2026.09.24 | GP | Consumer | Powersports Dealer Check

4Q26 Outlook Amid U.S.-Canada Trade Tensions

Primary:

PII

DOO:CN

Associated:

7272:JP

BC

HOG

Viewpoint:

Customer

Moderator: Katherine Spurlock (KS)

| Sep 23, 2026 | 43 Min Read

Ted Filer (TF), Owner - Filer's PowerSports

SU MMARY

Overview

The discussion focuses on the powersports industry, specifically examining the performance and outlook for companies like Polaris and BRP amid trade tensions between the US and Canada. The expert provides insights into the demand, pricing, and sales trends for various powersport vehicles, including ATVs, side-by-sides, snowmobiles, and personal watercraft. The conversation also touches on the impact of tariffs, interest rates, and fuel prices on the industry.

Key Insights

The expert notes a shift in consumer purchasing behavior, with affluent buyers increasingly driving sales, particularly in higher- priced, feature-rich side-by-sides and snowmobiles. Despite challenges such as high interest rates and fuel prices, the industry is well-positioned to cater to affluent customers who are less impacted by these economic factors. The expert highlights the resilience of the high-end market, drawing parallels to past economic cycles and noting that current conditions are reminiscent of previous periods of economic uncertainty. There is a trend towards consolidation within the dealer network, with larger, more sophisticated operators acquiring smaller dealerships to create more robust business models.

Competitive Landscape

Company

Positive Aspects

Negative Aspects

Market Position

Polaris

BRP

Strong utility vehicle growth, strategic inventory management

Facing pressure from CFMoto's competitive pricing

Gaining share in utility vehicles

Gaining market share, effective management of tariffs

Impacted by Canadian tariffs on certain products

Leading in share gains over competitors

CFMoto

Competitive pricing, feature-rich products

Capacity constraints limit market penetration

Emerging threat to established players

Quantitative Insights

Metric

Insight

Sales Growth

Polaris and BRP both reported increased sales and raised full-year guidance.

Inventory

Polaris reduced inventory by 8%, while BRP's inventory increased slightly due to strategic stocking.

Pricing

Average selling prices are rising, with significant increases in high-end models.

Tariff Impact

Polaris and BRP face substantial tariff exposures, prompting shifts in sourcing strategies.

Conclusion

The powersports industry is navigating a complex landscape of economic challenges and competitive pressures. Companies like Polaris and BRP are adapting by focusing on high-end products and managing inventory effectively. While trade tensions and economic factors pose risks, the industry's ability to cater to affluent customers provides a buffer against potential downturns. The ongoing consolidation among dealers is expected to strengthen the market's overall health and service quality.

KS: Hello, everyone. My name is Katherine Spurlock, and I'm a moderator with Guidepoint. I want to welcome everyone to our call today, Powersports, BRP, and Polaris dealer check Q326 demand, pricing, and the 4Q26 outlook amid US-Canada Trade Tensions with Ted Filer. If you have any questions for our advisors throughout the call, please email ask@guidepoint.com and I'll work your questions into our discussion. Your questions will be anonymous. Ted, I just want to make sure you will not speak about any material non-public information, security prices, your investment holdings, or provide any investment recommendations during the teleconference. Do you confirm?

TF: I confirm.

KS: All right. Thank you and thank you for being with us today. To start, can you please provide the audience with some background on your experience in the industry and some information about Filer Power Sports, including the segments it serves, the brands it sells, and its geographic footprint, and then we can begin our call. Thank you.

TF: Filer Power Sports is in western New York. It's in between Rochester and Syracuse. I've owned it since 2004, and we sell Polaris, BRP, Yamaha, Suzuki, and Kayo and SSR as Chinese import brands. We do about 1,000 units a year. We sell all the segments. We have two-wheel motorcycles, three-wheel motorcycles, electric motorcycles, ATVs, side- by-sides, snowmobiles, Sea-Doo watercraft, and Sea-Doo Switch boats. In addition, we sell the trailers that these kind of boats go on, and we've dabbled in golf carts, and we sell a lot of used Harley-Davidson motorcycles that we buy at auction. So we try to touch all segments of power sports.

KS: Thank you. So let's get started. In Polaris's Q2 quarter, sales rose 9% or 17, excluding Indian motorcycles. While North American retail increased 4%, BRP's fiscal year 27-2Q revenue grew 18% on higher off-road vehicle shipments, favorable side-by-side mix, and positive net pricing. Both companies raised their full-year guidance, with Polaris increased partly reflecting tariff refunds. For the context of your companies, performance, how did your sales perform in Q2 or the quarter ending June and what drove them price or volume? Thank you.

TF: Q2 in our region was weather challenged, so the personal watercraft sales were stunted at that point in time. I know you're more interested in the ATV and side-by-side business. We were up 3% for the quarter. In dollars, we were a little bit down in units. We're seeing the Polaris volume driving units, the low-priced ATVs and even the low-priced side-by-sides to some extent are challenged. Interest rates are high. The buyers that need to do payment financing

are a little stretched on payments. So we're not seeing as much of that, but we are seeing a shift that's bringing our dollar sales up, average sales per unit APU are rising quite substantially because the affluent buyers are coming in. Both Polaris and BRP are pushing cabbed units and they're bringing the cabbed units down into a lower price point relative to cabbed units, but still double what an uncabbed entry-level price unit would be. So we're seeing a swap out of an entry-level buyer for, let's say, a $10,000 side-by-side for a mid-level buyer at $20,000 and upper-level buyers at as much as $50,000 now for a side-by-side with all the bells and whistles on it.

KS: Thank you for joining us.

TF: We are seeing the high end of the market very resilient. It's a little bit reminiscent of the COVID days when the contractors were getting all kinds of money and they had money to burn and they would buy every expensive thing. Like right now, it's similar to 2008 and 2009 as well. The affluent folks are still affluent. The people that are making payments and that are suffering from high gas prices, they're pulling back. But the business and the industry right now seems well poised to take advantage of the buyers that are available. In 2008 and 2009, they didn't see it coming and weren't ready. Dealers weren't ready. During COVID, it was a surprise for everyone and supplies were challenging, but the OEMs right now are focusing on what it is that's selling, so it seems to be working for everyone.

KS: Thank you. Polaris expects a flat second half retail environment with utility growth offset by continued recreational weakness. BRP maintained its flat North American industry assumption, but expects continued off-road vehicle momentum. Did the trends you saw in Q2 continue into Q3? How did Q3 perform? We're just about at the end of September. And what's your outlook for Q4?

TF: So we, in fact, had the weather turn in our favor in June, which, where is June in your quarters? Sorry. Thank you.

KS: Well, they're on different quarters, but if we are using the Polaris quarter, that would be the second.

TF: June was our best month. It was the turning point for us out of the calendar. So however you would look at that, it's oftentimes April, sometimes May, never March, and very rarely is it in June. And June was our best month. July was the second best month. That's the second time ever that July has been the second best month of the year and August was kind of dismal. I don't know if we pulled all the sales forward or everybody left on vacation. One of the problems was August sales are oftentimes driven by Polaris factory authorized clearance. We didn't have any inventory to speak of because June and July were so good. We had sold through and hadn't got reshipped. The Polaris was busy switching over to 2027 models on some stuff. And so we were light on non-current Polaris, which would usually drive volume in August and we didn't have it. Weather in August wasn't great for personal watercraft sales and it's a little late in the season. And we saw, again, June and July were great. August is never great, but it was a little disappointing. September has so far been surprisingly good. It always comes back better than August, because I feel like people get back from vacation and they're home and they're thinking about stuff and the kids are off to school and whatnot. And surprisingly, we're selling an amazing number of personal watercraft and Switch boats in September. Where we are in western New York, usually it's Labor Day weekend, we're closed on Monday, we open Tuesday, and there's 50 Sea-Doos on trailers sitting in our parking lot with people wanting to winterize because for them the season's over. It runs Memorial Day to Labor Day in our town, and if it rains, it runs 4th of July to Labor Day, and that's it. But we're selling stuff in September. The weather's not even particularly favorable for it. There was a pretty big price increase for next year, and there's some good rebates on the non-current. I think people might be getting out in front of that. Some of these higher-end models are going to be $3,000 more next year. It's not all price increase. There's an engine increase in horsepower. There's a better screen on it, but still, we're talking from $20,000 to $23,000. It's a big move even for people with money, but anyways, it's working. Things are going well. September is strong. Early snowmobile interest is good. We had probably the best winter for snowmobiling in our region in the last 5 years, and there's always kind of the short-term memory of whatever happened last spring drives the fall. So when there's no snow in the spring, the fall is horrible and nobody buys a snowmobile until they see snow in their

yard. But we had snow in the spring last year until people are back and they're looking at snowmobiles.

KS: Thank you. So given what you see today, what are you forecasting for Q3 sales and Q4 sales mix between units and price? I believe in Q2, you said your units were up 3%, but were down. Anyway.

TF: Our unit volume was down a little bit in Q2. Our dollars were up 3%. Our dollars were up. I didn't quote a percent, I think. Unit sales were down 3% on count, but we had more dollars than we had last year with a reduced unit count. I expect that trend to continue. We're seeing APUs, average price unit, coming higher and higher. It just keeps going up. 5 years ago, I feel like a Sea-Doo for $14,000 was the top end of the market, and now it feels like it's the entry level outside the spark range. Our average Sea-Doo sale price last year was $19,000 and change. The Switch boats, we've had a couple of years of overproduction with $10,000 rebates, and those boats were trading at $28,000 to $32,000 with the rebates and the discounts to get rid of non-currents. The last 2 Switch boats I sold were $50,000 apiece. The average selling price just keeps going up. And we're getting margin squoze a little bit. I think we're getting more gross profit dollars, but on smaller margins. MSRPs are compressing. I think the OEMs are trying to absorb maybe some of their tariff impact and other things with a little bit of margin squeeze. And they're also looking at dollars. Our industry has a habit of discounting units and selling based on how much dollars profit they make anyways, not what percentage they make. So the OEMs lean into that and take advantage. Be like, oh, you can sell this and make $3,000, even if that's only 10%. They market that to us like that's a good thing. So we...

KS: Thank you.

TF: ...to answer your question, third and fourth quarter, I expect increased dollar volume, slightly down to flat unit sales. I do think snowmobile sales will be up. We have a good product mix of snowmobiles, currents and non- currents. There's decent promotions on them and last year we didn't get that snow till the spring so the fourth quarter was quiet. People again are early looking this year. If we follow that up with any kind of meaningful snow in late November or early December we could have a real bang in the last 6 weeks of the year.

KS: Thank you. Let's talk about that some more. Polaris said its off-road vehicle retail increased 5%, led by more than 10% utility growth. Given this, how are side-by-side ATVs, three-wheel vehicles, PWCs, snowmobiles, and utility sales performing in Q3 of 26 and what's your outlook for the remainder of the year? Do you think the growth will be led by the snowmobiles as you mentioned? Thank you.

TF: So we'll have growth in, again, side-by-sides. We're not only trading into cab side-by-sides, which are more expensive than uncabbed side-by-sides, but there is an increase in the acceleration of buyers not even buying an ATV and going straight to side-by-side. We saw this first 20 years ago. We identified it as the first time a husband and wife came in and bought 2 side-by-sides instead of 2 ATVs; they used to buy 2 ATVs because they both wanted to ride, but they'd buy 1 side-by-side, and I talked to this couple... I'm like, "You're buying 2?" We'd never sold 2 to the same couple at the same time before, and she said, "Yeah, I don't want to ride, I want to drive." We're seeing this is now that side-by-side is really entrenched as the 1 and only off-road vehicle in somebody's garage, and that trend is going to the more expensive cabbed, air conditioning, the $30,000-plus... you could buy a Jeep for the same price... kind of toy going in the garage. So we're trading in $7,000 to $12,000 ATV sales for side-by-side sales, which would normally be a $10,000 to $15,000 trade, but it seems to be trading them for $20,000 to $25,000 units that are going out the door. So that's the off-road again. Snowmobile, after all these bad years, I think we'll see an increase in actual transaction price, less discounting, less rebates. The demand will support that. So we're going to see an average selling price on snowmobiles go up, notwithstanding any price increases, just a higher percentage of MSRP will be achieved. Personal watercraft is generally slow from Labor Day to Memorial Day. We have done 6 to 10 every year since COVID. We used to do 0 to 2 pre-COVID. It's kind of changed. From what I'm seeing so far in September, I expect that to continue going. We purposely stocked a lot of non-currents at the end of the year, and again there's a huge price advantage this year over all years on these non-currents, and I think people will continue to come in and

take advantage of that. The Can-Am Spyder and the Can-Am electric motorcycle are the only really slow segments that are disappointing, but Can-Am is discontinuing rebates on the Spyders and pushing them out because I guess there's a shortage overall that's driven by some tariff-related concerns that they didn't elaborate on. They just said, you're not allowed to sell your US units into Canada and you're not going to have any rebates after the end of October, so deal with it. That was the answer we got on the 24 and 25 Spyders, which we still have a few of kicking around. So I think I covered all the categories there. Switch boats will go into the 27th season. This is the first time since the year they introduced them with only 20 to 27 models in stock. Every single non-current is sold and gone. We won't be selling a discounted non-current Switch boat unless we can score a bunch at the auction, and I'm going to suspect there's not a lot at the auction.

KS: Thank you. Let's talk about utility again. BRP said the Can-Am Defender HD11 drove more than 30% utility cab retail growth. Polaris reported utility retail growth above 10% with Ranger outperforming and new cab models gaining share. You touched on it, but what's driving the utility side-by-side growth? How sustainable is it? And how do ASPs and gross margins compare across these categories and brands? Thanks.

TF: So I will start by saying that the industry considers a Ranger or a Defender to be a utility vehicle because it's not a sport vehicle. Those are the 2 categories and sport for them would be a RZR or a Maverick in those parlance. And then you got the hybrid unit like a Can-Am Commander. These are not utility vehicles per se. These are recreational vehicles like people buy pickup trucks or SUVs and they don't drive them off-road and they don't use them to haul contracting supplies. They use them to haul their kids to soccer. So I just wanted to be clear that these are, if you're not personally looking at one or familiar with how these products play out, they are luxurious. The units that are getting sold that they're having all the success with, the HD11 cab models, they have power windows, they have heat, they have air conditioning, they have stereos. They have 12 speakers in them. They have insulated roofs in them. They've got a glass windshield with windshield wipers on it. Like this is a car basically with a plastic body on it and knobby tires. People are very... interested in owning them right now and the money doesn't seem to be holding them back. Again, I've been saying this for three or four years, but at a $50,000 price point, I struggle to see the utility in buying a Can-Am or a Polaris when I could go buy a Jeep or a Ford Maverick pickup truck and, you know, almost fit it on the same trails. But that's what people are buying, and we certainly don't tell them that they should go to the car dealer instead. I think that trend is strangely in early innings. I think the progress of it has already begun, which is that these price points are high and they're coming down. Even with tariff headwinds, our OEMs are dropping prices on cab stuff, 10% to 15% on an MSRP basis while increasing the features offered on these machines at a lower price point. I think this is a reaction that they're working their way to get ahead of CFMoto. CFMoto has been pricing very feature-laden, very good-looking, very dependable utility side-by-sides with cabs at as much as $10,000 less than BRP and Polaris. And I think we might have seen the gap drop to $6,000 now. But that's what they have to be worried about is when there's competition at a significantly lower price point, brand loyalty starts to come into question, US First starts to come into question because $10,000 on a $30,000 or $40,000 purchase is a significant gap. But I think we're good for right now. These things are growing while CFMoto is in this marketplace. I am not a CFMoto dealer. I have friends that are, and I sell against them. I think that one of the issues with CFMoto is they're a little capacity constrained, honestly. I think if they could make more, they'd sell more, and Polaris and BRP might have more problems. But as it is right now, I think that they're working their way. They're certainly aware, which I'm not sure they were 2 years ago, that they're going to need to compete against that product offering, and they seem to be following a path to get them there without disrupting their P&L and balance sheet on the way.

KS: Thank you. And wouldn't that manifest? You said Polaris and BRP are aware that they need to compete with CFMoto and they're cutting their costs, I believe, or their prices by 10% to 15%. When might that have a more lasting impact to these companies and the utility growth that they've seen over the past couple of years?

TF: So after 23 years of doing this, I'll tell you that Polaris and BRP like to play the playbook of MSRPs go up every year

now. This cab thing notwithstanding, they're lowering some MSRPs, they're adding features and benefits, they're doing this stuff, but they're not. Certainly not cutting this to the bone yet. It's always been a question of keep your prices up as high as the market will support and then when you see any kind of softness in your sales data, which they have much better data than we have, they have daily registrations nationwide, they can see what the competition's doing, they've got spies and access to data on how the competition's doing. I think you'll see rebates come into play if they start to lose share while they're gaining. The gaining share I don't think we're going to see a big acceleration, but I think in my lecture you've got 2 drivers of this. One, it's customer demand and if it slows up they won't know at first whether it's slowed up because customers aren't buying as many or whether they're buying something else, but they'll respond with rebates to try to keep the demand as what they forecast. Once they book 2027, they've likely committed to all the parts and engines and chassis and everything they need to build their forecasted amount of side- by-sides. And they're going to need to get them built and get them sold. And they don't want them stacking up in the yard. They're not very big at keeping inventory. They don't like to stuff shipping into dealers. Dealers won't reorder unless dealers sell. So rebates keep dealers selling, keep the shipments flowing, keep the forecast right. They'll come into next year's forecast. They will not want to cut the forecast because they're publicly traded and they know that looks really bad. So then they'll reevaluate where they need to be pricing. But customer demand is the first demand driver that they'll have to look at. And the second is whether the demand is going to the competition. And CFMoto might be driving that with their own offerings of product that are... perhaps known secretly to BRP or quietly or perhaps they can guess pretty well, but if there's a surprise, that will disrupt everything. If CFMoto comes out with a brand new XYZ model at price minus 30% from Can-Am's Polaris, they're going to have to respond if there's a quantity of that new vehicle in the market because it will take sales away from them. And a $3,000 rebate at that point wouldn't be enough to stop the slide probably.

KS: Thank you.

TF: And that's a lot of info. I don't know if that makes sense, but you can drill in if you want to ask me more questions. I'm trying to explain a complicated concept.

KS: That's helpful. So let's talk about share a little more. Polaris reported ORV share gains for a fifth consecutive quarter. BRP reported more than 3 points of current model side-by-side share gains, as well as gains in ATVs and PWCs. Given this, which OEMs are gaining share and or floor space? What are you seeing as it relates to share trends? Thank you.

TF: I'm seeing a continuation since COVID of BRP gaining share over Polaris. Additional donors to share have been Yamaha in a significant way. I hear not so much Kawasaki and Honda in other markets, but in our markets they're giving up a little bit of share there. Arctic Cat's back, and I'm seeing... dealers that I'm surprised are taking the leap, but I've seen dealers sign up with Arctic Cat and adding some side-by-sides in the mix. So having not had a product in the market for a few years, assuming any of them get sold, it's either going to eat into growth or cut into share, depending on where those incremental units come from. The BRP in power sports in Western New York and in Pennsylvania, Ohio, where I have friends that are dealers, they are the net gainer of share. And Polaris is, in my market, gaining back a little bit of the share they've lost over the last 3 years, if that makes sense. So they went down, they came back a little, but they're far off their peak. And I would guess that since BRP is still gaining, that Polaris is picking up share off of Honda, Kawasaki, and that other one that I said, Yamaha, sorry.

KS: Thank you. Sorry. Polaris reiterated its mid-cycle targets of mid-single-digit sales growth, mid-to-high teens EBITDA margins, and double-digit earnings per share growth. In Q2 26, utility retail grew by more than 10%, while favorable product mix, net pricing, and low promotion supported expansion. Given this, can utility growth, Ranger gains, premium mix, and lower promotion support Polaris' long-term sales margin and EPS targets? What are your thoughts? Thanks.

TF: I can't prognosticate for long term. I think they're good for 6 to 9 months from what I can see. It doesn't mean they're not good in 7 to 10 months. It just means it's too much of a guess for me. I think we'll be solid through the winter and into the spring, but things will change between now and then. I'm waiting for midterm elections. I'm waiting for oil prices. I think if we keep $6.50 diesel fuel for 6 consecutive months, every answer I give you today is subject to change. People get really freaked out about that stuff, and it'll be pervasive. It's not just the gas that goes in your tank, but it's everything you buy, shipments, diesel goes in the trucks, in the trains, in the ships that bring this stuff over. I think it'll have a meaningful impact, a chilling impact if we can't... get that genie back in a bottle and get, you know, you almost need diesel prices under $4 to feel good about it. But I guess if you go from $6.50 to $5, it'll feel kind of good for a while and bang your head against a softer wall.

KS: Thank you. What TF: But I KS: do you...

TF: think we're good for a few months because there's a willingness of people to believe that these current anomalies are transient. But, you know, when we get a second interest rate hike and oil prices are still high and whatever, whatever, it's everything could change.

KS: And given that dynamic, how might that impact dealerships' willingness to order or replenish one's stock, given the uncertainty that you just spoke about?

TF: Most dealers are obligated to replenish their stock based on what they've sold, so as long as the sales and, again, I think we're good for 6 to 9 months, are on target, then the replenishments will be on target. If I am supposed to sell 10 Polaris a month, then I'm going to reorder 10 Polaris a month, and it's a little oversimplification because there's some seasonality in the mix. But if I'm supposed to sell 10 a month for the next 3 months and I sell 15 instead of 30, then Polaris or BRP aren't going to make me order 30; they're going to make me order 15 or maybe 18 because they like to get a little aggressive, but it won't be 30. So, that's what we were talking about before, where if this demand drops off, we'll see rebates, we'll do whatever we have to do to keep demand up to keep the sales flowing. Now, that will help the demand forecast side, but it will hurt the promotional cost side of it because those rebates get booked as promotional expense. It hasn't happened yet. It is a cyclical business, and we're an extended uptrend of this cycle. COVID really broke the cycle trend, but there's no precedent in history for the amount of upswing that powersports has had. I mean, when I say history, we can go back to the 70s. The Japanese started sending motorcycles over here. It's been predictably cyclical till then. The 2008-9 financial crisis broke the cycle. It immediately reset when that came over. But COVID broke the cycle and it never reset. So it will reset at some point. I don't; nothing goes up all the time.

KS: Thank you. You mentioned promotions. Polaris expects promotions as a percentage of sales to decline slightly in the second half and described competitor discounting as targeted rather than broad. Are you seeing the same thing? How are promotions and rebates trending? Which brands are offering the most aggressive incentives and how do they compare versus a year ago? Thank you.

TF: I consider the current level of promotions in line with what Polaris said, I consider them low. High promotions are 15-ish% of MSRP. Extremely high, like panic mode, like we saw in 2008 and 2009, 25% of MSRP. We're running under 10% right now, and that's on the kind of most challenging products for the most part. The typical, you know, discounts is going to be 8%, 9% of MSRP. And again, sounds like a lot, but it's baked into the forecast when they do for the year. They know at the end of the year they're going to discount some of this stuff. They know they're going to do promotions and discount some of this stuff. It's not a high discount, and we're seeing for maybe the second or third time, I can't be absolutely precise, but the rebates aren't. Currently, what's selling the product, customers are coming in and buying it and the rebate is an afterthought or put it this way, if I have a $15,000 Polaris side-by-side, my buyer would pay $15,000 for it. The only reason they're not is because there's a guy across town advertising it for $14,000. If

he wasn't advertising it for $14,000, my guy would have just paid $15,000. There's not price sensitivity in the part of the market that's strong right now. They just come in and like, oh, you've got it, how much is it? Okay, I'll take it. I like that one. Give me the one in green. Give me the black one. It's not as crazy as COVID, but it's, again, this high-end, this $25,000 to $50,000 side-by-side market. The money is, people don't want to be taken advantage of and nobody wants to overpay, but the price isn't going to stop them from buying it. If the right price is the right price, they'll just buy it because they got that money. People are driving $200,000 Mercedes and like whether their side-by-side costs $40,000 or $43,000 isn't going to change whether they're putting one in the garage. That's today's market for us.

KS: Thank you. That's helpful. Let's talk about inventories. You touched on it, but let's go back. BRP's North American network inventory increased 2% with ORVs at approximately 100 days of inventory and higher inventory in PWCs. Polaris dealer inventory declined 8% with slightly more than 100 days of sales in the first half sales velocity. No, and first half sales velocity improved 18%, with BRP inventory up 2% and Polaris down 8%. How are inventory turns and age units trending? What are you seeing in terms of inventory? Thank you.

TF: I'm seeing inventories being about as good as they've been in 3 or 4 years. BRPs, if they're saying 2%, I think that's... I'm going to speculate that that's likely related to the fact that when the tariff situation was unclear, they loaded up a bunch of inventory beforehand and then they stopped and then they got a window again and they loaded up again and I think their shipments and production have been lumpy. I have no idea when they consider inventory to be inventory, whether it's got to be in a dealer's backyard and on their floor plan, or whether it can be sitting in the yard in Juarez, a factory. I don't know that answer. But I'm going to suspect that because sales are up and they're up at least as much as any reasonable entity would have forecast them to be up, that if there's an increase in inventory, it's a glitch, it's a bubble in the line of time. Polaris' experience is more logical to me that their inventories are down, their promotional costs are down, BRP's promotional costs are down. That's not normal when inventories are really up. So I think, I think that again, productions are in line with demand in a meaningful way. Again, I'll go back to COVID. It was a wonderful thing. There was no rebates. There was no discounts. Customers' change of philosophy took about 10 days. Every customer used to call and say, do you have X? How much is it? 2 weeks into COVID. The calls went from, do you have X and when can I have it? They never asked the price. They'd show up and hand you the money. And it's not that crazy right now, but the closer we get to supply-demand equilibrium, the less promotional costs and rebates we're going to have. And we're much closer than we were in 2010... whatever 20... I can't even do the math right now... 3 years ago, '23, '24, '25... too much inventory like we these guys came out of COVID and they're like oh if we build it they'll buy it I'm like no that day's over it's done no you can't do that anymore and they're finally got the memo.

KS: Thank you. Polaris reduced total inventory 8% year-over-year while shifting inventory towards utility vehicles and reducing weaker recreational, seasonal, and marine categories. Given this, are floor plan costs or credit availability affecting dealer health, orders, or Q4 26 promotions?

TF: So rarely does a dealer have credit access availability problems. If you're a Polaris or a BRP dealer and they think that you're needing more product to support more sales, they will make sure your floor plan line gets increased. If you're not selling very much, you don't need more floor plan line increase. You've got a yard full of stuff that they won't be shipping you more. So credit availability isn't a problem unless dealers are financially challenged and literally nobody could justify giving them more product. The way the floor plan works here, Wells Fargo does the Polaris floor plan and Huntington Bank does BRP floor plans. Polaris and BRP are obligated to buy back 100% of inventory if a dealer that's on their floor plan fails. So it's their risk if they call Huntington and say, hey, this guy needs another 500,000 in floor plan. And then I go bad and I don't pay the bill, Huntington doesn't take the units back, BRP takes them back and they pay any losses that are incurred in that process. So these manufacturers control the floor plan, they control how much inventory their dealers can have and they will in fact if they need to move product overextend to a dealer or a large section of dealers to get that product moving and get that inventory off their balance sheet and

off the Huntington's balance sheet and some of those loans will go bad and they'll take them back and that's when I say I buy stuff at auction the stuff I'm buying at auction is largely from dealers that have been overshipped and either closed down or surrender a line or negotiate with factory to take back some of the inventory so they don't get put out of business. But it doesn't happen that much. Auction volumes right now are pretty low. We've had times when BRP factory auctions 3,000 units a year. They used to do 150, 200, 300 a month. We're seeing like 300 a quarter right now, and still, that's a lot of cleanup of the older boats from 22 and 23 that were overproduced that are still kind of kicking around in the network. And now we're starting to see some electric motorcycles get auctioned off because BRP was way aggressive on what those would sell for and how many would sell in the world, and the easiest way out if you're a dealer is to just surrender your motorcycle, two-wheel motorcycle franchise, and then BRP takes them back and puts them at auction and sells them. But it's driving some of the volume and it's an anomaly. They know; they've probably already fully written it off because it's been a nightmare for them. We have 31 dealers in our district. We are the only electric motorcycle dealer in the district; every other dealer has surrendered now because we're the only one left. You think we'd be selling them gangbusters, but we sold 2, so it's not that good.

KS: Let me rephrase the question. Are you having issues with consumers wishing to buy on credit that are unable to do so because of credit constraints?

TF: Yeah, we are. That is the low end of the market, what we would call a payment buyer, somebody that needs to hit a monthly target for their budget so they can buy it, but either aren't approvable at the lowest rate, and they get an offer at 15% or 18%, and that makes the unit they want at the payment they want, the math just doesn't math. Or they can't get approved, period. But most payment buyers are not your A-credit, 850 score, getting the 7.5% rate. We still are, but our industry financing runs maybe 50% of sales. We're in an affluent market and we cater to affluent customers with our product mix, and we typically are 30% to 35% financing. In terms of deals, not in terms of dollars. In terms of dollars, we're 10 points lower than that because the finance people are spending less money as well as being a lesser percentage of the mix. We are in our finance business right now down about 25% of deals representing about 20% of dollars sold going through financing. And we're using very little of the factory finance. We've got credit unions locally that will take a flyer on their customers and part of our financing arrangement with the credit union is that the customers become members of the credit union so they're using it for customer acquisition and maybe buying deals they wouldn't necessarily buy if they weren't acquiring a customer in the process so it's a very symbiotic relationship we have there but still with those opportunities financing is down. And again, that's for us our entry level point of the ATV and side-by-side businesses, those Polaris, what Polaris calls the value units, and that's where our Polaris volume is off. And it's our store volume is off. It's all there. It's all right in that one bucket.

KS: Let's talk about prices. You mentioned them earlier, but let's go back. How are your prices trending? What are your pricing expectations for new and used units for the remainder of 2026 and for 2027 model year pricing? Thank you.

TF: I think prices continue to go up. I think in this environment that no OEM, CFMoto notwithstanding, can continue to produce things for less money. The cost of fuel, the cost of plastics, the cost of raw materials, the shipping cost, the labor cost, the insurance cost, it's all up. It's all up substantially, as much as 20% or 30%. And we're posting inflation numbers in the US, I think, in the 3% range. I'm not sure what all goes into that basket. I'm sure I could know and look, but in my world, my costs are up 20% in the last 2 years. I got to give people raises. My tech used to make $12 an hour before COVID. During COVID, they were making $20. I got to pay them $30 now. Everything is like that. My insurance was $35,000 a year. It's $60,000 a year now. I need a new air conditioner. The last time I bought a new air conditioner, remember I've owned this building 24 years. It's been more than once. Last time I bought a new air conditioner was $15,000 for a 15-ton unit. I just got a bill for $40,000 to replace the same unit that 10 years ago was $15,000. That's more than 3% of your bump, even compounded. So I think units are going to go up. I don't think it's necessarily a problem because I think everything's going up. People are expecting this. Price of going out to dinner is up. The price

of filling your car up. The price of Costco is up. The only thing that seems to be cheaper is flat screen TVs. I bought a couple yesterday. They were giving them away.

KS: Thank you. Let's talk about tariffs. BRP said the Section 232 tariff rate on ATVs declined from 25% to 15%. It also said Canadian imports are subject to a new 50% tariff and identified Spyder as its effective product line. How are Canadian to US and metal tariffs affecting cost, pricing, and demand? Thank you.

TF: But the OEMs have been very opaque for us for tariffs, and we're not impacted by tariffs other than what the OEMs tell us or pass through to us. So we basically get memos anytime there's something in the news about a new tariff that says there's a new tariff and here's what's going to be the effect for you. 95% of the time we've been told there's no effect. We're managing the situation. We'll keep you posted, but there's no change to MSRP. There's no change to this. There's no change to that. So we're not seeing it. We've taken an opportunity to try to use tariffs as an incentive for customers to buy. We put it on our website. There's tariffs coming on this date. You should buy before the tariffs. Prices might go up. Nobody cares. There's literally 0 customers impacted by a concern of a tariff changing the price of a product if they don't take action before a certain date.

KS: Thank you for joining us.

TF: I had mentioned before that they're pulling the Spyder rebates. That's because they're not going to ship anymore to the States with those tariffs in place. And so they feel like the inventory that's already here is going to get sold because the supply isn't going to increase. It's going to decrease as each unit gets sold. So they're pulling the rebates away because the landed product is there until those tariffs get negotiated away. But other than rebates going away on Spyder, we've been unaffected by tariffs, both in actual sales and impact on sales and conversations with customers and in seeing pricing come through. We're not even seeing it on the Chinese product. In fact, we got a lower price on the Chinese product about 6 months ago. Just said, "We're lowering our prices to be more competitive. Here you go. Here's a new price list." So, yeah, tariffs are in the news, and I'm sure they have a very real impact for Polaris and BRP, but they're shielding their dealers and their customers from whatever those impacts might be like. They're trying to tell their investors about it, I guess, but they're not telling us.

KS: Thanks. Let's talk about that some more. Polaris expects approximately $215 million of 2026 tariff payments and is moving China source materials to suppliers in the US and Mexico. BRP expects around $200 million Canadian dollars of fiscal year '27 net tariff exposures. With costs varying by product and configuration, given Polaris' and BRP's tariff exposures, could sourcing differences reshape dealer relationships, industry consolidation, and long-term competition? Do you see tariffs as a risk to the competitive landscape, one versus the other? Thank you.

TF: Again, I don't see a big risk in the tariff other than potentially I suspect that BRP as a company is more knowledgeable and experienced with navigating tariffs already because of the number of countries that they're in and the production that they have and the sales they've had in the European countries for years and years. If anything, this will be a game of navigating the tariffs, and if BRP does a slightly better job and has less impact, and let's assume these companies are similar in size, BRP's tariff impact of 200 million Canadian is, what, 30% less than Polaris' $250 million US. If they do a better job, they're going to have a price advantage and they may be able to push that advantage to gain even more share, which they're already growing from us. But I think that BRP and Polaris generally are going to be subject to the same forces. There may be nominal breakage opportunities... you know, to the 3% or 4% net difference... that won't really change the world. But customers are going to want Powersports products. Prices change. Again, we're seeing a great amount of elasticity there. So I'm not afraid currently of tariffs. I mean, if tariffs are 50% on Canadian products forever, BRP will figure out how to build Spyders not in Canada. That's just, it won't happen in a year, but it'll happen in 2 years. Thank you.

KS: Thank you. How is dealer sentiment these days and what's the outlook for industry consolidation?

TF: I've talked to a lot of other dealers through the course of business when we're trading inventory and we just had a bunch of trade shows for Can-Am and Polaris. Dealers are cautiously optimistic. I would say most of them expect things to be slightly better in the spring than they are now, and they acknowledge that they're not really bad right now. So the fact that they're going to get better is kind of surprising. And I respond the same way to that question, even though I think that there's oil challenges and I think there's interest rate challenges. The momentum seems to be positive, and we're already dealing with it in recent fuel cost spike, and it hasn't stopped us yet, so I need to see the negative impacts, and then I'll probably... and I probably won't be the only one, we'll probably slam on the brakes for our optimism, but we still sit here optimistic right now. And I see industry consolidation as... something that's happening and it was very strong during COVID and then it settled down. There was a lot of people that bought during COVID that bought a business that they didn't understand, bought a balance sheet and a P&L they didn't understand that was only supportable during COVID and some of those dealers have shaken out and some have surrendered and given up and there's open points or there's points with struggling dealers that made ill-advised acquisitions. That will get picked up by smart operators. We're seeing in our market more and more small chains, not national chains, but like our biggest competitor now is up to 7 stores within a 3-hour drive. And 5 years ago he had 3 stores, and he'll probably have 10 in 3 more years. When we go into the Syracuse market, which is the next major market over, we're seeing some consolidation there. We've seen 1 dealer in particular adding on lines and adding on building square footage. That's the same thing that's happening in Buffalo. So we're not seeing more points, but we're seeing existing strong dealers acquire other dealerships and not take their rooftop, but take their product line and add it into their already successful store. But yeah, consolidations, roll-ups, they're happening. Probably good for the industry. Polaris and to a large degree and some degree BRP to a smaller degree used dealer expansion to grow sales. Probably they would admit off the record or maybe even on the record improperly put too many dealers in a lot of markets, especially in New York, Pennsylvania, Ohio and some of the mid-south states. It turns out when you do that, you can't ever get rid of those dealers. We're franchise dealers. We have a lot of legal protections. You can't just make them go away. So they've been fighting that battle for a long time with a lot of small dealers instead of singular large dealer. And if you look at, I'll give you the parable in Rochester, New York. We have 1 Lexus dealer, 1 Mercedes dealer, 1 BMW dealer. They give great service. They make good margin. We have 11 Chevrolet dealers and they slash each other's throats. Nobody makes MSRP. Nobody has a brand new fancy showroom and service department because there's so many dealers fighting for the market. It's better to have 1 big strong dealer in a market of 1 million people like Rochester is than to have, you know, I think we had 9 Polaris dealers in the Rochester market when I got in business. I was the ninth. Why did they let me in? Who knows? We're down to 3 now. 3 rooftops, 2 dealers.

KS: So would you say that the dealer base is healthy these days, given what you just described?

TF: There is a lot of health improving. There are many markets where people are hanging on. There were guys, so a lot of COVID became the retirement strategy that nobody had. We were literally looking at an industry in Western New York and Pennsylvania and Ohio where the retirement plan was death and, you know, factory takes everything back. Like there was no buyers for this business you worked on for 20 or 30 years and the buyers were 70s, 80s, old 60s. They found buyers, they got out. Now we've got the guys that bought were in their 40s and 50s. They had money, they had some savvy, they probably made the money in a different industry. So in our area, these consolidations have changed from family owner operators to real businesses with a profit model and incentive, willingness to reinvest in the facilities and try to provide a good experience to the customer. So I'm seeing that the dealer base is getting healthier is probably a very good thing and maybe even related to how we're seeing an increase in affluent buyers and an increase in high-end product. We can now deliver the experience that that customer expects.

KS: Thank you for joining us.

TF: Because we're not, again, back to another part of the call. If I got a guy across town selling a unit for $14,000, I can't sell it for $15,000. Most people won't pay up, even if they know I'm going to give them better service. But when

we get rid of the guy that's selling at $14,000 and I can sell at full price, I can give good service, and that'll make good customers and good referrals, and it's a virtuous cycle for now. So consolidation is great for the industry.

KS: Thank you. And in closing, given everything we've discussed, what do you see as the top 2 or 3 opportunities and risks facing the power sports industry in 2026 and over the next 3 to 5 years? And what steps can be taken to mitigate any risks? Thank you.

TF: I think the risks at this point are unmitigatable. Interest rates drive not only consumer purchasing abilities with their financing, not as bad as if we were an RV dealer, but they still have an impact, and I suspect they're going up a couple times before they go down again. High fuel prices are very negative on sentiment. We've always seen a decrease in sales when fuel prices go up; it's just a mindset thing as well as these payment buyers. Even if interest rates are low, when fuel prices are high, it's meaningful to have to put $25 or $30 more in your tank; that's $140 a month and that's the payment on an entry-level ATV at, you know, a reasonable interest rate. And so we got high interest rates and high fuel prices, we're taking those buyers, those payment buyers, out of the market. And between interest rates and fuel costs, that's a pretty substantial risk that I don't know if they're mitigatable. You plan for it, you market towards the customers that aren't impacted by that as much. And I think that BRP and Polaris have seen this writing on the wall and they're doing just that. They're skewing their product mix to people that won't be as impacted.

KS: All right. Well, we are out of time. This has been most informative. And as a reminder to our audience, there will be a replay and a transcript following this call. Thanks so much and have a wonderful day.

TF: Thank you. Bye.

KS: Bye-bye.

DISCLAIMER: The statements or opinions expressed today are those of the Advisor and not Guidepoint, who disclaims all liability for the content provided. The Advisor may not disclose material nonpublic or confidential information or any information that would cause the Advisor to breach any duty or obligations. Guidepoint is not a registered investment advisor and the information provided is not intended to constitute investment advice.