All participants please stand by. Your conference is ready to begin. Good morning, ladies and gentlemen. And welcome to the BRP, Inc.’s FY ‘20 Third 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, Amo. Good morning. And welcome to BRP’s conference call for the third quarter of fiscal year ‘20. Joining me this morning are José Boisjoli, President and Chief Executive Officer; and Sébastien 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 uncertainty. I invite you to read BRP’s MD&A for a listing of these. Also during the call, reference will be made to supporting slides and you can find the presentation on our website at brp.com under the Investor Relations section. So, with that, I will turn the call over to José. José Boisjoli: Thank you, Philippe. Good morning, everyone, and thank you for joining us. I am pleased to report that we continue our solid performance trend as we have delivered a record third quarter of a strong retail growth and financial results. Based on these solid results and the good visibility we have on the demand for the rest of the year, we are rising the lower end of our guidance narrowing our normalized EPS range to $3.70 to $3.80, representing a growth of 19% to 23% versus last year. Now, let’s go into the highlights of the quarter starting with the financial results on slide four. Our revenue reached a record level for the quarter at a $1,644 billion, representing a year-over-year growth of 18%, driven by higher wholesale sales…

Thank you. [Operator Instructions] Our first question is from Robin Farley from UBS. Please go ahead.

Great. Thanks. I have two questions. One is guidance. José Boisjoli: Robin, sorry, could you speak louder.

Hopefully you can hear me now. I had a question about your revenue guidance being up about $79 million but EBITDA guidance up about $1.5 million, just kind of looking at the midpoint. Is that primarily the increase in shipments coming from Ryker or mostly or something that would be lower margin, just trying to think about why the corresponding change in EBITDA wouldn’t have been a bit higher as well? Thanks. Sébastien Martel: Yeah. Good morning, Robin. Obviously we are seeing good momentum in the year around product business and that’s a driver of the increase in revenue growth. But one of the elements, as well as driving the adjustments into the overall guidance is FX, for which the U.S. dollar has been trending higher than when we initially set guidance and so we are increasing the overall revenue guidance by 1%, driven by currency. However, we are naturally hedged on the U.S. dollar and so a lot of that does not flow unfortunately to the bottomline and that’s why we are not adjusting their profitability guidance as much.

Okay. Great. No. That’s helpful. Thank you. And then other question just on the timing, obviously, very strong retail and you shipped higher in your realm than we would expected and yet that the full year. So I am just wondering if you just kind of shipped some earlier in Q3 that you had originally thought you might ship in Q4 or if we might see a corresponding the upside potentially to Q4 here similar to what we saw in Q3? Sébastien Martel: Yeah. The production is pretty much frozen from now to the end of the year, obviously, when we saw the strong retail that we are having in Q3 that gave us the opportunity to ship some units that were initially planned for Q4 into Q3 and so we took that opportunity. And so that’s what drove the better than anticipated results in the third quarter versus what we had initially expected or anticipated.

In other words you are not necessarily planning to… Sébastien Martel: No….

… today [ph]. Sébastien Martel: No. We will not be increasing the adjustment we made the guidance is a reflection of the strong Q3 that we have. But we are not necessarily increasing the overall anticipated -- the anticipation for this year, as I said, production is pretty much frozen from not at the end of the year for side-by-side.

All right. Great. Great. Thank you very much.

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

Hey. Good morning. Two questions here. First of all, you talked about sale programs as a headwind to margin, you did increase margin nicely, but it was a headwind. So where you see increased sales programs and why, and then, I also want to talk about your own inventory up 24%, it looks like year-over-year on your books with finished goods up 50%. So you could talk about the inventory on your books? Thank you. Sébastien Martel: Yeah. We have been increasing capacity over the last few years not only on side- by-side but on personal watercraft and so that, obviously, allows us to build some of the inventory or some of the products a bit earlier than the previous years. For watercraft, we have counter-seasonal markets which are pretty big. And so that gave us the opportunity to build that inventory in Q3, put it on the water for shipment in South America and in Asia, and so a lot of the increase in inventory comes from that higher flexibility that we have and better timing for market. And also just the growth side-by-side, obviously that’s been growing as well and so as we are increasing capacity and as we are increasing output that results in higher levels of inventory. But when I look overall in terms of number of days and I look on a full year basis, we are actually improving our number of days of inventory and so I am comfortable with the working capital investments we are making.

Okay. Sébastien Martel: And on the margin side, well, I will let José probably cover the programs and then we could dive into the margin? José Boisjoli: Yeah. Good morning, Eric. If I look at what’s going on in the promotional environment, like typical at this time of the year for watercraft and snowmobile, the promotional activity is normal. On ATV, it’s -- I would categorize it as normal as except for the mid-CC category, non-current ATV, where there is quite an aggressive program there and we need to follow. On the side-by-side, it’s a bit unique and it’s quite aggressive on the non-current model, which is normal at this time of the year. But what is abnormal at this time of the year is some of our competitors are already programs on the current models. And on our side, we have no program right now on the Maverick X3 and the sport category, and we decided to follow with a two-year warranty or $300 to $500 program for the customer on the Defender and the Commander. Then is a bit earlier than typical, but we decided to be more aggressive on the Defender and Commander category to follow some action of the competition.

Okay. Thank you. Sébastien Martel: Thank you.

Thank you. Our following question is from Jean-François Lavoie from Desjardins Capital Markets. Please go ahead. Jean-François Lavoie: Yeah. Good morning, gentlemen, and congrats for the strong quarter. Sébastien Martel: Thank you. Jean-François Lavoie: In the presentation, you mentioned that the strong side-by-side growth was driven by the utility in the sorts segment. I was wondering if you could provide additional colors on the penetration you are seeing in the utility market, please? Sébastien Martel: Yeah. If I give you some colors on the sports category, the market was up mid-teen percent. Under review where we compete with the Commander it was minus single-digit and on the utility side, the industry was up high -- mid high-single digits, sorry. But our sales in the utility this side is doing well and I want to just give you a sense and many people talk about the ag space and we categorize seven states in U.S., part of the seven states, out of those seven states in six states we have the industry was the -- we were growing quite well except in one state, and our growth for the Defender in ag state was up by more than 40%, when the rest of United States was up by about 30%. Then the point I want to make is, on the utility segment which is the biggest segment, the industry have grown high single-digit, but we outperformed significantly the industry in all United States and particularly in the ag state. Jean-François Lavoie: Okay. Great. And in those states, I mean, in the future there is, probably, a more growth opportunities to penetrate those markets, right? Sébastien Martel: But for sure, like, we have said many times, we never really -- when we started with the Defender, it was a slow ramp-up because…

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

Yeah. Thanks. Good morning. Just a question on the snowmobile market, I mean, obviously, this season is off to a good start and your retail is strong. But as you mentioned, it is a little below, I guess, the broader industry and it sounds like some of your competitors had different sales strategy. Can you just talk us through that and what you would expect, you are going to make up some ground here as the season progresses? José Boisjoli: Yeah. Good morning, Cameron. We believe that we are the OEM. We sell the most presold unit to consumer. Some dealer turn to almost 50% of their orders is presold to consumer and you need to make sure you don’t deliver all of them in the same month. Then because we have about 50% of the market and because there is a high ratio of presold units sold to end consumer, we need to balance the way you ship vehicles to the dealers and nobody I think had predicted at the end of October the markets to be up by 30%. That is just a question of timing. And we are very enthusiastic with this snowmobile season. It’s been a while since we had to start like this. And we are confident that when all the model will be shipped to the dealers we will catch up our market share.

Okay. No. That’s good. And just maybe a couple of questions on couple of cost line items. Just looking at the selling and marketing line item, it does seems to be up quite a bit year-over-year and it was above what I would have expected and just maybe if you can just explain why that would have been the case and maybe the same question on a general and administrative, I am just wondering if these are kind of new runways that we should expect for those to cost line items? Sébastien Martel: Yeah. You should expect an absolute dollars ballpark these numbers, not in percentage increase but in absolute numbers. Obviously, we are investing in our growth business. The marketing spend is up as well in the quarter up just over 20%. Club is a big period of the year. We announced a lot of new product news and so there’s a lot of marketing dollars attached with that. As you might recall, we had a busy club with a lot of product news to announce on the side-by-side and on the personal watercraft. So that’s driving higher marketing spend. Obviously, the R&D element as well, we always said that we will not slow down the pace of innovation in R&D as part of that innovation introduction. And the other element is in NIM. It’s also up almost 20% this year versus year ago. We have talked about this a few times over some calls. We are investing more money in our IT systems and our RT backbone, and obviously, that comes with dollars and that’s being reflected on the -- most of it is being reflected on the admin line.

Okay. Will that IT spend at some point to mitigate? Sébastien Martel: We have that for a few years. At some point, yes, but call it, it’s a mid- to long-term investment that we are making.

Okay. No. That’s helpful. Thanks very much. Sébastien Martel: Thanks. José Boisjoli: Thanks.

Thank you. Our following question is from Tim Conder from Wells Fargo Securities. Please go ahead.

Good morning and congratulations gentlemen. Just a couple of follow ups here, José you said whoever wants to take this, maybe a little more color on the comment about the geographic market share impact in personal watercraft? And then also at the Analyst Meeting at the end of October, you mentioned about, the likelihood that you will be in the near future expanding capacity again needing to do that. Just maybe a little bit more color on that also on potential timing? Thank you, gentlemen. José Boisjoli: Yeah. Good morning, Tim. On the geographic mix, with Sea-Doo, we always been and again this is historical, because of our snowmobile heritage we always had the stronger dealer network in the snowbell and in the east of North America then out west and south. Obviously, Sea-Doo with 50% market share is doing well, but we have higher market share in the Midwest and in the east than the south. And what happened, I mean, we shipped quite quickly from fall to winter and we believe that all disadvantage versus some of our competitor where we are strong. Then it’s just a question of timing. We have no doubt that with the new platform that we introduce a club, which is in the GTI family, which is entry level product. We have a very, very competitive lineup and it’s a question of timing. Plus, the other thing I should add, I would be careful with the number in Q3, because in the big picture, it’s not big numbers in units, because we are in the tail end of this season and this is the our take on the geographic mix for watercraft. On the capacity, like, we said at the Investor and Analyst Day in Florida. For sure, if we continue to grow at the pace we are growing on the side-by-side business. At one point, we will reach our capacity limits in Juarez 2. And we are looking at all different options and if the growth continue, you can expect, we will need to make a decision, I would say, within the next 12 months.

Okay. Great. Thank you. José Boisjoli: Thank you.

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

Hi. Good morning. Question on the outlook for Q4 specifically on the cost side. Seb, you mentioned higher marketing and IT, but it doesn’t sound like anything other than norm. I just wondered if there’s any impediments such as accelerate product investment or commodity costs, because guidance looks a little bit conservative even with the frozen production. And then when we look to fiscal 2021, how should we think about the EBITDA margin cadence, is there any major changes in input cost impact and improvement? Sébastien Martel: Okay. One, just looking at Q4, obviously, we are expecting a slower growth rate in revenue, but nonetheless some growth. There is margin improvement important margin improvement coming in the fourth quarter as we have a bit more volume, but we also have a very favorable mix. Obviously, this side-by-side business is continuing to grow and we have a lot of new products, the Defender Pro, the Defender Limited with the cab and HVAC. These are units that we will start shipping in the fourth quarter. We also have the new RT that’s going to be shipping. And so margins are going to be healthy in the fourth quarter and that’s going to be driving the strong growth and EBITDA that we are planning. When I look into next year, we are looking at margin improvements for next year, but we will be giving you the full download of our guidance once we published our Q4 results. And as you know, our long-term objective is to grow our EPS by 15%, and so that’s where we are going to be driving for the next few years. But when I look at next year, there is a lot of good opportunities that are going to be obviously helping the bottomline. One, the strong momentum we have with side-by-side and ATV. The second season of Riker and in the end the introduction of the RT, the new Sea-Doo platform that we just launched a few months ago that’s going to be shipping into next year. And PAC as well is going to be growing as our side-by-side business is growing. The accessories business is again going to be growing with that. Our parts business is going to be growing with the increased fleet and who knows what the R&D team is going to reserve as a surprise at the Ski-Doo Club in a few months and I am sure we will have some exciting news there as well. So when I look into next year, a lot of positive elements are going to be driving the growth. When I look at consensus for next year as well is a number that I feel comfortable with that we can deliver. So a lot of good potential.

That’s helpful. Just in terms of realization of initial cost savings from M25, when should we start to see that -- those flow through? Sébastien Martel: Well, obviously, some of the pillars of M25 are already in place. So in terms of cost reduction on product design, that’s a platform that we have had now on for at least three years, four years. We are deploying fully on personal watercraft. There’s also going to be some opportunities on the side-by-side business as we grow. So that’s one of the big elements. And as we are rolling out some of the new ISIT tools that we have, well, we will be also leveraging some of the benefits of that to increase operational efficiency.

Thank you. Maybe one last question, José, on the marine segment, ongoing headwinds has anticipated. Now you have digested Telwater, presumably they don’t face the same hurdle. I was wondering if it’s tracking with expectations. And then in terms of the new projects such as Ghost, perhaps, some insight as to what’s been shared with the dealers to-date the reception and how we should think about timing? José Boisjoli: Yeah. First, Telwater is new -- it’s very new, but it’s at plans, no surprise on Telwater. I will say on the North America brand Alumacraft had a pretty good quarter and Manitou has a very good quarter. And because Pontoon it’s a high and expensive product, we put some promotional dollar there to help the dealer to lower their inventory, the flip side we have good order for season ‘20 that will start to ship in Q4. But I will say it was not the best season for our first boat business. But that being said, again, like we explained to you at the Investor Day the mid- to long term strategy and all the program about the new boat and the new Ghost program and Manitou is on schedule, and no change there, we are keeping the core.

Thank you very much. José Boisjoli: Thank you.

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

Hey. Good morning. Thank you for taking my questions. I wanted to ask about the side-by-side market. You have had tremendous success in that channel taking significant share. I think oversimplifying it’s been about product innovation, but also about profitability. Your dealers make a good amount of money on those units. Have you seen any erosion in the profitability in the channel of your product as you try to expand in that category? José Boisjoli: Good morning, Craig. For sure, if you play back the history we -- first we enter a lot of whitespace with all our product and this combined with our dealer value proposition. We -- this is the winning combination and that’s what we have been outpacing the industry significantly. All of the dealer value proposition is also evolving. We always work -- every year we raise our PMA for the dealers, also we make sure that we have the right balance between promotion and between no promotion to make sure that the dealer protect as much as they can their margin, because we don’t want the BRP dealer competing against the BRP dealers. Then overall there was evolution between now and when we introduced the program, the overall program, but I would say, some slight variation, but if you took overall, I think, we are in the same ballpark than we were a few years ago. And most of the dealer make very -- better margin with our product versus some of our competitor. Sébastien Martel: And we have been -- maybe if I add one point, we have been diligent in adding dealers. One of the key differentiating elements that we have versus other OEMs is the fewer number of dealers and therefore less intra-dealer competition. And that’s an element that we are tracking very closely to make sure that we are not building out too many dealers and therefore increasing dealer competition between themselves. José Boisjoli: Yeah.

Thank you. And then I wanted to ask a question about slide 13. It shows the net impact of the -- the net improvement in the attachment rate for Evinrude and Alumacraft and Manitou. I imagine there was some offset. Maybe you were dropped from other brands, just any way to describe the net impact of that? Sébastien Martel: Well, if you remember when we acquired the company in 2018, those two companies in 2018, Yamaha and Mercury stop supplying engine to Alumacraft and Manitou. It was more disrupting for Alumacraft because those two brands were big portion of our boat sales. For Manitou and Evinrude was already in the 40% range attachment on their pump tool. Then Alumacraft was hit harder than the Manitou. That being said now after a wonderful season, we know exactly, which dealer are engaged for both Alumacraft, Evinrude and Manitou and Evinrude, and now we can -- we believe we can grow the attachment rate from now at a good pace. But the first year, again, was more difficult than what we had anticipated, because of the reaction of our two competitor in the boat -- in the engine category.

Great. Hey, thank you. Sébastien Martel: Thank you. José Boisjoli: Thank you.

Thank you. Our following question is from Matt Bank from CIBC. Please go ahead.

Thanks. I just want to clarify the comment that production is frozen. Just in the context of you do have a significant effective capacity increase. So can you just clarify we saw capacity was up 25% to 50% year-over-year and then why can’t you ship more to meet the stronger than expected demand? José Boisjoli: Yeah. Good morning. As you know, we entered most for ATV, side-by-side, watercraft and the three-wheeled vehicle business. We introduce our new model, let’s say, in the summer, between June and September. And typically at the introduction of a new model year, you are going to full capacity because you are supplying to the dealer demand. The quarter that is more volatile in terms of supplying to our manufacturing at full capacity is always Q2. Then typically in our business, we are running Q3, Q4 almost all the time full of our capacity, Q1 most of the time is running full capacity and Q2 can be more volatile depending of the year and the retail and all this. And that’s why in the comment of Sébastien because of the strong demand we have on our retail, we were -- and the good dealer order backlog that we have, we already were planning Q3 and Q4 to run at full capacity.

Okay. Understood. And can you share any indicators or your confidence on retail momentum heading into Q4 or in Q4? Sébastien Martel: Well, we -- obviously, we don’t -- we look at our retail, we have good visibility. What I can tell you is that we are not seeing any changes in the consumer behavior from what we saw in Q3 and what we saw in the previous quarters of the year. Demand is still there and the consumer is still walking into the stores to buy goods. So that’s a good indication.

Thanks very much.

Thank you. Our following question is from Derek Dley from Canaccord Genuity. Please go ahead.

Yeah. Hi. Thanks and congrats on a strong quarter. Just one for me, just in terms of the inventory that you have got at the dealers now that you already shipped, can you just give a comment on the year, like, is it mostly current year models that you are seeing in the inventory channel at this point? Sébastien Martel: Yeah. The inventory is very clean. When I look at what’s driving the increase a bit of personal watercraft, inventory increased, but the main drivers are side-by-side and Ryker as we are shipping the new model year. So the inventory is very clean. I mean, we have less than 5% of the inventory in the dealer network that is more than 18 months old. So, it’s very clean inventory and nothing obsolete lying there.

So then from a promotional perspective, I mean, if the inventory is that clean, you should be pretty light on the promotions going forward or the near… Sébastien Martel: Well, I am not expecting a big change versus what we have seen overall in the last, let’s say, 12 months to 18 months. There was always promotion happening. You want to make sure that the consumers walk into the dealership. And so that’s a big driver of that. So I am not seeing any slowdown or any increase in promotions.

Okay. That’s great. Thank you very much. José Boisjoli: Thanks.

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

Hi. Good morning. I have a couple of questions just on the marine segment. Given that the marine margins have contracted pretty significantly this year and I know you pointed to some of the promotions on Manitou, should we expect the fourth quarter margins will be negative again this year? And then going forward if you have a targeted sort of run rate for the margin for that business I’d be curious to hear what that might be? Thanks. Sébastien Martel: Yeah. The margins will still be tough on the marine business for the next few quarters. Obviously, OE is more in a challenged position than the boat businesses are and OE is the bigger part of that business. So I am not seeing a material improvement in margin. But I will remind you that our marine strategy is a mid- to long-term play and that’s why we have decided to invest in boat companies and become a better integrator of engines than boat within boats and that improvement in our business will materialize not next year but in fiscal year ‘22 and in fiscal year ‘23. So I am not expecting any short-term improvements in that business.

Of course. And then could you give us an idea of maybe what percentage of full year orders you think you have visibility to for 2020. I know you guys have painted a pretty nice picture of that. The marine business is tracking in line with sort of what your expectations are, but I don’t know -- I can’t sort of judge how much visibility you have into that at this point and how much is remaining to play out given that we are only in November? José Boisjoli: Well, the way it work we have done three dealer meeting, one for Evinrude and two for -- one for Manitou and one for Alumacraft in August. And after those dealer meeting, the dealer gave us order -- firm order for delivery till the end of Q1. In parallel, we will start to do boat show around Christmas time and everything for the end of season ‘20 is like the additional order will depend on the boat show sales and also how the spring will evolve. Then that’s the cycle that we are planning and right now we have firm orders till the end of Q1.

Excellent. Thank you so much.

Thank you. We have no further questions registered at this time. I would now like to turn the meeting back over to Mr. Deschênes. Philippe Deschênes: Great. Thank you, Amo. And thanks everyone for joining us this morning and for your interest in BRP. We look forward to speaking with you again for our fourth quarter conference call scheduled for March 20th. Thanks again everyone and have a good day.

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