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

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, 10 distribution
centers/warehouses and multiple online marketplaces as of March 31, 2022. 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, 10 distribution centers/warehouses and multiple
online marketplaces through 28 acquisitions. Our current portfolio of companies,
as of March 31, 2022, 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 & 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.

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While we continue to monitor the impact of the COVID-19 pandemic on our business
and operations, our financial results for the three and six months ended March
31, 2022 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, 10 distribution centers/warehouses and multiple online marketplaces
through 28 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. 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, including supply chain constraints, 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, higher interest rates or higher fuel costs, 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.

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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.

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. 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 $4.1 million and $2.3 million as
of March 31, 2022 and September 30, 2021, respectively.

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 and six months ended March 31, 2022.

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 history indicates 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 manufactured and
assembled parts and accessories is determined using standard costing. The cost
of acquired 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 $1.1 million and $0.8 million at March 31, 2022 and
September 30, 2021, respectively.

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.

Identifiable intangible assets consist of trade names, design libraries and
customer relationships 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. Design libraries and customer
relationships are amortized over their estimated useful lives of ten years and
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable.

Impairment testing requires the assessment of both qualitative and quantitative
factors, including, but not limited to whether there has been a significant or
adverse change in the business climate that could affect the value of an asset
and/or significant or adverse changes in cash flow projections or earnings
forecasts. These assessments require management to make judgements, assumptions
and estimates. We did not perform impairment testing related to goodwill and
identifiable intangible assets for the six months ended March 31, 2022 as no
triggering events have occurred.

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.

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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, design
libraries and customer relationships. 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. Management estimated the fair value of the
trade names and design libraries using the relief from royalty method and
customer relationships using the multi-period excess earnings method. The fair
value determination of the trade names and design libraries required management
to make significant estimates and assumptions related to future revenues and the
selection of the royalty rate and discount rate. The fair value determination of
the customer relationships required management to make significant estimates and
assumptions related to future revenues attributable to existing customers,
future EBITDA margins and the selection of the customer attrition rate and
discount rate.

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 17.2% and 10.3% to revenue in the three months ended March 31, 2022
and 2021, respectively, and 15.8% and 10.6% to revenue in the six months ended
March 31, 2022 and 2021, respectively, due to the higher gross margin on these
product and service lines, non-boat sales contributed 28.9% and 25.6% to gross
profit in the three months ended March 31, 2022 and 2021, respectively, and
27.9% and 26.7% to gross profit in the six months ended March 31, 2022 and 2021,
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.

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").

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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 2022 Year-to-date 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.

• Effective February 1, 2022, we acquired JIF Marine, a leading supplier of

stainless steel ladders, dock products and other accessories which is based in

   Tennessee.

• Effective March 1, 2022, we acquired YakGear, a leading supplier of kayak

equipment, paddle sport accessories and boat mounting accessories which is

   based in Texas.



We refer to the acquisitions described above collectively as the ''2022
Acquisitions.'' Naples Boat Mart is fully reflected in our unaudited Condensed
Consolidated Statements of Operations for the three and six months ended March
31, 2022. The acquisitions of T-H Marine, Norfolk Marine Company and Quality
Boats are fully reflected in our unaudited Condensed Consolidated Statements of
Operations for the three months ended March 31, 2022 and partially reflected for
the six months ended March 31, 2022. The acquisitions of JIF Marine and YakGear
were partially included in the unaudited Condensed Consolidated Statements of
Operations for the three and six months ended March 31, 2022.

Fiscal 2021 Acquisitions

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

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

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

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

• 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.

• Effective August 1, 2021, we acquired substantially all of the assets of Stone

Harbor Marine, Inc., a full-service marine retailer based in New Jersey with

   one store.

• Effective September 1, 2021, we acquired substantially all of the assets of

   PartsVu, an online marketplace for OEM marine parts, electronics and
   accessories.



We refer to the acquisitions described above collectively as the ''2021
Acquisitions.'' The Tom George Yacht Sales, Inc, Walker Marine Group, Inc. and
Roscioli Yachting Center Inc. acquisitions are fully reflected in our unaudited
Condensed Consolidated Statements of Operations for the three months ended March
31, 2021 and partially reflected for the six months ended March 31, 2021. Stone
Harbor Marine, Inc. and PartsVu are not reflected in the unaudited Condensed
Consolidated Statements of Operations for the three and six months ended March
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 24.4% of pre-tax earnings for the six

months ended March 31, 2022.

• 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.



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Results of Operations

Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021

                                                            For the Three 

Months Ended March 31, 2022 For the Three Months Ended March 31, 2021

                                                                Amount                % of Revenue            Amount                % of Revenue          $ Change           % Change
                                                                                                                  ($ in thousands)
Revenues
New boat                                                    $       290,020                      65.6 %   $       239,654                      72.7 %   $      50,366               21.0 %
Pre-owned boat                                                       75,854                      17.2 %            56,082                      17.0 %          19,772               35.3 %
Finance & insurance income                                           14,948                       3.4 %            11,789                       3.6 %           3,159               26.8 %
Service, parts and other                                             61,305                      13.9 %            22,086                       6.7 %          39,219              177.6 %
Total revenues                                                      442,127                     100.0 %           329,611                     100.0 %         112,516               34.1 %

Gross Profit
New boat                                                             81,414                      18.4 %            52,507                      15.9 %          28,907               55.1 %
Pre-owned boat                                                       19,895                       4.5 %            13,534                       4.1 %           6,361               47.0 %
Finance & insurance                                                  14,948                       3.4 %            11,789                       3.6 %           3,159               26.8 %
Service, parts & other                                               26,285                       5.9 %            10,956                       3.3 %          15,329              139.9 %
Total gross profit                                                  142,542                      32.2 %            88,786                      26.9 %          53,756               60.5 %

Selling, general and administrative expenses                         75,492                      17.1 %            48,348                      14.7 %          27,144               56.1 %
Depreciation and amortization                                         4,727                       1.1 %             1,378                       0.4 %           3,349              243.0 %
Transaction costs                                                       776                       0.2 %               368                       0.1 %             408              110.9 %
Change in fair value of contingent consideration                      2,158                       0.5 %                 -                       0.0 %           2,158              100.0 %

Income from operations                                               59,389                      13.4 %            38,692                      11.7 %          20,697               53.5 %

Interest expense - floor plan                                         1,048                       0.2 %               330                       0.1 %             718              217.6 %
Interest expense - other                                              3,097                       0.7 %             1,215                       0.4 %           1,882              154.9 %
Other expense (income), net                                             109                       0.0 %                 5                       0.0 %             104                  *
Income before income tax expense                                     55,135                      12.5 %            37,142                      11.3 %          17,993               48.4 %
Income tax expense                                                   12,781                       2.9 %             6,550                       2.0 %           6,231               95.1 %
Net income                                                           42,354                       9.6 %            30,592                       9.3 %          11,762               38.4 %
Less: Net income attributable to non-controlling interest             1,011                                             -                                       1,011              100.0 %
Less: Net income attributable to non-controlling
interests of One Water Marine Holdings, LLC                           5,046                                        10,117                                      (5,071 )            -50.1 %
Net income attributable to One Water Marine Inc.            $        36,297                               $        20,475                               $      15,822               77.3 %



Revenue

Overall, revenue increased by $112.5 million, or 34.1%, to $442.1 million for
the three months ended March 31, 2022 from $329.6 million for the three months
ended March 31, 2021. Revenue generated from same-store sales increased 8.0% for
the three months ended March 31, 2022 as compared to the three months ended
March 31, 2021, 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 $112.5 million as a result of a $26.4 million increase in
same-store sales and a $86.1 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 $50.4 million, or 21.0%, to $290.0 million for the
three months ended March 31, 2022 from $239.7 for the three months ended March
31, 2021. 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.

Pre-owned Boat Sales

Pre-owned boat sales increased by $19.8 million, or 35.3%, to $75.9 million for
the three months ended March 31, 2022 from $56.1 million for the three months
ended March 31, 2021. 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. The average sales price per pre-owned unit for the three
months ended March 31, 2022 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.

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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 $3.2 million, or 26.8%, to $14.9 million for the
three months ended March 31, 2022 from $11.8 million for the three months ended
March 31, 2021. The increase was primarily due to the additional new and
pre-owned boat revenues. 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
decreased slightly as a percentage of total revenue to 3.4% in the three months
ended March 31, 2022 from 3.6% in the three months ended March 31, 2021. 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 $39.2 million, or 177.6%, to $61.3
million for the three months ended March 31, 2022 from $22.1 million for the
three months ended March 31, 2021. The increase in service, parts & other sales
is primarily due to the acquisition of T-H Marine as well as 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.

Gross Profit

Overall, gross profit increased by $53.8 million, or 60.5%, to $142.5 million
for the three months ended March 31, 2022 from $88.8 million for the three
months ended March 31, 2021. 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 2022 Acquisitions and the Company's focus on dynamic
pricing. Overall gross margins increased 530 basis points to 32.2% for the three
months ended March 31, 2022 from 26.9% for the three months ended March 31, 2021
due to the factors noted below.

New Boat Gross Profit

New boat gross profit increased by $28.9 million, or 55.1%, to $81.4 million for
the three months ended March 31, 2022 from $52.5 million for the three months
ended March 31, 2021. This increase was primarily due to our overall increase in
same-store sales as well as the impact of the 2022 Acquisitions. New boat gross
profit as a percentage of new boat revenue was 28.1% for the three months ended
March 31, 2022 as compared to 21.9% in the three months ended March 31, 2021.
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 and 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 $6.4 million, or 47.0%, to $19.9
million for the three months ended March 31, 2022 from $13.5 million for the
three months ended March 31, 2021. The increase in pre-owned gross profit was
driven by the increase in pre-owned revenue as a result of our same-store sales
growth and the impact of the 2022 Acquisitions. Pre-owned boat gross profit as a
percentage of pre-owned boat revenue was 26.2% and 24.1% for the three months
ended March 31, 2022 and 2021, 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 March 31, 2022 as compared to the three months ended
March 31, 2021, we experienced an increase in our gross profit on pre-owned
sales for each of the different sales arrangements with the exception of
wholesale.

Finance & Insurance Gross Profit

Finance & insurance gross profit increased by $3.2 million, or 26.8%, to $14.9
million for the three months ended March 31, 2022 from $11.8 million for the
three months ended March 31, 2021. 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 $15.3 million, or 139.9%, to
$26.3 million for the three months ended March 31, 2022 from $11.0 million for
the three months ended March 31, 2021. Service, parts & other gross profit as a
percentage of service, parts & other revenue was 42.9% and 49.6% for the three
months ended March 31, 2022 and 2021, respectively. The increase in gross profit
was primarily the result of our same-store sales growth as well as contributions
from the 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 $27.1 million, or 56.1%,
to $75.5 million for the three months ended March 31, 2022 from $48.3 million
for the three months ended March 31, 2021. This increase was primarily due to
expenses incurred to support the overall increase in revenues and gross profit.
The selling, general & administrative increase primarily consisted of a $18.5
million increase in personnel expenses. Selling, general & administrative
expenses as a percentage of revenue increased to 17.1% from 14.7% for the three
months ended March 31, 2022 and 2021, 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 gross profit margin.

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Depreciation and Amortization

Depreciation and amortization expense increased $3.3 million, or 243.0%, to $4.7
million for the three months ended March 31, 2022 compared to $1.4 million for
the three months ended March 31, 2021. The increase in depreciation and
amortization expense was primarily attributable to a $2.6 million increase in
amortization of design libraries and customer relationships from the 2022
Acquisitions.

Transaction Costs

The increase in transaction costs of $0.4 million, or 110.9%, to $0.8 million
for the three months ended March 31, 2022 compared to $0.4 million for the three
months ended March 31, 2021 was primarily attributable to expenses related to
the 2022 Acquisitions.

Change in Fair Value of Contingent Consideration

During the three months ended March 31, 2022, we incurred expenses of $2.2
million related to updated forecasts and accretion of contingent consideration
liabilities for acquisitions completed in fiscal year 2021 and 2022.

Income from Operations

Income from operations increased $20.7 million, or 53.5%, to $59.4 million for
the three months ended March 31, 2022 compared to $38.7 million for the three
months ended March 31, 2021. The increase was primarily attributable to the
$53.8 million increase in gross profit for the three months ended March 31, 2022
as compared to the three months ended March 31, 2021, partially offset by a
$27.1 million increase in selling, general & administrative expenses and a $3.3
million increase in depreciation and amortization during the same periods.

Interest Expense - Floor Plan

Interest expense - floor plan increased $0.7 million to $1.0 million for the
three months ended March 31, 2022 compared to $0.3 million for the three months
ended March 31, 2021. The increase in floor plan interest expense was primarily
attributable to the increase in average inventory for the three months ended
March 31, 2022 as compared to the three months ended March 31, 2021.

Interest Expense - Other

Interest expense - other increased by $1.9 million, or 154.9%, to $3.1 million
for the three months ended March 31, 2022 compared to $1.2 million for the three
months ended March 31, 2021. The increase in interest expense - other was
related to the increase in our long-term debt which was used to fund certain of
the 2022 Acquisitions.

Other Expense (Income), Net

Other expense increased slightly to $0.1 million for the three months ended
March 31, 2022 compared to $4,882 for the three months ended March 31, 2021.

Income Tax Expense

Income tax expense increased $6.2 million, or 95.1%, to $12.8 million for the
three months ended March 31, 2022 compared to $6.6 million for the three months
ended March 31, 2021. The increase was primarily attributable to the 48.4%
increase in income before income tax expense for the three months ended March
31, 2022 as compared to March 31, 2021 as well as the increased proportion of
consolidated income before income tax expense that is allocated to OneWater
Marine Inc. and therefore taxable due to exchanges of shares of Class B common
stock for shares of Class A common stock.

Net Income

Net income increased by $11.8 million to $42.4 million for the three months
ended March 31, 2022 compared to $30.6 million for the three months ended March
31, 2021. The increase was primarily attributable to the $53.8 million increase
in gross profit for the three months ended March 31, 2022 compared to March 31,
2021. The increase was partially offset by the $27.1 million increase in
selling, general & administrative expenses, $6.2 million increase in income tax
expense and the $3.3 million increase in depreciation and amortization for the
three months ended March 31, 2022 compared to the three months ended March 31,
2021.

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Six Months Ended March 31, 2022, Compared to Six Months Ended March 31, 2021

                                                                  For the Six Months Ended                  For the Six Months Ended
                                                                       March 31, 2022                            March 31, 2021
                                                                Amount             % of Revenue           Amount             % of Revenue         $ Change           % Change
                                                                                                              ($ in thousands)
Revenues
New boat                                                    $      526,218                   67.6 %   $      391,482                   72.0 %   $     134,736               34.4 %
Pre-owned boat                                                     129,303                   16.6 %           94,662                   17.4 %          34,641               36.6 %
Finance & insurance income                                          24,255                    3.1 %           17,752                    3.3 %           6,503               36.6 %
Service, parts and other                                            98,623                   12.7 %           39,798                    7.3 %          58,825              147.8 %
Total revenues                                                     778,399                  100.0 %          543,694                  100.0 %         234,705               43.2 %

Gross Profit
New boat                                                           141,716                   18.2 %           81,803                   15.0 %          59,913               73.2 %
Pre-owned boat                                                      33,974                    4.4 %           21,662                    4.0 %          12,312               56.8 %
Finance & insurance                                                 24,255                    3.1 %           17,752                    3.3 %           6,503               36.6 %
Service, parts & other                                              43,562                    5.6 %           20,005                    3.7 %          23,557              117.8 %
Total gross profit                                                 243,507                   31.3 %          141,222                   26.0 %         102,285               72.4 %

Selling, general and administrative expenses                       134,588                   17.3 %           83,208                   15.3 %          51,380               61.7 %
Depreciation and amortization                                        6,476                    0.8 %            2,341                    0.4 %           4,135              176.6 %
Transaction costs                                                    3,821                    0.5 %              568                    0.1 %           3,253              572.7 %
Change in fair value of contingent consideration                     7,904                    1.0 %              377                    0.1 %           7,527                  *

Income from operations                                              90,718                   11.7 %           54,728                   10.1 %          35,990               65.8 %

Interest expense - floor plan                                        1,925                    0.2 %            1,250                    0.2 %             675               54.0 %
Interest expense - other                                             4,626                    0.6 %            2,139                    0.4 %           2,487              116.3 %
Other (income) expense, net                                            657                    0.1 %              (89 )                  0.0 %             746                  *
Income before income tax expense                                    83,510                   10.7 %           51,428                    9.5 %          32,082               62.4 %
Income tax expense                                                  17,670                    2.3 %            9,061                    1.7 %           8,609               95.0 %
Net income                                                          65,840                    8.5 %           42,367                    7.8 %          23,473               55.4 %
Less: Net income attributable to non-controlling interest            1,011                                         -                                    1,011              100.0 %
Less: Net income attributable to non-controlling
interests of One Water Marine Holdings, LLC                          8,513                                    14,104                                   (5,591 )            -39.6 %
Net income attributable to One Water Marine Inc.            $       56,316                            $       28,263                            $      28,053               99.3 %



Revenue

Overall, revenue increased by $234.7 million, or 43.2%, to $778.4 million for
the six months ended March 31, 2022 from $543.7 million for the six months ended
March 31, 2021. Revenue generated from same-store sales increased 15.8% for the
six months ended March 31, 2022 as compared to the six months ended March 31,
2021, 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 $234.7 million as a result of a $86.0 million increase in
same-store sales and a $148.8 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 $134.7 million, or 34.4%, to $526.2 million for the
six months ended March 31, 2022 from $391.5 for the six months ended March 31,
2021. 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.

Pre-owned Boat Sales

Pre-owned boat sales increased by $34.6 million, or 36.6%, to $129.3 million for
the six months ended March 31, 2022 from $94.7 million for the six months ended
March 31, 2021. 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. The average sales price per pre-owned unit for the six
months ended March 31, 2022 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.

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 $6.5 million, or 36.6%, to $24.3 million for the
six months ended March 31, 2022 from $17.8 million for the six months ended
March 31, 2021. The increase was primarily due to the additional new and
pre-owned boat revenues. 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
decreased slightly as a percentage of total revenue to 3.1% in the six months
ended March 31, 2022 from 3.3% in the six months ended March 31, 2021. 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.

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Service, Parts & Other Sales

Service, parts & other sales increased by $58.8 million, or 147.8%, to $98.6
million for the six months ended March 31, 2022 from $39.8 million for the six
months ended March 31, 2021. The increase in service, parts & other sales is
primarily due to the acquisition of T-H Marine as well as 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.

Gross Profit

Overall, gross profit increased by $102.3 million, or 72.4%, to $243.5 million
for the six months ended March 31, 2022 from $141.2 million for the six months
ended March 31, 2021. 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 530 basis points to 31.3% for the six
months ended March 31, 2022 from 26.0% for the six months ended March 31, 2021
due to the factors noted below.

New Boat Gross Profit

New boat gross profit increased by $59.9 million, or 73.2%, to $141.7 million
for the six months ended March 31, 2022 from $81.8 million for the six months
ended March 31, 2021. This increase was primarily due to our overall increase in
same-store sales as well as the impact of the 2021 and 2022 acquisitions. New
boat gross profit as a percentage of new boat revenue was 26.9% for the six
months ended March 31, 2022 as compared to 20.9% in the six months ended March
31, 2021. 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 $12.3 million, or 56.8%, to $34.0
million for the six months ended March 31, 2022 from $21.7 million for the six
months ended March 31, 2021. The increase in pre-owned gross profit was driven
by the increase in pre-owned revenue as a result of our same-store sales growth
and the impact of the 2021 and 2022 acquisitions. Pre-owned boat gross profit as
a percentage of pre-owned boat revenue was 26.3% and 22.9% for the six months
ended March 31, 2022 and 2021, 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 six months ended March 31, 2022 as compared to the six months ended March
31, 2021, we experienced an increase in our gross profit on pre-owned sales for
each of the different sales arrangements with the exception of wholesale.

Finance & Insurance Gross Profit

Finance & insurance gross profit increased by $6.5 million, or 36.6%, to $24.3
million for the six months ended March 31, 2022 from $17.8 million for the six
months ended March 31, 2021. 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 $23.6 million, or 117.8%, to
$43.6 million for the six months ended March 31, 2022 from $20.0 million for the
six months ended March 31, 2021. Service, parts & other gross profit as a
percentage of service, parts & other revenue was 44.2% and 50.3% for the six
months ended March 31, 2022 and 2021, respectively. The increase in gross profit
was primarily the result of our same-store sales growth as well as contributions
from 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 $51.4 million, or 61.7%,
to $134.6 million for the six months ended March 31, 2022 from $83.2 million for
the six months ended March 31, 2021. This increase was primarily due to expenses
incurred to support the overall increase in revenues and gross profit which
included a $35.5 million increase in personnel expenses. Selling, general &
administrative expenses as a percentage of revenue increased to 17.3% from 15.3%
for the six months ended March 31, 2022 and 2021, 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 gross profit margin.

Depreciation and Amortization

Depreciation and amortization expense increased $4.1 million, or 176.6%, to $6.5
million for the six months ended March 31, 2022 compared to $2.3 million for the
six months ended March 31, 2021. The increase in depreciation and amortization
expense was primarily attributable to a $2.6 million increase in amortization of
design libraries and customer relationships from the 2022 Acquisitions as well
as an increase in property, plant and equipment.

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Transaction Costs

The increase in transaction costs of $3.3 million, or 572.7%, to $3.8 million
for the six months ended March 31, 2022 compared to $0.6 million for the six
months ended March 31, 2021 was primarily attributable to expenses related to
the 2022 Acquisitions.

Change in Fair Value of Contingent Consideration

During the six months ended March 31, 2022, we incurred expenses of $7.9 million
related to updated forecasts and accretion of contingent consideration
liabilities for acquisitions completed in fiscal year 2021 and 2022. During the
six months ended March 31, 2021, we incurred an 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 $36.0 million, or 65.8%, to $90.7 million for
the six months ended March 31, 2022 compared to $54.7 million for the six months
ended March 31, 2021. The increase was primarily attributable to the $102.3
million increase in gross profit for the six months ended March 31, 2022 as
compared to the six months ended March 31, 2021, partially offset by a $51.4
million increase in selling, general & administrative expenses, and a $7.5
million increase in the change in fair value of contingent consideration during
the same periods.

Interest Expense - Floor Plan

Interest expense - floor plan increased $0.7 million to $1.9 million for the six
months ended March 31, 2022 compared to $1.3 million for the six months ended
March 31, 2021. The increase in floor plan interest expense was primarily
attributable to the increase in average inventory for the six months ended March
31, 2022 as compared to the six months ended March 31, 2021.

Interest Expense - Other

Interest expense - other increased by $2.5 million, or 116.3%, to $4.6 million
for the six months ended March 31, 2022 compared to $2.1 million for the six
months ended March 31, 2021. 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 increased by $0.7 million to expense of $0.7 million
for the six months ended March 31, 2022 compared to income of $0.1 million for
the six months ended March 31, 2021. The increase in expense was primarily due
to the impact of tax rate changes on our tax receivable agreement liability.

Income Tax Expense

Income tax expense increased $8.6 million, or 95.0%, to $17.7 million for the
six months ended March 31, 2022 compared to $9.1 million for the six months
ended March 31, 2021. The increase was primarily attributable to the 62.4%
increase in income before income tax expense for the six months ended March 31,
2022 as compared to March 31, 2021 as well as the increased proportion of
consolidated income before income tax expense that is allocated to OneWater
Marine Inc. and therefore taxable due to exchanges of shares of Class B common
stock for shares of Class A common stock.

Net Income

Net income increased by $23.5 million to $65.9 million for the six months ended
March 31, 2022 compared to $42.4 million for the six months ended March 31,
2021. The increase was primarily attributable to the $102.3 million increase in
gross profit for the six months ended March 31, 2022 compared to March 31, 2021.
The increase was partially offset by a $51.4 million increase in selling,
general & administrative expenses, a $8.6 million increase in income tax expense
and a $7.5 million increase in the change in fair value of contingent
consideration during the same periods.

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.

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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 March 31, 2022, Compared to Three Months Ended March 31, 2021

                                                                  Three months ended March 31,
Description                                                         2022                 2021
                                                                        ($ in thousands)
Net income                                                     $       42,354       $       30,592
Interest expense - other                                                3,097                1,215
Income tax expense                                                     12,781                6,550
Depreciation and amortization                                           4,791                1,378
Change in fair value of contingent consideration                        2,158                    -
Transaction costs                                                         776                  368
Other expense (income), net                                               109                    5
Adjusted EBITDA                                                $       66,066       $       40,108



Adjusted EBITDA was $66.1 million for the three months ended March 31, 2022
compared to $40.1 million for the three months ended March 31, 2021. The
increase in Adjusted EBITDA resulted primarily from our 8.0% increase in
same-store sales growth for the three months ended March 31, 2022 as compared to
the three months ended March 31, 2021, the impact of the 2022 Acquisitions and
our ability to increase gross profit margins and control selling, general and
administrative expenses.

Six Months Ended March 31, 2022, Compared to Six Months Ended March 31, 2021

                                                       Six months ended March 31,
Description                                             2022                2021
                                                            ($ in thousands)
Net income                                         $       65,840       $      42,367
Interest expense - other                                    4,626               2,139
Income tax expense                                         17,670               9,061
Depreciation and amortization                               6,540               2,341
Change in fair value of contingent consideration            7,904                 377
Transaction costs                                           3,821                 568
Other expense (income), net                                   657                 (89 )
Adjusted EBITDA                                    $      107,058       $      56,764



Adjusted EBITDA was $107.1 million for the six months ended March 31, 2022
compared to $56.8 million for the six months ended March 31, 2021. The increase
in Adjusted EBITDA resulted primarily from our 15.8% increase in same-store
sales growth for the six months ended March 31, 2022 as compared to the six
months ended March 31, 2021, the impact of the 2021 and 2022 Acquisitions and
our ability to increase gross profit margins and control selling, general and
administrative expenses.

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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 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.

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
public or private issuances of debt or equity to fund our current operations, to
make share repurchases and to fund essential capital expenditures and
acquisitions for the next twelve months and beyond.

Cash needs for acquisitions have historically been financed with our credit
facilities 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 March
31, 2022, 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 Six Months Ended March 31, 2022 and
2021

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

                                                            Six Months ended March 31,

Description                                              2022          2021          Change
                                                                 ($ in thousands)

Net cash (used in) provided by operating activities $ (43,422 ) $ 30,581 $ (74,003 )
Net cash used in investing activities

                   (296,865 )     (90,507 )     (206,358 )
Net cash provided by financing activities                355,295        79,255        276,040
Net change in cash                                    $   15,008     $  19,329     $   (4,321 )



Operating Activities. Net cash used in operating activities was $43.4 million
for the six months ended March 31, 2022 compared to net cash provided by
operating activities of $30.6 million for the six months ended March 31, 2021.
The $74.0 million decrease in cash provided by operating activities was
primarily attributable to a $83.3 million increase in the change in inventory
and a $21.7 million increase in the change in accounts receivable for the six
months ended March 31, 2022 as compared to the six months ended March 31, 2021.
This amount was partially offset by a $23.5 million increase in net income and a
$13.4 million increase in the change in accounts payable for the six months
ended March 31, 2022 as compared to the six months ended March 31, 2021.

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Investing Activities. Net cash used in investing activities was $296.9 million
for the six months ended March 31, 2022 compared to net cash used in investing
activities of $90.5 million for the six months ended March 31, 2021. The $206.4
million increase in cash used in investing activities was primarily attributable
to a $203.4 million increase in cash used in acquisitions for the six months
ended March 31, 2022 as compared to the six months ended March 31, 2021.

Financing Activities. Net cash provided by financing activities was $355.3
million for the six months ended March 31, 2022 compared to net cash provided by
financing activities of $79.3 million for the six months ended March 31, 2021.
The $276.0 million increase in financing cash flow was primarily attributable to
a $210.0 million increase in borrowings on long-term debt and an $84.9 million
increase in net borrowings on our Inventory Financing Facility for the six
months ended March 31, 2022 as compared to the six months ended March 31, 2021.

Share Repurchase Program

On March 30, 2022, our Board authorized a share repurchase program of up to $50
million of outstanding shares of Class A common stock. As of March 31, 2022, no
shares had been repurchased under the program. The repurchase program does not
have a predetermined expiration date.

Debt Agreements

Credit Facility

Effective July 22, 2020, we and certain of our subsidiaries entered into the
Credit Agreement (as amended, restated, amended and restated, supplemented or
otherwise modified from time to time, the "Credit Facility") with Truist Bank
and the other lenders party thereto. The Credit Facility provides for (i) a
$50.0 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 (ii) a term loan facility (which
includes incremental term loans as provided in the First Incremental Amendment
and Second Incremental Amendment). Subject to certain conditions, the available
amount under the revolving credit facility and the term loans may be increased.
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
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

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.

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 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. As of March 31, 2022, we had $297.9 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 Credit Facility also contains non-financial covenants and
restrictive provisions that, among other things, limit the ability of the
Company to incur additional debt, transfer or dispose of all of its assets, make
certain investments, loans or payments and engage in certain transactions with
affiliates. The Company was in compliance with all covenants as of March 31,
2022.


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Inventory Financing Facility

On December 29, 2021, the Company and certain of its subsidiaries entered into
the Inventory Financing Facility to, among other things, increase the maximum
borrowing amount available to $500.0 million. Loans under the Inventory
Financing Facility may be extended from time to time to enable the Company to
purchase inventory from certain manufacturers. The Inventory Financing Facility
Expires on December 1, 2023.

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%. Loans are 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 are set forth in separate program terms letters that were entered into
from time to time. The collateral for the 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
secures the Credit Facility.

We are required to comply with certain financial and non-financial covenants
under the Inventory Financing Facility, including certain provisions related to
the Funded Debt to EBITDA Ratio (as defined in the Inventory Financing Facility)
and the Fixed Charge Coverage Ratio (as defined in the Inventory Financing
Facility). We are also subject to additional restrictive covenants, including
restrictions on our ability to (i) use, sell, rent or otherwise dispose of any
collateral securing 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 interests 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 their 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 certain of its subsidiaries are restricted from, among other things, making
cash dividends or distributions without the prior written consent of Wells
Fargo. 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.

As of March 31, 2022 and September 30, 2021, our indebtedness associated with
financing our inventory under the Inventory Financing Facility totaled $254.9
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 March 31, 2022
and September 30, 2021, the effective interest rate on the outstanding
short-term borrowings under the Inventory Financing Facility was 1.9% and 2.0%,
respectively. As of March 31, 2022 and September 30, 2021, our additional
available borrowings under our Inventory Financing Facility were $245.1 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 of March
31, 2022, we were in compliance with all covenants under the Inventory Financing
Facility.

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 March 31, 2022, our indebtedness
associated with our 2 acquisition notes payable totaled an aggregate of $3.2
million with a weighted average interest rate of 5.0% per annum. As of March 31,
2022, the principal amount outstanding under these acquisition notes payable
ranged from $1.1 million to $2.1 million, and the maturity dates ranged from
December 1, 2023 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
$115,000, and mature on dates between April 2022 to July 2028. As of March 31,
2022, we had $3.2 million outstanding under the commercial vehicles notes
payable.

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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.