Q2 2025 BRP Inc Earnings Call

September 6, 2024

Speaker Change: i

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.

For participants who use the telephone line, it is recommended to turn off the sound on your device.

Philippe Deschenes: And I would like to turn the meeting over to Mr. Philippe Deschenes. Please go ahead, sir.

Philippe Deschenes: Thank you, Sylvie.

Jose Boisjoli: 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 Sabahat Seymace, Chief Financial Officer.

Speaker Change: Thank you, Sivi. 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.

Philippe Deschenes: Before we move to the preparation, I would like to introduce you to Mr. Philippe Deschenes. 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. Before looking at formation, it is based on certain assumptions and is subject to risk and uncertainty, and I invite you to consult BRP's MDNA for completely studies. Also, during the call, reference will be made through supporting slides, and you can find the presentation on our website at BRT.com under the Industrial Relations section.

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.

Speaker Change: Before 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-dee. Also during the call, reference will be made to supporting slides 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.

Philippe Deschenes: Thank you, Philippe.

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

Speaker Change: Our financial results for second quarter were essentially as expected and reflect our focus on reducing its inventory to support our leaders.

Speaker Change: However, the Mecca Economic and 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.

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.

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 4 for key financial highlight. Revenue reached $1.8 billion. Normalize EBITDA was $199 million. Normalize EPS was $0.61, generally in line with our expectation. We have made great strides to reduce network 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 5. We are operating in an increasingly challenging economic environment.

Speaker Change: Let's learn to slide four for key financial highlight. Revenue reached $1.8 billion, normalize a bit though was $199 million, and normalize 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.

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.

Jose Boisjoli: 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 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: 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 network inventory, 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: Looking at retail performance for the quarter on slide six, overall retail was down in the ten 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. Given our focus on bringing network inventory down, we were anticipating some market share loss, namely for side by side.

Speaker Change: Looking at retail performance for the quarter on flight 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 C-do and canambrans.

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

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 and fact on our retail this season.

Speaker Change: A few words on our personal watercraft 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 industry weakness, had the larger than expected and 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 performed very well in ATV, gaining one and a half points of market share. With these achievements, we have closed the gap with the number one position in the industry in terms of ORV unit retail producers. In the current environment, we expect further short-term market share volatility.

Speaker Change: Turning to slide seven, we are pleased with our resolve in our view 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 for dealers.

Speaker Change: In the current environment, we expect further shorter market share volatility. However, with our recent product launches and momentum with dealers, we believe we will continue to gain in the future in order 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 highlights 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 entry into two wheel space. These models leverage our own ROTAX e-power unit, which also propels our electric snowmobile, and will be used in future VRP 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 Resson dealer event held in California.

Speaker Change: It was one of the largest ever in term of product news with over 3,000 participants in person and virtual.

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

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

Speaker Change: In terms 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 off-road lineup and producing the four-seat version of our top-of-the-line Mavic R. This extension was highly anticipated as multi-passenger model represent close to 60% of sales in debt category. 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. This new platform has been very well received, just like the mid CC last year. As for Triewell 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 to do seeing the four-seat 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, canon, are most rugged ever in this segment.

Jose Boisjoli: 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. 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 anglers worldwide.

Speaker Change: Purpose Bill to increase accessibility into the growing adventure to remarket, which has doubled in recent years. The Kenam Canyon will target three-wheel-rider of all scale levels.

Speaker Change: On the C2 side, we further bail on the Fischpro success by introducing the Fischpro Apex, the most powerful person over a craft in that segment, and the Switch Pound 2 Fisch Edition, the first ever in that category.

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

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.

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 were down 33% to $1 billion from the zoo to reduce 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 and 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 delivers market share gain in the mid CC segment.

Speaker Change: to

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 redew shipment.

Speaker Change: At Retail, Kenam side-by-side was bound 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 digits in the quarter, in line with the industry.

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

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: Looking at three-wheel vehicle, our retail was down 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 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 as explained a few minutes ago. 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. The switch was down high 30%, suffering from generally weaker trend in marine, and lapping a strong quarter last year, supported by a early introduction momentum.

Speaker Change: Turning to seasonal product on slide 11.

Speaker Change: 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 Trilevel 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.

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.

Jose Boisjoli: Moving on to slide 12, with par-sport part accessories in apparel and new EM engines, revenue were down 12% to $258 million due to lower sales volume. PNA sales continued to increase. To benefit from our growing fleet, especially in ORV, upset by weaker demand for snow-related products and lower accessories sales due to softer retail. Turning to marine, revenue were down 54% to $57 million, reflecting lower-boat shipment volume. Looking at retail sales, Alumea Kraf was up about 40%, while Many Too 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: Moving on to slide 12 with far sport part accessories and a peril in New E.M. engines.

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

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

Speaker Change: Turning to Marine.

Speaker Change: Revenue were down 54% to $57 million, reflecting Laura Boisjitman, Vol. Looking at retail sales, Alju McRath was up about 40%, while many 2 was up high 20% as we were mapping a low retail volume period.

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

Sabahat Khan: With that, I turned the call over to Sabahat Khan.

Sabahat Khan: 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. To accelerate the reduction of our network inventory levels. Looking at the numbers, revenues were down 34% to $1.8 million, primarily due to lower shipments. We generated $377 million 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: With that, I turn the call over to Sbastien.

Sbastien: 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 shipments in the quarter to accelerate the reduction of our net work and the reduction of our net work inventory levels.

Sbastien: Looking at the numbers, revenues were down 34% to $1.8 billion, primarily due to lower systems. We generated $377 million in gross profit, representing a margin of $2.4%.

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

Sbastien: and hire sales programs.

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

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

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

Sbastien: Including all of you above, or normalize them in the end, at $199 million, and are normalized earnings per share at 61 cents.

Sabahat Khan: 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.

Speaker Change: Turning to slide 15 for an update on our network in the story.

Speaker Change: 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 environments, high interest rates and increased competitive dynamics.

Speaker Change: 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.

Speaker Change: In fact, as of the NFC-2, our network inventory is down 13% from Q4 levels. While on our way towards the objective for reduction of 15 to 20% by your app.

Sabahat Khan: 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. In addition, we also have an increased commercial 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 U.S. power sport markets.

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

Speaker Change: While the actions we took to reduce the 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.

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

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

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

Sbastien: Moreover, the difficult macro environment, which had started affecting many of our key international markets in Sbastien 24.

Speaker Change: Now seems to also be impacting the very important U.S. power sport market.

Sabahat Khan: 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. 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.

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

Speaker Change: Consequently, we have adjusted our shipment plan for the rest of the year, as we continue to aim to right-size our net-orchestral and military levels in a weaker industry environment.

Speaker Change: Additionally, our revised guidance also incorporates plan and commensal sales program expenses, as we both continue to support our brands and our dealers in this increasingly promotional environment.

Speaker Change: following these adjustments.

Speaker Change: Nets of the benefit of additional cost-saving initiatives as we right size or expenses for the current environment.

For participants who use the telephone line, it is recommended to turn off the sound on your device.

Philippe Deschenes: 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. Thank you, Sylvie.

Sabahat Khan: 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. 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: We now expect our revenues to end between 7.8 and 8 billion dollars. Normalized that it does to end between 890 and 940 million dollars. And normalized DPS to end between 575 and 325.

Philippe Deschenes: And I would like to turn the meeting over to Mr. Philippe Deschenes. Please go ahead, sir.

Philippe Deschenes: Thank you, Sylvie.

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 Cimace, chief financial officer. Before we move to the preparer, I would like to introduce Mr. David, remarks I would like to remind everyone that certain four looking statement will be made during the call and that the actual result could differ from those implied in these statements. Before looking at formation is based on certain assumption and is subject to risk and uncertainty and I invite you to consult BRP's MDNA for completely studies.

Philippe Deschenes: 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 Sabahat Seymace, Chief Financial Officer.

Speaker Change: 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.

Speaker Change: As for how we anticipate the rest of the year's one full, we expect a sequential improvement in Q3 in terms of revenue, normalize dividends, and normalize DPS.

Philippe Deschenes: Also during the call, reference will be made through supporting slides, and you can find the presentation on our website that BRT.com under the industry relation section.

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.

Sabahat Khan: 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.

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

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

Jose Boisjoli: Thank you, Philippe.

Speaker Change: While still 25 is not unfolding as we had initially planned.

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 the toward 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.

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.

Jose Boisjoli: On that, I'll turn the call over to usually. 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 teens for their dedication through the difficult period. Over the years, our decisions have always been guided by our commitment to balance the interests of all our stakeholders.

VisualZ: 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.

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. Let's turn to slide four or key financial highlight. Revenue reached $1.8 billion. Normalize EBITDA was $199 million, and normalize EPS was $0.61, 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.

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

Jose Boisjoli: In this spirit, we were the first we aim to proactively reducing ships. We want to protect our dealer business, the value of our brands, and our long-term, profitable growth. Dealers have recognized that our actions 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.

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

VisualZ: We want to protect our dealer business.

Speaker Change: The value of our brains and our long-term, profitable group.

Speaker Change: Dealer have recognized that our actions are those of the true business partners.

Speaker Change: 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.

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

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

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.

Speaker Change: As we look to the long term, we remain considering our strategy driven by our focus on innovation.

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.

Speaker Change: Extensive portfolio and strong builder network, we are well positioned for continued success.

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 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 hands at first before pressing any keys.

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 six, 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.

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.

Speaker Change: And out of consideration to other collars 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 Kennisson at the Bayard. Please go ahead.

Speaker Change: And your first question will be from Craig Kenneson at Beard, please go ahead.

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

Craig Kenneson: 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.

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 sufficient.

Craig Kenneson: 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 core system. 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 RV to be down mid to high single digit, snowmobile to be down low to mid team. And water craft entry will there is only a few months to retail, but they will be down by slightly above 20%.

Jose Boisjoli: Given our focus on bringing network inventory down, we were anticipating some market share loss, namely for side by side.

Craig Kenneson: Yeah, good morning Craig.

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

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 a larger than expected impact on our retail this season.

Speaker Change: and the overall context.

Speaker Change: We are approaching the balance of the year on a course 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.

Speaker Change: and what we expect for each two is our view to be down mid to high single digit.

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 performed very well in ETV, gaining one and a half point of market share. With these achievements, we have closed the gap with the number one position in the industry in terms of ORV unit retail for dealers.

Speaker Change: Snowmobile to be down low to meeting and watercraft 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: Then we believe by when we see the brand in Q2, we believe that projecting this in each two 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 of the 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 our profitable business, we want to protect the dealers, and we want to protect our long-term growth.

Speaker Change: [inaudible] the right approach.

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

Samoyem: Samoyem, who have more inventory are very aggressive on the promotional side for the consumers for the dealers and even one.

Jose Boisjoli: 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: In the Afro Business Reduce is MSRP, and we are follower, we're not will not follow those actions because we want to protect again.

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.

Speaker Change: 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.

Jose Boisjoli: And this is basically...

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

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 announce the availability of our highly anticipated Canon pulse and origin, all electric motorcycle lineup, making our entry into two wheel space. These model leverage our own ROTAX e-power unit, which also propel our electric snowmobile and will be used in future BRP electric product.

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 were 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, and they came out to the club first positive with the new product.

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 in 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 have to commit it to reduce inventory.

Jose Boisjoli: In terms of the next step, we will be hosting several media event training our dealers and hosting BRP 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.

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

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: Our profitability, theirs and ours.

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

Jose Boisjoli: 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 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: But this was not the only key news of our dealer event as you can see on slide nine. We bolster our Canon off road lineup and producing the four-seat version of our top of the line Mavic R. This extension was highly anticipated, as multi passenger model represent close to 60% of sales in that category. 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.

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 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. 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.

Speaker Change: We will have 300 dealers here 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...

Jose Boisjoli: This new platform has been very well received just like the mid CC last year. As for Triewell Vehicle, we've launched the all new Cannam Canyon, our most rugged ever in this segment. Purpose bill 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. On the seedless side, we further bill 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: Display the product for the demo ride after that as much as the retail will be finished and it will be a

Speaker Change: Verdi law commitment from the dealer and so far it was well received.

Operator: Thank you.

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

Jose: Thanks, Jose.

Jose: Thank you.

Martin Landry: Please go ahead.

Jose: Next question will be from Martel Andri at Sbastien Foul. Please go ahead.

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

Martel Andri: Good morning. I was wondering if you could share your expectations for industry sales in North America for this year.

Jose Boisjoli: Like I just said, Martin, on the previous call, and I will repeat. Right now for ORV, 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%. 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.

Speaker Change: Like I just said, Marten, 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: 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: or 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: Now let's turn to slide 10 for more detail on our year-round product. Revenue were down 33% to $1 billion from the zoo to reduce 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 and 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 delivers market share gain in the mid CC segment.

Jose Boisjoli: Now, next turn to slide 10 for more detail on our year round product. Revenue were down 33% to $1 billion from the zoo to reduce 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 and aggressive promotion from other OEM this year. However, we continue getting share in the utility category driven by the ongoing success of our high end defender cab.

Speaker Change: and this is for the industry in North America. On the our retail side, because of the high promotion activity that we will not necessarily be a leader, but a follower. And we're planning to do some market share during that.

Jose Boisjoli: 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.

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

Jose Boisjoli: But we can the right thing to do for the long term. Okay, and just to be clear, are those units or dollars?

Jose Boisjoli: As for TV, retail was down low single digit in the quarter in line with the industry. We are still seeing solid traction with our new offlander platform, which deliver market share gain in the mid CC segment. 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: Okay, and just to be clear, are those units or dollars.

Jose Boisjoli: Units. Units, sorry.

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-round product business. The majority of it comes from side by side given the software trends we're seeing.

Speaker Change: You let's, you let's sorry.

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

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 this comes from side by side, given the software trends we're seeing.

Jose Boisjoli: Okay, and just to better clarify, what would be a good assumption to use in terms of average unit price sale, so fiscal 25 versus 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.

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 as explained a few minutes ago. 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. The switch was down high 30%, suffering from generally weaker trend in marine, and lapping a strong quarter last year, supported by a early introduction momentum.

Speaker Change: i

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

Speaker Change: U.N.Pryseel

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

Speaker Change: Well, in terms of MSRP, well 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 we try to price in the new features that we put in, some inflation on salary, etc. But, or mindful, that price point is a significant hit-win for some consumers.

Jose Boisjoli: Moving on to slide 12, with par-sport part accessories and apparel and new EM engines, revenue were down 12% to $258 million due to lower sales volume. PNA sales continued to increase. To benefit from our growing fleet, especially in ORV, upset by weaker demand for snow-related products and lower accessories sales due to softer retail.

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.

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.

Jose Boisjoli: 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 high. We expect the promotional environment to be sustained at these levels, at least for the first part of next year.

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

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.

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

Jose Boisjoli: Turning to marine, revenue were down 54% to $57 million, 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.

Bessent Look: Okay, thank you very much, Bessent Look.

Robin Farley: Next question will be from Robin Farley at UBS. Please go ahead.

Philippe Deschenes: Philippe Deschenes,

Philippe Deschenes: Next question will be from Robin Farley at UBS. Please go ahead.

Robin Farley: 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.

Robin Farley: But in your introductory remarks, it's kind of 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. And then I did have a follow-up. Let me just ask that first.

Sbastien Martel: With that, I turned 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.

Sabahat Khan: With that, I turned the call over to Sabahat Khan.

Speaker Change: But in your introductory remarks, I think.

Robin Farley: It sounded like you were saying you expect to gain Sharon or a V for the coming season, so I just wanted to...

Speaker Change: Thanks for your understanding.

Speaker Change: I think that would be sort of next year's calendar year, in other words, lose share between now and calendar end. 24 but then gained share in 25, we're just to kind of square that and then I did have a follow-up. Let me just ask that first. On my prepare remark, we gained share in season 24 that ended at the end of July.

Sbastien Martel: To accelerate the reduction of our network, the reduction of our network inventory levels. Looking at the numbers, revenues were down 34% to $1.8 million, primarily due to lower shipments. We generated $377 million 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.

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, with the product lineup that we have, with some inventory correction, believe it will be gaining share over the full season from August 1st to July next year.

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: Okay, great. Thank you for that clarification.

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

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.

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 other's 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 two-wheel market.

Speaker Change: Okay, great. Thank you for that clarification. And then my follow-up question is actually to some of the electric.

Speaker Change: Like, you know, you're making a big push in here, I guess others' expectation for electric motor cycle has come down significantly over time and just kind of wondering if you...

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 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 environments, high interest rates, 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.

Sbastien Martel: 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 year-end. 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.

Speaker Change: See that space, but differently than others are what leads you to be more optimistic about the electric two wheel market. Thanks.

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 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, but the product is very easy to ride.

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

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.

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 since the June we had a lot of media a lot of dear who have tried our product and they are very happy with the product and it's a product

Speaker Change: 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.

Sbastien Martel: With this in mind, let's turn to slide 16 for an update on our guidance for the year. As Jose 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 US power sport market.

Speaker Change: But the product is very easy to ride.

Sbastien Martel: As such, we are approaching the second half of the year with caution, assuming that the softness we saw into two 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.

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 1399 for the entry level Vitt model.

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

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 300 dealers in in in 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. 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.

Speaker Change: Then this is on the product side. The Kenan brand is well-known worldwide now. We have a very good dealer and that's work. We're planning 300 dealers.

Sabahat Khan: 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. 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.

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

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 a 150 city in Europe that are closing downtown to combustion engine vehicle and a lot of consumer turned to my electric motorcycle then.

Sbastien 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, and 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.

Jose Boisjoli: 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.

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.

Robin Farley: Okay, great, thank you.

Operator: Thank you.

Speaker Change: Okay, great, thank you.

Benoit Poirier: Next question will be from Benoit Poirier at the South Knight 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 takes which respect to fiscal year 26. How we should be looking at the fiscal year 26 given your revised outlook for fiscal year 25.

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

Sbastien 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. 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.

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 in take, which respect to fiscal year 26, how we should be looking at fiscal year 26 given your revised outlook for fiscal year 25.

Benoit Poirier: Thank you.

Sabahat Khan: 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. 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.

Speaker Change: Thank you.

Speaker Change: Good morning, good morning, but in the way, obviously, on the sales program, some of the VMs 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.

Julie: On that, I'll turn the call over to Julie. 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 the difficult period. Over the years, our decision has always been guide by our commitment to balance the interests of all our stakeholders.

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 floor plan 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.

Julie: In this spirit, we were the first we aim to proactively reducing ships. 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.

Sabahat Khan: 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.

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 buy-down, especially on the fore plan for us and for the dealers.

Jose Boisjoli: Dealers have recognized that our actions 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. 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.

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

Sabahat Khan: On your second question, what to expect for next year? It's a good one. Obviously, the environment has flew with very recently. So it's tough to come out 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.

Julie: 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. 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.

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

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.

Jose Boisjoli: We are well-positioned for continued success.

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 on 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. 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.

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

Sabahat Khan: 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, that's some of that pressure by taking the necessary actions to right size or cost structure.

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 in this reaction, the right flies are cost structure.

Sabahat Khan: 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 one of 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: But if we will be on next year, we are optimistic about the business, we're well positioned to continue to grow our markets here, especially in our V, exploring new markets, and obviously we still have further efficiencies to generate across the portfolio and across the business.

Operator: Thank you.

Craig Kennison: And your first question will be from Craig Kennisson at the Bayard.

Craig Kennison: And your first question will be from Craig Kennisin at Beard. Please go ahead. Hey, good morning. Thanks for taking my question. I guess I appreciate what you're doing with respect to dealers and making sure there's healthy as can be.

Craig Kennison: Please go ahead.

Jose Boisjoli: Hey, good morning. Thanks for taking my question. I guess it's appreciated what you're doing with respect to 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, and I'm curious what you'd use internally to know that this cut is sufficient.

Speaker Change: Ambulance.

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, but not that.

Craig Kennison: 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. 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.

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.

Sabahat Khan: Okay, that's great. 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.

Sabahat Khan: 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 revise outlook. Yeah, overall, very comfortable with a balance sheet. 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 or not restricted from any increases in leverage that we might be experiencing in the short term.

Speaker Change: Overall, very comfortable with a balance sheet. I've often said that coming although the great financial crisis, we had a 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.

Craig Kennison: And what we expect for each two is RV to be down mid to high single digit, snowmobile to be down low to mid team. And watercraft 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 the brand in Q2, we believe that projecting this in each two that our water is the right approach. On our side, we obviously, we are in a better position than some of the M with our inventory.

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 Fourth of Midterm.

Sabahat Khan: We've recently renegotiated the maturity of a billion-dollar term by 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. And from a capital deployment, we've just recently completed the NTIB. We were repurchased 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.

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

Craig Kennison: Some OEM 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. And we are follower, we will not follow those actions because we want to protect again our profitable business, we want to protect the dealers and we want to protect our long term growth. And 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: 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.

Craig Kennison: Thank you.

Speaker Change: But we'll want to make sure that we protect our reflectability 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 go before we need to make that decision.

Sabahat Khan: 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 this is basically...

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

Operator: 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.

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

Jose Boisjoli: 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 were the first who we end to committed to reduce inventory.

Martin Non: I get more, and this is Martin Non for Joe. Just sort of assuming that the retail environment holds up at the city basin right now, where the basin 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 defeat inventory. We are at 13 at the end of Q2, and our goal is to be 15 to 20. And obviously, snowmobile will be critical because we have more non-current and desired since last winter.

Martin Non: I am Lauren, this is Martin Non 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 line with next year or do you anticipate for no discounting?

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

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

Jose Boisjoli: 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.

Jose Boisjoli: In terms of balancing retail and wholesale 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: More non-corrending, desired.

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

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: Okay, understood. I'm just looking at this quarter; one of your competitors launched several model year 25 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, the shipment our plan a few months in advance, we have dollar on order order on hands and we ship according to plan for everything is scheduled for the next two to three months.

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

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 an 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. Thanks, Jose.

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

Craig Kennison: Thank you.

Jose Boisjoli: But for sure, I'm introducing 25 so early; they had a 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, and we decided not to follow because obviously we are in this business for long term. And I think it would be wrong to follow for our brand for the dealer business and our business and for long-term profitability.

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

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

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.

Operator: Thank you.

Martin Landry: 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, Martin, on the previous call, and I will repeat, right now for ORV, 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.

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

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

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.

Jose Boisjoli: I was wondering if you could share your expectations for industry sales in North America for this year. Like I just said, Martin, on the previous call, and I will repeat. Right now for ORV, 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%. 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.

Jose Boisjoli: 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: 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.

Jose Boisjoli: Thank you very much. Thank you.

Jean Chu: Next question will be from Jean Chu at BNP Packback. Please go ahead. Hi guys. Thanks for the question. You kind of mentioned that other competition, more bits lower to reduce shipments. I guess, like, how do you think the industry will.

Speaker Change: Thank you very much. Thank you.

Speaker Change: Next question, we'll be from John Shoe at B&P Packet, please go ahead.

John Shoe: 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?

Jose Boisjoli: Look, exiting the year, like, are the competition also kind of taking the right steps in your view, or such that you think like 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 exit inventory? 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 probably better industry and volume assumptions and some some relate to adopt the adapt to the software trends that we've been experiencing, and that resulted in more inventory out there.

Martin Landry: 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 the right thing to do for the long term.

Speaker Change: The industry will look exiting the year. Are the competition also taking the right steps in your view or such that you think the whole industry could be inventories could be down, 15 or so percent or how do you think about where the whole industry exists in the story?

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

Jose Boisjoli: 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.

Jose Boisjoli: And more aggressive promotions. Hopefully, that inventory gets liquidated in the near term. Even with software trends, if there 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 are down 13% since Q4. So we're making very good progress. And so, if 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: But we can the right thing to do for the long term.

Speaker Change: and more aggressive promotions, hopefully that inventory gets liquidated in the near term.

Martin Landry: 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 products business. The majority of it comes from side by side, given the software trends we're seeing. Okay, and just to better clarify, what would be a good assumption to use in terms of average unit price sale, fiscal 25 versus 24 in terms of decline?

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

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.

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 or are the inventory in the network. And we're well on track. You saw inventories of down 13% since Q4.

Jose Boisjoli: Okay, and just to better clarify, what would be a good assumption to use in terms of average unit price sale, so fiscal 25 versus 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: 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.

Operator: Okay, I got it.

Mark Petrie: Thanks. I'll pass on.

Speaker Change: i

Mark Petrie: Thank you.

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

Mark Petrie: Next question will be from Mark Petrie at CIBC.

Mark Petrie: Please go ahead. Hey, good morning. I guess just following up on that inventory question.

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

Martin Landry: 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?

Mark Petrie: 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 a different, 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.

Mark Petrie: Thank you for following me on that in the very question.

Mark Petrie: I think you've called out, it's up 3% you're 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.

Speaker Change: 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?

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, that's obviously MSRP, and maybe 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.

Martin Landry: That would be a fair assumption. 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 high. We expect the promotional environment to be sustained at these levels, at least for the first part of next year.

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

Jose Boisjoli: So then I'll say that the miss versus where we're expecting to end in Q2 is related to personal water graph. And as I said in my in one of the questions that I answered, we expect personal water graph shipments to be softer next year as we work to 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.

Martin Landry: Okay, okay, thank you very much.

Operator: Okay, okay, thank you very much.

Speaker Change: 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.

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's kind of 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.

Robin Farley: Next question will be from Robin Farley at UBS. Please go ahead.

Robin Farley: 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's kind of 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.

Jose Boisjoli: 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.

Speaker Change: 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.

Jose Boisjoli: 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 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.

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

Robin Farley: In other words, lose share between now and calendar and 24, but then gain share in 25 or just to kind of square that. And then I did have a follow up. Let me just ask that first. 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. We believe it will be gaining share over the full season from August 1st to July next year.

Jose Boisjoli: In other words, lose share between now and calendar end 24, but then gain share in 25 or just to kind of square that. And then I did have a follow-up. Let me just ask that first. 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, with the product lineup that we have, with some inventory correction, believe it will be gaining share over the full season from August 1st to July next year.

Speaker Change: Maybe a sort of related question. Can you just help us understand how you arrive at the target of?

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

Speaker Change: 15% to 20% inventory reduction.

Speaker Change: 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: 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 graph 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. If a dealer sells 100 snowmobiles. 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.

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

Speaker Change: This is a little product, let's see what a graph and the snow will be ill. We have a target.

Jose Boisjoli: Okay, great.

Operator: Thank you for that clarification.

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

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

Speaker Change #100: It's no more to hand the season with 10 units for the following season. That's...

Speaker Change #100: The ballpark that we're looking at as a proxy.

Speaker Change #100: then forced seasonal product, watercraft, and snow, it's very different and I would include in there the both industry, the marine industry.

Jose Boisjoli: For a year round product, like tree wheel, side by side, any TV, we're looking at it on days of an inventory, forward days of an inventory. In the deer, 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. And there is some fluctuation, depending on the region, but every dealer has that objective of being around 90 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 #100: For a year-round product, like Tree Will, side-by-side, and ETV

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 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, but the product is very easy to ride.

Speaker Change #100: We're looking at it on days of an eventory, forward days of an eventory, in the deer.

Speaker Change #100: 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.

Robin Farley: 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 we confident Robin, I believe we have, you know, the right product and what I'm very happy with in the last since the June, we have 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 rider, but it's a product for commuting or short distance.

Speaker Change #100: And there is some fluctuation, depending of the region, but every dealer has that objective of being around 19, 90 to 100 days of forward retail, depending of his region.

Speaker Change #100: It's dynamic, we have this map for all the dealer.

Speaker Change #100: 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.

Jose Boisjoli: 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: 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 13999 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.

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 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. 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 for dealers are feeling some pressure, higher MSRPs as well.

Jose Boisjoli: It has innovation, incredible connectivity and if you look at the price that we price with the range we have like the base price is 1399 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 80 to 50 minutes. Then this is on the product side; the Canon brand is well known worldwide now. We have a very good dealer network; we planning 300 dealers in in in in Canada, US, and 11 countries in Europe for the first year, going to 450 next year.

Speaker Change #100: Okay, that's excellent color, Jose, I appreciate that. I guess maybe just...

Speaker Change #101: My question would be then...

Speaker Change #102: 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 #103: Well, we still want a good unit representation in the network, and so even though we were planning for stuff during the street, the number that the 15 to 20 percent also factor in higher interest rates for dealers or feeling some pressure.

Robin Farley: 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 415 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. 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 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 mid to long term play.

Jose Boisjoli: 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 the software industry forecast. Yeah.

Speaker Change #104: Hire MSRPs as well and so in relative firms will still be lower despite market surgains than where we work pre-COVID.

Robin Farley: Okay, great, thank you. Thank you.

Jose Boisjoli: 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 #104: and so as Jose said the 90 is a target but could be the 90, 100 days were 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: 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 it something that will be instant?

Mark Petrie: Okay. John, thanks, guys. Appreciate the comments, and all the best.

Operator: Thank you.

Speaker Change #105: Okay, guys, thank you guys for your comments and all the best. Thank you.

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

James Hardiman: Please go ahead.

Speaker Change #105: Next question will be from James Hardeman at City. Please go ahead.

James Hardiman: 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 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's 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? And IE, you know, 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?

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

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.

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

James Hardeman: and early look at fiscal 26th, difficult, that may be. Obviously, you guys had the guidance bridge in the last couple of quarters. We scrapped that and I can certainly appreciate why that, who's getting a little bit too convoluted. But I guess maybe most significantly, is there a way to put a dollar?

Operator: Okay, great, thank you. Thank you.

Benoit Poirier: Next question will be from Benoit Poirier at the South Knight 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 which respect to fiscal year 26. How we should be looking at the fiscal year 26 given your revised outlook for fiscal year 25.

Speaker Change #107: Value around the magnitude of the inventory reduction, I know it's too early to tell, but it wholesale equal retail next year and retail was pretty flat. How much earnings would you get back in that scenario?

Jose Boisjoli: But you know, when we started the year, we, our first call in March, we said that we, 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 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. As I just said, we want to defeat inventory this year, to be at the right level for seasonal and year-round product.

Speaker Change #108: But you know, when we started the year, we, our first call in March, we said that,

Benoit Poirier: Thank you.

Benoit Poirier: Thank you. Good, good morning, but 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 were back to where we were in pre-COVID in terms of percentage of sales. 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.

Jose Boisjoli: 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. 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.

Speaker Change #108: 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 #108: 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.

Speaker Change #108: Probably next to 18 months will be still a correction period.

Speaker Change #108: As I just said...

Speaker Change #109: 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 next year is too early to call. I mean, with all the macroeconomics 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.

Benoit Poirier: And so some OEMs have been later in adjusting deliveries to 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. We've invested a 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-down, especially on the four planned for us and for the dealers.

Speaker Change #110: It would be interesting what the U.S. said will do.

Sbastien Brewer: and Sbastien Brewer.

Speaker Change #112: This is definitely positive, but it will take a while before we coming back to the level.

Sabahat Khan: Then I think there is too much factor out there to, to, to, to commit on anything. 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.

Speaker Change #113: a reasonable level, and 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, Q4 call that when we launch an instrument guidance for this year.

Benoit Poirier: But as I said, we expect it to remain high back half of this year in the beginning of next year. On your second question, what do we expect for next year? It's a good one. Obviously, the environment just flew with very recently. So it's tough to come out 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 #113: 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 #113: 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.

Sabahat Khan: Okay, and, and I guess the 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 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.

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 sustain 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.

Speaker Change #114: Okay, and I guess follow up to that. Any other big offsets we should be thinking about in terms of that bridge.

Speaker Change #115: and then I guess my follow-up question would be the interest rate piece.

Speaker Change #116: Obviously the Fed is set to pivot here in a meaningful way.

Speaker Change #117: 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: So shipments for that product line are likely to be down next year. And obviously, well, that's some of that pressure by taking the 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 continue 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 #118: 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.

Sabahat Khan: You just don't think that's going to make much of a difference in, in the sort of medium term. Well, for our, our financial 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. 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 #119: Well, for our financials, interest rates cuts are going to help. They're going to help the foreplan cost. And we are obviously, if we look at what's expected in the market, yes, that's going to help on the foreplan side.

Benoit Poirier: 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 one of 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 #119: 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 head-wing coming from interest rates next year, because these caps are rolling off. Probably let's say 10 to 15 million.

Sabahat Khan: Probably that's a 10 to 15 million. From a dealer point of view, it's going to help as well. I mean, there are 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? It would be two or later.

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. 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 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 few key learnings.

Benoit Poirier: Okay, that's great. 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 #120: From a dealer point of view, it's going to help as well. I mean, the four plant 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 #120: 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.

Sabahat Khan: Nicole. Got it. That's helpful.

Sabahat Khan: Thank you.

Benoit Poirier: One is make sure we have a covenant like 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 lights or 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 B pushing it to 2031.

Cameron Doerksen: Next question will be from Cameron Doerksen at National Bank Financial.

Speaker Change #121: Ciao, let's go for it. Thank you.

Speaker Change #122: Thank you. Next question will be from Cameron Dürksen at National Bank Financial. Please go ahead.

Cameron Doerksen: Please go ahead. Yeah, thanks.

Sabahat Khan: Good morning. I just wanted 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 lowering Q2. You've cited the, I guess, R&D subsidies. He's hitting the quarter there. So just he just talked a little bit about what you see the back half of the year on those operating expenses.

Cameron Dürksen: Good morning. I just wanted to speak in the frame of how we should think about some of the operating expense and light items for the rest of the year. Obviously, R&D was...

Cameron Dürksen: was lowering Q2, you decided that, I guess, already some of these hitting the quarter there, so just talk a little bit about what you see then that the back half of the year on those operating expenses.

Benoit Poirier: 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. And from a capital deployment, we've just recently completed the NCIB. We were repurchased 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 and certain, and so we prefer to be prudent, but there's a few months to grow before we need to make that decision.

Sabahat Khan: Yeah, and G and Gina. Yeah, obviously a bit of movement. But again, if I look, go down the PNL or 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, first six months of the year. Or gross profit margin was at 22.1%. And then in terms of old packs, obviously, there's going to be some opaque movement, but relatively flat the over a year as well from an opaque side.

Benoit Poirier: Thank you very much for the time.

Speaker Change #124: But again, if I go down the piano, I'll go to the piano. I'll go to the piano. I'll go to the piano, I'll go to the piano.

Speaker Change #125: I'll be growth process 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 22.1%. And in terms of all pecks, obviously there's going to be...

Sabahat Khan: and so we prefer to be prudent, but there's a few months to grow before we need to make that decision.

Speaker Change #126: Some opaque movement but relatively flat the over a year as well from an opaque size.

Operator: Thank you very much for the time. Thank you.

Sabahat Khan: 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 with with, there is always in the company like us, a lot of projects going on in different country, different area. And obviously we will relook at the whole list and reprioritize the next 18 months going to more slowdown and what we had anticipated.

Joe Altobello: Thank you. 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. Please go ahead.

Speaker Change #126: Ok.

Speaker Change #127: 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-based, 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?

Joe Altobello: Good morning, this is Martin Non for Joe. Just sort of assuming that the retail environment holds up at the city base 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 destalking? 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.

Joe Altobello: I get more, and this is Martin Non for Joe. Just sort of assuming that the retail environment holds up at the city basin right now, where the basin 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 defeat inventory. We are at 13 at the end of Q2, and our goal is to be 15 to 20. And obviously, snowmobile will be critical because we have more non-current and desired since last winter. In terms of balancing retail and wholesale next year, I think it's too early to call at this point.

Speaker Change #128: Without going to the details, there is always in the company like us, a lot of projects going on in different countries, different areas and obviously we will look at the whole list and prioritize.

Joe Altobello: And obviously, snowmobile will be critical because we have more non-current and desired since last winter. In terms of balancing retail and wholesale 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 #129: and the next 18 months going to more slow down than what we had anticipated.

Sabahat Khan: In the other elements is 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. And so that is certainly another level that we haven't also. So, 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.

Speaker Change #129: In the other elements, it's from the operations. Again, we're planning more conservatively for next year with softer 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.

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 #129: But when you do sequential adjustments to production, it's tough for them to run their shop as efficiently as possible.

Joe Altobello: Okay, understood. I'm just looking at this quarter. One of your competitors launched several model year 25 earlier than normal. How did that impacted your shipments and retail sort of in this corner in 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 dealer order on the hands and we ship according to plan for everything is scheduled for the next two to three months.

Jose Boisjoli: Okay, understood.

Jose Boisjoli: I'm just looking at this quarter; one of your competitors launched several model year 25 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, the shipment our plan a few months in advance, we have dollar on order order on hands and we ship according to plan for everything is scheduled for the next two to three months. But for sure, I'm introducing 25 so early; they had a 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, and we decided not to follow because obviously we are in this business for long term.

Speaker Change #129: 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 three or four years. Now we can focus on reducing billiomaterial through cost improvement initiatives.

Joe Altobello: But for sure, introducing 25 so 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 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.

Joe Altobello: Thank you very much.

Sabahat Khan: And that's going to be another important driver of efficiency. Okay, so that that process is I'll see you're you're that's ongoing, but maybe we'll see some of the benefits more so in fiscal 26 as opposed to this year. Yeah, absolutely.

Jean Chu: Thank you.

Speaker Change #129: and that's going to be another important driver of efficiency.

Speaker Change #130: Okay, so that, that, I guess, process is...

Speaker Change #131: I honestly hear that ongoing, but maybe we'll see some of the benefits more so in fiscal 26 as opposed to this year.

Sabahat Khan: Okay, great. Appreciate it. Thanks very much.

Operator: Thank you.

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

Speaker Change #132: Okay, great, appreciate it. Thanks very much.

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 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 to spur consumer demand? 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%.

Speaker Change #133: Thank you. Next question will be from Jonathan Goldman at Scolchabank. Please go ahead.

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 a function of consumers that are laying 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 a consumer demand?

Jose Boisjoli: And I think it would be wrong to follow for our brand for the dealer business and our business and for long-term profitability.

Speaker Change #135: And just to give you some consumer behavior or trend, you know, pre-COVID, 20% of our unit were sold to new and trend.

Jose Boisjoli: 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 #136: In the peak of the COVID time, it did go up above 30%.

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.

Operator: Thank you very much.

Jean Chu: Thank you.

Jean Chu: Next question will be from Jean Chu at BNP Packback.

Jean Chu: Next question will be from Jean Chu at BNP pack up. Please go ahead. Hi guys. Thanks for the question. You kind of mentioned that other competition more bits lower to reduce shipments.

Speaker Change #136: and now we're back to the 20%

Jose Boisjoli: Please go ahead.

Speaker Change #136: 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: Hi guys. Thanks for the question. You kind of mentioned that other competition, more bits lower to reduce shipments. I guess, like, how do you think the industry will.

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 water craft. 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 water 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.

Jean Chu: I guess like, how do you think the industry will look exiting the year like are the competition also kind of taking the right steps in your view or such that you think like 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 OEM started a year with probably be better probably better industry and volume assumptions and some some relate to adopt the adapt to the softer trends that we've been experiencing and that resulted in more inventory out there.

Speaker Change #137: Just split between high-end technology, innovation, product, versus interlevel. We see, and I will just give you some depth of what a craft.

Speaker Change #138: 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.

Jean Chu: And more aggressive promotions. Hopefully that inventory gets liquidated in the near term. Even with softer trends, if there 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.

Speaker Change #138: All the spark category in the GTA I category was hit harder.

Speaker Change #138: versus the high end.

Speaker Change #138: on side by side same thing. If you look premium versus value, the premium was up mid-singual digit. When the value was down mid-double digit, then the trend is that you see that.

Jose Boisjoli: Then the trend is, you see that the trend that we saw in the last quarter is continuing.

Jose Boisjoli: I was seen now, what's you is the new and trend level. And there is more customer, new and trend customers who finance their product that are refused to create it. We hear that more often. And this will come back when the interest rate will go down.

Speaker Change #138: The trend that we saw in the last two quarters is continuing. I will see now what's you is the new entrain level.

Speaker Change #139: and there is more customer new-entrant customers who will finance their product that are refused to credit.

Jean Chu: 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 are down 13% since Q4. So we're making very good progress. And so if that trend continues, we should be in a better position next year where we'll be more balanced in terms of wholesale and retail. Okay, I got it. Thanks.

Jose Boisjoli: 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 are down 13% since Q4. So we're making very good progress. And so, if that trend continues, we should be in a better position next year, where we'll be more balanced in terms of wholesale and retail. Okay, I got it.

Mark Petrie: I'll pass off.

Speaker Change #140: We hear that more often and this will come back when the interest rate will go down.

Mark Petrie: Thank you.

Jose Boisjoli: That's great color. And then you talked about potentially gaining share in order to 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 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.

Jose: and that's great color and then Jose you talked about potentially gaining share and all or the in the season 25. Your expectation you can gain similar levels as you did this year.

Operator: Thanks.

Mark Petrie: I'll pass on. Thank you.

Jose: Yeah, we're not adventurer, we're not adventurer committing on any numbers but the point is right now we are in the period where

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 a 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.

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.

Speaker Change #141: It's transitioning from Model Year 24 to 25, we start producing 25 for a TV side by side.

Jose Boisjoli: 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 a different, 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.

Desmont: 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, 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.

Desmont: But that's why when this transition is done typically take a quarter or two.

Desmont: After that, we will compete again, mother-year to mother-old-year, and we believe we have the right product to start with.

Mark Petrie: So I'm just wondering like what would it take for you to sort of move into our 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 graph industry, which was softer than what we have expected. So then I'll say that the miss versus where we're expecting to end in Q2 is related to personal water graph.

Jose Boisjoli: So I'm just wondering, like what would it take for you to sort of move into our step function higher in terms of promotional investment to clear inventory. Yeah, the main element in the second quarter mark is the personal water graph industry, which was softer than what we have expected. So then I'll say that the miss versus where we're expecting to end in Q2 is related to personal water graph. And as I said in my in one of the questions that I answered, we expect personal water graph shipments to be softer next year as we work to that inventory.

Jonathan Goldman: Just highlight on a TV. If you look at our TV 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 bodes well for the next season. Thank you for taking my questions.

Desmont: And we have, obviously, the right program to continue our momentum.

Desmont: And just 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.

Desmont: 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 boats well for the next season.

Mark Petrie: And as I said in my in one of the questions that I answered, we we expect personal water graph shipments to be softer next year as we work to 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. 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.

Operator: I'll get that from you. Thank you.

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.

Jaime Katz: Next question will be from Jaime Katz at Morningstar. Please go ahead. Hi, good morning. So, could 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 so far? Yeah, the rates are actually pegged to so far, so they haven't yet moved down. Obviously, there should be some positive news in the next few weeks. Hopefully, that's going to be announced.

Speaker Change #143: Thank you for taking my questions, I'll get back to you.

Speaker Change #143: Next question will be from Jamie Katz at Morning Start. Please go ahead.

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.

Jamie Katz: 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 still for?

Mark Petrie: Okay, appreciate that color. 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, you know, units per dealer or. Maybe units as a related to market share or however you think about that sort of inventory penetration.

Jose Boisjoli: Okay, appreciate that color. 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 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.

Speaker Change #145: Yeah, the rates are actually peg the solfer, so they haven't yet moved down. Obviously there should be some positive news in the next few weeks. Hopefully that is going to be announced. That is certainly going to help the US dealers.

Jaime Katz: That is certainly going to help the US dealers.

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

Speaker Change #145: But as of recently they've been stable at the levels in the last two quarters.

Jose Boisjoli: 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 untarded 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.

Mark Petrie: 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 graph and 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. If a dealer sells 100 snowmobile. It's normal to hand the season with 10 units for the following season. That's the ballpark that we're looking at as a proxy.

Speaker Change #146: Okay, and then when we think about assessing secular demand changes, I think it would be interesting to hear how maybe something like I'm chartered society demand has changed in the recent period. And 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 #147: 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 society is to team up with the best rental operator around the world.

Mark Petrie: Then for 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 an inventory, forward days of an inventory. In the deer, 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: 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 an inventory, forward days of an inventory. In the deer, 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. And there is some fluctuation, depending on the region, but every dealer has that objective of being around 90 to 100 days of forward retail, depending on this region.

Jose Boisjoli: And like we say internally, it's 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. Thanks. Thank you.

Speaker Change #148: So make sure we are offering a top-notch experience for our consumers and like we say internally but on seed because every time you try our product we believe we have a great success to converting in cells.

Speaker Change #148: But I didn't have new numbers to see if I didn't hurt anything that their business.

Speaker Change #149: Slow down drastically, lead lead.

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.

Speaker Change #150: Perfect Thanks!

Speaker Change #150: Thank you. Next question will be from Luke Henan at Kenna Court. Please go ahead.

Mark Petrie: And there is some fluctuation depending on the region, but every dealer has that objective of being around 90 to 100 days of forward retail, depending on this region. But it's dynamic. We have this map for all the dealer, depending of 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.

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 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 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 snowmobile, as you know, will be finished the season last year with higher snowmobile inventory that becomes non current.

Luke Henan: Thank you. 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 unity 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?

Jose Boisjoli: 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. 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 #152: 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 network, about 75% of the inventory was permanent.

Speaker Change #153: 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 position.

Mark Petrie: 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. Well, we still want a good unit representation in the network.

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 very much. Yep.

Brian Morrison: Thank you.

Brian Morrison: 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 destock to forward 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 have to check where you get your numbers.

Speaker Change #153: i

Speaker Change #153: Thank you. Next question will be from Brian Morrison at Cowen. Please go ahead.

Jose Boisjoli: 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 for dealers are feeling some pressure, higher MSRPs 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 the software industry forecast.

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 think it won't 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.

Mark Petrie: 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 MSRPs as well. And so in relative terms will still be lower despite market share gains and 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 the software industry forecast. Yeah.

Speaker Change #155: is still happy about 120 cases shared with us where you are now.

Speaker Change #156: 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.

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 inventory is already down 13% since the beginning of the year. And so we're in very good shape to the day. Okay, I understand. Can you give us a ballpark of where you are now? Well, the ballpark is 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.

Speaker Change #156: As I said, we made good progress for already in the inventory is already down 13%.

Operator: Yeah.

James Hardiman: Okay.

Mark Petrie: Okay. John, thanks guys. Appreciate the comments and all the best.

James Hardiman: John, thanks, guys. Appreciate the comments, and all the best.

Speaker Change #156: Since the beginning of the year and so we're in a very good shape to deliver our 15th to 20% for the end of the year right.

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

James Hardiman: Thank you. Next question will be from James Hardeman 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's getting a little bit too convoluted.

Speaker Change #157: Okay, understand, can you give us a ballpark of where you are now?

James Hardiman: So I wanted to circle back on the question about sort of early and early look 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's getting a little bit too convoluted.

Speaker Change #158: Well, all parts are 33% now, so that's pretty precise in terms of number.

Speaker Change #159: Okay, I'm talking in terms of days, but if next question said in terms of your liquidity, I understand it's very good, but is there a target from leverage that you don't want to see that I think you had a target of one and a half times the two times previously?

Jose Boisjoli: 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's 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 coming out light and the maturities are have been extended.

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

Sabahat Khan: But I guess maybe most significantly, is there a way to put a dollar value around the magnitude of the inventory reduction? And IE, you know, 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? But you know, when we started the year, we, our first call in March, we said that we, it was a correction in 2024; it was a correction year. We had the bad winter, but 2024, we all believe, was a correction year.

Speaker Change #160: Yeah, well, we want to keep in 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 slow down and we need to.

Speaker Change #161: Corrected at every week.

Speaker Change #161: Leverage is going to go off, but when we IPOred, we were three times levered and we operated that level and we were very comfortable operating at that level because our debt is going at light and the maturedies are...

James Hardiman: But you know, when we started the year, we, our first call in March, we said that we, 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 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: 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 up three times three point five 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.

Speaker Change #161: 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.

Sabahat Khan: 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. As I just said, we want to defeat inventory this year, to be at the right level for seasonal and year-round product.

Speaker Change #162: and so... Okay.

Speaker Change #162: Tolker with one at three times 3.5 times

Speaker Change #162: In the current context, where with our Treasury theme earlier this year, we extended the maturity of the revolver in the term B, I'm super comfortable operating at those levels.

Jose Boisjoli: 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.

James Hardiman: As I just said, we want to defeat an inventory this year, to be at the right level for seasonal and year-round product. And next year is too early to call. I mean, with all the macroeconomics situation, the interest rate are starting to go down, but it's not, it would be interesting what the U.S. 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. And I think there is too much factor out there to, to, to, to commit on anything for fiscal year 2026.

Speaker Change #163: Okay, and the last question, maybe just say, do you have any insight right now into the use marker?

Sabahat Khan: And next year is too early to call. I mean, with all the macroeconomics 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.

Speaker Change #164: We don't have much data on this on the use market, but obviously

Speaker Change #164: I think you know during the COVID a lot of consumer purchase.

Speaker Change #165: product at I mean above a misorpye price and this is...

Speaker Change #166: Clinging out slowly. It takes a while for our customer to accept a loss.

Speaker Change #166: A bigger loss than he was expecting on his use unit, but this is, I would say, stabilizing right now.

James Hardiman: Yeah, in terms of quantifying the impact in the Q1 or Q4 call there when we launched an instrument 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.

Jose Boisjoli: Okay, thank you very much. I appreciate the actions you guys are taking.

Speaker Change #166: But I don't have a specific data to share with you this morning.

Jose Boisjoli: Thank you.

Speaker Change #167: Okay, thank you very much. I appreciate the actions you've got to take it.

Frederick Wightman: Next question will be from Fred Whitman at Wolf Research.

Speaker Change #168: Thank you.

Frederick Wightman: Please go ahead. Hey guys, good morning. I was just hoping you could unpack the changes to the year-round guidance and 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 if you sort of give us an order of magnitude where you're making the biggest changes.

Speaker Change #168: Next question will be from Fred Wiffman at Wolf Research. Please go ahead.

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

Sabahat Khan: Yeah, good morning. We made an adjustment to your products' revenue guidance. If I look at the midpoint by about 165 million dollars, the year on products is a big business; about 50% of revenue is in the second half of the year. And the URV 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. About 80% of the adjustment we did is on side by side, and the rest is 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 overall of these.

Sabahat Khan: Okay, and, and I guess the 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 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.

Speaker Change #170: Yeah, good morning. We made an adjustment to your products for a new guidance. If I look at the midpoint by about $655 million, the year on products is a big business about 50% of rubber news in the second half of the year.

James Hardiman: Okay, and, 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 would be the interest rate piece. You know, 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.

Speaker Change #170: 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 Earth's shipment plan.

Speaker Change #170: About 80% of the adjustment we did is on side-by-side.

Speaker Change #170: and the rest is equally distributed between the ATV and the three wheels.

James Hardiman: 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, in the sort of medium term. Well, for our, our financial 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 on our financing costs.

Speaker Change #170: But again, as I mentioned, we want to be cautious, but yet we're still very bullish on the prospects a little more obvious. 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...

Sabahat Khan: 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 camp. Plus, we have also great product news coming out next year for the RRV business. That's we're anxious to turn out that. And so we're still very bullish despite making a sizable adjustment on the RRV this quarter. Great.

Speaker Change #170: 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.

Speaker Change #170: Plus we have also great product news coming out next year for the RV business that's we're anxious to announce that. And so we're still very bullish despite making a sizable adjustment on RV this quarter.

James Hardiman: 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 buy downs of interest rates for us are going to are going to be lower as well on the retail financing side.

Operator: Thanks a lot.

Operator: Thank you.

Operator: A reminder to please press star one if you have any questions.

Speaker Change #170: Great, thanks for watching!

Tristan Thomas: Next is Tristan Thomas Martin at BMO Capital Markets. Please go ahead. Morning. Just one question on PWC. You said you're going to end the season with some carrier of Raman Torrey that we're selling seed in the self-sending. 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 #171: Thank you. I'm reminded to please press star one if you have any questions. Next is Tristan Thomas Martin at Bimo Capital Market. Please go ahead.

James Hardiman: And for sure, from a consumer point of view, if we get several 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 two or later.

Speaker Change #171: [inaudible]

Speaker Change #172: Just one question on PWC. You said you're going to end the season with some carriers and inventory. The selling season itself 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?

Cameron Doerksen: Thank you.

Sabahat Khan: It would be two or later. Nicole. Got it.

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 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 it's; you can see how magnitude was bad for June and July.

Operator: That's helpful.

Cameron Doerksen: Thank you.

Speaker Change #173: Then on watercraft just to explain the dynamique that happened in the season 24, there is two elements.

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 light items for the rest of the year. Obviously, R&D was lowering Q2. You've cited the, I guess, R&D subsidies. He's hitting the quarter there.

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

Speaker Change #174: First, we're surprised by the magnitude of the industry decline. Again, at the end of May, we were on our plan. It's a low number, but the trending was...

Cameron Doerksen: Good morning. I just wanted 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 lowering Q2. You've cited the, I guess, R&D subsidies. He's hitting the quarter there. So just, he just talked a little bit about what you see the back half of the year on those operating expenses. Yeah, and G&A. Yeah, obviously a bit of movement.

Speaker Change #174: And I think when we had the call, we mentioned that Memorial Weekend was at the end of May was softer than typical.

Sabahat Khan: So just he just talked a little bit about what you see the back half of the year on those operating expenses. Yeah, and G and Gina. Yeah, obviously a bit of movement. But again, if I look, go down the PNL or 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, first six months of the year. Or gross profit margin was at 22.1%. And then in terms of old packs, obviously, there's going to be some opaque movement, but relatively flat the over a year as well from an opaque side.

Speaker Change #174: But following that June July was very, very soft summer retail and in fact it was the lowest Q2 industry retail in eight years than it is

Cameron Doerksen: But again, if I look, go down the PNL, their 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. Their gross profit margin was at 22.1%. And then in terms of OPEX, obviously, there's going to be some, some OPEX movement, but relatively flat the over a year as well from an OPEX line.

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 the 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. To be honest, our planning was probably too optimistic. And this is the two elements that affected our watercraft retail this season.

Speaker Change #174: You can see how magnitude was bad for June and July and this is the industry and on top of that

Speaker Change #174: And it wasn't dissipated, but it was worse than anticipated. As you remember in 2023, our main competitor on water crash hit very late is new product.

Speaker Change #174: We gain significant market share in that product category.

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?

Speaker Change #175: He ended up with more non-current than what we had planned.

Speaker Change #175: And this year, when we had a lot of nonturen, and he had more nonturen than us, we've lost more share that in the nonturen category than what we had anticipated. To be honest.

Speaker Change #175: Our planning was probably too optimistic and this is the tool element that affected our water graph retail this season.

Cameron Doerksen: I mean, without going into detail with there is always in the company like us, a lot of projects going on in different country, different area, and obviously we will relook at the whole list and reprioritize the next 18 months going to more slowdown and what we had anticipated. 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.

Jose Boisjoli: That being said, we're handing the season with close to 60% market share. I mean, we cannot not be happy about this law.

Speaker Change #175: that being said.

Speaker Change #175: We're handling the season with close to 60% market share. 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.

Jose Boisjoli: We just need next summer to re-adapt our shipment and the balance, the inventory out there to continue on this very good business. Yeah, 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? 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. Support until early next year, but you'll appreciate that for competitive reasons. I'll hold back from this closing amount, but it's all provided for the guidance.

Speaker Change #175: i

Cameron Doerksen: 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. And so that is certainly another lever that we haven't 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 or four years. Now we can focus on reducing bill of material through cost improvement initiatives.

Speaker Change #176: I guess what I was asking was with kind of the winner coming dealers, maybe having a little too much PWC inventory, is there an incremental for plant support?

Speaker Change #177: Yeah, we do provide additional foreplant support depending on the dealers, depending on how much more inventory they have in their yard.

Speaker Change #178: and we do provide support until early next year, but you'll appreciate that for a competitive reasons I'll hold back from this Jose County amount, but it's all provided for the guidance.

Cameron Doerksen: And that's going to be another important driver of efficiency. Okay, so that I guess process is I'll see your that's ongoing, but maybe we'll see some of the benefits more so in physical 26 as opposed to this year. Yeah, absolutely. Okay, great. Appreciate it. Thanks very much.

Sabahat Khan: And that's going to be another important driver of efficiency.

Sabahat Khan: Okay, so that that process is I'll see you're you're 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.

Jose Boisjoli: Thank you.

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

Galat: Galat, thank you.

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

Speaker Change #180: Thank you. At the time we have no other questions, I will turn the call to Mr. Deschenes to close the meeting.

Operator: Appreciate it.

Jonathan Goldman: Thanks very much.

Jonathan Goldman: Thank you.

Philippe Deschenes: We look forward to speaking with you again for a third quarter conference call on December 6th.

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

Jonathan Goldman: Thank you. Next question will be from Jonathan Goldman at school. She'll think 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 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 to spur consumer demand?

Jose Boisjoli: Next question will be from Jonathan Goldman at Scotiabank. 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 to spur consumer demand? And just to give you some consumer behavior trend, you know pre-COVID, 20% of our units were sold to new and trend.

Philippe Deschenes: 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 #182: Thank you. Ladies and gentlemen, this does indeed continue your conference call for today. Once again, thank you for attending and that the time we do ask that you please disconnect your lines.

Jonathan Goldman: 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 water craft.

Jose Boisjoli: 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 water craft. 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 water craft, all the Spark category and the GTI category was hit harder versus the high end.

Jonathan Goldman: 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 water 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. Then the trend is, you see that the trend that we saw in the last year quarter is continuing.

Jose Boisjoli: 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 quarter is continuing. I was seen now, what's you is the new and trend level. And there is more customer, new and trend customers who finance their product that are refused to create it. We hear that more often. And this will come back when the interest rate will go down.

Jonathan Goldman: I was seeing now what's you is the new and trend level. And there is more customer, new and trend customers who 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 order to see it in 25. Is your expectation you can gain similar levels as you did this year?

Jonathan Goldman: 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 the inventory, depending on the program and the non current, there is a play there. But that's why when this transition is done, typically take a quarter or two.

Jonathan Goldman: 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. And now we have the high CC platform that we recently introduced as well.

Jose Boisjoli: Just highlight on a TV. If you look at our TV 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 bodes well for the next season.

Jonathan Goldman: 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. So that obviously bodes well for the next season. That's good. Thank you for taking my questions. I'll get back. Thank you.

Operator: Thank you for taking my questions.

Jaime Katz: I'll get that from you. Thank you.

Jonathan Goldman: Next question will be from Jaime Katz at Morningstar. Please go ahead.

Jaime Katz: 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 few weeks. Hopefully that's going to be announced. That is certainly going to help the US dealers. But as of recently, they've been stable at the levels in the last few quarters.

Jaime Katz: Okay.

Jose Boisjoli: That is certainly going to help the US dealers.

Jose Boisjoli: But, as of recently, they've been stable at the levels in the last few quarters. Okay.

Jaime Katz: 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. You know, the goal of untarger society is to team up with the best rental operator around the world.

Operator: 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 untarded 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.

Jaime Katz: So make sure we are offering a top nut experience for consumers. And like we see internally 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.

Jaime Katz: Perfect. Thanks.

Luke Hammond: And like we say internally, it's 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. Thanks. Thank you.

Luke Hammond: Thank you.

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.

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

Luke Hammond: 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.

Luke Hammond: 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 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.

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: Great. Thank you very much. Yep. Thank you.

Operator: Thank you very much. Yep.

Brian Morrison: Thank you.

Brian Morrison: Next question will be from Brian Morrison at Cowan. Please go ahead.

Brian Morrison: 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 destock to forward revenue, I still have you about 120. Can you just share with us where you are now?

Brian Morrison: Yeah, no, we're lower than the 135. And again, I 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 inventory is already down 13% since the beginning of the year. And so we're in very good shape to the day.

Brian Morrison: [inaudible] going to have a lot of things going on here. We're going to have a lot of things going on here. We're going[inaudible] We're going to have a lot of things going on here. We're going to have a lot of things going on here. 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 all of these.

Sabahat Khan: 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's 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 coming out light and the maturities are have been extended.

Sabahat Khan: 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 up three times three point five 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.

Sabahat Khan: 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.

Sabahat Khan: Okay, thank you very much. I appreciate the actions you guys are taking.

Operator: Thank you.

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

Fred Whitman: Please go ahead. Hey guys, good morning. I was just hoping you could unpack the changes to the year-round guidance and 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 if you sort of give us an order of magnitude where you're making the biggest changes.

Brian Morrison: 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 camp. Plus, we have also great product news coming out next year for the RRV business, that's where I'm just to turn out that. And so we're still very bullish despite making a sizable adjustment on RV this quarter.

Sabahat Khan: 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 camp. Plus, we have also great product news coming out next year for the RRV business. That's we're anxious to turn out that. And so we're still very bullish despite making a sizable adjustment on the RRV this quarter.

Tristan Thomas: Great, thanks a lot. Thank you. A reminder to please press star one if you have any questions.

Operator: Great. Thanks a lot.

Operator: Thank you. A reminder to please press star one if you have any questions.

Tristan Thomas: Next is Tristan Thomas Martin, at BMO Capital Market. Please go ahead. Just one question on PWC. You said you're going to kind of end the season with some carrier of Raman Tori, 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?

Jose Boisjoli: And what a grab just to explain the dynamic that happened season 24. There is 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 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.

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 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 it's, you can see how magnitude was bad for June and July.

Jose Boisjoli: In fact, it was the lowest Q2 industry retail in eight years. Then you 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 water craft 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.

Jose Boisjoli: 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. To be honest, our planning was probably too optimistic. And this is the tool that affected our water craft 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.

Jose Boisjoli: To be honest, our planning was probably too optimistic. And this is the two elements 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.

Tristan Thomas: We just need next summer to re-adapt our shipmen and re-balance the inventory out there to continue on this very good business. Yeah, 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? 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 this closing any amount, but it's all provided for the guidance. Got it.

Operator: Thank you.

Philippe Deschenes: At this time, we have no other questions.

Jose Boisjoli: Thank you.

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

Philippe Deschenes: 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 BRP. 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.

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

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.

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