Brunswick Corporation (BC) Earnings Call Transcript & Summary

Good afternoon, and welcome to Brunswick Corporation's 2022 Investor Day Q&A follow-up conference call. [Operator Instructions] Today's meeting will be recorded. [Operator Instructions] I would now like to introduce Brent Dahl, Vice President of Investor Relations.

Hello, and thank you for joining us for today's 2022 Investor Day event Q&A follow-up session. Before we begin the discussion, I would like to remind everyone that our comments will include certain forward-looking statements about future results. Please keep in mind that our actual results could differ materially from these expectations. For details on the factors to consider, please refer to our recent SEC filings. All of these documents are available on our website at brunswick.com. Additionally, during today's discussion, we may refer to certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP financial measures are provided in our previously issued current reports on 8-K, all of which are available at brunswick.com. I will now turn the call over to our CEO, Dave Foulkes, for some opening comments. Dave?

Hi, everyone, and welcome to our 2022 Investor Day Q&A event. We hope you enjoyed the Investor Day materials, which were made available a week ago and is still available at brunswick.com. The presenters you saw and heard in the videos are joining me today, including our CFO, Ryan Gwillim; our CMO, Lauren Beckstedt; and our division Presidents, Chris Drees, Brett Dibkey, Aine Denari and Brenna Preisser. Next Wave is about combining our foundational strength of scale and capability with investments in our core business, our ACES strategy and our advancing digital capabilities to generate multiple long-term sustainable growth factors for our business. When we introduced the Next Wave strategy in 2021, we articulated the vision and some of the early key performance indicators that would measure our progress, and all these KPIs are on track or ahead of plan. But in our latest presentation, we much more directly connected the components of Next Wave to our target of delivering revenues of $10 billion in 2025. We're looking forward to your questions. With that, Melissa, let's open the line.

[Operator Instructions] Our first question comes from the line of Kevin Heenan with JPMorgan.

I guess, just to start, high level, how would you characterize the health of the consumer today? Are you seeing any impacts from higher gas prices? Or changes to the demand environment? And any change in the way you see 2022 retail unit demand up low singles?

Thanks for the question, Kevin. I think I would separate maybe some of the emerging pressures on the consumer in general, which you articulated, from our current experience of retail and wholesale demand. We're continuing to see intact retail and wholesale demand. But we, of course, recognize that some things are changing directionally in a way that might impact us at some point in the future. So we have our antenna up on that. It's just a little early for us to say. If you look back in history, though, I mentioned this in some recent meetings and events. We see effectively no correlation between gas prices and either our P&A business or new boat sales. So there isn't a historic trend because it is possible that the gas prices will go out of historical range. And if that happens, it's possible that there'll be an impact. Look, history at the moment tells us that they would really need to go significantly out of historical ranges for it to be a material impact. I think in terms of interest rates, of course, there's an upward trend, but they remain historically very low. So we've experienced conditions in the past with higher gas prices and higher interest rates in which demand remained intact, and that is our current situation. Although clearly, we're keeping our ear to ground with customers and with our channel partners to make sure that we sense any emerging trends as early as possible.

Great. And just following up on the longer-term targets you laid out last week, specifically the Boat segment, EBIT margin outlook for 13% by 2025, and that's about 200 basis points higher than the high end of the range you gave last May. I guess, what have been some of the key changes that give you confidence in that increased longer-run forecast? And maybe how would you rank order the drivers of the EBIT margin expansion across the initiatives laid out last week?

No, good question. Thank you. So I think it's important to look at where we came from, to start with. 5 or 6 years ago, the Boat business was essentially a breakeven business, and we've got it up to just over 9% in 2021. In fact, we had several quarters where it was above 10%. So I think we start with a strong track record in recent years of making a lot of progress in a relatively modest amount of time. We haven't previously projected out as far as 2025. But of course, we did project out to 2022, I think, when we were talking about 11%, or '23 maybe 11%. The drivers, there are quite a few drivers. They're operational. We've, as you know, consolidated the footprint of our Boat business quite a lot. We have about 10 plants now versus many more in the past. We've also changed the way in which we organize the operating model essentially so that we have a lot more centralized expertise and capability, which is deployed across all of the facilities, essentially taking operating best practices from our best plants and deploying them across all of our plants. We've also brought in people from outside marine to be heavily involved in the way the plants operate, the quality systems in the plant, et cetera. So we're just more and more efficient at an operating level. And then operating margins really start with all the way back at design, and we're much more disciplined now in the way in which we design our products to cost in addition to, of course, wanting them to be extremely competitive with all of the consumer-facing attributes. But there's a much more disciplined process now that goes on with the predesign to make sure that we deliver gross margins or standard margins that are suitable for the product. One of the things that we have done and continue to do, as you will have seen with our capacity expansions, is emphasized production at our lowest cost base facilities. And those are in Reynosa in Mexico and also in Vila Nova in Portugal. So operating our plants more efficiently, making sure that we expand at our lowest cost facilities and starting all the way back in the design process, with products that meet standard margin expectations really helps. In the future though, we will get some tailwind from scale as we increase our capacity from somewhere around 40,000 to somewhat above 50,000 units, and that majority of that expansion is indeed at Reynosa and Vila Nova. So there are other things in there, but I would say those are the top contributors. Aine, do you have anything you'd like to add there?

No, that's fine, David. I think you covered that really well, really driving that operational efficiency through operations, supply chain improvements, quality, more disciplined program management and ensuring, of course, that we have the best and most efficient footprint. And of course, ensuring that we have the best-in-class products and technology so that we can drive the top line too. I think those are all the major drivers, as you highlighted.

Our next question comes from the line of James Hardiman with Citi.

I had a couple of questions here. So as I think about this question of retail expectations, it sounds like you guys are pretty confident that you can deliver what you've laid out, largely independent of retail. But maybe walk us through the expense to which retail plays a role in your long-term guidance? And then I guess, even if not, how do you think about retail over the next 3 or 4 years? And then I had a follow-up.

Hey, James, it's Ryan. I'll take the first stab at this and then others can chime in. The model is predicated -- the projections are predicated on a relatively flattish retail market, flat, slightly up, kind of what it's been in the last 10 years on a rolling basis. So it is not predicated on a need for retail to be outsized growth for a handful of years. That being said, that's just what we predicated the plan on, as Dave said in his first remark, we're not seeing anything today that would give us pause that we're not going to be in a healthy retail environment and both from a retail sales, but also participation which continues to be elevated, which drives P&A and the annuity side of the business as well. So we're not planning on any outsize. It's not necessary for us to reach our targets, but we think it's going to continue to be a very conducive environment.

That's helpful. And then I guess if we just home in on 2022, and I know this call is less about sort of the 2022 outlook, but as we think about this low single-digit industry expectations that you guys have for the year, should we expect a fairly uniform growth rate from quarter-to-quarter? Or are there reasons to believe that, that accelerates as we work our way through the year? And I guess, to some degree, that's a -- it's another way of asking, is this a sort of a supply-driven growth story, right? As you get better product availability, should we expect an acceleration in retail?

I think yes is the answer, James. The -- we're clearly still in a very supply-constrained situation with low inventory, so there's no buffer really between retail and wholesale at the moment. Essentially, we can make what -- we can sell what we can make, and that continues to be the situation as we go through Q1. We are hoping that there will be some alleviation of the supply chain constraints as we get into the back half of the year. Certainly, the first quarter has continued to be somewhat the same as the fourth quarter or the back half of 2021 at the moment without a single specific source of shortage or disruption, just multiple things working their way through the system. But we continue to manage that very well. And in certain areas, there is some signs of improvement, which we hope will continue. So yes, I think we will gradually work up our production, and that is part of the 2022 plan that we articulated. We think that we can bring the supply base with us in terms of the plan that we set out. Upside to that, I think, depends on primarily the supply base. I think our capacity actions internally are proceeding exactly to plan at the moment.

Okay. I just beg one more question, I apologize. The signs of improvement, I got to ask, what are the signs of improvement?

There are certain areas where we're seeing improvements versus where we were at the end of last year in deliveries from Southeast Asia. And we also have -- and some of the constraints that we were seeing actually on commodities have really alleviated quite a lot, I would say.

Our next question comes from the line of Joe Altobello with Raymond James.

So first, I appreciate the EPS sensitivity analysis that you guys gave us. Under scenarios where both retail is down, I think, 30% to 40%. But if we did see a more moderate decline, let's say, 5% or 10%, at what point does that start to impact your wholesale shipments given where we are on the inventory side?

So Joe, I mean it's -- I think you can do the math. Right now, we are -- as just Brunswick, we're probably 12,000 units below what we were at the end of 2019. So at the end of 2019, we had about 25,000 units in the field. To start this year, we had about 12,000. So if you take retail down 5 or 10 points, it's not going to make a difference in the short term because you still need to make up that 10,000, 12,000 units, and that's going to take, even in your scenario where retail is down 5% or 10%, which again, we have 0 view that that's happening, it would still take 2 years really to have wholesale cover retail and go back to pipeline. So still a 2024, 2025 issue even in a retail down moderate scenario.

Okay. That's helpful. And maybe just a follow-up. Given the progress you guys have made in P&A, and particularly in your Advanced Systems Group, is there a way to quantify how much of the content of the average Brunswick boat is supplied by Brunswick across propulsion P&A electronics versus where that stood, let's say, a few years ago, for example?

I think it's a great question. I think we'll have to develop an answer for that, Joe. You're not the first to ask that question. So we'll try maybe as soon as the next earnings call to get you more quantification. In terms of specific examples, though, the one that I've quoted recently is the new 360 -- Boston Whaler 360 Outrage, which has Mercury's V12 engines, ASG's Fathom generator replacement system on it, ASG's digital switching system, CZone. And then also now Simrad's radar sonar and display systems. So it is a very substantial build material content from ASG and Mercury. But great question, and we'll develop a better answer.

Our next question comes from the line of Gerrick Johnson with BMO Capital Markets.

I actually have 3 questions, if I may. First, related to kind of the first question we heard about the consumer. In terms of boat shows, investors tend to go to Miami, New York, Fort Lauderdale, the sexy high horsepower 40-footer kind of a boat show. And we've seen no significant pushback on pricing there. It's high end, a frenzied pace to get product. But can you talk about what you're seeing as some of the smaller regional shows, perhaps more blue collar shows where you do sell a lot more units, albeit at a lower price? What are you seeing from those consumers at those shows? And how are they reacting to price increases, inflation, et cetera?

Gerrick, I don't think we're seeing a lot of difference between the different shows in terms of consumer behavior. And I think even if the big shows like Miami, I think we're kind of surprised that even with longer wait times, longer lead times than normal, people are still equally prepared to put down their orders. So of course, each regional show is a little bit of a different character. The U.S. boat market is not homogenous. There are regional changes in brands and boat types and, to some extent, behaviors. But I would say that we haven't had a disappointing show, we continue to have very strong shows from an engine and boat perspective. And nothing at a notable level in terms of pushback. I'm sure there's discussion, but it's not translating in any way into the -- what we see in terms of retail behaviors or wholesale behaviors.

Okay. Great. And I'll ask just one more. This one is to Ryan, please. You mentioned capacity expansion 17 times in your presentation. You mentioned incremental investments, whether they be digital assets, technology, et cetera, another 22 times. You mentioned that you're vertically integrating over 30 product lines to optimize logistics, so you know where I'm going here. You mentioned the current fixed cost base is about $1.25 billion, and that's about 20% of your '22 costs. Where does it go after all these initiatives? How -- and then how quickly can you compress once we've hit that 30 weeks of dealer inventory and perhaps a slowdown in overall retail? And then lastly, how do we compare now versus '06 or '07 pre-global financial crisis in terms of fixed cost base?

Yes. Thanks, Gerrick. I'll start, and maybe Dave has some additional comments. But you're right, we are -- we have our eye on the ball on cost. Obviously, our revenues and earnings have also been -- have been growing at a pretty strong clip and a little bit of fixed cost has to come along with it. There's only 3 buckets of fixed cost. You have the fixed cost of goods, which is about 5-ish percent, 5.5%, that hasn't moved materially at all as a percentage of sales. And after all the cost takeout we took in 2009, 2010. You've got SG&A, which is pretty flexible. That's, call it, $700 million to $800 million. That number, we could -- that could be trimmed relatively. I mean, it could be trimmed relatively quickly if need be. That number looked like $550 million or $600 million as recent as a couple of years ago, but all the spending that you're seeing is on growth initiatives and things that generate earnings and revenue moving forward. And then the other bucket's R&D. And R&D, we're not going to take the foot off the pedal. So when I look at those 3 buckets, the only one that really -- that we keep an eye on from a spending standpoint is the SG&A and I'm quite comfortable as a percentage of the overall revenue and as a percentage of the cost that it's appropriate for the growth story. But you know us very well. We took $500 million-or-so out of fixed cost from '08 to 2011. We don't have nearly that need even in a downturn scenario today, the downturn scenario that you saw in the deck assumes a modest level of cost takeout, but nothing that the business couldn't do without a whole lot of pay, we would not be sacrificing growth initiatives.

Yes. We also took $50 million out in 2019 which is really as we separated Life Fitness and move towards a more focused organization, we took that opportunity to spend things down a lot. And we're extremely careful as an organization about adding back costs. But revenues and demand and market share gains, demand that we make in investments, but we also are very, very careful about how we do it in terms of expected returns, and investing in the most efficient way and the most efficient facilities. I didn't -- that's a great count that you gave us. I think we need more variety next time, I think to that comment. But I would say that what we did talk about is that we continued to invest in the most efficient way possible inside our existing footprint where we can, adding automation where we can, investing in Reynosa and Vila Nova, repurposing existing facilities, we're very, very careful about the way that we utilize our capital. And I believe we're very efficient.

[Operator Instructions] Our next question comes from the line of Mike Swartz with Truist Securities.

I have a couple of questions for you. I guess just starting off, and I know it's a small part of the business today, but the e-commerce side of things, I think in your 2025 plan, you want to -- it looks like nearly triple that business. I'm just trying to understand what's driving that? Is that more product accessibility? Is it distribution capabilities? Is it maybe new consumer-facing technology? Just help us understand that ramp a little bit.

Yes. Well, I think -- Mike, thank you for the question. I'll start and then others can come in. I mean it's really across our business. But I think it's initially really driven by consumer expectation and new business norms to some extent. I think people want to conduct monitored purchase process online now. And so we're providing them with the opportunity to do that through configurators, more advanced and richer materials as part of our websites and other assets, which in turn gives us the opportunity for more upsell over time. And then with a much closer connection between what they do online with those and then the final fulfillment process. Certainly, some parts of our business utilize e-commerce more than others, particularly our P&A sales. So if you think about a product that can be sold, it doesn't necessarily require dealer installation or some significant amount of professional effort afterwards. That is a significant growth area for us and some of our channel partners are online as well. But maybe I'll ask Brett Dibkey from -- for an ASG perspective, Brett?

Yes. No, I would agree with Dave largely that consumer expectations are changing. I think the pandemic in many respects helped accelerate that change in buying behavior. And increasingly, with the types of products we sell, they're going to go to sources they trust. And I think we're well positioned to provide the right content to help them through the purchase journey. So it's a combination of technology and content strategies and just a general shift in consumer buying behaviors that allow us to be, I think, a definitive source for direct-to-consumer selling.

Okay. Great. And just one follow-up, and I think you've announced 8 new electric outboard engines by calendar year-end '25 if I was reading that correctly and you showed one at Miami. But I guess at a much higher level, I mean, how do we think about electric as maybe a percentage of outboard mix over the next couple of years? And what is the ability to platform electric product or technologies with your existing internal combustion lineup?

Yes. As we have said, Mike, we think that -- I mean, there is a viable market for electric outboard product, but it is lower horsepower product. It's an existing market. It's almost entirely in Europe, and it's almost entirely based around regulated lakes. But the fact is there are many thousands of electric outboards sold every year and the number is increasing, but 90% of them are lower than 5 horsepower. So it's -- there's clearly a gap and that we sell internal combustion engines from 2.5 horsepower up to 600, as you know. So the overlap with our existing product line is modest and clearly at the lower end. But as we -- as technology develops, the ability to go to a higher power obviously increases with more efficient weight and cost-effective battery technology, particularly. So we are starting with lower horsepower and moving up our expectations at the moment that how far we can go up is still quite limited and making something that is broadly good value to the consumer and we'll have a reasonable scale of market. But it is a real market, and we intend to be a very, very active participant in it. And we are -- we have the same expectations for return on investment for our electrified product that we do have for the rest of our product line. In terms of the ability to platform, it is possible to platform if you think through motors, inverters, even some of the housings and other things within certain horsepower ranges. So you might, and this is completely hypothetical, have a platform that covers like 1 to 5, another platform that covers 10 to 20, this is hypothetical. But it is possible to derive a number of horsepower nodes from a single or closely associated platform of components. And just as we have done with our internal combustion engines, we will take that approach with our electric product. I would not though neglect the work that we've already done and continue to do on generator replacements that there is a way that electrification can make its way into larger boats, just not necessarily through propulsion. But there is that other engine on most large boats that can be replaced. So our strategy does not neglect higher horsepower and larger boats, just -- it's just a different strategy, a different way of replacing combustion engines. Brett, yes?

Yes. Maybe I would just make one build or add on Dave's comment around generator replacements. And I couldn't agree more. It's a huge opportunity. I just wanted to make the point that it's not only limited to the marine industry as well. There's a pretty sizable addressable market outside marine and RV and work trucks that we're accessing today. So it's not a theoretical opportunity. It's a very real opportunity that we're capitalizing on in market.

Our next question comes from the line of Xian Siew with BNP Paribas Exane.

I appreciate you guys sizing the downside scenario, but I just want to maybe just dig in a little bit more on those. For example, for the P&A, can you maybe disaggregate how much of your P&A business is parts that are necessary for annual maintenance versus maybe some parts or accessories that are more discretionary and could be maybe just deferred out? Like trying to get a better sense of what's really like required annual maintenance.

Yes, I'll take that. And Chris, maybe you can also add in. We believe about 75% of our P&A business is aftermarket and a large, large majority of that, we would consider necessary maintenance and things that you just have to either consume, right? Consumables, oils, lubes, filters or things that just need to be repaired, replaced by normal usage. I think a lot of the nice to haves, right, the things that you could do without, a lot of those are in the boat parts and systems side of things, which is generally kind of a bit of the lower margin and more commodity-type products. We're happy to sell them. We distribute them same day, next day, obviously, through our distribution business. But the large majority of that aftermarket is required and necessary.

I'm sorry, Brett, I didn't mean to interrupt. But I would say, though, that if you look historically, even in the financial crisis, P&A only went down about 5%. So it isn't as though even in very tough financial circumstances, you see some huge change between -- change in behavior around aftermarket items on a boat. We actually saw that be extremely consistent. And I would say that, and we've mentioned it recently that consumers are, in a lot of cases, that will keep a boat for a while, but they don't want old electronics. They want new technologies. They want to be able to catch fish better and easier than they did before and better and easier than their friends can. And so we have now have ways of satisfying that, including things like over-the-air update. So we have new ways of delivering technology that make us even more robust, I think, than we were in the past. Sorry, Chris, please go ahead, Chris Drees.

No. And thanks, Dave. When you look at the Mercury and the replacement parts, those are really necessities to replace the propeller to keep your engine running. I would consider all the Mercury P&A, for the most part, necessity to keep your boat and engine running smoothly.

Okay. Yes, that's really helpful. And then maybe just on the propulsion side as well, you showed how it's potentially down less than boat retail. Maybe you can help bridge that gap as well a bit more? Are you thinking about things like share gains and more repower sales? Or just some more dimensionalization of that would be helpful.

Dave and group, I can grab this one a little bit. If you think about some of the markets that we have a lot of opportunity yet in the commercial market. Certainly, we're just touching the surface on some of that. Then as it goes on, the repower market opens up more broadly. And also the new OEMs, as we continue to launch new products, we're seeing great acceptance by new OEMs in the marketplace. And that's after we fill current back orders. So certainly, a lot of potential on the propulsion side.

Our next question comes from the line of Joseph Spak with RBC Capital Markets.

We touched a bunch on some of the nearer-term issues here. I guess I wanted to ask a couple of bigger picture questions. Just with all the initiatives and plans you have in place, but also everything else going on in the world, and I realize you might not have it set yet, but I'm curious to sort of get your thoughts on how you're thinking about this. Like how do you reimagine your supply and value chains? Because it seems like everything is going to be -- require sort of a rethink for what might be a different world for the next 10 versus the prior 10? And then secondarily, just for the initiatives that are aligned with your ACES view and the digital journey you're trying to take the customer on, how are you finding your ability to attract the right talent to execute on that?

Those are good questions. Thank you, Joe, very much. I think the supply chain is not our reimagining, if you like, the supply chain is a more continuous process than you might think. A lot of things have occurred over the past several years, tariffs, for example, would be one that caused you to rethink the way that you source product. Certainly, we've mentioned recently, the high degree of vertical integration that we have, particularly in Mercury. And with the investments that we're making now that tactical vertical integration will be further increased. And then the acquisitions that we're making and the technologies that we're developing organically all mean that we have more capability product systems that we generate internally. And I think the -- clearly, people are moving and we are moving less JIT and more towards supply chain robustness. And that is clearly a new theme, if you like, over the past several years, but we're well along with that in-sourcing of certain product lines. One of the advantages we have is there aren't so many people big enough to in-source some of this stuff and for the volumes still to make sense. But for us, it can really make sense, especially if it avoids disruption. So as we mentioned, sourcing patterns are changing. The products that we get delivered are changing. The amount we in-source is changing and our continued investment in vertical integration overall continues to help us a lot. Does anybody else have any comments on that?

I guess, I'll just say it from that Boat perspective, of course, we're doing all of the vertical integration that we talked about. I think it's very helpful for us with our sister divisions as well. That certainly enables us to manage the supply chain. And I think just this kind of longer-term visibility and more -- just kind of more holistic contracts in place, I think, that are really helping us. But just longer-term viewpoint that we're taking into your point, less of the just-in-time or more of the robustness has really been helping together with the [ different ] division relationship is enormously helpful.

On the second question, I think we're doing extremely well sourcing talent. I think the investments that we make in our culture and our compensation systems and our inclusiveness programs. Of course, they're the right thing to do, but they genuinely really help us. We have a great culture that's really well recognized when we get external recognition by brands like Forbes and we placed really high, not just in our industry but across industries, it is a huge benefit for us and we're getting a really strong return on it. We have hired incredible management and technical talent from multiple industries at senior management levels and throughout the organization just over the past 2 or 3 years and continued to do that. The market is certainly -- it's quite aggressive. We have to move quickly. We have to present the right kind of proposition. But in our space, I think nobody else is better equipped to do that than we are. And I think we're being very successful if you think just in the senior leadership team. Recently, we have Aine from Tier 1 automotive. We have Brett from consumer goods. We have John Reid from ag. So a lot of people coming into the business with exactly the capabilities that we want and the talent who view Brunswick as strong growth and with the right culture to be able to develop their careers. The operating model we put together really helps too, I think, having 4 divisions instead of just 2 gives everybody more opportunity to demonstrate their capabilities and shine and participate in the multiple growth vectors that we have. So everybody is highly motivated and we're getting really, really strong talent still. And actually, you'll see more of that in the coming months.

I'm sorry, this is Brenna. Sorry, Joe. I'll just build on the -- I love the question and the reimagine. What we haven't talked about yet, I would also say, we are reimagining the future participation in Marine. And so as we look at the future, it is not just a set of discrete transactions, but Brunswick is positioned -- in position really to win with consumers of the future over the course of their boating lifetime. And as we are bringing in and winning with new consumers, you can imagine in the next 5 to 10 years, the marine industry is going to look different, runs differently, Brunswick is best positioned to win. And in addition, just the synergies within the organization in our portfolio, as we think about the connection points to ultimately build a better experience. So we have a very strong optimistic view of the future and participation.

Yes. I just -- this is Brett, I just wanted to drill, I think, on points that underpin what Dave and Brenna shared. I think we've had remarkably good luck in attracting top-tier talent from a variety of different industries. And I think that's driven in part not only by the industry is one that elicits a lot of passion, but as Brenna was kind of alluding to, I think people generally understand and really connect to the narrative of Brunswick and our ability not just to participate in the transformation of the industry, but to really help drive it and lead it. And so when you couple that with an industry like ours that's fun and again, unless it's passion, I think it becomes a really attractive value proposition for top talent in the industry, and I think we're seeing evidence of that every day in our recruiting efforts.

Yes. And it sounds like your scale and positioning is in of itself a competitive advantage for what's a rapidly changing world.

[Operator Instructions] Our next question is a follow-up from the line of Gerrick Johnson with BMO Capital Markets.

David, you mentioned consumer-centric innovations in your presentation. I would love to hear more about that, the process and how you gain those consumer insights to develop that consumer-centric innovation.

Yes. Thank you for the question, Gerrick. We talked quite a bit about -- and I'll turn this over to Lauren Beckstedt in a second. About unique ways that we have developed over time, partly, I think, out of always looking for something that is an advantage, partly because that consumer dynamics are changing so fast, that allow us to get more real-time insights into consumer behaviors. And then I think we benefit a lot from the breadth of our portfolio. We have just a lot of touch points with consumers from value boats to premium boats from participation models like Freedom. And so maybe I'll turn it over to Lauren to expand on that, and then we can talk about how that drives innovation.

Yes. I think you finished the point. As it relates to the portfolio, one of our competitive advantages, especially as consumers interact with our brands more and more digitally every day, we get a macro view that nobody else has. And so looking at those big picture aggregate trends around the consumer helps us stay more nimble and dynamic. And then other things we've put in place like Ripl, which is our consumer community that gives us real-time feedback about consumer interest, preferences, behaviors, that we can really turn on at any point during the year cycle to stay in touch and stay close to trends. So -- and that's just one example. I think we've got lots of different mechanisms to stay close to the consumer to inform our innovation process, but those are 2 of the stronger competitive advantages that we nurture.

And then how it drives innovation, I think a couple of examples might be product innovation and then business model innovation. So on product innovation, of course, we share some of the high levels we get from the Ripl online community, which is I think, probably coming up on 5,000 members. But actually, we work with that community in a lot more depth. So for example, as we developed our electrification strategy, we were able to try and understand adoption rates, what does an early adopter look like? What does a late adopter look like? What are the attributes that they might be prepared to trade off on? So as we go into the process of designing a product, we understand rain, speed, performance, aesthetics, other attributes, digital attributes, for example, connectivity. And how -- where, in the case of electrification, where there's almost always some level of trade-off, where are people not willing to make the trade-off? And where are they willing to make a trade-off? So that has driven a lot of the direction of our electrification strategy. And then in terms of business model, you can imagine that in a business like Freedom, there are lots of -- inside that, a lot of programs, a lot of pricing opportunities, a lot of different ways to participate. Brenna, I don't know if you wanted to...

I would just add, we have a direct line of communication with 50,000 boaters that, in their respect, are very diverse. In addition, Boateka was -- is a great example of the business model that was borne out of an insight where consumers want trust and transparency in preowned boat purchasing. And so we've learned as we've designed the business and we continued to do a lot of learning by doing, we're refining the business model. So we're agile and we pivot, but consumer insight is really what's driving how we design our business models and build a competitive advantage.

That concludes our question-and-answer session. At this time, I'd like to turn the floor back to Dave for any concluding remarks.

Thank you, Melissa, very much, and thank you all very, very much for taking the time to join us today and for the excellent questions. I am very pleased that you had the opportunity to interact with our outstanding team today. As you can tell, we're all very excited Brunswick's progress and the future potential of all of our businesses. And in the coming months, you will see many more examples of our unique Next Wave strategy being brought to life. Thank you all very much for your time, and have a great day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.