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DATE

Thursday, April 30, 2026 at 11 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — David M. Foulkes
  • Executive Vice President and Chief Financial Officer — Ryan M. Gwillim

TAKEAWAYS

  • Net Sales -- $1.4 billion, up 13% year over year, with growth reported in all segments.
  • Adjusted EPS -- $0.70, representing a 25% increase versus the prior year period.
  • Adjusted Operating Earnings -- Up 15% compared with the prior year, driven by increased sales and cost management, net of incremental tariffs.
  • Propulsion Segment Sales -- Increased 17% year over year on global share gains and OEM demand; Mercury outboard unit orders up more than 15% with record segment share at major boat shows.
  • Propulsion Adjusted Operating Earnings -- Declined year over year due to higher product development investments and incremental tariff impact, offsetting sales and absorption gains.
  • Engine Parts & Accessories Sales -- Rose 14% over prior year, with U.S. distribution share up 150 basis points, and operating earnings up 24% on 27% operating leverage.
  • Navico Group Sales -- Up 7%, with adjusted operating earnings up 64% and adjusted margin up 280 basis points, driven by product launches and operational measures.
  • Boat Segment Sales -- Increased 6% year over year on higher wholesale shipments and favorable mix; adjusted operating earnings up 63% with margin up 130 basis points.
  • Freedom Boat Club Growth -- Four new locations added, member trips up 20%, same-store sales up 10%; acquisition of Boston and Cape Cod franchise adds 21 locations and is day-one accretive.
  • Dealer Pipeline Inventories -- Global boat pipelines down about 2,000 units from last year and flat sequentially; dealer inventory described as lean and healthy.
  • Cash Flow -- Free cash flow negative for the quarter, reflecting seasonal working capital requirements and restored variable compensation; the year-over-year decline attributed solely to compensation timing.
  • Tariff Impact and Outlook -- Anticipated net tariff cost now expected at the lower end of the $35 million to $45 million range after IEPA repeal and Section 122/232 adjustments; previously paid IEPA tariffs ($50 million estimated refund) not yet recognized in outlook.
  • Adjusted EPS Guidance -- Raised to $4.00 to $4.50, reflecting reduced tariff burden and strong Q1 performance, alongside macro uncertainty.
  • Capital Return -- $20 million in share repurchases to date, and a fourteenth consecutive annual dividend increase completed.
  • Boating Market Trends -- U.S. main powerboat retail down 5% YTD (SSI data), but Brunswick reported flat global and U.S. unit sales, outperforming industry benchmarks, with premium and core surpassing value.
  • Wholesale-to-Retail Alignment -- Global boat order backlog at period end represented 71% of upcoming quarter’s wholesale forecast, up six percentage points from prior year, supporting near-term sales visibility.
  • Operational Efficiencies -- Navico Group footprint rationalization and new product investments driving sustainable margin gains; Boat Group cost savings from facility actions expected to exceed $10 million next year.
  • Market Share Metrics -- Mercury global R12 share at 47%, with retail share up 200 basis points year to date and significant multi-engine/premium category gains.

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RISKS

  • Management cited "heightened geopolitical volatility" as introducing new uncertainties, particularly outside the United States, and pointed to potential impacts on consumer demand if conflict persists.
  • Increased fuel and aluminum prices remain a concern, with diesel surcharges implemented, though overall direct exposure to oil-linked materials was described as small (2% of COGS).
  • The health of the value consumer remains a focus, with management observing that macro pressures and international events could create further demand headwinds for value-tier products.

SUMMARY

Brunswick (BC +0.13%) reported robust top-line and margin growth across all segments, supported by OEM demand, accelerated product launches, and disciplined cost management. Management raised adjusted EPS guidance to $4.00–$4.50 on lower expected full-year tariff impacts, with previously paid IEPA tariff refunds excluded from current forecasts. Strategic M&A continued in the recurring revenue stream as Freedom Boat Club acquired the Boston and Cape Cod franchise and maintained double-digit growth in member activity. The company highlighted lean inventory positioning, strong premium segment sales, and greater wholesale-to-retail alignment, contributing to improved order visibility. Boat segment growth was strongest in premium aluminum and pontoon brands, with saltwater value continuing to lag. Navico Group delivered margin expansion following facility consolidation and successful product rollouts, underpinning expectations for further operational leverage. Management noted that macroeconomic uncertainty and geopolitical volatility, especially outside the United States, warrant a cautious approach to guidance despite current market outperformance.

  • CEO Foulkes stated, "Our high exposure to the most insulated markets, particularly the U.S. and Canada, which account for more than 70% of total sales, balanced portfolio, lean channel inventories, and operational discipline position us strongly to effectively navigate the volatility."
  • Freedom Boat Club acquisition was described as "day-one accretive," with integration aimed at unlocking operational synergies with nearby corporate-owned businesses.
  • Dealer and customer sentiment improved but was characterized as "still cautious," with inventory and channel metrics remaining favorable for new boat demand.
  • U.S. outboard engine industry grew 6% in the quarter, outpaced by Mercury retail units up approximately 11%; engines' wholesale pipelines were described as down 10% year over year but flat sequentially, creating a dynamic supportive of further market share gains.
  • Guidance conservatism was tied to the "dynamic macroeconomic environment," and assumptions exclude any benefits from further rate cuts or IEPA tariff refunds.

INDUSTRY GLOSSARY

  • IEPA Tariffs: Import duties previously applied to certain marine products, recently repealed and replaced by other tariff frameworks (Section 122/232).
  • SSI Data: Statistical Surveys Inc.—a marine industry benchmark for retail boat sales data.
  • R12 Share: Rolling 12-month market share measure used for engines or boat units.
  • Operating Leverage: The rate at which operating income increases as sales grow, measured as the ratio of growth in operating earnings to growth in net sales.
  • Freedom Boat Club: The subscription-based, recurring revenue business of Brunswick providing access to a fleet of boats as an alternative to ownership.

Full Conference Call Transcript

David M. Foulkes: Thank you, Stephen. We delivered an excellent start to the year, building on the market recovery in 2025, with first quarter results significantly ahead of expectations despite the dynamic geopolitical and tariff environment. Global and U.S. boat retail were approximately flat on a unit basis compared to the relatively strong first quarter of last year, and premium sales were up. Q1 was the third consecutive quarter of improved relative retail performance, building confidence in our retail forecast for the year as we move into the core selling season in our largest markets. Strong OEM order patterns drove gains for Mercury Marine and Navico Group, while solid boating participation benefited our recurring revenue, parts and accessories, aftermarket, and subscription boating businesses.

From an inventory perspective, boats and engine pipelines remain healthy and lean, well aligned with demand. Global boat pipelines are down approximately 2,000 units versus last year and flat sequentially versus 2025, reflecting our deliberate actions to closely match wholesale with retail. Our overall net sales of $1.4 billion increased 13% year over year with growth across all segments, driven by continued market share gains, strong OEM demand, accelerated new product and technology introductions, and disciplined operational execution across the enterprise. Our adjusted earnings per share of $0.70 increased 25% versus last year, with strong operating leverage from higher sales more than offsetting the impacts of the tariffs implemented after the first quarter of last year.

We continue to execute our disciplined capital allocation strategy, repurchasing $20 million of shares year to date, and delivered our fourteenth consecutive annual dividend increase, underscoring our commitment to returning capital to shareholders while maintaining a strong balance sheet. In our core U.S. market, product demand and boating participation remain relatively unaffected by the conflict in the Middle East, although the health of the value consumer remains a focus. We have a relatively small direct exposure to Middle East markets, but are monitoring trends in Australia, New Zealand, and other more exposed markets as oil supply tightens.

Our high exposure to the most insulated markets, particularly the U.S. and Canada, which account for more than 70% of total sales, balanced portfolio, lean channel inventories, and operational discipline position us strongly to effectively navigate the volatility. Turning to segment performance, for the third consecutive quarter, all segments delivered year-over-year sales growth. Operating margin expanded across the portfolio, except for Propulsion, which absorbed the majority of first quarter incremental tariffs. The strong performance reflected improving retail and wholesale trends, sustained boater participation, and disciplined operational execution across the organization.

Propulsion sales increased significantly versus last year, with Mercury’s global and U.S. outboard unit orders increasing more than 15% over the prior year period, and record Mercury outboard share at recent boat shows, including 60% overall and 80% on-the-water share at Miami, and 70% share at Palm Beach, signaling the potential for further high-horsepower share gains. Overall, R12 share remains steady at 47%, with year-to-date retail share up 200 basis points, along with strong wholesale share gains. Our accelerated investments in future high-horsepower outboard platforms and all-new mid-range high-volume models will reinforce our long-term competitive advantage.

Healthy boater participation and continued distribution gains drove higher sales and margin year over year in our Engine P&A business, with Land ’N’ Sea again increasing U.S. distribution share by 150 basis points. Navico Group delivered revenue growth and margin improvement, supported by new product launches and operational improvement actions. We introduced the SIMRAD NSO4 and B&G’s ZEUS SRX multifunction displays; at the Miami Boat Show, we received an innovation award for the Lowrance ActiveTarget 2XL fishfinder and continue to execute SIMRAD AutoPilot implementation plans with a range of OEM customers. Finally, our Boat Group segment grew sales and margin as wholesale shipments aligned with stable retail.

Boat show revenue increased year over year despite weather impacts at some Upper Midwest and Northern market events. At the Palm Beach premium saltwater show, Boston Whaler and Sea Ray delivered high unit sales and a substantial 40% revenue increase versus last year. Freedom Boat Club added four new locations in the quarter, increased member trips by 20%, improved same-store sales by 10%, and earlier this month completed the acquisition of the largest remaining franchise club in the Freedom network, which serves the Boston and Cape Cod region. Moving on to external conditions, rate cuts enacted late in 2025 are a continuing tailwind for retail and floor plan financing as we enter the peak selling season.

Our expectations for incremental rate relief have moderated; our forecast does not rely on additional cuts. Fuel prices have risen recently due to geopolitical events, but generally remain within historical bounds, and we are not experiencing any clearly discernible direct impact on retailer or OEM demand or on boating participation in our largest markets. The tariff environment remains dynamic, and Ryan will discuss the specific impact to our guidance later on the call. The tariff on Mercury Marine’s Japanese competitors remains in place, representing a potential structural advantage for Brunswick Corporation. Refunds related to previously paid IEPA tariffs are not yet factored into our outlook.

Current dealer sentiment is improved overall, but still cautious, supported by healthy and fresh inventories and lower pre-owned boat supply, which supports new boat demand. While incentives remain elevated versus historical norms, they improved approximately 100 basis points last year and we are forecasting further modest improvement in 2026. Looking now at industry retail performance, the latest SSI data for March shows U.S. industry main powerboat retail down approximately 5% year to date. Against this backdrop, SSI reported that Brunswick Corporation outperformed the industry. Our global and U.S. internal retail unit sales were approximately flat year over year compared with the relatively strong 2025, prior to the impact of tariffs, with premium and core again outperforming value.

From a pipeline standpoint, conditions remain very healthy. Global boat pipelines are down approximately 2,000 units versus last year, but flat sequentially versus the fourth quarter, and benefiting from wholesale-to-retail alignment consistent with our plan. In addition, our global boat order backlog at the end of the first quarter represented 71% of our second quarter wholesale forecast, up six percentage points from last year, providing improved near-term visibility. Turning to engines, U.S. outboard engine industry grew 6% in the first quarter, with Mercury retail units up approximately 11%. With a similar dynamic to boats, U.S. outboard pipelines were down approximately 10% versus last year, but flat sequentially versus the fourth quarter, reflecting wholesale-to-retail matching.

Overall, the combination of sustained share gains, disciplined pipeline management, and improving wholesale-to-retail alignment gives us confidence in our outlook for 2026 and supports our expectation of a flat to improving market as we enter the peak boating season. Finally, I want to address the impacts of recent oil price volatility, which has been a frequent topic in recent investor discussions. From the boat buyer or boater’s perspective, historically there has not been a correlation between oil price spikes and boat sales or boating participation.

A primary driver of this low correlation is that fuel costs represent a relatively small portion of total boat ownership expense, because on an annual basis, the typical recreational boat only uses about 20% to 30% of the fuel of a comparable passenger vehicle. From a Boat Group perspective, exposure to oil-linked materials is relatively small, representing a combined 2% of total cost of goods sold, and with the relevant materials being under long-term supply agreements. Our scale and sophistication also enable hedging programs for other key commodities, such as aluminum, further reducing exposure to spot price volatility. However, aluminum prices do remain elevated. Diesel prices have impacted boat and other transportation costs; we have implemented some surcharges.

I will now turn the call over to Ryan M. Gwillim to discuss our first quarter financial performance and updated guidance.

Ryan M. Gwillim: Thank you, Dave, and good morning, everyone. Brunswick Corporation’s outstanding first quarter performance came in ahead of expectations, with strong sales and earnings growth versus the first quarter of last year. On a consolidated basis, sales were up 13%, reflecting improved wholesale and retail trends, continued market share gains in propulsion and several boat categories, strong OEM demand for propulsion, components, and electronics, favorable changes in foreign currency exchange rates, pricing actions in each segment commencing in 2025, and solid boating participation driving aftermarket performance. Adjusted operating earnings were up 15%, supported by the increased sales, favorable mix, improved absorption, and disciplined cost management more than offsetting the impact of incremental tariffs implemented after the first quarter of last year.

Absent the year-over-year enterprise impact from incremental tariffs, adjusted operating leverage was approaching 30%, driving adjusted EPS of $0.70 for the quarter. Free cash flow was negative in the quarter, consistent with seasonal and historical patterns, reflecting higher production levels and working capital investment ahead of the peak selling season. Compared to the prior year, free cash flow was down solely due to reinstated variable compensation paid in the quarter. Moving to our segments, Propulsion delivered a very strong start to the year with sales increasing 17% versus the prior year, driven by an improved market, global share gains, and strong OEM demand heading into the selling season.

Adjusted operating earnings declined year over year solely due to the planned accelerated investments in product development and incremental tariff impact, which slightly more than offset the benefits of higher sales and improved absorption. Absent the incremental tariffs, pro forma adjusted operating leverage for Propulsion was north of 20% in the quarter, even after accounting for the high-single-digit millions of additional product development spend in the quarter. Moving to Engine Parts and Accessories, this segment once again delivered growth from its aftermarket, high-margin recurring revenue portfolio with sales up 14% versus the prior year, with significant growth across both products and distribution.

Healthy early season boating participation, even with the recent increase in fuel prices, and continued market share gains in global distribution drove growth in the quarter. The higher sales and robust adjusted operating leverage at 27% led to a 24% increase in adjusted operating earnings, with a 140 basis point improvement in adjusted operating margin. Navico Group had another great quarter, transitioning from stability to growth, with sales up 7% over prior year and up across all business lines, supported by improving OEM demand, steady aftermarket performance, and operational efficiency.

More importantly, adjusted operating earnings increased 64%, with adjusted operating margin expanding 280 basis points, reflecting the early benefits of product portfolio optimization, operational improvements, and disciplined cost control actions which more than offset incremental tariffs. We also discussed the inherent operating leverage in this high gross margin business, so it is fantastic to see 47% adjusted operating leverage in the quarter as our actions bear fruit. We continue to see encouraging traction from recent product launches, including SIMRAD NSO4 and B&G ZEUS SRX, and recognition for innovation with Lowrance ActiveTarget 2XL. While there is still work ahead, the results this quarter reinforce our confidence that Navico Group is on a sustainable path towards improved profitability.

Finally, our Boat segment also had a strong quarter, with sales up 6% over prior year, driven by higher wholesale shipments matching stabilized retail conditions, favorable mix, and continued momentum in the Business Acceleration portfolio. Boat growth was led by our aluminum fish and pontoon brands, while Freedom Boat Club continued to deliver strong increases in members, trips, and locations as mentioned earlier. Adjusted operating earnings increased 63%, and adjusted operating margin expanded 130 basis points, reflecting healthy adjusted operating leverage of 25%, primarily driven by the higher sales and favorable mix. Dealer pipelines remain very lean with mostly current model year product, well positioning the business heading into the prime retail season.

Lastly, I will discuss our updated outlook for 2026. As we enter the core retail selling season in the U.S., we are encouraged by the stable market conditions and the strength of our first quarter performance. Steady dealer and customer sentiment, exceptionally healthy and lean pipelines, disciplined wholesale-to-retail alignment, and sustained boating participation are sources of confidence as we move through the remainder of 2026. However, while direct sales and operational impacts remain limited, heightened geopolitical volatility has introduced new uncertainties.

Earlier, Dave discussed the muted impacts to date caused by fluctuations in interest rates and fuel prices, but we remain cognizant of the potential impact on the health of our consumer, especially outside the U.S., from a prolonged conflict in the Middle East. Finally, the tariff environment remains dynamic and, during the quarter, IEPA tariffs were repealed and replaced with Section 122, and more recently, Section 232 tariffs on steel and aluminum were amended. The net impact of these changes is positive; we now believe our full-year incremental net tariff impact will ultimately land near the lower end of our original $35 million to $45 million estimate shared at the beginning of the year.

Also, as Dave mentioned, refunds related to previously paid IEPA tariffs are not yet factored into our outlook or recognized in our financial statements. The result is materially unchanged guidance on the sales, margin, and free cash flow lines, but an increase to adjusted EPS guidance to $4.00 to $4.50, reflecting the lower full-year expected incremental net tariff impacts I just discussed as well as the first quarter overdrive, while also factoring in some cautiousness given the current dynamic macroeconomic environment. Overall, we believe our guidance reflects confidence in our operating plan, the resilience of our portfolio, and our ability to generate strong financial performance in a flat to slightly up retail environment.

I will now pass it back to Dave for concluding remarks.

David M. Foulkes: Thanks, Ryan. I want to highlight some exciting recent developments in one of our fastest growing businesses, Freedom Boat Club. As you know, Freedom is a profitable, high-growth recurring revenue business that continues to expand boating participation by making boating more accessible to a broader demographic. The model drives extensive synergy sales across the Brunswick Corporation portfolio, including through the purchase of Brunswick boats, Mercury Marine engines, parts and accessories, and Navico Group products, resulting in approximately $300 million of enterprise synergies since the 2019 acquisition. Since the acquisition, we have also grown the location count from 170 locations to 446 global corporate-owned and franchise locations, adding four more locations in the quarter.

Last year, Freedom members made 640,000 trips in the U.S. Earlier this month, we announced the acquisition of the largest remaining franchise club in the Freedom network, serving the Greater Boston and Cape Cod region. This acquisition adds 21 locations to our corporate-owned total, as well as a strategic maintenance operations center that will drive synergies with other nearby corporate locations. It is also day-one accretive to earnings.

Innovative new products and advanced technologies are central to Brunswick Corporation’s long-term value creation, differentiation, and share gain strategy, and during the quarter, we introduced many exciting new products across our portfolio, including the all-new Sea Ray SLX 360, and Boston Whaler Outrage 330 and 290 models, with Mercury power and Navico Group electronics; SIMRAD’s NSO4 multifunction display with Neon Android operating system; Mercury’s advanced keyless engine start system; an innovative Boost over-the-air outboard performance upgrade; and FLITEBOARD’s Race ultra high-performance model. All these products illustrate our commitment to constantly pushing the boundaries of marine innovation. Finally, I want to highlight the continued recognition our teams and brands are receiving across our enterprise.

Through the first quarter, Brunswick Corporation has already secured nearly 50 awards and remains on track to surpass 100 awards again in 2026. This recognition spans product innovation, workplace culture, leadership, and corporate reputation, and reflects the strength and consistency of our operating model and values. We are appreciative of having received many national awards now for multiple years, but notably, for the first time in 2026, Brunswick Corporation was named to Fast Company’s Most Innovative Companies list, reflecting the wide recognition for our industry-leading innovation. Thank you again to all our talented Brunswick employees who make this recognition possible.

Before we open the line for questions, I want to close by thanking our customers, channel partners, employees, and shareholders for their continued strong support. We are also excited to announce our Brunswick Investor Day will be held on August 11 at Mercury Marine’s global headquarters in Fond du Lac, Wisconsin. The event will include a facility tour, on-water product experiences, and live Q&A with Brunswick senior leaders. In advance of the event, a prerecorded video strategy presentation will be published to our website. For planning purposes, I kindly ask that you register your interest in attending using the contact information on this slide. Thank you for your attention. We will now open the call for questions.

Operator: Thank you. We will now be conducting a question-and-answer session. The first question is from Craig R. Kennison from Baird. Please go ahead.

Craig R. Kennison: Good morning. Thank you for taking my question. It really involves Mercury. You continue to pick up market share in a soft market, which could lead to record volume in a cyclical recovery. And then you also appear to have a winning product cycle and some tariff-related tailwinds. So I am just thinking with all of that in mind, you could give us an update on your capacity utilization and your ability to handle additional volume if there were to be a surge, and then provide a framework for thinking about incremental margin in that business? Thanks.

David M. Foulkes: Thanks, Craig. Great question. Yes, Mercury is continuing, as you said, to gain share, and we have fantastic product. There was some belief a year or two ago that some of the share gain was temporary because of supply constraints and other things, but clearly it is not. It is very structural. We have the best product line, and as you have heard, we are investing even more in five new outboard platforms from mid-range up to new extensions to the high-horsepower range. So it is very exciting. We are well capacitized after the investments that we made in 2019, 2020, and 2021 to support all of the foreseeable volume.

We do not anticipate any major additional investments to be able to support volume, certainly in the next year or so. As you heard from Ryan, Mercury is leveraging up very nicely, and absent the tariffs, we would have been approaching a 30% number in the quarter. Ryan, maybe you want to take over the leverage numbers.

Ryan M. Gwillim: Yes. We always quote more than 20% operating leverage. Obviously, with tariffs, that number gets skewed a bit, but we would have been approaching 30% in the quarter had we not had the tariff impact, and that is not even encompassing the additional spend that Dave mentioned, where we were up high-single-digit millions quarter over quarter versus 2025 to really supercharge those engine programs.

Operator: The next question is from James Lloyd Hardiman from Citi. Please go ahead.

James Lloyd Hardiman: Hey, good morning. Thanks for taking my questions. I was wondering if you could walk us through demand trends that you have seen to start the year. Last time you reported, it sounded like January was off to a really strong start, and I think you have spoken to continuation of that in February. As I think about a flattish first quarter, I think that means that March must have been down. What have you seen in April? More broadly, how are you thinking about month-to-month trends given the conflict that started in late February and March?

David M. Foulkes: Thank you, James. Monthly volumes are different as we go through the year, with March volumes being higher than January and February. We did see some high early volumes in January, which then stabilized over the balance of the quarter. Whether there was any real impact from the conflict is very difficult for us to determine, but the quarter ended effectively flat both globally and domestically. I would also note we continue to see premium outperforming value, and if there was some additional pressure in the quarter or hesitation caused by the conflict, it likely impacted the value buyer more than the premium buyer.

As we have gone into April, we are up year over year versus April last year, which is what we would have expected given the Liberation Day pause that happened last year. We are encouraged by the start to the second quarter, and at the moment that trend seems to be continuing week over week, with continued strength on the premium side. We also saw good sales in our aluminum products, our premium aluminum products. SSI data showed some dips in the first couple of months of the year and is now converging back to a flat market, and we would expect that to continue.

James Lloyd Hardiman: Got it. And then the outboard engine market continues to grow faster than the boat market itself. Higher attach rates and multi-engine configurations seem to be a driver, along with your share gains. In the context of your outlook, if the boat industry is flat to slightly up, how are you thinking about the outboard industry, and Mercury relative to that?

David M. Foulkes: Almost all recreational boats are now effectively powered by outboards, so we are getting more volume that way. Multiple engines are also a driver. You do not necessarily see the offsets in our financials because some of the offsets are between our 400-, 500-, 600-horsepower outboards and other people’s diesel engines. There never was a 500- or 600-horsepower outboard alternative historically. We did not sell many sterndrive gas engines in that high power range; most sterndrive gas engines we sold were typically in the 200 to 400 horsepower range. So we are grabbing share away from some traditional propulsion like diesel in bigger boats. We continue to outperform the market for the reasons discussed.

I am excited about new programs coming to market over the next couple of years which will extend the range upwards and refresh mid-range product. We must ensure our mid-range remains contemporary and outperforms competitors, so we continue to invest across the product line. Overall market conditions support our flat to slightly up scenario. We expect more Mercury share gain, a higher outboard attachment rate, and more multi-engine products since premium is growing faster than value. Value product tends to be single engine; premium is frequently multi-engine. Profitability is also driven by what we sell with engines—controls and rigging. We are selling more sophisticated controls, joysticks, and autopilots, all of which increase share of wallet and attachment for sophisticated controls.

Ryan M. Gwillim: The larger portion of the boat market now being outboard also increases the TAM for repower. We are seeing more repower simply because there are more outboard-powered boats to repower over time. That also contributes to engine retail outpacing pure boat retail.

Operator: The next question is from Xian Siew from BNP Paribas. Please go ahead.

Xian Siew: Hi, thanks for the question. On the competitive landscape, you mentioned competitors may be having tariffs. Could you elaborate on pricing and offering dynamics and how that could evolve and support further share gains?

David M. Foulkes: Pricing is pretty muted in outboards at the moment. Mercury put in place a 2% price increase at the beginning of this year. Our Japanese competitors are in that range as well. Pricing is constrained by the market and nobody really wants to take price even though there is margin pressure—some for us, but even more, I think, for our Japanese competitors. As the market normalizes over time, we will see how that goes. It is important for us to continue to gain share given the attachment rate for P&A that we get over time.

There are fairly acute margin pressures among some competitors, based on commentary and announcements last year, but they are better to speak to their own positions.

Xian Siew: And on the repower market, could you update us on its size for you? Previously, you mentioned maybe 20% of engine sales were repower. Has that grown?

Ryan M. Gwillim: It is still about 15% to 20% of units sold. That has not changed materially. It differs by jurisdiction; some markets outside the U.S., like Australia and New Zealand, are very high repower. We are just seeing good volume throughout all channels.

David M. Foulkes: Our share of repower is lower than our share of OEM. One reason is that repower is typically higher in saltwater markets where corrosion and higher performance take more of a toll. Saltwater is a market we have been expanding into more strongly over the last five to six years. We would expect a higher right to win in that market as our OEM share becomes more reflected overall. Over the next three to five years, we would expect share gains in repower as more of our product comes up to be in the repower cycle of about eight to ten years.

Operator: The next question is from Anna Glaessgen from B. Riley Securities. Please go ahead.

Anna Glaessgen: Good morning. On guidance, you mentioned lower tariffs flowing through the 1Q beat while also balancing with conservative macro assumptions. Could you provide more perspective on how that is informing guidance and, if we do not see disruption, what that could look like for the year? Thanks.

Ryan M. Gwillim: We are three months into the year, and the first quarter is generally one of the smallest. We had a really nice start, and we did get a little bit of tariff goodness. IEPA going away and being replaced by Section 122 was a positive, but changes to Section 232 were a slight negative. Net, it did not take us outside our initial tariff range for the year; it moved us from the high end down toward the low end of the $35 million to $45 million range. The Q1 beat is a positive, and tariffs are another small positive.

We are balancing that with caution regarding the consumer and global events as we enter the core selling season, where we make roughly 55% to 60% of our sales and profit. If the world stays where it is today, and the other shoe does not drop, we think we can get to the high end of the range or better. The point on guidance was to move up the bottom end and take some risk off the table, being prudent given world activities.

Anna Glaessgen: Thanks. And on 1Q EPS upside versus initial expectations, to what extent were lower tariffs contributing? Were there any expenses shifted into 2Q?

David M. Foulkes: No on both. Tariffs came in pretty much as we expected, and we did not push any expenses out of the quarter. It was a straight beat based on improved revenues and really nice leverage. We do have some additional tariff headwind in Q2 that informs Q2 guidance. We would prefer to be in a beat-and-raise cycle than take everything to the bank this early in the year.

Ryan M. Gwillim: To be very clear on Q2, the only real disconnect between our guidance and what the Street was modeling was the tariff impact, and it is rather material. We said on the January call that Q1 was about two-thirds or 60% of our tariff impact for the year and the remainder is in Q2, and that holds true. There are mechanics—balance sheet, LIFO, cap variances—but the upshot is the first half is a “bad guy” outside the $35 million to $45 million range, and the second half is a “good guy” that brings us back down into the range.

If you normalize Q2 just for the anticipated tariff impact, your EPS growth would be very similar to what we delivered in Q1. That is why the Q2 guide is just slightly down from what the Street anticipated—they had not fully caught up to all the tariff movements yet.

Operator: The next question is from Gerrick Johnson from Seaport. Please go ahead.

David M. Foulkes: Morning, Gerrick.

Operator: Gerrick, your line is open. We will move on to the next question. The next question is from Joseph Nicholas Altobello from Raymond James. Please go ahead.

Joseph Nicholas Altobello: First, on the industry outlook, you are still calling for flat to up for the year. Are you assuming any underlying fundamental improvement over the balance of the year, or does that just extrapolate current trends and then you are lapping the post–Liberation Day slowdown last spring? You also mentioned you are not anticipating any additional rate cuts.

David M. Foulkes: Hi, Joe. We certainly are anticipating that at least early Q2 will be up over last year, and that is what we are seeing as we head into the second quarter. Dealers are pretty optimistic, and they have their ear to the ground. We are continuing to get good order patterns; show sales were good. The back half of last year was okay as well. We just need to get through Q2—particularly early Q2—with a bit of overperformance to realize a flat-to-up market. Premium continues to outperform value. Loan rates are still about 200 basis points down from the peak, around 7.5%. Dealers are still getting flow-through from last year’s cuts into floor plan financing, so that tailwind is present.

We are also seeing a slightly improved discount environment, which is a good indicator of retail strength.

Joseph Nicholas Altobello: Last year, inventories were a bit heavier across the industry than they are today, and there was a lot of promotional spending. How much benefit will you get this year from lower promotional spending?

David M. Foulkes: We still think our estimate of about 40 basis points is a good one. We got about 100 basis points of benefit last year. Even with another 40 basis points, we will still be a couple of points above historical norms looking back to 2018 or 2019. There is room to run in a more normalized market as we move forward.

Operator: The next question is from Gerrick Johnson from Seaport. Please go ahead.

Gerrick Johnson: Great, thanks. I am back. I wanted to dive deeper into trends in your Boat Group—better sales growth in aluminum, rec was okay, and down in saltwater. Saltwater has been down for a number of quarters. Can you talk about what is going on within Boat Group and the segments there?

David M. Foulkes: We are seeing particular strength in our Lund brand, our premium freshwater brand, driving a lot of the increase. We are also seeing really good performance with our Harris pontoon boats, which are outperforming the market. In both cases, we have strong premium ends of aluminum brands with a lot of recent investment in new products. Freshwater markets are typically dedicated to fishing, not highly leveraged to fuel prices; they do not go a long way—go to a spot and fish—or on a pontoon, something similar. On rec fiberglass, we rationalized our value portfolio, so that is really a product of our Sea Ray brand and, to some extent, the Bayliner brand being up—both premium brands.

In saltwater, Boston Whaler, our premium saltwater brand, is actually up year over year. The softness is more on the value side of saltwater.

Operator: Next question is from Molly Baum from Morgan Stanley.

Molly Baum: Hi. Thanks for taking our question. First, on operational efficiencies you saw in the quarter—where do you see the most room to take cost out? Have you seen any benefit from the footprint rationalization on the value side of the boat business, and if not, when should we expect to see that?

David M. Foulkes: The biggest efficiency benefits at the moment from footprint and other actions are in Navico Group and Boat Group. On Boat Group, the process of rationalizing those facilities is on track, but directly it is a headwind to us from a cost basis this year. It will flow through to more than $10 million of efficiencies next year, and we would expect to see the majority then. We continue consolidating production lines and introducing more operational efficiencies. There is notable work on value engineering across product lines—ensuring we put in what consumers want and deliver it efficiently. Navico Group continues to rationalize footprint and closed two smaller facilities at the end of Q4 or early this year.

We are seeing benefits from that and other operational efficiencies. Navico Group’s footprint is now about right, investments in new products are coming through strongly with market share gains, and we saw a nice pop in margins that we believe is sustainable and will continue to grow. We will get some Boat Group benefit in the second half; Navico continues on its journey and has done a lot of work in recent quarters.

Molly Baum: Got it, thanks. A follow-up: Can you remind us what level of IEPA tariffs you have actually paid on an annualized basis, and if all of those are eligible for refunds? You noted it is not included in guidance, but if you do get a payout, would all of those qualify?

David M. Foulkes: Yes. We have begun the process of applying for IEPA tariff refunds. It is happening in phases; we have made our first applications. The total value of IEPA refunds we now estimate is about $50 million. We plan to recognize it as we receive the cash. We would expect some over the balance of this year and some next year.

Operator: The next question is from Thomas Martin from BMO Capital Markets. Please go ahead.

Thomas Martin: Good morning. On the value boater, removing macro pressures, what do you think it takes for them to come back to market? Or is it truly just the macro pressures keeping them out?

David M. Foulkes: We are trying to meet them where they want to be met. I would differentiate between fishing-related boating and general-purpose boating. Fishing, including aluminum boats, is up—certainly at the premium end but also strong at the value end. If it is part of your lifestyle, you keep doing it. On the fiberglass side, on the value end, it tends to be more general-purpose runabout-type boating. There is more fungibility between spending on boating and other leisure alternatives, and potentially more pressure on discretionary spending.

That is where Freedom Boat Club can play a big role in changing spending patterns—replacing a large capital outlay with a joining fee and monthly dues that provide access to a wide variety of boats with convenience. We have rationalized our product line in that area and are investing more in Freedom Boat Club.

Thomas Martin: Thanks. And could you provide an update on how you are thinking about normalized boat demand?

David M. Foulkes: In the short term, our expectations remain a flat to slightly up market. We believe there has been an inflection and the market is stabilizing after declines from 2020 through about 2024. We still see stratification between premium and value, but absent some major external change, we see no reason the market cannot return to growth as the causes of caution alleviate. We would anticipate modest regrowth of the market in the low- to mid-single-digit range in subsequent years.

Ryan M. Gwillim: Supported by two factors: the used market is in really good shape, with relatively light gently used product on dealer lots, which supports trade-up and trade-in values. People who bought around COVID have more equity and can get more for trade-ins, improving dynamics and getting folks off the sidelines. Lastly, even in a very conservative U.S. boat market, new boat sales are at about half to 60% of replacement value, so there is a lot of room to run. We will discuss this further at our Investor Day in August.

Operator: The next question is from Noah Seth Zatzkin from KeyBanc Capital Markets. Please go ahead.

Noah Seth Zatzkin: Hi, thanks for taking my questions. On the guidance range, what are the differences between the $4.00 and $4.50? Is it fair to say retail environment expectations are consistent on both ends of the range? Relatedly, what shipment tailwind do you expect in a flat to slightly up retail environment this year?

David M. Foulkes: On the range, as Ryan said earlier, if no other shoe drops, the top end—or better—is achievable. We are overlaying some caution based on external volatility, which could create additional caution, not necessarily in the U.S. market, but in some international markets. That overlay of caution gets you to the bottom end.

Ryan M. Gwillim: On balancing retail and wholesale, if you assume a flat boat market, then wholesale is up mid-single digits on a unit basis—just to match retail, given lower wholesale to start last year. On engines, it is a little greater—probably up mid- to high-single digits on units—given engine pipelines continue to be lower, certainly in high horsepower. We have taken out 10% of the 175-horsepower-and-above pipeline each of the last two years. The balancing of retail to wholesale there is a good dynamic even in a flat market.

Operator: Thank you. This concludes the question-and-answer session. At this time, we would like to turn the call back over to Dave for some concluding remarks.

David M. Foulkes: Thank you, everyone, for your questions. A very encouraging quarter for us: solid retail, revenue up substantially across all of our businesses, margin expansion, really good earnings leverage, and continued really solid free cash flow. We continue to outperform the market. We are clearly firing on all cylinders now—all parts of our businesses are doing well. I am excited about both this year and the future in general. Our recurring revenue businesses are doing great, providing extremely strong earnings and free cash flow. As we said, setting guidance in this environment is trickier than normal, but we prefer to be in a beat-and-raise cycle than take everything to the bank right now given how early we are in the year.

Finally, please reserve a spot at our investor event in August at our Mercury Marine headquarters in Fond du Lac. You will see the production of those fantastic engines that are leading the market right now, meet the leadership team, and experience some of our latest products on the water.

Ryan M. Gwillim: Thank you very much.

Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.