BRP Stock

BRP Inc. engages in the design, development, manufacturing, distribution, and marketing of powersports vehicles and marine products worldwide.

The company is a diversified manufacturer of powersports vehicles, propulsion systems and Marine Products, providing enthusiasts with a variety of exhilarating, stylish and powerful products for all year-round use on a variety of terrains and providing access to adventures and experiences across different playgrounds.

The company is a brand of choice for true powersports and boating enthusiasts. BRP’s products are recognized by stunning designs, powerful and efficient engines, and the incorporation of advanced technologies that drive industry-leading performance. BRP aims to continuously enhance the consumer experience through new features and models in a variety of ways, including enhancing rider ergonomics, adding safety features, enhancing engine performance and reducing environmental impact.

The company’s diversified portfolio of brands and products includes, under the Powersports segment, Year-Round Products, such as Can-Am ATVs, SSVs and 3WVs, Seasonal Products, such as Ski-Doo and Lynx snowmobiles, Sea-Doo PWCs and pontoons, and Rotax engines for karts and recreational aircraft, and under the Marine segment, Alumacraft, Manitou, Quintrex, Stacer and Yellowfin boats, Rotax engines for jet boats and Rotax S outboard engine with Stealth Technology. Additionally, the company supports its line of products with a dedicated PA&A business to fully optimize the riding experience.

The powersports industry is consisted of several product categories. The majority of powersports products are used for recreational purposes. Certain products, primarily ATVs and SSVs, are also used for utility purposes, such as for agriculture, construction, and other commercial applications. BRP competes in the ATV, SSV, snowmobile and PWC categories (which includes the recently introduced Sea-Doo Switch pontoons), in the three-wheeled vehicles category of motorcycles with the Can-Am Spyder and Ryker 3WVs and their respective PA&A businesses. BRP’s competition primarily comes from North American and Asian manufacturers.

The marine industry is composed of boats, marine engines and their respective PA&A businesses. BRP competes in the boat product category with the Alumacraft, Manitou, Quintrex, Stacer and Yellowfin boats and in the marine engine product category with the Rotax engines for jet boats and the all-new Rotax outboard engine with Stealth Technology.

Powersports and Marine Products are sold in more than 130 countries either directly to an established network of independent dealers or through independent distributors who act as intermediaries with their own dealers. Dealers and distributors are typically provided with marketing and after-sale service support, as well as training for service technicians. At the dealer/distributor level, competition is based on a number of factors, including sales and marketing support efforts, such as dealer/distributor inventory financing arrangements, dealer/distributor training, store redesign initiatives, flexible ordering systems, advertising and diversity in product offerings. Management believes that BRP’s Powersports and Marine Products, covering all seasons and, in the case of Powersports Products, multiple terrain applications, provide a compelling value proposition for its dealer/distributor network.

BRP Brands and Products

The company has the following 4 main product categories:

Powersports - Year-Round Products

Year-Round Products consist of BRP vehicles that are sold and used throughout the year in most climates and include the ATV, SSV and 3WV product lines. All products within the Year-Round Product category are sold under the Can-Am brand. Can-Am ATVs, SSVs and 3WVs all leverage BRP’s renowned Rotax engines.

ATVs

ATVs are four-wheel vehicles used for recreational and utility purposes in all four seasons of the year. Seats are designed to be straddled by the rider who steers using handlebars. ATVs can be broken down into four main categories: sport, recreational-sport, recreational-utility and youth.

The primary manufacturers of ATVs include BRP, CF Moto, Honda, Kawasaki, Polaris, Suzuki, Textron and Yamaha. Certain Chinese and Taiwanese manufacturers also produce ATVs, but primarily focus on entry-level products, which are not included in the industry data.

The Can-Am ATV line-up targets a broad range of consumers within the recreational-utility, recreational-sport, sport and youth sectors. The company offers a total of 77 models, including youth models and six-wheel ATVs.

SSVs

An SSV is driven much like a car, using a steering wheel and pedals, is equipped with seat belts and rollover protection bars and sits the driver and passenger side-by-side. Certain models also include one or two rows of additional seats to accommodate up to six passengers. SSVs can be divided into two categories: recreational SSVs, which can be sub-divided into three main groupings: sport, recreational-utility, and utility-recreational; and utility SSVs. The utility category of the SSV market remains strong, but in the last decade the SSV market has been transformed by the introduction of vehicles designed primarily for recreational purposes. Both existing and aspirational powersports consumers are drawn to recreational SSVs in large part by their enhanced functionality, innovation and differentiated riding experience. In recent years, several consumers have shifted from ATVs to SSVs.

The primary manufacturers of recreational SSVs are BRP, Honda, John Deere, Kawasaki, Polaris, Textron and Yamaha. The company’s share of the global recreational SSV market in season 2022 reflected a number two market share position based on management’s estimates.

The primary manufacturers of utility SSVs are Bobcat, John Deere, Kawasaki, Kubota and Polaris.

The company offers one of the widest and deepest line-ups of the SSV market with 78 models.

3WVs

BRP’s Can-Am Spyder and Ryker vehicles are non-traditional three-wheeled vehicles (with two wheels in the front and one in the back) designed to be driven on paved roads, highways and gravel roads. While many jurisdictions have implemented distinct licensing requirements for three-wheeled vehicles that are generally less expensive, demanding and lengthy to obtain than for traditional motorcycles, certain jurisdictions still apply the same licensing requirement for the Spyder and Ryker 3WVs as for traditional motorcycles. Other jurisdictions require only an automobile driver’s license.

BRP’s Can-Am Spyder and Ryker 3WVs compete for consumers against three-wheeled vehicle manufacturers such as Harley Davidson, Polaris, Piaggio and Yamaha. Management believes that, in addition to the traditional motorcycle consumer, the Spyder and Ryker 3WVs open-air experience, styling, performance and stability appeal to consumers that would not have considered buying a motorcycle. With their Y-shape architecture, vehicle stability system (‘VSS’) and semiautomatic or automatic transmission, management believes that the Spyder and Ryker 3WVs offer greater stability and overall ease of use for a broad range of riders of all skill levels.

The Can-Am 3WV line-up is consisted of 12 models.

Powersports - Seasonal Products

Seasonal Products consist of BRP products that are mostly used in specific seasons. These products include snowmobiles, which are mainly used during the winter season with sales to dealers concentrated in the months of September to January, PWCs and pontoons, which are mainly used during the summer season with sales to dealers concentrated in the months of January to June in North America. BRP leverages its Rotax E-TEC and ACE engine technologies to produce snowmobiles and watercraft that are recognized as being among the most fuel-efficient in the market.

Snowmobiles

Snowmobiles are used in various snow-covered riding environments, including on- and off-trail for deep snow, trail, performance, touring and utility purposes. On-trail models have high engine displacement and are generally used on groomed trails. Off-trail models, such as cross-over and deep snow snowmobiles have high engine displacement and are known for their lighter weight and longer tracks. Utility snowmobiles are easier to handle and are generally used for work-related purposes. The primary manufacturers of snowmobiles are BRP, Polaris, Textron and Yamaha. The company holds the leading market-share position of the global snowmobile market.

The company produces 145 different key models of snowmobiles, including youth models, categorized as on-trail models (touring, sport, cross-country and youth), on/off-trail models (cross-over) and off-trail models (mountain, utility). These models, addressing the needs of all consumer sectors, are grouped into 19 product families and marketed under two different brand names, Ski-Doo and Lynx. BRP snowmobiles are sold primarily in North America under the Ski-Doo brand and in Europe (and Russia prior to the suspension of sales) under the Lynx and Ski-Doo brands. In 2021, the company started selling snowmobiles under the Lynx brand in North America.

PWCs

PWCs include sit-down and stand-up models and are used on lakes, rivers or oceans. PWCs are designed to accommodate one to three riders and are used primarily for recreational purposes, with a small proportion being used for utility purposes such as marine patrol and rescue. PWCs can be divided into eight primary categories: Rec-Lite, Recreation, Touring, Performance, Tow Sports, Sport Fishing, Adventure and Stand-up.

The primary manufacturers in the PWC market are BRP, Kawasaki and Yamaha. The company holds the leading market-share position of the global PWC market.

The company produces a full line of PWCs consisting of 38 models marketed under the Sea-Doo brand name, which allows it to compete in the main PWC product categories.

In 2022, the company introduced Switch pontoons as a new product offering under the Sea-Doo brand. The Sea-Doo Switch offers a modular design made of tiles that can be re-configured easily; it is powered by a Rotax jet propulsion engine and is maneuvered by a handlebar steering system, and is sold via Sea-Doo dealers. The Sea-Doo Switch comes in two upgrade package options: the Cruise and the Sport, with lengths ranging from 13 to 21 feet. The company offers a total of 11 models.

Powersports - PA&A and Rotax Engines

Powersports PA&A

BRP sells a broad range of Powersports PA&A to complement each of its product lines, providing a stable revenue stream with high profit margins, along with increased brand exposure. PA&A products enhance the overall consumer experience and lifestyle associated with powersports products.

The parts sold by BRP include consumables (e.g. oils, lubricants and cleaning products), wearable components (e.g. brake pads, tires and transmission belts) and replacement parts (e.g. pistons, clutches and suspension components). BRP’s expertise also served to develop some of the lubricant and care products that it sells, including the XPS line of products, which have been engineered to prolong the life of vehicles and are tested on engine platforms and other applicable components of powersport vehicles.

The accessories include, for example, bumpers, windshields, rims, winches, passenger seats, covers, racks and cargo boxes. Certain accessories sold by BRP have also been designed and developed by BRP, including a tool-less system for near-instant installation of accessories named LinQ. The accessories designed with the LinQ system offer a sturdy and easy installation experience.

BRP intends to create an unparalleled riding experience by delivering technical riding gear and sportswear that promote its Lynx, Sea-Doo, Ski-Doo and Can-Am brands, among others, and enhances the adventure of riding. BRP’s riding gear and sportswear portfolio includes a range of products, such as shell jackets, insulated jackets, technical riding pants, gloves, boots, and helmets, as well as hoodies, t-shirts and caps.

BRP designs the vast majority of its PA&A. The parts and accessories are developed alongside the vehicles. They are subject to the same testing and validation processes as the vehicles, resulting in superior assembly, installation and fit. The company’s apparel line-up prominently features its brands. Management believes that BRP’s PA&A offering is a key influencer in the consumer’s purchase decision of a new vehicle, thus providing the company with a competitive advantage.

Rotax Engines

With their recognized performance, fuel efficiency and emissions profile, Rotax engines represent a core component of BRP’s industry-leading product performance. They power Can-Am ATVs, SSVs and 3WVs, Ski-Doo and Lynx snowmobiles, Sea-Doo PWCs and pontoons. Rotax engines are also sold to distributors and OEMs that manufacture products to be used for civilian recreational purposes and that are not in direct competition with BRP products. When sold to such third parties, the engines are used to power karts, small recreational aircraft and fire pumps. BRP has developed a comprehensive line-up of compact Rotax engines with engine specifications varying from one to four cylinders, 2-stroke and 4-stroke.

Most of BRP’s powersports competitors power their vehicles with engines they manufacture themselves. For kart engines, the main competitors are IAME, TM Racing and Vortex Engines. For motorcycle engines, the main competitors are Honda, Kawasaki, Triumph and Yamaha. For small recreational aircraft engines, the main competitors are Continental Motors and Lycoming.

Marine – Boats and Engines

Boats

Recreational boats include rigid inflatable boats, pontoon, deck, bowrider, cruiser and fishing boats.

Recreational fishing boats can be divided in two categories: fishing boats mostly used in offshore salt water, that are generally at least 25 feet long; and fishing boats mostly used in fresh water, that are generally less than 23 feet long. The vast majority of fishing boats are powered by outboard engines. Fishing boats mostly used in fresh water are made of either fiberglass or aluminum. The company’s Alumacraft fishing boats are of 21 feet or less, generally used in fresh water, in aluminum and are generally outboard powered. The company’s Quintrex, Stacer and Yellowfin fishing boats range from 7 to 23 feet long, used in offshore salt water and made of aluminum.

Pontoons are leisure boats made in aluminum, almost exclusively used in North America on fresh water, and are generally outboard powered.

Bowriders are generally designed for recreational use such as day cruising or watersports, and come in a variety of styles. They range between 16 to 28 feet long, use jet propulsion, stern drive, outboard or inboard engines and carry anywhere from 6 to 10 passengers. The company’s bowriders, which are made of aluminum only, are sold under the Quintrex, Stacer and Yellowfin brands.

BRP’s competition in the boat industry primarily comes from North American manufacturers, such as Bass Pro Shops, Brunswick, and Polaris.

Marine Engines

Marine propulsion systems for recreational power boats are consisted of outboard engines and inboard engines. They are generally sold to independent boat builders that in turn resell the engines and related rigging as part of a boat package, and to independent dealers and distributors. Outboard engines are designed to be affixed to the outside of a boat transom and tend to be lighter, less expensive and more easily replaceable than inboard engines. Inboard engines are designed to be integrated within the boat by the boat builder as part of the production of the boat.

For inboard engines, the primary manufacturers are Brunswick and Volvo Penta for stern drive propulsion systems, and BRP and Yamaha for jet propulsion systems. Management estimates that demand experienced some growth in recent years for inboard engines.

BRP manufactures Rotax inboard jet propulsion engines, which offer boat builders an alternative for traditional inboard sterndrives and other inboard engines.

Since May 2020, the company has discontinued its production of Evinrude E-TEC outboard engines, but it continues to sell Evinrude service parts. However, it continues to sell boat packages to its dealers and distributors, through arrangements and relationships with outboard engine providers, including Mercury Marine, Yamaha, Suzuki and Honda. In August 2022, BRP introduced the new Rotax S outboard engine with Stealth Technology, which the company offers as fully integrated into its Manitou, Alumacraft and Quintrex boats, allowing for stunning designs.

Strategic Priorities

In 2020, the company announced a strategic 5-year plan referred to as Mission 2025, which was implemented in 2021. Mission 2025 intends at ‘Setting the Course for BRP 2.0’ by creating and establishing the winning conditions for the company to be able to proceed to the next chapter as a global leader. The main objectives and priorities of Mission 2025 consist in building an improved lean enterprise model focused on efficiency, integration and smart solutions, placing the customers at the heart of all aspects of the company and delivering excellent employee experiences.

Research and Development

In the year ended January 31, 2023, investments by the company in research and development activities represented approximately $367.7 million.

Distribution, Sales and Marketing

Distribution and Sales

BRP has established an extensive global distribution network selling products, directly or indirectly, in over 130 countries. As of the date hereof, BRP sells products directly to approximately 2,600 dealers in 21 countries. In certain geographic markets, the company prefers to leverage a network of distributors acting as intermediaries with dealers. Through its network of approximately 150 distributors, BRP sells products to approximately 350 additional dealers. In China, the company distributes products through a joint venture with Smooth Marine Equipment Ltd., its long-time distributor in China, and BRP has a majority ownership stake in this joint venture. The company also has an office in Texas, the U.S. for management and staff forming part of the sales, marketing, dealer services, finance and human resources functions of the company. In Russia, through the establishment of an office, products were sold directly to dealers, however since March 2022, in light of the geopolitical instability around the military conflict in Ukraine, the company ceased the export of its products to Russia.

The company delivers its products to dealers and distributors either directly from distribution centers and warehouses strategically located, which are operated either by the company itself or by third-party logistics providers.

The company operates a build-to-order process under which it manufactures products based on dealer and distributor orders. It also manages a sales and operations process through which it adjusts production schedules on a weekly or monthly basis to precisely tailor production to incoming orders and market conditions. The company produces its Powersports Seasonal Products, namely its snowmobiles and PWCs, before and early in their respective seasons of use, while it produces its Powersports Year-Round Products and Marine Products, namely its ATVs, SSVs, 3WVs and boats, year-round.

The company regularly holds dealer and distributor meetings to introduce new products and register pre-season orders. Dealers and distributors also have the opportunity to modify their orders during the season, either quarterly, monthly or on an ongoing basis, depending on the product line and the geography. The distribution network for Seasonal and Year-Round Products is relatively stable and consists of a majority of dealers and distributors with whom BRP has enjoyed a longstanding relationship. The Rotax inboard jet propulsion engines are distributed exclusively through boat builders. The Alumacraft and Manitou boats are distributed mainly through a network of dealers in the United States and in Canada while the Quintrex, Stacer and Yellowfin boats are distributed through a network of dealers in Australia.

Dealers’ and Distributors’ Inventory Financing Arrangements

BRP has agreements with large financing companies in North America, Europe, Australia, New Zealand and Latin America to provide third-party inventory financing to its dealers and distributors in order to facilitate their purchase of the company’s products. These agreements improve BRP’s liquidity by financing dealer and distributor purchases of products without requiring substantial use of the company’s working capital. A significant percentage of BRP’s sales are made under such arrangements.

Marketing

BRP intends to deliver best-in-class customer experiences. BRP seeks to drive consumer loyalty and ambassadorship by focusing on consumer experience and collaborating with its dealers and distributors. The company has implemented several initiatives to expose thousands of consumers each year to the excitement and energy of the Powersports and Marine community, including through brand communications, physical and virtual experiences and high-quality product trials. In fact, in 2022, BRP was named Brand of the Year by Strategy magazine for moving from selling products to enabling its riders through experiences. The company’s digital factory leverages its websites, Customer Relationship Management platforms and social media properties to drive excitement, showcase the community, and provide customers with the information they are looking for.

Seasonality

Some of BRP’s product lines, such as snowmobiles, PWCs and boats, are seasonal. However, certain of these products are also sold during offsetting seasons, reducing the overall seasonal impact on the company. Additionally, BRP’s 3WV, jet boat engines, ATV and SSV products are less subject to seasonal weather patterns than snowmobiles, PWCs and boats.

Intellectual Property

Patents

As of January 31, 2023, the company held more than 1,870 issued patents and pending patent applications to protect its products, designs and technologies, in jurisdictions, including the United States, the European Union, Canada, China and Russia, among others.

As an example, the company’s intellectual property portfolio includes patents and applications relating to its ATV and SSV Ride Control technologies, Can-Am 3W VSS and Ryker Drivetrain technology, the Sea-Doo PWC iBR brake system and Shark Gill design, the Sea-Doo Switch Modular Deck and Tri-Hull design, the Ski-Doo Gen 5 chassis technology, the Ski-Doo 2 stroke turbocharged engine technology, the Ski-Doo SHOT starter, the Rotax Electric Kart Direct Drive technology, Rotax outboard engine with Stealth technology and the LinQ technology.

Trademarks

The company holds numerous registered trademarks in respect of its brands, including Alumacraft, BRP, Can-Am, Lynx, Manitou, Quintrex, Rotax, Sea-Doo, Ski-Doo and Stacer. It also holds registered trademarks with respect to its various model lines, including Aurora, Commander, Defender, Expedition, Fish Pro, Freeride, G2, Maverick, MX-Z, Renegade, Rave, Ryker, RXP, RXT, Skandic, Spark, Spyder, Summit, Switch and Traxter, and additional registered trademarks with respect to certain of its technologies, including 4-TEC, BRP Connect, BV2S, E-TEC, iBR, iCatch, iControl, iS, Learning Key, LinQ, Radien, REV, V-Toon, and XPS.

Regulatory Matters

The company is subject to extensive laws and regulations at many steps in its chain of conception, production and distribution of products.

The company’s products are subject to extensive laws, rules and regulations relating to product safety promulgated by the governments or regulatory authorities of Canada, individual Canadian provinces, the United States, individual American states or other countries. These requirements pertain to the conception, production and distribution of BRP’s products.

In addition, the company is a member of several industry and trade associations in Canada, the United States, and other countries whose mandate is to promote safety in the manufacture and use of powersports products. Some of those trade associations promulgate voluntary industry product safety standards with which the company complies.

The company’s products are subject to sound and gaseous emissions laws, rules and regulations promulgated by the governments and regulatory authorities of Canada (Environment and Climate Change Canada), the United States (Environmental Protection Agency), individual American states (such as the California Air Resources Board), the European Union and other jurisdictions.

The company is also subject to environmental laws, rules and regulations pursuant to which, among other things, it may become liable for the costs of investigating, removing and monitoring any hazardous substances found in its manufacturing and other facilities.

History

The company was founded in 1937. It was incorporated under the Canada Business Corporations Act in 2003. The company was formerly known as J.A. Bombardier (J.A.B.) Inc. and changed its name to BRP Inc. in 2013.