Good day. Thank you for standing by. Welcome to OneWater Marine's fiscal second quarter 2023 conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I'd like to hand the conference over to the speakers for some prepared remarks. Good morning, 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. Before we begin, I'd like to remind you that certain statements made by management in this morning's conference call regarding OneWater Marine and its operations may be considered forward-looking statements under securities law and involve a number of risks and uncertainties. As a result, the company cautions you that there are a number of factors, many of which are beyond the company's control, which could cause actual results and events to differ materially from those described in the forward-looking statements. Factors that might affect future results are discussed in the company's earnings release, which can be found in the investor relations section on the company's website and in its SEC filings. The company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. With that, I'd like to turn the call over to Austin Singleton, who will begin with a few opening remarks. Austin? Thanks, Jack. Thank you everyone for joining today's call. We delivered strong second quarter results reflecting revenue growth 19% on top of a 34% increase in the prior year period. Sales growth in the quarter was driven by a 23% increase in new boat sales and a 28% increase in service parts and other sales. Same-store sales grew 11%, well ahead of industry reports. Additionally, our parts and service business continues to grow at a good pace despite the stocking that has been occurring at the big box retailers over the past several months. The demand environment remains healthy. Boat show attendance and store traffic have been good, as both new boaters and returning customers are attracted by our innovative offerings. From our perspective, we are seeing a continued change in customer buying cadence as we return to typical seasonality. Lead times and inventories continue to normalize. The customers are shopping around to find their next new boat. We continue to see market share gains as evident by our unit growth that has significantly outpaced the industry. We are pleased to see a return of balanced growth in both units sold and unit prices. With the backdrop of a questionable macro environment, we are being aggressive as we prepare for the summer selling season. We are focused on having the appropriate boat inventory levels as we exit this selling season and roll into 2024 model year. We believe this approach will position us for continued market outperformance. With normalization of inventory and pricing, we saw a modest decline in margins as expected. Gross margin for new boat sales decreased to 23%, down from the peak of 28% a year ago, but well ahead of the 17% range of 2019. Overall, we don't believe margins will return to 2019 levels given the significant progress we have made to strengthen the business over the past few years. Since 2019, we have grown tremendously, both organically and through strategic M&A. We have diversified our offering by building out the parts and service business, which has grown five-fold. The strategic investment we have made to grow and diversify the business will enable OneWater to continue to outperform the industry and maintain our track record of profitable growth. Finally, the acquisition pipeline remains robust. Deals are starting to look more attractive as sellers become more in tune with the return to seasonality and normalized margins. As always, we will remain opportunistic, yet disciplined, as we evaluate any potential transactions. Overall, we feel well positioned to continue driving profitable growth and creating value for our shareholders. With that, I will turn it over to Anthony. Thanks, Austin. I also would like to thank our team members for their efforts this quarter. Despite macro uncertainty and industry noise, our sales team remained active and drove same-store growth to 11%. As Austin mentioned, from where we sit, we are seeing a change in customer buying cadence as the industry returns to normal seasonal cycle. With these cycles, we build inventory in winter months in preparation for the summer selling season. It's also important to note that our inventory has increased due to the acquisitions completed over the past 12 months. I am pleased to report that, as expected, inventory peaked in February and has started its decline to the seasonal low, which normally occurs in September. We believe that carrying higher inventory levels at this point of the year will strategically position us for the summer selling season. Our inventory weeks on hand today is lower than both industry averages and our 2019 metrics. We are taking full competitive advantage of our strong inventory management tools, which we believe will lead us to outpace the industry and further gain market share. Turning to some other trends we are seeing with customers. We continue to see strong interest in larger, more sophisticated boats over smaller value options. The average customer in the smaller boat market is typically more interest rate and price sensitive, as they are more likely to be reliant on financing options to purchase their boats. With this said, we are seeing customer credit readily available even though at higher rates, and banks continue to be diligent in underwriting loans as they have been for over the last 10 years. Our Service and Parts and other business continues to navigate challenging environment while delivering strong growth. As noted last quarter, our distribution segment continued to experience pressure from the industry-wide destocking occurring at big box retailers who built up inventory in response to supply chain delays. We expect inventory across the channel to normalize over the course of the summer selling season, and we are well-positioned to capitalize on the return of normalized demand. This area of the business continues to be an invaluable growth driver for OneWater, and it's a key piece of our diversification strategy. Overall, customers are excited about upcoming boat season and getting out on the water with friends and family. We remain focused on customer experience, strong execution from our team, great inventory management, and flexible business model to guide us through the turbulent waters that may be ahead. I will now turn the call over to Jack to review the financials. Thanks, Anthony. Fiscal second quarter revenue increased 19% to $524 million in 2023, from $442 million in the prior year quarter. This was driven by an 11% increase in same-store sales and revenue from acquisitions not yet included in the same-store base. New boat sales rose 23% to $355 million in fiscal second quarter of 2023, and pre-owned boat sales remained flat at $75 million. We are pleased to see new and used boat sales be comprised of a balance between unit and price growth. The higher margin parts of our business have been a constant contributor to our results. Service, parts, and other sales climbed 28% to $78 million, driven by our contributions from our recently acquired businesses and solid organic growth. Finance and insurance increased slightly, up by 3%. Overall, gross profit increased 3% to $147 million in the second quarter compared to the prior year, primarily due to the growth of our higher margin service, parts, and other revenue, partially offset by the normalization of gross margins on boats sold. As previously discussed, as boat margins normalize, we fully integrate acquisitions and the distribution segment stabilizes. We expect our overall gross margins to normalize in the high 20s, depending on seasonal sales trends and the mix of products sold. Second quarter 2023 selling general administrative expense increased to $90 million from $75 million. SG&A as a percentage of sales was 17%, which was flat compared to the second quarter of fiscal 2022. Our increased participation in boat shows led to an additional cost during the quarter compared to the prior years as we return to a normalized season of events, promotions, and shows. Additionally, higher than historical SG&A costs are anticipated as we continue to grow our parts and service businesses, which has a higher expense structure. These higher costs were partially offset by a reduction in variable expenses like sales commissions that declined due to reduced margins. Operating income decreased 18% to $49 million compared to $59 million in the prior year, and adjusted EBITDA decreased to $52 million compared to $66 million in the prior year. Net income for the fiscal second quarter totaled $27 million or $1.56 per diluted share, from $42 million or $2.54 per diluted share in the prior year. Contributing to this decline was a $10 million increase in total interest expense, which was $14 million in the quarter, up from $4 million in the prior year. This increase is a result of rising interest rates and an increase in the average borrowing on our debt facilities. Turning to the balance sheet. As of March 31st, 2023, total liquidity was in excess of $100 million, including cash on the balance sheet, availability under our revolving line of credit and floor plan credit facility. Total inventory as of March 31st, 2023, was $593 million. With the return of seasonality, our normal inventory build occurs during the winter months and peaked in February as the summer selling season begins. Total long-term debt as of March 31st, 2023, was $463 million. Net debt or long-term debt, net of cash was 1.8x trailing twelve months EBITDA. Our liquidity and leverage position remains in a comfortable range, and we are watching the macro environment closely. Moving to our outlook. We are maintaining our guidance range in anticipation of a continued trend towards seasonality. We are guiding same-store sales to be flat to up mid-single digits compared to the prior year, and expect adjusted EBITDA to be in the range of $200 million-$225 million, with earnings per diluted share to be in the range of $7.50-$8.00 per diluted share. These projections exclude any acquisitions that may be completed during the year. We continue to maintain our current capital allocation strategy. Operating with limited windows, we did repurchase approximately 63,000 shares during the quarter and may make opportunistic purchases in the future. As we navigate the markets moving forward, we will maintain the appropriate balance between internal investments, strategic M&A, share repurchases, and debt paydowns. As always, we are actively assessing strategic targets and will be opportunistic for the right acquisition. We intend to stay disciplined in our approach and drive value for our shareholders. This concludes our prepared remarks. Operator, will you please open the line for questions? Thank you. At this time, we'll conduct a question-and-answer session. As a reminder, to ask a question, you'll need to press star one one on your telephone and wait for the name to be announced. To withdraw your question, press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from Drew Crum from Stifel. Please go ahead. Okay, thanks. Hey, guys. Good morning. The same-store sales performance you posted feels better relative to the industry data and commentary from some of the other marine names we heard from last week. Where do you think the business outperformed? Any color you can share on how fiscal 3Q has started? I have a follow-up. Yeah. I'd say, you know, the team did a great job of execution. You know, we remain very focused on, you know, we've said it a couple of times, focused on making sure our inventory is in the right place as we exit the season. As here, as we're starting off the season, you know, we kicked it off with a bang. You know, the team was focused. We weren't missing deals. We were aggressive in the marketplace, and I think that's a little reflective of our gross margins. You know, customers are out there. You just have to, you know, work hard to earn their trust and earn their business. Okay. Any thoughts on April, how it's gone? Yeah, sorry about that. You know, April is, you know. Look, I don't think that we anticipate this quarter to have a double-digit same-store sales number. Again, we're looking at flat to mid-single digits. You know, so I think it's we're off to a good start, but, you know, we're, you know, just a month into it. So I don't, we don't have a same-store sales number yet for the month of April. There have been many, I went back and looked at several months in the past. April sometimes is a little bit slower than the month prior, than March. But, you know, we had a I will say we had a decent April. Good. Then, just quick follow-up. The service parts and other was just under 17% of sales for the first half of fiscal 2023. Is that a reasonable threshold for the fiscal year, or would you expect to be above or below that in light of the destocking headwind that you noted in your preamble? Yeah. You know, I would like for it to be higher than that. Okay ... the business was firing on all cylinders, it would be higher than that. We continue to make adjustments to the marketplace and working through that. You know, it's a strong business. It just kind of has a little bit of this, you know, supply chain, COVID kind of hangover, if you will, that we have to work our way through. Got it. Okay. Thanks, guys. Thank you. One moment for the next question. Our next question comes from Joe Altobello of Raymond James. Your line is open. Good morning. This is Martin on for Joe Altobello. Quick question. I mean, you mentioned that in the same-store sales growth of 11%, that it was fairly balanced. Could you give a little bit more color? Was unit growth higher or lower of that makeup? Yeah. Unit growth was... You know, it was about mix. I don't have the number right in front of me, but it's about half driven by, you know, units, half driven by price. That's, you know, in normal times, if you will, that's what we like to see in a same-store number is that balance between units and price. We're certainly encouraged by the fact that, you know, this is one of the first with first quarters in a while that, you know, we've seen a decent unit growth. That's encouraging. You know, we'll work to try to keep a balance if we can. Thank you. You mentioned that part of the reason you're so meaningfully outperforming the industry is that you're not missing deals and you're being aggressive in the marketplace, and it's reflected on the gross margins. Should we see that the gross margin decline is because of promotional activity, or what else can we read into that? you know, I think as you look at the margins, I think that, you know, there's a number of factors that go into it, right? You also have mix. you know, this is a time of year when you're maybe selling some larger boats and not as many of the smaller boats, which carry, you know, larger boats tend to have a lower margin as a percent. you know, but the team is focused on outpacing the industry in everything that we do. you know, to the extent that we're ahead of industry, I don't know that that's atypical. I think that's something that we certainly drive towards every day. Jack, I think one thing that we ought to mention, too, though, is that, you know, we took the proactive approach as we started to see industry inventories build. I mean, Brunswick came out and they either said 37, 34. We're hearing from Wells it's closer to 36 weeks on hand as an industry. Jack, what is our same store sales weeks on hand? Like 18? Yeah. Yes. Yeah. I think we took the approach. A couple of different things here. We took the approach that we want to be really clean of inventory come model year change in July. We wanted to be a little bit more aggressive on the new boat sales margin to make sure that we are extremely clean of inventory, way outpacing the industry when we get into model year change. You know, we feel that's important as we roll into 2024, so we don't have any excuse selling or deep discounting to unload, you know, old units. That was one thing that we did. You know, and the other thing that I look at is we were pretty confident in being able to hold a high, you know, those high twenty. We said, you know, close to 30% gross margin. You know, with the lower new boat margins, it pulled it down to 28, which we're comfortable with because like Jack just talked about a minute ago, our P&A is not hitting on all cylinders. It's hitting on a lot of them, but when it starts hitting on all of them, it'll creep that up. I think that it's important to us to try to maintain that double-digit EBITDA margin. It's encouraging to me to see that we can bring the new boat sales margin down some and maybe even pull it down a little bit more if we need to get aggressive to keep inventory clean. Because inventory costs at 7.5% are a lot different than they are at 2.5%. We just want to be super clean as we get into the 2024 model year. Got it. Thank you. It's very helpful, and congratulations on the great quarter. Thanks. Thank you. One moment for the next question. Our next question comes from Fred Wightman of Wolfe Research. Your line is open. Hey, guys. I just want to follow up on that last line of questioning. I mean, if you look at, call it mid to high thirties weeks supply across the industry, unusual seasonality, do you think that the industry is being as diligent about inventory ahead of the model year changeover later this summer, early fall? Or is that something that you guys are worried about? I don't think we're worried about it. I mean, I think that, you know, coming out of the boat shows, I think that you had some people that were trying to maintain those COVID margins. I think now they're probably saying, "Oh, well, maybe we should have been a little bit more flexible and collected some deals." We just don't know. You know, if you go back and look at 2019, I think the industry is still below where inventory levels were in 2019. You know, the more comforting thing is it's all current and not a lot of dated inventory out there. You know, I think with a, with a decent spring or a good spring rolling into the first month of summer that, you know, the industry gets into a good spot. I mean, like Jack said earlier, you know, we all kind of. It wasn't just us. We're pretty sure that everybody will peak from an inventory build in that February, early March. Everybody's kind of peaked, and now everything's going to start working its way down. We just want to be a lot better than everybody else. That makes sense. If you just look at some of the public comments from OEMs and retailers and you guys as well, there just seems to be this real divergence in terms of market outlook, both in terms of what happened as you progressed throughout 1Q or your guys' second quarter and even into April as well. Does that level of, I would say, maybe disagreement, is that surprising to you? Do you think that it can kind of be explained by differences in mix and geographic exposure? No, I mean, I think when you look at it, like I follow some of that stuff. I didn't see a whole lot of... You know, I think everybody's somewhat on the same pace that we are. I mean Brunswick was very positive. You know, Malibu seemed very positive. Same with Polaris. When you kind of maybe refer back to MarineMax, you know, they might have a different outlook than we do going forward, and that might be a little bit of the model mix. I mean, that could... We don't know that, but it could be that, you know, we're, you know, our focus is, let's just say 40 feet and down, and their focus tends to be above that. That, that forecast might not be as good as what we're seeing currently right now, you know, in the industry. I mean, our big boat segment's doing really, really good right now, but it's, you know, it's Jack, what is it? Less than 10% of our sales revenue? Our boat sales revenue? Yeah. It's Yeah. It's around 15. yeah, it's a nice piece, but it's a smaller compared to the overall. You know, we feel that it's not as interest rate effective if you're buying a $150,000 boat as if you're buying a $700,000 boat. Well, also I think that's the key that I was just gonna say, right? Is I think we tend to be in the premium space with the brands that we sell and represent and, you know, that customer is a little more resilient, a little less price and interest rate sensitive. That's fair. I guess just to summarize it, right? As you guys move throughout the fiscal second quarter, is it safe to say that you are more optimistic on calendar 2023 retail? Is it kind of in line with how you thought the year would shake out? I think it's in line with what we said at the end of last quarter. I mean, we think we're moving into a seasonality. You know, we can't control or we don't really know what the macro is gonna hold. I mean, every time you look at something, it says, you know, we're in a recession, and we've heard that for the last, you know, three years or 10 years, 12 years. You know, we do see it slowing down at some point. Right now, I believe that as you move into boating season, it's really hard to kill the momentum, especially when everybody has a short boating season. You know, is that boating season Memorial Day to Labor Day? Is it from when the kids get out of school to the kids start back? It's a condensed boating season, and we're right on the front of that, and it will take a lot to kill momentum going into that. What happens in the back half of the year is kind of, you know, that's what we're I would say we're a little bit more concerned or we're watching is what happens once you get through mid-June or July 4th and it becomes, you know, you're not in pushing into the season, you're kind of on the back part of the season or going into the off-season, what does demand do based off the macro that we can't control? Austin, that's exactly why we are doing what we're doing with our inventory, so making sure it's clean. Makes sense. Thanks a lot, guys. One moment for our next question. This question comes from Noah Zatzkin of KeyBanc Capital Markets. Your line is open. Hey, good morning. This is Alex on for Noah. Just wanted to loop back to gross margins real quick, maybe more specifically on the pre-owned side. Can you help us understand this sequential step down versus the first quarter? Is that all a function of the consignment softness there, or is there something else to consider? Yeah. Yeah. I'd say, within pre-owned there's definitely was some mix shift that was driving margins down. like you mentioned, a reduction in consignment as well as some reductions in brokerage. So those kind of affected, you know, that overall pre-owned margin, you know, a little bit. When we look at pre-owned, right, we tend to look to target, you know, a similar margin on trades as we do new boats and, you know, keeping it within, you know, I'll say a couple of points. You know, to some degree we did that with our trades, but then that mix shift kind of, you know, caused that total pre-owned margin to be, you know, a little bit further off, if you will. Got it. Thank you. Then maybe switching gears here. Just curious if you can add any color on, you know, where we're at in the distribution destock with retailers. Is that something that you see, you know, taking another quarter or two, or have you seen activity pick up a little bit? Just curious where that's at. I think it'll flush out over here over the next, you know, 60, 90 days. You know, that destocking is gonna come in when people start really using their boats. When you get to whatever the season is in particular geographies, is it, you know, Memorial Day to Labor Day? Is it when the kids get out of school to when the kids go back? You know, people are starting to prepare now. If they're not already boating, they're in the boating mindset to be getting ready so that when the weather breaks... I mean, we've had a, you know, extremely cold and wet, snowy, you know, Midwest, you know, cold, rainy, and windy in the Southeast. About the only boating market right now that is probably kicking on all cylinders from a weather perspective is Florida. That really should start to shake out over, I would say, the next 60, 90 days. You know, the hope is that that kicks in, you know, by the time we get into our Q4 of the year. Perfect. Thank you. That's all for me. Thank you. One moment to the next question. This question comes from Craig Kennison of Baird. Please go ahead. Your line is open. Thank you. Good morning. Austin, I think you mentioned this earlier. I just wanna ask you to reiterate, what is the rate for the cost to finance inventory today versus what it was maybe last year? Yeah, Craig, this is Jack. I'll jump on that. I mean, I'd say we're right now, at about 7%. A year ago, we were probably around 3. I mean, it's more than doubled, year-over-year. That combined with, you know, obviously, inventory normalizing and, you know, larger outstanding balance. The same question on consumer rates. What's the typical rate a consumer might see today versus last year? Yeah. There's a lot of variables in that, but I would say that, you know, it's not quite doubled, but it's close to that. You know, you were looking at Anthony, I might be off on this, like mid-4s a year ago to probably like low to mid-7s right now. You know, right at that 8%. It depends on dollar and credit. Yeah. Most of it is around 8% now. Yeah. The beginning is correct. Okay, that's helpful. Then, you know, I guess we're hearing about tighter credit conditions across the economy in the wake of these bad bank headlines. But why don't you think you're seeing tighter credit in your markets, if that's the right interpretation of what you said? Well, you know, this, you know, it's funny because most of the banks we deal with, you know, it's really four major banks that we deal with on the financing. We have, like, I think, almost 14 different lenders, but four major banks take the majority of that. They keep it on the books. It's some of their highest spreads. It's good business. You know, we've looked at this, you know, 'cause we've been hearing a lot of that. We've been worried about, you know, boat financing credit going away. I mean, it's not any tougher than it was a year ago on the underwriting. You know, you still have to, you know, give every 2008, 2009 put disciplines in place that are still held today. You know, what we're seeing is that the banks love this business. I mean, our average Beacon score is north of 790 on, you know, $800 million worth of financing. You know, our delinquency rate runs like 0.01%. You know, it's strong, good paper, and they don't package this up and sell it. They keep it on the bank's balance sheet, and I just think it's really good. You know, they underwrite it to a certain level, and they like the business. I think it's the margin spread from what I've been told, the margin spread for the banks on marine financing is really good, and they just, they like it. We're not overly concerned with credit tightening as far as the bank saying, "Okay, we're not financing boats anymore." We're more concerned with the consumer going, "I'm not paying that." That's been a little bit reflected in our profitability on the F&I side. We're not making as much of a spread as we used to. We're having to work that a little bit more. I think the other piece, Austin, is the customer, right? Yeah. This is a highly affluent customer who has a, you know, FICO score of, you know, 790, 800. It's, you know, those are the people who they wanna give credit to. That's great. Okay. Thanks, guys. One moment for the next question. As a reminder, to ask a question, press star one one on your telephone and wait for your name to be announced. Our next question comes from Michael Swartz of Truist Securities. Your line is open. Hey, guys. Good morning. Just wanted to distill down some of the comments I think you were making around both new and pre-owned boat margins in the fiscal second quarter. It sounds like there were some things maybe in terms, you know, boat show incentives and just some of the nuances to, you know, the pre-owned mix in the quarter. Am I hearing that maybe sequentially we should expect some improvement into the third quarter, or is that am I reading too much into that? Yeah, you're probably reading too much into that. I mean, you know, typically this Q1 calendar, our Q2 second boat show season is usually our lowest margins of the year when you get into those boat shows. I think that, you know, we looked at it and decided, we will continue to push this. It's more important for us to have really good inventory levels, the correct inventory levels, the correct inventory as we roll into 2024. You know, if we can maintain the new boat margins or even slightly go down in new boat margins and maintain that high twenties gross margin as the P&A continues, you know, maybe that destocking comes back, we can get a little bit more aggressive. It's important to us to get to that double-digit EBITDA margin, you know, as close to 30% gross margin as possible. We'll work new boat margins in order to, you know, try to maintain that and keep that with being as aggressive as we can because we don't want carryover inventory. Inventory expenses is much higher than it's been in the past, as we've just talked about, and now it starts to eat. I mean, we're rolling off a free floor plan as we roll into the month of May, it's gonna get, you know, to where it eats. We wanna be clean. I wouldn't read into margins going up. I mean, it may be stabilizing where they are, you know, give or take a half a point up or down. Okay. perfect. Then just on the M&A front, I mean, we've heard that, you know, on the RV side, there's been a lot more inbound traffic volume, a lot more willingness from sellers. Given, given the conditions in that market, which, I mean, the marine market obviously appears to be healthier than that, are you seeing any signs of sellers coming to the table over the last several months, maybe in a bigger way than they have previously? It's all driven by the same thing that, you know, when we did the IPO, we're talking about an incredible industry where the best of the best have no exit strategy and are starting to get into those years where they're starting to look for what's possible. You know, I would say the marine industry overall seems to be a lot stronger than the RV. I mean, I think RV's already reverted to, you know, pre-2019 margins where, you know, we're still seeing elevated margins and think we will continue to see elevated margins over 2019. It hasn't picked up any more or less. Our pipeline is decades deep. You know, adding to it is not really something we wanna do. It's, you know, one of the biggest issues, Mike, I have is how do you tell somebody that's 68 years old, "We love this idea. Can we talk to you in about 10 years?" I mean, that's not very comforting, but that's where we sit right now. I wouldn't say that anything over the last six months has changed the cadence or the inflow. It's, it's pretty steady the way it's been for the last two years. Okay, great. Thanks. That's it for me. Thanks, Mike. Thank you. That concludes our Q&A segment. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.