Mr. Jose Boisjoli reports

BRP PRESENTS ITS SECOND QUARTER RESULTS FOR FISCAL YEAR 2024

BRP Inc. has released its financial results for the three- and six-month periods ended July 31, 2023. All financial information is in Canadian dollars unless otherwise noted. The complete financial results are available on SEDAR+ and EDGAR as well as in the quarterly reports section of BRP's website.

"We are pleased with our performance as BRP delivered its strongest second quarter ever with revenues and normalized EPS [earnings per share] -- diluted increases of 14 per cent and 9 per cent, respectively, over last year. Driven by solid consumer demand, we significantly outpaced the North American powersports industry with an impressive 41-per-cent growth at retail, further increasing our market share in most product categories. We thank our employees for raising the bar and developing market-shaping products that set us apart worldwide," said Jose Boisjoli, president and chief executive officer of BRP.

"We had a very successful BRP Club in August with a significant number of new model launches. Our reputation for innovation, the breadth of our portfolio and a strong dealer network are key advantages for us in the industry, paving the way for continued success going forward.

"With our solid momentum, we expect fiscal 2024 to deliver record revenues and profitability. Reflecting our positive outlook, we are increasing the range of our financial guidance to normalized EPS -- diluted between $12.35 and $12.85," concluded Mr. Boisjoli.

Other assumptions for fiscal year 2024 guidance:

• Depreciation expenses: approximately $385-million;
• Net financing costs adjusted: approximately $180-million;
• Weighted average number of shares -- diluted: approximately 79.1 million shares (previously 79.8 million);
• Capital expenditures: approximately $650-million to $700-million (previously $750-million to $800-million).

FY 2024 quarterly outlook

The company continues to expect another solid year, reaffirming its normalized EBITDA (earnings before interest, taxes, depreciation and amortization) increase ranging from 9 per cent to 13 per cent compared with the previous year and anticipates that about 45 per cent of the implied normalized EBITDA for the rest of the year will be generated in the third quarter.

Second quarter results

Continued strong deliveries, aided by improvements in the supply chain and the inflationary environment, allowed the company to further build on the momentum created in its first quarter. The demand for the company's products remained healthy, as evidenced by the increase of 41 per cent in the company's North American retail sales for powersports products during the three-month period ended July 31, 2023, compared with the same period last year.

The increase in revenues for the three- and six-month periods ended July 31, 2023, compared with the corresponding periods ended July 31, 2022, is mainly explained by high deliveries of units due to improvements in the supply chain and sustained demand, which is driven in part by strong SSV (side-by-side vehicle), ATV (all-terrain vehicle), Sea-Doo pontoon and snowmobile retail sales. The supply chain has gradually stabilized, resulting in production efficiencies, a return to the company's normal wholesale delivery pattern and an increase in gross profit margin compared with the same period last year. However, these increases were partially offset by more costly sales programs, which are mostly due to rising interest rates.

Revenues

Revenues increased by $339.5-million, or 13.9 per cent, to $2,778-million for the three-month period ended July 31, 2023, compared with $2,438.5-million for the corresponding period ended July 31, 2022. The increase was primarily due to a higher volume of SSVs, ATVs and snowmobiles sold, increased deliveries of Sea-Doo pontoon, as well as favourable pricing across all product lines, partially offset by higher sales programs, due to higher interest rates. The increase includes a favourable foreign exchange rate variation of $81-million.

• Year-round products (53 per cent of Q2 2024 revenues): Revenues from year-round products increased by $103.5-million, or 7.6 per cent, to $1,461.6-million for the three-month period ended July 31, 2023, compared with $1,358.1-million for the corresponding period ended July 31, 2022. The increase was primarily attributable to a higher volume of SSVs and ATVs sold, as well as favourable pricing across all product lines, which was partially offset by higher sales programs. The increase includes a favourable foreign exchange rate variation of $40-million.
• Seasonal products (32 per cent of Q2 2024 revenues): Revenues from seasonal products increased by $206.3-million, or 29.8 per cent, to $897.5-million for the three-month period ended July 31, 2023, compared with $691.2-million for the corresponding period ended July 31, 2022. The increase is primarily attributable to a higher volume of snowmobiles sold due to a reduction in supply chain issues that impacted deliveries in the three-month period ended July 31, 2022, as well as increased deliveries of the Sea-Doo pontoon. The increase was also attributable to favourable pricing across all product lines, partially offset by higher sales programs. The increase also includes a favourable foreign exchange rate variation of $27-million.
• Powersports PA&A (parts, accessories and apparel) and OEM (original equipment manufacturer) engines (11 per cent of Q2 2024 revenues ): Revenues from powersports PA&A and OEM engines increased by $36.7-million, or 14.3 per cent, to $294.2-million for the three-month period ended July 31, 2023, compared with $257.5-million for the corresponding period ended July 31, 2022. The increase was mainly attributable to a higher volume of PA&A coming from strong unit retail sales and sales from businesses acquired in the second half of fiscal 2023, combined with favourable pricing. The increase was partially offset by higher sales programs. The increase also includes a favourable foreign exchange rate variation of $11-million.
• Marine (4 per cent of Q2 2024 revenues): Revenues from the marine segment decreased by $12.6-million, or 9 per cent, to $126.9-million for the three-month period ended July 31, 2023, compared with $139.5-million for the corresponding period ended July 31, 2022. The decrease was mainly due to a lower volume of boats and PA&A sold as a result of longer production ramp-up related to the introduction of new products, which have experienced extended delays due to supply chain issues, unfavourable mix across most product lines and higher sales programs. The decrease was partially offset by higher pricing and a favourable foreign exchange rate variation of $3-million.

North American retail sales

The company's North American retail sales for powersports products increased by 41 per cent for the three-month period ended July 31, 2023, compared with the three-month period ended July 31, 2022. The increase was mainly driven by an increase in the sales of SSVs, ATVs, PWCs (personal watercrafts) and snowmobiles, given the reduction in supply chain issues, which had impacted deliveries in the three-month period ended July 31, 2022.

• Year-round products: Retail sales increased on a percentage basis in the low-20s range compared with the three-month period ended July 31, 2022. In comparison, the year-round products industry increased on a percentage basis in the high single digits over the same period.
• Seasonal products: Retail sales increased on a percentage basis in the low-70s range, low 60s when excluding Sea-Doo pontoon, compared with the three-month period ended July 31, 2022. In comparison, the seasonal products industry increased on a percentage basis in the low-50s range over the same period.

Marine products retail sales decreased by 44 per cent compared with the three-month period ended July 31, 2022, as a result of softening consumer demand for the boating industry and lower product availability of newly introduced products in comparison with the prior-year period.

Gross profit

Gross profit increased by $94.9-million, or 15.7 per cent, to $697.6-million for the three-month period ended July 31, 2023, compared with $602.7-million for the three-month period ended July 31, 2022. Gross profit margin percentage increased by 40 basis points to 25.1 per cent from 24.7 per cent for the three-month period ended July 31, 2022. The increase was the result of a higher volume sold, as highlighted above, favourable pricing across all product lines, a decrease in logistics costs due to more efficiencies in the supply chain and a reduction in certain material costs. The increase was partially offset by higher labour costs due to inflation, as well as higher sales programs. The increase in gross profit margin percentage was the result of favourable pricing across all product lines and higher production efficiency coming from an improved supply chain, partially offset by higher sales programs. The increase in gross profit includes an unfavourable foreign exchange rate variation of $11-million.

Operating expenses

Operating expenses increased by $61.9-million, or 24.1 per cent, to $318.8-million for the three-month period ended July 31, 2023, compared with $256.9-million for the three-month period ended July 31, 2022. The increase was mainly attributable to higher selling and marketing expenses, which are mainly due to continued product investment and an increase in marketing projects, an increase in research and development expenses to support future growth, and higher general and administrative expenses, mainly related to the modernization of the company's software infrastructure. The increase in operating expenses includes an unfavourable foreign exchange rate variation of $27-million.

Normalized EBITDA

Normalized EBITDA increased by $54.8-million, or 13.1 per cent, to $473.1-million for the three-month period ended July 31, 2023, compared with $418.3-million for the three-month period ended July 31, 2022. The increase was primarily due to higher gross profit, partially offset by higher operating expenses.

Net income

Net income increased by $101.0-million, or 42.5 per cent, to $338.7-million for the three-month period ended July 31, 2023, compared with the $237.7-million for the three-month period ended July 31, 2022. The increase was primarily due to a higher operating income, lower income tax expense and a favourable impact of the foreign exchange rate variation on the U.S.-denominated long-term debt, partially offset by an increase in financing costs.

Six-month period ended July 31, 2023

Revenues

Revenues increased by $959.6-million, or 22.6 per cent, to $5,207.4-million for the six-month period ended July 31, 2023, compared with $4,247.8 million for the corresponding period ended July 31, 2022. The increase was primarily due to a higher volume of SSV, PWC, ATV and snowmobile sold, increased deliveries of Sea-Doo pontoon, favourable product mix across all product lines except snowmobile and SSV, as well as favourable pricing across all product lines. The increase was partially offset by higher sales programs. The increase includes a favourable foreign exchange rate variation of $176-million.

Normalized EBITDA

Normalized EBITDA increased by $159.8-million, or 23.1 per cent, to $850.2-million for the six-month period ended July 31, 2023, compared with $690.4-million for the six-month period ended July 31, 2022. The increase was primarily due to higher gross profit, partially offset by higher operating expenses.

Net income

Net income increased by $134.5-million, or 37.5 per cent, to $493.2-million for the six-month period ended July 31, 2023, compared with $358.7-million for the six-month period ended July 31, 2022. The increase was primarily due to a higher operating income, lower income tax expense and a favourable impact of the foreign exchange rate variation on the U.S.-denominated long-term debt, partially offset by an increase in financing costs.

Liquidity and capital resources

The company generated net cash flows from operating activities totalling $748.2-million for the six-month period ended July 31, 2023, compared with a usage of $1-million for the six-month period ended July 31, 2022. The increase was mainly due to favourable changes in working capital and lower income taxes paid.

The company invested $220.4-million of its liquidity in capital expenditures to add production capacity and modernize the company's software infrastructure to support future growth. Given the revised guidance for marine, the company decided to postpone the construction of its boat manufacturing plant in Chihuahua City, Mexico, by 12 months with an expected start of production in spring of 2026.

During the six-month period ended July 31, 2023, the company also returned $238.5-million to its shareholders through quarterly dividend payouts and its share repurchase programs for the six-month period ended July 31, 2023.

Dividend

On Sept. 6, 2023, the company's board of directors declared a quarterly dividend of 18 cents per share for holders of its multiple voting shares and subordinate voting shares. The dividend will be paid on Oct. 13, 2023, to shareholders of record at the close of business on Sept. 29, 2023.

Conference call and webcast presentation

Today at 9 a.m. ET, BRP will host a conference call and webcast to discuss its FY 2024 second quarter results. The call will be hosted by Mr. Boisjoli, president and CEO, and Sebastien Martel, chief financial officer. To listen to the conference call by phone (event No. 52909951), please dial 1-888-396-8049 (toll-free in North America).

The company's second quarter FY 2024 webcast presentation is posted in the quarterly reports section of BRP's website.

About BRP Inc.

BRP is a global leader in the world of powersports products, propulsion systems and boats built on over 80 years of ingenuity and intensive consumer focus. Through its portfolio of industry-leading and distinctive brands featuring Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft and pontoons, Can-Am on- and off-road vehicles, Alumacraft and Quintrex boats, Manitou pontoons, Rotax marine propulsion systems, as well as Rotax engines for karts and recreational aircraft, BRP unlocks exhilarating adventures and provides access to experiences across different playgrounds. The company completes its lines of products with a dedicated parts, accessories and apparel portfolio to fully optimize the riding experience. Committed to growing responsibly, BRP is developing electric models for its existing product lines and exploring new low-voltage and human-assisted product categories. Headquartered in Quebec, Canada, BRP has annual sales of $10-billion from over 130 countries and a global work force of close to 23,000 driven, resourceful people.

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