Q1 2021 OneWater Marine Inc Earnings Call
Ladies and gentlemen, and thank you for standing by and welcome to the one water Marine Inc. Phil.
First quarter 'twenty 'twenty, one earnings conference call at this time, all participants are in listen only mode. After the speaker's presentation there'll be a question and answer session.
I ask the question, though on the session you will need to press Star then one on your telephone. Please be advised on today's accomplished might be reported if you require any further assistance. Please press star then zero I would now like to hand, the conference over to your hosts a day, Jack Israel Chief Financial Officer. Please go ahead.
Yeah.
Good morning, and welcome to the one water marine fiscal first quarter 'twenty 'twenty, One earnings conference call I'm joined on the call today by Austin, Singleton, Chief Executive Officer, and Anthony Asquith, President and Chief operating Officer.
Before we begin I would like to remind you that certain statements made by management and this morning's conference call regarding one water 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 b.
And the company's control, which would cause actual results to differ materially from those described and the forward looking statements.
Factors that might affect future results are discussed in the company's earnings release, which can be found on the investor Relations section of the company's website and and as filings with the SEC. 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 and with that I'd like to turn the call over to Austin, Singleton, who will begin with a few opening remarks Austin.
Thanks, Jack and thank you everyone for joining today's call.
We delivered tremendous results and the first quarter of 2021, including a 39% increase and revenue compared to the prior year.
Standard gross margins and significantly increased earnings.
Same store sales increased 38% and the quarter.
On top of a 17% increase and the prior year and a 25 per cent increase last quarter.
Leveraging our efficient sales process innovated innovative digital platform and key relationships with our manufacturers.
Realized growth across all market segments.
Year over year, and new boat sales increased 48%, while pre owned boat sales grew 18%.
Our high margin financing and insurance income also saw strong growth of 38%.
And service parts and other revenue rose, 32% compared to the prior year.
Overall gross margin surged 360 basis points with margin increases and increases across all categories. The tremendous growth during the quarter can be attributed to our ongoing investment and our highly effective digital platform CRM and.
And innovative sales process.
Additionally, the combination of our inventory management systems and dynamic pricing strategy continued to lay the foundation for future outperformance.
On the M&A front, we had a very busy start to the physical year, completing three of the largest acquisitions and one waters' history, and putting more than 80 million to work for our shareholders.
As we have successfully done many times in the past we are laser focused on implementing our tried and tested integration playbook. This translates into increasing sales and EBITDA.
Let me briefly recap these new dealerships first Tom George Yacht group enhances our presence on the West coast of Florida, and expands new and pre owned boat sales as well as yacht brokerage and service and parts.
Walker Marine group marks the largest dealership acquisition on our company's history, adding five retail locations and southwest Florida to serve is established and growing customer base with new and pre owned boat sales quality service and parts as well as finance and insurance services and.
And lastly, but certainly not least.
And you're only guiding center expanded the company's presence in the yard and category supporting our diversification strategy, including higher margin service and repair offerings.
We have completed three acquisitions and mom with our expectations of doing two to four deals per year since the pandemic hit and the U S. Last March we have kept our M&A pipeline full and remain opportunistic.
We were fortunate to be able to frontload. These acquisitions, which we expect to have a significant impact on our physical 'twenty 'twenty, one results and long into the future.
As we continue to execute on our long term growth strategy.
We are confident that through the integration.
And all of our recent M&A activity continued investment and our innovative digital technology and the evolution of our higher margin business segments. We will further drive market share growth and sustained and meaningful value for our shareholders with that I will turn it over to Anthony to discuss business operations.
Thanks Austin.
The agility of our sales and marketing teams drove higher than normal sales for the first quarter. Our team hosted several smaller VIP events at our stores, where customers were able and have a more intimate interaction with the products and sales team and the absence.
I've organized boat shows and.
These events, we showcase the incredible new and exciting models introduced by several of our key manufacturer partners. The new models launched in multiple categories, including saltwater fishing.
Ski and wake boats run abouts and pontoon boats.
All of these new models and innovative design and capabilities and they were all well received by our customers.
We also use the absence of boat shows to our advantage by focusing on selling both locally and instead of preparing for and attending multiple shows across the country. This resulted and significantly higher sales and what is seasonally the lowest quarter of our fiscal year.
We continue to lean on our strong relationships with manufacturing partners and our nationwide inventory to ensure we have the boats that our customers want.
We do expect inventory to build slowly through 2021 with the expectation that it should start to normalize and early 2022.
Our inventory management system and operational dashboards continue to give us great visibility into the business and inventory, including boats on order or and production.
With inventories tight across the industry, one water has a significant competitive advantage as our digital tools provide our sales team with the intelligence on exactly what inventories available.
And we're coming available and where the inventories located.
This allows us to engage with our customers and pre sell boats that are inbound to any of our locations. Additionally, the lower inventory levels and higher turns result, and a reduction of floorplan interest inventory and maintenance and general carrying costs.
Sales and January remains elevated we continue to lever our state of the art.
Digital platform to provide intelligence on how the changing dynamics are impacting the seasonality of boat sales.
We will use this intelligence to help drive strategy moving forward, while continuously improving and outperforming for the benefit of all our shareholders I will now turn the call over to Jack who will talk about the financials in more detail.
Thanks, Anthony we delivered exceptional results and the first quarter with total revenue, increasing 39% to $214 1.002 million 21 from $153 7.002 million 20. This generated an increase in same store sales of 38% which was primary.
Really driven by an increase and new unit sales as well as a modest increase and the average unit price of new and pre owned boats sold.
We continue to see increased demand even during the off season from previous boaters returning to the water New boat sales grew 48% to $151 8 million and the fiscal first quarter of 2021 and pre owned boat sales increased 17% to $38 six.
We remain focused on growing all access of the business to further outperform the industry and sees additional market share as we move further into the year finance and insurance revenue increased 38% to 6 million and the first quarter of 2021 and revenue from service parts and other sales increased 30.
And 2% to $17 7 million compared to the prior year.
Gross profit increased 63% to $52 4 million and the first quarter compared to $32 2 million and the prior year driven by the increase and margin on new and pre owned sales a shift and the model mix and the size of both sold and higher average unit price.
Additionally, higher finance and insurance service parts and other sales contributed meaningfully to the increased gross profit.
Gross profit as a percentage of sales increased 360 basis points to $24 five per cent compared to 29% and the prior year.
With the increase in sales and the.
First quarter of 2021, selling general and administrative expenses increased to $34 9 million from $28 3 million. However, SG&A as a percentage of sales declined 210 basis points to 16, 3% from 18, 4% and the prior year.
Decline and SG&A as a percentage of sales was driven by our ability to leverage our existing expense structure to support the increase in revenue and reduction.
Selling expenses, including boat shows partially offset by event based marketing and increased public company expenses.
Operating income surged to $16 1 million from $2 7 million and the prior year driven by the higher sales expanded gross profit and SG&A as previously mentioned.
And as a result, adjusted EBITDA rose to $16 7 million compared to $1 2 million and the prior year.
Net income totaled $11 8 million or <unk> 71 cents per diluted share and the first fiscal quarter of 2021 compared to a net loss of $1 1 million and the prior year.
The increase was primarily due to the operating performance of the company.
Turning to the acquisitions, we completed during the quarter the combined $83 $9 million purchase price included the real estate associated with Raphael Yachting Center and was funded by $47 6 million of cash $30 million from the company's revolving line of credit and $2 1 million and a seller note payable.
And $4 $2 million and estimated contingent consideration.
Subsequent to the quarter and the company expanded its term loan credit facility by $30 million and used the proceeds to pay off the revolving line of credit that was utilized to fund. These recent acquisitions.
This expansion provides the company with $30 million of future liquidity, and addition to $26 million of cash on the balance sheet as of December 31, 2020.
And additional availability under the company's floor plan facility.
Total inventory at December 31, 2020 was $196 million compared to $313 8 million and December 31 2019.
This substantial decrease was primarily due to the sales.
Increase we achieved last year combined with the manufacturing delays as a result of the COVID-19 pandemic.
As a result of improving manufacturing environment and seasonality inventory was up $46 million or 30% sequentially from the quarter ended September 32020, we.
We continue to prioritize normalizing the supply chain by utilizing our key relationships with manufacturers and leveraging our competitive advantage stemming from our industry, leading inventory management technology.
And as often mentioned our M&A pipeline remains robust even after completing three acquisitions in December we're excited to be back on a regular pre IPO cadence of transactions and are focused on integrating these phenomenal businesses into the one water family.
Looking ahead for the full fiscal year 2021, we continue to expect same store sales to be up approximately mid single digits.
Three acquisitions that closed and the first quarter of 2021 will contribute significantly to our full year results and we now anticipate adjusted EBITDA to be and the range of $95 million to $100 million and diluted earnings per share to be and the range of $4 to $4 20.
Excluding any additional acquisitions that might be completed during the year.
This concludes our prepared remarks, operator, please open the line for questions.
Thank you.
As a reminder to ask a question you would need to press Star then one on your telephone to let's call. Your question. Please press the pound key.
Our first question comes from the line of Craig Kennison with Baird. Your line is now open.
Hey, good morning, Thanks for taking my questions. Jack you just mentioned your guidance.
And the first quarter same store sales was up 38% youre going to face some really challenging comps and the second half I'm just wondering if you see.
Any quarters, where you might have like a negative same store sales rate and orders still to get to that mid single digit.
Relative growth for the full year, I mean, youre starting off on such a high note I'm wondering how you feel the rest of the year will unfold.
I mean, we're it's a we've spoken many times about the June quarter, and a 44% comp that we have to Oh go on top of a I wouldn't say I'm forecasting to be negative and the June quarter, but that's probably more a flat quarter compared to.
Being up significantly this quarter and just also right and yet you got to remember this quarter is the smallest quarter of the year I suspect next quarter. If business continues we should have nice comps right, we're up against a negative 2% comp last year and so.
The comp and the March quarter, it's certainly easier for us to comp, but I think when you rollout the numbers and you are if you have good comps and the first half and then some lower comps and the back half I think you get to that mid <unk> mid single digits without any quarter going negative.
Oh that's helpful. Thank you and then just as it relates to the acquisitions can you confirm that.
That all of the acquisitions were paid for in fiscal Q1 or was there any cash outlay and Q2.
No. It was it was all in.
All in Q1 it was December.
<unk>.
Tom George closed on the first of December and then Rossiya Ali and.
Walker Marine both closed on December 31.
And so all the cash was out as of December 31.
Got it and then Austin.
We're integrating three deals now could you just remind us all of of what your integration process is what do you like to achieve and the first let's say 100 days of and integration and then how stretched is your team today, given you've got three integrations ongoing.
Such that you probably need to wait until those are integrated before you move on to the next.
Consolidation target.
Well I mean, Tom Doerr job was done on December one so when we it was fully integrated.
On December one.
And as far as the you know the system and all that stuff. So you know continuing on with Tom George now, it's just starting to get the processes of.
You know the our CRM process.
F&I and start ramping up the synergies and the things that we can bring to the table. So that wasn't really good shape. So we don't really have three on going right. Now we really only have walker because rocky always is more of a boat yard service storage area.
It's on a different system right now, we will be bringing that over to eight two to our current platform but.
But it's done a little bit different. So there is some tweak and we have to do to that and just because it's a different animal. So we're not having any you know our team to stretch and they're always stretch because there's always improvements we can do not only with acquisitions, but our internal business that these people also working on when where and when they are not integrating so we're in a pretty good spot I mean Jack.
Probably can.
And <unk>.
Expanding on that a little bit more if you want some more on Greg, but it's we're in and we're in a good spot yes, one thing I'd point out Austin as you know we are in a seasonally slower time. So some of our admin staff, who can chip in and service and parts staff, who often are heavily involved with.
Integrating acquisitions and they they do have the time right now to assist with these transitions.
Transitions.
I just would also point out that you know Tom should both Tom George and walkers and they were on our ERP system.
Lightspeed and so that the transition for them is a bit easier because it's we're not training them on how to use the system. We're just converting over their system.
You're always a little bit different like like Austin mentioned, but fortunately with them. They are more higher dollar lower volume.
Type transactions right people aren't necessarily coming in for a.
$200 oil change at.
And at that facility they are coming in for a $200000 paint job and so.
Building back up that that service process.
And just doesn't have the volume may be of a traditional dealership, but the team is actively working on it and we will have them all on integrated on our system here and in very short order.
Great I'll get back in the queue. Thanks.
Thank you. Our next question comes from the line of gel on some Bello with Raymond James Your line is now open.
Hey, guys good morning.
Just wanted to circle back on on the EBITDA guidance for a second so your prior guidance.
<unk> was up low to mid single digits off of last year's $83 million. Since then you've done and you mentioned three acquisition.
Could you break out for us the outlook for the base business.
Is it still low to mid singles growth this year and what's the incremental impact from those acquisitions.
Yeah, I think as of this point it is.
Probably leaning more towards the higher side of that low to mid <unk>.
The December quarter is such a small quarter and the full year and.
We've done I think the team has done a great job of.
<unk> events to to supplement the absence absence of boat shows and so I think there's just a little more.
No question as to the seasonality or is the seasonality of the year going to be altered because of the lack of boat shows and and the events that we're having and.
And so I think we're keeping the base business because you know we do have such a big year to comp.
Just trying to be conservative and keep the base business, just with a reasonable amount of growth and not necessary just rolling Q1 performance on top of our prior projections.
Got it Okay. That's helpful and just.
And the lack of boat shows this year and <unk>.
And obviously very helpful. In terms of the cadence for comps, but I'm curious, how you think about and pack.
A boat shows or lack of thereof.
In terms of March versus June quarter could there be sales that typically occur in the March quarter at boat shows that slip into June and and maybe secondly.
And I spend a fair amount of money on those and those shows where does that money go does it go towards digital marketing doesn't drop to the bottom line and makes it too.
And on the jumping a little bit right.
Joe Thanks for the question the boat shows and I've said that many times and not a big fan of them on there really is the second biggest expense on our P&L and when you go to a boat show you and kind of level, the playing field for subpart dealers.
And that's their only shot and year, but we're still learning a little bit about how the effects on the boat shows is going on.
And that impact our total year I mean, we had a great quarter, one thing I'd point out is.
And we spend a good part and a normal normal year, we spend the good part of the last part of October pretty much all of November and the first two weeks of December preparing for boat shows.
And that's not just Anthony preparing and that is the whole entire team it's training it's.
And just a lot goes into it and then you come out of that and then the first part of January you hit the ground running and boat show after boat show Hotel late nights.
It's just very tax lien on our team and I think this year Anthony you know who came up with this plan to do these events and market digitally and so we spent the first quarter Selwyn.
And instead and preparing for boat shows we were selling deals.
And I think as you know we need to understand the impact of that.
As we move forward into the year I will.
And we will tell you that January is off to a good start we're feeling really good about the year, where we're like Jack just said were in the lower part of the year and it's going to continue to build we hope, but we just don't know what just what we've done by selling interest and in Q1 versus preparing has done and we just need a little bit.
And more time to understand that when things things are definitely going in the right direction.
Got it and its effect.
I can just follow up on that after he mentioned that January was looking good.
Want to add any color I mean, our comps kind of in line with what you saw in Q1 or any slowdown at all.
Well I mean.
I would just tell you that believes or we keep waiting for that day, where lead starting to slow down and Jack you can expand on it a little bit more probably than I can on that.
But it's definitely go ahead.
I was just going to say if you are if you rewind back in time I think we you know back in.
Back around the pandemic timing moving things first kind of shut down.
If you recall January and February last year were very strong months and then it really was just the last two weeks of March that things kind of fell off and and really shut down the quarter. So we were up against some day.
Double digit comps and and I would tell you where.
And we haven't gone through and data and analysis and we're still working on closing the books, but I would tell you that comps are certainly double digits. So far through January.
Perfect. Thank you guys.
Thank you.
As a reminder to ask a question you will need to press Star then one on your telephone.
Our next question will come from the line of Mike Swartz with true Securities. Your line is now open.
Hey, guys. Good morning couple of questions here, I think and in the press release, you said that the combined benefit from the three acquisitions, you've made has about $125 million and annualized revenue I think that's on a 12 trailing month basis, maybe give us a sense of what that looks like and in fiscal year 'twenty one are used to.
And that kind of grows and that mid single digit range that you are.
And we're calling out for the underlying or the core business.
Yeah, I would tell you that is on a on a full year basis and we'd be looking at probably something around 100 million March causing net contribution this year.
Okay, right because some of it I assume would fall into fiscal year 'twenty, two as well correct right. Okay. Okay that makes sense and then just on the noticing that used boats are pre owned boats grew about 17% and the quarter, while everything else grew 30%, 40% year over year any commentary there.
On just the availability of pre owned product and maybe what Youre doing.
Gain access to inventory there.
Oh yeah.
And Anthony I was just going to say that's really for you.
Yeah, it's something we focus on daily with.
Employees and employees that are buyers and buyers only puts on our job is to do is to buy votes. So it is a.
The challenging part to continue to get inventory, but it's I think we're still doing a great job at getting this.
It's not keeping up with the new growth just because of.
And the amount of innovations that are manufacturers that were tied to or coming up which is just really driving some great growth force.
But used as something we concentrate on every day.
Yes, I think the other thing I'd point out too just a little bit behind the numbers as we we saw a significant increase and brokerage sales and as you can.
Both the sales and revenue.
You don't necessarily see the revenue dollars and pick up quite as much as as you wish it was and actually need and unit.
Got you that makes us that makes sense. Thanks for that and then and then maybe final question for Austin, maybe just talk about how the Standalone service centers are are are contributing and maybe how to think about that business over the next 12 months.
Right and there again.
The answer to your question, but I mean, you can see and the numbers. We start we started we saw a good increase and parts and service and obviously some of that is connected to that Anthony I mean, do you got any like more day to day operational comments.
And this continues to be and opportunity for us and the parts and service World and as we spoke last quarter and we've opened three service only facility.
Looking to open more parallel schedule and ship.
Very good and tremendous demand growth.
Of course with bridge.
Okay, great. Thanks, a lot.
Thank you there are no further questions at this time.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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