BRP Inc. reported its financial results for the three-month period ended April 30, 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 have experienced strong retail momentum in North America and Europe with all our sectors trending positively, and we are very satisfied with our year-over-year revenue growth of 17%, even while operating in a dynamic environment. We have continued to outpace the competition, and are positive about the outlook for the rest of this year,” declared José Boisjoli, BRP’s President and CEO.
Highlights for the quarter vs Q1 FY19:
- Revenues of $1,333.7 million, an increase of $197.0 million or 17.3%
- Strong growth in all regions with revenues up 19% in the United States, 12% in Canada and 17% at international
- Gross profit of $300.6 million representing 22.5% of revenues, an increase of $19.0 million
- Net income of $23.8 million, an increase of $10.4 million, which resulted in diluted earnings per share of $0.25, an increase of $0.12 per share or 92.3%
- Normalized net income of $52.7 million, a decrease of $0.8 million, which resulted in normalized diluted earnings per share of $0.54, an increase of $0.02 per share or 3.8%
- Normalized EBITDA of $146.7 million representing 11.0% of revenues, an increase of $20.1 million or 15.9%
“Our quarter after quarter strong performance is testament to our ability to execute on our strategic priorities : growth, agility and Lean enterprise. With our industry leadership position and our quality of our execution, we are confident to deliver the guidance for the year,” concluded Boisjoli.
Highlights for the Three-Month Period Ended April 30, 2019
Revenues increased by $197.0 million, or 17.3%, to $1,333.7 million for the three-month period ended April 30, 2019, compared with $1,136.7 million for the corresponding period ended April 30, 2018. The revenue increase was primarily attributable to higher wholesale of Year-Round Products. The increase includes a favorable foreign exchange rate variation of $13 million.
The Company’s North American retail sales for the three-month period ended April 30, 2019, increased by 10% compared with the three-month period ended April 30, 2018, mainly due to an increase in 3WV following the introduction of the Can-Am Ryker.
Gross profit increased by $19.0 million, or 6.7%, to $300.6 million for the three-month period ended April 30, 2019, compared with $281.6 million for the corresponding period ended April 30, 2018. Gross profit margin percentage decreased by 230 basis points to 22.5% from 24.8% for the three-month period ended April 30, 2018. The decrease was primarily due to higher commodity, production and distribution costs and an unfavorable product mix of 3WV sold, partially offset by higher volume of 3WV and PAC sold.
Operating expenses increased by $16.2 million, or 8.3%, to $211.6 million for the three-month period ended April 30, 2019, compared with $195.4 million for the three-month period ended April 30, 2018. The increase was mainly attributable to support for the launch of various products such as the Can-Am Ryker, continued product investments and costs related to the modernization of information systems, partially offset by lower variable employee compensation expenses.
Revenues from Year-Round Products increased by $100.4 million, or 19.1%, to $627.0 million for the three-month period ended April 30, 2019, compared with $526.6 million for the corresponding period ended April 30, 2018. The increase was primarily attributable to the introduction of the Can-Am Ryker, a higher volume of ATV sold and a favourable foreign exchange rate variation of $9 million.
North American Year-Round Products retail sales increased on a percentage basis in the twenties range compared with the three-month period ended April 30, 2018.
Revenues from Seasonal Products increased by $25.0 million, or 7.1%, to $375.4 million for the three-month period ended April 30, 2019, compared with $350.4 million for the corresponding period ended April 30, 2018. The increase resulted primarily from a favourable product mix and price increases in PWC and from a favourable foreign exchange rate variation of $3 million.
North American Seasonal Products retail sales increased on a percentage basis by high-single digits compared with the three-month period ended April 30, 2018.
Powersports PAC and OEM Engines
Revenues from Powersports PAC and OEM Engines increased by $29.0 million, or 18.6%, to $185.3 million for the three-month period ended April 30, 2019, compared with $156.3 million for the corresponding period ended April 30, 2018. The increase was mainly attributable to a higher volume of 3WV, SSV and PWC accessories and a higher volume of snowmobile and PWC parts.
ANNOUNCEMENT OF A SUBSTANTIAL ISSUER BID
The company announced that the Board of Directors has authorized the launch of a substantial issuer bid pursuant to which the company will offer to purchase for cancellation up to $300 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 July 2019. The company intends to fund the Substantial Issuer Bid with a combination of cash on hand, drawings on existing credit facilities and, subject to market conditions, the planned incremental term loan issuance.
Under the proposed issuer bid, which remains subject to regulatory approval in the United States and Canada, shareholders wishing to accept the offer will have the opportunity to tender their shares through a modified Dutch auction tender at a specified price within a range to be proposed by the company, or through a proportionate tender at a price determined by the Dutch auction tenders and that will result in them maintaining their proportionate equity ownership. 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 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. Beaudier Inc., 4338618 Canada Inc. and Bain Capital Luxembourg Investments S.à r.l., which collectively hold approximately 51.1% of the company’s outstanding shares, have advised the company that they intend to make proportionate tenders in connection with the offer in order to maintain their proportionate equity ownership following the completion of the bid, but neither is committed to taking any action with respect to the offer. As of May 30, 2019, the company had 42,313,579 subordinate voting shares and 54,101,384 multiple voting shares issued and outstanding. All shares purchased under the offer will be cancelled.