BRP, Inc., the parent company of the Sea-Doo, Ski-Doo and Lynx brands, reported revenues for the fiscal third quarter ended October 31 amounted to $2.47 billion, a decrease of 8.9 percent compared to the corresponding period last year.
The decrease was said to be 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 Q3 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, favorable product mix, and favorable pricing across all product lines. The decrease includes a favorable foreign exchange rate variation of $7 million.
North American quarterly retail sales were reportedly up for SSV, ATV and Snowmobile, offset by lower retail of PWC, 3WV and Sea-Doo Pontoon resulting in overall flat retail compared to the fiscal Q3 period last year.
“BRP delivered sound third-quarter results in the context of the current macroeconomic environment,” said José Boisjoli, president and CEO of BRP, Inc. “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. Like the rest of the industry, we have observed softening demand, particularly in international markets. We have proactively adjusted production and deliveries to manage network inventory and protect our dealer value proposition.”
Year-Round Products revenues decreased 7.8 percent to $1.18 billion, or 48 percent of total BRP revenues, for the three-month period ended October 31. The decrease was said to be 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 said to be partially offset by a favorable product mix of SSV and ATV sold due to the introduction of new models, and favorable pricing across all product lines. The company said the decrease includes a favorable foreign exchange rate variation of $5 million.
Seasonal Products revenues decreased 14.9 percent to $868.7 million, or 35 percent of total BRP sales, for the three-month period ended October 31. The decrease was said to be primarily attributable to a lower volume of PWC and Sea-Doo Pontoon sold, mainly due to late shipments in Q3 last year. The decrease was said to be partially offset by a higher volume of Snowmobile sold, a favorable product mix due to the introduction of new models, and favorable pricing across all product lines. The company said the decrease also includes an unfavorable foreign exchange rate variation of $4 million.
Powersports PA&A and OEM Engines revenues increased 5.5 percent to $314.5 million, or 13 percent of total BPR revenue, for the fiscal third quarter. The increase was reportedly attributable to a higher volume sold, coming from aircraft engine and mechanical gearbox sales for traditional and electric bicycles, and favorable pricing, partially offset by higher sales programs. The increase reportedly also includes a favorable foreign exchange rate variation of $5 million.
Marine segment revenues decreased 10.2 percent to $106.7 million, or 4 percent of total BRP revenue, in the third quarter. The decrease was said to be mainly due to a decrease in the volume sold and an increase in sales programs. The company said the decrease was partially offset by a favorable product mix and pricing across most product lines. The decrease reportedly includes a favorable foreign exchange rate variation of $1 million.
North American Retail Sales
North American Powersports Products retail sales were flat year-over-year for the third quarter. This was reportedly driven primarily by the strong retail sales of Snowmobile for the three-month period ended October 31, 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 year-ago period.
- Year-Round Products retail sales increased in the high-single digits on a percentage basis compared to the year-ago period. The Year-Round Products industry increased in the low-single digits on a percentage basis over the same period.
- Seasonal Products retail sales decreased in the low-teens range and by high-single digits when excluding Sea-Doo Pontoon, compared to the year-ago period. The Seasonal Products industry increased in the high-single digits over the same period.
- North American retail sales for Marine Products decreased 30 percent compared to the year-ago period as a result of softening consumer demand for the boating industry.
Gross Margin
Gross margin percentage increased 120 basis points to 25.4 percent of sales in Q3, compared to 24.2 percent in the prior-year period. The increase in gross margin percentage was reportedly the result of favorable 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 unfavorable foreign exchange rate variation of $19 million.
Operating Expenses
Operating expenses increased by $39.7 million, or 14.7 percent, to $309.6 million for the three-month period ended October 31. The increase was mainly attributable to an increase in R&D expenses to support future growth. The increase in operating expenses includes an unfavorable foreign exchange rate variation of $10 million.
Normalized EBITDA
Normalized EBITDA decreased by $43.0 million, or 8.8 percent, to $444.9 million for the three-month period ended October 31, compared to $487.9 million for the three-month period ended October 31, 2022. The decrease was said to be primarily due to lower gross profit and higher operating expenses.
Net Income
Net income decreased or 55.4 percent, by $78.5 million, to $63.1 million in the third quarter, compared to $141.6 million for the three-month period ended October 31, 2022. The decrease was said to be primarily due to a lower operating income, an unfavorable 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.
Normalized EBITDA
Normalized EBITDA was $444.9 million, down 8.8 percent compared to the corresponding period last year.
Photo courtesy Ski-Doo