BRP Reports Fiscal Year 2020 2nd Quarter Results

BRP Inc. reported its financial results for the three- and six-month periods ended July 31, 2019.

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 incomeof $68.8 million, an increase of $2.4 million, which resulted in a normalized diluted earnings per shareof $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.

Recent events:

On Aug. 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.

“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.”

Highlights for the 3- and 6-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 favorable 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 favorable 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 unfavorable 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 favorable 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 favorable 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.

Powersports Year-Round Products

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.

Seasonal Products

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.

Link: BRP