Good day. Thank you for standing by. Welcome to the OneWater Marine Fiscal Q3 2023 Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a Q&A session. To ask a question during this session, you'll need to press star one one on your telephone. You'll hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Please go ahead. Good morning, welcome to OneWater Marine's Fiscal Q3 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 to those described in the forward-looking statements. Factors that might affect the 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 filings with the SEC. The company disclaims any obligation or undertaking to update the forward-looking statement 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. I would like to start by commending our team for doing a tremendous job driving increased sales and maintaining flat same-store sales in this dynamic and changing environment, especially as we lap a comparable period of double-digit same-store sales growth in the biggest quarter of the year. The selling environment deteriorated in Q3. However, our team rose to the challenge. In the face of double-digit declines in industry unit sales, we delivered flat unit sales and same-store sales. With our sales pace outperforming the industry, we believe this results in increased market share for OneWater. We also maintained a very healthy inventory level of 17 weeks on hand. The industry average is approximately 28 weeks. As it continues to build, some believe the industry inventory levels will grow to 35-40 weeks on hand. This will undoubtedly lead to a more promotional environment and put further pressure on new boat margins. Our proactive approach of reducing inventory early will pay dividends in future quarters by reducing floor plan costs and other carrying costs. More importantly, going forward, we will have a good supply of 2024 inventory, which had a very modest price increase this year. We believe this puts us in a competitive position compared to an industry overloaded with 2023 models headed into the fall and winter. We are increasingly cautious as demand signals are pointing towards a retail slowdown. Traffic at the height of the season slowed, as evidenced by declining industry units in what is considered the prime selling season. As we move out of the summer into the fall, customers may delay their purchases, especially because inventory is plentiful and there may be better deals to be had in the spring. In addition, with interest carrying costs continuing to rise and expected to stay higher for longer, this will cause a significant headwind for certain industry participants. As margins and interest rates are starting to settle into the new normal, we must start to look inward, mainly at SG&A, to get back to our target EBITDA goal. While our SG&A costs as a percentage of revenue are reasonable at 16%, we have identified several areas to help offset these gross margin declines and outsized interest costs. Given all those factors, we are taking a very cautious approach to our outlook and are lowering our full-year guidance. Our business is resilient, we are taking prudent action to ensure that we can capitalize on the new normal and emerge stronger. We believe that our strategic approach to exiting the season with clean inventory positions us well for the quarters to come. Additionally, the M&A deal pipeline is getting more and more attractive, and there could be some steals to be had in the future. We are looking at all levels of the business and are confident that by accepting the short-term pain of the industry adjustment, we have set course for a solid future and attractive free cash flow generation. With that, I will turn it over to Anthony. Thanks, Austin. Our teams remained active during the selling season to drive solid revenue growth in a challenging market. Results were driven by double-digit growth in pre-owned boat sales, supported by increased trade-ins over the last few quarters. For customers looking to finance their boat purchases, credit remains widely available, in line with what we've been seeing throughout the year. As rates go up, the average customer does become a little more interest rate sensitive, which led to the flat finance and insurance income year-over-year. Our parts and service business continues to grow nicely. Sales are up 23% in the quarter and 38% year-to-date. Our dealerships are executing well, and the distribution business is starting to turn the corner on the destocking that has occurred at big box retailers over the last several months. While it has not had a material impact on our results this quarter, we are beginning to see orders from these retailers trickle in and expect them to ramp up this winter. Moving to inventory, as Austin mentioned, we are hyper-focused on carrying appropriate inventory levels through the end of the selling season and into the seasonally slower winter months. Inventory as of June 30, 2023, is down modestly compared to the end of Q2, and we expect the seasonal decline further. We are continually operating at a 17 weeks of inventory on hand, compared to an industry average of 28 weeks. We will enter the 2024 selling season with a fresher inventory mix than many of our competitors. This, coupled with a more moderate price increase from the manufacturers, we can be extremely competitive as the 2024 models will be easier to sell than prior year models. While we are comfortable with our inventory position, some industry information suggests that inventory and overall dealer channel has built up past 2019 levels. As we move forward, we believe this will give us a competitive advantage against the other dealers. The higher carrying costs and the interest expense for dealers with aged and non-current inventory creates a significant drag on their earnings and cash flows. Thus, we believe our proactive approach will benefit us significantly in the long term. As we have said before, there are many levers to pull as we adjust to the new sale levels and margin expectations. We are focused on adapting our SG&A expenses to support the current operating environment. We also expect the SG&A expenses to continue moderating as we further integrate acquired parts and service businesses. We remain focused on executing our playbook and positioning OneWater for continued success in any environment. I will now turn the call over to Jack to review the financials. Thanks, Anthony. Fiscal Q3 revenue increased 4% to $594 million in 2023, from $569 million in the prior year quarter, yielding same-store sales that were flat for the quarter. New boat sales decreased 1% to $372 million in the fiscal Q3 of 2023, and pre-owned boat sales increased 14% to $111 million. Service, parts, and other sales continued to positively impact our results, climbing 23% to $92 million, driven by the contributions of our recently acquired businesses and dealer operations. Overall, gross profit decreased 13% to $159 million in Q3 compared to the prior year, driven by the normalization of gross margins on boats sold. Gross profit margin fell to 27% as a percentage of total sales. As expected, the investments made in service, parts, and other businesses have softened the decline in overall gross margins as boat margins normalize. Third quarter 2023, Selling, General and Administrative expenses increased to $93 million from $88 million in the prior year. SG&A, as a percentage of sales, was 16%, which was flat compared to the fiscal Q3 of 2022. The increase in SG&A expense on a dollar basis was primarily driven by higher expense structure of our acquired parts and service businesses, as well as higher advertising expenses compared to the prior year, which supported our increase in sales. These increased costs were mostly offset by a variable cost structure, where expenses have started to adjust down with the declining gross margins. As the industry normalizes, our flexible SG&A expense structure is a lever we can pull to drive future profitability. Operating income decreased to $60 million compared to $88 million in the prior year. Adjusted EBITDA was $60 million compared to $95 million in the prior year. The decline in adjusted EBITDA was due to the reduction in boat gross margins and same-store sales being at the bottom of the expected range, combined with higher floor plan borrowings and related interest costs. Net income for fiscal Q3 totaled $33 million, or $1.95 per diluted share, from $64 million, or $3.86 per diluted share in the prior year. Contributing to this decline was an increase in interest expense, which was $17 million in the quarter, up from $4 million in the prior year. This increase is the result of rising interest rates and increased average borrowings on our debt facilities. Turning to the balance sheet. As of June 30, 2023, total liquidity continues to be in excess of $100 million, including cash on the balance sheet, availability under a revolving line of credit, and floor plan facility. Total inventory as of June 30, 2023, was $573 million and has increased year-over-year as the supply chain has come back online and as we integrate our recent acquisitions. Our inventory remains healthy at approximately 17 weeks on hand, and we expect inventory will continue to decline sequentially until we begin the seasonal build in the fall. Total long-term debt as of June 30 was $458 million. Adjusted net debt or long-term debt net of cash, was 2.2 times trailing twelve months EBITDA. Our liquidity and lever position remains in a comfortable range. We continue to use cash to pay down our floor plan, which has the highest interest rate, providing us with financial flexibility as needed. Moving to our outlook, we're updating our guidance as a result of the accelerated normalization of the industry. We're guiding same-store sales to be flat to the prior year and expect adjusted EBITDA to be in the range of $160 million-$170 million, with earnings per diluted share to be in the range of $4.45 to $4.70 per diluted share. These projections exclude any acquisitions that may be completed later this year. We will continue to maintain our current capital allocation strategy, supported by our strong free cash flow generation. The M&A pipeline is robust. Deals are beginning to look very attractive. As we continue to navigate this dynamic environment, we remain focused on positioning OneWater for the continued long-term success and maximizing value for our shareholders. This concludes our prepared remarks. Operator, will you please open the line for questions? Yes, thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile our Q&A roster. Our first question comes from the line of Joe Altobello of Raymond James. Please proceed. Thanks. Hey, guys. Good morning. I guess the first question, you know, for you, Austin, and, and sort of a big-picture question, you know, maybe where do you see pricing, and margins going, you know, next year across the industry, particularly if inventory continues to build? If I look at your new boat margins today, yes, they're down, but they're still above where we were, you know, pre-COVID. I guess, you know, do you think we ultimately go back there at some point? Yeah, thanks, Joe. Pricing, you know, that's one, that's one thing we're encouraged about. Pricing doesn't seem to have risen that much from the manufacturers this year, so it's a pretty modest price increase from the majority of our manufacturers, probably 3% or less, and a lot of that is content or engines. We're, we're super optimistic that the 2024, as far as the price increase, is going to give us a little bit of running room, and let us be a little bit more competitive if this inventory stays as high as it is on the 2023s. You know, margins, we didn't expect this, what, you know, what we saw in this last quarter. It really started right before Memorial Day, and I kind of have stepped back and go, you know, why did it happen so fast? I think the realization kicked in for the majority of the industry when they got that April interest bill from, you know, the, the floor plan manufacturers in, in late May, and they saw how much they were going to be spending every month on inventory, carrying it through, you know, the summer and into the fall, and that's when deep discounting came. Now, what we have seen is some, some promotional activity from some manufacturers, which is starting to come on board, which will help maybe ease some of that downward trend of margins. You know, I would say our, our, our comfort level, where they maintain where they are right now is, is kind of low. I mean, I, I would suspect that margins are going to deteriorate a little bit more. You know, the, the hope would be that, for us, is that you do get some promotional activity out of the manufacturers, but also that we get this inventory cleaner, and then we start selling 2024s at a higher margin against 2023s, because that's a, that's a pretty easy sell when you, when you match those two up with the customer. You know, in-inventory is still extremely scary. You know, we're, we're comfortable with where ours is. You know, the industry is, is high, and, and it's gonna, it's gonna take a while for it to flush through. You know, but there's positive, positive trends for July. You know, we had a good July. We're, we're hearing some preliminary results from out of Wells Fargo for what the industry did in July, so maybe, maybe it'll trend down, and it's just going to be a, a thread in the needle is going to be kind of what we're going to have to do over the next, you know, six to nine months. Got it. Very, very helpful on that. Maybe a second question on M&A. You sort of alluded to a, you know, a very attractive pipeline. It's been a while since you've done a dealer acquisition, for example. Help us understand how you're thinking about, you know, your M&A strategy, you know, here in, in late, late fiscal 2023 and maybe into fiscal 2024? Yeah, we, we've gone back and kind of looked at our deals, and I mean, it's, it's, it's kind of a, a math equation that's, that's so high level. If you go back and look at the deals that we've done in the past, and you just took them for what they were before we did them, and you adjust their pricing, just the revenues up for the price increases that we've seen on new boat sales. Remember, the majority of the deals that we end up doing, we, we're looking at them on the top 90%, 95%, 85% of their revenue is coming from new boat sales. It's very new boat sales dependent. They're really, really good at that, and everything else is just kind of all the other business operations get drug along with that. When we went back and looked at that and adjusted sales with old margins, you, you kind of put in, you know, what the curtailments were going to be, what the interest carry was going to be. You know, if you weren't making north of 5% as a, you know, net profit, you're going to run out of cash. We're kind of sitting back going, okay, well, you know, this is not, not good, so there, there could be some good deals. We've already started to look at a couple of deals where it's almost like tossing the keys. It's like: If you'll take over my inventory obligation and give me a lease, it's yours. We think that'll become a little bit better and, you know, a little bit more available to us as we work through this winter, because we haven't seen, you know... We're, we're at around 8%, I think, on our floor plan, Jack. Is that right? Yep, that's correct. Yeah. The majority of the industry is north of 10. You know, that's going to eat pretty good as we go through the winter. You're going to have some of these dealers that have already, you know, thinking about selling, that are, you know, I hate to use the word aged out, but have good-- you know, have great businesses. I don't know if they're going to really want to fight through another, what cycle we're going to go through. It's, it's going to be interesting, interesting over the next six months from an M&A perspective, where we're already starting to see those deals where, hey, you take the inventory obligation and, you know, give me a lease, and here's my business. That's, that's going to come our way. Maybe there's a way that we can start working with some manufacturers, because I don't want all that old inventory. Hopefully, you know, we can partner up with some manufacturers that help us do that, especially if the dealer's in trouble. Next six to nine months on the M-M&A side might be in, you know, interesting. Thank you. One moment for our next question. This question comes from Michael Swartz of Truist Securities. Please proceed. Hey, guys, good morning. Maybe just one for you, Jack, quickly. The flat comp store sales in the quarter, what was the composition of that units versus pricing? Yeah, that was, units were just ever, you know, slightly negative. Price was slightly positive. Okay. That does sound like you, you gained market share, but it, it, it also sounds like, at least directionally, you're talking about things getting worse in the quarter, and particularly since when you gave guidance in early May. I mean, we've, we've obviously seen the SSI for, for May, June, and your commentary for July seems pretty positive. I guess, is this just more of a, you know, One you know, pricing promotions gotten worse? Two, you guys are, are planning to take it on the chin a little bit more than you maybe thought and, and, and, and reduce inventory, so that you're in a better environment going into fiscal year 2024. Did I, did I frame that okay? 100%. 100%. I mean, this, this is, this is the competitive landscape going into Memorial Day, you know, you could feel it. Then by the time we got into June, you were fighting, you were scratching for every deal. It, it got to the point where a customer would come in, you would, you would talk them, talk to them, build a relationship, give them a price. They'd leave. They'd come back three days later with a, with a competitor, with a much better price. You would, you know, try to, try to work them on features and benefits and sell them and give them a new price. They'd leave for four or five days, they'd come back with a cheaper price. I mean, it was really, you worked every deal till there was no blood left, and, and that's, that's 100% what we saw. Yeah, Michael, I, I would also say, you know, as we exited last quarter, right, we had a, a double digit, same store, that we achieved in the quarter, you know, and, and felt it was going to also pull back. I, I think coming in flat was, was, you know, below our, our expectations at the time. Like, like Austin said, I mean, that the, the market slowed, price, sensitivity escalated, and, you know, we, we were, we were fighting to keep it, you know, unit sales roughly flat. Okay. It sounds like in terms of overall inventory, it doesn't sound like you're, you're, you're uncomfortable with where you sit necessarily today with 17 weeks on hand, but it sounds like you're more kind of, targeted on or concerned around maybe model mix within that inventory. Do you have any metrics or targets, you know, by the end of your either fiscal year-end or calendar year-end of, you know, where you want to be in terms of maybe either weeks on hand or just percentage of your new inventory that's, you know, model year 2023? Yeah. Yeah. That's, that's what we're focused on. Jack, Jack, you take that. Yeah. Let me say this real quick. Let me say this real quick. Inventory weeks on hand is not really the me-- that's, that's the metric that we measure to compare to the industry, we are getting truckloads of 2024s from the manufacturers already. Manufacturers are screaming for orders, we're already getting a lot of 2024s in. That 17 weeks on hand, if you look at the inventory that's actually costing us money, you know, that's the 2023s inventory. As long as that continues to run down fast and the, the weeks on hand, say, is 17, but it's because we're receiving 2024s, that's fine with me because that really doesn't have a carrying cost to us. Jack, you, you want to fill in anything there? Yeah, no, I'd say, I'd say we're very comfortable, and the mix of that inventory, 2023s versus 2024s, is really key. What happens as we, as we roll out the rest of this calendar year, right, the, the 2023s are, are, are still, still feel very current when I'm, I'm selling it in 2023. When we get into the springtime, which a lot of dealers are going to be carrying 2023s into, the, the spring boat shows, some of the winter boat shows, you know, we're, we're going to have our 2023s inventory, you know, pretty lean and, as, as we work through it over the next several months. You know, it's that composition that makes a huge difference. You know, and, and, and Multitude as well, right? When, when Austin was talking earlier about pressure on, on other dealers, as that inventory gets older, they're having to pay down the, you know, the floor plan balance on that boat in a period of time where there's low cash flows. Having to pay that 10+% interest, plus curtailments on that boat in November and December, when sales are seasonally slow, you know, will put pressure on them to, you know, to liquidate boats at, at lower prices. We're, we're, we're comfortable with our position. We just, you know, not 100% sure where the industry will be. Okay. That, that's super helpful. Thank you. Okay. Thank you. One moment for our next question. This question is from Kevin Condon of Baird. Please proceed. Hi, good morning, everyone. Thanks for taking my question. I wanted to ask a little bit about if you're seeing anything across different categories or, I guess, value versus premium parts of your offerings. I think earlier this year, you noted that the, the premium end was, was faring a little bit better, and I just wanted to ask if that was still the case. Then on a related note, if you've been seeing any pushbacks from customers around just the affordability of boats, given, you know, the last two, three plus years of price moves and, you know, just if there's anything that manufacturers or dealers are doing to try to address those affordability concerns? Thanks. Yes, I, I, I'll jump in on the price. I mean, I mean, as far as categories go, I mean, the SSI data, I think, is the best way to look at that. I mean, we're not seeing anything that's different than what the SSI data is showing from, you know, a category. I mean, you know, you can look at it and say, you know. One, one thing I would say is we're a big pontoon dealer, so pontoons have been very good for us, where I think the SSI data shaves that down a little bit. You know, you just look at the SSI data, and, and we're kind of in line with that from a segment perspective. The premium value, that's a really tricky deal because what is considered premium? We, we consider the majority of our brands premium for where we're selling them. Then there's also this, this, this thought that premium is just bigger. You know, it's just like, you know, it's premium 80 feet and bigger or 60 feet is bigger, so it's size. When you look at a 25-foot pontoon boat that's, you know, $200,000, we consider that premium. Premium has held up well, but really what held up better than anything is the boats that have a longer build time. If you can build a boat in 8 weeks versus a boat that takes 22 weeks to build, because it's a more complicated build, there's less supply, so that demand is still there, and those are the units that are still sold out into the future. We still have that. It's the ones that they can build quickly, and I don't even know quickly. It's the ones that they can, you know, that are really kind of like production set of, you know, or shorter build time that are still premium, but they're, they're the ones that we've got more inventory on. Premium is definitely holding up because it's got a longer build time on the bigger stuff. I mean, you know, we're not seeing, Anthony, I mean, it's just kind of generic across all brands and segments right now. I mean, it's not, not easy. Yeah, I would say the premium stuff is holding up. To answer this question, the premium stuff is holding up very well. The entry-level stuff and the people that are more cautious for financing are being. They didn't go away. They're just being a little more cautious, with the rates have risen quite a bit, but they're still selling. They haven't shut off by no means, but our premium inventory is still selling very well. Real quick on the pricing. I think we're, we're seeing the manufacturers understanding that by the, the price increases we got this year. You know, like I said, we have the majority of our, our manufacturers are up 3%, and there's content in on that 3%, so we almost feel like the majority of them are flat or close to flat. That's a good thing, you know. Yeah, boat pricing over the last three years, that's, that's tough. Thank you. Thank you. Our next question, please. One moment. This is our last question coming from Griffin Bryan of D.A. Davidson. Please proceed. Hi, this is Brandon Rollé with D.A. Davidson. Just one question. You had talked about, seeing increased promotional activity from the OEMs. Could you talk about, you know, what you're seeing in terms or how that's evolved maybe from the, you know, beginning of the summer to where we're at right now, and maybe from both a retail and wholesale incentive perspective, given, you know, what's going on in terms of, dealer inventories? Yeah, I mean, I, I think they've all kind of come out with their, with their same, you know, stuff they've done in the past. I mean, it starts off with like, hey, here, here's special rebates for boats, but if you sell one, you got to buy one. Like, you get this discount, but it's on the ordered boat. So if you have a 2023 in stock and you sell it and you order another 2024 to replace that, you get a, you know, $2,000, $5,000, $8,000 discount off the 2024. That's kind of where it starts. Then we've seen it morph into, you know, the, the, the more incentives just to move current inventory. You know, I think Malibu, you know, came out with their, Anthony, it's not a layaway program, but similar to that. I think it's been super successful. You know, they're all starting to kind of go back to where they were pre-COVID when inventories were built, and they needed to move that up, and it's just kind of a transition where it starts off light, and it's kind of like you sell one, you buy one, and then it's like, okay, we need to accelerate that. Then it's just discounts. I expect that to continue to ramp up as you get into the fall and winter season. I think a lot of the manufacturers' orders are lean right now. It's because people are looking at that interest statement from the floor plan companies and going, "Oh, my gosh, you know, that's a big number, and we've got to get rid of this inventory. Okay, great. Just one follow-up. I know, you have exposure to the pontoon industry, but also the ski/wake category, and I know the SSI data there has been a little weaker. Could you comment on what you think has been, you know, going on in that portion of the industry? Yeah, I mean, I, I think a little bit of it's price-driven. They've gotten, they've gotten pricey. I also think the reverse drive, you know, when you, when you go and you look at, you know, a Malibu or a MasterCraft or a Correct Craft, it, you know, I'm just making up numbers, $300,000, and you can go buy a Cobalt with a reverse drive that, that has, you know, a lot of the same abilities. It's not a competitive ski boat. If you're, if you're going to be wakeboarding, surfing, and skiing, you know, 85% of your time, that buyer is still buying the, the inboards, the towboats. If you're only doing it 20% or 30% of the time, or 40% of the time, and everybody likes it, those reverse drives are, are really kind of starting to kick in and, and really are, are relating to consumers because there's, there's different, you know, it rides a little bit better in rough water, it's a little bit faster on the top end, and it's less expensive. When you, like, look at the Cobalt reverse drive, I mean, we're doing-- those boats are almost, they're hard to keep in stock right now. You know, that, that's been a little bit, I think, of the decline, and then pricing has a little bit to do with it also. Austin, I just would also add on, on the pontoon segment, right. That's a really wide segment, with, you know, some, a lot of units and value units that we don't necessarily participate in. I think our, our higher-end, pontoon consumer is probably a little more resilient, and, we're doing a little bit better in that category than maybe the, SSI numbers suggest. Okay, great. Thank you. Okay, thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.