Stockholders' Equity

12 Months Ended

Sep. 30, 2022

Stockholders' Equity [Abstract]

Stockholders' Equity

12. Stockholders’ Equity

Equity-Based Compensation

We maintain the OneWater Marine Inc. Omnibus Incentive Plan (the “LTIP”) to incentivize individuals providing services to OneWater Inc and its subsidiaries and affiliates. The LTIP provides for the grant, from time to time, at the discretion of the board of directors of OneWater Marine Inc. (the “Board”) or a committee thereof, of (1) stock options, (2) stock appreciation rights, (3) restricted stock, (4) restricted stock units, (5) stock awards, (6) dividend equivalents, (7) other stock-based awards, (8) cash awards, (9) substitute awards and (10) performance awards. The total number of shares reserved for issuance under the LTIP that may be issued pursuant to incentive stock options (which generally are stock options that meet the requirements of Section 422 of the Code) is 1,564,156. The LTIP is and will continue to be administered by the Board, except to the extent the Board elects a committee of directors to administer the LTIP. Class A common stock subject to an award that expires or is cancelled, forfeited, exchanged, settled in cash or otherwise terminated without delivery of shares (including forfeiture of restricted stock awards) and shares withheld to pay the exercise price of, or to satisfy the withholding obligations with respect to, an award will again be available for delivery pursuant to other awards under the LTIP.

2022 Awards

During the fiscal year ended September 30, 2022, the Board approved the grant of 121,470 time-based restricted stock units. Of this amount, 14,186 restricted stock units fully vested on September 30, 2022, 12,000 restricted stock units fully vest on April 20, 2023 and the remaining 95,284 restricted stock units vest in three equal annual installments commencing on September 30, 2022.

During the fiscal year ended September 30, 2022, the Board approved the grant of 52,227 performance-based restricted stock units, which represents 100% of the target award. Performance-based restricted stock units provide an opportunity for the recipient to receive a number of shares of our common stock based on our performance goals. A performance-based restricted stock unit equals one share of common stock to the Company. As of September 30, 2022, the Company fully achieved the performance targets at 200% for the 2022 awards.

Compensation cost for time-based restricted stock units is based on the closing price of our common stock on the date immediately preceding the grant and is recognized on a graded basis over the applicable vesting periods. Compensation cost for performance share units is based on the closing price of our common stock on the date immediately preceding the grant and the ultimate performance level achieved and is recognized on a graded basis over the three-year vesting period. The Company recognized $9.8 million, $5.7 million and $1.6 million of compensation expense for the fiscal years ended September 30, 2022, 2021 and 2020, respectively, which includes $5.4 million, $2.6 million, and $0.5 million of compensation expense for the fiscal years ended September 30, 2022, 2021 and 2020, respectively, for performance share units.

The following table further summarizes activity related to restricted stock units for the years ended September 30, 2022 and 2021:

	Restricted Stock Unit Awards
	Number of Shares			Weighted Average Grant Date Fair Value ($)
Unvested at September 30, 2020		301,643		$	15.78
Awarded		348,927			27.37
Vested		(105,476	)		18.47
Forfeited		-			-
Unvested at September 30, 2021		545,094			22.68
Awarded		225,924			40.01
Vested		(211,225	)		27.10
Forfeited		-			-
Unvested at September 30, 2022		559,793		$	28.01

As of September 30, 2022, the total unrecognized compensation expense related to outstanding equity awards was $6.3 million, which the Company expects to recognize over a weighted-average period of 1.3 years.

We issue shares of our Class A common stock upon the vesting of performance-based restricted stock units and time-based restricted stock units. These shares are issued from our authorized and not outstanding common stock. In addition, in connection with the vesting of restricted stock units, we repurchase a portion of shares equal to the amount of employee income tax withholding.

Earnings Per Share

Basic and diluted earnings per share of Class A common stock is computed by dividing net income attributable to OneWater Inc by the weighted-average number of shares of Class A common stock outstanding during the same period. For the year ended September 30, 2020, earnings per share is calculated for the period from February 11, 2020 through September 30, 2020, the period following the IPO. Diluted earnings per share is computed by giving effect to all potentially dilutive shares.

There were no shares of Class A or Class B common stock outstanding prior to February 11, 2020, therefore no earnings per share information has been presented for any period prior to that date.

The following table sets forth the calculation of earnings per share for the years ended September 30, 2022, 2021, and 2020 (in thousands, except per share data):

Earnings per share:	2022		2021		2020
Numerator:
Net income attributable to OneWater Inc	$	130,944	$	79,059	$	17,425
Denominator:
Weighted-average number of unrestricted outstanding common shares used to calculate basic net income per share		13,877		11,087		6,243
Effect of dilutive securities:
Restricted stock units		457		272		44
Employee Stock Purchase Plan		3		-		-
Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted net income per share		14,337		11,359		6,287
Earnings per share of Class A common stock – basic	$	9.44	$	7.13	$	2.79
Earnings per share of Class A common stock – diluted	$	9.13	$	6.96	$	2.77

On March 30, 2022, the Board approved an up to $50 million share repurchase program. During the year ended September 30, 2022, the Company repurchased and retired 10,134 shares of Class A common stock under the repurchase program for a purchase price of approximately $0.4 million. As of September 30, 2022, approximately $49.6 million remained available for future purchase under the repurchase program. The repurchase program does not have a predetermined expiration date.

Shares of Class B common stock and unvested restricted stock units do not share in the income (losses) of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented.

The following number of weighted-average potentially dilutive shares were excluded from the calculation of diluted earnings per share because the effect of including such potentially dilutive shares would have been antidilutive upon conversion (in thousands):

	Year Ended September 30, 2022		Year Ended September 30, 2021		Year Ended September 30, 2020
Class B common stock		1,527		3,931		8,324
Restricted stock units		219		232		220
		1,746		4,163		8,544

Employee Stock Purchase Plan

At the Company’s 2021 Annual Meeting of Stockholders (the “Annual Meeting”), held on February 23, 2021, the Company’s stockholders approved the OneWater Marine Inc. 2021 Employee Stock Purchase Plan (the “ESPP”), which was approved and adopted by the Board as of January 13, 2021 (the “Adoption Date”), subject to stockholder approval at the Annual Meeting. The effective date of the ESPP is February 23, 2021, and, unless earlier terminated, the ESPP will expire on the twentieth anniversary of the Adoption Date. The ESPP will be administered by the Board or by one or more committees to which the Board delegates such administration.

The ESPP enables eligible employees to purchase shares of the Company’s Class A common stock at a discount through participation in discrete offering periods. The ESPP is intended to qualify as an employee stock purchase plan under section 423 of the Internal Revenue Code of 1986, as amended. Up to a maximum of 299,505 shares of the Company’s Class A common stock may be issued under the ESPP, subject to certain adjustments as set forth in the ESPP. On the first day of each fiscal year during the term of the ESPP, beginning on October 1, and ending on (and including) September 30, the number of shares of Class A common stock that may be issued under the ESPP will increase by a number of shares equal to the least of (i) 1% of the outstanding shares on the Adoption Date, or (ii) such lesser number of shares (including zero) that the administrator determines for purposes of the annual increase for that fiscal year. The number of shares of Class A common stock that may be granted to any single participant in any single option period will be subject to certain limitations set forth in the plan.

The first offering period began on July 1, 2022 and the Company recorded equity-based compensation of $0.2 million during the year ended September 30, 2022. As of September 30, 2022, we had current liabilities of $0.5 million for future purchases of shares under the ESPP. No purchases have been made under the ESPP as of September 30, 2022.

We used a Black-Scholes model to estimate the fair value of the options granted to purchase shares issued pursuant to the ESPP. Volatility is based on the historical volatility in our common stock. The risk-free rate for periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of grant.

The following are the weighted-average assumptions used for the fiscal year ended September 30, 2022:

	2022
Dividend yield		0.0	%
Risk-free interest rate		2.5	%
Volatility		57.4	%
Expected life	Six months

Distributions

During the fiscal years ended September 30, 2022, 2021 and 2020, the Company made distributions to OneWater Unit Holders for certain permitted tax payments.

Dividends

Dividends paid to holders of Class A common stock, distributions paid to OneWater Unit Holders and dividends payable to restricted stock unit holders are referred to herein collectively as “dividends”. Dividends declared are reported as a reduction of retained earnings. Dividends paid to OneWater Unit Holders are recorded as a reduction in non-controlling interest. On June 17, 2021, the Board declared a special cash dividend of $1.80 per share. The cash dividend of approximately $27.1 million was paid on July 19, 2021 to holders of Class A common stock and OneWater Unit Holders. Additionally, a $1.0 million cash dividend for restricted stock unit holders was accrued for payment to holders upon future vesting of restricted stock unit awards outstanding on the date the dividend was declared. During the year ended September 30, 2022, $0.2 million of the previously accrued balance was paid to restricted stock unit holders. The remaining $0.8 million is recorded in other payables and accrued expenses in the consolidated balance sheet as of September 30, 2022.

Non-Controlling Interest

In connection with the IPO, the former owners of Bosun’s Assets and Operations (“BAO”) and South Shore Assets and Operations (“SSAO”) received 290,466 and 306,199 shares of Class A common stock, respectively, for the surrender of their respective 25.0% ownership interests. The results of operations for BAO and SSAO have been included in the Company’s consolidated financial statements and the former owners’ minority interests have been recorded, accordingly, through the date of the IPO.

As discussed in Note 1, OneWater Inc consolidates the financial results of OneWater LLC and its subsidiaries and reports a non-controlling interest related to the portion of OneWater LLC owned by the holders of OneWater LLC Units (the “OneWater Unit Holders”). OneWater Unit Holders may exchange their LLC Units, together with an equal number of shares of Class B common stock of OneWater Inc, for shares of Class A common Stock of OneWater Inc on a one-for-one basis or, at OneWater LLC’s election, cash. Changes in ownership interest in OneWater LLC, while OneWater Inc retains its controlling interest, will be accounted for as equity transactions. Future direct exchanges of OneWater LLC units will result in a change in ownership and reduce the amount recorded as a non-controlling interest and increase additional paid-in-capital. As of September 30, 2022, OneWater Inc owned 90.9% of the economic interest of OneWater LLC with the OneWater Unit Holders owning the remaining 9.1%.

As discussed in Note 4, the Company acquired an 80% economic interest in Quality Boats during the year ended September 30, 2022. The Company has the exclusive right, but not obligation, to acquire the remaining 20% economic interest at any time before January 1, 2027. As of September 30, 2022, the Company has not exercised the right and maintains control of 80% of the economic interest of Quality Boats.