Q4 2021 BRP Inc Earnings Call

I would like to thank them for their hard work and dedication throughout this. Which allow us to deliver a standing result with exceptional retail sales growth and the record Norwich GPS.

Let's turn to slide for for more detailed. Look at Key highlight for fiscal year 21 during the year. We proactively manage the impact from the pandemic directing our employee and preserving our financial flexibility reduce our cost base. We focus our capex plan and hence our liquidity position. We do deliver exceptional retail growth across all our product Lines by supporting our dealer Network to a surge of customer demand as well as attractive and nurture and a precedent level of new entrance to the industry.

Operationally speaking with successfully executed directed production ramp-up after the temporary shutdown of our site and managers are volatile supply chain pipe Lee.

And we can forget the line down of the Evinrude outboard engine product to refocus our time and investment on are both brand in parallel. We continue to invest in our future growth. We broke ground on the construction of a new side-by-side manufacturing facility in Mexico introduce multiple models across all our product life and invested a record amount in R&D all-in-all with deliver an exceptional year. Despite the turbulent caused by defend emack & prepare the company for months. Now, let's turn to slide 5 to review the financial highlight of the year.

Revenue

For the full year, we're down 2% probably due to the temporary suspension of our operation earlier this year and the wind down of the Evinrude outboard engine production.

Despite this top-line pressure. We managed to grow our normalized the by 24% to end the year at $1 billion dollar and our diluted normalized earnings per share to an impressive 41% to reach $5.39 above. Our guidance range were able to achieve this record results due to our teams agility to quickly Implement initiative to mitigate the impact of the pandemic while at the same time taking advantage of the surge in consumer demand.

32 exceptional retail performance for the year on slide 6 we started the year with a strong retail momentum growing at the base of about 15% which was off by the onset of COVID-19 related restriction. We experienced a surge in demand as many consumers turn to our product including a higher than normal flux of new entrants to the industry interestingly the level of new entrant increase to over 30% this year compared to the normal 20% We typically experience all of this led to a 25% year-over-year growth far apart sport product retail in North America.

What is even more impressive is that all our product line experience the same Dynamic at varying degrees and excluding personal watercraft, which was the most affected impact by the production shut down our Powersport product generated 30% increase in retail.

Turning now to the fourth quarter slide on the fourth quarter on slide seven as you can observe the man remain very strong in Q4 as a as we outpace and distribution in most markets Powersport retail growth accelerated in North America, which retail up 30% demand for snowmobile was extremely strong. In fact, we started to run out of inventory in certain region in January, which affected our overall retail excluding snowmobile. Our retail is up 41% off and Retail was also strong in international market as product availability improve delivering retail growth of 9% in Latin America 11% in the month and 20% in asia-pacific turning now to slide eight for a deeper dive into North American retail by product line, which represent over 70% of

of our Consolidated revenues

Again, this quarter with dealer solid growth across the part spark product, but for you side-by-side any TVs both experienced strong consumer demand, which retail office in the mid Thirty and 40% respectively three wheel vehicle and personal watercraft are both off to a strong.

Continue to drive strong consumer demand.

turning to slide 9 for an update of our

Inventory and production capacity as you can observe our dealer Network inventory is down 67% compared to the same period last year in order to improve product availability and reach our long-term market share objective. We are ramping up production and investing in additional capacity recall that we are in the process of building a turd side-by-side facility in you eyes which expected to provide us with an additional 50% of capacity. The project is progressing bring us plan. And the production ramp-up is scheduled by the end of third-quarter. We are also our Sturtevant facility in the US.

both projects are progressing outs plan and the production ramp-up is expected expected to start in the

Fourth quarter these capacity expansion initiative will allow us to grow and sees market share for Trinity's supporting the achievement of our growth objectives. Now. Let's turn to slide 10 for the year round product.

Revenue were up 8% driven by a richer product mix in side-by-side and Laura sells program partially offset by a lower volume of three wheel vehicle wishing some of the production of three wheel vehicle into fiscal year twenty-two so that we could extend the production schedule for snowmobile to see the strong demand opportunity with this winter recall that were producing the Spyder F3 and RT and the Ski Doo snowmobile on the same assembly line in Vancouver on the retail side with seven months into the season 21 the North American side by side and the street is up in the high twenty percent. Can-Am. Side-by-Side is gaining share season-to-date, especially in the utility segment with retail up in the lower 30%

We also perform well in international market as the inventory availability improve which retail being up about 40% in emea and in the high 20% in Easy approved for side-by-side, we recently introduced and all new Commander platform for model year 21, the product was well-received by both the media and our dealer Network. This should allow us to resume market share gains in directly with segments that category in which we had been losing ground in recent years you to our aging offering off.

Turning to a TV the North American industry is also seven months into its season 21 and Retail is up in the high 20% Can-Am is gaining share season today, especially in the mid CC segment with retail up in the low 30% over the same. We are very happy with the momentum. We are seeing in the TV business office now looking at three-wheel Vehicles early early in the season the North American Free Will and the street retail is up in the low teens sent while Canonsburg vehicle retail is up in the high thirty percent.

We are ready for another good season with a very solid go-to-market plan. We continue to drive solid momentum with the media the product continue to attract Diversified consumer base, notably experiencing incredible momentum with woman. We are focusing on inclusion in education to attract more women to the support. I encourage you to go to our website and watch our new woman of Honor old video, which was launched a few weeks ago. I am very proud of this initiative your Rider Education Program registration continue to Trend above expectation.

We have a very good plan for a successful season 21.

I need to seasonal products on slide elephant seasonal products Revenue. We're up 24% resulting from higher shipment of both snowmobile and personal watercraft as well as from Life program to do a strong retail environment. Now looking at retail ten months into a season 21 the North American snowmobile industry is up in the high temperature schedule lineup continue to outpace the industry, which retail growth that is up in the low 20% over the same period as a result our market share with you to grow we change a new record level.

Looking at International Market our schedule and links lineup are performing very well in Russia facing the industry with retail up in the high 20% off in Scandinavia. The industry is down mid-single-digit due to the late arrival of snow, but retail accelerated in February, and we are outpacing the industry.

Also recently held are virtual product introduction event where we introduced our model year 22 Ski-Doo and links lineups. One of the key highlights of this month announced meant was the introduction of links the First new snowmobile brand to the North American Market in the case bringing an exclusive new alternative for snowmobile Riders Monday with three high end links models these premium model provides a different writing experience and show that track a new type of writer to BRP boss will only be available as pre-sold order in Spring and will be offered as a premium brand as a reminder in Scandinavia. We have over 60% market share with our combined Ski-Doo and links product line. The links introduction is a new growth opportunity for us and Mark and exciting new chapter in snowmobiling history.

V brand now available in North America. We also strengthened our schedule lined up with the introduction of the smart shot technology as we have done with the truck is here last year the addition of two new turbo engine options and the Return of the Mack Z muscle sled for this year only with these own Nation. We believe that our line nuts is very well positioned to have a successful Season 22

Turning to personal watercraft while still very early in the season the North American industry retail is up in the low seventy percent Sedar retail is up mid fifty percent slightly lagging industry growth since we handled last season with record low level of inventory in the network as we improve our product availability. We took place the industry into for the trend is also a very good encounter seasonal Market which written up mid 20% in Australia and New Zealand and up 50% in Brazil.

current trends

Are very strong and on top we have unprecedented level of customer preseason certificate. In fact, as of today over 50% of C do our jobs already pre-sold to consumer in North America.

Continuing on flight 12 with a look at Powersport parts accessories and apparel a new engine which experienced a similar Trend as vehicle Revenue were up 18% driven by a higher volume of PA and eight coming from a higher replacement parts Revenue you to increase usage of products and strong unit retaining that generated a lot of accessories sales the focus on our link ecosystem is paying half.

Now looking at Marine Revenue were down 17% impacted by the wind down of the Evinrude outboard engine at the retail level telwater is in the core of its retail jobs in in Australia, and it's performing very well retail with retail up over 20% for the quarter in North America. We are off season that are booking for the season 12 or 1 is completed and will be running at maximum production capacity until the end of July. We are pleased with the performance of are both brand and the progress wage are making on our strategy to transform the Marine industry. The wind down of Evinrude is now completed and we are focusing on are both brand with accelerated investment in New Jersey and Innovative products as well as Project M and goes with that. I will turn the call over to Sebastian.

Thank you for saying good morning everyone. We completed fiscal year 21 with record results for a fourth-quarter as we delivered on our production plan and continued benefiting from a lower sales program environment and a richer life product makes driven by the very strong consumer demand for products of our revenues reached a record level four fourth-quarter at one point eight billion dollars up 12% or normalized gross profit margin ended at 27.8% representing a 410 basis point increase driven by higher volume and richer makes a product sold and a favorable impact from purchasing and sales programs which were partly offset by unfavorable foreign exchange rate variations driven by this strong improvement in our normalized gross profit are normalized David and that the quarter of 41% to reach three hundred three hundred and thirteen dollars an alarm lies diluted EPS was up 63% $2.82 this resulted in a vain

Strong free cash flow generation of $198 million dollars for the quarter bringing the total to $674 for the year. Also just after months of the year. We took advantage of her solid liquidity position with 1.3 billion dollars of cash to deliver age or balance sheet by three hundred million dollars and significantly significantly reduce the overall interest rate on our debt leaving us with a much lower interest expense and a very robust balance sheet that provides us with the flexibility to sustain our investments in the business office while continuing to return Capital to our shareholders turning to slide fifteen for a look at the key drivers of our normalized gross profit margin Improvement for the year are normalized gross profit margins up 190 basis points for the year to reach 25.9% driven by a positive impact from volume makes pricing and sales programs for 440 basis bath.

Which was partly offset by negative.

Parts from production costs and depreciation expense for a hundred thirty basis points on federal fixed cost absorption due to the temporary plant closure earlier this year for fifty basis points off and unfavorable foreign exchange rate variation for 70 basis points. Looking ahead are normalized gross profit margins should be mostly flattish in fiscal 22, as we expect the positive impact from off the two months of planning closer to be mostly offset by inflationary pressures related to commodity pricing and Logistics moving to slide 16 for a look at our Network inventory position despite that we had increased or facilities output and delivered on our production plan in the fourth quarter the consumer demand for our products continue to outpace the supply we and we ended the year with with both our Network and our yard inventory low levels down 67% and 38% respectively this Dynamic is experienced across the product portfolio and wage.

Taking necessary actions to manage the growth in all of our product lines for personal water Craft boats, and three wheels are factories are running at full capacity and we are on plan to meet dealer orders in time the peak retail season and for off-road vehicles. We ramped up the production rate and we are optimizing our product mix and we have additional production capacity coming online in the third quarter wage. I was for snowmobile we expect in the season with a low level of inventory and the network and we are well-positioned to restock our dealers in time for the next season. So while our inventory remains below optic levels at the moment, we are taking necessary actions to manage the growth in our business and meet the strong demand for our products. And we believe we are well-positioned to make the most of the opportunity that lies ahead of us off now on to the guidance starting on slide Seventeen given the sustain strong retail demand for products in the inventory restocking cycle we have in front of us fiscal 22 is Pollo.

A very strong year for BRP. We expect to see robust Revenue growth across our product lines driven by the continued strong consumer interests for Powersport products or solid year of new product introductions and increased production volumes supported by our plants running at full capacity throughout the year and buy additional capacity coming online in the latter part of the year in terms of profitability. We expect another year a very strong ebitda margin driven by the positive impact coming from volume growth the full-year benefit of winding down the production of Evinrude object and as we get better leverage effect on operations notably as we lap a year where we suffered from inefficiencies due to the two months of production shut down.

As indicated the guidance assumes that we will be able to run our plants throughout the year without shutdowns like we experienced last year. However, like all companies in our industry. We are dealing with supply chain, but he constant monitoring and attention in order to keep our plants running commodity costs have also increased coming from the surgeon worldwide demand both these factors are increasing our operating costs. We have assumed inner guidance that we will be operating in this environment for most of the year. We also expect as although we hams ramp up their production. We may see an increase in the level of promotional activity in the back half of the Year given the more uncertain and unpredictable nature of these elements. We have provided guidance ranges for normalized David normalized DPS. Otherwise unusual for that time of year, finally, given our investments and additional production capacity. And as we are catching up on certain projects, we had you prioritized from last year fiscal 22 is expected to be a big. Yep.

In terms of capex investment. Now, let's go through the numbers on slide eighteen as I mentioned. We expect very solid growth across all our product lines with total company Revenue guidance up.

The 30% while our guidance calls for solid top-line growth. We expect a consumer demand will continue to outpace the supply of our products for the better part of the Year despite running or Factory at full capacity, which means that we will only plan to start rebuilding our dealer Network inventory later in the year and throughout fiscal 23 turning to the profitability month for the reasons discussed previously. We are starting the year with a wider than usual a bit. Guidance range with a growth of twenty to thirty percent for the year. We are assuming a depreciation expense of $280,000 an interest expense of $75 million dollars resulting from the refinancing of our debt sent earlier in February and using a share count of 87 million shares which accounts for the shares repurchased under our ncib so far our guidance calls for normalized EPS growth of thirty-five to forty 8% resulting in a range of $725 to $8 in terms of wage.

My location as I mentioned Siskel 22 will be a big year in terms of capex as we are planning for Investments between $575 and six hundred million dollars for next year still off even with this important level of investment. We expect to generate positive free cash flow for the year and with our strong balance sheet. We are well-positioned to continue returning Capital to our shoulders notably as we announced the increase of our quarterly dividend by 18% to $0.13 finally as you already realize our plan calls for the potential and achievement of rm2560. Yes Financial objective this year while the current situation definitely accelerated our volume growth. We still have many key strategic initiatives to deliver on our long-term plan such as the Marine a strategy or cost-saving initiatives the electrification of our lineup and a strong pipeline of product introductions that are expected to drive continued market share gains notably for sidewalk.

On top of these initiatives last year provided us with many key learnings and New Opportunities such as an influx of new entrants that will benefit our business going forward. So so while we may achieve our initial Financial objective this year, we remain focused on delivering on our key strategic initiatives and we are confident that with our plan and the opportunity that we have in front of us that we are well-positioned to continue delivering solid growth in the years to come. We look forward on updating you on our long-term Financial targets other later date when the global situation is more predictable. And with this I will turn the call back to Jose before I conclude I would like to briefly discuss the announcement we made this morning regarding a electric vehicle.

We have all the way set electrification was not a question of if but when today we are very excited to unveil more details of our plan of delivering Market shipping product officer that will enhance the consumer experience by offering new electric options for products.

Bill on previous investment. We already made in the space over the years for instance recall that we introduced electric car for racing in 2017 and 5 hour rule tax maxdome facility in 2019 more specifically we are developing our own rotax modular electric power pack technology package, which can be leveraged across our product line and provides us with a more cost-efficient effective solution. Just like we do for combustion engine there will be two years of development one in conscription focusing on the torque side the inverter and the high-performance electric motors in another invalid cool, which will focus on the energy side the charger the battery pack as well as the as the complete integration into the vehicle as a result will be heading many resources.

This to our team in Australia and in Canada, we intend to invest three hundred million over the next five year to Electrify our existing product line by the end of calendar month 26. In fact, you can expect the first product to be introduced to the Market within the next two years followed by a rapid rollout across all our product line off with the engineering know-how and Innovation capabilities of our team. We've been working hard to define the best strategy for our electric part technology while our product portfolio is very strong and exciting. Our objective is to expand our offering with electric option for each product line to attract new customers to continue to grow the industry.

to conclude

we had an exceptional fiscal year 21 with record result with record results. We were fortunate to be able to take advantage of an unexpected surge in college demand. We are sustaining this momentum in fiscal year 22 as we are off to a very strong start seeing continued strong retail demand across all our product line our Ascent snowmobile and side-by-side product launches generated a lot of excitement with dealers and consumers alike. Also our summer season looks very promising with the continuing trend of first time buyers and sticky issue.

We are committed to ensuring that these new entrants are converted into lifelong customers. Once they have experienced our vehicles and boats while health and safety of our people remain a priority. We are focused on managing the supply chain tightly keeping operation running and answering the smooth production a pup a few out a street and Kirito in fiscal year 22 will be focusing on several important Investments that will drive growth in fiscal year 23000 young. We are working on the electrifying all our product Lines by the end of 2026 and are accelerating our investment in R&D.

We are planning for.

Strong year of product introduction and building a third side-by-side facility in URS. We are also investing in are both brand as part of our marine strategy with Project M and project ghost with our solid start of the Year combined with these key investment. We are well-positioned to drive solid result in fiscal year 2018 and are confident that will deliver on our Guidance. The guidance has a wider range than usual with normalized EPS between $7.25 and $5 as the market and the dependability of the supply chain remain uncertain.

As mentioned by Sebastian with this guidance. We are in line to meet the financial Target of M25 earlier than anticipated while our strategy remained largely issue that we intend to give you an update at a later date.

I would like to express my gratitude to our employee suppliers and dealer for their agility dedication and resilient during this past year, which adds Drive our exceptional results on that note. I turn the call over to the operator for question as a reminder to ask a question. You need to press star one on your telephone to withdraw your question, press the pound or haschke. Please meet the webcast on your computer while you are participating over the phone for questions, please standby we compiled the Q&A roster off. Your first question comes line of Craig Kennison from Baird your line is not open.

Okay, good morning, and congratulations on the performance. Excellent work. I had a question on the longer-term. I guess plan for infrastructure around electric vehicle charging. Obviously, it's not these are not products that are on roads. And so you're going to have to invent the infrastructure as well. Are you going to rely on a homeowner's or ranchers or is there like a plan in place to ensure I guess charging infrastructure. Yeah. Good morning, Craig. No, there is no immediate plan for the infrastructures Oxley. Like you just said the usage of our product is mainly on-road off-road SRI, then it's very difficult to develop that infrastructure everywhere in the world. That being said the product will be you will be able to charge a product at home. You will be able to charge a product in any car charging station, but the plan for the charging.

Station off-road is is not finalized at this point.

Got it, and then, you know, maybe you're not prepared to comment on this but I think you alluded to some modular construction to your battery packs that would suggest maybe you could buy a multiplicity of these tax and then a charge them as your operating vehicle and then replace a dead battery with a Charged one. Is that the right mindset know, I think I think the way you should see it is I give an example we we've been wage. I think we are good to design product with the modular approach and I gave you the example the 900s engine we are able to use it on snowmobile on watercraft on Thursday. We land on side by side and it's a basic same Engine with three different application different transmission system. And that's what we meet. When we talk about the modular approach. We designing a few module of different components that you can combine them differently to up to be applied to all product line off.

Will conclude on this, you know.

The TV challenge is to balance the range the weight and the cost you can have longer range, but it will affect the wait on the cost and we need to find the right the right off balance that is acceptable for the customers and to be able to have a great customer experience.

Awesome. Thank you so much. I'll get back in the queue. Thank you. Your next question comes to line of Brian Morrison from TD Securities. Your line is now open.

Oh, good morning. I understand that you can make up some of the capacity in the second half of the year is the new facilities come online, but I'm a little bit more Curious on the existing facilities off and on-site nine. You talk about the ramp in capacity. So I'm wondering, you know, can you give us Comfort how you can optimize your current facilities to keep up with the retail demand in the first half of the year until you get additional capacity coming on in the back half. Yeah, good morning Brian as of now. I mean we are running our plants at full capacity and we do expect that we'll be able to meet retail demand respect for the seasonal products. So personal watercraft three-wheel, so we are well-positioned and the votes as well. So that's that's obviously positive. We are running at full capacity wage war view plans because obviously the man continues to be strong even even better than expected in in February and early March. Um, that being said, we'll still be dead.

The unable to build Network inventory in the first half of the year. We believe that we will meet the man and that's it. And it's more going to happen in a second half of the year and more as well. As I said in my prepared remarks and it's just go here twenty-three. So it's still going to be tight in terms of offering consumers will not necessarily have the the full Choice. That's our used have two or three years ago. And we're side by sides. Were they retail where they constrained in in Q4 by available capacity?

Yes, yes, and yes, we're still considering thank you. And then last question just in terms of Leverage your well below your ceilings and I'm wondering if you would consider potential accelerated return to shareholders such as you've done before. Yeah. Well, obviously you would probably solve we were active with with the ncib and the and the end of the fourth quarter and we continue to be uh, and the shark out reflects that obviously these are discussions. We are having with the board. We do have ample Financial flexibility. So all the options are open for now.

Thank you very much.

Your next question comes the line of Robin Farley from UVS. Your line is now open great. Thanks. I need to talk to about your shipments that you would probably only be able to meet demand in the first half. Can you give us a sense of the Cadence? I guess, you know like to sort of try to be able to back into kind of what retail growth rate your plan change could support in the first half.

Yeah, well, maybe if I give you my let's see some expectation on how my I see retail progressing. Let's say going forward q1 again is off to a good start. So we'll be leave that retail jobs going to be up probably high single digits in the first quarter. We are lapping obviously a strong quarter in Q2 retail was up 40% You might remember that or plants were closed during the week for for q1 and Q2 as well. And therefore that retail growth came from punishment, which is a lever we don't have this year. So my expectation is that retail will be down in the second quarter, maybe high single-digit to low teens and then as the year progresses, uh, we expect probably retail to be flattish dead single-digit again, depending on the quarter, but as I said, and so we don't have that big lever that we had in fiscal year 21.4 to drive retail.

Okay, so great that's helpful. And then I'm also curious tou. Your guidance assumes that kind of promotional activity comes back in in the second half and get everybody seems to be fairly Supply constraint. So I mean, I don't know if that's if you're just being conservative there, but can you I I I don't know if I miss if you said in your opening remarks what ASP was dead in in Q4 for the full year just so we can kind of think about what we're comping there, you know without having a lot of commercial activity. Yeah, when I look at fiscal year 2018 and the impact of the favorable promotional environment it brought about two hundred basis points of favorable lift to the margin Q1 was a a tough course where we did we were more intense in terms of promotional activities or expectation. Is that for next year. Two hundred basis points should be there. So continue to be favorable in q1 Q2, and yep.

Bit more we'll call it more conservative in our planning for Q3 Q4, which brings it to about two hundred basis points for the full year.

Okay, great. And just my last equipment can you get to the top end of your range kind of with current supply chain, you know the rate which you're getting or would the top end of your range kind of the supply chain to improve know. I mean the way and the the the guidance as a wide range because of the supply chain, we believe that the men will be there this year wage obviously like every weekend in the world, I think right now there is a there is a challenge on the daily basis, then if we are able to not interrupt the production we could be on the edge of the supply chain the rain sorry, but if obviously there is more interaction than we planning we could be on the low range of the guidance does the way to okay, I grew up. Thank you very much.

Your next question comes to the line.

Have been wiped from your line is hello open.

Yeah, good morning gentlemen, and congratulations for this strong finish and could you talk a little bit about the contribution of key strategic initiative that that will be that will be kind of impacting the the the your Revenue going forward and especially the referring to the project and project goes off in terms of what we could expect Beyond fiscal 22 in terms of Revenue contribution from Key strategic initiative. Yeah, good morning, but maybe the way to position it is but we don't believe in fiscal year. We believe that in fiscal year 22 the demand will remain strong till the end of the year.

The question is to manage the supply chain. And this is why we have a wide range in our guidance. If I look at fiscal year 23 and Beyond obviously, we investing money you are a 3 will be up and running on the back end of Q3. Then it will be operating only will be in ramp up in Q4 and will be fully operational next year project em will start delivery in late and Q4. Then big impact will be in fiscal year twenty-three. We also having additional capacity for watercraft thirty percent that will come fiscal year twenty-three then all those all those the key strategic initiative will benefit more twenty-three than you'll need to but basically we're quite optimistic about the demand for 22 and and twenty-three. I mean it's too early to call obviously, but yep.

Twenty-three we preparing to be ready if the demand remains.

That that that's a great color is Jose and how should we be thinking about the contributions specific to Project M and project goes in the long-term from the review standpoint off. Well, obviously, it's part of our pillar from M25 which we shared with with everyone now eighteen months ago. Obviously we have strong Ambitions for the Marine business. It is a big industry took over twenty billion dollars. And so we believe that we have the ability of getting a share of that project cam. You saw some some bits of it is it it's about creating an entry-level product that brings value to the consumer and leveraging to know how that we have. And so we believe that could be a good driver of of growth for us a dead sleep with our Innovation abilities on project project coast and with our marine Brands again, who knows where we can bring it, but again, our plan for marine is quite ambitious as wage.

so when we presented the the emission $25

Great details about the strategy going forward. I would be curious to have more caller about the uh, the assembly line whether you need a separate assembly line wage, whether there's been there will be some cannibalization or the revenue would be incremental to your current product line and wetter would be margin in creation or creative or delivery at the beginning and how you see the overall margin impact from electrification. That's a loaded question and you know mean the assembly line the assembly line. The plan is to assemble the product issue in the same line. Then where we assembling combustion engine combustion engine vehicle. Then every line will be upgraded. I would say you assemble the team you electric vehicle then this is this is one. The other thing is is the the the the whole strategy about the electrification. It's 2 a.m.

Attract a new set of customers give you some example a person that use any TV to go hunting for a week will not be you will not be attracted to the electric ATV because there is no charging station where he goes and in the world then we want to create in each product line a new product category that would appeal to some of our existing customer but also to new customers because there is an appeal writing electric vehicle and we believe it will be able to grow the industry in a different way. The other thing the last thing I would say about Kelly validation My Philosophy on this I prefer to come enable eyes are self. Then let someone else can have a light bulb and that's why for us going electric. It's a normal evolution in the technology.

Thank you very much for the caller and congrats again. Thank you.

Your next question comes to line of Mark Petrie from CIBC your line is now open.

Hey, good morning. And I'll I'll Echo the congrats from others. I just want to come back to the dynamic of new to Industry. Wondering if you can just provide some more contacts about how they've evolved through the year and more detail about how that varied by product. Yeah, good morning Mark then like I said in my remark, we ended the year with about 30% of bajor of people to purchase our unit that are new to the industry versus about twenty in the past. And if I look product line by product line slow snowmobile typically has a very very low ratio of new entrant and this year was three time but it's still the high single-digit watercraft this year half of the people who purchase our product were new and Trend three-wheeled tutored were new and Trend and for off-road. We were about twenty 25% new entrant, but what is amazing?

That's perfect and my last question, which respect you electrification you provided.

And we've done the details.

In the last few weeks if you serve a customer those new entrant right now 90% say that they want to stay in the industry for a long-term. And this is quite amazing a racial. The other thing that is interesting and I believe we are well-positioned because of our experience on spark and Riker. We are well-positioned to talk to those new entrant and and keep them in the Powersport industry. I mean, we we improve the quality of the shopping experience. We launched specific initiative or like Rider Education Program the women mentoring program the on Charter Society then we and we we have a lot of digital tools to talk to talk to those people then I believe we are extremely well positioned to make them lifetime consumer but more to come and we are we are ready to wage.

Do the best to convert has many as we can?

Okay, great. That's helpful. Also, just wanted to ask about your expectations for op-ex through the course of fiscal 22. Obviously, there's lots of noise in in fact twenty one you talked about wanting to invest specifically in in the initiatives around electric vehicles. Could you just give us a sense of sort of how to think about fiscal twenty-two? I guess specifically on selling and marketing and DNA. Yeah. Good morning Mark. If you look at our Q4 results or Opex, what's up about 13% versus a year ago. We expect that need to be to continue in terms of absolute increase next year open actually increase at the same level as Revenue growth abused as you mentioned last year was a funny year with a lot of noise, but obviously we have a lot of growth initiatives that we are investing in R&D will continue being a an area where we want to continue to invest so ballpark will pick should follow the birth.

Revenue growth

Okay, great helpful. Thank you.

Your next question comes from Steve GMP your line is now open. Hi, good morning everyone. My first question is with regards to pricing, you know, commodity costs are increasing. You also have additional costs related to Logistics and supply-chain efficiencies. So I was wondering have you taken price increases this year to offset these additional costs so far though, you need you need to balance the short-term and mid-term in in our product. Our product are not commodity. I mean if you buy a snowmobile at the high price and the year after the OEM reduce the price then you stuck with the retail sales retail wage value that is lowering and it's very sensitive then right in a typical year. We increase pricing of about 1% That's the average of the last few years.

We right now monitoring.

Obviously the cost increase for commodity and everything and even our efficiency. This is a lever that we have. But so far we didn't do it and we will continue to offer the overall situation, but it's something we will consider if things get very very difficult, but we didn't do it so far.

Okay, and and my second question is more longer-term, you know COVID-19 and staycations have been a really good driver, you know for the industry. I'm wondering you know in in your longer-term plans. You know, what do you think is going to happen to to to demand when travel returns to it to normal? How do you see things evolving wage? Obviously that's not our field of expertise. But if you read more and more article or expert regarding traveling vacation, the crews are like people believe it's more two three four years before we go back to the the old normal that will cause that way and that's why we believe people will probably travel more on the time but we don't see the trend that we're going right now through going from an enough it will take some time.

To taper down and that's why we like the challenge to convert those new entrant to to to the orange tree.

Okay, perfect and thank you for your results.

Thank you.

Your next question comes from line of Gerrick Johnson from BMO Capital markets. Your line is now open.

Good morning. Thank you. So around revenue is up about 8% right in the fourth quarter and I think the back half call at 9% by my estimate estimate or V was probably up above twelve and sorry to bring them up a Polaris crew off road by about 20 backpack. So so you lost some wholesale share there and it looks like you lost some side-by-side wage. I'm sure not a lot but a little bit in order. What is your ability to reclaim that wholesale share with the capacity you have now, that's one and number two months. How dependent are you on a new side-by-side facility to achieve the guidance that you have realize it's a free q4q ramp, but how dependent on a on a let's call it off and it's it's a perfect ramp up in 0 it's an abject disaster. You know, what level does that that have to be between 0 and 10 to to achieve your numbers?

The morning direct I I give you some numbers about our side-by-side growth over the years from fiscal year 16 to fiscal year 20 every year, we grew between twenty-five and thirty-five percent retail. Then we use to we used to grow and Chase capacity and and since the defender and throw back in 2015, We we deliver on our plan right now in 21 physically 21. We we grew 40% then an incredible momentum in the volume we deliver in twenty one is five full-time in unit what we're delivering before Defender then significant growth.

then for us when my

To lose a few share a quarter and gaining back the following quarter. But when you look at the big picture and the long-term trajectory, I'm very confident that we can achieve our objective of 35% plus market share in the timeline that we have set before then for me. Obviously. I don't like to lose one point one quarter, but I can live with it because I believe our plan is very strong to achieve our long-term trajectory now in terms of the facility obviously and and you know how long we've been ramping up new facility a lot of time in the last few years. We never miss a beat right now. You are a street construction is on plan then obviously we depend on you are a tree start up to to deliver on on this year guidance. But and only we have some flexibility though. We always put some cushion birth.

Overall, we depend on the u r a street to to deliver on the year and guidance. I think the the area which is the risk for all oems Gerrick is off the supply chain stability as you see in the news it is it is very fluid every every day every week. This week is a Swiss Canal. That's that's clogged up next week. Who knows what's going to happen and that's probably where uh, in terms of risk factor is much higher vs. Our ability to start up the plant a new plant. Yeah.

Okay. Yeah, and I'm still waiting for my barbecue grill that I ordered 2 months ago, but josee, I've got to say since I've known you since the 2013 you've basically achieved everything you said on Thursday, so I applaud you for that and I put Faith in in the numbers that you put out there. So, thank you very much. Thank you more pressure. Thank you.

Your next question comes to the line of Fred Whitman from Wolf research. Your line is now open. Hey guys, just a quick follow-up in in one of the earlier responses for the retail Outlook. Did you say that you were expecting one key retail to be up high single-digit or did did I miss here that so you heard correctly? Okay, could you just sort of touch on on what would drive off that number relative to what we saw this quarter just given sort of the commentary you've had on state performance and the fact that compares aren't too much tougher until next quarter. So so sort of what's driving the slow down at Outlook. Well, uh, they said obviously inventory availability is one of the factors delivery of units to the network as well as another factor or side by side that everything will be higher in the in the second quarter than the first quarter. So it's obviously a combination of factor and personal watercraft really kicks up in terms of retail usually dead.

in the second quarter can some retailer person watercraft be accelerating the first quarter see what the next few weeks Reserve but

That's that's our current read.

Okay, then just to you know sort of tie that with a Garrix question. I mean understand overtime market share generally is is up into the right and really positive but given some of that product tightness and and the comment box for the retail Outlook. Should we expect some choppiness on the market share side here for the next few quarters until some of that capacity comes online in the back half of the Year. We're not again. We don't believe that's our our competitors have that much excess capacity versus us. I think everyone is facing the same challenges of ramping up supply chain et cetera. So again, there might be a bit of choppiness off. But as soon as he mentioned our long-term plan is very solid or product lineup is also very solid and so our Target of of being a a a leader in the in the side-by-side industry long as we are today and even growing as is still very very valid.

Great. Thank you.

Your next question comes from line of Cameron doerksen from National Bank Financial. Your line is no open I think see a good morning. I guess the question on the on the M25 plan that may be your your, you know, achieving well ahead of schedule but you did mention that you know, you still have some of these Tailwinds from some of the costs initiatives that you had laid out in that plan. Can you just maybe go through you know, what's left to be done on that front? And and you know what we should expect from I guess from margin Tailwind from those cost and and leaning out initiatives. Yeah. Well, we're still very early in our in our service plan on the cost initiatives and honestly, obviously with the with Colvin priorities were shifted from our operations team to the manage the day-to-day Life as we said it's a it's a three hundred million dollar saving that we want to achieve that is going to provide a big lift to the margin Improvement. And the other one is the volume growth objective of growing our South

Inside markets are we're still at 20% market share for side-by-side that better asset utilization coming from the volume growth is also going to be a big driver of our margin Improvement down the road.

okay, that's that's helpful and just a