OneWater Marine ONEW S
March 03, 2020 - 1:32pm EST by
TallGuy
2020 2021
Price: 14.88 EPS 0 0
Shares Out. (in M): 15 P/E 0 0
Market Cap (in $M): 217 P/FCF 0 0
Net Debt (in $M): 119 EBIT 0 0
TEV ($): 336 TEV/EBIT 0 0
Borrow Cost: Available 0-15% cost

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Description

Summary

OneWater Marine went public in February at $12.00 a share selling 5.3 million share after failing to go public in October 2019 at $18 to $20 a share. The proceeds from the IPO, along with borrowings under its credit facility, were used to redeem all outstanding preferred units held by certain affiliates of Goldman and The Beekman Group.

OneWater has leverage on top of its floor plan financing. Should there be a slow down in boat sales (new and used) then OneWater equity should be materially impacted.

Business

OneWater Marine is a roll up of boat dealerships. Since 2014 the company has acquired 40 locations and as of 12/31/2019 operates 63 total locations. Typical acquisition targets have $20-30 million in revenue and $1-2 million in adjusted EBITDA. 

FY 2020 Guidance

  • Same store sales in low double digits
  • EBITDA $56 to 58 million.

Financial Profile

Balance of the term loan (GS/BIP Credit facility) post IPO - per the Q1 2020 CC - was $100 million. At 9/30 there were ~19 million in LT notes payable (acquisition and vehicle). We are using the 9/30 balances since the 10-Q is not out yet and the press release doesn’t break out debt. Interest rate on the credit facility is Libor (1.5% floor) plus a margin based on OneWater’s leverage ratio (currently 7%). 

Covenants

  • Maximum Senior Leverage Ratio is 2.5x 
  • Maximum Total Leverage Ratio is 3.0x
  • Fixed Charge Coverage Ratio is 1.5x

Unlike MarineMax, OneWater does not own any of its properties, and due to the the acquisitions maintains a negative tangible book value.

Gross margins on new boat sales were 16.8% in Q1 2020 down 130 bps from the prior year quarter. This level of gross margins is the lowest recorded by OneWater and is indicative of heavy discounting. CFO on the CC our emphasis below:

ONEW - Q1 2020 OneWater Marine Inc Earnings Call, Th 02.27.20 7:30 AM http://snt.io/JFFEtd75A “The decline in gross profit as a percentage of sales was due to a shift in the model mix of new and pre-owned boats sold, the margin profile of the recently acquired locations and our emphasis on generating same-store sales during the period.”

We believe this statement is a red flag indicative of OneWater’s outlook for the industry. We note this is before concerns surrounding the Coronavirus.  

Conclusion

 

This IPO was forced through and the business is in a tough spot financially. Given the fixed costs in the business EBITDA can quickly fall off a cliff. If the macro economic picture turns south then the equity should be in a rough spot.

 

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

Decline in earnings

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