Release Date: September 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue reached $1.8 billion, normalized EBITDA was $199 million, and normalized EPS was $0.61, generally in line with expectations.
- Network inventory was reduced by 13% so far this year, progressing towards a 15% to 20% reduction by the end of fiscal 2025.
- Latin American retail sales were up 18%, driven by strong performance in Mexico and Brazil.
- BRP Inc (DOOO, Financial) gained about 2 points of market share in side-by-side vehicles, passing the 30% mark for the first time.
- The company announced the availability of its highly anticipated Can-Am Pulse and Origin all-electric motorcycle lineup, marking its reentry into the two-wheel space.
Negative Points
- North American Powersports sales were down 18% from a strong second quarter last year due to weaker consumer demand.
- Revenue from seasonal products was down 40% from last year to $542 million.
- Revenue from marine products was down 54% to $57 million, reflecting lower boat shipment volume.
- The company expects to finish the season with more inventory than planned, particularly in the personal watercraft segment.
- BRP Inc (DOOO) has adjusted its shipment plan for the rest of the year due to weaker industry trends and increased promotional activity from competitors.
Q & A Highlights
Q: How do you know you've done enough cutting in terms of inventory and production?
A: Jose Boisjoli, Chairman of the Board, President, Chief Executive Officer: We are approaching the balance of the year cautiously, given the macroeconomic pressures and consumer demand trends. We believe our current adjustments are appropriate based on Q2 trends and ongoing market conditions. We aim to protect our profitability, dealer health, and long-term growth.
Q: How do your efforts to cut inventory help you convince dealers to stock new products like e-bikes?
A: Jose Boisjoli, Chairman of the Board, President, Chief Executive Officer: Dealers appreciate our proactive inventory reduction, seeing us as true partners. For new products like e-bikes, we require minimal showroom space and low initial inventory commitments, which has been well received.
Q: What are your revised expectations for industry sales in North America this year?
A: Jose Boisjoli, Chairman of the Board, President, Chief Executive Officer: We expect ORV to be down mid to high-single-digits, snowmobile down low to mid-teens, and watercraft and three-wheel vehicles down slightly above 20%. These are unit-based expectations.
Q: Can you provide some color on the level of promotional activities and its impact on fiscal year '26?
A: Sebastien Martel, Chief Financial Officer: Promotional activities are high, with consumer promotions back to pre-COVID levels in percentage terms but higher in absolute dollars. We expect this environment to persist through the first half of next year. For fiscal '26, we anticipate continued pressure on shipments and sustained promotional activity.
Q: How do you plan to manage operating expenses for the rest of the year?
A: Sebastien Martel, Chief Financial Officer: We expect gross profit margins to be flat to slightly down in the second half of the year. Operating expenses will remain relatively flat year-over-year, with continued focus on cost management and efficiency improvements.
Q: What are your thoughts on the electric motorcycle market and your position in it?
A: Jose Boisjoli, Chairman of the Board, President, Chief Executive Officer: We believe we have the right product with strong innovation and connectivity. Our Can-Am brand is well-known, and we have a solid dealer network. While the market is currently slow, we see long-term potential and are well-positioned for growth.
Q: How do you see the industry inventory levels exiting the year?
A: Sebastien Martel, Chief Financial Officer: Many OEMs are late in adjusting to softer trends, resulting in higher inventory and aggressive promotions. We expect the industry to better align wholesale and retail next year. We are on track to reduce our network inventory by 15% to 20% by year-end.
Q: What is your comfort level with leverage and ability to pursue buyback activity?
A: Sebastien Martel, Chief Financial Officer: We are comfortable operating at higher leverage levels, up to 3.5 times, given our covenant-light debt structure and extended maturities. We recently completed an NCIB and will continue to evaluate buyback opportunities while maintaining financial flexibility.
Q: How do you plan to address the elevated inventory levels in personal watercraft?
A: Jose Boisjoli, Chairman of the Board, President, Chief Executive Officer: We were surprised by the magnitude of the industry decline and higher non-current inventory from competitors. We plan to adjust shipments next year to rebalance inventory and maintain our market share.
Q: What are your expectations for market share in ORV for the coming season?
A: Jose Boisjoli, Chairman of the Board, President, Chief Executive Officer: We gained share in the last season and expect some short-term volatility. However, with our strong product lineup and dealer support, we believe we will continue to gain share over the full season.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
