BRP Inc. - Special Call

Sep 21, 2017 AM CEST
DOO.TO - BRP Inc
BRP Inc. - Special Call
Sep 21, 2017 / 11:30AM GMT 

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Corporate Participants
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   *  Jose Boisjoli
      BRP Inc. - President, CEO & Director
   *  Josee Perreault
      BRP Inc. - SVP of Can-Am Spyder
   *  Philippe Deschenese
      BRP Inc. - Financial Analyst, BRP US, Inc.
   *  Sandy Scullion
      BRP Inc. - VP and GM - Global Retail & Services (GR&S)
   *  Sebastien Martel
      BRP Inc. - CFO

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Conference Call Participants
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   *  Gerrick Luke Johnson
      BMO Capital Markets Equity Research - Senior Toys and Leisure Analyst

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Presentation
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 Philippe Deschenese,  BRP Inc. - Financial Analyst, BRP US, Inc.   [1]
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 Good morning, everyone. Welcome to our Club at Dallas, Texas. This morning, we'll have presentation by Jose Boisjoli, our CEO; Sandy Scullion, our Senior Vice President, Global Retail Services; and Josee Perreault, Senior Vice President, Spyder. Sebastien Martel will also be here to answer your questions if you have any. We're also very happy to have 3 board members with us this morning: Dan O'Neill, Louis Laporte and Laki Nomicos.

 Before we move to the presentation, I just want to make sure that you're all aware there will be some forward-looking statements, which are subject to certain risks and uncertainties. I invite you to read BRP's MD&A for a listing of these.

 Also, there is a slide deck available on our website to follow up with us this morning.

 So Jose will start the presentation, then it's going to be Sandy. And please keep your questions for Jose for Sandy and Josee Perreault's section because they might answer some of your questions before you ask. So I'll let Jose go with it.

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 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [2]
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 Good morning, everyone. Short night for many of us because of sunlight. When you're going into those events and you don't have much product news, you try to find stuff to tag the hour presentation. And yesterday, we had difficulty to tag all the product news in 1.5 hours, but it was a very nice evening.

 Again, very, very happy about the year, strong H1. We have a good momentum on H2. Good retail on all product line, but partially on side-by-side. As with what you saw last night, I'm sure you will be convinced that momentum will continue. Successful SIB, which is quite unusual in Canada, and we're very happy to have the successful $350 million SIB in Canada and the introduction of the dividend. And we are confident on our year-end guidance with the $2.23 to $2.35, the 14% to 20% EBITDA growth.

 This morning, I will talk a bit about the product news of last night, the watercraft; what the product news on Spyder; the product news on side-by-side. I will give you a bit more of the highlights of this feature. Sandy will give you more detail about the potential in the business, the [third] potential positioning. And Josee, obviously the story behind the Spyder finding with her team in the last 10 months and also why we have it called Project X last night.

 Then, if we start with watercraft, you know it's funny, we've been designing watercraft for more than 20 years and we always find ways to reinvent the business and I'm very, very happy with what the guys have done. Then if I just highlight the key feature of the product, first, everyone on the water likes music, but no system were waterproof and are splash-proof, and if you put something that is designed for a boat, you put it on a watercraft, the splash happening. Then we work for a few years, everything that you saw yesterday is custom-made for us and we're very happy and we believe it will take 3 to 4 years before someone come with something similar on the watercraft as good as we have. I'm very happy about that feature, and priced at $700, we believe a lot of consumers will go for the high-end radio with the product.

 In term of storage, the fact that we are now drive-by-wire product, we first removed the handle from the top of the deck. And in the past you always have to go over the handlebar to access the storage, which is very difficult on the water. Try it, you will see how it goes. But now, you open everything and that gives you a huge access to the front of the watercraft.

 And we believe that those 2 features in the showroom will be an incredible appeal. If you take a traditional watercraft, our key competitor, beside the new product, it will be an incredible appeal when you have this storage access and the radio.

 The other 2 things is the living room onboard with our thinking about the Lynx system and all the flexibility with the accessory that we have. We started that on ATV, side-by-side, snowmobile and now on watercraft. It gave a lot of flexibility to reorganize the back of the vehicle, basically a 1-up, 2-up bringing accessory. And I'm telling you accessories on watercraft have never been big, but now we're going aggressively about accessory, and it's just the beginning.

 The last thing is the stability of the product. We found ways, if you count the driver weight, to reduce the center of gravity by 3 inch, and this is a huge difference. Again, this morning, you will see on the water go both feet on the side of the watercraft. You won't be afraid. And in the past we were not able to do that.

 Then very, very happy about those key features that the customer will see and appreciate. Behind (inaudible) that is something more niche. The hull is basically the learning that we've done from Spark. When you design a watercraft with 60 horsepower, you need to find ways to have better acceleration, better (inaudible). And all the learning we've done on Spark we applied it on the vehicle last night, the new platform, last night improving the acceleration. For us, you will see 3 seconds to 2.5 is not a big deal, but for many customers, it's a big deal. All the learning we've done also on Spark on the iBR system and the reverse system to make it lower cost, we applied it to the new platform.

 And last, not least, on all the 8 batches, now you have a launch control. With the electronic today, you put launch control, full throttle, depending of your weight, the system will adjust automatically for the perfect launch.

 Another thing here on the watercraft, and that helped also the stability, we reduced the power -- the weight of the vehicle by 86 pounds and going from 914 pounds to 828 and that is making a big difference.

 We produced last -- 2 weeks ago 500 units in Queretaro and production -- full production model mix is starting in Queretaro next week that we are right now rolling out. First unit will go counter-season. This is the beginning of their season and the first unit will go counter-season for the beginning of the model year '17 season over there -- model year '18 season over there, sorry.

 Last, not least, this is the capacity we increase in Queretaro. And basically we had some bottleneck on the assembly line, but the big bottleneck was on the capacity of the fiberglass production, hull and deck, and basically after the investment that we have announced in Q1, we'll have a capacity increase in Queretaro for -- by 20% that will start in Q1 of fiscal year '19. Then, basically, we are on plan.

 The watercraft market is a very good market, and like I said to many of you many times, what is very nice about this industry, first, it is bouncing back. Second, there is not too many layers. Dealer makes money, we make money, and on top of it, customers are happy because the product keep their value when they trade. Then a very good industry to be in and a very good industry to lead those days.

 Going to Spyder. I won -- the BRP Connect -- yesterday, the (inaudible) was not the biggest news of the evening, but I can tell you that this was one of the #1 feature that customers were asking for. When you're buying a high-end Spyder for $25,000, you're expecting to get the connectivity and all the control that you have into a comparable car. And we were happy because we developed the BRP Connect with Bosch in Germany.

 Basically, this is a system that is on a high-end car. I cannot name the brand, but high-end car that we adopted on the Spyder. Then it's the same thing in the (inaudible) car fleet, very intuitive. That was a big challenge when you're writing a product with the (inaudible) you can access all the different screen. Same thing that you have in the car, but what is interesting with the Spyder, you keep your both hands on the vehicle and you can access all the different systems, the different display. In cars sometimes, you have to remove your hand from the steering bar. We're very happy about this. We believe it will be popular and it come with all the high-end X3 and RP starting production in November, end of November.

 Now Project X, obviously, I'm sure you understand the relationship or the parallel with the Spark. Basically, we believe it's the Spark story again that will rewrite for the Spyder business. The big question you might have, why did you announce it one year in advance, and Josee Perreault will tell you more about (inaudible) done in the rest of the world in the last 10 months and why we have introduced the Spyder X, this Project X 1 year in advance. But I'm sure you will understand the rationale after Josee's explanation.

 Last, not least, the introduction of the side-by-side lineup. I believe BRP... There's something on the line here. Okay. We were the first one to introduce, for example, the crossover snowmobile when we introduced the Renegade a few years ago. We're the first one to come out with the ATV X mr or the mud racing application and this is basically a continuity. A lot of people are using Maverick X mr, but it was time to come out with a Defender X mr. A lot of people prefer to use a 3-seat or a bench product for mud usage and the other one was rock crawling.

 This is a trend, and Sandy will talk about the trend in rock crawling. No OEM has done so far a dedicated product with key feature for the rock climbing application and we're very happy. And when you see the rock crawling, X3, in the showroom it's impressive. Just the stance of the vehicle, the size of the wheel that we've done, it's very, very impressive. And yesterday I was talking in the showroom with many dealers that are not selling to those customers, but they will buy a few because it makes a difference in the showroom and it's quite the statement.

 Then we're following our plan. This is our fifth in production in 24 months. Then we're following our plan. There is 3 more platform announcements to come in the next, I would say, 18 months. Then we are right on plan delivering on our commitment to the dealers and to the market.

 Now as Sandy will present to you the 50-inch Trail segment, it's not the biggest into the industry, but I'm convinced it will change this because our product obviously is a new generation of products. And as you will try today, this morning, our product is -- stand out versus the competition. We did work hard to come out with something, again reinventing the product category. It's not obvious onstage, it's not obvious in the showroom, but when you try it today, I'm sure you will be convinced of the difference.

 And here's a big thing. It's very, very difficult to pack two adults sitting side-by-side within a 40 inch of space for the trail. Then the team have done an incredible job to come out with a very comfortable cockpit for two adults with a lot of place to put your stuff, a lot of car compartment and extremely comfortable with adjustable seats. You will see we'll have a vehicle from the competition at the demo site. You will not ride it, but you can sit with it and if possible, for our vehicle go to sit on the vehicle competition just to see the cockpit size. You will be surprised how tight it is. And when you come in ours, it's very different.

 The other thing to improve stability and to give it comfort was the wheelbase. We're coming out with the longer vehicle in the industry for that product category with 90.6-inch wheelbase. Very, very comfortable ride, giving more stability to the vehicle. And it's the optimal weight distribution, 60/40, you're very, very close to the best in the industry. And despite the long wheelbase, the turning radius is very tight and we like to say it's very predictable, point and shoot. I mean, if you align the vehicle, you will see the aim perfectly. Then I believe those 2 feature will be making a big difference when the customer will get used to it and try it and the word-of-mouth into the industry.

 And last, not least, we came out with -- price is very important in that product category, then we came out with a basic product that can be equipped with 125 accessories from the get-go. And we're becoming better to develop accessories that goes on all our products. The (inaudible), for example, goes on snowmobiles, side-by-side. This product, ATV -- snowmobile, ATV, side-by-side and also in watercraft. The cooler will go on different product line, and the customer like that and the beauty of it is if you buy 1 unit with accessories, they have a tendency to buy the other product line with the same accessory because it fits everything. Then for us, we work hard to have a good price point on the Trail product, Maverick Trail product, but also you can equip it a lot with a lot of equipment to accommodate different riding style.

 Again, same thing, 500 units were produced in Juarez 2 last week and SOP is planned on October 12. Obviously, this morning, it's an allocation per dealer. We need to continue to produce X3 and Defender and for the next few months would be an allocation per dealer. But we will be able to accelerate the pace of Maverick Trail production in the coming months and full open production at the beginning of last year.

 Sorry. Okay, that's the capacity increase. From fiscal year '18, the new equipment that we're installing and for some of you who visited Juarez 2, it's mainly equipment in the manufacturing side, welding, cutting, tube welding, painting that we're having in Juarez 2. Then, when all of this is done, it's done at the end of 2018, beginning of fiscal year '19. Basically, our capacity in Juarez 2 will have increased by 30% compared to this year. And you will say, yes, but right now you have a trend of 50% retail growth. If the trend continue, we know what to do to continue the expansion or the additional capacity in Juarez 2 if things continue to progress as planned.

 Then, overall, very, very happy about the momentum we are having this year. Very happy about the product intro. And we believe that momentum will continue in the coming years.

 Sandy?

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 Sandy Scullion,  BRP Inc. - VP and GM - Global Retail & Services (GR&S)   [3]
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 Thank you, Jose. As Josee Perreault will cover Spyder, I will be covering watercraft, side-by-side and give you a little bit more perspective on where we're going on with the dealer development side.

 If we start with watercraft. Obviously, as you can see here, the industry is very healthy, mostly driven by the Rec Light segment. We used to be completely alone with the Spark until season 2017 and the competitor actually helped increase the industry, but Spark also increased in that same segment. The good news is that on the traditional segment, the watercraft, we actually gained 3 points of market share still, so we're really healthy in terms of profit pool.

 As you can see here, in terms of the premium watercraft, it represents about 1/3 of the industry. But in terms of profit pool, this is more than half of the industry. And this is where we've invested in a new platform with what we have in the GTX, the WAKE PRO and also the RXT. So we should be having a positive mix going forward with watercraft. And also, we're saying that in the Rec Light segment, with the addition of the TRIXX 3-seater that will also help on the next going forward because the TRIXX, as you probably know, has been extremely popular this year and we were -- basically our products were really early for this season.

 A couple words on side-by-side. This shows you the progression. This is about less than 2 years going from Q4 of fiscal '16, the power of the second generation of side-by-side that we've introduced starting with the Defender, the first shipment as we grew the lineup with the Maxes Also need to realize that we only started shipping X3 2-seater in Q3, and actually the Max, which represents the lion's share of the market in Q1 of fiscal year '18. And if you look at your last 12-month progression, the rolling last 12 months, we're talking about 50% increase. So extremely, extremely healthy.

 This is probably one of the most interesting slides. This gives you the market share of the segments we're in with the Maverick. So this is the 64-inch and the 72-inch turbo industry. This is, again, 10 months of retail for the X3 2-seater and 4 months only for the 4-seater and we're actually at 50% market share in that segment. That's the only segments we're in.

 Now as far -- same story for the Defender. Looking at Texas, Texas represents such a big opportunity for us. With the special focus that we put the team on, we're actually 3x the volume of last year in Texas, but there are obviously other regions like this in the world. We're doing extremely good in Mexico, Mexico representing the biggest country outside of North America in terms of side-by-side volumes. The volume increased by 100%.

 EMEA, despite the softer markets in Russia and the Middle East, we're still able to grow the business by 30% in the side-by-side.

 And Australia, growing extremely good at 50% increase, mostly driven by the Defender segment.

 As we move forward in the product releases, now we're addressing the segment we were not in yet, that's the trail segment, the 50-inch we saw yesterday. So this is certainly going to help us. It is mainly in the Snow Belt area, which is most of the mass of the market is, but also with the understanding that utility represents the biggest opportunity. The Defender XMR is continuing to fuel that segment and rock climbing as well and the sport segment. So if you combine this with what we believe one of the best dealer value proposition, obviously this puts us in a very good position going forward.

 A little bit about the new segments, Jose talked about it, the fact that specifically in that segment we haven't seen a lot of breakthroughs in the last 5 to 10 years, so I think the Maverick Trail is going to make a big difference, focusing on comfort, vehicle stability and handling, so very happy with the launch of this product.

 In terms of product expansion, this is interesting. You guys probably know this, but the amount of dollars our customers are putting on building special builds and even specialized builds for side-by-side is just amazing. And this is, as Jose said, this is the same story again from the XMR, which we introduced with the ATV, the first and now building into a bigger market. We see very positive trends in terms of uses for rock climbing, and as you saw yesterday, that unit is just amazing. Now we're lower body, we got special tires, we've got the smart lock in there. So we've got special equipment that makes it not only affordable, but a hell of a package.

 The new Defender high-value offering. As I said a little bit earlier, we basically started the industry with the mud -- or the X mr lineup with the ATVs, and you see the couple side-by-side. But this has been growing as an industry significantly in the last 2 years. So obviously, this is only a natural for us with the Defender X mr. And hearing the dealers yesterday and I talking about it, looking at it on social media, that's nice to see the reaction. This is -- it's going to be great news.

 We also know that 1/3 of our side-by-side customers are also riding on trails so the convenience of bringing a little bit more storage with the Defender XT-P, better suspension, better comfort with the bolster seat. So this, again, is addressing more specifically from our market.

 We've talked a little bit about Texas. Actually, Texas represents, for the side-by-side industry, this is twice as big as the second state in volume in the U.S., so a specific focus we're putting on Texas. It's mostly driven by the Defender segment. So you can imagine that this represents for us a big opportunity only because we have a relatively lower market share in that state, but I believe that this is going to be changing really soon.

 The Defender LONE STAR, another reason why we need to focus on that product is the Texas opportunity. So I know you had a chance to see it in the showroom. But the trim on this, the accessories we put, the specialty arms we put on the unit that makes it big and makes it Texan, so this is really exciting as well.

 Couple words on the dealer value proposition or our network development strategy. You're going to be seeing a little bit less of adding dealers into the North American market, a little bit more of increasing the quality of our dealer, so we're going to be focusing on that going forward. I think you've seen the dealer value proposition model. This is a continuously improving model because we have certification in there. We can address specific segment for PerforMAX, so this has been extremely successful.

 But on the right side, what you see there is that in multiline dealers, the lineup we have but also the engagement we get from the dealers we're actually growing twice as fast in the multiline dealers as we are in the single-line dealers. So this is taking advantage of the competitive traffic going into the dealers and converting them into the Can-Am product.

 And at the end of the day, as I said, softer -- despite the softer markets we have in Brazil, Argentina, the Middle East and Russia, we're able, in all the regions, to grow this year so this is extremely positive and it's mainly driven by the side-by-side and the watercraft market.

 So Philippe, should we have a...

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 Philippe Deschenese,  BRP Inc. - Financial Analyst, BRP US, Inc.   [4]
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 For questions or (inaudible)

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Questions and Answers
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Unidentified Analyst   [1]
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 Where are you pressing and aiming for the Trailer product to be (inaudible)?

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 Sandy Scullion,  BRP Inc. - VP and GM - Global Retail & Services (GR&S)   [2]
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 The question is the positioning of our pricing for the Maverick Trail and we're basically head-to-head with the competitive landscape.

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 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [3]
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 With a better product.

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 Sandy Scullion,  BRP Inc. - VP and GM - Global Retail & Services (GR&S)   [4]
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 With a better product, obviously.

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Unidentified Analyst   [5]
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 One specific question on PWC, so a lot of innovation. If we look at the manufacturing process and looking also at all the accessories and the options that we can put, what about the margin profile of the new vehicles as opposed to the traditional PWC?

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 Sandy Scullion,  BRP Inc. - VP and GM - Global Retail & Services (GR&S)   [6]
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 Want to answer that, Jose?

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 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [7]
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 We've been able to improve the margin from the new platform compared to the old one. And if you remember, we took -- we removed fiberglass -- we insourced fiberglass from a supplier to Queretaro when we started Queretaro. That's one of the reasons why we moved production to Mexico and doing it ourselves. But it was like our first attempt of this process.

 And now we have evolved this process to a better process, and that's how we've been able to reduce the weight of the vehicle 86 pounds and weight is dollars. So we've been able to see the margin there, and on top of it, obviously when you have a feature like the radio, $700 for a radio, that is a very good margin there. And I don't know how will be the mix for the customer, but that's why we're offering the radio on all product -- all models.

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Unidentified Analyst   [8]
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 (inaudible) your production (inaudible)

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 Sandy Scullion,  BRP Inc. - VP and GM - Global Retail & Services (GR&S)   [9]
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 The question is with the capacity increase, by when we'll be able to really supply the demand. By beginning of next year, we'll be in a better position to really ramp up and supply the trend. As obviously, as Jose mentioned, this year is a little bit of a limitation, but the pace of inventories in our network is still very healthy, so we don't think we're losing EBITDA. But we'll be able to push more in the beginning of next year.

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 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [10]
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 So the equipment takes about a year to order and to install. Right now, we believe we're okay with the 30%. If the retail trend continue about 30%, maybe in a quarter or 2 we'll announce another expansion to keep up with the increase, but that's a good problem to have and typically we don't have much problem with the investment (inaudible) those programs.

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Unidentified Analyst   [11]
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 On revenue line, you are showing very good sales growth. Can you talk about over the next, like, couple of years what do you think the key driver of growth and (inaudible) your sales will come from? (inaudible)

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 Sandy Scullion,  BRP Inc. - VP and GM - Global Retail & Services (GR&S)   [12]
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 Our teams are basically focused on -- the sales team just to be more focused on the wholesale. Now this is transitioning to more of being better business consultants, knowing where their margins are within their own department. So as we coach the dealers in being better businessmen and better retailers, obviously we gain a lot of credibility as a brand because we're helping the dealers make more money. So that's all about the dealer engagement. So we believe that our recipe will create that better engagement versus the competitive environment. So this should help the volume be directed more for us in the future.

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Unidentified Analyst   [13]
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 One question on the SSV. So when you look at the whole market, you do see now over -- well over 50%. So what is the percentage of this segment that you cover with the Defender right now?

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 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [14]
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 First, our market share are quite low still with the Defender intro. And we having -- right now with the product news we introduced a few months, we're having -- we're covering most of the area. You need to understand the person buying a utility side-by-side is a different customer. It's a farmer -- you don't have time to shop at the dealership to buy the product. Then we train our dealer right now (inaudible) that they put on the farm for a weekend. Possibly the farmer will keep it, but that's the type of thing we're working on.

 The association that we announced last night with Luke Bryan is another sign, how do you enter the farmer world. This is more our focus for the coming months and we'll continue obviously to expand the Defender, but the base is there (inaudible). And we'll serve different customers -- this is new for us, certainly new for us.

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Unidentified Analyst   [15]
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 Just quickly on the (inaudible), how much of that (inaudible) increase do you think is allocated to X3?

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 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [16]
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 Flexibility, I mean, obviously, for the one who saw the extended line we're doing model mix and you are right. And we could not produce 100% X3 from the line, but we reached ratio that follow the 75%, 80%. And certainly we had a lot of capacity depending on the season for Defender X3 or now Maverick Trail, but quite a lot flexible system.

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 Gerrick Luke Johnson,  BMO Capital Markets Equity Research - Senior Toys and Leisure Analyst   [17]
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 For the Spyder, can you talk about (inaudible). Can you discuss the marginal costs associated with doing that versus the marginal return you're getting on retail and potential marginal revenue you should get and are those costs you have to continue to spend?

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 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [18]
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 Josee Perreault will give you more detail or color to all of this right now and that's a challenge, Gerrick. Definitely, this year, we invested a lot of money with (inaudible). They had some initiatives that were too costly and we know we cannot do this in 50 states, that's why we started with 7 states. And now this is part of the strategy. What can we do, (inaudible) and at what cost? And this year was not so bad because it was 25 people instead of (inaudible), but how do we supply that to more states in the coming years and that's what we'll do (inaudible).

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 Gerrick Luke Johnson,  BMO Capital Markets Equity Research - Senior Toys and Leisure Analyst   [19]
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 One more. Have you been able to calculate return on your investment in that (inaudible)?

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 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [20]
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 Boy, I wish -- I wish -- I mean, maybe...

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 Sandy Scullion,  BRP Inc. - VP and GM - Global Retail & Services (GR&S)   [21]
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 Well, obviously, that (inaudible) is maybe a 3-year progress, first year, we're in the second year and probably the next year we'll probably talk about the ROI on the investments, but it's targeting the markets where we believe our consumer (inaudible). But when you look at our overall retail performance and how we've performed, we're extremely happy. Some of it is driven by the marketing investments we made obviously in NASCAR. Some of it is driven by our engagements and some of it is also driven by great products we're introducing. When we look at the overall business, ROIs are excellent and all of the interested parties (inaudible)

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 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [22]
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 If I can have add one thing. Brand awareness have improved significantly in the last 3 years. And maybe Phil can come back to you with the right number, but we're one of the lowest into the off-road key brands, one of the lowest. And in the last 3 years, the brand awareness have increased significantly. And if my recall is right, right now it's close to 85%. You have Sea-Doo, and Sea-Doo that's our well-known brand over 90%, and we're getting there quickly and we're convinced there is payback there. Can we calculate the payback? There is something there.

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Unidentified Analyst   [23]
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 There are some concerns (inaudible) different position, but curious if your -- could you describe a little bit on what your plans are in terms of what's going to happen with (inaudible) and if you have any battle plans or (inaudible)?

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 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [24]
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 There are so many variables to what could happen. It's very difficult to have (inaudible). Obviously, when the new administration took over, we're a bit concerned because they were very, very drastic about potential action. Now I think the process at least would be fine. There is like 9 rounds -- 8 rounds of negotiations (inaudible) that will happen before Christmas between the 2 countries. Some of it right now they don't disclose the color of the negotiation of each round openly.

 After that, I think you have another 6 months before the Congress and all the system in U.S. approve the new NAFTA. And we believe we could have something -- if everything goes right, we believe we have -- there will be something out next summer at the earliest. After that, with the collaboration between Canada, U.S. and Mexico, I would be very surprised if it will be a drastic. We believe that if there's a thing that would change, it will be to all the OEM, it's not only our side. It's car companies, this is the ag, this is the oil company, the energy company. They will give us the appropriate time to give us a chance to implement the change or to phase the change.

 But again, we've said that a few times. We -- between the time we've done the groundbreaking ceremony in Juarez and when we started the Defender production it was 12 months. And we built the building, we installed equipment, hired new employees, started production of the new platform in 12 months. And if something that drastic would happen, we believe we'll find ways to turn it for us. Anything could happen.

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Unidentified Analyst   [25]
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 You mentioned the product improvements you're making in watercraft and work on the margin profile. On the side-by-side business, is there any opportunity for margins? I mean, I'm sure (inaudible) by now, but is there anything you're doing from the manufacturing perspective? Could capacity increases help the margin?

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 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [26]
------------------------------
 For sure, when you fill up the factory, I mean, the last few thousand units are very profitable, then this is very good. All those new niche, the RC and the X mr, it's a win-win. So a customer will spend $16,000, $20,000 to take an X3, and (inaudible) is offering from factory with warranty of product for $20,000 roughly in U.S. So that's a rough number, you can comp that in. It's better margin for us, and it's a great value. So that's why those specialized segment have been very popular.

 Same thing for the X mr. Yesterday, I met with the dealer in the showroom. We're a bit upset and happy at the same time. They were making a ton of money when they find regular Defender to make X mr. But now they had it from the OEM, but the same thing, we'll be able to sell 5 instead of 1 per month. And that's the type of thing that we do to improve the margin.

 That being said, we say early sometime this year we're a bit on track with margin because we were selling a ton of 3 72 at 64 fully vested. Now we're entering the trail segment, which is the price point segment, lower price point segment. And the margin are good but not as good as on the high-end event. It's growing the volume and continuing to expand the platform and trying to come more and more with specialized products, which is a good deal for the consumers.

------------------------------
 Sandy Scullion,  BRP Inc. - VP and GM - Global Retail & Services (GR&S)   [27]
------------------------------
 And in the new side-by-sides, we're introducing our built-in (inaudible) battery that (inaudible) which is targeting 400 basis points of market share through centers (inaudible)

 We'll take a few questions and then we'll forward simple questions. We'll go to Josee, who'll have the table for Spyder.

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [28]
------------------------------
 Yes. So that should take a while to prepare in case (inaudible).

==============================
Presentation
------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [1]
------------------------------
 Good morning. (inaudible) space here.

 Okay, to go back to the history of the Spyder, those of you who weren't there last night, we said that this year marked the 10th anniversary of Spyder. So just want to remind ourselves that 10 years ago, this category did not exist. We created this category, and there's important milestones that we went through over the last 10 years.

 One of them producing over 125,000 Spyders. And if we look at the web visits we're getting on Spyder and the interest level we're getting on Spyder it is around 10 million site visits.

 So I want to go back quickly on what we've been doing in the last 2 years. The project started 2 years ago in spring of 2016, where we had 2 dedicate teams do what we call a Doo-it. And the 2 territories where they were experimenting the Doo-it was California and Florida.

 What we did when I came on board last October was we extended that test and learn strategy, and we added 5 other states, which were: Texas, the Carolinas, Georgia and Virginia. Why did we choose these states? It's because, first of all, they're in the Sun Belt. So the season is extended, gave us more time to test. And secondly, if you look at Texas, California and Florida, they're quite big states, so there is better volume potential.

 So what we did different in terms of these states is that we put dedicated people in these states to be -- to push retail, to be in our dealer space, to help them drive the consumer down the funnel, help them demo, help them build relationship with schools. So that was our main approach over the last 6 months, if I could say.

 Also, we chose these states because they have different license requirements, and that's really critical because what we've learned in terms of license, it's probably the key to unlock Spyder's potential. So what did we learn? Well, license is a big thing.

 And I just want to refresh or remind that when I came on board, everybody was telling me, "Quebec, Quebec, Quebec is the deal, this is the benchmark. That we need to be at the level of Quebec." So if we go back why Quebec is so strong on sales, we know that our dealers are exclusive to BRP, okay? We know also that the BRP awareness is probably higher than everywhere else in North America. But mostly, our dealers are engaged because they are exclusive to BRP, and we have a very organized 3-wheel rider education system in Quebec.

 As well as because our dealers are engaged, they're exclusive, they are giving a lot of demos. Please remind yourselves that to purchase a $20,000 or $30,000 unit and if you can't demo it, that's a barrier-to-entry. And we need to overcome that barrier.

 So what we tried to do based on the Quebec experience is see what's going on in the other states. So when we arrived in Florida, what we discovered is there was only 1 school in all the state of Florida giving 3-wheel rider education classes. So what we did, what the Doo-it mandate did at that particular time is open schools, and try to bring consumers down the funnel to get their license.

 Why is that important? Because at the end of the day, there's only 3 states in the U.S. where you need a car license -- that with a car license, you can drive a Spyder. All the rest, you either need a 2-wheel license or a 3-wheel license. So what we also found out is as we grew to the other states that none of the states will organize to offer a 3-wheel license, okay? And this is also very critical.

 At the end of the day, we say that we are -- we want to democratize open road. So we need to attract these new entrants into the market, and these new entrants do not have a 2-wheel license. So they need to figure out how to get a license to be able to drive a Spyder. And if they can't get a 3-wheel license, then we have a problem. So that's been a big -- the biggest finding, I believe, that we discovered throughout the last 6 months.

 Also, demos, again, high purchase -- high-price point, need a demo. What we realized is that 100% of our dealers in Quebec still offer demos. When we went into the key states, 60% of our dealers did not offer demos, okay? So that was an issue. So we needed to figure out how to incentivize our dealers to do offer demos and have a great experience about it to try to push the consumers down the purchasing funnel.

 Nurturing our clients. As you know, our key industry clients are quite older, averaged around 60 years old. It takes more time for them to purchase. We are evaluated that the purchase funnel is about 12 months, so there's a lot of handholding that will be required for them to convert. And lastly, oil pricing obviously is an issue.

 So this is a few that I covered last night, a few results that we had. Obviously, we are really happy with the result of our test key states compared to the U.S. industry trending down. We know that our tactics in terms of rider education and demos are working. We have good conversion there.

 Our hot leads, which is very important in the 7 key states, we did an approach digitally and the interest level where people went into our site, left their names because they wanted a quote and they wanted more information drove 60%, so that's very encouraging as well.

 And obviously, clean-up -- if you listened well yesterday, it was a year where we needed to correct Spyder in reducing the inventory level, and we're accomplishing that as well.

 So what are we planning for spring year or season '18? Basically, our goal is to have at least 1 school for every dealer, okay? This is the ratio that's working in Florida right now. So our goal in the next 6 to 12 months is to increase that level in about 21 states. If we can go faster, perhaps we will. But at least, 20, 21 states is the key to next year's plan, okay?

 Also, demo. We need to make sure that more demos are given throughout the space. If I look at the 7 key states, where 60% of the people weren't -- the dealers weren't offering demos, if we look at it today, it's only 20% of the dealers that are not offering demos. So we're working that barrier right now. So we're going to announce them in an hour to our dealers that we're going to have a more aggressive demo program to help them do that demo basically.

 Also, nurture. Nurture is really, really important. This year, our campaign was 80% digital. And what we found out is through the funnel, we needed to handhold our consumer to bring them to conversion. So this is a great learning, and we've done a lot of tests with concierge service, which is a call center calling our clients to confirm the appointment at school. Once they've done their license to confirm maybe they could have a demo at the dealer. Really following the client through the funnel to make sure that at the end they convert better.

 One other big finding is that when we -- when I started this program, there was a stigma about our client basically who was driving the RT and X3. Our client is on average 62 years old, and we have to embrace the fact that they're baby boomers and they're about 60, and that's okay. But we have to start talking to them and not pretend they're 30 years younger and that's what we're starting to do, okay?

 So if I go back to the announcement of yesterday, which was Project S. So I said it a bit. We've been -- when the vision of Spyder, when it was first introduced 10 years ago, was to democratize the open road. Democratizing means making it more accessible. I believe newbie coming in that we've been really good at extending the careers of motorcyclists. The fact that new entrants coming into the funnel can't get their license is a big deal because they can't drive a Spyder. So this is why the license requirement is super important in the plan going forward.

 So if you look at industry trends, basically, all, everything in a 2-wheel and a 3-wheel environment points to the fact that lower price is an option that's tracking right now. If you look at the 2-wheel industry, the segment below $12k is tracking more than the segments above. And if you look at the pre-owned in our 3-wheel industry, it's also increasing at a bigger level.

 So Project S, below $10,000, not that I'm going to show you much more, so the video that was shown yesterday was very, very short-lived. It will only be shown yesterday. We are not going to communicate it on social media or to our consumer. The video that was shown yesterday was really to engage our dealer and tell them that we're in, we're investing in BRP and in Spyder. So again nobody's going to show that video anymore. So this is the picture you're stuck with, okay?

 So just to give you a few more hints, if we look at the design DNA of how the Project S was built, this was the brief: fun to ride, affordable, versatile, easy-to-use. So we gave you a hint on the affordable part, not that I will give you more hints on the rest, but that was the brief. So you can imagine that this will drive these different specs in terms of material, in terms of looks, design DNA, in terms of ride and in terms of target clients, okay?

 And the analogy we drove, which was there on the stage with me yesterday was the Sea-Doo Spark analogy. And this is the one I want to drive home today, okay? When you look at these 2 units, very different like I said, material, design, the look, ride, et cetera. I am a new entrant into the Spyder market as well as into the Sea-Doo market. So I had the chance this summer to ride these 2 units all summer.

 I can tell you from a new entrant perspective, the ride is very different, okay? I have also the chance to have ridden Project S, and obviously I've ridden S3 and RT. I can tell you that the ride of Project S compared to the other models in the lineup is the same thing as riding a Spark versus a GTX.

 So this is what we're going to drive to our dealers later this morning. The drive is different, okay? So we feel that the cannibalization into the lineup will be minimal because our key consumer above 60 who likes to drive 300K a weekend will not want to drive a Spark or a Project S, okay? So this is the biggest analogy we can bring to the table today is the Sea-Doo Spark story versus what we're going to introduce with Project S.

 So I'm not going to -- another big thing, new entrants. We said yesterday that Spark brought a lot of new entrants into the market. We believe it's going to be the same thing with Project S. All the research shows that it's mostly new entrants coming to the market. And these new entrants are younger, okay, more female. Right now, our current status on terms of profile is 20% of our consumer base is women. We believe that's going to increase considerably with the new Project S and also more diverse.

 So this is really important to our dealers later this morning because new entrants bring new types of business. They need gloves, helmets, jackets, they need this the first time they ride a motorcycle or a 3-wheel. So they need more accessories. So this is a big value proposition for our dealers, okay?

 And lastly, why did we announce now? It's because we really want our consumer engaged in Spyder. We need to show them that we're investing. So obviously, when I said that we were dedicating our business plan in the last year to the 7 key states, we injected most of our dollars and our resources in the 7 key states. So people outside the key states might have felt abandoned or less paid attention to. So right now, we really need to tell them, "Mr. Dealers, we're with you. We're investing in Spyder, it's going to come." So this is the main reason.

 Second big reason is we need to develop the school system and to -- at the best model of school system is an ecosystem of the dealer, okay? Basically, dealer talks to the schools, schools to the dealer, and they talk about the consumer coming to them and getting the course done. Once they get the course, they call the dealer, and he's ready to demo, he's ready to convert. So this ecosystem between the dealership and the school is critical, and we need the participation of our dealers to get this going. And that's it.

 Yes?

==============================
Questions and Answers
------------------------------
Unidentified Analyst   [1]
------------------------------
 Can I ask you a question about the infrastructure that's required? And so I'd like to think about it from a dealer's perspective about what you're asking to do in terms of its finding investment and then investment in money.

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [2]
------------------------------
 It's not much, honestly. At the end of the day, we -- what worked in Florida is that we are doing most of the legwork in terms of seeing -- going to see the school. We've developed a value proposition for our schools because one of the main reasons the schools didn't want to offer 3-wheel rider education is -- resulted in know-how. And secondly, it was not profitable for them for different reasons. So we worked with the Motorcycle Safety Foundation, and we worked with a few schools to test what could make them attractive to offer 3-wheel education, and Florida was our test base. We found what the best value proposition was for the school, okay, and exactly tomorrow, the MSF is doing a mega conference where all the schools will be attending, and we have 1.5 hours to pitch our value proposition. So hopefully, this will get the demand contained in terms of the interest of these schools offering 3-wheel. So for the dealer, there's no investment. It's on our part the effort to develop the structure. Also one part of the success of the Florida test is that we did subsidize parts of the course, meaning that the consumer who's going to need to take this 3-wheel license will pay on average $250. So to make sure that we take that barrier away, we subsidize in the range of the $150 to $200 for them to take the course. So that's the investment on our part. What we're only asking the dealers is to develop that relationship with the school. Yes?

------------------------------
Unidentified Analyst   [3]
------------------------------
 So I'm assuming that getting a 3-wheel license in the States is easier to get than a 2-wheel license. My question is how many states have 3- wheel licenses that are different from 2-wheel licenses, that are separate?

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [4]
------------------------------
 I don't have the details right now. But I can tell you there's only 3 states in the U.S. that you need a car license. That's California, Nevada and South Carolina. All the rest, you either need a 2-wheel or a 3-wheel. The problem is the complexity of getting a 2- and a 3-wheel differs by state. Yes.

------------------------------
Unidentified Analyst   [5]
------------------------------
 Because it's very difficult in Quebec, I have one.

------------------------------
Unidentified Analyst   [6]
------------------------------
 And with respect to the Project S, Josee, what is your expectation down the road, in the next 3 years, where would you be happy to the point that the kind of the objective you foresee with the project S?

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [7]
------------------------------
 Well, I said it yesterday, I believe it's going to restart the industry. We need, once again, so we need to make it -- we need more entrants. We need more butts on the seat. The minute that you're going to see more Spyders on the road, it's going to take off, for the lineup, for this Project S as well. So our goal is to really put more people on the road, and I think that's going to bring that.

------------------------------
 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [8]
------------------------------
 Maybe if I can add to this. Before Spark and the watercraft industry, it was flattish. And what was frustrating is to see in the summer month, in the 3-months prime time for watercraft, you see the ATV, the motorcycle ATV, side-by-side in front of the stores in Spark but watercraft in the back. When you're generating volume, you get dealer attraction, attention and they put it. Now you go into any watercraft dealer, the watercraft in the summer months are different. And we believe that this Project S, when we introduce it, it could be an exciting product. With price, attracting new customer and bringing the activity around Spyder and bringing the engagement of the dealers.

------------------------------
Unidentified Analyst   [9]
------------------------------
 And have you decided if you -- that the product would be manufactured in Valcourt or you could be thinking about moving this line to Mexico?

------------------------------
 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [10]
------------------------------
 It would be manufactured in Juarez 1.

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [11]
------------------------------
 Yes?

------------------------------
Unidentified Analyst   [12]
------------------------------
 What percentage of the new Spyder riders are former 2-wheel motorcycle riders?

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [13]
------------------------------
 I don't have the stats on the top of my head, but it's quite a lot. Because right now, it's -- because of the 3-wheel license requirement, where it's a big barrier, it's mostly people converting to extending their career. That's what we say.

------------------------------
Unidentified Analyst   [14]
------------------------------
 Just looking on -- at customer growth, do you expect any impact (inaudible)? Do you expect any consumers to start to delay potential purchases so they can test drive the new project in September?

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [15]
------------------------------
 Look, maybe there's a risk, but we feel that the risk is less in the fact that it is a different client for sure. We know that through focus group and research that 65 to 60-year-old clients is still gravitating around the RT and the X3. And this is something that we'll drive later this morning and we'll drive throughout the next 2 days.

------------------------------
 Sandy Scullion,  BRP Inc. - VP and GM - Global Retail & Services (GR&S)   [16]
------------------------------
 That will part of the base decisions that preannounced by us. We believe that it's probably (inaudible) sales for the acquisition prices (inaudible).

------------------------------
 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [17]
------------------------------
 They said there should be dealers here and then they have -- all of them have a list of customers waiting to see them. If you think about 20 or 30 customers in the list that are waiting for an X3 or an S or a different model that we sell that it was positive for the long term to introduce the concept (inaudible) than waiting.

------------------------------
Unidentified Analyst   [18]
------------------------------
 Just going to (inaudible) demo unit for each unit?

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [19]
------------------------------
 It's a program we offer our dealers. Basically, it's a discount program that they have. They have 10% on the unit. They have to put so many miles on it, and then they put it back into the inventory. And it's considered a used unit after 6 months. So the dealers are quite happy, too.

------------------------------
Unidentified Analyst   [20]
------------------------------
 Good, and I guess that's also (inaudible)

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [21]
------------------------------
 Yes, exactly.

------------------------------
Unidentified Analyst   [22]
------------------------------
 So this licensing requirement issue has been an issue I've been hearing about, since before I even covered the company. It was an issue for Polaris too with their Slingshot, but they were able to get a new classification (inaudible) what they called autocycle. And they were very good in being able to exclude you guys from the autocycle. So could you just talk about your government affairs team? Who do you have working on this? And how close are we getting to maybe getting Spyder into autocycle, or -- I'm just kind of confused. I don't know how many states require or have a 3-wheel license requirement because, again, between price and licensing, that's -- those are the top (inaudible)

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [23]
------------------------------
 I know we have a team dedicated to the development of the 3-wheel license curriculum at BRP in my team. So we have people running around all these states and talking to governing bodies and the Senate and the college communities, everything. So each state is very different. On the top of my head, I can't tell you the details right now, but trust me, I have a dedicated team doing that. Why is it not like Slingshot? I think this is 2 different units, honestly. It's not -- I can't consider Spyder like a car, it's more a motorcycle. So it is that fact. And also I think having the 3-wheel license requirement, once we have a system in place, it's been good hook to get the new entrants in. Because at the end of the day, when you take your license, you're spending about 4 hours on the unit and it's a great demo at the same time. So if you're gaining confidence in driving the unit, which -- when in states when you don't have that requirement, you have a 20-minute demo at the dealership. So sometimes that's more a barrier.

------------------------------
Unidentified Analyst   [24]
------------------------------
 But maybe a different way, do you have an estimated time line where you can get Spyder licensable without a 2-wheel license?

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [25]
------------------------------
 Yes. Well, our goal this year is to go from the 7 states to 21 states. And then the following year, hopefully, we can maximize that coverage to most of the U.S.

------------------------------
Unidentified Analyst   [26]
------------------------------
 (inaudible) . If we look at the auto industry, there was a lot of things announced around the electric side, I know PowerSupport is going to be, kind of electric so far. But when you talk to the dealers, the customers, do you see a change on the electric side? And also if we look at automated (inaudible) braking system, this will be mandatory by 2022. So is there an opportunity to offer such a system for the older people that (inaudible).

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [27]
------------------------------
 I'll let Jose answer that question.

------------------------------
 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [28]
------------------------------
 For the electric, obviously, we've done a (inaudible) electric that we're selling at cost and we've sold not too many. We sell off-road vehicle electric don't (inaudible) Spyder may probably be the best product in our portfolio to move electric, but we have a Spyder electric, but we cannot hack enough battery to a reasonable rate. The Spyder electric we have does not with (inaudible) We have a rate of 125 kilometer, which is not enough for recreational activity. And then we're following what's happening in the electric world, and we believe it will come but it's not the right time, and it's too expensive. So that's the first thing. In term of the -- all the feature that autonomous car is applying to their vehicle, obviously, in many situation, car is a utility product. Recreational product is different. And I don't believe we will see soon an autonomous ATV or an autonomous watercraft, which defeats the purpose why you're buying it. That being said, there is many features, safety features, that they will -- they love that will incentive for our product in the pipeline. When costs are reasonable and you see that customers (inaudible) who could implement many features in our product.

------------------------------
Unidentified Analyst   [29]
------------------------------
 How are the margins on this compared to (inaudible)

------------------------------
 Sebastien Martel,  BRP Inc. - CFO   [30]
------------------------------
 The margins would be comparable to our traditional PWC parts. We use the same approach. We understand that margin (inaudible) but overall, this will be a at-need product that will be introduced (inaudible) Spark over time and (inaudible) to give pricing some incremental margin (inaudible) overall and the margin percentage (inaudible)

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [31]
------------------------------
 Yes?

------------------------------
Unidentified Analyst   [32]
------------------------------
 Could you give any kinds of ratings, order of magnitude in terms of the dollars investment expected next season?

------------------------------
 Sebastien Martel,  BRP Inc. - CFO   [33]
------------------------------
 For the -- in terms of margins or in terms of R&D?

------------------------------
Unidentified Analyst   [34]
------------------------------
 In terms of this project on Spyder getting more dealers involved, demo units, license requirements.

------------------------------
 Sebastien Martel,  BRP Inc. - CFO   [35]
------------------------------
 Basically, what we did is we (inaudible) we reallocated. We used to invest a lot in TV. TVs was offerings (inaudible) and so the money was better invested in call it guerilla marketing or guerilla sales tactics. And so it's a reallocation of funds for (inaudible) material increments to our overall (inaudible) Spyder for better use.

------------------------------
Unidentified Analyst   [36]
------------------------------
 And maybe just a quick one. You mentioned that the purchase funnel for a 62-year-old people is about a year or 12 months for the Spyder. What about the purchase funnel for younger people? Is it much quicker?

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [37]
------------------------------
 Yes. Well, what we found out through research is below $10,000 investment. You don't need to ask permission -- and mostly permission from the wives, note to self. So that's a big criteria. So it is faster.

------------------------------
Unidentified Analyst   [38]
------------------------------
 And we have a couple of months rather than 12, I assume or...

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [39]
------------------------------
 Pardon me?

------------------------------
Unidentified Analyst   [40]
------------------------------
 Is it material in terms of...

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [41]
------------------------------
 It's material because it's, in a lot of cases, it's a cash purchase. And in the cases where it is financed, the monthly payment, everybody says that, is lower than a cell phone bill payment, so much easier to swallow. So it is much faster.

------------------------------
 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [42]
------------------------------
 If you want to highlight, when we had the 10th anniversary. Therefore, we had 3,000 customers riding so therefore, (inaudible) very nice weekend but it was terrible. The people have done all the demo rides, all the [visits] , there is a few things. One journalist who's been in the motorcycle industry for years said, "There is 2 companies who are able to do this, and we're the third one, Harley, Ducati, and us. No other brand can attract so many loyal customers like this from all over the world." And that one is an interesting comment. The other thing is about the 62-years-old. (inaudible) perspective is not a mistake. We have always tried to attract younger customers to Spyder and when you think about it, today, our customer average age is 62. They have disposable income. They have time. They also look -- they're looking for social activity to gather with friends, and it will be a change to talking to them. We always try to talk to the younger, and now, it shows the shift. We said this, we will continue to talk with the younger, but the main focus will be to talk to the 62 -year-old customer, which is a perfect target. We've been searching for too long to try to attract new customers and then looking to that volume especially and marketing of the board. That was a big debate. How you attract and reset, from now, we're talking to those people. We believe (inaudible).

------------------------------
 Philippe Deschenese,  BRP Inc. - Financial Analyst, BRP US, Inc.   [43]
------------------------------
 Is there any more questions?

------------------------------
 Josee Perreault,  BRP Inc. - SVP of Can-Am Spyder   [44]
------------------------------
 Yes?

------------------------------
Unidentified Analyst   [45]
------------------------------
 I have a general question for you, gentleman #1.

------------------------------
 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [46]
------------------------------
 VIP. Go ahead.

------------------------------
Unidentified Analyst   [47]
------------------------------
 All right. Can you just talk about in general your view on the macro? So if you like kind of a worldwide, where we are right now and what your outlook is.

------------------------------
 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [48]
------------------------------
 When you look at the big picture like we see, (inaudible) I mean the economy is not great, but it's ongoing. And there is always a geopolitical risk that you know what will happen with North Korea and those things that we need to be careful, but we are very confident that if the situation stays like this, the momentum will continue and we'll continue and deliver our numbers. Why? I said this a few times. I believe that the most important thing for a household is to have a job, and unemployment rate is very low for most of the industrial country where we're selling our product. The other thing that is an important thing for families is a house, and the housing market is very good right now. And because of those global trends are positive, we believe that globally, our industry would continue to grow quite well. We cannot say that our industry are booming right now, but we are very good to take market share in every product line. And when we look at the big picture, if the geopolitical situation stays like this, quite stable, we believe we can continue to grow 3 to 6 billion in product [sales].

------------------------------
Unidentified Analyst   [49]
------------------------------
 And I guess just following on that, when you look across you dealer network, both at the for the dealer and for the dealer customer, how would you say the credit environment is for both those groups? And how does it differ from different points of the cycle (inaudible)?

------------------------------
 Sebastien Martel,  BRP Inc. - CFO   [50]
------------------------------
 (inaudible) the different markets are stable. I had a meeting yesterday with our retail partners. They're happy with the business, you can have more partners (inaudible) that have been with us now for under a year. And following from there, so there's better offering for the consumers. I hope that's (inaudible) are stable over time. Penetration rate (inaudible) customers are actually signing up for retail financing are also constant (inaudible) strong sense of churn (inaudible) being offered between (inaudible) offered out there. The supply will know big changes in the credit rating are also stable (inaudible) retail partners being lower (inaudible) the environment (inaudible).

------------------------------
Unidentified Analyst   [51]
------------------------------
 Yes, as you're last on this, (inaudible) you were talking about the potential look at the new growth factor, but given what you introduced, given that you still have more models to introduce, given there's still a lot of market share to gain, is that decision can be postponed or pushed to the right or...

------------------------------
 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [52]
------------------------------
 No, because, today, if you look at the fixed pipeline, we know where there is whitespace. We have a plan to increase market share at some -- in most of our product lines. And we know that that's what we need to reach the $6 billion. But what's next? The end of the road is not $6 billion because we need to grow the business. And we need those additional either 7 products that we do ourselves, acquisition or partnership, we continue to grow the business beyond $6 billion.

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Unidentified Analyst   [53]
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 How important is it to drive growth in the propulsion business (inaudible) ? As you think about additional growth (inaudible).

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 Jose Boisjoli,  BRP Inc. - President, CEO & Director   [54]
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 I think it's a -- we're just scratching the surface of the Propulsion System potential. And don't forget, it's spanning a long -- (inaudible) it's more complicated than cyclical than we have anticipated. And if I just redo the -- sorry, we acquired the bankruptcy of OMC 2001. When you do a part bankruptcy, you know what's inside but we've discovered a few things. What we discovered is that the E-TEC -- the [fit] technology that was developed by OMC at the time was a very good technology but not well-executed. And that's what we've done in the first 3 years to develop (inaudible) better use of (inaudible). And after we have done the E-TEC -- we developed the E-TEC technology or industrialized the E-TEC technology, we apply it to all the engines. But it was a race. It was a race because (inaudible) ignition and beginning stronger every year. Then to beat the average vehicle, to beat the average requirement, we had to race to put a modern technology in a 20-year old [block] , which is ridiculous. So we've done that. And at the end their product was very good. The G1 family was a very good family of products. But what we're doing with the G2, we're bringing it to the next level. And I think you now are just having, just to see the benefit of the G2. We have the G2 now from 150 to 200, but we introduced this summer the iDock that we're selling our $6,000. If you take a competitive product for iDOCK, you will pay anywhere between $15,000 to $25,000 with not the sophisticated system, hydraulic shock, (inaudible) everywhere (inaudible). For us, everything is included into a G2 structure and the G2 design with an iDOCK for $6,000, and we're just scratching the surface. I don't know if you about this but yesterday, we won 2 days ago the NMMA award for Innovation of the Year with iDOCK. Obviously, we'll promote that. And we won last night with the E-TEC team (inaudible) the other team was in the showroom, and there is a lot of interest right there from both builders that now are ready to talk to us because they see the value proposition of the twin engine application with iDock. And what you can do with the technology (inaudible) I think there is more to come on the propulsion system. Maybe one last one.

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Unidentified Analyst   [55]
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 The goal of [$6 billion] does that involve in the M&A several parts and the exclusive channels? I know you've just announced everything through your project slides (inaudible)

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 Sebastien Martel,  BRP Inc. - CFO   [56]
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 On the CapEx side, yes. We have increased our CapEx in the last few years, and you can expect this will remain. Like I said to many investors, by 2020, if we miss by $160 million, the top line must be delivered to [360] , nobody is too upset that this scenario would happen. We're not counting much on the M&A side to be part of the $6 billion, but we can see some -- I mean, if we do a move shortly, we'll do some move shortly. You will see that it will be a slower ramp up if it's a new product line, it's an association or partnership with something, but we're not counting on that first. If we do a major acquisition, we'll rethink (inaudible) with you.

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 Philippe Deschenese,  BRP Inc. - Financial Analyst, BRP US, Inc.   [57]
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 So no more questions? Thanks, everyone, for joining us this morning, and this will end the presentation.




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