BRP Inc.

Good morning, ladies and gentlemen, and welcome to the BRP Inc.' 's FY24 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. Philippe Deschaines. Please go ahead, Mr. Deschaines.

Thank you. Good morning, and welcome to BRP's conference call for the fourth quarter of fiscal year 24th. Joining me this morning are Joseph Boisselis, President and Chief Executive Officer, and Sébastien 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 uncertainties, and I invite you to consult DRPs and DNA 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 Jose.

Thank you, Philipp. Good morning, everyone, and thank you for joining us. Fiscal 24 was marked by sudden market share gain, successful product launches, and continued progress on our key strategic initiative. From a financial perspective, the year was more challenging than expected due to macroeconomic environment. We adapted to the situation, and as you know, we have proactively reduced our shipment to dealers. Despite unfavorable winter condition, which impacted our snow-related business, we've delivered ETS within our guidance range. Let's turn to slide four for key financial highlight for the year. Revenue increased 3% to reach $10.4 billion, a record high for BRP. Normalized EBITDA was stable at 1.7 billion, and normalized EPS was down 8% at $11.11. Our focus on cash management payoff as we've delivered a record free cash flow of more than $1 billion for the year. As for retail, our North American power sports sales were up 8% for the year compared to an industry of about 1%. The strong power sport retail performance further strengthened our position as the number one OEM in the industry, as you can see on slide five. With this additional growth in fiscal 24, our retail now stands 35% higher than pre-COVID level in an industry that has been flat. We added another 2% point of market share for the year with gain across almost all product lines. We have continued expanding our leadership position as the number one OEM in power support and the only one refilling more units per dealer than during COVID. Our success comes from our ability to constantly innovate by bringing new products to market that drive consumer demand, and we are well positioned to sustain our momentum going forward. Turning to slide six for a closer look at our retail performance in the fourth quarter. Our North American power sport retail was down 10%. as we were facing a tough compatible due to late shipment and retail of three-wheeled vehicle, personal watercraft, and Sea-Doo pontoon in Q4 last year. And yet, this year fourth quarter was our second strongest ever, even surpassing the COVID year, during which we had significantly depleted network inventory. Our performance was also impacted by unfavorable winter conditions, which led to a snowmobile decline in the high teens. Excluding snowmobiles, our retail for the quarter was down only 2%. Still, despite a more challenging dynamic in Q4, we are satisfied with our performance for the year. When excluding snowmobiles, our retail was up 12% compared to the industry, up low single digits. driven by a very strong performance in off-road vehicles and personal watercraft, and market share gained across most product lines. Turning to slide seven for an update on global retail trend. As mentioned last quarter, we started to see gradual signs that the macroeconomic environment was affecting our industry, leading to softer market conditions, especially in EME and Asia-Pacific. The fourth quarter played essentially in line with this view, as we saw softer demand in EME and Asia-Pacific, which retailed down 5 and 25% respectively. However, we had an excellent performance in Latin America, driven by the Brazilian and Mexican markets. Given these trends, we maintain a cautious approach entering fiscal year 25. Our priority is to tightly manage network inventory to protect dealer profitability. Now let's turn to slide eight for year-round product. Revenue were up 9%, reaching $1.4 billion in Q4, primarily driven by a favorable product mix and a return to normal shipment pattern for three-wheel vehicles. At retail, Can-Am side-by-side had its strongest Q4 ever, being up low 20%, firmly driven by solid growth in the utility category. Our performance is even more impressive as the first shipment of the new Mavic R occurred late in the season. This brand new platform already made its mark by winning the King of the Hammer race in California, two months ago, which would further stimulate consumer interest. This strong quarter concludes another exceptional year for our side-by-side business, where we grew retail at a high team percentage base and gained significant market share, especially in the utility segment. Our share reached 30%, achieving this objective a year earlier than our five-year plan. As for ATV, our retail was down low single digit as we lapping a very strong Q4 last year. That said, we are pleased with the success of our new outlander platform, which gained four points of market in the mid-CC segment. For the year, we gained almost two points, surpassing the 20% mark for the first time ever and getting closer to the number two position in the industry. Looking at three-wheel vehicles, we are in the off-season and Can-Am three-wheel retail was down high 20%. The decline is firmly due to lapping an unusually strong quarter of retail last year as we shipped units later than normal in the season. Still, given the interest of new entrants for the category, our strong lineup and enhancement to our Spider F3 and RT models, we are well positioned to have a successful season. Turning to seasonal products on slide nine. Revenue were down 28% from last year to about $950 million, driven by a lower volume of products sold, resulting from a different timing of shipment compared to last year. Looking at our retail performance, for personal watercraft, this was peak retail season in counter-seasonal market, and Sea-Doo saw retail decline of mid-single digit in Australia due to market weakness. This was partially offset by impressive growth in the low 30% in Latin America, notably driven by the Brazil market. As for North America, we are in the off-season and retail was down, probably due to a difficult compatible given late unit shipment last year. However, From a historical perspective, retail is performing well, up double digit from typical fourth quarter pre-COVID level. This trend also continued in February, which gave us confidence for the upcoming summer season. Looking at snowmobile, as previously mentioned, fourth quarter retail was impacted by unfavorable winter conditions in North America, leading to decline in the high tin percentage range. I have been in the business for a long time and saw several challenging seasons, but it's the first time that I see such difficult conditions across North America. That said, looking at historical trends, we know that the snowmobile industry is very resilient and typically bounces back following weaker seasons. We have a loyal and passionate customer base. Our Skido and Lynx brands are very strong and continue to outperform the industry with retail down low single digit for the season. Reflecting our commitment to bring innovation to market, we are strengthening our offering for model year 25 by introducing new features and technologies across the lineup. Furthermore, we have launched two new Ski-Doo and Lynx electric models designed for multi-use application, such as ski center and recreational resort. These model will also be available to consumers. With the strength of our lineup and recent addition, we expect to remain the number one industry player. Moving on to slide 10 with power support parts, accessories and apparel and OEM engine. Revenue were down 23% to $291 million due to lower product shipments to reduce network inventory level and lower demand for snow-related replacement parts. Moving on to marine, revenue were down 32% to $84 million due to lower volume of boat shipments as dealers continue to be cautious about taking on inventory given weaker demand trends. Looking at retail sales, we are in the off-season in North America, and Allumacraft retail was down about 20%, while Manitou retail was about flat. As for Quintrex, retail was down about 10% in line with the industry. Looking ahead, with software demand in the boating sector, we are seeing more promotion across the industry. For this reason, we decided to be more conservative with our plan for fiscal year 25 in order to manage network inventory and preserve the value of our newly introduced boat. As such, we expect marine revenue to remain above flat for the year. We are pleased with the consumer reception of the new Manitou boat and remain confident about the potential of our marine business for the coming years. With that, I turn the call over to Sebastien.