Good day, and welcome to the OneWater Marine Fiscal Fourth Quarter and Full Year 2024 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Jack Ezzell, Chief Financial Officer. Please go ahead.

Good morning, and welcome to OneWater Marine’s fiscal Q4 and full year 2024 earnings conference call. I am 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 could 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 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 forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. Please note that all comparisons of our fourth quarter 2024 results are made against the fourth quarter of 2023 unless otherwise noted. 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. This past year has been challenging for our team, our industry, and our communities. Tragically, in late September, Hurricane Helene struck followed by Hurricane Milton in early October, causing extensive damage and disruption across the West Coast of Florida. Our thoughts and prayers remain with those affected by the storms. Most importantly, I’m pleased to report that our teams are safe and most of our stores sustained only minor damage. As of today, while a few docks are still under repair, all retail locations have reopened and are fully operational. Despite the hardships, the resilience and support within these communities has been remarkable. I'm incredibly proud of our team's dedication to our customers and the communities during these difficult times. As you would expect, the disruption from Hurricane Helene significantly impacted our fourth quarter results. As previously disclosed in our press release in late September, we temporarily closed several stores in preparation for the storm and as insurance companies imposed a moratorium on writing new policies. As a result, sales were disrupted during a typically strong selling period for us. While the number of sales were closed in October, it is difficult to predict when the remaining sales will deliver. Customers are starting to settle insurance claims and rebuild their lives and our teams are prepared to serve them when they are ready. This past year was challenging for the marine industry as demand and pricing reset to historical norms. Our team's strong operational execution along with our revenue, brand and geographic diversity helped us mitigate these challenges. We remain focused on disciplined expense management and keeping our operating model in line with current demand. As a result, we executed further cost saving measures in the fourth quarter, including rationalizing…

Thanks, Austin. The sales pace for the quarter started in line with the month of June with demand increasingly slightly in August. However, September was challenged due to Hurricane Helene and October was further impacted by Hurricane Milton. These disruptions on the West Coast of Florida impacted sales for September and will continue to have an effect for the first half of the year as customers rebuild. We are pleased to report a record Fort Lauderdale boat show with a unit sales up double-digits compared to the prior year. The strong activity highlights the sustained customer appetite for voting despite uncertainty in the election and overall economy at the time. Our manufacturer partners unveiled a variety of new 2025 models, adding to the excitement and driving demand. Our diverse brand portfolio has been significant competitive advantage, ensuring we have the right boat for every customer, regardless of their location. Promotional activity remains robust, with the manufacturers consistently offering support to drive sales and clean out aged inventory. Elevated inventory levels have been a common theme across the industry this year. Although, we typically increase inventory in the fourth quarter as part of a seasonal build. Our inventory was slightly down sequentially due to our optimization efforts. As we redefine our product strategy and phase out certain brands, we expect inventory to decrease another 10% next year. Regarding our current inventory composition, we are comfortable with the mix of 2024s and 2025 models. We have reduced our orders for model year 2025 and are being replaced at a slower pace than prior year. Our finance and insurance penetration remained strong and well within our target range. Customers have appreciated a slightly lower interest rate environment, so any future rate cut should make financing options even more attractive to them, while also improving the economics of the boats financed through OneWater. And with that, I'll turn the call over to Jack to go over the financials in more detail.

Thanks, Anthony. As mentioned, our fourth quarter results were impacted by Hurricane Helene. The closure of stores and insurance markets prior to the storm directly affected our revenues. Fiscal fourth quarter revenue decreased 16% to $378 million in 2024 from $451 million in 2023. New boat sales were down 18% to $217 million in the fiscal fourth quarter of ‘24, while pre-owned boat sales decreased 20% to $73 million. Revenue from service parts and other sales for the quarter decreased 7% to $76 million. Driving this was a reduction in sales on our Distribution segment, which was partially offset by increases within our dealership segment. Finance and insurance revenue decreased 12% to $11 million in the fourth quarter, but was slightly higher as a percentage of total boat sales. Gross profit decreased 24% to $91 million in 2024, compared to $119 million in 2023. This was driven by the return to pre-COVID margins on boat sales, lower margins on brands we are exiting, and restructuring charges included in cost of sales. Sequentially, gross profit margin declined, but absent the restructuring charges and cost of sales, gross profit was in line with the June quarter and with our expectations. Fourth quarter 2024 selling, general and administrative expenses decreased to $80 million from $85 million. SG&A as a percentage of sales was 21%, up 220 basis points on lower sales. On a dollar basis, SG&A was down 6% due to the previous cost reduction actions and ongoing expense management and lower personnel costs in the quarter. Operating income increased $4 million from a loss of $117 million and adjusted EBITDA was $8 million compared to $30 million. Net loss for the fiscal fourth quarter totaled $10 million or $0.63 per diluted share compared to a net loss of $111 million or $6.89…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Joe Altobello with Raymond James. Please go ahead.

Thanks. Hey, guys. Good morning. First question for you, Jack. I guess, if you could quantify for us, what the impact on revenue and EBITDA in the quarter was from Helane?

Yeah. Thanks, Joe. It's a tough one to actually get a very specific number on. The period of time, it really was out a little over a week's time from quarter end. But we're estimating it's probably in that $30 million plus range. Some of it, we were able to get some deals like on the East Coast of Florida, which wasn't impacted. We had some insurance markets open up right on 30. So real fluid, but it's somewhere in that, I'll call it, all that range.

Okay, helpful. And then, in terms of the expectation for Helane and Milton, maybe help us understand how you're thinking about the first quarter in terms of EBITDA? And does your guidance assume that you recoup any of those lost sales over the balance of the year?

Yeah. There's -- it's difficult to exactly see how it's going to play out. Obviously, our expectations will be next -- the fourth quarter of '25 would be a very easy comp for us to overcome and expect to see that up significantly. But I do think there's some expectation that the back half will see some recovery from the West Coast of Florida. But just as you know, Joe, right, when you have a hurricane, customers don't just rebound the next day. Many people are having to replace homes, cars, businesses and unfortunately the boat is further down the list. Sometimes it can take 18 months before they're ready to purchase the boat. So it's -- you don't ever really expect a big spike coming from a post hurricane event, but we do think after six month period, certain customers will be back in the market and active. But we're monitoring the West Coast, we've had some mixed results. Some stores are tracking better than others. But we have about 11 store, excuse me, 10 stores in that, let's call it, Tampa Clearwater down to Fort Myers and that span there. So a number of stores in the impacted area.

Okay. Thank you.

Thanks, Joe.

And the next question comes from Craig Kennison with Baird. Please go ahead.

Hey, good morning. Thanks for taking my question. Austin, I'd love to ask you just to give your point of view on the state of the boat consumer. We've got difficult environment to predict, whether it's you mentioned the Fort Lauderdale Show, which is positive. You've got a lot of other trends that are somewhat negative in the industry? And then you've got the election result, which I assume is friendly towards the boat consumer. But how do you unpack all of that and digest that information to provide a boat outlook?

Yeah. I mean, that's a tough one. But I mean, if you look at Lauderdale, Lauderdale was a great show. It was kind of like, I mean, and I'll let Anthony jump in on this too because he was on the docks a pretty good bit, but it was like a breath of fresh air. Like, it just seemed different. And I don't know, if it was just -- there was a relief that the unknown of the election was over, because the weather wasn't that great, the first couple of days, but it was a lot better than we were expecting. We were kind of expecting it to continue on the -- let me rephrase, October was a pretty Dadgum good month. Now, we just -- some of that was pull forward from September, but it was just -- it just felt different. Anthony, you want to jump in and make a comment on that? I mean, it's hard to explain, but you just the vibe and the tone just felt completely different than what we've seen in the last nine months.

Yeah. We didn't have a lot of the interest rate conversations with customers. We didn't have a lot of negative conversations where they were waiting for something. Everybody was pretty positive and the boats were priced accordingly and aggressively. They also moved some older inventory, so it created a lot of stir and it was -- it felt very good back to where the boat business usually feels to me personally.

And just to follow-up on that, it sounds like you didn't get a lot of pushback on interest rates. Were you seeing a customer that's more affluent and just not sensitive to rates? And if so, do you have any comment on how the rate sensitive consumer might be thinking?

I think we've seen that for the last five years, seven years. I mean, the fluency of our customer is, it just continues to increase and it's just one of those things that when you look at from a financing perspective, we have to work really hard and we do work really hard and we're kind of still staying in that -- in our range of what we want this from a penetration standpoint. Now we just got to spread that margin. But yeah, the customer is definitely more affluent than it was 10 years ago. I mean, a lot of its access to water and more people getting to water, which is exciting because it just increases the churn. So a more a scarcity of access to water that's overloaded by fluency is a good thing for the churn as we move the industry forward.

That's great. Thank you.

And the next question comes from Drew Crum with Stifel. Please go ahead.

Okay. Thanks. Hey, guys. Good morning. So on your same-store sales for the quarter, it appeared to lag the industry. Is it simply the geographic concentration in Florida or are there any other factors you think contributed to the share loss? And then I have a follow-up.

Yeah, 100%, I think it was the -- how the -- we have so many stores kind of on that Gulf Coast. And so I think when you factor that in, we were slightly worse than the other, I think the industry that the segments we participate in was around 13%, 14%. So we were certainly a couple of points worse than that. But obviously, have a much heavier concentration on that Gulf Coast, right? Because when that storm was brewing in the Gulf, we had every store from the Florida Keys to Orange Beach, Alabama, all of those coastal stores in preparation mode. And so right the service department shut down. We're not doing retail work. We're getting customer boats out of the water, our boats out of the water, battening down the hatches. So I think that probably overweighted a little bit.

Got it. Okay. Thanks, Austin. And then with your pro forma leverage approaching 5 times, can you address what kind of flexibility you have around uses of cash? And I guess M&A specifically, I think you mentioned that, you've got a full pipeline entering fiscal '25 and where do you expect to be at year end? Thanks, guys.

Yeah. No, I think it's we continue to look at acquisitions. Some of them last couple of deals we've done have been minimal capital outlay. And I think there's a number of them in the pipe that are such. There's also some larger deals where they're still going through a normalization process of their earnings. And they have to kind of anniversary that before they're going to be realistic with purchase prices. So we're conscious of where we're at. We're working towards reducing debt and driving things forward with the cost actions that we take with the brand alignment that we took and reducing the number of brands, all of that helps to simplify our business, increase the profitability of our business and strengthen as we go forward.

Thanks, Jack.

Sure.

And the next question comes from Fred Wightman with Wolfe Research. Please go ahead.

Hey, guys. Good morning. I was hoping you could just help us out a little bit with some of the segment level expectations, particularly when it comes to gross margins. You mentioned that new boats are sort of back to where they were from a pre-COVID perspective, but there's also a lot of promo in the market. So as you think about fiscal '25, do you expect that sort of be up, down, sideways? How should we think about that?

Yeah. I'm -- let me jump in, Jack. I'm cautiously optimistic that we can get a little bit of margin to help on new boats as we move into 2025. What will be interesting is, how the overall industry the reduction of field inventory or dated field inventory comes down and how aggressive or fast the promo dollars go away and those have to be backfilled with just straight margin from us. But as you get through dated inventory and everybody is not in a -- I'm paying interest on this boat, I got to get rid of it, you should see some sort of margin relief to the upside. Is it a half a point? Is it a point? Is it a point and a half? That's still to be determined, but I don't think we see that till you get into the gut of the season, till you get into those April, May deals because there's still going to be some flushing out when you look at an overall gross margin, still going to be some flushing out of this old inventory. So I'm expecting to see some bump up, but we just got to -- we got to continue to keep chugging along like we are. It feels like every time we do these calls and like we're getting closer, we're getting closer. And it's just like running through quicksand. It just takes a little while for all this inventory to flush through the system. But it's better today than it was yesterday, and it's better this month than it was three months ago. And I think that, I've talked with [indiscernible] earlier in the week and that they've seen some good positive trends, not only from the Lauderdale Boat Show with other dealers, but also just across the nation of increased payoffs and stuff. So things seem to kind of be lighter and easier and going in the right direction, and we just need to keep doing that. We should see a little bit of margin bump as we move into the back half of next year.

Yeah. I'll point out two things, Fred. We had some restructuring charges hit new boat cost of sales, right? So new boat seem to tick down a little bit. When you back out those restructuring charges, we get right back to that 17% and change percent on new boats. And then the same thing in parts, service and other, we ticked down just below 40%, because of some we consolidated some plants, some warehouses and there's some charges restructuring charges in there that brought that number down below 40%. But on an ongoing basis, it will be above 40%. We expect that as well. I think as we look into the first quarter with some of these brands that we're exiting, we could see some little bit of margin pressure there. But we also have some exciting ‘25 product that we're getting full margin on. So it will be a balance.

Okay. That makes sense. And then on the cost saves, will you just remind us or help us with sort of what the all in expected benefits for that is heading into 25%. I know that I think you guys did an action back in March and then there were some September actions too. But as we just think about the SG&A tailwind into next year, what is sort of the all in benefit from that?

Yeah. It's been interesting. We wanted to trim some costs. We've actually seen in many cases unit sales increasing in recent months. So we have to kind of keep this balance of, we want to make sure we're having adequate staffing to keep to support our customers. And so, we've made some cuts. The March cut was around $10 million, so about half of that now is baked in. And then, we took in about another $5 million dollars at the end of the year, that will bake into '25

Great. thank you.

And the next question comes from Michael Swartz with Truist Securities. Please go ahead.

Hey, guys. Good morning. Maybe just to drill down a little bit more on your ‘25 guidance, the low-single digit comparable store sales growth expectation. Give us a little sense of the drivers there? What's your outlook for the industry during your fiscal year and are you embedding any benefit from share gains, pricing, etc.?

Yeah. I would say, we're definitely embedding some share gain. I think we will outpace the industry. If we're low-single digit positive, the industry is probably low-single digit negative. I think it's a -- I think there's some uncertainty for us in particular with respect to the West Coast of Florida, and how quickly that rebounds and exactly what that impact is on the same-store sales guide as well -- as well as we have some exiting brands that we're pushing out. We have some store closures that will come out of the base that we did earlier this year. And so it's a little noisy, but we are positive on the year.

Okay. Jack? Hang on. Jack, real quick clarify that store closings. It's not like I mean, it's one off satellite locations.

Yes, absolutely.

Really small.

We're not closing any…

We’re not closing any of our major stores or anything that has any substance to it. It's all really just do we really need to have a satellite that's 30 miles away from the mother ship of the spoken hub just because it was convenient and we got a cheap lease. Consolidating that back down is helping us with personnel costs and stuff like that. It just doesn't make sense. We won't lose that business. So it's not like we're closing stores. I don't want that to that didn't sound right.

Okay. Thanks for the clarification, Austin. And then just maybe to put a finer point on the first quarter, I mean, there's a lot of noise, a lot of obviously disruption and it sounds like you did get maybe some business back that shifted out of the fiscal fourth quarter. But would you expect EBITDA to be negative in the first quarter? I'm just trying to get a sense of how we should model it?

It wouldn't surprise me if it was slightly negative.

Okay. Wonderful. Thanks, guys.

Yes. I just think with the unknown of the West Coast, it's kind of hard to see with and then you combined some aggressive actions on some of these brands we're exiting and clearing out model year 2024s and calendar 2024. I think as well as right when typically the December quarter tends to be a slightly lower gross margin quarter, when you look at it just from a seasonality perspective as well.

Okay, great.

And the next question comes from Noah Zatzkin with KeyBanc Capital Markets. Please go ahead.

Hi, thanks for taking my question. Just wondering if you could give any thoughts around kind of the state of the pre-owned market, any trends you're seeing there and how you're kind of thinking about ‘25? Thanks.

Yeah. I mean, I would say, the only thing that's really changed or the only thing about the industry that doesn't seem to ever change is the pre-owned market. There's not enough of them. And that's pretty steady case out there still today. We could always use 3 times as many as we have. So that's something that we put a lot of emphasis on and it's an important part of our business and we continue to focus on it and it's just a -- it's a tougher part of our business just because of the lack of inventory that's available.

Thank you.

That is the end of our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.