Brunswick Corporation

Good morning and welcome to Brunswick Corporation's first quarter 2024 earnings conference call. All participants will be in listen-only mode until the question and answer period. Today's meeting will be recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Neha Clark, Senior Vice President, Enterprise Finance, Brunswick Corporation. Thank you and you may now begin.

Good morning and thank you for joining us. With me on the call this morning are Dave Fowkes, Brunswick CEO, and Ryan Guillem, CFO. Before we begin with our prepared remarks, I would like to remind everyone that during this call, our comments will include certain forward-looking statements about future results. Please keep in mind that our actual results could differ materially from these expectations. For details on these factors to consider, please refer to our recent SEC filings and today's press release. All of these documents are available on our website at Brunswick.com. During our presentation, we will be referring to certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP financial measures are provided in the appendix to this presentation and the reconciliation sections of the unaudited Consolidated Financial Statements accompanying today's results. I will now turn the call over to Dave.

Thanks, Neha, and good morning, everyone. Ronsec had a solid start to the year, delivering sales, margin, and adjusted earnings per share consistent with expectations, despite continued customer caution in the face of the economic uncertainty. Our performance benefited from continued market share gains, the wealth of recently launched and well-received new products, and comprehensive cost control measures across our businesses. offset by higher promotions and discounts on some product lines. We also continue to make good progress on our strategic initiatives. Our first quarter net sales of $1.4 billion and adjusted earnings per share of $1.35 were in line with our guidance range and consistent with the anticipated, restrained, early season marine dealer OEM and retail wholesale order patterns. which drove reduced production rates across our product businesses compared to the first quarter of 2023 when pipelines were being filled. Mercury Marine continued to capture market share with first quarter U.S. outboard retail share up 200 basis points versus prior year. Our early season boat unit retail performance is tracking with our outlook of flat to 2023. As we move into the core 2024 retail selling season, we continue to work closely with our channel partners to maintain balanced current model field imagery levels, and we close the first quarter with 36.1 weeks on hand in the U.S., which is in line with historical norms. In addition, during the quarter, we successfully completed a debt issuance of $400 million to cover the refinance of our only near-term debt, further solidifying our cash position and balance sheet. I'll now turn to some segment highlights for the quarter. Our propulsion business delivered lower sales and earnings versus a record first quarter of 2023 as boat manufacturers and dealers moderated order patterns and managed production of current model year products and pipelines ahead of the annual model year changeover. We expect OEMs to remain cautious through the model year changeover as they assess consumer sentiment and monitor the macro environment. Mercury continued to outperform the market, gaining 330 basis points of U.S. outboard market share in engines 150 horsepower and above. Our engine parts and accessories business continued its steady performance, with sales and earnings down modestly from the first quarter of 2023 as anticipated. but increasing sequentially over the prior quarter. Early season weather patterns have been supportive of boating in the northern U.S., and with normalized inventory levels across the dealer network, continued strong boating participation should contribute to growth for the remainder of the year. As expected, Navico Group had lower sales and earnings versus the first quarter of 2023, but delivered sequential sales growth, and consistent earnings versus the prior quarter. Navigo Group continues to focus on investment in new products, including the recently launched Simrad NSX ultra-wide multifunction display, which has been very well received by customers, and is preparing for several important new product launches in the remainder of the year. Finally, our boat business performs to plan, with exceptional retail performance by Boston Whaler and Sea Ray at early season boat shows. while continuing to introduce new models to support market share gains. Sales and earnings were below prior year, consistent with lower planned production levels, while operating margins improved sequentially. Freedom Boat Club continues to deliver steady membership sales, and same club sales in the quarter were mid-single-digit percent above prior year. Freedom has now expanded to 413 worldwide locations. Shifting to external factors now, U.S. GDP and employment remain stronger than anticipated, slowing the recent pace of disinflation and, consequently, the likely cadence of Fed rate reduction, which in turn is keeping consumer loan rates high. We are, however, seeing a higher proportion of buyers with high credit scores financing their purchases than in recent prior periods. and interest in the recently launched Brunswick Retail Finance Program continues to increase, with more than 35% of Brunswick boat dealers having enrolled. The marine industry is continuing to lobby against the proposed NOAA East Coast Vessel Speed Regulation and advocate for technology-based solutions. However, the exact contents of the proposed rule remain unknown, making an analysis of the impacts difficult. As noted, dealer sentiment is generally sequentially improving, but with appropriate inventory levels, they are carefully pacing wholesale orders, particularly for current mobile value product lines. We are working with dealers to deploy a portfolio of targeted discounts and promotions. On a per unit basis, retail and wholesale program spending is in line with pre-pandemic levels, but floor plan support spending is higher. Our investments in digital platforms continue to drive benefits across our brands, with more than a third of boat group sales digitally assisted in the first quarter. Our surveys continue to show strong boating participation levels supportive of steady P&A demand. Overall boat show results were encouraging, with interested buyers, strong lead generation, and sales above prior year levels on a unit basis and with a richer product mix. Our Boston Whaler and CRA businesses demonstrated exceptional retail performance at early boat shows, with new models supporting market share gains. Mercury Marine performed well at all major boat shows, recording the highest outboard share at Dusseldorf, Miami, and other key events. Shifting now to a global view of revenue in the quarter, overall we saw a 22% sales decline on a constant currency basis, excluding acquisitions. Moving now to U.S. retail performance, U.S. industry new boat unit sales in the quarter declined versus the first quarter of 2023. Brunswick internal retail data outperformed the overall market with particular strength in our premium brands. Our year-to-date global internal unit retail sales are flat to prior year, including a solid start in the first weeks of the second quarter. It is not uncommon to see differences in SSI reporting and internal data at this point in the season. And our expectation of a flat retail market for the full year currently remains unchanged. U.S. outboard engine industry retail units declined 9% in the first quarter versus prior year. Mercury continues to outperform the market with an overall share gain of 200 basis points in the quarter. We continued to successfully manage boat pipelines, and we ended the quarter with U.S. inventory at 36.1 weeks, in line with expectations and historical norms, and with 13,500 units in the pipeline versus nearly 18,000 units in 2019. International boat pipelines were slightly higher, which is normally the case. Notably, our first quarter U.S. boat pipelines declined versus the end of the fourth quarter of 2023, which is unusual given the first quarter is commonly a period of building pipelines ahead of the selling season, underlining the caution being exhibited by our channel partners. I'll now turn the call over to Ryan to provide additional comments on our financial performance and outlook.