Stockholders' and Members' Equity

3 Months Ended

Dec. 31, 2022

Stockholders' and Members' Equity [Abstract]

Stockholders' and Members' Equity

10. 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 1,572,755. 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 three months ended December 31, 2022, the Board approved the grant of 83,036 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 of the Company. Of this amount, 13,288 performance-based restricted stock units fully vest on October 1, 2023 and the remaining 69,748 restricted stock units vest in three equal annual installments commencing on October 1, 2023. As of December 31, 2022, the Company estimated achievement of the performance targets at 100%.

During the three months ended December 31, 2022, the Board approved the grant of 131,113 time-based restricted stock units. Of this amount, 19,928 restricted stock units fully vest on October 1, 2023 and the remaining 111,185 restricted stock units vest in three equal annual installments commencing on October 1, 2023.

  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-based restricted stock 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 applicable vesting period. The Company recognized $2.3 million and $2.1 million of compensation expense for the three months ended December 31, 2022 and 2021, respectively, which includes $1.1 million and $1.0 million of compensation expense for the three months ended December 31, 2022 and 2021, respectively, for performance-based restricted stock units.

The following table further summarizes activity related to restricted stock units for the three months ended December 31, 2022:

	Restricted Stock Unit Awards
	Number of Shares			Weighted Average Grant Date Fair Value ($)
Unvested at September 30, 2022		559,793		$	28.01
Awarded		214,149			30.11
Vested		(111,075	)		24.62
Forfeited		(1,000	)		40.21
Unvested at December 31, 2022		661,867		$	29.24

As of December 31, 2022, the total unrecognized compensation expense related to outstanding equity awards was $10.3 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 issued 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 Class A common stock outstanding during the period. Diluted earnings per share is computed by giving effect to all potentially dilutive shares.

The following table sets forth the calculation of earnings per share for the three months ended December 31, 2022 and 2021 (in thousands, except per share data):

Earnings per share:	Three Months Ended December 31, 2022		Three Months Ended December 31, 2021
Numerator:
Net income attributable to OneWater Inc.	$	8,900	$	20,019
Denominator:
Weighted-average number of unrestricted outstanding common shares used to calculate basic net income per share		14,297		13,380
Effect of dilutive securities:
Restricted stock units		284		381
Employee Stock Purchase Plan		6		-
Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted earnings per share		14,587		13,761
Earnings per share of Class A common stock – basic	$	0.62	$	1.50
Earnings per share of Class A common stock – diluted	$	0.61	$	1.45

On March 30, 2022, the Board approved an up to $50 million share repurchase program. As of December 31, 2022 the Company has 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 December 31, 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 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 December 31, 2022		Three Months Ended December 31, 2021
Class B common stock		1,430		1,815
Restricted Stock Units		377		233
		1,807		2,048

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 449,257 shares of the Company’s Class A common stock may be issued under the ESPP as of December 31, 2022, 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 three months ended December 31, 2022. As of December 31, 2022, we had current liabilities of $1.1 million for future purchases of shares under the ESPP. No purchases have been made under the ESPP as of December 31, 2022.

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

The following are the weighted-average assumptions used for the period ended December 31, 2022:

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

Distributions

During the three months ended December 31, 2022, the Company made distributions to OneWater Unit Holders for certain permitted tax payments.