Brunswick Corporation Q4 FY2025 earnings call

• 2025 performance: Finished ahead of recent expectations, net sales up 2% to $5.4 billion, adjusted earnings per share $3.27, free cash flow $442 million. Retail demand stabilized in second half after challenging first half. - Segment highlights: All segments grew revenue in Q4 2025; propulsion segment's Mercury had market share leads and new product investments; recurring revenue business saw growth; Navico Group saw revenue and margin growth; boat business benefited from retail improvement. - External factors: U.S. Fed cut rates 75 basis points in 2025, with more cuts anticipated in 2026; tariff mitigation actions in 2025 offset over half of gross dollar exposure, but 2026 expected to incur further incremental tariff costs of $35M to $45M. - Cash flow and balance sheet: Delivered $442M free cash flow in 2025, retired $240M of debt, repurchased $80M of shares, increased dividend. - New product launches and awards: Exhibited at CES, launched new products like Sea Ray SLX360, Mercury 808 concept; received awards at CES and boat shows, e.g., Navico AutoCaptain won CES pick award, Navan S30 model won Motor Boat of the Year.

Propulsion segment: Had an outstanding fourth quarter with revenues and earnings increasing in outboard, sterndrive, and controlled rigging and propellers. Mercury is market share leader in U.S., Canada, and Europe. Recurring revenue, high-margin engine parts and accessories business: Delivered higher sales and earnings in Q4 2025, fueled by higher boating participation and growing share in marine distribution. Market-leading U.S. distribution business gained 210 basis points of share in 2025. Navico Group: Increased both revenue and operating margin in Q4 2025. Boat business: Capitalized on continued improvement in retail market, drove sales growth and significantly expanded margins versus prior year quarter. Premium and core brands experienced 15% overall revenue growth at Fort Lauderdale Boat Show, value brands recovered momentum. Freedom Boat Club: Grew to 442 global locations, member trips finished year at over 640,000, up 5% over 2024.

• 2026 outlook: Assumes flat to slightly up U.S. retail boat market, anticipated revenue between $5.6B and $5.8B, adjusted operating margins between 7.58%, adjusted EPS in range of $3.8 to $4.4, strong free cash flow in excess of $350M. - Q1 directional guidance: Growth in net sales versus 2025, adjusted EPS between $0.35 and $0.45, burdened by majority of full-year incremental tariff cost and increased investments in first quarter. - Drivers of earnings improvement: Anticipated sales increases, benefits from annual pricing actions, lower discounting, mix benefits towards premium products, volume increases, favorable earnings impacts from currency, capital strategy, and cost reduction programs.

• Geopolitical and trade uncertainties: Dynamic geopolitical and trade environment could impact business. - Tariff impacts: Anticipated incremental tariff costs in 2026, with full-year impact of tariffs instituted in 2025. - Industry inventory levels: Stubbornly high inventories in the industry could be a headwind, though Brunswick's distributor inventory is fresh and in good levels.

Q: James Hardiman asked about retail performance in Q4 2025, inventory levels, and industry inventory levels' impact.

A: David Foulkes said retail was flat in units, saw strength in premium and core brands with recovery in value part; Ryan Gwillim said 2026 pipeline expected to be flat to maybe take out a couple of 100 units at most, and Brunswick's distributor inventory is fresh.

Q: Craig Kennison asked about repeat buyer behavior and deferred trade up cycle.

A: David Foulkes said there's a deferred trade up cycle due to depressed sales in past years, and equity markets and rate cuts are tailwinds.

Q: Gerrick Johnson asked about propulsion and boat business growth from OEM customers.

A: David Foulkes said Mercury is gaining share with new and existing customers, having multiyear agreements with European OEMs; Ryan Gwillim said engine pipelines are at lean levels with strong build rates.

Q: Anna Glaessgen asked about pipeline replenishment and tariff math.

A: David Foulkes said confidence is building with lower carrying costs and higher margins; Ryan Gwillim explained tariff math with Q1 taking brunt of incremental costs.

Q: Scott Stember asked about IEPA tariffs and margin upside.

A: Ryan Gwillim said IEPA tariffs impact $20M to $25M annually; Ryan Gwillim and David Foulkes discussed margin upside from strategic investments.

Q: Xian Siew asked about market share opportunities and margin flow through.

A: David Foulkes said steady march on share with new products; Ryan Gwillim said north of 20% incremental margins expected.

Q: Jaime Katz asked about margin headwinds and cost structure upside.

A: Ryan Gwillim said accelerated spending on investments is the main cost headwind, with upside from strategic investments in product and AI.