BRP Reports Fiscal Year 2019 Third Quarter Results

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Valcourt, Quebec, November 30, 2018 – BRP Inc. (TSX:DOO; NASDAQ: DOOO) reported its financial results for the three- and nine-month periods ended Oct. 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 posted another record quarter with sustained demand for our products,” José Boisjoli, President and CEO, said. “Consumer demand for BRP’s powersports line-up was also strong this quarter with retail up by more than 25 percent for both side-by-side vehicles (SSV) and personal watercraft (PWC) in North America. This performance is a testament to our relentless focus on executing on our strategic priorities and on bringing the most innovative products to market.

"The fundamentals of our business are robust, we continue to drive operational excellence, and are thus well positioned to be very competitive despite the current potential headwinds caused by current market inflationary pressure. The diversified BRP product portfolio and line-up has never been as strong and the degree of positive engagement from our dealers is very high. We are excited by our momentum and are committed on delivering another record year of normalized EPS growth of 30 to 35 percent."

Highlights For Three- and Nine-Month Periods Ended Oct. 31, 2018

Revenues increased by $167.7 million, or 13.7 percent, to $1,394.2 million for the three-month period ended Oct. 31, 2018, compared with $1,226.5 million for the corresponding period ended Oct. 31, 2017. The revenue increase was mainly due to higher wholesale in Year-Round Products and a favourable foreign exchange rate variation of $31 million.

The company's North American retail sales for powersports vehicles and outboard engines increased by 5 percent for the three-month period ended Oct. 31, 2018, compared with the three-month period ended Oct. 31, 2017. The increase was mainly due to SSV and PWC, partially offset by a decrease in snowmobiles sales.

As at Oct. 31, 2018, North American dealer inventories for powersports vehicles and outboard engines increased by 8 percent compared to Oct. 31, 2017. The increase was primarily driven by higher side-by-side inventory to meet demand for BRP’s line-up.

Gross profit increased by $36.9 million, or 11.5 percent, to $356.8 million for the three-month period ended Oct. 31, 2018, compared with $319.9 million for the corresponding period ended Oct. 31, 2017. The gross profit increase includes a favourable foreign exchange rate variation of $6 million. Gross profit margin percentage decreased by 50 basis points to 25.6 percent from 26.1 percent for the three-month period ended Oct. 31, 2017. The decrease was primarily due to an unfavourable product mix, partially offset by a higher volume of SSV and PAC sold.

Operating expenses increased by $32.3 million, or 19.3 percent, to $199.7 million for the three-month period ended Oct. 31, 2018, compared with $167.4 million for the three-month period ended Oct. 31, 2017. This increase was mainly attributable to higher general and administrative as well as higher selling and marketing expenses. The higher general and administrative expense is mainly due to costs related to the modernization of information systems and higher variable employee compensation expenses.

Revenues increased by $511.4 million, or 15.8 percent, to $3,737.9 million for the nine-month period ended Oct. 31, 2018, compared with $3,226.5 million for the corresponding period ended Oct. 31, 2017. The revenue increase was primarily attributable to higher wholesale of Year-Round Products and Seasonal Products and a favourable foreign exchange rate variation of $12 million.

The company's North American retail sales for powersports vehicles and outboard engines increased by 10 percent for the nine-month period ended Oct. 31, 2018 compared with the nine-month period ended Oct. 31, 2017, mainly due to an increase in SSV and PWC.

Gross profit increased by $155.5 million, or 20.4 percent, to $918.5 million for the nine-month period ended Oct. 31, 2018, compared with $763.0 million for the corresponding period ended Oct. 31, 2017. The gross profit increase includes a favourable foreign exchange rate variation of $7 million. Gross profit margin percentage increased by 100 basis points to 24.6 percent from 23.6 percent for the nine-month period ended Oct. 31, 2017. The increase was primarily due to a higher volume of SSV, PWC and PAC sold and to favourable pricing.

Operating expenses increased by $69.4 million, or 13.8 percent, to $572.4 million for the nine-month period ended Oct. 31, 2018, compared with $503.0 million for the nine-month period ended Oct. 31, 2017. The increase was mainly attributable to higher selling and marketing expenses to support launch of various products as well as higher general and administrative expenses.

Net Income data

Three-month periods ended

Nine-month periods ended

(in millions of Canadian dollars)

October 31,

2018

October 31,

2017

October 31,

2018

October 31,

2017

Restated [1]

Restated [1]

Revenues by category [2]

Powersports

Year-Round Products

$562.4

$464.4

$1,643.0

$1,300.9

Seasonal Products

490.9

475.6

1,225.9

1,116.7

Powersports PAC and OEM Engines

201.8

179.1

504.8

472.4

Marine

139.1

107.4

364.2

336.5

Total Revenues

1,394.2

1226.5

3,737.9

3,226.5

Cost of sales

1,037.4

906.6

2,819.4

2,463.5

Gross profit

356.8

319.9

918.5

763.0

As a percentage of revenues

25.6%

26.1%

24.6%

23.6%

Operating expenses

Selling and marketing

86.8

77.3

248.8

219.8

Research and development

51.6

47.4

158.2

146.0

General and administrative

58.0

38.4

155.8

126.0

Other operating expenses

3.3

4.3

9.6

11.2

Total operating expenses

199.7

167.4

572.4

503.0

Operating income

157.1

152.5

346.1

260.0

Net financing costs

16.9

15.4

54.7

39.9

Foreign exchange (gain) loss on long-term debt

10.2

31.7

69.0

(5.9)

Income before income taxes

130.0

105.4

222.4

226.0

Income tax expense

39.8

35.4

77.8

56.9

Quarterly Review By Segment

Powersports

Year-Round Products

Revenues from Year-Round Products increased by $98.0 million, or 21.1 percent, to $562.4 million for the three-month period ended Oct. 31, 2018, compared with $464.4 million for the corresponding period ended Oct. 31, 2017. The increase resulted mainly from a higher volume of SSV sold and a favourable foreign exchange rate variation of $21 million, partially offset by an unfavourable product mix of SSV sold.

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

Seasonal Products

Revenues from Seasonal Products increased by $15.3 million, or 3.2 percent, to $490.9 million for the three-month period ended Oct. 31, 2018, compared with $475.6 million for the corresponding period ended Oct. 31, 2017. The increase was driven by a higher volume of PWC sold and from a favourable foreign exchange rate variation of $5 million, partially offset by an unfavourable product mix of snowmobiles sold.

North American Seasonal Products retail sales decreased by low-single digits compared with the three-month period ended Oct. 31, 2017.

Powersports PAC and OEM Engines

Revenues from Powersports PAC and OEM Engines increased by $22.2 million, or 12.3 percent, to $202.2 million for the three-month period ended Oct. 31, 2018, compared with $180.0 million for the corresponding period ended Oct. 31, 2017. The increase was mainly attributable to a higher volume of SSV and PWC parts and accessories.

Marine

Revenues from Marine increased by $29.5 million, or 25.4 percent, to $145.8 million for the three-month period ended Oct. 31, 2018, compared with $116.3 million for the corresponding period ended Oct. 31, 2017. The increase was mainly due to the acquisition of Alumacraft and Triton, partially offset by a lower volume of outboard engines sold.

North American outboard engine retail sales decreased on a percentage basis in the low-teen range compared with the three-month period ended Oct. 31, 2017.

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