BRP presents its third quarter results for fiscal year 2025
by BRP 6 Dec 2024 11:37 PST
BRP logo © BRP
Highlights
- Revenues of $1,955.7 million, a decrease of 17.5% compared to last year, resulting from softer demand and continued focus on reducing network inventory levels;
- Net income of $27.3 million, a decrease of 69.7% compared to last year;
- Normalized EBITDA[1] of $264.1 million, a decrease of 42.9% compared to last year;
- Normalized diluted earnings per share[1] [2] of $1.16, a decrease of $2.08 per share, and diluted earnings per share of $0.37, a decrease of $0.79 per share, compared to last year;
- North American retail sales decreased by 11% compared to last year;
- North American Off-Road Vehicle network inventory has decreased by 22% compared to last yearend, achieving our objective one quarter ahead of plan;
- Reaffirming full year-end guidance adjusted for Marine discontinued operations with revenues between $7.6 and $7.8 billion, and Normalized earnings per share - diluted [1] [2] between $4.25 and $4.75;
- Following the initiation of a process for the sale of the Marine businesses, the financial results are presented on a continuing basis, excluding Marine discontinued operations, and prior periods are reclassified accordingly.
BRP Inc. (TSX:DOO; NASDAQ:DOOO) today reported its financial results for the three- and nine-month periods ended October 31, 2024. 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.
"Our disciplined execution allowed us to deliver results above expectations, despite the macroeconomic context and the promotional intensity in the industry. We were the first Powersports OEM to prioritize network inventory depletion, and we are on track to deliver on our objective to reduce levels by 15% to 20% by the end of the current fiscal year. Driven by our second-to-none product line-ups, our solid dealer network, and improved inventory position, we are uniquely placed to capture opportunities when the market rebounds," said José Boisjoli, President and CEO.
"We have strategically decided to double down on our core Powersports activities to protect our long-term profitable growth and to solidify our position as a global leader in the industry. We are investing to continue pushing technologies and innovation, and consumers can expect an exciting pipeline of new products in the coming years," concluded Mr. Boisjoli.
[1] See "Non-IFRS Measures" section of this press release
[2] Earnings per share is defined as "EPS"
Fiscal Year 2025 Guidance and Outlook
The FY25 guidance has been adjusted to exclude the financial results of Marine discontinued operations
and are as follows:
Third Quarter Results
In the context of softer demand and the Company's focus on reducing network inventory levels during the three-month period ended October 31, 2024, the revenues declined compared to the same period last year. The decrease in the volume of shipments, the higher sales programs due to increased promotional intensity and the decreased leverage of fixed costs as a result of reduced production have led to a decrease in the gross profit and gross profit margin compared to the same period last year. This decrease was partially offset by favourable pricing, production efficiencies and optimized distribution costs.
The Company's North American quarterly retail sales were down 11% for the three-month period ended October 31, 2024. The decrease is mainly explained by softer demand in both Seasonal and Year-Round Products.
Revenues
Revenues decreased by $415.3 million, or 17.5%, to $1,955.7 million for the three-month period ended October 31, 2024, compared to the $2,371.0 million for the corresponding period ended October 31, 2023. The decrease in revenues was primarily due to a lower volume sold across all product lines, as a result of softer demand and continued focus on reducing network inventory levels, as well as higher sales programs. The decrease was partially offset by favourable pricing across most product lines. The decrease includes a favourable foreign exchange rate variation of $15 million.
- Year-Round Products (53% of Q3-FY25 revenues): Revenues from Year-Round Products decreased by $144.2 million, or 12.2%, to $1,036.4 million for the three-month period ended October 31, 2024, compared to $1,180.6 million for the corresponding period ended October 31, 2023. The decrease in revenues from Year-Round Products was primarily attributable to a lower volume sold across all product lines, as a result of softer demand and continued focus on reducing network inventory levels, as well as higher sales programs. The decrease was partially offset by favourable product mix in SSV, and favourable pricing across all product lines. The decrease includes a favourable foreign exchange rate variation of $12 million.
- Seasonal Products (32% of Q3-FY25 revenues): Revenues from Seasonal Products decreased by $252.8 million, or 29.1%, to $615.9 million for the three-month period ended October 31, 2024, compared to $868.7 million for the corresponding period ended October 31, 2023. The decrease in revenues from Seasonal Products was primarily attributable to a lower volume sold across all product lines, as a result of softer demand and continued focus on reducing network inventory levels, as well as higher sales programs on Snowmobile and PWC, and unfavourable product mix across all product lines. The decrease was partially offset by favourable pricing on Snowmobile and PWC.
- PA&A and OEM Engines (15% of Q3-FY25 revenues): Revenues from PA&A and OEM Engines decreased by $18.3 million, or 5.7%, to $303.4 million for the three-month period ended October 31, 2024, compared to $321.7 million for the corresponding period ended October 31, 2023. The decrease in revenues from PA&A and OEM engines was primarily attributable to a lower volume sold due to a high network inventory level in Snowmobile and to a decrease in retail in other product lines. The decrease was partially offset by favourable pricing on PA&A. The decrease also includes a favourable foreign exchange rate variation of $3 million.
North American Retail Sales
The Company's North American retail sales decreased by 11% for the three-month period ended October 31, 2024 compared to the same period last year. The decrease is mainly explained by softer demand in both Seasonal and Year-Round Products.
- North American Year-Round Products retail sales decreased on a percentage basis in the highsingle digits compared to the three-month period ended October 31, 2023. The North American Year-Round Products industry decreased on a percentage basis in the low-single digits over the same period.
- North American Seasonal Products retail sales decreased on a percentage basis in the mid-teens range compared to the three-month period ended October 31, 2023. The North American Seasonal Products industry decreased on a percentage basis in the mid-teens range over the same period.
Gross profit
Gross profit decreased by $213.0 million, or 33.1%, to $430.0 million for the three-month period ended October 31, 2024, compared to $643.0 million for the three-month period ended October 31, 2023. Gross profit margin percentage decreased by 510 basis points to 22.0% from 27.1% for the three-month period ended October 31, 2024. The decreases in gross profit and gross profit margin percentage were the result of a lower volume sold, higher sales programs, decreased leverage of fixed costs as a result of reduced production, and higher warranty costs. The decreases were partially offset by favourable pricing across most product lines, as well as production efficiencies and optimized distribution costs. The decrease in gross profit includes a favourable foreign exchange rate variation of $10 million.
Operating Expenses
Operating expenses increased by $9.6 million, or 3.4%, to $295.1 million for the three-month period ended October 31, 2024, compared to $285.5 million for the three-month period ended October 31, 2023.
The increase in operating expenses was mainly attributable to higher restructuring and reorganization costs, and impairment charges taken on unutilized assets. The increase was partially offset by lower R&D expenses. The increase in operating expenses includes a favourable foreign exchange rate variation of $3 million.
Normalized EBITDA[1]
Normalized EBITDA decreased by $198.7 million, or 42.9%, to $264.1 million for the three-month period ended October 31, 2024, compared to $462.8 million for the three-month period ended October 31, 2023. The decrease in normalized EBITDA [1] was primarily due to lower gross margin.
Net Income
Net income decreased by $62.8 million, or 69.7%, to $27.3 million for the three-month period ended October 31, 2024, compared to $90.1 million for the three-month period ended October 31, 2023. The decrease in net income was primarily due to a lower operating income, resulting from a lower gross margin. The decrease was partially offset by a decrease in financing costs, a favourable foreign exchange rate variation on the U.S. denominated long-term debt and a lower income tax expense.
Net Loss from Discontinued Operations
Net loss decreased by $6.5 million, or 24.1%, to $20.5 million for the three-month period ended October 31, 2024, compared to $27.0 million for the three-month period ended October 31, 2023. The decrease in net loss was primarily due to lower operating loss, resulting from lower gross loss and lower operating expenses.
[1] See "Non-IFRS Measures" section of this press release
Nine-month period ended October 31, 2024
Revenues
Revenues decreased by $1,619.4 million, or 22.0%, to $5,732.1 million for the nine-month period ended October 31, 2024, compared to $7,351.5 million for the corresponding period ended October 31, 2023.
The decrease in revenues was primarily due to a lower volume sold across all product lines, as a result of softer demand and continued focus on reducing network inventory levels, as well as higher sales programs. The decrease was partially offset by favourable product mix across most product lines and favourable pricing across most product lines. The decrease includes a favourable foreign exchange rate variation of $61 million.
Normalized EBITDA[1]
Normalized EBITDA decreased by $560.4 million, or 41.2%, to $800.2 million for the nine-month period ended October 31, 2024, compared to $1,360.6 million for the nine-month period ended October 31, 2023. The decrease in Normalized EBITDA [1] was primarily due to a lower gross margin.
Net Income
Net income decreased by $521.7 million to $107.2 million for the nine-month period ended October 31, 2024, compared to $628.9 million for the nine-month period ended October 31, 2023. The decrease in net income was primarily due to lower operating income, resulting from a lower gross margin. The decrease was partially offset by lower financing costs and a lower income tax expense.
Net Loss from Discontinued Operations
Net loss increased by $28.0 million to $100.6 million for the nine-month period ended October 31, 2024, compared to $72.6 million for the nine-month period ended October 31, 2023. The increase in net loss was primarily due to higher operating loss, resulting from a lower volume sold due to high dealer inventory, softer consumer demand in the industry, higher sales programs, and production inefficiencies.
The increase in net loss was partially offset by a higher income tax recovery.
Liquidity and capital resources
Consolidated net cash flows generated from operating activities totaled $432.9 million for the nine-month period ended October 31, 2024 compared to consolidated net cash flows generated from operating activities of $1,053.2 million for the nine-month period ended October 31, 2023. The decrease was mainly due to lower profitability and unfavourable changes in working capital, partially offset by lower income taxes paid. The unfavourable changes in working capital were the result of maintaining higher provisions, which reflected the industry's promotional intensity, and maintaining inventory levels.
The Company invested $299.4 million of its liquidity in capital expenditures for the introduction of new products and modernization of the Company's software infrastructure to support future growth.
During the nine-month period ended October 31, 2024, the Company also returned $261.6 million to its shareholders through quarterly dividend payouts and its share repurchase programs.
Dividend
On December 5, 2024, the Company's Board of Directors declared a quarterly dividend of $0.21 per share for holders of its multiple voting shares and subordinate voting shares. The dividend will be paid on January 14, 2025 to shareholders of record at the close of business on December 31, 2024.
[1] See "Non-IFRS Measures" section of this press release
Conference call and webcast presentation
Today at 9 a.m. ET, BRP Inc. will host a conference call and webcast to discuss its FY25 third quarter results. 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 65618), please dial 1 800 717-1738 (toll-free in North America). Visit here for International numbers.
The Company's third quarter FY25 webcast presentation is posted in the Quarterly Reports section of BRP's website.