PII - Earnings call transcript Q1 2022

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Operator

Good day, and welcome to the Polaris First Quarter Earnings Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I’d now like to turn the conference over to J.C. Investor of President Vice Relations. Weigelt, Please, go ahead.

J.C. Weigelt

first Jason, J.C. Weigelt, you, Thank for our and Relations good I’m everyone. you XXXX for us afternoon, or joining earnings Vice Polaris. call. morning at Thank quarter President Investor of

presentation reference accessible on which will at We today, website ir.polaris.com. is slide a our

we’ll summarizing are for Joining our Both Officer. Chief today our some the and Executive expectations Mike take remarks our quarter on Then me call Officer; Chief XXXX. Financial have Speetzen, the and Mack, questions. prepared Bob

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

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

go turn Now, Mike, Mike Speetzen. over to will the call I ahead.

Mike Speetzen

J.C. good Thanks you everyone. for and Thank today. us joining morning,

negatively pressures Minnesota Just relent, our chain to here quarter persisted impacted and as during in have results. supply the the temperatures winter yet

products demand to constrain supply While vehicle our remains chain for shipments. ongoing healthy, disruptions continue

of the the is through Compared encouraging of our and of a we've the positive Scout new year is and the that and elevated, rates sort our was metric Pursuit XX%. which continue to quarter volatility XXXX to quarter comparison XX%, our up On-Road year to sales seeing and said, interest result, helps momentum, American strong we North with pandemic. SnowCheck XXXX, up billion launch model retail out XX% difficult repurchase pre-sold last sales where first versus retail one some against a down were being sold Indian through As of motorcycles. almost first see last remain flat $X That retail and was were year, over seen

and be a ability loss, inflationary the quarter this products. results by share as wins to the to highly shipment first to were as are supply largely with from believe impacted year the negatively are we likely timing well to reflect is volatile door. product manufacturer's losses While throughout and this expected out of environment, our the chain associated In share in happen chain manufacturing correlated challenges. get Margins gains versus supply inefficiencies also fundamental new quarter pressure, competitive result

declined benefit and As XX% a from pricing versus adjusted We the the of early half to EPS year. we this last a year year second last in did result in $X.XX. took result, quarter, actions the from direct favorable

On-Road segments Off-Road, and fact, across digit we increase price double all of In Marine. saw

of the expect to price remainder unveiled to want for I We increased costs. positive will highlight which February. the take moment we Day five-year strategy year, partially our chain in our Investor at that offset momentum supply a

productivity. This we long-term. value in drive deployment creation strategy both focused grow with expansion and and capital improved our in coupled position inorganic, margin the Our significant and core, for execution, drives shareholders investments through our will over refocuses leadership balanced and the our powersports organic our believe

Let me briefly our review some recent highlights. of

operations efforts These along expansion our with paint our plans in quarter, Minnesota. Rosa, build to to During foot upgrade Wilmington distribution the announced last year's on PG&A XXX,XXX square a we This our expansion Marine the Off-Road business. capacity near-term. and investment in us Mexico we capacity business for expansion our Indiana for the in the core for gives Monterrey, in need our center,

have the raise improved near-term. in once abate, supply manufacturing we chain by throughput and And those efficiencies driven completely are constraints capacity to the generate capacity Our challenges.

the innovation model launch with our We on year Snowmobiles. maintained models XXXX driven and rider of new our motorcycle also focus several Indian

engines, at We lead recognized new of the car powertrains the launch testament and most Led has lineup new lineup by successful Scout aimed an Motorcycles trails. the SX. the to honored never continues have list Company's Zero a lineup all-purpose and most on Polaris regarding stronger the Ventures, Rogue recent the new XX and been category-defining received our experience We in and companies. feedback given be the Indian February, of ProStar snowmobile innovative In Patriot products introduced Polaris the the of late to of these were true portfolio and our snow. the back positive engine, powersports. built Scout launched Motorcycles on as best we deliver four-stroke with electric the to XR also with snowmobiles two new one best country for we to named Fast were Joint a delivering partnership the also way to Sixty. Innovative

of and admired borne this were many investor vehicle was XP to partnership able ride first our at The RANGER of you Kinetic the meeting. all-electric that

performance top classes. from rider continue front overall to when driven San the the the driven expect Indian the RZR RZR comes innovation wins leading and rider of motorcycle win at the The it R innovation. three race with took Big aspects team electrification. highlight and Pro to and We Pro swept UTV Felipe in the XXX RZR

Indian our and all season. board the capability Flat consecutive products, Baggers, when victories. of these wins the to hard top the on Half-Mile In Motorcycles of at Track prouder addition bring prestigious that their be the work and the for by those XXXX involved the could to showcase Both Texas not we home secured leader win Indian team second placed Motorcycle two race its in positions the King of

outfitter Polaris several delivery. in Adventures the repurchase remain of engagement -- levels, and rates points. remain peak and Short-term We and key a data with remain to pre-sold supports ORV and despite engage Day price Polaris demand expansion Day powersports up, rides level. demand riding near to customer Select continue low, program, year our level ORV meet Midwest. the The of units as Polaris even healthy and cancellation last increase long-term customers that to are of recent sequentially, a rates through membership lack demand in a reflected new in main states produced. Adventures increasing Labor consistent cannot for up gearing team being to through which is were the due see fact continue the with Adventures season, four in snowmobile healthy delays we their more Memorial

and record remain see Lastly, that PG&A speaking, continued are to encouraged a are demand customers to indicating rates at vehicles, strong e-commerce trends. their growth. upgrade we attachment Broadly these looking given powersports high,

growth for. the the North inventory is current positive already there environment. will comment inventory supply was serve quarter, current of once Further continues thriving, well. felt are remains environment that that network summed and one to ship demand around dealer dealer for and up feedback any limiting persistent levels. points healthy healthy chain pre-sold spoken each we chain environment headwinds, My global strong dealer with constructive rest. surprisingly, I the not to care given ripe dealer work send and at to products me, we inventory constrained most availability. more of We American be book, is take the This, Additionally, our the a lows, business further supply us by improvement around record through demand demand order our

we of inventory the of the do rebuilding back anticipate in of expect optimal improvement remain levels levels half more we modest XXXX. While for below to inventory profound in year and the XXXX, remainder

Of that in chain see line course, we the with that expectations. is assuming supply our improve

levels. even inventory dealers dynamics, is these get healthier runway believe we Given XXXX into if back moderates, to as demand there for growth

consistent our mentioned, I to supply negatively Today, XXX the impacting number have the the As past has that impacted we shortages chain globally exist execution. from of And units. over and challenges and XX risen that have our with impacting supplier approximately production component shipping units these challenges of year, suppliers number has are shortages, logistics component sequentially while year-over-year. over remained suppliers

and semiconductor remains the the areas where are materials, the labor. risks and and logistics, shortages wire shocks, we displays, the most other industries, like experiencing cause of Specifically many root harnesses

chain that the taking not through; As view longer at the that refocusing we environment we work improvements in we're lens specifically see situation, remediate and our look will a chain supply to the substantial current we the near-term. supply likely are suspect term

making are challenging components. design work to we such, As around changes

see reduced in also better complexity delivery permanence the our we're have believe supplier the of of logistic models ability certain materialize We will organization these improve to enable institutionalizing a our begin of dozens and and to the and to efforts. impacts as near-term aspects result we to triage We QX. and remove of will deliver efforts recognition

expectations for our now Lastly, Bob? to customers. have who worked will remainder who all the I to as of our needs first to gratitude of turn performance express the our Bob of summarize over our to it as tirelessly quarter well employees I'll meet year. want the my

Bob Mack

on or expectations and comments be year. the and call today. everyone performance for of remainder Mike afternoon quarter the Thanks the morning good our My will first to around

Before I do the the Mike as navigate supply the our detail, that are chain pressures. negative jump impacts working emphasize tirelessly main more results from want and into to were to to said, driver these the I teams through

predicting chain recovery we as of know, While, of the to all and half supply accurately you do expect year, is in the beginning see recovery the modest timing back extent difficult.

driven were quarter America, PG&A, up Asia-Pacific shipments margin pricing netting through by down with PG&A while and On-Road for was Adjusted XX%. of operating with almost last favorable up cost raw of X%, go Latin points by basis logistics higher headwinds. new we X% the were year sales offset be we the flat increases the out. a April EBITDA X than QX in strength modest the by saw Sales we some start pre-sold Total supply the in relative commodity profit walking With mid-single-digit in of almost saw cost billion XXX remainder price EMEA lower price $X.XX Positive with Let in position better quarter. the declines. sales orders, shipment up higher increased unit expected was year. International to offset to on and and lower the around inefficiencies expect and through and the chain. helped and as costs ORV largest freight, volume premiums effective with partially materials, associated being to and

allows versus margin This discussed pricing base, but inflation to we due profit math do price least believe normal netting cost of elasticity with negative XXX% the up XXXX. market cost on and impact to and the Spot same XXX% of on To the steel commodities perspective, XXX% rates the premiums a in our in put shipping margins. the of in of were are cost our flow have the profit As also inflation XXXX. in trucking higher QX dynamic our gross in US were through past, EBITDA and for impact and QX Asia to and on out that. period offset top has over containers we versus products the us logistics to margins no not put at in respectively, aluminum the from up

is top were expect of activity. we'd low XXX% jump subside of we quarter. versus average. of and that profit, year lower we that impact income steel, for had which All-in up repurchase $X were these Shares commodities a by five-year as million million, most cost have over due seen lower over costs of to larger the XXXX in many rates almost in result our operating almost the are was recent the For or lower see items, XX% time. given rate premiums on The anticipated, discrete our of to the share quarter, driven to than $XXX a environment ago compared for by we already these current the tax we

Turning to our segments.

these and Let's a strong was up X%. start $X.X Sales year. XXX a and on double-digit Supply were margin. XXXX. were strong PG&A increases pricing relative Whole down last to volume, chain of offsetting of with were headwinds negative billion some goods impacting points. Adjusted up margins implemented had gross disruptions in Off-Road’s X% performance in impact Partially up with X% basis Off-Road. approximately mix

thus pointing America in in loss ATVs. industry Looking side-by-side was believe at high performance were North high XXs to modestly quarter. versus the a down We better share with we us in teens, for down performance, retail the

channel more we to One quarterly stated way this levels. within on this we at demand ourselves launch in the share earlier, shifts was continue dynamics Thus, Off-Road. over this look to smooth by out year. to into global With past position is have elevated share we believe customer-centric the believe this shipment the the we Mike than year be We industry. ability meet basis. these capacity products a flat of versus XX-month ship component availability estimate relatively ORV rolling in competitors. As continue and new in Overall, to competitive lumpy environment a share to are the shifts to the to expect of the result are metric, strong to and we the products see manufacturing ever

near the segment chain. international term goods by $XXX of were million now to Switching down a be in now. X% On-Road results the to and that expected driven down strong includes performance you XX%. X% the see However, On-Road PG&A of up mix whole plus our of with are Sales [indiscernible], Remember revenue. supply

First quarter for loss results our high those up the were main chain two were in quarter. Supply from the teens. driver share Indian businesses motorcycle shortages

positive up begin into some over and relief brought and quarter. have the some of our most points mix the quarter half due the on additional XXX to to and should back of see in components was We year. growth suppliers for at-risk basis Margin pricing modest this

inventory -- with North quarter from was and to presold process. over America remain in levels by almost motorcycle continue low, strong our ordering international retail dealer While by XX%. down we XX% our Indian demand see the in down

XX-month share the to at industry. believe share we on rolling Looking we lost point basis, X approximately of a

to were $XXX of our up Moving X%. segment. Sales million Marine

but retail improving which down a strong we this component XXX into continue low relatively Margins the the during in points. and the Marine believe chain. versus headwind. see volumes Marine to XX-month quarter. shortages, loss share experienced and production lower shipping the April, slowly average was segment in year. flat positive see led and will up was our trends in quarter Late we the to see some to share Similar were inefficiencies We our mid-teens, On rolling supply we segments, believe mix basis to unit shipment other industry. started associated to the continue with was Price and growth view, a quarter, seasonally

new where quarter and $XXX the consumers SUVs availability million, to Looking to for trucks at for down and aftermarket, due saw lower were down of sales X% tap X%, we almost upfit. used

the performance Our negatively on earnings clear share, within in-season performance strong our by inflation. main a sell powersports Summing driver aftermarket supply up and was inventory to for our continue quarter. first chain Challenges margins on were is supply segment, be that impact had this the and impacted quarter up XX% orders. by to chain disruptions snow negative sales, it

healthy as the to to powersports. industry-leading focus the deliver remains in year. this deliver the we of to ability continue environment Our and and top in execute products through our we innovation, remains we believe remainder Demand progress safety have quality, best and

Moving to financial flow to both with operating cash XXXX our flow free strong expect well continue XXXX be cash will a year generation above levels. and we position, cash

changed. have priorities deployment capital not Our

in approximately more have dividends, We repurchases stock investments, Most continue to focus Polaris to flexibility leaned us shareholders. targeted quarter. strong buying the first as cash on view excess share repurchase, organic long-term, allows we recently, providing high and acquisitions. learned -- also heavily it for the while return into in We and to a million back of by financial generate to sheet deploy as our position our invest returns business for strength the competitive balance our $XXX

updated some thoughts discuss let's on year full Now, guidance.

XX%. guidance. XX% the adjusted throughout anticipate we full per lower first still move back of we chain to to year our maintaining modestly we positively and to the grow year. are impact quarter to to full which to and While in performance had see adjusted as ease Therefore, XX% grow year share healthy continue earnings both We the and expect our was than should supply EPS expected, half, sales we to demand disruptions XX% sales continue

down shifts dynamic demand challenges. this driven ongoing the shipments slightly by to availability year-over-year, drive remain component as powersports retail believe share expect We but drive retail. overall to chain same entirely will supply We be healthy, consumer year in throughout

are the to unit expect volumes line expected vehicle goals XXXX. in with the be suppliers the in XX have in levels year, year also meet improves appendix half slide believe of we back of the of the with ample second should we Please chain hold. working details which the modest actions capacity We ramp unit volumes. shipment the assembly the this We in and our half in further see on in we shipment unit of supply a half second as see take to health the for saw currently

sequentially in we As quarter which compared quarter, chain be costs. the Off-Road. expected prior to look at year we across expect second segments, our help to is continue especially increased offset to the volumes of should most stronger, lower Price supply

to profit compared costs. we at to aggressively will our strong price the in prior the pricing to in chain incremental previously a but to to growth be will second We result means see back not half in year-over-year, discussed, margin As quarter are cover continue costs, the gross year. of our continue This margin which will will XXXX. we degradation EPS down believe supply

full year, with the to prior be higher XX expect for profit challenges. we XXX additional expectations adjusted gross in of XXX For points are for pressures to We be the to slightly versus chain expected and margins business inefficiencies although to are to basis are original due materials, now raw supply than we anticipated, XXX cost guidance below basis our freight, points. pricing the associated around seeing year down margin down

pronounced cost margin higher the our year-over-year. original EBITDA down the with points adjusted in year to expectation the half first second ease to of and the to XX expected basis expect and stable of are pressures more now leverage, in flat we price realization of premiums addition, These half In be XX versus be volume year.

for offset $XX a into exclusions XX% be to law, were the expense include tax rate year items There entirely to recent which is this higher XX.X%. a lower million other to signed benefit interest some year. tariff with that net closer Some note should

We that, also $X and focused turn building it This sales we taking earnings Mike the the on we closer more chain focus industry's the future. almost performance. not less our are supply once successfully our be remain navigating XX We for chain year-end. are thoughts. disruptions have to share to chain million down I a to supply than resilient growth final million global impact count only at deliver to headwinds, negative We initial continue also assumption for supply to the the Overall, improves, a year on is current continue shares to guidance. well-positioned on environment. then, strong Mike? for With but will until some believe back over the navigating and current

Mike Speetzen

Bob. Thanks,

challenges. While customer have retail and at see been to are healthy. in our We're at demand by pressures, driven results low supply inventory impacted correlated this to level, that inventory levels These low supply we dealers. a strength chain by chain a modest signal year, dealer decline the continue the directly remains expecting levels

Our our redesigning improved remains we And on now, hard components near-term while working support delivery. to see be the navigating shifts focus and own permanent chain. around challenging making to by progress destiny organizational reducing to complexity, are more supply might control

is expectation in modest the in there starting the deliveries coupled outlook; Our improvement supports internal that environment. with QX. is the action our supply chain That, improved

questions. high-quality over to With make that, customers, at Polaris. it to Jason on focus strategy expect team up and We strong year for capacity our remains Jason? to happen, products and I'll have turn this open delivering to the the our line we it to and and another deliver innovative steadfast

Operator

now the question-and-answer [Operator We’ll first question Craig Our Kennison Baird. Thank from from begin ahead. Instructions] comes go session. Please, you.

Craig Kennison

be the face, on are question. Thanks sure taking getting good supply you on questions we're for to economy. issues my morning. there questions but Hey, going the I'm more

flags then this to yet fact these opportunity and plenty reconcile pre-sold recession dealers. the trying Fed combat a the to ready potential how in a of just finally I'm you've inflation, for of the of consumer the demand ton reconcile, on With units economy? you there you have restock red the the that and demand do stockpiled are with act to also tremendous form potentially, to

Mike Speetzen

to. things. Craig. that mean, guess, remember income higher the I the to pay paying I clearly, I'd mean, point you close customers the a our I to tend very it's to attention Yes. end demographic, couple have scales. of customer of Thanks. be and Thanks, mean, I we're on something

point dynamic And always I'd now. that the fact on inflation has to quite so, that's been for helpful. some the also going time

with one through fuel pre-solds higher and our So those frame, up that consumers the we've prices things. of And types have and have been indicated groceries got all wrestling as The cost, entire chart. rate held time look impact will obviously But the have relative our interest on I that mean, moves, pretty component customers. it's to you small. at its when interest actually vehicle the some rate on

increases traffic is more to pressures. to the So we're improved pre-purchasing that rate, the just actually attention the very the and to performance. you, pre-buying, very encouraged make, fact had it's we've just pace saw strong, at price are inflationary similar consumers paying at with the tell that a a But probably April keep we're dealers strong I'll sequentially.

we frame, So geopolitical that as that see about cycle the the in And time moves you the during negative just inflation the as pretty well the is with issues, trend making. spike been Fed continuing. new it's think if

right back lot to because to or is so see of we've the might I inventory not if of we've we'd terms back internally. of never seeing the that channel. you that movement any look the kind look to demand So, channel that confident highlighted into still throughout able we're we like were we recession got suggesting probably we've I'm economic a in a seen work inventory, a from discussions be got depleted of trying if the one volatility or through ample we we get were we've I'm about had in a XXXX. feel recession, make because of the It two down charts soften, but at runway XX% inventory this quarter if getting the go demand soften were is on or we would in point inventory to to to were work three, lot do the where our think QX of Even into got that channel. a for

point, this daily. We watch watching at it it. So, we're

just Our our biggest supply around throughput. We've to efforts own making challenge we advantage of take the that April. we're starting everything and seen sure doing and concern, to chain can improve quite to materialize frankly, in is our

that So our primary as focus. keep we're going to

Craig Kennison

Mike. Thanks,

Operator

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

Joe Altobello

guys. Thanks Good morning.

So of surprisingly again, cover looks modest chain, you not anything, pretty got since first supply outlook question, the mentioned I incrementally your do But if does a it year. chain you expect improvement here back questions couple it in significantly. today, guess in some on supply half the worse QX. of like

maybe visibility that see So for we XQ late early starting turn the or you what that gives example? QX, or confidence do in a

Mike Speetzen

Yeah.

the as getting levels. Joe. visibility couple up, a with just industry we to suppliers, there's work many mean, and for other highlighted availability. the of areas we're that improved all the that we we but not of we are seeing, is the when work our they obviously for us harnesses with be some largest well, mean, and things shocks industries is probably think chip as are wire so and them item, not pacing our around through we're I I pressure will volume recovered the entire area suppliers, seeing like lined of perfectly things, I through

at point this are couple the taken to their actions quarter. And to you with during in that key very that couple complexity. when second here they communications us dozens we literally suggest driving and we've I my So had the improvement to to reduce the the I we're in have the out staying close comments, have suppliers delivery dozens mean, understand at we highlighted upon that be of models other to sure we that make going least of

I of the probably through others to isn't temporary out. to operating some we as soon. is, can many are been get troubled you've going challenges. the with these so production it chips across set reality process. or move seen easier we areas. that even we're and It the we've between Where our And redesigning us anytime vehicles supply makes components a to on causing SWAT that take industry can, that chain then, well get teams as better think that complexity try And it of some

making us we've make suppliers. And hour-to-hour drive got the our organizational so, that we're we've to that have the that more the sure folks of And moves staffing to with kind and of permanent. lot right those a discussions allows got can

So all that. watching we're

minor out trucking We there or just and are things a relative close data seeing like trend but some to if tough eye keep to that's going green a shoots availability It's that. point, on know to we're that. a

Bob Mack

the to see about, on mean, thing Joe, both other and put you'll think April The pre-sold price is, increase through orders. in year. I just we a new

again, because least half relative stability we're in high lot of And some tough be stabilized the as cost than will start price through QX rest And that really a long-term QX, were the have visibility the last QX. QX now they were They that. costs year. stabilize so, were for And well. XXXX, seeing when the year, the and right lower realized back in at seem continue to into It's the of QX, comps to the But have is really to year you there. into to get moment.

Michael Speetzen

Bob I point. Joe, the the want other sure thing that make we mentioned, just to emphasize

it's We and then, improved ramping. pricing see are fact half. is But may as into the not because obviously, you as the deliveries large that the got suggest, unit really into second through think expecting our numbers to to QX

more any it as, the there's annualize makes into think to second pricing climb the get a I'm well out, one offset But look calendarization than a in pricing the we have the half, that component a into back do Bob math the stretch. pointed by second the as as half, challenging you that half, half starts larger as when second as around suggest So it's of and to probably healthy hill unit of we a so hill amount substantial pretty as there's to first our may lay-up cost standpoint. isn't from not that near trying half

Joe Altobello

a in the if in just is on follow-up that seasonal, pontoons offer And this you that I'm versus thinking helpful. right? season year very all turn is risk vehicles, your happens I September missed motorcycles, here a business That's there particular, mean, standpoint? demand June, a that. very from August,

Michael Speetzen

is if are think sure get seasonality. people we because important look are get shot And were were the correlating to portion seasonality the I season. knowing line broadly same really want that And get true, to at exit getting still going as trying but, in be this of in to to actually that fact to to I to to have will terms business have make today. get not in typically suspect to a restocking a were so business, pre-sold people spiked, more don't so. it is for able anything boat a they economy demand the that access a with temporarily a of that our wane, for we'd if the the in you the demand would substantially, take boat vehicle. I that last people against when a you couple mean, it's down mean, even aren't pause. that vehicles, a And inventory channel season, -- year I And where difficult our you prime demand our trying isn't in of that see example

Joe Altobello

Thank great. Okay, you, guys.

Michael Speetzen

bet. You

Operator

go The comes Please James from next question Citi. from Hardman ahead.

James Hardman

Hey, good morning.

Michael Speetzen

morning. Good

James Hardman

year Obviously, to Mike, about out the door dots connect you that a And, over the has the of clearly it Maybe There's me. want since the look retail there maybe sequential then So April. into a for opened guess, to that course you I guess, want I would narrative questions couple is But you speak momentum tell extend however XXXX to the to can what of but April, quarter? that, us versus that degree. worse. the at consumer every month some sequentially that. basis, to comparable speak souring this to people on gotten momentum? the

Mike Speetzen

know saw don't suggested. I that we what Yes. you

momentum strong, solid. retail Our pretty has pretty remained

dealers at with me, coming comments share just business mean know, tell about dozens slowdown. and our really And XX%, I need can to of see we give survey much I competitors. As you I that so pages go and worried mentioned, got Polaris. I've commentary didn't in network our of anything more And just -- out I around them. unique or those product. focused get entirely from we dealer dozens and take And there that our I as weren't almost It dealers we we has you of was

So pointing be – suggesting I at there any at mean, got the necessarily just we are not a We're all the on continued we attachment that But have, rates. see website, I page, stage, to at don't on is and still more couldn't e-commerce, that strong especially everything of I'm that. our relative market, much . one than everything this as XXXX. rates, highlighted to engagement statistics looking we've watching, slowdown a point. pre-sold

James Hardman

right I'm quarter it me first lines, an to sounds in same we're, if or year, Got that. And lowered those guidance assume to retail the then environment math negative retail XQ, you along versus the improve. then we like doing again, help comparing in again, where Do if especially it. But availability for you accelerated ORV is is that here, the – that, the expect XXXX. understand ORV turns retail

couple maybe – a connect maybe that? of So

Mike Speetzen

demand small expecting we're on impact, had the availability for mean, it's expectations to obviously if a improve the sequentially. not I That being It our an impact pacing drive it chain improve through. we because ORV any got is quarter, the we're deliveries. But product. be we're Well, to When relative we'd having the get item. really means retail can get getting which that see, environment got out. vehicles the upon to year, we these vehicles parts facing to can some better to drop in efforts the by We've we a off the This our And driven step supply combined down. saying, the the challenges. presold, capacity, with back, expecting that then we're majority of is enough purely big at we've availability looking XXX% we're of as given obviously than more components the not retail about is if expecting, getting than improves ability you able labor and is obviously,

the that. out our But obviously and improve are guidance putting upon tied the power doing that we today. everything to have that's So view to we're we try in

James Hardman

Makes Thanks, sense. Mike.

Mike Speetzen

Sure.

Operator

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

Fred Wightman

that follow-up retail outlook. just to full year guys. Hey, Maybe on

case from and outlook, think full I similar you Is this of the weaker? or in of the new is a Off-Road that then year performance were expecting in pretty little past, sort On-Road. Off-Road sort bit still

Mike Speetzen

case. still them that's expecting going up have momentum bit more more little performance. half the second little similar No, a to steady. of the I Off-Road stays picks mean, into the year, On-Road But a

Fred Wightman

us if just you a little think half, it far you second as more and comfortable quarter, back just first like in had bit a bit Are or half then on we that, think you what weighted came Is given sort expecting first going expectations, to Okay. just even you're still color based of seeing of little Great. how below that? as about to seems last be prior based today, we it that should half back cadence? quarter. And on with

Bob Mack

Yeah.

mentioned, communicated. we lower had than and lower in I previously -- As had we year lower previous than the prior QX full I be think than what for half will what --

get I to revenue think a a revenue. to mid standpoint rate about where and QX. OpEx way about double-digit the you'll land relative QX, And growth their we in drop on low to regular a and will the good is QX bit QX, from more QX than that better quarters in it Think see quarter, think then think QX a QX. sequentially that's from little

doing and about. start and cost the to be the more stable see of that flow the what unit we talking supply is as chain loaded been Mike has work April will we're increase given base hopefully price half improvement a it through back So some shipment impact

Fred Wightman

guys. Perfect. Thanks

Operator

question Please from next comes from ahead. Capital The Gerrick BMO Johnson go Markets.

Gerrick Johnson

please. two, you. I Thank have Hi. Good morning.

you in US, kind in are First, Vietnam. Europe between Mexico, you've also you manufacturers? produced seeing product and of differences the some got regions What and in those supply

Mike Speetzen

as We've transitions supply of out It's -- know, is largely but I really suppliers moving with China, supply pretty facility moving not the our our sourcing hub Mexico. necessarily rest Poland seen in secondary some with you consistent base. consistent. of mean they're creating a

one-off. that, to logistics but those from board the a It's across that's so consistent of standpoint, helps And facilities. been more pretty different all obviously, a

are more nature. the the of factories, far are what focused specific more the unique Now, challenges facilities drive given

Roseau, is facility largely a Minnesota our snowmobile example, For factory.

that year, And with sites. issues our had bearing which obviously doesn't we impact some so last other any a of supplier,

more base. for in it's availability specific around the So, than that it is supply is products a component made difference than it

Gerrick Johnson

Okay. because dealers it Polaris, if pre-sold question, Thank them something a have affect put stock a next they our that or units? for how more multi-brand in just you you. seems exclusive dealers can multi-line forward they units are whereas, My less pre-orders, taking or going so don't research, Does pre-sold dealers, BRP or Honda from ship else.

Mike Speetzen

No. look, to availability. I the we're trying mean, improve

the As through we those beyond we at doing dealerships going of comments, pre-sold, of about everything percentage ship small, in. to you the which XX% base. stocking in prepared can look Polaris talked gets direct But units a retail our just our small is pre-solds, are we're when the

So more about still right than at so know is now, dealers, that battle else. we we're availability penetration seeing multi-line anything competitive and good our the

We make as a and we sure we in fact the we in and of can. that as hands had we're try cut window the price was delays that getting as can, that cancellation we've our we're that we pre-solds in And so we've make and encouraging. despite the those quick up on here half to for know And delivery product misses actually many got as customers rate increases. view as to held getting

Gerrick Johnson

Okay. Thank you, Mike.

Mike Speetzen

Thank you.

Operator

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

Robin Farley

Thanks. you clarify set Great. can lines, for One questions. our lower about QX, have across price. higher product you two just volume also but you is, talked I

shipment net where out of of terms in being terms down so your sales? or that year-over-year And in sales does up

Bob Mack

expecting to I little year, QX. units QX a revenue percentage in, mid-single-digits units snow, from to So, QX come perspective up are percentage to mix Robin, so little a have -- above ship is but slightly. in snow little yes, lower QX The like up. be relative low will of QX bit said, bit we'll to We're a different be up last a because XXXX I'm higher relative bit of will sorry,

Robin Farley

slightly units So, year-over-year, up sales. but dollar

Bob Mack

be-- will Sales

Robin Farley

right me… price the Because just for

Bob Mack

Yes.

Robin Farley

about tariffs with and on like gross like that's is break to can for just could question those are year? about to is helpful. you supply of the visibility guidance kind a have really just Okay, XXX there because other of bps, couple being here. less every out the at piece some you. price pieces on Thank versus that do of break margins guidance then because you on. can you not so that like risk -- good pieces pieces us with And are of some your you lower for down then margin, there visibility some obviously that of the think pieces the or really my good for like chain, us be we And visibility margin out you of think And have kind prior XXX increase,

quantify just Thanks. could that? help you us If

Bob Mack

I the but bit of complex some limiting I'm meant in the of a to of units harder environment, to more and is the sorry, said, are current just Yes, a numbers parts all obviously, units obviously harder right -- now volume us we're for tailwind mix little make, for. the challenging as headwind, because, Mike get

GP next we our we profiles the plan when from the a we a of with go From and we've price a a So, We obviously, prices. mix through would kind locked a We a perspective. what's do April headwind in volume on know year notice. our don't summer of and can and little we in time Xst. bit from raise later changed get specific model with dealers, price, have with month's

of staying that. we're So, on obviously, top

see pretty now. comments, the to like into third in look said at earlier side my stability. to to right get starting it, levels you I we the and similar As fourth our chain we're cost be as supply get the And some we're comparables at of quarter,

now. of prior risk to half are the supply increase in chain we the continued of versus right where the costs back the limited versus think year in we and year So, be relatively

fact, see hopefully, to things start In we'll improve. some

dynamic a environment. hard pretty some As for not, some some Mike it's some whether say trend opportunity But or said, availability in and the seen that's think and we shoots improvement that, container we trucking of a pricing there. green have we've to on

see on mix. that think now, I So loaded on we visibility change the we're obviously, The the price, But we something cost right that environment. good again, premiums, dynamic pretty a today have high I think and makes in don't it's visibility decent dramatically.

Mike Speetzen

as example, the the to that one we're at enact over Robin, margin price surcharges saw commodities think, way frequent to but or is, that, associated would rate, offset about erosion think we substantial. in XX% If percentage The they're a spike, given or couple logistics we relative second looking the reviews we've or years, we say what we what you would whatever moves cost building price fact the – when not a we're in far see for quickly price happen more price. very half margin and might if because of actions. margin made Hey you're to doing past of

erode the strategy So may the margin percent. is, just cost, to trying a cover cost we've to the to preserve the just margin standpoint trying versus cover intact. will our But really -- is dollar the it remain got from

forward. of really volume the as come with execution our levels going we it's to move So,

Bob Mack

guidance doing supply to in on the XX here mind an going best expenses. thing points to to we're any continue that estimate terms of when as offset other to of or we're Robin operating our focus revenue, We improved basis chain increased OpEx in is, to percentage manage updated other today. a our disruptions. keep The costs we as And of business

Robin Farley

-- can sorry, on in anything And margin then terms Thanks. you on just the… -- tariffs I'm of

Bob Mack

Sure.

$XX looking enacted. recently exclusions We've $XXX from got were a million benefit about about for we tariffs, So that the were the at year. million

that a legislative not standpoint, expect $XX right anticipating now. we from at which we're changes million, So, be unless something will

Robin Farley

to. total, just saying million year, or last versus you're $XX that Is delta

Bob Mack

million, $XX total. No,

Robin Farley

Okay. Great. Thank you.

Bob Mack

Robin. Thanks,

Operator

from Our Capital Spak next Markets. go from ahead. Joseph RBC question comes Please

Joseph Spak

had this at mean? could prior recession a believe, at what least Mike, you least was I about talks about Bob, some internally, Thank your sounds the extending you've year, very in comments. talked much. about restock it And into past next like well you've

quickly that that the done saw recession like next work how were versus environment like and going hit, you typical sort to have occur a a in new of you – does if demand So through occur year? stock

Mike Speetzen

a potentially. of determine some it's people through working we're because -- I it, you the that specific remind I recession But what mean, Joe. mean then COVID, all accelerate it mix. would we go pre-solds going to is I cancel of you'd up. there's last on we But and lot are would had during to demand vehicle have -- that, to mean I Yes. first saw

XXXX, XXXX, But obviously characteristics continuing was what and to different very that unique again from if even which you So environment. recession go a we're was with and very back a different driven back. a now, pretty our we right of of come where saw then and quarters, healthy we And drop business environment was couple still an off that had for in a inventory. level

us kind persists, protracted just risk have of front to the at And there is. stage, impact. think the not more a a Obviously, have I in seeing now. slowdown to longer the material environment So of we'd that we're right inflationary any see this

one I efficiency. a drop kind the any logistics of off and have are indicating point a are that improving to pointed trying some trend, decipher we are both versus doesn't how more more and capacity logistics out, we're and brought in least availability. seeing are Bob not data demand more more markers just they've by getting much of in driven at We're sure broadly channels that’s As make because and improving

all and still drop hard be to the see up of to going I But important us, the stay initiatives got if an about where it's sudden to watching the with at costs business. lot closely think front in channel of to out perspective. think my looking strategic we business we're taking mean, we're of and a of in environment imagine course of couple a that the a I over from really off demand opportunity even next that of a were So me I refill quarters, do couple going we've standpoint, for for start a an months. to we're face from going we here end

Joseph Spak

you've take inflation. maybe taken will to that's the But almost substantial And you helpful. to of inventory times different price completely probably situation clearly, helping is and very like here, different, bit a mentioned scenario, that's swallow. to making cover a a of Yeah, easier the some little taking, sort number continue that of,

of for think inventory, like we I'm further you promo normalize, this if competitors sort Is you, new normal how So per higher, higher but sticky, not than but with plays today? is for higher lower the but it as out a maybe industry that a in than wondering your would guess, the there the or is setting industry normal is your I to only keeping volumes think unit here seem itself get view, out MSRP because like mix inventories up of future.

Mike Speetzen

I it's I time think Yeah. talk mean through. and we've something continue spent to

a be little just of articulated. to what going it's you think bit I

when is we this. goal the carrying near on as much backside of anywhere Our be inventory. to We're not get going

do. our to customize making deliver and opportunity it. not they're environment paying to stocking good for the what promo Now, be obviously, induced they're chain more going as we the will ability dealers money units, to can't to competitors have If really many for supply That normalized And much are forecast floor interest plan quickly the consumers what obviously a they're against carrying gives put dealer not by margin. and not make as in customers a But are to now. our lot looking of with products a right for.

Now levels be programs markets, mean, never rates, promo have for the of like ag that. still back. suggesting I'm military, we will interest not and won't back away. went some things special It the come I completely

be covering along we to we we've when And because back coming that strategy we're think inventory be do can. whatever see because margins going And the a price promo net-net, just want to the a going And we with that's mean much is and back, not normalized that think essentially it into the of the egregious all might our gets of that's will to we'll increases dealers moves. out will, dilution And with the we're retain to to price economy but to the why we well. system. more positive benefit that as as bit back to as little see of suspect was our but normal, margins. to So net it seen cost try for also these costs a able continue and be we come

Joseph Spak

much. very Thanks

Mike Speetzen

Thank you.

Operator

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

Xian Siew

Thanks the guys. taking for Hi, question.

I think Do how the into share gains guide? to you new -- about expectation you updated last you still that expect is quarter XXXX? still intact with retail market continue talked

Bob Mack

Yes.

by think, people's quarter, as ability the for really it's think our I share obviously, we ship. to think on relatively about Right with we've But going think, to will to I be lumpy it's the depend market we ability I now, flat quarter market the ship share year, as into channel. said, think, going industry. be by driven to

industry. being So in player the the biggest

holding are we that to standpoint, if a chain I firm. see So think can opportunity take amount pre-solds we of to good got from share. We've a got improvement supply continue some have a huge

is on ship we those, now, don't what we've opportunity. a got bit can think we a what take looking having too. if of of we're So ship, being going And, realistic the can view we perfect ship. view a at industry right rest which I good think to the in we But to visibility have really our obviously,

Xian Siew

Is it, just I of up. Yes, the about -- inventory, China if can is Do you impacting raw you transit a in then how, you guess, of chain inventory? supply on ports the talked partially or just at understand is inventories to maybe material help maybe And have books, L.A. inventory or the it like, unit? that. in I of just lot understood. want are kind built on unpack the terms

Bob Mack

Sure.

actually of it's mentioned. inventory, the you all things So

water, increased the from in top to longer in times inventory transit longer stuck help mostly production. products transit, time on that So port, the meet of on Asia, expedited being

are So that's increased in up. materials transit. Raw

is, we not to fallout brought the you've certain get supply and in, you're out key need already we've accumulated that through already that but materials and bring all of the hard in disruptions. things sure to components. the continuing really bringing that make balance course in the of things We're we're you chain and missing Some working build

day. are on that So every the teams

rework what of really, see an side, needs you'll So the then, start held majority I the raw on our finished approach to biggest or out quality dealers. driver the when it think in inventory on versus improve and originally short a our taking rework goods the in-house that -- we're warehouses trying needs view, it's also obviously, of doing And, components that it that's we for that rework. call, to the and added would side. was to it that doing And built. to being burden the inventory it, be, from that not shipping to Holding holding were dealers. our perspective is We're from the

year. look of -- you'll the sequentially rework. you So ramping a finished chain down held supply quarter-over-quarter see improves, to as again, of the bit that's And, through for the see rest inventory that take that waiting we goods because up

Xian Siew

guys. Okay, got it. That’s helpful. Thanks

Bob Mack

Thank you.

Operator

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

David MacGregor

you these days providers be potential and recession a I'm about morning, my you're regard purely terms back that can first you wondering was our Good retail ahead, anything us all comment a concern question with credit with if dead of credit helpful? question And can bit. to the give for Yes. little retail -- everyone. and consumers in would on, credit. talk pulling availability My seeing on maybe what just

Bob Mack

Yes.

approval a any seen retail from haven't credit or pullback availability We standpoint.

are credit have get unions down other unit the bit consumers pen opportunity time wait so shop it Our to -- them a gives a things. rates to to and little because of more the

financing dealer little bit. disadvantages a So,

to that seen we all-time -- increase that partners lows at defaults, the that. obviously are portfolios haven't our historic watching try any through But have. we're in really defaults to So help dealers our work in

those region. issues in just right of seeing as now, So we're not

Bob Mack

we've least, the that retail folks means high at we and that I'd credit And the impact. and finance which those credit risk. usually they're the providers seen, remind bulk us the and the means FICOs, this that ones timeframe we've construct are David, that separation history, of retail strong the is, between during retail provider, construct the that through got getting you the saw around pandemic -- what are XXXX carrying even

Our making customers stick with payments. their tend to

So that at of lot think a there's area. point, this I in whole don't risk

David MacGregor

hear. to Good right. All

now to I are field is right provider important and to question second regard in you now. there's business, inventories growth the The for it in just probably PG&A continue -- year? between be How with field seems an PG&A, of to a big realize do right the growth the that the balance into accessories. the and garments have just difference inventory you depth parts versus of But

Mike Speetzen

there. parts together. and even the bumper that a to cab compared system, or is a high Yes, we're a The to building it’s complete components we we a difference of I moment that a the sourcing many If where suppliers. parts improved. mean lot someone's come the pretty that have got obviously, some to requires less went not or come side-by-side to you've buying through orders winch together that back because, had at X,XXX vehicle, one period same is a for complexity just

got, has frankly, it just offerings of seen one We've growth come innovation been we've rate the the credit. offerings I the much attachment give has that you and with availability the continue portfolio better. look our with lot really we've number really And And strong Indian the out. at of team up So as build a more for motorcycle, PG&A increased. vehicles, look more of each and they to at to that

encouraging. it's So,

piece non-PG&A Kolpin, the like saw so strong aftermarket, XXX, obviously Pro Powersports growth. Our Klim, Armor, continued businesses that's

customers, hands -- garments but the it's a are do or the in teams stock job. apparel pretty addressed working get good doing outs, we're quick into whether or have of parts and We of our those availability. doing the So to get job pretty good a we're areas

David MacGregor

luck. Mike. Good Great. Thanks

Mike Speetzen

Thanks.

Operator

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

Jamie Katz

Thanks it's guess, morning, talk little auto can I bit of are aftermarket my like the forecasting Hi. back industry, then cost aftermarket for improvements remainder we in for gentlemen. bit be given looks structure year. segment? about Good first, question. improved. what to taking making I Thanks. the the to for year talk you It are of guess, a the little end you the segment have and can -- that And about the significantly going you a the the that

Mike Speetzen

Sure.

and of the operate Transamerican piece segment, in to fairly of obviously, two think So, the jeeps market. just cars you aftermarket the by Transamerican impacted been in pieces negatively The and the powersports tightness about effectively have has and used availability or the speeds, the piece and differently. they new new trucks even

business. or So, a of the market, and a vehicle new our for headwind to to new tend for that lack upfit then it take XWP stores and buy the been vehicles into the a in consumers vehicle that's just

the is many you that auto of rest anticipating follow we market year, the we're do, built standpoint. as seasonality from auto but improvement of business. For There availability into dramatic an than not a the more

to tend to you QX, quarters. be their because vehicles seasons QX So, those to in tend and we people volume more out just better using are tend see more have

We're – improved new being stores. So, added those anticipate from we QX. on some we've focused also do been quarters

will the as the come out. rate sequentially those so year run into rolls And

a will also. that standpoint from help revenue So retail

product lot that on side, the just if strong, of really been the of made apparel, availability and apparel On the waterproof and the kind by Gore-Tex both particularly outside been aftermarket of US, is anything of timing shipments has limited powersports a business has side.

and year been businesses. anticipate there. a we and And have strong QX, had shipping challenge so, But with a good those logistics

Jamie Katz

be then earlier. I way it? right inventory go Is have we And discussion The the being follow-up were the demand having year. through the lower that implies on one that described think just Okay. it as to that was you significantly about theoretically working should way capital

Bob Mack

limit increase units working should on we're in it getting got I get see continue ship coming door. assuming see chain see capital the ability see start through to to we – to to as what's trying to inventory we've comes down. improvements or and in – supply focus improvements start to to Obviously, modest very we we Yes. our that in happen, out mean start the on focused but and we

year. see the in we second better the So, working of should half capital

Jamie Katz

you. Thank

Operator

presentation. question-and-answer has attending you Thank our for concludes session, the This concluded. conference today's now and

You may disconnect. now

Polaris (PII) 26 Apr 222022 Q1 Earnings call transcript