All right, good afternoon, everybody. I hope everybody enjoyed lunch. We'd like to kick off the afternoon portion of the conference with our next presenter, Brunswick Corporation. Brunswick is a leader in the global marine industry with many of the best-known brands in boating, including Boston Whaler, Sea Ray and Bayliner, just to name a few. In addition, its Mercury engine business has been gaining meaningful market share for several years now, while its parts and accessories and nautical businesses round out what we think is a very comprehensive product portfolio.
Yeah, thank you.
We are very pleased to have with us today the company's CEO, David Foulkes, to walk us through the story. If there's any time left at the end of the presentation, we will try to take a few questions from the audience. So with that, let me hand things over to Dave.
Thank you, Joe, very much. Good afternoon, everybody.
Everybody, hope you had a good lunch. Thank you for your interest in Brunswick. I have a lot of positive developments to share with you today. Before I leave the intro slide, I just want to point to Brunswick's tagline, "Next Never Rests." That is a reference to our continued investment in new products and technology and new business models, and you'll see that throughout my presentation. A couple of administrative slides. The material contains certain forward-looking statements about future results. Actual results may vary significantly from expectations. For factors to consider, look at our SEC filings on our website, brunswick.com. The material also contains certain non-GAAP financial measures for reconciliation of GAAP and non-GAAP. Also look at our SEC filings on brunswick.com.
I want to start with a video that brings to life that "Next Never Rests" spirit, talks about our leadership position in the marine industry, some of our industry-leading brands, and some of the fantastic new products that they've recently introduced. Hope you enjoyed that. It always energizes me. For those of you who are a bit less familiar with Brunswick, I'd like to use this slide to introduce our operating businesses and our segments and some of our industry-leading brands. So we have five operating businesses: Propulsion, Engine P&A, Navico Group, Boat Group, and Business Acceleration. You see the industry-leading brands under there. And then we have four reportable segments: Propulsion, Engine Parts and Accessories, Navico Group, and Boat Group. Boat Group comprises our boat business and our Business Acceleration business, which includes Freedom Boat Club.
You can see all the brands here, but even here, the "Next Never Rests" spirit applies under Propulsion. You can see the Avator brand. That's the new Mercury sub-brand for its new line of electric outboards. We launched the first five in the last year. And you can also see Flite, which is the brand for those electric foiling surfboards that you saw on the video. Inside our Boat Group, you see a couple of new brands. One is Veer, a boat designed for electric propulsion, and also Navan right here, which is a new European-style boat designed to compete particularly in the European market, but also in Pacific Northwest and Northeast. These revenues for our reporting segments for 2023 include about $500 million of what would be eliminations in the aggregate results. Those are synergy sales between our businesses.
It's a very unique element of our portfolio, the sales of our Mercury engines and Navico Group products to our Boat Group and also to Freedom Boat Club. That's about $500 million of sales, rising in the future in 2027 to about $700 million. We talk about our industry leadership, and these are just some examples, not exhaustive, of where we hold the number one position in various parts of the marine industry. Probably the one we talk about most is outboard engine share. Mercury is the market leader by a long way in the U.S., in Canada, and Europe, and many other markets, about 47% outboard share in the U.S. Mercury Racing, our high-performance division, is by far the market leader in high-performance boating propulsion.
We have the world's largest marine distribution network, the world's largest boat club, Freedom Boat Club, and our boat brands occupy the leading position in many sub-segments of the U.S. market and also in a number of international markets. So that leadership position is truly backed up by our market share in a number of different marine categories. But despite that leadership position, we never rest on our laurels. That's what "Next Never Rests" is about. Just in the last 15 months, we've won 155 awards for our products, brands, teams, and business, including for the sixth consecutive year being named as one of America's Best Large Employers. In the same 15-month period, we've launched 130 new products across our enterprise. Nobody in our industry and, frankly, few people outside our industry have our ability to launch new products across this breadth of categories and at this cadence.
But despite the fact that we've launched all these new products and we've been navigating the market, we have not lost our focus on sustainability. And recently, our CDP rating was upgraded from a C to a B. Those of you who know us well will know intimately what ACES stands for. It's a cornerstone of our innovation strategy. It stands for Autonomous, Connected, Electrified, and Shared. You'll recognize those innovation themes from across multiple verticals, but we're playing in all of them in the marine industry. In terms of autonomy, well, actually across the board, that ACES strategy has transitioned from technology development to product commercialization or business commercialization. We're well in the commercialization phase. In terms of autonomy, we've recently demonstrated our autonomous docking system, both to the media and at the Consumer Electronics Show, that is progressing to commercialization
We have the broadest range of connected products in the industry, a product called CZone, which is a vessel management system, V-Mobile, which connects Mercury's propulsion system to your smart device, 1st Mate, which is a safety and security system, and even the Avator companion app we recently launched. In terms of electrification, I mentioned that we just launched the first five models of electric outboard under the Avator sub-brand for Mercury Marine. We also have commercialized our Fathom generator replacement system that replaces onboard combustion engine generators with high-capacity lithium-ion systems and power management. And of course, we just acquired at the back end of last year Fliteboard, the electric foiling company. And then in terms of shared access, that's obviously centered on the Freedom Boat Club ecosystem, which, as you saw in the video, now actually has more than 410 locations worldwide, including in the U.S., Canada, Europe.
We've recently opened our first eight locations in Australia. So it's an expanding model. ACES is the cornerstone of our innovation strategy. It is not everything we're doing in terms of innovation. We'll start to talk about some more things beyond ACES later this year. Everybody is always super interested in Mercury and Mercury outboard market share. I think you know Mercury has done particularly well in boat shows and other trade shows this year with a really high presence at those shows compared to any competitors. For example, recently in Miami, more than 60% of all the outboards, over 150 horsepower, were Mercury outboards. We also gained another 50 basis points of market share last year across the board. This slide focuses on what we call our V-Series platform. That's the V6, V8, V10, and V12 outboards that go from 175-600 horsepower.
Nobody else has anything like this on an individual node basis or a platform basis. The highest power outboard amongst the competition is 450 horsepower. So we have made big investments in product development for these engines. They're very innovative. They're protected by a lot of IP and the capacity that goes with them, which presents an incredible competitive moat for us. We've invested $750 million, but it has been very worthwhile. Since 2018, with these engines, we've gained 11 points of market share. And the total revenue associated with this platform is now more than $1 billion. And it would take a decade for anybody to get even close to it, even if we were standing still. So I talked about the synergies between our businesses, how our engines and Navico Group product go into our boats, and our boats go into Freedom Boat Club.
But this is a really nice slide illustrating how that happens. About more than 50% of the content of the average Brunswick boat on a dollar basis is sourced from our own businesses, which is a huge source of margin stack in all of the boats that we sell. Of course, it gets attributed back to the respective reporting segments. But you can see the components that make that up and then the respective brands. These are all our brands that go along with those components. We have made huge progress in pulling Navico Group products through into our own boat models. Just between 2022 and 2023, we've increased the content in our own boats of Navico Group product by 37%.
And then inside Freedom Boat Club, now about 40% of all the boats in the 5,000-unit Freedom fleet are Brunswick boats and about 90% of all the engines in that fleet are Mercury engines. So we talked about synergies. We talked about how we're going to increase them. We've made really rapid progress on increasing those synergies. I turn now to talk a bit about the U.S. new boat market. For those of you who don't know, the U.S. is the biggest market, about 70% of the world sales of recreational boats. The black bars here show annual unit new boat retail sales in what we call the main power boat segment. It includes small boats, excludes, I'm sorry, small boats, PWCs, etc. It's basically the market in which we compete.
You see a steady increase from 2012 through to 2020 and then the market that we're in right now with the pullback associated with mainly credit conditions. In 2023, we're about 155,000 units, which is about 6% down on 2022. We expect this year to be roughly flat to 2023. Our early internal retail supports that, or maybe it's even a little bit more constructive, but January and February are in good shape. But January and February form a small proportion of the year. We're out of the season, so that is about 10% or 11% of the units. In our 2023 Investor Day, our baseline scenario was after a flat 2024, steady increasing through to 180,000 units again in 2027. That would be the same unit CAGR as we saw through the 2012 through kind of 2020 period. So it's not an extraordinary or different kind of assumption.
The purple line is interesting at the top. That is the number of recreational boats registered every year in the U.S. in millions. You can see it's been remarkably steady for the past 10 years or so, 10 to 10.5 million units. That is really important because that is the source of a lot of P&A revenue. Half of those boats are powered by Mercury engines. Of course, they have a lot of consumables. They get damaged. All kinds of things happen. That is a very predictable source of parts and accessories revenue for us, which is certainly high margin for us. You can also see the dollar value of the market. You can see not only effective inflation, but also the effect of premiumization. Boats like cars are just getting more equipped with comfort features. They're larger.
People want more electronics on their boats. So the ASP has gone up faster than the unit CAGR. So what that means is in our baseline assumptions versus the $6.4 billion of revenue that we achieved in 2023, based on that market growth we would expect to be and our market share gains and many other things, we'd expect to be at revenues of about $8.7 billion in 2027 and a margin of about 16%, which would be about 150 basis points higher than 2023. By the time we get to 2027, our earnings mix will be just less than 50% propulsion. But by that time, that will include Flite and Avator and the other things that we've just been are more in the embryonic stage right now. And then the other 50% will be split roughly equally between our other three operating segments.
We would expect to continue to have recurring revenue in the 35%-40% range. That recurring revenue is very important. It's our aftermarket P&A. It's Navico's aftermarket businesses. It is our repower engine sales on Freedom Boat Club. That is essentially sales that are fairly strongly decoupled from the new boat sales market and therefore remain much more constant through the business cycle. And we'd expect the ACES-related revenue by 2027 to be about $1 billion. So we put a big effort into ACES, and it is already yielding benefits and will continue to yield more. So by 2027, if you couple in an aggressive capital strategy, which we have continued to execute, we would expect EPS in the range of $15. So my last slide, the most important one for the shareholders.
We run this series from October 2019, which is the date when we first became a pure-play marine company and sold off our other assets through to the end of February. Our TSR has exceeded most of the other relevant industries and our peer average. We recently announced our 12th consecutive dividend increase. We continue to be very aggressive on share repurchases. Between those two, since 2019, we've returned two-thirds of our net income to shareholders. So very excited about the journey that we continue to be on, what that means for us as a business, and what that means for our shareholders. So that is the end of my presentation. Thank you for your attention. And now I believe I have some time for questions, Joe.
Yes. Thank you for the presentation.
Could you talk a little bit about the distribution of your product and especially the dynamic that exists today and how it's likely to evolve forward?
Yeah. So the question was about the distribution of our product. Our P&A distribution, a lot of it we do ourselves. But we also do it through online and conventional retailers like Amazon and Bass Pro. That's the same for our Navico aftermarket business. Those retailers have gone through a destocking cycle. And a lot of people experienced that. They essentially bought more inventory during the supply chain crisis and have gradually been normalizing. We believe we're mostly through that now. We've had three consecutive quarters of wholesale P&A sales increases, which is encouraging. In terms of the distribution of our other product, particularly our boat product, obviously, we do that distribution through independent dealers.
On the premium side, through names that you're familiar with like MarineMax, but on the value side through a whole range of other dealers. I would say in terms of what's changing, there's more pressure on dealer margins at the moment, but they remain healthy. And we're working with them very constructively, I think, to stimulate sales in the current environment.
You see consolidation happening in that space when you expect 4,000 dealers there, and it seems to be a lot of onesies, twosies that's going on?
Yeah. There has been quite a bit of consolidation, particularly MarineMax and OneWater have been the bigger consolidators. I would say they tend to look for a particular set of assets. The M&A market at the moment is not it's not a great market. I think there's a bit of a misalignment between expectations and potential to realize stuff. So I would say that there's going to be consolidation over time. I'm not seeing evidence of accelerated consolidation at the moment.
Do you prefer the larger players, or do you prefer to keep a fragmented distribution base, or do you prefer to deal with the OneWater Marine and the MarineMax?
It really depends on the type of product in terms of we're happy to deal with a whole range of dealers. We look for dealer quality. And because of the strength of our brands, we're typically able to achieve high dealer quality, whether it's with the bigger players or smaller players.
I just remember that in the focus of the early stage of the.
Yeah.
Most people, a lot of them will move to focus on the new to make a stay, or
They have stayed in. We have not seen it act thus.
So in an average year pre-COVID, about 25 or 26% of new boats would be sold to new boaters. The reality is it's unclear whether they were really new boaters, or they just weren't known in the system. They may have owned a boat previously and then dropped out of boating and come back. At the height of COVID, that was in the 30%-31%. So it certainly increased, but it wasn't an exponential increase. Because of supply chain, we were not able to build enough boats to satisfy demand during that period. We survey boaters very regularly. In fact, every month, we do a comprehensive survey of existing boaters and intending boaters. 90% of them say that they intend to be in boating for at least the next five years. So we believe boating tends to be a bit of a lifestyle thing.
It's not as discretionary as some other kind of leisure goods. You might have a home on a lake or some other connection to the water that is longstanding. And so they tend to be a relatively kind of sticky consumer, if you like.
Do you just talk through other dynamics in the water market for Honda? Can you help us understand why they've taken this tack for the last five years and what the implications are to market share and unit economics over the next five years, assuming that they remain fairly stagnant and you guys continue to move?
I need to come to a conference where Yamaha is presenting and listen to their answer to that question because I think I have to answer it more than they do. Yeah.
I don't think that, so the reality is just the U.S. Mercury and Yamaha have had about 80% of the U.S. market a long time. But for a long time, it was like 40%, 40%. Now we have about 47%. And I don't know their exact market share, but it's probably in the 30% somewhere. Suzuki is the third player. They haven't really taken their foot off the gas. They announced a replacement for their 350-horsepower engine, which they introduced earlier this year. They took their 425 to 450. I would just say that they have been, it seems like, in more of a maintenance-type mode of investment. And we have been in a very aggressive expansionary share gain mode. We have lots of room to run both domestically in the recreational market here. But last year, we became the market leader in Europe.
We're the market leader in Canada. We still have a lot of room to run in international markets, commercial markets, saltwater markets, repower. So I think a lot of continued growth opportunity for us. And we clearly are, by any measure, the technology and product leader in any meaningful attribute.
I'm trying to think of a nice way to answer the question. Your Brunswick Mercury is such a dynamite powerhouse. And if I've done the calculation right, your Brunswick sales can go from $2.8 billion last year to $4.3 billion.
You're talking about Mercury or Brunswick?
Mercury.
Yeah. Mercury. Yeah. Mercury. Yeah. Mercury. Yeah. Yeah.
I'm sorry. Mercury can go from $2.8 billion to $4.3 billion. It's clearly got a better margin than the other one.
Do you get the I mean, it seems to me on its own, it would give a much bigger multiple in the company because it's such a I mean, it's just been run so well, etc. How do you try to leave that kind of value that's there that you're probably not getting?
Yeah. I would think we're all in the same industry, which is the marine industry. It's kind of interesting. I've been with Brunswick for 17 years now, five as CEO. I've spent most of my early career in Mercury Marine developing a lot of their engine products. When I joined Mercury, Outboard was losing money. So it has been transformational for the business. But don't ignore the role that our Boat Group has played in pulling through a lot of their products into saltwater.
You think about the fact that our boat group has 13% market share in the U.S. market, and it is 100% Mercury. If that went elsewhere, that would change the share dynamics considerably. So I think that we continue to accelerate and amplify the impact of Mercury through our other businesses as well as creating value in the other businesses. Go ahead.
Yeah. The one thing you went over here earlier, perhaps commenting on this before I let us conclude this call. You indicated that we wouldn't see growth in retail until probably the second half of this year. So first question, would you agree with that? And second, if that's the case, do you think dealers would be hesitant to order model year 2024 with the prospect of model year 2025 coming up in July?
Yeah.
So for those of you who don't know, the model year in boats runs typically from June to June, if you like. So 1st of June will be 2025 model year. We're currently in 2024 model year. So the question was really around, are dealers going to wait for 2025 model year, or are they going to order more 2024s? The reality is even though model year certainly, dealers will not want to get caught with a lot of prior model inventory. However, the reality is even if the model year changes on the 1st of June, they don't get all their boats in June. That's when they start to get 2025 model year boats. So they don't want to miss a lot of the selling season in May, June, and July by avoiding 2024 model year.
So they are just I think they're going to continue to look for signs in the marketplace of retail behavior and consumer behavior. But I would say that I think that the notwithstanding the relatively small volumes, the early couple of months have been encouraging enough to suggest that they will be more balanced than 2024 model year ordering, even though they will certainly want to get as many 2025s as they can. Just to be clear, engines do not have model years m arine outboards don't have model years. It's a boat consideration.
Maybe just some comments on Freedom and what you've seen there with some friends, maybe locations you might be able to go for some information.
Yeah. So on Freedom Boat Club, we acquired Freedom in 2019 at 170 locations. We just passed 410. We're going to announce some more tomorrow.
It is continuing to expand really quickly. Membership is getting close to 100,000 now. We're obviously expanding domestically and internationally. The convenience of Freedom is really demonstrating itself by its growth. The reciprocal access opportunity is a big differentiator for us. For those of you who don't know, it's a bit like a golf club. You pay a joining fee, and then you pay monthly dues. You get access to a fleet of boats that you book on an app in your home location. Then you can also book boats at any other worldwide location of Freedom if you're going on vacation or whatever it is, which a lot of people do. It's a very convenient model. The boat's waiting for you, gassed up when you arrive. When you finish, you drop it off. It works particularly well for people who are time-constrained.
It works particularly well in metropolitan areas where maybe boat storage and stuff is a bit less available. It is also benefiting from the fact that some of the things that have been headwinds to durable goods purchases, particularly inflation and financing costs, have not been a headwind for Freedom, at least not to the same extent. So even though Freedom is obviously subject to some inflation, people are not taking out a loan to join Freedom. And the inflationary pressures that we saw through the supply chain don't impact Freedom nearly as much. So we continue to see a long runway of growth, not just for Freedom but for the ecosystem surrounding it like pre-owned boat sales and other things. This last one I'm sorry. One last question.
Can you just tell them how do you see the hydrofoil opportunity?
When you think about extending your product line into PWCs or areas that connect the gap, is that an area of focus for you to continue to brand the product?
Yeah. We see a lot of growth in e-foils. We think it's a great synergy with our Avator business. I think if you look at what people pay to do wakesports, buying a $200,000 boat compared with buying a $7,000 e-foil, I think the growth opportunity is large. Flite is currently about a $50 million business, and we're expecting a lot of growth. Thank you. Thank you all very much.