Brunswick Corporation

Good morning and welcome to Brunswick Corporation's third quarter 2026 earnings conference call. All participants will be in a listen-only mode until the question and answer session begins. 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. Thank you.

Good morning, and thank you for joining us. With me on the call this morning are David Foulkes, Brunswick's chairman and CEO, Ryan Gwillim, Brunswick's CFO and chief strategy officer, and Aine Denari, president of Navico Group and Brunswick's chief technology officer. 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.

Thank you, Steve. Brunswick delivered another strong quarter, characterized by solid execution across the enterprise, with financial performance ahead of expectations and year-over-year sales growth across all reporting segments for the fifth consecutive quarter. Headwinds from geopolitical uncertainty, inflation, and higher borrowing costs are weighing on consumer confidence and discretionary spending, particularly for the value consumer. But our premium and core focus portfolio continues to be resilient and perform ahead of overall year-to-date SSI data. When adjusted for the impact of discontinued value models, our overall year-to-date US retail is in line with the market. Voting participation remains healthy, supporting demand for parts, aftermarket products, and subscription voting, which, together with distribution market share gains, helped drive our strongest third-quarter engine P&A sales since 2020. Marine OEM orders remain balanced, but with lean pipelines drove solid gains for Mercury Marine and Nataco Group. Boat and engine pipelines remain low and healthy, with global boat pipelines down approximately 900 units versus the third quarter of last year, including a reduction of approximately 700 units in the U.S. Overall net sales of $1.5 billion increased 7% versus prior year, and adjusted operating earnings per share of $1.58 increased 63%. benefiting from business outperformance and a favorable adjusted effective tax rate and coming in significantly ahead of expectations. Adjusted operating margin increased 230 basis points and expanded by 140 basis points or more across all segments driven by leverage on higher sales and the lapping of last year's tariff impacts offset by cost inflation and planned incremental product development spending. We generated $140 million of free cash flow in the quarter, up $29 million from prior year, with strong earnings helping overcome the increased product investment and reduced working capital benefit due to higher volumes. Lastly, we've repurchased $75 million of shares year-to-date, taking advantage of our strong cash flow and favorable market conditions, and retired $100 million of debt, leaving us on track to meet or exceed our $160 million debt reduction target for the year. These actions demonstrate continued execution of our disciplined capital allocation strategy and our commitment to returning capital to shareholders while maintaining a strong balance sheet and our investment grade credit rating. Turning now to external conditions. As mentioned, geopolitical uncertainty, inflation and high interest rates continue to pressure discretionary spending and consumer confidence, especially for value consumers. However, strong capital markets and spending momentum amongst wealthier consumers continues to support the resilient performance of our premium and core brands and product lines. And while fuel prices are elevated, they do not appear to be abating enthusiasm for boating, with solid boating participation driving our strong P&A performance and increased Freedom Boat Club member trips. The tariff environment continues to evolve, but we continue to be agile in driving mitigation. We are maintaining our net incremental tariff estimate at approximately $40 million for 2026. We recognize around $3 million of gross IEPA refunds in the quarter and approximately $33 million year-to-date, with approximately an additional $10 million reflected in four-year guidance. Overall, we expect to recognize $60 to $70 million in gross IEPA refunds, with the majority of the balance expected in 2027. Dealer and OEM sentiment remains stable but cautious. However, dealer finances are healthy and benefiting from low pipeline inventories. The majority of our dealer partners have more than 50% of their credit capacity available, leaving them well positioned for retail acceleration. The expected balanced pipeline dynamic we discussed at the beginning of the year is playing out, with Brunswick and our OEM customers and partners closely aligning wholesale with retail. All segments delivered sales growth over the prior year period for the fifth consecutive quarter. and all segments expanded adjusted operating margin in the quarter on higher sales, with the propulsion segment lapping its first half incremental tariff burden and delivering 350 basis points of increase, fueled by higher volumes and strong high horse bar outboard sales, which attract higher margins. We maintained our market leading US outboard retail share of 46%, with strong wholesale share gains year to date. and also saw gains in repower as we execute the repower expansion plan shared at our investor day. Internationally, Mercury continues to gain share through dealer, OEM and retail partnerships. A Mercury share of boat shows remains strong, as highlighted by our recent performance at the Cannes show, where Mercury achieved 67% overall outboard share and 82% share at the viewport location that features larger, more premium boats. Our five new outboard programs remain on track, with three launching next year, and we anticipate these programs will continue to fuel global market share gains and further accelerate financial performance. Engine pipelines remain lean, with U.S. outboard pipelines down 3% in the quarter versus prior year. Our engine parts and accessories segment delivered its highest third quarter sales since 2020, as a result of robust boating participation and continued distribution share gains. A richer mix of higher margin products, along with the impact of prior pricing actions, drove operating margin expansion of 190 basis points to an outstanding 24.6%, one of the highest operating margins on record. The team worked effectively to mitigate higher input costs with multiple operational efficiency actions. Just one example of Brunswick's ongoing enterprise-wide continuous improvement programs. Land & Sea's rolling 12-month distribution share increased 120 basis points, and the business outperformed available industry benchmarks on profitability, workforce productivity, and cash conversion. Navico Group delivered another quarter of continued performance improvement, reflecting the team's focused execution and the leadership of its current president and incoming Brunswick CEO, Aine Denari. Sales rose 6% in the quarter, with growth in all business lines fueled by OEM wins and well-received new product launches. Structural operating cost reductions also assisted in expanding operating margin by 140 basis points, despite significant input cost pressures, including from higher memory and commodity costs. During the quarter, we were excited to partner with SacStore on the debut of Simrad AutoCaptain and its product line. SACSTOR is the first independent and international OEM to integrate the system, but others are following quickly. Our boat segment grew both sales and operating margins, with solid contributions from both boat group and business acceleration. Boat group benefited from the resilience of its premium and core brands, pricing and mix, continued cost reduction actions, and rationalization of the value product portfolio. Combined, these actions contributed to operating margin expansion of 160 basis points, despite the headwinds of inefficiencies associated with the closing of two production facilities, which will become a significant structural operating cost tailwind beginning in 2027. Our third quarter and year-to-date global premium fiberglass and core U.S. brand retail sales were flat prior year, with weaker performance and value product lines. The latest SSI data for September year-to-date shows U.S. boat industry retail down approximately 4%, with Brunswick U.S. internal retail in line with the industry when adjusted for the rationalized value models. We continue to launch new boat models across our brands, and our fast-growing Navan brand launched its latest model, the C38, in the Expanding Global Adventure category at the Cannes show, taking multiple orders at the event. Lastly, the Business Acceleration portfolio continues to deliver growth and expanding margins, led by Freedom Boat Club. Freedom captured an estimated 69% of the North American boat club market, up four percentage points, as a number of its competitors faltered. Freedom's increasing global scale and analytics are also enabling significant structural efficiencies to be realized in its operations. Member trips were up 3% year-to-date, again highlighting the continued strong boating participation trends. Moving now to our guidance. We thought it would be helpful to put our full year adjusted EPS guidance in perspective by reviewing how our outlook has progressed through the year. We started in January with full year EPS guidance midpoint of $4.10 compared with full year adjusted EPS of $3.27 in 2025. You raised the midpoint to $4.25 in April and again to $4.55 in July, despite the tough economic and market conditions. And we're raising it again today to $4.65. That's approximately 13% above our initial outlook and an increase of more than 42% versus 2025. Our Q3 overperformance was led by stronger gross margins, which were driven by a larger mix towards premium products and higher margin NGP&A products, together with improved operating efficiency and productivity, as well as a slightly better effective tax rate. There was no material IEPA benefits in the quarter. The latest $0.10 increase in our full year reflects our Q3 overperformance, partially offset by anticipated headwinds and uncertainty in the fourth quarter. Amongst the Q4 factors partially offsetting the Q3 overperformance are additional material inflation versus our July expectations, continued channel stocking caution as we enter the offseason, Some remaining uncertainty on IEPA refunds, as well as continued high levels of economic, trade, and political uncertainty. We remain extremely excited about and committed to finishing the year strong, while maintaining the disciplined approach to guidance we've taken throughout the year. I'll now hand the call over to Ryan for additional detail on our financial performance.