PII - Earnings call 2 2023

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Operator

Good day, and welcome to the Polaris Second Quarter 2023 Earnings Conference Call and Webcast. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to J.C. Weigelt, Vice President, Investor Relations. Please go ahead.

J.C. Weigelt

good afternoon, and Rocco, you, morning everyone. or Thank J.C. I'm Relations Weigelt, Vice Polaris. Investor of President at joining our us Earnings for you Thank for Call. XXXX Quarter Xnd

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

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

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

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

to will Speetzen. it over Mike I Now Go ahead, turn Mike.

Michael Speetzen

and Thanks, great and thank morning, everyone, summer joining with for today. outdoors hope Good everyone enjoying families. their you We friends is J.C. us and the

first For summer of especially and our this dealers dealer marks exciting our us year meeting XXXX. as the Polaris, in-person certainly our at for back is summer since peak riding season, we're welcoming

for less save which Market the a our and commentary also we'll Capital the Markets call XX we'll event, conjunction on the host focus Nashville. than Capital Day is future strategy will and of of some business week current with quarter meeting, this away. initiatives longer-term recapping In Today's the in on Day state and on July

Investor those website. who Relations our be the on cannot will For event webcast it, make

demand to net more the encouraging trends North XX% XX% to Slingshot see utility and In and both was due On-Road retail to driven Indian our recreation. retail up with positive availability grew than performance. of positive was and American X%, motorcycle and Sales quarter strong higher products. by pricing. it second Turning up for Off-Road, volume

softness we and Marine I'm the that in did the in Off-road, gained fact team's some Our during of share and performance see the quarter. the On-road business proud Marine retail core.

foreign As Margins of expect warranty we experienced lineup back progress hold costs. the share off-road near-term while and snow year, with in half interest, were a higher we gaining as modestly through On-Road, that and to launched down we the launched headwinds, exchange includes in vehicles. product soon-to-be robust recently share more including

to specific to also experience delivery, inefficiencies tight We labor as wire production as regions. markets due continue mainly in challenges harnesses with supplier well

take have has team on remediate Our to time our to some working progress efficiency while we July some And expect seen fronts, it to these improve issues. to levels. prepandemic been hard we both in

improved. line Adjusted count. with our higher and interest progressing expense told is foreign call. EPS in exchange year share was lower The has we offset relative to flat January partially price higher and the volume, with in prior Retail you headwinds, what year

inventory Our on optimal are customers product and dealers levels. positive both and and remains launches time from feedback near

continue have costs, both which XX labor, the half and in of expect of margins points in respectively, year. XX the profit EBITDA from back points, year, first the and litigation over While warranty the gross expanded basis basis margins half increasing and we seen to pressure

our on that that significant behind worth guidance it's we our year objective the expansion guidance remain of is us, but we With more focused strategy and a that strong shortly, half X-year out teams narrowed will many said, have returns for strategy provide of generate ranges. shareholders. noting to of year, last our with being laid Bob margin on color the

costs increased accordingly. during but anticipated our incurred our We EPS the narrowing year half guidance thus the adjusted us in guidance has and far are second raising sales

Polaris of at an on the our next wear and at Capital We and dealer Polaris sleeves been many meeting get to our that organization ever exciting you have Markets are will before. we year to drive Day an It's driven make feel our stronger week. than as and passion and energy

let challenges. Now Off-road, during saw The we're relative thoughts share story me Marine trends second some to in while more demand the improved seeing. quarter, customer On-road

remained expect XP dive progress launches. through trend me dollars more as to for for momentum to XPEDITION this off job around gains continue generate detail. strong, traffic. quarter, these quality working, geographies and our is targeting year. lastly, team leads into Let Polaris and Promotions great vehicles the July we start to the and and we the Recreation of dealer are our is drive a good Demand to and customers And quarter. as our to Off-road retail a share we expect during right continue builds the in utility and RZR improved recent doing third

year Indian robust For QX was In we did Marine, recovery second line, availability. strong Slingshot. a in motorcycles On-road, easy the due and quarter a combination improved weak during This to and a last given true is of comps, product retail not second retail across quarter. see both

year the soft off inventory position, Dealers higher inventory of season take to given this weather. selling costs a the combination than retail. reminder, reluctant healthy to a seem a kicked due later bit flooring additional on As anticipated and

team Our responding appropriately. is

for our to the softer our is the We of the reflected costs we and protect seems this are expectations, XXXX as original controlling time than ends in guidance. for that The profit. have revised adjusted our near dealer schedules in bulk a industry at and levels in weeks But season. few marine selling production inventory season now, assess term the marine sentiment variable and will prepare

been Turning to dealers. what from we've hearing

sources into Polaris survey Our dealer view insights our powersports. their dealers the great of as outlook for of feedback as dealers our working greatest and are provides one how biannual with well

poised on right the include: mid-April for XXX and great OEMs. facets, as many and areas satisfaction, A over name few. with dealer sentiment, including latest to quality to We to in on inventory dealers focused were responding. #X touches survey encouraging inventory is Polaris certainly survey highlights and give Off-Road that we The in results Sentiment the This rank conducted me other supply chain few to the improved. around are relative we continue strengthened confidence satisfaction dealer succeed. a

However, Ranger can all improved quality to area an opportunity. our product expressed of availability and across NorthStar lines. and product about how Supply scores impact continues promotions retail be optimism positively Dealers

month innovation that the dealers. the Off-Road launch Mid-Atlantic Pro and dealers while visits rider in we the and our innovation market. which we recent Pro, region. most told Turbo X race. at the and biggest we us customer in visit Lastly, Marine the dealers takeaways Earlier Polaris From us driven R the talked team ago, of The visited visited in XPEDITION, that the R, the are providing dealers RZR year, Southeast, we last I Polaris quarter, a recent of regularly some RZR expanding more winning are the the forefront the believe from experience XP is and to best of the about

their has the year. what the noted in believed outlook year to dealers improved earlier relative Secondly, on they

plenty market, the Pressure and new our mid-end but perform products. of remains of excitement to recreation at there's premium the around low to well, continues

are year indicated product for an shipping of we of this launches the innovation As year, these and now. start at XXXX exciting X is

redesigned lineup. the we product multi-terrain RZR segment RZR. class-leading with comfort and XP level. March, durability, long continue largest This top-selling be takes is RZR to industry. of we to side-by-side of it first sport generation In market, up The and best-selling next sports been segment our The heart performance XP and at the the our this XP side-by-side launched expect hits is the category completely line the the RZR the has next to the the that in in

meeting. Reception first many you it will in has time next been person the great, and at week's get see to of for

The The Polaris industry's yet new dealer the range, which a are it side-by-side we to market. pioneered into and and Plus side-by-side categories XPEDITION, side-by-side a in that to on summer. floors Similar the comfort side-by-side second adventure of the in do consumers product capabilities. factory with new any have adventure Polaris market, camping, again targeting RZR has the are with entirely in this any general during stand is category, out overlanding path the how who is the capacity making market mind and it XXX-plus mile exploration. fuel XPEDITION the and destination largest other on touts added for against hitting

done say not innovation and core year. this are safe yet to to there's of strategic yet. come we is Rider It's driven one our tenants more

is down dealers continue Stars level floors. and much agree. in dealer XX%. be last working as view more dealers' We Regarding to to to to optimal and North diligently and we XXXX, year relative Relative seem to inventory position healthier near to inventory, get products new are Ranger this about a

too OEMs has our are lower-end meet now evaluating inventory inventories availability from tell sell working hear While such during vehicle we their the feedback we is improved Polaris dealers of good On those inventory lower high, the hard overall demand. excess occasionally pandemic that for that that they from also some OEMs us to and visits, the dealer recent industry. end dealers need in across brought to coming on place OEM a is they their their heard and products

illustrating commitment around work this our good Switching with to Geared We with want enable value Good love continue relationships corporate ESG passion I strategy report. recognize success. to our and XXXX be the variety a published responsibility recently of report and and of our compilation our to for stories I our metrics. to team's dealers them mutual to our seeing stewards.

XXXX report our we environmental highlights the environmental and new from celebrated of One X goals We environmental announced exceeding XXXX goals. around in was set X that goals. this our original year's

take We Geared to continue other are done Good our on and needs be initiatives. meet approach these to goals the to strategy when a for and aligned to genuine

January. out are will gains believe year to we So in our thus and drive far how Innovation very we big has share similar played initially and through in retail to back here a way, we business. Polaris expected it at growth continue across halfway is the and

have remain, remediate Although positive and July. working challenges in thus hard with chain far we experienced supply to labor constraints momentum some been

the While control. summarize for and it over including balance uncertainty remains to turn additional we can I'll matters expectations. detail in and on of performance guidance economy, who are now Bob? broader provide XXXX, quarter we the executing our second Bob, the will

Robert Mack

afternoon Thanks, today. everyone Mike, and good on or call the to morning

and labor including continued line costs gains growth points, Second almost XPEDITION. and by many driven On-road EBITDA were for quarter of growth in Off-road, share Polaris margin of and the quarter basis on X%, results XX high top interest. the encouraging Marine, introduction double-digit retail fronts, finance was down the

for premiums cost increased logistics on items some and some headwinds costs. warranty from snow net We and down continue seeing basis, ahead pressure these expense margins offsetting expect they in And bit same the litigation prior quarter, a full of and quarter. are lower while as was period a to the were margin such year we also in expansion pricing the the Partially in remained of year-to-date on year. the

grew to was PG&A to driven both accessory the e-commerce X%, parts, primarily our rates International by and X%. posting well, and dealers up revenue up XX% In business, XX% of perform commercial was retail driven market growth. sales partners. sales increased by strong continue share growth and healthy quarter. Off-road in ORV attachment side-by-side

Polaris good to segment, same new improve was While it great which metrics in demand space, includes we to Recreation and utility demand see XPEDITION. continue RZR, the those our General across see the

the XP in and With new our XPEDITION. year, the half gains dealer share week. regard positive for have preorders with to Both are expected more sites taking we XPEDITION. received dealer and Polaris both product of many from share Capital to the RZR the Polaris shipping we back network excited meeting Day next Plus, now feedback and news are at you Markets the the were

margin us continue mix the increased year, as more We associated versus unfavorable quarter in shipped to typically were a promotions, remain we have them. as prior the finance leader in pressured help share snow warranty with expect costs powersports. these and gain which lower snowmobiles efforts we innovation by to Margins interest,

exciting time the and in expect an remains positive momentum extend to retail Off-road the back saw in half QX the we into of It year. our business we

are half shows history as We lead year. and and to believe share so to we market as positioned the we innovation second growing gains the the in have never do innovation can let of up on well that

strong our XX%. On-road, healthy of to gains market now straight our product gains by retail Switching Indian American over quarter was over share fourth Motorcycle up driven XX% inventory. and portfolio bolstering with was North share share

sales both double-digit gross FX [ and growth had Our headwinds. European brands, in ], strong UPL quarters and with profit Aixam despite meaningful

Improving had margin Indian to and plan is higher of up We mid- Motorcycles driven favorable to another EBITDA quarter On-Road X-year a gross mix company of profitability expand was product and volumes. profit Slingshot component key basis points, strong XXX our businesses high in teens. by these margin the to

over For half the year, the up On-Road points. XXX of are basis first profit margins gross

were the Moving from to than selling Results never were to lower fully our the Marine as expecting segment. recovered start a softer industry season. we

we was with the consumers purchase costs basis dealers While and higher we actively interest we digits us given variable are higher floor industry protect some boats continued inventory the Gross in net are concerns margin confidence plan pricing, up modest to healthy pontoon points Dealers hesitant and are that profit mid-single XXX to profits. plus, down about share due to telling Bennington. economy prices in the rates; our believe around have levels, are rates. interest we and quarter, given cautious inventory higher managing that gained increasing was

XXXX. As season in we less ahead pulse what get the than a a primary for is on concludes month, are to watching to levels talking selling and dealers inventory closely

turnaround likely going not results year in to be pressured. half any material We of expecting back the are are the thus

are While portfolio innovation this continuing to point hard current with stronger an of expect we is a boats. inflection invest from peg, to emerge to slowdown and in

to Moving position. financial our

continues in X.Xx. advantage. previous see be spot strong balance at leverage to continue was healthy as We first Cash our a and in to a half our sheet net competitive ratio generation years, relative the to

cash shares target set for XXXX. X in balance repurchased our variety are first the a million outstanding broader during our end capabilities our XXXX. scenarios We well half of We shares up year are ahead to and repurchase and the of XX% market of with of believe well in the sheet of we almost the generation before

our expectations XXXX. on let for guidance Now us move current to

are half it of remainder where the Given year year, how the adjusting first of ended and makes sense. for we the the our assumptions guidance

Regarding by year, first well our saw us. to On-Road prudent to given strong half the X%. flat up it half the sales X% as the Off-Road performance we the what increase to This up is driven sales, half the and X% in of first feel is year narrowing in we guidance from behind to in of range and as the the with raise year

the new digits biggest raising the Off products to Road We expect contributor year the from of Therefore, we half up to the be launched. mid-single we to the year in our our have high single following results second to digits. for are Off-road low guidance

seen are sales far expectations and given we half digits, low We we lowering time are have of year. On-road the up sales holding and guidance guidance, the single this to thus year for what Marine back this at

year of mid-teens healthier Share given to back from Marine in the sales launches. retail. down now we guidance flat look at is as and new the the expected levels half product for continue levels to dealer gains sales year inventory are match inventory

and in industry retail to assumption are industry raising modestly higher in call for We for believe improved retail the for thus XXXX. Off-road also the our

in our greater gains we given to So this industry ability and assumptions, share have our retail retail updated growth outpace year. confidence

industry. the the Our PG&A of expected and these businesses this be contributors sales and for promotions to our are Marine to international in drivers expectations year. revision some Offsetting downward strong are growth

margins, to we at profit points XX gross For XX are guidance basis holding expansion.

moving we of and where land pieces is year. the aggregate, number still a are for there Although in we impacts will timing this believe

headwinds such of the but in all to expense we We momentum interest year. and with have linger second logistics, price warranty as expect half which and there of the positive net finance are costs,

case product. and not in by to costs. to seeing our production shortages elevated spend ORV Polaris increased guidance. outlook. operationally, a with continue product and primarily associated On creation litigation headwind This is component are higher EBITDA QX plants retail and elevated support were costs associated improving driven typical margins, expenses to While new a XXXX, second share up the labor are settlement improved delays continue start-up suffer inefficiencies accounted liability products particularly start also category-defining shipping as on closures demand we costs by as and The we new backlogs COVID that catch from XPEDITION driven operating courts in with our and and major temporary over launching for and

You revised can also this see our in operating outlook expenses. for

flip margin of that the lowering side, basis the points. our by higher to financial retail to XX On points we from are end income basis expect outlook. Therefore, XX EBITDA given guidance we services, top XX improved

X% most to EPS expense. drop-through X% interest range also rate from down margin by to operations consumed X% continuing up to the from with for up the We a from being potential narrowed expansion X%, of higher down

quarter, third a the of For to note. couple things

seasonality very We Recall in pressure On-Road able orders. recovered as the and be and flattish expect and strong product to the we to ship business to year, and presold last due we Marine. were chain retail supply a from had fulfill third quarter On-road

retail expected up to double Margins vehicles modestly of initial ORV this sequentially Off-Road expected new as the digits down inefficiencies. earlier, are quarter, as be be to mentioned year-over-year year. causes navigate we is some the up I and modestly which, prior versus build

in addition, lower are headwinds the as year labor partially costs. by In continued prior on These warranty -- have period. offset we planned higher higher costs lap we recalls

exchange the finance will have year. headwinds expect other We persist of interest the we and interest, significant through foreign cost debt from that remainder higher

continue the have QX year. and great for in will pace be to due to meetings and timing launch dealer the of Operating we next for of we new QX week the XPEDITION expenses Nashville versus products. be cost expenses higher a supplier in Overall, other on and

the the we consistently on delivering economy. focused which amid and takes results, have done puts remain of teams broader Our strong

gains the we guidance through and outlook metrics. to meet allocating forward with on have strive proud capital our doing of what halfway what are deliver for can share while deliver have accomplished the we do sales our that narrowing team this market and other innovation, our future. to to look just and and returns. track I'm We on raised year strong are We in commitments, to

Go over I call our Mike to it ahead, summarize that, back turn today. Mike. will With to

Michael Speetzen

it pleased modestly first successful for and the Thanks, gain a believe us share to margins. second up We're year and with Bob. half of the sets half expand

retail industry had a the quarter While to originally the we on we environment than stronger point retail. this in year, and be flattish we second cautiously estimated expected, had saw to results we're optimistic

so firsthand seeing to been XP with innovation and It powersports. eager launches, RZR we the you to next and is sharing in why customers to we've You're see Polaris the these them bullish dealers and week. best and hands on exciting to certainly more come life, we're with products of look XPEDITION forward get in

there While than within past address smoother and opportunities operationally, remain supply business the manufacturing facilities. our years, couple to running chain is of efficiencies the the

We're and our focused expanding targets. on of margins X-year meeting all

in to you continued that, look Rocco the your open week. With Rocco? forward up many shareholders. line in Next Capital needs still you opportunity while a to person for it to seeing us laying thank update targets going for great turn be and what Market the week's in Nashville you over to I'll be out for questions. for to these returns of progress deliver order to on Day to to strong We we is done next support,

Operator

[Operator first question Craig with Instructions] Today's Kennison Baird. from comes

Craig Kennison

stronger I do we guidance be QX The double number your year-over-year of a sequentially on get we but flat. like positive think something you based how to up that's up basis. that. retail even math going would on very follow suggests significantly number do maybe on to said internally Bob, digits, a we low wanted a I

put Just that? driving your are QX point if a And finer on what retail? expectations a you on for wondering can year-over-year basis what is

Michael Speetzen

of of Yes, 'XX in availability. Craig, happened dynamics It's product lot both question. thanks for the year-over-year, comps the 'XX in got we a and terms that

at QX, when to QX from 'XX I sequentially. look actually had our So retail dropped

compares of element QX. to when year hold the of QX So you this terms there's XXXX, in flat an

it I'll we've flattish XXXX. entering third And hinted I vehicles. utility going quarter. are driven against We in helping strongly say better yet And baseline strength continue we're get relative still we've to had seeing come, third another the one, to by we're X the weak being new would because be fourth products, and to and continued performing we be the been, market slightly remind in got relatively and to a market. you, relative back than that's retail perspective obviously XXXX Off-road Recreation, it's had really the we into then where expected. is and although it's to our to And pretty the one going from end quarter segments. as into those then new us And

Operator

question Citi. James next today our at And comes from Hardiman

James Hardiman

morning. Good

if then had on prepared how a on of that lot to the a like those maybe margins. you quantify I up Doesn't out, you then inventories. the just a the A impact think the is. a big think of into So pieces of you feel away those margins. is going of a back and you a once dig to get could during question but as question things the what moving lot for on similar sound remarks. that I to go clear on trying OpEx think you I sort Any half called said opportunity are question during and production inefficiencies Maybe wanted quantification side. couple

costs. You quantification there called Any labor great. out litigation be would warranty

Robert Mack

Bob. it's James,

of couple a things. So

challenge some out as weeks. key of still as and the rework suppliers. That's diminish. the just starts have on progress plants freight some items. retain more We're stability improved of the being cost several the side their positives And think seeing people cadence We operating there's is COVID labor really come some able and we're in negatives, of back Where recruitment getting normal retain on last to right? to and just terms do I lies shortages the the on to seeing part the people. we some with side, great ocean

there. of XXX% not woods we're So the out

do it's the that's of I to the just some sequentially labor, month-over-month excess there's getting warehousing plant, excess the through quarter-over-quarter. better think But feels get work of the and of like accumulated course to COVID. the inefficiencies of that out some

So $XX-plus of year, of terms of of million the half in you look range at headwind. I the think dollars, a it's the in in terms as second the --

big side, The On the the so COVID. going dockets that things we stability issue. it's of -- systems last the really of a an out about hitting of started. forward we not not to on thing. thought had more legal cases costs much of different as OpEx kind year we we've closed are relative guidance, not It's more are where they're of feel in the necessarily year. got natural anticipated year just of had as the that kind laying liability. in being bad we in coming through about That's court during of product It's good the We terms court when terms unwinding

of catch-up things in were sort is system during a stuck of the just this that COVID. really So

Michael Speetzen

them you how reality good. ago. have out, it When little got about of the you the I past. we the still that some had look exhibited my in with meeting got we We out finest give our mean of James, at looks around a dealers you harnesses. doesn't the level quarter, the prepared I month units wiring pretty out we've but and same at just Yes, look and that the we were of I'll in When a color. remarks it discussion with mentioned

last been have from couple from the And ready that of years, can't pretty is vehicle down a but and significant it up the standpoint wire Our significantly supply it's wire of us, pandemic you was it's start where rework issue up from until set harness for harness really you go. the before chain. the in disrupted the still where is to

every we've We've the better our improvement. news caused supplier good continue that's with disruption. significant seen Now day. working They the to sequential been is that get

anticipate And headwind to The we've to so up. dissipate. is get we still issue caught got that starting

because they're a to make building level stock. adequate and to, supplier need labor spending that we're safety with that the customers sequentially. as we're out get should creates The an the we the originally inefficiency that vehicles of level to going in to sure And to to what we working half. to second them. indicated, higher there. of year, a But the still the standpoint, it's so what that it want relative thought working does be And dealers from we're make the is vehicles, But start what lot get for is need sure the demand we better

James Hardiman

a of on XPEDITION talk been some the as lot XQ. is, you $XXX was lap namely think million to new of in haven't that maybe this really are I another color. great guess and been you think about. ago time ORV that to you you a quarter like replenishment it third us, sort a could million product numbers that create I somewhat is and and is the a or second to I But That about the year space has could gave of think game-changing that that are feel $XXX guess guy the year in answer there to ultimately of some of question sort for I And we still . we ultimately the now going secondly fill white about I from then another here, where inventories used half? bad about shipments think was based from we replenishment question gap period ago significant of that product, maybe as

Robert Mack

Yes.

kind is the half to meeting XX% refill see months in the primarily XP you'll RZR in second of QX there's mobiles had and about it dealer that of your The the to 'XX in selling XP, a worth second think keep we week some we year, still versus So on offset million of the additional versus products and they're products, and the about that last then about million. we point, of about year new $XXX to launched snow you XXXX. then James, the that year XPEDITION, next half the the the in there's ago, channel in that's other which also few at mind, of $XXX if XXXX, was second is half, new

If stuff snow we QX shipped get time in lot struggled a you that in out to 'XX. for remember, XXXX, of in repeat of season, really and don't snow to We intend we mobiles 'XX.

normal in go will out snow more in So QX. cadence QX, a

got well. that's so an as impact And

Operator

next Noah our KeyBanc comes And today Markets. Capital question Zatzkin with from

Noah Zatzkin

top Just channel were me that one on the Marine to in expand challenges margin. the Obviously, you side. for able called out gross softer Marine guys line

of on the you could just levers pulled about That of the you're be rest So the thinking margins talk some Marine side the about if how helpful. you year? for would and there

Robert Mack

Yes.

Marine, what had think of shipments not boats, had We we the which with year. us we mix margin I expected, really solid first with in bad higher-end half some expansion. good helped not but mix good had year, -- to this the

we've And the efforts some Marine factories and automation to just bring had to some then of industry. the the to continue lean out

Some Markets margins of of first you'll help that year. in Day Capital the about to at half hear drive better the

be second Elkhart. margins certainly business. very year, is challenged. revenue is Labor much very I will down, of being a It the cost think half variable in with flexible

dealer going of production we've inventory. see to what schedules in terms so adjusted retail we're our think And and we for

on so going of what is still for it to boat back us. the It's the yesterday, be brand. the But it's which year, important Obviously, preparing to everybody that. half info did we're to like digesting sense exactly gains share look I through biggest tough for we're in half. to side, remarks, take hard our see we some out Bennington but August. try in say came It's early I here to get our what kind actions will meetings in the as that as And But my in second that it's to margins And said -- protect a say of is the have prepared necessary better to dealer turns. when we soft.

Operator

our today comes next And Fred Wightman Research. question with from Wolfe

Frederick Wightman

that are of at you side And in lower dealer optimal to inventories some the particularly alluded mentioned your competitors, levels. You the products elevated entry-level near also business.

dynamics? moving and how of from holding year-over-year think the just talk program So RFM can a seasonality sort perspective you perspective the given up competitive is all then you about from pieces the a

Michael Speetzen

we're spent by we positive. dealers they getting remarks. shipped in and doing the move of remarked number standpoint, signals the were incredibly the than large, able getting and the that A retail the most that felt Fred, being is well. of overall, getting channel. a the job unit into referenced with we I to with mean from that time RFM that my I prepared working dealers was a forward feedback replenish better unit And product And Yes. is an to

content on of vehicles. caveat where we're struggling business. That's we high higher have power with the I'll a tend that Now to still in the the end

North that type any dealers is deliveries. probably is delay going playing the hear you can And So supplier to out delivery. -- you'll largest the Star from of see disruption the one largely

has larger become That the segment premium has and that Ranger impact. business, super a larger so obviously portion of larger larger and

So it's an of area amount got that a we've heavy on. focus

vehicles these compounded is with they XXXX, The ASPs where foreign the of is other a are it thing level in inventory that softest it our that and the interest rates, is, there are though mind things the combine higher in when customer to that, that induced even the is so dealers the the that that you from to some issue and definitely from digest pretty the have truckload on it trying end still and was the keep you market feeling down OEMs where gets of substantial dealers low volume. lower-end is then like up standpoint of and buys really where these is have

everything interest doing we at a I end move trying And that to low of to think with heard sophistication they're lack But to And higher that. lot can discounting that the and units. frustrated do by market. of they're of the terms the move compounding large, the rates those pretty trying is so demand consumer they and in and

to we continue improve So dealers. the Stars, what to doing hands we're ability North a to of significant half going on our products the as Ranger We get and year. the the we into saw high-end of pretty get in the that's through improvement focused back get can to

Frederick Wightman

the on was know just there of you you XX-XX looks where little on quickly Was a the conservative then And half. the Like guys forward? closer expecting a Are to sense. back cadence. pull half? like XX-XX. back it's more biggest Makes were first just I maybe It sort change? half,

Robert Mack

revenues wouldn't there and in of shipments. of I say pull forward Yes. was a so terms much

pretty vehicles, some was mix higher-end did just the of the decent. was first of talking the a job getting Mike in half favorable promo was those We half. Some better in of out about net and price

So bit a financial more forward. it's than just results better little a pull

Operator

today Joe James. Altobello comes And with our from question Raymond next

Joseph Altobello

color guys the REC in quarter, on question, gains in demand first maybe share a maybe offered drove improvement saw little the what in you Indian? guess that ORV the massive the [india] I

Michael Speetzen

on side, crossover improved general continued deliveries in category RZR the we REC be end -- we strength the and to mean continues strength through into of we category. saw I tanks Yes. of on some had year as that strong relative the our The our high overhang the fuel rework got first from the of part late year completed the this to as and we work the recalls those. last the

mid-range a So market. I think we're change the not to of significant at the seeing low

strong. and high given those much crossover of the are because think used of that a vehicles it's multitude think element being been strong, around handy are of hold homeowner is our obviously, things employment space that I more some strong. to up category of pretty multi-acre remain crosses levels into an And I categories utility board there's the the vehicles that in property. across again, up that then income those levels has end favorable and And for that, of terms continued holding

Robert Mack

Yes.

midsize year, an in midsize and side, impulse the the the so first helped last and inventory dealers prime painted midsized growth a the half but of On greater saw heavyweight in we we both good the the in mix had Indian year. midsize -- parts, first had and black with good really problems of And saw it's -- we growth of growth. Indian the buyer, make the to and the tends dealer that of in in inhibited more the half season be in that with inventory year purchase selling first-time buyer new good

Joseph Altobello

And Got more of how improvement? margin probably come you Is do But is talking of it. in years, RAMP maybe this that see over are terms about 'XX? progression to a Or follow-up you just you'll next helpful. that in back-end week. there next that address like? That's weighted the some several the margin a looking guys

Robert Mack

some. there's think I

some targets. it headwinds. and to week, quite we're we got working about a good the there's having and to near-term continue we're moved will in we We short-term long-term things targets, work profitability get really company We as just cost but profitability. and operational but both set had next not with since and improvements to get helped some changing back a improve Slingshot, talk overcome FX margins. price through we're -- continue year Obviously, good the correct. factories and drive we that, Indian and track those activities inefficiencies bit that We've But on our that that will a ratio has total

So kind And stuff. Day. we'll some longer-term then of at Capital that's around and factories talk about design the things near-term Markets product

Michael Speetzen

Yes. I foreign that think mean, us when hit about exchange, hard. you Joe, really

more you of far of kind year couple is GP more where first of exchange it of assume point for impact. the today. more And pronounced as holds get gets and I that it's over the So just half was but next foreign muted, the a shy of impact obviously years, out

factories suppliers deliver that So cadence, efficiently overshadowing as of the good start we'll be we at clearly, cost to some the like then lot Bob out overcome have. said, factory. a of as we more we're able to obviously of work And it's that, working work the running to stronger a get our

pretty we week. we're optimistic and you about we'll stand, show next So have to where more

Operator

Robin Farley And the UBS. next question comes today with from

Unknown Analyst

we Arpine for Could actually trends for July second. go is to This back Robin. a

mean far July? a for up continued and full you seems expect what's have share it that it to talked in I for year of in up in and so or follow-up. having You about up into year-over-year ORV single for in mean ORV is ORV the on which quick June you're basis? guiding I then guidance QX retail that full a seems full low industry back ORV year And strength guess be half better gainer up slightly. And than retail a July. outpace Would extent digits? then Does year the that

Michael Speetzen

Yes. up we've July, I the I continued characterize it versus to mean, year, versus up last way guess in ORV, us strength not in only would would 'XX. have which see I but

that continuing starting a its For standpoint. at Marine obviously, down and soft segment, normal to be to On-road slow we're see the just seasonality from is

consistent answer I to yes, simple up. So everything the expect seems be to think pretty be we is, Off-Road playing out

products that XP like The that XPEDITION be replacement, gain thing product Polaris expect share. like products replacement new, is defining announced either number of and referenced several adding we're keep a yet or RZR in We the to in mind times. new to we've to strong the are category

drive incremental So that's obviously going to retail.

segment. that's we driving Off-road the what so see strength And in our

Unknown Analyst

sort to used And in those end of that key from inventory profitability lower that Polaris. at the talked you about dealer think OEMs? you talked be we end terms of units How about the versus think to competitively dealers of we lower do OEM us of about, longer one feedbacks as term

Michael Speetzen

profitability I know would significantly. high because and segment we the to lower-end of I heard it, I'll of rest as call They're a not. ship on mean, they to were the were really you're this because And I to of having that those I when mid- dynamic to end able to they're lot talking the paying ago, They're guys and get think Well, slow that were able margin pretty lot think a interest of is month moving a discounting. dealers do I changing the, units.

move that terms of we're with look and how into at business. We important competitive forward. we continuing brand. our pretty doesn't we we entry have in where we're customers with the it's done, to confident the know of at. that bringing mean as It we're lineup we're the confident value side And product and are So

Unknown Analyst

more Great. And one I'm I clarification if sorry, question, Great. may.

impacting In you in that could that in of Off-Road, terms impact temporary and mentioned you terms how the is margin? that production quantify of of the inefficiencies

Robert Mack

Yes.

I that. the answered think million I about second half. in It's $XX

Unknown Analyst

the In a year full half, okay, second on not basis.

Operator

BMO Markets. from And our with next comes Tristan question Thomas-Martin today Capital

Tristan Thomas-Martin

in impact of there margin a the half. did say point Just you first $XX X was also the million,

it So year full about if impact? then right? million it's $XX that add I Is up,

Robert Mack

the half. Mike point impact in was first from a there said X FX

Michael Speetzen

just Yes, X.

Tristan Thomas-Martin

Got it.

$XX So margin the is half million. kind much the of the with $XX was in how like-for-like million first then that impact

Michael Speetzen

impact not not one around half to rate that had really the we're was I because half seeing which materializing into is driven a levels we progress improvement huge rework that was be our we back in that we the sequentially assumed there. high. fact first by that's primarily continue mentioned. supplier And It same had were the largely that as the expected that I expecting that, It's inefficiency the at had mentioned,

it's to at continue year. earlier see But this we And sequentially, the but with going be out guidance when we to came momentum. had have see we'll that same to just obviously, not improvements that that, level anticipated we

Robert Mack

we where have I back Right. seeing thought we are improved half guidance. so we just We're just to mean we'd significantly the clear, to we be of not year XXXX. -- when relative improving versus improvement as be much in the did

Tristan Thomas-Martin

And more various trends points? maybe the it. Okay. you kind price you're of any Can question. one Got then out retail Marine at seeing break

Robert Mack

high retail say the of to smaller had amount drive loans given that as some just Marine that hearing far the of but boat of we're a data lends probably that products smaller rates higher-end data detail. kind rates really credence kind towards selling think the of consumers the chance and season, and boats is a just from length to haven't the or to in from longer products perspective, finance starting relative sell some the the May, those frame other tenors first the that data, strong But year, went cost a sizes, the concern the of perspective Through of June was would of perform finance boats the retail to to I we all go a dealers in the biting so Marine of were more Marine, stronger were kind tremendous half I Yes. which through in less higher came which the into the would finance. we cheaper stronger come time from of SSI what saw the yesterday out I back probably are

we've only bit that's of So seen that's little months. the changed dynamic the couple a really last in

Operator

question our at Research. David from today next Longbow comes MacGregor And

David S. MacGregor

Mike, medium interest, patterns less are to you work generation? ask reflected the and in the we be just would the I which consumer softer sales and in noted segment wanted line. there guess Or you at lead low recreational here? ORV, of I credit Is about would seeing constraints

Michael Speetzen

inorganic and purchase. starts abate is around starting is is rhetoric the generation lead both the inflation think as think organic to X things to I very Actually, One it soften hesitation. No. there's probability because the what's I strong, the driving -- talk think a discretionary or the I

people little when are And of recession a does cause hearing that the word pause. bit every a thrown around XX seconds,

And the X is financers. continuing heavy that number buyers REC evaluate. interest low rates, midrange are to rates that's side at have we on are Number moved to the So up, one.

promo it If of a would continue is area. at good our in be that you buying down. suspect portion rates look at I to we'll directed spend, aggressive

talk more there's that about the think probably next dealer meeting I week. at we'll

a little the not bit get consumers it's years payment, But rates X.X gets that impact area floor. help the a to shock showroom to they're though a over the tremendous higher. the when ago relative to even they see finance into the we bubble that, buyer it's the just greatest that's opportunity that were And able the on still of

and interest take to sure good are of hopefully that Fed economic less the some headed, that on least concerned if steer favor the So where out out. like feel work with coming people rates little I sounds help -- where able make hope And we the a what starts pressure. going bit at less promotion and we're in economic certainly of get could the stability news about to to think of front, consumers broader our to I we're

David S. MacGregor

to you promotions notable seeing difference second On-road there the differently on a How Off-Road? there? question me, in, just say, Is and are responding versus Right promotions. consumers for

Robert Mack

there's think a don't I notable difference.

bit then rebate the different seeing in to behavior and we're towards As in I Mike factor said, don't buying but I side. a bigger play and consumer a would rates either finance think one think down is On-Road difference say little promo trade-ins I a On-road. lean promo starting more on offers, that Off-Road

some that -- And are one-offs. impact paying in they're they people the and more are upside pandemic trade-ins during They're huge On-road. has but say and so things you driver, fees a not those encounter retail an bit bought of down stories, full I that a like stuff would though, still more that. dealer plus

Michael Speetzen

And is money, being more money David, We're, doing we've the if tests versus a of where our lot past a capability. I what directed better spent continuing see job we're works. rates say -- evolve. discounts at I'd to of behavior of down years doing we're CRM and our better think, in several buy far over is to being spending

than And so used greater pinpoint we're we able to customers and far to. target

doing offers going targeted doing not to category induce while where who hasn't in of machine broad So a their a to rather we're of than maybe we a more work. offer promo have type that somebody come lot a a we're consumer upgraded making new where in to

were the where which interest having towards historically, a using especially right of how as supplementing we're is percentage much they think now. thing, we're promos to money down a high I MSRP are to relative So think good still push rates I given better

Operator

with Katz from Jamie question Morningstar. our today And comes next

Jaime Katz

the haven't to business. in is want just a EV we talked I that which about I touch the guess direction something on of while,

is interest? product over evolving of time? how that is the of lineup see consumer how adoption that you the going? And do Sort What

Michael Speetzen

oversubscribed very the incredibly probably product, opening came first to of consumer feedback knew but were that a that there's of is of best the the out we've go with close know can done reviews reviews evaluating, with gotten. given you customer, we that's has been Feedback incredibly allotment. has We up encourage that talking only XP strong. new when we've you, given that obviously, out receptivity been a We're Customer strong. The strong. the independent We in. do very I'd a different started not and in are Kinetic. it's We category were delivering the process window. staying we the second from some that the demand is dealers ordering number

we're open anticipate to second see when going order the the probably future pretty too that we that in strong window, demand. not So distant we up

that in focus on anticipate in It's we to going we're proven area focus segment. would that to continue this need I to on. utility the to be

to can vehicles RANGER evolve that so product our out in other lineup, kind go of that category to next And with. we're we'll around we where centered come given obviously, and the you continue vehicle going with the anticipate means

Jaime Katz

Okay.

lift have I that exiting any market be the question Is a Yamaha pretty at bolster on other point or sort year their you to small consumer two. a guys share is market incrementally could or reason after wouldn't that bit go there provide of something that base little next over it of share in guess is And the And market. recently presence it snowmobiles. will this has although I time. The has announced

Michael Speetzen

given of certainly the will mean of we're I are it broader to our Board about the There the the lift. as implications a given that to the player But well such one They're tiny Yes. to recency just provide competitors they going it news. market. other just have. talking relationship a be in

direction a position how great We serious of about to big that team to to simplification. around continue great the I'm excited the business. we'll the commitment, about business, It's in taking the about that excited of up The dealer job to our of team a we what renewed them that a had that going to couple to We lot were phase the So done watch we to with about changes a for making has deliver we're we're meeting years talked and out. in we're season. a back have of incentive on it. offer. put take focus I'm making the sure where that it, probably to consumers a living ahead sleds more we the prove and pretty quality is and really

of to Yamaha great be we're So what spot in think does. regardless I going a

Operator

question comes from Siew our Paribas. today Xian BNP next And with

Xian Siew Hew Sam

optimal near terms thinking inventories the destock historically want QX. dealer mentioned about the in I #X, absolute to I or are think that the thinking clarify inventory guess I slide, You you show I'm is of what relative in XXXX. guess I to just units in you it's levels. like how

from we do a it expect here, units are similar is holding destock? here? from Or So historical

Michael Speetzen

on I going unit. Well, by an on category dealer region. dealer we're overall, is part There's there. by at tough we the look inventory The at in aggregate mean, looking a That's inventory lot level. measurement how and

given financing here heavy with sure the That is most on obviously of a getting So where focus vehicles want continue interest new we've obviously, QX that. into normal delivering and bit going said, retail got And pattern with to got renewed as stocked rebalancing the half units, Stars, good heavier for is little like. couple the portion we'd that for be into make as we're QX. we cyclical probably below they North so a there's to We the the going as in dealers those premium to category-defining we're coming follow that the the still be market. probably we deliveries going vehicles. making be we've get QX. but sure new way we're utility are back a part, we'll a move then anticipate than do of that and the we're where We will to into these is areas example, to the of start exception But inventory inventory side, we'd

Xian Siew Hew Sam

a And Okay. just helpful. follow-up. Very maybe

to think Because I ORV, I it's was X% retail guess XXXX. be X% down expecting XQ but XXXX I XQ you're versus think mentioned like down correctly? I flat that did versus hear you

kind So underlying is it of improvement?

Robert Mack

year, mean then we'll industry was relatively we think XX% better about XXXX, 'XX. -- below take thought it be I continue think flat XXXX. the would at 'XX be We be look will we Yes. I when as that, to than to we'll and the share. we started

we to the in And for all second will comes flat some 'XX, think that relatively of take the play so half year, will share. to be the industry assuming the year, it

Operator

from today comes D.A. with And question Rolle the Brandon Davidson. next

Brandon Rollé

on Did the business expect to in clarification. say the half share Just On-Road of you year? the briefly back hold you

Michael Speetzen

Yes.

Brandon Rollé

during of the you year-over-year XQ, is but it market guys obviously, strong share channel XQ you Or just better changes expect XQ? do And a maybe in Okay. gained what some function fill in and QX.

Michael Speetzen

as continue to that into get going I share. point, we're to normal channel half internally, we year-over-year that of Well, we're given year, think seasonality QX. do into this the we're comparisons, back And the half. I for more not paint the better difference in obviously, obviously, target black But to we issue first move business that made But gaining if mean, most a you last was it's the had. challenged going at filled, expecting

into just And back see playing so the dynamics those necessarily as out half. we don't move as much we

Brandon Rollé

now? the see on based the the Okay. is right at on Do Great. just industry concerns motorcycle the a underlying I And market in materializing? that Or that you're in a secular about seeing whole. demand following you that. of as up just decline. looking industry know view there's any

Michael Speetzen

necessarily share optimistic what mean a the has there's one we a continue means No, tremendous we're that about platforms the future amount large But moves that's such player to see business. I things that, of not seeing. think what various excitement market obviously I that around that we're we around. of particular have, the for that and

Operator

ROTH MKM. Scott comes The from with next question Stember today

Scott Stember

the maybe by past, that just could about considered, [coal anything PG&A the price by in I segment canary PG&A in Maybe about. be point. to by worry was mine], the if Mike, you've said talk and guess, there

down things go how chain. the you trying elastic are really to as see Just food

Michael Speetzen

Off-road the are I in portion up. has mean increased substantially and of continued our the the Yes. performance hold is more thing and we to more have I is a mind them. vehicles what with that install, PG&A coming good factory mean the through content that on to overall accessories vehicles on meaning we keep call out

talking Number vehicle look and with they're they're you If factory look coming and Polaris options. more you at accessory we'll you be next new the offerings, about higher look coming with the XPEDITION, that higher the RZR and week. install one, at more XP at

continue level so to And we see that increasing.

hold driving a as strong. us see people are activity We the up. going that out we vehicles the back sales anything year-over-year, continues probably to Parts but watch remain like to bit repair than in continue know anything to miles don't the as office to there at and Overall, many spending that more up. hold aren't that we repair office, we activity to little point, see time but do continue putting people concerned. has things this overly that the And necessarily point PG&A folks are down markers on, average Off-road that is doesn't miles other

Scott Stember

the year and of $XX saying that first pretty All what Is full at about production I right. were to back thought the you compared end inefficiencies. the point you for the just million an the that correct, half lower last If about this question, quarter. going correct? heard to the year, of probably than you at or back you savings, just of much are ORV originally commentary abatement and right, of the And expected

Robert Mack

And year expecting mean excess year-over-year costs cost to I are we in think paying, I of and use. basis impact declines kind Like a were in that we we it year, that good into noticeable them we the rough given declines. the seeing half that's Yes. on math, a is had started we seeing the said, We're the originally second terms at forecasted. we the rate of just the had than more premiums the first. sloped not proxy

Operator

you. Thank and and thank today's you this today's We concludes today's for gentlemen, session ladies attending question-and-answer And all presentation. conference call.

disconnect have a and your wonderful lines, You may now day.

Polaris (PII) 25 Jul 232023 Q2 Earnings call transcript