BRP, Inc. Q2 FY2025 earnings call

• The macroeconomic environment and high interest rates are pressuring consumer demand, leading to reduced demand and intensified promotional activity.
• BRP has reduced network inventory by 13% and is working towards a 15%-20% reduction by fiscal 2025 end.
• North American Powersports sales were down 18%, while Latin America had 18% growth. ORV had record retail performance, gaining market share in side-by-side and ATV.
• Dealer event in California announced new electric motorcycle lineup, bolstered Can-Am off-road lineup, and introduced new products in various segments like Sea-Doo personal watercraft and pontoons.
• Focus on innovation and product launches to gain market share in the future.

Revenue for the second quarter was $1.8 billion. Normalized EBITDA was $199 million, and normalized EPS was $0.61. North American Powersports sales were down 18% from a strong second quarter last year. Year-round product revenue was down 33% to $1 billion, primarily due to reduced shipments. Seasonal product revenue was down 40% to $542 million, with retail and personal watercraft down mid-20%. Parts, Accessories & Apparel and OEM engines revenue was down 12% to $258 million. Marine revenue was down 54% to $57 million. Network inventory is down 13% so far this year, progressing towards a 15% to 20% reduction by end of fiscal 2025.

Revised guidance: revenues expected to end between $7.8 billion and $8 billion, normalized EBITDA between $890 million and $940 million, normalized EPS between $275 million and $325 million. Expect lower free cash flow generation, north of $200 million. Anticipate sequential improvement in Q3 in revenue, normalized EBITDA, and normalized EPS.

• Macro-economic environment and high interest rates continuing to pressure consumer demand.
• Competitors with high inventory are more aggressive with promotions, impacting BRP's market share.
• Uncertainty in the macroeconomic environment affecting key markets, especially North America powersport market.

Q: On consumer side, is demand delay or lack of ability? What rate relief needed?

A: Pre-COVID, 20% of units sold to new entrants; now back to 20%. High-end products less impacted than entry-level. Interest rate cuts would help consumer financing and demand, but hard to predict impact.

Q: Insight on used market?

A: Limited data, but during COVID, consumers bought above MSRP, and used market is slowly stabilizing but no specific data shared.