Weak Powersports Industry Demand Pressures BRP Sales and Profits but Innovation Remains Topnotch

Crimped by macroeconomic headwinds, fiscal 2025 dealer demand has remained depressed, a pattern we expect will persist over the next few quarters. However, we contend this is a function of higher borrowing costs and expect that BRP's continued focus on its long-term product and operational priorities will allow it to maintain strong competitive positioning in the long-run. Strategic priorities focused on market share growth, lean operations, and cultivating an engaged workforce, while honing in on evolving customer demands should ensure BRP is on track. With manufacturing facilities located near demand (for example, personal watercraft in Mexico) and tactical spending on capacity, BRP should be able to capture efficiencies from its plants. Firmwide centers of expertise and excellence allow BRP to manufacture optimally, improving utilization and allowing it to bring products to market quickly, ensuring a continually relevant product lineup. Because BRP is exposed to many customer segments, we don’t believe acquisitions are required for expansion. However, we think entry into white-space categories (recently, motorcycles) and small acquisitions, particularly in parts and accessories or marine, are possible and could support growth.