OneWater Marine (ONEW) 4 May 232023 Q2 Earnings call transcript

Good day, and thank you for standing by. Welcome to OneWater Marine's Fiscal Second Quarter 2023 Conference Call. [Operator Instructions] I now like to hand the conference over to the speakers for some prepared remarks.

Good morning, and welcome to OneWater Marine's Fiscal Second Quarter 2023 Earnings Conference Call. I'm joined on the call today by Austin Singleton, Chief Executive Officer; and Anthony Aisquith, President and Chief Operating Officer.

be like in you regarding a this and operations I'd made certain OneWater number begin, under its management statements uncertainties. by morning's may of we risks to and that remind statements Marine securities and Before law forward-looking involve considered conference call

those obligation you or differ that, or a the reflect to made, to actual discussed in statements company's a remarks. control, future described Relations call website could to there that cause number materially statements the are of by section forward-looking Factors As with a affect be earnings events Investor law. And undertaking the that with which in opening I'd will the who filings. result, factors, found its on and company's any in release, and update beyond circumstances after to events in as Austin? begin required results from company cautions few are forward-looking statements. over the might Singleton, forward-looking like are disclaims many of company's the occur except to date Austin the can the the SEC which which that The are turn company results

ahead increase you, Same-store increase industry a XX%, new service grew a XX% today's in reflecting by strong growth second sales driven and increase the revenue XX% in parts sales in quarter of Thanks, sales. year everyone, the quarter for Jack, was a call. prior well and reports. in XX% boat other and Sales results top on growth thank joining We of delivered of period. XX%

change in we our occurring healthy. and to to both we good over to as remains continues normalize customer show Additionally, Lead by as return continued demand destocking has attendance the our seeing several store invaded buying box seasonality. retailers a new service offerings. big boat. that the continue been to boaters around are Boat attracted are have at a good are parts customers inventories From new pace typical cadence environment at next months. The and customers despite and our perspective, returning traffic the and times their past find grow business shopping been and

as We see significantly unit by market our to continue share outpaced gains that evident industry. has growth the

sold We see are of pleased to prices. return growth and units both balanced in unit a

of summer environment, are the With backdrop being as selling a the aggressive questionable macro we prepare season. we for

M&A. ago, believe years. Since into have on XX% strategic modest appropriate we a the return levels we levels year. model are We outperformance. to and having will but pricing, year decreased past and progress grown the the position With for XX% this from of few made over us believe continued for boat XXXX new the Overall, organically inventory through to margin boat this down as and don't season margins as we saw a range exit expected. sales XXXX ahead of Gross have both We we approach given strengthen significant roll business of the to XXXX, of peak focused selling in XXXX. XX%, inventory well tremendously, margins we normalization will the decline market

has enable our maintain grow and our the OneWater to the and made building the investment and diversified industry parts track service The will profitable of record outperform which by have to We to offering strategic have continue out business, fivefold. we diversify growth. grown business

more as acquisition sellers to look remains with become more to robust. normalized and are attractive Finally, the Deals seasonality the tune in return starting margins. pipeline

to to we our continue any value growth evaluate I over shareholders. With turn feel positioned we disciplined As yet opportunistic, potential for will well that, and remain it always, Overall, will profitable we driving as transactions. Anthony. creating

members this active team Thanks, XX%. their team quarter. and Austin. to drove noise, macro and I uncertainty Despite remained growth efforts for also industry sales same-store to our would thank our like

where we seeing cycle. in returns mentioned, are Austin As industry sit, normal a cadence we from to change seasonal as customer the buying

these point and inventory winter as that occurs that summer expected, September. We past for build due decline inventory February in season. in completed levels believe season. in selling to low, at over important the has It's report to months inventory also the to year the higher that we its strategically our the preparation am which I to acquisitions cycles, With summer note months. will position XX peaked us increased in this the has selling normally inventory of started the carrying for pleased seasonal

both hand inventory on XXXX Our our and weeks industry today than is metrics. averages lower

which are our to tools, we of us gain believe industry market and strong advantage outpace We taking will lead full the share. management inventory further competitive

trends seeing to Turning are some other customers. we with

interest strong financing larger, options. is we they We value banks higher more rate options sensitive are they underwriting and smaller price over though continue customer smaller be on The loans been for XX have purchase over the continue sophisticated boats. years. to With said, rates, reliant seeing to likely boats see more available be boat credit to customer this market even interest in and at as readily the to their in last are diligent more as in typically average

to Our navigate delivering growth. strong challenging parts other continues and environment service and business while

quarter, box continued to response while our industry pressure chain supply experience built Distribution inventory to who the last retailers As in from at delays. noted occurring up destocking segment big

may the This piece of course the out to of with be the that it's invaluable the diversification our focused OneWater inventory the we waters key a normalized customers capitalize be across on management season, to of about now excited and selling to financials. over upcoming flexible guide are area execution on and Overall, business through expect over to the business and will team, Jack our strategy. review We are and driver customer the of ahead. I and turn for growth great from boat the getting season an We to family. remain normalize experience, friends water summer well positioned us model continues demand. turbulent to channel strong on return the inventory call

Thanks, Anthony. $XXX was million same-store from This to Fiscal from in revenue not by in included quarter. increase in million quarter sales the revenue and $XXX yet an XXXX same-store in acquisitions increased driven prior XX% XX% year base. the second

XX% New fiscal boat $XXX second million sales boat pre-owned of in and rose at to sales $XX flat XXXX remained quarter million.

XX% balance new used our between in see our and business organic acquired the revenue, growth. solid margin the slightly, by sales Overall, parts $XX quarter and increased million, driven our by results. Service gross offset to pleased and and are $XXX primarily gross X%. a service to increased recently the up and on climbed Finance been contributions year contributor growth. prior parts our margins be and unit The boats due parts to to of constant price other higher-margin the comprised We from a of higher boat businesses other compared have normalization X% second to of to growth partially by our Insurance profit of million sales sold.

As to and segment overall XXs, sales sold. we we on previously high stabilizes, margins in the integrate margins normalize trends distribution and acquisitions the fully seasonal depending discussed, the gross expect of our normalize, mix as products boat

quarter XX%, to expense sales to million general which selling, the from flat second fiscal SG&A and a of compared percentage million. $XX $XX was as increased administrative XXXX XXXX. quarter was Second of

shows season cost an the led the year return in normalized shows. to participation to increased Our additional quarter boat events, promotions during as prior and to we compared a of

by for businesses, continue declined service grow EBITDA in prior to has which decreased Additionally, due as expense to compared $XX anticipated the to our and from million reduction This a higher to that quarter, and adjusted in is borrowing million prior the margins. Operating on in interest expenses the million prior prior in rates diluted in Net parts average Contributing higher income $X.XX and our totaled to million $XX or higher $X.XX partially the decreased increase from million result we facilities. variable million was per than increase income offset historical the commissions $XX million $XX which $XX like to SG&A a reduced a structure. up million year, share or the interest expense, quarter in an year. to debt decline diluted was this fiscal in per increase These $XX of total second million share year. costs rising the $X were $XX are XX% year. $XX a sales costs compared in

Turning to the balance sheet.

balance facility. million. Total of in XX, floor revolving inventory total liquidity was cash million, credit availability of XXXX, XX, As the sheet, as on our under line $XXX of and credit XXXX, March $XXX plan was of including excess March

long-term Total months peaked was EBITDA. net XX and return of debt the as XX, seasonality, long-term the of March summer normal during of was or months the cash season occurs $XXX inventory debt selling trailing begins. X.Xx With build in February net as million, debt XXXX, our winter

Our remains and liquidity closely. a macro range, and environment position we are leverage watching comfortable in the

outlook. to our Moving

We of anticipation range seasonality. are in maintaining a trend continued guidance our towards

EBITDA share compared range We are exclude per digits $XXX earnings in prior in may diluted guiding projections range share. expect mid-single to of be $X year flat the the to million, to be completed be the per $XXX be $X.XX to up with that to and year. acquisitions any same-store during million sales diluted adjusted the of to to These

the windows, quarter we Operating did our may and make current in maintain future. opportunistic continue during repurchase with approximately the to We strategy. shares capital purchases XX,XXX limited allocation

As internal and we M&A, we moving appropriate maintain navigate share balance the investments, between debt the paydowns. strategic forward, will repurchases markets

are questions. to opportunistic in remarks. and disciplined and our shareholders. This for intend we actively acquisition. our please the drive open you always, stay the line would assessing prepared be our we'll concludes targets, for right value Operator, As We strategic for approach

from Andrew first from Instructions] Stifel. [Operator comes Our question Crum

performance, follow-up. color XQ better week. some relative last to the do I from and sales on fiscal And from of you marine same-store have names the business outperformed? we you has industry a share The data started? can commentary think posted then Where the how any heard you And other feels

team it job -- on our inventory we did making in very focused the right We exit focused Yes. on sure a of couple the season. place said of great execution. a is times, remain as I'd say the we've

I And it weren't and of bag. The little there. think so as team the the as kicked off season, our marketplace, out [ aggressive off that's were reflective ] focused. are But we're of gross here in a We customers we the starting missing deals. was we're margins. We

hard their they're and just trust business. in have You their work to earn to

thoughts April, it's gone? any And Okay. on how

Yes.

is number. we we're quarter same-store April double-digit to digits. that Again, that. look, sales think a about I looking to Sorry mid-single have don't -- anticipate flat at this

just think start, a off So good a I but we're month we're to it. into

at several It yet a But month number the will a bit we many back we of So month is slower decent been March. in sales April. went than had for the looked past, months I of have -- don't same-store I than little have there April. I had a the and -- sometimes say April -- prior

then And headwind service was to reasonable that a a XX% of quick Or just in be threshold 'XX. fiscal Good. that below follow-up. your expect you the year? just first Okay. that other in parts The would half for preamble? or of fiscal light you of under sales destocking Is for the noted above and the

Yes... I was higher And cylinders, it be it all than fired I to be for would that. than it like that. think would higher on

bit the to to little a of way work business. strong that COVID, But -- kind adjustments It have supply to hangover, our you marketplace just chain, we it's through continue if we make through. and this kind has we will, of working that. a of So

the moment question. One next for

question Raymond comes next James. of Altobello Our from Joe

[ question. Martin same-store bit quick A sales Was unit of color? for or Altobello. mean balanced, is XX%, on you the I mentioned This ]? growth in of but a lower that little you can that higher that was growth give fairly more Joe mega

it -- about units, the in I was of half have me, don't was mix. driven front growth half it's driven but about Unit price. by Yes. number by

as while certainly We're if fact a seen see we've that's same-store balance so growth, between this we quarters in by is and is that the we that's like you can. so will, in unit But what to we one a -- work balance a and number that's times, try encouraging. to in that encouraged the units to And of the first decent normal price. keep that

read And is of mentioned in missing industry it's the gross you promotional part And you're we marketplace. the see you're gross reason deals of being not activity? that margin on we outperforming the that? and meaningfully the decline margins. what Should can still aggressive into is Or that you're because else the reflected that

to the selling at have that You look a not the which also lower it, margin mix. and everything outpacing I you're focused a maybe many number as is the in percent. -- boats larger larger into the is year This industry think I factors on when boats, smaller tend as a carry a have boats team margins, that do. of of think you time But of that right? there's as some we go the

don't industry, And so to we're that ahead know the I atypical. that's of extent the that

something every think drive we towards that certainly that's I day.

we think I Jack, though, ought the we proactive is thing one mention took that to approach. that too,

like, As Jack, on started I hearing XX to XX, as weeks mean, is what closer said I said industry. build, either came see and to It's we XX, industry same-store our on inventories they hand from weeks we're an sales out XX? And Brunswick hand wells.

Yes. Yes.

Yes.

the a couple of inventory different change that in want we year come July. things took to model think we be or We took of I -- here. really -- approach clean approach the it's

to we feel change. And more a margin into we extremely model industry of as make important that be on inventory, outpacing the that's year boat wanted the aggressive So XXXX. when we bit we roll we clean into little get sales to way sure new are

don't have selling excuse any or discounting units. to old deep we So unload

new confident them, Jack those the was like that about minute starts hitting hold talked a we're the we close boat get that maintain up. double-digit margin new can sales and that important margin. And not so of down maybe that EBITDA XX%, margin. And of some down it us the that it's high me look see to XX% we creep were lot a at I than to to at to P&A encouraging to hitting bring did. we we that margins, other And XX to in a aggressive that at just clean model a will hitting are It's to one which because keep little pretty said X.X% the think And we cylinders. down to when thing bit it clean it's they be more I try -- with all ago, different is on high our to as if to inventory are pull to on just it need even boat gross but X.X%. able super being And -- want inventory we into is a comfortable lower pulled with it cost XXXX we And them, lot on because it year. all thing get

and helpful on a very It's it. congratulations Got great quarter.

for moment question. One next the

Fred from comes of Wolfe. question next Our Wightman

on early guys changeover I being follow think as the that is about summer, unusual supply it, the just How seasonality, line last diligent call to you the you mid- look year if XXs of is to inventory? at, model industry industry, did mean across that later weeks this you worried about? want up that something questioning. fall? high that Or I do are

lot thing inventory XXXX. mean and that I of trying just we boat more is comforting probably still now don't But think that bit the should And were where some out the think in you been people shows, COVID I current a you little maintain about And at I collected had a more industry worried were all that we're below margins. and think flexible think of those they're "Oh, think We not I it. inventory saying, some look is if maybe don't I have go the there. deals." out to and levels I coming know. XXXX, back it's dated

month I the like will into mean, the a just a wasn't early an in build -- of So we rolling earlier, from it us. Jack or pretty of summer industry that all kind everybody spot. peak February, a that spring good with I good sure think said first We're gets decent March. into spring inventory that

a want lot So now to start everybody is We working just be way everybody and going of kind peaked else. has everything than down. to better its

your think Does or surprising And divergence maybe OEMs real well. of Or and April of comments this and and at look it Is seems well, in into some by That you just terms guys just you be can in kind as you? disagreement. I of what there XQ makes sense. outlook, the both as that throughout guys do even happened you that would market public level be from mix explained terms and say, that second to progressed if to as in of quarter you geographic exposure? of retailers differences

No. do I different back might when be but is, somewhat kind a of and some same I mean down to are. focus XX MarineMax, look think pace could a Same mean model think say, their we have is I very be we focus Brunswick know when on -- they tends we that, our that you It's might going I I that refer we positive. of stuff. mean see it little Malibu didn't don't that could lot at outlook just it, positive. everybody the than -- I Polaris, and feet that that. with of that mix. bit whole to forward, above very let's maybe be -- follow and I of a -- seems was the you like

in boat be it? the it's But right Less what doing good So industry. of sales that really, our revenue, our big is sales seeing segment XX% our right we're than might not now. Jack, forecast good as I as currently -- now really is revenue? boat what mean,

[indiscernible] a overall. the to compared about it's smaller it's Yes, but

boat. $XXX,XXX feel affected buying not boat we $XXX,XXX a if a you're buying interest if rate that so you're as And or it's

that going right, the more think customer that be little is and space I rate we to in premium brands And less that's was little the sell say, and resilient, a a to is just I with sensitive. think represent. the tend interest price we so Well, I key

That's guys you 'XX of fair. how quarter, it as kind is Or it the you I the out? guess, throughout And fiscal retail? move right, with second say is summarize to line more shake optimistic are it, just that year to in calendar on you safe thought would

it's control what right think don't moving of at a line I Is now, years, look right really what think you when years. XX we it or believe or Day said something macro a that a the we of last season. at that I point. the it's get every in season, momentum, the condensed and in And the we into mean everybody really know on going at hard that kids momentum can't I the boating as to short out slowing a Day, the that. we we quarter. when of the Memorial with start season or kids end to boating season, kill seasonality. take to front Labor especially from is boating move we're is a hold. into for lot do boating down time heard XX to some X I back. It's into that, you has that and And But years see last it we're we're says kill we've mean will And recession. school it going

we're you're control. I for of is mid-June back us, of happens we would kind back into the the kind the and we're off-season. off do you're say you in pushing can't the on half is watching What or the -- becomes once happens get July the more what demand what based it part year or into going season, season through or that the little concerned macro Now in does bit -- not that's we're a of of what

sure doing are that's clean. inventories Austin, our and we with making doing it's Yes, what we're exactly why

Makes sense.

Zatzkin comes Capital question of KeyBanc from Markets. This Noah

This is for Noah. Alex on

the to more a loop the is quarter? you Or us to all margins Can the understand to there? wanted sequential that Just real gross there specifically maybe quick, consignment Is side. softness on back function versus consider? the pre-owned something else down step of help first

reduction in pre-owned, say within you brokerage. like shift there was as I'd driving down, definitely Yes, mentioned, was well mix a as in reductions margins consignment some that some Yes.

overall little of look boats to And at as do keeping margin a so similar margin on affected it degree, a will. bit a we right, trade kind When pre-owned we this but then tend pre-owned shift a say, caused And you further we I'll to we new off, be if pre-owned, some little of total trade, that points. that bit. did look that target couple margin within, and our that of to with mix kind

it. switching maybe then here. And Got gears

you you Just a at Or can where color distribution retailers? something activity another that curious at. have little curious with or quarter see X? we're destock taking any Is Just that's in if up add that where bit? on you seen pick the

going come out boats. days. flush will it next to their the when really using people think over destocking XX I over start here in XX, That is

mindset to snowy boating, Labor had So weather kids get and in breaks, they're out geographies, If now. the to not the to Memorial it is when and extremely the season get we've the is are when it in go when wet, in boating getting whatever prepare back, Southeast. you windy is mean, Day, they're to I rainy people of particular ready cold that school, so Midwest, Day when be the cold, an the already kids starting

cylinders on now Florida. right perspective market boating only the a about all that is kicking is from probably So weather

would really next to over, So XX XX, say, I should out that the days. start shake

So year. time into in the the of that get is hope we kicks by that, the our QX

This from Craig comes Baird. of Kennison question

I finance this or ask earlier. year? reiterate the mentioned it inventory the want you what rate just today think versus maybe I what to last to you to is was Austin, cost

were outstanding we I'll in normalizing year-over-year. jump doubled mean is around balance. Craig, about obviously, than that. this on it's larger a at now I right more year combined That I'd X%, I Yes, probably with, X%. say mean, Jack. ago, we're inventory

today typical maybe consumer consumer might rates, And same year? last on the be a question what's the rate versus

I would close quite Yes. There's say a but that that. that, it's lot not in to doubled, variables but of it's

be to might it year Anthony, in like -- low right right mid-Xs at I a that -- like and mid-Xs to at depends awful dollar probably ago now, credit. on looking were You this

now it is beginning Yes. is X% at Most the of around correct.

tighter Okay. right we're you're think I interpretation credit tighter markets, of That's across you in said? seeing of if But bad these why about bank guess you wake conditions helpful. in economy your credit hearing what headlines. the the And don't the that's then

this Well, that -- of because deal we've major on financing. it's funny with -- banks really most the we is banks we deal X with the

I like, some that, good at highest in They this major XX hearing have majority about We tougher business. than almost We've I because that. it of but we've their the keep think, financing a banks of we've not underwriting. looked it been worried take lenders, ago lot any going X both It's was a and different credit It's it's been on the of the books. mean, year away. spreads.

to [ worth score have north average disciplines mean still this put Beacon is love our held ] I still You place banks that -- million that 'XX is in today. What give $XXX of of 'XX, are XXX every business. seeing financing. the on we're

delinquency runs rate X%. Our like XXX of

the certain really margin financing like I is good told, and the good, like they been it it. it's the think on to sell really, from and for level, send spread margin and So they think keep paper, what And marine just They -- don't a it And the I've business. they they bank's banks spread just on underwrite balance -- don't good. this package they it's and really it, up I they strong, sheet. the

having anymore. We're the saying, not as And credit okay, going, as tightening making not with far little F&I little that bit paying used financing spread been bit concerned overly we much a more. reflected a We're with banks more to So that's the a concerned we're as that. the side. consumer in not not profitability boats work We're I'm of our on to. we're as

a other think who the piece, has Austin, FICO score of This customer I is right? is a XXX. XXX, highly fluid customer, the

those give who the people are they so to. want And credit to

from Truist Instructions] Our next [Operator Securities. Swartz question Michael comes of

making I some you the fill is comments in nuances into in -- to Just third things the around quarter? margins new of both pre-owned quarter. were there of am that like the incentives just I improvement Am maybe boat wanted of expect should that some some It some and maybe that? quarter. down the second and I boat reading were terms the hearing mix in sequentially, into show fiscal Or pre-owned we think too sounds the to much

Yes, QX our second into I year for margin into mean, when too boat usually that. reading much boat QX season you're you typically, probably this show get lowest the shows. calendar, is our those

that have important for we push good we at levels, to and roll more we us It's will into I think and continue it this. decided, correct as correct really to the looked inventory inventory levels, XXXX. the inventory

get the us as past about. eat. we as just as boat keep with the aggressive been carryover want in to as starts maintain we've now we that go EBITDA a we're being the expense if margin than free in we'll to a more aggressive. It's to we of May. the possible. boat get as little can plan slightly order to maybe margins And as talked destocking try P&A margin Inventory XX% so even margins And roll close gross to as And and back don't margins important that that floor new new inventory. into double-digit to I or it can maintain to down because is we bit work can continues, new that month boat comes that higher margin and and it's we maintain high gross in rolling XXs mean much off

to And so We it's want to it going get eats. where to be clean.

where may they I be point are, stabilizing give So I wouldn't or up up. down. take read mean or margins into it going X.X

on just sellers. -- from maybe there's we've then more volume, on And a RV more been Perfect. lot Okay. mean, a heard traffic front, the that the willingness lot M&A the on inbound side, I

the in conditions I months, than in market, seeing several the maybe that Given that. over sellers the previously? to a marine they mean, bigger the coming market, be healthier obviously in way than to you had appears last of signs which, table Are any

say that thing what's of same when would years the I I we're margins elevated seeing we to still reverted think think the than to the exit those starting look an margins strategy I pre-'XX we're over elevated best, marine where the industry about possible. to to mean best incredible by talking be and into driven has seems I RV. overall We're IPO, for stronger margins all to continue having a It's No. see starting the and we 'XX. to the they're are already RV will where get lot industry. did

more or picked So less. any it hasn't up

deep. decades is pipeline Our

not it to is really somebody that's in is you how have do. X of changed talk love biggest we I we we we over that But comforting. to old, tell It's It's where something mean that's years. idea, this very issues, way it's do wouldn't XX you can I say the years adding last pretty one steady years. right XX about inflow. now. months the anything or the So has I to want X the sit last that's been for Mike, cadence the the

for today's Q&A program. Thank segment. our you your conference. the This participation in concludes conclude That does

You disconnect. may now