Q3 2023 Brunswick Corp Earnings Call

Good morning, welcome to friends with corporations third quarter 2023 earnings conference call. All participants will be in a listen only mode until the question and answer period. Today's meeting will be recorded if you have any objections you may disconnect at this time I would like to introduce.

Nate how Clark Senior Vice President Enterprise Finance Friendship Corporation.

You may begin.

Joining and thank you for joining us with me on the call. This morning are Dave Foulkes, Brunswick's, CEO and Brian <unk> CFO.

Before we begin with our prepared remarks, I would like to remind everyone that during this call. Our comments will include certain forward looking statements about future results.

Please keep in mind that our actual results could differ materially from these expectations for.

For details on these factors to consider please refer to our recent SEC filings in today's press release.

All of these documents are available on our website at Brunswick Com.

During our presentation, we will be referring to certain non-GAAP financial information reconciliations of GAAP to non-GAAP financial measures are provided in the appendix to this presentation and the reconciliation sections of the unaudited consolidated financial statements accompanying today's results.

Now I'll turn the call over to Dave.

Thanks, Dave and good morning, everyone.

Oh businesses delivered a solid third quarter as continued market share gains and new products efficient operations at our facilities comprehensive cost control measures and the resilient composition of our portfolio drove strong earnings and free cash flow. Despite the ongoing challenging macroeconomic backdrop.

Bob.

We delivered $1 $6 billion of net sales and slightly stronger than expected adjusted earnings per share of $2.42 in the quarter in the upper half of our guidance range.

We also generated strong free cash flow of $143 million in the third quarter.

Resulting in free cash flow conversion of 84% and delivering year to date free cash flow of $233 million higher than prior year.

In addition, we continue to be aggressive with share repurchases executing $220 million of repurchases year to date.

Mercury Marine has continued to capture solid market share gains this year with U S outboard retail market share up 90 basis points year to date versus prior year.

The new bulk market is on pace to finish generally in line with our estimates are down high single digits and Brunswick brands continue to outperform the market.

Okay.

As we move out of the course season, we continue to actively manage our global boat field inventory levels and we closed the third quarter with 32.8 weeks on hand.

We're working closely with all marine dealers and channel partners to maintain balanced inventory levels exiting 2023.

Hosting being generally in line with historical norms.

Which allows each location to carry a good representation of our model portfolio, while avoiding overstocking.

In addition, we're providing strong but targeted promotional support for retail investing in new products and technology progressing our operational excellence goals and implementing structural cost reduction actions across the enterprise.

I'll now turn to some of the segment highlights for the quarter.

Our propulsion business delivered topline growth with slightly lower earnings versus our record third quarter 2022.

Driven by growth in outboard engines, especially in high horsepower categories and controls and rigging.

All set by relatively weaker stern drive sales.

Mercury gained 130 basis points of market share in high horsepower outboard engines over 150 horsepower versus 2022 as additional.

Production capacity came online.

During the quarter. The business also successfully ratified a new five year collective bargaining agreements with the union representing workers that is engine production facility in <unk>, Wisconsin.

In addition continued strong production of outlets all electric outboards with 4000 units manufactured to date.

As we move into the off season Mercury is seeing some slowing of OEM orders as the OEM scaled back production to control field inventory going into 2020 four.

We expect Oems to remain cautious as they assess customer sentiment.

Late in 2023, and early 'twenty 'twenty four boat shows.

Well. This is a short term headwind it has a lot of mercury to gain share in the repower market, especially in high horsepower engines.

Our engine parts and accessories business demonstrated steady performance in the quarter.

Reflecting an improving sequential trend.

Sales for the products portion of the business were up 4% versus prior year.

Consumers use their boats in the primary season.

Distribution business sales were down year over year, which showed relative improvement from earlier in the year as the retailer inventory Destocking pass it's moderated.

Overall segment sales were up 24% versus the third quarter of 2019.

As anticipated Navajo group posted higher gross and operating margins versus third quarter 2022, despite lower sales.

Marine and RV, OEM orders offset improving trends and aftermarket channels.

Retailer stocking is recovering as we move into the fourth quarter with well received new product offerings driving strong retail pull through as we head into the holiday season.

Additionally, acceleration of planned restructuring efforts continues to result in reduced operating expenses versus prior year.

Finally, our boat business performed to plan continuing to introduce new models and white space brands are gaining share while adjusting production to manage pipelines.

The recently launched into bond premium adventure, Brian There's nearly sold out for model year, 'twenty 'twenty four and the refreshed Bayliner brand has also been well received.

Freedom Boat club continues to grow memberships, but now has 400 locations and nearly 60000 membership agreements covering more than 91000 members that worldwide.

Well generating exceptionally strong synergies sales across submarine portfolio.

Shifting to external factors stabilizing factors, including strong employment moderating inflation at a reduced pace of interest rate increases. However, despite the promotional environment and stable book purchase consideration higher prices high interest rates and credits availability remains strong heads.

Winds for consumers.

On a positive note boating participation remains strong.

It's a fairly strong main selling season in 2023 Boyd to some extent by promotions going into the off season deals are healthy, but anxious to avoid holding excess inventory ahead of an answer.

In 2024.

And we'll also be closely monitoring customer behavior at upcoming and early 'twenty 'twenty four boat shows.

With field pipelines replenished boat Oems are reducing production rates by taking out weeks of production or shifts in Q4 to align with anticipated retail in 2024.

Resulting in lower order rates for Mercury engines are not a core group of OEM products.

The order softness continues to be greater for smaller value boats, and lower horsepower engines with larger premium products not immune but continuing to display relative strength.

Given these factors we are maintaining production discipline.

Which may add pressure in the short so but will set us up for a more predictable first half of 'twenty 'twenty four.

Shifting now to a global view of revenue in the quarter overall, we saw a 7% sales decline on a constant currency basis.

Year to date, the U S market is showing relative strength versus international markets with sales relatively flat to 2022.

U S. New boat industry retail was flat in the quarter versus 2022 with year to date retail generally in line with expectations of down seven 5% versus 2022, and Brunswick growing share in both periods.

Overall year to date Brunswick has performed better than the industry picking up share, particularly through strong performance by our pontoon premium fiberglass toe brands supported by planned promotions and marketing on select product lines.

Outboard engine industry retail units were up 3% in the third quarter versus prior year, bringing year to date unit retail to down 2%.

Mercury continues to outperform the industry with third quarter share gains of 160 basis points and greater than 30 horsepower categories.

We are actively managing both pipelines to achieve year end levels within historical norms.

And then exit second quarter, three with global weeks on hand at a healthy level of 32.8 weeks.

We anticipate ending the year with a U S pipeline levels in line with expectations at approximately 36 weeks at approximately 14000 units.

This is approximately 35 weeks and 16000 units on hand at the end of at the end of 2019.

As is normally the case international ballpark clients will be higher.

Let me shift now to discuss some exciting new growth opportunities across our businesses.

We are thrilled to add flight to our portfolio of brands and product categories.

<unk> is an emerging and disruptive activity that allows for an extended hours long surfing experience an insurer coastal waters without the need for wake boat all stainless systems and flight is the premium brand in the space with high market share.

The slides are there already extended its product line to an easy to ride scooter and its many further developments in the pipeline.

Through Mercury Marine in Brunswick flight will have access to manufacturing and product technology and the world's largest marine distribution network.

Yeah.

As I mentioned earlier, we recently launched a new premium adventure brand product line, Nevada at the kind of international boat show.

This class of boats is very popular in Europe are gaining popularity in the U S and the two initial products, which have begun serial production nearly sold out for the 2020 for model year.

The media reception has been very strong and the new models have been nominated for best of boats and European Powerboats with the years 'twenty 'twenty four awards.

You May also have seen that just a few days ago, we announced Brunswick's finance and online retail finance solution that can be integrated into Brunswick and dealer partner websites to provide rapid customer finance approvals. In addition to supporting promotional financing.

We're beginning to roll out the solution in Q4.

Finally freedom boat club continues to expand rapidly in the Australian market recently announcing its seventh location.

We see the a and C. P region has a substantial new opportunity for freedom growth.

I'll now turn the call over to Ryan to provide some additional comments on our financial performance and outlook.

Thanks, Dave and good morning, everyone.

As previewed at Investor Day last months, Brexit delivered a solid third quarter, despite softening market conditions throughout our businesses.

When compared to the record prior year third quarter net sales were down 6% and adjusted EPS of $2 42 decreased 9%.

Net sales in each segment benefited from annualized price increases market share gains and benefits from well received new products.

Offsetting lower wholesale orders, resulting from field inventory, reaching normal levels and softer retail market conditions.

Okay.

Operating earnings and margins were down versus prior year as the impact of the lower sales.

Higher input costs higher absorption and unfavorable impact of foreign currency exchange rates more than offset benefits from our aggressive cost control measures throughout the enterprise.

Lastly, we had a strong free cash flow generation in the quarter of $143 million, primarily due to stronger working capital generation, resulting in a free cash flow conversion of 84%.

Year to date results also remains solid despite the uncertain macroeconomic environment.

Sales were down slightly from the record 2022 with stable adjusted operating margins and EPS, resulting from prudent operating expense control across the company steady.

Steady gross margin performance and in the case of adjusted EPS continued aggressive share repurchase activity.

Our strong free cash flow performance is significantly outpacing prior year, reflecting our continued focus on driving cash in this challenging market.

Now, we'll look at each reporting segment, starting with our propulsion business.

Revenue was slightly up versus the third quarter of 2022 as benefits from a favorable product mix related to continued strong high horsepower outboard engine demand and higher sales to repower customers together with annual pricing were partially offset by a board of declines in the low and mid range horsepower outboard.

Engines and Stern drive product.

Operating earnings decreased versus prior year due to lower sales higher input costs, including expenses related to the successful ratification of the Mercury found like labor agreement and the unfavorable impact of foreign currency exchange rates, which more than offset the benefits from cost control measures.

As Dave mentioned earlier as we exit 2023 and enter 2024, we anticipate that we will continue to maintain our progressive market share gains, but then our propulsion business will be impacted by additional boat OEM production reductions that may not abate until the start of the primary retail selling season in 2024.

This will enable us to sell more engines into the dealer channel, but the overall impact will still be a decrease in market demand for engines.

The engine parts and accessories business continues to improve sequentially throughout the year with Q3 sales down 4% versus 2022, but up 24% over the third quarter of 2019.

The high margin products business grew sales by 4% versus the prior year and by more than 10% in the United States.

Distribution sales were down 10%, but trends continued to improve from earlier in 2023.

Segment operating earnings were down versus prior year due to the slight sales decline and transition costs related to the newly opened distribution center.

Note that October orders in both the products and distribution businesses continue to trend positive as boat usage remained strong and customers in northern climates begin our winter is their product.

As anticipated <unk> group had an improved third quarter as aftermarket channel steadiness his help offset expected softness in marine and RV OEM customers.

Segment sales were down 9% due to the sales dynamics, but adjusted operating margins were up 110 basis points and adjusted operating earnings were up 3% as benefits from accelerated cost reduction actions and reorganization efforts together with strong new product performance more than offset the impact.

<unk> of lower sales.

The fourth quarter is an important time for the <unk> business as the holiday season drives aftermarket retail sales and.

And we will continue to watch not only consumer health and desire to spend for the holidays, but retailers wholesale reordering patterns at a time where inventory levels are normalized.

Finally, our boat business performed to plan continuing to introduce new models and white space brands are gaining share while adjusting our production to manage pipelines.

Sales were down 16% versus third quarter of 2022, given the production reductions together with continued elevated discounting to drive end of season retail.

Yeah.

Adjusted operating margin margins and earnings were down primarily due to the lower sales, partially offset by focused cost reduction activities.

Freedom Boat club, which is included in our business acceleration had another solid quarter contributing approximately 9% of the boat segment's revenue during the quarter, while seeing very steady membership levels. Despite the macroeconomic uncertainty.

Although we're entering the off season in most of our primary selling regions. We are focused on demonstrating resilient EPS and cash flow in a challenging market, while constraining, our pipelines to appropriate historical norms and delivering against our strategic initiatives.

The ongoing uncertain market conditions are resulting in measured ordering patterns by our retail channel partners and reduced production schedules with our marine and RV customers, but we continue to target marketing and promotional activities on select products to support retail sales, while remaining steadfast in bouncing inventory.

And pipeline levels.

As a result, and as previewed at Investor Day, we anticipate revenue of $6 45 to $6 $5 billion.

Adjusted operating margins of approximately 14% and adjusted EPS of approximately $9.

We continue to see positive free cash flow conversion and working capital trends and still anticipate generating more than $375 million of free cash flow for the year.

Lastly, we also have two full year P&L assumptions that we have updated first given our continued strong cash flow performance and recent further Brunswick share price dislocation, we are increasing our repurchase target to exceed $275 million of repurchases for the full year.

As a result, we anticipate slightly lower average diluted shares outstanding of approximately $75 million.

Second with the strengthening U S. Dollar, we now anticipate a slightly larger full year foreign exchange headwind of approximately $35 million.

I will now pass the call back over to Dave for concluding remarks.

Thanks, Brian before we close I wanted to share. Some examples of recent recognition Brunswick has received for a people business culture and products.

We're on pace for over 100 Major awards this year, an all time record.

For the fourth consecutive year.

<unk> was named to Forbes list of the world's best employers.

Ranking in the top 30% of the 700 companies that made the final list.

This award is a testament to our enduring commitment to being an employer of choice in creating a world class environment for our global employees.

Brunswick has also been named to Newsweek's inaugural list of the world's most trustworthy companies, reflecting our commitment to integrity safety and quality in our business and was named one of America's greenest companies, reflecting on numerous sustainability initiatives and commitments of further improvement.

Finally, our products continue to be recognized for excellence on the global stage I already mentioned, our success with Nevada, but both groups New Sea Ray SPX to 10 also won multiple magazine award for best boat below seven meters at the Cannes Boat show.

Further evidence of our commitment to leading the way in new products and technology across all businesses. Thank you again for joining the call. We will now begin the Q&A.

Thank you.

Like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May Press Star two if he would like to remove your question from the queue and for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys. Please ask one question.

And one follow up question, one moment, while we poll for questions.

Our first question is from Megan Alexander with Morgan Stanley. Please proceed.

Hi, Thanks for taking our questions I guess, maybe you did give some commentary on 24 could you maybe just update us on your base case expectation for a flat retail boat market next year.

Hi, Megan yet I think that's still our base case assumption I think.

Obviously, you've seen that where we're trying to match and I think achieving a good match between wholesale and retail as we go into.

Next year I think the.

Basically the assumption really is obviously, where it up for <unk>.

Overall retail levels sort of more like 2014, so we've.

Been pulled down about 30% since the peak.

I think the other thing that leads us to that conclusion really is the prevailing consumer conditions for most of the selling season. This year, we would expect to be pretty similar next year.

Priced all the price increases that happened really already occurred so pricing is now very similar to historical.

Levels interest rates, we don't see rising too much more.

So on balance doing next year so.

Also next year you know we were Q1, we would not have me on promotions as we will later in the year they seem to be pretty effective.

Operator: Good morning. Welcome to Brunswick Corporation's third quarter, 2023 Earnings Conference call. All participants will be in a listen only mode until the question and answer period.

I think a combination of consumer conditions that are pretty similar to this year.

Operator: Today's meeting will be recorded. If you have any objections, you may disconnect at this time.

Probably some increased promotional activity from us in the first quarter to kind of.

Neha Clark: I would like to introduce Neha Clark, Senior Vice President and your Prize Finance, Brunswick Corporation. You may begin. Good morning, and thank you for joining us.

Recognize where the market is.

Leads us to believe that that's a reasonable baseline assumption of course, it could be different for various reasons I would say on top of that.

Neha Clark: With me on the call this morning, our Dave Foulkes, Brunswick CEO, and Ryan Gwillim CSO. Before we begin with our prepared remarks, I would like to remind everyone that during this call, our comments will include certain forward-looking statements about future results. Please keep in mind that our actual results could differ materially from these expectations. For details on these factors to consider, please refer to our recent SEC filings and today's press release.

Market, obviously is not behaving in a homogenous way, we still are seeing more resilience at the premium end of the market.

No interestingly just feedback from the first day and the Fort Lauderdale boat show sales are strong in the first day, that's obviously a premium.

Joe So that was encouraging so those are essentially some of the components that go into our assumptions.

Neha Clark: All of these documents are available on our website at Brunswick.com. During our presentation, we will be referring to certain non-GAP financial information. Reconciliation of GAP to non-GAP financial measures are provided in the appendix to this presentation. And the reconciliation sections of the unordered consolidated financial statements accompanying today's results.

Okay. That's helpful and maybe a follow up if that's still the case.

Can you maybe talk through some of the puts and takes just on the margin line and then and then maybe getting to the bottom line.

You talked about maybe having some destocking in boats in propulsion, but you are lapping some significant headwinds.

The Cowen P&I, which also seemed to be improving I know you also talked about some interest expense headwind, but you're driving strong free cash flow. So.

David Foulkes: I will now turn the call over to Dave. Thanks Neha, and good morning everyone. Our businesses delivered a solid third quarter of continued market share gains, friends and new products, efficient operations at our facilities, comprehensive cost control measures, and the resilient composition of our portfolio. It drove strong burnings of free cash flow, despite the ongoing challenging macroeconomic backdrop.

Is the $9 that we're looking at for 'twenty three is that the right, Florida think about as a base case for next year.

It may get it's Ryan I'll go ahead and take this one.

And take it in reverse.

I'm not sure we know enough today in October to say that nine is a $9 a share would be a floor, but it's certainly in the in the set of possibilities or set of outcomes for next year. So.

David Foulkes: We delivered $1.6 billion in net sales and slightly stronger and expected adjusted earnings per share of $2.42 in the quarter in the upper half of our guidance range. We also regenerated strong free cash flow of $143 million in the third quarter, resulting in free cash flow conversion of 84% and delivering year-to-date free cash flow, $233 million higher than prior year. In addition, we continue to be aggressive with share repurchases, executing $220 million of repurchases year-to-date.

We'll just have to wait and see what the next handful of months bring us before we give more definitive 24 guidance, but definitely you know $9 in the competition set.

The puts and takes I think you've heard several of them I think on the plus side, you know parts and accessories is really.

Performing kind of as we thought it would historically I think there was some by year over year comps that spooked people are on edge and DNA and now that we're back to kind of normalized comps youre seeing that business grow at a low to mid single digit percentage kind of quarter in quarter out both sequentially and year.

David Foulkes: Mercury marinas continue to capture solid market share gains this year, with U.S, outboard retail market share up to 90 basis points year-to-date versus prior year. The new bulk market is on pace to finish generally in line with our estimates of down-high single digits, and Brunswick brands continue to outperform the market. As we move out of the course season, we continue to actively manage our global both field imagery levels, and we close the third quarter with 32.8 weeks on hand.

Over year, so as we get into next year, I think youre going to see goodness on the margin due to engine P&A business I think you'll also see growth on margin and Abaco I think we've been pretty clear that nano pro is.

Probably neared sovereign or coming off of its trough position on on margins in all of them.

Reorganization and good work that they've done youre going to get a full year benefit of that as you move forward.

I would say that the insurer thesis, obviously, we hope we're going to have to refinance our notes.

David Foulkes: We're working closely with our marine dealers and channel partners to maintain balanced imagery levels exiting 2023, targeting being generally in line with historical norms, which allows each location to carry a good representation of our model portfolio. While avoiding moving stockings.

85% sadly.

But we'll be smart and try to minimize the impact there, but the combat that will also continue to be very aggressive on.

Share repurchases.

Given where we're trading today I think that's something that obviously on the EPS line and will help on the margin, but that'll be that'll be a good benefit there so across the line I think we see retail matching wholesale which have been pretty clear about some really strong movement in the P&A businesses.

David Foulkes: In addition, we're providing strong but targeted promotional support for retail, investing in new products and technology, progressing our operational excellence goals, and implementing structural cost reduction actions across the enterprise.

David Foulkes: I'll now turn to some of the segment highlights for the quarter. Our propulsion business delivered top line growth with slightly lower earnings versus a record third quarter 2022. Driven by growth in outboard engines, especially in high-cost power categories and controls and rigging, offset by relatively weakest burn drive sales. Mercury gained 130 basis points of market share in high-cost power outboard engines, over 150 horsepower versus 2022, as additional production capacity came online.

<unk> had probably offset a little bit of difference in wholesale retail and boat and Austin.

And that's that's how you get out margin, it's pretty sustainable even at 2014 2015 retail levels.

Really helpful. Thank you I appreciate it.

Our next question is from James Hardiman with Citi. Please proceed.

Good morning, Thanks for taking my call.

Ryan that was really good color I wonder if you can imagine.

Dig even further on some of that.

David Foulkes: During the quarter, the business also successfully ratified a new five-year collective bargaining agreements with the union representing workers that is engine production facility in Fonda Lake, Wisconsin. And in addition, continued strong production of avatar electric outboards, with 4,000 units manufactured today. As we move into the offseason, Mercury is seeing some slowing of OEM orders as the OEM scale back production to control field imagery going into 2024. We expect OEMs to remain cautious as they assess customer sentiment at the late 2023 and early 2024 boat shows.

At.

As I think about your boat business.

Where do we think.

The delta between wholesale and retail will finish this year I mean, obviously there was some replenishment earlier in the year and I'm just trying to.

Trying to figure out what sort of a headwind that represent as we look to 2024 I'd get to about a.

Three and a half thousand unit headwind about 10% is that in the neighborhood too high too low.

Hi, James Thanks for your question I think Brian and I will kind of taxes, you met I think I'm in the U S. We produced.

<unk> 2000.

Units.

David Foulkes: While this is a short-term headwind, it is allowing Mercury to gain share in the repower market, especially in high-cost power engines. Our engine parts and accessories business demonstrated steady performance in the quarter, reflecting an improving sequential trend. Sales for the products portion of the business were up 4% versus prior year, as consumers using their boats in the primary season. The distribution business sales were down year over year, which showed relative improvement from earlier in the year, as dealer and retailer inventory destocking patterns moderated.

More wholesale than we did at retail.

So, but I would say they probably are almost entirely value units. So different mix in terms of dollars. So that obviously represents.

A headwind as we go into next year, but not a huge headwind I would say that particularly the.

The cost Takeouts that we've done across the enterprise, including the boat group.

What progressive through this year.

So they were higher impact in Q3 and Q4 so on.

Kind of run rate basis going into 2024, we should have some.

David Foulkes: Overall, segment sales were up 24% versus a third quarter of 2019. As anticipated, Navajo Group posted higher growth than operating margins versus third quarter 2022, despite lower sales, as slower marine and RV OEM orders offset improving trends in aftermarket channels. Retailers stocking is recovering as we move into the fourth quarter, with well-received new product offerings driving strong retail pull-through as we enter the holiday season. Additionally, acceleration of flan restructuring efforts continues to result in reduced operating expenses versus prior year.

Cost benefits that Randy Yeah, no that's correct.

Okay.

That's helpful.

So suffice it to say.

We're going to learn a lot more.

Three months from now presumably.

To be real hard for the boat segment to grow the top line.

I guess in previous conversations.

And you talked a lot about DNA engine, P&A and Amoco I guess, what's your level of confidence that propulsion can grow next year. That's the one where it seemed like at least previously you had the highest degree of confidence.

Through Hell or high water that that segment would be up on both the top and bottom line.

David Foulkes: Finally, our boat business performs a plan, continuing to introduce new models and wide space brands, and gaining share, while adjusting production to manage pipelines. The recently launched Mdavan Premium Adventure brand is nearly sold out for model year 2024, and the re-fresh Bayliner brand has also been well-received. Freedom boat club continues to grow memberships, and now has 400 locations and nearly 60,000 membership agreements covering more than 91,000 members network-wide, all well-generating exceptionally strong synergy sales across our marine portfolio.

Where do you stand here today and what it will allow you to sort of outgrow and unpredictable market next year.

I think the the market share gains continued so we know we clearly have a secular trend on top of some cyclicality here.

Tell you that.

And at the Fort Lauderdale show Mercury had.

The 7% I think sure overall, but close to 70% share of benches on the Wassa, which is by far our best.

David Foulkes: The thing to external factors, stabilizing factors include strong employment, moderating inflation, and a reduced pace of interest rate increases. However, despite the promotional environment and stable book purchase consideration, higher prices, high interest rates, and credit availability, remain strong headwinds for consumers. On a positive note, voting participation remains strong. Despite the fairly strong main selling season in 2023, void to some extent by promotions. Going into the off season, the others are healthy, but anxious to avoid holding excess inventory ahead of an uncertain 2024.

Showing it as you know that is a nice kind of proxy for new boats coming out and you know what mercury share might be headed so I think the secular trends supporting Mercury high horsepower.

Continues to be extremely strong of course in the end it depends.

Exactly on how the market performs next year, but I would say premium boats.

Surely have higher horsepower engines.

He needs to be strong not just domestically. We're also seeing the same thing in Europe.

Ohio horsepower customers with more premium boats are also the strongest very difficult to see exactly how this is all going to net out.

David Foulkes: And we'll also be closely monitoring customer behavior at upcoming and early 2024 boat shows. With field pipelines replenished, vote OEMs are reducing production rates by taking out weeks of production or shifts in Q4 to align with anticipated retail in 2024, resulting in lower order rates for mercury engines and navigable group OEM products. The order thoughtfulness continues to be greater for smaller value boats and lower horsepower engines with larger premium products, not immune, but continuing to display relative strength.

But generally we remain very constructive on that.

Continued to gain share in Repower.

As we buy capacity.

Well continue to convert Oems, both new Oems, but also greater share on existing OEM. So.

I think in the end, it's going to depend on how all of these things that out but I think we have a lot of positives as well as some potential.

Potential negatives.

Okay and so.

Just to clarify.

It seemed like previously you were real confident that propulsion, we grow next year now it sort of sounds like a it depends.

David Foulkes: Given these factors, we are maintaining production discipline, which may add pressure in the short term, but will step up for a more predictable first half of 2024. Shifting now to a global view of revenue in the quarter, overall, we saw a 7% sales decline on a constant currency basis. Here today, the US market is showing relative strength versus international markets, with sales relatively flat to 2022. US new boat industry retail was flat in the quarter versus 2022, with year-to-day retail generally in line with expectations of down 7.5% versus 2022, and Brunswick growing share in both periods.

Uh huh.

As we sit here, obviously with a lot more data to come in at that is that accurate.

I think I would say that the.

On a.

I think that the all of the things that are constructive trends on a secular basis, both propulsion are still in place.

This is really a is the market going to be slightly better than we assume or slightly worse.

Assume.

I would say that we're very.

I'm confident that the investment in high horsepower in our overall performance and high horse possible yield share gains.

David Foulkes: Overall, year-to-date, Brunswick has performed better than the industry, picking up share, particularly through strong performance by up on two premium fiberglass and toe brands, supported by planned promotions and marketing on select product lines. Outboard engine industry retail units were up 3% in the third quarter versus prior year, bringing year-to-day unit retail to down 2%. Mercury continues to outperform the industry, with third quarter share gains of 150 basis points in greater than 30 horsepower categories.

I don't exactly know how that's all good and that's out next year.

But mercury will end up stronger by the end of next year than it was at the end of this year I think.

And probably the other good news is we have done our investment we've done the investment on the capacity we've done our investment on new products Youll still be other things, but we're now at a time, where we can harvest those investments and really use them to gain share here moving forward.

Got it I appreciate the color thanks, guys.

Our next question is from same Sue with Bnb Paribas. Please proceed.

David Foulkes: We are actively managing both pipelines to achieve year-end levels within historical norms, and an exit thing towards a three with global weeks on hand at a healthy level of 32.8 weeks. We anticipate ending the year with US pipeline levels in line with expectations that are approximately 36 weeks and approximately 14,000 units, versus the approximately 35 weeks and 16,000 units on hand at the end of 2019. As is normally the case, international boat pipelines will be higher.

Hi, guys. Thanks for the question.

On inventories you mentioned weeks on hand, do you expect to exit the year at about 36 weeks, which is pretty much in line with 2019 at 35, but I guess, given you know higher floor plan financing higher as you kind of an uncertain retail market do you think like that.

It should be actually lower than 2019, or how do you think about.

How do you think about that.

Yes, I think we've I think we've had this kind of back and forwards for a while what we have always been saying that.

David Foulkes: Let me shift now to discuss some exciting new growth opportunities across our We're thrilled to add flight to our portfolio brands and product categories. E-foiling is an emerging and disruptive activity that allows for an extended hours-long surfing experience on insure or coastal waters without the need for a wakeboat or sail assistance and flight is the premium brand in the space with high market share. The flight team has already extended its product line to an easy-to-ride scooter and its many further developments in the pipeline. Through Mercury, Marine and Brunswick, flight will have access to manufacturing and product technology and the world's largest marine distribution network.

In the third CS is probably where.

Weeks on hand needs to be especially at the lower market level. So dealers have a representative.

Selection of our portfolio on a unit basis. It is lower than 2019, and 14000 units supposed to 16000 units.

And that is a reflection, obviously of the overall retail level, but could be to some extent the.

Our floor plan financing availability and credit limits in that kind of stuff I don't see that as a significant issue for us at the moment.

I think overall the predominant.

Desire and alignment between us and our channel partners is to just get the inventory level right.

David Foulkes: As I mentioned earlier, we recently launched a new premium adventure brand of product line Novan at the Cannes International Boat Show. This class of boats is very popular in Europe and gaining popularity in the US and the two initial products which have begun serial production are nearly sold out for the 2024 model year. The media reception has been very strong and the new models have been nominated for Best of Boat and European Power Boat of the Year 2024 Awards.

And I don't think that there is a specific issue with credit limits or kind of dollar value of inventory, that's really prevailing at the moment.

Well I think as you if you think about it.

If retail is flat obviously that is 36 weeks on a trailing basis in a forward looking basis, which seems to us to be extremely appropriate.

And the ability to kind of flatten the plane after a year like this with the $9 of EPS and inventory.

David Foulkes: You may also have seen that just a few days ago, we announced Brunswick Finance and online retail finance solution that can be integrated into Brunswick and dealer partner websites to provide rapid customer finance approvals in addition to supporting promotional finance thing. We're beginning to roll out the solution in Q4.

In line, it's not a bad trip to be honest so.

I think that I think we feel very comfortable about it.

Okay, great that makes sense and then maybe on propulsion guidance.

A bit lower on revenues, but margins were maintained maybe can you walk through some of the the.

David Foulkes: And finally, Freedom Boat Club continues to expand rapidly in the Australian market, recently announcing its seventh location. We see the ASEP region as a substantial new opportunity for freedom growth.

The bridge to hold the margin.

Yes, I can I can take that one.

Paulson business is larger today as it has several levers to be able to pull certainly in terms of opex.

Ryan Gwillim: And that's in the call over to Ryan to provide some additional comments in our financial performance and outlook.

But it starts at the gross margin line frankly in there they continue to hold gross margin steady if not a little bit.

Ryan Gwillim: Thanks Dave and good morning everyone. As a preview that investor day last month, Brunswick delivered a solid third quarter despite softening market conditions throughout our businesses. When compared to the record prior year, third quarter net sales were down 6% and adjusted EPS of $2.42 decreased 9%. Net sales at each segment benefited from annualized price increases, market share gains, and benefits from well-received new products. Offset by lower wholesale orders, resulting from field inventory reaching normal levels and soft to retail market conditions.

Even despite volume and that's mainly because of the strength in the high horsepower. So.

There's also a bit of mix in there obviously dealer orders were really strong in the quarter and that comes with it a little bit of <unk>.

Premium on the earnings front as well.

We had a little headwind in currency in the quarter and we're hoping the database a bit.

We kind of run out the year, but really that's.

Uh huh.

Those are the biggest pieces yes.

Yes, I just noted we obviously had the one off issue with a security incident this year, which.

Ryan Gwillim: Operating earnings and margins were down versus prior year as the impact of the lower sales, slightly higher input costs, higher absorption, and the unfavorable impact of foreign currency exchange rates, more than offset benefits from aggressive cost control measures throughout the enterprise.

That's alright, an absorption issue for a period that's right.

Okay, great. Thank you guys. Good luck.

Our next question is from Craig Kennison with Baird. Please proceed.

Hey, good morning, Thanks for taking my question I wanted to revisit I guess your base case for retail next year I know it's early.

Ryan Gwillim: Lastly, we had a strong free cash flow generation in the quarter of $143 million. Primarily due to stronger working capital generation, resulting in a free cash flow conversion of 84%. Year-to-date results also remain solid despite the uncertain macroeconomic environment. Sales it down slightly from the record 2022 with stable adjusted operating margins and EPS resulting from fruited operating expense control across the company. Denny gross margin performance, and in the case of adjusted EPS, continued aggressive share repurchase activity.

But certainly you know in my mind retail being flat next year would be fantastic and well above what I think the market may expect.

I would note that Patrick which is a supplier to this industry just sit on its call. They have an expectation for a 15% decline next year and I know they cater to a lower end, but still a pretty wide gap. There. So I guess my question is like what is the recession playbook.

At Brunswick, and how quickly can you pivot to that to kind of protect the floor in earnings power or whatever you think that might be.

Ryan Gwillim: Lee. Our strong free cashflow performance is significantly outpacing prior year, reflecting our continued focus on driving cash in the challenging market.

Yeah crowd I went through the assumptions really the drivers to kind.

Kind of a flattish retail assumption next year, I think I stand by those at the moment.

Ryan Gwillim: Now we'll look at each reporting segment starting with our propulsion business. Revenue is slightly up versus the third quarter of 2022, as benefits from a favorable product mix related to continued strong high horsepower outboard engine demand, and higher sales to repower customers, together with annual pricing, were partially offset by order declines in the low and mid-range horsepower outboard engines and stern drive products. Operating earnings decreased versus prior year due to lower sales, higher input costs, including expenses related to the successful ratification of the Mercury Find the Like Labor Agreement, and the unfavorable impact of foreign currency exchange rates, which more than offset the benefits from cost control measures.

The call we gave earlier this year about modestly down.

Obviously, the market of Pittsburgh quite a lot, but it kind of came back to where we thought it was.

That doesn't mean that we're always right, but I think we have a decent scale.

I think what you've seen this year is oh, we have all kinds of levers to pull them with very effective doing it.

We began to work on operating expense very quickly this year.

Market conditions are folded and pulled out significant operating expense so that as we.

And that was obviously progressive during the year. So on a run rate basis was higher.

As we go into 2024.

Ryan Gwillim: As Dave mentioned earlier, as we exit 2023 and enter 2024, we anticipate that we will continue to maintain our progressive market share gains, but that our propulsion business will be impacted by additional boat OEM production reductions that may not update until the start of the primary retail selling season in 2024. This will enable us to sell more engines into the dealer channel, but the overall impact will still be a decrease in market demand for engines.

But we still have.

Some things that are pretty favorable for us obviously as we see the market software and generally market soft the across recreation of beyond the.

Customer supply dynamics change, we're able to influence pricing somewhat more.

The people from whatever they want to do in this year to work more on getting Cogs reductions.

Design cost reductions negotiated cost reductions all those kinds of things including.

Ryan Gwillim: The engine, parched, and accessories business continues to improve sequentially throughout the year, with Q3 sales down 4% versus 2022, but up 24% over the third quarter of 2019. The high margin products business grew sales by 4% versus the prior year, and by more than 10% in the United States. Distribution sales were down 10%, but trends continue to improve from earlier in 2023. Segment operating earnings were down versus prior year due to the slight sales decline and transition costs related to the newly opened distribution center.

Working on our operating expense lines as well. So I think we still have plenty of levers to pull and we certainly demonstrated.

With that.

Craig I think you know this but I'd caution 15% down from this year would be below the level of sales after the dfc.

No.

Obviously everyone's doing their best to forecast the market, but that would seem to be an extremely down scenario given what we've seen in the.

And the environment, even this year.

Ryan Gwillim: Note that October orders in both the products and distribution businesses continue to trend positive, as boat usage remains strong, and customers in northern climates begin to winterize their product. As anticipated, Navajo Group had an improved third quarter, and aftermarket channel steadiness helped offset expected softness in marine and RV OEM customers. Segment sales were down 9% due to these sales dynamics, but adjusted operating margins were up 110 basis points, and adjusted operating earnings were up 3% as benefits from accelerated cost reduction actions and reorganization efforts together with strong new product performance, more than all of the impact of lower sales.

Yeah, I wouldn't Craig I wouldn't also.

Neglect, what we can do on the go to market side.

The New Brunswick finance solution that we're just rolling out I think is.

Gives us some unique flexibility too.

Also customers promotional financing of various kinds kind of bridged them through this period of.

Higher rates. So this is a multitude of levels that we have to pull on the go to market side.

On the Cogs side and on the expense side, but I think we could we've shown our effectiveness and do it and then I guess lastly throw in the capital strategy side I mean, if we needed to Craig we could take capex down to maintenance levels at just 30% 35%.

That starts at $100 million to $125 million I'm, not saying, we would want to.

Ryan Gwillim: The fourth quarter is an important time for the retail sales, and we will continue to watch not only consumer health and desire to spend for the holidays, but retailers wholesale reordering patterns at a time where inventory levels are normalized. Finally, our boat business performed a plan, continuing to introduce new models and space-based brands and gating share, while adjusting a production to manage pipeline. Fails are down 16% versus 3rd quarter of 2022, given the production reductions, together with continued elevated discounting to drive end of season retail.

But that something we could do obviously, our cash generation and our ability to convert working capital has been proven to be pretty strong this year and I would anticipate.

Next year. So in your scenario, we would go into even more cash generation buckled down mode.

And we've proven our ability to do that just because you don't have a whole lot of other fixed obligations to service at this time.

Capital and cost of debt.

Relatively low.

But luckily bring described was great, but it was a.

Interesting question I think.

We will finish this year, if we if we had a $9 EPS would be 10% on EPS below last table would be about 10% up on 2021 will be our second best year ever.

Ryan Gwillim: Adjusted operating margins and earnings were down primarily due to the lower sales, partially offset by focused cost reduction activities. Freedom Vocal Club, which is included in business preparation, had another solid quarter, contributing approximately 9% of the boat segments revenue during the quarter, while seeing very steady membership levels despite the macro economic uncertainty.

In market conditions that are less than ideal so I think we.

Well continue to perform.

That's really helpful. Thanks, guys.

Our next question is from Jamie Katz with Morningstar. Please proceed.

Ryan Gwillim: Although we're entering the all season and most of our primary selling regions, we are focused on demonstrating resilient EPS and cash flow in a challenging market, while constraining our pipelines to appropriate historical norms and delivering against our strategic initiatives. The ongoing uncertain market conditions are resulting in measured ordering patterns by our retail channel partners, and reduced production schedules with our marine and RV customers, but we continue to target marketing and promotional activities on select products to support retail sales, while remaining steadfast in balancing inventory and pipeline levels.

Hi, Good morning, Thank you want to talk a little bit about the empathize spread of new retail financing partnership I know you just mentioned that it was to help consumers through this period of time, but I'm wondering if that also imply that maybe other retail.

<unk> financing partners are getting a little bit more cautious and.

Or maybe changing there they're turning in lending currently.

No. It doesn't imply that it's all I think we have been in the retail financing we have a business called Blue finance.

So we've been in the retail financing kind of arena for a while.

Ryan Gwillim: As a result, and as previewed at Investor Day, we anticipate revenue of $6.45 to $6.5 billion, adjusted operating margins of approximately 14% and adjusted EPS of approximately $9. We continue to see positive free cash flow conversion and working capital trends, and still anticipate generating more than $375 million of free cash flow for the year.

This is really an integrated digital finance solution that is just much easier and quicker for consumers too.

Access so it's embedded in a website you can think of a boat you can immediately get not only the boat costs, but also approval for promoting these provisional approval for financing that would move through to the dealer.

So and it allows us to have more flexibility with our promotional finance offerings. So obviously at the moment in the current environment, we're offering discounts.

Ryan Gwillim: Lastly, we also have two full-year P&L assumptions that we have updated. First, given our continued strong cash flow performance and recent further brumswick share price defocation, we are increasing our repurchase target to exceed $275 million of repurchases for the full year. As a result, we anticipate slightly lower average diluted shares outstanding of approximately $70.25 million. Second, with the strengthening U.S, dollar, we now anticipate a slightly larger full-year foreign exchange headwind of approximately $35 million.

Discounts on purchase price.

And other things option allowances those kinds of things, but this is.

You lever for us to call if we see that the consumer is.

Most cautious because of interest rates versus other.

Potential criteria than this because there's another option. So yes, it's nothing to do with.

Lender availability everything to do with giving ourselves about it's okay, I'm, giving consumers a better experience.

David Foulkes: I will now pass the call back over today for concluding remarks. Thanks, Ryan. Before we close, I wanted to share some examples of recent recognition brumswick has received for our people, business, culture, and products, where on pace for over a hundred major awards this year, an all-time record. For the fourth consecutive year, brumswick was named to Forbes list of the world's best employers, ranking in the top 30% of the 700 companies that made the final list.

Through the process of acquiring boat.

Excellent and then can you just speak to.

David Foulkes: This award is a testament to our enduring commitment to being an employer of choice and creating a world-class environment for our global employees. Brumswick has also been named to Newsweek's inaugural list of the world's most trustworthy companies, reflecting our commitment to integrity, safety, and quality in our business, and with name one of America's greenest companies, reflecting our numerous sustainability initiatives, and commitment to further improvement. Finally, our products continue to be recognized for excellence on the global stage.

New voters in the market and your ability to continue to track them and this sort of environment has the mix.

Next our purchasers are participants in changing at all in the last six months or styling and sort of what are you expecting going forward.

Actually I'll be honest with you I don't have an updated.

Dataset on new bonuses, but we can go find that I would tell you, though the Brunswick brands over index towards attracting new boxes.

And interestingly not only in our value brands like <unk> and even in our.

Premium brands and I think the reason part of the reason for that at least as brand recognition.

123 of the four best known brands in the U S and your new boats, it's kind of where an obvious choice for the top of everybody's list of.

Essential boats in whatever category, you want to buy a boat.

I think our brand strength new products.

David Foulkes: I already mentioned about success with Navarre, but both groups new C-Ray SPX 210, also one of the multiple magazine awards for best boat below 7 meters at the Can Boat Show, further evidence of our commitment to leading the way in new products and technology across our businesses. Thank you again for joining the call.

It always going to mean that new boats is less vulnerable to marketplace Gravitates 12 brands and in addition freedom freedom.

Freedom is such a good gateway for new boaters, new and returning boaters boaters that have maybe been out for a decade or more jami. So that we continue to see really steady membership at freedom. Despite what is obviously a bit of a turbulent time in the market and the overall economy. So all of those things really.

Operator: We'll now begin the Q&A. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation Toma indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. And for a participant choosing speaker equipment and maybe necessary to pick up your handset before pressing the star keys. Please ask one question and one follow up question. One moment will we pull for questions.

<unk> lend itself to continuing to find ways to bring new boaters Ed.

Great. Thanks for the color.

Okay.

Our next question is from Joe.

Tabella with Raymond James Please proceed.

Hey, guys good morning.

Megan Alexander: Our first question is from Megan Alexander with Morgan Stanley. Please proceed. Hi, thanks for taking our questions. I guess maybe you did give some commentary on 24. Could you maybe just update us on your base case expectation for a flat retail boat market next year? Hi, Megan yet. I think that's a lot of base case assumption. I think, but obviously, as you've seen, we're trying to match, and I think achieving a good match between wholesale and retail as we go into next year.

I guess first question for you Ryan obviously, you were hesitant to call.

$9 in EPS lower for next year understandably, given all the uncertainty, but you said in the past that you felt like $8.

Is it is a reasonable recession floor.

Is that still your thinking.

Hi, Joe.

Yes.

We still stand very much behind those are $6 eight dollar cases.

Thank those give a really nice background into wide.

How we perform in a market situation that obviously, we're kind of seeing ourselves in the market is almost down 30% 35%.

Megan Alexander: I think the basically assumption really is obviously we're at, for a start, we're at overall retail levels that are more like 2014. So we've been pulled down about 30% since the peak. I think the other thing that leads us to that conclusion really is that the prevailing consumer conditions for most of this falling season this year, we would expect to be pretty similar next year. Price, all the price increases that happened have really already occurred.

So I don't think there'll be a whole lot of changes to our thinking on the $8 case.

I'd say our game engine P&A some good lights, there an impact to kind of steady growth navigate continuing to be improved.

Megan Alexander: So pricing is now very similar to star goal levels interest rates. We don't see rising too much more if tall on balance during next year. So also next year, you know, we were Q1. We were not as heavy on promotions as we were later in the year. They seem to be pretty effective. So I think a combination of consumer conditions that are pretty similar to this year, probably some increased promotional activity from us in the first quarter to kind of recognize where the market is, leads us to believe that that's a reasonable baseline assumption.

<unk> capital strategy, and then kind of steady boat and propulsion as they work through market dynamics all of those things were embedded into those plans and I think.

We would be very comfortable with those.

Okay helpful and maybe in terms of dealers and how they're thinking about.

Ordering and demand for next year, what do you think they'll get enough information.

Started packing order is at Miami is at Palm Beach.

It's a range Joe to be honest depends what brands and dealers you're talking about obviously Fort Lauderdale is going on right now for the next few days, which is premium brand premium kind of saltwater fiberglass focused but towards the end of the year earliest shows like Toronto Chicago.

Minneapolis all of January would be important for the aluminum.

Megan Alexander: Of course, it could be different for various reasons. I would say on top of that, the market obviously is not behaving in a much in a sway. We still are seeing more resilience in the premium end of the market. And actually, you know, interestingly, just feedback from the first day, the Fort Lauderdale boat show sells strong on the first day. That's obviously a premium show. So that was encouraging. So those are essentially some of the components that go into our assumptions.

Market sold off also at the end of January for the European market, which is mainly a fiberglass market not so much of it.

In a market and then.

Mid February of course, we have Miami, which is the next big.

So it's really.

This year, we're going through.

Genoa Perez can all those kinds of things, it's a pretty steady stream of late season shows and early season shows.

Megan Alexander: Okay, that's helpful. And maybe a follow up if that's still the case. You know, can you maybe talk through some of the puts and takes just on the margin line and then maybe getting to the bottom line, you know, you talked about maybe having some destocking and boats and propulsion, but you are lapping some significant headwinds and Avaco and PNA, which also seem to be improving. I know you also talked about some interest expense headwinds, but you're driving strong free cash flow. So, you know, is the $9 that we're looking at for $23? Is that the right floor to think about as a base case for next year?

Okay. So it should be pretty early in calendar 'twenty four let me now yes, depending.

Depending on the brand I mean, I think Fort Lauderdale will be a good.

So for premium.

So first day was very encouraging for us we will see how the rest of the show.

And then as you get into the balance of the year, obviously, not what's going on in December but really early.

January.

You get into quite a lot of <unk>.

Aluminum shows so there'll be a good indication of what buyers are feeling at that point in time and then late January early February we'll see.

Ryan Gwillim: and Megan, it's Ryan. I'll go ahead and take this one and take it in reverse. I'm not sure we know enough today in October to say that nine is $9 a share of the floor, but it's certainly in the set of possibilities or set of outcomes for next year.

More fiberglass, particularly on the premium end.

Got it thank you.

Our next question is from Scott timber with Roth. Please proceed.

Hi, good morning, Thanks for taking my questions guys.

Ryan Gwillim: So we'll just have to wait and see what the next handful of months bring us before we give more definitive 24 guys. But definitely, you know, $9 in the competition set puts and takes. I think you had several of them. I think on the plus side, you know, heart and accessories is really performing kind of as we thought it would. Historically, I think there was some year over your comps that spooked people on edge in PNA.

Hey, Scott.

On the.

Parts and accessory side could you talk about what retail P. O S is looking at looking like.

And maybe parse that out RV versus boat.

Yeah.

Yes, I can take that.

We still have limited.

POS information from from various retailers I would say on the marine side kind of on the traditional marine side. Scott. We're seeing you know kind of retail and wholesale matching we're seeing dealers take the inventory they need at the end of the year to winterize product and obviously, the southern hemisphere to keep folks on the water. So.

Ryan Gwillim: And now that we're back to kind of normalize comps. You're seeing that business grow at a load amid single digit percentage kind of quarter and quarter out. Both sequentially and year over year. So as we get into next year, I think you're going to see goodness on the margins due to engine PNA business. I think you'll also see growth on Marge on Navico. I think we've been planning that Navico is probably near it or coming off of its trough position on on margins and all of the reorganization and good work that they've done.

Again U S products was up 10% in the quarter.

Only a bit of that is price. So a lot of that is really nice strong demand and filling filling channels and ahead of a kind of the end of the season.

Those places where there is an end of the season for kind of more retailers and that is primarily we see that in an advocacy group. We believe that their inventories are right sized as we enter the holiday. So we're seeing pretty strong point of sale there certainly on the new products.

Ryan Gwillim: You're going to get a full year benefit of that as you move forward. I would say that the interest thesis, obviously, we're going to have to refinance our notes that are at point eight, five percent sadly, but you know, we'll be smart and try to minimize the impact there. But to combat that will also be very aggressive on share purchases. [inaudible][inaudible] So, Mercury had 57% I think share overall, but close to 70% share of engines on the water, which is by far our best, showing that as you know, that is a nice kind of proxy for new boats coming out and, you know, where Mercury share might be headed.

I mean to really drive retail out of out of the holiday New products is key and we continue to see good performance there.

Obviously, we said it in the release, but the holiday season is a big time for an avocado, there, they're preparing and getting the right inventory in the dealer and retail our hands and we would anticipate a pretty strong performance.

Alright, and just last question.

One of your competitors in the recreation and leisure space.

Off road vehicles did mentioned earlier.

Earlier, this week that they're seeing or at least they're hearing from the lenders that there was a slight tightening going on with.

Lenders looking more heavily.

Heavily yet things like.

Debt to income ratios are you seeing that tightening in your markets at all.

We're talking about retail financing right.

Credit score yeah.

I think the spreads, Ohio, So I think you know getting to the kind of 9% pretty good FICO score.

So I think we probably are seeing a bit of an increase in the spreads I wouldn't say it's.

Particularly Knoxville Beaumont, we could get some more detail on that but yeah. I think that's probably probably true and we are just continuing to see an influx of people, bringing cash yeah.

And down the whole spectrum, including premium so that is that is one that we continue to see.

Okay got it.

Alright, Thats all I have thank you.

Thank you.

Our next question is from Mike Swartz with truly Securities. Please proceed.

Hey, guys. Good morning, maybe just following up on Joe's question around you know order books for 2020 for model year 'twenty four I know, there's there's we're very early in the show season.

But maybe is there any sense or any range you can give us.

You know what those maybe early commitments have looked like versus at the same time last year.

Yes, Hi, Mike.

Thats strong we have very solid order banks across all of our brands at this point in time, but I.

I would say very similar across both brands.

Lastly, our at least if not last year at least in line with our expectations.

What's appropriate for.

For this year. So we go through looking at percentage of fulfillment that you probably know we go on a trimester basis here. So.

Right now we're looking at the kind of first trimester orders, but also appoint true for yeah.

I would say that I don't have the latest numbers, but I think we were aligned pretty well now in a very solid orders from all of our dealers.

Okay, and then with the with the rebate or the new Labor agreement up and find out just a broader question for 2024.

I guess, how should we think about the cost environment is it still going to be fairly inflationary or are you seeing any any of the cost curve flatten out or maybe even seeing any benefits as we go into 'twenty four.

Yeah, I would say that overall I think the.

Environment is.

Turning much more favorable for us.

In terms of.

Supplier pricing.

Supply is willing to take willing.

Willing to offer discounts willing to offer lower prices to as commodities, obviously up.

Come more in line with historical norms, I think our labor cost increases will be very normal so nothing.

Kind of out of the ordinary for next year, So I would say overall.

Ryan Gwillim: So, I think the secular transports in Mercury high horsepower continue to be extremely strong. Of course, in the end it depends exactly on how the market performs next year, but I would say premium boats generally have high horsepower engines continue to be strong, not just domestically. We're also seen the same thing in Europe where high horsepower customers with more premium boats are also the strongest, very difficult to see, you know, exactly how this is all going to net out.

Cost environment is going to be constructive for us somewhere.

I'm, putting a lot of resources in that area right now I would say, making sure. We're very actively working with the supply base to get the best cost.

While you're waiting alternative suppliers.

So yeah, we will work very actively in that area and I would expect overall for that to be constructed.

And every division is cost take out programs and plans and targets for the year.

Not just at the opex level, but ways to bring costs down as well so.

Ryan Gwillim: But generally, we remain very constructive on that and you continue to gain share in repower as we've passed available, continue to convert OEMs, both new OEMs, but also greater share on existing OEMs. So, I think in the end it's going to depend on how all of these things net out, but I think we have a lot of positives as well as some potential negatives. Okay, and so should just to clarify, seemed like previously you were real confident that propulsion would grow next year.

Back to the earlier question on what.

Streamed coupon.

Economic time.

Looking at programs that the gross margin line can be equally as important the chips raw cost takeout at Opex.

Our next question is from Matthew Boss with J P. Morgan. Please proceed.

Great. Thanks.

Dave So maybe higher level could you just elaborate on the consumer and dealer sentiment today, maybe relative to three months ago or just how you know or what evolved exactly in the forecast and then specifically with the higher interest rate backdrop are there any changes you've seen so far and the promotional landscape or just what levers what.

Ryan Gwillim: Now it sort of sounds like a depends sort of take as we sit here obviously with a lot more data to come in. Is that accurate? Yeah. I think that all of the things that are constructive trends on a secular basis for repulsion are still in place. This is really a, is the market going to be slightly better than we assume or slightly worse than we assume. But I would say that we're very confident that the investment in high horsepower and our overall performance in high horsepower will yield share gains.

Did you or could you pull to entice customers to convert if needed.

Yes, I think you know I don't think it's really.

A change in.

That's really I think it's just the part of the season that we're in right now obviously three months ago. We're in the height of the selling season people are spending their time doing a whole bunch of other stuff selling as much as they possibly can.

Focusing on getting product out the door now the pivoting to.

Much consideration of stocking levels to what is mainly the off season. So I don't think sentiment has really changed a lot I think that just now.

Ryan Gwillim: I don't exactly know how that's so good and that's out next year, but Mercury will end up stronger by the end of next year than it is at the end of this year I think. And probably the other good news is we have done our investment, we've done the investment on the capacity we've done our investment on new products. There'll still be other things, but we're now at a time where we can harvest those investments and really use them to gain share here moving forward. Got it. Appreciate color.

Ryan Gwillim: Thanks guys.

Now going through normal seasonal changes in the way that Oh.

Focusing I think you can tell from our.

It would field inventory levels that we've been very careful to make sure that we align well with our dealers that everybody feels good about it.

Stocking levels going into 2024, so I would say that we're encouraged.

Operator: Our next question is from Zane too with the N.D.

By that I think the so I don't think that there is a huge change in sentiment also feedback I'm getting I'm going down to Fort Lauderdale. Later this afternoon I'll get some direct feedback, but broadly OEM customers seem to be pretty positive.

Zane Tu: Parabas, please proceed. Thanks for the question. On the inventory, you mentioned weeks on hand, you expect that the year at about 36 weeks, which is pretty much in line with 2019 at 35. But I guess given higher floor plan financing, higher entities and maybe kind of an uncertain retail market, do you think that at least on hand should be actually lower than 2019 or how do you think about that? Yeah, I think we've had this kind of back and forwards for a while.

Obviously that show is a premium show.

And that is the most resilient.

Part of the market place. So I just I don't think that there is a marked change I think that's just general.

Caution.

Lee.

You know something like one of your questions I'm talking about some of the more downside scenarios for next year, but broadly.

Zane Tu: What we have always been saying that in the 30s is probably where weeks on hand needs to be, especially at a lower market level. So dealers have a representative selection of portfolio on a unit basis. It is lower than 2019, 14,000 units for 16,000 units. And that is a reflection obviously of the overall retail level, but could be to some extent the floor plan financing availability and credit limits and that kind of stuff.

Things that generally stabilizing on a price basis on our interest rate base since the environment is somewhat more stable.

I think that there is caution some.

What what might happen next year, but I wouldn't say, that's a multiple change.

Change in sense of money either from Oems or.

And consume less of that or what was the second part of it.

And our final question.

I'm, sorry could you repeat the second part of this.

Any changes in the promotional landscape or are there levers that you would pull just given the higher interest rate environment to entice a customer to convert.

Zane Tu: I don't see that as a significant issue for us at the moment. I think overall the predominant desire and alignment between us and our channel partners is to just get the inventory level right. And I don't think that there is a specific issue with credit limits or it's going to dollar value of inventory that's really prevailing at the moment. I think if you think about it. If retail is flat, obviously that is 36 weeks on a trailing basis and a forward looking basis, which seems to us to be extremely appropriate.

Ah, yes, well promotions through the backend of the selling season.

But kind of 2019 levels I would say to be honest at the moment.

Yes.

Great.

From now through the end of the year will be less than 10% of the total annual sales much less than 10%. So the influence of promotions is diminishing except in.

The southern markets.

So mostly fiberglass premium markets, where we havent had such a promotional environment.

Zane Tu: And the ability to kind of land the plane after a year like this with $9 of EPS and inventory in line. It's not a bad trick to be honest. So I think that I think we feel very comfortable about it.

We might be kind of working to get the last few units.

But we can but I would say the promotion at this time of the year is just talk.

Zane Tu: Okay, great. That makes sense.

Not super effective, but not super meaningful in the northern markets.

Right.

Helpful color best of luck.

Ryan Gwillim: And then maybe on propulsion guidance, a bit lower on revenues, but margins were maintained. Maybe can you walk through some of the bridge to hold the margins? Yeah, I can take that one. The propulsion business has several levers to be able to pull certainly in terms of op-ex, but it starts at the gross margin line, frankly, and they continue to hold the gross margin steady if not a little bit of even despite volume.

Our next question is from Tristan Thomas Martin with BMO capital markets. Please proceed.

Hey, good morning.

Two quick ones. One you mentioned Fort Lauderdale, a couple of times now where some of the other Paul.

All season boat shows and then with Freedom boat club, what's the state of the fleet there and then what could a potential kind of refresh upgrade cycle look like thanks.

Yes, good question so really.

Fort Lauderdale, Miami as to kind of start of season premium show in the U S. In Fort Lauderdale is more of that and the season U S show, we've been really focusing quite a while on European shows recently.

Ryan Gwillim: And that's mainly because of the strength and the high horsepower. So there's also a bit of mix in there. Obviously, dealer orders were really strong in the quarter, and that comes with that a little bit of premium on the earnings front as well. We had a little headwind and currency in the quarter, and then we're hoping that that abates a bit as we kind of run out the year. But really, that's, you know, that those are the biggest pieces. Yeah, I just noted we obviously had the one office issue with the security incident this year, which obviously was, that's right, an absorption issue for a period. That's right.

Ryan Gwillim: Okay, great.

Operator: Thank you guys. Good luck.

Really strong showing at <unk>.

Our brands are extremely well received.

We were able to get some.

Large Boston Whalers and larger sea rays over to Europe for a change because in the past three years everything that has been sold in the U S.

So it was very encouraging to get those bigger product styles over to Europe, when they sold very well the bond was.

Really well received and I think represents a significant opportunity for us and Mercury's market share through all of those shows was I can't remember the exact numbers, but we were in the high 50% to 66.

Craig Kennison: Our next question is from Craig Kennisin with Bears. Please proceed. Hey, good morning. Thanks for taking my question. I wanted to revisit, I guess, your base case for retail next year. I know it's early, but certainly, you know, in my mind, retail being flat next year would be, you know, fantastic and well about what I think the market may expect. I would note that Patrick, which is a supplier to this industry, just said, and it's called, they have an expectation for 15 percent decline next year, and I know they cater to a lower end, but still a pretty wide gap there.

Pretty much every show so all of the constructive factors that we've continued to see what prevailing.

Late season.

European shows and then obviously, we just have one day at Fort Lauderdale behind Us but.

Hoping for the best for the balance of that show.

Thank you. This will conclude our question and answer session I would like to turn the call back over to Dave for some concluding remarks.

Okay. Thank you all for joining us very much and for the great questions. As you saw despite the challenges we again delivered a very solid quarter for the rest of the year. Our focus is on balancing continuing to deliver those solid earnings and free cash flow.

David Foulkes: So, I guess my question is, what is the recession playbook at Brunswick, and how quickly can you pivot to that to kind of protect, you know, the floor and earnings power, whatever you think that might be? Yeah, you know, I went through the assumptions really that drive us to kind of a flatfish retail assumption next year. I think I'd stand by those at the moment. The call we gave earlier this year about modestly down, you know, it obviously the market it feels very quite a lot, but it kind of came back to where we thought it was.

With the imperative of making sure that end of year inventory pipelines are in the right place as we head into 2024.

I think the fact that we're able to do all this.

Still deliver.

Second best ever year with EPS within 10% of 2022.

10% higher than 2021 is pretty remarkable.

Still moving forward all of our strategic priorities, we didnt really talk much about electrification like avatar in flight, but those continue to be.

David Foulkes: That doesn't mean that we're always right, but I think we have a decent feel for this. But I think what you've seen this year is we have all kinds of levers to pull, and we're very effective at doing it. We began to work on operating expense very quickly this year, as market conditions are folded and pulled out significant operating expense. So, as we, and that was obviously progressive during the year, so on a run-rate basis with higher as we go into 2024, but we still have some things that are pretty favorable for us.

Positive growth opportunities for us.

Just again, it's nice to see when there's a lot of uncertainty around Mercury comes through again with 57% sure Lauderdale and close to 70% on the water. So.

That is a.

<unk> trend. That's just continues forward and we're very encouraged by it.

Alright, Thank you all very much for joining us.

Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

David Foulkes: Obviously, as we see the market softer and generally, market softer across recreation and beyond the customer supply dynamics change. We're able to influence price things somewhat more. We pivot people from whatever they were doing this year to work more on getting cogs reductions, design cost reductions, negotiate cost reductions, all those kinds of things, including and working on our operating spend lines as well. So I think we still have plenty of levels to pull, and we've consistently demonstrated how effective we can be doing that.

[music].

David Foulkes: And I would just Craig, I think you know this, but I caution 15% down from this year would be below the level of sales after the GFC. So obviously everyone's doing their best to forecast the market, but that would seem to be an extremely down scenario, given what we've seen in the environment even this year.

Ryan Gwillim: Craig, I wouldn't also neglect what we can do on the go-to-market side. The New Brunswick finance solution that we're just rolling out, I think gives us some unique flexibility to offer customers promotional financing of various kinds, kind of bridging them through this period of higher rates. So this is a multitude of levels that we have to pull on the go-to-market side, on the cog side, and on the expense side that I think we could, we've shown our effectiveness into it.

Ryan Gwillim: And then I guess I'd lastly throw in the capital strategy side. I mean, if we needed to Craig, we could take CapEx down to maintenance levels, which is 30, 35%, which you know, that starts at 100, 125 million. I'm not saying we would want to, but that's something we could do. Obviously, our cash generation and our ability to convert working capital has been proven to be pretty strong this year, and I would anticipate next year.

Okay.

[music].

Ryan Gwillim: So in your scenario, we would go into even more cash generation, buckle down mode, and we've proven our ability to do that because you don't have a whole lot of other fixed obligations to services at the time of our cost capital and cost of testing relatively low. But I'm delivering this, Craig was great, but it was an interesting question, I think. We will finish this year if we hit our $9.00 EPS, we'll be 10% on EPS below last year, but we've been about 10% up on 2021. So it'll be our second best year ever in market conditions, but a less than ideal. So I think we will continue to perform.

Craig Kennison: That's really helpful, thanks guys.

Jamie Katz: Our next question is from Jamie Katz with Morningstar, please proceed. Hi, good morning. You guys talk a little bit about the emphasis for the new retail financing partnership. I know you just mentioned that it was to help consumers through this period of time, but I'm wondering if it also implies that maybe other retail financing partners are getting a little bit more. Cautious and are maybe changing their their tune in lending currently.

Jamie Katz: No, it doesn't imply that at all. I think you know, we have been in the retail financing. We have a business called Blue Water Finance, so we've been in the retail financing kind of arena for a while. This is really an integrated digital finance solution that is just much easier and quicker for consumers to access. So it's embedded in a website. You configure a boat. You can immediately get not only the boat cost, but also approval for at least provisional approval for financing that would move through to the dealer.

Jamie Katz: So and it allows us to have more flexibility with a promotional finance offering. So obviously at the moment in the current environment, we're offering discounts on purchase price, and other things, option allowances, those kinds of things. But there's a new lever for us to pull if we see that a consumer is most cautious because of interest rates versus other potential criteria than this because there's another option. So yeah, it's nothing to do with lender availability, everything to do with giving ourselves about a toolkit and giving our consumers a better experience through the process of acquiring both.

Jamie Katz: Excellent. And then can you just speak to new voters in the market and your ability to continue to track them in this sort of environment? Has the mix of purchasers or participants been changing it all in the last six months or so and sort of what are you expecting going forward? Actually, I'll be honest with you, I don't have an updated kind of data set on new voters, but we can go find that.

Jamie Katz: I would tell you though that Brunswick brands over index towards attracting new voters. And interestingly, not only are our value brands like Bayline and even in our premium brands. And I think the reason part of the reason for that at least is brand recognition. If you own three of the four best known brands in the US and you're a new voter, it's kind of where an obvious choice with a top of every list of potential votes and whatever category you want to buy a vote.

Jamie Katz: So I think brand strength, new products are always going to mean that new voters is less vulnerable marketplace and gravitate 12 brands. And in addition, freedom, freedom is such a good gateway for new voters. New and returning voters, voters that have maybe been out for a decade or more, Jamie. And so that we continue to see really steady membership at freedom despite what is obviously a bit of a turbulent time in the market in the overall economy. So all of those things really led itself to continuing to find ways to bring new voters in.

Jamie Katz: Great. Thanks for the color.

Joseph Altobello: Our next question is from Joe Eltebello with Raymond James. Please proceed. Thanks. Hey guys. Good morning. I guess first question for you, Ryan. Obviously you were hesitant to call $9 an EPS lower for next year. Understandably given all the uncertainty. But you said in the past that you felt like $8 is a reasonable recession floor. Is that still what you're thinking?

Ryan Gwillim: Hi Joe. Yes. You know, we still stand very much behind those $6 and $8 cases. I think those give a really nice background into what? How we perform in a market situation that obviously we're kind of seeing ourselves in the market is almost down 30, 35%. So yeah, I don't think there'll be a whole lot of changes to our thinking on the $8 case. I would say again, engine PNA has some good lights there and impact to kind of steady growth.

Ryan Gwillim: Navajo continues to be improved a strong capital strategy and then kind of steady boat and propulsion as they work through market dynamics. All of those things were embedded into those plans and I think we would be very comfortable with those still.

Ryan Gwillim: Okay, helpful. And maybe in terms of dealers and how they're thinking about ordering a demand for next year, when do you think they'll get enough information to start impacting orders? Is it Miami? Is it Palm Beach? Okay, but towards the end of the year, earlier shows like Toronto, Chicago, Minneapolis, all in January, would be important for the aluminum market, Düsseldorf, also at the end of January for the European market, which is mainly a fiberglass market, not so much as aluminum market.

Ryan Gwillim: And then in mid-February, of course, we have Miami, which is the next big show. So it's really progressive in this year, we're going through, you know, Genoa, Paris, Cannes, all those kinds of things. It's a pretty steady stream of late season shows and early season shows moment. Okay, so it should be pretty early and counter 24, what let me know? Yeah, depending on the brand. I mean, I think for a lot of there will be a good point for premium.

Ryan Gwillim: So, you know, first day was very encouraging for us. We'll see how the rest of the show unfolds. And then as you get into the balance of the year, obviously not much going on in December, but really early January, you get into quite a lot of aluminum shows. So there'll be an indication of what buyers are feeling at that point time. And then late January to early February, we'll see more fiberglass, particularly on the premium end. Thank you.

Scott Stember: Our next question is from Scott Stember with Roth and KM, please proceed.

Scott Stember: Good morning. Thanks for taking my questions, guys. He's got on the parts and accessories side. Can you talk about what retail POS is looking at, looking like, and maybe parse that out RV versus boat? Yeah, I can take that. You know, we still have limited POS information from various retailers. I'd say on the marine side, kind of on the traditional marine side. Scott, we're seeing, you know, kind of retail and wholesale matching.

Scott Stember: We're seeing dealers take the inventory they need at the end of the year to winterize product and obviously the Southern hemisphere to keep folks on the water. So again, U.S, products was up 10% in the quarter, and only a bit of that is priced. So a lot of that is really nice, strong demand and filling, filling channels in ahead of a kind of the end of the season in those places where there is an end of the season for kind of more retailers.

Scott Stember: And that is primarily, we see that in the navigable group. You know, we believe that their inventory is at right side because we enter the holiday. So we're seeing pretty strong point of sale there, certainly on the new products that navigos come out with. I mean, to really drive retail out of the holiday, you know, new products is key and we continue to see good performance there. Big, you know, obviously we said it in the release, but the holiday season is a big time for Navico. They're preparing and getting the right inventory in the dealer and retailer hands and, you know, we would anticipate a pretty strong performance.

Scott Stember: All right, just last question. One of your competitors in the recreation and leisure space, artboard vehicles did mention earlier this week that they're hearing from the lenders that there's a slight tightening going on with lenders looking more heavily at things like, you know, debt to income ratios. Are you seeing that tightening in your markets at all? We're talking about retail financing, right? Yeah, I think the spreads are higher. So, I think, you know, getting to the kind of 9% reprise, pretty good flight score.

Scott Stember: So, I think we're probably asking a bit of increase in the spreads. I wouldn't say it's particularly noticeable at the moment we can get some more detail on that. But yeah, I think that's probably probably true. And we are just continuing to see an influx of people bringing cash up and down the whole spectrum, including premium. So, that is one that we continuously got it.

Scott Stember: All right, that's all I have. Thank you.

Michael Swartz: Our next question is from Mike Twartz with true securities. Please proceed. Hey, guys. Good morning. Maybe just following up on Joe's question around, you know, order books for 2024, model year 24. I know there's very early in the show season. But maybe is there any sense or any range can give us what those early commitments have looked like versus at the same time last year? Yeah, I might. That's strong. We have very solid board of banks across all of our brands at this point in time.

Michael Swartz: And I would say very similar across most brands to last year, or at least if not last year, at least in line with our expectations of what's appropriate for this year. So we go through looking at percentage of fulfillment and you probably know we go on a trimester basis here. So right now we're looking at the kind of first trimester orders, but also the point route for a year. But I would say that I don't have the latest numbers, but I think we were aligned pretty well now and have very solid orders from all of our dealers.

Michael Swartz: Okay, and then with the, with the red or the new labor agreement, I've been found a lot. It's just a broader question for 2024. I guess, how should we think about the cost environment? Is it still going to be fairly inflationary? Are you seeing any any, you know, the cost curve flat now, or maybe even seeing any benefits as we go into 24? Yeah, I would say that overall, I think the environment is turning much more favorable for us in terms of supplier pricing.

Michael Swartz: Suppliers willing to take, willing to offer discounts, willing to offer lower prices to us commodities, obviously, have come more in line with historical norms. I think our labor costing increases will be very normal. So nothing. Kind of out of the ordinary for next year. So I would say overall the cost environment is going to be constructive for us somewhere. I'm putting a lot of resources in that area right now. I would say, making sure we're very actively working with the supply base to get the best cost, valuating alternative supplies.

Michael Swartz: So yeah, we will work very actively in that area and I would expect overall for that to be constructive for the year. And every division has cost take out programs and plans and targets for the year. I'm not just at the outfits level, but ways to bring clogs down as well. So, you know, back to the earlier question on what what strings do you pull on a top economic time, you know, looking at programs at the gross margin line can be equally important. It's just wrong. Cost take out of the effects.

Matthew Boss: Our next question is from Matthew Bus with JP Morgan, please proceed. Great, thanks. Dave, so maybe higher level, could you just elaborate on the consumer and dealer sentiment today, maybe relative to three months ago or just how, you know, or what involved exactly in the forecast. And then specifically with the higher interest rate backdrop, are there any changes you've seen so far in the promotional landscape or just what levers would you or could you pull to entice customers to convert if needed.

Matthew Boss: And I think that you know, I don't think it's really a change in sentiment really. I think it's just the part of the season that we're in right now. Obviously, three months ago, we're in the height of the selling season. People are spending their time doing a whole bunch of other selling as much as they possibly can. And focusing on getting product up the door, now they're pivoting to much consideration of stocking levels to what is mainly the office season.

Matthew Boss: So I don't think sentiment has really changed a lot. I think they're just now going through normal seasonal changes in the way that they're focusing. I think you can tell from our inventory levels that we've been very careful to make sure that we align well with our dealers, that everybody feels good about stocking levels going into 2024. So I would say they're encouraged by that. I think the so yeah, I don't think that there is a huge change in sentiment also feedback.

Matthew Boss: I'm getting I'm going down to for a lot of they'll later the afternoon. I'll get some direct feedback. But broadly, we have customers seem to be pretty positive. Obviously that show is a premium show. That is the most resilient part of the marketplace. So I just I don't think that there is a marked change. I think this is general. Broadly, you know, some really early questions are talking about, you know, some of the more downside scenarios for next year, but broadly, things are generally stabilizing on a price basis on an interest rate basis, the environment is somewhat more stable.

Matthew Boss: I think that there is caution from you know about what what might happen next year, but I wouldn't say there's a notable change in in sentiment either from all yams or and Consumer Research. What was the second part of the question? Sorry, could you repeat the second part of the question? Any changes in the promotional landscape, or are there levers that you would pull just given the higher interest rate environment to entice a customer to convert?

Matthew Boss: Yeah, well, promotions through the kind of back ends of the selling season were kind of up at, you know, kind of 2019 levels, I would say. To be honest at the moment, you know, from now through the end of the year, we'll be less than 10 percent of the total and you'll say much less than 10 percent. So the influence of promotions is diminishing except in the southern markets, well, I know it's the mostly five of us premium markets, where we haven't had such a promotional environment.

Matthew Boss: So we might be kind of working to get the last few units that we can, but I would say the promotion at the time of the year is just not, you know, not super effective and not super meaningful in the northern markets.

Matthew Boss: No full-color, best of luck.

Tristan Thomas: Our next question is from Tristan Thomas, and with BMO Capital Markets, please proceed. Hey, good morning. Two quick ones. One, you mentioned Fort Waterdale a couple of times. How were some of the other fall season boat shows? And then with Freedom Oak Club, what's the state of the fleet there? And then what could a potential kind of refresh upgrade cycle look like? Thanks. Yeah, good question.

David Foulkes: So really, for Fort Waterdale, you know, Miami is the kind of start of season premium show in the US, and Fort Waterdale is more the end of season US show. We've been really focusing quite a lot on European shows recently. We had a really strong showing at Cannes. Our brands were extremely well received. We're able to get some large Boston whilers and large series over to Europe for a change because in the past three years, everything's been sold in the US.

David Foulkes: So it was very encouraging to get those bigger products miles over to Europe and they sold very well. The band was really well received and I think represents a significant opportunity for us. And Mercury's market share through all of those shows was, I can't remember the exact numbers, but we were in high 50s to 60s. Pretty much every show. So all of the constructive factors that we continued to see were prevailing through the late season European shows. And then obviously, we just have one day for a lot of bail behind us. But, you know, hoping for the best for the balance of that show. Thank you.

Operator: This will conclude our question answer session.

David Foulkes: I would like to turn the call back over to D for some concluding remarks. Okay, thank you all for joining us very much and for the great questions. As you saw, despite the challenges, we again delivered a very solid quarter.

David Foulkes: For the rest of the year, our focus is on balancing continuing to deliver those solid earnings and free cashflow with the imperative of making sure that end of year inventory pipelines are in the right place as we head into 2024. I think the fact that we're able to do all this, still deliver a second best ever year with EPS within 10% of 2022. 10% higher than 2021 is pretty remarkable, but still moving forward all of our strategic priorities.

David Foulkes: We didn't really talk much about location, like Avatar and vibe, but those continue to be positive growth opportunities for us. And just again, it is nice to see when there's a lot of uncertainty around, Mercury comes through again with 57% share of Lauderdale and most of the 70% on the water, so that is an incredible trend that just continues forward and we're very encouraged by it.

Operator: All right, thank you all very much for joining us.

Operator: Thank you, this will conclude today's conference.

Operator: You made this connect your lines at this time, and thank you for your participation.