PII - Earnings call transcript Q3 2018

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Operator

Good day, everyone, and welcome to the Polaris 2018 Third Quarter Earnings Results Conference Call. [Operator Instructions]. And please note that today's event is being recorded. I would now like to turn the conference over to Richard Edwards, Head of Investor Relations. Please go ahead.

Richard Edwards

good and Will, you, morning, everyone. Thank for earnings conference you joining us quarter third XXXX our call for Thank this morning. A for at has slide our website at accessible presentation www.ir.polaris.com, additional this information call. morning's is which be will Executive Chief Mike Chairman and you Scott Wine, hearing Today, Officer; Financial Chief our our Speetzen, and from Officer. remarks

differ for projections of we Private Securities of the will call, topics, XXXX. the purpose results discussing various those which Reform the Act materially should forward-looking statements. During be be in Actual could considered from forward-looking Litigation

can detailed refer and to a You our XXXX discussion uncertainties. for XX-K more risks of these

Additionally, at all an XXXX adjusted quarter end for presentation the Reg Please to actual on updated unless basis, results our otherwise noted. of adjustments. this references and to GAAP third non-GAAP refer the reported schedules guidance non-GAAP reconciliation are to XXXX G

Now Wine. turn Scott to Scott? our I CEO, it will over

Scott Wine

customer during levels year prior solid midsized with in at progress, a retail up compare way. at quarter. we core vehicles business spurred and the The PG&A and our were proven few paid to from of strong sales demand traffic for and a obstacles on. 'XX Good is for Thanks, leading X% retail word people, with versus so new tool the goes challenges, customers a Holdings plus consumer thank quarter Opole cost, I effort tribute is a of period, is integration the on tirelessly to improved email in by availability slightly joining while our for but the like, that Parts team an inventory a model tariffs, Richard. on in our months able offset. comes logistics we Innovation the the Boat limit the headwinds. dealers, third tariffs. impact motorcycles years focus our strength quarter. benefits, with orders and something increase and driving while as drove third with spending sent read: we like morning sales year morning, recently protection, to different dealer North are in the XX% Transamerican the increases the comparison to is and the against off we and growth the the simply unexpected promotion. list deliver process quarter, describe RANGERS positive year usually in different and normally methodology product commodities things tariffs, not were subject profitability their revitalization first third were results plant is us. benefits the American strategic International growth you slower healthy dealer our Auto that represents afforded sales but The in profitability. boosting working than employees had The is economy in overcoming business, that progress, we and making our Indian tariffs celebrate optimized we and that the prior and will not determination albeit would throughout cost, less Polaris. largest saw this But many we've maintaining continued A our corresponding outperformed

measuring. increases industry down, on-time delivery cost We also due RFM powersports since was American overall side-by-side kept to performance leveraging motorcycles in ATVs. our market, The deliver best to logistics primarily weakness began our well below North and while we

and Bennington competitor, to amid dealer for boats. working return customers. surpassed demand growth are encouraging industry third history midsized ORV Our to building posted Slingshot weakness in look mid-XXXX the demographic in strong quarter. these first to in was Even with was while growth gain their extremely to GENERAL well, up retail by Scout perform bikes quarter until promotions and and efforts, to single lifelong for into seeking modest and to unprecedented particularly which is those Slingshot. with in again offsetting and we bikes. and led time Authenticity product days, for down we to are saw low new retail lines riders strength our we traction a RANGER heavyweight digits do and the our share the September Indian continued XX% expect forward important Indian with marketing in to younger declines market partnerships we brands hard for attract. not grassroot Bobber

only ago flat newly story sense. success, on years the and engineers the always. riders absence winning they The launch made heart our several racing flat bike one complements in an XXXX FTR FTR popular too least fast-growing Indian With far new racing with Germany as holding and authentic is shows It team after racer track the decades. Cologne, almost motorcycle to as world, the bikes many INTERMOT, our segment. U.S., Indian conjunction by Motorcycle so racers this Indian FTR and reentered is an with when most of took But and perfectly rich started at in be as a circuit midsized the Our likely the spanning rebuilt our largest standard Europe the in track launched possible. designed the the legend track to way in heritage in first

never about nearly credentials X-year joined and our championships, a me way racing series man the bike. by I upstaged better those undisputed. Jared a track races both XX out are to FTR rider, his the stage consecutive XX winning on being Mees, of on launch have and flat XXXX top felt with and of our to record XX% With Jared of wins races

issue, but this already finding of our My spending given the not requires the and on new authentic I production great team until buzz shipping pitch. Indian spring, bikes deal and the time are the begin a fastest complexity will and reaching world's around tariffs. fever of We countermeasures implementing efforts. a size, is best importance But

it mitigate obtain three impact list so believe objective is understand taking pricing efforts actions. unlikely fall the relief our effective hold short- the aggressive agreement business, with considering will be been and substantial potentially and much Despite on a and trade there we or XXX on our advocacy, fairer these categories; we from of with firmly the medium-term XXX now I with and are actions and discussion administration or far support Through being largely either recent largely impact. freer and negotiation, previous As more of million. China. issues, to trade us $XX Those into gross allowing primary goal achieving we tariff earlier, to significant analysis, communicated China XXXX stated impact to tariff the its mentioned the with impact looming, have

rewrite fully understand pay the sure absorb of most a of But new on China Polaris that are fair and Polaris. pushing we neutral will our American we costs. tariffs. who expect not We The other have their Chinese and the since Americans through back successfully NAFTA suppliers, portion to ones USMCA more reasonable share important suppliers tariffs. cover do, that these who negotiations companies are to to be our negotiated we believe agreement are the I'm with

bear domestic Our similar. the these approach Polaris of not with full will suppliers is tariffs. burden

suppliers XXX the suppliers, not raise tariffs direct did because the of buy predominantly from metals prices. impact to we was use these substantial, aluminum steel the these opportunity While U.S.

of through with these our and prices offset List suppliers. partially have increases as well as XXX adjusting own X We negotiating

for manufacture much Polaris disproportionately gets with in an administration's our relief much the However, due consider avoid are our portion for we to tariffs. because that our addressing on more our to tariffs compelling a X a stronger. task, have exemptions. List cover seeking XXX XXX relief and When also major modeled customers, to competitors you price that severe reasons intentions, focused much we the to situation, path more this believe the which of being where outlier XXX and of United makes so by of is unintended repercussions our foreign-based accidentally consider we impact the offers on tariffs, argument largely just the disparate but fair primarily daunting punished States, We from a Polaris case

we strong our tariff commitment to seeking team to tariffs, precedence we productivity different to incentives, on so competitive solutions, actions takes side not and capable a With short-term sidestep constructive that successfully manage this. behavior, will encourage expect and Our impact. facts over despite take through

of turn and Speetzen, for produced the We vehicles very have in tariff majority the avoid to our CFO, financial that, for States, and I our we'll are strongly doing so. details penalties proud Mike it over additional to United seek to insights. With will

Michael Speetzen

would impact portion quarter tariff Scott, warranty, pleased combination lower third We're growth, a and delay costs quarter. with a results solid promotional in and costs which driven good Thanks, the our anticipated lower sales a we'd morning. that of by of third the were

prior growth performance, of shipments on from year. Adjusted well better several which $X.XX. higher demand. organic sales basis quarter, X% quarter GAAP GAAP on points and Markets, XX% Global our PG&A Earnings International adjusted the Both Third a X the contributed the Adjacent of share a continued were per up by and third growth, versus driven for was amount XXXX. were slightly as earnings and was strong by while $X.XX, basis, earnings retail was as QX. ORV, share shipments was small of anticipated drove The per originally first, per that retail income share factors: QX for credit better XX% up improved performance a driven approximately

expected originally $X costs I costs anticipate price In the portion earlier, And lower approximately performance tariff these of of some due third taxes incurred to push due count given than a in timing. lower into lower QX. favorability. million lastly, share and addition, mentioned expected slightly share provided to dilution lower quarter We do as we to

earlier, outlook levels we and retail inventory profile appropriate are dealer current targets. given indicated Scott As dealer our believe

dealer than our was end desired, dealer inventory which If lower of the every in time. you the much about XXXX just survey recall, conducted at was highlighted at QX

the about total retail an QX It's up ORV dealer recognize to period XX% volatility year-over-year with XX% deliveries, represents inventory, the is over meaningful which dealer year XXXX. given time. was against performance experienced to in inventory, it of compare that important last shipment extended Our more we of performance

see from lower are ORV You at the when look couple on of years. levels that you the flat right the dealer can essentially inventory chart last

Shipment were in alignment. same Retail XX-month North company's America for and that During performance trailing period,

be larger this abnormalities for at in in a viewed to allows a context. period given Looking extended quarter any

that of from and getting through our survey certain dealers we're are adequate levels requesting feedback increased the models. in fact, indicates our inventory some dealers quarterly the Additionally, are shipments

now Finally, established dealer to RFM requesting almost place And been and with line in ship for profiles would the remind for we year are close conjunction dealers. inventory agreed-upon in above in advance. levels our with the cannot that stocking I has in you without a side-by-sides profile being

adjusted with gained momentum basis model RANGER lineup. third XXXX demand QX Moving by year-to-date models. our pleased were the during quarter to ORV ORV and X% from our were new strong basis, a flat new with segment and XP ORV driven share the ORV/Snowmobiles share we in ATVs for vehicles side-by-side's sales share gaining a particularly segment year GAAP On the Demand up quarter, on worldwide. year strong a the with ago. We're 'XX seeing we're new in performance.

As were sales and on in basis as and North in year-over-year compared fourth down bikes logistics Indian majority greater riders the to despite offset warranty. from ongoing quarter. shipments quarter profit the were during brand are for by the the limited unit and to a new gained the shipped to tariffs, a gross promotions bringing category. sales QX. midsized new sellable was last somewhat of snowmobiles negative was due the the year in a QX as quarter. in continued down to again vehicles a quarter the presold primarily which down timing anticipated, basis which GAAP a the pressure our was were when per year spend during lower our for Snowmobile a in proportion market by in drive promotional during to impacted down effective promotional products lower due Adjusted retail commodities market, well the share use margins second sales sequentially to and recall success negatively low-teens spending Slingshot is and growth Chieftain of modest on about the flat as segment and from of to percent Indian more from impact the Limited, the American new which bagger ORV/Snowmobiles expected of continued a adjusted driven quarter. motorcycle weak QX, basis, a quarter this weak as of by on about mix Motorcycles Motorcycle overall due market, ship

As portfolio, than our continued has the lower during heavyweight expected, the our average selling which price motorcycle quarter, our bikes. of ASPs declined reflecting midsized strength

primarily adjacent the on Polaris are which the brands, with volume offset businesses XXX. accessory business-to-business motorcycle due mix, demand declined Adjusted in growth Southwest. truck sales The GAAP third North X% in orders. driven Global and synergies the promotional up & on lineup. the gross include driven headwinds. margins to year-over-year, sales basis positive. realized, KLIM, and and quarter a gross Aftermarket offset than X% somewhat by strong adjusted volume and and sales experience Armor, new market preseason continued were The by Adjusted Adjusted in sales Jeep sales segment and Adventures. logistics by gross other Tech third and increased increased lower for to up XX% increased profit as were the and growth Government Kolpin, in being quarter, Pro aftermarket and continued impacted driven for increasing delayed accessories warranty very our was America primarily improved costs. the by now strong XX% and a are We weakness in up motorcycles mix has tariff GAAP driven primarily outside Defense by adjusted they continue costs, by commodity and feedback and snow growth South TAP Trail driven improvements. basis, X% initial in tariff our Commercial, more margins been launching and by segment, and development are our Scout mix by in driven international which margin

which Our than we XX% segment, QX. forma in reported better Boat July million, of our On a new acquired boats X, slightly $XXX were on pro which sales expectations. year-over-year basis, is up

is business, gross profit on insurance will was margin the We've processes, Boat data track. plans, to by progressing expectations. a for and quarter modeling of of financial a website line Holdings continue cetera, Adjusted historical as view profit purposes. distinct in our provided While on investor our Holdings run Boat integration et sales for gross with

International Our The region XX%, from unfavorable you the EMEA growth continues up sales sales up in XX% during a to continued in the prior product share increased quarter. down the with sales strong up and its performance in impact slightly the was market slightly year. gains continued all up America Motorcycles. when in Latin strong remove standpoint, compared business Asia segments Pacific currency. From approximately sales Indian trends quarter XX% with and QX the

by and Garments primarily X% quarter, and increased sales growth. Our Parts, Accessories during the accessory driven strong ORV

slightly have previous strategic we're guidance, services single and is to previous dilution Financial by is to sales, expected guidance investments EPS due than move rates previously as in me repurchases now to full during to guidance for to to be XXXX range decrease also lower the of now XX expenses to of digits, operating lower high is of expected than We're lower and million guidance down are to margins Adjusted improved full points, performance. quarter up shares approximately let the expected XX% Share percent increase Adjusted which profit basis for XX% retail are from strong driven and year XXX,XXX versus expected X.X XX Now unchanged up the our range increase X%, share repurchased basis due points to be XXX a to year-to-date guidance. count sales issued $X.XX making. We now shares approximately from be penetration year which higher guidance. to is $X.XX. year-to-date. XXXX anticipated in impacts. into gross maintaining and previous repurchased our

authorization, the to board's expect the current in approximately We we and quarter the current shares million X.X in market be given the remaining shares fourth repurchasing share under have price.

Foreign exchange remain expense both and unchanged. interest

of the expected were XXX, points we compared successful gross with than this some Boat anticipate Turning to portion primarily was XXX gross XX profit note original X profit due costs by of mentioned X margin. were and to changed, to top P&L of not increase delay in begin with and XXXX XX basis tariff-related were into in comments than an excluding that team out portion On pushing warranty the were has anticipated, margins On through adjusted more List We've down mix, times commodity mind would start latest beyond. List gross addition the in total of the in to company. costs. which tariffs and basis to to the year, segment, of to to The tremendous the It's impact our offset We QX absorb without margins, back Improved were timing delayed half a gross the addition impact. basis, expense second because a promotional basis the the an quarter. better the of margins logistics of consistent XX.X%. tariffs as tariff QX that higher fourth the costs tariff lower This efforts coupled XXXX. the the XX.X% flowing the allowed to basis, points impact GAAP of and January last us they're impact will down and Polaris. that tariff, were QX of tariff margins to points of the acquisition, XX within to improve the guidance up put to the impact essentially cost primarily morning, tariffs because important Boat of the from for a QX the several impacts our

our guidance, margin percent As last different The as a originally total reduction XX basis points year. can to year-over-year entire than we see profile looks in by layering alluded company the driven come down anticipated, your which margin of through the our working result, a not any is is several tariffs countermeasures, we sales versus to year profit impact what's impact margins know providing of Scott XX while business. quantitative the to gross impact in for mean this XXXX? for and mind the still next, earlier. Boat tariffs we're as of We're as on the does what around maintain I guidance next

by changed in fourth Motorcycle lower more we heavyweight now down for the throughout Slingshot clarity follows: lower able profit sales our executing, higher not anticipate also our segments due aspects to expectations XX. discuss completely gross our gross margin profit to mix Motorcycle's tariffs driven warranty Gross and only plan we We January, profit call year-to-date Global low we're gross to expected year. and the digits, weak other as expect the be expectations expected the countermeasures on are expectations more and volume and strong XXXX. are to and sales but margin from provide Sales up single margin are being single to expected guidance to sales double are results. be follows: quarter up primarily digits, Aftermarket declined previous now given sales will year-to-date industry Slide changes for here of be The as be segment the shown now costs. driven due makes. ORV/snow low down the by at sales. the sales Markets' by is when Adjacent digits to low

of and needed inventory cash the changeover model timing the operating and third flow performance payments year-to-date as RFM. cash given higher was quarter accrual for Our of factory expected, execution down through year

still at turn well average operating thoughts. flow XX%, came With expectations unchanged for basis in for expected Boat we final to in over while ROIC is above the XX single of Our down competitor high cash range. and I'll the approximately Holdings and Scott some July. above back be average percentage over by capital, the down remains point just digit it cost driven that, to in our weighted of were acquisition outlook

Scott Wine

not Mike. perform still economy to mention initial recent will in and offer tariffs, Despite positive, motorcycle and we With the service retail industry to on industry. and powersports use Thanks, I offsetting the expect the year year rates We continued GDP we will this in some market another across ongoing comments XXXX. anticipate growth U.S. interest risks, my closing the backdrop staying increase anticipate portfolio, the growth Polaris on weakness with outweigh growth. to influences similarly and positive volatility, to the the thoughts industry of that continue. product ORV innovation

to quantify calibration of year's and number. next impact, accurate We point previous our much List ability coming XX% simply there provide at From our our are but ongoing through potential time. our X mitigation tariff guess from of efforts provide cannot an damage comments, XXX, too a the relief, mitigation we Between at regularly this around asked uncertainty domestic ambiguity but are our gain this our to efforts. is is indirectly notable, so potential to nearly impact suppliers,

that situation believe our some to and reason relief pursuing valid have aggressively rightful are warrants form We request. this of

strategic initiative sourcing making is Our progress. good

cost Although the be investment, forward validating the new will and the half look we ramp-up to the program savings are benefits high, suppliers beginning XXXX. of in of second parts to the and well worth

growth profitability continued efforts. leadership and we expect the to performance Holdings at innovation driving Boat sales and their throughout we will team provide support as actions, aggressive year. from improving is new anticipate TAP and them productivity We The in

continued keep successful thank of wrap-up PG&A factory Polaris to designed Facing headwinds innovation our choice serve. momentum in team. to business we a and kept core services have launch built our innovation with guidance us will and it and product year and developments positive and customers Our you on broaden exciting the specifically I our will successfully products and has expand appeal the simple major they full driving challenges, and while markets going.

that, With work of the lot would do, in questions? a have put line effort but always will for to to the dedicated open Will, you competitive this We win. team

Operator

Instructions]. [Operator

questioner will Hardiman James Securities. be with first today Wedbush The

James Hardiman

$XX States, so big. at List there's a I give is, we $XXX X, -- I it's an are Xx, Xx look two the as of about that exposure, guess, goods play a one if point? it lot round that? you just whole to If asked ask guess, is I that the us but don't that in Or indication. overall the reasonable to here, magnitude way. X a could United estimate? me I want understand List into know think versus of Let countermeasures you being million penalized million reasonable questions, I edges, is maybe another starting at your guess answer way is that coming

Scott Wine

It's to XX% tremendously we of and think our stuff not Obviously, that's is were directly that from China, source List of Most about we was the not, we our X, are source BXB and disproportionate of direct-to-consumer. pass on on pass aggressive James. as we other in we little it business, bit will it as anybody in have, buy, are as exempted, industries, in part that to of in XX% -- this domestic, so. just some. but we only that when impact directly fact And notice they trying right these our higher who offset suppliers slightly we with chain in that of because was reason domestic can are range. those significant BXB And It's our but you impact. then they without the the which of also the consumers. And was value much percentage, suppliers,

But in impact. say to significant remarks, there's again. -- why my and allude that's and tried I So I'll to it

strategies. X have We

in modeled use that some we have pricing are much to if pricing tool. aggressive we've already more and implementing We

not better factor now. impact. share. that you we it they're is When the a advocacy sure combined our on that have And those mitigation it of make mitigates idea relieved. we'll impact fair actively have what are we're idea January, efforts are, effort have maintain significantly make uncover, gross negotiating what tariff they is tremendous also their We suppliers to with actions And in our of going to will the what X a about and we'll better why talking a sure

James Hardiman

was That's follow-up of, helpful you, answered be and what my really going to question. kind actually

So venture cost And of goods directly from guess, sort of, sold care or is, don't XX% the -- to how China? from is of two-step know, suppliers, I China? domestic of your from XX% comes that's of much then coming that that your

Scott Wine

slightly that we more I source. intended to XX% say the than directly

James Hardiman

see I saying, what Oh you're okay.

Michael Speetzen

add obviously been if year, it's think indirect color layering quarter, which that is indirect. me Obviously, if But of I you out split a comes what you of bit has we roughly XX%, about a back up to just the about piece let amount because we've James, and that, what's in direct the XX-XX fair third Scott in little more little fact is more $XX the course said XX% fourth and of a the in think more and million delayed challenging. the XXX through about that's a the of that of a hitting really that lot think the of articulated, that quarter. terms

of gives you magnitude. So that the a sense

we've been will just guidance just sense XX% to through gave offset over on now, in other been a $XX of give to impact probably we've of million to in as you, come that EPS. later sitting able you I right we've well what about actions, as question The what's our pricing of to is calls, about essentially worth offset talked Q&A, $X.XX able piece because information the it of our prior because that up know I which

James Hardiman

clear, XX%, just and Okay, so but the we're indirect? is direct

Michael Speetzen

Yes.

Operator

today from be And our would Greg next with Badishkanian question Citi.

Gregory Badishkanian

focus on tough it, in call yes, quarter, really Great, for Retail, just think of to wanted I let's quarter last you the mid-teens, compares ORV. last year, third in the because had

versus? you So why or prioritize that what key to drove really do you driver the quarter, if of growth -- the you positive maybe was this were think what think

Scott Wine

availability quarter. were September, how as to good the And year we and product to out new a that the than the Mike both as is. throughout really of about products. was James, was ago remarkably it strong working. even July August We got felt and the referred started roll I established really, RFM so and Retail with fact and know, is you side-by-sides it, I much better profiles mean, we've

us So in with on you only shape. what really as and factory their choice doing team, pretty I his and to activation good build to advantage, think ORV competitive giving promotions tell was out. and and efficiency rolls going the we're innovation, addition in dealer I product that they're Musso will that Chris is

really compare. So encouraging, a plus really, that was XX% a positive we number to against were that able the fact post

Gregory Badishkanian

that as positive all a they is integration -- seeing Okay, seeing? that Arctic were let's reported wondering, mentioned and competitors, in it's Cat, they one The perfect. that issues the issues, a you're right, company-specific of not needle of when Or for you're going that are something see just to competitor -- direction? last move week. also so, I'm some they some your just big you

Scott Wine

It is the latter.

Gregory Badishkanian

terms Okay, also, a contributor market, there, much the just color a of little in all how that was? of and Ag right. And just oil

Michael Speetzen

I in with I the the to but good just Yes, and and again, little think, is at a which last is oil we stabilizing. up was we where of I bit theme some were think negative, consistent was Ag that around the year. quarter, slightly have timing think compares

Operator

And Farley the questioner next with Robin will UBS. be today

Robin Farley

on uncertainty investors? an you get? kind that it's where it of Is you sort sort you circling but I a to I might I'm time asked -- next might before little you issue, of be that certainty when maybe around period of, know sure. some to relief view back not thing, give be enough, Just to But the you for there -- frame the going bit that there could for tariff have any possible early year? the wonder some more, would it's mentioned about might if frame have ongoing just

Scott Wine

you it to whenever a in decision, uncertainty. adds the politicians mean, involve I

communicated, to facts trust despite Washington discussions are the quarter have on as target, requires no case, -- and the we're of fact There's We first our that action and we've call. our the and So believe story side the that's earnings ultimately very clarity that's the certainty by is that's that the goal. having. we much out but

Robin Farley

were you And sort mitigate great that expenses Okay. Great. then with parts carry would to XX% about of the impact as you that wonder the around things so Or through quarter just offset are to if been to mentioned other just those internally you next some you've negotiating? of about year some -- to were, of that temporarily to can year. you're tariffs, things well? that of push impact know X? the timing through into there a able are and into done other pricing kind things from of other you're things it XXXX the forward move in I able maybe that mitigate you actually some back also theory tariff before of, of could that to carry has get doing expenses Or trying next or that's mitigation

Scott Wine

making and clear. some you Mike we've it take Robin, taking -- negatively it. to have ethical on anymore? much question, aggressive to more we're have tell domestic Mike after said, got As "Hey, Or our saying, productivity in you supplier to of saying you and we've that we're you progress suppliers increase not you're want costs." team I modeled. to continue us, that be doesn't that I and pricing -- is "Hey, going There's more share that if I it making really to you because impact want Ken And goals, his Chinese it." actions make good appreciate are to taken recently, just legal long-term asking just suppliers, want and price these it Literally, that will going with to add to a we've or our sure

Michael Speetzen

that is, tariffs in push and to customs. to we've where direct, that delay price we're hard suppliers increase. of make how a in in come seen can in built things, as letting Robin. that's sure his we a One impact more that come would and timing the we are of working conservative not couple were quickly imagine just comes where indirect team when in paying It's the Ken you where the a probably and it's we're us, and Yes, goods

So there's fair of a there. amount work

I The pretty to get to his as been impacts many to List have we'd to in of imagine, was impact think from into X, we that's surcharge XXX, go Accessory price obviously, in to a And you And did which opening in Motorcycles outside the pricing a Off-Road relative largely Scott Vehicle comments, starts our price the and make of impact alluded business. disproportionate have for Parts, as the substantial as indicated, decisions more number foreign our communicating, was logistics, much or through. complicated not Garment our in business. that aftermarket can we a has I and process we and standpoint, have a our competitors.

and those complicated. a more little through price and of take a So little that we're some elasticity working just types of things of bit time bit more

Operator

next Research. And today will questioner the Bernstein Beckel David with be

David Beckel

-- with way losses in curious, spending? a there on quarter, but any in just was comp, realize I is share that pullback this a the difficult that does I associated promotional was

Michael Speetzen

-- a we market grow a -- of high much I and And a our gave way disproportionately comp. quarter, tough like with some managing encouraged our pleased really quarter, No, we're back. And in I engaging CRM so simply It mean, we really early just when we and we're just last around we signs share, progress, you way the that the advertising had was year, are, okay. the promos, reduction in said, by we're efforts, efforts that. -- fourth we're dealers the digital the that

David Beckel

have unrelated, And the seeing willingness those customer? along lend as of interest question, Or in rise Are -- rate any let's to powersports second of Great. you increases the partners. some this to to a business them general? from financing pressure to or interest pass the part on rates

Michael Speetzen

No, the financing environment remains strong.

of credit, dampen of majority have on our They are our the that. Number very help promotional highly focused around You with smart of own dealers. XX% is our half one. folks, through overall little half and folks two, retail movements number we that buy have we've on impact to retail the remember rate programs the partners the are through gotten of creative our the are and some to partners, with XX%, which payment, interest having payment

And so now. a between effect right it's pretty X I those think muted things, much

Operator

the will Craig Kennison Baird. with next be questioner today And

Craig Kennison

have at advocacy senior provide to work you this you Scott, traction policymakers. have relationships believe I point with strong your relief? know reason to has Do

Scott Wine

Yes, Craig.

punishing going wants we we're right American things a easy. manufacturing nobody get And story. story been disparate significantly that's help. recognize them and relief have. it's footprint not causes thing the we've get the the their that thinks a I the That of a work of disparate about One what everybody to know the disproportionate administration said, company about is aggressive relief, very mean, found that is nobody actual to with but the is that that talking everybody in like in impact we to do. both and that trying and understands communicating impact we've is to not invested Congress piece They on tariffs,

So going take get to it's to our efforts there. best

DC. McCarthy, might just relations, You hired government seen in have we a new Ellen

every single a she's there receptive messages on And relationships day we're in the Clark Myself those and the our being they're But So been have ground to to and Dougherty, new Council, message. what ultimately, carrying Lucy that's get. the carrying us. and to those working there has convey change message. General

Craig Kennison

And other as -- one And follow-up, affordability. the is buckets other a guess my on question the pricing. of I was

little Are as moving all got got powersports lifestyle rates that You've that affordability your inflation of through? the interest at diminish flows concerned chain, higher. a bit you you've moving could supply through the

Scott Wine

lot on a I our buy it of mean, customers credit. said earlier, Mike

in talk you extra when payment. -- the affordability, about the it's an dollars it's few monthly their So

a or I as over the There's the certainly in the come that because consumer consumers doesn't got this beneficiary else we're expect to complicated that very strong, to to get our our you large as in that forget we driving. about, we've we're remains getting tip so and strength time. game. worried it's that those full this but long savings, talked remain as And strategic to economy, don't as about time, that. powersports also burden sourcing lag not inflation over we're the consumers So a tariffs initiative expect we mean, and -- be of of something the doesn't --

Operator

our questioner Stember will next be today with CL And Scott King.

Scott Stember

you I talk you sales there going And see recalls, you besides know or the Maybe had over have been that's next year better year is some relief just Slingshot? the you been increase what's I far sales? until, to will that down don't year. or on makes product guess, than Can the we've confident on next what and about year as an year? Scott, so this expect be that, in a and there comments, recalls. sales obviously last talk else innovation about anything there weighing as And made

Scott Wine

Yes.

of the to Slingshot like being better consumers and found We've of for way pleased it to done it wherever make gone obviously, interest that we've fact park so a has work the last where are product it's We buy. to attracts still written. not can the a takes in are, couple refine cars. lot with a it years. got is One not people motorcycle constraints stall, want There it that garage between that it's people full to

to factor had we've do we it. into So that how

do about some we've feeling coming next Polaris innovation returning with that Slingshot quite we well talked we with launched it So the Adventures, half. really environment. second But doing why to good better year. about in product it's have It's and the in growth

Scott Stember

with And that's different I totally how but about maybe talk circumstances the inflationary some just talk is of a that the business and impacted. just Maybe these it. costs. be of know could set Boat regard business Boat Got have. to I there about all suppliers,

Scott Wine

good in between a actually -- industry way Mike's it's about core of disparity describing is got Boats the talking inflation the interesting really how compares. -- what's about powersports

Michael Speetzen

a going folks that impact a it's wealthy a that move able good. we The the of all OEMs obviously, is manufactured of in so chain. saw move, is boat price. move heavy standpoint were far in demographic. we Yes, with content. And business of the the pricing of on the minute concentrated to a again, us more aluminum. it's, from $X depending U.S. essentially about matter highly biggest happening you're more that each was saw production supply on but what talking the not a And And The interesting, Indiana, localized so given boats to of financed payment. are being But hit again, are you're boats $X to talking different way you're either hundreds matter it's dollars, price a monthly talking typical buying, or

So against I we're tariffs pretty an watching levied is it's muted. that business small, had tariffs, obviously, so But not relatively that's boats. of our mean, Canada inbound in really impact. much the retaliatory been were

Operator

with Tim And Conder be Securities. our next Fargo will Wells questioner from today

Timothy Conder

of back topic Maybe a here, little clarification bit the on favorite tariffs.

through guys million, into chain that total the you $X incremental able $X in on QX, anticipating are collective to What with said QX. primarily supply Mike, were here the you you in million? List X guess, So push I XXX,

Michael Speetzen

million a Well, I a Tim. it's the at level. essentially I $XX gross mean, held we've mean, offset, perfect

into the Some out of coming that is XXX, is the it of stuff of bulk really X that but effect. slid List QX,

Timothy Conder

up? of with any question left on Okay, other XXXs got List be, then we've X that, okay. be when here those X, could or should what And List Canada as expectations some come and you do repealed? is have to the EU, so then my would And previous retaliatories those question the

Scott Wine

done agreements to the topic. block, they've will, done Tim, get resolved USMCA, The do Then of an kind help lot a or that it's agreement. the I is of be a is a know if -- talks obviously and goal is. reach is in right if you towards. other the take we've an administration time, now on is agreement, conclusion Japan to you Europe think had And get are believe with going longest-term issues in and as get with working but to what We the that China. they're that's on biggest we to believe and where XXX, better focus why resolved. conversations going we that's That because in our impact resolved our

Timothy Conder

in what's left? and Okay, X, List then the

Scott Wine

it's $XXX worth think stuff. I billion of

we're that hit they consumer mostly don't concerned the this they left want about customers. huge they it's reason with we the as think that and consumer-direct. -- it reason -- after didn't have U.S. as List us not X why the off, inflation first and is X lists is Now go direct the that's because that affect left And to much,

And the So it's think than don't retailers want it going affects us. to significantly affect that. more I they

Operator

questioner Jaime Morningstar. be with And next our Katz today will

Jaime Katz

that or just that expected in I'm fourth to the about going I downtick Slingshot the that's segment else something you anything tariffs. though, is Motorcycle if metric? gross in their demand? a to you lower there's ask from else flowing Or that's ask is the on profitability timing and acting not am the curious mostly in going wise drag I'm about if quarter as margin through

Scott Wine

driven industry-driven question. predominantly and mix of business is by it's aggressive our weaker really That's offset by we midsized touring an continue growth it's our demand, demand and to bagging in insightful It as see weaker and segments.

sell -- can't Because below ship expectation. our and more the bikes we RFM, notoriously of for So are what those was retail don't they and weak. bikes, the sales heritage-style bigger

is business, a tariff-driven, like issue. but predominantly the So is ORV it's mix it it's mix it really slightly predominantly just as a there, flowing through

Michael Speetzen

that you obviously, and Indian, mean, to continuing will Jaime, I those Yes, we've got our remember facility as wind you essentially to completed backfill without more that's challenged Spirit we're the of Lake market little ramp that down so units that left and we had which Victory, the more being a thought heavyweight initially with but those we than originally that challenges maybe substantial. absorption we can that, bikes, higher-margin being imagine bit with expected

Scott Wine

in product new the news was 'XX said, of That it introduction of and late our year Indian. model Yes. the -- part

kind that there. new too is So but we doing with out very Chieftain is well that and in late didn't get consumers, the much season, of of the

to We're certainly more introductions. walk that. trend-based but be FTR if with example, product from styling, the on And with XXXX our sure more when to never bikes, market heritage increasingly of deliver that believe bike share. trend an are new lineup, consumers believe we away So gains on our we're towards significant trend, all we'll Indian we're moving we going being a

Jaime Katz

Okay. mid-single-digit be else assuming in in after I'm And shipments products, or there? from parts in that fourth for increase thinking segment, should of anything of is TAP that stalled launch quarter then the the there most Jeep of is we

Michael Speetzen

aftermarket powersports season hopefully I preseason being XX% in referenced think expect up we much that given that's for good will snow I be a aftermarket No, But sales. to of and continue QX, what core it. pretty the our that

Operator

Eric with next today will And Wold be our questioner B. Riley.

Eric Wold

X to Unfortunately, for tariffs on I will go back quickly question.

the of back long chance, you cetera, Or level become consumers get down? et you the in on reductions affordability you've tailwind And the on general improvements, to with affordability? around these overall that countermeasures of necessary that are do month medium actually on increases, so the or you an term? given could per consider it's given get then may a taking enough there's comments margins a relief, see that and or countermeasures if given Just even changes, tariff not taken not price the doing production to you depending would kind prices payment, may relief you or dollars few

Scott Wine

raise with and as for We're do prices overall going to with that we're lead industry we tariff-related, a on to just leader, the afraid to start price, a not little careful bit. there price. to And be not industry very need with we is powersports inflation, what the believe

into you're all where mean have turning tailwind. these that's could Ironically, We are our yet to it competitors got a not be. right we've even begin right, of about think But and this other countermeasures opportunity, now. I if done we relief

have So we're But even, that's we'll to we're just trying to do. trying a to work get and competitive the back advantage.

Eric Wold

quick or anything just the quarter, Or with $XX unusual the interest onetime whatnot the is so And going interest for Mike, level the or expense the question. The X that to there in acquisitions the million quick-numbers forward? charge follow-up financing? good of or associated

Michael Speetzen

expect. the essentially of we think July, beginning -- so the place debt pretty of of what reflective it's at indicative had No, in to I it's

Operator

questioner And today Altobello with Joe will be James. Raymond our next

Joseph Altobello

the powersports I America guess ask about to broadly. industry wanted I North

industry that got retail, very June what low consumer confidence. you not at speak, backdrop. the now million U.S.? the you the is How macro We've of grow growing do singles million in rising unemployment, see powersports we X.X to to rest it right you the ago, a participants now quarter, look low -- pie despite was healthy If long and in down the that mid-single, overall was down or so pie, beyond the that grow the pretty X

Scott Wine

that got on those of Well, But that, worried, a the when it's Mike player, when was it that directly doing about, X%. OpEx we're related the not stuff talk that's trust like asking was of to how what reason we said, pie. part are to down you're And we don't going industry the had about a with the being we grew bit, because and pulling we're strategically. are about efforts all up that much some investments a is segment right as is, little weaker we've that, the that largest is little talking Joe, mean, Polaris, was about got strategic to heavyweight expand simply competitors and obviously, think I motorcycle the our difficult QX you've only now. consistent compare

typically we've the -- pull been So, up. helped industry

to concerted fruition. don't in going industry we start come more at younger efforts move minorities, of I a as effort bring the trend then indicative into think it's to to our you'll women, in And some a company. on all. And those people within So we the more is of 'XX, see think

Michael Speetzen

back being you being really really where, mean, motorcycles Retail it's just by heavy-weight slide I'd our down side. Joe, the point Yes, end of on the the as market to I driven driven and the at being day,

referenced up single industry, it If with year you modestly was year. this digits up Off-Road us Scott last Vehicle industry look as being the at and, up core and leader, low the XX%

still at tell I think that healthy. pretty the that still is space you off-road least would vehicles

Joseph Altobello

tariff secondly, point. a then fair right? sort forced I'm question, to It's of ask And a

Scott Wine

really. Not

Joseph Altobello

some motorcycle But tariffs? how XXX like get Is I And you did It tariff will, that related help? me. on the anyway if you'll that looks components. relief excuse to much does

Scott Wine

mean where stuff hit got is the competitor concern and where EU -- really we we're is retaliatory of focus things which only that's other our is got but significant about. tariffs, the manage retaliatory the it's are certainly to on. can not the President -- motorcycles -- us, it's place talking No, that we've that a And the noise from -- not, on I yes, EU it's lot specifically a -- like

Michael Speetzen

Joe? there different asking, you're Is something

Joseph Altobello

application exclusion but on motorcycle parts update terms the components. other other tariff successful and says slide, in of No, it

Michael Speetzen

of think you administration. in everybody go lot I pressure -- exception an X, case. I which with is process and putting There's your Yes, there's of mean List can exclusion where on the plead the a

And, to news And high as been to it's I still go news where so, substantial successful, can we hurdles. through, have the we've the pretty would a bad that things we've pretty through imagine relatively is you but get had caution facing good we're instances you able small were the exclusions some some is impact.

Operator

be questioner the Longbow MacGregor next And will Research. with today David

David MacGregor

question are year When carryover model a up your on event, What I 'XX say sales you're much? prior by how year this -- the if you're just guess, retail clearing new FAC, so, inventory, through Scott. sales year-over-year? can your And you

Scott Wine

though clearance. started competitors about think new with you our not on it. new our we promotions put I not -- we've the fact, products. adamantly it model were significant best efficient, -- some of said fact, you mean, really We're portion factory products We out, in -- even a do question Yes, ever year a looking really, had in launch in do and getting I the of is not authorized

of to factory, very, the which dealers choice, but most lot an a think very though sale will that introduction a not it's they the enough, sales. something customers in on. focus fair our look where we significant Now up quarter expect generate really to that of and I number of gives will going from that We you not popular, differentiated make being that helps was and opportunity at -- look and we something us a was on to factory forward. buy tell new the the that come customers fourth products, is and able we be the for vehicles

David MacGregor

be every some sort out you're rolling against kind of you're promotional was year, So your But comment. of compare, backdrop year-over-year there carryover guess FAC so just of right? new product trying still get -- to a should I and inventory, I the

Michael Speetzen

it up, is our Yes, position year, inventory noncurrent. is think although David, current way much healthier a this to we're from mean, versus I one about

on have up you reception model and that year pretty think we've you I had not it it of and think And prepared compare which unit about the only in retail quarter, strong put we've We've but capability also as around XP significant XXXX, I about great core RANGER success remarks that so the 'XX. that the with. referenced the the tell with seen And up-fit our Retail Retail my you seen in think we accessories would we that the has.

David MacGregor

outlook, still commodity question of realize I but preliminary you at they markets if to it's and if as a right could I expect reset follow-up, were remain early, comment now? you kind just then And just wondering your where XXXX how spot supply on least you directionally contracts would Okay. guess, on commodity

Michael Speetzen

that in January. talk we'll Yes, about

Operator

the with next will Swartz And today questioner SunTrust. be Michael

Michael Swartz

about just talk wanted I to motorcycles.

you flat. can at were me you just commentary inventory give how that see profile? about Can you give your -- think end around us the I the out quarter, you're market playing next But said you the of maybe year? how maybe inventories seeing some color

Scott Wine

talk Well, our dealers sell what expect on. on is we with to the inventory and profile based

to mix. very that our those be Chieftain heritage in sold, and indicated, expecting as profile Roadmaster I still us. we less therefore, bikes said, out good So of doing there well. believe seeing, if is less market We've currently Elite got bigger of is we're the the very, That new and a we'll for

will now, to more that. shift all bikes, sell able bikes. we expect on profiles there's we with mean disappointed answer we're based -- heavier bikes. innovating not that directly, we get does gaining your in to our profile But I we with right grow. midsized as done share. FTR, as and question much so we So expect certainly where to more to But not which launch a market But on going We're shifting at mean, be be trend and bikes, we're it expect to of our set to be that to it newer we what heavyweight the

Michael Speetzen

it factory the a think, RFM it to bikes, business one we've reacts a way our and company means quickly with think alignment tighter that I I if selling you of is, and, why they're what's the are think, with pretty and dealers happened while putting for fact And around orders flat. that Michael, been Retail into inventories see sales now aren't with not the on motorcycle that that's

he'd healthy. to you Menneto, tell Steve I talking So appropriate I you're if and think, are think the inventory levels

Operator

And RBC will Markets. today with the next Capital questioner Joseph Spak be

Joseph Spak

quick. follow-up that to just maybe Mike, real on

I going factory RFM inventory think this is quarter When we through you've that another where high stuff. to mentioned should is still some completed? be of the expect

Michael Speetzen

third were of We think the the at had the within abnormally up we went quarters, in is units thousand remarks. specifically, by you of we've several inventory perspective, of and the looked by of to it low time couple the Joe. put levels to through alignment. mean, the Retail tight last just year, tighter couple some my last I been course I where in of we've the quarter. reason mentioned, see quarter. under-shipped you get think what and, had I We year our I QX levels a are that's we've I back as in the inventory QX and I comments the alignment and will years added mean, end prepared the where a know

back you in performance in you the had you the International change, our look the vehicles underlying the at strength So yes, you at look ASP Retail, start look to offered a when we where pretty the getting lot at space like and XX% standpoint. profile to because PG&A, are shows inventory to darn levels we're get alignment, we need you and they that starting pealing from it be close a feel tighter

Scott Wine

I And works. just to how want RFM reiterate

that implemented it's we above-profile a specifically ship to will once in. to. the the we business, them profile, in across set request before shipments Now fact, we has fully And ship dealer that's what

dealer sometimes other to shipping noise quarter-to-quarter innovation possible. not anything of there's bit but product ultimately new and to anyone for little So than stocking, because ever of us is suggest that demand

Joseph Spak

into of, average remarks, even and of, going further just productivity, grade true, that's be But that, think And can the commitment remind of, like of us then And current your the if programs? through process an identifying worse. sort productivity should I you might mentioned situation opening the we Scott, you read to in even that you're, clearly sort payback? without

Scott Wine

on increase I initiatives average payback But still our Well, which we to of strategic closer significant, lever design these what to a most spreading quite us. really off also as especially put much helpful we're the factories biggest one, ultimately we lever to the the rescue is sourcing capacity, volume to Menneto is for is to and but productivity be start The mean, the as seeing in designed us. Motorcycles, operating that kicked value their business, will very work that's have. nice

our these pressures more stupid it to tariff. why a some mean, -- I do purpose to whole and like would that. that of We're what manufacturing. That's referring do things productivity. a things paying it's with setup of something factory the transform going a productivity to mindset American a we and go I not So it just to a in new it's Mexico going the predominant was multifaceted but tariffs new not when put effort, like we're is avoid a do ongoing is tariff to as more to to commodity relates factory methodology on focus

Michael Speetzen

now steel, I efforts fair and countervail substantial tricky, China when on think, would takes about given I us in And we amount and the way validation increase, be of time it timing, a think been trying going are both aluminum think that our changing product. put through on about underway Joe, gets is, tariffs mostly to goods. what right have a have place the the could you

So and that's guys to through spot give now work tough be what you quantify, some hopefully, us right a insight to we'll that. to to January better we're for come much in trying

Operator

Seth be Woolf questioner today Research. next the from Northcoast will And

Seth Woolf

if, is then all-or-nothing does last this this up, mean, January. that expect know of able to about trying guys it go through comments get And wrap taking Would of I you Or for some some And an those how longer? as process have the factors you Mike been you've on to to this said, out? to could get exemption, that the you that just me, in you January? guess, tariffs work So -- two all mean by an that relief, I the would thing? on handle better of

Scott Wine

have to class. I'm you've Seth, give taken there's working will earlier, are said when is you I you as I to is January a certainty other sure that, I side desire. will happen. you that towards. no that, we our the Well But know call. It's impossible that that the goal an exactly answer mean, is But the negotiating to result going by tell

Seth Woolf

just we that said then when about think, Okay. other and as materials? the indirect, direct not is you of clarification, I point we the purchase XX% talk COGS, just And COGS, -- total of

Michael Speetzen

that XX%, between what of roughly we suppliers be components buy their through or It of and what U.S. it's direct China. other through COGS we XX-XX total will source buy and some that

Operator

last with the will BMO questioner today Gerrick And Johnson be Capital.

Gerrick Johnson

questions. two Last

So you where we charges, in you're are still remind pulling out restructuring can us journey? this

Michael Speetzen

the couple of through Brazil, Yes, We but the went I some with and wind movements actions of that associated payments. changes announced had Indiana were relatively there winding dealer business some closures associated think, it's we our small, Victory down of we and Gerrick, the down with down in Motorcycle that. a associated

into supply item of anticipate doing would work next we're group the I carry with chain, consulting in our that there and money think is into year. that will around biggest of for a the the I get have should, the that we some outstanding we a amount the Motorcycle Reg as the be majority and wind we have EPPL from page. G smaller standpoint, But Victory much next down the off year

going be a to amortization intangible you're we I smaller down really do, So and probably to that M&A any the amount think, restructuring. then of

Gerrick Johnson

having impact Polaris Harley here, Mike. X and motorcycles? List a sounds lastly, how disparate and And ORV say, is Honda Okay, heavyweight for or good, than, but sorry to dense being

Scott Wine

you I significant for The competitor tariff And that we I'll to I is actually the a a -- mean mean, akin they're question. we they're Harley thank -- is, good issue same asking more issues -- don't face. that tremendous motorcycles.

notwithstanding And but is is us, we're this industry how that some competitors issues, know, predominantly if but the our Arctic about biggest business, they're look, as of of smaller either like talking So impact really the same are has main Vehicle, is or disparate. you in mean, also that Japanese. Off-Road what Cat the kind which you the Canadian I and

Mexico, avoiding off-road Our Canadian in competitor of vehicles the tariffs. the assembles XXX every their thereby impact single of X

U.S. they mostly fact, most But the from think, Therefore, China. in predominantly pay Japanese They tariffs. in have suppliers. them, assembly their you Our don't them source competitors, as all the know, of I source they of plants from Japanese don't

Harley whatever that impact. us paying the ironically, facing So it's is are just and

Richard Edwards

All want right, that's I this in for goodbye. And all to forward you morning. to again, Thanks thank call. everyone quarter had fourth of look January the our on time participating. talking we we to

Operator

for is attending Thank concluded. you now the presentation. And conference today's

now disconnect may You your lines.

Polaris (PII) 22 Oct 182018 Q3 Earnings call transcript