Good morning, everyone. Thank you for joining us for our 2016 Analyst and Investor Day live from Juárez, Mexico. This morning, we will have a presentation from our management team. We will have José Boisjoli presenting our strategic priorities update, Anne Bélec presenting a marketing and pack update. Alain Villemure will present the marine propulsion system. We will have a 10-minute break around 11:05 local time, followed by a presentation from Sandy Scullion on PSP overview and international update. Followed by Bernard Guy, who is our VP of North America, will present a North American market trend update. Finally, Sébastien will present a quick presentation about some finance topics. Finally, José will come back for our closing remarks. As usual, the presentation will include a forward-looking statement.
Those are subject to a number of risks and uncertainties. You can find a full description of those in our MD&A. With that, I will leave the stage to José.
Good morning, everyone. Thank you for the ones here in the room and the people on the phone. First, welcome in Juárez. We're quite happy with our three manufacturing operations in Mexico. We're very happy that you took the commitment of taking three days of your schedule to come here in Juárez. As I said, we're very proud of our manufacturing operation here in Mexico. We started the Juárez 1 that you visit this morning in 2005, Querétaro in 2012, and now we have Juárez 2 that was opened last fall, and very happy. Also, last time we met for a full analyst and investor meeting was in Austria in the spring 2015. We're quite happy to give you an update on the business plan and to give you also the status of the progress that we've done.
The first word on our fiscal year 2017 year-end. In terms of H1, there is always plus and minus for the industry, for us. We are on track. Overall, we are on track versus our expectation for H1. We're happy with our retail in the first half of the year versus the industry to have grown the retail by 8% in H1. Despite that some industry are struggling, we're quite happy with this. Overall, for the year-end, we know that this year is again a loaded second half. Why we're confident to deliver on our guidance, I would like to remind you that we have order on hand for snowmobile. We have order on hand for watercraft. Maybe some people don't know, but at club, in Orlando, we took order on hand for the X3.
Typically, on our flow, we take order every month for the next 60 days, but because we're filling up the pipeline, and we knew that everyone was asking for more, we took order for the next 6 months. We have order on hand for all those product lines. Like we do, in H2, we filling up the pipeline with the new ATVs, new other side-by-sides. That's why we're comfortable with our guidance for the end of the year, despite that the fall will be busy. As I said on the call, and some of you since yesterday, I met Sandy, but we reorganized the Global Sales and Consumer Experience division with Sandy, who has 20 year experience with us, took the leadership, and we're very happy.
Sandy understand extremely well the dealers, the dynamic of the product, the dynamic in the industry, and very happy that Sandy accepted this new role. Going back to what we share with you in Austria. Maybe you will find it boring, but the plan is working, and it's a continuity. Basically, we maintaining our key strategic priority, and I would like to read it again. Growth, accelerate Can-Am growth, define the next wave of growth. I will say a few word about that. But I think today you will understand a lot more what we meant 18 months ago about Agility and Lean Enterprise. Agility is implement one-piece flow, a more modular approach, and a more flexible supply chains to better serve our consumer and dealers. Lean Enterprise, implement new core technology and drive margin improvement on new product launches.
I will give you quite a lot of detail this morning about the three pillar, but you will understand better what we have done in the last 15 months on Agility and Lean Enterprise. One thing that I can assure you, the team is very well aligned to deliver the plan, and this is worldwide. This is our scorecard versus growth, industry, and BRP. If I comment on ATV, we had planned at the time the industry to be flattish. It's around low single digits, but we've done better than our plan with the Outlander mid-cc category, and that's worldwide. On the side-by-side vehicle, the growth has slowed down. There is a lot of competition, a lot of inventory, but we are on plan despite that downside in the industry.
Spyder, as you will see in a few minutes, disappointed by the slowdown of the high price motorcycle, and we're disappointed with our performance since the introduction of the F3, and definitely we need to readjust going forward. Snowmobile, the last two season was so-so in term of snow. The industry didn't do as well. On the other hand, we're very happy. Highest market share ever last season with Ski-Doo, and the introduction of the new REV Gen4, a brand-new platform will be there for many years. Very well received by the consumer worldwide. Personal watercraft, incredible momentum, and Bernard and Sandy will give you more colors about where the industry is growing. But basically, in North America, the industry grew again high single digits this summer, and on top of it, in some countries by 20%. The industry is very healthy.
On top of it, we have been able to grow in both the sport category and the traditional watercraft. Very, very happy with the momentum there. Outboard engine, we had planned at the time a 2%-3% growth in the industry. The industry is doing better than that. We are doing a bit better than what we planned on the G2. We have been able to sign a lot of OEM and boat builder. OEM and dealers since the introduction of G2. A bit behind in G1, and we would rate all of this like on plan. Again, you see that despite some industries that have done worse than planned, because of our product diversification and our geographic diversification, basically overall, we are delivering on our plan.
In the growth pillar, obviously the product is there, but we have ongoing many initiatives to support the building of the awareness, to support the digital exposure, to support the dealer network expansion. Right now, a lot of things are going on. We are on plan, and Anne, Bernard, and Sandy will give you a lot more detail about this in their own presentation. But the plan is quite exciting, to be honest. You can see even going at the higher pace in the coming years. Why we are strong on our potential on the ORV business? If you look at the mid-cc or the mid-cc category, this is North America. But if you remember when we launched the Outlander L two years ago, we said our goal is to double our market share. We achieved this.
And when you look where we are, season 2016, there is more room to grow the mid-cc category. Our share in the mid-cc category, we are still a small player in that big segment. The Defender, what you have in season 2016 here is the market share we had in July. It is not year to date. It is in July because it took six months to fill up the pipeline and to have some momentum. But you can see that we are very confident with the product that we have, that we can grow our market share in the utility segment, the biggest into the industry. And on the sport category, the market share that we see there is what we had with the existing Maverick.
We do not include yet the X3, but when you look at our proportion in the sport category, we believe we are well positioned with the X3 to grow our market share. Basically, on the off-road vehicle business, there is three things that we need to make sure we continue the momentum. The first one is continue the lineup extension. The second one is the awareness of the Can-Am brand. The third one is the dealer network engagement and momentum. You will learn a lot more today about what we are doing to try to engage, particularly the multi-line dealers. Spyder, a different story. In here, you have the U.S. motorcycle industry in the last three years. In black is the motorcycle over CAD 18,000, and in yellow it is under CAD 18,000.
As you can see, you see that the growth in the high-end motorcycle industry has slowed down and was negative in season 2016, which was a surprise for us. We see that the entry level or the less price for the cycle is doing better than the high end. There was that shift that was not planned when we've done our planning 18 months ago. On top of it, that's why we wanted to give you some colors on the mix. You see in 2014, it was Spyder RS and Spyder ST in light gray, Spyder RT in dark. The Spyder F3 was introduced in 2015, and in retrospective, we probably made a mistake in season 2015.
In season 2015, because we knew that the Spyder RS and Spyder ST was ending and we would have more Spyder F3, we came out in June, July with too aggressive program, which pulled some customers probably and devaluated the trade. It created frustration for the consumer, frustration for the dealers. That's why in 2016, even if in June, July the trend was not doing well, we decided not to do those programs because we want to reestablish the level of inventory out there at a level where everyone will be able to make money. This is a bit what happened, our performance in season 2016. We're not happy about that. The learning of this season, there is definitely a need for a price point Spyder F3, and that's why we have introduced the base Spyder F3 at $16,999.
Also one learning, the marketing campaign in season 2016 was talking to a broader audience. Those customers who have no idea about the motorcycle industry, never ride a motorsport, are more difficult to bring or to convert. For them, when you talk about a motorcycle license, it's like a mountain. It's like a very, very big obstacle. On the other hand, the campaign was successful because it drew a lot of interest, a lot of leads, but we need to do a better job to convert those people who have interest to buy the product. One thing that we've done beginning of the year, we didn't talk about it, but we had a small team of four people in California and four people in Florida doing things.
We said to the dealers that those people just do regional stuff, try things to see what we can do, not do. We need to crack the code in the U.S. I'll give you an example. We discovered that in Florida, where we have 26 dealers, only three would facilitate the motorcycle license for the consumer. The other 23 just go there and no assistance. At the end of the season, we had 22 of the 26 who were well-organized to help the customers to pass his motorcycle license. That's the type of thing we need to do, more regional help for the dealers to convert those customers that have interest. There is too many obstacle in the process to buy the product. We're not here today to present our plan for season 2017. We're still learning, wrapping up the season 2016.
Definitely, you can expect from us a more regional approach in season 2017. There was too much good learning on what we've done in California and what we've done in Florida. On the growth pillar, we have defining the next wave of growth, and we have, in the last few months, defined our framework. We always been monitoring the option on the market, but now we have a team in place with this framework who is looking, what do we do next. Here, the three pillars, and I give you some example. The framework is we could do something to reinforce the core. It's innovative growth opportunities that are part of BRP current core business. For me, the Spark would fit that pillar. Expand the core. Growth opportunities that are not part of BRP core business, but are a natural extension to BRP existing activity.
The side-by-side business would fit that pillar. New growth territories that are feasible and accretive, the Spyder would fit that category. That's the three pillars that we're looking on, and there is three ways of doing it. We could do it in-house, we could do it in partnership with some other company, or we could do a potential acquisition. That's the framework that we have, and we are very active right now to make things happen because we know that we're filling up right now the white space in our six product lines, and at one point we need to define what's next. I can assure you the framework is there and the team is in place to accelerate things. Now going to Agility & Lean Enterprise. There is four things that we have discussed with you or launched in the last few months.
First, the Watercraft transfer to Querétaro was completed and on plan. The [inaudible] startup of production and production rollout is on track, and I will talk about it in a few seconds. The Gunskirchen 2020 plan that you saw last year or 18 months ago in Austria is on track. The Valcourt 2020 is on track, and I will give you more color about this in a few minutes. We have those initiatives that are improving our Agility & Lean Enterprise, and we expect to drive margin going forward. In fact, at constant CapEx, we have improved our margin between 2014 and 2016, and we believe that things could accelerate going forward. Sébastien will give you some colors at the end of the morning. Let's talk about Gunskirchen and their plant over there.
We have two mature sites, Gunskirchen and Valcourt, and we needed to find a way because that's the knowhow. We needed to find a way to protect the knowhow but make sure that they had value to our business. In Gunskirchen, what we've done is implanting new technology to create customer value and improve margin. The first thing that you saw last year is we have invested in plasma coating. The plasma coating, it's a bit technical, but you're replacing the steel sleeve in the engine by a coating. It's more efficient, and that gave us the opportunity to design a 300-horsepower engine with 1.6 liter. Now, the 850, the new engine with mobile is also plasma coating. It giving us the opportunity to design more efficient and performance engine for the same cc.
One thing that I would delegate this morning, we decided four years ago to design our own turbo. Just to give you a sense, there was last year in 2016, 62 million turbo produced in the world, and three company own 80% of this market. When you're going to knock on their door, you're asking for a turbo for 20,000 units. They say, "Okay, we have those models. Pick the one that fit your need." When you ask for a delivery, they say, "Which day you want us to deliver the turbo?" This is what's very difficult. The turbo that you have in the picture there is the X3 Turbo, and it's the first BRP product with our own turbo. Again, an idea to create value. We can produce those Turbo for less than half of the cost than what we had before.
That's why our Maverick or X3 Turbo is well priced versus some of the competition. On top of it, in construction, we are in the process to improve our assembly line. In the '90s, we had 14 assembly line. Today, in 2016, we have five assembly line, and we're going to two assembly line, going forward, then more efficient into the factory. All facts at the end of the day, and for the one of you who were there, in spring 2015, the Rotax is a key differentiator of BRP, and we found a way to create customer value and improve margin, even if we are in a higher cost country. ULF 2020 plan. The tagline is implementing the most efficient manufacturing system in the industry. Here what we've done here. It's not a factory, it's not a product, it's a manufacturing system.
Hear my story. I'm a baby boomer. A few years ago, if you go back 16 years ago, Audi, there was like the A4, the A6, and the A8. BMW, they had the Series 3, the Series 5, and the Series 7. I could not understand why in the last few years, you have the 2, the 3, the 4, the 5, the 6, the 7, the 8, coupe, convertible, and sedan, and you're launching this at a pace that you cannot follow. I had the chance in the summer 2010 with a group of people to go in a car company in Europe, I won't reveal the name, and understand how they do it.
It took us two years to adapt the principle, it's about adapting what they do in European car company to be so flexible, so agile, and go very, very fast to our product line. It's about establishing product design rule. The Defender is the first product that follows the design rule, followed by the Ski-Doo REV Gen4, followed by the X3. All new product at BRP that will be designed will be following that architecture. It's about designing the product, but at the same time, designing a factory very efficient to be able to assemble this product and change the product all the time and be able to implement the model. Because here in ULF 2, it's a greenfield application, as Sylvain will explain to you, the factory is extremely efficient and we have a very, very good assembly line.
Its manufacturing system, not the design of the product, not only the factory, this manufacturing system permit us to introduce a new side-by-side every six months for the next four years. A bit like some European car company has done in the last few years. Valcourt 2020. The tagline is right-sizing our maximum site to improve efficiency. In Valcourt, we outsource the ATV, we outsource the watercraft. We were due to do something. We have committed to invest CAD 118 million over the next five years. We are in our second year. We are in our first year. We started November last year. Basically, the plan is we're going from two assembly lines to one. Spyder will start on that new line in the fall 2017, followed by snowmobile in the spring 2018. This is to improve our efficiency and reduce our overhead.
Because we're freeing up one building, we will in-source the logistics center that was about 30 miles away from Valcourt, this will improve efficiency, reduce overhead, and reduce transportation cost. The last is not least. Our policy was outdated in Valcourt. It's an old site. Basically, we sat down with our employee and we said, "We're ready to invest, refresh the manufacturing system, but we need to adapt our salary, we need to adapt our way to work." Right now we have negotiated with the employee, and we've gone from 42 policy with 230 page to 12 policy, 60 page. That's why in some employee category, we have now the salary freeze to three to five years, depending on which category, to bring Valcourt competitive to what we pay into the market.
The idea here is to bring Valcourt expertise center to the next level. At the end of the day, and I think it's something that we believe, our diversification is a key differentiator in the industry. We have a diversified product portfolio. We don't depend on ORV business, on motorcycle as some of our competitor. We are the industry leader in snowmobile, in watercraft, and we have a good momentum in all our product line. We have global sales diversification, selling half in the U.S., 20% in Canada, and 30% international. The other thing, and then I will give you more color about this, but we started about three, four years ago on a program to improve dealer profitability. We've found a way, we believe, to engage the multi-line dealer to sell more BRP product.
We launched four years ago a program to differentiate ourselves from the competition to improve profitability and engage the dealer. We have seven manufacturing site. The manufacturing site in high-cost country, Canada, U.S., and Austria, but we bring value and manufacturing capacity in lower cost country. Our diversification is allowing us to keep growing despite a volatile environment. My last slide, it's what we presented to you in Austria 18 months ago. Our objective is to grow our sales by 10% and our EPS by 15%. Basically, because of all those Agility, all of those priorities that are supporting Agility and Lean, we believe that we can grow our EPS faster than our revenue. That's in a nutshell, my update on the overall situation about our business plan.
Any questions?
Any questions? Yep.
I'm sorry. What is the macro function behind your business plan?
I would say that, it's the overall industry and the big one. If United States, Canada, Western Europe, I would say in packages like this, we believe that this plan is very achievable. There will always be a Brazil that is going down and a Russia that is going down. We can maneuver with all this if the big economies or where we have big industry are stable like they are today, we believe we can deliver that plan. Again, we penetrate in white space. Anthony?
You mentioned you're looking at potential acquisitions. What's the criteria for those acquisitions? What would it need to bring to the company? What kind of valuation multiple are you looking at and how comfortable would you be willing to go in terms of leverage?
In term of business, it's following those three pillars.
Right.
This is in term of business. We believe that with the refinancing that we've done, we have the capacity to do an acquisition if we need. You want to add something, Sébastien?
Obviously, Tony, we aren't looking at growing the top line. The priority is growing top line, yes, but also needs to be accretive to the bottom line and overall bring shareholder value. We've got different metrics we look at. Overall return on invested capital. Today we're at the range of about 22% for BRP. Obviously we don't want to dilute this if we were to do an acquisition. Synergies is something we're looking at as well and also leveraging assets we have. We have a strong supplier base. We have a strong distribution network as well. We have manufacturing capacity and know-how. All that together are factors that we're considering when we're looking at various acquisition scenarios.
We don't want to do an acquisition only for the financial aspect. It needs to bring value to the business, that's why it was important for us to define those three pillars. Mark?
Yeah. Could you, in terms of those three pillars, maybe just give a bit more color or some goalposts around what you mean when you say natural expansion, or feasible. Just to sort of help us get a sense of how you think about the expansion possibilities.
I try in my presentation to give you a sense for what it means. For us, when we say I should just find my page. Sorry about that. When we say reinforce the core, the core is reinforcing. It's like a Spark. The Spark did grow the industry, did grow the traditional watercraft. For us, it's reinforcing the core. I have the question all the time. When can you do a Spark with Spyder? When can you do a Spark with ATV? That's the type of thing you could do to reinforce the core. Expand the core is something that, a bit like Sébastien said, you leverage your supplier network, you leverage your dealer network, you leverage our manufacturing expertise. Like adding a product line like the side-by-side. For us, the side-by-side, same brand, same supplier network, same dealer network.
It was a big benefit to have the side-by-side business, this is what we call expanding the core. The third one is new territories, which is a bit different than the rest. We want to create a new industry like we've done with Spyder. We're stretching a bit more the envelope here because we could have debates about the dealer network. We're stretching more the envelope here than the first two pillars that are more natural for us.
The third pillar could include something that doesn't necessarily leverage or go through the dealer network.
Yes.
It could.
Yes.
Could. Okay.
One last question. There.
Can you talk about the dealer network and how you're working with the dealers to make your products more captive? That could be a really important growth driver going forward and has been already.
Bernard has a full section on this later on. I can tell you that what the team have done is quite impressive and because of that and because our biggest market, that drives the show for implementing those philosophy in other country and those tool in other country. Basically, 4 years ago, we said to ourselves, we need to find a way to attract the multiline dealer. It's clear in our book, a single line BRP dealer is doing better than multiline dealer, but the multiline dealer in the U.S. is a reality that we will not choke. We said, let's put together a new ecosystem that will force, in a certain way, the multiline dealer to come our way. The base is the product. You need the product. If you don't have the product, you can have all the rest, it won't work.
If you have the product, and I believe we have good lineup, how could we turn the momentum in our favor with multiline dealer? Then I will give you a lot of detail about it. I'm creating expectation that now I'll say. Thank you very much.
Great. Well, good morning. Today, I'm going to touch upon some of our marketing initiatives and PAC, in support of our 2020 challenge. First, on the marketing front, we have developed a specific marketing mission to align our global marketing teams around the world and provide a retail orientation focus for the organization. We have three key pillars as part of our mission. The first is consumer insights, and it's all about elevating our knowledge and understanding of the consumer. The market is changing. New generations of consumers are behaving differently, they're consuming differently, and we have to be on top of it. The second pillar is digitally driven, and here we want to own the digital space. That is, that we want to be seamless as we try to target where our consumers are, and we want to leverage fully the technology that's available.
Finally, we want to break through the clutter in the powersport market with bold and differentiating approaches that distinguishes us, our brands, in the sea of sameness, just like we do with our product. To execute our marketing mission, we have adopted three key principles. The first is expertise. We seek to learn from the best organizations that are out there, whether it be Facebook or Google, AMA, associations, or other automotive examples, so that we can get the latest. We've also formed centers of excellence within our marketing teams, and these centers of excellence revolve around CRM, digital strategy, shows and events, and we want that knowledge to be deployed across the globe so we really can focus our efforts around there. The second is focus. We deliberately make choices by focusing on where there is most value for our marketing investment.
Let me go back. Whether it be which geographies, what product line, or what marketing initiatives are we going to choose, we're looking for a return on that. We have shifted 30% of our non-working dollars into consumer-driven and consumer-facing working dollars in the past year. That's investment that's completely consumer-facing. Then finally, scale. With our new digital tools, more sophisticated media analytics, it gives us the ability to test and rapidly adjust our campaigns before we go all out with large-scale investments. Our assets, of course, are developed centrally and shared across the globe. Now that we have a common digital platform that we can all share, we can deploy globally much, much more rapidly. Let's delve a little bit more deeply into the three pillars, starting with consumer insights.
The consumer experience and insights are at the core of our BRP product and go-to-market strategy. Information comes from various sources internally and externally. We cross-reference these pieces of information to develop insights. We use tools. Obviously, we leverage our CRM database. We do market research and needs-based segmentation. These are the traditional tools. We've also been able to evolve our analytics to be able to analyze media profiles that come through our web and develop lookalike profiles that we can then match across all of our leads and our databases internally. We've leveraged partnerships like Maschio, for example, where as we entered the Defender utility market, we could beef up our knowledge of that market by leveraging the knowledge that our partners have.
Finally, the results of these efforts have led really to tangible opportunities, such as, for example, in off-road, we developed a mud package. We were the first OEM to offer such a package. Our most recent example is the Maverick X3, which caters to a very specific and passionate group of consumers. It was really critical for us to have a deep understanding of their motivations and needs. We haven't been afraid to leverage our partnerships, such as BJ Baldwin and Ken Block, to really get a really deep sense of what these customers are all about and what makes them tick. Moving on to the digital platform. BRP is rapidly building its expertise in digital to efficiently reach its target customers.
We've built a solid platform over the last couple of years by installing Adobe CQ5 web platform with responsive design, that we have been able to deploy globally by now. It provides us agile digital models to test and adapt on an ongoing basis. It also comes with a solid analytics software. That means that we have the ability to measure our performance per media type, whether it's on TV or digital or social. We can test which creative works best, and that way we can see what works, what doesn't work, and adapt as we go. The focus is paying off. Our global web traffic is up more than 50% over the past two years. Our volume of hot leads generated has more than doubled in the last two years, and our North American cost per lead reduced by 300% in the last year alone.
That's efficiency. Finally, the third pillar is our bold and breakthrough. BRP launched a bold, comprehensive campaign to support the launch of the Maverick X3. What's so bold and breakthrough about that is really the layering of several initiatives, starting with our teaming up with high-profile product ambassadors like Ken Block and BJ Baldwin. Together, combined, they have 12 million followers on Facebook and Instagram. We also focused on the U.S. Southwest. There we really wanted to have a disruptive presence at the dealership, and you can see from the picture up here that we've completely wrapped the dealership. These are multi-line dealerships, and we've just completely taken over. Of course, we bring in other elements like technology, virtual reality, so that consumers can experience what it's like to ride a Maverick with Ken Block.
We entered M1, the famous Vegas to Reno race, this was just four days after we launched the Maverick X3, that was a big win with instant credibility for the vehicle. Impressive results. In just one month, 2.1 million video views, 800,000 unique visits to the X3 website, and 84,000 views on the Facebook Live that we did the night of the launch. We were one of the first companies to utilize Facebook's capabilities with Facebook Live, it's paying off. Our NASCAR platform has been great to build awareness for Can-Am, engage with consumers, and engage our dealers in the process. Frankly, we're pleasantly surprised by the level of interest that Can-Am has generated with NASCAR, and we want to continue to capitalize on that. With 75 million fans, it's a very good, very efficient platform.
We renewed our sponsorship for another two years, and we already have it in place, planned to be in Phoenix in November. We've had plenty of opportunities also on-site to do lead generation activities and other activations. We're quite happy with our NASCAR program. Moving on to parts. Parts revenues have increased 11% per year since fiscal year 2015, due mainly to a growth in accessories, which has also contributed to a more balanced portfolio in parts, not relying as much on new snowmobile as it has in the past. Parts is a highly strategic component of BRP's overall business. It's the highest gross profit margin across all of BRP's product categories. It contributes to the consumer riding experience, and we have customization opportunities, and it provides opportunities for consumers to extend the brand experience beyond the vehicle and beyond the time of purchase.
We think this is a strategic advantage. We've evolved our approach to accessories development over the last few years. This has been a major component of the growth. We've gone from a traditional approach where the parts accessories were developed after a vehicle was pretty much developed. That has some drawbacks in terms of time to market and fit and integration in the vehicle. We moved to an in-house parallel development where, of course, we had much better opportunity for good fit and integration in the product because we're developing alongside the vehicle project and of course, more accessories available at launch. Recently, in the last year, we've done more co-development and co-branding with external partners.
That allows us to leverage their brand reputation with speed to market, and it's also allowing us to do more regional approaches so that we can address specific markets like the Southwest with these partnerships. Our best example, most recent example, is what we have done with the Maverick X3. We were able to double the number of accessories that we would typically bring to market. 40% of those were co-created with our external partners and it was very short development for all parties involved. This is one of the ways that we've increased the Agility in our parts accessories development. Accessories are great. However, it has to also result into sales. We have added a lot more focus to our go-to-market initiatives and making sure that we support our dealers in merchandising efforts and the parts sales process. How we've done that?
We've added a dedicated parts North American sales team. These folks are just concentrated on parts activity, which has been done over the course of the last couple of years. We've, in the last year, integrated the parts marketing team with the vehicle marketing team so we can leverage the expertise and all of the different marketing communication platforms to promote the parts offering. We've also added online accessorization feature to all our vehicle websites. On the dealer support standpoint, we have focus dealers that we are working with. We provide them with more training, more merchandising assistance programs, tools, how-to videos, et cetera, and retail focused promotions to encourage a higher dollar per unit there. Finally, I think our marketing impact priorities are aligned with our long-term corporate objectives. From the marketing side, we continue to generate and deepen our consumer insights.
We leverage our investment in a global digital platform to reach more consumers, with the content that's relevant to them at the right time. We continue to challenge ourselves to develop bold and breakthrough campaigns to wow the customer and engage dealers. On the pack side, we're going to obviously continue this rapid pace of new accessory development for our off-road and Spyder with more co-development and co-branding partners. We're going to continue to develop accessories alongside vehicle project teams for best fit and integration. We're going to continue to push the envelope on our go-to-market efforts. With that, I will be happy to take some questions.
You obviously are making a big push in marketing. Curious to see how your Can-Am brand in the U.S. has evolved over the last five years in terms of brand awareness. Also, if you could tell us where does the Can-Am brand now rank in the powersport industry in the U.S. in terms of brand awareness?
The brand awareness has grown over the last five years, definitely. Certainly over the last couple of years with the big platforms like NASCAR and so on, it's been gaining in visibility. We haven't done a brand comparative assessment recently to see how it's progressed now in terms of comparison to the competition. I can't tell you what it is, but we know within our own numbers that it's been gaining.
Can you share some numbers with us that shows up by %, or can you quantify in any way the change in brand awareness?
Yeah, I'll have to get back to you on that with the right time frame comparison.
Okay.
Where we put the focus in the last few years with the introduction of more utility vehicles. The G2 line on ATVs and the Defender, obviously that was a market where we were not necessarily heavily promoting in the past. Our efforts have been also focused on those consumers who knew about ATVs, but not necessarily know Can-Am as a brand for them. We put a lot more CAD there to kind of start from a base of zero and increase awareness in those consumers.
And it-
The Can-Am brand is in a decent brand awareness in the powersports, you think?
Yes, absolutely. Especially on the off-road side. I mean, we've been now using the Can-Am name in ATV for 10 years, so it is well known especially among enthusiasts. We have a number 1 market share position in the [high-CC] segment, from the consumers who are enthusiastic about the product, I would say it's in the top three easily.
Yeah.
Where efforts have been deployed is really the utility segment.
In the powersport world, definitely we're in the top three.
Great.
Just on Spyder in particular, any changes in marketing effort there in terms of market awareness, consumer awareness, or is it more towards the dealer level with the training efforts you spoke on earlier?
The question is, what have we been doing on the Spyder front in terms of awareness? At the beginning of season 16, we modified our target consumer to focus more on the open road enthusiast. Technically more the people who are not as familiar, not coming from a motorcycle or a powersports experience. We have modified our messaging to be much more on the lifestyle and the emotional connection to consumers. We've seen that type of messaging has resonated much better with this target consumer. We've seen our web traffic and particularly our engagements once they come to see us within the funnel has exponentially increased. It's been good. With Spyders and having such a broad consumer target, awareness is still relatively low because you're talking to so many different people as opposed to another vehicle that's much more defined in the powersport business.
That's all the time we have for Anne. We'll come back at the end of the call.
Great. I'd like to invite Alain Villemure now.
Thanks again. Good morning. I'm here to talk about the MPS business, Marine Propulsion Systems business, and this is made of outboard engine systems and also the Jet Propulsion System. Just so we have that in mind. I'm going to talk about during the update of the systematic approach that we have to turn around our business. When I mean turn around our business is more from a market share standpoint. Sorry about that.
That is
It's for the business is a profitable business that allows us to invest, we've been quite stable in terms of market share over the years, we're doing a lot of activities to make sure that we can turn around that situation. That's going to be the essence of the presentation. If we look at the industry globally, you see that it's a healthy industry with a 5% CAGR growth. It's more so of a factor in North America, as you can see there. The industry in North America has been very good. You see from the market share standpoint in both markets that we're pretty much stable there. As José mentioned, we're gaining on G2, we're being challenged with our older platforms at the same time. If you look a bit deeper in terms of the market share situation, two elements.
I mentioned last time the proportion of the industry, which is package and repower. Package, you know, where the engine is sold or part of the boat package, the repower, you just repower the boat that you own. There was a switch in the last few years where the package proportion has increased at the expense of the repower. We're stronger on the repower historically, as you know. That affected us, definitely. That's why it's important for us to get boat builders and also new dealers on board so we can be successful in the package side of the business. You still have that chart, the G2 impact. We have quite a significant impact on the repower side of things, not as much on the package side of the business at this time.
If you see the other factor is a lot of the growth in the industry, especially in the high-horsepower segment, comes from the South Atlantic or the saltwater market in the U.S. You can see, from 2010 to 2015, that was quite significant. The partners alignment at this time in that specific market is not the greatest. That's something we've been working on. We've made some progress, we have some more progress to do on that side to really enjoy that growth on our side as well. Interesting enough, the industry is going up, also the horsepower distribution, as you can see in terms of units. If we take the 150 horsepower and up, you see the yellow portion. It has been increasing. Two phenomenon there.
Again, the saltwater, where you get more of the large boats, center console boats with high-horsepower engine, also the pontoon lineup, where the pontoon average horsepower, even with twin-engine, has gone up significantly in the last few years. Our product entry in that specific segment, we've launched the 200 plus, the 280 to 300 in June 2014. That was our first G2 launch. In last June, we launched the 150 to 200 horsepower. We're well-positioned to cater to that increase in the marketplace. I mentioned last time, 18 months ago, the three strategic priorities, I'll update you on that. We have the two existing priorities, which is create the market pull with the G2 deployment, highly differentiated product, also develop the jet propulsion system business.
I'm adding a third component to our priorities there, which is margin improvement through the deployment of the E-TEC G2 modularity. We were not necessarily in a position to talk about that much. José opened a bit more about the modularity approach of BRP. It also touches the outboard engine side of our business, where the G2 is really the head allowance or the main element of it, where we are going to deploy that G2 technology and cascading down in horsepower. That's going to bring a lot of benefit that we're going to talk about. If we provide a quick update on the G2 achievements in the last 18 months, there's obviously the performance of G2 for G2 200 plus, but we've launched the 150 to 200.
It brings the similar and even more in some cases in terms of torque, 30% more torque than what existed before the best-in-class engine. Also the functionality that we have included on the G2. It's the first 150 horsepower with digital shift and throttle. The first engine with standard i-Trim. We're really going into the consumer experience and really making an impact. Those things are seen as for people that can afford, but those are functionality the customer needs. If you look at the type of features you get on your car nowadays, that's really something that we need to evolve quickly as a marine industry. We're going to be strong on that. On the network front, we've added 91 dealers in the last 18 months and all the bases versus the plan that we committed back then.
On the product side, we get a lot of customers in the marketplace using the G2 and talking about it, and we'll cover some of those testimonials. If you look in terms of benefit, the affinity with that's right, I presented that last time. We're now up to 30% of torque difference with the best-in-class engines there with the 150 to 200, the 15% fuel economy, and the 75% emission reduction. We have the color matching that really starts to be seen in the marketplace. You see the G2 and there's one because it's matching so well with the colors, matching so well the boats. We've put quite a lot of emphasis with G2, and we can cascade that now with the consumer experience, with the fully integrated i-Trim, the digital shift and throttle, and the Dynamic Power Steering.
If you look at the adoption of Dynamic Power Steering, 85% of our sales on the G2 200 plus were power steering. This is really a departure from the industry. Even in the high horsepower, you don't see that much penetration. It's probably more in the 40% range. That's really something that customers want, but it needs to be affordable. It needs to be something that we can pay for. We've launched something very interesting, a concept called the Aim system. You're aware of the joystick approach with two outboard engines on larger boats. You can actually grab the boat and really become a very good captain all of a sudden. We all want to look like a good captain, especially the new entrants in the marketplace. The system sells for CAD 15,000-CAD 22,000. It's not affordable for everybody.
We've launched a concept that we intend to sell for CAD 3,000. We feel that it will understand that the value of the boat will increase the penetration dramatically. We don't see that only for high horsepower engine, we see that even in lower horsepower engine. That's something that you'll hear more about in the future. Those are our main key points that you've known for the G2. Just a testimonial, I won't read that, but the motor is a monster. Performance number are amazing. What's amazing is you can keep a higher speed at a fuel consumption level that is much less than what you have been experiencing before. Overwhelming majority of the reports were positive. We see that more and more, so it's really building up in the marketplace.
In that club last June, José made the commitment that we would launch three new G2 platforms in the next 36 months, and that was including the 150, 200 that we've launched at that time. What's interesting also, the modularity, José talked about the speed. Why are we going much faster than we were in the past? It took us basically ten years to implement the E-TEC technology on all our engines in the past. We're going to be much faster this time around because of the modularity approach.
If you look at the 150, 200 and drill down a bit more, you see that the yellow column, it's quite a significant segment, which will allow us to cater and please more dealers and more consumers. That's a big impact. Now with all the G2 family, we're covering 30% of the industry. We're starting to be quite significant with the G2 penetration now. I told you about the number of dealers update. When I met with you 18 months ago, we talked about adding 150 to 200 dealers by the end of fiscal year 2019, and we're at 91. At this point, we have 17 new OEMs that we've added in the last 18 months. That's more since the launch of G2. We're well on track to add the number of dealers that we committed at that point.
Now, in that industry, it's a two-step distribution. It's not like you're adding a dealer and you're going to get full benefit at day one or at least benefit at day one. It's still a lot of work, the education that needs to come. There will be time, and we have to be patient from that standpoint, but we see very positive sign of those dealers that we've signed. I want to touch on the international side of the business with outboard engine. Major deal that happened, as you heard about in Australia, where we are now appointed with Telwater, which is the largest aluminum boat builder in Australia. They're in excess of 10,000 boats, and they have 50% market share. They are now the distributor for Evinrude engine. We combined the two networks that we had.
We had a pretty good network with outboard engine there. We combined that with their own network. There's crossover, there's a lot of new dealers. We feel very positive. The reason why they decided to move with us is exactly because of the consumer experience. We see that the innovation we're bringing is really bringing the technology level in the outboard to a new place where everything else is basically a sea of sameness. They were very eager to be able to benefit and have their customers to benefit with that. Western Europe, two major RIB manufacturer, the inflatable boat manufacturer, which Zodiac that you know, I guess, and BWA also that is a new boat builder that we have working with us.
On the jet propulsion system side of things, you see that the jet propulsion industry has gained at the expense of the sterndrive. That's a trend that we've seen for many years now. It's 20% growth. You see that we've gained about 50% of that growth. Our partners are successful now at taking more and more of that market year after year. In fact, we're close to 20% of the market share in terms of the jet propulsion with our partners, Chaparral and Scarab and Glastron there. Very interesting also is we've launched the 903 ACE as part of the Spark program. That offers us the possibility to offer new jet artifacts that are not available in the marketplace. One very good example is the Williams MiniJet. Williams is the world leader jet tender boat, and the MiniJet is a new venture for them.
It's offering a smaller tender for smaller yachts. That's white space, as José was talking, for them and for us also. We're very excited. They've launched that product last summer with their building network, and the reception has been very good. People can afford. You see that some yacht manufacturers are starting to modify their boats to make room for that little tender. Our relation with Williams is increasing over time. The ACE power pack also offers us to cater to new needs, different segments in the marketplace. We're in discussion with other boat builders at this point, leveraging the 1503 engine that we have, but also the 903 to offer the jet propulsion system benefit to other segments. The last element of our priorities is the margin improvement through the deployment of the E-TEC G2 modularity.
I'll be very succinct here. Talk about a concrete example. You see in the left, that's the situation with our gear case. That's the bottom part that has the propeller at the end. You see that to cover the 150 to 300 horsepower segments for us, we needed 21 assemblies, five drive casings, nine gear ratios. With G2, once we're done in 2017 with the implementation and eliminating the older platforms, we're going to be facing four assemblies one die casting, two gear ratios. It's a completely different setup, which allows us to optimize our assembly, allows us to build more volume with our suppliers on less changeovers for the suppliers, less CapEx investment, less time to market.
You can see the reasons why we can come up with a 150-200 in such a short time versus what we've done, and versus what the competition is doing also. The modularity is something big that will bring a lot of benefit in time to market and also improving margin going forward. As a conclusion, I would say that we're midway in our turnaround with the outboard engine portion of our business. We're very aggressive with our release of product for the future with two new platforms in the next 36 months. We're still very active in the expansion of our network, but it's also optimize our network.
Although we optimized with the dealers that we've added, the boat builders that we've added, there will be much more effort from a sales standpoint, business development now, to make sure that we can capture the market with those people. The JPS with the ACE 903 allows us to cater to new segments. We're going to be also active, and we'll be able to talk about that in our future meetings. To conclude that there on the modularity, it applies to G2, it applies to outboard engine, and that's going to be a big element of transformation also for our facility. Hopefully, soon we'll be able to bring you to visit the plant. I'm not making the commitment for you guys, but that's going to be certainly something that we'll be able to do. That concludes my part.
Any questions for Alain?
Yeah. Could you provide maybe more color about the margin improvement that will come from the modular approach, what we could see if it's a big lever? Also, what about the margin improvement that could come from volume increase over time as you build those strong relationships with the dealers and the OEMs?
Yeah. That's a good question. What I can say is every new platform at BRP, that's an objective that José has titled a non-negotiable objective that we have. We need to improve by a certain number of points of margins every new platform. I don't think that we mentioned, but that is really.
José presented the plan to get to CAD 6 billion and increasing EPS as well by 15%. Obviously, that means profitability growth coming from margins. I have those slides I will share with you guys.
You're right, also, the other side of the margin improvement is volume, because we have the infrastructure, we have capacity. We're operating on one shift right now, we have plenty of capacity. Every new unit that we sell is something that will help us to absorb some of that overhead that we have. That's the other leverage. We're going to see those two components playing out in the next few years.
Thank you. We're going to take a quick break. We'll be back in 10 minutes.
Okay, we're back, we'll start off with Sandy to the podium with an overview of GSCE and International Division.
Thank you, Philippe. Good morning, everyone. The idea this morning is to give you a very small snapshot of the GSCE overall, but the main goal is to get into a little bit more details on the International market, because Bernard will cover the North American market. Some highlights. We're active in more than 100 countries. 3,000 dealers, which wouldn't include dealers of our distributors as well, and about 500 employees. The core responsibilities would be worldwide go-to-market strategy, sales, dealer development, and after-sales activities for BRP products in our boating units for [inaudible] and even now the North American responsibilities. The GSCE division is responsible for over 75% of BRP's revenues. Just a quick note on my background. Started actually 20 years ago as a district sales manager in Connecticut.
Was involved in multiple functions, mainly in sales, marketing, product development, and dealer support, headed also the global business for nine years. Two years ago, also headed the Western Europe, Middle East and Africa Division. Now in this role for a big 19 days, [inaudible] at GSCE. Not a surprise to see a deliver stand-out growth given the size of the industry we're going after, like José said a little bit earlier. Second point, even though we're in a leadership position for both snowmobile and watercraft, there are some segments within these two industries that show significant potential, and we're going to go after that as well. Geographically, there are still actually some significant pockets of opportunities in certain countries like China, like the U.K., or even like Mexico, which we need to double our effort and go after.
The fourth point about the dealer network, probably one of the greatest assets we have other than our brand. We need to continue bringing and offering the best dealer value proposition. This is a real enabler for our dealers to become even better retailers. Lastly, empower our teams for fast decision-making, but also being more competitive in the markets locally. Going to the International regions, as you know, we've combined the European activities together, making one region called EMEA which leaves the other two regions, Latin America and Asia Pacific. These three regions are about a little bit over CAD 1 billion in revenue. Okay. In terms of sales evolution, you see that EMEA now represents 62% of our sales. Stable in the last few years for EMEA.
The growth story here is about APAC, I'll get into a bit more numbers on that. What's hidden in these numbers is that challenging conditions both in Brazil and Russia, we're able to grow the international business 7% over the last six months. This shows the resilience of our portfolio and the geographic locations of where we're active. Just a little bit of a background in terms of our recent or the evolution of the international division. All started in 2001, focusing on countries like Brazil, Japan, Scandinavia, Australia and New Zealand. And with OMC acquisition, expanded distribution through distributors in a lot of countries. Which by 2005, we started to convert these distributors into dealer direct activities. Opening offices in the countries you see on the slide.
At the end, or in 2015, opening our first sales office in Shanghai and also forming a joint venture with our local distributor, which I also talked about a little bit earlier. Well-positioned to grow the powersports industry now in international markets that we have the infrastructure and the teams. Like I said a little bit earlier, the merger of all the European activities now under one roof, called EMEA. In terms of priorities, the international division priorities, which are closely related to the GSCE and the core priorities. First one, expand the ORV utility market with Defender and Outlander. Utility being relatively new for our teams and for our dealers but opening a lot of doors for growth for us in a lot of countries.
Doubling down on China, you'll see the momentum we have right now, still not significant in volume, but at the rate that it's going right now, we believe that this could become a big play in a couple of years from now. PAC being front and center of our priorities, making sure that the dealers promote and are engaged in selling the accessories and the customization like Anne mentioned a little bit earlier. Fourthly, piggybacking on the success of the North American play for the international markets, transforming the network and improving customer experience is also a priority for the international markets. Lastly, for Evinrude, our focus is mainly on developing the relationships with OEM boat builders. A little bit more deep dive in EMEA. As you can recognize, flat sales in the last three years.
Within Eastern Europe, there would be Russia in there, absorbing the downfall of Russia. Looking at Scandinavia at +9% and Western Europe at +11% sales in the last three years is quite the momentum. EMEA being probably one of our most mature markets outside of North America. One of the plays that we have to play well is how we support our dealer network to develop into better retailers. If you look five years ago, EMEA was mostly driven by the snowmobile sale, now you can recognize that the diversification of our portfolio made it extremely resilient in the context, especially with Russia. Some of the market characteristics that are different from North America. We have a much stronger presence of the low-cost brands, mainly in the ORV business.
Our dealerships are much smaller, little bit less sophisticated, obviously less volume, it means less investments in our own dealership. We need to deal with that compared to North America. Some barriers that are basically absent here in North America about homologation for on-road lighting for our ATVs and side-by-sides. Also the playground access that is constantly being challenged by local authorities. Overall, complete team in place with very good dynamics, especially in Scandinavia and Western Europe, ready for the rebound of Russia to capitalize on. A little bit more numbers in terms of industry size, ORV being the biggest for EMEA. Now position number two and number three respectively for ATV and side-by-side, but that's coming from number four and number five not too many years ago. There's a very interesting momentum going on right now.
Main countries would be Scandinavia, the Scandinavian countries, France and Germany as well. What we see as the biggest opportunity right now is definitely the utility segments now that we have the Defender, also the Maverick X3 in the sports segment for the Middle East, which is quite a big market for us. Snowmobile, number one position, little bit smaller industry size than ORV. Main countries obviously are Sweden, Finland and Norway. Still opportunities specifically with the new G4 platform being introduced this year, and we are monitoring Russia. In personal watercraft, still number one position. One of the highlights as well would be that Scandinavia as a whole is now six times more than what it was in fiscal year 2014 in terms of volume. There's obviously something going on in the Scandinavian market, and we're capturing it as we speak.
The other markets for watercraft, which are main markets for us, would be France and Spain. As far as APAC is concerned, the growth story is definitely at APAC. Australia and New Zealand are +11%, Obviously Japan and the rest of the Asia Pacific, +27, +22 in China, +22% year-over-year. 16% CAGR in the last three years. In terms of the dynamics, our strong holding products are definitely watercraft and now more and more off-road for Australia and New Zealand. China as well is very promising, specifically with the watercraft business. Also doing really well with the Defender, and I'll show you the slide in a second. In terms of the industry size which is still growing, now BRP's position, number two for ATV, number two for side-by-side.
Like probably it happened in the U.S. five, six, seven years ago, there's a migration from ATV to side-by-side that is happening right now in these countries. Like I said, very strong momentum on the Defender. Personal watercraft, number one position. There's still some opportunities everywhere, mostly China, also Southeastern Asian nations are showing some very good potential volume for us in watercraft. This is just an example of the Defender, how it's doing in Australia and New Zealand. This is H1 of last year versus H1 of this year. It's basically doubling the volume for Defender. Great momentum for the Can-Am brand and the utility segments we're going after. Some of the trends, as you can see, this is the last six years of China, 55% CAGR.
There is also, as you know, the middle class population that's going to grow significantly in the next years, we need to be ready to capture this. One of the barriers we have in China is the lack of developed playgrounds for our products, the industry needs to be built. It requires a completely different set of skills. It's not about only opening dealers, it's about promoting the industry. Obviously, this takes a little bit more time. Lastly, for LATAM, flat in terms of revenues. Brazil showing much more difficult context at -16%. The true story here is about Mexico and Argentina, +30% and +48%. Again, the story is about resilience. Hopefully these countries, whether they're Brazil or Russia, they're going to come back, and we'll be able to capture when we rebound. Industry position for BRP.
We're number one and number two for ATV and side-by-side respectively. Mexico is showing and is adopting the Can-Am brand at a fast rate. Our digital strategies are going extremely well. It's looking really good for Mexico. In terms of ORV, in terms of personal watercraft, again, still number one. We have a solid market position in Latin America, and we're pretty well positioned to take advantage of the rebound. Same story here. Some closing remarks. Obviously, Can-Am is on fire in many markets, we're capturing that opportunity as we speak. Secondly, our dealer and distributor value proposition, that's front and center of our global market strategy, and that's how we're going to win the game. Thirdly, despite the economic turndown in certain countries, like I said before, the team is ready to seize these opportunities when we come back. Questions?
You're talking about a lack of great playground for your products in Asia. Can you give us some concrete example on what you could do or what you've done to change that?
The playground for many of us just don't exist, right? It's the power sports culture that is still not present. It's not about just showing the dealers and training the dealers to organize their showrooms, but it's going to be about how they build the communities and how they promote the riding and how they bring more people into the sport. It's a different approach, but it will involve both BRP and the dealers. It's much more training that's going to come out from our teams to get these dealers up and running and with the right means and the right strategies for tactical or tactics within their own market. It's about building that community, that passionate bunch of customers that would buy our product.
It does, but that's a big hurdle.
It is
the Asian market to really expand and, for example, is there trail networks in Asia right now?
No, not at all. I think the biggest opportunity short-term for China is watercraft. They have a lot of one, two, three million city on the water, and there is more and more dealers that are trying to rent, to store the vehicle for the customers. That's an area where I believe it's easier than off-road to develop the industry, because the water is there, and people enjoy more and more riding watercraft. That's the area where we have a pretty good growth.
Cool.
Would you say that, which segment would be the highest growth potential in terms of region? Would you say China, maybe over the next five years or?
Yeah. Definitely, China is on a aggressive curve right now. I believe that with the population and with the investment we're making in the team and with the investment we're making in the dealer network, it has to be one of the biggest opportunities.
Okay. Where do you think the product offering needs to evolve to over time, make sure you have those growth opportunities in China? Do you think there's a complete need to be made in the product offering to
At this point, especially the watercraft is the main business for China, and we're pretty well-positioned with the Spark lineup. I don't think it's a lineup glitch. Again, it's more of a powersports culture fit that we need to put in place.
Just on the EMEA. You look at what's going on in Eastern Europe. Can you talk about what the growth rate has been outside of Russia, have a look at that too.
Eastern Europe, excluding Russia, has pretty much the same growth rate as what we have in Western Europe.
Okay. In the Russian sales, I mean, is that market predominantly snowmobiles or what?
It's a good balance between the snowmobile and off-road and ATV.
As a question, do you think we've bottomed in Russia?
Sorry?
Do you think we've bottomed the sales and it's more over, and it's really stabilized now?
In Russia right now is probably at 30% of what it used to be. We believe that if it's not at the bottom, it's very close to the bottom. On the other hand, we don't see quick ramp-up from Russia either.
The ruble is still low in value compared to what it was four or five years ago. Until that turns around, pricing is a barrier for the Russian market. You won't see a big turnaround quickly.
In the markets for oil and the basic commodities, have we bottomed, kind of thing? Question.
Well, maybe I'll take that one and the question was more in the oil and ag markets, whether or not we've faced the bottom for us. Obviously, we're entering into new segments with the Defender, with the X3 and the brand-new products for those markets. We do not feel that for us, we are at a bottom. We feel there's growth potential even though the market is weak in those areas. Other OEMs are seeing a different color in those markets. For us, we're still a good growth opportunity because of the new products we've just recently launched.
As you compete with the local manufacturers, the families that are here, is the competitive landscape different there in China?
It's no different from the rest of Europe. It is different from the U.S. or Canada. Being positioned as a premium brand for Can-Am as an example, when you're competing with products that are significantly lower in price you really need to sell the added value or the [TVA] from what our products offer. It's more challenging, that's for sure.
Just maybe to complement. Asian brands are quite present in Europe because of the scooter market. They enter the European market with their scooter, and when they started to do copy of ATVs and off-road vehicle, they just go into the same channel. They don't have that opportunity in North America yet.
Thank you. We can have Bernard.
Hello, everyone. My name is Bernard Guy. I'm the Regional General Manager for North America. I'm going to provide you today with a brief overview of the North America region, which represents about 69% of BRP revenues and about 65% of the worldwide powersport industry. Over the last several years, it's shown a very interesting CAGR of 16% in revenues and an appreciation of market share of about 200 basis points since 2012 fiscal year. I would like to run my presentation in three blocks, talking about our key strategic priorities. The first one being to significantly increase our presence in the year-round products and markets. As well as maintaining our market leadership and seize growth opportunities in seasonal products and markets. The last one, optimizing our network coverage and win dealer engagement by offering the best dealer value proposition.
Let's look at year-round products first, starting with off-road. In the off-road business in North America, you see here in black the ATV industry and in gray the side-by-side industry. You can appreciate that the side-by-side industry has been growing and taking bigger and bigger share of this off-road vehicle business, now even surpassing ATV in the last season 2016. We see that while this proportion of side-by-side business was increasing, our market share growth has a bit stabilized while we were increasing our lineup in side-by-side. Now that our lineup is more complete in side-by-side, we see the growth of market share going back up. If we start with ATV in North America, the ATV industry has been fairly stable. However, down mid-single digits in season 2016, with demand shifting from high-CC to mid-CC segment.
For Can-Am, however, our retail grew high single digits in season 2016, the highest retail and market share growth of any OEM in North America, and finished the season third in adult ATV for season 2016. Can-Am retail in the mid-cc segment more than doubled since the introduction of the Outlander G2L platform, and the momentum actually is continuing. We're number one in ICC rec utility with the Outlander, and we're number one in rec sport with the Renegade. For ATV, our Can-Am market share has reached a record high in season 2016. The key message here is that the momentum is really continuing. In side-by-side, the industry has been steadily growing in the last five seasons, fueled mostly by the sport and utility segment. However, the growth has been slowing down in season 2016 to mid-single digits.
Can-Am, in season 2016, has had some strong retail growth and actually accelerating in the last six months, outpacing the industry. We're number one in rec utility with the Commander. We have strong growth in utility with the Defender. Number two in sport with the Maverick, except in the less than 60-inch wide, where Can-Am is frankly not competing. We are tapping in the largest industry segments, which what I believe is best-in-class vehicles. We have the Defender in the utility segment, which is now about 60% of the industry. This represents our largest opportunity. The Defender availability ramped up in the second half of season 2016, and our sales are tracking on plan. Actually, the Defender is already our biggest Can-Am seller.
With full deployment in season 2017 with the Defender MAX, the Defender HD X Cab, and the Defender Mossy Oak unlimited edition, we believe that the momentum is going to further accelerate with the Defender in season 2017. The other one is obviously the Can-Am Maverick X3. The sport segment is now about 30% of the industry, with almost 60% of that being 60-inch wide vehicles. We've had very strong positive dealer and consumer reaction to the Maverick X3, which I believe also is a superior product that is starting at an MSRP CAD 2,000 less than the competition. We believe that we're well-positioned to grow in the largest industry segment in side-by-side in North America. Spyder update. As José mentioned, the motorcycle industry has been declining in season 2016.
It's a little bit up from its season 2011 floor level, season 2016 was definitely disappointing, with the industry declining mid-single digit in season 2016. Sales of motorcycles in the U.S. with a price above CAD 18,000 have been down double digits. In that context, our Spyder season, the retail has been disappointing. For us, reducing dealer inventory level next season will be our strong focus. That's the number one priority is making sure that business stays healthy for the dealer network. Customer interest is very high. We've been growing website traffic and record number of leads. Really what we need to tackle is the conversion to retail. That's a challenge that we need to address next season, and Anne alluded to that in her presentation. One of the elements is obviously making Spyder more affordable.
For 2017, we've introduced a Spyder F3 at $16,999 U.S. or CAD 19,299, which is a reduction of more than $2,700 in the U.S. and up to CAD 3,000 in Canada. It's a meaningful move in that direction. Moving on to seasonal products, where the idea is to maintain our market leadership, I want to show you that even as being market leaders, there's still growth opportunity within these mature markets. With snowmobile. Season 2016, El Niño winter, the snowmobile industry declined, Ski-Doo broke a 46-year-old market share record. You can see on the chart, that's pretty impressive market share growth that we've been steadily growing for quite some years. The industry growth in recent years has been mostly driven by cross-country and crossover. As I just mentioned, the warm winter was difficult on the industry in 2016.
For Sea-Doo, we've had the best retail performance of any OEM in season 2016, which resulted in dealer inventory that was cleaner than the competition overall. Couple that with the fact that we're holding the number one position in North America overall and in every single industry segment. Within that, mountains still represent a sizable growth opportunity. With this, the launch of the REV Gen4 platform with the 850 E-TEC in the three main segments of the industry led to strong model year 2017 dealer orders. In this context also, our 2017 Summit X 850 E-TEC is the most successful Sea-Doo spring sled. Those are the sleds that we pre-sell at retail during the spring to consumer. It's our most successful spring sled in nearly a decade.
You see there that even in a mature market after a tough winter, Sea-Doo is tackling very effectively a sub-segment where there's probably interesting growth for the brand. Moving on to PWC. I'd say that the Sea-Doo Spark successfully restart the personal watercraft industry, as you can see on this chart, with black being traditional watercraft and gray being the Spark. In 2015, Sea-Doo shattered a 24-year-old market share record, we are on our way to beat that record in 2016. Very good momentum for the Sea-Doo brand. What's interesting is while recent industry increase has been primarily attributable to Spark, in season 2016, as you can see on the chart, the industry growth also came from traditional watercraft, which was the intent.
What we're seeing right now is not only Spark is contributing to the growth, also traditional watercraft. We've been the industry leader for over 10 years, we still have room to grow in recreation and performance. For 2017, the Sea-Doo GTI with the 900 ACE engine, which is the most affordable, most fuel-efficient, full-size personal watercraft, will tackle this growth potential in recreation for Sea-Doo. The next one is the 2017 Sea-Doo GTR-X performance watercraft with the new 230 horsepower Rotax 1500 HO ACE, which will tackle the growth opportunity in the performance segment. Beyond Spark, for personal watercraft, there is room to grow for Sea-Doo. Last, I would like to talk about our network coverage optimization and also what I call the winning the dealer engagement by offering the best dealer value proposition.
The market in the U.S. is overwhelmingly addressed with a dealer network that is multi-OEM. When you take a step back to how do you win the in-dealership battle in such an environment? Yes, you may have the best product, a lot of the conversion is done inside the dealership. How do you get these dealers to want to push and promote your brand more than others? Through that reflection, we came to the realization that our own growth and profitability is tied to our ability to generate growth and profitability for our dealers. We believe that if we offer the best dealer value proposition, the general managers, the dealer owners will sway customers to where they make more money, where they have more growth potential, where profitability is.
What we did in the last three years, we developed a system centered around growth and profitability, from the dealer standpoint. In that system, there's five components. There's absolutely no rocket science in any of these, the importance to be successful is that you have this core belief that there's no growth and profitability for BRP if there's no growth and profitability for our dealer network. Let me speak a bit about each component. First obviously, it starts with strong brands and products, viewed from the standpoint that it has to provide growth and profitability potential to dealers. Great example of that is providing products to dealers with strong customer appeal that will command a price that yields superior dealer front-end retain margins. What that is, the retain margin at the retail of the vehicle.
That's the customer money coming in, how much margin the dealer is able to retain at that sale. Strong brand and products will make that front-end margin higher. Dealers will be able to retain a price that is closer to MSRP. That's the first element. Strong brand and products are key for dealers to retain more margins on the front end, and that is at the sale of the product. The second one is respecting our dealers' primary market area or PMAs while optimizing our network coverage. What are PMAs? A dealer PMA is a territory drawn to include most of its customer based on historical drive time habits. We're able to make a territory around the dealer that includes most of the dealer customer.
In other words, if a customer is inside that territory, all things being equal, that customer should want to shop at that dealer because it's the closest to his home. Okay? Now, we've opened more than 240 new dealers in North America in the past three years while being very respectful of our existing dealers' PMA. In order to avoid dealers being piled up one over another, being too close to one another. Okay? We want to put dealers in empty spaces, not to interfere with existing dealers' PMA as much as possible. Because over-concentration would make dealers compete for the same customers. Again, in dealer growth and profitability, that reduce dealers' profitability with our brand when they start competing each other for the same customer.
For 2017, we're still in line to achieve our fiscal 2017 end projection of new dealers signed between 45 to 55 new dealers, which would bring the total number of new dealers signed by fiscal year 2017 end to about 270 new dealers, thereby increasing the coverage for Can-Am brand by about 31% in the last four years by the end of fiscal 2017. With this, we are approaching the optimal number of dealers based on the 2016 industry sizes, and now we're focusing more and more in helping these new dealers achieving their full potential. The third element of the system is the BRP order management system, which helps dealers optimize their inventory level. Let's take the off-road OMS, which proposes a monthly recommended order based on a dealer's inventory and future retail plan, with the objective of maintaining a targeted forward days of inventory.
That way, it adjusts wholesale down if retail did not materialize and inventory starts accumulating, it also raises the recommended order if retail grew faster than planned. It's not a set number. It fluctuates with retail. Also, it will adjust down before a low season because it maintains a forward days of inventory. Before a low season, it will reduce the dealer inventory and ramp up inventory prior to the high season. All of that ensures dealers never have too little inventory and miss opportunity, or too much inventory, having to heavily discount and pay high carrying costs, again, focusing on dealer growth and profitability. That's the third element. The fourth one is our certification program, it basically proposes best business practices towards customer satisfaction.
It recognizes dealers that implement these best practices in four cornerstones, operational excellence, knowledge and competency, customer focus, and brand representation. Dealers implement these best practices and the certification program recognizes those who do. Dealers choose at which level they want to certify. We have three levels, silver, gold, or platinum. The dealers who go beyond the essential are rewarded with more back-end money. Now I was talking earlier on about retained front-end margin. I'm talking about back-end money that we're giving the dealers after the retail sale of a unit. This certification program influences the amount of back-end money that we are giving based on their certification status. It's providing basically our best dealer with more back-end money potential. The last piece of the puzzle is PerforMAX rewards retail achievement.
It starts from a core principle that when dealers achieve or exceed retail targets, BRP will achieve or overachieve in future wholesale. It's basically sharing future profits with our dealer in the form of a retail bonus paid on the back end. PerforMAX payments can be very significant for dealers, and they are a strong motivation for them to grow with BRP. For us, if the dealer overachieves, we will overachieve, we are more than happy to share. That's pretty much in a nutshell, the whole system to winning dealership by building the industry's best value proposition. With the whole system focused on dealer growth and profitability, which will result in BRP growth and profitability. It works.
To start with average dealer margins, just to illustrate, with products and brand commanding a price premium, with less inter-dealer competition, and with reduced discounting to clear excess inventory, the dealers have a front-end margin improvement. With certification at gold or platinum level, there's more money. With PerforMAX, the retail bonus for achievement or overachievement on retail, the dealers are improving their back-end margins for improved dealer margins in the end. Dealer retail margins are higher with BRP, and dealers have started to notice, which leads to dealer engagement. If you talk to some of our dealers, you may have heard that they have noticed, and they have started to increase their engagement behind the brand because they've noticed that they're making money selling BRP products.
With this, our three strategic priority, I think, are very well supported to increase our presence in year-round products and capture growth potential there, maintaining our market leadership and even growth opportunities that remain in mature markets in seasonal products with a system to always continue to improve our dealer value proposition. With this, any questions?
Now as you're talking about increasing your dealer margins, where are you in that cycle? Is this something that you guys have started recently, or are you at the end of that cycle? If you could just share with us, any numbers you can give us in terms of what does this look like over the last five years, how have the margins at dealer resolved?
That's a very good question. The question is about, when did we start, and is this recent improvement of dealer margin? About numbers, how much are we talking about in terms of improvement of dealer margin? For those on the line, I wanted to repeat the question. We started three years ago implementing the pieces, and we've been refining these pieces since the past three years. It's a work that will always be in progress. We're working with our dealers, actually. It takes a level of trust between the network and the OEM to build that together. At first, they were skeptic, but right now we're seeing that dealers are really appreciating and getting in it. We're continuing to improve this system.
In terms of numbers, for competitive reasons, I really cannot share, but I can tell you that they are meaningful enough to be noticed by the dealers, and for Can-Am to gain momentum due to dealer engagement. Yes.
The 270 new dealers through the end of 2017, kind of at the upper end of that range we provided. How do you think about the network sort of three years from now? What do you think is a reasonable growth target, or do you feel like the network at the end of 2017 is where you need to be?
The optimal size of the network is mostly dependent on two variables, the industry size and your market share. We will continue to grow market share, obviously. That's our intent. Industries are what they will be, and that's why there's not a perfect number for anyone. Every OEM has to have their number based on those factors. We are approaching right now the optimal level. That's what I mentioned. If we continue gaining market share, maybe we will need to add some dealers. Quite frankly, we are really approaching the optimal number, and now our focus is turning into helping the new dealers achieve their full potential, which takes a while. They need to get known. Yes.
Is there a tactical plan today to take advantage of the problems that your competitor Polaris has experienced and converting some of those dealers?
I think the only tactical plan is for us to continue focusing on execution with the plan that we have in place. We were already targeting to go after the sports segment with the Maverick X3. For us, what really matters is focusing on delivering and executing the strong go-to-market plan that Anne Bélec talked about earlier on. The tactical plan was to grow in that segment. Whatever happens to a competitor is part of the hand that you're dealt, but we think that we're well-positioned with the plan we are in. Yes.
How does the service margins compare with the product of the others?
Interesting question about service margins. While we are able to evaluate through dealer pool groups and dealer DMS, aggregate DMS data, dealer management system data for the sale of units, it's actually very difficult to appreciate the portion per brand of the service margins of a dealer. We're not in a position to yet be able to improve on that, but that's something that we hope the industry will focus on in the future. Yes.
Given the aggressive promotions that some of your competitors are offering, do you think that impacts the overall dealer profitability challenge that dealers have accelerated in the product strategy?
Short term, what we've seen is that it did not impact our momentum. If it lasts for long, you move into long term, it would eventually affect the resale value of the used units. As soon as it start doing that, dealers will be more cautious about taking units in, and therefore it might affect the overall industry profitability that's available for everyone to share. It is concerning, but it really depends how long it lasts and how intense it gets. For the moment, we have not seen any immediate impact, but it's something to be cautious about. Yes.
If you were to comment on the general health of the side-by-side market in North America since July, how would you describe it with the question in mind with Maverick X3 breaking into market share in what category of side-by-side? I suppose you need some time.
Yeah, you need some time. The question is about the health in recent months of the side-by-side industry and what do we think our market share could be in sport. Since July, the side-by-side industry has been down low single digits. It definitely slowed down. Some factors could be behind that. We're in an election year. There's always all sorts of things that are happening in an election year, some uncertainty brewing. This is what we see right now. Again, what's important for BRP is that even if the industry growth is not what some competitors would like it to be, there's still plenty of growth potential for BRP with its brand in the segment. As to the market share of the Maverick X3, we're ramping up production. We're starting deliveries. It's very early to assess rate of adoption, if you want.
Our intent has always been to become a strong number two in all segments in side-by-side, and definitely that would mean for us doubling our current market share over the next years with the Maverick X3 in the coming years.
Current market share is in the high single digits for
That is correct. Yes.
Just coming back about the SSV industry in North America. You gave good color for July, since July, also for the season. You talk about the uncertainty around election year, uncertainties overall. Do you think, what about the view of being more about the SSV industry getting more mature? What should we expect going forward, given there's more units in the used market and stuff like that? Is this something we should foresee a correction like we saw in the SSV industry, ATV industry in the past, snowmobile in the past also? Is this a kind of typical curve for our industry?
That's a very good question about the product life cycle or industry life cycle that side-by-side might have. I personally certainly not anticipate the life cycle curve to look anything like ATV or snowmobile had experienced. I think that that industry has been growing in a more mature way. I do not expect a sharp decline that would happen due to market saturation. I think that if you see a slowdown, my personal opinion, be a gradual slowdown and not necessarily anything revealing.
If I can add, Benoît.
Yeah.
If you take snowmobile, which is a pure recreational product, and watercraft also, they had very sharp decline in the '70s with snowmobile because of the oil crisis and watercraft because of the bad publicity. The interesting with the side-by-side, it's an industry that is 60% utility, 40% recreational. We believe that if something happen, it will not be a sharp decline like we saw in pure recreational activities.
You foresee that for now. All right.
Yeah, for sure.
I want to emphasize that for BRP and for Can-Am that truly does not hurt our growth potential in these industries.
Aside Polaris, obviously, who would you consider as maybe strong competitors in the SSV industry over time? Certainly competitors that you should be watching. I mean, aside Polaris, there are so many brands right now.
We like strong competitors. They make us have to do our very best. We have strong competitors in the side-by-side industry. Hondas and Yamahas are strong competitors, and all the brands that are participating in the side-by-side industry are strong competitors. That's fine with us. That just gets the best of us. That's the situation in side-by-side.
Maybe one last area, Sandy. It's got to be said and done because we've been all waiting.
All right.
Hopefully I'll be as exciting as Bernard with his internet working. What I want to cover with you actually, there's three things I'd like to cover with you. The path to the 2020 objective, which José alluded to. Give you a bit more color how we're going to achieve our revenue and our profitability objectives. Talk a bit about our capital allocation priorities and also cover the year-end guidance for the year. As José mentioned, and as you all know, we've been presenting this slide to you for the past 18 months. We're looking at 10% revenue growth and 15% EPS growth with three very strong pillars, which we hopefully gave you a better appreciation today of what they are and how we're working at each of these pillars of growth, Agility, and Lean Enterprise.
As part of these pillars, when we look at the revenue growth, last year we finished CAD 3.8 billion. We're looking at a CAD 6 billion revenue in fiscal year 2021. It basically comes from five key elements. The first one is the ORV business. I think we talked a lot about the ORV business today. We've talked about the introduction of new models, and Bernard gave you a good feeling as to how we are addressing the challenges of a multi-brand dealer network, especially in North America, allowing us to get a bigger mind share of the dealer network and having them focused on the Spyder product line. Innovation will be key, also our go-to-market efforts will be fundamental. The Spyder business, yes, it's been disappointing this year.
However, we do have some very good learnings from the regional initiatives we did in Florida and California, there are some key learnings that we will be applying going forward. We will be making announcements as well on the Spyder business, stay tuned for that. We are committed to this business. We believe there is a good potential and it will be an important driver of our revenue growth going forward. You've known BRP now for several years. We've been public since 2013. We've talked a lot about innovation. You got to meet José, and you probably figured out that José is a product guy as well and loves the product, that's something we are going to continue to do. You've seen how successful we've been in growing our market share in our seasonal business, in the ATV business.
Innovation is something that we are committed to bringing to market, but not just innovation for the sake of innovation, but innovations which are meaningful and which are going to be driving market share increases in seasonal products and as well in the marine propulsion systems business with the G2. Coming with that, as volume grows, obviously the parts business is going to grow. It is an important business for us, very profitable, but also with what Anne presented this morning on our focus on accessory development and increasing the overall dollar per unit of pack for every unit we retail, that will be an important element of our growth plan.
For the first time today, we opened up a bit more on other growth opportunities that we are investigating that provides us more lever for ensuring that we do achieve and even exceed the CAD 6 billion mark for 2021. The framework is in place. The team is working, looking at opportunities. We do have financial objectives associated with that. Obviously, we are going to focus on growth, but growth with a profitable outcome as well. That's for the revenue. When we look at the overall profitability, focusing on margin because it is the big lever of profitability growth for BRP, we are looking at a 200 to 300 basis point margin improvement over the next several years. Depreciation expense is going to be a headwind in the next year as our CapEx level is higher than what our depreciation expense level is.
That's going to be providing a bit of a downward pressure on margin. Capacity utilization and maximizing the footprints that we have with increased volume will be driving margin expansion. The various manufacturing initiatives that we have, be it the modular approach, which some of you will see today with the factory tour, new technologies as well that we are introducing. Again, we opened up today on the turbocharging systems that we are now building in-house. We are able to charge the consumers for that value-add technology, and that is also lowering our overall cost of material and therefore increasing margins. Also with the lean manufacturing and procurement initiatives that we have, that's another important driver of margin to, as mentioned, an overall 200 to 300 basis point increase.
That's the road to the 2020 objective, focused on revenue but also on profitability in order to increase overall shareholder value in the long term. When we look at overall capital allocation priorities, we are a business which generates a lot of cash on a yearly basis, a lot of free cash flow. Our priorities are, one, ensuring we are able to continue growing this business and fuel the growth, but also return capital to shareholders in the long term and in the short term as well. When we talk about fueling the growth, the number one priority for us is continuing investing in the business. That comes in the form of CapEx. On a yearly basis, we invest approximately CAD 200 million of CapEx.
We intend to continue investing in the low CAD 200 million of CapEx in the future as we venture into new product lines, enter into more segments. In the business we are, innovation requires investment in R&D and CapEx, we will ensure that we maintain that focus for the overall business. Financial flexibility is key. We are a product or an industry where sometimes we do face seasonality, having that flexibility in the long term is fundamental. We've just refinanced our balance sheet this summer, we've reduced overall leverage, that's something we've done over time, we will continue doing in the future as we increase profitability. We've also extended the maturity of that debt to 2023. It's been pushed back by three years versus what we initially had.
Also, to give us that financial flexibility, we've increased our revolver by CAD 75 million-CAD 425 million, overall reducing, strengthening the balance sheet and reducing leverage for BRP. Return capital to shareholders. Today, when we look at where the stock price is trading, the NCIB or share buyback is a program which we believe brings good returns to shareholders as an option. Last year, we purchased just 3.7 million shares, about CAD 96 million. This year, as of July 31st, we had a significant portion of the NCIB done. It's something we will continue to investigate and, as needed, we will execute on that plan. That's it for overall capital allocation priorities. A few slides on the year-end guidance. This is the guidance that we published with our Q2 results on September 9th.
As you might be aware, we've adjusted upward the year-end products revenue guidance despite a headwind on the Spyder business, given the strong dealer feedback and orders for the Maverick X3. That called for an increase in year-end product revenue guidance. We've adjusted downward a bit the PAC revenue guidance coming from lower replenishment following the soft winter we had. We've also adjusted normalized net income upward and the EPS metric as well upward coming from the refinancing and as well the share count adjustment. For the second half of the year. Historically, you've seen us deliver very strong second half of fiscal year 2015 and fiscal year 2016. It was also second half skew. Fiscal year 2017 as well is the same based on our guidance and the results that we have for the first half of the year.
When we look at the Q3 versus Q4, how things are going to pan out, Q4 is going to be significantly better than what it was a year ago. Two things driving that. Snowmobile volume is going to be very much so in Q4. We anticipate that the snowmobile volume will be down in Q3, coming from the fact that more units are going to be on the water being shipped to Scandinavia of the new snowmobile platform, so not yet to market. The Can-Am Maverick and Maverick X3 is a big plus for Q4, as we will be delivering these units to the dealer network. Also when I look at the Can-Am Defender, it is again a positive element for Q4. Last year, we only did partial shipments of Defender as we started shipping in January.
When I look at the year-over-year impact, Q3 versus Q4, we would expect Q4 to be significantly higher than last year. Again, as José mentioned, we are very confident in delivering these numbers. We have orders on hand from the dealers for snowmobiles, for the Maverick, for the watercrafts, for snowmobiles as well in Scandinavia. The outlook is extremely favorable for the rest of the year for BRP. With that, I will take your questions if you have any. Yes, Sophia.
You have a double-digit EPS growth target over the next four years, 12 months ago, you were talking about distributing a dividend as a priority. Not necessarily priority, but in alignment with capital allocation plans. What was the board's thinking about dividend?
We're having recurring discussions with the board on capital allocation priorities. In the current context, we believe that when we look at the share price in terms of returning capital, it is better to do the NCIB than to look at a dividend. Protecting liquidity for future growth as well is a priority. Maintaining financial flexibility was the main focus. We feel today that a dividend is not something which we need to start thinking about as growth is still a key element for us.
What about the financial flexibility? Obviously, two times the debt is, I think, a comfortable level, but the fact you've been kind of pushing for bringing it down to one time. Because you are now more diversified, you feel more comfortable with the two time or you're still targeting?
We still have an objective of further deleveraging the business. The way I look at it is my debt structure today. I have a covenant light debt structure. Again, if we were to hit a down cycle in the midterm, it would reduce my flexibility and my ability to continue investing in the business. Because we don't necessarily want to, if a down cycle happens, reduce investments in R&D and CapEx in order to manage our covenants. The fact that we have a covenant light debt structure, that comforts me, and the fact that the maturity is in 2023, I'm comfortable with a two times debt-to-EBITDA ratio today. As things evolve, deleveraging is still part of our priorities.
Okay. Does it mean that your CapEx number of CAD 200 million, assuming we would hit a recession in a few years or one, you would not bring your CapEx downward, but you would take the portion and still invest? Stepping back from that downturn than anybody else or?
What I did want to make sure is we continue investing in product innovation. We might look at some strategic projects where we say, "Well, the payback is a bit longer on these ones, infrastructure investments, et cetera," which we might scale back. We do want to maintain the ability to continue investing in innovation.
And in terms of acquisitions, what's the appetite there and what sites are we talking about? Are we talking about like small, little bolt-on or you can be a little bit more aggressive in doing mid-sized acquisitions?
Well, if we're talking about acquisitions today with you or potential acquisition, that's because the appetite is there. Obviously, we will not do an acquisition just for the sake of growing top line. We want to do acquisitions that are accretive to overall profitability and shareholder value. That have a strategic advantage. We might do an acquisition which is small, but strategically has a big impact. It could be a technology or it could be a certain market where we'll gain significant competitive advantage. It can be a significant acquisition where you become even a stronger player in the powersports industry. Those are the types of things that we are considering.
Just in terms of your bridge that you provided, is there any margin expansion related to leveraging some of the other fixed expenses beyond just the gross margin over the next four years?
Yeah, very good question. Obviously, when we look at our overall footprint, and today you're gonna visit our latest facility, we feel we do not need to add any walls in order to get to that CAD 6 billion mark. As we grow volume, the contribution margin coming from these incremental units will be absorbing more costs and therefore driving margins even more. Yes, there's some leveraging of assets implied in the overall bridge.
Just to come back on that question, to go to the CAD 6 billion. There's no M&A in that and you assume a new product line.
There is. If you go back to the pillars that I showed, yes, there's the growth component in there of M&A or other product lines that we could investigate, which will provide us with, let's say, maneuvering room to achieve that CAD 6 billion. That's an option that we want to have in order to make sure that we deliver on that CAD 6 billion.
How sizable is that piece related to the CAD 2 billion gap you need to fill by the end of 2020?
It's important but not significant. When we look at the overall ORV business today, that business is a billion-dollar business. Doubling it will bring us to CAD 2 billion. Spyder for us, we are still very bullish on Spyder. How big can Spyder be? When we have discussions, José and I, we believe that we should be selling more Spyders than Watercraft because the obstacle for the utilization of that product are much smaller. We will continue focusing on the assets that we have to grow. If we do an acquisition, well, that's just going to be a plus for us and we'll put that in our numbers. Thank you.
Yeah.
Yann, just to confirm that with this, it's what, in Q3 we'll see some strong growth going into Q4?
Oh, sorry. I misspoke on that one. The slide says Q4, so trust the slide.
My closing is quite short because I think that you understand where we're going. Basically, as I said in my intro, the plan didn't change since what we presented to you in Austria. Second thing, like I said to Tony, we believe that if the economy stay about like it is right now, U.S., Canada, Western Europe, and we show the numbers in more detail today, we have a very good chance to meet this objective for change of CAD 6 billion number 350 by fiscal year 2021. Obviously we don't control the worldwide economy, but if it remain like this, we should very good about our plan.
When I talk to the board and when I talk to investor, this is how I hope they see us. This is my closing remark. Going away from this meeting today, you know our business now in details. If there is one thing that I would like you to remember and when I'm talking to investors, this is what I'm saying. All of BRP employee are rallied around this strategic priority to grow, educate and win in enterprise. I think you could see during the presentation that everything is well aligned between sales, marketing, manufacturing operation. Everything is very well aligned. Our initiatives are progressing as planned and we are starting to reap the benefit. The RSE is done. The factory is here. We just need to fill it up. Gunskirchen 2020, there is 12 to 18 months to go.
We go on the tail end of the revamp of the factory. Valcourt 2020 just started last November and will end at the end of 2018. By the end of 2018, we'll invest about 70% of the CAD 118 million. My point is, a lot of investment has been done, and we can reap the benefit of those investments going forward. Last not least, you know that new modular approach that we learned from the car industry combined with the manufacturing operation, the Defender is under that new rule. The X3 is under there. The REV Gen4 is also following this rule, and the Evinrude G2 is already following this rule. Those four product lines will continue to grow, improving our margin. On top of it, any new platform will reach the market replacing, in time, watercraft, ATVs.
The calendar will come with that new philosophy. What I'm very happy with is we've been able to adapt those state-of-the-art philosophy to our product line, and I think we're quite unique in the industry. Third, the diversification of our product portfolio, geographic sales, and manufacturing footprint is allowing us to deliver our plan despite volatile industry. We see watercraft have done better, Spyder a bit worse. We have more levers than some of our competitors to continue to grow despite things that we don't control. Last and not least, and this is my belief. When I sell the company to a new employee or to an investor, that's my belief. Our capacity to innovate, our agility, our manufacturing expertise, and our diversification are putting us in a unique position in the industry. We're not dependent on ORV or motorcycle. We're more diversified.
I think all those things add up together, put BRP in a very unique situation into the industry. That's my closing remark.
Any closing questions?
Yeah.
Looking at the top line on the revenue side, is that geared more towards market share increases or market stimulation?
The top line, if you look, again, remember the slide on the ORV where you have the mid-cc, the utility, and you have the X3 or the sport side by side. The yellow bar is very low in those big markets, and we are entering more aggressively than ever before those segments. For me, it's still penetrating white space. We know that this will not continue for the next five years. That's why penetrating white space, plus the addition of the momentum in snowmobile and watercraft and outboard engine, and adding up another business in time, this is the plan right now. It's a mix of all this, but the good thing is we have more than one lever. We're not forced to do this perfectly to succeed. If we not have good as what we're planning, we have other lever to reach our objective.
Yep.
Can you talk about the next generation product or a new category that you could create? Are you worried at all that dealers don't have the capacity for all take on new product lines?
If you're successful and if they make money with your product, I think they will find space. That's my two cents. I give you the example for the one of you who are not familiar with Quebec, but the Quebec people here in the room. All the dealership in Quebec have been revamped, and it's beautiful store. Who paid the bill? Spyder. When they're selling 100 to 150 Spyder per season, new and used, they're making a lot of money, and they've been able to enlarge those dealerships to build new dealership. When the dealer make money, they will find a way to make [inaudible]. That's at least my belief.
Thank you very much.
Thank you.