BRP reports Fiscal Year 2020 first quarter results and authorization of substantial issuer bid
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%.
In addition, during the three-month period ended April 30, 2019:
- The Company amended its $575.0 million revolving credit facilities to increase the availability by $125.0 million for a total of $700.0 million, to extend the maturity from May 2023 to May 2024 and to improve pricing.
- On May 1, 2019, the Company announced that it had entered into a definitive agreement to acquire 80% of the outstanding shares of Telwater Pty, Ltd ("Telwater"), Australia's leading manufacturer of aluminum boats and trailers.
- The Company today announced the authorization of a substantial issuer bid (the Offer) to purchase for cancellation up to $300 million of the Companys subordinate voting shares. The SIB will be funded with a combination of cash on hand, drawing on existing credit facilities and planned incremental term loan issuance.
Valcourt, Quebec, May 30, 2019 – BRP Inc. (TSX:DOO; NASDAQ:DOOO) today 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 BRPs 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, BRPs President and CEO.
"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 favourable 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 unfavourable 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.
QUARTERLY REVIEW BY SEGMENT
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.
Revenues from Marine segment increased by $37.9 million, or 33.4%, to $151.3 million for the three-month period ended April 30, 2019, compared with $113.4 million for the corresponding period ended April 30, 2018. The increase was mainly due to the acquisition of Alumacraft Boat Co. ("Alumacraft) and Triton Industries, Inc. ("Manitou), partially offset by a lower volume of outboard engines sold.
North American outboard engine retail sales decreased on a percentage basis in the high-teens range compared with the three-month period ended April 30, 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 July 12, 2019 to shareholders of record at the close of business on June 28, 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.
ANNOUNCEMENT OF A SUBSTANTIAL ISSUER BID
The Company announced today 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 commited 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.
This press release is for informational purposes only and does not constitute an offer to buy or the solicitation of an offer to sell the Company's shares. The Offer referred to in this news release has not yet commenced. The solicitation and the Offer to buy the shares will only be made pursuant to a separate issuer bid circular, which will contain full details of the Offer and will be filed with the securities regulatory authorities and mailed to the Company's shareholders.
Fiscal Year 2020 Guidance
The table below sets forth BRPs financial guidance for Fiscal Year 2020 which reflects the adoption of 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. 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 May 29, 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 first 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 4304845), please dial 514-392-0235 or 1-800-564-3880 (toll-free in North America). Click for international dial-in numbers.
The Companys first quarter FY2020 MD&A, financial statements and webcast presentation are posted in the Quarterly Reports section of BRPs website.