Brunswick(BC) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q2 2022, Brunswick Corporation achieved over $300 million in adjusted operating earnings, marking a record revenue and EPS performance [6][16] - Net sales increased by 18% year-over-year, with adjusted operating margins at 16.4% and adjusted EPS rising by 12% to $2.82 [16][17] - Year-to-date results included over $3.5 billion in net sales and $568 million in operating earnings, with diluted EPS at $5.35, surpassing all previous full-year records except for the last year [17][24] Business Line Data and Key Metrics Changes - The Propulsion segment saw a 13% increase in revenue compared to Q2 2021, driven by strong global demand and increased production [10][18] - Parts and Accessories (P&A) sales grew by 19%, largely due to acquisitions made in 2021, although organic revenues were down 4% against a tough 2021 comparison [19][20] - The Boat segment reported a 27% increase in net sales, with double-digit operating margins, despite ongoing supply chain disruptions [21][22] Market Data and Key Metrics Changes - International sales rose by 7% year-over-year, while US sales grew by 14%, with Asia Pacific sales slightly down compared to 2021 but nearly doubling since pre-pandemic levels [13][14] - Retail performance in the boating sector showed resilience, with Brunswick's boat retail performance aligning with overall market trends, particularly in recreational fiberglass products [15][18] Company Strategy and Development Direction - Brunswick is focused on cost control, operational efficiencies, and investments in new capacity and product programs to drive future growth [6][8] - The company plans to continue aggressive share repurchases, having executed $140 million in Q2 and a total of $220 million year-to-date, with a target of $400 million for the year [7][25] - The company is also advancing sustainability initiatives and expanding its product offerings, including new models and technologies [28][30] Management's Comments on Operating Environment and Future Outlook - Management noted a strong consumer demand for products despite macroeconomic challenges, with supply chain constraints showing signs of abatement [8][9] - The outlook for the remainder of the year includes a narrowed revenue guidance of $6.9 billion to $7.1 billion and adjusted diluted EPS between $10 and $10.30 [24][26] - Management expressed confidence in maintaining strong margins and market share gains, particularly in the Propulsion segment [18][50] Other Important Information - Brunswick's Freedom Boat Club has expanded significantly, now with over 360 locations and 80,000 members, contributing approximately 6% to the Boat segment's revenue [12][27] - The company is experiencing a strong membership growth rate of 30% on a same-store basis for Freedom Boat Club [12][37] Q&A Session Summary Question: Has the improvement in retail numbers continued into July? - Management indicated that July has shown strong performance, particularly in Parts and Accessories, with robust retail trends expected to continue [34][35] Question: How much of the sales of P&A and propulsion contribute to Freedom Boat Club? - Management noted that Freedom is growing rapidly, with a significant portion of boats supplied by Brunswick expected to increase over time [36][38] Question: Can you provide wholesale unit numbers and production outlook for the Boat segment? - Wholesale shipments reached just over 10,000 units in Q2, the highest since 2018, with expectations to approach 39,000 units for the full year [43][74] Question: What is the visibility on demand for new production in the Propulsion segment? - Management expressed high visibility on demand for new production, with strong margins anticipated from new OEMs and international markets [50][51] Question: What factors are driving the margin improvement in the P&A segment? - Management highlighted that inflationary pressures are expected to moderate, and cost synergies from acquisitions will contribute to margin improvements in the back half of the year [64][66]