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BRP Inc (NASDAQ:DOOO)
Q4 2021 Earnings Call
Mar 25, 2021, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, welcome to the BRP Inc. FY '21 Fourth Quarter Conference Call. For participants who use the telephone line, it is recommended to turn off the sound on your devices. I would like to now turn the meeting over to Mr. Philippe Deschenes. Please go ahead, Mr. Deschenes.

Philippe Deschenes -- Manager-Treasury and Investor Relations

Thank you. Good morning and welcome to BRP's conference call for the fourth quarter and year-end results for fiscal '21. Joining me this morning are Jose 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 and that the results could differ from those implied in these statements. Please note that the forward-looking information is based on certain assumption and is subject to risks and uncertainties and I invite you to consult 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. So with that, I'll turn the call over to Jose.

Jose Boisjoli -- President and Chief Executive Officer

Thank you, Philippe. Good morning everyone and thank you for joining us. Fiscal year '21 has been a very unusual year as we went through a period of temporary production shutdowns followed by a surge of consumer demand for our products, which continue to this day. While this dynamic put pressure on our people, our suppliers, and our dealers, everyone rose to the occasion to make the most of this opportunity while answering the health and safety of our team everywhere around the world. I would like to thank them for their hard work and dedication throughout this period, which allow us to deliver outstanding results with exceptional retail sales growth and a record normalized EPS.

Let's turn to Slide 4 for a more detailed look at key highlights for fiscal year '21. During the year, we proactively managed the impact from the pandemic by protecting our employees and preserving our financial flexibility. We reduced our cost base, refocused our capex plan, and enhanced our liquidity position. We also delivered exceptional retail growth across all our product lines by supporting our dealer network through a surge of customer demand as well as attracted and nurture an unprecedented level of new entrants to the industry.

Operationally speaking, we successfully executed a record production ramp-up after the temporary shutdown of our site and managed our volatile supply chain tightly to limit disruption and deliver on our plan. And we can't forget the wind-down of the Evinrude outboard engine product to refocus our time and investment on our boat brands. In parallel, we continue to invest in our future growth. We broke ground on the construction of a new side-by-side manufacturing facility in Mexico, introduced multiple models across all our product lines, and invested a record amount in R&D. All-in-all, we've delivered an exceptional year despite the turbulence caused by the pandemic and prepared the company for the future.

Now let's turn to Slide 5 to review the financial highlights of the year. Our revenue for the full year were down 2% primarily due to the temporary suspension of our operations earlier this year and the wind-down of the Evinrude outboard engine production. Despite this top line pressure, we managed to grow our normalized EBITDA by 24% to end the year at CAD1 billion and our diluted normalized earnings per share to an impressive 41% to reach CAD5.39, above our guidance range. We're able to achieve this record result due to our team's agility to quickly implement initiatives to mitigate the impact of the pandemic while at the same time taking advantage of the surge in consumer demand.

Turning to our exceptional retail performance for the year on Slide 6. We started the year with a strong retail momentum growing at a pace of about 15%, which was accelerated by the onset of COVID-related restrictions. We experienced a surge in demand as many consumers turned to our product, including a higher than normal influx of new entrants to the industry. Interestingly, the level of new entrants increased to over 30% this year compared to the normal 20% we typically experience. All of this led to a 25% year-over-year growth for our powersports product retail in North America. What is even more impressive is that all our product lines experienced the same dynamic at varying degrees excluding personal watercraft, which was the most affected impact by the production shutdown. Our powersport product generated 30% increase in retail.

Turning now to the fourth quarter slide on -- the fourth quarter on Slide 7. As you can observe, demand remained very strong in Q4 as we outpaced industry growth in most markets. Powersports retail growth accelerated in North America with retail up 30%. Demand for our snowmobile was extremely strong. In fact, we started to run out of inventory in certain regions in January which affected our overall retail. Excluding snowmobile, our retail is up 41%. And retail was also strong in international market as product availability improved delivering retail growth of 9% in Latin America, 11% in EMEA, and 20% in Asia-Pacific.

Turning now to Slide 8 for a deeper dive into North American retail by product line, which represents over 70% of our consolidated revenues. Again this quarter, we've delivered solid growth across the powersports product portfolio. Side-by-side and ATVs both experienced strong consumer demand with retail up in the mid 30% and 40% respectively. Three-wheeled vehicle and personal watercraft are both off to a strong start of the season with retail up in the high 30% and 90% respectively. And we are having a very good snowmobile season posting a second consecutive quarter of over 20% retail growth despite product availability affecting our growth at the tail-end of the quarter. We are very pleased with the strength of our lineups, which continue to drive strong consumer demand.

Turning to Slide 9 for an update of our inventory and production capacity. As you can observe, our dealer network inventory is down 67% compared to the same period of last year. In order to improve product availability and reach our long-term market share objective, we are ramping up production and investing in additional capacity. Recall that we are in the process of building a third side-by-side facility in Juarez, which expected to provide us with an additional 50% of capacity. The project is progressing as planned and the production ramp-up is scheduled by the end of thid quarter.

We are also moving forward with investment in our Queretaro facility for another assembly line providing us with an additional 30% capacity for personal watercraft as well as for Project M motorized hull. The Project M motorized hull will be assembled in Queretaro, but the final assembly of the pontoon will be done at our Sturtevant facility in the U.S. Both projects are progressing as planned and the production ramp-up is expected to start in the fourth quarter. These capacity expansion initiatives will allow us to grow and seize market share opportunities supporting the achievement of our growth objective.

Now let's turn to Slide 10 for the year-round products. Revenue were up 8% driven by a richer product mix in side-by-side and lower sales program partially offset by a lower volume of three-wheeled vehicles. We shifted some of the production of three-wheeled vehicle into fiscal year '22 so that we could extend the production schedule for snowmobile to seize the strong demand opportunity this winter. Recall that we're producing the Spyder F3 and RT and the Ski-Doo snowmobile on the same assembly line in Vancouver.

On the retail side, seven months into the season '21, the North American side-by-side industry is up in the high 20%. Can-Am side-by-side is gaining share season to date, especially in the utility segment with retail up in the low-30%. We also performed well in international markets as the inventory availability improved with retail being up about 40% in EMEA and in the high 20% in Asia-Pacific. For side-by-side, we recently introduced an all new Commander platform for model year '21. The product was well received by both the media and our dealer network. This should allow us to resume market share gains in the Rec-Ute segment, a category in which we had been losing ground in recent years due to our aging offering.

Turning to ATV. The North American industry is also seven months into its season '21 and retail is up in the high 20%. Can-Am is gaining share season-to-date especially in the mid-CC segment with retail up in the low-30% over the same period. We are very happy with the momentum we are seeing in the ATV business. Now looking at three-wheeled vehicles, very early in the season, the North American three-wheeled industry retail is up in the low-teen percent while Can-Am three-wheeled vehicle retail is up in the high 30%. We are ready for another good season with a very solid go-to-market plan. We continue to drive solid momentum with the media. The product continues to attract a diversified consumer base notably experiencing incredible momentum with women.

We are focusing on inclusion and education to attract more women to the sport. I encourage you to go to our website and watch our new Women of On-Road video, which was launched a few weeks ago. I am very proud of this initiative. Finally, the rider education program registration continued to trend above-expectation. We have a very good plan for a successful season '21.

Turning to seasonal product on Slide 11. Seasonal product revenue were up 24% resulting from higher shipment of boat snowmobile and personal watercraft as well as from lower sales program due to a strong retail environment. Now looking at retail. 10 months into its season '21, the North American snowmobile industry is up in the high-teen percent. Our Ski-Doo lineup continued to outpace the industry with retail growth that is up in the low-20% over the same period. As a result, our market share continued to grow reaching a new record level. Looking at the international market, our Ski-Doo and Lynx lineup are performing very well in Russia, outpacing the industry with retail up in the high 20%. In Scandinavia, the industry is down mid-single digit due to the late arrival of snow, but retail accelerated in February and we are outpacing the industry.

Also, we recently held our virtual product introduction event where we introduced our model year '22 Ski-Doo and Lynx lineups. One of the key highlights of this product announcement was the introduction of Lynx, the first new snowmobile brand to the North American market bringing an exclusive new alternative for snowmobile riders with three high-end Lynx models. These premium models provide a different riding experience and should attract a new type of rider to BRP. They will only be available as pre-sold order in spring and will be offered as a premium brand. As a reminder, in Scandinavia, we have over 60% market share with our combined Ski-Doo and Lynx product lines. The Lynx introduction is a new growth opportunity for us and marks an exciting new chapter in snowmobiling history with the fifth brand now available in North America.

We also strengthened our Ski-Doo line up with the introduction of the Smart-Shox technology as we have done with the 3x [Phoentic] last year, the addition of two new turbo engine options, and the return of the Mach Z muscle sled for this year only. With these additions, we believe that our lineups is very well positioned to have a successful season '22.

Turning to personal watercraft, while still very early in the season, the North American industry retail is up in the low 70%. Sea-Doo retail is up mid 50%, slightly lagging industry growth since we ended last season with record low level of inventory in the network. As we improve our product availability, we started to outpace the industry in Q4. The trend is also very good in counter seasonal market with retail up mid 20% in Australia and New Zealand and up over 30% in Brazil. Current trends are very strong and on top, we have unprecedented level of customer pre-season certificate. In fact, as of today, over 50% of Sea-Doo are already pre-sold to consumer in North America.

Continuing on Slide 12 with a look at powersports part, accessories, and apparel and OEM engine, which experienced a similar trend as vehicle. Revenue were up 19% driven by a higher volume of PA&A coming from a higher replacement parts revenue due to increased usage of products and strong unit retail that generated a lot of accessories sales. The focus on our Lynx ecosystem is paying off. Now looking at the marine, revenue were down 17% impacted by the wind down of the Evinrude outboard engine. At the retail level, Telwater is in the core of its retail season in Australia and is performing very well with retail up over 20% for the quarter.

In North America, we are off-season, but our booking for the season '21 is completed and we'll be running at maximum production capacity until the end of July. We are pleased with the performance of our boat brand and the progress we are making on our strategy to transform the marine industry. The wind-down of Evinrude is now completed and we are focusing on our boat brands with accelerated investment in new technology and innovative product as well as Project M and Ghost. With that, I will turn the call over to Sebastien.

Sebastien Martel -- Chief Financial Officer

Thank you, Jose and good morning everyone. We completed fiscal year '21 with record results for a fourth quarter as we delivered on our production plan and continued benefiting from a lower sales program environment and a richer product mix driven by the very strong consumer demand for our products. Our revenues reached a record level for a fourth quarter at CAD1.8 billion, up 12%. Our normalized gross profit margin ended at 27.8% representing a 410 basis point increase driven by higher volume and richer mix of products sold and a favorable impact from pricing and sales programs, which were partly offset by unfavorable foreign exchange rate variations.

Driven by this strong improvement in our normalized gross profit, our normalized EBITDA ended the quarter up 41% to reach CAD313 million and our normalized diluted EPS was up 63% to CAD1.82. This resulted in a very strong free cash flow generation of CAD198 million for the quarter, bringing the total to CAD674 million for the year. Also, just after the end of the year, we took advantage of our solid liquidity position with CAD1.3 [Phonetic] billion of cash to deleverage our balance sheet by $300 million and significantly reduced the overall interest rate on our debt, leaving us with a much lower interest expense and a very robust balance sheet that provides us with the flexibility to sustain our investments in the business all the while continuing to return capital to our shareholders.

Turning to Slide 15 for a look at the key drivers of our normalized gross profit margin improvement for the year. Our normalized gross profit margin was up 190 basis points for the year to reach 25.9% driven by a positive impact from volume mix, pricing, and sales programs for 440 basis points, which was partly offset by negative impacts from production costs and depreciation expense for 130 basis points, unfavorable fixed cost absorption due to the temporary plant closure earlier this year for 50 basis points, and unfavorable foreign exchange rate variation for 70 basis points. Looking ahead, our normalized gross profit margin should be mostly flattish in fiscal '22 as we expect the positive impact from lapping the two months of plant closure to be mostly offset by inflationary pressures related to commodity pricing and logistics.

Moving to Slide 16 for a look at our network inventory position. Despite that we had increased our facilities output and delivered on our production plan in the fourth quarter, the consumer demand for our products continued to outpace the supply and we ended the year with both our network and our yard inventory at low levels, down 67% and 38% respectively. This dynamic is experienced across the product portfolio and we are taking necessary actions to manage the growth in all of our product lines.

For personal watercraft, boats and three wheels, our factories are running at full capacity and we are on plan to meet dealer orders in time for the peak retail season. And for off-road vehicles, we ramped up the production rate and we are optimizing our product mix and we have additional production capacity coming online in the third quarter.

As for snowmobile, we expect in the season with a low level of inventory in the network and we are well positioned to restock our dealers in time for the next season. So while our inventory remains below optimal levels at the moment, we are taking necessary actions to manage the growth in our business and meet the strong demand for our products and we believe we are well positioned to make the most of the opportunity that lies ahead of us.

Now on to the guidance starting on Slide 17. Given the sustained strong retail demand for our products and the inventory restocking cycle we have in front of us, fiscal '22 is poised to be a very strong year for BRP. We expect to see robust revenue growth across our product lines driven by the continued strong consumer interest for powersports products, a solid year of new product introductions, and increased production volumes supported by our plants running at full capacity throughout the year, and by additional capacity coming online in the latter part of the year.

In terms of profitability, we expect another year of very strong EBITDA margin driven by the positive impact coming from volume growth, the full year benefit of winding down the production of Evinrude outboard engines, and as we get better leverage effect on our operations, notably as we lap a year where we suffered from inefficiencies due to the two months of production shutdown. As indicated, the guidance assumes that we will be able to run our plants throughout the yearwithout shutdowns like we experienced last year.

However, like all companies in our industry, we are dealing with supply chain challenges that need constant monitoring and attention in order to keep our plants running. Commodity costs have also increased coming from the surge in worldwide demand. Both these factors are increasing our operating costs and we have assumed in our guidance that we will be operating in this environment for most of the year. We also expect as all OEMs ramp-up their production, we may see an increase in the level of promotional activity in the back half of the year. Given the more uncertain and unpredictable nature of these elements, we have provided guidance ranges for normalized EBITDA and normalized EPS that are unusual for this time of year.

Finally, given our investments in additional production capacity and as we are catching up on certain projects we had de-prioritized from last year, fiscal '22 is expected to be a big year in terms of capex investment. Now, let's go through the numbers on Slide 18. As I mentioned, we expect very solid growth across all our product lines with total company revenue guidance up 25% to 30%. While our guidance calls for solid top line growth, we expect that consumer demand will continue to outpace the supply of our products for the better part of the year despite running our factories at full capacity, which means that we will only plan to start rebuilding our dealer network inventory later in the year and throughout fiscal '23.

Turning to the profitability, for the reasons discussed previously, we are starting the year with a wider than usual EBITDA guidance range with a growth of 22% to 30% for the year. We are assuming a depreciation expense of CAD280 million, an interest expense of CAD75 million resulting from the refinancing of our debt done earlier in February, and using a share count of 87 million shares, which accounts for the shares repurchased under our NCIB so far. Our guidance calls for normalized EPS growth of 35% to 48% resulting in a range of CAD7.25 to CAD8.00.

In terms of capital allocation as I mentioned, fiscal '22 will be a big year in terms of capex as we are planning for investments between CAD575 million and CAD600 million for next year. Still, even with this important level of investment, we expect to generate positive free cash flow for the year and with our strong balance sheet, we are well positioned to continue returning capital to our shareholders notably as we announced the increase of our quarterly dividend by 18% to CAD0.13.

Finally, as you already realized, our plan calls for the potential achievement of our M25 EPS financial objective this year. While the current situation definitely accelerated our volume growth, we still have many key strategic initiatives to deliver on our long-term plan such as the marine strategy, our cost saving initiatives, the electrification of our lineup, and a strong pipeline of product introductions that are expected to drive continued market share gains, notably for side-by-side.

On top of these initiatives, last year provided us with many key learnings and new opportunities such as an influx of new entrants that will benefit our business going forward. So while we may achieve our initial financial objectives this year, we remain focused on delivering on our key strategic initiatives and we are confident that with our plan and the opportunities we have in front of us that we are well positioned to continue delivering solid growth in the years to come. We look forward on updating you on our long-term financial targets at a later date when the global situation is more predictable. And with this, I will turn the call back to Jose.

Jose Boisjoli -- President and Chief Executive Officer

Thank you, Sebastien. Before I conclude, I would like to briefly discuss the announcement we made this morning regarding electric vehicles. We have always said electrification was not a question of if, but when. Today, we are very excited to unveil more detail of our plan of delivering market shaping product that will enhance the consumer experience by offering new electric options for our products. This announcement builds on previous investment we already made in this space over the years. For instance, recall that we introduce electric cart for racing in 2017 and for our Rotax Max Dome facility in 2019.

More specifically, we are developing our own Rotax modular electric power pack technology, which can be leveraged across our product line and provides us with a more cost-effective solution just like we do for our combustion engine. There will be two poles of development, one in Gunskirchen focusing on the torque side, the inverter and the high performance electric motors, and another in Valcourt, which will focus on the energy side, the charger, the battery pack as well as the complete integration into the vehicle. As a result, we will be adding many resources to our team in Austria and in Canada. We intend to invest CAD300 million over the next five years to electrify our existing product lines by the end of calendar 2026. In fact, you can expect the first product to be introduced to the market within the next two years, followed by a rapid roll out across all our product lines.

With the engineering know-how and innovation capabilities of our team, we've been working hard to define the best strategy for our electric power technology. While our current product portfolio is very strong and exciting, our objective is to expand our offering with electric option for each product line to attract new customers to continue to grow the industry. To conclude, we had an exceptional fiscal year '21 with record results. We were fortunate to be able to take advantage of an unexpected surge in consumer demand. We are sustaining this momentum in fiscal year '22 as we are off to a very strong start seeing continued strong retail demand across all our product lines.

Our recent snowmobile and side-by-side product launches generated a lot of excitement with dealers and consumers alike. Also, our summer products season looks very promising with the continuing trend of first-time buyers and staycation. We are committed to ensuring that these new entrants are converted into lifelong customers once they have experienced our vehicles and boats. While the health and safety of our people remain a priority, we are focused on managing the supply chain tightly, keeping our operation running, and ensuring the smooth production ramp-up of Juarez 3 and Queretaro.

In fiscal year '22, we will be focusing on several important investments that will drive growth in fiscal year '23 and beyond. We are working on electrifying all our product lines by the end of 2026 and are accelerating our investment in R&D. We are planning for a strong year of product introduction and building a third side-by-side facility in Juarez. We are also investing in our boat brand as part of our marine strategy with Project M and Project Ghost. With our solid start of the year, combined with these key investments, we are well positioned to drive solid result in fiscal year '22 and are confident that we will deliver on our guidance.

The guidance has a wider range than usual with normalized EPS between CAD7.25 and CAD8.00 as the market and the dependability of the supply chain remain uncertain. As mentioned by Sebastien, with this guidance, we are in line to meet the financial target of M25 earlier than anticipated. While our strategy remained largely intact, we intend to give you an update at a later date. I would like to express my gratitude to our employees, suppliers, and dealers for their agility, dedication, and resilience during this past year, which helped drive our exceptional results. On that note, I turn the call over to the operator for questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Craig Kennison from Baird. Your line is now open.

Craig Kennison -- Baird -- Analyst

Oh, hey, good morning and congratulations on the performance. Excellent work. I had a question on the longer-term I guess plan for infrastructure around electric vehicle charging. Obviously, it's not -- these are not products that are on roads and so you're going to have to invent the infrastructure as well. Are you going to rely on homeowners or ranchers or is there a plan in place to ensure I guess charging infrastructure?

Jose Boisjoli -- President and Chief Executive Officer

Yeah, good morning, Craig. No, there is no immediate plan for the infrastructure. Obviously, like you just said, the usage of our product is mainly on road -- off-road sorry, then it's very difficult to develop that infrastructure everywhere in the world. That being said, the product will be -- you will be able to charge a product at home, you will be able to charge a product in any car charging station, but the plan for the charging station off-road is not finalized at this point.

Craig Kennison -- Baird -- Analyst

Got it and then maybe you're not prepared to comment on this, but I think you alluded to some modular construction to your battery packs that would suggest maybe you could buy a multiplicity of these packs and then charge them as you're operating the vehicle and then replace a dead battery with a charged one. Is that the right mindset?

Jose Boisjoli -- President and Chief Executive Officer

No, I think the way you should see it is I give you an example, we've been, I think we are good to design product with a modular approach and I gave you the example, the 900 ACE engine, we are able to use it on snowmobile, on watercraft, on three-wheel, and on-side-by-side and it's a basic same engine with three different applications, different transmission system and that's what we mean when we talk about the modular approach, we are designing a few modules of different components that you can combine them differently to be applied to all product line.

And I will conclude on this, you know, the EV challenge is to balance the range, the weight, and the cost. You can have longer range, but it will affect the weight and the cost, then we need to find the right balance that is acceptable for the customers and to be able to have a great customer experience.

Craig Kennison -- Baird -- Analyst

Awesome. Thank you so much. I'll get back in the queue.

Jose Boisjoli -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Brian Morrison from TD Securities. Your line is now open.

Brian Morrison -- TD Securities -- Analyst

Good morning. I understand that you can make up some of the capacity in the second half of the year as your new facilities come online, but I'm a little bit more curious on the existing facilities right now and on Slide 9, you talk about the ramp in capacity. So I'm wondering, can you give us comfort how you can optimize your current facilities to keep up with the retail demand in the first half of the year until you get additional capacity coming on in the back half.

Sebastien Martel -- Chief Financial Officer

Yeah, good morning, Brian. As of now, I mean, we are running our plants at full capacity and we do expect that we'll be able to meet retail demand, especially for the seasonal products, so personal watercraft, three-wheel, so we are well positioned in the boats as well. So that's obviously positive. We are running at full capacity on our ORV plants, because obviously demand continues to be strong, even better than expected in February and early March. That being said, we'll still be unable to build network inventory in the first half of the year. We believe that we will meet demand and that's it and it's more going to happen in the second half of the year and more as well as I said in my prepared remarks in fiscal year '23. So it's still going to be tight in terms of offering. Consumers will not necessarily have the full choice that they used to have two or thre years ago.

Brian Morrison -- TD Securities -- Analyst

And side-by-sides, were they constrained in Q4 by available capacity?

Sebastien Martel -- Chief Financial Officer

Yes, inventory is very lean and yes, we are still constrained.

Brian Morrison -- TD Securities -- Analyst

Thank you and then last question just in terms of leverage, you're well below your ceiling, Seb, and I'm wondering if you would consider potential accelerated return to shareholders such as you've done before?

Sebastien Martel -- Chief Financial Officer

Yeah, well, obviously, as you probably saw we were active with the NCIB at the end of the fourth quarter and we continue to be and the share count reflects that. Obviously, these are discussions we are having with the Board. We do have ample financial flexibility. So all the options are open for now.

Brian Morrison -- TD Securities -- Analyst

Thank you very much.

Operator

Your next question comes from the line of Robin Farley from UBS. Your line is now open.

Robin Farley -- UBS -- Analyst

Great, thanks. I know you talked about your shipments that you would probably only be able to meet demand in the first half. Can you give us a sense of the cadence. I guess, I would like to sort of try to be able to back into kind of what retail grocery your planned shipments could support in the first half?

Sebastien Martel -- Chief Financial Officer

Yeah, well, maybe if I give you my or let's say some expectation on how I see retail progressing let's say going forward. Q1 again is off to a good start. So we believe that retail is going to be up probably high-single digits in the first quarter. We are lapping obviously a strong quarter in Q2, retail was up 40%. You might remember that our plants were closed during -- for Q1 and part of Q2 as well and therefore that retail growth came from inventory replenishment, which is a lever we don't have this year.

So my expectation is that retail will be down in the second quarter, maybe high-single digit to low-teens. And then as the year progresses, we expect probably retail to be flattish to low-single digit again depending on the quarter but as I said [Technical Issues] is going to be lean and so we don't have that big lever that we had in fiscal year '21 for -- to drive retail.

Robin Farley -- UBS -- Analyst

Okay, great, that's helpful. And then I'm also curious your guidance assumes that kind of promotional activity comes back in the second half and yet everybody seems to be fairly supply constrained. So I mean I don't know if that's -- if you're just being conservative there, but can you -- I don't know if I missed if you said in your opening remarks what ASP was in Q4 and for the full year just so we can kind of think about what we're comping there without having a lot of commercial activity?

Sebastien Martel -- Chief Financial Officer

Yeah when I look at fiscal year '21 and the impact of the favorable promotional environment, it brought about 200 basis points of favorable lift to the margin. Q1 was a tough quarter where we were more intense in terms of promotional activity. So our expectation is that for next year that 200 basis points should be there. So, continue to be favorable in Q1, Q2 and probably a bit more, we'll call it more conservative in our planning for Q3, Q4, which brings it to about 200 basis points for the full year.

Robin Farley -- UBS -- Analyst

Okay, great and just my last quick one, can you get to the top-end of your range kind of with current supply chain, the rate at which you're getting or would the top-end of your range kind of need the supply chain to improve?

Jose Boisjoli -- President and Chief Executive Officer

No, I mean, the way and the guidance has a wide range because of the supply chain. We believe the demand will be there this year. Obviously, like every OEM in the world I think right now there is a challenge on the daily basis. Then if we are able to not interrupt the production, we could be on the higher range of the supply chain -- the range, sorry, but if, obviously there is a more interruption than we're planning, we could be on the lower range of the guidance. That's the way to see it.

Robin Farley -- UBS -- Analyst

Okay, all right, great. Thank you very much.

Operator

Your next question comes from the line of Benoit Poirier from Desjardins. Your line is now open.

Benoit Poirier -- Desjardins -- Analyst

Yeah, good morning, gentlemen and congratulations for the strong finish. Could you talk a little bit about the contribution of key strategic initiatives that will be kind of impacting your revenue going forward. I'm especially referring to the Project M and Project Ghost in terms of what we could expect beyond fiscal '22 in terms of revenue contribution from key strategic initiatives.

Jose Boisjoli -- President and Chief Executive Officer

Yeah, good morning, Benoit. Maybe the way to position it is, we don't believe in fiscal year -- we believe that in fiscal year '22, the demand will remain strong till the end of the year. The question is to manage the supply chain and this is why we have a wide range in our guidance. If I look at fiscal year '23 and beyond, obviously, we are investing. Juarez 3 will be up and running on the back end of Q3, then it will be operating only -- it will be in the ramp-up in Q4 and will be fully operational next year. Project M will start delivery late in Q4. Then, big impact will be in fiscal year '23. We're also adding additional capacity for watercraft in Queretaro, 30% that will come fiscal year '23. Then all those -- all those key strategic initiative will benefit more '23 than '22, but basically we're quite optimistic about the demand for '22 and '23 I mean, it's too early to call, obviously, but '23 we're preparing to be ready if the demand remains.

Benoit Poirier -- Desjardins -- Analyst

That's great color, Jose and how should we be thinking about the contribution specific to Project M and Project Ghost in the long-term from a revenue standpoint?

Sebastien Martel -- Chief Financial Officer

Well, obviously, it's part of our pillar from M25 which we shared with everyone now 18 months ago. Obviously, we have strong ambitions for the marine business. It is a big industry over CAD20 [Phoentic] billion and so we believe that we have the ability of getting a big share of that. Project M, you saw some bits of it. It's about creating an entry-level product that brings value to consumer and leveraging the know-how that we have and so we believe that could be a good driver of growth for us and obviously with our innovation abilities on Project Ghost and with our marine brands, again, who knows where we can bring it, but again, our plan for marine is quite ambitious as you saw when we presented the Mission '25.

Benoit Poirier -- Desjardins -- Analyst

That's perfect. And my last question with respect to electrification, you provided great details about the strategy going forward. I would be curious to have more color about the assembly line whether you need a separate assembly line whether there's been -- there will be some cannibalization or the revenue would be incremental to your current product line and whether it would be margin accretion or accretive or dilutive at the beginning and how you see the overall margin impact from electrification?

Jose Boisjoli -- President and Chief Executive Officer

That's a loaded [Phonetic] question, Benoit. No, I mean the assembly line -- the plan is to assemble the product in the same line where we are assembling combustion engine vehicle then every line will be upgraded I would say to assemble the new electric vehicle, then this is -- this is one. The other thing is the whole strategy about the electrification is to attract new set of customers. I give us some example, a person that use an ATV to go hunting for a week, he will not be attracted to an electric ATV because there is no charging station where he goes in the woods.

Then we want to create in each product line a new product category that will appeal to some of our existing customer but also to new customers because there is an appeal riding electric vehicle and we believe we'll be able to grow the industry in a different way. The other thing, the last thing I would say about cannibalization, my philosophy on this, I prefer to cannibalize ourselves than let someone else cannibalize us and that's why for us going electric, it's a normal evolution in the technology.

Benoit Poirier -- Desjardins -- Analyst

Thanks very much for the color and congrats again.

Jose Boisjoli -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Mark Petrie from CIBC. Your line is now open.

Mark Petrie -- CIBC -- Analyst

Hey, good morning. And I'll echo the congrats from others. I just wanted to come back to the dynamic of new to industry. Wondering if you can just provide some more context about how that evolved through the year and more detail about how that varied by product?

Jose Boisjoli -- President and Chief Executive Officer

Yeah, good morning, Mark. Then like I said in my remarks, we ended the year with about 30% of buyer of people to purchased our unit that are new to the industry versus about 20% in the past. And if I look product line by product line, snowmobile typically has a very, very low ratio of new entrants and this year was three [Phoentic] time, but it's still a high-single digit. Watercraft this year half of the people who purchased our products were new entrants. Three-wheel, two-thirds were new entrants and for off-road, we're about 20%, 25% new entrants, but what is amazing and we've done a detailed survey in the last few weeks, if you survey customer, those new entrants right now, 90% say that they want to stay in the industry for long-term and this is quite amazing ratio.

The other thing that is interesting and I believe we are well positioned because of our experience on Spark and Ryker, we are well positioned to talk to those new entrants and keep them in the powersport industry. I mean, we improved the quality of the shopping experience. We launched specific initiative like Rider Education Program, the women mentoring program, the Uncharted Society. And we have a lot of digital tools to talk to those people. Then I believe we are extremely well positioned to make them lifetime consumer, but more to come and we are ready to do the best to convert as many as we can.

Mark Petrie -- CIBC -- Analyst

Okay. Great. That's helpful. Also, I just wanted to ask about your expectations for opex through the course of fiscal '22. Obviously, there's lots of noise in fiscal '21. You've talked about wanting to invest specifically in the initiatives around electric vehicles. Could you just give us a sense of sort of how to think about fiscal '22, I guess, specifically on selling and marketing and G&A?

Sebastien Martel -- Chief Financial Officer

Yes, good morning, Mark, if you look at our Q4 results, our opex was up about 13% versus a year ago. We expect that trend to be -- to continue in terms of absolute increase next year. Opex should increase at the same level as revenue growth. As you mentioned, last year was a funny year with a lot of noise but obviously, we have a lot of growth initiatives that we are investing in R&D will continue being an area where we want to continue to invest. So ballpark, opex should follow the trend of revenue growth.

Mark Petrie -- CIBC -- Analyst

Okay, great, helpful. Thank you.

Operator

Your next question comes from the line of Martin Landry from Stifel GMP. Your line is now open.

Martin Landry -- Stifel GMP -- Analyst

Hi, good morning everyone. My first question is with regards to pricing. Commodity costs are increasing. You also have additional costs related to logistics and supply chain inefficiencies. So I was wondering, have you taken price increases this year to offset these additional costs?

Jose Boisjoli -- President and Chief Executive Officer

So far, no. You need, Martin, to balance the short-term and mid-term. In our product -- our products are not commodity. I mean if you buy a snowmobile at a high price, and the year after, the OEM reduce the price, then you are stuck with the resale value that is lower and it's very sensitive. Then in a typical year, we increase pricing of about 1%. That's the average of the last few years and we're right now, monitoring, obviously, the cost increase for commodity and everything and even our efficiency. This is a lever that we have, but so far, we didn't do it, and we will continue to monitor the overall situation but it's something we will consider if things get very, very difficult, but we didn't do it so far.

Martin Landry -- Stifel GMP -- Analyst

Okay and my second question is more longer-term. COVID and staycations have been a really good driver for the industry and I'm wondering in your longer-term plans, what do you think is going to happen to demand when travel returns to normal? How do you see things evolving?

Jose Boisjoli -- President and Chief Executive Officer

Obviously, that's not our field of expertise but if you read more and more articles or expert regarding traveling, vacation, the cruise, airline, people believe it's more two, three, four years before we go back to the old normal, I will call it that way and that's why we believe people will probably travel more in the time, but we don't see the trend that we're going right now through going from on and off. It will take some time to taper down and that's why we like the challenge to convert those new entrants to the our industry.

Martin Landry -- Stifel GMP -- Analyst

Okay, perfect and thank you for your results.

Jose Boisjoli -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Gerrick Johnson from BMO Capital Markets. Your line is now open.

Gerrick Johnson -- BMO Capital Markets -- Analyst

Good morning. Thank you. So year-round revenue was up about 8%, right, in the fourth quarter and I think the back half, call it, 9%. By my estimate, ORV was probably up 11% or 12% and sorry to bring them up, but Polaris grew off-road by about 23% in the back half. So you lost some wholesale share there and it looks like you lost some side-by-side retail share, not a lot, but a little bit in the quarter. What is your ability to reclaim that wholesale share with the capacity you have now? That's one. And number two, how dependent are you on the new side-by-side facility to achieve the guidance that you have? I realize it's a 3Q, 4Q ramp, but how dependent on a, let's call it,10, it's a perfect ramp up and zero, it's an abject disaster. What level does that have to be between zero and 10 to achieve your numbers?

Jose Boisjoli -- President and Chief Executive Officer

Gerrick, I gave you some numbers about our side-by-side growth over the years. From fiscal year '16 to fiscal year '20, every year, we grew between 25% and 35% retail. Then we used to grow and chase capacity and since the Defender and Pro back in 2015, we delivered on our plan. Right now in fiscal year '21, we grew 40%, then an incredible momentum and the volume we delivered in '21 is 5 times in unit what we we're delivering before Defender, then significant growth. Then for us, we might lose a few share a quarter and gaining back the following quarter but when you look at the big picture and the long-term trajectory, I'm very confident that we can achieve our objective of 35%-plus market share in the time line that we have said before.

Then for me, obviously, I don't like to lose 1 point in one quarter, but I can live with it because I believe our plan is very strong to achieve our long-term trajectory. Now in terms of the facility, obviously, and you know us, we've been ramping up new facility a lot of time in the last few years. We never missed a beat. Right now, Juarez 3 construction is on plan. Then obviously, we depend on Juarez 3 start-up to deliver on this year guidance. But -- I mean we have some flexibility, we always put some cushion, but overall, we depend on the Juarez 3 to deliver on the year-end guidance.

Sebastien Martel -- Chief Financial Officer

I think the area, which is the risk for all OEMs, Gerrick, is more on the supply chain stability. As you see in the news, it is very fluid every day, every week. This week is the Suez Canal that's clogged up. Next week, who knows what's going to happen. And that's probably an area where in terms of risk factor is much higher versus our ability to start-up the new plant.

Gerrick Johnson -- BMO Capital Markets -- Analyst

Okay, yeah, I'm still waiting for my barbeque grill that I ordered two months ago, but Jose, I've got to say since I've known you since 2013, you've basically achieved everything you set out to achieve. So I applaud you for that and I put faith in the numbers that you put out there. So thank you very much.

Jose Boisjoli -- President and Chief Executive Officer

Thank you. More pressure. Thank you.

Operator

Your next question comes from the line of Fred Wightman from Wolfe Research. Your line is now open.

Fred Wightman -- Wolfe Research -- Analyst

Hey guys, just a quick follow-up. Seb, in one of the earlier responses for the retail outlook, did you say that you were expecting 1Q retail to be up high-single digit or did I mishear that?

Sebastien Martel -- Chief Financial Officer

No. You heard correctly.

Fred Wightman -- Wolfe Research -- Analyst

Okay. Could you just sort of touch on what would drive that number relative to what we saw this quarter, just given sort of the commentary you've had on quarter-to-date performance, and the fact that compares aren't too much tougher until next quarter. So sort of what's driving the slowdown in that outlook?

Sebastien Martel -- Chief Financial Officer

Well, listen, obviously, inventory availability is one of the factors. Delivery of units to the network as well as another factor or side-by-side deliveries will be higher in the second quarter than in the first quarter. So it's obviously a combination of factor and personal watercraft really kicks up in terms of retail, usually in the second quarter. Can some retail of personal watercraft be accelerated in the first quarter? We'll see what the next few weeks reserve, but that's our current read.

Fred Wightman -- Wolfe Research -- Analyst

Okay and then just to sort of tie that with Gerrick's question. I mean understand over time, market share generally is up and to the right and really positive but given some of that product tightness and the comments for the retail outlook, should we expect some choppiness on the market share side here for the next few quarters until some of that capacity comes online in the back half of the year?

Sebastien Martel -- Chief Financial Officer

We're not -- again, we don't believe that our competitors have that much excess capacity versus us. I think everyone is facing the same challenges of ramping up supply chain, et cetera. So again, there might be a bit of choppiness, but as Jose mentioned, our long-term plan is very solid. Our product lineup is also very solid and so our target of being a leader in the side-by-side industry as we are today and even growing is still very, very valid.

Fred Wightman -- Wolfe Research -- Analyst

Great, thank you.

Operator

Your next question comes from the line of Cameron Doerksen from National Bank Financial. Your line is now open.

Cameron Doerksen -- National Bank Financial -- Analyst

Thanks. Yeah, good morning. I guess a question on the M25 plan that obviously you're achieving well ahead of schedule, but you did mention that you still have some of these tailwinds from some of the cost initiatives that you laid out in that plan. Can you just maybe go through what's left to be done on that front? And what we should expect from, I guess, from a margin tailwind from those costs and leaning out initiatives?

Sebastien Martel -- Chief Financial Officer

Yes well, we're still very early in our M25 plan on the cost initiatives. And honestly, obviously, with COVID priorities were shifted from our operations team to manage the day-to-day. As we said, it's a $300 [Phonetic] million saving that we want to achieve. That is going to provide a big lift to the margin improvement. And the other one is the volume growth, our objective of growing our side-by-side market share. We're still at 20% market share for side-by-side. That better asset utilization coming from the volume growth is also going to be a big driver of our margin improvement down the road.

Cameron Doerksen -- National Bank Financial -- Analyst

Okay. That's helpful. And just a question on cash flow in 2022. What should we expect from working capital? I mean, obviously, there was some -- fiscal 2021 was, again, a pretty weird year but what's your expectation for working capital usage in fiscal 2022?

Sebastien Martel -- Chief Financial Officer

Yes. The inventory, we finished the year quite lean, down about CAD185 million of inventory compared to the previous year. So obviously, our objective is to rebuild that yard inventory. So we're looking at a potential working cap investment in fiscal year '22, ranging from CAD150 million to CAD200 million.

Cameron Doerksen -- National Bank Financial -- Analyst

Okay, perfect. That's all I had. Thanks very much.

Operator

Your next question comes from the line of Jaime Katz from Morningstar. Your line is now open.

Jaime Katz -- Morningstar -- Analyst

Hi, good morning. Nice quarter. Thanks for taking my questions. I hope you can just clarify whether or not there's any left over Evinrude flow through in Marine this year? I'm just trying to think about what that base stand-alone Marine business can look like, or whether we are pretty much completely through that?

Sebastien Martel -- Chief Financial Officer

We are completely through that. There's no units left in inventory at the end of the year.

Jaime Katz -- Morningstar -- Analyst

Okay and then I think I heard you guys say that the gross margin would be flat in 2022, and that 200 basis points were gained from lower promotions, but basically that if the promotional environment picks up, it will not happen until next year, and that's when some of that might give back not this current year that we're in now. Is that correct?

Sebastien Martel -- Chief Financial Officer

Yes that's correct. So if I compare, obviously, fiscal '22 to '20, there is a -- so that's two years. There is a lift coming from the promotional activity, about 200 basis points. When I compare '22 to '21, the promotional activity should be flattish in terms of margin impact.

Jaime Katz -- Morningstar -- Analyst

Okay and then lastly, because this is a pretty high year of capital spending for you guys project-wise. Is it right to think about capex longer term in that CAD300 million to CAD400 million range or is there a better number for that?

Sebastien Martel -- Chief Financial Officer

There is a better number, which is higher than the CAD400 million range. Obviously, as the business grows as we continue investing in technology because we believe that is a big part of being successful in our business, that requires capex investments. And so we expect meaningful dollars of investments going forward, yes.

Jaime Katz -- Morningstar -- Analyst

Great, that's all I had. Thank you so much.

Operator

Your next question comes from Derek Dley from Canaccord Genuity. Your line is now open.

Derek Dley -- Canaccord Genuity -- Analyst

Yeah, hi guys, congrats on a strong quarter and really strong outlook. This might be a bit early to ask this question, but I'm just wondering what you guys have seen with some of the new customers that came into the sport or into the space during COVID. Have you seen these folks look to perhaps upgrade their products or buy additional products. Just wondering how their activity has been?

Jose Boisjoli -- President and Chief Executive Officer

Yes. Like you say, Derek, it's a bit early to try to pinpoint any trend. I can tell you that those people are typically younger, the ratio of women are higher than it used to be. And the dealers even say that they see customers that they've never seen before in their dealership. Then it's a different profile of customers, but it's difficult to say where they will go next time. The only thing we survey in the last month was, are you happy with your Powersport or your product and do you intend to remain into the industry and again, 90% said, yes, we intend to remain in the industry.

Derek Dley -- Canaccord Genuity -- Analyst

And when they come in for the first time, are they typically looking for more of an entry-level product or are they just kind of buying whatever they can get their hold their hands on at this point?

Jose Boisjoli -- President and Chief Executive Officer

No. I think your assumption is right. If I look at the number, in last year, 50% of watercraft sold was to new customers and for three-wheeled two-thirds and that's why we had the Spark and Ryker, then your assumption is totally right. That being said, what we developed as a strategy is to talk to them often. When they come to the industry, they don't know where to ride. Then you need -- that's why the women mentorship is important because it's a woman who purchased a unit, who speak to the new entrant to say, hey, come to ride. There is a club there. There is a nice ride there. Then what is important is that the minute they purchase the unit, they know what to do with it. And this is a big learning that we had from the Spark and the three-wheel and that's what we're trying to implement everywhere into our other product lines.

Derek Dley -- Canaccord Genuity -- Analyst

Okay, that's great. Thank you.

Operator

There are no more questions. I will turn the call to Mr. Boisjoli to close the meeting.

Jose Boisjoli -- President and Chief Executive Officer

Great. Thank you, and thanks everyone for joining us this morning and for your interest in BRP. We look forward to speaking with you again for our first quarter conference call in June. Thanks again, everyone, and have a good day.

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Philippe Deschenes -- Manager-Treasury and Investor Relations

Jose Boisjoli -- President and Chief Executive Officer

Sebastien Martel -- Chief Financial Officer

Craig Kennison -- Baird -- Analyst

Brian Morrison -- TD Securities -- Analyst

Robin Farley -- UBS -- Analyst

Benoit Poirier -- Desjardins -- Analyst

Mark Petrie -- CIBC -- Analyst

Martin Landry -- Stifel GMP -- Analyst

Gerrick Johnson -- BMO Capital Markets -- Analyst

Fred Wightman -- Wolfe Research -- Analyst

Cameron Doerksen -- National Bank Financial -- Analyst

Jaime Katz -- Morningstar -- Analyst

Derek Dley -- Canaccord Genuity -- Analyst

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