PII - Earnings call transcript Q3 2024

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Operator

Good day, and welcome to the Polaris Third Quarter 2024 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 quarter for you Thank for earnings XXXX call. quarter third

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

Chief Joining me today Officer. and call on Financial Mack, Chief Executive Speetzen, our are Bob Officer; Mike the our

remainder the we'll Then take questions. remarks Both as as XXXX. have summarizing prepared our of well quarter third expectations for the your

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

You references are continuing operations can details All to additional the an for and are third for our reported results XXXX non-GAAP noted. refer guidance otherwise to on basis, quarter unless XX-K XXXX uncertainties. regarding risks adjusted and actual our and

reconciliation our presentation to the to GAAP Reg refer Please at G the of the for adjustments. end non-GAAP schedules

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

Michael Speetzen

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

want started, Hurricane acknowledge from to immense Before the we minute a resulting to and take devastation Milton. Helene get I

those the costs of the impacted to I Red to behalf also Polaris team rescue the our to team, to Polaris thoughts checking has our sending with with and Cross, assist, areas, those Salvation help Army without associated and to Our generators storm. Polaris generously and to support, have the provided want and search and in impacted and hard-to-reach with organizations from traveling donated storms. employees Polaris other teams we've donated and dealers areas these been and devastation by RANGERs the On massive we prayers send . Polaris to power.

shipments QX update. protect you July, macroeconomic to lower on our and production we were to backdrop. told network dealer taking challenging actions to during Now we our In

sales response dropped included a lower-than-anticipated third our additional environment. in quarter XX%. retail to cuts during As the a This result, quarter shipment

to results, short-term inventory. move they strong reduce dealers our support our impacted with negatively actions commitment partnership to firm necessary dealer were these While our a to hold to and

call, our agile prudent As of fuel to operations. experience exceptional That on efficient dealer to earnings profitability QX I discussed long-term manage healthy maintaining on through and and continue this a our delivering while strategy. in investing moves focused part includes customer network, to in future strong, the remaining we growth cycle make innovation

With to year, below started the to we where on dealer as year. our size inventory we in Our and industry the third our outperform as we quarter consistent ensure lower-than-expected shipment inventory lowered again as scale to commitments to expectations bring stabilize. pleased progress markets reducing now the as us dealer focus are ORV our quarter well third the retail the down XX% our with I'm meet in positions XX%. we competitors and through

following expect talk We we noncurrent OEMs challenging protect in other and promotions observed to to the that this slide, but about I'll next inventory higher-than-expected management. more to levels environment dealers such, throughout continue to as third environment and will the quarter, with superior retail inventory as I persist promotional inventory. we want through here deal note a year, higher-than-normal elevated into continue

vehicles in As move a aggressively other to retail these are result, promoting environment. OEMs these challenging a

up movements this unsustainable focus as promotional these share short-term cleaning is unhealthy inventory. driving of Some OEMs activity on

level these for the segments aggressive specific promotional higher chase While targeted elevated as drove Polaris moves, to we many will of not protect. costs we

decrease XXX shipment an well gross additional added saw of promotional adjusted and basis profit margins within XX%. quarter. pressure as reductions as the the EPS costs margin higher a of This resulted from Our in decline points

coupled inventory, with choppy spoke market to just I has dealer led share to results. the competitive Elevated behavior promotional

a this rolling XPEDITION. company. from period we've focus to more I and of on our across team's as improving down with held in efficient year-to-date and in on ORV share segments prouder the XX-month operational was us our be strength a our Polaris emerge position better share stronger, basis, While couldn't to in continued and RANGER quarter, effectiveness

Outside points of continuing and of think strong our effectiveness largest me our innovation, build to achieving provide on progress. Last practices, with drive our supply to focus logistics to LEAN enhance mentioned improvements to and in continue operations. for important it's and and our is evidence I you operating overall proof improve I chain, schedules, quarter,

of with For plants, example, output input. largest increase approximately to same one amount labor we've seen within the levels of by compared historic our XX%

our off plant, compared hold to have vehicles XX% on of the vehicles in ORV pandemic. our XXXX. currently We clean before an since a seen decrease number almost At increase coming in the factory marks we've XX% This rework. in largest the line fewest

much to achieved we plant plants. efficiencies. and per saw time our larger teams our of how we improve quarter, reduction them This working spent line. Lastly, at X a easier making jobs progress their to driving and on in talking firsthand and in making Huntsville the improved our X% leaders manufacturing do hour costs I conditions, Monterrey past I for it are to

and is strategically to lifeblood innovation We're redundancies is cost-effective the eliminating areas such as challenging the R&D on these enable and to with our company. also positioned is material committed known productive of times will industry, logistics, to we're continue and from industry, remain recognizing to manufacturing will processes, investments. more in demand and the we it better we've our a hiring remain a and and use monitor is align key of inefficiencies what environment. in skilled spending labor emerge as current savings closely our Polaris our leader By enabled us we spending and force. and it in Innovation what for,

past as have With compelling most products and enter set introductions XX the of products made to launch year. next the months, exciting XXXX, have new we we over product lineup we've we the also new

which down consumers. stressed and below by interest X%, was retail was driven rates inflation, expectations, quarter financially our elevated slightly Third persistent

and see a one to seeing September, encouraging action take in with demand not believe was in retail, on immediate we not do it basis Fed the will environment. rate XX impact point cut this While stimulate any cut we're

cautious especially take will Consumers improve the discretionary remain position spending likely spending, on to pre-pandemic and purchases, interest it financial time returns more cuts before for with and rate levels. larger

Specifically within outperforming digits Off-Road, slightly utility down low with single RANGER was ATVs.

XX%, While recreation growth XPEDITION. bright straight spot for eighth a by Polaris at quarter, was crossover the down led the in was over

made On-Road our dealer responded in Dealers and well Feedback around well the as hold was Pro launches positive, also QX appreciating with lower our given midsized we that, driven coming pricing in the the industry August of inventory. in out commitment #X was to to the position candor in softness by dealers weak the meeting continue to heavyweight RZR retail overall our lineup. segment segment. we share as our updates Despite new an industry. in recent competitive

soft encouraged retail On-Road across driven Bennington. the out the expect year. In brands. orders by of teens was remain to better retail performance We our our for We of from Pontoon innovation all by Marine, summer high meeting coming of were remainder with down dealer

earlier, elevated pockets of dealers environment mentioned specific to the inventory remains and I unhealthy levels. as face OEMs As promotional continue

has dealers norms. is inventory far on of standpoint historic other have current been move clear, from who which case a with for within dealers the be pressure to not are the and older put OEMs profitability inventory, This long. too noncurrent To burden on well we noncurrent increased

retail As OEMs inventory profitability makes made situations a the over are years, able and their where sense Where to allocate result a and aggressive promotions, surgical dealers past were be and and standpoint, there to losses running we help of investments from when promotions on correct taking position. it vehicles we also several where we've dollars. about added but we've promotional are

quickly have interest up view extreme these participate. strategies lower environment. higher promotional temporary as and and We focused In to OEMs those dealers on dealers inventory decided inventory as driven remains and they noncurrent and as navigate possible. cleaning situations, from not rate their aggressive Sentiment a retail position by both as as we

XX% our there underway. are currently shipments inventory work and be to to quarter of well the continue required Fourth get planned We XX% reducing retail. below this goal year, actions towards well by to to are

stated crucial dealers through effort our as of bit as and discretionary consumer a work several we they inventory and partnership flooring for wait work having we targets. is to the As a across have of the a Polaris our appreciate we free in they collective cyclical our relief long-term with this impact Again, step willingness recovery of dealer months in our offer continue view provide dealers towards while to as dealers. for patterns. that it our negative And to this our transition, business, is we success a spending goal

our financials. turn to to going provide with you more on Bob over I'm to now detail it Bob?

Robert Mack

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

in out decline scheduled. XX% the Third versus driven caused The in second decision which actively the was shipments originally by to dealer less was The quarter our sales given inventory shipping quarter, more slightly sales half to drop year more the dealers. by product to declined expected than in lower of retail year. last reduce than us take

PG&A the Mix our environment elevated. retail. be and lower whole factory financials sales remained to were goods impacted was negative for as negatively shipments and net the promotional slower by a continued headwind price

mix decision margins snow year's continue from shipments left profit We Gross from see with by impacted lower also cut over and elevated to promotions. our last along inventory season. pressure to weak negatively were

in took absorption. partially but EBITDA. a from execution a Improvement lower to in this our the operations reduction margin supply place X-point prior chain July points gross versus provided a that offset by impact also year, X had of and factory workforce positive benefit on The headwind was

just offset this to the enough not However, referenced. I headwinds was

Turning negative down to Sales due mix. lower to volume were and XX% Off-Road.

just is vehicles ORV, my snow beginning, and including the on will Off-Road or ATVs side-by-sides. Given I focus season comments

in in crossover retail offset down RZR was partially the by ATVs, with in strength ORV American category. and North weakness X% quarter the

rates, single discretionary higher As low retail spending for was industry from deal down Ranger Polaris with We noted, down ORV single big-ticket the believe low and inflation headwinds digits. lower items. and also to continues interest digits was Mike

lower by Share these therefore, volumes, not held challenges profit year-over-year from and by meaningful absorption basis, headwinds have share plants share be you longer-term than own an mix other look was pricing continue fundamental and due as if our promotional margin loss in their sustainable. inventory a And to to driven year-to-date. impacted see We OEMs we elevated the moderate to believe quarter to negatively net do more by share from on environment. at we actions was at manage shifts. specific ORV tactics Gross

operations headwinds by that partially referenced Off-Road These which improvement primarily the business. benefited I were the costs in offset earlier,

given year-over-year, will quarter, be made As we actively ramp shipment still sequentially expect we but the manage the season September product. volumes July down by we as look the segment decisions fourth we meaningfully dealer less and to snow both into to and to total the shipments ship shipping inventory for in

While the compared expected headwind profit promotional this elevated promotions given flat began margin neutral year-over-year America. quarter headwind, and On-Road. of last expect factoring to to net remain Sales up the XXXX. North absorption Switching fourth expect contraction to quarter are savings. Therefore, almost gross to were the the be we to industry elevated, XX%, in price we broader during to in environment abate in slightly the reflecting year, of operational XX% down

is provide benefit. remind on a to lower operations warranty expense do onetime quarter side European to given from a the benefit on heavyweight category, share driven in ] during expect the year modest gains exiting the We and year-over-year mix in modest by heavyweights. of profit of weakness somewhat midsize. by you [ want promotions absorption, share momentum to in I Goupil in targeted was fourth driven we business, through gross heavyweight year. momentum weakness that the of margin booked partially and lost quarter by drop motorcycles and gains good the offset launch the with our negative share the comparable that by the gross Summer saw quarter profit Scout fourth the The in Indian the XXXX, the end in sizable quarter offset expected margin this

to Marine, were XX% interest purchase. sales partially challenged be and headwinds by be decision the and In consumers' dealer as higher This mix to impacting elevated price. rates benefit to offset inventory is expected from by industry down levels continues

year. down dealer As XX% to by quarter, we shipments brought the have we the approximately marine of beginning the inventory reduce continue versus in

portfolio. As momentum positive from the meetings our our innovation dealer August Mike noted, we see across did with

quarters. reflects plan in taking current place few Our fulfillment orders these next of the

fixed Gross profit driving given was and negative volume margin down mix pressure cost less absorption.

these XXXX had some quarter expect also challenges in model shortages We suppliers do towards believe not further shifted with fourth year quarter. our of part the the resolved, impacts are production boats. we as during We we and

our financial position. to Moving

with for updated cash from our business lowering year our earnings. due to cash are performance generation this expectations We less

materials. reductions We're through inventory, driving capital working savings raw in in specifically

balance finished take running levels on will normalize plants longer of to dealer and Our committed inflow based level. efficiently material keeping raw goods as we inventory our

with the basic We year remain committed goal and XX%. the end number our share expect of flat to to count reducing by shares outstanding of our year-over-year

cash in to working investments in repurchases. in position cycle. and over capital our projects innovation and use driving fund and form financial improve strategic the part in economic are key returned we to Year-to-date, the dividends our our to of continue and $XXX to confident share million stockholders of We remain this capital teams

to us our move and XXXX. let updated Now expectations for guidance

fiscal inventory our positioning XX% a with requires challenging continued to the current plan reduce year, This As for XX% to shipments in dealers and our commitment dealer we better XXXX. alignment quarter, we discussed market inventory and retail trends, for dealer positions. us last by environment

quarter Given to thus be in quarter. the guidance. we volume our than the this, heading retail a our shipments. in bigger with expected softer-than-expected modeled originally fourth a into and business the headwind coupled quarter, pressure in needed for reduction further on fourth we performance is further This Therefore, results to reduce

in EBITDA We last reduction mostly as to our XXXX. and to mix approximately our want on year logistics. a are We realizing well this we overcome areas. our a target through negative QX as volume headwinds July greater comps make liability, which to to ] that the due elevated operations our materials, within we job proud volume million offset we pressure efficiencies of took clean we plan I opportunities are efficiencies in by $XXX headwind evidence and say I'm with already on onetime workforce Mike What due margins [ plants. as as to the was cuts. done million operational and expect in easier product as great materials of was year actions in have was absorption modest expenses and as the regarding we point I and a to logistics lean that year by in earlier this this $XXX teams entered through provided year had well not On-Road, journey other expect finding the approximately and discussed which realize had own

should close We we cycle. $XXX financially. weeks as experienced immaterial immediate in QX to the of more power end create million expect the efficiencies, greater expected to this year which realizing hurricanes of last to emerge offset were operating the the the part than help negative few absorption from of earnings that The

from to However, geographies to the we expect perspective. will impact some that through manage disruption we need a retail longer-term

all doing help to are we communities impacted we importantly, More that can recover. the

grown industry success that is year mid-single a are I the This and not XX% last our to year. low us see headwinds unique want current long-term partnership a team's XX% we of our last in in market. to as an retail reflects traditionally period up with unit digits more reduce annually by important short-term dealers what trends, I that many inventory the said dealer where has this quarter we typically current these to for say taking than from guidance and Our set wins are to commitment experienced and actions and year-end relative projections believe our perspective. incorporates to reiterate

innovation and for our have of customers leads We margin value expansion record long our to enhanced that a driving business. for

the expand on business in is margins the see meaningful and year are future We've cash just working opportunistic be allowing well of efficiencies, ourselves operating continues been to a and strong a consistent with making It record beginning. us to also our can opportunity years. maintaining to invest this low in improvements we requirements, You capital generation this share as as buybacks. payments dividend

dealers, our our best are the of and in Go business will wrap With stakeholders, a perspective and our have we believe turn Mike. expansion, outlook generation over to uncertain, sales positive making of We that, the cash interest to today call. stockholders. the up customers, are attractive growth, back it returns. including Mike employees Although is all the the I ahead, we on margin timing from decisions

Michael Speetzen

demand end the we'll align Thanks, XXXX. forward-looking trends, but from expect staying Bob. do headwinds help and can't relevant we Reflecting I cautious to year approach time, to not with comments and through move remain as XXXX. notice this We on many agile my a demand into of consumer last change enter regarding to XXXX we of the discussed our significant remain in true XXXX at trends. as We're continue how we

cut RFM While are dealer flooring the we be Polaris a we working [ and to it's success. inventory interest to ], Fed dealers their partner encouraging into hard consumers profiles adjusted done needs to rates, choice that have additional to back of and reduced know With and their dealerships. see believe as vested get ensure in we more and support shipments,

We expect days see dealers means head historical with This, in below terms Polaris be lower dealer their Polaris flooring outstanding of well as trends inventory. reductions we costs inventory rates in associated sales into should coupled to interest with XXXX.

easy to building not that it's next XXXX, will know of this for and turn want to while out think headwinds your many you of year, simple. I tailwinds be may the I models all that are into year clear be it

in We point. are at XXXX retail not rebound predicting this a

coupled need I to items. and believe their many enable on more position large, with As more improved reductions, we spend discretionary confidence consumers rate interest financial said to previously, time

us things knew the the Therefore, of and be we with continued, associated headwinds. emerge given approach XXXX will headwinds the half to control we with on would as year second can continue of cutting difficult we operationally shipments We position a result the to stronger macroeconomic focus will to and competitively. caution,

rapid As we XXXX, into do fourth recovery. and the we expect a look quarter not

navigate and launches continue drive the demand, mix to we meet maintain product are in As our implement and close simple: to improvements. goals Stay inventory innovation level our environment, we continue to and operational lean and ensure new to on at the execute dealers expand XXXX right to

within Our our control. goals are

global and to powersports. set targets 'XX, and growth, deliver for to navigate on through-cycle our begin leader returns We as for attractive sales 'XX through this expansion up beyond margin the and in meaningful will environment ourselves

team best the have We in powersports.

have We manage will before, current through skillfully confident and to economic challenging the been environment. through I'm we continue that cycles

and the on today that have We right stronger the emerge will long-term strategy, an even executing on are we side the us initiatives enable of company cycle. to other

With thank you it your we turn and over I'll for continued Q&A. for support, that,

Operator

today's [Operator Instructions] Morgan And comes Megan first from question Stanley. Alexander with

Megan Christine Alexander

wanted asking about start unsurprisingly I by maybe to inventory. dealer

comments didn't was in where the the I on dealer imply relative inventories to last on based end up versus comment But where XQ. it seem X would it my of I quarters, or doing it math last You your guess, if quarter. correct, trended I'm to think

understand I'm that inventory that you've in case the the to would channel. about given talked reducing the just trying to be why So commitment

take can to time timing shipment it some adjust understand I be that schedules and discrepancies. driving can

the quarter? expected. and a on on retail like lot So think case. Maybe the that's progress seems the made than answer, dealer if is concern I sit also levels versus it of end today worse there of been just where could tell optically, you the October us hasn't inventory that the and is destocking, XX that's you

whether acceleration end the means to destocking continue actually this the of an trying don't just see year? retail we into through 'XX, understand if in could So

Michael Speetzen

This creating dealers happening under actually inventory, our conveyed dealers We've for were complicated we move look, tried Bob current of What overnight. with up to as off process. Las in about they mean, shut talked we to the that challenges much cut and is were more my this older mind. things We remarks, of I and actually conveyed a Yes. is current left August couple inventory. competitors both that. do were I seen a who was both obviously can't I which what it is And in in their they down demand, with was -- top Vegas. prepared ended were we --

through high cleared when see you the dynamics the Now turning fourth promotional somewhat most have that that really they're into up. and levels probably some been should of quarter this in fighting of

One season. down. As look we pull all is we year, We had prime youth because recalls a sorts of youth if stocking it's is of on you Dealer sequentially, inventory out. the Last our couple recall, things products.

shipping in season. the So late we delayed and for were very

And When snowmobile then ORV, progress business. obviously, we sequentially. you at look core have the made

we down of October to when really and to as the to hard a cadence main adjusted the Our end profiles pretty the November it's steady the as of happen December. get RFM then we progress XX% points and then XX% shipments are relative for And dealers. brought that's

weaker presented the quarter and retail we why changed back That's in Obviously, in schedules. went third challenges. our some the production

to going XX% XX% happen to of coming because the a fact later to on are down mindful hit that order in dealers with the We be of had had period. lot going clear was to it we we over. that were the inventory We year

You very The slow down by have dealers, supportive. been thing just this large, can't and overnight.

progress November to get excited seen about into overly results are the because tend we're see month again And continue be continue December. out suspect, in, we this to fourth going inventory dealer and top is that. reinforce work and and volatile where to dealer we council come our to don't quarter to representatives of clear been. to encouraging, as performance on to X retail environment's we'll and October, inventory through dealers key. going then be bring a I'm we've in continue our Monday obviously we'll but we down our I the week move-down, and and meaningful have Obviously, have Tuesday with that October of commitment dealer how going

Megan Christine Alexander

XXXX. more outlook just And just see in to But us And little into a XQ? little comments question on you then helpful. on follow pointed up answer baked I I then, on bit bit. wanted really the a seems could what's retail mean, be point. do understand continue for not predicting in a trying flat to your That's your that give prudent But retail can compound you're Do least XXXX? do you it retail maybe you way we think Or a you you're answered such maybe just that 'XX? enough declines that think at to and retail is see can rebound say retail into you to at this stabilized that

Michael Speetzen

early that I probably X in to for terms now, quarter, think you the reduction. utility we've rec I it's slight we're got a fact that we right ATV, feels probably retail in we RANGER what it us. third little on But business, decline seeing for and negative our business, tell our based space including can the continues the is albeit like straight the quarter. saw slowing the negative, trend go of saw,

a And we're been up a obviously close That third until keeping on quarter. had more eye that. so segment the resilient

environment, back and the to I really step We when rate trend. one look to hasn't It had one I quarter's much. at want But don't we've cut. done overreact interest

think come I economic just not uncertainty still lot in to Xs. just And a but sense. Inflation, right has it in our business economic running I now. the high down broader is think the there's although of mid- for

DSO we I standpoint. have sure helpful. to is going going inventory the from dealer to a year, But as to certainly we're that going think election at past an all-time the make getting we're low exit be

it system can movement, on it. shipments by keep for be But year, a us eye retail right going to the and going see gotten between because retail the consumer volatileness that's match the now. that to And where if pattern. thing going is less much the be Albeit continues maybe is we've volatile And shipments close position essentially quarter different the to out we watching a retail. point little a to to ourselves and bit think well. of should we're of a We negative the health primary we're

Operator

question Craig Kennison Our next comes today with from Baird.

Craig Kennison

has with It do really to RFM.

the maybe units floorplan without little placed look the a it DSOs like dealer right just actual, but too you feels on tool, on outside, focused from like, enough If costs. or weight

to what Mike, to you that wondering, an your future, dealer guess, I'm can problem inventory partnership just so I changes with strong reinforce RFM avoid, the make have to network. you And in extent

Michael Speetzen

mean we like. of certainly, been historically dollarize because I is And we having bang with obviously, rate, of Fed to the their what we see obviously, comes And are statements. flow the haven't ] now October bit that going the down, do conversations that dealers. the to little against had we've look a that move, relief dealers with [ the fair interest of we with starting number one profiles the making Yes. so things to through a haven't rate

And value along something it associated with of what were account that for well It's but count, front keep DSO the to going the and year, the and interest that also this the by comes below our does is just center. where that. why, we we're inventory of have is end the we it allows pre-pandemic for for because to box not us rate that

we're have the it is also think that that benefit we keeping I inventory sure current. makes

the preserve margin the allows as avoid inventory move they and the to much make as is fastest And about in we data the that that through to current get OEMs, that's that talked you couple And of prepared think my the what the inventory us can the be to they know remarks, going be to to at Lightspeed. the day, of our internally most direct allows of we RFM. have times is the dealer them most we that's able attribute It the current. all a heard need to that's You a and specifically And we've that I really end adjustments. costs. real-time needs interest

inventory around interest for a we're the in flooring because dealers, and is coverage mix risk significantly. we're DSO to going that we As to we be the they're that with minimized targeting the turning which going look inventory targeting of And to being out period where that we're position into of got 'XX their days, the XX time the we're coverage majority then provide averages ending be that and to be we the flooring trends. the believe mindful covers faster, demand the of at relative inventory going they've

Craig Kennison

that guess And reward more I you Mike. confident you other are market Great, that will share, is, rational dealers levels. then side maintain shipment the even of Polaris if with

is dealers you whatever most dumping to So be the want your pain. causing focused brand on don't just

If will pain, still them prioritizing they you're focus on not Polaris? causing

Michael Speetzen

it's is, to make health stuff program, of did that the terms other right? we're can't The focus mean once we Rewards them b, RFM we and that around North That's it's team those ORV communicating I moved. things financial tell the of and sure we're inventory a why we in council, get them deserve simplifying sure because things why need that had the referenced that of not not a it's certainly listening where the and other that Star inventory that, a Because and just we our some the to there's to coming we walk space Yes. floor meeting that making the Bob like maintain with last we our we I delicate in get of on them are a, need me, they it's balance, dealer earlier. of That's do with we levels. feedback dealership, it the that and priority. out key taking through, maintaining members number of

really our continue dealers. XX% the of is And we're be we we've certain why address us to do network choice in a job key that or sure it's there's is the product sure probably New is making to harder being to OEM reinforce And of I for important aspects. want to clearly got dealing important XX% of the we're now making but financial with doing we we obviously, when many you're product side a right work multiline, other and the most so think of work it segments. And And it's doing with everything than that. relationship. better really

the that's on to we other when think side cycle. I reward going get the us of

Operator

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

Noah Zatzkin

that one on the savings million you million operational guys kind realized the just Maybe $XXX of $XXX of prior. versus

delta driven in the terms kind out out of like on which we kind What's the in onetime? we realized to think terms extent more next bit the we of base? meaning a the of of provide should should being was recurring, And just about $XXX could of year, volume opportunities you how color million there? how to think look of that's or permanently what as then about If

Robert Mack

the things So if and things. the went of largest million, -- you includes that. say $XXX of target a spend said, haven't at supplier that do mix and and and shipments and It's And think from materials many we've late a premium. we we negotiations, about and the efficiently the materials to to Logistics, year, overdrive things operating been X with able have come different just I that. been changes, into we've labor plants, the then had come has work areas cost that like more design been would from been as that, expedites logistics. product like as a

move to trying time. efficiency good spend over On indirect been labor, side, on the it's labor, out reducing temporary plant just

that million, So as you in and more of probably it back, tied production. stays closely the what about comes is terms what XX% to of there's about think $XXX

get And portion so will back, if then back came to it some that takes comes of XX% what that production XX%, the vast But it, majority stay. because that's cost that loss production. of

and we're done. just said. plants at line major the And progress, those I were down of been while even And one we've only really plant, and opportunities focused in good here out Mike as made both of we've on aren't not each he either.

there's efficient, continue to of in we'll into a and that opportunity more 'XX. So lot to terms go left of drive getting

Michael Speetzen

a more I for the labor in the we're us. think, schedule those that more not going are to that's same have efficiency. look, when drive comes the made into necessarily I same huge have volume where And the production add we opportunity a couple to the rate. getting Noah, input. areas is eventually mean, labor I focus at Yes. think this about And the back And add we comments able for and output more of be for I would to

the to our get a to company. into in supply and other actions innovation it's cycle. are operational like took going when things cycle using and a as that we it's you as It the the factories, And into sure at the where we we drive logistics, I those it the part very down name well for that able have company. to a side of not and every improvement our just margin make last mean to down element take this as allows rapidly our it, of really the money move chain on we're about and structure complexity we're call we permanent. powersports, then And this talked of know remain through. things to things be quickly we We as us time put

Noah Zatzkin

terms on just kind this of to sense some maybe more, what levels dealerships when of -- general overall about dealers talk of tough in in higher from of maybe you kind Maybe of to of touched inning competitor competitors. kind answer, healthy? inventory in your just maybe of inventory promo you You question but kind are of in and if of X But terms your talking and levels dealers, in, getting kind their

Michael Speetzen

Yes. to tough a I answer of it's actually we have not because lot data. mean

are Those dealers think that through. lot that So #X call pretty incentives And us putting one comes A when either know substantial those huge the that it, of know #X across, outstanding. in OEMs drop to the after to position We top then see and financing are in really discounts we're a it areas there's OEMs. or days off other it working And large we able that X competitor. and sales inventory. I around are is are inventory and aged. we leaning

'XX. It's model year

deliberate there they've very It's saying participate. not about in to areas so really that got I of and going the doesn't take not compete X lot that product, a years our general with or down than of or try sense, sustainable. to it's something of X a make and value And not a going it was I'm front is and we're certain older are challenge why to expedition just in them. go an

they've to a think longer. got just know bit We it's that. And work through taken I that little

weaker the the cuts think produced we more backdrop I has that some OEMs think of other helped. BRP lot some not had make have I product of made. and slower and we're a And probably retail to these

Operator

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

Frederick Wightman

I sort is give $X.XX this year guess now, $X.XX you sort but comes if about of ] what a should there you knowing bridge next the thinking just from now, [ ], [ to question, Like the takes, to you what that up, building we be perspective, back I encourage just us a you This year? big of and blocks us Noah's that? that we follow-up think guys out puts for can flat? have the would mean, know down, about how model

Michael Speetzen

of into think lot a tough little say. good and good some there bonus where and of our bit get Yes. a about is cut a have certainly inventory got really really programs It's good go. Look, I'll savings. exactly as the we've back, compensation tough surprise mean to where point. of is. comes no the By some our year. have end puts at of starting that I pretty expense be feel is I let we persistent into we we our across next tailwind Bob that of of in year, a is, get so going a takes terms lot mean operational probably to will 'XX. The Flat retail it's more. been headwinds back know give much business. the to still I thing out it's time we

And around think from think many what mean I We there's do for standpoint for certainly, helpful question. the a elevated it's is out It certainly time from no helps underneath of, to going our going of levels it of cost telling it interest debt, dealers. the our and lowers happen. lowers to how But think customers. are to take the our many borrowing cost going of consumers debt. cuts. be cuts the rates it's We're we to not going to prognosticate I get

to have with X been lot of that starting they're that, product. hit segments, that or as 'XX a know to going And purchases these a age, happens good lot us for in starts the 'XX been to are dealing X when There's anybody's for high is cycle whether inflation. get point. years. of And a at call The we or products new of news that these in this to want they're They've some look made. that

Robert Mack

rate ops interest our on flooring, terms about not to obviously, carryover carryover said, the and buydowns July, positive, retail which like, we'll the impacts for puts took Yes. the giving actions and headcount we'll own obviously, focus into those. efficiencies, have I in Mike continue mean, get we But takes of in The of to we're impacts EPS XXXX. of the and rates, debt.

question. some So no positives,

there challenged, more But would interest And be industry, the at to then going year. back-half long-term they trend year. going hopefully that's impact going a probably little the that I of Mike months. some that half couple sporty the rate -- I of then, the be have is ] headwind been mentioned think, it to impact year. general [ a things. into first of of to think couple continue a pressure corporate And out would some however through weighted, obviously, from is be there tell. will next of flow it's normalizing that to bonus, see of don't real kind of the early know probably I least be to there's and maybe be last other we'll Commodities but the the cuts, but kind

Michael Speetzen

I going factories out we of happens. next have they get then whenever we're should I to the to work more able sized be if things appropriately, ready of be and more and inventories they for let's And we patterns to all we'll be the able faster is out, coming and If those respond them. them we're and the business is, Yes. part don't, advantage the that about take year, mean, they we've more have get at doing to leaning the the to where emerge, recovery efficient, see given production down the offense goal believe to want schedules. If be Fred, confidence look play the better turn be. cutting as philosophy to this than uncertainty, talking

Frederick Wightman

looks to seen Makes space then the marine look Can other you given going just on important I the might Marine is it business the forward? in take. about recovery some to Marine like how sense. how the quickly, there. cut the another we've outlook And that talk business to people assets, platform long just mean divest

Michael Speetzen

right money. on news mean, I of for Look, are the very know been down. now probably end There to at low I it Yes. probably business scratching good much head able behavior look, The our They're business, segment EBITDA par margins the that moves in the steer well. low quickly. frankly, They've competitive has us. not company. react and us. are share running Pontoon our really we Marine pretty at value, their looking just because to some relevant is clear market going make some driving we that these the shorter-term of everybody very boats is The low-margin that with are are are

for our to had. the Hurricane. [indiscernible] August. of work we boat. We're The center we've for do X X of is, across Godfrey, is Bennington and little -- boats and is bought us ever with actually Godfrey mean XX-foot the well The dealer we new day are When mid- from a 'XX. [ really look doing in we're new these and larger largest lot the now 'XX console the for news the it's good ] of We going to bit a standpoint. vehicles. in at not I meetings X to product and market Bennington are launch boats summer cheap And entering not high. the Interest just slow. held time be for X Godfrey. for people The are through rates that segments share think Bennington I these A system. in over

focus as recognize in that that was be the The think ready market we spot all we've we as top so we'll for were very the positioning boats. orders the and have And a -- great we really that getting deck well turns, got given strong, because business innovation when business. those we're products with around which Pontoons dealers for in encouraging love

Robert Mack

Yes. and even year. And last we've late been starting aggressive taking inventory year all down

year this we'll XXXX So and the a levels. down to historic be compared by end quite as bit even of

So -- ship want we 'XX. that for stuff think it's dealers the we'll

we think a ship of there we model the develops. we've field as will 'XX, how we'll and the out we then the or in good mix year 'XXs season got So 'XX see

they bought continue But the we bought fundamentally we of through leaders. cycle to already products the bought we market when we've different of market mean, the margins on kind improved business, compared million leaders. where We've They business be of them were back to in [indiscernible]. $XXX a I excess those we EBITDA mean on cash purchase, and businesses since the well I generate just tremendous gotten flow. cash flow our

So we I Marine think our that. to have changed commitment a strong haven't and we business,

Operator

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

Joseph Altobello

quarter but gave I'm And the surprised given and 'XX launch the your you it AM. the So share small, discount it's 'XXs. which, I theory, I know you seem went in like doesn't didn't to first timing back to model -- that Can ability that share of dealers that on year in Spring, model the in of gain your year Off-Road little question guess some a share.

you launch all? at did So And did the timing trading price chasing were buyers help lower promotions? see points? Or they to just down

Michael Speetzen

it Share correct. back with that them it's par X primarily getting they had definition, of really lot your would gains the X earlier. same. Japanese. you mean, discounts. in And noncurrent heavy is And of had I a are from was driven some moving last be to Yes. with by instances, -- I are product been on And parts share very by year the your tell question that the hypothesis where a or gains came

XPEDITION in think market name we going mean, an think were participate. dealer financing The categories new offers, that we about I $X,XXX it. think range challenged. up simple in power area And up is just the And They're probably areas innovation. And the speaks all the are a is going the have as not rec to we confidence great. segments mean that most I products. products. as those where are broader you of I of that we're doing talking to you have discounts The in short-term to a I But just XPEDITION, in backdrop caught noncurrent getting with over are stay term. when fine. cash, things of at that inventory. we something add look of the of up to not focused lot is unhealthy some the new moving I company and And value this not discounting We're on XX% long

Joseph Altobello

Understood. Maybe Bob. for question a

year-over-year. the driving my implies for guidance sales year, flat right, to not is your math margin. if gross And I that? gross lowered margin think QX up What's You

Robert Mack

Yes.

And of we'll the a couple a of well you snowmobiles There's holiday typically [ ATVs amount a in as nature, of ship kind So ] mix, things. season. in both just by our QX, season ship you're and for youth of season. a QX, is the into and chunk it fair of hunting lot going the

-- impact of out mix to So from Also, boats. and that a those that tend option to shift the positive dealer we'll shows will has boats came start higher the a be standpoint. that

to remember, this year. tend year-over-year those item last So in perspective, doesn't from $XX-plus good a a repeat million year at warranty we And also that be had Goupil then those. margin

that So on GP some basis. year-over-year drives . that of improvement a

Operator

Our with next Hardiman question today comes Citi. from James

James Hardiman

QX a little third could down was obviously, and was environment, the you we maybe retail less but down, overall. bit that us So actually walk it quarter ORVs for both than the hoping through saw declines just retail

I'm things the function -- there? later Was just better that as a worse little merely never surprised slowed sort Or that catalyze it of was July was hope expected? a the I'm came to than surprise fruition. it would numbers to good would something of you was from just you in and that guess I So then quarter there

Michael Speetzen

because though do this we've I game that good, we're there. a seen very from see surprised we of data. of standpoint, say cautious I'd okay by we the level obviously, things July of of were backdrop One, I and And before. couple depth why mean, inventory, some That's mean think got think the inventory, the even from consumer I worse the looked noncurrent the I looks a kind things. Yes. October then noncurrent of progressively

There'll just kind a OEMs, seeing. lot of the month-to-month around other I of of of what be about. stuff there's talked I some we mean there's the and inventory think volatility we're inventory. lot a Look, it's a lot of noncurrent

there's that And to even want rid -- so I dealer, interest a And because some around a stuff And door. of I'm it that's get that. if I'm focus heavy it. to of I paying have out to loss, trying on I'm take the of if get a just

I the a So gotten takes mean said, through. interest hasn't think to roll little backdrop rates Fed's time a going And It of I some for is but we I do moved one given bit rate Yes, the there's interest think better. to don't that action. consumer standpoint that, from as it.

are auto high, the think delinquency all-time keeping be huge now, good mean card rates going for mean I credit is to up. the look right powersports. economic coming delinquency in data we're multiple. to out is on I that. some close We're spike not it's an I have eye debt rates seeing you if thing at at a

spot. But a the consumer just great not in is

keep work we so than down. things we're focusing to focus think control. same get on the and us, I on better December the going just And October, to been. going the making through operations for And have it's can to time, We're they diligently inventory at the November

James Hardiman

concern hear DSO think be done level we be investors is still guess, given big as comment EPS there's think environment, I'm right it. And going the that, And to Got Like of times but where you've more level I is among that next some I'm inventory back, come the front, point about one-to-one seeing is of we're be year you're a the the to finer drawdowns, the where maybe of that is I with EPS, confidence inventory. for right? to not out going starting didn't would flat to finish appropriate that not and that guess then versus Maybe, would inventory a the this on put of wholesale a thinking I that inventory making. point retail grow you're work tailwinds year Maybe enter I XXXX. this you surprised the XXXX. called couple Mike, on progress way. in I if to retail would the surprised significant if

Michael Speetzen

a discussion make for get do mean, I gave next we're all, as And going think Well, to going sure everything performance. we a 'XX guys point I into to I to to drive guidance first here. work can you of Yes. obviously, not we're year. starting what we

see I rebound a think a nothing what of in us we don't Inventory unit of where from be signals the year by There's data-wise front that. it that perspective is were substantially the we XXXX. in would below coming. that signal end will

as care that that is healthy. sure do. very dealers, have to inventory. We about a commitments, to we that we job did got live as the when cycle, high. up financial to are We should that know will commitment be our through because is the partner into don't we days but to just direct sure of need dealers we that. November this protecting we of much And get the incredibly we December. north of as pulled window level confidence #X my down It's making and we reflection XXX be The October, that a preeminent to that We've is clear commitment around not meeting And just what fact these guidance make dealers key.

retail a reduction. to in we that got quarter, degree we're confidence we're fourth high As the going in dramatically to and we've said, XX% XX% undershipping land of

Operator

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

Robin Farley

us for that know the wouldn't also, about. volume sense it is production. volume first that's a you then when other so, in you to guess target. you dependent volume assuming of, back I wanted to well, saves XXXX back cut was from that gave of I $XXX dependent? Can go all cost looking sort all labor much it get to of talked volume XX% have EPS. you the materials I And of would tied But is that about said $XXX what Is how to at dependent? sort million you and back all, in to or million I'm give get the of the first

that line. it point was Is your where to in would need than higher be at that where line cost hit that XX% I shipments -- to up think is saves your -- your EPS your show where now. top to outlook see about sales the

Robert Mack

Sure.

I million, said what with what meant about XX%. $XXX So I of the

cost is direct it's of as indirect cost more the would So the Mike that XX% maybe likely It's in -- of back. fully savings volume plants labor consumable not it come so back, efficiently, that, is might come dependent. true the and labor, supplies said,

mean, I if also is by is though, up of would really come it of you in what obviously the the be reason see went back, $XXX-plus absorption. a this taken the $XXX volumes don't was benefit. much million absorption, year of benefit plan. $XXX-plus million was What it million But the would of generally would back the XXXX back original to come which

been we product. negative if a XPEDITIONs mix. you challenge and with been channel year still last that's has filling So year, some million, we offset $XXX Mix by and netted XDs remember, higher-end were and the all

And has a been mix headwind. so

a we So efficient have than to going this couple more how out the volume And volume and taken at you'd that it million, next back see see been efficiency plays to investments. it we to to some see of over out get think to it come was as all, and get continue we'll to have Mike at, can that of $XXX said, years. level But the all in back where would we're year. make improvements

Robin Farley

Okay.

saying volume to you're it original tied your achieve sort So in get to like not of the would EPS. million fair? not couple $XXX still million -- Is directly guidance to was cut expect up what XXXX show to that, saves that's back in take $XXX a should sounds we probably, that to cost of that that

Robert Mack

is million $XXX in the the already XXXX Robin, EPS.

so $XXX It's already next current that improvement run there. So [ to in only million this is come the The ], from in rate. back it's year. the thing going over year already year is further would any carry not

Robin Farley

if to the nobody few is were this could bucks then right Is because so or and and retail of back to were being And I year. of of it it ] think shipping just about think flat. about? theoretical cuts not inventory come EPS other guiding realize you but or getting reduction piece retail that would your shipments that that for year close year, if know to a that the in [ flat dealers. were But back, a And the the shipping guiding you're to Okay. outlook. that to fair next $X if were to were it, and I at that baseline, up like sort this retail, a reduction underwriting of be that some inventory shipments Is to you number

Michael Speetzen

probably levels if Yes. could I we're mean by we're approaching have answered retail seen being what saying than think 'XX, can early a still has But means we be at could And comment not obviously mean, it's historically, flat, we little to planning obviously, I anticipate still I is, us anticipate historically. to albeit And headwinds. Fred's continue there teams. question environment differently things do in that into on. this flat. challenged I that tough the our but process shipments we've about through with be read we talking the you that

the to where start accordingly. better the third fourth up, into put I we're the if isn't the There position 'XX. shipments margins pushing ability to But quarter. in that's much going in we in not it an us mean, environment in got saw that is then to comes on we've switch quarter. look, magic January so planning upswing. incremental certainly, a have It's that a we're I'm suggesting And continuing and X, and

those so that ability to lean same going when can work to XX%, time, We've into And done everything the those work into margins. over how we're It's where get we're need keep soon. team. just are the to in our don't to we've to get mean, where has comes you what at in lot are see make trying hard the of to view EBITDA out lever a we based lot quarter. in got We call at I around from just the consumer we margin come when things of a which 'XX, decrementals. a think I back, decrementals we're set next revenue around guys at. want taken the we'll seeing trying January with too today, some expectations few and a through on back we're fourth the 'XX. to months, to But performs headed -- of

Operator

Perry Alex Bank America. next today question comes from of of Our

Alexander Perry

some it wanted continuing to And sort trend? of look been any we trend? low that don't segments, of retail the there significantly then any have that significant deviation deviation as is fair other just Motorcycle asked. from follow on I any reason so expect have the on or down is to at that questions that single-digit in Marine should I assume up ORV of XQ, any you trend to guess,

Michael Speetzen

unknown some I there's right really there's mean which much one think now, that's snow from on coming our think leaves year the of the that snowmobile in talking spent We're last It's probably Minnesota one outlier. about the we're it's and we it. haven't but this business. snow time a trees. and still I in a fair way bad encouraging the point, to at That's about year. here sitting mountains mid-XXs, off is

certainly got all we're everybody encouraged. anything not that's So seeing

So outside I of are the snow assumptions. business, those think realistic

Alexander Perry

promotional then And type the do Are into that's your expect the a guide? promo helpful. quarter in seeing of Really the fourth promotional similar you to environment any easing you just on be? question. baked environment, How

Michael Speetzen

a of my same from still the And not environment. great. kind standpoint, percent encouraging it's promo The backdrop, -- about think in is, to if pretty back you No. in we're we're And of is were the we're we No. thing rough XXXX. revenue

quite that talked a of been the to made pricing I and my at that don't had the see consumers that But promo they essentially in it products from we where adjust outside it's can those adjustments having shifts on adjustments, just we're on MSRP some standpoint, so I promo made prepared sense no, vehicle. certainly, significant frankly, pricing promo so actual always a eliminate about types that products those Now of we helpful. see any to remarks, almost the they fourth looking on in expect quarter. website, when the pay

Operator

question final RBC from with our Capital Khan today Saba comes Markets. And

Sabahat Khan

Great. discussion guess just inventory. that just around tying promo maybe off and I entire

that So of confident that sounds of sort maybe the inventory comes on matching Is about reduction the undertaking. range competitors promotional of in but think level maybe more shipment like reduction about pretty sort right they're to way of the versus activity it the you are talked from it you've some getting to of it? of

Michael Speetzen

just -- participate. quality they're going areas be and to old, to down in that where I combination. we're path. not was not to just where X the don't But inventory we've it. that's a instance share at we're competitor going we're that There's got -- a or It's everything [ going X I ] to that segment. promotional earlier, highlighting as protect a we're throwing go as high view We years

And at we where of going if that the interest rate the buydowns difference. because gap point do that's start going move we're adjusted a that, interest to between down like will we But and where to we guidance. need the our a anything into. we consumers will are lean off while like sidelines certainly But moves to shipments things we we're to feel make There's not get rate we where to. why pull

Sabahat Khan

then And last the of PG&A just sales. the one kind on Great.

the expecting of Just macro you're cycle those we sort resilience line of maybe in and as where the here? that work business through

Michael Speetzen

accessory that we the decade. side, certainly, past substantially mean I built up the over Yes.

because bit parts So there's or on factory of to at install see business, But is to the production of there comes accessories. product vehicles hold as our even we add substantial far down of vehicles a the resilient factory look volatility and them. more repair of that accessories that is to we more look pull amount as the life our out when we little longer extend consumers

OEM rest the So the business, it side of historically. is of less which volatile is what exactly far . the seen than we've

Operator

management This our over for to Thank to like question-and-answer I concludes the any final back turn session. you. conference the would team remarks.

J.C. Weigelt

you everybody. anything very have Rocco, else. much, this don't is Thank J.C. We

Operator

this conclude attending for attending conference. sir. today's We Thank you, everyone you And -- all thank does for today's presentation.

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

Polaris (PII) 22 Oct 242024 Q3 Earnings call transcript