BRP reports fiscal year 2018 third-quarter results

Highlights for the quarter vs Q3 FY17:

• Revenues of $1,241 million, a 15% increase and a record for a third quarter;
• Gross profit of $329 million representing 26.6% of revenues, an increase of 7%;
• Normalized EBITDA[1] of $199 million, a 1% increase;
• Net income of $78 million resulting in a diluted earnings per share of $0.75, an increase of $0.05 per share;
• Normalized net income[1] of $109 million resulting in a record normalized diluted earnings per share[1] of $1.05, an increase of $0.12 per share;
• Amendment to the Company’s term facility, reducing the cost of borrowing by 0.50% and increasing the amount of borrowing by US$100 million; and
• Entry into the trail SSV segment with the Can-Am Maverick Trail model.

In addition, the Company announced yesterday the expansion of the Can-Am Maverick X3 family to include entry-level and mud-racing models.

Valcourt, Québec, December 1, 2017 – BRP Inc. (TSX:DOO) today reported its financial results for the three- and nine-month periods ended October 31, 2017. 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.

“I am proud of our retail momentum and the strong execution of our team worldwide; our third-quarter results are on target, and they represent a record in BRP history,” said José Boisjoli, President and CEO. “We had an excellent reaction to our latest products at our dealer event in Dallas. We entered a new segment with the launch of the Can-Am Maverick Trail vehicle, introduced a new Sea-Doo watercraft platform and announced an entry-level Spyder family starting at under US$10,000 for next Fall.”

“We are also announcing today a second phase of investment to increase SSV and powertrain production capacity, that should be completed in fiscal year 2020,” Boisjoli added. “This decision is testament to the strong growth we see with our Can-Am side-by-side business and our commitment to further developing it.”

“Overall, considering industry trends, the competitive landscape and the global economy, I am pleased by our strong results,” Boisjoli concluded. “I am confident that we will deliver on our full-year guidance including growth in normalized earnings per share of 15% to 20%.”

Highlights for the Three- and Nine-Month Periods Ended October 31, 2017

Revenues increased by $160.3 million, or 14.8%, to $1,240.5 million for the three-month period ended October 31, 2017, compared with $1,080.2 million for the corresponding period ended October 31, 2016. The revenue increase was mainly due to higher wholesale in Year-Round Products and Seasonal Products. The increase was partially offset by an unfavourable foreign exchange rate variation of $29 million.

Gross profit increased by $22.2 million, or 7.2%, to $329.4 million for the three-month period ended October 31, 2017, compared with $307.2 million for the corresponding period ended October 31, 2016. The gross profit increase includes an unfavourable foreign exchange rate variation of $15 million. Gross profit margin percentage decreased by 180 basis points to 26.6% from 28.4% for the three-month period ended October 31, 2016. The decrease was primarily due to higher sales program costs driven by the increase in retail sales, higher production costs and an unfavourable foreign exchange rate variation, partially offset by a higher volume of SSV and snowmobiles sold and general price increases.

Revenues increased by $357.5 million, or 12.5%, to $3,223.7 million for the nine-month period ended October 31, 2017, compared with $2,866.2 million for the corresponding period ended October 31, 2016. The revenue increase was primarily attributable to higher wholesale of Year-Round Products and Seasonal Products. The increase was partially offset by an unfavourable foreign exchange rate variation of $22 million.

Gross profit increased by $77.0 million, or 11.4%, to $750.3 million for the nine-month period ended October 31, 2017, compared with $673.3 million for the corresponding period ended October 31, 2016. The gross profit increase includes an unfavourable foreign exchange rate variation of $10 million. Gross profit margin percentage decreased by 20 basis points to 23.3% from 23.5% for the nine-month period ended October 31, 2016. The decrease was primarily due to higher production costs and higher sales program costs driven by the increase in retail sales, partially offset by a favourable product mix, a higher volume in SSV as well as general price increases.

QUARTERLY REVIEW BY CATEGORIES

Year-Round Products
Revenues from Year-Round Products increased by $77.0 million, or 20.1%, to $460.9 million for the three-month period ended October 31, 2017, compared with $383.9 million for the corresponding period ended October 31, 2016. The increase resulted from a higher volume of SSV sold due mainly to the Can-Am Maverick X3 and the Can-Am Maverick Trail. The increase was partially offset by lower wholesale in Spyder vehicles and an unfavourable foreign exchange rate variation of $11 million.

Seasonal Products
Revenues from Seasonal Products increased by $74.6 million, or 17.9%, to $491.7 million for the three-month period ended October 31, 2017, compared with $417.1 million for the corresponding period ended October 31, 2016. The increase resulted primarily from snowmobile due to a higher volume mainly attributable to earlier shipments than last year and to a favourable product mix. The increase was partially offset by an unfavourable foreign exchange rate variation of $12 million.

Propulsion Systems
Revenues from Propulsion Systems decreased by $0.7 million, or 0.7%, to $93.5 million for the three-month period ended October 31, 2017, compared with $94.2 million for the corresponding period ended October 31, 2016. The decrease includes an unfavourable foreign exchange rate variation of $2 million.

PAC (Parts, Accessories, Clothing and other services)
Revenues from PAC increased by $9.4 million, or 5.1%, to $194.4 million for the three-month period ended October 31, 2017, compared with $185.0 million for the corresponding period ended October 31, 2016. The increase was mainly attributable to a higher volume of SSV accessories and snowmobile parts sold. The increase was partially offset by an unfavourable foreign exchange rate variation of $4 million.

Operating expenses increased by $23.2 million, or 16.1%, to $167.4 million for the three-month period ended October 31, 2017, compared with $144.2 million for the three-month period ended October 31, 2016. This increase was mainly attributable to higher selling and marketing expenses for continued product investments.

Declaration of dividend

The Board of Directors approved a quarterly dividend of $0.08 per subordinate and multiple voting share that will be paid on January 12, 2018 to shareholders of record as at the close of business on December 29, 2017. The payment of each quarterly dividend will remain subject to declaration of that dividend by the Board of Directors. The actual amount of each quarterly dividend, as well as each declaration date, record date and payment date, is subject to the discretion of the Board of Directors.

Fiscal Year 2018 Guidance

The above targets are based on a number of economic and market assumptions the Company has made in preparing its Fiscal Year 2018 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 cautions that the assumptions used to prepare the forecasts for Fiscal Year 2018, although 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 November 30, 2017. 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. (ET), BRP Inc. will host a conference call and webcast to discuss BRP's FY2018 third-quarter results released this morning. 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 4276978), please dial 514-392-0235 or 800-564-3880 (toll-free in North America). Click for international dial-in numbers.

The Company’s third-quarter FY2018 MD&A, financial statements and webcast presentation are posted in the Quarterly Reports section of BRP’s website.

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