BRP Inc (DOOO) 2026 Q3 法說會逐字稿

Good morning ladies and gentlemen. Welcome to the BRP Inc's FY26 third quarter results conference call. For participants who use the telephone line, it is recommended to turn off the sound on your device. 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 result could differ from those implied in these statements. The forward-looking information is based on certain assumptions and is subject to risk and uncertainty, 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 slide, 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 result, which came in ahead of expectations. While we continue operating in a dynamic macroeconomic environment, our teams remain focused on discipline execution, and our hard work paid off.

We also gained market share in ORV fuelled by the success of our newly introduced models, notably the Can-Am Defender HD 11. Let's turn to slide 4 for key financial highlight. We ended the quarter with revenue of $2.3 billion normalized an 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 trends. In North America, our retail sales decreased by 4% or 1%, excluding snowmobiles, 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 US we're 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 favourably, 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 four by four and six by six, and enhancements to our Maverick lineup led to a record month of October at retail for both side-by-side NDTV.

Our new model captured consumer attention and earned rave reviews from media representatives, who tried 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 HD10, 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 RV shipments following new product launches. At retail side by side, what's up, high single-digit outpacing the industry. In fact, we delivered our strongest third quarter ever at retail for a side by side.

We continue to strongly outperform in current unit, gaining 4% of market share in the utility category. In ETV retail was down mid-single-digit, outperforming the industry, which was down high single-digit. In current unit we've gained double-digit market share points driven by our Outlander platform and newly introduced models.

As for three-wheel vehicles, 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 number one in the three-wheel vehicle business with a market share over 50%.

Turning to seasonal products on slide 9. Revenue was down 2% to $606 million mainly due to a planned reduction of snowmobile shipments to right-size network inventory. Looking at retail, the snowmobile industry saw a very high level of discounted non-current units from other OEMs.

In fact, about two third of units' retail during the quarter were non-current, a level we have not seen for many years. As expected, we lag the industry given our lower non-current inventory and strong retail performance at the end of last season. This dynamic should continue throughout the winter.

However, we underperform in current unit as a result of the overall strength of our lineup and elevated level of pre-sold unit. Turning to on-water product trend remained relatively soft in North America, for the season ended in September. Personal watercraft sales were down 1%, slightly lagging the industry, but we maintained our number one 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 CU retail up mid-single-digits 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 dealer 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 in production.

The revenue increase is also due to a more favorable mix of OEM engine sales. Before turning the call over to Sebastian, I want to give you an update on the sales of our marine business. In Q3 we've closed the cells of many. 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 turned the call over to Sebastian.

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 [$2.59].

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 USD200 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 maintain 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 three-wheel, personal watercraft, switch, and snowmobile, all showing strong double-digit reductions. 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 right sizing of our network inventory is largely complete. This will allow us to better align wholesale with retail moving forward. With a 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 tariffs 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 DPS for the year.

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

Thank you, Sebastian. Before closing my remark, 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 cause 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 focused on delivering against our new M28 strategic plan to capture our full power sport potential.

As part of this plan, we introduced a financial objective of $9.5 billion in revenue and $8 in normalized EPS by the end of fiscal '28. We are confident in our ability to reach these objectives. Looking ahead, we are best, we are the best position we have 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 products 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, who OEM in the industry.

This is my last earning call. It was a pleasure working with all of you. On that, I turned the call over to the operator for questions.

(Operator Instructions) James Hardiman, Citigroup.

Hi, this is Sean Wagner on for James Hardiman. You gained share in the quarter and ORV despite once again calling out the high levels of non-current 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 up, split it up into current versus non-current, and if you have any thoughts on sort of how that looks in the fourth quarter.

I think you mentioned that should, that should continue through the winter, but I guess maybe. Do you see that sort of normalizing or maybe even improving next year.

Good morning. As we came out of the 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 remark, we've gained in the current, we've lost in non-current, which was unplanned.

But this is basically what I can see. 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 of the four by four and six by six are extremely well received.

Then off-road we are very happy with the trend in October, but also the trend in one month in November. On the snow side, obviously we're benefiting from an early snowfall in many regions, and right now the momentum is improving. And this is basically what I can see on what happened on off road and our situation in 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 and 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 them '28 about two 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 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.

Mark Petrie, CIBC.

Yeah, thanks. 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.

Yeah, good morning, Mark. Obviously, when we went to club in in August, we were -- we couldn't ask for it to be in a better position because we had invested in reducing network inventory, and now we were coming with great product. 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 macroeconomic. 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 on in terms of dealer engagement.

Okay, thanks. And if I could follow-up on that topic, at the Investor Day, I think you talked about some OpEx, being allocated, notwithstanding your [lien] initiative, 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 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.

Robin Farley, UBS.

Great, thank you. Just thinking about your commentary on ORV and you mentioned that other OEMs have elevated inventory still and promos and non-current, it seems like yourselves and some of the larger. OEMs and even CF [Motor] 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 non-current and being promotional at this point that's got 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 a 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? Thanks.

Well, good morning, Robin. We expect in 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 not current, 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 suing 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. Thank you. 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.

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

Benoit Poirier, Desjardins.

Yes, thank you very much and congrats, Jose. It's been a pleasure working with you over the years.

Thank you,

Yeah, and maybe first question for Sebastian, when I look at the working cap you've benefited from a strong working capital release in the quarter. Just wondering if this was more of a one-time item and pack and how we should we expect working capital to play in the coming quarters.

Yeah, obviously we're really happy with our free cash flow generation year-to-date. We're at about $650 million for the first three quarters of the year. My outlook for the year will probably end about, let's say $650 to $700 free cash flow generation.

Working capital has been a big focus of the organization, especially of 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 the working cap.

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

As we said, Benoit, we're very involved in 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 reanalysing and trying to renew the USMCA is ongoing.

We're not reacting to news every day because it will be too painful, and 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 the outcome will be, but so far the people are working hard to renew it with minimum changes.

Craig Kennison, Baird.

Good morning. Thanks for taking my question. 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 consumer still struggling relative to the more affluent consumer. Yeah, do you have an assessment of the rate sensitivity of that low-end consumer and the impact of, meaningfully lower rates next year?

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

Thanks. And finally, just it sounds like HD 11 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, 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.

Yeah, to give you a sense, we're still producing the old platform and the new one, but in Q3 we produce about three quarter of the new one, and one quarter of the old one. Then we're definitely transitioning fast. We're taking order every month, Craig, as 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, the [PDI], and it don't stay on the floor very often, and we could not be happier of the reception of the new defender. Great, thank you.

Martin Landry, Stifel.

Hi, good morning. 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 non-current inventory, and obviously we're planning to lose market share this year because.

This unbalanced current non-current ratio from Aura, 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 in Upper Peninsula, in the West Canada, US, it's a bit patchy, and in Scandinavia it's good.

Then overall, it's a good start of the season. We gain market share in the current, and we have a lot of pre-sold units. We've a loss in the non-current 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 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.

Joe Altobello, Raymond James.

Thank you. Good morning. Want 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, you're 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?

Yeah, well, if you recall last year, Joe, we wanted to address, inventory in the network and the non-current 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 basis points 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 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 later on whatever assumptions we have on pricing and market share gains.

Yeah, obviously we are in the 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's some elements we already know. And that should serve as your best case for your models for next year.

The big tailwind is the element that you mentioned. They're just the right sizing 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 [$250 million] of ETS.

Obviously, there are some headwinds. We're transitioning the production of Riker to Vietnam, and so with that transition there'll be less Riker deliveries next year. So that's one of the headwinds. Some of the cost drivers as well, depreciate, depreciating 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 in your base case, Joe, you'll probably end up in an EPS probably up in the mid to high teen percentages for next year and probably inhibit the margin ballpark 14%. 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 we'll be -- it'll 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. Are, 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 a strong lineup that we have in all of the product categories.

Brian Morrison, TD Cowan.

Yeah, thanks very much. And 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 is the initial reception been with respect to the discounting of your entry-level product line?

Yeah, 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'll be a similar, I guess a similar dynamic than we see in snowmobile for the next season. With some non-current 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 products, what was the overall reception?

Yeah, basically, consumer trend, no big change since the beginning of the year. Just to give you some statistics, new trend in Q3 was 21%, about in line with the pre-COVID level, and premium sells better than value, just to give you a sense.

On side by side, our premium unit was up mid-double-digit when this is the industry, by the way, the premium was up mid-double-digit when the value was down low double-digit. And for the utility selling better upload double-digit when [Rexport] was down mid-single-digit and you can see the trend don't change.

Our household customer household income of our customer high at USD175,000 and the same trend continues. The beauty of all this, it's, obviously we don't like when we talk about Spark Riker, our entry level product, but overall, our lineups are more high-end than low end, and it's very good for us.

Right, Seb, 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.

Yeah, 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 1 time and 2 times. 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 USD200 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.

Sabahat Khan, RBC Capital Markets

Great, thanks and good morning. I guess just some of the directional comments you gave on calendar '26, something around the 14% type base case rate with the margin. Just curious, based on your current visibility, what sort of production levels are you at?

Just trying to think, and operating leverage is obviously a potential part of the story going forward. So just, are you back to something resembling normal production or whereabout will your factory? Before the next year based on (multiple speaker).

So we'll still be below average asset utilization rates you know I talked about a tailwind of say $400 to $500 million of revenue and so it still would bring us in the probably low 70 asset utilization.

Great. And then you know the tariff impact to the dollar amount in the in the calendar release here, I'm 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 via efficiencies, or is pricing on the table as well depending on how tariffs evolve. Thanks very much.

It really all depends. It's tough to speculate. It'll depend on the materiality, on what components it impacts, on the flexibility we have with suppliers to 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.

Luke Hannan, Canaccord Genuity.

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

Yeah, that's correct, as I mentioned again, we -- the teams 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, thanks. And then some for my follow-up here, the higher level, when we think about the bridge between the new raise 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 10s 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 year. 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, the 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.

Xian Siew, BNP Pariba.

Thanks guys, 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 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 in 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 about year '26, and those products 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 it's more a timing of the new model hitting the dealership. What I'm happy with is in November, the trend continues, and this is promising for the remaining of the fiscal year.

Okay, very helpful, and then maybe I'll -- on the utilization rate, I think you mentioned like in the 70% 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 we think about margin benefits.

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

Cameron Doerksen, National Bank.

Yeah, thanks, good morning and let me, echo my congratulations to Jose. I'm sure you're looking forward to the end of January. 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 to $500 million dollar revenue, from the alignment of retail and wholesale, or is that kind of incorporated into that assumption?

No, obviously if we have a, again it's 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 in, 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 retailed, so we'll take it.

Okay, no, that's good. That's helpful. And Seb, just to, I guess just a clarification, I guess on the remaining, marine sale that 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. I 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 and flow from the proceeds. That is expected.

Okay, so --

It that that would come in in Q4 assuming that the regulator approves it.

Yes, it would come into Q4 or early, yeah.

Jamie Katz, Morningstar.

Good morning, guys. 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?

Yeah, 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's being responsible and 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 plans. 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 into 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.

[Ellie Latt], BMO Capital Markets.

Thank you. Two for me. I just wanted to follow up on the potential sale of 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?

Yeah. 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 USD1.7 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, 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 times to 2 times.

1.5 times to 2 times leverage.

(Operator Instructions) Jonathan Goldman, Scotiabank.

Hi, good morning and thanks for taking my questions. Most of them have been asked, but maybe just to clarify one 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 yeah, it does factor a bit of share gains next year, but it would be a modest impact.

Okay. Perfect, thanks for that. 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 bps 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 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.