Prepared remarks
Good morning, and welcome to Brunswick Corporation's Second Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode until the question-and-answer period. Today's meeting will be recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Stephen Weiland, Senior Vice President and Deputy CFO, Brunswick Corporation.
Good morning, and thank you for joining us. With me on the call this morning are David Foulkes, Brunswick's Chairman and CEO, and Ryan Gwillim, Brunswick's CFO. Before we begin with our prepared remarks, I would like to remind everyone that during this call, our comments will include certain forward-looking statements about future results. Please keep in mind that our actual results could differ materially from these expectations. For details on the factors to consider, please refer to our recent SEC filings and 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 section of the unaudited consolidated financial statements accompanying today's results. I will now turn the call over to David.
Thank you, Steve. Brunswick delivered a strong second quarter despite the turbulent external backdrop. With financial performance ahead of expectations and year-over-year sales growth across all reporting segments for the fourth consecutive quarter. Our premium and core-biased portfolio remained resilient. Our first-half boat retail sales were essentially flat when adjusted for the purposeful value-model rationalization actions initiated last year. Marine OEM growth rates moderated somewhat from the exceptional first-quarter growth but remained very healthy, which drove gains for Mercury Marine and the Navico Group. Boating participation also remains very strong and continues to drive our recurring revenue parts and accessories aftermarket and subscription boating businesses. Boat and engine pipelines continue to be lean and fresh, with balanced channel dynamics. With global boat pipelines down approximately 1,800 units for the year, we are well positioned for wholesale growth with any future market improvement. Our overall net sales of $1.6 billion increased 8% year-over-year, with growth across all segments driven by pricing actions taken in recent periods, improved mix, new product traction, continued healthy OEM demand, and strong operational execution. Adjusted earnings per share of $1.56 increased 34% versus last year, benefiting from the same underlying business drivers as well as recognized tariff refunds, partially offset by cost inflation, higher variable compensation, incremental tariffs, and continued product investment. Absent the net IEEPA benefit, including its associated influence on variable compensation, adjusted EPS was still significantly ahead of expectations, demonstrating the strength of our underlying business performance. All segments increased adjusted operating earnings and margin with the exception of propulsion, which incurred additional tariffs and higher product development expenses as expected. Later, Ryan will discuss the overall financial impact of the IEEPA refunds on our results and guidance for the year. Finally, we repurchased $35 million of shares year-to-date and will retire $160 million or more of debt by year-end, underscoring our commitment to both maintaining an investment-grade balance sheet and returning capital to our shareholders. Turning now to external conditions. While fuel prices have clearly not dampened enthusiasm for boating participation, the prolonged conflict in the Middle East, combined with the impacts of inflation on affordability, are negatively impacting consumer sentiment, particularly among buyers of our value products. We continue to closely monitor the tariff environment and successfully drive mitigation actions. We now expect total gross IEEPA refunds of approximately $60 million to $70 million. We recognized approximately $30 million of submitted and accepted refunds in the quarter, with the remaining expected Phase 2 refunds of approximately $10 million reflected in full-year guidance. The window for the balance of our refund submissions beyond Phase 2 is not yet open and is not yet reflected in guidance. We are also monitoring the newly introduced Section 301 and Canadian tariffs, which we currently estimate will drive roughly $5 million of net negative incremental 2026 impact, and we will continue to adjust our mitigation actions as the environment evolves. Dealer and OEM sentiment is stable but cautious, with wholesale order rates remaining fairly steady. We continue to outperform the market, expanding our share of wallet and capturing new OEM wins with well-received new products. Moving to segment performance, our sustained momentum across our businesses and product lines is evident from the fact that all segments delivered year-over-year sales growth for the fourth consecutive quarter. As discussed earlier, adjusted operating margin also expanded across the enterprise in the quarter except in the propulsion segment. However, our incremental 2026 tariff payments are first-half-biased and we expect all segments will expand operating margin over the next two quarters. After a very strong first quarter, U.S. outboard engine industry retail units finished the first half slightly down versus prior year. Our propulsion business delivered another strong quarter with year-over-year sales growth driven by steady OEM demand, continued high market share, and strong international momentum. First-half global and U.S. outboard orders were up over 10%, with very strong June order activity. U.S. outboard rolling 12-month share was down slightly to 46%, driven primarily by below-5-horsepower registration declines at volume retailers and a strong 2025 comp, with OEM share remaining robust. Internationally, Mercury is driving strong share gains, with double-digit unit order increases year-to-date and rolling 12-month outboard share up across most regions, with significant gains in Asia and Latin America. Notably, in Brazil, we have increased share 600 basis points since 2019. Our five new engine platforms are on track for launching in the next two years. We are also pursuing growth opportunities in repower, government, and commercial markets, which we will share more about at our upcoming Investor Day. Engine pipelines remain lean, with U.S. outboard pipelines down 7% in the quarter versus prior year. Engine parts and accessories delivered another strong quarter, supported by healthy boating participation and resulting product demand along with past pricing actions. Combined with continued distribution gains, this drove higher sales and the products and distribution businesses both contributed to improved profitability, underscoring the stability and attractive operating leverage of this recurring revenue business. Our second-quarter sales were the best since 2022, and up across all global regions, with Land 'N' Sea rolling 12-month distribution share increasing again by 130 basis points. The Engine P&A business and Navico Group continue to work together to exploit combined footprint opportunities. Navico Group continued its strong performance trajectory, with sales growth across its business lines supported by new products, multiple OEM wins, sustained aftermarket demand, and ongoing operational improvement actions. Exclusive of the net IEEPA impact, it expanded its core operating margin by over 250 basis points versus prior year. We were also excited to finalize our first OEM supply agreement with Saxdor for Simrad autopilot, with more expected to be finalized soon. Lastly, our Boat segment grew both sales and margins, benefiting from the increased emphasis on premium and core brands, pricing actions, and continued growth in Freedom Boat Club. We expect continued strong margin expansion over the remainder of the year, benefiting from mix portfolio actions and operating efficiencies. The latest SSI data for June year-to-date shows U.S. main powerboat segment retail down approximately 4%, impacted by sentiment, affordability, and poor weather in some northern markets. Overall, Brunswick U.S. internal retail is performing at similar levels, with premium fiberglass and core product lines flat to prior year and pressure on value product lines as anticipated. When adjusted for our purposeful rationalization of value models, our first-half U.S. retail was roughly flat versus last year. Pipelines are lean and healthy, ending down approximately 1,800 units. The Business Acceleration portfolio continues to deliver growth and attractive margins, led by Freedom Boat Club. We recently announced our 450th global network location and member trips were up a record 13% for the first half of the year. I will now hand the call over to Ryan for more details on our financial performance.
Thank you, David, and good morning, everyone. Brunswick's second-quarter performance came in ahead of expectations with strong sales and earnings growth over last year. On a consolidated basis, sales were up 8% reflecting steady OEM orders, continued strong P&A and aftermarket performance driven by healthy boating participation, and pricing taken in previous periods. As Dave mentioned earlier, it was fantastic to see the fourth consecutive quarter of year-over-year sales growth for all segments. Adjusted operating earnings and margins were up, driven by the higher sales, IEEPA refunds, and positive mix impacts more than offsetting higher inflationary pressures, increased variable compensation, incremental tariffs versus Q2 of 2025, and continued spending on product development primarily in propulsion. Even absent the net impact of the IEEPA refund recognized in the quarter, adjusted operating earnings were up strongly versus the second quarter of 2025. This resulted in adjusted EPS of $1.56, up $0.34 over last year—an outstanding result. We delivered a robust $278 million of free cash flow in the quarter, just slightly behind Q2 of 2025 due solely to the second-quarter timing of our annual profit-sharing payment. This simple bridge shows the key factors of our Q2 adjusted EPS performance. From our Q2 guidance midpoint of $1.15, we had a net beat of a little less than $0.20 in the quarter due to our outstanding business performance. We then recognized a net IEEPA benefit of slightly more than $0.20, which is the gross IEEPA refunds accrued in Q2 netted against the related earnings impact of our enterprise-wide compensation plans. The result was an adjusted EPS of $1.56. Now looking at the first half of the year, sales were up 10% reflecting the prior second-quarter factors just mentioned together with the exceptionally strong first-quarter results. First-half adjusted operating earnings increased 18% over the prior year. Adjusted EPS is up 32% and free cash flow of $161 million is ahead of last year after normalizing for the impact of enterprise compensation paid versus 2025. Moving to our segments, propulsion had another fantastic quarter with sales increasing 8% versus the prior year, driven by steady OEM demand, market share, and pricing actions taken in recent quarters. Adjusted operating earnings were up and margins were essentially flat versus prior year due to the increased sales, favorable absorption, and net IEEPA refund offsetting elevated material and labor inflation, product spend, and tariffs. Absent the net IEEPA refund, adjusted operating earnings and margins declined year-over-year due to the incremental costs just mentioned offsetting the earnings from the increased sales and positive absorption impact. As year-over-year tariff costs reverse and elevated product spend normalizes in the back half of the year, we anticipate significant margin expansion in the second half of the year resulting in full-year margin growth of more than 100 basis points for the Propulsion segment. Our Engine Parts and Accessories business delivered another strong quarter of 9% sales growth, with 16% growth in the higher-margin products business. Growth in the quarter reflected strong boating participation and the resulting demand for P&A together with past pricing actions. Adjusted operating earnings were up 19% and adjusted operating margin increased 200 basis points driven by the increased mix from products and the leverage on higher sales, with the net IEEPA refund offering a very slight benefit. Now turning to Navico Group, it had another quarter of solid growth and improved profitability. Sales grew 7% over prior year and were up across all business lines and regions driven by increased OEM demand for new products, pricing, and boating participation supporting very strong aftermarket performance. Adjusted operating earnings increased 143% propelled by leverage on their higher revenue and their net IEEPA refund, with the adjusted operating margin expanding by 680 basis points. Absent the net IEEPA refund impact, both adjusted earnings and margins were still up significantly. Navico Group is solidly on track for its full-year target of increasing adjusted operating margin in excess of 100 basis points without any assistance from tariff refunds and despite inflationary impacts on inputs, including memory costs and other raw materials. Wrapping up segment results, our Boat Group sales were up 5%, driven by beneficial mix from premium models, improved pricing and lower discounts, and Freedom Boat Club. Adjusted operating earnings were up 45%, with margins up 120 basis points reflecting higher sales, the flow-through of pricing and lower discounts, and the continued focus on operational efficiencies designed to lower costs and increase gross margins throughout the portfolio. Freedom Boat Club had a very strong quarter, announcing its 450th global network location and continued increases in members and trips. IEEPA refunds had a de minimis impact on this segment. I will now share our updated guidance for the third quarter and full year. While certain new-boat retail markets remain pressured due to continued elevated rates and geopolitical uncertainty, our portfolio of leading premium boat and engine products continues to grow sales and capture OEM and consumer share, and our recurring revenue businesses continue to benefit from committed, healthy boating participation. Our disciplined execution and improvement actions also continue to drive strong operating leverage and are expected to result in materially increased adjusted operating margins and earnings this year. Overcoming the approximately $40 million impact of incremental tariffs, which is slightly elevated since our last estimate due to the anticipated impact of Section 301 replacing Section 122. Our overall tariff impact is first-half-weighted, with the year-over-year second-half impact lower than 2025. The overall result is revenue of $5.7 billion to $5.8 billion, up strongly over 2025, adjusted operating margins of approximately 8%, up 100 basis points year-over-year, and adjusted EPS of $4.35 to $4.75, up almost 40% at the midpoint. We are also increasing our free cash flow guidance to more than $400 million on the back of strong earnings, prudent working capital management, and the benefit of the net IEEPA refunds. Given all the moving pieces, we thought one last bridge would be helpful to show the components of our adjusted EPS guidance raise. As I mentioned earlier, absent any tariff refund impacts, our Q2 performance beat was about $0.20. From there, we anticipate a full-year net IEEPA benefit of a little more than $0.30 which includes the refunds accrued in Q2 plus the remainder of our Phase 2 refunds which we believe will be approved in the second half of the year. We are not anticipating or including in guidance any Phase 4 refunds in 2026, which could add more than $0.20 once approved. Offsetting these benefits are two primary factors. First, we anticipate incurring an additional $0.15 of material inflation in the back half of the year versus what was included in our April guidance, mostly incurred at Mercury and Navico Group. Second, we believe the tariff changes just discussed will add another approximately $0.05 to our overall cost base. These costs and benefits net to an approximate $0.30 of adjusted EPS benefit and we are flowing through to the full year with our EPS midpoint now $4.55 for the year reflecting a balanced view of risks and opportunities as we navigate the continued challenging macro environment. I will now pass the call back over to David for concluding remarks.
Thanks, Ryan. This year, Brunswick earned 15 Boating Industry Top Products Awards, the most we have ever received in a single year, with 13 different brands represented spanning both propulsion, vessel controls, and marine electronics. This extraordinary performance along with many other domestic and international product design and technology awards clearly illustrates the increasing breadth and depth of our product leadership. Overall, through the first half of the year, Brunswick has secured a company-record 86 awards, and we remain firmly on track to surpass 100 enterprise awards for the fifth consecutive year. As in prior years, this recognition spans products, innovation, workplace culture, leadership, and corporate reputation, and reflects the strength and consistency of our organization and values. Thank you to all of our Brunswick employees whose talent and dedication makes this recognition possible. Before we open the line for questions, while I am very pleased and excited about Brunswick's performance and trajectory, Next Never Rests™ and there is a lot more to come, which we will share at Brunswick's Investor Day on August 11. We will release a prerecorded video strategy presentation on our website next week and address questions on those materials at the event's live Q&A session. The event, which will be held at Mercury Marine's headquarters in Fond du Lac, Wisconsin, will also include facility tours and on-water product demonstrations. For those unable to attend, we will also be pleased to answer follow-up questions in post-event calls. We are approaching capacity for the event, so please register if you have not already done so. With that, we will now open the line for questions.
Questions and answers
Thank you. We will now be conducting a question-and-answer session. Lift your handset before pressing the star keys. The first question is from James Hardiman from Citi. Please go ahead.
Hey, good morning. Thanks for taking my questions. I have a question on tariffs because there are a lot of moving pieces there, and the incentive compensation makes it even more complicated. I think I get it for the quarter. Maybe as we think about the full-year guide, EPS is up $0.30, tariffs are giving you $0.30, those sort of roughly cancel each other out. There is some operational upside, but that is being offset by inflation and Canadian tariffs. Let me know if you think that is good math. As we think about the margin guide, the 25-basis-point increase, is that up or down at all excluding the refunds? Thanks.
Hey, James. Maybe I will take this and be just a little broader to start so that everyone gets the full picture. I think we consider the tariffs paid in 2026 and then the IEEPA refunds pretty different animals. So I will take them in sections. On 2026, the only major change in the quarter was the elimination of Section 122, replaced by Section 301, and then the additional potential Canadian tariffs. Together, we think that is probably a $5 million or so negative impact and that is really a second-half hit. If you think about our incremental tariff impact from last year, that takes it to approximately $40 million. That is embedded in the guidance. We will continue to mitigate and reduce our China impact. Remember, it is first-half loaded due to timing differences from last year. A negative in the first half and actually neutral to positive in the second half due to timing. On IEEPA refunds, we have been public with a gross number of $60 million of IEEPA refunds; today that looks to be $60 million to $70 million. Two key points: first, this is a gross number. The refunds are a reduction of COGS, which increases earnings, but the gross number does not include associated impacts on other parts of the P&L, namely variable compensation. That is why we talk about it as a net number. Second, there is timing. IEEPA refunds are in three phases: Phase 1, very small and received in Q2; Phase 2, about 60% of the refunds; and Phase 4, which is the remainder. Importantly, we are not anticipating any Phase 4 refunds to be accrued in 2026. So they are not included in guidance. Regarding Phase 2, about $30 million was accepted in Q2 and included in results. Once netted for enterprise-wide variable-compensation impacts, that represented about a $0.20 benefit in the quarter. The remaining about $10 million of Phase 2 was not accepted in Q2 due to some technicalities, but we are confident they will be accepted, and we included about $0.10 into the full-year guide for that benefit. So that covers tariffs. For your full-year guidance question, we had a $0.20 beat in Q2 unrelated to tariffs, and about $0.20 net IEEPA benefit in the quarter, resulting in the $0.40 beat versus our April midpoint. Looking forward to the second half, we see about $0.20 of risk from inflation and increased tariffs, offset by the $0.10 of Phase 2 benefit. That is how the bridge moved our EPS midpoint from $4.25 to $4.55. Hope that answers your question.
That is really good and a good way to frame it. On demand, you talked about retail all-in being down 4%, flattish excluding the value-unit rationalization. What can you tell us about the momentum within those numbers? You started out the year really strong in January and February, then March was weaker, and in Q2 February was weaker than Q1. Is there anything we should draw from that? The last month is always the tiebreaker. Any updated data points to help frame where demand appears to be headed? Thank you.
Yes. We continue to see a K-shaped economy effect with two distinct markets. The premium market is very stable; premium fiberglass was essentially flat to the unit. Brands like Boston Whaler, Sea Ray, and NAVAN remain solid. Our core portfolio is also very solid and essentially flat, including premium pontoons and premium fishing boats. The softness is in fiberglass runabout boats where buyers are less committed to boating as a lifestyle; they are not typically fishing or premium boats, which explains the weakness. This is not new and is why we rationalized the product line and manufacturing footprint in that area. We are rightsizing our business in the softer part of the market, sacrificing some revenue to gain margin—as intended, Boat Group gained about 100 basis points of margin from those actions. We expect to continue to monitor both parts of the market. We see positive trends, particularly in saltwater fishing for the balance of the year. The softer part of the market is more fragile economically and shows some caution, but it is not materially affecting our overall results.
Thanks, James. The next question is from Randy Konik from Jefferies. Please go ahead.
Yes, thanks a lot and good morning. Ryan, what I wanted to understand is how we should think about the long-term margin power of the business. You mentioned reducing the manufacturing footprint and fixed costs. If demand improves over the next two to five years, how should we think about margin power across the company and how different segments compare to prior cycle high margins achieved during COVID? Will margins be similar or different this time around?
Randy, good question. In four days at Investor Day, you will get a lot of detail on our earnings power in various market scenarios. We think there is still growth in the market and that pipelines are at historic lows, which provides upside. The constant is that Brunswick can continue to drive earnings in a variety of market conditions, as we have proven. Without getting too detailed, we expect significant operating leverage embedded in our plan—north of 20% and potentially higher in different conditions—across the portfolio. Navico Group continues to grow and improve gross margins; it has the highest product and variable margins across the company. Our parts and accessories business is also extremely strong from a margin standpoint. Propulsion and boats continue to grow margins in most conditions. The investment community should be pleased to see inherent growth across our businesses that would be supercharged with even modest market improvement. You will see more specifics in our investor materials on Monday.
That's super helpful. Can you quantify the extra spend and pull-forward related to the higher-horsepower engine programs? You mentioned five programs in process with launches in the next one to two years. How should we think about the duration of that expense and whether it laps by early 2027?
It is about $20 million to $25 million of spend spread across a couple of quarters. By next year, the product spend may not be dramatically lower; engine program spending is lumpy. Over recent quarters, multiple programs were at heavier spend simultaneously, which is what you observed. We will not stop spending on engine product development—it's a core competency and a competitive advantage. Think of it as about $20 million spread over several quarters that will soften, but not disappear, as we move to the out years.
The next question is from Matthew Boss from JPMorgan.
Great, thanks. David, could you elaborate on the progression of boat retail sales through the core summer selling season with retail sales tracking down 4% year-to-date? Any change to flat to up slightly for the year? Any change separately in your outlook for wholesale units this year?
On the retail side, given the softer value part of the market, we expect flattish performance and it could be slightly down on a unit basis, entirely due to the value segment. Premium and core parts of the market remain very steady and are likely to be flat through the balance of the year. By the end of July, about 75% of retail for the year is in, so changes will be modest. The market behaviors are analogous to automotive: pickups and SUVs are doing well while passenger cars are not. We are leaning into premium and core where the vast majority of our profitability lies. We are also participating in the value part of the market through Freedom Boat Club, which is an alternative way to reach those consumers less subject to inflation and interest rates. Freedom had a very strong performance this year. Boating participation remains incredibly strong; owners are using their boats extensively despite fuel price increases. The weakness is concentrated in the less committed part of the market and is not super material to our results.
On wholesale, premium and core products continue to show very strong demand for the 2027 model year, particularly at Whaler. Wholesale assumptions for the year are not materially changed. If anything, premium and core may be up slightly versus expectations while value is slightly down. Overall, there is very good momentum on wholesale for the back half of the year.
The next question is from Joe Altobello from Raymond James. Please go ahead.
Thanks. Good morning. First on shipments in the back half of the year, how are you thinking about wholesale versus retail with respect to both boats and engines? Would you expect dealers to end the year higher in terms of weeks-on-hand?
I think it will be flattish on a weeks-on-hand basis. Dealers believe they are approaching the right level of inventory on a total market basis. For us, inventory levels are lean and fresh. We have not seen any diminishing trends in wholesale orders and we believe orders will remain solid, so weeks-on-hand will likely be pretty flat through the year.
And on the U.S. outboard market, are you seeing any shifts in pricing from competitors at this point?
No, we are not seeing material shifts in pricing. Pricing activity is modest and we continue to maintain a premium pricing position, but there is not a lot of pricing activity at the moment.
The next question is from Anna Glaessgen from B. Riley. Please go ahead.
Hi, good morning. Thanks for taking my question. On the boat segment rationalization, do you expect rationalizations to continue into 2027, or should 2026 be the end of that impact?
We will continue to evaluate the portfolio. The product lines we removed were the right ones at the time, but we will continue to monitor the market. There are potential opportunities in the value part of the market with different model architectures and approaches that could be attractive. If further rationalization is required to maintain scale and lean into higher-margin parts of the market, we will do so. It will be dynamic; I cannot say it is complete yet.
One clarification: we've seen significant operating margin expansion in Navico through the first half, but full-year guidance appears to be up 200 basis points. Is that 200 excluding the IEEPA refunds, or is the guidance inclusive, because otherwise it implies potential compression in the back half?
Anna, the IEEPA refunds are included in our guidance. Navico benefited from that in the quarter, but even if you take the refunds out, they were still up about 260 basis points in the quarter. For the remainder of the year, we anticipate Q3 and Q4 to be up, with Q4 probably close to flat to get to the full-year guidance. It was a one-time benefit in the quarter that will be spread out for the full year, but to be clear, they are growing margins absent the IEEPA refund on a full-year basis.
The next question is from Gerrick Johnson from Seaport Research Partners. Please go ahead.
Hey, questions on associated variable compensation related to the tariff refunds. First, can you explain the mechanics? Is there a retroactive bonus at Brunswick? Second, how much of the variable comp is offsetting these refunds in the second quarter and in the back half? And lastly, how are the refunds spread across the segments?
Gerrick, our variable compensation plans depend on free cash flow, earnings or EPS, and long-term metrics such as cash flow return on investment. Typically, our variable-compensation curves are roughly linear. When tariffs hit last year, we did not adjust variable comp, so as tariffs flowed through the P&L we did not hit targets and variable comp payments were lower. As refunds flow through the P&L this year, they drive financial performance above target, which increases variable compensation payments. It is the linearity of the plan rather than a retroactive ad hoc bonus.
On spread and mechanics, the refunds are spread pretty evenly among Mercury, Navico Group, Boat, and corporate. The impact is not only incentive compensation on cash but also equity and profit sharing, which goes to all of our employees, both salaried and hourly. These components supported the payment we made this year and could support payments in the future. The nature of the KPIs and the compensation plans are publicly available in our disclosures.
Okay, thanks. We can go over the details later. I like to do my own math, but I appreciate the explanation.
The next question is from Craig Kennison from Baird. Please go ahead.
Hey, good morning. Thanks for taking my question. David, what indicators do you track that give you confidence marine usage remains healthy? And what signals do you need to see to believe boat usage will ultimately lead to a stronger replenishment cycle?
We track several indicators, with Freedom Boat Club data being the most real-time. Member boat trips are up 13% in the first half, which is a particularly clean indicator because members pay a fixed fee and then pay for fuel, so it isolates usage behavior despite fuel-price changes. That shows fuel increases have had no negative effect on participation. We also see strength indirectly in our P&A business; category sales indicate active usage. Registration data is supportive in the parts of the market where Brunswick participates, and registered units have grown over the past decade. Those indicators collectively show continued strong boating participation.
A follow-up on Mercury: as you gain share, is that starting to impact P&A demand this year and beyond?
Yes. As Mercury gains share, particularly in higher horsepower, we see more captive parts and replacement demand flowing to us. More sophisticated products make it difficult for others to provide aftermarket alternatives. As sterndrive engines declined historically, large outboards have replaced them and brought more captive content. We expect continued positive trends in P&A volume and margin, and Navico's aftermarket electronics is another growing and exciting part of our annuity.
Next question is from Tristan Thomas-Martin from BMO Capital Markets. Please go ahead.
Good morning. Question on the P&A trend: is there any benefit from the West Marine bankruptcy and store closures? Was that a benefit in the quarter and is it a benefit moving forward?
There could be some short-term benefit. We are the largest marine distributor globally, so customers will find parts and supplies through other channels, including our Land 'N' Sea and Kellogg distribution network. Some business could translate to our distribution channels, which is a possible short-term positive.
At this time, we would like to turn the call back to David for some concluding remarks.
Thank you, everybody, for your questions. Another very encouraging quarter completing a very strong first half of 2026: solid retail, revenue up substantially across all businesses, margin expansion, strong leverage, and continued strong free cash flow generation. Despite a new-boat market that has stabilized but is seeking a solid rebound, we are clearly firing on all cylinders with great new products and structural cost reductions coming through. Our portfolio is oriented toward and leaning into exactly the right parts of the market. Our recurring revenue businesses continue to thrive and had a particularly strong first half. You will hear more about a lot of exciting new growth opportunities for Brunswick at our investor event on August 11 at Mercury Marine's headquarters, where you will meet the leadership team, tour Mercury's facility, and get on-water experience. If you have not registered, please do so soon. We look forward to seeing you all. Thank you.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.