Brunswick Corporation

Good morning, and welcome to Brunswick Corporation's third quarter 2025 earnings conference call. All participants will be in a 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 Stephen Weiland, Senior Vice President and Deputy CFO, Brunswick Corporation.

Good morning, and thank you for joining us. With me on the call this morning is David Phelps, Brunswick's Chairman and CEO, and Ryan Willem, Brunswick's 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 the 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, Steve. Brunswick delivered strong third quarter results. with each reporting segment generating revenue growth over the prior year quarter, and overall financial performance exceeding expectations and guidance for the quarter. The sales growth reflected strength across all our businesses, despite a challenging, albeit improving, macro environment and industry backdrop. Our market-leading propulsion and boat portfolios outperformed their respective markets, and our recurring revenue, parts and accessories, and other aftermarket-focused businesses, along with Freedom Boat Club, continued to benefit from healthy boating activity. Brunswick's third quarter boat retail sales were flat year over year, and notable relative improvement from the first half of the year, driven by resilience in our premium and core categories. We continue to drive forward with financial and operational efficiencies, through the announced margin accretive footprint actions in our bulk business, continued enterprise-wide tariff mitigation initiatives, prudent pipeline management, and excellent capital strategy execution. Our third quarter sales of $1.4 billion were up 7% versus prior year. Our adjusted earnings per share of 97 cents were impacted by that reinstatement of variable compensation and tariffs but were up year over year, excluding those items, and we had another quarter of outstanding free cash flow generation, providing us with the flexibility to simultaneously invest in our business, return capital to shareholders, and strengthen our balance sheet. With 111 million of free cash flow in the third quarter, we have generated 355 million year to date. an exceptional $348 million improvement over the first three quarters of last year. For the first time since the first quarter of 2022, revenue grew in all our segments. The propulsion business delivered significant sales growth, with revenues in each of its three businesses, outboard, stern drive, and controls rigging and propellers, up over prior year as OEM order strength continued later into the boating season. Mercury continues to be the clear U.S. outboard market share leader, with 49.4% share of outboard engines sold in the quarter. Given the volume of Mercury competitor engines shipped into the U.S. in advance of the tariffs on Japanese imports, we have not yet seen the full potential impacts of those tariffs on competitor product pricing. but we continue to be well positioned. Strong voter participation in our core markets continues to benefit our high margin annuity engine parts and accessories business, which posted strong sales growth over the prior year, with sales in both the products and distribution businesses up solidly, and segment operating margin also up sequentially from the second quarter, reflecting the strong operating leverage in the business. In the U.S., our market-leading distribution business gained 140 basis points of market share year to date over the same period last year. Navico Group reported modest sales growth and steady adjusted operating margin over prior year. Growth was led by strong performance in marine electronics product lines that continued to benefit from investments in technology and new product introduction. while strong voting participation drove aftermarket sales that represent 60% of Navico revenue. Continued restructuring actions, a leaner, more focused organization, and new product investments are bearing fruit, and Navico Group's strategic importance to the Brunswick portfolio was recently reinforced by the introduction of the Simrad AutoCaptain autonomous voting system. developed by Navico Group in collaboration with Mercury Marine and Brunswick Boat Group. Lastly, GAAP operating earnings were impacted by 323 million of non-cash intangible asset charges for Navico Group. These impairment charges reflect the impact of the current trade and economic environment, despite our plans for continued growth and margin improvement in this important part of our portfolio. that is an increasing source of integrated solutions and differentiated innovation. Our boat business grew both revenue and adjusted operating margin over prior year, as our premium brands continued to perform well, and our aluminum boat businesses delivered a very strong quarter. ELA inventory remained historically low, and coupled with flat retail, allowed for steady wholesale shipments. In September, we announced the strategic rationalization of our fiberglass boat manufacturing footprint, exiting our facilities in Reynoso, Mexico and Flagler Beach, Florida by the middle of 2026 and consolidating production from these facilities into existing US facilities. Moving on to external factors, the US Fed cut the Fed funds rate by 25 basis points in September with expectations for several additional cuts through the balance of 2025 and or in early 2026. Lower interest rates have a compound benefit in reducing the cost of both dealer floor plan financing and consumer retail financing, which will be a tailwind for both wholesale stocking and the 2026 main selling season. Additionally, while we're still analyzing how best to take advantage of the tax provisions of the One Big Beautiful Bill Act, the cash flow benefits will most likely be realized in 2026. We continue to actively manage our tariff exposure in what is still a dynamic situation and are slightly increasing our estimate to approximately $75 million of net tariff impact for the year, mainly as a result of the expanded scope of Section 232 tariff. I will again highlight that because of our primarily US-based vertically integrated engine and boat manufacturing base and predominantly domestic supply chain, and the fact that we manufacture almost all our boats for international markets within those markets, we remain competitively well positioned in an environment of persistent tariffs. We also stand to potentially benefit from the tariffs of our engine competitors who import their engines from Japan now subject to a 15% tariff. Dealer sentiment remains stable, with historically low and fresh dealer inventory, and boating participation has increased considerably during the third quarter, benefiting our aftermarket businesses and driving Freedom Boat Club trips up 2.5% year-to-date versus prior year. OEM build rates have remained solid, and in combination with low inventories, of supported strong wholesale engine shipments. Retail incentives remain elevated compared to historic levels, but are lower than in the same period last year. Looking now at industry retail performance, which has steadily improved in recent months after the macroeconomic shocks from early spring, as of the latest SSI reporting for August, U.S. main powerboat industry retail was down a little more than 9% year to date. with Brunswick boat brands continuing to outperform the industry and Brunswick's internal retail performing better than SSI. Despite the U.S. outboard engine industry that is down slightly year-to-date, Mercury market share remains stable, with a 49.4% share in the third quarter, even in the face of significant competitor promotional activity. Internationally, Mercury drove strong share gains in the majority of its markets. From a global boat retail perspective, our core and premium brands outperformed the market during the quarter, and our valued brands performed steadily. Overall, Brunswick's boat retail was down mid-single digits in the first half of this year compared to prior year, while this quarter, overall, we came in flat to prior year. a significant relative improvement. While still down, we saw notable strengthening in our value segment as we took actions to streamline our model lineup and improve profitability through manufacturing consolidation, which we'll discuss on the next slide. Lastly, we continue to drive healthy and very lean daily inventory pipeline levels. Global pipelines are down over 2,200 units compared to the third quarter of 2024, and down over 1,500 units sequentially from the last quarter. In the U.S., pipelines are down over 1,200 units compared to the third quarter of 2024 and down over 700 units sequentially from the last quarter. While the performance of our fiberglass value brands improved in the third quarter, this has remained our most challenged category. Last quarter, we reported that we streamlined our value fiberglass model lineup by 25% for the 2026 model year, which began in July. And in September, we announced the strategic consolidation of our Reynosa, Mexico and Flagler Beach, Florida facilities into existing US locations. This consolidation will reduce fixed costs, drive improved profitability in our boat segment, and generate a strong return on investment. The transition is expected to be complete in mid-2026, with some inefficiencies during the transition, but with anticipated run rate savings of over $10 million a year upon completion, even at current volumes, and with the benefits increasing when the industry rebounds and production volumes increase. This quarter, Brunswick is again delivered outstanding free cash flow, with $355 million year to date. We have delivered $1.6 billion of free cash flow since 2021 and a record $635 million over the last 12 months in very dynamic and challenging market conditions. With a significant contribution from the recurring revenue components of our portfolio, but also with diligent focus on working capital reduction. And we expect this strong performance to continue into the fourth quarter and next year. Our investment grade balance sheet remains very healthy, with no debt maturities until 2029, an attractive cost of debt and maturity profile, and net leverage that continues to improve. We are, therefore, again increasing our debt reduction guidance for 2025 by $25 million to $200 million for the year, up $75 million since the beginning of the year. By year end, we're on track to retire approximately 375 million of debt since the beginning of 2023, and are committed to achieving our long-term net leverage target of below two times EBITDA. We're accomplishing this while maintaining significant financial flexibility, and at quarter end, we have $1.3 billion in liquidity, including full access to our undrawn revolving credit facility. We also anticipate retiring 200 million or more of debt next year while continuing to return capital to shareholders. I'll now turn the call over to Ryan to provide additional comments on our financial performance and outlook.