PII - Earnings call transcript Q3 2021

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Operator

Good morning and welcome to the Polaris Third Quarter 2021 Earnings Call and Webcast. All participants will be in listen-only mode. [Operator instructions] After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Richard Edwards, Head of Investor Relations. ahead. go Please

Richard Edwards

our call. has summarized and and us Jason, slide remarks everyone. Bob you ir.polaris.com, Executive Thank is Thank morning's our good year, questions. quarter the and third Chief joining this which at website for expectations Chief at Officer then for take our the Financial Officer; A information quarter Speetzen, Mike for have in for accessible you, our Mack, morning, additional our earnings revised presentation we'll call.

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

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

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

Mike Speetzen

Thanks, Richard. and Good joining you morning us. for everyone thank

by evidenced record sales industry continues respectively sales and is with The XX% supply of portion Polaris. XX% unique customers While to to is orders result at good expectations on the for and ability performance to the Polaris new very news deeply our year-to-date not able versus impacted challenges outperform meet with be were products supplier to presold logistics negatively chain to combination demand ship highs and much reported as quarter, mix, earnings earnings This and in a supply strong remained entire finished record we sales chain expectations. challenges our for up our as of shortages XXXX. but below large impacted were the by our continue earnings challenges. a and by sales impacted Powersports quarter. our is a that being The We and

segments year. market We up business also drive last continue in are to year-to-date other with are share share in line in versus market ORV of the and gains or

PG&A growth generated delivering in well while more excitement PG&A XX% and a with QX. of businesses sales introductions I business few have strong for and dealers our product X% details and our lot International of will slides, Additionally, And sales a International for in our new and energy performed ORV customers. cover growing

list port manage labor constraints escalating to and We through stemming from driver commodity shortages chain shortages; issues goes continue the supply very and backups, on on. truck and challenging prices,

to We additional given the into may year guidance of year. are combat Thus year any we months countermeasures are taking you will slightly. Bob detail more aggressive down steps our give realized until impact shortly. sometime but XXXX next be these we're revising not the full headwinds, XX

that recognize to a of I'm continued work of also understanding improve to us dedication full I flow Polaris the to While the team the disappointed impressed exhaustive more effort of lowering and we're supply their keep ongoing result our for year with our couldn't guidance challenges, as be dealers our well with our suppliers dedication challenging moving to availability Polaris our these their to as continue want to products as customers. components. who upon I and in for times, chain

the on Moving sales to for retail quarter.

in year resulted were two a XX% down XX% in XXXX. the down positive third being third sales from quarter retail retail the This quarter American North reported Our of basis. XX% on

issues. results entirely by lower supply than anticipated chain Our retail originally driven were

and for up a Dealer market a continues pre-COVID XX% average down of gains of down quarter levels most market. sales remain Indian And in the half ended in flat inventory supplier than share have and share currently gain levels to Motorcycles to market quarter. to supply getting basis XX% XX% at year-over-year in sales compared midsized We the business constrain XXXX. continued year-to-date. the share both less retail when for month also QX down we retail share vehicles We the in the on the on inventory a with stay – engaged maintain ORV, market than in side-by-sides. for be ATVs down interests our as vehicle gained to sales better is market of a share the lastly to that with dealers being the channel. is almost our the as the being and bikes a their during were performed category. retail lever continue while despite with way very quarter effective despite year-to-date consumers quarter, boats now was constraint and snowmobile Snowmobiles Presold point built. consumer to

Given with more the I'll on process, some seen team has which have advantage we changes, detail this the made competitive shortly. provide

to Given situation inventory issues, the current don't chain in materially supply XXXX. the we improve dealer sometime expect until

created levels have shipping As in return of lows earlier, supply our not with unprecedented inventory coupled dealer With normal significant I are expected discussed to continued cadence. to chain take record in integral products disruptions constraints to demand order and has process the orders an will become continue and deliver part dealers and to presold near-term. The of process consumers. be dealer how we

made dealers some acceptance Given the and visibility process and the to supply to consumers. to predictability process the challenges, and the modifications the of improve chain escalating preorder we've

with changes delivery production current ago, Let adjusted the schedule. few a we on with of of share dates a you. weeks our to orders presold few limited align A me number

order. dealer and customers allow their industry of confirmation introducing for both provide transparency This first estimates the presold order the are to order to greater plus order will online status data We tracker that new ability for customer. for up a will shipping find with presold date

the models, today. designed reservations We models improving and our provide multi models prioritization while to are believe system range and expectations wholegood product timing customer models. shipments changes our summary, Polaris are Razor for the shipment select this off-road are have will dealer the popular, ability necessary Next to and presold increased and improve consumer the of supply highest currently premium In All these dealer including will for and and demand clear of and PG&A existing the allocation communication improving experience. a orders better while today. multi we These models, premium program the most presold turbo models in remain manage the environment serve performance method highest created to setting of drive retail other to within Xtreme the profitability flow the and in customer. place RFM full-sized the process premium new in unchanged constraint and performance to dealer velocity plus and percentage full-sized multi currently the and general

continue supply constraint peak Our at operate capacity. plants manufacturing to chain

a While number name our include – have of shortages time, the semiconductors few. plastics, models. The a delays shortages doors, supply our mitigating are teams to just and disruptions unavoidable crankcases, and, course, days for chain become shocks, deliver of large real

environment across shortages aggressively behind the We cost. suppliers our who with higher is its railcars Each link with the continue the and shortages production A from business and bottlenecks, increased impacted exponentially. in the created byproduct and chain schedule has supply work ORV of being to given input have supply chain schedules are size. most disruption shipping input to costs where an port of rework increased lines trucks

when of capacity cost the have and these We've $XXX did on discuss is to the you recent Bob shortly. Bob which when issue. additional since not supply this that anticipate year want the through has offset clearly an that subside. a first attempted fivefold. the give update I issue. will we That's improvements Again, reemphasize, capacity disruptions It's manufacturing chain capacity attributable will surcharges, to supply demonstrate we costs will additions, increased constraints and will to a chain year of not costs chain have example, supply began. an million As over pricing which

a New of going remain product growth forward. our key introductions strategy and innovation component

including quarter, onboard During the and XX and box, It more and a larger storage introduced enhancements more limited product ORV more features, new noticeably ranger contour storage, comfort inspired models, leg a ride. premium new with seats. dump comes with new including a models, mid-size we rider quieter room edition

better fully GPS ride cap with a a for and and keep high vehicle technology. new doors our navigation EFI standard trim leading with exclusive And Our front to rear we younger to control visibility industry-leading geo-fencing allowed to available seasons. just technology is RZR introduced industry riders where the got XXX to the leading rider, the industry of inch the NorthStar E comfortable enclosed hard Sportsman, control ATV including features, D communication with brand safety the and go. top L to into technology speed also parents is and command cold X limiting with and allow speeds digital addition lights,

year models XXXX. to In of enhancements addition, and RZR in we GENERAL, model number a Sportsman RANGER, lineup the limited for edition added

innovations We in the out and bold years. of next continue slate are over to entering play sequence several invest and to exciting introduction with aggressively an phase development now the of research a launches industry-first

of the introductions One riders unveiled new throw which RZR all recreational is passionate November sure these will on our is Xth. that be extremely to

teaser check of haven't the seen videos, some should out. you you If them

highest excited been highly One While getting our industry not in nugget social the launching fan are to new ready our all open the to and media these bring new position Turbo Pro We're with leading RZR market. week, video ready that last tees R to channels. anticipated in to and I'm launched the we're launch wide two; We're today industry. recreational just across the products RZR has performing the little incredibly vehicle one R forums the segment rider and confirm is new RZR reaffirm the to leadership RZR. excitement energized

set throughout previewing, power braking, RANGER, a videos acceleration, always RANGER ride. in in full-size about year, innovation time marketing completely talking the we one center is instant this been precise of been will front As RANGER. regenerative quietest and including is control, electric growth is We've benefits leading torque said, ground of to highest cost a innovation This power, weight clearance, lunch all-new redesigned ownership some number the which now and the the I've have industry, strategy, be December. and new of lowest for in to our ratio, more

to and our of each needs summarize turn on With our – quarter can these these the incredibly over our offering game-changing bring updated the expectations the product, RANGER commitment see to XXXX remainder third game-changing that, website. results excited meet this videos to our who year. expanding Bob will We're market, for customers. You it of of our to reflects as I'll to our

Bob Mack

normalizes. counteract working sustained understand while the chain these are Thanks we supply third sure believe of everyone. morning, supply near-term the for we in well-positioned want the we and Mike demand the in good headwinds expect investors face pressure to on faced make are our the remainder as to Mike diligently the is and that highlighted chain to the continue headwinds We we year. capitalize to there to quarter

We the of have will the but on let the start quarter. more XXXX later, third summary me remainder with first of

basis of same Third boats the and the of to our were sales impacted and in down from XXXX, were shipped vehicles adjacent a GAAP more on businesses, quarter. versus were all premium compared motorcycles, sales market year a motorcycles finishing chain boats. ship during mix constraints we we and able stronger product improved impacted mix ORV, both quarter flat were quarter by to billion. and as improved while snowmobiles Sales in sales at basis, positively the aftermarket adjusted adjacent markets the supply a quarter on year-over-year X.XX global prior

the supply quarter by I lower markets $X.XX, Motorcycles given favorable share plant adjusted was and markets as XXX we per down on from alternative to all QX segments demand about increased selling per continue up given for was which the quarter year about increased $X.XX were Retail product ORV talk the Mix in impact available points our the the due the in perspective, motorcycles, ASPs units, lower were finished gross lesser and primarily taken GAAP declined the programs selling during Average they're as by adjustments quarter. and XX%. pre-order the to impact year, increasingly and about to more the to from financing actions. year-over-year X% quarter. from also the finally, adjacent a are chain did but financing quantity partially costs lower and an commodities, ORV, and to logistics, boats more operating in development a sales promotions in XX.X% reported for facing credit increased important were due marketing recently earnings increased basis credits primarily costs financing the benefit during segments. increased expected. around customers tax margins reported degree will increased taken $X.XX, large was expenses actions pricing, input reporting Adjusted were was a the snowmobile last up, ongoing cash, inflationary muted input quarter basis lower ongoing prices segment of down in favorable from and rate we related mix. have for in the due quarter earnings approximately of and we from additional X% and and development driven driven expenditures global up benefit labor. low financial all costs costs. increase on for favorable had by product having be a to in minimal today From floor Sales research and XX.X% quarter. during sales customer and services which options. pricing going volume segments to mostly high retail quarter, third Polaris an the channel. Income X%. countermeasure inefficiencies continued forward. shortages. for approximately XX% pricing the a boats in basis, Third approximately penetration paying XX% Pricing environment rates segments to compared promotional costs, low-promotional not quarter, share consumers Adjacent time to income. Adjusted from had would last on due research The taken at due All actions And the and lack May pricing offset aftermarket promotional to plan were to up to for shop were a

X% percentage supply recovered chain demand segments XX% increased continue and Currency sales quarter. economies the particularly remained increased business, sales orders international accessories they for the in during to to in quarter COVID shutdowns. regions added limiting from Parts, traction growth strong PG&A the with the quarter as with Back gain as the earlier Our and our for in international accessories. points three that and during segments, the many garments categories by across sales, all all parts growth bottlenecks growing quarter. driven high,

$X is full-year At to this approximately diluted per the share finish environment the quarter. are sales earnings sales we are third to And supply Moving billion guidance lowering our going product Therefore the has on supply into the the anticipated. challenges been quarter in we quarter. headed ways at we ship expecting at our last full as chain X.XX year, year. fourth the in anticipate level pressure and to Unfortunately, chain our expected our constraints expectations supply we improved per and year in fourth approximately Mike into sales company to had for the now of expectations for share. indicated, remainder had July, projected Total adjusted impacted the XXXX. as we ability significantly the quarter. When updated ease we fourth into in guidance XXXX for to earnings finish continued expected the

have While for $X.XX keep ability share guidance, driven earnings we are source than to components disappointed that update XXXX our is our the per in high guidance range. full the original products. higher we our are by needed mind The of to year end sales expectations and our this

be will performance for remainder chain that to the guidance current the not suppliers our in and Our supply component QX able year. assumes deteriorate our deliveries that expectations will of for further fulfill

impact quantity ship quarter a results. gives were a we shipments puts environment, providing In of guidance and the While confidence of could mix we us significantly given given this timing takes have a a which range. products and of realistic able typically in quarter, component our the to the for solid and view in therefore

dealers all unexpected We are have chain our we to quickly can doing limited consumers, countermeasure to certain ability deliver vehicles to and disruptions. supply but

our to our which we the As One have for vehicles thing is is XXXX, will run what reflective current we the can. as of projection requested on interest we such soon get production as in component rates. to viewpoint of availability do always consumers you balance them best our their is and certain provided

quarter the profit margins is increase escalating basis to be in plant at Moving inefficiencies made has expected beginning The the were Mike in approximately down input to following guidance. points from now plus basis Mike but labor significant. just input the costs been end and $XXX the rates, lower increase points, which down to of we've the our year third P&L, XX cost quarter. Adjusted previous million are gross approximately as prior logistics, million XXX rates, increased when of and revisions. third input in cost, the earlier, compared ocean indicated since our $XXX truck over alone, mentioned the commodities, year,

the the for cost our are XXXX. of are we magnitude that not the pricing increases Given, they expectation input in model transitory, quickly year adjusting

we Here also digits in announced ORV that were price Similar price percent average year. addition motorcycle sales price increases the increases announced have and will in in mid-single made the in to These are earlier several PG&A. most range. October, on the models associated increase increases for we increases

year, lower range, pricing improve our XX lower of the the operating points sales expectations, set guidance expenses impact versus to margins of headwind announced cost at will the will our XXXX to pricing percentage sales the management. by growth the gross previous until or dealer's While levels. have a recent current profit partially expected in pre-orders not by the again, quarter, the prudent the the actions environment quarter last end taken driven continue of is Adjusted basis previous as now of cost benefit that offset fourth at the as are a impact first significant

with unchanged flexible volume. controlling expectations as earlier. the well previous providers by the guidance, levels, issued provision in as rate as is in of adjustments for Guidance expenses explained inventory continuing from improvement to income commensurate be previously through sales retail P&L income items the the range, adjusting XX% our I materially of lower the And of to now the historically for from over driven XX.X% related financial low expected Income are down and favorable to due low-XXs our to invest range business year financing reflecting tax penetration the to be we're tax We rates our services credit. issued our our of full our lower percent the while dealer guidance. continued the remains to remainder R&D flow retail in

Our sales lowered given markets, have challenges the chain been which year. expectations for supply our adjacent segments for the remains the exception unchanged of with global

While feeling better the supply finished our inventory position the markets. market were and in our businesses the goods a in They adjacent given a BXB consumer challenges same recovered businesses. dealer rate has with market are chain other with slower at

adequate meet we demand. needed channel is to ease, place capacity current fill the the with to needed when current quick will inventory. have dealer Our ramp the begin and plan to supply much constraints the chain in And capacity

are and over square XXX,XXX over expected model feet is capacity XXXX launch QX next more adding for new the next accommodate general the additional year by the ORV year XX% of years. approximately models in We couple over to facility to our coming vehicles, expanding Monterey Razor the in Razor

demand we Indiana Syracuse, we meet to boats. back the manufacturing Boats, support capacity added deck approximately And feet Elkhart, our for Hurricane Bennington. to brought XX,XXX in for facility For demand the Indiana strong square of online

bending, higher addition in to to space, adding molding and support welding, have also In volumes. painting capabilities invested manufacturing assembly we heavily injection

the in an year. factory parts to vehicles pre-buying was increase much million operating increase be uncertainty period supply to same quarter The around improves. to to as at availability will capacity anticipated in ready driven these the the strong when adds, inventory last decrease waiting for demand flow meet remove components as With down significantly chain component possible. in cash finished compared the our by $XXX the third due Year-to-date of we

to improves. towards now repurchases Mike of concentrate return the With a While capital the we we In until remains back shareholders. capital to organic share will constrained over environment, like final some investments supply that, our use to turn much lever, current for I chain supply thoughts. to it will

Mike Speetzen

proving Thanks, Bob. challenging. supply be chain, XXXX forecasting With surrounding all is the to uncertainties

where you preliminary next me today. views Let some give year, stand on we given

in likely of be issues is chain varying out broke First, the ongoing the supply intensified. last since have pandemic to XXXX. the first of us quarter, chain March with in in the degrees an chain challenge end to past issues year. been But have supply Supply

Additionally, competition production continue In And pre-ordered to we the will outperform we year. lean cost to chain remain have this are experiencing Rest to that the we're working than we'll we higher year. can upon meantime, units I'm next majority supply us flexibility suppliers obtained. raise hand anticipated. taking until XXXX the assured expected to with through inventories hand to improves. we as current continue of chain the far the supply benefit in steps that We're optimistic prices so Dealer now much situation. our our improve prioritize is more are until to

consumer expect healthy the and of that to The supports through XXXX. staying demand customers new with is entered repurchase are data the number customers market that remain brand. rate have staggering We

take to businesses. I've current we've the our a appointed and substantial position the CEO my strong supply the advantage taking focused closer almost strategically we mantra I applies a operations, only was scenes, want capital. in first are the capacity expansion. given portfolio but day-to-day a that behind where been to look we're ago, of execution also starts also to the time was crisis. our our and year and of not concentrate When the full at recover, steps As chain talked this we investments But to navigate length position about supply in to taking at

in Biden receive process we've decision a initial the finally, financials expectation transaction around and our with year, we GEM to favorable exemption our reinstatement completed that end. compelling. divest realities made year The to tariff impact be by will possibility the such, on the appears while the insignificant of and businesses likely the out have less the As Taylor-Dunn And some process an of narrow I of rather far is next administration were been in been but hands industry. the down a XXXX. agile we've remaining growth formula year that brands to product profitability best believe and adjustments, have for with I'll by XXXX Couple the over line for The we that, Polaris winning and team and constant improve to years the and the of come. for portfolio open in best the has to adaptable. it With industry, Jason winning is questions. relief turn news

Operator

Thank Our go you. now question question-and-answer the Hardiman James We'll Securities. begin first Wedbush from [Operator comes session. Instructions] from ahead. Please

James Hardiman

taking Thanks Hey, morning. good for my call.

Mike Speetzen

Good morning.

James Hardiman

it supply sounds weeks, it's chain the few I over would've ago. bleak about be past months can if worse three that So, maybe you a pretty they we they perspective guess pretty are a talk to guess with or and getting than drill pretty are getting clear consistent maybe are expected been? cost better they from worse, b) where I month a) we or an delivery sit from have perspective input things, down as today,

Mike Speetzen

you would then couple the on I Semiconductors bigger supply moving say had fact supplier things happened after probably up this had shortage, they're at more kind have that that the our The have things when obviously sitting with mean, – a pronounced to a were by where things And that from off impacted is broader our pretty impact Beach, XX consistent driver were I it's in and there that think, hundreds. tremendously have the it's all And us. sector shortage, those specific to Long environment. a automotive there's a truck are that chain point, I Obviously, now become call chassis that back, just we've standpoint, issue. think we intensified. being I but we started of been. step of specific I in coming July. call, if our The sideways. there ships shortly company I think the they're

we're of will that what get or we're the sure tell a right share ports. on our we day-to-day in is And we with handful another. us, the can tend you at that we better, doing of I have things that's great within the things the disproportionate something make on context now. And work to is improvements start one, suppliers, get team that that call see impact trucking basis. realities should to but when and hearing supply suppliers And are broader have whether a that's The we from that suppliers to we biggest happen good of those through chain of environment. just mega then we're our see managing Now, the the working prioritization news our the

that So, that we'll with we're taking and bated breath see how goes.

I think supply soon the chain to as We're see Bob flexibility. mentioned poised react it. to as starts more

Bob Mack

a be more to think of level that least in some take at – obviously we to as because piece rolls buying down chain there. advance. commodities. headed the better a other normal you numbers, come through it the it full the steel to the of is James, costs at is although I we're into But early – towards impact get input And of in the year part looks year look there for as buys but it look deferral out next will back steel year,

downside So that help tend away. aluminum show offset going more things each challenging won't up right to is continues and other. those The get to are to

I'd to a for right flattish like So, now, it least while. be going the stuff is little commodity say, at relatively looks

James Hardiman

margin the way. hopefully will as from you've perspective? that the were side, bring quarter we it. like gross we and units the pricing which relief lower sort currently sit the there probably had throughout about a in the all the model here timing, my that a about are I inflation units the that priced And XXXX a price commentary think Got I would opposed prices? don't pricing to you increase is amount is I units an to be price way i.e., a that surrounding on guess, right as think, at that sufficient was the sold on the Street currently It's of guess of question. today, preordered then feel sort year thinking appreciate quarter. follow-up given those related really you I necessarily taken of Do The where you've fourth And where

Bob Mack

promo Yes, level. back. the to through sure. in and as I'll start bit commodities, at a from input a in relates logistics all behind little QX, costs getting XXXX We those terms – macro going it of QX, price we're challenges, a got standpoint

we costs As we the current and we will we XXXX. price QX, as and what increases, the going we'll at put QX change least to in in that where know into dynamic get see of be ahead where peak of they're start pricing

into good headed feel those a inflation. we'll where as we terms for aggressive year, and we of will ball things continue in at we be versus and the don't be Obviously, have aggressive factors look So those we'll next happen price to year with change. what as about next we're crystal price

Mike Speetzen

I were said, been in you price course think, everybody figure then we as which trying year have not think ramping behind about actions, James, additional because of through were is Yes, to headed. Bob the I as that analyzing just things us out and where the XXXX, costs, think surprising the the was

to we margins cost should As positive into annualization price. than is be of the of annualization it because the look less the XXXX, a the

us presold. that the into under decision that put balance cost should got prices going that our to hard We So ratio. positive from price we've the more made we're honor a a

fair than customers, with vehicles waiting change delayed more they given to the for expecting. was patience especially didn't So, their on think are that game we it the were

to dramatically doesn't pretty that be will favorable now, but more assumptions aren't commodities we we significantly assumption that that lot the chain what There's been, There get think that on going we stand. is a a of There's they've about based worse. around expensive right so see than get that. assumptions where we good tailwind. And supply feel

James Hardiman

Makes sense. Good pretty guys. luck navigating environment tricky here a

Mike Speetzen

Thanks, James.

Operator

Our next ahead. from Please Baird. Kennison question comes go from Craig

Craig Kennison

Hi, good morning. taking my for Thanks question.

James. last willing your I up Just on rising How to this guess inflation? customers follow absorb to are point that from

Mike Speetzen

It's interesting.

customers. from We have really not heard much

a high I rate. premium look in if overall think, selling vehicle are as and the cost prepared remarks, heard our a at the when at on price models – increase my of you you

and able we is the competitors constraint the of that So environment kind and landscape, dollar that similar to in significant. as supply increase scarcity watch we find moves. percentage being types our of know really not see And terms given the we of something

able by made, it's not stretch. that are it's price, smaller infinite – but consumers given we're feel to – not going the to I around obviously the forward, moves as any on be been we a portion take start we've that outlier of willing that. deliberate, more we as on good to an hopefully some costs think So And we'll elasticity move that and pricing. And have an which we'll these hold eye of subside, to then be especially keep to

Craig Kennison

GEM impact Thanks. you decision. the what cover And And question you're your portfolio to that Can Taylor-Dunn just then maybe goes looks decision? to the profit the the what criteria and quantify then like? define my on future of using of

Mike Speetzen

not money. as making press said million business of release, than revenue the in Well, we the XXX less was

good sense a you that will of give where that So stood.

talked the in I we've going evaluate continue portfolio. past, we're to to the mean, as I think

when not a with that management directly clearly do fit owners' It's think have that a we does look great allocate team. I what – mean, capital can platform. it'll straight other type And Powersports. hands at into and time better that I business, in it do frankly, of spend you more in be got

of evaluate And lot couple going our once forward. do it's board We complete that have talk continue confidence of with to in days to well to and meeting we a and portfolio here that we're a here to continue move as transaction the fourth the we strategy quarter. we'll in

Craig Kennison

thank Great, you.

Mike Speetzen

bet. You

Operator

question from from James. comes go Altobello next Joe ahead. Raymond Please The

Joe Altobello

this guidance cadence guidance in revenue somewhat improve implies your looks should question delivery it that for first like your the QX. year, on So

of lack that here. pickup the about that talked do much confidence how You visibility that October? guess? Have seen have happen, you And I will you in

Mike Speetzen

quarter a I our mean, is driven really dynamic the lot of by Well, snow business. fourth

I literally mean, earlier, asked we've really to inbound. that day we're battling every haven't mentioned materials James I As mean, got seen material when change. we question, sure make the a I

as can. real-time an in off them normally our positioning factory inefficient taking getting come completed reworking at process that quickly units then taken as what rework them parts facilities them five essentially a one components, missing we have the are to those and where as be and shipped and We have line and each would around secondary we're out then of

seen fourth that the in into And uptick day. battling So the by and again, haven't We're I you really every change in seasonality. the the largely try we driven environment. much see still really quarter is business ramp snowmobile as

Joe Altobello

what cost get pressures bit is you're QX, categorization? a that And you but likely correctly, peaked pressure helpful. to they have if they're a probably to Is interpret to in here side, for maybe That's before saying cost plateau better. fair Mike, the I over transition

Mike Speetzen

and what becoming issue some the a at Yeah, experiencing generalization. as in the favorable out markets. a you're of mean we've price it's lock, bit if steal an more able more Bob indicated, than a been is I been commodity But is mean, recently. I to go watching we've more of aluminum little reality

back that I don't So to huge moves we've see through have going lapping we think those obviously The going ramping we're we're historically. I XXXX saw know is, going there's the seen the year. and to forth. jumps costs be where to issue that we're

if you're cost going profile. still stabilize, assume increased to that you an they So have

same dynamic that Now, is the are moves to pretty the that pricing around all in as now. pricing as right well we're have speak going moves going much made good news we the as we've the

something to position. different but we to and continue out see be we're continue more see quarterly, that. process. pricing, So at better or it's more used far annual it proactive even then them review taking a position playing cost, frequent And than we'll think an year we process rise, it, obviously a be we if with it. We're of to evaluate in review We're model more our a in I'd now a looking say of

Joe Altobello

Got helpful. guys. it. Thanks Very

Operator

from question go Fred Research. next ahead. The Wolfe Please comes from Wightman

Fred Wightman

you Mike, inventories a or what to you Was that reset there? when of made at bit things wrapping color more expected give on sort you comment comment sort dealer just the were guys. were a end, you lower. that of a inventories meant on up, Hey company-owned Could inventories?

Mike Speetzen

In levels. improve dramatically talking XXXX. Yeah. closing expect dealer We them to I about comments, don't through my inventory was

and think loosen deliver if to high more the up pretty you we can at as about is demand starts chain Even still supply levels.

or We we that take on, so, high levels a waiting us get back And that to to a fair be. into right get is or I raw will dealer and it's to goods our components. while suspect company that a they XXXX. I of inventory the up to suspect amount mean, break level as that logjam second one one where two improve two very are have bringing components the profile to is and need obviously reasons, going we're we company start three now, finished inventory free obviously start should inventory at

Fred Wightman

Perfect. on this there in something what And gross profit breakdown, the corporate happened then call quarter? GP Was the meaningful that out? segment to

Mike Speetzen

thing only obviously that The through amount in flow that's would of factory disruptions. that the be tied and stuff there with the to absorption the all

Fred Wightman

Okay. Thank you.

Operator

next Katz comes Please go Morningstar. Jaime from from question The ahead.

Jaime Katz

which sort in sort in those the margin process. like we the think it's the dissect Hey, Can gross to the could fill expect with good want to for pre-sold taking program. have you of that about walk products gross demand orders priority It lift maybe near-term a just margin as we of take should on are that? lead case the us and through sounds possible respect morning. I premium order

Mike Speetzen

the a for The and seen tend it's dynamic had the vehicles. highest through expensive playing RZRs demand, year, have our characterization. NorthStar levels I Well, mean, RANGER, of RANGER think frankly. four passenger the be fair example, out those that to mean, we've more I quite I

alluded as should a better there new that the current we that take I is is you through the continue XXXX, especially working obviously of we're moves given the to my input work we've through think existing other unknown of different but position, an what in us that, more all than normally. I And with for we in the and the I can around pricing a the the environment pre-orders those start is current budgeting performs how I chain to the don't imagine price closing course hold obviously of far element the process at scenarios So different the complicated and mean, year. put comments substantially think component see as the backdrop is. made. level that lot if we're to But supply levels cost process And increasing running through now.

Jaime Katz

that it the you and about pre-sold at looks in like you accelerating? shows Can update And chart what guys Okay. And running looks – – whether that's or then easing last were quarter, that be for XX%. for what than by Slide the even it orders, X, that on maybe on QX. Thanks. like I would higher us quarter-to-date think

Mike Speetzen

longer It's It dealer a important as become last acknowledging to for competitive was from same the than going is We performing adjustments just our feedback environment's lot I as in the about supply to channel, based well much area. advantage on that outlined really constraint that as I the an anybody program, made expected. us. of think

from well. high it's partners. I very really – marks adapted think the we've general, working We're getting in our program So

Jaime Katz

Thank you.

Mike Speetzen

Thanks.

Operator

from Robin Please Our next question UBS. from go Farley ahead. comes

Robin Farley

just of the for chain, million input to circle supply of XXXX highlighted kind and the you back of Wanted comments higher pressures thanks. year. this XXX for Great, some cost to

sort looks XXXX. at those Looking through factors like of of those, would individually right it kind continue

that that model So some to model in in the needed exceed XXX that the idea of kind selling can that that XXXX, during price, expect price XXX that XXXX. will already is announced than for increase million you've higher million offset is year increases we price in expense? or the And price more maybe

Bob Mack

increases for thought XXXX certainly increasing looked we they can put price do certainly We're stay the – the designed it’s they Hey, days just year. at consistent as costs input those expect XXXX, and last in offset those Robin the them to we for Bob, whole relatively XXXX. consistent, The planning into into first would we that factor to going how were scenarios the half. so for few stay we

worse, they we'll top get we'll And XXXX, all if so from those standpoint. In and current costs at we if input a revisit we're and levels, And said, have input on the stay at be pricing feel on side, the we're the commodities of in obviously at much pricing monthly daily Mike at point it, like again to weekly. XXXX. this some like pretty cost looking looking

and now right next it on it of top keep on top we'll of we're So year.

Robin Farley

you bit Thank Great. some have my China been making headway market what and kind share just just have them can brands they then of really on market? doing know think is do is Thanks. Polaris to segments or of from your in And of kind market overall – sort you. may in that where I And be share. that not play as is, product lot of do really, a so premium import you don't of you been there little market question being not estimate sort a other the the in it

Bob Mack

would they easy us going for how it we assumption and and don't I play Yeah. to make general in not ours we're hey, them. mean, say, that's just operate. be to that But ignore

But team our not know, about or The size you competitors up of depending to add you we three our having impact and have watching add right huge a the you up, position, think has are which on on the good. of but making job I business think of the excellent an we're to we is two competitive really done to now. them you managing, size. get sure carefully reality feel that, overall they right us are in

opportunity four market be we're in not we've going that to a of that So could share is, five had and position put for us for disruption now us miss the to a or it let happen. quarters deal to demonstrating have ourselves big and

of job great through a done team's that. the So managing

Robin Farley

Okay, great. much. Thanks very

Bob Mack

you. Thank

Operator

go from question Please MacGregor next comes Longbow. from David The ahead.

David MacGregor

Yes. everyone. Good morning,

Just down? forward? back guess, increases as – going Are I price embedded continue get to to are there that clarity. are the on a might in some increases. Or there surcharges expected just your price costs that these come wanted I retrace question

Mike Speetzen

year recent stay to that mix we through price the through surcharges, a we into primarily is the had and Yes, increases – say we David, the price future. expect most XXXX both increases expect would true price increases that and round of I our

David MacGregor

Okay.

cost to follow to question launching the are prior when reference about inflation sufficient include you $XXX that make surcharges? next include so you're or on does that now And cover surcharges just not up that that does to ASPs year, million that, the

Mike Speetzen

stems separately an as dealers that put do because move. we've the the it logistics essentially specific around component. MSRP around, the to charges those we the start relief ability and usually that, to to No, around And we freight got quick surcharges from give reason move pretty

David MacGregor

– orders that? role will about in more normalize I'm you from invested just I Okay. My the future, will think state. some in point bigger the second pre-sold nature orders. question really you've the is I do the effort kind How your really of point a with to a into and time some balanced And process. get it deals And forward? and accommodating of curious be pre-sold guess At obviously picture and of and the just that back money what world going business that

Mike Speetzen

Yes, no, be it's going important component. to an

couple looking think, And are inventory back whenever normal deliver quickly be historically. our can they've been of times to comments don't for. pretty made that a dealers levels expect we to I what happens. at levels dealer we've we've that when that we to We get these demonstrated the

profitability. of us. really manage And clear. margins It's attractive. terms very their we come much vehicle the helping be the for a deliver dealers to believe customized to pretty and in future, with good a sales it's our through consumer seen capability and going that's quick dealership think We so day We've to of carry going that at to that time. And a we're a good lower them in in loud the period and outstanding for

lot from lot they terms what sitting guys large much changed you've think and think of of the look automotive has on in heard dealership where customer. is they inventory see I customized how be permanently by versus model like ordered coming the same the the a this a can will

advantage an and using good as hone it's to we're think we really going to so, competitive those skills forward. a And be opportunity moving this

David MacGregor

Good Mike. a luck. Thanks lot, Great.

Mike Speetzen

Thanks.

Operator

Exane comes Siew question Xian ahead. next go Please from The BNP Paribas. from

Xian Siew

for question. Hi, thanks the

satisfies guess slide some reworks the how where you And it to maybe with could when underlying? Slide XQ talking versus X [ph] look showed supply double now? you is? where lower you reworks the that chain XQ looking last a at So quarter with lower vehicles guess, now, going about plans rework the I the have producing chain higher a supply aggregate so that bit production XX% unit some

Mike Speetzen

what Yes. expecting it's the certainly chain we quarter, which I are mean, supply had to safe weren't we When worse, in reworks weren't get get the the last to is we that better, out we happened. to but dramatically come expecting assuming fact say in it were higher.

amount not short week want because number those so It is around, moves on can doing of is rework clean that rework a where team job for on into depending they And particular straight just have good moves to out the of were I unit, prioritizing go we it's week we of it higher. the a to to the we units. mean, whether And production are. that components put depending so delivery go, how those late those they the produce inbound really components a units go the if line, or there

job a it. it's sophisticated of So a and great team pretty the managing is doing operation

Xian Siew

a but ORV seems it chain on Okay, share it you about And question you there retail in sales down sale, like positioning? going can mid-XX, share then and resale on constraints, lower maybe it. got talk stack, another and what's retail I on terms how on the But the that of there's the were talked versus on two-year industry. And market sales know about gaining a stack supply than down were market two-year share that industry.

Mike Speetzen

– share gaining year. quarter about last of a each quarters points the two share. Yes, point the mean, been no, one in we of look I fourth at gaining half, I we've we of if and a started point, And

being we're we mean, good categories always So I there's ORV, the I for to to be And spot. different certainly in feel a think, that have. we going of back pretty elements good.

boats, feel great. feel really good. For In motorcycles, we we

So I good think overall a spot. we're in

Xian Siew

guys. Okay, Good Thanks great. luck.

Operator

[Operator from Instructions] Billy Morgan question Stanley. Please from next go ahead. Our comes Kovanis

Billy Kovanis

a as see of to you plan potential unveiled potential Thanks risk the ATV. as it Hi. how electric guys. Thanks. you release validation powersports expansion Do this or are Polaris has a time, Tesla planning and you and of see do an ahead to this?

Mike Speetzen

RANGER out going for about that next had day, mean, some ride from and us built have mean, see customers it play of going a we I the at vehicle. the is coming going going vehicles weeks a do electric been be with we it's space couple that what talked with prepared I and to a changes phenomenal while, us I to It of quickly vehicles ago end over customer the boy, made updates needs. environment the coming it's it and spectacular meet excited think lineup. mean, couple out opposed recent being remarks. you're to And as we've of look, – the talking our with the is the to vehicle is to in going competitive other about I address but the just I'm really have to you're probably in Well, opportunity vehicle. think see the the are I think be they're to I And needs our I to to vehicle. have starts RANGER, know I most. a that a Sure. reaffirms? they've again it showy what years. the out better than going We

Billy Kovanis

Got it. Thank you.

Operator

question ahead. from Smith Mark comes go Markets. The Please next Lake Street Capital from

Mark Smith

new on and to rates about looks on that's what kind supply and ask just like It looks any issues business. talk you products wanted in you pretty your holding Can just I guys. up Hey like PG&A? well. PG&A chain of that have inventory attachment

Mike Speetzen

Sure.

rates attachment depending bit seen on we've product. the remained consistent think of improvement I have little pretty

ORV backlogs, around some Our the lines. clearing just product bigger challenge particularly really in of the is

we're So, – significantly. it's not degrading

like been progress we'd constraints. haven't the much supply chain as able make given on We backlogs the in to to as clearing PG&A,

and You of got think and upgrading vehicle us the and repairing it's strong really are a really the of or opportunity. given we've gives a the because good our backdrop It lot for base. are given installed about PG&A existing riding aftermarket consumers size attachment who availability, actually great rates

that the executing team well really given backdrop. So, is

Mark Smith

you. Great. Thank

Operator

– no more are There sorry.

Richard Edwards

Thanks Jason. Yes. you December. the RANGER thank the electric coming look for and Thanks out forward questions just That's have. we X want look on the we and to participating all Razor to next again. to in We morning Goodbye. talking November this And new for quarter. everyone new

Operator

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

now may disconnect. You

Polaris (PII) 26 Oct 212021 Q3 Earnings call transcript