Craig Kennison

Craig Kennison inquired about the signals Winnebago Industries is monitoring to determine if the RV and marine end markets will experience growth in calendar year 2026, particularly in light of potential rate relief and tax policy changes. He also asked about the timing of a potential upgrade cycle for existing customers, given the company's position with higher-quality products.

Answer

CEO Michael Happe indicated that key signals include consumer foot traffic and retail appetite at upcoming industry shows in early 2026, as well as reception to new product launches. CFO Bryan Hughes added that the company monitors a basket of macro indicators such as interest rates, gas prices, housing starts, inflation, and consumer sentiment. Michael Happe acknowledged the deferral of an upgrade cycle but noted no significant momentum yet, expressing optimism for Winnebago's product lineup when the cycle eventually turns.

Craig Kennison inquired about the signals Winnebago Industries is monitoring to determine if end markets might grow for the first time since the pandemic, driven by factors like lower interest rates and tax policy. He also asked about the potential for an upgrade cycle in the customer portfolio, given the deferral observed in the market.

Answer

CEO Michael Happe indicated that Winnebago Industries is closely watching foot traffic and retail appetite at upcoming retail shows (January-March), as well as consumer and dealer reception to new products. CFO Bryan Hughes added that the company monitors a basket of macro indicators including interest rates, gas prices, housing starts, inflation, and consumer sentiment. Michael Happe acknowledged the deferral of an upgrade cycle but expressed optimism about the company's product lineups when the market eventually turns upward.

Craig Kennison asked about Winnebago's market share trends, particularly in RVs where it appeared to decline in fiscal 2025, and how the company plans to address this if the shift towards low-end units persists. He also requested a comparison of the RV and marine consumers and how dealers in each segment view the current market.

Answer

President and CEO Michael Happe identified Class B motorhomes and some fifth-wheel segments as areas of market share pressure due to increased competition and price point shifts. He outlined fiscal 2026 plans to stabilize and grow RV volume, driven by Grand Design Motorized and Winnebago Towables, with anticipated share gains in Class A Diesel and Grand Design Towables. Happe characterized the RV consumer as younger and more diversified, while noting the marine industry needs to attract younger generations. He stated that the marine industry is further behind in its cycle, with dealers holding elevated pontoon inventory and consumers being more hesitant than their RV counterparts.

Craig Kennison of Baird asked for management's perspective on tax proposals in Congress, specifically concerning the potential restoration of floor plan interest deductibility for dealers and the proposed auto loan interest deductibility for consumers.

Answer

CEO Michael Happe expressed strong support for restoring floor plan interest deductibility for towable dealers, calling it incredibly important. He noted that the consumer auto loan interest deduction is still in flux but would be welcome news if it makes RV purchases more affordable, though its scope and impact remain uncertain.

Craig Kennison asked a leadership question about the priorities for the new SVP of Enterprise Operations, Steve Speich, and how much of the current margin deficit is due to volume and mix versus operational areas he can improve.

Answer

President and CEO Michael Happe outlined that Steve Speich's focus will be on manufacturing excellence, strategic sourcing, quality, and continuous improvement, with immediate involvement in tariff mitigation. CFO Bryan Hughes added that while Speich's initiatives are longer-term, the primary near-term margin pressures have been volume deleverage and the product mix shift toward more affordable units.

Craig Kennison inquired about the financial health of Winnebago's RV and marine dealer networks and the potential risks to the company from any dealer stress.

Answer

CEO Michael Happe stated that the vast majority of dealers are managing well, with minimal financial impact to Winnebago in Q1. CFO Bryan Hughes added that because the company's brands are in high demand, it is relatively easy to reallocate inventory from a struggling dealer to a healthy one, muting any financial impact. Hughes also confirmed they have not seen an elevated need to move inventory.

Craig Kennison asked about the specific mandates or key performance indicators (KPIs) given to new leaders Chris West (Winnebago Motorhome) and Don Clark (Towables), and what changes in performance investors should expect.

Answer

President and CEO Michael Happe outlined the strategic goal for the Winnebago-branded towables business to grow its market share from ~1.5% to a 3-5% range long-term. He stated Chris West is tasked with stabilizing the Motorhome business's performance before building profitable share, contributing to the company's overall 13% North American RV market share goal.

Craig Kennison asked for clarification on the baseline SG&A from which CarMax expects to cut $150 million, specifically asking if it refers to the exit run rate as of Q4 FY27.

Answer

Enrique Mayor-Mora (EVP and CFO) confirmed that the $150 million SG&A reduction goal is compared to last year's baseline of roughly $2.5 billion and is an exit run rate as of Q4 FY27.

Craig Kennison sought clarification on the baseline SG&A figure from which CarMax plans to achieve a $150 million reduction, and confirmed if this target is an exit run rate for Q4 fiscal year 2027.

Answer

Enrique Mayor-Mora, EVP and CFO, confirmed the baseline SG&A is approximately $2.5 billion, comparing it to the previous year, and affirmed that the $150 million reduction is indeed an exit run rate for Q4 fiscal year 2027.

Craig Kennison of Baird asked why the percentage of digitally supported sales declined slightly in the quarter and how AI is influencing the company's strategy for search engine optimization.

Answer

President & CEO Bill Nash attributed the slight dip in digitally supported sales to seasonality, emphasizing that the more relevant trend is the increasing use of digital tools within omni-channel transactions. He also noted that AI is critical, shifting focus from just SEO to 'Generative Engine Optimization' (GEO) for marketing.

Craig Kennison asked if CarMax has any evidence that it is regaining market share as the vehicle pricing environment stabilizes.

Answer

CEO William Nash stated that the company will provide its market share update on its usual annual cadence at year-end, as there have been no major, disruptive price swings. He added that the management team feels great about the current sales momentum and the company's ability to gain market share going forward.

Craig Kennison noted the increase in online sales to 15% and asked about its future potential. He also questioned whether the shift to lower-touch, digital processes is expected to benefit per-unit profitability.

Answer

President & CEO William Nash expressed more excitement about the 2-point increase in omni-channel sales (to 57%), which represents the majority of customers, stating the company is agnostic to the specific path a customer chooses. EVP & CFO Enrique Mayor-Mora confirmed that the omni-selling model is now more efficient on key metrics (cost per retail unit, per total unit, and per gross margin dollar) than before its implementation, and these efficiencies should accelerate with sales growth.

Craig Kennison sought clarification on BRP's forecast for 'flat retail for the year,' confirming it referred to calendar 2026. He also asked about the rate sensitivity of the low-end consumer and the potential impact of meaningfully lower interest rates next year, and how quickly BRP processes retail signals for the popular HD11 to adjust production and optimize inventory.

Answer

CFO Sébastien Martel confirmed the 'flat retail' forecast was for calendar 2026. Regarding rate sensitivity, he noted that while difficult to triangulate, better demand and retail in Canada (where rates are ~175 basis points lower than the U.S.) suggests a positive impact as U.S. rates decline. President and CEO José Boisjoli explained that BRP is rapidly transitioning production for the new Defender, with Q3 production being three-quarters new platform and one-quarter old. They take orders monthly, allowing for agile adjustments to popular models like the HD11, which experiences fast turnover at dealerships.

Craig Kennison of Baird inquired about BRP's contingency planning for potential trade policy shifts, including the USMCA renegotiation and Mexico's tariffs on Asian imports, and asked about specific plans to mitigate the forecasted tariff exposure.

Answer

Chairman, President & CEO José Boisjoli explained that BRP is well-positioned as its products meet USMCA rules, with two-thirds of content sourced from North America. He expressed confidence in the company's ability to adapt to new regulations if given adequate lead time. To mitigate the current $90 million gross tariff impact, Boisjoli highlighted strategies like optimizing sourcing by moving supplier production between countries and bringing some assembly processes in-house.

Craig Kennison requested a breakdown of the $60-$70 million gross tariff impact, including mitigation effects and the annualized figure. He also asked CEO Jose Boisjoli to reflect on his proudest achievements during his tenure.

Answer

CFO Sebastien Martel detailed that the $60-$70 million gross tariff impact would be closer to $100 million on a full-year basis, with about half stemming from the P&A business. Mitigation efforts include supplier negotiations, operational efficiencies, and future pricing actions. CEO Jose Boisjoli stated he is most proud of BRP's transformation from a company with two profitable product lines to a diversified global leader with seven profitable lines.

Craig Kennison asked about the expected duration of the industry's noncurrent inventory overhang and its impact on BRP's market share, and how the $200 million in cost savings will be utilized.

Answer

CEO Jose Boisjoli estimated that competitors' high noncurrent inventory could normalize by early Q2, while CFO Sebastien Martel confirmed BRP expects market share challenges in H1. Regarding the $200 million in savings, Martel stated that in the current soft environment, the priority is protecting profitability and cash flow rather than passing savings on as price reductions, though they will remain flexible to stay competitive.

Craig Kennison asked about the sufficiency of BRP's production cuts and how management knows the current adjustments are enough given the market softness. He also inquired if inventory reduction efforts help persuade dealers to stock new products like the electric motorcycle lineup.

Answer

CEO Jose Boisjoli explained that the cautious outlook is based on Q2 retail trends, which are projected to continue through the second half of the year. He stated BRP will not lead aggressive promotions to protect long-term profitability. He also noted that dealers appreciate BRP's partnership approach, and the commitment for new electric motorcycles is intentionally low to avoid building inventory, a strategy that has been well-received.

Craig Kennison asked if the broader trend of declining accident claims is primarily a cyclical phenomenon linked to uninsured motorists or if ADAS technology is finally making a significant impact. He also inquired about the fate of vehicles involved in severe accidents not covered by insurance and Copart's ability to capture them on its platform.

Answer

CEO Jeff Liaw stated that safety technologies have consistently reduced accident frequency over decades, but this has been more than offset by the increase in total loss frequency, and fleet turnover takes too long for ADAS to cause a fundamental change in a single year. Mr. Liaw confirmed that Copart captures uninsured vehicles through its consumer-facing Cash for Cars business, though it's a less efficient sourcing method than institutional relationships.

Craig Kennison asked if the broader trend of declining accident claims is cyclical due to uninsured motorists or if ADAS technology is finally impacting the numbers, and also what happens to severely damaged cars not covered by insurance and if Copart can capture them.

Answer

CEO Jeff Liaw stated that safety technologies have always moved the needle, but total loss frequency has historically dwarfed accident frequency declines. He believes the current decline is more cyclical due to consumer retrenchment in insurance. For uninsured vehicles, he explained Copart's Cash for Cars business acquires them directly from consumers, though it's a less efficient sourcing pathway than institutional relationships.

Craig Kennison asked for an update on the Purple Wave partnership one year in, including lessons learned and future investment plans, and also inquired about the broad implications of recent trade policy and tariffs on Copart's business.

Answer

Executive Jeffrey Liaw stated that Purple Wave remains a strong strategic fit, despite market inertia from tariff and infrastructure spending uncertainty. Regarding tariffs on auto parts, Liaw explained they create uncertainty but ultimately make the repair path less attractive for insurers, which is a marginal net positive for Copart's total-loss business model, similar to but more favorable than the 2021 semiconductor crisis.

Craig Kennison of Robert W. Baird & Co. inquired about the learnings and future investment plans for the Purple Wave partnership, and also asked about the broader implications of changing trade policy and tariffs on Copart's business.

Answer

Executive Jeffrey Liaw stated the Purple Wave investment is sound both on its own merits and as a strategic fit, with its current flat performance attributed to broader market uncertainty in the heavy equipment sector. Regarding tariffs, he detailed how increased parts costs make vehicle repairs less attractive, which likely benefits total loss volumes, drawing a more favorable comparison for Copart than the past semiconductor shortage.

Craig Kennison focused on the Purple Wave equipment auction business, asking about its geographic expansion strategy, the network effects within its buyer base, and whether the 8% GTV growth is consistent with the recent doubling of its sales force.

Answer

Executive Leah Stearns outlined a two-pronged expansion strategy for Purple Wave: densifying its sales force in existing territories and hiring seasoned professionals in new high-volume markets. Executive Jeffrey Liaw added that since Purple Wave is a virtual auction, expansion is people-oriented rather than capital-intensive. Regarding growth, Stearns noted that the sales force doubling was recent and there is a natural ramp-up period for new hires, stating that the company is pleased with the new cohort's performance and expects further growth.

Craig Kennison followed up on Title Express, asking if it saves time and drives market share. He also requested details on a $12 million out-of-period expense and inquired about the growth drivers for Purple Wave.

Answer

Executive Jeffrey Liaw confirmed Title Express saves insurers time and money and is a key part of Copart's value proposition. Executive Leah Stearns clarified the expense, stating it was part of a $16 million nonrecurring charge in yard operations related to prior-period property taxes and vendor invoices. Liaw added that Purple Wave's growth is driven by both geographic expansion and increased penetration in existing territories.

Craig Kennison asked Eric Guerin to explain the motivation behind narrowing the full-year GTV guidance range for Q4, specifically the decision to lower the top end. Kennison also posed a broader question about RB Global's automotive business, asking about its exposure to concerns in the adjacent used car space, such as subprime credit issues, given its primary salvage focus.

Answer

CFO Eric Guerin explained that with only two months left in the year, the range was tightened from 0-3% to 0-1% to provide a more precise guide. CEO Jim Kessler added that the company is going up against a significant one-time CAT event from Q4 of the previous year, which is unlikely to recur. Regarding the automotive business, Jim Kessler clarified that RB Global's whole car business is complementary to salvage, focusing on slightly damaged cars typically under $5,000, and therefore has no exposure to upstream used car market issues or subprime credit concerns, except for a benefit from repossession business. Head of Investor Relations Samir Rathod added that the repossession business actually benefits from subprime issues.

Craig Kennison asked CFO Eric Guerin to explain the rationale behind narrowing the full-year GTV guidance range for Q4, particularly the decision to lower the top end of the range. Kennison also posed a broader question regarding RB Global's automotive business, seeking clarification on its exposure to concerns within the adjacent used car market, such as subprime credit issues, and the extent of its involvement in the non-salvage whole car ecosystem.

Answer

CFO Eric Guerin explained that the GTV guidance range was tightened to provide a more precise outlook with only two months remaining in the year. CEO Jim Kessler added that the company is facing a tough year-over-year comparison due to a significant one-time CAT event in Q4 2024, which is unlikely to recur. Regarding the automotive business, Kessler clarified that their whole car segment is complementary to salvage, focusing on slightly damaged vehicles typically under $5,000, and therefore has minimal exposure to upstream, higher-value used car market issues. Head of Investor Relations Sameer Rathod further noted that RB Global's repossession business can actually benefit from subprime credit challenges.

Craig Kennison asked about the impact of uninsured motorists on IAA's volume and whether recent tax law changes could drive optimism for the CC&T business from mega projects.

Answer

CEO Jim Kessler explained that the uninsured motorist trend has not had a dramatic impact on their total loss business, as it affects repairable claims more. On the CC&T side, he expressed long-term optimism about factors like bonus depreciation but noted that the timing of when mega projects drive asset disposals remains uncertain.

Craig Kennison from Baird questioned what catalysts could shift the 'wait and see' sentiment in the CC&T market to spur more transactions and asked if increased government efficiency initiatives were driving more surplus asset activity on the platform.

Answer

CEO Jim Kessler identified potential catalysts as interest rate cuts, clarity on tariffs, and the start of 'mega projects.' He stated that while waiting for these triggers, the company focuses on adding value through its suite of services. Kessler also noted that while they handle government surplus, there hasn't been an abnormal uptick in activity from federal efficiency programs yet.

Craig Kennison from Baird asked for clarification on accident frequency trends, noting the 'milder winter' might have offset gains from the higher total loss rate, and also inquired if share buybacks are being considered as part of the capital allocation strategy.

Answer

CEO Jim Kessler and executive Sameer Rathod acknowledged the milder winter's impact but emphasized that the primary driver for lower auto volumes was the previously disclosed customer loss. CFO Eric Guerin stated that the company currently has no share buyback authorization and the focus for the year remains on paying down its Term Loan A.

Craig Kennison focused on the acquisition of J.M. Wood, asking about the synergies RB Global brings to the deal and whether this transaction could serve as a template for future M&A.

Answer

CEO Jim Kessler detailed that the acquisition fills a geographic gap in Alabama and provides synergies through RB Global's scale, technology, financial services, and multiple marketplace platforms. He also noted J.M. Wood's strength in the municipal sector is an area for nationwide expansion. Kessler confirmed that this type of tuck-in acquisition is a model for future deals, stating there are ample opportunities in both U.S. and international markets.

Craig Kennison inquired about the current marine consumer's behavior, retail trends in the fiscal first quarter and October, and the impact of lower interest rates amidst market uncertainty. He also asked if recent dealer network additions are expected to drive outperformance against the industry's projected 5-10% decline.

Answer

Alec Carman, Director of Strategy and Investor Relations, noted that lower rates are a positive, and while the industry was down in Q1, MasterCraft gained share, maintaining the full-year retail outlook of down 5-10%. CEO Bradley Nelson added that premium buyers remain strong, and dealer network changes, combined with new products, are contributing to market share gains. Dealers are cautiously optimistic, with no significant order cancellations or failures, but sustained retail momentum is needed.

Craig Kennison with Baird inquired about the current marine consumer behavior, retail trends in Q1 and October, and how lower interest rates are influencing the market. He also asked if recent dealer network additions are expected to help MasterCraft outperform the industry, and if this is already factored into the 5%-10% decline forecast.

Answer

Alec Carman, Director of Strategy and Investor Relations, noted that lower rates are a positive for the industry, and MasterCraft gained market share in Q1 due to new products and dealer growth, maintaining the 5%-10% retail decline expectation for the full year. CEO Bradley Nelson added that premium buyers remain strong and dealers are cautiously optimistic, with no significant order cancellations or failures.

Craig Kennison from Baird asked about the current consumer dynamic amid tariff uncertainty, the company's strategy for affordability given a new price surcharge, and for an update on recent dealer network expansions and net gains.

Answer

CEO Brad Nelson explained that the market is leaning towards premium products, which benefits MasterCraft, but consumer sentiment remains cautious. On affordability, he noted that FY25 pricing was held flat or even lowered on entry-level models, and for FY26, the company will manage costs and use targeted discounts as needed. Nelson also highlighted successful dealer network expansions in key markets like Dallas, Houston, Southern Utah, and Coeur D'Alene.

Craig Kennison from Baird inquired about MasterCraft's direct and indirect tariff exposure, the success factors behind its dealer network expansion, and the overall financial health of its dealer network.

Answer

CFO Timothy Oxley stated that while the company has a good handle on supplier tariff exposure, the full impact for fiscal 2026 is still evolving, with a modest impact expected in Q4. CEO Bradley Nelson attributed dealer network growth to filling geographic white space and increasing density in key markets like Texas and Utah. Mr. Oxley added that the company is pleased with the health of its dealer network, having avoided significant failures by using various support tools and close monitoring.

Craig Kennison of Robert W. Baird & Co. inquired about the company's direct and indirect exposure to tariffs, the factors driving recent success in dealer network expansion, and the overall financial health of the dealer network.

Answer

CFO Timothy Oxley stated that the company has analyzed its supply chain for tariff exposure, including indirect 'parts of parts' costs, but the full fiscal '26 impact is still evolving. CEO Bradley Nelson attributed dealer network growth to successfully targeting geographic white space and increasing density in key markets like Texas and Utah. Oxley affirmed the dealer network is healthy, highlighting that they have avoided significant dealer failures by using various support tools and monitoring them closely.

Craig Kennison from Baird asked for details on MasterCraft's strategic growth initiatives, including potential acquisitions or brand start-ups, and how the company weighs the ROI of these investments against share buybacks. He also requested more color on the company's distribution expansion opportunities.

Answer

CEO Bradley Nelson stated that the immediate focus is on execution, simplifying the business, and returning capital while maintaining a 'fortress balance sheet.' He emphasized that all investments are tracked for ROI, but flexibility is key in the current variable market. Regarding distribution, Nelson highlighted opportunities in expanding geographic coverage, both domestically and internationally, by adding more dealer rooftops and aligning new products with demographic growth areas, particularly during the down cycle.

Craig Kennison from Baird followed up on retail performance, asking about the contribution of promotional activity, the nature of the 500-unit inventory reduction, the channel fill opportunity for the new Balise premium pontoon brand, and for confirmation that retail sales were up year-over-year for all brands.

Answer

Executive Timothy Oxley confirmed that promotions were a contributing factor to clearing aged inventory. CEO Bradley Nelson added that the new model year '25 products were also well-received. Nelson clarified the 500-unit inventory reduction was a significant sequential decrease for Q1. Regarding Balise, he noted that as a new premium brand, there will be a stocking opportunity as new dealers are signed, though volumes will be modest. Oxley confirmed that retail sales were indeed up year-over-year for all boat brands during the quarter.

Craig Kennison asked for details on the consumer profile of the new Ranger 500, specifically whether buyers are new to powersports, younger, or first-time vehicle owners. He also inquired about any emerging cracks in the subprime auto space and their potential impact on credit availability for Polaris's consumer base.

Answer

CEO Mike Speetzen explained that Ranger 500 customers are often new to Polaris or powersports, seeking an entry-level vehicle for light utility tasks, viewing it as an opportunity to onboard them into the brand. CFO Bob Mack stated that Polaris has not seen significant changes in credit availability in Q3, with credit metrics remaining good, FICOs only slightly down, and 12-month losses improving, indicating a stable subprime lending environment for their products.

Craig Kennison inquired about the consumer profile of the RANGER 500, specifically if buyers are new to powersports, younger, or first-time buyers, and asked about any changes in credit availability for subprime auto impacting Polaris's consumer credit tiers.

Answer

CEO Mike Speetzen described RANGER 500 customers as prospective buyers seeking an entry point, often new to Polaris, potentially upgrading from golf carts or big box retailers' brands, and owning smaller properties, viewing them as future product family evolvers. CFO Bob Mack stated that Polaris has not seen significant changes in Q3 credit availability; credit metrics were good, FICOs slightly down but 12-month losses improved, and subprime availability has been decent without the fallout seen in the auto sector.

Craig Kennison asked about Polaris's strategy for potential USMCA renegotiations and its ability to compete at lower price points with the new Ranger 500 amidst current trade policies.

Answer

CEO Michael Speetzen and CFO Robert Mack explained that Polaris is mitigating trade risks by increasing sourcing in the U.S. and Mexico and designing new products with higher USMCA content. Speetzen confirmed the new Ranger 500, made in Mexico, has a higher margin than the model it replaces and is positioned to compete effectively against tariff-impacted imports from Asia.

Craig Kennison of Baird followed up on the tariff topic, asking if Polaris has a sympathetic ear in Washington, and questioned the sustainability of the dividend given that the 2025 payout will significantly exceed earnings.

Answer

CEO Mike Speetzen acknowledged mixed success with policymakers on tariffs, stating the company focuses on controlling its supply chain. CFO Bob Mack affirmed the commitment to the dividend, citing confidence in 2025 free cash flow generation, the short-term nature of the earnings pressure, and the dividend's importance to investors, drawing a parallel to their decision to maintain it during the COVID-19 pandemic.

Craig Kennison asked about Polaris's Retail Flow Management (RFM) system, questioning if it overemphasizes unit counts rather than dealers' actual floorplan costs. He also asked if dealers would reward Polaris with market share for its rational inventory management or prioritize selling competitors' distressed inventory.

Answer

CEO Mike Speetzen explained that Polaris now incorporates the dollar value of inventory and interest rates into its RFM profiles, aiming for DSO levels well below pre-pandemic norms to mitigate dealer costs. He acknowledged the 'delicate balance' with dealers needing to clear other brands' aged inventory but expressed confidence that Polaris's partnership approach, communication, and new products would make it the 'OEM of choice' and be rewarded with market share in the long term.

Craig Kennison inquired about the impact of U.S. tariffs on Japanese competitors' engines, asking if competitors have raised prices and if boat OEMs are showing interest in sourcing engines domestically. He also asked about the quantification of cash flow benefits from the new tax policy.

Answer

CEO David Foulkes confirmed that Brunswick is hearing about some price increases from competitors and continues to gain share and convert OEMs, including two European OEMs in the last six months, driven by Mercury's strong product pipeline and integrated system offerings like AutoCaptain. CFO Ryan Gwillim discussed the optionality under the new tax bill regarding bonus appreciation and other benefits, noting that Brunswick's free cash flow guidance for the year is extremely strong, and the ability to generate cash and working capital differentiates the company.

Craig Kennison from Baird asked about the long-term revenue and profitability targets for the Navico Group once the market normalizes and its innovation pipeline matures. He also inquired about the potential full-year tariff impact for 2026 if current policies were to persist.

Answer

CEO David Foulkes reiterated long-term expectations for Navico Group to achieve low to mid-teens operating margins and mid-to-high single-digit top-line growth, citing progress in product innovation and business restructuring. CFO Ryan Gwillim addressed the 2026 tariff outlook, stating that while uncertain, he expects the impact to be of a similar magnitude to 2025, considering various offsetting factors like duty drawbacks and ongoing onshoring efforts. Foulkes added that Brunswick's domestic footprint provides a competitive advantage in a persistent tariff environment.

Craig Kennison requested more details on the company's plans to streamline its entry-level boat offerings, asking which categories or brands might be affected and if the changes are tactical or strategic.

Answer

David Foulkes (executive) confirmed that Brunswick is actively reducing the number of models in its entry-level segment, which is most affected by economic pressures, noting fiberglass value is currently weaker than aluminum. While not making brand-level strategic decisions yet, he said the company is studying options with long-term cost benefits, while being careful to protect Mercury's engine share.

Craig Kennison inquired about the specific sources of the projected $1.25 per share in cost savings for the 2025 fiscal year.

Answer

CEO David Foulkes explained that the savings stem from multiple initiatives. Key drivers include the full-year run-rate impact of 2024 staff reductions, a shift to more efficient production levels after underproducing in late 2024, re-optimized production lines, and negotiated cost reductions from suppliers.

Craig Kennison asked for more details from the company's consumer survey, specifically regarding purchase intent and the survey's historical predictive accuracy.

Answer

CEO David Foulkes explained that their monthly surveys show stable purchase intent among core and value boaters but noted an increase among higher household income consumers. He believes latent demand is building, currently held back by economic uncertainty. He highlighted that recent interest rate movements have already lowered boat financing costs, which could positively influence future demand.

Craig Kennison of Baird requested clarification on the retail outlook embedded in the fiscal 2026 guidance, asking if it assumes continued destocking. He also questioned whether recent upgrades to the dealer network would have a material impact on inventory stocking plans.

Answer

CEO Steve Menneto stated the outlook assumes 'more of the same,' with a focus on gaining share in a market expected to be down mid-to-upper single digits. CFO Bruce Beckman confirmed the guidance anticipates a scenario similar to fiscal 2025, which includes further channel destocking, potentially at a slightly higher rate due to a soft Q4. Beckman also noted that the dealer network changes are considered 'fairly immaterial' to overall stocking plans.

Craig Kennison inquired about the current profile of the company's boat customers, asking for insights into the behavior of repeat versus first-time buyers.

Answer

CEO Steven Menneto responded that retail trends are meeting expectations, with a noticeable return of repeat cash buyers, while new buyers still constitute a small portion of sales. CFO Bruce Beckman added that the percentage of sales to first-time buyers has remained stable since the COVID-19 period, which the company views as a positive indicator.

Craig Kennison inquired about the impact of hurricane activity on the Florida market, questioning the company's exposure and any signals of long-term replacement demand.

Answer

CEO Steven Menneto explained that Florida, which accounts for over 50% of the company's saltwater business, is experiencing a market decline steeper than the national average. He stated that replacement demand is expected to be gradual and prolonged, not a sharp rebound, due to significant delays consumers face in rebuilding essential infrastructure like docks and homes before considering a new boat purchase.

Craig Kennison asked for CEO Steve Menneto's observations on opportunities and challenges after his first 100 days, and about the differences in dealer channel dynamics between the marine and powersports industries.

Answer

CEO Steven Menneto identified operations as a core strength and stated his focus is on enhancing the commercial side of the business to drive demand. He acknowledged that while dealer partnerships are crucial in both industries, marine channel dynamics are different, and his goal is to be an OEM partner that dealers want to work with.

Craig Kennison of Robert W. Baird & Co. inquired about the similarities between marine and powersports dealer channels, the retail assumptions in the fiscal 2025 guidance, and how the company reconciles sales growth with expectations of a down retail market and lower dealer inventories.

Answer

CEO Steve Menneto noted similarities but highlighted the higher price points and slower velocity in marine, emphasizing the focus on matching inventory to retail. An executive, likely CFO Bruce Beckman, explained that the guidance assumes a mid-single-digit down market and a ~15% reduction in dealer inventories. The projected sales growth is possible because fiscal 2024 wholesale shipments were significantly below retail levels due to a major destocking effort, creating an easy comparison.

Craig Kennison of Baird asked if any end markets were lapping a significant destocking period, which could create an easy comparison for growth in 2026. He also requested an update on Marucci's key growth vectors, such as international expansion, footwear, and softball.

Answer

CEO Mike Dennison stated there are no 'easy comps' and that growth is earned through execution, though he conceded powersports could be an easier comp if interest rates fall. For Marucci, he highlighted several growth vectors: strong international performance with Japan up ~140-150% YoY, product diversification into shoes and Lizard Skin, and the significant, largely untapped market opportunity in fast-pitch and slow-pitch softball.

Craig Kennison from Baird asked for commentary on the expected EBITDA margin progression by business segment throughout 2025.

Answer

CFO Dennis Schemm provided a detailed outlook, stating that SSG margins will start soft due to investments but recover in the second half with volume. AAG will see a similar progression as cost savings and product releases ramp up. PVG margins are expected to grow sequentially from Q1 and then pick up more as their cost initiatives flow through the P&L.

Craig Kennison asked for an updated view on the total addressable market for the upfitting business and whether a broader product array could increase sales volume per dealer.

Answer

CFO Dennis Schemm stated that the upfitting opportunity is 'far greater' than the 15,000-16,000 units per year previously discussed, with growth contingent on chassis availability and an expanding dealer network. He confirmed '100%' that offering a tiered 'good, better, best' product lineup at various price points is a key strategy to both increase sales per dealer and attract new dealers to the network.

Craig Kennison of Baird sought clarity on the timing of the expected inflection in off-lease vehicle volumes and requested more detail on the cross-pollination initiatives between the AFC and OpenLane businesses.

Answer

CEO Peter Kelly stated he has a high level of confidence that commercial volumes will begin increasing year-over-year from Q2 2026 onwards, driven by rising off-lease maturities and declining consumer buyout rates, especially for EVs. For cross-pollination, Kelly detailed several initiatives, including a vehicle recommendation carousel on the AFC app for dealers paying off loans, a streamlined registration process for AFC dealers to join OpenLane, and aligning internal sales incentives to foster collaboration between the two business units.

Craig Kennison of Robert W. Baird & Co. asked if recent tariff announcements caused a pull-forward in auction activity and questioned the drivers behind the 15% dealer volume growth, specifically the role of brand awareness.

Answer

Peter Kelly, CEO, clarified that OPENLANE's strong Q1 performance was established well before any tariff-related pull-ahead, which he described as a minor, incremental benefit late in the quarter. He attributed the robust 15% dealer volume growth to a multifaceted strategy, including the unified OPENLANE brand, a unique inventory mix from platform consolidation, and successful go-to-market investments made in the previous year.

Craig Kennison of Robert W. Baird & Co. asked about the potential for tariff-related demand pull-forward and the primary drivers of the 15% growth in dealer-to-dealer volume, questioning the role of brand awareness.

Answer

CEO Peter Kelly clarified that the strong Q1 performance was established well before any late-quarter tariff impacts, which he described as incremental. He attributed the robust 15% dealer volume growth to a multi-faceted strategy, including the unified OPENLANE brand, a unique inventory mix from platform consolidation, and successful go-to-market investments made in mid-2024. He emphasized that OPENLANE is gaining market share and that the large physical auction market presents a significant ongoing opportunity for digital conversion.

Asked for clarification on a cash flow item related to a divestiture, details about a 'win back' commercial client, and an explanation of the integration of commercial inventory onto the dealer platform.

Answer

The cash flow item was confirmed as the sale of the key business. The commercial 'win back' is an incremental share gain from a client that left four years ago, with volumes expected in 2026. The platform integration involves making commercial inventory available on the open marketplace and creating a 'one app' for dealers to access both open and private label auctions seamlessly.

Inquired about the typical path dealers take to become sellers on the platform and asked for perspective on the fair value of the AFC financing business, which seems to be undervalued by the market.

Answer

The path for dealers is varied, but many start as buyers (often on a private label site) before being introduced to the selling solutions. Regarding AFC, executives declined to comment on valuation but stated the upcoming investor day is designed to provide enhanced disclosures to help the market better appreciate the business's financial performance and strategic value.

Craig Kennison asked about the typical path dealers take to become sellers on the platform and inquired about the high-level rationale for why management believes the AFC financing business is not properly valued by the market.

Answer

CEO Peter Kelly explained that the path for dealers is varied, but many first experience OPENLANE as a buyer on a private label site before being introduced to the full suite of selling solutions. Regarding AFC, both Kelly and CFO Brad Lakhia stated that the business has become a larger and more critical part of OPENLANE. They believe that providing enhanced disclosures and performance metrics at the upcoming investor day will help the market better appreciate AFC's financial strength and strategic value.

Craig Kennison asked about the typical path dealers take to become sellers on the platform and inquired about the rationale for the upcoming AFC investor event, suggesting the market may not be properly valuing the financing business.

Answer

CEO Peter Kelly explained that the path is varied, but many dealers begin as buyers, often on a private label site, before the sales team introduces them to the selling solution. Regarding AFC, both Kelly and CFO Brad Lakhia stated the goal of the investor update is to provide enhanced disclosures and metrics to help the market better understand and appreciate the business's financial performance and strategic value, especially as it has become a larger part of the consolidated company.

Craig Kennison of Baird requested details on the single-axle towable RV mix, asking how to reconcile an improving trend with Camping World's success in affordable units, and inquired about data on aftermarket activity from pandemic-era buyers.

Answer

EVP & CFO Lillian Etzkorn noted the single-axle mix improved from 24% last quarter to around 20.5% in Q2, though it remains above historical teen levels. President and CEO Jason Lippert added that the long-term strategy is for first-time buyers of these smaller units to trade up. He explained that while there is no specific data tracking pandemic-era buyers, the growth in OEM content since 2021 naturally fuels future aftermarket repair and replacement demand.

Craig Kennison requested the dollar cost of raw materials for tariff calculations, the baseline for the 85 basis point margin expansion target, the impact of the de minimis loophole closure, and whether Q2 guidance implies an organic revenue decline.

Answer

Executive Lillian Etzkorn stated that LCI does not break out raw material dollar costs and confirmed the baseline for the margin target is the 5.8% operating income from 2024. She clarified that while some adjacent markets are soft, a 5% organic growth in RV OEM sales should lead to 'flattish' overall organic revenue in Q2. CEO Jason Lippert noted the de minimis loophole closure has a minimal impact on their business.

Craig Kennison followed up on the tariff discussion, asking for the specific tariff tax paid in recent years and whether competitors might be more disadvantaged. He also asked a broader question about the key factors needed for LCI to return to its pre-pandemic EBITDA margin range of 8-10%.

Answer

VP of Finance and Treasurer Lillian Etzkorn did not have the specific tariff tax figure available. CEO Jason Lippert expressed confidence that LCI is better positioned than competitors due to its multi-year de-risking from China. He explained that returning to double-digit EBITDA margins hinges on the RV market normalizing to a 400,000-425,000 wholesale unit level, continued maturation of diversified businesses, and ongoing cost structure improvements.

Craig Kennison asked for an explanation of recent RV shipment volatility, inquired about synergies between acquired businesses, and questioned the impact of new tax legislation on company decisions.

Answer

President - RV, Jeffrey Rodino, attributed RV shipment swings to the timing of model year changeovers and extended holiday shutdowns, noting underlying production remains disciplined. CEO Andy Nemeth confirmed strong collaborative energy among brands is driving new product solutions. Nemeth also characterized the tax legislation as a tailwind that does not alter their disciplined capital allocation strategy.

Craig Kennison followed up on the tariff issue, asking specifically if the potential incremental 10% tariff on goods from Canada and China has been contemplated.

Answer

CEO Andy L. Nemeth confirmed that the company has contemplated the potential tariffs. He explained that through a combination of alternative sourcing and partnerships with suppliers to mitigate costs, they do not feel the need to build any negative impact into their current financial guidance.

Craig Kennison sought clarification on the 2025 operating margin outlook, asking if it implied an approximately 8% margin. He also requested assumptions for 2025 interest expense and share count and asked about the interest rate outlook embedded in the company's forecast.

Answer

CFO Andrew Roeder confirmed the math for the ~8% operating margin was correct. He and CEO Andy L. Nemeth provided guidance for 2025 interest expense around $78-$80 million and a diluted share count of approximately 23 million. Nemeth added that their optimism assumes a couple more interest rate reductions are needed to drive a consumer inflection.

Craig Kennison from Baird inquired about shifts in customer behavior following recent clarity on tariff policies and the strong 18% growth in pre-owned boat sales, questioning the drivers behind the increase and the nature of customer trade-in activity.

Answer

CFO Jack Ezzell and CEO Austin Singleton explained that while tariff uncertainty impacted consumer confidence during the quarter, July showed positive signs. They clarified that the robust pre-owned sales growth is not a trade-down effect but a result of more customers trading-in and upgrading to larger, premium boats, driven by better new boat availability. The company's strategic focus on the pre-owned market, including outright purchases, also contributed to the strong performance.

Craig Kennison from Robert W. Baird & Co. inquired about the impact of recent tariff clarity on customer behavior and the key drivers behind the significant 18% growth in pre-owned boat sales, including trade-in dynamics.

Answer

CFO Jack Ezzell explained that while tariff uncertainty impacted the quarter, subsequent clarity and moderate manufacturer price increases have been positive. CEO Austin Singleton added that the premium customer remains resilient, as shown by July's performance. Regarding the 18% growth in pre-owned sales, Singleton attributed it not to a trade-down effect, but to higher trade-in volumes as new boat availability improves. He clarified that these are typically trade-ups to larger boats, creating a healthy 'trickle-down' effect in the used market.

Craig Kennison of Baird inquired about changes in customer behavior following recent clarity on tariff policy, the drivers behind the strong 18% growth in pre-owned boat sales, and the nature of customer trade-in activity.

Answer

CFO Jack Ezzell and CEO Austin Singleton explained that while tariff uncertainty created noise during the quarter, subsequent clarity has been positive, with July showing encouraging results. Singleton clarified that the strong pre-owned sales growth is not a trade-down effect but a result of higher trade-in volumes as new boat availability improves, a trend supported by the company's aggressive purchasing strategy. He further noted that trade-ins typically involve customers upgrading to larger, premium boats, which creates a healthy trickle-down effect in the pre-owned market.

Craig Kennison of Baird inquired about recent changes in customer behavior following increased clarity on tariff and tax policies, and also asked for the drivers behind the surprisingly strong 18% growth in pre-owned boat sales, questioning if it was due to better supply or a trade-down effect.

Answer

CFO Jack Ezzell and CEO Austin Singleton explained that while tariff confusion was high during the quarter, subsequent clarity has been positive, with July showing encouraging trends, especially among resilient premium customers. Regarding pre-owned sales, CEO Austin Singleton, President/COO Anthony Aisquith, and CFO Jack Ezzell clarified that the growth is driven by a higher volume of trade-ins as customers upgrade, not a trade-down effect. They attributed this to better new boat availability, the company's aggressive purchasing strategy, and a strategic focus on the pre-owned segment.

Craig Kennison of Robert W. Baird & Co. Incorporated inquired about the long-term outlook for the marine industry, asking if the current slowdown will lead to brand consolidation. He also requested specifics on the number of brands OneWater is exiting versus retaining.

Answer

CEO Philip Singleton offered a detailed perspective, suggesting that unlike the '08-'09 crisis, the current environment of higher carrying costs and consolidated supplier bases is closing the cost gap between premium and value brands. He predicts this will pressure lower-tier brands, potentially leading to consolidation or financial struggles over the next 3 to 10 years, reinforcing OneWater's strategy to focus on premium brands. Executive Jack Ezzell added that the company will still have over 50 brands after the rationalization is complete.

Craig Kennison asked for management's perspective on the state of the boat consumer, considering the positive Fort Lauderdale Boat Show, other negative industry trends, and the election. He also followed up on customer affluence and sensitivity to interest rates.

Answer

CEO Austin Singleton described the Fort Lauderdale show as a "breath of fresh air" with a palpable positive shift in customer sentiment. President and COO Anthony Aisquith added that there were fewer negative conversations about interest rates. Singleton confirmed that the customer base is becoming more affluent and less rate-sensitive, which he views as a positive long-term trend for the industry.

Craig Kennison of Baird asked for clarification on the components and calculation used to arrive at the 1.75 times book value multiple for the HDFS transaction.

Answer

CFO & President - Commercial, Jonathan Root, explained that the 1.75x multiple is a derivative of the equity investment proceeds from KKR and PIMCO relative to the post-transaction book value of HDFS. He noted that more detailed disclosures would be available in upcoming SEC filings.

Craig Kennison of Baird asked for clarification on the components used to calculate the 1.75 times book value multiple for the HDFS transaction.

Answer

CFO & President - Commercial, Jonathan Root, explained that the 1.75x multiple is derived from the premium KKR and PIMCO paid for their equity investment relative to the post-transaction book value of HDFS. He noted that more detailed disclosures would be provided in future SEC filings.

Craig Kennison from Baird asked for a breakdown of the components used to calculate the 1.75 times book value multiple for the Harley-Davidson Financial Services (HDFS) transaction.

Answer

CFO & President - Commercial Jonathan Root explained that the 1.75x multiple is derived from the premium paid by KKR and PIMCO for their equity investment relative to the post-transaction book value of HDFS. He noted that more detailed disclosures would be provided in future SEC filings.

Craig Kennison of Robert W. Baird & Co. asked about the change in management's view on Harley-Davidson Financial Services (HDFS) being a strategic asset and whether the evaluation is driven by a desire to achieve a more realistic market valuation for the business.

Answer

CFO and President of Commercial Jonathan Root confirmed the primary driver is to provide a market-based view on HDFS's value. He emphasized that the company still envisions participating in the business and is not planning to jettison it entirely, viewing the evaluation as good governance and a response to leaked news.

Craig Kennison inquired about the change in management's perspective on Harley-Davidson Financial Services (HDFS), asking why it is now being evaluated for a potential investment after previously being considered a core strategic asset.

Answer

Jonathan Root, CFO and President of Commercial, explained that the evaluation is driven by a desire to get a market-based valuation for HDFS to highlight its value for shareholders. He clarified that the company does not envision selling the entire business but sees it as good governance to periodically review its strategic assets and unlock value, especially after news of the evaluation was leaked.

Craig Kennison of Robert W. Baird & Co. asked for insights from recent dealer conversations, inquiring about key themes and the company's current message to its network.

Answer

CEO Jochen Zeitz acknowledged that dealer profitability is a primary concern in a challenging discretionary market. He highlighted a recent dealer forum where the company presented its 2025 support plan, including new products and co-marketing investments, which he stated was received very positively. Zeitz emphasized the company's commitment to ensuring its single-brand network remains the most profitable in the industry.

Craig Kennison of Robert W. Baird & Co. inquired about recent themes from dealer conversations and Harley-Davidson's current message to its dealer network, noting a perceived change in tone.

Answer

CEO Jochen Zeitz acknowledged that dealer profitability is a primary concern in a tough discretionary market. He highlighted the positive reception at the recent annual dealer forum, where the company presented its 2025 support plan, including a new product lineup and significant core marketing investments. Zeitz emphasized the strength of the single-brand network and the company's commitment to ensuring it remains the most profitable in the powersports industry.

Craig Kennison from Robert W. Baird & Co. Incorporated asked about key themes from recent dealer conversations and the company's evolving message to its dealer network.

Answer

CEO Jochen Zeitz acknowledged that dealer profitability is a primary concern amid a tough discretionary market. He highlighted a recent dealer forum where Harley-Davidson presented its 2025 support plan, which includes a new product lineup and significant marketing investments, stating that dealers responded very positively to the future plans.

Craig Kennison of Baird asked for a deeper understanding of the 'unrepaired vehicle' trend and its expected timeline for recovery, given high insurance rates. He also requested the specific figure for the Average Price per Unit (APU) growth.

Answer

President & CEO Justin Jude explained that while the timing for a recovery in repaired vehicles is uncertain, it is a cyclical trend that will eventually normalize as insurance rates stabilize and used car values rise. He stressed that LKQ is outperforming the market by gaining share in self-pay repairs. Senior VP & CFO Rick Galloway provided the specific metric, stating that APU is now close to 39%, driven by the strong value proposition of alternative parts.

Craig Kennison asked if the SKU reduction program in Europe has affected revenue or fulfillment rates and inquired about the current private label penetration percentage and its long-term target.

Answer

CEO Justin Jude confirmed the SKU rationalization has not negatively impacted revenue, as the delisted low-volume items are being offset by private label or other brands. He attributed European revenue softness to macroeconomic conditions rather than the program. CFO Rick Galloway added that private label penetration is currently in the 21-22% range, with a long-term goal of reaching approximately 30% by 2030.

Craig Kennison inquired about LKQ's European SKU rationalization project, asking if it has negatively impacted revenue and what benefits have been realized from consolidating business with remaining vendors.

Answer

President and CEO Justin Jude explained that the company is taking a cautious, multi-year approach to avoid revenue loss, and none has been observed so far. He noted that while they are reducing stock numbers, they are increasing application coverage and private label offerings to compete on price. Jude stated that while they expect improved terms and cost of goods, these benefits have not yet been quantified.

Craig Kennison inquired about the competitive dynamics in the automotive paint category, asking whether recent pressures were due to a structural change in the landscape or tactical moves by competitors, and questioned the value proposition of LKQ having paint in its portfolio.

Answer

CEO Justin Jude explained the pressure was a mix of factors, including customer and sales rep attrition at FinishMaster during the Uni-Select acquisition's 'quiet period' and the loss of a large MSO account. He emphasized that LKQ's value proposition is superior service and availability, as it can leverage its existing parts delivery network to add paint to daily shipments, a cost structure and service level that is difficult for competitors to match.

The analyst inquired about the impact of the current tariff environment, specifically the messaging from OEM partners and whether there has been any evidence of demand pull-forward from consumers.

Answer

The company's primary OEM partners in Mexico, Canada, and Japan present limited direct risk from China tariffs on finished goods. For now, OEMs are absorbing the tariff costs, and there is no significant impact being passed on. There is no evidence of consumers pulling demand forward; in fact, new unit sales are down significantly, and the shift to used vehicles is not attributed to tariff concerns.

Inquired about the company's perspective on overall industry inventory levels and whether continued promotional activity is expected to depress gross margins.

Answer

The executive expressed confidence in their own new inventory levels but noted parts inventory is still a bit high. They anticipate that promotional factors will persist in the industry, with the situation being dynamic and also influenced by potential tariffs and OEM actions.

Craig Kennison questioned whether the 2025 guidance anticipates further market share gains in new RVs and asked for a reminder of the company's used platform investments and strategic advantages.

Answer

CEO Marcus Lemonis stated the company expects to end 2025 with positive new unit growth and aims to increase its combined new and used market share from 11.2% to a record 12%. Executive Matt Wagner detailed the used platform's advantage, centered on the Good Sam RV Valuator, which leverages decades of data to provide real-time asset values and generates over 2,000 valuation requests daily. Lemonis stressed that despite the opportunity, they remain prudent, focusing on improving turns and margins to drive profitability.

Craig Kennison from Baird sought clarification on a cash flow item related to a divestiture, details on winning back a major off-lease remarketing client, and the specifics of integrating commercial inventory onto the dealer platform.

Answer

EVP and CFO Brad Lakhia confirmed the cash flow item was from the sale of the automotive key business. CEO Peter Kelly added that a large OEM client that left four years ago has been won back, with volumes expected to start in 2026. He also explained that the new 'one app' platform seamlessly integrates private label and open marketplace inventory, which has boosted franchise dealer engagement.