Ladies and gentlemen, thank you for standing by. And welcome to the OneWater Marine's Fiscal Fourth Quarter and Full Year 2022 Conference Call. [Operator Instructions] I would now like to turn the call over to Jack Ezzell, Chief Financial Officer. You may begin.

Good morning, and welcome to OneWater Marine's fiscal fourth quarter and full year 2022 earnings conference call. I'm joined on the call today by Austin Singleton, Chief Executive Officer; and Anthony Aisquith, President and Chief Operating Officer. Before we begin, I'd like to remind you that certain statements made by management in this morning's conference call regarding OneWater Marine and its operations may be considered forward-looking statements under securities law and involve a number of risks and uncertainties. As a result, the company cautions you that there are a number of factors, many of which are beyond the company's control, which would cause actual results and events to differ materially from those described in 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 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 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 are proud to deliver another year of record results, highlighting outstanding execution of our proven growth strategy. I would like to thank our team for their relentless efforts throughout all the challenges facing our industry, including a challenging supply chain and the devastation caused by Hurricane Ian late in the quarter. The storm hit very close to home for OneWater, as we have 43 stores in Florida and 12 in Southwest Florida. Of our stores impacted by Ian, three remain closed but are expected to reopen in the December quarter. Our thoughts and prayers are with everyone impacted, and we are working tirelessly to help these communities rebuild. Full year 2022 revenue increased 42% to $1.7 billion, on top of 20% growth in 2021. Same-store sales growth for the full year was 12%, in line with our expectations. We made tremendous progress on our diversification strategy during the year. Service, parts and other sales increased 164% compared to the prior year, and finance and insurance revenues expanded by more than 30%. These higher margin revenue streams will remain a key focus area as we see significant room for growth in the years ahead. Our full year 2022 adjusted EBITDA of $248 million grew nearly 60%, in line with our guidance, due largely to our strong execution and diverse business model, supported by a robust and steady demand throughout the year. Propelling this growth is our acquisition engine which was running at full steam, highlighted by our consistent cadence of acquisitions during the year. To that end, we completed four dealership acquisitions during full year 2022 and announced last month we closed the acquisition of Taylor Marine, an award-winning dealer with a strong reputation that complements presence in the Mid-Atlantic…

Thanks, Austin. The strong demand that we've experienced over the past year continued in the fourth quarter. Now the boat show season has officially kicked off, with great results coming out of the first few shows. At the recent Fort Lauderdale Boat Show, we experienced record-setting results. We saw continued demand for boats in all categories, but the 40-foot-plus range remains especially strong. These larger items carry longer lead times that we'll deliver over the next year or more, providing strength to our already sizable backlog. Further, we have started to see pockets of easing within the supply chain, which supported improved inventory levels in some categories, though they have remained far from pre-COVID levels. Inventories for smaller boats are starting to normalize. It will expect restocking to continue into 2024 for larger boats. That said, we do anticipate making further improvement in the winter months, where we have traditionally been able to build our inventory. As we have highlighted before, our sophisticated inventory tools have enabled our dealers to navigate the environment and pre-sell inventory efficiently and effectively. We are able to keep our fingers on the pulse of the inventory and redirect or adjust orders in response to changing market dynamics. Pre-sold inventory and customer deposits remained elevated compared to the prior year and prior quarter. We anticipate supply chain constraints easing throughout next year, and look forward to an enhanced visibility and ensuring more timely deliveries to our customers. As Austin mentioned, we are incredibly excited about our revenue from our higher-margin service, parts and other sales, which increased more than 200% in the fourth quarter and over 164% compared to the prior year period. Our efforts to build this revenue stream lays the foundation for our higher gross margins in our future. We are impressed with…

Thanks, Anthony. Fiscal fourth quarter revenue increased 42% to $398 million in 2022 from $280 million in the prior year quarter. New boat sales grew 22% to $236 million in the fiscal fourth quarter of '22, while pre-owned boat sales increased 33% to $67 million. As Anthony mentioned, we experienced a softer-than-expected close to September due to the impact of Hurricane Ian, as we were unable to close deals in the last week of the month for most of our operations in the Gulf Coast region. We anticipate approximately $25 million in sales to carry over to the coming quarters as communities rebuild. With respect to our diversification strategy, our higher-margin businesses contributed meaningfully to our results in the quarter. Revenue from service, parts and other sales increased 201% to $81 million compared to the prior year, driven by contributions of our recently-acquired businesses. Finance and insurance revenue increased 32% to $13 million in the fourth quarter of 2022. Gross profit increased 41% to $126 million in the fourth quarter compared to $89 million in the prior year driven by the increase in the higher-margin service, parts and other sales, as well as the shift in the mix of the size of the boats sold. Gross profit margin decreased by 20 basis points to 31.7% compared to 31.9% in the prior year. Fourth quarter 2022 selling, general and administrative expenses increased to $80 million from $55 million or 20% of sales in both periods. Operating income grew 36% to $40 million compared to $29 million in the prior year. And as a percentage of sales, operating income margin was 10% in the quarter. As a result, adjusted EBITDA increased to $45 million compared to $34 million in the prior year. Net income for the fiscal fourth quarter totaled $22 million…

[Operator Instructions] Our first question comes from Joe Altobello with Raymond James.

First question is on product mix. You mentioned it and called it out as a headwind on gross margin. Was that size or content, or both?

Joe, it's entry level, what we would consider premium entry level for us. So it's -- Anthony spoke of 40 feet and larger being in extreme demand still. And so as you start coming down in foot, it starts to ease up a little bit. So we start talking about 30 to 40-foot, that there is a higher demand because there's a large backlog on that than there is on the 20 to 30 foot. So as you creep down in feet, you're starting to see a little bit of an ease in inventory build just because that cycle -- the build cycle is much shorter than the larger boats, and the backlog is not is sold out as far.

Got it. Okay. Just a follow-up on that. In terms of inventories, obviously, up significantly year-over-year. Where do you guys stand on a same-store basis versus 2019?

Yes. So I -- Go ahead.

Jack, go ahead, and then I want to jump in after you go.

Yes. I would say we're still behind. When you look at the numbers, obviously, they're a bit difficult to compare with all the acquisitions that we've done. But going back to 2019, I went and did some weeks on hand analysis. And back then, we were averaging around 20 to 22 weeks on hand, and we're currently around 11 to 12. So we still have some room to grow on -- from that perspective. Acquisitions contributed about 40% -- 30%, 40% to the growth of our inventory year-over-year. So it's a meaningful number, and there's still room to go. I’d say, as Austin was highlighting, some of the smaller boats are starting to normalize but we have a ways to go within the larger boats.

And then going back to what Jack just said about days on hands, we were playing around with some back of the national numbers and talking with our foreplan providers also. And what was funny is -- or what I thought was really neat is if you look at September of 2019, the industry was about 22 weeks days on hand as an industry as a whole. We were around just north of 20, so a little bit better than the industry but not significantly better. Today, September of this year, the inventory for the industry is at 16 weeks as a whole, and we're like Jack just said, around between that 11 and 12 week. So inventory is still pretty depleted. And the bigger the boat is, the longer it's going to take for that to normalize.

That's very helpful. Also maybe one more, if I could squeeze it in. In terms of acquisitions, how do you guys think about the M&A market for '23? Are you still thinking about four to six dealer acquisitions and two to four parts in service?

Well, I think we're going to monitor the macro over the next several months and kind of look at that. This is really the wrong time of the year for us to be doing acquisitions. If you look at the way they layer in the Harbor View, and it's a great one for us because it gives us some lease security in the panhandle that we didn't have at our Pensacola location. So that's a really good small deal for us. But the bigger deals, we're going to look at probably a little bit harder than we have in the past because we don't think margins are sustainable. New boat margins, we've been saying this for the last couple of quarters, we feel that somewhat peaked or sub-40 feet, they're not going to get any better. They're probably going to start to erode as we move into next year. Now, how much of that erosion we have to take on as a dealer versus the manufacturing starting to do rebates is yet to be seen. But we're going to be extremely prudent. We've got a lot of deals in the pipeline and a lot of deals that look really good, but it's not something that we see a gigantic upside yet. Like, if we can't look at it within 30 seconds and say, okay, this deal is an easy double inside 24 months because it's not taking care of all the components, that becomes enticing. But for the short term right now, we're probably just going to sit back and watch a little bit, but we will be doing some M&A. I just don't know if we'll get four in this year. I think we're just going to be really prudent to make sure whatever we do has tremendous upside because we're going to have to let these new boat margins normalize for a little bit.

[Operator Instructions] Our next question comes from Michael Swartz with Truist.

This is Lucas on for Mike. Just had a question on going back to Ian real quick. You gave out the revenue impact. I was wondering if you could also talk about any cost associated with it?

Yes. We have a $2 million in the -- as expense in the P&L right now as our kind of estimate, and some of the costs we incurred with respect to clean-up and some things like that or preparation. It kind of remains to be seen what's going to happen with insurance claims and recoveries and things like that, but not a ton of charges at this point. We do just have three locations, Fort Myers Beach, Fort Myers and Englewood that were a little more impacted, so there's some recovery efforts and rebuilding we're having to deal with, while we work those locations to be back online here in the coming days and ready for business.

Our next question comes from Brandon Rollé with D.A. Davidson. Brandon Rollé : I just had a question on promotional activity. What you're seeing out there right now, and your expectations for how that evolves over the next three to six months?

Yes. I mean, there's not a whole lot of it out there right now. What you're seeing is you're seeing some dealers that are discounting what we would call last year's model. So now that we've had a model change and we're rolling into winter, anybody that's got a '22 model year is doing a little bit of discounting just to make sure that thing gets across the curve. Our inventory is in really good shape. We're just not seeing that. So what we don't know is what -- how long it's going to take for the manufacturers to feel like they need to come in with rebates. And what typically happens is there's a set number of manufacturers out there that have a dealer network that really have nothing to offer but price. And as we've gone through these great years with this high demand and some supply chain issues, those dynamics have allowed them not to have to really do any of that. But at some point in time, that's the only way you can compete. So they'll slide in, start doing some discounting, some manufacturing rebates. It won't affect the dealers, then the other manufacturers will start to follow suit. And then what it does is it just eventually snowballs into where everybody is doing it. I feel extremely comfortable. I would say north of 30 feet, we're going to be able to hold really good margins. It's that sub-30% -- the sub-30 feet that over the next year, I do believe we'll start seeing some margin erosion because the dealers will discount on top of what the manufacturing rebate is. Good thing for us is we've put a lot of effort into that higher-margin business. And as we sit down and Jack and Anthony and I look at this, we're starting to get a little bit more comfort to be able to have that gross margin in that high 20s, 30% range, which will impact or leave us with a double-digit EBITDA margin as we go forward. So we made the moves, and I think we're -- every day, we're getting closer and closer to be able to adapt and to offset any margin erosion on the new boat sales, which we know is coming. Brandon Rollé : Great. And just one follow-up, if possible. Any comments on the used boat market and what you're seeing in terms of pricing or inventory availability?

Yes. I mean, Anthony, you want to jump in on that? I mean it's tight, and it's -- there's nothing out there. So it is -- go ahead.

The new boat market continues to be very tight, and we continue to try to -- we employ several buyers all over the country, just trying to add -- use those to our mix. It's still very robust.

[Operator Instructions] And I'm not showing any further questions this time. I'd like to turn the call back over to management for any closing remarks.

Thank you, everybody, for joining the call. And at this point, we will disconnect. Have a great day.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.