Q1 2025 BRP Inc Earnings Call

Okay.

Operator: Good morning, ladies and gentlemen. Welcome to the BRP, Inc. fiscal year 25 first quarter results conference call. For participants, we use the telephone line. It is recommended to turn off the sound on your device.

Speaker Change: Good morning, ladies and gentlemen, welcome to the P. R. P. Inc's fiscal year 'twenty five first quarter results conference call for participants who use the telephone line. It is recommended to turn off the sound on your device and I would like to turn the meeting over to Mr. Phillips's Sharon. Please go ahead Mr. Shane.

Philippe Deschenes: And I would like to turn the meeting over to Mr. Philippe Deschenes. Please go ahead, Mr. Deschenes. Thank you, Sylvie. Good morning, and welcome to BRP's conference call for the first quarter of Fiscal Year 2020. Joining me this morning are Jose Boisjoli, President and Chief Executive Officer, and Sbastien Martel, Chief Financial Officer. Before we move to the prepared remarks, I would like to remind everyone that a certain forward-looking statement will be made during the call and that the actual results could differ from those implied in the statement.

Speaker Change: Thank you Cindy.

Speaker Change: Good morning, and welcome to the RPM prints culprit of first quarter of fiscal year 'twenty five joining.

Speaker Change: Joining me this morning are president.

Speaker Change: President and Chief Executive Officer, and Sebastien Martel, Chief Financial Officer.

Speaker Change: Before we move to the prepared remarks, I would like to remind everyone that certain forward looking statements will be made during the call and that the actual results could differ from those implied in the statements.

Speaker Change: Forward looking information is based on certain assumptions and is subject to risks and uncertainties and I invite you to consult your system.

Speaker Change: They were completely puppies.

Speaker Change: So during the call reference will be made to supporting slides and you can find the presentation on our website that DRP dot com under the Investor Relations section, so with that I'll turn the call over to Jonathan.

Philippe Deschenes: The forward-looking information is based on certain assumptions and is subject to risk and uncertainty, and I invite you to consult BRP's MD&A for a complete list of... Also, during the call, reference will be made to supporting slides, and you can find the presentation on our website at brp.com under the investor relations section. So with that, I'll turn the call over to Joseph. Thank you, Philippe. Good morning, everyone, and thank you for joining us.

Jonathan: Thank you Philip good morning, everyone and thank you for joining us.

Jose Boisjoli: The first quarter of fiscal 25 played out essentially in line with our plan. Financial results were as expected and reflect our focus on managing network inventory to support our dealers. From a retail standpoint, our product portfolio performed relatively well despite softer market conditions. As the year continues to unfold, our dealers are very cautious with respect to inventory as uncertain economic conditions and high interest rates are impacting them more than anticipated. Moreover, many OEMs are turning to more aggressive promotional activity, and dealer profitability is under pressure as they are selling at a low margin to move inventory.

Jonathan: The first quarter of fiscal 'twenty five play out essentially in line with our plan.

Jonathan: And that's a result, where it has expected and reflect our focus on managing network inventory to support our dealers.

Jonathan: From a retail standpoint, our product portfolio for from relatively well despite softer market condition.

Jonathan: As the year continues to unfold our dealer are very cautious with respect to inventory as uncertain economic condition and high interest rates are impacting them more than anticipated.

Jonathan: Moreover, many Oems are turning to more aggressive promotional activity and dealer profitability is under pressure as they are selling at low margin to move inventory.

Jose Boisjoli: On the marine side, the industry has been softer than expected since April, and dealers are taking a limited number of new boats. As you know, we have always been close to our dealers and proactive in taking markets on board.

Jonathan: On the marine side the.

Jonathan: The industry has been softer than expected April and dealer or taking a limited number of new book.

Jonathan: As you know we are we have always been close to our dealers and proactive in taking market conditions.

Jose Boisjoli: Therefore, in light of the current context, we are adjusting our production to further reduce dealer inventory. This is reflected in our updated guidance. Now, let's turn to slide 4 for key financial highlights. Revenue reached $2 billion, normalized EBITDA was $247 billion, and normalized EPS was $0.95.

Jonathan: Therefore in light of the current context, we are adjusting our product sales to further reduce theater. It's been three this is reflected in our updated guidance.

Jonathan: Let's turn to slide four for key financial highlights.

Revenue reached $2 billion normalized EBITDA was $247 million and normalized EPS was 95 seven.

Jose Boisjoli: All as expected and consistent with our planned volume reduction. As for retail, our North American PowerSport sales were down 5% in line with the industry, with a solid performance in year-round product, offset by a softer trend in seasonal product, as you can see on slide 5. In fact, year-round product retail was up 11% with solid growth and market share gains across all product lines. Meanwhile, seasonal products were down, reflecting a soft end-of-season for snowmobiles due to unfavorable winter conditions. A softer overall industry trend in marine, which also impacted the sea-do switch and a difficult market for personal watercraft, as Q1 last year was unusually strong.

All it has expected and consistent with our planned volume reductions.

Jonathan: As for retail our North American Forest parts sales were down 5% in line with the industry with a solid performance in year round products offset by softer trends and seasonal product as you can see on slide five.

In fact, our year round product and retail was up 11% with solid growth and market share gains across all product lines.

Jonathan: Meanwhile, sees a little product were down reflecting.

Jonathan: Our stuff and see that as far as snowmobile due to uncertainty bullet winter condition.

Jonathan: Softer overall industry trend in marine which also impacted this T to switch and <unk>.

Jonathan: A difficult comparable for personal watercraft as Q1 last year was unusually strong.

Jose Boisjoli: Still, while the industry was down 19% versus last year, it was up about 10% versus pre-COVID. In summary, despite more challenging market conditions, we continue outpacing the industry across most product lines. Turning to slide 6 for an update on the global power support market, first looking at geographical regions.

Jonathan: So while the industry was down mid teen percent versus last year. It was up about 10% versus pre COVID-19.

Jonathan: In summary, despite more challenging market conditions, we continue outpacing the industry across most product lines.

Jonathan: Turning to slide six.

Jonathan: Six for an update on the global power sport market.

Jonathan: First looking at geographical region.

Jose Boisjoli: Canada remains relatively strong, with retail up 18% in the quarter, excluding snowmobiles. The US, however, is softer, with retail down 4%, also excluding snowmobiles. Latin America is continuing to show strength, with retail up 11%.

Jonathan: Canada remained relatively strong with retail up 18% in the quarter excluding snowmobile.

Jonathan: The U S. However is softer which retail was down 4% also excluding snowmobile.

Jonathan: Latin America is continuing to show strength with retail up 11%.

Jose Boisjoli: EMEA and Asia Pacific are still experiencing softer demand, which fell down 13% and 2% respectively. From a consumer preference standpoint, we continue to see more traction globally for premium vehicles, category; trends are more positive in the utility segment. One element that has evolved during the quarter is that many OEMs have been more aggressive with promotion and price. We expect this trend to continue throughout the year. As I said earlier, our focus is on managing network inventories. In March, our objective was to reduce parts for shipment by 10 to 15 percent by the end of the year.

Jonathan: EMEA and Asia Pacific are still seeing softer demand, which we sell down 13, 2% respectively.

Jonathan: From a consumer preference standpoint, we continue to see more traction globally for premium vehicles.

Jonathan: In the off road category trends are more positive in the utility segment compared to recreational product.

Jonathan: One element that has evolved during the quarter is that many Oems have been more aggressive with promotion and pricing we.

Jonathan: We expect this trend to continue throughout the year.

Jonathan: As I said earlier, our focus is on managing network inventory.

Jonathan: In March our objective was to reduce bar sports shipments by 10% to 15% by the end of the year now with consumer remaining.

Jose Boisjoli: Now, with consumers remaining cautious, a more competitive landscape, and the high cost of carrying inventory, killer profitability is under pressure. A revised plan calls for a 15 to 20 percent reduction, and to accelerate depletion, we will limit Q2 shipments. In parallel, for marine, we are also further reducing production until the end of. In addition, we are increasing promotional support for Parsport and Marine to accelerate and bend the return. Bottom line, we will support our dealers through this more challenging environment. This is a priority for me.

Jonathan: Remaining four fifth a more competitive landscape and the high cost of carrying inventory dealer profitability is under pressure.

Jonathan: Our revised plan calls for 15% to 20% reduction and to accelerate depletion, we will limit to shipments.

Jonathan: Instead as far Marine we're also further reducing production until the end of the year.

Jonathan: In addition, we are increasing promotional support for our sport and Murray to accelerate inventory turns.

Jonathan: Bottom line, we will support our dealers through this more challenging undergrad and then this is the priority.

Jose Boisjoli: Now let's turn to slide 8 for a more detailed look at year-round products. Revenue was down 13% to $1.2 billion, primarily due to reduced shipping. At retail, Can-Am's side-by-side sales were at its strongest Q1 ever. Retail was up 19%, primarily driven by solid growth in the utility category and in premium models, notably the Defender cap. We are pleased with the sustained momentum of our side-by-side lineup, as our numbers of units retailed during the first quarter nearly doubled compared to pre-COVID levels. ETV also had a solid quarter, reaching its highest quarterly market share ever, which was up high single digits per cent.

Jonathan: Now, let's turn to slide eight for a more detailed look at year round product.

Jonathan: Revenue were down 13% to $1 $2 billion, primarily due to reduced shipments.

Jonathan: At retail and them side by side at its strongest Q1 ever.

Jonathan: Retail was up low teen percent, probably driven by solid growth in the utility category and in premium model, notably the defender cap.

Jonathan: We are pleased with the sustained momentum of our side by side lineup as our numbers of units retailed during the first quarter as nearly double compared to pre COVID-19 level.

Jonathan: <unk> TV also had a solid quarter, reaching its highest quarterly market share ever which retail up high single digits percentage.

Jose Boisjoli: This performance was driven by the continued success of our new Outlander platform, which delivers market share gains in the mid-CC segment. Looking at three-wheel vehicles, Can-Am is off to a good season start, with retail hub in low single digits. These strong results are driven by the positive consumer reaction to the recent upgrade we made to our Spyder F3 and RT lineup. Turning to seasonal products on slide 9. Revenue was down 23% from last year to $535 million, probably reflecting reduced shipments.

Jonathan: This performance was driven by the continued success of our new Outlander platform, which deliver market share gains in the mid Cc segment.

Looking at three wheeled vehicle can name is off to a good start with retail up low single digits.

Jonathan: These strong results are driven by the positive consumer reaction to the recent upgrades, we made to our Spider F <unk> and RP lineup.

Jonathan: Turning to seasonal product on slide nine.

Jonathan: Revenue were down 23% from last year to 535 million, primarily reflecting reduced shipments.

Jose Boisjoli: Looking at our retail performance. In Snowmobile, we closed the North American season on March 31st, which retailed down in high single digits, once again outpacing the industry and further increasing our record high market share. We also ended the season with the number one position in each segment in which we competed.

Jonathan: Looking at our retail performance.

Jonathan: Snowmobile with closed the North American season on March 31.

Jonathan: Which we sell down high single digits once again outpacing the industry and further increasing our record high market share.

Jonathan: We also ended the season with the number one position in each segment in which we compete.

Jose Boisjoli: In Scandinavia, the season had a late start, resulting in retail down a low 10%. But we remain; we maintain our industry leading position with market share over 70%. This performance demonstrates the strength of our Ski-Doo and Lynx brands. Now looking at the upcoming season, we have just completed our spring booking. While volume came in broadly in line with expectation, the mix is not as rich as anticipated. Looking at the CDO product, retail was down as we were facing a difficult comparable due to late shipment last year.

Jonathan: In Scandinavia. The season has at least start resulting in retail down low teen percent, but we remain we maintain our industry leading position with market share over 70%.

Jonathan: This performance demonstrates the strength of our ski Doo and Lynx brands.

Jonathan: Now looking at the upcoming season, we just completed our spring bookings.

While volume came in broadly in line with expectations. The mix is not as rich as anticipated.

Jonathan: Looking at Cedar product retail was down as we were facing a difficult comparable due to late shipments last year.

Jose Boisjoli: However, from an historical perspective, retail is performing well, with CEDU up about 18% from a typical pre-COVID first quarter. As for the CEDU switch, it also faced the same dynamic as personal watercraft, with late shipment in Q1 of last year leading to a decrease in retail this year.

Jonathan: However from an historical perspective retail is performing well with <unk> up about 18% from a typical peak over the first quarter.

Jonathan: As for the <unk> switch it also face the same dynamic as personal watercraft with late shipment in Q1 of last year, leading to a decrease in retail this year.

Jose Boisjoli: Given software trends in the marine industry, increased promotional activity, and high levels of dealer inventories, we are also taking a more cautious stance with our C2Switch business. As such, we have decided to reduce our shipment for the balance of the year. However, we remain confident in the long-term prospects for this business, especially with new products in the pipeline for the coming year. Moving to slide 10, with Parsport Parts, Accessories, and Apparel, and OEM Engines.

Jonathan: Given suffered trend in the marine industry increased promotional activity and higher level of dealer inventory. We are also taking a more cautious stance with our CD switch business.

Jonathan: As such we have decided to reduce our shipments for the balance of the year.

Jonathan: However, we remain confident in the long term prospect for this business, especially with new products in the pipeline for the coming years.

Jonathan: Moving to slide 10, with power sport part accessories, and apparel and OEM engine revs.

Jose Boisjoli: Revenue was up 1% to $289 million, driven by higher volume and favorable pricing, offset by higher sales progress. From a product standpoint, our park and accessory business for off-road continues to increase, driven by the growing fleet of vehicles in use and the positive retail momentum. However, unfavorable winter conditions negatively impacted sales of parts and accessories for snow-related products. Revenue was down 58% to $50 million, driven by the lower volume of boat ships.

Jonathan: You were up 1% to $289 million drill.

Jonathan: Driven by a higher volume and favorable pricing offset by higher sales program.

Jonathan: I'm, a product standpoint, our parts and accessory business for off road continued to increase driven by the growing fleet of vehicle in use and the positive retail momentum.

Jonathan: However, unfavorable winter condition negatively impacted sales of parts and accessories for snow related product.

Jonathan: Moving to marine revenue were down 58% to $50 million driven by the lower volume of both shipments.

Jose Boisjoli: Looking at retail sales, Alimacraft retail was up in the low 20%, while Manitou retail was about flat. Our retail increase in North America was the result of good pre-sales at the Boat Show. As for Quinterec, retail was down a low 10% in line with the industry trend. Although the marine industry has been challenging in recent quarters, this business is, for us, a long-term growth place. With that, I turn the call over to Sabahat.

Jonathan: Looking at retail sales.

Jonathan: <unk> retail was up in the low 20%, while 92 retailer was about flat.

Jonathan: Our retail increase in North America was the result of good increased sales at boat shows.

Jonathan: As for <unk> retail was down low teen percent inline with the industry trend.

Jonathan: Although the marine industry has been challenging in recent quarter. This business is for us a long term growth.

Jonathan: With that I'll turn the call over to <unk>. Thank you Jose and good morning, everyone. Our first quarter results came in essentially in line with our expectations looking at the numbers revenues were down 16% to $2 billion, primarily due to lower shipments and higher sales program.

Sbastien Martel: Thank you, Jose, and good morning, everyone. Our first quarter results came in essentially in line with our expectations. Looking at the numbers, revenues were down 16% to $2 billion, primarily due to lower shipments and higher sales for a week. We generated $480 million in gross profit, representing a margin of 23.6%, down 210 basis points from last year. This decline was primarily due to lower shipment volumes and higher sales programs, partly offset by a richer mix of products, favorable pricing, and cost efficiency.

Jose: We generated $480 million gross profit representing a margin of 23, 6% down 210 basis points from last year. This.

Jose: This decline was primarily due to lower shipment volumes and higher sales program, partly offset by a richer mix of products favorable pricing and cost efficiencies.

Sbastien Martel: Note that an important margin headwind was related to our marine business as we significantly reduced shipments and introduced new promotions during the quarter. Meanwhile, our PowerSport Growth Profit Margin remains strong at 26.2%. Continuing down the P&L, our normalized EBITDA ended at $247 million, and our normalized earnings per share was $95; free cash flow came in stronger than anticipated at $66 million, driven by our tight management of CapEx and working capital.

Jose: Is that an important margin headwind was related to our marine business as we significantly reduced shipments and tribute and introduced new promotions during the quarter.

Meanwhile, our power sport gross profit margin remained strong at 26, 2%.

Jose: Continuing down the P&L, our normalized EBITDA ended at $247 million and our normalized earnings per share at 95.

Jose: Free cash flow came in stronger than anticipated at $66 million driven by our tight management of Capex and working capital.

Sbastien Martel: From a usage perspective, we continue to actively return capital to shareholders with a 17% increase in the quarterly dividend and through $47 million of share repurchase. Now for an update on our network inventory. Our dealer's inventory ended the first quarter up 23% from last year. This increase was in line with our expectations as we faced a difficult comparison with last year's overall linear inventory levels, and we ended the snow season with more inventory due to the unfavorable winter we just experienced. Note that Snowmobile accounted for 43% of the year-over-year revenue.

From a user's perspective.

Jose: We continued to actively returning capital to shareholders with a 17% increase in the quarterly dividend and through $47 million of share repurchases.

Jose: Now for an update of our network inventory, our dealers' inventory ended the first quarter up 23% from last year.

Jose: This increase was in line with our expectations as we faced a difficult comparison with last year's overall leaner inventory levels and we ended the snow season with more inventory due to the unfavorable winter we just experienced.

Jose: Note that snowmobile accounted for 43% of the year over year increase.

Sbastien Martel: From Q4, we began making progress and right-sizing and improving the quality of our off-road inventory, which was down 6% sequentially, including more important reductions in non-current models and in categories that experienced software retail trends. As for other product lines, inventory evolved from Q4 levels following the traditional seasonal pattern with declines at the end of the season for snowmobiles and a build-up ahead of the core retail period for personal watercraft, switch pontoon, and three-wheel.

Jose: From Q4, we began making progress in right sizing and improving the quality of our off road inventory, which was down 6% sequentially.

Jose: Including more important reductions in non current models and in categories that are experienced softer retail trends.

Jose: As for other product lines, the inventory evolved from Q4 levels. Following the traditional seasonal pattern with declines at the end of the season for snowmobile and a buildup ahead of the core retail period for personal watercraft switch bond tool and three wheel.

Sbastien Martel: Despite operating with better inventory terms versus pre-COVID, as Jose mentioned, the uncertain macroeconomic environment, higher interest rates, and increased competitive dynamics are putting pressure on dealer margins, making them more cautious about taking on more products. To support them, we decided to further reduce our network inventory compared to our initial guide.

Speaker Change: Despite operating with better inventory turns versus pre Covid as you already mentioned.

Speaker Change: The uncertain macroeconomic environment higher interest rates and increased competitive dynamics are putting pressure on dealer margins, making them more cautious about taking on more products the <unk>.

Speaker Change: Support them, we decided to further reduce our network inventory compared to our initial guidance.

Sbastien Martel: Accordingly, we plan on limiting shipments in Q2 to accelerate the depletion process, which will continue throughout H2. Our objective is to gradually improve our overall inventory levels to reach a year-over-year reduction of 15% to 20% by the end of Fiscal 25. While these actions are expected to impact our financial results, we strongly believe that supporting our dealers in this challenging operating environment for them is essential to ensure our long-term mutual security.

Speaker Change: Accordingly, we plan on limiting shipments in Q2 to accelerate the depletion process, which will continue throughout <unk> two or.

Speaker Change: Our objective is to gradually improve our overall inventory levels to reach a year over year reduction of 15% to 20% by the end of fiscal 'twenty five.

Speaker Change: While these actions are expected to impact our financial results, we strongly believe that supporting our dealers and this challenging operating environment for them is essential to ensure our long term mutual success.

Sbastien Martel: With this in mind, let's turn to slide 14 for an update on the guidance. We have adjusted our guidance to reflect the impact of the initiatives we have put in place to further support our dealers in the form of lower shipments and increased promotional support, the result of our spring booking for Snowmobile, and the ongoing software trends in Marine. Accordingly, we now expect revenues to end between $8.6 billion and $8.9 billion, with a greater adjustment made to seasonal products in Marine.

Speaker Change: With this in mind, let's turn to slide 14 for an update of the guidance, we have adjusted our guidance to reflect the impact of the initiatives. We have put in place to further support our dealers in the form of lower shipments and increased promotional support the result of our spring booking personal meal and the ongoing softer trends in marine Accordingly, we now expect <unk>.

Speaker Change: Unused and between $8 6 billion and $8 $9 billion with greater adjustment made the seasonal products and marine <unk>.

Sbastien Martel: Considering the decrease in our top line, along with the benefits of additional efficiencies and cost reduction efforts, we now anticipate our normalized diluted EPS to end between $6 and $7. As you can appreciate, these expected results do not represent the true earnings power of the business as the one-time 15% to 20% expected reduction in inventory is impacting our revenues unfavorably by $575 million to $775 million this year. From a cash perspective, we further optimized our TPEC plan by $25 million.

Speaker Change: Considering the decrease in our topline along with the benefit of additional efficiencies and cost reduction efforts, we now anticipate our normalized diluted EPS and between $6 and $7.

Speaker Change: As you can appreciate these expected results sooner.

Speaker Change: The true earnings power of the business as the one time, 15% to 20% expected reduction in inventory is impacting our revenues unfavorably by 575 million to $7 to $775 million this year.

Speaker Change: From a cash perspective, we further optimize our capex plan by $25 million. This savings combined with expected working capital improvements and lower tax outflows still positions us to deliver approximately $750 million of free cash flow for the year.

Sbastien Martel: This saving, combined with expected working capital improvements and lower tax outflows, still positions us to deliver approximately $750 million of free cash flow for the year. As such, we expect to have the financial flexibility to continue providing a strong return of capital to shareholders. Before turning the call over to Jose, I would like to provide further color on the adjustments we made to the guidance by taking a look at slide 15.

Speaker Change: Such we expect to have the financial flexibility to continue providing a strong return of capital to shareholders.

Speaker Change: Before turning the call over to Jose I would like to provide further color on the adjustments we made to the guidance by taking a look at slide 15.

Sbastien Martel: As you can see from the chart, about $1.65 of the adjustment in the guidance is coming from Powersports, notably driven by the additional measures we are taking to support our dealers in this challenging environment for them. As for Marine, we expect an additional impact of about $0.50 versus last guidance. As a result, Marine is expected to represent a drag of more than $1.50 on our earnings for the year.

Jose: As you can see from the chart above $1 65 of the adjustment.

Jose: And the guidance is coming from power sports, notably driven by the additional measures we are taking to support our dealers in this challenging environment for them.

Jose: As for Marine we expect the additional impact of about <unk> 50 versus last guidance.

Jose: As a result marine is expected to represent a drag of more than $1 50 or on our earnings for the year.

Sbastien Martel: To offset these, we have put in place additional efficiencies and cost reduction measures that are expected to generate an incremental $0.75 benefit for the year. Looking ahead, as previously mentioned, our plan is to further limit shipments in Q2 in order to accelerate the network inventory depletion process for our dealers. Consequently, we expect revenues for the second quarter to be down high single-digits and normalized dividends to be down about mid-20% from Q1 levels.

Jose: To offset these we have put in place additional efficiencies and cost reduction measures that are expected to generate an incremental 75 benefit for the year.

Jose: Looking ahead as previously mentioned our plan is to further limit shipments in Q2 in order to accelerate the network inventory depletion process for our dealers.

Jose: Currently we expect revenues for the second quarter to be down high single digit normalized EBITDA to be down about mid 20% from Q1 levels.

Sbastien Martel: Our results are then expected to improve in H2 with a return to growth over the previous year in Q4. Once again, FY25 is expected to be a transition year from a financial standpoint as we focus on supporting our dealers. Still, with our strong business fundamentals and continued focus on efficiency and innovation, we are well positioned to sustain our long-term success. And on that, I'll turn the call over to Jose. Thank you, Sbastien.

Jose: Our results are the unexpected to improvement H, two with a return to growth over last year in Q4. Once again in fiscal 'twenty five is expected to be a transition year from refinancing standpoint, as we focus on supporting our dealers.

Jose: With our strong business fundamentals and continued focus on efficiency and innovation, we are well positioned to sustain our long term success.

Speaker Change: And on that I will turn the call over to Julie.

Jose Boisjoli: Over the short term, we are focused on protecting our dealer value proposition by managing network inventory and proactively adjusting our shipments. Looking beyond this correction year, we remain confident in our long-term strategy. Our agility is a significant advantage, and we have proven many times that we are geared up to respond to evolving market conditions and continue to outperform the industry. We are managing the business to ensure continued success, and we are committed to investing in the development of market-shaping products in true BRP fashion.

Julie: Thank you Sebastien.

Julie: Short term, we are focused on protecting our dealer value proposition by managing network in the then 30 and proactively adjusting our shipment.

Julie: Looking beyond this correction year, we remain confident in our long term strategy. Our agility is a significant advantage and we have proven many times over that we are gear up to respond to evolving market conditions and continued to outperform the industry.

Julie: We are managing the business to ensure continuing success and we are and we are committed to investing in the development of market shaping product in true <unk> fashion, we will keep on innovating to strengthen our leadership position in the power sports industry.

Jose Boisjoli: We will keep on innovating to strengthen our leadership position in the power sport industry. On that note, we look forward to hosting our dealer event in August, and you are invited to join us in Hanaheim, California.

Julie: On that note, we look forward to hosting our dealer event in August and you are invited to join us in <unk>, California.

Jose Boisjoli: As usual, we will introduce new technologies and products to bolster our life. We are also planning to launch our promising new Can-Am electric motorcycle, which will allow us to enter a new industry. I thank all our employees for their hard work and dedication.

Julie: As usual, we will introduce new technologies and products to bolster our lineups. We are also on plan to launch our <unk> electric motorcycle, which will allow us to enter a new industry.

Julie: I. Thank all our employees for their hard work and dedication their capacity to adapt to changing market dynamic enable us to continue to succeed in a challenging context.

Julie: I also echo Lake our dealers for supporting our lineups and for their confidence in our ability to provide them with a superior value proposition.

Jose Boisjoli: Their capacity to adapt to changing market dynamics enables us to continue to succeed in a challenging country. I also acknowledge our dealers for supporting our lineups and for their confidence in our ability to provide them with a superior value proposition. On that note, I will turn the call over to the operator for questions. Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star for one on your touchtone phone. You will hear a prompt advising that your hand has been raised, and if you should wish to withdraw from the question queue, simply press star followed by two.

Julie: On that note I'll turn the call over to the operator for questions.

Speaker Change: Thank you, Sir ladies and gentlemen, if you would like to ask a question. Please press star one on your touch Thompson, you will hear a prompt.

Speaker Change: Advising that your hands as been raised and if you wish to withdraw from the question queue simply press star followed by two.

Operator: And if you're using a speakerphone, you will need to lift the handset first before pressing any key. And we ask that, out of consideration for other callers on the line today, you please limit yourself to one question and one follow-up. Please go ahead and press star 1 now if you have any questions. And your first question will be from Craig Kennison at Baird. Please go ahead. Hey, good morning.

Speaker Change: You're using a speakerphone you will need to lift your handset before pressing any keys.

Speaker Change: And we ask that out of consideration for other callers on the line today you. Please limit yourself to one question and one follow up.

Speaker Change: Please go ahead and press Star one now if you have any questions.

Speaker Change: And your first question will be from Craig Kennison.

Speaker Change: Baird. Please go ahead.

Craig R. Kennison: Thanks for taking my question. You talked about inventory. I'm wondering if you could share with us the percentage of your power sports inventory that is non-current. Good morning, Craig. Obviously, non-current inventory is a subject that we've heard quite a bit about, and we are actually, when I look at the overall retail numbers for the first quarter, About 65% of the total retail that we did was current inventory. So we're actually in a very good position from an inventory point of view. And that's pretty much in line with the industry as well, where they were trending at that percentage as well.

Craig R. Kennison: Hey, good morning. Thanks for taking my question you talked about inventory I'm wondering if you could share with us the percentage of your power sports inventory that is non current.

Speaker Change: Good morning, Craig.

Obviously.

Speaker Change: The non current inventory as a subject that we've heard quite a bit of both and we're actually when I look at the overall retail numbers for the first quarter.

Speaker Change: About 65% of the total retail that we did was current inventory. So we're actually a very good position from an inventory point of view and Thats pretty much in line with the industry as well, where they were trending in that percentage as well.

Jose Boisjoli: The inventory that we have is, let's say non-current model year 23, less than 1% of the total inventory that we have is model year 23 and over. So what we have left is model year 24, and that is relatively clean, and the rest is current inventory. And as I mentioned, for Q1, 65% of our retail was current inventory. So that's an indication of how healthy it is. Thanks, I'll get back in the queue.

Speaker Change: The inventory that we have is.

Speaker Change: Let's say non current model year, 'twenty three less than 1% of the total inventory that we have is.

Our model year 'twenty three it over so what do we have left is model year 'twenty four and that is relatively clean and the rest is current inventory and as I mentioned Q for Q1, 65% of our retail was current inventory. So that's an indication of how healthy it is.

Speaker Change: Thanks ill get back in the queue.

Operator: Thank you. The next question will be from James Hardiman at Citi. Please go ahead. Hey, good morning.

Speaker Change: Thank you.

Speaker Change: Next question will be from James Hardiman at Citi. Please go ahead.

James Lloyd Hardiman: Thanks for taking my call. So, on the last call, I thought it was really helpful to hear your view as we look through some of the noise. I think you said something along the lines of, you know, it felt like, from an underlying earnings power perspective, more of an 1150-type year in terms of earnings once we add back some of those, if you want to call them one-time-ish costs. I guess, you know, a couple months later, and the guidance is down another $1.25. I guess, maybe if you could take us through a similar exercise, does this still feel like an 1150-type year once we sort of get past some of these one-time-ish costs? Yeah, good morning.

Speaker Change: Hey, good morning, Thanks for taking my call.

James Lloyd Hardiman: So on the last call I thought it was really helpful.

Speaker Change: It's sort of your view as we look through some of the noise I think you said something along the lines of.

Speaker Change: It felt like from an underlying earnings power perspective.

Speaker Change: More of an $11 50 type year in terms of earnings once we add back some of those.

Speaker Change: If you want to call them, one time ish cost.

Speaker Change: I guess a couple of months later.

Speaker Change: The guidance is down another $1 25, I guess, maybe if you could take us through a similar exercise.

Bill: Bill feel like an 11 50 type year.

Bill: Once we sort of get past some of these onetime costs.

Jose Boisjoli: First, I will just give you a high-level of what has changed since March. And I would like to put things in perspective to start with the inventory in units is up 36% pre-COVID. But our retail is up 50% versus pre-COVID. Then our turn of inventory is better than pre-COVID.

Speaker Change: Yes. Good morning, first I will just give you.

Speaker Change: High level what that change.

Speaker Change: Since March.

Speaker Change: And I would like to put things in perspective to start with the.

Speaker Change: The inventory in unit is up 36% pre COVID-19.

Speaker Change: But our retail is up 50% versus pre COVID-19, our turnover inventory is better than pre COVID-19 and.

Jose Boisjoli: And we're fully aware that the increased value of the unit has changed. There is a new product line that switched. The size of the product has got bigger.

Speaker Change: And we're fully aware that the.

Speaker Change: The increase the value of the unit change there is a new product line that switch the product has got bigger and obviously the cost of carrying in the venturi is putting pressure on leader to move product in retail and the retailer at a low margin.

Jose Boisjoli: And obviously, the cost of carrying an inventory is putting pressure on dealers to move product and retail, and they retail at a low margin. What has changed since last guidance is the high level of snowmobiles that is confirmed. The softer trend in marine and the U.S. market, which is softer for the first time in a while. And if you combine all this with the macroeconomic context, the competitive landscape, and the high interest rate,

Speaker Change: Let that change since that guidance is the high level of snowmobile that discomfort.

Speaker Change: The softer trends in marine and the U S market that is tougher for the first time in a while.

Speaker Change: If you combine all of this to the macroeconomic context, the competitive landscape and the high interest rate.

Jose Boisjoli: All this is a lot at the same time, and we were aware of those elements, and it's no surprise to us, but to be honest, we have not anticipated how dealers will react to the accumulation of those factors. And this is why we decided to reduce inventory by an additional 5%, now up to 15 to 20% by the end of the year. We will also limit shipment of seasonal products outside of the core retail season.

Speaker Change: Although this is a lot at the same time and we were aware of dose element. It is no surprise to us but to be on that.

We had not anticipated how dealer react to the accumulation of those sector.

Speaker Change: And this is why we decided to reduce inventory by an additional 5% now up to 15% to 20% by the end of the year.

Speaker Change: We will also limit chipman of seasonal product outside of the core retail season.

Jose Boisjoli: And we are investing in more promotion support to move inventory faster. Then all of this is obviously impacting financial performance. And you can be sure that we don't like having to reduce our guidance just one quarter into the year. But, again, we believe it's essential that we protect our value proposition with the dealer, and it's the right thing to do for the long-term success of the business. And if I could give you a bit of color on this year, and it is, in fact, a transition year, and we do have a few headwinds, as you mentioned, that will turn into positives in the near future, I would bucket them into three categories.

Speaker Change: And we are investing in more promotion support to move inventory faster than <unk>.

Speaker Change: All of this is obviously impacting the financial performance and you can be assured that we don't like having to reduce our guidance just one quarter into the year.

Speaker Change: But again, we believe it's essential that we protect our value proposition with the dealer and is the right thing to do for the long term success of the business.

Speaker Change: Yeah, and if I, if I give you a bit of color.

Speaker Change: Two is through this year and it is in fact, a transition year and we do have a few headwinds that you mentioned that will turn into positives in the near future.

Speaker Change: Get them into three categories. Obviously, the first one is the impact of the snow season, where we're reducing deliveries and being more promotional this year. The other element is the marine business, which I highlighted.

Jose Boisjoli: Obviously, the first one is the impact of the snow season, where we're reducing deliveries and being more promotional this year. The other element is the marine business, which I highlighted this morning. It's a drag on earnings of $1.50, and obviously that's unacceptable, and we're obviously going to work to fix that. And the other element is the one-time element of reducing inventory. Inventory terms are better than pre-COVID. They usually give you some color on retail versus inventory.

Morning, It's a drag on earnings of about 50, and obviously, that's unacceptable and we're obviously going to work to fix that and the other element is the onetime element of reducing inventory.

Jose Boisjoli: So the inventory is in a healthy situation because of the higher interest rates, obviously, dealers are more cautious about taking on inventory, but that 15 to 20% inventory reduction is a drag on revenue, as I mentioned, of $575 to $775 million. So, when I package all of these three elements together, is there like $3 to $4 of EPS that will come back into our earnings post-fiscal year 2025? Yes. Does it all happen next year?

Speaker Change: Inventory turns are better than pre COVID-19.

Speaker Change: Gave you some color on the retail versus the inventory sold inventory.

Speaker Change: Healthy situation because of the higher interest rates, obviously dealer.

Speaker Change: Dealers are more cautious on taking on inventory by about 15% to 20% inventory reduction is a drag to revenue as I mentioned of $575 million to $775 million.

Speaker Change: One a package all of those three elements together is there like a 3% to four blocks of EPS.

Speaker Change: We'll come back to our earnings.

Speaker Change: Post fiscal year 'twenty five yes does it all happen next year, obviously, we're going to certainly work to.

Jose Boisjoli: Obviously, we're going to certainly work to make sure that we crystallize that as quickly as possible. But obviously, these one-time headwinds are certainly impacting our financials this year, and on a normalized basis, the earnings potential of BRP is much higher than what we're presenting as guidance.

Speaker Change: To make sure that we crystallize that as quickly as possible.

But obviously these onetime headwinds are certainly impacting our financials this year and on a normalized basis the earnings potential of the ERP is much higher than what we're presenting is the guidance. This morning.

Jose Boisjoli: That's really helpful. And then maybe as a follow-up, I mean, you noted a couple times about, you know, limiting inventory carrying costs and wanting to protect dealer profitability. I think implied there is that it's at the expense of your own profitability in a lot of cases. So this sounds like somewhat of a sort of a goodwill play, right? That dealers will appreciate the support that you're giving them. I guess maybe you should speak to them.

Speaker Change: Got it that's really helpful. And then maybe as a follow up I mean, you noted a couple of times about.

Speaker Change: Limiting inventory carrying costs and wanting to protect.

Speaker Change: Dealer profitability.

Speaker Change: Think implied there is that it's at the expense of your own profit Colby.

Speaker Change: And a lot of cases.

Speaker Change: This sounds like somewhat of a.

Speaker Change: A goodwill play right that dealers will appreciate the support that you're giving them.

Speaker Change: I guess maybe speak to.

Jose Boisjoli: What you're seeing in the broader industry and, you know, if there's a broader sort of industry support to protect the dealers, and ultimately, do you get that back, right? Does that goodwill, as we look forward, benefit you in some tangible way or bring you some financial benefit? Thanks.

Speaker Change: What youre seeing in the broader industry and <unk>.

Speaker Change: If there is broader sort of industry support.

Speaker Change: The dealers and ultimately do you get that back right because that goodwill as we look forward.

Speaker Change: Benefit you in some tangible way or some some financial benefit thanks.

Jose Boisjoli: Then maybe just to add, you know, over the years, we are the OEM who invests the most in R&D and in CapEx, and we're pushing to gain market share in every product category. And we've proved that over the last few years.

Speaker Change: Then maybe just to add.

Speaker Change: Over the years.

Speaker Change: The OEM win the best the lowest in R&D and Capex.

Speaker Change: And we are pushing to gain market share in all of the product category and we prove that over the last few years.

Jose Boisjoli: And we always say to our dealers, you can expect from us that we will push for market share because we are investing more than the competition and we deserve, with product innovation and investment, we deserve to gain market share, but you can't count on us that if there is a hiccup, we will support you. And this has been our mantra for the last 20 years with our dealers. And here we are in a situation where we are after the COVID bubble, and we want to make sure that we support our dealers, and we are sure that it's the right thing to do for the long term of the business.

Speaker Change: And we always say to our dealers you can expect from us that they will push.

Speaker Change: Sure market share because we are investing more than the competition and we deserve.

Speaker Change: With the product innovation and the investment deserve to gain market share, but you can count on us that if there is a hiccup.

Speaker Change: Although support you and this is has been our speech for the last 20 years.

Speaker Change: With the dealers and here we are in a situation where we are after the COVID-19 bubble and we want to make sure that we support our dealers and we are sure that this is the right thing to do for the long term of the business.

Jose Boisjoli: That's helpful. Thanks, guys. Thank you. The next question will be from Jonathan Goldman at Scotiabank. Please go ahead.

Speaker Change: Got it that's helpful. Thanks, guys.

Speaker Change: You.

Next question will be from Jonathan Goldman at Scotia Bank. Please go ahead.

Jonathan Goldman: Good morning, and thanks for taking my questions. Maybe to start off, Jose, and you did discuss this in your prepared remarks, but could you specifically discuss how the competitive environment has changed? Q4 and relatedly, what gives you confidence that the additional actions you've taken to right-size production will be sufficient and that competitive intensity won't accelerate through the year? Yeah, first, like we said, there is more promotional activity. And also, some OEMs have reduced their pricing on the new model.

Jonathan Goldman: Good morning, and thanks for taking my questions maybe to start auction day you did discuss this in your prepared remarks, but can you discuss specifically.

Speaker Change: Typically how the competitive environment has changed.

Speaker Change: In Q4, and Relatedly, what gives you confidence that the additional actions you've taken.

Speaker Change: <unk> production will be sufficient and that competitive intensity won't accelerate through the year.

Jonathan Goldman: And this is putting pressure on the dealer, and some OEMs are still pushing the dealer to take more than, You can say, is this will play in your favor or not, but I would like to remain to remind you the dynamic for multiline dealers then. We're convinced that reducing inventory will increase inventory turnover and reduce floor plan cost. And for a multi-line dealer, they have a credit line for each OEM. It's not one credit line for all the manufacturers.

Speaker Change: Yes first of all like we said.

Speaker Change: There is more promotional activity.

And also some OEM have reduced their pricing on the new model and this is putting pressure and some OEM are still pushing the dealer to take more than.

Speaker Change: And you can you can see is this oil play in your favor or not but I would like to remain to remind you the dynamic for a multi line dealers then.

Speaker Change: We convinced that reducing inventory will increase inventory turnover and reduce <unk> cost.

Speaker Change: And for a multi line dealer they have a credit line for each OEM is that one credit line for all the OEM each OEM bring his financial partners.

Jose Boisjoli: Each OEM brings its financial partners, and by reducing our inventory does not mean that the other will fill the credit. Then the other thing that is different versus other OEMs is that we are more than an ORV business. We are the leader with a high market share in watercraft and snow.

Speaker Change: And by reducing our inventory doesn't that mean.

Speaker Change: The other was.

Speaker Change: The credit line then the other thing that is different versus other Oems we are more than in the RV business. We are the leader with high market share in watercraft and slope.

Jose Boisjoli: And we'll make sure that we reduce the same shipment, that will help the dealer and will ship closer to the retail peak of those big product lines for us. Then, Overall, you could see some market share play from month to month, depending on the action of the other VMs and the sales program and the dynamics in the industry. But for this year, we're still planning to gain share in ORV and maintain our leadership position in watercraft and snow. And again, we're convinced it's the right thing to do. I appreciate those comments and corrections.

Speaker Change: And we will make sure that we reducing shipman.

Speaker Change: That will help the theater and will ship closer to their retail peak those are big product line for us.

Speaker Change: Then.

Speaker Change: Overall, and you could see some market share play lift from month to month, depending of the action of the other OEM into sales program and the dynamic in the industry.

Speaker Change: But for this year, we're still planning to gain share in the RV and maintain our leadership.

Speaker Change: Both Asian, and watercraft, and so and again, we convinced it's the right thing to do.

Jose Boisjoli: That's very helpful. And I guess a follow-up question then: do you have any visibility, or do you have a sense of how much excess inventory we have? Well, as I've mentioned, our inventory levels are healthy, and our returns are better than pre-COVID. I don't think it's a question of having way too much inventory; it's much more a question of the higher interest rates, the current macro environment, the marine business that is softer, and that's making dealers more hesitant to take more inventory for the fear of having that huge foreplan interest expense at the end. And again, the foreplanned cost for dealers is probably in the 13 to 14% range. And so it is quite expensive.

Speaker Change: I appreciate those comments, it's very helpful and I guess the follow up then do you have any visibility or do you have a sense of how much excess inventory is in the industry generally related to current demand levels.

Speaker Change: Well.

Speaker Change: As I've mentioned, our inventory levels are healthy our turns are better than pre COVID-19.

Speaker Change: I don't think it's a question of.

Speaker Change: Having way too much inventory, it's much more a question of.

Speaker Change: The higher interest rates the current macro environment, the marine business that is softer and thats, making dealers more hesitant on taking more inventory for the fear of having that huge for plan.

Interest expense that they have to be and again at the end of four planned cost for dealers in the probably in the 13% to 14% range and so it is quite expensive.

Jose Boisjoli: And in a context where dealers are more cautious with inventory, it means they're more discounting, hence making less profits. And when you add that for planned costs, it obviously puts more pressure on their profitability. So it's not a question of having too much inventory; it's more a question of dealers being more cautious, given the current context. And again, us as OEMs, we have that ability of reducing our deliveries in order to give them a bit more breathing room. And that's great, Carlos.

Speaker Change: And in a context, where the.

Speaker Change: <unk> are more cautious on inventory means theyre more discounting, hence, making less profit and when you add that floorplan cost and obviously puts more pressure on their profitability. So it's not a question having too much inventory. It's a question of dealers being more cautious given the current context.

Speaker Change: Again us as Oems.

Speaker Change: We have the ability of reducing our deliveries in order to give them a bit more breathing room.

Jose Boisjoli: Thank you very much. I'll get back to you. Thank you. Next question will be from Joe Altobello at Raymond James. Please go ahead. Thanks. Hey, guys. Good morning.

Speaker Change: Okay. That's great color. Thank you very much I'll get back in queue.

Speaker Change: Thank you next question will be from Joe also below at the Raymond James. Please go ahead.

Joseph Nicholas Altobello: I guess the first question sort of broadly: how's your North America power sports industry? Has the retail outlook, you know, changed at all? I think last quarter you were talking about, you know, an industry down low single digits. We've done a few tweaks to the outlook, especially on the seasonal side, and that's where we've adjusted the guidance more for seasonality on the SIDU switch and on the SIDU water graph. But overall, pretty much in line with what we had versus versus last guidance.

Joe: Thanks, Hey, guys good morning I.

Joe: I guess first question sort of broadly how is your north American power sports industry.

Speaker Change: Retail outlook.

Speaker Change: Is it all I think last quarter, you were talking about an industry down low single digits.

Speaker Change: We've done a few tweak to the outlook, especially on the seasonal side and that's where we've adjusted the guidance more seasonal.

Speaker Change: On the <unk> switch it on.

Speaker Change: On the CD watercraft.

Speaker Change: But overall pretty much in line with what we had versus versus last guidance of one good indication of this is that we've maintained our P&A guidance equal to what it was previously.

Joseph Nicholas Altobello: And one good indication of this is that we've maintained our P&A guidance equal to what it was previously because retail is a big driver of the P&A business. So overall, no big changes other than the seasonal. Okay, and just to follow up on that, the increased promotional activity and support that you cited in power sports, is that across the board, or is it concentrated in particular product categories? And how does that compare, perhaps, with the competition?

Speaker Change: Retail is a big driver of the PMA business.

Speaker Change: So overall no big changes other than the seasonal business.

Jose Boisjoli: Are you guys generally more or less promotional than other players? It varies by product category. Obviously, for Snowmobile, everyone has been more promotional because everyone ended with more inventory. We are in a relatively good position when you look at our market share versus the inventory that's remaining. What we've seen as well is that OEMs have introduced new models with price reductions. And so that's a new phenomenon that we're seeing.

Speaker Change: Okay, and just to follow up on that the increased promotional activity.

Speaker Change: And support that you cited the power sports is that across the board or is it concentrated in particular product categories and how does that compare maybe with the competition or are you guys generally more or less promotional than other players.

Speaker Change: It varies by product category, obviously personal mobile everyone has been more promotional because everyone ended with more inventory. We are in a relatively good position. When you look at our market share versus the inventory thats remaining what we've seen as well is that Oems introduce new models with <unk>.

Speaker Change: Price reductions.

Speaker Change: And so that's that's a new phenomenon that we're seeing but overall, yes. The industry is more promotional dealers are more promotional as well and Oems are more promotional because they see that dealers are hesitant to take on inventory and therefore offer higher wholesale incentives were even retail incentives as well.

Jose Boisjoli: But overall, yes, the industry is more promotional. Dealers are more promotional as well, and OEMs are more promotional because they see that dealers are hesitant to take on inventory and, therefore, offer higher wholesale incentives or even retail incentives. I guess just in terms of all of our vehicles, though, are you seeing that in that space as well?

Speaker Change: Okay.

Speaker Change: I guess just in terms of all of our vehicles now are you seeing it in that space as well.

Jose Boisjoli: The promotional, yes, it's in that space as well for R. And marine, I would say, if I were a CEO, I would say the pure traditional marine business is significantly more promotional than the power sport industry. Okay, thanks. Thank you. The next question will be from Cameron Doerksen at National Bank Financial. Please go ahead. Yeah, thanks very much. Good morning.

Speaker Change: The promotional yes, it's in that space as well for RBC.

Speaker Change: Marine I would say if I were to go.

Speaker Change: The pure traditional marine business is significantly more promotional than the power sports industry.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you next question will be from Kevin Jackson National Bank Financial. Please go ahead.

Cameron Doerksen: Just want to ask about Marine. I mean, obviously, it's difficult to predict when that market will start to start to rebound. But just wondering, you know, what actions you can take if we don't get a return to more healthy market conditions? I mean, obviously, you mentioned the $1.50 drag on EPS, but is there something you can do to, you know, try to make that business more profitable, even if we don't get a, you know, significant rebound in underlying, Good morning.

Kevin Jackson: Yes, thanks very much good morning, I just wanted to ask about marine I mean, obviously, it's difficult to.

Kevin Jackson: Predict win when that market will start to start to rebound.

Speaker Change: But just wondering what actions you can take.

Speaker Change: We don't get a return to more healthy market conditions.

Speaker Change: So you mentioned the $1 50 drag on EPS, but is there something you can do to.

Speaker Change: Try to make that business more profitable, even if we don't get a significant rebound in underlying demand.

Cameron Doerksen: Obviously, it's not the start that we were planning. And when we were up and running, we were ready and able to run. But the industry softened, there was more promotional activity, and this season, dealers are very hesitant to take inventory. It's a difficult environment, and obviously, nobody could plan that.

Speaker Change: Yes, good morning.

Speaker Change: Obviously, it's not the start that we were planning and when we're up and running we were already in the up to run.

Speaker Change: The industry soft and more promotional activity.

Speaker Change: And this season dealer or or is it time to take inventory.

Speaker Change: It's a difficult environment.

Speaker Change: Obviously, nobody could plan that what I would say is.

Jose Boisjoli: What I would say is that right now, what we have done, we have reduced to a minimum our production between now and the end of the year for both Alumacraft, Manitou, and Switch. In Australia, Quinterex is in line with the industry, and the reduction is lighter, but basically, we have reduced production to a minimum, and now we're working. To deplete the inventory of the dealer, then you can expect minimum production of model year 25, and we will restart in 26.

As of right now what we have done.

Speaker Change: We have reduced to a minimum our production between now and the end of the year for <unk>.

Speaker Change: You may.

Speaker Change: <unk> and switch.

Speaker Change: In Australia, when <unk> is in line with the industry and that the reduction is lighter, but basically we reduced production to a minimum and now working.

Speaker Change: To deplete the inventory of the dealer then you can expect minimum production of model year, 'twenty, five and we will restart in 2006.

Jose Boisjoli: With more normal volume, then this is a transition year. We need to go through that bubble of inventory. And early in the year, we were thinking that it would be a one-year correction. It might take the industry, not us, a bit more than one year, maybe 18 months to correct this bubble of inventory.

Speaker Change: With more normal volume then this is a transition year, we need to go through that bubble of inventory.

Speaker Change: Early in the year, we were thinking that it would be a one year correction it might take to the industry slow a bit more than one year, maybe 18 months to correct. This bubble of inventory.

Speaker Change: Obviously.

Jose Boisjoli: And obviously, every business in our portfolio needs to contribute, and Marine is no different. And we believe we have the right strategy; we just need to go through this industry normalization or inventory normalization. Okay, no, that's helpful. And, you know, as obviously, if you've reduced your workforce, I think, for some of the marine segments, but is this going to represent a challenge when you do restart production? I mean, obviously, there's a fair bit of, I guess, skilled labor required. And I think production inefficiencies have been somewhat of a challenge as it is. Just wondering how you sort of manage that re-ramp once it does come back.

Speaker Change: And obviously every business in our portfolio need to contribute and marine is no different.

Speaker Change: And we believe we have the right strategy, we just need to go through this.

Speaker Change: Industry normalization R&D inventory normalization.

Okay, that's helpful and.

Speaker Change: Obviously, if you reduce your workforce I think for some of the marine segments, but it's just going to represent a challenge when you do restart production I mean, obviously there is there is a fair bit of skilled.

Speaker Change: Skilled labor required in fuel production efficiencies have been somewhat of a challenge as it is just wondering how you sort of manage that that re ramp once it once it does come now.

Jose Boisjoli: No, you're totally right. There is a lot in factory know-how, and we did make sure that we kept the right level of people to be able to ramp up when things get busy. Okay, that's great. I'll pass the line.

Speaker Change: So youre right. There is a lot of them those sector, the knowhow and we didnt make sure that we keep the right level of people to be able to ramp up.

Speaker Change: When things get better.

Speaker Change: Okay. That's great. Thanks very much thank.

Speaker Change: Thank you.

Jose Boisjoli: Thanks very much. The next question will be from Mark Petrie at CIBC; please go ahead. Thanks. Good morning.

Speaker Change: Next question will be from Mark Petrie of CIBC. Please go ahead.

Mark Robert Petrie: Mostly just want to follow up on a couple of the topics you've hit on. I guess, specifically, the guided decline for Q2 would imply that the second half EBITDA will actually be modestly higher than what you had previously guided to, I think, and just hoping you can help square that up. Is that mostly sort of unchanged revenue and gross margin but just lower costs, and that's tied to the cost reductions you've put in place? Or can you just clarify that, please? Yeah, it's a combination of many elements.

Mark Robert Petrie: Yeah. Thanks, Good morning, mostly just wanted to follow up on a couple of the topics you've hit on.

Mark Robert Petrie: I guess, just specifically the guided decline for Q2 would imply that the second half EBITDA will actually be modestly higher than what you had previously guided to.

Mark Robert Petrie: Just hoping you could help square that up is that mostly sort of unchanged revenue and gross margin, but just lower costs and thats tied to the cost reductions you've put in place or can you just clarify that please.

Sbastien Martel: We're taking a harder adjustment on volume deliveries in the second quarter. Some of these units will be delivered in the third quarter, but in order to give immediate relief to the dealers from an inventory point of view, that's why we decided to reduce shipments significantly. So we'll be shipping some of the snowmobiles that were initially planned for the second quarter in the third quarter, closer to the retail season as well, and also, yes, obviously, as you saw on the bridge, we're driving higher cost efficiencies, which are going to pay off in the second half of the year.

Speaker Change: Yes, it's a combination of elements were taking a harder adjustment on the volume deliveries in the second quarter. Some of these units will be delivered in the third quarter.

Speaker Change: But in order to give immediate relief to the dealers from an inventory point of view, we that's why we decided to reduce shipments significantly. So we will be shipping some of the snowmobiles that were initially planned for the second quarter in the third quarter.

Speaker Change: Closer to retail season as well.

Speaker Change: And also yes, obviously as you saw in the bridge, we're driving higher cost efficiencies, which are going to pay off in the second half of the year, helping.

Sbastien Martel: Helping the overall EBITDA and EBITDA margin. Yeah, okay. And could you just elaborate on the actions you took with regard to the cost structure and that $0.75? I mean, you alluded to that being mostly in marine, but any color would be helpful.

Speaker Change: Helping the overall EBITDA and EBITDA margin as well.

Speaker Change: Yes, Okay and could you just elaborate.

Speaker Change: On the actions you took with regards to the cost structure and that 75, I mean, you alluded to that being mostly in marine but any color would be helpful. And do you think of those as permanent cost reductions and efficiencies or mostly temporary.

Sbastien Martel: And do you think of those as permanent cost reductions and efficiencies or mostly temporary? Some of it is permanent, some of it is temporary. I'd say the reductions we've had probably split half between variable compensation, given the lower profitability, and the other half is efficiency. You know, obviously, over the last four or five years, our business has grown significantly, and the operations team has been hyper-focused on adding capacity and producing units and challenging COVID times. And sometimes we were producing these units at any cost.

Speaker Change: Some of it are permanent some of it are temporary as say the.

Speaker Change: The reductions we've had probably split half is variable compensation, given the lower profitability and the other half is efficiency.

Speaker Change: Obviously over the last four or five years, our business has grown significantly and the operations team has been hyper focused on adding capacity and producing units in and challenging Covid times and some times, we were producing these units at any cost now.

Sbastien Martel: Now, obviously, with reduced volumes, the teams are able to rethink the way they operate, re-assess the efficiencies of the plant, and we're actually getting a lot of savings coming from a greater focus from our teams on driving lean practices in our business, which, as you see, is helping compensate for some of the headwinds we have. Okay, and so it's fair to say that, oh, sorry That would be permanent, Mark.

Speaker Change: Now obviously with reduced volumes the teams were able to.

Speaker Change: To rethink the way they operate.

Speaker Change: Reassess the efficiencies in the plant and we're actually getting a lot of savings coming from a greater focus.

Speaker Change: From our teams on.

Speaker Change: On driving lean practices in our business, which you see is helping compensate some of the headwinds we had this year.

Speaker Change: Okay. So it's fair to say that.

Speaker Change: Go ahead go ahead.

Mark Robert Petrie: Permanent Mark Yes, yes.

Sbastien Martel: Yeah. Yeah, yeah, understood. But, but I guess just to clarify, so that half of the 75 cents, which you're calling efficiency, most of that would actually be outside of marine, it sounds like. Yes, yes. Okay. All right. Thanks for that. Take care, all the best.

Speaker Change: Yeah, Yeah, understood, but I guess just to clarify so that half of the 75, which you are calling efficiency.

Speaker Change: Most of that would actually be outside in marine it sounds though.

Yes, yes.

Speaker Change: Okay, alright, thanks for that take care of all of us.

Sbastien Martel: Thank you. The next question will be from Fred Whitman at Wolf Research. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Next question will be from Brett Beckman at Wolfe Research. Please go ahead.

Frederick Charles Wightman: Hey, guys, good morning. I just wanted to come back to the promotional outlook. And you talked about some incremental promos in Power Sports and Marine. And I think in the past, you talked about, you know, still being a little bit below pre-COVID levels. So can you sort of level set where that current expectation would put you? Are you going to be higher than sort of normal pre-COVID levels for this year?

Brett Beckman: Hey, guys. Good morning, I, just wanted to come back to the promotional outlook and you did talk about some incremental promotional power sports and marine and I think in the past you've talked about.

Brett Beckman: Still being a little bit below pre COVID-19 levels. So can you sort of level set where that current expectation would put you are you going to be higher than sort of normal pre COVID-19 levels for this year.

Sbastien Martel: Yeah, currently, when I look at the forecast, we're pretty much in line, I'm looking at a power sport business. We're in line with where we were pre-COVID. That is in a context where interest rates are higher and any retail financing promotions are more expensive as well. So from a call it as a percentage of revenue basis, we're pretty much in line with where we were pre-COVID. Okay, that makes sense.

Speaker Change: Yes currently the when I look at the forecast there were pretty much in line.

Speaker Change: And then looking at the power sport business were in line with where we were pre COVID-19 that is in a context, where interest rates are higher than any retail financing promotions are more expensive as well so from a call it as a percentage of revenue basis.

Pretty much in line with where we were.

Speaker Change: Pre COVID-19.

Frederick Charles Wightman: And when you take a step back, and you talked about interest rate headwinds, retail's been mixed across different categories, like what gets dealers comfortable ordering again? Do you need to see a pickup in retail? Is it really just a matter of a couple rate cuts, lowering these floor plan rates? What is sort of the big catalyst that gets people comfortable going forward?

Speaker Change: Okay that makes sense and when you take a step back and you.

Speaker Change: Talked about interest rate headwinds retail's been mixed across different categories.

Speaker Change #100: What gets dealers comfortable ordering again, you need to see a pickup in retail is it really just a matter of a couple of rate cuts lowering these floor plan rates, what is sort of the big catalyst that gets people comfortable going forward.

Sbastien Martel: Well, certainly, I mean, financing is probably, let's say, 500 basis points higher for them versus pre-COVID, so it's obviously, it's obviously a big dent in their profitability. And so if we were to see rate cuts happening, who knows when, that would certainly provide more comfort for the dealers and their appetite to take on more inventory. Certainly, that's something that is. Okay, thanks a lot.

Speaker Change #100: While it certainly.

<unk>.

Speaker Change #100: Financing is probably let's say 500 basis points higher for them versus pre COVID-19. So it's obviously.

Speaker Change #100: It's obviously, a big dent in their profitability and so if we were to see rate cuts happening.

Speaker Change #100: Who knows when that would certainly provide more comfort for the dealers and their appetite to take on more inventory.

Speaker Change #100: Certainly that's something that is going to help.

Speaker Change #101: Okay. Thanks, Bob.

Benoit Poirier: Thank you. The next question will be from Benoit Poirier at Desjardins Capital Markets. Please go ahead. Yeah, good morning, everyone.

Thank you next question will be from <unk> at <unk> capital markets. Please go ahead.

Jose Boisjoli: Just looking back at Marine, obviously, you provide great color about the weather, and the promotional activity. We know there's been a sizable investment in the STEL technology. So any more color?

Yes, good morning, everyone.

Speaker Change #102: Just looking back at the Marine obviously, you provide great color about whether that promotional activity. We know there has been sizable investment with the cell technology.

Speaker Change #103: So any more color or what how would you qualify the market acceptance of your new stealth technology and any change in the strategy for marine going forward I'm just trying to know how committed are you to this segment given the contribution right now.

Benoit Poirier: How would you quantify the market acceptance of your new STEL technology and any change in the strategy for Marine going forward? I'm just trying to find out how committed are you to the segment given the contribution, right? Yeah, good morning, Benoit.

Jose Boisjoli: You know, so far, and again, the product has not been there long, but so far, that what we call the max deck, and the max deck, you know, is the platform extension in the back of the boat. You gain four feet or six feet, depending on whether a single or dual engine. This is a big value for the consumers. And this is only feasible if you have the Rotex Stealth Engine package. So far, we have many tools available with MacDeck.

Speaker Change #104: Good morning.

Speaker Change #105: You know so far.

Speaker Change #106: Again, the product have not been there long lived but so far.

Speaker Change #106: That what we call the magnetic and the <unk>.

Speaker Change #107: Platform extension in the back of the <unk> youre, gaining four feet or six feed depending if a single or dual engine. This is a big <unk>.

Speaker Change #107: Value for the consumers and this is only feasible if you have the <unk>.

Speaker Change #107: Tell.

Engine package that so far.

Jose Boisjoli: Alimacraft is coming out with their model right now. And this is basically what we were betting on when we developed this new technology. And it is, so far, well-received by the consumers. Obviously, like I said in my remark, the timing to introduce those new boats with this feature is not ideal, but we need to first deplete inventory and be patient. With, with, with the strategy.

Speaker Change #107: We have many too is available with magnetek as you make it up is coming with their model right now and this is basically what we were betting for when we.

Speaker Change #107: We developed this new technology and this is so far well received by the consumers of let's say like I said in my remarks, the timing to introduce those new boat with that feature is not ideal, but we need to first deplete inventory and be patient.

Speaker Change #107: With with.

Speaker Change #107: With the strategy.

Jose Boisjoli: Okay. And with respect to PwC, it seems that you're looking at market share when you look at your trends versus the industry. It looks like Canada right now is much stronger than the U.S. with respect to PwC and ATV. So I'm just wondering the discrepancy between the two countries, whether it's more weather-related or the competitive landscape; is it more aggressive right now in the U.S. versus Canada? What basically explains the discrepancy between both countries?

Speaker Change #107: Okay.

Speaker Change #107: Pwc.

Seems that you are looking market share when you look at your trends versus the industry. It looks like Ken has done right now is much stronger in the U S with respect to Pwc M. ATV. So I'm just wondering the discrepancy between two country, whether it's more weather related or that.

Speaker Change #108: <unk> landscape is more aggressive right now in U S versus Canada, what explain basically the discrepancy between both countries.

Jose Boisjoli: Then first, our market share in Canada is very high. It's over 75%. And Canada has always been a good market for watercraft. I would say it's a bit too early, Benoit, to conclude anything. The big retail season for watercraft is May, June, and July, and the watercraft customer is an impulse buy. Relatively low priced product. And it can go very fast, up or down depending on the weather, obviously, depending on the overall situation. Then, I think we have good momentum in Canada. So, I think it's too early to call if it will be a good season or a very good season or not so good season. I think it's too early.

Then first.

Speaker Change #109: Our market share in Canada is very high it's over.

Speaker Change #110: 75% and Canada has always been a good market for watercraft I would say, it's a bit too early but what to conclude anything the big retail season for watercraft is May June July.

Speaker Change #110: And in the watercraft customer is impulse buy.

Speaker Change #110: Relatively low priced product and it can go very fast.

Speaker Change #110: Up or down depending of the weather, obviously, depending of the overall situation than I think we have good momentum in Canada softer in U S.

Speaker Change #110: But I think it's too early to call if it will be a <unk>.

Speaker Change #110: Good season, or a very good season or not so good season, I think it's too early but so far Canada is doing well a bit lagging the U S. We'll see how things evolve.

Jose Boisjoli: But, so far... Canada is doing well, a bit behind the US, we'll see how things evolve. Thank you very much. Thank you. The next question will be from Robin Farley at the GBS. Please go ahead.

Speaker Change #111: Thank you very much.

Speaker Change #112: Thank you.

Speaker Change #113: Question will be from Robin Farley of UBS. Please go ahead.

Robin Margaret Farley: Actually, I had a similar question on the Marine Outlook. Just, you know, given we've had in ORV and Snow, you know, great market share and great share growth, and Marine, you know, maybe doesn't have that sort of position to recover back to even when the market gets better. So I, I wonder if you could, you know, kind of give us your thoughts on it.

Speaker Change #112: Okay.

Robin Margaret Farley: A question on the marine outlook.

Speaker Change #112: Okay.

Speaker Change #115: In our RV and snow great market share in great share growth in marine.

Speaker Change #116: Maybe doesn't have that sort of position to recover back to even when that when the market gets better.

Speaker Change #117: Uh huh.

Speaker Change #118: Wonder if you could.

Speaker Change #118: Yes.

Jose Boisjoli: It seems like it would actually be, you know, fairly additive to earnings if you exited the marine business. I'm just wondering how you see that longer term. Thank you. But just a comment Robin, you know, with the high market share we have in watercraft and snowmobiling, beginning in the off-road, many... And us, we need to continue to plan for to grow the business. And if you remember the addressable market, we have a third of the power sport industry, and we need to plan for the mid to long term where we will continue to grow because we will continue to grow in power sport, but we need to plan what's next.

Speaker Change #119: Do you guys kind of give us a thought on it it seems like it would actually be fairly additive to earnings if you.

Speaker Change #120: If you exited the marine business and just wondering how you see that longer term. Thank you.

Speaker Change #121: But just a comment Robyn.

Speaker Change #122: With the high market share we have in the watercraft and snowmobile and we're gaining in the off road many.

Speaker Change #123: In us we need to continue to plan for it to grow the business and if you remember the addressable market, we have a third of the power of sport and distribute.

Speaker Change #123: And we need to plan.

Speaker Change #123: Mid to long term, where we will continue to grow because we will continue to grow in parts.

Speaker Change #123: But we need to plan less neck and marine obviously.

Jose Boisjoli: And marine, obviously, is the same skill that we have in power sport, and it's a big market, and we believe we can be successful there. Again, like I said, the timing of our production could not be worse. And we didn't execute perfectly either.

It's the same scale than we have on <unk> support and it's a big market and we believe we can be successful there again like I said.

Jose Boisjoli: But this is a long-term play; we just need to go to the bubble. And this is a long-term play. And we will next year reduce our expenses on that product. Thank you. Thank you. The next question will be from Tristan Thomas Martin at BMO Capital Markets. Please go ahead. Good morning.

Speaker Change #123: The timing of our production could be worse.

Speaker Change #123: You didn't execute perfectly eater, but this is a long term play we just need to go through the bubble and this is a long term play and we will next year reduce.

Speaker Change #123: Our expenses in that product category.

Speaker Change #124: Okay. Thank you.

Speaker Change #125: Thank you next.

Speaker Change #126: Our next question will be from Tristan Thomas Martin at BMO Capital markets. Please go ahead.

Speaker Change #127: Good morning.

Tristan M. Thomas: How has May trended at retail? I would say, first, we don't have industry data yet, but so far, Maine is a bit softer than what we were initially anticipating. We just went through the Memorial weekend in the U.S.

Speaker Change #128: How is mei trended at retail.

Speaker Change #129: I would say first we don't have industry desktop yet.

Speaker Change #129: But so far.

Speaker Change #130: <unk> is a bit softer than what we were initially anticipating.

Speaker Change #130: We just didn't we just been through the memorial weekend.

In the U S. We don't have.

Jose Boisjoli: All the registrations are yet in our system, but the feedback we have from the dealer is a bit softer than we thought. But again, like I just explained, Memorial Weekend is the start of the season in the U.S. for all the marine products, and it's a bit too early to say how it will go. So far, BRP off-road is performing well, the watercraft switch is a bit lower than what we were planning, and obviously, the marine product is lower than what we're planning.

Speaker Change #130: All of the registration yet in our system, but the feedback we have from the <unk>, it's a bit softer than what we thought.

Speaker Change #130: But again like I just explained.

Speaker Change #130: <unk> weekend is the start of the season in U S for all the marine product and it's a bit too early to say how it will go so far.

Speaker Change #130: <unk>.

Speaker Change #130: <unk> is performing good watercraft switch is a bit.

Speaker Change #130: Lower than what we were planning and obviously.

Speaker Change #130: Marine product is slower than what we're planning.

Speaker Change #130: Then.

Jose Boisjoli: This is basically where we are. But again, we'd be careful because we are very early into the marine. I'm just going to sneak in one more question. You've alluded to one of your competitors cutting prices a couple of times. Is that something you would consider?

Speaker Change #130: This is basically where we are but again.

Be careful because we are very early into the marine season.

Speaker Change #131: Alright, let me just kind of.

Speaker Change #132: One more question given that it's one of your competitors cutting pricing a couple of times that something you'd consider.

Speaker Change #131: Yeah.

Tristan M. Thomas: of reducing pricing? Yes. Well, obviously, when you look at the whole life cycle of a product, if we're able to drive cost efficiencies in our product, obviously, pricing is something that we would consider. But the pricing adjustments we've made over time to increase prices were in line with the inflation that we saw. One thing that we're mindful about is people who bought a product six months ago or 12 months ago. If you come out with a new model year and you're discounting the new model year, obviously, it reduces the whole value proposition for that.

Speaker Change #131: Of reducing pricing.

Speaker Change #131: Yes.

Speaker Change #131: Well.

Speaker Change #131: Obviously, when you look at the whole lifecycle of our products.

Speaker Change #131: <unk>.

Speaker Change #131: If we're able to drive cost efficiencies in our product obviously pricing is something that we would consider but the pricing adjustments. We've made over time to increase pricing was in line with the inflation that we see.

One thing that we're mindful of is people, who brought a product six months ago or 12 months ago. If you come out with a new model year and Youre discounting the new model year, obviously, it reduces the whole value proposition for that consumer.

Tristan M. Thomas: And so obviously, our focus is to bring innovative products, let's bring great products to the market, let's make sure we price that PVA for the customer. And that, in the end, consumers see the value that you're bringing, that they're willing to pay for the innovation and all. And in situations where markets are tougher, we prefer to use retail incentives in order to drive consumers to the dealer and stimulate sales. So it's a complex balance, Tristan.

Speaker Change #131: And so obviously our focus is let's bring innovative product with spring break products the market, let's make sure we repriced our TBA for the customer.

Speaker Change #131: And then in the yen.

Speaker Change #131: Consumers see the value that you bring in that they are willing to pay for.

Speaker Change #131: The innovation the novelty.

Speaker Change #131: And in situations, where markets are more tougher we preferred to.

Speaker Change #131: Used retail incentives in order to drive consumers to the dealer and.

Speaker Change #131: And stimulate sales.

Speaker Change #131: So it's a complex.

Speaker Change #131: And all of that.

Speaker Change #133: Got it thank you.

Speaker Change #131: Yes.

Jose Boisjoli: Got it. Thank you. Thank you. The next question will be from Martin Landry at TIFO. Please go ahead. Hi, good morning. I may have missed it.

Speaker Change #134: Thank you next question will be from Mustang larvae of Stifel. Please go ahead.

Martin Landry: But did you change your assumption for your retail sales in North America this year and for industry retail sales as well? And I was wondering if you could just update us on those assumptions. Yeah, we had the questions a bit earlier, Martin, maybe you missed it, but we did a few tweaks on the seasonal business, and that's why we adjusted the guidance. That's where we made some adjustments internally, but nothing more significant on the ORB.

Speaker Change #135: Hi, good morning.

Speaker Change #136: I missed it but did you change your assumptions are.

Speaker Change #137: Retail sales in North America, this year and four for industry retail sales as well as wondering if you could just update us on these assumptions yes.

Speaker Change #138: Yes, we have no questions a bit earlier much thing maybe you missed it but we did a few tweaks on the seasonal business and that's why we adjusted the guidance.

Speaker Change #138: That's where we've made some adjustments internally.

Speaker Change #138: But nothing more significant on the Europe side.

Sbastien Martel: Okay. And in your opening remarks, Sbastien, you talked about PowerSport gross margins being around 26.2% despite sales being down in the high teens. Can you just, it looks like it's pretty solid despite, you know, sales decline. Can you just talk a little bit about what it's like, how are you able to sustain your personal margins despite the lower sales? Well, it's been part of our long-term strategy of obviously leveraging our growth through our Mexican footprint, driving innovation for consumers, and also insourcing some technologies.

Speaker Change #138: Okay.

I heard in your opening remarks that the best thing we talked about.

Speaker Change #138: Paris part gross margins being around 26, 2%.

Speaker Change #139: Despite sales being down.

Speaker Change #139: The high teens.

Speaker Change #140: Can you just it looks like it's pretty solid and despite a sales decline can you just talk a little bit about what's how are youre able to sustain your margin despite lower sales.

Speaker Change #141: Well, it's been part of our long term strategy of.

Speaker Change #141: Obviously, leveraging our growth through.

Speaker Change #141: Our Mexican footprint driving innovation to the consumers.

Speaker Change #141: So in sourcing some technologies we've talked about.

Speaker Change #141: Mobile charging we've talked about modularity with.

Speaker Change #141: Our with our engines with our platform I think when you take the sum of all of the App and also the focus of the teams on efficiency. When you take the sum of all of the up even though we have lower volume is even though we've put more programs in the quarter.

Martin Landry: We've talked about turbocharging, we've talked about modularity with our engines, with our platform. I think when you take the sum of all of that, and also the focus of the teams on efficiency, when you take the sum of all of that, even though we have lower volumes, even though we've put more programs in the quarter, we're still able to drive very healthy gross margins for the power sector. And so the long-term strategy we've had, as you can see today, is paying off. Okay, thank you. The next question will be from Brian Morrison at TD Cowan. Please go ahead. Good morning.

Speaker Change #141: Still able to drive very healthy gross margins for the power sports business.

Speaker Change #141: And so the long term strategy we've had.

Yes, you can see today is paying off.

Speaker Change #142: Okay. Thank you.

Yes.

Speaker Change #143: Next question will be from Brian Morrison of TD Cowen. Please go ahead.

Brian Morrison: Seb, I know you made tweaks to your assumptions. What are your assumptions within your guidance with respect to retail sales volumes and your net pricing, and is the message that your destocking will be complete by the end of Q3? Well, the destocking is going to happen throughout the year because snowmobile destocking is going to be a Q4 element. ORV dealers are going to feel it right away in the second quarter, and so it's going to be progressive, but a big part of it will happen in the second quarter.

Good morning.

Brian Morrison: I know you made tweaks to your assumptions what are your.

Brian Morrison: Assumptions within your guidance with respect to retail sales volumes and your net pricing and is the message that you are destocking will be complete by the end of Q3.

Speaker Change #145: Well the.

Speaker Change #146: The destocking is going to happen throughout the year, because snowmobile destocking is going to be a Q4 element.

Speaker Change #146: Or.

Dealers are going to feel it right away in the second quarter.

Speaker Change #146: And so.

Speaker Change #146: So it's going to be progressive but.

Speaker Change #146: A big part of it will happen in the second quarter.

Sbastien Martel: Inventory should probably be down versus Q1 in the second quarter; it's probably down 15%. In terms of pricing, obviously, we're going to the club, as Jose mentioned, in a few months and we'll obviously be introducing new products and new model years, and we'll revisit our assumptions then. We'll appreciate that for competitive reasons. We won't necessarily disclose what our plan is.

Speaker Change #146: Inventory.

Speaker Change #146: <unk> be down versus Q1 in the second quarter was probably down 15%.

Speaker Change #147: In terms of pricing, obviously, we're going to a club as Jose mentioned in a few months and we will obviously be introducing new products and new multi year and we will revisit our assumptions then.

Speaker Change #147: You'll appreciate that for competitive reasons.

Speaker Change #147: <unk> was 30 disclose what our plan is but.

Sbastien Martel: But as I mentioned earlier, we want to make sure that we price the value that we bring to our consumers. And also, we prefer using incentives as a way to stimulate retail sales when things are. This is a production of the Center for Autonomous Vehicles. No part of this recording may be reproduced without Moore's permission.

Speaker Change #147: But as I mentioned earlier, we want to make sure that.

Speaker Change #147: We price the value that we bring to our consumers.

Speaker Change #147: Also we prefer using.

Speaker Change #147: Incentives as a way to stimulate retail sales when things are tougher.

Speaker Change #148: Hey, Bill.

Speaker Change #148: Yeah.

Jose Boisjoli: This recording may not be reproduced without Moore's permission. Maybe to add on this the pricing from your question, but the previous question, this is very, It's a science. We always measure the technology we have in our product versus the competition, all the features, and how much the customer is ready to pay for that feature and that feature. And that doesn't mean that because another OEM reduced pricing that we will automatically follow.

Speaker Change #149: Maybe to add on this on the pricing from your question, but the previous questions. This is a very.

Speaker Change #149: It's a science.

Speaker Change #150: I'll always measure that technology, we have in our product versus the competition all the feature and how much the customer is ready to pay for that feature in that Fischer then that don't mean.

Speaker Change #150: Because another OEM reduced pricing that automatically will follow a defense of how.

Jose Boisjoli: It depends on how competitive our product is and what the value of our features and our technology and our product versus others is. Then don't take it for granted that because another one does it, we will follow automatically. We will. We're doing our homework right now, and we're preparing for the Model Year 25 launch. That's love in California.

Speaker Change #150: Product is competitive and what are the value of our future and our technology and our product versus others.

Speaker Change #150: Don't take it.

Speaker Change #150: For granted that because another one two it will follow automatically we will we are doing our homework right now and we are preparing for the model year 'twenty five lunch.

Speaker Change #150: At club in California.

Brian Morrison: Okay, sorry, just to clarify. I appreciate that color. To clarify, in terms of your retail sales volumes, do you expect them to be flat to down? And then just to follow up, Seb, within this base level of earnings that everyone likes to focus on, what is your normalized EBITDA margin within those $10, $11, whatever you want to call it? Well, in terms of retail, obviously, to give you a global number probably doesn't give you the full appreciation of what we're driving.

Okay, sorry, just to clarify I appreciate that color to clarify in terms of your retail sales volumes do you expect them to be flat to down and then just a follow up within this base level of earnings that everyone likes to focus upon what is your normalized EBIT margin within those.

Speaker Change #151: $10 $11, whatever you want to call it.

Speaker Change #150: Yes.

In terms of retail obviously.

To give you a global number probably get it doesn't give you the full appreciation of.

Speaker Change #150: Of what we are driving but the expectation is that for RV retail will be up in the low single digit and for seasonal products business, we expect retail to be down.

Sbastien Martel: But the expectation is that for RV retail, retail will be up, in the low single digits. And for the seasonal products business, we expect retail to be down. Softer, obviously, the personal watercraft market; we had a very strong retail last year, and the switch as well. We're expecting to be down because of the marine business and snowmobiles. Obviously, with the softer snow we had this year, it impacted our retail expectations. So we're expecting our seasonal business to be down, probably in the high single digits.

Speaker Change #150: Softer obviously personal watercraft market, we had a very strong.

Speaker Change #150: Retail last year switch as well, we expect it to be down because of the marine business in snowmobiles, obviously with the softer snow we had this year.

Speaker Change #150: It impacted our.

Speaker Change #150: Obviously, our retail expectations and so we're expecting our seasonal business to be down probably in the in the high single digits.

Sbastien Martel: And sorry, just the EBITDA margin that you factor into your base level earnings? Well, we've communicated the expectation that the EBITDA should come back to 17% for us with the size of the business we have, and with the investments we've made in modularity and technology. We certainly believe that a 17% EBITDA margin is something that should be achieved.

Speaker Change #152: And sorry, just the EBITDA margin that you factor into your base level of earnings.

Speaker Change #153: Well, we've communicated the expectation that EBITDA should come back to 17% for us.

Speaker Change #153: The size of the business, we have with the investments we've made in modularity and technology. We certainly believe that 17% EBITDA margin is something that should be achieved even when you look at the implied guidance for the second half of the year will actually be fringing close to that 17% EBITDA margin in it.

Speaker Change #153: Year, where we're cutting deliveries so.

Speaker Change #153: So it's certainly something that we believe is achievable.

Sbastien Martel: Even when you look at the implied guidance for the second half of the year, we'll actually be coming close to that 17% EBITDA margin in a year where we're cutting deliveries. So it's certainly something that we believe is achievable. Very good. Thank you very much and good luck. The next question will be from Jean Hsu at BNP Pakistan. Please go ahead.

Speaker Change #154: Very good thank you very much and good luck.

Speaker Change #153: Yes.

Speaker Change #156: Next question will be from John <unk> at BNP Paribas.

Speaker Change #155: Please go ahead.

Jean Hsu: Hi guys. Thanks for the question. I think in the previous guidance, net price was supposed to be a $0.50 benefit, and now it's, you know, I guess $0.75 headwind. So maybe, you know, putting that together, $0.25 year-on-year headwind. I guess what you're asking is, how do you, what gives you confidence that this is enough, like just like a $0.25 headwind? And is this kind of the new normal on promos? Or do you think promos get better now?

Speaker Change #157: Hi, guys. Thanks for the question I think in the previous guidance net price is supposed to be a 50 benefit and now it's 70.

Speaker Change #158: 75 headwind so maybe.

Speaker Change #159: Putting that together, 25% year on year headwind I guess is that how do you. What gives you confidence that this is enough like just like a 25% that headwind and is this kind of a new normal on promos or do you think promos get better next year.

Sbastien Martel: Well, certainly. When I look at the promos, one of the big costs of the promos is the high interest rates. And so if rates were to come down, and hopefully they do in the near future, obviously, that's going to reduce the cost to us for these promotions. And again, based on what we have in our forecast, and what we see today, we believe the pricing assumptions and the program assumptions we have are sufficient. We've made important provisions for the marine business at NFQ1.

Speaker Change #160: Well certainly.

Speaker Change #160: Sure.

Speaker Change #161: When I look at the promos.

Speaker Change #162: One of the big cost of the promos as the high interest rates and that's what it's costing us more money and so if rates were to come down.

Speaker Change #162: And hopefully they do in the near future, obviously, that's going to reduce the cost to us for these promotions and.

Speaker Change #162: Less of a headwind from a margin point of view.

Speaker Change #162: Again based on what we have in our forecast what we see today, we believe.

Speaker Change #162: The pricing assumptions in the program assumptions, we have are sufficient.

Speaker Change #162: We've taken important provisions for the marine business at the end of Q1.

Jean Hsu: And also planning for some programs in the second quarter. So again, with the guidance we have, I'm comfortable that we have enough money to go through what we see today in terms of overall demand. Okay, it's very helpful.

Speaker Change #162: And also planning for some programs in the second quarter. So again with the guidance. We have we're comfortable we have enough money to go through.

Speaker Change #162: What we see today in terms of overall demand.

Sbastien Martel: And then maybe just, Can you elaborate a bit more on the gross margin assumptions between Marine and Power Sports? I mean, it sounds like Marine is still negative, but to your point, the 26% Power Sports gross margin, is that, like, how do we think about the rest of the year relative to that? Well, the margin was obviously impacted in the quarter from higher promotions. But again, in the back half of the year, we plan for it to be a bit higher than what we delivered in the first quarter. Usually, the second half of the year, we see better margins as well, historically, from the mix of the products that we ship.

Speaker Change #163: Okay very helpful and then maybe just.

Speaker Change #164: Can you elaborate a bit more on the gross margin assumption between marine and power switch I mean, it sounds like marine still negative but.

Speaker Change #165: To your point, the 26% power sports gross margin is that right.

Speaker Change #166: How do we think about the rest of the year relative to that.

Speaker Change #166: Well.

Speaker Change #167: The margin was obviously impacted in the quarter from a higher promotions, but again margin in the back half of the year are planned to be a bit higher than what we delivered in the first quarter, usually the second half of the year, we see a better margins as well historically from the mix of the products that we ship.

Jean Hsu: We usually ship obviously new model year snowmobile premium models side-by-side at the start of the season, and that tends to drive higher margins in the back end. Okay, very helpful. Thank you. Thank you. The next question will be from Luke Hannan at Kennecourt Genuity. Please go ahead.

Speaker Change #167: We usually ship, obviously, new model years snowmobile premium models.

Speaker Change #167: For for side by side or the start of the season and that tends to drive higher margins in the back half of the year.

Speaker Change #168: Okay very helpful. Thank you.

Speaker Change #169: Thank you next question will be from Luke Hannan Canaccord Genuity. Please go ahead.

Luke Hannan: Thanks, and good morning. Jose, on the last call, I know you gave good color on how the snowmobile industry has sort of bounced back from periods where, you know, units, industry units were sort of lower than expectations. I'm curious, when we think about the marine sector, I think I heard you correctly in that it probably is going to take about 12 to 18 months for inventory to normalize there. How does that compare to maybe past periods where retail was a little bit softer and dealers had access to inventory to work? I think the two and the three are quite different.

Thanks, and good morning to say on the on the last call. I know you gave good color on how the snowmobile industry is sort of bounce back from periods, where units industry units for sort of lower than and expectations. I'm curious when we think about the marine business.

Speaker Change #170: I think I heard you correctly and that probably is going to take about 12 to 18 months for inventory to normalize there how does that compare to maybe past periods, where our retail was a little bit softer and dealers had excess inventory to work off.

Jose Boisjoli: In slow mobile, you have only a few OEMs, and we are the market leader, and the snowmobiler is very, I would say, enthusiastic about the sport. And what is happening with snowmobiles is, like this year, there will be quite a lot in the next season, but there will be quite a lot of modified Year 24 with discounts, and the model year 25 with reduced numbers. And this is why the snowmobile industry typically is quite resilient after a bad snow season. On marine, the big difference is that a lot of smaller OEMs are supplying the industry, and there is a lot of different behavior between the OEMs.

Speaker Change #171: Yes, I think I think the two industry are quite different in the snowmobile you have only a few Oems.

Speaker Change #171: We are the market leader and in the snowmobile <unk> Verdes.

Speaker Change #172: And <unk> <unk> above the support and what is happening on snowmobile is light. This year, there will be quite a lot in the next season that there will be quite a lot of model year 'twenty four with discount.

Speaker Change #172: The model year 'twenty five reduced numbers. Then this is why the snowmobile industry typically is quite resilient after a bad snow season.

On Marine the Big difference is a lot of smaller OEM with supply in the industry.

Speaker Change #172: And there is a lot of different behavior.

Duane D OEM and.

Jose Boisjoli: This is why it's a bit more difficult to predict. But it will probably take more time, like I was saying. We were planning that it would be corrected in 2025. Now we say maybe it will take two seasons to correct the inventory bubble that is up. But the dynamic is a bit different because of the number of OEMs that have different behaviors.

Speaker Change #172: And this is why it's a bit more difficult to predict.

Speaker Change #172: But it will take probably more time like I was saying.

Speaker Change #172: We were planning that it would be.

Speaker Change #172: Corrected in 2025 now we see may be it will take to season to correct. The industry bubble the MD inventory bubble that is out there but.

Speaker Change #172: But the dynamic is a bit different because of the number of Oems that have different behavior and when we say two seasons, we may be doing 75%.

Jose Boisjoli: And when we say two seasons, we maybe do 75% of that this season and then 25%. Okay, I appreciate that. Thanks. And then a very quick follow-up.

Speaker Change #172: This season, and then 25% in the next.

Luke Hannan: Seb, I think I heard you correctly. It's still expecting $750 million of free cash flow. What do you have baked into your assumptions as far as working capital? Well, we do expect a slight tailwind from working capital. We were, as we've shared in the past, still running with high raw material inventory post-COVID and supply chain challenges, so we kept higher safety stocks, but now we're progressively reducing these.

Speaker Change #173: Okay I appreciate that thanks, and then a very quick follow up so if I think I heard you correctly, it still expecting $750 million of free cash flow. What do you have baked into your assumptions as far as working capital goes.

While we do expect a slight tailwind from working capital.

We as we've shared in the past, we were still running with high raw material inventory.

Speaker Change #173: Post COVID-19 and supply chain challenges. So we kept higher safety stocks, but now we are progressively reducing these.

Sbastien Martel: So I'm probably expecting a tailwind of about 100 million from working capital this year. Thank you. The next question will be from Jaime Katz at Morningstar. Please go ahead.

Speaker Change #173: And so I am expecting probably a tailwind of about 100 million from working capital this year.

Speaker Change #173: Thanks.

Speaker Change #174: Thank you next question will be from Jamie Katz with Morningstar. Please go ahead.

Jaime M. Katz: Thanks for squeezing me in. I just have one question on CapEx. It looks like you guys have taken CapEx down just a touch this year, but are we thinking about maybe moderating some of the bigger projects over the next year or two, given that the environment looks like it might remain soft a little bit longer than previously expected? Thanks. Yeah, we're actually selective in how we deploy CapEx.

Jaime M. Katz: Thanks for squeezing me in I just have one question on Capex. It looks like you guys have taken capex down just a touch this year, but are we thinking about maybe moderating any bigger projects over the next year or two given that the environment. It looks like it might remain soft a little bit longer.

Jaime M. Katz: Than previously expected.

Sbastien Martel: And as we've shared in the past, we're comfortable with the capacity we have today. So we don't see us needing to add more capacity in the mid-short term. And so we're good there. But obviously, we'll continue investing in technology. And so that's CapEx investments for new products. You'll see that.

Speaker Change #177: Yes, we're actually selective in how we deploy the capex and as we've shared in the past we're comfortable with the capacity. We have today. So we don't see us needing to add more capacity in the short term.

Speaker Change #176: And so.

Speaker Change #176: So we're good there.

Speaker Change #176: But obviously, we'll continue investing in technology and so that's that's capex investments for new products Youll see that.

Sbastien Martel: But again, this year, I think we're at the right level with where the business is, and we'll make sure that we continue driving returns and driving good free cash flow as well for the business by being selective in our. So does that imply that maybe next year it will be around the same level of spend, or perhaps just slightly higher as things resume rather than picking up again? Yeah, it could be slightly higher. That's certainly something that's possible. Not to the levels we were in the last few years, but a bit higher than this year is a possibility.

Speaker Change #176: But again this year.

Speaker Change #176: At the right level with where the businesses.

We will make sure that we continue driving returns and drive good free cash flow as well for the business by being selective in our investment decision.

So does that imply that maybe next year it will be around the same.

And level or perhaps just slightly higher as things resume rather than picking up again.

Jaime M. Katz: Could you add 50, 75 million? Excellent. Thank you. Thank you. The next question will be from Brandon Roley at D.A. Davidson.

Speaker Change #178: Yes, it could be it could be slightly higher.

That's certainly something that's possible.

Speaker Change #179: Not to the levels, we were in the last few years, but a bit higher than this year as a possibility could you add $50 million to $75 million, yes, we could.

Speaker Change #180: Excellent. Thank you.

Speaker Change #181: Thank you next question will be from Brandon Raleigh at D. A Davidson. Please go ahead.

Brandon Roll: Please go ahead. Good morning. Thank you for squeezing me in here. Just a couple quick questions. First, just on the off-road vehicle.

Brandon Roll: Good morning, Thank you for squeezing me in here just.

Brandon Roll: A couple of quick questions first just on off road vehicle, given what's going on with some of the other Oems being aggressive with their shipping approach do you feel as though there could be a market share headwind in the near term over the next couple of quarters because there.

Brandon Roll: Continuing to ship aggressively while you're kind of pulling back on inventory and introducing.

Brandon Roll: Our new model year kind of out of season.

Jose Boisjoli: Given what's going on with some of the other OEMs being aggressive with their shipping approach, do you feel as though there could be a market share headwind in the near term over the next couple quarters because they're continuing to ship aggressively while you're kind of pulling back on inventory and introducing a new model year kind of out of season? Like I said, in my question before my answer before, you know, each dealer is a multiline dealer has credit lines by OEM, then we don't, I know the dealer cannot fulfill with other product lines, our credit line, then this is, well, we believe we will have, despite the reduction in inventory, enough inventory not to miss retail. But also, it could happen that a month we lose some, but we gain some.

Speaker Change #183: Like I said in my in my.

Question before in my answer before.

Each dealer aged multi line dealer have credit lines by OEM, then we don't.

Speaker Change #183: In OEM dealer cannot fulfill with other product line our credit line and this is this is a well we believe we will have despite the reduction in inventory and enough inventory not to Miss retail, but also.

Speaker Change #183: It could have been that.

Speaker Change #183: A month, we lose some but we gained some but overall for the year, we still believe we will gain a.

Speaker Change #183: <unk> market share in the off road business.

Jose Boisjoli: But overall for the year, we still believe we will gain some market share in the offer. Okay, great. And just finally, I think you had mentioned you're going to be introducing an electric motorcycle at your dealer event in August. Could you just kind of talk about what you're seeing in the electric motorcycle market and your reasoning for why you think now's a good time to introduce a new model there?

Speaker Change #184: Okay, Great and just finally, I think you had mentioned youre going to be introducing our electric motorcycle that your dealer event in August could you just kind of talk about what youre seeing in the electric motorcycle market in.

Speaker Change #185: The reasoning for why you think now's a good time to kind of introduce a new model there. Thank you.

Jose Boisjoli: Thank you. But first, this project I started about three years ago, and everything is done; the investment is made. But I have to admit that I had the chance to try the product myself, and it's funny, in the last two days, and today, there are dealers from Europe and North America that have been trying the product, and we get their feedback, and we feel quite optimistic about our product and how it will be competitive in that new segment for us.

Speaker Change #186: Ben first.

Ben: This project started about three years ago.

Everything is done the investment is made but I have to admit.

Ben: Debt.

Ben: And the sense of trying to product myself and it's funny in the last two days and today there is dealers from Europe, and North America that are rising.

Ben: The product and.

Ben: And we get their feedback and we feel quite.

Ben: We feel quite optimistic about our product and how it will be competitive in that new segment for us, but again I think you cannot in yard.

Jose Boisjoli: But again, I think you cannot ignore the trend that you see in the electric product. It has flowed down over the last few years, but it's still there to stay. And we believe we have a good product, and we need to start somewhere. The beauty of what we've done is the power pack that we're using on the motorcycle is exactly the same power pack that we have on snowmobiles, and this part of our power pack will end up in other product lines. Then you can leverage a multi-product line with one investment in the electric power pack.

Ben: Trend that you see in the electric products.

Ben: <unk> slowed down over the last few years, but there is still there to stay.

Ben: The we believe we have good product and we need to to start somewhere the beauty of what we've done.

Ben: Par back that we're using on the modal cycle is exactly the same for our bank debt, we have on snowmobile and this part of our <unk> will end up in other product line then you can leverage.

Ben: Multi product line with one investment in the electric power back.

Jose Boisjoli: And we believe it's a long-term play, but we believe it's the right thing to do for the continuation of our business. Great, thank you. Thank you. At this time, I will turn the call over to Mr. Deschenes to close the meeting. Thank you, Sergei, and thanks to everyone for joining us this morning and for your interest in BRP. We look forward to speaking with you again during our second quarter conference call on September 6th.

Ben: And we believe it's a long term play, but we believe it's the right thing to do for the continuation of our business.

Speaker Change #188: Great. Thank you.

Speaker Change #189: Thank you at this time I will turn the call to Mr. Shang to close the meeting.

Speaker Change #190: Thank you Sir.

Mr. Shang: Thanks, everyone for joining us this morning and for your interest in PRT. We look forward to speaking with you again for our second quarter conference call in September. Thanks, again, everyone and have a good day.

Jose Boisjoli: Thanks again, everyone, and have a good day. Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

Speaker Change #192: Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.

Speaker Change #193: A good weekend.

Speaker Change #193: Okay.

Speaker Change #193: Okay.

Speaker Change #193: Yes.

Speaker Change #193: Okay.

Speaker Change #193: Okay.

Speaker Change #193: Yes.