OneWater Marine Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended September 30, 2021 (not a standalone 2021 fourth-quarter report). Amounts are U.S. dollars; financial statement figures are in millions unless noted.
Business context
OneWater is a marine retailer selling new and pre-owned boats, finance and insurance products, and service, parts and other offerings. At year-end it operated 70 stores in 11 states. Florida generated about 49% of 2020 revenue; the Southeast and Gulf Coast together accounted for approximately 80% of FY2021 revenue. The company completed five acquisitions during FY2021 and continued expanding into parts and accessories.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $1,228.2 | $1,023.0 |
| Gross profit / margin | $357.5 / 29.1% | $235.5 / 23.0% |
| Operating income / margin | $148.9 / 12.1% | $78.3 / 7.7% |
| Net income | $116.4 | $48.5 |
| Net income attributable to OneWater Inc. | $79.1 | $17.4 |
| Adjusted EBITDA (non-GAAP) | $155.8 | $83.1 |
| Operating cash flow | $159.4 | $212.5 |
Revenue grew 20.1%; same-store sales increased 9.7%. New-boat revenue rose 21.7% to $872.7 million, pre-owned revenue increased 5.2% to $216.4 million, finance and insurance income grew 16.0% to $42.7 million, and service, parts and other revenue rose 52.0% to $96.4 million. FY2021 basic and diluted Class A EPS were $7.13 and $6.96; FY2020 EPS covers only the period after the February 2020 IPO and is not directly comparable.
Gross margin expanded by 6.1 percentage points, with higher boat margins and growth in service, parts and other sales. SG&A rose 38.6% to $199.0 million and increased to 16.2% of revenue from 14.0%, primarily reflecting acquisitions, personnel costs and higher performance-based compensation.
Cash used in investing was $117.1 million, including $107.5 million for acquisitions; financing used $36.5 million. Year-end cash was $62.6 million, with another $11.3 million restricted. Current assets were $280.9 million and current liabilities $227.6 million. Debt included $105.9 million under the term loan, $114.2 million of floor-plan borrowings and $10.7 million of notes payable; the filing reports approximately $312.4 million of aggregate additional borrowing availability under the credit facilities at September 30. The company was covenant-compliant at year-end.
Changes, outlook and notable items
- Management attributed strong demand partly to consumers seeking outdoor, socially distanced recreation. It also said industry supply constraints limited boat availability and reduced FY2021 revenue potential, particularly for pre-owned boats.
- The five FY2021 acquisitions contributed $107.9 million of revenue and $13.3 million of pre-tax income from their respective acquisition dates. Acquisitions increased goodwill and identifiable intangibles; contingent consideration was $12.1 million at year-end.
- The company paid a one-time $1.80-per-share special dividend in July 2021, totaling approximately $27.1 million. It does not expect regular cash dividends in the foreseeable future.
- No formal FY2022 revenue or earnings guidance is provided. Management said it expected adequate cash flow and borrowing capacity for operations, essential capital expenditures and acquisitions over the next 12 months, based on then-current circumstances. It generally targets four to six dealership acquisitions annually.
- After year-end, the company acquired T-H Marine and Norfolk Marine and completed the Naples Boat Mart acquisition. T-H Marine was funded in part with a $200 million incremental term loan; the revolving commitment also increased by $20 million. A Quality Boats acquisition was announced as expected to close within 90 days.
- The floor-plan facility’s September 2021 maturity was extended in amendments through January 1, 2022. Effective October 1, 2021, its benchmark transitioned from LIBOR to SOFR. The timing and terms of continued floor-plan financing remain important given the facility’s role in funding inventory.
- Other principal risks include seasonality and weather, dependence on manufacturers and boat supply, discretionary consumer demand and credit availability, acquisition integration, interest-rate exposure, and environmental and regulatory obligations. Management reported no pending litigation expected to have a material adverse effect. The financial-statement and internal-control audits received unqualified opinions; the auditor identified acquisition contingent-consideration and acquired trade-name valuations as critical audit matters.
Important facts for investors to verify
- Confirm the status, maturity and borrowing terms of the inventory floor-plan facility following its short-term extensions, and assess the effect of SOFR and interest-rate changes.
- Evaluate whether FY2021’s unusually strong boat margins, demand and Adjusted EBITDA are sustainable as supply constraints and pandemic-driven demand change.
- Review post-year-end acquisition funding and integration, including the incremental T-H Marine debt, and the company’s capacity to meet its acquisition plans and debt covenants.
- Assess contingent consideration estimates and preliminary purchase-price allocations, including the $12.1 million year-end contingent-consideration liability and acquired goodwill and trade names.
- Consider geographic concentration, especially Southeast and Gulf Coast exposure, and the $40.1 million tax receivable agreement liability, which may increase or accelerate under specified circumstances.