Brunswick(US:BC)2025-07-24 10:19Second Quarter 2025 Financial Highlights Brunswick Corporation reported strong second-quarter results, exceeding expectations with flat net sales and record free cash flow, despite a significant decline in profitability Overall Performance Brunswick Corporation reported strong second-quarter results that exceeded expectations, characterized by flat net sales growth of 0.2% to $1,447.0 million, though profitability declined significantly with GAAP operating margin falling 390 basis points to 7.1% and As Adjusted diluted EPS decreasing 35.6% to $1.16, while achieving record free cash flow generation of $288 million for the quarter Q2 2025 Financial Summary (vs Q2 2024) | in millions (except per share data) | GAAP | Change vs Q2'24 | As Adjusted | Change vs Q2'24 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,447.0 | 0.2% | $1,447.0 | 0.2% | | Operating Earnings | $103.3 | (34.7)% | $126.0 | (30.3)% | | Operating Margin | 7.1% | (390) bps | 8.7% | (380) bps | | Diluted EPS from Continuing Operations | $0.90 | (41.9)% | $1.16 | (35.6)% | - The company achieved record free cash flow of $288 million in the second quarter, contributing to a record first-half free cash flow of $244 million, a $279 million improvement over the first half of 20244 CEO Commentary CEO David Foulkes highlighted that strong operational execution and cost control allowed the company to surpass financial expectations despite a challenging macro environment, unfavorable weather, and tariff impacts, with recurring revenue businesses significantly contributing to adjusted operating earnings - Performance was challenged by the macroeconomic environment, uncooperative weather, and tariffs, which directly impacted earnings3 - Mercury's high-horsepower outboard engines continued to gain market share, with over 300 basis points of U.S. retail share gain in engines over 300 horsepower during the quarter5 - Recurring revenue businesses and channels, including Engine P&A, repower business, Freedom Boat Club, and Navico's aftermarket sales, contributed nearly 60% of the company's second-quarter adjusted operating earnings9 Segment Performance Analysis This section details the individual performance of Brunswick's Propulsion, Engine P&A, Navico Group, and Boat segments, highlighting varied sales trends and profitability challenges Propulsion Segment The Propulsion segment's sales increased by 7% to $598.2 million, driven by strong orders from U.S. OEMs, though GAAP operating earnings fell 23.1% to $65.8 million, with margins contracting by 430 basis points to 11.0% due to tariffs, lower absorption from decreased production, and variable compensation reinstatement Q2 2025 Propulsion Segment Performance (GAAP, in millions) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $598.2 | $558.0 | 7.2% | | Operating Earnings | $65.8 | $85.6 | (23.1)% | | Operating Margin | 11.0% | 15.3% | (430) bps | Engine Parts and Accessories Segment The Engine Parts and Accessories segment reported a slight sales increase of 1% to $337.8 million, primarily due to a 4% rise in its Distribution business, while GAAP operating earnings decreased by 5.2% to $71.7 million, with operating margin declining 130 basis points to 21.2% mainly due to enterprise-wide factors Q2 2025 Engine P&A Segment Performance (GAAP, in millions) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $337.8 | $336.1 | 0.5% | | Operating Earnings | $71.7 | $75.6 | (5.2)% | | Operating Margin | 21.2% | 22.5% | (130) bps | - The segment's sales growth was driven by its Distribution business (up 4%), while the Products business saw a 4% decline12 Navico Group Segment Navico Group's sales decreased by 4% to $202.3 million, as modest declines in aftermarket and marine OEM channels were partially offset by new products, resulting in a wider GAAP operating loss of $7.6 million due to lower sales, tariffs, and variable compensation reset, with restructuring actions currently in progress Q2 2025 Navico Group Segment Performance (GAAP, in millions) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $202.3 | $210.1 | (3.7)% | | Operating Loss | ($7.6) | ($3.0) | NM | | Operating Margin | (3.8)% | (1.4)% | (240) bps | - The company is implementing restructuring actions, including consolidating two production locations and transferring European distribution to a third-party logistics provider (3PL)7 Boat Segment The Boat segment experienced a 7% sales decline to $405.6 million, reflecting cautious wholesale ordering by dealers, with GAAP operating earnings falling 55.2% to $11.1 million and margins contracting by 300 basis points, though Freedom Boat Club was a highlight, contributing approximately 12% of segment sales and expanding into the Middle East Q2 2025 Boat Segment Performance (GAAP, in millions) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $405.6 | $434.2 | (6.6)% | | Operating Earnings | $11.1 | $24.8 | (55.2)% | | Operating Margin | 2.7% | 5.7% | (300) bps | - Freedom Boat Club contributed about 12% of segment sales and signed its first Middle East franchisee in Dubai, expanding its global locations to 433814 Financial Position and Cash Flow This section reviews Brunswick's solid balance sheet, improved debt-to-capitalization ratio, and exceptional cash generation in the first half of 2025 Balance Sheet Review As of the end of the second quarter, Brunswick's balance sheet remained solid with cash and marketable securities totaling $334.7 million, an increase of $48.0 million from the end of 2024, and an improved debt-to-capitalization ratio of 54.4% from 55.3% at year-end 2024 Key Balance Sheet Items (June 28, 2025, in millions) | Metric | Amount | | :--- | :--- | | Cash and marketable securities | $334.7 | | Net inventories | $1,305.1 | | Total assets | $5,794.3 | | Total debt (Short & Long-term) | $2,274.1 | | Total shareholders' equity | $1,905.0 | Cash Flow Review The company demonstrated exceptional cash generation in the first half of 2025, with net cash provided by operating activities increasing substantially to $309.1 million, resulting in a record first-half free cash flow of $243.5 million, and capital allocation included significant share repurchases and dividend payments First Half Cash Flow Summary (in millions) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $309.1 | $67.6 | | Capital expenditures | ($82.6) | ($101.1) | | Free cash flow | $243.5 | ($35.1) | - During the first half of 2025, the company used cash for $43.1 million in share repurchases and $56.6 million in dividend payments17 2025 Outlook and Guidance Brunswick outlines its strategic focus on marine-centric investments and provides updated full-year and third-quarter financial guidance Strategic Focus For the remainder of 2025, Brunswick will focus on its marine-centric strategy by investing in new products and technologies, including AI-powered tools and an autonomous docking system, while also working to maintain balanced channel inventory, mitigate tariff impacts, and execute rationalization and manufacturing optimization actions to improve profitability and cash flow - Strategic priorities include investing in new products and technologies, managing channel pipelines, and mitigating tariff impacts18 - The company is increasing investment in AI for productivity and consumer applications, with AI-assisted coding tools already in use and AI-powered customer service tools launching soon19 - Brunswick's autonomous docking system is on track to launch later in 202519 Updated Full-Year and Q3 Guidance Brunswick updated its full-year 2025 guidance, maintaining the midpoint for sales and adjusted EPS while increasing its free cash flow forecast, now expecting net sales of approximately $5.2 billion, adjusted diluted EPS of approximately $3.25, and free cash flow in excess of $400 million, with Q3 revenue anticipated between $1.1 and $1.3 billion and adjusted diluted EPS between $0.75 and $0.90 Updated 2025 Full-Year and Q3 Guidance | Guidance Metric | Full-Year 2025 | Q3 2025 | | :--- | :--- | :--- | | Net Sales | ~$5.2 billion | $1.1B - $1.3B | | Adjusted Diluted EPS | ~$3.25 | $0.75 - $0.90 | | Free Cash Flow | >$400 million | N/A | Financial Statements and Reconciliations This section presents the unaudited consolidated financial statements and detailed non-GAAP reconciliations for the reported periods Consolidated Statements of Operations This section provides the unaudited condensed consolidated statements of operations for the three and six months ended June 28, 2025, compared to the same periods in 2024, detailing net sales, costs, operating earnings, and net earnings per share Q2 2025 Statement of Operations (in millions, except per share) | | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | | :--- | :--- | :--- | | Net sales | $1,447.0 | $1,443.9 | | Operating earnings | $103.3 | $158.3 | | Net earnings from continuing operations | $59.6 | $104.8 | | Diluted EPS from continuing operations | $0.90 | $1.55 | Consolidated Balance Sheets This section presents the unaudited condensed consolidated balance sheets as of June 28, 2025, compared to December 31, 2024, and June 29, 2024, outlining the company's assets, liabilities, and shareholders' equity Condensed Balance Sheet (in millions) | | June 28, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $2,236.3 | $2,113.8 | | Total assets | $5,794.3 | $5,677.7 | | Total current liabilities | $1,334.4 | $1,279.9 | | Total liabilities | $3,889.3 | $3,785.4 | | Total shareholders' equity | $1,905.0 | $1,892.3 | Consolidated Statements of Cash Flows This section details the unaudited condensed consolidated statements of cash flows for the six months ended June 28, 2025, and June 29, 2024, showing cash flows from operating, investing, and financing activities Six Months Ended Cash Flows (in millions) | | June 28, 2025 | June 29, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $288.8 | $57.6 | | Net cash used for investing activities | ($70.0) | ($176.0) | | Net cash (used for) provided by financing activities | ($181.0) | $157.2 | | Net increase in Cash | $48.0 | $31.8 | Non-GAAP Reconciliations This section provides detailed reconciliations of GAAP financial measures to their non-GAAP counterparts, such as As Adjusted Operating Earnings and As Adjusted Diluted EPS, with adjustments primarily excluding items like restructuring charges and purchase accounting amortization to offer a clearer view of ongoing business performance Q2 2025 Reconciliation of GAAP to As Adjusted EPS | | Diluted EPS | | :--- | :--- | | GAAP | $0.90 | | Restructuring, exit and impairment charges | $0.09 | | Purchase accounting amortization | $0.17 | | As Adjusted | $1.16 |