Yes. We've certainly looked at that. Certainly, one of the reasons we're interesting in these because they are complementary products and complementary markets that we don't totally participate. So now we ultimately have an opportunity to sell to almost anybody. I mean we actually had some discussions the other day with a bunch of our consultants on the line that we were all talking about how -- what boat we like and everybody had a different one. We are now going to have an opportunity to sell into all those markets, both from a performance based from a MasterCraft perspective, a more leisurely product with pontoons, a recreational focused boat with Chaparral as well as a sport fishing focus for the Robalo brand. So it couldn't hardly be a better merger for us to expand, to your point, the addressable market.

And if you look at a unit count level across these segments, the total ski tow wake market, roughly 8,000 units a year right now. And here we sit at the bottom of the cycle, these numbers. Pontoon, roughly 45,000 units a year. That's on the traditional MasterCraft side as our company is today. Going forward, post close, Gen rec market brings an additional roughly 8,000 boats a year from a market potential perspective. And salt fish brings an additional 20,000 units per year, purely incremental, 0 cannibalization. Both those categories are highly complementary from a product perspective, technology perspective, boat length manufacturing best practices and of course, through the dealer network.

Got it. That's really helpful. And maybe one more, just looking at Slide 14, it kind of struck me that Robalo and Chaparral have a pretty kind of wide price range. So how much did that kind of play into your thought process around the acquisition in terms of being able to reach maybe kind of a wider swath of consumers from a kind of income perspective?

It's an important point and high consideration in this deal. Affordability in marine is an issue and being able to attract a wider consumer base. And by the way, the dealers need this, too, provides wide expansion for us to reach a dynamic consumer, not only now, but as we continue to innovate new products in the future and within market recovery, having a much wider range of boat lengths, boat types, segments and price points is going to be to our advantage and do it with premium positioning as well.

Our next question comes from Gerrick Johnson with Seaport Research Partners.

I'm going to approach the revenue synergy question here, maybe a little bit more cynically. It seems every dealer has a fiberglass runabout brand, a pontoon brand, et cetera. So realistically, how long would it take to expand distribution? Because it seems if you wanted, you'd have to push another brand out to get your brand in. And also, the complementary dealerships might be a little bit more difficult getting offshore fishing into inland and pontoons and wait ski to coastal markets. So how do you approach those issues?

Yes, a couple of things. Thanks, Gerrick. On the water types, I mean, there's -- as we all know, there's lake small -- on the freshwater side, small, medium and large. And on the medium to large-sized water, center consoles and sport fishing vessels are on the increase. And that's where we have high penetration of inland dealers with strong knowledge of those local markets. So there's opportunity there. But in most of the coastal markets, there's also, I don't want to say untapped, but undertapped freshwater and saltwater opportunities for our boat categories on the MasterCraft and pontoon side of the house.

Now it's not easy dealer by dealer, market by market. It's not a cakewalk, but at this scale, with this attractive of a portfolio, not only right now, but as we continue to refresh and innovate and differentiate on the product line, that is what's going to create those opportunities market by market for brand aggregation in some cases with the dealers. Not every dealer this is going to work for, but there definitely are some. We've already identified key markets and have work streams ready to go once the deal closes. But we're talking about over 500 dealers. And so market entry, market expansion, much more enabled with this deal than prior.

Okay. Yes, makes sense. And then just shifting gears a little bit, maybe the uptake on Balise and the build-out of that dealer base, how is that going? And maybe after this deal, does that kind of put that on the back burner or maybe something you might not continue with?

Well, Balise, in general, continues on its ramp. It's early. It's an ultra-premium product in a market right now that has not rebounded yet and that consumer and dealer network, and we're also in the dark part of the season approaching spring. Pontoons consolidates even more so into summer selling season. Balise by itself is a modest-sized business, but there's a compelling case out there. We're seeing strong interest from consumers. Dealer feedback has been strong. It's a resilient buyer that's buying off of wealth for that product. And it's largely an incremental dealer network on the Balise side of the house. So no, that doesn't go to the back burner. That continues to expand, especially as the market comes back. We just recently launched the new Halo model. So there's now a portfolio of products in the Balise sphere that our dealers are really excited about.

And remember, each of our business units is going to operate independently. So just because we pick up Chaparral and Robalo, we still have a team in pontoons that is driving their own initiatives and will continue. And Balise is an important piece of that. We are finding a few places where Balise is leading to Crest being picked up by dealers as well. So it's creating kind of a halo effect over the entire pontoon segment and helping the entire segment.

Okay. Okay. And lastly for me, touching on Craig's question, I guess there's probably no risk in this not closing considering the Rollins Estate owns 2/3 of the shares.

Well, in terms of the mechanics, we are excited about this deal. It's a compelling business case for shareholders, we believe. And it's going to work its way through the process. Now there's mechanics and all that stuff will be in our proxy for reference. But we see advantages out there. We've highlighted a lot of them in our press release as well as in our commentary here today.

And I think everyone sees that we can be a good steward of these brands and keep that history and the legacy of those brands moving forward. So we certainly have a belief that we can get to closing.

That will conclude today's question-and-answer session. This concludes today's conference call. Thank you for participating. You may now disconnect.

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 brands. We remain encouraged by recent operational and quality trends within our MasterCraft brand, which were echoed by our dealer network during our annual dealer meeting held in late September. The energy and excitement for our brand reinforce confidence in our strategic direction and product road maps.

In the quarter, we launched the first model of the all-new X family, the X24 to our dealers, followed by a successful consumer debut. This groundbreaking model ushers in the next generation of premium ski-wake products, featuring advanced technology and elevated design, reinforcing our commitment to differentiated innovation and category leadership.

The timing of the X24 launch builds on the momentum of our ultra-premium XStar family and further positions MasterCraft at the forefront of the premium ski-wake segment. Initial dealer and consumer response has been strong, building anticipation for delivery of the full platform of models. We remain disciplined in ramping production throughout the year to ensure quality and demand alignment.

In addition to product innovation, we continue to strengthen our brand through strategic partnerships and industry involvement. As an example, our recent partnership with the World Wake Association reflects our standard of delivering premium experiences, welcoming new riders, fostering a vibrant community around water sports while showcasing our latest innovations like the new X24.

Turning to our Pontoon segment. Our Pontoon segment delivered meaningful progress with year-over-year improvements in operational execution despite broader market challenges. Crest's model year 2026 lineup was well received at our recent dealer meeting. The refreshed portfolio includes multiple new products, most notably the rebranded Conquest line, which modernizes the offering while honoring Crest's history legacy. We also introduced the Conquest SE, a new model designed to expand our addressable market at a more accessible price point. Combined with the successful addition of several new distribution points in key markets across the U.S., Crest is well positioned to capitalize on growth opportunities as market conditions improve.

Our new Balise offering, which now includes the third model in the series, the all-new Halo, launched within the quarter, is garnering excitement and delivering a new level of differentiated consumer experience.

While we remain measured in our near-term expectations given broader market dynamics, our focus is on building a foundation of future growth. Our strategy for the Pontoon segment remains centered on delivering differentiated products that elevate the on-water experience, supporting and strengthening our dealer partners and continuing to deliver marked operational improvements.

Across the company, our financial position remains strong, and our strategic growth initiatives are fully resourced. Our flexible operating model and consistent cash flow generation are enabling us to invest confidently throughout the cycle. We continue to advance differentiated innovation across our business, returning capital to shareholders through EPS-accretive share repurchases and remain disciplined in evaluating inorganic opportunities.

With that, I'll turn it over to Scott to review the financials.

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 over 100,000 shares totaling $2.3 million in Q1, reflecting our continued confidence in our long-term outlook. This brings cumulative repurchases to 3.2 million shares and $76.5 million since we started the share repurchase program, a 20% benefit to Q1's adjusted EPS. We continue to prioritize returning capital to shareholders and expect to deliver total repurchases above prior-year levels by the end of the fiscal year.

As we look ahead, based on our fiscal Q1 performance and current expectations, we are raising the earnings and adjusted earnings per share ranges of our full year guidance. For fiscal '26, consolidated net sales are expected to be between $295 million and $310 million, with adjusted EBITDA now expected to be between $30 million and $35 million. Adjusted earnings per share between $1.18 and $1.43. We continue to expect capital expenditures to be approximately $9 million for the year.

For the second quarter of fiscal '26, consolidated net sales are expected to be approximately $69 million, with adjusted EBITDA of approximately $5 million and adjusted earnings per share of approximately $0.16.

Keep in mind, our lower wholesale shipments in the first half remain consistent with our initial production plans for the year as we prioritize the introduction and ramp of our new generation of X family products. In the second half of our fiscal year, we plan to ramp up production as we execute our new product initiatives and maintain readiness for seasonal demand. To that end, our wholesale and financial plan is disciplined and provides us with the ability to deliver year-over-year growth despite continued market uncertainty.

I will now turn the call back to Brad for his closing remarks.

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.

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 flagship XStar product in fiscal 2025, once again establishing our leadership in the ultra-premium ski/wake category, creating a positive halo effect across the line. Our team is already preparing another major premium launch for model year '26 which we will give detail later.

Balise, our premium Pontoon brand made progress in its first full year, contributing modest incremental volume as production ramped in our Owosso, Michigan facility, where Crest has successfully operated for nearly 70 years.

We have stayed disciplined in our capital allocation approach. Fiscal 2025 free cash flow was $29 million despite low cycle volumes. This cash flow, in addition to the $26 million proceeds from the sale of our Merritt Island facility enabled us to fully repay all outstanding debt, strengthen our balance sheet and reduce interest expense, while deploying nearly $10 million to our share repurchase program.

As a result, net cash and investments grew by more than $42 million to $79 million leaving us debt-free with one of the strongest balance sheets in the industry. This gives us the resilience to withstand a prolonged down cycle while continuing to invest in product innovation, channel development, and operational excellence. We are well positioned well for long-term growth.

Looking ahead to fiscal 2026. We're expecting some uncertainty to continue, and we are prepared for a range of demand and inventory scenarios. Consistent across the leisure sector, we are partnering with our dealers to fine-tune inventories, which may result in some modest destocking in 2026.

Additionally, we expect retail units in our markets to decline 5% to 10% in fiscal 2026. Our cost control discipline and tight working capital management should allow us to generate positive free cash flow again this year, underscoring the flexibility of our variable operating model.

Over the longer term, we see favorable underlying secular trends across the industry. Our brands are well positioned in key markets and demographic and migration patterns continue to favor boating-friendly high-income states. Interest in outdoor recreation remains strong across all age groups, benefiting all of our product lines and brands.

MasterCraft remains the top-selling brand in the high-margin ski/wake space, a testament to our brand strength, strong dealers and loyal customers. The category leads premium and our product innovation strategy supports sustained leadership.

In our Pontoon segment, we continue to refine our Crest lineup to expand our market reach and presence over the long term. This positions us well to weather short-term industry and macro headwinds, including elevated interest rates and inventory levels across the category and capitalize on the next market recovery.

Our new ultra-premium Balise product brings a new level of customer and dealer base, offering a differentiated Pontoon experience. Despite near-term market challenges, our segments have outperformed the broader powerboat market over the past decade, and our brands are positioned for long-term growth.

Our strong balance sheet supports ongoing investment in innovation, selective and disciplined M&A and continued shareholder return. We expect share repurchases in fiscal 2026 to exceed last year's levels. Innovation continues to be the lifeblood of the MasterCraft brand. Our broader model year '26 lineup includes a range of new features and enhancements such as our advanced stern thruster, with proportional control for effortless maneuvering. Meridian audio for a premium on-water listening experience and keyless ignition for safe, convenient start-ups.

Building on the momentum of last year's successful XStar launch, we are excited to announce the all-new redesigned MasterCraft X Family. This cornerstone of the MasterCraft legacy has been reengineered, delivering more power, precision and presence than ever before, combining elite performance with refined luxury.

In July, we again sponsored the American Century Championship in Lake Tahoe, showcasing the XStar 23 and XStar 25, which was met with strong dealer and consumer response.

Crest's new Conquest series and Conquest SE expands and enhances our value offering in pontoons. For model year 2026, we are expanding the Balise family with the launch of our new [Halo] series, twin engine configurations and broader customization options, along with expanded dealer coverage.

With that, I'll turn it back to Scott to review the financials.

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 has provided us with a strong financial position as we continue to navigate through the current cycle.

We ended the year with $79 million in cash and short-term investments, no debt and ample liquidity. We repurchased over 530,000 shares totaling $9.5 million in fiscal '25, bringing cumulative repurchases to 3.1 million shares and $74 million since we started the share repurchase program. A 14% benefit to full year adjusted EPS.

Turning to the volatile trade and tariff environment. The impact of our fiscal '25 results was marginal. In fiscal '26, we anticipate offsetting most direct costs with temporary price surcharge and expect the profit impact to be negligible. The broader tariff impact on volume and overall sentiment from the uncertain macro environment is more difficult to estimate. The potential impact is embedded in our retail projections for the year.

Now turning to our expectations for fiscal '26. As discussed earlier, our guidance reflects an assumption of retail unit sales being down between 5% and 10%. This cautious approach is indicative of macro and market uncertainties as we exit the summer selling season. Despite another year of projected retail decline, we expect net sales to increase over fiscal '25 to between $295 million and $310 million and adjusted EBITDA between $29 million and $34 million. We expect diluted earnings per share to be between $1.15 and to $1.40. We expect capital expenditures to be approximately $9 million for the full year.

Q1 net sales are expected to be near $69 million or $67 million with adjusted EBITDA of $4 million and adjusted earnings per share of approximately $0.16. The Q1 guidance reflects a lower Q1 ASP as we transition to the next generation of our X Series product line, which will begin shipping in our second fiscal quarter.

With that, I'll turn the call back to Brad for his closing remarks.

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.