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MCBC Holdings Inc  (NASDAQ:MCFT)
Q2 2019 Earnings Conference Call
Feb. 07, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Q2 Fiscal 2019 MasterCraft Boat Holdings Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today's conference is being recorded.

I would now like to turn the call over to Mr. Tim Oxley, Chief Financial Officer. Sir, please begin.

Timothy M. Oxley -- Vice President, Chief Financial Officer

Thank you operator and welcome everyone. Today's call is being webcast live and will also be archived on our website for future listening. Joining me on today's call is Terry McNew, MasterCraft Boat Holdings President and Chief Executive Officer. Our agenda includes a strategic overview by Terry, followed by my analysis of the financials. And Terry will discuss our updated expectations for fiscal 2019, followed by the Q&A session.

Before we begin, we'd like to remind participants that the information contained in this call is current only as of today, February 7, 2019. 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 would discuss non-GAAP measures that include or exclude special or one-time items not indicative of our ongoing operations. For each non-GAAP measure, we will also provide the most directly comparable GAAP measure in our fiscal 2019 second quarter earnings release, which includes a reconciliation of these non-GAAP measures to our GAAP results.

Before turning the call over to Terry, I'd like to remind listeners that there is a slide deck summarizing our financial results in the Investors section of our website.

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

Terry D. McNew -- President, Chief Executive Officer and Director

Thanks, Tim. I'd also like to thank everyone for joining us today. As you saw from today's press release, during our fiscal second quarter, we continued our track record of delivering record setting levels of net sales, adjusted EBITDA, and adjusted net income, reflecting the successful execution of our growth strategy. For the quarter, net sales increased 55% to $121.5 million, adjusted EBITDA increased 35.6% to $18.6 million and fully diluted adjusted net income per share grew 45.5% to $0.64 per share.

We couldn't be more pleased with the performance of our employees during the quarter across all of our brands. We would like to especially welcome and congratulate Crest employees whose performance during the quarter exceeded our already lofty expectations for the brand in their first quarter under our ownership. At MasterCraft, we continue to see strong momentum in the Performance Sports Boats segment from a retail perspective with internal registrations up significantly year-over-year, which is driving our wholesale demand.

Our dealer inventory turns are at optimal levels entering the boat show season and we're already seeing growth in orders from some of the early shows. While still early, we are encouraged by what we are seeing on the retail front at MasterCraft heading into the heavy selling season. We attribute this strong retail performance to our best-in-class product development, expanding dealer network and continued US economic growth. From a new model perspective, the introductions of our X24 and X22 have been extremely well received. Launched in September of 2018, the X22 uses the industry's most advanced wake making technology to serve up perfect customizable ways for everyone on the boat.

Launched in June of 2018, the X24 utilizes a new surf-specific hull design that when equipped with up to 4,300 pounds of ballast and Gen 2 Surf System creates the industry's largest wake that is perfectly sculpted and customized through MasterCraft technology. Through our industry-leading product design and engineering, we will continue to push the bounds of what Performance Sports Boats can accomplish on the water.

Looking at margins, we have seen some margin degradation year-over-year at MasterCraft given the timing of the new revenue recognition standard as well as our strategic decision to offset a portion of the retaliatory import tariffs impacting our Canadian and European dealers. We believe our strategic decision to support these dealers provides us with a competitive advantage compared to other boat companies not offering support as we are providing tariff-free inventory for dealers to sell consumers heading into both the boat show season and heavy retail selling season. We believe this investment in our dealers is paying off and we are seeing strong wholesale and retail orders from Canada year-to-date. As we have said all along, we do not anticipate these import tariffs becoming permanent, but as long as they persist, they will remain a headwind.

As we move forward throughout the balance of fiscal 2019, we expect the future financial impact of this import tariff support to be significantly lower over the second half of fiscal 2019 as our strategy of having tariff-free boats on dealer showroom floors during boat show season has been successful. Additionally, should the Canadian Government decide to retroactively reimburse dealers for those import tariffs when they are removed, this would result in a favorable adjustment to MasterCraft.

At NauticStar, we continue to implement significant product development and manufacturing initiatives and we are pleased with the results to date. As we discussed last quarter, fiscal 2019 is an investment year for the NauticStar brand both in new product and from an operational perspective. Over the past six months, NauticStar has introduced three new models, the I95 Bay, the 251 Hybrid, and the 32 XS Offshore, the largest model ever produced by the brand. The market for center console boats larger than 25 feet is growing and with NauticStar's new 251 Hybrid and new 32 XS Offshore access offshore, NauticStar will have five models to attack this growing segment with future larger models in development.

With these three new model introductions, we have effectively tripled the normal product development cycle for NauticStar and now have the designers, engineers, and processes in-house to continue to carry innovation and product development into the future. Similar to what we see at MasterCraft, we believe innovation is a key driver of retail demand in the outboard fiberglass segment. We are excited about what these new and future models will do for the brand heading forward.

In order to facilitate this new product development cadence and especially the larger models, it was critical to undertake a major restructuring of NauticStar's manufacturing facility. In our fiscal first quarter, we significantly pulled back production to lay out the facility in a way that was more efficient and would allow for the production of larger models. Given this production pullback, we saw a decline in NauticStar's gross margins principally attributable to reduced overhead absorption. Our plan contemplated gradual gross margin increases throughout the remainder of fiscal 2019 as we ramp production back up and realize the benefits of our improved operating efficiencies as well as higher ASPs and higher margins from these larger boats.

We are pleased with the progress NauticStar made in fiscal second quarter, with gross margins 460 basis points greater than in our first fiscal quarter. We will continue to execute on our growth strategy in NauticStar, which we believe puts us on a path to achieve consistent gross margins in the low 20% range in the future.

Regarding Crest, as I mentioned in my opening comments, we've been extremely pleased with the results from the brand in its first quarter under our ownership. Crest contributed $25.9 million of net sales or 33% of the growth over the prior-year period. Crest continues to take market share in the pontoons segment and early results from Jose (ph) reflect retail orders that are up year-over-year. Crest has exceeded our expectations, but we are most excited about the operational and product development initiatives we're working on, that we believe will drive sustainable, profitable market share growth in the large and growing pontoons segment over the long term.

Lastly, we are excited to share more details on our new Luxury Day Boat brand, Aviara. As you may have seen in our press release a couple of days ago, we will officially debut Aviara at the Miami Boat Show next week with our first model, the AV32. Aviara is the culmination of years of consumer and industry research aimed at bringing to market a new and exciting brand that builds the product white space in our portfolio, the growing Luxury Day Boat segment. With Aviara, we are adding a complementary premium focused brand that will keep existing MasterCraft Boat Holdings owners in the family even as their boating preferences evolve over time. Built in our award-winning MasterCraft facility, Aviara owners can expect the same innovation, quality, performance and customer service that defines the MasterCraft brand.

Importantly, we've been able to launch a completely new brand in a completely new segment for the Company with a relatively minimal amount of capital. All in, our investment in Aviara from ID -- ideas conception to start production will be around $10 million. While we do not plan to provide additional financial guidance on Aviara until a later time, we believe the incremental benefit we receive from Aviara will result in a best-in-class return on investment and lead to strong shareholder returns.

As previously shared, Aviara is not a Performance Sports Boat and therefore Aviara will be distributed through a separate distribution network from our core MasterCraft product. Today, we are excited to share that we have partnered with MarineMax. the nation's largest recreational boating and yacht retailer to help maximize the success of this new brand. We believe this partnership will be successful for both parties as MarineMax's industry leadership and reputation as a world-class retailer will be instrumental in ensuring Aviara's success from day one, while Aviara will serve to fill a void in MarineMax's product portfolio.

The AV32 will be available through MarineMax retailers later this year, with two Aviara models available, an outboard and a sterndrive. Two AV32s will be on display at the Miami Boat Show next week located on Pier 8, slips 828 & 830. For those of you attending the show, we invite you to join us on Thursday, February 14 at 3:30 PM Eastern Time in the Aviara boat for brand launching ceremony and you experience firsthand this exciting new luxury brand.

Now I'd like to turn the call back over to Tim to go over our financials.

Timothy M. Oxley -- Vice President, Chief Financial Officer

Thanks, Terry. From a top line perspective, net sales for the second quarter ended December 30, 2018, rose 55% or $43.1 million to $121.5 million, compared to $78.4 million for the year-ago second quarter. Inclusion of Crest represented $25.9 million or 33% of the overall increase. MasterCraft's net sales grew $18.2 million or 31.2% driven by favorable product mix, price increases, and an increase in unit volume partially due to an extra week of production in the fiscal second quarter given the timing of the planned holiday shutdown compared to the prior year's shutdown.This increase in net sales was partially mitigated by increased retail rebate expense due to the timing impact from the new revenue recognition standard as well as by higher sales discounts given to Canadian and European dealers impacted by the retaliatory import tariffs.

As Terry mentioned in his remarks, we made the strategic decision to partially offset the import tariffs for our Canadian and European dealers which we believe provides us with a competitive advantage heading into the boat show season.

NauticStar's net sales decreased by 5% or $1 million due to lower wholesale units, driven by the scheduled pullback in production as NauticStar's facility is retrofitted to handle new larger boat models being introduced during -- throughout calendar year 2019, offset by an increase in average selling price driven by favorable model mix and price increases.

Second quarter gross profit increased $7.1 million or 35.8% to $27.1 million, compared to $19.9 million for the prior-year period. The inclusion of Crest accounted for $4.5 million of the increase while MasterCraft contributed $3.2 million to the increase in gross profit. NauticStar's gross profit declined $0.5 million. On a consolidated basis, gross margin decreased to 22.3% for the fiscal second quarter compared to 25.4% for the prior-year period. The decrease was primarily due to the dilutive effect from the inclusion of Crest, higher warranty expense, the planned decline in NauticStar net sales and higher retail sales incentives due to the timing impact from the new revenue recognition standard and our strategic decision to offset a portion of the retaliatory import tariffs impacting our Canadian and European dealers. The decrease was partially offset by growth in MasterCraft unit sales volume and favorable product mix and price increases at both Mastercraft and NauticStar.

On the expense front, operating expenses for the second quarter increased $2.7 million or 31.6% to $11.4 million compared to $8.6 million for the prior-year period. This increase was mainly due to the inclusion of Crest, an increase in compensation costs from added headcount to support growth initiatives, other costs associated with our new Aviara brand. These were offset by MasterCraft's Annual Dealer Meeting occurring in fiscal 2019 first quarter instead of the fiscal second quarter as it did last year. As a percentage of net sales, operating expenses decreased from the fiscal second quarter compared to the prior-year period to 9.4% of net sales from 11% of net sales respectively.

Turning to the bottom line, second quarter net income totaled $10.2 million versus $8 million for the year-earlier period, driven by the inclusion of Crest, continued strong net sales momentum at MasterCraft, and reduced tax rates from the enactment of the Tax Cuts and Jobs Act. Adjusted net income of $12.1 million or $0.64 per share on a fully diluted weighted average share count of 18.9 million shares was computed using the Company's estimated effective tax rate of approximately 22.5% versus 29% in the prior period. This compares to adjusted net income of $8.2 million or $0.44 per fully diluted share in the prior-year period.

Adjusted EBITDA was $18.6 million for the fiscal second quarter compared to $13.7 million in the prior-year period. Adjusted EBITDA margin was 15.3%, down from 17.5% in the fiscal 2018 second quarter.

Lastly, given our ability to generate strong free cash flow, we've been able to reduce our pro forma net leverage ratio to 1.6 times adjusted EBITDA. Recall that at the time of the Crest acquisition in October 2018, we had a pro forma net leverage ratio of 2.1 times adjusted EBITDA. While we believe we have a healthy balance sheet, we will continue to emphasize the payment of debt in the near future.

Please see the non-GAAP measures section of our press release and 10-Q for a reconciliation of adjusted EBITDA, adjusted EBITDA margin and adjusted net income to the most directly comparable financial measures presented in accordance with GAAP.

In summary, we are very pleased with our results for the first half of fiscal 2019 and look forward to building on this momentum for the remainder of the year.

With that, I'd like to turn back over to Terry for our outlook.

Terry D. McNew -- President, Chief Executive Officer and Director

Thanks, Tim. Looking ahead to the second half of fiscal 2019 and beyond, we continue to expect strong top line and bottom line growth along with record levels of cash flow generation. These will be driven by the Crest acquisition, continued strong demand for our core MasterCraft products, healthy dealer inventory levels across all our segments, product development initiatives at NauticStar, and the realization of operational improvement initiatives at NauticStar and Crest.

We believe we are executing our growth strategy on all fronts, and coupled with a continued strong economy, we remain well positioned to drive sustainable profitable growth going forward.

For the full fiscal year end June 30, 2019, we are revising our previously provided guidance given expected higher contribution from our Crest brand. On a fully consolidated basis, we expect net sales percentage growth to be up in the low 40% range. Adjusted EBITDA margins are expected to be in the mid to high 16% range driven by the higher net sales contribution from Crest which is dilutive to margins. Adjusted EPS percentage growth is expected to be in the low 30% range.

For the fiscal third quarter ending in March, net sales percentage growth is expected to be in the low 30% range, reflecting lower growth at MasterCraft compared to our fiscal second quarter due to one less production week given the timing of our fiscal 2019 planned holiday shutdown compared to fiscal 2018. This will be partially offset by higher net sales contribution margin from -- or contribution from Crest. Adjusted EBITDA margins will be in the 16% range driven by the dilutive effect of Crest. Adjusted EPS percentage growth is expected to be in the high-teens percentage range.

Now I'd like to turn it over to the operator for questions.

Questions and Answers:

Operator

Thank you.

(Operator Instructions)

Our first question comes from the line of Joe Altobello Raymond James, your line is now open.

Joseph Altobello -- Raymond James -- Analyst

Thanks. Hey guys, good afternoon. Just a couple of questions and obviously wanted to focus in here on the margins this quarter. You guys noted a number of margin pressures in terms of supporting your Canadian and European dealers, the timing of revenue recognition accounting et cetera. Which one of those, I guess, was the biggest contributor and which one of those was the most surprising to you in the quarter?

Terry D. McNew -- President, Chief Executive Officer and Director

The biggest contributor is the tariff support -- tariff support -- followed by revenue recognition standard changes, Joe, and then other changes that we're pointing out in our MD&A.

Joseph Altobello -- Raymond James -- Analyst

Okay, and were those larger than you anticipated coming into the quarter?

Terry D. McNew -- President, Chief Executive Officer and Director

Perhaps, I know that some of the dealers took advantage of trying to get some boots on the ground by 12/31. So maybe a little bit larger than we were expecting.

Timothy M. Oxley -- Vice President, Chief Financial Officer

-- more timing than it was anything, maybe some of that got pulled in from Q3, but on a full year basis, not surprising.

Joseph Altobello -- Raymond James -- Analyst

Okay. And I get that Crest is dilutive to margins and I see, obviously you raised your sales guidance this afternoon, but you lowered your EPS growth guidance. Is there something else going on beyond the over -- over-performance at Crest?

Terry D. McNew -- President, Chief Executive Officer and Director

No, Joe, actually, Crest does great. And as we said in my prepared comments, NauticStar gross margins were up 460 basis points in Q2. As I mentioned in the last quarter's call, we expect that to increase in Q3 and in Q4. Now, as they change and it's a pretty significant change mixing and changing to larger product, we have yet one more product release later this fiscal year at NauticStar, but we continue to do well at MasterCraft. So really I think all things are good, probably just a little bit less because of the additional anticipated contribution from Crest on a net sales basis. They are performing extremely well.

Joseph Altobello -- Raymond James -- Analyst

Okay, thank you, guys.

Operator

Thank you. And our next question comes from the line of Craig Kennison with Baird. Your line is now open.

Craig Kennison -- Baird -- Analyst

Hey, good afternoon. Thanks for taking my question. Just to follow up on what Joe had asked, again your EPS growth guidance is just a little bit lower. Would you say it's the tariff issue that's incremental and maybe an unforeseen cost as of last quarter?

Timothy M. Oxley -- Vice President, Chief Financial Officer

We -- you know the tariff cost and contribution is certainly the biggest drag and headwind as I mentioned in the prepared comments. So I think it's small, but we've extended that a bit longer than we had anticipated. But that's probably it, this revenue recognition standard is known and predictable and there's just a a host of other small items. But probably just the incremental extension through boat shows for the Canadian and European tariffs.

Craig Kennison -- Baird -- Analyst

Thanks. And then shifting to Aviara, the MarineMax win is just a major endorsement of that product line. Is that an exclusive relationship or might you eventually distribute through other dealers or could you?

Terry D. McNew -- President, Chief Executive Officer and Director

Well, right now, and for the foreseeable future, really, it's going to be MarineMax. There is a possibility to look at other dealers. But I don't anticipate that any time soon. they are absolutely premier dealers, you know, Tim and I were at Brunswick for a number of years, we've got a long relationship with them, and this is an open wreck day boat and they are absolutely the best dealer to represent us with this, they are equally as excited about it, and as I mentioned, it fills a white space in their portfolio, I really encourage everybody to come by the slips at Pier 8 during the show to see it the testing as it's been done by third-party riders and some of our dealers that have seen it, it's just been off the charts. We think it's going to be an exceptionally well received product.

Craig Kennison -- Baird -- Analyst

Thanks. And from a modeling perspective, how would you expect shipments for that product line to ramp throughout the year? And what would it contribute in terms of volume and revenue?

Timothy M. Oxley -- Vice President, Chief Financial Officer

As we've mentioned before, we will not start to book revenue until July that's at the beginning of our 2020 model year and we're just not providing guidance on 2020 yet, we will fill you guys in on future calls.

Craig Kennison -- Baird -- Analyst

Okay, thank you.

Terry D. McNew -- President, Chief Executive Officer and Director

All right. Thanks, Craig.

Operator

And our next question comes from the line of Eric Wold of B. Riley FBR. Your line is now open.

Eric Wold -- B. Riley FBR -- Analyst

Thank you. Good afternoon. A couple of questions. I guess one on the tariffs, can you give us a sense of what the year-to-date margin impacts from those tariffs has been?

Timothy M. Oxley -- Vice President, Chief Financial Officer

It's in the $0.09 per share range on a year-to-date basis.

Eric Wold -- B. Riley FBR -- Analyst

Okay. And then on Aviara, what is your planned I guess initial capacity or production capacity for that and is there kind of a breakeven level you can point to in terms of number of units to get to for that brand?

Terry D. McNew -- President, Chief Executive Officer and Director

Right. So we've got available capacity here as I mentioned in the prepared remarks, and as you guys know Industry Week Magazine two years ago recognized this as the best manufacturer in North America. So we've got the capacity, we've got the know-how. Remember, we used to build Hydra-Sport here, we've built product up to 42 feet. So we have that capability. We will release three models over the course of this calendar year, I've mentioned that before. The first one is our (inaudible) to be offered in an outboard and a sterndrive. So, this will not impact capacity growth -- future for growth for MasterCraft at all. We've got plenty capacity to do that. We think it's -- as I mentioned, it's about $10 million, to -- in total investment G&A and CapEx to do this. The payback is going to be within the first year.

Eric Wold -- B. Riley FBR -- Analyst

Okay. And then on -- lastly on Crest. Now you've got on your belt for the quarter, update us on where you are in terms of driving more production out of that facility and where you can get it to over next 12 months, both in terms of increased production and possibly margin expansion?

Terry D. McNew -- President, Chief Executive Officer and Director

Yeah. Great -- great people there -- they are taken to our our processes in engineering and manufacturing and working capital, material control in particular, extremely well. Keep in mind, aluminum boats obviously, if fabricated, you don't need the tooling. So they are able to change and they are changing. They are probably three quarters of the way through the initiatives that we've laid out for material control and we are putting in synchronous flow manufacturing in their assembly process, which is already showing some benefit, that will have the effect within this second half of the year of increasing capacity and throughput and improving margins.

So very short in process time at that aluminum boat company fabrication in process is probably two-and-a-half to three days. Really, really quick. So, no problem. They're going to have plenty of capacity. They're growing, they're taking market share, we are very, very positive about Crest.

Eric Wold -- B. Riley FBR -- Analyst

Perfect. Thank you.

Terry D. McNew -- President, Chief Executive Officer and Director

Thank you.

Operator

And our next question comes from the line of Michael Swartz of SunTrust. Your line is now open.

Michael Swartz -- SunTrust Robinson Humphrey -- Analyst

Hey, good afternoon guys. I just wanted to touch on Aviara quickly, I don't know how much you're going to give us, Terry, before you lay out maybe your 2020 view. But I guess, just in terms of -- could you frame the size of how big of an opportunity you think Aviara is, maybe how big that actual unit market is in unit volume and maybe what you think your fair share will be there over a couple of years?

Terry D. McNew -- President, Chief Executive Officer and Director

Well, we've mentioned before, we will release three new models this calendar year. The other two models will be released at the Fort Lauderdale Boat Show, there are three models with two different platforms, both outboard and sterndrive for each of the models from 30 feet to 40 feet. It's not only going to fill a white space for our MasterCraft Boat Holding customers, as who tend to do consumer insight studies, we know that they tend to leave the brand and their boating preferences change as they become empty nesters, they'll clearly stay into this brand. We also think it's going to do well and capture market share from adjacent categories in sterndrive and outboard. Once you see the styling of the boat and you're able to ride it one day, the performance is exceptional, the styling is clearly European, we think it's a home run. So we'll give you those specific numbers and what we think the addressable market is in the upcoming calls.

Michael Swartz -- SunTrust Robinson Humphrey -- Analyst

Okay, and just more of a technical question with regard to how to think about Aviara in 2020 and beyond. I mean, will you be including Aviara in the MasterCraft's segment as you reported today, or will you be breaking out a new kind of line item for Aviara?

Terry D. McNew -- President, Chief Executive Officer and Director

No, it will be included in the MasterCraft P&L, we will not do segment reporting, there will not be a brand president, that will all report in through myself here at MasterCraft.

Michael Swartz -- SunTrust Robinson Humphrey -- Analyst

Okay. Okay, fantastic. And then maybe Tim, could you just give us a sense, I know you said you had an extra -- I think production week relative to last year, which was part of the reason the core MasterCraft volumes I think were up like 32%, 33%. If -- one, how much of that increase of that extra week add and should we think about maybe that being pulled from the third quarter? Is that how that would flow?

Timothy M. Oxley -- Vice President, Chief Financial Officer

Exactly Mike, when I take the effect out and it's around $6 million for that extra week of production, Mastercraft's net sales for the Q2 were still up 21% even when you take that out. So I want to make sure you guys understand that MasterCraft's growing over above the effect of that week. And so yes, we have embedded that in our guidance for Q3 and moving that -- moving the $6 million between quarters.

Michael Swartz -- SunTrust Robinson Humphrey -- Analyst

Got you. That's helpful. And then I guess the other -- the other question on MasterCraft and with regard to tariffs, I mean, is Mastercraft the only brand or the primary brand that was impacted by the the funding of the tariffs -- that something that activity you did, I'm just kind of surprised given that 30% growth in unit volume that margins on that business warrant a little better than they were, I mean, is there a way of looking at how much you spent during the quarter was any -- and again was most of that attributable to MasterCraft?

Timothy M. Oxley -- Vice President, Chief Financial Officer

It is de minimis at the other two brands. So it is almost 100% attributable to MasterCraft and for the quarter it's in the $0.06 per share range.

Michael Swartz -- SunTrust Robinson Humphrey -- Analyst

Okay, great, that's helpful, thanks a lot.

Timothy M. Oxley -- Vice President, Chief Financial Officer

Okay.

Operator

And our next question comes from the line of Brett Andress of KeyBanc Capital Markets. Your line is now open.

Dan Terrell -- KeyBanc Capital Markets -- Analyst

Hey guys, this is Dan Terrell on for Brett. Thanks for taking my questions. So just -- just wanted to touch on some of the core MasterCraft's demand. It looks like the restated registrations data was up well in the double digits for the quarter. I know that can be variable, but can you talk about how the demand has been at retail, and which -- which product lines have been driving that?

Timothy M. Oxley -- Vice President, Chief Financial Officer

I'm going to talk about MasterCraft first of all, you know, our Q1 of this fiscal year was the highest Q1 retail in the company's history and the same thing for Q2. So that is what is driving the improved turns at MasterCraft and the demand for MasterCraft as well as in our segment has been outstanding.

Terry D. McNew -- President, Chief Executive Officer and Director

Yeah, for Crest, it's good. I think I'd characterize it this way, we are holding share at all three brands, increasing a bit at Crest. And as Tim said, MasterCraft in Q1 and Q2 experienced the highest retail sales in the company's history and Crest is just doing exceptional job, they've had great three-year double-digit growth as well and we're seeing NauticStar as they shifted to larger boats will -- because that larger than 25-foot category center consoles is clearly growing.

Dan Terrell -- KeyBanc Capital Markets -- Analyst

Got it. That's helpful. And then touching on the core MasterCraft brand, some of the ASPs came in a bit lighter than we've seen recently. Was some of that just due to product mix? Can you talk about some of the dynamics within that?

Terry D. McNew -- President, Chief Executive Officer and Director

Yes, we typically see that in Q2, this is a little bit darker, it's a slower retail quarter of the year and so dealers would generally brings boats in a little lightly -- lighter contented, and we've also been helping with different packages with the dealers, they appropriately content their inventory and segregate, excuse me, into three or four different classifications. So that was understood and expected.

Timothy M. Oxley -- Vice President, Chief Financial Officer

And don't forget, we booked the tariff support as a reduction in sales. And so I think that's a pretty significant reason for the change, yes, in the net sales per unit also.

Terry D. McNew -- President, Chief Executive Officer and Director

Yeah.

Dan Terrell -- KeyBanc Capital Markets -- Analyst

Got it, got it. Okay, that's helpful. And one more I may have missed this earlier, but for NauticStar, it looks like we may have under-appreciated the production dynamic there, how much longer are you planning on that impacting your schedules and should we expect a similar impact to the year-over-year unit growth going forward?

Terry D. McNew -- President, Chief Executive Officer and Director

So again, as we switch to larger models, unit growth is -- units will change, and we'll guide you on that going forward. So -- and they were hitting to their internal plan, Q2 was up 460 basis points over Q1 and Q3 will be up over Q2, Q4 will be up over Q3. So they will get back to expected gross margin levels by the end of this fiscal year.

Timothy M. Oxley -- Vice President, Chief Financial Officer

And Terry's comment was regarding net sales. So again -- and once again as they switch to larger product, you might see a decline in units, I'm not worried about that, I'm most concerned obviously net sales, right.

Dan Terrell -- KeyBanc Capital Markets -- Analyst

Got it, thanks. Helpful.

Operator

Thank you. (Operator Instructions) Our next question comes from the line of Tim Conder of Wells Fargo Securities. Your line is now open.

Mark Torrente -- Wells Fargo Securities. -- Analyst

Hey guys, this is actually Mark Torrente on for Tim, just a few follow-up questions for us. Last week, one of your peers called out some recent brand -- value brand weakness in aluminum fishing and pontoons, just wanted to hear your take on what you're seeing more recently across the industry, maybe more specifically out of NXT and Crest?

Terry D. McNew -- President, Chief Executive Officer and Director

Yes, we saw that comments as well. But for aluminum pontoons, Crest in particular, boat show sales are up year-to-date compared to last year same timeframe year-to-date, they're increasing market share, sell-through is great, we're rationalizing the portfolio, we're actually not seeing any negative impact at Crest at all. NXT sales are continuing to be strong, our NXT 22, that is selling off the charts and it's been at some point over the last year sold out for periods of time.

Timothy M. Oxley -- Vice President, Chief Financial Officer

Yes, I would point out that our NXT is not a value brand, it's our entry level, part of the MasterCraft lineup comes with the same quality and warranty and everything else and so that maybe one reason that we don't see that.

Terry D. McNew -- President, Chief Executive Officer and Director

That's true.

Mark Torrente -- Wells Fargo Securities. -- Analyst

Okay, great. And then on the tariff support $0.09 year-to-date impact, about how much are you expecting in the back half of the year. I know you said it's going to drop off. And then if the tariffs are lifted, is there any pent-up demand that you would expect to start coming through?

Timothy M. Oxley -- Vice President, Chief Financial Officer

If the tariffs are lifted, yes, we could see some pent-up demand, but the good news for us is part of our strategy of having the dealers with these tariff-free boats in their inventories we can take advantage of the pent-up demand. There is not enough time to produce the boats to satisfy pent-up demand if that occurs at least not and get it in this fiscal year.

Terry D. McNew -- President, Chief Executive Officer and Director

Well might I add to that, Tim, Mark, we intentionally decided to support the Canadian and European dealers and I'll talk about Canada particular to make sure they have the proper level of inventory in our competitive checks that we do throughout every region of the world, but I'll talk about North America. We think we've got a competitive advantage. We did help offset that tariff in Canada, that our dealers have proper inventory, we don't necessarily see that everywhere else and so, to Tim's point, we have product on the ground, we are seeing strong wholesale and retail in Canada and we know that we will be able to fulfill that demand come the boating season and the ever important Q4 April, May and June. If other manufacturers don't have their dealers properly stocked, they may miss that season in large part.

Timothy M. Oxley -- Vice President, Chief Financial Officer

And in regard to the quantity in the second half and it's going to be in a $0.03 to $0.04 range. So significantly less than it was in the first half, right, on a per share basis.

Mark Torrente -- Wells Fargo Securities. -- Analyst

Okay, thanks. And then also on the international front, could you provide any more color on other major regions in terms of retail that you're seeing, maybe Australia, Europe?

Terry D. McNew -- President, Chief Executive Officer and Director

Yes, Australia continues to be strong for us, Europe with the 25% tariff, we anticipated and put in our full year guidance and plans that there would be some reduction in wholesale volume. It's actually a little bit less than we had planned for, we're not fully supporting that tariff, we are partially supporting dealer incentives to offset a portion of that tariff, but Europe has probably seen the largest decline, but still we think we're probably as strong or stronger than most other brands in all the areas, especially in Europe.

Timothy M. Oxley -- Vice President, Chief Financial Officer

When I was looking at the dealer inventory at the end of December, I'm seeing turns up, not only in the US but in Canada and in rest of world, which includes, Europe and Australia, so we're very pleased with how our products position.

Terry D. McNew -- President, Chief Executive Officer and Director

And that's a great point, Tim, and Mark, I would just want to reemphasize as you know, we watch dealer pipeline inventory every single week. We do not push product out to our dealers, we definitely want retail demand at the end of Q2, the model year, the first half, global -- global retail was up in the high 20%.

Timothy M. Oxley -- Vice President, Chief Financial Officer

Also important to note the $0.03 per share $0.03 to $0.04 I mentioned earlier, is it has been contemplated in our guidance.

Mark Torrente -- Wells Fargo Securities. -- Analyst

Okay, thank you very much. We'll see you next week.

Timothy M. Oxley -- Vice President, Chief Financial Officer

All right. Thanks.

Terry D. McNew -- President, Chief Executive Officer and Director

Thanks Mark.

Operator

And I'm showing no further questions at this time, I would now like to turn the call back to Mr. Terry McNew, Chief Executive Officer, for any closing remarks.

Terry D. McNew -- President, Chief Executive Officer and Director

Thank you, operator. And once again thanks for everyone for joining us this afternoon. Across the organization, we continue to be well positioned for fiscal 2019 and beyond. We look forward to updating you on our progress and third quarter results in May. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a wonderful day.

Duration: 39 minutes

Call participants:

Timothy M. Oxley -- Vice President, Chief Financial Officer

Terry D. McNew -- President, Chief Executive Officer and Director

Joseph Altobello -- Raymond James -- Analyst

Craig Kennison -- Baird -- Analyst

Eric Wold -- B. Riley FBR -- Analyst

Michael Swartz -- SunTrust Robinson Humphrey -- Analyst

Dan Terrell -- KeyBanc Capital Markets -- Analyst

Mark Torrente -- Wells Fargo Securities. -- Analyst

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