Executive Summary / Key Takeaways

• Diversified Strength and Cash Generation: Brunswick Corporation's resilient portfolio, heavily weighted towards recurring revenue streams from its Engine P&A, repower, Freedom Boat Club, and Navico Group aftermarket businesses, consistently drives strong earnings and exceptional free cash flow generation, a critical differentiator in a dynamic market.
• Strategic Innovation and Integration: The company maintains a competitive edge through continuous investment in differentiated technology, exemplified by the commercial launch of the Simrad AutoCaptain autonomous boating system, which integrates across its Propulsion, Navico Group, and Boat segments, enhancing user experience and solidifying its ACES strategy.
• Operational Efficiency and Market Outperformance: Proactive structural cost reductions, including manufacturing footprint rationalization and streamlined product offerings, are enhancing profitability. Brunswick's market-leading brands, particularly Mercury Marine, continue to gain share and outperform the broader marine industry despite challenging macroeconomic conditions.
• Positive Outlook Despite Macro Uncertainties: Management anticipates mid-to-high single-digit revenue growth and over 25% adjusted EPS growth for 2026, driven by an expected flat to slightly up U.S. retail boat market, easing interest rates, and effective tariff mitigation, supported by a robust capital allocation strategy focused on debt reduction and shareholder returns.
• Tariff and FX Management: While facing an estimated $75 million net tariff impact and foreign exchange headwinds in 2025, Brunswick leverages its primarily U.S.-based, vertically integrated manufacturing and active mitigation strategies to maintain a competitively advantaged position.

Setting the Course: Brunswick's Enduring Legacy and Strategic Vision

Brunswick Corporation, a venerable name in recreation since 1845, stands as a global leader in marine technology, designing, manufacturing, and marketing a comprehensive suite of products across the United States, Europe, Asia-Pacific, and Canada. The company's enduring presence, marked by its 100th anniversary of listing on the New York Stock Exchange in January 2025, underscores a history of adaptability and strategic evolution. At its core, Brunswick's strategy revolves around a diversified portfolio that leverages market-leading brands, continuous innovation, and a robust aftermarket presence to deliver a comprehensive marine ecosystem.

The company operates through four key segments: Propulsion, Engine P&A, Navico Group, and Boat. This structure allows Brunswick to capture value across the entire boating lifecycle, from initial purchase to ongoing maintenance and upgrades. Its overarching strategy emphasizes vertical integration, particularly evident in its Mercury Marine engine division and its boat brands, which often feature Mercury propulsion and Navico Group technology. This integrated approach not only enhances product performance and user experience but also creates significant synergies across its businesses.

In the competitive marine and recreation products industry, Brunswick faces rivals such as Bombardier Recreational Products (BRP), Malibu Boats (MBUU), MasterCraft Boat Holdings (MCFT), and Marine Products Corporation (MPX). Brunswick's market positioning is characterized by its scale, extensive dealer network, and a broad product portfolio that caters to a wide range of consumers, from entry-level to premium segments. While competitors like BRP offer a diversified recreational product line, Brunswick's specialization in marine recreation, coupled with its integrated offerings, provides a distinct advantage in aftermarket support and parts availability. Against niche players like Malibu and MasterCraft, Brunswick offers greater versatility and broader market access, though these specialized competitors may excel in specific high-performance features.

Broad industry trends and market drivers significantly influence Brunswick's operating environment. The U.S. Fed's September interest rate cut and expectations for further reductions through late 2025 and early 2026 are anticipated to reduce financing costs for both dealers and consumers, providing a tailwind for wholesale stocking and the upcoming selling seasons. Dealer sentiment remains stable, supported by historically low and fresh inventory levels. Boating participation has shown resilience, driving demand for aftermarket services and subscription models like Freedom Boat Club. However, the industry has also contended with macroeconomic uncertainties, including volatile consumer sentiment and a complex tariff environment, which have impacted demand, particularly in the value boat segment.

Technological Edge: Fueling Innovation and Competitive Moats

Brunswick's commitment to technological differentiation is a cornerstone of its competitive strategy, driving both product innovation and integrated solutions across its portfolio. A prime example is the Simrad AutoCaptain autonomous boating system, a groundbreaking technology developed by Navico Group in collaboration with Mercury Marine and Brunswick Boat Group. This system represents the first commercialized solution under the Autonomy pillar of Brunswick's ACES (Autonomy, Connectivity, Electrification, Shared Access) strategy, marking a significant milestone.

AutoCaptain offers fully autonomous and dynamic docking, undocking, and close-quarter maneuvering with precision and reliability. Its integrated sensor suite actively counters wind, waves, and currents, providing 360-degree awareness to recognize and react to surroundings, avoiding obstacles like passing boats. This technology directly addresses a major pain point for boaters, as docking is routinely cited as one of the most stressful aspects of boating. The system's advanced capabilities are exclusive to Mercury propulsion, creating a powerful incentive for OEMs and consumers to choose Brunswick's integrated offerings. Post-launch, Brunswick plans to expand AutoCaptain's capabilities and features through software upgrades, ensuring continuous innovation.

Beyond AutoCaptain, Brunswick's R&D initiatives are evident across its segments. Navico Group, despite facing a significant non-cash intangible asset impairment charge of $323 million in Q3 2025, continues to invest heavily in differentiated innovation. Recent launches include a full turnkey cloud and mobile app solution for OEMs and dealers, leveraging real-time telematic data for valuable insights. Lowrance introduced the all-new Ghost X Trolling Motor, delivering 20% more thrust with ultra-quiet operations, GPS anchoring, and seamless sonar integration. SIMRAD also launched the NSS four multifunction display, allowing analysts to track four sonar sources on a single display, enhancing situational awareness. These advancements contribute to Navico Group's strategic importance, driving OEM penetration and aftermarket sales, which constitute 60% of its revenue.

In the Propulsion segment, Mercury Marine's continuous product pipeline includes new 425 and refreshed 350 horsepower outboard engines, which deliver superior performance, smoothness, quietness, and lightweight design. These new products are expected to provide significant tailwinds, further solidifying Mercury's market leadership. The FLITELab brand, debuted by FLITE, leverages innovative product design and technology to offer foilers unmatched versatility. These technological differentiators are not merely product enhancements; they are critical to Brunswick's competitive moat, enabling higher average selling prices, lower manufacturing costs through efficiency, and superior margins. They reinforce Brunswick's market positioning as an innovator and leader, driving long-term growth by continuously enhancing the boating experience.

Segment Performance and Operational Resilience

Brunswick's diversified segments demonstrated a mixed but ultimately resilient performance through the first nine months of 2025, culminating in a strong third quarter.

Propulsion Segment

The Propulsion segment, anchored by Mercury Marine, delivered significant sales growth in the third quarter of 2025, with net sales reaching $472.0 million, an increase of 10.2% over the prior year period. This growth was fueled by strong OEM orders across outboard, sterndrive, and controls, rigging, and propellers. For the nine months ended September 27, 2025, net sales were $1,410.7 million, nearly flat compared to the previous year, as strong Q3 performance partially offset earlier impacts from pipeline management. Operating earnings for Q3 2025 were $45.1 million (GAAP) and $45.4 million (Adjusted), with margins of 8.4% and 8.5% respectively, down from the prior year due to tariffs and the reinstatement of variable compensation, but benefiting from improved absorption due to higher production. Mercury maintained its U.S. outboard market share leadership at 49.4% in Q3 2025 and continued to gain share internationally. The company has strategically reduced engine pipeline inventory by approximately 25% for under 175-horsepower and 33% for over 175-horsepower since January 1, 2024, positioning it for future growth.

Engine Parts and Accessories (Engine PA)

The Engine PA segment, a high-margin annuity business, continued its strong performance, with net sales of $361.9 million in Q3 2025, an 8.2% increase year-over-year. Year-to-date, net sales reached $950.7 million, up 2.4%. This growth was driven by healthy boater participation and market share gains in its distribution business, which saw a 140 basis point increase year-to-date in the U.S. Operating earnings for Q3 2025 were $82.4 million, with a robust GAAP and Adjusted operating margin of 22.7%. While operating earnings were slightly down year-over-year due to enterprise-wide factors like variable compensation and tariffs, the segment's consistent performance underscores its strategic importance in providing stable financial returns.

Navico Group

Navico Group reported modest sales growth of 1.5% in Q3 2025, reaching $166.3 million, primarily driven by its marine electronics portfolio. However, year-to-date net sales were slightly down at $530.5 million. The segment recorded a significant GAAP operating loss of $(328.9) million in Q3 2025 and $(339.3) million year-to-date, primarily due to non-cash goodwill and intangible asset impairment charges totaling $322.8 million and $17 million, respectively. Adjusted operating earnings for Q3 2025 were $8.8 million, with an adjusted operating margin of 4.7%. Despite these charges, management emphasized the segment's strategic importance and ongoing efforts to improve operational efficiency, including consolidating distribution and optimizing systems. Gross margins improved significantly in Q3 2025 due to cost reductions and warehouse consolidation initiatives.

Boat Segment

The Boat segment's net sales increased 4.3% in Q3 2025 to $360.0 million, driven by strong performance from premium brands and aluminum boat businesses. However, year-to-date net sales decreased 5.6% to $1,137.1 million. Operating earnings for Q3 2025 were $3.3 million (GAAP) and $7.1 million (Adjusted), with an adjusted operating margin of 2.0%. The segment's performance was impacted by tariffs and the reinstatement of variable compensation, partially offset by increased sales and cost actions. Dealer inventory remains historically low, supporting steady wholesale shipments. Brunswick announced a strategic rationalization of its fiberglass boat manufacturing footprint in Q3 2025, exiting facilities in Reynosa, Mexico, and Flagler Beach, Florida, by mid-2026 to consolidate production into existing U.S. facilities. This move is expected to yield over $10 million in annualized cost savings. Freedom Boat Club continues its profitable growth, contributing approximately 13% of segment sales in Q3 2025 and expanding globally, including a new franchise in Christchurch, New Zealand, and Dubai.

Financial Strength and Capital Allocation

Brunswick's financial health is characterized by robust cash flow generation and a disciplined capital allocation strategy. Net cash provided by operating activities of continuing operations for the nine months ended September 27, 2025, significantly improved to $451.10 million, up from $137.50 million in the prior year, primarily due to effective working capital management. Year-to-date free cash flow reached an exceptional $355 million in Q3 2025, representing a $348 million improvement over the first three quarters of the prior year. The company has generated $1.6 billion of free cash flow since 2021 and a record $635 million over the last 12 months, demonstrating its ability to generate cash even in dynamic market conditions.

The balance sheet remains healthy, with no debt maturities until 2029. Total liquidity as of September 27, 2025, stood at $1,295.50 million, comprising $298.50 million in cash and marketable securities and $997 million in available borrowing capacity. Total debt was $2,193.20 million, resulting in a debt-to-capitalization ratio of 57%. Brunswick is committed to strengthening its balance sheet, anticipating approximately $200 million in debt reduction for 2025, and aims to achieve a long-term net leverage target below 2x EBITDA. This commitment is balanced with returning value to shareholders, with $65 million in common stock repurchases during the first nine months of 2025 and a minimum target of $80 million for the full year.

Outlook and Strategic Momentum

Brunswick's management maintains a confident outlook, anticipating continued momentum into 2026. For the full year 2025, the company reaffirmed its guidance of approximately $5.2 billion in revenue and adjusted EPS of approximately $3.25, while increasing its free cash flow estimate to over $425 million. This guidance reflects a U.S. retail boat market expected to be flat to slightly down versus 2024, with weakness concentrated in value products.

Looking ahead to 2026, Brunswick provided preliminary guidance, projecting mid-to-high single-digit revenue growth and over 25% growth in adjusted EPS, coupled with continued significant free cash flow generation. This optimistic forecast is predicated on relative macroeconomic stability, no material negative changes in the tariff environment, and ongoing interest rate improvements. The company expects to benefit from its operating leverage, continued structural cost reductions, and the market momentum of its leading brands and innovative products.

Risks and Competitive Positioning

Despite its strengths, Brunswick faces several risks. Macroeconomic uncertainties, including volatile consumer sentiment and the trajectory of interest rate reductions, could impact demand, particularly in the value segment. The tariff environment remains a significant headwind, with an estimated net impact of approximately $75 million for 2025 due to expanded Section 232 tariffs. While Brunswick's primarily U.S.-based, vertically integrated manufacturing base provides a competitive advantage against competitors importing from regions like Japan, the volatile trade policy can still lead to declining consumer confidence and increased costs. Foreign currency fluctuations are also expected to result in a $30 million to $40 million unfavorable earnings impact in 2025.

Brunswick actively mitigates these risks through strategic actions. Its tariff mitigation strategies include migrating its supply base, inventory staging, and pricing adjustments. The company's diversified portfolio, with nearly 60% of Q1 2025 adjusted operating earnings from recurring revenue businesses, provides a buffer against cyclical downturns in new boat sales. Operationally, the rationalization of its fiberglass boat manufacturing footprint is expected to yield over $10 million in annualized cost savings, enhancing profitability.

In the competitive landscape, Brunswick's integrated solutions, such as the Simrad AutoCaptain system, differentiate it from rivals by offering a seamless, technologically advanced boating experience. Mercury Marine's consistent market share gains, even amidst competitive promotional activity, underscore its product strength and brand loyalty. While competitors like BRP offer broader recreational product lines, Brunswick's deep specialization and integrated marine ecosystem provide a robust competitive moat, particularly in aftermarket support and technological innovation.

Conclusion

Brunswick Corporation is demonstrating remarkable resilience and strategic foresight in a challenging market. Its diversified portfolio, underpinned by strong recurring revenue streams and a relentless focus on technological innovation, positions the company for sustained growth. The commercialization of advanced systems like Simrad AutoCaptain, coupled with continuous product development across its Propulsion, Navico Group, and Boat segments, reinforces its competitive moat and drives market share gains.

Despite macroeconomic headwinds, including tariffs and foreign exchange volatility, Brunswick's proactive operational efficiencies, such as manufacturing footprint rationalization and disciplined inventory management, are enhancing profitability and generating exceptional free cash flow. With a clear roadmap for debt reduction and a commitment to shareholder returns, Brunswick is not merely weathering the storm but strategically strengthening its foundation. The anticipated easing of financial conditions and the company's strong operating leverage suggest a compelling outlook, making Brunswick a compelling investment for those seeking a leader in marine recreation poised for significant adjusted EPS expansion.