Good morning, ladies and gentlemen. Welcome to the BRP Inc.'s FY19 Fourth Quarter Results Conference Call. I would now like to turn the meeting over to Mr. Philippe Deschênes. Please go ahead, Mr. Deschênes. Philippe Deschênes: Thank you, Moe. Good morning, and welcome to BRP's conference call for the fourth quarter of fiscal year 2019. Joining me this morning are José 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 that are subject to a number of risks and uncertainties. I invite you to read BRP's MD&A for listing of these. Also during the call, reference will be made to supporting slides, and you can find the presentation on our Web site at brp.com under the Investor Relations section. So with that, I'll turn the call over to José. José Boisjoli: Thank you, Philippe. Good morning, everyone, and thank you for joining us. It’s a real pleasure for me to present our fourth quarter and full year results this morning. Fiscal year '19 was an incredible year for us, and I’m extremely proud of the team and how well our people executed delivered on our plan achieving record results. And to them, I say thank you. Now, let's start with the financial highlights of the fiscal year on Slide 4. Our revenues were up 18% to reach 5.2 billion, primarily driven by strong growth in year around and seasonal product. Our normalized EBITDA was up 22% to $656 million, resulting in a normalized earnings per share came in above our guidance range at $3.10, representing impressive growth of 37% over last year. Our retail growth was also remarkable. For the third straight year, we’ve…

Thank you, José, and good morning everyone. We completed fiscal year '19 with solid results for our fourth quarter driven by the continued strength of our side-by-side business, the introduction of the Can-Am Ryker and the strong snowmobile shipments. Our quarterly revenues were up 23% to reach $1.5 billion, and we generated $335 million of gross profit. Our gross profit margin ended at 22.2%, a decline of 80 basis points from last year's fourth quarter due to higher production, warranty and distribution costs that were partly offset by higher volume of 3-wheel vehicle, snowmobile and PAC sold. Our normalized EBITDA came in at $182 million, up 12% from last year and our normalized diluted EPS came in at $0.88, up 19% from last year. We completed the year investing $299 million in CapEx, and generated $263 million of free cash flow. We also successfully completed just last week an amendment of our revolving credit facility, increasing the availability by $125 million and extending the maturity by one year to May 2024. This is providing us with additional flexibility to continue investing in our growth plan. Turning to Slide 17, you will see that our quarterly normalized net income increased $10 million over the last year, and ended the quarter at $86 million. The increase was driven by a favorable impact coming from volume, mix, pricing and sales programs for $120 million, which was partly offset by higher cost and depreciation expense for a total negative impact of $65 million and increased investment in operating expenses for the development and launch of various new products and the modernization of our information systems for $46 million. Now, looking at our network inventory position on Slide 18. Our network inventory is up 15% over last year's fourth quarter level, primarily driven by the…

Thank you, Mr. Boisjoli [Operator Instructions]. Our first question is from Mark Petrie from CIBC. Please go ahead.

Congrats, and the strong end to fiscal '19. I wanted to just start and ask about the pricing environment heading into the season, specifically around side-by-side. Could you just give us a sense of how pricing is shaping up for the year and your expectations in terms of promotional investment relative to the last couple of years? José Boisjoli: What is unusual this season is one of our main competitors in the off-road business has increased its pricing for ATVs and side-by-side mid-year into the season. This is quite unusual. But we did believe that the funding a lot of back end money with those price increase than the competitive environment into, I would say, the network is quite competitive, but this is quite unusual. And obviously, we're preparing to announce our model year '20 in June, but this is what happened into the market so far.

And do you have a sense of what uncertainty that introduces into the market and how that might affect the seasons? José Boisjoli: Yes, what is difficult, Mark, is we have adjusted to price and the MSRP is lower. But there is a lot of back end-money given to the dealers, and it’s very difficult for us to put our fingers on how much money we're talking about, and it seems to vary between regions. And this is what we see. We don’t change our plan. So far we have our programs, we have the PerforMAX and from time-to-time, we have lunched more aggressive program in March. We announce our -- like we do every year on the backend of the season, we have launched our program for model year '19. But it's something we watch very closely and we will adjust if we need to.

And one other question, I guess, just maybe bigger picture. Relative to maybe the financial crisis, which I know is a long time ago now. Could you just talk about the benefits in your system of the flexible manufacturing that your modular manufacturing that you guys have implemented, as well as the more flexible ordering system for dealers> And how you think that positions you relative to the last slowdown in terms of being able to respond to a weakening of demand if and when that were to come to that… José Boisjoli: First, the modular approach is something we implemented in the design of our product in 2012. And every new product we've launched since the December in 2015, it's following that mindset. And basically if you design your product right, you have a lot of flexibility in the manufacturing and the way you assemble. And we could move -- it's not the intention, but we could move easily products between our factory around the world, because all our new assembly-lines are set-up the same way. And the design of product, the new product is designed in that same way, and that give us a lot of flexibility that we didn’t had in 2008. The other thing is today we are taking for off-road vehicle. We are taking orders every month for deliveries in the next -- for like right now, in March, we are taking orders for product to be delivered in May. Then obviously we see the dealer adjusting their orders to the retail quite quickly, and this is something we are monitoring very closely, because we don't want to have too much inventory, and we want to have the right inventory. But we believe that compared to what we had in '08 where we had probably two order periods per year at that time, we had a lot flexible and the quality of our inventory, it's a lot better. For three wheel vehicle, we are not as flexible. We take orders when we introduce product, but we give a chance to the dealers to adjust their orders during to the season. But it's very different environment to what we had in '08, '09.

And obviously when you compare to '08, '09 versus today, '08, '09 were very seasonal product business focus with watercraft and snowmobile today. Obviously, year around product business plays a much bigger part. ATV also is bigger than we had in '08, '09 and again, the size of the side-by-side business, which was not there in '08 or '09 and provide more advantages. So we're more diversified in terms of product portfolio and region as well. And so we're very different as a company versus in that period.

Following question is from Derek Dley from Canaccord Genuity. Please go ahead.

I just wanted to clarify one thing that you mentioned in your prepared remarks that you continue to expect to launch a new SSV product every six month. Did you give a timeframe on that? I mean the last period was for a period of four years. Is there an updated time frame or is it just opening it? José Boisjoli: It's not exactly what I said. First, we will introduce our eight platforms in June and we will complete the commitment of a new side-by-side every six year for years. What I said is to be able to deliver one new platform every six months, we put a group of people in place and processes in place to achieve a high pace of innovation and we intend to keep the same momentum. And everything all the people that were there for the last four years with the process we had in the last four years, we'll remain to be able to continue to gain market share in the side-by-side business. But we don't commit at this point on new platform, because we not completed -- not completed, but we have. And it will be a constant innovation, constant model change. But we don't want to specific numbers at this point.

Can you comment on the macro environment that you're seeing on a global basis? I know you commented and again in your press release that certain regions Europe, Brazil, Asia Pacific were strong. But how do you view the consumer spending in the discretionary spending environment today? José Boisjoli: If I start with U.S., unemployment rate in U.S. is still below 4%. The housing is slowing down a bit but still healthy. And the retail, I think the retail in general was up 1.8% in United States. And we see overall the industry quite healthy. Canada, it’s a bit of the same thing. There are some regions that were affected than more than others, but same thing. We saw slowdown in China but China is still growing. And you need to understand that China was growing above 25% a year for the last three years and now this year, in fiscal year '19, it grew about 10% for us. And it's still growing but at the slower base; Argentina, its more political situation where basically it's very difficult to ship product over there; Middle East, it's more difficult. But overall when you step back and you look at the big picture and you look the region where we have highest volume, we are in pretty good shape. And we feel quite optimistic for the years to come. To be honest, in North America and everywhere in the world, the spring is a bit difficult to read. The winter is longer, which benefits snowmobile. Right now, the retail is still good but start to affect off-road and summer product. But when we talk to dealers, the order for March for the May delivery on off-road are good, and then we are quite optimistic about the good spring. We just hope that soon the winter will turn to better weather.

Thank you. Our following question is from Robin Farley from UBS Bank. Please go ahead.

I wanted to ask a couple of things about the seasonal business. One is just wanted to think about why the lack of non-current availability. Wouldn’t that just in theory drive more sales of your current models? And then is it the snow season, is that why your overall seasonal guidance is flat to up 3%? Is it because the snowfall this year that you’re anticipating, not shipping a lot of -- much of an increase in snow for next quarter because of that? And then also just had a question on the Evinrude in the Marine business. I guess how long is until your marine investments do you think will drive growth in Evinrude? Thanks. José Boisjoli: First of all, snowmobile, the industry so far and this is at the end of January, was up mid single-digit and we're up mid single-digit. But what happened is last year we had an incredible growth in snowmobile and we end up with only 25% of noncurrent inventory when our market shares about 50%. That means our competitor at 75 of the noncurrent inventory. And if you remember this winter the snow was quite good early in November than the noncurrent deplete very, very quickly. But December was soft in terms of snow and it started in January. And it was an uneven snow season with region that have almost too much snow and very cold weather in other regions, and other regions weaken of snow and weaken of rain. Then so far, we are following the industry basically. We are in line with the industry. But we were hoping for better than that. And that's why we expect the shipment in fiscal year '20 a bit lower than last year. And all of this is included in our guidance. On the Marine front, we're quite happy with our acquisition of Alumacraft. So when we announced the acquisition of Alumacraft two of our engine suppliers decided to stop delivering to us, and it created some confusion with the dealer network. But right now, we are working on this and we believe we will gain back and we will have -- if a dealer want to drop Alumacraft, we have plenty of Evinrude dealers that raise their hands to take it but it will take a year to adjust all this. On the Manitou front, we were very happy. We had a very good booking in last August. And so far the retail it's early in the season, but so far the retail is 50% up in Q4 and very happy about the acquisition. But all of this will take probably a year to align in terms of dealer network. But the big plat is better integrates the design of the engine and the boat, and this is more a midterm play about three years. And more we advance and more we progress, we will tell you more about this.

Thank you. Our following question is from Gerrick Johnson from BMO Capital Markets. Please go ahead.

First, I just want to be clear and specific about what you're talking about regarding retail trends in February and March. Are you saying offered retail is down in February and March? José Boisjoli: On off-road vehicle it's soft and we believe there is a weather pattern. The dealers are not concerned, because they still have very good booking in March. But what we see so far it's a bit tough for February, March.

And then your comments on snow confused me a little bit. Could you just talk to some dealers who just had fantastic season and fantastic year-end, I guess it's not spread like peanut butter. I guess, it's patchy that you were saying after February and March snow was good in some areas and not others? José Boisjoli: Yes, exactly. If you go Ontario and Quebec, very, very good winter. If you go in the Midwest soft. If you go in the West, it's very patchy. Some dealer had excellent season, others a bit weaker. And it’s very, very patchy all over North America. But at the end of the day, the industry is up only mid single-digits.

And lastly, Sebastien, can you talk about the components of the gross margin decline. You did mention program impact but you mention warranty impact. So maybe if you could give us a basis point break down, a rough breakdown of what hit you where and then more specifically what's going on with warranty? Thank you.

Sure, I will give you the walk through of the margin decline, 80 basis points decline in the quarter. Volume was positive. As you saw the top line growth year-over-year, so that brought about 210 basis points of margin improvement. The topic this year has been commodities and freight. And so obviously we've been impacting fourth quarter, that’s a headwind of 90 basis points. We did record additional warranty related to the Marine business in the fourth quarter that was an impact of 90 basis points, currency as well unfavorable for 60, and then there is other elements overhead related to capacity increase and growth for about 50 basis points.

And under capacity expansion, I understand it probably adding operating profit dollars at this point. But is the Juarez expansion right now a headwind in terms of operating margin percent?

No, for the fiscal year '20, it's going to be a positive impact, because in H1 it's going to softer where we should product the same level of production that we had in H2 of last year, because the ramp-up in capacity is being offset by the shutdown that we have. For H2 it's going to be positive. We’re going to be seeing more and more volume coming out of Juarez 2, and so net for the year is going to be a positive.

Our following question is from Benoit Poirier from DesJardins Capital Markets. Please go ahead.

Gentleman, could you come back a little bit and provide more granularly on the capital spending forecast this year? Obviously, it’s a significant bump versus last year and the previous year. You talk about the fast pace of innovation, digital information system and Juarez 2. But could you provide maybe more granularity on the spending expected and what is driving the increase?

Yes, so as you covered well, I guess, you listen one of my comments this morning. The other elements that we are addressing are capacity expansion elements. Watercraft is growing, I think you've visited our plant in Querétaro, so we need to invest in Querétaro for added capacity. The side-by-side business is also growing. So yes, we're increasing the plants, machining et cetera. But we also need to increase the logistics around the capacity increase. And therefore, delivering units to dealers is requiring additional investments this year, and so that's covered in our plan as well. And also as part of our transformation 2020 mission, well we have some better tools that we want to deploy to our teams internally and to our dealers. And that's calling for important investments as well.

And my second question is with respect to the acquisition of Alta Motors that you've announced recently. I understand that there is no intention to bring back some motorcycle from Alta right now. But could you talk a little bit about the strategy, where do you see Alta contributing in the future and what we should expect out of this small acquisition? José Boisjoli: It's not a secret that we've said a few times that one day our product will be electric, it's nothing all of them but some of our product with the electric and if not -- if it will happen when it will happen. And you know that we've done -- we sold Commander -- electric Commander for a few years. We have prototype of electric spider. We have prototype of other -- of our product in electric version. And as it was an opportunity, Alta had difficulty and it was an opportunity this fall where we did acquired for small money interesting technology, interesting equipment and also a few key patent that will help us to develop more performance electric power pack. Then nothing more that I can share this morning, but it was an opportunity and we decided to go for it.

Are there some product lines where the electric is more suitable and maybe some product lines where the electric capabilities is maybe less suitable at this point, José? José Boisjoli: For sure, the difficult in our industry first many of our product line are off-road and second, we don't have much space in our product line to put battery than the range is affected. The challenge we have is to have high-performance parcel to maximize the space and to maximize the range. That's the challenge that we are facing. Obviously, for competitive reason Benoit I cannot share more than that for the time.

And maybe the last question on the -- or maybe two quick ones. On the retail side, you put out some good color about the fact that the retail inventories 15%. But given the introduction of new products, what should we be expecting in terms of retail inventory towards fiscal '20? Should we expect the reduction or maybe another continued increase given the strong top line growth?

Yes, the increase this year was high against the 15%. But don’t forget the last year, we were chasing capacity for side-by-side and so we were missing inventory in the networks. So when I look at the average increase over two years, we're looking at a 9% increase over two years of inventory when our retail was up 11%. So I think we are doing a good job in managing the overall inventory in the network. So obviously, our business is call to grow for side-by-side, we have strong aspirations to grow this business. We're still an important player but we want to be have greater impact on that industry. And so I am looking for inventory to increase in next year as well. There would be some pluses and minuses quarterly but for a full year the inventory will go on.

And last one for me. Could you talk a little bit about free cash flow generation and anything we should be aware, in terms of working cap for fiscal '20, and maybe the cash deployment opportunity that you see as you grow the EBITDA and reduce that?

Yes, in terms of free cash flow, we're probably looking at a free cash generation to between $200 million and $250 million next year. Factors impacting free cash flow outside of the EBITDA and the CapEx. Obviously, income taxes will be increasing. Some of the attributes that we have for Canada in U.S. have been fully utilized and therefore, we're in a more cash taxpaying position. And working capital investments as well will require some cash investments.

Thank you. Our following question is from Brian Morrison from TD Securities. Please go ahead.

I just want to go back on the gross margin performance, specifically within the Marine segment. I’m wondering if you can just go through for me the key factors impacting the decline in gross margin whether that was in line with expectations and maybe whether there is some house cleaning to proceed with your future strategy of building the vertical that would be appreciated. And then just I know I realized it's early to maybe elaborate on the headwinds and tailwind you're encounter optimizing the network?

Well, Q4 is usually a softer period for the Marine business when volumes are usually lower and also the Marine -- the boat businesses that we are acquired have a lower gross margin profile. On the EBITDA side, it delivered similar EBITDA margin. But because of lower overhead or lower pricing, they have lower gross margin, lower OpEx, which deliver similar EBITDA. Where we needed to make an adjustment this quarter which is non-recurring, was related to gross margin that impacted as I said our total -- related to warranty, that impacted our gross margin by 90 basis points negatively this quarter. Obviously, as José eluded, our plan for the Marine business is a more long-term plan. Yes, we are not happy with the results that I've eluded but more challenging in the package side of the business, we’re doing a good job on the loose engines. And so our strategy as a long-term strategy where we want to transform that industry and it's going to be a three to four year journey as José eluded.

And then just the headwinds and tailwinds you’re encountering of optimizing the network?

The headwinds we have is transition from Yamaha and Mercury to Evinrude and other engine brands, so that’s one of the headwinds we’re facing. The tailwinds, obviously, is while there is excitement with BRP, they know what our innovation capabilities are, they see what we within the powersport industry, what we've done in the side-by-side industry in a very, very short period of time. And so they are excited or anxious to see what we’re going to come coming out with in terms of integrated package for the Marine business. And that's something, which is obviously bringing dealers to BRP and to the Evinrude brand in anticipation of what’s going to be coming. José Boisjoli: But just to give you a sense, Brian, I wouldn’t have called that a headwind at this point. I mean, Alumacraf, we've lost 11 dealers so far. We added 16. And Manitou we didn’t lost any and we added six but we’re right now in a period where some dealer don’t know if they want to continue or to stop. And we have a list of dealers that we’re in discussion with that they need to make a decision but we have also a list of dealers that are ready to take over. And just to give you a sense to remind you the number. We have 1,022 dealers Evinrude in North America. Alumacraf has about 280 dealers and Manitou 150. They will have plenty of alternatives but we are right now in the period where the dealer needs to make a decision.

Last question just on the global macro outlook been a little bit more uncertain, the M&A climate where you've seen more acquisition opportunities, maybe decline in valuations which are becoming more attractive? José Boisjoli: I mean like we said, we are still exploring some boat companies, we are still discussing with some other both company, but nothing more than that for the time being.

Thank you. Our following question is from Craig Kennison from Baird. Please go ahead.

I wanted to start with retail and follow-up with some prior questions. Have you seen any impact from the U.S. government shutdown, tardy tax rate refunds, or the flooding in some rural markets? José Boisjoli: Yes, we heard about the government shutdown and some delay on some farm loan program. We heard about this from through some dealers that it was affected. But again the Hagen Oil area are quite I would say not good, but quite stable. But we don't see that -- we are still growing in those states, because we started from nothing and now the defender is gaining in popularity. And then we heard about that through the dealers. But I would not say that it affected our growth in those states.

And then with respect to the NCIB 7, you said on Slide 20 you talk about the somewhat backend loaded nature of normalized net income. Does that imply that your buyback activity might correlate to that and be a little more backend loaded? Or could you take advantage of the stock weakness here recently and be more aggressive early in the process?

Obviously, we do not like where the stock is trading today. It's been like the first six months. And so part of what’s driven added some dark clouds over economic slowdown but the dark clouds seem to be dissipating and we are not seeing any slowdown in the economy. And so obviously as part of our strategy, we want to maximize in CID and so doing some buybacks this is early in the year when the price is very attractive would be the right thing to do.

As a follow-up, does EPS guidance include any benefit from buyback activity?

No, the EPS guidance does not include any share accounts impact coming from buybacks.

Thank you. Our following question is from Cameron Doerksen from National Bank Financial. Please go ahead.

Just a couple of questions on the IFRS 16 impact. Just wondering what that does for the balance sheet? I mean, it looks like you've got about $250 million-or so in operating lease commitments. I assume the associated debt that's going to come on balance sheet with something lower than that. I'm just wondering if you can quantify on that.

On the balance sheet you'll be seeing about $200 million of assets being reported in the fixed benefit of the balance sheet. And you'll see in corresponding liability of about $200 million as well going on the balance sheet.

And lease expenses now are under the previous accounting, it's running through cost of sales, correct?

Most of it is running through cost of sales, some of it a bit in admin expense. But the majority is running through cost of sales. And so what you're going to be seeing is a increase in gross margin coming from the removal of that lease expense. Part of it is going to be offset by higher depreciation expense. But then the remaining portion about, that’s an $8 million impact, is on financing costs, so financing costs are increased. When you look at the guidance, it calls for an $8 million impact coming from IFRS 60.

And just following just on the -- you talked about inflationary cost headwinds in the past. I'm just wondering if you can give us an update on what you're seeing for fiscal 2020 on things like commodity costs and tariffs and freight cost.

Yes, things have stabilized a bit when we talked last in December. You might remember that for fiscal year '20, I called out about $35 million impact coming from commodities, freight, tariffs that was versus fiscal year '19. We're still in that ballpark. Tariffs, it’s been the status quo in terms of 10% on this three. And so that’s factored in our guidance commodity increases as well as in our guidance. We've seen a bit of improvement but nothing material yet to let’s say call $10 million favorable versus what we had estimated but at least the trends are in the right direction.

Thank you. Our following question is from Jaime Katz from the Morningstar. Please go ahead.

So you've talked a lot of production and distribution costs, the factors that have impacted the gross margin. But I’m curious about what levers you guys might have to pull and to mitigate some of those expenses in the year ahead to benefit the gross margin line? Thanks.

When I look at our overall gross margin, and you might remember that once we launched the 2020 plan, we had called for about 200 to 300 basis point improvement in gross margin. When I look at the progress we've made over the last three, four years, gross margin has improved net of FX about 130 basis points. This year, we're impacted negatively by commodity increases, freight costs for about 80 basis points. So we’re pretty much very close to our estimated improvement in margin of about 200 basis points to 300 basis points. Going forward, I mean we’re still focused on modularity and so not a 100% of lineup is modular. ATV business, none of the ATV products that we have today follow that modularity strategy. We’re in the process of converting the last part of the personal watercraft business that’s going to drive further margin improvement. And with the added production that we're doing in Mexico for side-by-side that's also bringing margin improvements. So there is still some road to go but there are still opportunities to continue improving, and getting to the 300 basis point target that we have.

And then in one of the documents this morning, it noted that the expectations for the year ahead would be that the industry was flat and that you'd be gaining market share in the year around and seasonal and then constant share in Marine. But I'm curious what your take is for that Marine segment going forward specifically. Do you have outlook on industry growth that you have there? Thanks.

Yes, we do have an outlook on industry growth for Marine. The Marine business has been very healthy in the last few years. The macroeconomic trends are very positive and so we are continuing to see some optimism in that industry, and that's one of the reasons why we've invested and we want to grow into that market. Engine sales are up both sales, as well as good and the trend in the boat shows are favorable. I mean, last year was strong and we'll see similar trends this year. And so no red flags are on our screen on the Marine side.

Thank you. We have no further questions registered at this time. I would now like to turn the meeting back over to you, Mr. Deschênes. Philippe Deschênes: Thank you, Moe. And thanks, everyone, for joining us this morning for your interest in BRP. We look forward to speaking with you again on May 30th for our Q1 earnings call. Thanks again everyone, and have a good day.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.