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, 2022, filed with the SEC on December
15, 2022, 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 100 retail locations, 12 distribution
centers/warehouses and multiple online marketplaces as of March 31, 2023. 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 of the markets in which we
operate. Additionally, the recent acquisitions of T-H Marine Supplies, LLC ("T-H
Marine") and Ocean Bio-Chem have significantly expanded our sales of
marine-related parts and accessories. The combination of our significant scale,
diverse inventory, access to premium boat brands, access to a broad array of
parts and accessories, and meaningful group brand equity enables us to provide a
consistently professional experience as reflected in the number of our repeat
customers and Dealership same-store sales growth.

Effective August 9, 2022, our reportable segments changed as a result of the
Company's acquisition of Ocean Bio-Chem, which changed management's reporting
structure and operating activities. We now report our operations through two
reportable segments: Dealerships and Distribution.

As of March 31, 2023, the Dealerships segment includes operations of 100
dealerships in 16 states including Florida, Texas, Alabama and Georgia, among
others, and represents approximately 91% and 90% of revenues for the three and
six months ended March 31, 2023, respectively. The Dealership segment engages in
the sale of new and pre-owned boats, arranges financing and insurance products,
performs repairs and maintenance services, offers marine-related parts and
accessories and offers slip and storage accommodations in certain locations. In
fiscal year 2022, we sold over 10,500 new and pre-owned boats, many of which
were sold to customers who had a trade-in or with whom we otherwise had
established relationships. The combination of our significant scale, diverse
inventory and revenue streams, access to premium boat brands and meaningful
brand equity enables us to provide a consistently professional experience as
reflected by the number of our repeat customers and Dealership same-store sales
growth.

As of March 31, 2023, the Distribution segment includes the activity of three of
our fully-owned businesses, PartsVu, Ocean Bio-Chem and T-H Marine and its
subsidiaries, which together operate 12 distribution centers/warehouses in
Alabama, Florida, Texas, Oklahoma, Indiana, Tennessee and Illinois and
represents approximately 9% and 10% of revenues for the three and six months
ended March 31, 2023, respectively. The Distribution segment engages in the
manufacturing, assembly and distribution of primarily marine-related products
for sale to distributors, big box retailers, online retailers and direct to
consumers. We offer a wide array of branded parts and accessories including jack
plates, rigging parts, plumbing components, LED lighting, storage systems, and
appearance, cleaning, and maintenance products for the marine and ancillary
industries. All revenue for the Distribution segment is reported in service,
parts & other in our consolidated statements of operations.

We were formed in 2014 as OneWater LLC through the combination of Singleton
Marine and Legendary Marine, which created a marine retail platform that
collectively owned and operated 19 dealerships. Since the combination in 2014,
we have acquired a total of 79 additional dealerships, 12 distribution
centers/warehouses and multiple online marketplaces through 32 acquisitions. Our
current portfolio as of March 31, 2023 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 marine retailers in the United
States based on number of dealerships and total boats sold. While we have
opportunistically opened new dealerships in select markets, or launched
additional parts and accessory products, we believe that it is generally more
effective economically and operationally to acquire existing businesses with
experienced staff and established reputations.
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The boat dealership market is highly fragmented, as evidenced by the over 4,000
boat dealers nationwide. Most competing boat retailers are operated by local
business owners who own three or fewer stores; however, we do have other large
competitors including MarineMax and Bass Pro Shops. 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. In addition to boat sales, we also
generate sales from related products including finance & insurance and service,
parts and other sales. The recent acquisitions of T-H Marine and Ocean Bio-Chem
have significantly expanded our sales of marine parts and accessories. Our
strategic growth in this area is also expected to materially expand our
addressable market in the parts and accessories business. We are able to operate
with a comparatively higher degree of profitability than other independent
retailers because we allocate support resources across our broader base, focus
on high margin service, parts and accessories, 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 marine 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 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 also caused significant supply chain
challenges as suppliers were faced with business closures and shipping delays.
This led to an industry wide inventory shortage of boats, engines and certain
marine parts. As of March 31, 2023, we have seen considerable improvements in
the supply chain and believe we are returning to the more traditional seasonal
cycles of our business. The ultimate impact of a resurgence of COVID-19 or
another global pandemic and its related effects remains uncertain and depends on
various factors including consumer demand, our ability to safely operate
locations 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 79 additional dealerships through
27 dealer group acquisitions. Our team remains focused on expanding our
dealership growth in regions with strong boating cultures, enhancing the
customer experience and generating value for our shareholders. In addition to
dealership acquisitions, the Company has strategically acquired parts and
accessories companies as part of our growth and diversification strategy. We
have acquired 12 distribution centers and warehouses through the acquisition of
5 parts and accessories companies. We plan to continue to strategically evaluate
and complete acquisitions moving forward.

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
dealerships at attractive EBITDA multiples and then grow same-store sales while
benefitting from cost-reducing synergies. Historically, we have typically
acquired dealerships 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. With the expansion of our Distribution segment, we look to
acquire parts and accessories manufacturing and distribution companies within a
range of 5.0x - 10.0x EBITDA on a trailing twelve-month basis, depending on the
size of the business.

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 a
global pandemic, 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 dealerships, particularly in the Southeast, can have a
major impact on our overall results of operations. Local influences, such as
corporate downsizing, inclement weather such as hurricanes and other storms,
environmental conditions, and 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 dealerships 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 & 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 pandemics, rising
interest rates, inflation, or the extent to which they could adversely affect
our operating results.
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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 Estimates

There have been no material changes in our critical accounting policies and
estimates from the information provided in the Company's Annual Report for the
year ended September 30, 2022.

How We Evaluate Our Operations

Revenue

We have a diversified revenue profile that is comprised of new boat sales,
pre-owned boat sales, finance & insurance 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 generate 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 17.9% and 17.2% to revenue in the three months ended
March 31, 2023 and 2022, respectively, and 19.3% and 15.8% to revenue in the six
months ended March 31, 2023 and 2022, respectively, due to the higher gross
margin on these product and service lines, non-boat sales contributed 33.6% and
28.9% to gross profit in the three months ended March 31, 2023 and 2022,
respectively, and 33.7% and 27.9% to gross profit in the six months ended
March 31, 2023 and 2022, respectively. We have also diversified our business
across geographies, dealership types (e.g., fresh water and salt water), and
product offerings (e.g., focus on parts and accessories business through
PartsVu, T-H Marine and Ocean Bio-Chem) in order to reduce the effects of
seasonality and cyclicality of our business. 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 dealerships and vendor
consideration. Gross profit excludes the majority of 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 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 selling, general, and administrative expenses in
the aggregate as a percentage of total revenue.

Dealership Same-Store Sales

We assess the organic growth of our Dealership segment 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 dealerships become
eligible for inclusion in the comparable dealership base at the end of the
dealership's thirteenth month of operations under our ownership and revenues are
only included for identical months in the same-store base periods. Dealerships
relocated within an existing market remain in the comparable dealership base for
all periods. Additionally, amounts related to closed dealerships are excluded
from each comparative base period. Because Dealership 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.
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Adjusted EBITDA

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 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 (loss), the
most directly comparable financial measure calculated and presented in
accordance with GAAP.

Summary of Acquisitions

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

Fiscal 2023 Year-to-date Acquisitions

•Effective October 1, 2022, we acquired Taylor Marine Centers, a full-service
marine retailer with locations in Maryland and Delaware.
•Effective December 1, 2022, we acquired Harbor View Marine, a full-service
marine retailer with locations in Florida and Alabama.

We refer to the fiscal year 2023 acquisitions described above collectively as
the ''2023 Acquisitions.'' The acquisition of Taylor Marine Centers is fully
reflected in our unaudited Condensed Consolidated Statements of Operations for
the three and six months ended March 31, 2023. The acquisition of Harbor View
Marine is fully reflected in our unaudited Condensed Consolidated Statements of
Operations for the three months ended March 31, 2023 and partially reflected for
the six months ended March 31, 2023.

Fiscal Year 2022 Acquisitions

•Effective October 1, 2021, we acquired Naples Boat Mart, a full-service marine
retailer with one location in Florida.
•Effective November 30, 2021, we acquired T-H Marine, a leading provider of
branded marine parts and accessories for OEMs and the aftermarket, 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.
•Effective April 1, 2022, we acquired Denison Yachting, a leader in yacht and
superyacht sales as well as ancillary yacht services, with 20 locations.
•Effective August 9, 2022, we acquired Ocean Bio-Chem, including Star Brite
Europe, Inc., a leading supplier and distributor of appearance, cleaning and
maintenance products for the marine industry and the automotive, powersports,
recreational vehicles, and outdoor power equipment markets with locations in
Alabama and Florida.

We refer to the fiscal year 2022 acquisitions described above collectively as
the "2022 Acquisitions." The acquisition of 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 are partially reflected in our unaudited
Condensed Consolidated Statements of Operations for the three and six months
ended March 31, 2022. The remaining 2022 Acquisitions are not reflected in our
unaudited Condensed Consolidated Statements of Operations for the three and six
months ended March 31, 2022.

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.'s effective tax rates were 22.8% and 21.2% for the six
months ended March 31, 2023 and 2022, respectively.
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•As we further implement controls, processes and infrastructure applicable to
companies with publicly traded equity securities, it is likely that we will
incur additional selling, general, and administrative expenses relative to
historical periods. Our future results will depend on our ability to efficiently
manage our combined operations and execute our business strategy.

Results of Operations

Three Months Ended March 31, 2023, Compared to Three Months Ended March 31, 2022

                                                  For the Three Months Ended March 31, 2023        For the Three Months Ended March 31, 2022
($ in thousands)                                       Amount               % of Revenue                Amount               % of Revenue            $ Change            % Change
Revenues:
New boat                                          $     355,284                      67.8  %       $     290,020                      65.6  %       $ 65,264                  22.5  %
Pre-owned boat                                           75,394                      14.4  %              75,854                      17.2  %           (460)                 -0.6  %
Finance & insurance income                               15,324                       2.9  %              14,948                       3.4  %            376                   2.5  %
Service, parts & other                                   78,329                      14.9  %              61,305                      13.9  %         17,024                  27.8  %
Total revenues                                          524,331                     100.0  %             442,127                     100.0  %         82,204                  18.6  %

Gross Profit
New boat                                                 80,258                      15.3  %              81,414                      18.4  %         (1,156)                 -1.4  %
Pre-owned boat                                           17,214                       3.3  %              19,895                       4.5  %         (2,681)                -13.5  %
Finance & insurance                                      15,324                       2.9  %              14,948                       3.4  %            376                   2.5  %
Service, parts & other                                   33,901                       6.5  %              26,285                       5.9  %          7,616                  29.0  %
Total gross profit                                      146,697                      28.0  %             142,542                      32.2  %          4,155                   2.9  %

Selling, general and administrative
expenses                                                 90,193                      17.2  %              75,492                      17.1  %         14,701                  19.5  %
Depreciation and amortization                             5,637                       1.1  %               4,727                       1.1  %            910                  19.3  %
Transaction costs                                           241                         -  %                 776                       0.2  %           (535)                -68.9  %
Change in fair value of contingent
consideration                                             1,736                       0.3  %               2,158                       0.5  %           (422)                -19.6  %

Income from operations                                   48,890                       9.3  %              59,389                      13.4  %        (10,499)                -17.7  %

Interest expense - floor plan                             5,472                       1.0  %               1,048                       0.2  %          4,424                 422.1  %
Interest expense - other                                  8,604                       1.6  %               3,097                       0.7  %          5,507                 177.8  %
Other (income) expense, net                                (187)                        -  %                 109                         -  %           (296)               -271.6  %
Income before income tax expense                         35,001                       6.7  %              55,135                      12.5  %        (20,134)                -36.5  %
Income tax expense                                        7,964                       1.5  %              12,781                       2.9  %         (4,817)                -37.7  %
Net income                                               27,037                       5.2  %              42,354                       9.6  %        (15,317)                -36.2  %
Less: Net income attributable to
non-controlling interests                                (1,165)                                          (1,011)
Less: Net income attributable to
non-controlling interests of One Water
Marine Holdings, LLC                                     (3,068)                                          (5,046)
Net income attributable to OneWater Marine
Inc.                                              $      22,804                                    $      36,297


Revenue

Overall, revenue increased by $82.2 million, or 18.6%, to $524.3 million for the
three months ended March 31, 2023 from $442.1 million for the three months ended
March 31, 2022. Revenue increased due to Dealership same-store sales growth of
11% as well as acquisition growth. The overall revenue increase is primarily
attributable to a $65.3 million increase in new boat sales and a $17.0 million
increase in service, parts and other sales for the three months ended March 31,
2023 compared to the three months ended March 31, 2022.
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New Boat Sales

New boat sales increased by $65.3 million, or 22.5%, to $355.3 million for the
three months ended March 31, 2023 from $290.0 million for the three months ended
March 31, 2022. The increase was primarily attributable to an increase in both
unit sales and the average sales price driven by Dealership same-store sales
growth and acquisition growth.

Pre-owned Boat Sales

Pre-owned boat sales were flat, decreasing by $0.5 million, or 0.6%, to $75.4
million for the three months ended March 31, 2023 from $75.9 million for the
three months ended March 31, 2022. 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 decrease in pre-owned boat sales
was primarily attributable to a decrease in consignment sales, offset by an
increase in pre-owned boat sales from trade-ins.

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 $0.4 million, or 2.5%, to $15.3 million for the
three months ended March 31, 2023 from $14.9 million for the three months ended
March 31, 2022. The increase was primarily a result of the increase in new boat
sales. We remain very focused on improving sales of finance & insurance products
throughout our dealer network and implementing best practices at acquired dealer
groups and existing dealerships. 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 $17.0 million, or 27.8%, to $78.3
million for the three months ended March 31, 2023 from $61.3 million for the
three months ended March 31, 2022. The increase in service, parts & other sales
is primarily due to the contributions from our recently acquired parts and
accessories businesses, including Ocean Bio Chem, as well as increases across
the board in labor, parts, fuel and storage sales, driven by ancillary sales
generated from our increase in new boat sales at our dealerships. Total revenue
for the Distribution segment was $46.0 million for the three months ended
March 31, 2023.

Gross Profit

Overall, gross profit increased by $4.2 million, or 2.9%, to $146.7 million for
the three months ended March 31, 2023 from $142.5 million for the three months
ended March 31, 2022. This increase was primarily due to the impact of the 2023
Acquisitions and 2022 Acquisitions, the Company's focus on dynamic pricing and
the overall increase in Dealership same-store sales. Overall gross margins
decreased 420 basis points to 28.0% for the three months ended March 31, 2023
from 32.2% for the three months ended March 31, 2022 due to the factors noted
below.

New Boat Gross Profit

New boat gross profit decreased by $1.2 million, or 1.4%, to $80.3 million for
the three months ended March 31, 2023 from $81.4 million for the three months
ended March 31, 2022. This decrease was primarily due to the decrease in new
boat gross profit margin. New boat gross profit margin was 22.6% for the three
months ended March 31, 2023 as compared to 28.1% in the three months ended
March 31, 2022. The decrease in new boat gross profit and gross profit margin is
due primarily to a return of industry seasonality; however, new boat gross
profit margins for the three months ended March 31, 2023 remained above
pre-pandemic margins.

Pre-owned Boat Gross Profit

Pre-owned boat gross profit decreased by $2.7 million, or 13.5%, to $17.2
million for the three months ended March 31, 2023 from $19.9 million for the
three months ended March 31, 2022. The decrease in pre-owned boat gross profit
was primarily driven by the decrease in pre-owned boat gross profit margin as a
result of returning industry seasonality as well as a decrease in brokerage
sales. Pre-owned boat gross profit margin was 22.8% and 26.2% for the three
months ended March 31, 2023 and 2022, 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.

Finance & Insurance Gross Profit

Finance & insurance gross profit increased by $0.4 million, or 2.5%, to $15.3
million for the three months ended March 31, 2023 from $14.9 million for the
three months ended March 31, 2022. Finance & insurance income is fee-based
revenue for which we do not recognize incremental cost of sales.
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Service, Parts & Other Gross Profit

Service, parts & other gross profit increased by $7.6 million, or 29.0%, to
$33.9 million for the three months ended March 31, 2023 from $26.3 million for
the three months ended March 31, 2022. Service, parts & other gross profit
margin was 43.3% and 42.9% for the three months ended March 31, 2023 and 2022,
respectively. The increase in gross profit was primarily the result of the
acquisitions in our Distribution segment as well as our Dealership same-store
sales growth.

Selling, General & Administrative Expenses
Selling, general & administrative expenses increased by $14.7 million, or 19.5%,
to $90.2 million for the three months ended March 31, 2023 from $75.5 million
for the three months ended March 31, 2022. This increase was primarily due to
expenses incurred to support the overall increase in revenues and gross profit.
Selling, general & administrative expenses as a percentage of revenue was flat
at 17.2% and 17.1% for the three months ended March 31, 2023 and 2022,
respectively, due primarily to increased marketing costs associated with
increased boat show participation and higher costs associated with our service,
parts & other business. This increase was offset by our ability to leverage our
expense structure across the increase in Dealership same-store sales.

Depreciation and Amortization

Depreciation and amortization expense increased $0.9 million, or 19.3%, to $5.6
million for the three months ended March 31, 2023 compared to $4.7 million for
the three months ended March 31, 2022. The increase in depreciation and
amortization expense for the three months ended March 31, 2023 compared to the
three months ended March 31, 2022 was primarily attributable to an increase in
amortization of identifiable intangible assets, primarily attributable to the
2022 Acquisitions.

Transaction Costs

The decrease in transaction costs of $0.5 million, or 68.9%, to $0.2 million for
the three months ended March 31, 2023 compared to $0.8 million for the three
months ended March 31, 2022 was primarily attributable to a reduction in
acquisition activity during the second quarter of the current year compared to
the previous year.

Change in Fair Value of Contingent Consideration

During the three months ended March 31, 2023, we recognized a loss of $1.7
million related to updated forecasts and accretion of contingent consideration
liabilities related to acquisitions completed in fiscal years 2021, 2022 and
2023.

Income from Operations

Income from operations decreased $10.5 million, or 17.7%, to $48.9 million for
the three months ended March 31, 2023 compared to $59.4 million for the three
months ended March 31, 2022. The decrease was primarily attributable to the
$14.7 million increase in selling, general and administrative expenses for the
three months ended March 31, 2023 as compared to the three months ended
March 31, 2022, partially offset by a $4.2 million increase in gross profit
during the same periods.

Interest Expense - Floor Plan

Interest expense - floor plan increased $4.4 million, or 422.1%, to $5.5 million
for the three months ended March 31, 2023 compared to $1.0 million for the three
months ended March 31, 2022. Floor plan related interest expense increased
primarily due to an increase in the average inventory for the three months ended
March 31, 2023 compared to the three months ended March 31, 2022 as well as an
increase in interest rates.

Interest Expense - Other

Interest expense - other increased by $5.5 million, or 177.8%, to $8.6 million
for the three months ended March 31, 2023 compared to $3.1 million for the three
months ended March 31, 2022. The increase in interest expense - other was
related to the increase in our long-term debt which was primarily used to fund
certain 2022 acquisitions, as well as rising interest rates.

Other (Income) Expense, Net

Other (income) expense, net changed by $0.3 million, or 271.6%, to $0.2 million
of income for the three months ended March 31, 2023 compared to $0.1 million of
expense for the three months ended March 31, 2022. The change was primarily
related to the exchange rates gains recognized during the three months ended
March 31, 2023 compared to the losses recognized during three months ended
March 31, 2022.

Income Tax Expense

Income tax expense decreased $4.8 million, or 37.7%, to $8.0 million for the
three months ended March 31, 2023 compared to $12.8 million for the three months
ended March 31, 2022. The decrease was primarily attributable to the 36.5%
decrease in income before income tax expense for the three months ended
March 31, 2023 as compared to March 31, 2022.
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Net Income (Loss)

Net income decreased by $15.3 million to $27.0 million for the three months
ended March 31, 2023 compared to $42.4 million for the three months ended
March 31, 2022. The decrease was primarily attributable to the $14.7 million
increase in selling, general & administrative expenses, the $5.5 million
increase in interest expense - other and the $4.4 million increase in interest
expense - floor plan for the three months ended March 31, 2023 compared to the
three months ended March 31, 2022. The decrease was partially offset by a $4.2
million increase in gross profit and the $4.8 million decrease in income tax
expense for the three months ended March 31, 2023 compared to March 31, 2022.

Six Months Ended March 31, 2023, Compared to Six Months Ended March 31, 2022

                                                   For the Six Months Ended March 31, 2023         For the Six Months Ended March 31, 2022
($ in thousands)                                      Amount               % of Revenue               Amount               % of Revenue            $ Change            % Change
Revenues:
New boat                                          $    587,689                      66.0  %       $    526,218                      67.6  %       $ 61,471                  11.7  %
Pre-owned boat                                         131,172                      14.7  %            129,303                      16.6  %          1,869                   1.4  %
Finance & insurance income                              24,258                       2.7  %             24,255                       3.1  %              3                     -  %
Service, parts & other                                 147,871                      16.6  %             98,623                      12.7  %         49,248                  49.9  %
Total revenues                                         890,990                     100.0  %            778,399                     100.0  %        112,591                  14.5  %

Gross Profit
New boat                                               137,405                      15.4  %            141,716                      18.2  %         (4,311)                 -3.0  %
Pre-owned boat                                          32,688                       3.7  %             33,974                       4.4  %         (1,286)                 -3.8  %
Finance & insurance                                     24,258                       2.7  %             24,255                       3.1  %              3                     -  %
Service, parts & other                                  62,334                       7.0  %             43,562                       5.6  %         18,772                  43.1  %
Total gross profit                                     256,685                      28.8  %            243,507                      31.3  %         13,178                   5.4  %

Selling, general and administrative
expenses                                               168,031                      18.9  %            134,588                      17.3  %         33,443                  24.8  %
Depreciation and amortization                           11,330                       1.3  %              6,476                       0.8  %          4,854                  75.0  %
Transaction costs                                        1,571                       0.2  %              3,821                       0.5  %         (2,250)                -58.9  %
Change in fair value of contingent
consideration                                              327                         -  %              7,904                       1.0  %         (7,577)                -95.9  %

Income from operations                                  75,426                       8.5  %             90,718                      11.7  %        (15,292)                -16.9  %

Interest expense - floor plan                           10,251                       1.2  %              1,925                       0.2  %          8,326                 432.5  %
Interest expense - other                                16,188                       1.8  %              4,626                       0.6  %         11,562                 249.9  %
Other (income) expense, net                               (826)                     -0.1  %                657                       0.1  %         (1,483)               -225.7  %
Income before income tax expense                        49,813                       5.6  %             83,510                      10.7  %        (33,697)                -40.4  %
Income tax expense                                      11,348                       1.3  %             17,670                       2.3  %         (6,322)                -35.8  %
Net income                                              38,465                       4.3  %             65,840                       8.5  %        (27,375)                -41.6  %
Less: Net income attributable to
non-controlling interests                               (2,530)                                         (1,011)
Less: Net income attributable to
non-controlling interests of One Water
Marine Holdings, LLC                                    (4,231)                                         (8,513)
Net income attributable to OneWater Marine
Inc.                                              $     31,704                                    $     56,316


Revenue

Overall, revenue increased by $112.6 million, or 14.5%, to $891.0 million for
the six months ended March 31, 2023 from $778.4 million for the six months ended
March 31, 2022. Overall revenue increased primarily due to acquisition growth,
driven by a $61.5 million increase in new boat sales and a $49.3 million
increase in service, parts and other sales for the six months ended March 31,
2023 compared to the six months ended March 31, 2022, as a result of the 2022
Acquisitions and 2023 Acquisitions, as well as an increase in new boat average
sales price.
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New Boat Sales

New boat sales increased by $61.5 million, or 11.7%, to $587.7 million for the
six months ended March 31, 2023 from $526.2 million for the six months ended
March 31, 2022. The increase was primarily attributable to an increase in
average sales price as well as a mild increase in unit sales.

Pre-owned Boat Sales

Pre-owned boat sales increased by $1.9 million, or 1.4%, to $131.2 million for
the six months ended March 31, 2023 from $129.3 million for the six months ended
March 31, 2022. 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 increase in pre-owned boat sales was primarily
attributable to an increase in the number of units sold as well as growth in
brokerage sales.

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 remained flat at $24.3 million for the six months ended
March 31, 2023 and 2022. 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 dealerships. 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 $49.2 million, or 49.9%, to $147.9
million for the six months ended March 31, 2023 from $98.6 million for the six
months ended March 31, 2022. The increase in service, parts & other sales is
primarily due to the contributions from our recently acquired parts and
accessories businesses, including Ocean Bio Chem, 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 at our dealerships.
Total revenue for the Distribution segment was $85.9 million for the six months
ended March 31, 2023.

Gross Profit

Overall, gross profit increased by $13.2 million, or 5.4%, to $256.7 million for
the six months ended March 31, 2023 from $243.5 million for the six months ended
March 31, 2022. This increase was primarily due to the impact of the 2023
Acquisitions and 2022 Acquisitions and the Company's focus on dynamic pricing.
Overall gross margins decreased 250 basis points to 28.8% for the six months
ended March 31, 2023 from 31.3% for the six months ended March 31, 2022 due to
the factors noted below.

New Boat Gross Profit

New boat gross profit decreased by $4.3 million, or 3.0%, to $137.4 million for
the six months ended March 31, 2023 from $141.7 million for the six months ended
March 31, 2022. This decrease was primarily due to the decrease in new boat
gross profit margin. New boat gross profit margin was 23.4% for the six months
ended March 31, 2023 as compared to 26.9% in the six months ended March 31,
2022. The decrease in new boat gross profit and gross profit margin is due
primarily to a returning of industry seasonality; however, new boat gross profit
margins for the six months ended March 31, 2023 remained well ahead of
pre-pandemic margins.

Pre-owned Boat Gross Profit

Pre-owned boat gross profit decreased by $1.3 million, or 3.8%, to $32.7 million
for the six months ended March 31, 2023 from $34.0 million for the six months
ended March 31, 2022. The decrease in pre-owned boat gross profit was primarily
driven by a decrease in consignment sales, partially offset by an increase in
our brokerage sales. Pre-owned boat gross profit as a percentage of pre-owned
boat revenue was 24.9% and 26.3% for the six months ended March 31, 2023 and
2022, respectively. The decrease in pre-owned gross profit margin is due
primarily to the returning of industry seasonality. 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.

Finance & Insurance Gross Profit

Finance & insurance gross profit remained flat at $24.3 million for the six
months ended March 31, 2023 and 2022, respectively. Finance & insurance income
is fee-based revenue for which we do not recognize incremental cost of sales.

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Service, Parts & Other Gross Profit

Service, parts & other gross profit increased by $18.8 million, or 43.1%, to
$62.3 million for the six months ended March 31, 2023 from $43.6 million for the
six months ended March 31, 2022. Service, parts & other gross profit margin was
42.2% and 44.2% for the six months ended March 31, 2023 and 2022, respectively.
The increase in gross profit was primarily the result of the acquisitions in our
Distribution segment. The decrease in gross profit margin percentage was due to
a shift in the revenue mix towards parts & accessories which has a lower margin
percentage than service and other sales.

Selling, General & Administrative Expenses

Selling, general & administrative expenses increased by $33.4 million, or 24.8%,
to $168.0 million for the six months ended March 31, 2023 from $134.6 million
for the six months ended March 31, 2022. This increase was primarily due to
expenses incurred to support the overall increase in revenues and gross profit.
Selling, general & administrative expenses as a percentage of revenue increased
to 18.9% from 17.3% for the six months ended March 31, 2023 and 2022,
respectively. The increase in selling, general and administrative expenses as a
percentage of revenue was primarily due to higher administrative expenses
related to acquisitions as well as higher marketing expenses related to
increased boat show activity during the current period.

Depreciation and Amortization

Depreciation and amortization expense increased $4.9 million, or 75.0%, to $11.3
million for the six months ended March 31, 2023 compared to $6.5 million for the
six months ended March 31, 2022. The increase in depreciation and amortization
expense for the six months ended March 31, 2023 compared to the six months ended
March 31, 2022 was primarily attributable to depreciation of acquired tangible
assets and amortization of acquired intangible assets from the 2022
Acquisitions.

Transaction Costs

The decrease in transaction costs of $2.3 million, or 58.9%, to $1.6 million for
the six months ended March 31, 2023 compared to $3.8 million for the six months
ended March 31, 2022 was primarily attributable to a reduction in acquisition
activity during the six months ended March 31, 2023 as compared to March 31,
2022.

Change in Fair Value of Contingent Consideration

During the six months ended March 31, 2023, we recognized a loss of $0.3 million
related to updated forecasts and accretion of contingent consideration
liabilities related to acquisitions completed in fiscal years 2021, 2022 and
2023.

Income from Operations

Income from operations decreased $15.3 million, or 16.9%, to $75.4 million for
the six months ended March 31, 2023 compared to $90.7 million for the six months
ended March 31, 2022. The decrease was primarily attributable to the $33.4
million increase in selling, general and administrative expenses for the six
months ended March 31, 2023 as compared to the six months ended March 31, 2022,
partially offset by a $13.2 million increase in gross profit and a $7.6 million
decrease in the change in fair value of contingent consideration during the same
periods.

Interest Expense - Floor Plan

Interest expense - floor plan increased $8.3 million, or 432.5%, to $10.3
million for the six months ended March 31, 2023 compared to $1.9 million for the
six months ended March 31, 2022. Floor plan related interest expense increased
primarily due to an increase in the average inventory for the six months ended
March 31, 2023 compared to the six months ended March 31, 2022 as well as an
increase in interest rates.

Interest Expense - Other

Interest expense - other increased by $11.6 million, or 249.9%, to $16.2 million
for the six months ended March 31, 2023 compared to $4.6 million for the six
months ended March 31, 2022. The increase in interest expense - other was
related to the increase in our long-term debt which was used to fund certain
2022 acquisitions as well as rising interest rates.

Other (Income) Expense, Net

Other (income) expense, net changed by $1.5 million, or 225.7%, to $0.8 million
of income for the six months ended March 31, 2023 compared to $0.7 million of
expense for the six months ended March 31, 2022. The change was primarily
related to proceeds from insurance as a result of Hurricane Ian and a $0.6
million reduction in expenses related to tax rate changes on our tax receivable
agreement liability during the six months ended March 31, 2022 compared to the
six months ended March 31, 2022.
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Income Tax Expense

Income tax expense decreased $6.3 million, or 35.8%, to $11.3 million for the
six months ended March 31, 2023 compared to $17.7 million for the six months
ended March 31, 2022. The decrease was primarily attributable to the 40.4%
decrease in income before income tax expense for the six months ended March 31,
2023 as compared to March 31, 2022, partially offset by an increase in our
effective tax rate.

Net Income (Loss)

Net income decreased by $27.4 million to $38.5 million for the six months ended
March 31, 2023 compared to $65.8 million for the six months ended March 31,
2022. The decrease was primarily attributable to the $33.4 million increase in
selling, general & administrative expenses, the $11.6 million increase in
interest expense - other and the $8.3 million increase in interest expense -
floor plan for the six months ended March 31, 2023 compared to the six months
ended March 31, 2022. The decrease was partially offset by a $13.2 million
increase in gross profit, a $7.6 million decrease in the change in fair value of
contingent consideration, and a $6.3 million decrease in income tax expense for
the six months ended March 31, 2023 compared to March 31, 2022.

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 the fair value
of contingent consideration, gain (loss) on extinguishment of debt and
transaction costs.

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 change in the
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.
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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, 2023, Compared to Three Months Ended March 31, 2022

                                                                     Three Months Ended March 31,
($ in thousands)                                                      2023                    2022
Net income                                                     $        27,037          $      42,354
Interest expense - other                                                 8,604                  3,097
Income tax expense                                                       7,964                 12,781
Depreciation and amortization                                            6,360                  4,791
Change in fair value of contingent consideration                         1,736                  2,158
Transaction costs                                                          241                    776
Other (income) expense, net                                               (187)                   109
Adjusted EBITDA                                                $        51,755          $      66,066


Adjusted EBITDA was $51.8 million for the three months ended March 31, 2023
compared to $66.1 million for the three months ended March 31, 2022. The
decrease in Adjusted EBITDA resulted primarily from the increase in selling,
general and administrative expenses, partially offset by the increase in gross
profit for the three months ended March 31, 2023 compared to the three months
ended March 31, 2022.

Six Months Ended March 31, 2023, Compared to Six Months Ended March 31, 2022

                                                            Six Months Ended March 31,
($ in thousands)                                                2023                 2022
Net income                                            $      38,465               $  65,840
Interest expense - other                                     16,188                   4,626
Income tax expense                                           11,348                  17,670
Depreciation and amortization                                12,542                   6,540
Change in fair value of contingent consideration                327                   7,904
Transaction costs                                             1,571                   3,821
Other (income) expense, net                                    (826)                    657
Adjusted EBITDA                                       $      79,615               $ 107,058


Adjusted EBITDA was $79.6 million for the six months ended March 31, 2023
compared to $107.1 million for the six months ended March 31, 2022. The decrease
in Adjusted EBITDA resulted primarily from the increase in selling, general and
administrative expenses, partially offset by the increase in gross profit for
the six months ended March 31, 2023 compared to the six months ended March 31,
2022.

Seasonality

Our business, along with the entire recreational boating industry, is highly
seasonal, and such seasonality varies by geographic market. With the exception
of Florida, we generally realize significantly lower sales and higher levels of
inventories, and related floor plan borrowings, in the quarterly periods ending
December 31 and March 31. Revenue generated from our dealerships 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 a global pandemic, our
seasonal trends may also change as a result of, among other things, location
closures, disruptions to the supply chain and inventory availability,
manufacturer delays, and cancellation of boat shows.
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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 A&R Credit Facility (as defined below), 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 A&R
Credit Facility and Inventory Financing Facility (described below) (together,
the "Credit Facilities") 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-A&R
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 A&R 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 A&R
Credit Facility to fund acquisitions depends upon Adjusted EBITDA and compliance
with covenants of the A&R 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, 2023, we were in compliance with all covenants under the A&R 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, 2023 and
2022

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

                                                                 Six Months Ended March 31,
($ in thousands)                                     2023                   2022                  Change

Net cash used in operating activities $ (169,259) $ (43,422) $ (125,837)
Net cash used in investing activities

                (40,379)              (296,865)               256,486
Net cash provided by financing
activities                                           220,355                355,295               (134,940)
Effect of exchange rate changes on cash
and restricted cash                                       19                      -                     19
Net change in cash                             $      10,736          $      15,008          $      (4,272)


Operating Activities. Net cash used in operating activities was $169.3 million
for the six months ended March 31, 2023 compared to net cash used in operating
activities of $43.4 million for the six months ended March 31, 2022. The $125.8
million increase in cash used in operating activities was primarily attributable
to a $100.3 million increase in the change in inventory and a $27.4 million
decrease in net income for the six months ended March 31, 2023 as compared to
the six months ended March 31, 2022.

Investing Activities. Net cash used in investing activities was $40.4 million
for the six months ended March 31, 2023 compared to net cash used in investing
activities of $296.9 million for the six months ended March 31, 2022. The $256.5
million decrease in cash used in investing activities was primarily attributable
to a $260.3 million decrease in cash used in acquisitions for the six months
ended March 31, 2023 as compared to the six months ended March 31, 2022.

Financing Activities. Net cash provided by financing activities was $220.4
million for the six months ended March 31, 2023 compared to net cash provided by
financing activities of $355.3 million for the six months ended March 31, 2022.
The $134.9 million decrease in financing cash flow was primarily attributable to
a $210.0 million decrease in borrowings on long-term debt, partially offset by a
$75.4 million increase in net borrowings on our Inventory Financing Facility for
the six months ended March 31, 2023 as compared to the six months ended
March 31, 2022.
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Share Repurchase Program

On March 30, 2022 the Board authorized a share repurchase program of up to $50
million of outstanding shares of Class A common stock. Repurchases under the
share repurchase program may be made at any time or from time to time, without
prior notice, in the open market or in privately negotiated transactions at
prevailing market prices, or such other means as will comply with applicable
state and federal securities laws and regulations, including the provisions of
the Securities Exchange Act of 1934, including Rule 10b5-1 and, to the extent
practicable or advisable, Rule 10b-18 thereunder, and consistent with the
Company's contractual limitations and other requirements. As of March 31, 2023
the Company has repurchased and retired 73,487 shares at an average price of
$26.28 per share. The Company has $48.1 million remaining under the share
repurchase program.

The Inflation Reduction Act, which was signed into law on August 2022, imposes a
1%, non-deductible excise tax on certain repurchases of common stock that occur
after December 31, 2022. We expect the excise tax to apply to our share
repurchase program, but do not expect the tax to have a material effect on our
business.

Debt Agreements

Credit Facility

Effective July 22, 2020, we and certain of our subsidiaries entered into the
Credit Agreement (as amended by the First Incremental Amendment and the Second
Incremental Amendment and as further 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
provided for (i) a $50.0 million revolving credit facility that was 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 (as defined below) and Second Incremental Amendment (as
defined below)). Subject to certain conditions, the available amount under the
revolving credit facility and the term loans may be increased. The revolving
credit facility was scheduled to mature on July 22, 2025. The term loan was
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 to OWAO in an aggregate principal amount equal
to $30.0 million, which was added to, and constituted 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 to OWAO in an aggregate principal amount
equal to $200.0 million, which was added to, and constituted a part of, the
existing $110.0 million term loan. The Second Incremental Amendment further
provided for a $20.0 million increase in the existing revolving commitment,
which was added to, and constituted a part of, the existing $30.0 million
revolving commitment.

A&R Credit Facility

On August 9, 2022 we entered into the Amended and Restated Credit Agreement (the
"A&R Credit Facility"), with certain of our subsidiaries, Truist Bank and the
other lenders party thereto. The A&R Credit Facility amends and restates and
replaces in its entirety the Credit Facility. The A&R Credit Facility provides
for, among other things, (i) a $65.0 million revolving credit facility
(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 $445.0 million term loan
facility. Subject to certain conditions, the available amount under the Term
Facility and the Revolving Facility may be increased by $125.0 million plus
additional amounts subject to additional conditions (including satisfaction of a
consolidated leverage ratio requirement) in the aggregate (with up to $50.0
million allocable to the Revolving Facility). The Revolving Facility matures on
August 9, 2027. The Term Facility is repayable in installments beginning on
December 31, 2022, with the remainder due on the earlier of (i) August 9, 2027
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 A&R Credit Facility.

Borrowings under the A&R Credit Facility bear interest, at our 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) Term SOFR (as defined in the A&R
Credit Facility) for a one-month Interest Period (calculated on a daily basis
after taking into account a floor equal to 0.00%) plus 1.00%, and (iv) 1.00%, in
each case, plus an applicable margin ranging from 0.75% to 1.75%, or (b) Term
SOFR, plus an applicable margin ranging from 0.75% to 1.75%. Interest on
swingline loans shall bear interest at the Base Rate plus an applicable margin
ranging from 1.75% to 2.75%. All applicable interest margins are based on
certain consolidated leverage ratio measures.
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The A&R Credit Facility is subject to certain financial covenants including the
maintenance of a minimum fixed charge coverage ratio and a maximum consolidated
leverage ratio. The A&R Credit Facility also contains non-financial covenants
and restrictive provisions that, among other things, limit the ability of the
Loan Parties (as defined in the A&R Credit Facility) to incur additional debt,
transfer or dispose of all of their respective assets, make certain investments,
loans or restricted payments and engage in certain transactions with affiliates.
The A&R Credit Facility also includes events of default, borrowing conditions,
representations and warranties and provisions regarding indemnification and
expense reimbursement. The Company was in compliance with all covenants as of
March 31, 2023.

Inventory Financing Facility

On December 29, 2021, the Company and certain of its subsidiaries entered into
the Seventh Amended and Restated Inventory Financing Agreement (as amended,
restated, supplemented or otherwise modified, 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.

On February 24, 2022, April 1, 2022, August 9, 2022 and February 14, 2023 the
Company entered into the First, Second, Third and Fourth Amendments to the
Inventory Financing Facility, respectively, to join various subsidiaries of the
Company to the Inventory Financing Facility in connection with certain
acquisitions made by the Company, in each case, as permitted by and under the
Inventory Financing Facility. The Third Amendment to the Inventory Financing
Facility increased the Funded Debt to EBIDTA Ratio (as defined in the Inventory
Financing Facility). The Fourth Amendment to the Inventory Financing Facility
further increased the maximum borrowing amount available under the Inventory
Financing Facility to $550.0 million. No other terms of the Inventory Financing
Facility were changed with the amendments.

Interest on new boats and for rental units is calculated using the Adjusted
30-Day Average 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
Inventory Financing Facility and related assets, including accounts receivable,
bank accounts, and proceeds of the foregoing, and excludes the collateral that
secures the A&R 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, 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 marine retailers (ix)
make any change in any of our marine retailers' capital structure or in any of
their business objectives or operations which might in any way adversely affect
the ability of such marine retailer 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, 2023 and September 30, 2022, our indebtedness associated with
financing our inventory under the Inventory Financing Facility totaled $485.4
million and $267.1 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. For the six months
ended March 31, 2023 and the year ended September 30, 2022, the effective
interest rate on the outstanding short-term borrowings under the Inventory
Financing Facility was 4.8% and 2.2%, respectively. As of March 31, 2023 and
September 30, 2022, our additional available borrowings under our Inventory
Financing Facility were $64.6 million and $232.9 million, respectively, based
upon the outstanding borrowings and the maximum facility amount. The aging of
our inventory limits our borrowing capacity as defined curtailments reduce the
allowable advance rate as our inventory ages. As of March 31, 2023, we were in
compliance with all covenants under the Inventory Financing Facility.
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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, 2023, 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,
2023, 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 8.4% per annum, require monthly payments of approximately
$148,000, and mature on dates between April 2023 to July 2028. As of March 31,
2023, we had $4.5 million outstanding under the commercial vehicles notes
payable.

Tax Receivable Agreement

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

Recent Accounting Pronouncements

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