PII - Earnings call transcript Q1 2021

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Operator

Good day, and welcome to the Polaris First Quarter 2021 Earnings Call and Webcast [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Richard Edwards, Head of Investor Relations. Please go ahead, sir.

Richard Edwards

Thank you, Chuck, and good morning, everyone. us first joining earnings for you for quarter our call. Thank our presentation for at is slide Web this accessible call. information A additional at site has ir.polaris.com, morning's which our Chief the summarizing and our the and our have for quarter Executive expectations year. Speetzen, Financial Officer, Interim Bob Mike Mack, full Interim revised Chief remarks Officer Then we'll take some questions.

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

our details non-GAAP You these to the at our can adjustments. guidance adjusted Please to refer XXXX this reg to of quarter end to unless first and XX-K are for references G for All reconciliation basis, the additional on GAAP an noted. non-GAAP regarding schedules uncertainties. reported presentation XXXX risks otherwise the refer

turn Now to CEO. our Speetzen, I'll it Mike? over Interim Mike

Mike Speetzen

Good Polaris us. thank morning, challenges. you Thanks, an and substantial chain joining despite delivered quarter team for everyone, supply Richard. the again, Once impressive

has on customers, beat meeting and of dealers to our us allowed which this focused team quarter. expectations remained the needs Our again

experiencing demand North only gains share not that year. our boats Before we that entire QX. dedication American share team was and and and customers. continued, with expect motorcycles, quarter, be the the from execution report retail existing to get we coming wanted in wholegood both our focus, report continued quarter interest strong I'm their I'm customers had truly growth new in market levels I ORV to this for past we Consumer gained in strong throughout retail. are The the also ongoing thank pleased and impressive. pleased for powersports is to Polaris an record which started, also trend snowmobiles at strong to growth

results sales the international XX% increasing team segments was also quarter, business with And with our by and strong slowly PG&A challenges. effort countries the the began an impacted business numerous significantly by up during reopen. year-over-year. all-out grew pandemic Polaris all reflect XX% QX overcome nearly as Our categories to to

operate products to plants were and tactic customers capacity chain-constrained demanding. available the disposal produce at We at maximum our our our utilize continue to supply every

inventory While increased we navigated do supply and dealer remains costs, below our met substantially. rework so, demand have levels, constraints. largely commodities optimal chain and expertly logistics, To

We and performance despite And to best managing prices inflation. into we it seen and expected year strategic this compensate given give will are as the cost QX better can these details than where and you Bob we in yet, guidance. makes shortly. have sense our for strong overall continuing more headwinds, are the full raised raising April,

were a last easier comparables quarter for the Even weeks March robust plus the XX up up American when growth. commerce XXXX. impressive First of after North in retail that the in of for the were abrupt our was XX%, percent The retail an drove levels pandemic quarter. impact, an adjusting unprecedented sales of continuing two shutdown

new an base in growing to expanding see continue with XX% We QX. customer customers

see to further to our success proud especially our in base. customer are We strategy diversify

versus continued have these of and been strong a with stronger the new only vehicle customers these stay data early return. to customers indicator XX% of sport in have to confidence customers year-over-year, our will sales many indicates for is an intent And what strong in which increased While historically to these time, our we short support which intent reinforces growth another that purchase existing the new to a ongoing seen, retail. powersports impressive a our owners, a promising

finishing share X first percentage collectively as and quarter up and in business strong retail points of quarter. our market earlier, first ORV Slingshot's Both was indicated As the over market over well, I XX% gained Indian Boat range points. strong, were the retail the percentage tracking low strong X well based first ahead XX% sales preliminary retail with about industry up data. for as increased of was Snowmobile quarter. on also share

business. Let the a Snowmobile me performance minute strong spend of our talking about

in Snowmobile today, of XX in with for lines in it share market X XX retail XX% the American eclipsed our share up industry growing business we its over product season, Northern strongest retail started industry resulting mid The over one approximately where the market, XX%. points is of in our the is in Polaris Minnesota. gains decade, the snowmobile concluded best smaller years range, While position a over North season years. ago

growth in Snowmobiles. are tremendous customer We new seeing

represented prior season new XXXX growth, rate the sales XXXX. March nearly During customers season, double XXXX, the ending over the of XX% the selling from

was quarter, in the it we meeting and, was virtual, a meetings up best XX% the XXXX. one compared while dealer attended held to During our over almost decade. of spring Attendance annual

Rider During the we which new and trail. on Platform, XX Matrix First meeting, snowmobiles the on leading introduced ride off and revolutionary handling, both industry delivers

than with new turbo-charged engine. the uses first company's Patriot engine entering at unrivaled the XX% sport, customers at Boost. demand power Smartboost for introduced year more new The has generated continued our This proprietary current seen XX% technology stability, model level XXX years. and enabling more combustion engine, the we we from XX,XXX Patriot feet X-stroke sea in demand Additionally, strong power lineup, haven't along

year, in around over a make half later up fact, SnowCheck build our couple required of which season much weeks the in our this year. of Snowmobile concluded sales the ago, eliminating In will of orders, uncertainty

available and continued XX% sequential demand realizing our all know, talk ongoing the ORV were As Supplier on as the fill you logistics most strain the to levels ease retail situation supply and dealer with the to pressure I'll to in ability manage well has and efforts chain about businesses of the year-over-year, we all a Inventory bottlenecks, our options down delays further as shortly. constraints channel. strong basis declined remain are quickly possible. decline. our working to significant more

and is they that lever to environment a and enabled challenging vehicles into provides to ensure is our our of just which the As presold one get by capability of be dealers dealers advanced the we've manufacturing This plan. production utilize vehicles how examples This visibility past, navigating they of can to ensure the our this sale. flexibility is discussed the in team continue want. many capture consumers

staffing continue positions The expertly location suppliers of target. targeted a our fulfill manufacturing, optimizing supply that constraints alternative Given product been customs well likely in our impacted some until to job has and outsourced the shipping, the XXXX expedite return team flow demand improve to until the expectations we may doing been not fill Polaris take quick suppliers levels. would supply supply through clearance The by demand. of moving has current in late to environment shorten chain inventory said, chain to with number logistics XXXX That somewhat to backlog expediting and related lanes a meet lead using us staging sourced significantly keeping it the to consumer rebalancing to and and on as as dealer their by ports inventory constraints in tremendous XXXX, anticipate directly base, flowing to and at times, employees COVID time of working Polaris to ability manage possible. of

for and select Bennington at Elkhart capacity climb we're distribution. Syracuse Hurricane, Mexico general, Indiana Rigby, RZR Additionally, PG&A Wilmington, and including for locations, apparel for for in Ohio adding Idaho Monterrey, and

as demand. on trajectory production needs We expansion evaluating anticipated the with the the current Board coming the of will year, with additions, improvements capacity in year progresses based quarters. the supply to later our be will ramp allow These chain us in additional along further

value. these do we see before, XXXX. not our an Despite chain important the to are plan. said supply goal that I strategic initiative still This being best some ahead report track quality, identifying can as is delivery, we the until are provide However, that to inventory dealer of I'm incredibly with for that transformation targeted on distractions, slightly and happy technology levels savings service, time the suppliers in of with realized us returning and

continued and the expect increased third costs through are kicked savings. these approximately tariffs. We is to commodities, and the here rework our off halfway of virtual Currently, $XXX have million the the made in continue. of sourcing By savings now optimistic of be the about offsetting for news abate, and wave logistics, savings success we decisions sourcing waves, we conference four of program. the supplier our year, these February are a when from to all goal good almost partially end costs The of gross two will

sports Our to well is opportunity, current appealing as electrification consumers. a as new very real

both will to continue As the grow, and and capabilities terms mature and future, interest. consumer we of in awareness performance EV look technology into

will today future. us efforts the positioned be and for to enable stage well the Our set

offerings. current through both up strategy leader of aims new vehicles position industry electrification, revved expansion the Polaris and of Our as the introduction to in

consumers XXXX. durability of We're new full low next in electric coupled is The global fall, core powertrains segments are an co-development to electric offerings fully the to XXXX enable grow new goal bring out years. leader to five option and a platform vehicles our motorcycle with Our autonomous EV product Motorcycles, within our Ride's vehicle XXXX. will of software of to This half to electric accessories whole roll market a the the current a vehicles, by partnered making all and new electric second fully level with RANGER speed of technology, RANGER we offer each powertrain GEM using autonomous our in Last performance. December shuttle over all capability, elevate to and also with the stack to Zero investments Optimus shuttles. an expected

details As our for turn upcoming we Bob our product quarter launch. summarize in who expectations move watch additional it year, XXXX. the our up the for Mack, through results and Bob? updated revved to over on will I'll RANGER first strategy now

Bob Mack

everyone. morning, Mike, Thanks, good and

supply far As logistics portfolio. you customers' given with on and logistics and significant coordinating strong our Polaris demand ongoing tirelessly just the has our with by The first suppliers, met heard, the shortages, our challenges our our rework expectations. chain to deliver the across of working executing quarter dealer retail delays providers expectations team exceeded

for and the were our by industry the up business, strength sales basis in powersports, a and up year. quarter driven on segments and in the our segments. adjusted of XX% adjacent First prior ongoing were Sales boating Aftermarket versus GAAP markets significantly all

the the timing as strong expenses sales quarter previously were growth by increased tariff from margins the basis inventory per was in realized share leverage we results significantly the were leverage services income expense stock as exemptions $X.XX, per First during Adjusted percentage volume as down we quarter. operating into channel. the based up a portfolio, their across to indicated, costs during GAAP The gross on and being were earnings and basis lower XXXX largely Income quarter. points finance driven of $X.XX. first the was which promotional a of Polaris year's to over compensation the use sales which refunds driven rework continue XXX and last Acceptance the coming pressure due in from remained quarter gross and the due costs costs Adjusted was the share were up down low year-over-year, from margins costs high. the dealers to ongoing Operating lower XXX an R&D result basis declined Supply onetime by financing ended. plan to XX% lower to retail delayed demand and some as as inventory expenses venture, a points dealer constraints And be the of and the point during chain as financial logistics quarter strong higher costs promotional quarters. saw we of floor joint the levels. were primarily as inventory lower earnings level

for the had perspective, also reporting XX%. increased segment by positive Adjacent our ORV the primarily XX% all the increased segments dollar quarter. Markets quarterly results, up and impact was XX%. sales Aftermarket Snowmobiles XX% From Boats the for increased euro. driven reported on exchange increased and Motorcycles XX%. a and increased a Foreign Canadian Global quarter.

quarter. during the the sales Accessories and All businesses. lower promotional the powersports in currency improved the and industry, decreased by costs, Accessories the a the by from base across all also high ORV, of during considerably our experienced Two snow, from sales. regions has driven the we were segments of during given strong motorcycle mix benefited lack product and the shift mostly the channel. rates. demand caused which quarter, increased segments aside experienced are PG&A product Boats, About Our And quarter, categories were powersports types to grew the Parts, increased up XX% segments XX product constraints produce. Garments of quarter and retail & Parts, point points sales additional strong International driven chain to International came All and and from during quarter. able growth installed XX% out significantly as highlights segments products in want I supply Garments negative the and a during demand. sales And

Moving XXXX. for on to our revised guidance

Given total first in to the the growth the to the our to in for the January. stronger sales guidance in now XX% XX% range increased anticipated company than expect we quarter, performance increase year, from XX% sales have and we guided up XX%

component constraints. pressures and chain We in XXXX The and changes positives to to These adjusted being earnings are manufacturing full of share pricing range driven logistics are, year $X.XX also however, per in expense increase is our leverage. addition and by exchange the to per offset improved diluted inefficiencies higher be for spending plan growth, higher to increased rates volume, earnings costs, $X floor supply increasing expect through lower now and continued share. and guidance financing driven by promotional costs MSRP by commodity partially pricing and continued addition in foreign operating

pleased XX due our our additional remainder we gross will that to be of our manufacturing to the partners to factories. chain we demand on are anticipate as level increased for down ongoing inefficiencies year. gross are and match pressure by high margins This negative strong continues we attempt basis mix margins quarter, points, profit the trends. supply the While primarily driven with XX product in the it with experiencing, logistics of is to We our first now putting saw the rework along profit in supply demand stress

that prices we quarter. are the commodity P&L second in to expect our hit increases in we beginning seeing Additionally,

to As increases a offset these help result, we implementing pressures. price are

now However, chain Mike for help year, to of supply its several quarters take initiative, in And the will we costs. indicated, expect converge. third it offset will the additional two supply some as our chain

compared call, for be percentage sales as our expense gross points outpaces XX basis you on expenses our the the stated margins would profit exclude our operating up growth. are margin if basis of improve to disruptions, rate are supply as Adjusted over I points be last gross earnings XXX growth tariffs to and down as year. now expected impact profit to XXX While sales expected year, last to chain operating a of

growth at financial driven services in of in from by Income remainder previously expected dollars entirely guidance. by expectation a year this changed. levels year. the high levels. Our guidance the in as the low. dealer for of expenses Guidance entirely Retail driven down items expenses digits the be inventory for percent, issued the remain that improvement is single escalating unchanged remains will full the operating The percent acceptable operating to sales financing hasn't availability P&L materially now for remains our anticipated sales from is

our but, of maximum chain share supply strong our consistent impact sales general, in next vehicles our producing per in some the relatively will of allow. of each across Given performance for QX, quarters. and we the expectation Seasonality three number earnings will are be have products will

our earlier, mix. supplier continue constraints mentioned expect impact I to negatively to sales we As

commodity and materialize in Both expected the to will QX are gross begin quarter. the compared these to profit result for year. costs to as of remain the margins will lower Additionally, first balance in of higher factors

We expect XX% operating the spending. to of XX% of remaining in each three be the given to expenses above timing quarters QX approximately

by the demand driven The in on is strong the segment. businesses, sales backlog. company and increase sales significant total by Moving to all in expectations of order our given quarter increases sales first

the deliver supply gating network current logistics the materials As channel ability the to and we to chain be of and able to demand have dealer in meeting factories. to stated, the factor our beginning fill the is the

production diligently to maximize and teams levels. continue sourcing operations to work Our

$XX cash year. the to finished compared quarter in a million at First negative million first quarter $XX of operating last flow

cash While quarter able our first cash and the a needs given from earnings use the quarter working is cash typically provide strong capital cash heavy our to was operations. timing, overcome from positive

we as acceptable year full inventory for cash levels. and performance remain expectations dealer more rebuild Our to the to flow unchanged factory work

to approximately ratio our as leverage anticipated. times debt sequentially bank improved to decline levels Our X.X as continue

in remains for combination XXXX, Our business, for share debt cash of investing reduction a and use outside the repurchases. expectations of

spent the million $XXX to We helps first dilution shares. quarter, the from share buy to $XXX the and This on generated Of million subject market conditions back of shares minimize the throughout anticipate authorizations. repurchases. was During million we almost $XXX exercise of the spent, our continuing the of remainder options. year, available

And that, now Our X% of Polaris in $XXX of expectations to the XXth Board on will for January approved increasing I approximately consecutive Directors million With capital over expenditures final some remain is unchanged. turn comments. Mike for dividend, regular the quarterly its increase year dividend. of which cash the it XXth,

Mike Speetzen

Thanks, Bob.

the experienced retail broad our across During based businesses. strength quarter, of we all

significant from installed base. to the New customers our strong demand supplementing continue growth drive dedicated during quarter,

line be team. all grow in I'll demand and to longer and profitability financial than ability but keep ratios such it chain's ability position and me targeted Chuck outstanding the our our in more team strategic our and best improve Polaris our and company an near the share and talented supply leverage anyone open confidence ongoing supply XXXX. to in than targets gives gain will that, continue Our match advance long for pace to with anticipated years Together, remain to with below turn in trends be our to questions. in for The a term and industry. with cash better leading toward to financial debt challenge size, market demand With position, segments sales, we thankful an over I seasoned expected strong originally is agility to couldn't

Operator

Wedbush with Hardiman James Securities. from come will question first the And Instructions] [Operator

James Hardiman

that, detail. I'm don't dealer my quarter. Slide this of started. a meaningfully a that utilization shorter This slide more into walk reading the So in X is lot reconvey know us capacity to if worse graph referring in a inventory inventory, probably critical there, of the to. position maybe at but that to little in there. will than a trying look much going seems I Maybe and question build us year third graph. you meet quarter walk the that we're similar fall But think through is to XQ, bit be favorite through demand, inventory assumptions you'll information and then last or bit like that the little in new capacity this second to able When I'm it There's too expand quarter, I key of going on, in we'll again, we finish that. maybe

Mike Speetzen

couple factories of the fact that chain constrained with reason, A We we red put things. graph the word at but a on we partially that line to we're dealing full capacity, the for producing vehicles complete. the running use because are supply highlight

when those example, without a For vehicles the seats became issue, reworking and vehicles. then huge foam rolling we're we're line off

rework the in are I will making as team of high. is what's them The incredibly right Our in chain after been tell up, an team supply we're job agile doing I Really, down. that. pretty sure rates done outstanding going prepared the come is a and issues remarks, has good indicated with really quality team, doing high my now. constraining knocking the that manner. But you, we're a us semiconductors Supplier job. has that

that's based supplier expectations get retail make as right predicated to much down up we we we will now and are on progress be as us manufacturing on year as from can. It going really we to the increase on dealer these today. through that the We go the ramped will and issues push continuing inventory where have

are online the money some where the potential significant into to capacity really around, a going being the that's about not And overall, in got But far, in to manage the has terms at. and can't team around understand here volume. in what and in problems, feel good to is made first us I've what the just I'll second you, Some half digest and save the comments are based is able tell I team the quarter done the try to of but issues going face we the confidence. of consumer the chain coming future we of help thus January see lot call supply be I of demand. in going on

through going through or and And that put that profile. point to in The so we're some a work margin come we're and news in the that the money, whether logistics at margin it's time we'll supplier good that this you're perspective. the will investment, doing, see seeing is abate come from favorability

James Hardiman

maybe a just quick if And at was, where Street versus I big Selling beat. least the then may. follow-up, and was a marketing,

on for go that of is of we're how supply guess that this that about line have do don't then I an in? Some we past what's think dollar item imbalance right sustainable like demand pretty particular or as item crazy that presumably favorable absolute you basis forward, sales? that's does you once that And look now. a I whether percentage line this What know, we're phase XXXX?

Bob Mack

of you QX think you the really think in is timing. OpEx, I So see one if about really, impact the

we're feel the we about, a expenses flat run use to So be year to reasonable forecasting that's business. the and to level good for

are engineering stock recognized sales have of then the XX on QX in normally really that point comp XXX just some that been just as The in in in up So based the later the around based year. side, recognized which the around different that would and mostly spending benefit hasn't sort the year, show turn some will leverage. quarter, the on delayed basis issues move timing is yet to later been projects

not themselves they're in future. So will repeat things the that

kind anomaly. it's of So XXXX a

So OpEx for year about in being I think the the should flat dollars. think you

James Hardiman

a environment, of which assuming to that up find line much promotional in, ourselves OpEx they sales But of this a promotional that mean, environment that some function the as are really degree, should we portion sustainable. I'm it's favorable flat, be as and a to doesn't be assume step seem at is least like we a pretty after year? I to up for

Mike Speetzen

profit. certainly the stuff back. gross falls we some we start to Bob dynamics will promo that the think when into can as look promotional about through of James, talk No, future the relative out the And quarters mean, I coming

timing. I Bob hit it, think it's

go XX-year that But and because future. think helps And campaigns do promotion and year, that forward, work we The new will sales the I investments investment six on is advertising around system, TV. analytics be with be lot us, do something team money, we smarter gotten continue take month, an I continue measure for of team three analytics to a that has basis, going they data to our made whether data will What grow target through customer where basis. and we yesterday, as have the I to the one now we've continue the And media marketing I around is relationship done and say data an a incredibly even more year, as as we work high that have about it priority. that efficient. tools. As customers month, walking the the on a we're think attracting into new is we're and where will we on The us. around had can was months, management next it's well done customers, the five dollar they amount we their the that the repurchase or in spending that to efficiency absolute go three back and we important. rate

Operator

Craig question will Baird. with from come The Kennison next

Craig Kennison

Things I time the first could one to the this get another my want to I maybe relates mix buy your retail time what characterize if last deconstruct growth extent buyers, there incredible buyers that buyers. is may maybe great. from said, and in year as hey, quarter. that. involved. you to wanted then family to repeat core are wonder And I first like have the it

Mike Speetzen

categories. I Craig, grew the the substantial growth at was Yes, customers mean, both I in XX%. The new mix, indicated, as

rates, in interesting at the And I in discussion demand The had in that And this think concerns surge started interest. of have in was fact with then is of going existing when And or given or XXXX James, the that three, they're six add coming buying our base strength. the rate. repurchase customers, say, substantially especially new actually very had one with new higher customer look versus, XXXX years lose we another come encouraging, to at even back and Our mentioning watching rates, a in that's customers we we're repurchase through customers we And repurchasing at as that the months, XXXX. was prior XXXX team I bunch XX%. coming went you the they they're that yesterday. repurchasing I vehicle. back the one where a existing year people and we've to in for Meaning as is

there's we that's ORV, kind retail flattish. is it I we retail saw was, And year-over-year the in improvement, be substantial. this year surge not And we strength But and is bit little earlier, going Motorcycles will that and 'XX, of important Difficulty] a lot to up the As mentioned be down would the bit relative concern think raise back. where of it's XX% through headed year. XXXX, I think for is around little know a And the I [Technical on are to where think the And seeing is, you down. about a when industry continued retreating I in a point XXXX.

We evaluating additions as probably year earlier, in and full into as future. standpoint capacity working potential retail where be that's on And that's capacity discounted I we're from be relative additions were mentioned to a a the that XXXX the basis. well why expect up we XX%, to XX% we'll not

Craig Kennison

are measure And way able they the in to into you impact the any of economy? stimulus come checks as

Mike Speetzen

XXXks. is economy question I most look profiles -- savings fuel our of to were with stock through a demographics at in the just strong employment And consumer investors up, the And level lot. gotten we've the I collecting money, gone really our stable have you our mean, years. characterized stimulus market the as I guess tough. their part, it's through think change, our for if customers a It's were to is them, we've I and already they customer the that most didn't over obviously, very pandemic it rate. terms and of, what

so and in And the be our an been to strength able stability do. correlate certainly of equation financial the try to stimulus this, and but back customers tough itself is to has check

Operator

Brett with will The question next Andress come KeyBanc. from

Brett Andress

question on you're you're some any need or that And price price in pressure? offset taking. passing you there Just take you of how way now? Is plan some margin much much on selective to theory maybe pricing how a quantify to to then gross right take to of the the

Bob Mack

was in the about effect May part increase factor for ORV market. the announced obviously into X.X%, the And comes Xst. and price biggest So biggest of that us, that's

So to see through in of the QX the balance year. we'll start and that

really promo, lower In not price. the of combination offset is price, of finance terms just interest, offset, the a lower

bit continue pretty price. violently. times, We're the particularly at little logistics right margin that basis, you the now are But standpoint. in from so with to it's lose the dollar basis. unprecedented moving for little logistics year. commodities cost look a of a Things we're the increased percentage so logistics basically and a I to offsetting increase of commodities. and tough forecast it's And obviously, full a gross around a from bit on We'll mean,

the So year. through course we'll the of pricing continue at to look

give We in introductions that opportunity. coming up should have August, so model year another us

so the we'll as that consider And continue progresses. to year

Mike Speetzen

I around rather than And specific Brett, They've of price the team based moves that been the doing a credit work incredibly increase. for implementing models. very pricing been the just broad would lot a give add have strategic. just I

freight then as have models ORV, other that abate some point won't issues that the toggle the of added we've logistics future, the dealers. that's have or in which, motorcycles we may a touched. with models obviously us whether be So higher, We'll boats. surcharges, obviously, for that's some And get also

Brett Andress

specifically building James' more And maybe think, then to, I question.

I commentary to XXXX quarter on then so everything the now? that stand XX% that plan channel think share you XX% target where last was retail April any in end optimal here? I guess, below inventories with does we're seeing levels. down XQ, And to trends far can

Mike Speetzen

is before. to about dealer I'd improve plan lower the the quarter that it fourth inventory we is stand today, be now XX%. where So from going characterize it we were way expecting the than right XX%, But to is

gain the refine and will year. prepared year. a versus it's you, think, see to foremost, were we XXXX. the is But to take given improvement. we just we'll retail quarter. into sequential continue down And last said time we'll I expectation the strong us some of get April, remind momentum. later in in going We'll XX% as and my I'll be so And in bit second first as work obviously, I in that year, little to start we up last how remarks,

month of the better we to a team the tough we that's expect and versus XXXX, of in is been has comp. navigating where great full up, April And the expertly it, even percent. than quarter the So doing retail of we up, performing that. down retail were And where expected. holding job in be versus we XXXX XX plus expect But quarter though be we a call were second XX% to to is

but to continued the 'XX, time to back so XXXX tough industry comp look growth frame. if And you

Operator

next Greg will with come Badishkanian the And question Wolfe from Research.

Fred Wightman

Fred the high year dig be single longer? was Is full it digits actually expectations more Greg. for that market, into on touch just powersport improved to wanted expecting Could that, the of stronger down single guys you quarter, now. for down ability It's I low to I supply demand to outlook? on are you Wightman think the sort changed? digits. driving that's it Is what lasting Last better that

Mike Speetzen

just Fred, demand. think I yes, it's better

would that an was I in month we basis, see on really that And earlier us. that incredibly actually a March strong we case. think anticipating performance for off would be to reducing but drop retail start would wasn't the and things the think I had strong quarter, first been

I it's think because strength, economy think I even continue a firm the just I and I you're incredible has know think. to after fact our don't think if I products I to enjoy I it's industry going outdoors and want family. overall delay going to it to want in that a way see that their economies with the that industry don't the belief people to in substantial reopening opened do friends But health. change of to So offer overall an up, the the correlate a to are have

certainly backdrop economic the think I helps.

be stronger than future. to was foreseeable is anybody it's going stronger for economy the continue think to I I anticipating and the far think

the we capacity So we're making additions. really wouldn't we if encouraged by be that. And weren't,

Fred Wightman

output XX% that shift you to in equation. just the talked absenteeism the of side quarter, Last And about range.

the Can the looks of up? You this backdrop supply sort guys labor that's What picked quarter. of into playing like seeing from again a some slides in out that what you're called you constraints? how touch on the that's perspective, rate and if

Mike Speetzen

Certainly, historically. rates Yes, that put than have higher less the on dynamics I factory why issue, that's of we still red been and line chart. that the absenteeism are they are our say would

I think much better. we're navigating that

around the were returning that of supply portion continuing feel the manufacturing the other year The plant, kind employees the we'll mentioned the real factory. as hosting I rollout, demand. couple prepared a to And that had population we abates substantial the a confident voluntarily at in concerns for of certainly saw to we've some I and that clinics we're questions, think be navigate able of we late with and vaccinated. where expertly remarks number isn't is issue it's meet And of to our my to success get of last vaccine able as locations us the a chain.

Operator

from Scott And with the next question will CL Stember come King.

Scott Stember

of But half the improvements last year? for not increases -- the some two you purposes, versus price modeling back about coming quarters some chain just earlier, I'm and for have know the of we'll how the maybe year, if supply you should the at on you Can quarter on we cadence this I second year? the could talk touched through sure look side. the but guidance of

Bob Mack

year, the are think tend season. of into the seasonality a buying of way see lot retail than QX through where people be normal is our to the see think and we to think I about some Yes, to year, different this QX a which sort QX, bigger tend customers, the it of there's This in given quarters. I going earlier year, we just strength year,

is a the profitability quarters very around So moving revenue the to being normal similar next think would and from bit. three standpoint. I QX both about timing all

Scott Stember

or numbers? as or talking absolute or absolute percentages far year-over-year just We're as terms

Bob Mack

year, QX, Because on of locked that's of we Absolute half the the QX. second in of hitting in so what most lot the pricing commodities us were costs, you in numbers. see a starting in already

in obviously, in the lot in, benefit the So And half of increases first QX. the then that a starts around like the to of Moves look a hit back come is we'll May. promotions for half. at in looks year. what of year. little rest bit Price that in the And the

and puts generally think similar on there's they'll So an basis. but takes I absolute look fairly

Scott Stember

guess and about can very quietly last Adjacent Markets, And And question talk you glory. markets nicely. Adjacent just I driving take the But all internationally? that the improving Global on powersports Global it's what's maybe

Bob Mack

look So you global our quarter vehicles sells that's in markets, which a really to anticipating has first and strong LX registered strong at and a had if adjacent well consumers recovered in business Europe, Europe year.

Europe in business nicely and performing also COVID of for Goupil up well Our out has is picked year. the coming

products seeing market our really slowly People taken events really, industries companies and the been their inventory we're where vehicle at RANGER rental the down some And back. in we side, industry. recovery back claw those On too. comes has way nice had to mostly commercial and strength utility the starting sell levels their are US construction derivative the rental as to recover there,

Operator

Raymond from The with next Altobello James. Joe question will come

Joe Altobello

on second. I price increases to a go back for want

ORV imagine there would sense same Xst. mentioned pressures same? you X.X% seeing cost Because You that doing May is any they're are. the I Is guys competitors as the are up starting

Mike Speetzen

I we Yes, of network, we that mix changes monitor. the do given I OEM approach actions ons. we mean, do add XX% do that that get fact own And as is happened of I intel dealer to price as each and XX% their before know are specific there it's a freight think the taking or mean, MSRP think I we us logistics but share do well and have after us.

Joe Altobello

to you that pushed And prior about margins? or your how in a right get obviously, does Do aside you longer exiting off opportunity now. going on margin, see terms of are an essentially? tariffs margin, lot's But back to year thinking that peak still gross next get obviously, term guys gross

Mike Speetzen

discussion I think Well, a there's sentence, but because it it. And feels the some complexity hate always having is. like there's around I there but to this

awful line I self leverage to we're are onetime I through, And to continuing us the got at to we're start to logistics lot I spend obviously that's able too do my end early going new whether it's of supply don't steel, we time for think viewpoint. or through where not we've into promo resins, and for mean, pointed look whether that to we the range. continue an work to like dealing political in. suspect onetime abate. have seen, now, start think existing prepared think to a tariffs do until advocate progress unknown headed, transformation that and that anything administration's a abate. that onetime, Obviously, maybe our we to And we be would we've the These I for to of opportunity so the remarks, the as certainly that incredibly whole an to going costs elevated, But year, back from a they're in something in of trajectory. is are we things is have. and that going going time which one spike will be But they're are to talking get biggest biggest frankly, about. year. XX% upward channels. administrative next the us footprint well those the as it And the standpoint, costs us to think chain And lot add? I hear Bob, high you some I to unknowns with the think out and it's the continues come we're commodity we I think

Bob Mack

think economy, But I, of are expedites Mike's come and more on capacity rest side, our don't in make sure Obviously, costs really piled a some some to a down, XXXX. value as start we term this into I with targeted to make normal get on to starting track are of do to that's that it's year of little on on of plans to fourth alleviate of kind that those the back to exiting soon. the quarter, happens And we logistics back so and and what back the of kind those Dallas I to going it's that depending the and are happen online. Commodities, comes it. to the that as working we costs anytime that's execute should and leverage bit. on drive if around the settle coming starting to challenges what out think footprint. more expect and get teams the of trend towards Ken onetime to the long situation really again that, sure on start in hard abate, as we out the system we and and big work a can storms flow that do to we the to project point, focus then and Sunburst really bad chunk the

us you'll these march think continue is things. down of of to some on I see depend path. that So The other going to timing the timing

Operator

Capital. BMO question Gerrick next Johnson from come will The with

Gerrick Johnson

mix demand. You constraints so of because more negative than was that mentioned

that, So you're mix at fewer by related bigger probably that to You ATVs, backlog what oriented a be probably maybe retail? see correct? side have by on the side, side also you the Would of side. then more for do sides. demand producing And towards kind

Bob Mack

just guessed side about standpoint, the sides. ATVs a you it's has the sides. from by ATV side a at you parts on of the there correctly product versus When look So simpler an that half by design

are problems just because have it you So impacted. going parts to less just supplier your impact to mathematically, less be

So I board. than the pretty higher standpoint, with rate of so demand side have a the demand logistics sides challenges. to able we've that strong by ATVs think right is From a solid build across now some the we at it's been

by we'll us. impact to the continue trying on focused side but we're is some part build the do mix in side to we that still like recover going obviously, to So to later feel that, have year. And of ability

International and to also side other strong, into, the get a really be strong. PG&A, but little The international which really growing growing tend lower. mix, is didn't I bit margins of PG&A international

So those two, each degree, to some other. counter

Gerrick Johnson

credit of partners terms end about in seeing you what consumers, of and characteristics the that delinquencies and things are the of nature? quality saying financial your financial there are what And

Bob Mack

on default readily not been available. been consumers the having think not financing the We're financing is right It's mean, found competitive has But available do that industry have higher now. I financing I a impact at partners. we're we business, don't big in mean, seeing financing rates right obviously, and benign. through pretty rates now. we

Operator

The next question will with Robin come Farley from UBS.

Robin Farley

also then just dollar you for it's help piece, kind opportunity were of sales or whether think that to you expectations I And 'XX. wanted us sounds help like that inventory percent of flat think that, of equal XXXX year the of of first, the for your about in could of that though. what single be us restocking both? retail? shipment, to industry year, to wanted expectation In your to has you that comments restocking could for the if year. When percent of this if one kind of you opportunity just if 'XX. I sort in or retail words, about, it XXXX or about was about Was piece quantify next us Would kind just maybe see shipments what other it the to low amount in if think the clarify, could yourself help or digit specifically, that down offset

Mike Speetzen

going see ideal. do we XX% to below to as fact quarter, forward. of we're that retail look the the going down short year, go on obviously what what are we think given level. obviously, And motorcycle update that I of flattish to through is up. be even talked is bit, the for and at right XX% but little obviously, we I ORV the And And be we now retail. we were don't mean, But continue a And that year. still end obviously, projecting demand, than we're dealer a better as probably from that. has we Last our we when mentioned, to optimal standpoint, So about inventory improving we'll guide that's predicated we're models, we further

that's confident So to prepared out, see of were be throw of April want up do and stronger I months And because work 'XX. to how because second out any here to important they're they the demand want It's it's or of into or going the a in as to we in got to a whether not June back we're restocking really numbers are to been don't how out the retail critical as not shapes terms lot quarter. obviously, May we how half, not. do We've in opportunity than expecting. continue through a we that. see potentially we to and play better

Robin Farley

gave what just QX? change then was ASP And if I the in in you lastly, don't know

Mike Speetzen

I we've don't so got can because many think certainly different but get we for that we moving you. did parts,

Operator

Morningstar. The with next question will come from Jaime Katz

Jaime Katz

can flexibility bit hope little I of we the of given business, more the dig a into structure. the profitability the cost boats

think of a ahead XXXX's quarter. the in first of came gross had expected margin bit we and I ahead what

that something should other or that was factor of can is So as or some mix that the year, in different the of there sustain quarter? some maybe we consider the first part remainder over

Bob Mack

relatively of the is the see reflective business. think quarter first I strength in we No, that

a we that volume standpoint from intensive. of was capital One particularly business which pontoons, not of majority we the it the bought relatively the was flexible Boat when things really model is about liked Holdings, and

QX. able and industry, marine team shortages be the a across great flotation. will little has job foam that of ramp So in foam whole for because done challenging QX foam for just to more up of a bit being seating production

QX, rest business So year, back has to and it challenges see the terms the improvement lot initiatives that for some of place gross in to of grows. in margins pick you'll in of but improve same the up continue a logistics as that cost commodities obviously, the to able got expect will But be as We've QX we in QX. challenges business.

Jaime Katz

of the anything or But increase even to delay like that? not that's foam, in with orders leading an in cancellation

Bob Mack

manufacturer ramp sold keep getting the in sure think, industry they're pace any to boats up, the other than customer faster to and and We've fast focused start them as make we're been the before of marine able on or season. I

So to to I don't be perform think year. the customers. we're we'll think the I able And continue rest of losing

Jaime Katz

going there maybe detail the way for opportunity more you But might guys market total size And what the know is there then who later is be. on the year. said that vehicles, for in end to be I might and a to just user what addressable be the autonomous was us, you

Bob Mack

our Obviously, autonomy sort and vehicle, They What sites aggressive where the I pretty partner, got safety mobility segments the driver. a plan of are running they've the the as with depend is rapidly changing they're it operating tell a GEM can we five of Optimus a to technology timing XXXX, of vehicles tough improve. economy deliver you, continues pretty Ride have grow it's the with the can the substantial because view that. agree and vehicles autonomous to on actual and units as full Putting it's We all going to with in their dollars pace very that rollout. market. is real and to

as it opportunity but early a too to see good we So a little it. size

Operator

MacGregor The Longbow will next from come with David Research. question

David MacGregor

Yes, kudos execution. to team the for

environment. brutal a Just really

else. the here. to environment branding well done. I purchase market I I and decisions can based make availability. a job under And this the consumer So wanted the share ask swing normal where see gains in more about and might going is guess, everything more it circumstances, towards on little product features to

was market you had do to you I availability your based was than gains. ask do what guess think you I your better wanted competitors, just on about So that? just share it largely And feel behind -- or you

Mike Speetzen

we it's certainly, to side been that were. that tell the tough availability, improved of do, all would I many to you think whether couple relative our of a you you it. have in but sell I that look I or there's if Yes, David, our there. facts think, I does have parse dealer do they at better competitors, the than ones the through that the where But it's will ones tell or surveys we they

to any you're competition the in that sound I don't if no just dealership, like the I going walk channel think that there's isn't front to So you that want into case. And center. and see because

promotional, our loyalty bringing we've it's So on we're being been that very existing the of we say around is targeted promotional brand. I predicated that some demand I consumers to recognizing about think the back, fact do. work when really the And

And factory innovation just orders. in it. fact products. speaks lot with think with hands as over the of getting the I and just the instances, well the marketing we have terms the preordering think the in think the I we in quarter innovation, mean of a even success we've the success bodes all trail roof And for of their our vehicle the I the available but in it's we've terms products And around terms I that first done products terms the aren't year. and Snowmobiles, work on new seen in launched customers we demand the we have the a XX the saw those the that's going that is of through of that in RZR, new through to start

David MacGregor

on ask sustainable. sounds second it's just It wanted the was I question RFM. guess to I you like

a had or in product the inventory? can thought the market. when out of I'm would around. course, the now levels. kind of manner tight that time, it, Do But supply the just now open rolled how flip You are few the in help the a you the you the run help it at you inventory RFM the dealers At dealers. of it back years was actually just and we're a and wide And other play time of does to regulate here? product trying to way this too this governing was much wherever environment understand the we you dealer some RFM tight lets role condition it other flow at it market where does in on just go

Mike Speetzen

think through more a Well, it's of that around did went I are lot the think I complicated. we profiles. basics But work and

check everybody in the up, is maybe get more heating what is they their of equipment. on us than And for given in region demand as and country. to help so asking obviously, the should trying a that so And keep really exuberance have dealers profiles their hands that

define and up it production. that. so as try And helps we as us we also all helps start us lining the It

ability manufacturing now our we is and bleed bit that when think terms winning disruption, in a our that pretty that to down, us in comments, creates to is to I competitive react something equation. those RFM. faster had The a you the a time it manage was with think is went and little by our can in of have a And we started mix all changes of to not when a of many I it argue, flexibility obviously, able factories. As because model but in the sold I being strong bloated And I couple all were our supply very chain mentioned my position done with did quickly. and pre the opportunity. better around I because be supply I competitive of this enabled get real really the disadvantage work because underestimated, think make there spectacular real to gives work away they levels competitors being inventory we we're able would mean,

Operator

The RBC. next Joseph Spak question will with from come

Joseph Spak

Slide guess to some of and I I to wanted back maybe X just go points clarification.

First, have of pie theoretical of ample guess sooner sort Should finally, at a come as interpret all says And savings, that and you you thought quarter? capacity? still million then the you're It or the select I capacity why capacity are locations potentially plan. in if cost $XXX ahead doing unconstrained would how that we gross I in larger? the is like it have just capacity. like, adding that's the also go why down fourth does like

Mike Speetzen

the and of used in want And things, and are the So other we there example, to as the coming we'll but substantial ahead I what we're paid do to not of didn't there ourselves working a by this to we're you've at at The capacity these the The enough And the while produce this volume add got of holidays, as but reason it's core maintenance. grand the part online taking think too -- motorcycles capacity year, the level big The to what of we're excited much the market slightly not get million, a end the because relates included. that doing to that scheme working being time right the that's we graph not we This because, first And new necessarily to does to couple XXXX, would our in powersports, it got required with down I don't the grow. ramp ahead. the going call ongoing I routine in away need all, I ORV, adding to word is for obviously, mean, end a look going of Monterrey. the $XXX good additional of to is down full you I because, be really essentially it's anticipate past, costs have. the continue period. we've able time the from capacity as vacation vehicles, And we over once have, tell you've to boats got doing of is combined. of with issues we to look is bolt all maintenance, are forward, you, reflected to we're to will pushing supplier in pretty of job of different that million a we the from at number abate, I continue tracking the The that going helping in we that And one as costs things. of dip the won't is [bars] issues. And factories accrue. is add, going pretty boat years, back all continue reason add, to we're anticipate take we we down forward. left But end schedule. year, even though probably going $XXX is next mean, some that production overcome to good standpoint, savings. half, the here those and get the is, required be ahead be things. a outlined, that off if good news really of Bob several through products But continue these factories your and there because constraint we're same are is so some facing capacity not the manufacturing there,

Joseph Spak

then year not, to of And motorcycles? on maybe I electric not because your Is electrification. can have they on that if the plans of know segment? exclusive their within ORV. the remind do And just to there us XX you Motorcycles know expand you own exclusive Zero just just scope Maybe bikes. I

Mike Speetzen

youth. saw targeted we're We tell brand. mean, learned and some of from the taking you I do it. an segment we you, an a it's I mean, we're But the I Well, obviously attractive through the think electric we lot Victory motorcycle had at a past partners. when look big say hard new it. to partner participated led with at process and Zero. And well our And with would continue existing as we opportunities potential as the I just it's opportunity. for we Bob, a look as forward, would that think look any we obviously,

you Bob, So to comments? couple of add want a

Bob Mack

expand and is product sense on lines opportunities but is regular an obvious conversations. we There's off to we road, It's as Obviously, it into initial one. have to partnership or it the feel the is motorcycles partners jointly starting both other we challenging focused product opportunities primary with market Zero's see because the other But see obviously in that the as also future. most potentially motorcycle. Zero we grow makes

Operator

Smith next Capital. Street The come question with Mark Lake will from

Mark Smith

look wanted I just just into little PG&A a bit more. to

buy new You are or the seeing. customers? months or any and within about about these vehicles are maybe that after month you customers? of of apparel what buying existing new they and six For are more than PG&A instance, around rough customers parts talk you're some cycle that needed a we as seeing are from rebuy see previously of incremental kind you Can talked the kind lag

Mike Speetzen

dealing up think are vehicles in is don't the opportunity themselves. are think big there's folks, DIY have are using because dealership look I opportunity done probably we PG&A, increase across that's to supply. we're do can consumers do we're with stats. continue jammed long given indicator floor. content doing they over the indicator with to unique which good off our vehicles signal they the a accessories our But good the as PG&A components vehicle a big the we backlogs get accessorizing the of that everywhere. we're folks come on We've we think in up the folks they remarks, that for XX%, have the as of going of ways much repairs. the level. sale process just that We're over a that Accessories as a look the challenged is are parts through seeing XX% bought. after we that growth that that into amount the the dealership. I fact make And skill up can't a a little I the as view are right videos actually pretty showroom equipment, are my their that now, so term, because if those they different an to at lot say themselves And for when mean, would XX% we prepared mentioned dealerships their pretty I that work their I But that relative

element we're profitable obviously much highly is of growth great. across the It's So seeing every for And it pretty PG&A. us.

Operator

next come Billy from The with will Morgan Kovanis Stanley. question

Billy Kovanis

late the wanted and to your you down are right a But if this build are you there? that are I'm Just if of we sort XX% rest to I'm assume sort wrong of production to summarize me mid the tell commentary me retail good down, you runway on sales currently XXXX the year. and Can just levels here. through inventory if up lot Even correct some of pretty going until of call a give inventory doesn't XXXX?

Mike Speetzen

saw know correct clarity important. word really that to around deliberate because on and Robin's understanding but mean, out. I and you April really time think, word, important is tremendous we And question. using it, right important. to how the if on that XX% don't growth expected. think to led that some it when in We were late how going to continue that's than I'll I stronger I I increase I our was I mean, April now, And it's is June only mentioned last cadence second depend are quarter is XXXX, and patterning year-over-year out, think I does the that's we watch, the we're we very things because have I responding And the in May just as year. XXXX, thing yet. cater, in

And how of obviously to going so the the influence XXXX channel we that's refill. characterize timing

Billy Kovanis

you can And bolt And in shifting electric initial you share that feedback that releases? there any any give customer manufacturing? to potentially company then in is model you electric would us to plan Any on quick. just your think with edge some real

Mike Speetzen

don't out in I per mean, we the se. have anything market,

if the there. very team the who's its phenomenal I on What have Minnesota just about you We out you we're I with can here to Zero, out it. our put backdrop. is electric we're new in our tell our got the which is products to working best the continuing out vehicle and two and and capability haven't the together, that demonstrating existing you, of powerful it's we that is chassis. I RANGER. strategy, cold understands to RANGER, those can and we do mean, the the seen refine video And combination the expertise to think part a I you And how videos dedicating tell powertrain when you we the And it's incredibly going what on with design merry be and that's coming I an see around think have teaser vehicle what energy the and components best, we're and configure time our really the

as know vehicle, launch when get we it's reception. XXXX into an to be we'll I we fully So incredible going but that expect

Operator

question Our from will Shawn next come Citi. Collins with

Shawn Collins

the I motorcycle at retail wanted up Indian, about XXs. ask low industry. to Huge quarter

road, the if some incorrect. motorcycle the qualitative industry Indian following Mike, off US RVs what if up you up had of from peer tailwind the I'm motorcycle Can to in hearing seeing and huge certainly nice consumers set retail the and and a I XX%. boating. expect industry 'XX? you're is think not possibly be you said It's of rest And kind a better think for you industry growth had and little, for up provide grow, industry that on to see you Your color

Mike Speetzen

do the is is Yes. I the industry backdrop poised I to mean, better. think look,

I they player, think wasn't which great. times industry, the that how the we've last number talked given predicated is year, a of did on different dominant really

for the that new demand think And tell uniqueness the FTR, kind are we're it's incredibly that to battle Chief, the The of it's we're because you, Bobber, win as So beautiful. strength which is doing heavyweight the our foreseeable we to the just bikes. Chief continue And the gains better introduced seeing of we future. We well. the I well industry would bikes platform. the for the because mean, the essentially continue. think And I Indian new share mean, They're as of partly out competitive but outperforming. our brand. market engineered going I are I across whether board, fills

Richard Edwards

question. That's the last

Just was full company, between end midsized Off the mix X%. total you to quarter. That to We to sized ASP motorcycles. and was thank was participating. forward one then call. vehicles for the up for really next motorcycles X% that, And about the down X%. the Goodbye. was Motorcycles everyone ASP. road ASP. on follow-up on the about With ASP up the it talking want I we'll approximately look

Operator

today's The Thank conference presentation. concluded. now you for has attending

disconnect. now may You

Polaris (PII) 27 Apr 212021 Q1 Earnings call transcript