OneWater Marine Q3 Earnings Call Highlights

Key Points

• Q3 results showed resilience despite weak demand: Revenue fell 4% to $531 million, but gross margin expanded to 24% and adjusted EBITDA increased to $38 million from $33 million. Same-store sales declined 2%, outperforming the broader industry’s high-single-digit drop.
• Balance-sheet progress continued: OneWater reduced adjusted net leverage to 3.7 times from 5.8 times a year earlier, achieving its below-4-times target ahead of schedule. The company is also exploring debt-refinancing options.
• Full-year guidance was lowered amid an industry downturn: Management expects same-store sales to decline low to mid-single digits, revenue of $1.75 billion to $1.8 billion, adjusted EBITDA of $68 million to $78 million, and adjusted diluted EPS of $0.35 to $0.55.

OneWater Marine NASDAQ: ONEW reported fiscal third-quarter revenue of $531 million, down 4% from the prior-year period, while gross margin expanded and adjusted EBITDA increased as the dealership operator continued to manage inventory, costs and debt during a challenging retail environment.

Net income totaled $12 million, or $0.69 per diluted share, compared with $11 million, or $0.65 per diluted share, a year earlier. Adjusted diluted earnings per share was $0.73, compared with $0.79 in the prior-year quarter. Adjusted EBITDA rose to $38 million from $33 million.

Executive Chairman Austin Singleton said the company’s results reflected continued execution of its strategic priorities despite mixed retail conditions. Revenue declined, but gross margin rose 70 basis points to 24%, supported by favorable product mix and initiatives intended to increase boat gross profit.

“Throughout the year, we have remained focused on the levers within our control, optimizing inventory, expanding margin, and strengthening our balance sheet,” Singleton said.

Sales Decline, but Same-Store Performance Outpaces Industry

Chief Financial Officer and Chief Operating Officer Jack Ezzell said same-store sales declined 2% during the quarter. That compared with high-single-digit declines for the industry in the categories where OneWater competes, based on SSI data cited by the company.

• New boat revenue decreased 2%, reflecting the impact of strategic brand exits completed in the prior year, partly offset by higher average selling prices.
• Pre-owned boat revenue declined 4%, following an 18% increase in the prior-year quarter.
• Service, parts and other revenue fell 13%, primarily due to the sale of Ocean Bio-Chem. Excluding that divestiture, the underlying service, parts and other businesses grew year over year.

CEO Anthony Aisquith said new boat unit volume was lower, though higher average selling prices and product mix helped offset some of the volume pressure. He said customer engagement and boating activity remained healthy, particularly among premium brands, even as the broader retail market remained difficult during the peak selling season.

Aisquith also said the company has continued to manage the quality and age profile of both new and pre-owned inventory, which he described as a competitive strength. Over the past year, OneWater has worked to optimize inventory across its dealership network, efforts that management said improved operational performance and financial flexibility.

Margin Expansion and Cost Discipline

Gross profit was $127 million, with gross margin reaching 24%. In response to an analyst question, Ezzell said the improvement was largely driven by pricing and product mix, including the effect of prior-year brand exits that had weighed on margins.

He said the company’s focus on maintaining the right inventory at retail locations has supported pricing and margins. Aisquith added that inventory conditions across the premium marine market have improved, reducing the degree of “panic selling” and helping stabilize pricing.

Selling, general and administrative expenses declined 5% to $87 million, reflecting earlier cost-reduction actions and ongoing expense discipline. As a percentage of revenue, SG&A decreased slightly, as the benefits of lower expenses were mostly offset by lower revenue, Ezzell said.

Debt Reduction Reaches Target Early

OneWater ended the quarter with $69 million in cash and cash equivalents, while inventory declined to $486 million. Long-term debt stood at $348 million, and adjusted net leverage was 3.7 times trailing 12-month adjusted EBITDA, down from 5.8 times in the prior-year period.

The company had targeted year-end leverage below 4 times adjusted EBITDA and reached that objective ahead of schedule. Ezzell said the progress was supported by cash flow and proceeds from the Ocean Bio-Chem sale, which were used to pay down debt.

OneWater is also actively exploring debt refinancing options and expects to provide an update later in the year, he said.

Outlook Updated for Industry Downturn

Management said it now expects the marine industry to decline by high single digits year over year, based on year-to-date retail trends. The company said it expects to continue outperforming the industry and updated its fiscal-year outlook.

• Dealership same-store sales are expected to decline by low- to mid-single digits.
• Revenue is projected at $1.75 billion to $1.8 billion.
• Adjusted EBITDA is expected to be $68 million to $78 million.
• Adjusted diluted earnings per share is projected at $0.35 to $0.55.

The revenue outlook incorporates current market trends, sales lost from exited brands and the Ocean Bio-Chem divestiture. The company expects the sale of Ocean Bio-Chem to create an approximately $2 million year-over-year headwind to fourth-quarter adjusted EBITDA.

During the question-and-answer session, Ezzell said July was trending toward flat to slightly positive same-store sales. He noted that recent SSI data showed a low-single-digit industry decline, an improvement from prior readings, but said it remained too early to conclude that the market has turned positive.

“I’m optimistic, but we have to wait to see the data and how it pans out,” Ezzell said.

About OneWater Marine (NASDAQ:ONEW)

OneWater Marine Inc NASDAQ: ONEW is a leading U.S.-based recreational boat retailer offering a comprehensive range of marine products and services. Since its public debut in 2018, the company has built a broad network of locations that serve both coastal and inland markets. OneWater Marine focuses on delivering a full-service customer experience, from initial boat selection to long-term maintenance and support.

Through its dealership network, OneWater Marine markets new and pre-owned powerboats and personal watercraft from top manufacturers.

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