BRP Inc.

All participants, your conference is now ready to begin. Good morning, ladies and gentlemen, and welcome to the BRP Inc.'s FY20 second quarter results call. I would now like to turn the meeting over to Mr. Philippe Deschenes. Please go ahead, Mr. Deschenes.

Thank you, Louise. Good morning, and welcome to BRP's conference call for a second quarter of fiscal year 2020. Joining me this morning are Jose Bocelli, President and Chief Executive Officer, and Sebastien Martel, Chief Financial Assessor. Before we move to the prepared remarks, I would like to remind everyone that certain forward-looking statements will be made during the call that are subject to an uncertainty. I invite you to read BRP's MD&A for a listing of these. Also during the call, reference will be made to supporting slides, and you can find the presentation on our website at brp.com under the Investor Relations section. So with that, I'll turn the call over to Jose.

Thank you, Philippe. Good morning, everyone, and thank you for joining us. I am pleased to report that we concluded the first half of the fiscal year on a strong note as our momentum continued in the second quarter and we've delivered solid results across the board. The demand of our product remains strong as we achieve another quarter of double-digit retail growth for our power support. Although we had poor early spring weather, especially in certain regions like the northern and midwest portion of North America, We were able to catch up in June and July for all product lines. From a financial standpoint, we experienced our best second quarter on record after delivering our highest revenue and normalized EPS diluted for that period. On the back of this solid performance, the successful completion of our substantial issuer bid and the closing of the tailwater acquisition We are narrowing the range and increasing our year-end EPS guidance to 365 to 380, an increase of 18 to 23% year-over-year. Now let's get into the highlight of the quarter, starting with the financial result on slide 4. Our revenue reached a record level for our second quarter at $1,460,000,000, representing a year-over-year growth of 21%. Notably driven by year-round product. All regions contributed to the growth with revenue up 21% in the United States, 32% in Canada, and 14% for international. Our normalized EBITDA was up 16% to $168 million, resulting in a normalized earning per share of $0.71, up 8% over last year. Our retail momentum continued to be strong. In North America, our transport industry remains healthy and continues to perform well, despite negative weather conditions earlier in the spring, posting a mid-single-digit retail growth for the quarter. Our products continue to outperform in the region, as we've delivered a second consecutive quarter of mid-teen retail growth. Internationally, we continue to be affected by political and economic tension in certain parts of the world. Mexico has slowed down, but still remains up mid-single digit, with retail remaining generally strong in Latin America overall and up 18%. In the MEA, we are performing well, with retail up 18%, while the industry is down high single digit. For APAC, Our performance in China has been flattished, and China is impacting the rest of APAC, where our retail is slightly down 2%, and the industry down about 10%. Looking at the North American retail by product line on slide 6. Again, this quarter, in general, we outpaced the competition and delivered growth in our power sport product line. Side-by-side and ETV had a very strong quarter, with retail hot, in the high 20 and low 10% respectively. Pre-wheel vehicle continued their robust growth, which rated up in the 90%, driven by the introduction of Ryker. And finally, personal watercraft was up low single digit, affected by weather condition this spring, which is better than the marine business and in line with the rest of the industry. Turning to slide seven. On June 4th, we introduce our Model Year 20 Can-Am off-road lineup, the most complete and competitive yet. The key highlights are the introduction of the Can-Am Defender 6x6 HD10, representing a significant addition to Can-Am Utility lineup, with its 6-wheel traction, longer cargo box, and industry-leading torque. This model was in response to a need in the industry for increased cargo capacity. The combination of the longer box and six wheels give this product incredible capability and the opportunity to create a new segment in the industry. The Can-Am Defender 6x6 is also the eighth new side-by-side platform introduced over the last four years. delivering on the commitment we made in 2015 of introducing a new side-by-side platform every six months for the next four years. Now, the Mavic X3 Turbo RR offers the best performance in the sports segment with its industry-leading 195 horsepower and improved off-road maneuverability. Since its introduction in 2016, we continue to build awareness for the Mavic X3, our flagship side-by-side vehicle, as the phase of racing present and future. For example, we occupied the top six places earlier this month in the highly regarded Best in the Desert race from Las Vegas to Reno. With our Model Year 20 introduction, We now offer a more competitive lineup across the price spectrum with the introduction of a new bin HP and entry-level high HP Maverick X3 package. Very happy with those introductions. And for ATV, the upgraded Can-Am Outlander features improved airflow with new inner fender and side panel making the temperature cooler and more comfortable for the rider. With the introduction of the Can-Am Defender 6x6 complete, we plan to continue the same pace of innovation which allow us to more than double our side-by-side retail over the past four years. Our capability increase at URS2 is completed and we are now running at full line speed. As you see on this slide, we still have a lot of room to grow in the utility, sport, and recreational segments. Over the years, we have set a solid foundation that positioned us well to capture market opportunity and continue our growth trajectory. Now, let's turn to slide nine for the year-round product highlight. Revenue were up 32% for the quarter, driven by a higher volume of side-by-side and ETV sold and the introduction of the Can-Am Riker. On the retail side, the North American side-by-side industry ended its season 19 on June 30th with retail sales up mid-single digit. Can-Am side-by-side had a very strong end of season with retail up in the high 20% for the quarter, driven by our continued pace of innovation, strong momentum with our dealer network, and greater availability of product. For the fall season, Our retail was up 20% and for the first time we ranked second in the industry. Our side-by-side business also continued to grow rapidly in international market, notably in EMEA and Latin America, where retail sales grew above 25% in the quarter. Turning to ATV, the North American ATV industry also ended its season 19 on June 30th with retail down low single digits. For the same period, Can-Am ETV retail was up high single digit and ended the season with the number three market share position in North America. We have a very strong momentum with ETV as we continue to gain market share in both the mid-CC and the high-CC categories. Our ETV growth is also a result of our growing Can-Am off-road offering, our dealer value proposition, and overall improved brand awareness. We have similar success in Latin America and in Europe where our retail grew 15% and 37% respectively in the quarter. I am very pleased with our off-road vehicle performance and confident we can continue our momentum. Now looking at the three-wheel vehicle business. Nine months into Season 19, the North American three-wheel motorcycle industry is up in the mid-30% range. Our Can-Am three-wheel vehicle retail sales are up over 100% for the same period, and our lineup is driving the industry growth so far this season. We are pleased with the momentum we have with Riker. We are seeing strong consumer demand, especially in North America and in Europe. and the awareness for the product continue to grow as it is attracting a lot of attention from the media and the online community. We have made good progress with our rider education program which is now offered in 189 schools in 50 states and provinces and close to 17,000 courses completed with a conversion rate that is trending above our 15% target. All in all, we are pleased with the launch of Riker and the progress we have made in the first year of our two-year plan, as well as with the different initiatives taken to unlock the full potential of our three-wheel vehicle business. As you know, our goal is to replicate the Sea-Doo Spark success story, and we seem to be on the right path. Now turning to seasonal product on slide 10. Seasonal product revenue were up 11%, Primarily driven by favorable product volume and mixed for personal watercraft. Looking at retail sales. Historically, retail sales have always been strongest for Sea-Doo in the North America, East and Midwest versus the competition, which ran to perform well in the South. With the poor spring weather condition and sustained flooding, we were disadvantaged in these markets. Despite this, because of our strong lineup, we were able to catch up in June and July and finish the quarter in line with the industry. The industry 10 months into the season 19 is up low single digit percentage and Sea-Doo North America Retail is also up low single digit over the same period. It is a similar situation in EME where the market was slightly down driven mainly by Scandinavian weather condition all those SIDUs continue to gain market share. The SIDU Fish Pro is also performing well in its first season with very good sell-through in all our key markets around the world. In fact, the Fish Pro won an Australian Good Design Award for the quality of our design and its innovative feature. For snowmobiles, The Scandinavian industry ended its season 19 on June 30th, with retail up low single digit. Ski-Doo and Lynx combined retail was also up low single digit for the season, and they maintained the number one position in the industry. Continuing with a look at power sport pack and OEM engine on slide 11. Revenue were up 18% in the quarter driven by continued solid momentum for part and accessory business across all of our part support product line. Our accessory business continued to experience strong growth with a 32% increase in revenue for the quarter, notably helped by the success of the Riker accessories lineup for which sales continue to trend above target. The core of our success is our strategy to develop accessories In parallel with the vehicle, resulting in an extensive lineup of accessories that are ready at the launch, well integrated into the vehicle and compatible with multiple models across all brands. The Defender 6x6 is a great example of this, as we already introduced over 150 accessories available for this vehicle. On the Rotax front, During the quarter, we opened the first Rotax Max Dome in Linz, Austria, close to our manufacturing facility in Gunschkirchen. It is an innovative concept that combines indoor electric go-karting racing with gaming technology, augmented reality, and virtual entertainment. Karting is the perfect product for electrification Because the distance range per charge in a control environment is not an issue compared to other product lines. By hiding the aspect of gamification, it creates a whole new customer experience. During the year, we will continue to improve the MaxDome model, but our mid- to long-term plan is to expand this concept to other cities and countries. This is our first venture in a direct-to-consumer experience, and it provides us a useful learning opportunity, both to define this model and to potentially offer other experiential concepts in the future. Now, looking at the marine category on slide 12. Revenue were up 1% in the quarter due to the acquisition of Alumacaraf and Manitou last year, offset by a lower volume of outboard engines sold. The marine industry was the most impacted by the unfavorable weather condition we experienced during the spring and the early summer. On top of that, one-third of our Evenrude and Alumacra business and 50% of our Manitou business is in the Great Lake region, the area hardest hit. Because of our current geographical concentration, we were especially impacted. Looking at retail, the North American outboard engine industry ended its season 19 on June 30th with retail about flat compared to the previous season. Even road retail was down high team percentage for the season. In the marine business, boat industry data is delayed and it's not reported the same ways as for the engine and power support. Regarding the boat retail for the period of April to June, for Allumacraft, the aluminum fishing boat industry was down low teens and we were down high teens. For Manitou, the pontoon boat industry was down high single digit and we were down mid teens for the same period. Finally, Following the end of the second quarter, we completed the acquisition of Tailwater, the leading manufacturer of aluminum boat in Australia. Our marine strategy is ongoing, and the Evenrood, Alumacraf, and many two teams are all working together to integrate the next generation of engine with the next generation of boats. We are looking forward to sharing more detail on our strategy with you soon. Considering this is our first year into the boat business, this is not exactly the season we would have asked for. However, we are satisfied with the progress the team have made on the integration of our acquisition. And as a reminder, this is a mid- to long-term strategy, and we are confident in our ability to deliver its high potential. On that note, I will turn the call over to Sebastien.