Q4 2020 OneWater Marine Inc Earnings Call
At this time all participants are in a listen only mode. After the speakers presentation, there will be a question and answer session.
A question during the session will be the press star one on your telephone if you're acquiring further assistance. Please press Star then zero.
No actually it's your first conference call Mr. Johnson, you may begin Sir.
Good morning, and welcome to one water marine fiscal fourth quarter and full year 2020, <unk> earnings conference call I am.
Joined on the call today by Austin, Singleton, Chief Executive Officer, and Anthony Asquith, President and Chief operating Officer. Please.
Before we begin I'd like to remind you that certain statements made by management in this mornings conference call regarding water water marine and its operations maybe 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 statement.
Factors that might affect future results are discussed in the company's earnings release, which can be found on the Investor Relations section on the company's web site and in its filings with the EPS you see.
The company disclaims any obligations or undertaking to update forward looking statements to reflect circumstances or events that occur. After the day. The forward looking statements are made except where required by law and with that I'd like to turn the call over to Austin, Singleton, who will begin with a few opening remarks.
Thanks, Jack and thank you everyone for joining todays call.
We delivered record results in our first year as a public company, highlighting our strong execution and flexible business model.
I'd like to thank our team and customers for their unwavering commitment to one war.
Total your 2020 revenues surpassed 1 billion for the first time in one waters history, which was an increase of 33 per cent compared to the prior year.
Same store sales increased 24% more than doubling our expectations.
Hi margin finance and insurance revenue grew by walking 41 per cent compared to the prior year and will continue to be a major focus with a lot more room for growth in the years ahead.
We continue to gain sustainable market share in all our business segments.
At the same time, our full year 2020, adjusted EBITDA of 83 point.
3 million nearly doubled from the prior year, mainly due to our superior execution and strong business model.
Importantly, our M&A execution is second to none.
The synergies and growth we have been able to realize from our recent acquired stores have significantly contributed to our 2020 results.
Bolstering our full year.
Results was a strong fourth quarter, where we continue to take market share and meet heightened retail demand.
In the fourth quarter revenue increased 30% and same store sales increased 25% year over year comfortably above our expectations.
This increase comes on top of a 20 per cent same store sales increase in the fourth quarter of 2019.
Our highly efficient sales process innovative retail technologies and strong manufacturing partnerships enable the team to continue to deliver strong results.
In 2020, the marine industry experienced a surge of first time buyers, which has expanded our addressable markets fish.
Fisher has shown us that many of these customers will stay in the boating lifestyle for years to come.
Our customer focus team and huge selection of products will keep them coming back to one water for older boating needs, which will support further margin expansion.
Finally, our industry, leading digital platform, along with our dynamic pricing strategy will continue to enhance operations of our dealers and serve as a clear competitive advantage.
Inventories remain at historically low levels, but they have begun to build since the end of the fourth quarter.
Despite supply chain constraints sided biofilms in recent weeks, we do expect inventories to build further throughout the slower winter months setting us up for a fresh lined up in inventory for the spring selling season.
Our strong OEM relationships or a differentiator and our inventory planning tools allow us to have a great visibility into.
Boats on order or in production this enables us to.
Engage with the customers presale inventory that is in bound to all locations, creating an enormous savings on floor plan interest inventory maintenance and general carrying cost.
M&A remains a core component of our long term growth strategy and our acquisition pipeline has continued to build on pace with our historical trends.
We're seeing the size of the opportunities increased as well just like with our latest deal Tom George you got in <unk>, which is one of our largest acquisitions today.
We are excited about the return of this critical growth component of our business.
Our proven system of employing a disciplined and prudent approach to identify top dealers and high performing markets and then systematically capitalizing on improvements and synergies will continue to advance our position as an industry leader.
Our results this year were outstanding and we're excited about 2021.
The ramp up in our M&A activities and the strong execution across our dealers will continue to support our growth.
Well the evolution of our high margin business segments, and heightened focus on technology innovation will enable us to further gain market share.
We believe all these efforts will support meaningful value for our shareholders as we move into 2021 and beyond.
With that I will turn it over to Anthony to discuss business operations.
Thanks Austin.
With more and more families turning to boating as a lifestyle demand.
Demand continued at unprecedented levels in our fiscal fourth quarter. Our team continue to provide superior customer service to keep our growing customer base out on the water Park.
Our custom CRM, along with their inventory management tools operational dashboards have helped us outperform the industry by selling boats across our dealerships moving inventory to different locations to meet the demand levels and providing more visibility into inbound inventory from Oliver manufacturers.
With critical data at their fingertips, our sales team is able to seamlessly integrate.
The surge of new customers into the one water family and continued to outperform the industry.
During the quarter, we made some key leadership changes to double down on our digital strategies and foster future growth.
Name day, witty and marine industry relative rather in a long time, one water teammates as our Chief Technology Officer people focused on expanding our book digital infrastructure with integrated marketing to enhance the customer experience and to provide tools for the new one water team to facilitate growth.
In addition, we leveraged our deep bench of leadership talent committed number of organizational realignments to position business leaders closer to our customers, which enhances our ability to capitalize on near and long term growth opportunities.
The boat show season is shaping up to look very different this year with shows operating under significant restrictions, others being postponed and the number being cancelled altogether.
We're taking the opportunity to host a more intimate VIP or smaller local events at our stores, where customers can have a more personalized interaction with our product and our team.
And our results have been outstanding.
As for traditional boat shows we recently attended the Fort Lauderdale Book show, we scaled back our presence at the show and our team operated under restrictions and safety measures in chartered some challenging weather yet our sales were still higher than the prior year. Additionally, we saw sales increase in the weeks, leading up to and following the show at certain locations it's been.
He customer shop locally versus vs traveling to Fort Lauderdale.
The testament to our ability to leverage our highly effective digital platform to maintain our momentum.
As part of our long term strategy, we remain focused on continuing to develop our high margin businesses.
With restrict we have have provided stability for our company our service parts and other revenue increased 9% in the fiscal fourth quarter during bike too.
New service locations that recently went into operation in Georgia and Alabama.
But instead insurance revenue continued to increase during the quarter. It was up 41% year over year, the ethanol as a percentage of sales has increased to 3.6 percentage sales.
We remain committed to expanding this line of business and identifying opportunities to increase penetration rates and the number and types of products that are available to our customers.
And with that I'll turn the call over to Jack to go to the financials in more detail.
Thanks, Anthony we delivered strong results in the fourth quarter.
With revenue, increasing 30% to 271 million and 2020 from 208.8 million and 2019 and same store sales increased 25%, primarily driven by an increase in the number of units sold as well as an increase in the average unit price of new and pre owned boats.
This same store sales increase is on top of a 20% increase in the fourth quarter of 2019.
During the fourth quarter, we continue to meet the heightened demand for new and free up those across our business as customers continue to choose voting to enjoy the outdoors with friends and family and safe socially distance way.
New boat sales grew 29% to $186.8 million in the fiscal fourth quarter of 2020 and pre owned assets sales increased 47% to 56.2 million as Anthony said, we continue to focus on growing the higher margin segments of our business that offer attractive market share growth opportunities.
For near and long term fine.
Finance and insurance revenue increased to 7.7 million in the fourth quarter of 2020 and revenue from service parts and other sales increased to 20.3 million.
Gross profit increased to 64.1 billion in the fourth quarter compared to $46.4 million in the prior year driven by an increase in new and pre owned sales and higher service parts and other sales gross profit as a percentage of sales increased to 140 basis points to 23.6% compared to.
22.2 in the prior year.
With the significant increase in sales the fourth quarter 2020, selling general and administrative expenses increased to 39.7 day from 32.6 million in the prior year. However, as you know as a percentage of sales declined 100 basis points to 14.6% from 15 point.
6% in the prior year the decline in ESG day as a percentage of sales was mainly due to the increased sales.
And the cost reduction actions enacted in response to cover my team.
Operating income climbed 29% to 16.5 million compared to $12.8 million in the prior year driven by higher sales, partially offset by higher EPS, you know expenses and the $6.8 million charge related contingent consideration on a 2019 acquisition.
Adjusted EBITDA rose, 108% to $23 million compared to $11 million in the prior year.
Net income totaled $6 million in the fiscal fourth quarter of 2020 up 18.9% from 5 million in the prior year keeping in mind that the prior year did not reflect our post IPO organizational structure and was not subject to income taxes.
And our first full year as a public company our team delivered record results for the year for the first time in one waters history full year revenue exceeded $1 billion, an increase of 33% compared to the prior year, highlighting the strength of our team and the resiliency of our business model.
Same store sales increased 24%. This is on top of a 12% increase in the prior year.
New and free up both sales increased 36% to 717 million and 34% to 206 million respectively.
On the higher margin side of our business finance and insurance revenue increased 41% to 36.8 million contributing directly to our bottom line.
Full year 2020 gross profit increase.
37% to 235.5 million gross profit as a percentage of sales increased 60 basis points compared to fiscal 2018, driven by the increased volume of new and pre owned units sold and an increase in average unit price compared to fiscal 2019.
Full year 2020, operating income surged, 47% to 78.5 million compared to $53.3 million in the prior year net income increased 30% to $48.5 million and adjusted EBITDA climbed 80 per cent to 83.3 million.
Now turning to the balance sheet at September Thirtyth 2020, we had 66.1 million of cash and 30 million of availability under our revolving line of credit and in excess of 10 million available our flow flat total.
Total inventory at September Thirtyth, 2020 was $150 million compared to 277 billion at September Thirtyth 2018.
This substantial decrease is primarily due to demand for our products and the production shutdowns at our OEM partners last spring.
As Anthony mentioned, we are confident that we are able to meet current retail demand.
In a timely manner as we leverage our strong partnerships and our industry, leading inventory management technology.
With the lower levels of inventory and higher inventory turns we anticipate floor plan interest expense to be down significantly and 2021.
As previously announced in September we closed on the public offering of 3.2 million shares of class a common stock at $20 per share.
The majority of the share where secondary but the company did issue 425000 primary shares and received approximately 8.1 billion of proceeds after underwriting discounts and commissions.
Proceeds from the transaction will be used for general corporate purposes, including expansion of the business.
Looking ahead to 2021, we are seeing strong momentum continue and expect to see same store sales to be up approximately 5% with adjusted EBITDA to be up low to mid single digits. This excludes acquisitions completed during the year.
As Austin mentioned, our M&A pipeline is strong and we are returning to the cadence of transactions that we had prior to our IPO. We are excited to continue to grow in the current business and scale, our proven strategies across newly acquired dealerships.
This concludes our prepared remarks, operator would you. Please open the line for questions.
As a reminder to ask question you need to press Star one on your telephone to withdraw your question just price to kind of keep.
Please standby only composite can a roster.
And our first question comes from the line of Craig Kennison from Baird you may begin.
Hey, good morning, Thanks for taking my questions.
I wanted to start just with guidance a point of clarification.
Does guidance include the Tom George Yacht deal or would that be additive.
That would be additive non.
Thank you.
And with respect to the 2021 outlook. It seems many investors fear that this is as good as it gets from an industry perspective in that industry boat demand could return to normal in 2021, I guess Austin, how do you weigh all the macro factors from.
Lapping the pandemic to the surge in first time buyers and overall growth in the industry.
Two political events things like that to get you comfortable that your growth outlook is is achievable.
Craig I think one of the things that we looked at.
When we were kind of when we got to your income was really what was the contribution.
To this increase from just our business model you know if you kind of take the acquisitions that did not mature you know we talk about needing 24 months with an acquisition to really you know feel those synergies and get that up that.
That push that we're looking for we had several that were in their first year are just coming up on their 20 force you know.
Moving on in this calendar year. So we look at you know.
Thinking and feeling that a good portion of our our results. This year were because of improvements or normal improvements to the acquisitions that were maturing that we'd already closed on so we know we got a coded bought we know that drove new buyers into.
The into the space. It brought people that had been on the sidelines that might have had an older boat back into this space and I think Anthony probably tells that the best when he talks about how you know boating today from an industry perspective, and how you use your bowden and.
What the experiences is completely different than it was 10 years ago, and we feel you know two things one we still got acquisitions that were bringing on line on that we're going to get a push from those we still got a lot of own internal stuff from our same store sales that have a lot of upside.
But then you still you can take that Kogut bump and say, okay, well, we're not going to get that bump again, but you got all these people that have come into the market that really probably just bought a boat by book and after they spent a seasoned out on the lake we fielded a lot of them are going to make adjustments this year.
You got a young couple that comes the end it thinks that they have to have Steve.
In order to deal with the water they buy ski boat. They spend you know Tom out on the Lake and the wife's getting beat the heck Im back because it's rough on the lake and they're not Steve you know they've got little kids, that's just what they call.
And then they see another couple pass them at a pontoon boat that's got a full drink that's not even spilling over into the room in there like we want to do that you know, but didnt is the flip side to that people come into by upon too, but we think that there's going to be this just push for the new boat owner, that's gotten excited about voting that might trade for might.
Change segments, then we've got you know going back to we've got all these things internally that we looked at on our same store sales were there's improvement and we're just pretty comfortable where we are I mean that I'm excited about this coming year.
You know the inventory being on the tighter side is going to help us with margins I think that you know I, let Anthony and Jack jump in if they want to add to that but I think we're pretty confident with our our forward looking 2021, and where we're going to end up.
That's terrific. Thank you.
Then my last question was just on boats per sale Dot com seems like a very interesting strategy didnt really address much of it in your prepared remarks, but you know if you would just tell us how that works when that platform might open and what kind of investment you'll need to make in order to achieve some scale in that.
Platform.
So the easy part of the investment the investment is more time than dollars.
Where we sit right now we have the first three pieces of that we're actually beta testing or testing in our with our sales staff right now we have the.
Part of the way that the.
The trade evaluation or the pricing tool works.
Hi, Anthony how long have we been doing that it's been about four weeks three weeks.
Yeah about six weeks so far.
Six weeks on that one and then so we're hoping to have that rolled out.
You know.
Optimistically I would I would say before the end of the year, but I think it's going to be ended the first quarter of next year before we get it outage, it's very very important that when we roll it out that everything worked perfectly on it because if you roll it out and it doesn't work right then it kind of Mike died in the water and that's not what we want and so we're running it internally right now.
Now and having all the sales guys use the tools that will be rolled out in this first phase.
So that we when we do roll that out it's a flawless.
Flawless execution, but I would say I would.
Conservatively I think we're still 60 days before it rolls out.
Sounds good I'll jump back in the queue. Thank you.
Thank you. Our next question comes from the line of Mike's Force from true as Securities you may begin.
Hey, good morning, guys interest just to follow up on the on the guidance.
The guidance for 2021.
With the mid single digit comp store growth and low to mid single digit adjusted EBITDA growth.
Implying some sort of.
Margin de leverage at the bottom end of that range is there any any reason for that or any any investments that you're making that would drive drive that.
Yeah, I think one of the things that you think year over year. You know, we don't have a fully baked public company costs into the into the prior year.
Thats, certainly going to be a bit of a headwind for us and.
That's probably the largest item I would say kind of going into the expense structure and probably going to have.
Have the effect of seeing seen a tick up you know a a little bit as a percentage of sales.
But you know we were just trying to I think be conservative and you know putting a model together.
Okay, and then maybe just given the state of.
Boat shows being cancelled or postponed or scaled back in over the next nine to 12 months, maybe talk about some of the things that you're doing it in a little more detail in terms of customer interaction and you're you're a digital platform.
Yes, well I don't think we were doing our secret sauce.
Well give our secret a lot of way isn't.
But a lot of events in house event.
Mr. Much safer environment for the customers and give them reasons you know we're blessed to be you know partnered with 72 different brands that ever.
Every year are coming out whats just simple my gosh products. So we have a lot to talk about yeah, that's pretty easy once you're in boating like Boston was saying earlier about the you had a margin you might want to go to an inboard boat each.
Each one of these manufacturers each year are coming out with some Oh my gosh stuff. So it's pretty easy to get people to come in for some private events.
And then one more if I may just just in terms of the quarter fourth quarter.
As they look at the different revenue line items in a strong double digit growth in both.
New and free on both sales, but ethanol I was up less.
Than two percentage year over year.
Why was there that disconnect in the quarter was there something specific.
Yeah, I think a little bit, but you got to remember we were up for the full year, it's up 41%.
Keeps being something that we drive hard, but if you look back to last year.
Last year.
In the quarter was actually up 80 per cent sick.
Significantly outpacing.
The sales increase of that kind of played into the the effort there, but no. It's still a sales in area, we feel very strong about and we feel that the growth of F., an EIS and outpace our same store sales.
Okay. Thank you.
Thank you and once again that star a wonderful question Star one.
Our next question will come from the line of Joe Altobello from Raymond James You May begin.
Hey, guys. Good morning, just wanted to get an update on on the overall M&A environment. Tom George was I think your first acquisition in quite some time. So is it fair to four acquisitions that you're still the target or could.
Could we see some catch up in 2021 cents.
Last year was relatively quiet.
Yeah, I think our cadence will probably stay the same one thing that might change a little bit on the cadence is just the size of the deals.
They're going to be on the larger side.
Pretty much everything that I've got close right now.
It is bigger than than what our average would be.
But I don't think we're going to be able to get more yet and it's not that we don't want to it's just so you know we've talked about perfect execution.
And it's not that.
We cannot have one of these not worked perfectly because you know the credibility that we have with the manufacturers into support and then then still being our number when lead generator you don't want to have a deal that goes bad or something go wrong, where.
Were you lose that manufacturing support and an end to end closing the deals the hardest part for US closing the deals right now is the integration of the software and the 45 days prior to closing to 45 days after but it's also scheduling the software company.
Company to come in and do the integration and the training so that that's a little bit of our challenge, but I mean, we're going to have a you know I'm glad that I used to be jackets told me out of the house and said for me to go do deals again. So we're excited about this year, we've got a great pipeline.
You know we're in a good position that if something were to happen would one deal. We got deals you can slide right into that that place.
We're running some dual tracks right now just to make sure that we have a good solid year of acquisitions and you know we've been on the sidelines for a while and it was nice to get this Tom George Yacht deal done because.
Because we've been talking with Tom per for for a number of years and it's exciting and some of the things that we're going to be able to do with this this actual acquisition from a strategic standpoint are exciting to us.
That's very helpful. Thank you and then maybe kind of a follow up on that on the inventory side.
Exactly makes and you're right Uh huh.
You're right, that's down almost 50% year over year.
How long do you think it'll take you guys to get back to what you perceive to be ideal inventory levels and do you expect to operate at a higher turn.
Permanently going forward.
Yeah, I'll start and then yes, I want to start on this one we're never going to get back to that level, we don't ever want to get back to that level. Okay. I mean, we we see you know that.
The inventory is you can look at inventory and look at your European nail and you can see the cost of inventory. But then you can also look at inventory and look at your PNM and you don't see the cost of inventory I mean, you know moving about 10 times on the yard you don't really keep up with that on the personnel and you know so less inventory higher turns.
You know to us means lower costs higher margins and you know the manufacturers are doing the best they can all of our manufacturers you're doing a phenomenal job getting this boats there.
You know I know they are killing themselves, they're looking to ramp up production, but from where we sit I think that the way that Anthony has spent the last four years developing his inventory tool and fine tuning that we're going to be able to operate well.
Higher revenues are higher boat sales with less inventory.
Because the forecasting tools and the stuff that he is put into place in the way that we're now getting the data that we need to make the right decisions will allow us to forecast even better than we have in the past. So I don't think we'll ever return back to that.
As we scaled the company you know the inventories we will of course increase but we want to operate with a you know if you asked me I'd like to get free more turns a year I don't think thats possible, but that's what we're going to work towards in the software and what Anthony and his team have really gotten fine tune in the day.
Data that we're getting today will allow us to continue to make that even stronger.
Gotcha, all costs and you pretty much stole most of my Thunder I think the only thing I would ask why did that.
[laughter] is that we you know subsequent to year end, we have seen inventories began to build as we expected. So average over the last month and a half you know shipments have been coming in we're in a seasonally slower cycle and stores are starting to to build inventory on her life.
Great. Thank you guys. Good luck.
Thank you.
And our next question comes line of Mike's Force from true as Securities you may begin.
Hey, guys. Thanks for letting me hop back going here and just wanted to follow up on a comment you made regarding the fiscal year 21 outlook. You said you saw the momentum carry into.
You know the the early part of the year and since no one's asked the question any color or quantification you can provide just in terms of what you saw on a comp store basis in October maybe maybe even quarter to date as we sit here today.
Yeah, I would say, it's you know it's it's it's moving.
At a good pace similar to what we've seen in recent months you know there's still it's a seasonally obviously, it's a seasonally slower period.
So sales are slowing as we go through the month of October November and then December is the smallest month of the border.
And with that kind of being it's also our smallest quarter of the year. So it's it's you know just from a seasonality perspective, it's one of those where it's tougher to gauge you know a full year number for your forecast this off of.
The smallest quarter so.
I think from a seasonality perspective, I think that's going to be one of the challenging things as we look to model out the year, we feel we feel good about our annual model what what's unclear about is you know how they the quarter's lined up and you know just with you know Q2 low.
Last year was a.
A lower quarter because of shutdowns encoded Q.
Q3, obviously it was a a large.
A large quarter for us but yes.
It is really unclear as to how you know boat shows will play into Q2 results.
As well as Q3 results.
Okay, great. Thanks, a lot that yeah.
Thank you once again, ladies and gentlemen that started one for questions. So.
One moment for questions.
And I'm not showing any further questions at this time, ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
[music].