Q4 2023 Brunswick Corp Earnings Call

Good morning, welcome to Brent Smith Corporation's fourth quarter and full year 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 now like to introduce Niihau Clarke Senior Vice President Enterprise Finance Friendship Corporation. Thank you you may begin.

Garrett Johnson: Good morning, and thank you for joining US with me on the call. This morning are Dave Foulkes, Brunswick's, CEO and Ryan Gwilym 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 details on these factors to consider please refer to our recent SEC filings and todays.

S released all of these documents are available on our website at Brunswick Dot com.

Garrett Johnson: During our presentation, we will be referring to certain non-GAAP financial information.

Conciliations 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.

I'll now turn the call over to Dave.

Thanks, Neal and good morning, everyone.

Brunswick delivered another successful year in which we achieved the second highest sales and adjusted earnings per share in company history.

Despite market headwinds.

We also continued to gain market share increase our operational efficiency launch exceptional new products.

David M. Foulkes: Simply control costs and progressed on our strategic initiatives, including our ACO strategy.

David M. Foulkes: Our full year net sales of $6 4 billion and adjusted earnings per share of $8.80 was slightly below our guidance range.

David M. Foulkes: We'll sell a customer ordering pattern softened later in the year.

David M. Foulkes: However, our diligent focus on cash generation resulted in outstanding free cash flow of $473 million.

David M. Foulkes: For full year free cash flow conversion of 76%.

David M. Foulkes: In addition, we executed $275 million of share repurchases.

Mercury Marine has continued to catch a solid market share with full year U S outboard retail share up 50 basis points versus prior year.

2023 U S. New boat market unit retail sales are anticipated to finished in line with our estimates of down mid to high single digits.

With Brunswick brands outperforming the market in many segments.

As we moved out of the call. It 2023 retail selling season, we work closely with our Marine channel partners actively manage both field inventory levels and we closed the year with $36 seven weeks on hand in the U S, which is in line with our target them with historical norms.

David M. Foulkes: Yeah.

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

Our propulsion business finished its second best year on record leveraging more exciting new products market share gains and operational efficiencies.

Deliver consistent year over year operating margins, despite slightly lower sales and earnings.

David M. Foulkes: The historical highs in 2022.

David M. Foulkes: For the full year Mercury gained 150 basis points of overall U S retail share.

Just over 30 horsepower.

Which account for the majority of Mercury's investment in recent years.

In addition over 5000 Avatar electric outflows were produced following the launch of the first model in early 2023.

Mercury saw slowing up OEM off season orders as the Oems scaled back flow production controlled field inventory going into the new year.

We expect Oems to remain cautious entering the first quarter of 2024.

Consumer sentiment early season boat shows and monitor the macro environment.

Our engine parts and accessories business demonstrated steady performance in the quarter, reflecting a continued improving sequential trend.

David M. Foulkes: They also in the product portion of the business was up versus prior year for the second consecutive quarter.

And our distribution business was only down slightly with sequential improvement from the previous quarter.

Overall segment sales were up 22% on a full year basis versus 2019.

David M. Foulkes: They have a core group had a solid finish to the year as an increased flow of new products and continued focus on cost control business integration and complexity reduction helped offset a softer marine OEM market in the quarter.

I'm, a considerably slower I'll be manufacturing environments.

Finally, our boat business delivered sales and earnings in the quarter consistent with expectations, while continuing to ensure a healthy pipeline inventory levels entering 2024.

Strong demand for premium products together with market share gains in many categories. It is helping to provide a stable baseline for 2024.

David M. Foulkes: We didn't book club continues to grow and now has more than 410 locations.

<unk> completed approximately 600000 trips in 'twenty, two 'twenty three demonstrating the productivity of the model.

Shifting to external factors now U S employment remains at healthy levels with inflation continuing to stabilize.

The cadence of size and global Central Bank interest rate reductions will continue to be an important factor in the coming months.

Overall boat retail sales are trending slightly above 2023, but unit sales in the month of January or was a small contribution to the year.

Global early season boat shows are generally encouraging with good traffic interested buyers unhealthy lead generation.

Normalized inventory levels are allowing consumers to shop for the models have that choice and incentives continue to be important.

Emulating interest and assisting dealers in closing sales.

Oh, both engine and technology brands continued to perform well with Mercury recording outboard share gains at the important dusseldorf boat show achieving overall share of 48%.

<unk> entered 2024 with healthy inventory and a cautious in their ordering entering the new year. That's like closely monitor boat shows and retail at the start of the season.

Well as the economic trajectory.

We are pleased with interest in the recently launched Brunswick retail Finance program.

With more than 25% of Brunswick boat dealers, having already enrolled.

The program provides an additional way to stimulate demand in corporate leads with an efficient online consumer finance approval process and the ability to introduce promotional financing.

In addition, our investments in digital platforms continue to drive benefits across all brands with more than a third of boat group sales digitally assisted in 2023.

As expected both Oems are carefully controlling boat production rates to align with anticipated retail in 2024.

Resulting in lower order rates for Mercury engines, and medical group OEM products.

The softness continues to be more prevalent in value products at a low to mid horsepower outboard engines with premium product production and demand remaining solid.

Shifting now to a global view of revenue in the quarter.

Overall, we saw 15% sales decline on a constant currency basis, excluding acquisitions.

On a full year basis, the U S market declined mid single digits versus 2022, roughly in line with Europe and Asia Pacific.

You asked me boat industry retail was slightly down in the fourth quarter versus 2022.

With preliminary full year retail in line with expectations down approximately 6% versus 2022.

Overall for the full year Brunswick performed slightly better than the industry.

Picking up share, particularly strong performance by our pontoon.

Liam fiberglass and so brands supported by planned promotions and marketing on select product lines.

Outboard engine industry retail units turned positive this period with the fourth quarter up 1% versus prior year, bringing full year unit retail to down 2%.

David M. Foulkes: Mercury continues to outperform the industry with fourth quarter share gains of 50 basis points and greater than 30 horsepower categories.

David M. Foulkes: As we actively manage both pipelines we ended with inventory in line with expectations and historical norms with U S weeks on hand at $36 seven weeks and 14000 units versus 16000 units in 2019.

International both pipelines with slightly higher which is normally the case.

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

Thanks, Dave and good morning, everyone.

Once it's delivered a solid fourth quarter, despite softer wholesale demand across our businesses.

When compared to an extremely strong fourth quarter of 2022 net sales in the quarter were down 14% and adjusted EPS of $1.45 decreased 27%.

However, we delivered a record Q4 free cash flow of $242 million, a 25% increase over prior year as we continue to focus the enterprise on generating cash and minimizing working capital usage.

Sales were below prior year as the impact of cautious wholesale ordering patterns by dealers.

And retailers, coupled with higher discounts in select segments was only partially offset by successful new product momentum positive mix and pricing implemented in previous quarters.

Operating earnings and margin declined versus a record fourth quarter 2022, resulting from the impact of lower net sales and prudent spending on growth initiatives, partially offset by ongoing cost containment efforts.

For the full year, we delivered the second highest sales and adjusted EPS in Brunswick's history, just behind our 2022 performance.

Our strong free cash flow of $473 million resulted in second half free cash flow conversion of 143% again, 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 down 12% versus the fourth quarter of 2022, primarily due to cautious OEM ordering patterns, partially offset by continued market share gains in outboard engines and the acquisition of flight Board completed earlier in the year.

Operating margins increased by 110 basis points versus Q4 2022, as the impact of the sales declines and higher labor inflation costs were more than offset by cost control and reduced material inflation.

As Dave mentioned earlier as we exit 2023 and enter 2024, we anticipate that we will continue to maintain a progressive market share gains, but that our propulsion business will be impacted by additional reductions in both OEM production levels 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 overall market demand for engines.

The engine parts and accessories business continued to improve sequentially throughout the year with Q4 sales essentially flat versus 2022.

The high margin products business grew sales by 3% versus prior year, while distribution sales were down 4% as trends have continued to improve in both businesses from early 'twenty three.

Segment operating earnings and margins decreased in the quarter with a slight net sales decline and higher manufacturing costs more than offsetting the impact of pricing and lower operating expenses versus prior year.

Medical group reported a 17% decrease in sales as the business experienced softer marine OEM orders and the continued weak RV manufacturing environment in the quarter.

David M. Foulkes: Segment operating margins decreased in the quarter, primarily as a result of the net sales declines which more than offset the benefit of lower operating expenses.

Despite an overall challenging 2023 Navajo continues to make strides against our strategic priorities, including removing almost $20 million of structural cost, while improving its product development process and continuing to invest in market, leading technologies and expand its customer base for integrated and connected.

Illusions.

Finally, our boat business delivered sales and earnings in the quarter consistent with expectations, while continuing to ensure healthy pipeline inventory levels as we enter 2024.

Sales were down 22% versus Q4 of 2022, but sales in our more premium saltwater fish segment, which includes Boston whaler grew 5% year over year.

Adjusted operating 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 business acceleration had another solid quarter contributing approximately 8% of the boat segment's revenue during the quarter.

We're seeing very steady membership levels, despite the macro economic uncertainty.

We successfully executed our capital strategy in 2023, ending the year with $480 million of cash while funding strategic go in our businesses and returning capital to shareholders.

We deployed $289 million for capital expenditures on exciting new products and growth projects across our businesses.

Which we believe will drive future revenue and earnings growth.

In addition, as Dave mentioned, we took advantage of market and Brunswick share value dislocation repurchasing $275 million of our shares representing approximately three 5 million shares or 5% of the company.

We also increased our dividend for the 11th consecutive year.

Finally, our investment grade credit rating remains strong, reflecting a healthy balance sheet and net leverage of one eight times.

We will refinance our 2024 notes during the first half of this year with our strong liquidity and cash flow generation capabilities, continuing to provide investment and spending flexibility across the enterprise.

Tony's 24 has the potential to be a year of steadily easing financial conditions and while we entered the year with a cautious outlook, particularly on the first quarter. We remain extremely focused on driving earnings while delivering steady free cash flow and resilient EPS, which we believe will result in continued strong shareholder.

The returns.

Our disciplined pipeline management strong operational performance and continued investment in new product and growth coupled with prudent cost containment actions and a thoughtful capital strategy provide the necessary controllable levers in this uncertain consumer and business environment.

For fiscal 'twenty 'twenty, four we anticipate revenue of between six and $6 $2 billion adjusted.

Operating margins of between 12 and 13% and.

And adjusted EPS in the range of seven to $8.

We continue to see positive free cash flow conversion and working capital trends and anticipate generating more than $350 million of free cash flow for the year.

Please see the appendix for additional guidance regarding anticipated segment metrics.

We thought it would also be useful to provide a short walk from our 2023 adjusted EPS to our 2024 guidance along with providing more insight on our planned 2020 for Opex.

The main driver of the 2024 EPS reduction as the absence of pipeline fill across our business units as our channel inventory levels are fresh and at appropriate levels to start the season.

A little more than half of the impact relates to our propulsion business as they continued to fill OEM and dealer pipelines well into 2023.

With the remainder split evenly between our boat group and Abaco.

If retail demand exceeds our expectations, we anticipate the dealers and retailers will reorder product more consistent with historical patterns, which can provide a potential benefit later in 'twenty 'twenty four oriented 2025.

We then have approximately 50 cents of impact from increased tariffs interest expense and a slightly higher tax rate.

Lastly, we will continue to take actions to rightsize, our enterprise cost structure.

Although opex will increase slightly year over year. The increase was primarily related to the flight Board and freedom boat club acquisitions from 'twenty to 'twenty three.

Together with normal cost inflation, and resetting variable compensation back to target levels.

We are countering these items by planning to remove no less than $40 million of structural cost across the enterprise.

David M. Foulkes: Countering these headwinds are several tailwind mostly within our control.

We anticipate continuing to take market share in outboard engines, especially in high horsepower categories. While also taking share in premium boat categories, and certain marine electronic categories, where new products will drive growth.

David M. Foulkes: We also plan to be aggressive with share repurchases, especially early in the year.

I will wrap up the financial update by sharing some P&L cash flow and other capital strategy assumptions for the year.

First we expect a modest working capital usage for the year, reflecting our continued enterprise goal of lowering inventory levels to match anticipated sales while generating cash.

David M. Foulkes: Our slightly higher depreciation versus prior year reflects the additional capital invested in our businesses in recent years with acquisition amortization, which we exclude from our adjusted results being similar to prior year.

David M. Foulkes: It's been a few years since we've had to discuss tariffs, but despite a favorable exemption extension into the spring, we anticipate paying $15 million more tariffs versus 2023.

These terrorists are primarily related to components sourced from China, using our primary outboard manufacturing facility in Palo like Wisconsin.

Along with the importation of 40 to 60 horsepower engines produced at our Suzhou, China Assembly plant.

Lastly, our tax Department does an outstanding job of prudently and appropriately minimizing our textbook Brett and we anticipate a 23% effective tax rate on adjusted earnings for 'twenty, 'twenty, four which is slightly higher than 2023.

And finally this page shows several capital strategy and other financial assumptions as we begin the year.

On capital strategy, we anticipate being very active with share repurchases as I just mentioned.

And to support this effort earlier this week, our board of directors approved a fresh share repurchase authorization of $500 million, which we plan to put to good use.

We will have a higher net interest expense in 2024, resulting from the eventual refinancing of the 'twenty 'twenty. Four note, but are also planning a $100 million of debt reduction to minimize the impact.

We also anticipate increasing our dividend in February for the 12th straight year.

On FX. We currently think that rates will have a neutral to slightly negative impact on full year earnings, but this can obviously swing either way predominantly on the strength of the U S dollar versus the euro and a few other currencies used by our global businesses.

Finally, you'll notice a reduction in planned capex for the year.

Although we plan to continue funding many projects and investments in products and technology for future growth.

We are in harvest phase of many of our larger products from recent years and plan to be able to scale back spending slightly without sacrificing any future growth plans.

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

Thanks, Brian.

With field inventory at normalized levels and consumers, having that choice of products. It is vital that Brunswick continues to differentiate through a rapid flow of exciting new products and technology.

And then just the first few weeks of 'twenty 'twenty four Brunswick launched over 50, new products across its brands and businesses.

In January we again participated in the consumer electronic show, we launched two higher horsepower models and the Mercury Avatar electric outboard lineup, which now contains five models in total.

Demand for Avatar remains solid with maybe 60% of shipments in 2023 go into Europe.

Operator: Good morning. Welcome to Brunswick Corporation's fourth quarter and full year 2023 earnings conference call. All participants will be in a listen only mode until the question and answer period.

Theory introduced the new SPX to 70 217 models with next generation features styling and comfort.

Yes, the extra <unk> is the first modeling the S. T X line the feature of the Mercury Bravo for Us what we're displacing drive.

Operator: Today's meeting will be recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Neha Clark, Senior Vice President, Enterprise Finance, Friendship Corporation. Thank you. You may be seated.

And then switching wake surfing control system design jointly by Mercury Marine Unethical group.

Brunswick Sprint Scott Harris and low brands also introduced multiple new products that early season shows featuring Mercury Marine and novel Technology.

Neha Clark: Good morning, and thank you for joining us. Me on the call this morning are Dave Foulkes, StormTrack CEO, and Ryan Gwillim. See you.

David M. Foulkes: We are also very excited about the new segment, leading semerad NSX ultra wide. The industry's first full functionality high definition multifunction display, which features a 16 by nine screen aspect ratio.

Neha Clark: Before we begin with our prepared remarks, I would like to remind everyone that during this call, our comments will, forward Scott, Please keep in mind that our actual results could differ materially from these experts. For details on these factors to consider, please refer to our recent SEC filings and today's press conference. All of these documents are available on our website. During our presentation, we will be referring to certain non-GAAP financial measures. 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 meeting. I will now turn the call over to David. Thanks, NEMA, and good morning, everyone.

And showcases the seamless interface of the latest Cymrite Android operating system.

And finally freedom boat club continues to grow organically and through acquisition.

Including through the acquisitions of Savannah in Hilton head franchise territories in late 2023.

Two new franchise locations in Spain already announced in 2024.

Before we conclude I'm thrilled to highlight the exceptional accomplishments of our teams from across the enterprise that were recognized with a record high number of awards in 2023 and continue to be recognized in early 2024.

We wrap 2023 with 115 major awards for our products technology people and culture.

David M. Foulkes: Brunswick delivered another successful year in which we achieved the second highest sales and adjusted earnings per share in company history, despite market headwinds. We also continue to gain market share, increase our operational efficiency, launch exceptional new products, actively control costs, and progress our strategic initiatives, including our ACRE Spak. Our full year net sales were $6.4 billion and adjusted earnings per share of $8.80, which was slightly below our guidance year. A wholesale customer ordering pattern softens late in the year. However, our diligent focus on the past generation resulted in an outstanding true cash flow of $473 million, fourth four-year pre-cash flow conversion of 76 percent. In addition, we have completed $275 million of share equity.

David M. Foulkes: And just in early 2020 for the new Harris to 50 Crown when the animal Innovation Awards, the Minneapolis boat show.

The new Sea Ray to 60 F. L X one European power most of the year.

The V O E 13, when boating magazine boats of the units category.

In addition, brunswick's products and teams are nominated for multiple awards at the upcoming Miami boat show.

Thank you again to all of our talented Brunswick employees, who make these prestigious awards possible.

Which leads me to remind you to join us at our Investor and analyst event on February 15.

'twenty 'twenty four the Miami International boat show, where.

When we look forward to hosting you to see the latest products and technologies from across our brands and businesses as.

As well as meet with members of our management team.

David M. Foulkes: Mercury Marine has continued to capture solid market share with a four-year US outboard retail share of 50 basis points versus the prior year. 2023 US New Vault Market Unit retail sales are anticipated to finish in line with our estimates of down mid to high single digits, and Brunswick Brands helps perform in the market in many segments has been moved out of the core 2023 retail selling. We work closely with our marine channel partners to actively manage boat field imagery levels, and we close the year with 36.7 weeks on hand in the U.S., which is in line with our target and with historical norms. And now I turn to some of the segment highlights for the quarter and for the year. Our propulsion business finished its second best year on record, leveraging more exciting new products, market share gains, and operational efficiency to deliver consistent year-over-year operating margins despite slightly lower sales and earnings versus historical highs in 2022.

Thank you for joining the call that concludes our prepared remarks, we'll now open the line for questions.

Thank you.

I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. 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, we ask that you. Please.

David M. Foulkes: Ask one question and one follow up question.

Our first question is from Matthew boss.

With J P. Morgan. Please proceed.

Thanks, So Dave maybe could you help rank the top line drivers by segment and just visibility today to improvement as the year progresses, if we could just bridge that [noise].

Delta between the more than 20% decline expected in the first quarter to the full year guide of down mid single digits that I think that'd be really helpful.

Yeah, Hi, Matthew Yeah, I think the.

Factors really.

David M. Foulkes: For the full year, Mercury gained 150 basis points of overall U.S. resale share for outboard engines over 30 horsepower, which accounts for the majority of Mercury's investment in recent years. In addition, over 5,000 Avator electric outboards were built, following the launch of the first model in early 2023. Mercury saw a flow of OEM off-season orders as the OEM scaled back boat production for Field Infantry going into the new year. We expect OEMs to remain cautious entering the third quarter of 2024 as they assess consumer sentiment at early season boat shows and monitor the macroenvironment. Our Ancient Parts and Accessories Fitness segment demonstrated steady performance in the course.

David M. Foulkes: Similar across all of our businesses to some extent and it's really the fact that we.

David M. Foulkes: We saw in the particularly the December.

Fourth quarter.

Reduced demand from Marine Oems.

And more production shutdowns.

Each had an impact on our mercury wholesale orders in Devon.

Wholesale orders.

As well as of course, we reduced production to meet our year end targets for boat inventory and get to that 37 ish weeks on hand.

So the fourth the first quarter, we anticipate continued cautious ordering cross tool sale.

By Mercury's OEM customers, which is about kind of 80% of their sales.

David M. Foulkes: Reflecting a Continued Improving Secular Trend, Sales in the past portion of the business were up versus the prior year for the second consecutive quarter, and our distribution business was only down slightly, with sequential improvements from the previous quarter. Overall, segment sales were up 20% on a four-year basis for 2019. Nabucco Group had its forward finished for the year.

And never called groups OEM customer marine customers, which is about 30%.

We obviously will be.

Continuing to be to meet to our own boat production during that period.

But we anticipate based on early season retail.

Firms I think probably at least these retail now isn't orders will begin to pick up to more normalized levels as we enter the selling.

David M. Foulkes: This flow of new products and continued focus on cost control, business integration, and complexity reduction helped offset a soft and marine OEM market in the Corp and the considerably flawed RV manufacturing environment. Finally, our bold business delivered sales and earnings in the quarter consistent with expectations. I'll continue to ensure healthy pipeline imagery levels and from 2024. Strong demand for premium products, together with market share gains in many categories, is helping to provide a stable baseline for 2024. Freedom Boat Club continues to grow and now has more than 410 locations.

Selling season.

Q1, as we get to the end of Q1 was seeing.

Boat retail up about 10% versus last year, which is an encouraging sign so I would say that the factors really affect all of our divisions somewhat slowly.

It is the production and wholesale order and getting back to more normalized levels Q2 forward.

And Matthew Good morning, Brian just for a reminder, Q1 of 2023.

We were very much still filling pipelines and just about all engine categories and even boats. If you remember so it is a more challenging comparison and I wouldnt, if you're modeling it out.

David M. Foulkes: Members completed approximately 600,000 trips in 2023, demonstrating the productivity of the model. Shifting to external factors now, U.S. employment remains at healthy levels, with inflation continuing to stabilize. The cadence of Fed and global central bank interest rate reductions will continue to be an important factor in the coming months. Overall, boat retail sales are trending slightly above 2023, but unit sales in the month of January are always a small contribution to the year. Global early season boat shows are generally encouraging, with good traffic, interested buyers, and healthy lead generation.

First quarter of 2024 should look relatively similar to the fourth quarter of 2003 as Dave mentioned.

Great and then maybe just a follow up Brian as we consider that I think it's roughly 12% operating margin at the lower end of this year's guide as maybe a potential floor could you just elaborate on that the 40 million structural cost savings that you cited in your remarks, where in the organization.

That you've found efficiencies and are there further opportunities that you see for potentially additional savings.

Yeah, Matthew I mean, this is a cross enterprise project that where they were undertaking and frankly, its just to right size. The overall cost structure of the enterprise. If you think about where our strategic plan and our targets are we're still very confident in those.

David M. Foulkes: Normalized entry levels are allowing consumers to shop for the models of their choice, and incentives continue to be important in stimulating interest and assisting dealers in closing sales. Our engine and technology brands continue to perform well, with Mercury Recording outpouring share gains at the important Düsseldorf Boat Show, achieving an overall share of 48%. Steelers entered 2024 with healthy inventory and are cautious in their ordering entering the new year, as they closely monitor boat shows and retail at the start of the season, as well as the economic recovery. We are pleased with interest in the recently launched Brunswick Retail Finance Program, with more than 25% of Bronx High School students having already enrolled. The program provides an additional way to stimulate demand and convert leads, with an efficient online consumer finance approval process and the ability to introduce promotional finance.

But getting there in 2027 is going to take a little bit the shape of that is kind of unfolding as we would expect which is 24 being a little bit more muted and then picking back up in the out years, we just need to make sure that our cost structure matches that that same shape.

Those.

Actions are in flight actions, if we need to find more we always find a way that's right.

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

Hey, good morning, Thanks for taking my call. So when he's talking about inventory you guys have said that you feel pretty good about where you sit today.

It seems like a lot of other players in the industry are speaking kit inventory being too high I guess, you know what do you think the differences there.

David M. Foulkes: In addition, our investments in digital platforms continue to drive benefits across our brands. There is more than a third of boat group sales historically invested in 2023. As expected, both OEMs are carefully controlling bulk production rates to align with anticipated retail in 2024, resulting in lower order rates for Mercury engines and Nautical Group OEM products. However, the softness continues to be more prevalent in value products and low to mid-horsepower outboard engines.

Do you think you control your own inventories better than maybe some other Oems it doesn't matter. If that's the case if you ultimately competing with those that happened.

And I guess, how do we think about inventory.

Inventories at finish 'twenty 'twenty, four whether in terms of units or or weeks on hand.

Yeah, Hi, James Thank you for the question yeah. Thanks.

We did see a lot of.

Commentary about.

David M. Foulkes: Premium Product Production and Demand remains very solid. Shifting now to a global view of revenue in the quarter, overall, we saw a 15% sales decline on a constant currency basis, excluding acquisitions.

Oem's noticing higher than desired inventory levels, we are very comfortable without inventory levels.

I think we we explained that we had put a lot of effort into managing inventory in the back half of the year, we did see some relatively abrupt.

David M. Foulkes: On a full year basis, the U.S. market declined mid-single-digit versus 2022, roughly in line with Europe and Asia-Pacific. U.S. People Industry retail was slightly down in the fourth quarter of 2022, with Preliminary Full Year Retail in line with expectations of down approximately 6% this 2020. Overall, for the full year, Brunswick performed slightly faster than the industry. Thank you enough to share, particularly through strong performance by Opton2, Premium PhytoGlass, and Tobrand. Supported by Grand Promotions and Marketing of Select Product Lines, Outboard Engine Industry retail units turned positive this period, with a fourth quarter up 1% versus the prior year, bringing full year unit retail to down 2%. My frequency needs to outperform the industry. 4th Quarter Stag Game for 50 bases, and Grace is in the 30 horsepower category.

Changes in production patterns in December from some of Mercury's OEM customers.

Our production did not change as it probably because we began to I think be trimmed down somewhat earlier.

And yeah honestly despite the.

Yeah.

Commentary, yeah, we feel extremely good about our inventory levels.

Does it matter.

What the industry does well it makes it difficult more difficult for us to predict Mercury and never called group wholesale sales.

Because we tend to experience more kind of choppy ordering patterns in the back half of Q4, we made maybe the same in the first half of Q1.

But I feel like based on our retail performance in January which you know is a very small month, but still somewhat encouraging I don't think we're suffering I think we have the right level of retail incentives dealer incentives.

Ryan M. Gwillim: As we actively managed bulk pipelines, we ended with inventory in line with expectations and historical norms, with U.S. weeks on hand at 36.7 weeks and 14,000 units versus 16,000 units in 2019. International Boat Pipeline is slightly higher, which is normally the case. And I turn the call over to Ryan to provide additional comments on our financial performance and outlook. Please stay, and good morning everyone.

Demand and I think we have the right inventory level, so I'm very comfortable where we are.

And then the last part of your question was.

Thank you will and 24.

The plan is to have inventory levels below.

David M. Foulkes: In 2023 end of year levels by the end of this year not dramatically, but down a handful of weeks on hand.

If if retail continues to be a little bit outpacing maybe our expectations.

Ryan M. Gwillim: Funds delivered a solid fourth quarter despite softer wholesale demand across our businesses. However, when compared to an extremely strong fourth quarter of 2022, net sales in the quarter were down 14% and adjusted EPS of $1.45 decreased 27%. However, we delivered a record Q4 free cash flow of $242 million, a 25% increase over the prior year, as we continue to focus the enterprise on generating cash and minimizing working capital usage. Sales were below the prior year, as the impact of cautious wholesale ordering patterns by dealers, OEMs, and retailers, coupled with higher discounts in select segments, was only partially offset by successful new product momentum, positive mix, and pricing implemented in previous quarters. Operating earnings and margin declined versus a record fourth quarter 2022, resulting from the impact of lower net sales and prudent spending on growth initiatives, partially offset by ongoing cost containment efforts.

Then we can maneuver that a little bit but right now the.

The plan would be in a few weeks of a weeks on hand, it lower at the end of 'twenty four 'twenty three.

Got it really helpful.

And then you know as we sort of contemplate the 'twenty 'twenty four guidance.

It sits somewhere between you know when you gave us the recession scenarios sort of a modest.

The severe recession, despite not being in a recession that I don't point that out to sort of knock your.

Projections two years ago, but I guess, maybe speak to what the divergent series, but I guess as it occurs to me back then we weren't necessarily thinking but the macro weakness would be as interest rate driven as it appears to have been maybe speak to that and I guess, what I'm <unk>.

Really trying to figure out is if rates in fact do come down.

This year is there an opportunity for snap back maybe more quickly than we would otherwise see.

Ryan M. Gwillim: For the full year, we delivered the second highest sales and adjusted EPS in Brunswick's history, just behind our 2022 performance. Our strong free cash flow of $473 million resulted in a second half free cash flow conversion of 143%, again 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 down 12% versus the fourth quarter of 2022, primarily due to cautious OEM ordering patterns, partially offset by continued market share gains in outboard engines and the acquisition of flight boards completed earlier in the year. Operating margins increased by 110 basis points versus Q4 2022 as the impact of the sales declines and higher labor inflation costs was more than offset by cost control and reduced material inflation.

You know in previous sort of post recession scenario.

Yes, <unk> I'll start with that and then Dave can fill in yeah.

I always interesting when you come out with a downside scenario, you've got a you've got to live with that kind of in perpetuity.

But we knew that we would get this question obviously on the call. This morning, you know the difference really is kind of two things. One is the starting point if I remember this was a one year scenario that we came out with in 2022 at a time, where we were coming off a kind of a $10 EPS number.

Or had a 10 dollar budget excuse me for 2020 to EPS and we are anticipating what would happen if the if the world dropped off in one year that Youre also had some pipeline fill in it where boat group, although the retail sales of drop off I think we said 30% to 35% at retail.

The wholesale would actually hold in a little better there.

Ryan M. 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 reductions in both OEM production levels 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 overall market demand for engines. The engine parts and accessories business continued to improve sequentially throughout the year, with Q4 sales essentially flat versus 2022. The high-margin product business grew sales by 3% versus the prior year, while distribution sales were down 4%, as trends continued to improve in both businesses in early 2023. Judging operating earnings and margins decreased in the quarter, with the slight net sales decline and higher manufacturing costs more than offsetting the impact of pricing and lower operating expenses versus the prior year. Medical Group reported a 17% decrease in sales as the business experienced softer marine OEM orders and the continued weak RV manufacturing environment in the quarter.

As we sit today the real difference is two one.

No pipeline refill, our remaining really in both boats or engines, but to really the P&A businesses as a whole they haven't performed any different than we anticipated, but they have performed a little different from a starting point. If you remember really peak PNA season was end of 'twenty one.

Into 'twenty, two and despite still having a CAGR of kind of eight 9% over the last five years that business has come off a little bit from a high really those two years that we that we gave the downside scenario. So if you take the midpoint of our range kind of a 750, you've probably gotten a little bit of goodness.

I'll share a little trailing on DNA shares are obviously, a good guy because we've been buying back a little more and then the last thing I'd say it was an investment really in the aces are in.

In all of our acis categories that.

David M. Foulkes: German about maybe 40 50 of.

Costs, but we're obviously happy to do that.

So that's really the difference.

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

Hey, guys just wanted to touch on the propulsion guidance and more specifically just the margin assumptions it looks like you're kind of embedding in that guidance about 16% margins, which is stepped down about 200 basis points.

Ryan M. Gwillim: Segment operating margins decreased in the quarter primarily as a result of the net sales declines, which more than offset the benefit of lower operating expenses. Despite an overall challenging 2023, Navico continues to make strides against its strategic priorities, including removing almost $20 million of structural costs while improving its product development process and continuing to invest in market-leading technologies and expand its customer base for integrated and connected solutions. Finally, our bulk business delivered sales and earnings in the quarter consistent with expectations, while continuing to ensure healthy pipeline inventory levels as we enter 2024. Sales are down 22% versus Q4 of 2022, but sales in our more premium saltwater fish segment, which includes Boston Whaler, grew 5% year over year. Adjusted operating margins and earnings were down primarily due to lower sales, partially offset by focused cost reduction activities.

From the commentary you probably wouldn't call. It sounds like you know mix, both product mix and channel mix should be positives just help us walk through how you get to that 200 basis point decline.

Hey, good morning, Mike Yeah again. This is one that we kind of knew would get folks attention.

Starts with absorption just due to lower volume if you look on the EPS Bridge you noted the pipeline the lack of pipeline fill being a big driver in EPS and a chunk of that is obviously value and sales related but that also hurts absorption in the facility certainly in the final like facility with lower.

David M. Foulkes: Volume absorption is certainly the number one tariffs as number two are about 15 million more of tariffs and that just goes right to Cogs.

And we're doing our best to offset it by doing other things and where we do final assembly, but its still $15 million is hard to cover.

Ryan M. Gwillim: Freedom Boat Club, which is included in business acceleration, had another solid quarter, contributing approximately 8% of the boat segment's revenue during the quarter, while seeing very steady membership levels despite the macro economic uncertainty. We successfully executed our capital strategy in 2023, ending the year with $480 million of cash while funding strategic growth in our businesses and returning capital to shareholders. We deployed $289 million for capital expenditures on exciting new products and growth projects across our businesses, which we believe will drive future revenue and earnings. In addition, as Dave mentioned, we took advantage of market and brokerage share value dislocation, repurchasing $275 million of our shares, representing approximately 3.5 million shares, or 5% of the company. We have also increased our dividends for the 11th consecutive year.

And then we are in a position where input costs material and labor are elevated a little bit over prior year, not not a terrible amount, but our ability to price over that although positive so price peanut price over input costs. So positive.

The spread there the available price over input cost is not as large so the goodness is not as large.

Those three things are really the primary drivers in there they're really all in gross margin I would note that as as per usual Mercury does a fantastic job of moderating their cost structure and their opex is targeted to be relatively flat.

Year over year, and that's inclusive of absorbing all the Opex from flight, which is the October acquisition, obviously, and the resetting of comp back to target levels.

Okay. That's helpful. Thank you, Brian and maybe just a second question.

David M. Foulkes:

David M. Foulkes: As we think about the the the lower end of the earnings range than the higher end of the range I mean, maybe walk us through maybe the the big four or five.

Ryan M. Gwillim: Finally, our investment grade credit rating remains strong, reflecting a healthy balance sheet and net leverage of 1.8 times. We will refinance our 2024 notes during the first half of this year, using our strong liquidity and cash flow generation capabilities, continuing to provide investment and spending flexibility across the enterprise. 2024 has the potential to be a year of steadily easing financial conditions. And while we enter the year with a cautious outlook, particularly for the first quarter, we remain extremely focused on driving earnings while delivering steady free cash flow and resilient EPS, which we believe will result in continued strong shareholder returns. Our disciplined pipeline management, strong operational performance, and continued investment in new products and growth, coupled with prudent cost containment actions and a thoughtful capital strategy, provide the necessary controllable levers in this uncertain consumer and business environment. For fiscal 2024, we anticipate revenue of between $6.2 billion and $6.2 billion.

Factors driving that how do you get to the top end, how do you get to the bottom end.

I think Mike.

Just one addition to the previous point is that the absorption issue really over indexes towards Q1, because we don't want to get rid of people buying.

Prices in Q1 that we're going to need in Q2, so there's a kind of compounding effect in Q1 that will normalize through the other quarters in the year.

In terms of top on bought some of the range I think bottom of the range would have to be for the macro.

Weakness than we anticipate.

If retail sales hanging in it.

Roughly flat to the last year, it's difficult to see the box model.

But we don't need a lot of.

Market tailwind.

To get above the mid point really I think our.

Assumption of.

Wholesale boat units actually production going down.

This year in terms of being about a thousand units been below retail is probably a bit on the pessimistic.

Syed and then especially with the cost reductions that we will implement an in any market scenario that we've already described I think that will help our leverage.

I'm, particularly benefit E. P. S. So I would say downside would have to be additional macro risks some kind.

Ryan M. Gwillim: Adjusted operating margins of between 12 and 13% and Adjusted EPS in the range of $7 to $8. We continue to see positive free cash flow conversion and working capital trends and anticipate generating more than $350 million of free cash flow for the year. Please see the appendix for additional guidance regarding anticipated segment metrics.

The upside is a bit better tailwind from the market.

Speaker Change: Okay. Thank you.

Yeah.

Our next question is from Alexander with Morgan Stanley. Please proceed.

Hi, Yeah, I don't want to belabor it but just did have a follow up on that propulsion margin answer if I could.

Everything you said makes sense, but if I sit here and take kind of that $15 million of tariff out there.

Ryan M. Gwillim: We thought it would also be useful to provide a short walk from our 2023 adjusted EPS to our 2024 guidance, along with providing more insight on our planned 2024 options. The main driver of the 2024 EPS reduction is the absence of pipeline fill across our business, as our channel inventory levels are fresh and at appropriate levels to start the season. A little more than half of the impact relates to our propulsion business, as they continued to fill OEM and dealer pipelines well into 2023. With the remainder, we're evenly split between our vote group and NAMIC.

To kind of look apples to apples versus last year I'm still getting you know somewhere in the range of 45% ish decremental margins I think you've historically kind of talked about volume deleverage in the 20% to 30% range. So can you just maybe help us understand understand the discrepancy there because it just seems pretty large.

Yeah, I know, maybe I'm, making you right there.

There is the absorption hit is real I mean, it's a coming off of a first and second quarter, where we were running about as hard as.

As we could in that facility and really into the third quarter.

And then back to scaling back to kind of normal production levels for this year I mean, we're taking.

Call it a little bit more than 10% of production out of I find a lag.

Speaker Change: Here year over year, it's been.

Becomes a more material piece of the puzzle.

Ryan M. Gwillim: If retail demand exceeds our expectations, we anticipate that dealers and retailers will reorder products more consistent with historical patterns, which will provide a potential benefit later in 2024 or into 2025. We then have approximately 50 cents of impact from increased tariffs, interest expense, and a slightly higher tax rate. Although these three items are primarily uncontrollable, we will do our best to mitigate and minimize these expenses as we move throughout the year. Lastly, we will continue to take actions to rightsize our enterprise call structure. Although OPEX will increase slightly year over year, the increase is primarily related to the flight board and Freedom Boat Club acquisitions from 2020-30, together with Normal Cost Inflation and Resetting Variable Compensation back to target levels. We are countering these items by planning to remove no less than $40 million of structural costs across the enterprise. Counting these headwinds are several tailwinds, mostly within our control.

And as Dave said don't don't sleep, a little bit on the input costs and again, it's a good story that P&I is positive but in past years that that spread would've been.

50, 60 $70 million and this year, it's a half of that so the ability.

For us the price over some of the input cost inflation is a bit challenging.

Lastly, I would just tell you the <unk>.

<unk> says.

Where some of these are estimates obviously, if if the world looks a little better I think we all know that mercury can outperform that that margin guidance, but as we sit today I think it's a kind of middle of the road.

Margin of where we think we can land the year.

Okay. That's helpful. Thank you and then maybe just another follow up would you be able to quantify maybe what the pipeline fill it was last year and more of what's just a hard compare in the first quarter versus what you've embedded in terms of what you're seeing as it relates to the the cautious wholesale ordering patterns, just particularly I'm I'm propulsion is we're trying to.

A sense for how to think about the cadence of that segment in particular beyond the first quarter.

Yeah. So if you think that holds the production levels that find like will be down kind of 10 ish percent year over year, a lot of that is going to be in the first and second quarter of the year and most of that is kind of 75 to.

Ryan M. Gwillim: We anticipate continuing to take market share in outboard engines, especially in high horsepower categories, while also taking share in premium boat categories and certain marine electronic categories where new products will drive growth. We also plan to be aggressive with share repurchases, especially early in the year. I will wrap up the financial update by sharing some P&L, cash flow, and other capital strategy assumptions for the year. First, we expect modest working capital usage for the year, reflecting our continued enterprise goal of lowering inventory levels to match anticipated sales while generating cash. A slightly higher depreciation versus the prior year reflects the additional capital invested in our businesses in recent years, with acquisition amortization, which we exclude from our adjusted results, being similar to prior years.

It's below 300 horsepower, there's really no no shortage of 300 and above.

So most of that 10% would be.

The first quarter, and then a little bit in the second.

Okay I appreciate that thank you.

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

Hey, good morning, Thanks for taking my question. It's been a helpful color as always I guess I wanted to dig into novel co a bit I think we're coming on the three year anniversary. This summer of that transaction and I guess, Dave I'd be curious to get your take on you know.

What has gone well and and what has not gone so well.

Yeah, Thanks, I'm, Craig, Yes, you're coming up on the figure anniversary.

So I think what's gone well is oh, it continued belief that now because it's absolutely the right asset for us to own there was nothing like it in the marketplace and Astellas anything like it in the marketplace.

It plays very strongly to our move really from kind of bulk company to technology company. It really has some of the best technology assets in the business.

Ryan M. Gwillim: It's been a few years since we've had to discuss tariffs, but despite a favorable exemption extension into the spring, we anticipate paying $15 million more in tariffs versus 2023. These pairs are primarily related to components sourced from China using our primary outboard manufacturing facility in Fond du Lac, Wisconsin, along with the importation of 40 to 60 horsepower engines produced at our Suzhou, China assembly plant.

And despite the fact that the financial performance is not what we'd originally anticipated at this time I would say there are several factors that covering that but I'll talk about in a second it is actually doing well extremely well in a lot of those sub segments of electronics continues to do well in <unk>.

Using our unique solutions that nobody else can produce like the southern system.

We're beginning to see a flow of new products that reflect our.

Directions like the ultra wide, which is I mean extraordinarily well received.

Ryan M. Gwillim: Lastly, our tax department does an outstanding job of prudently and appropriately minimizing our tax footprint, and we anticipate a 23% effective tax rate on adjusted earnings for 2024, which is slightly higher than 2023. And finally, this page shows several capital strategy and other financial assumptions as we begin the year. On capital strategy, we anticipate being very accurate with share repurchases, as I just mentioned. And to support this effort, earlier this week, our Board of Directors approved a fresh share repurchase authorization of $500 million, which we plan to put to good use.

And other things that will be coming out late in the year. So I think the the asset is the right asset for US. We just bought it ahead of a market downturn.

And one of the things I guess is.

If you think about Nava COSE kind.

Kind of mix, it's about kind of 30% marine OEM 10 or 12%.

In specialty vehicles, a little bit less than 60% aftermarket.

I think what we did.

Did not see a couple of things we didn't see really what the the destocking that has experienced over the past several years, but we think as well.

Essentially trough now and also the really severe decline in manufacturing.

Ryan M. Gwillim: We will have a higher net interest expense in 2024 resulting from the eventual refinancing of the 2024 note, but we are also planning $100 million of debt reduction to minimize the impact. We also anticipate increasing our dividend in February for the 12th straight year. On FX, we currently think that rates will have a neutral to slightly negative impact on four-year earnings.

It used to experience.

So those are the things that we have to combat that I would tell you that.

Coal was about 10% up margin.

We expect that margin to expand.

In 2024.

It's a combination of new products takes hold and also as the full year effect of.

Cost reductions take hold.

So I would say.

Ryan M. Gwillim: But this can obviously swing either way, predominantly on the strength of the U.S. dollar versus the euro and a few other currencies used by our global businesses. Finally, you'll notice a reduction in planned CAPEX for the year. Although we plan to continue funding many projects and investments in products and technology for future growth, we are in the harvest phase of many of our larger products from recent years and plan to be able to scale back spending slightly without sacrificing any future growth plans. I will now pass the call back over to Dave for concluding remarks. Thanks, Ryan.

Positives are strategic benefit and new products coming out some of the negative some more associated with.

Speaker Change: How the markets perform generally including Destocking in the past two or three years.

Yeah. Thank you, Dave that's very helpful and if I could just drill down like with Mercury. We can very clearly see your share gains show up in the industry data, but it's less obvious for nabokov, whether you are getting a larger share of wallet from your OEM customers as you sort of.

Integrated all of those solutions along the lines of your Acis strategy. So I'm just curious.

Is there a way to frame.

No your share of wallet across the Nab a co portfolio.

David M. Foulkes: With field imagery at normalized levels, and consumers having their choice of products, it is vital the bronzer continues to differentiate through a rapid flow of exciting new products and technologies. And in just the first few weeks of 2024, Quantec launched over 15 new products across its brands. In January, we again participated in the Consumer Electronics Show, where we launched two higher-horsepower models in the Mercury Avatar electric outboard lineup, which now contains five models in total. Demand for Avitor remains solid, with nearly 60% of shipments in 2023 going to Europe.

Yeah, we we have not broken that out but since you asked the question I think we can look into whether we do that on a more systematic basis going forward I can tell you that the brand has gained market share last year and continues to do extremely well and we imagine that only accelerating as the ultra.

Right, which is unique in the market place takes hold.

Obviously, Craig you'll be at Miami, and hopefully, you'll see a whole bunch of fathom system disappearing.

You can call that market share gain if you think about.

And as the number of Oems for which we perform fully integrated services.

But it's a good question and we will think about whether we can establish some kpis that make it more easy to track.

David M. Foulkes: CRE introduced the new SCX270 and 270 SPUR models, with next-generation features, styling, and comfort. The FDX surf is the first model in the FDX line to feature the Mercury Bravo 4S forward-facing drive and an intuitive wake surfing control system, designed by Eva Merck Irmorine and Matga Kokhr, from which Trespass, Harrods, and Low Brands also introduced multiple new products at early season We are also very excited about the new segment-leading Simrad NSX Ultrawide. The industry's first full-functionality, high-definition, multi-function display, which features a 16x9 screen aspect ratio, this presentation showcases the seamless interface of the latest Firmware Android operating system.

Great Hey, thank you.

Yeah.

Speaker Change: Our next question is from Zane <unk> with BNP Paribas. Please proceed.

Hi, guys. Thanks for the question I wanted to ask about the engine P&A guidance. It looks like revenues are kind of expected to be flattish, but EBIT margin is up 150 bps could you maybe walk through some of the drivers there.

Yeah.

Happy to have that that is really a bit of a mixed story.

We think that distribution will still be a little bit sluggish certainly in the <unk>.

First part of the year, but that our products business the higher margin products business will.

It will be will be up as it has been really the last handful of quarters.

David M. Foulkes: And finally, Freedom Boat Club continues to grow organically and through acquisition, including the acquisitions of its Savannah and Hilton Head Franchise Poetry in late 2023 and two new Sci-Fi locations in Spain already announced in 2024. Before we conclude, I'm thrilled to highlight the exceptional accomplishments of our team from across the enterprise that were recognized with a record high number of awards in 2023 and will continue to be recognized in early 2024. We wrap up 2023 with 115 major awards for our products, technology, people, and culture. And in early 2024, the new Harris 250 Crown won the NMMA Innovation Award at the Minneapolis Boat Show. The new CRH-260FLX won European Powerboat of the Year and the BFB 13, in the Votes of the Year category.

So that remember that the business that generally takes a point or two of price and generally the market is.

Another one or two points, we think that it's going to kind of play through on the product side with distribution trailing a bit the other item to remember is the brownsberg transition and our facility our new facility in Indianapolis.

Syed.

To go while it's been a been about it's been a harder lift in 'twenty three than anticipated by the comp should be a little better going into 'twenty four and beyond.

Okay got it thanks, and then maybe in the 2024 guidance Bridge, which is helpful. You also have 30 cents from other as a benefit what what is that exactly.

A lot of that is gross margin factors and there are I mean, there's a there's a kind of a laundry list of them that we are we didn't want to make the slide and more busy than it was but you can think of various cogs and other initiatives that we're doing above the opex line that will help to offset some of the sales.

David M. Foulkes: In addition, Brunswick's products and teams are nominated for multiple awards at the upcoming Miami Voting. Thank you again to all our talented Gruntalake employees who make these prestigious awards possible, which leads me to remind you to join us at our investor and analyst event on February 15th. 2024 at the Miami International Vote Show, where we look forward to hosting you to see the latest products and technologies from across our brands of business, and well-to-do members of our management. Thank you for joining the call.

This certainly in the first half of the year.

Got it so it's like a gross margin okay.

Yes, it's mostly all I'd say, it's a litany of gross margin goodness a lot of them are programs at each of our divisions are doing to take cost out at the Cogs level.

And also at the same time working out of their Opex.

Okay. Thank you guys. Good luck.

Our next question is from Fred Reitman with Wolfe Research. Please proceed.

Hey, guys I wanted to come back to the engine refill, our comments and I'm, a little bit surprised that you're talking about not having as much of a pipeline opportunity. There just given some of the OEM backlog comment that you guys. Just made historically and I know that you sort of stopped giving the Oems who wanted to transition to mercury power, but.

Operator: That concludes our prepared remarks. We will now open the line for questions. Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Are you still seeing conversion for that backlog is that conversion more muted just given what's going on with retail and wholesale how does that sort of share opportunity stance on like our backlog go forward basis.

David M. Foulkes: And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star 2. We ask that you please ask one question and one follow-up question. Our first question is from Matthew Boss, with J.P. Morgan. Please proceed. Thanks. Um, Dave, maybe, could you help rank the top line drivers by sex? and just visibility today to improvement over the year... We could just bridge the delta between the more than 20% decline expected in the first quarter to the full year guide of down mid-year. Yeah, hi Matthew.

Yeah, So maybe I'll start and Brian could pick up if we did note share gain as and clearly part of that share gain is mercury getting into more Oems and getting more share of existing.

Oh, yes, there are a couple of notables coming across the line I think you might see a few.

And Miami already so we're continuing to convert I think though if you look at the overall market obviously the.

The way the market is behaving as it is affecting them.

Every OEM and that is.

Not reflected in the.

Dollar 50 that Ryan included in the at the start of the bridge, but the additional Oems that were bringing on board and we do continue to do that.

David M. Foulkes: I think the factors really are similar across all of our businesses to some extent. And it's really the fact that we saw, in particular, in December of the fourth quarter, reduced demand for merino yams and more production shutdowns, which had an impact on our mercury, sulfur, water, and navigable groups. As well as, of course, we reduce production to meet our year-end targets for bulk inventory and get to that 30,000 space sheets on hand. So, for the first quarter, we anticipate continued car-ship ordering across wholesale by Mercury's OEM customers, which is about 80% of their sales, and Navajo Groups, OEM customers, and marine customers, which is about two and a half years old. And we obviously will be continuing to make their own boat production during that period. What we anticipate, based on early season retail, or confirmed, I think, by early season retail now, is that orders will begin to pick up to more normalized levels as we enter the main selling season. Thank you.

And an increased mix and others is reflected in that 50 cents a share opportunity.

Yeah.

Yeah.

Okay.

If we could shift to the to the boat business. I mean, you guys just posted almost a 6% operating margin in a quarter, where you were down over 20% in sales and if we look historically I think you guys should be really really happy with the 6% margin agnostic if sales were up down or sideways. So can you just sort of help us maybe give a state of the union for the downs.

Speaker Change: Side margin performance of that I mean, you've talked about getting back to double digits. Historically understanding that that's tough wholesale environment today, but is that 6% is pretty good for going forward.

Hey, Brad I'll take this and Dave can fill and yeah. We are pretty happy I mean, given that volume is down almost 20% as you've said.

Q4, 2022 where we did hit that 10%.

Operating margin, which I believe is the fourth.

Fourth out of five quarters, we did it in a row.

Yeah, we're we're pretty happy with that fourth quarter performance and that's in an environment, where we have a little bit extra discounting to spur retail certainly Andy.

Started the season, but it also reflects some really nice operational improvements really across all of our brands. The bulk group's done a great job of taking opex out and keeping it out.

Ryan M. Gwillim: One, as we get to the end of Q1, we're seeing... U-Boat Retail. I'm going to talk about the temperature increase last year, which is an encouraging sign. So I would say that the factors really affect all of our divisions from what we worry about, and it is production and wholesale orders and getting back to more normalized levels in Q2. And Matthew, good morning.

So yeah, I would say, 6% is a pretty nice floor or a quarter, where volume is where it was I think you've seen the guidance for the full year and in a year, where we're still going to produce.

A little bit lower than we did in twenty-three holding margins into that.

678% for the full year number is something that you know a handful years ago would have been pretty darn impossible, So and testament to the operating chops and all the businesses, but certainly the focus on taking opex out and keeping it out.

Ryan M. Gwillim: Ryan, just a reminder, in Q1 of 2023, we were very much still filling pipelines in just about all engine categories, and even both, if you remember. So it is a more challenging comparison. And I would say if you're modeling it out, the first quarter of 2024 should look relatively similar to the fourth quarter of 2023, as Dave mentioned. And then maybe just to follow up, Ryan, as we consider the, I think it's roughly 12% operating margin at the lower end of this year's guide as maybe a potential floor, could you just elaborate on the $40 million structural cost savings that you cited in your remarks, where in the organization for Potentially Efficient. Yeah, Matthew.

Speaker Change: Perfect. Thanks, a lot.

Our next question is from Scott Stepper with Rust M. Can please proceed.

Good morning, and thanks for taking my questions as well.

Hey, Scott.

It sounds like you guys are looking for a flattish boat market.

This year.

What are your assumptions as far as getting some help from interest rate reductions from the fed.

Yeah.

Yeah.

I think the interest rate reductions from the fed and also other global central banks given our.

Our presence in Europe, particularly but also in other markets.

It has two effects one is directly impacts financing costs and the other is.

Ryan M. Gwillim: I mean, this is a cross-enterprise project that we're undertaking, and frankly, it's just the right size for the overall cost structure of the enterprise. If you think about where our strategic plan and our targets are, we're still very confident in those. But getting there to 2027 is going to take a little bit. The shape of that is kind of unfolding as we'd expect, which is 24 being a little bit more muted and then picking back up in the later years. We just need to make sure that our cost structure matches that same shape. Those actions are called insight actions.

Frees up kind of family budgets.

<unk> spending more broadly.

It's century in fact is just consumer confidence. So there are a number of kind of tail winds that hopefully when that cycle begins will be introduced.

I would say that the there is a lot of promotional financing around at the moment.

Including from US, but you will if you go to the boat shows are if you look online.

We'll see many companies offering promotional rates, so I would I would say that.

Ryan M. Gwillim: If we need to find more, we always find a way. Our next question is from James Hardiman with Citi. Hey, good morning.

Speaker Change:

A lot of people are not paying unless unless that credit rating is not.

David M. Foulkes: Thanks for taking my call. So, we talked about inventory. You guys have said that you feel pretty good about where you sit today. Seems like a lot of other players in the industry are speaking to inventories being too high. I guess, you know, what do you think the difference is there?

Hi, there probably not paying the nominal rate.

Which at the moment has dropped about 50 basis points to about 5% I think probably more people.

Thing.

590 699.

Rates one of the things we are seeing though is we continue to see a lot more cash buyers.

David M. Foulkes: Do you think you've controlled your own inventories better than maybe some other OEMs? It doesn't matter, I think that's the case, if you're ultimately competing with those that haven't. And I guess, how do we think about thinking towards the finish of 2024, whether in terms of units or leapfrogging? Yeah, hi, James.

And even though the promotional interest rates pull people N.

Speaker Change: A lot of cases, the deal closes with people, taking the cash and paying cash.

So I think the primary effect will be there, but the secondary and tertiary effects of more discretionary income and consumer confidence or at least equally as important.

David M. Foulkes: Thank you for the question. Yes, that's, you know, we did see a lot of commentary about other OEMs melting higher than desired inventory levels. We are very comfortable with our inventory levels.

Got it and then last question on the engine side Repower I guess one of the theories is as you guys have.

More production capabilities and as the OEM side is falling back a little bit.

David M. Foulkes: I think we explained that we had put a lot of effort into managing inventory in the back half of the year. We did see some relatively abrupt... Changes in production patterns in December from some of Mercury's early app customers. Our production did not change as abruptly because we began to, I think, be twice down somewhat earlier. And yeah, honestly, despite the commentary.

The tougher economy that.

Boat owners with Repower their boats with some of your newer products are you starting to see that.

Yet and B could you just remind us of the margin Delta on an engine between.

Repower and OEM.

Hey, Scott Yeah, Repower actually had a really nice second half and probably will have a pretty good first half.

David M. Foulkes: Yeah, we feel extremely good about our inventory levels. But does it matter, you know, what the industry does? Well, it makes it difficult, more difficult for us to predict mercury and natural group wholesale sales because we tend to experience more choppy ordering patterns in the back half of Q4. It may be the same in the first half of Q1. I feel like based on our retail performance in January, which you know is a very small month but still somewhat encouraging, I don't think we're suffering. I think we have the right level of retail incentives and dealer incentives. And then the last part of your question was, how do you think you'll end up in 2024?

We actually gained 500 basis points of Repower share in the year, which is pretty pretty big.

But still a repower share trails, our overall U S share so there's still room to run.

There you know, we don't talk exact on margins, but the you know the retail.

Dealer margin certainly is stronger than our OEM just based on volume. So that is definitely a positive on the operating margin side, but we don't comment on exactly how much that is but yeah very good repower and not only in the U S, but internationally as well.

Got it.

That's all for me thank you.

Thank you.

At this time, we would like to turn the call back over to Dave for some concluding remarks.

David M. Foulkes: The plan is to have inventory levels below 2023 end-of-year levels by the end of this year. Not dramatically, but down a handful of weeks on hand. If retail continues to be a little bit outpacing maybe our expectations, then we can maneuver that a little bit. But right now, the plan would be a few weeks on hand lower at the end of 2024 than in 2023.

Thank you well. Thank you all for joining us again and for the great questions. We really appreciate them.

The challenges, we again delivered a very strong year second best ever.

Forget that but we were trying to make sure you don't which I think continues to demonstrate the resilience of our portfolio free cash flow generation was a particular highlight I think in the second half of the year and gives us additional flexibility as we go into 2024.

Ryan M. Gwillim: Really helpful. And then, you know, as you sort of contemplate this 2024 guidance, it fits somewhere between, you know, when you gave us the recession scenario, sort of the modest and the severe recession, despite not being in a recession. And I don't point that out to sort of knock your projection two years ago.

We noted a couple of times OEM and dealer customers will likely continue to be cautious in their ordering through a portion of the first quarter.

But we think we equipped ourselves very well for the start of 2024 pipelines are at appropriate levels. We have a wealth of new products, we have great digital properties, we have.

A well thought out mix of incentives.

And we're also as Brian mentioned, a couple of times continuing to control costs.

Ryan M. Gwillim: But I guess I could speak to what the divergence is. I guess, as it occurs to me, back then, we weren't necessarily thinking that the macro weakness would be as interest rate driven as it appears to have been.

I would say that were.

We are we would prefer a year this year of increase in guidance.

So you know we're looking at it's exciting thing I think that we're off to a good start with retail.

Good show, we didn't talk much about but.

Ryan M. Gwillim: And I guess what I'm really trying to figure out is, if rates in fact do come down starting this year, is there an opportunity for a snapback maybe more quickly than we would otherwise see in a, you know, previous sort of post-recession scenario? Yeah, Dave, maybe I'll start with that, and then Dave can fill in. Yeah, it's always interesting when you come up with a downside scenario. You've got to live with it, kind of perpetuity, but we knew that we would get this question, obviously, on the call this morning. You know, the difference really is kind of two things.

Good shows sales or maybe.

Single digits down versus last year, but improving as we go through the year mix is significantly up Bob.

Into kind of 15% to 20% kind of mix a mix up versus last year, which is which is very encouraging.

So we could talk about all of those things and introduce you to our new products at our Investor and analyst event in Miami on February 14th.

And we look forward to seeing you all that.

Thank you.

Ryan M. Gwillim: One's the starting point. If you remember, this was a one-year scenario that we came up with in 2022, at a time when we were coming off a kind of a $10 EPS number, or had a $10 budget, excuse me, for 2022 EPS, and we were anticipating what would happen if the world dropped off in one year. That year also had some pipeline fill in it, where Boat Group, although the retail sales would drop off, I think we said 30 or 35 percent, that retail, that the wholesale would actually hold in a little better. As we said today, the real difference is, two, one, there is no pipeline retail remaining, really, in boats or engines, but two, really, the P&A businesses as a whole, they haven't performed any different than we anticipated, but they have performed a little differently from a starting point.

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

Yeah.

[music].

Ryan M. Gwillim: If you remember, really, peak P&A season was the end of 21 and into 22, and despite still having a canker of kind of eight, nine percent over the last five years, that business has come off a little bit from a high in those two years that we gave the downside scenario. If you take the midpoint of our range, kind of the 750, you probably get a little bit of goodness on compulsion, a little trailing on P&A, share of gravity, a good guy because we've been buying back a little more, and then the last thing I'd say was an investment, really, in the ACEs, in all of our ACEs categories that have driven about, you know, maybe 40, Our next question is from Mike Schwartz with Trose Securities. Hey guys, just wanted to touch on the propulsion guidance and, more specifically, just the margin assumptions.

Yeah.

Speaker Change: [music].

Ryan M. Gwillim: It looks like you're embedding in that guidance about 16% margins, which is a step down about 200 basis points. From the commentary you provide on the call, it sounds like, you know, mix, both product mix and channel mix, should be positive. Just help us walk through how you get to that 200 basis point decline. Hey, good morning, Mike. Yeah, then again, this is one that we kind of knew would get folks' attention. You know, it really starts with absorption just due to the lower volume.

Ryan M. Gwillim: If you look at the EPS bridge, you noted the pipeline, the lack of pipeline fill being a big driver of EPS. And a chunk of that is obviously volume and sales-related, but that also hurts absorption in the facility, certainly in the Fond du Lac facility, with lower volume. So absorption is certainly the number one driver.

Ryan M. Gwillim: Tariffs are number two, about $15 million more in tariffs, and that just goes right to COGS. And, you know, we're doing our best to offset it by doing other things and where we do final assembly, but it's still, you know, $15 million is hard to cover. And then we are in a position where input costs, material, and labor, are elevated a little bit over prior to here, which is a terrible amount, but our ability to price over that, although positive, so price, PNOC, price over input costs is still positive, the spread there, the available price over input costs is not as large, so the goodness is not as large.

Ryan M. Gwillim: Those three things are really the primary drivers, and they're really all in gross margin. I would note that, as per usual, Murphy does a fantastic job of monitoring their cost structure, and their OPEX is targeted to be relatively flat year over year, and that's inclusive of absorbing all the OPEX from flight, which is the October acquisition, obviously, and the resetting with comp back to target level. Okay, that's helpful. Thank you, Ryan. And maybe just a second question, you know, as we think about the lower end of the earnings range and the higher end of the range, maybe walk us through the big four or five factors driving that. How do you get to the top end? How do you get to the bottom end?

Ryan M. Gwillim: I think, Mike, just one addition to the previous point is that the absorption issue really over-indexes towards Q1, because we don't want to get rid of people and line operators in Q1 that we're going to need in Q2, so there's a kind of compounding effect in Q1 that will normalize through the other quarters of the year. In terms of the top and bottom of the range, I think the bottom of the range would have to be further lateral weakness than we anticipate. If the pre-sales fail, hang in there. Brought in from the last year, it's difficult to see the bottom of them.

David M. Foulkes: But we don't need a lot of market tailwind to get above the midpoint, really. I think our assumption of wholesale boat units, actually, production going down this year, in terms of being about 1,000 units per row below retail, is probably a bit on the pessimistic side. I would say the downside would have to be additional macro-routes of some kind.

David M. Foulkes: The upside is that it is a bit better than the one from the market. Thank you. Our next question is from Megan Alexander with Morgan Stanley, please. Hi, yeah, I don't want to belabor it, but I just wanted a follow-up on that propulsion margin answer if I could. Everything you said makes sense, but if I sit here and take kind of that $15 million tariff out, just to kind of look apples to apples versus last year, I'm still getting, you know, somewhere in the range of 45%-ish decremental margins. I think you've historically kind of talked about volume de-leverage in the 20 to 30% range. Can you just maybe help us understand the discrepancy there, because it just seems pretty clear. Yeah, Megan, you're right, you know, there's the absorption hit is real.

Ryan M. Gwillim: I mean, it's coming off of a first and second quarter where we were running about as hard as we could in that facility and really into the third quarter, and then back to scaling back to kind of normal production levels for this year. I mean, we're taking probably a little bit more than 10% of production out of Fond du Lac here year over year. It's, you know, becoming a more material piece of the puzzle.

Ryan M. Gwillim: And, you know, as they said, don't sleep a little bit on the input cost. And, again, it's a good story that PNOC is positive. But in past years, that spread would have been, you know, it could have been $50, $60, $70 million. And this year, it's half of that.

Ryan M. Gwillim: So, the ability for us to price over some of the input cost inflation is a bit challenging. And lastly, I would just tell you that the guidance is, you know, we're, some of these are estimates. Obviously, if the world looks a little better, I think we all know that Mercury can outperform that margin guidance. But as we said today, I think it's a kind of middle of the road margin of where we think we can land the year. Okay, that's helpful. Thank you. And then, maybe just another follow up.

Ryan M. Gwillim: Would you be able to quantify maybe what the pipeline still was last year and more of what's just a hard compare in the first quarter for what you've embedded in terms of what you're seeing as it relates to the cautious wholesale ordering patterns, just particularly on propulsion as we're trying to get a sense for how to think about the cadence of that segment in particular beyond the first quarter? Yeah, so if you think that production levels at Final Act will be down kind of 10-ish percent year over year, a lot of that is going to be in the first and second quarters of the year. And most of that is kind of 75 to, you know, it's below 300 horsepower. There's really no shortage of 300 and above.

Ryan M. Gwillim: So most of that 10% would be the first quarter and a little bit of the second. Okay. I appreciate that. Thank you. Our next question is from Craig Kennison with Baird. Hey, good morning.

David M. Foulkes: Thanks for taking my question. It's been a helpful call, as always. I guess I wanted to dig into Navico a bit.

David M. Foulkes: I think we're coming on the three-year anniversary this summer of that transaction. And I guess, Dave, I'd be curious to get your take on, you know, what has gone well and what has not gone so well. Yeah, thanks, Craig. Yes, on a big anniversary.

David M. Foulkes: So I think what's gone well is I will continue to believe that Navico is absolutely the right asset for us to own. There was nothing like it in the marketplace, and there isn't anything like it in the marketplace. It plays very strongly to our move, really, from a book company to a technology company. It really has some of the best technology efforts in the business. And despite the fact that the financial performance is not what we'd originally anticipated at this time, I would say there are several factors affecting that that I'll talk about in a second. It is actually doing well, extremely well, in a lot of those sub-segments of electronics. It continues to do well in producing unique solutions that nobody else can produce, like the fabric system.

David M. Foulkes: We're beginning to see a floor of new products that reflect our directions, like the ultrawide, which is, I mean, extraordinarily well-received, and other things that will be coming out late in the year. So I think the asset is the right asset. For us, we just bought it ahead of a market downturn. And one of those things, I guess, is...

David M. Foulkes: If you think about Navicode, it's about 30% Marine OEM and 12% Harvey and Specialty Vehicles, and a little bit less than 60% aftermarket. I think what we did not foresee, a couple of things we didn't really foresee, were the de-stocking that has experienced over the past several years. Thank you, and I think we've all got a sense of trust now.

David M. Foulkes: And also the really severe decline in RV manufacturing that it continues to experience. So those are the things that we have had to combat. Now, I would tell you that, you know, Metzanamico was about 10% higher on the market in 2003. We expect that margin to expand in 2024 as the combination of new products takes hold and also as the four-year effect of cost reductions takes hold. So I would say the positives are strategic benefits and new products coming out. Some of the negatives are more associated with how the market has performed generally, including de-stocking in the past two or three years. Yeah, thank you, Dave. That's very helpful.

David M. Foulkes: And if I could just drill down, like with Mercury, we can very clearly see your share gains show up in the industry data. But it's less obvious for Navico, whether you are getting a larger share of wallet from your OEM customers as you sort of... Integrate all of those solutions along the lines of your ACES strategy. I'm just curious.

David M. Foulkes: Is there a way to frame, you know, your share of wallet across the Navico portfolio? Yeah, we have not broken that out, but since you asked the question, I think we can look into whether we do that in a more systematic way going forward. I can tell you that the Simrad brand gained market share last year and continues to do extremely well, and we imagine that only increasing as the ultrawide, which is unique in the marketplace, takes hold. Obviously, Greg will be in Miami, and hopefully, you'll see a whole bunch of Fathom systems appear.

David M. Foulkes: And you could call that market share gain if you think about it as the number of OEMs for which we perform fully integrated services. But it's a good question, and we will think about whether we can establish some PPIs that make it more easy to track. Hey, thank you.

Ryan M. Gwillim: Our next question is from Zane Hsu with BNP Paribas. Hi guys, thanks for the question. I want to ask about the engine PMA guidance. Looks like revenues are kind of expected to be flattish, but even margin is up, I think 150 bits. Can you maybe walk through some of the drivers there? Yeah, happy to. That is really a bit of a mixed story.

Ryan M. Gwillim: We think that distribution will still be a little bit sluggish, certainly in the first part of the year, but that our product business, the higher-margin product business, will be up, as it has been in the last handful of quarters. So remember, that's a business that generally takes a point or two of price, and generally the market is, you know, another one or two points. We think that's going to kind of play out on the product side with distribution trailing a bit. The other item to remember is the Brownsburg transition in our facility; our new facility in Indianapolis, or just outside it, continues to go well. It's been a bit of a, you know, it's been a harder list 23 than anticipated, but the comps would be a little better going into 24 and beyond.

Ryan M. Gwillim: Okay, got it, thanks. And then maybe in the 2024 guidance bridge, which is helpful, you also have 30 cents from others as a benefit. What is that exactly?

Ryan M. Gwillim: A lot of that is gross margin factors, and there is, I mean, there's a kind of laundry list of them that we didn't want to make the slide any more busy than it was, but you can, you know, think of various COGS and other initiatives that we're doing above the OPEX line that will help to offset some of the sales softness, certainly in the first half of the year. Johnston, but in the gross margin, okay. Yeah, it's mostly all, it's a living of gross margin goodness. A lot of them are programs that each of our divisions is doing to take costs out at the cost level instead and also, at the same time, work on their offset. Okay, thank you, guys.

David M. Foulkes: Our next question is from Fred Reitman with Wolf Research, please. Hey guys, I wanted to come back to the engine refill comments, and I'm a little bit surprised that you're talking about not having as much of a pipeline opportunity there, just given some of the OEM backlog comments that you guys have made historically. And I know that you sort of stopped giving the OEMs who wanted to transition to mercury power, but are you still seeing conversion for that backlog? Is that conversion more muted just given what's going on with retail and wholesale? How does that sort of shared opportunity stand on a like a backlog go forward basis? Yes, so maybe I'll start and Ryan can pick up.

David M. Foulkes: You did know share gain, and clearly part of that share gain is Mercury getting into more OEMs and getting more share of existing funds. OEMs. There are a couple of notables coming across the line.

David M. Foulkes: I think you might see a few in Miami already. So we're continuing to convert. I think so. If you look at the overall market, obviously, the way the market is behaving is affecting. Every OEM, and that is somewhat reflected in the... Ryan Gwillim, David Corp, William Metzger, James Hardiman, Joseph Nolan, David Corp, William Senior, David Corp, William Metzger, James Hardiman, Joseph Nolan, David Corp, William Senior, David, Okay.

Ryan M. Gwillim: And if we could shift to the boat business, I mean, you guys just posted almost a 6% operating margin in the quarter where you were down over 20% in sales. And if we look historically, I think you guys would be really, really happy with the 6% margin, agnostic of whether sales dropped down or sideways. So, can you just sort of help us, you know, maybe give a state of the union for the downside margin performance of that? I mean, you've talked about getting back to double digits historically, understanding that it's a tough wholesale environment today, but you know, is that 6% a pretty good floor going forward? Hey Fred,

Ryan M. Gwillim: I'll take this, and Dave can fill in. Yeah, we are pretty happy. I mean, given that volume is down almost 20%, as you said, off of a Q4 2022 where we did hit that 10% operating margin, which I believe was the fourth out of five quarters we did it in a row. Yeah, we're pretty happy with that fourth quarter performance.

Ryan M. Gwillim: And that's in an environment where we have a little bit extra discounting to spur retail, certainly at the start of the season. But it also reflects some really nice operational improvements across all of our brands. You know, the Boat Group's done a great job of taking op-eds out and keeping them out.

Ryan M. Gwillim: And so, yeah, I would say 6% is a pretty nice floor for a quarter where volume is where it was. I think, you know, you've seen the guidance for the full year. And in a year where we're still going to produce a little bit lower than we did in 2023, holding margins into that kind of 6%, 7%, 8% for the full year number is something that, you know, a handful of years ago would have been pretty darn impossible. So the testaments of the operating jobs and all the businesses, but certainly the focus on taking op-eds out and keeping them out. Perfect, thanks a lot. Our next question is from Scott Stember with Ross MKM. Good morning, and thanks for taking my questions as well.

David M. Foulkes: Thanks, Scott. It sounds like you guys are looking for a flattish boat market this year. What are your assumptions as far as getting some help from interest rate reductions from the Fed? Yeah, I think the interest rate reductions from the Fed and also other global central banks, given our presence in Europe, particularly, but also in other markets, have two effects. One directly impacts financing costs, and the other is, It brings up the kind of family budgets, and discretionary spending more broadly.

David M. Foulkes: And maybe an assertion of fact is just consumer confidence. So there are a number of kinds of tailwinds that, hopefully, when that cycle begins, will be introduced. I would say that there is a lot of promotional financing around at the moment, including from us, but you will, if you go to the bookshelves or if you look online, you will see many companies offering promotional rates. I would say that unless their credit rating is not high, they're probably not paying the nominal rate, which at the moment has dropped about 50 basis points to about 8.5%.

David M. Foulkes: I think probably more people are seeing 5.99 and 6.99 rates. One of the things we are seeing, though, is we continue to see a lot more cash buyers. And even though the promotional interest rates pull people in, in a lot of cases, the deal closes with people taking the cash and paying cash.

David M. Foulkes: So, I think the primary effect will be there, but the secondary and tertiary effects of more discretionary income and consumer confidence are at least equally as important. And then, uh, last question on the engine side: Repower. Um, I guess one of the theories is, as you guys have seen, Scott stabbed production capabilities, and as the OEM side is falling back a little bit in a proper economy, boat owners would re-power their boats with some of their newer products.

Ryan M. Gwillim: Repower and OEI. Thanks, Scott. Yeah, I mean, Repower actually had a really nice second half and probably will have a pretty good first half.

Ryan M. Gwillim: We actually gained, you know, 500 basis points of Repower share in the year, which is pretty big. But still, our Repower share trails our overall U.S. share, so there's still room to run there. We don't plot exact margins, but the retail dealer margin certainly is stronger than OEM, just based on volume.

Ryan M. Gwillim: So that is definitely a positive on the operating margin side, but we don't comment on exactly how much that is. But yeah, very good Repower, not only in the U.S. but internationally as well.

Ryan M. Gwillim: That's all from me. Thank you. Thank you. At this time, we would like to turn the call back over to Dave for some concluding remarks. Thank you. Well, thank you all for joining us again to answer the great questions. We really appreciate them. Despite the challenges, we again delivered a very strong year. Second best ever.

David M. Foulkes: We need to forget that, but we're trying to make sure we don't, which I think continues to demonstrate the resilience of our portfolio. Free cash flow generation was a particular highlight, I think, in the second half of the year and gives us additional flexibility as we go into 2024. As we noted a couple of times, OER and dealer customers will likely continue to be cautious in their ordering through the portion of the first quarter, but we think we have equipped ourselves very well for the start of 2024. Pipelines are at appropriate levels.

David M. Foulkes: We have a wealth of new products. We have great digital property. We have a well-thought-out mix of incentives, and we're also, as Ryan mentioned a couple of times, continuing to control costs. I would say that we're, um... We prefer this year of increasing guidance, and so it's exciting, I think, that we're off to a good start with retail. So, we didn't talk much about, but Voteshow's sales are maybe a single digit down versus last year, but they should improve as we go through the year. Mix is significantly up, but into kind of a 15 to 20 percent mix, kind of mixing up the ratio, which is very encouraging.

David M. Foulkes: So, we can talk about all of those things and introduce you to our new products at our investor and analyst event in Miami on Feb. 14, and we look forward to seeing you all there. Thank you. Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.