Brunswick Corporation Q3 FY2025 earnings call

• Brunswick delivered strong third quarter results with all segments generating revenue growth. Market-leading propulsion and boat portfolios outperformed markets. Recurring revenue and aftermarket businesses benefited from healthy boating activity. - Free cash flow was $111M in Q3, $355M YTD, with $1.6B since 2021 and record $635M over last 12 months. - Announced margin-accretive footprint actions in boat business, enterprise-wide tariff mitigation initiatives. - Navico Group's Simrad AutoCaptain autonomous boating system launched, combining efforts of Navico, Mercury, and Boat Group. - Boat segment streamlined value fiberglass model lineup and announced consolidation of Mexico and Florida facilities to reduce fixed costs and improve profitability.

Propulsion: Delivered significant sales growth with all three businesses (outboard, sterndrive, controls, rigging and propellers) up year-over-year. Mercury was U.S. outboard market share leader with 49.4% share. Engine Parts and Accessories business posted strong sales growth with segment operating margin up sequentially. Navico Group: Reported modest sales growth, steady adjusted operating margin, but GAAP operating earnings impacted by $323M noncash intangible asset charges. Sales growth led by marine electronics, but affected by trade and economic environment. Boat: Grew revenue and adjusted operating margin, with aluminum boat brands strong, Freedom Boat Club contributing ~13% of segment sales. Dealer inventory low, and strategic consolidation of fiberglass facilities planned to reduce costs and improve profitability.

• Full year guidance unchanged: revenue ~$5.2B, adjusted operating margins ~7%, adjusted EPS ~$3.25. - Increased full year free cash flow estimate to in excess of $425M. - Increased debt reduction guidance for 2025 to $200M, aiming to lower net leverage below 2x EBITDA. - Anticipate retiring $200M or more of debt next year while returning capital to shareholders.

• Tariff impacts: Slight increase in estimated net tariff impact to ~$75M for the year due to expanded scope of Section 232 tariffs. - Macroeconomic and trade environment affecting Navico Group's impairment charges. - Value boat segment remains challenged despite efforts to streamline model lineup and improve profitability.

Q: James Hardiman asked about where Brunswick is relative to 2026 expectations and building blocks for positive inflection.

A: David Foulkes said early Q2 had shocks, but recovery and stabilization, premium/core parts outperforming, and momentum continuing into next season.

Q: Craig Kennison asked about U.S. tariffs on competitors and boat OEMs sourcing domestically.

A: David Foulkes said competitors attempting price increases, and Mercury continuing to gain share with new products.

Q: Anna Glaessgen asked about Navico margins excluding tariffs and variable comp.

A: Ryan Gwillim confirmed Navico margins would have been up excluding those items.

Q: Xian Siew asked about Propulsion market share growth and destocking benefit.

A: David Foulkes said steady market share growth with new products, and Ryan Gwillim discussed pipeline reductions.

Q: Amanda Douglas asked about value boat segment model lineup and inventory levels.

A: David Foulkes said model lineup rationalized, inventories rightsized across segments.

Q: Jaime Katz asked about Navico's road map.

A: David Foulkes said continued work on operational efficiency, product development, and inventory turns.

Q: Joe Altobello asked about 2026 revenue growth drivers.

A: Ryan Gwillim said combination of market, pricing, share gains, and discounting improvement.

Q: Joe Nolan asked about plant consolidation impact.

A: David Foulkes said fourth quarter impact small, with $10M+ run rate savings expected post-transition.

Q: Tristan Thomas asked about normalized boat industry demand.

A: David Foulkes said normalized demand affected by past disruptions, but flat to slightly up expected for 2026.

Q: Noah Zatzkin asked about tariff mitigation.

A: Ryan Gwillim said mitigation efforts outpacing expectations, incremental impact next year smaller, and working to reduce tariff impact.