QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification No.)
|
|
(Address of principal executive offices)
|
(Zip code)
|
Title of Each Class
|
Trading Symbol(s)
|
Name of Each Exchange on Which Registered
|
||
|
|
|
Large accelerated filer
|
☐
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|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
Emerging growth company
|
|
|
|
3
|
||
5 |
||
Item 1.
|
5 |
|
|
5 |
|
|
6 |
|
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended December 31, 2022 and December 31, 2021 | 7 |
|
|
8 |
|
|
9 |
|
|
10 |
|
Item 2.
|
24 |
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Item 3.
|
36 |
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Item 4.
|
37 |
|
37 | ||
Item 1.
|
37 | |
Item 1A.
|
37 | |
Item 2.
|
37 | |
Item 3.
|
37 | |
Item 4.
|
37 | |
Item 5.
|
37 | |
Item 6.
|
38 |
•
|
general economic conditions, including changes in employment levels, rates of inflation, consumer demand, preferences and confidence levels, fuel prices, levels of discretionary income, consumer spending patterns and uncertainty
regarding the timing, pace and extent of an economic recovery in the United States;
|
•
|
economic conditions in certain geographic regions in which we primarily generate our revenue;
|
•
|
credit markets and the availability and cost of borrowed funds;
|
•
|
our business strategy, including acquisitions and Dealership same-store growth;
|
•
|
our ability to integrate acquisitions;
|
•
|
competition;
|
•
|
our ability to maintain our relationships with manufacturers, including meeting the requirements of our dealer agreements and receiving the benefits of certain manufacturer incentives;
|
•
|
demand for our products and our ability to maintain acceptable pricing for our products and services, including financing, insurance and extended service contracts;
|
•
|
effects of an inflationary environment on the cost of the products we sell and personnel and other expenses that are incurred within our operations;
|
•
|
our ability to finance working capital and capital expenditures;
|
•
|
our operating cash flows, the availability of capital and our liquidity;
|
•
|
our future revenue, Dealership same-store sales, income, financial condition, and operating performance;
|
•
|
our ability to sustain and improve our utilization, revenue and margins;
|
•
|
seasonality and inclement weather such as hurricanes, severe storms, fire and floods, generally and in certain geographic regions in which we primarily generate our revenue;
|
•
|
any potential tax savings we may realize as a result of our organizational structure;
|
•
|
our future operating results and profitability;
|
•
|
our ability to integrate the operations of Ocean Bio-Chem, Inc. (“Ocean Bio-Chem”) with our existing operations and fully realize the expected synergies of the Ocean Bio-Chem acquisition or on the expected timeline; and
|
•
|
plans, objectives, expectations and intentions contained in this Form 10-Q that are not historical.
|
•
|
decline in demand for our products and services;
|
•
|
the effects of the novel coronavirus (“COVID-19”) pandemic on the Company’s business;
|
•
|
other risks associated with the COVID-19 pandemic including, among others, the ability to safely operate our locations, access to inventory and customer demand;
|
•
|
the seasonality and volatility of the boat industry;
|
•
|
global public health concerns, including the COVID-19 pandemic;
|
•
|
general domestic and
international political and regulatory conditions, including changes in tax or fiscal policy and the effects of current restrictions on various commercial and economic activities in response to the COVID-19 pandemic;
|
•
|
environmental conditions and real or perceived human health or safety risks;
|
•
|
our acquisition strategies and our ability to integrate additional marine retailers;
|
•
|
effects of industry wide supply chain challenges and our ability to manage our inventory;
|
•
|
our ability to retain key personnel and the effects of labor shortages;
|
•
|
the inability to comply with the financial and other covenants and metrics in our credit facilities;
|
•
|
cash flow and access to capital;
|
•
|
the timing of development expenditures; and
|
•
|
the other risks described under “Risk Factors” and discussed elsewhere in our Annual Report on Form 10-K for the year ended September 30, 2022 and discussed elsewhere in this Quarterly Report on Form 10-Q.
|
Item 1. |
Condensed Consolidated
Financial Statements (Unaudited)
|
December 31,
2022
|
September 30,
2022 |
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash
|
$
|
|
$
|
|
||||
Restricted cash
|
|
|
||||||
Accounts receivable, net
|
|
|
||||||
Inventories, net
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Property and equipment, net
|
|
|
||||||
Operating lease right-of-use assets |
||||||||
Other assets:
|
||||||||
Other assets
|
|
|
||||||
Deferred tax assets, net
|
|
|
||||||
Intangible assets, net
|
|
|
||||||
Goodwill
|
|
|
||||||
Total other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
Liabilities and Stockholders’ Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
|
$
|
|
||||
Other payables and accrued expenses
|
|
|
||||||
Customer deposits
|
|
|
||||||
Notes payable – floor plan
|
|
|
||||||
Current portion of operating lease liabilities
|
||||||||
Current portion of long-term debt, net
|
|
|
||||||
Current portion of tax receivable agreement liability
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Long-term Liabilities:
|
||||||||
Other long-term liabilities
|
|
|
||||||
Tax receivable agreement liability
|
|
|
||||||
Noncurrent operating lease liabilities | ||||||||
Long-term debt, net
|
|
|
||||||
Total liabilities |
||||||||
Stockholders’ Equity:
|
||||||||
Preferred stock, $
|
|
|
||||||
Class A common stock, $
|
|
|
||||||
Class B common stock, $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Retained earnings
|
|
|
||||||
Accumulated other comprehensive income (loss) |
( |
) | ||||||
Total stockholders’ equity attributable to OneWater Marine Inc.
|
|
|
||||||
Equity attributable to non-controlling interests
|
|
|
||||||
Total stockholders’ equity
|
|
|
||||||
Total liabilities and stockholders’ equity
|
$
|
|
$
|
|
Three Months Ended
December 31,
|
||||||||
2022
|
2021
|
|||||||
Revenues
|
||||||||
New boat
|
$ | $ | ||||||
Pre-owned boat
|
||||||||
Finance & insurance income
|
||||||||
Service, parts & other
|
||||||||
Total revenues
|
||||||||
Cost of sales (exclusive of depreciation and amortization shown separately below)
|
||||||||
New boat
|
||||||||
Pre-owned boat
|
||||||||
Service, parts & other
|
||||||||
Total cost of sales
|
||||||||
Selling, general and administrative expenses
|
||||||||
Depreciation and amortization
|
||||||||
Transaction costs
|
||||||||
Change in fair value of contingent consideration
|
( |
) | ||||||
Income from operations
|
||||||||
Other expense (income)
|
||||||||
Interest expense – floor plan
|
||||||||
Interest expense – other
|
||||||||
Other (income) expense, net
|
( |
) | ||||||
Total other expense, net
|
||||||||
Income before income tax expense
|
||||||||
Income tax expense
|
||||||||
Net income
|
||||||||
Less: Net income attributable to non-controlling interests |
( |
) | ||||||
Less: Net income attributable to non-controlling interests of One Water Marine Holdings, LLC
|
( |
) | ( |
) | ||||
Net income attributable to OneWater Marine Inc.
|
$ | $ | ||||||
Earnings per share of Class A common stock – basic
|
$ | $ | ||||||
Earnings per share of Class A common stock – diluted
|
$ | $ | ||||||
Basic weighted-average shares of Class A common stock outstanding
|
||||||||
Diluted weighted-average shares of Class A common stock outstanding
|
For the Three Months Ended
December 31,
|
||||||||
2022
|
2021
|
|||||||
Net income
|
$
|
|
$
|
|
||||
Other comprehensive income:
|
||||||||
Foreign currency translation adjustment
|
|
|
||||||
Comprehensive income
|
|
|
||||||
Less: Net income attributable to non-controlling interests
|
(
|
)
|
|
|||||
Less: Net income attributable to non-controlling interests of One Water Marine Holdings, LLC
|
(
|
)
|
(
|
)
|
||||
Foreign currency translation adjustment attributable to non-controlling interest of One Water Marine Holdings, LLC
|
(
|
)
|
|
|||||
Comprehensive income attributable to One Water Marine Holdings, Inc.
|
$
|
|
$
|
|
Class A Common Stock
|
Class B Common Stock
|
|||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Additional Paid-in Capital
|
Retained Earnings
|
Non-controlling Interest
|
Accumulated Other
Comprehensive Income (Loss) |
Total Stockholders’ Equity
|
||||||||||||||||||||||||||||
Balance at September 30, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$ | ( |
) |
$
|
|
|||||||||||||||||||
Net income
|
-
|
|
-
|
|
|
|
|
|
||||||||||||||||||||||||||||
Distributions to members
|
-
|
|
-
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||||||
Shares issued upon vesting of equity-based awards, net of tax withholding
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||||||||||
Equity-based compensation
|
-
|
|
-
|
|
|
|
|
|
||||||||||||||||||||||||||||
Currency translation adjustment
|
- | - | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$ |
$
|
|
Class A Common Stock
|
Class B Common Stock
|
|||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Additional Paid-in Capital
|
Retained Earnings
|
Non-controlling Interest
|
Accumulated Other
Comprehensive Income (Loss) |
Total Stockholders’ Equity
|
||||||||||||||||||||||||||||
Balance at September 30, 2021
|
|
$
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$ |
$
|
|
|||||||||||||||||||||
Net income
|
-
|
|
-
|
|
|
|
|
|
||||||||||||||||||||||||||||
Distributions to members
|
-
|
|
-
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||||||
Non-controlling interest in subsidiary
|
-
|
|
-
|
|
|
|
|
|
||||||||||||||||||||||||||||
Exchange of B shares for A shares
|
|
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
|
|||||||||||||||||||||||||
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis
|
-
|
|
-
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||||||||||
Shares issued upon vesting of equity-based awards, net of tax withholding
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||||||||||
Shares issued in connection with a business combination
|
||||||||||||||||||||||||||||||||||||
Equity-based compensation
|
-
|
|
-
|
|
|
|
|
|
||||||||||||||||||||||||||||
Balance at December 31, 2021
|
|
$
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$ |
$
|
|
For the Three Months Ended December 31
|
2022
|
2021 | ||||||
Cash flows from operating activities
|
||||||||
Net income
|
$
|
|
$
|
|
||||
Adjustments to reconcile net income to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
|
|
||||||
Equity-based awards
|
|
|
||||||
Loss (gain) on asset disposals
|
|
(
|
)
|
|||||
Non-cash interest expense
|
|
|
||||||
Deferred income tax provision
|
|
|
||||||
Change in fair value of contingent consideration
|
( |
) | ||||||
Loss on equity investment
|
||||||||
(Increase) decrease in assets:
|
||||||||
Accounts receivable
|
(
|
)
|
|
|||||
Inventories
|
(
|
)
|
(
|
)
|
||||
Prepaid expenses and other current assets
|
|
|
||||||
Other assets
|
(
|
)
|
(
|
)
|
||||
Increase (decrease) in liabilities:
|
||||||||
Accounts payable
|
(
|
)
|
|
|||||
Other payables and accrued expenses
|
(
|
)
|
(
|
)
|
||||
Tax receivable agreement liability
|
||||||||
Customer deposits
|
(
|
)
|
|
|||||
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from investing activities
|
||||||||
Purchases of property and equipment and construction in progress
|
(
|
)
|
(
|
)
|
||||
Proceeds from disposal of property and equipment
|
|
|
||||||
Cash used in acquisitions, net of cash acquired
|
(
|
)
|
(
|
)
|
||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from financing activities
|
||||||||
Net borrowings from floor plan
|
|
|
||||||
Proceeds from long-term debt
|
|
|
||||||
Payments on long-term debt
|
(
|
)
|
(
|
)
|
||||
Payments of debt issuance costs
|
|
(
|
)
|
|||||
Payments of contingent consideration |
( |
) | ||||||
Payments of tax withholdings for equity-based awards
|
(
|
)
|
( |
) | ||||
Distributions to members
|
(
|
)
|
(
|
)
|
||||
Net cash provided by financing activities
|
|
|
||||||
Effects of exchange rate changes on cash and restricted cash |
||||||||
Net change in cash
|
(
|
)
|
|
|||||
Cash and restricted cash at beginning of period
|
|
|
||||||
Cash and restricted cash at end of period
|
$
|
|
$
|
|
||||
Supplemental cash flow disclosures
|
||||||||
Cash paid for interest
|
$
|
|
$
|
|
||||
Cash paid for income taxes
|
|
|
||||||
Noncash items
|
||||||||
Acquisition purchase price funded by seller notes payable
|
$
|
|
$
|
|
||||
Acquisition purchase price funded by contingent consideration
|
|
|
||||||
Accrued purchase consideration |
||||||||
Acquisition purchase price funded by issuance of Class A common stock
|
||||||||
Purchase of property and equipment funded by long-term debt
|
|
|
||||||
Right-of-use assets obtained in exchange for new operating lease liabilities | ||||||||
Acquisition purchase price funded by affiliate financing |
||||||||
Settlement of affiliate financing with proceeds from sale and leaseback |
1. |
Description of Company and Basis of Presentation
|
2. |
Summary of Significant Accounting Policies
|
($ in thousands)
|
Three Months Ended
December 31, 2022
|
|||
Beginning contract liability
|
$
|
|
||
Revenue recognized from contract
liabilities included in the beginning balance
|
(
|
)
|
||
Increases due to business combinations
and cash received, net of amounts recognized in revenue during the period
|
|
|||
Ending contract liability
|
$
|
|
Three Months Ended
December 31, 2022
|
Three Months Ended
December 31, 2021
|
|||||||
Goods and services transferred at a point
in time
|
|
%
|
|
%
|
||||
Goods and services transferred over time
|
|
%
|
|
%
|
||||
Total Revenue
|
|
%
|
|
%
|
3. |
New Accounting Pronouncements
|
4. |
Acquisitions
|
•
|
On October 1, 2022, Taylor Marine Centers with locations in Maryland and Delaware
|
•
|
On December 1, 2022, Harbor View Marine with locations in Alabama and Florida
|
Summary of Assets Acquired and Liabilities Assumed
($ in thousands)
|
Total Acquisitions
|
|||
Accounts receivable
|
$
|
|
||
Inventories
|
|
|||
Prepaid expenses
|
|
|||
Property and equipment
|
|
|||
Operating lease right-of-use assets
|
|
|||
Identifiable intangible assets
|
|
|||
Goodwill
|
|
|||
Accounts payable
|
(
|
)
|
||
Accrued expenses
|
(
|
)
|
||
Customer deposits
|
(
|
)
|
||
Notes payable - floor plan | ( |
) | ||
Operating lease liabilities
|
(
|
)
|
||
Aggregate acquisition date fair value
|
$
|
|
||
Consideration transferred
|
$
|
|
Three Months Ended
December 31, 2022
|
Three Months Ended
December 31, 2021
|
|||||||
($ in thousands) | ||||||||
(Unaudited)
|
||||||||
Pro forma revenue
|
$ |
$
|
|
|||||
Pro forma net income
|
$ |
$
|
|
5.
|
Accounts Receivable
|
($ in thousands)
|
December 31, 2022
|
September 30, 2022
|
||||||
Trade accounts receivable
|
$
|
|
$
|
|
||||
Contracts in transit
|
|
|
||||||
Manufacturer receivable
|
|
|
||||||
Total accounts receivable
|
|
|
||||||
Less – allowance for credit losses
|
(
|
)
|
(
|
)
|
||||
Total accounts receivable, net
|
$
|
|
$
|
|
6. |
Inventories
|
($ in thousands)
|
December 31, 2022
|
September 30, 2022
|
||||||
New vessels
|
$
|
|
$
|
|
||||
Pre-owned vessels
|
|
|
||||||
Work in process, parts and accessories
|
|
|
||||||
$
|
|
$
|
|
7. |
Goodwill and Other Identifiable Intangible Assets
|
($ in thousands)
|
Goodwill
Unamortized
|
Trade Names
Unamortized
|
Developed technologies Amortized |
Customer Relationships
Amortized
|
Domain Names Amortized |
Internally Developed
Software Amortized |
Total
Intangible
Assets, net
|
|||||||||||||||||||||
Net balance as of September 30, 2022
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Acquisitions during the three months ended December 31, 2022
|
|
|
|
|
||||||||||||||||||||||||
Accumulated amortization for the three months ended December 31, 2022
|
-
|
-
|
( |
) |
(
|
)
|
( |
) | ( |
) |
(
|
)
|
||||||||||||||||
Net balance as of December 31, 2022
|
$
|
|
$
|
|
$ |
$
|
|
$ |
$ |
$
|
|
2023 (excluding the three months ended December 31, 2022)
|
$
|
|
||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
Thereafter
|
|
|||
$
|
|
8. |
Notes Payable — Floor Plan
|
9. |
Long-term Debt and Line of Credit
|
($ in thousands)
|
December 31,
2022
|
September 30,
2022
|
||||||
Term note payable to Truist Bank, secured
and bearing interest at
|
$
|
|
$
|
|
||||
Revolving note payable for an amount up
to $
|
|
|
||||||
Notes payable to commercial vehicle
lenders secured by the value of the vehicles bearing interest at rates ranging from
|
|
|
||||||
Note payable to Tom George Yacht Group,
unsecured and bearing interest at
|
|
|
||||||
Note payable to Norfolk Marine Company,
unsecured and bearing interest at
|
|
|
||||||
Total debt outstanding
|
|
|
||||||
Less current portion (net of debt
issuance costs)
|
(
|
)
|
(
|
)
|
||||
Less unamortized portion of debt issuance
costs
|
(
|
)
|
(
|
)
|
||||
Long-term debt, net of current portion and
unamortized debt issuance costs
|
$
|
|
$
|
|
10. |
Stockholders’ and Members’ Equity
|