Q4 2025 BRP Inc Earnings Call

Operator: Good morning, ladies and gentlemen, and welcome to the BRP Inc. fiscal year 2025 fourth quarter results conference call. For participants who use a telephone line, it is recommended to turn off the sound on your device.

Good morning, ladies and gentlemen, and welcome to the B R. P Inc. Fiscal year 2025 fourth quarter results conference call for participants who use the telephone line. It is recommended to turn off the sound on your device I would now like to turn the meeting over to Mr. Philip The Shine. Please go ahead Sir.

Philippe Deschenes: I would now like to turn the meeting over to Mr. Philippe Deschenes. Please go ahead, sir. Thank you, Sylvie.

Jose Boisjoli: Good morning and welcome to BRP's conference call for the fourth quarter of fiscal year 25.

Speaker Change: Thank you Sylvie.

Speaker Change: Good morning, and welcome to ERP principal part of fourth quarter of fiscal year 'twenty five.

Philippe Deschenes: Joining me this morning are Jose Boisjoli, President and Chief Executive Officer, and Sbastien Martel, Chief Financial Officer. Before we move to the prepared remarks, I would like to remind everyone that certain forward-looking statements will be made during the call and that the actual results could differ from those implied in these statements. The forward-looking information is based on certain assumptions and is subject to risk and uncertainty, and I invite you to consult DRTs and DNA for a complete list of these.

Speaker Change: With me this morning are.

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

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

Sebastien Martel: The forward looking information is based on sort of an assumption and is subject to risks and uncertainties and I invite you to cancel erp's MBNA for completed piece of these.

Philippe Deschenes: Also during the call, reference will be made to the supporting slide and you can find the presentation on our website at BRP.com under the investor relations section.

Sebastien Martel: So during the call reference will be made to supporting excited and you can find the presentation on our website at <unk> com under the Investor Relations section.

Philippe Deschenes: And as a reminder, note that the following and following the announcement of the initiation of the self-process for marine businesses, these businesses are now presented as discontinued operation. Therefore, all periods presented in these release reflect continuing operation only unless otherwise noticed.

Sebastien Martel: And as a reminder, note that the following them following the announcement of the initiation of the sales process of our marine businesses. These businesses are now presented as discontinued operations. Therefore.

Sebastien Martel: Barry I presented in these release reflect continuing operations only unless otherwise noted.

Jose Boisjoli: So with that, I'll turn the call over to Jose. Thank you, Philippe. Good morning, everyone, and thank you for joining us. Although Fiscal 25 brought a share of challenges, I am proud of our team's agility and dedication. We have always been known to be leaders, and this year was no different. In light of a difficult macroeconomic environment, softer industry, and continued pressure on consumer demand, we were the first OEM to proactively reduce production and shipment. Throughout the year, we remain focused on the discipline execution of our inventory reduction plan to support our dealers and protect the value of our brand.

Sebastien Martel: So with that I'll turn the call over to Jonathan. Thank you Philip and good morning, everyone and thank you for joining us.

Sebastien Martel: Although fiscal 'twenty five broad its share of challenges I am proud of our team's agility and litigation.

Sebastien Martel: We have always been known to be leaders in this year was no different.

Sebastien Martel: A light of the difficult macroeconomic environment softer industry and continued pressure on consumer demand.

We were the first OEM to proactively reduce production and shipments.

Sebastien Martel: Throughout the year, we remain focused on the disciplined execution of our inventory reduction plan.

Sebastien Martel: To support our dealers and protect the value of our brands.

Jose Boisjoli: has expected this resulted in short-term market share losses. We have also continued positioning the business for long-term success. We have introduced several new models, entered new segments, and further improved operational efficiency by achieving over $200 million in lean savings for the year.

Sebastien Martel: As expected this resulted in short term market share losses.

Sebastien Martel: We have also continued positioning the business for long term success.

Sebastien Martel: We have introduced several new models and turn new segment and further improve operational efficiency by achieving over $200 million in lean savings for the year.

Jose Boisjoli: Also, as you know, we have decided to sell our marine business. The process is currently following its course. We will update you in due time. Our strategy is to double down on our Parsport leadership position. will focus our effort and investment on our core activities and capitalize on attractive long-term growth opportunities.

Sebastien Martel: Also as you know, we have decided to sell our marine business.

Our process is currently following its of course, we will update you in due time.

Sebastien Martel: Our strategy is to double down on our parts CT leadership position.

Sebastien Martel: We will focus our effort and investment on our core activities.

Sebastien Martel: Capitalize on electric tier long term growth opportunities.

Jose Boisjoli: Now let's turn to slide 5 for key financial highlights. We ended the year with $7.8 billion in revenue, normalized EBITDA of $1 billion, and normalized EPS of $4.68, all within our revised guidance range.

Sebastien Martel: Now, let's turn to slide five for key financial highlights.

Sebastien Martel: We ended the year with $7 8 billion in revenue normalized EBITDA of 1 billion and normalized EPS of $4 68, all within our revised guidance range.

Jose Boisjoli: We also achieved one of our key objectives, by significantly reducing network inventory level, as you can see on slide 6. And VentaRay was down 13% at the end of the year, or down 18% when excluding Snowmobile, which saw softer than anticipated retail in the fourth quarter. With better snow condition in February, snowmobile retail has improved, bringing our total North American Parsport inventory reduction to 18%, in line with our objective of 15% to 20%. This solid performance shows our commitment to protecting our dealer value proposition and put us in a favorable position to capture market opportunity when the industry rebounds.

Sebastien Martel: We also achieved one of our key objective by significantly reducing network inventory level as you can see on slide six.

Sebastien Martel: And <unk> was down 13% at the end of the year are down 18%, when excluding snowmobile, which saw softer than anticipated retail in the fourth quarter.

Sebastien Martel: With better still condition in February snowmobile retail as improved bringing our total north American power sports and inventory reduction to 18%.

Sebastien Martel: In line with our objective of 15% to 20%.

Sebastien Martel: This solid performance shows our commitment to protecting our dealer value proposition.

Sebastien Martel: And put us in a favorable position to capture market opportunity when the industry rebounds.

Jose Boisjoli: Let's turn to slide seven for an update on the global power support market. The fourth quarter was consistent with the trend observed earlier in the year. In North America, our passport retail was down 21%, essentially in line with our expectations. Excluding Snowmobile, it was down 11%. From an international perspective, we continue to see softer demand in EMEA and Asia-Pacific, which retail down 11% and 10% respectively. Latin America continued to outperform other regions, which retailed up 16%, driven by sustained momentum in ORV and personal watercraft.

Sebastien Martel: Let's turn to slide seven for an update on the global power sports market.

Sebastien Martel: The fourth quarter was consistent with the trend observed earlier in the year.

Sebastien Martel: In North America, our <unk> retail was down 21% essentially in line with our expectations.

Sebastien Martel: Excluding snowmobile it was down 11%.

Sebastien Martel: From an international perspective, we continued to see softer demand in EMEA, and Asia Pacific with retail down, 11% and 10% respectively.

Sebastien Martel: Latin America continued to outperform other region.

Sebastien Martel: With retail up 16% driven by sustained momentum in the RV and personal watercraft.

Jose Boisjoli: Turning to slide 8, for a look at our North American retail performance by product line. ORV performed as expected during the quarter with our retail lagging the industry as we were less competitive in non-current unit due to our leaner inventory position. Meanwhile, snowmobile retail was softer than anticipated because of the late arrival of snowfall.

Sebastien Martel: Turning to slide eight for a look at our North American retail performance by product line.

Sebastien Martel: <unk> from as expected during the quarter with our retail lagging the industry as we were less competitive in <unk> and the unit due to our leaner inventory position.

Sebastien Martel: Meanwhile, snowmobile retail was softer than anticipated because of delayed arrival of snowfall.

Jose Boisjoli: retail peak later in the season, with February and March better than planned, which should limit the shortfall for the season.

Sebastien Martel: Retail peak later in the season with February and March better than plan.

Sebastien Martel: Which should limit the shortfall for this season.

Jose Boisjoli: As for three-wheel personal autograph and pontoon, Q4 was the off-season, and there are no major trend to highlight, as volume were small.

Sebastien Martel: As for three wheeled personal autograph and palm to Q4 was the off season and there are no major trend to highlight as volume we're small.

Jose Boisjoli: Let me circle back to ORV on flyline. As you can see, the dynamic we've discussed last quarter continued in Q4, with the industry essentially being driven by discounted non-current units. Since we significantly reduced our network inventory, we had lower availability of non-current units and were less competitive in that market.

Sebastien Martel: Let me circle back to <unk> on slide nine.

Sebastien Martel: As you can see the dynamic with discussed last quarter continued in Q4 with the industry essentially being driven by discount.

Sebastien Martel: The non current unit.

Sebastien Martel: Since we significantly reduce our network inventory.

Sebastien Martel: We had lower availability of noncore and unit and we are less competitive in that market.

Jose Boisjoli: However, we've gained further share in current units, which gave us confidence that we will regain momentum when the inventory positions of other OEMs normalize.

Sebastien Martel: However, we've gained further share in current unit, which gave us confidence that we will regain momentum when the inventory position of other Oems normalize.

Jose Boisjoli: Before reviewing quarterly results by product line, let's turn to slide 10 to take a step back and look at our progress made over the past few years. We became the number one OEM in PowerSport in North America, and we are a much stronger company than five years ago. In fact, we have gained six points of market share versus pre-COVID. Our ambitious ORV strategy paid off, leading to market share gains of 11 points in side-by-side and 4 points in ATV. We even extended our leadership position in personal watercraft and snowmobile with gains of 2 and 9 points, respectively.

Sebastien Martel: Before reviewing quarterly results by product line, let's turn to slide 10 to take a step back and look at our progress made over the past few years.

Sebastien Martel: We became the number one OEM in pars support in North America, and we are a much stronger company than five years ago. In fact, we have gained six point of market share versus pre COVID-19.

Sebastien Martel: Our ambitious of RV strategy paid off leading to market share gains of 11 point in side by side and four point in ATV.

Sebastien Martel: We even extended our leadership position in personal watercraft, and snowmobile with gain of two and nine points respectively.

Jose Boisjoli: The only area where we lost some ground is in Three-Wheel Vehicle as we face a tough competitive with pre-COVID being the first season of the Ryker.

Sebastien Martel: The only area, where we lost some ground is in three wheel vehicle as we face a tough comparable with pre COVID-19 being the first season of the ryker.

Jose Boisjoli: Even if fiscal 25 was a more difficult year, we continued applying the same formula that delivered these results. We push technology and introduce several key models across all our product lines to wow our consumers. We grew our addressable market with the launch of the Can-Am electric motorcycle. We expanded the rollout of our modular design, namely with the introduction of the new Hi-CCE TV platform. And we stay true to our performance and innovation heritage, winning on the racetrack and being recognized by the industry with 17 design awards. With our momentum, we strongly believe that we are well positioned to benefit from a market rebound.

Sebastien Martel: Even in fiscal 2005 was a more difficult year. We continued applying the same formula that delivered these results with.

Sebastien Martel: We push technology and introduced several key model across all our product line to Wow our consumers.

Sebastien Martel: We grew our addressable market with the launch of the <unk> electric motorcycle we.

Sebastien Martel: We extended the rollout of our modular design, namely with the introduction of the new high Cc ATV platform.

Sebastien Martel: And we stay true to our performance and innovation heritage, winning under race track and being recognized by the industry with 17 Design Award.

Sebastien Martel: With our momentum we strongly believe that we are well positioned to benefit from a market rebound.

Jose Boisjoli: Now let's turn to slide 11 for a more detailed look at year-round products. Fourth quarter revenue were down 17% to $1.1 billion, probably due to the reduced shipment to right-size our network inventory. At retail, Can-Am side-by-side was down about 10% due to the non-current unit dynamic compared to the industry, which was down low single digits. Still, fiscal 25 was our second best year ever at retail. We continue to experience strong demand for our high-end Defender cab, gaining about 2 points of market share this year in the utility segment. DTV Retail was also down about 10% for the same reason as Side by Side.

Sebastien Martel: Now, let's turn to slide 11 for a more detailed look at year round products.

Sebastien Martel: Fourth quarter revenues were down 17% to $1 1 billion from leaves you to the reduced shipments to right size our network inventory.

Sebastien Martel: At retail cannot side by side was down about 10% due to the non current unit dynamic compared to the industry, which was down low single digits.

Sebastien Martel: In fiscal 2005 was our second best year ever at retail.

Sebastien Martel: We continue to experience strong demand for our high end defender cab gaining about two points of market share this year in the utilities segment.

Sebastien Martel: ETV retail was also down about 10% for the same reason has site by site.

Jose Boisjoli: However, we are well positioned with our new Outlander platform and gained over two points of market share in the mid-CC category in fiscal 25. This platform was also introduced last August across our high CC model, a significant upgrade in ATV. Looking at three-wheel vehicle retail was down about 30% very early in the season.

Sebastien Martel: However, we are well positioned with our new <unk> platform and gained over two points of market share in the mid cc category in fiscal 'twenty five.

Sebastien Martel: This platform was also introduced last August across our high Cc model a significant upgrade in ATV.

Sebastien Martel: Looking at three wheeled vehicle retail was down about 30% very early in the season.

Jose Boisjoli: We remain optimistic about the upcoming season, given the positive response to the recently introduced Can-Am Canyon, which tapped into the growing adventure touring market.

Sebastien Martel: We remain we remain optimistic about the upcoming season, given the positive response to the recently introduced Canam Canyon, which taps into the growing adventure touring market.

Jose Boisjoli: Turning to seasonal product on slide 12. Revenue were down 29% to $678 million, primarily reflecting redo shipments. In Contour's seasonal market, it was peak season for personal autographs and see-do's had a low 10% decline in APAC, slightly outperforming the market. That was down mid-10%. Meanwhile, we continue to grow in Latin America, which rated up low single-digit percentage.

Sebastien Martel: Turning to seasonal product on slide 12.

Sebastien Martel: Revenue were down 29% to 678 million, primarily reflecting reduced shipment.

Sebastien Martel: And <unk> is a low market. It was peak season for personal watercraft and <unk> had a low teen percent decline in APAC slightly outperforming the market that was down mid teen percent.

Sebastien Martel: Meanwhile, we continue to grow in Latin America, with retail up low single digit percentage.

Jose Boisjoli: As for North America, we are in the off-season, but early indication from boat shows suggest more stable industry conditions compared to last year. For Snowmobile, retail was down low 30% in the quarter. When the season began, we had proportionally less non-current units than our competitors, resulting in market share loss in North America as of the end of January. In Scandinavia, we gain market share, which retails down high single-digit percentage compared to an industry that was down low 20%.

Sebastien Martel: As for North America, we are in the off season, but early indications from boat shows suggest more stable industry conditions compared to last year.

Sebastien Martel: For snowmobile retail was down low 30% in the quarter.

Sebastien Martel: When the season began we had proportionally less non current unit that our competitors, resulting in market share loss in North America as of the end of January.

Sebastien Martel: In Scandinavia, we gained market share with retail down high single digit percentage compared to an industry that was down low 20%.

Jose Boisjoli: We introduce our new model 2026 in mid-February, and we are currently in the booking process. We strengthened our lineup by expanding the REV Gen 5 platform to additional models, adding new features, and providing better connectivity. As this year was also challenging, we remain cautious with our upcoming production schedule to tightly manage inventory. Our new model, coupled with the fact that some players are exiting the industry, put us in a very good position to gain further share.

Sebastien Martel: We introduced our new model 2026 in mid February and we are currently in the booking process.

Sebastien Martel: We strengthened our lineup by extending their Rev. Gen five platform to additional model, having new feature and providing better connectivity.

Sebastien Martel: As this year was also challenging we remain cautious with our upcoming production schedule to tightly manage inventory.

Sebastien Martel: Our new model, coupled with the fact that some players are exiting the industry puts us in a very good position to gain further share.

Jose Boisjoli: Moving on slide 13, for parts, accessories, and apparel, an OEM engine. Revenue were down 1% to $293 million, probably due to slower to lower shipment of P&A given softer industry trends. From a product standpoint, our ORV part business maintains its momentum, driven by ongoing usage of our growing vehicle fleet, while accessory sales have been softer in line with retail.

Sebastien Martel: Moving on slide 13, four part accessories, and apparel and OEM engines.

Sebastien Martel: Revenue were down 1% to 293 million, primarily due to slower to lower shipments of P&A given softer industry trends.

Sebastien Martel: From a product standpoint.

Sebastien Martel: RV parts business maintained its momentum driven by ongoing usage of our growing vehicle fleet, while accessories sales have been softer in line with retail.

Sbastien Martel: With that, I turn the call over to Sbastien. Thank you, Jose, and good morning, everyone. We completed fiscal 25 with another quarter of tight execution against our plan to deliver on our network inventory reduction target, all the while meeting our revised guidance for the year. Looking at the numbers for Q4, revenues were down 20 percent to $2.1 billion, primarily due to the lower shipments and higher sales port rent. We generated $429 million in gross profit, representing a margin of 20.5% down from last year, primarily due to the less efficient use of our assets, given the lower production volumes, higher sales programs, and an unfavorable model.

Sebastien Martel: With that I'll turn the call over to Sebastien.

Thank you Jose and good morning, everyone. We completed fiscal 'twenty five with another quarter of tight execution against our plan to deliver on our network inventory reduction target all the while meeting our revised guidance for the year looking at the numbers for Q4 revenues were down 20% to $2 1 billion, primarily due to the lower.

Sebastien Martel: Shipments and higher sales program.

Sebastien Martel: We generated $429 million in gross profit representing a margin of 25 down from last year, primarily due to the less efficient use of our assets given the lower production volumes higher sales programs and an unfavorable model mix.

Sbastien Martel: These were partly offset by favorable prices. Our normalized EBITDA ended at $240 million, and our normalized earnings per share at 98%. From a cash flow perspective, we ended the year generating over $450 million of free cash flow from continuing operations, allowing us to sustain attractive returns of capital to our shareholders with $62 million in dividend payments and $215 million in share repurchase. From a balance sheet perspective, we close Fiscal 25 with $180 million of cash in a comfortable net leverage ratio of 2.6 times, providing us with the balance sheet flexibility as we navigate uncertain environments.

Sebastien Martel: These were partly offset by favorable pricing.

Sebastien Martel: Our normalized EBITDA ended at $240 million and our normalized earnings per share at 98%.

Sebastien Martel: From a cash flow perspective, we ended the year generating over $450 million of free cash flow from continuing operations.

Sebastien Martel: Allowing us to sustain attractive returns of capital to our shareholders with $62 million in dividend payments and $215 million in share repurchases.

Sebastien Martel: From a balance sheet perspective, we closed fiscal 'twenty five with a 100 million $180 million of cash and a comfortable net leverage ratio of two six times, providing us with the balance sheet flexibility as we navigate uncertain environment.

Sbastien Martel: All in all, while fiscal 25 was a challenging year from an industry dynamics perspective, I am pleased with our team's constant focus on the tight management of our expenses and cash generation and their ability to unlock efficiencies throughout the business. It is these efforts that allow us to deliver results at the upper end of our revised guidance.

Sebastien Martel: All in all while fiscal 'twenty five was a challenging year from an industry dynamics perspective, I am pleased with our team's constant focus on the tight management of our expenses and cash generation and the ability to unlock efficiencies throughout the business.

Sebastien Martel: It is these are first that allow us to deliver results at the upper end of our revised guidance.

Sbastien Martel: Now turning to fiscal 26, starting with an update on the current tariff situation on slide 16. Like many North American companies, we have optimized our manufacturing footprint supply chain over the years based on free trade agreements between Canada, United States, and Mexico. As such, we currently have operations in a supply chain across all three countries, and consequently, the ongoing tariff disputes are impacting our business, our suppliers, and our customers.

Now turning to fiscal 'twenty six starting with an update on the current tariff situation on slide 16.

Many north American companies, we have optimized our manufacturing footprint supply chain over the years based on the free trade agreements between Canada, United States and Mexico.

Sebastien Martel: Such we currently have operations and our supply chain across all three countries and consequently, the ongoing tariff disputes are impacting our business our suppliers and our customers.

Sbastien Martel: So far, this is the situation for BRP. All of our vehicles produced in Canada and Mexico are USMCA compliant and are currently exempt from the 25% tariff levy by the United States on these countries. We have limited exposure to imports from China into the U.S. or from imports from U.S. to Canada. And while we are impacted by U.S. tariffs on steel and aluminum, the cost is relatively small as the exposure is mostly limited to our P&A business. So with what we know today, the tariffs that are currently in effect would have an estimated impact of about $40 million on our business if they stay as is throughout the year.

Sebastien Martel: So far this is the situation for ERP.

Sebastien Martel: All of our vehicles produced in Canada, and Mexico are U S MCA compliant.

Sebastien Martel: And our currently exempt from the 25% tariffs levied by the United States on these countries we.

Sebastien Martel: We have limited exposure to imports from China into the U S or from imports from U S to Canada, and while we are impacted by U S tariffs on steel and aluminum the cost is relatively small as the exposure is mostly limited to our P&A business.

Sebastien Martel: So with what we know today the tariffs that are currently in effect would have an estimated impact of about $40 million on our business. If they stay as is throughout the year.

Sbastien Martel: But, as you well know, the situation remains very fluid and we are continuously refining our assessment of the potential cost of these tariffs on our business, especially as it relates to potential impacts on our Tier 2 and Tier 3 suppliers.

As you all know the situation remains very fluid and we are continuously refining our assessment of the potential cost of these tariffs on our business, especially as it relates to potential impacts on our tier two and tier three suppliers.

Sbastien Martel: This brings us to the discussion about what to expect for fiscal 26 on slide 17. As we already mentioned, with the disciplined execution of our plan throughout the past year, we started Fiscal 26 in a stronger position, notably with leaner inventory levels, a cost structure that was right-sized for the current industry environment, and a greater focus on our core power sports business. With that, we were well-positioned to deliver some top-line growth, driven by improved ORV shipments with wholesale's most closely matching retail, new product introductions, and partly offset by lower shipments of personal watercraft and snowmobiles to bring back our network inventory to a more normalized level.

Sebastien Martel: This brings us to the discussion about what to expect for fiscal 2006 on slide 17.

Sebastien Martel: As we already mentioned with the disciplined execution of our plan throughout the past year, we started fiscal 'twenty six in a stronger position, notably with leaner inventory levels.

Sebastien Martel: Cost structure that was right sized for the current industry environment and a greater focus on our core power sports business with that we were well positioned to deliver some topline growth driven by improved RV shipments with wholesales more closely matching retail new product introductions.

Sebastien Martel: And partly offset by lower shipments of personal watercraft and snowmobile to bring back our network inventory to a more normalized levels.

Sbastien Martel: And we were poised to deliver some improvements in EBITDA margin driven by the increased shipments and lower sales program, given that we are operating with leaner network inventory levels and a more efficient overhead structure following the optimizations we did in fiscal 2014. These elements would be partly offset by a return of variable compensation and unfavorable foreign exchange variation. Accounting for higher depreciation, financing costs, and tax rate, our plan called for about $4.50 to $5.00 of normalized EPS for the year, with tougher comparables in the first half of the year, notably expecting Q1 EPS to be down about 70% on a continuing operation basis.

Sebastien Martel: And we're poised to deliver some improvements in EBITDA margin driven by the increased shipments and lower sales program. Given that we are operating with leaner network inventory levels and a more efficient overhead structure. Following the optimizations, we did in fiscal 'twenty five.

Sebastien Martel: These elements would be partly offset by return on variable compensation and unfavorable foreign exchange variation.

Sebastien Martel: Accounting for higher depreciation and financing costs and tax rate our plan called for about $4 50 to $5 of normalized EPS for the year with tougher tougher comparables in the first half of the year, notably expecting Q1, EPS to be down about 70% on a continuing operations basis.

Sbastien Martel: However, since the beginning of the year, with the ongoing tariff disputes and changing geopolitical dynamics, our operating and demand environment has become much less predictable. While we expect to be able to manage through the currently implemented tariffs, several more tariffs have been announced by different governments, and we lack the necessary visibility as to the timing, nature, and extent of potential changes to trade regulations to fully assess the potential impact on our business. More importantly, we are seeing the uncertainty created by the situation starting to impact the economy and the consumer confidence, which makes it very difficult for us to properly forecast our industries and the demand for our products with the level of confidence we require.

Sebastien Martel: However, since the beginning of the year with the ongoing tariff disputes and changing geopolitical dynamics are operating and demand environment has become much less predictable.

Sebastien Martel: While we expect to be able to manage through the currently implemented tariffs several more tariffs have been announced by different governments and we lacked the necessary visibility as to the timing nature and extends the potential changes to trade regulations to fully assess the potential impact on our business.

Sebastien Martel: More and more importantly, we are seeing the uncertainty created by the situation starting to impact the economy and the consumer confidence, which is which makes it very difficult for us to properly forecast our industries and the demand for our products with the level of confidence we require.

Sbastien Martel: In this context, we believe it would be inappropriate to issue guidance today, and we will therefore refrain from doing so. Still, we remain focused on tightly managing our business and making sure that we remain agile to rapidly adapt to any change in operating environment, all the while continuing to position our business to create long-term value for our shareholders. We look forward to a return to a more stable and predictable environment, enabling us to provide you with a clearer outlook for fiscal year 26.

Sebastien Martel: In this context, we believe it would be inappropriate to issue guidance today, and we will therefore refrain from doing so.

Still we remain focused on tightly managing our business and making sure that we remain agile to rapidly adapt to any change in operating environment, all the while continuing to position our business to create long term value for our shareholders.

Sebastien Martel: We look forward to a return to more stable and predictable environment, enabling us to provide you with a clearer outlook for fiscal year 2006 on that I will turn the call over to Jordan.

Jose Boisjoli: On that, I will turn the call over to Jose. Thank you, Sbastien. Fiscal 25 was a challenging year for the power sport industry. I am proud that we were the first OEM to reduce network inventory and, more importantly, that we have achieved our initial objective. We have also outpaced the off-road market and current unit which speak highly about the appeal of our lineup. We finished the year on plan, despite uncertainty created by the threat of tariff, which has further impacted consumer sentiment and market demand. We are used to dealing with changing trade rules, and we have always succeeded in adapting to new tariffs.

Speaker Change: Thank you Sebastian.

Speaker Change: Fiscal 2005 was a challenging year for the forest for the industry.

Speaker Change: I am proud that we were the first OEM to reduce network inventory and more importantly that we have achieved our initial objective.

Speaker Change: We have also outpace the off road market and current unit, which speak highly about the appeal of our lineups.

Speaker Change: We finished the year on plan. Despite the uncertainty created by the threat of tariffs, which has further impacted consumer sentiment and market demand.

Speaker Change: We are used to dealing with changing trade rules and we have always succeeded in adapting to new tariff.

Jose Boisjoli: However, if we have to deal with significant changes in regulation, such as a 25% tariff, we will need enough time to adjust our plan accordingly. For now, we are closely monitoring the situation and proactively implementing short-term mitigation measures. As we enter fiscal 26, we are encouraged by our solid market position. From now on, doubling down on PowerSport will solidify our leadership while our strong product pipeline and passion for innovation will continue to set us apart.

Speaker Change: However, if we have to deal with significant changes in regulation. Thus has a 25% tariffs will need enough time to adjust our plan accordingly.

Speaker Change: For now we are closely monitoring the situation and proactively implementing short term mitigation measure.

Speaker Change: As we enter fiscal 'twenty six we are encouraged by our solid market position.

Speaker Change: From now on doubling down on power sport will solidify our leadership, while our strong product pipeline and passion for innovation will continue to set us apart.

Jose Boisjoli: Our goal is to consistently wow consumers with market-shaping products, and I can tell you that in Fiscal 26, consumers won't be disappointed.

Speaker Change: Our goal is to consistently wow consumers with market shaping product and I can tell you that in fiscal 'twenty six consumer won't be disappointed.

Operator: On that note, I turn the call over to the operator for questions. Thank you, sir. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by two. And if you're using a speakerphone, you will need to lift the handset first before pressing any keys.

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

Speaker Change: Thank you, Sir ladies and gentlemen, if you do have any questions. Please press star followed by one on your Touchtone phone and we will then hear a prompt that Johan has been debates and should you wish to decline from the polling process. Please press star followed by two.

Speaker Change: Can you speak a phone you will need to lift the handset before pressing any keith.

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

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

Operator: Please go ahead and press star one now if you have any questions.

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

Sabahat Khan: First, we will hear from Sabahat Khan at RBC Capital Markets. Please go ahead. Great. Thanks and good morning. And thanks for the initial sort of commentary on fiscal 2026. And as you think about your inventory that you outlined, what sort of industry inventory backdrop and competitive pricing, etc., are you taking into account when contemplating a situation where you could grow revenue potentially and margins? Do you feel the industry inventory broadly is in a good shape? Just reviews on the peers in the industry from that perspective.

Unknown Khan: First we will hear from <unk> Khan at RBC capital markets. Please go ahead.

Speaker Change: Okay, great. Thanks, and good morning, and thanks for the initial sort of commentary on fiscal 2026, and as you think about your inventory that you outline what sort of industry inventory backdrop and competitive pricing et cetera are you taking into account win.

Speaker Change: Contemplating a situation where you could go revenue potentially end margins.

Speaker Change: Do you feel the industry inventory broadly is in a good shape justice reviews on the peers in the industry perspective.

Jose Boisjoli: Good morning. Well, if I go back 12 months, I think the industry expected a better outlook, and so that's why we are in a situation today where some OEMs have a lot more inventory than we have. We proactively, as you might remember, beginning of last year, decided to reduce production and shipments to really manage the inventory levels.

Speaker Change: Good morning, well, if I go back 12 months.

Speaker Change: The <unk> the industry expected a better outlook and so that's why we are in a situation today, where some Oems who have a lot more inventory.

Speaker Change: Then we have we proactively as you might remember beginning of last year decided to reduce production and shipments to really manage the inventory levels and sold for sure. We are starting the year in a much better position.

Jose Boisjoli: And so, for sure, we are starting the year in a much better position. However, not all of the OEMs are in a similar situation, and we're seeing higher non-current inventory from other OEMs. And so the expectation is that we would have another Q1 where non-current inventory would be in play from a market share perspective. and that we were looking for more normalized levels of inventory starting in the back half of Q2 and into the second half of next year. Obviously, if the industry is softer, it will take a bit more time for other OEMs to liquidate that inventory and come out with more normalized levels.

Speaker Change: However, not all of the Oems are in a suit and mirrors situation and we're seeing higher non current inventory from other Oems and so the expectation is that we would have another.

Speaker Change: Q1 were non current inventory would be in play from a market share perspective.

And that we were looking for more normalized levels of inventory starting in the back half of Q2 and into the second half of next year, obviously, if the industry is softer.

Speaker Change: It will take a bit more time for other Oems to liquidate that inventory and come up come out come out with more normalized levels.

Jose Boisjoli: That may mean that we might see a bit more incentives in the second quarter and the second half of next year, but that's certainly something that we're used to navigating through and we'll adjust accordingly. We believe that the things we did of right-sizing our inventory earlier was the right thing to do for the dealers and also for the business.

Speaker Change: That may mean that we might see a bit more incentives in the second quarter and the first and the second half of next year.

Speaker Change: But that's certainly something that we are.

Speaker Change: Navigating through and we'll adjust accordingly, and we believe that.

Speaker Change: The things we did the right sizing our inventory earlier was the right thing to do for the dealers.

Speaker Change: And also for the business.

Operator: Okay, great.

Operator: And then just the second one on, you know, your expectations for sort of production, CapEx, etc. Is that a bit more fluid at this point in the year? Just trying to get an understanding of, you know, this year may have benefited from a bit of inventory cleanup on the free cash flow side. Just your thoughts on how CapEx and or cash flow could trend through the year.

Speaker Change: Okay, Great and then just the second one on your expectations for sort of production and Capex, etc is that a bit more fluid at this point in the year and starting out understanding.

Speaker Change: This segment benefited from.

Speaker Change: Inventory clean up on the free cash flow. So just your thoughts on how capex annual cash flow could trend through the year. Thank you.

Sbastien Martel: Thank you. Yeah, well, what, again, start of the year, we were expecting very good and solid free cash flow generation with, I guess, the elements I highlighted in my prepared remarks. Working capital is certainly something that we continue managing digitally, and it could be a minor tailwind for us. And from a CapEx perspective, ballpark, we should be slightly higher to where we were last year, again, with what we see today. Most of that increase is actually coming from foreign exchange. U.S. and euro rates are quite high compared to last year, and that's what's driving the CapEx variation.

Speaker Change: Yes.

Speaker Change: Yes, I'll start off the year, we were expecting very good and solid free cash flow generation with.

Speaker Change: The elements I highlighted in my prepared remarks.

Speaker Change: Working capital is certainly something that we continue managing digital huntly and it could be a minor tail tailwind for us.

Speaker Change: And from a Capex perspective.

Speaker Change: Ballpark, we should be slightly higher to where we were last year again with what we see today.

Speaker Change: Most of that increase is actually coming from foreign exchange U S and euro rates are quite high compared to last year and Thats whats driving the capex variation, but again, we're nimble we're flexible and if things are more challenging we'll obviously adapt our plans.

Sbastien Martel: But again, we're nimble, we're flexible, and if things are more challenging, we'll obviously adapt our plans. But we remain very much aware of the situation.

Speaker Change: But we remain.

Speaker Change: Very much aware.

Speaker Change: Aware of those situations.

Operator: Thanks so much.

Thanks, so much.

Operator: Thank you.

Joe Altobello: Next question will be from Joe Altobello at Raymond James. Please go ahead. Thanks. Hey, guys, good morning. I want to go back to the network inventory situation for a second. You mentioned in your in your slide deck that you think shipments and retail should be in better alignment here in fiscal 26. But would you still expect to take inventory out of the channel? It does sound like ORV is in good shape, but PwC and snow probably a little bit heavy.

Speaker Change: Thank you Ned.

Speaker Change: The next question will be from Joe also Belo Raymond James. Please go ahead.

Joe: Thanks, Hey, guys. Good morning, just want to go back to the network inventory situation for a second you mentioned in your in your slide deck, you think shipments and retail.

Joe: Should be in better alignment here in fiscal 'twenty, six but would you still expect to take inventory out of the channel. It does sound like MRV is in good shape, but pwc and <unk>, probably a little bit heavy.

Jose Boisjoli: Good morning. Like you said, I think on ORV, we have reached our level and we are very comfortable with what we have. On Watercraft, everything is in line to achieve.

Joe: Good morning, like I said I think on the RV, we have reached our level and we are very comfortable with what we have.

Joe: On watercraft everything is in line to achieve obviously the retail is on plan to achieve a good level of inventory at the end of the.

Jose Boisjoli: Obviously, if the retail is on plan to achieve a good level of inventory at the end of the model year, the existing model year season that ends in the fall, then on this, we were cautious on production to make sure that we would end up in good shape. And on Snowmobile, to be honest, February and March was good retail, better than what typically we do because of the late snow. Then it will be lower than last year, but still too high, and we are cautious on how many Snowmobile will produce in model year this fiscal year to make sure we hand the inventory in good shape next year.

Joe: The model year.

Joe: The existing <unk> season, and in the fall than on this we were cautious on production to make sure that we would end up in good shape.

Joe: On snowmobile to be honest as February and March was good retail and better than what typically we do because of delays.

Joe: Then it will be lower than last year, but still too high and we are cautious on <unk> with produce and mother here. This fiscal year to make sure. We have the inventory in good shape next year. Then overall, we have very good progress in all product line with watercraft is unplanned.

Joe Altobello: Then overall, we have very good progress in all product lines. Watercraft is on plan. Snowmobile is behind because of the late snow. Got it.

Joe: Snowmobile is behind because of delayed slope.

Joe Altobello: Okay, helpful. And just to kind of go back to a comment you made earlier, Seb, about the $4.50 to $5 outlook for 2016. Correct me if I'm wrong, but it sounds like that was more of your assumption three months ago. Since then, obviously, the tariff situation has evolved. And so the $40 million you mentioned earlier is sort of incremental to that, and then maybe some demand impact. Is that how we should think about that number? Yeah, that's how you should think of it. And as you've mentioned in the last comment you made, obviously, at the beginning of the year, obviously, consumer demand has also softened.

Speaker Change: Got it okay helpful just to kind of go back to.

Speaker Change: Comment you made earlier about the $4 50 to $5 outlook for 'twenty six correct me, if I'm wrong, but it sounds like that was more of your assumption three months ago.

Speaker Change: Since then obviously the tax situation.

Speaker Change: Has evolved and so the $40 million, you mentioned sort of incremental to that and then maybe some demand impact how we should think about that number.

Speaker Change: Yes, that's how you should think of it as you mentioned in the last comments you made obviously since the beginning of the year, obviously consumer demand has also softened.

Joe Altobello: And that would have obviously impacted any guidance that we if we would have issued any guidance today. So it does not include the $40 million headwind. And obviously does not include the softness in expected consumer demand.

Speaker Change: And that would have obviously impact that any guidance that would it be if we would have issued any guidance today. So it does not include the $40 million headwind.

Speaker Change: Obviously with the.

Speaker Change: The softness than expected consumer demand.

Jose Boisjoli: And maybe if I can add on Sbastien, if I can add on Sbastien, and this is a message we want to convey. Basically, we, our plan in H2 was very well executed and we're on plan all second half of the year. And we were on plan for fiscal year 26 before the tariff situation. then this is basically a message we want to make sure that the investor understands. Okay, perfect. Thank you.

Speaker Change: And maybe if I can add.

Speaker Change: If I can add on <unk> and this as I mentioned is we want to compete.

Speaker Change: Basically we are planning <unk> was very well executed and we're on plan.

Speaker Change: Our second half of the year and we're on plan for fiscal year 2016, before the tariff situation.

Speaker Change: Then this is basically a message we want to make sure that the investor.

Speaker Change: Understood.

Speaker Change: Okay perfect. Thank you.

Speaker Change: Thank you.

Craig Kennison: Next question will be from Craig Kennison at Baird. Please go ahead. Hey, good morning. Thanks for taking my questions. Just to follow up on the the non current inventory situation across the industry. Will that be an overhang in fiscal 26? And would you therefore expect to continue to lose share until that is complete?

Speaker Change: Next question will be from Craig Kennison Baird. Please go ahead.

Speaker Change: Hey, good morning, Thanks for taking my questions just to follow up on the.

Speaker Change: The non current inventory situation across the industry.

Speaker Change: Will that be an overhang in fiscal 'twenty six and would you. Therefore expect to continue to lose share until that is complete.

Jose Boisjoli: Good morning, Craig. I mean, right now, if we look at the – some OEMs still have too much inventory. I give you an example in ORV, and again, this is coming from CDK, Datola. It's a tool to manage in and out at dealer level. But on ORV, I mean, some OEMs still have 50% of non-current inventory at this time of the year, which is too high. Then we believe, like Sbastien said, that this – if the retail hold, this will normalize at the end of Q1 or early Q2, but we feel confident for the second half of the year.

Craig: Good morning, Craig I mean right now.

Speaker Change: If we look at.

Speaker Change: Some Oems still have too much inventory.

Speaker Change: I give you an example in the RV and again this is coming from the CD key.

Speaker Change: That Taylor, it's a tool to manage in and out at dealer level, but they'll know RV.

Speaker Change: Some Oems still have 50% of non current inventory at this time of the year, which is too high then we believe <unk> <unk> said.

Speaker Change: This is the retail the hold this will normalize at the end of Q1 or early Q2, but we feel confident for the second half of the year.

Craig Kennison: And to your question, Craig, yes, so market share challenges in the first half of the year are expected on our Thank you.

Speaker Change: And to your question Craig, Yes, so market share challenges in the first half of the euro expected on our front.

Speaker Change: Thank you and then with respect to the $200 million in cost savings that you have identified.

Craig Kennison: And then with respect to the $200 million in cost savings that you have identified, how will that impact the income statement, as you think about fiscal 26 and beyond? Is that something where you'd give price back to consumers or some of that flow to the bottom line? Well, obviously, we're operating in an environment where production is not at the level where we want it to be, where the industries are softer. And so it's not something that would automatically flow through as price reduction. We want to generate profitability. We want to generate free cash flow. So that's something that we will try to protect as much as possible.

Craig: How will that impact the income statement as you think about fiscal 'twenty six and beyond is that something where you'd give price back to consumers or will some of that flow to the bottom line.

Speaker Change: Obviously, we are operating in a environment where.

Speaker Change: Production is not at the level, where we would want it to be worthy industries are softer.

Speaker Change: And so it's not something that would automatically flow through was a price reduction.

Speaker Change: We wanted to generate profitability, we wanted to free cash flow. So that's something that we will try to protect as much as possible.

Jose Boisjoli: But again, we'll remain flexible based on what the industry dynamics are and what the promotional environment is to make sure that our products remain competitive for the consumers, for the dealers as well, and that we're able to win the market share battle as well and sell the innovation that we have.

Speaker Change: But again, we will remain flexible based on what the industry dynamics are and what the promotional environment is to make sure that our products remain competitive for the consumers for the dealers as well.

Speaker Change: We're able to win the market share battle as well and sell the innovation that we have.

Operator: Thank you.

Speaker Change: Thank you.

Martin Landry: Next question will be from Martin Landry at CIFO. Please go ahead. Good morning, guys. You know, lots of headwinds and lots of moving parts. But if we focus on retail demand, I'd like to understand a little bit how you view the industry at retail in North America evolved this year. a good morning. If you look at some of this, some consumer highlight. Basically, new entrants right now are at the same level than pre-COVID. And retail on the high-end product is quite good. It's touching more the entry-level product or recreational product.

Speaker Change: Thank you next.

Speaker Change: Our next question will be from Martin Landry of Stifel. Please go ahead.

Martin Landry: Hey, good morning, guys.

Speaker Change: <unk>.

Speaker Change: Lots of.

Speaker Change: Headwinds and lots of moving parts, but if we focus on retail demand.

Speaker Change: I would like to.

Speaker Change: Understanding a little bit of how you view the industry.

Speaker Change: At retail in North America.

Speaker Change: All of this year.

Speaker Change: Good morning, if you look at.

Speaker Change: Some obviously some.

Speaker Change: Consumer a highlight basically new and trend right now are at the same level than pre COVID-19.

Speaker Change: <unk> retail on the high end product is quite good.

Speaker Change: It's touching more of the entry level product or recreational product.

Jose Boisjoli: Then I give you an example. In some product line, like all our entry-level product, the Spark, the Ryker, and the Switch are down about 30%. On the other hand, the Defender cab is up. Then this is basically what we see, same trend and what we've told you in Q3 and Q4, in Q3, sorry, but this is the dynamic that we see, the inflation, the high interest rate are affecting more the customer for entry-level product and the high end is doing quite well. Obviously, because of our non-current position, we're losing some share in the non-current, but on the other hand, we're very happy of the momentum we have in the current category.

Speaker Change: And I give you an example.

Speaker Change: In some product lines like.

Speaker Change: All our entry level product this part the ryker.

Speaker Change: The switch are down about 30%.

Speaker Change: On the other hand, the defender cabinet is hub.

Speaker Change: Then this is basically what we see.

Speaker Change: Same trend than what we've told you in Q3 and Q4 and Q3 story, but this is the dynamic that we see.

Speaker Change: The inflation.

Speaker Change: The high interest rate are affecting more the.

Speaker Change: Net customer for entry level product.

Speaker Change: And the high end is doing quite well.

Speaker Change: Obviously because of our non curran.

Speaker Change: <unk>, we are losing some share in the non QM, but on the other hand, we're very happy with the momentum we have.

Speaker Change: In the current category, but curious statement buffet as you mentioned the situation is obviously evolving and it's tough to read and Thats. The reason why today, it's difficult for us to have a evaluation of what the true industry demand is then provide guidance I'm looking at the February numbers, the retailers choppy Im looking at awardee retail.

Jose Boisjoli: But to your statement, Martin, as you mentioned, the situation is obviously evolving and it's tough to read, and that's the reason why today it's difficult for us to have an evaluation of what the true industry demand is and provide guidance.

Martin Landry: I'm looking at the February numbers, the retail is choppy, I'm looking at ORV retail down in the mid-teens for the ORV industry in February only, and so how is that going to trend going forward? And again, it's very difficult to call. Okay, and just to follow up to that, you're saying that high end products are, you know, selling well and value or entry price products are a little less soft. So does that mean, you know, when you talk about your potential for top line growth, does that mean from a volume price standpoint, volumes could be down year over year and price up?

Speaker Change: And in the mid teens for the RV industry in February only and so how is that going to trend going forward and again, it's very difficult to call.

Speaker Change: Okay, and just a follow up to that.

Speaker Change: Youre seeing that high end products are set.

Speaker Change: Selling well in and value our entry price products.

Speaker Change: Nonetheless, soft so does that mean.

Speaker Change: When you talk about.

Speaker Change: Your potential for topline growth does that mean.

Speaker Change: As volume price standpoint.

Speaker Change: Volumes could be down year.

Speaker Change: Year over year and price up.

Martin Landry: Potentially, yes. Again, based on today, the difficulty in forecasting the industry, that is a potential scenario.

Speaker Change: Potentially yes, potentially yes again.

Speaker Change: Based on today.

Speaker Change: The difficult.

Speaker Change: <unk> and forecasting the industry that is a potential scenario.

Martin Landry: Okay, thank you. Best of luck.

Speaker Change: Okay. Thank you and best of luck.

Robin Farley: Thank you. Next question will be from Robin Farley at UBS. Please go ahead. Great. Thanks. Just trying to understand a little bit more.

Speaker Change: Thank you.

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

Speaker Change: Great. Thanks.

Robin Farley: I know you mentioned that previously you would have guided to the $450 to $5 range before the $40 million headwind from tariffs and retail softening. Can you quantify what that $450 to $5 would have assumed in industry retail overall and for ORV? And maybe you aren't ready to quantify where you see that now, but just wanting to think about how your retail expectation has changed. Thanks. Yeah. The assumption assumed a relatively flat industry outlook, but obviously we were lapping a year where we did significant inventory correction, especially in ORV, and so we would have had retail matching wholesale in fiscal 26, which have provided for obviously volume growth on our end and also new product introductions, which are expected to be very well received from the consumers.

Speaker Change: I understand a little bit more I know you mentioned that sort of.

Speaker Change: Previously you would have guided to the $455 range, both for the $40 million headwind from tariffs and.

Speaker Change: Retail softening.

Speaker Change: Can you.

Speaker Change: Defy what you.

I guess, what that $155 would've assumed what industry retail.

Speaker Change: What kind of overall and for LNG and maybe.

Speaker Change: Pardon me to quantify where you see that now but just.

Speaker Change: Just wanting to think about.

Speaker Change: All your retail expectation change yes.

Speaker Change: Yes.

Speaker Change: The assumption assumed.

Speaker Change: A relatively flat industry outlook.

Speaker Change: But obviously we were.

Speaker Change: Lapping a year, where we did.

Speaker Change: <unk> inventory correction, and especially into R&D and so we would not have retailed matching wholesale.

Speaker Change: In fiscal 'twenty, six which provided four obviously volume growth on our end and also new product introductions.

Speaker Change: <unk> are expected to be very well received from the consumers. So that was the our initial assumption the start of the year.

Robin Farley: So that was our initial assumption at the start of the year before all of this.

Speaker Change: Before all of this took place.

Robin Farley: And now your assumption would be for industry retail to be kind of... Oh, the assumption is no guidance, so... I know, I got it, I know, I understood. To be honest, it's difficult to call. It's been choppy and obviously with the uncertainty created by all of this, the consumers are holding back. You could have expected consumers to buy these goods because if their tariffs are coming on, there's going to be surcharges that are going to be applied. And so technically these goods are more affordable today than they might be in six months. But again, that uncertainty is a bigger overhang than the potential opportunity of buying a product with no tariffs today.

Speaker Change: And now your assumption would be for industry retail to be.

Speaker Change: The assumption is the assumption there is no guidance.

Speaker Change: Got it.

Bob: Sure Bob.

Speaker Change: Difficult to call, it's been it's been choppy and obviously with the uncertainty created by.

Speaker Change: All of this the consumers are holding back you could've expected consumers to buy these goods because tariffs are coming on there's going to be surcharges are going to be applied.

Speaker Change: Technically these guys are more affordable today than they might be in six months.

Speaker Change: But again that uncertainty is a bigger overhang does the potential opportunity of buying a product with.

Speaker Change: With the tariffs today so.

Robin Farley: So it says a lot about how the consumer is feeling.

Speaker Change: It says a lot about how the consumer is feeling.

Robin Farley: And then just for my follow-up, you mentioned you've taken some mitigating actions. Is there sort of some amount of inventory that you've manufactured that you have crossed the border or able to get across by April 2nd so that you could continue to have inventory go to dealers without tariffs for some period of time? I don't know if you can quantify any sort of days sales outstanding or kind of thinking about what amount of inventory you've maybe been able to move in anticipation of, you know, potential further tariff action.

Speaker Change: And.

Speaker Change: And then just for my follow up on you mentioned you've taken some mitigating actions is there some amount of inventory that you've manufactured that you have across the border are able to get across by April 2nd. So that you could continue to have inventory.

Speaker Change: Go to dealers without tariffs.

Speaker Change: Some period of time I don't know if you can quantify any sort of days sales outstanding you're kind of thinking.

Speaker Change: Thinking about what amount of inventory, you've maybe been able to.

Speaker Change: Move in anticipation.

Speaker Change: Potential further tariff actions.

Jose Boisjoli: Yeah, when all this tariff discussion started back in December last year, We even rented some warehouse in the United States to give us additional capacity. And right now, every product that is produced to be shipped to the United States, even if it's too early to ship them to the dealers, we cross the borders. And our warehouse that we have in the U.S. are always full. We're maximizing everything we can for product, but also for parts and accessories. Then this is what we're doing right now. And it's difficult for us to quantify, but I would say we probably have a month of inventory altogether that is on the other side of the border.

Speaker Change: Yes.

Speaker Change: All of this tariff.

Speaker Change: Discussion started.

Speaker Change: Back in December last year.

Speaker Change: We even the rented some warehouse in the United States to give us additional capacity and right now a great product that is produced to be shipped to United States even if.

Speaker Change: It's too early to ship them to the dealers and we cross the borders.

Speaker Change: Warehouses that we have in U S.

Speaker Change: <unk> always full with maximizing everything we can for our product, but also for parts and accessories.

Speaker Change: And this is what we're doing right now.

Speaker Change: And it's difficult for us to quantify but I would say, we probably have.

Speaker Change: Months of inventory altogether.

Speaker Change: On the other side of the border.

Jose Boisjoli: And also we need to remember that doorkeepers also have inventory in their in their yards. And so if if something would be announced, we don't necessarily need to knee jerk, we can see how things will evolve. And as we've seen in the past, things sometimes change after a few days. And so we're not forced to ship units every day. And that's, I think, a positive thing about our business that we can see where things are going to kind of trend towards before making more.

Speaker Change: And also we need to remember that our dealers also have.

Speaker Change: Inventory and they're in their yards until if if something would be announce we don't necessarily need to knee jerk. We can see how things will evolve and as we've seen in the past things sometimes change after a few days.

Speaker Change: And so we're not forced to ship units every day and Thats I think a positive thing about our business that we can see where things are going to kind of trend towards before making more.

Jose Boisjoli: midterm to long-term decision.

Speaker Change: Mid term to long term decisions.

Operator: Great. Very helpful.

Speaker Change: Great very helpful. Thank you.

Speaker Change: Thank you next.

James Hardiman: Next question will be from James Hardiman at Citigroup. Please go ahead.

Speaker Change: The next question will be from James Hardiman.

Speaker Change: Citigroup. Please go ahead.

Sean Wagner: Hi, this is Sean Wagner, author James. Just kind of you touched on February retail trends. Is there any color you can give on March month to date retail trends? Oh, we're kind of seeing the same same elements. Retail is still softer than what we would have expected three months ago. So again, there's still the uncertainty around what's going to happen on April 2. And I think that is influencing consumer behavior. Okay, that's fair.

Speaker Change: Hi, This is Sean Wagner on for James.

Speaker Change: Just kind of you touched on February retail trends is there any color you can give on March month to date retail chains.

Speaker Change: Oh.

Speaker Change: We're kind of seeing the same same elements.

Speaker Change: The retail is still softer than what we award are expected three months ago. So again theres still be uncertainty around what's going to happen on April 2nd.

Speaker Change: And I think that is influencing consumer behavior.

Speaker Change: Okay.

Sean Wagner: I guess if we take the incremental $40 million in tariff costs as sort of a base case scenario, are you even considering what the size of a worst case scenario might be? Or I guess excluding tariffs, you had talked about 50 bits of improvement in OPEX year over year in your last call, is that still sort of excluding the incremental $40 million what you would be targeting? Or were there other moving parts since your last report that maybe changed that thinking? Well, again, we've, the situation obviously is always changing, we try to be, uh... We obviously follow it closely and today what I can tell you is what we know today is $40 million.

Speaker Change: And I guess, if we take the incremental $40 million of tariff costs as sort of a base case scenario are you even.

Speaker Change: Considering.

Speaker Change: What the size of worst case scenario might be or I.

Speaker Change: I guess excluding <unk>.

Speaker Change: Tariffs.

Speaker Change: You had talked about 50 bps of improvement in Opex.

Speaker Change: The year over year on your last call is that still sort of excluding the incremental $40 million, what you would be targeting or were there other moving parts since your last report that.

Speaker Change: Maybe changed that thinking.

Speaker Change: Well again.

Speaker Change: Situation, obviously is always changing we try to be.

Speaker Change: We obviously follow it closely and today, what I can failure was what we know today is $40 million.

Sbastien Martel: Obviously, what if I can give you an appreciation of what it could mean for BRP and obviously the U.S. market is a big market for us. 60% of our revenues come from the U.S. And most of what we sell to the U.S. originates from either Mexico or Canada. And so it could have a sizable impact if tariffs were imposed on all goods crossing the border. But as we've always said, I mean, our supply chain and the supply chain of many, many industries have been optimized over the last 25 years, leveraging these free trade agreements. So if you were to do a dramatic shift overnight, it would be extremely disruptive for a lot of companies and the economy.

Speaker Change: Obviously on what if I can give you an appreciation of what it could mean for ERP and obviously the U S market is a big market for US 60% of our revenues coming from the U S and most of what we sell to the U S.

Speaker Change: Originates from either Mexico or Canada.

Speaker Change: And so it could have a sizable impact if tariffs were imposed on all goods.

Speaker Change: Crossing the border, but as we've always said that our supply chain and the supply chain of many many industries have been optimized over the last 25 years leveraging these free trade agreements. So if you were to do a dramatic shift overnight. It would be extremely disrupt full for a lot of companies in the economy and so for us that is not a set.

Sbastien Martel: And so for us, that is not a scenario which we believe is viable in the long term. Can there be changes to the USMCA agreement? I think yes, that's a very likely probability and it's scheduled to be renegotiated in a little over 12 months. So maybe that is where we go. And as they've done during the last time when there were changes to the USMCA agreement, there was a transition period that was put in place to allow companies to adjust. And we've always been flexible and adapted our operations to make sure that we leverage the new rules as they come into play.

Speaker Change: Area, which we believe is viable in the long term can.

Speaker Change: Can they be changes to the U S. MCA agreement, but yes, I'd say very likely probability and it's it's scheduled to be renegotiated.

Speaker Change: A little over 12 months, so maybe that is where we go in as they have done during the last time when there were changes to the UMC U S. MCA agreement. There was a transition period that was put in place to allow companies to adjust and we've always been flexible and adapted our operations to make sure that we leverage the new rules as they come.

Sbastien Martel: So that's how we see it.

Speaker Change: In play so that's how we see it.

Speaker Change: Thank you.

John Hsu: Next question will be from John Hsu at BNP Paribas. Please go ahead. Hi guys, thanks for the question. On the current versus non current inventory mix, helpful that you mentioned what you think some of the competitors are at. But could you maybe give us a sense of how your inventory mixes current versus non current and how that compares to maybe pre COVID FY20? Yeah, when I look at where we were on January, and if I look at just ORV, only a third of my inventory was non-current, and so the rest was current, which obviously is very good compared to what the numbers that Josie mentioned to you.

Speaker Change: Thank you.

Speaker Change: Next question will be from John Chu at BNP Paribas. Please go ahead.

John Chu: Hi, guys. Thanks for the question.

Speaker Change: Current versus non current inventory mix helpful. That you mentioned, what you think some of the competitors are at.

Speaker Change: But could you maybe give us a sense of how your inventory mix since Congress non current and how that compares to maybe pre COVID-19 FY 'twenty.

Speaker Change: Yes, when I look at.

Speaker Change: Where we were in January and I, if I look at <unk> or <unk>.

Speaker Change: Only a third of my inventory was.

Speaker Change: Non current.

Speaker Change: So the rest was currency, which obviously is very good compared to what the numbers that Julie mentioned to you and I would say, it's pretty much in line, even better than when we were.

Sbastien Martel: And I would say it's pretty much in line, even better than when we were pre-COVID. We actually purposefully reduced inventory, and so that had the benefit of reducing non-current inventory. So that's where we are for non-current on ORV, and for seasonal business, we're a bit higher because we've just ended the season and snowmobile was a tougher season versus the season we had versus pre-COVID.

Speaker Change: <unk>.

Speaker Change: We actually purposefully reduced inventory.

Speaker Change: And so that had the benefit of reducing non current inventory. So that's where we are for non non current.

Speaker Change: RV and for seasonal business were a bit higher because we've just ended the season in snowmobile. It was a tougher season versus the season, we had a versus pre COVID-19.

Sbastien Martel: So trending a bit higher on snowmobile, but in a very good position on ORV with 30% of our inventory being non-current. Okay, very helpful. And then on snow, it sounds like you're planning some reduction in shipments. Maybe could you help us think about how big of an impact that could be to the top line? Or maybe remind us how big snow is within your seasonal? Yeah, I'd say snow business is probably going to be similar to the snow season we had last year. And so fiscal year 25 for us was not a good snow season from a wholesale perspective because we reduced shipments off a tough season.

Speaker Change: Trending a bit higher on snowmobile, but then a very good position on the RV with.

Speaker Change: 30% of our inventory being non core.

Speaker Change: Okay very helpful and then on snow it sounds like Youre planning some reduction in shipments maybe could you help us think about how how big of an impact that could be to the top line or maybe remind us how big now is within your seasonal.

Speaker Change: I'd say with snow business is probably going to be similar to the snow season, we had last year.

Speaker Change: So fiscal year 'twenty five for US was not a good snow season from a wholesale perspective, because we reduced shipments off a tough season. So the expectation for next year as we will have similar deliveries as we had in fiscal year 'twenty five.

Sbastien Martel: So the expectation for next year is we'll have similar deliveries as we had in fiscal year 25. correcting inventory, correcting inventory in the network. You've got it.

Speaker Change: Correcting inventory.

Speaker Change: Correcting inventory in the network.

Operator: Thank you.

Speaker Change: Got it thank you.

Jonathan Goldman: Next question will be from Jonathan Goldman at Scotiabank. Please go ahead. Hi, good morning, and thanks for taking my questions. I just wanted to circle back to some of the slides you provided, the potential for top line growth and potential for margin improvement. On the top line growth, you talked about better alignment of retail and wholesale and RRV and de-stocking and seasonal. And you discussed earlier potential for share shifts. So what would be the underlying assumption that would drive the top line growth?

Jonathan Goldman: Thank you next question will be from Jonathan Goldman at Scotia Bank. Please go ahead.

Jonathan Goldman: Hi, good morning, and thanks for taking my question I, just wanted to circle back to some of the slides you provided the potential for topline growth and potential for margin improvement.

Jonathan Goldman: On the top line growth you talked about better alignment of retail and wholesale in RV and Destocking seasonal and you discussed earlier potential for share shifts so what would be the underlying assumptions that would drive top line growth.

Jose Boisjoli: For more information, visit www.FEMA.gov Well, the underlying assumption that would allow tri-plane growth is the first one is ORV deliveries where wholesale is better aligned with retail. We did a significant adjustment to inventory, 19% reduction in ORV and inventory reduction this year, obviously. That means that you're shipping much less into the network than you're retailing, so that's been number one. The other element, which is not on slide 17, but it's the introduction of new products this year, which we believe will, in the back half of the year, which will drive wholesale deliveries and revenue because the dealers and the consumers will want these products in the showroom and in their yards.

Jonathan Goldman: While the underlying assumption that would load truck line growth is.

Jonathan Goldman: The first one is all of your deliveries were wholesale is better aligned with retail we did a significant adjustment to inventory, 19% reduction in or the reduction in inventory reduction. This year, obviously that means that you're shipping much less into the network. Then your retailing. So thats the number one the other element, which is not on slide 17, but its the.

Jonathan Goldman: Introduction of new products this year, which we believe will play.

Jonathan Goldman: But in the back half of the year, which will drive.

Jonathan Goldman: Our wholesale deliveries and revenue because of the dealers and the consumers will want these products in the showroom and in their yards.

Jonathan Goldman: And.

Jose Boisjoli: And that would be somewhat offset by the adjustment of inventory for seasonal business. There's also a pricing increase, obviously, and we believe that the overall promotional environment will be better for us in 2026 than it would have been in 2025 because of less non-current inventory that we need to deploy.

Jonathan Goldman: And that would be somewhat offset by.

Jonathan Goldman: By the adjustment of inventory for seasonal business. There's also a pricing increase obviously and we believe that the.

Jonathan Goldman: The overall promotional environment will be better for us.

Jonathan Goldman: In 2006 that it would've been 25 because of less non current inventory that we need to deeply.

Jose Boisjoli: Okay, but just circling back maybe on the pricing discussion, the margin improvement driven by lower sales programs, given the consumer headwinds you've called out of the aggressive promo from other OEMs that maybe weren't as proactive, the stocking on current units, why would industry or your promo be down or even flat this year? Well, there's two things. One is we have less non-current inventory to liquidate. So that means you don't necessarily need to have the same level of promotion on your non-current inventory. Yes, OEMs will need to liquidate their non-current inventory. And that's why we said we would expect to lose market share in the first half of the year.

Speaker Change: Okay, but just circling back maybe on the pricing discussion the margin improvement driven by lower sales programs given the consumer headwinds you called out of the aggressive promo from other Oems that maybe werent as proactive destocking on current units whitewood industry.

Jonathan Goldman: <unk> will be down or even flat this year.

Speaker Change: Well, there's two things one is we have less non current inventory to liquidate so that means.

Speaker Change: So do you need to have the same level of promotion on your non current inventory Es Oems would need to liquidate their non current inventory and Thats why we said, we would expect to lose market share in the first half of the year.

Jose Boisjoli: And then in the back half of the year, once the OEM and the industry has corrected their inventory situation, we'd be operating in a more normalized environment in the back half of the year. But again, these were the assumptions that we had at the beginning of the year. And so we'll see how the industry is trending and we'll adapt accordingly. Okay, got it.

Speaker Change: And then in the back half of the year once the OEM in the industry has corrected their inventory situation, we'd be operating in a more normalized environment in the back half of the year, but again these worthy assumptions that we had at the beginning of the year.

Speaker Change: And so we'll see how the industry is trending and we'll adapt accordingly.

Operator: Thanks for taking my questions. Thank you.

Speaker Change: Okay got it thanks for taking my question.

Speaker Change: Thank you.

Cameron Doerksen: Next question will be from Cameron Doerksen at National Bank Financial. Please go ahead. Yeah, thanks. Good morning. Just a question, I guess, on the supply chain. I mean, you've mentioned the $40 million tariff impact so far. I presume that most of that is related to the steel and aluminum tariffs. Maybe there's a little bit of China exposure in there.

Speaker Change: Next question will be from Kamran Dixon at National Bank Financial. Please go ahead.

Speaker Change: Yes. Thanks. Good morning, just a question I guess on the supply chain I mean, you mentioned the $40 million <unk>. So far I presume that most of that is related to the steel and aluminum tariffs.

Speaker Change: Maybe there's a little bit of China exposure. There I'm just wondering if just on that portion of what's been announced so far are there anything you can is there anything you can do to adjust your.

Jose Boisjoli: I'm just wondering if just on that portion of what's been announced so far, is there anything you can do to adjust your supply chain to mitigate that over time? Yeah, I mean, for sure. You know, we've been dealing with tariffs all our life, and we are used to adapt to rules. What is difficult this time is the rules are not clear and they're changing all the time, and there is no lead time. Then the point is, we need clear rules, stability, and lead time, and we will adapt. We've done that a lot of time, and we will adapt going forward.

Speaker Change: Supply chain to mitigate that over time.

Speaker Change: Yes, I mean for sure.

Speaker Change: We've been we've been doing we've been dealing with carrier.

Speaker Change: Our life and we are used to adapt to the rules.

Speaker Change: <unk>. This time is the rule are not clear and changing all the time.

Speaker Change: And there is no lead time than the point is we need clear rule stability in lead time, and we will adapt we've done that a lot of time and we will adapt going forward right now.

Jose Boisjoli: Right now, the $40 million is an estimation. I think we can work on it to reduce, but we don't know if there is another rule that will happen in a month. Then this is the difficulty. The $40 million is our best estimate at this point with what we know, and obviously, we'll continue to work on ways to mitigate it.

Speaker Change: $40 million.

Speaker Change: Estimation I think we can work on it to reduce but we don't know if there is another rule that will happen in a month and this is a good difficulty the $40 million is our best estimate at this point with what we know and obviously, we'll continue to work on.

Speaker Change: Ways to mitigate it.

Jose Boisjoli: Okay, no, fair enough. A lot of uncertainty out there. And just just for a follow up just on the I guess the dealer inventory finance, I know you've been providing a fair amount of support there for the dealers on that front. Now that you know, the dealer inventory, at least for your products is down to a more normalized level. How do you expect that that financing support is going to trend over the next 12 months? Well, for us, they'll obviously be a positive.

Speaker Change: Okay fair enough a lot of uncertainty out there and just for a follow up just on the.

Speaker Change: I guess the dealer inventory finance I know you've been providing a fair amount of support there for the dealers on that front now that the dealer inventory at least for your products is down to a more normalized level. How do you expect that that financing support is going to trend over the next 12 months.

Speaker Change: While there is for us sale obviously.

Jose Boisjoli: When I look at what we've invested in fiscal year 2025 versus pre-COVID, just the floor plan financing was about 1.6% of our revenues compared to 1% in fiscal year 2020. And today, with what I see, I'm expecting floor plan to be relatively as a percentage of revenues similar to what we had in fiscal year 2020. Obviously, the leaner inventory will certainly help and the more rapid liquidation from the dealers as well with that leaner inventory is another factor.

Speaker Change: A positive when I look at.

Speaker Change: What we've invested in fiscal year 'twenty five versus pre COVID-19.

Speaker Change: Just the floor plan financing worth about one 6% of our revenue as compared to 1%.

Speaker Change: Fiscal year 'twenty.

Speaker Change: And today with what I see in my correcting for planned to be relatively as a percentage of revenue similar to what we had.

Speaker Change: In fiscal year, 'twenty, obviously, the leaner inventory.

Speaker Change: We will certainly help.

Speaker Change: And the more rapid.

Speaker Change: Liquidation from the dealers as well without leaner inventory is another factor.

Operator: Okay, that's very helpful.

Speaker Change: Okay No that's very helpful. Thanks very much.

Luke Hannan: Thanks very much. Thank you.

Luke Hannan: Next question will be from Luke Hannan at Canaccord. Please go ahead. Good morning, thanks. I wanted to follow up on the earlier line of questioning on the, you know, the staging of inventory. I know that that was in response to the discussion around the tariff uncertainty and perhaps moving inventory around in advance of these tariffs being imposed.

Speaker Change: Thank you.

Speaker Change: Next question will be from Luke Hannan of Canaccord. Please go ahead.

Good morning, Thanks, I wanted to follow up on the earlier line of questioning on the staging of inventory I know that that was in response to the discussion around the tariff uncertainty and perhaps moving inventory around.

Speaker Change: In advance of these tariffs being imposed but I wonder if the experience at the dealers have had over the course of the last several years now has given any sort of thought and perhaps yourselves any sort of thoughts as to I guess, helping to stage inventory a little bit more.

Jose Boisjoli: But I wonder if the experience that the dealers have had over the course of the last several years now has given them any sort of thought, and perhaps yourselves, any sort of thought as to, I guess, helping to stage inventory a little bit more thoughtfully, we'll call it, moving forward, so as to make sure there's less inventory on their lots going forward, less of a burden from a floor plan perspective. Curious to know if you've had any discussions there and what your thoughts are, absent, of course, it's going on the tariffs. Obviously, with the high interest rate that we had in the last few years, dealers are extremely sensitive to inventory.

Speaker Change: Thoughtfully, we will call it moving forward so as to make sure. There is there is less inventory on their lots going forward less of a burden from a floor plan perspective, I'm curious to know if you've had any discussions there and what your thoughts are absence of course, it's going on with tariffs.

Speaker Change: Obviously with the interest rate that we had in the last few years dealer are extremely sensitive to inventory and.

Jose Boisjoli: And that's why on the year-round product, off-road particularly, where we take order every month for what will be shipped in three months, it's a discussion that is a lot more detailed with dealers than it used to be. Then, for sure, and when the seasonal product, like we're doing the booking right now on Snowmobile for production that will happen this spring and summer, it will be, for sure, a total discussion with the dealer. Then the dealer don't, typically don't, they make less profit selling non-current, and obviously the high interest rate, then they are extremely cautious about what they will order.

Speaker Change: And Thats why.

Speaker Change: On the year round product off road, particularly where we think order of your month for what will be shipped in three months.

Speaker Change: It's a discussion that this is up more detail with dealers than it used to be.

Speaker Change: Then for sure.

Speaker Change: When the seasonal product like <unk>.

Speaker Change: We are doing the booking right now in snowmobile for production that will happen this spring and summer.

Speaker Change: It will be for sure its total discussion with the dealer then the dealer.

Speaker Change: Typically they make less profit selling non current.

Speaker Change: And obviously the interest rate than they are extremely cautious about.

Speaker Change: What they will orders and I think overall. This is this will be healthy for the industry mid to long term.

Jose Boisjoli: And I think, overall, this will be healthy for the industry, mid- to long-term.

Jose Boisjoli: Okay, thanks. And then for my follow-up here, Jose, you mentioned that the early read from the boat shows was showing more stable industry conditions. Just curious, what sort of data points are you looking at there? Is it registrations primarily, or is there other information that's sort of informing that?

Speaker Change: Okay. Thanks, and then for my follow up here.

Speaker Change: You mentioned that the early read from the boat shows were showing more stable industry conditions I'm, just curious what sort of data points are you looking at there is it registrations, primarily or is there other information that's sort of informing that.

Jose Boisjoli: Yeah, Boat Show, it's always difficult to get statistics from Boat Show because customers go to the Boat Show, dealers meet them, and it's very difficult to get what is signed at the Boat Show or what will be signed in the following weeks. But what we're hearing from dealers, last year, last year dealers, Boat Show were very good in certain areas and bad in other areas. This year it was more consistent across. and North America. Then what we're hearing, the dealers are quite happy with the boat show booking or the boat show sales. And even right now, we are on tour, on off-road, and the tendency, the interest for the product is there.

Speaker Change: Yes, both show, it's always difficult to get statistic from both short because.

Speaker Change: Customer go to the board show dealer meet them and this is very difficult to get what the sign of the boat show of what will be signed in the following weeks, but what are we hearing from dealers last year last year dealers boat show were very good and certainly <unk> and bad in other area. This year it was more consistent.

Speaker Change: In North America.

Speaker Change: And then what we're hearing.

Speaker Change: The dealer are quite happy with the boat show.

Speaker Change: Booking or the both wholesale and.

Speaker Change: And even right now we are on tour enough road and the tendency the interest for the product.

Jose Boisjoli: Then, like we've said many times, we feel good about the beginning of the year, and I think a lot of customers are on the fence, waiting to better what will happen with the tariff and the global economy.

Speaker Change: Is there.

Speaker Change: Then like we said many time, we feel good about the beginning of the year and exiting a lot of customer are on the fence waiting.

Speaker Change: To better understand what will happen with the tariff in the global economy.

Operator: Okay, thank you very much. Thank you.

Speaker Change: Okay. Thank you very much.

Jaime Katz: Next question will be from Jaime Katz at Morningstar. Please go ahead. Hi, good morning.

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

Jaime Katz: I want to frame profit growth in a different way. Are you do you guys have a level of sales where you really start to see the absorption, pick up and and lend to operating margin expansion? Is it something like low single digit growth, mid single digit growth? Can you just sort of put a size around that for us?

Jamie Katz: Hi, good morning, I wanted to frame.

Speaker Change: Growth in a different way are you do you guys have a level of sales, where you really start to see the absorption.

Speaker Change: Pick up and lend to operating margin expansion is it something like low single digit mid single digit growth can you just sort of.

Speaker Change: <unk>.

Speaker Change: Is around that for us.

Jose Boisjoli: Well, this year, fiscal 25, we were operating our plans probably at a 55% utilization, which is obviously suboptimal. Every unit we add is contributing. We'll call it direct margin or call it revenue minus variable cost to the bottom line. And so they're all extremely profitable. And so any volume increase is beneficial for us and it'll give you more than what you're currently reporting as a profit margin or a gross margin. So that's obviously the beauty of our business. Yes, there's a certain level of fixed cost. We still can be profitable even running with 55% asset utilization.

Speaker Change: While this year fiscal 'twenty five we were operating our plants, probably up 55% utilization, which is obviously a sub optimal.

Speaker Change: Every unit, we add is contributing.

Speaker Change: We'll call it.

Speaker Change: Direct margin or call it revenue minus variable cost to the bottom line and so where they are all extremely profitable and so any any volume increases beneficial for us and we'll give you more than what you're currently reporting as a profit margin or gross margin. So that's the obviously the beauty of our busy.

Speaker Change: <unk>.

Speaker Change: Yes to a certain level of fixed cost, we still can be profitable, even running with 55% asset utilization.

Jose Boisjoli: But as we increase, every percentage point of asset utilization is exponential in terms of revenue growth that we could get. So anything positive would be good is what it sounds like.

Speaker Change: But as we increase every percentage point of our civilization exponential in terms of revenue growth that we could get.

Speaker Change: Okay.

Speaker Change: Anything positive would be guidance.

Speaker Change: But it sounds like.

Speaker Change: Yes, yes.

Sbastien Martel: And then can you talk a little bit about how you guys are thinking about your capital allocation priorities this year and where that that spend is going to? Thanks. Well the number one priority continues to be the product, the innovation. This is what fuels demand, fuels interest in the consumer, fuels dealer engagement and so that's why we're continuing to invest and we have an exciting year of product introductions coming up and we'll continue focusing on that and protecting this. The other element is obviously we want to distribute capital to shareholders with the dividend and so we're modestly increasing the dividend this year.

Speaker Change: And then can you talk a little bit about how you guys are thinking about your capital allocation priorities this year and where that that spend is going to thanks.

Speaker Change: The number one priority continues to be the product innovation.

Speaker Change: This is what fuels demand fueled interest in the consumer fuels dealer engagement and so.

Speaker Change: That's why we're continuing to invest in and we have an exciting year of product introductions coming up.

Speaker Change: And we will continue focusing all of that and protecting this the other element is obviously were.

While the distributing capital to assure the shareholders with the dividend and so we're modestly increasing the dividend this year.

Sbastien Martel: We still have $3.3 million of shares that we can buy back under the NCIB program and so that is certainly an opportunity that we would like to tap in but obviously you'll understand in the current context we prefer protecting the flexibility of our balance sheet and so we'll be holding back on buybacks until we have a better read as to where tariffs will go and where the economy is going to land.

Speaker Change: We still have $3 $3 million of shares that we can buy back under the CIB program and so that is certainly an opportunity that we would like the top end, but obviously youll understand in the current context.

Speaker Change: We prefer protecting the flexibility of our balance sheet.

Speaker Change: And so we will be holding back on buybacks until we have better read as to where tariffs will go and where the economy is going to land.

Speaker Change: Thanks.

Operator: Thank you.

Tristan Thomas Martin: Next question will be from Tristan Thomas Martin at BMO.

Speaker Change: Thank you next question will be from Tristan Thomas Martin at BMO. Please go ahead.

Tristan Thomas Martin: Please go ahead. Hey, good morning. Good morning.

Speaker Change: Hey, good morning.

Speaker Change: Good morning, good morning.

Tristan Thomas Martin: I may have missed this, but just on the $40 million tax impact, was that COGS or somewhere else on the income statement? It will be in the cards. Okay, awesome.

I may have missed this but just on the $40 million higher from Pac was that Cogs are somewhere else on the income statement.

Speaker Change: It will be in Cogs.

Jose Boisjoli: And then just, how are you thinking? How are you thinking about affordability? I mean, you call it out entry level being still being soft, one of your competitors is hinting at much cheaper kind of off-road vehicle products coming later in this year. So how are you thinking about ASPs? And where do you think they kind of need to go to bring back entry level vent? As you know, the price have increased quite a lot during the COVID years, but give an example of last year, model year 25 ORV that we introduced last August. Basically, we didn't increase our pricing in ORV, it's even side by side, modest increase of 1% on watercraft entry wheel.

Speaker Change: Okay awesome.

Speaker Change: And then just how are you thinking how are you thinking about affordability I mean, you called out the entry level being.

Speaker Change: Still being saw one of your competitors.

Speaker Change: Hinting at much cheaper kind of off road vehicle products coming later in this year. So how are you thinking about Asps, where do you think they kind of need to go to bring back entry level demand.

Speaker Change: As you know the price have increased quite a lot during the COVID-19 years, but.

Speaker Change: Give you. An example of last year model year 'twenty five of RV that we introduced last August.

Speaker Change: Basically we did increase our pricing in RV ATV and side by side model, an increase of 1% on watercraft entry will.

Jose Boisjoli: But what is important, we still try to protect our entry-level product in each product category. Then on watercraft and on snow, we have some model below $7,000. The Riker is still below $10,000. Some side-by-side vehicle are below $15,000. And the switch is still, the base switch is still at $23,000, $24,000. Then the point is we, now we, pre-COVID, the price increase was about 1% per year. That was the average for the last two years. We had price increase higher than typical during the COVID year, but now we are back to normal and we're making effort to protect the entry-level model for new customers.

Speaker Change: But what is important that we still we still try to protect our entry level product in each product category.

Speaker Change: On watercraft on slow we have some model below $7000.

Speaker Change: The ryker is still below 10.

Speaker Change: Some side by side vehicle are below 15, and the switches still debase switches stood at 23000.

Speaker Change: 820, $24000 then the point is we.

Speaker Change: Now we meet pre Covid the price increase was about 1% per year that was the average for the last two years.

Speaker Change: We had <unk>.

Speaker Change: This increase.

Speaker Change: Higher than typical during the Covid year, but now we are back to normal and we're making effort to protect the entry level models that.

Speaker Change: For four new customers.

Jose Boisjoli: Okay, and then if I could maybe sneak one more in there, just how are the underlying retail rates to the consumer looking year over year? The retail what? Sorry, Tristan. retail financing rates to the consumer. Well, similar in the U.S., very similar to where we were 12 months ago. No big changes, no changes in terms of acceptance, credit scores, penetration, etc. Very consistent.

Speaker Change: Okay, and then if I could maybe sneak one more in there just how are the underlying retail rates to the consumer looking year over year.

Speaker Change: The retail what's sort of interesting.

Speaker Change: Retail financing rates to the consumer.

Speaker Change: Similarly, while similar in the U S very similar to where we were 12 months ago No big changes no changes in terms of acceptance credit scores penetration et cetera.

Speaker Change: System.

Operator: Awesome, thank you.

Speaker Change: Awesome. Thank you.

Speaker Change: Thank you.

Michael Kaprios: Next question will be from Michael Kaprios at the Jardin Capital Markets. Please go ahead. Good morning, and thank you for taking my question.

Speaker Change: Next question will be from Michael <unk> with Deutsche Bank Capital markets. Please go ahead.

Speaker Change: Good morning, and thank you for taking my question I was just wondering if you had any update on the on the marine sale in <unk>.

Jose Boisjoli: I was just wondering if you had any updates on the on the marine sale and anything else in the business that you might be considering divesting? Yeah, the process is still ongoing. And obviously, we cannot say much about the topic. The only thing I would say is, like we said, we're still targeting to end the process, end of Q1, beginning of Q2. And overall, we are on plan. Perfect. I appreciate it.

Speaker Change: Anything else.

Speaker Change: So you might be considering divesting.

Speaker Change: Yes, the process is still ongoing and obviously, we cannot say much about the topic.

Speaker Change: Only thing I would say is like we said, we're still targeting to end the process end of Q1, beginning of Q2 and overall we are on plan.

Speaker Change: Perfect I appreciate it and maybe I was just curious if you had performed any internal scenarios on the on the cost of potentially having to build or acquire a manufacturing facility or exposure in the U S.

Jose Boisjoli: And maybe I was just curious if you had performed any internal scenarios on the on the cost of potentially having to build or acquire a manufacturing facility or exposure in the US? But for sure, you know, our current footprint like we explained this morning is optimized to meet the USMCA role that is there. We're very happy with our manufacturing facility in Canada because it's close to R&D, it's close to the center of expertise for BRP. We like Mexico because the culture, the availability of labor, the proximity to the US market. We have some factory in US that were for mainly for marine because of transportation costs.

Speaker Change: But for sure.

Speaker Change: No.

Speaker Change: Our current footprint like we explained this morning is optimized to meet the Usmc rule that is there.

Speaker Change: We're very happy with our manufacturing facility in Canada, because it's close to R&D.

It's close to.

Speaker Change: The center of expertise for <unk>.

Speaker Change: We like Mexico, because the culture, the availability of labor the proximity to the U S market, we have some affected in U S that were.

Speaker Change: For mainly for marine because of transportation costs, but at the end of the day like I said before even the rule when their rule are clear and there is a stable environment and we have enough lead time to adapt.

Jose Boisjoli: But at the end of the day, like I said before, if the rule, when the rule are clear and there is a stable environment and we have enough free time to adapt, we will adapt. We always done it and we'll be what is right for the customers, the employees and the shareholders. But again, we need to have clear rules, stable environment and with some lead time we'll be able to adapt.

Speaker Change: At <unk>, we always done it and we will be what is right for the customers the employees and the shareholders, but again, we need to have clear clear rules.

Speaker Change: Stable on gentlemen, and with some lead time will be able to adapt.

Operator: Appreciate the call.

Speaker Change: I appreciate the color.

Speaker Change: Thank you.

Operator: And at this time, we have no more questions.

Speaker Change: And at this time, we have no more questions I will turn the call to Mr. <unk> to close the meeting.

Philippe Deschenes: I will turn the call to Mr. Deschenes to close the meeting.

Philippe Deschenes: Thank you, Sylvie, and thanks, everyone, for joining us this morning and for your interest in BRT. We look forward to speaking with you again on May 29th for our Q1 earnings call.

Thank you Sylvia and thanks, everyone for joining us this morning and for your interest and we look forward to speaking with you again on May 29 for our Q1 earnings call. Thanks, again, everyone and have a good mix.

Operator: Thanks again, everyone, and have a good day. Thank you, sir.

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

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

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.