BRP rides profitable powersports trend in North America – revenue up 18%

BRP Inc. has reported its financial results for the three- and six-month periods ended July 31, 2018.

Picture of three side-by-sides in a sunlit forest.

— Photo courtesy BRP Inc.


Highlights for the quarter vs Q2 FY18:

  • Strong momentum in North America powersports retail; up 16%, outpacing the industry;
  • Revenues of $1,207.0 million, an increase of $183.9 million or 18.0%;
  • Gross profit of $280.1 million representing 23.2% of revenues, an increase of $64.1 million or 210 basis points;
  • Normalized EBITDA [1] of $144.2 million representing 11.9% of revenues, an increase of $60.5 million;
  • Net income of $41.0 million, a decrease of $63.0 million, which resulted in a diluted earnings per share of $0.41, a decrease of $0.52 per share;
  • Normalized net income [1] of $66.4 million, an increase of $43.5 million, which resulted in a normalized diluted earnings per share [1] of $0.66, an increase of $0.46 per share;
  • Increase in guidance for end-of-year with Normalized EPS growth of 30% to 35% compared to last year.

BRP Inc. (TSX:DOO) has reported its financial results for the three- and six-month periods ended July 31, 2018. All financial information is in Canadian dollars unless otherwise noted. The complete financial results are available at www.sedar.com, as well as in the Quarterly Reports section of BRP’s website.

“We outpaced the North American powersports industry with 16% growth in retail this quarter. Our Side-by-Side vehicle retail growth continued to be robust and with the great summer we’ve had, our Sea-Doo PWC retail was very strong in all markets. Based on the solid first half of the year and a positive outlook for the remaining six months, we are comfortable increasing our guidance with a normalized EPS growth rate of 30% to 35% for FY19, despite inflationary and other headwinds”, said José Boisjoli, president and CEO.

Boisjoli added, “We are now in the fourth year of our 2020 challenge, and the alignment of the BRP team around our Growth, Agility and Lean objectives is well-demonstrated by the healthy results we are delivering. Given this momentum, we expect to achieve our objective to deliver at least $3.50 of normalized EPS in FY20, one year earlier than initially planned.”


Highlights for the Three- and Six-Month Periods Ended July 31, 2018

Revenues increased by $183.9 million, or 18.0%, to $1,207.0 million for the three-month period ended July 31, 2018, compared with $1,023.1 million for the corresponding period ended July 31, 2017. The revenue increase was mainly due to higher wholesale in Year-Round Products and Seasonal Products, partially offset by an unfavourable foreign exchange rate variation of $7 million.

The Company’s North American retail sales for powersports vehicles and outboard engines increased by 14% for the three-month period ended July 31, 2018 compared with the three-month period ended July 31, 2017, mainly due to an increase in PWC and SSV sales.

As at July 31, 2018, North American dealer inventories for powersports vehicles and outboard engines increased by 8% compared to July 31, 2017.

Gross profit increased by $64.1 million, or 29.7%, to $280.1 million for the three-month period ended July 31, 2018, compared with $216.0 million for the corresponding period ended July 31, 2017. The gross profit increase includes a favourable foreign exchange rate variation of $5 million. Gross profit margin percentage increased by 210 basis points to 23.2% from 21.1% for the three-month period ended July 31, 2017. The increase was primarily due to a higher volume of SSV sold, a favourable product mix and pricing and a favourable foreign exchange rate variation, partially offset by higher production costs.

Operating expenses increased by $8.4 million, or 5.0%, to $177.3 million for the three-month period ended July 31, 2018, compared with $168.9 million for the three-month period ended July 31, 2017. This increase was mainly attributable to higher selling and marketing expenses.

Revenues increased by $343.7 million, or 17.2%, to $2,343.7 million for the six-month period ended July 31, 2018, compared with $2,000.0 million for the corresponding period ended July 31, 2017. The revenue increase was primarily attributable to higher wholesale of Year-Round Products and Seasonal Products, partially offset by an unfavourable foreign exchange rate variation of $19 million.

The Company’s North American retail sales for powersports vehicles and outboard engines increased by 12% for the six-month period ended July 31, 2018 compared with the six-month period ended July 31, 2017, mainly due to an increase in SSV and PWC.

Gross profit increased by $118.6 million, or 26.8%, to $561.7 million for the six-month period ended July 31, 2018, compared with $443.1 million for the corresponding period ended July 31, 2017. The gross profit increase includes a favourable foreign exchange rate variation of $1 million. Gross profit margin percentage increased by 180 basis points to 24.0% from 22.2% for the six-month period ended July 31, 2017. The increase was primarily due to a higher volume of SSV and PWC sold and a favourable product mix and pricing, partially offset by higher sales program costs and higher production costs.

Operating expenses increased by $37.1 million, or 11.1%, to $372.7 million for the six-month period ended July 31, 2018, compared with $335.6 million for the six-month period ended July 31, 2017. The increase was mainly attributable to higher selling and marketing expenses.


Quarterly review by segment:

Powersports

Year-Round Products

Revenues from Year-Round Products increased by $113.6 million, or 25.8%, to $554.0 million for the three-month period ended July 31, 2018, compared with $440.4 million for the corresponding period ended July 31, 2017. The increase resulted mainly from a higher volume and a favourable product mix of SSV sold, partially offset by an unfavourable foreign exchange rate variation of $4 million.

North American Year-Round Products retail sales increased on a percentage basis in the high-teen range compared with the three-month period ended July 31, 2017.

Seasonal Products

Revenues from Seasonal Products increased by $67.9 million, or 21.4%, to $384.6 million for the three-month period ended July 31, 2018, compared with $316.7 million for the corresponding period ended July 31, 2017. The increase was driven by a higher volume and a favourable product mix of PWC sold and from a favourable product mix of snowmobiles sold. North American Seasonal Products retail sales increased in the mid-teen range compared with the three-month period ended July 31, 2017.


Powersports PAC and OEM Engines

Revenues from Powersports PAC and OEM Engines remained stable at $147.4 million for the three-month period ended July 31, 2018, compared with $143.4 million for the corresponding period ended July 31, 2017.


Marine

Marine Engines, Boats and PAC

Revenues from Marine Engines, Boats and PAC remained stable at $128.8 million for the three-month period ended July 31, 2018, compared with $129.5 million for the corresponding period ended July 31, 2017.

North American outboard engine retail sales increased on a percentage basis by low-single digits compared with the three-month period ended July 31, 2017.


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