OneWater Marine Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Hurricane Impact: Hurricanes Helene and Milton caused disruption, with stores temporarily closed, but all retail locations reopened. Sales were disrupted during a strong period, and customer recovery from insurance claims is ongoing.
• Industry Challenges: Marine industry faced demand and pricing reset to historical norms. OneWater's diversity helped mitigate challenges, with disciplined expense management.
• Cost-Saving Measures: Rationalized brands and consolidated parts/service facilities in Q4, impacting margins in the quarter but expected to benefit in 2025. Earlier cost actions led to lower SG&A expenses.
• Full Year Results: Same-store sales down 7% due to softer retail environment and weather closures. Service parts revenue affected by lower manufacturer production. Inventory strategy progress with inventory tracking in the right direction.
• M&A: Quiet in 2024 but active pipeline, with opportunistic transactions pursued that meet financial criteria and strategic objectives.

Segment Performance

• Fourth Quarter 2024: Revenue decreased 16% to $378 million. New boat sales down 18% to $217 million, pre-owned boat sales down 20% to $73 million, service parts and other sales down 7% to $76 million. Finance and insurance revenue down 12% to $11 million. Gross profit decreased 24% to $91 million. SG&A expenses decreased to $80 million. Operating income increased from a loss to $4 million. Net loss was $10 million or $0.63 per diluted share.
• Full Year 2024: Total revenue decreased 8% to $1.8 billion. Same-store sales decreased 7%. Service parts and other revenue decreased 10% to $291 million. Gross profit decreased 19% to $435 million. SG&A expenses decreased to $333 million. Operating income grew to $65 million. Net loss was $6 million or $0.39 per diluted share.

Guidance

• 2025 Outlook: Total sales expected in range of $1.7 billion to $1.85 billion, same-store sales low-single digit up. Adjusted EBITDA expected in range of $80 million to $110 million, adjusted earnings per share in range of $1 to $2.
• Recovery Expectations: Anticipate back half of 2025 to see recovery from West Coast Florida, but customer rebound from hurricanes takes time, with some customers taking 18 months to be ready to purchase.
• Inventory: Expect inventory to decrease another 10% in 2025, with current inventory mix of 2024s and 2025 models comfortable.

Risks

• Hurricane Disruptions: Uncertainty in customer recovery time from hurricanes, impacting sales and operations.
• Marine Industry Volatility: Fluctuations in demand, pricing, and inventory levels pose challenges to financial performance.
• Interest Rate Effects: Impact on financing costs and inventory carrying costs, affecting profitability.

Q: Joe Altobello with Raymond James asked about the impact of Hurricane Helene on revenue and EBITDA in the quarter and expectations for the first quarter.

A: Jack Ezzell estimated the revenue impact from Helene was in the $30 million plus range, and it's difficult to predict first quarter EBITDA precisely, with expectation of recovery in the back half but customer rebound taking time.

Q: Craig Kennison with Baird asked about the state of the boat consumer and interest rates.

A: Austin Singleton noted the Fort Lauderdale Show was positive, customer is more affluent, and financing penetration remains strong. Anthony Aisquith mentioned positive vibe at the show with aggressive pricing and older inventory movement.

Q: Drew Crum with Stifel asked about same-store sales lag and pro forma leverage.

A: Austin Singleton attributed same-store sales lag to geographic concentration in Florida. Jack Ezzell discussed M&A pipeline with minimal capital outlay deals and focus on reducing debt.

Q: Fred Wightman with Wolfe Research asked about segment level expectations for gross margins in 2025.

A: Austin Singleton expected margin bump as dated inventory flushes out, and Jack Ezzell noted restructuring charges impacted new boat and parts margins, with ongoing margin balance between exiting brands and new '25 product.

Q: Michael Swartz with Truist Securities asked about 2025 guidance and drivers of comparable store sales growth.

A: Jack Ezzell mentioned embedding share gains, expecting to outpace industry, with uncertainty from West Coast Florida recovery and exiting brands. Austin Singleton clarified no significant store closures, just consolidation.

Q: Noah Zatzkin with KeyBanc Capital Markets asked about the pre-owned market.

A: Austin Singleton noted the pre-owned market has limited inventory, which is an important part of the business but challenging due to lack of available inventory.