Sebastien Martel: I mean, I think we’re, obviously we’re not the expert in weather and it’s not our job, but I, like I said in my answer a few minutes ago when you look at this snowmobile industry, it’s quite stable. And if you look at the last 15 years, there was three bad snow season and the industry was quite stable between 95,000 and 105,000 units in North America and very flat in Scandinavia and in Europe at about 20,000 units. Then for us, it’s a bad winter, typically the following year because of the non-current ratio available for consumer, the industry is quite stable, but it remained that we are happy to be more diversified than 20 years ago because obviously we have more product line, but snowmobile remained a very good business for us and our dealers, and we’ll go to a bad season and we’ll bounce back after.
And just to add on Jose’s point, and as you mentioned, the beauty of our business is yes, we are diversified and so if a product is not going as good, we are seeing an uptick in other products. And anecdotally, we’ve had some dealers say, you know what? My snowmobile business has slowed down significantly in February, March, but consumers are walking in and buying ORB product instead. So yes, we’ve seen some of that, and again, the beauty of being diversified.
Tristan Thomas-Martin: Got it. Thank you.
Operator: Thank you. Next question will be from Fred Wightman at Wolfe Research. Please go ahead.
Fred Wightman : Just a quick question on the implied EBITDA margin, I think it looks a little bit lower than what you guys had alluded to last quarter. Is that just a matter of the incremental de-leverage from the softer snow and marine performance, or is there something else going on there?
Sebastien Martel: It’s mainly related to the volume impact and the revenue decline. So, the snow impact is having a ripple effect on the overall margin, but nonetheless, we’re still, when you look at the guidance range, we’re still looking to deliver even the margin in the mid-15 percentage points, which is significantly higher than what we had versus pre-COVID. And so, it’s still very strong performance financially on our side, and we still see opportunities as we get through these onetime elements to continue improving our EBITDA margin down the road.
Fred Wightman : And then Seb, you talked about just from a cadence perspective, a softer first half with the stronger back half of the year. Are you guys assuming rate cuts in that outlook, and can you maybe talk about how quickly you think potential rate cuts could start to either catalyze consumer demand or dealer orders if floor plan rates come down?
Sebastien Martel: We’ve always said that we’re not an economics, so we’re not, we’re not predicting any rate cuts in our guidance. We’ve assumed the current rates as they are today. If they happen, well, it’ll be good news for our dealers, good news for our consumers, and hopefully we’ll benefit from it as well with higher wholesale. But currently no and no rate cuts.
Fred Wightman: Great. Thank you.
Operator: Thank you. Next question will be from Benoit Poirier at Desjardin. Please go ahead.
Benoit Poirier : Good morning. Could you maybe provide more color on Marine, given the impairment charge that was taken and the adjustment? Just wondering how much of a drive could it be right now, either in terms of EPS or how diluted would it be in terms of EBITDA and just trying to gauge kind of the rebound, we might see in terms of contribution going forward as you continue to grow that business beyond fiscal year ‘25?
Jose Boisjoli: The marine industry has had its struggles in the last year. We’ve obviously seen softer consumer demand and less demand from the dealer network that obviously impacted our profitability. And we had our issues as well with the ramp up in the Marine — in with the new, many two boats, which obviously impacted profitability. And that is what drove the impairment charge we took this year. Obviously, our plan is to bring the Marine business to a much more profitable level. And so, I won’t necessarily go into the details of the impact of that, but we do when we look at how we’ve designed these boats from a modular point of view and a more industrialized process of making these boats, our expectation is that the marine business should drive similar returns than some of the product lines that we have in the Powersport group.
Benoit Poirier: Okay. Thank you, very much.
Operator: Thank you. Next question will be from Jaime Katz at Morningstar.Please go ahead.
Jaime Katz: Good morning. I just want to clarify something on that last question. It sounds like, the impairment was more focused on the cost structure of the Marine business rather than what you guys think about if the long-term revenue opportunity set. Is that right?
Sebastien Martel: That’s correct. When we look at the overall results that we’ve delivered in the last few years, the softness in the industry and the expectation for next year as well that will be a key or initial expectation and that’s the main driver of the impairment.
Jaime Katz: Okay. And then, the, a lot of the expense deleverage that we’re seeing this coming year is a function of sales decline. So, if we get back to, let’s say, a low single-digit top-line growth rate in the following year, there’s nothing really holding back expense leverage from accruing and theoretically we should go back towards where we were. Is that the right way to think about it?
Sebastien Martel: Well, I mean, we’re diligent in how we deploy our projects and where we increase our overhead. And so, as the business as the volumes comes back next year and we increase revenue. Obviously, we’ll have more flexibility in deciding which projects we do and which projects we don’t. We might we’ll increase overhead costs, yes, but we’ll be selective in where we decide to increase it.
Jaime Katz: Perfect. Thanks.
Operator: Thank you. Next question will be from Luke Hannan at Canaccord Genuity. Please go ahead.
Luke Hannan: Thanks. Good morning, everyone. Maybe just going back to the target to bring down network inventory levels by 10% to 15% for the year. Is that a number that you’d established internally what you felt like the dealers should be comfortable with? Or is that a back and forth that’s what the dealers felt they’d be more comfortable operating with in the network going forward?
Jose Boisjoli: When we look at inventory, we look at it internally. We look at it at days of inventory, and we want to have a good turn of inventory at the dealer level. And we believe that we had set a target ourselves during the COVID time not to go back to the pre-COVID level. And this is why we were proactive. And on top of it, you have the pressure of the high interest rate for the dealers. Then we’re working hand in hand with the dealers to try to maximize, obviously, our business but also their business. And this is a decision we take, we believe, to protect value proposition of the dealers, the money they’re making, the margin they’re making with our product. We believe it’s the right thing to do to continue to work hand on hand with them and continue to grow overall. And it’s an internal target that we put together because we believe it’s healthy for the dealer and us.
Luke Hannan: Got it. Understood. And maybe sort of a follow-up to that then is just broadly speaking, how is the, we’ll call it, the financial health of the dealer network as we stand today?
Sebastien Martel: The financial health of the network is very good. The interest cost that they have to bear is an important cost, but it’s not the bulk of what’s driving their profitability. It’s an important component, but not the bulk. For them, it’s obviously volume, and as you see, the retail is still going strong, especially for their side-by-side and ATVs. And during COVID, the dealers made a lot of money. And so financially they are in a good situation. The interest cost is higher because the value of the units are much higher than pre-COVID. The mix of the products is more side by side. The Swedish switch pontoon, so from a dollar value per unit is much higher, and so they see a much higher interest cost, and that’s why we want to be diligent, but we have no concerns and we work hand in hand with our floor plan partners looking at the dealer health that there’s a high risk in that area.
Luke Hannan: Okay. Thank you, very much.
Operator: Thank you. Next question will be from Brian Morrison at TD Securities. Please go ahead.
Brian Morrison : Good morning. Maybe what are you seeing in terms of pricing from your competitors across your verticals in general? Because dealer inventory in dollars is up 60% sustain since the pandemic units, I think you said 30%, so that indicates very strong pricing over that time, which takes inflation to account. But the question is, are competitors remaining disciplined right now? As within your guidance? I’m just trying to reconcile price increases and market share gains in what’s an increasingly competitive environment.
Sebastien Martel: It’s obviously, yes, it’s competitive. And we’ve been in this business for well over 50 years, so we know this industry very well. We know how to operate within these dynamics. But I’d say we’re still below pre-COVID levels. There is discounting happening on non-current inventory. There’s discounting happening on current models, but it is obviously a factor of higher interest rates where in order to stimulate retail, you want to offer certain promotions to bring the consumer in the store and give them a reason to buy the product. And financing the interest rate by subsidizing it is certainly something that is helping to move the needle. Both us and other OEMs are using this as a tool to stimulate retail and it’s working.
Brian Morrison: You are not seeing any competitive intensity heating up at this time?
Sebastien Martel: Again, it’s a healthy battle. There is discounting that’s happening, but nothing, I think nobody wants to buy market share. And so, I think there’s a good level of promotional activity happening, but it’s nothing crazy.
Brian Morrison: Great. Thank you.
Operator: Thank you. Next question will be from Mark Petrie at CIBC. Please go ahead.
