BRP(DOOO) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported revenues of $7.8 billion, normalized EBITDA of $1 billion, and normalized EPS of $4.68, all within the revised guidance range [10][31]. - Inventory levels were reduced by 13% year-over-year, or 18% when excluding Snowmobile, which experienced softer retail demand [10][11]. - The fourth quarter revenues decreased by 20% to $2.1 billion, primarily due to lower shipments and higher sales programs [30]. Business Line Data and Key Metrics Changes - ORV retail was down about 10%, while ATV retail also saw a similar decline due to non-current unit dynamics [21][22]. - Seasonal product revenues decreased by 29% to $678 million, reflecting reduced shipments [24]. - Snowmobile retail was down low 30% in the quarter, with a better performance in February and March due to improved snow conditions [25][26]. Market Data and Key Metrics Changes - North American Powersports retail was down 21%, with a decline of 11% when excluding Snowmobile [12]. - EMEA and Asia Pacific markets saw retail declines of 11% and 10%, respectively, while Latin America outperformed with a 16% increase in retail [13]. - The company gained market share in current units despite losing ground in non-current units due to inventory reductions [16][17]. Company Strategy and Development Direction - The company aims to focus on its Powersports leadership position and capitalize on long-term growth opportunities [9][40]. - A decision was made to sell the Marine business, which is currently in the sales process [8]. - The company plans to continue investing in core activities and new product introductions to enhance market presence [9][19]. Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging fiscal year due to macroeconomic pressures and consumer demand [6][7]. - The company remains cautious about the upcoming production schedule and inventory management due to ongoing tariff disputes and economic uncertainty [32][38]. - Management refrained from issuing guidance for fiscal '26 due to unpredictable operating conditions and consumer confidence [38][39]. Other Important Information - The company achieved over $200 million in lean savings for the year, contributing to operational efficiency [8]. - Free cash flow from continuing operations exceeded $450 million, allowing for dividends and share repurchases [31]. - The company has a comfortable net leverage ratio of 2.6 times, providing balance sheet flexibility [31]. Q&A Session Summary Question: Industry inventory backdrop and competitive pricing considerations - Management noted that while the company is in a better inventory position, other OEMs have higher non-current inventory, which may affect market share in the first half of fiscal '26 [46][47]. Question: Expectations for production and CapEx trends - Management expects solid free cash flow generation and a slight increase in CapEx due to foreign exchange impacts [50]. Question: Network inventory situation and future expectations - Management confirmed that while ORV inventory is in good shape, Snowmobile inventory remains high, and they are cautious about production levels [56][57]. Question: Impact of tariffs on guidance and demand - Management indicated that the $40 million tariff impact is an estimate and that consumer demand has softened, affecting potential guidance [60][61]. Question: Non-current inventory challenges and market share - Management expects to face market share challenges in the first half of the year due to competitors' excess inventory [66]. Question: Cost savings impact on income statement - Management stated that cost savings would not automatically translate to price reductions, as they aim to protect profitability [68]. Question: Retail demand outlook in North America - Management observed that high-end products are performing well, while entry-level products are struggling due to inflation and high interest rates [74][76]. Question: Inventory management strategies moving forward - Management emphasized the importance of working closely with dealers to manage inventory levels effectively, especially in light of high interest rates [134].