Highlights for the quarter vs Q2 FY19:
- Revenues of $1,459.5 million, an increase of $252.5 million or 20.9%;
- Gross profit of $327.8 million representing 22.5% of revenues, an increase of $47.7 million;
- Net income of $93.3 million, an increase of $52.3 million, which resulted in a diluted earnings per share of $0.96, an increase of $0.55 per share or 134.1%;
- Normalized net income of $68.8 million, an increase of $2.4 million, which resulted in a normalized diluted earnings per share of $0.71, an increase of $0.05 per share or 7.6%;
- Normalized EBITDA of $167.7 million, an increase of $23.5 million or 16.3%;
- Increase in guidance for end-of-year with Normalized EPS growth of 18% to 23% compared to last year.
In addition, during the three-month period ended July 31, 2019:
- The Company completed its substantial issuer bid offer launched in May 2019 with the repurchase of 6,342,494 subordinate voting shares for a total consideration of $300.0 million.
- The Company amended its term facility to add a new U.S. $335.0 million tranche for a total principal of U.S. $1,235.0 million.
- On August 1, 2019, the Company announced the completion of the acquisition of 80% of the outstanding shares of Telwater Pty Ltd (“Telwater”). Telwater is located in Coomera, Queensland (Australia) and is a leading manufacturer of aluminium boats under brands such as Quintrex, Stacer, Savage and Yellowfin Plate.
 See the reconciliation table in “Non-IFRS Measures” section.
VALCOURT, QUEBEC, CANADA – August 29, 2019 – (Motor Sports NewsWire) – BRP Inc. (TSX: DOO, NASDAQ: DOOO) today reported its financial results for the three- and six-month periods ended July 31, 2019. All financial information is in Canadian dollars unless otherwise noted. The complete financial results are available at Sedar, as well as in the Quarterly Reports section of BRP’s website.
“We delivered another solid financial performance and record second-quarter results, driven by the success of Can-Am on- and off-road vehicles, with our side-by-side category driving robust growth in North America and Western Europe in particular,” stated José Boisjoli, President and CEO. “Quarter after quarter we have been outpacing the powersports industry and this quarter was no exception. Our efforts and commitment to build our side-by-side strategy over the past four years are paying off and we intend to maintain our strong pace of innovation,” he added.
Highlights for the Three- and Six-Month Periods Ended July 31, 2019
Revenues increased by $252.5 million, or 20.9%, to $1,459.5 million for the three-month period ended July 31, 2019, compared with $1,207.0 million for the corresponding period ended July 31, 2018. The revenue increase was mainly due to higher wholesale of Year-Round Products and a favourable foreign exchange rate variation of $8 million.
The Company’s North American retail sales for powersports vehicles and outboard engines increased by 9% for the three-month period ended July 31, 2019 compared with the three-month period ended July 31, 2018. The increase was driven by Year-Round Products, partially offset by lower retail of outboard engines.
Gross profit increased by $47.7 million, or 17.0%, to $327.8 million for the three-month period ended July 31, 2019, compared with $280.1 million for the corresponding period ended July 31, 2018. The gross profit increase includes a favourable foreign exchange rate variation of $4 million. Gross profit margin percentage decreased by 70 basis points to 22.5% from 23.2% for the three-month period ended July 31, 2018. The decrease of 70 basis points was primarily due to higher commodity, production and distribution costs, higher sales program costs and an unfavourable product mix of SSV and 3WV. The decrease was partially offset by a higher volume of Year-Round Products sold.
Operating expenses increased by $40.6 million, or 22.9%, to $217.9 million for the three-month period ended July 31, 2019, compared with $177.3 million for the three-month period ended July 31, 2018. This increase was mainly attributable to support for the launch of various products such as the Can-Am Ryker, continued product investments, costs related to the modernization of information systems and additional Alumacraft Boat Co. and Triton Industries, Inc. (“Boat Companies”) operating expenses following their acquisition during Fiscal 2019.
Revenues increased by $449.5 million, or 19.2%, to $2,793.2 million for the six-month period ended July 31, 2019, compared with $2,343.7 million for the corresponding period ended July 31, 2018. The revenue increase was primarily attributable to higher wholesale of Year-Round Products and a favourable foreign exchange rate variation of $21 million.
The Company’s North American retail sales for powersports vehicles and outboard engines increased by 9% for the six-month period ended July 31, 2019 compared with the six-month period ended July 31, 2018, mainly due to an increase in Year-Round Products, partially offset by lower retail of outboard engines.
Gross profit increased by $66.7 million, or 11.9%, to $628.4 million for the six-month period ended July 31, 2019, compared with $561.7 million for the corresponding period ended July 31, 2018. The gross profit increase includes a favourable foreign exchange rate variation of $3 million. Gross profit margin percentage decreased by 150 basis points to 22.5% from 24.0% for the six-month period ended July 31, 2018. The decrease was primarily due to higher commodity, production and distribution costs and higher sales program costs, partially offset by higher volume of Year-Round Products sold.
Operating expenses increased by $56.8 million, or 15.2%, to $429.5 million for the six-month period ended July 31, 2019, compared with $372.7 million for the six-month period ended July 31, 2018. The increase was mainly attributable to support for the launch of various products such as the Can-Am Ryker, continued product investments, costs related to the modernization of information systems and additional Boat Companies operating expenses following their acquisition during Fiscal 2019, partially offset by lower variable employee compensation expenses.
|Net Income data|
|Three-month periods ended||Six-month periods ended|
|(in millions of Canadian dollars)||July 31,
|Revenues by category|
|Powersports PAC and OEM Engines||173.7||147.1||358.7||303.0|
|Cost of sales||1,131.7||926.9||2,164.8||1,782.0|
|As a percentage of revenues||22.5||%||23.2||%||22.5||%||24.0||%|
|Selling and marketing||91.8||79.0||189.0||162.0|
|Research and development||55.9||51.0||113.4||106.6|
|General and administrative||65.9||49.1||118.1||97.8|
|Other operating expenses (income)||4.3||(1.8||)||9.0||6.3|
|Total operating expenses||217.9||177.3||429.5||372.7|
|Net financing costs||20.4||26.3||40.3||37.8|
|Foreign exchange (gain) loss on long-term debt||(25.3||)||17.3||0.4||58.8|
|Income before income taxes||114.8||59.2||158.2||92.4|
|Income tax expense||21.5||18.2||41.1||38.0|
|Attributable to shareholders||$93.4||$40.7||$117.4||$54.0|
|Attributable to non-controlling interest||$(0.1||)||$0.3||$(0.3||)||$0.4|
|Normalized EBITDA ||$167.7||$144.2||$314.4||$270.8|
|Normalized net income ||$68.8||$66.4||$121.5||$119.9|
| See “Non-IFRS Measures” section.|
QUARTERLY REVIEW BY SEGMENT
Revenues from Year-Round Products increased by $180.6 million, or 32.6%, to $734.6 million for the three-month period ended July 31, 2019, compared with $554.0 million for the corresponding period ended July 31, 2018. The increase resulted mainly from a higher volume of SSV and ATV sold, the introduction of the Can-Am Ryker and a favourable foreign exchange rate variation of $8 million.
North American Year-Round Products retail sales increased on a percentage basis in the high-twenties range compared with the three-month period ended July 31, 2018.
Revenues from Seasonal Products increased by $43.9 million, or 11.4%, to $428.5 million for the three-month period ended July 31, 2019, compared with $384.6 million for the corresponding period ended July 31, 2018. The increase was driven by a favourable product mix in PWC.
North American Seasonal Products retail sales increased on a percentage basis by low-single digits compared with the three-month period ended July 31, 2018.
Powersports PAC and OEM Engines 
Revenues from Powersports PAC and OEM Engines increased by $26.6 million, or 18.0%, to $174.0 million for the three-month period ended July 31, 2019, compared with $147.4 million for the corresponding period ended July 31, 2018. The increase was mainly attributable to a higher volume of parts and accessories for all product lines.
Revenues from Marine segment decreased by $2.4 million, or 1.9%, to $126.4 million for the three-month period ended July 31, 2019, compared with $128.8 million for the corresponding period ended July 31, 2018. The decrease was mainly due to a lower volume of outboard engines sold, mostly offset by the additional revenues following the acquisition of Boat Companies.
North American outboard engine retail sales decreased on a percentage basis in the low-thirties range compared with the three-month period ended July 31, 2018.
DECLARATION OF DIVIDEND
The Board of Directors approved a quarterly dividend of $0.10 per share for holders of its multiple voting shares and subordinate voting shares. The dividend will be paid on October 11, 2019 to shareholders of record at the close of business on September 27, 2019. The payment of each quarterly dividend remains subject to the declaration of that dividend by the Board of Directors. The actual amount, the declaration date, the record date and the payment date of each quarterly dividend are subject to the discretion of the Board of Directors.
Fiscal Year 2020 Guidance
The table below sets forth BRP’s financial guidance for Fiscal Year 2020 which reflects the adoption of the new IFRS 16 – Leases (“IFRS 16”) standard effective as of February 1, 2019. Under IFRS 16, operating lease expenses are recorded as depreciation and interest expense rather than operating costs within Normalized EBITDA. No restatement of prior periods was made.
 Includes inter-segment transactions
The financial guidance targets have been adjusted as follows:
|Financial Metric||FY19||FY20 Guidance vs FY19|
|Year-Round Products||$2,240.6||Up 16% to 19%
(previously up to 14% to 19%)
|Seasonal Products||$1,803.5||Up 2% to 5%|
|Powersports PAC and OEM Engines||$707.5||Up 5% to 9%|
|Marine||$492.2||Up 17% to 22%|
|Total Company Revenues||$5,243.8||Up 10% to 13%
(previously up 9% to 13%)
|Normalized EBITDA||$655.9||Up 21% to 23%
(previously up 20% to 23%)
|Effective Tax Rate||25.5%||26.5% to 27.0%|
|Normalized Earnings per Share – Diluted||$3.10||Up 18% to 23% ($3.65 to $3.80)
(previously $3.55 to $3.75)
|Net Income||227.3||$345M to $370M (assuming an Fx loss on long-term debt and lease liabilities of $0.4M)|
- Expecting ~$231M Depreciation Expense (increased from ~$227M) compared to $176M in FY19, ~$89M of Net Financing Costs Adjusted (increased from ~$85M) and ~94.3M shares (decreased from 97.5M shares).
- Expecting Capital Expenditures of ~$360M to $370M in FY20 compared to $299M in FY19.
 Please refer to “Non-IFRS Measures” section.
 Effective tax rate based on Normalized Earnings before Normalized Income Tax.
 Please refer to “Forward-Looking Statements” and “Key assumptions” sections for a summary of important risk factors underlying the FY20 guidance.
The above targets are based on a number of economic and market assumptions the Company has made in preparing its Fiscal Year 2020 financial guidance, including assumptions regarding the performance of the economies in which it operates, foreign exchange currency fluctuations, market competition and tax laws applicable to its operations. The Company made a number of economic and market assumptions in preparing and making forward-looking statements. The Company is assuming reasonable industry growth ranging from flat to high-single digits, moderate market share gains in Year-Round Products and Seasonal Products and constant market share for the Marine segment. The Company is also assuming interest rates increase modestly, currencies remain at near current levels and inflation remains in line with central bank expectations in countries where the Company is doing business. The Company cautions that the assumptions used to prepare the forecasts for Fiscal Year 2020, although believed to be reasonable at the time they were made, may prove to be incorrect or inaccurate. In addition, the above forecasts do not reflect the potential impact of any non-recurring or other special items or of any new material commercial agreements, dispositions, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after August 28, 2019. The financial impact of such transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we present known risks affecting our business. Accordingly, our actual results could differ materially from our expectations as set forth in this news release. The outlook provided constitutes forward-looking statements within the meaning of applicable securities laws and should be read in conjunction with the “Caution Concerning Forward-Looking Statements” section.
Conference Call and Webcast Presentation
Today at 9 a.m. EDT, BRP Inc. will host a conference call and webcast to discuss its FY2020 second 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 4309214), please dial 514-392-0235 or 1-800-377-0758 (toll-free in North America). Click for international dial-in numbers.
The Company’s second quarter FY2020 MD&A, financial statements and webcast presentation are posted in the Quarterly Reports section of BRP’s website.
We are a global leader in the world of powersports vehicles, propulsion systems and boats built on over 75 years of ingenuity and intensive consumer focus. Our portfolio of industry-leading and distinctive products includes Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft, Can-Am on- and off-road vehicles, Alumacraft, Manitou and Telwater boats, Evinrude and Rotax marine propulsion systems as well as Rotax engines for karts, motorcycles and recreational aircraft. We complete our lines of products with a dedicated parts, accessories and clothing to fully enhance the riding experience. With annual sales of CA$5.2 billion from over 120 countries, our global workforce is made up of more than 12,500 driven, resourceful people. www.brp.com @BRPnews
Ski-Doo, Lynx, Sea-Doo, Can-Am, Rotax, Evinrude, Manitou, Alumacraft, Telwater and the BRP logo are trademarks of Bombardier Recreational Products Inc. or its affiliates. All other trademarks are the property of their respective owners.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
Certain information included in this release, including, but not limited to, statements relating to our Fiscal Year 2020 financial outlook (including revenues, Normalized EBITDA, Effective Tax Rate, Normalized earnings per share, net income, depreciation expense, net financing costs adjusted and capital expenditures), the declaration and payment of dividends, the Company’s ability to achieve its Fiscal Year 2020 guidance and other statements that are not historical facts, are “forward-looking statements” within the meaning of Canadian securities laws. Forward-looking statements are typically identified by the use of terminology such as “may”, “will”, “would”, “should”, “could”, “expects”, “forecasts”, “plans”, “intends”, “trends”, “indications”, “anticipates”, “believes”, “estimates”, “outlook”, “predicts”, “projects”, “likely” or “potential” or the negative or other variations of these words or other comparable words or phrases. Forward looking statements, by their very nature, involve inherent risks and uncertainties and are based on several assumptions, both general and specific. BRP cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although believed reasonable at the time they were made, subject to greater uncertainty. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Company or the powersports industry to be materially different from the outlook or any future results or performance implied by such statements. Key assumptions used in determining forward-looking information are set forth below.
The Company made a number of economic and market assumptions in preparing its Fiscal Year 2020 financial guidance, including assumptions regarding the performance of the economies in which it operates, market competition, tax laws applicable to its operations and foreign exchange currency fluctuation. The Company made a number of economic and market assumptions in preparing and making forward-looking statements. The Company is assuming reasonable industry growth ranging from flat to high-single digits, moderate market share gains in Year-Round Products and Seasonal Products and constant market share for the Marine segment. The Company is also assuming interest rates increase modestly, currencies remain at near current levels and inflation remains in line with central bank expectations in countries where the Company is doing business. In addition, many factors could cause the Company’s actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors, which are discussed in greater detail under the heading “Risk Factors” in the Company’s most recent Annual Information Form filed with the Canadian Securities Administrators (available at sedar.com) and on Form 40-F with the Securities and Exchange Commission in the United States (available at https://www.sec.gov/): impact of adverse economic conditions on consumer spending; decline in social acceptability of the Company’s products; fluctuations in foreign currency exchange rates; high levels of indebtedness; unavailability of additional capital; unfavourable weather conditions; seasonal sales fluctuations; inability to comply with product safety, health, environmental and noise pollution laws; large fixed cost base; inability of dealers and distributors to secure adequate access to capital; supply problems, termination or interruption of supply arrangements or increases in the cost of materials; competition in product lines; inability to successfully execute growth strategy; international sales and operations; failure of information technology systems or security breach; failure to maintain an effective system of internal control over financial reporting and to produce accurate and timely financial statements; loss of members of management team or employees who possess specialized market knowledge and technical skills; inability to maintain and enhance reputation and brands; significant product liability claim; significant product repair and/or replacement due to product warranty claims or product recalls; reliance on a network of independent dealers and distributors; inability to successfully manage inventory levels; intellectual property infringement and litigation; inability to successfully execute manufacturing strategy; covenants in financing and other material agreements; changes in tax laws and unanticipated tax liabilities; deterioration in relationships with employees; pension plan liabilities; natural disasters; failure to carry proper insurance coverage; volatile market price for BRP’s subordinate voting shares; conduct of business through subsidiaries; significant influence by Beaudier Inc. and 4338618 Canada Inc. (together the “Beaudier Group”) and Bain Capital Luxembourg Investments S. à r. l. (“Bain Capital”); and future sales of BRP’s shares by Beaudier Group, Bain Capital, directors, officers or senior management of the Company. These factors are not intended to represent a complete list of the factors that could affect the Company; however, these factors should be considered carefully.
The forward-looking statements contained in this release are made as of the date of this release and BRP undertakes no obligation to update or revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable Canadian securities laws. In the event that BRP does update any forward-looking statement, no inference should be made that BRP will make additional updates with respect to that statement, related matters, or any other forward-looking statement.
This press release makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS. The Company uses non-IFRS measures including Normalized EBITDA, Normalized net income, Normalized income tax expense, Normalized effective tax rate, Normalized basic earnings per share and Normalized diluted earnings per share.
Normalized EBITDA is provided to assist investors in determining the financial performance of the Company’s operating activities on a consistent basis by excluding certain non-cash elements such as depreciation expense, impairment charge and foreign exchange gain or loss on the Company’s long-term debt denominated in U.S. dollars. Other elements, such as restructuring costs and acquisition related-costs, may also be excluded from net income in the determination of Normalized EBITDA as they are considered not being reflective of the operational performance of the Company. Normalized net income, Normalized income tax expense, Normalized effective tax rate, Normalized basic earnings per share and Normalized diluted earnings per share, in addition to the financial performance of operating activities, take into account the impact of investing activities, financing activities and income taxes on the Company’s financial results.
The Company believes non-IFRS measures are important supplemental measures of financial performance because they eliminate items that have less bearing on the Company’s financial performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS measures. The Company also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of companies, many of which present similar metrics when reporting their results. Management also uses non-IFRS measures in order to facilitate financial performance comparisons from period to period, prepare annual operating budgets, assess the Company’s ability to meet its future debt service, capital expenditure and working capital requirements and, also, as a component in the determination of the short-term incentive compensation for the Company’s employees. Because other companies may calculate these non-IFRS measures differently than the Company does, these metrics are not comparable to similarly titled measures reported by other companies.
Normalized EBITDA is defined as net income before financing costs, financing income, income tax expense (recovery), depreciation expense and normalized elements. Normalized net income is defined as net income before normalized elements adjusted to reflect the tax effect on these elements. Normalized income tax expense is defined as income tax expense adjusted to reflect the tax effect on normalized elements and to normalize specific tax elements. Normalized effective tax rate is based on Normalized net income before Normalized income tax expense. Normalized earnings per share – basic and Normalized earnings per share – diluted are calculated respectively by dividing the Normalized net income by the weighted average number of shares – basic and the weighted average number of shares – diluted. The Company refers the reader to the “Selected Consolidated Financial Information” section of this MD&A for the reconciliations of Normalized EBITDA and Normalized net income presented by the Company to the most directly comparable IFRS measure.
|The following table presents the reconciliation of Net income to Normalized net income and Normalized EBITDA.|
|Three-month periods ended||Six-month periods ended|
|(in millions of Canadian dollars)||July 31,
|Foreign exchange (gain) loss on long-term debt and lease liabilities||(27.2||)||17.3||0.4||58.8|
|Transaction costs and other related expenses ||1.4||1.2||1.7||1.2|
|Restructuring and related costs||1.9||0.6||1.9||0.8|
|Loss on litigation ||0.2||0.2||0.4||0.8|
|Transaction costs on long-term debt||—||8.9||—||8.9|
|Pension plan past service gains||—||(1.4||)||—||(1.4||)|
|Depreciation of intangible assets related to business combinations||0.6||—||1.3||—|
|Income tax adjustment||(0.9||)||(2.6||)||(1.3||)||(2.8||)|
|Normalized net income ||68.8||66.4||121.5||119.9|
|Normalized income tax expense ||22.4||20.8||42.4||40.8|
|Financing costs adjusted ||21.2||16.7||41.9||30.8|
|Financing income adjusted  ||(0.8||)||(0.5||)||(1.6||)||(1.1||)|
|Depreciation expense adjusted  ||56.1||40.8||110.2||80.4|
|Normalized EBITDA ||$167.7||$144.2||$314.4||$270.8|
|||See “Non-IFRS Measures” section.|
|||Costs related to business combinations.|
|||The Company is involved, from time to time, in restructuring and reorganization activities in order to gain flexibility and improve efficiency. The costs related to these activities are mainly composed of severance costs and retention salaries.|
|||The Company is involved in patent infringement litigation cases with one of its competitors.|
|||Adjusted for transaction costs on long-term debt and NCIB gains and losses in net income.|
|||Adjusted for depreciation of intangible assets acquired through business combinations.|
|For media enquiries:||For investor relations:|
|Elaine Arsenault||Philippe Deschênes|
|Senior Advisor, Media Relations||Manager Treasury and Investor Relations|
|Tel.: 514.732.7092||Tel.: 450.532.6462|
Source: Bombardier Recreational Products Inc.