PII - Earnings call 4 2023

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Operator

Hello, and welcome to the Polaris Q4 and Full Year 2023 Earnings Call and Webcast. [Operator Instructions].

I would now like to hand the call to J.C. Weigelt. Please go ahead.

J.C. Weigelt

good afternoon, and MJ, you, morning everyone. or Thank J.C. I'm Relations Weigelt, Vice Polaris. Investor of President at joining our us and for you Thank for earnings full XXXX call. year quarter fourth

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

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

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

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

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

Michael Speetzen

could you a with Good and J.C. everyone, segments. After categorized our across all joining gains turbulent share be thank morning, today. us what year, Thanks, we XXXX only as for ended X of

guidance. the challenges, higher in and margin which the run EPS of execution anticipated, a particularly strategy, quarter continue to faced went aligned to there drove was plenty several right our we that While our longer-term as and than we miss to fourth costs

seen. the delivering we XD innovation our competitive It much customers. X that ever vehicles Off-Road, RANGER the to of started lineup this we XP category-defining spring, commitment off-road there to of last redesigned performance our with Together the right with went was industry-leading the While Polaris XPEDITION industry in vehicles below our brand-new introduced In have bring expectations, launch XXXX. on now us the the and completely XXXX. has RZR year, most was

Ride with Elite resulting in Indian which the endless Pursuit American & VTN and specifically Lock In launched all-new bar and the Sport the Max launched we On-Road, new purpose-built Chief, accessories the motorcycles, cruisers. intuitive Indian raises entirely also system performance a platform. customization for remarkably and the We attachments,

In we crossing we and testament lines a the before success been Marine, quality the has finish bullish past Pro we to expect R vehicle has a these our and had Polaris. feedback positive, were market. new was customers also what performance the the introduced we XXXX, were and on celebrate models from indicating pontoon of the all launched that others line new value Bennington's The SV Bennington year in this RZR strengthened within to teams. When early the It race vehicle, in offering and this right. is summer

innovate to top Our push to from what racing has envelope the the of possible world and Polaris to suspension drive again. technology led is horsepower

a at as ruling and Hammers most Arabia Polaris as some X Saudi the late-breaking monumental San is the we terrain unforgiving Rally, which XXX win Filipe Not XXXX, the of in the swept covering challenge. miles weeks Desert over X,XXX through races podium news, King in the of we Baja secured X,XXX did the win DAKAR in well just XXX only annual at XXth and the one

teams talented and on Indian racing where in Motorcycle our We place took cannot players Hooligans. a successful race to Hats forget first and Flat Track about year year. another engineers off our for we also such successful American Super

of years. product dealing availability In removing with stabilized addition to inventory, we several been for record levels dealer of challenges innovation, we've the

flow, share and $XXX dividends shareholders that of of balance over million We and XXXX, our free cash that health putting to of to we Another the sheet. and our In between we're highlight cash deployment flow cash repurchases. million generated is execution capital returned the of work. strategy $XXX adjusted

and strategy center organic our shareholder deployment all has dividend in capital of repurchases, continue and been Our generate share around consistent, to goal we to expect which value. our investments, to lean

lot While we short our be certainly proud our fell have of, a of to commitments financial against execution expectations.

products year, new challenge to manufacturing did that them to on disappointing pressure. margins was driving for It's below came expectations centered to. team, which processes operations level inventory, of Our a important our warranty EBITDA pressure This, largest as we below operational and improved our in we and inefficiencies sales, liability with the costs higher-than-anticipated note planning. spend achieve in manufacturing had on facilities. as the with around and and in product This me We XXXX. the start we to difficulty and not producing focus improve did later Add significant efficiencies focused year. volumes to addressing margin are resulted causes the root that planned, but our led margin the not and the coupled our lower within expected to well throughout

utility was driven and retail by American X%, North up snow.

digits, snow in range relative of than by vehicles. our snowfall lack retail continued the to year, most expected encouraging of driven our positive last given we in side-by-side to performance It see regions. expected While weaker strength up low results was were double

and them. exclude share business gaining recreational year you to utility profitability the interest higher little see if X with associated We Off-Road over given used in rates slightly vehicles that While ended uncertainty. more have point strength, economic continues saw pressure our of

Share started. snow gains are the as were able we deliver SnowCheck all our season-to-date to season of before positive units

the Marine and by did in better share and we slight While for gain share in availability year, quarter, under new products. product segments both On-Road driven pressure the segments was in our

both saw seemed slightly strategy We we an response our those Our short term noncurrent we sales We to is as lower December, promotional by and lower quarter current until inventory competitive months. November situation increase competitors. lower. than retail and to the were of play expectations net given during heavy results than view we in this and in well discounting activity. our saw inventory for out as promotions price In noncurrent inventory meaningfully due lower anticipated increased increase our and retail

also made as the lines margins quarter. last the fourth is of These revenue given recreational also levels inventory goal into saw proactively the pressures dealer rates. lower given lower dealer of inventory. targeted seasonal floor XXXX. models trends We expected razor uptick Consistent and a feel our the shipments, our of We continued increased an we manage maintaining inventory. interest and to within decisions result headwind our important finance of higher with This quarter certain specifically product retail on decision are plan these to interest remain of in and a to in negatively impacted quarter, off-road

in who with driven component by product by costs our expense million was a the Goupil caused the In previously lower-than-expected bankruptcy. failure, addition, saw was we charge in a These business within issues, claims liability margins. our mentioned battery warranty operational This elevated supplier associated quarter, a $XX On-Road warranty as elevated well which had impact for as with coupled I drove of filed earlier costs segment.

quarter. points XXX was in margin versus fourth the down year EBITDA last basis resulting Our

the due We've our increase increased $X.XX, pressure, higher challenging to XX% to the year-over-year of product for expense our Most along This environment. claims adjusted falling XXXX. liability short produced guidance. with EPS interest relates of drove before accrual to product down litigation

and consumer can that year environment a concludes on quarter consistent execution volatile macro and of a be defined fourth a our by demand part. The lack

to if While and to we're we year, of operate ability margin share free proud efficiently need adjusted our take flow more I'm to targets. long-term hit cash strong generate during the our

in improvements believe drive forward, gains. while Moving share our I teams aligned operational XXXX are delivering to

Let's fourth recreational Broadly now note as within retail snowmobile quarter, Two at driven important expectations by here. retail as portfolio things talk our dealer was the off-road the well speaking, than as to trends lower the in our about well as our data business. level.

sales with makes see product product retail quarter remaining fifth these used discretionary reminder, more marks consumer. Recreational products up The be tend the main a more softness as purchases side with and they Ranger We negatively portfolio. with to main off-road coupled economic by the interest the vehicles feel These vehicle are are be uncertainty retail. in First, higher RZR nature health as the purposes. to to continued makes discretionary the negative recreational our and XX%, are straight tends of purchase work retail in side-by-side. Recreation impacting less general our side. the sensitive to the of conditions our up Off-Road rates, XX% for the our of being of in quarter, which being and almost vehicles primarily utility economic

a expect given and positive our the easy channel. improved an product into delivery business to year snow comparison we from Second, last contribution

and poor first XXXX. this we was growth into lower executed in we While continue improved the quarter, than snow quarter given conditions on fourth to the expected of deliveries, expect

were do levels As in mentioned of promotional competitive We dynamics to XXXX. elevated into expect elevated promotions QX the remain QX I earlier, given explained our earlier.

We industry modestly XXXX. be to are expecting in retail down

continue XD While products activity with from we of see in year concerned the while Polaris conveyed being worsened time demand. survey survey our interest product higher retail anticipate rates the spring. to and relative This for challenged, given includes the We economy, in dealers on full as coupled XXXX. be we strong XXX that concluded to Sentiment industry promotional resulting last well ORV responses. biannual able new recently the grow survey consumer a launch that the to be the conducted dealers impact broader about dealer additional as portfolio they will share XPEDITION to expected our and close helping, RANGER to

too high. Dealers believe still system is inventory

than others. [indiscernible] many While healthier is inventory

believe channel and for in XD we've our continued an still we RANGER We that build Marine dealer and Razor Indian adjustments we began and and built specifically our Polaris feedback. Motorcycle an We plans range have within inventory optimal in to and opportunities opportunity into inventory making for have XXXX. given improvements with is to those improve, XPEDITION like where Ranger areas XXXX,

to XXXX. intend dealer operate That levels manner inventory in disciplined levels optimal in at said, we to remain a ensure

to will have positioning. environment. the industry competitive my and complex the comments the Wrapping the need retail with battle on how and right up plays our out We we and in competitive a the won the in the quarter inventory playing to balance year, offense field by maintain share

focused to financial against financial We on XXXX margins expand fell agenda. we While share, did and to executing execution our gain execution our all significant execute make against entered ensure at short, levels strategic progress commitments. we on our continue

and it to performance will expectations now Bob Bob? summarize and over fourth our who turn quarter provide initial guidance I'll XXXX. for

Robert Mack

continue choppy the Mike, driven back the retail made environment. third We On-Road quarter as good interest plans Similar year-over-year. decision by and a costs today. quarter lower higher with call everyone impacting be costs scale booked the cases our higher elevated. Manufacturing in to a higher sizable remain warranty on in quarter, COVID shipments, and the segment. price, system. Fourth were during during liability lower progressed factory morning to but margins. delayed the a vehicle our afternoon to as And we mentioned, Promotions line Mike Thanks, ago continued finance net to product results we to sales year or were to see shipments court relative both through the off-road given quarter expense

points. its pace the XXX of breaking of with in basis growth of continued gross of profit record and margin quarter PG&A records expansion XX% -- over

up at Our with continues Today, installed very for recent products, PG&A an the sales profitability. XX% us of factory, addition competitive most advantage sales of includes marine. offering business which in attractive make be of accessories total with PG&A a approximately to the

utility, XXXX, X%, PG&A increased revenue with expect in to commercial-related growth positive driven In a by margin and recreational be a product to products. XX% in lines, off-road snow our contributor double-digit continue we somewhat expansion. by offset Looking growth business, at and decline

our increased almost Polaris mid-teens gain much customer agricultural continue Unfortunately, including saw higher overall bit saw has We growth, minimal quarter. temperatures on America have the Utility Midwest. XPEDITION RANGER during expected XD our XX points we product. November. and premium which the helped been traction began a uncharacteristically North Edition, snow high of arrival previous retail the shipping to crossover We of was which the across to which late in given for for strong impact given a had share tend see vehicles, base, our retailer demonstrated during the XXXX softer demand need than snow retail NorthStar category the quarters. in of than with quarter,

share. Season-to-date, gained we modest have

mix profile. higher we elevated interest as margin snowmobiles, season, in we the volumes of promotional for conclude inventory given by lower shipping the and grapples finance and levels, with we a quarter larger typically dealers razors As expect season, at the as the the more pressured lower industry have sold snow. upcoming were which lack Margins fewer

We expect and basis, snowmobile lack ORV in driven that on a shipments the year-over-year channel somewhat the occurred quarter on by challenging refill a quarter of the first in XXXX.

in XXXX, our and large a channel sleds the to refill strong we're healthier we new volume finishing dealer up Recall late that We also to year. of in products this product get share well place. a as snow given do shipped expect launching to as continue inventory some on later portfolio gains season,

are We margins to manufacturing for X our largest efficiencies realize also as we expand clients. planning at

XXXX, we operational might the be improve us efficiencies, our setting the enter momentum position we stronger to it to while our have in believe to So half back X-year we challenging strategy. and a start emerge of as up share continue

rates Indian markets with highlight constraints. XX% start Doherty monthly great continued the were with and the full for job Sales the quarter were year its to want comparison payments into team the first and the year network We down have for a Like is motorcycle building supply motorcycle high backdrop Motorcycles XXXX. motorcycle we when XXXX also in interest that I be #X the brand impacting given On-Road. were done look globally, difficult to the challenged success. against continued we off Indian to difficult a forward up refilling Switching profitability given of a to bikes to market macro dealer and consumers. as during

expense sixth straight marking points, Motorcycles achieve the expanding them warranty mentioned was quarter points offset profit the this pressure the On-Road basis XXX profitability by XXX by gross strength profit previously modest market quarter. Indian booked basis in over somewhat Gross competitive for in which continued Indian the XXX Motorcycles points space, up quarter midsize. year. lost margin heavyweight the was helping margin was down in due during share nearly to driven basis

shipments with higher were sales Marine, dealer purchase. basis impacting curtail was top Gross decision elevated the pressures. were to the levels given decision the consumer's resulted down industry we lower year as inventory In XX% down and profit to points in quarter. in the given margin in trends rates seeing, line volumes fourth to continues which the made the deal We XXX interest earlier

However, continues team protect variable their to components manage our actively to the profits. of cost structure

in Godfrey Bennington, XXXX. Hurricane and took concluded season all the share With

portfolio are they about We early the Marine show are to XXXX. future to With add as slightly new our the continue that trending on seems as to the well continue excited boat down network. versus feel flat dealers of season as business us, inventory and they dealers refresh retail high their be upon read is to

specifically On-Road profitable more each we to above Quickly in or of this Indian year our gained again, reviewing challenges Segment was the motorcycles and ended up great guidance, strong sales it challenging. a and segment. year. with full by walked Off-Road. in see being share through Retail were at segment performance Operationally, products. And we our competitive operating have be

year significant free operating adjusted growth financial year-over-year cash flow. We and to the in our Moving concluded with position.

this dividends CapEx investments the the form we in used and support repurchases. year, $XXX and cash returned million to During share to shareholders of

financial We Xx like ending in middle our with the X.Xx, in business. a net to are X the leverage of ratio a we to which strong position, manage is year range of the

well senior shares and XX% long repurchased rate of variable public offering million of our our outstanding We to to bonds. XXXX notes before our brings end ahead X-year of our XX% the remained debt XXXX. and This mix investment-grade quarter, the target X.X basic shares we fixed fixed completed variable. During of inaugural by in XX% repurchase issuing to

for the balance market well a of from last cash up broader set we a our and in with variety are dollar in scenarios perspective We believe sheet can that replicate believe we year's generation XXXX.

guidance to and let's XXXX. move for Now expectations

guidance dealer as quarter. the We we shipping calling favored headwinds realized retail shipments first sales in volumes which coupled expected in are are the in to of a lap in be today and for and be down timing initiating with RV reduction of Most to fill these marine snow difficult a XXXX. environment, inventory XXXX

I year of is off goal If around a is dealer changes, then what said retail think worth inventory discipline our it based on opinion estimates industry declining will or on dealer inventory repeating of this we competitive environment. strong levels retail our Mike inventory. and inventory update dealer our positioning of

and interest margin. by driven top we -- adds and within pressure lower mid-single line quarter segment, somewhat such shipment headwinds to These snow by to Promotions through XXXX. are digits, be fill interest be Off-Road expected finance models RANGER the channel to to some first also the our as down are products a offset and in expected retail launch of the year, sales ORV. and products remain of and XD By scheduled which volumes tough elevated to comp are as in and expected within new progress

take in to are be strong soft interest as We expect higher its Off-Road XXXX, a competitive On-Road portfolio. we continue to year-over-year see to expected given flat rates. market given share sales

expectation share launching products this year. exciting Our gained that with On-Road very some is later

sales challenging are to Bennington's channel work great new inventory be lineup midst mid-teens We the as a reduce pontoon to a share opportunity continue in in in us expected give Marine percent SSV the down believe taking to industry. the of market. we

gross both Our margin and guidance calls EBITDA profit for expanding margins.

with happens at expected you logistics see efficiencies can plants. with guidance, to and profit gross materials, at be As level the and our in the savings expansion realized our

funnel savings opportunity. $XXX are we with larger over operational targeting million in In total, an of even

our new with plants, the renewed coming on as vehicles. efficient being practices as manufacturing down of costs see well we focus Within lean the production a with more

expense be to investments expected Vietnam being shop and [indiscernible], wage dollars also Operating we to to are paint business. on and in payouts up X% vertical back include offset X% cost reduction which by by and new the systems Monterrey, We actions compensation to capital driven mostly XXXX, expect relative made integration. the target inflation incentive returned from savings across

planned for continue liability to we to product backlogs. have as case work remain level a similar XXXX We costs to at through

floor new profit costs items headwind launch impacts tooling and include: due approximately dealer planning, gross higher with last modestly XXXX that expense. year. finance to of up EPS, to Additionally, interest a couple introduced EBITDA not costs. but other to of note debt XX% associated the relative to This is as well depreciation A is interest as our year-over-year products

X the We have in second planned cuts half. rate for

a tax do as well in of as higher amount items other planning the the the are lower we We of expect R&D rate XXXX. that credits some not benefit same onetime as helped rate

to Foreign again volatile currencies remain once be are a expected and headwind.

items, planned XX.X. decline the dollar Canadian we We have at $X.XX and are Canadian the rates. X.XX, for we to of XX% and peso are these euro in [indiscernible] to well relative We for guiding of Accounting peso XX% is XXXX. the these at between adjusted EPS changes $X.XX, the below all which hedged X.XX to at dollar at believe a

first a For note. things quarter, few to the

have mentioned, I shipments to as snow due trend the in marine. refill ORV sales to headwind last As year a and in we meaningful channel as well

similar to in fourth such sales to expect the Higher the year-over-year at a first be quarter. XX% we run quarter. Given promotions headwinds, approximately rate down

pricing, headwinds We during [indiscernible] quarter. finance interest stable and fourth efficient operational costs from the that net we to continue incurred experience

continued interest be unfavorable and expense year-over-year. FX lastly, And to

a on pressure for the adjusted first that have the to this headwinds, result together margins we and expected of are in sales putting breakeven headwinds quarter, number EPS. So predominantly

from expansion volumes, closer efficiencies from products share of year expect fix with new the These we year-over-year remaining margin industry. efforts X slower to [Technical sales through to plants the the margin sales and our go see as and Difficulty]. yield a savings year-over-year realize to meaningful in XXXX offsetting gains coupled will our quarters with We flat

as We our continues early new processes. to the expect generation also lean vehicles in another to from drive year down. of the made plants progress is strong the see It working building to reinvigorating cash flow more efficiently team we've capital encouraging

still on Polaris, Before renewed focus I the opportunity at and am our work industrial to plants. career lean was but the my have I I great. sector, do, with is see by the we know encouraged

are aligned to forward teams through look plan, our year. Our the and progress out on we the reporting on

over the to ahead, back it Mike call. hand I'll up to Mike. wrap that, With Go

Michael Speetzen

better, much strengthened and We are we cost once our coming off in There we launched more will. in we power and again Thanks, demonstrate major remain sports. where Improved why for that will come not us. products to competitive the incredible XXXX, a Operationally, quality Bob. we're the position, leader new focus we XXXX do and in gas. is must

Our I'm many began on across quality and team quarter, business best poised the lower increase the and execute of working to our momentum and opportunities that teams to are initiatives, we Starting the cost, last on these improve teams to our execute. margins. have focus, confident

the is that the maintain important commitment We our dealers our appropriate uncertain, a healthy dealer competitive of and worked is level ability an level to While part of of is of profitability clear. ensure inventory environment optimal maintain hard inventory and equation. an our to to maximized is

focus our cash to We there first Our which deployment additional a XXXX our as our XXXX committed in marks operations, challenges, dividend repurchase to while XX%, the here flow invest around is With commitment the is is we shares. our XXXX to halfway targets. attractive believe remain a continue to yield an and our strategy, free couple remain and stock point aristocrat we see path investment. years targets. And hovering added also to our capital unwavering. of

is XXXX are get done team months met. needs critical ensure long-term those over in and meet those on targets, the targets and what focused my are Executing to next XX to I to

fundamentals. our position in stronger and power products on with operational year retail While customer we innovative XXXX sports the will a leadership within most the industry, to setting a is not unmatched up be robust standpoint, from build experiences

best get you this We to thank know and year. what in team We we needs have the powersports for your done support. continued

to over the MJ up for to I'll with questions. turn And MJ? it open that, line

Operator

from Frederick Wightman Research. question [Operator session. question-and-answer the begin now with Instructions] comes Today's will Wolfe first We

Frederick Wightman

some I just snow us sales earnings And you sort and ORV more segment the And think guys first detail and just maybe margin high-level the that year? performance assuming performance can improvement year-over-year for sort that on of have are thoughts of implied pieces either or gave you the give outlook the how for us guys the quarter. some of to But the some you on you with remainder there? moving know Bob, restocking. about

Robert Mack

Sure.

So drop look and all, shipments plus is most high year. than at year the is expected also seeing the both it level sequentially it, relatively if of higher mean revenue. it's was first QX, to first have in primary although the of for promo unit you I [indiscernible] the be 'XX. be from quarter, QX. we are the It it flat X of in OpEx versus on the we're for motorcycles which flat snow and continued Off-Road, will what factors marine are QX

do to them consistent we at As through product recall as expect higher saw be to -- anticipate as in I with these have. liability cases to said some older on any razor level cases we or high costs we pass work the be XXXX, in other well the related pretty call, what continue accrual -- of their we we XXXX as we to we and did

It's we really inventory, challenge around fairly in causing pieces getting So will slower little picture we a dealer a QX. keeping those bit where the for and this the what dealer what's in given tepid terms I big retail what expected the be in we inventory mean, adjustment QX. at the in than are that retail quarter see QX think level was optimum of

of lot flat start sales XXXX relatively and the rest year, be When from improvement see to quarters. quarters and the operational come consistent of you'll through. the And you start get look gains into with more the rest will the earnings a efficiency to the the

see through you really sort how the the we built in what is If we works, math inventory QX. in QX of think

on that factory seeing QX we're gets sequentially improvement far be terms hours, volume factory in it by that in so going you'll start to the see having to So of that of those down fact the matched just cost, hurt. impact we are not hours the

it's won't that the through improvement continue stand to have the QX you and won't working the QX through necessarily performance we So into that And to we're hard there. year. -- out, sure to margin drive make going but been

Michael Speetzen

delivering Fred, that low had quarter customers. is business that late, which for us we've anyway. for typically Remember, QX is not benefit And pretty a optable the years, obviously of snow for

retail, starting to time. have But And monitoring QX, heavy when to to in And even of what are of we spot. with business. together we've you, operations obviously through And a to than going more and measures and this normal came a tell stay remainder have back-end that look cost isn't at encouraged much now getting back the up So level. a not not in got one of QX. QX. making we as we're in and it And inventory you January. all and business that year. out so It's out I back essentially Bob where of essentially of coming an look around isn't getting at better we're number bottoming this is mentioned, you're -- before, metrics top get Shipping the optimal our QX QX generating earnings much, can strong in plan. essentially I've team I the the the on basis, seen I'm QX sure we to kind executes. running dealer factors a of opportunity on as gate make of There's and us business it's loaded out. something at far, more in the specifically the really performance essentially when is It's team it the front us in it at to

Frederick Wightman

that share modestly. anything categories a of Mike, then industry shake comment you terms rates retail cadence I there you're Is think And out? year? to does across made were couple else expecting the as just to a that in assuming can be performance you think you well. coming down mentioned you the interest back I the How of outlook, just or of

Michael Speetzen

We've one, Yes. as some, of of got to coming very dealers of you they want past in [indiscernible] a did have I share going weaker confident I'm came that those continue top our is sure we that late and us year a and what inventory and we know it's of the the team broader and things. leader, lot to terms pushing have got year lot intriguing And we've discerning we to dealer And mean, I with performance. think there's but have as adherence our will. getting appropriate And the and Bennington, dealers the year stayed demonstrate this a the on-road say that. just brands, behave that their done, a add the are a really level. mean in really And obviously, at that making it the industry benefits I that couple Marine for to we we in an Godfrey that behind And reason we because that XPEDITION X us, I'd all they're And and out segments. with, obviously full in gaining become dealerships appreciate it the some work news year. The segment. on obviously, that, Hurricane. of not this given XD. more then has products relative Bob out with new in the in in

inventory trends right worse, make going but and plans going out shipping that his adjust not skis, ahead sure we're or to monitor we're to to retail, to we're in have make are our our shipments. accordingly. And sure going prepared the we're ignore if we mentioned and trends. not right remarks, better our we're going Bob of going we're get going at to the dealers, watching as to So We're

Robert Mack

built XXX year rate got It's about the to the on map as to bp cut, Fred, QX. Fed think And back we've in the right rate half the is all now what going the do. over late actually cuts in, of people QX, bit in

year relatively We'll planned So develops. conservatively we there. how the see

Operator

from question The Stanley. Morgan with next is Megan Alexander

Megan Christine Alexander

accrual Is Maybe the maybe to could there. the comments there the any can quarter. up way follow if product we liability XQ quantify fourth impact you on

it seems just at and was G&A like in prior. your maybe looking run up $XX it rate shows that think a million I headwind

there. So maybe could start we

Robert Mack

relatively That's accurate. Yes.

analysis where from accruals cases QX there's I year a QX, on but of the through twice the of sometimes product it's the facts our of confluence specific kind cases and accrual. lot system really a update think QX. our and incurred just aware both in plus G&A was been and for and -- We And court those cases that had of not are have knowledge of in pretrial increase we most rulings we in we overspend of going liability in reported motions. discovery, a

of and so that couple And we by that of quarters last quantity got it's the that larger really of cases the had analysis. update it's they what to anticipating that the was accrual been than impact just driven kind and were that moved than larger historically, on in

and cost-cutting have we're work into we organization tailwinds. the the missed head in that. for as challenge Obviously, we but fourth think on the focus year drop. So cut is of quarter given it as engineering given We're OpEx. We've you the to done at and rate not and don't pool, that then full like kept flat, OpEx is legal, basically the full our similar increases quarter rate, and merit our about first going a very of we've innovation really and it's which this -- efficiency the we you run headwinds XXXX judicious we returning the bonus to we -- and obviously the revenue plan hiring payout, guidance didn't just cost and year. things type being And for some But year. XXXX living really want the on a that our run about this are combination then around think

continue we be material look those think keep we'll it is that So to different if investments what than Obviously, in. the today. we to out year turns all at

Michael Speetzen

that we imagine, shut that just and prepared court on essentially these quick. costs legal, as down back can pretty has are up speed of do -- it. kind best you obviously merits the And with to to products COVID, cases the into XXXX. before said in been And these getting stay of we're Megan, the of and has I it. in And kind movement pace it so reemphasizing happening can but just the my trying gotten of of thing it back keep the system to I during to top is are mind The remarks, associated majority

at similar legal much it's of all it. and challenging think Obviously, is they pretty that unique we've planned on very than cost historically. us. in 'XX. Bob higher We're now have to settlements we environment mentioned not a The right 'XX that saw been level to and trials and what overall a I eye keeping are close

product have do insurance. we So liability

do factored want how about guidance So in benefit risk. think financial that we to as have we handicap and potential we

Megan Christine Alexander

the today maybe it be 'XX, quarter your the What inventory slightly on are terms to those was seeing promotions. That's And to up of same then in I and fourth the helpful. versus relative flat down. levels X% context promotional question of for in expectation to think you

all impact what's think So to level about that that this of how the the your is first promotional kind we And should contained first quarter. to confidence quarter?

Michael Speetzen

I probably We of quarter, in as up dynamics some of couple inventory. ended a given mean, around bit competitive more the the doing mentioned, Well, fourth a I noncurrent things.

than relative it was to can, As the is 'XX inventory coming can quarter you where if quarter probably that been. 'XX, versus days we XX of first tell best But that, dealer at has we optimal. first look of lower down our

the trying the in caught were in So quarter. channel. ourselves promo still We little there very first to get was up all

sitting of floor dealer inventory comparison, well and that around that so to really adjustments that that's substantial. relatively now Look, others watching it's going come remains are on sure going to important others And to is when down there to have to in we commitment. discipline that promo which inventory, that starting and that, the the retail as year-over-year the to going as pretty making a the excess do in dynamic And heard we made just to I isn't making voice encouraging. making amount an sure that noncurrent you sure we've make think we're be shipments. And We've know contained fashion. it's

customers through to so investments and our the much CRM we know the more for offer. to just successful upgrade. are offers, we offers other we've a of our and Our that obviously it's a that go so made are done years in out end bracket lot trying certain money with we do go while, obviously, to a We're that tier systems of as of few the in a use time up efficient have team a really we has much a that hit offers Polaris family been that terms blanket you'll pretty know that around more than But have are and over in lot financing targeted that past with credit blanket of doing rating.

Operator

is question next Craig Baird. with from The Kennison

Craig Kennison

Really goes to the XXXX plan.

would achieving believe those frankly, operational believe confidence you drivers For and what I well? And some I it achieve it, think XXXX given you need to some . of the of plan? margin your key guess frame drivers to potential that level maybe which, to investors of to they the as faced the expansion, are in in some challenges significant to how is that harder XXXX. margin believe, in

Michael Speetzen

one good team now. about Craig. of right is on think with to And feel why obviously I have margin we I everything. the I'd The work it's inefficiencies. couple EBITDA margin the pretty hard obviously it's mean things, contending a we're I say the pushed

lost all I'd in way. a sure but what trying amount the don't time, from on supply to period, making product lean a in our was get I that were And The time chaos, the kind happening that we managing amount factories of there chain you, If you was budgets focused standpoint. tell daily given cost with out. want of back inefficiency was a fair to we to during our focus of fair down plan, were go dealing say it

If inventory out trailers then whack. really And labor. you by becoming got get so happened And versus product during could the to factory team were targets. our of working essentially lot the in labor in because plants of us. performance consumers flow. Typically, material Specific a you do really line. Material had past At through process. an deficit of have for we out the year make you they needed. driven quality product some getting lot days indirect less to that them saw came and that's improving. having secondary a examples of against would more give a really we you're checks be Monterrey. an remember supplemental extra hard that tractor started the really we the assembly our direct relative back rework less the with things of product And when direct needing yet we to and of a in The indirect that wasn't a that factor than moving out work dealer point, X,XXX COVID XX-day issue this in sure and flow chain and I the that is credit go to parts inefficient supply symptom the that do teams one balance of

work skilled of very and team yes, very members lean brought Now in, of principles. have front a but some the in news we We've us, a team. lot is, good have we steep new

hands-on, external down identify we've the QX get that business got leaders that more some fixing and fixes. review in we're are progress our really Bob are engaged basis These are help short-term pretty have we're this the We've unit the review the to who folks seen come after. I we've regular isn't We their operational in on us systematic the to of sitting process, and issues. starting momentum tailored internal that sure to cadence such and consultants not presidents with and that some to doing the keeping more a how things making going shift

X have a into lot get really get call, that. start but And to They really Because some and 'XX. improvements not if enhancements And guidance. what this then puts the that into the you momentum get position positive momentum improvements they're not market bending gaining the of build making, as will that factored is we've and cost we obviously can in be a the to happening get targeting the that as That's start 'XX sitting second in you up it's then see and much, leverage momentum. So half. if confidence a to really why we're revenue just the happens slightly, changes in curve. positive momentum that growth imagine, day that the And our EBITDA expansion. much making into to a the those 'XX. going flat I of versus I'm business better of And either lot a of here in can or you margin that improvement us is and for us key have you

things does deployment, I really the execution into think of two, play pieces our on return one, start And feel on, the macro our cost capital rest out. about. predicated invested of improve I I those 'XX? to mean, improvements late to capital, the and internally. It's then the really going in broader good 'XX be

Robert Mack

Yes.

if you is Craig, we the we I finance at think put one rates interest side. headwind X.X thing on are from keep targets when in we've and mind, of too, for where to interest 'XX, FX out, point these look got

mid-XXs interest be constant currency, a on basis. And constant so we would

have improvement you'll we've we had look got a QX. an see, We for these the pretty I XXXX. coming where year, at to if some And we've but those, think made we're It's making headwinds. we flat That's targeting actual overcome with said excuse. you not just that's So from are progress.

certainly And be QX, will better. QX so the significantly QX,

closer I it that the think real our potential on basis. full targets we're you'll start year than and maybe to see what to a is appears

coming The now. in factory motorcycles other thing just is around Vietnam for the is online right

while facilities exit so started the the Some we those, also ramp it on about up production, have it will and factories rate on at the exit than be said as the a rate get of the to because just in to they're in Mexico takes Mike lot new starting full. 'XX the plants, limited facilities better improvements leave is 'XX like of the production a the just start

Operator

question James. from Raymond Altobello Joe with comes next The

Joseph Altobello

the gross improvement looking for XX margin, to points year. First you're question basis was this XXX on

the and that will lower cost the million like talked of FX to in will, of and right? it a cost sounds I accrual goods. in good It lot hit most last half of of You $XXX million of also year. a headwind, about . terms incremental sounds Do of like you expecting of costs $XX if math lot second shipments incurred the recoup savings that have that guys, manufacturing that you're you the And net pricing.

Robert Mack

material, I talked then logistics smallest the of in when GP. It's at mean we $XX between range getting Yes. the and materials of about that going million hit $XXX would and logistics about. largest all to we really that's be that plant piece talked split improvement, and million plants, is the commodities the in

Joseph Altobello

to And the expect all of incremental recoup manufacturing costs, . you that?

Michael Speetzen

it Well, the enough way we say -- I Joe, guess 'XX. didn't the way get after is in it, at to of I'd come

down that time that targeted. already actions starting the roll some cost also takes commodities the momentum in much had We we in coming that so just is as definitely did didn't 'XX. been we near get there's it obviously come from We through we've down down inventory. as piece to 'XX. taking, around And aside out get missed sequentially, And to certain and

monthly of on weekly, the we're and team out and have well a this Bob terms pretty in happen, that buckets that's basis. what pegged So basically to the reviewing need

Joseph Altobello

marine and year. of housekeeping snowmobile restock And the just RV one last in QX quick shipments question. impact The from incremental the in

think that million revenue. I about right? combined Is it . of incremental for $XXX

Robert Mack

year? Last

Joseph Altobello

QX. Yes,

Michael Speetzen

I'd higher No, much on you QX? Joe. say that, No, it's than the impact mean

Robert Mack

said from last down We we'd year. XX% be

Michael Speetzen

marine -- in of the and on essentially bulk at some you're getting performance RV. And And it's bottoming question if out of essentially that's our snow of the Joe, the look it -- in is the DSO don't the of snowmobile comment days the is well it's because the the it's you we made as don't well, around and decline I X it, but motorcycle, that there's that almost impact revenue of earlier late But the front of that opportunity have the in with business, things, as inventory so promo. hangover have we and it's fixing fact deliveries first X XX quarter, majority us.

into get back shipping you you're of into QX, So to retail. once kind

with we're down is we're product stability slightly, that So our outperforming industry set the given assuming an up. but

into a quarters, more far QX, and get QX of normalized set You QX.

Operator

The from Markets. next BMO question is Thomas-Martin with Tristan Capital

Tristan Thomas-Martin

margin next margins thinking you segment Continuing year? are thread. on How the gross margins, about

Robert Mack

see be gross we'll because underperforming our bulk the Monterrey of factories. mean, large the have the been segment margin and Off-Road improvement in have X that been will I factories X are

primarily focused are those so And Off-Road. on

kind in little plays focus a will mostly how Off-Road. and like, mix on gross will of that versus heavyweights It on of pretty bulk just In that midsize. But what to depend On-Road, Indian the see looks continued flat heavyweight than depend you'll year. more margin. the carry midsized So margin a the out. obviously, on it's industry

continuing structure. managing they're lower really that job And And is of about to margins then in business given cost -- a the great do marine, shipments. nice thing variable it's a we'll pretty

even So been down. we've bit EBITDA the at get gross margins little to able cost to were though help overall structure a maintain margins,

see So comes I in improvement think is you'll Off-Road. the of where most

Tristan Thomas-Martin

then X more. And just

'XX the incremental little this higher chance XD XPEDITION, new a that there you bit thought. kind the a product was initial XXXX Given unannounced of product the than shipping I Is actually shipment, shipping in for new think is later 'XX? pushed than

Michael Speetzen

be opportunity and -- if to are not the XD those Yes. about I but incremental. suspect I think tough given I XPEDITION positive mean, we that's mean reception, going have the it's to think that I highly say. with completely, you

cannibalize going new bulk of any markets. for of some the the for we terms given customers given to that and size the of is that will have segments, potential But core XPEDITION Ranger would of those just incremental, products off In outpace other it's we general XD. business certainly probably new

Robert Mack

Yes, bit was QX. be that pretty will to the a low. of XPEDITIONS There'll -- be shipped well there'll most little But some XXXX, in pretty then as of XPEDITION. on XD incremental shipping which there'll XD be little said, be we incremental a weren't Mike in

Operator

next The Khan question Sabahat Capital RBC with is from Markets.

Sabahat Khan

to a I'm cost of you savings Just bit account in Sort up baking have to in I promotional market. of competitor obviously the underwrite but into terms number? going in kind that 'XX would of this activity more on are side, this maybe how what do more get bit aggressive that you could inventory? a expectation. you into taking margin And gross the promotional guess, What of you respond to angle, guidance, back margin your did clean folks

Robert Mack

Yes.

I think fair said had we saw some amount 'XX Mike carryover. in what expecting, of year his model we're a remarks, competitors as

'XX Our up had ramped though we the we inventory spend, people we and a That was to was that not lose current promotional down. with effective QX. cleaner. is really to That respond, had winding share to respond lot [indiscernible] inventory in even buying of inventory, to had

kind expect of a we're versus year. do start QX QX. in think 'XX all a channel of like because to promo we QX 'XX So But in last we we abate dynamic we low to had first quarter that fill all, said, lapping of the

in the So lowest QX. across the promos industry, of we're XXXX point

aggressive. most the was which QX, with that lapping we're So

course take I are year, the to we we're many going and plays try think we're reasonable said, the through same out retail levels Mike our year. as of it through competitors in inventory at some are message having the As inventory -- dealer that to dealer the of the in keep industry

conservative the we've with a early in get we position the better what it on as should I following quarter. people all in to help the think the space based kind be second of be which us are a similar of shipments like inventory year, path so part seen pretty far, they'll across the that into looks

year, planning dealer to on with we're it's this happens line dependent be So on promo going being what in to relatively inventory. highly and

Sabahat Khan

just And overall kind then just on dynamics. I guess of industry the one

a the there could the months, last, it, industry be volumes of backwards X units sort Is pre-pandemic? been 'XX One industry broad of X to the with softness over in some and/or call of normalization sort happening we've margins. questions industry step getting a towards

then consider your want year normalization. view and most your on there? How the unit that out you Just is to as you this and get, volumes Just I to overall you you're be do for vantage going did normal of of volumes QX out from as point, be from what in weakness sort guess, what margins? industry to seeing hearing dealers any perspective do well call

Michael Speetzen

think some what reason, like the there's mean, really, of assuming be industry COVID. anticipate you remarks, in to the said it if the dealers' And I years prepared related ton, to in view down as year had a I a last just the Well, and to happened that just is I massive where been and we've my with some got industry back we going everything what uptick essentially, for sold we floors get go off caught up. was just spent trying time, was few not then a industry happened

that So with at been And really industry X it's where going to a bit being we little or below that have year, historically. down to are hovering get resolved. my from standpoint, still think things the next volumes are they've

as to the people rates want economy people I rates. the it relates of isn't mean, products, interest like that generally of to financing isn't our look, interest things rec marine, well even some top as payment monthly discretionary -- -- though impact market. think uncertainty finance just the the to I the around don't products, at the the impact the their as significant

where the months willing talked pandemic had who One I about think ago got I of positive for see stagnant up. facts we are since that every see we've the during and vehicles rates some both X people rates. who repurchase that the so as from start think 'XX, much we interest " ago, surge XX to We're rates actually things are they're of is the once I about ago, interesting X shift. vehicles. be see you And going need kind the during as just the the not we of lot in with calls, move, in. get those seen, the And start talks out lowered seen repurchase Fed a be is rates, there. new years seeing some has "Hey, the things do think in going industry. And people And hints it track 'XX, that's to we've to into that bought you that coming industry, at market what Everything some or a think years fever out. back setup rates what know of And marketplace. started across were just innovation in for that to a do prior to saying, is industry settle out year to the can as They've repurchase out got ago. And people heading we people product time want track new for for ticking of product. it because pay category to to well because good aging I into used got a actually and for pretty want optimistic customers we've surge were potentially do we every we We've people category the I'm think much as us the ton out better 'XX, company we

Sabahat Khan

sneak the And maybe if could I one side. on marine in

firms the Marine it for mid-teens and the is you here picks decreases level half June where year? revenue how of I of thinking back Just the that up that course in down would expectations, in guess talk the of marine with pretty a rate the One over maybe 'XX that bit what business about 'XX. kind pointing in planning of the to a business cut those above an expectation -- is could of the guide? comfort terms maybe marine you're significant if in about well has just year-end you're you of playing are

Michael Speetzen

Duke slowing dealers 'XX, And know. feedback saw associated we the around made course always cuts a to costs dealer interest production through marine to course his of from the the team firm Ben it's through it's mean, why year. the levels inventory environment with stance I and a of look, our we as Well, the those. of series retail we tough pretty working But and with took

'XX, cognizant very as of so we we're And head being still that. to into

Bennington sense second dealers really key dealers get boating to are position be want how looks going much and a of stance a essentially issue as more on. far the like, to within are aggressive quarter what chain of the all had can't our OEMs have a a businesses. time because inventory first The taking obviously the they The or Godfrey season last caught supply up. I think Hurricane we've take

And system can so pretty move they manufacturing know quickly. the

we'll keep as those to And taken approach And to were check. this out we a boat a in happen if we what bit don't up end little sure downturn they obviously, can in year. think One thing a make reductions demonstrated things 'XX we've our volumes. we and is EBITDA that in segment improve react. going can anticipated, lower-than-anticipated Bob about quickly, point. is margins and to actually make play to we inventory business we able as better, despite dealing so if good things that conservative And having react made

Robert Mack

adding boats and benefit other been lot as when little brands, picked floor market successful to We've a able challenged, the those it side during we is they have [indiscernible] something carrying has created COVID, the has which on as space they do bit, dealers dealers focused they of they a their products get pretty upgrading out, of it but been inventory. niche plan us. and a talked brands Mike particularly want the a lot time Marine, in in for of we're some interest pushed also because couldn't cost dealers, about inventory, more marine The up smaller brands, seeing the we long which and been had

a to new So dealer. supply

are the So helping a some us those I bit little of weakness. both of things, think, offset

Michael Speetzen

got in another mean, back year, our I down over last guidance Marine at we'll pulled the be data, says XX% we revenue business a And I 'XX. mean, go and mid-teens and look we've then in that down

happens. category, the to good it's So see appropriately what we're going to have to we're going responding important and [indiscernible] to hopefully, And be

Operator

UBS. comes The next Robin question with from Farley

Robin Farley

have questions my of Most been answered.

Just product on the wanted you're mentioned be drivers rates well idea up, goals maintaining to do or that back . of don't and we guess, is like of yet than of more acquisition? what seems you're getting and want previous there clearing we'll those kind kind to new I type Is would is there XXXX top know you and the kind interest it between XXXX just that be? of that kind I what side to clarify, of circle you Or that in any just terms drivers but revenue of that that revenue to I might maintaining. now without to think is the just the economic that And biggest take about goal outlook. that something looking of clarify, know the line about back that see economic as will it line? your for uncertainty

Michael Speetzen

couple economic talking done of mean, Obviously, in of well get environment. don't I some But what on. fixed years products have to I to and about perspective. those on spend COVID in the need -- new I cycle be have didn't go from coming of out predicted an coming to It's us. around we're we lot more back time about just were couple out. we're I was -- we ago, to and work more the And not of product think of into won't more a the we've not stabilized a fixed what and of losing another significantly. was things Bob I we've do confidence we're the not look out. that the that think it super really had share. obviously broader record What other say got team's get sport. going were we've I front geopolitical us at Yes. can back environment if that and that that to think, And terms can't it's going you We're coming a knock when done there math of and as tightening as 'XX do with And we done, We getting talk obviously, numbers, more detail we to ever not probably, issues think and a I have to like. mean that, end now. like what gives me everybody is, have a 'XX -- anybody could what years

that it's what going going a to at I youth, everybody share assured, more great It's we rest And we a after last share gained But gain that. get that great when to that in from look have back. go lot excluding happened more back But else. starting we're share we're than we that year. XXXX-XXXX time period standpoint, still

not We are in building acquisitions.

investment Given where imagine made our a right comments stock Polaris my stock is to cash free better perspective. some I now yield, hard is than there from about trading, our flow

that objective. go to to I so convinced company some need be to growth other and meet our And be try we hard-pressed and out buy revenue

to the think be get hard. pushing confident and committed under going team our to for after I feel The be I to Craig's wouldn't that biggest understands them, doing we're we're highly able and about we're that team going I around and they're stake terms against and driven the bet them. us, at what's and that in I things challenge question. is The earlier talked to margins, it are control, things the and

Operator

The Research. question MacGregor with David comes Longbow next from

David S. MacGregor

a progress you've ask able terms made pretty around these free P&L. back the or numbers reshoring we'll Can chance you zone. to House. you about with last that about good are any near-shoring and to up And progress? around tariffs, Republic of just the time end the Mike, there's I were trade North to wanted put of And White talk pretty disruptive to American you tariffs in

Michael Speetzen

be here. around the to Yes. it I that mean isn't used topic it certainly

resigned potential that. we say I things a -- but least. The only they're -- opportunity near-shoring a aren't going is and exemptions, I renewed even be in these them, seems the and fleeting for tariffs shoring of company, ourselves to get permanent. I to more shoring we not though case great tariffs being vulnerabilities to think would U.S.-based control made the tariff then we've incredibly frankly, little truly and of ton say 'XX. do and any can't our powersports, as happen making the we we're there's team, think to continued but they're still level and haven't improvement. that on calculate paying and the a opposed how going region I'm risk some footprint us probably not the really locating and great. know supply get have global we've leader push. feel our would only inroads, of that of we that types government a something within got we disadvantaged obviously, a wrong in those in some what's But away constantly things mean those but sure the give the them. of got we're we because Lord ones the that relations as like is lot here there sure know advocating knows continuity that us to But chain, does being news, that things well supply, I the what sourcing substantial we make there's of more to and counting do. to continents it. large those in lot We good benefit. terms of And how be subjected coming think do being we really produced And built look, if are from to so our -- we've to in Mexico, given we've

still the the a so House, relative take White them in think to China going if those it's I be pressure go even think great is Republican for on. there's things a to that if I to while acted away

we're to for and we business. great going like permanent the So act continue do what to it and do they're do

Operator

Morningstar. with Katz Jaime from is question next The

Jaime Katz

ones. quick Two

any share would trends update then First, can guys seeing are and how finance That thinking you're over you you be to about how your standards if partners mix lending price the segment and the quarters? what next in helpful. maybe really versus ORV from with that few

Robert Mack

I'll the Really first. question Sure. pretty been consistent. take financing

markets, we've the credit backed lenders some things financing. have kind of their of leave off and improved unions pen of smaller Our the of have some as niche rates seen some

that for us. well So usually plays

XXX is up rest rates X points year. for there. and rate about the have the points up quarter the major in about of FICOs Approval Our QX don't We in remained consistent trends versus pen year. are and the basis see

think and of relatively And I willingness the bit think Price driver relying price anyone higher finance. to pricing the been cash kind levels a be had the think flat to don't on we in been debt opportunity on a has in that to I promo, harder great we hasn't and of of borrower relatively credit as lapping think QX to pushing hinder. a more year. MSRPs take bunch seen promo, we we'll QX to industry, to I terms lenders terms going year. see across have and but just a relative really you're where FICO, opposed being to flat talked of what other than little itself, I sees credit kind in this of rate about last ratings is people what have The availability, of income quality flow

Operator

conference our does Thank the has you This concluded. and for participation. Thank you. question-and-answer conclude your session, now

disconnect may You now lines. your

Polaris (PII) 30 Jan 242023 Q4 Earnings call transcript