OneWater Marine Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended June 30, 2021; filed August 12, 2021. Unaudited results are compared with the corresponding 2020 periods. OneWater operates marine retail dealerships; at quarter-end it had 69 stores in 10 states.
Key financial results
| Metric | Three months ended June 30 | Nine months ended June 30 |
|---|---|---|
| Revenue | $404.2 million, down 1.0% | $947.9 million, up 26.1% |
| Gross profit / margin | $127.0 million / 31.4%, versus $94.7 million / 23.2% | $268.2 million / 28.3%, versus $171.5 million / 22.8% |
| Operating income | $64.9 million, versus $50.7 million | $119.7 million, versus $61.9 million |
| Net income | $51.6 million, versus $40.6 million | $93.9 million, versus $42.5 million |
| Net income attributable to OneWater Inc. | $34.5 million; diluted EPS $3.04 | $62.8 million; diluted EPS $5.63 |
| Adjusted EBITDA (non-GAAP) | $65.5 million, up 33.0% | $122.3 million, up 103.3% |
Quarterly new- and pre-owned-boat revenue fell 2.2% and 9.1%, respectively, while service, parts and other revenue rose 58.1%. Nine-month growth reflected same-store sales growth of 16.3%, acquisitions and stronger service revenue. Management attributed improved gross margins to product mix, dynamic pricing, higher boat prices amid constrained supply, and increased service work. Quarterly same-store sales declined 10.9%, which management attributed largely to industry supply constraints and comparison with 2020 sales delayed by initial pandemic shutdowns.
Cash flow, balance sheet and liquidity
- Nine-month operating cash flow was $153.2 million, compared with $152.6 million. Investing cash use was $91.1 million, including $83.5 million for acquisitions; financing cash use was $9.5 million. Cash and restricted cash totaled $120.7 million at period-end, including $113.2 million of cash.
- At June 30, 2021, current assets were $307.6 million and current liabilities $244.6 million. Inventory was $116.9 million, down from $150.1 million at September 30, 2020; customer deposits were $43.1 million, up from $17.3 million.
- Debt included $118.0 million of long-term debt and $108.2 million of floor-plan borrowings. The floor-plan facility had $284.3 million of additional borrowing capacity. The company reported compliance with its credit-facility covenants.
- Operating cash flow and borrowing availability were identified as funding sources for operations, working capital and acquisitions. Management said it believed liquidity was adequate for the next 12 months.
Material changes, outlook and risks
- Three acquisitions completed during the nine months—Tom George Yacht Group, Walker Marine Group and Roscioli Yachting Center—had a combined purchase price of about $91.0 million. They contributed $75.5 million of nine-month revenue and $10.3 million of income before tax.
- The board declared a special cash dividend of $1.80 per share and per OneWater LLC unit. Approximately $27.1 million was paid July 19, 2021; an additional $0.7 million related to restricted stock units is payable upon vesting.
- After quarter-end, OneWater agreed to acquire Naples Boat Mart and PartsVu, and completed its acquisition of Stone Harbor Marine on August 1, 2021. No quantified earnings or revenue guidance is provided.
- Management said pandemic-driven demand remained resilient, but COVID-19-related supply-chain constraints and inventory shortages had reduced quarterly sales and could continue to affect future revenue. Other key exposures include seasonality, weather, discretionary consumer demand, interest rates, acquisition execution, and manufacturer relationships; the top ten new-boat brands represented about 42.9% of quarterly sales.
- The company reported no material change to its previously disclosed risk factors. Management said pending litigation was not expected to have a material adverse effect, while noting outcomes are uncertain. The company was not hedging its interest-rate exposure. A 100-basis-point increase was estimated to affect period interest expense by $1.1 million on floor-plan debt and about $0.4 million on the term facility.
- OneWater expects adoption of lease accounting in fiscal 2023 to materially increase reported assets and liabilities. The filing also notes that results are seasonal and the business is highly acquisitive.
Important facts for investors to verify
- Whether constrained boat availability continues to limit unit sales, and whether unusually strong boat pricing and margins persist.
- How much reported growth is attributable to same-store performance versus acquisitions, and the acquired businesses’ subsequent contribution and integration costs.
- Liquidity and covenant headroom after the special dividend, acquisition spending and changes in working capital; review floor-plan and term-debt balances and interest-rate sensitivity.
- The assumptions underlying future acquisition earnouts, tax receivable agreement payments, and goodwill and intangible-asset valuations.
- Comparability of EPS and income attributable to OneWater: ownership interests and the public-company tax structure changed between periods, and non-controlling interests receive a portion of consolidated income.