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Selden 2020 - LEADERBOARD

BRP presents its third quarter results for fiscal year 2024

by BRP 1 Dec 2023 09:27 PST
BRP logo © BRP

Highlights

  • Revenues of $2,467.8 million, a decrease of $241.5 million or 8.9% compared to the same period last year;
  • Normalized EBITDA[1] of $444.9 million, down 8.8% compared to the same period last year;
  • Normalized earnings per share - diluted [1] [2] of $3.06, a decrease of $0.58 per share or 15.9% and earnings per share - diluted [2] of $0.81, a decrease of $0.95 per share, or 54.0%, compared to the same period last year;
  • North American quarterly retail sales were up for SSV, ATV and Snowmobile, offset by lower retail of PWC, 3WV and Sea-Doo Pontoon resulting in overall flat retail when compared to the same period last year; and
  • Adjusting full year-end guidance for Normalized EPS - diluted [1] [2] downward, now ranging from $11.10 to $11.35.

BRP Inc. (TSX:DOO; NASDAQ:DOOO) today reported its financial results for the three- and nine-month periods ended October 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.

"BRP delivered sound third-quarter results in the context of the current macroeconomic environment. Our team's focus on operational excellence enabled us to improve gross margin despite reduced volumes. Our performance has led to solid retail sales growth since the beginning of the year, resulting in further market share gains in the North American Powersports industry," said José Boisjoli, President and CEO of BRP.

"Like the rest of the industry, we have observed softening demand, particularly in international markets. We have proactively adjusted production and deliveries to manage network inventory and protect our dealer value proposition."

"Importantly, since we became BRP 20 years ago, we have never shied away from investing in our future to build a resilient organization that is geared up to respond to market fluctuations. We remain well-positioned to drive long-term profitable growth thanks to our dedicated team, innovative and diversified product portfolio, and engaged dealer network," concluded Mr. Boisjoli.

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

Fiscal year 2024 updated guidance

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.

Third quarter results

The Company's three-month period ended October 31, 2023 was marked by a decrease in the volume of shipments and revenues compared to the three-month period ended October 31, 2022. The results of the third quarter of this fiscal year were driven by a decrease in PWC and 3WV deliveries, as the third quarter of this fiscal year compares unfavourably to a strong third quarter last fiscal year, where shipments of PWC and 3WV were completed after peak retail season due to supply chain issues last year. The ORV [5] deliveries were also negatively impacted during the third quarter from the lower delivery throughput at the U.S.-Mexico border, following a three-week period of increased cargo inspections. The decrease can also be explained by a softening in industry demand in the International market compared to the three-month period ended October 31, 2022. The Company's North American quarterly retail sales were up for SSV, ATV and Snowmobile which were offset by lower retail of PWC, 3WV and Sea-Doo pontoon resulting in overall flat retail when compared to the same period last year. Furthermore, the Company continues to demonstrate production efficiencies due to supply chain improvements, leading to an increase in the profit margin percentage for the three-month period ended October 31, 2023, compared to the same period last year.

Revenues

Revenues decreased by $241.5 million, or 8.9%, to $2,467.8 million for the three-month period ended October 31, 2023, compared to $2,709.3 million for the corresponding period ended October 31, 2022. The decrease was primarily due to a lower volume of PWC, 3WV, SSV and Sea-Doo pontoon sold, mainly explained by the late shipments of PWC and 3WV for the same period last fiscal year, the U.S.-Mexico border slowdown affecting ORV [5] deliveries, the softening in industry demand in the International market, and higher sales programs across all product lines except PWC. The decrease was partially offset by a higher volume of Snowmobile and ATV sold, favourable product mix, and favourable pricing across all product lines. The decrease includes a favourable foreign exchange rate variation of $7 million.

  • Year-Round Products [6] (48% of Q3-FY24 revenues): Revenues from Year-Round Products decreased by $99.2 million, or 7.8%, to $1,180.6 million for the three-month period ended October 31, 2023, compared to $1,279.8 million for the corresponding period ended October 31, 2022. The decrease was primarily attributable to a lower volume of 3WV and SSV sold, combined with higher sales programs. The decrease in SSV wholesale is partially explained by the U.S.-Mexico border slowdown, where the implementation of systematic cargo inspections adversely affected the Company's ability to complete certain deliveries. The decrease in revenues was partially offset by a favourable product mix of SSV and ATV sold due to the introduction of new models, and favourable pricing across all product lines. The decrease includes a favourable foreign exchange rate variation of $5 million.

  • Seasonal Products [6] (35% of Q3-FY24 revenues): Revenues from Seasonal Products decreased by $152.2 million, or 14.9%, to $868.7 million for the three-month period ended October 31, 2023, compared to $1,020.9 million for the corresponding period ended October 31, 2022. The decrease was primarily attributable to a lower volume of PWC and Sea-Doo pontoon sold, mainly due to late shipments in the three-month period ended October 31, 2022. The decrease was partially offset by a higher volume of Snowmobile sold, a favourable product mix due to the introduction of new models, and favourable pricing across all product lines. The decrease also includes an unfavourable foreign exchange rate variation of $4 million.

    [5] ORV defined as Off-Road Vehicles
    [6] The inter-segment transactions are included in the analysis

  • Powersports PA&A and OEM Engines [6] (13% of Q3-FY24 revenues): Revenues from Powersports PA&A and OEM Engines increased by $16.5 million, or 5.5%, to $314.5 million for the three-month period ended October 31, 2023, compared to $298.0 million for the corresponding period ended October 31, 2022. The increase was attributable to a higher volume sold, coming from aircraft engine and mechanical gearbox sales for traditional and electric bicycles, and favourable pricing, partially offset by higher sales programs. The increase also includes a favourable foreign exchange rate variation of $5 million.

  • Marine [6] (4% of Q3-FY24 revenues): Revenues from the Marine segment decreased by $12.1 million, or 10.2%, to $106.7 million for the three-month period ended October 31, 2023, compared to $118.8 million for the corresponding period ended October 31, 2022. The decrease was mainly due to a decrease in the volume sold and an increase in sales programs. The decrease was partially offset by a favourable product mix and pricing across most product lines. The decrease includes a favourable foreign exchange rate variation of $1 million.

North American Retail Sales

The Company's North American retail sales for Powersports Products were flat for the three-month period ended October 31, 2023 compared to the three-month period ended October 31, 2022. This was mainly driven by the strong retail sales of Snowmobile for the three-month period ended October 31, 2023 compared to the three-month period ended October 31, 2022, which completely offset the decrease in the retail sales of PWC and 3WV, which was due to late shipments that occurred after peak retail season during the three-month period ended October 31, 2022.

  • Year-Round Products: retail sales increased on a percentage basis in the high-single digits compared to the three-month period ended October 31, 2022. The Year-Round Products industry increased on a percentage basis in the low-single digits over the same period.

  • Seasonal Products: retail sales decreased on a percentage basis in the low-teens range and by high-single digits when excluding Sea-Doo pontoon, compared to the three-month period ended October 31, 2022. The Seasonal Products industry increased on a percentage basis in the high-single digits over the same period.

The Company's North American retail sales for Marine Products decreased by 30% compared to the three-month period ended October 31, 2022 as a result of softening consumer demand for the boating industry.

Gross profit

Gross profit decreased by $27.3 million, or 4.2%, to $627.4 million for the three-month period ended October 31, 2023, compared to $654.7 million for the three-month period ended October 31, 2022. Gross profit margin percentage increased by 120 basis points to 25.4% from 24.2% for the three-month period ended October 31, 2022. The decrease in gross profit was the result of a lower volume sold, as highlighted above, higher sales programs, and higher labor costs due to inflation. The decrease was partially offset by favourable pricing across all product lines, favourable product mix of Snowmobile and SSV sold, a decrease in logistics costs due to more efficiencies in the supply chain and a reduction in certain material costs. 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 a lower volume sold and higher sales programs. The decrease in gross profit includes an unfavourable foreign exchange rate variation of $19 million.

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

Operating expenses

Operating expenses increased by $39.7 million, or 14.7%, to $309.6 million for the three-month period ended October 31, 2023, compared to $269.9 million for the three-month period ended October 31, 2022. The increase was mainly attributable to an increase in R&D expenses to support future growth. The increase in operating expenses includes an unfavourable foreign exchange rate variation of $10 million.

Normalized EBITDA [1]

Normalized EBITDA [1] decreased by $43.0 million, or 8.8%, to $444.9 million for the three-month period ended October 31, 2023, compared to $487.9 million for the three-month period ended October 31, 2022. The decrease was primarily due to lower gross profit and higher operating expenses.

Net income

Net income decreased by $78.5 million to $63.1 million, or 55.4%, for the three-month period ended October 31, 2023, compared to $141.6 million for the three-month period ended October 31, 2022. The decrease was primarily due to a lower operating income, an unfavourable foreign exchange rate variation on the U.S. denominated long-term debt and an increase in financing costs, partially offset by a lower income tax expense and an increase in financing income.

Nine-month period ended October 31, 2023

Revenues

Revenues increased by $718.1 million, or 10.3%, to $7,675.2 million for the nine-month period ended October 31, 2023, compared to $6,957.1 million for the corresponding period ended October 31, 2022. The increase was primarily due to a higher volume of SSV, ATV and Snowmobile sold, increased deliveries of Sea-Doo pontoon, favourable product mix across most product lines, as well as favourable pricing. The increase was partially offset by higher sales programs which are mostly due to rising interest rates, and a lower volume of 3WV, PWC and PA&A sold. The increase includes a favourable foreign exchange rate variation of $183 million.

Normalized EBITDA [1]

Normalized EBITDA [1] increased by $116.8 million, or 9.9%, to $1,295.1 million for the nine-month period ended October 31, 2023, compared to $1,178.3 million for the nine-month period ended October 31, 2022. The increase was primarily due to higher gross profit, partially offset by higher operating expenses.

Net Income

Net income increased by $56.0 million to $556.3 million, or 11.2%, for the nine-month period ended October 31, 2023, compared to the $500.3 million for the nine-month period ended October 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.

[1] See "Non-IFRS Measures" section of this press release.

Liquidity and capital resources

The Company generated net cash flows from operating activities totaling $1,053.2 million for the ninemonth period ended October 31, 2023 compared to net cash flows of $342.3 million for the nine-month period ended October 31, 2022. The increase was mainly due to higher profitability, favourable changes in working capital and lower income taxes paid.

The Company invested $352.5 million of its liquidity in capital expenditures to add production capacity and modernize the Company's software infrastructure to support future growth.

During the nine-month period ended October 31, 2023, the Company also returned $409.0 million to its shareholders through quarterly dividend payouts and its share repurchase programs.

Dividend

On November 29, 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 January 12, 2024 to shareholders of record at the close of business on December 29, 2023.

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