BRUNSWICK CORP Q1 FY2025 earnings call

• All businesses had strong first quarter despite challenging macro environment; first-quarter financial performance ahead of expectations.
• Year-to-date unit retail sales for core premium boat brands in line with expectations for second-half biased year; weakness in entry-level products prompting consideration of streamlining offerings.
• Growing Freedom Boat Club, early season boat shows retail performance flat to prior year.
• First-quarter results demonstrated portfolio resiliency; outstanding free cash flow generation, $26 million in share repurchases.
• Propulsion business: Mercury outboard engines gained market share, sales to US boat OEMs strong. Engine P&A business had strong earnings and margin growth. Navico Group: Sequential sales growth vs Q4 2024, aftermarket sales strong but OEM orders pressured. Boat business: Sales and operating earnings below prior year, but sales grew mid-single digits vs Q4 2024.
• External factors: Uncertain tariff environment, macroeconomic conditions; potential $100 million to $125 million incremental net tariff costs in 2025 if current rates persist.

Propulsion: Sales down 16% vs prior year, segment operating earnings below prior year; Mercury outboard engines gained 40 basis points of US retail share. Engine P&A business: Strong quarter with solid year-over-year earnings and margin growth despite lower sales. Navico Group: Sequentially stronger sales vs Q4 2024, slight sales decrease vs Q1 2024, segment operating earnings decreased due to lower sales. Boat business: Sales down 13% vs prior year, segment operating earnings within expectations. Freedom Boat Club: Continued global expansion, steady membership sales growth, early season member boat usage trends up 3% sequentially. Revenue contribution: Recurring revenue businesses/channels (engine P&A, propulsions repower, Freedom Boat Club, Navico Group's aftermarket) contributed nearly 60% of first-quarter adjusted operating earnings.

• Adjusted EPS guidance range $2.50 to $4.00 per share, driven by anticipated revenue between $5 billion and $5.4 billion.
• Anticipate volume pressure in near term due to uncertain tariff environment, modeling $0.75 reduction approx 5% revenue decline.
• Plan to achieve $350 million free cash flow for the year; Q2 market conditions similar to Q1, with sequentially stronger revenue and earnings; boat unit sales slightly down vs 2024, weakness in value product.

• Uncertain tariff environment contributing to declining consumer sentiment and US Fed policy uncertainty.
• Potential $100 million to $125 million incremental net tariff costs in 2025 if current rates persist.
• Fluctuations in foreign exchange rates, interest rate environment.
• Potential retaliatory tariffs from EU and Canada on US manufactured boats, engines, parts; disruption of capital markets impacting consumer during retail boating season.

Q: Could you help understand the lower and higher end of the 2025 EPS guidance range?

A: High end anticipates moderation in tariff environment or better mitigation; low end reflects far end of tariff environment and volume decline.

Q: What about annualized tariff mitigation?

A: Hard to give exact number, but mitigation efforts ongoing, with some tariff impacts timing benefiting future years.

Q: What's driving Q2 guidance beneath street?

A: Tariff environment uncertainty, macro conditions, mix of sales and FX; plan to reduce inventory to match production.

Q: Plans to streamline entry-level boats?

A: Streamlining entry-level models, studying long-term cost benefits, ensuring not to compromise Mercury's share.

Q: Impact of capital markets disruption on premium brands?

A: Premium brands held up well, dealers still feeling need for wholesale orders; premium brands produced domestically with beneficial tariff environment.

Q: Mitigation actions against tariffs?

A: Pricing selectively, migrating supply base to lower tariff locations/onshoring, appropriately classifying components to minimize tariff exposure.

Q: Inventory and pipeline outlook?

A: Hoping to reduce pipeline by 1,000 units globally, landing weeks on hand in mid-thirties; engine pipeline also to be reduced.

Q: Outlook for share repurchases?

A: Balancing capital strategy, but cash flow positive for the year gives chance to be aggressive on shares.

Q: What's working best for consumers in terms of incentives?

A: Cashback with potential discounted financing rates, being more targeted with promotions.