BRP, Inc. Aktie

Good morning, ladies and gentlemen. Welcome to the BRP Inc.'s FY '27 Q2 Conference Call.

[Operator Instructions]

I would now like to turn the meeting over to Mr. Philippe Deschenes. Please go ahead, Mr. Deschenes.

Thank you. Good morning, and welcome to BRP's conference call for the second quarter of fiscal year '27. Joining me this morning are Denis Le Vot, President and Chief Executive Officer; and Sebastien Martel, Chief Financial Officer.

Before we move to the prepared remarks, I would like to remind everyone that certain forward-looking statements will be made during the call and that the actual results could differ from those implied in these statements. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties, and I invite you to consult BRP's MD&A for a complete list of these.

Also during the call, reference will be made to supporting slides, and you can find the presentation on our website, brp.com, under the Investor Relations section. So with that, I'll turn the call over to Denis.

Well, thank you, Philippe. Good morning, everyone, and thank you for joining us today. Before getting into quarterly results, I want to say a few words about Sebastian's retirement announcement released earlier this morning, as you could see. Sebastien has shared with the company's objective to retire some time ago, and he has since supported the succession planning process. I want to thank Sebastien for his outstanding contribution over more than 2 decades at BRP. He has played a key role in many of the company's significant milestones, including its initial public offering on the TSX in 2013, named at the time, IPO of the year. Sebastien's strong leadership, strategic vision and financial discipline contributed to making BRP what it is today with a proven track record and solid financial performance. This is Sebastien's last quarterly call as a CFO, but he will stay with us for a while as an executive adviser.

Effective October 1, [indiscernible], who is with us today are Executive Vice President, Global Corporate and Product Strategy, who some of you already know, will become our new Chief Financial Officer. [indiscernible] joined BRP in 2017. Over the years, he has demonstrated leadership excellence across corporate strategy, merger and acquisition, transformation and product strategy. He has spearhead several initiatives that have driven BRP success, including leading the implementation of our new North American ERP system, developing our M28 strategic plan and paving the way for the company's manufacturing footprint in Asia.

Prior to BRP, Minton built deep expertise in investment and corporate banking with Lazar and BMO Capital Markets. His strong financial acumen, sharp business insight and extensive powersports industry experience position him as the right person to lead our finance organization. Minton and Sebastien will work together to ensure a smooth transition until Sebastien officially retires in April 2027.

Now to our quarterly results. We delivered another started performance with financial results ahead of our expectations, sustained ORV retail momentum, driving further market share gains and meaningful progress on our key strategic initiatives. We also continue to further improve our net tariff exposure while protecting our competitive position and long-term growth prospects.

In this context, at our recent dealer event, we unveiled new models that demonstrate our solid commitment to innovation further expanding our product offering and adapting to the current tariff environment. Our team's ability to manage the business in this volatile geopolitical and macroeconomic environment, combined with our solid performance in ORV and overall strong execution, reinforce our confidence in the outlook.

As a result, we are increasing our full year guidance, Sebastien will provide further details later in the presentation. Now let's take a look at the second quarter results on Slide #4. We delivered revenues of $2.2 billion, normalized EBITDA of $139 million and a normalized loss per share of $0.18. It is important to note that these results include an incremental net tariff impact of about $145 million compared with the second quarter of last year.

Despite this headwind, our performance came in ahead of our expectations, driven primarily by sustained momentum in ORV retail demand and the benefit of a reduced tariff rate on ATVs. We also generated a strong free cash flow of $193 million, further strengthening our balance sheet and enhancing our financial flexibility as we navigate this volatile environment.

Let's turn to our network inventory on Slide #5. Dealer inventory remains healthy, being up only 2% year-over-year. We increased ORV availability and further optimize the mix of current model units across our product line. Together, these actions position us well to capitalize on market opportunities in the second half of the year, while supporting sound profitability for both BRP and our dealers.

Turning to Global Retail trends on Slide #6. In North America, market dynamics remained broadly consistent with recent quarters with modest industry growth led by continued strength in SSV. Against this environment, our retail performance tracks the industry with ORV market share gains, offset by softer PWC conditions. Internationally, EMEA market conditions continued to improve, particularly in ORV and PWC, notably supported by strong demand in Eastern Europe and Scandinavia.

Our year-over-year retail performance was up low single digits trailing the industry due to softer trends in the 3-wheel vehicles. In Latin America, retail declined 4%, primarily reflecting softer SSV demand in Mexico. In Asia Pacific, Industry retail grew low single digits, driven by continued strength in ORV. We outperformed the industry with retail increasing 8%, gaining further market share in SSV.

Overall, we are pleased with our retail performance, particularly in ORV, where we delivered strong results across most regions and continued to gain share in several key markets.

Now let's look at our North American performance, beginning with a side-by-side on Slide #7. We ended [ season '26 ] on a strong note with second quarter retail up mid-single digits, outpacing the industry. Our momentum continued driven by the success of the new Defender HD 11, which fueled utility cab retail growth of more than 30%. We delivered our strongest ever second quarter for utility SSV retail. For the full season ended in June, our SSV retail grew by high single digits, outpacing an industry that grew mid-single digits.

More importantly, we gained more than 3 points of market share in current model year SSV units, achieving an all-time high in this category with Can-Am capturing nearly 1/3 of units sold. To leverage higher-than-expected demand, we expanded capacity within our existing manufacturing footprint. This should enable us to sustain our growth trajectory through the balance of the year and beyond.

These positive trends also expanded to ATV as shown on Slide #8. While the industry declined low single digits during the quarter, our retail increased mid-single digits significantly outperforming the market. This strong performance moved us into the #2 position within striking distance of the leader. For the full season, our retail grew low single digits, outperforming an industry that declined low single digits. We gained share in the key mid- and high CC segment, demonstrating the success of our products. Retail of current model units increased by nearly 20%, allowing CanAm to finish the season as the #1 brand in the category. Overall, we are pleased with our ORV performance, which reflects Canam's industry-leading product lineup, the effectiveness of our innovation strategy and the disciplined execution of our business plan.

Turning to PWC. Our retail declined low single digits during the season's key quarter in line with the industry. From a market share perspective, elevated levels of discounted carryover inventory from other OEMs continued to pressure noncurrent units. However, our current model year performance remains strong with market share increasing by more than 6 points, ending the quarter above 60%.

Given softer than anticipated industry demand, we have proactively decided to further reduce shipments for the balance of the year. This disciplined approach will optimize network inventory, support retail execution, and position both our dealer and BRP for a stronger start to next season.

Let's turn to Slide #10 for an overview of our retail performance in North America in other product categories. In 3-wheel, retail declined mid-single digits, with premium models continuing to account for most days, underscoring resilient demand at the higher end of the category. [indiscernible] tools, retail declined almost 30%, reflecting softness across the marine industry. That said, we made solid progress in reducing noncurrent inventory. Finally, snowmobile retail was up more than 20% on low off-season volume. Overall, we are pleased with our second quarter performance while PWC continued to face softer industry conditions, our ORV business remained very strong, and we delivered solid results across several higher-margin segments, particularly in current model units.

Moving on to Slide 11 for a recap of key announcements from our recent club BRP. Attending this major event for the first time since joining the company, I had the privilege of meeting several dealers and business partners. The energy and engagement were remarkable with nearly 3,000 participants present in person, representing more than 90 countries. On the commercial side, we launched BRP Financial Services, our new U.S. retail financing program. It is designed to provide customers with a seamless financing experience while giving us greater flexibility to support retail growth and build stronger direct relationships with our consumers. In line with our objective of strengthening dealer engagement and experience, we also enhance our commercial programs to strengthen our dealer value proposition and support profitable long-term growth across the network.

From a product perspective, our focus is clear, delivering more value to customers while reinforcing our leadership in innovation. In PWC, we announced our 2027 C2 lineup which includes the all-new Spark X model, more powerful than ever and packed with premium features. We also launched the [indiscernible] RXPX 350 as a tribute to F1 legend [indiscernible] Stena who inspired the world to push ban the reason the racetrack and beyond. Our collaboration with [indiscernible] is already making ways, elevating [indiscernible] global visibility. This limited edition is powered by the all new 350-horsepower Rotax 1630 ACE engine, the most powerful factory installed engine ever after in the category.

This engine is also available across the other [indiscernible] performance model. In 3-wheeled vehicle, we introduced the most significant evolution of the Can-Am [indiscernible] since its initial launch, improving handling and overall riding experience. It will be the first model manufactured our new facility in Vietnam. Finally, meaningful upgrades across our OLV lineup, including new models, added feature and stronger value proposition set up to sustain our momentum and drive further market share gains in both ATV and SSV.

More importantly, we strengthened our position in what we see as the industry most attractive growth opportunity, utility SSV cabs shown on Slide 12. Over the past 6 years, the segment has more than quadrupled and now represent nearly half of the utility side-by-side industry. For model year '27, we strengthened the Defender lineup with the all new HD 10 platform for the mid-HP segment and the X, a new and enhanced utility offering, built for customers who depend on their vehicle in demanding work environment, the X brings together factory installed accessories, greater capability and exceptional value in a purpose-built package.

Finally, let's turn to Slide 13. [indiscernible] Club BRP, we demonstrated how serious we are about Can-Am becoming North America's leading off-road brand. We brought to life 2 visionary concepts the defender pre-runner and the Maverick X-ray, while needle is a production announcement, both showcased the creativity and engineering excellence, shaping our product pipeline.

Last but not least, we committed to introducing major off-road product news every 6 months for the next 4 years. This commitment reflects our confidence in the category's long-term potential and our determination to remain the OEM of choice for dealers and writers. I am extremely proud of what we achieved at Club BRP. It was inspiring to see so many people come together to carry the message of our iconic brands and what we stand for. Moments like these keep us closely connected to our riders expectation and challenges to find new ways to raise the bar. With that, Sebastien, my friend, for the 50th and last time over to you for a more detailed review of our financial performance and guidance for the year.

Thank you very much, Denis, and good morning, everyone. Our team once again executed well in a dynamic environment, capitalizing on stronger-than-expected demand in RV to deliver second quarter results ahead of our expectations. This, combined with an improved estimated net tariff exposure is placing us well for the second half of the year and supports our full year guidance increase.

Looking at the financial results. Revenues grew 18% to $2.2 billion primarily driven by higher ORV shipments, a favorable SSV product mix and positive pricing net of programs. Turning to profitability on Slide 16. We generated gross profit of $263 million representing a margin of 11.7%. The year-over-year decline in gross margin reflects 2 primary factors: tariff headwinds for approximately 740 basis points and the onetime impact of a supplier financial restructuring, which impacted gross margin by approximately 330 basis points but was excluded from our normalized metrics.

Excluding these 2 items, gross profit margin would have increased by approximately 140 basis points year-over-year, reflecting the underlying strength of the business. Normalized EBITDA was $139 million, while normalized EPS ended at a loss of $0.18 per share. We generated strong free cash flow of $193 million during the quarter and $560 million year-to-date, further strengthening an already solid balance sheet. As a result, we ended the quarter with more than $600 million in cash and a net leverage ratio of 1.6x.

Now turning to Slide 17 for our revised fiscal '27 guidance. With the first half of the year now behind us, we have delivered results ahead of our expectations, supported by continued strength in ORV demand and solid execution across the business. While the macroeconomic, geopolitical and trade environments remain volatile, the momentum in off-road, together with an improvement in our expected net tariff exposure has enabled us to absorb a portion of the other headwinds we are facing and increase our normalized EPS guidance by $1 to a range of $4 to $4.50.

Looking at the key drivers of the guidance update. From a product perspective, we expect continued momentum in ORV supported by recent product launches and additional production capacity coming online to more than offset our decision to lower volumes and increased sales programs in personal watercraft in light of a softer-than-expected trends in the industry. We believe these actions will position the business for a healthier start to next season, particularly given the strong reception of our new models at Club BRP.

On the cost front, like many companies, we continue to face higher commodity and freight costs due to elevated oil and energy prices and ongoing transportation pressures. These factors are affecting our gross margin and are reflected in our updated guidance. As for tariffs, factoring the latest tariff development and our revised business assumptions, we now expect Section 232 and 338 net tariff exposure to be $200 million for the year, which would represent approximately $225 million of net tariff exposure on an annualized basis. Finally, our updated guidance incorporates the revised tax rate assumptions and lower share count resulting from the completion of our NCIB program.

Incorporating all these changes, we now expect revenues between $9.225 billion and $9.475 billion, normalized EBITDA between $1.025 billion and $1.075 billion and normalized EPS between $4 and $4.50. From a cadence perspective, we expect third quarter normalized EPS to be down 50% to 60% year-over-year, mainly due to the incremental tariff impact. This implies a much stronger Q4 normalized EPS compared to Q3. With these revised assumptions, we now expect to generate more than $800 million of free cash flow for the year, providing additional flexibility and further strengthening our balance sheet.

As I mentioned last quarter, we do not believe this outlook reflects the full earnings potential of our business. BRP continues to benefit from strong fundamentals and attractive long-term growth opportunities. Over time, we expect our earnings to better reflect this potential as we continue expanding our plan and as the trade environment becomes more stable and predictable. And finally, before I pass the call back to Denis, I would like to say a few words. As Denis mentioned earlier, after 22 years with BRP, I have decided it is time to let the new generation lead the finance team.

It has been an incredible privilege to be part of this organization and to work alongside such talented people throughout my career at BRP. BRP is in a strong position with external brands and compelling product portfolio and a highly capable leadership team led by Denis.

I am confident that together with our talented finance organization, Minton will build on the strong foundation we have established and help take BRP to the next level. Having worked closely with him for many years, I know he has a deep understanding of our business, our strategy and our financial priorities and that he is the right person for the job. To all of you on the line, thank you for your trust, feedback and continued support over the years. Obviously, I look forward to watching BRP's continued success in the years ahead. And with that, I will turn the call back to Denis.

Thank you, Sebastien. Thank you very much. And as everybody understood, we are satisfied with our first half performance, our financial results reflect sustained momentum in ORV, while our response to a volatile environment once again demonstrate BRP's agility and flexibility. We quickly identified factors within our control and acted on them with precision and discipline. In parallel, we continue to advance our M28 strategic plan with the announcement made at BRP reinforcing our commitment to capturing our full powersports potential. Our recent ORV success shows our ability to translate insights into market-shaping product that resonates with customers and drive market share gains.

We remain focused on becoming the #1 ORV brand in North America, and on increasing our competitive edge across our portfolio. In closing, driven by our strong lineups and engaged dealer network, we are confident in our ability to reinforce BRP's competitive position, sustain profitable growth and create lasting value for shareholders. As we're currently working on our next long-term plan, I look forward to sharing our vision for the road ahead. On that note, I will turn the call over to the operator for questions. And once again, welcome to Minton, and congratulations to Sebastien. Operator?

[Operator Instructions]

Your first question comes from Sabahat Khan with RBC Capital Markets.

Great. And just before getting into questions, all the best, Seb, with the next chapter. Just on, sort of, the commentary around the guidance update that you guys have shared, hoping to get a little bit more detail around -- just breaking that out, how much of this was just maybe the environment getting a little bit better, whether it's on the macro?

And then secondly, if you can just detail the puts and takes around the evolution of tariffs [indiscernible]. Obviously, your dollar amount, but just what are you assuming for the tariff backdrop? Maybe give us some commentary around the ability to get some exemptions, maybe how much of that is baked in here. Would love to get some color on, sort of, the setup into the back half and what's evolved since the beginning of the year, both on tariffs and on the fundamental outlook.

Sure. Well, first on the guidance, if we look at the puts and takes, obviously, when you look at the top line, the movement is coming from better ORVs deliveries this year offset a bit by the adjustments in production that we're doing and deliveries for personal watercrafts that he mentioned in his opening remarks. That is a small tailwind net-net of about $0.10 to $0.15. Obviously, inflation is top of mind with a lot of people with a lot of companies, and so we're feeling that impact as well. We are talking about another, call it, 50-ish basis points impact on our profitability this year. So that's roughly $0.50 headwind. And the rest is primarily related to our net tariff exposure that has evolved in the last few months, which is bringing the guidance up by $1.

Now to your second question as to what the puts and takes on the tariff, just let me just give you an update as what has changed since the last time we talked in May. The first thing is Section 232 tariffs for ATVs has gone from 25% to 15%. And the second [ element ] is a new tariff Section 338 tariffs for imports from Canada into the U.S., which are now subject to 50% tariff rate. And this product line that is impacted is Spyder. Not a huge impact this year because most of the deliveries for the year have been done in the first half of the year, but will have an impact next year.

And then the other element, and it's something I've shared with you in the past as well, when we talk about Section 232 tariffs, it's not a broad stroke that the U.S. administration has taken on the powersport industry, it's very targeted to either specific vehicle categories and sometimes even specific vehicle configuration. And so at BRP Club, we introduced new models, which cater to a growing segment of the market, more specifically utility. And some of these models that we are introduced are not subject to 232 tariffs. And so a different tax treatment applies to them.

And that provides us with a benefit because what we've seen after Club is that the mix of demand from consumers and from dealers has shifted towards these models. So net-net, when you add all of this, we're talking about a net exposure this year of $200 million and next year of $225 million on an annualized basis.

Great. And just for my follow-up, just given the, sort of, evolving backdrop, can you maybe talk about, sort of, the production ramp you, sort of, talked about and maybe how, sort of, production, manufacturing and just any early thoughts on how you're positioning that side of the business as you head into, sort of, maybe a more favorable operating backdrop. And just maybe you can tie in, sort of, the retail demand outlook there as well.

Yes. We're obviously -- the last thing we want to do is overproduced and have too much inventory in [indiscernible]. We're seeing greater demand from cab units. And so that is where we're adding capacity for cab units. Dealers are asking for it, consumers are asking for it. And so it's a decision that we've been looking at or an alternative we've been looking at for quite a few quarters. And so we're going to increase capacity on that front.

Yes. On that one, as I said, the cap now is half of the utility and has quadrupled. So this is a very big trend Defender is behaving very well in that category. So this is why we are investing on that one.

Your next question comes from Craig Kennison with Baird.

Seb, it's really been a pleasure working with you. I wanted to ask about the supplier financial restructuring line item. Maybe just shed more light on that issue, please?

Yes. Well, we've -- it's something we do not do in normal circumstances, but we had an important supplier that was going through financial difficulties and in order to ensure continued supply of parts, we needed to step in and provide this type of financial support. But obviously, it's been with this company for 22 years, and it's the first time we've had to do this. So it's an exceptional circumstance.

Can you shed light on, sort of, the nature of the transaction itself and whether their downstream implications to relationship with that company? Any, sort of, details around that because your $75 million hit.

The objective is to maintain the relationship with the supplier. It's a good supplier and good quality parts. So the objective is to maintain that relationship. Obviously, there is potential increases in prices that we will get from that supplier in order to make sure that the profitability is maintained for the supplier, but nothing too material. And so I'd say the most material element is the adjustment we've done this quarter on the results.

So as we look forward on that particular line item, the bulk of it or all of it was the [indiscernible].

The most of it is reflected in the quarter.

Your next question comes from Brian Morrison with TD Cowen.

Seb, it's been a true pleasure both professionally and personally. I have enjoyed every unit that this drive together, and I wish you all the best in the next chapter. That said, I want to dive a bit more into these tariffs. So I think you stated $145 million for the first half of the year and $225 million for the full year this year. So that's $80 million in the back half. And I think you said $225 million for next year as well. Is that correct? And if so, why does the prorated $80 million for the second half accelerate for next year?

Well, this year, when we talk about the net tariff impact, we're actually looking at offsets as well that we've announced in May. So we need to factor that. So the margin impact on tariffs this year was more in the range of $165 million. The bottom line impact is about $145 million because of the offsets we did on the operational front. So total for the year, we talked about $200 million. So we're more looking at a net impact for H2 of $55 million which brings the $200 million and so for the total next year is going to be $225 million. Why proportionately, is it less this year because we actually paid tariffs because of the mix of products that we ship in H1. And so we expect the mix to improve next year, and that's why we're seeing a reduced overall annualized impact coming down.

Okay. So if I can follow up, if I recall correctly back at [ Mission '28 ] at the Investor Day, the EBITDA implied is about $1.45 billion. And then Q1 of this year, you added another $50 million for improved fundamentals. Would that be the starting point that we should think about for mission '28 with respect to EBITDA for 2028 prior to take into account these net tariffs?

Yes. Well, when we look at M28, obviously, the fundamentals of M28 are very much in place. I mean we've talked about dealer network expansion that is online. We've talked about ORV. The market share gains that is progressing even better than planned. The industry as well is healthy. We have more product introductions coming in. Our lean initiatives as well are in line and even we've pulled them forward this year to offset some of the tariff headwinds we were facing. The big variable is commodity prices and inflation, which is higher than what we this year, we're looking at probably 100 to 125 basis points higher than the initial M28, but we believe we can offset that with more volume and also continued lean initiative.

So the M28 objective of $8 for next year is still very much reachable net of tariffs. Obviously, the macro and the geopolitical will dictate how things trend over the next, let's say, 12 to 18 months, but we certainly feel as a management team that, that number is still achievable net of tariffs.

Yes. This is what we are working on guys. The top line is in pretty good shape. And I would even add that the international, as we speak this year, fiscal '27, we'll almost reach the $2.5 billion that we were chasing for last year.

Your next question comes from James Hartman with Citi.

I was hoping we could drill down a little bit on the inflation piece. Obviously, freight and transportation are a big deal. Any incremental color you could give us there in terms of, sort of, overland versus ocean freight how that's proceeded, I think you've given us some numbers that, sort of, give us an idea for this year and next year, but maybe just, sort of, underline those as we think about how this issue progresses?

Yes. When we talked last quarter, I talked about a 70 to 75 basis point headwind coming from inflation. And now with the updated guidance, we're looking more at the 100 to 125 basis points. There are many variables driving this. We haven't seen the price at the pump for fuel come down despite the barrel has kind of -- the pressure on the barrel has come down, but the pump and refined products has continued to go up, and therefore, plastics in certain commodities is higher. We're seeing steel and copper as well being higher. And your question on freight and transportation, most of the challenges is on land. Obviously, the availability of trailers, the availability of drivers has tightened a lot in the last 12 months, and that has continued to put pressure on on our pricing. And so that's why we've built in an additional 50 basis points in the guidance.

Got it. That's helpful. And then maybe just give us a state of the ORV industry. Obviously, the industry grew in the second quarter, you grew even more, I guess, a, why do you think ORVs have outperformed some of these other big-ticket discretionary categories. What role, if any, of our rates playing. And then from a market share perspective, you guys seem to be gaining significant share to listen to Polaris. It sounds like they're gaining share. Kawasaki has some compelling products that they're bringing to the market. CF Moto doesn't seem like they're going anywhere. So maybe, sort of, how we should think about the market share landscape if you're gaming who's losing sort of thing? And ultimately, just help us understand the forward outlook for ORVs and then the sustainability of your share gains?

Yes. There is a strong momentum behind this, which is a shift from used to be, kind of, a recreational segment to the utility segment quarter by a year after year. As we said, the quadrupled in the last for years, and we see a continued growth on this one. This goes from farming to construction business to first respond business. I mean, there's a lot of applications which are now turning to SSV applications. And we are, of course, into this as a great position with our Defender, especially with the Defender [indiscernible]. So we see the 2 things at the same time. The strong momentum on the segment itself, I think it will continue to make the global ORV growth at least in North America from that standpoint.

And the second thing is that we are a product offer, like the [indiscernible] we just introduced that was really very well received by the dealer, which is really a rough and tough application for construction that we are doing here and the continued investment we're having, we mentioned also on the manufacturing capacity that we are having, makes you think that, yes, for the next years to come, there is still growth in that segment, and it's a major change into the clients that are buying the SSV in the U.S.

That's helpful color. And I'll reiterate what a lot of people have said, Seb. Congrats on the retirement. It's been great working with you. And Minton congrats on the new role, looking forward to expanding the relationship.

Your next question comes from Benoit Poirier with Desjardins.

Yes. Congrats on your successful carrier and congrats into for your new role. Just in terms of tariffs, you did a pretty good job so far managing the tariff exposure still $225 million impact for next year. So I was just curious to see if there is any other mitigation factors that you currently consider that exist that might erase a good portion of the remaining tariff impact.

For sure, it's possible. Being agile means being ready. And we are constantly working on trying to be ready, okay, which is a lot of work, by the way. And you've seen how quick we could react in just 1 quarter on this net impact that we have been here [indiscernible] in the magnitude that you just saw. We continue working on that, okay? This is the case, of course, product offers continuing on all the levers, which is from the overhead to the lean management with a supplier of course, to the new product that we are offering, and we'll continue offering. And of course, any project that we're having on potential move of the manufacturing or whatever is also here because I'm sure it's going to be a question, but what we are doing is that we are getting ready for any kind of situation. The other thing is what we need to go further in what we are doing is to deem that we are in an environment of tariff, which is predictable and fix, okay, over the time. And I think you will agree with me, this is not the time as we speak. So difficult to elaborate on what's going next, once we don't have a minimum of productivity in the environment.

Okay. That's great. And on the ORV side, you've been quite successful in terms of market share gain. It looks like that the competitive landscape is evolving on side-by-side with Yamaha exiting the market. What's your expectation, Denis, on whether they will remain in the ATV market? And what about Endo's presence side-by-side given their declining market share?

Well, I will certainly not comment on competitor strategy. The thing you have to have in mind is that this is the place of the market that we are investing the most. I mean our momentum is tremendous. The Defender is gaining by the day market share. And as I explained before, with the lineup with the investment we are making in our capacity to produce the product that the dealers and the clients are demanding for, I'm super confident on our position on the market.

Okay. That's great. And just one for Seb. In terms of free cash flow, obviously, you see some upside for the year. you've been quite aggressive in terms of buybacks. So just curious to hear some color about the opportunities that you foresee in terms of incremental capital deployment, whether it's on the buyback or maybe a boost on CapEx requirement for next year given all the opportunities that you see ahead?

Well, obviously, strong free cash flow generation this year big variation planned this year and next year. Obviously, we're continuing to invest in the business. We have a solid portfolio of products that are going to be introduced, but certainly, we have another NCIB window that's opening up early December. And so we could deploy easily an additional $200 million of cash towards buybacks from now to the end of the year. And the good news is we have the flexibility to do it if we decide to execute on it.

Your next question comes from Robin Farley with UBS.

Great. Seb, best wishes. It's been so nice working with you. You'll definitely be missed. And then sorry to pivot right into a tariff question from that. But I wonder if you could give a little bit of color on tariff in Q3 versus Q4 because there's just something about the tariff cadence that just seems a little unclear. So just the split of the tariff impact between those 2 quarters. And then if you wouldn't mind clarifying if it's $55 million tariff impact in the second half, seems to be double next year. You mentioned some of that was the mix of products. Can you kind of quantify how much of that is incremental 338 tariffs? And how much is that mix issue that you mentioned?

Yes. Well, obviously, going into the granular, kind of, gets complicated. But what I could say on the -- just on the cadence of tariffs is that we would expect higher tariffs in Q3 versus Q4 because the transition to the new products we've recently launched is going to be happening mostly in Q4. So you'll see some probably in the range of $30 million to $35 million easily of tariffs in Q3 and the remaining in Q4.

Okay. Great. That's very helpful. And I didn't know if you had a comment, I'm sorry, on next year on the -- how much of the implemental is?

Yes. Well this year, again, it depends on the mix of the product and the timing by quarter. And so that obviously influences the payout but the cadence should be pretty much probably more skewed in the first half of the year as we ship or the unit. And then also, we have Spyder kicking in next year, which is about, let's call it, $60 million to $65 million headwind that we're facing with fighter.

Your next question comes from Joe Altobello with Raymond James.

Seb, congratulations. I know I haven't said it already, but it's been great working with you. And obviously, then good luck as well. A couple of questions here. I guess, first, on the guidance, and I want to follow up your response to Robin's question. If I look at your third quarter guidance, it implies EBITDA margin down a few hundred basis points, kind of, similar to what we saw in the second quarter, even though the bulk of the margin -- or I'm sorry, the tariff pressure is, sort of, behind you here. So what else is wane, I guess, on that third quarter margin?

Well, other than the tariff, there's still some tariffs remaining in the third quarter, but the other element that is there in the Q3, Q4, the second half of the year is the inflationary pressure. So we've been increasing or reducing our guidance because of inflation. So we're at 125 basis point headwind. And so a lot of that will be happening in the second half of the year. So more amplified.

And then the other element is product mix. Last year, we had a very rich mix with shipments of Defender HD 11 and also personal watercraft. This year, the mix is a bit more stabilized and also we're reducing our personal watercraft deliveries. I'd say these are the 3 elements which are impacting gross margin.

Got it. Very helpful. And just a follow-up on that. You called out ORV demand pretty healthy. Obviously, you're taking share, but the industry is also growing nicely coming from the utility side. But in terms of the end user or buyer, where are you seeing the most pockets of strength?

All the utility and on the cab unit, the luxury models are very strong. We talked about our average hospital income of $176,000 at the investor meeting that obviously results in us being able to sell higher-end models. And and Denis mentioned that we are increasing capacity for cab units because the demand is strong and dealers see the door swings from these consumers for the novelty that we're bringing to the market.

And you can see it in -- it's only our -- it's mostly -- sorry, our upper range, upper segment, upper power in the engines that we are selling and in the current business, okay? Because this is where we are very big, and we are gaining 3 points of market on the ORV and on the ATV and 6 points of market in the PWC in the current model year business, which also reflects how healthy our clients are.

Next question comes from Cameron Doerksen with National Bank.

Let me echo my congratulations to Seb as well on well-deserved retirement. I hope you have many trips planned in the next few years. But I guess maybe my question is really around the year-round revenue guide. Obviously, you indicated that the ORV sales are performing ahead of expectations you had earlier this year. I guess for the full year guide, though, it sort of implies relatively modest, I guess, year-over-year revenue growth in year-round products. I'm just wondering what you're seeing there. Is there some element conservatism built into your second half guide? And if you can also make a comment on what you're seeing just in the retail so far here in your fiscal Q3?

Yes, I'll comment on the first part, and I'll let Denis comment on the retail. As I mentioned to Joe earlier, obviously, again, last year was a very strong second half with HD11 deliveries. So a very rich mix. This year, we had product news, obviously, into the HD10 and open cab models as well. So that makes us a bit more balanced this year, and so that is providing less top line growth than you could have expected. But from a retail perspective, the expectation is good for the second half because we're now having full cab in the network and that should help retail. And I'll let Denis comment more specifically on the trends for Q3.

Yes. Globally, on the market, if you say if we are on the ORV specifically SSV in North America, the momentum is good, but the momentum in size if you take, for instance, the Q2 is the market is up low single, okay? The market is up low single. The cab or the utility is very strong, we are plus 30% year-over-year, but it's a piece of the market. But globally, what we plan for is this up low single growth of the market in the H2 and for next year, and we are very confident that this will happen inside of the market, we are playing the switch of our own mix of sales, which is way higher on the utility and the cab. That's the point.

Your next question comes from Martin Landry with Stifel.

I'd like to dig a little bit into your dealer inventory. You say that your dealer inventory in North America is up 2% year-over-year in units. I'm just trying to reconcile that with your sales. Looking at your sales of seasonal and year-round products, they're up, I think, 26% year-to-date. Your retail sales are mostly flat year-to-date in North America. So I understand that I'm comparing units versus sales, but is pricing can't be up that much to explain the difference. So I was wondering if you can help me better understand why your inventory dealership is only up 2%, that would be great.

Yes. You need to look at it versus where we were in January at the end of January. That's probably a better way to look at it. And so we had very, very lean inventory in January. So that's how you we need to run the math and looking at wholesale, retail and inventory. We are actually happy with where the inventory is. ORV is in a good place. We're probably 100 days of inventory and quite much lower on the cab unit. We finished snowmobile inventory at the end of the season, down 30% versus a year ago. So again, in a good position.

One area where we do have more inventory is personal watercraft and as Denis mentioned in the prepared remarks, the season was softer than expected. So we're cutting production in order to start to season off. in a good position and help protect your profitability. So when I look at it in a nutshell, I think we are well balanced to make sure that we have enough inventory to support retail but also the right amount of inventory to protect the dealers' profitability.

Given the momentum is a healthy position.

And is there a difference between your inventory level globally versus North America?

Well, in international, dealers tend to hold less inventory, very similar to the auto industry. Obviously, you can comment on that part on international. But we see the same trend. So there is less of an inventory hold by the dealers in these markets. But generally, the same trends are experienced at international in terms of the healthiness.

And we have good movements, as you could notice in my speech also at international, right, like Asia Pacific, retail was very high. We are good in Scandinavia, Eastern Europe on most of the product lines. So we don't have a problem there.

Okay. And Sebastien, congrats on your career. Best of luck on the next chapter and Minton, well done. Congrats on your appointment.

Your next question comes from Tristan Thomas-Martin with BMO Capital Markets.

Everyone has a congrats, Seb and congrats [indiscernible]. I was just curious, you kind of alluded to it in one of the prior questions, but how many dealerships have you added relative to your 100-plus target from the M28 plan?

Well, if you take last year, 36, we targeted 30. And this year, we're targeting our modeling that it would be around 40 that we are chasing, and we're already starting 20. And more importantly, at the club, we talk about the prospects which are visiting us to take a decision, and we have a lot of contacts. So we are super confident with increasing by 40 this year.

Okay. Great. And then just really quick, anything you want to flag on the overall kind of promotional backdrop?

Well, nothing particular to call out. Inventories are healthy and so we see OEMs being less promotional. We expect a positive tailwind from less promotion this year similar to what we shared back in May, we're about 50 basis points.

Your next question comes from Anthony Bonadio with Wells Fargo.

Seb and Minton, congrats to you both. I just wanted to dig in on the Model X you a little bit, the Defender. Can you just maybe talk about how penetration of that could evolve just given the reception you got from dealers at the Orlando event. And just any thoughts on like the anticipated mix of that versus other models next year?

Yes. The mix is continuously growing. Most -- I would just repeat one figure. We took 3 points in the current business, okay, of market share, and this is mostly due to this new offer on the Defender, obviously, right? So this is big because it drives most of our growth on the segment, and we want to continue so. So that's why we're also investing on the cabs as well as on the Defender, as I said before, right? So we are now pushing as we did in the club, the offer on the utility with the series that you certainly have seen, right? And also continuing investing in the factory in order to follow. But most of our growth, and I repeat, this is a 3-point on the entire current model business, which is mostly coming from this Defender.

That's helpful. And then just on the BRP financial services announcement. Can you just maybe talk a little bit more about that decision? Why was now the appropriate time for that? And then just thoughts on implications to the P&L as that ramps, and we look to model that.

Yes, it was a big non-product news club, a very, very good reception from the dealers. It's all about elevating the dealer network experience dealer elevating the consumer experience as well. Dealers and consumers are expecting OEMs to provide them the same service level that car OEMs are providing. And so that was the #1 objective. The other objective as well is being closer to the customer and knowing our customer better, understanding repurchase rates, influencing repurchase rates as well. And the other element as well is we'll be more tactical on how we hone promotions as well, how we target certain credit scores in the market vis-a-vis certain product lines. So it is certainly a huge news. Dealers reacted favorably. After 2 weeks, we have 90% of our dealer network already signed up. We're originating loans already. So it's very happy with the result. And yes, it has a -- it may have a positive financial implication, but I think the broader implication is about BRP becoming the OEM of choice for dealers and consumers and building that brand aura around ERP.

And if I may, coming from the auto industry, I have some experience on that 1 and being closer to the client is super important, not only for the network but also for us because this opens the door for new projects to come about renewal of the financial and renewal for the products, sorry, and even a certified pre-own programs, et cetera. This is all related. So creating the link with the client as an immense value for both our dealers and also our company.

Your next question comes from Brandon Rolle with Loop Capital

Again, to echo everyone else's comments, congratulations on the retirement. Just a couple of questions for me. First, on tariffs. Could you just talk about maybe the portion of the tariff mitigation efforts that are potentially structural in nature, maybe once tariffs are repealed or get rolled back?

Well, we -- in May, we talked about $200 million of, call it, tactical operational elements we were putting in place. That's still much in-force today. and we expect some of that as well to carry over next year, probably not to the level of what it is this year. but certainly there. And obviously, it's all about building better business practices and who knows if tariffs do leave one day .[indiscernible] will be the CFO, and I know he'll be controlling a tight leash. And so maybe he's going to want to keep some of that to the bottom line. I certainly hope he does.

Okay. Great. And then just looking at the second half guide, what's the underlying assumption for ORV retail in the back half of the year?

Well, as you saw year-to-date our side-by-side retail up 7%; TV, 4%. So good retail performance year-to-date. The expectation is that the industry will remain as we had it in the second half. And our expectation is good retail momentum, especially that we have, we'll call it, a full 6 months of Defender HD1 in the network.

Your next question comes from Gerrick Johnson with Seaport Research Partners.

Congratulations, Sebastien. Congratulations Manon. I had a question on factory expansion you're talking about. I presume this is was too. What are you doing there? It seems like you're expanding capacity pretty quickly. So is it just more throughput? Or is there actual capital that needs to go in. SP7756456 It's not very big in terms of CapEx.

Indeed, what we are doing here is more like the line physical line organization because -- of course, when you do a cabin, you need more space because there are some steps of manufacturing that you add on the mainline. And we do this by a bypass to this line. So we are just mostly extended the building. So we're extending a building so that we can have a throughput of this, which has increased by roughly 33% of what we are doing right now, which is -- which will be impacting, of course, on our commercial performance. And as Sebastien said before, our dealer inventory is rather low on this one. The demand is still there. So we are super confident that the market is -- would be solved this.

Okay. Great. And it will be super wonderful recreational demand kicked in. just for edification, what was recreational ORV retail in the quarter?

I don't have that granular data with me, but we can certainly try to share something later.

Okay. What's your guess? Probably down significantly or down a little bit or...

Down in the high teens.

Okay. I'm looking at [indiscernible].

I don't like to guesstimate, and so we'll promote harder numbers.

[Operator Instructions]

Our next question comes from Jonathan Goldman with Scotiabank.

Seb, let me be the last one to sign the retirement card. Congratulations particularly on managing through the last 5 or 6 years environment. And congratulations to [indiscernible] as well, I look forward to connecting. Most of my questions have been asked. So just a couple, I guess, clarification ones. Are you able to discuss in the quarter the revenue growth, maybe break it down in terms of volume share gains? How much was pricing and mix?

Yes. Well, if I look at the overall margin evolution this quarter, as we said in our prepared remarks, look at gross profit was hit by 740 basis points from tariffs. We have the supplier restructuring 330. And so net-net, we're looking at the 140 basis point year-over-year improvement when you exclude the 2 previous items I mentioned. And so what drove the gross margin improvement obviously, leverage on fixed cost is about 110 basis point pricing, 80 basis points positive, manufacturing efficiencies, about 110 basis points and then in terms of a headwind, we have inflation FX and other for about 160 in the quarter.

Okay. That's useful. And then maybe one more. You kind of discussed this, I guess, on a question or 2 ago, but just thinking more broadly, have you changed your assumption on North American Tower sports industry retail? I think you're talking about flattish on the previous couple of calls?

No change in assumption, no.

There are no further questions at this time. I will now turn the call over to Mr. Deschenes to close the meeting.

Great. Thank you, Joanne, and thanks, everyone, for joining us this morning and for your interest in BRP. We look forward to speaking with you again for the third quarter conference call plan for December 1. Thanks again, everyone, and have a good day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Good morning. Welcome to BRP's Annual Meeting of Shareholders. My name is Pierre Boudot, and I am the Chair of the Board of Directors. Please note that since the main portion of the meeting will be held in French, you can always benefit from the simultaneous English translation by clicking on the language icon on the right side of the webcast platform. If you have any questions, you can submit them in the language of your choice.

[Foreign Language]

authority vested in me as Chair of the meeting. I appoint the representatives of Computershare Investor Services, Inc. BRP's transfer agent present here today as scrutineers for the meeting. They will count the proxies and votes cast online today.

I have with me the certificate of Computershare Investor Services, Inc., indicating that the notice of meeting was properly given in accordance by or in accordance with the Canada Business Corporations Act and the bylaws of the corporation.

Accordingly, unless there are any objections, I will dispense with the reading of the notice of meeting. The report provided by Computershare Investor Services, Inc. prior to the meeting confirms that we have the prescribed quorum I now declare the Annual Meeting of Shareholders of BRP duly convened and validly constituted to proceed with the items on the agenda. I will now turn the floor over to Martel who will provide an overview of the meeting proceedings and will set out voting procedures.

Thank you, Pierre. We will now begin the meeting with an overview and vote on the matters formally identified in the notice of meeting followed by the preliminary voting results. Presentations will then be made by our President and CEO, Denis and by our CFO, Sebastien. Finally, there will be a question-and-answer period, which will take place and where BRP's management will answer questions submitted in advance of the meeting or electronically through the webcast platform during the meeting.

Based on the preliminary count of proxies received and votes counted, -- the scrutineers have informed me that approximately 209 million votes for multiple voting shares and 39 million votes per subordinate voting shares are represented here today. For those of you who are entitled to vote and have not already done so, at the appropriate time, you will see the electronic ballot appear on the left of your screen, allowing you to vote. .

In order to facilitate the deliberations since the meeting is being held virtually, I will move all motions as a shareholder. I will now turn the floor over to Pierre for the next portion of the meeting.

Thank you, Marta. Let's move to the first item on our agenda. I now submit the consolidated financial statements of BRP for the year ended January 31, 2026, and the related auditor's report. As these documents have been sent in accordance with the provisions of the law to all shareholders who requested them. I will dispense Marta from the reading of them. We will now proceed with the election of BRP's directors.

BRP management proposes 12 nominees for election as Directors of BRP. You have been provided with in the management proxy circular with a short biography and other relevant information about them. I will now ask Marta to introduce the proposed nominees candidates as directors.

I am pleased to nominate each of the following persons for election as a director until the next Annual Meeting of Shareholders or until his or her successor is elected or appointed. Pierre Elen Bud, Ashua Bekenstein, Charles Bombardier, Ernesto M. Hernandez, Katherine Kuni, Denis Levi, Nicola Nomicos, Edward Philip, Michael Ross, Barbara Samedi, Hildegard Maria Wortman.

Are there any questions from the participants regarding any of these nominations?

No, we do not have any questions. I now declare the nominations closed. And we will proceed on the vote on this matter. You may vote for or against each of these candidates. We'll give you a few seconds to enter your vote. But you can vote or change your vote until the ballot closes, and that will take place when the last item on the agenda is presented.

We will now proceed with the appointment of PricewaterhouseCoopers as BRP's auditor. PricewaterhouseCoopers is being nominated for the first time as auditors of BRP replacing Deloitte. This nomination follows a rigorous tender process conducted by the Audit Committee during fiscal year 2026, in line with our commitment to exemplary governance practices.

On behalf of BRP, I'd like to express our sincere appreciation to the lot for its 20 years of dedicated service. is BRP's external auditor since 2006. I would now like to ask Matel to make a motion to appoint the auditor.

Thank you. I propose that PricewaterhouseCoopers be appointed as BRP's auditor until the close of the next Annual Meeting of Shareholders of BRP. Thank you. Are there any questions from the participants with regards to the appointment of the auditor? .

No, we do not have any questions Okay.

Since we have not received any questions from the participants, let's move to the vote. We will now proceed to a vote on the advisory resolution regarding BRP's approach to executive compensation as set out in the management proxy circular -- as explained in the circular.

This is an advisory resolution. The result of the vote will not be binding on BRP's Board of Directors. However, members of the Human Resources and Compensation Committee will take the outcome into consideration in their future review of the principal policies, programs or mechanisms relating to executive compensation.

I would now like to ask Martel to make a motion to approve this resolution. I move on an advisory basis and without diminishing the roles and responsibilities of the Board of Directors that the shareholders accept the approach to executive compensation disclosed in the management proxy circular.

Are there any questions from participants with regards to the advisory vote on executive compensation.

No, we don't have any questions. Okay. We will now move to the vote on this item. There being no further business to conduct. I declare the voting on all items of business closed. The scrutineers have completed the preliminary vote count for each of the items on the agenda. I would therefore like to invite Martin to share with us the preliminary results of the vote.

I am pleased to report that according to the preliminary scrutineers report. The 12 nominees for Lexus directed were duly elected. The appointment of PricewaterhouseCoopers as BRP's auditor has also been a -- and finally, the advisory resolution on BRP's approach to executive compensation has also been adopted. A press release regarding the official detailed voting results will be published on BRP's website and our onset following the meeting. On this pierre, I turn the floor back over to you.

Thank you. I'd now like to invite BRP's President and CEO, Denis and the CFO, Sebastian, to make their presentations.

Dear shareholders, BRP partners, ladies and gentlemen, I'm pleased to speak to you today. This is my first Annual Shareholders' Meeting of BRP. I'd like to mention that the accomplishments happened under -- the cases going to be sharing happened over the leadership or under the leadership.

Over the past 28 years, he has driven a remarkable growth that has made BRP a global leader in the motorsport industry. Since I've arrived I have been impressed by BRP's strength its strategic positioning, and it's deeply revalued. This is an organization with hurt and grit exceptional talent and a network of truly committed dealers. I'm thrilled with the idea of joining this chapter BRP.

Our team successfully rose to challenges in fiscal 2026 despite the economic uncertainties caused by a volatile tariff environment industry -- and in spite of all of this, we delivered financial results that exceeded expectations. After making significant progress on our inventory reduction plan in the first half of the fiscal year. We recorded solid revenues and earnings growth in the second half, thanks to the successful launch of our new products. Our revenues and normalized diluted earnings per share increased by 7% to reach $8.4 billion and $5.21 or $5.21 per share, respectively.

In terms of retail sales, the North American motor sport industry experienced a slight decline during fiscal 2026 due to an uncertain economic environment. For us, as expected, our market shares declined in the first half of the year, as other manufacturers cleared their high inventory levels through significant discount.

However, the arrival of our new off-road vehicles at our dealerships was a real game changer. Thus, as a result in the third and fourth quarters, we recorded record market shares for those periods in the utility side-by-side naturals. In addition, our market share for high distillation off-road vehicles increased by nearly 9 points between October and January.

Another highlight of fiscal 2026 was the unveiling of our strategic plan, which we call Mission '28 or M '28 which aims to enable us to realize our full potential in the motorsports industry. Our team is focused on implementing this plan. And we have already progressed on a number of key elements.

Very much specifically, market share gains for our new off-road products, an increase in the number of dealers in North America, growth in our international operations, and improved operational efficiencies. I will continue to update you on our M5 achievements over the coming quarters. As you know, innovation is part of our BRP DNA. Year-after-year, we expand our product lines with new models featuring unique capabilities, pushing the boundaries of technology constantly. These innovations allow us to enrich consumer experiences and position the company.

On the path to sustainable success for side-by-side vehicles -- we launched a new generation of Cam Defender HD 11, further cementing its reputation as the most capable hostile and reliable utility vehicle cost. We also enhanced Mavrick R are by integrating features designed for Rocky terrains. On the ATV all-terrain vehicle segment, we launched electric cannot outlander powered by our modular tax.

Power technology. And we introduced the Outlander MAX 6 the most rugged model in the CM lineup with its 6-wheel drive robust chassis and powerful real tax engine packages. For do in seasonal products, we continue to enhance the personal watercraft experience with new connectivity features. In pontoon boats in that category, the 300-horsepower road tax 1630 ACE engine was added to the select models in the Switch family. .

For skid and links, we have offered comprehensive lineups while enhancing versatility functionality and connectivity. Our teams remain deeply driven by the desire to design and bring to market new products with safety industry, in fact since its inception, BRP has won more than 200 international design awards, including 2 new ones over the course of. I'd like to congratulate our design team, which was named Red Dot Design Team of Year. This is 1 of the most prestigious awards in the field awarded for the first time to a Canadian company. after Ferrari, Apple and Porch, BRP has now joined an exclusive circle of renowned brands.

Before continuing, I'd like to highlight some of our progress the progresses that we made in sustainability. First of all, environmentally speaking, we have implemented a database for our direct suppliers that allows us to accurately track upstream CO2 emissions. On the social front, I'm pleased to share that we have achieved the lowest overall recordable accident rate in our history.

We are at 0.42. This rate is a key health indicators safety performance indicator. It's a key indicator that allows us to track our progress in risk prevention. -- at BRP, the goal is simple, 0 accidents. And finally, we continued to engage our global network in our stand-up to bullying program.

And in November, more than 6,000 BRP employees, dealers, ambassadors and partners participated in our yellow Day. -- or yellow days, which allowed us to raise donations that brought our total contributions to over $10 million since the launch of our initiatives. We'll talk about this again in the fall as we celebrate 5 years.

Fiscal 2026 was the end of our corporate social responsibility, '25 corporate responsibility plan and building on our achievements, we recently launched our new 2030 sustainability program beyond the event. It balances performance and sustainability through rigorous continuous improvement approach. It is based on ESG pillars, and I'm so proud to begin my journey at BRP with a plan that reflects our aspirations to become better and better day-after-day.

In conclusion, I'd like to reaffirm that despite economic turbulence, as well as tensions associated with tariffs and the geopolitical situation, we will continue to rely on our adaptability ingenuity our determination. Shorter history, we've often had to deal with tariff changes. Thanks to the talent of our teams, we have always managed to find solutions. On the short term, our priority is to implement mitigation measures to protect our business and to execute our M28 plan.

As such, we continue to invest in research and development. to bring products to market that constantly push the boundaries. I'm also thrilled to be working closely with our management team and the members of the Board of Directors to develop our next strategic plan and identify future growth opportunities.

Thanks to the strength of our brand, the loyalty of our customers, the ongoing commitment of our dealers and the dedication of our employees our foundations are extremely solid. We trust that we have the capacity to strengthen our position as a leader in the motorsport industry over the long term and to create sustained and sustainable value for our shareholders.

With that, I'd like to turn the floor over to Sebastien.

Denis, thank you very much, and I'll briefly review our results for fiscal 6. As Denis mentioned the past over the past year, -- we demonstrated our ability to face challenges and come out on top despite relatively difficult market conditions. BRP thus ended fiscal 2026 with the results slightly higher than those of 2025 and also above our expectations.

Revenues reached $8.4 billion, representing a 6.8% increase compared to the previous fiscal year. Normalized EBITDA amounted to BRL 1.1 billion, up 4.3% on from the previous year. This improvement reflects an increase in gross margin attributable to favorable pricing, reduced sales promotions as well as reductions in production and distribution costs.

Normalized net income $383 million or $5.21 per diluted share compared to BRL 362 million or $4.86 per diluted share for the previous year. Given disciplined management of working capital and capital expenditures, we generated strong cash flows of BRL 929 million. These funds were used in particular, to repay $336 million in long term debt.

We also returned $113 million to our shareholders through share repurchases totaling $50 million and dividend payments in and dividend payments. On March 2026, we announced an increase of more than 16% of the quarter dividend bringing it to $0.25 per share, thereby demonstrating our confidence in our ability to maintain sound cash management.

In closing, thank you to all of our shareholders for their support and their trust in BRP. I'll now turn the floor back over to Pierre Boudot to continue the meeting.

Thank you, Denis. Thank you, Sean for this overview of the previous year. There's no question-and-answer time. If you have not yet submitted your questions, please do so by clicking on the messaging tab and by following the instructions that will appear.

I'd like to remind you that your questions should be of general interest to all shareholders and not of a personal nature. If your question relates to your personal situation, a BRP representative will communicate with you after the meeting. as long as you've provided your contact information. You can ask your questions in either English or French. It is as you wish. Martha, have we received any questions.

No not just yet, let's just wait a couple of moments. So no questions. With no questions, I'm going to turn the floor back over to Pierre for the conclusion.

We are now at the end of our meeting, we've treated all of what we've dealt with all of the points on our agenda. You have the documents, and we have dealt with all of these. We have confirmed the sending of documents, the formula or the form of proxy was submitted by management, the report and all of the documents emitted by Computershare as long or along with consolidated financial results. Therefore, I confirm the end of our meeting. Thank you for your presence and your participation here today.

Good morning, ladies and gentlemen. Welcome to the BRP Inc.'s Q1 Fiscal Year '27 Conference Call. [Operator Instructions] I would now like to turn the meeting over to Mr. Philippe Deschenes. Please go ahead, Mr. Deschenes.

Thank you, Sylvie. Good morning, and welcome to Marty's conference call for the first quarter of fiscal year '27. Joining me this morning are Denis Le Vot, President and Chief Executive Officer; and Sebastien Martel, Chief Financial Officer. Before we move to the prepared remarks, I would like to remind everyone that certain forward-looking lens will be made during the call and that the actual results could differ from those statements. .

The forward-looking information is based on certain assumptions and is subject to risks and uncertainties, and I invite you to consult BRP's MD&A for a complete list of the -- also during the call, reference will be made to supporting slides, and you can find the presentation on our website at brp.com under the Investor Relations section.

So with that, I'll turn the call over to Denis.

Thank you, Philippe. Good morning, everyone, and thank you for joining us. We delivered a solid performance in the first quarter with financial results ahead of expectations and experienced sustained retail momentum across our key segments. As you know, the quarter was marked by a significant shift in the North American tariff landscape. While this created uncertainty and led us to suspend our fiscal '27 guidance, our teams have moved quickly to identify several mitigation measures to partially offset the impact on our business.

Those measures include further optimization of our direct costs and overhead a thorough review of our value chain to unlock efficiency and targeted pricing adjustments. In addition, we continue to engage with government and key stakeholders to bring forward the impact of the current situation on the industry and consumers in general. Looking ahead, we are focused on navigating these headwinds while also protecting our long-term growth prospects. Although the geopolitical and trade environment remains volatile, we are issuing a revised full year guidance that incorporates both positive trends in our business and net tariff costs.

Sebastien will share more details later in the presentation.

Now let's look at financial results on Slide #4. We ended the first quarter with revenue of $2.4 billion, normalized EBITDA of $ 334 million, and normalized EPS of $1.83. These results exceeded our expectations driven by stronger volumes, disciplined cost management and a more favorable promotional environment despite the early impact of incremental tariffs. We also generated strong free cash flow of more than $350 million, surpassing last year's level underscoring resilience of our operating model and our prudent approach to capital management.

Let's turn to our network inventory position on Slide #5. Delayed battery remains healthy, down 3% compared to the same period last year, reflecting improved alignment between wholesale shipments and retail demand, particularly in ORV. Product mix also improved with lower snowmobile inventory at the end of the season and better perforate craft availability ahead of the peak retail period. We believe inventory is near optimal level. We are well positioned to capture market opportunities and remain disciplined in protecting profitability for both BRP and our dealers.

Turning to Global Retail trends on Slide #6. Market dynamics in North America were consistent with the previous quarter. excluding snowmobile, which lapped a strong quarter last year, the industry grew low single digit, while BRP was up 2%. In line with our strategy, ORV remained the primary growth driver particularly in the utility and premium segment. Let's look at other regions. In EMEA, trends improved despite the still relatively muted macroeconomic environment our retail increased by 10%, in line with the industry.

We saw growth across most of our product categories, supported by a stronger end of the sloweseason in Scandinavia as well as improved demand for PwC and ORV in key European markets. In Latin America, our sales grew by 7%, with record first quarter performance in both Brazil and Mexico, driven by continued strength in all RV -- in Asia Pacific, the industry grew low single digits, supported by strong ATV demand partially offset by a late season decline in PC given our higher exposure on PwC, we trained the industry, with retail down 4%.

Overall, we are pleased with our retail performance partially in ORV, which delivered strong results across most regions. Now let's focus on our North American performance, beginning with side by side on Slide #7. We -- the industry remained healthy, grow mid-single digit, supported by the utility segment and continued adoption of Cap units. Can-Am sustained strong momentum driven by the success of the new Defender HD11 equipped with a new road tax engine, boasting 95-horsepower and best-in-class towing and cargo capacity, setting a new standard in the industry.

We once again outpaced the market with retail high single digits, including low teen percentage growth in the utility segment. More importantly, we gained over 3 points of market share in premium current units. This shows that our commitment to innovation can drive retail growth and contribute positively to profitability. Turning to ATB on Slide 8. while the industry declined low single digits during the quarter, we outperformed with retail up low single digits and reached the #1 position in the North American industry in April for the first time ever.

We continue to benefit from the rollout of our new platform across our lineup, contributing 3 points of market share gain in current units during the first quarter. We continued traction with dealers, ongoing network development initiatives and a robust pipeline of upcoming product launches, we are confident in our ability to sustain our or growth to further expand our market share.

Turning to Slide 9 to Corpus no mobile. The 2026 season ended in late March with industry retail up low single digits. As anticipated, since other OEM entered the season with elevated level of noncurrent inventory, industry retail was driven by heavily discounted units. In this context, we traded the industry slightly, given our disciplined approach to inventory management. That said, by maintaining pricing integrity rather than changing discounted volume, we achieved a record market share over 70% in current units and reduced our network inventory by 40%, putting us in a healthy position.

Our new products and features introduced in February allowed us to once again elevate with the adventure. To name a few, a new Rotax 600 ETEC engine with client leading power completely redesigned Q2 Scandic and Tura models as well as a linked trader model up to 12 lighter. This led us to have 1 of our most successful spring preorder campaign we are now well aligned to increase shipments and drive growth in the next season.

Let's turn to Slide 10 for an overview of our retail performance in other product categories for which the first quarter remained an off-season period. Looking at PwC as favorable weather affected the industry as a whole. In addition, Ted's year-over-year retail was pressured by elevated levels of discounted carryover inventory from other OEMs. Still, we had a strong performance in current units.

Moreover, as weather conditions improved through April, we saw retail activity pick up late in the month and the trend continued into May. The situation evolved similarly for 3-wheel vehicles and pontoons. Overall, we are pleased with our first quarter retail number. While seasonal product category faced industry headwinds, we continue to outperform in ORV, our most important growth driver. This is significant to our financial profile going forward, giving us confidence in the revised outlook that we are issuing today.

With that, I turn the call over to Sebastien.

Thank you, Denny, and good morning, everyone. We had a solid start to the year as we delivered a robust top line growth driven by continued strong demand for our products across the portfolio. We also benefited from a more favorable promotional environment than anticipated, which, combined with continued disciplined overhead management, drove Q1 results ahead of expectations. Looking at the numbers.

Revenues grew 30% and to $2.4 billion, with solid double-digit growth across all product categories as we lapped the quarter last year where we were rightsizing our network inventory. The increase was primarily driven by higher PWC and ORV shipments a favorable product mix in RV and positive pricing net of sales programs. Turning to Slide 13 for key profitability mix. We generated $562 million in gross profit, representing a margin of 23.5%, up 210 basis points from last year.

This improvement was driven by better capacity utilization, lower sales program, favorable pricing and partly offset by tariffs. Normalized EBITDA increased by 67% to $334 million and normalized nearly tripled to $1.83, it is worth noting that we only had a limited impact from the revised Section 232 tariffs during the quarter as these came into effect late into Q1, and we temporarily redirected plan U.S. shipments to other marks, while we assess the situation.

Shipments to the U.S. returned to normal levels by the end of April. As a result of our strong performance in support of our working capital tailwinds, we generated solid free cash flow of $367 million and ended the quarter with close to $700 million of cash on the balance sheet. Our balance sheet remains very strong with a net leverage ratio of 1.4x at quarter end. This provides us with the flexibility to navigate the current tariff environment while sustaining our investments for long-term growth, aligned with our N28 plan and can join to return cattle to shareholders.

Now turning to Slide 14 for context on our revised fiscal '27 guidance. As you'll recall, we entered the year with strong momentum, supported by solid retail trends, robust and for our recently introduced models and network inventory close to optimal levels and our Q1 results clearly reflect that positive trajectory. However, the quarter was marked by significant change in Section 232 tariffs. In essence, the amendment introduces a 25% tariff on the full value of imported snowmobiles and most of our remodels, replacing the previous 50% tariff on metal content only.

This represents a meaningful incremental cost to our business and has led us to suspend guidance while we assess the full impact. While uncertainty remains in the evolving geopolitical and trade environment, including the upcoming USMCA renegotiation, we now have sufficient visibility into the Section 232 exposure in our mitigation plan and our expected results for the year to introduce a revised guidance based on what we know today.

Looking at the guidance, First, the fundamentals of our business remains strong. Our outlook for volume growth is largely unaffected by the incremental tariffs and actually continues to improve. Our revised guidance includes stronger-than-expected trends in ORV. Snowmobile preorders above target, improved product mix and higher P&A dealer orders.

Together, we expect these factors to drive about $60 million of normalized EBITDA or $0.60 per share of upside versus our initial outlook. Against this, we expect a total incremental tariff impact of $500 million to $550 million for the year. To address this, we have put in place an initial mitigation plan focused on overhead cipline, project prioritization, targeted pricing actions and value chain efficiencies. Together, they are expected to offset approximately $200 million of that impact.

As these actions progressively take hold through the year, the net tariff headwind remains meaningful, especially in the near term. So putting it all together, we started the year with a normalized EPS guidance range of $550 million to $650 million. Since then, we anticipate a $0.60 improvement coming from better-than-expected trends in the business, resulting in a potential earnings power for the year of 60 to 70 before the impact of recent incremental tariff. Still, keep in mind that this figure includes about $90 million of tariffs as per our initial guidance.

And then the expected incremental net tariff impact of $3.10 to $3.60 per share brings our revised guidance and $3.50. Turning to the full guidance overview on Slide 15. Incorporating all these changes, we expect revenues between $9.125 billion and $9.375 billion, normalized EBITDA between $925 million and $975 million and normalized EPS between $3 and $3.50. Additionally, despite the tariff impact, we continue to expect strong free cash flow generation of over $600 million, further reinforcing our balance sheet. That said, we want to be clear, this outlook does not reflect the full earnings potential of our business.

It reflects our deliberate decision in the near term to prioritize protecting our long-term competitive position while implementing targeted mitigation actions to preserve our financial spring. We continue to evaluate other potential mitigation measures. And over time, as the trade environment stabilizes and the rules become clearer, we will take the necessary steps to further adapt and optimize our value chain as we have done in the past.

Based on this view and given our confidence in the long-term value of the business, we intend to resume the share repurchases under our NCIB shortly. Finally, looking at the cadence of earnings for the year. We expect the incremental tariff burden to be fairly distributed throughout the rest of the year with a slightly higher impact in Q3 due to the timing of snowmobile shipments.

Looking more specifically at Q2, we expect earnings to decline by approximately $1.60 to $1.65 year-over-year, resulting from the net tariff impact PwC shipment timing with more deliveries in the first quarter and less in the second versus last year and the impact of the tax credit we recorded in Q2 last year. Still our fundamentals remain strong, and we expect continued momentum with our ORV business.

On that, I will turn the call over to Denny.

Thank you, Sebastien. As you saw our first quarter results confirm the strength of our competitive position, as shown by our sustained retail momentum. As the tariff situation continues to create uncertainty, I am proud of our team's hands-on approach to defining mitigation measures, proving once again that DRP is an agile organization. We are used to deadline with evolving trade requirements and are always striving to find solution to overcome challenges.

We will continue to monitor the situation, including the upcoming USMCA negotiations and we will not hesitate to further adjust our operations to protect our long-term competitiveness. Our objective is to continue outpacing the industry by focusing on what we can control including the execution of our M2A strategic plan and delivering on our commitment to innovation. In this regard, we are going forward to our dealer event coming up in August in Orlando, Florida. You can expect exciting model year '27 product news that will continue to build on our current momentum and you are welcome to join us.

In closing, thanks to our engaged dealer network and cutting-edge product line up we are confident in our ability to further strengthen our position as a leading global power sports OEM in the future, drive sustained growth and deliver lasting value shareholders. On that note, I turn the call over to the operator for questions.

Thank you, sir. [Operator Instructions] Your first question will be from Craig Kennison at Baird.

I appreciate the detailed color on the slide presentation as well. Seb, I wanted to dig into, I guess, Slide 14 and I understand the tariff mitigation, that $200 million. Could you be specific, I guess, on where you can cut overhead, which projects get reprioritized, how much your partners can absorb? And then lastly, by how much can you raise price or that really damaging demand?

Yes. Well, certainly, when we looked at the overall mitigation and the priority of the team and the Board as well was to protect the long-term growth business, the 28 fundamentals as well that we want to protect. But certainly, we do have levers as any company. And one of the big levers is certainly overhead. And so we have I guess, targeted certain initiatives like E-travel is one of them where we can scale back and not impact the business, certain more longer-term projects, exploratory projects, which we've moved back -- and as you know, in our initial guidance, we were planning to invest in overhead.

And so we've scaled back as well the increase or the pace of increase of overhead. So that's the new 1 element. As you know, as well in N28, we have the lean initiative, which targets to bring $350 million of lean in the business over 3 years. And so we are able to accelerate some of these lean initiatives and bring them into the current year. And as for pricing, again, we don't want to raise our competitive position in the market. And so we really honed our pricing very specific.

And what we do is we want to peg pricing around the world on the U.S. market. We saw opportunities to we'll call it based on currency movements that we could adjust pricing in some markets in order to offset some of the headwinds, and these would have -- these were above and beyond what we had planned in the budget. So -- in a nutshell, that's where we've targeted these initiatives. But again, very focused on not hurting the business for the long term.

Yes. Exactly. Thank you, Seb. Don't expect to your question, don't expect any brutal move on the pricing on the market. We will preserve the good momentum we're having on the retail. And also we protected the investment and CapEx for the 7-year lineup also. So we haven't been touching the products for the future growth of the company.

And as a follow-up, I imagine you're much closer to USMCA negotiations than me, but to what extent is Section 232 on the table that seems to be the one that you need to be changed? .

Yes. We've been very active indeed, of course, right, with governments, would it be Canada, U.S. as well as Mexico, as you know, foster. Our first target was to make sure that all of them understand the implication. Globally on the industry and globally on the future clients. So we know that negotiations and discussions are ongoing.

Obviously, we cannot -- we don't know when we are not in a position to say what is going to happen, but we know that this is ongoing. And together with USMCA in parallel, in the months to come, there should be a clarification on what will be the regulation going forward, which is also important for us because, of course, we are actively working on this potential scenario to even improve our situation.

Next question will be from Mark Petrie at CIBC.

I wanted to actually just follow up on the mitigation efforts. And just to clarify, so the $200 million impact, I think, is for fiscal '27. So what would be the annualized level exiting fiscal '27? And I think some of these are sustainable? Or do you think some of this would just revert back should the tariff environment go back to maybe what you had expected before?

Well, certainly too early to call out what next year is going to be, especially on the tariff front. As you know, things are moving and USMCA being renegotiation renegotiating. So our view is that the there is probably a world where tariffs will exist, but probably not the configuration that we see it today going forward. And certainly, if we don't need these mitigation measures and we want to reinvest in the business, we'll certainly scale back on some of them.

But sure, some of the lean initiatives that we are accelerating are going to be there next year. So that's good. So you probably have, I don't know, probably in the range of $100 million of initiatives that will certainly remain -- then for next year, obviously, depending on the landscape, we'll decide what we do with the overhead spend and whether or not we can further invest in the business or scale back some of these investments.

Fair. I appreciate that. And I just want to ask about the demand environment and just sort of more short-term focused if you've seen any shifts as sort of macro uncertainty, higher energy prices have had a bigger impact on consumer sentiment just in the most recent months.

Not really. It depends on the market, maybe a little in Europe, which is of that importance for us. But when it comes to North America, First, have in mind that most of our clients are wealthy households, okay? So the level is higher than the average population, which means that we don't really see that. As I said before, the ORV trend is a good one, and we are performing into it as well as, for instance, if you take the stock model a 27 snowmobile the preorder we're having is 50% more than what we had last year. So we cannot say that we see a reflection of the global economy on the demand on our products so far. .

Next question will be from James Hardiman at Citi.

Good morning. So following up on some previous questions, I can certainly appreciate the idea that you're going to drive as much mitigation as you can without really making any sort of wholesale changes that could be undone by the next week or certainly by a series of tariff renegotiations or court cases -- but I guess I'm curious, if you deemed the current structure as the new normal, what more serious levers are available to you to maybe cut back on the bulk of the tariffs that are currently hitting you specifically at least one of your competitors as we think about 232 is paying closer to that 10% rate as opposed to the 25% rate on 232.

Just curious how difficult would it be for you to get there? I think it would involve you shifting a lot of your metal sourcing to the United States, but maybe speak to that and just more broadly, what are the levers, the more drastic levers that you could pull if this tariff headwind persisted.

Well, obviously, with the visibility we have, we believe that the $200 million is the right level of mitigation measures, protecting the long-term growth of the business. But obviously, if this landscape were to stay more permanent, which we do not believe is the case. But if it were the case, then what we've always said is once we know what the rules are and they're well established, then we'll make the right decision.

So of course, the teams are not on standby and waiting for the rules to come in. We're looking at various scenarios. And once we know what these rules are, then we'll put them into play. But again, we've opened plants in the past, and that's certainly something we can do. We've shifted production from different plants to other plants, and that's also something we can do so.

The the munitions we have are well known, well understood and well controlled by us. And if once we need to pull the trigger, we'll put it in execution. But my view is I don't want to commit hundreds of millions of capital until we know what these rules are. And so today, we believe that managing in this environment with the 200 million mitigation measures is the right thing to do. And once we know what the rules are, we'll act accordingly.

We know we need, we need visibility and stability, and we know negotiations are ongoing between the governments. So it's too early to tell. We're going to react and we are getting ready.

And the last thing I'd say is we have a solid balance sheet. And so we're not -- if we need to deploy capital, we'll deploy it again, if it's the right thing to do for the business in the context of the new trade environment. .

That all makes sense. And then maybe shifting to the fundamentals of the business, excluding tariffs. You touched a little bit on it in the prepared remarks, but maybe walk us through the past few months sounds like there was some weather. Obviously, you had a Waller that started. But then maybe more specifically, any detail you can give us on May trends from a retail perspective for both you and anything you can going from the industry?

Yes, sure. The weather actually was good for the so mobile, less good if we may say, for the PC, which is very normal in a way, on both the seasonal product, we are satisfied with where we stand. The snowmobile may look a little down for sure. But have in mind that there is a seasonality of the quarter year-on-year, which is very drastic. So the global season was kind of the same this year versus the last year.

Number two, we are running at a speed of 7% market share in the current snowmobile, which is very high, shows how competitive we are in terms of product. And I said before, the orders of the '27 models, because the question is on the short-term period, -- the order of the '27 model is 50%, 5-0, up compared to last year. So we are very confident with that one. Of course, this is very early on the PwC to get the global vision, okay? Again, our market share on the current is up 10 points, so which is not neglectable.

But the market is still kind of person with a lot of noncurrent that we basically do not have at BRP or say, so we got to see the way it's coming. End of April, beginning of May, the trend is becoming positive back again. So -- but this is early decision to talk about and finish with us the most important product. We are super happy to be on line with our plan and I'm talking here, of course, ORV so let me repeat the last month, April, we were #1 in North America with the ORV and on the current unit, we were up 3 points on the market.

And same with SSV, we are a little above the industry. And on the premium period, we are above again 3 points especially with the Defender because the utility segment is the most growing 1 inside this. So all in all, the momentum is very solid.

The next question will be from Robin Farley at UBS.

Great. And I appreciate the fact that the tariff situation is likely to change in your view. I just wonder if you could help us think about if it didn't, just so we can think about what an annualized impact looks like, for both the tariff and the mitigation. So that $500 million to $550 million is for this partial year, would that be, I would assume somewhere in the $600 million to $700 million on a full year basis? if you could help us in that range.

And then similarly, your mitigation that $200 million -- is that also a partial year? Or does that kind of represent you really have done -- put everything that would be annualized and that will land in the next 3 quarters? Or does that number look bigger on a full year basis, again, with the idea that if things didn't change.

So the -- I would say the tariffs annualized is in the range of, let's say, $50 million to $700 million, so very close to your number. In terms of mitigation measures, you could see a higher amount annualized, maybe, let's say, $25 million to $50 million higher. Some of the initiatives that we're doing will only take hold in Q3 and Q4. And so that -- this is what you could expect on a full year basis. .

And then just to think about potential -- you mentioned you're engaging with the government at various -- my understanding is the 232 is always sat outside of USMCA. So I guess, are there other things outside of the renegotiation period for USMCA, which could end up not changing, are there other avenues for you to pursue potential changes in this 232 tariffs?

Well, the going-in assumption is, obviously, when you talk about a free trade agreement between the North American countries, free trade means retraded so when you factor in the 232, you're no longer in a free trade territory. And so the going-in assumption is that at some point, the 232 lane will merge with the USMCA lane and the government will come to an agreement as to what is the required or desired level of tarification between the countries.

And so that's why we believe that the current landscape and the current structure of tariffs is temporary and the U.S. MCA will lead to a revision of the whole tarification policies of the different countries.

Next question will be from Brian Morrison at PD Cowen.

First of all, I want to end you guys on putting guidance out there. You often put yourselves out there when others don't challenge in time. So thank you -- maybe just going back to some of the questions on potential alternatives or offsets to the tariffs that are out there. Would that include potential reconfiguration of your manufacturing footprint if the tariffs stay in the current form?

First of all, we are depending on the tariff and the USMCA. First of all, we are already present in the U.S. if it is what's behind the question because we are manufacturing some products in the U.S. We also have foundries in the U.S., and we also have of course, a solid network of suppliers that we procure from in the U.S. It's way too early to answer your question so directly because, of course, it will depend on how the thing is globally going both from the 232 and the USMCA, right?

So as we said before, we are, of course, preparing all scenarios but we will certainly not make any decision before we estimate that the regulation is becoming steady and reliable. So which is not the case today. We hope in a few months, we're going to get more clarity on that one.

Okay. So it's steady state in terms of pricing and cost efficiencies until such time that you get visibility on USMCA. Is that correct?

Absolutely.

Okay. And then my second question is for Seb. Just specifically on the free cash flow. I mean, $650 million, that's a big number. I'm having trouble getting there with your guide. Maybe is there some sort of working capital...

Working capital is a good tailwind this year. 2 key elements: one, AR, we are putting in place a floor plan factoring facility Aviat should bring about $150 million this year of a tailwind. And cash tax will also be relatively slim this year. That's also a big -- a nice tailwind that we have. .

Next question will be from Martin Landry at Stifel.

I just wanted to get more details on the price increases that you've put through or you expected through -- can you give us just an order of magnitude in terms of percentage-wise, what that implies?

Well, it's -- as I mentioned earlier, Martin, it's not the big lever as part of the $200 million. So the other -- the big levers of the overhead, the lean initiatives. And as I said, we look at pricing globally, but benchmarking it to the U.S. market. And so versus our initial budget assumption, we had an opportunity to increase pricing because of currency movements, and we want to peg the pricing as much vis-a-vis the U.S.

So that's what drove. We completely protected the 2026 model year, okay, which are ongoing, number one. Number two, we also protected the peso, the preseason orders of the snowmobile on the '27 model. So this is a no move for the existing, say, pipe of orders ongoing with our network. So no bad surprise for nobody here and then, of course, don't expect a move. I think we're going to preserve totally our competitiveness versus competition when it comes to the 2027, sorry, for the yes. So we completely respect the retail momentum we haven't.

Okay. So if I hear you correctly, -- it looks like you're raising prices across the globe to subsidize a little bit the tariff impact on the U.S. So if I hear you correctly, it sounds like the price increases that you're putting through in the U.S. are something like low single-digit percentages, nothing that could impair your competitive pricing versus your competitors?

Yes. And we're not even talking about low single digit because if you do the reverse math, we, let's say, around $10 billion of revenue, 1% is $100 million, and we're not even at these levels in terms of pricing increase. .

Our next question will be from Joe Altobello at Raymond James.

Just a little more clarification on the tariff outlook. There's a lot that's going to happen in July, right? So the $122 million tariffs will expire. And I guess the thinking is that the new 301 tariffs will take their place. So is it fair to assume that your assumption and your guidance is that indeed is the case that nothing changes from where we are today on a net basis. .

Our assumption is that for the full year basis, we have nothing changes, and so we're exposed to the 232 until January 31. That's why you get the $500 million to $550 million gross impact. Yes.

Okay. Perfect. And just a follow-up on that, you mentioned the promotional environment was a little bit more favorable than you expected. Has that continued here in the second quarter? .

Yes, it has. We -- obviously, the big OEMs have a cleaner inventory and we see them not being as competitive or not as aggressive on promotions as we've seen them in the past.

Next question will be from Benoit Poirier at Desjardin Capital Markets.

Yes. My question is more related to PwC and pontoon. So when we look at pontoons, down low 30%, while PWC down low teens I was just wondering how much is related to poor weather or whether it's still tough market dynamics out there with higher inventory? And any thoughts on your PwC fishing offering since the introduction of the cross wave by your competitor?

Yes. Well, obviously, it was a tougher quarter for personal watercraft in Q1, where, as Denis alluded to, 1 OEM had a lot of noncurrent inventory and that's what drove the industry. But when I look at the May trends, our watercraft sales -- retail sales are up quite sizably versus last year. So we're happy -- good news is that the OEM probably got rid of some of the noncurrent.

And obviously, we have a lot of innovation on Personal Watercraft, which is driving momentum. And our lineup, obviously, we've been in this business for 50 years. There's always some competition coming in with new products, but our lineup in personal watercraft is super strong. A lot of innovation a super strong lineup. So obviously, we're not too concerned with new products coming in. And I think it's good for the industry because they'll probably bring new consumers to the personal autograph industry and that's good for our business in general.

Okay. That's great color. And with respect to the $60 million of positive NPAT that comes from fundamentals. Obviously, you gave good details about it on ORV -- you talked about improved product mix. I was wondering if it's more a reaction of Section 232, the fact that you put more accessories on products -- or it's just a matter that premium continues to outperform low entry levels that yes.

It would be the latter, Benoit, as Denis mentioned, we have affluent customers that tend to be more insulated from inflationary pressures and gas prices and that's driving the mix up as well. Also note that the season was in terms of use of the product at P&A is up also a P&A conception, especially parts was very good during the quarter. .

The next question will be from Cameron Doerksen at National Bank.

Maybe just a couple of questions on the international markets. Maybe you can just go into a little bit more detail what you're seeing, I guess, more recently and expectations for the remainder of the year and some of the key international markets that you're in? .

Yes. As I said before, in Europe, the markets are high single-digit high and we are 10% high. So in Europe, we are doing rather well. Latin America is a very good momentum, not this quarter. It has been now for a few quarters, okay, that we are growing big time in Brazil. So we are beating records every quad in Brazil and Mexico is also back. So these are 2 good zones of the world for us. Asia Pacific, is slightly down.

We are a bit more down than the market, but this is just because the PwC just like here is a little slow and is very, very high in our mix down there. And also note that, by the way, we are getting ready to launch the Ryker, which is the 3-wheel vehicle in Southeast Asia that will be manufactured in our Vietnam factory. So we are also preparing for, let's say, the second step in our international game plan.

Okay. That actually leads me to my sort of second question on international markets. I mean, in your longer-term strategic plan, that was highlighted as a key growth area. In the context of all the tariffs that we're seeing in the U.S., is there a way or is there any consideration to trying to accelerate growth in international markets? Because obviously, those will be less impacted by some of the tariff stuff we're seeing in North America? .

Well, we were still a part with our plan, and the plan is actually we are growing in international as we speak, right? We are chasing $2.5 billion next year, fiscal '28, this is the target of the plan and we are on track for that. So this is a serious growth. And after that, we'll come back at the right moment with the future plan to talk to you about we continue this growth going forward. the year to continue. But for sure, it's a territory that we will continue exploring to progress globally in the growth of the company, yes. .

Next question will be from Luke Hannan at Canaccord Genuity.

I want to ask about the revised Section 232 tariffs. Have they impeded your ability at all when it comes to extending the dealer counts in the near term?

No. You understand that as part of the M28, we have a dealer expansion plan of 100 dealers. Last year, we opened 36 dealers. This year, the target is 40 and we're well on track to achieve this target this year. I'm happy with the progress that was made in the first quarter. .

And then second question, a quick 1 and just a clarification. So the revenue guidance that you have there now is up slightly from what you had previously before the suspension. I'm assuming embedded within that is the same sort of industry sales assumption and it's just implying a little bit more market share capture than what you had previously?

Yes, that's correct. The industry assumption is for a flat industry with gains and market share. Obviously, we've had a solid snowmobile season and a solid preorder book from consumers. And so that's what provided us with an increase in revenue guidance. .

Next question will be from Xian Siew at BNP Paribas.

I wanted to ask about cost maybe outside of tariffs in the last call, you talked about 60 bps from kind of freight and fuel and con inflation. So maybe just can you update us on how you're seeing costs maybe outside of the tariff environment?

Yes. Good question. We've -- in our initial guidance that we had talked about the barrel at $100 for the full year. And so this assumption remains, but we've updated our cost estimates. And the 60 basis points is now more in the range of 70 to 75 basis points coming more from freight cost and also commodity, so still manageable, but we have seen some changes versus our initial guidance.

Okay. Got it. And then maybe on retail, I think you just mentioned you have flat for the industry and market share opportunities. But maybe can you talk a little bit about some of the new products I mean, HD 11 seems to be off to a good start. Any other kind of call out in terms of where we could see more potential market share gains?

Well, the snowmobile lineup was -- we announced our new features just a few months ago, super well received. And it's why I did mention that the preorders were very strong coming from that innovation. The high-end ATV as well is doing extremely well. So we're seeing good momentum. Obviously, we -- as Denny mentioned in his prepared remarks, we have a dealer meeting coming in August, and we'll also have a lot of product news that should drive wholesale in the back half of the year.

Next question is coming from Gerrick Johnson at Seaport Research Partners.

On gross margin, you mentioned promotions are a tailwind, and then you gave us the update on the input cost. But what's the gross margin outlook for the year that's embedded in your guidance?

Yes, obviously, the gross margin outlook is expected to be hit because of that tarriff. When you look at the midpoint of the guidance, the gross margin should be probably slightly north of 19% for the full year. That's my estimate at the midpoint. .

Okay. Great. And then on the halting of shipments of RVs to the U.S., I understand you shifted shipments elsewhere. -- how much of a gap was there? How much of a gap in the United States? And how much might it have impacted your retail in the quarter? And will that be made up in the U.S.

Well, we paused for a few days that at the beginning of April when the 232 tariffs, we redirected shipments Canada for certain models, but for the Defender HD11, we continued shipping into the U.S. So I don't feel it impacted our retail performance.

Not enough to hit the retail. It was just very temporary. .

Next question will be from Anthony Bonadio at Wells Fargo.

Just one more on tariffs. Can you just talk about the competitive implications from the tariff changes, just given where your peers are manufacturing if we sort of see some sustainability to this and does that at all impact your view on your ability to take share over time?

Well, as you saw, we've increased the guidance this year based on -- by $0.60 because of the momentum we have in the business. So our view is this is -- does not change our competitiveness in the market and we purposefully did mitigation measures that did not hurt the business. And so no change to our market share or growth aspiration, the '28 fundamentals and the priorities are still intact and the teams are moving forward, be it dealer expansion commercial improvement, market share gains, et cetera, product innovation that Denis mentioned as well. So very much still relevant in this context. .

And just as a follow-up on the M28 targets, I guess just given all the changes we've seen, how are you now thinking about that $8 number in F28? And what might that look like under different tariff scenarios? .

Yes. Well, obviously, there are many hypothetical scenarios we could run for now. As we said, we believe this context is temporary. We might end in a situation where there's tariffs. And I'll remind you that our initial guidance had $90 million of care. And when -- and that was baked into our N28 target. So too early to call out, but certainly, if tariffs were to remain as is, it would certainly be a headwind. But as again, I mentioned, and I don't want to sound like a broken recorder there, but we're protecting the fundamentals of M2.

The question is from Tristan Thomas Martin at BMO Capital Markets.

I just wanted to make sure I have something right. Did you say quarter-to-date retail May was positive? And was that for a consolidated or just an ORV number?

Was more positive consolidated or numbers up for salwatercraft numbers up as well. So a good indication going into the prime retail season. .

And then just what do you -- what are you seeing in terms of financing rates at the dealership level? And then any other credit metrics you want to provide would be great.

What we are seeing from a retail financing point of view, we are seeing FICO scores come down. And so obviously, when we dig in and understand what's driving this is actually that the Tier A customers are actually using the cash rebates or paying cash and not necessarily going for the financing option, which has driven down the FICO scores. But besides that, everything is pretty much similar to what we've seen in the past, no big changes. .

And just any sense of where rates are, maybe year-over-year? .

Off the top of my head, I wouldn't be able to recycle rates, but again, no changes in the bank rates haven't moved in the last quarter. So steady to where it was in Q4. .

Next question comes from Brandon Rolle at Loop Capital.

First, just on Slide 7, you displayed strong market share gains within the Utility segment. I think a lot of people associate you guys with strong market share in the recreational segment. Could you touch on what's driving some of the share gains within the Utility segment? .

Yes. First, this is the HD level itself, right, which is our new product that we are launching on this segment. With the strength of the brands of Canam and entering the segment, we are really doing very well in this segment, especially I mentioned horsepower Rotax which is engine, which is very much adapted to this kind of vehicle. So the demand is very, very high, and we are producing at the maximum in our factories to provide to the market.

So this is a very good trend that we have -- and by the way, we are not only recreational because if you take the U.S. ORV vehicle, where more than 50% is a professional usage. Would it be a first response professionals, farmers, et cetera, et cetera. So we are -- been already in this market for a while.

Okay. Great. And then just circling back to the competitive positioning questions post tariffs. I was just wondering, it seems like historically, you guys have been slightly -- your products have been slightly more expensive than maybe some of your larger competitors and you're only potentially layering on a low single-digit price increase. Is that -- one, is that true? -- your products are more expensive already and you still take share -- or do you feel like the step up this low single-digit price increase would vastly increase the pricing spread between you and some of your larger competitors? .

Well, sorry. ahead Price is a matter of specification. I mean our products are very high-spec product, and we are leading the pace in terms of innovation and attractiveness in what we are offering. So of course, not everything has the same price. When it comes to competitiveness, I think that we are -- I think because it depends on capitation. But as Sebastien said it, we're not going to press on the pricing level, okay, to be very clear, it's very minimum in our 200 million plans, so don't expect any big price movement by ourselves. And I do think that we're going to keep the same competitiveness as we're having right now, which we are okay with because you see the retail momentum we have improved that we are well passioned.

Next question will be from Jonathan Goldman at Scotiabank.

Just one for me, and I apologize if this has been asked already. But did you update your views on your expectations for Powersports North America retail this year? I believe in the previous call, we were talking about flat for the year.

Yes, that hasn't changed. We're still expecting flat industry this year. .

So the improved fundamentals on your slide deck is everything you listed there. The RV trends are better, snowmel-seasonal improved mix potentially share gains in a better pricing environment?

Yes. There are BRP specific, yes. .

And at this time, we have no other questions registered. I would like to turn the call over to Mr. Deschenes.

Thank you, Sylvi, and thanks, everyone, for joining us this morning and for your interest in -- we look forward to speaking with you again for our second quarter conference call on September 3. Thanks again, everyone, and have a good day. .

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.

Good morning, ladies and gentlemen. Welcome to the BRP Inc.'s Fiscal Year 2026 Fourth Quarter Results Conference Call. [Operator Instructions]

I would now like to turn the meeting over to Mr. Philippe Deschenes. Please go ahead, Mr. Deschenes.

Thank you, Julie. Good morning, and welcome to BRP's conference call for the fourth quarter of fiscal year 2016. Joining me this morning are Denis Le Vot, President and Chief Executive Officer; and Sebastien Martel, Chief Financial Officer.

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

So with that, I'll turn the call over to Denis.

Well, thank you, Philippe. Good morning, everyone, and thank you for joining us. I'm truly honored to be here today as the new CEO of BRP. Although I've only been here in my role for 2 months, I can see how Jose Boisjoli and the team contributed to building an exceptional company and move our industry forward in meaningful ways. I am excited to lead the next chapter of this great organization built on solid foundation and deep rooted values.

Since joining BRP, I have spent my time diving into the business. meeting our talented employees, visiting our sites and engaging with our dealers, distributors and partners. Last week, I had the chance to ride our side-by-side vehicle and personal watercraft in Palm Bay, and believe me that was quite an experience. My views will continue to evolve as I refine my understanding of the business. But so far, I am energized by the passion I've seen and the immense potential ahead of us. It is already clear to me that BRP has a proud legacy, a culture of innovation and excellence and a unique position as a leading part sports OEM poised for continued growth.

I'm happy to share with you the solid results our team delivered, starting with a look at fiscal '26 highlights on Slide #4. Looking at the past year, I am impressed with how the company managed through a volatile tariff environment and challenging competitive landscape as the other OEMs were still looking through excess inventory. Despite these headwinds, we delivered financial results above our initial expectation for the year and continued prioritizing our business relationships with dealers by making great strides in rightsizing our network inventory. Additionally, several steps have been taken to strengthen the long-term prospects of our business. such as the introduction of several new key models, the divestiture of 2 of our Marine businesses and the introduction of our M28 strategic plan. BRP is in a solid position heading into fiscal '27.

Now let's take a look at the year's financial results on Slide #5. We ended fiscal '26 with revenues of $8.4 billion, normalized EBITDA of $1.1 billion and normalized EPS of $5.21, all coming in above guidance. Additionally, we generated solid free cash flow of more than $900 million, ending the year with a strong balance sheet. Turning to more operational elements. We concluded the year with a healthy network inventory position, as you can see on Slide #6. In North America, our dealers inventory was down 17% from a year ago and down 28% over 2 years. We reached optimal levels for ORV and snowmobile following a good quarter at retail, and we are progressing towards these levels for the other product lines. We are now positioned to better align wholesale with retail in fiscal '27 and to capture market demand when the industry returns to growth.

Now turning to our retail performance by looking at global trends on Slide #7. We had a solid quarter with our North American powersport retail increasing 12%, fueled by positive industry trends and market share gains in ORV and snowmobiles. Actually, we delivered a record Q4 performance in ORV in Canada. Let's look at the other regions. Markets in EMEA remain relatively muted with a slight growth in ORV and PWC, but offset by snowmobile trends in Scandinavia due to unfavorable snow conditions. As a result, we lagged the broader industry given our important snowmobile business in the region. Meanwhile, our retail was up 1% in both Latin America and Asia Pacific, primarily driven by a strong end of season for PWC in these markets. This notably led our strongest retail quarter ever in Brazil. Overall, we saw global trends continuing to improve in Q4 with industry growth in all regions.

Now turning to Slide 8 for a look at our North American retail performance by product line. As mentioned, we had a very strong quarter with our retail up 12% and market share gains across the portfolio. The side-by-side industry remains healthy, up low single digits in the quarter, driven by the utility segment, reflecting the growing adoption of CAB units. Can-Am performed remarkably well with retail up high single digit, thanks to the success of the new Defender HD11. For ATV, the industry was down mid-single digits, but up when excluding used models. Can-Am significantly outpaced the industry again with retail up low-teen percent, driven by market share gains in the high-cc segment following recent product introductions.

As for the snowmobile, the industry was up mid-teens from a weak Q4 last year. Even though we were competing against high level of discounted and aged network inventory from other OEM, we again outpaced the industry in the quarter. Moreover, a few weeks ago, we launched our new Ski-Doo and Lynx lineups for the upcoming season. Once again, we are by far offering our rider and dealers the most innovation in the industry with improved performance, comfort and features. With our strong retail momentum per the end of season inventory levels and exciting new lineups, we are well positioned to further extend our leadership in the snowmobile industry. Finally, Q4 was off season for 3-wheel vehicle, personal watercraft and [indiscernible] tools. Retail trends were softer than last year, notably due to an extended winter season. We will get to a better picture of market demand when core retail season begins in late April.

Before concluding on retail, I want to further emphasize the strong impact of our new ORV models on our retail momentum on Slide #9. As I said earlier, we significantly outpaced the ORV industry in the fourth quarter, a trend that began in October when our new models were reaching [indiscernible] showroom. Since then, our SSV retail has been up about 10%. In fact, we have achieved our highest third and fourth quarter market share ever in utility, the largest and fastest-growing side-by-side segment. We had also announced the repricing of certain model [indiscernible], and this decision is paying off so far, resulting in a market share gain of almost 4 points for this model in Q4. As for ATV, the Revamp Outlander platform and recently introduced high-cc Models led to a market share gain of almost 9 points in this category. These achievements show the importance of innovation, which has always been part of BRP's DNA and the driving force behind its continued success.

On that, I turn the call over to Sebastien.

Thank you, Denis, and welcome to your first BRP earnings call, and good morning, everyone, driven by robust consumer demand across our lineup and solid execution throughout the organization. We closed the year on a strong note, delivering results ahead of expectations.

Looking at the numbers. Revenue grew 16% to $2.5 billion, with solid double-digit growth across all product categories. The increase was primarily driven by [indiscernible], snowmobile and ORV shipment a favorable product mix and positive pricing net of sales programs.

Before moving into the profitability metrics on the following slide, I want to briefly address the impairment charge recorded this quarter. As discussed in the past, we entered the EV and light mobility markets during a period of rapid expansion, investing in these areas with a long-term mindset. Since then, adoption has slowed and market dynamics have become more challenging. Given the reduced outlook for returns on our investments, we recorded an impairment charge on our EV and liability assets during the quarter. Still, as previously mentioned, our intention remains to continue selling EV products we have already developed while limiting the annual financial impact to $25 million.

Looking at gross profit. Excluding the impact of some of the EV write-down classified as cost of sales, the gross profit was $582 million, representing a margin of 23.7%, up 380 basis points from last year. The improvement was driven by better capacity utilization, lower sales programs and favorable pricing, partly offset by tariffs, higher warranty expense and the return of variable compensation. Normalized EBITDA increased 47% to $364 million and normalized EPS more than doubled to $2.21. These results translated into robust cash generation as shown on Slide 13. In fact, we delivered our strongest year ever, generating over $900 million of free cash flow from continuing operations. With these strong results and the proactive steps we took last fall to strengthening our debt structure, we ended the year with a solid balance sheet, including over $400 million in cash and a net leverage ratio of just 1.8x.

Combined with our strong retail performance and solid outlook for the business, this positions us well with the financial flexibility to continue investing in our growth while accelerating capital returns to shareholders. As such, we announced a 16% increase to our dividend and plan to be active with buybacks with over 2.6 million shares still authorized for repurchase under our NCIB.

Now turning to Slide 14 for an outlook for our guidance. We entered fiscal '27 with strong momentum, supported by solid retail growth in Q4 and continued robust demand for our newly introduced models across the portfolio. In addition, with our network inventory rightsizing largely behind us, we are well positioned to benefit from the improved alignment between wholesale and retail. With these factors in mind, we are on an even better trajectory than we thought we would be when we reported our Q3 results back in December, and entered fiscal '27 positioned to deliver north of $6 of normalized EPS. However, as you know, events in the recent weeks have increased uncertainty around the broader environment, making it more challenging to anticipate how market conditions may evolve.

While we are not seeing any material impact on the demand for our products at this time, we have elected to introduce a wider than usual guidance range to reflect potential outcomes should conditions change as the year unfolds. Consequently, looking at the different scenarios, we expect our revenues to grow between 5% and 8% and our normalized EBITDA between 6% and 16% and our normalized EPS to end between $5.50 and $6.50.

Now looking at how we expect the year to unfold on Slide 15. Retail and fiscal '27 continues to perform well and is tracking in line with our initial plan for the year. This positions for a strong top line growth in the first half driven by continued market share gains and supported by shipments that are expected to be more aligned with retail following last year's significant network inventory right size. Revenue growth is expected to moderate in the second half as we lap the initial shipments of last year's significant product introduction and as typical at this time of the year, we take a more conservative view of the snowmobile business for the upcoming season. Assuming demand continues to track with our plan and incorporating the impact of the recent increases in oil, energy and commodity prices for the full year. We expect to deliver results in the upper half of our guidance range with normalized EPS of $6 to $6.50, representing a 15% to 25% growth over fiscal '26.

While we cannot predict how current events will unfold or whether they may ultimately affect our business, we recognize that they could lead to more uncertainty in the broader economy. As such, we have assessed what it could mean for the business in an alternative scenario where demand gradually softened towards a mid-single-digit industry decline later in the year. In such a case, we expect that the impact on our first half results would be limited as most of the planned volume is already backed by dealer orders. Any required adjustment would therefore occur primarily in the second half. Factoring in lower volumes, higher sales program and the impact of lower variable compensation and alignment of overhead spend to that environment, we expect that our normalized EPS could land within the lower half of our guidance range.

Still, based on what we see today across the business, most importantly, with retail trends and dealer orders, we continue to track towards the upper half of the guidance range, and we are trending towards a strong first half of the year, including normalized EBITDA growth in the 40% range for Q1. All of this supports our confidence in continuing to invest in our long-term growth while accelerating capital returns to shareholders.

On that, I will turn the call over back to Denis.

Thank you, Sebastien. Before concluding, I would like to provide an update on our M28 strategic plan. The team has already progressed on many key strategic initiatives, notably by gaining market share through our new ORV products, growing our North American dealer network, expanding our international business and improving efficiency by unlocking lean value. I look forward to working on further progressing on our targets.

On the heel of a successful fiscal '26 and fueled by our Q4 retail momentum, we are stepping into fiscal '27 with a solid alignment and ready to deliver on our commitments. As mentioned in my introduction, I have met with many of our stakeholders since joining BRP, and they all have this in common, the passion for our products and willingness to contribute to our success. Visiting some dealers allowed me to witness that the network is engaged and healthy and that our efforts to improve the dealer sentiment are paying off. And this is only the beginning. I had a chance to meet with some of our design and engineering colleagues, and I am convinced that we have a strong lineup coming up and an exciting pipeline.

Everyone is looking forward to invading new innovation later this year and beyond. While the geopolitical environment remains uncertain, we are confident in our ability to adapt and execute on what we can control to continue outpacing our industry. In the longer term, we aim to strengthen BRP's position as a leading global powersports OEM, drive sustained growth and deliver lasting value for shareholders. I look forward to having the opportunity to further engage with you in the near term. And on that note, I turn the call over to the operator for questions.

[Operator Instructions] Your first question comes from Benoit Poirier from Desjardins.

Welcome on board, Denis. So obviously, very impressive engineering background in the automotive industry and in a few companies around the globe. So could you give us your first impression? And where do you see the greatest opportunities to bring value on the back of your strong experience?

Well, thank you, Benoit. Thank you very much, and hello, everyone. We are very happy to join. I've been in the car industry and the auto industry for decades. That's true in Europe as well as in North America, was ahead of Japanese brand in the U.S. a few years ago. And I think that when you look at motor sports, there are 2 folds to your question. The first one is the similarities, there are similarities. This is a big volume, industrial business, in which, of course, you have the same challenges, the value of the brand relationship with the network, the quality of the product, the competitiveness of the company this is very, very similar. And on that one, I guess, I have a huge experience.

The second fold of course, is the differences. These are the products. Though I've been writing motorbikes all my life, you don't come to this job like you come to any job. You have to be attractive and I am fully attracted by the products of the company. These are great, great, great products. These are dream machines to me, and this is another part of the game, which I think is very important, especially on positioning the brand on the marketing positioning, and I'm really excited to be here.

Okay. That's great color. And just for the follow-up question, looking at fiscal year '27, Obviously, we saw the forecast, the guidance for fiscal year '27. Could you talk maybe about the assumptions from a tariff standpoint also in terms of promotional activities? And given on what you're tracking so far in terms of market share gain, if there is room to exceed the fiscal year '28 targets in terms of side-by-side and ATV.

Yes, I think it's -- I'll start with the last part of your question. I think it's too early to call out whether or not M28 target that we will exceed it. We're certainly focused on delivering it. And as you saw Denis's prepared remarks, he covered the accomplishments we've achieved on '28.

One thing for sure is we're happy with the reception that our products have gained in Q4 and with the retail momentum. And as I said in my prepared remarks, we're actually ahead of where we were -- where we thought we would be when we talked back in December. So that's a good news. The snowmobile season went well. For the puts and takes for next year. Obviously, we expect EBITDA margin expansion. That EBITDA margin expansion will come from gross margin. I'll start with the overhead and the OpEx. We're planning for little leverage on OpEx as we are making targeted investments in order to achieve M28 objectives, the elements that we covered during our investor meeting in terms of product and also dealer network.

But the margin growth is going to certainly come from the added volume now that retail is more balanced with wholesale. The lean initiatives that we have, and there is some tailwind as well coming from programs. What we did build in our guidance, which we have not forecasted initially was the oil barrel going up from $60 to $100. So our assumption initially was at $60 and going to $100 from a freight perspective commodity is an impact of about 60 basis points that we baked into our guidance.

Your next question comes from Robin Farley from UBS.

Great. Just wanted to get more clarity around your guidance. It sounds like you're saying that what you're seeing is actually in the top half of your EPS range and that the sort of entire bottom half would be a change from what you're seeing. But I just want to clarify, you just mentioned that you already do have higher fuel price baked into the top end of guidance, right? In other words, the current fuel price still puts you in the top end of that guidance?

And then also, if you could give us some color around just what's baked in for your expectation for ORV retail for this year? And like how much -- you mentioned shipping in line with retail? And then if you could help us quantify sort of the dollar amount of destocking that you're comping. So in other words, if you ship in line with retail and retail is flat, you would still be up just to help us.

So yes, on your question, we have baked in the financial impact of a higher barrel cost on our business obviously, and as I mentioned, to Benoit, about a 60 basis point impact.

In terms of industry expectation, we're expecting a flat industry that's going in assumption. Overall for all of the powersports industry, we have a slight increase, the low, low single digit for ORV. And we are expecting market share gains. So ORV, we're expecting market share gains, snowmobile off a good season, inventory corrected. We're expecting a solid season next year. So that's also big then. Where we might see a bit of [ gnarliness ] is on the market share for personal watercraft. Other OEMs have more inventory. They finished the season higher than they were last year. So we might see a bit of market share loss on that front.

And as Sebastien was saying, the first half is already solid by the orders we get from our dealers. And the gains of market share is already -- the momentum is already there because the is really outpacing the market when it comes to U.S., as you asked, SSV ORV, we have 12% growth already in the Q4 only.

Okay. Great. And then -- and just I didn't know if you could help quantify the destocking benefit to your...

Sorry, there was [indiscernible]. So the destocking impact, depending on the guidance range, we're talking, let's say, $350 million to $450 million positive tailwind that we're getting in next year.

Your next question comes from Sabahat Khan from RBC Capital Markets.

This is Arthur on for Saba. I wanted to start with the EPS guidance, specifically the bottom end of the range. I guess just in terms of your outlook for the back half of the year, can you share how you ended up at the assumption behind the mid-single-digit decline outlook?

Well, the -- a mid-single-digit decline outlook. It's probably, let's say, 10% volume reduction in the back half of the year. So 5% to 10% for us, wholesale reduction which we think, again, today is a fair assumption. We don't know where things will go. Things will go sideways, et cetera. We've lived a few disruptions in the last few years with the war in Ukraine last year. the tariff uncertainty.

So again, it's the assumption we took in a context where economic uncertainty may grow, consumers are being under pressure, interest rates do not go down or even might go up. So that's the assumption we took. But obviously, there are multiple scenarios we could have run, but we think this is a fair scenario today with what we know. And again, we've already built 60 basis points of headwind coming from higher fuel cost than our number.

Okay. That's helpful. And then maybe switching to inventory. It seems like your inventory is in a good spot for the most part. Can you just comment on how you feel about your current mix? And I guess as a follow-up, I think you mentioned you still see elevated levels of noncurrent inventory from competitors. Can you just talk about maybe what that looks like today compared to the past few quarters?

Yes. Well, as you saw on Slide 6, our inventory down 17% versus last year, 28% versus 2 years ago. When I look at -- even for ORV, our inventory is down prior COVID, so lower than before COVID and our retail has actually gone up by 40%. So again, a super healthy spot. As for the competition and other OEMs, the situation has improved a lot over the last 12 to 18 months. But for ORV, we see a few smaller OEMs that still have a lot of inventory. So they're going to have to work through that. but it's not as meaningful as we saw in past years. And as I mentioned, for Personal Watercraft, some OEMs also have a bit more inventory. But generally, we expect that environment will lead to a less promotional environment, and that's why we built a 50 basis point tailwind coming from programs in our numbers for fiscal '27.

Got it. That's helpful. And then maybe just on retail sales. Last question for me. Another good quarter of share gains. Can you just maybe talk about the uptake of your new product offerings and maybe kind of what the -- what your expectations are for that over the coming year?

Yes, for sure. So there's a lot of new product coming in the year, right? But what we can say is that the momentum is based on innovation, right? So this is a healthy momentum that we're having and the growth that we're posting for next year is based on that. The skid starting very well with the new 600 cc engine that we've launched, which is a top or changing with very low inertia very responsive, and we have a very, very good order trend on the skid for that reason, right? We also renewed all our platforms on the utility for the ski does. But of course, the most the most important innovation in the way is the Defender HD level we talked about, right? Because the fund G11 is a complete new platform, new engines.

We have a new dashboard. We have a 10-inch screen on an SSD. This is a very big hit. And more importantly, this is the biggest growing segment by far is the cap. And here, we're having a success, we can hardly produce as the demand is going. So this is a very, very good position that we have in for the future. So this is mostly the 2 that are fueling the growth for '27.

Your next question comes from Joe Altobello from Raymond James.

I guess first question for you, and it's probably a tough d1 because you've been in the seat for all of 2 months here. But what sort of changes can we expect at BRP either strategically or operationally or financially?

Yes, it's not a tough question. It's a bad question because actually, I don't see the point to make changes. I'm sitting in the company which is growing 7% in revenue to 8.4 billion, as you saw, which is posting 8.9 billion or 9 billion revenue for next year and also is believing hard in its M28 plan of 9.5 billion revenue 2 years down the road. So I don't think that it's the moment for very quick and short-term changes, right? But still, beyond our plan for 28, there will be the longer-term plan that we have to build all together in the company. And this is going to be one of my jobs. I'm very confident in the short-term position in the business that we are running.

I can tell you that the product lineup that I've seen, that you haven't seen, for the years to come is very, very solid. And this is a chance that I'm having because we have a plan our plan is solid and we believe in it. So it gives me a little time in order to prepare with the team the next longer-term plan. And this is where potentially there could be a novelty, but this will come in due time.

Got it. Very helpful. And just to follow up on that, you mentioned the M28 targets. Glad to hear that you're backing them this morning. If I take the high end of guidance this year on EPS of $6.50, it's quite a leap to $8. Can you remind us what's driving that largely margin expansion in 28?

Well, the driving margin expansion is going to come with the volume growth. Obviously, part of the M28 plan is gains in market share in ORV and especially in side-by-side. And so with that, we're also -- it's going to be fueled by dealer network expansion. As you saw this year, we finished above our target. We have a target of opening new dealers as well in the coming year. So it's a combination of volume efficiency gain with the lean initiatives that we have and also continuing to execute and build dealer engagement around the brand.

Got it. And can I sneak in one more on tariffs? I think somebody asked earlier, I'm not sure we got a number, but what was the incremental tariff in '26 and what's the expected tariff in '27?

Yes. The expectation is a flat year-over-year tariff assumption. So we've only built -- we did not build anything coming out of the recent Supreme Court ruling in terms of sitting. So we have a $90 million impact built in our guidance for this year, and it was also ballpark $90 million as well last year. So a flattish tariff impact.

Your next question comes from Mark Petrie from CIBC.

I wanted to ask, actually, you just touched on it, but on the dealer network growth, as you noted, you added a little bit more or a few more than planned for fiscal '26, I think the plan was 40% for fiscal '27. Just to update that. And then I'm curious just to hear anecdotally, what sort of reaction you're hearing from your existing dealers? And then any color you can add just with regards to sort of where those dealers are going and a sense of, yes, sort of the geographic opportunities?

Yes. Maybe I'll take this one. We grew in North America, maybe in the U.S. by 36 dealers this year, right? Of course, you can imagine with the momentum that we're having on our products, the growth that we're having. This movement is partially natural, if I may say, right? We are attractive to dealers, as I said before, the dealer sentiment is increasing, and we work on that.

Going forward, as Seb just said, we still -- the biggest potential we're having is still in the ORV in North America and especially in the U.S. The momentum is right, with the HD11, with a 12% growth in Q4. So this is something that we are hardly working on. And I would say that apart from this, we are also growing in Brazil. We are also growing in other zones of the world where we can also expand the size of our dealerships.

And to your last question, in terms of dealer feedback, in some states in the U.S., we are underpenetrated, and we haven't expanded our dealer network in the last 5, 6 years, and so we were overdue to do it. And most of the dealers that we open are actually existing dealers that decide to open a new rooftop either by acquiring a dealer and bringing in the brand or adding a rooftop. And so given this underpenetration, we're not seeing any -- a lot of friction from the existing dealer base.

Okay. And then I just wanted to follow up and just to sort of clarify, you aren't seeing any reaction from consumers or dealers in the last month or so as macro uncertainties have elevated? Or how are those sort of conversations with the dealers gone or evolved in that time frame?

No. The inventory being lower and the momentum being high, we cannot say today that we have a reaction by our dealers on that one on the country we are manufacturing as quickly as we can. From the client standpoint, remember what Motor Sports is our clients are rather wealthy households. We are above $150,000 a year, but in the north of that to $170-something per year. So there is probably a distance between what's happening short term and what the reaction of the market will be. So that's why with the team, we decided to have this confirming the first half of the year and being cautious on the second half of the year in our guidance.

Your next question comes from Anthony Bonadio from Wells Fargo.

So I wanted to start out with your lean value initiative. I think you guys had another $200 million to go from the original $350 million when you presented to us in October. So can you just talk about how much benefit you're expecting in fiscal '27? And maybe how you're thinking about the level of flow through there versus reinvestment at this point?

Yes. Well, obviously, it's a big priority of the team to drive lean. We saw we delivered $150 million last year. The expectation this year is 100 basis points value coming from this lean initiative. So that's what's baked into the guidance. Obviously, we are facing inflation as we do every year, and the expectation is that pricing will be -- will offset inflationary costs that we see. So globally, I'm happy with how we're tracking what we're driving. And again, this year, if we deliver the 100 basis points, we'll make delivering the M28 objective certainly achievable for next year.

Got it. That's helpful. And then just a follow-up question on tariffs. I know there's sort of a refund request process underway. Can you just talk about maybe how you're thinking about getting any of that money back? And just any thoughts on the time line at this point?

Yes. We're not -- honestly, we're not in a -- obviously, we'd like to get the money as quick as possible, but we're going to -- we're still monitoring. We're going to see how the process is and the likelihood of capturing it. I'm not a big fan of spending money on lawyers if we're not able to get that money. But obviously, we won't leave any money on the table. And once the process is clearly established and the certainty is there, we will obviously file for refunds. Yes, we haven't baked in our guidance, obviously.

Your next question comes from Martin Landry from Stifel.

I was wondering how -- if there is a correlation between industry demand and oil prices, have you looked at how the industry behaved in the past period of oil shocks? And just trying to understand a little bit if there's any at all correlations. I understand that so far, you haven't seen any impact on demand, but it would be great to have a little bit more color on and if there's any correlation between oil prices and industry demand.

Yes, fair question, Martin. Obviously, when we look to the last time we saw oil prices this high was when the Ukraine war started. And we did not see an impact on demand. It's all a question of where the barrel goes, how long does it stay there? And what's the impact on the overall economy. I think that's the biggest factor. So there's a question of the nature. So how big it is it? The extent along it last and which market is being more impacted. So that's why we've preferred this morning to issue kind of a low -- a wider guidance range and provide a kind of a potential downside scenario for the back half of the year.

Okay. That's fair. And in light of that, rent has gone up a lot more than WTI. So I was wondering you're talking about your guidance assuming flat industry demand. Can you break that down between regions? Just trying to see what assumptions you've used for North America. And then what assumptions you've used for EMEA, LatAm and Asia Pacific, if possible?

Yes. Again, I think when you look at it -- we do look at it more from a macro level. Our volumes in the Middle East are quite low, less than 1%. So obviously, we were more pessimistic there. But generally, given that all consumers can be impacted from higher oil prices from inflation, from interest rates. And given the affluency of our customers, it's pretty much standard around the world, we decided to apply a similar assumption globally, which will still permit growth, I don't misunderstand because last year, it was about snow for Europe. So hopefully, store will begin this season. We outpaced the market even if they are flattish in Latin America and Asia. And as we said already during the call, our growth in North America will most be the market share in the in the U.S. So...

Denis, welcome.

Your next question comes from Xian Siew from BNP Paribas.

I wanted to ask first about the first quarter, you talked about EBITDA being up 40%. Can you maybe give us a little bit more in terms of what's underlying -- the underlying assumptions for the quarter in terms of like revenue because it does feel like you have kind of a lot of more visibility to 1Q. So yes, just curious on some more guidance on that.

Yes. Certainly, last year, you might recall that it was a quarter where we undershipped because of the inventory depletion, especially on personal watercraft. It's a quarter where we reported a provision related to snowmobile. It was a tough story see them. So we could see revenues grow quite sizably obviously, to drive this big growth in EBITDA. And also on year round, we'll be seeing increases as well in terms of overall revenue growth. From the HD11, the side-by-side and also RV. So ballpark, you could see a $300 million of revenue growth in the quarter, and that obviously is trickling down to solid EBITDA and EPS.

Okay. Great. Then I wanted to ask about the Utility segment. Obviously, you guys are making a lot of progress on the new platform is quite impressive. But just kind of wondering like the share gains, do you think it's from new customers, existing customers kind of trading up, maybe customers who entered the industry, I don't know, in 2020 and are now kind of looking to upgrade their product? Or like I'm just curious about kind of the customer base that you're attracting and if you're kind of seeing a replacement cycle in utility?

Yes. We have both actually because that's true. We are growing in the utility, which means that we are bringing more people, let's say, conquest on the market that maybe we are on the reg part of the segment.

As a global figure, I would tell you that we are bringing like 230,000 new people to our family every year, right? So we are really on the dynamic of growing our market share and growing our base of clients. So we are attracting people. And the offer coming to utility that we're having again on the HD11 is really hit, right, by the vehicle, by the new 3-cylinder engine, we're having positioning on the vehicle makes it -- I mean, a complete on the subsegment of the utility, and we are really producing full speed on that one.

Your next question comes from Luke Hannan from Canaccord Genuity.

Welcome, Denis. Seb, I wanted to follow up. You mentioned as far as what you're baking in the guidance right now, I think you had said a 50 basis point tailwind from sales programs. assuming you stay within the top half of the guidance range there, what would be implied for you then to be at the lower end of the guidance range? Would you assume sort of no tailwinds from sales programs? Or would there be a headwind there?

Yes. The lower end of the guidance, obviously, it means a tougher macro, more competitiveness as well, a more promotional environment. So certainly, we would lose that tailwind of 50 basis coming from programs, and we have an impact -- have a favorable impact at the top end of the guidance coming from volume and mix of about 40 basis points and probably lose a big part of that as well.

And then I wanted to follow up also with Telwater and basically just where things stand as of today and when we might expect your a little more on that.

The -- well, as you probably saw, the Telwater business is still classified as a discounting operation. So that means that it's still available for sale. It is a great business, great management team as well, running the operations there, probably revenues likely above the $100 million range with EBITDA margin potential in the low teens. So good business. We're not in a rush to sell it. So obviously, we're in the market. If there are buyers that are interested, they'll approach us but that's where we stand today. Yes.

Your next question comes from Tristan Thomas-Martin from BMO Capital Markets.

Denis, looking forward to working with you. Just a question on the HD11 production kind of ramp. I think you said you're producing full speed. Does that mean you're at 100% of where you want to be? Or is that still ramping?

No, no. We are 100% of where we want it to be. The ramp-up is totally finished, and we are at the right level of production right now. Now I just mentioned that because this is one of the products which is a real hit on the market, and it's a good thing that we are -- most of the parts of the factory are working 3 ships on this vehicle.

Okay. Great. And then just curious, in times of like elevated oil and gas prices, have you seen increased utility demand in those regions?

I can't say there's a high correlation. Obviously, we are if there were to be a slowdown, we would expect less of a slowdown in utility because of the novelty of the HD11. but there's obviously impacts on the ag market as well on construction industry, et cetera, coming from higher oil prices. So it's difficult to call a show as to what the actual outcome. That will be the global economy more, yes.

Your next question comes from Jaime Katz from Morningstar.

We haven't heard too much about demand trends on premium or whether you guys have seen any sort of value-seeking behavior. So I guess if you have any color on whether attachment rates are staying consistent or if there has been any value-seeking behavior, that would be really helpful to hear about.

Sorry, Jamie, we lost you. I hope you're still there. Operator, maybe we go to the next question and we bring back my later?

I may able to hear Jamie. [Technical Difficulty]

So I guess I was interested in hearing more about demand trends given your tilt to premium, whether you guys have seen any value-seeking behavior, buying things like attachment rates stayed the same? Or is there anything that is changing given sort of the increasing uncertainty in the macroeconomic environment?

We haven't seen any changes. The trend has been towards more the affluent customer in the last, let's say, 12 to 18 months and that trend continues. And BRP is obviously, as you well know, position more towards the higher end. And so that consumer is, I guess, more isolated from inflationary pressures, high interest rates, et cetera. And so even that kind of shield us a bit from the potential slowdown if it were to happen. But nonetheless, we monitor overall retail trends continuously to make sure that we understand where the trend is going towards.

Yes. And I guess on that note, is there -- has there been any difference in mix in finance versus cash purchases?

No. Generally, we still see about 30% of the retail financing going through our dedicated partners. FICO scores remain high. And so I haven't seen any changes between this quarter and any previous quarters.

Your next question comes from Cameron Doerksen from National Bank.

A question on free cash flow. You had a very strong year in fiscal '26. There was a pretty nice tailwind from working capital. So just wondering what your expectations here are for fiscal '27 on free cash flow and what we should expect from the working capital?

Yes. It depends on where we land on the guidance, but we're expecting another strong year next year on free cash flow, maybe in the range of, let's say, $750 million to $800 million. CapEx, in the $400 million range, as you saw. So another good year next year.

Okay. And in that context, it looks like you're going to continue to build cash on the balance sheet. So obviously, you've announced the dividend increase this morning. But I guess where are the capital allocation priorities here? I mean the CapEx is fairly stable. But just wondering what your expectation is here for capital deployment?

Yes. We've strengthened further the balance sheet last year with debt refund and debt maturity extension. So we're obviously in a very good position. We still have 2.6 million shares to repurchase under the Inside B, and our intention is to be active on that front.

And as I said -- sorry, Denis speaking, and this gives us a solid ground to prepare the next plan that we will be preparing during the year.

Absolutely. No, it's a good position to be in.

Your next question comes from [ Alice Rickland ] from Baird.

I wanted to touch in a little more detail on the utility side-by-side segment and particularly that CAB category that you called out. Maybe provide a little more detail on the impact that that's having and how long you think momentum can be sustained in that product category?

Well, it's a trend we've seen over the last few years, and we've invested one in capacity because it's different to build a unit than a non-cat unit in the plant. So we have invested in capacity. And the new Defender platform was designed around it being a CAB units, so that specifically design purpose. What we're seeing is that consumers are seeking automotive features more and more in the vehicles. So obviously, an enclosed space, heating, air conditioning, connectivity, and that's what we're offering.

And now the HD11 was the first model on the new platform. And obviously, we will be introducing other models in the HD10, HD8 in the coming years and flat obviously is going to increase the addressable market that we have. So we expect continued growth on the utility segment for the next few years.

That's helpful. And then maybe just checking the box on guidance, what kind of interest rate assumptions are embedded in your outlook?

We've assumed a flat interest rate compared to this year. No changes in the federal reserve rates.

Your next question comes from [ Catherine Song ] from TD Cowen.

Just a follow-up on the margin guidance. Is the EV rightsizing be a benefit to the [indiscernible] in outlook?

It is a benefit. We -- last year, we were investing in the launching of the 2-wheel products. And so when you look at the overall EBITDA margin growth that we're planning this year compared to last year, [indiscernible] is a tailwind of about 50 basis points. which is going to be offset by investments that we are making on the M28 plan, i.e., R&D, so product lineup despite having a very fresh lineup. We're going to continue investing and also on the sales organization and network organization as well. So we're expecting no operational leverage coming from OpEx investments this year versus last year. So yes, a tailwind, but compensated by other investments.

Your next question comes from Gerrick Johnson from Seaport Research.

Denis, welcome. So maybe a finer point on the oil impact on costs, Sebastiaen. Can you remind us the percent of cost of goods sold that shipping would be? And then also resins? And then how far are those contracted out? How locked in are you on those prices?

Yes. From a commodity point of view, we do have long-term agreements with our suppliers. And so we are pretty much hedged. And obviously, freight costs, I probably won't go in too much detail for competitive reasons, but it is an important part of our business. And as I mentioned, going from $60 to $100 per barrel is a 60 basis point impact on our business, Gerrick.

Okay. Okay. You're going to make us do the math. That's fine on volatility.

Given your back, I'll have you work a bit.

On utility back on that topic, are your dealers see any sort of impact or increase in demand for utility from businesses, farmers or [indiscernible], et cetera, owing to the statement of bonus depreciation of 100% in the U.S.?

Yes. Well, certainly, that has been a driver for small businesses as well and not just call it, the commercial business. And we also have commercial programs in place to drive awareness on that consumer group. And so yes, we are seeing a benefit coming from, we'll call it, the commercial business. It's 100% driven by the accelerated depreciation. I don't know. But certainly, it's an area that we focused on.

Your next question comes from Jonathan Goldman from Scotiabank.

Most of them have been asked, but just maybe to put a finer point on it, the walk to margin expansion, gross margin expansion year-on-year. Can you remind me of the drivers there? There's a tailwind from lower promo freight headwind of 60 bps of volume mix tailwind to 40 bps. Is that right?

Yes. Let me give you the color -- let me give you the EBITDA margin bridge. But OpEx stable year-over-year. as a percentage. Volume and mix, a tailwind of 40 bps. Sales program, 50 bps. Pricing, net of inflation, that's a wash. Lean cost improvement, 100 bps. Overhead investments in the gross margin, about 40 bps negative. So that brings us to 150 bps. And then the recent events, when we talked about oil prices being higher at 60 bps. So at the top end of the guidance range, we're looking at a number just shy of 14% EBITDA margin. And at the lower end of the guidance, we're about just north of 13%.

Okay. That's helpful. And then maybe another one on the competitive environment. I know you've baked in some conservatism to the guide kind of a wide range of outcomes. But have you seen any other competitors maybe move quicker to try and respond to consumer anxiety and kind of lower prices to take some share ahead of any sort of headwinds?

No, we haven't seen anything, given I think the big plus we have as an industry is that everyone has been diligent in reducing inventories over the last 18 months. And so I think it pushes in everyone and the industry in a good position to face a potential downside if it were to happen.

And then I guess related to that last one on the industry inventory, could you give us an update on where we are versus current and noncurrent and maybe it's obviously defers by product line?

Yes. I did share a bit of comments earlier, but snowmobile there's -- we're in a decent shape. Obviously, spring has -- winter has decided to hang around a bit longer than we all would like. And obviously, that helps on this [indiscernible] side. But personal watercraft, some OEMs have a bit more noncurrent inventory. And so that's going to probably hurt our market share for the next season. But generally, aside from a few small OEMs, the overall ORV inventory is in good sharpe.

And there are no more questions. I will turn the call back over to Mr. Deschenes to close the meeting.

Thank you, Julie, and thanks, everyone, for joining us this morning and for your interest in BRP. We look forward to speaking with you again on May 28 for our first quarter conference call. Thanks, again, everyone, and have a good day.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.

Good morning, ladies and gentlemen. Welcome to the BRP Inc.'s FY '26 Third Quarter Results Conference Call. [Operator Instructions] I would now like to turn the meeting over to Mr. Philippe Deschenes. Please go ahead, Mr. Deschenes.

Thank you, Joel. Good morning, and welcome to BRP's conference call for the third quarter of fiscal '26. Joining me this morning are Jose Boisjoli, President and Chief Executive Officer; and Sebastien Martel, Chief Financial Officer.

Before we move to the prepared remarks, I would like to remind everyone that certain forward-looking statements will be made during the call and that the actual results could differ from those implied in these statements. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties, and I invite you to consult BRP's MD&A for a complete list of these.

Also during the call, reference will be made to supporting slides, and you can find the presentation on our website at brp.com under the Investor Relations section.

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

Thank you, Philippe. Good morning, everyone, and thank you for joining us. We are pleased with our third quarter financial results, which came in ahead of expectation. While we continue operating in a dynamic macroeconomic environment, our teams remain focused on disciplined execution and our hard work paid off. We also gained market share in ORV, fueled by the success of our newly introduced models, notably the Can-Am Defender HD11.

Let's turn to Slide 4 for key financial highlights. We ended the quarter with revenue of $2.3 billion, normalized EBITDA of $326 million, normalized EPS of $1.59 and free cash flow of $320 million, all significant increase over last year.

On the back of this solid performance, we are increasing our guidance and are now expecting to deliver approximately $5 of normalized EPS for the year.

Moving on to Slide 5 for global industry trend. In North America, our retail sales decreased by 4%, or 1% excluding snowmobile, in line with the market. Our retail in Canada was flat, excluding snowmobile, with a solid performance in the side-by-side category. In the U.S., we were down 3%, in line with our plan, and we expect the trend to improve in Q4.

In international markets, Latin America continued to experience solid momentum, with retail up 13%, led by a strong ORV performance in Mexico and by our highly engaged and growing dealer network. Demand remained generally soft in EME, with retail down 4%, while Asia Pacific, our retail decreased 11%.

Global industry trends have remained mostly consistent with previous quarters. In general, demand remains stronger for high-end products compared to entry level. We view this favorably as we have introduced several new high-end models this year that are well received.

Turning to Slide 6 for a look at our retail performance by product line in North America. As anticipated, we have lost market share in all product lines, except ORV due to the industry dynamic in the low volume period of the retail season. That said, the highlight of the quarter was the strong reception of our 2026 ORV lineup, which drove market share gain for both side-by-side and ETV despite continued promotional activity from other OEMs.

As you can see on Slide 7, the momentum created by the new generation of the Defender, the Outlander Backcountry 4x4 and 6x6 and enhancements to our Maverick lineup led to a record month of October at retail for both side-by-side and ETV. Our new model capture consumer attention and earn rave review from media representatives who try them. The coverage highlighted our product as the market benchmark in the industry.

Building on this momentum, we've launched additional ORV models at the end of November, namely the Defender CAB AGT10, the most affordable HVAC equipped side-by-side in the industry.

Now let's turn to Slide 8 for a more detailed look at year-round products. Revenue were up 22% to $1.3 billion, driven by higher ORV shipments following new product launches. At retail, side-by-side was up high single digit, outpacing the industry. In fact, we delivered our strongest third quarter ever at retail for side-by-side. We continue to strongly outperform in current unit, gaining 4 point of market share in the utility category. In ETV, retail was down mid-single digits, outperforming the industry, which was down high single digit. In current units, we've gained double-digit market share point, driven by our Outlander platform and newly introduced models.

As for 3-wheel vehicle, we closed the 2025 season lagging the industry. We continue to experience softer retail for our entry-level Ryker lineup, which is consistent with overall market trends. This said, our high-end Spyder lineup performed better, allowing us to remain #1 in the 3-wheel vehicle business with a market share over 50%.

Turning to seasonal product on Slide 9. Revenue were down 2% to $606 million, mainly due to a planned reduction of snowmobile shipment to rightsize network inventory. Looking at retail, the snowmobile industry saw a very high level of discounted noncurrent unit from other OEMs. In fact, about 2/3 of unit retail during the quarter were noncurrent, a level we have not seen for many years. As expected, we lagged the industry given our lower noncurrent inventory and strong retail performance at the end of last season. This dynamic should continue throughout the winter.

However, we outperformed in current units as a result of the overall strength of our lineup and elevated level of presold units.

Turning to on-water product, trend remained relatively soft in North America. For the season ended in September, personal watercraft sales were down low teen percent, slightly lagging the industry but we remain -- we maintained our #1 position in North America. As for pontoon, retail was down mid-20% as the industry is still going through a correction period.

We had a better quarter in counter-seasonal market, which are entering their peak retail season, with Sea-Doo retail up mid-single digit in both Asia Pacific and Latin America.

Moving to Slide 10 for parts, accessories and apparel and OEM engine. Revenue were up 18% to $379 million due to a higher volume of parts and accessory sales as dealers replenish their inventory. The increase in parts and oil sales show that consumers are riding our product, which is positive, while higher accessory sales reflect the success of our new product introduction. The revenue increase is also due to a more favorable mix of OEM engine sales.

Before turning the call over to Sebastien, I want to give you an update on the sales of our Marine business. In Q3, we've closed the sales of Manitou. As for Telwater in Australia, the transaction remains subject to regulatory approvals. The process is taking longer than initially anticipated, and we expect a decision over the coming weeks. With that, I turn the call over to Sebastien.

Thank you, Jose, and good morning, everyone. Thanks to our team's disciplined execution, continued focus on operational efficiency and the strong reception of our newly introduced models, we delivered a solid Q3 with retail and financial results above expectations.

Now looking at the numbers. Revenues increased 14% to $2.3 billion, driven by stronger ORV shipments, partly offset by lower snowmobile deliveries. Gross profit reached $541 million, representing a margin of 24.1%, up 210 basis points, mainly driven by better capacity utilization, cost improvement initiatives, lower sales programs and favorable pricing. These gains were partly offset by the impact of tariffs, the return of variable compensation and unfavorable foreign exchange rate variations.

Normalized EBITDA grew 21% to $326 million, and our normalized earnings per share rose 33% to $1.59. Free cash flow from continuing operations was $320 million, and we closed the quarter with $250 million of cash on hand. Also during the quarter, we seized the opportunity to further strengthen our balance sheet by extending the maturity of a portion of our long-term debt, lowering the average interest rate of our term facility and repaying about USD 200 million of debt. These actions are expected to generate financing cost savings of about $10 million in fiscal '26 and $30 million annually from fiscal '27 onwards.

Given our solid balance sheet and robust free cash flow generation, we are well positioned to enhance the return of capital to shareholders by reactivating our share buyback program. Accordingly, we have renewed our NCIB, allowing us to repurchase up to 3.1 million shares over the next 12 months.

Now turning to Slide 13 for an update on our network inventory. We maintained a disciplined approach to network inventory management throughout the quarter, ending Q3 with inventory down 17% versus last year and down 6% below pre-COVID levels. Importantly, we have made strong progress in key areas of focus with 3-wheel, personal watercraft, switch and snowmobile, all showing strong double-digit reduction.

Meanwhile, our ORV network inventory remains healthy, down 8% year-over-year, with SSV sequentially declining from Q2 levels, notably driven by our solid retail performance. This positions our dealers with significant capacity to take on our newly introduced products as we ramp up production.

Looking ahead, aside from snowmobiles for which the season is still unfolding, the rightsizing of our network inventory is largely complete. This will allow us to better align wholesale with retail moving forward.

With our robust product lineup and healthy network inventory levels, we believe we are best positioned in the industry to capture demand upside while market conditions improve.

With this, let's turn to Slide 14 for an update on fiscal '26. As I mentioned earlier, we are pleased with our execution and results so far this year. Assuming macroeconomic conditions and tariff remain stable, we have good visibility on dealer orders for the rest of the year, positioning us to deliver revenues at the higher end of our initial guidance ranges. Additionally, with the continued tight management of our expenses, efficiency gains we are generating across the organization and the benefits of our recent debt transaction, we now expect to deliver better normalized EBITDA and normalized EPS than previously anticipated. As such, we now expect to deliver about $8.3 billion of revenue, $1.1 billion of normalized EBITDA and about $5 of normalized EPS for the year.

Looking ahead, with our successful product introductions, lean network inventory levels and improving dealer sentiment, we expect to carry our strong momentum into fiscal '27, positioning us to deliver double-digit normalized EPS growth while having the financial flexibility to enhance return of capital to shareholders. On that, I turn the call over to Jose.

Thank you, Sebastien. Before closing my remarks, I would like to talk about our fourth Yellow Day held on November 20. As an organization, we are committed to making a positive social impact. I was pleased to see a growing number of employees, dealers and ambassadors worldwide actively engaging with our cost to ride out intimidation. It is rewarding to know that we are making a real difference.

In conclusion, I am proud of our accomplishments so far this year. Our strong Q3 performance has resulted in higher guidance for fiscal '26. In the short term, all our teams are aligned internally and focus on delivering against our new M28 strategic plan to capture our full powersport potential. As part of this plan, we introduced financial objective of $9.5 billion in revenue and $8 in normalized EPS by end of fiscal '28. We are confident in our ability to reach these objectives.

Looking ahead, we are the best positioned OEM to benefit from an industry rebound given our lean inventory position, engaged dealer network and strong lineup. We had the most product introduction for model year '26 and we will not stop here. Our goal is to consistently wow consumers with innovative product and unbeatable experience.

With the solid foundation we have built over time, we can create a bright future for BRP and drive long-term profitability. Lastly, about the nomination of the new CEO, the process is ongoing and the Board is still targeting the end of January. I will work closely with the executive team to ensure a smooth transition for my successor. I am proud of what BRP has become. We have built a strong organization, and I have no doubt that we are the best OEM in the industry. This is my last earnings call. It was a pleasure working with all of you.

On that, I turn the call over to the operator for questions.

[Operator Instructions] Your first question comes from James Hardiman with Citigroup.

This is Sean Wagner on for James Hardiman. You gained share in the quarter in ORV despite once again calling out the high levels of noncurrent inventory and elevated promotions from the other OEMs. I guess, I'm just wondering if you can give any color on how things looked if we split it up into current versus noncurrent? If you have any thoughts on sort of how that looks in the fourth quarter? I think you mentioned that, that should continue through the winter. But I guess, maybe do you see that sort of normalizing or maybe even improving next year?

As you know, we came out of club with great engagement from the dealers. The dealers were extremely and the media were extremely pleased with the ETV lineup and also the side-by-side lineup, notably the HD11. The review is very good, and we start production and shipment beginning of Q3. And we had the benefit mainly in the second half of Q3 to have a very good retail because the product was at the dealership, and they were selling every day. Then, obviously, like I said in my remarks, with gain in the current, we've lost in noncurrent, which was on plan. But this is basically what I can say. The momentum for side-by-side is very strong, and it was our highest quarter ever at the term of retail.

Now for November, obviously, I cannot go into detail. We have our numbers, but we don't have any industry data. But I can say that, again, the retail is quite positive, the HD11 and the ETV Backcountry series, or the 4x4 and 6x6 are extremely well received. Then off-road, we are very happy with the trend in October, but also the trend in 1 month in November. On the snow side, obviously, we're benefiting of an early snowfall in many regions. And right now, the momentum is improving. Then this is basically what I can say on what happened on off-road and our situation on November. But overall, we are very happy with our position in the industry.

Okay. That's very helpful. I guess just following up on that, to your point, there's -- you've had a great start to model year '26, it sounds like for ORVs through November. Your fiscal '28 targets assumed low single-digit growth in side-by-side. Has your thinking changed at all there of the potential for that segment? Or is this kind of still in line with your expectations? Or is it just too early to say?

No, obviously, we introduced M28 about 2 months ago then, but as you remember, we reached close to 30% in a few years. We've lost market share in the last 18 months because of our desire to reduce the inventory and we had less non-current than the competition. But as we said when we introduced the M28, the plan is to go back to 30% by the end of fiscal year '28.

Your next question comes from Mark Petrie with CIBC.

And first, just let me repeat my congratulations to you, Jose. It's been a pleasure working with you over the last decade plus and wish you all the best in your next chapter. Obviously, product innovation is a key short-term variable, but I want to hear your comments or if you could just expand on your comments so far about dealer appetite to invest in their business and sort of step up inventory levels, just given macro conditions and uncertainty?

Yes. Mark, obviously, when we went to club in August, we were -- we couldn't ask for to be in a better position because we had invested in reducing network inventory, and now we're coming with great products. And so when dealers are sitting down and looking at their business, obviously, they are more willing to take on the new models, the new innovation, and that's what we're seeing from dealer orders. The reception is good. Dealers are obviously always concerned with the macroeconomics. Have we reached the trough, some speculate that we are, but obviously, as we see rates come down, as we see inventories being leaned by all the OEMs, the level of appetite from dealers is also increasing to take on more inventory, especially of the new stuff. So we're in a very good position and couldn't ask for a better outlook in terms of dealer engagement.

Okay. And if I could follow up on that topic. At the Investor Day, I think you talked about some OpEx being allocated, notwithstanding your lean initiatives, some OpEx being allocated to support dealer engagement. Hoping you could just talk more about those plans and the timing of that, and how you see that affecting your business?

Like we said, we intend to be the best, obviously, with our -- we have the best product lineup, but also we want to be the best for experience and thus include our dealers. And we will invest to better support our dealers in terms of parts and accessories, training them and also leading them with all the leads we get from the website. And this is part of the plan. But like we said, we are full throttle with the M28 plan right now. The plan have been cascaded down. And also, we will increase the number of dealers. We had an objective of 30 dealers addition net this year, and we already have achieved that number, then it's quite positive. And the team is not stopping because we have achieved our number for this year that they are already working on next year achievement.

But what I want to say is what you saw in Valcourt with the M28, everything is in motion, and we're very happy where we are.

Your next question comes from Robin Farley with UBS.

Just thinking about your commentary on ORV and you mentioned that other OEMs have elevated inventory still and promos and noncurrent. It seems like yourselves and some of the larger OEMS and even CFMoto have felt good about their inventory position for a while. So isn't it fair to think that at this point, the only other OEMs out there with this kind of excess noncurrent and being promotional, at this point, that's going to be a fairly small percent of what's out there. I guess I'm just curious on your thoughts on why that would be -- if it's sort of a single-digit percent of product out there? Is that still pressuring things overall? And how much longer do you think at the rate that you're seeing that sell-through do you expect this to continue?

Well, we expect Q4 to still be a noncurrent market. Obviously, we just transitioned into a new model year. And so as OEMs introduce new models, dealers are selling through their noncurrent. Obviously, Q3 is a being noncurrent quarter where the bulk of the retail is noncurrent, Q4 as well. But we've seen OEMs being still promotional, even on model year '26 products, we saw OEMs for side-by-side already advertising discounts. So our view is that this environment will be here for maybe another few quarters, and that obviously impacts the profitability of everybody's business. From a consumer point of view, the high-end products are selling well, but the lower-end models, the more entry-level models, traffic is lighter, and therefore, we see some OEMs pushing harder on discounts.

That's helpful. And maybe just as a follow-up, do you have a view on sort of where the industry may shake out for ORV retail in the next 12 months kind of based on everything you're seeing?

Yes. Our going-in assumption for next year is a flat industry. And if I look year-to-date, industry is down 1%, so you could call it flattish. So our base case for next year is for the industry to remain where it is.

Your next question comes from Benoit Poirier with Desjardins.

Yes. Congrats to Jose, it's been a pleasure working with you over the years.

Thank you.

And maybe first question for Sebastien. When I look at the working cap, you benefited from a strong working capital release in the quarter. Just wondering if this was more of a onetime item in pack, and how should we expect working capital to play in the coming quarters?

Yes. Obviously, we're really happy with our free cash flow generation year-to-date that we're at about $650 million for the first 3 quarters of the year. My outlook for the year will probably end about, let's say, $650 million to $700 million free cash flow generation. Working capital has been a big focus of the organization, especially off COVID, where we did build up some safety stock, et cetera. Now with better visibility on the supply chain, obviously, everyone has been hands on this element, and we see the benefits to date. So I'm expecting overall for the full year, maybe a slight tailwind on overall working cap, but obviously, very happy with the work that the team is doing in freeing up some cash by reducing our investments in working cap.

Okay. And this morning, there are some headlines about the fact that the Trump could decide to withdraw from the USMCA, obviously you are very well positioned right now, but just wondering any actions that you can take to mitigate the risk and how do you deal with this uncertainty.

As we said, Benoit, we're very involved into following the negotiation and even giving our point of view or giving data on our situation with industry association, but also with some government and the progress of reanalyzing and trying to renew the USMCA is ongoing. We're not reacting to news every day because it will be too painful. Then we're just focusing to better support the industry and the government with data and our point of view on different things, and we will see what will be the outcome. But so far, the people are working hard to renew it with minimum changes.

Your next question comes from Craig Kennison with Baird.

Seb, I wanted to follow up on your response to Robin. When you talked about flat retail for the year, were you talking about calendar '26?

Yes, calendar '26.

Thank you for clarifying. And then you were also talking about the low-end consumers still struggling relative to the more affluent consumer. Do you have an assessment of the rate sensitivity of that low-end consumer and the impact of meaningfully lower rates next year?

Yes. Obviously, it's difficult to triangulate how a movement of, let's say, 25 basis points in rate will impact consumers. But what I can tell you is, if look at Canada versus the U.S., rates are probably about 175 basis points lower in Canada than the U.S. And we've seen good demand and good better retail in Canada. So certainly, as rates will come down in the U.S., we do hope that we'll see the same impact that it had on Canadian demand.

And finally, just -- it sounds like HD11 has done really well and dealers are selling through that quickly. I'm curious how quickly are you getting retail signals such that you can adjust production to make sure you have the right inventory? Because we do hear that, "Hey, we'd love more HD11, but we've got too many of the other units that are turning more slowly." I'm curious if you've upgraded your ability to process those signals?

Yes. To give you a sense, we're still producing the old platform and the new one, but in Q3, we produced about 3/4 of the new one and 1/4 of the old one, then we're definitely transitioning fast. We're taking order every month, Craig, as you know. And right now, beginning of December, we're taking deliveries. We're taking orders for what will be delivered in February. Then we have quite a good ability to adjust to the most popular model at retail. And we're very confident with -- it's a fast turnover. The dealer received the unit, they PDI it, and don't fill on the floor very often, then we could not be happier of the reception of the new Defender.

Your next question comes from Martin Landry with Stifel.

I would like to focus a little bit on snowmobiles. Wondering if you can just refresh or remind us what's your inventory level versus your comfort level in terms of snowmobiles right now?

Then just to give you a sense, we finished last season last spring with about 60% market share, in North America I'm talking, and 30% of the inventory, the noncurrent inventory. And obviously, we're planning to lose market share this year because this unbalanced current, noncurrent ratio from other OEM. But this was all planned, all included in our guidance. What is good right now in the Northeast, including Quebec, the snow is quite good, good in upper peninsula. In the West, Canada, U.S., it's a bit patchy. And in Scandinavia, it's good. Then overall, it's a good start of the season. We gained market share in the current, and we have a lot of presold unit. We've lost in the noncurrent as planned, and it will be a year of correction and this was all planned.

Okay. So can we expect you to have fully cleared your older models by the end of the snowmobile season?

We were a bit on the high side, but we were in a relatively good shape at the end of the season '25. And we still need to deplete some of that inventory to be at, I would say, normal level. But we believe that -- and partially with the good snow, we believe that all of this should be, for us, realigned at the end of the season '26.

Your next question comes from Joe Altobello with Raymond James.

I wanted to go back to the promotional environment. I think in your press release, you mentioned that you saw favorable variations in your sales programs. But this morning, you're talking about still very elevated levels of promotion in the industry. So is it that the industry is still very promotional, but you guys were a little bit lower in terms of sales programs versus last year?

Yes. Well, if you recall last year, Joe, we wanted to address inventory in the network and the noncurrent inventory as well. And so we did put a lot of dollars last year to work in order to flush that inventory, which we were able to do. And so this year, we're probably trending about, let's say, 70 to 80 basis points lower in terms of retail promotion versus last year. So that's the main reason. But nonetheless, I mean, there's still some high levels of promotions that are being advertised out there in the market.

Got it. Okay. And in terms of fiscal '27, you mentioned that wholesale and retail should be largely in alignment. And I think Seb, in the past, you've said that just lapping this year's destocking probably gives you $400 million to $500 million of revenue. Is that still the case? And should we think about that as a base and then layer on whatever assumptions we have on pricing and market share gains?

Yes. Obviously, we are in the middle of our planning for next year, but it's certainly too early to provide a detailed guidance to all of you. And as you mentioned, there are some elements we already know and that should serve as your best case for your models there for next year. The big tailwind is the element that you mentioned there, just the rightsizing of the inventory that is behind us last year and this year. And so that is a tailwind of about $400 million to $500 million of revenue and probably roughly about $1.25 of EPS.

Obviously, there are some headwinds. We're transitioning the production of Ryker to Vietnam. And so with that transition, there will be less Ryker deliveries next year. So that's one of the headwinds. Some of the cost drivers as well, depreciated expense will go up probably about $30 million next year. And I'm also expecting my tax rate to go up to historical levels, call it, 25% to 26%. So if you factor these elements in your base case, Joel, you'll probably end up in an EPS probably up in the mid- to high teen percentages for next year and probably an EBITDA margin ballpark 14-ish percent.

But again, this is a base case. And obviously, over the next few months, we'll see how the business trends. Snowmobile season is an important business for us. And so if the snow sticks, maybe it will be good. The macro environment is also evolving every day. As Benoit mentioned this morning, we have new data on tariffs. We'll see how that unfolds. And obviously, there's a competition as well. How are other OEMs going to behave, are they going to be more aggressive in terms of putting units in the industry and also discounting. So obviously, there's a lot of variables that we're monitoring in order for us to make an educated guess on the industry. But again, with still a few months to go before we issue guidance, we'll be able to give you the full download in March. But again, we're optimistic, especially with the strong lineup that we have in all of the product categories.

Your next question comes from Brian Morrison with TD Cowen.

Jose, it's certainly been a pleasure working together all these years. I want to go back to the inventory, and you've done a very good job explaining ORV and snowmobiles, can you just maybe let us know how CD sits as we enter into the season. And with respect to ORVs, how has the initial reception been with respect to the discounting of your entry-level product line?

I'll take on the first question, Personal Watercraft. If you look at Slide 13 on the deck, personal watercraft is actually down 22% versus last year. So obviously, very happy with where we sit. As I've shared with you in the past, other OEMs do have more inventory in the network. And so we believe it will be a similar I guess, the similar dynamic that we see in snowmobile for the next season with some noncurrent units impacting overall market share performance. But from a current point of view, the lineup we have is obviously very strong. And the orders that we got from the dealers at our club in August also provide us a good outlook for next year.

So we were sitting in a very good position, much better than where we were last year. And on the entry-level product, Jose, overall reception?

Yes. Basically, consumer trend, no big change since the beginning of the year. Just to give you some statistic, new entrant in Q3 was 21%, about in line with the pre-COVID level. And premium sales better than value. Just to give you a sense on side-by-side, our premium units was up mid-double digit when -- this is the industry, by the way. The premium was up mid-double digits when the value was down low double digit. And for the utility, selling better, up low double digit when the export was down mid-single digits. And you can see the trend don't change. Our household customer -- household income of our customers high at USD 175,000, and the same trend continue. The beauty of all this, it's -- obviously, we don't like when we talk about Spark Ryker, our entry-level product. But overall, our lineups are more high end than low end, and it's very good for us.

Right. So one follow-up question, if I can. You renewed your NCIB here this morning. I wonder if you can just reiterate what your target leverage is, and if you expect to be active with the NCIB in the near term?

Yes. Our target leverage for the end of the year, probably in the range of 2x net debt-to-EBITDA. We've always said we're -- our overall target is between 1x and 2x. So we're really happy with how the business has progressed and the refinancing that we did last -- just a few months ago with the repayment of USD 200 million of debt and also the repricing where it provides us a big tailwind of $0.30 next year. So I couldn't ask for better results from our Treasurer and our legal team, really happy with the outcome.

On the NCIB, we've been on the sideline now being more cautious over the last 15 months, waiting to see where the overall economy is going to go trade, et cetera. Now that we are seeing our leverage come down, we're strong free cash flow generation. Our intention is to be active on the NCIB in the next few weeks.

Your next question comes from Sabahat Khan with RBC Capital Markets.

I guess just some of the directional comments you gave on calendar '26, something around the 14% type base case for EBITDA margin. Just curious, based on your current visibility, what sort of production levels are you at? Just trying to think an operating leverage has obviously put a potential part of the story going forward. So just -- are you back to something resembling normal production? Or where about will your factories be for the next year based on...

We'll still be below average asset utilization rates, again I talked about a tailwind of, I would say, $400 million to $500 million of revenue. And so it still would bring us in the probably low 70 asset utilization.

Great. And then you noted the tariff impact to the dollar amount in the calendar release here -- or sorry, in the presentation. Can you just talk about the tariffs might evolve, but is this more the idea that, look, anything additional might just have to be sort of worked through the efficiencies? Or is pricing on the table as well, depending on how tariffs evolve?

It really all depends. It's tough to speculate. It will depend on the materiality, on what components it impacts, on the flexibility we have with suppliers, can we relocate parts, et cetera. But what I can say is that our teams, our custom brokers are getting smarter, more sophisticated. We have now more granular data that allows us to be a lot more targeted when we do file custom declaration forms. And so that headwind that we have this year is expected to be actually very similar next year as well because of the better processes we have and better collaboration we have with the various partners. But again, we'll monitor, and we'll act accordingly as we usually do.

We've always been very proactive in adapting to new situations.

Your next question comes from Luke Hannan with Canaccord Genuity.

I want to follow up on that last line of question, Seb. So just to be absolutely clear, if we went back to last quarter, I think the gross headwind that you're expecting for fiscal '27 was in the neighborhood of $120 million to $130 million. So it should now be closer to $100 million -- pardon me, $90 million when it comes to the gross tariff headwind?

Yes, that's correct. We mentioned again, we -- the team obviously is a huge focus of us, and we worked on finding ways to reduce the overall exposure. And it's a very positive outcome. And so my expectation is that we should be flattish next year.

Got it. Very helpful. And then for my follow-up here, the higher level. When we think about the bridge between the new raised guidance that you just put out there and then the mission 2028 target of $8 of EPS, and then we also factor in the mid- to high-teens EPS growth, roughly speaking, that we should expect for next year, it does imply more contribution, I suppose, during the year of fiscal '28 as well. Can you just help us think from a high level what should be the bigger drivers of EPS growth during 2027, fiscal '27 versus '26?

Well, for next year, I gave you -- well, are you talking calendar or you're talking fiscal?

Fiscal year, yes.

So I gave you the fiscal details. So the drivers, obviously, are in the base case is mainly the tailwind coming from retail equal wholesale. But then when you look at '28, obviously, there's a lot of elements of market share gains from the ORV business, the dealer network expansion, all of that will be drivers of growth in '28. So the base case for '27 remains, as I highlighted, and the drivers between '26 and '27, but '28, obviously, there's the product introductions that we'll be doing and the focus on the dealer experience and the dealer network.

Your next question comes from Xian Siew with BNP Paribas.

Could you talk maybe a little bit about how retail and market share gains evolved over the quarter? It sounded like maybe the first couple of months of the quarter were a little bit more promotional and maybe there's some acceleration in October and into November. And if that's the case, I guess, like with the exit rate improving, does that give you kind of more confidence in potential market share gains over the next year or so?

I mean I don't -- we don't want to be -- to start to split quarters because it will be complicated. But we were talking more about off-road. Basically, we introduced very good novelty for model year '26. And those product was introduced in August at the club. We started production the day after. And basically, the time that you produce, you ship, the dealer PDI, transportation, dealer PDI. That's why our second half of Q3 in terms of retail for off-road was stronger than the first half because the new model hit the ground at the dealership when they had low inventory. That is more a timing of new model hitting the dealership.

What I'm happy with is, in November, the trend continue, and this is promising for the remaining of the fiscal year.

Okay. Very helpful. And then maybe on the utilization rate, I think you mentioned like in the 70s percent next year. Can you maybe just remind us this year what is the utilization rate and how like that we can kind of calibrate as utilization steps up, how would you think about margin benefits?

Yes, we're in the average of a 65% utilization rate this year.

Your next question comes from Cameron Doerksen with National Bank.

Let me echo my congratulations to Jose. I'm sure you're looking forward to the end of January. I wanted to come back to the -- I guess, the snowmobile market discussion. So if you and the industry end this season with a very healthy dealer inventories, and we have a pretty decent snow season, it's off to a decent start so far, it feels like this could be a very nice tailwind for you in fiscal 2027. I'm just wondering if that's potential upside to kind of that $400 million to $500 million revenue from the alignment of retail and wholesale? Or is that kind of incorporated into that assumption?

No. Obviously, if we have a, again, a super good season, we have a lot of enthusiast customers in the snowmobile industry. And so if you have a lot of snow and people get a lot of riding and we obviously have -- we'll have great product news next year as well. You can expect strong customer orders in the spring and that obviously is going to be a good tailwind for the back half of fiscal year '27. So -- but we always like to plan snowmobile conservatively because it's very dependent on snowfall. And so again, every inch of snow is more units that get retail, so we'll take it.

Okay. No, that's good. That's helpful. And Seb, just -- I guess just a clarification, I guess, on the remaining marine sale at the Telwater, I think, Jose, you mentioned hopefully coming in the next few weeks, just what's the cash inflow? I mean I think the number, it looks like it's probably something like $200 million that you would expect from that. Have I got that right? And if not, what is the expected cash inflow from that?

Well, obviously, we have a good offer from Yamaha for that asset, in the ballpark, it's around that amount of expected cash inflow from the proceeds that is expected.

Okay. So that would come in Q4, assuming that the regulator approves it?

Yes, it will come into Q4 or early -- yes, Q4.

Your next question comes from Jamie Katz with Morningstar.

I have just a quick one on CapEx. I know it was shifted down a little bit. Were there any particular investments that we should be aware were sort of either pushed out or delayed? And then should we be thinking of CapEx as a percentage of sales still around that like 4.5% level longer term?

Yes, nothing special to call out for this year. Obviously, we are diligent in our CapEx spend, and the teams know that if we push a project out, it doesn't mean that they lose it. And so everyone is being responsible in how they deploy CapEx. And for next year, probably in the range of, let's say, $420 million is a fair number in terms of CapEx and for the out years as well.

As you might know, we've invested quite a bit in the last few years in capacity. And so we don't necessarily need to build any more capacity out for our plan. That's the good news. And most of the investments are around product and technology.

Okay. And then I don't know that this was called out, but for new-to-brand consumers, is there anything noteworthy on what is getting them to convert sales? Is it promotions, innovation, financing deals, some mix of that all? Just curious what's motivating consumers the most right now?

I'd say innovation is what's motivating customers the most. Obviously, with products that have been out there in the market for quite a bit of time, discounts can drive consumers, but for new to BRP, obviously, when they see the innovation that we have on most of the product line, on all the lineup, that is what's driving the conversion from other brands.

Your next question comes from [ eli Lapp ] with BMO Capital Markets.

Two for me. I just wanted to follow up on the potential sale of to Yamaha and what you would potentially do with those proceeds, the $200 million? And then just kind of in the same vein, you mentioned $210 million of debt reduction. Could you tell us where your debt stood where your total debt stood at the end of the quarter?

Yes. Well, our capital deployment priorities are not changing. The first one is to invest in the business and that will remain. Then the other capital deployment priority is obviously modestly increase our dividend, and then any excess free cash flow, when the shares trade below what the implied value is, we like to return capital to shareholders. So the good news is we have flexibility. I feel that our cap structure is adequate today with the refinancing that we did just a few months ago. The overall debt stands at USD 1.7 billion today. And so overall leverage is very comfortable, and I don't feel that we need to reduce the overall debt level.

So just as a follow-up, you had mentioned during the call, I think that -- if you correct me if I'm mistaken, but I think you said your long-term guidance was 1 to 2x?

1.5 to 2x leverage.

1.5 to 2x.

[Operator Instructions] Your next question comes from Jonathan Goldman with Scotiabank.

Most of them have been asked, but maybe just to clarify 1 to begin with. I'm sorry if I missed this. But Seb, did you talk about the base case for next year, including share gains?

Well, again, our plan, if you look at the M28 target, we said modest share gains in the ORV segment. So yes, it does factor a bit of share gains next year, but it would be a modest impact.

Okay. Perfect. And then on the gross margin, I believe, Seb, on the last call, you said you could possibly see a tailwind next year in the 50 bp range. Given where the inventory is in the industry right now and your comments about promo still being somewhat elevated, how are you thinking about potential gross margin expansion next year?

Well, the big driver of our gross margin, obviously, is some of the volume that we're going to be bringing back from just matching retail with wholesale. The other element is obviously cost initiatives that we have in all of the -- all of our plans, all of our product lines. And so from asset utilization and cost efficiency, that should drive margins up. We are expecting as well to continue investing in the business or in the marketing. So I do not expect a huge operational leverage coming from OpEx, maybe 50 bps, which could bring us to a 14% EBITDA margin on the base case.

There are no further questions at this time. I will now turn the call over to Mr. Deschenes for closing remarks.

Thank you, Joel, and thanks, everyone, for joining us this morning and for your interest in BRP. We look forward to speaking with you again for our Q4 earnings in March. Thanks again, everyone, and have a good day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Good morning, and welcome to BRP's 2025 Analyst and Investor Day. Today, our senior management team will provide an update on the business and present our M28 plan and its key strategic initiatives.

Before moving to the presentation, please note that today's presentation will include some forward-looking statements and future results may differ from those implied in these statements. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties and invite you to read BRP's MD&A for more details.

Now moving to the agenda. In the first portion of the presentation, you will first hear from Jose Boisjoli, our President and CEO; Josée Perreault, our CMO; Sandy Scullion, our President of Powersports; David Baker, our VP, GM, North America; and Steve Pelletier, our VP, GM, International. After this, we'll have a short break, and then we'll come back with Thomas Uhr, our CTO. Patrick Dussault, our EVP, Global Manufacturing Operations; and Sebastien Martel, our CFO. Then Jose will come back for the conclusion and the Q&A session.

Also note that all the management team is in the room. So Stéphane Bilodeau, our CIO; Martin Langelier, our CLO; Anne Le Breton, our EVP, People and Culture; and Minh Thanh Tran, our EVP, Global Corporate and Product Strategy, are all in the room and will be available to answer questions at the end of the presentation.

So with this, I'll turn the mic over to Jose.

Hello again for the people on the line. Good morning, very happy to share with us -- with you, not with us, with you, the new strategic plan, M28. And I know we are overdue. And to be honest, we've been ready for a few months. And in March, obviously, with the tariff, we felt that it was not right to launch a new business plan, there was too much uncertainty. But now, the business is more predictable, and we are happy to share with you our new plan, sorry. And I would say, if the macroeconomic and geopolitical situation is still like this, we're confident to deliver on this plan.

Then you know us, most of you, you'd ask, who we are today, then we are obviously a diversified product portfolio, industry leader in innovation, established global distribution network, a global and modern manufacturing footprint and proven management team, and we will cover all this between this morning presentation.

Now just to give you a sense versus the M20 -- versus the fiscal year '20, the pre-COVID and where we stand today. Basically, our -- with the COVID bubble and everything, our revenue increased by 36% and our normalized EBITDA by 32% despite all the volatility that we will -- that we've been through. And we have a solid foundation to continue to grow and outpace the industry, and we are here this morning to explain to you our plan. And I hope by the end of the morning, you will believe that what we do is achievable.

Now a look back at M25. I cannot talk about M28 with now looking to what we have achieved in M25. And we introduced M25 in October 2019, and the definition was setting the course for BRP 2.0. After being 10 years private, it was the next wave. We have 4 pillars at the time. We had 4 pillar: Growth, Customer X, Employee X and Lean. And we had 6 different priorities and goals for fiscal year '25. And the financial target was to reach revenue of $9.5 billion and EPS of $7.50. That was in October 2019.

Then obviously, COVID hit in the beginning of 2020. And we end up with EBITDA over $12 -- we reached EBITDA in the range of $12. Then in fiscal year '23, when we had $10 billion in revenue and $12 in EPS, we needed to do something, and this is what we've done in June 2022. We restate basically the financial target. We adjusted some strategy very likely, but we restate the financial target to $12 billion and $13.50 of normalized EPS. Obviously, in fiscal year '24 and '23, it was similar revenue in those range, and the business started to deteriorate or the market started to deteriorate in H2 fiscal year '24 and fiscal year '25.

And when we look at -- if we look back to M25, it was a 5-year plan, and it was marked by, I would say, multiple important disruption, and many of them was a first in the world, I think. Then the COVID obviously hit in March 2020, creating a huge bubble, a blitz in demand followed by a supply chain issue. And we're all happy how our industry was popular at that time, but it created a lot of disruption, and we'll talk about it this morning. After that, we were hit by cyber attack. This is a BRP thing. The only thing I can say to you, we managed well, we restarted our factory a few weeks after. But to finalize all the recovery, it took us 6 to 12 months, depending on the area because cyberattack is difficult, and you need to leave it once to understand what it means.

We -- the interest rate had the highest increase and fastest increase in the last 35 years. And that's affected, obviously, our customers. That's affected our dealers and obviously, that affected us, our cost of interest did go high.

And finally is the geopolitical and macroeconomic. We all know that there is more conflict in the world right now than what we've been through in the last 50 years. And also the tariff situation was something that was not expected at one point. And as you see, we've been in the M25 in the 5-year or the M25 through a lot of very important disruption. And this challenging environment, and this is why here we're showing to you the North America market. Later on, Sandy will show you international. But basically, you see in the last 10 years and before COVID, from fiscal year '16 to, let's say, beginning of '21 fiscal year, the market was slightly increasing, Powersports North America.

We had the COVID demand. After that, like many company or industry, we had the supply chain issue. We had the industry stabilization. And since, I would say, H2 fiscal year '24, the macroeconomic pressure impacting the industry interest rate created some disappointment into the industry. And obviously, it's affected our results.

But in this context, and I remember in March 2024, we decided to -- and we announced in March '24, but we decided to reduce dealer inventory. We felt that it was not sustainable for the dealers and it was affecting the brand and dealer profitability. And basically, in March '24, we announced to you, it was that fund that we would deplete inventory and the goal was to deplete it by 10% to 15% over the next months. After that, we restate 15% to 20%, but it took us 18 months to reduce inventory.

But today, and you have it on the left side, Today, if we compare to the end of fiscal year '24 to our inventory in Q2 in this year, our inventory for Powersports in North America is down by 31%. Now if you look on the right side of the slide, Powersports, not ORV, all the other product except ORV, you see our inventory is up 2%, but our retail is up 19%. If you take ORV by itself, our inventory is down 5% versus pre -- versus 18 months ago. And the retail is up 50%. Then the dealer right now have a very good level of inventory. And we believe that we are at a good place. And even in some product line, we'll readjust our plan going forward. But the point I want to make is we are where we wanted to be into the inventory depletion.

Now obviously, the inventory depletion affected our results in fiscal year '25, '26 because we retail more units than we shipped to the dealers, and it affected our revenue, but also our normalized EPS, as you know. But basically, this is what -- if we had to summarize what happened during the 5-year of the M25, this is basically what we have done over the last 5 years, but it was the highlight, it was many important factor disrupt our business.

Now despite all this, we continue to position our business for success. And this is what I want to highlight to you. First, and during my experience at BRP, when you're going through a tough time, the name to recover quickly is to refocus. Then when we saw in fiscal year '24, '25 that it was more difficult, we took key decisions, not easy decision, but we took key decision. The first one, we decided to exit Marine. We felt that it would be longer to recover, but also we're in a situation where we're small, then we decided to exit the marine industry. Now it's done. We reduced investment in electrification. We have said openly in the last few months, basically, we have developed a 9-kilowatt hour power pack that we're using on snowmobile 2-wheel and ATV.

And basically, we had planned to develop a smaller power pack and a bigger water pack. We put all this on hold. And we've decided with the management committee to limit our investment in EV to $25 million a year. Then it's an investment. We need to understand who is that customers. We need to better understand the technology, how we can reduce costs. And you saw yesterday for the one who've tried the ATV, it's a very good product. Then we believe it will grow, but it will take some time.

And we reduced or put on pause our investment in urban mobility program. And for the one that are in the room today, you saw some product that we were investigating. But for the time being, we put that on pause. The key benefit of all this is the focus. All the teams around the world are focused right now on Powersport. And the M28 basically, it's a 2.5 years plan. We are halfway in fiscal year '16 (sic) [ '26 ]. Then we have, obviously, we will announce our Q3 results in the end of November, beginning of December, but we are halfway during fiscal year '26. And we, here, M28 is covering fiscal year '27 and '28. And we'll come back on this. And the focus is winning on Powersport. Then everyone is focused on winning on Powersport, and we'll tell you this morning how we intend to do this.

Now one thing also I want to highlight During the COVID, we invested to chase the demand. And basically, our factory have been modernized, more efficient than ever before. We have also extra capacity. And today, our factory are running at about 60% of their capacity. Then when the market regain volume, we have all the tools to be able to meet demand with minimum cost, minimum overhead. We need some time to crank up the suppliers, but we're ready to respond to the demand when it will come.

Also in this, I want to take a few word, I want to take a few minutes because it's something maybe we didn't talk much, but made a big difference in our efficiency. We've done 4 key strategic acquisition and one will be new for you. But basically, we increase our capability for in-sourcing in key activity. In 2022, we acquired BRP Megatech. BRP Megatech is the old division of Kongsberg. It's based in Quebec here. But this is a company we acquired in 2022 and basically, they do the manufacturing -- PC design and manufacturing PC board. An electronic and mechatronic component. And what it is in real life, the commodo that we have on our vehicle is done by Megatech. The power steering on our vehicle is done by Megatech, design and production. And the IPR on the watercraft is done by Megatech. Then 80% of their sales was BRP, and now it's part of us better integrated within the company.

The other one is Rotax Taiwan and Rotax Vienna. We hire a group of people in Taiwan that were doing part-time work for us. We created BRP Taiwan or BRP Rotax Taiwan. In Vienna, we acquired a company that was existing in Vienna. But basically, those people are expert in software design for EV but also combustion engine, then they are really increasing our capability to do in-house design of software. And the last one, BRP Vietnam, and this is an announcement this morning. Basically, we've signed a few months ago, an agreement for a manufacturing joint venture in Vietnam. Then BRP Vietnam is located in a city that is called Ðong Nai. It's an hour from Ho Chi Minh. And basically, it's a joint venture with our long-term partners, VPIC.

VPIC, it's a supplier from us, and we've been doing business with them for 15 years. We are one of their big customers, and we sat down with them and established that joint venture. And the first product that will be manufactured in the joint venture will be the Ryker that we will move from Mexico to Vietnam, and that will be -- that is planned for Q4 next year.

But obviously, today, Vietnam is lower cost than Mexico, labor costs and all this, longer to transportation. There is tariff involved. But you will see in the presentation of Steve you'll see in a few minutes, one of the big reason for establishing a JV in Vietnam is for avoiding tariff in South Asia, and we'll come back on this in a few minutes in the presentation of Steve Pelletier.

Then this is for acquisition that we've done that is not has, I would say, has visible than when you acquired a company with product, but this has increased significantly our capabilities. Also, during those 5 years, we increased our market position significantly. Then we've gained 6 points between fiscal year '20 and '25, and 4 points between '22 and '25 when we restated our financial target. And this is giving the benefit that BRP today is the company in North America that is selling the most unit per dealers.

Then you see here in gray all our competitor line. You see our yellow line. And basically, we pass from #4 to #1 in terms of number of unit by dealers. What is the effect of this is today, BRP is very important for dealers. We are the company where they buy the most unit for the OEM. And we know and we'll talk about it, we're bringing the best margin in the industry. Then this is something that we intend to continue to grow. But the benefit of all this is we are very important for the dealers. We want to take advantage of this going forward.

R&D, and Thomas alluded to it. Basically, over the years, we invested 4% of our revenue in R&D. In fiscal year '25, '26, we're closer to 5% because our revenue declined, but we did not reduce our R&D spending. As you see on the chart, we almost double it, and the intent is to keep it at that level. And basically, the strategy that we have, there is more competition. There is competition coming from all around the world, and we want to continue to push technology and innovation to the next level. And for the one who had the chance to join us yesterday and today, you saw the product, you saw this morning our design capabilities. You saw this morning our engineering capabilities. You saw also how we do product planning, and we hope that we convince you that it's money well invested. We know what we do.

Then as you can see, we set solid foundation to build on as we enter our next wave of growth. And here, basically, what we plan for the new plan. Then internally, we have a 10-year vision. And the vision is to create the unbeatable experience of moving you in every way. And this 10 years vision is built in 3 stage. And Stage 1 is M28. And we won't talk about Stage 2 and Stage 3 this morning. But internally, what we want to build is unbeatable experience. Obviously, it's experience with the product, but it's also experience with the dealers, experience with the service, experience during the whole cycle of ownership, which I think we can do better. And moving you in every way, obviously, it's on snow, water on land, but also satisfaction with the experience when you own a BRP product.

Then I just want you to know that internally, we have a 10-year vision. But what we will focus on this morning is M28. And M28 is after the key decision that we took, is capture our full powersport potential. And in all this, to start with, we kept 3 pillars identical to what we had in M25. We kept Growth, same pillars. We kept Employee X that are at the center of what we do. We kept Customer X, and I think we've done not the best job in M25, and Sandy will tell you how we can do better in M28. And we kept Lean, but we have had Agility. because we realized in the last 5 years that in this new environment where things change overnight, you need to be very agile. And this is why we reinforced the fourth pillar of Lean by now being lean and agility. Then you can say it's a continuity of what we were doing in those 4 pillars.

Now here, M28 for the people in the room, I will build the slide. Then it's capture the full potential of Powersport. Then the strategy and the target for fiscal year '28, and I will go over each of them briefly. The first one is to go full throttle to become #1 in ORV. Full throttle to be #1 in ORV. It won't happen in '28. But in '28, we want to return our market share to 30% plus in side-by-side and reach 25% in ATV. We've lost some share in the last 18 months because of our inventory depletion. Then the first step is to go to 30% plus market share in side-by-side and 25% plus in ATV.

The second one is to gear up international. You will see Steve will explain what do we do to grow international to the next level. It won't happen in the next 2.5 years. But in the next 2 years, we want to bring international to $2.5 billion in revenue and build for the future. The third one is upshift the dealer and customer experience, customer X, Sandy will talk about it. Fuel the BRP heartbeat, drive value through speed and efficiency. And basically, we intend to reduce our time to market by 20% and also to deliver $350 million of lean value and Thomas and Patrick Dussault will explain to you how we intend to do this. A new one, Boost Defense and Specialized Vehicle. I'm coming back on this in a few minutes. And Rev Up our Product Competitive Edge, and Minh Thanh, Thomas and Denys explained this to you this morning.

And the target is revenue of $9.5 billion and normalized EPS on $8. Then this is basically M25. Now we had a debate internally and the Board is working on it, and I want to say a few words on the CEO transition. The Board is working on it, and we are still on plan to have a transition at the end of the year. And I've been CEO for 22 years, and the Board can count on me to ensure a good transmission. I'm not plus or minus 1 month if there would be some delay.

Now some of you told Philippe and Sebastien lately, not sure we're expecting a target at the investor meeting. But we felt, to be honest, that presenting a new plan without a financial target wasn't complete. And we know you -- you will all do your model anyway, and you will ask us to give you input to do this. Then after some discussion with the management committee and the Board, we decided to give you the guidance, the financial guidance and here why. First is M28. It's 30 months. It's not long, long term. And second is the strategy and its focus on Powersport. The strategy is defined. The next 2 years in terms of new product are not totally frozen, but are well aligned, then this is not much risk. And the focus for the next 2 years, 2.5 years will be to deliver on Powersport, and it will give a chance to the new CEO to take place to understand the business to adjust maybe some element in the next 2 years, but it won't be, we believe, drastic, but adjust the future.

Then this is why we decided to give you the target. Maybe you don't agree, but this is what we've decided, but we believe that it was the right thing to do to give you a complete picture of the M28.

Then the financial target, obviously, will be -- and this is from fiscal year '16 (sic) [ '26 ], our midpoint of the guidance and fiscal year '16 (sic) [ '26 ], midpoint of the EPS. But basically, it will be a growth in revenue of 7% CAGR and a growth in EPS of 33% CAGR, then we would go back by the end of fiscal year '28 to $8. And basically, this is the planning. And what we will present to you in the next few minutes is how we will achieve this. And this is our time to convince you that it's realistic. Obviously, always if the macroeconomics stay like this, and it's not perfect. But if there is no big conflict that is stopping something or crazy thing that is happening, we believe that this plan is very achievable.

Then this morning, out of the key priorities, 3 will not be covered, and I will say a few words about it. Then the first one is Fuel the BRP Heartbeat. And obviously, the employee is at the heart of everything we do, and we'll continue to improve our health and safety journey. Today, we are about 0.5 in terms of event or accident coming in our plan. We all know that below 1 is very good, and we're very happy to be below that, but we're improving every year. And we will continue to basically hire the best people, give them a carrier growth plan and develop them, and this has been our success at BRP. The second one is Boost Defense and Specialized Vehicle.

And on this one, it might surprise you, but we've been selling snowmobile and ATV and outboard engine, MFE outboard engine to Army for the last 15 years. And basically, we developed our snowmobile and ATV for NATO standard in Finland. And we've been selling a few units every year, a few 500,000 units. We never really talk about it. And in outboard engine, and we've kept that technology, we're producing from time to time MFE engine, Multi-Fuel engine, outboard engine for the U.S. Army. They can put jet fuel, diesel, gasoline, maybe vodka to power the engine and it's working. It's working.

Then we've been basically supplying or in contact with some countries and army around the world, but it was not a big business for us. Obviously, with what's happening in the world and many countries want to invest significantly in this venue to defend their country. And we've been approached by many, many companies -- many country in the last few months because we are considered -- our products are considered light mobility. Then right now, we decided to put a small team together under the leadership of Thomas Uhr because those countries are coming out with the basic products stay the same, but some particularity that needs some R&D adaptation. And this is why we put this small group. We will beef up the group, but the small group will be under the leadership of Thomas.

Today, I cannot -- and this is why we cannot talk about -- we cannot quantify what it could look like at BRP. We're just starting. But you can definitely -- and you will hear about it more and more in the next few weeks or months because it's something that we are more and more involved in. The other one is specialized vehicle. A lot of our dealers around the world are taking a Defender 6x6 with the long box or the Defender Pro, and they're doing specialized vehicle for Red Cross. I visit dealers in Germany who were doing -- they were taking a Defender Pro. They're putting an additional equipment for the Red Cross, selling it for EUR 70,000, and this is growing big time right now, and we want to better support our dealers and maybe do from the factory product for specialized vehicle. Then this is basically this priorities, Boost Defense and Specialized Vehicle.

The third one is rev up our product competitiveness. You will see this morning, we have big objective for ORV. But we don't want to slow down in the rest either. Then you saw, again, for the one who are here yesterday and today, you saw -- you try our ATV and -- side-by-side. I hope we convince you that we have the best product into the industry. And you saw this morning our design, engineering and global product strategy, the way we manage our portfolio. Then I hope we convince you that we can continue even if we have high market share in snowmobile and watercraft, we can continue to do well in those business.

Then this concludes my introduction, and I will pass it over to Josée Perreault, who is Chief Marketing Officer.

Good morning. So let's talk a bit about our customers. So in recent years, we've been really busy at building our customer base. So case in point, we've built a BRP business experience unit and year-to-date -- or year-to-date, since the inception in 2021, we've been adding about 2 million people or butts on seat that have experienced our product. And these people are mostly new entrants. We've also introduced new product introduction, new platforms, as you know, if you trusted yesterday. And we've also added a direct-to-consumer platform to meet the needs of our customers who want to acquire parts, accessories and apparel online.

So today, we feel that we are really well positioned to gain our fair of market share in an addressable market of the power sport industry that we feel is today at 70 million riders. Since 2021, we've been adding 230,000 new customers every year. So since that date, we've added 1 million unique customers that have acquired BRP vehicles globally. And we feel that with those million unique owners, we built a good fan base that we continue engaging. Today, we have close to 8 million BRP followers. They're following us on all our social media platform for all our brands. And as you know, this has grown also substantially over the last few years at the same growth level as our ownership as well.

Since 2021, we've added about 1 million followers, and it's engaged followers as well. In our industry, passion runs really, really high, and we have the most engaged followers than our competitors. As you can see here, our Sea-Doo followers are very much engaged as well as our off-road followers. And when I say they are engaged, that means they answer to our post, they emojis our post, they share their repost and whatnot. So this shows the fan engagement for BRP.

So I want us to meet our riders right now. So we're pretty well balanced in terms of customer mix. Close to half of our customers we conquested from other brands. We have 32% repurchasers and our level of new entrants is at 21%. Obviously, we all know that COVID was a peak in the powersport industry of new people coming in. For BRP in 2021 as well as 2022, we had a high level of new entrants in all our categories. Today, the level of new entrants has gone back to pre-COVID levels. We also know that our new entrants are more vulnerable to the economic conditions right now. and we attest that with our softer retail sales of our entry-level products such as Ryker and Sea-Doo. But in spite of having a lower level of new entrants, we're compensating elsewhere.

Since 2021, we've added more conquesting -- we're conquesting more from other brands. But notably, we also had a huge leap in terms of repurchaser since the last 5 years. So if you look at the customer, we had an inflow of new entrants in 2021, so that changed the demography of our customers. So reversely, as we go back to pre-COVID trends in terms of new entrants, our customer has aged a bit. Since 2021, our customer has gained about 3 years. It stands at 52 years old of average. Our customer continues to be completely male dominated. The majority of our customers come from rural and suburban areas. And the good news is our customer is wealthier than it was in 2021, and that's important.

In fact, our customer right now is probably twice as wealthy as the median of an average wage in America. Our customer -- 1 in 2 of our customer earns $150,000 right now. It was -- that ratio was 1 in 3 back in 2021. So we're getting a bit wealthier since that time. It's also notable on the graph of the right side that our customers are less impacted with the economic condition. When you speak to our customers, they all feel and they all see the crunch in the economy right now, but they are most -- since they're wealthier, they feel much more -- much less vulnerable than the customers out there.

So we've spoken about the overall BRP customers. Jose said just earlier that ORV was one of our focus. So let's start to focus or zooming on ORV. Right now, in terms of brand awareness for Can-Am, our ORV brand, we're gaining momentum, and we're closely bridging the gap with our main competition in terms of brand awareness. Also 1 in 2 of our ORV customers, we've conquested from another brand. That means that ORV owners of other brands have switched to Can-Am in the recent years. That's mostly enlarged by the enthusiast of our Can-Am owners. We know that right now, we're bridging the gap also in terms of NPS score for the SSV owner. So we're close to our main competitor. We surpassed a lot of our competition. We're not the leader yet in terms of NPS score, but we're soon bridging that gap.

So we've asked our owners, all ORV owners, all brands combined, what do they associate BRP? What are we known for? And it was a resounding effect that BRP in ORV space is known for quality and power, not surprising considering our reputation in performance. But as you can see in the lower left quadrant, we're much less known in terms of utility and farming and ranching. So for us, this is a great, great opportunity. So every year, we do a brand association survey, same principle. We go ask the overall ORV owners out there, what they associated us with. So at that point in time, last year, 29% of ORV owners associated with Can-Am through ranching and farming. Same survey done a few months ago, that level rose to 42%, which is a huge improvement in leap of perception, and that means we've really nailed down a vector of growth for ORV in general.

So we also in the ORV band have 1 in 3 of our ORV customers are repurchaser. What does that mean? That means an ATV Can-Am ATV owner will repurchase another ATV on a side-by-side in the Can-Am brand. But what it also means is that we have repurchasing within the portfolio of brand right now. Case in point, 22% of our Ski-Doo owners own the Can-Am brand, okay? And we feel that this is an important opportunity for BRP, given that we cover all playgrounds and we cover all seasons. We're probably one of the first OEM that can pretend or say that we cover all of that.

So if you look at the space of the cross-brand purchasing of our customer, it grew 28% in the last 4 years. And we feel that we are scratching the surface, 29% growth of cross-brand purchasing -- and that's organic growth, that's us doing barely anything. So obviously if we push slightly that measure we feel like it should be a good focus in the next coming years.

So as I bring you back to what I said at the beginning, our aim is to build a huge customer base. It's to build fans and engage our fans. To do that, we have an important marketing machine. We have over 150 ambassadors. We are present in more than 30 events with our customers. We launched last August a new brand platform for Can-Am showing that our brand is unstoppable. That's the platform we are pushing for the next few years. Also our brands are engaging. We're seeing a lot of traffic to all our websites for the brand. Traffic to our websites increased 28% this year alone.

So obviously, we're going to continue pushing on that machine. It's really important for us to continue building our fans and continue engaging our fans because our ultimate goal is to build for BRP, a great BRP fandom.

On that, I'll pass it to Sandy. Go ahead, Sandy.

Thank you, Josee. Let's kick it off. Let's kick off the strategic initiatives. I brought with me, obviously, David Baker and Steve Pelletier. And David is responsible for the North American market, and Steve for the international markets. So before we get into the specifics of the strategic initiatives, let me just remind you that we are operating in more than 130 countries worldwide through 2,700 dealers. And just to note, what you see on the left side of the screen is our diversification. More than 1/4 of our revenues come from international markets, so outside of North America. And that speaks, obviously, diversification, but also it speaks resilience.

So diving into the North American industry, what you see on this graph, the line is actually the industry, Powersports industry and the bars are actually our wholesales. And I won't repeat what Jose said, but it was obviously quite a ride going through the different crisis that we had to go through, starting with the pandemic with the undersupply, then obviously, the supply chain issues and then the oversupply as we replenished inventories in the network, combined with somewhat of a slowdown of the industries in fiscal '24.

We -- at the spring of last year, we had to make a tough decision in reducing significantly our shipments to protect our dealers, obviously. And I'm all saying this because the whole plan was to be in the position we're in today in fiscal '26, where except for snowmobile, wholesale will equal retail in our planning. And that's the value we're bringing not only for our dealers, but also for our investors and for BRP.

Now when you look at international, it's a similar pattern that we've seen within the recent years. But this while absorbing the exit of Russia, we tend to forget this. And in terms of wholesale equals retail, it's pretty much in the same range, but you see less variation from international not by country as an aggregate international because we see right now countries that are struggling more, but there's China, there's Brazil and there's Mexico that are doing really well. And just a note, Mexico is now the second biggest ORV business outside of North America, so growing really fast. So very interesting.

So again, back to spring of 2024, a little bit of a reality check with the inventories growing faster than expected. We had to take or put a time out to the shipments. And what we had in mind, obviously, was to protect our dealers. The dealer value proposition for us is key. This is what we believe, was a key ingredients of the growth of the last 10 years. So the intention was to reboost the dealer economics, make sure that they make money with our products and we differentiate ourselves by OEM profitability, and that was for us, key. But as we also grew very fast in the last years, we became a little bit more complex, and we made sure that we eased the way of doing business with our dealers, introducing new ways, simpler ways for the dealers to actually deal with us.

And despite the slowdown -- the latest slowdown in the last 18 months of the industries, we did invest and additional resources directly supporting our dealers, both on the sales support, but also on the technical support as our business not only got more complex, but our vehicles have become more complex as well and the dealers needed the training, needed that attention to get back on track. So this is what was done in the last 15 months.

And the whole point here is to how we set ourselves for the rebound. And this is why I say BRP at an inflection point. For those of you that were at the club in Boston, where we launched the Defender HD11, the 6x6, the 300 HP on the Switch and many other product news, by far, we are recognized by our dealers to be the most aggressive OEM in terms of product news. Nobody else came even close to the number of products that we launched on Boston. So this is certainly engaging the dealers big time.

Like I said, in North America, except for snowmobile, we're on track in terms of wholesale equals retail. So inventory-wise, we're in a good position. Jose talked about it, especially on the ORV, and we're actually rebuilding some inventory as we speak. And thirdly is this dealer sentiment. When you make this tough call and when we decide to care about the dealers and caring about dealer profitability, protecting the dealers, but also our brands, this is the reward we're getting from the dealers. So sentiment from the dealer side. This is something, by the way, we do measure on a quarterly basis as we saw that sentiment going up significantly in the last 12 months, I would say.

Now tackling the different strategic priorities, as Jose mentioned, Full Throttle to #1 in ORV. And I think I'll repeat it again. We are going for the #1 position. And -- but for the next 30 months, our target is 30% market share for side-by-side and 25% market share in ATV, and that's for North America. As far as gearing up for international, this is preparing the grounds for the next wave of growth. As you understand, there's a lot of wealth going Far East. Middle class is exploding in many regions of South Asia, but also in China. And although we're well positioned today, we have a strong network, we can do more. And Steve will explain exactly how he's going to prepare the grounds to be able to hit the ground running when we're ready to do this.

So this is about preparing the grounds for the next 30 months. And I'll be covering Upshift the Dealer and Customer Experience, and I'll jump into that right now, and then David and Steve will follow through right after.

So in terms of this importance of -- remember the M25, it was all about CX, but the dealer dynamic and how we manage CX is super important. And this is why we have a target for our dealers, and this is to be the undeniable OEM of choice for our dealers. If the dealers win, we win and increase our NPS, customer NPS. This is how we create ambassadors by 20% plus. This is our target in the next 30 months. So strategic initiatives, again, a lot around the dealer deploy our revamped network value proposition. And this is around profitability, ease of doing business and trust. These are the 3 key attributes that the dealers are telling us a few guys do this, you will win the business.

Secondly, raise service excellence and aftersales operations to become the industry benchmark. And I'll cover that a little bit later more in details, but with our premium brands, now it's time that we get to the premium experience and service. And thirdly, enhance the ownership experience with relentless focus on converting detractors into brand promoters or ambassadors. And not to forget, we will continuously improve on the purchasing experience across all touch points.

On that specifically, and this is -- internally, we say DX as a driver of CX. And there's the reason why we're saying this. It's because they hold 80% of the customer interactions. And to be honest, as an OEM, we've been focusing in the last 10 years on the purchasing experience especially in the context of digitalization. This is where we've put the most focus in the last 10 years. And as far as the ownership experience, which is actually measured in years, and this is how you build lifelong relationship with the brands, this was mostly in the hands of our dealers. And this is the shift that we're going to be making and the importance of what the dealer has a role to play in making that transformation.

So how we're going to do this, and this is stepping back and understanding what we need to do with our network so that they can provide a consistent customer experience. First off is about elevating our brands. This is what we always do, invest in our brands, but also in the franchise value. So this is not about our profitability. It's also about the dealers' profitability. If they are successful and they're profitable, obviously, they'll be able to invest in our brands. And secondly, in exchange, we'll be asking for more. Josee talked about the fact that now we are the OEM that sells the most unit per dealer. We are in a position to ask for more, making sure that we transform our dealers in much better retailers. And that has to do with how we control the retail environment and how we control the service environment and so on and so forth.

So when we do this, we believe we can become the most attractive OEM for dealers. And by the same token, this is attracting the best operators and the best investors in the field to carry our brands and to carry our brands, obviously, in the future for growth.

Last but not least, this is probably the most important pillar of our dealer value proposition is how that translate into bringing this premium customer experience. So again, the overall objective, remember, DX is a driver of CX. We start with the dealers. We make sure that they can -- they're set up to be able to provide that premium customer experience.

Now why is this important? What you see on the left is the quadrant. And we understand BRP. I think this is undeniable. We are playing in the premium product segment. Our brands are premium. But in terms of premium experience, as Jose said, I don't think we are doing a super job. And industry-wide, I think we can raise the bar as well. And this top right quadrant is about this white space that exists today in powersport. Nobody is there. But we believe we have the right to capture this and make sure we continue growing while obviously providing that premium experience. And the drivers for this is speed and responsiveness for service, ease of doing business. And obviously, service profitability and scalability at the leadership is very important.

And at the end of the day, what drives customer lifetime value is buy more, refer more, stay longer in the category. And at the end of the day, it's going to cost less for customer acquisitions going forward. So on this, I'll pass the mic to Mr. Baker.

Thank you, Sandy. Good morning, everyone. First of all, I'll introduce myself. I guess I'm a new face for this crowd, but not new at BRP. I've been at BRP for 17 years, 14 of which I spent in the North American division. Prior to this role, I spent 3 years based out of Sydney, Australia, where I was General Manager for our Asia Pacific division. And I've joined North America back as the Vice President and General Manager for North America at the beginning of fiscal '25.

So before we start, allow me to give you some perspective on our past performance. So what you see on the chart is the North American off-road industry per OEM. Obviously, the white -- the yellow line is Can-Am and all the other lines are players in the industry. So from fiscal '19 to fiscal '25 and fiscal '19 being the index point. A at the end of the day, Can-Am retail grew over 60% from fiscal '19 to fiscal '25. And then when we sum up the competitors to understand the industry average without Can-Am, Can-Am significantly outpaced the other OEM in the industry.

But then if we take a further step back and we look at a horizon of 10 years, so from fiscal '16 to fiscal '25, our market share went from sub-10% to 25%. We went from being a third player in the industry to a solid second in the industry in fiscal '22. And all of this in that period that we delivered double-digit annual retail growth over those 10 years. But then if we zoom in from fiscal '20 to fiscal '25, Can-Am has closed the gap with the #1 position by 46%. And what I mean by that is that when you look at fiscal '20 and you calculate the quantity of units that was required for us to be #1 and then we look at where we finished fiscal '25 and looked at how many units is now required to be #1, the delta between fiscal '25 and fiscal '20 has shrunk by 46%.

And obviously, all this is also because of the expansion of our lineup. It has been a key driver of our success. We've introduced game-changing products across different segments of the category. In full transparency, products that have shaped who we are as an organization. Over the last 10 years, we've gained valuable knowledge of the off-road industry, but also products that have shaped the industry itself, setting new standards in terms of performance, handling, build quality, design and fit and finish.

But meanwhile, we've achieved this with limited addition of dealers. If you look at the left-hand side of the screen from fiscal '14 to fiscal '19, this was the initial phase of the dealer network expansion, and it was tied toward lineup expansion. But then from fiscal '20 until fiscal '25, we've gained 10 points of market share with limited addition of dealers. And today, there is a white space in the industry for us to fill a gap given our market share position.

So when we sum all of this up, over the last decade, we've built an industry-leading portfolio of products. We've built an engaged and performing dealer network. But above all, we've built some momentum. And today, we're ready for next wave of growth. And as Jose and Sandy said, that next wave of growth for us is to reach the #1 position in the off-road industry, and let me walk you through this.

And why off-road? The off-road industry is 3x the size of the other industries in which we play in. When you look at the left, the other products of the portfolio and in their industries, we come in, on average, 50% market share. When you look at the off-road industry at 25% market share, we see plenty of runway ahead of us. And today, as I said, over the last 10 years, we've gained knowledge in the off-road industry. So we have the capabilities, but also the resources to reach that #1 position in the off-road industry.

So full throttle to #1, Jose mentioned the target for side-by-side is for us to regain that 30% market share. We've been there before in fiscal year '25, but we made the tough decision to cut production to reduce inventory at the dealers to protect their profitability, to protect their long-term engagement with BRP. Now that inventories are level set, we're not going to be standing on our back foot. And on ATV, our target is set a new milestone for Can-Am Outlander with 25% market share. And we have 3 key pillars. Number one, it's about optimizing our network coverage in the U.S. by adding 100 dealers in the U.S. Secondly, it's about gaining share of wallet in underperforming markets. And lastly, it's about winning in key underperforming segment with a competitive value proposition.

In terms of dealer network expansion, we're targeting to grow our North American network by 100 dealers. And more specifically, this will be in the U.S. by the end of fiscal '28. 30 dealers this year, 40 dealers next year and 30 dealers in the last year of the plan. This should grow our U.S. dealer network by roughly 10%. And we're going to add those dealers focusing on the region where we're underserved by Can-Am. And the reason I'm saying this is that we want to improve our industry coverage while limiting dealer oversaturation. Sandy mentioned it, we want to make sure our dealers are profitable and viable. Therefore, we will limit dealer oversaturation. In terms of industry coverage, adding 100 dealers is expected to bring our industry coverage in line with the rest of the industry.

In terms of dealer count, we're still expecting to maintain a dealer count despite the fact that we'll add 100 dealers below the rest of the competitors. Therefore, we'll be thoughtfully managing our network expansion to protect that dealer profitability. So therefore, we'll not open points at any given cost. Our second key pillar is about winning in underperforming markets.

Let me share with you what we've done in the past. We've successfully deployed Growth plays initiative in multiple regions over the year. And the first growth play we had was in Texas. So if you look at the left side of the screen, yellow bar, our Texas market share. Black bar is the U.S. without Texas in terms of market share. And you see the evolution from fiscal '16 to fiscal '25. At the end of the day, at the end of fiscal '25, our off-road market share in Texas was 9 points higher than the rest of the U.S. And thereafter, we've launched 2 other initiatives, one in 2022 and one in 2023. In both of these markets, our market share outperformed the rest of the U.S. So therefore, we understand how to win in key markets, and we have a proven recipe to drive tangible results.

So if you look at the top of the slide, it's Can-Am Off-road fiscal year '25 market share performance. We've divided the market in 3 categories: Underperforming markets, so this is our bottom 20% then completely to the right, our best-performing markets, our top 20%. What I want us to remember here is that in our top 20% of our markets or our best-performing markets, Can-Am market share commands 40% plus of market share. Whilst at the same time, when we look at our underperforming markets, we have less than 20% market share. Looking at the lower part of the screen where we see the industry size per market, in our underperforming markets, the industry size of those markets is 50% larger than our best-performing markets.

So we see a substantial opportunity for us to grow by addressing our underperforming markets with our own recipe, which we call Growth place. And as well, we're going to focus on improving underperforming categories. So in the portfolio, on side-by-side and on ATV, we have products, which we call our best-performing segments that deliver today a market share well above our M28 target. However, at the same time, we have an important volume opportunity by addressing those underperforming segments and the average segments, and we will be focusing energy on that portion of the portfolio.

And at our recent dealer event, we've done just that by reinventing the best-selling side-by-side with the launch of the Defender HD11, brand-new platform, brand-new engine. We brought value for money for our customers with the introduction of the Maverick X3 X, and we've introduced rough climbing capabilities to our flagship Maverick R. And then on ATV, the Outlander Back country has everything for the outdoor enthusiasts. We've overhauled our workhorse, the Outlander 6x6. And last but not least, we've introduced the first EV ATV of the industry with the Outlander EV.

But product strategy is one thing, but we're also implementing commercial strategies. One of the major news that we did at our dealer event was the following. If you look at the left of the slide, which we call the RC SPORT Mid-HP, the segment, this is our Maverick X3 135 HP. We've reduced the price of that vehicle by $2,000. The MSRP today in the U.S. is $19, 999, and we've priced that vehicle on purpose head on with the category leader of that segment. And same can be said for the other segments. I'll touch briefly on the UTE REC Mid-HP. This is the Defender HD9, which saw a price reduction so that we are priced head on with the category leader. And then the UTE REC Mid-HP cab, this is the Defender HD9 cab now priced at $20,999, making it the most affordable full-size cab of the industry. So we're optimizing our model year '26 pricing to unlock volume opportunities.

And to sum everything up, so full throttle to #1 in Off-road, a 3-pillar approach. Number one, we're going to increase our dealer count and improve our network coverage. So plus 100 dealers in the U.S., more or less plus 10%. We're going to expand our growth play strategies so that we address those underperforming markets. And we're going to bolster our lineup, not just from a product strategy standpoint, but also from commercial tactics to improve those underperforming categories. So the target is clear on side-by-side. It's to return to that market share of 30%. And on ATV is to set a new benchmark at 25%.

So we're setting a solid foundation today to rapidly grow our market share by fiscal year '28. But most importantly, it's to sustain that momentum well beyond that point so that we become #1 in the off-road industry and Can-Am is known as the best-selling off-road brand in North America.

On this, I'll pass it on to Steve.

Good morning, everyone. Pleasure to be with you. First of all, let me introduce myself. Steve Pelletier, I'm the General Manager for the International business at BRP. I've been with BRP for over 21 years. My first 12 years at BRP were in Finance. And then I evolved into the sales side at becoming the General Manager of Europe, Middle East and Africa. And then 4 years later, I became the General Manager at International. So it's a pleasure for me to be here.

Let me start by highlighting a bit the strength of our international model, our network and our network coverage. Outside North America, BRP operates through 2 complementary business channel, the dealer direct model like we have in North America, but also a distributor model that allows us to penetrate markets that have less volume in certain part of the world are more complex to penetrate and requires less investment. And together, they gave us a very good presence in more than 130 countries with 1,100 points of sales.

This level of coverage, very few in the powersport industry can match. It gives us a true competitive advantage, combining global reach with global expertise. And it's a foundation that supports growth and resilience, like Sandy mentioned earlier on.

But that's not all. Building on that network strength, our geographical and product diversity is another major differentiator. We now operate across 3 main regions: Europe, Middle East, Africa, Latin America and Asia Pacific, and we offer the full range of our product portfolio in each one of them. This balanced footprint pretty much means that one region struggles with either economic downturns or climate headwinds, the other can actually offset it. And you'll see that later on in the presentation. It gives us stability, flexibility and a global growth engine that very few competitors can replicate rapidly.

But dealing at international brings its sets of challenges in a global footprint like that. And this is what makes my job actually very, very interesting. We operate across 2 hemisphere under the pressure of regulatory frameworks that actually can affect the playground in which we operate and the product that we can offer in some of these playgrounds. And this is why you see programs like responsible rider being important, the launch of Maverick Sports with ABS. Our ORV products in Europe have ABS brakes to bypass some of these regulations. And that is an important part. However, when you look at it, then despite these challenges, our international business remains a tremendous source of opportunities. In many of our markets, it's not just about gaining market share. It's actually developing the powersport industry as a whole.

And with the teams that we have and the ability to maneuver and adapt in this environment, it positions us very, very well to capture these future opportunities.

So what I've described is actually the backdrop of M28 for us. And Sandy alluded to that. M28 is our road map to build capabilities required to capture growth beyond fiscal year '28. Our strategy will focus on accelerating our growth in Asia, maintaining our very strong momentum in Latin America, like Sandy talked earlier, establishing a manufacturing...

[Audio Gap]

The first region to be faced with the economic challenges that we have. But also we combine this with weather conditions that were not optimal for our seasonal product. But even through this, we are holding a very strong market leadership position in seasonal product, and we're actively developing the untapped potential in the utility ORV market. EMEA is the more mature region that we have, but it's one that is poised for rebound, especially in the seasonal product. And our increasing focus on customer experience, like Sandy alluded to, and the utility segment will be a key differentiator in what's already a competitive segment.

Moving on to Latin America. I've mentioned that EMEA is a more mature market, but Latin America right now is our growth engine internationally. It's our fastest-growing region, fueled by very strong performance in Mexico and Brazil, which is backed by a solid team, local team, but a highly -- a high-quality dealer network in both of these countries. Actually, when you look at Mexico, and Sandy talked about it earlier, has quickly developed a very robust ORV business, while Brazil is excelling in developing the seasonal market through PWC. And by sharing the knowledge and sharing best practices between the 2 countries, we're able to accelerate the growth in both countries and in both categories. And the opportunity that lies ahead for us are still very promising as we continue to expand our network and developing regional initiatives to continue to develop the industry or the powersport industry.

And when you look at our network, here, you see some of our dealership in Mexico and Brazil. They are modern, professional and fully aligned with our brand image. And these partners are a cornerstone of our success. They bring BRP experience to life and a major reason why we continue to outperform year after year in these regions.

Now if we move to the other side of the word with Asia Pacific, the growth in that region has actually been tempered by a slower economic situation in Australia and New Zealand. Australia and New Zealand were probably the first 2 countries to start slowing down a few years ago. Even so, in that region, we have built solid and established network that gives us a leadership position in seasonal product and a strong position in ORV. In Australia and New Zealand, we'll continue to focus on the PWC market, but also the utility ORV segment, where our products are perfectly matching the local usage and terrain over there. But at the same time, in Asia Pacific, we need to continue to develop the potential in emerging across Asia and ensuring that APAC remains a key contributor to BRP's future growth.

And if we look at Asia, specifically, excluding Australia and New Zealand from previous page, you see that the growth story becomes even stronger with a growth rate of 11%. We're actually building strong foundation by developing a premium network and service levels that deliver a high-end consumer experience aligned with our brand standard. At the same time, we're creating the industry itself by democratizing the access to our product by developing new playgrounds, introducing new business model with partners such as rental operators or white glove services experience that help new customers actually discover our products.

And when you look at the overall macroeconomic or macro environment that Sandy alluded to earlier on, it supports that growth trajectory. Government in some countries are actually investing in domestic tourism and leisure, which is perfectly aligned with the portfolio of products that we offer. And with a rapid expansion of the middle class, where the number of households able to afford our products will keep increasing for years to come, it provides significant opportunities for us to continue to grow over there.

So our strategy to Asia is really focused and clear. First, we'll develop a high-quality network of dealers or representative that will represent our brands. Second, we need to drive awareness of BRP, our products and also the powersport industry. Third, we'll be partnering with local authorities and stakeholders to develop sustainable playground, but also a supportive framework around it so that it's sustainable for many years to come. And finally, by deepening our understanding of consumer to create products and experience that truly match their needs. Together, these pillars define how we will lead the premium powersport industry in the markets such as Asia.

On the next page, you actually see example and here, tangible proof of what we're doing in China. Our newly opened leaderships in that country. They actually showcase the professionalism, consistency and brand experience. To us, they're more than just point of sales in that country. They're actually ambassadors of BRP's premium positioning and a key part of gaining the customers' confidence.

If we move on to what Jose talked about earlier on about the manufacturing footprint in Asia, specifically in Vietnam, this is a key enabler of our growth strategy in Asia. This will help us overcome some key structural challenges that we face with long lead time, high transportation costs and high duties. In certain countries, import duties can represent up to 50% of the value of the product. So we needed to find a way to reduce that and the manufacturing footprint in Vietnam will help us. And this is why we actually chose Vietnam strategically. Vietnam is at the center of many free trade agreements in Asia, but beyond Asia. And it's going to give us a tremendous asset that we'll be able to leverage, continue to grow and give us a significant competitive advantage from a cost perspective, speed to market and market access.

This is a chart that I like because it shows the diversity of what we've been doing over the years at international. And you see there that our approach has allowed us to double the international business despite various headwinds. And you see Russia there where we lose -- we lost the business in Russia almost twice with everything that has happened over the years. But we were able by developing new markets and strengthening market position where we are to alleviate some of these bumps or headwinds that we face. And this track record actually proves that our model works, and it gives us the confidence to continue scaling across all regions that we're doing business at international.

In conclusion, we've talked about the numbers, but BRP International actually stands on very solid foundation. An experienced and agile team, a powerful global network and a clear mission to build capabilities that will carry us far beyond fiscal year '28. We've shown we can grow, adapt and lead in a complex environment. And with Mission 28, we're now positioned not just to grow faster, but to shape the future of the powersport industry worldwide.

Thank you, everyone, and I'll pass it on to Sandy to conclude.

All right. So I think what you just saw is the power of the refocus on powersports and the depth of the plan going forward speaks the investments and so on. I just want to make sure that we go back to the 3 strategic initiatives, ORV by far the biggest opportunity. I hope David convinced you that not only we have a vision with this plan, but we're actually hitting the ground running with proven approaches on the commercial side. And on the Gear Up International, this is probably the best kept secret of BRP. Obviously, in the next 30 months, we will grow that business, but the better is to come post fiscal '28. And all of this around this focus on the customer creating this lifetime value, but focusing on the dealer because they own 80% of the touch points with our customer, I believe, is the right thing. So all in all, we believe, is a very solid plan.

And on this, I believe we'll take a 10-minute break.

[Break]

Good morning, everybody. I try to get your refocused after the break, and we do this with speed and efficiency. Patrick and myself want to use the next couple of minutes to show you what we are intending to do at BRP in order to drive value through speed and efficiency. Our target in this initiative for fiscal year for our M28 is accelerate time to market by more than 20% and deliver more than $350 million of lean value. For this, we have 4 strategic initiatives that we are following. As you can see, we want to accelerate our time to market and to reduce development costs with our new product development process. We want to optimize the utilization of assets and our net working capital captured. We want to achieve consistent results on our key productivity and cost KPIs. And we want to strengthen our culture of continuous improvement for all of us at BRP going forward.

For this, we prepared a couple of examples. And as we are under the Lean and Agility pillar, I want to be very lean, and I reuse the slide that I showed to you 3 years ago. Because the metrics of cost is not really changing. And what we changed and what we refined big time is the initiatives that you see in yellow below. We want to show you, Patrick and myself, we want to show you some examples for modularity, product design, material cost savings and for labor cost efficiency. And I start with one very important thing that already starts in design and in the conceptional design of a vehicle of a product, which is the modularity, the family or platform fit of a new product.

What you see here is our new ATV that we introduced 2 years ago. We started to introduce it in the mid-CC platform. We -- a year ago, we introduced the big high-CC platform, and there is more to come. But all this is within one platform. And between all of these products, we have a modularity of single parts that is bigger than 70%, which makes it for us very easy to do cost effectively different variants of this platform.

The most expensive portion in our products is still the powertrain. And the whole propulsion system in these units is also extremely modular setup. So just between the 2 engines that we are using in this platform, it's a modularity for more than 80%, which is quite unusual when you see that these are completely different engines with a wide spread of power and displacement. So 80% gives us an opportunity to react on different market developments in the future, very flexible. And all what I'm showing here is also true for our electric ATV. On the electric ATV, the same level of modularity on the propulsion system side and on the vehicle side.

Another example that I have here is that we call it internally XCU. So it's a flexible computer that controls engine gearboxes and vehicles. This system, it's electronic hardware. The most expensive piece of it is the software. Software and electronic development becomes more and more important and is a big portion in development time, in quality, but also in cost. And therefore, we started years ago to standardize this in standardized modules, and this is such a standardized modules. In the past, you buy this from a supplier. The supplier delivers you the hardware and you get the software developed by a proven supplier.

Today, we are doing the software portion in-house. So all the specific software that we need for the different product lines is done in-house, and we are using the same standardized hardware that we can buy very -- to a very fair price on the market. And you can see on the table on the right side, we are in the process of rolling this out. So more than 90% of our vehicles will have this controller, which is a huge saving potential and makes it only possible to have this electronic and software features on our vehicles that we would not be able to develop for each vehicle individually.

The next one is a relatively simple example. It's a material change that we did. So we changed the -- it's called the rear knuckles or the piece that holds the wheel, and we changed it from forged aluminum to forged steel. This is an annual saving of $3 million. Now you could say, $3 million is not that thriving. If you have 10 of such activities, you already have $30 million. And this comes without customer disadvantage. And it's actually the opposite. We are also improving our carbon footprint with this decision.

Another example is the lighting. When you look at the front of our vehicles, our vehicles looking -- first of all, they are beautiful, of course, but they are looking different. Each vehicle looks very different. But we are using one standardized LED module for all of this lighting. With this, we are getting in completely different levels of volume for this lighting element, and we can -- first of all, we get a very good quality. And secondly, we get it on a very good price because for our supplier, we are interesting with this volume that we created with this modularity. In this case, it's a saving in the range of $5 million per year.

This is a complicated example. Let me explain this a little bit. In each product, if it is electric steering, if it is the IVR brake on our Sea-Doos, if it is an electric product there, it's obvious, we have electric motors or we have parts in there that requires magnets. Magnets are built -- the standard magnet today, the high-efficiency magnets, they are built with seldom earth. Seldom earth is mainly controlled, 80% plus is controlled worldwide by China. And actually, there was an update yesterday. It's getting worse. China is using this instrument also for controlling who gets what in this market. It's a huge lever.

What are we doing here? And what is the advantage of having a flexible, agile organization? So we are capable of sourcing magnets from different suppliers as the ones that we originally have in our plan. We are able to adapt our own internal designs so that these new magnets are fitting, which gives us the opportunity to react very fast on demand -- on supply problems that we see due to some changes in the legal environment. And long term, this is the short-term reaction on the right side, long term, all these little black pieces that you see on the inner circle, these are the magnets in an electric engine here as an example. And there are techniques available and we are working on them to either reduce the magnets to use magnets without seldom earth content or to get completely rid of magnets in electric machines.

So this is the midterm to long-term solutions that we are working on to reduce our dependability from this. So an example how to react to supply chain limitations. I already talked about time to market. One main element in the time to market is the time that we need for our new development process. And this time, we did some intensive benchmarking, and we developed our process. We streamlined our process so that we are targeting a reduction from more than 20% for the from decision of a new product until it hits the market, so until we have start of production, which is quite significant and makes us more agile in the future. And as a secondary outcome, we are also reducing our cost, and we are able to reduce also product cost with this because we are much closer to production and time-wise, much closer in what we are doing in the development work.

With this example, I'm handing over to Patrick, who gives us some examples from the operations side, please.

Thank you, Thomas. Good morning, everyone. first time we meet. So just introducing myself quickly, 29 years with BRP, always in the field of -- different field of manufacturing. Core of my career has been in designing and implementing the current manufacturing footprint. Today, in charge of global manufacturing since the last 3 years and part of the management committee since January last year. So let's then have a look on how manufacturing is going to contribute on creating this link value.

So our plan is based on 3 pillars. First one is about strengthening our culture of continuous improvement, then boosting our performance through focus on operational excellence and cost reduction. And thirdly, strengthening our position on digital and AI-driven optimization.

So if we start with culture in manufacturing, continuous improvement has always been part of what we do. But in the last decade, a lot of our focus was around growth and managing capacity. So starting in 2024, we saw that we needed to quickly change from a mindset of growth to a mindset of lean. And the only way to win when you focus on lean is to make sure that you find your way to bring all of the employees starting from shop floor to leadership being part of those value creation and waste elimination program. So this is what we did, and we had quite a lot of success in the recent years. So this is based on this that we were able to deliver on M25, and it's going to be the foundation on which we're going to build to work on the M28 value creation program.

So the way we did it is we gave teams real visibility and ownership on cost driver. So the way we attack it is we took the cost per unit of every product being produced in every factory, and we broke it down to hundreds of granular element. And then what we did is we identified the cost driver, which impact all of those subgranular elements. And we sit with all the leadership, production supervisor, manager, again, all site functions across the global footprint, and we train them on how to define better those cost drivers and what are the levers that they do have in their daily job, right, that they could trigger in order to influence those drivers and generate cost reduction.

So we started that 1.5 years ago, and the momentum is very interesting and somewhat exceeding my own expectation. So we're having a lot of Ideas coming from every level of the organization, thousands of ideas. And I just took 3 of them just to have a little bit of a representation of what's going on. Obviously, we need to classify them because we have thousands of them coming from the shop floor, some of them coming from the office and some of them which are more transformational.

So just using one example of this employee forklift driver in our Mexican plant. His job is to pack some welded part to be sent to Canada in a warehouse for parts and accessory. So raised the hand as a supervisor, knowing better a little bit of what he controls in terms of cost. Why am I using brand-new boxes to ship parts to a distribution center for which they're going to be repacked anyway instead of using the ones that I'm throwing away on the compactor, right? It seems very simple as an idea. We did some testing, then we get the go ahead, implemented this, and we save $15,000 per year. And now the same employee is working on recycling pallets to do the same thing.

So just one example, one employee, think about what could happen when you have thousands of them and you scale it on a global scale. Professional employee engineer working on the laser cutting process, understanding his cost driver, nitrogen is one of the main cost driver he's having in the process he manages. Went on the Internet, talked to the manufacturer of the equipment, came out with the idea to say, "Hey, why don't we move from nitrogen to dry compressed air in order to run the process." Did the business case, we implemented the solution, $700,000 of saving per year, 3 plants, time 3 plants for just a little investment. So again, just not impacting the cost driver, just improving or reducing the level of gas, but just canceling or not avoiding the use of gas completely.

So last example, manager in transportation, understanding his budget and his driver realize that we're paying a premium cost when we ship containers to international market because our products are classified as of this material. Why? It's because we're having some residual gas remaining in the tank, right? Can we remove it? No. Paradigm, sat with engineering, with method engineering inside our factory, find ways to remove residual gas, we save $5 million per year.

So again, when people and the whole workforce in every level understand that lean is not about working harder, it's about working smarter and you scale it up to thousands of employees across the globe. It not only generates millions of savings, but it will help us to shape our culture.

So having ideas is one thing, but sustaining them is the challenge. So the way we do it is to make sure that once the employees are having the full accountability on finding the solution and implementing them, we make sure that we do take the time and the quality time to recognize them, okay? So is it via through the daily walks or the weekly or monthly meeting or quarterly celebration, we do take time for them to understand that what they do matters, and it's having a lot of impact.

So if you look at the Net Promoter Score today, we're having a Net Promoter Score result, which is 2x higher than the average manufacturing industry in North America. So this contributes to create a purpose for all the employees coming to work and engaging themselves into continuous improvement. But we're not stopping there. So we're trying to amplify this using some of the AI tools that are available nowadays. So we started to define how we should tackle this big old world of AI into manufacturing. So what we wanted to do is to make sure that we're extremely pragmatic in the way that we attack it to start with.

So we just identified some areas where we could do some proof of concept on making sure that we do solve concrete issues that we're having on the plant. So again, just using one example, you see in the middle, those -- going back to those tube cutting. But pretty interesting process because you're having more than 700 part numbers coming from more than 32 profiles, but we're feeding 3 plants in a piece throughput system with more than 14 million cuts per year. And at the end, every tube link, you scrap a portion of the tube that goes to scrap. But with the amount of tube we're consuming, we're generating more than 3 million of scrap per year. But to try to define the best cut pattern with an engineer and Excel spreadsheet, it's extremely complicated.

So sitting with Stephane's team and the data team and the AI team, they supported us to build this application. And now we're just using it, and we're able to reduce our scrap rate by $700,000 per year with a very minimal investment. So we're learning how to use those tools to generate savings in a simple matter, but we're progressing pretty well. Now we're using it to -- we're having a project going on. We're using AI to optimize our mix pattern on the assembly line of the snowmobile line. So more than 100 workstations with more than 400 SKUs to find the perfect mix, again, it's super difficult.

So with the AI, we're able to generate a visualization of what's the best mix. And we're implementing it, and we're going to have more than $100 million of saving in the next few years again. And now we're working on load optimization for finished product distribution, and we're just starting. So again, the point is we're scratching the surface at this point, but we're moving in the right direction, and it's pretty much promising for us going forward.

So this works not only in delivering cost savings, but also on helping us to deliver a pretty good level of KPI result in terms of operational excellence. So if you look on the chart, starting with safety to quality, to productivity, to people, today, we're at the strongest operational momentum we had in the last decade. So another proof of when the culture is there and the focus is there that we're being able -- we are able to generate a lot of great momentum on the manufacturing front.

So if I then step back and look at the global picture, coming back to Thomas' introduction, the whole value creation pillar at the corp level, the good thing is we're having a lot of momentum. So if you just look at where we are as of now today in fiscal year '26, we're on the path to deliver more than $150 million of savings only this year. So this is already a good step forward into this mandate of delivering $350 million. So we're on it. 50% of the year, like Jose said, is behind us, but we're already having a good portion of the objective, which is already met.

So in conclusion, well, the goal is pretty straightforward for all of us. It's to deliver sustainable, substantial margin improvement by fiscal year '28. And how we're going to do this? Well, we're having $1 billion of growth coming to us. We're having asset capacity, which is available, and we're having quite a lot of different strategic initiatives, both on engineering, procurement, supply chain production. And if we bring all this together, we're very confident we're going to be able to meet on expectation.

So that concludes my presentation. Thank you.

Well, thank you very much, Thomas, Patrick. Congratulations to both of you. Congratulations to your teams. I am sure everyone can appreciate the huge impact that the focus you have on continuous improvement lean has on our profitability and the financial performance of the organization. And what I like about this is it's not finance pushing on the teams to drive lean and efficiency. It comes from within and even the operations teams are pulling on finance to support them.

So I'll cover a few slides on financials. But before I go into the M28 objective, I do want to cover a bit of the history. Obviously, since our IPO, we grew our business significantly, and this came from solid execution on many fronts, product, manufacturing, marketing, commercialization, really, when we look at what we've accomplished, obviously, we're extremely proud. We've also been agile in some of the periods that we faced, and you will remember the COVID period where we've had to find creative ways to get products much quicker to the consumers, to the dealers. This obviously allowed us to deliver, I would say, industry-leading profitability and financial performance during the COVID years.

And 18 months ago, with the experience we have in the business and the knowledge we have of how to manage an operation like ours, we were the first OEM to pivot and decide to reduce deliveries in the network. One, obviously, we're doing it for the dealer value proposition because they were facing high interest charges with more inventory, higher MSRPs, but also because we know that the quicker we react, the quicker we adjust the operations and rightsize the business. When the industry stabilizes, it makes our performance much easier. And when the industry grows as well, while we're there, we're also able to grow and not focus on managing older inventory in the network.

And yes, our industries were hit harder in the last few years. And when you look at this graph, it compares industry for each product category pre-COVID and also during the peak of COVID. And you see our industries down flattish to high double digits. Personal watercraft, 3-wheel impacted as well with high interest rates because we have entry-level products. Yes, our profitability was impacted, lower wholesale, more discounting and certainly some margin erosion coming from less efficient use of our assets. But when I look at our EBITDA margin, we've maintained a margin above pre-COVID levels. And again, focus on how we run this business. Yes, our mix is stronger purposefully. We're able to drive rich mix in all of our product categories, but also we grew our side-by-side business over the years, which certainly helps as a side-by-side is a very profitable business from a margin point of view.

Sandy, Thomas talked about unlocking efficiencies in the business, and that remains a priority, but we've obviously delivered some efficiencies over the last few years. And you saw this year, we already have $150 million. And the other element, and Jose covered it earlier this morning, is refocusing on the powersport business. It is a more profitable business than the traditional marine business. And therefore, by us refocusing on the core powersport business certainly helps in driving better EBITDA margin. And as we operate in an environment where our production volumes are lower than the capacity we have, you can appreciate that when volume goes up, the overall profitability margin as well will follow.

Cash generation, for those of you who've been following us over the last several years is also very much who we are. And even in a period where the industry is softer, deliveries are softer as well on our side, we're able to generate solid free cash flow last year, above $300 million for the first 6 months of the year, almost $250 million. And since fiscal year '20, we've returned over $2.5 billion of capital to our shareholders. We've reduced share count by over 30% and so obviously, providing strong returns to the whole investor base.

Our framework for managing the balance sheet has not changed. It's been in place now for over 15 years since the great financial crisis. We are prudent managers of our balance sheet. It also allows us to obviously focus on the business. So management attention is directed to managing the business and not managing the balance sheet when we hit a softer market or softer industry. And also managing maturities is very much part of our framework. You all saw our press release last week where as customary, we've extended the maturity on $265 million of our Term Loan B debt. We also took advantage of good market conditions and dovetailed the reimbursement of USD 200 million debt with more leverage to negotiate repricing on USD 1.5 billion. That is going to help this year by $0.10. So if we're going to -- if we were to issue guidance today, we'd increase the guidance by $0.10 and a $0.30 impact for next year. So obviously, quite meaningful as we look ahead.

Now coming to M28. You've seen this slide before this morning. So getting to $9.5 billion of revenue and also $8 of EPS. How do we get there? We'll cover the revenue items first. And what I like about this plan, and again, for those of you who have covered BRP over the last several years, this is a bottom-up plan. So people in this room are accountable to deliver this plan and not just people in this room, but people in the whole organization are accountable to deliver this plan. It's a bottom-up exercise.

And the first big pillar is just retail equal wholesale. We've been undershipping versus retail in the last 2 years. And once now our inventory is stabilized, we've reduced inventory by 20% year-over-year at the end of Q2. So just having wholesale equal retail is certainly a big tailwind and then executing on the ORV plan. We're not looking to grow market share by 10% in the next 3 years. It's a 3% increase in market share, side-by-side coming back to where we were during the COVID. I think you saw and you can appreciate the building blocks that we have behind this plan. It's not fluff. It's real tangible elements that we are tackling from DVP, from network expansion and also improving the overall consumer experience.

International, Steve gave us a good overview of the international business. Some of it is already happening this year, bringing our international business to a $2.5 billion. We have obviously a secret sauce. We have the know-how, the competencies. We've been in the international market for a long time. We know how to deal with the various complexities that we face in all of these markets. and therefore, being able to deliver this is certainly something that is within reach.

Growing in the other business, we're not planning for any industry growth other than, let's say, a 1% increase in the side-by-side business industry. But the other industries, we're planning for flat industries, minor market share increases. Obviously, as we grow the side-by-side business, and I often say this, I'm a huge fan of side-by-side. Why? Because there's a lot of square inches on the side-by-side, and we can attach a lot of accessories, especially our link accessories. And that obviously will drive good top line, but also good margin.

And lastly, pricing. So we have pricing built for '26. This is the only pricing that we have in the plan. And also as we operate with leaner inventory and as the whole industry is going to operate with leaner inventories because that's the message that everyone is transmitting. Obviously, we'll operate with lower programs to bring us to the 9.5%. On the EPS, well, the 2 -- the first 2 buckets are covered by the revenue top line elements. We expect that tariffs will be part of the commercial environment as we go forward. And so we've built a tariff headwind in our plan. You've had the pleasure for those of you in the room of trying our products, you were able to compare products, previous generation to new generation.

Over the last 10 years, we've added a lot of technology in our products. In the next 10 years, we'll be adding a lot of technology as well. We need to invest in order to do so. But the good news is we'll be able to offset a lot of that with our lean initiatives. And then we have the customary financing, depreciation and taxes to bring us to the $8 of EPS.

But this is not the end. Obviously, where could we bring our business toward a mid-cycle industry level? David, Steve covered what are we doing with our network, with the dealer value proposition. We're going to be benefiting from these initiatives down the road. We're going to get the full potential. So obviously, we want to continue growing on ORV. And what if the powersport industry recovers to what it was in pre-COVID, as I mentioned, we're not planning for any industry growth in the other products, except for a modest increase in side-by-side, and that is certainly another tailwind that we could experience. And obviously, as we grow top line, we will also be benefiting from an EPS growth, and we could foresee an EPS number of $10 after the M28 target has been delivered.

And so with this, I will turn it over to Jose for closing remarks.

Sebastien. Like I said this morning, this meeting was definitely overdue. I'm happy that you could pass some time with the management team, and you see that like Sebastien explained, it's a real bottom-up plan, then very happy that you took the time. I hope over the last 2 days, we convinced you that we have built a solid business that is positioned to deliver growth. Many of you, after we exit Marine, we pause urban mobility, we're saying, where are you going BRP,ow you will grow with your high market share. I hope we convinced you that we have a plan, and we intend to optimize our position into the powersport industry.

Obviously, one of our strength is our diversified product portfolio and our brand. And again, competition can copy our product. but did not copy a brand. And the idea is to continue to push technology innovation, but also to bring the brand to the next level, something that is very difficult to copy. It takes time to do this. Thomas explained to you our R&D capacity and then also by visiting the design studio for the one who are here this morning, and very happy about what we have built so far, and we have a team that are dedicated, passionate about what they do and are able to continue to push innovation and technology faster than what we're doing in the past.

Our dealer network, our established dealer network in North America and in Europe. But what is interesting in Asia by starting from fresh. You start with the whole product portfolio and you have super nice dealer network and dealer showroom, then very happy about where we are in our dealer network expansion.

Manufacturing footprint, I mean, state-of-the-art ready to state-of-the-art, and we have capacity to react quickly if the demand is increasing and happy about the JV in Vietnam. I think it's a first step in that direction. But I'm convinced that to serve better the South Asia, that will be key mid- to long term.

And last but not least, the management team. You had a chance to mingle with everyone. I just want to say that it's a very experienced management team. And without me, it's still 19 years of seniority or experience in the company, then BRP is in a very good end.

Then that will conclude the presentation, and we'll open up for the Q&A. Sebastien and I will be in the front, and Philippe will call the management committee if it's -- for other people. Sorry, I missed 2 slides.

This is the 7 priorities, well aligned, but I just want to tell you that we met -- we've been working on this for more than 18 months. We had discussion with the Board who obviously challenge us that we're all aligned with the management committee and the Board. We met a month ago all the VP and Director of BRP in Montreal for 3 days to explain where we're going. We have a webcast tomorrow morning at 9:30 to download to all manager and up. And before the end of the October, every single employee in the company will know about this. And when we are focused, typically, we deliver.

Thank you, Jose. So we'll take questions from the room. Anyone has a question, please state your name and the firm you're representing and we'll go ahead. Robin? There's a microphone.

Robin Farley with UBS. Just wanted to go back to your market share targets. Where do you think -- at what point do you cross to being #1 in ORV? I know you're saying sort of above 30% and above 25% in ATV. And then also your expectation for market growth. I know you said seasonal would recover because it's below normal, not much growth. Did you say something specifically on ORV? I'm sorry if I missed that, your expectations for the market growth for ORV.

I'll take with your first question. Being #1, it's not a 50% market share, at least #1 [indiscernible]. And in terms of industry assumptions for the -- we'll call the other than side-by-side, our industry assumption is flat industry. For side-by-side, we have low single-digit.

Benoit Poirier from Desjardins. Just in terms of EBITDA margin profile, you've reached a peak of 19% during the COVID, and there was 21% if you exclude Marine, supply chain issues were impacting negatively by 400 bps. So right now, when I look at the $8 of EPS, it implies roughly 15%. I'm looking at the utilization rate that is at 60%. Just wondering what we could think longer term about the potential EBITDA margin, if there's an opportunity to maybe rightsize the footprint given the kind of the midterm outlook you provided today?

Yes. Well, obviously, our rightsizing the footprint is not something we want to look at as we are in the middle of trade negotiations. I often say this is not, let's say, the pulp and paper industry or the cruise line industry where assets need to be running 24/7 in order for us to make money. Even running with, let's say, 70%, 75% capacity utilization, we'd still be able to generate strong returns. I do believe that a 17% EBITDA margin mid-cycle is something that we can achieve. You're right. When you look at COVID period, excluding Marine, we were at the 21% EBITDA margin, and we had huge headwinds coming from inefficiencies. And so the management team is aligned around this number. And certainly, post M28, we'll certainly want to achieve that target.

James?

James Hardiman, Citigroup. I wanted to dig in on inventories a little bit, specifically ORV and maybe tie together some of the numbers that you've given us today. If memory serves, inventory turns were in decent shape prior to the pandemic. And you guys talked about how, I think, retail for ORV is up 50-plus percent and inventories are down 5%, right? So job well done. It seems like inventory turns have gotten a lot better. And if we think about sort of going forward, retail is going to be growing, right? And so typically, you would need to wholesale more than retail to keep that turn number fixed.

And then if I layer on top of that, the idea that you're going to be adding 10% to your dealer base, right? So on a per dealer basis, inventory turns are going to go even higher. So maybe help us square that with the idea that wholesale is going to equal retail for this planning period. Is there an opportunity maybe for some channel fill? Obviously, that would be upside to your $8 number, but maybe help us think through that.

Yes. We -- obviously, we look at inventory turn in days internally, and we look at it by region. We need to be careful because the dealers don't look at it that way. They look at their interest bill. On that slide, you don't forget that the value of the unit have increased significantly and the high -- the mix have improved significantly. Then for the dealers, even if our days of inventory is significantly better, their inventory in dollar is still not higher at probably lower than pre-COVID, but still they feel a bit -- it's higher than the number of days improvement that we have done.

And I think it's something that we need to balance. Our goal is wholesale, we call retail. And it's -- we need to balance it. And at the table last night, we had discussion about you've been supporting the dealer, you want to protect your brand. What's the fine line between inventory and what we call the great pressure in the [indiscernible] for the dealers.

We believe that what we have in our plan makes sense. We really believe that wholesale equal retail makes sense. But if some dealers are not ready to play, we'll need to find a way to push. And -- but this is the fine line that we need to define in the coming months. But we know we don't want to be the good guy that is not winning. We want to be the -- we invest a lot in the business. We push. We want to have our fair share of every single PMA, and that's what we're aiming for. But it will be something we will adjust depending on how things will evolve.

So you made the point about the dollar value of that inventory being higher just given interest rates. And I'm sure inflation has played a role in that as well. So I guess, is there an opportunity? Let me ask it this way, what are you assuming in terms of interest rates over this planning period? And if rates come down materially, could that be sort of the thawing point as we think about dealers being more willing to go back to some normalized sort of inventory level?

Well, that's why we're planning for a flat industry. So we're assuming an interest rate environment that is consistent with what we are experiencing today. So if it changes, the wall it's for the good or for the bad, we'll adapt, hopefully, for the good.

One last thing, James. Obviously, the goal for fiscal year '28 is 30% plus side-by-side and 25%-plus EPV, but we'll not stop there. Our goal is to become #1 in off-road like we are on snowmobile and watercraft. And the team knows that we have no way of -- if we don't embark the dealer in our plan, we have no way to win, and we'll find ways to win.

Craig?

Craig Kennison from Baird. I wanted to get back to the market share topic. I believe your market share calculations exclude CFMoto and other brands because they don't disclose the data you would need to calculate that. But how do you frame your outlook and your vision of gaining share in the context of all of those players? And then maybe if you would just address how USMCA and those negotiations might play out to impact the competitiveness of those players?

Yes. I'll take the first part, and Jose can take the other part. For us, you're right, industry data does not include CFMoto, but they are a player in the North American industry. And so when we look at our financial planning, obviously, it's volume-based. And so if CFMoto enters the industry, and reports the data, it will not change our unit volume plan, and it will not change the financial plan. The market share number might move because now the industry is going to be better, bigger, they're going to be included in it. So the market share number is going to move. But in terms of overall units that we expect to retail, that should not change.

On the USMCA, USMCA is working quite well. And I was 2 time in Mexico City in the last month to meet people from the government of Mexico, Canada, United States, but also to meet different industry. And basically, we are to proof that USMCA is working. All our product manufactured in Canada and in Mexico and in U.S. meet obviously USMCA. And we -- our content because the USMCA minimum content is 60% North America, then we are buying more from North America, the 3 countries. And we're buying less from Asia, less than 10% of our goods are coming from Asia. Then we are proof that USMC is working. And we met -- we are obviously involved deeply with different industry and the 3 government to give our input. And right now, the sentiment of most of the people is USMC will be reconducted. It could have some adjustment, positive, maybe some slight adjustment. But right now, the assumption is that USMC will be reconducted because we don't know more at this point.

And again, BRP have been in business for 80 years. We always found ways to adapt our manufacturing footprint, our supply chain quickly. We just need some time to adapt and stability in the roles, which we don't always have in the last few months. But we are confident that we'll find our ways when the USMC is reconducting with some change that could happen. And this is what we have in our plan at this time.

Martin.

Martin Landry from Stifel. Sebastien, in your mid-cycle EPS target of $10, what is your assumption for excess cash flows? If you take into account share buybacks? And if not, is there a possibility for share buybacks?

Well, in terms of capital deployment strategy, we are not assuming any changes in how we've deployed capital in the future versus how we've done in the past. And obviously, mid-cycle getting to $10 of EPS will be generating significant free cash flow. That will give us the option to either grow the business through M&A, if that's what we decide to do or continue doing buybacks, which has been very good for our shareholders. But our plan does not factor in any share reduction coming from buybacks. It's at a constant share count.

Joe?

Joe Altobello, Raymond James. In terms of the ORV growth strategy, you mentioned improvements in underperforming markets and improvements in underperforming categories. They're obviously underperforming for a reason. So I guess, first, why is that? And second, how do you turn that around? I mean it's easier to them done, I think.

Give it to Sandy or David.

Yes, I'll answer that one. Obviously, when we look at the performance of the market, like the underperforming versus the overperforming, what we're doing right now is really on our approach of our growth plays, we'll go market per market with our proven formula. Obviously, there are some dealers today that are holding the franchise and are underperforming versus their peers and we'll address these. But also, we need to realize that today, we have a complete lineup. The days that when we've appointed some of these dealers, probably they were not at the right location.

So we'll look at all of these. So the entire mix of the focus, adding new dealers and the complete lineup will help us address the underperforming markets in the off-road industry.

[indiscernible] In the presentation, you've mentioned that you will lower prices on certain value proposition SKUs. Historically, how effective BRP strategy on cutting prices has been what's your batting average, so to speak, in tougher times to gain shares while cutting prices?

I can take this one. We've had this situation a couple of times even in different markets. And we did this in ATV 2014 to 2016. And obviously, it has to do with how we position the product. And in certain of these categories, we pushed pricing a little bit too high. And like David said earlier, like on the Maverick X3, this positions us exactly head-to-head with our competitors.

So this is about managing mostly what you saw is more on the entry level packages. And for us, these are important volumes we need to get to. And with the level of market share we have in these segments, there's, I would say, much less to lose, much more to gain. As we have our capacity at 60% utilization right now, it's important that we grow volume for Patrick and the plan. So all of this together, we believe, is going to be a successful adventure. And the feedback -- the early feedback we're getting from dealers right now is very positive on that end. So very confident.

Tristan?

Tristan Thomas-Martin from BMO. Kind of a follow-up to Paul's question. How are you thinking about kind of the promotional strategy in M28, particularly related to like monthly payment affordability? Could you call out model year '26 price increases, but then also leaner promotions? So are you going to see an increase in kind of the average monthly payments to the consumer? And then kind of second part to that question, if some of your competitors get more aggressive trying to offset some of their own price increases, would you let them do that? Or would you try to chase them to kind of remain in parity?

Well, on your first question, the benefit that we're seeing from promotions in the plan is going to come from less noncurrent inventory, which are discounted a lot more. So less from a, let's say, interest rate cost for the retail financing, but much more noncurrent units require more discounting. And then obviously, from a retail financing point of view, we always want to be competitive with the offering there. Obviously, we have many tools in our box in order to compete. It could be extended warranty, it could be retail financing, it could be cash offers.

And we'll, again, be nimble and adapt in order to make sure we have a compelling offer for the consumers, make sure dealers also have something to drive traffic in their dealership. And if we need to tweak, we'll have that flexibility. But again, our assumption is that we're not counting on reduced interest rates to reduce our promotions.

Mark Petrie with CIBC. I had a question just with regards to dealer experience and customer experience. So maybe that's for Sandy or David. But it would be helpful, I think, just to hear about maybe 1 or 2 of the most impactful changes that you're making to your process to sort of drive that? Or is it more a matter of just bringing those underperforming dealers to what the sort of best-performing dealers are doing? Or do you need improvement across the network?

It's a little bit of both. And I mentioned that a little bit in the presentation where the business has become more complex for our dealers. The technology, what you've tried yesterday in terms of technical support has gone more complex as well. Combine that with the COVID days where training was limited to webcast versus physical training for the dealers. So there's a big portion of it on the service side where we need to come in and obviously, physically with the dealers and mechanics and their certified technicians raise the bar, be more responsive on our end as well and finding the solution.

But the same applies as well in terms of product training, right? We assume because we launched a unit at the club that everybody knows about the technical aspect of the units. But if we're going to be fighting to be #1, we need the salespeople on the floor at the dealers to really understand these products. so they can actually feel comfortable selling them as well. So it's not only for the, I would say, the underperforming dealers throughout the whole network. Obviously, we have always this 20% of our network that is doing a really good job, but the intention is to raise the bar everywhere.

Cam Doerksen from National Bank. Just a question, I guess, for Seb on CapEx expectations over the next number of years. I mean you've got lots of excess capacity in the plants. But presumably, you're going to still have new product development. So maybe just talk about the trend that we should expect over the next few years on CapEx.

No significant change versus what we have in the guidance this year. This year, we're calling for $410 million of CapEx ballpark, that's what we should be seeing in my presentation, I talked about continuing to push innovation and innovation is costing money and costing CapEx. That's where most of the money will be put to work.

Xian Siew at BNP Paribas. As ORV becomes a bigger part of the business, can you just talk a bit more about what that means for your margins and how that can kind of change the margin profile?

Well, as I mentioned earlier when I talked about our EBITDA margin versus pre-COVID, side-by-side is certainly a driver of this. Again, I don't want to repeat myself too much, but I love the side-by-side industry because there's an opportunity for segmentation, fragmentation. And we're good at this. Minh Thanh gave you examples this morning as to how we came up with creative products that meet specific consumer needs. Well, there's that demand for the side-by-side industry as well. And usually, when you're able to make these specific targeted products for consumers, you're able to price for it because that's what the consumer really wants. And so obviously, as we grow side-by-side, that is certainly going to help to drive growth in EBITDA margin.

And also, it's the product line that has one of the best for attachment of accessories by the dollar of accessories per unit is high, a lot of square inch like you like to see.

[ Gerrick Johnson ], Seaport Research Partners. Polaris recently came out of the 500. It's about 30% less expensive than your least expensive Defender. So is that a portion of the market that you're not going after? What's your outlook on the lower end of the market?

But at this point, Gerrick, I mean, we're looking at this, but we have better projects with better return on investment on subsegment, creating new segment or investing more in the high end than going into the low end. I'm not saying we'll never go there, but it's not part of the next 2 years, 2, 3 years to go there because we have better way to continue to grow and improve in higher value segment.

Me again. So just a quick math question, Seb, as we think about 2028, sort of share buybacks and interest -- share count and interest, is it sort of where we are today?

No change in number of shares outstanding and interest rates as they are today.

Post the transaction.

Post the transaction. $0.30. We'll take that one.

Yes. And then I've been really impressed with how we've sort of focused on the long term during this meeting. But to throw a bone to our friends in New York, maybe let's talk about near-term trends a little bit. Obviously, those of us that do any channel checks have picked up on some nice improvement in August and September. And even, I don't know, I'd be curious to hear about October. But I guess, a, have you seen -- how would you characterize the strength in terms of retail units? And then b, should we sort of temper our excitement given sort of the promotional environment and how that could impact dollar sales and/or margins?

I would say for -- obviously, we cannot comment on Q3, though we want to be careful on this. We don't have industry numbers. But I would say the trend continue to be good. Then basically, that's where we're going.

In terms of -- right now, with all the new products we introduced, all factories are ramping up on those new products. And basically, on off-road, we are on allocation. We gave to the dealer, here, you should order for the next 3 months, so many units. And if it's not enough, give you -- give us your wish list. But with the wish list, we cannot react within 2 or 3 months. Then basically, we are on plan for the remaining of the year. We will try to maximize it if we can, though we're still taking orders. But basically, retail is doing well with some plus and minus like typical. And on the wholesale, very happy about the booking with the new product, the reception of the new product, but don't expect us to bust the bank by the end of the year because there is a reality in lead time. But it's doing -- business is predictable, and we're very happy where we are.

And as we said during the Q2 call, Q3 retail market share is going to be more gnarly because there's still some noncurrent inventory from other OEMs that are being fleshed out. So Q4 is sequentially improving.

It's Brian Morrison, TD Cowen. When I take a look at your margin expansion initiatives, the 200 basis points of EBITDA expansion, it looks awfully conservative with respect to your ORV growth and your Lean initiatives. But then you have this big growth initiatives offsetting that. And I'm wondering if it's just simply if you can go a little bit more in depth, is it just R&D? Is it the dealer support we've talked about, but what are those offsets?

Well, the -- yes, R&D is part of it. We're going to continue growing the R&D spend. The other element versus fiscal '25 is variable compensation. There is no variable comp in '25. And so that is obviously factored in our plan. And then there's other parts of the business. The initiatives we have from a dealer perspective, improving service, improving training for our dealers, that is obviously going to require resources, which we want to do, and that obviously requires investments to do so.

And also marketing expenses. We want to elevate our brand. We want to elevate our awareness of the brand, then there is some investment there, too.

Luke Hannan, Canaccord Genuity. I just wanted to ask about the joint venture that you guys have in Vietnam. So it's going to begin in Q4 of fiscal '27. How big should we expect it to be roughly either in terms of square footage or units coming out of that? And if it progresses as planned, what's your intention as far as how big that could be?

Then overall, VPIC had an old factory that together we remodel, then we're not building a new building, we're just remodeling an existing building and our products are quite small, then it was easy to fit an efficient layout into those buildings. And investment in the big picture is very reasonable. And we will go step by step. Ryker is the first product. We have other plans for other products. But obviously, for competitive reasons, we'll not go there this morning. But the agreement has been signed a few months ago. We are on plan for Q4 next year. And we're quite optimistic because, as I said, the main benefit is to avoid tariff in South Asia.

Then if Steve can bring the growth, we'll continue to add product in that factory. That means Ryker, we're shifting production from Mexico to Vietnam because we needed space in Juarez 1 for the ATV. Juarez 1 is our smallest factory, then the timing was perfect for this. After that, we could -- you could expect to have maybe assembly of other product lines in 2 factories, one for North America [ USMCA ] and one for Vietnam, but that's mid- to long term.

Perfect. This concludes our Q&A session and our 2025 Analyst Day. Thank you for your participation and interest. Thank you very much.

Good morning, ladies and gentlemen. Welcome to the BRP Inc.'s FY '26 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.

Thank you, Joel. Good morning, and welcome to BRP's conference call for the second quarter of fiscal year '26. Joining me this morning are Jose Boisjoli, President and Chief Executive Officer; and Sebastien Martel, Chief Financial Officer.

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

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

Thank you, Philippe. Good morning, everyone, and thank you for joining us. We've delivered better-than-expected results in our second quarter in an operating environment that remained challenging. At retail in North America, we have gained further market share with our current Can-Am models, but as expected, we've lost market share in the noncurrent due to our low inventory. With a 20% year-over-year reduction in network inventory, we have reached proper level across all our product lines, except snowmobile. From this healthier base, we are well positioned to benefit from our newly introduced product to gain additional market share.

During the quarter, we also announced a definitive agreement for the sales of Manitou, which is expected to close in the coming weeks. Now let's turn to Slide 4 for key financial highlights. We ended the quarter with revenue of $1.9 billion, normalized EBITDA of $213 million, normalized EPS of $0.92 and solid free cash flow of almost $100 million. We are pleased with our results considering that Q2 is usually a transition quarter as we start introducing product for a new model year.

Looking at Slide 5. Our North American Powersport retail decreased 11%. Canada continued to perform better than the U.S. with a 4% growth, driven by ORV as Can-Am side-by-side had a record quarter. This growth was offset by a 15% decline in the U.S. In international market, Latin America continued to stand out through rapid and sustained growth. Retail was up 22%, led by a solid performance in ORV.

In Asia Pacific, our retail grew 5%, representing a first increase in about 2 years, fueled by momentum in China. Meanwhile, demand remained generally soft in EMEA, with retail down 13%, in line with the industry. Overall, we are encouraged to see that global industry trend has slightly improved from previous quarters.

Turning to Slide 6 for a look at our retail performance by product line in North America. Our Powersport retail declined 11%. As in previous quarter, Can-Am ORV market share was affected by a leaner level of noncurrent unit and high promotional activity by other OEMs. In 3-wheel vehicle, personal watercraft and Switch pontoon, retail was weak early in the quarter due to soft trends and unfavorable weather, but condition improved in July and early August.

Turning to Slide 7 for highlights from Club BRP held in Boston earlier this month. The event was a success with close to 4,100 participants in person and virtual. We introduced several new models and upgrade across our lineup, including many industry first. Once again, we stayed true to our commitment of pushing technology and innovation to wow consumers.

The highlight was the launch of the new generation of the Can-Am Defender. This vehicle received a ground-up overhaul further solidifying its position as the most capable, versatile and reliable utility side-by-side on the market. The new Defender remained best-in-class in terms of technology towing and cargo capacity while also offering riders the largest cab in its category.

The Defender was already the best product out there even with its original 10-year-old platform. Now with this new generation outfitted with the most advanced technology, we are setting an entirely new standard in the industry. We are in excellent position to continue gaining further market share in that segment that represent over 2/3 of the side-by-side industry.

Reaction to the new Defender were extremely positive. Dealer sentiment for the product was very good, while media who had a chance to test it, were impressed and issued very positive reviews. I encourage you to read them. But that's not all.

Let's turn to Slide 8 to look at some of other product news. We expanded our electric vehicle offering by launching the Outlander electric, featuring industry-leading towing capacity impressive off-road performance in a very quiet riding experience. It used our e-POWER unit, which also propel our electric monocycle and snowmobiles. This is another demonstration of how we leverage our modular design approach, to optimize development across many product lines.

In addition, we further surprised our dealers by introducing multiple model upgrade and enhancement. We've launched the Outlander MAX 6x6 designed to be the hardest working ATV in the lineup under extreme conditions. We added rock crawling capabilities to the Maverick R lineup with the XRC package and updated our Maverick X3.

In 3-wheel, we continue the evolution of our lineup with new modern coloration. As for Sea-Doo, we introduced new connectivity features and improvement to the entire lineup. We also ramped up the Switch pontoon experience with a highly anticipated 300-horsepower engine on some models.

We have also announced the repricing of some underperforming model, which was very well received by our dealers. As you see, we are the OEM who introduced the most product news for model year '26.

Now let's turn to Slide 9 for a more detailed look at year-round product. Revenue were up 13% to $1.1 billion, driven by higher ORV shipments following last year's inventory reduction plan. At retail, side-by-side was down mid-single digits. We underperformed due to high level of discounting on noncurrent unit by other OEMs.

We continue to outperform in current units ending the '25 season with more than 3 points of market share gains, driven by our Maverick R MAX. In ATV, retail was down low single digit in the quarter, in line with the industry. That said, we gained over 3 points of market share in current unit for the season fueled by our new Outlander platform.

As for 3-wheel, retail was down mid-20% as entry-level consumers are struggling to get approved for financing. A few words on our electric motorcycle. The ramp-up of our retail sales is not as expected in the context of a slowdown in global EV adoption. However, it's still early. We are proud to have set the bar high and put our electric motorcycle at the forefront.

The excitement around this new EV has been felt in North America and Europe as a result of our efforts to generate media and consumer awareness. In addition, to further build the demand and drive traffic in dealerships, we have announced price reduction in response to market feedback. We aim to leverage our past investment to grow this industry, make our motorcycle accessible to more riders and position ourselves as leaders.

Turning to seasonal products on Slide 10. Revenue were down 13% to $470 million, mainly due to a planned reduction of personal watercraft shipment. Our inventory is trending in line with pre-COVID level, which is creating a more favorable environment for the arrival of our model year '26.

Looking at retail, trend remained weak for marine products in North America. Personal watercraft sales were down mid-teen percent, slightly lagging the industry. Switch pontoon retail was down mid-20% as the industry is still going to a correction period. Sea-Doo had a better performance in international market with sales holding steady in Asia Pacific and growing low single digit in Latin America.

Moving to Slide 11 with parts, accessories and apparel and OEM engine. Revenue were up 7% to $305 million as dealers replenish their parts and accessories inventories. Finally, we continue to bring new parts and accessories through our LINK system for customization, which would further stimulate this business.

With that, I turn the call over to Sebastien.

Thank you, Jose, and good morning, everyone. Once again, our team did an exceptional job navigating a dynamic and volatile environment. We remained focused on our plan, continuing to be disciplined in managing shipments to further improve our network inventory position, while maintaining a strong emphasis on operational efficiency.

As a result, we closed the second quarter with a financial performance of free cash flow generation and a network inventory position, all ahead of our expectations, positioning us well as we enter the second half of the year.

Now looking at the numbers. Revenues were up 4% to $1.9 billion, primarily driven by stronger ORV shipments and offset by lower PWC deliveries. Gross profit came in at $398 million, representing a margin of 21.1%, down year-over-year, mainly due to lower capacity utilization and unfavorable product mix and the impact of tariffs. These headwinds were partly offset by cost inefficiencies in our manufacturing operations, favorable pricing and lower floor plan costs resulting from our leaner network inventory.

Normalized EBITDA ended at $213 million and our normalized earnings per share at $0.92, which includes roughly $0.35 coming from tax credits recorded in the quarter. Free cash flow from continuing operations reached $100 million, and we ended the quarter with over $270 million in cash, maintaining a solid balance sheet and strong financial flexibility.

Turning to Slide 14 for an update on the network inventory. As mentioned last quarter, our plan was to further rightsize our network inventory in Q2, and we delivered on that objective. In fact, our dealers' inventory ended the quarter down 20% year-over-year and 13% sequentially from Q1.

All product lines for which we had inventory in the network last year, saw double-digit declines compared to the prior year. Also, to put things in perspective, on a comparable product line basis, our dealers' inventory is down 1% versus pre-COVID levels. including a 5% decline in ORV, even as our ORV retail is up about 50% over the same period.

With these leaner inventory levels, our dealers' credit line usage ended the quarter at just above 60%. This is an excellent position to be in as it not only reduces floor plan financing costs for both us and our dealers, but it also provides significant capacity for dealers to take on new products, particularly with the introduction of the all-new Can-Am Defender, which addresses the largest segment in the side-by-side industry and is a key driver of dealer profitability.

Looking ahead, aside from snowmobiles, where some work remains, the rightsizing of our network inventory is largely complete. This positions us to better align our wholesale with retail as we move into the second half of the year. More importantly, these leaner inventory levels help protect the value of our brand, strengthen the dealers' financial health and enhance the competitiveness by enabling the rapid distribution of new products across the network, and by ensuring that we are best positioned to capture demand upside when market conditions improve.

With this, let's turn to Slide 15 for an update on fiscal '26. We are pleased with our execution so far this year. Quarterly results came in ahead of expectations. Network inventory levels have been diligently reduced, and we continue to drive efficiency gains across the organization. Combined with the significant innovations we have introduced to the market, these achievements position us well for a strong second half.

While the macroeconomic environment remains uncertain, and the industry dynamics continue to be volatile, we now have better visibility on expected deliveries for the remainder of the year versus what we had in previous quarters, given that the rightsizing of our network inventory is mostly complete, and these leaner levels provide us with more flexibility in managing our shipments based on retail trends. We have snowmobile orders on hand following our spring booking and we will be fueling the initial demand of our new introduced products with the receptions from the dealers was very positive.

These factors give us the confidence in our volume outlook for H2. And consequently, we are comfortable issuing a guidance at this time. Obviously, this assumes that the tariff situation remains as is for the rest of the year. Note that based on the information we have today, we have factored in our guidance about $90 million of gross tariff impact. This is up from the previous estimate of $60 million to $70 million, reflecting the increase in steel and aluminum tariffs to 50%. New tariffs on copper and the expansion of steel and aluminum tariffs to additional products, including some of our vehicles.

All in all, our guidance calls for revenues of $8.15 billion to $8.3 billion, normalized EBITDA of $1.04 billion to $1.09 billion and normalized EPS of $4.25 to $4.75. More importantly, it calls for solid growth across the board in the second half as highlighted on Slide 16.

From a top line perspective, our guidance implies growth of 8% to 12% in the second half, driven by the elements I previously mentioned. Benefiting from the stronger revenues and the ongoing focus on operational efficiency, we expect to be able to more than offset the impact of higher sales program, tariff costs and the return on variable compensation to deliver significantly improved profitability. In fact, our guidance calls for H2 normalized EBITDA to be up between 22% and 31% over last year, resulting in a normalized EBITDA margin in excess of 14%, well above H1 levels.

And this all results in normalized EPS that is expected to grow between 28% and 51%. From a cadence perspective, given the lower shipments planned for snowmobiles and the lower RV shipments in August ahead of the new product launches, Q3 normalized EPS is expected to be roughly stable versus last year with the bulk of the H2 growth coming in Q4.

On that, I will turn the call over to Jose.

Thank you, Sebastien. I am proud of our accomplishments so far this year. Despite macroeconomic environment, we've delivered results ahead of expectations through solid execution and operational excellence. The timing of our model year '26 launches could not be better. We are the OEM with the most product news, which we are bringing to market as our network inventory is healthy and dealer sentiment is improving.

When I was in Boston for Club BRP, I felt a significant upswing versus last year. Many dealers appreciated that we were the OEM who supported them the most from day 1 during these challenging times. Since we are starting to see the benefit of our action and despite ongoing volatility, we are comfortable issuing guidance. We are confident that the momentum generated by our new product introduction will allow us to deliver a stronger second half of the year.

With the most complete product offering, strong brands and a solid dealer network, we are uniquely positioned to come out on top when the industry fully recovered. As I said many times in the past, our goal is to consistently wow consumers with market-shaping product over the long term. We remain committed to pushing technology and innovation to capitalize on market opportunities and sustain profitable growth.

On that note, I turn the call over to the operator for questions.

[Operator Instructions] Your first question comes from Craig Kennison with Baird.

For the updated guidance, I wanted to ask about trade policy. What are the tariff scenarios that you're contemplating? I know we have USMCA that is subject to renegotiation and Mexico has suggested plans to raise tariffs on Asian imports. So I think you're well positioned for the current landscape, but what are the scenarios you're thinking about down the road?

Yes, obviously, over the years, and you know that we optimized our manufacturing footprint and our supply chain and all our products made in Canada and Mexico meet the USMCA. Today, about 2/3 of our content come from North America. I won't give you the detail between Canada, U.S. and Mexico for competitive reasons. But 2/3 of our content come from North America.

Obviously, we are in constant dialogue with Canadian and Mexican government and authorities to try to follow very closely what's going on. And I believe that beyond BRP, the USMC agreement is critical for North American company to be able to compete worldwide. Then to be honest, we're not working right now on any scenarios.

Like I said many times, we always found ways to adapt to any regulation if they -- if the norm or the new USMC rules are clear, and we have lead time, I'm very confident we will adapt to any situation. But we're following that closely, and we're ready to fire up when we know better.

And could you shed any light on your plans to mitigate the tariff exposure you forecast in your guidance?

Again, the $90 million is the growth. And basically, it's sourcing. We move depending on the regulation and where the goods are coming, sometimes we move the production or the supplier from one country to the others. I saw some idea from our team where supplier were doing an assembly from -- a part coming from Asia, and now we're doing it ourselves in our factory, then there is many, many things that we do to be able to minimize the impact of those tariffs. And to be honest, I'm impressed how fast we react and how good we are, but we're learning every day.

Your next question comes from James Hardiman with Citi.

So would love to sort of have a conversation about the current versus noncurrent setup in the industry right now. Obviously, that was worth calling out, right, that your overall retail, particularly in ORV was down. But if we split it up into current versus noncurrent tells a very different story.

I guess, as we roll that forward, what does that look like in the third quarter? And I think a lot of the answer comes down to when we think your peers will -- if they haven't already worked down their noncurrent and ultimately, sort of ease up from a promotional perspective. But curious how you see sort of your retail rolling forward in that context.

Then obviously, we are in the quarter. Q2 is a quarter where many OEM transition from model year '25 to '26, then there is some estimation in our forecast. But basically, we saw in Q2 that most of the OEMs are more cautious versus shipment. And we saw inventory -- in our case, we are happy where we are versus except snowmobile that we intend to deplete in the upcoming season, but we saw positive signs like in the ORV.

The ATV inventory was down by 20% in Q2, side-by-side 10%, the industry, not us. Watercraft is a bit on the high side. One OEM have shipped quite a lot of '25 late into the season. But overall, the noncurrent versus current inventory ratio has improved over the quarters. Then this is our situation. Why we are encouraged for H2, and we are comfortable to issue the guidance is we have a good visibility on what we will be shipping and also we see that we are in a position where our inventory is low.

We have very good product news. The reception of the dealer were very upbeat at Club. And we were the first one, like I said in my script, to take the bullet and support them in the last 18 months. And now it's time that we take advantage of this. Then that is why we are in a unique situation, and we're comfortable and we believe we can grow market share in the H2, and we're comfortable with our guidance.

Got it. And just to clarify, it sounds like you're saying you think retail is going to be up in the second half, maybe just confirm or deny that. And then just early thoughts on 2026. Obviously, as I think about puts and takes, there was some inventory drawdown this year, assuming we're back to sort of 1:1 wholesale retail, what does that get you?

And then the tariff piece, right? I think you've said in the past that we shouldn't think about next year being double this year. But with the new $90 million number, any sort of initial thoughts on what that might look like for '26?

I will give you color on our forecast for the industry in H2 and Sebastien will talk about fiscal year '26. Then obviously, there is a lot of volatility in the macroeconomic. But basically, we're planning for the industry H2 similar to Q2. And just to give you a sense by key countries, U.S. was down mid-single digit in Q2. Obviously, we believe tariff uncertainty and the inflation still affect consumer confidence.

Canada have done well with low -- up low single digit. I'm talking the industry. LatAm is doing very strong with over 20% growth in Q2 and drive by the ORV momentum in Brazil and Mexico, and we believe this will continue.

And EMEA was down in Q2 by mid-teens, but is improved versus previous quarter. Then when -- this is basically our planning for the industry. And again, our position, we believe we are in a good position versus the others.

On tariffs, as I mentioned in the prepared remarks, this year is a headwind of -- a gross headwind of $90 million. There are some onetime elements that we've incurred this year that will not come back next year, probably in the range of about $10 million. If we do nothing, and obviously, that's not how we operate. The teams are always there to optimize and minimize the impact.

You could see again with the same tariff base that we have, maybe a headwind of $120 million, $130 million. But obviously, we're going to keep working on optimizing and working with our suppliers to reduce as much as possible the tariff risk, but that would be the, let's say, the run rate on a steady basis.

Your next question comes from Brian Morrison with TD Cowen.

A question for Seb or Jose. You have called the $1.3 billion revenue headwind or so a big number from the destock over the past year with the industry inventory being closer to rightsize now. How do we think about the revenue profile outlook of this alignment of wholesale and retail? Should it be straight-line recovery over the next 12 months? How do you think about that?

Well, obviously, it's probably a bit early to call what next year is going to be like as we just issued guidance for the next 6 months of the year. But if you look at the pluses and minus for next year versus this year, I think the big one is going to be the retail equal wholesale.

And when you look at the number this year and the destocking we did, it's between $400 million to $500 million revenue impact that we've had, and it's well above $1 of EPS impact, obviously. And so once -- hopefully, we're going to be there at the end of the year. We're there already where our inventory is rightsized. We need a bit more work to do on snowmobile. And so that headwind should be gone next year.

Obviously, there are some volume opportunities as well for next year. We've been losing market share in ORV now for the past year or so, mainly due to the noncurrent dynamic in the industry. Now the inventories are cleaner. There's a bit of more work to be done for a few OEMs, but my call is that they should be done by the end of the year.

We're back from Club, as Jose mentioned that in his remarks as well, a lot of excitement. You were there as well, Brian, last week, and you saw the dealer engagement. You saw the great products we have. And so that obviously helps next year. And from the market share perspective, I trust that Sandy and his team will be working on turning the tide and we should see market share improve next year. So that obviously will be a plus, so that's from a more a top line perspective.

And then when you look at the profitability, obviously, we continue to drive efficiencies. That's for sure. The teams are always working on optimizing the bill of material, the operations on our plant. We might decide to invest in other -- in certain sectors. We -- even though there's a slowdown, you saw that we continued investing in innovation. We're going to continue doing that next year. So maybe that's a wash.

And then in terms of other minuses, I talked about the tariffs, so they're going to be higher next year. That's if we don't do anything, depreciation could be, let's say, $30 million higher next year financing costs as well. and the tax rate probably closer to where we were historically at the 25%, 26% range. So again, here are some of the plus -- high level of pluses and minuses, but obviously, too early to call. We'll enjoy the guidance that we just issued today. It's still hot. It's still warm, and we look forward to provide you with details on '27 in the next few quarters.

I appreciate those details. I think the message though is that of that alignment, $400 million to $500 million of that is incurred in the second half of this year. And then in a flat environment, we should see the remainder of that next year. Is that correct?

And then my second question is really just on your margins, what you said. Can you maybe just bring the impacts from promo activity this year because obviously, it's material. And with the noncurrent inventory in the industry starting to ease, maybe just frame how we should think about the margin impact that should have going forward?

Yes. Last year was a big year in terms of promotion. So this year, we're going to get a benefit probably in the range of, let's say, 75 to 100 basis points versus pre-COVID or even 50 basis points better. Could we further optimize next year? For sure, as we did a big -- well, the commercial environment was tougher this year, so more promotions. We had to compete against other OEMs that had noncurrent. So could there be another 50 basis point tailwind next year? Most certainly. That's something that is plausible. Obviously, there are a lot of variables that need to fall into place, but it is one possible scenario.

Your next question comes from Robin Farley with UBS.

Great. Just 2 things. One is a follow-up to your comments about expectations for a second half of retail. You said kind of similar to what we saw in Q2, but you mentioned U.S. down mid-single, Canada up low single. If we were talking about just your ORV expectations because I understand there's some seasonal things that -- for your product lines may be different. But if we were looking at just North American ORV retail in the second half, would you say that you're expecting North America to be up low single digit as you saw in Q2? In other words, some of the numbers you were giving, I assume were impacted by those other product lines. But is it fair to say that your comment about expecting second half trends similar to Q2 would be also the case just for ORV specifically?

Well, we -- when I look at Q2, every month sequentially ORV retail improved. And so from May to June to July. And sequentially, we're seeing improvements as well happening in August. As Jose mentioned, the industry is cleaner in terms of current noncurrent. Yes, some OEMs have higher noncurrent than where they were historically. But I think we'll be competing in a better environment.

Obviously, yes, we're transitioning to a new model year. So I'm hoping to see better numbers than what we saw in Q2. And early in August, the trend is in the right direction. And so obviously, we're working to make sure that, that continues.

Okay. Great. And then my other question is when we look at your inventory compared to pre-COVID levels being up only 2%, down 1%, including new product lines or excluding new product lines. And I guess, specifically for ORV down 5%. With your retail volume so much higher than pre-COVID levels, how is that down 5% the right number? And especially because I'm assuming that's an aggregate and your dealer base has probably grown so that would suggest that like on a per dealer level your ORV inventory is even further below. Just wondering why that is the right number for you.

Well, one, the dealer count is fairly stable versus we were pre-COVID. And so it's on a, let's say, same-store basis. And were we to a bit too high during pre-COVID? Some could say yes. Obviously, it's a question of dollars as well. The dollar value of units is significantly higher. And so dealers are more cautious in taking inventory when the dollar value was almost up 50%, i.e., MSRP increase, but also a combination of better mix. And also, there is a benefit in where demand for cab units is still very strong and supply is slightly lower than where we were in a historical level for our other product lines.

So that's one of the reasons that's driving lower ORV inventory for us, but also other OEM. And there's always going to be variation in our inventory levels. It's never going to be fixed 90 day, every month, every quarter. It will move. But generally, we're happy with where the inventory stands. It provides us with flexibility proactivity if there were to be an economic slowdown. And I think given where the uncertainty in the state of the economy, I think it's at the right level, and we'll adjust our inventories accordingly as the business continues to evolve.

Your next question comes from Sabahat Khan with RBC Capital Markets.

Just in light of some of the comments around the inventory position and sort of the outlook, can you get a little bit deeper into sort of the retail evolution you expect into sort of the back half of this year and into next year? Is this sort of just sequential improvement in the retail uptake on the consumer side? And sort of how are you factoring into your outlook, some of the macro factors that you talked about and how they might impact the consumer uptake? And if there's any color across categories on the retail uptake outlook?

Yes. Again, we don't have, let's say, a black box that gives us the full industry and retail trends. But obviously, there's -- we need to appreciate that there are many variables such as tariffs, interest rates, consumer sentiment. So it's difficult to forecast industry at the moment.

But all in all, despite all the noise that we've seen in the industry and the market, the industries have held up so far decently, this year being down low single-digit percentage overall. Yes, some of that was helped by the noncurrent promotions, that's fair. And -- but we're transitioning now to a model year. So now we're -- there's going to be noncurrent, the model year '25 will be noncurrent.

And the other big question is how interest rates will behave, how interest rates will move? So our base case for the rest of the year is a continuation of the trend we are seeing, because we're transitioning to a new model year. But despite this, even though there's volatility, we're confident in the guidance we have today because, again, even if there is a slight movement in industry and retail -- our inventories are low. Dealers want our new units, the new innovation. We have orders for snowmobile. And so we're confident in the guidance we've issued today based on all of these factors.

Great. And then as we look at sort of the balance sheet in the, call it, 2.5x range, is it a bit of a wait and see on the balance sheet and capital allocation as you look ahead? And presumably, production probably picks up, might be some need for investment there as units start to improve. Can you just walk us through your views on sort of capital allocation, balance sheet and maybe reinvestment into the business as we potentially move toward an up cycle here?

Yes. Well, our priority in terms of capital allocation has always been investing in the business, growing the dividend and also doing buybacks. But we've given the context, the uncertainty around tariffs, the economy, we've been on the sideline on buybacks, and we'll probably continue being on the sideline as well until we see that clarity and when we see the cash flow come in.

The priority has always been protecting the financial flexibility of the company, and we are fortunate, we are in a good position. We've got debts with no covenants. And so we don't need to worry about the financial -- meeting our financial covenants. We've got ample flexibility on the revolver as well. But currently, being prudent has been the name of the game, and we're going to continue managing our balance sheet that way.

Your next question comes from Joe Altobello with Raymond James.

So just want to go back to the guidance for a second. And I think, Seb, you mentioned this earlier. If I look at first half versus second half, it's quite striking. The revenue midpoint, I guess, is up 10% or around $400 million. So I'm just trying to understand how much of that is simply lapping last year's under shipping demand? And how much is innovation like Defender, for example? I'm just trying to assess the risk of that outlook.

Well, for sure, I mean, last year, it was an easy -- H2 is an easy second half to lap. And most of the focus last year was on reducing seasonal product inventory in the network. And so our shipments were actually down for the seasonal product business.

This year, when you look at our H2 guidance or outlook, seasonal revenue is relatively flat versus last year as there's still work to be done on snowmobile. But we're planning to increase year-round products. Last year was decent, but this year, H2 is going to be more in line with what we did in '23 and '24.

In terms of delivery, obviously, we have the new products that's driving some of the volume, but we believe that's going to be -- also going to be driving retail. And also mix is also going to be beneficial in the second half of this year where mix was more challenged last year as we undershipped seasonal business with a very rich miss, and we also have, obviously, cost efficiencies that we're factoring in the second half and also lower sales program.

So all in all, I would say that, yes, it was an easy comp last year, and last year was well below what we believe the earnings power of the company is. And this year is a more indication of what the true earnings power of BRP is when the inventory is -- when we're shipping more wholesale equal retail.

Okay. Got it. And on the tariff front, you mentioned the $90 million this morning. I think somebody else asked this, but I'm not sure if you answered it. What's the net number post mitigation? I'm just trying to tie back to your original EPS outlook for this year, which I think was $4.50 to $5. Just curious if that's now actually higher if we exclude the tariffs.

Yes. Net of the mitigation efforts we've put in, we're probably ending at a, let's $0.25 to $0.30 negative impact on the P&L. Most of the mitigation efforts have been that we've taken higher pricing. Usually, we do a 1%, 1.5%, but we've taken pricing higher, mainly in the parts and accessories business. But that's how we've mitigated the impact.

Your next question comes from Martin Landry with Stifel.

Sebastien, speaking about earnings power, I would like to just have a little bit of a discussion. A couple of years ago, the company was guiding for an EPS of all the way up to $14 and now you're guiding for an EPS for $4 to $4.70 -- yes, around $4.50. So how long -- and what kind of earnings power could we expect from the company in the coming years? I understand that going back to $14 is probably unrealistic in the near term. But I'd love to hear you talk a little bit about what kind of earnings power can the company have in the next 2, 3, 4 years?

Well, I mean I like where BRP is sitting today. I've been with the company for 20 years. I've seen how the company has grown and evolved. And obviously, we are today a must in the Powersport industry, from the breadth of our product portfolio, from the quality of the products we offer, from the dealer network we've built over the years, not only in North America, but around the world.

And so I believe that BRP can continue growing in the industry? Absolutely. We've talked about ORV market share, being able to grow it and obviously, not only the side-by-side, but ATV -- it all obviously depends on the industry. So BRP has the resources, the capacity to continue growing. We need to drive industry as well. But the industry is based on the macro environment, interest rates, consumer confidence, unemployment rates, et cetera.

So there are many variables. So it's very dependent on how the industry behaves, Martin. So do I believe that if the industry grows and the economy is robust, that we can get to the numbers that we talked about in the past? Absolutely. Because BRP has become innovation machine and a profitability machine as well for the dealers. And that's -- these are the key factors that are going to drive growth in the future.

Okay. And could we -- is it fair to say that there's a realistic scenario where your EPS could double from current level in the next 2, 3 years?

Again, it's very -- do we have the backbone to do it? Yes, we have the manufacturing capacity to do it? Yes, we have the product lines to do it. Yes. The network? Yes. It will be very dependent on industry dynamics.

Your next question comes from Mark Petrie with CIBC.

I just want to clarify maybe a couple of things. You talked about 2 figures from the destock headwind, the $1.3 billion and then the $400 million to $500 million. Could you just square up exactly what those are referring to? I think the $400 million to $500 million is the potential tailwind into next year. But could you just be clear on that?

Yes, the overall impact if you do the accumulation there, when we talked about destocking in '20 fiscal -- I don't want to make the fiscal year '25 now we're destocking in fiscal year '26. The combined effect probably adds up to $1 billion close.

The number I referred to in my question to Brian was a $400 million to $500 million impact when I compare the destocking we did in the current fiscal year. The impact of that destocking is about $400 million to $500 million of revenue just for this year.

Okay. Understood. And then you were talking about the -- or highlighting the 14% to 15% EBITDA margin level implied for the second half in your outlook. Could you just sort of walk through kind of the biggest factors bridging that from last year?

And then how to shape those into fiscal '27. I think you've already touched on the programs, which I think you said it could be a 50-basis point tailwind. But could you just give a little bit more color there, please?

Yes. And I'll -- again, I'll probably refrain from making any estimates on '27, too early. But I gave you some color as to what I believe the pluses and minuses are for next year. But when I look at this year, just for H2, we look at gross profit, obviously, the second half of the year, I'm expecting gross profit to increase probably 300 basis points easily versus where we were last year.

So let's say, low 300 basis points to whatever, 250, 300 from an OpEx, it will be higher in the second half of the year versus last year, probably 500 basis points, mainly coming from variable compensation. And from an EBITDA margin, second half of the year, you're probably going to see 150 basis points net-net there when you do the pluses and minuses on the EBITDA, a positive growth. So well above 14% EBITDA margin in the second half of the year.

Your next question comes from Benoit Poirier with Desjardins.

Yes. Jose, just in terms of retail sales between Canada and U.S., there's been a discrepancy. Canada was up low single digits. U.S. was down low single digits. So I was wondering if you have any thoughts on what's driving this? I've seen some comments from dealers in Canada pointing to greater interest for BRP products, given the geopolitical issues or I'm just wondering if it's a matter of having a much lower of noncurrent units in Canada. So any color on the discrepancy between both countries would be great.

I think there is -- this is my belief, in U.S., there is still the tariff uncertainty and the thing, the price change very often. Also, the inflation is still high on the high side, and there was no interest rate reduction so far, then the U.S. consumers I think is more uncertain about the overall economy. And we see that in the lower income customers, a lot of our rejection rate for people who are asking to buy a Ryker is very high in U.S. In Canada, it's a bit different dynamic. The dealer are -- first, the dealer in Canada are very loyal to BRP and the economy is overall good.

I didn't hear personally dealers saying that because of the tariff situation, there is more interest for BRP product. I believe maybe some U.S. companies have more difficulty because of the exchange rate between Canada and U.S. to come to Canada. But I think the dynamic is more caused by the macroeconomic environment in the U.S. than anything else.

Okay. That's interesting. And with respect to the pricing adjustment that we -- you just announced at the Club, we've seen some of your peers that were able to drive stronger sales on the back of lower pricing. So I was wondering whether you're seeing positive impact following price adjustments made at the Club, Jose?

I mean it's too early to call because right now, Benoit, we have order on hand for all the ORV products for deliveries in August, September. We're doing next week, the booking for deliveries in October. But what I can tell you, it's not -- it's normal that from time to time, you readjust your pricing. And what happened during the COVID, a lot of OEM have increased more the pricing than others. And we were somewhat not competitive in 6 category. And we took the timing right now that our inventory is low situation, it seems to be more stable to readjust our pricing in 6 category because we drive to continue to gain market share in the off-road business and every category need to grow. And this is -- the timing was perfect for us. Then it's too early to tell you, but in our internal planning, we're definitely planning to grow volume in those category for product.

Okay. And maybe last one for me. You've been quite successful ramping up the fishing offering in the Sea-Doo category. We've seen Yamaha that came with the new fishing PWC called the Crosswave. So I was wondering, Jose, if you have any thoughts on this new product from Yamaha and whether you've seen some impact on the Sea-Doo Fish Pro offering so far?

First, the product, nobody saw it physically yet. It's scheduled to be delivered next spring, then we'll see how it goes. But definitely, in the watercraft industry, recreational -- product for recreational-only activity is still good, but we've been very good to have specialized vehicle, and that's what we've done with the WAKE PRO. That's what we've done with the Explorer, that's what we've done with the Fish Pro.

And this is tailored to activity, which bring new customer to the industry. Then obviously, Yamaha took a different approach, but it will be interesting to see how it grows. And at the same time, it's pushing us to be better and to be more competitive. We like competition.

And if they can accelerate the development of people who fit into the watercraft category, I welcome the initiative. I mean, if we could continue because we are the 2 main players to grow the industry, I think it will be better for both of us, and we're not afraid of the competition.

Your next question comes from Luke Hannan with Canaccord.

Most of my questions have been answered. So it's just a clarification on some earlier lines of questioning. On the topic of the normalized earnings power, I know you've referenced it as far as EPS in the past -- but I know that you've also discussed a normalized EBITDA margin of in and around 17% as sort of being the structural mid-cycle target that you guys have had. What does that number look like? Or has it changed at all post marine divestments? What should we be thinking about as sort of the longer-term margin potential here?

No. If there's anything, it's probably even more achievable. I mean, we've delivered high EBITDA margin percentages in the past with the marine business up to 19%. I think when you exclude marine pro forma, you would be at 21%. So is the 17% still achievable to an earlier question from Martin Landry, again, as the business grows, as we get to these -- as the industry grows, as we get to these higher revenue numbers, for sure, EBITDA margin will grow as we leverage the investments we've made in the past and as we leverage the existing manufacturing capacity. So I do believe that it's a number that's still very much achievable.

Great. And then you also touched on the dealers' utilization of their line of credit. It was 60% this quarter and it's down from 70% last quarter. How has that fluctuated over the course of, we'll say, the last few years? And I mean like is it at a point now where it's basically troughed and then we continue -- we should see that expand given the retail environment? Or just how roughly, I guess, should we be thinking about that over the course of the near to medium term?

It is very healthy. Dealers see it as well in their monthly financing cost or floor plan costs. So it is very healthy. As I said, it will move, yes, because there's seasonality in our business. There's inventory buildup before a retail season, sometimes retail does not go according to plan. Sometimes it's better. So we are expecting it to move. It did go up quite significantly in the last 24 months. But we also did rightsizing of line of credits. We talked about this as well.

Our business has grown significantly. MSRPs have grown as well. And so we needed to bring dealers along to acknowledge that their lines of credit also needed to be tailored to the new reality of the Powersports industry and our BRP's business. So that's another factor.

Okay. And then last one for me and then I'll pass the line. Utility SSVs represent about 2/3 of the overall industry. Can you share what it represents as far as your SSV mix today? And then when we think about the longer-term market share opportunity for you in SSVs, how much of that is utility market share capture versus other, we'll say, capture in recreational versus other drivers?

Same ratio for us, 2/3 of our volume is utility. And obviously, we've always been stronger in the report. And obviously, there is more opportunity in the utility, and that's why we're so optimistic with the new Defender. Because like I said, we have the best ATV with old technology. Now we established a new standard with the new technology.

Your next question comes from Cameron Doerksen with National Bank Financial.

I guess a question on the tariffs. You mentioned that the new tariff estimate for the year includes the recent announcement of the expansion of products on steel and aluminum tariffs. It doesn't sound like that affects all of your products.

Can you just maybe detail that a bit more and whether there's any risk that there could be I guess, further tariff impact, if there's, I guess, another expansion of that steel and aluminum to more products?

Yes, there's always a possibility of the rules changing. This came into effect on August 18, where steel aluminum now at 50%. The vehicles that are impacted is mainly ATV, side-by-side and however, some models of side-by-side are excluded. And it's really on the steel content that are in the vehicle. So the secret is obviously providing what the weight and pack is. And steel is obviously a big part of the vehicle, but it's a low cost in the vehicle. And so it is -- we prefer not to have it.

It is an impact, but it's certainly something that we can absorb and if the rules change, we'll adapt as we always do. But difficult for me to call what could be the impact if I were to apply X percentage tariff on X and Y products.

Okay. No, that's helpful. And maybe, I guess, second question, not that we're rushing to see Jose accelerate his retirement, but just wondered if there's any update on the new CEO search at this point.

No update. The search is ongoing, and I was with the HR committee this week and there should -- the transition should be by the end of the year, no change.

Your next question comes from Tristan Thomas-Martin with BMO Capital Markets.

I don't know if I missed this, but did you guys disclose where you expect your channel inventory levels to be at the end of the year? And then also anecdotally, I'm curious you've heard anything about how dealers are planning on ordering the new product? I understand the reception has been very positive, but just curious how dealers are kind of thinking about the back half and then early next year in terms of planning their order?

From an inventory perspective, no big changes versus where we stand. Obviously, there is -- as we've mentioned, there's a bit of work to do on snowmobile. And so that's going to be the focus in the second half of the year. But generally, where we are in Q2 for the various product lines is where we expect to be at the end of Q4.

And for your second question, sorry, I missed the -- I think Jose is going to take it.

On the other front, like Sebastien mentioned, we have the order on hand for snowmobile for the delivery for fiscal year '26. Now on watercraft, we're just finalizing the booking. Dealers saw the product at Club, they look, they do their model mix. But basically, we are on plan. And off-road, we have dealer on hand for the deliveries in August and September.

We're taking the delivery -- we're taking an order every month or delivery in 2 months. And we'll be taking deliveries in the next 2 weeks for delivery in October, but we're very confident with the off-road lineup that we have and the novelty that we will meet our numbers.

Okay. Great. And if I could just sneak one more in there. I believe in your prepared comments, you said investing in other sectors. Is that investing in product lines within an end markets you're in or possibly expanding into other end markets?

It's still centered around the Powersport industry.

[Operator Instructions] Your next question comes from Jonathan Goldman with Scotiabank.

I apologize if I missed this, but just going back to the guidance, the second half implying a plus 10% at the midpoint. I think you called out retail being aligned with wholesale and retail kind of being similar in the second half to Q2, which was down low single digits. So to bridge the delta, is it pricing, share gains, new product launches? Any other elements in there?

Well, it's a combination of factors. As I mentioned, the favorable product mix is going to be a factor. The less programs as well as another factor helping revenue. These would be the 2 big items that are, let's say, not volume related.

Okay. And maybe, Jose, could you comment on the level of new entrants in the industry now versus 2019, how elevated it is? And I guess this ties into the broader question of the earnings power of the business. If you look at the industry data, calendar '24 units are kind of exactly where they were in 2019. So do we have more room to grow unit wise in the industry? Or is it kind of stabilized in terms of volume? And then obviously, this year would be lower and it's just getting back to the $1.2 billion level?

New entrant numbers in Q2 were at 23%, same, same level than pre-COVID. And it seems that we're back to where we were before the COVID bubble. I think in terms of industry, I answered the -- what we're planning for the industry. I think what maybe additional and for you is the trend that we saw in the last 2 quarters is continuing.

Obviously, the inflation, the high financing rate, the uncertainty put some pressure on the lower income customers, and we see the premium selling well versus the value product. And Spark and Ryker are below traditional watercraft and below traditional fuel vehicle. And in the side-by-side, the premium sell well, the value is down. Utilities sell well and their export is down.

Then the same trend that we saw in the last 2 quarters, but we are well positioned because, as you know, we're better to -- in the high-end product than the entry level. And with the new Defender and the utility going up, we are -- timing could not be better.

Okay. That makes sense. And I guess just following up on that, do you think the industry is larger today in terms of units than it was in 2019? If you exclude motorcycles, I guess, there was about 1.2 billion units sold in 2019. In a normalized environment, do you think we can exceed that volume in the industry totally? -- in North America?

The side-by-side have grown over the last few years and it continued to grow. And what is interesting, it's growing in North America, but it's growing even more in some international markets. The number are still obviously lower than North America, but the growth is very good. And I think there is a place to continue to grow or the industry will continue to grow in the side-by-side business.

There are no further questions at this time. I will now turn the call over to Mr. Deschenes for closing remarks.

Thank you, Joel, and thanks, everyone, for joining us this morning and for your interest in BRP. Before we go, note that we will be hosting an Analyst and Investor Day on October 8 and 9 in Valcourt. Stay on the lookout for more detail. Thanks again, everyone, and have a good day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.