Ryan Gwillim on Brunswick's Strong Earnings & Consumer Resilience

**SPEAKER_1** (0:00)
To break down the recent earnings from Marine Recreation Company Brunswick, let's welcome in Ryan Gwillim, the Chief Financial Officer and Strategy Officer over at Brunswick Corporation. Ryan, thanks so much for joining us.
$1.6 billion in net sales, obviously a nice quarter here, free cash flow looks good, $278 million. I'm just wondering though, I mean, how would you characterize the consumer currently? I mean, you obviously cater to a specific type of person, but we're all looking for any signs of demand destruction, people pulling back. I mean, do they do that with boats?

**Ryan Gwillim** (0:38)
Hey, good afternoon and thanks for having me on. We measure the health of the consumer in a number of different ways. I mean, one is obviously the sales of new boat products.
As we've seen thus far this year, the sale of our premium and core products remains pretty steady.
Our premium fiberglass product is on a unit basis flat and slightly up from last year. That really shows the health of that portion of the consumer. Another way though is to also look at the amount of people that are on the water and boating on a day-to-day basis and we judged this through our sales of our engine parts and accessories which are consumable products that really vary by the use of the boat. Also through our Freedom Boat Club and watching the number of trips that our members take. Across the board, I think our consumer is holding in there. It's pretty healthy and we're looking forward to closing out a pretty good year.

**SPEAKER_3** (1:33)
I know, Ryan, as you look to close out that year, for this quarter, you had a pretty significant earnings beat. You raised your full year outlook. What changed the most in the business over the last few months that gave you the greater confidence in the second half?

**Ryan Gwillim** (1:48)
Yeah, I don't know if anything changed specifically but I will say that the macro economy in which we're sitting in and the backdrop has probably had a little less change than maybe earlier in the year. It's certainly not perfect and there's still puts and takes, but I think the magnitude of the change and the implications on our consumer and our business have been just a little less rocky over the last handful of months. That gave us confidence going into the back half. One other thing, remember about two-thirds of our retail sales of the year are already behind us at this stage.
We already have good leads into our wholesale in the back half. So as we look at the rest of 26, wholesale is in very good shape. Our consumables and parts and accessories businesses are doing really well and finishing off a strong participation year.
Our Freedom Boat Club business continues to be as strong as ever.
All the things are moving in the right direction and I think just the absence of a little bit of noise has really helped us.

**SPEAKER_1** (2:52)
And Ryan, your boats are made here in the US. Seventy-five percent of your supply base is domestic. So that's good news. How are you dealing, however, with respect to components with Taris right now?

**Ryan Gwillim** (3:07)
Yeah, obviously we source components from around the world. But when you push comes to shove, we're a US manufacturer manufacturing a majority of our products for a US consumer. And so we have done a number of things on vertical integration by bringing in component manufacturing into our facility. Mercury Marine is a great example of that. So we make everything 75 horsepower and above up in Fond du Lac, Wisconsin. We're actually just there on Tuesday with the investor community on our investor day. And we are looking at all different ways of bringing in certain components and actually making them in-house in Fond du Lac versus sourcing them remotely.
There's some parts of the supply chain that we'll likely never be able to replace, but certainly we are focused on lowering our dependency on China. Our percentage of our cogs is already below 5 percent, and we're looking to get it to 2 percent or below here in the next couple of years.

**SPEAKER_3** (4:03)
And Ryan, I'm just looking over the numbers here. Parts and accessories, a particularly interesting piece of the story, because the aftermarket demand seems to be pretty resilient here. But as you look at this, are you seeing more consumers spend to maintain boats that they already own as opposed to buying new ones?

**Ryan Gwillim** (4:23)
I think that's one factor that plays into the parts and accessories sales continuing to be strong. And approximately 60 percent of our sales and earnings on a given quarter can be deemed recurring, which is aftermarket portions that go to our consumers and really are focused on people using their products versus buying new products.