Brunswick Corporation Price & Performance (BC)

With me on the call this morning is Dave Faukes, Brunswick's Chairman and CEO and Ryan Glome, Brunswick's CFO. Before we begin with our prepared remarks, I would like to remind everyone that during this call, our comments will 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 in today's press release. All of these documents are available on our website at brunswick.com. During our presentation, we will be referring to certain non GAAP financial information. Reconciliations of GAAP to non GAAP financial measures are provided in the appendix to this presentation and the reconciliation sections of the unaudited consolidated financial statements accompanying today's results.

I will now turn the call over to Dave.

Thanks, Zach, and good morning, everyone.

All our businesses delivered a strong first quarter as the resilient composition of our portfolio together with proactive pipeline management, well received new products, the benefits of executed and ongoing structural cost reduction measures, and efficient execution resulted in first quarter financial performance ahead of expectations despite the challenging macro environment. Year to date, unit retail sales for our core premium boat brands and product lines are in line with our expectations for a second half biased year. We're seeing some weakness in entry level products, prompting us to consider streamlining our product offerings in the entry level space. While growing Freedom Boat Club as an alternative participation model. Early season boat shows are essentially complete. With retail performance at shows flat to prior year. And in line with expectations. While overall retail performance in the quarter resulted in appropriate boat field inventory levels, as we enter the primary retail season. Our first quarter results again demonstrated the resiliency of our portfolio with our recurring revenue businesses and channels including our engine P and A business, [indiscernible] Freedom Boat Club and Navico Group's aftermarket sales contributing nearly 60% of our first quarter adjusted operating earnings We had outstanding free cash flow generation in the quarter, leveraging the inventory reduction and other working capital initiatives started last year, resulting in the second best first quarter cash flow on record.

And $160,000,000 improvement versus Q1 twenty twenty four This performance enabled $26,000,000 in share repurchases in the quarter, maintaining our commitment to returning value to shareholders. Despite the uncertain market conditions, for Brunswick, our customers and our channel partners, we're very pleased about our overall start to the year. Which exceeded our expectations back in January. Turning to some highlights from our segments in the quarter. Our propulsion business delivered sequentially improved sales and operating earnings, versus the fourth quarter of twenty twenty four. Although below first quarter twenty twenty four levels as anticipated. Mercury's outboard engine lineup continues to take market share gaining 40 basis points of U. S. Retail share on a rolling twelve month basis. With indications of a strong April performance following significant share increases at twenty twenty five boat shows. Sales to U. S. Boat OEMs were strong as our customer builders increased production levels ahead of the primary retail season and engine pipelines remain at appropriate levels. Our engine parts and accessories business had another strong quarter. With solid year over year earnings and margin growth despite lower sales. This primarily aftermarket based business continues to derive its success from stable boating participation and the world's largest marine distribution network which delivered sales growth of 2% through continued distribution market share gains resulting from our ability to support same day or next day deliveries to most locations in the world.

Navico Group had flat sales and slightly lower operating earnings versus the first quarter of twenty twenty four, as aftermarket sales to dealers and retailers remained strong but OEM orders were pressured. Navajo Group delivered sequential sales growth versus fourth quarter twenty twenty four as its exciting recently launched new products continue to gain momentum and market acceptance. Finally, our boat business had sales and operating earnings below the first quarter of twenty twenty four consistent with lower planned wholesale shipments. But sales grew mid single digits versus fourth quarter twenty twenty four as anticipated Our book group teams are working hard to reduce product costs and protect margins in an environment with limited pricing opportunities. Freedom Boat Club continues to expand globally in premier boating locations. And deliver steady membership sales growth And early season member boat usage trends continue to be strong. With trips up 3% sequentially in the first quarter. Turning to external factors, The uncertain tariff environment has, of course, become an elevated consideration in a challenging macroeconomic backdrop and is contributing to declining consumer sentiment and more uncertainty in U. S. Fed policy and the trajectory of interest rate reductions. The abrupt introduction of the tariffs in early April and subsequent policy confusion in addition to the capital market turmoil, have certainly introduced new reasons for short term consumer hesitancy.

Brunswick has the benefit of producing the large majority of our products in The U. S. For The U. S. Market. We've significantly reduced our exposure to China based suppliers since the initial imposition of Section three zero one tariffs in 2017. However, at current tariff rates, we have the potential to incur up to $100,000,000 to 125,000,000 of incremental net tariff costs in 2025. Which Ryan will discuss further in a few moments. We continue to prepare for a range of scenarios and have many short and long term mitigation actions already underway. Including continued migration of our supply base, inventory staging pricing and optimization of our facilities. But this remains a very dynamic situation. Despite the macroeconomic noise, dealer sentiment remains fairly stable. As early season boat show performance was solid and retail traffic is holding in. Consumer sentiment remains volatile response to daily news flow. But our dealers are reporting that retail foot traffic continues to be steady. And with the right incentives, they're able to get sales across the line. Moving now to U. S. Industry retail performance. U. S. Main powerboat industry retail was down modestly in the first quarter with Brunswick's performance influenced almost entirely by declines in the value segment.

You'll see on this slide that we're showing a slightly different view of U. S. Retail which reinforces the fact that versus a strong first quarter twenty twenty four, retail remained very steady for our premium brands, including Boston Whaler, Sea Ray, Lund and Navan, and as a whole for our core brands, Retail performance for our value brands continues to be challenged, We're working to optimize the profitability of these businesses at reduced production volumes. Outboard engine industry retail units declined 6% in the quarter, with Mercury slightly lower, primarily due to calendarization of registration moving into the first few days of April. Remain confident that Mercury will continue to gain share for the full year. Lastly, have continued to diligently manage both pipeline levels, and First Quarter U. S. Wholesale shipments were down 16% resulting in an 11% reduction in U. S. Pipeline or over 1,500 fewer units. U. S. Weeks on hand are lower than Q1 twenty twenty four at thirty five point six weeks, with similar pipeline dynamics also occurring outside The U. S. Before I turn it over to Ryan, want to walk through the components of our updated full year 2025 adjusted EPS guidance which is now in a range between $2.5 and $4 per share.

There remains significant uncertainty related to our '25 performance and guidance. Primarily due to the uncertainties of trade policy the direct and indirect impact of these uncertainties on our consumers fluctuations in foreign exchange rates and the interest rate environment. Attempting to provide guidance is uniquely challenging in this environment but we appreciate investor desire to understand the earnings components and guideposts we're tracking internally to drive financial results. To that end, this slide is showing midpoints of ranges of what we currently anticipate to be the most likely outcomes for the year. Assuming the current tariff rates persist and estimating the resulting impact to our businesses, the economy our channel partners and the end consumer. After accounting for the Q1 beat, we believe that we would see volume pressure especially in the near term, as our consumer spends cautiously in response to the uncertain tariff environment. Dollars 0.75 would represent an approximate 5% reduction in revenue related to slower retail sales resulting in comparably lower wholesale sales. We've modeled the dollar of EPS as the midpoint of our anticipated net tariff impact This is in addition to the $30,000,000 of China three zero one tariffs that were included in our initial guidance for the year.

And would represent a scenario where current tariffs remain in place we continue to work urgently on our mitigation efforts. With achievement better than our baseline plan. Offsetting these headwinds are more planned cost reductions and an improved foreign currency exchange rate environment with a softer U. S. Dollar has lessened the initially planned transactional headwind from the start of the year. The result is an EPS range of $2.5 to four point and a midpoint of 3.25 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.

Brunswick's first quarter results were solidly ahead of expectations but remained below prior year due to the continued challenging U. S. Retail marine market and macroeconomic conditions. Versus the first quarter of twenty twenty four, net sales in the quarter were down 11%. With adjusted operating margins of 6% resulting in an adjusted EPS of $0.56 First quarter sales were below prior year as the impact of continued lower wholesale ordering by dealers and OEMs and prudent pipeline management throughout the channel, was only partially offset by modest annual price increases, and benefits from well received new products. Adjusted operating earnings were down versus prior as a result of the impact of lower sales, lower absorption from decreased production levels, and the negative impact of changes in foreign currency exchange rates partially offset by new product momentum annual price increases and ongoing cost control measures throughout the enterprise.

Lastly, we used $44,000,000 of free cash flow in the quarter a significant improvement versus Q1 of twenty twenty four and the second best start to a year in over a decade as Dave stated earlier. Now we'll look at each reporting segment starting with our propulsion business. Which saw a 16% decrease in sales primarily resulting from continued pipeline management, and overall lower wholesale shipments to OEM boat builder customers which although below prior year first quarter were slightly ahead of expectations. Segment operating earnings were below prior year due to the impact of sales declines and lower absorption partially offset by cost control measures. Our aftermarket led engine parts and accessories business had another solid quarter with a 3% decrease in sales versus the same period last year due to slightly lower shipments but a 7% increase in adjusted operating earnings resulting from the efficient operation of the business and slightly lower cost inflation. Sales in the product business were down 9%. While the distribution business sales were up 2% compared to prior year. While the segment's adjusted operating margin was seasonally strong at 15%, up more than 100 basis points versus prior year. Navico Group reported sequentially stronger sales versus fourth quarter twenty twenty four and a slight sales decrease of 1% versus Q1 of twenty twenty four, primarily driven by reduced sales to marine and RV OEMs, resulting from lower customer OEM production levels, mostly offset by strong aftermarket sales and new product momentum.

Segment operating earnings decreased due to the lower sales. Navico continues its progress with new product introductions with successful recent launches of the Eagle, and Elite FX multifunction displays together with the re controlling motor leading to share gains in the fishing segment. Finally, our boat business reported a 13% decrease in sales resulting from anticipated cautious wholesale ordering patterns by dealers which was only partially offset by the favorable impact of modest model year price increases. Freedom Boat Club had another strong contributing approximately 11% of segment sales including the benefits from recent acquisitions. Segment operating earnings were within expectations as the impact of net sales declines and lower absorption from the reduced production was partially offset by pricing and continued cost control. Next, I wanted to provide additional information on our anticipated tariff impact for 2025 should the current tariff rates continue for the remainder of the year. This slide shows the approximate percentage of COGS affected by tariffs currently in force. Along with our anticipated 2025 net tariff impact for each category after planned mitigation measures are considered. The largest tariff impact relates to China. And while only approximately 5% of our COGS could represent 75,000,000 to $100,000,000 of tariff expense due to the current 145% tariff rate on supply from China and China tariffs on U. S. Imports.

These incremental tariffs are in addition to the approximately $30,000,000 of Section three zero one tariffs that were included in our initial guidance for the year.

We continue to make strides in lowering our dependency on the China supply chain and are working with our Chinese supply partners on cost sharing and other mitigation efforts. Mexico and Canada supply accounts for approximately 15% of U. S. COGS, but most of the supply from these two countries are imported under the USMCA. Meaning that our tariff exposure here is small assuming the continued USMCA exemption. Finally, are other smaller tariffs on rest of world imports. Not included in this analysis are other impacts or potential impacts both positive and negative to the enterprise [indiscernible] potential retaliatory tariffs from the EU and Canada on U. S. Manufactured boats and possibly engines and parts tariffs on boats imported into The U. S. By our European OEM partners that use Mercury engine and parts. Mercury engine competitors which are paying tariffs on the importation of engine from Japan or other non U. S. Manufacturing [indiscernible] maybe most importantly the disruption of the capital markets and the corresponding impact on our consumer during this critical [indiscernible] the retail boating season. As everyone is aware, this is an extremely dynamic situation and the entire Brunswick team is committed to minimizing the overall impact that tariffs ultimately have on our enterprise.

My last slide shows our updated full year guidance taking into account the uncertainties that we have been discussing. Earlier, Dave walked through the components of our adjusted EPS rate of $2.5 to $4 which is driven by anticipated revenue of between $5,000,000,000 and $5,400,000,000 We are strongly focused on cash generation believe we can still reach or exceed our initial guidance of $350,000,000 of free cash flow for the year. We anticipate the Q2 market conditions looking similar to Q1 with sequentially stronger revenue and earnings driven by the annual seasonality of our business Lastly, while we still believe a flat U. S. Retail boat market is achievable for full year 2025, our guidance contemplates potential volume impacts resulting from the tariff environment and general uncertainty in the macro economy and its anticipated impact on our consumer, which we believe could result in boat unit sales being slightly down versus 2024 with weakness primarily related to value product. I will now pass the call back to Dave for concluding remarks.

Thanks Ryan. As we wrap up, I want to highlight some of the key product launches and events from the first quarter. Well as some of the notable awards we've received so far this year. During the twenty twenty five Miami Boat Show, Cimrad launched the all new NSS4 multifunction display. The latest premium chart plotter and fish finder in the Cimrad portfolio. Which for the first time allows anglers to track four sauna sources on a single display.

One had a very busy start to the year with the January launch of the 185 Impact GL, and an all new heavy gauge product line on the way. In February, Ryan and I were able to attend the Annual Freedom Forum, another successful gathering of our outstanding Freedom Bowl Club franchise partners and corporate team We all had the opportunity to experience the power of being part of the Brunswick family and celebrate Freedom's continued growth and success. FLYHT launched the all new Series five Flight Board with a highly efficient LightJet II propulsion system in Miami. Hosting a media event and on water demos featuring their full product lineup. While the Bayliner C21 had its European launch at the Dusseldorf Boat Show, and was very well received by its international channel partners. Lastly, Navan's C30 and S30 models had a strong boat show season following the North American introduction late in 2024. With sales at multiple shows already in 2025. They've also been very well received as a premium option at a select number of Freedom Boat Club locations. Finally, we've continued our rapid pace of awards in the quarter for our people, products and commitment to innovation.

And are on pace to eclipse 100 awards again in 2025. In the quarter, we won a pair of Newsweek awards, including being named to the list of the most trustworthy companies in America for the third consecutive year. Brunswick ranked in the top 10 companies within the manufacturing and industrial equipment category. Also for the first time, Brunswick was named to Newsweek's list of America's greatest workplaces for women and two of our outstanding female leaders were selected as Women Make winners. The highest honor for women in manufacturing. From the National Association of Manufacturing. Our product awards continued in the first quarter with the Flight Board team winning a pair of Red Dot [indiscernible] One of the world's most prestigious design awards, and PrintzCraft winning its first ever National Marine Manufacturers Association Innovation Award at the Minneapolis Boat Show. Also expect to be able to announce a number of additional product awards in the near future. Finally, boating industry Magazine announced its twenty twenty five forty Under 40 list, recognizing six emerging leaders from Brunswick Corporation and Freedom Boat Club. Among the industry's top young professionals. Congratulations to all the winners. Despite the continued external headwinds, we never take our eye off the importance of making Brunswick one of the most exciting and rewarding places to work.

That's the end of our prepared remarks. We'll now turn it back over to the operator questions.

Thank you. We'll now be conducting a question and answer session.

Thank you. And our first question comes from the line of Mike Swartz with Truist Securities.

Please proceed with your question.

There was a lot of numbers and scenarios thrown out in terms of the guidance update for 25%.

But maybe Ryan, Dave, at a high level, could you help us just understand what's embedded at the lower end and maybe what's embedded at the higher end of your outlook for the year? Yes. Good morning, Mike. I'll take a stab and then Dave can fill in. It's pretty straightforward. I think the high end of the range would anticipate a couple of things. It probably be a moderation a bit of the tariff environment and or combination of us being able to continue to mitigate the costs better than anticipated. Which by the way, we're I think we're as an enterprise, doing the best we can and really been on this since day one on mitigation exercises. So that would if the tariff environment moderated a bit, I think you would have an argument that the volume degradation that's in our that's in the bridge there could be lessened or even go away. So it's kind of that simple on the high end on the low end for the [indiscernible] tariff environment that goes to the far end of our range that we show on the slide.

And the volume does [indiscernible] And maybe there's not the FX benefit that we've shown. So it's kind of all those things on the chart so pretty negative versus on top end, there's just a little bit of relief. Okay. Okay. That's helpful. And just with the tariff outlook of [indiscernible] [indiscernible] I would assume that's only is that way half year? I mean, if we were annualizing that, you anticipate another $100,000,000 next year? I'm just trying to think through how that that works.

Yes. Lost you there in the middle of the question a little bit, but I think I have the question right. About a full year annualized view No, I would say well, obviously, what's on the slide, the tariff slide is a 2025 impact. [indiscernible] [indiscernible] [indiscernible] including an extremely high China rate, which is our biggest impact. However, if you go to an [indiscernible] you're going to have a lot more ability to mitigate. And a lot more time to do that, Mike. And I think we've shown the ability to be very thoughtful and quick in mitigation. You would also have some of the benefits from tariffs paid in 2025 that would actually not show up until 2026. And that would include duty drawback and substitution primarily at Mercury Because the accounting there's a bit of a delay on when we pay them and when it occurred and then when we are able to do some of the mitigation drawbacks or substitution and some of that timing would benefit a future year. So it's really hard for me you an exact number, but I am confident it will be lower than just an annualized full year 2025.

Okay, perfect. Thank you for that. Thank you.

Our next questions are from the line of James Hardiman with Citi. Hey, good morning. And maybe just a quick follow-up on that last point.

Ryan. If we were to think about 100,000,000 to 125,000,000 of net impact this year. What's the gross number I. E, how much are you assuming you're able to mitigate away?

Yes. It's hard to give that number. I mean you can take the COGS that we've given you on the slide and multiply it by the rates But there's so much that goes in there, James, including, as I said, the timing of when the tariff comes in. It's obviously we're mitigating a good amount I would say the gross number is probably not double that, but it's somewhere south of it. But again, with all the moving pieces on how you have to account for it and actually pay it versus incur it, It's just not as simple as a COGS calculation that you'd want to make.

Got it. And then let's talk about Q2 and then what's implied for the second half of the year. Certainly, the Q2 guidance came in pretty materially beneath the street.

What's driving that? And I guess as part of that question, as we think about tariffs, how much of that 100,000,000 to 125,000,000 is in Q2? And what are you assuming for inventory? Normally Q2 is an inventory drawdown quarter Is that going to be even more aggressive this year? Just trying to get you through a second half guidance that assumes material growth year over year despite a bunch of tariffs in there. How realistic of an expectation that will Thanks.

All right. Thanks, James. Couple of several questions in there. I'll try to respond Hope as well. So I will say, on Q2, yes, there is a tariff impact. Obviously, the way you have to account for anticipated full year tariff impact would include capitalizing the cost that you anticipate for the full as incurred So there is a portion of that tariff impact that is in Q2. There's probably a little bit conservatism there in terms of the sales figure. You saw the volume drop on our bridge. I think we would anticipate that starting in the second quarter, it's important quarter for retail. It's important quarter for wholesale. And if there's still uncertainty in the tariff environment and in the macros, I think you could see that come through in the second quarter. But also it could it could be a little bit of a delay. The other thing, FX is kind of a good guide for us in the quarter. And there's probably some mix in there as well. A little bit more sales to P and A. So a lot of back and forth between what you of what we saw in Q1 and what we'd anticipate in Q2.

Last thing I'd mention and you can correct me if I left anything out, For inventory, we do still plan on an inventory reduction through the year. One of the big drivers of our cash flow success in the quarter is inventory and working capital usage being down. So we keen on keeping inventory to match our production And should there be volume reductions needed in the back half because of sales pressure, we will and have shown the ability to ensure that we put the brakes on inventory coming in.

Yes, I would just add James that there might be, I think, there might be an implication in there that we had some sales pull ahead into Q1, which is the case in some other industries like automotive, for example, but we really didn't we had negligible sales pull ahead into Q1.

And really, we did embed [indiscernible] quite a bit of the revenue uncertainty in that bridge into Q2 just because of the extremely dynamic environment, which we think is driving more hesitancy and uncertainty at the moment versus what will hopefully be a bit more of a certain environment in the back half of the year. So there's plenty of opportunity for us to do better in that second quarter if things stabilize.

I guess ultimately my question, if you don't mind just sort of following up and maybe distilling my question a little bit better. As I think about the second half, you've got earnings up year over year. Obviously, big tailwind is that you were reducing inventory in the back half of last year. So that was a big negative a year ago. This year, you're going to have significant tariff exposure Are we as we work through our models is the assumption that that the good guy is bigger than the bad guy as we work through all of that math? Particularly given an uncertain consumer environment.

Yes, James. That's a good point. And yes, that's a good point. I think you're really talking about pipeline inventories at a little bit more than than our inventory, in which case, yes. Remember that we Mercury took their production down the second half dramatically. More than 50% even in Fond Du Lac and our high horsepower and and both did something similar. So we've done a really nice job of lowering production and lowering the pipelines. In advance of what we anticipated was going to be a strong 2025 and actually was actually a good start to the year. I think even on balance, the good outweighs the bad as we look to the second half even a tariff impact environment.

Yeah. I think the only one of the main components of that is we were operating in an a very inefficient way in the back half of last year. Our production lines were not optimized. We had too many people because we're all we're kind of always kind of trailing, trying to get people optimized for production rates. Mercury, Ryan said, was running essentially every other week So we should be operating much more efficiently in this environment in the back half of the And that will come through on the absorption line too, James. That's a big the year over year production swings look much more favorable in the back half, even even in tariff impacted environment.

Got it. Thanks, Dave. Thanks, Ryan.

Next question is from the line of Craig Kennison with Baird. Please proceed with your question.

Hey, good morning. Thanks for taking my question. The press release mentions plans to streamline and level boats. I'm wondering if you could shed more light on those plans and maybe even comment on which categories or brands might be impacted?

Yes. Thank you, Craig, very much. Yes, we already are essentially in process at a kind of model by model level. Obviously, as we showed in in the slide deck, entry level really is the most impacted, at least in our portfolio at the moment. Which tends to correlate to the more economically sensitive consumer, I would say, And as we've seen these successive declines in volume, there's a if we were anticipating a year of increasing volumes in that segment, then we could maybe tolerate those lower gross margins for a while. But given the current environment, it seems appropriate to take action in that segment. So the first thing you'll see is really reducing the number of models that we that we continue to offer in that category. I would say broadly, probably fiberglass value is weaker than aluminum value at the moment. Every model that you continue really carries the cost of not just the immediate cost of kind of lower gross margin, if you like, but also the requirement for future investment develop new models or enhanced models or model year changes? And as we think about where we prioritize our investments, we clearly would like to prioritize it in the areas with the highest margins for us and the biggest growth opportunities.

So we'll be working on that. We're certainly studying additional ways to to make sure that we optimize manufacturing in that area. Of the things I would just point out though is although the margins on those products are relatively small for the boat group, of course, are margins that flow through to Mercury and Navico Group. All those boats carry Mercury engines. So we have to think holistically as we're as we're doing this to make sure we don't we don't compromise Mercury Shared, for example, as we take those actions. But you should expect to see more detail on those as we go through the year and firm up the direction Should we think of those as more tactical decisions to reduce the number of models you have within a brand [indiscernible] are you making more strategic decisions with respect to some of your brands or some of the bulk categories themselves? Yes. Wouldn't say that we're making any strategic decisions at a brand level. But I would say that we're studying options that would have long term cost benefits to us, not just short term tactical. Opportunities.

Great. Thank you.

Thanks, Craig. The next questions are from the line of Megan Klap with Morgan Stanley. Please proceed with your questions.

Hi, good morning. Thanks so much.

I wanted to ask, I think Ryan, you talked a lot about impacts that could impact the guide that aren't included in your analysis today, one of which was the disruption of capital markets. I wanted to ask, premiums held up very nicely over the last couple of years and I think you said was flat in 1Q. But anything you're seeing or hearing from from dealers kind of month to date in April as it relates to discernible impacts from that consumer in particular just as we've seen more stock market volatility?

Yes. Maybe I'll start and Ryan can [indiscernible] our I would say our premium brand seems to be in a pretty decent spot overall, I would say. I would say that there's been if you look it's always difficult to segment our brands because even our premium brands have small models for Vostemuela has a 16 foot [indiscernible] So I think what we're seeing at the moment is it tends to be smaller product, like less than 100,000 that we might see a bit of weakness in. And then I think some of the very large product categories that we don't really participate in. Fundamentally, I think our brands are in pretty good shape. Certainly, [indiscernible] stock market is going to have a fairly it could be concerning for a whole broad range of consumers. I think we're feeling okay at the moment. So yes, I think we're in a good position relative to others in the marketplace with our products. But yes, there certainly could be some short term hesitancy. I would say that both buyers, particularly in that premium segment, just holding up well now, they've held up well for a number of years. In the face of quite a few headwinds.

So they're a very resilient consumer. They tend to be very engaged in the on water lifestyle. So we continue to expect them to be pretty resilient. Even in the face of the current uncertainty but everybody's impacted, right?

And if maybe you translate that wholesale, this is where the very lean pipelines, especially at Whaler, Sea Ray, some of the premium lung products really helps us. Q2 wholesale for those those products is already kind of in the books if you would. So retail whether it slows for a temporary period or doesn't, still our dealers are feeling the need to take product just because they're boats per rooftop, if you would, are still extremely lean and that's a result of all the activity we did at the end of last year. [indiscernible] component here is, you're right that the capital market turmoil is certainly a headwind. I would say a bit of a tailwind for our brands, particularly premium brands and co brands, but really all of them, is that they're produced domestically. And most of them carry mercury engines that are produced domestically. So versus some of the imported brands, we are not we're in a beneficial tariff environment at a boat level. Anyway. So I think as dealers look at where to place their bets, in terms of wholesale orders, we're probably in a preferred position at the moment, which is which to some extent mitigates some of the other headwinds.

Okay. That's helpful. And maybe just a follow-up on propulsion. It seems like just looking in the appendix that by segment that is where the bulk of the at least bottom line cut is coming from, which presumably I think that's because you're importing components from China. But correct me if I'm wrong. But how do you think about, again, I think, Ryan, another factor you mentioned was the potential for, I think, what would be a tailwind given some competitors are importing from importing the full engine from other countries. So I guess how do you do you kind of think about that potential tailwind today? Is that anything you're seeing or hearing yet from OEMs? And when could that potentially play out?

Yes. Thanks, Megan. And you're correct on the first piece. Mercury is the recipient, if you would, on a majority of our tariff impact. And also, tariff impact on their sales into China, which are actually not immaterial given that they sell engines in part into China 125% retaliatory, those are going be very challenged. But yes, one of the potential benefits is non U. S. Engine manufacturers paying tariffs on the importation of their engines into The United States. All the way back to 2017, this has been a pretty sore subject around Mercury as many of us use similar Chinese supply chains and have for a number of years. Some of our competitors take those same components go to their facilities in Japan, manufacture the engine and sell the engine into The United States with zero tariffs. We take the same components, sell it, send them to The United States, use all of The United States labor and up in Fond Du Lac, make those projects products here in The United States. But we pay tariffs on the importation of those exact same components. And so, yes, there's certainly a benefit there if the non U. S. Engine manufacturers continue to have a tariff inbound.

I don't know if we've seen any of that benefit yet. I think there's a whole lot of people that are just being cautious and looking at each other right now with and keeping their inventories steady until they see where it's ultimately going to land. But that is one where I think that would be