Brunswick (BC) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Oct. 29, 2026

CALL PARTICIPANTS

• Senior Vice President and Deputy CFO-Stephen Weiland
• Chairman and CEO-David Foulkes
• CFO and Chief Strategy Officer-Ryan Gwillim
• President of Navico Group and Brunswick's Chief Technology Officer-Áine Denari

TAKEAWAYS

• Adjusted Diluted EPS -- $1.58, representing a 63% increase year over year.
• Net Sales -- $1.5 billion, representing 7% growth year over year and the fifth consecutive quarter of sales increases across all reporting segments.
• Adjusted Operating Margin -- 10.1%, expanding 230 basis points due to higher sales volume, favorable product mix, and the lapping of prior-year tariff impacts.
• Propulsion Segment Revenue -- $570.5 million, up 6.6% year over year as steady original equipment manufacturer demand countered a low pipeline environment.
• Propulsion Adjusted Operating Margin -- 12%, expanding 350 basis points behind higher production absorption and strong high-horsepower outboard sales.
• Engine P&A Revenue -- $380.9 million, increasing 4.7% year over year to reach the highest third-quarter level for the segment since 2020.
• Engine P&A Adjusted Operating Margin -- 24.6%, expanding 190 basis points as a result of prior pricing actions and a richer mix of higher-margin products.
• Navico Group Revenue -- $197.7 million, up 5.8% year over year supported by original equipment manufacturer wins and new product launches.
• Navico Group Adjusted Operating Margin -- 6.1%, expanding 140 basis points despite significant input cost pressures from memory and commodity costs.
• Boat Segment Revenue -- $394.4 million, representing 9.5% growth driven by strength in premium saltwater fishing and aluminum freshwater product lines.
• Boat Segment Adjusted Operating Margin -- 3.6%, expanding 160 basis points as manufacturing cost-reduction programs offset inefficiencies from closing two production facilities.
• 2026 Adjusted EPS Guidance -- approximately $4.65, raised from the previous outlook of $4.55 despite challenging macroeconomic conditions.
• 2026 Net Sales Guidance -- $5.7 billion to $5.8 billion, reflecting management's expectation of continued growth in premium and recurring-revenue businesses.
• Free Cash Flow -- $140 million in the third quarter, representing a 26% increase year over year driven by higher net earnings.
• Share Repurchases -- $75 million year to date, with management increasing the full-year target to exceed $80 million following share price dislocation.
• Debt Retirement -- $100 million year to date, leaving the company on track to meet its full-year reduction target of at least $160 million.
• U.S. Outboard Retail Share -- 46%, maintaining a market-leading position while gaining wholesale share during the year-to-date period.
• Freedom Boat Club Market Share -- 69% of the North American boat club market, increasing 4 percentage points as smaller competitors struggled.
• Global Boat Pipelines -- 900 units lower than the prior year, indicating lean inventory levels well-aligned with current retail demand.
• U.S. Boat Industry Retail -- down approximately 4% year to date through September, with the company's internal retail performing in line with the industry when adjusted for discontinued models.
• Gross IEEPA Refunds -- $33 million recognized year to date, with a total expectation of $60 million to $70 million in refunds through 2027.
• Capital Expenditures -- $148.9 million for the first nine months, reflecting ongoing investment in innovative new products and manufacturing capacity.
• Freedom Boat Club Trips -- increased 3% year to date, which management identified as a proxy for healthy overall boating participation.

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RISKS

• Foulkes stated, "Headwinds from geopolitical uncertainty, inflation, and higher borrowing costs are weighing on consumer confidence and discretionary spending, particularly for the value consumer," noting a softening in retail demand for lower-priced products.
• Gwillim reported that the fourth-quarter guidance includes an offset from "additional material inflation versus our July expectations," specifically citing rising costs for copper, aluminum, and memory.
• Management noted that fourth-quarter performance remains subject to "continued channel stocking caution as we enter the off-season" and uncertainty regarding the exact timing of the remaining IEEPA refunds.

SUMMARY

Brunswick Corp. (NYSE:BC) reported its fifth consecutive quarter of year-over-year sales growth across all reporting segments, driven by the resilience of its premium brand portfolio and recurring-revenue businesses. Management indicated that the company is successfully decoupling its financial performance from broader U.S. marine retail trends, which saw industrywide unit sales decline by 4% through September. The company is preparing for a CEO transition, with Áine Denari set to succeed David Foulkes on Jan. 1, 2027, as strategic focus remains on high-margin profit pools, capital allocation, and technical enterprise synergies. Full-year earnings guidance was raised for the third time this year, reflecting operational efficiencies and a larger mix of premium products that offset inflationary pressures in raw materials and electronic components.

• Management reported that three new Mercury outboard programs are on track for launch next year, which are expected to drive further global market share gains.
• Áine Denari noted the "increasing content per vessel concept" at Navico Group, where more complex integrated systems are driving higher revenue per boat sale.
• Foulkes highlighted that Mercury Marine achieved 67% overall outboard share at recent European boat shows and 82% share in the premium boat segment at the Cannes show.
• The company expects the closing of two production facilities to become a significant structural operating cost tailwind beginning in 2027.
• Management is utilizing artificial intelligence and robotic process automation to fundamentally reshape end-to-end processes and drive margin expansion across the enterprise.
• Land 'N' Sea reported a 120 basis point increase in its 12-month distribution share, outperforming industry benchmarks for productivity and cash conversion.
• Management aims to lower the company's net debt leverage to under 2 times during the next year while maintaining its investment-grade credit rating.

INDUSTRY GLOSSARY

• SSI: Statistical Surveys, Inc., which provides industry data for marine retail registrations.
• IEEPA Refunds: Refunds related to the International Emergency Economic Powers Act regarding tariffs previously paid on certain imported components.
• Repower: The process of replacing an existing boat's engine with a new one while maintaining the original hull.
• Navico Group: Brunswick's segment focused on marine electronics, sensors, and power management systems.
• Propulsion: The segment encompassing outboard, inboard, and sterndrive engines and related control systems.
• P&A: Parts and Accessories, referring to engine components and aftermarket marine products.
• NAVAN: A premium adventure boat brand launched by Brunswick to target the exploration category.
• Dockhook: A Mercury joystick feature designed to simplify holding a vessel's position against a dock.

Full Conference Call Transcript

Operator: Good morning, and welcome to Brunswick Corporation's Third Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode until the question and answer session begins. Today's meeting will be recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Stephen Weiland, Senior Vice President and Deputy CFO, Brunswick Corporation. Thank you.

Stephen Weiland: Good morning, and thank you for joining us. With me on the call this morning are David Foulkes, Brunswick's Chairman and CEO, Ryan Gwillim, Brunswick's CFO and Chief Strategy Officer, and Áine Denari, President of Navico Group and Brunswick's Chief Technology Officer. Before we begin with our prepared remarks, I would like to remind everyone that during this call, our comments will include certain forward-looking statements about future results. Please keep in mind that our actual results could differ materially from these expectations. For details on the factors to consider, please refer to our recent SEC filings and today's press release. All of these documents are available on our website at brunswick.com.

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

David Foulkes: Thank you, Steve. Brunswick delivered another strong quarter, characterized by solid execution across the enterprise, with financial performance ahead of expectations and year-over-year sales growth across all reporting segments for the fifth consecutive quarter. Headwinds from geopolitical uncertainty, inflation, and higher borrowing costs are weighing on consumer confidence and discretionary spending, particularly for the value consumer. But our premium and core focus portfolio continues to be resilient and perform ahead of overall year-to-date SSI data. When adjusted for the impact of discontinued value models, our overall year-to-date U.S. retail is in line with the market.

Boating participation remains healthy, supporting demand for parts, aftermarket products, and subscription boating, which together with distribution market share gains, helped drive our strongest third quarter Engine P&A sales since 2020. Marine OEM orders remain balanced, but with lean pipelines drove solid gains for Mercury Marine and Navico Group. Boat and engine pipelines remain low and healthy, with global boat pipelines down approximately 900 units versus the third quarter of last year, including a reduction of approximately 700 units in the U.S.

Overall net sales of $1.5 billion increased 7% versus prior year, and adjusted operating earnings per share of $1.58 increased 63%, benefiting from business outperformance and a favorable adjusted effective tax rate and coming in significantly ahead of expectations. Adjusted operating margin increased 230 basis points and expanded by 140 basis points or more across all segments, driven by leverage on higher sales and the lapping of last year's tariff impacts offset by cost inflation and planned incremental product development spending. We generated $140 million of free cash flow in the quarter, up $29 million from prior year, with strong earnings helping overcome the increased product investment and reduced working capital benefit due to higher volumes.

Lastly, we repurchased $75 million of shares year to date, taking advantage of our strong cash flow and favorable market conditions, and retired $100 million of debt, leaving us on track to meet or exceed our $160 million debt reduction target for the year. These actions demonstrate continued execution of our disciplined capital allocation strategy and our commitment to returning capital to shareholders while maintaining a strong balance sheet and our investment-grade credit rating. Turning now to external conditions. As mentioned, geopolitical uncertainty, inflation, and high interest rates continue to pressure discretionary spending and consumer confidence, especially for value consumers.

However, strong capital markets and spending momentum among wealthier consumers continues to support the resilient performance of our premium and core brands and product lines. While fuel prices are elevated, they do not appear to be abating enthusiasm for boating, with solid boating participation driving our strong P&A performance and increased Freedom Boat Club memberships. The tariff environment continues to evolve, but we continue to be agile in driving mitigation. We are maintaining our net incremental tariff estimate at approximately $40 million for 2026. We recognized around $3 million of gross IEEPA refunds in the quarter and approximately $33 million year to date, with approximately an additional $10 million reflected in full year guidance.

Overall, we expect to recognize $60 million-$70 million in gross IEEPA refunds, with the majority of the balance expected in 2027. Dealer and OEM sentiment remains stable but cautious. However, dealer finances are healthy and benefiting from low pipeline inventories. The majority of our dealer partners have more than 50% of their credit capacity available, leaving them well-positioned for retail acceleration. The expected balanced pipeline dynamic we discussed at the beginning of the year is playing out, with Brunswick and our OEM customers and partners closely aligning wholesale with retail.

All segments delivered sales growth over the prior year period for the fifth consecutive quarter, and all segments expanded adjusted operating margin in the quarter on higher sales, with the Propulsion segment lapping its first half incremental tariff burden and delivering 350 basis points of increase fueled by higher volumes and strong high horsepower outboard sales, which attract higher margins. We maintained our market leading U.S. outboard retail share of 46%, with strong wholesale share gains year-to-date, and also saw gains in repower as we execute the repower expansion plan shared at our investor day. Internationally, Mercury continues to gain share through dealer, OEM, and retail partnerships.

Mercury's share of boat shows remains strong, as highlighted by our recent performance at the Cannes show, where Mercury achieved 67% overall outboard share and 82% share at the Vieux Port location that features larger, more premium boats. Our five new outboard programs remain on track, with three launching next year, and we anticipate these programs will continue to fuel global market share gains and further accelerate financial performance. Engine pipelines remain lean, with U.S. outboard pipelines down 3% in the quarter versus prior year. Our Engine Parts & Accessories segment delivered its highest third quarter sales since 2020 as a result of robust boating participation and continued distribution share gains.

A richer mix of higher margin products, along with the impact of prior pricing actions, drove operating margin expansion of 190 basis points to an outstanding 24.6%, one of the highest operating margins on record. The team worked effectively to mitigate higher input costs with multiple operational efficiency actions, just one example of Brunswick's ongoing enterprisewide continuous improvement programs. Land 'N' Sea's rolling 12-month distribution share increased 120 basis points, and the business outperformed available industry benchmarks on profitability, workforce productivity, and cash conversion. Navico Group delivered another quarter of continued performance improvement, reflecting the team's focused execution and the leadership of its current president and incoming Brunswick CEO, Áine Denari.

Sales rose 6% in the quarter, with growth in all business lines fueled by OEM wins and well-received new product launches. Structural operating cost reductions also assisted in expanding operating margin by 140 basis points, despite significant input cost pressures, including from higher memory and commodity costs. During the quarter, we were excited to partner with Saxdor on the debut of Simrad AutoCaptain in its product line. Saxdor is the first independent and international OEM to integrate the system, with others following quickly. Our Boats segment grew both sales and operating margins with solid contributions from both Boat Group and Business Acceleration.

Boat Group benefited from the resilience of its premium and core brands, pricing and mix, continued cost reduction actions, and rationalization of the value product portfolio. Combined, these actions contributed to operating margin expansion of 160 basis points, despite the headwinds of inefficiencies associated with the closing of two production facilities, which will become a significant structural operating cost tailwind beginning in 2027. Our third quarter and year-to-date global premium fiberglass and core U.S. brand retail sales were flat prior year, with weaker performance in value product lines. The latest SSI data for September year-to-date shows U.S. boat industry retail down approximately 4%, with Brunswick U.S. internal retail in line with the industry when adjusted for the rationalized value models.

We continue to launch new boat models across our brands, and our fast-growing NAVAN brand launched its latest model, the NAVAN C38, in the expanding global adventure category at the Cannes Show, taking multiple orders at the event. Lastly, the Business Acceleration portfolio continues to deliver growth in expanding margins led by Freedom Boat Club. Freedom captured an estimated 69% of the North American Boat Club market, up 4 percentage points, as a number of its competitors faltered. Freedom's increasing global scale and analytics are also enabling significant structural efficiencies to be realized in its operations. Member trips were up 3% year-to-date, again highlighting the continued strong boating participation trends. Moving now to our guidance.

We thought it would be helpful to put our full year adjusted EPS guidance in perspective by reviewing how our outlook has progressed through the year. We started in January with full year EPS guidance midpoint of $4.10, compared with full year adjusted EPS of $3.27 in 2025. We raised the midpoint to $4.25 in April and again to $4.55 in July, despite the tough economic and market conditions. We are raising it again today to $4.65. That is approximately 13% above our initial outlook and an increase of more than 42% versus 2025.

Our Q3 overperformance was led by stronger gross margins, which were driven by a larger mix toward premium products and higher margin Engine P&A products, together with improved operating efficiency and productivity, as well as a slightly better effective tax rate. There was no material IEEPA benefit in the quarter. The latest $0.10 increase in our full year reflects our Q3 overperformance, partially offset by anticipated headwinds and uncertainty in the fourth quarter. Amongst the Q4 factors partially offsetting the Q3 overperformance are additional material inflation versus our July expectations, continued channel stocking caution as we enter the off-season, some remaining uncertainty on our IEEPA refunds, as well as continued high levels of economic, trade, and political uncertainty.

We remain extremely excited about and committed to finishing the year strong while maintaining the disciplined approach to guidance we have taken throughout the year. I will now hand the call over to Ryan for additional detail on our financial performance.

Ryan Gwillim: Thank you, Dave, and good morning, everyone. Brunswick's third quarter performance came in ahead of expectations, with sales and earnings growth in each of our segments versus the third quarter of 2025. On a consolidated basis, sales were up 7%, reflecting steady OEM demand across the portfolio, pricing actions taken in previous periods, continued market share gains, and solid boating participation supporting our P&A and aftermarket businesses.

Adjusted operating earnings were up 38%, with adjusted operating margins of 10.1% expanding 230 basis points as the stronger sales, operational strength and efficiency across the enterprise, improved absorption on higher production, favorable mix, and disciplined cost management, together with the lapping of last year's tariff impacts, more than offset material and labor inflation and planned spending on product and technology initiatives. This resulted in adjusted EPS of $1.58, up 63% over last year, another outstanding result. Lastly, we generated $140 million of free cash flow in the quarter, up 26% versus the third quarter of 2025, driven by the higher sales and prudent working capital management across the enterprise.

On a year-to-date basis, sales were up 9%, driven by the same factors supporting the third quarter, while year-to-date adjusted operating earnings are up 25%. Adjusted operating margins expanded 100 basis points to 8.6%, and adjusted EPS was up 42% versus the first nine months of 2025. Free cash flow of $301 million is down versus the prior year due solely to the roughly $100 million year-over-year impact of the reinstatement of variable compensation. Absent that item, year-to-date free cash flow is well ahead of 2025, consistent with the sales growth we previously discussed. Moving to our segments, Propulsion delivered another strong quarter, with sales up 7% versus the prior year on steady OEM demand and a low pipeline environment.

Outboard engine sales were up 7%, and controls, rigging, and propellers grew 9%. Adjusted operating earnings were up 51%, and margins expanded 350 basis points to 12%, showing the expected margin inflection we've been anticipating. This improvement resulted from the leverage on higher sales, favorable mix, improved absorption, and reduced year-over-year tariff pressure offsetting continued planned product development investment and ongoing material, freight, and labor inflation. We remain on track for full-year propulsion margin expansion of more than 100 basis points. Turning to Engine Parts and Accessories, our aftermarket high margin recurring revenue business delivered another quarter of growth, with sales up 5% versus the prior year behind solid contributions from both products and distribution.

Sustained boater participation through the back half of the season continued share gains in our global distribution business and disciplined commercial execution drove broad-based growth across essentially all of our global regions. Adjusted operating earnings were up 14%, with adjusted operating margin of 24.6% up 190 basis points versus the prior year. That improvement reflects margin expansion from the leverage on higher sales and cost discipline, partially offset by higher commodity and other material input costs. Over to Navico Group, which delivered yet another quarter of sales growth and margin expansion. Sales were up 6%, with all three business lines contributing.

OEM demand was the key driver as new product wins supported double-digit marine OEM growth, while retail and aftermarket channels remained steady. Adjusted operating earnings rose 36%, with adjusted operating margin expanding 140 basis points to 6.1%, resulting from the higher sales plus the cost actions we have been executing all year. Footprint consolidations and SKU rationalization continue to drive gross margin improvement, with resulting benefits more than offsetting memory and other material cost inflation. We continue to see encouraging traction from recent product launches, and our second phase of Ensenada capacity came online in early October to support that demand.

With a strengthening OEM pipeline heading into model year 2027, Navico Group remains on track to deliver full-year adjusted operating margin expansion in excess of 200 basis points. Finally, our Boat segment delivered a 9% sales increase over the prior year, with growth in both boat sales and the Business Acceleration portfolio. Saltwater fishing led the way, up 30%, with aluminum freshwater up 13% and Business Acceleration up 14%, more than offsetting a planned reduction in value offerings as part of our model rationalization plan. Freedom Boat Club continued its growth journey, contributing roughly 13% of segment sales. Segment adjusted operating earnings doubled, with adjusted operating margin expanding 160 basis points to 3.6%.

This improvement reflects the higher sales and favorable mix together with ongoing manufacturing and sourcing cost savings programs, which continue to pace ahead of plan and are flowing through into better gross margins across the portfolio. As Dave mentioned earlier, the retail environment softened during the quarter, and we responded with targeted retail programs and additional cost discipline on headcount and discretionary spending. Importantly, we maintained wholesale discipline, so dealer pipelines ended the quarter healthy and lean, with mostly current model year products, which well positions the segment as we move into the fourth quarter and next year's early selling season. My last slide shows our full year guidance.

We are maintaining revenue guidance of $5.7 billion-$5.8 billion and adjusted operating margin guidance of approximately 8%. As Dave discussed earlier, we are raising adjusted EPS to approximately $4.65, as despite the dynamic operating environment, we remain confident in our ability to drive sales and earnings growth to close out the year. Our continued strong cash flow performance will enable us to meet our debt retirement target and progress our goal of lowering our net debt leverage to under 2 times during the next year. Following recent Brunswick share price dislocation, we are increasing our repurchase target to exceed $80 million of repurchases for the full year, with $75 million of those repurchases already complete.

I will now pass the call back to Dave for concluding remarks.

David Foulkes: Thanks, Ryan. During the Q2 earnings call, we highlighted the record 15 boating industry top product awards we have recently received. Brunswick never rests, and as we wrap up, I want to highlight some of our product launches, events, and technology introductions from the third quarter. We had a strong presence at all the major European boat shows, including Cannes, Interboot, and Genoa, all of which served to highlight the continued strength of our brands. In addition to the introduction of the all-new NAVAN C38, we continued to build out our premium aluminum boat portfolio in the quarter with the new Lund TI, Harris Summit twin engine models, and Princecraft Platinum 220.

As always, these new models are powered by Mercury engines and equipped with Navico Group technology, another demonstration of the power of our enterprise synergies. Mercury also continued its rapid pace of innovation, adding the Dockhook feature to its joystick system, which makes holding position against the dock simpler and more intuitive. The new Rev X 16-inch right-hand propeller model extends our propeller offering for high horsepower applications. Finally, Navico Group introduced the ECS900 for light commercial and professional vessel applications, and the new AI intelligent boating assistant highlighted at our recent investor and media events.

We have now surpassed 100 Enterprise Awards for the fifth consecutive year, and we got there faster than ever before, which speaks to our momentum and the exceptional nature of our people, products, and innovation. A few highlights include Newsweek again naming Brunswick one of America's Most Trustworthy Companies, having seven of our female leaders receive Women Making Waves awards, which recognize women shaping the future of the marine industry, and being recognized in the IBEX Innovation Awards' new EPIC Award category. Thank you again to all our talented Brunswick employees whose dedication makes this recognition possible. Before we take the questions, I would like to say a few words on the leadership transition we announced last month.

Leading Brunswick has been the greatest privilege of my professional life. I am grateful to our employees, leadership team, board, and shareholders for your support, and very proud of the marine powerhouse we have built together. Preparing a successor is a central responsibility of the Brunswick board and myself as Chairman and CEO, and we are extremely confident that Áine is the right leader for Brunswick's next chapter. Áine brings 30 years of operating experience across marine, automotive, and industrial businesses with technical, financial, commercial depth gained at Brunswick, ZF, TRW, Ingersoll Rand, and Ford.

Her McKinsey and Bain strategy experience, board service at Masco and Wheels, Kellogg MBA, and engineering degrees complement her record of delivering results and leading teams in multiple complex environments. Since joining Brunswick in 2020, Áine has turned strategy and technology into financial results. She led Boat Group through changing market conditions, launching new models and delivering strong performance. As Navico Group President and Chief Technology Officer, she has broadened her enterprise perspective while driving market share gains, product innovation, and operating improvements, leading to revenue growth and margin expansion. Our strategy, capital allocation priorities, and long-term Investor Day targets remain unchanged. Áine and the team will continue to execute that strategy with a continued focus on driving shareholder returns.

I will work closely with Áine through year-end ahead of her January effective date as CEO, and we will be on the road together in the fourth quarter, meeting many of our shareholders. As you will have seen, we have also already announced the appointment of talented, experienced back fills for the open roles on the leadership team created by Áine's appointment. I am very excited about what Áine and the Brunswick team can achieve in the future. That is the end of our prepared remarks. Note that Áine is present today in her current role as Navico Group President to answer any of your questions on Navico Group, but she will not take questions on other topics today.

We will now turn it back over to the operator to open the line for questions.

Operator: Thank you. At this time, if you would like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk, and then you will hear your name called. Please then accept, unmute your audio, and ask your question. We will wait one moment to assemble the queue. Our first question comes from Anna Glaessgen at B. Riley Securities. Anna, you may now unmute your line and ask your question. Thank you.

Anna Glaessgen: Hi. Good morning. Thanks for taking my questions. First, I'd like to ask for a little bit more perspective on the material inflation we've seen over the past few months. Any perspective you can share on the movement to 4Q earnings in light of that versus internal expectations and perspective into 2027? Thanks.

David Foulkes: Yeah. Hi, Anna. Thank you for your question. Yeah. We called out commodity inflation in aluminum and copper, as you might expect, and also memory inflation. Obviously, we have a different effect in the P&L depending on when it rolls off the balance sheet versus what the exact spot price is. So we saw some significant increases through the year, and that will still roll off the balance sheet then before. But we are seeing stabilization now, so we do anticipate a more stable environment as we can roll into 2027, which I think will be helpful for the first quarter of the year and hopefully the full year. We've taken a lot of mitigation actions.

Our scale really helps with that. Hedging programs. We have a bigger buy on some of those areas that can help with getting good pricing. I think memory was called out by some other companies, but the reality for us is it only represents something like 2% of our costs. So it's a pretty small portion of our costs, but nevertheless, we have seen inflation. Áine might want to comment a bit more on that.

Áine Denari: Yeah. No, that's right. It is about 2% of costs for Navico Group. We should also mention that is an inflationary pressure that we have had throughout the year, this year. It does not represent a headwind for us as we move into next year. We, of course, are taking all the mitigation actions that Dave mentioned. That includes value engineering, looking for alternate supply sources, as well as taking other actions. So we're feeling pretty good about the position we're in as we round out this year and move into next year.

Anna Glaessgen: Great. Thanks. I guess, Áine, while we have you here, would love some more perspective on Navico Group's transformation over the past few years and where it stands today. Particularly, you mentioned on the call, or it was mentioned that it benefited from some cost-cutting this quarter. Maybe share some perspective on the margin opportunities going ahead. Are there more cost cuts, or is it mostly driven from gross margin expansion ahead? Thanks.

Áine Denari: Yeah. No. Of course, you saw the strategic plan targets that we laid out in our Investor Day, and those certainly remain true. We certainly have pretty good confidence in the ability to continue to deliver those. I would say what's really driving things for Navico Group is a combination of both top line and bottom line. A lot of it really, honestly, is top line and efficiency gains as we think about market share gains, new product launches, increasing content per vessel as we think about more complicated integration systems that we are delivering.

We're also continuing to conquest new OEMs, which is very helpful both in the initial phase as well as then from an ongoing kind of stickiness phase and flow through to the aftermarket. So those are all things that are really driving the top line growth as well as the margin expansion. As you know, Navico Group in particular, has some pretty strong leverage. On the efficiency side, we certainly have delivered a lot of operations efficiency gains. We have done several footprint consolidations over the last several years. I think we're in a pretty good, stable place there as it relates to our footprint.

We have also done a lot of work on refining the org structure, refining the teams, and we have been embedding AI and robotic process automation across the board to drive further efficiency. So that is helping drive the margin expansion, and we expect to see that to continue to drive the margin expansion as we move forward throughout the remaining strategic plan period.

Anna Glaessgen: Great. Thanks. I will pass that along.

Operator: Thank you. Our next question comes from James Hardiman at Citi. James, you may now unmute your line and ask your question. Thank you.

James Hardiman: Hey, good morning. Thanks for taking my questions. First, I wanted to say, Dave, congrats on the retirement. Thanks for all the time and the engagement with the investment community over the years. It has been a blast. And Áine, congrats on the CEO appointment. Excited to work more with you.

David Foulkes: Thank you very much.

Áine Denari: Yeah, thanks.

James Hardiman: Absolutely. Let's talk 4Q a little bit. Obviously, sizable beat in 3Q. A lot of that we are giving back in 4Q. We talked about how the retail environment softened a little bit over the course of the quarter. Maybe bridge where you were in terms of fourth quarter thinking, and where you are today. How much of the implied 4Q reflects dealer ordering assumptions? How much of that is inflation specific to that quarter? I do not know if there is any tariff timing that we need to be considering in the context of 4Q.

Ryan Gwillim: Hey, James. It's Ryan. I will start with this one, and then Dave can follow through. If you think about Q3, $0.20, maybe a little bit more of a beat. We passed half of it through. I would say the other half really is the majority of that is just material inflation that arose in the quarter that we did not anticipate when we gave July guidance. I think Dave talked about the puts and takes there a second ago, so I will not repeat them. I think the fourth quarter is a relatively small quarter, and so as we think about ordering patterns, there just could be a little variability there.

But all in all, the only real change from a numbers perspective is just material inflation. Otherwise, I think the commercial side will come in as we anticipated. The ordering side will be fine. We continue to see very good steadiness from all of our aftermarket businesses. P&A from Áine's aftermarket and retail businesses as well continue to be nice and steady. I think that gives us some support on the bottom end with just a little bit of inflation kind of coming at us. Otherwise, really nothing has changed from a fundamental operational performance perspective, and I think we are going to end the year strong.

David Foulkes: Yeah, I agree. I do not think the softening that Ryan referred to is going to be significantly reflected in Q4. That softening continues to be in the value segment. You know 90% of our Boat Group profit is from our premium and core products, and they continue to hold up extremely well. A number of us are heading to the Fort Lauderdale show right after this call. Just a heads up, Mercury share is up again and pretty significantly so we are excited to be able to report that out a little bit later. Even in the fall shows, which obviously run through early Q4, we are seeing some nice early indicators.

I think we are seeing solid ordering from our OEM customers. This is the off-season, so it is more about stocking and certainly in the seasonal markets. We are not seeing a lot of changes in wholesale ordering patterns.

James Hardiman: Got it. As I think about 2026, coming into the year, one of the biggest cards that you had to play that you had in your back pocket was that you had undershipped the channel pretty meaningfully in 2025. When you lapped that was going to create or unleash a good amount of hidden earnings power. I do not know that the setup is quite as beneficial from that perspective in 2027. How should we think about the setup for next year? Any breadcrumbs that you could give us that would help us understand. Obviously, the market is going to do what the market is going to do. It is volatile.

What types of earnings tailwinds do you think that you can lever to offset declines in the industry if we see that or enhance your earnings power in, let us say, a flat demand environment?

David Foulkes: Yeah. Good question, James. I think one of the things we continue to exhibit really is a lot of discipline in pipelines. We have, even through this year, continued to undership across pretty much every part of our business. Obviously, we noticed that boat pipelines are down again, engine pipelines are down again, and down pretty significantly over the past couple of years. We still have some of the wholesale, retail rebalancing that will be a tailwind for us as we enter 2027. We do have a lot of exciting other tailwinds. When you think on the product side, we have three new Mercury Outboards launching, continue to gain repower share. We continue to gain share in wholesale distribution.

Navico Group is launching some very exciting new products at the end of this year and into early next year. On the product momentum side, we have a lot going for us. On the cost side, we have some other tailwinds. For example, the headwind that our Boat Group saw this year from the footprint consolidation will reverse as we go into 2027 and be a nice tailwind for us. I think we have some continued benefit from restocking cycle, a lot of product-related market share gain opportunities, as well as some pretty significant and material and realizable cost efficiencies, again, going into the year.

It has been really nice to see that our premium and core brands are really holding up very well. Mercury share is strong, I mentioned, at FLIBS. When you think about where we are in terms of market position on Mercury propulsion, on marine distribution, now we have Freedom Boat Club with a commanding share of the boat club market, 70% of the market. I think the franchise is in pretty good shape for 2027.

James Hardiman: Just to clarify, you do or don't think that this inflation that we've seen the last couple of months is going to be a meaningful headwind for 2027?

David Foulkes: Well, of course, you never exactly know, but I would say that we think that we have taken a lot of the pain in the second half of 2026. As we look on the kind of 2026 second half into 2027 first half, we think we've taken the bulk of the pain on that basis.

Ryan Gwillim: Yeah. James, just to put it very finely, we do not see any reason sitting here today that 2027 does not track the sales and operating leverage targets that we just laid out in the strategic plan. Sales growth in the 5%-8%, operating leverage of 20%-25%. We are very confident we can deliver that. We also have benefits from the capital strategy work that we have done this year, both on continuing to buy our shares and being more aggressive on that in the third quarter and paying down debt. More to come in January, but folks should not be surprised that 2027 is going to continue the glide path of the strategic plan that we just laid out.

James Hardiman: That is really helpful. Thank you both.

Operator: Thank you. Our next question comes from Scott Stember at ROTH MKM. Scott, you may now unmute your line and ask your question. Thank you.

Scott Stember: Good morning, and thanks for taking my questions. Last couple of quarters, you gave some data which suggested that you are not seeing any meaningful impact from fuel costs going up, notably on the usage side, and obviously we saw that in the strong results in Engine P&A. Did you see anything in the quarter as it accelerated that changed that narrative?

David Foulkes: No. No, Scott, we don't. Obviously, we're entering a period where the seasonal markets are going to be shutting down over the next couple of months. But in the non-seasonal markets, we don't really see any evidence of fuel prices affecting the kind of proxies that we have for boating participation, things like Freedom Boat Club trips. I've said it before, but it's interesting. If you could design an experiment to isolate the impact of fuel prices on boating, it would be Freedom Boat Club because other than their joining payment and monthly dues, that's basically the only variable, and we don't see it affecting year-over-year trips. In fact, year-over-year trips are up.

And certainly, as a proxy, our P&A performance distribution and products continues to be extremely strong. Obviously, we hit a really strong Q3 here. So no, the answer is no. We don't see any evidence of abatements or slowdown in participation.

Scott Stember: Got it. My next question was on Freedom. Are you seeing any folks that have been members over the last few years that have decided to trade up and/or become official boat members buying a Brunswick boat? Or is right now really proving the worth of Freedom, where people just, the ease and the lower cost really proves its worth?

David Foulkes: Yeah, I think generally that is the case, that I think Freedom attracts people coming into boating and people who would exit boat ownership if they didn't have an alternative like Freedom available. I do think it's very interesting to see. Despite whatever trends you look at in new boat sales, if you provide people with a really compelling, convenient value proposition, they will go for it. And I think that is what Freedom is. But operating something like Freedom is not just about providing a compelling proposition like that, it's also being extremely operationally efficient. How do you think about customer lifetime value? How do you think about boat lifetime value?

And what you see with Freedom for us is, not only a compelling consumer proposition, but also an extremely well-oiled machine behind it that is expanding margins, not just domestically, but globally. And what we are seeing is we are growing share because we provide the best experience. The other smaller participants in the market who are generally not doing as well, some are honestly not doing well at all, do not have our scale, do not have our analytics, do not provide a consistent value proposition to the consumer. We are very excited about Freedom.

We did actually put in place some programs that allow people to use a portion of their entrance fee to Freedom as a credit to enter boating, we have seen some uptake in that. We are experimenting a bit with a cross-sell, upsell between Freedom and our boat brands. I would say predominantly, people are pretty comfortable in Freedom.

Operator: Thank you. Our next question comes from Tristan Thomas-Martin at BMO Capital Markets. Tristan, you may now unmute your line and ask your question. Thank you.

Tristan Thomas-Martin: Hey, good morning. I will just question a different way. How does like for like pricing going to be on the boat side and also on the outboard engine side next year?

David Foulkes: I think our pricing on the boat side this year, I would say we took moderate pricing. I do not know, I think we were in the 3%-4% typically, across product lines. One of the things that has really helped us, I think, is our ability to absorb commodity costs. Some of our competitors, particularly on the aluminum side, took larger pricing actions, which is certainly helpful for us. I do not know exactly, but based on the input cost discussion that we recently had, I would expect similar levels of price increase next year. On the outboard engine side, we just took a couple of points of pricing. Really, the competition is not taking a lot of pricing either.

I think, given our market position and the benefits we have from premium pricing and increased absorption, I think we have some flexibility. I would imagine modest pricing on the outboard side as well.

Ryan Gwillim: Tristan, two things. If you see ASP growing, a big component of that is just the mix shift to premium, and less sales of value products. Do not treat or think about that as pure price. The other thing to remind yourself of is we continue to support our dealer networks with discounting and our discounting at the retail level to ensure the pipeline remains lean and fresh. The price that is actually being paid by our consumer may be even less than that increase just because we are helping them along the way. That is something that we had anticipated discounting to be actually down this year, but in actuality it is flat, slightly up.

A bit of that is related to the wholesale finance that we use and help our dealers with on the floor plan side, but a chunk of that is still retail support that we are giving our dealers.

Tristan Thomas-Martin: Okay. Thank you. Just a quick follow-up. You mentioned mix. Is there further value boat rationalization next year?

David Foulkes: I think there is some more to be done. We continue to evaluate the portfolio in that regard. I think prudently reshape it toward the biggest value pools. It is not as simple as here is premium and here is value and trim value. There are some parts of the market that we are really going after, like the expedition adventure category, which is more on the premium side. So you will see a lot of new products in that space. Yes, I would expect to see modest additional rationalization of the value part of the portfolio. Really on the fiberglass side, I would say.

Tristan Thomas-Martin: Great. Thank you.

Operator: Thank you. Our next question comes from Craig Kennison at Baird. You may now unmute your line and ask your question. Thank you. Craig Kennison.

David Foulkes: Craig, we cannot hear you.

Operator: You may now unmute.

Craig Kennison: Sorry about that. I am an old dog with a new trick here. Can you hear me? Listen, Dave.

David Foulkes: Hi, Craig.

Craig Kennison: I just want to echo James' comments to you and also to you, Áine. It is going to be a pleasure to work with you as well. I guess I wanted to ask about Navico Group, and to me it feels like one of the biggest opportunities you have that's still within your control to expand margin and drive better profitability. I wonder if you just maybe summarize the top two or three drivers to the margin expansion that you see and help us understand the cadence of that as well.

Áine Denari: Yeah. I think a good chunk of the margin expansion here is really around the new product vitality. As we launch new products, they typically are launching with higher margin profiles. As you know, especially in the electronic space, the life cycle is quite short, and so the cadence of new product refreshes and new product launches is quite quick. That helps drive the margin expansion. Another key element would be this increasing content per vessel concept. As we're launching more complicated integrated systems, that by nature drives up our share of wallet on every boat that we sell. I would probably also call out the increasing aftermarket component.

The more we're penetrated on the OEM side, the more that flows through into increasing aftermarket sales over the life of the vessel. Of course, people will upgrade their electronics and their power management systems, et cetera, many times over the life of a vessel hull. That helps drive up our margin profile as well. Of course, operational efficiency, and as I mentioned earlier, the role of artificial intelligence as we think about things like our supply chain and our customer service processes are also certainly enabling us to increase efficiency and drive down the cost structure, which helps increase the margin profile also.

David Foulkes: I think you're great. Áine's done a fantastic job. We talked a bit earlier about the physical footprint consolidation, but that is a precursor to digital operations consolidation as well. So you'll see great emphasis in that area that can yield efficiency. I know it is kind of incumbent on everybody to say something about AI in a call, but I would tell you it is really yielding some significant efficiencies for us now. We've moved from targeted use cases, low-hanging fruit, if you like, to fundamentally reshaping a lot of our end-to-end processes, and that is going to yield significant benefits for Navico Group and the whole enterprise. We really are very excited about that possibility as well.

Operator: Thank you. Our next question comes from Joseph Altobello at Raymond James. Joseph, you may now unmute your line and ask your question. Thank you.

Joseph Altobello: Thanks. Good morning, guys. Dave, best of luck. Congratulations, Áine, same to you. Looking forward to working with you as well. This question on the industry. Given the downturn or the duration of this downturn we've experienced, just curious how your OEM and dealer partners are thinking about the year ahead. Are they generally taking a wait and see approach on retail given we've had some optimism it seems like every January for the last five years and it hasn't panned out. I'm just curious how you're thinking about 2027.

David Foulkes: Yeah, I would say that the dealers are in pretty good spirits. We mentioned in the slide deck and possibly in the release as well, that more than 50% of our dealers have more than 50% of their credit lines still available. Clearly, we are seeing no distress among our dealers. I think they are behaving rationally. I think that they have learned over time. You mentioned it's been a period for us to kind of rethink how we approach pipelines and balance and make sure we don't try and kind of take profit for the short term at the expense of the long term. I think they're generally behaving extremely well, and I think they're very comfortable with that.

I think the other thing, Joe, is thinking about, I know it's important because there's an industry data point, but the overall unit sale, retail sales, is really a very broad measure of new boat sales and does not reflect where the real profit pools are over time. We are reshaping toward those profit pools. It's almost like Ferrari's performance is not reflected in whether the U.S. industry is 16 million units or 15 million units. You have to go to where the profit pools are and grow in those pools, and whether it's engines or premium and core boats or electronics or even shared access, we are finding and commanding the major profit pools.

This is a bit of a morphing of, and to some extent, a bit of a decoupling, I think, of our business performance over the long term from that single number unit sales. I think you'll see that continue over time.

Operator: Thank you. This completes the allotted time for questions. I will now turn the call back over to Dave for any closing remarks. Thank you.

Ryan Gwillim: Well, before we go back to Dave, I did want to take a moment to recognize and thank Dave for his outstanding tenure at Brunswick. 19 years in total, the last eight years as our CEO. Dave, this is our 26th earnings call together, and I want to thank you for the outstanding leadership, partnership, and friendship that you have provided to me, the rest of the Brunswick leadership team, and the over 14,000 Brunswick global employees you have supported and led during your tenure. Congratulations on your retirement. You will be missed, but your legacy will continue.

Lastly, congratulations to Áine Denari, who will assume the CEO role starting January 1. Áine, we all look forward to working with you to execute our strategic plans while continuing to deliver strong shareholder value. I personally look forward to our first call together in January. Congrats again. Now, Dave, back to you.

David Foulkes: Thank you very much, Ryan. That was very meaningful. Thank you very much. Thank you to Ryan, thank you to Steve Weiland, thanks to Randy Altman, Ryan Crawford, and their teams who have done a fantastic job preparing for this call and the previous calls and all the follow-up investor calls and analyst calls that you guys work on. You do a fantastic job. Thank you. I am pleased that my final call is a beat and raise call. We have had a few of those in recent history, but it is always nice to see that. It is nice to leave the business with such strong momentum and in the hands of such an exceptional leadership team. Congrats, Áine.

I am looking forward to Brunswick's success in the future. Thank you all very much indeed.

Operator: Thank you for joining the Brunswick Corporation's third quarter 2026 earnings call. This concludes today's conference call. You may now disconnect. Thank you.

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