Good morning, ladies and gentlemen. Welcome to the BRP's Q2 Fiscal Year 2021 Earnings Call. I would now like to turn the meeting over to Mr. Philippe Deschênes. Please go ahead, Mr. Deschênes. Philippe Deschênes: Thank you, Judi. Good morning, and welcome to BRP's conference call for the second quarter of fiscal year '21. Joining me this morning are José Boisjoli, President and Chief Executive Officer; and Sebastien Martel, Chief Financial Officer. Before we move to the prepared remarks, I would like to remind everyone that certain forward-looking statements will be made during the call that are subject to a number of risks and uncertainties. I invite you to read BRP's MD&A for a listing of these. Also during the call, reference will be made to supporting slides, and you can find the presentation on our website at brp.com under the Investor Relations section. With that, I'll turn the call over to José. José Boisjoli: Thank you, Philippe. Good morning, everyone, and thank you for joining us. Before I talk about our result this quarter, allow me to say that in this unusual year, I'm extremely proud of the effort of our people and our dealers in reacting with agility in order to respond to the crisis and preserve our business momentum. Our results this quarter are significantly better than our original projection that we made when the pandemic was first declared, and confinement measures were put in place. We were in an excellent position heading into this situation, and we will emerge stronger from this crisis. Based on our revised projection and better visibility, we are expecting revenue down 5% to 9% for the year and a normalized EPS range of $3.65 to $3.95 for the year. The range is quite large because of the uncertainties we are still…

Thank you, José, and good morning, everyone. As José mentioned, our second quarter results came in much stronger than we were anticipating just 3 months ago, driven by the exceptionally strong worldwide demand for our products throughout the quarter. Our revenues ended the quarter at $1.2 billion, a decline of only 16% from last year despite the significant impact from the production shutdown. Our normalized EBITDA was up 28% to $214 million, driven by improved adjusted gross profit margin and lower operating expense as a result of the cost-saving measures we have implemented to preserve liquidity, given the uncertain environment we were operating in just a few months ago. This resulted in normalized EPS of $1.14, up 61% from last year's. These better-than-anticipated results, coupled with the significant efforts deployed by our teams to preserve liquidity led to the generation of $248 million of free cash flow so far this year. And with over $900 million of additional financing we secured this quarter, we stand in a very solid financial position, with about $1.1 billion of cash on the balance sheet. While we remain cautious about the current environment, our solid financial flexibility is providing us with the ability to be opportunistic and accelerated investments in the business to drive long-term growth for the company, as highlighted by the recently announced construction of a new side-by-side plant. Coming back to our revenue performance. Our ability to generate growth in certain markets was driven by the inventory availability in our yard. At International, we started the quarter with a good inventory position, given that the region was more impacted by COVID during the first quarters, with revenues down 29%. As the region rebounded with strong retail demand, we were able to shift units from inventory and generate revenue growth of 15%…

[Operator Instructions]. The first question is from Steve Arthur from RBC Capital Markets.

Just wondering if you can elaborate a little bit more on the current status of the operations at your plants. Just some sense of what level of utilization you're running at now and how much of an impact the local health measures are having, in particular, in Mexico? And I guess, finally, just how the utilization should trend through the balance of the year? José Boisjoli: Good morning Steve. All our operations right now are running at full capacity. And we are able to operate without any efficiency loss everywhere in the world, then we're quite happy. And I'm very, very impressed with our people who accept to put a lot of safety measure and the healthcare measure and operate efficiently in this whole context.

That's remarkable. So in terms of adding new shifts and new lines and such, is that on top of what you're doing now or is that 100% reflective of those additions? José Boisjoli: No. I mean, we're running right now at full capacity everywhere. Then obviously, I mean, we expect to have some here and there difficulty with supplier, tight delivery or stuff like that, but this is a thing that we can manage. Obviously, like Sebastien explained in the guidance, we can overcome some small difficulty. Obviously, if there would be a whole reconfinement in the country, around the world that would be more difficult, but very, very happy with the way our people are operating our operations.

Okay. And just a final one, just very interesting your survey of customers and new customers in particular, 40% new to powersports. I guess on -- has there been an active marketing effort so far trying to attract these people or is that just a natural flow of people looking for new things this summer. And I guess, looking ahead -- I'm sorry, go ahead. José Boisjoli: Yes, definitely, when all of this started, and we saw the surge of new demand, we've done a detailed survey in March, and we've done another one beginning of August, and basically to better understand who is buying and try to talk to them directly and encourage them to try our product. And obviously, for competitive reason, I cannot give you all the details of our plan, but obviously, we are in contact more and more with new customers, knowing who they are, trying to promote the experience they could have with our product. And just an example, in July, we've launched an initiative called the Unchartered Society. If you go on our website at brpuncharteredsociety.com, you will see we partner with a lot of operators in North America. We believe we partner with the best into the industry offering safe ride and high quality. But right now, I mean, you can book a snowmobile ride in Rocky Mountain in Utah. We have the ride for women on-road ride in San Gabriel Mountain in California with the Ryker. One of my favorite is DADS & KIDDOS Adventure in the Grand Canyon, Arizona. Then we're trying, obviously, to do cross-sell between consumer. If someone purchase a side-by-side, we're trying to promote those to our -- that at least they can try a watercraft for snowmobile in the winter. But I can tell you, our marketing people are extremely active to try to talk to those customers and try to make them lifetime customers.

The next question comes from Mark Petrie from CIBC.

Congrats on the excellent result. I just wanted to ask a bit more, just a follow-up on the outlook for Snowmobile. I was wondering if you could just -- you went through a lot of statistics there. I'm just wondering if you could sort of summarize the production capacity right now. I know inventories are lower at the dealer level. But do you expect that to be sort of normalized in the coming months? And just sort of an overview of the outlook for Snowmobile for this season, please? José Boisjoli: Mark, but first the snowmobile season ended very quickly mid-March last year. If you remember, most of the trail system were closed mid-March because of government regulation. Then we ended the season -- all the OEM ended the season with more inventory than previous year. And we took orders from our dealers in April, in the middle of the crisis. And we restarted, in our case, in Valcourt and in Finland, we restarted production a bit later than originally planned because we needed to produce some three wheeled vehicle in May and June. Then right now, we are scheduled in both of our factory in Finland and in Valcourt to run at full capacity till Christmas time. We have capacity to meet the order that we took from the dealers. And like Seb said on his on intro, we have some capacity to add on if there will be a demand from a dealer, we'll follow the trend closely in October and November, and we plan some material to be able to react quickly if there is a need.

Okay. And just from a competitive standpoint, in terms of marketing and promotion, I understand sort of early on, you guys were fairly aggressive in terms of marketing and some of your promotions and financing deals. When did those get ratcheted back? And then how are you -- or what's your expectation for how the industry is going to approach the snowmobile season?

Yes. Mark, overall, we ended the first quarter a bit more cautious in our planning for retail, and so we had provided for some programs. But these programs were not needed, especially that the retail was very strong. And when you look at next season, there's less noncurrent inventory. And so, the way we look at the second half of the year, we believe that promotions will be a tailwind to our results. There will be a lesser of a need for retail incentives, less non-current as well. So, it should be a positive element, and that's factored into our guidance number.

The next question is from Benoit Poirier from Desjardins Capital Markets.

Congratulations for the very impressive quarter. So José, could you mention some color on how the -- does the pandemic impact your five year plan? I was wondering whether it postponed some product introduction or it put in advance on product introduction translating into a bigger market, especially with the new entrants coming to the powersports industry. José Boisjoli: Benoit, for sure, when everything shut down in March, and it was shut down for 2 months, we had to tweak a bit our R&D effort and our product planning, but the essence of what we believe will make a big difference in the industry have not changed. Then overall, all the program going from model year '20 to '21 this year are ongoing as planned. There is a few tweaking here and there, but some shift, maybe a month or two, but nothing that we believe will affect our five year plan. To be honest, I'm very impressed. They're working from home, how we were able to be efficient in this whole context because, obviously, there is things that are easier to do by phone, but when you talk about product development, you need to touch and feel, try. It's a bit more complicated, and the team have done an incredible job to pull it off. There is no change on the five year plan.

Okay. And with respect to capital deployment opportunities, you're going to be revisiting the NCIB and dividend with the third quarter results. But given the new plant built in Mexico, could you talk a little bit about the working capital movement expected in the second half? And maybe some color about CapEx expected for fiscal '22?

Yes. Ben, like the first half of the year, we generated solid free cash flow coming from, obviously, the good results. Working capital was a positive as well with the inventory reduction and AR that we collected. Back half of the year, I'm expecting inventory to rebuild, AR to rebuild, we'll offset some of that from the accounts payable. So probably free cash flow gen of probably, let's say, $100 million for the back half of the year. CapEx, as you see, back half of the year is going to be very loaded with about $200 million of investment. Obviously, when the crisis started, we adjusted some of our plans for this year and so CapEx is lower than what we were expecting when we were looking at our budgets, let's say, back in January when there was very little talk of COVID. Obviously, some of that is going to be pushed to next year. So I'm expecting next year to be pretty important year in terms of investments. Obviously, we have side-by-side plans that we're investing in and more investments. So it will be a record year in terms of CapEx investments for '22.

Okay. And last question for me. When we look at Slide 15 with respect to the gross margin, you quantified the impact of the Evinrude outboard engine wind down and also the COVID-19. I would just be curious what we should expect if there is any more costs with respect to Evinrude wind down and COVID-19 impact for the second half?

Very little cost related to the wind down, we took all of that in the first -- some in the first and most of it in the second in terms of workout on the cash cost. When I look at the back half of the year or the full year, you see my normalized EBITDA margin there, it should improve by 130 to 140 basis points just based on the guidance. What's going to be driving that improvement? About 50 basis points from operating expense, and the rest will be coming from margin, Benoit.

Okay. Perfect, and for the full year, right, the 130 to 150?

Yes, yes, yes.

The next question is from Robin Farley from UBS.

Great. Just trying to think about the dealer inventory declining, while retail rising in those charts you had. I wonder if you can give us a little bit of color on kind of the rate of change in that retail through June, July and kind of what you see now with most of August on? And then if you can help us think about, is there a cap just sort of mathematically on where retail for you could go in Q3 based on what we see as fairly depleted dealer inventory? Is there a sort of a natural cap that even though you're at full capacity everywhere, based on what you're able to ship and where dealer inventory is, that we shouldn't expect despite what may be strong demand, is there just kind of a natural cap in that near term?

Yes. Robin, obviously, yes, the retail was very strong in the beginning of the quarter and that retail growth slowed down as we saw our inventory go down. August is still very good. I'll remind you that Q3 of last year was a very, very strong quarter in terms of retail, especially in the month of August. Despite that, despite the low inventory, we're still up on retail for our ORV business. Obviously, as José mentioned, the inventory for PWC is super, super lean. And so retail in August is down. When I look at Q3 and the expectation for retail, there's a certain ceiling, yes, to what the retail could be. With low inventory in Personal Watercraft, snowmobile shipments that are a bit later than last year, we expect good retail, but not to the level where it was last year in terms of retail growth because of the whole inventory situation. And as we go into Q4, as the inventory gets replenished, we should see retail pickup. But for us, and as I mentioned in my prepared remarks, a lot of the units that we'll be producing, especially for Personal Watercraft and 3-Wheeled will be shipped next year. And that's when we'll come back to more normalized inventory levels. So it will take a few quarters before we stabilize the inventory in the network.

Okay. And just to make sure I understood, you were saying snow is shipping later and Personal Watercraft inventory is super lean and you said so retail would be lower there. You're saying retail down there just for the seasonal, but not for year-round?

Not for year-round. José Boisjoli: Yes.

Okay. Okay. And I guess, are you at the point where you're starting to see retail be a -- and I guess I'm thinking specifically of off-road or year-round here where you're actually able to see retail levels start to accelerate a little bit as you ship more or not at that point yet?

Well, it's still early. I mean, the retail is still up and so we're still at very lean inventory levels in the network. As I said, it will take a few quarters before we come back to more normalized levels. And when I say a few quarters, that's next year, fiscal year '22, when we have the new plant running. And so our expectation, when I look at the inventory outlook in the network for Q3 and Q4, I'm still expecting it down to -- it to be down significantly year-over-year at the end of Q3 and Q4. José Boisjoli: But maybe to give some colors, like Sebastien mentioned, last year in August, just to give you some numbers, if I exclude Watercraft to do the comparison because we don't have any Watercraft this year. But last year in August, our retails between all product line, except Watercraft, was up about 40%. And right now, so far in August, we are up excluding Watercraft, again, a bit higher than 20% and that's despite we're not optimum in inventory in some product line. Then we believe demand will be there. We believe every OEM is struggling with the refilling the inventory. But the demand is there, no doubt about that.

The next question is from Craig Kennison from Baird.

Congratulations on the quarter as well. Wanted to follow-up on Robin's question. Just so I understand the retail comment regarding Q3. Seb, I think that you said not to the level of Q3 of last year, did you mean the level of growth last year or the absolute level of retail?

The level of growth last year.

And then wanted to dig into your survey, which is really interesting on first-time riders. And do you have any data on the follow-through of first-time riders? I'm imagining that people who buy maybe an ORV or some powersports equipment tend to buy one for the family, but may buy more as time moves on. So one question is just what's the follow-through typically of a first-time buyer either buying a new unit to replace that unit or adding units to the garage because it's such a great activity. José Boisjoli: But like we said on our -- on the slide that we had in the package, 23% of our customer purchase in Q3 -- in Q2 are existing customers. And this is lower because we had a surge of new entrants in the quarter. But there is no doubt, Craig, that we are all surprised by this surge of new entrant, and we're doing everything we can to give them an idea how to ride our product, to do cross-product selling and to encourage them to ride in different environment. Then this is our marketing effort and we believe that opportunity will be there for -- I don't know. I think we always knew that we were competing against leisure. And when I say leisure, we're not a specialist, but if we take cruise, airline and amusement park, this is a huge industry, and they are significantly down. Then I think there is an opportunity there that will remain for probably a few years. And you, the analysts, say that it will take 3 years to those industries to go back to normal. Then right now, our effort is to make sure that we make those customer lifetime customers.

And then again, regarding your survey, I'm wondering to what extent you tapped into the behavior of your core riders. And specifically, I'm wondering whether some of your existing riders who might have been in the market to replace their unit this year maybe instead just said, I'm going to ride this year, no need to compete with everyone else to buy units that are scarce in the channel because I'm really wondering whether that customer deferred demand into next year, perhaps, which would create a more sustainable trend going forward? José Boisjoli: Yes. I don't have, Craig, on top of mind that level of detail. I'm sure our team has it. But for me, I don't have it at the top of our mind. Maybe one interesting data we can give you and, again, it's not for Q2, it's from March 15 to the end of July, the number of people who purchased who are between 18 and 44 years old, the number of people increased by 49% versus last year. Women, again, from March 15 to the end of July, plus 63%; and family, people who purchase a product to use it with family, plus 53%. Then it's coming new entrants and we're attracting a more diverse customer base, which we believe is very healthy for everyone in the industry.

The next question is from Brian Morrison from TD Securities.

I just have a couple of follow-ups with specifics to prior questions. So maybe for Seb. In terms of the dealer catch-up with dealer inventory being down 51%, can you maybe just give us the dollar value of that to get back up to the optimal level for Powersports overall? And maybe specifically for PWC.

Well, if you look at the outstanding inventory that's there and it's disclosed, that we have on our balance sheet, I mean, we're down almost $1 billion in terms of inventory in the network. And so in terms of dollar figure, that's what it represents. So it's quite sizable in terms of reduction.

Okay. And then in terms of your CapEx, it's going to be at all-time levels for next year, I presume that's greater than $400 million?

Yes, that's fair.

Okay. And in terms of your leverage, your commentary about reviewing the dividend or NCIB, what would your target leverage be, assuming you have visibility going forward?

Well, we've operated pretty much in the range of a net debt-to-EBITDA about 2x. And that's an area we're comfortable and going into the crisis that provided us with flexibility of getting additional financing. And so obviously, we'll continue having discussions with the Board on what's the optimal leverage level. But lesson learned was that at these levels and with the type of debt structure that we had in place, with a covenant-lite and long-term maturity was something that served us well during the last few months. And I think it's something that we will try to preserve going forward.

Okay. And then last question, just in terms of, obviously, Powersports very well, but also Marine, the boat sales were incredibly strong as well. Just maybe an update on the boat inventory as well, where you stand on that front? José Boisjoli: Yes. The boat inventory declined a bit, but not as drastic as what we had in the Powersports business declined by about 25%.

The next question is from Greg Badishkanian from Wolfe Research.

It's actually Fred Wightman on for Greg. If we look at the 3Q retail color that you guys gave, that was really helpful. But how should we think about market share against that backdrop? Should we expect more share loss into next quarter?

It all depends on the inventory position of our competitors, and that's something we do not have visibility on. Obviously, as I said, we believe we started with a leaner inventory position going into this crisis because our retail was super strong in January, February and March, where we outperformed the industry and even outperformed what our expectations were. Our units flew off the shelf, if I can say, early in April and May. We were shut down for a few weeks longer than most of our competitors. And so it's all a question of inventory replenishment. But when we look at our situation going in, we were a market leader. We had the innovative products. We have a great deal of value proposition. And so there might be some share loss driven by inventory availability in the short term, but we believe that when things come back to more normal and we're able to meet demand with our capacity. That will continue that momentum going forward. José Boisjoli: I would like to put a bit of color on this. At international level where we had enough inventory because we had shipped prior the shutdown, we gained market share. We've lost some market share in North America because the timing of the production shutdown and the shipment was for North America. But we don't talk massive numbers. We're talking a point or two here and there. And it's something that we believe we will catch up when the right level of inventory will be there because the fundamental of our strategy didn't change. And it's about product, it's about value proposition for the dealer, and that has not changed.

Okay. That's fair. Maybe just simplistically, given the inventory destocking and the retail momentum, why aren't you guys expecting more top line growth in the back half of the year? Is the way to think about it that it's really just sales and shipments shifting into next year given some of the disruption? Or what is sort of the way to frame that?

Well, that's one of the big elements where we're shifting more units for the upcoming season into fiscal year '22 and the other one is international, where we need to replenish inventory. We finished the second quarter very lean, both in yard and in-transit inventory. Obviously, to ship something in Australia, there's a few weeks on the water that you need to factor. And so there is that element as well, just rebuilding that inventory in our yards just to be able to supply to demand.

The next question is from Martin Landry from Stifel GMP.

On my first question is on the supply chain. Obviously, with COVID, everybody in the supply chain has been stretched. And I'm wondering if you can give us some color as to how the situation has evolved this summer? And how confident you are that supply chain is solid to help you out, for instance, capture the strong snowmobile season coming up? José Boisjoli: Yes, Martin. For sure, I mean, it's a rock-and-roll year for the people and in operation. I mean in Canada, you had the railway blockage in the spring. We had the Port of Montreal last month. We had California supplier who are shutting down a long period of time, but at the end of the day, we've been able to overcome all those difficulty. Sometime, we could have backorder parts for day or two, we prefer to assemble backorder and put the parts on the vehicle a few days later. But overall, we are able to manage the situation. And like we said, if there is a few hiccup like this in the back half, we believe it's manageable. Obviously, if a country would shut down for a month, that could be more difficult, but we cannot plan for this. We're planning for some hiccup, but not a big shutdown. And so far, the team have done a great job to manage it.

Okay. And I may have missed this, but you're guiding for Marine revenues to be down 25% to 30% this year. If we exclude Evinrude, what would that look like?

Well, Evinrude full year is about $140 million reduction. Last year, it was a $200 million impact on our revenues. And so obviously we sold some units in the first quarter. And so net is about $140 million.

So the shortfall in revenues this year is $140 million?

Yes. So all of it is to outboard engine.

Okay. And last question on your customer survey. You're saying 40% are new to the industry. What is usually the proportion of new customers in the industry in normal conditions? José Boisjoli: Okay, I'm not sure 100%, but I think it's 1/3 of that.

So 1/3 of 40%? José Boisjoli: Yes.

The next question is from Cameron Doerksen from National Bank Financial.

I just wanted to dig maybe a little bit further into the margins in the quarter. Normally, Q2 would be, I guess, a lower margin quarter for you. Obviously, there were a lot of puts and takes this quarter, but I don't know if you can provide any more, I guess, color around if we were to look ahead to next year, in the Q2, I mean, is it 25% gross margin, I guess, adjusted something that's an achievable number in a kind of a normal year, whatever that may be, but any kind of, I guess, color you can sort of put around what sort of a more normalized margin might be here going forward?

Let me -- what I'll do is probably give you -- obviously, there's noise, as you said, between Q1 and Q2. And so I'll give you the full picture for the 6 months of the year. So last year, we were at 22.5%; in 6 months this year, we're at 23% before any OE wind down or COVID impact. So about a 50 basis point improvement. Volume was negative. So we hope that's going to go away next year. The plus that we got was on the sales program. So for a full six months, it's about 120 basis point positive impact. It all depends on how next year is going to go. Are we going to see that benefit, let's say, of about 100 basis points next year on our gross margin because of a -- still a good demand for products and a less competitive environment where less noncurrent inventory. So it's still early to call what next year is going to be like in terms of gross margin. But with better capacity utilization and potentially better sales programs, we might see a 100 basis point improvement in margin on a full year basis.

Okay. And is there any of the, I guess, sort of the cost savings you've achieved outside of the selling and marketing? Are some of these more permanent as you've learned to do things more efficiently, maybe there's more remote work, things like that? I'm just wondering if you can talk about sort of more permanent cost reductions.

Well, the important one is our decision to exit the outboard engine business. As we said, in Q1, it's about a $0.60 to $0.70 EPS impact. This year, we should probably get about a $0.40 benefit of it and that's going to obviously roll over next year, and we'll get the full year benefit. That comes from -- obviously, the saving comes from operating expenses that are going away. And yes, there are some lessons learned. But obviously, we are focused on growing this business. And so there's no big cost saving from working from home. I mean, there's a structure that's in place that needs to be supported. We'll have some employees working more remote next year, but a lot of them will still be in our premises hopefully. And obviously, we continue focusing on being efficient in how we run the business, and that's part of what we do every year. So we'll continue driving margin improvement.

Okay. Great. And just finally, for me, just shifting gears, I wonder if you can talk a little bit about the used market for off-road vehicles and Personal Watercraft, maybe snowmobile as well. I mean our understanding is that there's very low availability of used product out there in the market. So I'm wondering if you have any data on that, what the sales of used products have been? I know it might be difficult to track, but any data on that? And what do you think that means for new product sales as we look ahead to next year? José Boisjoli: Yes. As you said, we don't have any data of the inventory out there by region. But one thing is sure, I mean, we heard a lot of dealers saying they are empty. Watercraft was totally empty this summer in North America and I believe it's the same thing for our froze -- snowmobile, the season is just starting. But I was talking to a dealer Saturday, and there is a surge of customer at the dealership right now and obviously, the salespeople are saying buy now because we'll be out of inventory soon. Then I think all of this is very healthy for the industry and for the dealers, and we'll all gain from it.

The next question is from Derek Dley from Canaccord Genuity.

Just one for me. In terms of given the strong demand pull forward here that we've seen, are you guys seeing any changes early stages here in terms of dealer order patterns? Like are dealers looking now to potentially hold more product on their floors, just given that the really strong demand that they're seeing? José Boisjoli: Derek, I mean, first, we believe that, in general, dealer don't like inventory and some were complaining they had too much inventory before the COVID. Then we believe that this all surge of demand could give us an opportunity, when I say us, the dealer and us, to maybe lower a bit the inventory in the network. It will take a while before we get there. But this is an opportunity that all of us together, the other OEM, the dealer and us, will run leaner on inventory and be more efficient, but it will take a while before we get there.

The next question is from Jaime Katz from Morningstar.

Can you give us a little bit more color on the Canadian market? It looks like the sales there or the shipments decelerated a little bit faster than some of the other geographies. And I'm wondering if maybe it has reaccelerated in products to the other geographies since the end of the quarter?

Yes, Canada was down in the quarter, obviously, coming from, one, the leaner inventory and the shipments of personal watercraft that we had to reduce. But the other big factor is timing in snowmobile shipments. We shipped less snowmobiles in the second quarter than last year. These are units that we'll be shipping in the third and fourth quarter.

Okay. And then for the Unchartered Society program that you mentioned earlier, are you guys basically loaning units to these providers? And then if that's the case, are there some shipments that are sizable, maybe that we should think about as this is initiated relative to what it's going to look like next year shipping into that program? José Boisjoli: First, definitely, I mean, we partner with people that we believe are the best in the industry and, obviously, they use our product, but we don't think it's meaningful in the overall thing. They have a fleet of vehicle that they turn probably once a year, but it's not meaningful in the whole thing.

The last question is from Gerrick Johnson from BMO Capital Markets.

The last three questions. So first question, your decision -- well, the announcement on the new factors made in early July. So when was that decision made? Was that something you were contemplating pre-COVID back January, February? Or is that something that the demand you've seen since the pandemic, did that trigger that decision? José Boisjoli: Gerrick, I mean, as we've said -- I mean you were a part of the analyst call last September, we were starting to plan for it. Obviously, when the COVID thing happened in mid-March, we put everything on the hold. But when we saw the surge in demand, we have restarted the program. Then it was planned that's something that with the growth that we had pre-COVID, that's something that we needed anyhow. But that's why in the middle of all this, we decided to announce and move forward.

Okay. Great. And then a follow-up on Fred's question, for the second half, sales to be flat to up 7%. Can you talk about other variables that would go into that guidance, specifically thinking about the retail demand you're expecting? And also where you are planning on dealer inventories to end up at the end of -- in January, at the end of the year?

Yes. As we said, we're very focused on producing as many units as we can in the second quarter. There's going to be an international inventory replenishment, which I mentioned about. One item we didn't talk about is, parts and accessory. They performed very, very well in the second quarter; obviously, driven by the strong demand in our products. It was soft in the first quarter. It was actually down in the first quarter impacted by COVID. And so are there opportunities there for the second half of the year? Our guidance calls for, let's say, down 2% to up 7%. Some of it in the second quarter was probably a tailwind i.e., dealers being closed in the first quarter and more cautious planning from them. So we'll see where that ends. But we certainly like to see the performance that we had in Q2 continue. And the team is very focused on making sure we deliver strong growth on the PAC side.

Okay. Well, José mentioned earlier that you're going to run leaner on inventory. So does that mean the optimal level of dealer inventory is lower than it had been in the past?

Well, in absolute -- again, it depends on the overall industry and the number of days. Could we reduce the overall number of days by, let's say, 25%? Yes, but doesn't mean that the inventory is going to go down by 25%. Probably not because, obviously, the industries are growing, our market share is growing. So that's something we need to factor in when we look at the overall total inventory. But José comment was more in terms of reducing the number of days out there.

Okay. And then my last one is a little bit more specificity on the cost savings. You outlined on the last call, $450 million of total savings. I guess, the ongoing number excluding Evinrude would be about $370 million, that was overhead costs that you're taking out through layoffs, hiring freezes, salary reductions. Now where are we now? Are those costs coming back online? I'd assume that, that $370 million number would be lower? What's the number of cost savings to expect going forward?

Yes. Well, you saw, let's say for -- and we look at OpEx for the first half of the year, when you compare year-over-year, it's an $80 million saving that we have. When we talked about the $450 million, it was $450 million versus our original plan for fiscal year '21, not a year-over-year reduction. I'm expecting Q3 OpEx to also be down as we continue seeing the benefit of the cost reductions. But obviously, as the business is much better than what we were anticipating and the outlook for next year as well is favorable, we need to continue invest in growth. And so Q4, I'm expecting OpEx to be flat year-over-year.

There are no further questions at this time. So I will return the meeting over to you. José Boisjoli: Great. Thanks, everyone, for joining us this morning, and we look forward to speaking with you again on November 25 for our third quarter results. Thank you. Bye.

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