OneWater Marine Inc. (ONEW) Earnings Call Transcript & Summary

Thank you. Hello everyone. Thank you for joining us and welcome to One Water Marine Inc. Fiscal Third Quarter 2026 Conference Call. Um, After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Jack Ezell, Chief Financial Officer and Chief Operating Officer. Jack, please go ahead.

Good morning and welcome to One Water Marine's fiscal third quarter 2026 earning conference call. I'm joined on the call today by Austin Singleton, Executive Chairman, and Anthony Ashworth, Chief Executive Officer. Before we begin, I'd like to remind you that certain statements made by management during this morning's conference call regarding One Water Marine's fiscal third quarter 2026 in 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. affect future results are disclosed 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 by law. Please note that all comparisons of our third quarter 2026 results are made against the third quarter 2025 unless otherwise noted. And with that, I'd like to turn the call over to Austin Singleton, who will begin with a few opening remarks.

Good morning everyone and thank you for joining today's call. We delivered solid third core results that reflect continued execution of our strategic priorities despite a mixed retail environment. Throughout the year, we have remained focused on the levers within our control, optimizing inventory, expanding margin, and strengthening our balance sheet. While those actions required difficult decisions, they have positioned the business for stronger performance over the long term. As expected, we are starting to see these benefits reflected in our results. Despite revenue declining 4% year over year, we expanded gross margin by 70 basis points to 24%, driven by favorable product mix and the continued execution of our initiatives to enhance gross profit. And as volume leverage returns, we believe the benefits of these actions will have a greater impact on our P&L. We also are strengthening our balance sheet. We continue to reduce debt and reach our year-end leverage target ahead of schedule, demonstrating the strength of our execution and disciplined capital management. At the same time, we maintain healthy inventory levels across our dealership network, positioning us to meet the demand while preserving financial flexibility. In the current macro environment, we remain focused on what we can control. We set out to streamline the business, strengthen operations, and improve our financial position. As a result, we are primed to deliver accelerated growth as the market recovers. With that, I'll turn the call over to Anthony.

Thanks, Austin, and good morning, everyone. The retail environment remains challenging across the industry, particularly during what is typically the peak selling season. Even so, voting activity and customer engagement remains healthy, especially within our premium brands, giving us confidence in the underlying demand for the voting lifestyle. NEW BOAT REVENUE DECLINED MODESTLY AS LOWER UNIT VOLUMES WERE PARTIALLY OFFSET BY HIGHER AVERAGE SELLING PRICES, REFLECTING DISCIPLINE PRICING AND A FAVORABLE PRODUCT MIX. PREOWN REVENUE WAS DOWN AGAINST A DIFFICULT PRIOR YEAR COMPARISON, BUT UNDERLYING DEMAND REMAINED STABLE, AND WE CONTINUE TO EFFECTIVELY MANAGE OUR INTEREST. one of our core competitive strengths. The quality and age of profile of our new and pre-owned inventory positions us to meet customer demand while protecting margins. Over the past year, we've made significant progress optimizing inventory across the network. This is disciplined execution has strengthened both our operational performance and our financial position. Our parts and service business continued to demonstrate resilience. While reported revenue declined as a result of Ocean Biochem's sale, the underlying distribution business delivered year-over-year growth. Overall, we're pleased with the performance this quarter. Over the past year, we have made meaningful structural improvements to the business, strengthening our operating model, enhancing liquidity, and positioning the company to drive earnings growth as marketing conditions improve. At the same time, we have remained focused on delivering exceptional experience for our customers, reinforcing the foundation for long-term success.

With that, I'll turn the call over to Jack. Thanks, Anthony. Revenue for the third quarter was $531 million, a decrease of 4% compared to the prior year, with same-store sales down 2% versus an industry that is down high single digits in the categories where we compete based on the SSI data. New boat revenue decreased 2% driven by the impact of the strategic brand exits completed during the prior year, partially offset by higher average selling prices this year. Pre-owned boat revenue declined 4% against a difficult prior year comparison, which saw 18% growth. Service parts and other revenue declined 13%, primarily reflecting the impact of the ocean biochem sale. Excluding the impact of the sale, the underlying service parts and other businesses increased year over year. Gross profit totaled 127 million, while gross profit margin expanded 70 basis points to 24 percent, reflecting a favorable product mix and continued execution of our strategic initiatives to enhance BOE gross profit. Selling general administrative expenses declined by 5% to $87 million, reflecting the benefits of our prior cost reduction actions and continued expense discipline. As a percentage of revenue, SG&A was down slightly as the benefits of these cost actions mostly offset by lower revenue. Net income for the quarter totaled $12 million, or $0.69 per diluted share, compared to net income of $11 million, or $0.65 per diluted share, in the prior year period. The increase was primarily driven by higher income from operation and lower interest expense. adjusted diluting earnings per share was 73 cents compared to 79 cents in the prior year period. adjusted EBITDA totaled $38 million for the quarter, compared to $33 million in the prior year period. Turning to the balance sheet, we ended the quarter with $69 million of cash and cash equivalents. Inventory declined to $486 million, reflecting our disciplined inventory management and the impact of the Ocean Biochem sale. Long-term debt was 348 million, and adjusted net leverage was 3.7 times trailing 12-month adjusted EBITDA, a significant improvement from 5.8 times in the prior year period. Our target was to finish the year under four times, and as Austin mentioned, we achieved our goal ahead of schedule. We are pleased with our progress, supported by strong cash flows, proceeds from the Ocean Biochem sale, which were used to pay down debt. We are actively exploring debt refinancing options, and we look forward to sharing an update with you later this year. Turning to our outlook, based on the year-to-date retail trends across our markets, we now expect the marine industry to be down high single digits year-over-year. Despite a challenging retail environment, we expect to continue to outperform the industry. As a result, we have updated and narrowed our guidance for the fiscal year. We now expect dealership same source sales to be down low to mid single digits and revenue of 1.75 to 1.8 billion, which factors in current market trends, lost revenue from the exited brands, and the divestiture of Ocean Biochem. We expect adjusted EBITDA of 68 to 78 million and adjusted diluted earnings per share of 35 to 55 cents. For additional context, we anticipate a roughly $2 million headwind to adjusted EBITDA in the fourth quarter as compared to the prior year as a result of the Ocean Biochem sale. As we look ahead, our priorities remain unchanged. We will continue to focus on profitable growth, disciplined cost management, inventory optimization, and strengthening our balance sheet. We are starting to see the structural improvements we have made over the past year in our financial performance. These improvements have also created a more resilient business that is well positioned to capitalize on improving market conditions and deliver long-term value for our shareholders. This concludes our prepared remarks. Operator, will you please open the line for questions?.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Joe Altobello with Raymond James. Your line is open. Please go ahead. Hey everyone, this is Mitchell Engel, on for Joe.