Mr. Jose Boisjoli reports

BRP PRESENTS ITS THIRD QUARTER RESULTS FOR FISCAL YEAR 2024

BRP Inc. has released its financial results for the three- and nine-month periods ended Oct. 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.

"BRP delivered sound third quarter results in the context of the current macroeconomic environment. Our team's focus on operational excellence enabled us to improve gross margin despite reduced volumes. Our performance has led to solid retail sales growth since the beginning of the year, resulting in further market share gains in the North American powersports industry," said Jose Boisjoli, president and chief executive officer of BRP.

"Like the rest of the industry, we have observed softening demand, particularly in international markets. We have pro-actively adjusted production and deliveries to manage network inventory and protect our dealer value proposition.

"Importantly, since we became BRP 20 years ago, we have never shied away from investing in our future to build a resilient organization that is geared up to respond to market fluctuations. We remain well positioned to drive long-term profitable growth thanks to our dedicated team, innovative and diversified product portfolio, and engaged dealer network," concluded Mr. Boisjoli.

Other assumptions for fiscal year 2024 guidance:

• Depreciation expenses: approximately $385-million;
• Net financing costs adjusted: approximately $175-million (previously approximately $180-million);
• Weighted average number of shares -- diluted: approximately 78.7 million shares (previously approximately 79.1 million);
• Capital expenditures: approximately $650-million to $700-million.

Third quarter results

The company's three-month period ended Oct. 31, 2023, was marked by a decrease in the volume of shipments and revenues compared with the three-month period ended Oct. 31, 2022. The results of the third quarter of this fiscal year were driven by a decrease in PWC (personal watercraft) and 3WV (three-wheeled vehicle) deliveries, as the third quarter of this fiscal year compares unfavourably with a strong third quarter last fiscal year, where shipments of PWC and 3WV were completed after peak retail season due to supply chain issues last year. The ORV (off-road recreational vehicle) deliveries were also negatively impacted during the third quarter from the lower delivery throughput at the United States-Mexico border, following a three-week period of increased cargo inspections. The decrease can also be explained by a softening in industry demand in the international market compared with the three-month period ended Oct. 31, 2022. The company's North American quarterly retail sales were up for SSV (side-by-side vehicle), ATV (all-terrain vehicle) and snowmobile which were offset by lower retail of PWC, 3WV and Sea-Doo pontoon resulting in overall flat retail when compared with the same period last year. Furthermore, the company continues to demonstrate production efficiencies due to supply chain improvements, leading to an increase in the profit margin percentage for the three-month period ended Oct. 31, 2023, compared with the same period last year.

Revenues

Revenues decreased by $241.5-million, or 8.9 per cent, to $2,467.8-million for the three-month period ended Oct. 31, 2023, compared with $2,709.3-million for the corresponding period ended Oct. 31, 2022. The decrease was primarily due to a lower volume of PWC, 3WV, SSV and Sea-Doo pontoon sold, mainly explained by the late shipments of PWC and 3WV for the same period last fiscal year, the U.S.-Mexico border slowdown affecting ORV deliveries, the softening in industry demand in the international market, and higher sales programs across all product lines except PWC. The decrease was partially offset by a higher volume of snowmobile and ATV sold, favourable product mix, and favourable pricing across all product lines. The decrease includes a favourable foreign exchange rate variation of $7-million.

• Year-round products (48 per cent of Q3 FY 2024 revenues): Revenues from year-round products decreased by $99.2-million, or 7.8 per cent, to $1,180.6-million for the three-month period ended Oct. 31, 2023, compared with $1,279.8-million for the corresponding period ended Oct. 31, 2022. The decrease was primarily attributable to a lower volume of 3WV and SSV sold, combined with higher sales programs. The decrease in SSV wholesale is partially explained by the U.S.-Mexico border slowdown, where the implementation of systematic cargo inspections adversely affected the company's ability to complete certain deliveries. The decrease in revenues was partially offset by a favourable product mix of SSV and ATV sold due to the introduction of new models, and favourable pricing across all product lines. The decrease includes a favourable foreign exchange rate variation of $5-million.
• Seasonal products (35 per cent of Q3 FY 2024 revenues): Revenues from seasonal products decreased by $152.2-million, or 14.9 per cent, to $868.7-million for the three-month period ended Oct. 31, 2023, compared with $1,020.9-million for the corresponding period ended Oct. 31, 2022. The decrease was primarily attributable to a lower volume of PWC and Sea-Doo pontoon sold, mainly due to late shipments in the three-month period ended Oct. 31, 2022. The decrease was partially offset by a higher volume of Snowmobile sold, a favourable product mix due to the introduction of new models and favourable pricing across all product lines. The decrease also includes an unfavourable foreign exchange rate variation of $4-million.
• Powersports PA&A (parts, accessories and apparel) and OEM (original equipment manufacturer) engines (13 per cent of Q3 FY 2024 revenues): Revenues from powersports PA&A and OEM engines increased by $16.5-million, or 5.5 per cent, to $314.5-million for the three-month period ended Oct. 31, 2023, compared with $298-million for the corresponding period ended Oct. 31, 2022. The increase was attributable to a higher volume sold, coming from aircraft engine and mechanical gearbox sales for traditional and electric bicycles, and favourable pricing, partially offset by higher sales programs. The increase also includes a favourable foreign exchange rate variation of $5-million.
• Marine (4 per cent of Q3 FY 2024 revenues): Revenues from the marine segment decreased by $12.1-million, or 10.2 per cent, to $106.7-million for the three-month period ended Oct. 31, 2023, compared with $118.8-million for the corresponding period ended Oct. 31, 2022. The decrease was mainly due to a decrease in the volume sold and an increase in sales programs. The decrease was partially offset by a favourable product mix and pricing across most product lines. The decrease includes a favourable foreign exchange rate variation of $1-million.

North American retail sales

The company's North American retail sales for powersports products were flat for the three-month period ended Oct. 31, 2023, compared with the three-month period ended Oct. 31, 2022. This was mainly driven by the strong retail sales of snowmobile for the three-month period ended Oct. 31, 2023, compared with the three-month period ended Oct. 31, 2022, which completely offset the decrease in the retail sales of PWC and 3WV, which was due to late shipments that occurred after peak retail season during the three-month period ended Oct. 31, 2022.

• Year-round products: Retail sales increased on a percentage basis in the high single digits compared with the three-month period ended Oct. 31, 2022. The year-round products industry increased on a percentage basis in the low single digits over the same period.
• Seasonal products: Retail sales decreased on a percentage basis in the low-teens range and by high single digits when excluding Sea-Doo pontoon, compared with the three-month period ended Oct. 31, 2022. The seasonal products industry increased on a percentage basis in the high single digits over the same period.

The company's North American retail sales for marine products decreased by 30 per cent compared with the three-month period ended Oct. 31, 2022, as a result of softening consumer demand for the boating industry.

Gross profit

Gross profit decreased by $27.3 million, or 4.2 per cent, to $627.4-million for the three-month period ended Oct. 31, 2023, compared with $654.7-million for the three-month period ended Oct. 31, 2022. Gross profit margin percentage increased by 120 basis points to 25.4 per cent from 24.2 per cent for the three-month period ended Oct. 31, 2022. The decrease in gross profit was the result of a lower volume sold, as highlighted above, higher sales programs and higher labour costs due to inflation. The decrease was partially offset by favourable pricing across all product lines, favourable product mix of snowmobile and SSV sold, a decrease in logistics costs due to more efficiencies in the supply chain, and a reduction in certain material costs. 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 a lower volume sold and higher sales programs. The decrease in gross profit includes an unfavourable foreign exchange rate variation of $19-million.

The intersegment transactions are included in the analysis.

Operating expenses

Operating expenses increased by $39.7-million, or 14.7 per cent, to $309.6-million for the three-month period ended Oct. 31, 2023, compared with $269.9-million for the three-month period ended Oct. 31, 2022. The increase was mainly attributable to an increase in research and development expenses to support future growth. The increase in operating expenses includes an unfavourable foreign exchange rate variation of $10-million.

Normalized EBITDA

Normalized EBITDA (earnings before interest, taxes, depreciation and amortization) decreased by $43-million, or 8.8 per cent, to $444.9-million for the three-month period ended Oct. 31, 2023, compared with $487.9-million for the three-month period ended Oct. 31, 2022. The decrease was primarily due to lower gross profit and higher operating expenses.

Net income

Net income decreased by $78.5-million to $63.1-million, or 55.4 per cent, for the three-month period ended Oct. 31, 2023, compared with $141.6-million for the three-month period ended Oct. 31, 2022. The decrease was primarily due to a lower operating income, an unfavourable foreign exchange rate variation on the U.S.-denominated long-term debt and an increase in financing costs, partially offset by a lower income tax expense and an increase in financing income.

Nine-month period ended Oct. 31, 2023

Revenues

Revenues increased by $718.1-million, or 10.3 per cent, to $7,675.2-million for the nine-month period ended Oct. 31, 2023, compared with $6,957.1-million for the corresponding period ended Oct. 31, 2022. The increase was primarily due to a higher volume of SSV, ATV and snowmobile sold, increased deliveries of Sea-Doo pontoon, favourable product mix across most product lines, as well as favourable pricing. The increase was partially offset by higher sales programs which are mostly due to rising interest rates, and a lower volume of 3WV, PWC, and PA&A sold. The increase includes a favourable foreign exchange rate variation of $183-million.

Normalized EBITDA

Normalized EBITDA increased by $116.8-million, or 9.9 per cent, to $1,295.1-million for the nine-month period ended Oct. 31, 2023, compared with $1,178.3-million for the nine-month period ended Oct. 31, 2022. The increase was primarily due to higher gross profit, partially offset by higher operating expenses.

Net income

Net income increased by $56.0-million to $556.3-million, or 11.2 per cent, for the nine-month period ended Oct. 31, 2023, compared with the $500.3-million for the nine-month period ended Oct. 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 $1,053.2-million for the nine-month period ended Oct. 31, 2023, compared with net cash flows of $342.3-million for the nine-month period ended Oct. 31, 2022. The increase was mainly due to higher profitability, favourable changes in working capital and lower income taxes paid.

The company invested $352.5-million of its liquidity in capital expenditures to add production capacity and modernize the company's software infrastructure to support future growth.

During the nine-month period ended Oct. 31, 2023, the company also returned $409-million to its shareholders through quarterly dividend payouts and its share repurchase programs.

Dividend

On Nov. 29, 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 Jan. 12, 2024, to shareholders of record at the close of business on Dec. 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 third 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. 30107451), please dial 1-888-396-8049 (toll-free in North America).

The company's third 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.

We seek Safe Harbor.