Xian Siew

Xian Siew inquired about Brunswick's market share opportunities for its propulsion segment in 2026, considering Mercury's competitive advantage from tariffs and recent momentum. He also asked about the implied incremental margins in the 2026 guidance and the potential for further improvement.

Answer

Chairman and CEO David Foulkes stated that Mercury anticipates a steady march on share, potentially "supercharged" by new product introductions in ultra-high and mid-horsepower segments, and continued OEM shifts towards exclusivity. CFO Ryan Gwillim confirmed that the 2026 guidance implies north of 20% incremental margins, even with tariff impacts, and expects higher incrementals in propulsion, P&A, and Navico Group, with volume growth driving further improvements.

Xian Siew inquired about Brunswick's market share opportunities for Mercury in 2026, considering its competitive advantage on tariffs against Japanese OEMs and recent momentum. He also asked about the underlying potential for incremental margins and flow-through beyond the 20% implied in the 2026 guidance, which already includes incremental tariffs.

Answer

Chairman and CEO David Foulkes and CFO Ryan Gwillim discussed Mercury's long-term structural advantage and anticipated a steady march in market share, potentially 'supercharged' in certain segments with upcoming new products, including ultra-high horsepower and mid-horsepower engine refreshes. They noted strong wholesale share in recent months as a positive indicator for 2026. Regarding margins, they confirmed that 20%+ incremental margins are achievable even with tariffs, with higher incrementals expected in propulsion, P&A, and Navico Group, which had a strong Q4 2025 due to high product and variable margins. They anticipate increased volume in 2026 and beyond will further improve incrementals.

Xian Siew asked about the propulsion business outlook for next year, specifically the benefit from de-stocking and expected market share growth for Mercury. He also inquired about the implied boat margins and revenue growth for Q4 and beyond.

Answer

CEO David Foulkes anticipated a steady trajectory for Mercury's market share growth, with tailwinds from new products and continued global momentum. CFO Ryan Gwillim quantified engine pipeline reductions, noting that pipelines for under 175 hp engines are down about 25% and over 175 hp engines are down 33% since January 1, 2024, positioning Brunswick to capture upside growth. For Q4 boat margins, Ryan Gwillim explained that Q3 typically has lower margins due to summer shutdowns, and Q4 will see normal production rates, leading to improved margins compared to Q4 of last year when production days were reduced.

Xian Siew from BNP Paribas questioned the Propulsion segment's 7% sales growth, which outpaced the 6% decline in retail, asking if this was due to market share gains or OEMs pre-ordering ahead of tariffs. He also asked about the engine pipeline target for year-end and the outlook for segment margins.

Answer

CFO Ryan Gwillim clarified the sales strength was primarily due to refilling a lean engine pipeline, which had been reduced by about 25% over the past six quarters. He stated that Brunswick is now matching wholesale shipments to its retail share gains and OEM production needs. Gwillim projected the engine pipeline would end the year down about 25% from the start of 2024 and does not anticipate significant further reductions in the second half.

Xian Siew Hew Sam asked for more detail on tariff mitigation actions and the company's target for reducing inventory pipeline levels.

Answer

David Foulkes (executive) outlined mitigation efforts including selective pricing, migrating the supply base away from China with a goal to reduce exposure by 50% by year-end, and ensuring proper tariff code classification. Ryan Gwillim (executive) added that the full-year goal is to reduce the global boat pipeline by another 1,000 units, which would bring U.S. weeks on hand into the mid-30s.

Xian Siew Hew Sam inquired about global dealer inventory levels, particularly in international markets, and asked about the outlook for pricing and promotions in 2025.

Answer

CEO David Foulkes noted that European weeks-on-hand inventory is structurally higher (40-41 weeks) than in the U.S. He also stated that while promotional activity is expected to be similar to H2 2024, the overall level for 2025 may be lower due to healthier, fresher channel inventory, reducing the need for aggressive discounting on prior-year models.

Xian Siew asked about the drivers of the low implied Q4 Propulsion segment margin and the outlook for the European market, given comments about weakening demand and higher inventory.

Answer

CEO David Foulkes and CFO Ryan Gwillim explained that the primary driver for the lower Q4 Propulsion margin is significant negative absorption from planned production cuts of around 25% year-over-year. Regarding Europe, Foulkes noted that while they are managing pipelines carefully, slightly higher inventory levels are typical for the region due to longer transit times and logistics.

Xian Siew asked how retail and market share gains evolved over Q3, specifically if there was an acceleration in October and November, and if this improving exit rate boosts confidence for market share gains next year. He also inquired about the current year's utilization rate compared to the projected 70% for next year and how to calibrate margin benefits from increased utilization.

Answer

President and CEO José Boisjoli explained that the second half of Q3 saw stronger off-road retail than the first half, primarily because new Model Year 2026 products, introduced in August, reached dealerships when inventory was low. He noted that this positive trend continued into November, which is promising. CFO Sébastien Martel stated that the average utilization rate for the current year is 65%.

Xian Siew asked for an update on the mix of non-current inventory for BRP versus the industry and how dealer feedback on BRP's cleaner inventory position is influencing market share expectations.

Answer

CEO Jose Boisjoli noted that while the industry is improving, BRP is particularly well-positioned, citing the snowmobile business where BRP holds about one-third of the non-current inventory despite having two-thirds of the market share. He stated that while dealers are currently focused on reducing all inventory, BRP's strong product introductions, dealer value proposition, and healthier inventory levels position it to gain momentum and market share in H2.

Xian Siew Hew Sam inquired about BRP's specific current versus noncurrent inventory mix compared to pre-COVID levels and asked for the expected magnitude of the planned reduction in snowmobile shipments.

Answer

CFO Sebastien Martel reported a healthy ORV inventory mix, with only one-third being noncurrent, which is better than pre-COVID levels. However, snowmobile noncurrent inventory is higher due to a tough season. He expects fiscal 2026 snowmobile wholesale shipments to be similar to fiscal 2025 levels as they continue to correct network inventory.

Xian Siew Hew Sam asked about the industry-wide inventory situation and whether competitors are taking similar corrective actions as BRP to rightsize their stock levels.

Answer

CFO Sebastien Martel noted that many OEMs were late to adapt to softer market trends, resulting in excess inventory and aggressive promotions across the industry. He expressed hope that this inventory will be liquidated in the near term. He contrasted this with BRP's proactive stance, stating BRP is on track with its reduction targets and expects to be in a stronger, more balanced position next year.

Xian Siew Hew Sam of BNP Paribas questioned the shift in net price from a previously guided benefit to a headwind, asking for confidence that the adjustment is sufficient and whether this is the new normal for promotions. He also asked for more detail on gross margin assumptions for Marine versus Powersports.

Answer

CFO Sebastien Martel explained that a major driver of higher promotion costs is high interest rates; if rates come down, the cost pressure would ease. He expressed confidence that the current assumptions are sufficient based on today's outlook. For margins, he noted that second-half margins are typically higher due to the mix of new model year snowmobiles and premium side-by-sides, and this trend is expected to continue.

Xian Siew inquired about the behavioral patterns of Gen Z members, including their membership tier choices, utilization, and churn. He also asked if improving unit economics were prompting franchisees to accelerate new club openings.

Answer

CEO Colleen Keating noted that while they don't break down data by cohort, overall member utilization is rising as Gen Z becomes the fastest-growing segment. She and CFO Jay Stasz confirmed that positive trends in real estate, build costs, and top-line performance are encouraging for franchisees, and new club cohorts are performing well.

Xian Siew Hew Sam asked for color on franchisee sentiment regarding new club openings following the solid Q1 performance. He also inquired about the primary drivers of the strong comp growth, seeking to understand the impact of new formats, strength equipment, and advertising.

Answer

CEO Colleen Keating noted that the new club opening guidance reflects franchisee sentiment and that openings remain back-end loaded to Q4 to capitalize on the subsequent Q1 join season. She emphasized that 100% of franchisees opening clubs in 2025 chose the new, rebalanced equipment mix. CFO Jay Stasz added that while it's difficult to bifurcate the exact drivers, they are seeing 'green shoots' from the brand repositioning and focus on strength.

Xian Siew asked for color on how the key January sales period performed and whether the 2025 store opening guidance represents the 'consistent growth' cadence or if the pace could accelerate further.

Answer

CFO Jay Stasz declined to comment on Q1 performance, stating it would be discussed on the next earnings call. CEO Colleen Keating reiterated that while not guiding beyond 2025, the company is focused on accelerating new club growth in a 'healthy, sustained' manner to eventually reach 200 annual openings, implying a ramp-up from the 2025 level. She promised more specific long-range targets later in the year.

Xian Siew from BNP Paribas, on for Laurent Basilasu, inquired about the outlook for securing international worker visas and the seasonal labor environment. He also asked for an update on the company's resource efficiency transformation plan.

Answer

EVP & CFO Angela Korch explained that the company has managed through various visa environments and has reduced its dependency due to high employee retention rates. Regarding the transformation plan, she noted the company successfully accelerated $8 million in savings into the current fiscal year and is on track to achieve its $100 million annualized goal by fiscal 2026.

Xian Siew Hew Sam asked if the mix of World Cruises, specifically having one in 2025 versus two in 2024, created a favorable comparison that inflated the initial pricing growth reported for the 2025 booking curve.

Answer

EVP of Finance Linh Banh confirmed this reasoning was 'along the right line.' She agreed that the reduction in lower-yielding World Cruises in 2025 compared to 2024 contributed to a greater year-over-year rate increase at the start of the booking cycle. She pointed to the full-season curves as the best indicator for overall annual trends.

Xian Siew Hew Sam asked if the reduction from two World Cruises in 2024 to one in 2025 created a favorable mix impact that contributed to the initially high year-over-year pricing growth seen in the 2025 Ocean booking curve.

Answer

EVP of Finance Linh Banh confirmed that this was a 'fair point.' She acknowledged that the comparison to two World Cruises in the prior year did contribute to a greater year-over-year rate increase when the 2025 season first went on sale. She then reiterated that the full-season booking curves provide the best view of anticipated trends.

Xian Siew asked why the full-year net yield guidance was not raised more significantly following the Q1 beat and strong Q2 outlook. He also inquired about any differing booking trends between new and returning customers.

Answer

CFO Naftali Holtz explained that the guidance update primarily reflects the Q1 outperformance. He reiterated that yield growth cadence is affected by timing, with Q1 benefiting from a full quarter of Icon of the Seas and Q3 facing a headwind from the late arrival of Star of the Seas. CEO Jason Liberty added that while demand from new-to-cruise is 'exceptionally high,' the company is seeing significantly more repeat business from loyalty members, driven by successful cross-brand marketing.

Xian Siew from BNP Paribas asked about the path to returning to pre-COVID EBITDA levels and how the new UEFA financial sustainability regulations might impact the club's strategy and competitive position.

Answer

CEO Richard Arnold stated that returning to historical EBITDA levels hinges on qualifying for the Champions League, normalizing player wage levels after recent elevated investment, and continued strong revenue growth. Regarding UEFA regulations, he noted the club supports them, believing they will foster a more sustainable football ecosystem and align with Manchester United's own goal of balancing effective investment for on-pitch success with long-term financial health.

Xian Siew from BNP Paribas asked for clarification on the timing and mix of the new international versus domestic broadcasting rights deals, and also inquired about any further business disruptions related to the situation in Ukraine.

Answer

CFO Cliff Baty and Chief Strategy Officer Hemen Tseayo addressed the broadcasting question. Baty highlighted that international rights revenue now surpasses domestic and is expected to continue growing. Tseayo clarified the U.S. deal is a renewal with NBC, ensuring broad reach, and noted the new distribution model includes a merit-based component. CEO Richard Arnold responded to the second question, confirming the suspension of rights for one partner and stating there were no other effects to flag at the time.

Xian Siew of Exane BNP Paribas inquired about the potential commercial revenue impact from signing Cristiano Ronaldo and whether commercial revenues could surpass pre-COVID levels. He also asked about the business environment in China, including the effects of lockdowns and fan engagement trends.

Answer

CFO Cliff Baty explained that excluding the impact of no summer tour, fiscal 2022 commercial revenue is expected to be similar to pre-COVID (FY 2019) levels. Group Managing Director Richard Arnold stated that it was too early to quantify Ronaldo's off-pitch impact and an update would be provided in the next quarter's results. Regarding China, Arnold highlighted the market's importance and the success of partnerships with Harves and others in driving engagement despite previous lockdowns.