Brunswick : Earnings Presentation with Script PDF Q1 2025

Published: 2025-04-24 06:16:12 ET BC

4/24/2025

Q1 2025 Earnings

Conference Call

APRIL 24, 2025

4/24/2025

BRUNSWICK CORPORATION - EARNINGS RELEASE

Forward-Looking Statements

Certain statements in this presentation are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations, estimates, and projections about Brunswick's business and by their nature address matters that are, to different degrees, uncertain. Words such as "may," "could," "should," "expect," "anticipate," "project," "position," "intend," "target," "plan," "seek," "estimate," "believe," "predict," "outlook," and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this presentation. These risks include, but are not limited to: the effect of adverse general economic conditions, including rising interest rates, and the amount of disposable income consumers have available for discretionary spending; changes in currency exchange rates; changes to trade policy and tariffs, including retaliatory tariffs; fiscal and monetary policy changes; adverse capital market conditions; competitive pricing pressures; higher energy and fuel costs; managing our manufacturing footprint and operations; loss of key customers; international business risks, geopolitical tensions or conflicts, sanctions, embargoes, or other regulations; actual or anticipated increases in costs, disruptions of supply, or defects in raw materials, parts, or components we purchase from third parties; supplier manufacturing constraints, increased demand for shipping carriers, and transportation disruptions; adverse weather conditions, climate change events and other catastrophic event risks; our ability to develop new and innovative products and services at a competitive price; absorbing fixed costs in production; our ability to meet demand in a rapidly changing environment; public health emergencies or pandemics; risks associated with joint ventures that do not operate solely for our benefit; our ability to successfully implement our strategic plan and growth initiatives; attracting and retaining skilled labor, implementing succession plans for key leadership, and executing organizational and leadership changes; our ability to integrate acquisitions and the risk of associated disruption to our business; the risk that restructuring or strategic divestitures will not provide business benefits; our ability to identify and complete targeted acquisitions; maintaining effective distribution; dealer and customer ability to access adequate financing; inventory reductions by dealers, retailers, or independent boat builders; requirements for us to repurchase inventory; risks related to the Freedom Boat Club franchise business model; outages, breaches, or other cybersecurity events regarding our technology systems, which have affected and could further affect manufacturing and business operations and could result in lost or stolen information and associated remediation costs; our ability to protect our brands and intellectual property; an impairment to the value of goodwill and other assets; product liability, warranty, and other claims risks; legal, environmental, and other regulatory compliance, including increased costs, fines, and reputational risks; changes in income tax legislation or enforcement; managing our share repurchases; and risks associated with certain divisive shareholder activist actions.

Additional risk factors are included in the Company's Annual Report on Form 10-K for 2024. Forward-looking statements speak only as of the date on which they are made, and Brunswick does not undertake any obligation to update them to reflect events or circumstances after the date of this news release.

Ryan Gwillim - Executive Vice President, Chief Financial and Strategy Officer

Brunswick Corporation, 26125 N. Riverwoods, Mettawa, IL 60045

Phone: +1-312-523-6772

Email: [email protected]

Good morning and thank you for joining us. With me on the call this morning is Dave Foulkes, Brunswick's Chairman and CEO, and Ryan Gwillim, 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 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.

4/24/2025

BRUNSWICK CORPORATION - EARNINGS RELEASE

Use of Non-GAAP Financial Information and Constant Currency Reporting

In this presentation, Brunswick uses certain non-GAAP financial measures, which are numerical measures of a registrant's historical or future financial performance, financial position or cash flows that exclude amounts, or are subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of operations, balance sheets or statements of cash flows of the registrant; or include amounts, or are subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.

Brunswick has used certain non-GAAP financial measures that are included in this presentation for several years, both in presenting its results to shareholders and the investment community and in its internal evaluation and management of its businesses. Brunswick's management believes that these measures and the information they provide are useful to investors because they permit investors to view Brunswick's performance using the same tools that Brunswick uses and to better evaluate Brunswick's ongoing business performance. In addition, in order to better align Brunswick's reported results with the internal metrics used by the Company's management to evaluate business performance as well as to provide better comparisons to prior periods and peer data, non-GAAP measures exclude the impact of purchase accounting amortization related to acquisitions, among other adjustments.

For additional information and reconciliations of GAAP to non-GAAP measures, please see Brunswick's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2025, which is available at www.brunswick.com, and the Appendix to this presentation.

Brunswick does not provide forward-looking guidance for certain financial measures on a GAAP basis because it is unable to predict certain items contained in the GAAP measures without unreasonable efforts. These items may include restructuring, exit and impairment costs, special tax items, acquisition-related costs and certain other unusual adjustments.

For purposes of comparison, 2025 net sales growth is also shown using 2024 exchange rates for the comparative period to enhance the visibility of the underlying business trends, excluding the impact of translation arising from foreign currency exchange rate fluctuations. We refer to this as "constant currency" reporting.

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.

4/24/2025

BRUNSWICK CORPORATION - EARNINGS RELEASE

Business

Overview -

Dave Foulkes,

CEO

Thanks Zach, and good morning everyone.

4/24/2025

BRUNSWICK CORPORATION - EARNINGS RELEASE

$1.2B

$0.56

Net Sales

Adjusted1 EPS

Q1 2025

(-11% vs. Q1 2024)

(-59% vs. Q1 2024)

Solid first quarter, above

expectations despite turbulent

macro environment

+$160M $26M

Free Cash Flow1 vs Q1 2024

Share Repurchases

1SEE THE APPENDIX TO THIS PRESENTATION AND TODAY'S FORM 8-K FOR RECONCILIATIONS TO GAAP FIGURES.

All of our businesses delivered a strong first quarter as the resilient composition of our portfolio, together with proactive pipeline management, well-received new products, the benefits of executed and ongoing structural cost reduction measures, and efficient execution resulted in first quarter financial performance ahead of expectations despite the challenging macro environment. Year to date unit retail sales for our core and premium boat brands and product-lines are in-line with our expectations for a second-half biased year, but we are seeing some weakness in entry-level products, prompting us to consider streamlining our product offerings in the entry-level space while growing Freedom Boat Club as an alternative participation model.

Early season boat shows are essentially complete, with retail performance at shows flat to prior year and inline with expectations, while overall retail performance in the quarter resulted in appropriate boat field inventory levels as we enter the primary retail season.

Our first quarter results again demonstrated the resiliency of our portfolio, with our recurring revenue businesses and channels, including our Engine P&A business, Propulsion's repower business, Freedom Boat Club, and Navico Group's aftermarket sales, contributing nearly 60 percent of our first quarter adjusted operating earnings. We had outstanding free cash flow generation in the quarter, leveraging the inventory reduction and other working capital initiatives started last year, resulting in the second best first quarter cash flow on record, and a $160 million improvement versus Q1 2024. This performance enabled $26 million in share repurchases in the quarter, maintaining our commitment to return value to shareholders.

Despite the uncertain market conditions for Brunswick, our customers, and our channel partners, we're very pleased about our overall start to the year which exceeded our expectations back in January.

4/24/2025

BRUNSWICK CORPORATION - EARNINGS RELEASE

Segments continue to execute well despite cautious customer/consumer

Propulsion

Engine Parts

Navico Group1

Boat2

& Accessories1

1SEE THE APPENDIX TO THIS PRESENTATION AND TODAY'S FORM 8-K FOR RECONCILIATIONS TO GAAP FIGURES

2BOAT SEGMENT INCLUDES BUSINESS ACCELERATION

Turning to some highlights from our segments in the quarter.

Our propulsion business delivered sequentially improved sales and operating earnings versus the fourth quarter of 2024, although below first quarter 2024 levels, as anticipated. Mercury's outboard engine lineup continues to take market share, gaining 40 basis points of U.S. retail share on a rolling twelve-month basis, with indications of a strong April performance following significant share increases at 2025 boat shows. Sales to U.S. boat OEMs were strong as our customer builders increased production levels ahead of the primary retail season and engine pipelines remain at appropriate levels.

Our engine parts and accessories business had another strong quarter, with solid year-over-year earnings and margin growth despite slightly lower sales. This primarily aftermarket-based business continues to derive its success from stable boating participation and the world's largest marine distribution network, which delivered sales growth of 2 percent through continued distribution market share gains resulting from our ability to support same day or next day deliveries to most locations in the world.

Navico Group had flat sales and slightly lower operating earnings versus the first quarter of 2024 as aftermarket sales to dealers and retailers remained strong, but OEM orders were pressured. Navico Group delivered sequential sales growth versus fourth quarter 2024 as its exciting, recently launched new products continue to gain momentum and market acceptance.

Finally, our boat business had sales and operating earnings below the first quarter of 2024, consistent with lower planned wholesale shipments, but sales grew mid-single digits versus fourth quarter 2024 as anticipated. Our Boat Group teams are working hard to reduce product costs and protect margins in an environment with limited pricing opportunities. Freedom Boat Club continues to expand globally in premier boating locations and deliver steady membership sales growth, and early-season member boat usage trends continue to be strong with trips up 3% sequentially in the first quarter.

4/24/2025

BRUNSWICK CORPORATION - EARNINGS RELEASE

External, Customer and Consumer Conditions

External Landscape

Tariffs

Dealer & Customer Sentiment

OEM Environment

Turning to external factors, the uncertain tariff environment has, of course, become an elevated consideration in a challenging macro-economic backdrop, and is contributing to declining consumer sentiment and more uncertainty in U.S. Fed policy and the trajectory of interest rate reductions.

The abrupt introduction of the tariffs in early April and subsequent policy confusion, in addition to the capital market turmoil, have certainly introduced new reasons for short-term consumer hesitancy.

Brunswick has the benefit of producing the large majority of our products in the U.S. for the U.S. market, and we have significantly reduced our exposure to China-based suppliers since the initial imposition of Section 301 tariffs in 2017. However, at current tariff rates, we have the potential to incur up to $100 - $125M of incremental net tariff costs in 2025, which Ryan will discuss further in a few moments. We continue to prepare 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, pricing, and optimization of our facilities, but this remains a very dynamic situation.

Despite the macro-economic noise, dealer sentiment remains fairly stable as early season boat show performance was solid and retail traffic is holding in. Consumer sentiment remains volatile in response to the daily news flow, but our dealers are reporting that retail foot traffic continues to be steady and, with the right incentives, they are able to get sales across the line.

4/24/2025

BRUNSWICK CORPORATION - EARNINGS RELEASE

U.S. Industry Retail

Units and Pipeline

Q1 2025 U.S. Industry Retail

Change vs. Q1 2024

Ending Q1 2025

 Q1 U.S. boat industry retail down 5%, with BC slightly lower due primarily to value brand performance

-6%-5%

U.S. Brunswick Q1 Boat

Retail by Segment

YOY Change

>90% of Current Boat

Group Gross Margin

FLAT

-MSD%

Outboard

Main Powerboat

Engines

Segment

-20%

Premium

Core

Value

SOURCE: STATISTICAL SURVEYS, INC.: PRELIMINARY DATA IS SHOWN ON A COMPARATIVE BASIS USING STATES REPORTING TO

DATE FOR 2025: JAN 89%, FEB 73% AND MAR 68% OF THE U.S. BOAT MARKET, COAST GUARD DATA THROUGH 3/25.

Moving now to U.S. Industry retail performance.

U.S. main powerboat industry retail was down modestly in the first quarter, with Brunswick's performance influenced almost entirely by declines in the value segment. You'll see on this slide that we're showing a slightly different view of U.S. retail, which reinforces the fact that, versus a strong first quarter 2024, retail remained very steady for our premium brands including Boston Whaler, Sea Ray, Lund, and Navan, and, as a whole, for our core brands. Retail performance for our value brands continues to be challenged and we are working to optimize the profitability of these businesses at reduced production volumes.

Outboard engine industry retail units declined 6% in the quarter, with Mercury slightly lower primarily due to calendarization of registrations moving into the first few days of April. We remain confident that Mercury will continue to gain share for the full year.

Lastly, we have continued to diligently manage boat pipeline levels and first quarter U.S. wholesale shipments were down 16%, resulting in an 11% reduction in U.S. pipelines, or over 1,500 fewer units. U.S. weeks on hand are lower than Q1 2024 at 35.6 weeks, with similar pipeline dynamics also occurring outside the U.S.

4/24/2025

BRUNSWICK CORPORATION - EARNINGS RELEASE

2025 Adjusted EPS Bridge

Updated full year EPS guidance of $2.50 to $4.00 relates entirely to incorporating incremental tariffs and related macro-economic impacts

$0.35

$4.25

 Incremental tariff impact

likely to negatively

impact demand

$(0.75)

$0.20

$3.25

 Tariff assumptions are net

of mitigation actions

$0.20

$(1.00)

 Incremental cost actions

and recent FX trends

serving as partial offsets

Prior 2025

Volume

Tariffs

Cost

Currency

Current 2025

Midpoint

EPS Beat

Reductions

Midpoint

Before I turn it over to Ryan, I wanted to walk through the components of our updated full year 2025 adjusted EPS guidance, which is now in a range between $2.50 and $4.00 per share.

There remains significant uncertainty related to our 2025 performance and guidance, primarily due to the uncertainties of trade policy, the direct and indirect impact of these uncertainties on our consumers, fluctuations in foreign exchange rates, and the interest rate environment. Attempting to provide guidance is uniquely challenging in this environment, but we appreciate investor desire to understand the earnings components and guideposts that we're tracking internally to drive financial results.

To that end, this slide is showing midpoints of ranges of what we currently anticipate to be the most likely outcomes for the year, assuming the current tariff rates persist and estimating the resulting impact to our businesses, the economy, our channel partners, and the end consumer.

After accounting for the Q1 beat, we believe that we would see volume pressure, especially in the near-term as our consumer spends cautiously in response to the uncertain tariff environment. 75 cents would represent an approximate 5% reduction in revenue related to slower retail sales resulting in comparably lower wholesale sales.

We've modeled $1.00 of EPS as the midpoint of our anticipated net tariff impact. This is in addition to the $30M of China 301 tariffs that were included in our initial guidance for the year, and would represent a scenario where current tariffs remain in place but we continue to work urgently on our mitigation efforts with achievement better than our baseline plan.

Offsetting these headwinds are more planned cost reductions and an improved foreign currency exchange rate environment where the softer U.S. dollar has lessened the initially planned transactional headwind from the start of the year.

The result is an EPS range of $2.50 to $4.00 and a midpoint of $3.25.

4/24/2025

BRUNSWICK CORPORATION - EARNINGS RELEASE

Financial

Overview -

Ryan Gwillim,

CFO

I will now turn the call over to Ryan to provide additional comments on our financial performance and outlook.

Disclaimer

Brunswick Corporation published this content on April 24, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 24, 2025 at 10:15 UTC.