OneWater Marine Inc.

We believe that our strategic approach to exiting the season with clean inventory positions as well for the quarters to come. Additionally, the M&A deal pipeline is getting more and more attractive, and there could be some steals to be had in the future. We are looking at all levels of the business and are confident that by accepting the short-term pain of the industry adjustment, we have set course for a solid future and attractive free cash flow generation. And with that, I will turn it over to Anthony.

Thanks, Austin. Our teams remain active during the selling season to drive solid revenue growth in a challenging market. Results were driven by double-digit growth in pre-owned boat sales, supported by increased trade-ins over the last few quarters. For customers looking to finance their boat purchases, credit remains widely available, in line with what we've been seeing throughout the year. As rates go up, the average customer does become a little more interest rate sensitive, which led to the flat finance and insurance income year over year. Our parts and service business continues to grow nicely, and sales are up 23% in the quarter and 38% year to date. Our dealerships are executing well, and the distribution business is starting to turn the corner on the destocking that has occurred at big box retailers over the last several months. While it has not had a material impact on our results this quarter. We are beginning to see orders from these retailers trickle in and expect them to ramp up this winter. Moving to inventory, as Austin mentioned, we are hyper-focused on carrying appropriate inventory levels through the end of the selling season and into the seasonally slower winter months. Inventory as of June 30th, 2023, is down modestly compared to the end of Q2, and we expect the seasonal decline further. We are continually operating at a 17 weeks of inventory on hand compared to an industry average of 28 weeks. We will enter the 2024 selling season with a fresher inventory mix than many of our competitors. This coupled with a more moderate price increase from the manufacturers, we can be extremely competitive as the 2024 models will be easier to sell than prior year models. While we are comfortable with our inventory position, some industry information suggests that inventory and overall dealer channel has built up past 2019 levels. As we move forward, we believe this will give us a competitive advantage against the other dealers. The higher carrying costs and the interest expense for dealers with aged and non-current inventory creates a significant drag on their earnings and cash flows. Thus, we believe our proactive approach will benefit us significantly in the long term. As we have said before, there are many levers to pull. as we adjust to the new sale levels and margin expectations. We are focused on adapting our SG&A expenses to support the current operating environment. We also expect the SG&A expenses to continue moderating as we further integrate acquired parts and service businesses. We remain focused on executing our playbook and positioning OneWater for continued success in any environment. I will now turn the call over to Jack to review the financials.

Thanks, Anthony. Fiscal third quarter revenue increased 4% to $594 million in 2023 from $569 million in the prior year quarter, yielding same-store sales that were flat for the quarter. New boat sales decreased 1% to $372 million in the fiscal third quarter of 2023, and pre-owned boat sales increased 14% to $111 million. Service parts and other sales continue to positively impact our results, climbing 23% to $92 million, driven by the contributions of our recently acquired businesses and dealer operations. Overall, gross profit decreased 13% to $159 million in the third quarter compared to the prior year, driven by the normalization of gross margins on boats sold. Gross profit margin fell to 27% as a percentage of total sales, As expected, the investments made in service parts and other businesses have softened the decline in overall gross margins as boat margins normalize. Third quarter 2023, selling general administrative expenses increased to 93 million from 88 million in the prior year. SG&A as a percentage of sales was 16%, which was flat compared to the fiscal third quarter of 2022. The increase in SG&A Expense on a dollar basis was primarily driven by higher expense structure of our acquired parts and service businesses, as well as higher advertising expenses compared to the prior year, which supported our increase in sales. These increased costs were mostly offset by a variable cost structure where expenses have started to adjust down with the declining gross margin. As the industry normalizes, our flexible SG&A expense structure is a lever we can pull to drive future profitability. Operating income decreased to $60 million compared to $88 million in the prior year, and adjusted EBITDA was $60 million compared to $95 million in the prior year. The decline in adjusted EBITDA was due to the reduction in both gross margins in same-store sales being at the bottom of the expected range, combined with higher floor plan borrowings and related interest costs. Net income for fiscal third quarter totaled $33 million, or $1.95 per diluted share, from $64 million, or $3.86 per diluted share in the prior year. Contributing to this decline was an increase in interest expense, which was $17 million in the quarter, up from $4 million in the prior year. This increase is the result of rising interest rates and increased average borrowings on our debt facilities. Turning to the balance sheet, as of June 30th, 2023, total liquidity continues to be in excess of 100 million, including cash on the balance sheet, availability under a revolving line of credit, and floor plan facility. Total inventory as of June 30th, 2023, was 573 million and has increased year over year as the supply chain has come back online and as we integrate our recent acquisitions. Our inventory remains healthy at approximately 17 weeks on hand, and we expect inventory will continue to decline sequentially until we begin the seasonal build in the fall. Total long-term debt as of June 30th was $458 million. Adjusted net debt, or long-term debt net of cash, was 2.2 times trailing 12-month EBITDA. Our liquidity and lever position remained in a comfortable range, and we continue to use cash to pay down our floor plan, which has the highest interest rate, providing us with financial flexibility as needed. Moving to our outlook, we're updating our guidance as a result of the accelerated normalization of the industry. We're guiding same-store sales to be flat to the prior year and expect adjusted EBITDA to be in the range of $160 to $170 million. with earnings per diluted share to be in the range of $4.45 to $4.70 per diluted share. These projections exclude any acquisitions that may be completed later this year. We will continue to maintain our current capital allocation strategy supported by our strong free cash flow generation. The M&A pipeline is robust, and deals are beginning to look very attractive. As we continue to navigate this dynamic environment, We remain focused on positioning OneWater for the continued long-term success and maximizing value for our shareholders. This concludes our prepared remarks. Operator, will you please open the line for questions?