Q2 2025 OneWater Marine Inc Earnings Call

Quarter 2025 conference call.

Speaker Change: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be question and answer session should you wish to ask questions. At this time. Please press star one on your telephone keypad. Thank you I would now like to turn the conference over to Jack Ezzell Chief Financial Officer. Please go ahead.

Austin Singleton: And, you know, it's kind of in line where we thought we'd.

Austin Singleton: All right, and then maybe you could just kind of as a follow up to that add some color to the promotional and discounting environment. I mean, I guess the question is, are you having to discount heavily to essentially move more volume? Game Share. I guess A, that's what's happening, and B, that's strategic. Yeah, I mean, absolutely. That's a little bit of what's happening. And yes, it is strategic. I would say that, you know, there's a couple of different pieces of that. When you look at non-currents, and that would just be old, you know, 24s and older, that's where the majority of the dated inventory is in the industry.

Jack Ezzell: Good morning, and welcome to one Walgreens fiscal second quarter 2025 earnings Conference call I'm joined on the call today by Austin, Singleton, Chief Executive Officer, and Anthony Asquith, President and Chief operating Officer.

Speaker Change: Before we begin I would like to remind you that certain statements made by management in this morning's conference call regarding one water marine and its operations may be considered forward looking statements under the 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.

Jack Ezzell: And events to differ materially from those described in the forward looking statements fat.

Austin Singleton: So that is super competitive out there, because those boats have curtailments, they have high interest rates hitting them hard on interest expense. And so everybody's being super aggressive and competitive, and we have to stay competitive in order to get that gone. Now, when you get into the current year model, you know, what I think we're actually making pretty decent margin on that. So as we continue to get the inventory clean, there should be some sort of, you know, some sort of modest, you know, gross margin increase on new boat sales.

Jack Ezzell: Factors that might affect future results are discussed in the company's earnings release, which can be found in the investor Relations section of the company's website and in its filings with the SEC. The company disclaims any obligation or undertaking to update the forward looking statements to reflect circumstances or events that occur. After the date. The forward looking statements are made except as required.

Jack Ezzell: Wired by law. Please note that all comparisons of our second quarter 2025 results are made against the second quarter 2024, unless otherwise noted.

Jack Ezzell: With that I would like to turn the call over to Austin, Singleton, who will begin with a few opening remarks Austin.

Austin Singleton: One thing I would point out is, you know, we took our exiting brands from 13 to 15. Okay, and we're really, you know, I would say this is, I'm bullish on where our inventory position is, and what our inventory is more today than I have been in quite a while. Because when you look at the breakdown of the exiting brands, and we took it from 13 to 15. So we added two more brands to kind of get us to where we would be in the position to really push harder with our key manufacturers. But we're talking about, you know, we got 3000 plus boats in inventory, and we're talking about having 50 to 60.

Austin Singleton: Thanks, Jack and thank you everyone for joining today's call our teams executed well despite considerable macroeconomic uncertainty and a challenging environment.

Austin Singleton: Same store sales declined 2% for the quarter, driven primarily by softer sales.

Austin Singleton: On the West Coast of Florida, which continues to recover from the impact of Hurricanes Helena and Milton.

Austin Singleton: Performance from our impacted locations is improving over time.

Austin Singleton: <unk> more in line with the rest of our dealerships when compared to the first quarter.

Austin Singleton: Total unit sales for the industry were down in excess of 10% for the quarter with our results continuing to outperform the industry and take market share.

Austin Singleton: I think the number exactly is 56. exiting brands left. 56 units out of 3,000. So we are getting to the point where we won't have those boats going out at zero or a negative margin once we can sell about 50 more boats. and that's going to have an impact as we move forward into the selling season and as we prepare for 2026.

Austin Singleton: In facing these headwinds our teams across the country, we continue to execute on our inventory and brand rationalization strategies, where we are seeing tangible benefits through strategic planning and a strong push to close sales, we reduced inventory by 12% year over year and 5% sequentially.

Austin Singleton: So that's definitely a green shoot that we have out in front of us. Great, that's really helpful. Thanks. Thank you.

Austin Singleton: Outpacing the industry.

Austin Singleton: This not only improves working capital, but also strengthens our long term position, we continue to be focused on keeping a clean slate of inventory that includes our highest performing brands as we make our way through the selling season.

Craig Kennison: And your next question comes from the line of Craig Kennison from Bayer. Please go ahead. Okay, good morning. Thanks for taking my question. Austin, you mentioned exiting, I think, 15 brands. I'm curious, big picture.

Austin Singleton: Gross margins remained challenged largely due to the current promotional environment within the industry, we are being thoughtful with our pricing striking a balance between closing the deal and maintain margin integrity and brand value.

Craig Kennison: How do you see the industry shaking out after we exit this slowdown period? Will we see far fewer brands and therefore maybe a more rational market? Or do you think those brands are going to come back? the same dynamic going forward.

Austin Singleton: We are also continuing to execute on our cost saving initiatives, however, higher costs associated with boat shows and inflationary pressures on our fixed costs more than offset.

Austin Singleton: That's a really, really, really good question, and one that's somewhat difficult to answer in a short time period, because I could talk about this a lot. I would go back and point to 08-09 and how resilient the manufacturers were during that period of time, and how we really didn't lose many manufacturers at all. and this is nothing like that. What I think is going to be interesting and what I think in my opinion is going to happen over the next three to 10 years. as we've come into this new norm of higher interest rates or higher carrying costs on floor plan.

Austin Singleton: Savings, leading to higher selling general and administrative expenses as compared to the prior year period moving forward. We expect further benefits from our initiatives as we accelerate cost actions in our distribution segment at the end of the quarter.

Austin Singleton: We will continue to adjust our cost structure to align with retail activity given our flexible operating model.

Austin Singleton: Turning to the tariff landscape, we are keeping a close eye on the situation and monitoring developments from where we stand today, we do not expect an impact to pricing on our current inventory. We are communicating with our manufacturing partners, who are doing their best to mitigate tariff impacts and temporary pricing increases for the upcoming model year.

Austin Singleton: You know, supply chain did something to the industry that is something that we've never seen before, and it took a lot of the suppliers out. So when you start looking at, you know, 10 brands, let's say, just take a segment. Let's, you know, use runabouts. You know, 10, 12, 15 years ago, there was a gap between what was the highest premium and maybe the mid-range of, you know, brands. So, I mean, you could take Brand X and Brand, you know, Z, and there was $20,000 difference in true cost because Brand Z didn't build it like Brand X.

Austin Singleton: While the direct impact to the supply chain are still being determined we are taking a more cautious view on the demand environment and consequently, we are updating our outlook.

Austin Singleton: While April results are in line with the prior year the macro environment remains uncertain we.

Austin Singleton: Our focus on factors within our control, including rationalizing our brand portfolio.

Austin Singleton: Streamlining operations and meeting the needs of our customers. These efforts are positioning us to not only weather the challenges of today, but to emerge stronger and more competitive over the long term.

Austin Singleton: With that I will turn it over to Anthony to discuss the business operations.

Anthony Asquith: Thanks, Austin I'll take a few minutes to walk through our operational performance in the quarter.

Austin Singleton: Well, when those suppliers went out, now they're all using the same suppliers, so their costs are all. So what I think's gonna happen over time is you're gonna have the gap between brand X and brand Z as really close. So if you've got higher interest rates or higher carrying costs. to brand the lower brand's dealer network, it's gonna be harder for them to compete and make money. Okay, so then it's gonna be harder for that manufacturer to make margin because they're gonna have to buy basically by the sales. And so I think that this gap closing is going to make it where at some point in time, over time, you're either gonna have consolidation or you're gonna have manufacturers and dealers that struggle to make money and one day they're gonna wake up and go, why are we doing this?

Anthony Asquith: Where we continue to see steady progress across key parts of the business. Our teams remain focused on cleaning aged inventory and those efforts are tracking ahead of schedule.

Anthony Asquith: So in the environment is competitive and we continue to receive support from our manufacturing partners, helping to drive robust traffic at our dealership level web traffic was up year over year, which is positive given the March 2024 was one of our strongest month in our history.

Anthony Asquith: The average unit price of new boats increased driven by continued strength in larger boats demand for premium models is holding up well, reflecting our ability to deliver on the performance features and design customers are looking for on the high end market.

Austin Singleton: You know, and so that's coming.

Anthony Asquith: Pre owned boat sales were strong.

Austin Singleton: I just don't know how big it'll be and what it'll do. And that's one of the reasons we want to stay positioned on the premium hire inside of the business in all the segments. And we want to consolidate what we're doing more with our top brands. And that's a little bit of why we reconfigured what we're selling today. And while we're exiting 15 brands today, which we probably would have never thought of exiting brands five years ago.

Anthony Asquith: We're higher volumes were supported by an increase in trade ins and importantly trade ups. After several years of limited pre owned inventory, we're seeing a healthy turnover of boats for upgraded models.

Anthony Asquith: Financing and insurance revenue continues to be a strength of our business model.

Anthony Asquith: <unk> was up slightly both in terms of dollars and a percentage of total sales and speaks to the quality of our in store financing programs and ability to deploy them across the portfolio.

Jack Ezzell: really interesting. Could you just tell us how many brands you started with and what you'll have left when you're completed with this project? I will mess those numbers up to be exact, but I'll throw that back to Jack because he probably knows it off the top of his head. It's still a lot, Craig. We probably have 50 plus brands still. Got it. Great. Thank you.

Anthony Asquith: And our parts and service business revenue was up 2% a modest increase driven by solid performance from our dealership segment, partially offset by the distribution segment that continues to see headwinds stemming from the reduced boat manufacturing production schedules and now tariff concerns.

Speaker Change: To view the business as a valuable source of reoccurring revenue.

Anthony Asquith: <unk> customer engagement.

Operator: Once again, should you have a question, please press star four by the one on your telephone keypad. There are no further questions at this time.

Anthony Asquith: On inventory, we remain thoughtful about our order intake brand rationalization efforts have been accelerated with additional brands added to our plan, we expect to clear this inventory as part of our broader strategy over the balance of the selling season.

Anthony Asquith: And we are well on track to exceed our initial full year goal of a 10% reduction in inventory.

Operator: This concludes today's conference call. You may now disconnect.

Jack Ezzell: We now expect to end the year with inventory down, 10% to 15%, which will leave us better positioned with tighter more productive lineups of brands and with that I'll turn the call over to Jack to go over the financials in more detail.

Jack Ezzell: Thanks, Anthony fiscal second quarter revenue decreased 1% to $484 million in 2025 from $488 million in 2024, New boat sales were down 5% to $310 million in the second quarter, while pre owned boat sales increased 14% to $90 million overall same store sales.

Jack Ezzell: We're down 2% driven by a decrease in new boat sales, it's important to note that according to Ssi industry data.

Jack Ezzell: Net sales were down in excess of 10% during the quarter.

Jack Ezzell: Revenue from service parts and other sales for the quarter increased 2% to $69 million. The increase was driven by growth in our dealership segment with more than offset the impact of lower production from boat manufacturers with continued to weigh on the sales of our distribution segment.

Jack Ezzell: Finance and insurance revenue increased 10 basis points as a percentage of sales as customers continue to finance a portion of the purchase through our programs.

Jack Ezzell: Gross profit declined to $110 million in 2025 compared to $120 million. In 2024. This was driven by lower gross margins on the brands, we are exiting and the current model mix and pricing environment on the votes.

Jack Ezzell: Second quarter, 2025, selling general and administrative expenses increased 1% to $88 million.

Jack Ezzell: SG&A as a percentage of sales was 18% up 50 basis points as a percentage of revenue as the benefits from previous cost reduction actions were more than offset by inflationary increases in selling expenses, primarily boat shows as well as increase in other fixed and administrative expenses.

Jack Ezzell: Operating income increased to $16 million and adjusted EBITDA was $18 million.

Jack Ezzell: Net loss for the fiscal second quarter totaled 375000, or <unk> <unk> per diluted share compared to a net loss of 5 million or <unk> 27 per diluted share in the prior year.

Jack Ezzell: Adjusted income per diluted share was <unk> 13.

Jack Ezzell: Compared to adjusted income per diluted share of <unk> 67 in the prior year.

Jack Ezzell: I would like to note at the end of the quarter. The remaining class B shares outstanding were converted into class a shares.

Jack Ezzell: As a result, we are no longer be allocating a portion of our income to noncontrolling interest in our class a share count will increase.

Jack Ezzell: Since the income allocated to the controlling interest and a share count will increase proportionately it should not have an impact on our earnings per share.

Jack Ezzell: At March 31, 2025, total class a shares outstanding were $16 3 million.

Jack Ezzell: Now turning to the balance sheet.

Jack Ezzell: March 31, 2025, total liquidity was in excess of $74 million, including cash on hand, and additional availability under our credit facilities.

Jack Ezzell: Total inventory at March 31.

Jack Ezzell: 2025 was $602 million compared to 687 million March 31 2024.

Jack Ezzell: Our inventory position continues to strengthen with a healthier mix and aging profile and we still anticipate some incremental benefits from further inventory reductions as we complete our brand rationalizations throughout the year.

Jack Ezzell: Total long term debt as of March 31, 2025, with $427 million and net of cash resulted in a net leverage of five four times trailing 12 months adjusted EBITDA, we remain focused on reducing leverage in the latter half of 2025 as part of our capital allocation strategy.

Jack Ezzell: Given the impact of heightened macroeconomic uncertainty on consumer demand due to the tariff environment and results year to date, we are updating our previously issued fiscal 2025 guidance. We anticipate total sales to be in the range of $1 seven to $1 8 billion same store sales to be flat to down low single digit.

Jack Ezzell: It's against an industry backdrop that we now expect to be down as much as 10% to 15%.

Jack Ezzell: We now forecast adjusted EBITDA to be in the range of $65 million to $95 million and adjusted earnings per diluted share to be the range of 75 to $1 25.

Jack Ezzell: This guidance encompasses our current expectations of the impact that tariffs and increased costs will have on the business. While the situation remains fluid. We are focused on aspects of the business that we can't control. We are closely monitoring the macroeconomic environment and our flexible operating model enables us to respond quickly to any changes.

Jack Ezzell: This concludes our prepared remarks, operator would you. Please open the line for questions.

Jack Ezzell: Thank you at this time I would like to remind everyone in order to ask a question.

Speaker Change: Pardon the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Joe <unk> from Raymond James. Please go ahead.

Joe <unk>: Thanks, Hey, guys good morning.

Joe <unk>: Austin I think you've touched on this earlier, but I want to go back to what Youre seeing in April.

Speaker Change: Demand standpoint post the tap.

Joe <unk>: Tap announcements.

Joe <unk>: Yes, Joe April was.

Joe <unk>: In line with kind of last year I mean, we were up in units compared to last year and up in dollars slightly on both of those which was a pretty positive sign and as we roll into may.

Joe <unk>: At the beginning of May looks looks to be ahead of where we were at the beginning of May last year. So we're a little bit encouraged with the momentum kind of keeps moving forward.

I think the biggest thing that we got in front of US right now is theres not demand coming through the door, it's how to start making money on that and as the inventory continues to correct itself.

Joe <unk>: That outdated stuff runs through we should be in a pretty good spot.

Joe <unk>: To go into the bulk of the season here in May and June and July and hopefully be able to pick up some margin dollars and continue to get our inventory leader.

Joe <unk>: Got it okay, just a follow up on that in the margins.

Joe <unk>: On used were a little bit softer than I was modeling and I think if youre softness used margin.

Joe <unk>: It's totally realize so maybe talk about what drove that margin down if you could.

Speaker Change: Yes, I think I'll, probably let Jack or Anthony jump in on this I would just a little bit of it's probably going to be the model mix between.

Speaker Change: What exactly was pre owned versus brokerage and consignment that can skew the skew those numbers a little bit.

Speaker Change: And then it's also I think we're being a little bit more aggressive because we are getting more trades. We're just trying to keep everything churn in and moving forward.

Speaker Change: Jackie I don't know what the breakout is but that's that's my gut right. There, yes, the model mix the mix between.

Speaker Change: Trades brokerage and consignment definitely weighed in on that margin profile.

Speaker Change: Yes.

Speaker Change: To me, it's a little bit of a positive Joe because you know like Anthony spoke of just a minute ago. We're taken more trades today than we have in the past which is good.

Speaker Change: Means people are moving up either moving into a different segment or theyre moving up in both sides and so as that trade continues to come in and Thats a positive sign something we've been waiting on for five or six years now to start being able to get more trades and so that's an exciting really more of a tailwind than anything for us.

Speaker Change: Got it okay. Thank you.

Speaker Change: Luke you once again that is star and wanted to ask the question and your next question comes from the line of Mike <unk> from benchmark. Please go ahead.

Speaker Change: Yeah, Hey, good morning, guys. Thanks for taking my question here.

Speaker Change: Yeah.

Speaker Change: Good morning, I, just wanted to ask about kind of the share gains I think you alluded to the market being down about 10%. Obviously on a same store basis. You guys are down 2% could you just add some color as to where you are taking share premium burger value segment et cetera.

Speaker Change: Well the majority of it would be in premium because thats really where we operate so we do have some value, but it's really on the edges that we operate in that so it's definitely on the premium premium side of things and when we talk about premium we're not talking about in size were just talking about in perception of the brand.

Speaker Change: Where it holds its placement in the.

Speaker Change: Okay.

Speaker Change: In this particular segment.

Speaker Change: And.

Speaker Change: So freshwater is a little bit different in salt that when you get into the big boats, it's a little bit different also.

Speaker Change: When you look at an industry, that's down 10, plus percent and we're down somewhere around two.

Speaker Change: That's pretty positive.

Speaker Change: And when we're kind of I wouldn't say excited about being down too, but compared to where the industry is it makes us feel pretty good.

Speaker Change: And it.

Speaker Change: It's kind of in line with where we thought we'd be.

Speaker Change: Alright, and then maybe you could just kind of.

As a follow up to that add some color to the promotional and discounting environment. I mean, I guess the question is where are you.

Speaker Change: Having to discount heavily to essentially move more volume in.

Speaker Change: Gaining share is that I guess, that's what happening.

Speaker Change: Strategic.

Speaker Change: Yes, I mean, absolutely that's that's a little bit of what's happening in the yes. It is strategic I would say.

Speaker Change: There's a couple of different pieces of that.

Speaker Change: When you look at non currents.

Speaker Change: And that would just be old.

Speaker Change: <unk> four is an older.

Speaker Change: That's where the majority of the data and inventory is in the industry. So that is super competitive out there because those boats have curtailments. They have high interest rates hitting them hard on interest expense and so everybody is being super aggressive and competitive and we have to stay competitive in order to get that gone now when you get into the current year.

Speaker Change: Model.

Speaker Change: What I think we're actually making pretty decent margin on that so as we continue to get the inventory clean.

Speaker Change: There should be some sort of some sort of modest.

Speaker Change: Gross margin increased on new boat sales, what one thing I would point out is we took our exiting brands from 13 to 15.

Speaker Change: Okay, and we are really I would say this.

Speaker Change: Bullish on where our inventory position is and what our inventory is more today than I have been in quite a while because when you look at the breakdown of the exiting brands and we took it from 13 to 15. So we added two more brands to that to kind of get us to where we would be in the position to really push harder with our key.

Speaker Change: Key manufacturers.

Speaker Change: We're talking about we've got 3000 plus boats in inventory and we're talking about having 50 to 60 I think I think the number exactly is 56.

Speaker Change: Exiting brands left 56 units out of 3000.

Speaker Change: So we are getting to the point, where we won't have those boats going out at zero or a negative margin. Once we can sell about 50 more boats.

Speaker Change: And that's that's going to have an impact as we move forward into the selling season and as we prepare for 2026.

Speaker Change: That's definitely a green shoot that we have out in front of us.

Speaker Change: Alright, Thats really helpful. Thank you.

Speaker Change: Thank you and your next question comes from the line of Craig Kennison from Baird. Please go ahead.

Craig Kennison: Hey, good morning, Thanks for taking my question Austin, You mentioned exiting I think 15 brand I'm curious big picture.

Speaker Change: How you see the industry is shaking out.

Speaker Change: After we exit this slowdown period, what we see far fewer brands and therefore, maybe irrational market or do you think those brands are going to come back and get the same dynamic going forward.

Speaker Change: That's a really really really good question and one that's somewhat difficult to answer in the in.

Speaker Change: In the short time period, because I can talk about this a lot.

Speaker Change: I would go back a point to <unk> nine.

Speaker Change: How resilient the manufacturers were during that period of time, and how we really didn't lose many manufacturers at all.

Speaker Change: And this is nothing like that.

Speaker Change: What I think is going to be interesting and what I think in my opinion is going to happen over the next three to 10 years.

Speaker Change: As we've come into this new norm of higher interest rates are higher carrying costs on floor plan.

Speaker Change: Supply chain did something to the industry that is something that we've never seen before and it took a lot of the suppliers out. So when you start looking at 10 brands.

Speaker Change: Lets say just take a segment.

Speaker Change: Use run abouts.

Speaker Change: 10, 12, 15 years ago, there was a gap between what was the highest premium and maybe the mid range of.

Speaker Change: Branch, So you could take brand acts and brand.

Speaker Change: And there was $20000 difference in true cost because brands need it and build it Mike brand X Windows suppliers went out now they are all using the same supplier. So their costs are all about the same.

Speaker Change: And so what I think is going to happen over time is youre going to have brand the gap between brand X and brand Z is really closed. So if you got higher interest rates are higher carrying costs to brand the lower brand dealer network, it's going to be harder for them to compete and make money okay.

Speaker Change: So then it's going to be harder for that manufacturer to make margin because they're going to have to Bob Bob basically by the sales. So I think this gap closing is going to make it where at some point in time over time, you're either going to have consolidation or youre going to have manufacturers and dealers struggled to make money and have one day, they're going to wake up and go why.

Speaker Change: Are we doing this.

Speaker Change: And so that's coming I, just don't know how big it will be and what it will do.

Speaker Change: That's one of the reasons, we want to stay positioned on the premium higher inside of the business and all of the segments.

Speaker Change: And we want to consolidate what we're doing more with our top brands and Thats, a little bit of while we reconfigure what we're selling today and while we are exiting 15 brands today.

Speaker Change: Which we probably would've never thought of exiting brands five years ago.

Speaker Change: It's really interesting maybe could you just tell us how many brands.

Speaker Change: Started with and what Youll have locked when you are completed with this project.

Speaker Change: I will miss those numbers up to be exact I don't throw that back to Jack to see probably knows that off the top of his head.

Craig Kennison: It's still a lot Craig we probably have 50 plus brands spill.

Speaker Change: Got it great. Thank you.

Speaker Change: Okay.

Speaker Change: Thank you once again should you have any question the asbestos followed by the one on your telephone keypad.

Speaker Change: There are no further questions at this time. This concludes today's conference call you may now disconnect.