BRP Reports Fiscal Year 2022 Second Quarter Results

• Revenues of $1,904 million, up 54% compared to the same period last year
• Net income of $213 million, or diluted earnings per share of $2.46
• Normalized diluted EPS^[1] of $2.89, up 154% compared to the same period last year
• Normalized EBITDA^[1] of $415 million, up 94% compared to the same period last year
• Returned $350 million to shareholders through Substantial Issuer Bid
• North American Powersports retail sales down 19% compared to a record quarter last year mostly explained by limited product availability in the network, and up 14% when compared to two years ago, in FY20 Q2
• Increase of annual guidance for Normalized EPS - diluted^[1] now ranging from $8.25 to $9.75, a growth of 53% to 81% compared to Fiscal 21, and up from previous guidance of $7.75 to $8.50

VALCOURT, QC, Sept. 2, 2021 /PRNewswire/ - BRP Inc. (TSX: DOO) (NASDAQ: DOOO) today reported its financial results for the three- and six-month periods ended July 31, 2021. All financial information is in Canadian dollars unless otherwise noted. The complete financial results are available on Sedar as well as in the section Quarterly Reports of BRP's website.

"We delivered another record quarter, with revenues up 54% and Normalized Earnings per share up 154%. These excellent results are fueled by continued strong demand, market share gains, traction with new entrants as well as our teams' ability to manage through a challenging supply chain environment." said José Boisjoli, President and CEO.

"Looking ahead, we are optimistic about the future considering continued strong demand for our products, our new and exciting product introductions and additional capacity coming online over the next few months. Based on this positive outlook and factoring in ongoing supply chain and logistics challenges we are increasing our overall guidance for Fiscal 22. Normalized EPS is now expected to grow between 53% and 81% over last year. Furthermore, we are well-positioned to build on this momentum and generate further growth in Fiscal 23 primarily driven by sustained consumer interest in powersports and the upcoming significant inventory replenishment cycle," concluded Mr. Boisjoli.

FISCAL YEAR 2022 GUIDANCE

The FY22 guidance has been updated as follows:

Outlook
Following a solid first half of the year, the Company has expanded its FY22 revenue guidance range, now expecting growth between 27% to 35% when compared to FY21. It has also reviewed upward its expectations for Normalized EPS - diluted^[5] to a growth in the range of 53% to 81% for the full year of FY22 vs. FY21 resulting in a range of $8.25 to $9.75.

Heading into the second half of the year, the Company remains focused on delivering its strong dealer orders for the year while managing through supply chain constraints which are expected to weigh more on product deliveries in Q3. The Company anticipates the supply chain situation to improve as the year progresses and provide more upside in Q4, expecting Normalized EPS - diluted^[5] growth of about 40% for the quarter, reflecting the mid-point of its guidance range.

The Company expects to be well-positioned to build on FY22 momentum and generate further growth in Fiscal 23 primarily driven by the sustained consumer interest in powersports, added production capacity, demand for new product introductions and the upcoming significant inventory replenishment cycle.

SECOND QUARTER RESULTS

Revenues
Revenues increased by $670.5 million, or 54.4%, to $1,903.8 million for the three-month period ended July 31, 2021, compared to the $1,233.3 million for the corresponding period ended July 31, 2020. The revenue increase was primarily due to a higher wholesale of Year-Round Products and Seasonal Products due to COVID-19 impact last year, lower sales programs due to a strong retail environment and a higher volume of Powersports PA&A, partially offset by an unfavourable foreign exchange rate variation of $100 million.

• Year-Round Products^[6] (50% of Q2-22 revenues): Revenues from Year-Round Products increased by $334.4 million, or 53.8%, to $955.6 million for the three-month period ended July 31, 2021, compared to the $621.2 million for the corresponding period ended July 31, 2020. The increase was primarily attributable to a higher volume of products sold due to COVID-19 impact last year, lower sales programs due to a strong retail environment and a favourable product mix of SSV sold. The increase was partially offset by an unfavourable foreign exchange rate variation of $51 million.
  
  
• Seasonal Products^[6] (30% of Q2-22 revenues): Revenues from Seasonal Products increased by $251.8 million, or 78.0%, to $574.5 million for the three-month period ended July 31, 2021, compared to the $322.7 million for the corresponding period ended July 31, 2020. The increase resulted primarily from a higher volume of PWC sold due to COVID-19 impact last year, lower sales programs in light of a strong retail environment and a favourable product mix of PWC sold. The increase was partially offset by an unfavourable foreign exchange rate variation of $29 million.
  
  
• Powersports PA&A and OEM Engines^[6] (13% of Q2-22 revenues): Revenues from Powersports PA&A and OEM Engines increased by $39.6 million, or 18.9%, to $248.7 million for the three-month period ended July 31, 2021, compared to the $209.1 million for the corresponding period ended July 31, 2020. The increase was mainly attributable to a higher volume of PA&A and lower sales programs in light of a strong retail environment, increased usage of vehicles by consumers and the COVID-19 impact last year. The increase was partially offset by an unfavourable foreign exchange rate variation of $15 million.

• Marine^[6] (7% of Q2-22 revenues): Revenues from the Marine segment increased by $47.8 million, or 59.0%, to $128.8 million for the three-month period ended July 31, 2021, compared to $81.0 million for the corresponding period ended July 31, 2020. The increase was mainly due to the strong product mix in boats and lower sales programs, partially offset by the wind-down of the Evinrude outboard engines production resulting in a lower volume of outboard engines sold and an unfavourable foreign exchange rate variation of $6 million.

North American Retail Sales
The Company's North American retail sales for powersports vehicles decreased by 19% for the three-month period ended July 31, 2021 compared to the three-month period ended July 31, 2020. The decrease in both Powersports and Marine segments was mainly driven by limited product availability.

• Year-Round Products: retail sales decreased on a percentage basis in the mid-twenties range compared to the three-month period ended July 31, 2020.
  
  
• Seasonal Products: retail sales decreased on a percentage basis by high single-digits compared to the three-month period ended July 31, 2020.
  
  
• Marine: boat retail sales decreased by 16% compared with the three-month period ended July 31, 2020.

Gross profit 
Gross profit increased by $321.7 million, or 129.5%, to $570.1 million for the three-month period ended July 31, 2021, compared to the $248.4 million for the corresponding period ended July 31, 2020. The gross profit increase includes an unfavourable foreign exchange rate variation of $43 million. Gross profit margin percentage increased by 980 basis points to 29.9% from 20.1% for the three-month period ended July 31, 2020. The increase was attributable to a higher volume of Year-Round and Seasonal Products sold and a favourable product mix combined with lower sales programs driven by the strong retail environment and limited product availability. The increase was partially offset by higher logistics, commodities and labour costs due to inefficiencies related to supply chain disruptions and an unfavourable foreign exchange rate variation.

Operating expenses 
Operating expenses increased by $42.8 million, or 22.7%, to $231.7 million for the three-month period ended July 31, 2021, compared to the $188.9 million for the three-month period ended July 31, 2020. This increase was mainly attributable to lower expenses in Fiscal 2021 following cost reduction initiatives to mitigate the impact of COVID-19.

Normalized EBITDA^[7] 
Normalized EBITDA^[7] increased by $200.7 million, or 93.7%, to $415.0 million for the three-month period ended July 31, 2021, compared to the $214.3 million for the three-month period ended July 31, 2020. The increase was primarily due to higher gross profit, partially offset by higher operating expenses.

Net Income
Net Income increased by $86.8 million to $212.9 million for the three-month period ended July 31, 2021, compared to the $126.1 million for the three-month period ended July 31, 2020. The increase was primarily due to higher operating income, partly offset by an unfavourable foreign exchange rate variation impact on the U.S. denominated long-term debt and higher income tax expense.

SIX-MONTH PERIODS ENDED JULY 31, 2021

Revenues
Revenues increased by $1,249.3 million, or 50.7%, to $3,712.4 million for the six-month period ended July 31, 2021, compared to $2,463.1 million for the corresponding period ended July 31, 2020. The revenue increase was primarily due to a higher wholesale of SSV, PWC, 3WV and PA&A due to COVID-19 impact last year, lower sales programs due to a strong retail environment and favourable product mix of SSV. The increase was partially offset by the wind-down of the Evinrude outboard engines production resulting in a lower volume of outboard engines sold and an unfavourable foreign exchange rate variation of $192 million.

Normalized EBITDA^[8] 
Normalized EBITDA^[8] increased by $456.7 million, or 135.4%, to $794.0 million for the six-month period ended July 31, 2021, compared to $337.3 million for the six-month period ended July 31, 2020. The increase was primarily due to higher gross profit, partially offset by higher operating expenses, when excluding the impairment charge relating to the Marine segment recorded in Fiscal 2021.

Net Income (Loss)
Net income increased by $557.3 million to $457.3 million for the six-month period ended July 31, 2021, compared to a net loss of $100.0 million for the six-month period ended July 31, 2020. The increase was primarily due to higher operating income and a favourable foreign exchange rate variation on the U.S. denominated long-term debt, partially offset by higher income tax expense and higher net financing costs.

LIQUIDITY AND CAPITAL RESOURCES

The Company generated net cash flows from operating activities totalled $326.9 million for the six-month period ended July 31, 2021 compared to $326.6 million for the six-month period ended July 31, 2020. 

The Company used its liquidity primarily to invest in capital expenditures for $228.0 million to support its future growth, partially repaid its Term B Loan for a net amount of approximately US$300 million and returned $650 million to its shareholders through shares repurchase and quarterly dividend payout.

On May 4, 2021, the Company amended its $700.0 million revolving credit facilities to increase the total availability to $800.0 million and to extend the maturity from May 2024 to May 2026. The pricing grid and other conditions remain unchanged.

Substantial Issuer Bid (SIB)
During the three-month period ended July 31, 2021, the Company completed its SIB with the repurchase for cancellation of 3,381,641 subordinate voting shares for a total consideration of $350.0 million. Prior to the completion of the SIB, 936,692 multiple voting shares were converted into an equivalent number of subordinate voting shares. These converted shares were repurchased in the SIB.

Dividend
On September 1, 2021, the Company's Board of Directors declared a quarterly dividend of $0.13 per share for holders of its multiple voting shares and subordinate voting shares. The dividend will be paid on October 14, 2021 to shareholders of record at the close of business on September 30, 2021.

CONFERENCE CALL AND WEBCAST PRESENTATION

Today at 9 a.m. EDT, BRP Inc. will host a conference call and webcast to discuss its FY22 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 8049566), please dial 1 (833) 449-0987(toll-free in North America). Click here for International numbers.

The Company's second quarter FY22 webcast presentation is posted in the Quarterly Reports section of BRP's website.

About BRP
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, Quintrex boats and Rotax marine propulsion systems as well as Rotax engines for karts and recreational aircraft. We complete our lines of products with a dedicated parts, accessories and apparel business to fully enhance the riding experience. With annual sales of CA$6.0 billion from over 130 countries, our global workforce is made up of more than 14,500 driven, resourceful people.

www.brp.com
@BRPNews

Ski-Doo, Lynx, Sea-Doo, Can-Am, Rotax, Alumacraft, Manitou, Quintrex, Stacer, Savage, Evinrude 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 statements in this press release, including, but not limited to, statements relating to our Fiscal Year 2022, including financial guidance and outlook and related assumptions of the Company (including revenues, Normalized EBITDA, Effective Tax Rate, Normalized earnings per share, net income, depreciation expense, net financing costs adjusted, weighted average of the number of shares diluted and capital expenditures), the Company's ability to convert new entrants into life-long customers, statements relating to the anticipated additional production capacity and its plan to make strategic investments in new products, statements relating to the declaration and payment of dividends, statements about the Company's current and future plans, and other statements about the Company's prospects, expectations, anticipations, estimates and intentions, results, levels of activity, performance, objectives, targets, goals or achievements, priorities and strategies, financial position, market position, capabilities, competitive strengths, beliefs, the prospects and trends of the industries in which the Company operates, the expected growth in demand for products and services in the markets in which the Company competes, research and product development activities, including projected design, characteristics, capacity or performance of future products and their expected scheduled entry to market expected financial requirements and the availability of capital resources and liquidities or any other future events or developments and other statements that are not historical facts constitute forward-looking statements within the meaning of Canadian and United States securities laws. The words "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, are intended to identify forward-looking statements.

Forward-looking statements are presented for the purpose of assisting readers in understanding certain key elements of the Company's current objectives, goals, targets, strategic priorities, expectations and plans, and in obtaining a better understanding of the Company's business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes; readers should not place undue reliance on forward-looking statements contained herein. Forward-looking statements, by their very nature, involve inherent risks and uncertainties and are based on a number of assumptions, both general and specific, as further described below.

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" of its Annual Information Form: the impact of adverse economic conditions such as those resulting from the ongoing coronavirus (known as COVID-19) health crisis (including on consumer spending, the Company's operations and supply and distribution chains, the availability of credit and the Company's workforce); any decline in social acceptability of the Company's products; fluctuations in foreign currency exchange rates; high levels of indebtedness; any unavailability of additional capital; unfavourable weather conditions; any failure of information technology systems or security breach; the Company's international sales and operations; any supply problems, termination or interruption of supply arrangements or increases in the cost of materials; seasonal sales fluctuations; any inability to comply with product safety, health, environmental and noise pollution laws; the Company's large fixed cost base; any inability of dealers and distributors to secure adequate access to capital; the Company's competition in product lines; any Company's inability to successfully execute its growth strategy; any failure to maintain an effective system of internal control over financial reporting and to produce accurate and timely financial statements; any loss of members of the Company's management team or employees who possess specialized market knowledge and technical skills; any inability to maintain and enhance the Company's reputation and brands; any significant product liability claim; any significant product repair and/or replacement due to product warranty claims or product recalls; the Company's reliance on a network of independent dealers and distributors; any Company's inability to successfully manage inventory levels; any intellectual property infringement and litigation; any Company's inability to successfully execute its manufacturing strategy or to meet customer demand as a result of manufacturing capacity constraints; increased freight and shipping costs or disruptions in transportation and shipping infrastructure; any failure to comply with covenants in financing and other material agreements; any changes in tax laws and unanticipated tax liabilities; any impairment in the carrying value of goodwill and trademarks; any deterioration in relationships with employees; pension plan liabilities; natural disasters; any failure to carry proper insurance coverage; volatility in the market price for the Subordinate Voting Shares; the Company's conduct of business through subsidiaries; the 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 Subordinate Voting 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. Unless otherwise stated, the forward-looking statements contained in this press release are made as of the date of this press release and the Company has no intention and undertakes no obligation to update or revise any forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable securities regulations. In the event that the Company does update any forward-looking statements contained in this press release, no inference should be made that the Company will make additional updates with respect to that statement, related matters or any other forwardlooking statement. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

KEY ASSUMPTIONS
The Company made a number of economic, market and operational assumptions in preparing and making certain forward-looking statements contained in this press release and in preparing its Fiscal Year 2022 guidance, including the following: reasonable industry growth ranging from slightly down to up high-single digits %; market share that will remain constant or moderately increase; no further deterioration and a relatively rapid stabilization of global and North American economic conditions, including with respect to the ongoing COVID-19 crisis; any increase in interest rates will be modest; currencies will remain at near current levels; inflation will remain in line with central bank expectations in countries where the Company is doing business; the Company's margins, excluding the impact of the wind-down of Evinrude ETEC outboard engines and COVID-19 and supply chain constraints, will remain near current levels; the Company anticipates supply chain constraints but expects to be able to support  product development and planned production rates on commercially acceptable terms; there will be no significant changes in tax laws or free trade arrangements or treaties applicable to the Company; no trade barriers will be imposed amongst jurisdictions in which the Company carries operations; and the absence of unusually adverse weather conditions, especially in peak seasons. BRP cautions that its assumptions may not materialize and that current economic conditions, including all of the current uncertainty resulting from the ongoing COVID-19 health crisis and its broader repercussions on the global economy, render such assumptions, although believed reasonable at the time they were made, subject to greater uncertainty.

NON-IFRS MEASURES
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, foreign exchange gain or loss on the Company's long-term debt denominated in U.S. dollars and foreign exchange gain or loss on certain of the Company's lease liabilities. Other elements, such as restructuring and wind-down costs, gain or loss on litigation 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 press release for the reconciliations of Normalized EBITDA and Normalized net income presented by the Company to the most directly comparable IFRS measure.

SOURCE BRP Inc.

Related Links

https://www.brp.com/

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