BRP reports fiscal year 2020 second quarter results
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[1] of $68.8 million, an increase of $2.4 million, which resulted in a normalized diluted earnings per share[1] of $0.71, an increase of $0.05 per share or 7.6%;
Normalized EBITDA[1] 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 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.
Valcourt, Quebec, August 29, 2019 – 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 BRPs 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.
QUARTERLY REVIEW BY SEGMENT
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.
Marine
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 BRPs 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[1]. No restatement of prior periods was made.
The financial guidance targets have been adjusted as follows:
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 Companys second quarter FY2020 MD&A, financial statements and webcast presentation are posted in the Quarterly Reports section of BRPs website.
