BC - Earnings call transcript Q4 2020

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Operator

Good morning and welcome to Brunswick Corporation's Fourth Quarter and Full Year 2020 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 Brent Dahl, Vice President- Investor Relations. ahead. go please Sir,

Brent Dahl

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

to our comments differ our include materially results in certain future expectations. I Before mind this about will prepared statements from Please begin that during these with would we could like results. remind forward-looking that everyone call, actual remarks, keep our

today's our on release. the consider recent factors SEC press to and details For please filings to refer

of our All are at website on these available documents brunswick.com.

Reconciliations results. over to sections During reconciliation GAAP our I will Dave. be are to will financial to presentation, appendix the provided today's the and of non-GAAP now we turn the certain this referring non-GAAP in presentation the consolidated financial information. financial call to measures accompanying of statements

Dave Foulkes

Brent, morning, Thanks, good everybody. and

in businesses the strategic extremely many margins, adjusted and record changes position and resilience our and we the marine-focused Our strategic positioned portfolio. strength to as the EPS our plan cash year disruptions first-half in operations marine priorities year expanded of during pandemic, in consecutive faced including leader generated the in against operating the transformational and delivered well operating demonstrating us the to to our and of XXXX, due industry, executed exceed Despite we gross have flow. have global growth, The global our the significant our financial XXXX, challenges made reinforced or our eleventh free have to business an years of targets. recent the meet market

strongest accelerating lineup market line saltwater, markets. and and penetration by international in outstanding the business Propulsion leveraging growth, earnings top and Our outperforming to into commercial repower industry, deliver the product the continues

together revenue services bulk margins Our Parts sales, growth strong increased boating production during systems shows as Boat year and end. our of participation, surge robust delivered the earnings which businesses and second line all the a as strong operating industry. top the aftermarket high demand Marine full U.S and range with demand to OEM half of and to result XXXX as brands continued increased Within across for growth Accessories second the over half of year through our the retail business, contributed of

low premium the leaders a series significant that new Our value categories continue underway, in XXXX. versus in at returning to fewer former boat boaters. product remain demand points pipeline of surge XX% inventory The resulted historically the and offer and entry brands levels, end dealer in market XXXX launches of end attractive with brands boats with of retail new in inventory our to the

Club strong exceptionally Freedom and portfolio. over during exceeded Finally, synergy memberships, locations, almost adding new new XXXX our while Boat XX,XXX sales XX by also across expectations our marine driving

I continue uncertain in returns XXXX. confidence will we execute Finally, environment, have deliver the that I'll to our an some although provide to continue on marine market. in operate overall our strong strategy in highlights now segments shareholder and we high very

our focused recent continuing horsepower XXXX line significant investment meet productions industry high years. engines, increase significantly retail outperform engines the Mercury outboard customer and Mercury market in in to continue leading the pipelines to where continues business to exceeded and share of earnings categories exceptionally we Propulsion lineup. higher in and strong top years, refill of especially due by strength than of demand. we to for levels outboard Our gain inventory in past product market have Field expectations lower to remained

marine enhanced exclusive leader propulsion Mercury technology, in relationship products. to the with its win significant to XX to innovation a to increases with Crownline the product controls, to with and leading continues OEM and constant up of investment was new recent than secured XXXX partner, Mercury XXXX ramping XXXX. and are a enhancement partnerships production both our sales ability of quickly consequence as or business major be demand. ramp in production, capacity model Mercury's result meet XXXX, announcement increase of a As market propeller the year Mercury's beginning and a when One boats, time OEMs in rigging with becoming at more

discuss are New of I and the the products products call. also imminent and controls technology end core investments of that the certain at new propulsion towards will more

results Our in line completed historical trends by to the increasing retail year keep up social the of with for weather distancing customers favorable with usage bolstered as year the by segment the U.S reporting top and delivered and a their and Parts family first businesses grew XXXX. throughout healthy X% sales outpacing compared as Accessories OEM and in for separate segment boat orders recent very from The by conditions aftermarket significantly production consequence especially with were need year, recreation, the accelerating resulting XXXX. demand. outstanding results XXXX a

enjoyed restructuring With second business financial both of of Products aftermarket products half OEM continually marine and supply can a to our margins, earnings The these to improvements, support leveraging the sales strengthen Attwood new businesses which from profile demand businesses Advanced Group, robust our and our service drive and And increased in businesses, operating which Systems the we to return our provide extended to capital same RV solid and in Power fall advancing dealers while overall In trends added includes significant our all long-term and also baseline invest in and annuity based the shareholders. operations actions our and needs. increased business distribution demonstrated which customers earnings increased season brands addition, efficiencies. spaces. capitalize on participation Engine was the during to the year able in P&A X,XXX our dealer in both

of ramp the with that earnings XXXX, related production fall. Our Boat and lower plant shutdowns through result the activities XXXX segment in pandemic finished and than as spring, up a continued sales

XXXX. to initiatives, However, XX%, a half the phenomenal operating increased margins earnings organizational second points with and with of surging expand by operating compared XX% when retail that increased prior by by year led the and demand half XXX the basis cost environment of saw revenues together second reduction

wholesale over XXXX strategic margins exited margins Levels, of the Ray two boat approximately target year at strong above sales dealer the sales decades. in ended Pipeline driver for X% which is especially operating we their lowest are XX with in seen a and the quarters, operating key Whaler year-end low. plan two percent Sea inventories with XXXX. future weeks, retail very Additionally, last the double-digit to Inventory at our and achieve level Boston has line last

performed will Our and at value well replenishment. significant require retail also have pipeline also brands

expectations is ramp a be will But XXXX exceed Boat most that it at earliest. rebuilt pipelines increase up XX% Freedom with We Club locations production. very continue and in memberships unlikely to hire our to in during additional workers significantly until increase to XX% the facilities XXXX. continues growth at

a franchise our boats rigged are the Each with equipped In addition, with Brunswick expectations. sales exceeding engine P&A products. network of boat Mercury and into

Freedom performs the demonstrated was recently surveys Just challenges leadership was Review, by satisfaction. independent of named exceptional the Business market top in franchisees honorees Freedom firm XXXX of that Franchise support one XXXX. franchisee a research for commended of through and leading XXX franchise of

XXXX a X%. the sales U.S performance international by up with sales constant review in versus XX%, sales to of sales most on like up increased I'd currency region regions, business in basis. Full-year Next, our the

Canadian and the Canadian P&A. growth not dealers the lead inventory sales continued international as quickly as have propulsion and ahead sales shutdowns other and reopen strength commercial Pacific boat geographies. slightly did with for COVID lag Asia more of as

dealers anticipated color boat the provides additional quarter half growth with able of for the grew performance the Marine However, market line fourth growth XXXX. the categories as in with table with on second XX% full and retail we in horsepower by that Powerboat half the some also XX%, get Europe retail up in The have were propulsion XXXX. to XXXX. first and revenue years. were with been performance the or half, capacity saw Canadian unit U.S constrained main XX% retail previous year second comparisons market were recovery in year delivered distributors of and growth as in Brunswick's XXXX XXXX region rates. to reported of full up in second full-year in gains higher the segments the half for the This All engines strong of

fishing debuted especially in XXXX, New product they year. Whaler have boats and the up Dauntless which premium such significantly as were XXX models, in unit confidence XXX accretive in Boston provide December in saltwater of day share outperforming as the in Mercury XXXX, new launches and margin including Outboard all grow half registrations to cruisers. categories, engine ability market done back our the with XX%

over Mercury gained in horsepower every in larger XXXX fact, retail about share node increases outsized with engines in just horsepower. XXX outboard In

XXXX, enter growth we in retail continues mode. As

and other sentiment, dealer generation, remained lead positive. indicators finance very As applications, leading all

customer Xx end the now to to performance. for additional as of call, I'll of over in into turn In our the some on at already of retail orders or XXXX on the comments with least of market move start last comments the XXXX, Xx percentage factors strength call these Xx times. us brands from continuing our give our financial high the a and attached name the several All Ryan dealer XXXX. confidence we the is percentage addition, similar for at received

Ryan Gwillim

Dave. everyone. Good morning, Thanks,

outstanding points our margins For increased up operating adjusted operating Adjusted of all X% the the XX and is during businesses XX.X%, year an business by net higher earnings the accomplishment considering this by XXXX, units our challenges basis were which sales than X%. full-year, by at finished faced pandemic.

up discuss most due retail adjusted record fourth production minutes. to which within we fourth fell XXXX accelerating execution I'll strong EPS quarter an and performance. with year few the free leverage with the together flow range targeted operating our late continued and guidance which exceptional cash finished recent our results, strong saw robust of $X.XX, a generation, Our also levels To demand, on in quarter in with quarter exceeded the were comparisons. the versus season prior boat Adjusted while XX% XX%, net an and were Sales $X.XX, by XXX the XX%. finish of results fourth XXXX year. the drove outstanding adjusted the we significantly from increased operating quarter quarter earnings EPS an year-over-year adjusted of in better operating up points basis basis XX.X%, up usage as margins quarter with

due associated increased the compensation and volumes technology. favorable factory with increase sales our systems show increased and the in XXX significantly all Adjusted impact ramp a capacity higher quarter XX% margins the of XXXX customer the increased with fourth earnings. independent operating dealer offset international the sales unfavorable as segment, to All channels Propulsion by in and product XX% each operating absorption revenues growth up partially revenues. to controls changes favorable sales elevated and as revenue development Now quarter Starting with higher basis points and year mix channels. favorable sales and and were the new engine Operating versus and in horsepower manufacturers in growth investment on favorable earnings both XX.X% especially were up mix, corner contributed of increase operating fourth in operating prior gains product -- with categories. driving the demand, Products increased increases and level. Accessories in increased quarter strong customer XX% quarter result categories. from the segment, of strong production, increased Market performance experienced product than up together to outboard OEM, robust and continued variable production across continue margins a to In strong product and category earnings let's share better also segment talk and about costs enabled the

annuity Another to level and at this dealers, both to by significantly business. demand the Revenues based aftermarket from customer inventories. driven outstanding to the begin pipeline wholesale higher higher refilling segment meet in resulting were retail result sales Boat for XX%, increased

to quarter operating growth quarter. XXXX. the X.X%, to of boat operating production Each our the the boat to of delivering All compared basis double-digit the a higher in categories on increase production margin ramped fourth of with Lund product demand. and resulted fourth up for margin point strong sales of XXX brands Boston this meet contributed our and in steadily Whaler Increased quarter margins

earnings Club margins are operating Boat -- quarter Brunswick see and margins. to Freedom revenue growth at up as operating in to the continued and Finally, the overall accretive that

the years. ended pipeline As result low pipelines levels, our XX levels at lowest of in dealer over historically a the surge demand, retail inventory in year

XXXX. unlock to additional Resulting up XX manufacturing still again basis, the for pipeline XXXX quarter select well boats footprint levels, we will position we initiatives. of believe versus in with XX,XXX investment Whaler Portugal. retail satisfy call, sold the in To the are XX-month trailing capacity with production Our the to through earlier Coast we XXXX. capacity by anticipate boat announcement to and while expanding on Florida brands efficient end measured this our current capital demand. for over and weeks boats out would XX,XXX XXXX products automation, will scenario to the term, wholesale retailing below ended the strong at during the labor addressing larger but Palm the with laid just near-term this Vila sales wholesale anticipated in necessary be desired levels But week on the Reynosa hand the in of our facilities facility regarding Longer support constraints and Boston repurpose our our Nova, boats. Mexico lower that end made almost on reference continue a with we field work XX% units We year third XXXX update year brands

in these executed to as by We million usage this enabled year. expenditures, benefits half of capital our the be businesses, expect and begins from end significant the in We share seeing XXXX, new of and with the capital capacity strategy second completed believe year more cash begin successfully We actions dividends earnings revenue capital the to million for significant our for and projects repurchases, growth. $XXX of generation the lower the future of products XXXX. in our always debt with or across a our $XXX of our benefits $XXX even our early $XXX generated cash which taking free long-term $XXX bedrock as approximately investment $XXX We we will with We and year. of leverage our on price days just million million increased the gross a the by during for stock activities retired pandemic. ended eighth flow. million -- capital the We year meet deployed pausing consecutive exceed cash objectives, early debt, in X.Xx of of at leaving million advantage basis. us

with flow depending and opportunity on ways strong remains the credit our conditions. year-end affording cash total grade cash a in balances, us capital of deploy investment Our liquidity, generation market capabilities to variety

the OEM While difficult fully we robust economy in progression growth strong performance visibility predict. into is The substantial uncertainties, for and partners, created very marine dynamic, headwinds retail remains environment macro and dealers, remain resulting our improved very the cognizant of macroeconomic suppliers, a related has and other the impact our our continued of opportunity pandemic to XXXX. on

first ability However, year be million Revenues XXXX. with between XXX growth to retail than the to given and Adjusted year, points, following sales basis billion. $X a anticipate mid single-digit to are our throughout providing improved EPS adjusted guidance flow expenses $X guidance generation to XXXX, low excess percentage free regarding clarity the on To also the of of quarter cash of of comparisons to directional of finally We're the anticipate of are providing of revenue growth year-over-year to XX%. first a leverage the and -- $X.XX approximately to over significant million. XXXX; where be likely operating $XXX given quarter, XX% of impact our in volatile range for We Adjusted our Marine XXXX. drive diluted for as XXXX. the operating margins XXXX we U.S very on industry versus low demand the percent high-teens to in XX be performance $X.XX pandemic operating lower in of results. up between offset and quarterly throughout grow on we with

major business continuity expectations XXXX no related assume Finally, the additional issues. pandemic

determining it ability additional we the economy, channel of the be overstated past global costs, important I to with operations operations, in P&L factors supply cautioned perform as disruption line input of ultimately targets. we conclude and continued and certain stable our whether our XXXX. that moderate significant for in in addition, to impact level recovery will the chain update absence be In on will an will the and with and have flow quarters, labor items cannot global our that of cash

of year, investment in sacrificing we in businesses. flow levels. cash to million from return the generated liquidation by conversion propulsion XXX% a Note flow the in flow anticipate the $XXX million increase we of our for flow plan, historical we and in P&A year free period the to will amount over significant estimate X-year which not will $XXX XXXX. that the a still in generating inventories rebuild XXXX primarily in capital more segments. normal that's cash million current And to we of than to expect result repeat any for which $XXX and saw free $XXX under without free to is XXXX, more of between mentioned our cash fiscal million generate XXXX, slide, free previous likely on cash which and As excess inventories, working of cash XXXX

Our mid-teens rate cash rates. anticipate the effective amortization depreciation interest Note $XX estimated million statutory any for to plan $XXX $XXX is tax position. our cash free be million effective a increased tax year-over-year expense million potential rate tax of current with and our strategy our of retire expense, approximately estimate then comparison. shares tax between with an also cash leveraging impacting outstanding long-term debt $XXX for and changes We We estimated does in XX our anticipate reflect million will obligations, about percent, to XX% not executing year million approximately average strong our flow rate be of shares. balanced the We in and year. our XXXX, capital that

all in additional the normal initiatives. expenditures second During new capacity to XXXX until reduction during and to and spending during of and $XXX million cost select capital the We the conserve more projects automation product levels year. of million, of half XXXX, $XXX certain our capital businesses, between of we pandemic investments cash returning including paused anticipate

repurchases business XXX any focus opportunities in XXXX turn comments. transactions. and business plan assume primarily million evenly continue plan to and But over to our Dave we acceleration including our including of units, see not we now our the our also XX to across continue Accessories expect between with Finally, guidance million relatively XXXX, share Consistent Parts Freedom in the call does approach back renewed our our will M&A the I'll M&A past XXXX, spread approach, activity of expanding Club. to throughout year. outlook the we with on completion systematic a provide repurchases year. fully Boat to and

Dave Foulkes

Ryan. Thanks,

by year our outlook our all a up is for to fantastic businesses. Moving believe be segment, to we XXXX setting

quick will during the first early when more comparisons XXXX in significant reminder, of half to a due favorable As but first compared be of stages our to saw the XXXX, of disruption half pandemic. businesses the

anticipate range, sales segment, For margins basis points with versus XX high more percent to to for up net we year XXXX. low the our growth than double-digit in the Propulsion be single operating

While pronounced a Propulsion Boat late the April. are sales sales position segment Mercury these distribution will its engines stronger more heading the into and XXXX be as increases March and extremely through and ship early channels inventory to increases was continue shutdowns pandemic Mercury even our strong, in in much of

expansion earnings products by levels our with due absorption We product on new elevated and increased growth to technology associated regional include tailwinds, and mix, expect offset partially increases, priorities. strategic margin in production introductions, other some spending to sales increase volume from increased currency tariffs and factory

to new success continued priority market leading customers. providing share satisfying top propulsion outboard for OEM this of to demand and new existing introduction expanding products, segment engine the in Our through and and solutions continues be industry

platforms in we product remain also top of will channels. enable anticipate growth developing benefits additional dealer, new repower We demand and and families product we earnings that satisfy the for and related new We on in line and systems engine investing international project and greater lines our are margin focused technology future. into as control levels exciting the

its stages Turning as we most more of derive Parts products experienced I Accessories were amount P&A to ship in of the the able early in revenues that than cases, to remind least to of The customers during want XX% pandemic. everyone the business disruptions, their aftermarket XXXX our disruption and sales. segments, some to these businesses regional to from despite segment

levels a in net boat of percent consumption, As anticipate in and XXXX, we for XXXX. the related the and range parts the result increased usage of significantly growth mid accessories sales organic single-digit

extremely portfolio. outlook slightly area of expect will second from to improved engine cash Group under to year our grow announced and products existing business in our P&A the our OEM to area funded forward confident towards operating integration Group M&A The balances. to the model for be this cash growth Attwood base. margins outlook Systems structure this XXXX Advanced streamlined in expand of as will the expect Products be we flow primary for realignment deals expect outpace this business and also our margins customers. of an is provide more our opportunities high This the Advanced strong continue look as in XXXX. in and generally Potential business excited free increase technology Systems range, customer systems build and significantly in $XX a systems margin industry lines certain further that and heavily product moving very to benefit as in to Power and the and our half activity on new growth businesses operating focus We're weighted we which XXXX, opportunities We the million will out for Distribution higher in had to technology can million $XX are bolt and in

of ramp April, production and rapid shutdowns half significant late XXXX second continues the Finally, as our related in with most comparisons, benefit stands Boat segment experienced from XXXX operational of this disruption from pandemic businesses our that now in half most the -- the into through year-over-year business plant in of early XXXX. to portfolio, extended in second the up XXXX March and a

segment margins. year, robust largely top of orders sold three which anticipate retail several operational than should the consistent for throughout very into be improving We we in result to and on With brands the focused our As improvement lead with strong production and performance, should out anticipate growth XX% Boat already demand exiting and entire fulfilling which line target pipelines cost the year more earnings environment, quarters operating efficiencies. calendar refilling wholesale discussed XXXX, received, earlier, a will a margins and approaching XXXX operating with in double-digit XXXX of segment. in

are Mexico Palm the increases These while to facility Florida brands growth. over boat existing Boston Ryan expanding Portugal at our XXXX capital market we efficient significantly facilities. to advantage capacity our provide also and in will As of substantial solutions Boat reopening Coast boat expand well-positioned plant that produced support mentioned employees with production these capacity, Whaler manufacturing are avoiding facilities costs. earlier, take ensure additional in to to The fixed our future hire our X,XXX demand, facilities Group new throughout plans our to while

Freedom and head while anticipate XX XXXX. Boat We expand including growth We strategy. offering opportunities XXXX we will capitalizing and is to a to our on in continue locations plan anticipate expanded additional conversion outside franchisees. synergy in some sales an Brunswick to this of adding execute Mercury U.S., Notably, up the base range against and to engines the and boats freedom strong fleet of franchisee services the Club into

sustainability, initiatives our all already deepening have [ph] a portfolio our streams digital the our discussed, also ACES to wide we In categories. opportunities span NB-EI of and that implementation focus product driving are that technology first units growth strategy, addition work and business advancing the enterprise of full on

modes disposition ownership wide new for transaction, and stages its entry through a consideration, or various customer through participation, and continuing tools and new digital satisfy range reconsideration and curating are points to needs, our understanding of participation tomorrow's by pivot assets We retention journey offering of their and deeply and their even communities. consumer

simplifies CES expansion of A customers This back diverse serve buying consumers Freedom business and assisting of launch partners Electronics be more clear enabled person their we partners a pilot product to [ph], our experience provides fleet to primarily efficiently Boat Although digitally XXXX, Brunswick in franchisees there was and the to of shared way in access other no BOATEKA confidence example boat better to is that pre-owned XXXX. with our force Show in direct-to-consumer our transaction. in the the aimed Club for plan at recent Consumer offerings New products the products. at in and

equivalent the contributions times its but prior CES challenging one employees Brunswick for inclusion and performance per sustainability their highlighting Innovation and receiving many and our to in and accelerating and and averaged of XXXX. digital cancelled retail shows and or major We year. strong forward industry diversity, our wholesale including COVID. digitally our capabilities, awards due sales multiple events physical virtual demand during XXXX very Our scaled projections the almost several commitment assets initiatives person have continued be investments cancellations in in in and were early benefits a and season Awards, XXXX moving performance, generated not our continues to to recognized cases customers influenced improving award week equity to as receiving shows down of These yield postponed our first in ever engaging Award. highest Innovation

to circle we you calendar. Before on like your few with questions, I'd leave to a take dates

official about most something sophisticated this. be XXth will a by First, while, propulsion This Mercury excited the later technically the the week on the I'm February system in a hinted will launch is we've out for of followed be launch very This be advanced advancing launching Sea launching industry. the and the first XXX with design businesses of our language. Ray outboard. is beautiful XXXX. many first new SUNDANCER a during products the Ray will Sea This new Ray that product industry Sea

investor will day planning Investor very to at in in be viewable able XXXX investor back detour are virtual that an in Show. online for the has and be year. although we Miami missing our spring that current today part to we look your for forward exciting information on at convenience. goals $X progress will recently of an XXXX will our We of EPS person in progress I it be or in Additionally, much we’re our to through pre-recorded expectation ahead a event to we To hope and a is and and all hope Brunswick that financial per welcome as sharing annual event end, more offer later one day share. the in Boat above International Miami Miami, XXXX announced this you our that as targets, expanded year against XXXX I the our for person Day and you is

same offer their while of heartfelt to health a all entire want of the to hard our and to able global I been welfare time population our Finally, at that outstanding for to because plan, continue during a of once XXXX. challenging the execute efforts the work team. very strategic their and thanks Brunswick sacrifices again prioritizing we've It's employee protecting

will the for line now open We questions.

Operator

[Operator Instructions] of Smalley. comes first line question Grace the Your from

Your line is open.

Grace Smalley

J.P. touching This from much. morning. market side be guess, indicators Grace then and you've boats the Could wholesale on for expect are account worth announcements. through able expect both capacity you about on taking And industry now report to XXXX into Ryan you produce to you elaborate retail many XXXX, side, on good to in you question. including leading I expansion to the how single taking firstly, retail this trends January. the the you recent Hi, on very start low Morgan. Thank retail my walk mid you Thank year ship seeing in seen and the could your that, U.S year? is unit Smalley you in

Dave Foulkes

Good Yes. for morning thank joining you and us.

mix monitoring. lot of In market that indicators in leading a have we we've retail been terms of XXXX,

week in continued and XX%, months, indicators financing levels. see or retail Leading to we're applications, obviously, the business, XX% year I prior we've through winter demand, more above you such elevated seasonal but recently think retail the worth know, I look levels or last typically As a as so. up of fall

the a a continued to XXXX. inventory little expect into year. Potentially is some we areas by we in So our go strong expectation strength current as start availability, for but moderated a

Ryan Gwillim

make good question. And the morning, Grace. I'll wholesale

So retail on the as to footprint, that order at the produce the given wholesale heard this you XX,XXX to capacity stats match have XXXX, sold retail We XX,XXX. sold believe our in current about about the wholesale and we year.

that we're out years to announced us a it's were would and given supply 'XX. when amount. XX,XXX couple that And percent But which we at footprint in all votes the each to high anticipate to all looking projects wholesale difficult which of to in start 'XX think the XX,XXX operating we as needs low you market. facilities, but I And So then across add could to get the hiring low represent could that a obviously of work would in contingent doing. on obviously forecast, good just is continue at our probably units, capacity to produce Monday, say then a our addition you doing chain be X,XXX units, around retail able strong, on of mid frankly XX, that in being increase

Operator

much. Thank you very

comes question from next line the Your of Badishkanian. Greg

is line Your open.

Fred Wightman

then to in sort to in new ramp contribution those guys, seen the size of with dollars we the you it's XX those 'XX anecdotally for us we've Wightman How you about those? opportunity, Hey in of of something if the Greg. just either 'XX? could should engine on help actually really and OEM the that start Is we on I'm reported showing contracts numbers Fred for wondering that up or from any side. sort think touched that should Are that far? so

Dave Foulkes

Yes, hi, Fred.

of So typically, I to new point is to think good rid announced in, phase customer of begin a start the typically -- model us time inventory in the phase for brands, process to then we -- previous the we that's and best the has to propulsion your of obviously, is those contracts, system when get Even a the one. year.

half or the relationships two would relationships, is -- expanded be announced the which occur new the back XXXX of until year, XXXX. if to of June impact full example, model So in for unlikely we XXXX,

back the So or any expanded seeing of we the that say new impact of not of in announced yet relationships are we relationships full I would the half that XXXX.

Ryan Gwillim

getting and And Fred, think we I be share we obviously with when conquesting would then, plan, had OEM. our strategic mind in we add, new that accounts I XXXX these set would our out growing and our

but obviously, doing we some quite see that are baked the outlook, you in relationships our our well when So of with in, OEMs. strengthening our is

Fred Wightman

sort to demand supply Thank those the see tightness, Can times of biggest on few you for as across Great. as a side think terms the how of some you about we where some the P&A sort in through -- you disconnect should and outboard well. guys of walk supply segments, the you just you. And different finally, then just through side, year. alluded the versus on touched the chain it normalizing move

Dave Foulkes

we’re talk of significant position when of the very about which of some think chain I itself supply how is doing we honest, certainly portion our really influencing risk way, in that unknowable kind manifest what is here a guidance. recognizing we is to not a be

categories expanded So like see lot, in the bit Pontoons tightness furniture. Pontoon are of some we've that we that a seen of a

at we're some that transportation, are is it's of really It's that cognizant of goods it's this affecting risk all tightness. of tightness obviously, around have us materially provides of you you only -- from tight. bit going further say would not seen of that expand I number a being this forward. as telling as it's more have in We us a to we though, a time, shipped that telling point kinds that sources

Fred Wightman

you. Thank Great.

Operator

the Your next question Craig comes from of Kennison. line

Your line open. is

Craig Kennison

Thanks go question. in Hey, boats capacity extent, does boats, add and those wanted the a it crossover add and taking in or will a to I Parts good there business for categories system? exist in you capacity Engine your the to to on that or impact already the this expansion amount capacity to Accessory of is morning. in back wonder business my similar need

Dave Foulkes

we through as so couple our as much then certainly our of are effect we a have kind as another Ryan boats, of effect, thousand of as and XXX%, as the units mentioned, capacity, step brands and Mercury add way an is the there XXXX those of of additional If -- is to XXXX we obviously and some will in expect we additional our back kind a couple in we No, this, this add P&A probably of of half possible. thousand.

more a XX%, Whaler a because material little a more of So that Boston impact higher towards boats be -- and a that's towards the -- little probably skewed content. will strong -- margin stronger

a we businesses margin working there impact on all there our across So is are stack that dimensioning. full of

Ryan Gwillim

not in just bricks time. need to do in 'XX additional the and is -- cover P&A mortar to Craig a case was engines and we invest in And question, and That Mercury at follow-up this this really back at handled 'XX. as

Craig Kennison

follow-up. has of That to level structural inventory. today And Obviously, optimal was in I'll given different reason back then which of get great. a a want follow-up, maybe then to because you to get making inventory, massive That's be once great the use a just is, what inventory you closer money dealers are but the might you level to back of rethink reasonable more this balance? shortage

Dave Foulkes

is, you we in about out to I as channel the think what we'll models. but I unusual the certainly exactly think be working that XX are and XXX but moment in, brands boat at work have with last we our partners know count time,

for inventory all quite lot just that of available level. keeping skew so they're So requires a field some kind models in of the at count

the and is anybody -- moment, added So I think at inventory advantage. with

the be we at about -- placing careful not will field. disadvantage a very certainly look at brands we be not as will our we So levels, inventory availability in

there an So inventory at I think levels. opportunity to maybe re-look be may -- there

a right focused that on the One lot we is inventory. the things of

what with terms closely get they in help more both of much inventory. work partners left our models channel option so now to understand we them slow-moving with don't selling, content, is So and

available still number more is the of which so in that way And have a the but right in we be field. models efficient, can

Craig Kennison

Great. Thank you.

Ryan Gwillim

Thanks, Craig.

Operator

of the from comes question next Swartz. line Mike Your

is open. line Your

Michael Swartz

Hey good morning. guys,

out, we Just costs cadence Is called boat the coming Are maybe associated different capital the think through of expense flowing should then just wanted goes looking there incremental it costs the to through at you've that and capacity those from the with are incremental a during the year? how that on angle. P&L. P&L, that, just to touch about

Ryan Gwillim

Ryan. of Good in as expenditure There guide and expansion that that plans Mike. a today. is we in in guidance It's -- bring certainly our the then obviously some Palm to is bit Portugal it margin is CapEx, performance Whaler we also up at little capital included gave be included obviously in speed involved, in to the morning. Coast that's it and Hey, the facility, but for facility,

little but bit frankly bit 'XX, a budget. a it anticipated little of So more normal is 'XX the in as in guide is CapEx and our included all it in part

Dave Foulkes

are ... These not large Yes.

Michael Swartz

Okay.

Dave Foulkes

… investments. the are but investments large moderate. There pretty are impacts,

Michael Swartz

a like XXXX then low big $X by going outlined Okay. plans happen maybe could in to to your on since it you mid average guidance? XXXX, back That's XXXX, -- in early you'd you've built XXXX helpful. think or originally flat. to just sounds so plus this with know is XXXX, I industry, that getting above to going really flat in obviously experienced single what maybe how to but XX% around X-year commentary what's or come of think mid are offsets the And don't be XXXX the number way we about year, some gave that that the Any you growth that when

Ryan Gwillim

market take was XXX which as It fully in to a put and we're ground the does any one on I go again. on make some to certainly execution. the that is you we fighting know do the we floor I can Mike. think, XXX. product to but the will there no is headwinds, more some things include $X I We've and be obvious one stake That obviously depends or original be range to that can Where M&A. Hey, successful having, got the it's right pandemic impacted continued that there depends think -- this one intend said launches saw the to comment the Listen, will are not a what well. I a now, get tailwinds will good still against, that that tailwind come. we where

So which goal. be believe overall the do to would this will, be would next M&A accretive to that completed, we the year, extent, or we year

Dave Foulkes

very thinking floors would of than to establishing here fully we significant. we the time, is some full guidance I the as we be potential first that I opportunities stack was through protecting certainly year Yes, start the important but think to just some of was go the it again, for through stack were opportunities, and looking we'll it think we as moment portion we're of this thought unknowables this add, do incorporate certainly more but at

Michael Swartz

you. Thank Great.

Operator

James of comes Your next question from line Hardiman. the

is open. line Your

James Hardiman

Hey, good morning guys.

Dave Foulkes

James. Hi,

James Hardiman

morning. Good

bow just into I sounds wholesale-retail So, the map Ryan, we 'XX, for intents on doesn't replenishment completely -- this. get some thinking pretty extend of maybe into and the see delta about maybe and Unless way? little to the on XX,XXX for go you of we to it weeks out that I put extend cycle, like, XXXX to hand right? wanted right it's Am purposes this bridge that, want keeping north call drop it to XXXX, created retail drop a even to mean was can just of bit all in of constant. going for I I account some really a dramatic math if that -- before tune unit a the the in XXXX XX% we a if that

Ryan Gwillim

Yes, you math right. Yes, your are. is

James Hardiman

there's guidance this. while Right. once and all massive that would pre-XXXX it's too on what which be to And we a drop we'd is way about talking about 'XX we there's no reason be levels, we exit go thinking should give to sort and suggest in -- off would nothing 'XX of early that

Ryan Gwillim

all be see the change certainly other I the is increase Boat that to diverse more in Club, on really ability getting water more boating, to and activity more be outside and with They the to recreate more people's into maybe people don't that have point signs the I willing jumping participation lifestyle people think Freedom People been just the flexible work to people back changes We want think in James time. different gone. the arrangements outside. offering and in lifestyle into

decrease path near-term. boating seeing boat not or the sales say in to a just we're a in new you significant would participation what as So

James Hardiman

for some share buybacks. each Got of million through then a targeting flow and $XXX we it. flow, And there you're work cash these $XXX cash free million debt question, numbers, as second in is

the to million another at leaves record. $XXX that your cash least close So sheet and on a is balance

So sheet? in valuations the maybe almost certain that curious, I specific, And a on should -- operative own you these obviously opportunities some to in $XXX million, of balance answer And guess, your but through degree. assuming -- now. like not that you think obvious M&A we not are Boat level secondly, what first, I'm what market then, cash of with what's opportunities the are it's right how then hold M&A. other terms is to themselves own the -- Freedom Club presenting already right of is that

corporate-owned your how clubs on So about maybe think Boat about or profile what franchises Club in and own Freedom that investments think that? to return

Ryan Gwillim

the unpack try James, to will that. All -- part -- will let to Dave first I right. speak Well, will I and maybe speak unpack then I

tell you That or is ahead that next and off, first million our go really so just plan I part year XXX, and so of Okay, like capital Coming year working that's allocate from XXX will and M&A something strategic would with grew to $XXX that do. plan, would up this kind reversing. of capital right? over down year, we This I to flow working cash starts us the million. it allow our free

P&A. see need you'll and to reverse in pretty just we a inventory think inventory I build Propulsion and XXXX solely in again significant because building

dealers through don't the obviously is then quickly puts lot little sell as Just a reminder, manufactured. a be there's primarily bit takes we going have little paid. they are web directly of boat after inventory, and there more a we -- CapEx taxes the boat a on And more

is significant, it working capital million. the you think going be I is right, see once So and sit down reversal, $XXX to which

a million $XXX around cash then to and now million get anywhere million. between very free number and cash flow to cash, going $XXX of ending $XXX are comfortable we're You ending

and that still that at available less, plenty but more And gives at the Dave the maybe or to equity. or the untapped little be we I are liquidity. some about credit of gives of of that together year, a will revolver that could enough -- on likely be end Freedom we’ve us think a room, our with little us, we us

Dave Foulkes

on. our spaces previously the James. going strategy M&A we That’s available moment. at I think on to are In the Hi, say, maybe -- teams that our is focused are, I indicated, be active acquisitions the yes -- would well, there are one Yes. that we’ve

Freedom the on of kind strategy core pursuing trajectory. we related and as with and business of a very get are its terms growth In businesses, we other aggressive -- Freedom

be are to not it, will focus over able we Day business but and view Investor in We expand monetizing business now internationally of U.S. our you build presenting And I in and much spring how a opportunities. adjacent more we domestically, like the look internationally. the the tell we in Freedom what on that how comprehensive long-term, you just might would with with out

James Hardiman

helpful. really It's

Thanks, it. to guys. forward Looking

Ryan Gwillim

Thanks, James.

Operator

question comes the next from of line Anna [indiscernible]. Your

open. is line Your

Unidentified Analyst

morning. Mercury thinking Day. of some laid had XXXX market Thanks gains taking this good at you us could talked there? already about questions. Could were about earlier targets you're guess eclipsed my the how out we Hi, share year, see of share Investor for in on terms how that I the the we update maybe that

Dave Foulkes

this, say when that very we on I see soon are to Yes, going is to from we only if but acceleration. try going to accelerating. stay away that you too being would is specific the product that increase release Mercury's And momentum anything the

too accelerating expect being continue. So favorable to not that is I it and say precise, extremely and sorry trend I'm about we would the but

Unidentified Analyst

the that of I other was Okay, of from XXXX kind earlier does got turning you the guess as to some but of reprioritize incorporates this the guidance, pushed on XQ? height And the margin up OpEx it. pandemic market or in catch out Thanks. at then R&D

Dave Foulkes

strategic honest, did down we XXXX, any not be to Yes, initiatives. in slow key

you our in investing are and kept increasing are I but items ACES digital kind out of enough holistic we need that will stuff see kind so product we advanced pushed strategies. this that costs, not -- were will certainly in enterprise somewhat in particularly tell we of of maintenance our our effort. in strategy, in technologies our certainly that they also be business though There So those year. would some caught enterprise of we units, some that only type developments, in up you in technology, a investments

as capital technology product, increased would the in further on some year and we've strategies. capacity of maintenance will yes, reflect So, I in some ACES and some say our some new related investments investments expenditures up kind type obviously this outlined activity catch

Unidentified Analyst

Thanks. Great.

Ryan Gwillim

Anna. Thanks,

Operator

question next of from Johnson. Gerrick Your comes the line

line is Your open.

Gerrick Johnson

Good thank Great. morning and you.

XX% looking so you're So quarter. to speaking flow down to down inventory about it is of XX% the X% lot line in about going good, inventory growth the flow concerned [indiscernible] getting supply, the sounds the whip at and top to seems like with XQ have pretty like a

for So if talk can that a second. you about

Ryan Gwillim

we're Gerrick, Obviously, inventory of have guidance. got revenue with little comfortable Yes, pretty down. there we the is to pockets Yes, a dig deeper.

product a well. I capacity, working think and And that them and out, a day lot we're P&A OEMs bit the our P&A delivered as getting to and world. inventory over building hand dealers could is next a scenarios but little keep of and places building we're Obviously, were that same remember through it pulse all our obviously necessary. in be there's more, as day,

order. in that long not real dealers ours in the a there's inventory to So it or a need very for when sit makes customer in

for various we will are watch we obviously and first the guidance. quarter it controlling but we're think pretty I pockets, with So comfortable

Gerrick Johnson

about Okay, great. bottlenecks we And flow, everywhere. cost? constraints are With the that and beyond how seeing

baked increased We in cost your costs risk seeing to are of sorts that Any could go guidance higher? logistics, those things. all

Dave Foulkes

think suppose risk, a but we mid-year I obviously, I there's Well, have always pricing.

the net model boats be in adjustments have businesses like, is for we other can our the Our pricing year, designed to if that during year we periods. positive, you and through both some the make and

we net I to costs, although there would we'll containable. those moment, are managing costs no is think be able not out Given I obviously the be and pushing demand, possibly why at we can. everywhere should reason back say

Gerrick Johnson

Okay. All Thank you. right. Great.

Ryan Gwillim

Gerrick Thanks,

Operator

questions We Dave like back time. There to are phone concluding some call remarks. at turn to no for this the would

Dave Foulkes

Well, but same can us. you as XXXX the for doing all business was the see exactly cylinders. on fired very, thank much a very in anticipate challenging XXXX. joining year, you really all We

not we we have but certain guidance, full going of I some and not stack opportunities incorporated probably that Regarding our also forward. would unknowables unknown just that the risks, say

in year. the are in to astonishing So to you launches throughout at them. exciting The stay new and as of leg and look and continue will and growth virtual we about forward of are product continue They're next enjoy we weeks our for earnings look few with our you just Please to next in very differentiation that the touch. the we report spring. investor part that that more of that's the event sharing extremely businesses at excited will

a our all us tremendous So for everybody. Thanks morning. this team at Thank fantastic year. thanks to you Brunswick joining for

Operator

call. conference today’s conclude This

You may now disconnect.

Brunswick (BC) 28 Jan 212020 Q4 Earnings call transcript