OneWater Marine Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the One Water Marine Fiscal Fourth Quarter and Full Year 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, please press star then 0. I would now like to introduce your office conference call. Mr. Jacuzel, you may begin, sir.

Good morning, and welcome to One Water Marine Fiscal Fourth Quarter and and full year 2020 earnings conference call. I am joined on the call today by Austin Singleton, Chief Executive Officer, and Anthony Asquith, President and Chief Operating Officer. Before we begin, I'd like to remind you that certain statements made by management in this morning's conference call regarding One Water Marine and its operations may be considered forward-looking statements under securities law and involve a number of risks and uncertainties. As a result, the company cautions you that there are a number of factors, many of which are beyond the company's control, which would cause actual results and events to differ materially from those described in the forward-looking statements. Factors that might affect future results are discussed in the company's earnings release, which can be found on the investor relations section on the company's website and in its filings with the SEC. The company disclaims any obligations or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except where required by law. And with that, I'd like to turn the call over to Austin Singleton, who will begin with a few opening remarks.

Austin Singleton Thanks, Jack, and thank you, everyone, for joining today's call. We delivered record results in our first year as a public company, highlighting our strong execution and flexible business model. I would like to thank our team and customers for their unwavering commitment to OneWater. Full year 2020 revenue surpassed $1 billion for the first time in OneWater's history, which was an increase of 33% compared to the prior year. Same store sales increased 24% more than doubling our expectations. Our high margin finance and insurance revenue grew by a whopping 41% compared to the prior year and will continue to be a major focus with a lot more room for growth in the years ahead. We continue to gain substantial market share in all our business segments. At the same time, our full year 2020 adjusted EBITDA of 83.3 million nearly doubled from the prior year, mainly due to our superior execution and strong business model. Importantly, our M&A execution is second to none. The synergies and growth we have been able to realize from our recent acquired stores have significantly contributed to our 2020 results. Ulster in our full year results was a strong fourth quarter where we continue to take market share and meet heightened retail demand. In the fourth quarter, revenue increased 30% and same store sales increased 25% year over year, comfortably above our expectations. This increase comes on top of a 20% same store sales increase in the fourth quarter of 2019. Our highly efficient sales process, innovative retail technologies, and strong manufacturing partnerships enabled the team to continue to deliver strong results. In 2020, the marine industry experienced a surge of first-time buyers, which has expanded our addressable markets. History has shown us that many of these customers will stay in the boating lifestyle for years to come. Our customer-focused team and huge selection of products will keep them coming back to One Water for all their boating needs, which will support further margin expansion. Finally, our industry-leading digital platform, along with our dynamic pricing strategy, will continue to enhance operations of our dealers and serve as a clear competitive advantage. Inventories remain at historically low levels, but they have begun to build since the end of the fourth quarter. Despite supply chain constraints cited by OEMs in recent weeks, we do expect inventories to build further throughout the slower winter months, setting us up for a fresh lineup of inventory for the spring selling season. Our strong OEM relationships are a differentiator, and our inventory planning tools allow us to have a great visibility into boats on order or in production. This enables us to engage with the customers, and pre-sell inventory that is inbound to all locations, creating an enormous savings on floor plan interest, inventory maintenance, and general carrying costs. M&A remains a core component of our long-term growth strategy, and our acquisition pipeline has continued to build on pace with our historical trends. We are seeing the size of the opportunities increase as well. Just like with our latest deal, Tom George Yacht Group, which is one of our largest acquisitions to date. We are excited about the return of this critical growth component of our business. Our proven system of employing a disciplined and prudent approach to identify top dealers and high-performing markets and then systematically capitalizing on improvements and synergies will continue to advance our position as an industry leader. Our results this year were outstanding, and we are excited about 2021. The ramp up in our M&A activities and the strong execution across our dealers will continue to support our growth, while the evolution of our high-margin business segments and heightened focus on technology innovation will enable us to further gain market share. We believe all these efforts will support meaningful value for our shareholders as we move into 2021 and beyond. With that, I will turn it over to Anthony to discuss business operations.

Thanks, Austin. With more and more families turning to boating as a lifestyle, demand continued at an unprecedented level in our fiscal fourth quarter. Our team continued to provide superior customer service to keep our growing customer base out on the water. Our custom CRM, along with our inventory management tools, Operational dashboards have helped us outperform the industry by selling boats across our dealerships, moving inventory to different locations to meet the demand levels and providing more visibility into inbound inventory from all of our manufacturers. With critical data at their fingertips, our sales team is able to seamlessly integrate the surge of new customers into the OneWater family and continue to outperform the industry. During the quarter, we made some key leadership changes to double down on our digital strategies and foster future growth. We named Dave Witte, a marine industry veteran and a longtime OneWater teammate, as our chief technology officer. Dave will focus on expanding our growth digital infrastructure with integrated marketing to enhance the customer experience and to provide tools for the new OneWater team to facilitate growth. In addition, we leveraged our deep bench of leadership talent and made a number of organizational realignments to position business leaders closer to our customers, which enhances our ability to capitalize on near and long-term growth opportunities. The boat show season is shaping up to look very different this year, with shows operating under significant restrictions, others being postponed, and a number being canceled altogether. We are taking the opportunity to host a more intimate VIP or smaller local event at our stores where customers can have a more personalized interaction with our product and our team. And our results have been outstanding. As for traditional boat shows, we recently attended the Fort Lauderdale Boat Show. We scaled back our presence at the show, and our team operated under restrictions and safety measures. Encountered some challenging weather, yet our sales were still higher than the prior year. Additionally, we saw sales increase in the weeks leading up to and following the show at certain locations since many customers shopped locally versus traveling to Fort Lauderdale. This is a testament to our ability to leverage our highly effective digital platform to maintain our momentum. As part of our long-term strategy, we remain focused on continuing to develop our high-margin businesses. We historically have provided stability for our company. Our service parts are and other revenue increased 9% in the fiscal fourth quarter driven by two new service locations that recently went into operation in Georgia and Alabama. Finance and insurance revenue continued to increase during the quarter and is up 41% year-over-year. The F&I as a percentage of sales has increased to 3.6% of sales. We remain committed to expanding this line of business and identifying opportunities to increase penetration rates and the number and types of products that are available to our customers. And with that, I'll turn the call over to Jack to go into the financials in more detail.

Thanks, Anthony. We delivered strong results in the fourth quarter, with revenue increasing 30% to $271 million in 2020 from $208.8 million in 2019. and same-store sales increased 25%, primarily driven by an increase in the number of units sold, as well as an increase in the average unit price of new and pre-owned boats. This same-store sales increase is on top of a 20% increase in the fourth quarter of 2019. During the fourth quarter, we continued to meet the heightened demand for new and pre-owned boats across our business. As customers continued to choose boating to enjoy the outdoors with friends and family in a safe, socially distanced way. New boat sales grew 29% to $186.8 million in the fiscal fourth quarter of 2020, and pre-owned boat sales increased 47% to $56.2 million. As Anthony said, we continue to focus on growing the higher margin segments of our business that offer attractive market share growth opportunities for near and long term. Finance and insurance revenue increased to $7.7 million in the fourth quarter of 2020, and revenue from service parts and other sales increased to $20.3 million. Gross profit increased to $64.1 million in the fourth quarter compared to $46.4 million in the prior year, driven by an increase in new and pre-owned sales and higher service parts and other sales. Gross profit as a percent of sales increased 140 basis points to 23.6 percent compared to 22.2 in the prior year. With the significant increase in sales, the fourth quarter 2020 selling general administrative expenses increased to 39.7 million from 32.6 million in the prior year. However, SG&A as a percentage of sales declined 100 basis points to 14.6 percent from 15.6 percent in the prior year. The decline in SG&A as a percentage of sales was mainly due to the increase in sales and the cost reduction actions enacted in response to COVID-19. Operating income climbed 29% to $16.5 million compared to $12.8 million in the prior year, driven by higher sales partially offset by higher SG&A expenses and the $6.8 million charge related to contingent consideration on a 2019 acquisition. adjusted EBIT arose 108% to $23 million compared to $11 million in the prior year. Net income totaled $6 million in the fiscal fourth quarter of 2020, up 18.9% from $5 million in the prior year, keeping in mind that the prior year did not reflect our post-IPO organizational structure and was not subject to income taxes. In our first full year as a public company, our team delivered record results for the year. For the first time in OneWater's history, full-year revenue exceeded $1 billion, an increase of 33% compared to the prior year, highlighting the strength of our team and the resiliency of our business model. Same-store sales increased 24%. This is on top of a 12% increase in the prior year. New and pre-owned boat sales increased 36% to $717 million and 34% to $206 million, respectively. On the higher margin side of our business, finance and insurance revenue increased 41% to 36.8 million, contributing directly to our bottom line. Full year 2020 gross profit increased 37% to 235.5 million. Gross profit as a percentage of sales increased 60 basis points compared to fiscal 2019, driven by the increased volume of new and pre-owned units sold and an increase in the average unit price compared to fiscal 2019. Full year 2020 operating income surged 47% to $78.5 million compared to $53.3 million in the prior year. Net income increased 30% to $48.5 million and adjusted EVA declined 80% to $83.3 million. Now turning to the balance sheet, at September 30th, 2020, we had $66.1 million of cash and $30 million of availability under our revolving line of credit, and in excess of $10 million available on our floor plan. Total inventory at September 30, 2020, was $150 million compared to $277 million at September 30, 2019. This substantial decrease is primarily due to demand for our products and the production shutdowns at our OEM partners last spring. As Anthony mentioned, we are confident that we are able to meet current retail demands in a timely manner as we leverage our strong partnerships in our industry-leading inventory management technology. With the lower levels of inventory and higher inventory terms, we anticipate full plan interest expense to be down significantly in 2021. As previously announced in September, we closed on the public offering of 3.2 million shares of Class A common stock at $20 per share. The majority of these shares were secondary, but the company did issue 425,000 of primary shares and received approximately 8.1 million in proceeds after underwriting discounts and commissions. The proceeds from the transaction will be used for general corporate purposes, including expansion of the business. Looking ahead to 2021, we are seeing strong momentum continue and expect to see same source sales to be up approximately 5% with adjusted EBITDA to be up low to mid single digits. This excludes acquisitions completed during the year. As Austin mentioned, our M&A pipeline is strong, and we are returning to the cadence of transactions that we had prior to our IPO. We are excited to continue to grow in the current business and scale our proven strategies across newly acquired dealerships. This concludes our prepared remarks. Operator, would you please open the line for questions?

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, just press the pound key. Please stand by while we compile the Q&A roster. And our first question will come from the line of Craig Kennison from Baird. You may begin.

Hey, good morning. Thanks for taking my questions. I wanted to start just with guidance, a point of clarification. Does guidance include the Tom George yacht deal, or would that be additive?

That would be additive. It's not included in there.

Thank you. And with respect to the 2021 outlook, it seems many investors fear that this is as good as it gets from an industry perspective and that industry boat demand could return to normal in 2021. I guess, Austin, how do you weigh all the macro factors from lapping the pandemic to the surge in first-time buyers and overall growth in the industry to political events, things like that? to get you comfortable that, you know, your growth outlook is achievable.

Craig, I mean, I think one of the things that we looked at when we were kind of, when we got to year end was really what was the contribution to this increase from just our business model. You know, if you kind of take the acquisitions that had not matured, you know, we talk about, needing 24 months with an acquisition to really feel those synergies and get that push that we're looking for. We had several that were in their first year or just coming up on their 24th month in this calendar year. So we look at thinking and feeling that a good portion of our results this year were because of improvements that or normal improvements to the acquisitions that were maturing that we'd already closed on. So, you know, we know we got a COVID bump. We know that drove new buyers into the, into the space. It brought people that had been on the sidelines that might've had an older boat back into the space. And I think Anthony probably tells it the best when he talks about how, you know, boating today from an industry perspective and, how you use your boat and what the experience is, is completely different than it was 10 years ago. And we feel, you know, two things. One, we've still got acquisitions that we're bringing online that we're going to get up push from those. We've still got a lot of internal stuff from our same store sales that have a lot of upsides. But then you still, you know, you can take that COVID bump and say, okay, well, we're not going to get that bump again. But you've got all these people that have come into the market that really probably just bought a boat to buy a boat. And after they spend a season out on the lake, we feel that a lot of them are going to make adjustments this year. You've got a young couple that comes in that thinks that they have to have a ski boat in order to join the water. They buy a ski boat, they spend, you know, timeout on the lake and the wife's getting beat to heck and back because it's rough on the lake and they're not skiing. You know, they've got little kids. That's just what they thought. And then they see another couple pass them in a pontoon boat that's got a full drink that's not even spilling over the rim. And they're like, well, we want to do that. You know, but then there's a flip side to that. People come in and buy a pontoon boat. So we think that there's going to be this push for the new boat owner that's gotten excited about boating and that might trade or might change segments then we've got you know going back to we've got all these things internally that we've looked at on our same store sales where there's improvement and we're just pretty comfortable where we are i mean i i'm excited about this coming year um you know the inventory being on the tighter side is going to help us with margins i think that um you know i'll let anthony and jack jump in if they want to add to that but i think we're pretty confident with our forward-looking 2021 and where we're going to end up.

That's terrific. Thank you. And then my last question was just on votesforsale.com. It seems like a very interesting strategy. You didn't really address much of it in your prepared remarks. But, you know, if you would, just tell us how that works, when that platform might open, and what kind of investment you'll need to make. in order to achieve some scale in that platform?

So the easy part is the investment. The investment is more time than dollars. Where we sit right now, we have the first three pieces of that. We're actually beta testing or testing with our sales staff right now. We have part of the way that the trade evaluation or the pricing tool works. Anthony, how long have we been doing that? It's been about four weeks, three weeks?

Yeah, about six weeks so far.

Six weeks on that one. And then, you know, so we're hoping to have that rolled out, you know, optimistically I would say before the end of the year, but I think it's going to be into the first quarter of next year before we get it out. It's very, very important that when we roll it out that everything work perfectly on it. Because if you roll it out and it doesn't work right, then it kind of might die in the water. And that's not what we want. And so we're running it internally right now and having all the sales guys use the tools that we'll be rolling out in this first phase so that when we do roll it out, it's a flawless execution. But I would conservatively, I think we're still 60 days before it rolls out.

Sounds good. I'll jump back in the queue. Thank you.

Thank you. Our next question comes from Mike Schwartz from Truist Securities. You may begin.

Hey, good morning, guys. Just to follow up on the guidance for 2021, with the mid-single-digit comp store growth and then low to mid-single-digit adjusted EBITDA growth implying some sort of margin to leverage at the bottom end of that range, is there any reason for that or any investments that you're making that would drive drive that?

Yeah, I think one of the things is you think year over year, we don't have fully baked public company costs into the prior year. So that's certainly going to be a bit of a headwind for us. And that's probably the largest item, I would say, kind of going into the expense structure and probably going to have the effect of seeing SG&A tick up a little bit as a percent of sales. But, you know, we're just trying to, you know, I think be conservative and, you know, putting the model together.

Okay.

And then maybe just given the state of, you know, boat shows being canceled or postponed or scaled back, you know, over the next nine to 12 months, maybe talk about some of the things that you're doing in a little more detail in terms of customer interaction and your own digital platform.

Well, I don't think we want to give our secrets. Don't give our secrets away, Anthony. But there's a lot of events, in-house events, that make for a much safer environment for the customers and gives them reasons. You know, we're blessed to be, you know, partnered with 72 different brands that every year are coming out with just some oh-my-gosh products. So we have a lot to talk about. And it's pretty easy once you're in boating, like Austin was saying earlier about, you know, if you had a pontoon, you might want to go to an inboard boat. Each one of these manufacturers each year are coming out with some oh-my-gosh stuff. So it's pretty easy to get people to come in for some private events.

And then one more, if I may.

Just in terms of the fourth quarter, as I look at the different revenue line items, strong double-digit growth in both new and pre-owned boat sales, but F&I was up less than 2% year-over-year. Why was there that disconnect in the quarter? Was there something specific?

Yeah, I think it's a little bit – you've got to remember we were up – for the full year, it's up 41%. It keeps being something that we drive hard. But if you look back to last year, last year F&I in the quarter was actually up 80%, significantly outpacing the sales increase. So that kind of played into the effort there. But no – it still is an area we feel very strong about, and we feel the growth of F&I is going to outpace our same-store sales.

Okay, thank you. Thank you. And once again, that's star one for questions, star one. Our next question will come from the line of Joe Altabello from Raymond James. You may begin.

Thanks. Hey, guys. Good morning. Just wanted to get an update on the overall M&A environment. You know, Tom George was I think your first acquisition in quite some time. So is two to four acquisitions a year still the target? Could we see some catch-up in 2021 since last year was relatively quiet?

I think our cadence will probably stay the same. One thing that might change a little bit on the cadence is just the size of the deals. They're going to be on the larger side. Pretty much everything that I've got close right now, is bigger than what our average would be. But I don't think we're going to be able to get more in. And it's not that we don't want to. It's just that, you know, we've talked about, you know, perfect execution. And it's not that we cannot have one of these not work perfectly because, you know, the credibility that we have with the manufacturers and the support and them still being our number one lead generator is, You don't want to have a deal that goes bad or something go wrong where you lose that manufacturing support. And closing the deals, the hardest part for us closing the deals right now is the integration of the software. And the 45 days prior to closing, the 45 days after, but it's also scheduling the software company to come in and do the integration and the training. So that's a little bit of our challenge here. But, I mean, we're going to have a, you know, I'm glad that Anthony and Jack have pulled me out of the house and said for me to go do deals again. So we're excited about this year. We've got a great pipeline. You know, we're in a good position that if something were to happen with one deal, we've got deals that can slide right into that place. We're running some dual tracks right now just to make sure that we have a good, solid year. of acquisitions. And, you know, we've been on the sidelines for a while, and it was nice to get this Tom George deal done because we've been talking with Tom for a number of years, and it's exciting, and some of the things that we're going to be able to do with this acquisition from a strategic standpoint are exciting to us.

That's very helpful, Austin. Thank you. And maybe kind of to follow up on that on the inventory side, I think Jackie mentioned you're at $150 million of inventory at your end. That's down almost 50% year-over-year. How long do you think it will take you guys to get back to what you perceive to be ideal inventory levels, and do you expect to operate at a higher turn rate permanently going forward?

I'm going to start, and then I want to start with this one. We're never going to get back to that level. We don't ever want to get back to that level. I mean, we – You know, the inventory is, you know, you can look at inventory and look at your P&L and you can see the cost of inventory, but then you can also look at inventory and look at your P&L and you don't see the cost of inventory. I mean, you know, moving a boat 10 times on a yard, you don't really keep up with that on the P&L. And, you know, so less inventory, higher turns, you know, to us means lower costs, higher margins. And, you know, the manufacturers are doing the best they can. All of our manufacturers are doing a phenomenal job getting us boats. You know, I know they're killing themselves. They're looking to ramp up production. But from where we sit, I think that the way that Anthony has spent the last four years developing his inventory tool and fine-tuning that, that we're going to be able to operate with higher revenues or higher boat sales with less inventory. because the forecasting tools and the stuff that he has put into place and the way that we're now getting the data that we need to make the right decisions will allow us to forecast even better than we have in the past. So I don't think we'll ever return back to that. You know, as we scale the company, you know, the inventories will, of course, increase. But we want to operate with, you know, if you ask me, I'd like to get three more turns a year. I don't think that's possible. But that's what we're going to work towards. And the software and what Anthony and his team have really gotten fine-tuned and the data that we're getting today will allow us to continue to make that even stronger. Gotcha.

Well, Austin, you pretty much stole most of my thunder. I think the only thing I would add is that we, you know, subsequent to year end, we have seen, inventories begin to build as we expected. So over the last month and a half, you know, shipments have been coming in. We're in a seasonally slower cycle, and, you know, stores are starting to build inventory on their lots. Great. Thank you, guys.

Good luck. Thank you.

And our next question comes from Mike Schwartz from Choice Securities. You may begin.

Hey, guys. Thanks for letting me hop back on here. I just wanted to follow up on a comment you made regarding the fiscal year 21 outlook. You said you saw the momentum carry into the early part of the year, and since no one's asked the question, any color or quantification you can provide just in terms of what you saw on a comp store basis in October or maybe even quarter date as we sit here today?

Yeah, I would say it's moving. you know, at a good pace, you know, similar to what we've seen in recent months. You know, there's still, it's a seasonally, obviously it's a seasonally slower period, you know, so sales are slowing as we go through the months of, you know, October, November, and then December is the smallest month of the quarter. And with it kind of being, it's also our smallest quarter of the year, So it's, you know, just from a seasonality perspective, it's one of those where it's tougher to gauge, you know, a full year number or a full year forecast just off of, you know, the smallest quarter. So I think from a seasonality perspective, I think that's going to be one of the challenging things as we look to model out the year. We feel good about our annual model. What's unclear about is, you know, how the quarters line up. And, you know, just with, you know, Q2 last year was a lower quarter because of shutdowns and COVID. Q3 obviously was a large quarter for us. But, you know, it's really unclear as to how, you know, boat shows will play into Q2 results as well as Q3 results.

Okay, great. Thanks a lot, Doug.

Yeah.

Thank you. Once again, ladies and gentlemen, that's star one for questions. Star one. One moment for questions. And I'm not showing any further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Thank you. Thank you. you Thank you. Thank you.

Thank you. Thank you.

Ladies and gentlemen, thank you for standing by, and welcome to the One Water Marine Fiscal Fourth Quarter and Full Year 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, please press star then 0. I would now like to introduce your host, Mr. Jack DeVille. You may begin, sir.

Good morning, and welcome to One Water Marine Fiscal Fourth Quarter and and full year 2020 earnings conference call. I am joined on the call today by Austin Singleton, Chief Executive Officer, and Anthony Asquith, President and Chief Operating Officer. Before we begin, I'd like to remind you that certain statements made by management in this morning's conference call regarding One Water Marine and its operations may be considered forward-looking statements under securities law and involve a number of risks and uncertainties. As a result, the company cautions you that there are a number of factors, many of which are beyond the company's control, which would cause actual results and events to differ materially from those described in the forward-looking statements. Factors that might affect future results are discussed in the company's earnings release, which can be found on the investor relations section on the company's website and in its filings with the SEC. The company disclaims any obligations or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except where required by law. And with that, I'd like to turn the call over to Austin Singleton, who will begin with a few opening remarks.

Thanks, Jack, and thank you, everyone, for joining today's call. We delivered record results in our first year as a public company, highlighting our strong execution and flexible business model. I would like to thank our team and customers for their unwavering commitment to OneWater. Full year 2020 revenue surpassed $1 billion for the first time in OneWater's history, which was an increase of 33% compared to the prior year. Same store sales increased 24% more than doubling our expectations. Our high margin finance and insurance revenue grew by a whopping 41% compared to the prior year and will continue to be a major focus with a lot more room for growth in the years ahead. We continue to gain substantial market share in all our business segments. At the same time, our full year 2020 adjusted EBITDA of $83.3 million nearly doubled from the prior year, mainly due to our superior execution and strong business model. Importantly, our M&A execution is second to none. The synergies and growth we have been able to realize from our recent acquired stores have significantly contributed to our 2020 results. Ulster in our full year results was a strong fourth quarter where we continue to take market share and meet heightened retail demand. In the fourth quarter, revenue increased 30% and same store sales increased 25% year over year, comfortably above our expectations. This increase comes on top of a 20% same-store sales increase in the fourth quarter of 2019. Our highly efficient sales process, innovative retail technologies, and strong manufacturing partnerships enabled the team to continue to deliver strong results. In 2020, the marine industry experienced a surge of first-time buyers, which has expanded our addressable markets. History has shown us that many of these customers will stay in the boating lifestyle for years to come. Our customer-focused team and huge selection of products will keep them coming back to OneWater for all their boating needs, which will support further margin expansion. Finally, our industry-leading digital platform along with our dynamic pricing strategy will continue to enhance operations of our dealers and serve as a clear competitive advantage. Inventories remain at historically low levels, but they have begun to build since the end of the fourth quarter. Despite supply chain constraints cited by OEMs in recent weeks, we do expect inventories to build further throughout the slower winter months, setting us up for a fresh lineup of inventory for the spring selling season. Our strong OEM relationships are a differentiator, and our inventory planning tools allow us to have a great visibility into boats on order or in production. This enables us to engage with the customers, and pre-sell inventory that is inbound to all locations, creating an enormous savings on floor plan interest, inventory maintenance, and general carrying costs. M&A remains a core component of our long-term growth strategy, and our acquisition pipeline has continued to build on pace with our historical trends. We are seeing the size of the opportunities increase as well. Just like with our latest deal, Tom George Yacht Group, which is one of our largest acquisitions to date. We are excited about the return of this critical growth component of our business. Our proven system of employing a disciplined and prudent approach to identify top dealers and high-performing markets and then systematically capitalizing on improvements and synergies will continue to advance our position as an industry leader. Our results this year were outstanding, and we are excited about 2021. The ramp up in our M&A activities and the strong execution across our dealers will continue to support our growth, while the evolution of our high-margin business segments and heightened focus on technology innovation will enable us to further gain market share. We believe all these efforts will support meaningful value for our shareholders as we move into 2021 and beyond. With that, I will turn it over to Anthony to discuss business operations.

Thanks, Austin. With more and more families turning to boating as a lifestyle, demand continued at an unprecedented level in our fiscal fourth quarter. Our team continued to provide superior customer service to keep our growing customer base out on the water. Our custom CRM, along with our inventory management tools, Operational dashboards have helped us outperform the industry by selling boats across our dealerships, moving inventory to different locations to meet the demand levels and providing more visibility into inbound inventory from all of our manufacturers. With critical data at their fingertips, our sales team is able to seamlessly integrate the surge of new customers into the OneWater family and continue to outperform the industry. During the quarter, we made some key leadership changes to double down on our digital strategies and foster future growth. We named Dave Witte, a marine industry veteran and a longtime OneWater teammate, as our chief technology officer. Dave will focus on expanding our growth digital infrastructure with integrated marketing to enhance the customer experience and to provide tools for the new OneWater team to facilitate growth. In addition, we leveraged our deep bench of leadership talent and made a number of organizational realignments to position business leaders closer to our customers, which enhances our ability to capitalize on near and long-term growth opportunities. The boat show season is shaping up to look very different this year, with shows operating under significant restrictions, others being postponed, and a number being canceled altogether. We are taking the opportunity to host a more intimate VIP or smaller local event at our stores where customers can have a more personalized interaction with our product and our team. And our results have been outstanding. As for traditional boat shows, we recently attended the Fort Lauderdale Boat Show. We scaled back our presence at the show, and our team operated under restrictions and safety measures. Encountered some challenging weather, yet our sales were still higher than the prior year. Additionally, we saw sales increase in the weeks leading up to and following the show at certain locations since many customers shopped locally versus traveling to Fort Lauderdale. This is a testament to our ability to leverage our highly effective digital platform to maintain our momentum. As part of our long-term strategy, we remain focused on continuing to develop our high-margin businesses. We historically have provided stability for our company, our service parts, and other revenue increased 9% in the fiscal fourth quarter driven by two new service locations that recently went into operation in Georgia and Alabama. Finance and insurance revenue continued to increase during the quarter and is up 41% year-over-year. The F&I as a percentage of sales has increased at 3.6% of sales. We remain committed to expanding this line of business and identifying opportunities to increase penetration rates and the number and types of products that are available to our customers. And with that, I'll turn the call over to Jack to go into the financials in more detail.

Thanks, Anthony. We delivered strong results in the fourth quarter, with revenue increasing 30% to $271 million in 2020 from $208.8 million in 2019. and same-store sales increased 25%, primarily driven by an increase in the number of units sold, as well as an increase in the average unit price of new and pre-owned boats. This same-store sales increase is on top of a 20% increase in the fourth quarter of 2019. During the fourth quarter, we continued to meet the heightened demand for new and pre-owned boats across our business. As customers continued to choose boating to enjoy the outdoors with friends and family in a safe, socially distanced way. New boat sales grew 29% to $186.8 million in the fiscal fourth quarter of 2020, and pre-owned boat sales increased 47% to $56.2 million. As Anthony said, we continue to focus on growing the higher margin segments of our business that offer attractive market share growth opportunities for near and long term. Finance and insurance revenue increased to $7.7 million in the fourth quarter of 2020, and revenue from service parts and other sales increased to $20.3 million. Gross profit increased to $64.1 million in the fourth quarter compared to $46.4 million in the prior year, driven by an increase in new and pre-owned sales and higher service parts and other sales. Gross profit as a percent of sales increased 140 basis points to 23.6% compared to 22.2% in the prior year. With the significant increase in sales, the fourth quarter 2020 selling general administrative expenses increased to 39.7 million from 32.6 million in the prior year. However, SG&A as a percentage of sales declined 100 basis points to 14.6% from 15.6% in the prior year. The decline in SG&A as a percentage of sales was mainly due to the increase in sales and the cost reduction actions enacted in response to COVID-19. Operating income climbed 29% to $16.5 million compared to $12.8 million in the prior year driven by higher sales partially offset by higher SG&A expenses and the $6.8 million charge related to contingent consideration on a 2019 acquisition. adjusted EBITDA rose 108% to $23 million compared to $11 million in the prior year. Net income totaled $6 million in the fiscal fourth quarter of 2020, up 18.9% from $5 million in the prior year, keeping in mind that the prior year did not reflect our post-IPO organizational structure and was not subject to income taxes. In our first full year as a public company, our team delivered record results for the year. For the first time in OneWater's history, full-year revenue exceeded $1 billion, an increase of 33% compared to the prior year, highlighting the strength of our team and the resiliency of our business model. Same-store sales increased 24%. This is on top of a 12% increase in the prior year. New and pre-owned boat sales increased 36% to $717 million and 34% to $206 million, respectively. On the higher margin side of our business, finance and insurance revenue increased 41% to $36.8 million, contributing directly to our bottom line. Full year 2020 gross profit increased 37% to $235.5 million. Gross profit as a percentage of sales increased 60 basis points compared to fiscal 2019, driven by the increased volume of new and pre-owned units sold and an increase in the average unit price compared to fiscal 2019. Full year 2020 operating income surged 47% to $78.5 million compared to $53.3 million in the prior year. Net income increased 30% to $48.5 million and adjusted EBIT declined 80% to $83.3 million. Now turning to the balance sheet, at September 30th, 2020, we had $66.1 million of cash and $30 million of availability under our revolving line of credit, and an excess of $10 million available on our floor plan. Total inventory at September 30, 2020, was $150 million compared to $277 million at September 30, 2019. This substantial decrease is primarily due to demand for our products and the production shutdowns at our OEM partners last spring. As Anthony mentioned, we are confident that we are able to meet current retail demand in a timely manner as we leverage our strong partnerships in our industry-leading inventory management technology. With the lower levels of inventory and higher inventory terms, we anticipate full plan interest expense to be down significantly in 2021. As previously announced in September, we closed on the public offering of 3.2 million shares of Class A common stock at $20 per share. The majority of these shares were secondary, but the company did issue 425,000 of primary shares and received approximately 8.1 million in proceeds after underwriting discounts and commissions. The proceeds from the transaction will be used for general corporate purposes, including expansion of the business. Looking ahead to 2021, we are seeing strong momentum continue and expect to see same-source sales to be up approximately 5%, with adjusted EBITDA to be up low to mid single digits. This excludes acquisitions completed during the year. As Austin mentioned, our M&A pipeline is strong, and we are returning to the cadence of transactions that we had prior to our IPO. We are excited to continue to grow in the current business and scale our proven strategies across newly acquired dealerships. This concludes our prepared remarks. Operator, would you please open the line for questions?

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, just press the pound key. Please stand by while we compile the Q&A roster. And our first question will come from the line of Craig Kennison from Baird. You may begin.

Hey, good morning. Thanks for taking my questions. I wanted to start just with guidance, a point of clarification. Does guidance include the Tom George yacht deal, or would that be additive?

That would be additive. It's not included in there.

Thank you. And with respect to the 2021 outlook, it seems many investors fear that this is as good as it gets from an industry perspective and that industry boat demand could return to normal in 2021. I guess, Austin, how do you weigh all the macro factors from you know, lapping the pandemic to the surge in first-time buyers and overall growth in the industry to political events, things like that, to get you comfortable that, you know, your growth outlook is achievable.

Craig, I mean, I think one of the things that we looked at when we were kind of, when we got to year end was really what was the contribution to this increase from, just our business model. You know, if you kind of take the acquisitions that had not matured, you know, we talk about needing 24 months with an acquisition to really, you know, feel those synergies and get that push that we're looking for. We had several that were in their first year or just coming up on their 24th, you know, month in this calendar year. So we look at, you know, thinking and feeling that a good portion of our results this year were because of improvements or normal improvements to the acquisitions that were maturing that we'd already closed on. So, you know, we know we got a COVID bump. We know that drove new buyers into the space. It brought people that had been on the sidelines that might have had an older boat back into the space. And I think Anthony probably tells it the best when he talks about how, you know, boating today from an industry perspective and how you use your boat and what the experience is, is completely different than it was 10 years ago. And we feel, you know, two things. One, we've still got acquisitions that we're bringing online that we're going to get up, up push from those. We still got a lot of, internal stuff from our same store sales that have a lot of upside. But then you still, you know, you can take that COVID bump and say, okay, well, we're not going to get that bump again, but you've got all these people that have come into the market that really probably just bought a boat to buy a boat. And after they spend a season out on the lake, we feel that a lot of them are going to make adjustments this year. Um, you got a young couple that comes in that thinks that they have to have a ski boat in order to join the water. They buy a ski boat. They spend, you know, time out on the lake and the wife's getting beat the heck and back because it's rough on the lake and they're not skiing. You know, they've got little kids. That's just what they thought. And then they see another couple pass them in a pontoon boat. That's got a full drink. That's not even spilling over the rim. And they're like, well, we want to do that. You know, but then there's a flip side to that. People come in and buy a pontoon boat. So we, We think that there's going to be this push for the new boat owner that's gotten excited about boating that might trade or might change segments. Then we've got, you know, going back to we've got all these things internally that we've looked at on our same store sales where there's improvement, and we're just pretty comfortable where we are. I mean, I'm excited about this coming year. You know, the inventory being on the tighter side is going to help us with margins and I think that, you know, I'll let Anthony and Jack jump in if they want to add to that, but I think we're pretty confident with our forward-looking 2021 and where we're going to end up.

That's terrific. Thank you. And then my last question was just on votesforsale.com. It seems like a very interesting strategy. You didn't really address much of it in your prepared remarks, but, you know, if you would, just tell us how that works. when that platform might open, and what kind of investment you'll need to make in order to achieve some scale in that platform?

So the easy part is the investment. The investment is more time than dollars. Where we sit right now, we have the first three pieces of that. We're actually beta testing or testing with our sales staff right now. We have part of the way that the – the trade evaluation or the pricing tool works. Anthony, how long have we been doing that? It's been about four weeks, three weeks?

Yeah, about six weeks so far.

Six weeks on that one. So we're hoping to have that rolled out. Optimistically, I would say before the end of the year, but I think it's going to be into the first quarter of next year before we get it out. It's very, very important that when we roll it out, that everything worked perfectly on it. Because if you roll it out and it doesn't work right, then it kind of might die in the water. And that's not what we want. And so we're running it internally right now and having all the sales guys use the tools that we'll be rolling out in this first phase so that when we do roll it out, it's a flawless execution. But I would conservatively, I think we're still 60 days before it rolls out.

Sounds good. I'll jump back in the queue. Thank you.

Thank you. Our next question comes from Mike Swartz from Truist Securities. You may begin.

Hey, good morning, guys. Just to follow up on the guidance for 2021, with the mid-single-digit comp store growth and then low to mid-single-digit adjusted EBITDA growth implying some sort of margin deleverage at the bottom end of that range, is there any reason for that or any investments that you're making that would drive drive that?

Yeah, I think one of the things is you think year over year, we don't have fully baked public company costs into the prior year. So that's certainly going to be a bit of a headwind for us. And that's probably the largest item, I would say, kind of going into the expense structure and probably going to have the effect of seeing SG&A tick up a little bit as a percent of sales. But, you know, we're just trying to, you know, I think be conservative and, you know, putting the model together.

Okay.

And then maybe just given the state of, you know, boat shows being canceled or postponed or scaled back, you know, over the next nine to 12 months, maybe talk about some of the things that you're doing in a little more detail in terms of customer interaction and your own digital platform.

I don't think we want to give our secrets. Don't give our secrets away, Anthony. It's a lot of events, in-house events. It's a much safer environment for the customers and gives them reasons. We're blessed to be partnering with 72 different brands that every year are coming out with just some oh-my-gosh products. So we have a lot to talk about, and it's pretty easy. Once you're in boating, like Austin was saying earlier about if you had a pontoon, you might want to go to an inboard boat. Each one of these manufacturers each year are coming out with some oh-my-gosh stuff. So it's pretty easy to get people to come in for some private events.

And then one more, if I may.

Just in terms of the fourth quarter, as I look at the different revenue line items, strong double-digit growth in both new and pre-owned boat sales, but F&I was up less than 2% year-over-year. Why was there that disconnect in the quarter? Was there something specific?

Yeah, I think it's a little bit – you got to remember we were up, you know, for the full year it's up 41%. It keeps being something that we drive hard. But if you look back to last year, last year F&I in the quarter was actually up 80%, significantly outpacing the sales increase. So that kind of played into the effort there. But no – it still is an area we feel very strong about, and we feel the growth of F&I is going to outpace our same-store sales.

Okay, thank you. Thank you. And once again, that's star one for questions, star one. Our next question will come from the line of Joe Altabello from Raymond James. You may begin.

Thanks. Hey, guys. Good morning. Just wanted to get an update on the overall M&A environment. You know, Tom George was – I think your first acquisition in quite some time. So is two to four acquisitions a year still the target? Could we see some catch-up in 2021 since last year was relatively quiet?

I think our cadence will probably stay the same. One thing that might change a little bit on the cadence is just the size of the deals. They're going to be on the larger side. Pretty much everything that I've got close right now, is bigger than what our average would be. But I don't think we're going to be able to get more in. And it's not that we don't want to. It's just that, you know, we've talked about, you know, perfect execution. And it's not that we cannot have one of these not work perfectly because, you know, the credibility that we have with the manufacturers and the support and them still being our number one lead generator is You don't want to have a deal that goes bad or something go wrong where you lose that manufacturing support. And closing the deals, the hardest part for us closing the deals right now is the integration of the software. And the 45 days prior to closing, the 45 days after, but it's also scheduling the software company to come in and do the integration and the training. So that's a little bit of our challenge. But, I mean, we're going to have a, you know, I'm glad that Anthony and Jack have pulled me out of the house and said for me to go do deals again. So we're excited about this year. We've got a great pipeline. You know, we're in a good position that if something were to happen with one deal, we've got deals that can slide right into that place. We're running some dual tracks right now just to make sure that we have a good, solid year. of acquisitions. And, you know, we've been on the sidelines for a while, and it was nice to get this Tom George deal done because we've been talking with Tom for a number of years, and it's exciting, and some of the things that we're going to be able to do with this acquisition from a strategic standpoint are exciting to us.

That's very helpful, Austin. Thank you. And maybe kind of to follow up on that on the inventory side, I think Jackie mentioned you're at $150 million of inventory at your end. That's down almost 50% year-over-year. How long do you think it will take you guys to get back to what you perceive to be ideal inventory levels, and do you expect to operate at a higher turn rate permanently going forward?

I'm going to start, and then I want to start with this one. We're never going to get back to that level. We don't ever want to get back to that level. I mean, we – You know, the inventory is, you know, you can look at inventory and look at your P&L and you can see the cost of inventory. But then you can also look at inventory and look at your P&L and you don't see the cost of inventory. I mean, you know, moving a boat 10 times on a yard, you don't really keep up with that on the P&L. And, you know, so less inventory, higher turns, you know, to us means lower costs, higher margins. And, you know, the manufacturers are doing the best they can. All of our manufacturers are doing a phenomenal job getting us boats. You know, I know they're killing themselves. They're looking to ramp up production. But from where we sit, I think that the way that Anthony has spent the last four years developing his inventory tool and fine-tuning that, that we're going to be able to operate with higher revenues or higher boat sales with less inventory. because the forecasting tools and the stuff that he has put into place and the way that we're now getting the data that we need to make the right decisions will allow us to forecast even better than we have in the past. So I don't think we'll ever return back to that. You know, as we scale the company, you know, the inventories will, of course, increase. But we want to operate with, you know, if you ask me, I'd like to get three more turns a year. I don't think that's possible. But that's what we're going to work towards in the software and what Anthony and his team have really gotten fine-tuned, and the data that we're getting today will allow us to continue to make that even stronger.

Well, Austin, you pretty much stole most of my thunder. I think the only thing I would add is that we, you know, subsequent to year end, we have seen, inventories begin to build as we expected. So over the last month and a half, you know, shipments have been coming in. We're in a seasonally slower cycle, and, you know, stores are starting to build inventory on their lots. Great. Thank you, guys. Good luck.

Thank you.

And our next question comes from Mike Schwartz from Choice Securities. You may begin.

Hey, guys. Thanks for letting me hop back on here. I just wanted to follow up on a comment you made regarding the fiscal year 21 outlook. You said you saw the momentum carry into the early part of the year, and since no one's asked the question, any color or quantification you can provide just in terms of what you saw on a comp store basis in October or maybe even quarter date as we sit here today?

Yeah, I would say it's moving. you know, at a good pace, you know, similar to what we've seen in recent months. You know, there's still, it's a seasonally, obviously it's a seasonally slower period, you know, so sales are slowing as we go through the months of, you know, October, November, and then December is the smallest month of the quarter. And with it kind of being, it's also our smallest quarter of the year, So it's, you know, just from a seasonality perspective, it's one of those where it's tougher to gauge, you know, a full year number or a full year forecast just off of, you know, the smallest quarter. So I think from a seasonality perspective, I think that's going to be one of the challenging things as we look to model out the year. We feel good about our annual model. What's unclear about is, you know, how the quarters line up. And, you know, just with, you know, Q2 last year was a lower quarter because of shutdowns and COVID. Q3 obviously was a large quarter for us. But, you know, it's really unclear as to how, you know, boat shows will play into Q2 results as well as Q3 results.

Okay, great. Thanks a lot, Jack.

Yeah.

Thank you. Once again, ladies and gentlemen, that's star one for questions. Star one. One moment for questions. And I'm not showing any further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.