DOO

• Leadership Transition: CFO Sebastien Martel announced his retirement effective April 2027. Mintan Pran, currently EVP Global Corporate and Product Strategy, will succeed him as CFO effective October 1st.
• Strategic Innovation & Product Launches: At Club BRP, the company unveiled new models including the Defender HD10/XU for utility applications, the all-new SparkX PWC, and the Sea-Doo RXP-X Senna 350 featuring the most powerful factory engine in its category. The company committed to major off-road product news every six months for the next four years.
• Market Share Gains: BRP gained over three points of market share in current model year SSV units in North America, achieving an all-time high. Can-Am became the number one brand in the ATV category for the full season. In PWC, current model year market share increased by more than six points to above 60%.
• Manufacturing Expansion: To meet surging demand for utility cabs (which now represent nearly half of the utility SSV industry), BRP expanded capacity within its existing North American manufacturing footprint, increasing throughput by approximately 33%.
• Financial Services Initiative: Launched BRP Financial Services in the U.S., a new retail financing program designed to strengthen dealer relationships, improve consumer experience, and provide tactical flexibility in promotions. 90% of the dealer network signed up within two weeks.
• Inventory Management: Network inventory remains healthy, up only 2% year-over-year. Proactive reductions in PWC shipments were made to optimize inventory levels given softer industry demand.

• Full Year Revenue Guidance Raised: Increased to a range of $9.225 billion to $9.475 billion, up from previous estimates.
• Normalized EBITDA Guidance Raised: Increased to a range of $1.025 billion to $1.075 billion.
• Normalized EPS Guidance Raised: Increased by $1.00 to a range of $4.00 to $4.50 per share.
• Free Cash Flow Expectation: Expected to generate more than $800 million for the full year.
• Tariff Exposure: Net tariff exposure is now expected to be $200 million for fiscal 2027 (annualized ~$225 million).
• Q3 Outlook: Management expects Q3 normalized EPS to decline 50-60% year-over-year due to incremental tariff impacts and inflationary pressures, implying a stronger Q4.

Total revenues were $2.2 billion, an 18% increase year-over-year, driven by higher Off-Road Vehicle (ORV) shipments and favorable product mix. Gross profit was $263 million with a margin of 11.7%, negatively impacted by tariff headwinds (~740 bps) and a one-time supplier restructuring charge (~330 bps). Normalized EBITDA was $139 million, and normalized EPS was a loss of $0.18 per share. Free cash flow was strong at $193 million for the quarter ($560 million year-to-date). ORV retail momentum was sustained across North America, with Utility Side-by-Side (SSV) retail growing high single digits and ATV retail increasing mid-single digits, outperforming the industry. Personal Watercraft (PWC) retail declined low single digits in line with the industry, while three-wheel vehicles and pontoons saw declines.

• Tariff Volatility: Continued exposure to Section 232 and 338 tariffs, with net impact estimated at $200 million for FY27. Future trade environment stability remains uncertain.
• Inflationary Pressures: Elevated commodity prices (steel, copper, plastics) and freight costs are impacting margins, adding a headwind of approximately 100-125 basis points.
• Supplier Reliability: A rare instance of supplier financial distress required a one-time restructuring charge of approximately $75 million to ensure continued parts supply.
• PWC Market Softness: Softer-than-anticipated demand in the Personal Watercraft segment led to proactive shipment reductions, posing execution risks if retail recovery lags.

Q: Analyst asked for details on the guidance update drivers and tariff evolution, specifically exemptions or changes in tariff rates since May. / A: CFO explained that better ORV deliveries provided a small tailwind, while inflation added a ~50 bps headwind. The primary driver for the $1 EPS upgrade was improved tariff exposure. Key changes included the reduction of Section 232 ATV tariffs from 25% to 15%, and the introduction of 50% Section 338 tariffs on Canadian imports (Spider), which will impact next year. Additionally, new utility models launched at Club BRP are not subject to certain 232 tariffs, shifting demand toward these exempt products and improving the overall tax treatment mix.

Q: Analyst inquired about the nature of the supplier financial restructuring hit and downstream implications for the relationship. / A: CFO clarified this was an exceptional circumstance involving a key supplier facing financial difficulties. BRP stepped in to ensure continued supply of high-quality parts. While there may be slight price increases from the supplier to maintain their profitability, the transaction is primarily a balance sheet adjustment to preserve the strategic relationship. The bulk of the $75 million impact was recognized in the current quarter.

Q: Analyst questioned the sustainability of ORV market share gains amidst competition and asked about the shift from recreational to utility usage. / A: CEO emphasized that the ORV segment is undergoing a structural shift from pure recreation to utility applications (farming, construction, first response), a trend that has quadrupled the utility cab segment in four years. BRP is well-positioned with the Defender lineup and new XU offerings. The company is investing heavily in manufacturing capacity for cabs to capture this growth. CEO expressed confidence that despite competitors like Yamaha exiting or Kawasaki launching products, BRP’s innovation and focus on high-end utility segments will sustain its share gains.

Q: Analyst asked about the cadence of tariff impacts between Q3 and Q4 and the breakdown of next year's $225 million exposure. / A: CFO indicated that tariff pressure will be heavier in Q3 (~$30-35 million) compared to Q4, as the transition to new, potentially more tariff-efficient products occurs mostly in Q4. For next year, the annualized impact is expected to be $225 million. This includes a significant headwind of $60-65 million from the new Section 338 tariffs on Spider imports. The cadence next year will likely skew to the first half as ORV units ship, with timing and product mix determining the quarterly payout.

Q: Analyst sought clarification on BRP Financial Services launch timing, adoption, and strategic value beyond P&L impact. / A: CFO stated the initiative received excellent reception, with 90% of dealers signing up within two weeks. The strategic goal is to elevate the dealer experience to match auto OEM standards, get closer to consumers to understand repurchase rates, and gain tactical flexibility in targeting specific credit profiles. CEO added that this direct link opens doors for future initiatives like certified pre-owned programs, enhancing the brand aura and long-term customer loyalty.