BRP Inc. (DOOO) Q2 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

Despite strong financial metrics and optimistic guidance for H2, the lack of visibility to issue guidance, potential tariff impacts, and cautious buybacks due to economic uncertainty balance the positives. The market cap suggests a moderate reaction, aligning with a neutral sentiment.

Key Financial Performance

Revenue $1.9 billion, up 4% year-over-year, primarily driven by stronger ORV shipments and offset by lower PWC deliveries.

Normalized EBITDA $213 million, includes roughly $0.35 coming from tax credits recorded in the quarter. Down year-over-year due to lower capacity utilization, unfavorable product mix, and the impact of tariffs, partially offset by cost efficiencies, favorable pricing, and lower floor plan costs.

Normalized EPS $0.92, includes $0.35 from tax credits. Reflects the same factors affecting EBITDA.

Free Cash Flow $100 million, solid performance attributed to disciplined inventory management and operational efficiency.

Gross Profit $398 million, representing a margin of 21.1%, down year-over-year due to lower capacity utilization, unfavorable product mix, and tariffs, partially offset by cost efficiencies and favorable pricing.

North American Powersport Retail Decreased 11% year-over-year. Canada grew 4% driven by ORV, while the U.S. declined 15% due to leaner noncurrent inventory and high promotional activity by competitors.

International Retail Performance Latin America retail up 22% driven by ORV. Asia Pacific retail grew 5% due to momentum in China. EMEA retail down 13% in line with the industry.

Year-Round Product Revenue Up 13% to $1.1 billion, driven by higher ORV shipments following last year's inventory reduction plan. Retail for side-by-side was down mid-single digits due to high discounting by competitors.

Seasonal Product Revenue Down 13% to $470 million, mainly due to a planned reduction of personal watercraft shipments. Inventory levels are trending in line with pre-COVID levels.

Parts, Accessories, and Apparel Revenue Up 7% to $305 million as dealers replenished inventories and new products were introduced.

Dealer Inventory Down 20% year-over-year and 13% sequentially from Q1. Inventory levels are now largely in line with pre-COVID levels, except for snowmobiles.

You have reached the limit. Sign up to access full content

Get started

Operating Highlights

Launch of new Can-Am Defender: The new generation of the Can-Am Defender was launched, featuring advanced technology, best-in-class towing and cargo capacity, and the largest cab in its category. It aims to set a new industry standard.

Expansion of electric vehicle offerings: Introduced the Outlander electric with industry-leading towing capacity and quiet off-road performance. It uses the e-POWER unit, which is also used in electric monocycles and snowmobiles.

Product upgrades: Introduced multiple upgrades, including the Outlander MAX 6x6 for extreme conditions, rock crawling capabilities for the Maverick R lineup, and new connectivity features for Sea-Doo.

Market share gains in North America: Gained market share in current Can-Am models despite a decline in noncurrent units due to low inventory. The new Can-Am Defender is expected to further boost market share.

Growth in Latin America and Asia Pacific: Retail grew 22% in Latin America and 5% in Asia Pacific, driven by strong performance in ORV and momentum in China.

Inventory management: Achieved a 20% year-over-year reduction in network inventory, aligning inventory levels with pre-COVID standards and improving dealer financial health.

Operational efficiency: Focused on cost efficiencies in manufacturing operations, favorable pricing, and reduced floor plan costs due to leaner inventory levels.

Guidance for fiscal year '26: Issued guidance for revenues of $8.15 billion to $8.3 billion, normalized EBITDA of $1.04 billion to $1.09 billion, and normalized EPS of $4.25 to $4.75, reflecting confidence in a strong second half.

Tariff impact management: Factored in $90 million of gross tariff impact into guidance, up from previous estimates, due to increased tariffs on steel, aluminum, and copper.

You have reached the limit. Sign up to access full content

Get started

Risk or Challenges

North American Powersport Retail Decline: Retail sales in North America decreased by 11%, with a 15% decline in the U.S. market. This was attributed to leaner levels of noncurrent units and high promotional activity by competitors, which could impact market share and revenue.

Weak Retail Trends in Seasonal Products: Personal watercraft sales were down mid-teen percent, and Switch pontoon retail was down mid-20% due to a correction period in the industry. This weak demand could negatively affect revenue and inventory management.

Challenges in Electric Vehicle (EV) Adoption: The ramp-up of retail sales for electric motorcycles did not meet expectations due to a slowdown in global EV adoption. This could hinder the company's efforts to establish itself as a leader in the EV market.

Tariff Impacts: The company faces approximately $90 million in gross tariff impacts, up from previous estimates. This includes increased tariffs on steel, aluminum, and copper, which could pressure margins and profitability.

Financing Challenges for Entry-Level Consumers: Retail for 3-wheel vehicles was down mid-20% as entry-level consumers struggled to get approved for financing. This could limit growth in this segment.

Soft Demand in EMEA: Retail demand in the EMEA region was down 13%, in line with the industry, indicating weak market conditions that could affect international revenue.

Snowmobile Inventory Challenges: The company still faces challenges in rightsizing snowmobile inventory, which could impact dealer satisfaction and operational efficiency.

You have reached the limit. Sign up to access full content

Get started

Guidance & Outlook

Revenue Guidance: The company has issued guidance for fiscal year '26, projecting revenues of $8.15 billion to $8.3 billion.

Normalized EBITDA Guidance: The company expects normalized EBITDA to range between $1.04 billion and $1.09 billion for fiscal year '26.

Normalized EPS Guidance: Normalized earnings per share (EPS) is projected to be between $4.25 and $4.75 for fiscal year '26.

Second Half Revenue Growth: The company anticipates revenue growth of 8% to 12% in the second half of fiscal year '26.

Second Half EBITDA Growth: Normalized EBITDA for the second half is expected to grow between 22% and 31%, resulting in a normalized EBITDA margin exceeding 14%.

Second Half EPS Growth: Normalized EPS for the second half is projected to grow between 28% and 51%, with the majority of growth occurring in Q4.

Tariff Impact: The company has factored in approximately $90 million of gross tariff impact for fiscal year '26, up from the previous estimate of $60 million to $70 million.

Snowmobile Orders: The company has snowmobile orders on hand following spring bookings, which will fuel initial demand for newly introduced products.

Dealer Inventory Levels: Dealer inventory levels have been rightsized, with a 20% year-over-year reduction, positioning the company to better align wholesale with retail trends in the second half of fiscal year '26.

New Product Launch Impact: The introduction of new products, including the Can-Am Defender, is expected to drive dealer profitability and market share gains in the second half of fiscal year '26.

You have reached the limit. Sign up to access full content

Get started

Shareholder Return Plan

Dividend Program: No specific mention of a dividend program was made during the call.

Share Buyback Program: No specific mention of a share buyback program was made during the call.

You have reached the limit. Sign up to access full content

Get started

Key Q&A

Q:What are the tariff scenarios BRP is contemplating for the updated guidance?

A:BRP has optimized its manufacturing footprint and supply chain to meet USMCA requirements, with 2/3 of content sourced from North America. They are in constant dialogue with Canadian and Mexican authorities but are not currently working on any specific scenarios. They are confident in adapting to any new regulations if given lead time.

Q:How does BRP plan to mitigate the $90 million tariff exposure forecasted in their guidance?

A:BRP mitigates tariff exposure by adjusting sourcing, moving production or suppliers between countries, and internalizing assembly processes. They are continuously learning and adapting to minimize tariff impacts.

Q:What is BRP's outlook for the current versus noncurrent inventory setup in the industry?

A:BRP observed that most OEMs are cautious with shipments, and inventory levels are improving. ATV inventory was down 20%, side-by-side down 10%, and watercraft inventory is slightly high. BRP is optimistic about H2 due to low inventory levels, strong product reception, and market share growth potential.

Q:Will BRP's retail be up in the second half of the year?

A:BRP expects retail to be similar to Q2 trends, with the U.S. down mid-single digits, Canada up low single digits, LatAm growing over 20%, and EMEA improving. They are confident in their guidance due to low inventory levels and strong product reception.

Q:What is BRP's initial outlook for fiscal year 2026?

A:BRP anticipates a headwind of $120-$130 million from tariffs if no action is taken, but they plan to optimize and minimize impacts. They expect retail to equal wholesale, eliminating a $400-$500 million revenue impact from destocking. They also foresee opportunities for market share growth and continued investment in innovation.

Q:How does BRP view the revenue profile outlook with the alignment of wholesale and retail?

A:BRP expects a $400-$500 million revenue impact from destocking to be eliminated next year, leading to a more normalized environment. They anticipate a straight-line recovery in revenue with opportunities for market share growth and margin improvements.

Q:What is BRP's outlook on promotional activity and its impact on margins?

A:Promotional activity is expected to provide a 75-100 basis point benefit this year compared to last year, with a potential additional 50 basis point tailwind next year as the noncurrent inventory situation eases.

Q:What are BRP's expectations for North American ORV retail in the second half?

A:BRP expects North American ORV retail to improve sequentially, with better numbers than Q2 as the industry transitions to a new model year and inventory levels become cleaner.

Q:Why is BRP's ORV inventory down 5% compared to pre-COVID levels?

A:BRP's ORV inventory is down due to higher unit costs, dealer caution, and strong demand for cab units. They believe the current inventory level provides flexibility in case of an economic slowdown.

Q:What is BRP's retail outlook for the back half of the year and into next year?

A:BRP expects retail trends to continue, with the industry down low single digits this year. They are confident in their guidance due to low inventory levels, strong product reception, and orders for snowmobiles.

Q:What is BRP's approach to capital allocation and balance sheet management?

A:BRP prioritizes investing in the business, growing dividends, and buybacks. However, they are cautious with buybacks due to economic uncertainty and are focused on maintaining financial flexibility.

Q:What is driving the 10% revenue growth in BRP's second-half guidance?

A:The growth is driven by lapping last year's under-shipping, new product launches, favorable product mix, and lower promotional activity.

Q:What is BRP's net tariff impact after mitigation efforts?

A:The net tariff impact is estimated to be $0.25-$0.30 negative on the P&L, with mitigation efforts including higher pricing, particularly in the parts and accessories business.

Q:What is BRP's view on its normalized earnings power and EBITDA margin potential?

A:BRP believes it can achieve a 17% EBITDA margin in a normalized environment, leveraging its innovation, manufacturing capacity, and dealer network. Future earnings power depends on industry dynamics and macroeconomic conditions.

Q:What is BRP's perspective on the discrepancy between U.S. and Canadian retail sales?

A:BRP attributes the discrepancy to U.S. consumers being more affected by tariff uncertainty, inflation, and high interest rates, while Canadian dealers are more loyal to BRP and the economy is performing well.

Q:What is BRP's response to Yamaha's new fishing PWC product?

A:BRP welcomes competition and believes it drives industry growth. They are confident in their specialized vehicles like the Fish Pro and see Yamaha's entry as an opportunity to grow the market.

Q:What is BRP's view on the industry's unit growth potential compared to pre-COVID levels?

A:BRP believes the side-by-side segment has growth potential, particularly in international markets, and expects the industry to continue growing in this category.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the breakdown of North American content between Canada, U.S., and Mexico, citing competitive reasons. They also refrained from making specific forecasts for fiscal year 2027, emphasizing the uncertainty of industry dynamics and macroeconomic conditions.

You have reached the limit. Sign up to access full content

Get started

Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

DOOO Transcript

BRP Inc. (DOOO) Q2 2026 Earnings Call Transcript

Unknown8-29

BRP Inc. (NASDAQ:DOOO) Q1 2026 Earnings Call Transcript

Unknown5-30

The earnings call reveals several negative aspects: a revenue decline, soft demand in EMEA and Asia Pacific, and significant tariff impacts. Despite positive EPS and inventory management, the lack of formal guidance, declining margins, and retail demand fluctuations are concerning. The Q&A highlighted risks with tariffs and inventory, and management's vague responses further add uncertainty. The market cap suggests moderate sensitivity to these factors, leading to a predicted stock price movement of -2% to -8% over the next two weeks.

BRP Inc. (DOOO) Q1 2026 Earnings Call Transcript

Unknown5-29

The earnings call reveals several negative factors: declining revenue, gross profit margin, and soft consumer demand in key regions. Tariffs and competitive pressures add further challenges. Despite some positives like inventory reduction and confidence in H2 retail, the lack of formal guidance and unclear management responses contribute to uncertainty. The company's market cap suggests moderate sensitivity to these issues, leading to a negative sentiment prediction for the stock price movement.

BRP Inc. (DOOO) Q4 2025 Earnings Call Transcript

Unknown3-26

The earnings call summary indicates declining financial metrics with a 20% revenue drop and decreased margins. Tariff impacts and consumer confidence issues present risks. The Q&A reveals concerns about inventory overhang, mixed retail demand, and unclear management responses. Despite share repurchases, the negative financial performance and market challenges outweigh positives. Given the company's market cap of approximately $4.7 billion, the stock is likely to react within the 'Negative' range of -2% to -8% over the next two weeks.

DOOO Report

Frequently Asked Questions

Where does this earnings call transcript come from?

All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.

How soon is the transcript available after the earnings call ends?

Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.

Is the transcript edited or altered in any way?

No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.

Why do some answers appear as “Unclear” or “Inaudible”?

When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.

Who creates the AI Summary and Key Q&A highlights shown above the transcript?

They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.