DOOO - Earnings call transcript Q2 2022

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Operator

Good morning, ladies and gentlemen. Welcome to the BRP Inc.’s Fiscal Year 2022 Second Quarter Results Conference Call. [Operator Instructions] I would now like to turn the meeting over to Mr. Philippe Deschenes. Please go ahead, Mr. Deschenes.

Philippe Deschenes

morning quarter to of Good for conference Natalia. second the fiscal you, and BRP’s welcome call Thank year ‘XX.

morning Sebastien Officer. this Executive me are President Boisjoli, Joining and Officer and Martel, Financial Chief Jose Chief

and to to complete on Also, you be Before for call, Relations risks we prepared and our and I subject consult made that statements. to the is implied move on at invite that be will forward-looking presentation slides certain website and future uncertainties forward-looking Investor list will is the section. and brp.com differ you BRP’s MD&A The remind the from the in can would made statements those remarks, certain reference during during a to everyone I to supporting these. assumptions like based find call results of the information could these under

over So the I call turn Jose. with will to that,

Jose Boisjoli

us. you, record Philippe. continued pleased a all again morning, thank across that everyone strong to year and Thank quarter driven for this lines. Good results momentum our concluded delivering first note the half I very product report on of am financial we the by joining you

their and successfully of again than effort in negative environment, managed once I thank resiliency planned. for environment. very deliver in delivery and supplier dealer would beyond difficult dealers resulted the on units a the more to demonstrated team in going relentless a above to – our for and chain incredible our and while like challenging supply Our impact through the and logistic limiting customers. This

$X.XX factoring are positive our XX% share. completion year It represents to normalized continued guidance increasing growth substantial a for $X.XX exceptional and a now issuer results, Given outlook year. successful for to XX% we of our of range to the to of EPS compared per the our last bid, the these in business

and environment the challenges. will range our this ongoing provide to Sebastien account on You further current that guidance widened we moment. notice detail supply will for chain a in

This highlights Slide look second increased at earnings billion. were a million on Normalized the up product robust across very low for lower up key quarter $XXX were sales Let’s share by program than X.Xx driven to with to inventory. Revenues higher strong coupled to normalized volume take was all performance and retail XX% financial probably lines $X.XX. due per XX% the continued our demand to network EBITDA $X.X expected X.

expected, retail to look for retail better were for than we Slide down last quarter XX% were quarter, for the our quarter Compared in the second significantly sales a the operating our XX% less at XX%. but of performance American North with the a American X inventory year, which is were Powersport Turning retail continued ‘XX our record lapping demand. a clear up fiscal This North up indication of to was with year retail quarter despite pre-COVID, solid was network. as

historically grow we low inventory days highest are the limiting year. we down quarter, ongoing operating XX of ability are to retail. our in an fact, year, about the we to with our and as fiscal our days. recent XX have most uncertainty chain down is network. retail last with QX in supply about Last been words days quarter, These exception of average levels are our network year we mentioned inventory XXX inventory, to on ever the A of In recorded few ‘XX last with combined

and from and start result, to pressure throughout a QX additional grow QX Querétaro. the retail snowmobile of remain and and Juarez expect we to the timing driven capacity in improve by under shipment X As production

industry our on were year, in mid-XX%. still down comparison Slide picture outpaced North global the the at to we American last was sales Looking X, retail although retail down which

lineup QX to lines. our to retail have Similarly, that decreased North notice strong international quarter in the it gained in most in well market, You product sales as year. due perform combined last in market can very a America lack share we continued inventory, being with of

the X%. introduction, With up well-positioned X outpace to to quarters, new years the ago, very corresponding with capacity, retail compared combined continue are industry. However, the was product we to additional our

and positive are entrant To entrants. X. opportunity, retain is continued can focusing the to Another we new on growth you on are with key sign this we Slide strong experiencing traction seize initiatives as observe attract new

of on-charter – through categories them the society, strategy product our expanding such in On-Road. our their innovation, for broad videos reinventing new Powersport within Education strengthen provide easing growing the leveraging learning lineup to and programs offer believe inspiring to we How-to our a consists and generating to product value Rider join portfolio with our our by ambassador education Program creating leverage are of broad continuing initiatives this we customer level as customers, Our women’s of With industry. further a curve entry and lineup and growing to series community content and interest well-positioned as such and strategy, developing with and

statistic that second to quarter buyers represent last compared and entrant decade the XX% recent new year. in Our our XX% of

with As and people, a families. including and a women XX% roughly are historically. reminder, traditional it more more varied was than customer more group younger our They diverse

our the growth typically rate a confirm indicating to X% repurchase these addition, than mere remain to higher new the the a we what trends only distraction. purchased intend These of all COVID are in having our customer In a with Also, is product surveying industry, observed. to for that our industry. positive entrant of continued long-term as mid

we X also consumer plan product over again, at allows extremely with Sea-Doo the held the was Slide the growing same event was at by and attendance world. around dealer for reach popular that Can-Am the our virtual mid-August. us It key our of recent audience Once to a XX% time. from introduced an to Turning overview

is with in personal with our and personal worldwide. million is of FishPro personal This watercraft very the with XXXX. is key more ability of full-sized product significant the our introduction our the It and the accessible lineup product XX In launches, to being the to option. This many FishPro its of opportunities up buyer for two identify a example over opportunity watercraft, top watercraft fishing segment market a personal with subcategories. we of feature watercraft FishPro addition new create terms models: side, over of line popular been line FishPro entrants the XX% the equipped boats the since has another Scout over fastest key of XXX a million the on in growing and the of lineup. angler U.S. in fishing There expanded Trophy, market

coupled all the product of to the performance segment, Turbo our first sports the upgrade in with For the leadership our This includes roller the fastest in clutch growing engine RR with a which category our pDrive Can-Am, is introduction industry. new industry. we engine Maverick XXX power all-new – system in horsepower, ensure maintained the that

We to received and HDX Ryker and class also and by the were performance their offer HDX the tracking theaters we power capabilities respond. our Rally products leading with and comfort These of improved introduced new engine utility option to ruggedness results well and media that in are Can-Am the very new our booking maximize off-road. and capabilities lineup and

in Sea-Doo of the there opportunities club the game for to we highlight Switch. boat sizable. space, of industry boats power many official Pontoon we reinvent is X, were for to XXXX, reentered and about of Turning Slide the When was the which the main XX% realized changing accounts us introduction quite the U.S.

with the the has one growing of addition, years. industry X last the in fastest In an rate CAGR over it X%

runabout. combined all experience. with provides Turning adaptable, most to Slide that convenient, a XX, performance fun a the watersports a product capabilities a the accessible, stability friendly and onboard the of and of and space Switch is the boating driving It Pontoon

around ‘XX. part at ‘XX, of One Production season. some $XX,XXX product is through is in to available of of your feature already to Having Sea-Doo changer out provides is believe We boating it Lego your to and border the as to flexibility network. system, come adaptable is link dealers, easy the and to the sizable end boat evolves. accessories with the configuration new Sea-Doo accessories is for by fourth easy highly to the of the customer to the dedicated business. quarter and starting younger year the world boating also orders start represents lunch to will our of also delivered the be over is next and which in It to adapt a a for use, the to price sold the boat XX that needs Switch year is to of variety sold expected are many The new a and The taking interior are and to innovative as it’s it package day with layout unique in ever model attract model for inspired system. braking which all available borders that our a latter is generation. appeal innovative is the plug with will Switch duck is many compatible June play for different game planned It at as well-positioned with deliveries talked dealer accessible expected opportunity system. strongly very engine also a product of is be land first change with

to Spark, segments. the able by proven the helped three-wheeled industry. which production, allowed the to new personal in it we its Ryker industry X XX% the following the industry Sea-Doo are the Over industry recently in years, believe We in grow we now we grow Pontoon since we and have same vehicle years do the did disrupt it’s more with which the introduction. will with And watercraft XX% creating

million, let’s the in on I side produced. local Production in the employee following higher XX% was am Revenues the of for Tuesday. a outdoor by vehicles sincerely help safely July our mainly vehicle. businessmen yard richer facility All by sales Mexico and were – program are caused firefighter, wish very the the to mix manufacturing XX, grateful Juarez the to were for businesses once and resumed a to employees $XXX support. authorities was Slide evacuated quick damage facility. to to for thank I there no where fire again, and response. product. for their XX side-by-side Now, And site up local driven X on year-round On side volume, lower storage Saturday, the turn

side second XX% down at side down mid-XX%. outpacing looking which the retail side Now, industry, quarter, was American the retail, by North Can-Am by side was low in

the side gain increase mid constrained of single-digits inventory. with we closed industry this Can-Am growth high industry. end for the low result, network last very Consumer have side growth share Note very by June, for made that for looks XX%, an demand full for the of above when while grew at future and level a The market low lineup promising Can-Am the some season to record business. come by season XX%. As remained compared year side North the American very low Can-Am Similarly, solid strong. by side single-digits despite being over

our and full of the new We’ll on XXXX. Our end are started we through products beginning Juarez shift January the capacity XX XX% ramping plan production well-received a X the on up second at the facility very the full have of additional of year of benefit the of August to and be to plan.

for and the Turning and due to the up the to in season. availability ATV, full full industry single-digit American with limited product down line retail in for quarter were the high quarter for North season. XX% both low Both the Can-Am was

season. Now, vehicle Education the both industry in trend and Program expectation. continues well in the perform gaining three-wheeled to motorcycle the above so the to-date. registration to share industry growing season market The Can-Am quarter remained to fastest three-wheeled this brand It compared Rider far vehicle, continued

minorities. attracting and woman In is are a fact, the be entrants, very at consumer trend successful to excited very base, a positive outlook visible high level we This the more three-wheeled diverse of at continue new and for with we younger business. and vehicle

lower and seasonal million were from richer products mix driven program. shipment personal XX% to products revenue up $XXX primarily on higher to seasonal Slide sales of XX, Turning watercraft or

watercraft in America. North down which holds North Sea-Doo end low up the season in gain XX% Now, the retail that quarter again Currently, to to American is retail, share segments low level now way Based to single-digit. compared number the performing, position year, strong low expect of next looking one brand will year. industry. is continues an the on in in at very the personal network it all fiscal in market market we to season-to-date In industry the with lead is a inventory this the shipment

the of For are the slow snowmobile, period in season. currently we

for Our line. OEM to of XX% season about XX Still, of engines, all-time $XXX to level is revenues at unit for lines. positioned with Parts, in accessory last This product the the our retail a across availability & well as we are each which pre-sold – generated increased upcoming units part product on higher in is were the usage strong due season to Continuing quarter. due increased of volume was Apparel down to inventory Year-to-date, which million consumers. limited level an very retail network. Powersports increased we product up by record look ended XX% sales by revenue product all combined and driven low with growth generates of replacement with a Accessories Slide with

driving is lineup strong demand. Our our and parts, LinQ consumer system notably, extensive apparel of accessories proprietary

a up than and sales XX% mix $XXX program down lower volume million. the from offset to Now, benefit sold were to due engines to Slide both of marine of revenues sold The more of Evinrude. outboard looking the favorable XX, on wind lower

retail Alumacraft both at year. retail Looking and in in to sales, were the more earlier compared as made quarter season last decline the sales saw Manitou

low well brands year-to-date retail high-teen American for Manitou. percent Alumacraft are performing and both for North single-digit However, with up

As boating quarter. Retail was for perform of were up single-digit the at to the we for Telwater, in and the end well season high continued Australia.

models. Boat XT also Alumacraft ago, Series improvement Manitou our virtual We Manitou where It and our our XXXX introduced to host we our event lineup. LX a dealers and weeks Alumacraft Bass included PRO X into with

we boats that, turn pleased progress With new XXXX. in three with each call have in brands are the to the the over forward second of the and looking Ghost our to with are business made launching engine I half Sebastien. in marine of We our

Sebastien Martel

Thank everyone. you, morning Jose and good

$X.X margin. especially additional results million second to $XXX second cost profit invested the expected quarter we the As generated and robust favorable had came lower wind higher closed constraint. FX. a benefited distribution XX.X% from fixed from working million volume, margin and operating and as delivered as related temporary these down our capital. categories with work-in-process operations our and we as Notably, last across of profit a production a strong and continue shutdown. positive quarter With higher in level exceptional the earnings ever. carried of strongest product gross through this lower first from $X.XX $XXX that Evinrude production supply EBITDA as a from than in that offered from and year, to the engine our of resulting costs $XXX generation From mix margin year million $XXX diluted quarter The strong generated year’s broad-based sales into of half last profit with with revenue, million were share. by product which the normalized expectations. From expenses, of we Compared momentum This on revenue we gross standpoint, year’s Worth programs of of offset regions. and and unfavorable growth we quarterly of we costs gross results and better normalized Jose solid impact operating mentioned, quarter in billion partly per cash inventory was profitability above are noting second perspective, managing very all another we chain generated had were business, flow exit cash absorptions outboard last the performance and our in

primarily completion which We under million million repurchased invested $XXX our returned of through shares. to million $XXX successful X.X we and the in shareholders, also CapEx SIB

and normalized million, expense pricing ship programs XX had were a benefited driven than for see because quarter growth units for can to of depreciation expense $XXX key sales resulted normalized planned. mix, partly higher in second mainly of $XX than quarter, and grew program, the and expense net our foreign and our we from net resulted the coming million by drivers million operating $XX you tax higher as positive our net exchange able representing we income chart, year’s detailed by for volume, the the a million. negative we offset our This more impact was last in million, normalized increased for to Slide normalized investing as at look to for costs million, for sales We which quarter we more which expenses anticipated Turning production $XX the manage our variation from $XXX $XX diligently from income in $XXX stronger from of than growth, for long-term operating for lower continue million initially lower impacts expected unfavorable continue plan. income versus spending,

Now, to network our for Slide inventory quick situation. XX a moving on of look

we ability growth. inventory, very As Jose levels is which limiting network our of continue mentioned, to operating generate with retail low

consumer output to outpace and the supply fact, despite versus production and ago. our X last In XX% year inventory increasing demand continued quarter, an XX% capacity versus decline in products the of in years resulted to for products

we that to consumer are And While in this not the of take interest capacity we the positioned and additional industry. gain the production well widespread situation will be disruptions in is advantage believe we levels of the very sustained chain full are benefit definitely coming mitigated, optimal, of our supply inventory across once products. low months our

with you at looking Now, better into Slide let context me a the getting XX. updated provide before by guidance

better industries the many been the part As chain you year. dealing Powersports know, supply with of have including challenges for

shutdowns, factory to business. constantly as shortage through pressure and remained limiting in is able coming with have turbulence Asia this while semiconductor in from our Southeast Still, So North on labor we especially the America. vigilant COVID-related far, shortages evolving, situation impact manage the we been the negative

with on to our for a exposure their to putting pressure such deal parts. direct delivery on operations challenges schedules many and daily limited ability have the suppliers these issues, have limiting their basis, we to commit firm of While

all supply deliver timing As second timing suppliers next capacity, of continue produce may to we shipments retrofit which we quarters. these products product them the during to and on in few impact the such, half to unfinished the our in have we to dealers a expect have of more the received. hand of we QX from today, units Still, on weigh of most dealer we missing the on or some components shipped in are that a issues to store the to to expect our increased wholesale will on variability fourth Nonetheless, reception be quarter. year. aim production limit components schedules This leading a position Based expect will fourth stronger over the once plan visibility retrofit we and in to much good of we in quarter, continue quarter. and orders chain the the

updated light of do, than While next in In year the which we on is more we the fire. that we with than ranges losses guidance with lead of units the reflect continued and Powersports can our programs to impact end end we level shipments even year. with are seasonal headwinds. Slide range marine of are revenue guidance the year, products the P&A engine and lowered first revenue the sales tax and of the XX. products have our of of OEM throughout planned bottom see wider end the are may you we usually between the of maintaining guidance of we revenue why increasing of range of Note, the have operating the ranges. QX usual This rest so higher results And and the and year-round potential supply achieved in QX despite to as this comfortable our guidance a better QX far lower also the comfortable units in chain are the than the and plan, visibility and quarter year-round we higher delays between

XX%. to between total now we XX% and grow revenues adjustments, these With expect company

resulting for metrics chain inefficiencies from to increases adjusted additional profitability account due have the by costs issues. costs reflect commodity also higher our mostly and offset We are mentioned supply elements to previously ongoing to which and pricing

the EPS to XX%. and results, result And growth cost using between count, and and for a and expense between HX normalized XX% strong depreciation Following revised we accounting between our end EBITDA XXX expected lower as assumptions SIB, adjustments the share expect for financing to is our account a normalized XX% and of XX%. a XXX, and into grow after now now taking our representing

the for pressures. in already As on for quarterly I results through mentioned, terms despite deliver objective dealer our of expectations of supply year, orders managing the have as we half to chain is back

we in call will that then issues and to the weigh grow QX. At could our on Jose. year these normalized We to that, EPS QX. upside progresses improve to as expect of guidance, turn midpoint in more about QX more expect over the provide On the XX% would I

Jose Boisjoli

half To delivered year. Thank have you, the of Sebastien. record result in conclude, we first the

the to Short-term, are execution half very concentrate demand. We able our consumer achieve across solid this, delivering strong the thanks of and a second solid company on we the year. to will

We on supply managing production and will and focus deliver interruption plan. on our mitigating

such remains Furthermore, objective about we order achieve expect end. on confident this, the quite deliver the revised for Switch. initiatives is promising. Sea-Doo key to new we we trends, product as and confident new including to Our our a future ability are proving already as on are introduction, in business The Based numerous and guidance. Ghost to from us Project our benefit all and represents latter

X expect done product introduction years past, next consumer In than the Powersports we marine. fact, can you in over the interest the sustained in and more have

a and lines. next XX our impact fiscal to X capacity product and that cycle to Our ‘XX new greater X upcoming expected provides that is customers. place the the progressing all well, take ability which with from positive Querétaro our starting over us additional have replenishment in confidence over to them significant is years turn expected Juarez strategy The months. The is production to into everyday year inventory XX electrification next the entrants, lifelong for which in passes of

well-positioned outpace and industry. the drive As to long-term you to are can continue we growth see,

strategy during the fiscal dealer challenging expressing We for to impressive collaboration, to gratitude execute growth call and the in their patience beyond. on successfully difference. and our for that sincere manage I are confident ‘XX suppliers our and is ability and insist truly and my year ever world, commitment On in our dedication to this over In changing and note, operator questions. these turn the times. agility, capacity their to make I employee,

Operator

first [Operations question from line with Robin UBS. Instructions] the of Your is Farley

Robin Farley

Great, counted thank market have where a you. I offered am some of fantastic as be just the Two on industry that market. wondering much are the way, into of some in of some have Obviously, dealers I gains lack we I of am and are the kind if And of of about And questions. kind you share from am as hear lot market either wondering availability the if wondering inroads don’t future? I quarter. could measure made these issue. new data? wonder newer And into degree OEMs availability that that guess share taking sort I an entrants them have Thanks. of those sort thoughts entrants just advantage general in your of making they of

Jose Boisjoli

happy Robin. lost – it’s customers, that said from time network are growing. those small we what And in my have are for like we morning, some I honest, hear supplier that they new very entrants with, it’s dealers but that are restriction mean, have we quite in Good time, minimal, in the it’s to the intro, be sure, to I saying number.

that But right cycle in them not in count we quarter direction XX% And too XX% in, surveyed planning. future, the is have And was and because versus repurchase QX we in the pointing better stay the at intend that our we is within obviously, see than count historical them and are projection now, believe more, industry. them more future the they the everything to when trend We We do make to XX%. is lifelong strong, customer. quarter. for after right our them our we average to

Robin Farley

about then not worse quarter. retail, comment a is, sales was in very of the other’s second in looks terms surprising. question retail availability That’s like comparing through It you. And looking Thank great. June your bit July comments Okay, quarter at helpful. to product about the

just that it or be be guess, better guess confidence potentially? you that I your you would getting I logistics that so things like I just to I So feel much QX it that worse at what looking can’t the and is, conviction mean, possibly guidance, levels gives at guess of Thanks. won’t these QX continue difficult to try just sort into get get is

Jose Boisjoli

is with are in the are second their them operation restriction in COVID And now, component in right right we manufacturing manufacture most Asia direction. obviously, South there the measure, Asia, going one, then the of area OEM better impact Sebastien and shortage who getting like believe over are the COVID restriction sanitary companies of we semiconductor, vaccine themselves, employee. said on South And – there And labor challenges the mainly America. three North the the the in

more many to there the talked Malaysia. a closer which widen why situation that improve semiconductor, in end electronic us where in why now have supplied it back with factories and normal. the what In confident there you from the the our the XXXX component – are was end like engine, for will Then come Japan. range. we it are cluster difficult, those to that today, some will of the are vehicle, XX who our situation if guidance as computer through but will will next once to I know XXXX, know back or a decided is don’t to wide high they we believe those in are back to that’s factories be on range to we than they today we because of to we country. When with XXXX. will supplier know But today in After XX was a And chips the there in improve that we months. fire few other uncertainty, but what normal terms that’s produced a shutdown think be

Robin Farley

very you Thank great. much. Okay,

Operator

Raymond with James. question is Your Joe from next the of Altobello line

Joe Altobello

Thanks. morning good Hey, everybody.

particular, So guidance, from so to than first profitability largely it be to raise looks EPS year far in What’s along some a thought back driven question this input lower you costs to guidance the share margin better been it etcetera? count is Is Is mix? a with the degree. standpoint?

Sebastien Martel

are There well. morning, minuses. the pluses Joe. OEMs sales very for healthy are factors still big financial results. environment The of that obviously as for the many But there pluses and promotional Good and driving dealers program. are Yes. lot is are Obviously,

as much in so, drove don’t better promotions the we that’s results offer And what have we second to as the And quarter. anticipated. initially

Jose Boisjoli

with selective of production, demand plus. and the we there some of to seeing That’s call high that Obviously, well. will product on scarcity that mix of which commodity in the a yes, OEMs well. costs and richer and are we more level are offset the we and is make are we Obviously, some we it able logistics, surcharges pricing but with headwinds and are as as

Joe Altobello

just And secondly, helpful. apologize That’s maybe I missed it. I Got if this.

up for In for is this single still terms full to flat year? it outlook of your retail, year high

Sebastien Martel

QX just low And third about QX one, is quarter full are the year high because to Jose to with low high the be single-digit. and the supply number. single-digit. to talked to right chain the network challenge. going for is flat – up the with The a expectation be challenges flattish. be we a That’s Obviously that to is going we to for year-to-date, flat to low Yes, are going tough super inventory. into a

Joe Altobello

Thank you. great. Okay,

Operator

of question Stifel GMP. Your Landry with Martin the line next from is

Martin Landry

guidance wanted get bit I more for clarity morning. to the a good just back your on half. Hi,

the EPS midpoint. are that to You XX% year-over-year at you expect seeing increase using QX

would be ago. and So, that X would suggest even lower down than that weaker years be QX could your

pressure what’s your on low sheet, exactly be doesn’t bit on your QX look understand helpful? forward QX super as been or there would to inventory pull looking it levels, trying putting just a your color at balance sales So, like have into of just some

Sebastien Martel

Sure. Good morning, Martin.

yes, QX shipped because First, earlier, I better, said more as units. we ended

was that forward. of pull Some

in finished wholesale able So, the we we inventory quarter. had are good to that

retrofit and is for units our at reworked end more end sale fourth I our have quarter the be at earlier challenge will So units of in the that obviously third reduces in the of to expectation ability the QX. we is than units big the the quarter. These in But – third in finished have the supply we available as QX the will we goods quarter. mentioned produce have chain

profitability our to that’s QX to and that’s as have a why Jose when indicated, impact as ranges down. from the volume perspective, the we talked be we with will supply. us give visibility obviously of But So they and and going suppliers

that is And that can so are confident we number we a QX deliver.

Martin Landry

growth, just talking clarify again, fiscal you when then you talking ‘XX got are you about growth, expecting talking And – about or comments revenue XXXX talking further to further Okay. have you EPS about are about are some growth growth?

Sebastien Martel

added both. opportunities year. itemized have the what are Obviously, we It’s capacity. for next We

Switch. Sea-Doo have We

We we level extremely inventory in replenish. have low that products is new introducing. of there that well the obviously network as be will And to needs

from we So as perspective, perspective top profitability a well. growth a line anticipate from and

growth able next generate you to the the that this double-digit we guidance EPS expectation are of midpoint year. If take for is our year,

Martin Landry

Double-digit EPS for growth fiscal ‘XX?

Sebastien Martel

Yes.

Martin Landry

Thank you. perfect. Okay,

Operator

the line from is question BMO Markets. of with Capital Johnson next Gerrick Your

Gerrick Johnson

Hey, Thank distribution morning. you. I process. talk want to about your good

an Polaris distribute how Can as about the its it’s why ship and use points pre-orders well competition? than better retail process as talk of you flow so, to as your asset And and you management. its don’t pre-orders, you

Jose Boisjoli

long, you Gerrick. the a answer I Yes. picture. maybe Then big Good would my will morning, be bit but give

our we planning, we the than we COVID schedule. all that Sebastien North semiconductor. America right Southeast snowmobile And are in production control the the the in main same and now for are are challenges very – labor way and product facing But the what challenges we not change shortage OEM stable. better restriction and for believe the are do want others. our it, As allocating first X we try keep three-wheeled don’t production We to keep watercraft, year. we we – we, to in said,

the us we the gave dealer when – for mix But try So it booking the freeze site. wish it our we year freeze on done, list. to and is the

cluster, to geographic season minimize and allocating from product we supplier a prioritize not to the and we our nobody and it are period product the all factory diversified the the we portfolio also, missing to retrofit For dealers a needs a will And X a optimize we the I in depending consult implement that’s have the we produce if our to we took end. on like of unit watercraft, watercraft. with we between our then at months. now, by level. a and the mean, because our introduction diversification, to we instead a supply but to team because After very we by now, allocate tried the of have of snowmobile component is again, discipline dealer key recipe. then ATV dealer, produce And side And right is we goal product spring freeze those retail honor component we what a that, the to work we few right try And decision this put side the with agile, part, peak next orders. with the will retrofit, is season to principles is and prioritize the lines. how

far, obviously working so quite it’s but it’s well. not And perfect,

Gerrick Johnson

just more order year perhaps contribution I hear really one the model model we have now. you magnitude, expected And Okay. Switch quantify to Switch, how idea sell-outs. from could the But any the sell-outs, right don’t of

we So, line contribution? in top should terms what of anticipate

Jose Boisjoli

produced of is products, us. units. a XX,XXX And switch pontoon next you a like the from trade-in. have could used be life. industry years. and market the billion are X this XXX,XXX year, Then a But time fleet to we targeting America grow here, share. in we which the switch about believe say that attract And give for the that know a mid-term in XX% believe $XX it’s XX,XXX big in just the estimated plus there last we And units business But XXXX, will industry sense, year boating used that is the North about XX opportunity the been in calendar it’s XXX,XXX about to $XXX Then let’s market to the years. years, Spark X business million we that will a the industry quickly units could we become

Gerrick Johnson

work Thank that. with I Okay. you. can

Jose Boisjoli

Thank you.

Operator

is CIBC. the of Mark Your Petrie next question from with line

Mark Petrie

Good Yes. morning.

just the Just with effect is regards there Mexico operation? situation, to wondering if your in any labor

Jose Boisjoli

it’s side, Europe, But very our the in Finland supplier. labor situation Canada same good. is Mexico. for And It’s, this United shortage In Obviously, well, giving the is contribution, Good it’s and morning labor in thing be good. any much is in manufacturing we Mexico no, don’t difficult labor in also flexibility. affecting Mark. but us difficulty. not factory obviously with honest, very To the States This now Mexico all are country. some have more our

Mark Petrie

And Ghost be I then last was ‘XX? then that fiscal how then plans could for sense us will same that factors excellent. Can regards to you Thanks. also how can idea answer you, mean into for revert switch? a for and ramping of you anything to with that helpful comment to Okay, very give capacity the your also CapEx and the

Jose Boisjoli

in our been capacity any Then now of product right our term capacity, line X in will of into then and always is capacity phase or new Phase ready.

QX. are see a now demand lot we the production pre-sold remember, As of see But the already start right the at assembled will increase motorized Querétaro ready that will capacity of we capacity the market to if XXX,XXX to to phase there. is in would are And we the be we we the believe industry to we you consumer. to of units shipped are hull the is And the range are we that then But capacity then too fast. call there. quite XX% is need ready a It’s end in invest bit if what good, more if in in North the to be with shut. like hull, we And I need second share, that units [indiscernible]. the obviously and could targeting demand mean, grow early of very America said, I pontoon

Sebastien Martel

for this for almost the at year question year high-end obviously, CapEx your a big next for million is On range. of the investments year, CapEx $XXX

are capacity. in We year assembly investing line this

We the PWC. side, will manufacturing powertrain, have investments next year on

this am we are I we that’s to year, range of And investing next products in the as So, expecting well. requiring investments are CapEx. have where probably in Obviously, new sustained year.

our Jose and high of be introduction next we in going are – the is So that pace mentioned X years. to

with And CapEx. so comes obviously, that

Mark Petrie

the pass line. much. I will very Thanks Okay.

Jose Boisjoli

Thank you.

Operator

next line is of Your the from with [indiscernible] Exane BNP question Paribas.

Unidentified Analyst

want dig more. Hi, bit Slide to for into guys. the Thanks a question. I XX

So, am you production. Can production? no supply XX% chain show full how does if what capacity, compare how or that does have much that just higher, XX% to were disruption how there And curious, I we… you higher? expected –

Jose Boisjoli

to a expected you you units at versus we also go is line the call sale year retrofitted. total available When it would for are going to that capacity see QX. are that units be be looking double-digits. Yes. will I is This and if ago, am at up, are going to actually up That’s output. that versus looking QX QX, And

QX. in happening increase further So,

supply as we available all But full at produced disruptions advantage of We the taking the could bad. almost not So, capacity. are to produce were – of our running all more units. of if shifts chain we are

Unidentified Analyst

you And it. got QX. context put may Okay, can be into versus then

talking is or QX, about QX maybe improving – after kind to of So you supply it showing as QX? are back it you are QX, than the better chain. getting even Is

Jose Boisjoli

tight, will going Well, of QX end still QX, bottom normalized. I things is be more think the of probably first that’s to when be half the in

we be quarter going In higher the new personal to the that’s and is now terms that’s of going QX yes. because we in in obviously have QX watercraft output, quarter of have online QX, Juarez fourth than higher also X, third to peak And than coming terms capacity output, online. so be

Unidentified Analyst

Right.

Okay. Got you. Thank it.

Jose Boisjoli

Thank you.

Operator

the Jaime next Your of with Morningstar. question is from Katz line

Jaime Katz

was in I capacity want manufacturing think that, morning. demand in it months retail the theoretically Hi, to XX inventory until I good the question, be like guess be I on given a utilization because there articulated of or I would was it looks longer would that is chain. it to I actually think significantly channel. was flack months But XX there you piggyback like that higher channel bit something to expecting And the sort actually bit replenished. be little dealer if of a

a back So, timeline levels? get to more those to that inventory the to is there confident dates feel to appropriate right the reconcile way that’s

Jose Boisjoli

Because for and typically product using been all the year at ramping – factory beginning X on factories our capacity season But almost let’s and historically, for always for you your is just right come half up. seasonal introduced in now, we then snowmobile, been our Querétaro, morning, stronger is have our more at Capacity new watercraft, are our typically, will new say max of usage, first capacity. XXXX. back line if HX. products, you Obviously, and than we that has our look new round second Juarez – on fiscal in and running the always year watercraft products full half. to Good August be

Sebastien Martel

with question, was inventory QX. Yes. And QX inventory since Inventory we QX the to pandemic. down your finished of actually there level beginning in the compared lowest the maybe of on XX%

next So, Replenishment our this there management. and of going expectation That’s to the to is that is rev is at replenishment next end year ‘XX. year no year. into fiscal our be start year, expectation going for

Jaime Katz

what next sort like of walk for as us with then – And Thanks. that the less chain supply expectations few becomes over of Okay. that – quarters through does you can strangled? looks your the inventory,

Sebastien Martel

a tight are for still waiting there. se, still tailwind be demand Consumers be per there products. – of obviously, their going to is going to It’s

So, few to quarters we most in to retailed is next dealers shipped going be the that very quickly. likely everything

to going As June is switch Jose are resold a up mentioned and be until that year. next lot dealers of wholesale on switch

expectation next inventory only backlog half should in of we replenishment starting a it’s inventory our quarters. that few happening see of will as year see in is we the back is there up. build And So, next that demand, to the

Jaime Katz

Okay.

Jose Boisjoli

Thank you.

Operator

Markets. is Poirier with question the line next of Capital Desjardins from Your Benoit

Benoit Poirier

bit replenishment quantify XX months everyone period? billion inventory you expectation? of ‘XX, the year morning, fiscal talk And also the could to quarter. maybe a over little again $X.X good margin respect the about whether for Good Yes. With you XX it’s months of congratulations to the could still revenue size potential and

Sebastien Martel

utilization, expanding headwind. expected year mission look operational headwinds. probably you at benefiting to and targets. obviously we we going going would expect XX% I Programs be But well. EBITDA increased to as that some offset about pricing. XXXX we are that XX%. expecting are next is for be able cost through know next saving – year, be If to that some a margin commodity volume, we I from this obviously are be the all to to us. asset a continue But leverage, better Obviously, have year better will also Well, headwind should for

be we introduce also with as better will getting We margins. new those products

have So, had similar what our expectation we is that be to year. margins this should

Benoit Poirier

able that’s size And you be would Okay, great. replenishment to the quantify Sebastien? inventory the of

Sebastien Martel

end the is it be. I we inventory a levels have could inventory the almost grown the historical Well, low. lot. QX were, that’s you, look where at low. can is quarter When of said, as the simplify to at I If it record what This was is you obviously extremely – the the replenishment opportunity industries have wholesale, for equivalent a

Benoit Poirier

the you terms mix of so But down one about already market Okay, ordered accessories size down, you the color some of road. the could color provided some far in initial and perfect. last about level expectation? versus the And me, maybe for switch provide

Jose Boisjoli

XXX Yes. go and compact starting all at remember mean, XX-foot you sense I crews and Good to to add foot, a the analysts investor, give the it’s the $XX,XXX. you Switch Benoit. go Difficult, but for can the low The you just if if morning, the some package. up you XX.X,

have we three packages. know, you As

right are it’s up and then $XX,XXX retails $X,XXX. I early. it’s and you at packages $XX,XXX. a and the Cruise the three would the water fun And anywhere and ending if which give bit package for package, now sport Then take of you you $XX,XXX. had have water between I if say it’s We and you $XX,XXX the the of XX, example Then, fun packet

a I are say $XX,XXX. lot pre-order we have of slightly We would the But tracking in above system.

Benoit Poirier

Okay, Thank congratulations. and you much that’s great color. again, very

Jose Boisjoli

Benoit. Okay,

Operator

Wolfe Your with next of question Fred the Wightman from is line Research.

Fred Wightman

wanted to just from Hey, expected follow-up guys, the facility. good the morning. tailwinds Juarez of I some on

comment boost that still the XX% by are I made expecting that think January. you capacity you

four you us started good a just the the ramp, for a some months sight of just like Just ask when can how maybe seems given with line is it tight to make today, suppliers big supply give now? orders for how sense to you chain from is

Jose Boisjoli

I of the supply But morning. we different again, the lot thing main now, plastic difficult. difficulty is obviously, am the that from we it’s to was XXXX, Then back coming the Right At That Yes. manage Good of others, semiconductor. one – now components. well. going beginning to a the chain. had

now what Sometime with it’s said, some was And next the Then the getting more there roadblock that expensive, difficulty right but are is growth say in that ups component now, fiscal start – we now And Asia. is downs. we like fire them supplier the in our right are for this some growth microchips South year semiconductor. ‘XX. the we plan. today, right factory, better. improve for where same from And situation believe and Then our now, we this suppliers Japan we in and that year we the But to – well. will see some with is planning doing with

manage and reach We are to planning for there. the growth, we will

Fred Wightman

sales of that to indicator spooked pivoting It discretionary July. Delta applications a U.S. the people still equation, purchases? traveling in and the credit macro macro the a for makes where the sort vehicle some of take these big to that it’s sort seeing are sense. whether or is or we the August, they towards down some if start some in of step of space sort you are side of Are sort leads versus pretty good mirror broader If about step of backdrop safer really back vehicle of contra a at the forward look numbers confidence indicators the just of consumer

Jose Boisjoli

than might that in the sense people our think traveling. a I And to industry forced demand restriction consumer many general be different stop COVID bit the

versus travel. it And realize younger, that of the buyer now, product. take right, few income that family to the still increased, we and And entrants, into for are they before now be are our we because optimistic we their new industries. are them, dynamic used why, restarting years back our will when see I buying believe survey about traditional to even look be those to are they had. its the But to we ratio what has think maybe at our pre-COVID. a more will change happy they more are we oriented, think quite complicated, new I And are woman, it household people that’s new could us, it that more and entrants they entrants those we future,

Fred Wightman

guys. Thanks Okay.

Operator

Your next with Dley question is from of Derek the Genuity. Canaccord line

Unidentified Analyst

actually morning. for question. filling him taking I today. for Hi, Thanks [indiscernible] just good am in the

Just Could allocation guys. after that’s you capital a to that your couple up speak questions of you preferences for going complete? forward [indiscernible] wrap

Sebastien Martel

always Good Yes. CapEx in have invested for in capital But done morning. as a been where we inactive the organic and that’s been have us quarter. share we investing of Obviously, buybacks of we in growth. have we prioritize in terms deployment priority deployment, last

sheet very strong. balance Our is

our products, year, continue just management. new obviously have And are And big have mindful with capital electric, switch. said, also expectation deploy going as returns. so have will discussions next have regularly investing we best the the done we in is I have terms of that we always we the are as These in we And business what’s the of we as another options for better and introductions such but CapEx year with forward. opportunity drives to with new Board the investments that

Unidentified Analyst

of That’s the more in then was forward? you know helpful. But follow-up, normalized margins. do target gross as limited promotional factor view a as And what terms gross really I this a quarter margin activity looking Thank the you.

Sebastien Martel

year of we year better be XXX expectation a probably mix good basis expectation point coming we fiscal positive the incentive. benefited would we that versus ‘XX, from for year, points XXX quarter, that keep also versus basis will from a this forward, and Well, is sales full that fiscal going My is that. the year probably And ‘XX. last but programs get

Unidentified Analyst

great. That’s Thanks a lot.

Jose Boisjoli

Thank you.

Operator

Your next the line of TD with Morrison is from Brian question Securities.

Unidentified Analyst

for This Good Brian. you. morning. Thank on is [indiscernible]

challenges the the plant are can half there to securing of to talk your your secure relative have you on in that But thoughts about just capacity? QX? second the you the And year? to did in those all industry outperformance contribute semiconductors And increase for at dynamic in any components that components. the understandably, ability and given So,

Jose Boisjoli

gave that to supplier capacity bit We what past. there. we or a happening the we is ago. expect where need a surprise will And electronic for the obviously, visibility commit typically ‘XX, Then And suppliers that’s to with the in better area than our all tooling. we suppliers, And there and for long-term have shortage a few why be is year. we to the to maybe on no in fiscal next securing, then are world, year asking invested our are in longer our improve know produce either exactly working tight, more it months know

are the end with believe on for some thing we from believe last are the and till we probably why – that’s again, We downs. it have this XXXX. few what improve it months. ups that today better, where we will been but – we be working will are will of And last we we But know, with

Sebastien Martel

necessary a quarter nightmare meet teams sure consumer market units. because our battle produce job. industry, we units But it’s a is question make to obviously, we we compared and manage. But to to been product have get the doing it’s we been I second gained quarter. other want the we performance the more share – have OEMs. overall demand lines have a to to to in our in believe certain to And phenomenal significant parts where build on have a the It And your seen able daily on the don’t second in say

the obviously, continue so need that’s delivering next obviously, in focusing results team. to kudos great quarters. we few to on And our But

Unidentified Analyst

the terms in the out operating And can just call of secondly, is Thank below quarter? being expenses in you. there anything expectations you

Sebastien Martel

tight It’s last we costs we management significantly. through went year, a COVID, of Obviously reduced expenses.

an overhead is scarcity especially saw in marketing obviously, we spend mindful making brands. for we in if expenses. sure increase this the So that our good this network. awareness on year, money we Obviously, is But front. quarter, there the necessary, of There are

And expenses on do based we so sometimes we needed. what’s what modulate

Jose Boisjoli

Thank you.

Operator

Craig of from with comes the Your Baird. question final line Kennison

Craig Kennison

Thanks for taking very my question. This has helpful call. a been

seeing your electric timeline? quick a will those have Just issues chain supply one, vehicle on you are any impact that

Jose Boisjoli

the are the of our type, No, – where building, developing work period no engineering for building program. we And are at obviously on it’s we where the we delay product. the we are and but

Craig Kennison

you. thank Great,

Jose Boisjoli

very you much. Thank

Operator

That there is any remarks? the closing question-and-answer session. Are

Jose Boisjoli

today a and day. again look third all to with you. Thank Xst. December thank forward again everyone you Thanks and good for we have speaking us call Yes, for on joining conference you quarter our

Operator

Thank BRP Inc. your quarter for results the you second conference This participation. concludes call.

You may disconnect. now

BRP (DOOO) 2 Sep 212022 Q2 Earnings call transcript