BRP Inc.

Good morning, ladies and gentlemen, and welcome to the BRP Inc.' 's Fiscal Year 2024 Third 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. Philippe Deschain. Please go ahead.

Thank you, Sylvie. Good morning and welcome to BRP's Conference Call for the Third Quarter of Fiscal Year 2024. Joining me this morning are José Boisjoli, President and Chief Executive Officer, and Sébastien Martel, 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 result could differ from those implied in these statements. The forward-looking information is based on certain assumptions and is subject to risk and uncertainties, and I invite you to consult BRP's MD&A for a complete list of these. Also during the call, reference will be made to supporting slides, and you can find the presentation on our website at brp.com under the investor relations section. So with that, I'll turn the call over to José. Thank you, Philippe.

Good morning, everyone, and thank you for joining us. BRP delivered a sound performance in the third quarter as our team continued to demonstrate its commitment and resilience in a dynamic environment. We maintain our momentum in gaining market share in the off-road category and delivered financial results that came in close to our expectations. However, like the rest of the industry and despite our continued solid execution, we are seeing signs of softening demand in certain product categories, more particularly in international markets. The situation leads us to proactively take a more cautious approach for the upcoming quarters as we strive to maintain a solid value proposition for our dealers. We remain committed to continue to lead our industry and to further grow our market share. We believe that our proactive action will further solidify BRP position for long-term success. Let's turn to slide four for key financial highlight of the quarter. Revenue reached $2.5 billion below our expectation due to softer demand in international markets and, to a lesser extent, a temporary slowdown at the Texas-Mexico borders, which impacted deliveries of side-by-side and ETV over three weeks, near to the end of the quarter. This situation is now back to normal. With a strong product mix and tight expense management, we've still delivered normalized EBITDA of $445 million and normalized diluted EPS of $3.06, both coming in close to our expectation. Turning to slide five for a look at our retail performance. In North America, our retail sales were about flat with continued solid growth in ORV and snowmobile. offset by decline in personal watercraft, pontoon, and three-wheel due to a different timing of shipment this year compared to last. As you may remember, supply chain issue last year forced us to ship late in these product categories. It resulted in stronger than usual revenue and stronger retail in the third quarter of fiscal year 23, impacting the year-over-year compatibility. Excluding these affected categories, our retail sales were up 21% compared to an industry that was up mid-single digit. Our performance at retail continued to be strong in Latin America, with a 30% growth. Demand was softer in Asia Pacific and EMEA, but we still outperformed the market in the latter. We are expecting very low shipment in the short term in the Middle East countries affected by the conflict. Turning to slide six, we see that we have continued to gain share since the beginning of the year in the North American power support market. Since fiscal year 16, we have gained 17 points of market share to reach approximately 37%. More than one out of three products sold at retail is a BRP product. We have outperformed the industry in ORV, snowmobile, and personal aircraft, which shows the strength and the diversity of our product portfolio. Moving to slide seven. At the beginning of the quarter in August and September, Year-over-year growth remained positive in line with the trend observed in recent quarters. However, since October, we have started to see incremental signs that the macroeconomic and geopolitical environment is affecting the industry. As you can see, if we zoom in on the ORV market, demand began to soften in all regions, with more important decline in the EMEA and Asia-Pacific. This trend is continuing into November. Reflecting this situation and considering the macroeconomic environment, we are proactively adjusting our wholesale shipment plan for the coming quarters. This scenario is reflected in the updated guidance that Sébastien will discuss in a moment. Now, let's turn to slide eight for year-round product. Revenue were down 8% to $1.2 billion. The decline was probably driven by the different timing of shipment of three-wheel vehicle compared to last year and the temporary border slowdown which impacted ORV shipments. At retail, Can-Am side-by-side had another very strong quarter with retail up low 10%. notably driven by solid market share gain in the utility segment. All industry growth came from the premium vehicle category. This market dynamic is very favorable for Can-Am, given our significant market share in higher-end models. As for ATV, our retail was up mid-single-digit, led by strong growth in the mid-CC segment driven by the success of our newly introduced Outlander platform. We are pleased with the momentum of our off-road business. The strength of our lineup put us in a good position to continue outperforming the industry. Looking at three-wheel vehicles, we ended Season 23 with retail down low single digits compared to an industry that was up low single digits. The slight decline came from the Riker. While consumer interests remain high, entry-level buyers have been more resilient lately, hesitant lately, sorry. Meanwhile, the Spyder F3 and RT higher-end model have experienced positive momentum throughout the year. Turning to seasonal product on slide nine, revenue were down 15%, to $869 million, primarily due to the exceptional high level of shipment last year and previously, as previously explained. Looking at our retail performance, we are very pleased with the success of our Sea-Doo product line. We completed season 23 in North America with an outstanding performance for Sea-Doo, leading to an all-time high market share. Furthermore, we ended the season with the number one market position in all the segments in which we compete and the number one position in all province and state. As far as Sidhu Pantoon, retail was up over 200% for the season. We ended with the number three market position in the U.S., but very close to the first two players. In Canada, we estimate that we finished the season with a solid mid-20% market share. Turning to snowmobile, while still relatively early, we are off to a very good start with our strongest season-to-date retail in the last 10 years. Looking ahead, retail trends for snowmobile are positive, and we are well positioned with a strong level of pre-sold units. Moving to slide 10, with power sport parts, accessories, and apparel and OEM engines. Revenue were up 6% to $315 million, notably driven by higher sales of aircraft engine and pinion gearbox. We also continue to benefit from a growing product portfolio and a larger vehicle fleet in use, which led to higher sales of replacement parts and accessories driven by the Link ecosystem. We are notably seeing solid trend for the new Mavic R, with buyer adding many accessories to their . This trend demonstrates the benefit of developing highly integrated accessories, which are available right at the launch of the vehicle. Moving to Marine on slide 11. Revenue were down 6% to $104 million due to a lower volume of boat shipment. In general, dealers have high inventory and with higher financing costs, they remain cautious about accepting deliveries during the off-season. Looking at retail sales, from an industry perspective, we continue to see the category being more impacted by higher interest rates. For Q3, Manitou retail was down low 20% and Alu Makaraf down mid 30%. As for Quintrex, although it's still early in the season in Australia, retail was up low single digit. I am proud that our new Quintrex boat, the Freestyler X, won a good design award in Australia. This prize illustrates the strong appeal and excellence of our new boat design and technology. This is the main reason why we remain confident about the potential of our marine business for the coming years despite current industry challenges. With that, I turn the call over to Sébastien.