Stockholders' and Members' Equity

9 Months Ended

Jun. 30, 2021

Stockholders' and Members' Equity [Abstract]

Stockholders' and Members' Equity

9. Stockholders’ and Members’ 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 1,503,902. 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 nine months ended June 30, 2021, the Board approved the grant of 102,490 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 during fiscal year 2021 as measured against objective performance goals as determined by the Board. The actual number of units earned may range from 0% to 200% of the target number of units depending upon achievement of the performance goals. Performance-based restricted stock units vest in three equal annual installments, commencing on October 1, 2022. Upon vesting, each performance-based restricted stock unit equals one share of common stock of the Company. Compensation cost for performance-based restricted stock units is based on the closing price of our common stock on the date immediately preceding the grant and the Company’s assessment of the probability and level of performance achievement, and is recognized on a graded basis over the three-year vesting period. As of June 30, 2021, the Company estimated achievement of the performance targets at 200% and therefore $0.3 million and $0.7 million of expense related to the performance awards was recorded in the three and nine months ended June 30, 2021, respectively.

During the nine months ended June 30, 2021, the Board approved the grant of 143,947 time-based restricted stock units. 25,620 restricted stock units fully vest on October 1, 2021 and the remaining 118,327 restricted stock units vest in four equal annual installments commencing on September 30, 2021.

The following table further summarizes activity related to restricted stock units for the nine months ended June 30, 2021:

	Restricted Stock Unit Awards
	Number of Shares			Weighted Average Grant Date Fair Value ($)
Unvested at September 30, 2020		301,643		$	15.78
Awarded		246,437			26.58
Vested		(75,893	)		15.70
Forfeited		-			-
Unvested at June 30, 2021		472,187		$	21.43

Compensation cost for 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 straight-line basis over the applicable vesting periods. For the three and nine months ended June 30, 2021, the Company recognized $1.1 million and $3.3 million of compensation expense, respectively. As of June 30, 2021, the total unrecognized compensation expense related to outstanding equity awards was $9.4 million, which the Company expects to recognize over a weighted-average period of 1.6 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 issued equal to the amount of employee income tax withholding.

Investor Voting Warrants

On October 28, 2016, the Company issued 25,000 OneWater LLC common unit warrants in exchange for $1.0 million. The common unit warrants had a ten-year life from the date of issuance and provided the holders with a put right after five years, or potentially earlier, under certain circumstances. The holders of the warrants maintained full voting rights in OneWater LLC. As the common unit warrants could be settled in cash at the election of the holder, the fair value of the common unit warrants was included in warrant liability. In connection with the Offering, Goldman Sachs & Co. LLC and certain of its affiliates (“Goldman”) and The Beekman Group (“Beekman”) received 2,148,806 OneWater LLC units upon exercise of the warrants.

The Company engaged a third-party valuation specialist to assist management in performing a valuation of the fair value of the common unit warrants. Accordingly, the warrant liability was accounted for based on inputs that were unobservable and significant to the overall fair value measurement (Level 3). The valuation considered both a market and a discounted cash flows approach in arriving at the fair value of the common unit warrants. As previously noted, the common unit warrants were exercised in connection with the Offering for common units of OneWater LLC and therefore no warrant liability existed as of September 30, 2020 and June 30, 2021. The Company recognized income of $0.8 million for the nine months ended June 30, 2020, and this change in the fair value was recorded as a change in the fair value of warrant liability in the accompanying unaudited condensed consolidated statements of operations.

Non-Controlling Interest

In connection with the Offering, the former owners of Bosun’s Assets and Operations and South Shore Assets and Operations received 290,466 and 306,199 shares of Class A common stock, respectively, for the surrender of their respective 25.0% ownership interests. Accordingly, the former owners’ minority interests have been recorded as a non-controlling interest from October 1, 2019 through February 10, 2020, the period prior to the Offering.

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”). 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 June 30, 2021, OneWater Inc. owned 77.5% of the economic interest of OneWater LLC with the OneWater Unit Holders owning the remaining 22.5%.

Distributions

During the nine months ended June 30, 2021, the Company made distributions to OneWater Unit Holders for certain permitted tax payments.

Dividends

Dividends paid to holders of Class A common stock, distributions paid to OneWater Unit Holders and dividends payable to restricted stock unit holders are referred to herein collectively as “dividends”. Dividends declared are reported as a reduction of retained earnings. Dividends paid to OneWater Unit Holders are recorded as a reduction in non-controlling interest. On June 17, 2021, the Board declared a special cash dividend of $1.80 per share. The cash dividend of approximately $27.1 million was paid on July 19, 2021 to holders of Class A common stock and OneWater Unit Holders. Additionally, a $0.7 million cash dividend for restricted stock unit holders will be paid to holders upon vesting of the awards. The dividends are recorded in other payables and accrued expenses in the condensed consolidated balance sheets as of June 30, 2021.

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 Class A common stock outstanding during the period. For the nine months ended June 30, 2020, earnings per share is calculated for the period from February 11, 2020 through June 30, 2020, the period following the Offering. Diluted earnings per share is computed by giving effect to all potentially dilutive shares.

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

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

Earnings per share:	Three Months Ended June 30, 2021		Three Months Ended June 30, 2020
Numerator:
Net income attributable to OneWater Inc	$	34,503	$	14,367
Denominator:
Weighted-average number of unrestricted outstanding common shares used to calculate basic net income per share		10,976		6,088
Effect of dilutive securities:
Restricted stock units		365		9
Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted earnings per share		11,341		6,097
Earnings per share of Class A common stock – basic	$	3.14	$	2.36
Earnings per share of Class A common stock – diluted	$	3.04	$	2.36

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

Earnings per share:	Nine Months Ended June 30, 2021		Nine Months Ended June 30, 2020
Numerator:
Net income attributable to OneWater Inc	$	62,765	$	15,452
Denominator:
Weighted-average number of unrestricted outstanding common shares used to calculate basic net income per share		10,884		6,088
Effect of dilutive securities:
Restricted stock units		259		5
Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted earnings per share		11,143		6,093
Earnings per share of Class A common stock – basic	$	5.77	$	2.54
Earnings per share of Class A common stock – diluted	$	5.63	$	2.54

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 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):

	Three Months Ended June 30, 2021		Three Months Ended June 30, 2020
Class B common stock		4,063		8,462
Restricted Stock Units		201		292
		4,264		8,754

	Nine Months Ended June 30, 2021		Nine Months Ended June 30, 2020
Class B common stock		4,124		8,462
Restricted Stock Units		221		235
		4,345		8,697

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. As of June 30, 2021, there has not yet been an offering period under the ESPP.