OneWater Marine Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
January 30, 2025
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Operator

Good morning. My name is Chloe, and I will be your conference operator today. At this time, I would like to welcome everyone to the One Water Marine, Inc. Fiscal First Quarter 2025 Conference Call. All lines have been placed on mute to prevent any background noise.

Operator

After the speakers' remarks, there will be a question and answer session. Thank you. I would now like to turn the conference over to Jack Ezell, Chief Financial Officer. Please go ahead.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Good morning, and welcome to 1 Water Marine's fiscal Q1 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. Before we begin, I'd 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 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 influence future results are discussed in the company's earnings release, which can be found in the Investor Relations section on the company's website and in its filings with the SEC.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

The company disclaims any obligation or undertaking to update forward looking statements to reflect circumstances or events that may occur after the date the forward looking statements are made, except as required by law. Please also note that all comparisons to our fiscal Q1 2025 results are made against our fiscal Q1 2024, unless otherwise noted. And with that, I'd like to turn the call over to Austin, who will begin with a few opening remarks. Austin?

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Thanks, Jack. Thank you, everyone, for joining today's call. Our Q1 results came in better than expected driven by low double digit increase in new unit sales significantly outpacing the industry. Overall, revenue increased 3% with same store sales up 4% driven by the strong push from our sales team to gain market share and optimize inventory. Margins declined in the quarter reflecting the impact of deliberate actions to drive sales.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Margins also vary by product. Current model year margins are holding up well, while brands we were exiting were discounted to close sales. Given the impact of Hurricane, Helene and Milton had on the West Coast of Florida, I am pleased with our top line growth in the quarter. As you may recall, we temporarily closed several stores in the fall in preparation for the storm affecting Florida and the Gulf Coast. While it is difficult to quantify lost sales that we recouped during the quarter, sales in the impacted area were down mid single digits compared to the prior year.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Overall, we are making good progress on managing inventory, which is down 10% year over year. Our goal is to have cleaner inventories each quarter striking the right balance of brand, make and model, ensuring that we are well positioned to meet customer needs while maintaining operational efficiency. These efforts are starting to pay off as highlighted by our lower carrying costs on floorplan interest expense versus the prior year period. We are also seeing the benefits of our ongoing cost reduction initiatives taking effect. Selling, general and administrative expenses declined on both a dollar basis and as a percentage of total revenue.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Between our inventory position and cost actions, we are setting One Water up for success in the quarters to come. Despite better than expected results in the Q1, which is historically our smallest quarter, we remain cautiously optimistic about 2025. The industry continues to face uncertainty after a challenging 2024, and we have not seen any significant market changes that would alter our outlook for the year. As a result, we are reaffirming our guidance range for 2025. Our focus remains on executing our inventory strategy as we prepare for the summer selling season, while remaining nimble to respond to any changes in market dynamics.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

With that, I will turn it over to Anthony to discuss the business operations.

Anthony Aisquith
Anthony Aisquith
President & COO at OneWater Marine

Thanks, Austin. Sales in the quarter benefit from higher unit volumes, offset by the lower average unit price as we work to drive sales during the slower winter months. With all of our stores operational again after hurricane related closures, we developed promotional strategies and actions to give customers additional reasons to buy. I am proud of the team's effort to achieve the increase in sales in the quarter that seasonally experiences the slowest activity. Our attention now shifts to the boat show season.

Anthony Aisquith
Anthony Aisquith
President & COO at OneWater Marine

Region shows have been mixed results, some facing challenges like unprecedented cold weather and snow in Atlanta and significant rain at the St. Petersburg Outdoor Show. Despite these adversities, customers have been active when weather permitted and overall sentiment has been positive. The premium category has done well and is in line with recent trends. All in all, we are ready to serve customers at upcoming events.

Anthony Aisquith
Anthony Aisquith
President & COO at OneWater Marine

After a year marked by high inventory levels, our focused approach to inventory management has put us in a strong position as the industry works to clear out excess and non current inventory. While this push caused some near term discounting, we are encouraged by our solid finance and insurance performance, which helped offset some of the impact and highlighted the benefits of our diverse business model. Total finance and insurance revenue grew 50 basis points as a percentage of total revenue compared to the prior period and finance penetration remained strong. Our diverse brand portfolio continues to be a key advantage, enabling us to deliver boats and to meet the varied wants and needs of our customers across different markets. Meanwhile, the promotional environment has continued with our manufacturing partners actively supporting sales initiatives and helping clear aged inventory.

Anthony Aisquith
Anthony Aisquith
President & COO at OneWater Marine

Although we typically build inventories in the winter months, we've added inventory from the 4th quarter at a slower pace compared to the prior year, being mindful of the volume and model of 2025 boats we are taking in. And with that, I'll turn the call over to Jack to go over the financials in more detail.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Thanks, Anthony. The Q1 was a solid start to the year with revenue increasing 3 percent to $376,000,000 from $364,000,000 in the prior year. New boat sales were up 3% to $248,000,000 in the Q1, while pre owned boat sales increased 7% to $57,000,000 Overall, same store sales were up 4% driven by an increase in new unit sales despite the industry unit sales being down approximately 14% in the categories we participate in. Revenue from service parts and other sales for the quarter decreased 1% to $62,000,000 As we have seen in the last several quarters, reduced production schedules from boat manufacturers drove lower sales in our distribution segment, which were partially offset by increases in our dealership segment. Finance and insurance revenue increased 28% to $9,000,000 in the Q1 and was higher as a percentage of total boat sales.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Gross profit decreased 8% to $84,000,000 in 2025 compared to $91,000,000 in 2024. This was driven by lower margins of the brands we are exiting in addition to new and pre owned boat pricing. Q1 2025 selling, general and administrative expenses decreased 1% to $79,000,000 SG and A as a percentage of sales was 21%, down 90 basis points as a percentage of revenue due in part to lower personnel costs in the quarter, previous cost reduction actions and ongoing expense management. These savings were partially offset by certain inflationary increase in fixed and administrative expenses. Operating loss decreased to $2,000,000 and adjusted EBITDA was $2,000,000 Net loss for the Q1 totaled $14,000,000 or $0.81 per diluted share compared to a net loss of $8,000,000 or $0.49 per diluted share in the prior year.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Adjusted loss per diluted share was $0.54 compared to an adjusted loss per diluted share of $0.38 in the prior year. Now turning to the balance sheet, December 31, 2024, total liquidity was in excess of $40,000,000 dollars including $23,000,000 of cash and additional availability under our credit facilities. Total inventory at December 31, 2024 was $637,000,000 compared to $707,000,000 at December 31, 2023. We continue to improve our current mix in aging while we execute on our brand rationalizations. We expect to see some incremental benefits from further inventory reductions as we progress throughout the year.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Total long term debt as of December 31, 2024 was $428,000,000 net of $23,000,000 in cash, results in net leverage of 5.2 times trailing 12 month adjusted EBITDA. We are focused on reducing leverage in the latter half of twenty twenty five. Looking ahead, we are maintaining our previously issued fiscal 2025 guidance and anticipate total sales to the union in the range of $1,700,000,000 to $1,850,000,000 with same store sales up in the low single digits. We continue to expect adjusted EBITDA to be in the range of $80,000,000 to $110,000,000 and adjusted earnings per diluted share to be in the range of $1 to $2 Our capital allocation priorities remain the same, driving organic growth, expanding our presence through strategic acquisitions in key boating markets. The pipeline is active, but we will continue to deploy cash where it creates the greatest value for shareholders.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

This concludes our prepared remarks. Operator, will you please open the line for questions?

Operator

Our first question comes from the line of Fred Wightman from Wolfe Research. Your line is open.

Fred Wightman
Director at Wolfe Research LLC

Hey, guys. Good morning. I was hoping you could just talk about the cadence of the quarter, Austin. I think when you reported last or held a call last, you talked about some encouraging October trends. So I'm wondering if you could just update us on what you saw from sort of month to month basis?

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

I think it was a pretty solid quarter on every month if you were comparing it over last year. But I would say if anything, December is the 1 month that you really can't pinpoint because it starts to get really cold in some places, but then people get caught up in Thanksgiving into November and running into just the year end New Year's and Christmas is just, I would say October November were pretty dagum strong and December was probably on average or flat. Anthony, you probably have a better feel for that than I do.

Anthony Aisquith
Anthony Aisquith
President & COO at OneWater Marine

Yes, I think you described it exactly. I mean our October November were very strong with the December just being what it normally is in normal times.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

The thing I'd point out too, right, is that October in particular, especially the first half was in the Florida locations were impacted by the storms. So that kind of geography was a little bit light compared to the rest of the country.

Fred Wightman
Director at Wolfe Research LLC

Okay. That makes sense. And then just on the front end grosses, it was down a little down year over year and then down a little bit sequentially. I know you guys are exiting some brands. So can you maybe just give us some guideposts for what that looked like maybe on a like for like basis versus the exited brands?

Fred Wightman
Director at Wolfe Research LLC

How to think about that margin profile going forward? Thanks.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Jack, you want to Yes. Well, I mean, I'll just say, look, let me just say this and then you can kind of fill in what I don't wherever. When Fred, when we get to those exiting brands, we want those things gone. I mean, there's no support from the manufacturer. The sales guys don't like them because there's no real long term future in them.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

So they gravitate for the other things. So I mean, it's a tough sledding and we've done a really good job of pushing those through. But those are coming at 0 margin or either a negative margin. And so it's having a pretty good impact. I think we mentioned in the script up there that the New Year model stuff is kind of much better healthier margin.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

And the further we get into this year, the better off that's what gives us a little bit of confidence in what we said last quarter on the earnings call was one of those green shoots that we saw as we get rid of these exiting brands, we do feel like we'll get some margin lift because the new boats are bringing a higher margin.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Yes, Fred. I think next quarter we'll see some margin pressure continue as we get through the rest of them. But I would expect once we get past our Q2 and kind of get into the heat of the season that margins may pick up a little bit. But we're focused on making sure we keep our inventory in check and we're balancing that with our model year 2025s are coming a little bit slower than model year 2024s did. You'll notice that by inventory decline year over year and we're going to continue to focus on bringing those numbers down.

Fred Wightman
Director at Wolfe Research LLC

And Jack, just to be clear, when you say pressure in 2Q, is that a sequential comment, year over year comment, both? What do you mean?

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Yes.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

It's a year over year. I would say actually, it's flattish, maybe even a little bit better. Again, it's really hard to move a lot of product in those winter months, especially outside of Florida. And the team did an outstanding job outside of Florida moving product.

Fred Wightman
Director at Wolfe Research LLC

Perfect. Thanks a lot guys.

Operator

Our next question comes from the line of Joe Altobello from Raymond James. Your line is open.

RESERVED
SPEAKER at UNKNOWN

Hey, good morning. This is Martin on for Joe. I just first wanted to touch on the comp. Do you have an idea of where comp was excluding Florida?

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Yes, it's going to move up. I'd say it's probably in it was probably in the range of 6%, 7%.

RESERVED
SPEAKER at UNKNOWN

Okay. And then just quickly on comp again, do you have a breakdown between units and ASPs?

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Yes, I mean, it's largely units were up double digits. So I think it was in the 12%, 13% range.

RESERVED
SPEAKER at UNKNOWN

Perfect. Appreciate it guys. Thank you.

Operator

Our

Operator

next question comes from the line of Mike Swartz from Wolfe Securities. Your line is open.

Michael Swartz
Michael Swartz
Director & Equity Research at Truist Securities

Hey guys, good

Michael Swartz
Michael Swartz
Director & Equity Research at Truist Securities

morning. Maybe just starting with inventory. Jack, is there I guess an inventory level you guys are actually in terms of new boats, is there an inventory level you guys are targeting for fiscal year end? And maybe what does that look like relative to where we are today?

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Yes. No, we made a good concerted effort with the sales push as well as with how we're managing our orders this quarter. Our target for September 25 is to be down year over year 10% plus. I think, again, we while we're down 9 a little over 9% this quarter, I think that could flux next quarter as we take some additional bows in advance of the season. So that will be a little fluid throughout the year, but our goal is to be down in excess of 10%.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Well, yes, our goal is to be down Mike, our goal is to be down a little bit just because we've exited 9 brands. But I mean, we also going to continue to do what we do every day and that's monitor the market. I mean, we feel pretty good about this year as we move into the back half. I don't know if that means that we're going to see a big push on the retail side. But if retail comes out better than expected, then that will probably not be the case.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

I mean, we'll have plan accordingly based off what demand is and what we're seeing out there and we watch that on a weekly, really on almost a daily basis.

Michael Swartz
Michael Swartz
Director & Equity Research at Truist Securities

Okay.

Michael Swartz
Michael Swartz
Director & Equity Research at Truist Securities

And just sticking on the subject of inventory, is there a way to think about maybe what used inventory or sorry, not used, what aged inventory looks like today maybe versus a typical, whatever typical means, a year? And then also, what I guess how much inventory do you still have kind of wrapped up with some of these brands you're exiting? I'm just trying to get a sense of how impactful that headwind is over the next couple of quarters relative to what we've seen in the last, call it, 6 months or so?

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Yes. I wouldn't say it's that impactful over the next couple of quarters. I think we'll as Jack said a little while ago, we'll feel the pressure of it a little bit this quarter. But I look at it just from a total dated standpoint because all those brands that were exiting are really in my dated box. So you got current 2025s and then you got dated stuff.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

And typically in a normal year pre COVID for 2 decades pre COVID, you really went into the off season wanting somewhere around 20 or not wanting, but the industry usually ended up going in there somewhere around 20%, 25% of carryovers going into the new year, calendar new year. And we always wanted to be slightly under that, Jack,

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

I don't know if you

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

have that in front of you, but I mean we're probably less than 20% right now or right at that, aren't we?

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Yes, I don't have that right in front of me.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

I would

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

agree with your comment. I did hear from some data I've gotten from wells that suggested the industry as a whole was kind of getting to that point.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Yes. The inventory story to me, not just one water, but for the industry per wells is that inventory is cleaning up pretty bad gum good. I don't really get into total inventory out there from a wells perspective versus what's the dated and they seem to be a lot happier today than they were a month ago, 3 months ago, 6 months ago, especially forecasting going into the selling season. So the inventory itself from a dating perspective is continuing on the trend that it's been on the last 6 months cleaning itself up slowly but surely and that's some of the green shoots that we see in the back half of the year.

Michael Swartz
Michael Swartz
Director & Equity Research at Truist Securities

Okay, okay. That's helpful. Thanks Austin. And then maybe just philosophically, right, your quarter came in plus 4% in comp despite a lot of the headwinds and challenges that we had with some of the dislocation in the Florida market and you're maintaining your outlook for the full year despite having some pretty easy comps going forward. I mean, can you just give us a sense of what maybe what that discussion was like internally in terms of just maintaining that outlook?

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Yes. I mean, I think look a lot of it has to do with when you think about Q4 or excuse me the December quarter, right, it's the slowest quarter of the year. When I go out and I look also at consensus, consensus has Q3 at EBITDA of $50,000,000 which seems feels a little strong. And so I think if you layer in and Q2 and Q4 tend to be pretty close to one another. And so I think if you bring down Q3 a little bit and level out Q2 and Q4, I think that kind of keeps you around that 95% consensus number, which is the midpoint of the range.

Michael Swartz
Michael Swartz
Director & Equity Research at Truist Securities

Okay.

Michael Swartz
Michael Swartz
Director & Equity Research at Truist Securities

Thanks.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Jack, I'm a little bit more of an optimist and I'm starting to really kind of you can see some of these green shoots. But I mean, we thought we've seen some green shoots in the past and been throwing curve balls. And so we really want to watch out and be a little bit more cautious until we get a little bit further into the selling season, in the back half of Miami. After that Miami show, I think we'll have a little bit more confidence in what's in front of us versus where we are today coming out of the like Jack said, the slowest quarter of the year.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Yes. I'll just point out too, right, what once felt like a tailwind of interest rates from the Fed and whatnot, it feels like rates the latest forecast suggests that we're not going to get as many cuts as we thought 3 or 6 months ago. And so I don't feel like it's necessarily a headwind coming at us, but it just doesn't feel like we're going to get the some of that relief maybe we were expecting in the back half of the year.

Michael Swartz
Michael Swartz
Director & Equity Research at Truist Securities

Got you. Okay, helpful. Thanks guys.

Operator

Our next question comes from the line of Noah Zatkin from KeyBanc Capital Markets. Your line is open.

RESERVED
SPEAKER at UNKNOWN

Hi, this is Ryan on for Noah. Thanks for taking my question. And I know you just kind of briefly touched on it, but it would be great to hear your perspective on the industry. Now we're in a difficult environment and it seems like that rate cut conversation has changed and has maybe kind of put on pause for now. But it would be great to hear if you're seeing any other kind of green shoots or changes in confidence coming out of this quarter?

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

I don't know if there's a change in confidence. I think that me, Jack and Anthony talk about it a lot. I mean, the green shoots that we kind of laid out last earnings call are still out there and they still look reasonably achievable. And when you get into what really will be one of the biggest drivers of that and that's inventory cleaning up. Because as inventory cleans itself up from a dated perspective, I think if you just if you took the total industry and took all the 2024s out and older, the dated inventory out and you just looked at what the industry has just in 2025, the industry is super healthy.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

I mean, the manufacturers have been disciplined on cutting back production. The dealers are taking the right amount of inventory going into 2025. So when you look at that, you're like, okay, that's we're in great shape from an industry perspective. It's getting the other stuff cleaned up. And the quicker we clean it up, that leads to several things from a one water perspective that we look up.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

It leads to higher margins on new boat sales. It leads to more turns on new boats, which saves us money that we can count because we know what our interest savings is when you increase your turns. But there's dollars that are hard to quantify like if you move a boat 25 times around the lot versus one time, there's a cost associated with it. And then you look at interest savings, even if the rates don't move, the more turns, the less interest you pay. But then as inventory cleans itself up, the manufacturers are going to get ready to increase production going into 2026, which swaps over and helps TH, because TH doesn't have to do anything today to increase its revenue and bottom line.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

All we need to do is have the manufacturers increase production 10% and we'll get a 10% lift on what we sell to those a 10% increase in sales there for those manufacturers that are increasing sales because they have to have the parts in order to build the boat. So there's all these little things that kind of are starting to really take shape, but

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

a lot of it has

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

to do with getting that inventory cleaned up. And I would just say, every at the end of every quarter, really at the end of every month and now really on a weekly basis that I'm talking to wells, we're headed in the right direction. We haven't the train hasn't come off the track and that's starting to build confidence as we go into the selling season and which is a little bit of a wait and see. We just need that to continue.

RESERVED
SPEAKER at UNKNOWN

Yes. Thanks for taking my question. And maybe just pivoting a little bit, it would be helpful to hear any thoughts around the state of pre owned market, what you're kind of seeing there and how you're thinking about used in 2025?

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Yes, it's the same old broken record that we've been saying for the last 25 years. We don't have enough of them. It's that pre owned market is still extremely limited on inventory. It's still extremely limited on from an industry perspective, there's just not enough out there. And I don't see that getting better anytime soon.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Thanks.

Operator

Our next question comes from the line of Alice Wicklund from Baird. Your line is open.

RESERVED
SPEAKER at UNKNOWN

Yes. Good morning, gentlemen. Thanks for taking my questions on for Craig this morning. Maybe a little bit related to the pre owned question, but a little more focused on new. Curious if you have a way to measure first time buyers versus trade in buyers.

RESERVED
SPEAKER at UNKNOWN

In some markets like auto, we're seeing some would be trading consumers sitting out because the monthly payment math just doesn't make sense given inflation rates and trade in value. So wondering if you're seeing anything on that, and how it's playing out in the marine category?

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Jack, Anthony, I'll let you all take that. I mean, you can speak really to the Atlanta Boat Show probably on that, just what we saw there.

Anthony Aisquith
Anthony Aisquith
President & COO at OneWater Marine

Yes. I think we are seeing the amount of trades starting to reach up where prior in the COVID period where the trades really went dropped down significantly in this whole fiscal year has already started off with more of a demand in trades. People are trading boats in where they weren't before. We are blessed to be tied to a lot of manufacturers that continue to be innovative that gives people a reason to trade. Whereas, 25 years ago, the new boat came out and it was just a different color where today, every year our manufacturers are bringing some incredible things.

Anthony Aisquith
Anthony Aisquith
President & COO at OneWater Marine

So it's making people want to trade. So the percentage I don't Jack, I don't know if you have that in front of you with the actual percentage, but it has gone up dramatically where it was.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Yes.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Again, right, this what Austin was getting at our biggest challenge is supply when it comes to selling trades or selling used boats. And so I think we've seen some indicators of supply coming in at the shows like Anthony referred to. When you break down our sales, our pre owned sales, which are up 6% 6.5% year over year, actually trades are up double digits in that, countered by a little bit of people shifting from a little downward trend in consignment, right? So people go ahead trading their boats to get that new product. It's easier, more efficient process for them where they can just hand over their trade and we'll take care of the paperwork and everything else with getting them in a new boat.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Well, but one other thing too though that we need to kind of it's really hard for us to get really good clarity on this because we have we've been pushing for years in some of the states that we operate in and have now gone to basically a title. So a lot of boats in the past went from consumer to consumer, never went through the dealership because there was no tax advantage. And the way that if you sold it from person to person, you didn't pay sales tax. That started to change because when you go and get the it was like that probably half the states we operated in. And we've slowly been getting that push through from a legislation standpoint to get if it's once you go get a boat, get a new tag, you pay sales tax.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

If you haven't you don't prove that you paid it at a dealership. And that way more trades are probably starting to come to us too. So it's a little hard to really to gauge that. But I agree with what Anthony and Jack both said, I do believe trades are up.

RESERVED
SPEAKER at UNKNOWN

Great. That's helpful color. Just switching gears a little bit, I mean, you called out higher F and I penetration mitigating some of the margin pressure from working down inventory. Maybe let's dig into that a little bit. What's driving that?

RESERVED
SPEAKER at UNKNOWN

And is it something that's sustainable through the balance of the year?

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Yes. It's definitely, again, it's a concerted effort by the team. I think it's one of those areas if you're not pushing as hard as you can to get that finance, you won't get it. And so I think the team executed on some strategies. We had some price points and some special finance options for some of those discontinued brands that help kind of drive a little bit.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

But we'll continue to be very competitive in the F and I department kind of looking to expand and increase our penetration and increase our income there.

RESERVED
SPEAKER at UNKNOWN

Great. And then I think that just want to touch on the M and A pipeline. I think you called it active, maybe frame a little bit more what that looks like today.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Yes, we're in no hurry to do anything right now. I mean, every day time works in our favor. And I think we're just we're being cautious kind of waiting to see how things plan out over the next 30, 90 days getting into the season. There's a lot of dealers out there that it's been a hard winter for them. And we're just kind of wait and see how numbers react and how they come down and what they look like going into the selling season compared to a year ago, especially since most of the deals that we buy are on a trailing 12.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Just going to be very selective and be a little bit disciplined on timing right now and just wait for stuff to kind of fall in our lap.

RESERVED
SPEAKER at UNKNOWN

Great. Thanks guys. That's all for me.

Operator

Our next question comes from the line of Brian Griffin from D. A. Davidson. Your line is open.

Griffin Bryan
Senior Equity Research Associate at D.A. Davidson Companies

Yes. Thanks guys. Good morning. So what have you guys been seeing from a promotional aspect of these shows so far? Right.

Griffin Bryan
Senior Equity Research Associate at D.A. Davidson Companies

I'm assuming it's still competitive, but maybe just some high level comments on what you've seen so far by category and maybe other dealers.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

I think it's been Anthony, you know what they did at the Atlanta Boat Show and what we've been doing at the Boat Show, but I think it's been pretty much steady Eddie for the last year. I mean manufacturers are still being very supportive moving inventory. They know they've got to be out there helping especially pushing the stated inventory through. And I think they're all still doing that basically on the same level that they had been. And that's why we weren't expecting a whole lot last quarter or this past fall because there was really no incentive to buy in October when you could buy in January at the boat shows and still be ready for the boat show season.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

So I think it's just been pretty much on par with what it's been like over the last year, year and a half of promotion. I think manufacturers are very committed to helping retail clean up the field inventory because that benefits us all moving forward.

Anthony Aisquith
Anthony Aisquith
President & COO at OneWater Marine

Yes, I think it's been across the board Austin. I mean, it's every manufacturer, not just our manufacturers, our competitors' manufacturers, all of them are digging in with everybody. So I haven't I don't see it slowing down at this point. But they are all very helpful to help facilitate putting deals together.

Griffin Bryan
Senior Equity Research Associate at D.A. Davidson Companies

Got you. And what are you guys hearing from OEMs on potential tariffs and how that may impact demand and margins overall?

Griffin Bryan
Senior Equity Research Associate at D.A. Davidson Companies

Well, I mean,

Griffin Bryan
Senior Equity Research Associate at D.A. Davidson Companies

and margins overall?

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

Well, I mean, we go ahead, Jack.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

No, I was just adding is, I think a lot of them have a wait and see sort of standpoint. I mean, I think there's too much, there's too much noise around exactly what things look like to try to do anything to prepare or to counteract. And I know through the over the course of time, a number of manufacturers have worked to diversify their sources of product. But a lot of products are manufactured in the United States, which certainly helps. But I think it just kind of remains to be seen on that.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

I don't want to say it's not impactful or meaningful or say that it's going to have nothing to no effect at all because it will depending on where the tariffs are and what they're on. But if you look at a boat, whether you're looking at a pontoon boat, a ski boat or center console fishing boat or a runabout, the majority of that pricing is in the engine and in the raw materials to make the boat, the aluminum, the fiberglass, all that stuff. That's where the majority of your pricing is. So it's just not like we're going to see a 20% tariffs on all this stuff from all these different countries and all of a sudden boats are going to go up 20% because all the materials to build it went up 20%. It's just not a big enough piece of the boat to me where it's going to have that big of an impact.

Austin Singleton
Austin Singleton
Founder, CEO & Director at OneWater Marine

I mean, and hell, they're already so daggum expensive now and it doesn't seem to be bothering people.

Griffin Bryan
Senior Equity Research Associate at D.A. Davidson Companies

Understood. Thanks guys.

Jack Ezzell
Jack Ezzell
CFO at OneWater Marine

Thanks.

Operator

There are no further questions at this time. This concludes today's conference call. You may now disconnect.

Executives
Analysts
    • Fred Wightman
      Director at Wolfe Research LLC
    • RESERVED
      SPEAKER at UNKNOWN
    • Michael Swartz
      Director & Equity Research at Truist Securities
    • Griffin Bryan
      Senior Equity Research Associate at D.A. Davidson Companies
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Earnings Conference Call
OneWater Marine Q1 2025
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