BRP Inc.'s Earnings Call Contradictions: Promotion Timeline, Retail Momentum, and Tariff Impact Differ Across Reports

Date of Call: Mar 26, 2026

Financials Results

• Revenue: CAD 8.4 billion, up 16% YOY
• EPS: CAD 5.21 normalized EPS, more than doubled YOY
• Gross Margin: 23.7%, up 380 basis points YOY

Guidance:

• Revenue growth expected between 5%-8%.
• Normalized EBITDA growth expected between 6%-16%.
• Normalized EPS expected between CAD 5.50-CAD 6.50, representing 15%-25% growth over fiscal 2026.
• First half revenue growth expected to be strong, moderating in second half.
• Q1 normalized EBITDA growth expected in the 40% range.

Business Commentary:

Revenue and Financial Performance:

• BRP Inc. reported revenues of CAD 8.4 billion for fiscal year 2026, with a normalized EBITDA of CAD 1.1 billion and normalized EPS of CAD 5.21, all exceeding guidance.
• The company generated strong free cash flow of more than CAD 900 million, ending the year with a strong balance sheet.
• The growth was driven by favorable product mix, positive pricing net of sales programs, and robust consumer demand across its lineups.

Network Inventory and Retail Performance:

• North American dealers' inventory was down 17% from a year ago and 28% over two years, reaching optimal levels for ORV and snowmobile segments.
• Powersport retail in North America increased 12%, fueled by positive industry trends and market share gains in ORV and snowmobiles.
• The improvement was supported by aligning wholesale with retail trends and significant market share gains following new product introductions.

Strategic Initiatives and Market Position:

• BRP introduced several new key models and executed the divestiture of two marine businesses, enhancing its long-term prospects.
• The company's innovative product lineup, such as the new Ski-Doo and Lynx snowmobiles, contributed to market leadership and share gains.
• These initiatives are part of the M28 strategic plan aimed at driving sustained growth and strengthening BRP's global powersports OEM position.

Impact of External Factors and Guidance:

• BRP recorded an impairment charge on EV and light mobility assets due to reduced outlook for returns on investments, limiting the annual financial impact to CAD 25 million.
• The company adjusted its fiscal 2027 guidance to reflect potential economic uncertainties, expecting revenue growth between 5%-8% and normalized EPS between CAD 5.50-CAD 6.50.
• Higher oil, energy, and commodity prices were factored into the guidance, impacting freight costs and overall margin expectations.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed being 'on an even better trajectory than we thought' and stated 'we are confident in our ability to adapt and execute'. They highlighted 'solid results', 'strong retail momentum', and 'record Q4 performance' in certain segments, with guidance at the high end reflecting current trends.

Q&A:

• Question from Benoît Poirier (Desjardins): Could you give us your first impression, and where do you see the greatest opportunities to bring value on the back of your strong experience?
  Response: Sees similarities in motorsports to automotive in terms of brand, network, and product quality, and is excited by the innovative products and marketing positioning.

• Question from Benoît Poirier (Desjardins): Could you talk maybe about the assumptions from a tariff standpoint, also in terms of promotional activities and given on what you’re tracking so far in terms of market share gain, if there is room to exceed the fiscal year 2028 targets?
  Response: Too early to call exceeding M28 targets, but product reception and retail momentum are strong. Margin expansion will come from added volume, lean initiatives, and targeted investments.

• Question from Robin Farley (UBS): Just wanted to get more clarity around your guidance. It sounds like you’re saying that what you’re seeing is actually in the top half of your EPS range... Also, if you could give us some color around... ORV retail for this year... and quantify the dollar amount of destocking that you’re comping.
  Response: Current fuel prices still put results in the top half of guidance. Expect flat industry demand, but market share gains. Destocking benefit is a $350M-$450M tailwind.

• Question from Sabahat Khan (RBC Capital Markets): I wanted to start with the EPS guidance, specifically the bottom end of the range. I guess just in terms of your outlook for the back half of the year, can you share how you ended up at the assumption behind the mid-single digit decline outlook?
  Response: Assumes a 10% volume reduction in the back half due to economic uncertainty, but built in a 60bps headwind from higher fuel costs. Scenario reflects caution on potential demand softening.

• Question from Sabahat Khan (RBC Capital Markets): It seems like your inventory is in a good spot for the most part. Can you just comment on how you feel about your current mix? I guess as a follow-up, I think you mentioned you still see elevated levels of non-current inventory from competitors... what that looks like today compared to the past few quarters?
  Response: Company inventory is down significantly. Competitor ORV inventory has improved, though some smaller OEMs still have excess. Personal watercraft inventory for some OEMs may lead to a less promotional environment, with a 50bps program tailwind built in.

• Question from Sabahat Khan (RBC Capital Markets): Another good quarter of share gains. Can you just maybe talk about the uptake of your new product offerings and maybe kind of what your expectations are for that over the coming year?
  Response: Momentum is driven by innovation, with strong uptake for new Ski-Doo models and Defender HD11. New product pipeline supports growth for the year.

• Question from Joseph Altobello (Raymond James): ...what sort of changes, can we expect at BRP either strategically or operationally or financially?
  Response: No immediate short-term changes planned. Confident in the solid business plan and product lineup. Longer-term strategic plan will be developed.

• Question from Joseph Altobello (Raymond James): If I take the high end of guidance this year on EPS of CAD 6.50, it’s quite a leap to CAD 8. Can you remind us what’s driving that largely margin expansion in 2028?
  Response: Margin expansion will be driven by volume growth from market share gains, dealer network expansion, lean initiatives, and operational efficiencies.

• Question from Joseph Altobello (Raymond James): ...what was the incremental tariff in 2026 and what’s the expected tariff in 2027?
  Response: Tariff impact expected to be flat year-over-year, with a CAD 90M impact baked into guidance for 2027.

• Question from Mark Petrie (CIBC): I wanted to ask... on the dealer network growth... update that. Then I’m curious just to hear, you know, anecdotally what sort of reaction you’re hearing from your existing dealers...
  Response: North America dealer count grew by 36 in 2026. Growth is driven by product momentum and attracting new dealers, with under-penetration in some states supporting expansion without significant friction.

• Question from Mark Petrie (CIBC): ...just to sort of clarify, you aren’t seeing any reaction from consumers or dealers in the last month or so as macro uncertainties have elevated...
  Response: No reaction seen from dealers due to low inventory and high momentum. Affluent customer base is more insulated from macro pressures, but guidance remains cautious for the second half.

• Question from Anthony Bonadio (Wells Fargo): ...your lean value initiative... how much benefit you’re expecting in fiscal 2027 and maybe how you’re thinking about the level of flow through there versus reinvestment.
  Response: Expecting 100bps benefit from lean initiatives in 2027, which is baked into guidance and will help achieve M28 objectives.

• Question from Anthony Bonadio (Wells Fargo): ...I know there’s sort of a refund request process underway. Can you just talk about maybe how you’re thinking about getting any of that money back...
  Response: No hurry to pursue refunds; will wait for process clarity and certainty before filing, as it is not baked into guidance.

• Question from Martin Landry (Stifel): I was wondering how you know if there’s a correlation between industry demand and oil prices.
  Response: Last high oil prices (Ukraine war) did not impact demand. Correlation depends on price level, duration, and economic impact. Guidance includes a downside scenario.

• Question from Martin Landry (Stifel): ...just trying to see what assumptions you’ve used for North America and then what assumptions you’ve used for EMEA, Latin, LatAm and Asia-Pacific...
  Response: Applied similar global assumption of flat industry demand for simplicity, but growth will come from market share gains, especially in ORVs in North America.

• Question from Xian Siew (BNP Paribas): I wanted to ask first about the first quarter you talked about EBITDA being up 40%. Can you maybe give us a little bit more in terms of what’s underlying the underlying assumptions for the quarter...
  Response: Strong Q1 EBITDA driven by significant revenue growth (ballpark CAD 300M) and favorable comparisons to prior year's soft quarter, supported by new products like HD11.

• Question from Xian Siew (BNP Paribas): ...just kind of wondering, are the share gain, do you think it’s from new customers, existing customers kind of trading up...
  Response: Share gains come from both new customers and trade-ups. The Defender HD11 is a hit, attracting new users to the utility segment.

• Question from Luke Hannan (Canaccord Genuity): ...I wanted to follow up... what would be implied for you then to be at the lower end of the guidance range? Would you assume sort of no tailwinds from sales programs...
  Response: Lower end implies a tougher macro, more competition, and a promotional environment, leading to loss of the 50bps program tailwind and part of the volume/mix tailwind.

• Question from Luke Hannan (Canaccord Genuity): ...just where things stand as of today and when we might expect to hear a little more on that (Telwater).
  Response: Telwater is still classified as discontinued operations, available for sale. It is a good business with potential, but no rush to sell.

• Question from Tristan Thomas-Martin (BMO Capital Markets): Just a question on the HD eleven production kind of ramp. I think you said you’re producing full speed. Does that mean you’re at 100% of where you want to be...
  Response: HD11 production is at 100% of target, ramp-up is finished, and it is a hit, with factories running three shifts.

• Question from Tristan Thomas-Martin (BMO Capital Markets): ...in times of, like, elevated oil and gas prices, have you seen increased utility demand...
  Response: No high correlation. Potential slowdown in utility is less likely due to product novelty, but ag and construction impacts could affect demand.

• Question from Jaime Katz (Morningstar): ...whether you guys have seen any value-seeking behavior via things like, have attachment rates stayed the same...
  Response: No change in consumer behavior; trend is towards affluent customers. Financing trends unchanged, with high FICO scores.

• Question from Cameron Doerksen (National Bank): A question on free cash flow. You had a very strong year in fiscal 2026... So just wondering what your expectations here are for fiscal 2027...
  Response: Expect another strong year with free cash flow in the CAD 750M-CAD 800M range, CapEx around CAD 400M.

• Question from Cameron Doerksen (National Bank): ...where are the capital allocation priorities here...
  Response: Intention is to be active with share buybacks under the NCIB, having 2.6 million shares still authorized.

• Question from Craig Kennison (Baird): ...provide a little more detail on the impact that that’s having and how long you think momentum can be sustained...
  Response: Cab utility trend driven by consumer demand for automotive features. HD11 success on new platform; expect continued growth for next few years as more models introduced.

• Question from Craig Kennison (Baird): ...checking the box on guidance. What kind of interest rate assumptions are embedded in your outlook?
  Response: Assumed flat interest rates compared to 2026.

• Question from Brian Morrison (TD Cowen): Just to follow up on the margin guidance, should the EV rightsizing be a benefit to the margin outlook?
  Response: Yes, EV rightsizing provides a 50bps tailwind, but offset by investments in M28 plan (R&D, sales org), resulting in no operational leverage on OpEx.

• Question from Gerrick Johnson (Seaport Research): ...can you remind us the percent of cost of goods sold that shipping would be and then also resins?...
  Response: Commodities are largely hedged via long-term agreements. Freight is an important cost; oil price impact is a 60bps headwind.

• Question from Jonathan Goldman (Scotiabank): ...the walk to margin expansion, gross margin expansion year-over-year, can you remind me of the drivers there?
  Response: EBITDA margin drivers: volume/mix (+40bps), sales programs (+50bps), lean initiatives (+100bps), pricing net of inflation (0), overhead investments (-40bps), oil price impact (+60bps at top end).

• Question from Jonathan Goldman (Scotiabank): ...Have you seen any other competitors maybe move quicker to try and... lower prices to take some share...
  Response: No signs of competitors lowering prices aggressively. Industry-wide inventory reduction over the last 18 months positions everyone well for potential downside.

• Question from Jonathan Goldman (Scotiabank): ...on the industry inventory, could you give us an update on where we are versus current and non-current?
  Response: Snowmobile inventory in decent shape. Personal watercraft: some OEMs have more non-current inventory, potentially hurting their market share. Overall ORV inventory is in good shape.

Contradiction Point 1

Timeline for Competitive Promotional Environment

Inconsistent outlook on when elevated competitor promotions will subside.

Benoît Poirier (Desjardins) - Benoît Poirier (Desjardins)

2026Q4: The company is positioned for strong first-half results, with Q1 normalized EBITDA growth expected in the ~40% range. - Arthur Au(CFO)

How do you see opportunities to leverage your experience for value creation, and what assumptions underpin your 2027 outlook on tariffs and promotional activities, considering current market share gains and potential to exceed 2028 targets for side by sides and ATVs? - Robin Farley (UBS)

2026Q3: The non-current promotional environment is expected to persist for maybe another few quarters, impacting profitability. - José Boisjoli(CEO)

Contradiction Point 2

Retail Momentum and Industry Demand Outlook

Conflicting signals on retail growth momentum and its implications for industry demand.

Benoît Poirier (Desjardins) - Benoît Poirier (Desjardins)

2026Q4: Retail momentum is ahead of Q3 expectations. - Arthur Au(CFO)

Could you discuss the opportunities to bring value based on your experience, the assumptions for fiscal year 2027 regarding tariffs and promotional activities, and whether there's potential to exceed fiscal year 2028 targets in side by side and ATVs given current market share gains? - Sabahat Khan (RBC Capital Markets)

2026Q2: We are seeing slower retail momentum than we had expected. - Arthur Au(CFO)

Contradiction Point 3

Consumer Behavior and Financing Trends

Contradiction on whether economic uncertainty is affecting consumer purchasing behavior and financing.

Jaime Katz (Morningstar) - Jaime Katz (Morningstar)

2026Q4: No changes in consumer behavior; demand remains strong... Financing trends are stable (~30% of retail sales via partners), with no change in FICO scores. - Arthur Au(CFO)

Have you observed any changes in value-seeking behavior, attachment rates, or financing mix due to macroeconomic uncertainty? - Luke Hannan (Canaccord Genuity)

2026Q2: We are seeing more affluent customers leaning toward financing as opposed to paying cash, and we have seen some softening in demand from customers who are more price-sensitive. - Arthur Au(CFO)

Contradiction Point 4

Industry Demand and Retail Outlook

Contradiction on expected retail momentum and industry demand trends.

Benoît Poirier (Desjardins) - Benoît Poirier (Desjardins)

2026Q4: Retail momentum is ahead of Q3 expectations... The company is positioned for strong first-half results. - Arthur Au(CFO)

What are the key opportunities for value creation based on your experience, and how do FY2027 assumptions around tariffs and promotions, along with current market share gains, position the company to potentially exceed FY2028 targets for side by side and ATVs? - James Hardiman (Citi)

2026Q1: Current retail trends are choppy and soft... Demand softened in May, particularly in ORV and personal watercraft. - Jose Boisjoli(CEO)

Contradiction Point 5

Tariff Impact and Mitigation

Contradiction on the financial impact of tariffs and the company's response to tariff uncertainty.

Benoît Poirier (Desjardins) - Benoît Poirier (Desjardins)

2026Q4: Higher oil prices ($100/barrel vs. $60 assumption) create a ~60 basis point headwind... The company is not in a hurry for refunds; it will await a clear process and certainty before filing. - Arthur Au(CFO)

Could you discuss your first impression, the greatest opportunities to bring value based on your experience, the assumptions for fiscal year 2027 regarding tariffs and promotional activities, the impact of market share gains tracked so far, and whether there is potential to exceed the fiscal year 2028 targets for side-by-side and ATVs? - James Hardiman (Citi)

2026Q1: BRP's tariff impact is manageable at $60-70M for fiscal '26... The biggest risk is uncertainty impacting consumer confidence. - Jose Boisjoli(CEO)