Ladies and gentlemen, thank you for standing by, and welcome to the OneWater Marine Fiscal Fourth Quarter and Full-Year 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to introduce your host for this conference call, Mr. Jack Ezzell. You may begin, sir.

Good morning, and welcome to OneWater Marine's fiscal fourth quarter and full- 2020 earnings conference call. I am joined on the call today by Austin Singleton, Chief Executive Officer; and Anthony Aisquith, 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 OneWater Marine and it's 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 it's filings with the SEC. The company disclaims any obligation or undertaking to update the forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except or 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. 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. Bolstering 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 focus team and…

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 continue 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 the 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 Witty, a marine industry veteran and a long-time 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 events 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.…

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 the increase in the number of units sold, as well as an increase in the average unit price of new and pre-owned boats. The same-store sales increase is on top of a 20% increase in the fourth quarter of 2019. During the fourth quarter, we continue to meet the heightened demand for new and pre-owned boats across our business. As customers continue to choose boating to enjoy the outdoors with friends and family in safe socially distance 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 and 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…

[Operator Instructions] 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, both 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 your growth outlook is achievable?

Craig, 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. If you kind of take the acquisitions that have not matured; 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 or normal improvements to the acquisitions that were maturing, that we'd already closed on. So, 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 boating today, from an industry perspective, and how you use your boat and what the experience is, it's completely different than it was 10 years ago. And we feel two things: one, we've still got acquisitions that we're bringing online that we're going to get a 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 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…

That's terrific. Thank you. And then my last question was just on boatsforsale.com, seems like a very interesting strategy, didn't really address much of it in your prepared remarks. But 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 and dollars. Where we sit right now, we have the first three pieces of that were actually beta testing or testing in our -- with our sales staff right now. We have the -- part of the way that the trade evaluation or the pricing tool works is, Anthony, how long have we been doing that? It's been about four weeks, three weeks?

Yes, about six weeks so far.

Six weeks on that one. And then, 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. 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 we -- 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 the line of Mike Swartz from Truist Securities. You may begin.

Hey, good morning, guys. Just a 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 that?

Yes, I think one of the things if 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 we -- we're just trying to, I think, be conservative in putting the model together.

Okay. And maybe just given the state of -- both shows being canceled or postponed or scaled back, 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 think we were doing - yes.

So don't give our secret in a lot of way, Anthony.

It's a lot of events, in-house events and much safer environment for the customers and gives them reasons. We're blessed to be 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 had a pontoon, you might want to go to an inboard boat. I mean, 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 quarter, fourth quarter, and I look at the different revenue line items, strong double-digit growth in both new and pre-owned boat sales, but F&I was less than 2% year-over-year. Why was there that disconnect in the quarter? Was there something specific?

Yes, I think it's a little bit - you got to remember, we were up -- for the full- it's up 41%, 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's still -- it still is an area we feel very strong about and we feel that the growth of F&I is going to outpace our same-store sales.

Okay, thank you.

Thank you. [Operator Instructions] Our next question will come from line of Joe Altobello from Raymond James. You may begin.

Thanks. Hey, guys, good morning. I just wanted to get an update on the overall M&A environment; Tom and 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 have probably stayed 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 we've talked about perfect execution and it's not that we cannot have one of these not work perfectly because the credibility that we have with the manufacturers into support and them still being our number one lead generator, you don't want to have a deal that goes bad or something go wrong where you lose that manufacturing support. And in 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 -- you know, I'm glad that Anthony and Jack has 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. 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 we've been on the sidelines for a while, and it was nice to get this Tom George Yacht 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 actual acquisition from a strategic standpoint are exciting to us.

That's very helpful, Austin. Thank you. And maybe kind of a follow-up on that, on the inventory side. I think Jack you mentioned, you're at $150 million of inventory, year-end, that's down almost 50% year-over-year. How long do you think it'll 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.

Okay.

I mean, we – we -- you know, that the inventory is -- 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 about 10 times on a yard, you don't really keep up with that on the P&L. And so, less inventory higher returns 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. 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 both sales with less inventory. Because the forecasting tools and the stuff that he has put into place in the way that we are 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. As we scale the company, the inventories will of course increase; but we want to operate with [indiscernible]. 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.

Got you.

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

Great. Thank you, guys. Good luck.

And our next question comes from the line of Mike Swartz from Truist Securities. You may begin.

Hey, guys, thanks for letting me hop back on here. And just wanted to follow-up one on the comments you made regarding the fiscal year '21 outlook; that you said you saw the momentum carry to the early part of the year, and 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-to-date as we sit here today?

Yes, I would say it's moving at a good pace, similar to what we we've seen in recent months. There is still -- it's seasonally -- obviously, it's a seasonally slower period; so sales are slowing as we go through the months of October, November, and then December is the smallest month of the quarter. And with that kind of being, it's also our smallest quarter of the year; so it's -- just from a seasonality perspective, it's one of those where it's tougher to gauge a full year number, a full year forecast just off of 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, how the quarter is lined up. And just with Q2 last year was a lower quarter because of shutdowns and COVID; Q3 obviously was a large quarter for us, but still -- it's really unclear as to how both shows will play into Q2 results, as well as Q4 -- Q3 results.

Okay, great. Thanks a lot, guys.

Thank you. [Operator Instructions] 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.