BRP Inc.

Our participants, please stand by. Your conference is ready to begin. Good morning, ladies and gentlemen, and welcome to the BRP Inc.'s FY20 Third Quarter Results Conference Call. I would now like to turn the meeting over to Mr. Philippe Deschenes. Please go ahead, Mr. Deschenes.

Thank you, Maud. Good morning, and welcome to BRP's conference call for the third quarter of fiscal year 2020. Joining me this morning are Josee Beaujolais, President and Chief Executive Officer, and Sebastien Martel, Chief Financial Officer. Before we move to the prepared remarks, I would like to remind everyone that certain forward-looking statements will be made during the call and are subject to a number of risks and uncertainties. I invite you to read BRPs and DNA 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 continue our solid performance trend as we've delivered a record third quarter of strong retail growth and financial results. Based on these solid results and the good visibility we have on the demand for the rest of the year, we are rising the lower end of our guidance, narrowing our normalized EPS range to $3.70 to $3.80 representing a growth of 19% to 23% versus last year. Now let's go into the highlight of the quarter starting with financial results on slide four. Our revenue reached a record level for the quarter at $1,644,000,000 representing year-over-year growth of 18% driven by higher wholesale of year-round and seasonal products. Our gross profit margin was up 130 basis points over last year's third quarter, and our normalized EBITDA was up 32% to reach $268 million, resulting in a normalized earning per share of $1.51, up 45% over last year. The highlight of the quarter is the strength of our retail momentum globally. In North America, our Parasport products continue to drive strong consumer demand as we deliver a retail growth of 24%. The breadth of our product portfolio and the strength of our offer are also helping us to grow in international markets despite rapidly evolving geopolitical environment in certain regions of the world. Latin America was up 23%. In EMEA, we are performing well with retail up 12% while the industry was about flat. For APAC, retail was up 20% while the industry is up mid-single digits. As you see, retail momentum remains strong in all international markets. Looking at the North American retail by product line on slide 6. Again, this quarter, we've delivered solid growth across the transport product line. Side-by-side NETV had very strong retail results, up in low 30 and low 10% respectively. Three-wheel vehicles ended the season on a strong note with retail up high 80%, personal watercraft was low single digit, and snowmobiles is off to a good start for the season with Ski-Doo retail up high 20%. We are happy with our power sport retail performance and the momentum we have across our product portfolio. Some investors are asking about the health of our industry. As you can see on this slide, all our industry are up globally and we continue to have good momentum in all product lines. Turning to slide seven. In September, we held our annual Can-Am and Sea-Doo Club at which we introduced our new products for the upcoming season. We notably transcend our utility side-by-side offering with the introduction of the Can-Am Defender Pro, delivering industry-leading payload capacity with its six-foot cargo box, and the introduction of the Can-Am Defender Limited with a cab and HVAC, providing more cockpit comfort with reduced sound level and industry-exclusive auto climate control. We also introduced our fully redesigned Can-Am Spider RT, addressing the most important requests for improvement by current owners. With over 50,000 current Spider RT owners, we believe there is pent-up demand for this new vehicle. The other major product news was the introduction of a new Sea-Doo platform to the recreational segment through the GTI line-up. When the new high-end SIDU platform was introduced two years ago, it was highly successful and drove over 8% point of market share in the high-end performance and touring segments. Now we are bringing the same innovation to the recreational segment, the largest in the industry. We also took the opportunity to share some insights on our electric vehicle exploration as we unveil six electric vehicle concepts. Like I have said before, the electrification of our vehicle is part of our long-term sustainable development plan, and when the demand for this product comes, we will be there to seize the opportunity. Now, let's turn to slide 9 for the year-round product highlights. Revenue were up 29% for the quarter, driven by a higher volume of side-by-side sold and the introduction of the Can-Am Riker. On the retail side, four months into Season 20, the North American side-by-side industry is up high single digits. Can-Am side-by-side continues to drive strong consumer demand, and retail is up low 30% so far this season. We are seeing very good traction with the new products we introduced this summer, notably the Maverick X3 Turbo RR and the Can-Am Defender 6x6. The Can-Am Defender Pro started shipping two months ago and initial feedback is positive and the Can-Am Defender Limited with CAB and HVAC will start shipping in mid-December. Our side-by-side business is also performing well in international markets with our retail for the quarter up mid-20% in Latin America, mid-50% in the MEA and low-40% in Asia-Pacific. As you know, we had ambitious goals for our side-by-side business, and I'm very happy to see them coming through. Also four months into the season 20, the North American ATV industry is about flat compared to last year. For the same period, Can-Am ATV retail was up a lot in percentage, driven by market share gain in both the mid and high CC segments. I am pleased with our off-road vehicle performance, and confident we can continue our momentum around the world. Now looking at the three-wheel vehicle business. The North American three-wheel motorcycle industry ended the 2019 season on October 31st with retail up in the mid-30% range. Our Can-Am three-wheel vehicle retail sales are up over 100% over the same period and we ended the season with the number one market share position in the three-wheel category and number five position in the on-highway motorcycle industry. Our marketing campaign since the Can-Am Riker launch has generated over 2 billion impressions and 5 million website visits, which gave us a strong three-wheel vehicle exporter. The launch of the Riker attracted 42% new entrants, 30% being women and 70% under the age of 55. Over 20,000 training courses have been completed so far, with a conversion rate to new units to over 20%. Our customization strategy is also paying off, with average accessories dollar spent per unit surpassing our target by 30%. The parallel between the success of SIDU Spark and Can-Am Riper is clear. Not only have we reinvented the way we design, but also how we market entry-level products. And so far, Riker is driving similar trend for three-wheel vehicle as the Spark did for personal watercraft. Riker is off to a very good start with three-wheel vehicle retail sales having more than doubled in the first year. Turning to seasonal product on slide 11. Seasonal product revenue were up 13%, primarily driven by favorable product mix for snowmobile and a higher volume of personal watercraft and snowmobiles sold. Looking at retail sales, despite the challenges facing the marine season this year, the North American personal watercraft industry ended season 19 on September 30th, with retail up mid-single digit. Sea-Doo retail was up low single digit percentage for the season, slightly lower than the industry. Our loss of market share is related to regional mix. The main highlights for this season are we continue to gain share with our new Sea-Doo platform in the high-end performance segment. The Sea-Doo Fish Pro had a very good first year and there are plenty of opportunities to further build the market for this product. And the customizability of our new platform is delivering solid results as we saw strong accessories revenue growth this season. For international, it is the beginning of the season in counter seasonal market and retail is trending positively with double digit growth in both Latin America and Asia Pacific. We are happy with our SIDU business in general and with the continued growing consumer interest for this industry and our solid lineup. We are optimistic about the upcoming season, especially with the recent introduction of the new platform on our GTI models, which compete in the largest segment of the industry. So we are well positioned to continue to grow. For snowmobiles, early in season 20, the North American industry is up about 30%. Two things are driving this. Weather projection, which predict a long and favorable winter, as well as the early snow and cold weather across the snow belt, that have spiked consumer interest. Ski-Doo retail is up mid 20%, slightly lagging the industry as we have a lower proportion of our pre-sold unit registered compared to the competition at this point of the season. With our strong product lineup, our production and shipment on track, and early snow coverage in many of the key snowmobile markets, we are very positive about the upcoming snowmobile season. Continuing with a look at PowerSport PAC and OEM engine on slide 12. Revenue were up 12% in the quarter, driven by continued solid momentum for parts and accessories business, especially for side-by-side. Accessories continue to be the key driver of growth for this category, with revenue increasing 18% in the quarter. This is the result of our ability to design extensive lineup of innovative accessories that improve customer experience and that are ready at vehicle launch. For example, we already have over 150 accessories available for the Can-Am Defender Pro. This new vehicle represents a sizable opportunity for our accessories business with this blank compatible six foot cargo box that is very customizable. We are pleased with the progress of our packed business, and with the growth of our fleet, we are seeing good traction across all our product lines. Now, looking at the marine category on slide 13. We are, admittedly, disappointed with the season for this segment. Both retail started late in the spring, and although it began to recover slowly in Q3, a low period for this industry. Our Season 19 was not great for marine, with revenue down 1% due to a lower volume of unit sold, partially offset by the additional revenue as a result of the tailwater acquisition. For the OE industry, retail was up low single digit in the quarter, and for Avon Road, retail was down no team percentage for the same period. Our boat retail, after a difficult season, impacted Impacted by unfavorable weather conditions has shown some improvement over the last few months. For the third quarter, Allumacraft retail was about flat compared to last year. Manitou retail was up by about 50%, which was mainly the result of promotional activity. The good news is that dealer orders for Season 20 are on target. For our boat brand, we ended the season on a good note. Despite this difficult season, our marine strategy is on track and we have the right element in place to transition from an engine to a boat company. On that note, I will turn the call over to Sebastien.