All right. Good morning, everybody. Thank you for joining us. I'm Joe Altobello, leisure analyst here at Raymond James. I'm very pleased to introduce our next presentation of the morning from Brunswick Corporation. Brunswick is a leader in the global marine industry with a comprehensive product portfolio that includes some of the best-known boat brands, including Boston Whaler, Sea Ray, and Bayliner, just to name a very few. These are powered by its Mercury engines, which have been gaining meaningful market share for several years now, while also complemented by its Navico technology segment as well as its parts and accessories businesses. Here to tell us all about it is CEO David Foulkes, along with CFO Ryan Gwillim. I believe David has a few slides he'd like to go over, after which, we'll dive into a fireside chat.
With that, let me hand things over to David.
Thank you, Joe, very much. Morning, everybody. How's everybody doing? Thank you for your interest in Brunswick. Thank you for attending this morning. We have a lot of positive developments to share, and then we'll do some questions. Before I leave this slide, I always like to point to our tagline, "Next Never Rests," which is a reference to our continued investments in new products and technologies and innovation, and I will talk about that during the presentation. Little bit of admin to start. Presentation contains certain forward-looking statements about future results. Actual results may vary significantly. For the factors to consider, please reference our SEC filings on brunswick.com. I'll also use certain non-GAAP financial measures. For reconciliations of non-GAAP to GAAP, check our 8-Ks, also on brunswick.com. All right.
I will kick off here with a video that brings to life our business model, some key facts about our organization, and our industry-leading brands and technologies. All right. I hope you enjoyed the video. I always feel energized by it. I'll just pick up on a few key facts from the video here. About 50% of U.S. recreational boats in the U.S. fleet are powered by Mercury Marine engines. That is the power behind our very strong engine P&A business, recurring revenue, high margin business. We have been awarded more than 1,000 patents over about the last 10 years. That provides an intellectual property moat around our technologies. Freedom Boat Club is by far the biggest shared access asset in the marine industry. 63,000 memberships at the moment involving more than 100,000 members.
We own three of the four most recognized boat brands in the U.S., Sea Ray, Boston Whaler, and Bayliner. For those of you who are not familiar with the structure of our business, this slide helps you navigate it. We have five operating divisions, our Propulsion division, Mercury Marine, Engine Parts and Accessories, our Technology division, Navico Group, our Boat Group, and Business Acceleration. You can see the incredible stable of industry-leading brands in all of those divisions. On the lower part of the chart, you see our reporting segments. For reporting purposes, we combine Boat Group and Business Acceleration into a single Boat segment. Business Acceleration, which contains Freedom and our service businesses, is our smallest business, but has been consistently the fastest-growing of the businesses over the past several years.
The revenue numbers in the reporting segments include about $400 million of synergy sales or elimination or intercompany sales. That is sales of engines to our Boat Group, Navico Group parts to our Boat Group, Boat Group boats to Freedom Boat Club. That is that ends up in very rich margins for the boats we sell, and also amplifies the impact of Freedom on our overall business. We are the market leader in many areas of the marine industry, in propulsion technology, boats. Mercury is the outboard market share leader in the U.S., Canada, and Europe. About 47% share in the U.S., in the 40s in Canada, above 50% now I think in high horsepower in Europe. Mercury Racing is really the only big player in high-performance marine and competition marine.
We own the world's largest marine distribution business, our Land Sea and Kellogg Marine businesses, with market share roughly 43% in the U.S. Freedom Boat Club, as I mentioned earlier, is the world's largest boat club. In many boating segments, boat types, and international markets, our boat brands hold the number one position. There's a picture of a Fliteboard up there, an eFoil. I believe even though we don't say it, I think we have the number one share position in eFoils as well at the moment. Here is a great example. This is kind of a ghosted view of a Boston Whaler showing all of the internally sourced components in one of our boats or systems. Everything from Propulsion, to displays, to radar, sonar, electrical components.
On average, our boats contain about 50% of the BOM is internally sourced, and we supply those components to many other OEMs across the industry as well. I mentioned the $400 million of internal synergies. It looks like it's just individual components and systems, but more and more we are providing fully integrated modular and scalable solutions for our own boats and for many different OEMs. A couple of examples here are our newly launched Simrad Autopilot Captain autonomous boating system, which will autonomously dock, undock a boat and perform close quarter maneuvering. We began to show the production version of that late last year. We've demoed it to multiple OEMs now, and we've also have Memorandums of Understanding for implementation with multiple OEMs now.
We also show Fathom our power management system, which replaces onboard combustion engine generators with an advanced power management solution, including lithium-ion batteries, power distribution, et cetera. Nobody else can provide these kind of solutions. Only Brunswick has the capability to provide this deep level of integration. We keep going. We have a tremendous pace of innovation and new product launches. We also have an advantage footprint. We launched more than 100 new products across our portfolio in 2025. Received more than 100 major awards as well for our products, our innovation, our technology, our people, our culture. You may have seen in the video we're on many of the best lists, best companies lists for Forbes, for Time, for Newsweek.
If you think about our footprint, about 70% of our cost of goods is based in the U.S., and most of our recent investment has been in the U.S. over the past five or 10 years. That provide us with a significant advantage in the presence of persistent tariffs and very dynamic trade policy at the moment. If you think we are the only domestic manufacturer of outboard engines. All of our competitors manufacture in Japan and are subject to tariffs, and that is the case with some boat brands that compete in the U.S. as well. Many of you have seen versions of this slide before. The upper portion of the slide shows unit retail sales in the U.S. powerboat market from 2010 through to the latest estimate for 2025. You can see the more cyclical nature.
Sales rose pretty consistently after the GFC through to the peak in COVID in 2020 and have declined, although that decline has slowed. In 2026 we expect a flat to slightly up market. Our strategy in new boats is leaning into premium, gaining market share, and also gaining share of wallet. The bottom chart shows new and existing boat registrations, in the U.S. over roughly the same period. What you see here is an increase in boating participation. This excludes less than 16 feet, very small boats. Very consistent levels of boating participation. This is a part of the market that we uniquely lean into with our P&A business, with our aftermarket business, with Freedom Boat Club, for example.
In 2025, about 60% of our earnings came from these recurring revenue sources of income, leaning into that participation part of the market. Boating is very sticky. If you ask consumers, which we do frequently, 90% of those currently boating expect to be boating in the next five years. Our strategy is differentiated and working. We have a differentiated portfolio and business model that is winning in the marketplace. We have a stable of industry-leading brands that you just saw. We have recurring revenue, less cyclical portions to our business that deliver consistent cash flow through the economic cycle, allowing us to continue to invest. Our enterprise synergies that I mentioned earlier capture more of those earnings internally.
We have product leadership everywhere we play, and we're continuing to gain market share, including now with some of those amazing modular solutions like AutoCaptain and Fathom. Then we have a long history of very diligent and strong execution. Whether it's our supply base or dynamically adjusting our manufacturing footprint or making sure that our internal and field inventories are always at the right level. Then finally, we have an investment-grade credit profile and balance sheet. We maximize our free cash flow. We've been strengthening our balance sheet through debt reduction, $240 million last year, back towards our target of net leverage of two times. We also consistently return capital to our shareholders via dividends and share repurchases. Let's take a look at some recent boat shows and new product introductions.
Mercury continues to gain market share in every new boat show. This is Fort Lauderdale, October last year, Düsseldorf and Miami Boat Show early this year. At the Miami Boat Show, Mercury had 84% of all of the outboards in boats on the water. 84%. You could not see anybody else's outboards anywhere. We continue to launch very well-received new products. We won Motor Boat of the Year earlier this year for a Navan product. We also won European Powerboat of the Year for a Sea Ray product. These are not. We're about scale, but we're about exceptional products and experiences at scale. Of course, Next Never Rests. Here are some of the recent things that we've debuted.
You see in the top left, the Mercury 808 concept that we showed at the Consumer Electronics Show and at the Miami Boat Show. We showed earlier our 600 horsepower V12 outboard. It signals where we might be going next. That architecture was developed with a lot of expansion capability, so that's an exciting prospect for the future. That's not the only thing we've launched recently. Mercury launched Boost, which is an over-the-air update that enhances the performance of existing outboards already in service on the water. A keyless start and entry system. You don't need keys, or you need to press a button to start your Mercury engines now. You just need your cell phone. I do wanna point out the Simrad NSO 4, which is the latest and largest of Simrad's new multifunction displays.
Simrad's, we've invested in this over the past three or four years. Simrad's entire lineup of multifunction displays now is on the Android-based NEON operating system. Nobody else has Android-based. Everybody else is still on Linux-based systems and is being powered by Qualcomm, very fast Qualcomm chips. Let's come back and talk a bit about 2026 guidance. This is the guidance that we issued at the end of January. Unadjusted, for example, for recent tariff developments, but we can talk about that. We're anticipating growing revenue. Actually, we grew revenue last year versus 2024 by 2%, which is nice to see.
We anticipate growing about 8% to 10% this year on the top line and expanding our operating margins, delivering diluted EPS about 25% higher in 2026 than in 2025, and with still very strong cash flow. If we look over a longer period, I became CEO in 2019. In about the middle of 2019, we shed our last non-marine business. We became a marine-focused business. We've increased our dividend now for 14 consecutive years and since that time I mentioned earlier, returned $1.7 billion in share repurchases, which means that between dividends and share repurchases, we've delivered about 70% of our net income back to shareholders since 2019 and delivered very strong shareholder returns. All right, I will stop there and Joe has some questions, I think.
Thank you, David. Appreciate that. I guess first question, you mentioned this in your presentation, your outlook for the U.S. industry is flat to up slightly this year. What factors do you think could drive that better or worse than that outlook, potentially?
Yeah. I would say, first of all, it's important to say that of the roughly 8%-10% revenue growth that we see this year, only roughly 2% of that is associated with market growth. The rest is matching wholesale with retail, market share gains, pricing, et cetera. We're not depending on that share growth, but certainly there are tailwinds. If you think about 2025, the interest rate reductions that occurred in 2025 occurred between September and December, which is after our main selling season. They did drive retail interest rates on boat loans from 9%-10% down to about 7.5%, which will be a tailwind into 2026, into this year. Obviously, I think what we are...
We are leaning into the premium part of the market. I think everybody understands the K-shaped economy. Most of our customers tend to be on the somewhat wealthier end of that, and you'll see improving confidence in segment and sentiment in that area. A lot of things, obviously, every year could be some headwinds for us, but we continue to manage those as we go forward.
In terms of the outlook, is it including or does it anticipate any additional rate cuts or just what we've seen so far?
No, it doesn't specifically anticipate any additional rate cuts. I think obviously things are very dynamic at the moment, but we're still assuming one to two quarter point cuts during the year.
Okay. In terms of inventory, it sounds like it was pretty healthy at year-end.
Our inventory is extremely low and healthy. It came down globally about 2,000 units through last year. I think it's about the leanest it's really been, and it's very fresh. I think 80%-90% of all the products we have in the field are less than a year old, which means they don't require additional discounts. They're quite easy to sell. We've been very, very deliberate about making sure that we have the right level of in-inventory.
You're assuming a one-for-one relationship between retail.
Yes. What we've seen in prior years is that wholesale has gone down, so it's been essentially behind retail sales, which has been, you know, difficult, but we managed it down very deliberately. We expect this year that roughly it will be one for one.
In your EPS guidance, you have this little bar called strategic OpEx.
Mm-hmm.
Can you explain to our audience what that is?
Yes. There is a little bar in there called strategic OpEx. Essentially, that is some additional investments that we plan to make. We have five Mercury outboard engine programs running consecutively at the moment, so there is a little bit of a first quarter bias to that spending as well. We hinted at what one of those programs might be, but you know, we continue to introduce a lot of new products, so there's a lot going on.
Is that something you would expect to be recurring?
no. It is a bit of an artifact of the fact that we have all these programs running simultaneously, and they happen to have certain things happening simultaneously, like the different builds that you do during a development program.
Okay. You expect to earn a return on that fairly quickly, it sounds like.
Yes. We're excited about it. I mean, I think what's been interesting is we've continued to gain market share against our rivals on the outboard side, and then they've introduced new products, but we've still continued to gain market share. What we know is, we wanna continue to maintain that leadership position in terms of horsepower, in terms of feature and functionality, and everything that matters to the consumer. We will continue to invest and stay ahead.
That, in fact, was my next question. How much runway do you think you still have on the outboard engine market share gain?
A lot. It's, you know, it's been interesting to watch, particularly on high horsepower. In Miami, I mentioned the boats on the water, which are mostly the bigger boats, 84% Mercury. I think that's a good leading indicator.
Mm-hmm
... where we could go. It was interesting in Düsseldorf as well. Mercury had more than 50% share in Düsseldorf, which is the premium European show. All of the other competitors, Yamaha and Suzuki and Honda, had shares in the teens, so it wasn't even close. It wasn't like there was Mercury and then a number two and then others. We were three times more than anybody else at the show. I think that, if we provide the right products and technology, the right attributes that matter to consumers, we will continue to gain market share.
Let's talk about capital allocation. You guys have generated a fair amount of cash.
Mm-hmm
... the last few years and expect to do more of that this year. You've bought back some stock. You've done some acquisitions in the past, less so recently. How are you thinking about capital allocation in 2026, and where does M&A play in that?
You're right. We've adjusted a little bit over the last few years. We've continued with share purchases. We bought back $80 million of stock last year. We still anticipate buying. Our baseline is about $50 million. It might be more than that. We don't know. We'll continue to pay down our debt. We expect to be less than 2.5 times leverage by the end of the year on our way back to two times. We'll continue to increase our dividend, obviously. Continuing to invest in new products and technology remains a top priority for us, but we maintain a very balanced capital strategy, adjusting as things develop during the year, but we will continue to return capital to shareholders certainly.
Are there any areas of the portfolio that you want to strengthen or add to?
In terms of M&A, there are some tuck-ins that we are evaluating. We've done some acquisitions with Freedom Boat Club, essentially taking some of the franchises and making them corporate locations, which gives us a much richer margin stack than the, just the franchise fees. There might be some other tuck-ins that we evaluate. We do not anticipate any large acquisitions in the near future.
Okay. You mentioned tariffs earlier. Last year I think it was $75 million of incremental tariffs. The guide this year is $35 million-$45 million. How much of that is EPA and how does this Supreme Court decision impact you?
Yeah. It was $35 million to about $40 million of incremental because in 2025 there were no tariffs in Q1. In 2026 there are. If AFA obviously was ruled illegal, although not all of the U.S. Customs and Border Protection systems catch up very quickly with those decisions, there's still some of that in development. If AFA, it continues to be replaced by Section 122 at 10% or 15%, that will probably, you know, be in the $15 million to $20 million. Would effectively half that incremental tariff that we anticipated. And be rough, we're worth about $0.20, something like that.
as of now-
Of improvements, yeah.
Yep. As of now, you're still paying the full tariff?
Well, we're trying to manage it. For those of you who are interested in the minutiae, you can have a Supreme Court decision, but the Customs and Border Patrol systems don't necessarily, like, click to a different rate overnight. There's an implementation period. We're assuming that the 122s will be effective as soon as they can do that. There's always a period where we're trying to manage making sure we don't pull too much inventory.
Mm-hmm
out of our Free Trade Zones, for example, until we're clear what the tariff regime is gonna look like.
Okay.
There's some kind of short-term management that we can do to minimize our tariff exposure and take advantage of a lower anticipated future regime.
Okay. We've got about four and a half minutes left if anybody has a question. How have the boat shows been so far?
Really good. You know, it's been very exciting for us. Continue to, as I mentioned, show the strength of Mercury. Our premium products have done very well. At Fort Lauderdale, our premium rev boat sales were up about 15%. At Düsseldorf, I think they were up 6%. Nice string of boat shows, particularly associated with our premium brands. It's been exciting to demonstrate some of our new technologies like AutoCaptain. We demonstrated that probably to 25 OEMs and have begun to sign MOUs around implementation. It's been a very exciting period for us.
Okay. Last chance before we go to the breakout if anybody has a question. Okay. Do you expect to get tariff money back on anything?
Yes, we do. The exact timing and mechanism for that is not completely clear, but we have continued to do the appropriate filings to make sure that we are up to date and eligible for those refunds. I think you've probably seen that a number of companies are taking legal action. We may do that, or it may become a little bit clearer if there is an alternative mechanism to do that. It could be worth $25 million-ish to us, total refunds.
Okay
on AIPA.
Anybody else? All right. Thank you, David. Thank you, everybody.
Thank you.
I hope everybody enjoys the rest of the conference.
Thank you, everybody, for your attendance.