Brunswick Corporation

meeting will be recorded. If you have any objections, you may now disconnect at this time. I would now like to introduce Neha Clark, Senior Vice President, Enterprise Finance, Brunswick Corporations. Thank you. You may begin.

Good morning, and thank you for joining us. With me on the call this morning are Dave Fowkes, Brunswick CEO, and Ryan Guilham, 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. We had a very solid finish to 2024, characterized by significant cash generation in the fourth quarter, further outboard engine market share gains, successful new product launches, and optimal operating performance in the circumstances, all of which enabled us to conclude full year 2024 slightly ahead of our recent expectations. Our ongoing diligent management of both field inventory and production resulted in well-balanced levels exiting the year, with 36.8 weeks on hand in the U.S. dealer pipeline. In line with prior expectations, U.S. new boat retail sales ended 2024 down high single-digit percent versus 2023, with Brunswick performing slightly better than the industry in important premium segments. With dealer and retail inventories well-positioned, our channel partners have shifted their focus towards early season boat shows, which has been fairly encouraging to date. Our continued focus on cost containment, robust capital strategy execution, and successful efforts to manage working capital resulted in four-year free cash flow conversion of 92%, even as we continue to invest in new products and technologies to support strategic growth initiatives. In addition, we completed a total of $200 million of share repurchases in 2024. Turning to some highlights from our segments in the quarter. As anticipated, reduced production in our propulsion business resulted in lower net sales and operating earnings in the fourth quarter versus 2023. However, we continue to outperform the market and gained 110 basis points of US retail outboard engine share during the year. in addition to achieving significant share increases at 2025 early season boat shows. Our engine parts and accessories businesses delivered slightly lower net sales and earnings in the fourth quarter versus prior year, but grew earnings and operating margins for the full year, led by the products portion of the business and the operational efficiencies resulting from the completed transition to the Brownsburg, Indiana distribution center. Navico Group sales were essentially flat versus fourth quarter 2023, with well-received and positioned new products supporting higher net sales in the aftermarket business versus prior year, and a solid holiday season performance which, together with continued cost control and complexity reduction, resulted in sequentially higher sales and adjusted earnings versus the third quarter. Our bulk business delivered sales and earnings in the quarter consistent with expectation, while continuing to ensure healthy pipeline inventory levels as we enter 2025. Strong demand for premium products, together with market share gains in several categories, help provide a stable baseline for 2025. Finally, Freedom Boat Club had another strong quarter, continuing to integrate its recent acquisitions and achieving over 600,000 annual member trips for the second consecutive year. Over the past 12 months, Freedom added many new locations in the US, Europe, Australia, and New Zealand, and continues on a path to add more regions enabled by its convenient, synergistic, and cycle-resistant business model. Turning to the external environment, we have obviously seen some welcome interest rate relief since September, which was too late to affect the 2024 season, which should be a tailwind for the 2025 season. The uncertain tariff environment has, of course, become an elevated consideration. We have the benefit of producing the large majority of our products in the U.S. and for the U.S. market, and we have significantly reduced our exposure to China over the past few years. However, at current tariff rates, we anticipate an annualized impact of approximately $35 million in 2025. We are preparing for a range of scenarios, and have many short and long-term mitigating actions already underway, including continued migration of our supply base, inventory staging, and optimization of our facilities. Dealer sentiment is fairly solid, with focus shifted towards early season boat shows. We were pleased to see U.S. small business confidence improving in the most recent surveys. As we enter 2025, discounting and promotion levels remain elevated. particularly on prior model year products. And as anticipated, OEMs and channel partners are continuing to be cautious in their production and ordering patterns. However, we continue to see strong boating participation, supporting our resilient recurring revenue businesses. There is high interest in and good acceptance of our many fresh, innovative new products. Finally, the previously proposed North Atlantic right whale vessel speed restriction rule was recently withdrawn from the regulatory agenda. Moving now to U.S. industry retail performance. U.S. outboard engine industry retail units declined 8% on a four-year basis versus prior year, with Mercury Marine outperforming the industry. As mentioned, Mercury Marine continues to gain share delivering 110 basis points of US output engine market share increase for the full year. We have diligently managed both pipeline levels, and for the full year, wholesale shipments were down 24% in a retail environment that was down high single digits, leading to healthy US year-end inventory of 36.8 weeks on hand. Premium fiberglass pipelines finished well below historical levels, Before I turn it over to Ryan, I wanted to walk through the components of our full year 2025 adjusted EPS guidance of between $3.50 and $5 per share. As many of you are aware, there are several unique factors that will influence this year's earnings profile, with some outside our direct control. This bridge illustrates our current view of the moving pieces. In the areas over which we have more control, we believe that we'll grow earnings as a result of additional volume, primarily in the back half of the year. In addition, we have significant cost reduction efforts underway with an anticipated benefit of approximately $1.25 per share, which will be partly offset by the variable compensation rate set of $1 per share. The combination of tariffs and the impact of foreign exchange rates creates a headwind of just under 80 cents per share, slip roughly evenly. The tariff estimate reflects our base impact predicated on current rules and rates, which Ryan will speak more about in a moment. The further strengthening of the U.S. dollar versus several currencies, including the euro, peso, real, and others, results in primarily transaction losses as our non-U.S. businesses purchase product from our U.S. operations. We believe we can partially offset this impact through pricing for certain markets and product lines, but we'll not be able to offset the full impact. I'll now turn the call over to Ryan to provide additional comments on our financial performance in Outlook.