Joe Altobello

Joe Altobello asked about the drivers behind the Q4 revenue and same-store sales, specifically inquiring about lower average pricing and any shifts in pricing tiers. He also asked about the expected EBITDA improvement from the outsourced retail model.

Answer

CFO John Meloun explained that lower average pricing in Q4 was due to promotions like Black Friday sales, which bring in new members through package offerings, causing temporary dilution. He noted stability in pricing tiers. Regarding the outsourced retail model, John Meloun and CEO Mike Nuzzo stated it would result in a high single-digit to low double-digit million dollar EBITDA enhancement, improving gross profit margins significantly as it shifts from a break-even or loss-making operation to a nearly 100% margin rebate model.

Joe Altobello asked about the drivers behind the lower average pricing impacting revenue and same-store sales in the quarter, inquiring if there were shifts between pricing tiers. He also asked about the assumed EBITDA improvement from transitioning to an outsourced retail model for the year.

Answer

CFO John Meloun explained that lower average pricing was influenced by new studios ramping up and successful Q4 promotions like Black Friday sales, which typically dilute pricing temporarily but normalize in Q1/Q2. He noted no material shifts in pricing tiers. Regarding the outsourced retail model, John Meloun stated it would significantly improve gross profit from low-to-mid 80% to closer to 90%, resulting in a high single-digit to low double-digit million ($9M-$10M) EBITDA enhancement. CEO Mike Nuzzo added that the transition was well-executed and the outsourced model is a non-core function, allowing for better focus on new product introductions.

Joe Altobello asked about the unexpected 19% club growth in the quarter, seeking clarification on its drivers and why it didn't fully translate to the EBITDA line. He also inquired about the breakdown of the $70 million tariff costs, specifically the IEEPA portion, and whether a refund has been filed.

Answer

EVP and CFO Sean Sullivan attributed the club growth to strong execution and demand, particularly for T-Series irons and SM10 wedges, while explaining that tariff impacts in Q4 affected the EBITDA conversion rate. He confirmed that the incremental $40 million in tariffs is related to IEEPA and stated that the company is assessing the approach for filing a refund.

Joe Altobello expressed surprise at the 19% club growth in Q4 2025, asking what drove this upside and why it didn't fully flow through to the EBITDA line. He also sought clarification on the $70 million total tariff costs for 2026, specifically how much of the incremental $40 million is related to IEPA, and whether a refund has been filed.

Answer

Sean Sullivan, EVP and CFO, attributed the Q4 club growth to better-than-expected performance, strong demand, and successful T-Series irons and SM10 wedges. He explained that the EBITDA conversion was impacted by $15 million in tariffs during Q4, the largest quarter for tariff costs in 2025. David Maher, President and CEO, confirmed that the incremental $40 million in 2026 tariff costs is entirely related to IEPA. He added that the company has not yet filed for a refund but is actively monitoring the situation and assessing its approach.

Joe Altobello questioned why the tariff headwind is expected to be another $0.35 this year, similar to last year, despite YETI's supply chain diversification efforts, seeking clarification on the underlying factors.

Answer

CFO Mike McMullen attributed the continued tariff impact primarily to annualization. He explained that the prior year included four months with little to no tariffs, followed by increasing rates (China ~30%, rest of world ~10-20%). The current year's guidance assumes a full year of approximately 20% tariffs globally.

Joe Altobello questioned why the tariff headwind is expected to be an incremental $0.35 in 2026, similar to 2025, despite YETI's supply chain diversification efforts. He also asked if there are any structural factors, such as competitive landscape, cultural differences, or fewer use cases, that might make market penetration more difficult in international markets like Japan, China, or Korea.

Answer

Mike McMullen, CFO, clarified that the incremental tariff headwind in 2026 is primarily due to the annualization of higher tariff rates (approximately 20% globally) throughout the full year, compared to the partial-year and varying rates experienced in 2025. Matt Reintjes, President and CEO, stated that YETI does not see any structural barriers in international markets, emphasizing that market penetration is more about prioritization and the chosen approach (direct presence versus leveraging partners) to navigate market complexities.

An analyst on behalf of Joe Altobello asked for the rationale behind the Q4 guidance implying flat EPS growth after a strong Q3 and requested an update on the competitive landscape.

Answer

CFO Mike McMullen attributed the Q4 outlook to the macroeconomic environment, specific gross margin dynamics like lapping price decreases, and continued strategic investments, emphasizing the strong full-year performance. CEO Matt Reintjes added that there have been no significant changes in the competitive landscape and that YETI's brand strength and portfolio diversification continue to drive results.

Joe Altobello asked why the RV wholesale shipment outlook for 2026 was softer than previous discussions in late October, and what dynamics contributed to the Q1 outlook of +4% revenue growth, a slowdown from Q4's +16%.

Answer

President and CEO Jason Lippert attributed the softer RV outlook to ongoing struggles among mid and small-sized dealers and a 'logjam' in dealership acquisitions. He explained the Q1 slowdown as a result of dealer and OEM discipline in managing inventory, waiting for retail numbers to improve, and noted the impact of recent weather events.

Joe Altobello asked about the reasons for a softer RV wholesale shipment outlook for the year compared to late October, and whether the Q1 outlook's slowdown from Q4 is due to tougher comparisons or other early Q1 dynamics.

Answer

President and CEO Jason Lippert attributed the softer outlook to struggling mid and small-sized dealers, a logjam in dealership consolidation, and a conservative approach, though he noted the industry is slowly coming off the bottom. For Q1, he explained the slowdown is due to dealer and OEM discipline in managing inventory, waiting for retail numbers to pick up, despite decent show traffic.

Joe Altobello asked about the drivers behind the meaningful increases in content per unit with new model year changeovers, inquiring if it reflects larger units, more content, or largely share gains. He also asked for more color on the 70-90 basis points operating margin expansion outlook, specifically regarding contributions from volumes, pricing, and mix.

Answer

Jeff Rodino, President, explained that content per unit growth is a combination of both, with content pickups in composites, electronics, and core products, along with a favorable mix from larger, higher-contented RV units. Andy Nemeth, CEO, added that the operating margin expansion is driven by volume leverage due to a well-positioned cost structure, content gains, and the ability to offer low-cost alternatives through full solutions.

Joe Altobello asked about the drivers behind the meaningful increases in content per unit with new model year changeovers, specifically whether it reflects larger units, more content, or share gains. He also inquired about the factors contributing to the projected 70-90 basis points expansion in operating margin, such as volumes, pricing, or mix.

Answer

President Jeff Rodino explained that content per unit growth is a combination of both new content in composites, electronics, and core products, along with a favorable mix from larger, higher-contented RV units in Q3 and Q4. CEO Andy Nemeth attributed the operating margin expansion primarily to volume leverage, noting the company's well-positioned cost structure to support significant volume increases without substantial overhead, complemented by content gains and solutions offering low-cost alternatives.

Joe Altobello questioned the apparent contradiction between BRP's press release mentioning favorable variations in sales programs and the ongoing elevated promotional environment in the industry, asking if BRP's sales programs were lower than last year. He also asked for confirmation on the CAD 400 million-CAD 500 million revenue tailwind from aligning wholesale with retail in Fiscal 2027 and if this serves as a base for further assumptions.

Answer

CFO Sébastien Martel clarified that BRP's retail promotion spending is trending 70-80 basis points lower this year compared to last year, when significant investments were made to clear inventory, despite continued high promotional levels in the broader market. He confirmed the CAD 400 million-CAD 500 million revenue tailwind (and approximately $1.25 EPS impact) from right-sizing inventory for Fiscal 2027. Mr. Martel also outlined headwinds for FY27, including reduced Ryker deliveries due to production transition to Vietnam, a ~$30 million increase in depreciation expense, and a tax rate returning to 25-26%, leading to a base case of mid-to-high teens EPS growth and roughly 14% margin.

Martin Mitela, on behalf of Joe Altobello, asked about a proposed U.S. bill that would allow interest write-offs for products with final assembly in the U.S. and whether it would create a disadvantage for BRP.

Answer

CFO Sebastien Martel acknowledged the company is monitoring the bill, which has not yet been enacted. He pointed out potential limitations, such as income caps and usage of itemized deductions, that might reduce its impact. He also suggested that such a provision could be viewed as a subsidy and become a point of discussion in broader trade negotiations like the USMCA review.

Speaking on behalf of Joe Altobello, an analyst asked if BRP expects wholesale and retail to align next year or if further destocking is anticipated. He also inquired about the market impact from a competitor's early launch of model year '25 vehicles.

Answer

CEO Jose Boisjoli stated it is too early to predict wholesale and retail alignment for next year due to market volatility, but confirmed the focus for H2 remains on inventory reduction. He noted that while a competitor's early launch and discounting affected retail, BRP will not follow their MSRP reduction, viewing it as a poor long-term strategy for the brand.

Joe Altobello asked if the successful Factory Authorized Clearance (FAC) program might have pulled demand forward and what current retail trends are in October/Q4, also inquiring about the incremental net tariff impact and incremental margin expectations for 2026.

Answer

CEO Mike Speetzen clarified that FAC generated excitement and foot traffic without significant incremental spend, primarily moving non-current inventory. He noted strong October results in RANGER XD, XPEDITION, and ATV, but youth will be a Q4 headwind due to production shifts, expecting Q4 ORV retail (excluding youth) to be up low single digits. CFO Bob Mack stated that the incremental tariff impact for 2026 is over $100 million versus 2025, with total tariffs expected to be just north of $200 million, declining to provide 2026 incremental margin guidance due to pending data and the Indian Motorcycle divestiture.

Representing Joe Altobello of Raymond James, an analyst asked for the same-store sales figure excluding the impact of Florida and for a breakdown of the comp between unit sales and average selling price (ASP).

Answer

CFO Jack Ezzell stated that excluding Florida, which was impacted by hurricanes, same-store sales growth would have been in the 6% to 7% range. He further clarified that the overall comp growth was driven by a double-digit increase in unit sales, specifically in the 12% to 13% range, which was offset by lower average unit prices.