Company Overview

Brunswick Corporation, a global leader in marine recreation, has been navigating the industry with remarkable resilience and innovation. With a rich history spanning over a century, this diversified company has cemented its position as a formidable player in the recreational boating market.

Incorporated in Delaware in 1907, Brunswick has evolved from a manufacturer of bowling equipment to a premier provider of cutting-edge marine solutions. The company's portfolio encompasses a wide range of products, including leading marine propulsion systems, boats, parts, and accessories, catering to both individual consumers and commercial entities.

Historical Background

Brunswick's journey began as a manufacturer of billiard tables and bowling products, but it has since transformed itself into a global leader in the marine recreation industry. The company has been trading on the New York Stock Exchange for 100 years, showcasing its longevity and stability in the market.

Brunswick's entry into the marine industry began in the 1960s with the acquisition of boat manufacturer Sea Ray. This strategic move marked the beginning of Brunswick's transition into a major player in the recreational boating market. Over the subsequent decades, the company continued to expand its marine business through additional acquisitions of renowned boat brands such as Boston Whaler, Bayliner, and Lund.

During the 1990s and 2000s, Brunswick faced challenges as the marine industry experienced downturns. However, the company demonstrated its resilience by focusing on innovation, improving operational efficiency, and strengthening its dealer network. This period also saw Brunswick expanding its portfolio through the acquisition of marine electronics company Navico and engine manufacturer Mercury Marine, further solidifying its position in the industry.

Business Segments

One of the key drivers of Brunswick's success has been its unwavering commitment to understanding and addressing the changing needs and behaviors of global boating participants. The company has strategically invested in innovative, global product leadership, leveraging its strong brand recognition to meet the evolving demands of its customers.

Propulsion Segment

Brunswick's Propulsion segment, which includes the renowned Mercury Marine brand, is a world leader in the manufacturing and sale of recreational marine engines and propulsion systems. With a global network of over 860 boat builders and more than 8,900 marine dealers and distributors, the Propulsion segment has consistently captured market share, solidifying its position as a dominant force in the industry. In 2024, the Propulsion segment had net sales of $2.07 billion, representing 39.5% of the company's total net sales. The segment's international sales were 36% of its net sales in 2024.

Engine Parts and Accessories Segment

The Engine Parts and Accessories (Engine PA) segment has demonstrated its resilience, even in the face of challenging market conditions. This segment, which includes the distribution businesses Land N Sea, Kellogg Marine Supply, and Lankhorst Taselaar, has continued to deliver strong earnings and operating margins, thanks to the operational efficiencies gained from the completed transition to the state-of-the-art Brownsburg, Indiana distribution center. In 2024, the Engine PA segment had net sales of $1.16 billion, or 22.1% of total net sales. The segment's international sales were 30% of its net sales in 2024.

Navico Group Segment

The Navico Group segment, which designs, develops, manufactures, and markets products and systems for the marine, RV, specialty vehicle, mobile, and industrial markets, has also been a key contributor to Brunswick's success. Despite facing softness in certain end markets, the Navico Group has remained focused on delivering innovative solutions and maintaining a strong position in the aftermarket channels. In 2024, the Navico Group segment had net sales of $800.2 million, or 15.3% of the company's total net sales. International sales were 41% of the segment's net sales.

Boat Segment

Brunswick's Boat segment, which encompasses its boat brands and the Business Acceleration division, has navigated the market volatility with agility. While the segment experienced a decline in sales and earnings in the recent quarter, the company's commitment to managing dealer and retail inventories has positioned it well for the future. The Business Acceleration division, which includes the successful Freedom Boat Club franchise, has continued to expand its presence and deliver consistent performance. In 2024, the Boat segment had net sales of $1.55 billion, or 29.6% of the company's total net sales. International sales were 20% of the Boat segment's net sales.

Financials

Financially, Brunswick has demonstrated its resilience and adaptability. For the full year 2024, the company reported annual revenue of $5.24 billion, representing a decline in net sales of 18.2% compared to the previous year. The company achieved adjusted operating margins of 9.5% and adjusted diluted EPS of $4.57, down 48% compared to 2023. However, the company's strong free cash flow of $284.3 million, with a conversion rate of 92%, and disciplined capital allocation strategy, including $200 million in share repurchases, have underscored its commitment to delivering value to shareholders.

In the most recent quarter (Q4 2024), Brunswick reported quarterly revenue of $1.15 billion, representing a year-over-year decrease of 15.2%. The quarterly net income was -$71.2 million. Despite the challenges, the company generated $278 million of free cash flow in Q4 2024, a record for any Q4 in their history.

Brunswick's performance across geographic markets in 2024 was as follows:

• North America (United States and Canada): $3.86 billion in revenue (73.6% of total revenue)
• Europe: $758.6 million in revenue (14.5% of total revenue)
• Asia-Pacific: $360.8 million in revenue (6.9% of total revenue)
• Rest of World: $314.0 million in revenue (6.0% of total revenue)

Liquidity

Brunswick's strong financial position is further evidenced by its robust liquidity. As of December 31, 2024, the company reported:

• Cash and Cash Equivalents: $269.0 million
• Available Credit Facility: $997.0 million
• Debt/Equity Ratio: 0.442
• Current Ratio: 1.65
• Quick Ratio: 0.77

These figures demonstrate Brunswick's ability to meet its short-term obligations and maintain financial flexibility.

Future Outlook

Looking ahead, Brunswick is well-positioned to capitalize on the evolving landscape of the recreational boating industry. The company's focus on innovation, technology, and sustainability positions it as a leader in the ACES (Autonomy, Connectivity, Electrification, and Shared Access) strategies, with a growing portfolio of commercially available products in each category.

For 2025, Brunswick has provided guidance for adjusted diluted EPS between $3.50 and $5.00 per share, with net sales expected to range between $5.2 billion and $5.6 billion. The company anticipates generating free cash flow in excess of $350 million in 2025, with strong free cash flow conversion. Brunswick's underlying assumption is for the U.S. boat retail market to be flat compared to 2024 in terms of retail units sold.

The company expects to generate approximately $100 million of net working capital in 2025 as they continue to moderate inventory levels. Brunswick plans to do a minimum of $80 million in share repurchases in 2025, with the potential to increase if cash generation exceeds initial expectations. The guidance assumes $30-$40 million of incremental tariff impact and $30-$40 million of unfavorable FX impact in 2025.

It's worth noting that the marine industry has seen moderate growth, with a 5-year CAGR of approximately 3-4% prior to the COVID-19 pandemic. While the industry faced some headwinds in 2024 due to macroeconomic factors, leading to a decline in overall demand, Brunswick has maintained its position as a market leader through continued innovation, strategic acquisitions, and operational efficiency initiatives.

Moreover, Brunswick's recent recognition as one of Newsweek's America's Greatest Workplaces for Women and its numerous awards for people, culture, products, and innovation further reinforce its status as an employer of choice and an industry trailblazer.

Conclusion

In conclusion, Brunswick Corporation's unwavering commitment to understanding customer needs, investing in innovative solutions, and delivering exceptional experiences has solidified its position as a global leader in the marine recreation industry. As the company navigates the challenges and opportunities ahead, its strong financial performance, strategic vision, and dedication to sustainability and corporate responsibility make it a compelling investment proposition for those seeking exposure to the dynamic recreational boating market.