Good morning, ladies and gentlemen. Welcome to the BRP Inc. full year 2022 first quarter results conference call. For participants who use the telephone line, it is recommended to turn off the sound on your device. I would now like to turn the meeting over to Mr. Philippe Deschênes. Please go ahead, Mr. Deschênes. Thank you, Simone. Good morning, and welcome to BRP's conference call for the first quarter of fiscal year 2022. 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, please note that certain forward-looking statements will be made during the call and that future results could differ from those in these statements. Also note that forward-looking information is based on certain assumptions and is subject to a number of risks and uncertainties. I invite you to consult BRP's MD&A for a list 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. With that, I'll turn the call over to José. Thank you, Philippe. Good morning, everyone, and thank you for joining us. Building on the momentum we had over the last several quarters, we experienced a solid start to the year with record first quarter results, which came in above our expectations. This growth was driven by the fact we are lacking a quarter in which our manufacturing operations were partially shut down, coupled with ongoing robust demand for our products. Given these strong results and continued positive outlook for the business, we are increasing our normalized EPS guidance for the year by CAD 0.50 to a range of CAD 7.75-CAD 8.50 per share. We are maintaining a wider than usual guidance range given the ongoing challenges we are facing with the supply chain. I will touch on this in more detail in a few minutes. Let's turn to slide four for a more detailed look at key financial highlights for the first quarter. Revenue grew 47% to an all-time first quarter high of CAD 1.8 billion, primarily driven by higher volume across all our product lines, especially for PA&A business, coupled with lower than expected sales programs. Our revenues not only surpassed the same period last year but also increased 36% compared to the first quarter of fiscal year 2020. Our normalized EBITDA was up threefold to CAD 375 million, and our normalized earnings per share reached CAD 2.53. Not only were our financial results solid, but consumer demand remained very strong in the quarter, as you can see on slide five. Globally, our retail grew in all key regions while continuing to outpace the industry. In North America, our parts for retail growth accelerated from the fourth quarter, up 39%, or 49% when excluding snowmobile. We also had a strong performance in international markets, with retail up 9% in Latin America, 32% in EMEA, and 82% in Asia Pacific. By product line, we grew across all of our lineups except snowmobile, as our dealer ran out of units at the end of the season. For side-by-side, growth was more moderate, as it has also suffered from limited product availability due to low inventory. I will provide more color by product line in a moment. Turning to slide six. Despite the strong demand in the first quarter, we expect retail growth to be limited in the second and third quarters, mainly due to the ongoing supply chain constraints, which are evolving very rapidly. When we last updated you in late March, one of our key challenges was the logistic congestion at different ports. Our team was successful at addressing this issue by finding alternative solutions. Today, logistics are predictable and manageable. Currently, we are managing the tight availability and delivery delay for certain raw materials. In this case, we are working with our supplier to find substitutes or new sources of supply, which are creating some delay. For the past month, our main challenge has been dealing with a shortage of semiconductors. This is affecting some of our Tier 1, but also some of our Tier 2 suppliers, where we have less visibility. This is presently the main source of disruption in our operation because finding alternative parts would require technical changes. Given these issues, some of our units will need to be retrofitted. This means the unit is missing a few components, and it will move to final assembly when the components are received. This situation will delay the timing of certain deliveries and temporarily increase our work in process. Regardless of these challenges, our objective is to deliver all orders by the end of our fourth quarter. Our plants are running at full capacity, and we are in the process of increasing production capacity at BRP Saint-Jérôme to make this happen. We plan to work through these issues for the balance of the year to deliver our production schedule. Take note that all of this is increasing our cost versus last year, but it has been factored into our guidance. Turning to slide seven. Given those challenges and the impact on production, dealer inventory will remain low throughout the year. To better illustrate the situation, we have provided statistics from the past few years. In fiscal year 2018, 2019, and 2020, you can observe on the graph that our level of inventory in our dealer network was in sync with retail at about 175 days. During those years, our retail was growing low double digits. In fiscal year 2021, given the surge in demand, coupled with our two-month production shutdown, inventory dropped to 80 days. In the first quarter of fiscal year 2022, it dropped as low as 40 days. With the continued strong demand, we expect to remain at this level of inventory for the remainder of the year, which will limit our retail sales growth. It is now clear that inventory replenishment will take place in fiscal year 2023. Turning to slide eight. We continue to experience strong consumer demand across all our product lines. New entrants continue to enter the industry, representing 37% of buyers in the first quarter compared to about 20% historically. This is good news for the industry, and it doesn't seem to be driven only by the impact from the pandemic. According to our survey, only 7% of new entrants said they purchased a powersport vehicle as a COVID distraction. In fact, new entrants are a more diverse group representing younger people and more women and families. In addition, according to our survey, 82% of buyers are not making a trade-off when purchasing a unit. Contrary to our and general belief, only 3% of buyers declare to have purchased a unit instead of traveling. There are multiple positive signs of sustained consumer interest. This is the fourth consecutive quarter of double-digit growth for the powersport industry. Website visits are up over 60% compared to last year for all our brands. We had a strong demand for our products, including record snowmobile spring unit booking, the strongest start of the personal watercraft season in over a decade, and our three-wheel vehicle rider education program registrations are trending above our target. These are all positive trends for the mid to long-term growth of our industry. Now let's turn to slide nine for year-round products. Revenue were up 44% to CAD 923 million, mainly driven by higher volume, lower sales program, and a richer mix of side-by-side vehicles. Looking at side-by-side vehicle season to date retail, 10 months into season 2021, the North American side-by-side industry is up high 20%, while our Can-Am side-by-side vehicle is up low 20% as we're impacted by limited product availability. This is also impacting our retail performance in international markets as we deliver more units to North America. As a result, our retail performance was up high single digits in EMEA and mid-teen% in Asia-Pacific. Still, we are very happy with the strong consumer demand for our lineup, and we look forward to ramping up production as we expect the Juárez 3 facility to come online at the end of the third quarter. Turning to ATV. The North American industry is also seven months into season 2021, and retail is up in the low 30%. Can-Am is performing in line with the industry, with retail up in the low 30% over the same period. For both ATV and side-by-side, our worldwide network inventory is at a historic low. Now looking at three-wheel vehicles. Now six months into season 2021, the North American three-wheel industry retail is up about 90%. Can-Am three-wheel vehicle is off to a very strong start. It is the fastest-growing brand in the motorcycle industry so far this season, with retail up over 140%. We are very happy with the momentum we have with three-wheel vehicles. The retail trend is very positive. The rider education program registration continues to trend above expectation, with registration up over 50% versus our internal target, which bodes well for the sustainability of consumer demand. We continue to attract a younger and more diverse consumer base, notably with retail to women up 166%, diverse community up 190%, and new entrants up 180%. These are exceptional results, we are very excited at the outlook for the three-wheel vehicle business appear promising. Turning to seasonal products on slide 10. Seasonal product revenue were up also 44% to CAD 463 million, driven primarily from higher shipments and richer mix of personal watercraft and lower sales program. Now looking at personal watercraft retail. Only six months into the North American season 2021, the industry retail is up in the low 70%. Sea-Doo retail is up mid-90%, outpacing the industry and gaining market share in all the industry segments in which we compete. The trend is also very good in international markets, with retail up over 110% in EMEA, 130% in Australia and New Zealand, and up over 30% in Brazil. This year is the strongest start of the retail season that we have experienced in over 20 years. Given the strong start, unit availability is already getting tighter heading into the summer. We expect to end the season with a very low level of inventory again this year, which should lead to strong shipments in the next fiscal year. Turning to snowmobile. The North American snowmobile industry ended the season 2021 with retail up in the high teen%. Ski-Doo retail was also up high teen% over the same period and ended the season with the number one market position in every industry segment in which it competes, and with its highest market share in history. Our momentum was also very good in Scandinavia and Russia, with retail up low 20% for the quarter. Turning to slide 11. Looking ahead, our snowmobile business is very well positioned for season 2022, as we have a very strong lineup, notably with the introduction of the Lynx brand in North America and the return of an all-time favorite, the Ski-Doo Mach Z. We ended season 2021 with record low network inventory. Unit presale to consumer are up 157% over last year. As a reminder, spring unit are special models only available at preorder and allow us to better forecast volume for the upcoming season. This year, exceptional strong spring unit orders represent roughly 70% of the upcoming season volume, compared to about 35% historically. This reflects the continued very strong consumer interest for powersport products and snowmobiles in particular. Continuing on slide 12 with a look of Powersport Parts, Accessories, and Apparel in OEM engine, which experienced a similar trend as vehicle. Revenue were up 91% to CAD 300 million, driven by higher volume of replacement parts due to increased product usage combined with strong units retail, which generated increased accessory sales across all our product lines. It is clear that our LinQ ecosystem accessory strategy is driving demand and paying off. Despite supply chain challenges that also affected PA&A, we've delivered exceptional results. Now looking at marine on slide 13. Revenue were up 11% to CAD 122 million, as strong boat shipments more than offset the impact of the wind-down of the Evinrude outboard engine. Looking at our different brands in terms of retail performance for the quarter, Manitou was up over 80%, and Alumacraft over 60%, and Telwater was about up 40%. All in all, we are pleased with the performance of our boat brands and are on track for the introduction of new products with the Ghost engine. With that, I will turn the call over to Sébastien. Thank you, José, and good morning, everyone. Our revenues reached a record level for a first quarter at CAD 1.8 billion, up 47% from the same period last year. Gross profit margin also reached a record level at 30%. Compared to last year, our gross profit margin mainly benefited from lower sales programs and better fixed cost absorption, as last year's first quarter margin suffered from the temporary production shutdown. The margins also benefited from the exit of the outboard engine business and our continued focus on introducing products with better margins. When compared to our expectations for the quarter, our gross profit margin was better than expected, driven by a favorable product mix resulting from stronger than anticipated PA&A sales and lower than planned sales programs due to the strength of the retail demand and faster than anticipated inventory turns. With this strong gross profit generation and lower than expected operating expenses, we delivered our strongest quarter ever in terms of normalized EBITDA of CAD 379 million, and this resulted in normalized diluted earnings per share of CAD 2.53. We generated CAD 379 million of cash from operations in the quarter and invested CAD 153 million in working capital, notably for inventory, where, due to supply chain issues, our work-in-process inventory was higher. This higher work-in-process inventory allows us to more efficiently manage our operations in the supply chain constrained environment and allows us to ship units to dealers quicker when the missing components come in. We also invested CAD 97 million in CapEx and returned CAD 288 million to our shareholders through share buybacks, completing our previously announced normal course issuer bid. Turning to slide 16 for a look at the key drivers of our normalized net income growth for the quarter. As you can see from the chart, our normalized net income grew CAD 199 million from last year's first quarter, driven by a positive impact of volume, mix, pricing, and sales programs for CAD 388 million, which was partly offset by negative impacts from production cost and depreciation expense for CAD 30 million. Higher operating expenses for CAD 70 million as we continue investing for our long-term growth and higher normalized tax expense for CAD 89 million. This resulted in CAD 222 million of normalized net income for the quarter, a performance that was stronger than we had anticipated, driven by the continued strong demand, lower sales programs, and very strong PA&A sales. Turning to slide 17 for a look at network inventory. As José mentioned, given the exceptionally strong retail growth we have experienced over the last year, our North American Powersport dealer inventory ended the first quarter at a historic low level, being down 73% versus a year ago. This, combined with our finished good inventory, represents a decline of over CAD 1.6 billion in inventory value compared to last year. Despite increasing shipments in recent quarters, all our product lines are seeing significant inventory decline. For ORV, the network inventory is down about 80% as the demand for Can-Am brand is higher than ever, and everything we ship is being retailed very fast. For snowmobile, Ski-Doo had a very strong season, resulting in a record low level of inventory at the end of Q1, down 83% versus last year. For our summer products, both PWC and Three-Wheel are off to a very strong start of the season, with consumers purchasing their units earlier than typical. Their network inventories are down 64% and 54% respectively. These low levels of inventory are limiting our ability to grow retail in the short term, but the demand for our lineups remains very strong, and we expect to resume market share gains, more specifically for ORV, as product availability improves in the network starting later this year. Turning to slide 18 for an update on the guidance for the year. As José mentioned, we are reviewing upward our year-end guidance driven by the stronger than expected first quarter results, notably for our PA&A business, the very strong spring unit booking for snowmobile, and lower than expected sales programs throughout the year, given our very low network inventory position. We also expect that we will continue dealing with supply chain constraints that are likely going to lead to delays in the reception of components, which in turn would lead to delays in the shipment of products. Based on the visibility we have today, we believe that these supply chain challenges will impact the timing of product deliveries in Q2 and Q3, but our full-year volume target remains intact. We have included additional costs and maintain a wide and unusual guidance range to account for the potential impact of these supply chain constraints and for commodity price increases. Following these adjustments, we now expect our total company revenue to grow between 28% and 33%, our normalized EBITDA to grow between 27% and 35%, and our normalized EPS to end between CAD 7.75 and CAD 8.50, representing a growth of 44% to 58% over last year. Now looking at slide 19 for some additional color on the quarterly outlook for the year. In terms of normalized DPS, as mentioned, we expect the supply chain constraints to weigh more on the second and third quarter, therefore pushing more volume in the fourth quarter. Given this dynamic, we expect to generate a modest normalized DPS growth in Q2, a slight decline in Q3, and strong growth in Q4. In terms of our expected North American Powersport retail, as previously mentioned, our low level of network inventory, coupled with the impact of supply chain constraints and the fact that we will be lapping very strong quarters last year should lead to retail sales decline in Q2 and Q3 and a return to growth in Q4 as we benefit from improved unit deliveries and additional production capacity, notably for side-by-side with the Juárez 3 facility. For the year, we expect our North American Powersport retail to end somewhere between flat to upside single digits, with SSV generating the strongest growth. On that, I will turn the call over to José. Thank you, Sébastien. To conclude, fiscal 2021 was an exceptional year, and the momentum continued into fiscal 2022. Our team is doing an excellent job managing the ongoing strong demand for our product with all our facilities running at full capacity. Despite the supply chain issue, given the continued strong consumer demand and related lower sales program, we are well-positioned to finish the year with solid results and expect to deliver our increased guidance for the year. In addition, we are continuing to position BRP for the future by driving different projects to generate long-term growth, including turning new entrants into lifelong customers, pursuing new market-shaping product introductions, taking advantage of additional production capacity with the ramp-up of Juárez 3, Querétaro, and St-Eustache, as well as executing on our bold investment in electric vehicles. I would like to thank our employees for continuing to diligently follow our COVID safety protocol and for working longer hours, both in production and administrative functions. I would also like to thank our suppliers for doing extra work to meet our orders and our dealers for their patience and for managing consumers on the front line. Lastly, I would like to thank them all for their agility, dedication, and resilience in these unusual times. On that note, I will turn the call over to the operator for questions. Your first question comes from the line of Robin Farley with UBS. Your line is open. Great, thanks. I want to ask about two things related to dealer restocking. One is, I wonder if you could help quantify the restocking opportunity, which I realize is a fiscal 2023 event. Just thinking that maybe inventory wouldn't get back all the way to 175 days, if you can help us quantify that. We had heard from dealers that potentially some production was limited by the availability of engines where there's some shared engine capacity between snow and off-road. I wonder if you could address whether that will limit your snow production or your side-by-side off-road production later this year. If there are trade-offs that you have to make there because of the Rotax engine capacity. Thanks. Good morning, Robin. I'll take the first part, and I think José is going to take the second part. In terms of replenishment opportunity, obviously, as you said, we were historically running with 170 days of inventory. Our guess is that the industry will be running lower, but obviously, as the industry grows, as we gain market share. In absolute dollars, you're probably looking at an opportunity of restocking in the range of well above CAD 1 billion. Obviously it is quite sizable, and as José alluded to in the prepared remarks, we believe that that restocking is going to happen next year because of continued demand for the products and the low levels of inventory we have now. Robin, to your second question about parts availability at Rotax. Dealers are right in the sense that we have limited capacity of engine components, and we are trying to manage with them between product lines to better optimize the situation. This is an ongoing discussion we're having with our dealers, with our suppliers, try to maximize what we can do to respond to the demand. That depends a lot on the seasonality of the product. Dealers don't need now snowmobile. They will start to deliver it to consumer in October. This is what we're trying to manage the best we can. Definitely, there is some challenges on the engine component. Okay, great. Thank you. Your next question comes from the line of Cameron Doerksen with National Bank Financial. Your line is open. Thanks. Good morning. Just wanted to, I guess, questions on the retail. I think, Sébastien, you said that your expectation for the full year retail was flat to up high single digits. Just wanted to confirm that number. In addition to that, is there any way you can sort of give us an idea of what your expectation is for retail this year versus two years ago? Obviously, last year was a bit of an anomaly. Yeah. Good morning, Cameron Doerksen. Yes, that's correct. You correctly quoted me, flat to up high single digits. Obviously, the retail will vary quarter-by-quarter. This quarter, we had very strong retail. There was some pull forward from Q2 for personal watercraft and three-wheel. What I could tell you is if I look at the second quarter, when I compare it to two years ago, I believe the second quarter should be flat in retail compared to two years ago. Obviously, two years ago was a strong quarter, continued strong demand, obviously, we'll be lapping a very strong quarter compared to last year, and that's why we'll be down compared to last year. Okay. Do you have any, I guess, a number for the full year? I think that the expectation would maybe be in the high teens or even 20% versus two years ago for the full year. Yeah. For the full year, you'll be in the high teens to low 20s. Okay. That's excellent. Just want to follow up with the question on the three-wheel market, because you're doing obviously very well there, ahead of plan. Is there any way to maybe talk about the difference in, I guess, in retail demand between Spyder and Ryker? Is it really broad-based across the entire product portfolio? Yeah. For sure, the Ryker is attracting a younger customer base because of the price point. I would say that all the programs we put together, the program where the people do the rider education program, we have many Ryker customer, but also many RT F3 customer. The Women of On-R oad community is affecting all the models. Ryker, because of price point, definitely attract a younger customer base. I would say the momentum on three-wheel is the three models, and we're very happy. Okay, very well. Thanks very much. Your next question comes from the line of Craig Kennison with Baird. Your line is open. Hey, good morning. Thanks for taking my question. It's really on allocation. What are you doing to, I guess, fairly allocate inventory across your dealer network given the shortages? Good morning, Craig. We don't favor one dealer versus the other. We try to be as equitable to everyone because short-term, you could do favoritism, but we don't do that because it's not helping the second dealer, and mid to long-term will be impacted by this. We try as much as we can to allocate obviously by countries and after that by region and after that by dealers. We're trying to be very fair between all the dealer networks to make sure we protect the mid to long-term. We talked about our dealer value proposition, and one of the key elements is our OMS system, the order management system, and that is, I would say, an objective model where a dealer places an order, but the orders are also correlated to what their market share targets are. That obviously makes sure that everyone's treated fairly. Thanks. What systems are in place to help dealers either trade new inventory or even used inventory among themselves? Is there anything BRP can do to help facilitate, I guess, better liquidity, to help your dealers help themselves? In each region, each dealer has a network of other dealers where they typically trade between themselves. That being said, in the last 12 months, there was definitely less trade than typical because every dealer wants to hold to every unit they can. Great. Thank you. Your next question comes from the line of Benoit Poirier with Desjardins Capital Markets. Your line is open. Yeah. Good morning, everyone, and congratulations for the good quarter. Could you talk a little bit about the capital deployment strategy in light of your favorable market environment, strong balance sheet, and whether a substantial share bid is something that you could consider? Good morning, Benoit. Obviously, a sound capital allocation strategy has been part of our success. As you said, we do have a strong balance sheet that provides us with flexibility. As we've always said, our priority is to invest in the growth of the company. When you look at our CapEx guidance for the year, up to a CAD 600 million investment, we maintain that disciplined approach. As you also saw in our Q1, we completed the NCIB. We invested almost CAD 300 million in share buybacks. That completes the NCIB that we started last December. We purchased about 4.3 million shares. The next opportunity to do NCIB would start in December. Until then, well, as you said, the good news is we have a strong balance sheet. We have that flexibility, and if we decide to be opportunistic in buying shares, we do have that possibility. No decision taken now, but obviously, as I said, there's time between now and the next NCIB window. Okay. That's great. You talked, José, about the supply chain constraint. I was wondering if there's also impacting the ramp-up at Juárez 3 Querétaro and also Saint-Jérôme with respect to the new Project M. Given the strong consumer demand, any new capacity increase required either at Valcourt or Juárez to deal with the load factor? Good morning, Benoit. First, Juárez 3 is on plan. This is doing good, and we are planning to ramp up production on the back end of Q3. Project M in St-Eustache is also on plan. Manufacturing the motorized hull will be made in Querétaro. This is on plan, and the St-Eustache facility revamp is also on plan. End of Q4, we'll start production then. In terms of engine, and maybe to complement on what I answered to Rod in the first question, overall, the engine, we have a very good supplier network. We manufacture our key component ourselves, and we were already in an investment mode to satisfy the growth we had. Obviously, there is some timing of equipment, but the engine capacity is a very short period of time. You need to realize that in fiscal year 2023, Juárez 3 will be fully running, Querétaro with Watercraft 30%, there will be Project M, and we're tweaking to optimize production in other sites. We feel we have the right capacity for fiscal year 2023. Okay. That's great. That's it for me. Thank you. That's it. Your next question comes from the line of Fred Wightman with Wolfe Research. Your line is open. Hey, guys. Good morning. Thanks for taking the question. I just wanted to look back at sort of the commentary you provided last quarter for your retail expectations. I think you talked about high single-digit retail, and if we look at what you posted, you came in quite a bit above that for the full quarter. What does that mean for these retail parameters that you outlined here for 2Q and 3Q? What drove the outperformance? Was it better than expected consumer demand, better availability in terms of supply? How does that shake out for the guidance that you've given us? Yeah. Good morning, Fred. You're right that we did call out that retail would be a bit more softer than what we actually delivered in terms of numbers. I think the surprise was in the accelerated retail for personal watercraft and three-wheel. Obviously, production is set at a certain level. Whatever we retail in Q1 is retail that we lose in the second quarter, and so that acceleration provided for stronger growth in the first quarter versus what we were expecting. Obviously, it's going to impact our retail expectation for the second quarter. Makes sense. Just circling back to the allocation question from earlier, can you talk about how pre-sold units factor into the internal allocation system, and if you've seen any change in dealer order patterns tied to pre-sold units specifically? Yeah. First, our goal is to order every pre-sold unit to the consumer. Like, give you the example, for snowmobile, our next production season, the pre-sold unit is at a record high, and we're trying to order every single unit that is pre-sold for every product line. We have less visibility on off-road, but the team is doing their best to make sure we protect that everything is pre-sold to the consumers. Got it. Thank you. Your next question comes from the line of Martin Landry with Stifel. Your line is open. Hi, good morning, everyone. My first question is on your Parts, Apparel, and Accessories. It increased twice as fast as your revenues during the quarter. I was wondering if you can give us some color on what explains that strong performance. It's a mix of two things. The product usage, customer is using the product a lot more than typical. We saw it during the snowmobile season this winter. Product usage is one element. The second one is the accessories, the linked ecosystem that we put together, where many accessories can fit many product lines. The same accessory can fit many product lines. This is doing extremely well. It's a combination of those two things that are generating the growth. Okay, thank you. My other question was on your survey. You shared some very interesting data point on the consumers. You're quoting 3% of buyers purchased a unit instead of traveling, and you were mentioning 7% of new entrants purchased a vehicle, only 7% as a COVID distraction. Were you surprised by these results? If staycation and COVID explain just a small portion of the growth, then what does explain the surge in demand that you've seen for Powersport products this year? First, just as a reminder, at the end of each quarter, we do a survey. About 1,000 customer will purchase a new unit during the quarter. Yes, we were surprised by a few numbers. New entrant is growing 37% in Q1 fiscal year 2022 versus historically 20, but last quarter, fiscal year 2021 Q1 quarter was at 30%, this is increasing. The two number that we were also surprised is the 7%, that only 7% said that it was COVID distraction. A big portion, it's true interest to the Powersport. The other one is the 3% that trade-off for traveling. Those are extremely strong results, and we are very happy. I think we need to give to our marketing team, they've done a very good job to If you look at our website today versus what it was a year ago, our website, our Watercraft to make it easy for the people who don't know the industry. We try to educate the customer how and where to ride. We try to educate them to make sure they select the right product, and we encourage them to ride, promoting community and women off on the road and the program for riding education. I think it's a combination of all this that is giving those incredible results. Great. Was that the first time that you were asking these questions about purchase instead of traveling and COVID distraction, just to see if we have some benchmark as that evolved? Yeah, that was the first time we were asking that question. Every quarter, if you want to do a good survey, you need a certain number of questions, not too many, but not too little. We try to remove the one that are less critical and add the most relevant one, and the traveling was the first time. Okay, perfect. Thank you. Thank you. Your next question comes from the line of Shawn Collins with Citigroup Research. Your line is open. Great. Thanks. Good morning, gentlemen. Good morning. My question is on today's unique inventory environment and its impact on retail results. Today's lack of inventory or scarcity of products is certainly a challenge, maybe a high-class challenge, but still a challenge. I wanted to ask if there are any comparable periods from the past where you experienced a similar environment, and I'm curious how that may have played out, resolved itself. Any historical context might be helpful. Thanks. I would say that's an interesting question. I would say that I saw a period like we're going through with a product line. I remember BRP started producing watercraft in 1988, and in the mid-'90s, we were not able to supply to the demand. For three, four years, there was no UTVs out there, and the growth was incredible. I saw over the years in our industry, one product line taking off versus the others, but having the whole industry, all product line like this, I think is the first time in the history of powersports. Okay. Understand, that's helpful. It really is truly unique. Maybe just a brief follow-up. As you experience supply chain challenges and some rising input costs, just curious any commentary on how well and successful you are to pass on those costs to the consumer market. Thanks. Yeah, on the cost side, just to give you a sense, on the marine, where aluminum cost and wood are very critical, we already announced a special surcharge that was effective June 1st, and the price increase will be announced shortly for being effective July 1st with the model year change. On the powersports side, obviously right now, many of our suppliers are hedged. This whole year, we are partially hedged, and every year we increase our pricing between 1%-2%. That's typical. The model year change for ORV is July 1st, and for watercraft, it's in September, and we'll announce price increase at the model year change. That's the way we plan it for the H2 for all those product lines. Great. That is helpful insight. Thank you. Your next question comes from the line of Brian Morrison with TD Securities. Your line is open. Hi, good morning. Going back to Juárez 3, can you talk about the ramp trajectory of those extra 50,000 units? Is that a methodical ramp or do you hit the ground running? Also in terms of Querétaro, same question for PWC, when will that commence running? Is that a Q4 or Q1 event? Yeah. Let's start with Juárez 3. Juárez 3, the construction is ongoing. We already have a team training employee, and the ramp-up will be on the back end of Q3. The way you can see it, let's say you say the production will run three, four months this year, this fiscal year, then you can probably count maybe at 50%, something like that. Next year, obviously, in fiscal year 2023, you can count the 50% additional capacity. That's for Juárez 3. Querétaro, the installation will be done for the start of production in the fall. That means when production will start in August, there will be some additional capacity for watercraft. Project M, which is a new product, this is coming in Q4. Changing gears to the cost side of the equation, Seb, the CAD 300 million in cost savings from M25, is that put on hold at all with the current dynamics, or can you update us on where we are with that and what more that entails? Well, obviously, there were many levers to the CAD 300 million cost saving. As I said the last time, obviously the team is very focused on making sure we are producing all the units that we can produce. One of the big pillars of M25, the CAD 300 million, is also introducing products with better margins. Obviously, as you see, our performance this quarter was very strong, and some of that is driven by the engineering that we've done in our product, the modularity approach. I'm not worried about our ability to get to that CAD 300 million, especially with, we'll have, again, low levels of inventory. What we're learning on sales programs, there are some learnings that will stay with us even when the industry comes back to a more normal way of operating. Can you just give us a sense of how far you are through it this point in time? Oh, again, tough to call, Brian. We'll obviously look forward to updating investors and analysts in the near future on our M25 plan, we'll give you more color then. Thanks very much. Your next question comes from the line of Derek Dley with Canaccord Genuity. Your line is open. Yeah. Hi all. Just one for me. Just on the gross margins, obviously we've seen some strong gross margin performance here with limited promotional spending and sales programs. Has the normalized gross margin in your view changed going forward, or let's sort of call it? Mid 20% prior to the pandemic. Has that stepped up in your view? We finished last year very strong gross margin, and our expectation for this year is that we should be slightly up compared to fiscal year 2021. As part of our Mission 25 plan and our target to deliver a CAD 300 million cost savings, some of that may be margin improvement. Obviously, this quarter we benefited from a higher proportion of ATV sales, that is lifting the margin. Going forward, yes, I do believe that as we are doing a better usage of our assets, we continue introducing products with better margins. We've exited the outboard engine business as well. These are all elements that will help bring the gross margin up. Okay. Well, that's helpful. Actually just one more. R&D kind of typically run at like a 4%, 4.5% of revenue percentage. Is that something we should expect to continue going forward as well? Yes. Great. Thank you very much. Thanks. Your next question comes from the line of Jaime Katz with Morningstar. Your line is open. Hi. Good morning. Thanks for taking my questions. I don't think it is clearly delineated whether or not the supply chain issues that you are seeing were as pervasive for the boat and marine business. Would you be willing to talk a little bit about that or whether the throughput has been slightly more consistent in that segment? Good morning, Jaime. Yes, all product line are affected, and depending obviously on the seasonality. Between all product lines, about the same challenges that we're facing. After that, and that's where I think our team is doing an excellent job working with our suppliers. Sometimes we try to allocate the parts to one product line versus the others. An example, right now, we don't make snowmobile. We're producing snowmobile with some missing part that the vehicle will need to be refitted, but we have time because snowmobile retail is starting really in October. That's the type of thing, to optimize the situation, we need to work with our suppliers, and we need to work internally between product lines to make sure that we optimize the situation to first deliver on consumer orders and try to honor all orders from consumer and dealers that we have on hand. Okay. I don't think I heard the number, but have you guys laid out what you expect increased commodity costs to cost for you or what they'll account for this year in your estimates? No, I haven't given any color, but I'm more than happy to do so. If I look at Q1 logistics, commodity costs had an impact of about 190 basis points on the margin, and I'm expecting that to continue for the rest of the year. Obviously, with the higher volume sales programs, good mix will be able to offset a lot of that. The expectation is what we saw in Q1 is going to continue for the rest of the year. Okay. Is there any thoughts about how you think your market share will pan out at the end of the year? Will you be able to sort of outpace your competitors in filling the channel going forward, or do you sort of perceive the constraint as equal across the industry at this point? Thanks. Obviously, with a significant increase in production capacity in the fourth quarter with side-by-sides, we believe that it provide us with an important competitive advantage in our ability to replenish inventory and supply to demand. That should be driving the share gains for side-by-side business. Okay. Thank you. Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from the line of Gerrick Johnson with BMO Capital Markets. Your line is open. Hey, good morning. I sort of have the inverse question to what Craig asked about retail ordering. Do you have in place, what do you have in place in policing over-ordering since product is so difficult to get at the dealer level? The other question I had was about your own inventory with yard inventory down 34%, but your materials and WIP up 64%. Have you had mismatches like that before in your past, and is there any risk to sort of obsolescence of the WIP that you have on the books right now? Good morning, Derek. I will answer the first question, Sébastien on the second. On the allocation question, obviously, seasonal product are very different than off-road or year-round product. Seasonal product, we have a pretty good idea of We know exactly how each product line perform and how each region and each dealer perform, and we can plan for a growth the following year. That's why we have a target for each dealer. After that, depending of how the dealer pre-sold the unit or depending of how much you want unit for the following year, it's a discussion with the salespeople. It's not like, give me your order and do your wish list. We try not to disappoint the dealer by letting dream about the big numbers that we cannot deliver. This has worked very well for everything that is seasonal product. On the off-road side, right now we're working on allocation, and it's our job to make sure, like I answered to Craig, that we don't favor a region versus the others. We're trying also to be fair on product mix, but off-road will be on allocation till the end of the year. On your question on raw material, yes, raw material in WIP is up over CAD 200 million this quarter compared to January 31st. No concern on obsolescence. That inventory turns around very quickly. Just a question of getting the missing parts in and then retrofitting the units. Obviously, the number is high, but well under control. Okay. Then just one more if I could, since I'm near the rear here. On that number, 37% new entrants, you said only 7% said the purchases were as a COVID-19 distraction. Kind of curious, don't know if you asked them, but maybe the second derivative of that, how many of those people had friends who bought as a COVID distraction last year? Because that was kind of the bull case going forward. You have a bigger install base, more friends keeping up with Joneses, things like that. I don't know. Maybe my team has, but I don't have the answer to this question, Derek. For sure, we see that there is. I have a statistic that I can share with you, but the new entrants are younger than the repurchaser, 43% versus 32 for the repurchaser. More women and more family-oriented, which is all positive, but I don't have the answer to exactly what you're asking for. Yeah. No. Okay. That's fine. Thank you very much, guys. You're welcome. Your next question comes from the line of Mark Petrie with CIBC. Your line is open. Good morning, and thanks for all of the commentary so far. I just wanted to ask about your expectations with regards to the promo programs over the course of time. What's embedded in your guidance with regards to the back half of the year? Do you expect the current levels to sort of remain in place? Looking forward into fiscal 2023, do you expect that the industry sort of evolves a little bit in terms of how the pricing programs are utilized? Do you expect that normalizes over the course of time? Good morning, Mark. When we talked back in March, I indicated that in fiscal year 2021, we had a positive tailwind from programs of about 200 basis points, and we were expecting that 200 basis points to remain in fiscal year 2022. Obviously, with the strong performance we had in Q1, we've adjusted that assumption. Now we're looking more at a 250 basis point tailwind coming from programs. Next year, obviously, when we turn on the switch and it's February 1st, the inventory is still going to be lean. We're thinking about inventory replenishment in fiscal year 2022, it's going to happen more probably in the back half of next year. I'm expecting the first half of next year to still be favorable on the commercial side. Obviously, as I said, there are some important learnings that we are taking from COVID, and how we tailor our programs that will stay with us going forward, and that will provide benefits to obviously the bottom line. How much? Too early to call. Understood. Thanks a lot. Thanks. There are no further questions at this time. I turn the call back over to our presenters. Super. Thank you all for joining us this morning. Just before we let you go, we wanted to take the opportunity to invite you to join us for our virtual Can-Am off-road and three-wheel vehicle and Sea-Doo product introduction. The event will be out on August 11th and will also feature the official launch of the Project M. We look forward to sharing with you more information about this over the next few weeks, and we hope you will be able to join us. With that, thanks again and have a good day. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.