Good morning, ladies, and gentlemen, and welcome to the BRP Inc's FY 2023 Third Quarter Results Conference Call. For participants who use the phone line, it is recommended to turn off the sound on your device. I would like to turn the meeting over to Mr. Philippe Deschênes. Please go ahead, Mr. Deschênes. Thank you, Sylvie. Good morning, welcome to BRP's Conference Call for the Third Quarter of Fiscal Year 2023. 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 and that actual results could differ from those implied in these statements. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties, I invite you to read BRP's MD&A for a complete list of these. During the call, reference will be made to supporting slides, 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, thank you for joining us. Our teams once again demonstrated incredible agility and resilience as we navigated through the unprecedented challenge of a cyberattack, which forced us to temporarily suspend operation early in the quarter and yet managed to deliver our strongest quarterly result ever. Driven by our strong product portfolio and our team ability to navigate the tight supply chain environment, we continue to outperform the industry and delivered solid retail growth and market share gains. With this excellent performance, our financial results came in well ahead of expectation. Taking into consideration these exceptional results and in light of the clearer visibility we have on customers' demand and on the supply chain environment for the rest of the year, we are increasing our Normalized EPS guidance for the year to a range of $11.65- $12 per share, representing a year-over-year increase of 17%-21%. Let's turn to slide four for key financial highlight. Revenue reached $2.7 billion, up 71% compared to last year, driven by solid growth for side-by-side fuel vehicles, personal watercraft and snowmobile, as well as the introduction of the Sea-Doo Pontoon. Normalized EBITDA was up 94% to $488 million, and normalized earnings per share increased 146%, reaching $3.64. Turning to slide five for a look at our Q3 retail performance. The strong demand for our product and our ability to navigate the tight supply chain environment allow us to deliver a strong retail performance across our product portfolio and in all geographies. In North America, our retail sales were up 42% or 39% when excluding the Sea-Doo Pontoon, compared to the industry which was up mid-single digit. Our performance was also very strong in other region, with retail up 34% in EMEA and 41% in Latin America. Asia Pacific, while our retail was down 3% in the quarter, it significantly outpaced the industry, which was down in the low 30%. You can see the key driver of this strong performance on slide six. Our success over the years has been driven by our ability to constantly innovate as we bring new product to market that drive consumer interest and by our value proposition, which motivates dealer to sell our product by maximizing their profitability. Through such initiatives, we have been able to attract the best dealers and gain floor base within their showrooms. Given we were capable of leveraging additional product capacity, we have delivered impressive result. Our Q3 retail performance was our strongest ever for a third quarter. We have gained over 2 percentage points of market in North American powersports industry so far this year, increasing our global market share to more than 30%. We have become the industry number one OEM in term of the average number of unit retail per dealers. This make BRP a must for any powersports dealers. We are very pleased with our momentum and strongly believe that we have set solid foundation to continue to grow in the coming years. Turning to slide seven for a quick update of the state of consumer demand. As you can see with the strength of our retail sales, consumer demand remain healthy despite the ongoing macroeconomic concern. More importantly, when we look at the different indicator, the trend remain positive. We continue to see a strong level of pre-orders. Over 40% of our expected North American retail for Q4 is already pre-sold to consumers. Cancellation rate remain low. We completed the international dealer booking following our August club and dealer order came in above expectation. Retail financing metric remained quite favorable, demonstrating that our customers are in a strong financial position with continued increase in FICO scores. Website visit and Google search for our brands remain higher than pre-COVID level. As you can see, customer interest for our product remains healthy. Turning to slide eight for a quick update on our manufacturing operation. In term of the supply chain, the situation during the third quarter essentially evolved as anticipated. This allow us to increase production throughput and progressively ship more unit and component to our dealers. As the environment improve, our strategy of shipping units that are missing a few components and quickly retrofitting them at the dealer delivered great result. Based on the current state of the supply chain and the healthier inventory level, we are well positioned to have a strong Q4 and deliver on our guidance for the year. Now let's turn to slide 9 for year-round product. Revenue were up 74%, reaching CAD 1.3 billion in Q3. This was primarily driven by strong side-by-side shipment as we were able to further utilize our increased capacity and by the later shipment of 3-Wheel vehicle model year 2022 due to the supply chain issue earlier this year. In term of retail, Can-Am side-by-side had its strongest quarter so far this year, benefiting from the additional production capacity at Juárez 3 and from an improving supply chain. Can-Am gained market share in all industry segment, more importantly, made significant gain in utility, which is the largest segment. Our retail was up high 40% in the quarter, so far in season 2023, we are close to our M25 objective of 30% market share in the category. As for ATV, retail was down low single digit in the quarter due to the limited product availability as we made the decision to prioritize component for side-by-side. Still, Can-Am ATV continued to gain traction with customers and has gained over one point of market share so far in fiscal year 2023. With our solid lineup and additional production capacity, we are well positioned to sustain our growth momentum with Can-Am Off-Road. As for 3-Wheel vehicle, we ended season 2022 on a strong note with Can-Am 3-Wheel vehicle retail being up over 50% in the quarter, driven by shipment later than usual due to supply chain challenges. For season 2022, Can-Am 3-Wheel vehicle retail was down mid 20%. Though disappointed with our performance for the season as our retail was impacted by the untimely product deliveries, we strongly believe that the future is bright for 3-Wheel vehicle business since we continue to attract a high level of new entrants to the industry. We also continue to see strong traction with our rider education program, for which course completion are up over 20% year-to-date. Historically, these completion have resulted in a strong conversion rate towards the purchase of new units. Turning to seasonal product on slide 10. Seasonal product revenue were up 132% from last year, passing the billion-dollar mark for the quarter. The strong growth was driven by late shipment of personal watercraft model year 2022 and the introduction of the Sea-Doo pontoon. We also shipped more snowmobile than last year. Looking at the retail, our retail for personal watercraft in the quarter was up over 100%, driven by later deliveries of model year 2022 product pre-sold to consumers. These pre-sold units have also contributed to maintaining a solid momentum in November, which retail up significantly. Looking at counter-seasonal markets, we are only at the beginning of their season. Retail was up mid-single digit in the quarter. As for snowmobile, we are still early in the season and retail is trending well, being up mid-single digit for the quarter. With the strong level of customer pre-order, we are well positioned to have a successful snowmobile season. Continuing on slide 11 with a look at powersports parts, accessories and apparel and OEM engines. Revenue were up 5% to CAD 297 million. Our revenue continued to benefit from a growing product portfolio, which led to higher volume of replacement parts and increased sales of accessories driven by the LinQ ecosystem. We are currently witnessing solid momentum for our new model year lineup of snowmobile accessories and apparel, both from dealers and consumers, which bode well for the upcoming season. Moving to Marine on slide 12. Marine was the last business unit to restart operation after the cyberattack. This, combined with some supply chain issue, impacted the ramp-up of production for the new Manitou product, which affected Q3 and is also expected to affect Q4. As a result, revenue were down 15% in comparison to last year, ending the quarter at CAD 111 million. Looking at retail sales. In North America, our retail for the quarter was down low 30% for Alumacraft, which we believe is in line with the industry. I would point out that we are no longer selling welded boat. Manitou was down in the low 60% due to the production ramp-up issue, as already mentioned. As for Quintrex, we are in the early part of the season in Australia, and retail was down low- teen% in the quarter. We are in the off-season for boating in North America, but we believe that with the new Manitou and Alumacraft product, we are well positioned for the future. Our new boat and pontoon design are very well received. Notably, Manitou new MAX Deck platform won the top prize in the innovative onboard design solution category at the recent 2022 Boat Builder Awards in Amsterdam, where we're competing against high-end luxury boat from well-renowned brand. Manitou is also featured on the cover of Pontoon and Deck Boat Magazine, the segment most influential publication with an impressive readership. The cover tagline says it all, "Time to shake up the industry." With that, I turn the call over to Sébastien. Thank you, José. Good morning, everyone. Thanks to the sustained robust demand for products and the improving supply chain environment, we delivered results that came in well above our expectations, leading to the strongest quarter ever in our history. The outperformance was primarily driven by higher deliveries of side-by-sides, stronger shipments of components to dealers in the quarter, resulting in a higher completion of unfinished units, and the continued tight management of our expenses. Looking at the numbers, our revenues for the quarter were up 71% versus last year, reaching CAD 2.7 billion. We generated CAD 655 million of gross profit, representing a margin of 24.2% down in comparison to last year's level as the benefit from higher volume, especially side-by-side mix and pricing, was more than offset by the impact of inflation, supply chain inefficiencies, and cyberattack. Note that the cyberattack represented a headwind to gross profit of about 90 basis points in the quarter. Continuing down the P&L, we generated record Normalized EBITDA for the quarter of $488 million, representing a strong margin of 18%. Our Normalized EPS came in at $293 million, resulting in a Normalized EPS of $3.64, up 146% from last year's Q3. Moving to our network inventory situation on slide 15. As we already mentioned, we have been able to increase our throughput during the quarter, driven by better utilization of our production capacity and the improved supply chain environment. As a result, we have seen a healthy increase of 105% in our network inventory driven by side-by-side ATV and snowmobile, which puts us in a better position to support the strong demand for products in the fourth quarter. We have also ended the quarter with a higher level of inventory for 3-Wheel and personal watercraft, resulting from the late deliveries after the summer season due to the supply chain challenges we had to deal with earlier in the year. The retail of these model year 2022 units is going well, especially with many of the PWC already presold to customers, and we expect to be in a good inventory position with these units in the spring. While we have made good progress on improving the availability of our products in the network, there are still areas where we have a lot of inventory to rebuild to bring it to a more optimal level. In fact, despite significantly increasing ORV deliveries to dealers in the last nine months, we also delivered important retail growth and market share gains, which limited the inventory growth for that product category as it is still down 42% versus pre-COVID, and it is still far from an optimal level at roughly 50 days of inventory. Bringing ORV up to our target of about 100 days and optimizing our inventory for seasonal product still represents about CAD 750 million of inventory to rebuild. All in all, things are trending in the right direction as we were able to make headway in improving unit availability to support our retail momentum. Now, looking at slide 16 for an update of guidance for the year. While the year has seen its share of challenges, our teams have done an exceptional job to manage through these tough situations, allowing us to outperform our competitors and deliver results ahead of expectation. We look to the rest of the year, we are well positioned to sustain our solid momentum as we continue to experience robust demand for our products and as the improvement in our supply chain is allowing us to better utilize our increased capacity and deliver more units to our network. As such, with two months to go in the year, we are comfortable increasing both our top line and bottom line guidance. We now expect our total revenues for the year to be up 27%-32% as we are planning for increased production of side-by-sides. We are well positioned to hit the higher end of our seasonal products guidance as snowmobile is off to a good start. You will notice that we reduced our guidance for marine revenues as a result of the delayed ramp-up in production for the new Manitou, as José mentioned earlier. Going down the P&L, benefiting from increased volume, we now expect our Normalized EBITDA to grow between 15% and 18% and our normalized EPS to end between CAD 11.65 and CAD 12, representing a growth of 17%-21% over last year. Our guidance calls for the delivery of another strong quarter in Q4, carrying our momentum into fiscal year 2024, which we expect to be another solid year for BRP, given the strength of our product portfolio, where structurally it is driving higher margins, the strong progress we made in terms of market share gains, especially with side-by-side, the continuing momentum with new products such as the Sea-Doo Switch and the new Manitou pontoon. All of this supported by better utilization of our increased production capacity and lastly, an improved cost environment with expected lower commodity rates and a reduction in supply chain related headwinds such as retrofit expenses, spot buys and special freight. On that, I'll turn the call over to José. Thank you, Sébastien. I am pleased with our multiple accomplishments. We are also making good progress on the CSR front. Earlier this year, we committed to take corporate social responsibility even further with the launch of our new CSR25 program. It includes ambitious targets and concrete initiatives like the BRP Community Engagement program, Ride Out Intimidation. We are very proud of this initiative and of all the BRP employees worldwide who are embracing the fight against intimidation and raising awareness for this important cause. In conclusion, I am impressed with our performance so far this year as we've delivered better than expected results in a challenging environment while continuing to progress on our strategic initiatives. This positions us well to deliver on our guidance as we anticipate another record year. Looking ahead, the new product introduction, additional production capacity, as well as our momentum with dealers and recent acquisition, put us in a strong position to sustain our growth trajectory. I sincerely thank all our employees, dealers and suppliers for their relentless effort, especially given the numerous challenges and headwinds we have had to face. Without their hard work, resilience and dedication, it would not have been possible to achieve these exceptional results, and we look forward to keeping our momentum. On that note, I turn the call over to the operator for questions. Thank you, sir. Ladies, and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone. You will then hear a three tone prompt acknowledging your request. If you would like to withdraw from the question queue, please press star followed by two. If you are using a speakerphone, you will need to lift the handset before pressing any keys. Please go ahead and press star one now if you do have a question. Your first question will be from Joe Altobello at Raymond James. Please go ahead. Thanks. Hey, guys. Good morning. First question, I guess, is on, you know, your retail and the share gains that we've been seeing, in previous quarters. Obviously, this quarter, very strong again, particularly in side by sides. I guess, what are you guys doing that the competition isn't, that's enabling you to get more units to dealers? How much of that improvement is product availability versus some other driver? Good morning, Joe. Listen, I believe that the fundamental of our business, our strategy is very strong. First, we have very innovative and competitive product. We have took the call a few years ago to increase capacity in Juárez, now with the supply chain that is getting better, the supply chain is definitely helping, and we can use the capacity which we could not use in H1. The third element is the BO strategy. We decided to ship uncomplete product to dealers with little thing to repair or to add on to the unit, a few parts to add on to the unit, and we're using their service to PDI the product. In Q3, we had good supply chain. We're able to accelerate our throughput in production, ship more units to the dealer, but also ship components to dealers. I think it's a combination of all this. We have great momentum with the dealers. We've been working hard to improve the value proposition, and it's paying off. I think it's a combination of all this. I don't think there is a silver bullet, but this is what is making a difference. The beauty is, Q3 was strong, and we see November continuing with that trend. It's very helpful. Maybe just a follow-up for Séb. I believe you mentioned earlier the pipeline refill opportunity with CAD 750 million, and I think that was CAD 1.4 billion last quarter. Maybe help us bridge that difference? One of it is timing related. As you saw, we have more inventory for personal watercraft and 3-Wheel. This is really timing related because we had supply issues, we delivered these units later. That means there's more inventory of that unit, which should correct itself in the next few quarters. Obviously, what we want is make sure that the product availability is there for the consumers, for the dealers. It's our goal to replenish inventory. We always said that it would happen at the tail end of fiscal year 2023 and at the beginning of next year. There's still CAD 750 million to replenish. Some of it is gonna happen in Q4, depends on obviously production and how strong retail is. My expectation is that by early next year, we should be in a good inventory position level at the dealer network where there's enough product there for the dealers to meet consumer demand. Got it. Okay, thank you guys. Thank you. Next question will be from Robin Farley at UBS. Please go ahead. Great, thanks. I wonder if you could comment on some others in the market have talked about seeing some softness in recreation units, and you did mention your release, the return of some sales programs, so I don't know if it was related to that. Also just a quick clarification on when you talked about dealer inventory down 20%, and I know it's on the slide as well, is that including the substantially completed units that technically are not in your shipments yet, or is that excluding the substantially completed? Thanks. Good morning, Robin. I'll take the inventory one first. It does include the units that the dealers have on hand, which are incomplete, but also has the parts. If you were to look at the increase in inventory, we said it's about 200%. If you exclude the units for which the dealers have and the dealers have the parts but are not yet installed, that would be up only about 100%. There's still quite a bit of units that still need to be retrofitted by the dealers in the network, as of where we stand at the end of October. Obviously, the dealers will repair them as the season progresses. But that's in a nutshell what the inventory is. In terms of programs, we've seen a bit more programs happening from various OEMs, but far from the extent where they were pre-COVID. There's a bit of money being put towards certain products. I think it's more a getting customers through the doors, attracting them at the dealership. It's not a caused by excess inventory, definitely not. Okay. No, that's very helpful. If I could just fit one more quick one in, please. I'm just wondering with the PWC, you mentioned there were some, you know, later than normal deliveries than you expected. Is there a way to quantify, you know, were there some of those units where there were deposits on them that then were canceled due to, you know, how late they arrived? Were dealers able to adjust their orders for next summer to sort of factor in that, you know, they would maybe have a little bit more inventory than they thought, when they thought those, you know, units would have retailed? Thanks. On this, Robin, first one, we met the dealer at club in August. They knew that those unit would be delivered to them in August, basically. The booking that we took from the dealer for model year 2023, dealer knew that it was there, then this is done. What we're hearing, and again, we don't have hard data on this, but all the, those units were pre-sold to consumers and there was some cancellation, but very, very little. When you have a cancellation, you find a customer who is ready to take it because those units are at the dealer and they will be there next spring for the snow belt. What we're hearing is a portion of the customer take it now because they want to secure the delivery and everything. Many customer say, "We will stick to our 2022 and we will take it when spring come in the snow belt." To be honest, we're not worried about those unit at all. If in the spring, we see that the retail is not going as expected, we could reduce or adjust model year 2023 or convert 2022-20 24. We'll adjust depending of the retail trend. Right now, those 2022 for us, it's a non-issue. Great. Thanks very much. Thank you. Thank you. Next question will be from Joe Spak at RBC Capital Markets. Please go ahead. Thanks so much, everyone. I guess the... Was wondering if you could comment on, just working capital and free cash flow, 'cause you mentioned, you know, some of the changes in production and getting stuff to dealers, and I know working capital's been an issue, really all year, all year long. Should we expect some relief to begin in the fourth quarter, or is that really more of a, of a next year, phenomenon at this point? Good morning. Well, if you look at the numbers at the end of October, nine months that we've invested over CAD 500 million in working cap, coming from all the items that you've listed. It's a strategy that has paid off for us in building more retrofit units and you see it in the retail numbers. I do expect a small relief happening in Q4 as the supply chain is improving, but nothing too material. We're still gonna be running with high levels of working cap in Q1, Q2 of next year. As we get more comfortable with our suppliers delivering to the levels we want with the logistics headwinds that we saw around the world, obviously we'll encourage the teams to reduce the working cap. If it happens, it's probably gonna happen in the tail end of next year. The second half is when we should see improvements. Okay. Thank you. Maybe one more since you delved into next year a little bit. You know, I know interest expense was guided up a little bit here. Obviously, we know your capital structure, With the floating rate, but I do think you have a good amount of Of cap contracts as well, that limits your exposure there. You know, how far out do those go? I mean, I think you're continuing to roll those. I guess considering where rates are now and the contracts, is that, like, CAD 130 million interest expense, like, a good level for next year? The caps go out to 2025. Probably we're hedged for about 60%, or is a 1% cap. Obviously, we've seen. That's on the Term B. We've seen rate increases by the Fed, or two rate increases since we talked, one in September, one in November. We've also obviously done a few acquisitions, so we've used the revolver more. That's what's driving the increase in interest. Next year, probably expecting in the range of $110 million, slightly higher as well, because obviously we'll have a full year effect of higher rates, and especially the Fed is calling for further rate increases as well. At a minimum $110 million, but it could go higher as well. Slightly higher. Thank you. Next question will be from Martin Landry at Stifel. Please go ahead. Hi, good morning. You've touched on next year and you expect sustained momentum. I was wondering if you can talk a little bit about industry retail sales in North America. I'm wondering what's your assumption for industry retail sales to do next year? It's again a tough call, Martin, you know, I guess my crystal ball is probably not better than your crystal ball. There's a few things that make us optimistic if I just look at the industry side. If you take side-by-side, the industry is down rolling 12 months. Even if we were to have a flat industry next year, that means down versus the peak of COVID, probably 25% down versus the peak of COVID. If we were just to maintain the market share that we have in Q3, it would represent almost a 10% volume growth just next year for us. Even with a flat industry, we'd be able to generate growth with the market share gains that we've experienced. If you look at the personal watercraft industry, the season that just ended, it was the weakest season for personal watercraft since 2017. Snowmobile also had weak seasons. Our expectation is that for seasonal products, the industry should be higher than what we've experienced this year. Despite all of that, with flat to modestly increasing industries for seasonal, we are comfortable in our ability to generate growth next year. Okay, that's helpful. I'd like to just touch on Europe or EMEA. you know, your retail sales there were up 34% year-over-year, a significant outperformance. I was wondering a little bit, you know, was that, you know, related to pre-orders or, are you still seeing new orders coming in? Just trying to get a bit of an understanding of how the consumer is behaving there, given the economic and political challenges. Good morning, Martin. what we're hearing from dealers, and it's even the case in North America, but more in Europe, there is less traffic in the dealership. That being said, worldwide, we do less promotion because we don't want to attract customers to the dealership, and they have nothing to see. We slow down the promotion. There is less traffic. Also, customers are trained right now. If they go in the dealership, they don't have new product out there. Except for the traffic at the dealership, and maybe specific country like U.K. where it's more difficult, retail is still strong. Like you said, North America without Sea-Doo Switch was 39%, and EMEA was 34%. Dealer orders, you know, we had our club in August, and we gave to the dealer two months to complete their booking for model year 2023. Their booking of the dealer came out stronger than what we're planning, and they are the frontline. They are the one who meet the customer every day. We're hearing, like you do, like everyone do, the tough situation with energy and all this in Europe, but it don't show in our numbers. Okay. That's it for me. Thank you. Thank you. Next question will be from Fred Wightman at Wolfe Research. Please go ahead. Hey, guys. Good morning. I was hoping you could just sort of put the three key results into context. I know if we go back last quarter, you had given us some guide rails about where you thought EPS would sort of shake out 3 Q versus 4 Q. The 4Q. Like, was 3 Q just much stronger? Is there anything that's giving you a little bit of caution about 4 Q, or did the Street just sort of have things modeled inappropriately? It's very much modeling. Obviously, when we talked in September for the Q2 results, we were coming out of a cyber incident. We were also looking at the supply chain. There was some, I guess, cautiousness or we were gun-shy on the Q3 numbers maybe a bit. The teams outperformed, both on the recovery from the cyber incident, on managing supply chain, on the utilization of capacity. We were able to deliver. More units than expected in the third quarter. These are units that were planned into in Q4 that now are carried forward or carried earlier in Q3. Also expenses as well. We continue to manage them tightly, and that came in lower than expected as well. Helping deliver the strong Q3 results. Makes sense. Then just on the marine segment, you touched on sort of the supply chain impact and then also this cybersecurity impact. I get why the cyber ramp would hit 3Q, but can you just dig into the 4Q outlook? Is the supply chain just worse than you expected there? If there's anything in particular that's holding up the marine segment of the business, would be great to hear a bit more about that. Yeah. On the cyber, what happened is, I think we disclosed this, you know, the hacker came into a third party to our system. Obviously, when all of this happened, we shut down all those third party, and we were able to ramp up after that, giving them access to our system. At Manitou, it's the whole system that the previous owner had, and there is more third party involved managing the business. Because of this, we were able to restart production, but there was many system that was not operational, because of too many third party, like I see in the kitchen. We were very cautious to reopen those access, and they suffer most than the other product line or division. That's in a nutshell what happened. We were cautious about reopening access to third party. That's why Q4 deliveries will be, this combined with some supplier issue, with our delivery for Q4 will be lower than what we had planned in September. That's why we reduced our guidance. Makes sense. Thank you so much. Thank you. Next question will be from Benoit Poirier at Desjardins. Please go ahead. Good morning, everyone, and congratulations for the good quarter. Could you talk a little bit about the success of the zero financing for 60 months that you offered on select 2022 Sea-Doo models in order to lower the sold units at the dealer level? When we look at your inventory, dealer inventory still down 20% versus pre-pandemic level. If you were to remove the units that are substantially completed and also the 2022 Sea-Doo models, how down would be the dealer inventory and what would be kind of the inventory replenishment opportunity? Yeah, I'll take the interest question. I'll try to give you a bit of color as well on the inventory. We actually had an opportunity with our retail financing partner to offer a program with a very low cost to BRP again, structurally with this financing partner that we have. In the last few years, we kind of accumulated credits with them that we could use. It was a good opportunity for us to use these credits and offer an attractive financing package for consumers on the retail side. That's being successful. Obviously, we have strong retail. You saw the retail in Q3, and José commented on the momentum that we have in November as well. That is certainly helping. From the inventory perspective, as I said, if we were to exclude the incomplete units there, inventory would be up only 100%. The personal watercraft, I don't have the number, Benoit, that we could come back to you on this one with the impact of a personal watercraft is, but it is quite sizable on the inventory growth in just for the quarter. Okay, perfect. The other question, we saw Polaris struggling with recalls over the last three months. Just wondering if you have seen benefits so far, in terms of new entrants, whether they are looking more closely at the BRP brand, or do you see opportunities to gain additional revenue, with those recalls? We definitely. If you talk to a dealer that is Polaris and BRP, and there is 40% of our dealers that are Polaris and BRP, those dealer obviously right now are overwhelmed. Because in the snowmobile, the snowmobile PDI, I mean, delivering all those units in a short period of time is always a heavy period. They have to retrofit some of our BOs, but also they have all those recalls from Polaris. For those 40% of the BRP dealer that are also Polaris, for sure, it's a difficult fall. We're lucky in the sense that 60% of our dealers are not Polaris, those have an easier fall than the first one. There is definitely, I think, Benoit, an advantage in the dealership that are not that are only BRP, not Polaris. It's very difficult to quantify. Benoit, if you were to take the total inventory and just remove personal watercraft and 3-Wheel, the inventory would be up 120%. Okay, perfect. That's great color. For fiscal year 2024, you gave a great color about how should we be looking at the revenue, the pluses and the minuses. What about the margin side, Séb? Could you maybe provide some color about the key elements that will impact the margin going into fiscal year 2024, and whether 17% is still something that should hold up? Absolutely, yes. The 17% is something that should still hold up. If you look at BRP, structurally we're a very different company than what we were just a few years ago. There's a few things that obviously are helping us. One, our modularity approach that we've implemented over the last several years is obviously paying off benefits for sustained gross margin. Two, we have a better asset utilization as well with the volume growth that we have. Three, our footprint is, as you know, the growth that we've invested in Mexico, and so very cost efficient. Structurally, that brings good margin improvement. From a product mix point of view, our side-by-side business has grown a lot in the last few years. Just a few years ago, side-by-side represented 30% of our revenues. This year will be just almost 40% of our revenue coming from side-by-side and the parts business that goes with it. That business drives better margin than the average portfolio of products of BRP. That obviously is helping to sustain strong gross margin. If you look at fiscal year 2023, we've obviously had a lot of headwinds from inefficiencies, from retrofits, from doing spot buy from microchips, from air freighting components from suppliers to our assembly plants just to get the units out the door. We probably have a 250 basis points headwind this year just coming from those inefficiencies. Not all of those will go away next year because the supply chain is still fragile in some pockets, and logistics has not yet been reestablished completely, but we'll certainly get some gains coming from better efficiency. When I look at next year, I talked about the top-line elements, a lot of optimism, but also from a cost efficiency point of view as well, there's some great opportunities. Okay. That's great color. Thanks for the time. Thank you, Benoit. Next question will be from Xian Siew at the BNP Paribas. Please go ahead. Hi, guys. Thanks for the question. I just wanted to ask a little bit more about inventory levels. So you're expanding capacity and you're gaining a lot of share. I'm just wondering, is it possible that, you know, I guess in the future or when the dust settles, that you can have structurally higher inventory levels than pre-pandemic anyways, and that the pre-COVID, I guess, compare is maybe less relevant as the business becomes bigger? From a dollar perspective, yes, because our business have been growing, we've been gaining market share, we've adding new products as well, and some products are bigger ticket items as well, if you look at the Switch, you look at the side-by-side. From a dollar point of view, yes, we can have more inventory than in the past, and there's been inflation and price increase, et cetera. But from a number of days, we were trending sometimes in the 150, 180 days of inventory in the past. We wanna operate with lower levels of inventory. We said 100 days-ish would be a number that we like operating with, dealers like operating with. There's enough product there so that they can quickly execute on quick retail, but lower the total cost of operations for us and the dealership as well. That's the targeted number. Okay. Got it. Makes sense. Maybe just on the NCIB, you know, it sounds like working cap maybe two quarters before you really see the big benefit. Just wondering how are you thinking about stepping into the market. You know, is it when the working cap kind of unwinds, or how are you thinking about, you know, I guess share buybacks? Well, we've always our priorities has always been investing in the business. CapEx has been one priority where we're investing quite a bit this year, investing for growth as well. That obviously required some working cap investments. We did CAD 300 million of buybacks this year, of which CAD 250 is on SIB. And we've also done acquisitions, so investing in the business as well. Our priorities remain growth, and we are a business that generates good free cash flow. Increasing the dividend modestly as well is part of our priority. With excess cash, returning that capital to shareholders is a good way to provide good returns, and that's something that we'll continue to investigate, especially in this context where obviously our expectations for the business is very good and the valuations currently are at very attractive prices. Okay. Very helpful. Thanks, guys, and good luck. Next question will be from Mark Petrie at CIBC. Please go ahead. Thanks. Good morning. I was wondering if you could just give a bit more color on the topic of dealer engagement, and just sort of how you're gauging the impact of that. Obviously it is difficult to quantify in totality, but any commentary just with regards to sort of floor space or, you know, the pace of renovations or updated dealerships, that would be helpful. Yeah. Good morning, Mark. I don't have any hard fact, definitely, we're growing at a fast pace. We're taking more and more floor space in dealership. At the same time, like you said, you say people, we like to have the BRP space in the dealership space. This is one of the strategy we put together. We want when you enter in the dealership, you have the BRP DNA flavor. Right now, we're forcing dealers. Give you the example of the Sea-Doo Switch. When we gave to the dealers the Switch line, they needed to committed to a certain amount of space of floor to display the product. This is the type of thing we've done and we will continue to do. This is part of our strategy, first to sign the best dealers, and second, to continue to gain floor space. To be honest, because we have strong product line, because we have a good value proposition, they're making money, more money with our product than the most of our competitor. I would say it's a good value proposition. It's a business discussion, and it's not too complicated to convince dealer. Yeah. Okay. Helpful. Séb, I'm wondering if you're able to or willing to quantify how much of the revenue in the quarter recognized was from retrofit units that were sort of brought to saleable condition. Are you able to quantify sort of the level of retrofit units at the dealer today compared to last quarter or earlier in the year? I don't have the numbers with me. Obviously these numbers have been going down every quarter. At the end of Q3, the number of units remaining in the network is a very small percentage of our total annual production. Almost nothing left in the network. It wasn't that much as well in the second quarter. What happens is that the dealers convert them quite quickly, or we ship the parts quite quickly. We might ship, I don't know, we can replenish easily in a quarter of 100% of what we ship. Things turn around quite quickly. Usually it's just a few week window between the time we ship the unit and we ship the parts. Okay. Okay. That's helpful. Thank you. Next question will be from Cameron Doerksen at National Bank Financial. Please go ahead. Thanks. Good morning. Just wanna talk a bit about the side-by-side market. You sort of called out the market share gains that you've had so far this year for the Defender. Are you able to give us some color around what percentage of your SSV, I guess, sales now are related to the utility segment? We used to be behind the segment or the proportion of the segment. As you know, SSV-utility is about 60% of the industry. The Defender used to be below that in our numbers. Like we said on the, in Q3, we've gained 9-point market share in that segment. Right now we are about in line with the industry. The utility represent for us about 60% of our retail in Q3, which is a great, which is a great accomplishment. The other thing I would like to highlight to give you more colors, we always also measure the premium product versus the value product. About 75% of our side-by-side sales are premium, where the industry is 55%. We gaining share, and on top of it, we're gaining on the high end, which has been our trademark in the sport with the X3. We're very, very happy with the momentum we have in the side-by-side business this fall. Again, it's a combination of, we added the capacity and now the supply chain is getting better and the momentum is there. Okay. No, that's really good information. Maybe just secondly for me, you know, obviously the, you know, retail for you guys has been, you know, really exceptionally strong. I guess my question is, are there any signs for you that are sort of cautionary? I mean other than sort of the macroeconomic indicators that we all see. I mean, is there anything that you're seeing out in your markets that would give you, I guess, any reason to be incrementally more cautious than, say, three months ago? It's a bit in line with the question I answer for the European market. When you talk to dealer, they would tell you, they will tell us that the traffic is not as much as it used to be. At the same time we don't do as much publicity and when the customer show in the showroom, there is not much to see then. There is a reason for that. When you look at our numbers, I mean our retail in Q3 was exceptional. The new entrant in Q3 was over 30% when typically it was 20%, and it's about in line since the COVID at 30%-35%. Our web traffic is higher than what it was pre-COVID. The other thing also that changed into the COVID period is the household income. 65% of the population in U.S. household income is below $100,000. All our product are not significantly above, but our lowest product is ATV with $115,000, and all the others are above that. When we look at... 40% of our Q4 retail is pre-sold to consumer. When you're adding all those elements, we hearing like you do about the macroeconomic concern and the slowdown and the interest rate. Except for the traffic at the dealerships, we don't see that in our hard numbers. The traffic is down compared to pre-COVID? Sure. compared to COVID, where it was obviously at an all-time high. Yep. In line with what it was pre-COVID. Okay. No, that's very helpful. Thanks very much. Thank you. Thank you. Next question will be from Derek Dley at Canaccord. Please go ahead. On the cost side, obviously, you had some really strong cost control this quarter. Can you just give us an idea- Derek, could you re-ask your question? We missed the beginning, at least here. Yep. Yeah, sure. Sorry. Just wondering on the cost side, you guys obviously had some strong cost control this quarter. You know, historically, we used to think about R&D as a percentage of revenue in the 4% range, and it's been tracking, you know, a bit below that over the last three quarters. Should we expect a, you know, a change in that, in that algorithm going forward? Obviously, we've had very strong growth in revenues this quarter, that's why when you look at overall OpEx, they're just a little shy of 10% of revenues for the quarter. R&D trending at 3%. Some of it is timing related. Some projects were pushed into Q4. Our expectation is that we'll continue investing in R&D in the range of 4% going forward. That's the expectation. A lot of it this quarter is very much related to the strong growth in revenue that we've experienced. Okay, that's helpful. If you look at in absolute dollars, the year OpEx spend is increasing. It's been increasing sequentially there over the last several quarters. Yeah. Okay. Got it. You mentioned the new entrants, you know, still 30% of product sales or revenue. If we go back to like the COVID period when you had a big jump in new entrants, can you just comment on any of the buying activity from those? I know it's still relatively early days, but have you seen those new entrants, you know, trade up, buy a second product? You know, what kind of, what kind of purchasing patterns are you seeing there? We're following five things about the new entrant phenomenon. First, the numbers. Like I said, in Q3, it's above 30%. Typically, historically, it was 20%, in fiscal year 2021, 2022, it was 30%. We are above 2021, 2022. What is interesting is 55% of those saying that they are in the powersports for a long time, which is a good number. Many have already repurchase another product. They are younger. The number of people who are between 18 and 44 years old have increased by 10 point. More women, 7 point, and more families, 6 point. Their household income is higher than what it was pre-COVID. When you add all this, it's difficult to say 1+ 1 + 1=3, but all those things are positive. And the momentum or the statistic didn't change since, I would say fiscal this fall, even if the macroeconomic environment is unstable. Okay, great. Thank you very much. Thank you. Thank you. Next question will be from Garrick Johnson at BMO Capital Markets. Please go ahead. Good morning. Thank you. On the Alumacraft and Manitou product that you've been shipping, I see it's at certain dealers. What's the consumer reaction been? You know, you've given us metrics before on Switch and so forth and what's been pre-sold and sell-through. Can you talk about the end consumer reaction? Excellent, Garrick. I mean, the people are very happy with the new Manitou. Like you saw, we're winning many prize. Alumacraft, it's a different market. We'll see in the Midwest at the Minneapolis Boat Show. We don't have any pre-order system for the boat. I can tell you we sold out for our production capacity till next summers, but we don't have any pre-order number to give to you. Again, I would like to highlight, we've done a tour, a North American tour with the boats. That's where we get the feedback, but we don't have any pre-order system with the marine business yet. Okay, great. On the model year 2022 personal watercraft and 3-Wheel vehicles that you've shipped, what proportion of those are pre-sold? You know, I'm just concerned that you have 2022 product out there after the season's over and how that might affect the flow of 2023s coming in for next season. Also, you know, the discounting probably you needed to move those units 'cause really who wants a 2022 personal watercraft in December? Just if you could talk about how much of that's pre-sold and what you have baked into your guide in terms of what you need to discount to move those units before the 2023s come in. As I said, we do have a retail incentive program out there offering zero interest for five years to our consumers. That's been or that's helping with the strong retail performance we've seen in the last few months. Obviously, we would have preferred to ship these units in May and June and get them to consumers because, as you know, the level of pre-orders from consumers was very high. The season last year in the industry ended at an all-time low in the last five years, so there's still a high level of unfulfilled demand. The other reason why we're comfortable, and obviously we don't like it, but we're comfortable with the situation, is the level of pre-orders at the dealership was high, so dealers are telling us, "I'm not getting cancellations for these units." Customers are gonna take ownership of these units in the spring. The other thing is that there will be price increases on model year 2023 that we've announced, 3%-4% increases. And so customers, they have an option of taking a model year 2022 at a price lower than a model year 2023, and that's something that will also incentivize them not to cancel their order and take the units. To be clear, what's embedded in your guidance right now or your thought process is the finance offer, not additional rebating? Yep. Okay. That's correct. Great. Great. Thank you. Once again, as a reminder, if you do have any questions, please press star followed by one on your touchtone phone. Your next question will be from Jaime Katz at Morningstar. Please go ahead. Hi, good morning. I was hoping that you guys would elaborate on maybe where you're seeing supply chain shortfalls that might lead to opportunities for further vertical integration, given the recent acquisitions you've made. You know, sort of adjacent to that, it looks like in the financials today, you guys have carved out this Low Voltage & Human Assisted Group, and to facilitate your growth strategy, and I'm curious whether that's just electric or is there something else we should be thinking about to figure out what the total addressable market of what you're trying to do there might include? Thanks. Yeah. First, on the vertical integration, we're happy with the acquisition in Austria. What we acquired is talent. It was a group of about 50 people that are deeply competent into electric technology that now is part of our R&D group. Kongsberg in Quebec, we were the biggest customer of that division. For us, those components are key, and they will be even more key going more electric. Pinion is a different thing. Pinion, it's a compact gearbox that we can implement obviously on bike, on electric bike, but also on other product line or new type of product line. Right now there is no plan for additional other vertical integration or activity. We were opportunistic with those and we are very happy with those acquisition because over and above, and those are not big acquisition, but we acquired a lot of talent that will be key for the future. On the LVHA, right now is the name is an internal code name, but low voltage. Our motorcycle and our powersports electric vehicle will be high voltage. We are right now working on low voltage product that will be electric. Obviously, HA is human assist, and the Pinion gearbox is key for the human assist product line. All of this is a strategy to enter... You know, when we presented at the analyst meeting, investor meeting in June in Florida, we had the CAD 34 billion bubble of powersports, where we have about 30% market share. Marine is CAD 36 billion. We are a small player. We intend to grow there. We have motorcycle, Europe and North America, CAD 15 billion. We have a plan with our electric motorcycle. We're talking about CAD 70 billion urban mobility, our new type of market, and those acquisitions are key to enter in those market. Okay. That's helpful. Thanks. Thank you. Next question will be from Brian Morrison at TD Securities. Please go ahead. Well, good morning. Just very quickly, Séb, when I look at the working capital unwind next year, I know we've spoken about this a bit, but it looks like it should be north of $500 million. I just wonder if that would be correct. With the rising cost of debt, would you plan to allocate some of your free cash flow towards debt rather than the NCIB? Well, when you look at the overall number of days of working cap and what we've invested there year-to-date, as I said, we've invested about $526 million. Obviously this is a growing business. From a number of days perspective, if you were compared to, let's say, fiscal year 2020, if you were to come back to the same number of days there, it's about a $500 million opportunity of reduction in working cap. When is that going to happen? As I said, some of it's going to happen in the back half of next year. How quickly do we come back to the previous levels we were? Obviously we'll be stretching our teams to make sure we optimize the working cap investments and run our plants efficiently. Yes, you're right. Ballpark, it's a CAD 500 million opportunity that we have. Now how we use the cash next year, obviously it's something that we look at continuously. We have discussions with the board. Our leverage is relatively still low and the overall cost of financing, yes, rates are going up, but it's relatively still accessible. We have interest rate caps which are making the overall cost lower for us as well. We do wanna make sure that we optimize return to shareholders and obviously these decisions are based on where the stock is trading, and how much cash we have to deploy either to reduction of debt or to doing buybacks. Okay. one housekeeping question. just in terms of the pack high margin business, it seems to have real outsized growth in Q4. What is driving that? It looks like it's going to be a very record quarter in the fourth quarter. I'm just not sure what is the key contributor there. Well, the snowmobile business is always a big parts business and obviously, we're shipping a lot of units in the fourth quarter, both from a ORV point of view, from a personal watercraft point of view as well. There are some deliveries to the dealers as well for upcoming season products and getting ready for the season as well. There's a bunch of factors that are helping with the strong growth in PAC. Thank you. Thank you. There are no more questions. I would like to turn the call to Monsieur Deschênes to close the meeting. Super. Thanks everyone for joining us today and for your interest in BRP. We look forward to speaking with you again for our Q4 earnings call in March. Thanks again, everyone, and have a good day. Thank you, sir. Ladies, and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please-