Q2 2025 BRP Inc Earnings Call

September 6, 2024

Speaker Change: Good morning, ladies and gentlemen and welcome to BRP-Inx FY25, second 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. Philippe Deschenes. Please go ahead, sir.

Operator: and 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. Philippe Deschenes. Please go ahead, sir.

Philippe Deschenes: Thank you, Sylvie. Good morning and welcome to BRP's conference call for the second quarter of fiscal year 25. Joining me this morning are Jose Boisjoli, President and Chief Executive Officer, and Sebastien Martel, Chief Financial Officer. 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 these statements.

Speaker Change: Thank you, Sidney. Good morning and welcome to BRP's conference call for a second quarter of fiscal year 25. Joining me this morning are Jose Boisjoli president and chief executive officer and Sbastien Martel chief financial officer.

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

Philippe Deschenes: Before looking in formation, it plays on certain assumption, and it's subject to risk and uncertainty. I invite you to consult BRP's MDNA for a complete list of these. Also, during the call, reference will be made through supporting slides, and you can find the presentation on our website at brp.com under the investor relation section.

Speaker Change: So for looking in formation is based on certain assumptions and is subject to risk and uncertainties and I invite you to consult BRT's MDNA for a completely set-dead. Also during the call, reference will be made to supporting slide and you can find the presentation on our website at BRT.com under the Industrial Relations section.

Jose Boisjoli: So, with that, I'll turn the call over to Joseph. Thank you, Philippe. Good morning, everyone, and thank you for joining us. Our financial result for second quarter were essentially as expected and reflect our focus on reducing net worth inventory to support our dealers. However, the macroeconomic environment and high interest rate continue to put pressure on consumer demand. As a result, the demand has declined more than anticipated, while promotional activity has intensified. In this context and given our commitment of safeguarding our dealer value proposition, we have decided to further adjust our production schedule for the year, which is reflected in our updated guidance.

Speaker Change: So with that I'll turn it over to Jose. Thank you for it. Good morning everyone and thank you for joining us.

Jose: Our financial results for second quarter were essentially as expected and reflect our focus on reducing that what an inventory to support our leaders.

Speaker Change: However, the Mecca economic development and high interest rate continue to put pressure on consumer demand.

Speaker Change: As a result, the demand has declined more than anticipated while promotional activity has intensified.

Speaker Change: In this context and given our commitment of safeguarding our dealer value proposition, we have decided to further adjust our production schedule for the year, which is reflected in our updated guidance.

Jose Boisjoli: Let's turn to slide four for key financial highlight. Revenue reached 1.8 billion dollars, normalized a bit though was 199 million, and normalized EPS was 61 cents, generally in line with our expectation. We have made great strides to reduce network and inventory, which is down 13% so far this year, progressing towards our objective of a 15 to 20% reduction by the end of fiscal 2025. As for retail, our North American power sports sales were down 18% from a strong second quarter last year, as the industry experienced weaker consumer demand, as you can see on slide five.

Speaker Change: Let's turn to slide 4 for key financial highlight. Revenue reached $1.8 billion, normalized a bit though was $199 billion, and normalized a PS was 61 cents, generally in line with our expectation.

Speaker Change: We have made great stride to reduce network inventory, which is down 13% so far this year. Progressing towers are objective of a 15-20% reduction by the end of fiscal 2025.

Speaker Change: As for retail, our North American passport sales were down 18% from a strong second quarter last year, as the industry experienced weaker consumer demand, as you can see on slide five.

Jose Boisjoli: We are operating in an increasingly challenging economic environment. Market conditions were in line with our plan through April but deteriorated in the second quarter. Although these conditions are impacting many of the regions where we operate, it has recently become more challenging in North America, our key power sports market. On the plus side, we have been more proactive than most OEMs at reducing network and inventory, and this was received positively by our dealers. Having said that, OEMs with high level of inventory have been more aggressive with promotion, which has expected impacted our market share this quarter.

Speaker Change: We are operating in an increasingly challenging economic environment. Market conditions were in line with our plan through April, but deteriorated in the second quarter.

Speaker Change: Although these conditions are impacting many of the region where we operate, it has recently become more challenging in North America, our key passport market.

Speaker Change: On the plus side, we have been more proactive than most OEM at reducing that work in Venturi, and this was received positively by our dealers.

Speaker Change: Having said that, OEMs with high level of inventory have been more aggressive with promotion, which has expected impacted our market share this quarter.

Jose Boisjoli: Peter. Looking at retail performance for the quarter on slide six, overall retail was down in the teen percentage, lagging the industry in North America, EME, and Asia Pacific. Meanwhile, it was up 18% in Latin America, driven by a very strong performance in Mexico and Brazil, where consumers are highly engaged with our Sido and Canaan brands.

Speaker Change: Looking at retail performance for the quarter on slide 6.

Speaker Change: Overall, retail was down in the 10% age, lagging the industry in North America, EME and Asia Pacific.

Speaker Change: Meanwhile, it was up 18% in Latin America, driven by a very strong performance in Mexico and Brazil, where consumers are highly engaged with our Sido and Kenan brands.

Jose Boisjoli: Given our focus on bringing network inventory down, we were anticipating some market share loss, namely for side by side. A few words on our personal watercraft market share decline. Last year, you may remember that our main competitor had supply issues, which turned out to our advantage. The fact that this situation is back to normal, combined with the current industry weakness, had a larger than expected impact on our retail this season.

Speaker Change: Given our focus on bringing network inventory down, we were anticipating some market sure last, namely for side-by-side.

Speaker Change: A few words on our personal autographed market share decline.

Speaker Change: Last year, you may remember that our main competitor had supply issue, which turned out to our advantage.

Speaker Change: The fact that this situation is back to normal, combined with the current and the speed weakness, had a larger than expected than fact on our retail this season.

Jose Boisjoli: Turning to slide seven, we are pleased with our resolve in ORV for the full season, as we've delivered record retail performance, up 8% in an industry that was flat. We gained about two point of market share inside by side vehicle, passing the 30% mark for the first time. We also perform very well in ETV, gaining one and a half points of market share. With this achievement, we have closed the gap with the number one position in the industry in terms of ORV unit retail for dealers. In the current environment, we expect further short-term market share volatility.

Speaker Change: Turning to slide 7, we are pleased with our resolve in our V for the full season. As we've delivered, record retail performance up 8% in an industry that was flat.

Speaker Change: We gain about 2 points of market share inside by side vehicle, passing the 30% mark for the first time.

Speaker Change: We also perform very well in ATV, gaining one and a half point of market share.

Speaker Change: With these achievements, we have closed the gap with the number one position in the industry, in term of RV unit retail producers.

Speaker Change: In the current unveilment, we expect further short-term market share volatility. However, with our recent product lunches and momentum with dealers, we believe we will continue to gain share in ORV for the coming season.

Jose Boisjoli: However, with our recent product launches and momentum with dealers, we believe we will continue to gain share in ORV for the coming season.

Jose Boisjoli: Let's turn to slide eight. For highlight of our current of our recent dealer event held in California. It was one of the largest ever in terms of product news, with over 3,000 participants in person and virtual. We announced the availability of our highly anticipated Canon Pulse and Origin, all electric motorcycle lineup, making our end reentry into two wheel space. These models leverage our own Rotax ePower unit, which also propels our electric snowmobile and will be used in future BRP electric products. In terms of the next step, we will be hosting several media event training our dealers and hosting VRP customer event throughout the second half of the year.

Speaker Change: Let's turn to slide eight.

Speaker Change: For a Highlight of our current of our Rism dealer event held in California.

Speaker Change: It was one of the largest ever in term of product news with over 3000 participants in person and virtual.

Speaker Change: We announce the availability of our highly anticipated Kenan Pulse and Origin, all electric motorcycle lineup, making our entry into two wheel space.

Speaker Change: These model leverage our own ROTACS E power unit, which also propel our electric snowmobile and will be used in future VRP electric products.

Speaker Change: In term of the next step, we will be hosting several media events, training our dealers and hosting VRP customer event throughout the second half of the year.

Jose Boisjoli: We intend to become a global leader in that space with true innovation designed to simplify the riding experience for new riders and introduce electric motorcycles to all.

Speaker Change: We intend to become a global leader in that space with true innovation, designed to simplify the writing experience for new writers and introduce electric motorcycle to all.

Jose Boisjoli: But this was not the only key news of our dealer event, as you can see on slide nine. We bolster our Canon Mofrode lineup and producing the four seat version of our top of the line. This extension was highly anticipated as multi-passenger model represent close to 60% of sales in debt category. We also introduced our all-new Atlanta ATV platform in the high CC segment, representing the first major platform upgrade in that segment in about 15 years. This new platform has been very well received, just like the mid CC last year. As for Triewel Vehicle, we've launched the all-new Cannam Canyon, our most rugged ever in this segment.

Speaker Change: But this was not the only key news of our dealer event as you can see on slide 9. We bolster our Kenama-Frode lineup and producing the 4th seed version of our top-of-the-line Mavic R.

Speaker Change: This extension was highly anticipated as multi-passenger model represented close to 60% of sales in that category.

Speaker Change: We also introduce our all-new Atlanta ATV platform in the high CC segment, representing the first major platform upgrade in that segment in about 15 years.

Speaker Change: This new platform has been very well received just like the mid-CC last year.

Speaker Change: As for Tree Will Vehicle, we've launched the all-new canon, our most rugged ever in this segment. Purpose built to increase accessibility into the growing adventure to re-market, which has double in recent years.

Jose Boisjoli: Purpose built to increase accessibility into the growing adventure terrain market, which has doubled in recent years. The Cannam Canyon will target Triewel rider of all scale levels. On the seedless side, we further build on the Fish Pro success by introducing the Fish Pro Apex, the most powerful personal aircraft in that segment, and the Switch Poundtune Fish Edition, the first ever in that category. This model catered to a very large potential consumer base with over 220 million recreational anglers worldwide. The product launches at our dealer event demonstrate our commitment to innovation and position us to continue gaining market share in the future.

Speaker Change: The Kenam Canyon will target three-wheel-rider of all-scale levels.

Speaker Change: On the sidu side, we further build on the Fischpro success by introducing the Fischpro Apex, the most powerful person with a craft in that segment, and the Switch Pomptoon Fisch Edition, the first ever in that category.

Speaker Change: This model cater to very large potential consumer base with over 220 million recreational angler worldwide.

Speaker Change: The product launches at our dealer event demonstrates our commitment to innovation and position us to continue gaining market share in the future.

Jose Boisjoli: Now, let's turn to slide 10 for more detail on our year-round product. Revenue worked down 33% to $1 billion, primarily due to reduced shipment. At Triewel, Cannam side by side was down high single-digit percentage, slightly more than the industry, as we're facing a very strong quarter last year in aggressive promotion from other OEMs this year. However, we continue gaining share in the utility category, driven by the ongoing success of our high-end defender cab. As for ETV, retail was down low single-digit in the quarter, in line with the industry. We are still seeing solid traction with our new off-lander platform, which deliver market share gain in the mid-CC segment.

Speaker Change: Now, next turn to slide 10 for more detail on our year-round product. Revenue where down 33% to $1 billion from is due to redue shipment.

Speaker Change: At Retail, Kenam side-by-side was down high single digit percentage, slightly more than the industry. As we're facing a very strong quarter last year, an aggressive promotion from other OEM this year.

Speaker Change: However, we continue getting shared in the utility category, driven by the ongoing success of our high-end defender cab.

Speaker Change: As for ATV, retail was down low single digit in the quarter, in line with the industry.

Speaker Change: We are still seeing solid traction with our new offline-der platform which deliver market share gain in the mid-CC segment.

Jose Boisjoli: Looking at Triewel vehicle, our retail was down in the high 20%, slightly lagging the industry. We continue to see stronger performance at the high end of our lineup, while the Riker, our entry-level product, is affected by the economic pressure on target consumers.

Speaker Change: Looking at three-wheel vehicle, our retail was done in the high-20% slightly lagging the industry.

Speaker Change: We continue to see stronger performance at the high end of our lineup, while the riker, our entry-level product, is affected by the economic pressure on target consumers.

Jose Boisjoli: Turning to seasonal product on slight element, revenue were down 40% from last year to $542 million. Our retail and personal water craft declined in the mid-20% due to weak industry trend and reduced market share as explained a few minutes ago. Entry-level products were more impacted, but we performed well in the high-end category. At this stage, we expect to finish the season with more inventory than plastic.

Speaker Change: Turning to seasonal product on slide 11. Revenue were down 40% from last year to $542 million.

Speaker Change: Our retail and personal watercraft declined in the mid-20% due to weak industry trend and reduced market share, reduced market share, as explained a few minutes ago.

Speaker Change: and Trilabel product were more impacted but we perform well in the high end category.

Speaker Change: At this stage, we expect to finish the season with more inventory than plan.

Jose Boisjoli: The switch was down high 30%, suffering from generally weaker trend in marine and lapping a strong quarter last year supported by Hurley Introduction Momentum. Moving on to slide 12, with power-sport part accessories and apparel and new EM engines, revenue were down 12% to 258 million dollars due to lower sales volume. We expect to benefit from our growing fleet, especially in ORV, upset by weaker demand for slow-related products and lower accessories sales due to softer retail. Turning to marine, revenue were down 54% to 57 million dollars, reflecting lower-boat shipment volume. Looking at retail sales, aluminum aircraft was up about 40%, while many two was up high 20% as we were lapping a low retail volume period.

Speaker Change: This switch was down high 30% suffering from generally weaker trend in marine and lapping a strong quarter last year supported by a Hurley introduction momentum.

Speaker Change: Moving on to slide 12 with far sport part accessories and apparel and new EM engines.

Speaker Change: Revenue are down 12% to $268 million due to lower sales volume.

Speaker Change: PNA sales continued to benefit from our growing fleet, especially in ORV, upset by weaker demand for a snow-related product, and lower accessory sales due to softer retail.

Speaker Change: Turning to Marine.

Laura Boisjoli: Revenue were down 54% to $57 million, reflecting Laura Boisjoli's shipment volume.

Speaker Change: Looking at retail sales, I'll do my craft was up about 40% while many two was up high 20% as we were slapping a low retail volume period.

Jose Boisjoli: As for Quintex, retail was down mid-single digit in line with the industry.

Speaker Change: As for Quintrex, retail was down mid-single digit in line with the industry.

Sbastien Martel: With that, I turn the call over to Sbastien. Thank you, Jose, and good morning, everyone. Our Q2 financial result came in essentially in line with our expectation and demonstrated our commitment to support our dealers as we proactively slowed our shipment in the quarter.

Speaker Change: With that, I turn the call over to Sbastien.

Sbastien: Thank you, Jose, and good morning, everyone. Our Q2 financial results came in, essentially, in line with our expectations and demonstrated our commitment to support our dealers as we proactively slow our shipment in the quarter to accelerate the reduction of our net work, the reduction of our net work inventory levels.

Sbastien Martel: To accelerate the reduction of our network and the reduction of our network inventory levels. Looking at the numbers, revenues were down 34% to 1.8 million dollars, primarily due to lower shipments. We generated 377 million dollars in gross profit, representing a margin of 20.4%. Down from last year, due to the less efficient use of our assets given the lower production volumes and higher sales programs. These were partly offset by our return product mix, especially in side-by-side and personal water graph, and favorable pricing. In this context, we continued to diligently manage our expenses and also benefited from the recognition of R&D subsidies in the quarter.

Sbastien: Looking at the numbers, revenues were down 34% to $1.8 billion, primarily due to lower stiffness. We generated $377 million in gross profit, representing a margin of 20.4%.

Sbastien: Down from last year, due to the less efficient use of our assets given the lower production volumes, and higher sales programs.

Sbastien: These were partly offset by a richer product mix, especially in side-by-side and personal water graph and favorable pricing.

Sbastien: In this context, we continue to diligently manage our expenses and also benefit it from the recognition of our in these subsidies in the court. Combine? We'll text was down 10% compared to Q2 last year, alleviating some of the pressure from reduced shepherds.

Sbastien Martel: Combined, WPX was down 10% compared to Q2 last year, alleviating some of the pressure from reduced shipments.

Sbastien Martel: Including all of the above are normalized a bit, and that at $199 million and are normalized earnings per share at 61 cents.

Sbastien: Including all of you above, or normalize the Vidda, and that at $199 million dollars, and our normalized earnings per share at 61 cents.

Sbastien Martel: Turning to slide 15 for an update on our network inventory. As discussed since the beginning of the year, a key driver of our plan for fiscal 25 is the reduction of our network inventory to support our dealers whose margins are pressured by the uncertain economic environment. High interest rate and increased competitive dynamics. Being the first OEM to commit to supporting our dealers through this challenging environment by proactively reducing our shipments earlier in the year allowed us to make solid progress on our network inventory reduction target. In fact, as of the end of Q2, our network inventory is down 13% from Q4 levels.

Sbastien: Turning to slide 15 for an update on our net work inventory.

Sbastien: As discussed since the beginning of the year, a key driver of our plan for fiscal 25 is the reduction of our network inventory, the supporter deitors, whose margins are pressured by the uncertain economic environments, high interest rate and increased competitive dynamics.

Sbastien: Being the first OEM to commit the supporting our dealers through this challenging environment by proactively reducing our shipments earlier in the year. Out of us to make solid progress on our network inventory reduction target.

Sbastien: In fact, as of the end of 2-2, our network inventory is down 13% from 2-4 levels. While on our way towards the objective for reduction of 15-20% by ERAC.

Sbastien Martel: While on our way towards our objective for reduction of 15 to 20% by R&D. Furthermore, we continue to improve the quality of our inventory, with most of the reduction in the quarter coming from non-current units. While the actions we took to reduce our network inventory during the second quarter impacted our financial performance, we strongly believe that supporting our dealers in this difficult environment is essential to ensure our long-term mutual success.

Sbastien: Furthermore, we continue to improve the quality of our inventory, with most of the reduction in the quarters coming from non-current units.

Sbastien: While the actions we took to reduce the network inventory during a second quarter impacted our financial performance. We strongly believe that supporting our dealers in this difficult environment is essential to ensure our long-term mutual success.

Sbastien Martel: With this in mind, let's turn to slide 16 for an update on our guidance for the year. As Josie mentioned, our markets have proven to be more challenging than expected so far this year due to weaker industry trends, especially for side-by-side and personal autograph, an increased promotional activity from competitors in the form of consumer rebate, dealer incentives, and even MSRP reduction. Moreover, the difficult macro-environment which had started affecting many of our key international markets in fiscal 24 now seems to also be impacting the very important U.S. power-sport markets. As such, we are approaching the second half of the year with caution, assuming that the softness we saw in Q2 will persist through H2 and will likely continue through at least the first half of next year.

Sbastien: With this in mind, let's turn to slide 16 for an update on our guidance for the year.

Sbastien: As Jose mentioned, our markets have proven to be more challenging than expected so far this year due to weaker industry trend.

Speaker Change: especially for side-by-side and personal autographs, and increase promotional activity from competitors in the form of consumer rebates, dealer incentives, and even MSRP reduction.

Speaker Change: Moreover, the difficult macro environment, which had started affecting many of our key international markets in fiscal 24. Now seems to also be impacting the very important U.S. power sport market.

Speaker Change: As such, we are approaching the second half of the year with caution, assuming that the softness we saw into to will persist through H2, and will likely continue through at least the first half of next year.

Sbastien Martel: Consequently, we have adjusted our shipment plan for the rest of the year as we continue to aim to right-size our network inventory levels in a weaker industry environment. Additionally, our revised guidance also incorporates plan and incremental sales program expenses, as we will continue to support our brand and our dealers in this increasingly promotional environment. Following these adjustments, net of the benefit of additional cost-saving initiatives as we right-size our expenses for the current environment, we now expect our revenues to end between $7.8 and $8 billion, normalize that to end between $890 and $940 million, and normalize DPS to end between $275 and $325.

Claude Cuntley: Claude Cuntley, we have adjusted our shipment plan for the rest of the year as we continue to aim to right-size our net-orchestral and rural areas in a weaker industry environment.

Claude Cuntley: Additionally, our revised guidance also incorporates plan and commensal sales program expenses, as we will continue to support our brand and our dealers in this increasingly promotional environment.

Claude Cuntley: Following these adjustments, next of the benefit of additional cost-saving initiatives as we right size or expenses for the current environment.

Speaker Change: We now expect our revenues to end between 7.8 and 8 billion dollars. Normalize that it does to end between 890 and 940 million dollars. And normalize DPS to end between 575 and 325.

Sbastien Martel: With these revised assumptions coupled with a working-capital headwind resulting from the change in production schedule, we now expect a lower level of free cash flow generation for the year somewhere north of $200 million. As for how we anticipate the rest of the year to unfold, we expect a sequential improvement in 2-3 in terms of revenue, normalize DPS and normalize DPS, with the former expected to be up in the range of high-single digits to low-teen percentage from the 61 cents we just delivered in 2-2. While fiscal 25 is not unfolding as we had initially planned, we strongly believe that we are taking the right actions to protect our business and our dealers in this challenging environment.

Speaker Change: With these revised assumptions, coupled with a working capital headwind resulting from the change in production schedule. We now expect a lower level of free cash flow generation for the year, somewhere north of $200 million.

Speaker Change: As for how we anticipate the rest of the year to unfold, we expect this sequential improvement in Q3 in terms of revenue, normalized dividda, and normalized DPS.

Speaker Change: With the former expected to be up in the range of high single digits to a low teen percentage from the 61 cents we just delivered into 2.

Speaker Change: While 525 is not unfolding as we had initially planned.

VisualZ: We strongly believe that we are taking the right actions to protect our business, and our dealers, and this challenging environment. All the while, positioning our business to lead the industry when markets return to growth. On that, I'll turn the call over to VisualZ.

Sbastien Martel: All the while, positioning our business to lead the industry when markets return to growth.

Sbastien Martel: On that, I'll turn the call over to you as well.

Jose Boisjoli: Thank you, Sebastian. The first half of the year was challenging, but we believe we made the right decision at the right time. Our plan has been well-executed, and I thank our teams for their dedication through this difficult period. Over the years, our decision has always been guided by our commitment to balance the interest of all our stakeholders. In this spirit, we were the first; we aim to proactively reduce the ship. We want to protect our dealer business, the value of our brands, and our long-term, profitable growth. Dealer have recognized that our action are those of the true business partners.

VisualZ: Thank you Sbastien. The first half of the year was challenging, but we believe we made the right decision at the right time.

VisualZ: Our plan has been well executed and I thank our teams for their dedication through the difficult period.

VisualZ: Over the years, our decision have always been guide by our commitment to balance the interest of all our stakeholders.

VisualZ: In this period, we were the first OEM to proactively reducing shipment.

Philippe Deschenes: Thank you, Sylvie.

VisualZ: We want to protect our dealer business, the value of our brands and our long-term, profitable group.

VisualZ: Dealer have recognized that our action are those of the true business partners.

Jose Boisjoli: We had the opportunity to connect with them at our dealer event. They are enthusiastic about our recent product launches and pleased to see that we remain committed to actively investing in R&D. Despite the current context, they know we are doing what's needed to remain their OEM of choice. Over the short-term, proactively managing production and network inventory is a priority.

VisualZ: We had the opportunity to connect with them at our dealer event. They are enthusiastic about our recent product launches, and pleased to see that we remain committed to actively investing in our indie.

VisualZ: Despite the current context, they know we are doing what's needed to remain their OEM of choice.

Jose Boisjoli: So, with that, I'll turn the call over to Joseph.

VisualZ: Over the short term, proactively managing production and network inventory is a priority.

Jose Boisjoli: Thank you, Philippe.

Jose Boisjoli: As we look to the long-term, we remain confident in our strategy driven by our focus on innovation, extensive portfolio, and strong dealer network. We are well positioned for continued success.

Philippe Deschenes: Good morning and welcome to BRP's conference call for a second quarter of fiscal year 25. Joining me this morning are Jose Boisjoli, president and chief executive officer, and Sabahat Khan, chief financial officer.

Jose Boisjoli: Good morning, everyone, and thank you for joining us. Our financial result for second quarter were essentially as expected and reflect our focus on reducing net worth inventory to support our dealers. However, the macroeconomic environment and high interest rate continue to put pressure on consumer demand. As a result, the demand has declined more than anticipated, while promotional activity has intensified.

Philippe Deschenes: Before we move to the prepared remarks, I would like to remind everyone that certain forward-looking statement will be made during the call, and that the actual result could differ from those implied in these statements. The forward-looking information is based on certain assumption and is subject to risk and uncertainty, and I invite you to consult BRP's MDNA for complete list of these. 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 relation section.

VisualZ: As we look to the long-term, we remain confident in our strategy, driven by our focus on innovation.

VisualZ: Extensive portfolio and strong leader network, we are well positioned for continued success.

Philippe Deschenes: So with that, I'll turn the call over to you with it. Thank you, Philippe.

Operator: On that, I 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 followed by one on your touchtone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If using your speaker phone, you will need to lift the handsets first before pressing any keys.

Speaker Change: On that, I turn the call over to the operator for questions.

Speaker Change: Thank you sir.

Speaker Change: Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your Dutch tone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If using a speaker phone, you will need to lift the handset first before pressing any keys.

Jose Boisjoli: In this context and given our commitment of safeguarding our dealer value proposition, we have decided to further adjust our production schedule for the year, which is reflected in our updated guidance.

Operator: And, out of consideration to other callers on the line today, we ask that you please limit yourself to one question and one follow-up. Thank you.

Jose Boisjoli: Let's turn to slide four for key financial highlight. Revenue reached 1.8 billion dollars, normalized a bit though was 199 million, and normalized EPS was 61 cents, generally in line with our expectation. We have made great stride to reduce network and inventory, which is down 13% so far this year, progressing towards our objective of a 15 to 20% reduction by the end of fiscal 2025. As for retail, our North American power sports sales were down 18% from a strong second quarter last year, as the industry experienced weaker consumer demand, as you can see on slide five.

Speaker Change: In Out of Consideration to Other Colors on the Line Today, we ask that you please limit yourself to one question and one follow-up. Thank you.

Craig Kennison: And your first question will be from Craig-Kennison at Bayard. Please go ahead. Good morning. Thanks for taking my question. I appreciate what you're doing with respected dealers and making sure there's healthy as can be. How do you know you're done enough cutting? Those of us on the outside are all trying to figure that out, and I'm curious what you'd use internally to know that this cut is deficient.

Speaker Change: And your first question will be from Craig Canison at Beard. Please go ahead.

Craig Canison: Hey, good morning. Thanks for taking my question. I guess appreciate what you're doing with respect to dealers and making sure there is healthy as can be.

Craig Canison: How do you know you've done enough cutting? Those of us on the outside are trying to figure that out and curious what you use internally to know that this cut is deficient.

Jose Boisjoli: Yeah, good morning, Craig. You know, when we look at the macroeconomics, the pressure on the consumers and the overall context, we are approaching the balance of the year on a cautious stance. And basically, we saw the Q2 retail trending down in; we saw the trend of retail going down in Q2, and it's continuing in August. And what we expect for H2 is ORV to be down mid to high single digit, snowmobile to be down low to mid-ting. And watercraft entry will, there is only a few months to retail, but they will be down by slightly above 20%.

Craig Canison: Yeah, good morning Craig.

Craig Canison: You know, when we look at the macroeconomics, the pressure on the consumers and the...

Speaker Change: and the overall context.

Jose Boisjoli: Good morning, everyone, and thank you for joining us. Our financial result for second quarter were essentially as expected, and reflect our focus on reducing network inventory to support our dealers. However, the macroeconomic environment and high interest rate continue to put pressure on consumer demand. As a result, the demand has declined more than anticipated while promotional activity has intensified.

Speaker Change: We are approaching the balance of the year on a course of stance and basically we saw the Q2 retail trending down and we saw the trend of retail going down in Q2 and it's continuing August.

Jose Boisjoli: In this context, and given our commitment of safeguarding our dealer value proposition, we have decided to further adjust our production schedule for the year, which is reflected in our updated guidance.

Jose Boisjoli: Let's turn to slide four for key financial highlight. Revenue reached $1.8 billion. Normalize EBITDA was $199 million. Normalize EPS was 61 cents, generally in line with our expectation. We have made great stride to reduce network inventory, which is down 13% so far this year, progressing towards our objective of a 15-20% reduction by the end of fiscal 2025. As for retail, our North American power sports sales were down 18% from a strong second quarter last year, as the industry experienced weaker consumer demand as you can see on slide five.

Speaker Change: And what we expect for each two is our V to be down mid to high single digit. Snowmobile to be down low to mid thing. And what our craft and tree will, there is only a few months to retail, but they will be down by slightly above 20%. Then we believe.

Jose Boisjoli: We are operating in an increasingly challenging economic environment. Market conditions were in line with our plan through April, but deteriorated in the second quarter. Although these conditions are impacting many of the region where we operate, it has recently become more challenging in North America, our key power sports market. On the plus side, we have been more proactive than most OEM at reducing network inventory, and this was received positively by our dealers.

Jose Boisjoli: Then we believe by when we see that the brand in Q2, we believe that projecting this in H2 that our water is the right approach. On our side, we obviously, we are in a better position than some of the EM with our inventory. Some EM who have more inventory are very aggressive on the promotional side for the consumers, for the dealers, and even one in the off-road business reduces its MSRP, and we are follower. We will not follow those actions because we want to protect again. and our profitable business. We want to protect the dealers, and we want to protect our long-term growth.

Speaker Change: [inaudible]

Jose Boisjoli: Having said that, OEMs with high level of inventory have been more aggressive with promotion, which has expected, impacted our market share this quarter. Looking at retail performance for the quarter on slide 6, overall retail was down in the 10% age, lagging the industry in North America, EME and Asia Pacific. Meanwhile, it was up 18% in Latin America, driven by a very strong performance in Mexico and Brazil, where consumers are highly engaged with our Sido and Canaan brands. Given our focus on bringing network inventory down, we were anticipating some market share loss, namely for side by side.

Speaker Change: On our side, we obviously, we are in the better position than some of the EM with our inventory.

Speaker Change: Some OEM have more inventory are very aggressive on the promotional side for the consumers, for the dealers. And even one in the Afro Business Reduce is MSRP and we are follower. We're not will not follow those action because we want to protect again.

Speaker Change: our profitable business, we want to protect the dealers and we want to protect our long-term growth. Then this is basically...

Jose Boisjoli: Then this is basically how we plan H2, and we feel that where we are, we are at the right level for the balance of H2.

Speaker Change: How we plan H2, and we feel that where we are, we are at the right level for the balance of H2.

Jose Boisjoli: A few words on our personal watercraft market share decline. Last year, you may remember that our main competitor had supply issues, which turned out to our advantage. The fact that this situation is back to normal, combined with the current industry weakness, had a larger than expected impact on our retail this season. Turning to slide seven, we are pleased with our resolve in ORV for the full season, as we've delivered record retail performance, up 8% in an industry that was flat. We gained about two point of market share inside by side vehicle, passing the 30% mark for the first time.

Jose Boisjoli: A few words on our personal watercraft market share decline. Last year, you may remember that our main competitor had supply issue, which turned out to our advantage. The fact that this situation is back to normal, combined with the current industry weakness, had the larger than expected impact on our retail this season. Turning to slide 7, we are pleased with our resolve in ORV for the full season, as we've delivered record retail performance up 8% in an industry that was flat.

Jose Boisjoli: Thank you. And as a follow-up, to what extent do your efforts to cut, you know, broad inventory, help you convince dealers to stock eBikes and some of the newer products that you have in order to win showroom space with your dealer? Yeah, I think on this and it's not black and white, but you know, we were, I was for three days with the dealer at our dealer show, and obviously they are happy about that we're the first who we am to committed to reduce inventory. They see that we are true partners. They see that we're trying to protect our profitability, theirs and ours, and we're working hand in hand with them.

Speaker Change: Thank you and as a follow-up.

Speaker Change: To what extent do your efforts to cut, you know, broad inventory, help you convince dealers to stock e-bikes and some of the newer products that you have in order to win showroom space with your dealer.

Speaker Change: I think on this, and it's not black and white, but you know we were, I was for three days with the dealer at our dealer show and obviously they are happy about that we're the first who we end to committed to reduce and venturing.

Jose Boisjoli: We gained about 2 point of market share inside by side vehicle, passing the 30% mark for the first time. We also performed very well in ETV, gaining 1.5 point of market share. With this achievement, we have closed the gap with the number 1 position in the industry in terms of ORV unit retail per dealers. In the current environment, we expect further short term market share volatility. However, with our recent product launches and momentum with dealers, we believe we will continue to gain share in ORV for the coming season.

Speaker Change: The C that we are two partners, the C that we're trying to protect.

Jose Boisjoli: We also perform very well in ETV, gaining one and a half points of market share. With this achievement, we have closed the gap with the number one position in the industry in terms of ORV unit retail for dealers. In the current environment, we expect further short-term market share volatility. However, with our recent product launches and momentum with dealers, we believe we will continue to gain share in ORV for the coming season.

Speaker Change: Our profitability, theirs and ours.

Jose Boisjoli: And they came out to the club first positive with the new product. This is always what they're looking for. But second, they believe that doing what we're doing, we're doing the right thing for the long term. And this is basically the mindset that we saw at Club.

Speaker Change: and we're working hand-on-hand with them.

Speaker Change: and they came out to the first positive with the new product. This is always what they're looking for. But second, they believe that doing what we're doing, we're doing the right thing for the long term.

Jose Boisjoli: On the two wheel, I don't see the correlation between what we're doing for two wheels. You know, we will have 300 dealers year one. We sell the two wheels, and our requirement is some space in the dealership room, but our commitment for units is quite low. And we want to make sure we don't build inventory. Basically, it's taking a minimum inventory to display the product for the demo. Right after that, as much as the retail will replenish, then it will be a very low commitment from the dealer, and so far it was well received. Thanks, Jose.

Speaker Change: And this is basically the mindset that we saw at Trump. On the two-wheel, I don't see the correlation between what we're doing for two wheels, you know.

Jose Boisjoli: Let's turn to slide 8 for highlight of our current of our recent dealer event held in California. It was one of the largest ever in terms of product news with over 3000 participants in person and virtual. We announced the availability of our highly anticipated Kenan Pals and origin, all electric motorcycle lineup, making our entry into two wheel space. These model leverage our own ROTAX ePower unit, which also propel our electric snowmobile and will be used in future BRP electric product.

Speaker Change: We will have 300 theaters year one, we sell the two wheels.

Speaker Change: and our requirement is some space in the dear, for room but our commitment for units is quite low. And we want to make sure we don't build an inventory. Basically, it's taking a minimum inventory to dis...

Speaker Change: Display the product for the demo ride after that as much as the retail will be finished and it will be a

Speaker Change: a very low commitment from the dealer and so far it was well received.

Operator: Thank you.

Martin Landrie: Next question will be from Martin Landrie at the default. Please go ahead. Hi, good morning. I was wondering if you could share your expectations for industry sales in North America for this year. Like I just said, methane on the previous call, and I will repeat right now for our V. We expect the industry to be down mid to high single digit or snowmobile down to low to mid teen; obviously, the snow will play a factor there. And what a craft entry will, and there is only a few months to go, and it's low retail month. They will close the year probably down 20%.

Jose: Thanks, Jose.

Jose: Thank you.

Jose: Next question, will be from Martelandri at Stiefel. Please go ahead.

Jose Boisjoli: In terms of the next step, we will be hosting several media event training our dealers and hosting VRP customer event throughout the second half of the year. We intend to become a global leader in that space, with true innovation, designed to simplify the riding experience for new riders and introduce electric motorcycle to all.

Martelandri: Hi, good morning. I was wondering if you could share your expectations for industry sales in North America for this year.

Jose Boisjoli: We intend to become a global leader in that space with true innovation designed to simplify the riding experience for new riders and introduce electric motorcycles to all.

Martelandri: Like I just said, Martel, on the previous call, and I will repeat.

Speaker Change: Right now for ORV, we expect the industry to be down mid to high single digit.

Jose Boisjoli: But this was not the only key news of our dealer event as you can see on slide 9. We bolster our Kenan Mofroad lineup and producing the four seed version of our top of the line This extension was highly anticipated as multi passenger model represent close to 60% of sales in that category. We also introduced our all new Atlanta ATV platform in the high CC segment representing the first major platform upgrade in that segment in about 15 years. This new platform has been very well received just like the mid CC last year.

Speaker Change: For snow a bill down to low to mid-teen, obviously the snow will play a factor there. And what a graph entry will and there is only a few months to go and it's low retail month. They will close the year probably down 20%.

Jose Boisjoli: And this is for the industry in North America under our retail side because of the high promotion activity that we will not necessarily be a leader, but the follower. And we're planning to lose some market share during that correction supply-demand period. We could lose some market share and some product line, but we can the right thing to do for the long term.

Speaker Change: and this is for the industry in North America.

Speaker Change: On the our retail side, because of the...

Speaker Change: The High Promotion Activity

Speaker Change: that we will not necessarily be a leader but a follower and we're planning to lose some market share during that.

Speaker Change: Corrections supply the men's period. We could lose some market share in some product line. But we can't even say the right thing to do for the long term.

Jose Boisjoli: As for Triewell Vehicle, we've launched the all new Cannam Canyon, our most rugged ever in this segment, purpose built to increase accessibility into the growing adventure terrain market, which has doubled in recent years. The Cannam Canyon will target Triewell rider of all scale levels.

Martin Landrie: Okay, and just to be clear, are those units or dollars? Units, sorry.

Speaker Change: Okay, and just to be clear, are those units or dollars.

Jose Boisjoli: Yeah, so can you give us your assumptions for dollars? Right now, no. In terms of industry dollars, no. But obviously, when you look at our guidance, we made a sizable adjustment to the year on product business. The majority of it comes from side by side, given the software trends we're seeing.

Julets: Julets, you're necessary.

Speaker Change: Yeah, so can you give us your assumptions for dollars?

Jose Boisjoli: On the seedless side, we further build on the fish pro success by introducing the fish pro apex, the most powerful personal aircraft in that segment, and the switch pound tune fish edition, the first ever in that category. This model cater to very large potential consumer base with over 220 million recreational angler worldwide.

Speaker Change: Right now, no, in terms of industry dollars, no, but obviously when you look at our guidance, we made a sizable adjustment to the year-on products business. The majority of it comes from side-by-side, given the software trends we're seeing.

Martin Landrie: Okay, and just to better clarify, what would be a good assumption to use in terms of average unit price sale, fiscal 25 or just 24 in terms of decline? Well, in terms of MSRP, all the expectation is that we've done quite sizable MSRP increases over COVID. Inflation is tapering down, so the expectation is that we'll come back probably to normal pricing increases next year, as we've done pre-COVID. So usually we try to price in the new features that we put in some inflation on salary, etc. But we're mindful that price point is a significant headwind for some consumers.

Speaker Change: Okay, and just to better clarify, what would be a good assumption to use in terms of

Jose Boisjoli: The product launches at our dealer event demonstrate our commitment to innovation and position us to continue gaining market share in the future.

Jose Boisjoli: Now next turn to slide 10 for more detail on our year round product. Revenue were down 33% to $1 billion, primarily due to reduced shipment. At retail, Cannam side by side was down high single digit percentage, slightly more than the industry, as we're facing a very strong quarter last year in aggressive promotion from other OEM this year.

Speaker Change: Unit Price Sale.

Speaker Change: 225 versus 24 in terms of the client.

Speaker Change: Well, in terms of MSRP, the expectation is that we've done quite advisable MSRP increases over COVID. Inflation is tapering down, so the expectation is that we'll come back probably.

Speaker Change: to normal pricing increases next year as we've done pre-COVID, so usually we try to price in the new features that we put in, some inflation on salary, etc. But more mindful that price point is a significant hit when for some consumers.

Jose Boisjoli: However, we continue gaining share in the utility category driven by the ongoing success of our high end defender cab. As for ITV, retail was down low single digit in the quarter in line with the industry. We are still seeing solid traction with our new off-lander platform, which deliver market share gain in the mid CC segment.

Martin Landrie: So usually we do a price increase of 1%; could we be in that range next year? That would be a fair assumption: nothing. Okay, okay, that's obviously MSRP, and sometimes actual with discounts are going to be lower, right? Yeah, well, the promotional environment is still quite high. We expect the promotional environment to be sustained at these levels, at least for the first part of next year.

Speaker Change: So, usually we do a price increase of 1% could we be in that range next year that would be a fair assumption.

Speaker Change: Okay, that's obviously MSRP and sometimes actual with discounts we're going to be lower, right?

Jose Boisjoli: Looking at Triewell vehicle, our retail was down in the high 20%, slightly lagging the industry. We continue to see stronger performance at the high end of our lineup, while the Riker, our entry level product is affected by the economic pressure on target consumers.

Speaker Change: Yeah, well, the promotional environment is still quite high. We expect the promotional environment to be sustained at these levels, at least for the first part of next year.

Operator: Okay, okay, thank you very much.

Robin Farley: Next question will be from Robin Farley at UBS. Please go ahead. Great, thanks. I just wanted to clarify: you mentioned the retail declines you're expecting for the industry. And I think you were sort of mentioning that you might lose some share because others are being more promotional. But in your introductory remarks, it sounded like you were saying you expect to gain share in ORV for the coming season. So I just wanted to make sure I understand whether that would be sort of next year's calendar year. In other words, lose share between now and calendar end 24, but then gain share in 25 or just to kind of square that.

Speaker Change: Ok, thank you very much for this vlog.

Speaker Change: Sbastien Martel, Philippe Deschenes, Philippe Deschenes, Philippe Deschenes,

Speaker Change: Next question will be from Robin Farley at UBS, please go ahead.

Jose Boisjoli: Turning to seasonal product on slight element, revenue were down 40% from last year to $542 million. Our retail and personal water craft declined in the mid-20% due to weak industry trend and reduced market share, as explained a few minutes ago. Entry-level products were more impacted, but we performed well in the high-end category. At this stage, we expect to finish the season with more inventory than plastic.

Jose Boisjoli: Turning to seasonal product on slide 11. Revenue were down 40% from last year to $542 million. Our retail and personal water craft declined in the mid 20%, due to weak industry trend and reduced market share, reduced market share, as explained a few minutes ago.

Robin Farley: Great, thanks. I just wanted to clarify you mentioned the retail decline you're expecting for the industry. And I think you were sort of mentioning that you might lose some share because others are being more promotional. But in your introductory remarks.

Speaker Change: It's kind of like you were saying you expect to gain Sharon or a V for the coming seasons so I just under

Jose Boisjoli: Entry level product were more impacted, but we perform well in the high end category. At this stage, we expect to finish the season with more inventory than plastic.

Speaker Change: Thanks for your understanding.

Speaker Change: Whether that would be sort of next year's calendar year, in other words, loose share between now and calendar end, 24 but then gain share and 25 or just...

Robin Farley: And then I did have a follow up. Let me just ask that first.

Jose Boisjoli: The switch was down high 30% suffering from generally weaker trend in marine and lapping a strong quarter last year supported by early introduction momentum Moving on to slide 12 with power support part accessories and apparel and new EM engines, revenue were down 12% to 258 million dollars due to lower sales volume. We expect to benefit from our growing fleet, especially in ORV, upset by weaker demand for slow related product and lower accessories sales due to softer retail.

Jose Boisjoli: The switch was down high 30%, suffering from generally weaker trend in marine and lapping a strong quarter last year supported by Hurley Introduction Momentum. Moving on to slide 12 with power-sport part accessories and apparel and new EM engines, revenue were down 12% to 258 million dollars due to lower sales volume. We expect to benefit from our growing fleet, especially in ORV, upset by weaker demand for slow-related products and lower accessories sales due to softer retail. Turning to marine, revenue were down 54% to 57 million dollars, reflecting lower-boat shipment volume. Looking at retail sales, aluminum aircraft was up about 40%, while many two was up high 20% as we were lapping a low retail volume period.

Jose Boisjoli: On my prepare remark, we gained share in season 24 that ended at the end of July. And now we're starting the new season, and we might lose some share. Let's say in H2, but we would the product lineup that we have with some inventory correction.

Speaker Change: to kind of square that and then I did have a follow-up, but let me just ask that first. On that, on that paper, we gained share in season 24 that ended at the end of July.

Speaker Change: And now we're starting the new season and we might lose some share, let's say, in H2. But we, with the product line up that we have with some inventory correction, we believe it will be gaining share over the full season.

Robin Farley: We believe we will be gaining share over the full season from August 1st to July next year. Okay, great. Thank you for that clarification.

Speaker Change: from August 1st of July next year.

Robin Farley: And then my follow-up question is actually just on the electric bike that you're making a big push in here. I guess others' expectation for electric motorcycle has come down significantly over time. And just kind of wondering if you see that space differently than others or what leads you to be more optimistic about the electric fuel market.

Speaker Change: Okay, great. Thank you for that clarification and then my follow-up question is actually just a neat electric.

Jose Boisjoli: Turning to marine, revenue were down 54% to 57 million dollars reflecting lower boat shipment volume. Looking at retail sales, aluminum aircraft was up about 40% while many two was up high 20% as we were lapping a low retail volume period. As for quintex retail was down mid single digit in line with the industry.

Speaker Change: Like, you know, you're making a big push in here, I guess others' expectation for electric motor cycle has.

Speaker Change: Come down significantly over time and just kind of wondering if you see that space but differently than others are what leads you to be more optimistic about the electric two-wheel market.

Jose Boisjoli: As for Quintex, retail was down mid-single digit in line with the industry.

Jose Boisjoli: Yeah, and you know that decision to enter the two-wheel market electric was done four years ago, and we did great progress over that period. We totally really think that there is like a slowdown right now in electric car sales, but we believe this is, it will take a few years to adjust and the trend is there it will remain that for sure. But why I'm confident, Robin? I believe we have, you know, the right product. And what I'm very happy with in the last, since June, we had a lot of media, a lot of dealers who have tried our product, and they are very happy with the product. And it's a product because there is no clutching. It's not a product for a long-distance ride, but it's a product for commuting or short distance. But the product is very easy to ride.

Sbastien Martel: With that, I turn the call over to Sbastien.

Sebastien Martel: With that, I turn the call over to Sebastien. Thank you Jose and good morning everyone. Our Q2 financial result came in essentially in line with our expectations and demonstrated our commitment to support our dealers as we proactively slowed our shipment in the quarter.

Speaker Change: And you know that decision to enter the two-wheel market electric was done for years ago and it's great progress.

Sbastien Martel: Thank you, Jose, and good morning, everyone. Our Q2 financial result came in essentially in line with our expectation and demonstrated our commitment to support our dealers as we proactively slowed our shipment in the quarter. To accelerate the reduction of our network and the reduction of our network inventory levels. Looking at the numbers, revenues were down 34% to 1.8 million dollars, primarily due to lower shipments. We generated 377 million dollars in gross profit, representing a margin of 20.4%. Down from last year, due to the less efficient use of our assets given the lower production volumes and higher sales programs. These were partly offset by our return product mix, especially in side-by-side and personal water graph, and favorable pricing.

Speaker Change: Over that period, we totally really think that there is like a slow down right now in electric car cells. But we believe this is, it will take a few years to adjust and it is.

Sebastien Martel: To accelerate the reduction of our network and the reduction of our network inventory levels. Looking at the numbers, revenues were down 34% to 1.8 million dollars primarily due to lower shipments. We generated 377 million dollars in gross profit representing a margin of 20.4%. Down from last year due to the less efficient use of our assets given the lower production volumes and higher sales programs. These were partly offset by our return product mix, especially in side by side and personal water graph and favorable pricing.

Speaker Change: The trend is there, it will remain that's what's here.

Robin Farley: But why we confident Robin, I believe we have...

Robin Farley: You know the right product, and what I'm very happy with in the last season of June, we had a lot of media.

Robin Farley: and a lot of theater, we have to try our product and they are very happy with the product and it's a product.

Robin Farley: Because there is no clutching, it's not a product for a long distance ride, but it's a product for commuting or short distance.

Sebastien Martel: In this context, we continued to diligently manage our expenses and also benefited from the recognition of R&D subsidies in the quarter. Combined, WPX was down 10% compared to Q2 last year, alleviating some of the pressure from reduced shipments.

Sbastien Martel: In this context, we continued to diligently manage our expenses and also benefited from the recognition of R&D subsidies in the quarter. Combined, WPX was down 10% compared to Q2 last year, alleviating some of the pressure from reduced shipments. Including all of the above are normalized a bit, and that at $199 million and are normalized earnings per share at 61 cents.

Jose Boisjoli: It has innovation and credible connectivity, and if you look at the price that we price with the range we have, like the base price is thirteen nine nine nine for the entry level model, you have a hundred sixty kilometer of a hundred mile of range. But our vehicle is equipped with fast charging; you can recharge from twenty to eighteen fifty minute. Then this is on the product side. The Canon brand is well known worldwide. Now we have a very good dealer network. We planning three hundred dealers in in in in Canada, US, and eleven countries in Europe for the first year, going to four fifteen next year.

Robin Farley: But the product is very easy to ride.

Speaker Change: It has innovation and credible connectivity, and if you look at the price that we price with the range we have like the base price is 39.99 for the interlevel with Mado.

Sebastien Martel: Including all of the above are normalized a bit, and that at $199 million and are normalized earnings per share at 61 cents.

Speaker Change: You have 160 km of 100 mile of range, but our vehicle is equipped with fast charging. You can recharge from 20 to 15 minutes.

Sebastien Martel: Turning to slide 15 for an update on our network inventory. As discussed since the beginning of the year, a key driver of our plan for fiscal 25 is the reduction of our network inventory to support our dealers whose margins are pressured by the uncertain economic environment. High interest rate and increased competitive dynamics.

Speaker Change: The Kenan brand is well known worldwide now. We have a very good dealer in that's work. We planning 300 dealers.

Sebastien Martel: Being the first OEM to commit to supporting our dealers through this challenging environment by proactively reducing our shipments earlier in the year allowed us to make solid progress on our network inventory reduction target. In fact, as of the end of Q2, our network inventory is down 13% from Q4 levels. While on our way towards our objective for reduction of 15 to 20% by R&D. Furthermore, we continue to improve the quality of our inventory with most of the reduction in the quarter coming from non-current units.

Speaker Change: in Canada, U.S. and the 11 countries in Europe for the first year going to 450 next year.

Jose Boisjoli: The price range again we feel we're well position and we have a very good marketing plan to to make the product with a demo ride and VIP event to make sure the people knows about it then and I was myself in France in July. There is a hundred fifty city in Europe that are closing downtown to combustion engine vehicle. And a lot of consumers turn to buy electric motorcycles then is it is it something that will be instant.

Speaker Change: The price range, again, we feel we're well positioned and we have a very good marketing plan.

Speaker Change: to make the product with a demo ride and VIP event to make sure the people knows about it.

Speaker Change: and I was myself in France in July.

Speaker Change: There is 150 cities in Europe that are closing downtown to combustion and genveekle and a lot of consumer turns to buy electric motorcycle.

Sebastien Martel: While the actions we took to reduce our network inventory during the second quarter impacted our financial performance, we strongly believe that supporting our dealers in this difficult environment is essential to ensure our long-term mutual success.

Jose Boisjoli: This is difficult to say. I think we are better positioned than all the competition we have in that category, but it's a mid to long term play. Okay great thank you.

Speaker Change: Is this something that will be instant? This is difficult to say. I think we are better positioned in all the competition we have in that category. But it's a mid to long-term play.

Sebastien Martel: With this in mind, let's turn to slide 16 for an update on our guidance for the year. As Joseph mentioned, our markets have proven to be more challenging than expected so far this year due to weaker industry trends, especially for side-by-side and personal autographs, an increased promotional activity from competitors in the form of consumer rebates, dealer incentives, and even MSRP reduction. Moreover, the difficult macro environment which had started affecting many of our key international markets in fiscal 24 now seems to also be impacting the very important US power sport markets.

Operator: Thank you.

Benoit Poirier: Next question will be from Benoit Poirier at this Out There Capital Markets. Please go ahead. Yeah, good morning everyone. So for my first question, could you maybe provide some color about the level of promotional activities we see these days versus the two hundred bits impact in a normal environment and also the puts and takes with respect to fiscal year twenty six. How we should be looking at the fiscal year twenty-six given your revised outlook for fiscal year twenty-five. Thank you.

Speaker Change: Okay, great, thank you.

Speaker Change: Thank you. Next question will be from Benuapwari, at the Jadnei Capital Market. Please go ahead.

Benuapwari: Good morning everyone. So for my first question, could you maybe provide some color about the level of promotional activities? We see these days versus the 200 bits impact in a normal environment and also the puts intake, which respect to fiscal year 26, how we should be looking at fiscal year 26 given your revised outlook for fiscal year 25.

Sebastien Martel: As such, we are approaching the second half of the year with caution, assuming that the softness we saw in Q2 will persist through H2 and will likely continue through at least the first half of next year. Consequently, we have adjusted our shipment plan for the rest of the year as we continue to aim to right-size our network inventory levels in a weaker industry environment. Additionally, our revised guidance also incorporates plan and incremental sales program expenses as we will continue to support our brand and our dealers in this increasingly promotional environment.

Sbastien Martel: Good good morning Benoit.

Sbastien Martel: Yeah, obviously on the sales program from some OEMs are more promotional recently than we've seen during pre-COVID. We saw, obviously, from a retail perspective, or consumer promotions, we’re back to where we were in pre-COVID in terms of percentage of sales.

Speaker Change: Good morning, good morning, good morning, but we obviously on the sales program front some some OEMs are more promotional Recently than we've seen during pre-COVID We saw obviously from a retail perspective or consumer promotions were back to where we were in pre-COVID in terms of percentage of sales

Sebastien Martel: Following these adjustments, net of the benefit of additional cost-saving initiatives as we right-size our expenses for the current environment, we now expect our revenues to end between $7.8 and $8 billion, normalize that to end between $890 and $940 million, and normalize DPS to end between $275 and $325. With these revised assumptions coupled with the working capital headwind resulting from the change in production schedule, we now expect a lower level of free cash flow generation for the year somewhere north of $200 million.

Sbastien Martel: Charles, but in absolute dollars, fire because obviously there's been MSRP increases. In terms of incentives directly to the dealers as well, we see a lot of four planned subsidies happening back and money. And so some OEMs have been later in adjusting deliveries to their dealers and so are probably finding themselves in a higher inventory position, and so they need to clear it out. And we expect that to continue through the rest of the year and probably in the first half of next year. Obviously, when rates come down because it looks like the outlook is favorable for that, that will certainly help, especially on the buy downs, especially on the four planned for us and for the dealers.

Speaker Change: But in absolute dollars, fire, because obviously there's been MSRP increases. In terms of incentives directly to the dealers, as well, we see a lot of four plant subsidies happening back and money.

Speaker Change: And so some of the M's have been later in adjusting deliveries to their dealers and so are probably finding themselves in a higher inventory position and so they need to clear it out.

Speaker Change: And we expect that to continue through the rest of the year and probably in the first half of next year. Obviously, when the race comes down, because it looks like the outlook is favorable for that. That will certainly help, especially on the by-down, especially on the fore plan for us and for the deers.

Sbastien Martel: But, as I said, we expect it to remain high back half of this year and the beginning of next year.

Sebastien Martel: As for how we anticipate the rest of the year to unfold, we expect a sequential improvement in Q3 in terms of revenue, normalize DPS, with the former expected to be up in the range of high-single digits to low-teen percentage from the 61 cents we just delivered in Q2.

Speaker Change: But as I said, we expect that there remain high back half of this year and the beginning of next year.

Sbastien Martel: On your second question, what do we expect for next year? It's a good one. Obviously, the environment has flew with very recently. So it's tough to come up today with a target for next year. I'm sure you can appreciate that, especially with the software trends we're seeing across the industries and the uncertainty about the macroeconomic environment and where rates will be going next year. What's going to be the environment next year? Tough to call, but we are approaching the year with a few key assumptions, one that the softness we're seeing across the different industries is likely to persist throughout at least the first half of next year, which means continued pressure on shipments and sustain high level of promotional activity.

Speaker Change: On your second question, what do we expect for next year? It's a good one. Obviously the environment is fluid very recently. It's tough to come out today with a target for next year.

Sebastien Martel: While fiscal 25 is not unfolding as we had initially planned, we strongly believe that we are taking the right actions to protect our business and our dealers in this challenging environment. All the while, positioning our business to lead the industry when markets return to growth.

Speaker Change: I'm sure you can appreciate that, especially with the softer trends we're seeing across the industries and the uncertainty about the macroeconomic environment and where rates will be going next year.

Sbastien Martel: All the while, positioning our business to lead the industry when markets return to growth.

Speaker Change: What's going to be the environment next year, tough to call, but we are approaching the year with a few PS functions. One that the softness we're seeing across the different industries is likely to persist.

Sebastien Martel: On that, I'll turn the call over to you shortly. Thank you, Sebastian. The first half of the year was challenging, but we believe we made the right decision at the right time. Our plan has been well-executed and I thank our teams for their dedication to the difficult period. Over the years, our decision has always been guide by our commitment to balance the interests of all our stakeholders.

Philippe Deschenes: On that, I'll turn the call over to you as well.

Speaker Change: Thrall at least the first half of next year, which means continued pressure on shipments and sustain high level of promotion activity.

Speaker Change: For us, we're likely to end the personal water crash season with more elevated levels of inventory in the network, because of the industry slow down that we saw similar to what we saw in Marine.

Speaker Change: So shipments for that product line are likely to be down next year, and obviously we'll offset some of that pressure by taking a necessary actions to right-size our cost structure.

Sebastien Martel: In this spirit, we were the first we aim to proactively reduce the ship. We want to protect our dealer business, the value of our brands, and our long-term, profitable growth. Dealer have recognized that our action are those of the true business partners. We had the opportunity to connect with them at our dealer event. They are enthusiastic about our recent product launches and pleased to see that we remain committed to actively investing in R&D. Despite the current context, they know we are doing what's needed to remain their OEM of choice. Over the short term, proactively managing production and network inventory is a priority.

Sbastien Martel: But if we look beyond next year, we are optimistic about the business. We're well positioned to can either to grow our market share, especially in a RV exploring new markets and obviously we still have for the efficiency to generate across the portfolio and across the business. And what we can achieve in terms of financial performance is really dependent on the industry. And so we do believe that in a normalized environment, but why that? The earnings power of the business is significantly greater than what we're going to see this year and what we could potentially see next year as well.

Jose Boisjoli: Edmundsman. We want to protect our dealer business, the value of our brands, and our long-term, profitable growth. Dealer have recognized that our action are those of the true business partners. We had the opportunity to connect with them at our dealer event. They are enthusiastic about our recent product launches and pleased to see that we remain committed to actively investing in R&D. Despite the current context, they know we are doing what's needed to remain their OEM of choice. Over the short-term, proactively managing production and network inventory is a priority.

Speaker Change: But if we would be on next year we are optimistic about the business, we're well positioned to continue to grow our market share, especially in our V, exploring new markets and obviously we still have further efficiencies to generate our cross-upport 40 on our cross-the-business.

Speaker Change: Abuse.

Speaker Change: And what we can achieve in terms of financial performance is really dependent on the industry. And so we do believe that in our normalized environment and why that.

Speaker Change: The earnings power of the business is significantly greater than what we're going to see this year and what we could potentially see next year as well.

Benoit Poirier: Okay, that's great.

Benoit Poirier: And just in terms of quick follow-up, you ended the leverage at 2.1 times. And you mentioned some color about free cash low.

Speaker Change: Okay, that's great. And just in terms of quick follow-up, you ended the leverage at 2.1 time and you mentioned some color about free cash flow. So I would be just curious to see what is your comfort level in terms of leverage and your ability to pursue a buyback activity in light of the revised outlook.

Benoit Poirier: So I would be just curious to see what is your comfort level in terms of leverage and your ability to pursue by bad.

Sebastien Martel: As we look to the long-term, we remain confident in our strategy driven by our focus on innovation, extensive portfolio, and strong dealer network, we are well positioned for continued success.

Sbastien Martel: What is the impact activity in light of the revised outlook? Yeah, overall, very comfortable with a balance sheet.

Sbastien Martel: I've often said that coming out of the Great Financial Crisis, we had two key learnings. One is make sure we have a covenant light debt structure, making sure we have long term maturities on our debt instruments, making sure we have ample flexibility and availability on the revolver. And these are things that we've done. Our debt is covenant light, so we're not restricted from any increases and leverage that we might be experiencing in the short to midterm. We've recently renegotiated the maturity of a billion-dollar term by pushing it to 2031. We've recently extended the maturity, but this past May have the revolver to 2030.

Speaker Change: Yeah, overall, very comfortable with a balance sheet. By often said that coming although the great financial crisis, we had to two key learnings. One is, make sure we have a covenant like debt structure, make sure we have long-term maturities on our debt instruments, make sure we have ample flexibility and availability on the revolver.

Operator: On that, I 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 followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If using a speaker phone, you will need to lift the handsets first before pressing any keys.

Philippe Deschenes: On that, I turn the call over to the operator for question. Thank you, sir.

Operator: Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two.

Speaker Change: And these are things that we've done. Our death is covered at light or not restricted from any increases in leverage that we might be experiencing in the short-term midterm.

Operator: If using your speaker phone, you will need to lift the handsets first before pressing any keys. And out of consideration to other callers on the line today, we ask that you please limit yourself to one question and one follow-up.

Operator: And, out of consideration to other callers on the line today, we ask that you please limit yourself to one question and one follow-up. Thank you.

Operator: Thank you.

Speaker Change: We've recently renegotiated the maturity of a billion dollars from B, pushing it to 2031. We've recently extended the maturity for this past May of the revolver to 2030. So we're very comfortable from a balanced sheet point of view.

Craig Kennison: And your first question will be from Craig Kenneson at Bayard. Please go ahead.

Craig Kennison: And your first question will be from Craig Kenneson at Baird. Please go ahead. Hey, good morning. Thanks for taking my question. I guess I appreciate what you're doing with respected dealers and making sure there's healthy as can be. How do you know you've done enough cutting? Those of us on the outside are all trying to figure that out.

Sbastien Martel: So we're very comfortable from a balance sheet point of view.

Sbastien Martel: And from a capital deployment, we've just recently completed the NTIB. We were we purchased 3.2 million shares completed in July. The next window is going to open up in December, and obviously will continue having discussions with the board, but we'll want to make sure that we protect our flexibility in a context that is probably more uncertain these days than certain. and so we prefer to be prudent, but there's a few months to grow before we need to make that decision.

Craig Kennison: Hey, good morning. Thanks for taking my question. I guess I appreciate what you're doing with respected dealers and making sure there's healthy as can be.

Speaker Change: And from a capital deployment, we've just recently completed the NCIB, we've repurchased 3.2 million shares completed in July. The next window is going to open up in December, and obviously we'll continue having discussions with the board.

Jose Boisjoli: How do you know you've done enough cutting? Those of us on the outside are all trying to figure that out, and I'm curious what you'd use internally to know that this cut is deficient.

Speaker Change: But we'll want to make sure that we protect our flexibility in a context that is probably more uncertain these days than certain. And so we prefer to be prudent, but there's a few months to grow before we need to make that decision.

Jose Boisjoli: And I'm curious what you'd use internally to know that this cut is deficient. Yeah, good morning, Craig. You know, when we look at the macroeconomics, the pressure on the consumers and the overall context, we approaching the balance of the year on a cautious stance. And basically, we saw the Q2 retail trending down in, we saw the trend of retail going down in Q2 and it's continuing August. And what we expect for H2 is ORV to be down mid to high single digit, snowmobile to be down low to mid-ting.

Jose Boisjoli: Yeah, good morning, Craig. You know, when we look at the macroeconomics, the pressure on the consumers and the overall context, we are approaching the balance of the year on a cautious stance. And basically, we saw the Q2 retail trending down in. We saw the trend of retail going down in Q2, and it's continuing in August. And what we expect for each two is ORV to be down mid to high single digit, snowmobile to be down low to mid team. And water graph entry will there is only a few months to retail, but they will be down by slightly above 20%.

Benoit Poirier: Thank you very much for the time. Thank you.

Speaker Change: Thank you very much for the time.

Joe Altobello: Next question will be from Joe Altobello at Raymond James. Please go ahead. Good morning.

Speaker Change: Thank you. Next question will be from Joe Altabillo at Raymond James. Please go ahead.

Martin: This is Martin on for Joe. Just sort of assuming that the retail environment holds up at the city pace right now or the pace it is right now. Would you expect wholesale and retail to be in alignment next year, or do you anticipate further destocking? Right now, again, for H2, we will continue to deplete inventory. We are at 13 at the end of Q2, and our goal is to be 15 to 20. Obviously, Somobile will be critical because we had more non-current and desired since last winter.

Martin Nond: I am Martin Nond for Joe. Just sort of assuming that the retail environment holds up at the city base is right now, where the base is right now. Would you expect wholesale and retail to be in Lyment next year or do you anticipate for no decent talking?

Speaker Change: Right now, again, for H2, we will continue to repeat an eventory. We are at 13 at the end of Q2 and our goal is to be 15 to 20.

Jose Boisjoli: And water graph entry will there is only a few months to retail, but they will be down by slightly above 20%. Then we believe by when we see that there's the brand in Q2, we believe that projecting this in H2 that our water is the right approach. On our side, we obviously, we are in a better position than some of the EM with our inventory. Some EM who have more inventory are very aggressive on the promotional side for the consumers, for the dealers, and even one in the off-road business reduced is MSRP.

Jose Boisjoli: Then we believe by when we see the brand in Q2, we believe that projecting this in each two that are quarter is the right approach. On our side, we obviously, we are in a better position than some of the EM with our inventory. Some of the EM who have more inventory are very aggressive on the promotional side for the consumers or the dealers, and even one in the off-road business reduces its MSRP. And we are follower; we will not follow those actions because we want to protect again. and our profitable business. We want to protect the dealers, and we want to protect our long-term growth.

Speaker Change: and obviously Sonoma Bill will be critical because we had...

Speaker Change: More Non-Corin than Desard.

Martin: In terms of balancing retail and wholesale the next year, I think it's too early to call at this point. There is so much volatility out there that it's very difficult to predict, and I would not this morning commit on anything on that one. Okay, understood.

Speaker Change: since last winter. In term of balancing, retail and wholesales next year, I think it's truly to call that discord.

Speaker Change: There is so much volatility out there that it's very difficult to predict and I would not this morning commit on anything on that one.

Jose Boisjoli: And just looking at this quarter, one of your competitors launched several modern year 25s earlier than normal. How did that impact your shipments and retail sort of in this corner and generally? Listen, it didn't impact our shipment. I mean, we the shipment our plan a few months in advance. We have dollar on order, deliver order on the hands and we ship according to plan for everything is. Scheduled for the next two to three months, but for sure, introducing 25s or early, they had discount on their 24 that for sure affected some retail, but we were surprised with the MSRP reduction, which we believe is not good for the brand.

Speaker Change: I'm just looking at this quarter, one of your competitors launched several modern year 25s earlier than normal. How has that impacted your shipments and retail sort of in this quarter in generally?

Jose Boisjoli: And we are follower. We will not follow those actions because we want to protect again, and our profitable business. We want to protect the dealers, and we want to protect our long-term growth. Then this is basically how we plan H2, and we feel that where we are, we are at the right level for the balance of H2.

Craig Kennison: Thank you.

Speaker Change: It didn't impact our shipment, I mean the shipment are planned a few months in advance. We have dollar on order of the order on hands and we ship according to plan for everything is scheduled for the next two to three months.

Jose Boisjoli: Then this is basically how we plan H2, and we feel that where we are, we are at the right level for the balance of H2.

Jose Boisjoli: Thank you. And as a follow-up, to what extent do your efforts to cut, you know, broad inventory, help you convince dealers to stock eBikes and some of the newer products that you have in order to win showroom space with your dealer? Yeah, I think on this and it's not black and white, but you know, we were, I was for three days with the dealer at our dealer show and obviously they are happy about that we're the first who we am to committed to reduce inventory. They see that we are true partners. They see that we're trying to protect our profitability, theirs and ours, and we're working hand in hand with them.

Martin Landry: And as a follow-up, to what extent do your efforts to cut, you know, broad inventory help you to convince dealers to stock eBikes and some of the newer products that you have in order to win showroom space with your dealer? Yeah, I think on this, and it's not black and white, but you know, we were, I was for three days with the dealer at our dealer show and obviously they are happy about that we're the first who we am to committed to reduce and inventory.

Speaker Change: for sure.

Speaker Change: Interducing 25 Surherly, they had discount on their 24th that for sure affected some retail.

Speaker Change: But we were surprised with the MSRP reduction.

Jose Boisjoli: And we decided not to follow because obviously we are in this business for a long term. And I think it would be wrong to follow for our brand for the dealer business and our business and for a long-term profitability. Then it's a short term. It's a short-term blitz, and we believe what we're doing is the right thing to do for the mid to long term. Thank you very much.

Speaker Change: which we believe is not good for the brand and we decided not to follow because obviously we are in this business for a long term.

Speaker Change: And I think it would be wrong to follow our brand for the dealer business and our business and for our long-term profitability. Then it's a short-term.

Martin Landry: They see that we are true partners, they see that we're trying to protect our profitability, theirs and ours, and we're working hand on hand with them. And they came out to the club first positive with the new product. This is always what they're looking for, but second, they believe that doing what we're doing, we're doing the right thing for the long term. And this is basically the mindset that we saw at club.

Speaker Change: It's a short term bliss and we believe what we're doing is the right thing to do for the mid to long term.

Operator: Thank you.

Jean Chu: Next question will be from Jean Chu at BNP Pac-Bop. Please go ahead. Hi guys, thanks for the question. You kind of mentioned that other competition were a bit slower to reduce shipments. I guess, like, how do you think the industry will look exiting the year? Are the competition also kind of taking the right steps in your view, or such that you think the whole industry could be, you know, inventories could be down. 15 to 15 or so percent, or how do you think about where the whole industry exits inventory? Yeah, you're right. Obviously, part of what's happening right now is that many OEMs started a year with probably better, probably better industry and volume assumptions and some more late to adopt the adapt to the softer trends that we've been experiencing, and that resulted in more inventory out there.

Speaker Change: Thank you very much.

Speaker Change: Thank you.

Speaker Change: Next question will be from John Chu at B&P Pacabab. Please go ahead.

John Chu: Hi, guys. Thanks for the question. You kind of mentioned that other competition more bit slower to reduce shipment. I guess like how do you think?

John Chu: The industry will look exiting the year, like are the competition also taking the right steps in your view?

Martin Landry: On the two wheel, I don't see the correlation between what we're doing for two wheels, you know, we will have 300 dealers year one, we sell the two wheels. And our requirement is some space in the dealer showroom, but our commitment for units is quite low. And we want to make sure we don't build inventory. Basically, it's taking a minimum inventory to display the product for the demo ride after that as much as the retail will replenish, then it will be a very low commitment from the dealer and so far it was well received.

Speaker Change: Such that you think like the whole industry could be, you know, inventories could be down, 15 or so percent or how do you think about where the whole industry exists in inventories?

Jose Boisjoli: Thanks, Jose.

Speaker Change: Yeah, you're right. Obviously part of what's happening right now is that many of we have started a year with probably be better industry and volume assumptions. And so I'm so more laid to adopt the data to the software trends that we've been experiencing and that resulted in more inventory out there.

Martin Landry: Thank you.

Jose Boisjoli: And more aggressive promotions. Hopefully, that inventory gets liquidated in the near term. Even with softer trends, if they were to persist next year. We believe that OEMs and dealers will be better aligned in terms of wholesale coming in and retail coming out, and that should help. As for ourselves, we expect to be in a better position and on the offense. This year we're making a big correction to our RV inventory in the network, and we're well on track. You saw inventories of down 13% and Q4, so we're making very good progress. We should be in a better position next year where we'll be more balanced in terms of wholesale and retail.

Operator: Thank you.

Martin Landry: Next question will be from Martin Landrie at the default.

Robin Farley: Next question will be from Martin Landrie at the default. Please go ahead. Hi, good morning. I was wondering if you could share your expectations for industry sales in North America for this year. Like I just said, methane on the previous call and I will repeat. Right now for ORV, we expect the industry to be down mid to high single digit. For snowmobile down to low to mid teen, obviously, the snow will play a factor there.

Speaker Change: We believe that OEMs and dealers will be better aligned in terms of wholesale coming in and retail coming out and that should help.

Martin Landry: Please go ahead. Hi, good morning.

Jose Boisjoli: I was wondering if you could share your expectations for industry sales in North America for this year. Like I just said, methane on the on the previous call and I will repeat right now for our V, we expect the industry to be down mid to high single digit or snowmobile down to low to mid teen. Obviously, the snow will play a factor there.

Speaker Change: As for ourselves, we expect to be in any...

Speaker Change: Better position and on the offense. This year, we're making a big correction to our the inventory in the network. And we're well on track. You saw inventories of down 13% since Q4.

Speaker Change: So we're making very good progress and so with that trend continues we should be in a better position next year where we'll be more balanced in terms of wholesale and retail.

Jose Boisjoli: Okay, I've got it.

Operator: Thanks.

Mark Petrie: I'll pass it off. Thank you.

Speaker Change: Okay, I've got it. Thanks, I'll pass it on.

Mark Petrie: Next question will be from Mark Petrie at CIBC. Please go ahead. Hey, good morning. I guess just following up on that inventory question, I think you called out it's up 3% year over year, but just looking back at the last quarter, it looked like you guys had planned for it to be down, you know, call it mid single digits or maybe high single digits by the end of Q2. So obviously you have different levers in terms of addressing that, you know, the lower shipments clearly is what is in guidance, but you also have the lever of higher incentives.

Jose Boisjoli: And what a craft entry will and there is only a few months to go, and it's low retail month; they will close the year, probably down 20%. And this is for the industry in North America under our retail side because of the high promotion activity that we will not necessarily be a leader, but the follower. And we're planning to lose some market share during that correction supply-demand period. We could lose some market share and some product line, but we can the right thing to do for the long term.

Robin Farley: And what a craft entry will and there is only a few months to go and it's low retail month. They will close the year, probably down 20%. And this is for the industry in North America under our retail side because of the the high promotion activity that we will not necessarily be a leader, but the follower and we're planning to lose some market share during that correction supply demand period. We could lose some market share and some product line, but we can the right thing to do for the long term.

Speaker Change: Thank you. Next question will be from Mark Petrie at CIBC. Please go ahead.

Mark Petrie: Hey good morning. I guess just follow me up on that inventory question.

Mark Petrie: I think you've called out, it's up 3% year or a year, but just looking back at the last quarter, it looked like you guys had planned for it to be down, you know, call it mid-singled digits or maybe high-singled digits by the end of Q2. So obviously you have to pull.

Speaker Change: Different levers in terms of addressing that, you know, the lower shipments clearly is what is in guidance.

Jose Boisjoli: So I'm just wondering, like what would it take for you to sort of move into or a step function higher in terms of promotional investment to clear inventory? Yeah, the main element in the second quarter mark is the personal water craft industry, which was softer than what we have expected. So then I'll say that the miss versus where we're expecting to end into two is related to personal water craft. And as I said in my in one of the questions that I answered, we expect personal water craft shipments to be softer next year as we work to that inventory.

Speaker Change #100: But you also have the level of higher incentive. So I'm just wondering, like, what would it take for you to sort of move into a, or a step function higher in terms of, in terms of promotional investment to clear inventory?

Robin Farley: Okay, and just to be clear, are those units or dollars? Units, sorry. Yeah, so can can can can can can you give us your assumptions for dollars? Right now, no, in terms of industry dollars, no, but obviously when you look at our guidance, we made a sizable adjustment to the year on products. Business, the majority of it comes from side by side given the software trends we're seeing. Okay, and just just to just to to better clarify, what would be a good assumption to use in terms of average unit price sale 25 fiscal 25 versus 24 in terms of decline?

Jose Boisjoli: Okay, and just to be clear, are those units or dollars? Units, sorry. Yeah, so can you give us your assumptions for dollars? Right now, no. In terms of industry dollars, no. But obviously, when you look at our guidance, we made a sizable adjustment to the year on product business. The majority of it comes from side by side, given the software trends we're seeing.

Speaker Change #101: The main element in the second quarter mark is the personal watercraft industry, which was softer than what we expected. So then I'll say that the myth first is where we're expecting to end into two is the related to personal watercraft.

Speaker Change #102: And as I said in one of the questions that I answered, we expect personal watercraft shipments to be softer next year as we work through that inventory. Some of it's happening in the back half of this year and some of it's going to happen as well next year.

Jose Boisjoli: Some of it happening in the back half of this year, and some of it's going to happen as well next year. But from our promotional side, we believe we're competitive. We give we have enough tools out there to make sure that we support our brand, support our dealers, and allow them to the match or other OEMs and what they offer. Okay, appreciate that color.

Jose Boisjoli: Okay, and just to better clarify, what would be a good assumption to use in terms of average unit price sale, fiscal 25 or just 24 in terms of decline? Well, in terms of MSRP, all the expectation is that we've done quite sizable MSRP increases over COVID. Inflation is tapering down, so the expectation is that we'll come back probably to normal pricing increases next year, as we've done pre-COVID. So usually we try to price in the new features that we put in some inflation on salary, etc. But we're mindful that price point is a significant headwind for some consumers.

Speaker Change #102: But from our promotional side, we believe we're competitive, we give, we have enough tools out there to make sure that we support our brand support our dealers and allow them to match other OEMs and what they offer.

Robin Farley: Well, in terms of MSRP, all the expectation is that we've done quite sizable MSRP increases over COVID. Inflation is tapering down so the expectation is that we'll come back probably to normal pricing increases next year as we've done pre-COVID so usually we try to price in the new features that we put in some inflation on salary etc. But we're mindful that price point is a significant headwind for some consumers. So usually we do a price increase of 1% could we be in that range next year that would be a fair assumption.

Jose Boisjoli: And, and I guess maybe, maybe sort of related question. Can you just help us understand how you arrive at the target of 15 to 20% inventory reduction by year end and then also like what would that like versus sort of historical slower demand periods? What would that imply in terms of units per dealer or maybe units as a related to market share or however you think about that sort of inventory penetration. Yeah, then first you need to make a difference between the seasonal product and the year-round product. The seasonal product, let's say water craft and in the snow mobile, we have a target of about 10% of the next year, next year retail.

Speaker Change #103: Okay, appreciate that color and I guess.

Speaker Change #104: Maybe sort of related question.

Speaker Change #105: Can you just help us understand how you arrive at the target of...

Speaker Change #106: 15% to 20% inventory reduction.

Euron: By Euron, and then also like what would that like versus sort of historical slower demand periods? What would that imply in terms of you know units per dealer or you know maybe units as a you know related to market share or however you think about that sort of inventory penetration?

Jose Boisjoli: So usually we do a price increase of 1%; could we be in that range next year? That would be a fair assumption: nothing. Okay, okay, that's obviously MSRP, and sometimes actual with discounts are going to be lower, right? Yeah, well, the promotional environment is still quite high. We expect the promotional environment to be sustained at these levels, at least for the first part of next year.

Robin Farley: Okay, that's obviously MSRP and maybe sometimes actual with discounts are going to be lower right? Yeah, well the promotional environment is still quite quite high. We expect the promotional environment to be sustained at these levels, at least for the first part of next year.

Euron: First, you need to make a difference between the seasonal product and the year-round product.

Speaker Change #108: The seasonal product, let's see what a graph and the snow will be ill. We have a target.

Speaker Change #109: of about 10% of the next year retail. Then basically we believe, and this is a discussion we have at dealer, if a dealer sell 100 snowmobile.

Jose Boisjoli: Then, basically, we believe, and this is a discussion we have a dealer. If a dealer sells 100 snowmobiles. It's normal to hand a season with ten units for the following season. That's the ballpark that we're looking at as a proxy. Then, for a seasonal product, watercraft and snow is very different, and I would include in there the boat industry, the marine industry. For a year-round product, like tree wheel, side by side, any TV, we're looking at it on days of inventory, forward days of inventory. In the dealer, it's retail is going every month, and there is like two high season, the spring and the fall.

Robin Farley: Okay, okay, thank you very much.

Jose Boisjoli: Okay, okay, thank you very much.

Robin Farley: Next question will be from Robin Farley at UBS. Please go ahead. Great, thanks. I just wanted to clarify, you mentioned the retail declines you're expecting for the industry. And I think you were sort of mentioning that you might lose some share because others are being more promotional. But in your introductory remarks, it sounded like you were saying you expect to gain share in ORV for the coming season. So I just wanted to make sure I understand whether that would be sort of next year's calendar year.

Speaker Change #109: It's normal to hand the season with 10 units for the following season.

Speaker Change #109: The ballpark that we're looking at as a proxy.

Speaker Change #109: Then for seasonal products, watercraft and snow is very different and that would include in the boat industry, the marine industry.

Speaker Change #109: For a year-round product like Tree Will, side-by-side, any TV.

Speaker Change #110: We're looking at it on days of an eventory, forward days of an eventory, didn't it?

Speaker Change #110: It's a, it's a, it's retail is going every month and there is like two high season the spring and the fall and we're looking to be around 90 days of inventory forward retail

Jose Boisjoli: And we're looking to be around 90 days of inventory, forward retail. And there is some fluctuation depending of the region, but every dealer has that objective of being around 1900 to 100 days of forward retail, depending of its region, but it's dynamic. We have this map for all the dealer, depending on more sport, more utility, and this is the way we will look at it. And this is roll up to the target that we had. This is how we came out with the 15 to 20% to come back for seasonal and year round product in those proxy.

Robin Farley: In other words, lose share between now and calendar and 24 but then gain share and 25 or just to kind of square that. And then I did have a follow up. On my prepare remark, we gain share in season 24 that ended at the end of July. And now we're starting the new season and we might lose some share, let's say in H2, but we would the product lineup that we have with some inventory correction. We believe we will be gaining share over the full season from August 1st to July next year. Okay, great. Thank you for that clarification.

Robin Farley: And then I did have a follow up. Let me just ask that first.

Speaker Change #110: And there is some fluctuation depending of the region, but every dealer has that objective of being around 19 to 100 days of forward retail, depending of his region.

Speaker Change #110: It's dynamic, we have this map for all the dealer.

Speaker Change #110: Depending of more sport, more utility, and this is the way we look at it. And this is roll up to the target that we had. This is how we came out with the 15-20% to come back for seasonal and year-round product in those proxy.

Robin Farley: Okay, great. Thank you for that clarification.

Jose Boisjoli: Okay, that's excellent color. I appreciate that. I guess maybe just my question would be then, like, would that 15 to 20, would that not have changed? Just given the deterioration and demand that you saw through Q2 and into the first part of Q3, like I would have thought that that number might have come down just based on the parameters that you just provided. But we still want a good unit representation in the network. And so, even though we were planning for the software industry, the number that the 15 to 20% also factored in higher interest rates or dealers are feeling some pressure.

Robin Farley: And then my follow up question is actually just on the electric bike that you're making a big push in here. I guess others expectation for electric motorcycle has come down significantly over time. And just kind of wondering if you see that space differently than others or what lead you to be more optimistic about the electric fuel market.

Jose Boisjoli: And then my follow-up question is actually just on the electric bike that you're making a big push in here. I guess others' expectation for electric motorcycle has come down significantly over time. And just kind of wondering if you see that space differently than others or what leads you to be more optimistic about the electric fuel market. Yeah, and you know that decision to enter the two-wheel market electric was done four years ago, and we did great progress over that period. We totally really think that there is like a slowdown right now in electric car sales, but we believe this is, it will take a few years to adjust and the trend is there; it will remain that for sure.

Speaker Change #111: Okay, that's excellent color Jose, I appreciate that. I guess maybe just my question would be then.

Speaker Change #112: With that 15 to 20, would that not have changed just given the deterioration in demand that you saw through Q2 and into the first part of Q3? I would have thought that that number might have come down just based on the parameters that you just provided.

Speaker Change #113: But we still want a good unit representation in the network. And so even though we were planning for software industries, the number that the 15 to 20 percent also factored in higher interest rates for dealers are feeling some pressure.

Jose Boisjoli: Yes, and you know that decision to enter the two-wheel market electric was done four years ago and we did great progress over that period. But why we confident Robin, I believe we have, you know the right product and what I'm very happy with in the last since June we had a lot of media, a lot of dealer who have tried our product and they are very happy with the product. And it's a product because there is no clutching, it's not a product for a long distance ride but it's a product for commuting or short distance.

Mark Petrie: Higher and start piece as well. And so, in relative terms, will still be lower, despite market share gains, than where we were pre-COVID. And so, as Rosy said, the 90 is a target, but could we be at 90, 100 days? We're still comfortable with those levels. And so that's why staying at the 15 to 20% target is something that we believe was the right thing to do for the business, despite softer industry forecast. Yeah, okay.

Speaker Change #114: Hire MSRPs as well. And in relative terms, we'll still be lower despite market surgains than where we work pre-COVID.

Speaker Change #114: And so, as Jose said, the 90 is a target, but could we be at 90 a hundred days? We're still comfortable with those levels. And so, that's why staying at the 15-20% target is something that we believe was the right thing to do for the business despite softer industry forecast.

Jose Boisjoli: But why I'm confident, Robin? I believe we have, you know, the right product. And what I'm very happy with in the last, since June, we had a lot of media, a lot of dealers who have tried our product, and they are very happy with the product. And it's a product because there is no clutching. It's not a product for a long distance ride, but it's a product for commuting or short distance. But the product is very easy to ride. It has innovation and credible connectivity, and if you look at the price that we price with the range we have, like the base price is thirteen nine nine nine for the entry level model, you have a hundred sixty kilometer of a hundred mile of range. But our vehicle is equipped with fast charging; you can recharge from twenty to eighteen fifty minute.

Mark Petrie: Thanks, guys. Appreciate the comments, and all the best.

James Hardiman: Thank you. Next question will be from James Hardeman at City. Please go ahead. Hey, good morning. Thanks for taking my question.

Speaker Change #115: Okay, thank you guys for your comments and all the best. Thank you.

Speaker Change #115: Next question will be from James Harderman at the city. Please go ahead.

James Hardiman: So I wanted to circle back on the question about sort of early and early look at at fiscal 26. It's difficult. That may be obviously you guys had the guidance bridge the last couple of quarters. We scrapped that, and I can certainly appreciate why that was getting a little bit too convoluted.

James Harderman: Hey, good morning. Thanks for taking my questions.

James Harderman: I wanted to circle back on the question about sort of early.

Jose Boisjoli: But the product is very easy to ride, it has innovation and credible connectivity and if you look at the price that we price with the range we have like the base price is 139999 for the entry level model. You have 160 kilometer of 100 mile of range but our vehicle is equipped with fast charging, you can recharge from 20 to 18 to 15 minutes. Then this is on the product side, the Canon brand is well known worldwide now.

James Harderman: and early look at fiscal 26th, the difficult of that may be.

James Harderman: Obviously, you guys had the guidance bridge in the last couple of quarters we scrapped that and I can certainly appreciate why that. If we're getting a little bit too convoluted, but I guess maybe most significantly, is there a way to put a dollar?

James Hardiman: But I guess maybe most significantly, is there a way to put a dollar value around the magnitude of the inventory reduction. I know it's too early to tell, but if wholesale equaled retail next year and retail was pretty flat, like what how much earnings power would you get back in that? Samaria.

Speaker Change #117: Value around the magnitude of the inventory reduction, I know it's too early to tell, but if wholesale equal retail next year and retail was pretty flat, like how much earnings power would you get back in that scenario?

Jose Boisjoli: Then this is on the product side. The Canon brand is well known worldwide. Now we have a very good dealer network. We planning three hundred dealers in in in in Canada, US, and eleven countries in Europe for the first year, going to four fifteen next year. The price range again we feel we're well position and we have a very good marketing plan to to make the product with a demo ride and VIP event to make sure the people knows about it then and I was myself in France in July. There is a hundred fifty city in Europe that are closing downtown to combustion engine vehicle.

Jose Boisjoli: But you know, when we started the year, our first call in March, we said that it was a correction in 2024 was a correction year. We had the bad winter, but 2024 we all believe was a correction year. Now, with the trend that we have in Q2 and what we're planning in each two, it will be more probably a correction period. For sure, the next 12 months, probably next to 18 months will be still a correction period. As I just said, we want to defeat inventory this year to be at the right level for seasonal and year-round product.

Jose Boisjoli: We have a very good dealer network, we planning 300 dealers in Canada, US and 11 country in Europe for the first year going to 450 next year. The price range again we feel we are well positioned and we have a very good marketing plan to make the product with a demo ride and VIP event to make sure the people knows about it.

Speaker Change #118: But you know, when we started the year, our first call in March, we said that it was a correction in 2024 was a correction year. We had the bad winter, but 2024 we all believed was a correction year.

Speaker Change #119: Now with the trend that we have in Q2 and what we're planning in H2, it will be more probably a correction period for sure the next 12 months probably next to 18 months will be still a correction period.

Jose Boisjoli: Then and I was myself in France in July, there is 150 city in Europe that are closing downtown to combustion engine vehicle and a lot of consumer turn to buy electric motorcycle. Is this something that will be instant? This is difficult to say, I think we are better positioned than all the competition we have in that category but it's a mid to long-term play.

Speaker Change #119: As I just said...

Speaker Change #120: We want to repeat an inventory this year to be at the right level for seasonal and year-round product. And next year is tourally to call. I mean, with all the macroeconomics situation, the interest rate are starting to go down, but it's not...

Jose Boisjoli: And a lot of consumers turn to buy electric motorcycles then is it is it something that will be instant. This is difficult to say. I think we are better positioned than all the competition we have in that category, but it's a mid to long term play.

Jose Boisjoli: And next year is tourally to call. I mean, with all the macroeconomic situation, the interest rates are starting to go down, but it's not; it would be interesting what the US Fed will do in September. This is definitely positive, but it will take a while before we coming back to the level, a reasonable level.

Jose Boisjoli: Okay, great, thank you.

Benoit Poirier: Thank you.

Speaker Change #121: It would be interesting what the U.S. fed will do in September.

Robin Farley: Okay great thank you.

Speaker Change #121: This is definitely positive, but it will take a while before we coming back to the level, a reasonable level. Then I think there is too much factor out there to commit on anything for fiscal year 20.

Jose Boisjoli: Then I think there is too much factor out there to commit on anything for fiscal year 2026.

Benoit Poirier: Next question will be from Benoit Portier at the Jean-Marie Capital Market, please go ahead. Yeah, good morning everyone. So for my first question, could you maybe provide some color about the level of promotional activities? We see these days versus the 200 bits impact in a normal environment and also the puts and take with respect to fiscal year 26, how we should be looking at fiscal year 26 given your revised outlook for fiscal year 25.

Sbastien Martel: Yeah, in terms of quantifying the impact, in the Q1 or Q4 call there when we launch an insurance guidance for this year. I referred to the inventory correction that we're doing about an impact of three to four bucks. And so again, in a situation where industries are normalized as no inventory depletion, is that a potential tailwind that we have to our earnings? That would be how I would still frame it. Okay.

Speaker Change #122: In terms of quantifying the impact, in the Q1 or Q4 call that when we launch an instrumental guidance for this year.

Speaker Change #122: I referred to the inventory correction that we're doing about an impact of three to four bucks. And so again, in a situation where...

Speaker Change #123: Industries are normalized as no inventory depletion is that a potential tailwind that we have to our earnings that would be how I would still frame it.

Sbastien Martel: Thank you. Good good morning Benoit. Yeah, obviously on the sales program from some OEMs are more promotional recently than we've seen during pre-COVID. We saw, obviously, from a retail perspective, or consumer promotions, were back to where we were in pre-COVID in terms of percentage of sales. Charles, but in absolute dollars, fire because obviously there's been MSRP increases. In terms of incentives directly to the dealers as well, we see a lot of four planned subsidies happening back and money. And so some OEMs have been later in adjusting deliveries to their dealers and so are probably finding themselves in a higher inventory position, and so they need to clear it out.

Benoit Poirier: Thank you. Good morning, Benoit. Yeah, obviously on the sales program, some OEMs are more promotional recently than we've seen during pre-COVID. We saw obviously from a retail perspective or consumer promotions, we're back to where we were in pre-COVID in terms of percentage of sales. Charles, but in absolute dollars, fire because obviously there's been MSRP increases. In terms of incentives directly to the dealers as well, we see a lot of four planned subsidies happening back and money.

James Hardiman: And I guess a follow up to that. Any other big offsets we should be thinking about in terms of that bridge.

Speaker Change #124: Okay, and I guess follow to that. Any other big offsets we should be thinking about in terms of that bridge.

James Hardiman: And then I guess my second, I guess my follow-up question would be the interest rate piece. Obviously, the Fed is set to pivot here in a meaningful way. It doesn't seem like you're assuming that that will help your business much, particularly as we think about the commentary for the first half of next year, not really getting any better. And so is that that you're just not building any of those interest rate cuts in, or you are making some assumptions about interest rate cuts. You just don't think that's going to make much of a difference in the sort of medium term.

Speaker Change #125: and then I guess my follow-up question would be the interest rate piece.

Speaker Change #126: Obviously the fatty set to pivot here in a meaningful way.

Speaker Change #127: It doesn't seem like you're assuming that that will help your business much, particularly as we think about the commentary for the first half of next year, not really getting any better. And so it's that.

Benoit Poirier: And so some OEMs have been later in adjusting deliveries to their dealers and so are probably finding themselves in a higher inventory position and so they need to clear it out. And we expect that to continue through the rest of the year and probably in the first half of next year. Obviously when rates come down because it looks like the outlook is favorable for that, that will certainly help, especially on the buy downs, especially on the four planned for us and for the dealers.

Speaker Change #128: You're just not building any of those interest rate cuts in, or you are making some assumptions about interest rate cuts. You just don't think that's going to make much of a difference in the sort of medium term.

Sbastien Martel: And we expect that to continue through the rest of the year and probably in the first half of next year. Obviously, when rates come down because it looks like the outlook is favorable for that, that will certainly help, especially on the buy downs, especially on the four planned for us and for the dealers. But, as I said, we expect it to remain high back half of this year and the beginning of next year. On your second question, what do we expect for next year? It's a good one. Obviously, the environment has flew with very recently.

Sbastien Martel: Well, for our financial interest rate cuts are going to help; they're going to help the four plan costs. And we are, obviously, if we look at what's expected in the market, yes, that's going to help on the four plan side. On our financing cost, it's going to help, but we have interest rate caps that are falling off next year. So even if we build in rate reductions, we'll probably have a headwind coming from interest rates next year because these caps are rolling off. Probably let's say 10 to 15 million. From a dealer point of view, it's going to help as well.

Speaker Change #129: Well, for our financial interest rates cuts are going to help, they're going to help the foreplane cost. And we are, obviously, if we look at what's expected in the market, yes, that's going to help on the foreplane side.

Benoit Poirier: But as I said, we expect it to remain high back half of this year and the beginning of next year. On your second question, what do we expect for next year? It's a good one. Obviously the environment is fluid very recently. So it's tough to come up today with a target for next year. I'm sure you can appreciate that, especially with the software trends we're seeing across the industries and the uncertainty about the macro economic environment and where rates will be going next year.

Speaker Change #130: On our financing costs, it's going to help, but we have interest rate caps that are falling off next year. So even if we build in rate reductions, we'll probably have a headwind coming from interest rates next year, because these caps are rolling off. Probably let's say 10 to 15 million.

Sbastien Martel: So it's tough to come up today with a target for next year. I'm sure you can appreciate that, especially with the software trends we're seeing across the industries and the uncertainty about the macroeconomic environment and where rates will be going next year. What's going to be the environment next year? Tough to call, but we are approaching the year with a few key assumptions, one that the softness we're seeing across the different industries is likely to persist throughout at least the first half of next year, which means continued pressure on shipments and sustain high level of promotional activity.

Sbastien Martel: I mean, the four plan expenses are going to be lower; buy downs of interest rates for us are going to be lower as well on the retail financing side. And for sure, from a consumer point of view, if we get double rate cuts this year and next year, that's going to help as well. But is it going to move the needle? Is it going to remove some of the macro concerns that we're seeing today?

Speaker Change #131: From a dealer point of view, it's going to help as well. I mean, the report plan expenses are going to be lower by downs of interest rates for us. They're going to be lower as well on the retail financing side.

Speaker Change #131: and for sure from a consumer point of view if we get double rate cuts this year and next year that's going to help as well. But is it going to move the needle? Is it going to remove some of the macro concerns that we're seeing today? It would be too early to call.

Benoit Poirier: What's going to be the environment next year? Tough to call, but we are approaching the year with a few key assumptions, one that the softness we're seeing across the different industries is likely to persist throughout at least the first half of next year, which means continued pressure on shipments and sustained high level of promotional activity. For us, we're likely to end the personal watercraft season with more elevated levels of inventory in the network, because of the industry slowdown that we saw similar to what we saw in marine. So shipments for that product line are likely to be down next year and obviously will often that some of that pressure by taking a necessary actions to right size or cost structure.

James Hardiman: It would be too early to Nicole. Got it.

James Hardiman: That's helpful. Thank you.

Speaker Change #131: Sbastien Martel, Philippe Deschenes, Philippe Deschenes, Philippe Deschenes,

Cameron Doerksen: Next question will be from Cameron Doerksen at National Bank Financial. Please go ahead. Yeah, thanks. Good morning. I just wanted if you could frame how should we think about some of the operating expense-like items for the rest of the year. Obviously, R&D was lower in Q2. You've cited the, I guess, R&D subsidies hitting the quarter there. So just you can just talk a little bit about what you see than the back half of the year on those operating expenses. Yeah, and G&A. Yeah, obviously a bit of movement. But again, if I go down the P&L, the gross profit wise, I'd expect probably gross profit to be flat, to maybe down in the second half of the year versus what we saw in the beginning of the year. First six months of the year, gross profit margin was at 22.1%.

Speaker Change #131: Gareth, that's all for. Thank you.

Sbastien Martel: For us, we're likely to end the personal watercraft season with more elevated levels of inventory in the network because of the industry slowdown that we saw, similar to what we saw in marine. So shipments for that product line are likely to be down next year. And obviously, well off to some of that pressure by taking necessary actions to right size or cost structure. But if we look beyond next year, we are optimistic about the business. We're well positioned to can either to grow our market share, especially in a RV exploring new markets and obviously we still have for the efficiency to generate across the portfolio and across the business.

Speaker Change #132: Thank you. Next question will be from Cameron Dürksen at National Bank Financial. Please go ahead.

Speaker Change #133: Good morning, I just wanted to speak to frame how we should think about some of the operating expense line items for the rest of the year. Obviously, R&D was...

Benoit Poirier: But if we look beyond next year, we are optimistic about the business. We're well positioned to can either to grow our market share, especially in our V exploring new markets and obviously we still have for the efficiency to generate across the portfolio and across the business. And what we can achieve in terms of financial performance is really dependent on the industry. And so we do believe that in our normalize environment, but why that? The earnings power of the business is significantly greater than what we're going to see this year and what we could potentially see next year as well.

Sbastien Martel: And what we can achieve in terms of financial performance is really dependent on the industry. And so we do believe that in a normalized environment, but why that? The earnings power of the business is significantly greater than what we're going to see this year and what we could potentially see next year as well.

Speaker Change #134: But again, if I go down the P&L, the gross profit wise, I'd expect.

Speaker Change #135: I'll be close process to be flat, maybe down in the second half of the year versus what we saw in the beginning of the year first first six months of the year

Cameron Doerksen: And then in terms of OPEX, obviously, there's going to be some OPEX movement, but relatively flat year over year as well from an OPEX line.

Speaker Change #135: Cross-profit margin was at 22.1%.

Benoit Poirier: Okay, that's great. And just in terms of quick follow up, you ended the leverage at 2.1 time. And you mentioned some color about free cash low.

Benoit Poirier: Okay, that's great.

Speaker Change #135: and then in terms of all pecks, obviously there's going to be a...

Benoit Poirier: And just in terms of quick follow-up, you ended the leverage at 2.1 times. And you mentioned some color about free cash low.

Speaker Change #135: Some opaque movement, but relatively flat the over a year as well from an opaque size.

Sebastien Martel: So I would be just curious to see what is your comfort level in terms of leverage and your ability to pursue by bad. What is the impact activity in light of the revise outlook? Yeah, overall, very comfortable with a balance sheet. I've often said that coming out of the great financial crisis, we had a two key learnings. One is make sure we have a covenant light debt structure, making sure we have long term maturities on our debt instruments, making sure we have ample flexibility and availability on the revolver.

Sbastien Martel: So I would be just curious to see what is your comfort level in terms of leverage and your ability to pursue by bad.

Cameron Doerksen: Okay. And as you sort of look ahead to next year, I mean, one of these you sort of mentioned earlier in the call was around adjustments to the cost base to kind of offset further weakness here. I guess, what can you do across the business to reduce costs to try to offset some of the weakness on the demand side of the equation? I mean, without going into detail, there is always in the company like us, a lot of projects going on in different country, different area. And obviously, we will look at the whole list, and we prioritize the next 18 months, going to a more slowdown in what we had anticipated.

Speaker Change #136: Okay. And as you sort of look ahead the next year, I mean, one of the things you sort of mentioned to Irr and the call was around a distance to the cost base to kind of offset, you know, further weakness here. I guess what can you do across the business to reduce cost to try to offset some of the weakness on the demand side of the equation?

Sbastien Martel: What is the impact activity in light of the revised outlook? Yeah, overall, very comfortable with a balance sheet.

Sebastien Martel: And these are things that we've done, our debt is covenant light, so we're not restricted from any increases and leverage that we might be experiencing in the short term. We've recently renegotiated the maturity of a billion dollar term be pushing it to 2031. We've recently extended the maturity for this past May of the revolver to 2030. So we're very comfortable from a balance sheet point of view.

Speaker Change #137: We're not going to detail with there is always in the company like us, a lot of projects going on in different countries, different areas. Obviously we will look at the whole list and if you prioritize the next.

Cameron Doerksen: In the other elements that from the operations, again, we're planning more conservatively for next year with software industry trends. That means our operations people will plan accordingly this year. It's been challenging for them, but they've actually done a very good job. But when you do sequential adjustments to production, it's tough for them to run their shops as efficiently as possible. And so that is certainly another level that we have also. As you know, we've had a lot; there's been a lot of inflation, a lot of management of COVID needed to happen in the last three, four years.

Speaker Change #138: 18 months going to a more slow down than what we had anticipated.

Speaker Change #138: In the other elements, it's from the operations, again we're planning more conservatively for next year with software industry trends, that means our operations people will plan accordingly this year, it's been challenging for them, but they've actually done a very good job. But when you do sequential adjustments to production, it's tough for them to run the job site efficiently as possible.

Sbastien Martel: So we're very comfortable from a balance sheet point of view.

Sebastien Martel: And from a capital deployment, we've just recently completed the NTIB. We were repurchased to 3.2 million shares completed in July. The next window is going to open up in December and obviously will continue having discussions with the board, but we'll want to make sure that we protect our flexibility in a context that is probably more uncertain these days than certain, and so we prefer to be prudent, but there's a few months to grow before we need to make that decision.

Speaker Change #138: and so that is certainly another lever that we have and also as you know we've had a lot, there's been a lot of inflation, a lot of management of COVID needed to happen in the last pre-four years. Now we can focus on reducing billiomaterial through cost improvement initiatives.

Cameron Doerksen: Now we can focus on reducing bill of material through cost improvement initiatives. And that's going to be another important driver of efficiency. Okay.

Speaker Change #138: And that's going to be another important driver of the Efficiency.

Cameron Doerksen: So that, that, I guess, processes, I don't see your, that's ongoing, but maybe we'll see some of the benefits more so in fiscal 26 as opposed to this year. Yeah, absolutely. Okay.

Speaker Change #139: Okay, so that, that, I guess, processes.

Benoit Poirier: Thank you very much for the time.

Speaker Change #140: I obviously hear that ongoing but maybe we'll see some of the benefits more so in fiscal 26 as opposed to this year.

Joe Altobello: Thank you.

Operator: Thank you.

Martin Landry: Next question will be from Joe Altobello at Raymond James. Please go ahead.

Joe Altobello: Next question will be from Joe Altobello at Raymond James.

Cameron Doerksen: Great. Appreciate it. Thanks very much. Thank you.

Joe Altobello: Please go ahead.

Martin Landry: Good morning. This is Martin on for Joe. Just sort of assuming that the retail environment holds up at the city pace right now or the pace it is right now. Would you expect wholesale and retail to be in alignment next year or do you anticipate further destocking? Right now, again, for H2, we will continue to deplete inventory. We are at 13 at the end of Q2 and our goal is to be 15 to 20.

Martin: Good morning. This is Martin on for Joe. Just sort of assuming that the retail environment holds up at the city pace right now or the pace it is right now. Would you expect wholesale and retail to be in alignment next year, or do you anticipate further destocking? Right now, again, for H2, we will continue to deplete inventory. We are at 13 at the end of Q2, and our goal is to be 15 to 20. Obviously, Somobile will be critical because we had more non-current and desired since last winter. In terms of balancing retail and wholesale the next year, I think it's too early to call at this point.

Jonathan Goldman: Next question will be from Jonathan Goldman at Skolshebank. Please go ahead.

Speaker Change #141: Okay, great. Appreciate it. Thanks very much.

Speaker Change #142: Thank you. Next question will be from Jonathan Goldman at Scorsher Bank. Please go ahead.

Jonathan Goldman: Hi. Good morning. Thanks for taking my questions. On the consumer side, the weaker demand trend that you're seeing, do you think that's more of a function of consumers delaying or deferring approaches, or is it lacking the ability to make a purchase in the first place? And in either case, what sort of rate relief would you need to see to spur consumer demand?

Jonathan Goldman: Hi, good morning and thanks for taking my questions. On the consumer side, the week or demand trend that you're seeing, do you think that's more of a function of consumers that lay or deferring approaches or is it lacking the ability to make a purchase in the first place?

Jose Boisjoli: Times. And just to give you some consumer behavior trend, you know pre-COVID, 20% of our units were sold to new and trend. In the peak of the COVID time, it did go up above 30%. And now we're back to the 20% ratio. Then we're back to pre-COVID level; 20% of our unit basically are sold to new and trend.

Speaker Change #144: And in either case, what sort of rate relief would you need to see to spur a consumer demand?

Martin Landry: Obviously, Somobile will be critical because we had more non-current and desired since last winter. In terms of balancing retail and wholesale the next year, I think it's too early to call at this point. There is so much volatility out there that it's very difficult to predict and I would not this morning commit on anything on that one.

Speaker Change #145: and just to give you some consumer behavior or trend, you know pre-COVID, 20% of our unit were sold to new and trend.

Martin Landry: Okay, understood.

Speaker Change #146: In the peak of the COVID time, it did go up above 30%.

Jose Boisjoli: There is so much volatility out there that it's very difficult to predict, and I would not this morning commit on anything on that one.

Speaker Change #146: And now we're back to the 20%

Speaker Change #146: the Ratio, then we're back to pre-COVID level, 20% of our units basically are sold to new entrem. What is interesting is this...

Jose Boisjoli: What is interesting is the split between high-end technology, innovation, product, versus entry level. We see, and I will just give you some data for watercraft. Our entry level retail in Q2 was down high double, was down high double digit, when our high end was down high single digit. And you can see that on watercraft, all the Spark category and the GTI category was hit harder versus the high end; on side by side, same thing. If you look premium versus value, the premium was up mid single digit when the value was down mid double digit. Then the trend is, you see that the trend that we saw in the last year quarter is continuing.

Jose Boisjoli: Okay, understood.

Jose Boisjoli: And just looking at this quarter, one of your competitors launched several modern year 25s earlier than normal. How did that impacted your shipments and retail sort of in this corner and generally? Listen, it didn't impact our shipment. I mean, we the shipment our plan a few months in advance. We have dollar on order, deliver order on the hands and we ship according to plan for everything is. Scheduled for the next two to three months, but for sure, introducing 25s or early, they had discount on their 24 that for sure affected some retail, but we were surprised with the MSRP reduction, which we believe is not good for the brand.

Speaker Change #146: is split between high-end technology, innovation, product, versus entry level. We see, and I will just give you some data for watercraft.

Speaker Change #146: Our entry level retail in Q2 was down high double digit when our high end was down high single digit. And you can see that on what across.

Speaker Change #146: All the spark category and the GTA category was hit harder versus the high end.

Speaker Change #146: on side-by-side same thing. If you look premium versus value, the premium was up a mid-single digit. When the value was down mid-double digit, then the trend is that you see that...

Jose Boisjoli: And we decided not to follow because obviously we are in this business for a long term. And I think it would be wrong to follow for our brand for the dealer business and our business and for a long term profitability. Then it's a short term. It's a short term blitz and we believe what we're doing is the right thing to do for the mid to long term.

Speaker Change #146: The trend that we saw in the last quarter is continuing. I will see now what's the new and trend level.

Martin Landry: Thank you very much.

Speaker Change #147: and there is more customer new-entrant customers who will find the product that are refused to grid.

Jean Chu: Thank you.

Speaker Change #148: We hear that more often and this will come back when the interest rate will go down.

Jose Boisjoli: That's great color. And then you talked about potentially gaining share in ORV and see it in 25. Is your expectation you can gain similar levels as you did this year? Yeah, we're not adventure, we're not adventure committing on any numbers, but the point is right now we are in the period where it's transitioning from model year 24 to 25. We start producing 25 for a TV side by side this month in end of July beginning of August. Then we are in that transition where, depending on an inventory, depending on the program and the non-current, there is a play there.

Operator: Thank you very much. Thank you.

Jean Chu: Next question will be from Jean Chu at BNP Pac-Bop. Please go ahead. Hi guys, thanks for the question. You kind of mentioned that other competition were a bit slower to reduce shipments. I guess, like, how do you think the industry will look exiting the year? Are the competition also kind of taking the right steps, in your view, or such that you think the whole industry could be, you know, inventories could be down. 15 to 15 or so percent, or how do you think about where the whole industry exits inventory? Yeah, you're right. Obviously, part of what's happening right now is that many OEMs started a year with probably better, probably better industry and volume assumptions and some more late to adopt the adapt to the softer trends that we've been experiencing, and that resulted in more inventory out there.

Speaker Change #149: And that's great color and then you talked about potentially gaining share and already in the season 25. So your expectation you can gain similar levels as you did this year.

Speaker Change #150: Yeah, we're not adventure, we're not adventure committing on any numbers but the point is right now we are in the period where

Speaker Change #151: It's transitioning from model year 24 to 25. We start producing 25 for a TV side by side.

Jean Chu: 15 to 15 or so percent or how do you think about where the whole industry exits inventory? Yeah, you're right. Obviously, part of what's happening right now is that many OEM started a year with probably better, probably better industry and volume assumptions and some some more late to adopt the adapt to the softer trends that we've been experiencing and that resulted in more inventory out there. And more aggressive promotions. Hopefully that inventory gets liquidated in the near term.

Speaker Change #152: Desmont, and of July beginning of August. Then we are in that transition where depending of an eventory, depending of the program and the Nunker, and there is a play there.

Jose Boisjoli: But that's why when this transition is done, it typically takes a quarter or two; after that, we will compete again, model year to model year. And we believe we have the right product to start with. And we have obviously the right program to continue our momentum. Yeah, and just to highlight on ATV, if you look at our ATV lineup, we've completely refreshed the whole lineup in the last 18 months with the introduction of a mid-level platform 18 months ago. And now we have the high CC platform that we recently introduced as well. So from a product point of view, we're extremely, extremely competitive.

Speaker Change #152: But that's why when this transition is done typically take a quarter or two, after that we will compete again a mother year to mother year and we believe we have the right product to start with.

Jean Chu: And more aggressive promotions. Hopefully, that inventory gets liquidated in the near term. Even with softer trends, if they were to persist next year. We believe that OEMs and dealers will be better aligned in terms of wholesale coming in and retail coming out, and that should help. As for ourselves, we expect to be in a better position and on the offense. This year we're making a big correction to our RV inventory in the network, and we're well on track. You saw inventories of down 13% and Q4, so we're making very good progress. We should be in a better position next year where we'll be more balanced in terms of wholesale and retail.

Speaker Change #152: And we have, obviously, the right program to continue our momentum.

Jean Chu: Even with softer trends, if they were to persist next year. We believe that OEMs and dealers will be better aligned in terms of wholesale coming in and retail coming out, and that should help. As for ourselves, we expect to be in a better position and on the offense. This year we're making a big correction to our RV inventory in the network. It should be in a better position next year where we'll be more balanced in terms of wholesale and retail. Okay, I've got it. Thanks.

Speaker Change #153: And just a highlight on ATV, if you look at our ATV lineup, we've completely refreshed the whole lineup in the last 18 months with the introduction of a mid-level platform, 18 months ago, and now we have the high-CC platform that we recently introduced as well.

Mark Petrie: I'll pass it off.

Mark Petrie: Thank you.

Jose Boisjoli: With a lot of new features, and there's been very little innovation in the last 10 years on the ATV. Streso, that obviously both well for the next season.

Speaker Change #153: So, from a product point of view, we're extremely, extremely competitive with a lot of new features and there's been very little innovation in the last 10 years on the ATV industry. So, that obviously builds well for the next season.

Jonathan Goldman: Now that's a good girl. Thank you for taking my questions.

Operator: I'll get back in cute.

Luke Hammond: Thank you. Next question will be from Jaime Katz at Morningstar. Please go ahead. Hi, good morning. So can you guys give us some insight as to how dealer financing rates have changed? I'm wondering if they've moved down similarly to mortgage rates and, you know, if the demand has still sort of languished while those rates are moving down. Or is that rate generally a little bit stickier to sort of sofa? Yeah, the rates are actually pegged to Sofa, so they haven't yet moved down. Obviously, there should be some positive news in the next two weeks. Hopefully, that's going to be an out.

Speaker Change #154: Thank you for taking my questions, I'll get back in the queue.

Jose Boisjoli: Okay, I've got it. Thanks.

Speaker Change #155: Next question will be from Jamie Katz at Morning Start. Please go ahead.

Jose Boisjoli: I'll pass it off.

Mark Petrie: Thank you. Next question will be from Mark Petrie at CIBC. Please go ahead.

Brian Morrison: Next question will be from Mark Petrie at CIBC. Please go ahead. Hey, good morning. I guess just following up on that inventory question, I think you called out it's up 3% year over year, but just looking back at the last quarter, it looked like you guys had planned for it to be down, you know, call it mid single digits or maybe high single digits by the end of Q2. So obviously you have different levers in terms of addressing that, you know, the lower shipments clearly is what is in guidance, but you also have the lever of higher incentives.

Jamie Katz: Hi, good morning.

Jamie Katz: So, could you guys give us some insight as to how dealer financing rates have changed? I'm wondering if they've moved down.

Mark Petrie: Hey, good morning. I guess just following up on that inventory question, I think you called out it's up 3% year over year, but just looking back at the last quarter, it looked like you guys had planned for it to be down, you know, call it mid single digits or maybe high single digits by the end of Q2. So obviously you have different levers in terms of addressing that, you know, the lower shipments clearly is what is in guidance, but you also have the lever of higher incentives.

Speaker Change #157: Similarly to mortgage rates and, you know, if the demand is still sort of languished while those rates are moving down, or is that rate generally a little bit sticky or to sort of so far?

Speaker Change #158: Yeah, the rates are actually peg the solfer, so they haven't yet to move down. Obviously, there should be some positive news in the next few weeks. Hopefully that's going to be announced. That is certainly going to help the US dealers.

Luke Hammond: That is certainly going to help the US dealers.

Luke Hammond: But, as of recently, they've been stable at the levels in the last few quarters.

Brian Morrison: So I'm just wondering, like what would it take for you to sort of move into or a step function higher in terms of in terms of promotional investment to clear inventory? Yeah, the main element in the second quarter mark is the personal water craft industry, which was softer than what we have expected. So then the miss versus where we're expecting to end into two is related to personal water craft. And as I said in my in one of the questions that I answered, we, we expect personal water craft shipments to be softer next year as we, we worked with that inventory, some of it happening in the back half of this year and some of it's going to happen as well next year.

Speaker Change #158: But as of recently they've been stable at the levels in the last few quarters.

Jose Boisjoli: Okay, and then when we think about assessing secular demand changes, I think it would be interesting to hear how maybe something like untarded society demand has changed in the recent period. Has that sort of kept up given the limited requirement for ownership in it? And otherwise, have you seen any other patterns coming out of that business? I don't have the latest data, to be honest, this morning, but I didn't hear anything. You know, the goal of Uncharter Society is to team up with the best rental operator around the world. So make sure we are offering a top nut experience for consumers.

Speaker Change #159: Okay, and then when we think about assessing secular demand change, you know.

Speaker Change #160: I think it would be interesting to hear how maybe something like untarded society demand has changed in the recent period, has that sort of kept up given the limited requirement for ownership in it, and otherwise, have you seen any other patterns coming out of that business?

Speaker Change #161: I don't have the latest data to be honest this morning, but I didn't hear anything. You know the goal of uncharters of sight is to team up with the best rental operator around the world.

Jose Boisjoli: And like we see internally, put button seat because every time you try our product, we believe we have a great success to converting in sales. But I didn't have new numbers to see if I didn't heard anything that their business slow down drastically lately. Perfect.

Brian Morrison: But from our promotional side, we believe we're competitive. We give we have enough tools out there to make sure that we support our brand support our dealers and allow them to the match or other OEMs and what they offer. Okay, appreciate that color. And and I guess maybe maybe sort of related question. Can you just help us understand how you arrive at the target of 15 to 20% inventory reduction by year end and then also like what would that like versus sort of historical slower demand periods?

Speaker Change #162: So make sure we offer a tough, not-experience for our consumers and like we say internally, put a button seat because every time you try our product, we believe we have a great success to converting themselves.

Speaker Change #162: But I didn't have new numbers to see if I didn't heard anything that their business slowed down drastically lately.

Jose Boisjoli: Okay, appreciate that color. And, and I guess maybe, maybe sort of related question. Can you just help us understand how you arrive at the target of 15 to 20% inventory reduction by year end and then also like what would that like versus sort of historical slower demand periods? What would that imply in terms of units per dealer or maybe units as a related to market share or however you think about that sort of inventory penetration. Yeah, then first you need to make a difference between the seasonal product and the year-round product. The seasonal product, let's say water craft and in the snow mobile, we have a target of about 10% of the next year, next year retail.

Operator: Thanks. Thank you.

Fred Whitman: Next question will be from Luke Hammond at Kenna Court. Please go ahead. Thanks.

Speaker Change #163: Perfect thanks.

Speaker Change #163: Thank you. Next question will be from Luke Henan at Kenna Court. Please go ahead.

Fred Whitman: Good morning. Just one question on my end here. If we go back to last quarter, if I remember correctly, Jose, I think it was roughly two thirds of the units that you had retailed during the quarter were recurrent versus non-current. Where did that stand this quarter? And how does that compare to the industry? Yeah, as I said in my prepared remarks, we are actually successful in retailing on current units in the quarter. At the end of the quarter, what I could tell you is the overall inventory in the network; about 75% of the inventory was permanent.

Luke Henan: Good morning, just one question on my end here. If we go back to last quarter, if I remember correctly, Jose, I think it was roughly 2-3rds of the unit that we had retailed during the quarter were current versus non-current. Where did that stand this quarter and how does that compare to the industry?

Brian Morrison: What would that imply in terms of, you know, units per dealer or, you know, maybe units as a, you know, related to market share or however you think about that sort of inventory penetration. Yeah, then first you need to make a difference between the seasonal product and the year round product, the seasonal product. Let's see what a craft and in the snowmobile, we have a target of about 10% of the next year, next year retail, then basically we believe and this is a discussion we have a dealer.

Jose: Yeah, as I said in my prepared remarks, we are actually successful in redelling, contrary to units in the quarter. At the end of the quarter, what I could tell you is the overall inventory in the networks, about 75% of the inventory was German.

Jose Boisjoli: It was a bit lower because no mobile, as you know, will be finished the season last year with higher summer inventory that becomes non-current. As for RV, the inventory and the network was 90% current at the end of July. So we're in a very good position there. Great. Thank you very much. Yep.

Speaker Change #165: It was a bit lower because no mobile, as you know, we finished the season last year with higher thermal inventory that becomes non-current. As for our VD inventory, the network was 90% current at the end of July. But we're in a very good good.

Jose Boisjoli: Then, basically, we believe, and this is a discussion we have a dealer. If a dealer sells 100 snowmobiles. It's normal to hand a season with ten units for the following season. That's the ballpark that we're looking at as a proxy. Then, for a seasonal product, watercraft and snow is very different, and I would include in there the boat industry, the marine industry. For a year round product, like tree wheel, side by side, any TV, we're looking at it on days of inventory, forward days of inventory. In the dealer, it's retail is going every month, and there is like two high season, the spring and the fall.

Brian Morrison: If a dealer sell 100 snowmobile. It's normal to hand a season with 10 units for the following season. That's the ballpark that we're looking at as a proxy. Then for a seasonal product, watercraft and snow is very different and I would include in there the boat industry, the marine industry. For a year round product, like tree wheel, side by side any TV, we're looking at it on days of inventory, forward days of inventory.

Speaker Change #166: in there.

Speaker Change #167: Great, thank you very much.

Jose Boisjoli: Thank you.

Brian Morrison: Next question will be from Brian Morrison at Cowan. Please go ahead. Good morning. Thank you very much. So I appreciate the color on Mark's question on the 15 to 20% inventory through that reduction. Can we just take it one step further. If you target 90 days of inventory, where are you now? Because I have you around 135 days. And if I add back the D stock to 4 revenue, I still have you about 120. Can you just share with us where you are now? Yeah, no, we're lower than the 135. And again, I'd have to check where you get your numbers.

Speaker Change #167: [inaudible]

Speaker Change #168: Thank you. Next question will be from Brian Morrison at Cowan. Please go ahead.

Brian Morrison: Good morning. Thank you very much. So, Sbastien Martel, I appreciate the color on Mark's question on the 15 to 20% inventory that reduction. We just take a one-stop further. If you target 90 days of inventory, where are you now? Because I have you around 135 days, and if I add back the D stock to four revenue.

Brian Morrison: In the dealer, it's retail is going every month and there is like two high season, the spring and the fall and we're looking to be around 90 days of inventory, forward retail. There is some fluctuation depending on the region but every dealer has that objective of being around 1990 to 100 days of forward retail depending on this region but it's dynamic. We have this map for all the dealer depending on more sport, more utility and this is the way we will look at it.

Speaker Change #170: They still have you about 120, can you just share with us where you are now.

Speaker Change #171: Yeah, no more lower than the 135 and again, I'd have to check where you get your numbers. We are lower than the 135. If you look at, if you compare to our wholesale obviously, our wholesale is lower than what's happening in retail, so that's probably why you're getting higher numbers.

Sbastien Martel: We are lower than the 135. If you look at, if you compare to our wholesale obviously, our wholesale is lower than what's happening in retail, so that's probably why you're getting higher numbers. As I mentioned, we made good progress. We're already in the inventory is already down 13% since the beginning of the year, and so we're in a very good shape to deliver our 15 to 20% for the year right. Okay, I understand. Can you give us a ballpark of where you are now? Well, the ballpark is 30% down, so that's pretty precise in terms of number.

Speaker Change #171: As I said, we made good progress for already in the inventory is already down 13%.

Speaker Change #171: Since the beginning of the year, and so we're in a very good shape to deliver our 15th to 20% for the year, right?

Brian Morrison: And this is roll up to the target that we had. This is how we came out with the 15 to 20% to come back for seasonal and year round product in those proxy. Okay, that's excellent color. I appreciate that. I guess maybe just my question would be then like, would that 15 to 20 would that not have changed just given the deterioration in demand that you saw through q2 and into the first part of q3 like I would have thought that that number might have come down just based on the parameters that you just provided.

Speaker Change #172: Okay, understand, can you give us a ballpark of where you are now?

Speaker Change #173: Well, all parts are at 33% now, so that's pretty precise in terms of number.

Sbastien Martel: Okay, I'm talking in terms of days, but the next question said in terms of your liquidity. Understand it's very good, but is there a target leverage that you don't want to exceed? I think you had a target of one and a half times the two times previously. Yeah, well, we want to keep a normal circumstances. I want to have time to two times because we want to have that flexibility, and we know that in a situation where there is a slowdown and we need to correct delivery. That leverage is going to go up, but when we IPO, we were three times levered and we operated at that level and we were very comfortable operating at that level because our debt is going at light and the maturities are have been extended.

Speaker Change #174: Okay, I'm talking in terms of days, but next question, in terms of your liquidity, I understand it's very good, but is there a target leverage that you don't want to exceed? I think you had a target of one and a half times to two times previously.

Speaker Change #175: Yeah, well, we want to keep a normal circumstance as I want to have time to two times because we want to have that flexibility and we know that in a situation where there is a slow down and we need to correct delivery

Brian Morrison: But we still want a good unit representation in the network. And so even though we were planning for software industry, the number that the 15 to 20% also factored in higher interest rates or dealers are feeling some pressure. Higher as our piece as well. And so in relative terms will still be lower despite market share gains than where we were pre-COVID. And so as Rosy said, the 90 is a target, but could we be at 90, 100 days, we're still comfortable with those levels.

Speaker Change #176: Leverage is going to go up, but when we see old we were three times levered and we operate at that level and we're very comfortable operating at that level because our debt is going to light and the maturedies are

Sbastien Martel: And so we have no short-term financial commitment that is going to distract the organization from focusing on operations versus managing cash flow. Okay, so could we run three times 3.5 times in the current context where, with our treasury team earlier this year, we extended the maturity of the revolver and the term B. I'm super comfortable operating at those levels.

Jose Boisjoli: Higher and start piece as well. And so, in relative terms, will still be lower, despite market share gains, than where we were pre-COVID. And so, as Rosy said, the 90 is a target, but could we be at 90, 100 days? We're still comfortable with those levels. And so that's why staying at the 15 to 20% target is something that we believe was the right thing to do for the business, despite softer industry forecast.

Speaker Change #176: Have been extended and so we have no short-term financial commitment that is going to distract the organization from focusing on operations versus managing cash flow.

Speaker Change #177: And so... Okay.

Brian Morrison: And so that's why staying at the 15 to 20% target is something that we believe was the right thing to do for the business despite softer industry forecast. Yeah, okay. Thanks guys. Appreciate the comments and all the best. Thank you.

Speaker Change #177: Token with one at three times, 3.5 times.

Speaker Change #177: In the current context, where with our Treasury theme earlier this year, we extended the maturity of the revolver in the turn B, I'm super comfortable operating at those levels.

Mark Petrie: Yeah, okay. Thanks, guys.

Sbastien Martel: Okay, and the last question, maybe just say, do you have any insight right now into the used market? We don't have much data on this on the use market, but obviously, I think you know during the COVID, a lot of consumer purchase product at I mean, above a SRP price and this is cleaning out slowly. It takes a while for a customer to accept a loss; a bigger loss than he was expecting is a use unit, but this is, I would say, stabilizing right now, but I don't have a specific data to share with you this morning.

Mark Petrie: Appreciate the comments, and all the best.

Operator: Thank you.

Speaker Change #178: Okay, and the last question, maybe just say, do you have any insight right now into the use market?

James Hardiman: Next question will be from James Hardeman at City.

Brian Morrison: Next question will be from James Harderman at city. Please go ahead. Hey, good morning. Thanks for taking my question. So I wanted to circle back on the question about sort of early and early look at at fiscal 26. It's difficult. That may be obviously you guys had the guidance bridge the last couple of quarters we scrapped that and I can certainly appreciate why that was getting a little bit too convoluted. But I guess maybe most significantly is there a way to put a dollar value around the magnitude of the inventory reduction. I know it's too early to tell, but if wholesale equaled retail next year and retail was pretty flat, like what how much earnings power would you get back in that? Samaria.

James Hardiman: Please go ahead.

Jose Boisjoli: Hey, good morning. Thanks for taking my question. So I wanted to circle back on the question about sort of early and early look at at fiscal 26. It's difficult. That may be obviously you guys had the guidance bridge the last couple of quarters. We we scrapped that, and I can certainly appreciate why that was getting a little bit too convoluted. But I guess maybe most significantly, is there a way to put a dollar value around the magnitude of the inventory reduction. I know it's too early to tell, but if wholesale equaled retail next year and retail was pretty flat, like what how much earnings power would you get back in that?

Speaker Change #178: We don't have much data on this on the use market, but obviously, I think you know during the COVID a lot of consumer purchase

Speaker Change #179: Product, I mean, above a misarty price and this is...

Speaker Change #180: Clinging out slowly. It takes a while for our customer to accept a loss.

Speaker Change #181: A bigger loss than he was expecting on his use unit, but this is, I would say, stabilizing right now.

Fred Whitman: Okay, thank you very much. I appreciate the actions you guys are taking.

Speaker Change #181: But I don't have a specific data to share with you this morning.

Fred Whitman: Thank you. Next question will be from Fred Whitman at Wolf Research. Please go ahead. Hey guys, good morning. I was just hoping you could unpack the changes to the year-round guidance. I'm into your point, that's sort of where the biggest chunk of the full year outlook adjustment comes, but there are some different subcategories within that. So could you sort of give us an order of magnitude where you're making the biggest changes?

Speaker Change #182: Okay, thank you very much. I appreciate the actions you've got to take it.

Speaker Change #183: Thank you.

Speaker Change #183: Next question will be from Fred Wittman at Wolf Research. Please go ahead.

Jose Boisjoli: Samaria.

Jose Boisjoli: But you know, when we started the year, we our first call in March, we said that it was a correction in 2024 was a correction year. We had the bad winter but 2024 we all believe was a correction year. Now with the trend that we have in Q2 and what we're planning in Q2, it will be more probably a correction period. For sure, the next 12 months, probably next to 18 months will be still a correction period. As I just said, we want to deplete inventory this year to be at the right level for seasonal and year round product.

Sbastien Martel: But you know, when we started the year, our first call in March, we said that it was a correction in 2024 was a correction year. We had the bad winter, but 2024 we all believe was a correction year. Now, with the trend that we have in Q2 and what we're planning in each two, it will be more probably a correction period. For sure, the next 12 months, probably next to 18 months will be still a correction period. As I just said, we want to defeat inventory this year to be at the right level for seasonal and year-round product.

Fred Wittman: Hey guys, good morning. I was just hoping you could unpack the changes to the year-round guidance. I'm into your point that sort of where the biggest chunk of the Fuljure outlook adjustment comes, but there are some different subcategories within that. If you sort of give us order of magnitude, where you're making the biggest changes.

Fred Whitman: Yeah, good morning. We made an adjustment to your products' revenue guidance. If I look at the midpoint by about $165 million, the year on products is a big business; about 50% of revenue is in the second half of the year. And the ORV industry has where we've made the biggest adjustment because that's where we're seeing more softness, and we want to be cautious, obviously, on our shipment class. About 80% of the adjustment we did is on side by side, and the rest equally distributed between ATV and 3-wheel. But again, as I mentioned, we want to be cautious, but yet we're still very bullish on the prospects over our Vs.

Speaker Change #185: Yeah, good morning. We made an adjustment to your products, revenue guidance, if I look at the midpoint by about $165 million. The year on products is a big business, about 50% of revenue is in the second half of the year.

Speaker Change #186: and the ORV industry has where we've made the biggest adjustment because that's where we're seeing more softness and we want to be cautious obviously on our shipment plan.

Speaker Change #186: About 80% of the adjustment we did is on side-by-side.

Sbastien Martel: And next year is tourally to call. I mean, with all the macroeconomic situation, the interest rates are starting to go down, but it's not; it would be interesting what the US Fed will do in September. This is definitely positive, but it will take a while before we coming back to the level, a reasonable level.

Jose Boisjoli: And next year is tourally to call. I mean, with all the macroeconomic situation, the interest rate are starting to go down but it's not, it would be interesting what the US Fed will do in September. This is definitely positive but it will take a while before we coming back to the level, a reasonable level.

Speaker Change #186: and the rescue equally distributed between the ATV and the three wheel. But again, as I mentioned, we want to be cautious. But yet we're still very bullish on the prospects a little more of these. As I mentioned earlier, coming out of the club, the new ATV platform very well received, the Maverick R Max as well, which is 60% of the...

Sbastien Martel: As I mentioned earlier, coming out of the club, the new ATV platform very well received, the Maverick R Max as well, which is 60% of the super sport industry for side by side. That was super well received, and also the new defender with the upgrades that we did on the defender cap. Plus, we have also great product news coming out next year for the RRV business, that we're anxious to announce that. And so, we're still very bullish despite making a sizable adjustment on RD this quarter.

Speaker Change #186: Super Sport in the street for side-by-side. That was super well received and also the new defender with the upgrades that we did on the defender cap.

Sbastien Martel: Then I think there is too much factor out there to commit on anything for fiscal year 2026.

Sebastien Martel: Then I think there is too much factor out there to commit on anything for fiscal year 2026. Yeah, in terms of quantifying the impact, in the Q1 or Q4 call there when we launched an insurance guidance for this year, I referred to the inventory correction that we're doing about an impact of three to four bucks. And so again, in a situation where industries are normalized as no inventory depletion is that a potential tailwind that we have to do for earnings would be how I would still frame it.

Speaker Change #186: Plus we have also great product news coming out next year for the RV business that we're anxious to announce that. And so we're still very bullish despite making a sizable adjustment on RV this quarter.

Fred Whitman: Great, thanks a lot.

Tristan Thomas: Thank you. I remind it to please press star one if you have any questions. Next is Tristan Thomas Martin at BMO Capital Markets. Please go ahead. Morning. Just one question on PWC. You said you're going to kind of end the season with some carrier and regulatory; the selling season itself is ending, so I'm assuming there's a lot of floor plan support kind of baked into your guidance and potentially early next year. Is that right? And then, is there any way to quantify how much that is?

Speaker Change #187: Great, thanks for all.

Speaker Change #188: Thank you. I'm reminded to please press star one if you have any questions. Next is Tristan Thomas Martin at Bemo Capital Market. Please go ahead.

Speaker Change #188: Martel.

Sebastien Martel: Okay, and I guess a follow up to that. Any other big offsets we should be thinking about in terms of that bridge. And then I guess my second, I guess my follow up question would be the interest rate piece, obviously the Fed is set to pivot here in a meaningful way. It doesn't seem like you're assuming that that will help your business much, particularly as we think about the commentary for the first half of next year, not really getting any better.

Sbastien Martel: And I guess a follow up to that. Any other big offsets we should be thinking about in terms of that bridge. And then I guess my second, I guess my follow-up question would be the interest rate piece. Obviously, the Fed is set to pivot here in a meaningful way. It doesn't seem like you're assuming that that will help your business much, particularly as we think about the commentary for the first half of next year, not really getting any better. And so is that that you're just not building any of those interest rate cuts in, or you are making some assumptions about interest rate cuts.

Speaker Change #189: One question on PWC, you said you're going to end the season with some carriers, Ramin Tori, the Selling season and the Sells is ending, so I'm assuming there's a lot of floor plant support, kind of baked into your guidance and essentially early next year. Is that right and then is there any way to quantify how much that is?

Jose Boisjoli: And on what a graph just to explain the dynamic that happened season 24, there are two elements. First, we're surprised by the magnitude of the industry decline. Again, at the end of May, we were on our plan, the low number, but the trend, the trending was half plan. And I think when we had the call, we mentioned that Memorial Weekend was at the end of May, was softer than typical. But following that June, July was very, very soft summer retail. In fact, it was the lowest Q2 industry retail in eight years. Then you can see how magnitude was bad for June and July.

Speaker Change #190: General Watercraft just to explain the dynamic that happened in the season 24, there is two

Speaker Change #191: First, we're surprised by the magnitude of the industry decline. Again, at the end of May, we were on our plan. I was a low number, but the trending was...

Sebastien Martel: And so it is that you're just not building any of those interest rate cuts in or you are making some assumptions about interest rate cuts. You just don't think that's going to make much of a difference in the sort of medium term. Well, for our financials interest rate cuts are going to help, they're going to help the four-plan cost. And we are obviously, if we look at what's expected in the market, yes, that's going to help on the four-plan side.

Speaker Change #191: And I think when we had the call we mentioned that Memorial Weekend was a day of May was softer than typical.

Sbastien Martel: You just don't think that's going to make much of a difference in the sort of medium term. Well, for our financial interest rate cuts are going to help; they're going to help the four plan costs. And we are, obviously, if we look at what's expected in the market, yes, that's going to help on the four plan side. On our financing cost, it's going to help, but we have interest rate caps that are falling off next year. So even if we build in rate reductions, we'll probably have a headwind coming from interest rates next year because these caps are rolling off.

Speaker Change #191: But following that June July was very, very soft summer retail and in fact

Speaker Change #191: It was the lowest Q2 industry retail in eight years, then it's...

Sebastien Martel: On our financing cost, it's going to help, but we have interest rate caps that are falling off next year. So even if we build in rate reductions, we'll probably have a headwind coming from interest rates next year because these caps are rolling off, probably let's say 10 to 15 million. From a dealer point of view, it's going to help as well. I mean, the four-plan expenses are going to be lower. Bidowns of interest rates for us are going to be lower as well on the retail financing side.

Jose Boisjoli: And this is the industry. And on top of that, and it was anticipated, but it was worse than anticipated. As you remember, in 2023, our main competitor on watercraft ship very late is new product. We gained significant market share in that product category. He ended up with more non-current than what we had planned. And this year, when we had a lot of non-current and he had more non-current than us, we've lost more share in the non-current category than what we had anticipated.

Speaker Change #191: and you can see how magnitude was bad for June and July. And this is the industry and on top of that.

Sebastien Martel: And for sure, from a consumer point of view, if we get double rate cuts this year and next year, that's going to help as well. But is it going to move the needle? Is it going to remove some of the macro concerns that we're seeing today?

Speaker Change #191: And it was anticipated, but it was worth an anticipated. As you remember in 2023, our main competitor on watercraft ship very late is new product.

Sbastien Martel: Probably let's say 10 to 15 million. From a dealer point of view, it's going to help as well. I mean, the four plan expenses are going to be lower; buy downs of interest rates for us are going to be lower as well on the retail financing side. And for sure, from a consumer point of view, if we get double rate cuts this year and next year, that's going to help as well. But is it going to move the needle? Is it going to remove some of the macro concerns that we're seeing today?

Speaker Change #191: We gain significant market share in that product category.

Speaker Change #192: He ended up with more non-current than what we had planned.

Speaker Change #192: And this year, when we had a lot of non-curen, and we had more non-curen than us, we've lost more share that in the non-curen category than what we had anticipated.

Sebastien Martel: It would be too early to- Nicole. Got it. That's helpful.

Sbastien Martel: It would be too early to Nicole. Got it. That's helpful.

Cameron Doerksen: Thank you.

Speaker Change #192: Our planning was probably too optimistic, and this is the tool element that affected our water graph retail this season. That being said.

Operator: Thank you.

Cameron Doerksen: Next question will be from Cameron Doerksen, at National Bank Financial. Please go ahead. Yeah, thanks.

Cameron Doerksen: Next question will be from Cameron Doerksen at National Bank Financial. Please go ahead. Yeah, thanks. Good morning.

Jonathan Goldman: Good morning. I just wanted to if you could frame how should we think about some of the operating expense light items for the rest of the year. Obviously, R&D was lower in Q2. You've cited the, I guess, R&D subsidies hitting the quarter there. So just if you just talk a little bit about what you see, then the back half of the year on those operating expenses. Yeah, and G&A. Yeah, obviously a bit of movement.

Speaker Change #192: We're heading the season with close to 60% market share.

Cameron Doerksen: I just wanted if you could frame how should we think about some of the operating expense-like items for the rest of the year. Obviously, R&D was lower in Q2. You've cited the, I guess, R&D subsidies hitting the quarter there. So just you can just talk a little bit about what you see than the back half of the year on those operating expenses. Yeah, and G&A. Yeah, obviously a bit of movement. But again, if I go down the P&L, the gross profit wise, I'd expect probably gross profit to be flat, to maybe down in the second half of the year versus what we saw in the beginning of the year. First six months of the year, gross profit margin was at 22.1%.

Jose Boisjoli: We just need next summer to re-adapt our shipment and re-balance the inventory out there to continue on this very good business. Smith. Yeah, okay, I understand. I guess what I was asking was with kind of the winter coming, dealers maybe having a little too much PWC inventory, is there incremental floor plan support? Yeah, we do provide additional floor plan support depending on the dealers, depending on how much more inventory they have in their yard. And we do provide support until early next year, but you'll appreciate that, for competitive reasons. I'll hold back from disclosing any amount, but it's all provided for the guidance.

Speaker Change #192: I mean, we cannot be happy about this, so we just need an extommer to re-adapt our shipment and reap the balance, the inventory out there to continue on this very good business.

Speaker Change #193: I guess what I was asking was with kind of the winner coming, the others maybe having a little too much PWC inventory, is there incremental for plant support?

Jonathan Goldman: But again, if I go down the P&L, their growth profit wise, I'd expect probably growth profit to be flat to maybe down in the second half of the year versus what we saw in the beginning of the year. First six months of the year, growth profit margin was at 22.1%. And then in terms of OPEX, obviously there's going to be some OPEX movement, but relatively flat year over year as well from an OPEX line.

Speaker Change #194: Yeah, we are very, very, very quantified amongst you.

Speaker Change #195: We do provide additional foreplant support depending on the dealers, depending on how much more inventory they have in their yard And we do provide support until early next year, but you'll appreciate that for competitive reasons I'll hold back from this closing item out, but it's all provided for the guidance.

Sbastien Martel: And then, in terms of OPEX, obviously, there's going to be some OPEX movement, but relatively flat year over year as well from an OPEX line.

Tristan Thomas: Yeah, thank you.

Operator: Thank you. At this time, we have no other questions.

Dalat: Dalat, thank you.

Sbastien Martel: Okay. And as you sort of look ahead to next year, I mean one of these you sort of mentioned earlier in the call was around adjustments to the cost base to kind of offset further weakness here. I guess, what can you do across the business to reduce costs to try to offset some of the weakness on the demand side of the equation? I mean, without going into detail, there is always in the company like us, a lot of projects going on in different country, different area. And obviously, we will look at the whole list, and we prioritize the next 18 months, going to a more slowdown in what we had anticipated.

Jose Boisjoli: Okay. And as you sort of look ahead the next year, maybe one of these you sort of mentioned earlier in the call was around adjustments to the cost base to kind of offset further weakness here. I guess what can you do across the business to reduce costs to try to offset some of the weakness on the demand side of the equation? Without going into detail, there is always in the company like us a lot of projects going on in different country, different area.

Philippe Deschenes: I will turn the call to Mr. Deschnes to close the meeting. Great. Thank you, Sylvie. And thanks for joining us this morning and for your interest in BRT.

Speaker Change #197: Thank you. At the time we have no other questions, I will turn the call to Mr. Deschenes to close the meeting.

Philippe Deschenes: We look forward to speaking with you again for a third quarter conference call on December 6th. Thanks again, everyone, and have a good day.

Deschenes: Great, thank you Sbastien Martel and thanks to Ron for joining us this morning and for your interest in the RP. We look forward to taking with you again for a third quarter conference call on December 6. Thanks again everyone and have a good day.

Operator: Thank you.

Operator: 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 #199: Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and that the time we do ask that you please disconnect your lines.

Jose Boisjoli: And obviously we will relook at the whole list and re-prioritize the next 18 months going to a more slowdown in what we had anticipated. And the other element that's from the operations, again, we're planning more conservatively for next year with software industry trends. That means our operations people will plan accordingly. This year it's been challenging for them, but they've actually done a very good job. But when you do a sequential adjustments to production, it's tough for them to run the shops as efficiently as possible.

Sbastien Martel: In the other elements that from the operations, again, we're planning more conservatively for next year with software industry trends. That means our operations people will plan accordingly this year. It's been challenging for them, but they've actually done a very good job. But when you do sequential adjustments to production, it's tough for them to run their shops as efficiently as possible. And so that is certainly another level that we have also. As you know, we've had a lot; there's been a lot of inflation, a lot of management of COVID needed to happen in the last three, four years.

Jose Boisjoli: And so that is certainly another lever that we have also. As you know, we've had a lot there's been a lot of inflation, a lot of management of COVID needed to happen the last three, four years. Now we can focus on reducing bill of material through cost improvement initiatives. And that's going to be another important driver of efficiency. Okay, so that I guess the process is, I don't see your that's ongoing, but maybe we'll see some of the benefits more so in fiscal 26 as opposed to this year.

Jose Boisjoli: Yeah, absolutely.

Jonathan Goldman: Okay, great. Appreciate it.

Sbastien Martel: Now we can focus on reducing bill of material through cost improvement initiatives. And that's going to be another important driver of efficiency.

Jonathan Goldman: Thanks very much.

Sbastien Martel: Okay. So that, that, I guess, processes, I don't see your, that's ongoing, but maybe we'll see some of the benefits more so in fiscal 26 as opposed to this year. Yeah, absolutely. Okay. Great.

Cameron Doerksen: Appreciate it. Thanks very much.

Operator: Thank you.

Luke Hammond: Thank you. Next question will be from Jonathan Goldman at Skolshebank. Please go ahead. Hi, good morning. Thanks for taking my questions. On the consumer side, the weaker demand trend that you're seeing, do you think that's more of a function of consumers delaying or deferring a purchase? Or is it lacking the ability to make a purchase in the first place? And in either case, what sort of rate relief would you need to see the consumer demand?

Jonathan Goldman: Next question will be from Jonathan Goldman at Skolshebank.

Jonathan Goldman: Please go ahead. Hi. Good morning. Thanks for taking my questions. On the consumer side, the weaker demand trend that you're seeing, do you think that's more of a function of consumers delaying or deferring approaches, or is it lacking the ability to make a purchase in the first place? And in either case, what sort of rate relief would you need to see to spur consumer demand? Times. And just to give you some consumer behavior trend, you know pre-COVID, 20% of our unit were sold to new and trend. In the peak of the COVID time, it did go up above 30%.

Luke Hammond: And just to give you some consumer behavior or trend, you know pre-COVID 20% of our unit were sold to new and trend. In the peak of the COVID time, it did go up above 30%. And now we're back to the 20% ratio. Then we're back to pre-COVID level 20% of our unit basically are sold. What is interesting is the split between high end technology, innovation, product, versus entry level. We see and I will just give you some data for what a craft.

Jose Boisjoli: And now we're back to the 20% ratio. Then we're back to pre-COVID level; 20% of our unit basically are sold to new and trend.

Luke Hammond: Our entry level retail in Q2 was down high double, was down high double digit. When our high end was down high single digit. And you can see that on what a craft. All the spark category and the GTI category was hit harder versus the high end. On side by side, same thing. If you look premium versus value, the premium was up mid single digit. When the value was down mid double digit.

Luke Hammond: Then the trend is that you see that the trend that we saw in the last year quarter is continuing. I will see now what you is the new and trend level. And there is more customer, new and trend customers will find as a product that are refused to crit. We hear that more often. And this will come back when the interest rate will go down. That's great color. And then you talked about potentially gaining share in order to see it in 25.

Jose Boisjoli: I will see now what's you is the new and trend level. And there is more customer, new and trend customers will finance their product that are refused to credit. We hear that more often. And this will come back when the interest rate will go down. That's great color. And then you talked about potentially gaining share in ORV and see it in 25. Is your expectation you can gain similar levels as you did this year? Yeah, we're not adventure, we're not adventure committing on any numbers, but the point is right now we are in the period where it's transitioning from model year 24 to 25.

Luke Hammond: Is your expectation you can gain similar levels as you did this year? Yeah, we're not adventure. We're not adventure committing on any numbers. But the point is right now we are in the period where it's transitioning from model year 24 to 25. We start producing 25 for TV side by side this month in end of July beginning of August. Then we are in that transition where depending on the inventory, depending on the program and the non current, there is a play there.

Luke Hammond: But that's why when this transition is done, typically take a quarter or two. After that, we will compete again, model year to model year. And we believe we have the right product to start with. And we have obviously the right program to continue our momentum. Just highlight on ATV. If you look at our ATV lineup, we've completely refresh the whole lineup in the last 18 months with the introduction of a mid level platform 18 months ago.

Jose Boisjoli: We start producing 25 for a TV side by side this month in end of July beginning of August. Then we are in that transition where, depending on an inventory, depending on the program and the non-current, there is a play there. But that's why when this transition is done, it typically takes a quarter or two; after that, we will compete again, model year to model year. And we believe we have the right product to start with. And we have obviously the right program to continue our momentum.

Jose Boisjoli: Yeah, and just to highlight on ATV, if you look at our ATV lineup, we've completely refreshed the whole lineup in the last 18 months with the introduction of a mid-level platform 18 months ago. And now we have the high CC platform that we recently introduced as well. So from a product point of view, we're extremely, extremely competitive. With a lot of new features, and there's been very little innovation in the last 10 years on the ATV. Streso, that obviously both well for the next season. Now that's a good girl. Thank you for taking my questions.

Luke Hammond: And now we have the high CC platform that we recently introduced as well. So from a product point of view, we're extremely, extremely competitive with a lot of new features. And there's been very little innovation in the last 10 years on the ATV. Streso, that obviously boasts well for the next season. That's good girl. Thank you for taking my questions.

Luke Hammond: I'll get back in cute.

Jose Boisjoli: I'll get back in cute.

Operator: Thank you. Next question will be from Jaime Katz at Morningstar.

Brian Morrison: Thank you. Next question will be from Jaime Katz at Morningstar. Please go ahead.

Jaime Katz: Please go ahead. Hi, good morning. So can you guys give us some insight as to how dealer financing rates have changed? I'm wondering if they've moved down similarly to mortgage rates and, you know, if the demand has still sort of languished while those rates are moving down. Or is that rate generally a little bit stickier to sort of sofa? Yeah, the rates are actually pegged to Sofa, so they haven't yet moved down. Obviously, there should be some positive news in the next two weeks. Hopefully, that's going to be an out. That is certainly going to help the US dealers.

Brian Morrison: Hi, good morning. So can you guys give us some insight as to how dealer financing rates have changed? I'm wondering if they've moved down similarly to mortgage rates. And, you know, if the demand has still sort of languished while those rates are moving down, or is that rate generally a little bit stickier to sort of sofa? Yeah, the rates are actually pegged to sofa. So they haven't yet moved down. Obviously, there should be some positive news in the next two weeks. Hopefully that's going to be announced. That is certainly going to help the US dealers.

Brian Morrison: But as of recently, they've been stable at the levels in the last few quarters.

Jaime Katz: But, as of recently, they've been stable at the levels in the last few quarters.

Brian Morrison: Okay, and then when we think about assessing secular demand changes, I think it would be interesting to hear how maybe something like untarded society demand has changed in the recent period. Has that sort of kept up given the limited requirement for ownership in it? And otherwise, have you seen any other patterns coming out of that business? I don't have the latest data to be honest this morning, but I didn't heard anything.

Brian Morrison: You know, the goal of untaraged society is to team up with the best rental operator around the world. So make sure we are offering a top nut experience for consumers. And like we see internally put button seat because every time you try our product, we believe we have a great success to converting in sales. But I didn't have new numbers to see if I didn't heard anything that their business slowed down drastically lately.

Brian Morrison: Perfect. Thanks.

Brian Morrison: Thank you.

Operator: Thanks.

Luke Hammond: Thank you.

Brian Morrison: Next question will be from Luke Hammond at Kenna Court. Please go ahead. Thanks.

Luke Hammond: Next question will be from Luke Hammond at Kenna Court. Please go ahead. Thanks. Good morning. Just one question on my end here.

Brian Morrison: Good morning. Just one question on my end here. If we go back to last quarter, if I remember correctly, Jose, I think it was roughly two thirds of the unit that you had retailed during the quarter. Were we're current versus non-current? Where did that stand this quarter? And how does that compare to the industry? Yeah, as I said in my prepared remarks, we are actually successful in retailing non-current units in the quarter.

Jose Boisjoli: If we go back to last quarter, if I remember correctly, Jose, I think it was roughly two thirds of the units that you had retailed during the quarter were recurrent versus non-current. Where did that stand this quarter? And how does that compare to the industry? Yeah, as I said in my prepared remarks, we are actually successful in retailing on current units in the quarter. At the end of the quarter, what I could tell you is the overall inventory in the network; about 75% of the inventory was permanent. It was a bit lower because no mobile, as you know, will be finished the season last year with higher summer inventory that becomes non-current.

Brian Morrison: At the end of the quarter, what I could tell you is the overall inventory in the networks about 75% of the inventory was permanent. It was a bit lower because snowmobile, as you know, will be finished the season last year with higher snowmobile inventory that becomes non-current. As for RV, the inventory and the network was 90% current at the end of July. So we're in a very good position there.

Brian Morrison: Great. Thank you very much.

Brian Morrison: Yep.

Jose Boisjoli: As for RV, the inventory and the network was 90% current at the end of July. So we're in a very good position there. Great.

Brian Morrison: Thank you.

Operator: Thank you very much. Yep.

Brian Morrison: Thank you.

Fred Whitman: Next question will be from Brian Morrison at Cowan. Please go ahead. Good morning. Thank you very much. So, so I appreciate the color on Mark's question on the 15 to 20% inventory through that reduction. Can we just take it one step further? If you target 90 days of inventory, where are you now? Because I have you around 135 days. And if I add back the D stock to forward revenue, I still have you about 120.

Fred Whitman: Can you just share with us where you are now? Yeah, no, we're lower than the 135. And again, I'd have to check where you get your numbers. We are lower than the 135. If you look at, if you compare to our wholesale, obviously, our wholesale is lower than what's happening in retail, so that's probably why you're getting higher numbers. As I mentioned, we made good progress. We're already in the inventory is already down 13% since the beginning of the year, and so we're in very good shape to deliver our 15 to 20% for the year, Brian.

Jose Boisjoli: We are lower than the 135. If you look at, if you compare to our wholesale obviously, our wholesale is lower than what's happening in retail, so that's probably why you're getting higher numbers. As I mentioned, we made good progress. We're already in the inventory is already down 13% since the beginning of the year, and so we're in a very good shape to deliver our 15 to 20% for the year, right. Okay, I understand. Can you give us a ballpark of where you are now? Well, the ballpark is 30% down, so that's pretty precise in terms of number.

Fred Whitman: Okay, I understand. Can you give us a ballpark of where you are now? Well, the ballpark is 3% down, so that's pretty precise in terms of number. Okay, I'm talking in terms of days, but the next question said in terms of your liquidity, understand it's very good, but is there a target leverage that you don't want to exceed? I think you had a target of 1.5 times the two times previously. Yeah, well, we want to keep a normal circumstances.

Fred Whitman: I want to have time to two times because we want to have that flexibility and, and we know that in a situation where there is a slowdown and we need to correct delivery. That leverage is going to go up, but when we IPO, we were 3 times levered, and we operated at that level, and we were very comfortable operating at that level because our debt is going at light, and the maturities are have been extended, and so we have no short term financial commitment that is going to distract the organization from focusing on operations versus managing cash flow.

Fred Whitman: Okay, so could we run 3 times 3.5 times in the current context where with our treasury team earlier this year, we extended the maturity of the revolver and the term B, I'm super comfortable operating at those levels. Okay, and the last question, maybe just say, do you have any insight right now into the use market? We don't have much data on this on the use market, but obviously, I think you know, during the COVID, a lot of consumer purchase product at, I mean, above a SRP price, and this is cleaning out slowly.

Fred Whitman: It takes a while for a customer to accept a loss, a bigger loss than he was expecting is a use unit, but this is, I would say, stabilizing right now, but I don't have a specific data to share with you this morning. Okay, thank you very much. I appreciate the actions you guys are taking.

Fred Whitman: Thank you.

Fred Whitman: Okay, thank you very much. I appreciate the actions you guys are taking. Thank you.

Fred Whitman: Next question will be from Fred Whitman at Wolf Research. Please go ahead.

Sbastien Martel: Next question will be from Fred Whitman at Wolf Research. Please go ahead. Hey guys, good morning. I was just hoping you could unpack the changes to the year-round guidance. I'm into your point; that's sort of where the biggest chunk of the full year outlook adjustment comes, but there are some different subcategories within that. So could you sort of give us an order of magnitude where you're making the biggest changes?

Fred Whitman: Hey guys, good morning. I was just hoping you could unpack the changes to the year round guidance, I'm into your point that sort of where the biggest chunk of the full year outlook adjustment comes, but there are some different subcategories within that. So could you sort of give us a order of magnitude where you're making the biggest changes? Yeah, good morning. We made an adjustment to your products revenue guidance. If I look at the midpoint by about $165 million, they are on products is a big business about 50% of revenues in the second half of the year.

Sbastien Martel: Yeah, good morning. We made an adjustment to your products' revenue guidance. If I look at the midpoint by about $165 million, the year on products is a big business; about 50% of revenue is in the second half of the year. And the ORV industry has where we've made the biggest adjustment because that's where we're seeing more softness, and we want to be cautious, obviously, on our shipment class. About 80% of the adjustment we did is on side by side, and the rest equally distributed between ATV and 3-wheel. But again, as I mentioned, we want to be cautious, but yet we're still very bullish on the prospects over our Vs.

Fred Whitman: And the ORV industry has where we've made the biggest adjustment because that's where we're seeing more softness and we want to be cautious, obviously, on our shipment class, about 80% of the adjustment we did is on side by side, and the recipe equally distributed between ATV and 3 wheel. But again, as I mentioned, we want to be cautious, but yet we're still very bullish on the prospects over our Vs. As I mentioned earlier coming out of the club, the new ATV platform very well received, the Maverick R Max as well, which is 60% of the super support industry for side by side, that was super well received, and also the new defender with the upgrades that we did on the defender cap.

Fred Whitman: Plus, we have also great product news coming out next year for the RRV business. That's we're anxious to announce that. And so we're still very bullish despite making a sizable adjustment on RD this quarter. Great, thanks a lot. Thank you. I remind it to please press star one if you have any questions.

Fred Whitman: Great, thanks a lot.

Operator: Thank you. I remind it to please press star one if you have any questions.

Jose Boisjoli: Next is Tristan Thomas Martin at BMO Capital Market. Please go ahead. Morning. Just one question on PWC. You said you're going to kind of end the season with some carrier regulatory, the selling season itself is ending, so I'm assuming there's a lot of floor plan support kind of baking to your guidance and potentially early next year. Is that right? And then is there any way to quantify how much that is? And on what a graph just to explain the dynamic that happened season 24, there is two elements.

Operator: Next is Tristan Thomas Martin at BMO Capital Markets. Please go ahead.

Tristan Thomas: Morning. Just one question on PWC. You said you're going to kind of end the season with some carrier and regulatory; the selling season itself is ending, so I'm assuming there's a lot of floor plan support kind of baked into your guidance and potentially early next year. Is that right?

Tristan Thomas: And then, is there any way to quantify how much that is?

Jose Boisjoli: First, we're surprised by the magnitude of the industry decline. Again, at the end of May, we were on our plan, the low number, but the trend the trending was half plan. And I think when we had the call, we mentioned that Memorial Weekend was at the end of May was softer than typical. But following that June, July was very, very soft summer retail. In fact, it was the lowest Q2 industry retail in eight years.

Jose Boisjoli: Then it can see how magnitude was bad for June and July. And this is the industry. And on top of that, and it was anticipated, but it was worse and anticipated. As you remember in 2023, our main competitor on watercraft ship very late is new product. We gained significant market share in that product category. He ended up with more non-current than what we had planned. And this year when we had a lot of non-current and he had more non-current than us, we've lost more share that in the non-current category than what we had anticipated.

Jose Boisjoli: And this is the industry. And on top of that, and it was anticipated, but it was worse than anticipated. As you remember in 2023, our main competitor on watercraft ship very late is new product. We gained significant market share in that product category. He ended up with more non-current than what we had planned. And this year, when we had a lot of non-current and he had more non-current than us, we've lost more share in the non-current category than what we had anticipated.

Jose Boisjoli: To be honest, our planning was probably too optimistic. And this is the tool I meant that affected our watercraft retail this season. That being said, we're handing the season with close to 60% market share. I mean, we cannot not be happy about this law. We just need next summer to re-adapt our shipment and re-balance the inventory out there to continue on this very good business. Yes, I understand that. I guess what I was asking was, with kind of the winter coming, dealers maybe having a little too much PWC inventory, is there incremental floor plan support?

Jose Boisjoli: We just need next summer to re-adapt our shipment and re-balance the inventory out there to continue on this very good business. Smith. Yeah, okay, I understand.

Jose Boisjoli: I guess what I was asking was with kind of the winter coming, dealers maybe having a little too much PWC inventory, is there incremental floor plan support? Yeah, we do provide additional floor plan support depending on the dealers, depending on how much more inventory they have in their yard. And we do provide support until early next year, but you'll appreciate that for competitive reasons. I'll hold back from disclosing any amount, but it's all provided for the guidance. Yeah, thank you.

Jose Boisjoli: Yeah, we do provide additional floor plan support depending on the dealers depending on how much more inventory they have in their yard. Until early next year, but you'll appreciate that for a competitive reason. I'll hold back from this closing any amount, but it's all provided for the guidance. Got it. Thank you.

Operator: Thank you. At this time, we have no other questions.

Philippe Deschenes: At this time, we have no other questions. I will turn the call to Mr. Deschenes to close the meeting. Great. Thank you, Sylvie, and thanks for joining us this morning and for your interest in BRT. We look forward to speaking with you again for a third quarter conference call on December 6th. Thanks again, everyone, and have a good day. Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today.

Philippe Deschenes: I will turn the call to Mr. Deschnes to close the meeting. Great. Thank you, Sylvie. And thanks for joining us this morning and for your interest in BRT.

Philippe Deschenes: We look forward to speaking with you again for a third quarter conference call on December 6th. Thanks again, everyone, and have a good day.

Operator: Thank you.

Operator: 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.

Once again, thank you for attending, and at this time, we do ask that you please disconnect your lines.

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