MasterCraft Boat Holdings, Inc. (MCFT) Q1 2021 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2021 MasterCraft Boat Holdings, Inc. Earnings Conference Call. [Operator Instructions] 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, Mr. Tim Oxley, Chief Financial Officer. Please go ahead.

Thank you, operator, and welcome, everyone. Thank you for joining us today as we discuss MasterCraft's first quarter performance for fiscal 2021. As a reminder, today's call is being webcast live and will also be archived on our website for future listening. Joining me on today's call are Fred Brightbill, Chief Executive Officer and Chairman; and George Steinbarger, our Chief Revenue Officer. Fred will begin with an overview of our progress on our strategic plan and review our operational highlight lights from the quarter. I will then discuss our financial performance for the first quarter and how we see 2021 shaping up, recognizing that petitions may change. Then I'll turn the call back to Fred for closing remarks before we open the call for Q&A. Before we begin, we'd like to remind participants that the information contained in this call is current only as of today, November 11, 2020. The company assumes no obligation to update any statements, including forward-looking statements. Statements that are not historical facts are forward-looking statements and are 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 special or items not indicative of our ongoing operations. For each non-GAAP measure, we also provide the most directly comparable GAAP measure, and our fiscal 2021 first quarter earnings release, which includes a reconciliation to these non-GAAP measures to our GAAP results. We'd also like to remind listeners that there is a slide deck summarizing our financial results in the Investors section of our website. With that, I'll turn the call over to Fred.

Thank you, Tim, and good morning, everyone. I appreciate you joining us today. This continues to be a dynamic and challenging time and we sincerely hope that you and your families remain healthy and safe. Also on this Veterans Day, we'd like to take a moment to recognize all the brave men and women who have served this country. Your service and sacrifice have kept our country safe and free and we thank you. MasterCraft Boat Holdings delivered record first quarter financial results exceeding the guidance we provided last quarter. Our performance this quarter, the most profitable quarter in MasterCraft's history demonstrates continued momentum on implementing and executing against our strategic plan and the continued robust retail demand across all our brands. I'm very proud of the hard work and disciplined execution of our team members, who continued to prove their resilience as we shifted from addressing the COVID-19 related shutdowns to restarting operations and aggressively ramping up production to meet demand while even further differentiating our product quality. We have talked about it before, but it bears repeating. Our culture and employees are key drivers of our strong performance in this dynamic environment. While our results are a testament to the strong retail demand for recreational boating, they are also a function of our continued execution on our value-enhancing strategy. As a reminder, our strategy is centered on 4 key pillars designed to achieve one overarching objective to drive sustainable, accelerated growth. First, we shifted our focus to providing consumers with the best end-to-end experience in the industry. This means getting closer to our consumers to better understand what they expect from our brands and how we can work with our dealers to meet those expectations and improve their lifelong journey. It also means that we are using what we learned from consumers earlier in our development process products to meet their needs. The insights we have gained through this have informed our recent investments in expanding our product development and engineering team. In the last 3 months, we've aggressively recruited and hired leading engineering talent that can be leveraged across all our brands as we look to accelerate our product development and innovation life cycle, in particular, at MasterCraft and NauticStar. These investments will be an important component of our market share and financial growth plan. For example, our 2 most recent model introductions at MasterCraft, the NXT24 and the iconic ProStar have been extremely well received, and both are sold out for the year. Second, we activated a consumer-driven marketing strategy across our organization to increase brand awareness, create a community of interest, expand our target market, improved lead generation and ultimately drive sales and market share gains. We have repurposed a portion of our sales and marketing expenses, investing in the talent and infrastructure required to elevate our digital marketing capabilities while working closely with our dealer partners in their local markets to help them drive consumer traffic to their websites and showrooms, leading to greater consumer acquisition and shortening consumer repurchase cycles. This investment will lead to increased market share across all our brands. Third, we accelerated our operational excellence program across all our manufacturing facilities to drive efficiency improvements and enhance quality. Across all our brands, we expertly manage the supply chain-related issues during the COVID-19 pandemic, executing an aggressive production ramp-up. At each of our facilities, we are now running at production rates above pre-COVID levels and plan to continue to increase production throughout the year to meet the robust retail demand. Despite the inefficiencies realized during a production ramp-up, the dynamic supply chain environment and increasing labor costs the company delivered gross margins of 25.3% in the first quarter, up 200 basis points versus the prior year. The NauticStar turnaround is proceeding according to plan, and we were encouraged by the early results Scott Womack and his team delivered. While there's still work to do, we are confident in the long-term prospects of the NauticStar brand and our ability to generate gross margin levels approaching 20% over the next few years through a combination of operational excellence and new product development initiatives. And fourth, we strengthened our high-performance organizational framework to attract, develop and retain a highly skilled and specialized workforce. Like many other recreational product manufacturers, we are aggressively recruiting skilled labor to increase production at all our facilities. While the market for talent remains tight, we're encouraged by the pace and quality of our recent hiring, which gives us confidence that we are heading in the right direction. We have seen some labor rate inflation due to the tight labor market. But as evidenced by our gross margin performance, we have been able to mitigate most of this increase through our superior material cost management and overhead absorption as volume increases. Our people are our most valuable asset as we have prioritized their health and safety throughout this time. This Safety First culture is critical to our success. I am so proud of the more than 1,200 men and women that drive the success of this business every day through their professionalism and dedication to delivering the best products on the water. Looking more closely at the quarter, we are encouraged by the momentum we are seeing all around our 4 growth priorities. And we'll continue to proactively adjust our strategy to the business environment. Delivering on our core dealer and consumer propositions is at the center of this growth strategy. Our results reflect progress on our work to accelerate production and efficiently manage our supply chain to meet increased demand. As of today, across our brands, our wholesale production plan is fully committed. In addition, the percentage of our order book that is already retail sold is at record levels. Dealer inventories remain at historically low levels. And consistent with our message last quarter, we believe it will be fiscal 2022 before dealer inventories reach optimal levels. Combined with the current supply and demand dynamic in our industry, this provides us with wholesale growth visibility greater than at any time in the recent past. As we have continued to execute our consumer-focused strategic plan, we are well-positioned to outperform relative to competition and generate tremendous value for shareholders. Against this backdrop, promotional activity has remained relatively benign. Although we do expect to see greater promotional activity heading into the boat show season, as competitors adapt to the likely scenario where most in person boat shows are either severely limited or canceled. We are actively working on nontraditional boat show alternatives and believe the premium nature and leading market share positions of our brands, our relative mature and sophisticated dealer network and our digital marketing capabilities provide us a competitive advantage over our competition. Let me now briefly review some of the latest developments across our brands. At Aviara, we continue to be pleased with the retail performance of the brand. To date, nearly 70% of the Aviara's we have shipped at wholesale have been delivered to a retail consumer. This extraordinary performance, combined with the unprecedented retail demand in boating, has led us to the point where we've accelerated our growth plan for Aviara. As previously announced, on August 17, 2020, we entered into a contract to purchase a boat manufacturing facility in Merritt Island, Florida. On October 26, 2020, we closed on the purchase, and we've begun to prepare the facility to start production of Aviara's in early fiscal Q3. As many of you are aware, MarineMax, our only Aviara dealer, recently acquired a large dealer in the Midwest, adding 20 additional locations. This provides Aviara with a great incremental opportunity to grow in a large boating market. While the near-term increase in overhead due to the acquisition of the Merritt Island facility and subsequent transfer of Aviara production will have a dilutive near-term impact on margins and profitability, we believe the additional capacity will set up the brand for many years of future growth in sales and profit. It is important to note that moving Aviara from the MasterCraft facility frees up much needed capacity for MasterCraft in addition to the increase in Aviara capacity. At Crest, we experienced record retail performance during the fiscal first quarter. This underscores the attractiveness of the Crest brand. The value it delivers at an attainable price point and the easy to use and new boater friendly nature of the pontoon segment. Most recently, Crest enhanced its leading position in the ultra luxury category with the release of the redesigned Savannah. Additional model refreshes and launches are in development for model year 2022. As we fully expected, Crest delivered a strong quarter financially with higher gross margins and profitability on lower sales. As we continue to ramp up production at Crest, we are realizing the benefits of our operational improvement initiatives. As we have stated, our long-term goal is to achieve gross margins in the low 20% range and we are well on our way. Similarly, at NauticStar, we experienced record retail results in fiscal Q1. As the brands model lineup and attainable price point attracted new to boating consumers in strong boating markets. While we're pleased with the increased demand, we strongly believe there is room for continued growth. Scott Womack, who joined us in August, as President of NauticStar is executing a number of initiatives to ramp up production, improve overall quality, refresh the product offering. While we expect it will take until next year to see the full benefits of these efforts, we are confident that we have the right leader in place and that the brand is on track to deliver meaningful and sustainable profitability improvement. At MasterCraft, the retail performance during the fiscal quarter was phenomenal. And even more impressive given the tough comparison to last year's late summer selling season. Our new model introductions and model refreshes for model year 2021 have been well received, and demand for our product is at an all-time high. We continue to grow distribution in markets where demand for ski, wakeboards is strong as demonstrated by adding new dealers in Southern California, Northern California, Long Island, Charlotte and Western Canada. These incremental distribution points provide a significant runway for MasterCraft to take market share this year and beyond. On a financial basis, excluding the impact of Aviara, the MasterCraft brand saw increased net sales on lower units and achieved record fiscal first quarter gross margin levels driven by consumers continuing to add features and options to their orders. As previously stated, we expect to continue to ramp up production throughout the year, which will drive some labor inefficiencies in the short term, but allow us to better meet wholesale demand from our dealers as they look to stock up heading into the summer selling season. Importantly, our progress in business fundamentals are setting us up for an outstanding fiscal year 2021, and I feel confident in our ability to continue driving long-term momentum. We remain committed to building on this progress through investments to further strengthen our competitive position, grow our categories, deliver long-term shareholder value, guided by our strategic priorities. Looking at how far we have come over the past several months gives us confidence that we can continue to deliver superior growth in sales and profits. I will now turn the call over to Tim, who will provide more color on our financial results. Tim?

Thanks, Fred. Looking at the top line, net sales for the first quarter were $103.7 million compared to $109.8 million for the prior year period. The decrease was primarily due to lower sales volume at each of our segments -- as each segment continues to ramp up production, partially offsetting the impact of lower sales volumes was a favorable mix of higher price and higher contented models, lower dealer incentives and higher parts sales volume-driven by unprecedented boat usage this past boating season. As Fred mentioned, this was the most profitable first quarter in the company's history. Gross profit increased $0.7 million or 2.7% to $26.2 million compared to $25.5 million for the prior year period. This increase was principally driven by lower dealer incentives, higher prices, favorable model mix and higher parts volume. Our gross margin was 25.3% for the first quarter, an increase of 200 basis points compared to the prior year period. The increase was primarily attributable to lower dealer incentives and a richer product mix, driven by continuing strong retail demand, partially offset by lower overhead absorption, driven by lower sales volume and higher labor costs as a percentage of sales as we ramp up production across each of our facilities to restock our dealers' inventory. Operating expenses were $12.8 million for the first quarter and flat compared to the prior year period as lower selling and marketing costs were offset by higher general and administrative expenses due to the additional spend related to product development and variable compensations. Turning to the bottom line. Adjusted net income was $10.9 million or $0.58 per diluted share, computed using the company's estimated annual effective tax rate of approximately 23%. This represents an increase of 7.8% compared to adjusted net income of $10.1 million or $0.54 per diluted share in the prior year period. Adjusted EBITDA was $17 million for the first quarter compared to $15.9 million in the prior year period. Adjusted EBITDA margin was 16.3%, up from 14.5% in the prior year period. Turning to our liquidity and balance sheet. As of October 4, we had close to $9 million of cash on our balance sheet. We also have fully repaid our revolving credit facility resulting in liquidity approaching $45 million at quarter end. As we look at the end of the fiscal year while uncertainties in the marketplace remain, our visibility has continued to improve, and we remain confident in the strength of our business and our brands. With the continued increase in retail demand and the strength of our order book, we are raising our guidance for the remainder of fiscal 2021. For the full year fiscal 2021, consolidated net sales is expected to grow in the mid-30% range year-over-year. With adjusted EBITDA margins approaching at 15% and adjusted earnings per share growth in the mid-80% range year-over-year. For the fiscal second quarter, consolidated net sales is expected to be up in the mid-teens percent range year-over-year, with adjusted EBITDA margins in the mid 13% range and adjusted earnings per share growth approaching 20%. As Fred commented in his prepared remarks, the addition of overhead with the new Aviara facility combined with the investments we are making for future growth, including new talent in our product development and engineering department and investments in digital marketing will impact our adjusted EBITDA margins in the short term. As we ramp up production and gain efficiencies in the new Aviara plant and see the benefits of these strategic investments later this year and beyond, we expect to drive meaningful operating leverage to the bottom line. I'll now turn the call back to Fred.

Thank you, Tim. To reiterate my earlier comments, we are pleased by the progress we've made during the quarter to accelerate production as we efficiently manage our supply chain to meet increased consumer demand across all our brands. We continue to believe the changes in consumer behavior that began with COVID-19, including how consumers engage with our brands will lead to meaningful long-term growth for our company. As we look to capitalize on this opportunity, we remain focused on our mission to deliver the best experience to our consumers. We believe this is our differentiator in what brings people to MasterCraft and the reason they remain with us. I also want to thank our employees who have been instrumental in our ability to deliver such a successful quarter. Their health and safety remain our top priority as we continue to ramp up production across all our facilities. We are committed to maintaining rigorous health and safety standards and closely monitoring all our facilities. As we manage through the unprecedented business environment near term, we remain committed to the long-term value creation of our shareholders and all our stakeholders. We will continue to be a purpose-driven business, committed to our consumers, our dealer and vendor partners and our people. Operator, you may open the line for questions.

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

I guess, first question, just a quick housekeeping item. The sales growth guidance up mid-30s, could you break that down between unit growth and ASP improvement for this year?

The ASP improvement is going to be modest. So primarily, it's going to be unit growth driven.

Got it, Tim. And just last quarter, you guys talked about the significant under inventory position that you guys were in. I think you quoted something around 2,100 boats, what about half of that MasterCraft. Where do we stand today? Have you been able to attack that number at all in Q1?

Yes. Joe, it's George. We saw retail really continue to be robust in the first quarter. While dealers were light on inventory, just given the demand, we still were able to exceed prior year comps from a retail perspective across all the brands. And while we did ramp up wholesale production, I think the strong retail offset the increased production and filling the pipeline. So we're kind of in the same place, Joe, with -- in terms of the fill in opportunity that we guided to last quarter. So we think that further reinforces why we believe it's going to take into our fiscal '22 to get the dealer pipelines where we want them.

Got it, George. Just one last one for me. In terms of the ramp-up in production. It sounds like it's gone fairly well with the bottleneck being mostly labor. Are there any lingering supply chain issues that you guys are experiencing at this point?

I wouldn't call them lingering issues. There are ongoing issues that we deal with every day. They are not systematically concentrated in any particular area. And so it's just part of managing through the environment that we're in. And so far, we've been able to do it successfully.

Our next question comes from Craig Kennison with Baird.

I'd say there's a general concern among investors that this pandemic created this kind of onetime boom in the marketplace, and it may be followed by something much weaker than that. How would you address that particular concern? What's the retail outlook embedded in your guidance? And how confident are you that there's more to it than just a onetime pandemic boom?

Let me start off with perspective and the other fellows can chime in. But first of all, we have very conservative retail growth embedded in our guidance. Secondly, I think that we've attracted a number of new participants to the industry. And I think our strategy focuses on giving them a superior experience. And as a result, I think we're going to fare very well in terms of retaining them. And I think that even if there is a vaccine, and we're thankful that there will be and look forward to drawing this pandemic to an end. It's going to take some time to get into distribution and get fully accepted. And the most recent reports I've heard suggested that sometime late summer. So I see it likely having very little impact on this summer selling season. As we said, we think it will take into the following fiscal year for us to really get pipelines where we want them to be. So I expect to head into next fiscal year with a tremendous amount of momentum.

Yes, Craig, it's George. I mean, I would add, as Fred mentioned in his prepared remarks, I mean, we're seeing record levels of retail sold orders throughout all of our brands as a percentage of our total orders, further increasing -- demonstrating to us that there's this very strong retail demand as consumers look for alternatives. As we've introduced more people to the boating lifestyle, we've heard anecdotal story after story about how much they love the time that they're spending with their family being out on the water, being in nature. So we think that this -- there truly has been a shift for a lot of people across the country and globally on how they want to spend their discretionary time. We don't just compete for dollars. We compete for discretionary time. And while certainly, we look forward to getting the pandemic behind us. We think that there's been a nice shift towards that, and we think that will be a long-term benefit to our industry and certainly our brands.

Okay, that helps. And then regarding NauticStar, could you help us understand the priorities for that brand under new leadership? It seems like there's a turnaround at work, but I'd love to hear some details on the plans.

Well, as I indicated in our comments, first and foremost is a focus on operational excellence. We have a very experienced leader there in that area. Greater process, greater turnarounds. And that's the first and foremost focus, getting the processes in place that create the foundation that we can build upon. We're well on our way there. And as we continue to move down that path, then we'll continue to move into other areas, accelerate new product development, refresh the product offering and then, of course, move on to expanding distribution and using all the digital tools available to us for marketing.

I will say, I'd like to add that given the very small town they are in Mississippi, I think they probably have the most challenges as they hire and ramp up with people just because of their geographic location, but they're making good progress.

Our next question comes from Eric Wold with B. Riley.

A couple of questions. I guess, a follow-up question on production. Can you just maybe just give a better sense of what have been the main drivers of boosting production above pre-COVID levels so far? And what will it take to do it going forward? How much of that is production on Fridays being added? And then when do you expect to be able to fully take over the vacated Aviara space at the MasterCraft facility?

Yes. First of all, I mean, this train is rolling down the tracks and gaining momentum. So we continue to bring new people in. We've expanded our training programs, we understand how to do that successfully now. We've stepped our quality levels up to a new high, and we're feeling very, very good about all those things. So with that momentum behind us, we expect to continue to ramp up throughout the year. Now at some point, we would have reached a constraint with regard to our ability to produce MasterCraft's at this facility with the footprint we had. But as Aviara moves out of here, and that transition is taking place as we speak, we will be able to replace that with MasterCraft capacity. And so there's a significant step change available to us that allows us to continue to ramp up through the year. With regard to the timing, we see that phasing in, in the third quarter of this fiscal year and then really hitting full speed in the fourth quarter. And that exit speed that we'll be at in terms of rate of production gives us a tremendous confidence in the outlook for next year, where we won't be ramping up as we head to this year. We'll be entering that year at a very, very high level of production. So it's really third quarter where we see the transition to Aviara being produced in the Florida plant and the utilization of the capacity here, the reconfiguration and utilization. But the move is taking place this quarter to set us up to be able to produce in the third quarter.

Eric, I would add that our production on Fridays are done primarily when we see a temporary increase in demand. And we think this demand is sustainable so that we're going to go ahead and make the investment in the new employees and training.

Yes. So just balancing that point. We use them as necessary we are not consciously utilizing Fridays as a way to add capacity. That's not the approach that we're taking. We're going to hire people and do it during our normal shifts.

Perfect. And then you talked about getting dealer inventories back to normal levels by fiscal '22, any hesitancy out there among dealers to get back to normal levels, maybe operate on leaner inventories? Or is that just not a path they want to take?

Well, first and foremost, we expect the optimal levels to be substantially lower, in terms -- higher turnovers, therefore, relatively lower inventory levels in the dealer pipeline than we've had in the past. We fully expect that. We think we've learned some things about how to distribute, how to be smarter about it, and we'll take cost out of the channel as a result. So when we speak to optimal, optimal is not a return to the past, it's a return to a substantially higher turnover level. Having said that, you know the seasonality that's involved. So we're going to be ramping up here such that I think our dealers are going to be in pretty good shape for this busy selling season in terms of inventory levels, and we expect to make a big impact on market share during that period. And then, of course, during that all important fourth quarter, inventories will be reduced and will run into the next year, continuing that ramp up.

I think just a final question for me. Can you just remind us what percentage of sales typically come from the boat shows either directly at the shows or directly that will be the sales near-term effort?

Yes. Eric, it's George. It does vary by brand. It's tended to be a higher percentage for our Crest and NauticStar brands, excuse me -- kind of, in that 30% to 40% range. It's a much lower number for MasterCraft and Aviara. But we're highly confident that actually in an environment where there are no physical boat shows we actually believe that's a competitive advantage for our brands, given our leading market share positions, the investments that we're making in digital marketing strategies we've got some alternatives that we won't provide a lot of detail on the call, but we think there are some things that we can do that are unique in the marketplace to drive consumers to our brands and to our dealers. And then the relatively more mature and sophisticated nature of our dealers, we believe, gives us a competitive advantage. So quite honestly, a lot of our dealers are very happy that there might not be boat shows in their markets because they believe this is an opportunity for them to really differentiate and take market share. So we're encouraged by that.

Our next question comes from Mike Swartz with Truist Securities.

I wanted to focus on the new Aviara facility and the incremental production you're adding there, and understanding the near-term there's a bunch of inefficiencies as you ramp that up. But maybe as we look out a year from now and just from a longer-term perspective, what will that facility add in terms of annual operating costs? Is that something that you've done a lot of work on yet?

We have done a lot of work on -- I would think of it along the line, though, more from the standpoint of -- we take on that facility. We've hired the people. We have all the infrastructure that we're adding to tune it and we're going to go through a ramp-up this year, next year. I expect this year over last year, we'll double volume and we'll do at least that going into the following year. So it's -- there's going to be a heavy push there to expand that.

Okay. And then the -- sorry, I think you had called out some dealer additions in the MasterCraft business in your prepared remarks, what was the timing of those additions? And were those replacements for existing dealers that left the network? Or are those truly additions to your geographic footprint?

We were only talking about areas where we had made incremental additions. So we may have had dealerships in the area, but where we added additional locations or made changes, that's what we were referring to. And those have been taking place over the past few months, and they're fully in place, and we're very, very excited about it because we really haven't seen the retail impact of them yet. That's all to be seen during the latter part of this year, it should have a very, very significant impact on market share.

Our next question comes from Brett Andress with KeyBanc Capital Markets.

So just a housekeeping for our models. How should we think about the progression of NauticStar sales for the remainder of the year? I mean, could you see unit increases next quarter? Or is that something that happens later in the fiscal year? And then also, when does that ASP mix benefit start to hit?

I think you're going to see -- and really, across all of our brands, we're continuing to ramp up throughout the year. So we're going to see increases in net sales probably each quarter throughout the year. As far as the ASPs, we're going to build what the market is asking for. And so I don't have a forecast of how the ASPs are going to change other than to say there's a modest improvement over the prior year at NauticStar.

Okay. And then just on the 200 basis points of margin expansion in the quarter, any way to quantify how much of the 200 was lower dealer incentives? And then also, could you put a number around the percent of your pipeline that's retail sold.

Yes. I don't have the exact -- this is George, Brett. We -- as we commented, we saw a very benign promotional activity. So that was a big contributor to that. We expect that to change, we've already started to see some large competitors in the Ski Wake segment start to get promotional. So we do anticipate, especially in a world where there's no physical boat shows competitors may go to price to drive market share. So we don't expect to see as big a factor on that going forward. And then in terms of the percentage, we haven't publicly disclosed that, but it's at record level. So certainly for this time of year, the percentage of retail customer names in our order book is just at all-time highs across the brands.

And Brett, in addition to the less incentives, the other component was less financing assistance as it relates to floor plan costs. As the dealers turns have gone faster, means there's less money that we spend in helping those guys with their financing costs.

Our next question comes from Gerrick Johnson with BMO Capital Markets.

If this call had occurred, say, 2 weeks ago, would your guidance have been the same? Or has it been adjusted for the results of the election? And then related to that, I know it's only a week, but what have your dealers been saying to you about their outlook for business now that we're having a change in White House?

With regard to the political environment, we're focused on running our business and all the data that I've been able to get my hands on suggests that there really is no impact of political party on the near-term outlook for our business. Whether or not that's the case longer-term remains to be seen, but certainly, all the data suggests that over the near term, it doesn't. Both parties are looking to try and get some alignment and get an incentive package passed. And so I think a stimulus package is on the horizon. That's going to be a positive overall. Longer run, who knows with regard to tax rates and some of the other potential changes. But in the foreseeable future, and again, with mixed houses in the Democratic Republic IC business is -- our fundamentals are so strong. I have a very hard time believing that those will be dissipated.

Yes. And Gerri, this is George. I mean, we've been on the road a lot talking to dealers, and I got to tell you that the political environment is not on the conversation. It's they're focused on how well they're doing at retail, the increased demand that they're seeing in their products and our products, and they're focused on getting products so they can meet that demand. That's what their number one focus is. I got to tell you, we just have not had a lot of political conversations with dealers over the last -- even the last quarter, forget, not even the last couple of weeks.

And the increase in our guidance had nothing to do with the election results. If we had done it 2 weeks ago, it would have been the same. So the thing that includes our guidance is continuing retail demand and continuing success in our ramp up.

And I'm showing no further questions in the queue at this time. Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program. And you may now disconnect.