ONEWATER MARINE INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations - Insurance News | InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.™

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home Now reading Newswires
Topics
    • Advisor News
    • Annuity Index
    • Annuity News
    • Companies
    • Earnings
    • Fiduciary
    • From the Field: Expert Insights
    • Health/Employee Benefits
    • Insurance & Financial Fraud
    • INN Magazine
    • Insiders Only
    • Life Insurance News
    • Newswires
    • Property and Casualty
    • Regulation News
    • Sponsored Articles
    • Washington Wire
    • Videos
    • ———
    • About
    • Meet our Editorial Staff
    • Advertise
    • Contact
    • Newsletters
  • Exclusives
  • NewsWires
  • Magazine
  • Newsletters
Sign in or register to be an INNsider.
  • AdvisorNews
  • Annuity News
  • Companies
  • Earnings
  • Fiduciary
  • Health/Employee Benefits
  • Insurance & Financial Fraud
  • INN Exclusives
  • INN Magazine
  • Insurtech
  • Life Insurance News
  • Newswires
  • Property and Casualty
  • Regulation News
  • Sponsored Articles
  • Video
  • Washington Wire
  • Life Insurance
  • Annuities
  • Advisor
  • Health/Benefits
  • Property & Casualty
  • Insurtech
  • About
  • Advertise
  • Contact
  • Editorial Staff

Get Social

  • Facebook
  • X
  • LinkedIn
Newswires
Newswires RSS Get our newsletter
Order Prints
February 8, 2022 Newswires
Share
Share
Post
Email

ONEWATER MARINE INC. – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations

Edgar Glimpses

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                           AND RESULTS OF OPERATIONS

Unless the context requires otherwise, references in this report to the
"Company," "we," "us," and "our" refer to OneWater Marine Inc. and its
consolidated subsidiaries. The following discussion and analysis should be read
in conjunction with the accompanying financial statements and related notes. The
following discussion contains forward-looking statements that reflect our future
plans, estimates, beliefs and expected performance. The forward-looking
statements are dependent upon events, risks and uncertainties that may be
outside our control. Our actual results could differ materially from those
discussed in these forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those factors
discussed above in "Cautionary Statement Regarding Forward-Looking Statements"
and described under the heading "Risk Factors" included in our Annual Report on
Form 10-K for the year ended September 30, 2021, filed with the U.S. Securities
and Exchange Commission (the "SEC") on December 17, 2021, all of which are
difficult to predict. In light of these risks, uncertainties and assumptions,
the forward-looking events discussed may not occur. We do not undertake any
obligation to publicly update any forward-looking statements except as otherwise
required by applicable law.

Overview

We believe that we are one of the largest and fastest-growing marine retailers
in the United States with 75 retail locations, 8 distribution centers/warehouses
and multiple online marketplaces as of December 31, 2021. Our retail locations
are located in highly attractive markets throughout the Southeast, Gulf Coast,
Mid-Atlantic and Northeast, many of which are in top twenty states for marine
retail expenditures. We believe that we are a market leader by volume in sales
of premium boats in 13 out of the 18 markets in which we operate. In fiscal year
2021, we sold approximately 9,500 new and pre-owned boats, many of which were
sold to customers who had a trade-in or with whom we had otherwise established
relationships. The combination of our significant scale, diverse inventory and
revenue streams, access to premium boat brands and meaningful brand equity
enable us to provide a consistently professional experience as reflected in the
number of our repeat customers and same-store sales growth.

We were formed in 2014 as One Water Marine Holdings, LLC ("OneWater LLC")
through the combination of Singleton Marine and Legendary Marine, which created
a marine retail platform that collectively owned and operated 19 retail
locations. Since the combination in 2014, we have acquired a total of 55
additional retail locations, 8 distribution centers/warehouses and multiple
online marketplaces through 26 acquisitions. Our current portfolio of companies
as of December 31, 2021 consists of multiple brands which are recognized on a
local, regional or national basis. Because of this, we believe we are one of the
largest and fastest-growing premium recreational marine retailers in the United
States based on number of stores and total boats sold. While we have
opportunistically opened new locations in select markets, we believe that it is
generally more effective economically and operationally to acquire existing
locations with experienced staff and established reputations.

The marine retail industry is highly fragmented, as evidenced by the over 4,000
boat dealers nationwide. Most competing boat retailers offer new boat sales,
pre-owned boat sales, finance and insurance products, repair and maintenance
services and parts and accessories and are operated by local business owners
with three or fewer stores. Despite our size, we comprise less than 3% of total
industry sales. Our scale and business model allow us to leverage our extensive
inventory to provide consumers with the ability to find a boat that matches
their preferences (e.g., make, model, color, configuration and other options)
and to deliver the boat within days while providing a personalized sales
experience. We are able to operate with a comparatively higher degree of
profitability than other independent retailers because we allocate support
resources across our store base, focus on high-margin products and services,
utilize floor plan financing and provide core back-office functions on a scale
that many independent retailers are unable to match. We seek to be the leading
boat retailer by total market share within each boating market and within the
product segments in which we participate. To the extent that we are not, we will
evaluate acquiring other local retailers in order to increase our sales, to add
additional brands or to provide us with additional high-quality personnel.

Impact of COVID-19


The COVID-19 pandemic and its related effects, including restraints on U.S.
economic and leisure activities, has and may continue to have a significant
impact on our operations and financial condition. National, state and local
governments in affected regions have implemented and may continue to implement
safety precautions, including shelter in place orders, travel restrictions,
business closures, cancellations of public gatherings, including boat shows, and
other measures. At times, these measures have affected our ability to sell and
service boats, required us to temporarily close or partially close certain
locations and may require additional closures in the future. In light of the
current environment, our sales team members are fully engaged with customers and
are providing them with virtual walkthroughs of inventory and/or private, at
home or on water, showings, while our service departments are working hard to
deliver boats and keep customers on the water.

The COVID-19 pandemic and its related effects have, to date, positively impacted
our sales as more customers desire to engage in outdoor recreational activities
that can be enjoyed close to first or second homes, in a socially distanced
manner. However, the COVID-19 pandemic has also caused significant supply chain
challenges as suppliers were, and continue to be, faced with business closures
and shipping delays. This has led to an industry wide inventory shortage of
boats, engines and certain marine parts.  The COVID-19 pandemic and its related
effects may continue to interfere with the ability of our employees,
contractors, customers, suppliers, and other business partners to perform our
and their respective responsibilities and obligations with respect to the
operation of our business.

                                       21
--------------------------------------------------------------------------------
  Table of Contents
While we continue to monitor the impact of the COVID-19 pandemic on our business
and operations, our financial results for the three months ended December 31,
2021 suggest that spending in all our regions and across product lines has
proven resilient despite the challenges posed by the pandemic as customers have
continued to focus on socially distanced outdoor recreations. The ultimate
impact of the COVID-19 pandemic on our business remains uncertain and dependent
on various factors including consumer demand, a possible resurgence of COVID-19,
including variants of the virus in certain geographic areas, our ability to
safely operate stores and the existence and extent of a prolonged economic
downturn.

Trends and Other Factors Impacting Our Performance

Acquisitions


We are a highly acquisitive company. Since the combination of Singleton Marine
and Legendary Marine in 2014, we have acquired a total of 55 additional retail
locations, 8 distribution centers/warehouses and multiple online marketplaces
through 26 acquisitions. Our team remains focused on expanding our retail
locations in regions with strong boating cultures, enhancing the customer
experience, and generating value for our shareholders. Additionally, we continue
to evaluate acquisitions of companies who focus primarily on parts and accessory
sales, further strengthening that area of our business.

We have an extensive acquisition track record within the marine retail industry
and believe we have developed a reputation for treating sellers and their staff
in an honest and fair manner. We typically retain the management team and name
of the acquired group. We believe this practice preserves the acquired dealer's
customer relationships and goodwill in the local marketplace. We believe our
reputation and scale have positioned us as a buyer of choice for marine
retailers who want to sell their businesses. To date, 100% of our acquisitions
have been sourced from inbound inquiries, and the number of annual inquiries we
receive has consistently increased over time. Our strategy is to acquire stores
at attractive EBITDA multiples and then grow same-store sales while benefitting
from cost-reducing synergies. Historically, we have typically acquired dealer
groups for less than 4.0x EBITDA on a trailing twelve-month basis and believe
that we will be able to continue to make attractive acquisitions within this
range.

General Economic Conditions

General economic conditions and consumer spending patterns can negatively impact
our operating results. Unfavorable local, regional, national, or global economic
developments or uncertainties, including the adverse economic effects of the
COVID-19 pandemic or a prolonged economic downturn, could reduce consumer
spending and adversely affect our business. Consumer spending on discretionary
goods may also decline as a result of lower consumer confidence levels, even if
prevailing economic conditions are otherwise favorable. Economic conditions in
areas in which we operate stores, particularly in the Southeast, can have a
major impact on our overall results of operations. Local influences, such as
corporate downsizing and inclement weather such as hurricanes and other storms,
environmental conditions, global public health concerns and events could
adversely affect our operations in certain markets and in certain periods. Any
extended period of adverse economic conditions or low consumer confidence is
likely to have a negative effect on our business.

Our business was significantly impacted during the recessionary period that
began in 2007. This period of weakness in consumer spending and depressed
economic conditions had a substantial negative effect on our operating results.
In response to these conditions we reduced our inventory purchases, closed
certain stores and reduced headcount. Additionally, in an effort to counteract
the downturn, we increased our focus on pre-owned sales, parts and repair
services, and finance and insurance services. As a result, we surpassed our
pre-recession sales levels in less than 24 months. While we believe the measures
we took significantly reduced the impact of the downturn on the business, we
cannot guarantee similar results in the event of a future downturn.
Additionally, we cannot predict the timing or length of unfavorable economic or
industry conditions, including a downturn as a result of the COVID-19 pandemic,
or the extent to which they could adversely affect our operating results.

Although past economic conditions have adversely affected our operating results,
we believe we are capable of responding in a manner that allows us to
substantially outperform the industry and gain market share. We believe our
ability to capture such market share enables us to align our retail strategies
with the desires of customers. We expect our core strengths, including retail
and acquisition strategies, will allow us to capitalize on growth opportunities
as they occur, despite market conditions.

Critical Accounting Policies and Significant Estimates


The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, contingent assets and liabilities, each as of the date
of the financial statements, and revenues and expenses during the periods
presented. On an ongoing basis, management evaluates their estimates and
assumptions, and the effects of any such revisions are reflected in the
financial statements in the period in which they are determined to be necessary.
Actual outcomes could differ materially from those estimates in a manner that
could have a material effect on our consolidated financial statements. Set forth
below are the policies and estimates that we have identified as critical to our
business operations and understanding our results of operations, based on the
high degree of judgment or complexity in their application.

Revenue Recognition


Revenue is recognized from the sale of products and commissions earned on new
and pre-owned boats (including used, brokerage, consignment and wholesale) when
ownership is transferred to the customer, which is generally upon acceptance by
or delivery to the customer. At the time of acceptance or delivery, the customer
is able to direct the use of the product and obtain substantially all of the
benefits at such time. We are the principal with respect to revenue from new,
pre-owned and consignment sales and such revenue is recorded at the gross sales
price. With respect to brokerage transactions, we are acting as an agent in the
transaction, therefore the fee or commission is recorded on a net basis.

                                       22
--------------------------------------------------------------------------------
  Table of Contents
Revenue from parts and service operations (boat maintenance and repairs) is
recorded over time as services are performed. Satisfaction of this performance
obligation creates an asset with no alternative use for which an enforceable
right to payment for performance to date exists within our contractual
agreements. Each boat maintenance and repair service is a single performance
obligation that includes both the parts and labor associated with the service.
Payment for boat maintenance and repairs is typically due upon the completion of
the service, which is generally completed within a period of one year or less
from contract inception. The Company recorded contract assets in prepaid
expenses and other current assets of $3.0 million and $2.3 million as of
December 31, 2021 and September 30, 2021, respectively. Revenue from parts and
accessories sold directly to a customer (not on a repair order) are recognized
when control of the items is transferred to the customer, which is typically
upon shipment.

Deferred revenue from storage and marina operations is recognized on a
straight-line basis over the term of the contract as services are completed.
Revenue from arranging financing, insurance and extended warranty contracts to
customers through various third-party financial institutions and insurance
companies is recognized when the related boats are sold. We do not directly
finance our customers' boat, motor or trailer purchases. We are acting as an
agent in the transaction, therefore the commissions are recorded on a net basis.
Subject to our agreements and in the event of early cancellation, prepayment or
default of such loans or insurance contracts by the customer, we may be assessed
a chargeback for a portion of the commission paid by the third-party financial
institutions and insurance companies. We reserve for these chargebacks based on
our historical experience with repayments or defaults. Chargebacks were not
material to the unaudited condensed consolidated financial statements for the
three months ended December 31, 2021.

Inventories


Inventories are stated at the lower of cost or net realizable value. The cost of
new and pre-owned boat inventory is determined using the specific identification
method. New and pre-owned boat sales histories indicated that the overwhelming
majority of such boats are sold for, or in excess of, the cost to purchase those
boats. In assessing the lower of cost or net realizable value, we consider the
aging of the boats, historical sales of a particular product and current market
conditions. There are inherent uncertainties in assessing net realizable value
as management must make assumptions and apply judgment to changes in the market,
brands and other factors that drive consumer preferences and spending. We
typically do not maintain a boat inventory reserve. The cost of parts and
accessories is determined using the weighted average cost method. Inventory is
reported net of write downs for obsolete and slow moving items of approximately
$0.8 million at December 31, 2021 and September 30, 2021.

Goodwill and Other Intangible Assets


In accordance with ASC 350, we review goodwill for impairment annually in the
fourth fiscal quarter, or more often if events or circumstances indicate that
impairment may have occurred. When evaluating goodwill for impairment, if the
fair value of a reporting unit is less than its carrying value, the difference
would represent the amount of required goodwill impairment in accordance with
ASC 350. To the extent the reporting unit's earnings decline significantly or
there are changes in one or more of these inputs that would result in a lower
valuation, it could cause the carrying value of the reporting unit to exceed its
fair value and thus require the Company to record goodwill impairment.

The quantitative goodwill impairment test requires a determination of whether
the fair value of a reporting unit is less than its carrying value. We estimate
the fair value of our reporting unit using an "income" valuation approach, which
discounts projected free cash flows of the reporting unit at a computed weighted
average cost of capital as the discount rate. The income valuation approach
requires the use of significant estimates and assumptions, which include revenue
growth rates and future operating margins used to calculate projected future
cash flows, weighted average costs of capital, and future economic and market
conditions. In connection with this process, we also reconcile the estimated
aggregate fair value of our reporting unit to our market capitalization,
including consideration of a control premium that represents the estimated
amount an investor would pay for our equity securities to obtain a controlling
interest. We believe that this reconciliation process is consistent with a
market participant perspective. We base our cash flow forecasts on our knowledge
of the industry, our recent performance, our expectations of our future
performance, and other assumptions we believe to be reasonable but that are
unpredictable and inherently uncertain. Actual future results may differ from
those estimates.

Identifiable intangible assets consist of trade names related to the
acquisitions we have completed. We have determined that trade names have an
indefinite life, as there are no economic, contractual or other factors that
limit their useful lives and they are expected to generate value as long as the
trade name is utilized by the dealer group, and therefore, are not subject to
amortization.

The quantitative impairment test for trade names requires the comparison of the
trade names' estimated fair value to carrying value on an individual basis. Fair
values of trade names are estimated using Level 3 inputs by discounting expected
future cash flows of the trade name. The forecasted cash flows contain inherent
uncertainties, including significant estimates and assumptions, which include
revenue growth rates and future operating margins used to calculate projected
future cash flows, weighted average costs of capital, and future economic and
market conditions, and other marketplace data we believe to be reasonable.
Financial statement risk exists to the extent identifiable intangibles become
impaired due to the decrease in the fair value of the identifiable assets.

                                       23

--------------------------------------------------------------------------------

  Table of Contents


Business Combinations

We account for business combinations using the acquisition method of accounting,
which requires recognition of assets acquired and liabilities assumed at fair
value as of the date of the acquisition. Determination of the estimated fair
value assigned to each asset acquired or liability assumed can materially impact
the net income in subsequent periods through depreciation and amortization and
potential impairment charges.

The most critical areas of judgment in applying the acquisition method include
selecting the appropriate valuation techniques and assumptions that are used to
measure the acquired assets and assumed liabilities at fair value, particularly
for inventory, acquisition contingent consideration, trade names and goodwill.
The fair value of acquired inventory is based on manufacturer invoice cost,
curtailments, and market data. The significant estimates used to value
acquisition contingent consideration are future earnings and discount rates. We
apply an income approach for the fair value of trade names, which discounts the
estimate of future net cash flow using an appropriate discount rate that
reflects the risks associated with such projected future cash flow.

In selecting the techniques and assumptions noted above, we generally engage
third-party, independent valuation professionals to assist us in developing the
assumptions and applying the valuation techniques to a particular business
combination transaction. In particular, the discount rates selected are compared
to and evaluated with (i) the industry weighted-average cost of capital, (ii)
the inherent risks associated with each type of asset and (iii) the level and
timing of future cash flows appropriately reflecting market participant
assumptions.

How We Evaluate Our Operations

Revenue


We have a diversified revenue profile that is comprised of new boat sales,
pre-owned boat sales, F&I products, repair and maintenance services, and parts
and accessories. During different phases of the economic cycle, consumer
behavior may shift away from new boats; however, we are well-positioned to
benefit from revenue from pre-owned boats, repair and maintenance services, and
parts and accessories, which have all historically increased during periods of
economic uncertainty. We generate pre-owned sales from boats traded-in for new
and pre-owned boats, boats purchased from consumers, brokerage transactions,
consignment sales and wholesale sales. We continue to focus on all aspects of
our business including non-boat sales of finance & insurance products, repair
and maintenance services, and parts and accessories. Although non-boat sales
contributed 13.9% and 11.1% to revenue in the three months ended December 31,
2021 and 2020, respectively, due to the higher gross margin on these product and
service lines, non-boat sales contributed 26.3% and 28.6% to gross profit in the
three months ended December 31, 2021 and 2020, respectively. We have also
diversified our business across geographies and dealership types (e.g., fresh
water and salt water) in order to reduce the effects of seasonality. In addition
to seasonality, revenue and operating results may also be significantly affected
by quarter-to-quarter changes in economic conditions, manufacturer incentive
programs, adverse weather conditions and other developments outside of our
control.

Gross Profit


We calculate gross profit as revenue less cost of sales. Cost of sales consists
of actual amounts paid for products, costs of services (primarily labor),
transportation costs from manufacturers to our retail stores and vendor
consideration. Gross profit excludes depreciation and amortization, which is
presented separately in our consolidated statements of operations.

Gross Profit Margin


Our overall gross profit margin varies with our revenue mix. Sales of new and
pre-owned boats, which have comparable margins, generally result in a lower
gross profit margin than our non-boat sales. As a result, when revenue from
non-boat sales increases as a percentage of total revenue, we expect our overall
gross profit margin to increase.

Selling, General and Administrative Expenses


Selling, general, and administrative (''SG&A'') expenses consist primarily of
salaries and incentive-based compensation, advertising, rent, insurance,
utilities, and other customary operating expenses. A portion of our cost
structure is variable (such as sales commissions and incentive compensation), or
controllable (such as advertising), which we believe allows us to adapt to
changes in the retail environment over the long term. We typically evaluate our
variable expenses, selling expenses and all other SG&A expenses in the aggregate
as a percentage of total revenue.

                                       24
--------------------------------------------------------------------------------
  Table of Contents
Same-Store Sales

We assess the organic growth of our revenue on a same-store basis. We believe
that our assessment on a same-store basis represents an important indicator of
comparative financial results and provides relevant information to assess our
performance. New and acquired stores become eligible for inclusion in the
comparable store base at the end of the store's thirteenth month of operations
under our ownership and revenues are only included for identical months in the
same-store base periods. Stores relocated within an existing market remain in
the comparable store base for all periods. Additionally, amounts related to
closed stores are excluded from each comparative base period. Because same-store
sales may be defined differently by other companies in our industry, our
definition of this measure may not be comparable to similarly titled measures of
other companies, thereby diminishing its utility.

Adjusted EBITDA


We define Adjusted EBITDA as net income before interest expense - other, income
tax expense, depreciation and amortization and other (income) expense, further
adjusted to eliminate the effects of items such as the change in fair value of
warrant liability, change in fair value of contingent consideration, loss on
extinguishment of debt and transaction costs. See ''-Comparison of Non-GAAP
Financial Measure'' for more information and a reconciliation of Adjusted EBITDA
to net income, the most directly comparable financial measure calculated and
presented in accordance with accounting principles generally accepted in the
United States of America ("GAAP").

Summary of Acquisitions


The comparability of our results of operations between the periods discussed
below is naturally affected by the acquisitions we have completed during such
periods. We are also continuously evaluating and pursuing acquisitions on an
ongoing basis, and such acquisitions, if completed, will continue to impact the
comparability of our financial results. While we expect continued growth and
strategic acquisitions in the future, our acquisitions may have materially
different characteristics than our historical results, and such differences in
economics may impact the comparability of our future results of operations to
our historical results.

Fiscal First Quarter 2022 Acquisitions

• Effective October 1, 2021, we acquired Naples Boat Mart, a full-service marine

retailer with one location in Florida.

• Effective November 30, 2021, we acquired T-H Marine, a leading provider of

branded marine parts and accessories, with locations in Alabama, Florida,

Illinois, Indiana, Oklahoma and Texas.

• Effective December 1, 2021, we acquired Norfolk Marine Company, a full-service

marine retailer with one location in Virginia.

• Effective December 31, 2021, we acquired a majority interest in Quality Boats,

a full-service marine retailer with three locations in Florida.




We refer to the fiscal first quarter 2022 acquisitions described above
collectively as the ''2022 Acquisitions.'' The acquisitions of Naples Boat Mart,
T-H Marine and Norfolk Marine Company are partially reflected in our unaudited
Condensed Consolidated Statements of Operations for the three months ended
December 31, 2021. The majority interest in Quality Boats was not included in
the unaudited Condensed Consolidated Statements of Operations for the three
months ended December 31, 2021 as the acquisition was completed on the last day
of the period.

Fiscal First Quarter 2021 Acquisitions

• Effective December 1, 2020, we acquired Tom George Yacht Sales, Inc, a

full-service marine retailer based in Florida with two stores.

• Effective December 31, 2020, we acquired Walker Marine Group, Inc., a

full-service marine retailer based in Florida with five stores.

• Effective December 31, 2020, we acquired Roscioli Yachting Center, Inc., a

full-service marina and yachting facility located in Florida, including the

related real estate and in-water slips.




We refer to the fiscal first quarter 2021 acquisitions described above
collectively as the ''2021 Acquisitions.'' The Tom George Yacht Sales, Inc.
acquisition is partially reflected in our unaudited Condensed Consolidated
Statements of Operations for the three months ended December 31, 2020 and fully
reflected for the three months ended December 31, 2021. The Walker Marine Group,
Inc. and Roscioli Yachting Center, Inc. acquisitions were not included in the
unaudited Condensed Consolidated Statements of Operations for the three months
ended December 31, 2020 as they were completed on the last day of the period but
are fully reflected in the three months ended December 31, 2021.

Other Factors Affecting Comparability of Our Future Results of Operations to Our
Historical Results of Operations

Our historical financial results discussed below may not be comparable to our
future financial results for the reasons described below.

• OneWater Inc. is subject to U.S. federal, state and local income taxes as a

corporation. Our accounting predecessor, OneWater LLC, was and is treated as a

partnership for U.S. federal income tax purposes, and as such, was generally

not subject to U.S. federal income tax at the entity level. Rather, the tax

liability with respect to its taxable income is passed through to its members.

Accordingly, the financial data attributable to our predecessor contains no

provision for U.S. federal income taxes or income taxes in any state or

locality. OneWater Inc. was subject to U.S. federal, state and local taxes at

an estimated blended statutory rate of 24.0% of pre-tax earnings for the three

   months ended December 31, 2021.



                                       25

--------------------------------------------------------------------------------

Table of Contents

• As we further implement controls, processes and infrastructure applicable to

companies with publicly traded equity securities, it is likely that we will

incur additional SG&A expenses relative to historical periods. Our future

   results will depend on our ability to efficiently manage our combined
   operations and execute our business strategy.


Results of Operations


Three Months Ended December 31, 2021, Compared to Three Months Ended December
31, 2020

                                                          For the three months                   For the three months
                                                        ended December 31, 2021                ended December 31, 2020
                                                   Amount               % of Revenue      Amount               % of Revenue      $ Change         % Change
                                                                                                 ($ in thousands)
Revenues
New boat                                           $      236,198                70.2 %   $      151,828                70.9 %   $     84,370              55.6 %
Pre-owned boat                                             53,449                15.9 %           38,580                18.0 %         14,869              38.5 %
Finance & insurance income                                  9,307                 2.8 %            5,963                 2.8 %          3,344              56.1 %
Service, parts and other                                   37,318                11.1 %           17,712                 8.3 %         19,606             110.7 %
Total revenues                                            336,272               100.0 %          214,083               100.0 %        122,189              57.1 %

Gross Profit
New boat                                                   60,302                17.9 %           29,296                13.7 %         31,006             105.8 %
Pre-owned boat                                             14,079                 4.2 %            8,128                 3.8 %          5,951              73.2 %
Finance & insurance                                         9,307                 2.8 %            5,963                 2.8 %          3,344              56.1 %
Service, parts & other                                     17,277                 5.1 %            9,049                 4.2 %          8,228              90.9 %
Total gross profit                                        100,965                30.0 %           52,436                24.5 %         48,529              92.5 %

Selling, general and administrative expenses               59,096                17.6 %           34,860                16.3 %         24,236              69.5 %
Depreciation and amortization                               1,749                 0.5 %              963                 0.4 %            786              81.6 %
Transaction costs                                           3,045                 0.9 %              200                 0.1 %          2,845            1422.5 %
Loss on contingent consideration                            5,746                 1.7 %              377                 0.2 %          5,369          

100.0 %


Income from operations                                     31,329                 9.3 %           16,036                 7.5 %         15,293          

95.4 %


Interest expense - floor plan                                 877                 0.3 %              920                 0.4 %            (43 )            -4.7 %
Interest expense - other                                    1,529                 0.5 %              924                 0.4 %            605              65.5 %
Other expense (income), net                                   548                 0.2 %              (94 )               0.0 %            642            -683.0 %
Income before income tax expense                           28,375                 8.4 %           14,286                 6.7 %         14,089              98.6 %
Income tax expense                                          4,889                 1.5 %            2,511                 1.2 %          2,378             100.0 %
Net income                                                 23,486                 7.0 %           11,775                 5.5 %         11,711              99.5 %
Less: Net income attributable to non-controlling
interests of One Water Marine Holdings, LLC                (3,467 )                               (3,987 )

Net income attributable to One Water Marine Inc. $ 20,019

              $        7,788



Revenue

Overall, revenue increased by $122.2 million, or 57.1%, to $336.3 million for
the three months ended December 31, 2021 from $214.1 million for the three
months ended December 31, 2020. Revenue generated from same-store sales
increased 27.9% for the three months ended December 31, 2021 as compared to the
three months ended December 31, 2020, primarily due to an increase in the
average selling price of new and pre-owned boats, the model mix of boats sold,
an increase in finance & insurance sales and an increase in service, parts and
other sales. Overall revenue increased by $122.2 million as a result of a $59.6
million increase in same-store sales and a $62.6 million increase from stores
not eligible for inclusion in the same-store sales base. New and acquired stores
become eligible for inclusion in the comparable store base at the end of the
store's thirteenth month of operations under our ownership and revenues are only
included for identical months in the same-store base periods.

New Boat Sales


New boat sales increased by $84.4 million, or 55.6%, to $236.2 million for the
three months ended December 31, 2021 from $151.8 for the three months ended
December 31, 2020. The increase was primarily attributable to our same-store
sales growth, our acquisitions and an increase in our average unit price. We
believe the increase in sales was primarily due to continued execution of
operational improvements on previously acquired dealers, the mix of boat brands
and models sold, and product improvements in the functionality of technology of
boats which drove average unit prices higher. New boat unit sales for the three
months ended December 31, 2021 as compared to December 31, 2020 were flat due to
industry-wide inventory and supply chain constraints.

Pre-owned Boat Sales


Pre-owned boat sales increased by $14.9 million, or 38.5%, to $53.4 million for
the three months ended December 31, 2021 from $38.6 million for the three months
ended December 31, 2020. We sell a wide range of brands and sizes of pre-owned
boats under different types of sales arrangements (e.g., trade-ins, brokerage,
consigned and wholesale), which causes periodic and seasonal fluctuations in the
average sales price. Pre-owned boat unit sales for the three months ended
December 31, 2021 as compared to December 31, 2020 were flat due to
industry-wide supply constraints. The average sales price per pre-owned unit for
the three months ended December 31, 2021 increased largely due to the mix of
pre-owned products, the composition of the brands and models sold during the
period as well as the industry-wide supply restrictions.

                                       26
--------------------------------------------------------------------------------
  Table of Contents
Finance & Insurance Income

We generate revenue from arranging finance & insurance products, including
financing, insurance and extended warranty contracts, to customers through
various third-party financial institutions and insurance companies. Finance &
insurance income increased by $3.3 million, or 56.1%, to $9.3 million for the
three months ended December 31, 2021 from $6.0 million for the three months
ended December 31, 2020. The increase was primarily a result of the increase in
same-store sales. We remain very focused on improving sales of finance &
insurance products throughout our dealer network and implementing best practices
at acquired dealer groups and existing stores. Finance & insurance products held
steady as a percentage of total revenue at 2.8% in the three months ended
December 31, 2021 and 2020. Finance & insurance income is recorded net of
related fees, including fees charged back due to any early cancellation of loan
or insurance contracts by a customer. Since finance & insurance income is
fee-based, we do not incur any related cost of sale.

Service, Parts & Other Sales


Service, parts & other sales increased by $19.6 million, or 110.7%, to $37.3
million for the three months ended December 31, 2021 from $17.7 million for the
three months ended December 31, 2020. The increase in service, parts & other
sales is primarily due to increases across the board in labor, parts, fuel and
storage sales, driven by ancillary sales generated from our increase in new and
pre-owned boat sales and the impact of our 2021 and 2022 Acquisitions.

Gross Profit


Overall, gross profit increased by $48.5 million, or 92.5%, to $101.0 million
for the three months ended December 31, 2021 from $52.4 million for the three
months ended December 31, 2020. This increase was primarily due to our overall
increase in same-store sales which was driven by increases in all revenue
streams, the impact of the 2021 and 2022 Acquisitions and the Company's focus on
dynamic pricing. Overall gross margins increased 550 basis points to 30.0% for
the three months ended December 31, 2021 from 24.5% for the three months ended
December 31, 2020 due to the factors noted below.

New Boat Gross Profit


New boat gross profit increased by $31.0 million, or 105.8%, to $60.3 million
for the three months ended December 31, 2021 from $29.3 million for the three
months ended December 31, 2020. This increase was primarily due to our overall
increase in same-store sales. New boat gross profit as a percentage of new boat
revenue was 25.5% for the three months ended December 31, 2021 as compared to
19.3% in the three months ended December 31, 2020. The increase in new boat
gross profit and gross profit margin is due primarily to a shift in the mix and
size of boat models sold, the margin profile of recently acquired locations, our
emphasis on expanding new boat gross profit margins amid the industry wide
inventory and supply chain constraints.

Pre-owned Boat Gross Profit


Pre-owned boat gross profit increased by $6.0 million, or 73.2%, to $14.1
million for the three months ended December 31, 2021 from $8.1 million for the
three months ended December 31, 2020. The increase in pre-owned gross profit was
driven by the increase in pre-owned revenue primarily as a result of our
same-store sales growth. Pre-owned boat gross profit as a percentage of
pre-owned boat revenue was 26.3% and 21.1% for the three months ended December
31, 2021 and 2020, respectively. We sell a wide range of brands and sizes of
pre-owned boats under different types of sales arrangements (e.g., trade-ins,
brokerage, consignment and wholesale), which may cause periodic and seasonal
fluctuations in pre-owned boat gross profit as a percentage of revenue. In the
three months ended December 31, 2021 as compared to the three months ended
December 31, 2020, we experienced an increase in our gross profit on pre-owned
sales for each of the different sales arrangements.

Finance & Insurance Gross Profit


Finance & insurance gross profit increased by $3.3 million, or 56.1%, to $9.3
million for the three months ended December 31, 2021 from $6.0 million for the
three months ended December 31, 2020. Finance & insurance income is fee-based
revenue for which we do not recognize incremental cost of sale.

Service, Parts & Other Gross Profit


Service, parts & other gross profit increased by $8.2 million, or 90.9%, to
$17.3 million for the three months ended December 31, 2021 from $9.0 million for
the three months ended December 31, 2020. Service, parts & other gross profit as
a percentage of service, parts & other revenue was 46.3% and 51.1% for the three
months ended December 31, 2021 and 2020, respectively. The increase in gross
profit was primarily the result of our same-store sales growth as well as the
2021 and 2022 acquisitions. The decrease in gross profit margin percentage was
due to a shift in the mix of products sold towards parts & accessories which has
a lower margin percentage than service and other sales.

Selling, General & Administrative Expenses


Selling, general & administrative expenses increased by $24.2 million, or 69.5%,
to $59.1 million for the three months ended December 31, 2021 from $34.9 million
for the three months ended December 31, 2020. This increase was primarily due to
expenses incurred to support the overall increase in revenues and gross profit.
The increase primarily consisted of a $17.0 million increase in personnel
expenses. Selling, general & administrative expenses as a percentage of revenue
increased to 17.6% from 16.3% for the three months ended December 31, 2021 and
2020, respectively. The increase in selling, general and administrative expenses
as a percentage of revenue was primarily due to higher variable-based
compensation expense as a result of the Company's increased net profit margin.

                                       27
--------------------------------------------------------------------------------
  Table of Contents
Depreciation and Amortization

Depreciation and amortization expense increased $0.8 million, or 81.6%, to $1.7
million for the three months ended December 31, 2021 compared to $1.0 million
for the three months ended December 31, 2020. The increase in depreciation and
amortization expense for the three months ended December 31, 2021 compared to
the three months ended December 31, 2020 was primarily attributable to an
increase in property and equipment from our 2021 Acquisitions.

Transaction Costs


The increase in transaction costs of $2.8 million, or 1,422.5%, to $3.0 million
for the three months ended December 31, 2021 compared to $0.2 million for the
three months ended December 31, 2020 was primarily attributable to expenses
related to the 2022 Acquisitions.

Change in Fair Value of Contingent Consideration


During the three months ended December 31, 2021, we incurred an expense of $5.7
million related to updated forecasts and accretion of two contingent
consideration liabilities for acquisitions completed in fiscal year 2021. During
the three months ended December 31, 2020, we incurred expense of $0.4 million
related to the settlement of contingent consideration from a fiscal year 2019
acquisition.

Income from Operations

Income from operations increased $15.3 million, or 95.4%, to $31.3 million for
the three months ended December 31, 2021 compared to $16.0 million for the three
months ended December 31, 2020. The increase was primarily attributable to the
$48.5 million increase in gross profit for the three months ended December 31,
2021 as compared to the three months ended December 31, 2020, partially offset
by a $24.2 million increase in selling, general & administrative expenses and a
$5.4 million increase in change in fair value of contingent consideration during
the same periods.

Interest Expense - Floor Plan


Interest expense - floor plan was flat at $0.9 million for each of the three
months ended December 31, 2021 and December 31, 2020. Floor plan related
interest expense remained flat despite our acquisitional growth due to reduced
levels of inventory and elevated inventory turns.

Interest Expense - Other


Interest expense - other increased by $0.6 million, or 65.5%, to $1.5 million
for the three months ended December 31, 2021 compared to $0.9 million for the
three months ended December 31, 2020. The increase in interest expense - other
was related to the increase in our long-term debt which was used to fund certain
2022 acquisitions.

Other Expense (Income), Net

Other expense (income), net decreased by $0.6 million to expense of $0.5 million
for the three months ended December 31, 2021 compared to other income of $0.1
million for the three months ended December 31, 2020. The decrease was primarily
due to the impact of tax rate changes on our tax receivable agreement liability.

Income Tax Expense


Income tax expense increased $2.4 million, or 94.7%, to $4.9 million for the
three months ended December 31, 2021 compared to $2.5 million for the three
months ended December 31, 2020. The increase was primarily attributable to the
98.6% increase in income before income tax expense for the three months ended
December 31, 2021 as compared to December 31, 2020.

Net Income


Net income increased by $11.7 million to $23.5 million for the three months
ended December 31, 2021 compared to $11.8 million for the three months ended
December 31, 2020. The increase was primarily attributable to the $48.5 million
increase in gross profit for the three months ended December 31, 2021 compared
to December 31, 2020. The increase was partially offset by the $24.2 million
increase in selling, general & administrative expenses and the $5.4 million
increase in change in fair value of contingent consideration for the three
months ended December 31, 2021 compared to the three months ended December 31,
2020.

Comparison of Non-GAAP Financial Measure


We view Adjusted EBITDA as an important indicator of performance. We define
Adjusted EBITDA as net income (loss) before interest expense - other, income tax
expense, depreciation and amortization and other (income) expense, further
adjusted to eliminate the effects of items such as the change in fair value of
warrant liability, change in fair value of contingent consideration, loss on
extinguishment of debt and transaction costs.

                                       28
--------------------------------------------------------------------------------
  Table of Contents
Our board of directors, management team and lenders use Adjusted EBITDA to
assess our financial performance because it allows them to compare our operating
performance on a consistent basis across periods by removing the effects of our
capital structure (such as varying levels of interest expense), asset base (such
as depreciation and amortization) and other items (such as the fair value
adjustment of the warrants, change in fair value of contingent consideration,
gain (loss) on extinguishment of debt and transaction costs) that impact the
comparability of financial results from period to period. We present Adjusted
EBITDA because we believe it provides useful information regarding the factors
and trends affecting our business in addition to measures calculated under GAAP.
Adjusted EBITDA is not a financial measure presented in accordance with GAAP. We
believe that the presentation of this non-GAAP financial measure will provide
useful information to investors and analysts in assessing our financial
performance and results of operations across reporting periods by excluding
items we do not believe are indicative of our core operating performance. Net
income (loss) is the GAAP measure most directly comparable to Adjusted EBITDA.
Our non-GAAP financial measure should not be considered as an alternative to the
most directly comparable GAAP financial measure. You are encouraged to evaluate
each of these adjustments and the reasons we consider them appropriate for
supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that
in the future we may incur expenses that are the same as or similar to some of
the adjustments in such presentation. Our presentation of Adjusted EBITDA should
not be construed as an inference that our future results will be unaffected by
unusual or non-recurring items. There can be no assurance that we will not
modify the presentation of Adjusted EBITDA in the future, and any such
modification may be material. Adjusted EBITDA has important limitations as an
analytical tool and you should not consider Adjusted EBITDA in isolation or as a
substitute for analysis of our results as reported under GAAP. Because Adjusted
EBITDA may be defined differently by other companies in our industry, our
definition of this non-GAAP financial measure may not be comparable to similarly
titled measures of other companies, thereby diminishing its utility.

The following tables present a reconciliation of Adjusted EBITDA to our net
income, which is the most directly comparable GAAP measure for the periods
presented.


Three Months Ended December 31, 2021, Compared to Three Months Ended December
31, 2020

                                                                  Three months ended December 31,
Description                                                         2021                  2020
                                                                         ($ in thousands)
Net income                                                     $        23,486       $        11,775
Interest expense - other                                                 1,529                   924
Income tax expense                                                       4,889                 2,511
Depreciation and amortization                                            1,749                   963
Change in fair value of contingent consideration                         5,746                   377
Transaction costs                                                        3,045                   200
Other expense (income), net                                                548                   (94 )
Adjusted EBITDA                                                $        40,992       $        16,656



Adjusted EBITDA was $41.0 million for the three months ended December 31, 2021
compared to $16.7 million for the three months ended December 31, 2020. The
increase in Adjusted EBITDA resulted primarily from our 27.9% increase in
same-store sales growth for the three months ended December 31, 2021 as compared
to the three months ended December 31, 2020, combined with the results of our
ability to increase gross profit margins and control selling, general and
administrative expenses.

Seasonality


Our business, along with the entire recreational boating industry, is highly
seasonal, and such seasonality varies by geographic market. With the exception
of Florida, we generally realize significantly lower sales and higher levels of
inventories, and related floor plan borrowings, in the quarterly periods ending
December 31 and March 31. Revenue generated from our stores in Florida serves to
offset generally lower winter revenue in our other states and enables us to
maintain a more consistent revenue stream. The onset of the public boat and
recreation shows in January stimulates boat sales and typically allows us to
reduce our inventory levels and related floor plan borrowings throughout the
remainder of the fiscal year. The impact of seasonality on our results of
operations could be materially impacted based on the location of our
acquisitions. For example, our operations could be substantially more seasonal
if we acquire dealer groups that operate in colder regions of the United States.
Our business is also subject to weather patterns, which may adversely affect our
results of operations. For example, prolonged winter conditions, reduced
rainfall levels or excessive rain, may limit access to boating locations or
render boating dangerous or inconvenient, thereby curtailing customer demand for
our products and services. In addition, unseasonably cool weather and prolonged
winter conditions may lead to a shorter selling season in certain locations.
Hurricanes and other storms could result in disruptions of our operations or
damage to our boat inventories and facilities, as has been the case when Florida
and other markets were affected by hurricanes. We believe our geographic
diversity is likely to reduce the overall impact to us of adverse weather
conditions in any one market area. Additionally, due to the COVID-19 pandemic,
our seasonal trends may also change as a result of, among other things, store
closures, disruptions to the supply chain and inventory availability,
manufacturer delays, and cancellation of boat shows.

                                       29
--------------------------------------------------------------------------------
  Table of Contents
Liquidity and Capital Resources

Overview


OneWater Inc. is a holding company with no operations and is the sole managing
member of OneWater LLC. OneWater Inc's principal asset consists of common units
of OneWater LLC. Our earnings and cash flows and ability to meet our obligations
under the Credit Facility, and any other debt obligations will depend on the
cash flows resulting from the operations of our operating subsidiaries, and the
payment of distributions by such subsidiaries. Our Credit Facility and Inventory
Financing Facility (described below) contain certain restrictions on
distributions or transfers from our operating subsidiaries to their members or
unitholders, as applicable, as described in the summaries below under "-Debt
Agreements-Credit Facility" and "-Inventory Financing Facility." Accordingly,
the operating results of our subsidiaries may not be sufficient for them to make
distributions to us. As a result, our ability to make payments under the Credit
Facility and any other debt obligations or to declare dividends could be
limited.

Our cash needs are primarily for growth through acquisitions and working capital
to support our operations, including new and pre-owned boat and related parts
inventories and off-season liquidity. We routinely monitor our cash flow to
determine the amount of cash available to complete acquisitions. We monitor our
inventories, inventory aging and current market trends to determine our current
and future inventory and related floorplan financing needs. Based on current
facts and circumstances, we believe we will have adequate cash flow from
operations, borrowings under our Credit Facilities and proceeds from any future
issuances of debt or equity to fund our current operations, and essential
capital expenditures and acquisitions for the next twelve months and beyond.

Cash needs for acquisitions have historically been financed with our credit
facilities, including the Credit Facility and cash generated from operations.
Our ability to utilize the Credit Facility to fund operations depends upon
Adjusted EBITDA and compliance with covenants of the Credit Facility. Cash needs
for inventory have historically been financed with our Inventory Financing
Facility. Our ability to fund inventory purchases and operations depends on the
collateral levels and our compliance with the covenants of the Inventory
Financing Facility. As of December 31, 2021, we were in compliance with all
covenants under the Credit Facility and the Inventory Financing Facility.

We have no material off balance sheet arrangements, except for purchase
commitments under supply agreements entered into in the normal course of
business.

Cash Flows

Analysis of Cash Flow Changes Between the Three Months Ended December 31, 2021
and 2020

The following table summarizes our cash flows for the periods indicated:

                                                Three Months ended December 31,
Description                                    2021           2020          Change
                                                        ($ in thousands)

Net cash used in operating activities $ (22,825 ) $ (28,615 ) $

5,790

Net cash used in investing activities (282,220 ) (79,963 ) (202,257 )
Net cash provided by financing activities 305,865 70,361

 235,504
Net change in cash                          $       820     $ (38,217 )   $   39,037



Operating Activities. Net cash used in operating activities was $22.8 million
for the three months ended December 31, 2021 compared to net cash used in
operating activities of $28.6 million for the three months ended December 31,
2020. The $5.8 million decrease in cash used in operating activities was
primarily attributable to a $16.7 million increase in the change in accounts
payable, an $11.7 million increase in net income and a $5.8 million increase in
loss on change in fair value of contingent consideration for the three months
ended December 31, 2021 as compared to the three months ended December 31, 2020.
This amount was partially offset by an $31.7 million increase in the change in
inventory for the three months ended December 31, 2021 as compared to the three
months ended December 31, 2020.

Investing Activities. Net cash used in investing activities was $282.2 million
for the three months ended December 31, 2021 compared to net cash used in
investing activities of $80.0 million for the three months ended December 31,
2020. The $202.3 million increase in cash used in investing activities was
primarily attributable to a $201.2 million increase in cash used in acquisitions
for the three months ended December 31, 2021 as compared to the three months
ended December 31, 2020.

Financing Activities. Net cash provided by financing activities was $305.9
million for the three months ended December 31, 2021 compared to net cash
provided by financing activities of $70.4 million for the three months ended
December 31, 2020. The $235.5 million increase in financing cash flow was
primarily attributable to a $210.0 million increase in borrowings on long-term
debt and a $39.1 million increase in net borrowings on our Inventory Financing
Facility for the three months ended December 31, 2021 as compared to the three
months ended December 31, 2020.

Debt Agreements

Credit Facility


Effective July 22, 2020, we and certain of our subsidiaries entered into the
Credit Facility. The Credit Facility provides for a $30.0 million revolving
credit facility that may be used for revolving credit loans (including up to
$5.0 million in swingline loans) and up to $5.0 million in letters of credit
from time to time, and a $80.0 million term loan, which was advanced in full on
July 22, 2020. Subject to certain conditions, the available amount under the
revolving credit facility and the term loans may be increased by $50.0 million
in the aggregate. The revolving credit facility matures on July 22, 2025. The
term loan is repayable in installments beginning on March 31, 2021, with the
remainder due on July 22, 2025.

                                       30
--------------------------------------------------------------------------------
  Table of Contents
On February 2, 2021, we entered into the Incremental Amendment No. 1 (the "First
Incremental Amendment") to the Credit Facility to provide for, among other
things, an incremental term loan (the "Incremental Term Loan") to OWAO in an
aggregate principal amount equal to $30.0 million, which was added to, and
constitutes a part of, the existing $80.0 million term loan. As provided for by
the First Incremental Amendment, the proceeds of the Incremental Term Loan were
used to pay off the balance of the revolving credit facility, under which an
aggregate of $30.0 million was outstanding as of February 1, 2021.

On November 30, 2021, we entered into the Incremental Amendment No. 2 (the
"Second Incremental Amendment") to the Credit Facility to provide for, among
other things, an incremental term loan (the "Second Incremental Term Loan") to
OWAO in an aggregate principal amount equal to $200.0 million, which will be
added to, and constitute a part of, the existing $110.0 million term loan. The
Second Incremental Term Loan is on the same terms (including interest rates, but
excluding upfront fees, original issue discount and other similar amounts)
applicable to the existing term loan under the Credit Facility and the other
loan documents. As provided for by the Second Incremental Amendment, the
proceeds of the Second Incremental Term Loan were used to finance the Company's
acquisition of T-H Marine. The maturity date for the Second Incremental Term
Loan is the earlier of (i) July 22, 2025 or (ii) the date on which the principal
amount of all outstanding term loans have been declared or automatically have
become due and payable pursuant to the terms of the Credit Facility. The Second
Incremental Amendment further provides for a $20.0 million increase in the
existing revolving commitment (the "Incremental Revolving Increase"), which was
added to, and constitutes a part of, the existing $30.0 million revolving
commitment. The Incremental Revolving Increase constitutes a single class of
revolving commitments with the existing revolving commitment. The Incremental
Revolving Increase is secured by identical collateral and guaranties on
identical terms as the existing revolving commitment. The maturity date for the
Incremental Revolving Increase is the earlier of (i) July 22, 2025 and (ii) the
date on which the Revolving Commitments (as defined in the Credit Facility) are
terminated pursuant to the terms of the Credit Facility. As of December 31,
2021, we had $301.9 million outstanding under the term loan and $40.0 million
outstanding under the revolving credit facility.

Borrowings under the Credit Facility bear interest, at OWAO's option, at either
(a) a base rate (the "Base Rate") equal to the highest of (i) the prime rate (as
announced by Truist Bank from time to time), (ii) the Federal Funds Rate, as in
effect from time to time, plus 0.50%, (iii) the Adjusted LIBO Rate (defined
below) determined on a daily basis for an interest period of one month, plus
1.00%, or (iv) 1.75%, plus an applicable margin of up to 2.00%, or (b) the rate
per annum obtained by dividing the London Interbank Offered Rate for such
interest period by a percentage equal to 1.00% minus the Eurodollar Reserve
Percentage (the "Adjusted LIBO Rate") plus an applicable margin of up to 3.00%.
Interest on swingline loans shall be the Base Rate plus an applicable margin of
up to 2.00%. All applicable interest margins are subject to step-downs based on
certain consolidated leverage ratio measures.

The Credit Facility is subject to certain financial covenants related to the
maintenance of a minimum fixed charge coverage ratio and a maximum consolidated
leverage ratio.

The proceeds of the term loan portion of the Credit Facility, together with cash
on OWAO's balance sheet, have been used (i) to pay for the Refinancing, (ii) to
pay the fees and expenses incurred in connection with the Refinancing and (iii)
for working capital and general corporate purposes.

Inventory Financing Facility


On June 14, 2018, OneWater LLC and certain of its subsidiaries entered into the
Inventory Financing Facility. On September 21, 2018, OneWater LLC and certain of
our subsidiaries entered into the First Amendment to the Fourth Amended and
Restated Inventory Financing Agreement, which, among other things, increased the
maximum amount of borrowing available under the Inventory Financing Facility
from $200.0 million to $275.0 million. On April 5, 2019, OneWater LLC and
certain of its subsidiaries further amended the Inventory Financing Facility to,
among other things, increase the maximum amount of borrowing available under the
Inventory Financing Facility from $275.0 million to $292.5 million. On November
26, 2019, OneWater LLC and certain of its subsidiaries entered into the Fifth
Amended and Restated Inventory Financing Agreement with Wells Fargo to, among
other things, increase the maximum amount of borrowing available under the
Inventory Financing Facility from $292.5 million to $392.5 million.

Effective February 11, 2020, in connection with the IPO, OneWater Inc. and
certain of its subsidiaries entered into the Sixth Amended and Restated
Inventory Financing Agreement with Wells Fargo (as amended, the " Sixth
Inventory Financing Facility"), which amended and restated the Fifth Amended and
Restated Inventory Financing Agreement, dated as of November 26, 2019, to, among
other things, permit certain payments and transactions contemplated by or in
connection with the IPO, including payments under the Tax Receivable Agreement.
The maximum amount of borrowing available, interest rates and the termination
date of the Inventory Financing Facility remained unchanged.

On July 22, 2020, the Company, OneWater LLC, Opco and certain of Opco's
subsidiaries entered into the First Amendment (the "First Amendment") to the
Sixth Inventory Financing Facility. The First Amendment amended the Sixth
Inventory Financing Facility, to, among other things, address the Refinancing,
permit the amount of indebtedness allowed under the Credit Facility to be $160.0
million (which includes the potential for a $50.0 million increase under the
Credit Facility), permit the payment of fees and expenses in connection with the
termination of the Term and Revolver Credit Facility and the payment of present
and future transaction costs incurred in connection with the negotiation,
closing and ongoing administration of the Credit Facility.

                                       31
--------------------------------------------------------------------------------
  Table of Contents
On December 10, 2020, the Company and certain of its subsidiaries entered into
the Second Amendment to the Sixth Inventory Financing Facility to change certain
compliance reporting from weekly to monthly. The maximum borrowing amount
available, interest rates and the termination date of the agreement remained
unchanged.

On September 23, 2021, the Company entered into the Third Amendment to the Sixth
Inventory Financing Facility, (the "Third Amendment"), to, among other things,
address the future discontinuance of LIBOR by clarifying the mechanics related
to the transition to a replacement benchmark rate and to extend the term of the
Sixth Inventory Financing Facility to November 1, 2021. The maximum borrowing
amount available remained unchanged. The Sixth Inventory Financing Facility is
used to purchase new and pre-owned inventory (boats, engines, and trailers).

On October 29, 2021, the Company entered into the Fourth Amendment to the Sixth
Inventory Financing Facility to (a) increase the amount of Permitted
Indebtedness (as defined in the Sixth Inventory Financing Facility) to $360.0
million and (b) extend the term of the Sixth Inventory Financing Facility to
December 1, 2021.

On December 1, 2021, the Company entered into the Fifth Amendment the Sixth
Inventory Financing Facility to (a) increase the amount of Permitted
Indebtedness (as defined in the Sixth Inventory Financing Facility) to $380.0
million and (b) extend the term of the Sixth Inventory Financing Facility to
January 1, 2022.

On December 29, 2021, the Company entered into the Seventh Amended and Restated
Inventory Financing Agreement (the "Inventory Financing Facility") to increase
the maximum borrowing amount available to $500.0 million. The Inventory
Financing Facility Expires on December 1, 2023.

Prior to October 1, 2021, the interest rate for amounts outstanding under the
Sixth Inventory Financing Facility was calculated using the one month LIBOR plus
an applicable margin of 2.75% to 5.00% for new boats and at the new boat rate
plus 0.25% for pre-owned boats. Loans were extended from time to time to enable
us to purchase inventory from certain manufacturers and to lease certain boats
and related parts to customers. The applicable financial terms, curtailment
schedule and maturity for each loan was set forth in separate program terms
letters entered into from time to time. The collateral for the Sixth Inventory
Financing Facility consisted primarily of our inventory that was financed
through the Sixth Inventory Financing Facility and related assets, including
accounts receivable, bank accounts, and proceeds of the foregoing, and excludes
the collateral that underlies the Credit Facility.

Effective October 1, 2021, interest on new boats and for rental units is
calculated using the Adjusted 30-Day Average SOFR (as defined in the Inventory
Financing Facility) ("SOFR") plus an applicable margin of 2.75% to 5.00%
depending on the age of the inventory. Interest on pre-owned boats is calculated
at the new boat rate plus 0.25%.

We are required to comply with certain financial and non-financial covenants
under the Inventory Financing Facility, including provisions that the Funded
Debt to EBITDA Ratio (as defined in the Inventory Financing Facility) of
OneWater LLC must not exceed 2.00 to 1.00, and that our Fixed Charge Coverage
Ratio (as defined in the Inventory Financing Facility) on a consolidated basis
must be at least 1.50 to 1.00. We are also subject to additional restrictive
covenants, including restrictions on our ability to (i) use, sell, rent or
otherwise dispose of any collateral underlying the Inventory Financing Facility
except for the sale of inventory in the ordinary course of business, (ii) incur
certain liens, (iii) engage in any material transaction not in the ordinary
course of business, (iv) change our business in any material manner or our
organizational structure, other than as otherwise provided for in the Inventory
Financing Facility, (v) engage in certain mergers or consolidations, (vi)
acquire certain assets or ownership interest of any other person or entities,
except for certain permitted acquisitions, (vii) guarantee or indemnify or
otherwise become in any way liable with respect to certain obligations of any
other person or entity, except as provided by the Inventory Financing Facility,
(viii) redeem, retire, purchase or otherwise acquire, directly or indirectly,
any of the equity of our acquired dealer groups, (ix) make any change in any of
our dealer groups' capital structure or in any of its business objectives or
operations which might in any way adversely affect the ability of such dealer
group to repay its obligations under the Inventory Financing Facility, (x)
incur, create, assume, guarantee or otherwise become or remain liable with
respect to certain indebtedness, and (xi) make certain payments of subordinated
debt. OneWater LLC and its subsidiaries are restricted from, among other things,
making cash dividends or distributions without the prior written consent of
Wells Fargo Commercial Distribution Finance, LLC (the "Agent"). Under the
Inventory Financing Facility, among other exceptions, OneWater LLC may make
distributions to its members for certain permitted tax payments subject to
certain financial ratios, may make scheduled payments on certain subordinated
debt and is permitted to make pro rata distributions to the OneWater Unit
Holders, including OneWater Inc., in an amount sufficient to allow OneWater Inc.
to pay its taxes and to make payments under the Tax Receivable Agreement.
OneWater LLC's subsidiaries are generally restricted from making loans or
advances to OneWater LLC. Our Chief Executive Officer, Philip Austin Singleton,
Jr., and our Chief Operating Officer, Anthony Aisquith, provide certain personal
guarantees of the Inventory Financing Facility.

On June 16, 2021, OneWater Inc. and OneWater LLC obtained a written consent from
the Agent to permit the payment of the Special Dividend.


As of December 31, 2021 and September 30, 2021, our indebtedness associated with
financing our inventory under the Inventory Financing Facility totaled $195.6
million and $114.2 million, respectively. Certain of our manufacturers enter
into independent agreements with the lenders to the Inventory Financing
Facility, which results in a lower effective interest rate charged to us for
borrowings related to the products by such manufacturer. As of December 31, 2021
and September 30, 2021, the effective interest rate on the outstanding
short-term borrowings under the Inventory Financing Facility was 2.2% and 2.0%,
respectively. As of December 31, 2021 and September 30, 2021, our additional
available borrowings under our Inventory Financing Facility were $304.4 million
and $278.3 million, respectively, based upon the outstanding borrowings and the
maximum facility amount. The aging of our inventory limits our borrowing
capacity as defined curtailments reduce the allowable advance rate as our
inventory ages. As of December 31, 2021, we were in compliance with all
covenants under the Inventory Financing Facility.

                                       32
--------------------------------------------------------------------------------
  Table of Contents
Notes Payable

Acquisition Notes Payable. In connection with certain of our acquisitions of
dealer groups, we have entered into notes payable agreements with the acquired
entities to finance these acquisitions. As of December 31, 2021, our
indebtedness associated with our 4 acquisition notes payable totaled an
aggregate of $7.3 million with a weighted average interest rate of 5.1% per
annum. As of December 31, 2021, the principal amount outstanding under these
acquisition notes payable ranged from $1.1 million to $2.2 million, and the
maturity dates ranged from February 1, 2022 to December 1, 2024.

Commercial Vehicles Notes Payable. Since 2015, we have entered into multiple
notes payable with various commercial lenders in connection with our acquisition
of certain vehicles utilized in our retail operations. Such notes bear interest
ranging from 0.0% to 8.9% per annum, require monthly payments of approximately
$103,000, and mature on dates between February 2022 to June 2028. As of December
31, 2021, we had $3.2 million outstanding under the commercial vehicles notes
payable.

Tax Receivable Agreement

The Tax Receivable Agreement generally provides for the payment by OneWater Inc.
to certain of the OneWater Unit Holders of 85% of the net cash savings, if any,
in U.S. federal, state and local income tax and franchise tax (computed using
the estimated impact of state and local taxes) that OneWater Inc. actually
realizes (or is deemed to realize in certain circumstances) in periods after the
IPO as a result of certain tax basis increases and certain tax benefits
attributable to imputed interest. OneWater Inc. will retain the benefit of the
remaining 15% of these net cash savings. To the extent OneWater LLC has
available cash and subject to the terms of any current or future debt or other
agreements, the OneWater LLC Agreement will require OneWater LLC to make pro
rata cash distributions to OneWater Unit Holders, including OneWater Inc., in an
amount sufficient to allow OneWater Inc. to pay its taxes and to make payments
under the Tax Receivable Agreement. We generally expect OneWater LLC to fund
such distributions out of available cash. However, except in cases where
OneWater Inc. elects to terminate the Tax Receivable Agreement early, the Tax
Receivable Agreement is terminated early due to certain mergers or other changes
of control or OneWater Inc. has available cash but fails to make payments when
due, generally OneWater Inc. may elect to defer payments due under the Tax
Receivable Agreement if it does not have available cash to satisfy its payment
obligations under the Tax Receivable Agreement or if its contractual obligations
limit its ability to make these payments. Any such deferred payments under the
Tax Receivable Agreement generally will accrue interest. In certain cases,
payments under the Tax Receivable Agreement may be accelerated and/or
significantly exceed the actual benefits, if any, OneWater Inc. realizes in
respect of the tax attributes subject to the Tax Receivable Agreement. In the
case of such an acceleration, where applicable, we generally expect the
accelerated payments due under the Tax Receivable Agreement to be funded out of
the proceeds of the change of control transaction giving rise to such
acceleration. OneWater Inc. intends to account for any amounts payable under the
Tax Receivable Agreement in accordance with ASC Topic 450, Contingencies.

Recent Accounting Pronouncements

See Note 3 of the Notes to the Condensed Consolidated Financial Statements.

Older

Findings in Discrete and Continuous Dynamical Systems Reported from Southwest Jiaotong University (Optimal Asset Allocation for CRRA and CARA Insurers under the Vasicek Interest Rate Model): Discrete and Continuous Dynamical Systems

Newer

Research Data from Johns Hopkins University Update Understanding of Radius Fracture (The Financial Burden of Nonoperatively Treated Pediatric Distal Radius Fractures: Medical Debt In Privately Versus Publicly Insured Patients): Radius Fracture

Advisor News

  • A rising retirement challenge: The license to spend
  • Financial stress leaves less room for retirement saving
  • Giving while you’re living: 3 frequently asked questions about gifting
  • Helping clients prepare for one of their biggest retirement expenses
  • Important year-end financial conversations every advisor must have
More Advisor News

Annuity News

  • A rising retirement challenge: The license to spend
  • What lower interest rates mean to annuity payouts
  • AM Best downgrades A-Cap insurers amid financial and regulatory troubles
  • Lawsuit claims Delaware Life hid billions in insurer-linked investments
  • AM Best to Deliver Presentation at 2026 ACLI Annual Conference
More Annuity News

Health/Employee Benefits News

  • New leader named for state HHS Medical Services
  • Health Insurance Marketplace enrollment starts Nov. 1
  • The flawed logic of Medicare for All
  • Bailey pushes back on Abbott tax message
  • Commentary: Health coverage for all
Sponsor
More Health/Employee Benefits News

Life Insurance News

  • Study Results from Cornell University in the Area of Insurance Reported (Regulatory Competition In the Us Life Insurance Industry): Insurance
  • AM Best Comments on Issuer Credit Ratings of Pacific Life Insurance Company’s Commercial Paper Following Amendment to Program
  • AM Best Affirms Credit Ratings of Protective Life Corporation and Its Key Subsidiaries
  • ICICI Life Insurance names Sidharatha Mishra managing director, CEO
  • Lawsuit alleges companies collected $30 million in ‘illegal wager on human life’
Sponsor
More Life Insurance News

NEWS INSIDE

  • Companies
  • Earnings
  • Economic News
  • INN Magazine
  • Insurtech News
  • Newswires Feed
  • Regulation News
  • Washington Wire
  • Videos

FEATURED OFFERS

Press Releases

  • Lauren Sinnott Named to Ragan’s Top Women in Marketing Awards, Class of 2026 
  • Classic Car Insurer OpenRoad Insurance Expands to 40 U.S. States in Two Years
  • How Aspire General Turned an Early Technology Bet Into Claims Automation at Scale with Kyber
  • Adjusto launches AI-Native contents claims services powered by its technology platform
  • URL Insurance Group Celebrates 40 Years of Service, Growth, and Industry Leadership
More Press Releases > Add Your Press Release >

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

Topics

  • Advisor News
  • Annuity Index
  • Annuity News
  • Companies
  • Earnings
  • Fiduciary
  • From the Field: Expert Insights
  • Health/Employee Benefits
  • Insurance & Financial Fraud
  • INN Magazine
  • Insiders Only
  • Life Insurance News
  • Newswires
  • Property and Casualty
  • Regulation News
  • Sponsored Articles
  • Washington Wire
  • Videos
  • ———
  • About
  • Meet our Editorial Staff
  • Advertise
  • Contact
  • Newsletters

Top Sections

  • AdvisorNews
  • Annuity News
  • Health/Employee Benefits News
  • InsuranceNewsNet Magazine
  • Life Insurance News
  • Property and Casualty News
  • Washington Wire

Our Company

  • About
  • Advertise
  • Contact
  • Meet our Editorial Staff
  • Magazine Subscription
  • Write for INN

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
© 2026 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • InsuranceNewsNet Magazine

Sign in with your Insider Pro Account

Not registered? Become an Insider Pro.