BRP(DOOO) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue decreased by 8% year-over-year, with normalized EBITDA down 16% [32] - Normalized EPS for the quarter was $0.26 [32] - Gross profit margin was impacted by COVID-19, with a 350 basis point decline primarily due to production shutdowns [35] Business Line Data and Key Metrics Changes - Retail performance in North America was strong, with power sport retail up 4%, and 10% excluding snowmobiles [16] - Side-by-side retail grew about 40%, while ATV retail was up in the high single digits [18] - Personal watercraft retail was up low single digits, while snowmobile retail was up mid-single digits [26][28] - Marine business revenues were down 26% due to lower outboard engine sales [30] Market Data and Key Metrics Changes - Approximately 90% of dealers in the U.S. were reopened, while about 80% in Europe were operational [52] - Retail was up about 35% worldwide since the beginning of May [53] - The North American three-wheeled vehicle industry was down low 30%, with the company down low 40% [24] Company Strategy and Development Direction - The company announced the discontinuation of outboard engine production to refocus on higher expected returns and sustainable projects [9][13] - A global supply agreement with Mercury was established to secure access to engines [13] - The company aims to adapt its growth objectives to the new reality post-COVID-19, focusing on e-commerce and consumer behavior changes [49] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about the future but expects to navigate through uncertain times while investing for long-term growth [9] - The company anticipates a challenging second quarter with revenues expected to decline by about 40% [43] - There is uncertainty regarding the timing of recovery to fiscal year 2020 levels, but management believes in the strength of their market position [97] Other Important Information - The company implemented cost mitigation measures resulting in overhead savings of up to $450 million for the year [8] - A non-cash impairment of $171 million was taken for the marine business due to challenging industry dynamics [37] Q&A Session Summary Question: Retail trends into May - Management noted that about 90% of U.S. dealers are reopened, with a positive retail trend of about 35% worldwide since early May [52][53] Question: Production ramp-up - Production in Mexico is set to restart on June 1, with expectations of full operational capacity in three factories [55] Question: Operating costs and overhead savings - The company plans to reduce expenses by up to $450 million, with some savings expected to be structural due to the discontinuation of the outboard engine business [57] Question: Annualized revenue and margin profile of the engine business - The engine business was nearly breakeven, with a market share in the mid-single digits [61][63] Question: Demand for outdoor recreational products globally - Management indicated that the timing of COVID-19 impacts varies by region, affecting retail recovery in markets outside North America [68] Question: Future investments in e-commerce - The company is reallocating IT investments to enhance e-commerce capabilities without significant capital expenditure [90] Question: Impact of the outboard engine business on EPS - The discontinuation of the engine business is expected to improve EPS by approximately $0.60 to $0.70 [79][98]