BRP, Inc. Q3 FY2024 earnings call

• BRP delivered sound Q3 performance with market share gains in off-road. - Saw softening demand in certain product categories, especially international markets. - Proactively adjusting shipment plans due to macroeconomic and geopolitical factors. - Success of Yellow Day global movement against intimidation. - Continued to gain market share in North American Powersports market since fiscal 2016, reaching ~37%.

Year round product: Revenue down 8% to $1.2 billion. Decline driven by timing of 3-wheeled vehicle shipments and border slowdown. Can-Am side-by-side retail up low-10%, ATV retail up mid-single digits. 3-wheel vehicle retail down low single digit. Seasonal products: Revenue down 15% to $869 million. Sea-Doo had outstanding performance with all-time high market share, Pontoon retail up over 200%, snowmobile off to good start. Powersports, parts, accessories and apparel and OEM engines: Revenue up 6% to $315 million, driven by aircraft engine and Pinion gearbox. Marine: Revenue down 6% to $104 million due to lower boat shipments. Manitou and Alumacraft retail down, Quintrex up low single digit.

• Fiscal '24 total company sales projected up 4-5%. - Normalized EBITDA flat to up 2% for the year. - Normalized EPS expected to end between $11.10 and $11.35. - Adjusted shipment plan for remainder of the year due to challenging industry and macroeconomic backdrop.

• Softening demand in certain product categories, particularly in international markets. - Macro-economic and geopolitical uncertainties affecting the industry. - Dealer inventory and financing cost pressures.

Q: Craig Kennison asked about the slowdown in October and November.

A: José Boisjoli said H1 was in line, decline started in October in almost all markets, especially international, and trend continued in November. Proactively adjusting shipments to protect dealer value proposition.

Q: Robin Farley asked about M25 targets and retail in Q4 and 2024.

A: José Boisjoli said M25 initiatives unchanged but working with conservative industry numbers, expecting fiscal '25 revenue down. Sébastien Martel added softer industry expected next year, impact on profitability with mix, marine expected stronger but offsets from lower volume, etc.

Q: James Hardiman asked about softer industry for 2025.

A: Sébastien Martel said softer than previously expected, still early to give color on own retail, but confident in market share gains.

Q: James Hardiman asked about inventory days and peers.

A: Sébastien Martel said inventory turns healthier than pre-COVID, expectation for Q4 inventory flat to up single digit, José Boisjoli said pre-COVID had less inventory than peers and gaining share by protecting dealer value proposition.

Q: Martin Landry asked about production cuts and promotional activity.

A: Sébastien Martel said production cuts reflected in guidance, expecting strong Q4 for year-round products; José Boisjoli said some competition promoting model year '23 and '24, no promotion on '24 but normal promotion on '23.

Q: Joe Altobello asked about softer demand across segments and marine growth.

A: José Boisjoli said adjustments in off-road, marine, and P&A; Sébastien Martel said lapping easy Q4 last year for marine, expecting to deliver new products ahead of boat shows.

Q: Benoit Poirier asked about promotional activity impact and capital deployment.

A: Sébastien Martel said promotional environment headwind 100 basis points in quarter, expecting 200 basis points end of year; Sébastien Martel also said expecting tailwind in Q4 free cash flow, opportunistic on NCIB, priority on investing in business.

Q: Xian Siew asked about cost base and margin protection.

A: Sébastien Martel said strategic on costs, want to protect long-term activities like R&D, tactical on short-term headwinds.

Q: Jonathan Goldman asked about retail trend in November and competitive dynamics.

A: Sébastien Martel said retail still up but industry expected down in November; José Boisjoli said some competitors discounting to defend market share.

Q: Jaime Katz asked about marine profitability and pricing.

A: Sébastien Martel said marine had tough quarter with special charge, expecting improvement next year; Sébastien Martel also said diligent on pricing, manufacturing footprint in Mexico and modular design help margins.

Q: Luke Hannan asked about entry-level sales and share capture.

A: José Boisjoli said value products down, premium up, Ryker down, F3 and RT up, more traction on premium, skewed to premium products.

Q: Cameron Doerksen asked about marginal competitors and CapEx.

A: José Boisjoli said hard to predict competitors, some dealers may drop product lines; Sébastien Martel said expected continued CapEx investment similar to current year.

Q: Mark Petrie asked about EBITDA margin and customer demographics.

A: Sébastien Martel said lower EBITDA margin due to slower volumes and OpEx as % of revenue; José Boisjoli said lower income customers have more financing difficulty, banks more restrictive.

Q: Tristan Thomas-Martin asked about revenue drivers.

A: Sébastien Martel said Q4 channel fill from new products like Maverick R and new ATV platform.

Q: Sabahat Khan asked about dealer inventory and financing.

A: Sébastien Martel said inventory up 24% vs pre-COVID, retail up 43%, but dealer financing costs high, want to manage inventory, support dealers.

Q: Brian Morrison asked about used market.

A: Sébastien Martel said used market still healthier than pre-COVID, gap of new to used increased, but trade-in values good due to higher MSRPs.