BRP Q2 2026 Earnings Report

BRP EPS Results

• Actual EPS: $0.67
• Consensus EPS: $0.33
• Beat/Miss: Beat by +$0.34
• One Year Ago EPS: N/A

BRP Revenue Results

• Actual Revenue: $1.36 billion
• Expected Revenue: $1.77 billion
• Beat/Miss: Missed by -$407.46 million
• YoY Revenue Growth: N/A

BRP Announcement Details

• Quarter: Q2 2026
• Date: 8/29/2025
• Time: Before Market Opens
• Conference Call Date: Friday, August 29, 2025
• Conference Call Time: 9:00AM ET

BRP (NASDAQ:DOOO), operating under the brand name Bombardier Recreational Products, is a leader in designing, manufacturing and distributing recreational vehicles and propulsion systems for winter, on-road, off-road and water lifestyles. The company’s diversified portfolio includes snowmobiles, personal watercraft, all-terrain vehicles and roadsters, all powered by in-house Rotax engines. With a focus on innovation and performance, BRP has positioned itself at the forefront of the powersports industry.

At the heart of BRP’s product lineup are its flagship Ski-Doo snowmobiles and Sea-Doo personal watercraft, which serve both recreational and professional segments. Complementing these are Can-Am off-road vehicles, including ATVs and side-by-side vehicles, along with the three-wheel Spyder roadster. Propulsion solutions, chiefly through Rotax engines, support both the company’s own vehicles and third-party manufacturers, underpinning BRP’s reputation for engineering excellence and reliability.

BRP’s origins date back to 1942 when founder Joseph-Armand Bombardier developed his first snowmobile in Valcourt, Quebec. The business evolved over decades, expanding into marine and off-road vehicles, and in 2003 it was spun off from Bombardier Inc. as an independent publicly traded company. A public debut on Nasdaq in 2013 broadened the company’s investor base and marked a significant step in its globalization strategy.

Today, BRP serves customers in more than 100 countries through a network of global sales, distribution and manufacturing facilities, including sites in North America, Europe and Asia. Headquartered in Valcourt, Quebec, the company is guided by President and Chief Executive Officer José Boisjoli, under whose leadership it continues to emphasize sustainable growth, digital transformation and customer experience. With a commitment to technological innovation and brand development, BRP aims to drive the next generation of powersports solutions.

BRP Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: BRP reported $1.9 billion in Q2 revenue, $213 million normalized EBITDA, $0.92 normalized EPS, and ~$100 million in free cash flow, outpacing expectations.
• Positive Sentiment: Dealer network inventory was reduced by 20% year-over-year, reaching healthy levels across all product lines except snowmobiles, positioning BRP to respond quickly to demand for new models.
• Positive Sentiment: BRP launched a new generation Can-Am Defender with best-in-class technology and expanded its electric vehicle lineup, demonstrating its modular design approach to capture additional market share.
• Positive Sentiment: BRP issued H2 guidance calling for 8-12% revenue growth, a >14% EBITDA margin, and full-year normalized EPS of $4.25-$4.75, reflecting confidence in the second-half outlook.
• Negative Sentiment: BRP faces a revised gross tariff headwind of $90 million for 2026, now expected to reduce EPS by roughly $0.03 after mitigation efforts.

Presentation

[Operator]

Good morning, ladies and gentlemen. Welcome to the BRP Inc. FY twenty twenty six Second Quarter Results Conference Call. I would now like to turn the meeting over to Mr. Philippe Deschaine. Please go ahead, Mr. Deschaine.

[Philippe Deschênes, Director - IR at BRP]

Thank you, Joelle. Good morning, and welcome to BRP's conference call for the 2026. Joining me this morning are Jose Borjade, 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 BRT's MD and A for a complete list of these.

[Philippe Deschênes, Director - IR at BRP]

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.

[José Boisjoli, Chairman, President & CEO at BRP]

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 CANA 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.

[José Boisjoli, Chairman, President & CEO at BRP]

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 four for key financial highlights. We ended the quarter with revenue of $1,900,000,000 normalized EBITDA of $213,000,000 normalized EPS of $0.92 and solid free cash flow of almost $100,000,000 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 five.

[José Boisjoli, Chairman, President & CEO at BRP]

Our North American powersports 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.

[José Boisjoli, Chairman, President & CEO at BRP]

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 our first increase in about two years, fueled by momentum in China. Meanwhile, demand remained generally soft in EMEA, with retail down 13%, in line with the industry.

[José Boisjoli, Chairman, President & CEO at BRP]

Overall, we are encouraged to see that global industry trend have slightly improved from previous quarters. Turning to Slide six for a look at our retail performance by product line in North America. Our powersports 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 others OEM. In three wheeled vehicle, personal watercraft and switch pontoon, retail was weak early in the quarter due to soft trend and unfavorable weather, but condition improved in July and early August.

[José Boisjoli, Chairman, President & CEO at BRP]

Turning to Slide seven 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 model and upgrade across our lineups, 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.

[José Boisjoli, Chairman, President & CEO at BRP]

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 ten 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 twothree of the side by side industry.

[José Boisjoli, Chairman, President & CEO at BRP]

Reaction to the new Defender were extremely positive. Dealer sentiment for the product was very good, while media who had the 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 eight to look at some of other product news.

[José Boisjoli, Chairman, President & CEO at BRP]

We expanded our electric vehicle offering by launching the Outlander Electric, featuring industry leading towing capacity, impressive off road performance and a very quiet riding experience. It used our e power unit, which also propel our electric motorcycle and snowmobiles. This is another demonstration of how we leverage our modular design approach to optimize development costs across many product lines. In addition, we further surprised our dealers by introducing multiple model upgrades and enhancement. We've launched the Outlander MAX66 designed to be the hardest working ATV in the lineup under extreme conditions.

[José Boisjoli, Chairman, President & CEO at BRP]

We added rock crawling capabilities to the Mavic R lineup with the XRC package and updated our Mavic X3. In three 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.

[José Boisjoli, Chairman, President & CEO at BRP]

As you see, we are the OEM who introduced the most product news for model year 2026. Now let's turn to Slide nine for a more detailed look at year round product. Revenue were up 13 to $1,100,000,000 driven by higher ORV shipments following last year's inventory reduction plan. At retail, side by side was down mid single digit. We underperformed due to high level of discounting of on noncurrent unit by other OEMs.

[José Boisjoli, Chairman, President & CEO at BRP]

We continue to outperform in current unit, ending the '25 season with more than three points of market share gain, driven by our Mavic R Max. In ATV, retail was down low single digit in the quarter, in line with the industry. That said, we gained over three points of market share in current units for the season, fueled by our new Offender platform. As for three wheel, retail was down mid-twenty percent as entry level consumers are struggling to get approved for financing. A few words on our electric motorcycle sorry.

[José Boisjoli, Chairman, President & CEO at BRP]

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 these 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.

[José Boisjoli, Chairman, President & CEO at BRP]

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 product on Slide 10. Revenues were down 13% to $470,000,000 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 2026. Looking at retail, trend remained weak for marine product in North America.

[José Boisjoli, Chairman, President & CEO at BRP]

Personal watercraft sales were down mid teen percent, slightly lagging the industry. Switch pontoon retail was down mid-twenty percent as the industry is still going through 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 $3.00 5,000,000 as dealer replenished their parts and accessories inventories.

[José Boisjoli, Chairman, President & CEO at BRP]

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.

[Sébastien Martel, CFO at BRP]

Thank you, Jose, and good morning, everyone. Once again, our team did an exceptional job navigating a dynamic and volatile environment. We remain 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, a 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.

[Sébastien Martel, CFO at BRP]

Revenues were up 4% to $1,900,000,000 primarily driven by stronger ORV shipments and offset by lower PwC deliveries. Gross profit came in at three ninety eight million dollars 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 floorplan costs resulting from our leaner network inventory. Normalized EBITDA ended at $213,000,000 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 $100,000,000 and we ended the quarter with over $270,000,000 in cash, maintaining a solid balance sheet and strong financial flexibility.

[Sébastien Martel, CFO at BRP]

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. Our 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.

[Sébastien Martel, CFO at BRP]

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 floorplan 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.

[Sébastien Martel, CFO at BRP]

With this, let's turn to Slide 15 for an update on fiscal twenty twenty six. 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.

[Sébastien Martel, CFO at BRP]

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 reception 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.

[Sébastien Martel, CFO at BRP]

Note that based on the information we have today, we have factored in our guidance about $90,000,000 of gross tariff impact. This is up from the previous estimate of 60,000,000 to $70,000,000 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 $8,150,000,000 to $8,300,000,000 normalized EBITDA of $1,040,000,000 to 1,090,000,000.00 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 2231% 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 2851%. 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.

[Sébastien Martel, CFO at BRP]

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

[José Boisjoli, Chairman, President & CEO at BRP]

Thank you, Sebastien.

[José Boisjoli, Chairman, President & CEO at BRP]

I am proud of our accomplishments so far this year. Despite macroeconomic environment, we've delivered results ahead of expectation through solid execution and operational excellence. The timing of our model year 2026 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.

[José Boisjoli, Chairman, President & CEO at BRP]

Many dealers appreciated that we were the OEM who supported them the most from day one during these challenging times. Since we are starting to see the benefit of our action and despite ongoing volatility, we are comfortable in showing 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 recover. As I said many times in the past, our goal is to consistently wow consumers with market shaping product.

[José Boisjoli, Chairman, President & CEO at BRP]

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]

Thank you. Ladies and gentlemen, we will now begin the question and answer now question we Your first question and comes from Craig Kennison with Baird. Your line is now open.

[Craig Kennison, Director - Research Operations & Senior Research Analyst at Baird]

Hey, thanks for taking my question and 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?

[José Boisjoli, Chairman, President & CEO at BRP]

Yes. Craig, obviously, over the years, and you know that we optimize our manufacturing footprint and our supply chain and all our products made in Canada and Mexico meet the USMCA. Today, about twothree of our content come from North America. I won't give you the detail between Canada, U. S.

[José Boisjoli, Chairman, President & CEO at BRP]

And Mexico for competitive reasons, but twothree of our content comes 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 VRP, the USMCA 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.

[José Boisjoli, Chairman, President & CEO at BRP]

If the norm or the new USMCA 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.

[Craig Kennison, Director - Research Operations & Senior Research Analyst at Baird]

Thanks. And could you shed any light on your plans to mitigate the tariff exposure you forecast in your guidance?

[José Boisjoli, Chairman, President & CEO at BRP]

Again, the $90,000,000 is the growth. And basically, it's sourcing. Move depending of the regulation and where the goods are coming. Sometime we move the production or the supplier from one country to the others. I saw some idea from our team where a supplier were doing an assembly from 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.

[José Boisjoli, Chairman, President & CEO at BRP]

And to be honest, I'm impressed how fast we react and how good we are, but we're learning everything.

[Craig Kennison, Director - Research Operations & Senior Research Analyst at Baird]

Thank you.

[Operator]

Your next question comes from James Hardiman with Citi. Your line is now open.

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

Hey, good morning. So would love to sort of have a conversation about the current versus non current 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 non current, it tells a very different story. I guess as we roll that forward, what does that look like in the third quarter?

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

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 non current and ultimately sort of ease up from a promotional perspective. But curious how you see sort of your retail rolling forward in that context.

[José Boisjoli, Chairman, President & CEO at BRP]

Dan, obviously, we are in the quarter Q2 is the quarter where many OEM transitions from model year '25 to '26. Then there is some estimation in our forecast. But basically, 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.

[José Boisjoli, Chairman, President & CEO at BRP]

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 have improved over the quarters. Then this is our situation.

[José Boisjoli, Chairman, President & CEO at BRP]

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, 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 eighteen months.

[José Boisjoli, Chairman, President & CEO at BRP]

And now it's time that we take advantage of this. Then this 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.

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

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.

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

Assuming we're back to sort of one to one wholesale to 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 $90,000,000 number, any sort of initial thought on what that might look like for 2026? Thanks.

[José Boisjoli, Chairman, President & CEO at BRP]

I will give you color on our forecast for the industry in H2 and Sebastien will talk about fiscal year 2026. 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.

[José Boisjoli, Chairman, President & CEO at BRP]

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.

[José Boisjoli, Chairman, President & CEO at BRP]

LATAM is doing very strong with over 20% growth in Q2 drive by the ORV momentum in Brazil and Mexico, and we believe this will continue. And EMEA was down in Q2 by mid teen, 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.

[Sébastien Martel, CFO at BRP]

On tariffs, as I mentioned in the prepared remarks, this year is a headwind of gross headwind of $90,000,000 There are some onetime elements that we've incurred this year that will not come back next year, probably in the range of about $10,000,000 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 $120,000,000 $130,000,000 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, run rate on a steady basis.

[James Hardiman, Director - Leisure and Travel Analyst at Citi]

Got it. That's helpful. Thanks guys.

[Operator]

Your next question comes from Brian Morrison with G. D. Cowen. Your line is now open.

[Brian Morrison, VP & Director at TD Securities]

Good morning. A question for Syb or Jose. You have called the $1,300,000,000 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 twelve months? How do you think about that?

[Sébastien Martel, CFO at BRP]

Well, obviously, it's Brian, probably a bit early to call what next year is going to be like as we just issued guidance for the next six 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 a 400,000,000 to $500,000,000 revenue impact that we've had, and it's well above $1 of EPS impact, obviously. So once and hopefully, we're going be there at the end of the year. We're there already where inventory is rightsized.

[Sébastien Martel, CFO at BRP]

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.

[Sébastien Martel, CFO at BRP]

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. Jose mentioned that in his remarks as well. A lot of excitement.

[Sébastien Martel, CFO at BRP]

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.

[Sébastien Martel, CFO at BRP]

So that's from a more 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.

[Sébastien Martel, CFO at BRP]

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.

[Sébastien Martel, CFO at BRP]

That's if we don't do anything. Depreciation could be, let's say, 30,000,000 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.

[Sébastien Martel, CFO at BRP]

We'll enjoy the guidance that we just issued today. Still hot, it's still warm. We look forward to provide you with details on '27 in the next few quarters.

[Brian Morrison, VP & Director at TD Securities]

I appreciate those details. I think the message though is that alignment, 400 to $500,000,000 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 margin, which you said.

[Brian Morrison, VP & Director at TD Securities]

Can you maybe just frame the impact 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.

[Sébastien Martel, CFO at BRP]

Yes. Last year was a big year in terms of promotion. So this year, we're getting 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.

[Sébastien Martel, CFO at BRP]

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.

[Brian Morrison, VP & Director at TD Securities]

Thanks very much for the color.

[Operator]

Your next question comes from Robin Fairley with UBS. Your line is now open.

[Robin Farley, Managing Director - Leisure Analyst at UBS Group]

Great. Thanks. Just two things. One is a follow-up to your comments about expectations for second half retail. You said kind of similar to what we saw in Q2, but you mentioned U.

[Robin Farley, Managing Director - Leisure Analyst at UBS Group]

S. Down mid single, kind of 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 that 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.

[Robin Farley, Managing Director - Leisure Analyst at UBS Group]

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? Thanks.

[Sébastien Martel, CFO at BRP]

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, non current. Yes, some OEMs have higher non current than where they were historically.

[Sébastien Martel, CFO at BRP]

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.

[Robin Farley, Managing Director - Leisure Analyst at UBS Group]

Okay, great. Thank you. 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?

[Robin Farley, Managing Director - Leisure Analyst at UBS Group]

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 RV inventory is even further below. Just wondering why that is the right number for you? Thanks.

[Sébastien Martel, CFO at BRP]

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 too a bit too high during pre COVID? Some could say yes. Obviously, it's a question of dollars as well.

[Sébastien Martel, CFO at BRP]

The dollar value of units is significantly higher. And so dealers are more cautious in taking inventory when the dollar value is almost up 50%, I. E, MSRP increase, but also a combination of better mix. And also, there is a benefit where demand for cab units is still very strong and supply is slightly lower than where we were in 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.

[Sébastien Martel, CFO at BRP]

And there's always going to be variation in our inventory levels. It's never going to be fixed ninety 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.

[Sébastien Martel, CFO at BRP]

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.

[Robin Farley, Managing Director - Leisure Analyst at UBS Group]

Okay, great. Thank you very much.

[Operator]

Your next question comes from Subbaha Khan with RBC Capital Markets. Your line is now open.

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

Great. Thanks and good morning. 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 it 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 consumer uptake?

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

And if there's any color across categories on the retail uptake outlook? Thanks.

[Sébastien Martel, CFO at BRP]

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 tariff, interest rate, 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 market, the industries have held up so far decently this year being down low single digit percentage overall.

[Sébastien Martel, CFO at BRP]

Yes, some of that was helped by the non current and promotions. That's fair. And but we're transitioning now to a model year. So now we're there's going to be non current. The model year 2025 will be non current.

[Sébastien Martel, CFO at BRP]

And the other big question is how interest rates will behave, how interest rates will move. So our base case there 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's 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.

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

Great. And then as we look at sort of the balance sheet in the call it 2.5 times 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 investment there as units start to improve. Maybe 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? Thanks.

[Sébastien Martel, CFO at BRP]

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.

[Sébastien Martel, CFO at BRP]

And so we don't need to worry about financial meeting our financial covenants. We've got ample flexibility on the revolver as well.

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

But

[Sébastien Martel, CFO at BRP]

currently, being prudent has been the name of the game, and we're going to continue managing our balance sheet that way.

[José Boisjoli, Chairman, President & CEO at BRP]

Great. Thanks very much.

[Operator]

Your next question comes from Joe Altobello with Raymond James. Your line is now open.

[Joseph Altobello, Managing Director at Raymond James Financial]

Thanks. Hey, guys. Good morning. So just want to go back to the guidance for a second. And I think, Seth, you mentioned this earlier.

[Joseph Altobello, Managing Director at Raymond James Financial]

If I look at first half versus second half, it's quite striking. Revenue midpoint, I guess, is up 10% or around 400,000,000 So I'm just trying understand how much of that is simply lapping last year's undershipping demand? And how much is innovation like Defender, for example? I'm just trying to assess the risk of that outlook.

[Sébastien Martel, CFO at BRP]

Well, for sure, I mean, last year was an easy H2 was 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.

[Sébastien Martel, CFO at BRP]

Last year was decent, but this year, H2 was going to be more in line with what we did in 2023 and 2024. 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 mix. 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.

[Sébastien Martel, CFO at BRP]

And last year was well below what we believe the earnings power of the company is. And this year is more indication of what the true earnings power of ERP is when the inventory is when we're shipping more wholesale equal retail.

[Joseph Altobello, Managing Director at Raymond James Financial]

Okay. Got it. And on the tariff front, you mentioned the $90,000,000 this morning. I think somebody else asked this, but I'm not sure if you answered it. What's the net number post mitigation?

[Joseph Altobello, Managing Director at Raymond James Financial]

I'm just trying to tie back to your original EPS outlook for this year, which I think was $4.5 to $5 Just curious if that's now actually higher if we exclude the tariffs?

[Sébastien Martel, CFO at BRP]

Yes. Net of the mitigation efforts we've put in, we're probably ending at a, let's, $0.02 5 to $0.3 negative impact on the P and L. Most of the mitigation efforts have been that we've taken higher pricing. Usually, we do A1 percent, 1.5%, but we've taken pricing hires mainly on the parts and accessories business. But that's how we've mitigated the impact.

[Joseph Altobello, Managing Director at Raymond James Financial]

Okay, great. Thank you.

[Operator]

Next question comes from Martin Landry with Stifel. Your line is now open.

[Martin Landry, MD - Equity Research at Stifel Financial Corp]

Hi, good morning, guys. Sebastien, speaking about earnings power, I would like to just have a little

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

bit of a

[Martin Landry, MD - Equity Research at Stifel Financial Corp]

discussion.

[Martin Landry, MD - Equity Research at Stifel Financial Corp]

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 of 4.7 yes, around $4.5 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 two, three, four years?

[Sébastien Martel, CFO at BRP]

Well, I mean, I like where BRP is sitting today. I've been with the company for twenty 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 do I believe that BRP can continue growing in this industry?

[Sébastien Martel, CFO at BRP]

Absolutely. We've talked about the ORV market share, able to grow it. And obviously, not only the side by side, but ATV. It all obviously depends on the industry. So DRP has the resources, the capacity to continue growing.

[Sébastien Martel, CFO at BRP]

We need to drive industry as well. But the industry is based on the macro environment, interest rates, consumer confidence, unemployment rates, etcetera. So there are many variables. So it's very dependent on how the industry behaves, Marcin. 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?

[Sébastien Martel, CFO at BRP]

Absolutely. Because BRP has become an innovation machine and a profitability machine as well for the dealers. And that's sort of these are the key factors that are going to drive growth in the future.

[Martin Landry, MD - Equity Research at Stifel Financial Corp]

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 two, three years?

[Sébastien Martel, CFO at BRP]

Again, it's very do we have the backbone to do it? Yes. Do we have the manufacturing capacity to do it? Yes. Do we have the product lines to do it?

[Sébastien Martel, CFO at BRP]

Yes. The network? Yes. It will be very dependent on industry dynamics.

[Martin Landry, MD - Equity Research at Stifel Financial Corp]

Okay. Thank you.

[Operator]

Your next question comes from Mark Petrie with CIBC. Line is now open. Morning, Mark Petrie.

[Mark Petrie, Equity Research Analyst at CIBC Capital Markets]

Sorry about that. Thanks for the question and good morning. I just want to clarify maybe a couple of things. You talked about two figures from the destock headwind, the $1,300,000,000 and then the 400 to $500,000,000 Could you just square up exactly what those are referring to? I think the 400,000,000 to 500,000,000 is the potential tailwind into next year, but could you just be clear on that?

[Sébastien Martel, CFO at BRP]

Yes. The overall impact, if you do the accumulation there, when we talked about destocking in twenty fiscal I don't want to make the fiscal year fiscal year 2025 and now we're destocking in fiscal year 2026, the combined effect probably adds up to $1,000,000,000 close. The number I referred to in my question to Brian was 300,000,000 a 400 to $500,000,000 impact. When I compare the destocking we did in the current fiscal year. The impact of that destocking is about 400,000,000 to $500,000,000 of revenue just for this year.

[Mark Petrie, Equity Research Analyst at CIBC Capital Markets]

Okay. Understood. And then you were talking about 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 twenty twenty seven?

[Mark Petrie, Equity Research Analyst at CIBC Capital Markets]

I think you've already touched on the programs, which I think you said could be a 50 basis point tailwind. But could you just give a little bit more color there, please?

[Sébastien Martel, CFO at BRP]

Yes. And I'll I'll probably refrain from making any estimates on 2027 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'll 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.

[Sébastien Martel, CFO at BRP]

So let's say, low 300 basis points to probably whatever two fifty, 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 point 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.

[Mark Petrie, Equity Research Analyst at CIBC Capital Markets]

Yes. Okay. Understood. Appreciate that. All the best.

[Sébastien Martel, CFO at BRP]

Thank you.

[José Boisjoli, Chairman, President & CEO at BRP]

Thank you.

[Operator]

Your next question comes from Benoit Poirier with Desjardins. Your line is now open.

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

Yes. Good morning. Jose, just in terms of retail sales between Canada and U. S, there has been a discrepancy. Canada was up low single digit, U.

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

S. Was down low single digit. 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.

[José Boisjoli, Chairman, President & CEO at BRP]

Well, 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. The U.

[José Boisjoli, Chairman, President & CEO at BRP]

S. Consumers, 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.

[José Boisjoli, Chairman, President & CEO at BRP]

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 heard personally dealers saying that because of the tariff situation, there is more interest for BRP product. I believe maybe some U.

[José Boisjoli, Chairman, President & CEO at BRP]

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.

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

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 adjustment made at the club, Jose?

[José Boisjoli, Chairman, President & CEO at BRP]

I mean it's too early call because right now, Benoit, we have order on hand for all the ORV product 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 six category.

[José Boisjoli, Chairman, President & CEO at BRP]

And we thought the timing right now that our inventory is low, situation seems to be more stable to readjust our pricing in six 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 categories for product.

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

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 Cross Wave. So I was wondering, Jose, if you have any thoughts on this new product from Yama and whether you've seen some impact on the SeaDew Fish Pro offering so far.

[José Boisjoli, Chairman, President & CEO at BRP]

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 WakePro. That's what we've done with the Explorer.

[José Boisjoli, Chairman, President & CEO at BRP]

That's what we've done with the FishPro. 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 grow. And at the same time, it's pushing us to be better and to be more competitive. We like competition.

[José Boisjoli, Chairman, President & CEO at BRP]

And if they can accelerate the development of people who fish into the watercraft category, I welcome the initiative. I mean if we could continue because we are the two main players to grow the industry, I think it will be better for both of us, and we're not afraid of the competition.

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

Perfect. Thank you very much for the color, Jose.

[José Boisjoli, Chairman, President & CEO at BRP]

Thank you.

[Operator]

Your next question comes from Luke Hannan with Canaccord. Your line is now open.

[Luke Hannan, Equity Research Analyst - Consumer at Canaccord Genuity - Global Capital Markets]

Thanks. Good morning, everyone. 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?

[Luke Hannan, Equity Research Analyst - Consumer at Canaccord Genuity - Global Capital Markets]

What should we be thinking about as sort of the longer term margin potential here?

[Sébastien Martel, CFO at BRP]

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 form a, you would be at 21%. So is the 17% still achievable? To the earlier question from Martin Andre, 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.

[Sébastien Martel, CFO at BRP]

So I do believe that it's a number that's still very much achievable.

[Luke Hannan, Equity Research Analyst - Consumer at Canaccord Genuity - Global Capital Markets]

Great. Thanks. And then you also touched on the dealers utilization of their line of credit. It was 50% this quarter and it's down from 70% last quarter. How has that fluctuated over the course of, let's say, last few years?

[Luke Hannan, Equity Research Analyst - Consumer at Canaccord Genuity - Global Capital Markets]

And I mean, like, is it at a point now where it's basically troughed and that 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?

[Sébastien Martel, CFO at BRP]

It is very healthy. Dealers see it as well in their monthly financing costs or floorplan costs. So it is very healthy. As I said, it will move, yes, because there's seasonality in our business. There is inventory buildups before a retail season.

[Sébastien Martel, CFO at BRP]

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 twenty four months. But we also did rightsizing of line of credits.

[Sébastien Martel, CFO at BRP]

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 of BRPs business. So that's another factor.

[Luke Hannan, Equity Research Analyst - Consumer at Canaccord Genuity - Global Capital Markets]

Okay. And then last one for me, then I'll pass the line. Utility SSDs represent about two thirds of the overall industry. Can you share what it represents as far as your SSDs mix today? And then when we think about the longer term market share opportunity for you in SSDs, how much of that is utility market share capture versus other, we'll say, capture in recreational versus other drivers?

[José Boisjoli, Chairman, President & CEO at BRP]

Yes. The same ratio for us, twothree of our volume is utility. And obviously, we always been stronger in the REX port. 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 all technology.

[José Boisjoli, Chairman, President & CEO at BRP]

Now we stand we established a new standard with the new technology.

[Luke Hannan, Equity Research Analyst - Consumer at Canaccord Genuity - Global Capital Markets]

Okay. Thank you very much.

[Operator]

Your next question comes from Cameron Doerksen with National Bank Financial. Your line is now open.

[Cameron Doerksen, Research Analyst at National Bank Financial]

Thanks. Good morning. 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.

[Cameron Doerksen, Research Analyst at National Bank Financial]

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?

[Sébastien Martel, CFO at BRP]

There's good morning, Cam. Yes, there's always a possibility of the rules changing. This came into effect on August 18, where steel and 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.

[Sébastien Martel, CFO at BRP]

And it's really on the steel content that are in the vehicles. So the secret is obviously providing what the weighted 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 a we prefer not to have it. It is an impact, but it's certainly something that we can absorb.

[Sébastien Martel, CFO at BRP]

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.

[Cameron Doerksen, Research Analyst at National Bank Financial]

Okay. That's helpful. And maybe, I guess, second question, not that you're rushing to see Jose accelerate his retirement, but just wondering if there's any update on the new CEO search at this point.

[José Boisjoli, Chairman, President & CEO at BRP]

No update. The search is ongoing. And I was with the HR committee this week and the transition should be by the end of the year. No change.

[Cameron Doerksen, Research Analyst at National Bank Financial]

Okay, perfect. I'll pass the line. Thanks very much.

[José Boisjoli, Chairman, President & CEO at BRP]

Thank you.

[Operator]

Your next question comes from Tristan Thomas Martin with BMO Capital Markets. Your line is now open.

[Tristan Thomas, Equity Research Associate at BMO Capital Markets]

Hey, good morning. 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 if you've heard anything about how dealers are planning on ordering the new product. 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?

[Sébastien Martel, CFO at BRP]

From an inventory perspective, no big changes versus where we stand. Obviously, there's 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.

[José Boisjoli, Chairman, President & CEO at BRP]

On the other front, like Sebastien mentioned, we have the order on hand for snowmobile for the delivery for fiscal year twenty twenty six. 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.

[José Boisjoli, Chairman, President & CEO at BRP]

We're taking the delivery we're taking an order every month for delivery in two months. Then we'll be taking deliveries in the next two weeks for delivery in October, but we're very confident with the Afro lineup that we have and the novelty that we will meet our numbers.

[Tristan Thomas, Equity Research Associate at BMO Capital Markets]

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 with an end market you're already in or possibly expanding into other end markets? Thanks.

[Sébastien Martel, CFO at BRP]

It's still centered around the powersport industry.

[Tristan Thomas, Equity Research Associate at BMO Capital Markets]

Okay, great. Thank you.

[Sébastien Martel, CFO at BRP]

Thank you.

[Operator]

Your next question comes from Jonathan Goldman with Scotiabank. Your line is now open.

[Jonathan Goldman, Equity Research Analyst at Scotiabank]

Hi, good morning team and thanks for taking my questions. I apologize if I missed this, but just going back to the guidance for the second half implying 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?

[Sébastien Martel, CFO at BRP]

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 two big items that are, let's say, not volume related.

[Jonathan Goldman, Equity Research Analyst at Scotiabank]

Okay. Thanks for that. 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 2024 units are kind of exactly where they were in 2019.

[Jonathan Goldman, Equity Research Analyst at Scotiabank]

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 $1,200,000,000 level.

[José Boisjoli, Chairman, President & CEO at BRP]

And new entrant numbers in Q2 were at twenty three percent, 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 the planning for the industry. I think what maybe additional for you is the trend that we saw in the last two 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. Then 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 direct export is down.

[José Boisjoli, Chairman, President & CEO at BRP]

Then the same trend that we saw in the last two 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.

[Jonathan Goldman, Equity Research Analyst at Scotiabank]

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 1,200,000,000 units sold in 2019.

[Jonathan Goldman, Equity Research Analyst at Scotiabank]

In a normalized environment, do you think we can exceed that volume in the industry totally in North America?

[José Boisjoli, Chairman, President & CEO at BRP]

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 market. The number are still obviously lower than North America, but the growth is very good. And I think there is place to continue to grow or the industry will continue to grow in the side by side business.

[Jonathan Goldman, Equity Research Analyst at Scotiabank]

Okay. Thank you very much for the color.

[José Boisjoli, Chairman, President & CEO at BRP]

Thank you.

[Operator]

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

[Philippe Deschênes, Director - IR at BRP]

Thank you, Joelle, and thanks, everyone, for joining us this morning and for your interest in BRT. Before we go, note that we will be hosting an Analyst and Investor Day on October in Valcour. Stay on the lookout for more detail. Thanks again, everyone, and have a good day.

[Operator]

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

Participants

Executives

• Philippe Deschênes, Director - IR
• José Boisjoli, Chairman, President & CEO
• Sébastien Martel, CFO

Analysts

• Craig Kennison, Director - Research Operations & Senior Research Analyst at Baird
• James Hardiman, Director - Leisure and Travel Analyst at Citi
• Brian Morrison, VP & Director at TD Securities
• Robin Farley, Managing Director - Leisure Analyst at UBS Group
• Sabahat Khan, MD - Global Research at RBC Capital Markets
• Joseph Altobello, Managing Director at Raymond James Financial
• Martin Landry, MD - Equity Research at Stifel Financial Corp
• Mark Petrie, Equity Research Analyst at CIBC Capital Markets
• Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities
• Luke Hannan, Equity Research Analyst - Consumer at Canaccord Genuity - Global Capital Markets
• Cameron Doerksen, Research Analyst at National Bank Financial
• Tristan Thomas, Equity Research Associate at BMO Capital Markets
• Jonathan Goldman, Equity Research Analyst at Scotiabank