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Introduction & Market Context
BRP Inc . (TSX:DOO) presented its first quarter fiscal year 2026 results on May 29, 2025, revealing a complex financial picture as the powersports manufacturer navigates challenging market conditions. The company reported an 8% decline in revenue while simultaneously achieving a remarkable 279% increase in net income compared to the same period last year.
The quarter was characterized by BRP (NASDAQ:DOOO)’s strategic focus on reducing network inventory levels, which dropped 21% year-over-year in North America. This approach appears to be positioning the company for more sustainable operations amid volatile market conditions and tariff uncertainties.
Quarterly Performance Highlights
BRP’s Q1 FY26 financial results showed significant contrasts between reported and normalized figures. While revenue decreased 8% to $1.85 billion from $2.00 billion in Q1 FY25, net income surged to $161.0 million, representing a 279% increase from $42.5 million in the prior year period.
Diluted earnings per share followed a similar pattern, increasing 291% to $2.19 from $0.56 year-over-year. However, normalized diluted EPS, which excludes certain one-time items, decreased 70% to $0.47 from $1.58 in Q1 FY25.
As shown in the following financial highlights chart:
The company’s normalized EBITDA decreased 35% to $201 million, while free cash flow generation increased 40% to $162 million. Management indicated that the Q1 financial results were in line with expectations as the company focused on right-sizing network inventory levels.
Detailed Financial Analysis
The financial overview reveals the extent of BRP’s mixed performance. Gross profit decreased 24% to $394.8 million, while operating income fell 51% to $93.9 million compared to the prior year period.
The substantial difference between reported and normalized figures appears to be related to one-time items, as detailed in the reconciliation tables provided in the presentation. This explains how net income could increase dramatically while normalized metrics declined.
The following chart provides a comprehensive view of BRP’s financial performance:
Free cash flow from continuing operations increased to $162.0 million from $120.7 million in Q1 FY25, representing a 34% improvement. This positive cash flow generation occurred despite challenging market conditions, suggesting effective working capital management.
Product Line Performance
BRP’s performance varied significantly across its product categories:
Year-Round Products, which include Side-by-Side Vehicles, All-Terrain Vehicles, and Three-Wheel Vehicles, saw revenues decrease by 4% to $1,106 million. This segment was impacted by lower volume and unfavorable product mix in Three-Wheel Vehicles, partially offset by favorable mix in ATVs and SSVs.
The product line breakdown shows:
Seasonal Products experienced a more substantial decline, with revenues dropping 22% to $419 million from $535 million in Q1 FY25. Despite this revenue decrease, the company highlighted that snowmobiles had another solid season, with Ski-Doo and Lynx snowmobiles ending the season as #1 worldwide. Spring booking units were up over 50% compared to last year.
In contrast, the Parts, Accessories & Apparel (PA&A) and OEM Engines segment showed growth, with revenues increasing 5% to $322 million. This increase was attributed to higher volume of snowmobile parts following a strong end of season. PA&A network inventory was down 11%, aligning with the company’s overall inventory reduction strategy.
Regional Performance
BRP outperformed industry trends in most regions during Q1 FY26. In Canada, BRP’s retail sales increased 21% compared to industry growth of approximately 10%. The United States saw BRP retail sales increase 6% against industry growth in the low-single digits.
The company achieved even stronger relative performance in international markets. In EMEA (Europe, Middle East, and Africa), BRP retail sales grew 22% compared to industry growth in the mid-teens. Latin America saw 18% growth for BRP, while Asia-Pacific retail sales increased 13% against industry growth in the low-single digits.
The following chart illustrates BRP’s global performance:
In North America specifically, BRP’s performance varied by product line. The company outperformed the industry in snowmobiles with growth in the low-80% range compared to industry growth of high-60%. However, Three-Wheel Vehicles and Personal Watercrafts experienced declines in the high-20% and mid-20% ranges, respectively.
Strategic Initiatives & Outlook
BRP is navigating several strategic challenges and opportunities. The company is closely monitoring the tariff situation, noting that all vehicles manufactured in Canada and Mexico are USMCA compliant and exempt from US tariffs. However, tariff exposure remains for PA&A and Tier 2 suppliers, with an estimated impact of $60-70 million in FY26.
For Q2 FY26, BRP is planning further network inventory reduction and expects performance similar to Q1. Looking ahead to the second half of FY26, the company plans to right-size network inventory to better align with retail, and anticipates new product introductions at its August Dealer Event.
Given the volatile operating environment, BRP has not issued formal guidance for FY26, indicating that potential demand and financial performance remain uncertain amid volatile macroeconomic conditions.
On a positive note, BRP’s Design and Innovation team received the honorary title "Red Dot: Design Team of the Year 2025," a prestigious recognition previously awarded to companies like Apple (NASDAQ:AAPL), Ferrari (BIT:RACE), and Porsche. This accolade underscores BRP’s commitment to innovation despite challenging market conditions.
In its closing remarks, management emphasized that BRP is well-positioned to manage through the challenging environment, having proactively reduced network inventory and improved organizational agility. The company is doubling down on its Powersports business while divesting its Marine operations, demonstrating a strategic refocus on core strengths.
As BRP continues to navigate market uncertainties, its focus on inventory management, product innovation, and strategic positioning appears aimed at emerging stronger from the current challenging environment.
Full presentation:
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