Q4 2020 Earnings Call
All participants please standby you'll conferences led you to begin good morning, ladies and gentlemen, and welcome to do beyond being that's why Twinkie fourth quarter results conference call I would not likes to turn the meeting over to Mr. fit. It does Shane. Please go ahead Mr. does Shane.
Thank you remote good morning, welcome to be RP conference call. It worked water up it's called your southern 20.
Joining me this morning, <unk>, President and Chief Executive Officer, and Sebastien myself, Chief Financial Officer.
Before we moved to the prepared remarks, I would like to remind everyone that certain forward looking statement will be made during the call that are subject to a number up risk and uncertainties.
I invite you to read yard piece <unk> earnings press release for listing of the.
I was wondering that called refresh will be made to supporting slides and you can find the presentation on our website that the ARPU dot com under the Investor Relations section.
So with that protocol over to deal with it.
You said it [noise].
Good morning, everyone and thank you for joining us.
This morning, we'll give you the Q4 in fiscal year 20 to result.
However, given how rapidly the situation would cut in 19 is evolving globally. It is difficult to predict gets sent back on our business.
Well I understand that who will continue to adjust our blend.
Last thing unfold.
Hi by reviewing their current situation.
First the employer BRT are doing well, we have established clear policy on travel event and help and what continued to update them as go running better restaurants evolve. We have also adds up to the work from home practice where applicable.
Can I would like to thank all our employee in particular, our manufacturing workforce work, peaking extracare to apply special help extend measure.
Third we have had some challenges but have not experience any break in our supply chain to date.
Sport as of two deep all our manufacturing site, our operational but we anticipate that will be line speeds reduction or temporary closure to adapt to the men.
Fifth.
Most of our dealer around the world with a few exceptions are continuing their operation.
And dealer are completely close and he said he Spain and friends. Furthermore.
Interesting to note in China 26 out of our 33 dealers have really opened for business.
And traffic is beginning to review.
As you can imagine we are monitoring the situation closely and we'll continue to adapt.
Before I move on to discuss fiscal year, 20 result, I would like to remind everyone that our diversified manufacturing footprint.
Well, you and market prisons provides a solid base toward upon.
Let's start by looking at our financial results for the year on slide four.
Our revenue were up 15% to reached 6.1 billion, primarily driven by strong growth in year on products.
Our normalized EBITDA was up 23%.
804 million, resulting in a normalized earnings per share that came in above our guidance range at $3 83, representing solid growth of 24% over last year.
For the fourth straight year, we have been able to outpace the industry.
Our north enmity Qanbar sport retail sales for the year were up 15% compared to an industry that was up mid single digit.
When excluding snowmobile or lower committee can parse sport retails sales.
Were up 17% in an industry that was up mid single digit.
This is a testament to our reputation for pushing technology and innovation to create market shaping product as well as our flawless execution and our strong dealer network.
It's difficult to celebrate in times like this.
But we achieved our 2020 objective one year in advance by delivering over 6 billion into revenue and over $3 50 normalized GPS.
I'm extremely proud of what PRP is becoming I would like to thank all our employees for their hard work, we have said a solid foundation together.
Now, let's move to our performance for the fourth quarter, starting with the look at global retail on slide seven.
Our strong momentum continued into the fourth quarter as once again, our parts import product line up continue to drive strong consumer demand around the world.
In North America.
Retail was up 12% or 21% when excluding snowmobile.
Latin America was up 19% driven by strong side by side and personal watercress sales.
We continued performing well in EMEA.
We treat the up 7%.
Even though the industry was down low single digit and he needs you up that's just stick where our retail was up 9% why did the industry was up mid single digit.
Looking at North immediate can the retail by product line on slide eight.
Again, this quarter with delivered solid growth across our parse port product portfolio.
We continued to outperform the offer them to street with side by side retail growing above 30% for a second consecutive quarter EV your retail being up about 10%.
Early in the season fee will be color retail was up low single digit.
Continuing to grow despite lapping a very difficult comparable as our retail had tripled during last year fourth quarter.
Hello, watercraft perform well.
Early in the season with retail up low teens, and we had the strong quarter for snowmobile with retail up mid single digit in an industry that was down high single digit.
Now, let's turn to slide nine for the year on product highlight.
Revenue were up 18% driven by a higher volume of side by sides.
On the retail site seven months into season 20, the side by side industry was up high single digit.
The demands park and them side by side was very strong and our retail was up low 30% season to date.
Got them side by side was also performing well in international markets, we create though for the quarter up over 30% in Latin America and up over 40% in the EMEA and Asia Pacific.
Turning to we TV the North American if Youve industry was also seven months into the season and retail overall was up low single digit.
What are the same period cannot meet TV was up low teen percent, notably gaining share in the mid Cc segment.
Yeah, Let me TV was also performing very well in Europe, and Asia Pacific with retail up high single digit and low teen respectively.
Now looking at the T. wheeled vehicle.
Earnings season, 20, the North American three will motorcycle industry was up low single digit and kept them three will vehicle retail was up low single digit.
We started shipping the new RT model in the last two week of the fourth quarter and it is very well received by dealer and consumer.
Turning to seasonal product on slide 10.
Seasonal product revenue were down, 6%, primarily driven by lower volume or personal watercraft sold.
Due to production timing.
Looking at retail starting with personal or graph. We are currently at the end of this season in country season market and see do continue to experience solid growth, notably in Brazil.
Our retail was up in the mid 20% for the quarter.
In Australia, New Zealand, our retail was up low single digit despite the negative impact from the wildfire problems.
In North America traction that the boat show was good and season to date retail was up low teen percent both for the industry unforeseen too.
Turning to snowmobile, then Monday to the season, the North American snowmobile industry was about flat compared to last year.
Our skewed to line up continue to drive strong consumer demand, resulting in the retail that was up about 10% and we remain number one in North America in all the segment in the which we are competing and have globally, the highest market share in our history.
So we're essentially hell, our dealer event, where we introduced our mother Deere 21 key do Enlinks flying up.
The most important than use far mother Deere 21 key to lighten up was the introduction of the world perspective. They built two stroke turbocharge engine that is available on the news key to submit 850.
This is another great example of our ability to push technology and disrupt the industry.
Continuing with the look our sport part accessories and apparel at OEM and OEM engines.
Revenue were up 6% into quarter, driven by higher volume of year around product parts and accessories.
Fiscal year 20 was an excellent year far accessories business.
With delivered double digit accessories revenue growth with all our parts support product line.
Now looking at the Marine Kathy Goody revenues were up 19% in their quarter driven by the acquisition of 10 water and the higher volume of outboard engine. So.
Looking at retail sales seven months into season 20, the North American outboard engine industry was about flat with Evan Road retail down high teen percent.
Both retails for I do Mecca, many two and Quint today was generally in line with the industry.
For the Marine business, we are following our by Bill transform strategy and that would like to remind you again that this is a mid to long term.
Overall, we had a very good result for fiscal year 20, and our momentum continued early into fiscal year 21.
Exceptionally this morning will share some color on our fiscal year two underwater retail.
Our retail from first to last Friday on March 13.
Was up 11% and 24% excluding snowmobile for a good start of the year.
However in this current global uncertainty, we are proactively implementing measure depressing, our financial flexibility and our monitoring closely the situation.
And discount that will not issue a full year guidance for fiscal year 2001 at this time.
We believe that beer fee will be well position when the economy bonds back.
And with that I will turn the call over to say best team and will return for closing remark.
Thank you Julie and good morning, everyone before we jump into Q1 day and discuss the current business environment. Let me give you an overview of the Q4 results. We completed fiscal year 20 with results came in slightly ahead of our expectations driven by the continued strength or RV business.
Revenues for the last three months of fiscal year grew 7% to read $1.6 billion, primarily driven by higher wholesale services.
Due to continued popularity of our lineup with consumers.
Our gross profit margin ended up 23.7% an increase of 150 basis points from last year's fourth quarter.
The net favorable impacts coming from volume pricing and sales programs and production and distribution costs were partly offset by unfavorable foreign exchange rate variation.
Our normalized EBITDA was up 22% to $222 million and our normalized the Pos was up 27% to reach a dollar in 12.
Looking at the full year as I mentioned, we also delivered record results with revenues up 15% to reached $6.1 billion and normalize dps up 24% to reach $3.83, both metrics and being slightly above the higher end of our guidance ranges firemen every driven by strong.
Longer than anticipated results for our or V business and favorable tax rate.
Free cash flow and that a 225 million, including Capex that ended below our guidance with investments of $331 million a certain projects were pushed the fiscal year 21.
So just after the end of the year, we extended the maturity on our long term debt by two years to May 2027, and reduced pricing on a portion of it.
As you know proactively managing the maturity of our long term debt and maintaining our covenant light structure is one other ways, we contribute to strengthening our balance sheet.
Turning to slide 15.
Our quarterly normalize that income was up $14 million compared to last year as it ended the quarter at $100 million. The growth was driven by a net favorable impact of $56 million coming from volume mix pricing and sales program.
And then net favorable impact from production and distribution costs of $19 million, which were partly offset by higher operating expenses for $15 million to support continued product investments higher net financing costs and normalized income tax expense for $17 million than another.
Favorable foreign exchange rate impact for $29 million.
Looking at network inventory on Slide 16, our network inventory was up 7% over the same period last year as we continue gaining market share.
Remember that our retail for the quarter was up 12% or 21% when excluding snowmobile. So again this quarter. The increase in network inventory continued to trend positively as it was lower than retail sales growth.
Our network inventory is up for and so as we continued to experience solid momentum with the second consecutive quarter of retail growth above 30%.
And three will primarily driven by Riker for which demand continued to be strong and we started shipping units for the upcoming season earlier than we did last year, we are comfortable with our network inventory level and quality as the number of days continued to trend in line with our targets.
And the quantity of aged inventory is low with less than 3% being more than 18 months.
Managing a healthy network is a key priority of ours, and we will continue to diligently manage it to ensure that evolves in line with retail demand.
Finally, turning to slide 17 to talk about fiscal year 21.
Now with the recent developments related to coven 19, our ability to forecast the year. At this time is challenged the potential impacts, resulting from the pandemic remain unknown and difficult to predict and so far the direct impact on our business as well as they indicated have been limited.
However, when we look at the containment measures the various governments have implemented around the world. It is only a matter of time before we start feeling the impact on our business whether through supply chain or retail demand. Therefore, given the fluidity of the situation and the inherent challenges it creates in predicting how the now.
Just months will unfold, we will not be issuing guidance for fiscal year 21 today.
Despite the limited visibility like many companies we have started scenario planning exercise, but focus in part on volume reductions cost control and cash flow.
We are still in the beginning of this process and therefore it is too early to share the details of this with you today.
However, proactively in order to ensure that we have access to liquidity as needed. This past Wednesday, we have drew the full amount on our 700 million dollar revolver facility and with the board, we have decided to suspend the quarterly dividend.
We expect to provide you with more information and details at the latest.
On our outlook for fiscal year 21 during our Q1 earnings call.
As we looked ahead, our focus remains on delivering on what we control all the while taking a prudent approach to the year, notably by implementing recommend that actions by government officials to ensure the safety our event of our employees by working closely with our suppliers.
Adjusting or production levels in line with retail trends to ensure that our dealer network inventory remains healthy and lastly, and a balance proactive and prudent manner by implementing contingency measures as required to control cost optimized cash flow and position us to continue on.
Our growth once this crisis is behind us and with this I will turn the call back to levels.
Thank you so best team.
Fiscal year, two and there was an incredible year for us as we deliver our five year plan challenge 2021 year that beds by exceeding our 6 billion in revenue and $3 50 EPS target.
As I said I'm extremely proud of what VR has achieved as well as this trend and the resilience of our people.
During the fed yet this videos of uncertainty our first our with everyone affected by the situation, including our employees dealers and business partners.
As the situation evolve we are ready to respond and to adjust our business plan as needed in order to protect our long term growth.
Thats no I will turn the call over to the operator for questions.
Thank you.
Please press star one at this time, if you have a question yes, we follow from all participants with just a quick question.
Thank you for your patience.
Our first question is from Steve Harsha from RBC capital markets. Please go ahead.
Great. Thank you very much.
Wondering if you can elaborate on a couple of things.
Just on dealer inventory you talked about it at the end of the quarter in something there can you comment at all.
In what you're seeing how is trending over the last few weeks since quarter end.
And with respect to dealer orders that are expected to delivery in the next coming months, how firm or those how much flexibility just dealer hub for.
For deliveries or Chancellor right.
The revenue recognition impacts there.
Good morning, Steve dealer orders I will talk to above the dealer order and substantial or video inventory.
The dealer order right now obviously in country like.
Spain Debbie.
And friends dealer order I mean everything is close then we don't have any.
Shipment.
In North America, we don't see yet.
Any dealer consolidation.
The retailer was exit and Thats why I gave you the color of our retail to less.
Friday, our retail excellent last Friday, and we didn't see any.
Cancellation of the order at this point that being said.
We believe it will come.
I don't think.
I don't think the dealer will will cancel orders, but that's one point dealer will close and this will be difficult to ship.
Obviously, we have firm orders for off road for the next three months.
We have firm order for watercraft, we have the NFC do ski snowmobiles.
And she will vehicle we have firm order also till the end of the season, but it will depend how this situation will evolve over.
Over the next few days.
Hi, Good morning, Steve on the inventory as you saw at the end of January retail for the quarter retail was super strong and the inventory position was good as well and as rosy indicated in his opening remarks retail up to last week was up 24% when you exclude snowmobile. So the retail continued to be very.
Very good and so the inventory position is still very healthy obviously, we will monitor.
We are monitoring or retail on a on a daily and weekly basis, and we are working with our teams to.
Adjusts deliveries and production if needed based on dealers ability that take these orders and service consumers.
Yes.
And just one final one too.
Rapidly evolving situation, but any color on the actions you've taken already are the things that have already been implemented to scale back production.
At the various facilities and when you look at your stress testing.
Any color at all and what locates downside scenarios look like over the coming.
As a as of today all our manufacturing sites are running normally but you can expect in the coming weeks.
Some effectivity would go from to shift to one shit.
To slow down production and some could be close temporarily corporate uptime.
Obviously see the we will add that depending how fast the situation will.
Well, we'll have that no impact.
What is a bit funny is some industry are doing still very well our retail on side by side. This strong LTV.
Even watercraft and US is doing well then it's very very difficult right now.
To to follow this is tuition and we'll adjust.
As fast as weekend, when we have a better indication.
Of course, I understand thanks, very much they will.
Thank you.
Thank you.
Following question is from Mark Peachtree from RBC. Please go ahead.
Hey, good morning, just a follow up on that topic with regards to sort of the production of specific types of product at each of your facilities just remind us.
Although your ability to potentially sort of consolidate.
Across the facilities.
As opposed to just sort of shutting down line.
No at this point, we don't think about consolidation.
A lot more efficient.
To go from to shift to one shift.
And if the demand stuff totally to stuff totally the operation.
In addition takes time and we're not there.
I think.
I think we'll go through a period of time and this is this is the big.
The big question, how deep and how long.
This will less than we are not thats ease of looking at the consolidation.
This could last a few months this good less.
I don't know.
Then we'll adjust our plan, but right now, it's a lot easier to reduce lightspeed and.
And temporary closing than consolidations.
Yes, Okay fair enough.
And then could you just give us a sense sort of by your buckets of costs.
Via cost of goods and then your various opex lines, how much of that was sort of be trying to fix or just pure overhead and how much would be very.
Variable or semi variable.
Good morning March.
Obviously, when we looked at our business and we looked at.
Adjusting.
Adjusting level operations, Opex and overhead will be the big element.
And just to give you a bit a color.
Most comfortable spot.
Okay.
Sure.
Variable.
We have about.
Let's say.
Probably 90% of their costs and overhead is.
Is fixed.
And then the cost of goods sold bucket, 85% of the costs are variable 15% of that is fixed and of that 15%, 90% is pretty much difficult to reduce because it's either depreciation or.
Leases that you have on the building so 85% is variable 15% of states than about 90% pretty much.
It was them and so overall in Cogs about 13% is fixed and then on Opex well that is pretty much variable you probably have 80, 85% about that's variable.
Sorry.
Right.
Yes no.
We got there.
And then could you just.
Could you just sort of talk at a high level. If when you I mean, obviously, we're not there yet, but theres going to be a performance.
Presumably there's a scenario where.
A lot of your dealers are under some pretty significant financial pressure could you just talking about structures or past experiences in terms of providing financial release, the dealers and what that has looked like.
First you.
You know we've been we've been growing and the economy have been strong for more than 10 years than the dealer overall, we're in good financial situation compared to wait to align the where the situation.
Did you have the eight for a few years before to hit the crisis in a way to nine then first I think the dealer today worldwide are in better shape than they were in the way to align does the first thing I.
I think everyone is managing their inventory better compared to what we're doing before.
And.
And theater right now.
Our trying to operate just to give you a sense.
In your West Wednesday, we've done this survey in North America, we've done the survey Wednesday, and only 4% of the dealer workflows.
20, or thinking about closing and the other we're still operating let's changing a bit their habits.
Our trying to sell products.
On digital some are doing VIP delivery that everyone is trying to to find new ways to keep going.
Very difficult to to know, but no doubt that we are in better shape than were before.
Okay appreciate it unless the line thanks.
Thank you.
Following question is on the Fenwal from Desjardins capital markets. Please go ahead.
Yes, good morning, everyone.
Could you talk as you'll see a little bit.
About the situation back in 2008, 2009, and also what kind of flexibility.
From a capex standpoint kind of your ability to to reduce your capex going forward do which level.
Yes, what intellectual Alain and Weve look obviously if.
How would the situation deteriorate, but the big differences in the way to align you had like about 10 months of declining in sales.
Thats, we hit the bottom and it took a long time so to cover this time is different as you saw and Thats why I gave you the color on our retail up to last Friday everything was rolling full blast.
And now we know that deal will be a slowdown, but the big question is how deep and the how long.
Then right now we are monitoring obviously, the health of our employee we're monitoring closely all our expenses.
All that capex that we can depending how things evolve that we can deli and obviously doing that.
Doing that trying to protect our short term growth our term our growth when the economy bounce back we wont to be our goal is to be extremely well positioned when the economy bonds back.
And on your Capex question.
And while we had shared some preliminary numbers last fall that are looking at fiscal year, one and we had said that our plan for fiscal year 21 was capex north of $400 million.
We are still in the planning phase obviously, we're taking this very seriously and we're looking at all the cash elements of the business.
We don't have a number yet for 21, but if we need to bring that number in the low 200, it's certainly something that is.
Is feasible.
When I looked at the high level plan, but obviously, we'll we'll be doing a bottom up in the next few weeks.
Okay, perfect and how much of your sales you expect if we look at fiscal 2001 no guidance. All do you expect growth in every product line so how much.
Revenues is already bake in terms of the people that already preorder snowmobiles that will be received.
In November and December and how should we expect dealer inventory to evolve.
Let's say.
The coming quarters.
Obviously the situation is still very very fluid at unprecedented we do have firm orders for personal watercraft, but we wanted to we have the orders for Q1 for Q2, there's super good visibility there for our view. We also have good visibility for snowmobile dealers have placed the orders for next season, but obviously.
It's one thing to produce some but then you need to have dealers that are able to take them and consumers that are able to buy them as well and so.
Today, I think it would be optimistic the thing we were able to.
Well all of the preordered units for consumers and as we said we will be adjusting our plans accordingly, and we will be working with our dealers or or planned partners to make sure that we do the right thing for the business in the long term.
Okay perfect. Thank you very much.
Thank you.
Following question is from Tim Conder from Wells Fargo Securities. Please go ahead.
Hey, good morning, this is actually more turnkey on for Tim.
Our questions.
First just given where oil prices on out could you remind us of your direct and indirect exposure to the oil patch regions may be a percentage of your total off road vehicle sales where sales overall.
Yes, I mean, the our exposure to the oil.
These are fairly limited and.
We still have a lot of market share to gain in those in those states and the we do we don't do much beat to be we do most of our sales b to C. But just to give US then it's about 20% of our U.S sales.
Seven states to access the Plowman, new Mexico, because that a dual Wyoming North Dakota in California.
And so far I mean, we're growing this season, we're growing over 20% in those states.
Then.
So far we don't see any direct them back, but because we see fairly small in dos and don'ts area. We still believe that we have some runway.
Okay, Great and then with this uncertain environment is there any I guess.
At this point that change product launch cadence throughout the year.
No. It's still too early to call obviously that product launches are scheduled several years and advance our team is working on product launches.
One year two years so.
Too early to say, what we're going to be announcing in June what we're going to be announcing in September we might adjust our plans based on how the economy's evolving but most of the engineering work is done for these products. So we still have a healthy pipeline of product introductions to do.
Obviously, the situation will dictate what we announce.
And one.
Okay. Thanks, and then.
Thats you provided some commentary on your 2021 plan prior to the virus impact.
Could you provide anymore detail on what your segment outlooks kind of look like without the impact for the year.
What the what could have a looks like sorry, Mark I missed the segment.
Yes segment outlooks for the year.
Yes, we were obviously you saw the result that we delivered last year and.
You saw the retail how it ticked off early this year and so were outlook for fiscal year 21 before this whole situation was very favorable.
Obviously or the.
And off road was a segment where.
We were we were looking for growth and solid growth.
Snowmobile with the product introductions that we did last last winter and a few months ago at our club. We were also optimistic for for that product line and we have a very solid lineup with personal watercraft and with our three real business. So.
Honestly before this we were actually very very bullish for fiscal year 21.
Okay, great. Thank you.
Thank you.
My question is from Robin Farley from you'll be US. Please go ahead.
Thanks, Good luck.
With that.
Perfect that just since February one you take that retailer Rich collection Hi, Justin.
Started that period.
So.
Can clarify.
Can you production, which you'd be maintaining labor expense I. Just I know you gave some of the fixed versus variable, but thank you.
So much the variable labor expansion manner that will keep maintained.
Thanks.
First the the retailers I gave you in fiscal year 2001.
Was from fed first.
But this year two last Friday March 13, and just to repeat were up 11% overall and excluding snowmobile were up.
24% than the.
This is.
We had the ability to good momentum in term of labor if we.
Close temporarily.
We will adapt to the country rules in some in North America and in Europe. There is.
As program for.
Lark competitively off that it will depend of the country, where we have the operation or we have our sales.
Team will adapt to each region.
Potentially.
Make sense and continuing they precautions that.
Okay. Okay.
She testing.
The line is very bad Robin, we you're breaking up sorry.
Just.
With the a couple of weeks maybe maintaining.
Labour sure just curious maintained this labor cost.
If if we do temporary shutdowns.
Most of the government programs kick in immediately the first they have upped of temporary really off and so.
We wouldn't necessarily need to with most of the country's need to maintain the labor cost for a few weeks if we shut down for a few weeks.
Okay, great. Thank you very much.
Thank you.
Well following question is from Craig Kennison from Baird. Please go ahead.
Hey, good morning, Thank you for taking my questions as well.
Seven I understand you are undergoing a liquidity review right now, but just wondering if there are any particular covenants in play and that our top of mind for you.
Good morning, Craig Good question.
Weve.
She was and I were both paranoid online and back then we had that long term debt.
With with covenants and so we have to navigate through that period of uncertainty and manage the business through covenants and one of the takeaways. We had back then is that if ever there was another slowdown we don't we don't want to be hindered by jeopardizing or making sacrifices to the business because we need to comply with covenants. So we've been.
Very.
Stubborn and diligent in maintaining a covenant lite depth and so today. Our death is covenant light there are no financial covenants associated with our term b.
We've also been very diligent addicts always extended the extending the maturities, we don't want to be stuck with any short term.
Debt reimbursements.
And.
Last January the markets were good pricing was good as well and we decided proactively to extend the maturity on or debt by an additional two years and so now our term b has a covenant light structure and the repayment date of 2027 and so.
That's one of the lessons that we learn back in a wait and online and today, while knock on wood. This is one good decision that we've taken and it provides us with added flexibility in these types of situations.
Thank you that's very helpful. And then I'm wondering if you've had conversations with your credit partners either on the floor plan side or.
Those who provide.
Loans to consumers and just curious what they might be saying to you at this time.
Absolutely we've been we've we're working with the Tcf in North America for Fore plan, we work with Wells Fargo as well it at international and we're in constant communication with.
With both partners they are extremely supportive they understand the situation that I've been through this before.
We are working hand in hand to support our dealers.
We are adjusting our payment terms, we are we're extending for plan as well to our dealers.
No.
We need our dealers in the long term and we need healthy dealers and so we understand that Tcf and wells Fargo understands that as well and so we're proactively working to try to lessen the burden on them as much as possible.
Thanks, and lastly, I don't know if you commented on retail.
The last week, obviously, it's early but things have changed a lot have you seen any.
Any statistics on retail since the end of last week.
Yes, well give you some colors, Craig and we're monitoring this worldwide.
Just to give you a sense.
Our retail was about 10%.
Fourth since the beginning of the year last two weeks last week than the Rolling last week and last week was about 10% up.
It was down 9% in the last three days and you can see that.
Starting to effect, obviously in Europe trends, Spain.
And each of the are down then this is totally normal and in U.S. like I said in my comments, 4% of the dealer.
Our close right. Now then this is what we don't know is I'll big will be enough, how deep and how long it will be.
Very helpful. Thank you.
Thank you.
I'll. Following question is from the KEMRON Saxa from National Bank Financial. Please go ahead.
It's just the removed himself from queue, so I'm going to go with the.
Jimmy Johnson from BMO capital markets. Please go ahead.
Great. Thank you Hey.
Can you tell us what the capacity utilization.
Was prior to the virus outbreak.
On the revolver.
No factory capacity utilization, where we are too.
We were a analysts we were running.
Full capacity at the end side by side, the personal watercraft as well so we were running.
Pretty high base, obviously snowmobile is an off seasons without without running.
But in the three wheeled vehicle business as well we were we started production of the new RT model late January and so thats in production and by goal and the reicher as well shipping for the summer season.
Great.
You said about the $7 million revolver.
Yes, well in my prepared remarks, what I indicated as we last Wednesday, we decided to draw the full amount on the revolver okay.
In order to provide us with necessary liquidity.
When needed.
Was there a chance that it would go away why did you need to what you need to pull on that right now well when we when we look up the overall market situation when we look at the uncertainty.
Obviously your look you're reading a news like everyone else is.
A lot of the business a lot of businesses are going through tough times.
And back in a way to nine there was the concerns about access to liquidity and how banks would fare and all this we're not worried because we have Canadian charter banks behind the revolver, but other certain points.
We wanted to be proactive and prudent and our managing the business and Thats why we decided to pull on the revolver. Okay Gotcha and lastly, similar to Robbins line of questioning on Opex I think you said, 85% is variable.
Good R&D, and perhaps sales and marketing, but GNS I would think would be pretty darn fix, especially if its people and labor behind that so can you just talked about your operating expense a little bit more in detail on how it is 85% variable.
Yes, well, maybe I'll, just I, probably didnt do a good job on Rover announced or question earlier on terms of fixed versus variable. So let me read without over again, we'll start with a cost of goods sold line.
When you look at the cost of goods sold all the cost of goods sold 15% as overhead and depreciation and about 90% of that is fix the rest of the Cogs is material labor rate warranty et cetera, and thats, 85% of the cost of goods sold and that's variable in terms of Opex, yes, theres a lot of salaries.
Yes, Theres advertising dollars consultants, I would say, 80% to 85% of that it's variable and addressable, yes, theres some salaries, but if the situation warrants.
That we need to adjust our workforce, we will adjust our workforce. Accordingly, obviously these actions will be measured.
There are certain skills and competencies that we want to protect and make sure that they are there when the economy turns around but.
The way we look at is everything should be addressable in terms of spend.
And then we will take the measure decisions as needed okay. Great. Thank you.
Thank you.
The following question is from Brendan Raleigh from Northcoast Research. Please go ahead.
Good morning, I, just wanted to about all your largest north American RV competitor.
They've gotten much more aggressive this year have you seen any impact on your retail demand since maybe mid February.
In the future do you plan to compete with lower pricing.
Or do you plan to just continue beating on innovation. Thank you.
No I think I mean, we didn't see any slowdown in our retail as you saw on Q4, we were over 30%.
And your retail versus last year, and we had a very very strong start of fiscal year 2001, then obviously there is a great competition between.
Our biggest competitor and us, but when you didn't see any slowdown in our retail.
Okay, great. Thank you.
Thank you.
Well following question is from Brian Morrison from TD Securities. Please go ahead.
Hi, Good morning sub in your commentary you talked about your Capex and flexibility to ticket from potentially 400 million down to 200 million can you maybe just talk about some of the major projects that comprise that 400 million and and what might be.
Amenable that you can take it down to 200 million.
Yes, well, obviously, you've seen our business evolve over the last two years and you've seen us grow and our plans for fiscal year 21 or more to continue to grow and so we were making investments in capacity.
In most of our sites and so obviously, we will request and capacity investments in the short term.
Some we also had some some projects that.
More longer term returns certain.
Investments in our systems at all on and so these are items that we can re question as well.
And obviously in situations like this well some improvements that you might want to me to some of the buildings, but are not 30 critical can be postponed to wave a future time and obviously these are things that we will.
Also be addressing in our in our plans.
Okay. Thank you and then one follow ups I can back in your perspective see provided some color on the impact of.
Volumes and.
Revenues and EBITDA and manpack back in a way no nine can you maybe talk about what happened your free cash flow at that time as well just to get a colors.
Colour on the impacts.
Well, obviously cash generation was impacted back in OID and own nine.
We were in a way to nine we did consume.
Some cash in the first year and it took about two years before we came back to positive cash generation.
And so that's why we are taking a prudent approach and managing the business Thats why we took the decision to postpone the dividend payment the quarterly dividend payment.
We have ample flexibility with our revolver.
But I was there was a indicated the.
The duration in the extent of.
Of this price is unknown today, and we prefer to be prudent.
And adjust accordingly, if things are better than.
Than what people anticipate.
Thank you very much.
Thank you. Following question is from some Directv Lee from Canaccord Genuity. Please go ahead.
Hi, Thanks, just one last one on the Capex, so that low 200 million numbers you quoted.
Is that what you would define as maintenance capex right now within that within the system too early to call I. Just wanted to give you an appreciation of as the as to the flexibility that we have on our capex device.
Talked earlier, obviously will be selective and what we decide to do when not to do.
But like any companies, we were growing and so we were making investments some of them that are paying more in the short terms that are being more in the long term.
The good news is that we have flexibility to adjust our plans than we do not believe that.
Could jeopardize the business in the long term, so we'll be very very selective and what we decide to do.
Okay. Thanks, and just in terms of your on.
Exposure to more oil and gas focused regions.
Assuming the majority of that exposure would be in year round products and likely.
Realty segment.
I would be around can you just comment on like where your market share is on that I mean that was obviously.
Gross.
Vertical for you and I suspect that you you still going to gain market share even in that could be very challenged market.
The popular product can those region is the defender the utility side by side. This is the product was.
The big seller in dose region, and again, we introduced a new defender the defender in 2000.
15.
Then that's why we started from almost zero market share and we've been going since that time at the very good.
And this is why we believe we still have runway despite.
Price that have declined leasing.
Can you give us any color on the market share.
The market share I mean, it's low to mid teen.
Recent.
Great. Thank you very much.
Thank you.
Following question is from then with wells from Desjardins Capital markets. Please go ahead.
Yes.
With respect to capital deployment opportunities could you maybe provide your view about how do you look at share buyback given the pullback in your stock price weather.
For presented in the fortunate in your view and maybe if you believe there might be some and then nailed fortunate sees a down the road and if it's something that Youre a will be.
Looking at the end.
Markets environment. Thanks.
But the what as long as we don't have better visibility on the situation, we will be very prudent.
Again, I think it's the first time, we're writing history.
Right now in the Big question is how deep and how long.
This crisis was will last.
And.
As long as we don't have better visibility will be very careful to protect our cash position.
That's great okay. Thanks.
Thank you we have no further questions, but just so at this time I would now like to turn the meeting back over to Mr. addition.
Thank you moat and thanks, everyone for joining us. This morning, our next conference call will be on May 28 for first quarter conference call.
This call 21, thanks, again, everyone and other good.
Thank you.
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