OneWater Marine Inc.

Good day and thank you for standing by. Welcome to the One Water Marine Fiscal First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I want to act ahead of conference over to your speaker today, Jack Azell. Chief Financial Officer. Please go ahead.

Good morning and welcome to One Water Marine's fiscal first quarter 2022 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 could 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 of the company's website and in its filings with the SEC. The company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as 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?

Thanks, Jack, and thank you, everyone, for joining today's call. Across the board, we delivered exceptional results for the first quarter of 2022. highlighting the strength of our team and our ability to outperform the market. Revenue for the first quarter increased 57% to $336 million, and even in the face of an ongoing industry-wide supply chain constraints, we increased same-store sales by 28% on top of an incredible 38% comp in the prior year. These same-store sales gains are significantly above reports on industry growth, which suggests we are achieving market share gains. As a part of our incredible increase in same store sales, we also saw a significant increase in our higher margin service parts and other revenue. And in the end, we delivered adjusted EBITDA of 41 million, an increase of 146%. As we come up on tough same store sales comps over the next quarter, we should see the strength of these stable revenue streams shine through. While we expect lower inventories to persist over the next few quarters, we're extremely confident in the prospects for the business. We continue to see robust demand and pre-sold inventory remains elevated through yet another quarter. We also saw our service parts and other sales up 111% and the quarter significantly outpacing growth of boat sales. This increase was driven by our recent acquisitions of Partsview and TH Marine that led to further diversification of our revenue. We expect service parts and other revenue growth to continue to outpace boat sales as we integrate these acquisitions. And these higher margin revenue streams will also support our overall gross profit margin in the future. We were extremely active with M&A to start the year, closing three new dealership transactions and adding a significant piece to our parts and service business. The dealer transactions are OneWater's bread and butter, expanding our geographical reach for new and pre-owned boat sales, finance and insurance income, and service parts and other sales. These transactions will leverage OneWater's expertise and platform to push newly integrated dealers to even greater heights. Earlier this week, we announced the closing of a tuck-in acquisition in the parts and service space. JIF Marine provides complimentary products and establishes us as a market leader in stainless steel ladders and docking products. We are very excited about the synergies and opportunities to expand this less cyclical part of our business. We also believe there is a significant opportunity for us to grow in the future through additional parts and service tuck-in acquisitions. Accordingly, as part of our corporate acquisition and diversification strategy, we are establishing a target to complete two to four parts and service acquisitions per year. This is in addition to our target of completing four to six dealership acquisitions per year. Looking ahead, our acquisition pipeline for 2022 is robust and will continue to be a core component of our overall strategy. While the opportunities are plentiful, we are committed to our disciplined approach, selecting targets that meaningfully drive growth, diversification, and are in line with our goals. We believe our acquisition strategy significantly adds to the earning potential of the company. In summary, our first quarter results drove expansion of both the top and bottom line. We look forward to continuing to capture the momentum of the unrelenting customer demand and feel confident about our position to manage through the supply chain constraints. Our M&A activities will continue to fuel growth as we integrate market leading dealers and expand higher margin revenue streams, supporting expansion of the business, and enhancing the overall quality of our earnings. We believe these efforts will further extend our market share and generate meaningful value to our shareholders. With that, I will turn it over to Anthony to discuss business operations.

Thanks, Austin. The strong levels of demand from fiscal year 2021 carried into the first quarter when demand typically slows during the winter months. Our customers are happy and they're out shopping. putting money down for their next boat with no signs of demand slowing. Presold inventory remains elevated, and customer deposits more than doubled in the quarter compared to prior year, highlighted the continued strong customer demand. Seasonal sales were stronger than anticipated in the cooler climates as presold units delivered, and in the south, the sales of big boats were particularly strong in the first quarter. We continue to see strength across the board in ski wakes, pontoons, saltwater fish, runabouts, and yachts, with all categories and all geographies performing well. The team continued to do a great job of effectively using our superior inventory management tools to sell inventory from any location across our portfolio. This asset-like model reduces our imploring costs and consequently supports a higher margin profile, marked by a 550-point basis point improvement in gross margin this quarter compared to prior year periods. Improvement in our inventory levels continues to be a focus as we prepare for the summer selling season. We experienced an increase in inventory during the quarter, which is partially attributed to our numerous acquisitions coming online. The supply chain continues to pose challenges for OEMs. However, our exclusive technology and strong vendor relationships allows us to navigate the environment in an extraordinary manner. We are leveraging these resources and our expertise to put us in the position to continue to outperform the industry, and we feel good about where we stand. At some point, the supply chain environment will normalize, and the overall industry will begin to build back inventory to a new level of normal. It is still unclear exactly when this will happen. However, we have the team and the tools to make sure we can operate successfully in this environment. I am also proud of the success we have had in our service parts and other lines of businesses. Our dedicated team takes great pride in meeting our customers' parts and service needs so they can get back on the water enjoying their boat and making memories that will keep them boating for years to come. We will continue to service their existing boat and stand ready to help them find their next boat of their dreams when the time comes. Moving on to our marketing activities, we continue to our balanced strategy between boat shows and local dealer-sponsored events. While some shows were canceled due to COVID-19, we participated in other shows throughout the quarter and saw the same level of activity that we are seeing at our local personalized events. Customers are out. They're happy. They're excited about the product innovation, and they're buying boats. And with that, I'll turn the call over to Jack to go over the financials in more detail.

Thanks, Anthony. Physical first quarter of 2022 revenue increased 57% to $336 million from $214.1 million in the prior year quarter, which was fueled by a 28% same-store sales increase. New boat sales grew 56% to $236 million in the physical first quarter of 2022, and pre-owned boat sales increased 39% to $53.4 million. We continue to realize the benefits of our diversification strategy in growing the higher margin parts of our business, which contributed meaningful to our results in the quarter. Finance and insurance revenue increased 56% to $9.3 million in the first quarter of 22, and service parts and other sales increased 111% to $37.3 million, driven by our same-store sales growth and businesses recently acquired. Gross profit increased 93% to $101 million in the first quarter compared to $52.4 million in the prior year, primarily driven by the increase in gross margins of new and pre-owned boat sales and an increase in the higher margin service parts and other sales. Gross profit margin increased 550 basis points to 30% compared to 24.5% in the prior year. First quarter of 2022 selling general and administrative expenses increased to 59.1 million from 34.9 million. SG&A as a percentage of sales increased to 18% from 16% in the prior year. The increase in SG&A as a percentage of sales was mainly due to higher variable personnel costs driven by the increased level of profitability compared to the prior year quarter. Operating income climbed 95 percent to $31.3 million compared to $16 million in the prior year, driven by the increased gross profit and partially offset by higher SG&A expenses. And as a result, adjusted EBITDA increased to $41 million compared to $16.7 million in the prior year. Net income for the fiscal first quarter totaled $23.5 million, or $1.45 per diluted share. up 99% from $11.8 million, or $0.71 per diluted share in the prior year. For both periods, charges related to transaction costs and contingent consideration adversely impacted diluted earnings per share. These amounts tax-affected at 25% were $0.41 per share in the first quarter of 2022 and $0.03 per share in the first quarter of 2021. Looking ahead for the full year fiscal 2022, we are raising our outlook for adjusted EBITDA to be in the range of $210 million to $220 million, and earnings per diluted share to be in the range of $8 to $8.40 per share. We maintain our anticipation for same-source sales to be up high single digits despite the ongoing inventory challenges. These projections include the acquisition completed during the first quarter and the recently announced JIF Marine transaction, but exclude any additional acquisitions that may be completed during the year. With regard to our capital allocation, we remain focused on accelerating organic growth, executing on strategic M&A opportunities, and leveraging synergies. By executing these strategies on a longer-term basis, we believe we can increase our adjusted EBITDA run rate by 15% to 25% per year, with our M&A strategy contributing 10% to 15% and existing operations contributing 5% to 10% aligned with their long-term same-store sales expectations. For this year, we believe we'll exceed these amounts, with the low end of our guidance range yielding adjusted EBITDA growth in excess of 30%, before any additional acquisitions we may complete this year. Following through on the math, this basically gets you to a 50% increase in adjusted EBITDA by 2024 and a run rate in excess of $300 million. Needless to say, we are working hard for shareholders to execute on completing additional acquisitions, implement our proven strategies across newly acquired dealerships, and enhancing our earnings by growing our higher margin businesses. This concludes our prepared remarks. Operator, will you please open the line for questions?

In order to ask a question at this time, please press star 1 on your telephone. And to withdraw your question, just press the pound key. Once again, that's star 1 for questions, 1 for questions. Our first question will come from the line of Drew Crum from Stiefel. Your line is open.

Okay, thanks. Hey, guys, good morning. The 28% same-store sales figure I think was better than anyone expected. Understanding the fiscal 1Q is seasonally less important. Any thoughts around what the shape of the year should look like for same-store sales? And then separately, Austin, you talked about targeting two to four parts and services businesses on an annual basis going forward. How do the economics and purchase price multiples of these deals compare to your dealership transactions?

Thanks. Jack, do you want to jump in on the same store sales? Go ahead. Go ahead. I was just going to say, you know, a little bit of that, you know, this quarter is our lightest quarter. I do think we had some deals that should have probably been captured in the last year that that just got pushed into this quarter. And I've spoken about this on the last couple of calls that really the last 7 to 10 days of each quarter are probably the most important for us because it can shift a quarter. And that's why we've been kind of not really same-store sales on a quarterly basis is going to be very choppy for us. Year-end, having that high single-digit you know, projection or guidance is very doable and we're comfortable with that. And this quarter just happened to probably have some deals push out. And then the boats came in early because everybody kind of took some Christmas time. So we didn't have as much dependence on the last, you know, seven to 10 days that between Christmas and New Year's was not as, we weren't as dependent on that as we would be like the last 10 days of March. that'll be extremely busy. So it can sway a little bit. So staying store sales, this, you know, we had a great quarter. We knew we were getting the boats kind of like what we've got coming into this quarter. We know when the boats are supposed to come in. And so as long as there's no more disruptions or slowdowns, we're pretty confident in where we sit and know kind of what it's going to look like for the next several quarters. But then again, the last 10 days are what's mattered. Jack, you want to add anything to that before I talk about the part stuff?

Yeah, I just think it's important to understand last year, Q2, we had a 58% or 57% comp. That'll be a tough number to overcome. But then Q3 and Q4 were up against a negative comp. So I think the comps certainly get a little bit easier, although those are our largest quarters. So I think it's going to be a little bit challenging to get the forecast perfect for the quarter. for the year. I will say that even though Q2 is a big comp we're going up against, we're not expecting a major reduction, right? We're not expecting a 30% reduction in same source sales. I also wouldn't expect a 30% increase in same source sales, right? So I think it's I think we'll be able to be in and around the number from last year, and then just like Austin said, it's going to depend on how those flow at the end of the quarter.

And then, Drew, just to answer on the parts side of it, when we did the TH Marine deal, part of one of the things that was intriguing to us when we were looking into that was his pipeline and the opportunities that he had. So his pipeline is probably – as good or maybe even better than mine because, you know, it's not as fluid. He kind of already knows everybody. So as we started to get ramped up and get them folded in and once they got integrated, you know, we sat down with Jeff and David at TH and they were like, here are all the opportunities. And we were like, well, let's get going and let's start addressing those. So pipeline is pretty robust. Economics are a little bit different than ours. I mean, he's probably closer to a four to seven times on a trailing 12. And, you know, the synergies, the business is a little bit more, I would say, stable, you know, because it's less cyclical. So stable is probably not the right word. It's just less cyclical, so there's not as much peaks and valleys as you look back over the years. So the multiple is probably going to average into the, I would say, between five and six on the acquisitions. And they're a little bit smaller. And then the synergies aren't quite as big. I mean, we're not buying anything on the part side that's going to double in 24 months. It's going to be a little bit more, you know, we're going to pick up some synergies on margin, some SG&A stuff and stuff like that. So the increase or the upside we're going to have to build into the into additional revenues. And so when we start looking at these, what we're trying to do is pick the ones that really fold in, that complement, and have the ability to use the parts view side of it to either expand revenues or either as we bring them in the TH side, it expands margin. I think that should answer your question.

Yeah.

Thanks, guys.

Appreciate it.

Our next question will come from the line of Craig Kennison. From Baird, your line is open.

Hey, good morning. Thanks for taking my questions. I think you mentioned that deposits were up. I'm wondering if you could just characterize how you're handling the demand that you can't currently satisfy because you lack inventory.

I'll let Anthony jump in on this. But let me just say, I don't think we're missing deals. I mean, the consumer... has kind of been conditioned over the last year and a half to understand they're pretty much having to wait on everything. So what I think we're seeing and why those deposits are double where they were is I think people are preparing a lot more in advance. So the people that, you know, were planning on doing something, you know, for spring or summer, they jumped out this fall knowing that they were going to have to wait to get what they wanted. But I'll let Anthony probably, he'll be better to talk about that.

You know, Craig, I just think the customers are a little more specific on what they want, and there's so many new models that are coming out that our manufacturers are dealing with. So the consumer is willing to wait for what they want, and they're paying for it, and we're not having any issues with it. So I don't feel as though we're missing anything. They're just getting exactly what they want.

It's a really – good environment really to be a dealer and you're, you're able to price for the kind of features that consumers want. You're a large dealer. Are you having any conversations with your OEM partners to figure out how you might be able to preserve some of this, I guess, scarcity dynamic where the customer comes in and expect to pay full price and they just want to choose the features they want?

Daily, we have those conversations with, with our OEMs. I mean, it's, It's something that I think that my views are that, you know, the old model of, you know, having two turns a year like most dealers do, we were always much higher. But, you know, ordering the right boats and using the technology that we have to make sure that the boats that we have in stock are what everybody wants instead of, you know, I've used this example in the past, you know, if a manufacturer builds 14 different models, you don't put all 14 different models in a market if it takes, a year to sell, you know, two of those models. So, you know, ordering better real-time inventory, sharing inventory between it, and just using the data that we collect to make sure that we have the right boats at the right places at the right time. And that's where we're getting better and better. So I don't really ever see us going back to having, you know, over an abundance of boats on our yard if we order correctly.

And, Craig, on top of that, I think the manufacturers that have, also you know seen this you know when we had when we had 2008 and 2009 you know there wasn't an opportunity for the manufacturer to understand how a flattened production schedule where there's not peaks and valleys in their production schedule make them much more efficient make make the dealers healthier it creates turns it creates margin and so I think most of the manufacturers especially in the short term. You know, it's going to still take us a couple of years to catch up in inventory, and then probably a couple of years after that there will be a discipline where manufacturers, I'm not going to say they're going to create scarcity by not producing boats. I just don't think they're going to ramp up to overproduce and start flooding the inventory, you know, field. Because, one, I don't think the dealers want it. I don't think the floor plan company wants it. And now I don't think the manufacturers want it. I don't think they want these old peaks and valleys of inefficiency in production. I think that they've realized that. So I think that, you know, because of where we are from an inventory perspective, some of the things that everybody's able to see now that we weren't able to see in 08, 09, and 10 because we were cleaning out the inventory channel has brought light to everybody. And I think everybody's kind of getting on the same page, and I think that's just going to give us more years ahead of us where not only are we going to have to work through the supply chain and get inventories back to a new normal, but I think there will be a discipline for a period of time after that. Now, eventually greed sets in, people start stuffing the channel, but, you know, I honestly think that that's five to six years out. And so we do have conversations along with them about how some of the tools that we have, we don't need to hog them as one water tools. some of the inventory tool will make the whole entire industry healthier and it'll help our manufacturers even out that production line. And so, you know, there's some opportunities there that we're looking at on how we can take the tools that we have and push those out to, to, to other people for their, for their use to, to help them manage filled inventory.

And then just to follow up, um, what's the customer experience like? How do you have to, I guess, manage the information flow. So as a customer, If I put money down and I have some uncertain future about when I might get my boat, are you doing things to keep customers apprised of progress along the way so that customer feels engaged and pleased with the experience even though, you know, it's hard to know when the boat's delivered?

Yeah, Greg, through our CRM, we are in constant communication with the consumer and it's the way we train our employees to,

continue to have those touches even though the boat may be a year away or nine months away that we're continually touching the customer but just real quick we don't have customers coming in like if you came in today and it doesn't matter what boat you ordered you said well i want this boat we're not saying okay well that boat is going to be 300 grand give us a thirty thousand dollar deposit and we'll let you know i mean we're able to through our tools and working with the manufacturers, if you come in and just pick any boat, you can pick an R5 Cobalt, a Barletta, a Sunseeker, it doesn't matter. We're going to give you an estimated delivery date that's going to be within 10 days before or after that date the boat's going to be delivered. It's not a big unknown, like we don't have a clue. I mean, we have a really good idea over the next, because of the production slots that we have, when that boat should deliver. Now, There's all kinds of things that shift that delivery date, like I said, 10 days earlier, 10 days later. But it's not this, you know, well, we'll get it to you when we can. So, you know, we're able to set the expectation, and then like Anthony said, the CRM tool is very powerful for our sales associates to really do things through email, text. They do do phone calls. I mean, to keep those touches going just to stay in front of them. That's why – you know, one of the things everybody talks about was, oh, people aren't going to wait. They're going to want their deposits back. We feel that our stuff is extremely sticky because it's an emotional purchase. And once they make the purchase and they put the money down, I mean, the fallout that we have on deposited boats is not somebody changing their mind. It's a life-changing circumstance. They get relocated. There's a death or something like that. That's about, you know, the half a dozen or dozen yearly backouts that we have is off something like that once we get a deposit.

Great. Hey, thank you.

Our next question will come from Joe Altabetto from Raymond James. You may begin.

Thanks. Hey, guys. Good morning. I guess first question may be for Jack, a clarification on the guidance. So you raised the EBITDA guidance. by $40 to $45 million. By our math, the acquisitions that are now included, which is, I guess, TH, Norfolk, Quality, and JIF, I think those represent about $30 to $35 million of that EBITDA. So is my math right and the base business went up by about $10 million or so for this year?

Yeah, I think you've got to look at the acquisitions. Be careful when you're looking at the acquisitions, right, because on a full-year basis, you know, they're going to contribute probably closer to $40 million. And so you've got to make sure you're adjusting it down for the partial period. You know, one thing that wasn't mentioned earlier when we were talking about JIF, right, is that's a smaller business. It's about $5 million in annual revenues and about, you know, a little under $1 million of EBITDA. So it wasn't a real big deal. But, you know, you've got to scale it in that way and, you know, Yeah, I think you're thinking about it right as long as you're backing down a portion of the costs, a portion of the projected EBITDA for those acquisitions on a per-rata basis for the year. Okay, that's helpful.

And then secondly, in terms of the $300 million plus run rate that you guys talked about this morning for fiscal 24, I guess first, what's the similar run rate – I guess I can figure it out, right? You're adding $40 million to the 210 to 220. That's your run rate for this year. But what are the assumptions around future acquisitions? Are you assuming, you know, call it a couple of parts and service acquisitions and maybe, you know, four or five dealer acquisitions?

Yeah. Well, real quick, and one thing I want to point out, Joe, that run rate is based off historical numbers. That's historical numbers. That's no synergies. Yeah, and that's pre-synergies. And I think another thing that's important to do, you know, is we were ultra-conservative when we were kind of planning out that run rate. Jack, I mean, you can talk to him about what we kind of, you know, put in as base case for acquisitions. And, you know, we have a historical record of doubling acquisitions on the dealership side inside 24 months, and we by no means put any of that in.

Yeah, so we're, you know, again, if you look at a modest growth on the base business, if you, you know, you think about it right now, we're looking at a total cadence of about eight acquisitions a year. That's kind of the, you know, say three on the parts side, five on the dealership side, right, just kind of taking that midpoint. You know, that's probably going to generate, you know, $25 million worth of EBITDA. And, you know, it's It's very powerful. It's very powerful how it adds to the growth of the company. Then, like Austin said, we do have a good history of improving those dealership acquisitions by implementing our tools. I think there's probably even a decent amount of upside from that $300 million.

Okay. That's helpful. Maybe if I could squeeze in one more. In terms of the price environment, obviously the comp plus $28 million, very strong, mostly pricing-driven. This may sound like a bit of a silly question, but is there any chance we start to see discounting at all in 2022, or given where inventories are, that's really not possible at this point?

Yeah, I don't see discounting, especially not until the end of the season. Now, do you get to the end of the season and have some pockets in the country that have had some, you know, weather issues. I mean, we've seen this in the past where you'll have a really wet Midwest, you know, start to the season. In some cases, I've seen it where a lot of people couldn't vote till the end of June in the Midwest just because their lakes were flooded. So if you get some sort of dynamic like that, and then you come out towards the end of this year, you might see some discounting from some of the smaller dealers that just don't want to have any carryover inventory. But from an inventory perspective, If you look at the country as a whole, it's going to take us a while to get back to this new normal. So I don't expect to see any massive discounting. And where you do see discounting will really be on the low-end super value side, not on the high-end premium side where we mainly, you know, where we operate. I don't see that coming anytime soon, like no time soon.

So it's going to be isolated if we do see it later this year.

Yeah. And one other thing I'd like to point out, and, Jack, tell me if I'm wrong, but, you know, Joe, you said, you know, the 28% comp. I mean, a lot of that was driven not just by new boat sales or pricing of new boats. A lot of that was driven, you know, on those ancillary businesses. You know, our parks and service, you know, was a huge contributor to that. That's a good point. Thank you, guys.

Thanks, Joe.

Our next question is from Fred Whiteman from Wolf Research. You may begin.

Hey, guys. Good morning. Do you have the organic inventory number? Just sort of try to parse out what is the impact of the acquisitions on that inventory number on the balance sheet.

Yeah, I don't have it in front of me, but it's up slightly. The majority of it is driven by acquisitions.

Okay, and when you say flat to up, that's on a year-over-year basis, right?

Year-over-year basis, yes. Sequentially, it's up a lot more just because of the seasonality of the business, and you tend to build inventory through the winter. But, yeah, on a year-over-year basis.

Sure. Okay, that makes sense. And could you just give a little bit more detail on sort of the margin performance across the new and the used segments that you saw in the quarter? I mean, still up big on a year-over-year basis, but that growth rate looks like it might have ticked down a bit versus last quarter or so. Are we sort of at a steady state margin here for those two categories going forward? Do you think it could sort of fluctuate a bit given seasonality? How should we think about that?

Yeah, I think what you also have going on here is a trend. You tend to have, you know, bigger boats sold in the winter months that we're in now. And so that typically the December quarter tends to be a lower margin quarter. And so I think that's a little bit at what's play here. We certainly will see our larger boat business perform very well in this quarter.

Makes sense. And then just within that high single-digit comp number that you guys are still guiding to, has the unit assumption changed? Are you planning for – I mean, said differently, do you think that the deliveries from OEMs is going to be better or worse versus when you sort of put that out there last quarter?

Yeah, I think it's still a little early to tell. I mean, there's, you know, we're optimistic about the supply chain, but, you know, we are expecting some unit growth. But, you know, it's a balance there between price and growth.

Perfect. Thanks, guys.

Once again, that's style one for questions. Our next question comes from Mike Swips from Tourist Securities. You may begin.

Hey, good morning, guys. Maybe a question for Jack just around the cadence of acquisitions on the part side and unveiling that number, kind of targeted number for acquisitions annually. I guess how should we think about that relative to, you know, return on invested capital or just working capital intensity? Are these businesses much more working capital intensive than dealerships?

Yeah, they are. I mean, typically, you know, the various businesses have funded working capital through, you know, either cash or, you know, some sort of revolver. As of right now, we, you know, they don't have the floor plan facility like the boat dealerships do. So there certainly will be a little more, a little additional working capital, right? But a lot of them, you know, as well, these aren't massive businesses. You know, quite so often we can, you know, integrate them into our existing operations and, you know, absorb some of that working capital need, reduce some of their, you know, fixed costs, you know, to improve and cover that cost.

Okay. And then just kind of similar lines in the service parts and other supporting segments. Now that you've made a couple acquisitions there, I guess how should we think about the margin shaking out in a steady state environment? Understanding parts tend to be diluted relative to service. So is there a way to think about that?

Yeah, I mean, you saw it this quarter where we saw our margin for service parts and other come down a little bit. I think on a more steady state, depending on the cadence of the acquisitions, you know, that margin will probably fall closer to a, you know, closer to like a 40% number, you know, but which will still contribute positively to our overall margins as, you know, that is higher than boat sales. But you're 100% correct. You know, parts tend to be in and around 30, 32, you know, 33%. You know, your service labor tends to be, you know, closer to 60, so we'll kind of you know, we'll blend down kind of in the middle there in that 40 range.

Okay, great. That's helpful. That's all for me. Thank you. Thanks, Mike.

Thank you. And that will conclude our Q&A for today. I have no further questions in the queue. And this will conclude today's conference as well. Thank you for your participation. You may now disconnect. Everyone, have a great day.