What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-12-14 compared with 2022-12-15 · 8 added, 1373 removed, 8 unchanged (99% of the section changed)

2 unchanged sentences

Our Inventory Financing Facility exposes us to risks caused by fluctuations in interest rates.

As of September 30, 2022, the interest rate on our Inventory Financing Facility for major unit inventory is calculated

using SOFR plus an applicable margin.

Based on an outstanding balance of $267.1 million as of September 30, 2022, a change of 100 basis points in the underlying interest rate would have caused a change in interest expense of approximately $2.7

The interest rate on our Inventory Financing Facility for major unit inventory is calculated using SOFR plus an applicable margin.

Based on an outstanding balance under the Seventh Inventory Financing Facility of $489.0 million as of September 30, 2023 , a change of 100 basis points in the underlying interest rate would cause a change in interest expense of approximately $4.9 million.

We do not currently hedge our interest rate exposure.

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.

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 an outstanding balance of $445.0 million and Term SOFR as of September 30, 2022, a change of 100 basis points in the underlying interest rate would have caused a change in interest expense of approximately $4.5 million.

We do not currently

hedge our interest rate exposure.

Based on an outstanding balance of $428.3 million and Term SOFR as of September 30, 2023 , a change of 100 basis points in the underlying interest rate would cause a change in interest expense of approximately $4.3 million.

We do not currently hedge our interest rate exposure.

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.

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.

Financial Statements and Supplementary Data.

INDEX TO FINANCIAL STATEMENTS

OneWater Marine Inc.

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

Consolidated Balance Sheets as of September 30, 2022 and 2021

Consolidated Statements of Operations for the Years Ended September 30, 2022, 2021, and 2020

Consolidated Statements of Comprehensive Income for the Years Ended September 30, 2022, 2021, and 2020

Consolidated Statements of Stockholders’ and Members’ Equity for the Years Ended September 30, 2022, 2021, and 2020

Consolidated Statements of Cash Flows for the Years Ended September 30, 2022, 2021 and 2020

Notes to the Consolidated Financial Statements

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, 2022

and 2021, the related consolidated statements of operations, comprehensive income, changes in stockholders’ and members’ equity, and cash flows for each of the three years in the period ended September 30, 2022, 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, 2022 and 2021, and the results of its operations and its cash

flows for each of the three years in the period ended September 30, 2022, 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, 2022, 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 15, 2022 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

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 matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be

communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical

audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or

disclosures to which it relates.

Valuation of developed technologies, trade names and customer relationship intangible assets acquired for Distribution segment acquisitions

As described further in Note 4 to the consolidated financial statements, during the year ended September 30, 2022, the Company acquired T-H Marine Supplies, LLC and

Ocean Bio-Chem, Inc.

for total purchase consideration of $318.9 million.

As part of these acquisitions, the Company acquired $164.8 million of identified intangible assets, including developed technologies ($13.5 million for T-H Marine

Supplies, LLC), trade names ($26.8 million and $18.3 million, respectively) and customer relationships ($65.2 million and $39.6 million, respectively).

We identified the assumptions used in the valuation of developed technologies and tradenames (specifically revenue growth rates, royalty rates and discount rates),

and the assumptions used in the valuation of customer relationships (specifically revenue growth rates, customer attrition rates, EBITDA and discount rates) acquired in the T-H Marine Supplies, LLC and Ocean Bio-Chem, Inc.

acquisitions as a

critical audit matter.

The principal consideration for our determination that the valuation of developed technologies, trade names and customer relationship intangible assets acquired is

a critical audit matter is the high degree of auditor judgment necessary in evaluating certain inputs and assumptions made by management in the valuation models used to determine fair value.

Those key assumptions include revenue growth rates,

royalty rates, customer attrition rates, EBITDA and discount rates.

Our audit procedures related to the Company’s valuation of developed technologies, trade names and customer relationship intangible assets related to the T-H Marine

Supplies, LLC and Ocean Bio-Chem, Inc.

acquisitions included the following, among others:

• We obtained an understanding, evaluated the design and tested the

operating effectiveness of the Company’s relevant controls to value acquired intangible assets, including the Company’s controls over the selection and review of the appropriateness of revenue growth rates, royalty rates, customer attrition

rates, EBITDA and discount rates used in determining fair value.

• We evaluated the appropriateness of the Company’s forecasted revenue

growth rates used to value developed technologies, trade names and customer relationship intangible assets by (1) comparing forecasted revenue growth rates to forecasted industry growth rates and available market data and (2) comparing forecasted revenue growth rates to historical growth rates of the acquired entity.

• We evaluated the appropriateness of the Company’s forecasted EBITDA

used to value customer relationship intangible assets by (1) comparing forecasted EBITDA margin to historical EBITDA margin and (2) comparing forecasted EBITDA margin to available industry and market data.

• We utilized a specialist to evaluate key inputs and assumptions used

to determine fair value.

Our specialist compared the estimated customer attrition rates used to value the customer relationship intangible assets to historical customer retention data of the acquired companies, compared the discount rates

used to value the developed technologies, trade names and customer relationship intangible assets to independently developed discount rates derived from publicly available data for comparable companies, and compared the royalty rates used

to value the developed technologies and trade names to royalty rates derived from publicly available data for comparable companies.

/s/ GRANT THORNTON LLP

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

Atlanta, Georgia

December 15, 2022

ONEWATER MARINE INC.

CONSOLIDATED BALANCE SHEETS

($ in thousands, except par value and share data)

September 30, 2022

September 30, 2021

Current assets:

Restricted cash

Accounts receivable, net

Inventories, net

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

Operating lease right-of-use assets

Other assets:

Deferred tax assets, net

Intangible assets, net

Total other assets

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

Other payables and accrued expenses

Customer deposits

Notes payable – floor plan

Current portion of operating lease liabilities

Current portion of long-term debt, net

Current portion of tax receivable agreement liability

Total current liabilities

Long-term Liabilities:

Other long-term liabilities

Tax receivable agreement liability

Noncurrent operating lease liabilities

Long-term debt, net

Total liabilities

Stockholders’ Equity:

Preferred stock, $ 0.01 par value, 1,000,000 shares authorized, none

issued and outstanding as of September 30, 2022 and September 30, 2021

Class A common stock, $ 0.01 par value, 40,000,000 shares authorized, 14,211,621

shares issued and outstanding as of September 30, 2022 and 13,276,538 shares issued and outstanding as of September 30, 2021

Class B common stock, $ 0.01 par value, 10,000,000 shares authorized, 1,429,940

shares issued and outstanding as of September 30, 2022 and 1,819,112 shares issued and outstanding as of September 30, 2021

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

Total stockholders’ equity attributable to OneWater Marine Inc.

Equity attributable to non-controlling interests

Total stockholders’ equity

Total liabilities and stockholders’ equity

ONEWATER MARINE INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands except per share data)

For the Years Ended September 30,

Pre-owned boat

Finance & insurance income

Service, parts & other

Total revenues

Cost of sales (exclusive of depreciation and amortization shown separately below):

Pre-owned boat

Service, parts & other

Total cost of sales

Selling, general and administrative expenses

Depreciation and amortization

Transaction costs

Change in fair value of contingent consideration

Income from operations

Other expense (income):

Interest expense – floor plan

Interest expense – other

Change in fair value of warrant liability

Loss on extinguishment of debt

Other expense (income), net

Total other expense (income), net

Income before income tax expense

Income tax expense

Net income attributable to non-controlling interests

Net income attributable to non-controlling interests of One Water Marine Holdings, LLC

Net income attributable to OneWater Marine Inc.

Earnings per share of Class A common stock – basic (1)

Earnings per share of Class A common stock – diluted (1)

Basic weighted-average shares of Class A common stock outstanding (1)

Diluted weighted-average shares of Class A common stock outstanding (1)

For the fiscal year ended September 30, 2020, represents earnings per

share of Class A common stock and weighted-average shares of Class A common stock outstanding for the period from February 11, 2020 through September 30, 2020, the period following OneWater Marine Inc.’s initial public

ONEWATER MARINE INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

($ in thousands)

For the Years Ended September 30,

Other comprehensive loss:

Foreign currency translation adjustment

Comprehensive income

Net income attributable to non-controlling

Net income attributable to non-controlling interests of One Water Marine Holdings, LLC

Foreign currency translation adjustment attributable to non-controlling interest of One Water Marine Holdings, LLC

Comprehensive income attributable to One Water Marine Holdings, Inc.

ONEWATER MARINE INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ AND MEMBERS’ EQUITY

($ in thousands)

Class A Common Stock

Class B Common Stock

Redeemable Preferred Interest in Subsidiary

Members’ Equity

Additional Paid-in Capital

Retained Earnings

controlling Interest

Comprehensive

Total Stockholders’ and Members’ Equity

Balance at September 30, 2019

Net (loss) income prior to the initial public offering

Distributions to members prior to the initial public offering

Accumulated unpaid preferred returns prior to the initial public offering

Accretion of redeemable preferred and issuance costs prior to the initial public offering

Equity-based compensation prior to the initial public offering

Effect of the initial public offering and related transactions

Effect of September Offering

Exchange of B shares for A shares

Distributions subsequent to the initial public offering

Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis

Equity-based compensation subsequent to the initial public offering

Net income subsequent to the initial public offering

Balance at September 30, 2020

Distributions to members

Dividends and distributions

Effect of September Offering, including underwriter exercise of option to purchase shares

Exchange of B shares for A shares

Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis

Shares issued upon vesting of equity-based awards, net of tax withholding

Shares issued in connection with a business combination

Adjustment to adopt Topic 842

Equity-based compensation

Balance at September 30, 2021

Distributions to members

Exchange of B shares for A shares

Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increase in tax basis

Shares issued upon vesting of equity-based awards, net of tax withholding

Shares issued in connection with business combinations

Non-controlling interest in subsidiary

Equity-based compensation

Repurchase and retirement of Class A common stock

Currency Translation Adjustment

Balance at September 30, 2022

ONEWATER MARINE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)

For the Years Ended September 30,

Cash flows from operating activities

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Equity-based compensation

(Gain) loss on asset disposals

Change in fair value of warrant liability

Loss on extinguishment of debt

Non-cash interest expense

Deferred income tax provision

Change in fair value of contingent consideration

Loss on equity investments

(Increase) decrease in assets:

Accounts receivable

Prepaid expenses and other current assets

Increase (decrease) in liabilities:

Accounts payable

Other payables and accrued expenses

Tax receivable agreement liability

Customer deposits

Net cash provided by operating activities

Cash flows from investing activities

Purchases of property and equipment

Proceeds from disposal of property and equipment

Purchases of equity investments

Cash used for additions to intangible assets

Cash used in acquisitions

Net cash used in investing activities

Cash flows from financing activities

Net borrowings (payments) from floor plan

Proceeds from long-term debt

Payments on long-term debt

Payments of debt issuance costs

Payments of debt extinguishment costs

Payments of initial public offering costs

Payments of September Offering costs

Payments of contingent consideration

Distributions to redeemable preferred interest members and redemption of redeemable preferred interest

Proceeds from issuance of Class A common stock sold in initial public offering, net of underwriting discounts and commissions

Proceeds from issuance of Class A common stock sold in September Offering, net of underwriting discounts and commissions

Payments of tax withholdings for equity-based awards

Dividends and distributions

Distributions to members

Repurchase and retirement of Class A common stock

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and restricted cash

Net change in cash

Cash and restricted cash at beginning of period

Cash and restricted cash at end of period

Supplemental cash flow disclosures

Cash paid for interest

Cash paid for income taxes

Noncash items

Acquisition purchase price funded by seller notes payable

Acquisition purchase price funded by contingent consideration

Acquisition purchase price funded by issuance of Class A common stock

Accrued purchase consideration

Purchase of property and equipment funded by long-term debt

Dividends payable

Distributions payable

Offering costs, accrued not yet paid

Initial operating lease right-of-use-assets for adoption of Topic 842

OneWater Marine Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

Description of Company and Basis of Presentation

Description of the Business

OneWater Marine Inc.

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 wholly-owned 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, 2022, the Company operates a total of 96 retail locations, 12

distribution centers/warehouses and multiple online marketplaces in 19 states, several of which are in the top twenty states for

marine retail expenditures.

Operating results are generally subject to seasonal

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 and consumer

spending patterns can negatively impact the Company’s operating results.

Unfavorable local, regional, national, or global economic developments, global public health concerns, including the COVID-19 pandemic, 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 and other storms, environmental conditions, and other events 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 41.8 %,

42.9 % and 41.1 %

of total sales for the years ended September 30, 2022, 2021 and 2020, 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 15.6 %, 17.0 % and 17.0 % of our consolidated revenue for the years ended September 30, 2022, 2021 and

2020, 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

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.

Initial Public Offering

On February 11, 2020, OneWater Inc completed its IPO of 5,307,693 shares of Class A common stock, par value $ 0.01

per share (the “Class A common stock”), which includes the exercise in full of the underwriters’ option to purchase up to 692,308

additional shares of Class A common stock pursuant to the Underwriting Agreement, at a price to the public of $ 12.00 per share.

After deducting underwriting discounts and commissions, OneWater Inc received net proceeds of $ 59.2 million.

contributed all of the net proceeds of the IPO received to OneWater LLC in exchange for limited liability company interests in OneWater LLC (“LLC Units”).

OneWater LLC used the net proceeds, cash on hand and borrowings under its Amended and

Restated Credit and Guaranty Agreement by and among OneWater Inc, OneWater LLC and its subsidiaries, with Goldman Sachs Specialty Lending Group, L.P.

(i) to pay $ 3.2 million to one Legacy Owner in exchange for the surrender of a preferred distribution right and (ii) to contribute cash to OWAO in exchange for additional units therein, and OWAO used such cash to fully

redeem the preferred interest in subsidiary held by Goldman Sachs & Co.

LLC and certain of its affiliates (collectively, “Goldman”) and affiliates of The Beekman Group (“Beekman”).

Additionally, the Company provided certain of the

existing owners of OneWater LLC, including Goldman and Beekman and certain members of the Company’s management team, the right to receive a tax distribution to cover taxable income arising as a result of OneWater LLC’s operating income

through the period ending on the date of the closing of the IPO.

September Offering

On September 22, 2020, OneWater Inc completed an

underwritten public offering (the “September Offering”) of 3,170,868 shares of Class A common stock, at a public offering price

of $ 20.00 per share, less underwriting discounts and commissions.

OneWater Inc sold 425,000 shares of Class A common stock, and certain stockholders of the Company (the “Selling Stockholders”) sold 2,745,868 shares of Class A common stock.

In connection with the September Offering, Goldman granted the underwriters a 30-day option to purchase up to an additional 475,630

shares of the Company’s Class A common stock (the “Optional Shares”).

On September 29, 2020, the underwriters notified OneWater Inc and Goldman of their intent to purchase an additional 387,458 Optional Shares.

The sale of the Optional Shares closed on October 2, 2020.

The Company did not receive any proceeds from the sale of the Optional Shares or the

Class A common stock sold by Selling Stockholders.

After deducting underwriting discounts and commissions,

OneWater Inc received net proceeds of $ 8.1 million.

OneWater Inc contributed all of the net proceeds of the September Offering

received to OneWater LLC in exchange for LLC Units.

OneWater LLC used the net proceeds for general corporate purposes.

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, and through OneWater LLC and its wholly-owned subsidiaries, as well as majority-owned subsidiaries over which the Company exercises control, 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 income attributable to OneWater Inc’s Class A stockholders.

As of September 30, 2022, OneWater Inc owned 90.9 %

of the economic interest of OneWater LLC.

Commencing December 31, 2021, the Company owns 80 % of the economic interest of Quality Assets and Operations, over which the Company exercises control and the minority interest in this

subsidiary has been recorded accordingly.

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 necessary for fair presentation, have been reflected in these consolidated financial statements.

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.

COVID-19 Pandemic

The duration and related impact on the Company’s consolidated financial statements is

currently uncertain, and it is possible that the pandemic, including the resurgence of COVID-19 in certain geographic areas or the emergence of variant strains of the virus, may negatively impact the Company’s future results of

The impact of COVID-19 on our suppliers and the recent increase in demand for marine

retail products has led to industry-wide supply chain constraints.

The Company is monitoring and assessing the situation and preparing for implications to the business, including the ability to safely operate its

locations, access to inventory and customer demand.

Summary of Significant Accounting Policies

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, 2022 and 2021, 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

Restricted Cash

Restricted cash relates to amounts collected for pre-owned sales, in

certain states, which are held in escrow on behalf of the respective buyers and sellers for future purchases of boats.

Total customers deposits are shown as a liability on the consolidated balance sheets.

These liabilities may be more than

the applicable restricted cash balances and fluctuate due to timing differences and because in certain states the deposits are not restricted from use.

Inventories are stated at the lower of cost or net realizable value.

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 both the average cost method 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.

estimated useful lives of assets are as follows:

Company vehicles

Buildings and improvements

Machinery and equipment

Office equipment

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 no t record an impairment of our property and equipment in fiscal years 2022, 2021 or 2020.

Goodwill and Other Identifiable Intangible Assets

Goodwill and 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.

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.

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 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.

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.

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.

The Company elected a qualitative assessment for our September

30, 2022 and 2021 goodwill impairment testing and determined for both assessments as of September 30, 2022 and 2021, 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 years then ended.

Identifiable intangible assets consist of trade names, developed

technologies, including design libraries, and customer relationships related to the acquisitions the Company has 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 and are reviewed for impairment whenever events or changes in

circumstances indicate that the carrying amount of the asset may not be recoverable.

Financial statement risk exists to the extent identifiable intangibles

become impaired due to the decrease in the fair value of the identifiable assets.

The Company elected qualitative assessments for our September 30, 2022 and 2021 identifiable intangible assets impairment testing and determined for both

assessments as of September 30, 2022 and 2021, that it was more likely than not that the fair values of the Company’s identifiable intangible assets were greater than their carrying amounts, and as a result, no impairment for identifiable intangible assets was required for the years then ended.

Software Development and Cloud Computing Arrangement Implementation Costs

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.

The Company capitalizes qualifying implementation costs under cloud computing arrangements

Capitalization ceases once the software is ready for its intended use.

The capitalized CCA implementation cost is allocated between current and long term based on the expected amortization to be recognized within one year .

There was no current

balance as of September 30, 2022.

The long-term balance of the CCA implementation costs was $ 1.7 million as of September 30, 2022

and is included in other assets on the accompanying consolidated balance sheets.

There were no capitalized CCA

implementation costs as of September 30, 2021.

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.

At the time of acceptance or delivery, the customer is able to

direct the use of, and obtain substantially all of the benefits of the asset.

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) are

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 $ 3.7 million and $ 2.3 million as of September 30, 2022 and 2021, 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, 2022, 2021

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, 2022 and 2021 is as follows:

($ in thousands)

Beginning contract liability

Revenue recognized from contract

liabilities included in the beginning balance

Increases due to business combinations and

cash received, net of amounts recognized in revenue during the period

Ending contract liability

The following table sets forth percentages on the timing of revenue

recognition for the years ended September 30, 2022, 2021 and 2020:

Goods and services transferred at a point

Goods and services transferred over time

Total Revenue

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 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, 2022, 2021 and 2020, were $ 13.4 million, $ 4.5 million and $ 5.4 million,

which are net of related co-op assistance of $ 1.8 million, $ 0.7 million and $ 0.7 million, respectively.

Equity-Based Compensation

Equity-based compensation plans are accounted for following the

provisions of FASB Accounting Standards Codification 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.

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’

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.

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.

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

Effective August 9, 2022, our reportable segments changed as a result of

the Company’s acquisition of Ocean Bio-Chem, Inc., and Star Brite Europe, Inc (collectively “Ocean Bio-Chem”), which changed management’s reporting structure and operating activities.

We now report our operations through two new 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.

The change in reportable segments had no impact on

the Company’s previously reported historical consolidated financial statements.

Recently Adopted Accounting Standards

In December 2019, the FASB

issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes” .

The pronouncement is effective for a public company’s annual reporting periods beginning after

December 15, 2020, and interim periods within those annual periods.

The Company adopted the new guidance as of October 1, 2021.

The adoption of the guidance did not have an impact on the consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference

Rate Reform” , which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”).

The guidance provides certain expedients and exceptions to applying GAAP in

order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified.

The guidance is effective upon issuance and expires on December 31,

The Company has assessed the transactions involving LIBOR and has transitioned away from LIBOR as part of our agreements.

Standards Issued But Not Yet Adopted

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” , which is intended to improve the accounting for acquired revenue contracts with customers in

a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer.

pronouncement is effective for a public company’s annual reporting periods beginning after December 15, 2022, and interim periods within those annual periods.

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 2024.

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

financial statements.

In the years ended September 30, 2022 and 2021, the Company completed acquisitions of multiple businesses in the

United States.

No acquisitions were completed during the year ended September 30, 2020.

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 will be reclassified from goodwill upon the completion of the valuations.

Fiscal Year 2022

For the year ended September 30, 2022, the Company completed the following transactions:

On October 1, 2021, Naples Boat Mart, a retail marine dealership with one

location in Florida

On November 30, 2021, T-H Marine Supplies, LLC (“T-H Marine”), a leading provider of branded marine parts and accessories for original equipment manufacturers (“OEMs”) and the

aftermarket, with locations in Alabama, Florida, Illinois, Indiana, Oklahoma and Texas

On December 1, 2021, Norfolk Marine Company, a retail marine dealership with one

location in Virginia

On December 31, 2021, a majority interest in Quality Boats, a retail marine dealership with three locations in Florida.

The sellers retained a 20 % economic interest in

Quality Boats.

The Company has the exclusive right, but not obligation, to acquire the remaining 20 % interest at

any time before January 1, 2027.

On February 1, 2022, JIF Marine, a leading supplier of stainless steel ladders, dock products and other accessories which is based in Tennessee

On March 1, 2022, YakGear, a leading supplier of kayak equipment, paddle sports accessories and boat mounting accessories which is based in Texas

On April 1, 2022, Denison Yachting, a leader in yacht and superyacht sales as well as ancillary yacht services, with 20 retail locations in 7 states

On August 9, 2022, Ocean Bio-Chem, 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.

Consideration paid for the consummated acquisitions was $ 490.6 million with $ 459.5 million paid at closing (net

of cash acquired), $ 1.1 million financed through a note payable to the sellers bearing interest at a rate of 4.0 % per year, estimated payments of $ 15.3

million in contingent consideration and the remaining $ 14.6 million with the issuance of shares of Class A common stock.

notes are payable in one lump sum on December 1, 2024, with interest payments due quarterly.

The estimated payments of contingent consideration are part of multiple earnouts varying from the achievement of certain post-acquisition

increases in adjusted EBITDA to the generation of acquisition leads for the Company.

The acquisition contingent consideration was developed using weighted average projections based on the Company’s historical experience, current forecasts

for the industry and current expectations of the ability to generate viable acquisition leads.

The minimum payout on acquisition contingent consideration is $ 5.9 million and the maximum payout is $ 24.7 million.

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:

Fiscal year 2022 Acquisitions:

Summary of Assets Acquired and Liabilities Assumed

($ in thousands)

Quality Boats

Denison Yachting

Ocean Bio-Chem

Other Acquisitions

Total Acquisitions

Accounts receivable

Prepaid expenses

Property and equipment

Operating lease right-of-use assets

Identifiable intangible assets

Accounts payable

Accrued expenses

Customer deposits

Deferred tax liabilities

Long-term debt

Operating lease liabilities

Aggregate acquisition date fair value

Consideration transferred

Cash acquired

Fair value of non-controlling interests

Aggregate acquisition date fair values

The fair value of the non-controlling interest of Quality Boats as of the acquisition date was estimated using the

discounted cash flow method and market multiple method.

Significant inputs to the discounted cash flows included estimated future revenues and discount rates.

Significant inputs to the market multiple method include the peer public

company group and the financial performance of reporting units related to the peer public company group.

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.

The acquisitions of Denison Yachting, Ocean Bio-Chem., and Star Brite Europe, Inc.

are preliminary.

The valuation

of the identifiable intangible assets for Ocean Bio-Chem.

and Star Brite Europe, Inc.

are preliminary pending receipt of final valuation analyses.

The valuation of tangible assets and assumed liabilities are preliminary for Denison

Yachting, Ocean Bio-Chem., and Star Brite Europe, Inc.

as the acquisitions are subject to certain customary closing and post-closing adjustments.

Included in our results for the year ended September 30, 2022, the acquisitions contributed $ 275.3 million to our consolidated revenue and $ 41.1

million to our income before income tax expense.

Costs related to acquisitions are included in transaction costs and primarily relate to legal, accounting, and valuation fees, which are charged directly to operations in the accompanying

consolidated statements of operations as incurred in the amount of $ 7.5 million for the year ended September 30, 2022.

Fiscal Year 2021

For the year ended September 30, 2021, the Company completed the following transactions:

On December 1, 2020, Tom George Yacht Group a retail marine dealership with two

locations in Florida

December 31, 2020, Walker Marine Group a retail marine dealership with five

locations in Florida.

On December 31, 2020, Rosioli Yachting Center, a full-service marina and yachting facility, with one location in Florida

On August 1, 2021, Stone Harbor Marina a retail marine dealership with one

location in New Jersey

On September 1, 2021, PartsVu, an online marketplace for OEM marine parts, electronics and accessories

with a warehouse in Florida

Consideration paid for the consummated acquisitions was $ 122.1 million with $ 107.5 million paid at closing (net

of cash acquired), $ 2.1 million financed through a note payable to the sellers, estimated payments of $ 9.2 million in contingent consideration, $ 1.9

million in accrued purchase consideration and the remaining $ 1.5 million with the issuance of shares of Class A common stock.

The estimated payments of contingent consideration are part of multiple earnouts subject to the achievement of certain post-acquisition increases in adjusted EBITDA.

The acquisition contingent consideration was developed using weighted

average projections based on the Company’s historical experience with acquisitions as well as current forecasts for the industry.

The minimum payout on acquisition contingent consideration is $ 0.2 million and the maximum payout is unlimited.

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:

Fiscal year 2021 Acquisitions:

($ in thousands)

Walker Marine Group

Roscioli Yachting Center

Other Acquisitions

Total Acquisitions

Accounts receivable

Prepaid expenses

Property and equipment

Identifiable intangible assets

Accounts payable

Accrued expenses

Customer deposits

Notes payable – floor plan

Aggregate acquisition date fair value

Consideration transferred

Aggregate acquisition date fair values

2022 and 2021 acquisitions have resulted in the recording of goodwill that is expected to be deductible for tax purposes of $ 144.0

million and $ 55.4 million for the years ended September 30, 2022 and 2021, respectively.

The following unaudited pro forma results of operations for the years ended September 30, 2022, 2021 and 2020 assumes

that all acquisitions were completed on October 1, 2019.

($ in thousands)

Pro forma revenues

Pro forma net income

Accounts Receivable

Accounts receivable primarily consists of trade accounts receivable, contracts in transit and manufacturer receivables.

Trade receivables include amounts due from customers on the sale of boats, parts, service, and

Contracts in transit represent anticipated funding from the loan agreement customers execute at the dealership when they purchase their new or pre-owned boat.

These finance contracts are typically funded within 30 days.

Amounts due from manufacturers represent receivables for various manufacturer incentive programs and parts and service work performed

pursuant to the manufacturers’ warranties.

The allowance for

credit losses is estimated based on past collection experience, current conditions and reasonable and supportable forecasts.

The annual activity for charges and subsequent recoveries is immaterial.

Accounts receivable consisted of the following:

($ in thousands)

September 30,

Trade accounts receivable

Contracts in transit

Manufacturer receivable

Total accounts receivable

Less – allowance for credit losses

Total accounts receivable, net

Inventories consisted of the

following at:

($ in thousands)

September 30,

Pre-owned vessels

Parts and accessories,

work in process, net

Total inventories,

Property and Equipment

Property and equipment, net consisted of the following:

($ in thousands)

September 30, 2022

September 30, 2021

Buildings and improvements

Leasehold improvements

Machinery and equipment

Office equipment

Company vehicles

Construction in progress

Total property and equipment

Less accumulated depreciation

Total property and equipment, net

For the years ended September 30, 2022, 2021 and 2020, depreciation

expense totaled $ 8.8 million, $ 5.4

million and $ 3.2 million, respectively.

Goodwill and Intangible Assets

Our acquisitions have resulted in the recording of 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

Intangible assets consist of internally developed software, domain names and other identifiable intangible assets such as, trade names, developed technologies, including design libraries, and customer relationships related to

the acquisitions the Company has completed.

The changes in goodwill and intangible assets are as follows:

($ in thousands)

Customer Relationships

Net balance as of September 30, 2020

Acquisitions during the year ended September 30, 2021

Net balance as of September 30, 2021

Acquisitions during the year ended September 30, 2022

Accumulated amortization for the year ended September 30, 2022

Net balance as of September 30, 2022

Amortization expense was $ 7.6 million for the year ended September 30, 2022 and is recorded in depreciation and amortization expense in the consolidated statements of operations.

No amortization expense was recorded for the years ended September 30, 2021 and 2020.

For acquisitions during the year ended September 30,

2022, the weighted average useful lives of developed technologies and customer relationships are 10 years and domain names

and internally developed software are 5 years.

The following table summarizes the expected amortization expense for the fiscal years 2023 through 2027 and thereafter ($ in thousands):

As of September 30, 2022, the carrying value of goodwill totaled approximately $ 378.6 million, of which $ 280.0 million was related to

our Dealerships reporting segment and $ 98.6 million was related to our Distribution reporting segment.

See Note 2 for more information about our annual impairment tests of goodwill and identifiable intangible assets.

Other Payables and Accrued Expenses

Other payables and accrued expenses consisted of the following:

($ in thousands)

September 30,

Payroll accrual

Sales tax payable

Other payables and accrued expenses

Acquisition contingent consideration

Accrued interest

Total other payables and accrued expenses

Notes Payable — Floor Plan

The Company maintains an ongoing wholesale marine products inventory

financing program with a syndicate of banks.

The program is administered by Wells Fargo Commercial Distribution Finance, LLC (“Wells Fargo”).

On December 29, 2021, the Company and certain of its subsidiaries entered into the Seventh Amended

and Restated Inventory Financing Agreement (as amended, the “Inventory Financing Facility) with Wells Fargo and the other financial institutions party thereto to increase the maximum borrowing amount available to $ 500.0 million.

The Inventory Financing Facility expires on December 1, 2023.

The outstanding balance of the facility was $ 267.1 million and $ 114.2 million,

as of September 30, 2022 and 2021, respectively.

Effective October 1, 2021, interest on new boats and for

rental units is calculated using the Adjusted 30-Day Average SOFR (as defined in the Inventory Financing Facility) (“SOFR”)

plus an applicable margin of 2.75 % to 5.00 % depending on the age of the inventory.

Interest on pre-owned boats in calculated at the new boat rate plus 0.25 %.

Wells Fargo will finance 100.0 % of the vendor invoice price for new boats, engines,

and trailers.

As of September 30, 2022 the interest rate on the Inventory Financing Facility ranged from 5.33 % to 7.58 % for new inventory and 5.58 %

to 7.83 % for pre-owned inventory.

As of September 30, 2021 the interest rate on the Inventory Financing Facility was

calculated under the legacy London Inter-Bank Offering Rate and ranged from 3.08 % to 5.33 % for new inventory and 3.33 % to 5.58 % for pre-owned inventory.

Borrowing capacity available at September 30, 2022 and September 30, 2021 was $ 232.9 million and $ 278.3

million, respectively.

The Inventory Financing Facility has certain financial and

non-financial covenants as specified in the agreement.

The financial covenants include requirements to comply with a maximum funded debt to EBITDA ratio (as defined in the Inventory Financing Facility).

In addition, certain non-financial

covenants could restrict the Company’s ability to sell assets (excluding inventory in the normal course of business), engage in certain mergers and acquisitions, incur additional debt and pay cash dividends or distributions, among others.

The Company was in compliance with all covenants at September 30, 2022.

The collateral for the Inventory Financing Facility consists primarily of our inventory that is financed through the Inventory Financing Facility and related

assets, including accounts receivable, bank accounts and proceeds of the foregoing, and excludes the collateral that underlies the term note payable to Truist Bank.

Long-term Debt and Line of Credit

On August 9, 2022, the

Company and certain of its subsidiaries entered into the Amended and Restated Credit Agreement (the “A&R Credit Facility”) with Truist Bank.

The A&R Credit Facility provides for a $ 65.0 million revolving credit facility (the “A&R Revolving Facility”) that may be used for revolving credit loans (including up to $ 5.0 million in swingline loans and up to $ 5.0

million in letters of credit) and a $ 445.0 million term loan (the “A&R Term Loan”).

Subject to certain conditions, the

available amount under the revolving credit facility and term loans may be increased by $ 125.0 million in the aggregate.

A&R Credit Facility bears interest at a rate that is equal to Term SOFR plus an applicable margin ranging from 1.75 % to 2.75 % based on certain consolidated leverage ratio measures.

The A&R Revolving Facility matures on August 9, 2027 .

The A&R Term Loan is repayable in installments beginning December 31, 2022, with the remainder due on August 9, 2027 .

The A&R Credit Facility is collateralized by certain

real and personal property (including certain capital stock) of the Company and its subsidiaries.

The collateral does not include inventory and certain other assets of the Company’s subsidiaries financed under the Inventory Financing

The A&R Credit Facility is subject to certain financial covenants related to 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 Company to incur additional debt, transfer or dispose of all of its assets, make certain investments, loans or payments and engage in

certain transactions with affiliates.

The Company was in compliance with all covenants at September 30, 2022.

On November 30, 2021, the Company and certain of its

subsidiaries entered into Incremental Amendment No.

2 (the “Second Amendment”) to the Credit Facility (as defined below) with Truist Bank.

The Second Amendment amends the Credit Facility to, among other things, provide for an incremental

term loan (the “Incremental Term Loan”) in an aggregate principal amount equal to $ 200.0 million which will be added to, and

constitute part of, the existing $ 110.0 million term loan and will be on the same terms applicable to the existing term loan

under the Credit Facility.

Additionally, the Second Amendment further provides a $ 20.0 million increase in the revolving

commitment, which will be added to, and constitute part of, the existing $ 30.0 revolving commitment.

On February 2, 2021, the Company entered into Incremental Amendment No.

1 (the “First Amendment”) to Amend the Credit Facility (as defined below), to among other things, provide for an incremental term loan in an aggregate principal amount equal to $ 30.0 million, which will be added to, and constitute a part of, the existing $ 80.0 million term loan.

The First Amendment was on the same terms applicable to the existing term loan.

On July 22, 2020, the Company entered into a Credit Agreement (the

“Credit Facility”), with Truist Bank.

The Credit Facility provides for a $ 30.0 million revolving credit facility that may be used

for revolving credit loans (including up to $ 5.0 million in swingline loans) and up to $ 5.0 million in letters of credit from time to time, and a $ 80.0

million term loan.

Subject to certain conditions, the available amount under the revolving credit facility and the term loans may be increased by $ 50.0

million in the aggregate.

The Credit Facility bears interest at a rate that is equal to LIBOR for such interest period plus an applicable margin of up to 3.00 %, subject to step-downs to be determined based on the consolidated leverage ratio.

The revolving credit facility is subject to an unused line fee of up to 0.40 %, subject to step-downs to be determined based on the consolidated leverage ratio.

Long-term debt consisted of the following at:

($ in thousands)

September 30,

Term note payable to Truist Bank, secured and bearing interest at 5.31 % at September 30, 2022 and 2.75 %

at September 30, 2021.

The note requires quarterly principal payments commencing on December 31, 2022 and maturing

with a full repayment on August 9, 2027

Revolving note payable for an amount up to $ 65.0 million to Truist Bank

Notes payable to commercial vehicle lenders secured by the value of the vehicles bearing

interest at rates ranging from 0.0 % to 8.9 % per annum.

The notes require monthly installment payments of principal and

interest ranging from $ 100 to $ 5,600 through October 2028

Note payable to Tom George Yacht Group, unsecured and bearing interest at 5.5 % per annum.

The note requires monthly interest payments, with a balloon payment of principal due on December 1, 2023

Note payable to Norfolk Marine Company, unsecured and bearing interest at 4.0 % per annum.

The note requires quarterly

interest payments, with a balloon payment of principal due on December 1, 2024 .

Note payable to Central Marine Services, Inc., unsecured and bearing interest at 5.5 % per annum.

The note was repaid in full on February 1, 2022 .

Note payable to Ocean Blue Yacht Sales, unsecured and bearing interest at 5.0 % per annum.

The note was repaid in full on February 1, 2022 .

Note payable to Slalom Shop, LLC, unsecured and bearing interest at 5.0 % per annum.

The note was repaid in full on December 1, 2021 .

Total debt outstanding

Less current portion (net of current debt issuance costs)

Less unamortized portion of debt issuance costs

Long-term debt, net of current portion and unamortized debt issuance costs

Principal repayment requirements of long-term debt at September 30, 2022 are as

follows (in thousands):

Year ending September 30,

Total principal payments

Debt issuance costs are amortized on a straight-line basis over the

life of the loan, which approximates the effective interest method.

During the fiscal year ended 2022 and 2021, the Company capitalized loan costs of $ 9.1 million and $ 0.7 million, respectively, and had accumulated amortization of $ 1.9 million and $ 0.8 million as

of September 30, 2022 and 2021, respectively.

In connection with entering into the A&R Credit Facility, the Company wrote off unamortized debt issuance cost of $ 0.4 million which was included in loss on extinguishment of debt in the Consolidated Statements of Operations for the year ended September 30, 2022.

In connection with

the prepayment of the Term and Revolver Credit Facility with Goldman Sachs Specialty Lending Group, L.P., the Company wrote off unamortized debt issuance costs of $ 2.4 million which was included in loss on extinguishment of debt in the Consolidated Statement of Operations for the year ended September 30, 2020.

Amortization for the

years ended September 30, 2022, 2021 and 2020 amounted to $ 1.3 million, $ 0.7 million and $ 0.4 million, respectively, and is

included in interest expense.

As of September 30,

2022, the Company had $ 0.4 million in letters of credit outstanding under the A&R Revolving Facility.

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.

During the fiscal year ended September 30, 2022, the Board approved the grant

of 121,470 time-based restricted stock units.

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.

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

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

Unvested at September 30, 2020

Unvested at September 30, 2021

Unvested at September 30, 2022

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

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:

Net income attributable to OneWater Inc

Weighted-average number of unrestricted

outstanding common shares used to calculate basic net income per share

Effect of dilutive securities:

Restricted stock units

Employee Stock Purchase Plan

Diluted weighted-average shares of Class

A common stock outstanding used to calculate diluted net income per share

Earnings per share of

Class A common stock – basic

Earnings per share of

Class A common stock – diluted

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):

September 30, 2022

September 30, 2021

September 30, 2020

Class B common stock

Restricted stock units

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.

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

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:

Dividend yield

Risk-free interest rate

Expected life

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 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

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 %.

in Note 4, the Company acquired an 80 % economic interest in Quality Boats during the year ended September 30, 2022.

Company has the exclusive right, but not obligation, to acquire the remaining 20 % economic interest at any time before January

As of September 30, 2022, the Company has not exercised the right and maintains control of 80 % of the economic

interest of Quality Boats.

Redeemable Preferred Interest in Subsidiary

1, 2016, the Company organized OWAO.

As of September 30, 2016, OWAO was not funded.

In conjunction with Goldman and Beekman, OneWater LLC contributed a majority of its assets, including subsidiaries operating all of its retail operations,

to OWAO in return for 100,000 common units.

Additionally, as a part of the transaction, OWAO issued 68,000 preferred units in OWAO to Goldman and Beekman.

The preferred interest had a stated 10.0 % rate of return and there was no allocation of profits in excess of the stated return.

The preferred interests were not convertible but may have been redeemed by

the holder after 5 years or upon certain triggering events at face value plus accrued interest.

had classified the redeemable preferred interest as temporary equity in the consolidated balance sheets.

The discount on the issuance of the redeemable preferred interest was being accreted to retained common interests as a dividend from

the date of issuance through the fifth anniversary of the issuance date.

On February 11, 2020, in connection with the IPO, OWAO used $ 89.2

million in cash to fully redeem the preferred interest in subsidiary held by Goldman and Beekman.

Retirement Plan

The Company offers a 401(k) retirement plan to its full-time employees over the age of 21 .

The Company currently makes discretionary matching contributions of 50.0 % for the first 4.0 % of employee salary deferrals.

made discretionary contributions of $ 2.2 million, $ 1.5 million and $ 0.8 million for the years ended September 30, 2022,

2021 and 2020, respectively.

Fair Value Measurements

In determining fair value, the Company uses various

valuation approaches including market, income and/or cost approaches.

FASB standard ‘‘ Fair Value Measurements ’’ (Topic 820) establishes a hierarchy

for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are inputs that market

participants would use in pricing the asset or liability developed based on market data obtained from independent sources.

Unobservable inputs are those that reflect the Company’s expectation of the assumptions market participants would use

in pricing the asset or liability developed based on the best information available in the circumstances.

The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1 – Valuations based on quoted prices in active markets for

identical assets or liabilities that the Company has the ability to access.

Assets utilizing Level 1 inputs include marketable securities that are actively traded.

Level 2 – Valuations based on quoted prices in markets that are not active

or for which all significant inputs are observable, either directly or indirectly.

Level 3 – Valuations based on inputs that are unobservable and significant

to the overall fair value measurement.

Asset and liability measurements utilizing Level 3 inputs include those used in estimating fair value of non-financial assets and non-financial liabilities in purchase acquisitions, those used in

assessing impairment of property, plant and equipment and other intangibles and those used in the reporting unit valuation in the annual goodwill impairment evaluation ,

contingent consideration and those used in the valuation of the warrant liability.

The availability of observable inputs can vary and is

affected by a wide variety of factors.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.

Accordingly, the degree of

judgment required in determining fair value is greatest for assets and liabilities categorized in Level 3.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases,

for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

Fair value measurements can

be volatile based on various factors that may or may not be within the Company’s control .

The following tables summarize the Company’s financial assets and liabilities measured at fair value in the accompanying Consolidated Balance Sheets as of September 30,

($ in thousands)

Investment in Equity Securities

Contingent Consideration

($ in thousands)

Contingent Consideration

There were no transfers between the valuation hierarchy Levels 1, 2, and 3 for the fiscal years ended September 30,

2022, and 2021.

We measure all equity investments

that do not result in consolidation and are not accounted for under the equity method at fair value with the change in fair value included in other expense (income), net, in the Consolidated Statements of Operations.

The fair value of

equity investments is measured using quoted prices in its active markets.

The investment in equity securities balance is recorded in other assets in the Consolidated Balance Sheets and consists of a $ 0.8 million investment in Forza X1, Inc.

The portion of unrealized

losses recognized related to equity securities still held as of September 30 consists of the following:

($ in thousands)

September 30,

Net losses recognized during the period on equity securities

net losses recognized during the period on equity securities sold during the period

Unrealized losses recognized during the reporting period on equity securities still held at the reporting date

There were no unrealized losses (gains) recognized during the years ended September 30, 2021 and 2020.

We estimate the fair value of contingent consideration using a probability-weighted discounted cash flow model based

on forecasted future earnings or forecasted probabilities of producing acquisition leads.

The acquisition contingent consideration liability has been accounted for based on inputs that are unobservable and significant to the overall fair

value measurement (Level 3).

The contingent consideration balance is recorded in other payables and accrued expenses and other long-term liabilities in the Consolidated Balance Sheets.

Changes in fair value and net present value of

contingent consideration are included in change in fair value of contingent consideration in the Consolidated Statements of Operations.

The fair value of contingent consideration is reassessed on a quarterly basis.

The following table sets forth the changes in fair value of our contingent consideration for the fiscal years ended

September 30, 2022 and 2021:

($ in thousands)

Contingent Consideration

Balance as of September 30, 2020

Additions from acquisitions

Settlement of contingent consideration

Change in fair value, including accretion

Balance as of September 30, 2021

Additions from acquisitions

Settlement of contingent consideration

Change in fair value, including accretion

Balance as of September 30, 2022

We determined the carrying value of our cash and cash equivalents, accounts receivable, accounts payable, other

payables and accrued expenses, floor plan notes payable, term note payable with Truist Bank, seller notes payable and company vehicle notes payable approximate their fair values because of the nature of their terms and current market

rates of these instruments.

Company is a corporation and, as a result is subject to U.S.

federal, state and local income taxes.

OneWater LLC is treated as a pass-through entity for U.S.

federal tax purposes and in most state and local jurisdictions.

As such, OneWater

LLC’s members, including the Company, are liable for federal and state income taxes on their respective shares of OneWater LLC’s taxable income.

components of income tax expense are:

($ in thousands)

September 30,

Income tax expense

A reconciliation of the United

States statutory income tax rate to the Company’s effective income tax rate is as follows:

For the Years Ended September 30,

Statutory federal tax rate

Income attributable to non-controlling interests and nontaxable income

State income taxes, net of federal benefit

Effective income tax rate

of the Company’s deferred tax assets and liabilities are as follows:

($ in thousands)

September 30,

Deferred tax assets:

Investment in partnerships

Tax receivable agreement

Valuation allowance

Total deferred tax assets

Deferred tax liabilities:

Investment in partnerships

Total deferred tax liabilities

Deferred tax assets, net

The Company recognizes deferred tax assets to the extent it believes these assets are more-likely-than-not to be

In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax planning strategies and

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk