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Selden 2020 - LEADERBOARD

BRP reports fourth quarter and full-year 2022 results and authorization of substantial issuer bid

by BRP 25 Mar 16:36 PDT
BRP logo © BRP

BRP Inc. (TSX:DOO; NASDAQ:DOOO) today reported its financial results for the three- and twelve-month periods ended January 31, 2022. All financial information is in Canadian dollars unless otherwise noted. The complete financial results are available on SEDAR and EDGAR as well as in the section Quarterly Reports of BRP's website.

"We are extremely pleased with our fourth quarter performance which concluded an exceptional Fiscal 22. We delivered record annual results with revenues reaching over $7 billion for the first time in our history, despite operating in a volatile environment. We continued gaining market share in the powersports industry and attained record market share in the snowmobile, PWC, ATV and SSV segments. These results were driven by ongoing robust demand for our products and our team's ability to navigate through supply chain disruptions," said José Boisjoli, President and CEO.

"Looking ahead to Fiscal 23, we anticipate solid growth of 8% to 12% in diluted Normalized EPS. The first half of the year could prove to be more challenging given the global supply chain volatility. We are confident we can achieve our full year guidance based on sustained consumer interest in powersports, our strong product portfolio, including new product introductions, and the agility of our team," added Mr. Boisjoli.

"Furthermore, we are very excited to announce today that our iconic Can-Am brand is returning to its motorcycle roots with a product line-up that will be completely electric, and the first models are expected to be available in mid-2024," concluded Mr. Boisjoli.

Fiscal Year 2023 Guidance  

The Company has established its FY23 guidance as follows: Financial Metric FY22 FY23 Guidance vs FY22
Revenues
Year-Round Products $3,467.5 Up 30% to 35%
Seasonal Products 2,524.1 Up 22% to 27%
Powersports PA&A and OEM Engines 1,143.5 Up 17% to 22%
Marine 512.8 Up 12% to 17%
Total Company Revenues 7,647.9 Up 24% to 29%
Normalized EBITDA 1,462.1 Up 12% to 15%
Effective Tax Rate 25.4% 26.0% to 26.5%
Normalized Earnings per Share – Diluted $9.92 Up 8% to 12% ($10.75 to $11.10)
Net income 794.6 ~$900M to $925M

Other assumptions for FY23 Guidance:

  • Depreciation Expenses: ~$350M (Compared to $268M in FY22)
  • Net Financing Costs Adjusted: ~$72M (Compared to $60M in FY22)
  • Weighted average number of shares - diluted: ~83.5M shares (Compared to 85.3M shares in FY22)
  • Capital Expenditures: ~$675M to $700M (Compared to $698M in FY22)
FY23 Quarterly Outlook

Following a strong fourth quarter in Fiscal 2022, we expect another solid year with a Normalized EBITDA increase ranging from 12% to 15% compared to the previous period. The Company anticipates the incremental Normalized EBITDA for the year will be generated during the last three quarters and will represent 30% growth compared to the last three quarters of FY22 as we anticipate supply chain constraints to subside while also benefiting from an increase in production capacity beginning in the second quarter.

Financial Highlights
Three-month periods ended Twelve-month periods ended
(in millions of Canadian dollars, except per share data and margin) January 31, 2022 January 31, 2021 January 31, 2022 January 31, 2021 January 31, 2020
Revenues $2,347.5 $1,815.1 $7,647.9 $5,952.9 $6,052.7
Gross Profit 609.5 501.9 2,132.2 1,472.3 1,454.0
Gross Profit (%) 26.0% 27.7% 27.9% 24.7% 24.0%
Normalized EBITDA 416.4 313.1 1,462.1 999.0 804.4
Net income (loss) 209.6 264.2 794.6 362.9 370.6
Normalized net income 251.3 162.8 846.5 477.0 358.4
Earnings per share - diluted 2.50 2.95 9.31 4.10 2.28
Normalized earnings per share – diluted 3.00 1.82 9.92 5.39 3.10
Weighted average number of shares – basic 81,965,577 87,440,713 82,973,284 87,519,856 92,760,943
Weighted average number of shares – diluted 83,691,775 89,508,263 85,259,520 88,604,984 93,813,815

Fourth Quarter Results

The Company continued to experience supply chain related disruptions and inefficiencies in an increasingly inflationary environment when compared to the first nine months of Fiscal 2022 and the fourth quarter of Fiscal 2021. As a result, it limited the Company's ability to replenish dealer inventories thereby limiting product availability in the network. Such supply chain related disruptions also resulted in an increased level of substantially completed units awaiting missing components throughout the second half of Fiscal 2022. Despite these challenges, the Company optimized the shipment of missing components to its dealer network resulting in a high conversion rate of substantially completed units available for retail, revised its production planning to favor the manufacturing of in season products, such as snowmobiles which, combined with strategic pricing initiatives, allowed it to achieve record high revenues during the fourth quarter of Fiscal 2022.

Revenues

Revenues increased by $532.4 million, or 29.3%, to $2,347.5 million for the three-month period ended January 31, 2022, compared to the $1,815.1 million for the corresponding period ended January 31, 2021. The revenue increase was primarily driven by a higher wholesale volume across all product lines due to strong retail demand and favourable pricing mostly due to supply chain related surcharges. The increase was partially offset by an unfavourable product mix in Year-Round Products. The increase includes an unfavourable foreign exchange rate variation of $42 million.

  • Year-Round Products (36% of Q4-22 revenues): Revenues from Year-Round Products Products increased by $93.4 million, or 12.3%, to $853.1 million for the three-month period ended January 31, 2022, compared to the $759.7 million for the corresponding period ended January 31, 2021. The increase was primarily attributable to a higher volume of ATV and SSV sold and favourable pricing on all products. The increase was partially offset by an unfavourable product mix of SSV. The increase includes an unfavourable foreign exchange rate variation of $8 million.
  • Seasonal Products (45% of Q4-22 revenues): Revenues from Seasonal Products increased by $377.5 million, or 56.2%, to $1,048.9 million for the three-month period ended January 31, 2022, compared to $671.4 million for the corresponding period ended January 31, 2021. The increase was primarily attributable to a higher volume of snowmobiles and PWC, combined with a favourable mix of snowmobiles sold and a favourable pricing of PWC. The increase was partially offset by an unfavourable foreign exchange rate variation of $25 million.
  • Powersports PA&A and OEM Engines (13% of Q4-22 revenues): Revenues from Powersports PA&A and OEM Engines increased by $53.6 million, or 20.8%, to $310.7 million for the three-month period ended January 31, 2022, compared to the $257.1 million for the corresponding period ended January 31, 2021. The increase was mainly attributable to a higher volume of PA&A coming from strong unit retail sales and higher replacement parts revenue driven by an increased usage of products by consumers combined with a favourable pricing. The increase was partially offset by an unfavourable foreign exchange rate variation of $7 million.
  • Marine (6% of Q4-22 revenues): Revenues from the Marine segment increased by $9.8 million, or 7.6%, to $139.0 million for the three-month period ended January 31, 2022, compared to $129.2 million for the corresponding period ended January 31, 2021. The increase was primarily due to a favourable mix of boats sold, partially offset by an unfavourable foreign exchange rate variation of $2 million.
North American Retail Sales

The Company's North American retail sales for powersports vehicles decreased by 7% for the three-month period ended January 31, 2022 compared to the three-month period ended January 31, 2021. The decrease was mainly driven by limited product availability.

  • Year-Round Products: retail sales decreased on a percentage basis in the high-twenties range compared to the three-month period ended January 31, 2021.
  • Seasonal Products: retail sales increased on a percentage basis in the high single digit range compared to the three-month period ended January 31, 2021.
  • Marine: boat retail sales decreased by 20% compared with the three-month period ended January 31, 2021.
Gross profit

Gross profit increased by $107.6 million, or 21.4%, to $609.5 million for the three-month period ended January 31, 2022, compared to $501.9 million for the corresponding period ended January 31, 2021. The increase was primarily due to favourable volume and pricing. Gross profit margin percentage decreased by 170 basis points to 26.0% from 27.7% for the three-month period ended January 31, 2021. The decrease was attributable to higher logistics, commodities and labour costs due to inefficiencies related to supply chain disruptions, partially offset by higher volume.

Operating expenses

Operating expenses increased by $10.1 million, or 4.0%, to $262.9 million for the three-month period ended January 31, 2022, compared to $252.8 million for the three-month period ended January 31, 2021. This increase was mainly attributable to lower expenses in FY21 following cost reduction initiatives to mitigate the impact of Covid.

Normalized EBITDA

Normalized EBITDA increased by $103.3 million, or 33.0%, to $416.4 million for the three-month period ended January 31, 2022, compared to $313.1 million for the three-month period ended January 31, 2021. The increase was primarily due to higher gross profit, partially offset by higher operating expenses.

Net Income

Net income decreased by $54.6 million to $209.6 million for the three-month period ended January 31, 2022, compared to the $264.2 million for the three-month period ended January 31, 2021. The decrease was primarily due to an unfavourable foreign exchange rate variation impact on the U.S. denominated long-term debt, partially offset by higher operating income.

Twelve-Month Period Ended January 31, 2022

Revenues

Revenues increased by $1,695.0 million, or 28.5%, to $7,647.9 million for the twelve-month period ended January 31, 2022, compared to $5,952.9 million for the corresponding period ended January 31, 2021. The revenue increase was primarily due to higher wholesale across all product lines due to Covid impact last year, lower sales programs due to a strong retail environment and favourable pricing combined with a favourable product mix of PWC, ATV and SSV. The increase was partially offset by an unfavourable foreign exchange rate variation of $287 million.

Normalized EBITDA

Normalized EBITDA increased by $463.1 million, or 46.4%, to $1,462.1 million for the twelve-month period ended January 31, 2022, compared to $999.0 million for the twelve-month period ended January 31, 2021. The increase was primarily due to higher gross profit, partially offset by higher operating expenses, when excluding the impairment charge relating to the Marine segment recorded in FY21.

Net Income

Net income increased $431.7 million to $794.6 million for the twelve-month period ended January 31, 2022, compared to $362.9 million for the twelve-month period ended January 31, 2021. The increase was primarily due to higher operating income, partially offset by a higher income tax expense, higher net financing costs and lower foreign exchange rate variation impact on the U.S. denominated long-term debt.

Liquidity and Capital Resources

The Company generated net cash flows from operating activities totalling $770.0 million for the twelve-month period ended January 31, 2022 compared to $954.2 million for the twelve-month period ended January 31, 2021.

The Company used its liquidity primarily to invest in capital expenditures for $688 million to add production capacity and to acquire previously leased production facilities, as well as invested to modernize the Company's software infrastructure to support future growth. The Company also partially repaid its Term B Loan for a net amount of approximately US$300 million and returned $726 million to shareholders through share repurchases and a quarterly dividend payout.

On May 4, 2021, the Company amended its $700.0 million revolving credit facilities to increase the availability to $800.0 million and to extend the maturity from May 2024 to May 2026 (the "Revolving Credit Facilities"). Subsequent to January 31, 2022, the Company amended again its Revolving Credit Facilities to increase total availability to $1,100.0 million and replace LIBOR references by SOFR references. The pricing grid and other conditions remained unchanged.

Dividend

On March 24, 2022, the Company's Board of Directors declared a quarterly dividend of $0.16 per share for holders of its multiple voting shares and subordinate voting shares. The dividend will be paid on April 18, 2022 to shareholders of record at the close of business on April 4, 2022.

Announcement of A Substantial Issuer Bid

The Company announced today that the Board of Directors has authorized the launch of a substantial issuer bid ("SIB") pursuant to which the Company will offer to purchase for cancellation up to $250 million of its subordinate voting shares. The Company anticipates that the offer will commence, and the terms and pricing will be determined, during the next two weeks and will be completed before the end of May 2022. The Company intends to fund the substantial issuer bid with a combination of cash on hand and drawings on existing credit facilities.

Under the proposed issuer bid, shareholders wishing to accept the offer will have the opportunity to tender their shares (i) by making an auction tender at a specified price per share within a range proposed by the Company (i.e. modified "Dutch auction") and for a specified number of shares (an "Auction Tender"), or (ii) by making a purchase price tender without specifying a price per share, but rather agreeing to have a specified number of shares purchased at the purchase price to be determined by the Auction Tenders. The maximum and minimum prices to be proposed under the Dutch auction tender will be determined in the context of the market price of the Company's subordinate voting shares at the time of commencement of the proposed issuer bid. The offer will not provide for any proportionate tenders. The offer will not be conditional upon any minimum number of shares being tendered and will be subject to conditions customary for transactions of this nature.

Holders of multiple voting shares will be entitled to tender the subordinate voting shares underlying their multiple voting shares in the proposed bid. Multiple voting shares taken up by the Company will be converted into subordinate voting shares on a one-for-one basis immediately prior to take up. As of March 23, 2022, the Company had 38,080,486 subordinate voting shares and 42,954,979 multiple voting shares issued and outstanding. All shares purchased under the offer will be cancelled.

This press release is for informational purposes only and does not constitute an offer to buy or the solicitation of an offer to sell the Company's shares. The offer referred to in this news release has not yet commenced. The solicitation and the offer to buy the shares will only be made pursuant to a separate issuer bid circular, which will contain full details of the offer and will be filed with the securities regulatory authorities and mailed to the Company's shareholders.

Conference Call and Webcast Presentation

Today at 9 a.m. EDT, BRP Inc. will host a conference call and webcast to discuss its FY22 fourth quarter. The call will be hosted by José Boisjoli, President and CEO, and Sébastien Martel, CFO. To listen to the conference call by phone (event number 2279047), please dial 1 (888) 440-2167 (toll-free in North America). Click here for International numbers.

The Company's fourth quarter FY22 webcast presentation is posted in the Quarterly Reports section of BRP's website.

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