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Selden 2020 - LEADERBOARD

BRP presents its second quarter results for fiscal year 2024

by BRP 8 Sep 2023 06:23 PDT
Quintrex Freestyler X © BRP

Highlights

  • Revenues of $2,778.0 million, up 14% compared to the same period last year, a record second quarter for BRP;
  • Normalized EBITDA[1] of $473.1 million, up 13% compared to the same period last year;
  • North American Powersports retail sales grew by 41% compared to the same period last year, once again outperforming the industry and achieving record highs in terms of market share for PWC, ATV and SSV;
  • Normalized earnings per share - diluted[1] of $3.21, an increase of $0.27 per share, or 9%, and earnings per share - diluted of $4.26, an increase of $1.32 per share, or 45%, compared to the same period last year; and
  • Increasing full year-end guidance for Normalized EPS - diluted[1][2] upward by $0.10, now ranging from $12.35 to $12.85.

Recent events - Highlights from Club BRP 2024

  • The Company launched the all-new Can-Am Maverick R, setting a new benchmark in the high-end SSV Sport segment. BRP also announced that it was expanding the Can-Am SSV lineup with more 4-seaters and entry-level models.
  • For 3WV, the Company revealed that it was enhancing the rider connectivity experience on all Can-Am Spyder F3 and RT models, which will now feature an all-new 10.25-inch color touchscreen with Apple CarPlay.
  • The Company also introduced the next generation of its iconic Sea-Doo Spark, and the new class-leading 325 hp Sea-Doo RXP-X/RXT-X. In addition, it unveiled the new Sea-Doo Switch Cruise Limited pontoon, with a host of upgraded technologies.
  • On the Marine side, BRP announced that it was bolstering the Manitou lineup for model year 24 with the all-new Manitou Explore MAX Dual Engine model, featuring dual Rotax S150 outboard engines, a larger MAX Deck and the iDock intuitive piloting system.

BRP Inc. (TSX:DOO; NASDAQ:DOOO) today reported its financial results for the three- and six-month period ended July 31, 2023. 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 pleased with our performance as BRP delivered its strongest second quarter ever with revenues and Normalized EPS - diluted[1] increases of 14% and 9%, respectively, over last year. Driven by solid consumer demand, we significantly outpaced the North American Powersports industry with an impressive 41% growth at retail, further increasing our market share in most product categories. We thank our employees for raising the bar and developing market-shaping products that set us apart worldwide," said José Boisjoli, President and CEO of BRP.

"We had a very successful BRP Club in August with a significant number of new model launches. Our reputation for innovation, the breadth of our portfolio, and a strong dealer network are key advantages for us in the industry, paving the way for continued success going forward."

"With our solid momentum, we expect fiscal 2024 to deliver record revenues and profitability. Reflecting our positive outlook, we are increasing the range of our financial guidance to Normalized EPS - diluted[1] between $12.35 and $12.85," concluded Mr. Boisjoli.

[1] See "Non-IFRS Measures" section of this press release
[2] Earnings per share is defined as "EPS

Fiscal year 2024 updated guidance and outlook

The FY24 guidance has been updated as follows:

[1] See "Non-IFRS Measures" section of this press release.
[3] Effective tax rate based on Normalized Earnings before Normalized Income Tax.
[4] Please refer to the "Caution Concerning Forward-Looking Statements" and "Key assumptions" sections of this press release for a summary of important risk factors that could affect the above guidance and of the assumptions underlying this Fiscal Year 2024 guidance.

FY24 Quarterly Outlook

The Company continues to expect another solid year, reaffirming its Normalized EBITDA [1] increase ranging from 9% to 13% compared to the previous year and anticipates that about 45% of the implied Normalized EBITDA [1] for the rest of the year will be generated in the third quarter.

Second quarter results

Continued strong deliveries, aided by improvements in the supply chain and the inflationary environment, allowed the Company to further build on the momentum created in its first quarter. The demand for the Company's products remained healthy, as evidenced by the increase of 41% in the Company's North American retail sales for Powersports Products during the three-month period ended July 31, 2023, compared to the same period last year.

The increase in revenues for the three- and six-month periods ended July 31, 2023 compared to the corresponding periods ended July 31, 2022 is mainly explained by high deliveries of units due to improvements in the supply chain and sustained demand, which is driven in part by strong SSV, ATV, SeaDoo pontoon and Snowmobile retail sales. The supply chain has gradually stabilized, resulting in production efficiencies, a return to the Company's normal wholesale delivery pattern and an increase in gross profit margin compared to the same period last year. However, these increases were partially offset by more costly sales programs, which are mostly due to rising interest rates.

Revenues

Revenues increased by $339.5 million, or 13.9%, to $2,778.0 million for the three-month period ended July 31, 2023, compared to $2,438.5 million for the corresponding period ended July 31, 2022. The increase was primarily due to a higher volume of SSV, ATV and Snowmobile sold, increased deliveries of Sea-Doo pontoon, as well as favourable pricing across all product lines, partially offset by higher sales programs, due to higher interest rates. The increase includes a favourable foreign exchange rate variation of $81 million.

  • Year-Round Products [5] (53% of Q2-24 revenues): Revenues from Year-Round Products increased by $103.5 million, or 7.6%, to $1,461.6 million for the three-month period ended July 31, 2023, compared to $1,358.1 million for the corresponding period ended July 31, 2022. The increase was primarily attributable to a higher volume of SSV and ATV sold, as well as favourable pricing across all product lines, which was partially offset by higher sales programs. The increase includes a favourable foreign exchange rate variation of $40 million.

  • Seasonal Products [5] (32% of Q2-24 revenues): Revenues from Seasonal Products increased by $206.3 million, or 29.8%, to $897.5 million for the three-month period ended July 31, 2023, compared to $691.2 million for the corresponding period ended July 31, 2022. The increase is primarily attributable to a higher volume of Snowmobile sold due to a reduction in supply chain issues that impacted deliveries in the three-month period ended July 31, 2022, as well as increased deliveries of the Sea-Doo pontoon. The increase was also attributable to favourable pricing across all product lines, partially offset by higher sales programs. The increase also includes a favourable foreign exchange rate variation of $27 million.

    [1] See “Non-IFRS Measures” section of this press release.
    [5] The inter-segment transactions are included in the analysis.

  • Powersports PA&A and OEM Engines [5] (11% of Q2-24 revenues): Revenues from Powersports PA&A and OEM Engines increased by $36.7 million, or 14.3%, to $294.2 million for the three-month period ended July 31, 2023, compared to $257.5 million for the corresponding period ended July 31, 2022. The increase was mainly attributable to a higher volume of PA&A coming from strong unit retail sales and sales from businesses acquired in the second half of Fiscal 2023, combined with favourable pricing. The increase was partially offset by higher sales programs. The increase also includes a favourable foreign exchange rate variation of $11 million.

  • Marine [5] (4% of Q2-24 revenues): Revenues from the Marine segment decreased by $12.6 million, or 9.0%, to $126.9 million for the three-month period ended July 31, 2023, compared to $139.5 million for the corresponding period ended July 31, 2022. The decrease was mainly due to a lower volume of boats and PA&A sold as a result of longer production ramp-up related to the introduction of new products, which have experienced extended delays due to supply chain issues, unfavourable mix across most product lines and higher sales programs. The decrease was partially offset by higher pricing and a favourable foreign exchange rate variation of $3 million

North American Retail Sales

The Company's North American retail sales for Powersports Products increased by 41% for the threemonth period ended July 31, 2023 compared to the three-month period ended July 31, 2022. The increase was mainly driven by an increase in the sales of SSV, ATV, PWC and Snowmobile, given the reduction in supply chain issues, which had impacted deliveries in the three-month period ended July 31, 2022.

  • Year-Round Products: retail sales increased on a percentage basis in the low-twenties range compared to the three-month period ended July 31, 2022. In comparison, the Year-Round Products industry increased on a percentage basis in the high-single digits over the same period.
  • Seasonal Products: retail sales increased on a percentage basis in the low-seventies range, low-sixties when excluding Sea-Doo pontoon, compared to the three-month period ended July 31, 2022. In comparison, the Seasonal Products industry increased on a percentage basis in the low-fifties range over the same period.

Marine Products retail sales decreased by 44% compared to the three-month period ended July 31, 2022 as a result of softening consumer demand for the boating industry and lower product availability of newly introduced products in comparison with the prior-year period.

Gross profit

Gross profit increased by $94.9 million, or 15.7%, to $697.6 million for the three-month period ended July 31, 2023, compared to $602.7 million for the three-month period ended July 31, 2022. Gross profit margin percentage increased by 40 basis points to 25.1% from 24.7% for the three-month period ended July 31, 2022. The increase was the result of a higher volume sold, as highlighted above, favourable pricing across all product lines, a decrease in logistics costs due to more efficiencies in the supply chain and a reduction in certain material costs. The increase was partially offset by higher labour costs due to inflation, as well as higher sales programs. The increase in gross profit margin percentage was the result of favourable pricing across all product lines and higher production efficiency coming from an improved supply chain, partially offset by higher sales programs. The increase in gross profit includes an unfavourable foreign exchange rate variation of $11 million.

[5] The inter-segment transactions are included in the analysis.

Operating expenses

Operating expenses increased by $61.9 million, or 24.1%, to $318.8 million for the three-month period ended July 31, 2023, compared to $256.9 million for the three-month period ended July 31, 2022. The increase was mainly attributable to higher selling and marketing expenses, which are mainly due to continued product investment and an increase in marketing projects, an increase in R&D expenses to support future growth and higher G&A expenses, mainly related to the modernization of the Company's software infrastructure. The increase in operating expenses includes an unfavourable foreign exchange rate variation of $27 million.

Normalized EBITDA [1]

Normalized EBITDA [1] increased by $54.8 million, or 13.1%, to $473.1 million for the three-month period ended July 31, 2023, compared to $418.3 million for the three-month period ended July 31, 2022. The increase was primarily due to higher gross profit, partially offset by higher operating expenses.

Net Income

Net income increased by $101.0 million, or 42.5%, to $338.7 million for the three-month period ended July 31, 2023, compared to the $237.7 million for the three-month period ended July 31, 2022. The increase was primarily due to a higher operating income, lower income tax expense and a favourable impact of the foreign exchange rate variation on the U.S. denominated long-term debt, partially offset by an increase in financing costs.

Six-month period ended July 31, 2023

Revenues

Revenues increased by $959.6 million, or 22.6%, to $5,207.4 million for the six-month period ended July 31, 2023, compared to $4,247.8 million for the corresponding period ended July 31, 2022. The increase was primarily due to a higher volume of SSV, PWC, ATV and Snowmobile sold, increased deliveries of Sea-Doo pontoon, favourable product mix across all product lines except Snowmobile and SSV, as well as favourable pricing across all product lines. The increase was partially offset by higher sales programs. The increase includes a favourable foreign exchange rate variation of $176 million.

Normalized EBITDA [1]

Normalized EBITDA [1] increased by $159.8 million, or 23.1%, to $850.2 million for the six-month period ended July 31, 2023, compared to $690.4 million for the six-month period ended July 31, 2022. The increase was primarily due to higher gross profit, partially offset by higher operating expenses.

Net Income

Net income increased by $134.5 million, or 37.5%, to $493.2 million for the six-month period ended July 31, 2023, compared to $358.7 million for the six-month period ended July 31, 2022. The increase was primarily due to a higher operating income, lower income tax expense and a favourable impact of the foreign exchange rate variation on the U.S. denominated long-term debt, partially offset by an increase in financing costs.

Liquidity and capital resources

The Company generated net cash flows from operating activities totaling $748.2 million for the six-month period ended July 31, 2023 compared to a usage of $1.0 million for the six-month period ended July 31, 2022. The increase was mainly due to favourable changes in working capital and lower income taxes paid.

The Company invested $220.4 million of its liquidity in capital expenditures to add production capacity and modernize the Company's software infrastructure to support future growth. Given the revised guidance for Marine, the Company decided to postpone the construction of its boat manufacturing plant in Chihuahua City, Mexico, by 12 months with an expected start of production in Spring of 2026.

During the six-month period ended July 31, 2023, the Company also returned $238.5 million to its shareholders through quarterly dividend payouts and its share repurchase programs for the six-month period ended July 31, 2023.

[1] See “Non-IFRS Measures” section of the press release

Dividend

On September 6, 2023, the Company’s Board of Directors declared a quarterly dividend of $0.18 per share for holders of its multiple voting shares and subordinate voting shares. The dividend will be paid on October 13, 2023 to shareholders of record at the close of business on September 29, 2023.

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