BRP, Inc. Q4 FY2025 earnings call

• Proactive inventory reduction in response to macroeconomic challenges and softer consumer demand.
• Introduced new models, entered new segments, and achieved over $200 million in lean savings for the year.
• Decided to sell Marine business, with the process ongoing.
• Focus on doubling down on Powersports leadership position, investing in core activities and long-term growth opportunities.
• Tight execution on inventory reduction plan in fiscal '25, meeting revised guidance for the year.
• Q4 revenues down 20% to $2.1 billion, gross profit $429 million with margin 20.5%, driven by lower shipments and higher sales programs.

Year-round products

• Fourth quarter revenue down 17% to $1.1 billion. ORV retail down about 10% due to non-current unit dynamics; ATV retail down about 10% for the same reason; Three-Wheel vehicle retail down about 30% very early in the season.

Seasonal product

• Revenue down 29% to $678 million. Personal Watercraft had low-teen percent decline in APAC; Snowmobile retail down low 30% in the quarter; North America in offseason with early indications of more stable industry conditions compared to last year.

Part Accessories and Apparel and OEM engines

• Revenue down 1% to $293 million primarily due to lower shipments of P&A given softer industry trend. ORV part business maintained momentum, while accessory sales were softer in line with retail.

• Refrained from issuing fiscal '26 guidance due to ongoing tariff disputes, changing geopolitical dynamics, and uncertain economic and consumer confidence impacts.
• Expected tougher comparables in the first half of fiscal '26, with Q1 EPS expected to be down about 70% on a continuing operation basis.
• Cautious about forecasting due to lack of visibility on trade regulations and their potential impact on business.

• Tariff uncertainties and changing trade regulations impacting consumer confidence and market demand.
• Inventory management challenges, especially with some OEMs still having high non-current inventory levels.
• Competition from other OEMs, particularly in the face of industry softness and changing consumer preferences.

Q: Sabahat Khan at RBC Capital Markets asked about industry inventory backdrop and CapEx.

A: Sebastien Martel responded that the industry had higher non-current inventory from some OEMs, expecting market share challenges in H1, and CapEx expected to be slightly higher with foreign exchange driving variation.

Q: Joe Altobello at Raymond James asked about network inventory and inventory reduction.

A: Jose Boisjoli said ORV inventory is in good shape, while PWC and snow had heavier inventory, and they were cautious on production for Snowmobile to manage inventory.

Q: Craig Kennison at Baird asked about non-current inventory and cost savings impact.

A: Jose Boisjoli mentioned some OEMs still had too much non-current inventory, and Sebastien Martel said cost savings wouldn't automatically flow to price reductions but would be protected for profitability.

Q: Martin Landry at Stifel asked about retail demand evolution.

A: Jose Boisjoli noted new entrants at pre-COVID levels, high-end products doing well, and entry-level products softer due to inflation and high interest rates.

Q: Robin Farley at UBS asked about tariff impact and inventory staging.

A: Jose Boisjoli and Sebastien Martel discussed mitigating actions like renting warehouses and maximizing inventory across borders, and the complexity of tariff uncertainties affecting consumer behavior.

Q: Xian Siew at BNP Paribas asked about inventory mix comparison to pre-COVID.

A: Sebastien Martel said ORV non-current inventory was a third, better than pre-COVID, and Snowmobile had higher non-current inventory due to tougher season.

Q: Cameron Doerksen at National Bank Financial asked about dealer inventory finance.

A: Sebastien Martel said floor plan financing as a percentage of revenue was expected to be similar to pre-COVID levels due to leaner inventory.

Q: Luke Hannan at Canaccord asked about inventory staging and boat show data.

A: Jose Boisjoli discussed dealer sensitivity to inventory and boat show trends showing more consistent industry conditions, and Luke Hannan asked about boat show data points.

Q: Jaime Katz at Morningstar asked about profit growth and capital allocation.

A: Sebastien Martel said any volume increase is beneficial for profit, and capital allocation priority is on product innovation with modest dividend increases and share buybacks considered but flexible.

Q: Tristan Thomas-Martin at BMO asked about tariff impact on income statement and retail financing rates.

A: Sebastien Martel said tariff impact is in COGS, and retail financing rates were similar to 12 months ago.

Q: Michael Kypreos at Desjardins Capital Markets asked about Marine sale update and manufacturing facility considerations.

A: Jose Boisjoli said Marine sale process ongoing, targeting end of Q1/beginning of Q2, and BRP's manufacturing footprint is optimized but needs clear trade rules for adaptation.