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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Unless the context requires otherwise, references in this report to the “Company,” “we,” “us,” and “our” refer to OneWater Marine Inc. and its consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes appearing elsewhere in this Form 10-K. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements as a result of a variety of risks and uncertainties, including those described in this Form 10-K under “Special Note Regarding Forward-Looking Statements” and “Risk Factors.” In light of these risk, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements, except as otherwise required by applicable law.

Overview

We believe that we are one of the largest and fastest-growing marine retailers in the United States with 96 dealerships, 10 distribution centers/warehouses and multiple online marketplaces as of September 30, 2024. Our dealer groups are located within highly attractive markets throughout the Southeast, Gulf Coast, Mid-Atlantic and Northeast, many of which are in the top twenty states for marine retail expenditures. We believe that we are a market leader by volume in sales of premium boats in many of the markets in which we operate. In addition to boat sales, we also generate sales from related products including finance & insurance and service, parts & other sales. The acquisitions of T-H Marine and Ocean Bio-Chem significantly expanded our sales of marine parts and accessories. The combination of our significant scale, diverse inventory, access to premium boat brands, access to a broad array of parts and accessories and meaningful brand equity enables us to provide a consistently professional experience as reflected in the number of our repeat customers and Dealership same-store sales growth.

We were formed in 2014 as OneWater LLC through the combination of Singleton Marine and Legendary Marine, which created a marine retail platform that collectively owned and operated 19 dealerships. Since the combination in 2014, we have acquired a total of 81 additional dealerships, 12 distribution centers/warehouses and multiple online marketplaces through 34 acquisitions. Our current portfolio

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as of September 30, 2024 consists of multiple brands which are recognized on a local, regional or national basis. Because of this, we believe we are one of the largest and fastest-growing marine retailers in the United States based on number of dealerships and total boats sold. While we have opportunistically opened new dealerships in select markets, or launched additional parts and accessory products, we believe that it is generally more effective economically and operationally to acquire existing businesses with experienced staff and established reputations.

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

As of September 30, 2024, the Dealerships reporting segment includes operations of 96 dealerships in 16 states including Florida, Texas, Alabama and Georgia, among others, and represents approximately 91% of revenues. The Dealership segment engages in the sale of new and pre-owned boats, arranges financing and insurance products, performs repairs and maintenance services, offers marine related parts and accessories and offers slip and storage accommodations in certain locations.

As of September 30, 2024, the Distribution reporting segment includes the activity of three of our fully-owned businesses and subsidiaries, which together operate 10 distribution centers/warehouses in Alabama, Florida, Oklahoma, Indiana and Tennessee and represents approximately 9% of revenues. The Distribution segment engages in the manufacturing, assembly and distribution of marine-related products (and adjacent industries).

The boat dealership market is highly fragmented and is comprised of approximately 4,000 dealerships nationwide. Most competing boat retailers are operated by local business owners who own three or fewer stores; however we do have other large competitors. We believe we are one of the largest and fastest-growing marine retailers in the United States. Despite our size, we comprise less than 4% of total industry sales. Our scale and business model allow us to leverage our extensive inventory to provide consumers with the ability to find a boat that matches their preferences (e.g., make, model, color, configuration and other options) and to deliver the boat within days while providing a personalized sales experience. In addition to boat sales, we also generate sales from related products including finance & insurance and service, parts & other sales. The acquisitions of T-H Marine and Ocean Bio-Chem have significantly expanded our sales of marine parts and accessories. Our strategic growth in this area is also expected to materially expand our addressable market in the parts and accessories business. We are able to operate with a comparatively higher degree of profitability than other independent retailers because we allocate support resources across our broader base, focus on high-margin service parts and accessories, utilize floor plan financing and provide core back-office functions on a scale that many independent retailers are unable to match. We seek to be the leading marine retailer by total market share within each boating market and within the product segments in which we participate. To the extent that we are not, we will evaluate acquiring other local retailers in order to increase our sales, to add additional brands or to provide us with additional high-quality personnel.

Trends and Other Factors Impacting Our Performance

Acquisitions

We are a highly acquisitive company. Since the combination of Singleton Marine and Legendary Marine in 2014, we have acquired 81 additional dealerships through 29 dealer group acquisitions. Our team remains focused on expanding our dealership growth in regions with strong boating cultures, enhancing the customer experience and generating value for our shareholders. In addition to dealership acquisitions, the Company has strategically acquired parts and accessories companies as part of our growth and diversification strategy. We have acquired 12 distribution centers and warehouses through the acquisition of 5 parts and accessories companies. We plan to continue to strategically evaluate and complete acquisitions moving forward. For the years ended September 30, 2024 and 2023, we completed 1 and 3 acquisitions, respectively.

We have an extensive acquisition track record within the retail marine industry and believe we have developed a reputation for treating sellers and their staff in an honest and fair manner. We typically retain the management team and name of the acquired group. We believe this practice preserves customer relationships and goodwill in the local marketplace. We believe our reputation and scale have positioned us as a buyer of choice for marine retailers who want to sell their businesses. Our strategy is to acquire dealerships at attractive EBITDA multiples and then grow same-store sales while benefiting from cost-reducing synergies. Historically, we have typically acquired dealerships for less than 4.0x EBITDA on a trailing twelve month basis and believe that we will be able to continue to make attractive acquisitions within this range. With the expansion of our Distribution segment, we look to acquire parts and accessories manufacturing and distribution companies within a range of 5.0x – 10.0x EBITDA on a trailing twelve month basis, depending on the size of the business.

General Economic Conditions

General economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national, or global economic developments or uncertainties, including the adverse economic effects of higher interest rates or inflation, supply chain constraints, or a prolonged economic downturn, could reduce consumer spending and adversely affect our business. Consumer spending on discretionary goods may also decline as a result of lower consumer confidence levels, higher interest rates or higher fuel costs, even if prevailing economic conditions are otherwise favorable. Economic conditions in areas in which we operate dealerships,

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particularly in the Southeast, can have a major impact on our overall results of operations. Local influences, such as corporate downsizing, inclement weather such as hurricanes, tornadoes, and other storms, environmental conditions, and global public health concerns and events have and could adversely affect our operations in certain markets and in certain periods. Any extended period of adverse economic conditions or low consumer confidence is likely to have a negative effect on our business.

Our business was significantly impacted during the recessionary period that began in 2007. This period of weakness in consumer spending and depressed economic conditions had a substantial negative effect on our operating results. In response to these conditions we reduced our inventory purchases, closed certain dealerships and reduced headcount. Additionally, in an effort to counteract the downturn, we increased our focus on pre-owned sales, parts and repair services, and finance & insurance services. As a result, we surpassed our pre-recession sales levels in less than 24 months. While we believe the measures we took significantly reduced the impact of the downturn on the business, we cannot guarantee similar results in the event of a future downturn. Additionally, we cannot predict the timing or length of unfavorable economic or industry conditions, including a downturn as a result of a global health crisis, rising interest rates, inflation, or the extent to which they could adversely affect our operating results.

Although past economic conditions have adversely affected our operating results, we believe we are capable of responding in a manner that allows us to substantially outperform the industry and gain market share. We believe our ability to capture such market share enables us to align our retail strategies with the desires of customers. We expect our core strengths, including retail and acquisition strategies, will allow us to capitalize on growth opportunities as they occur, despite market conditions.

The COVID-19 pandemic and its related effects positively impacted our sales and gross profit margins as more customers desired to engage in outdoor recreational activities in a socially distanced manner. However, the COVID-19 pandemic also caused significant supply chain challenges as suppliers were faced with business closures and shipping delays. This led to an industry wide inventory shortage of boats, engines and certain marine parts. As of September 30, 2024, the supply chain has normalized and we have returned to the more traditional seasonal cycles of our business which has led to the normalization of our inventory levels and gross profit margins in line with pre-COVID seasonal metrics.

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, each as of the date of the financial statements, and revenues and expenses during the periods presented. On an ongoing basis, management evaluates their estimates and assumptions, and the effects of any such revisions are reflected in the financial statements in the period in which they are determined to be necessary. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our consolidated financial statements. Set forth below are the estimates that we have identified as critical to our business operations and understanding our results of operations, based on the high degree of judgment or complexity in their application.

Inventories

Inventories are stated at the lower of cost or net realizable value. The cost of new and pre-owned boat inventory is determined using the specific identification method. New and pre-owned boat sales histories indicate that the overwhelming majority of such boats are sold for, or in excess of, the cost to purchase those boats. In assessing the lower of cost or net realizable value, we consider the aging of the boats, historical sales of a particular product and current market conditions. There are inherent uncertainties in assessing net realizable value as management must make assumptions and apply judgment to changes in the market, brands and other factors that drive consumer preferences and spending.

Goodwill and Other Intangible Assets

In accordance with Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Others (“ASC 350”), we review goodwill for impairment annually in the fourth fiscal quarter, or more often if events or circumstances indicate that impairment may have occurred. When evaluating goodwill for impairment, if the fair value of a reporting unit is less than its carrying value, the difference would represent the amount of required goodwill impairment in accordance with ASC 350. To the extent the reporting unit’s earnings decline significantly or there are changes in one or more of these inputs that would result in a lower valuation, it could cause the carrying value of the reporting unit to exceed its fair value and thus require the Company to record goodwill impairment.

Identifiable intangible assets as a result of the acquisitions we have completed consist of trade names, developed technologies, including design libraries, and customer relationships. We have determined that trade names have an indefinite life, as there is no economic, contractual or other factors that limit their useful lives and they are expected to generate value as long as the trade name is utilized by the marine retailer, and therefore, are not subject to amortization. Developed technologies and customer relationships are amortized over their estimated useful lives of ten years and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

Impairment testing requires the assessment of both qualitative and quantitative factors, including, but not limited to whether there has been a significant or adverse change in the business climate that could affect the value of an asset and/or significant or adverse changes in

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cash flow projections or earnings forecasts. These assessments require management to make judgements, assumptions and estimates regarding the macroeconomic and industry conditions, our financial performance, and other factors and are often interdependent; therefore, they do not change in isolation. Factors that management must estimate include, among others, the economic lives of the assets, sales volume, pricing, royalty rates, long-term growth rates, tax rates, capital spending, and customers’ financial condition. The estimates and assumptions used in these tests are evaluated and updated as appropriate. The variability of these factors depends on a number of conditions, including uncertainty about future events, and thus our accounting estimates may change from period to period. If other assumptions and estimates had been used when these tests were performed, impairment charges could have changed. As mentioned above, these factors do not change in isolation and, therefore, we do not believe it is practicable or meaningful to present the impact of changing a single factor. Furthermore, if management uses different assumptions in future periods or if different conditions exist in future periods, additional impairment charges could result.

During the year ended September 30, 2023, the Company determined that there were circumstances that indicated that impairment may have occurred. We engaged a third-party independent valuation professional to perform a quantitative analysis of the fair values compared to the carrying value and, as a result, recorded a loss on impairment of $147.4 million. For the years ended September 30, 2024 and 2022, the Company determined that it was more likely than not that the fair value of the goodwill and identifiable intangible assets was greater than its carrying amount, and as a result, no impairment for goodwill and identifiable intangible assets was required.

Business Combinations

We account for business combinations using the acquisition method of accounting, which requires recognition of assets acquired and liabilities assumed at fair value as of the date of the acquisition. Determination of the estimated fair value assigned to each asset acquired or liability assumed can materially impact the net income in subsequent periods through depreciation and amortization and potential impairment charges.

The most critical areas of judgment in applying the acquisition method include selecting the appropriate valuation techniques and assumptions that are used to measure the acquired assets and assumed liabilities at fair value, particularly for inventory, contingent consideration, trade names, developed technologies, including design libraries, and customer relationships. The fair value of acquired inventory is based on manufacturer invoice cost, curtailments, and market data. The significant estimates used to value contingent consideration are future earnings and discount rates. Management estimated the fair value of the trade names and developed technologies using the relief from royalty method and customer relationships using the multi-period excess earnings method. The fair value determination of the trade names and design libraries required management to make significant estimates and assumptions related to future revenues and the selection of the royalty rate and discount rate. The fair value determination of the customer relationships require management to make significant estimates and assumptions related to future revenues attributable to existing customers, future EBITDA margins and the selection of the customer attrition rate and discount rate. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on the determination of the fair value.

In selecting the techniques and assumptions noted above, we generally engage third-party, independent valuation professionals to assist us in developing the assumptions and applying the valuation techniques to a particular business combination transaction. In particular, the discount rates selected are compared to and evaluated with (i) the industry weighted-average cost of capital, (ii) the inherent risks associated with each type of asset and (iii) the level and timing of future cash flows appropriately reflecting market participant assumptions.

How We Evaluate Our Operations

Revenue

We have a diversified revenue profile that is comprised of new boat sales, pre-owned boat sales, finance & insurance products, repair and maintenance services, and parts and accessories sales. During different phases of the economic cycle, consumer behavior may shift away from new boats; however, we are well-positioned to generate revenue from pre-owned boats, repair and maintenance services, and parts and accessories, which have all historically increased during periods of economic uncertainty. We generate pre-owned sales from boats traded-in for new and pre-owned boats, boats purchased from customers, brokerage transactions, consignment sales and wholesale sales. We continue to focus on all aspects of our business including non-boat sales of finance & insurance products, repair and maintenance services, and parts and accessories. Although non-boat sales contributed approximately 19.3%, 19.5% and 17.8% to revenue in fiscal years 2024, 2023 and 2022, respectively, due to the higher gross margin on these product and service lines, non-boat sales contributed 40.0%, 35.6% and 30.1% to gross profit in fiscal years 2024, 2023 and 2022, respectively. We have also diversified our business across geographies, dealership types (e.g., fresh water and salt water), and product offerings (e.g., focus on parts and accessories businesses through our Distribution segment) in order to reduce the effects of seasonality and cyclicality of our business. In addition to seasonality, revenue and operating results may be significantly affected by quarter-to-quarter changes in economic conditions, manufacturer incentive programs, adverse weather conditions and other developments outside of our control.

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Gross Profit

We calculate gross profit as revenue less cost of sales. Cost of sales consists of actual amounts paid for products, costs of services (primarily labor), transportation costs from manufacturers to our dealerships and vendor consideration. Gross profit excludes the majority of our depreciation and amortization, which is presented separately in our consolidated statements of operations.

Gross Profit Margin

Our overall gross profit margin varies with our revenue mix. Sales of new and pre-owned boats, which have comparable margins, generally result in a lower gross profit margin than our non-boat sales. As a result, when revenue from non-boat sales increases as a percentage of total revenue, we expect our overall gross profit margin to increase.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of base salaries and incentive-based compensation, advertising, rent, insurance, utilities, and other customary operating expenses. A portion of our cost structure is variable (such as sales commissions and incentive compensation), or controllable (such as advertising), which we believe allows us to adapt to changes in the retail environment over the long term. We typically evaluate our variable expenses, selling expenses and all other selling, general and administrative expenses in the aggregate as a percentage of total revenue.

Dealership Same-Store Sales

We assess the organic growth of our Dealership segment revenue on a same-store basis. We believe that our assessment on a same-store basis represents an important indicator of comparative financial results and provides relevant information to assess our performance. New and acquired dealerships become eligible for inclusion in the comparable dealership base at the end of the dealership’s thirteenth month of operations under our ownership and revenues are only included for identical months in the same-store base periods. Dealerships relocated within an existing market remain in the comparable dealership base for all periods. Additionally, amounts related to closed dealerships are excluded from each comparative base period. Because Dealership same-store sales may be defined differently by other companies in our industry, our definition of this measure may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss) before interest expense – other, income tax (benefit) expense, depreciation and amortization and other (income) expense, further adjusted to eliminate the effects of items such as the change in fair value of contingent consideration, loss on extinguishment of debt, transaction costs, stock-based compensation and restructuring and impairment. See “—Comparison of Non-GAAP Financial Measures” for more information and a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.

Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share

We define Adjusted Net Income Attributable to OneWater Marine Inc. as net income (loss) attributable to OneWater Marine Inc. before transaction costs, intangible amortization, change in fair value of contingent consideration, restructuring and impairment and other (income) expense, all of which are then adjusted for an allocation to the non-controlling interest of OneWater LLC. Each of these adjustments are subsequently adjusted for income tax at an estimated effective tax rate. Management also reports Adjusted Diluted Earnings Per Share which presents all of the adjustments to net income attributable to OneWater Marine Inc. on a per share basis. See "— Comparison of Non-GAAP Financial Measures" for more information and a reconciliation of Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share to net income (loss) and net earnings (loss) per share, respectively, the most directly comparable financial measures calculated and presented in accordance with GAAP.

Summary of Acquisitions and Dispositions

Acquisitions

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

Fiscal Year 2024 Acquisitions

•Effective May 1, 2024, we acquired Garden State Yacht Sales, a full service marine retailer located in New Jersey.

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We refer to the fiscal year 2024 acquisition described above as the “2024 Acquisition.” The 2024 Acquisition is partially reflected in our consolidated statements of operations for the year ended September 30, 2024, beginning on the date of acquisition. Our 2024 Acquisition did not impact our results of operations for the years ended September 30, 2023 and 2022.

On October 31, 2023, we exercised our right to acquire the remaining 20% economic interest in Quality Assets and Operations, LLC. Subsequent to the acquisition, the Company now owns 100% of the economic interest in Quality Assets and Operations, LLC.

Fiscal Year 2023 Acquisitions

•Effective October 1, 2022, we acquired Taylor Marine Centers, a full service marine retailer with locations in Maryland and Delaware.

•Effective December 1, 2022, we acquired Harbor View Marine, a full service marine retailer with locations in Florida and Alabama.

•Effective September 1, 2023, we acquired Harbor Pointe Marina, a full service marine retailer with one location in Alabama.

We refer to the fiscal year 2023 acquisitions described above collectively as the “2023 Acquisitions.” The 2023 Acquisitions are fully reflected in our consolidated financial statements for the year ended September 30, 2024. Taylor Marine Centers is fully reflected in our consolidated statements of operations for the year ended September 30, 2023. The remaining 2023 Acquisitions are partially reflected in our consolidated statements of operations for the year ended September 30, 2023, beginning on the date of acquisition. None of our 2023 Acquisitions impact our results of operations for the year ended September 30, 2022.

Fiscal Year 2022 Acquisitions

•Effective October 1, 2021, we acquired Naples Boat Mart, a full-service marine retailer with one location in Florida.

•Effective November 30, 2021, we acquired T-H Marine, a leading provider of branded marine parts and accessories for OEMs and the aftermarket, with locations in Alabama, Florida, Illinois, Indiana, Oklahoma and Texas.

•Effective December 1, 2021, we acquired Norfolk Marine Company, a full-service marine retailer with one location in Virginia.

•Effective December 31, 2021, we acquired a majority interest in Quality Boats, a full-service marine retailer with three locations in Florida.

•Effective February 1, 2022 we acquired JIF Marine, a leading supplier of stainless steel ladders, dock products and other accessories which is based in Tennessee.

•Effective March 1, 2022, we acquired YakGear, a leading supplier of kayak equipment, paddle sport accessories and boat mounting accessories which is based in Texas.

•Effective April 1, 2022, we acquired Denison Yachting, a leader in yacht and superyacht sales as well as ancillary yacht services, with 20 locations.

•Effective August 9, 2022, we acquired Ocean Bio-Chem, including Star Brite Europe, Inc. (now Star Brite Europe, LLC), a leading supplier and distributor of appearance, cleaning and maintenance products for the marine industry and the automotive, powersports, recreational vehicles, and outdoor power equipment markets with locations in Alabama and Florida.

We refer to the fiscal year 2022 acquisitions described above collectively as the “2022 Acquisitions.” The 2022 Acquisitions are fully reflected in our consolidated financial statements for the years ended September 30, 2024 and 2023. Naples Boat Mart is fully reflected in our consolidated statements of operations for the year ended September 30, 2022. The remaining 2022 Acquisitions are partially reflected in our consolidated statements of operations for the year ended September 30, 2022, beginning on the date of acquisition.

Dispositions

The comparability of our results of operations between the periods discussed below is naturally affected by the dispositions we have completed during such periods. While we do not expect significant dispositions in the future, any such dispositions may impact the comparability of our future results of operations to our historical results.

Fiscal Year 2023 Dispositions

•Effective September 30, 2023, we sold Roscioli Yachting Center, a full-service marine and yachting facility located in Florida, including the related real estate and in-water slips. A portion of the sold property was leased back by the Company.

•Effective September 30, 2023 we sold Lookout Marine, a full-service marine retailer based in Kentucky with two locations.

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We refer to the fiscal year 2023 dispositions described above collectively as the “2023 Dispositions.” The 2023 Dispositions are fully reflected in our consolidated financial statements for the years ended September 30, 2023 and 2022, as the transactions took place on the final day of fiscal year 2023. There were no dispositions during the fiscal years ended September 30, 2024 and 2022.

Other Factors Affecting Comparability of Our Future Results of Operations to Our Historical Results of Operations

Our historical financial results discussed below may not be comparable to our future financial results. As we further implement controls, processes and infrastructure applicable to companies with publicly traded equity securities, including the integration of acquired companies, it is likely that we will incur additional selling, general, and administrative expenses relative to historical periods. Our future results will depend on our ability to efficiently manage our combined operations and execute our business strategy.

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Results of Operations

Year Ended September 30, 2024, Compared to Year Ended September 30, 2023

For the Year Ended September 30,

Description Amount % ofRevenue Amount % ofRevenue $ Change % Change

($ in thousands)

Revenues:

Gross Profit

Loss on extinguishment of debt — — % — — % — 100.0 %

Other expense (income), net 14 — % 953 — % (939) -98.5 %

Net income attributable to non-controlling interests (119) (3,810)

Net (loss) income attributable to OneWater Marine Inc. $ (5,705) $ (38,592)

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Revenue

Overall, revenue decreased by $163.7 million, or 8.5%, to $1,772.6 million for the year ended September 30, 2024 from $1,936.3 million for the year ended September 30, 2023. Revenue generated from Dealership same-store sales decreased 7.4% for the year ended September 30, 2024, as compared to the year ended September 30, 2023, primarily due to a decrease in the number of new and pre-owned boats sold and a decrease in service, parts & other sales. The decrease was primarily attributable to softer demand within the broader recreational marine market, the impact of Hurricane Helene and the impact of the 2023 Dispositions.

New Boat Sales

New boat sales decreased by $105.4 million, or 8.6%, to $1,118.3 million for the year ended September 30, 2024 from $1,223.7 million for the year ended September 30, 2023. The decrease was the result of the reduction in Dealership same-store sales, driven by a drop in unit sales. We believe the decrease in sales was primarily due to softer demand within the broader recreational marine market and the impact of Hurricane Helene.

Pre-owned Boat Sales

Pre-owned boat sales decreased by $22.3 million, or 6.7%, to $312.2 million for the year ended September 30, 2024 from $334.5 million for the year ended September 30, 2023. We sell a wide range of brands and sizes of pre-owned boats under different types of sales arrangements (e.g., trade-ins, brokerage, consigned and wholesale), which causes periodic and seasonal fluctuations in the average sales price. The decrease in pre-owned boat sales was attributable to both a decrease in the number of units sold and average selling price which was driven by the continued normalization of consumer demand following the COVID-19 pandemic.

Finance & Insurance Income

We generate revenue from arranging finance & insurance products, including financing, insurance and extended warranty contracts, to customers through various third-party financial institutions and insurance companies. Finance & insurance income decreased by $4.8 million, or 8.6%, to $51.5 million for the year ended September 30, 2024 from $56.3 million for the year ended September 30, 2023. The decrease was primarily due to the reduction in new and pre-owned boat revenues. We remain very focused on maintaining and improving sales penetration of finance & insurance products throughout our dealer network and implementing best practices at acquired dealer groups and existing dealerships. Finance & insurance income is recorded net of related fees, including fees charged back due to any early cancellation of loan or insurance contracts by a customer. Since finance & insurance income is fee-based, we do not incur any related cost of sale.

Service, Parts & Other Sales

Service, parts & other sales decreased by $31.2 million, or 9.7%, to $290.7 million for the year ended September 30, 2024 from $321.8 million for the year ended September 30, 2023. This decrease in service, parts & other sales is primarily due to a reduction in parts and accessories sold to OEMs as boat manufacturers reduced production. Revenue for the Distribution segment is reported in service, parts & other sales and totaled $156.1 million and $181.1 million for the years ended September 30, 2024 and 2023, respectively. Excluding the impact from the 2023 Dispositions, Dealership segment service, parts & other sales were positive.

Gross Profit

Overall, gross profit decreased by $100.1 million, or 18.7%, to $435.1 million for the year ended September 30, 2024 from $535.1 million for the year ended September 30, 2023. This decrease was mainly due to moderated boat pricing as a result of the industry normalization following the COVID-era environment. Overall gross margins decreased 310 basis points to 24.5% for the year ended September 30, 2024 from 27.6% for the year ended September 30, 2023 due to the factors noted below.

New Boat Gross Profit

New boat gross profit decreased by $71.6 million, or 26.7%, to $196.9 million for the year ended September 30, 2024 from $268.5 million for the year ended September 30, 2023. This decrease was due to the decrease in both new boat sales and new boat gross profit margin. New boat gross profit as a percentage of new boat revenue was 17.6% for the year ended September 30, 2024 as compared to 21.9% in the year ended September 30, 2023. The decrease in new boat gross profit and gross profit margin is due primarily to the continued normalization of new boat pricing and consumer demand following the COVID-19 pandemic. Additionally, we have made strategic efforts to ensure inventory levels are healthy as we transition to our non-peak season.

Pre-owned Boat Gross Profit

Pre-owned boat gross profit decreased by $11.8 million, or 15.6%, to $64.1 million for the year ended September 30, 2024 from $76.0 million for the year ended September 30, 2023. This decrease was primarily driven by a decrease in both pre-owned boat sales and pre-owned boat gross profit margin. Pre-owned boat gross profit as a percentage of pre-owned boat revenue was 20.5% for the year ended

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September 30, 2024 as compared to 22.7% for the year ended September 30, 2023. The pre-owned gross profit margin primarily decreased as a result of the normalization of pre-owned boat pricing following the COVID-19 pandemic and a mix shift in the components of pre-owned sales including a reduction in brokerage sales. We sell a wide range of brands and sizes of pre-owned boats under different types of sales arrangements (e.g., trade-ins, brokerage, consignment and wholesale), which may cause periodic and seasonal fluctuations in pre-owned boat gross profit as a percentage of revenue.

Finance & Insurance Gross Profit

Finance & insurance gross profit decreased by $4.8 million, or 8.6%, to $51.5 million for the year ended September 30, 2024 from $56.3 million for the year ended September 30, 2023. Finance & insurance income is fee-based revenue for which we do not recognize incremental cost of sales.

Service, Parts & Other Gross Profit

Service, parts & other gross profit decreased by $11.8 million, or 8.8%, to $122.6 million for the year ended September 30, 2024 from $134.4 million for the year ended September 30, 2023. The decrease in gross profit was primarily the result of the decrease in sales in our Distribution segment and our 2023 Dispositions, specifically Roscioli Yachting Center. Service, parts & other gross profit as a percentage of service, parts & other revenue was 42.2% and 41.8% for the years ended September 30, 2024 and 2023, respectively. The increase in gross profit margin was due to a slight shift in the mix of revenue towards service labor which has a higher gross profit percentage.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $12.8 million, or 3.7%, to $332.7 million for the year ended September 30, 2024 from $345.5 million for the year ended September 30, 2023. This decrease was primarily due to our variable cost structure, which resulted in a decrease in commissions as a result of declining gross margins, and cost savings from the 2024 restructuring activities. Selling, general and administrative expenses as a percentage of revenue increased to 18.8% from 17.8% for the years ended September 30, 2024 and 2023, respectively. The increase in selling, general and administrative expenses as a percentage of revenue was primarily due to the reduction of revenues, which resulted in a lower cost leverage for the year ended September 30, 2024.

Depreciation and Amortization

Depreciation and amortization expense decreased $4.5 million, or 18.8%, to $19.4 million for the year ended September 30, 2024 compared to $23.9 million for the year ended September 30, 2023. The decrease in depreciation and amortization expense is primarily due to a reduction in intangible assets due to the prior year impairment charge as well as a reduction in property and equipment related to the 2023 Dispositions. These decreases were partially offset by the increase in property and equipment during the year ended September 30, 2024 to support operations.

Transaction Costs

The decrease in transaction costs of $0.3 million, or 16.8%, to $1.5 million for the year ended September 30, 2024 compared to $1.8 million for the year ended September 30, 2023 was primarily attributable to the reduction in acquisition activity during the year ended September 30, 2024 compared to the year ended September 30, 2023.

Change in Fair Value of Contingent Consideration

During the year ended September 30, 2024, we recognized a loss of $4.2 million related to updated forecasts and accretion of contingent consideration liabilities related to previous acquisitions.

Restructuring and Impairment

During the year ended September 30, 2024, we recognized restructuring and impairment charges of $12.4 million as a result of proactive changes to better align our cost structure with the normalization of sales and margins which resulted in a reduction of headcount and retail locations, cancellation of certain dealer agreements, and the cancellation of certain in-process information and technology ("IT") related projects.

During the year ended September 30, 2023, we recognized a loss on impairment of $147.4 as a result of the quantitative assessment of the fair values compared to the carrying values of goodwill and identifiable intangible assets for the Dealerships and Distribution segments. The impairment was largely driven by a decline in the Distribution segment's results as well as a decrease in the Company's market capitalization.

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Income from Operations

Income from operations increased $46.8 million, or 258.8%, to $64.8 million for the year ended September 30, 2024 compared to $18.1 million for the year ended September 30, 2023. The increase was primarily attributable to the $135.0 million decrease in restructuring and impairment charges and a $12.8 million decrease in selling, general and administrative expenses, partially offset by a $100.1 million decrease in gross profit during the same periods.

Interest Expense – Floor Plan

Interest expense – floor plan increased $9.0 million, or 35.9%, to $34.1 million for the year ended September 30, 2024 compared to $25.1 million for the year ended September 30, 2023. The increase in floor plan interest expense is primarily attributable to an increase in interest rates and the average inventory for the year ended September 30, 2024 compared to the year ended September 30, 2023.

Interest Expense – Other

Interest expense – other increased $2.5 million, or 7.2%, to $37.1 million for the year ended September 30, 2024 compared to $34.6 million for the year ended September 30, 2023. The increase was primarily attributable to an increase in interest rates.

Other Expense (Income), Net

Other expense (income), net decreased by $0.9 million to less than $0.1 million of expense for the year ended September 30, 2024, compared to $1.0 million of expense for the year ended September 30, 2023. The decrease is primarily attributable to the change in expenses associated with natural disasters and their respective insurance proceeds.

Income Tax (Benefit) Expense

Income tax benefit decreased by $3.3 million, or 95.4%, to an income tax benefit of $0.2 million for the year ended September 30, 2024, compared to an income tax benefit $3.4 million for the year ended September 30, 2023. The decrease was primarily attributable to the 85.1% decrease in loss before income tax benefit. The change in loss before income tax benefit was primarily related to the decrease in restructuring and impairment charges.

Net (loss) Income

Net loss decreased by $32.9 million to a net loss of $6.2 million for the year ended September 30, 2024, compared to net loss of $39.1 million for the year ended September 30, 2023. The decrease was primarily attributable to the decrease in restructuring and impairment charges and selling, general and administrative expenses, partially offset by the decrease in gross profit and increase in interest expense – floor plan during the same periods.

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Results of Operations

Year Ended September 30, 2023, Compared to Year Ended September 30, 2022

For the Year Ended September 30,

Description Amount % ofRevenue Amount % ofRevenue $ Change % Change

($ in thousands)

Revenues:

Gross Profit

Net income attributable to non-controlling interests (3,810) (2,998)

Net income attributable to OneWater Marine Inc. $ (38,592) $ 130,944

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Revenue

Overall, revenue increased by $191.5 million, or 11.0%, to $1,936.3 million for the year ended September 30, 2023 from $1,744.8 million for the year ended September 30, 2022. Revenue generated from Dealership same-store sales increased 3.0% for the year ended September 30, 2023 as compared to the year ended September 30, 2022, primarily due to an increase in the average selling price of new and pre-owned boats, the number of pre-owned boats sold, the model mix of boats sold, and an increase in service, parts & other sales. Overall revenue increased by $48.1 million as a result of our increase in Dealership same-store sales and $143.4 million from revenue increases in our Distribution segment as well as revenue not eligible for inclusion in the Dealership same-store sales base. New and acquired dealerships become eligible for inclusion in the comparable dealership base at the end of the dealership’s thirteenth month of operations under our ownership, and revenues are only included for identical months in the same-store base periods. For the years ended September 30, 2023 and 2022, we completed 3 and 8 acquisitions, respectively.

New Boat Sales

New boat sales increased by $84.4 million, or 7.4%, to $1,223.7 million for the year ended September 30, 2023 from $1,139.3 million for the year ended September 30, 2022. The increase was the result of our Dealership same-store sales growth during the twelve-month period, our acquisitions and an increase in our average selling price. We believe the increase in sales was primarily due to continued execution of operational improvements on previously acquired dealers, the mix on boat brands and models sold, and product improvements in the functionality of technology which drove average unit prices higher.

Pre-owned Boat Sales

Pre-owned boat sales increased by $39.6 million, or 13.4%, to $334.5 million for the year ended September 30, 2023 from $294.8 million for the year ended September 30, 2022. We sell a wide range of brands and sizes of pre-owned boats under different types of sales arrangements (e.g., trade-ins, brokerage, consigned and wholesale), which causes periodic and seasonal fluctuations in the average sales price. The increase in pre-owned boat sales was primarily attributable to an increase in the number of units sold and average selling price which was driven by Dealership same-store sales growth and acquisition growth.

Finance & Insurance Income

We generate revenue from arranging finance & insurance products, including financing, insurance and extended warranty contracts, to customers through various third-party financial institutions and insurance companies. Finance & insurance income increased by $0.3 million, or 0.6%, to $56.3 million for the year ended September 30, 2023 from $56.0 million for the year ended September 30, 2022. The increase was primarily due to the additional new and pre-owned boat revenues, partially offset by the declining spreads charged to customers with the current high interest-rate environment. We remain very focused on improving sales of finance & insurance products throughout our dealer network and implementing best practices at acquired dealer groups and existing dealerships. Finance & insurance income is recorded net of related fees, including fees charged back due to any early cancellation of loan or insurance contracts by a customer. Since finance & insurance income is fee-based, we do not incur any related cost of sale.

Service, Parts & Other Sales

Service, parts & other sales increased by $67.1 million, or 26.4%, to $321.8 million for the year ended September 30, 2023 from $254.7 million for the year ended September 30, 2022. This increase in service, parts & other sales is primarily due to the contributions from our recently acquired parts and accessories businesses, including Ocean Bio-Chem, as well as increases across the board in labor, parts, fuel and storage sales, driven by ancillary sales generated from our increase in new and pre-owned boat sales at our dealerships. Revenue for the Distribution segment are reported in service, parts & other sales and totaled $181.1 million and $135.9 million for the years ended September 30, 2023 and 2022, respectively.

Gross Profit

Overall, gross profit decreased by $18.5 million, or 3.3%, to $535.1 million for the year ended September 30, 2023 from $553.7 million for the year ended September 30, 2022. This decrease was mainly due to industry margin normalization and the return of seasonality, partially offset by the impact of the 2023 Acquisitions, the 2022 Acquisitions and the Company’s focus on dynamic pricing. Overall gross margins decreased 410 basis points to 27.6% for the year ended September 30, 2023 from 31.7% for the year ended September 30, 2022 due to the factors noted below.

New Boat Gross Profit

New boat gross profit decreased by $36.8 million, or 12.1%, to $268.5 million for the year ended September 30, 2023 from $305.3 million for the year ended September 30, 2022. This decrease was due to the decrease in new boat gross profit margin. New boat gross profit as a percentage of new boat revenue was 21.9% for the year ended September 30, 2023 as compared to 26.8% in the year ended September 30, 2022. The decrease in new boat gross profit and gross profit margin is due primarily to the normalization of new boat pricing following the COVID-19 pandemic and the return of seasonality.

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Pre-owned Boat Gross Profit

Pre-owned boat gross profit decreased by $5.7 million, or 7.0%, to $76.0 million for the year ended September 30, 2023 from $81.7 million for the year ended September 30, 2022. This decrease was primarily driven by a decrease in pre-owned boat gross profit margin. Pre-owned boat gross profit as a percentage of pre-owned boat revenue was 22.7% for the year ended September 30, 2023 as compared to 27.7% for the year ended September 30, 2022. The pre-owned gross profit margin primarily decreased as a result of the normalization of pre-owned boat pricing following the COVID-19 pandemic, the return of seasonality and a mix shift in the components of pre-owned sales including a reduction in brokerage sales. We sell a wide range of brands and sizes of pre-owned boats under different types of sales arrangements (e.g., trade-ins, brokerage, consignment and wholesale), which may cause periodic and seasonal fluctuations in pre-owned boat gross profit as a percentage of revenue.

Finance & Insurance Gross Profit

Finance & insurance gross profit increased by $0.3 million, or 0.6%, to $56.3 million for the year ended September 30, 2023 from $56.0 million for the year ended September 30, 2022. Finance & insurance income is fee-based revenue for which we do not recognize incremental cost of sales.

Service, Parts & Other Gross Profit

Service, parts & other gross profit increased by $23.7 million, or 21.4%, to $134.4 million for the year ended September 30, 2023 from $110.7 million for the year ended September 30, 2022. The increase in gross profit was primarily the result of our acquisitions of parts and accessories businesses, including Ocean Bio-Chem, but was also further enhanced by our Dealership sales growth. Service, parts & other gross profit as a percentage of service, parts & other revenue was 41.8% and 43.5% for the years ended September 30, 2023 and 2022, respectively. The decrease in gross profit margin was due to a shift in the mix of revenue towards parts and accessories which has a lower gross profit percentage than service and other sales, as well as rising labor costs. Although the service, parts & other mix shifted and led to a year over year decrease in margin percentage, our parts and accessories gross profit percentage was still accretive to the overall company gross profit percentage of 27.6% for the year ended September 30, 2023.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $43.4 million, or 14.4%, to $345.5 million for the year ended September 30, 2023 from $302.1 million for the year ended September 30, 2022. This increase was primarily due to expenses incurred to support the overall increase in revenues. Selling, general and administrative expenses as a percentage of revenue increased to 17.8% from 17.3% for the years ended September 30, 2023 and 2022, respectively. The increase in selling, general and administrative expenses as a percentage of revenue was primarily due to higher administrative expenses for the acquisitions in our Distribution segment, higher marketing expenses and increased costs as a result of the current personnel environment for the year ended September 30, 2023.

Depreciation and Amortization

Depreciation and amortization expense increased $8.3 million, or 53.1%, to $23.9 million for the year ended September 30, 2023 compared to $15.6 million for the year ended September 30, 2022. The increase in depreciation and amortization expense is primarily due to an increase in amortization of identifiable intangible assets for the 2022 Acquisitions, as well as an increase in our property and equipment.

Transaction Costs

The decrease in transaction costs of $5.9 million, or 76.2%, to $1.8 million for the year ended September 30, 2023 compared to $7.7 million for the year ended September 30, 2022 was primarily attributable to the fewer number of acquisitions completed during the year ended September 30, 2023 compared to those completed during the year ended September 30, 2022.

Change in Fair Value of Contingent Consideration

During the year ended September 30, 2023, we recognized income of $1.6 million related to updated forecasts and accretion of contingent consideration liabilities related to fiscal 2021, 2022 and 2023 acquisitions.

Restructuring and impairment

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Income from Operations

Income from operations decreased $199.8 million, or 91.7%, to $18.1 million for the year ended September 30, 2023 compared to $217.8 million for the year ended September 30, 2022. The decrease was primarily attributable to the 147.4 million loss on impairment, a $43.4 million increase in selling, general and administrative expenses and a $18.5 million decrease in gross profit, partially offset by a $5.9 million decrease in transaction costs and a $12.0 million decrease in the change in fair value of contingent consideration during the same periods.

Interest Expense – Floor Plan

Interest expense – floor plan increased $20.4 million, or 439.7%, to $25.1 million for the year ended September 30, 2023 compared to $4.6 million for the year ended September 30, 2022. The increase in floor plan interest expense is primarily attributable to an increase in interest rates and the average inventory for the year ended September 30, 2023 compared to the year ended September 30, 2022.

Interest Expense – Other

Interest expense – other increased $21.4 million, or 161.8%, to $34.6 million for the year ended September 30, 2023 compared to $13.2 million for the year ended September 30, 2022. The increase was primarily attributable to the increase in the average balance of our long term debt during the year ended September 30, 2023 compared to the average balance during the year ended September 30, 2022 as well as an increase in interest rates.

Loss on Extinguishment of Debt

We incurred no debt extinguishment expenses for the year ended September 30, 2023, as compared to $0.4 million in debt extinguishment expenses for the year ended September 30, 2022, related to the August 9, 2022 amendment of our term debt.

Other Expense (Income), Net

Other expense (income), net decreased by $2.8 million to $1.0 million of expense for the year ended September 30, 2023, compared to $3.8 million of expense for the year ended September 30, 2022. The decrease is primarily attributable to the decrease in the unrealized loss on an equity investment and expenses associated with Hurricane Ian recorded, partially offset by the loss on disposal of businesses during the year ended September 30, 2023.

Income Tax (Benefit) Expense

Income tax (benefit) expense changed by $46.6 million, or 107.9%, to an income tax benefit of $3.4 million for the year ended September 30, 2023, compared to income tax expense $43.2 million for the year ended September 30, 2022. The change was primarily attributable to the 121.7% decrease in income before tax expense which was primarily related to the loss on impairment.

Net (loss) Income

Net (loss) income changed by $191.7 million to a net loss of $(39.1) million for the year ended September 30, 2023, compared to net income of $152.6 million for the year ended September 30, 2022. The change was primarily attributable to the $147.4 million loss on impairment, the increases in selling, general and administrative expenses, interest expense – floor plan and interest expense – other, all partially offset by the decrease in the change in fair value of contingent consideration during the same periods.

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Comparison of Non-GAAP Financial Measures

Adjusted EBITDA

We view Adjusted EBITDA as an important indicator of performance. We define Adjusted EBITDA as net income (loss) before interest expense – other, income tax (benefit) expense, depreciation and amortization and other (income) expense, further adjusted to eliminate the effects of items such as the change in fair value of contingent consideration, gain (loss) on extinguishment of debt, restructuring and impairment, stock-based compensation and transaction costs.

Our Board, management team and lenders use Adjusted EBITDA to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization) and other items (such as the change in fair value of contingent consideration, gain (loss) on extinguishment of debt, income tax (benefit) expense, restructuring and impairment, stock-based compensation and transaction costs) that impact the comparability of financial results from period to period. We present Adjusted EBITDA because we believe it provides useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP. Adjusted EBITDA is not a financial measure presented in accordance with GAAP. We believe that the presentation of this non-GAAP financial measure will provide useful information to investors and analysts in assessing our financial performance and results of operations across reporting periods by excluding items we do not believe are indicative of our core operating performance. Net income is the GAAP measure most directly comparable to Adjusted EBITDA. Our non-GAAP financial measure should not be considered as an alternative to the most directly comparable GAAP financial measure. You are encouraged to evaluate each of these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in such presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of Adjusted EBITDA in the future, and any such modification may be material. Adjusted EBITDA has important limitations as an analytical tool and you should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined differently by other companies in our industry, our definition of this non-GAAP financial measure may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

The following tables present a reconciliation of Adjusted EBITDA to our net (loss) income, which is the most directly comparable GAAP measure for the periods presented.

Year Ended September 30, 2024, Compared to Year Ended September 30, 2023.

Years Ended September 30,

($ in thousands)

Change in fair value of contingent consideration 4,248 (1,604) 5,852

Adjusted EBITDA was $82.5 million for the year ended September 30, 2024 compared to $176.4 million for the year ended September 30, 2023. The decrease in Adjusted EBITDA resulted from the decrease in gross profit and the increase in interest expense - floor plan, partially offset by the decrease in selling, general and administrative expenses for the year ended September 30, 2024 as compared to the year ended September 30, 2023.

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Year Ended September 30, 2023, Compared to Year Ended September 30, 2022.

Years Ended September 30,

($ in thousands)

Change in fair value of contingent consideration (1,604) 10,380 (11,984)

Loss on extinguishment of debt — 356 (356)

Adjusted EBITDA was $176.4 million for the year ended September 30, 2023 compared to $257.6 million for the year ended September 30, 2022. The decrease in Adjusted EBITDA resulted from the decrease in gross profit, the increase in selling, general and administrative expenses and the increase in interest expense - floor plan for the year ended September 30, 2023 as compared to the year ended September 30, 2022.

Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share

We view Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share as important indicators of performance. We define Adjusted Net Income Attributable to OneWater Marine Inc. as net income (loss) attributable to OneWater Marine Inc. before transaction costs, intangible amortization, change in fair value of contingent consideration, restructuring and impairment and other expense (income), all of which are then adjusted for an allocation to the non-controlling interest of OneWater LLC. Each of these adjustments are subsequently adjusted for income tax at an estimated effective tax rate. Management also reports Adjusted Diluted Earnings Per Share which presents all of the adjustments to net income (loss) attributable to OneWater Marine Inc. noted above on a per share basis.

Our Board, management team and lenders use Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of unusual or one time charges and other items (such as the change in fair value of contingent consideration, intangible amortization, restructuring and impairment and transaction costs) that impact the comparability of financial results from period to period. We present Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP. Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures will provide useful information to investors and analysts in assessing our financial performance and results of operations across reporting periods by excluding items we do not believe are indicative of our core operating performance. Net income (loss) attributable to OneWater Marine Inc. is the GAAP measure most directly comparable to Adjusted Net Income Attributable to OneWater Marine Inc. and Net earnings (loss) per share of Class A common stock - diluted is the GAAP measure most directly comparable to Adjusted Diluted Earnings Per Share. Our non-GAAP financial measures should not be considered as an alternative to the most directly comparable GAAP financial measure. You are encouraged to evaluate each of these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in such presentation. Our presentation of Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share in the future, and any such modification may be material. Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share have important limitations as analytical tools and you should not consider Adjusted Net Income Attributable to OneWater Marine Inc. or Adjusted Diluted Earnings Per Share in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share may be defined differently by other companies in our industry, our definition of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

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The following tables present a reconciliation of Adjusted Net Income Attributable to OneWater Marine Inc. to our net income (loss) attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share to our net earnings (loss) per share of Class A common stock - diluted, which are the most directly comparable GAAP measures for the periods presented.

Year Ended September 30, 2024, Compared to Year Ended September 30, 2023.

Years Ended September 30,

($ in thousands, except per share data)

Net loss attributable to OneWater Marine Inc. $ (5,705) $ (38,592) $ 32,887

Change in fair value of contingent consideration 4,248 (1,604) 5,852

Adjusted net income attributable to OneWater Marine Inc. 14,581 74,815 (60,234)

Net loss per share of Class A common stock - diluted $ (0.39) $ (2.69) $ 2.30

Change in fair value of contingent consideration 0.29 (0.11) 0.40

Other expense (income), net — 0.07 (0.07)

Adjustments to income tax expense (2) (0.42) (2.36) 1.94

Adjustment for dilutive shares (3) (0.01) (0.14) 0.13

Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share were $14.6 million and $0.98, respectively, for the year ended September 30, 2024 compared to $74.8 million and $5.10, respectively, for the year ended September 30, 2023. The decrease in Adjusted Net Income Attributable to OneWater Marine Inc. resulted from the decrease in gross profit and the increases in interest expense - floor plan, partially offset by the decrease in selling, general and administrative expenses for the year ended September 30, 2024, each as compared to the year ended September 30, 2023. The decrease in Adjusted Diluted Earnings Per Share resulted from the decrease in Adjusted Net Income Attributable to OneWater Marine Inc.

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Year Ended September 30, 2023, Compared to Year Ended September 30, 2022.

Years Ended September 30,

($ in thousands, except per share data)

Change in fair value of contingent consideration (1,604) 10,380 (11,984)

Change in fair value of contingent consideration (0.11) 0.72 (0.83)

Restructuring and impairment 10.29 — 10.29

Adjustments to income tax expense (2) (2.36) (0.43) (1.93)

Adjustment for dilutive shares (3) (0.14) — (0.14)

Adjusted Net Income Attributable to OneWater Marine Inc. and Adjusted Diluted Earnings Per Share were $74.8 million and $5.10, respectively, for the year ended September 30, 2023 compared to $151.5 million and $10.53, respectively, for the year ended September 30, 2022. The decrease in Adjusted Net Income Attributable to OneWater Marine Inc. resulted from the decrease in gross profit, the increase in selling, general and administrative expenses and the increases in interest expense - floor plan and interest expense - other, all partially offset by the decrease in income tax expense for the year ended September 30, 2023, each as compared to the year ended September 30, 2022. The decrease in Adjusted Diluted Earnings Per Share resulted from the decrease in Adjusted Net Income Attributable to OneWater Marine Inc.

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Seasonality

Our business, along with the entire boating industry, is highly seasonal, and such seasonality varies by geographic market. With the exception of Florida, we generally realize significantly lower sales and higher levels of inventories, and related floor plan borrowings, in the quarterly periods ending December 31 and March 31. Revenue generated from our dealerships in Florida serves to offset generally lower winter revenue in our other states and enables us to maintain a more consistent revenue stream. The onset of the public boat and recreation shows in January stimulates boat sales and typically allows us to reduce our inventory levels and related floor plan borrowings throughout the remainder of the fiscal year. The impact of seasonality on our results of operations could be materially impacted based on the location of our acquisitions. For example, our operations could be substantially more seasonal if we acquire dealer groups that operate in colder regions of the United States. Our business is also subject to weather patterns, which may adversely affect our results of operations. For example, prolonged winter conditions, reduced rainfall levels or excessive rain, may limit access to boating locations or render boating dangerous or inconvenient, thereby curtailing customer demand for our products and services. In addition, unseasonably cool weather and prolonged winter conditions may lead to a shorter selling season in certain locations. Hurricanes, tornadoes, and other storms have and could result in disruptions of our operations or damage to our boat inventories and facilities, as has been the case when Florida, Texas, and other markets were affected by hurricanes. We believe our geographic diversity is likely to reduce the overall impact to us of adverse weather conditions in any one market area. For more information, see “Risk Factors—Risks Related to Industry and Competition—Our business, as well as the entire retail marine industry, is highly seasonal, with seasonality varying in different geographic markets” and “Business—Seasonality.”

Liquidity and Capital Resources

Overview

OneWater Inc. is a holding company with no operations and is the sole managing member of OneWater LLC. OneWater Inc.’s principal asset consists of common units of OneWater LLC. Our earnings and cash flows and ability to meet our obligations under the A&R Credit Facility, and any other debt obligations will depend on the cash flows resulting from the operations of our operating subsidiaries, and the payment of distributions by such subsidiaries. Our A&R Credit Facility and Inventory Financing Facility (described below) contain certain restrictions on distributions or transfers from our operating subsidiaries to their members or unitholders, as applicable, as described in the summaries below under “—Debt Agreements—A&R Credit Facility” and “—Inventory Financing Facility.” Accordingly, the operating results of our subsidiaries may not be sufficient for them to make distributions to us. As a result, our ability to make payments under the A&R Credit Facility and any other debt obligations or to declare dividends could be limited.

Our cash needs are primarily for growth through acquisitions and working capital to support our operations, including new and pre-owned boat and related parts inventories and off-season liquidity. We routinely monitor our cash flow to determine the amount of cash available to complete acquisitions. We monitor our inventories, inventory aging and current market trends to determine our current and future inventory and related floorplan financing needs. Based on current facts and circumstances, we believe we will have adequate cash flow from operations, borrowings under our Credit Facilities and proceeds from any future public or private issuances of debt or equity to fund our current operations, to make share repurchases and to fund essential capital expenditures and acquisitions for the next twelve months and beyond.

Cash needs for acquisitions have historically been financed with our Credit Facilities and cash generated from operations. Our ability to utilize the A&R Credit Facility to fund acquisitions depends upon Adjusted EBITDA and compliance with covenants of the A&R Credit Facility. Cash needs for inventory have historically been financed with our Inventory Financing Facility. Our ability to fund inventory purchases and operations depends on the collateral levels and our compliance with the covenants of the Inventory Financing Facility. For the reporting period ended September 30, 2024, we were not in compliance with all covenants under the A&R Credit Facility and the Inventory Financing Facility; however, the covenant noncompliance was waived pursuant to the amendments as described below under “Debt Agreements—A&R Credit Facility” and “Debt Agreements—Inventory Financing Facility.”

Cash Flows

Analysis of Cash Flow Changes Between the Year Ended September 30, 2024 and 2023

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

Year Ended September 30,

Effect of exchange rate changes on cash and restricted cash (18) 9 (27)

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Operating Activities. Net cash provided by operating activities was $34.8 million for the year ended September 30, 2024 compared to net cash used in operating activities of $129.8 million for the year ended September 30, 2023. The $164.6 million increase in cash provided by operating activities was primarily attributable to a $256.9 million decrease in the change in inventory, a $32.9 million decrease in net loss in addition to a $26.9 million decrease in the change in customer deposits, partially offset by a $146.9 million decrease in restructuring and impairment for the year ended September 30, 2024 as compared to the year ended September 30, 2023.

Investing Activities. Net cash provided by investing activities was $13.3 million for the year ended September 30, 2024 compared to net cash used in investing activities of $51.6 million for the year ended September 30, 2023. The $64.9 million increase in cash provided by investing activities was primarily attributable to a $44.3 million increase in proceeds from disposal of a business and a $23.2 million decrease in cash used in acquisitions for the year ended September 30, 2024 as compared to the year ended September 30, 2023.

Financing Activities. Net cash used in financing activities was $114.1 million for the year ended September 30, 2024 compared to net cash provided by financing activities of $213.7 million for the year ended September 30, 2023. The $327.8 million increase in cash used in financing activities was primarily attributable to a $265.3 million decrease in net borrowing from our Inventory Financing Facility and a $60.0 million increase in payments on long-term debt, partially offset by a $13.4 million increase in proceeds of long term debt for the year ended September 30, 2024 as compared to the year ended September 30, 2023.

Analysis of Cash Flow Changes Between the Year Ended September 30, 2023 and 2022

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

Year Ended September 30,

Effect of exchange rate changes on cash and restricted cash 9 (8) $ 17

Operating Activities. Net cash used in operating activities was $129.8 million for the year ended September 30, 2023 compared to net cash provided by operating activities of $7.4 million for the year ended September 30, 2022. The $137.2 million increase in cash used in operating activities was primarily attributable to a $191.7 million decrease in net income in addition to a $65.1 million increase in the change in inventory, partially offset by a $147.4 million increase in loss on impairment for the year ended September 30, 2023 as compared to the year ended September 30, 2022.

Investing Activities. Net cash used in investing activities was $51.6 million for the year ended September 30, 2023 compared to $476.8 million for the year ended September 30, 2022. The $425.2 million decrease in cash used in investing activities was primarily attributable to a $430.7 million decrease in cash used in acquisitions for the year ended September 30, 2023 as compared to the year ended September 30, 2022.

Financing Activities. Net cash provided by financing activities was $213.7 million for the year ended September 30, 2023 compared to net cash provided by financing activities of $456.4 million for the year ended September 30, 2022. The $242.7 million decrease in cash provided by financing activities was primarily attributable to a $382.5 million decrease in proceeds of long term debt, partially offset by a $66.8 million increase in net borrowing from our Inventory Financing Facility and a $69.7 million decrease in payments on long-term debt for the year ended September 30, 2023 as compared to the year ended September 30, 2022.

Share Repurchase Program

On March 30, 2022, the Board authorized a share repurchase program of up to $50 million of outstanding shares of Class A common stock. Repurchases under the share repurchase program may be made at any time or from time to time, without prior notice, in the open market or in privately negotiated transactions at prevailing market prices, or such other means as will comply with applicable state and federal securities laws and regulations, including the provisions of the Securities Exchange Act of 1934, including Rule 10b5-1 and, to the extent practicable or advisable, Rule 10b-18 thereunder, and consistent with the Company’s contractual limitations and other requirements. The Company made no repurchases during the fiscal year ended September 30, 2024. The Company has $48.1 million remaining under the share repurchase program.

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Debt Agreements

A&R Credit Facility

On August 9, 2022, we entered into the Amended and Restated Credit Agreement (the “A&R Credit Facility”), with certain of our subsidiaries, Truist Bank and the other lenders party thereto. The A&R Credit Facility provides for, among other things, (i) a $65.0 million revolving credit facility (including up to $5.0 million in swingline loans and up to $5.0 million in letters of credit from time to time) and (ii) a $445.0 million term loan facility. Subject to certain conditions, the available amount under the Term Facility and the Revolving Facility may be increased by $125.0 million plus additional amounts subject to additional conditions (including satisfaction of a consolidated leverage ratio requirement) in the aggregate (with up to $50.0 million allocable to the Revolving Facility). As of September 30, 2024, the Revolving Facility was scheduled to mature on August 9, 2027. As of September 30, 2024, the Term Facility was repayable in installments beginning on December 31, 2022, with the remainder due on the earlier of (i) August 9, 2027 or (ii) the date on which the principal amount of all outstanding term loans have been declared or automatically have become due and payable pursuant to the terms of the A&R Credit Facility.

Borrowings under the A&R Credit Facility bear interest, at our option, at either (a) a base rate (the “Base Rate”) equal to the highest of (i) the prime rate (as announced by Truist Bank from time to time), (ii) the Federal Funds Rate, as in effect from time to time, plus 0.50%, (iii) Term SOFR (as defined in the A&R Credit Facility) for a one-month Interest Period (calculated on a daily basis after taking into account a floor equal to 0.00%) plus 1.00%, and (iv) 1.00%, in each case, plus an applicable margin ranging from 0.75% to 1.75%, or (b) Term SOFR, plus an applicable margin ranging from 0.75% to 1.75%. Interest on swingline loans shall bear interest at the Base Rate plus an applicable margin ranging from 1.75% to 2.75%. All applicable interest margins are based on certain consolidated leverage ratio measures.

The A&R Credit Facility is subject to certain financial covenants including the maintenance of a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio. The A&R Credit Facility also contains non-financial covenants and restrictive provisions that, among other things, limit the ability of the Loan Parties (as defined in the A&R Credit Facility) to incur additional debt, transfer or dispose of all of their respective assets, make certain investments, loans or restricted payments and engage in certain transactions with affiliates. The A&R Credit Facility also includes events of default, borrowing conditions, representations and warranties and provisions regarding indemnification and expense reimbursement. The Company was not in compliance with all covenants for the reporting period ended September 30, 2024; however, the covenant noncompliance was waived pursuant to Amendment No. 6. to the Amended and Restated Credit Agreement and Waiver and Amendment No. 1 to Pledge and Security Agreement ("Amendment No. 6") entered into on November 13, 2024.

On November 13, 2024, the Company and certain of its subsidiaries entered into Amendment No. 6 with Truist Bank, as administrative agent, and other lenders party thereto. Amendment No. 6 amended the Amended and Restated Credit Agreement to, among other things, (i) modify certain definitions, terms and conditions, (ii) adjust the minimum fixed charge coverage ratio, (iii) adjust the maximum leverage ratio measures, (iv) adjust the minimum liquidity measure, (v) modify the maturity date to be July 31, 2026, and in connection therewith, the repayment schedule, and (vi) waive certain covenant compliance requirements, including for the period ended September 30, 2024.

Inventory Financing Facility

On November 14, 2023, the Company entered into the Eighth Amended and Restated Inventory Financing Agreement (as amended, restated, supplemented or otherwise modified, the “Inventory Financing Facility”), which amended and restated the Seventh Amended and Restated Inventory Financing Agreement (the "Seventh Inventory Financing Facility") on substantially similar terms to, among other things, increase the maximum borrowing amount available to $650.0 million. Loans under the Inventory Financing Facility may be extended from time to time to enable the Company to purchase inventory from certain manufacturers. The Inventory Financing Facility expires on March 1, 2026.

Under the Inventory Financing Facility, interest on new boats and for rental units is calculated using the Adjusted 30-Day Average SOFR plus an applicable margin of 2.75% to 5.00% depending on the age of the inventory. Interest on pre-owned boats is calculated at the new boat rate plus 0.25%. Loans are extended from time to time to enable us to purchase inventory from certain manufacturers and to lease certain boats and related parts to customers. The applicable financial terms, curtailment schedule and maturity for each loan are set forth in separate program terms letters that are entered into from time to time. The collateral for the Inventory Financing Facility consists primarily of our inventory that was financed through the Inventory Financing Facility and related assets, including accounts receivable, bank accounts, and proceeds of the foregoing, and excludes the collateral that secures the A&R Credit Facility.

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We are required to comply with certain financial and non-financial covenants under the Inventory Financing Facility, including certain provisions related to the Funded Debt to EBITDA Ratio, and the Fixed Charge Coverage Ratio (as defined in the Inventory Financing Facility). We are also subject to additional restrictive covenants, including restrictions on our ability to (i) use, sell, rent or otherwise dispose of any collateral securing the Inventory Financing Facility except for the sale of inventory in the ordinary course of business, (ii) incur certain liens, (iii) engage in any material transaction not in the ordinary course of business, (iv) change our business in any material manner or our organizational structure, other than as otherwise provided for in the Inventory Financing Facility, (v) engage in certain mergers or consolidations, (vi) acquire certain assets or ownership interests of any other person or entities, except for certain permitted acquisitions, (vii) guarantee or indemnify or otherwise become in any way liable with respect to certain obligations of any other person or entity, except as provided by the Inventory Financing Facility, (viii) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of the equity of our acquired marine retailers (ix) make any change in any of our marine retailers’ capital structure or in any of their business objectives or operations which might in any way adversely affect the ability of such marine retailer to repay its obligations under the Inventory Financing Facility, (x) incur, create, assume, guarantee or otherwise become or remain liable with respect to certain indebtedness, and (xi) make certain payments of subordinated debt. OneWater LLC and certain of its subsidiaries are restricted from, among other things, making cash dividends or distributions without the prior written consent of Wells Fargo. Under the Inventory Financing Facility, among other exceptions, OneWater LLC may make distributions to its members for certain permitted tax payments subject to certain financial ratios, may make scheduled payments on certain subordinated debt, may make distributions to the Company for repurchases of the Company's common stock subject to certain financial ratios, and is permitted to make pro rata distributions to the OneWater Unit Holders, including OneWater Inc., in an amount sufficient to allow OneWater Inc. to pay its taxes and to make payments under the Tax Receivable Agreement. OneWater LLC’s subsidiaries are generally restricted from making loans or advances to OneWater LLC. Our Chief Executive Officer, Philip Austin Singleton, Jr., and our President and Chief Operating Officer, Anthony Aisquith, provide certain personal guarantees of the Inventory Financing Facility.

As of September 30, 2024 and September 30, 2023, our indebtedness associated with financing our inventory under the Inventory Financing Facility totaled $443.4 million and $489.0 million, respectively. Certain of our manufacturers enter into independent agreements with the lenders to the Inventory Financing Facility, which results in a lower effective interest rate charged to us for borrowings related to the products by such manufacturer. As of September 30, 2024 and September 30, 2023, the effective interest rate on the outstanding short-term borrowings under the Inventory Financing Facility was 6.6% and 5.7%, respectively. As of September 30, 2024 and September 30, 2023, our additional available borrowings under our Inventory Financing Facility were $206.6 million and $61.0 million, respectively, based upon the outstanding borrowings and the maximum facility amount. The aging of our inventory limits our borrowing capacity as defined curtailments reduce the allowable advance rate as our inventory ages.

For the reporting period ended September 30, 2024, we were not in compliance with all covenants under the Inventory Financing Facility; however, the covenant noncompliance was waived pursuant to the Consent, Waiver and Second Amendment to Eighth Amended and Restated Inventory Financing Agreement (the "November 2024 Inventory Financing Amendment") entered into on November 13, 2024. The November 2024 Inventory Financing Amendment amends the Inventory Financing Facility to, among other things, (i) modify certain definitions, terms and conditions, (ii) adjust the minimum fixed charge coverage ratio, (iii) adjust the maximum funded debt to EBITDA ratio, (iv) establish a new minimum liquidity measure, (v) allow for certain swap transactions to mitigate risk in the ordinary course of business, (iv) reduce the maximum borrowing capacity to $595.0 million, and (vii) waive certain covenant compliance requirements, including for the period ended September 30, 2024.

Notes Payable

Acquisition Notes Payable. In connection with certain of our acquisitions of dealer groups, we have from time to time entered into notes payable agreements with the acquired entities to finance these acquisitions. As of September 30, 2024, our indebtedness associated with our acquisition notes payable totaled $1.1 million with an interest rate of 4.0% per annum and a maturity date of December 1, 2024.

Commercial Vehicles Notes Payable. Since 2015, we have entered into multiple notes payable with various commercial lenders in connection with our acquisition of certain vehicles utilized in our retail operations. Such notes bear interest ranging from 0.0% to 10.8% per annum, require monthly payments of approximately $108,000, and mature on dates between October 2024 to April 2029. As of September 30, 2024, we had $2.6 million outstanding under the commercial vehicles notes payable.

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Contractual Obligations

The table below provides estimates of the timing of future payments that we are contractually obligated to make based on agreements in place at September 30, 2024.

Payments Due by Period

Less than 1year 1 – 3 years 3 – 5 years More than 5years Total

(in thousands)

__________________________________

(1)Payments are generally made as required pursuant to the A&R Credit Facility discussed above under “—Debt Agreements—A&R Credit Facility.”

(2)Payments are generally made as required pursuant to the Inventory Financing Facility discussed above under “—Debt Agreements—Inventory Financing Facility.” Amounts do not include estimated interest payments.

(3)Includes notes payable entered into in connection with certain of our acquisitions of dealer groups and notes payable entered into with various commercial lenders in connection with our acquisition of certain vehicles. Payments are generally made as required pursuant to the terms of the relevant notes payable and as discussed above under “—Debt Agreements—Notes Payable.”

(4)Estimated interest payments based on the outstanding principal and stated interest rates on the A&R Credit Facility and Notes Payable.

(5)Includes certain physical facilities and equipment that we lease under noncancelable operating leases.

Tax Receivable Agreement

The Tax Receivable Agreement generally provides for the payment by OneWater Inc. to each TRA Holder of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax (computed using the estimated impact of state and local taxes) that OneWater Inc. actually realizes (or is deemed to realize in certain circumstances) in periods after the IPO as a result of certain tax basis increases and certain tax benefits attributable to imputed interest. OneWater Inc. will retain the benefit of the remaining net cash savings.

As of September 30, 2024 and September 30, 2023, our liability under the Tax Receivable Agreement was $40.6 million and $43.1 million, respectively. To the extent OneWater LLC has available cash and subject to the terms of any current or future debt or other agreements, the OneWater LLC Agreement will require OneWater LLC to make pro rata cash distributions to TRA Holders, including OneWater Inc., in an amount sufficient to allow OneWater Inc. to pay its taxes and to make payments under the Tax Receivable Agreement. We generally expect OneWater LLC to fund such distributions out of available cash. However, except in cases where OneWater Inc. elects to terminate the Tax Receivable Agreement early, the Tax Receivable Agreement is terminated early due to certain mergers or other changes of control or OneWater Inc. has available cash but fails to make payments when due, generally OneWater Inc. may elect to defer payments due under the Tax Receivable Agreement if it does not have available cash to satisfy its payment obligations under the Tax Receivable Agreement or if its contractual obligations limit its ability to make these payments. Any such deferred payments under the Tax Receivable Agreement generally will accrue interest. In certain cases, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits, if any, OneWater Inc. realizes in respect of the tax attributes subject to the Tax Receivable Agreement. In the case of such an acceleration, where applicable, we generally expect the accelerated payments due under the Tax Receivable Agreement to be funded out of the proceeds of the change of control transaction giving rise to such acceleration. OneWater Inc. intends to account for any amounts payable under the Tax Receivable Agreement in accordance with ASC Topic 450, Contingencies.

Off Balance Sheet Arrangements

We have no material off balance sheet arrangements.

Recent Accounting Pronouncements

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

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

Our Inventory Financing Facility exposes us to risks caused by fluctuations in interest rates. The interest rate on our Inventory Financing Facility for major unit inventory is calculated using SOFR plus an applicable margin. Based on the portion of the outstanding balance under the Inventory Financing Facility that is not covered by interest rate swaps of $243.4 million as of September 30, 2024, a change of 100 basis points in the underlying interest rate would cause a change in interest expense of approximately $2.4 million. This hypothetical increase does not take into account a corresponding increase to the programs that we may receive from our manufacturers or management’s ability to curtail inventory and related floor plan balances, both of which would reduce the impact of the interest rate increase.

Our A&R Credit Facility exposes us to risks caused by fluctuations in interest rates. The interest rate on our A&R Credit Facility is calculated using Term SOFR (with a 0.00% floor) plus an applicable margin. Based on the portion of the outstanding balance that is not covered by interest rate swaps of $226.6 million as of September 30, 2024, a change of 100 basis points in the underlying interest rate would cause a change in interest expense of approximately $2.3 million.

As part of our strategy to mitigate the exposure risk to fluctuations in interest rates for our Inventory Financing Facility and A&R Credit Facility, we may enter into various interest rate swap agreements. As of September 30, 2024 we had two interest rate swap agreements with a combined notional principal amount of $400.0 million. The swaps are designed to provide a hedge against the changes in variable cash flows regarding fluctuations in the SOFR and Term SOFR rates which are used in calculating interest payments. All of our interest rate swaps qualify for cash flow hedge accounting. The following table provides information regarding our interest rate swaps as of September 30, 2024:

Foreign Currency Risk

We purchase certain of our new boat and parts inventories from foreign manufacturers and some of these transactions are denominated in a currency other than the U.S. dollar. Our business is subject to foreign exchange rate risk that may influence manufacturers’ ability to provide their products at competitive prices in the United States. From time to time we may enter into foreign currency forward contracts to hedge certain foreign currency exposures to lessen, but not completely eliminate, the effects of foreign currency fluctuations on our financial results. To the extent that we cannot recapture this volatility in prices charged to customers or if this volatility negatively impacts consumer demand for our products, this volatility could adversely affect our future operating results.

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Item 8. Financial Statements and Supplementary Data.

INDEX TO FINANCIAL STATEMENTS

OneWater Marine Inc. Page

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248) 70

Consolidated Balance Sheets as of September 30, 2024 and 2023 71

Notes to the Consolidated Financial Statements 76

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

OneWater Marine Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of OneWater Marine Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of September 30, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of September 30, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated December 10, 2024 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2017.

Atlanta, Georgia

December 10, 2024

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ONEWATER MARINE INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share data)

ASSETS

CURRENT ASSETS:

Prepaid expenses and other current assets 85,922 65,798

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Current portion of operating lease liabilities 15,704 14,568

Current portion of long-term debt, net 7,874 29,324

Current portion of tax receivable agreement liability 2,578 2,447

COMMITMENTS AND CONTINGENCIES (Note 18)

STOCKHOLDERS' EQUITY

Accumulated other comprehensive (loss) income (1,897) 1

Total stockholders’ equity attributable to OneWater Marine Inc. 360,810 358,609

Equity attributable to non-controlling interests 29,943 55,469

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ONEWATER MARINE INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share data)

For the Years Ended September 30,

Revenues:

Cost of sales:

Change in fair value of contingent consideration 4,248 (1,604) 10,380

Other expense (income):

Loss on extinguishment of debt — — 356

Net (loss) income before income tax (benefit) expense (6,333) (42,523) 195,836

Net (income) attributable to non-controlling interests (119) (3,810) (2,998)

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ONEWATER MARINE INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

For the Years Ended September 30,

Other comprehensive income (loss):

Foreign currency translation adjustment (18) 9 (8)

Change in fair value of interest rate swaps (2,066) — —

Net (income) attributable to non-controlling interests (119) (3,810) (2,998)

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ONEWATER MARINE INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

Class A Common Stock Class B Common Stock

Distributions to members — — — — — (784) (3,497) — (4,281)

Non-controlling interest in subsidiary — — — — — — 19,311 19,311

Equity-based compensation — — — — 10,013 — — 10,013

Currency translation adjustment — — — — — — (1) (7) (8)

Distributions to members — — — — — (38) (3,565) — (3,603)

Shares issued as part of employee stock purchase plan 86 1 — — 2,091 — — — 2,092

Equity-based compensation — — — — 8,962 — — — 8,962

Currency translation adjustment — — — — — — 1 8 9

Distributions to members — — — — — (102) (5,313) — (5,415)

Shares issued as part of employee stock purchase plan 59 1 — — 1,519 — — — 1,520

Equity-based compensation — — — — 8,443 — — — 8,443

Purchase of non-controlling interest — — — — 716 — (19,556) — (18,840)

Currency translation adjustment — — — — — — (2) (16) (18)

Change in fair value of cash flow swaps — — — — — — (184) (1,882) (2,066)

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ONEWATER MARINE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the Years Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Loss (gain) on asset disposals 36 221 (135)

Loss on disposal of a business — 750 —

Loss on restructuring and impairment 539 147,402 —

Loss on extinguishment of debt — — 356

Change in fair value of contingent consideration 1,763 (1,604) 10,380

(Increase) decrease in assets:

Increase (decrease) in liabilities:

Tax receivable agreement liability (2,602) (3,227) (67)

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from disposal of property and equipment 757 567 345

Purchases of equity investments — — (2,000)

Cash used for additions to intangible assets (909) (2,823) (4,246)

Proceeds from disposal of a business 45,100 788 —

CASH FLOWS FROM FINANCING ACTIVITIES:

Payments of debt issuance costs (2,221) — (9,095)

Payments of tax withholdings for equity-based awards (2,641) (1,971) (1,628)

Purchase of non-controlling interest (18,840) — —

Repurchase and retirement of Class A common stock — (1,579) (354)

Effects of exchange rate changes on cash and restricted cash (18) 9 (8)

Supplemental cash flow disclosures

Noncash items

Acquisition purchase price funded by seller notes payable $ — $ — $ 1,126

Acquisition purchase price funded by contingent consideration — 2,550 15,321

Acquisition purchase price funded by issuance of Class A common stock — — 14,627

Purchase of property and equipment funded by long-term debt 156 1,122 2,087

Acquisition purchase price funded by affiliate financing — 10,600 —

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OneWater Marine Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

1. Description of Company and Basis of Presentation

Description of the Business

OneWater Marine Inc. (“OneWater Inc”) was incorporated in Delaware on April 3, 2019 and was a wholly-owned subsidiary of One Water Marine Holdings, LLC (“OneWater LLC”). Pursuant to a reorganization on February 11, 2020 into a holding company structure for the purpose of facilitating an initial public offering (the “IPO”) and related transactions in order to carry on the business of OneWater LLC and its subsidiaries (together with OneWater Inc, the “Company”), OneWater Inc is the holding company and its sole material asset is the equity interest in OneWater LLC. OneWater LLC was organized as a limited liability company under the law of the State of Delaware in 2014 and is the parent company of One Water Assets & Operations (“OWAO”), and its subsidiaries.

The Company is one of the largest recreational marine retailers in the United States. The Company engages primarily in the retail sale, brokerage, and service of new and pre-owned boats, motors, trailers, the sale of marine parts and accessories, and offers slip and storage accommodations in certain locations. The Company also arranges related boat financing, insurance, and extended service contracts for customers with third-party lenders and insurance companies. As of September 30, 2024, the Company operates a total of 96 retail locations, 10 distribution centers/warehouses and multiple online marketplaces in 18 states, several of which are in the top twenty states for marine retail expenditures.

Operating results are generally subject to seasonal variations. Demand for products is generally highest during the third and fourth quarters of the fiscal year and, accordingly, revenues are generally expected to be higher during these periods. General economic conditions, including rising interest rates and consumer spending patterns, can negatively impact the Company’s operating results. Unfavorable local, regional, national, or global economic developments, global public health concerns, or uncertainties could reduce consumer spending and adversely affect the Company’s business. Consumer spending on discretionary goods may also decline as a result of lower consumer confidence levels, even if prevailing economic conditions are otherwise favorable. Economic conditions in areas in which the Company operates, particularly in the Southeast, can have a major impact on the Company’s overall results of operations. Local influences such as corporate downsizing, inclement weather such as hurricanes, tornadoes and other storms, environmental conditions, and other events have and could adversely affect the Company’s operations in certain markets and in certain periods. Any extended period of adverse economic conditions or low consumer confidence is likely to have a negative effect on the Company’s business.

Sales of new boats from the Company’s top ten brands represent approximately 41.7%, 39.4% and 41.8% of total sales for the years ended September 30, 2024, 2023 and 2022, respectively, making them major suppliers of the Company. Of this amount, Malibu Boats, Inc, including its brands Malibu, Axis, Cobalt, Pursuit, Maverick, Hewes, Cobia and Pathfinder accounted for 13.1%, 13.9% and 15.6% of our consolidated revenue for the years ended September 30, 2024, 2023 and 2022, respectively. As is typical in the industry, the Company contracts with most manufacturers under renewable annual dealer agreements, each of which provides the right to sell various makes and models of boats within a given geographic region. Any change or termination of these agreements, or the agreements discussed above, for any reason, or changes in competitive, regulatory, or marketing practices, including rebate or incentive programs, could adversely affect results of operations. Pre-owned boats are usually trade-ins from retail customers who are purchasing a boat from the Company.

Principles of Consolidation

As the sole managing member of OneWater LLC, OneWater Inc. operates and controls all of the businesses and affairs of OneWater LLC. Through OneWater LLC and its wholly-owned subsidiaries, as well as majority-owned subsidiaries over which the Company exercises control, OneWater Inc. conducts its business. As a result, OneWater Inc consolidates the financial results of OneWater LLC and its subsidiaries and reports non-controlling interests related to the portion of units of OneWater LLC (the “OneWater LLC Units”) not owned by OneWater Inc, which will reduce net (loss) income attributable to OneWater Inc’s Class A stockholders. As of September 30, 2024, OneWater Inc owned 91.1% of the economic interest of OneWater LLC.

Commencing December 31, 2021, the Company owned 80% of the economic interest of Quality Assets and Operations, LLC, over which the Company exercised control and the minority interest in this subsidiary was recorded accordingly. On October 31, 2023, the Company acquired the remaining 20% of the economic interest and, as a result, as of September 30, 2024 owned 100% of Quality Assets and Operations, LLC. See Note 4 for additional information regarding the acquisition.

Basis of Financial Statement Preparation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). All adjustments, consisting of only normal recurring adjustments considered by management to be necessary for fair presentation, have been reflected in these consolidated financial statements.

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All intercompany transactions have been eliminated in consolidation. The Company operates on a fiscal year basis with the first day of the fiscal year being October 1, and the last day of the fiscal year ending on September 30.

2. Summary of Significant Accounting Policies

Cash

At times the amount of cash on deposit may exceed the federally insured limit of the bank. Deposit accounts at each of the institutions are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC). At September 30, 2024 and 2023, the Company exceeded FDIC limits at various institutions. The Company has not experienced any losses in such accounts and believes there is little to no exposure to any significant credit risk. Total cash and restricted cash shown in the consolidated statements of cash flows is comprised of the amounts reported in cash and restricted cash on the consolidated balance sheets.

Restricted Cash

Restricted cash relates to amounts collected for brokerage sales, in certain states, which are held in escrow on behalf of the respective buyers and sellers for future purchases of boats.

Inventories

Inventories are stated at the lower of cost or net realizable value. The cost of inventories consist of amounts paid to acquire the inventory, net of vendor consideration received and purchase discounts, and varying by inventory type, may include the cost of reconditioning, equipment addition, transportation, material, labor and manufacturing overhead. The cost of the new and pre-owned boat inventory is determined using the specific identification method. In assessing lower of cost or net realizable value, the Company considers the aging of the boats, historical sales of a brand and current market conditions. The cost of acquired, manufactured and assembled parts and accessories is determined using methods which vary by subsidiary and include the average cost method, standard costs approximating average costs, and first-in, first-out (“FIFO”).

Vendor Consideration Received

Consideration received from vendors is accounted for in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 330, ‘‘Inventory’’ (‘‘ASC 330’’). Pursuant to ASC 330, manufacturer incentives based upon cumulative volume of sales and purchases are recorded as a reduction of inventory cost and related cost of sales when the amounts are probable and reasonably estimable.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives. Leasehold improvements are amortized over the shorter of the lease period or the estimated useful lives. The estimated useful lives of assets are as follows:

Years

Company vehicles 5

Buildings and improvements 10-39

Machinery and equipment 5-7

Office equipment 5-7

Expenditures for major improvements that extend the useful life of assets are capitalized. Minor replacements, maintenance and repairs which do not extend the useful life of an asset are expensed as incurred.

The carrying value of property and equipment and other long-term assets (other than goodwill and indefinite life intangible assets) is evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If such an indication is present, the carrying amount of the asset is compared to the estimated undiscounted cash flows related to that asset. The Company would conclude that an asset may be impaired if the sum of such undiscounted expected future cash flows is less than the carrying amount of the related asset. If an asset is impaired, the impairment loss would be the amount by which the carrying amount of the related asset exceeds its fair value. We did not record an impairment of our property and equipment in fiscal years 2024, 2023 or 2022.

Goodwill and Other Identifiable Intangible Assets

Goodwill is an asset representing operational synergies and future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Other identifiable intangible assets primarily consist of trade names, developed technologies, including design libraries, and customer relationships related to the acquisitions the Company has

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completed. The Company has determined that trade names have an indefinite life, as there are no economic, contractual or other factors that limit their useful lives and they are expected to generate value as long as the trade name is utilized by the Company, and therefore, are not subject to amortization. Developed technologies and customer relationships are amortized over their estimated useful lives of ten years. Goodwill and indefinite-lived intangible assets are accounted for in accordance with FASB ASC 350, ‘‘Intangibles - Goodwill and Other’’ (‘‘ASC 350’’), which provides that the excess of cost over the fair value of the net assets of businesses acquired, including other identifiable intangible assets, is recorded as goodwill.

In accordance with ASC 350, Goodwill is tested for impairment at least annually, or more frequently when events or circumstances indicate that impairment might have occurred. ASC 350 also states for annual impairment tests that if an entity determines, based on an assessment of certain qualitative factors, that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then a quantitative goodwill impairment test is unnecessary. The Company performs its annual test in the fiscal fourth quarter.

In evaluating goodwill for impairment, if the fair value of a reporting unit is less than its carrying value, the difference would represent the amount of required goodwill impairment. The Company calculates the fair value of its reporting units by considering both the income and market approach. The income approach calculates the fair value of the reporting unit using a discounted cash flow method. Fair value under the market approach is determined for each unit by applying market multiples for comparable public companies to the unit's financial results.

The Company elected a qualitative assessment for our fiscal fourth quarter 2024 goodwill impairment testing and determined that it was more likely than not that the fair value of the reporting units were greater than their carrying amounts, and as a result, no impairment for goodwill was required for the year then ended. During the year ended September 30, 2023, the Company determined that there were circumstances that indicated impairment may have occurred, including a drop in the Company's market capitalization and declining margins, and performed a quantitative goodwill impairment analysis. As a result, the Company recognized a $57.7 million impairment for goodwill for the year then ended. See Note 8 for more information about the impairment of goodwill.

In accordance with ASC 350, the Company first performs an annual qualitative impairment assessment for indefinite-lived intangible assets to determine if it is more likely than not that the fair values are greater than their carrying amounts. If it is determined that it is more likely than not that the fair values of the indefinite-lived intangible assets are less than their respective carrying amounts, the Company then performs a quantitative impairment analysis by comparing the carrying amount of the indefinite-lived intangible assets to the fair values. To determine the fair value of the indefinite-lived intangible assets, the Company uses a relief from royalty method for trade names.

The Company elected qualitative assessments for our fiscal fourth quarter 2024 indefinite-lived intangible assets impairment testing and determined that it was more likely than not that the fair values of the Company’s indefinite-lived intangible assets were greater than their carrying amounts, and as a result, no impairment was required for the year then ended. During the year ended September 30, 2023, the Company performed a quantitative impairment analysis. As a result, the Company recognized a $43.0 million impairment for indefinite-lived intangible assets for the year then ended. See Note 8 for more information about the impairment of indefinite-live intangible assets.

In accordance with FASB ASC 360-10, "Property, Plant and Equipment – Impairment or Disposal of Long-Lived Assets" (“ASC 360”), the Company assesses the potential for impairment of its definite-lived intangible assets if facts and circumstances, such as declines in sales, earnings, cash flows or adverse changes in the business climate, suggest that they may be impaired. Definite-lived intangible assets include developed technologies and customer relationships which are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

The Company performs its assessment by comparing the book value of the asset groups to the estimated future undiscounted cash flows associated with the asset groups. If any impairment in the carrying value of its definite-lived intangible assets is indicated, the assets would be adjusted to an estimate of fair value. To determine the fair value of the definite-lived intangible assets, the Company uses a relief from royalty method for developed technology and discounted cash flows method for customer relationships.

During the year ended September 30, 2024, the Company evaluated the indicators of potential impairment for definite-lived intangible assets and did not identify any potential triggering events, and as a result, no impairment was required for the year then ended. During the year ended September 30, 2023, the Company performed a quantitative impairment analysis. As a result, the Company recognized a $46.7 million impairment for definite-lived intangible assets for the year then ended. See Note 8 for more information about the impairment of definite-lived intangible assets.

Software Development

The Company capitalizes cost for software developed or obtained for internal use, including domain names and internally developed software, and amortizes them over their estimated useful life, which is generally three to five years. The Company begins to capitalize costs incurred for computer software during the application development stage, as long as it is probable that the project will be completed and the software will be used for its intended purpose. Capitalization ceases when a software project is substantially complete and ready for its intended use.

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Cloud Computing Arrangement Implementation Costs

The Company capitalizes qualifying implementation costs under cloud computing arrangements (“CCA”). Capitalization ceases once the software is ready for its intended use. Capitalized CCA implementation costs are amortized over the term of the implemented software agreement. Capitalized CCA implementation costs are allocated between prepaid expenses and other current assets and other long-term assets on the accompanying consolidated balance sheets based on the expected amortization to be recognized within one year. Total capitalized CCA implementation costs were $1.7 million and $5.4 million, as of September 30, 2024 and 2023, respectively, which are a result of various enterprise resource planning ("ERP") software agreements. Accumulated amortization of these CCA implementation costs was $0.4 million and $0.1 million, as of September 30, 2024 and 2023, respectively. The Company recorded $0.3 million and $0.1 million of expense during the year ended September 30, 2024 and 2023, respectively, in selling, general and administrative expenses on the accompanying consolidated statements of operations related to the amortization of CCA implementation costs. The Company recognized a portion of the previously capitalized CCA implementation costs into expense as part of the 2024 Restructuring discussed in Note 16.

Sales Tax

The Company collects sales tax on all of the Company’s sales to nonexempt customers and remits the entire amount to the states that imposed the sales tax. The Company’s accounting policy is to exclude the tax collected and remitted to the states from revenues and cost of sales.

Revenue Recognition

Revenue is recognized from the sale of products and commissions earned on new and pre-owned boats (including used, brokerage, consignment and wholesale) when ownership is transferred to the customer, which is generally upon acceptance or delivery to the customer. At the time of acceptance or delivery, the customer is able to direct the use of, and obtain substantially all of the benefits. We are the principal with respect to revenue from new, pre-owned and consignment sales and such revenue is recorded at the gross sales price. With respect to brokerage transactions, we are acting as an agent in the transaction, therefore the fee or commission is recorded on a net basis.

Revenue from parts and accessories sold directly to a customer (not on a repair order) are recognized when control of the item is transferred to the customer, which is typically upon shipment. Revenue from parts and service operations (boat maintenance and repairs) is recorded over time as services are performed. Satisfaction of this performance obligation creates an asset with no alternative use for which an enforceable right to payment for performance to date exists within our contractual agreements. Each boat maintenance and repair service is a single performance obligation that includes both the parts and labor associated with the service. Payment for boat maintenance and repairs is typically due upon the completion of the service, which is generally completed within a period of one year or less from contract inception. The Company recorded contract assets in prepaid expenses and other current assets of $4.2 million and $4.4 million as of September 30, 2024 and 2023, respectively.

Certain parts and service transactions require the Company to perform shipping and handling activities after the transfer of control to the customer (e.g., when control transfers prior to delivery). They are considered fulfillment activities and are included in selling, general and administrative expenses.

Revenue from storage and marina operations is recognized on a straight-line basis over the term of the contract as services are completed. Revenue from arranging financing, insurance and extended warranty contracts to customers through various third-party financial institutions and insurance companies is recognized when the related boats are sold. We do not directly finance our customers’ boat, motor or trailer purchases. We are acting as an agent in the transaction, therefore the commissions are recorded on a net basis. Subject to our agreements and in the event of early cancellation, prepayment or default of such loans or insurance contracts by the customer, we may be assessed a chargeback for a portion of the commission paid by the third-party financial institutions and insurance companies. We reserve for these chargebacks based on our historical experience with repayments or defaults. Chargebacks were not material to the consolidated financial statements for the years ended September 30, 2024, 2023 and 2022.

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Contract liabilities consist of deferred revenues from marina and storage operations and customer deposits and are classified in customer deposits in the Company’s consolidated balance sheets. Deposits received from customers are recorded as a liability until the related sales orders have been fulfilled by us and control of the vessel is transferred to the customer.The activity in customer deposits for the years ended September 30, 2024, 2023 and 2022 is as follows:

The following table sets forth percentages on the timing of revenue recognition for the years ended September 30, 2024, 2023 and 2022:

Goods and services transferred at a point in time 93.8 % 93.8 % 94.4 %

Goods and services transferred over time 6.2 % 6.2 % 5.6 %

Advertising Costs

We expense advertising and promotional costs as incurred and include them in selling, general and administrative expenses in the accompanying consolidated statements of operations. Pursuant to FASB ASC 606, ‘‘Revenue from Contracts with Customers’’ (‘‘ASC 606’’), we net amounts received under our co-op assistance programs from our manufacturers against the related advertising expenses. Total advertising costs for the years ended September 30, 2024, 2023 and 2022, were $26.9 million, $24.8 million and $13.4 million, which are net of related co-op assistance of $1.6 million, $2.2 million and $1.8 million, respectively.

Equity-Based Compensation

Equity-based compensation plans are accounted for following the provisions of FASB ASC 718, ‘‘Compensation — Stock Compensation’’ (‘‘ASC 718’’). Equity-based awards are designed to reward employees for their long-term contributions to the Company and to provide incentives for them to remain with the Company. Valuation models and the quoted market price of our common stock are used to value all equity-based compensation. Compensation for awards is measured at fair value on the grant date based on the number of shares expected to vest. The Company recognizes compensation cost for all awards on a graded basis over the requisite service period of the award.

Income Taxes

OneWater Inc is a corporation and as a result, is subject to U.S. federal, state and local income taxes. We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the consolidated financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the book value and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period in which the enactment date occurs. We recognize deferred tax assets to the extent we believe these assets are more-likely-than-not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations.

OneWater LLC is treated as a partnership for U.S. federal income tax purposes and therefore does not pay U.S. federal income tax on its taxable income. Instead, the OneWater LLC members are liable for U.S. federal income tax on their respective shares of the Company’s taxable income reported on the members’ U.S. federal income tax returns.

When there are situations with uncertainty as to the timing of the deduction, the amount of the deduction, or the validity of the deduction, the Company adjusts the financial statements to reflect only those tax positions that are more-likely-than-not to be sustained. Positions that meet this criterion are measured using the largest benefit that is more than 50% likely to be realized. Interest and penalties related to income taxes are included in the benefit (provision) for income taxes in the consolidated statements of operations.

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Loan costs

The Company accounts for its loan costs in accordance with FASB Accounting Standards Update (“ASU”) No. 2015-03, ‘‘Interest-Imputation Subtopic (835-30): Simplifying the Presentation of Debt Issuance Costs’’, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction of the carrying amount of that debt liability.

Loan costs are amortized to interest expense on a straight-line basis over the life of the loan, which approximates the effective interest method.

Derivative and hedging instruments

The Company utilizes derivative financial instruments to manage its interest rate risk. The types of risks hedged are those relating to the variability of cash flows caused by fluctuations in interest rates. The Company documents the management strategy and assess hedge effectiveness at inception and throughout the term of the hedging relationship. Derivatives are reported at fair value on the accompanying consolidated balance sheets.

The changes in fair value on the hedges is reported as a component of accumulated other comprehensive loss on the accompanying consolidated balance sheets, and reclassified to either interest expense – floor plan or interest expense – other in the accompanying consolidated statements of operations based on the nature of the hedged transaction in the period during which the hedged transaction affects earnings. Cash flows from hedging instruments, including cash receipts and payments, are classified on the consolidated statements of cash flows in the same category as the cash flows resulting from the item being hedged.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the periods presented. Actual results could differ materially from these estimates. Estimates and assumptions are reviewed periodically, and the effects of any revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Significant estimates made in the accompanying consolidated financial statements include, but are not limited to, those relating to inventory mark downs, certain assumptions related to intangible and long-lived assets and valuation of contingent consideration.

Segment Information

We report our operations through two reportable segments: Dealerships and Distribution. The Dealership segment engages in the sale of new and pre-owned boats, arranges financing and insurance products, performs repairs and maintenance services, offers marine related parts and accessories and offers slip and storage accommodations in certain locations. The Distribution segment engages in the manufacturing, assembly and distribution primarily of marine related products to distributors, big box retailers and online retailers through a network of warehouse and distribution centers. Each reporting segment has discrete financial information and is regularly reviewed by the Company’s chief operating decision maker (“CODM”) to assess performance and allocate resources. The Company has identified its Chief Executive Officer as its CODM.

3. New Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", which is intended to improve financial reporting by requiring disclosures of incremental segment information on an annual and interim basis. The pronouncement is effective for a public company's annual reporting periods beginning after December 15, 2023, and interim periods within annual reporting periods beginning after December 15, 2024. The Company is currently evaluating the impact that this standard will have on the consolidated financial statements. The Company plans to adopt the pronouncement in fiscal year 2025.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures", which is intended to improve the transparency, effectiveness and comparability of income tax disclosures by requiring greater disaggregation of information and additional disclosures. The pronouncement is effective for a public company's annual reporting periods beginning after December 15, 2024. The Company is currently evaluating the impact that this standard will have on the consolidated financial statements. The Company plans to adopt the pronouncement in fiscal year 2026.

Other than as noted above, there are no new accounting pronouncements that are expected to have a material effect on our consolidated financial statements.

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4. Acquisitions and Dispositions

Acquisitions

In the years ended September 30, 2024, 2023 and 2022, the Company completed acquisitions of multiple businesses. The results of operations of acquisitions are included in the accompanying consolidated financial statements from the acquisition date. The purchase price of acquisitions was allocated to identifiable tangible assets and intangible assets acquired based on their estimated fair values at the acquisition date, with the excess being allocated to goodwill. Under the acquisition method of accounting, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on the information currently available. Any changes to the value of identifiable intangible assets are reclassified from goodwill upon the completion of the valuations.

The fair values of the developed technology and trade name intangible assets as of the acquisition date were determined using the relief from royalty model. The fair values of the customer relationship intangible assets as of the acquisition date were determined using the discounted cash flow method.

Fiscal Year 2024

For the year ended September 30, 2024, the Company completed the following transaction:

•On May 1, 2024, Garden State Yacht Sales, a full service marine retailer located in New Jersey

The table below summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date:

Summary of Assets Acquired and Liabilities Assumed

($ in thousands) Total Acquisitions

Accounts receivable $ 113

Prepaid expenses 11

Property and equipment 478

Operating lease right-of-use assets 4,360

Accounts payable (1,263)

Accrued expenses (36)

Customer deposits (267)

Operating lease liabilities (4,360)

Aggregate acquisition date fair value $ 5,712

Consideration transferred 5,712

Included in our results for the year ended September 30, 2024, the acquisition contributed $7.0 million to our consolidated revenue and income of $0.2 million to our net (loss) income before income tax expense. Costs related to acquisitions are included in transaction costs and primarily relate to legal, accounting, valuation and other fees, which are charged directly to operations in the accompanying consolidated statements of operations as incurred in the amount of $0.1 million for the year ended September 30, 2024.

On October 31, 2023, the Company exercised its right to acquire the remaining 20% economic interest in Quality Assets and Operations, LLC for consideration totaling $18.8 million. Subsequent to the acquisition, the Company owns 100% of the economic interest in Quality Assets and Operations, LLC.

Fiscal Year 2023

For the year ended September 30, 2023, the Company completed the following transactions:

•On October 1, 2022, Taylor Marine Centers, a retail marine dealership with locations in Maryland and Delaware

•On December 1, 2022, Harbor View Marine, a retail marine dealership with locations in Florida and Alabama

•On September 1, 2023, Harbor Pointe Marina, a retail marine dealership with one location in Alabama

Consideration paid for the consummated acquisitions was $42.0 million with $28.9 million paid at closing (net of cash acquired), $10.6 million in non-cash financing and the remaining $2.6 million in estimated payments of contingent consideration. The payments of contingent consideration are part of earnouts from the achievement of certain post-acquisition increases in adjusted EBITDA. As of September 30, 2023, the earnout period for the acquisitions was completed and no contingent consideration payout was achieved.

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The table below summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date, including the goodwill recorded as a result of the transactions:

Summary of Assets Acquired and Liabilities Assumed

($ in thousands) Total Acquisitions

Accounts receivable $ 286

Prepaid expenses 72

Property and equipment 11,588

Operating lease right-of-use assets 3,820

Identifiable intangible assets 8,800

Accounts payable (17)

Accrued expenses (361)

Customer deposits (1,013)

Notes payable - floor plan (2,228)

Operating lease liabilities (3,820)

Aggregate acquisition date fair value $ 42,032

Consideration transferred 42,032

In connection with the acquisition of Harbor View Marine, an entity affiliated with the Company agreed to acquire the real estate for the two acquired locations, in effect providing non-cash financing. The Company has accounted for this transaction as a sale and leaseback of the properties in our consolidated financial statements. There was no gain or loss recorded as part of the transaction. The leases for the two properties include an initial term of 15 years and two, five-year renewal options. The leases are accounted for as operating leases and are included in the operating lease right-of-use assets and operating lease liabilities on the consolidated balance sheets.

Included in our results for the year ended September 30, 2023, the acquisitions contributed $60.9 million to our consolidated revenue and $6.3 million to our (loss) income before income tax expense. Costs related to acquisitions are included in transaction costs and primarily relate to legal, accounting, valuation and other fees, which are charged directly to operations in the accompanying consolidated statements of operations as incurred in the amount of $1.2 million for the year ended September 30, 2023.

ONEW US Equity

ONEW · 10-K · period ended 2024-09-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

ONEW US Equity☆

ONEW · 10-K · period ended 2024-09-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

ONEW US Equity