BC - Earnings call transcript Q3 2021

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Operator

Good morning and welcome to Brunswick Corporation’s Third Quarter 2021 Earnings Conference Call. [Operator Instructions] 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.

Brent Dahl

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

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

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

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

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

Dave Foulkes

morning Thanks, good Brent and everyone.

another had businesses outstanding Our quarter.

our overall inflation delivered our comparisons with result a throughout share consecutive our brands. supply chain we market the take our active fifth EPS for enterprise. Despite many challenges engines successful of continue quarterly to of of and earnings adjusted healthy. to last remains in extremely mitigation cost now products boat and have of retail We operating Mercury as robust performance, And outboard for our operational demand record year, challenging management

Robust hand. In lowest model. XX over the expand retail base continues decades to demand this has on addition, Freedom our field shared to in rapidly inventory participation Boat for membership as at very synergistic weeks we Club grow its access successful driven level and just products

plan. chain meet to our constraints in increase businesses cases, to overdrive supply though ability to production our limiting across continue We our production demand are some

initiatives retail laying the focused demand during refill and in field year while production of to strategic and next acquisitions, and we levels the XXXX. out the Navico elevating closing the As groundwork successful on in history, wave integrating other most success our XXXX, Brunswick’s our are progressing inventory close we off-season, meet for

generation out another increased performance and a year strong outstanding and closing returns, with focused our growth are businesses from have margin healthy shareholder and guidance flow accordingly. XXXX earnings operational of on we Our resulting robust our cash market free marine in substantial

share we the a award Before third received the during just wanted of few nominations to for results quarter. and you awards that quarter, with I discuss Brunswick the the

For the and changing time Soundings the a Verado Marine panel Innovative jointly and amongst Brunswick Ray for Trade record-setting such Marine launches Tampa of as with XXX The and month. second years, product multiple judges Company Mercury V-XX outboard a in Only horsepower Most in the industry XXX at X Brunswick Mercury praised filled award engine others. Trade presented Sundancer XXXX, Show with last Sea IBEX were the

major International Innovation ranking award, DAME X and design awards. X also Boats product Year Electronic Trade, Step the from of is of second of consecutive the and nominated women Statista this thrilled receive companies the awards, one our X was customer only Brunswick Brunswick for the to employees of the for the Ahead recognizing X XX IBI thousands employers. manufacturing and recognized Consumer companies XXX also meeting and Best European X for world awards awards been selected best Mercury for award, during Brunswick several category. committing recognition, for and eligible world’s Best the of as safety and Additionally, Of efforts of in the METS awards, within Show year X of Boatbuilder to to continue pandemic. our global demand to Forbes the companies engineering top other be by health were including the in commended awards, extraordinary Powerboat in has Brunswick a manufacturing,

vital boating access to recurring insights pullback industry are updated democratizing in the In Our XXXX. diversifying to to and continued quarters, trends first-time we provided strategy growth we talent and the the and base. encouraging our and ensuring of past and around central as any customer our our boating pleased demographic commitment trends is to demographic experienced and buyers boat well as during seeing I’m not we changes. to that

diversity member to XXX with are percentage grew We total Freedom X.X% XX%. to XX% the members, by basis percentage and notable leading the see in to continuing to also members XXXX. women base, XXXX, X.X% almost Hispanic the which XXXX demographic from seen which in points increases doubled XX% in XXXX particular note, around Freedom in from making way shifts. Since these has our of the now up Also ethnic our of of grew Freedom of

their doing further work for in versus belief their get quarter that and third our actually working segments boating boat time. fit opportunities at boat during remotely at help have marine people encouraged persistent Brunswick’s least maintain Most polled the boating those to which on by seasoned highlights gained from entire will this into to share XX% and approximately the work which and surveyed, so week on that with who I’ll secure new community, more XXXX of changes these XX% the those continue very you includes work to during healthy market. online provide Brunswick for out pandemic. some also and Ripple provide trends been than pre both partially, some marine expect like supports worked insights more boaters. people a through polling people way and fit some industry. the overall into water elevated our XX% will at their future of week with now Of usage XXXX, I’d to levels able season, the boating consumer We’re

growth, margins another than mix business delivered significant top propulsion Our stronger customer favorable quarter line and earnings of leading anticipated. to with more

of recent a has has Over last extraordinary market products, gained investment amount gains Mercury made horsepower points basis U.S. significant retail outsized in the share XXX an higher of years, X been with in where years.

strong, favorable late resulted Verado exceptionally delivered season to horsepower quarter. expectations been elevated businesses new and robust in different already product Parts weather and for participation overdriving conditions aftermarket by V-XX and Outstanding the driven demand many Additionally, in Accessories in areas XX demand booking OEMs. we’ve execution, the engine our has XXX

Navico ACES our and RELiON batteries third vertically provide to Advanced complex wiring acquisition customers. digital to this closing SemahTronix during announced Systems systems and addition, solutions integrated enterprise-wide will along These further our our electrical to complement to with OEM of strengthen earlier respectively. In complete the offerings of and and our strategy lithium-ion enhance ability acquisitions comprehensive consumers to Battery the existing month, the innovative tuck-in of Group further quarter acquisitions, the its portfolio integrate harnesses,

delays our business environment. boat and our growth Despite continues our chain in inflation original labor comparison, production during unit shortages top business deliver challenges, Finally, line plan our facilities its approximately year, original own XXX% and to strong tightness the upside. of to production of By of the XX% for constraining we at our schedule. propulsion XXXX a and of supply quarter, production than anticipate with some primarily suppliers disrupted additional greater annual is anticipated cost produce

with excluding attracting continues Freedom global like by young region and diverse rapidly and currency Brunswick increasing acquisitions. percentage memberships XXX our the boats more including Finally, a of I’d its network-wide than now customer overall on constant is while expand and to an Next, locations X,XXX in approaching Freedom engines basis, business base. XX,XXX Boat boats review Club to sales a fleet, of performance

the with significant other X share our very still as industry. the the same XXXX It’s XXXX. industry’s indications declining in prior first difficult with XXXX, regions expected, rate, July X% availability environment. period recent XX% of impact more Domestic third engine period of through periods result greater played resulting to beginning to slightly year lead leading remain has sales that Delta than all with gains portion call, the note XXXX. The and and XXXX year, versus in than of the overall which, are gains grew performance versus a the in all the result earnings up compared is registrations the more the first still XX%, has somewhat COVID XXXX outsized direct X same the the disruptions positive. performance anticipated, pronounced a Except retail not to of we the outperforming in growth year. retail and in the Mercury’s more aluminum in on versus first saw XX% driven in is main experienced up are generation, significant As comparing were normalize and up of in XXXX posted than down through but of of same quarter largely more powerboat for led a growth decline reported declines the when quarter retail and XXXX sentiment the X% together share unit Outboard unit retail May. more inventory-constrained expected in we’ve compared easy market, market double significantly we has indicators This all recent are market industry market when both same XXXX products. anyone sales the period comparisons X% the with years. Asia-Pacific, Brunswick’s that color U.S. due in same important but with same being with the compared supply the period provides registrations product Since outboard XXXX. in generally table comps international more XXXX The in sales marine chain are year-to-date to unit of months the experienced dealer months ahead variant, the by XXXX. engine primarily with U.S. the consumer in impact period a year-to-date demand. market out Mercury sales sales with in

all the calendar And manufacturing ability together these than inflation back continue on mitigate our slots of out. to confidence increases factors of on sold the increases net percentage slide of annual For XXXX. early year boats our in the give model our in normal impact inflation a with leaving continuing the strength we our cost we of already our retail of price the view in This All XXXX are year. of half price sold. Based XXXX quarter, as to and year implemented provides inflation price perspective levels the high the impact. of significant facilities XX% to we already enter see mitigate retail our us take July higher anticipated example, third to some input production on in businesses,

exceeded with a basis, anticipate pricing the and rate labor materials, higher-than-normal However, full to in single-digit on high take cover we we in cost range year both with the we’ve inflation we cost of in ensure freight, additional year. Propulsion has and that half inflation further to input our inflation in October mid-cycle price direct on felt the our run significant second Between be implemented increases during so increases Boat basis. estimates, majority businesses the to versus a of percent XXXX. and/or need XXXX a Consequently, increases may impact input

lower However, our the price the implemented to raw date we the not end implemented to I’ll increases and for at the of on are are over impacting those believe call demand. comments now financial generally performance. we’ve industry Ryan turn additional across

Ryan Gwillim

and Thanks, everyone. good Dave morning,

marine have earnings Our all-time from increased favorable market changes for sales, increased in gains setting and XX% earnings adjusted When in XXXX, by benefited each as-adjusted $X.XX, with demand offset any and with XX.X%. increased compared impacted again pricing was due new on records. EPS foreign input we partially basis by net for Operating costs margins and quarter up X%, initiatives. outstanding by highs spending to products, segment and currency third adjusted businesses on delivered which ACES for volume another sales strong global operating sales and increased Sales increased quarter share increased quarter. third other with rates, once available of growth and marketing exchange were an positively

resulted net margins XXXX in comparisons a First adjusted operating months of robust X basis and very with $X.XX also EPS a operating the XXXX. first from and first for of favorable, X-month point XX%. of the XX.X%, months improvement up XX% with XXXX sales are This leverage XXX of very adjusted X when compared

increased months levels to of production period. generated have X $XX million almost which needed to in first year, elevate satisfy $XXX we prior of needs spending inventory compared We free result for is a working the same when flow capital as strong million cash the capital and increase the incremental considering through the the year

were Accessories growth-related for segment, margins should XX% were margins Favorable costs, regions basis primarily with points to prior XXXX. in points. the closure national negatively earnings XXX as increased when quarter spending for versus compared share all and revenue demand X% segments, lockdowns in slightly X.X% the growth aftermarket many is product to operating to with the were which increased of gains, were boating approximately up adjusted were lower for key of up continues in accretive distribution our versus to up third absorption XX.X% volume prior businesses. weather versus Parts of enabled our to caused at be QX Boat quarter contributed third the segment, particular and drove sales basis and manufacturing COVID quarter were year In versus by In up resulting offset by revenues with XX% earnings. and the were compared with of participation, XXX third versus all season inefficiencies favorable adjusted product including XXXX increased increased cost sales included points and to in to in increased due business quarter versus Strong increased and able margins retail XX% year levels. of XXXX. continue and which on but investments. XXXX. down propulsion inflation, levels Adjusted XXX X% the operating higher as a the material in New in basis drive late segment’s XXX our by XXXX, Turning initiatives, and segment sales sales was quarter inflation. benefits and manufacturing due margin favorable and and material Boat Freedom as QX higher third margins with acceleration, of mix Increased impacted up operating allowing XXXX, into more compared continue location When XXXX. points pricing, the of freshwater, operating higher of together a lower is the adjusted of significant quarter profile offset increased strength discount market portion Zealand operating basis were categories, production revenue from XXXX our X%, segment. Sales categories when down which were be in to to by Club, of to QX Operating XX% a the spending sales, manufacturing together on flat pricing aluminum business sales pontoon were up that well

for we Turning current Supply to certain in the receiving deferral challenges, certain shipping our boats delays believe least given earlier, a pipelines, Dave of reach remarkable our production we as at boat in including to has of supply-constrained attainment the will mentioned components, in. are XX% XXXX, completed original resulted production environment working subsequent nearly achievement plan quarters. chain

X,XXX sold units. This X,XXX greater the which of result, the units third the quarter at low boats quarter, a approximately XX% same of wholesale approximately dealer XXXX. than keeps an wholesale As of number we sold all-time units during in number sold retail was and of inventories the third roughly at

brands of over XX% units on basis, just lower weeks boats the with year. the same by on with ended hand, last XX-month measured a time September versus Our trailing XX in boat field

operating we generation into businesses our performance outstanding and robust another are margin on flow closing healthy fourth resulting the As free our a substantial returns year and head quarter, market. with cash growth shareholder from of marine strong focused out earnings in

clear elevated and as headwinds, our industry. and leader transportation certain we innovation to we we are Although growth confident labor and challenges, continue costs drive in continue including can navigating supply that chain, the

net only We cash believe the reported year retail than will are projected XX% acquisitions, to of Navico, adjusted marine levels, including about to points, the impact and on be after contribute for the fourth will that adjusted meaningful income we of but industry billion, our for for to demand of which with percent excess at costs flat than the the the of a million XX.X%, Now margin on year of rate that growth, approximately the P&L effective expenses tax the diluted guidance related and from changes, closed will is state remain neutral be and year. the update cash rate the following Note an basis certain sales providing improve now to approximately anticipate increase from favorability for remainder EPS represents unit for $X.X which financing acquisitions estimate XX% XXX due full branch over the XXXX, our close XXXX U.S. transaction. update updated in the the related XXXX. to EPS flow XXX our Navico of effective to XXXX, call. including a we July full of approximately benefits tax law we will lower between interest lower our from year operating revenue including XXXX. The quarter’s free foreign impact growth acquisition additional some ending $X.XX, items of conclude operating relates will year-to-date sales and our to as of $XXX I believe tax certain flow versus slightly

We the retired with gross strategy debt acquisitions. anticipate interest $XX associated process. X.Xx with with debt with approximately materially on intangible a the the basis. updated financing our changed creating X.Xx the and tendering result working for guidance our net with a capital expense for of a the year financing notes the below additional XXXX a We of of basis and XXXX leverage as million of during ending our the on execution have assumptions completed have our slightly year, also higher of Navico capital and not transaction, Similarly, associated amortization

approximately we to share our our of just share have repurchases worth the the of the and end anticipate I our over guidance turn adjusted year total $XXX quarter Dave will show $XXX shy continue to outlook our for call year. reaching that of million by repurchases the comments. we $XX back to now brings Additionally, in share million the third million, repurchases to of

Dave Foulkes

Thanks, as we’ve deliver we execute squarely Ryan. operational has our to against operating us on businesses throughout track year. and Very by XXXX execution an the discussed outstanding priorities the solid strategic

top satisfying and new saltwater, segment OEM international share, demand and market to expanding in dealer, especially outboard continues the and repower engine channels. priority be customers existing for Our Propulsion from

that solutions top industry-leading far continuing the product enable invest project new and future. introductions to We’re into in earnings heavily will propulsion and growth we line

projects the second for believe capacity remain half track and us their completion incremental XXXX additional being to gain of allow already on in who by accelerated Mercury. expressed interest we supplied by will Our have customers

model systems Our operating its segment strength support and on in position remains focused Accessories Parts distribution and of its ACES digital global in products to battery and of our optimizing strategy. technology, leverage connected of areas

also has environment. over seven build now its in advantage of high-margin and synergies territory, capital which focus region focused further systems and future cost will increasingly expansion businesses we take purchase new continue can of the in as with footprint M&A on efforts keenly New the pipelines are acquisition portion plans, the Northeast to a supply continue The recent we more will And integration expand in locations. to integrated business. Navico, help XXX and out its Parts year, of this U.S. mitigate our We higher increasing expand our locations number activity acquisition York opportunities territory Boat other the significant memberships. executing to segment Accessories for recurring Combined review chain this with can SemahTronix. and and large, to and continues on more the thoughtful the very RELiON of quickly Connecticut activities focus products, we technology robust in launching to of vertically to Freedom revenue issues refilling retail earlier become

leave close a with from the customers. to early deals Before see distribution this our more we already morning, Systems from winning Group completed business to retail out you new begun RELiON OEM significant and returns few updates. comments I wanted with Advanced We’ve positive

during with addition In its international Club distance that our acquisition potential revenue competition. fourth rapidly Freedom of third in quarter. Fanautic the further future-orientated these the Connecticut recurring believe continued to the quarter, us expansion in the We from acquisition pace plans Club businesses early expanding Spain in will Boat

double from like aware, important in that end consumers feedback kicked Cannes As are of one Sea most boat than sales. Lauderdale outwards partners of participated new number the our see the our show our new and and we on versus of other XX% European brands. strong outboard than revenue on in-person combined. brands positive. September, the and Fort all display of resumption on show, while the boat off beginning reported boat all shows most XXX was Show in Verado its the more The the also Mercury extremely we’re models closest reported early you manufacturers consumer in events the Boat channel interest engines competitor Cannes reported other display at XXXX horsepower show, significantly its V-XX yesterday. and Brunswick the also a for to And increase Ray in

new launch across continued products to pace at the enterprise. a have rapid We

Energy front, this also the Land newly third another On waste the Association becoming Engineers landfill Wisconsin. operation Kellogg location important we installed zero quarter, solar to Sea won And milestone the of Mercury Brunswick Marine to award achieve distribution third an the ‘N’ in for during a array designation. with sustainability reached

we working more to initiatives, expand this on next will and are sustainability further share subject early year. We our

and once communities. what during for want effort a thanks sacrifices I their a still offer employee families again Finally, challenging all heartfelt our some time population of dedication, and global to is for to our

hard outpaced and to plan work initial our and us enabled seamlessly our profit has execute growth significantly Your expectations. strategic

We will now the for open line questions.

Operator

state your Please, [Operator Instructions] with Matthew first comes question. Thank question from Boss you. The JPMorgan.

Kevin Heenan

is morning, quarter. on Congrats a for strong Heenan on guys. good Matt. Hi, Kevin This

Dave Foulkes

Thanks, Kevin.

Kevin Heenan

year-to-date the powerboats for to about on thinking outlook the move Thanks. you and just to how down improvement you’re your U.S. the retail if demand I provided the XX% as total relative ask X% to XXXX? for we flat the wanted in into in could confidence today, industry on the for to So market, or the retail year elaborate regard

Dave Foulkes

year. it’s Obviously, an Kevin. Thanks, Yes. unusual

So, a going lot of into this. thought

We X% are comping off the SSI.

is our typically, internal estimates far. and converge that improving some And retail we revisions forward. kind down SSI our SSI. go as And recent So internal we’ve of showing seen from not we see

trying triangulate. October. We’ve in from do retail we’re what seen to is So perspective, again our also internal improving

year, if are shows some than down showrooms to forward-looking will of think trajectory SSI of but And have the of nothing. hold a you there a up the flat, kind of dealers see trends, revisions. like. closer lag have bit want SSI moment, as in current to some or plus again us who So or the retail improving Across some the shows. be they I because reflect end there’ll we dynamics, any kind some There inventory lot minus them their be at will

sale. may – the who be sales. retail companies but retail But have getting register different year not cash others inclined are be through retail register would be interested to the incentives also will more to various that So end register in inclined of they sale, to the the

trying into day early – for revisions, Whaler account day Lauderdale, And demand. than XXXX, clearly looked to So internal our SSI of just is minuses, retail first we XXXX, and September those at October. retail the XX%. up what happened seeing then and first I the strong look at just more Boston to And incredibly the the trends was raw and Fort we’re think take through I general we’re plus or

no So question of first versus year’s last the there show. is day

retail people begin really improve and stabilize supply and wanting late expect boats, we no were to is we the and that to to are begin in that XXXX acute in of chains some QX there alleviate. issues more question So experiencing as QX

on XXXX, light the much inventory can in how expect certainly on – depend So the depend it given much it we produce. in levels, will growth still but retail will how industry

Kevin Heenan

Great. Thanks very much.

Dave Foulkes

Thanks, Kevin.

Operator

with comes with Please, question Exane from go Siew ahead, Xian BNP your question. Paribas. next Our

Xian Siew

guys. of to question. share there you talk the maybe now. sales Club, have less a Hi, just retail – you tied elaborate how Freedom starting, Maybe little business is maybe is a is about sales the for can lot P&A Thanks market sales. on getting bigger. retail Boat But gains. obviously

successful. you retail growth elaborate maybe sales that need So maybe as you thought? Can don’t to much be on

Dave Foulkes

Sure.

and market a thank in share of source seeing market you’re great units. point, really that business are growth Propulsion for think I our even you trumping it’s it. overall gains raising as a Certainly,

up If the third you think Propulsion I our think, think, were, quarter, in XX%, the XXXX. about I versus revenues fact that

business right. of P&A part And the on of of seen usage, systems more absolutely goes course, in ahead trends market, Every that growing more our our segment P&A and water you’re and the massively usage is it. So improve. of we’ve so has now then, boat large depends increasingly on and and these technologies

profiles So we’re you P&A over if usage like, been enriching fleet, strong. very with the time. And have

the weekend. voting that was after week not One during the now, we included of are who Ripl the polled just slides we slide our online but community, people the number of

usage and and our doesn’t we this year. extend then, is course, have been of expanding Freedom sales have at Boat And boat will improving, new depend another all on of which Seasons profile is So again part recurring revenue. Club,

the obviously, add Navico increase hugely in some is and acquire from growth both areas into businesses like, new territories and recent through into lower. of And more earnings boat lower revenue – and P&A, for Freedom, that other to sales gets we exposure, as new we As those of if inorganic acquisitions. you

Ryan Gwillim

Yes.

close look Club earnings so Dave recurring be the countercyclical P&A our time Freedom Boat almost we I comprised XXXX to aftermarket of repower said. businesses the to going the at been business, and of out business, by and growing, the are as we’ve mean, Just half ‘XX, add,

of spending So our that’s investment is a dollars. number that a should where focus stick minds into we’re that because people’s

Xian Siew

lot the for to a is chain, makes and do Okay, front. plan been there XXX% out? supply And then tightness for you difficulties been supply your chain original thanks. to XX%-plus on supply stand that And obviously how Propulsion what on this able I were chain, have guys able the you guess supply talk of chain, about of But and then it boats. navigate way?

Dave Foulkes

helps really domestically. and Mercury, us produced level of the on with Propulsion lot sell the domestically product think I of it and that it’s our fact the that integration a we side vertical

manufacturer We’re the U.S. product in outboard producing only the

and that’s sales. So gets – where it mostly

correspondingly and plant. So some said freight side exposure is – and It’s engine the competitors. Mercury our guys on to than are And the many lower you to other I’ve times, shipping an amazing welcome visit place. then things of if our

aluminum coming crushed in wheels see integrated end the going outboards of at how it That’s one car and is. other. vertically You’ll out

a that So And supply reduces make collaborate fundamentally to with great levers exposure. its have across I pull. sure we what teams our lot understand think enterprise, we that chain of can then reach who we global

have to engineering things. that are teams able requalify We

scale, I global And we part – us of more and we to of a advantages chain continue will engineering on So be items those resilient to those the especially of chain think supply more on probably. are people our vertical teams exposed great integration disruption. our strategy forward. that somewhat scale, to vertically the other is by as makes lot in teams work we than our integrate capitalize move might Certainly, of sector some supply and a combination more

it improve the So go hopefully overall, will we forward, situation to as time. we exposure be but over reduce hopefully, will will our –

Operator

Thank you.

with Swartz ahead, go your Mike Our with Truist. question from next comes question. Please,

Mike Swartz

talk I well you’re talk strategy that sold going Hey, wanted mid-cycle be that retail a some to protecting or to taking as to through. morning. wanted your else – pricing you maybe seems just to pricing fall. backlogs and I the bit about and maybe and pricing, the everyone as how Good guys. take little orders just with you’re But this degree maybe think protecting about

Dave Foulkes

that think lot Hi, less protecting that products to in a it’s are Mike, of sold I we – moment, – might of other do wholesale the the because already amount we Yes. sold doing we are at fair our retail that yes, circumstances. than say price we

So we frequently, partners have changes which to is we there of that think, with some understandings, our pricing kind reached I and protect extent can will the limited. be more channel

then price a making for price they through. in so sure protect it level circumstances some flows think I fortunately, those or are and a understanding, only are So example, that but might, price a for – increases we quarter, increase we

even Sometimes for we a won’t protect quarter.

So that the lot protecting more because we’re do. it’s normally with a we of doing And that of dynamic moment. price at the would amount a retailed, bit issue than is less wholesale little

Mike Swartz

thank of the in a freshwater both the continue at we your just in as quarter, for Should the look in I third in embed Great, towards cost/price it to give next regarding business. I’m so fourth another the well? just the just it the As slide little question expect kind quarter? that dynamic looks And mix change like material Okay. that. the was presentation heavier fourth quarter that quarter, any does you then wondering, for

Dave Foulkes

I anticipating don’t that think we’re that particularly.

of I dynamics. think supply what the some is chain it is

more Some complicated. a of saltwater are little boats bit those larger

a tend But some through with chain like, we’re of you that, do a supply are than moment, issues. hung think way, at the quite will in associated up lot think other doing. So to connected capacity they QX, the supply I of don’t be with we if of that bit kind – look longer some I start-up as costs, of the we we expansions have a so.

brought the Boston online. plant additional – we just Whaler We’re bringing

Portugal of operating bringing we out capacity but a are for of online costs. expansions, flow but incurring lot We’re there, yet seeing not we’re volume

some So, think soon looking QX. start shift. capacity the will And the a I change material dynamics of as to as we’re don’t expansions for

Ryan Gwillim

trail any supply other reasons we’re to may Dave with, QX. really, and outstanding but from sequentially equation the the inflation last of for margins the of better or not. was have that the anticipate margin And still – just Mike, QX, we for in QX to would QX chain QX expect overall the dealing quarter maybe growth from piece really We be mentioned. a boat would which They issues than is profile. we’re didn’t No, business

Mike Swartz

Okay. Great. Thanks for the color, guys.

Operator

next your question. from question Altobello Our state with comes Raymond James. Joe Please,

Joe Altobello

peaked Good here? do guys. that half that comment next Boat Or guess mean margins made, pressures getting just follow-up have worse sequentially the Does year? about of you margin they you’re first think the possibly Hi, I’ll better you in QX. last I seeing could morning. Ryan, get that in that

Ryan Gwillim

and tough to this It’s question. thanks Joe, the for obviously, Yes, obviously tell early.

got the to board terms get on we able things as produce we’ve helping to in a more think lot of are about. that continue talked capacity of units has Dave that us being I

obviously, lumpy comps take the anticipate the tried would a next growth but business. of little issues, on chain guessing. guess year anybody to growth year doing bit ‘XX, next if Boat margin of happen, waning be margin But we’d of in will there’ll just which all think probably in when still to going be versus that’s be we because that that, I a just and So just the ‘XX timing the the supply

Dave Foulkes

start-up for follow-up acute was – just that big facility, of wanted terms with mean with a QX Whaler to of on this limited for facility Portugal particularly the in I comment. production. new lot Joe us I really for Yes. is the Boston costs

production no out limited part the coming coming only of of flags. the Portugal yet and fact, facility out newer of In units

So absorption. new as get Whaler Boston will online, in QX, those the particularly better come facility we

I seeing are some of well, We some mitigation costs. think, as commodity

this I down this think steel significantly is month. is Aluminum down month.

trends I on we as need it. So flexibility on mentioned, we’re view hoping that we some this. continue. We have pricing take said long-term and of execute if But will try previously to those do, of a we

We’re But are obviously that is we going product affordability very cover it sure maintained. in over time. making to interested

Joe Altobello

follow-up number, past. the a have all? year, thinking impacted And Understood. issues just in or EPS to next talked chain a or at about still you have supply that that give guys point Is this maybe your $X at take,

Dave Foulkes

comments this on any make call. in additional didn’t We particular No. earnings it

scenario currently say would early that I we foresee be next is will we We that’s than there – year. will that. no lower

for are where as we So, I that should going. base a that you think good regard

Joe Altobello

Thanks guys.

Operator

question Securities. with comes your from go question. James Wedbush Hardiman Please ahead Our next with

James Hardiman

morning. Good Hi.

it bridges sort basis, you are us between downgraded only big guys looking gap, it such Maybe help is is number we And industry seems meaningfully. time? your not least So, be sales the Maybe exercise figure of things a to sales. out and pretty would at how the that but two that always your outlook, like, because industry for used organic an those unchanged. own your you growth these outlook here were same do at a good on you able accomplish to –

Dave Foulkes

and know don’t of has say that a would and time. that I moves up that have SSI. honest. tracking probably be James, will doing of over the as registering if internal through revised now of generally for it year you, can do dealers lot numbers recently very its boats, think bridge stuff our will as fully are I necessarily kind ahead catch and moves it And I it retail SSI so Hi into we not up I Yes. is XXXX. I busy

gained have it. market it, think not some but all some enough We the don’t bridge of share, to It’s we of that’s but difference.

And going so happens be we what have wait, honest, to and with SSI see a forward. little the to

a can bit we bridge share. So, market with

would sales I such internal with retail. market don’t retail We it. which share can based U.S. know what available think our in of look at be imagine did, said, our an we we just all you certainly as think is. the product, that lack issue that just gain is We QX. of change didn’t of on We view market covering

than We is revised continuing internal positive I correct. to show yes, SSI. But So say, you certainly are would that. retail more

James Hardiman

getting to little are point, given perspective? little bit maybe to a how safe heavier bit on the numbers your a on guys this are it you pricing that say and that challenges lighter chain just from what supply a and ASP units at Is does

Dave Foulkes

– production our we side, a Well, likely more. the just finish XXX% as or probably we initially I on think planned engine we of on the will and above unit mentioned year basis, yes, XX% a

I So, going I huge terms in of there difference. for isn’t are think – that’s a a but ASPs massive obviously, up, bridge us don’t mean,

James Hardiman

quarter. you third Okay. units And then my in second question, the so X,XXX wholesaled

was impact production? is we those the going that that into, all that fourth units Could second units. to read inventory, I guess And unfinished the on hang over that I forward? should think I number that that into the does corporate the quarter, its chain I supply just mean, right, you expect think – you your gave X,XXX. way I think about of as how quarter Do or in that XXXX? you work said the release went the in us

Dave Foulkes

between disruption. Essentially, is there in the take on part, first That’s we QX. new think I a QX downtime natural do reduction changeovers. model just launch and supply where we some So, chain July not

because of holidays. – fewer of And then And ourselves in so we over there QX occurs by July most and essentially that efficient that changing in we model days are make lines. less so – have production

recall, models, that it new is of and this I that would I XXXX. say natural. in group is launch some will, think I upgraded XX, of So, year either We if both or chain – some difference supply

we have July, are that through the probably door. that that will in units would I – units of So, situation. best doing units still likely is difference. will in And impact we system, at our am it’s of the of get mostly the Obviously, be some still changes end the going those to say then year, out we the those sorry, unfinished. I the that part have

be another the said matter its is XX,XXX will parts. at moment. demand has making The possibly in we obviously, really we say, would I if I or meeting, Although high X,XXX it boat – we doing doesn’t can. will be everything the parts

part, the If effect. it’s you same are minus one then

the obviously, out that hung complicated more are boats those the And tend the door. of we up So, want get to boats.

get assume we doing won’t be So, out. it’s we will can, we everything everything but to realistic

James Hardiman

Very Got it. Thanks. helpful.

Dave Foulkes

Thank you, James.

Operator

question next comes Please from state Research. Wolfe Our Fred your question. with Wightman

Fred Wightman

Good guys. Hi morning.

on expected You fourth had here you of expect back here on year. disconnect and about some saw the third should quarter. the business like It a talked I touch where expected catch-up you that was in in better of sort half of in mix side in propulsion came the the sounded hoping headwinds the the not quarter? whether or than could the we

Dave Foulkes

Yes.

supplying business in a large lot I to dealer the our dynamics are channel, OEMs, think depends smaller mix OEMs, propulsion we on – whether we on have international.

saw strong. international pretty was that growth You

good. there the is mix so And

saltwater. You in saw are share that gaining we

for So, pretty those saw well repower very are this strong And are secular. we quarter. demand as I think, in

will it’s I changes, over path generally, a dynamics over as supplying growth and but time. think it of time the on secular others a bit fluctuate OEMs

price choice. that of propulsion be the are to As able we technology. continues Obviously, it Mercury, for to

will improve, generally, to will see over we So time. continue dynamics some it but

Fred Wightman

sort an But be the us comment XQ XQ favorable know area versus to where I quarter. for side you might the into a fair then tailwind And see what weather year about normal think amount there seasonality always the year? on seasonality, from sequential Okay. just you help is aftermarket some can we of noise Navico. from business as made this a going about in that’s a that had of a into that fourth also

Ryan Gwillim

I mean, Yes. product. the Fred, usage P&A, this Ryan. on obviously is of based is change

and pretty I pretty certainly winter was a some service and pushes and months. QX. think with longer October, boats little good and a strong even saw therefore, Midwest and in we last on some the track P&A sales September – waters leaves similar a nice that the year saw what QX in the We in fall a very into

year. of I we favorability we out guidance, but – as So, a embedded think we have into that our the bit is little it close

Operator

with Anna comes your And you. question state Please Thank our from Jefferies. next Glaessgen question.

Anna Glaessgen

nice so Thanks for demand. far Hi. seem actions impacted not my to have taking to hear It’s taken that price question.

contemplating stop and what have ensure do to I increases overshoot not isn’t affected? further guess, gaps and actions, you that place with As in we demand think about XXXX

Dave Foulkes

Yes.

So, good question.

view the marketplace, of I making a at successful the long-term think new keep very have and have we we people we boating. said mitigating to into sure consistently people market which get we balance that in with are been trying inflation and

in whole. middle get large pricing I risk get So, share take you losing a market what make think and far It course, of that the of of try and easy year have the is sure buyers modulate very to is inflation. losing don’t been we chunk But take a would our have is as everything. or in a seen to ahead either of – this of pricing ahead too

will making partners balance our how increases. affordability And price approach will inflation. we channel we So, we to around we maintaining reached covering with have continue agreements sure that with be

Anna Glaessgen

Okay, Thanks. great.

Operator

Thank you.

your Our with Baird. Please from Kennison question. comes next state Craig question

Craig Kennison

Yes. Thanks.

I on my at least am trend, the laughing. committed season. from next So, boat for just working to once to stay Thanks

m be as And bring a Navico. on OEM is question their the integrated guess some partners? I conversations your those you receptivity might I more to to of the components accessories with of all had wondering and So, if and solution OEM what partners have you

Dave Foulkes

Yes. Thanks, Craig.

of I from too. Navico strong Navico’s acquisition acquisition – customers, customers of our think very been all has Brunswick’s to the reception our of and

all delivering I Group, they successful both Systems Connect see Advanced ASC So, from the certainly opportunity integrated perspective. think also Mercury being have We are there. the with increasingly been the solutions, and – from perspective

mention can’t but site and names, their – OEMs, products. integrator of will I You are for majority some we on the now

favorable certainly, we significant have favorable a brands. that continue to we an we go. we us. to a the very product expanding impact in for balance to And is there as having Obviously, with opportunity is our So, to do a marketplace. sure making of select more are their opportunity people that flexible course, are introduce want that, every But of line that we as opportunity, time

Craig Kennison

buyback fourth been follow-up, the stock with and with to reach could your that’s at number how the year a next aggressive quarter XXx days, as in of to Ryan, stock? even be the to you recent tax you, respect basically a announced you hope in your contemplation And

Ryan Gwillim

Craig. quite be could aggressive, We

we allows. million we the I deck look put severely all as certainly situation think we $XXX and undervalued, buyback think the most will people if that know very number that that as corrects in that is go there be have pretty And can we the certainly we standard as market at. a up And from aggressive. formula I our stock believe,

a have issue all. at not an authorization, so significant that’s We

Craig Kennison

Great. Thank you.

Operator

And Spak RBC. question your Thank Please comes next Joe state from question. our with you.

Joe Spak

I am corrosion, get they everyone. exposure the some more know was Thanks. that’s U.S., China of of of the would least think could is Europe, believe be Good wrong color curious there, freshwater I so based. sort shortages. from provide that China. I their And used or morning helpful. to lot you I any magnesium aluminum especially magnesium a in of for probably know I for I that’s maybe but boats, And locally, you on lot sourced if have any a but more at

Dave Foulkes

Yes.

So, we of some that magnesium constituent the in a use. alloys is

major the not pleased month. think was aluminum seen have impact see last from price, We down down I to a X% in is XX%. I it. Steel

was way. long I month, the in think lumber a down last

market. moderating. the formulas, is have of So, scrap – from I recycle of those think We in which its a outboard of takes trends aluminum do user as a but big product does or are also lot its a some Mercury, engines, proprietary

the In fact, all to which markets. tends than it, virgin be more almost of protected

are some that It of magnesium. say would not I are this. So, seeing to and we is we overexposed moderating clearly,

Joe Spak

Ryan, your that’s Okay. up just own And inventory, on then, higher.

more a would keep and seems also on maybe made a you is you want little chains how be to some over it on are new keep to the little parts build given business best towards seen to any that you P&A, helpful. happen a guess able year, more – want here supply there there we capital would also commentary normal demand. bit bit be working manage think your where to in have like to – what I a hand I But you building as you own inventory, more to your you like meet moves comment mix, but because

Ryan Gwillim

on have facilities a rods it’s all time it, call in great factors that year, from short whips versus supply to kind make get a or actually we our folks bit but in it’s inventory off question. net higher under-inventoried. $XXX rebuild don’t primarily inventory And season we where and September It’s it’s a lot to last we on want that’s we for Obviously, winterizing were sure we of you related and just laid million a of the boats. September-over-September so exactly Yes, a number, the stock of spend frankly And a are Joe, as in it. their last P&A time so the ready situation. that out, up, little

enter having around around little much concerns to inventory. And so production. more one businesses, allow our The too retail very don’t have any look make whole the be – lot are want is about as season to sit finished do hardly just of may I a our boats I in And yes, zero are to I have a clear – maximize as sitting we facilities. we we to that that thing able our we so bit

sold they And a customer. dealer. boats them are As those right most right go people know, of finished, soon now, to the as to XX% as are

So, when of of kind you see that and that a percent very, of number boat. of is The small P&A. very finished rest million, propulsion is $XXX it good

Joe Spak

you. Thank it. Appreciate

Operator

you. Thank

Tristan Our Please Thomas next BMO from question comes state with Capital Markets. your question.

Tristan Thomas

Good Good morning. afternoon.

dealers kind taking are I to context provide on the are think you you of alluded the taking? around pricing before, of could maybe you this but top pricing

Dave Foulkes

I the environment the are pricing kind of is the I obviously and retail moment. retail covering that the discounts very promotional at there then provide, Well, don’t obviously favorable. many pricing is think we around think

prices anything. transacting do. to predatory that generally have MSRP might say are with or channel or would gouging our examples of I I kind of seen they So, closer normally than not certainly pricing

costs we cover our sure make to we sure is in make the and here thing right the that believes everybody the think market. keep consumer I

Tristan Thomas

Okay. And then just one question. more

attached that’s the Your XXXX to right? how name of just many XX% sold, them? production, customer So, wondering year those – was – calendar of wholesale a I have what

Dave Foulkes

of in typically Yes, XX to we percentage range XX wholesale the have been running the sold.

probably I think that’s close.

Tristan Thomas

Okay, great. Thanks.

Dave Foulkes

you. Thank

Operator

today’s concludes for back the remarks. will that Dave Mr. closing And you. Thank session. to turn question-and-answer I floor Thank you. Foulkes now

Dave Foulkes

very all much on the call for us very today. much. you Thank joining Thank you

appreciate We interest Brunswick. your continue to in

continue very about and in success success executing consistent of and business really and the our reshaping We future strong and They excited new are and very customers. are continued resiliency relevance very our strategy on financial broader with operational and to performance our pace be course, acquisitions. very, for – strong with

Initial very With software skills into had with strong. the family. X,XXX experience Boat a the the consistent display. tell, early of shows kind for earlier, the recent a come positioning has first that of lot total are very and we to brands on new in Show. in for in well people the Mercury lot mid-XX% And they the Fort that can than more new people start our from of future. day, are on engineers, looked us Brunswick I is digital very a But that outboards what mentioned show. reports with it’s acquisitions, the And really we Lauderdale future, strong are it relevant very welcoming of the

excited. are So, we

very Boston propelling reflects of the also that you see year raw forward as brands, our much. Whaler strength only but Mercury think this I we and on not next Thank and that on the incredible well. all business others, particularly demand into

Operator

a conference. you. Thank parties This day. Have may good concludes today’s All disconnect.

Brunswick (BC) 28 Oct 212021 Q3 Earnings call transcript