Polaris (PII) 23 Jul 242024 Q2 Earnings call transcript

Good day, and welcome to the Polaris Second 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. Please go ahead.

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

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

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

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

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

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

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

Thanks, good morning, an that joining saw in EPS We in and expectations. and challenging our sales you Thank below environment in today. second increasingly us the came for adjusted quarter, everyone. resulting JC,

considering those targets some the morning take our discuss current as time annual We will guidance well XXXX an to environment. results, talk this update through provide as our for on the long-term outlook

larger with and XX%, were retail. persistent elevated macroeconomic result, cycle I industry purchases, seen by the and want Sales included to These quarter we down especially headwinds. confidence headwinds has weaken, We've addition rates. a inflation a impacted First, took to with lower for consumer response industry start discretionary actions interest results. the as in seen in prolonged to second

driven Additionally, dealers inventory are accordingly. reducing flooring their orders managing to higher costs due are rates higher interest by and the conservatively

have adjust start retail year, shipments given was we expected, of said dealer saw would softer year our we that As for full help shipment We process adjusted protect than outlook if dealers. And the QX we our the started retail. outlook inventory now accordingly and lower we to at anchor. a in

As the as we full to XXXX actions reflect year have revised as aggressively environment well the to we result, current counter manage a taken guidance have our costs. down

is this reflects retail disappointing, environment we challenging expected. it the than While industry more a or

dealer As several healthy levels, maintaining activity. I've adjusted are is field and promotional increased to which the why inventory reiterated committed inventory supported we times, shipments in we with at

and On of we results gain implemented our support particularly dealers currently they're to We materials carrying. price and positive more of logistics negative facilities, inventory the offset lower further have flooring able a volumes. saw net of absorption These spend manufacturing for partially note, in manufacturing within lower our cost loss the efforts also to assist favorable in efficiencies to with reduce to with with quarter. effects cost manufacturing and were the response savings associated the

travel. of X% We streamline were eliminated current we also areas R&D make rightsize salaried to to Year-to-date, and and recently preserving strategic our we help in reduced the great redundancies took I such key structure certain discretionary We and with costs better match efforts workforce as spending business. our our actions to reduced demand surgical. word sure intentional have eliminating the was investments. cost our surgically operating environment have

gas emerging is market to stabilizes. this staying on the key as before when innovation know seen with a the stronger company have and We that

changes be structural We $XXX over million with actions will ongoing estimate of portion and headwind that help an benefit associated a to volumes. these offset in the equate lower

shipments than crystal by retail saying year. let clear below cut played we slide, we start that this protect from the If expectations, weaker on dealer out of will year more would expected, proven dynamics, move I at guidance our close were later. anyone cover to Before down. Bob me detail the which our guidance inventory. bringing we Unfortunately, to full the acted and has has market in us address retail

spend laid the progress time strategy out today to the XXXX talking and early we I about in made. some that want we've

continue strategy growth, generate and the believe within will positive powersports our strengthen We position to us industry this help returns. generate shareholder profitable

fact, our customer and on choices innovation, guided business our our In the more focusing through improving operations focused efficient. elevating making recently, strategy from has more experience to

dealer given priorities, manage supports achieve strategic continuing It has while profitability also progress the financial X-year to become that our did time financial we driving the our on has Despite deliver a powersports to our significant way marine to actions the XXXX, dealers the guided of early targets and inventory cycle. anticipate of part customer timing downward our not this a experience. these the uncertain we carefully in downturn. in gave headwinds targets the external best numerous At

we margins have we EBITDA these generation and teens, to the more a clarity We to end are What to timing financial attractive in and mid-single when to high return anticipate We in to the digits these and power markets remain goals. occurs. achieving cash EPS see double to in doing committed when ROIC additional the position sales environment. grow mid-XXs. believe even achieving higher expand today timing a We our grew around earnings us more of is recovery our the normalized providing a deliver will of is mid- digits, targets stronger work doubt objectives information

we to it's how important emerge are to think about stronger. I executing examples change some cover

made portfolio GEM, of outside we tenure resulting divestiture Transamerican decisions powersports to big First, the in and Auto early our Parts. distractions Taylor-Dunn on my in of some as CEO of prune

with and and enabled that has with to continue are offer. us. the customers, proven allocation us have we be more the a disciplined on a products we again to aligned result, more focus raise innovation is we the be capital to investments, time powersports, have time driver we for we and a winning key Rider-driven aligned which will ensuring and and focused portfolio As strong and that bar

notable to our Kinetic, XP made quality, XPEDITION. upgrades, to highest design we the motorcycle extreme worked category-defining RZR, with industry's our these durability only we Ranger Ranger Polaris ongoing and the Indian with years. and and industry platform. market the matching come standards all-electric quality post-sales We've recently to duty of products vehicles deliver to connected in hard [indiscernible] lineups to our the leveraging performance From COMMAND+ over products to anyone's like surveillance This industry-leading pre- enable vehicles the to our believe of customer last the RIDE continued level the close the enhance innovation brought the includes several experience. We don't through

Turning to Agile and efficient operations.

operational chain efficiency such leveraging operations, manufacturing, unloading improving specialized our in supply save on dealer U.S. as have requirements on increase equipment and We packaging ship logistics and within doubled our our down to new vehicle on-time and standards. to efforts charges suppliers' capabilities

are reduce importantly, to improve changes in X plants, model improvements downtime efficiency productivity. in Most our more. in largest The significantly line identifying or of manufacturing are and dramatic lean methods resulting lines XX%

achieving now production north a from are is the of XX% which massive performance on well schedules, our last improvement of We year.

achieve that targeted seeing operational more which While confidence of there much are is me and gives do, much improvements, will efficiencies. desired level the needed progress still we to we

objectives allocation targeted goal. continue our share we capital track Lastly, buyback execute remain to and against to on our

into headwinds There decision that back factored push are of timing the to our targets. our several financial

wallet lower sentiment inflation, had have discretionary to and today is discretionary customer it with levels than have stubborn at a was factors prior Debt-to-income example, consumer elevated negatively impacted For impact share on impacting dealers. either to rates, XXXX. a have peak retail hesitant levels. negative of dealerships. All inventory spending. industry rates maxed out The items our for less these along reached interest need resulted interest lend consumers to and are these or environment Elevated and banks a are the also in

pre-pandemic resulted with further dealer the as dealer levels, with higher inventory is their inventory many buyers. on coupled heavy, broad channel, elevated promotions the Not looking surprisingly, weaker interest unit promotional inventory to Even dealers costs. and lower is additional the of concerns noncurrent costs. their by number also lower dealers inventory, of in want higher industry retail this to inventory interest in given though mix across dealing inventory entice OEMs activity. has retail reduce per worse Higher to made and This macro driving and below

XXXX. out. and I are watching we're targets future. remain last the have days of to want our laid one strategy the remain abandoning in dealer is noncurrent terms are in the inventory at Consistent We looking timing, sales headwinds CDK optimistic confident temporary clear, for question when quarter, We never is out still to committed of journey outstanding the data been the channel. health these financial which laid of I more company healthiest the we in believe and Polaris with the the we carefully. and and we about not be on

trends in ATV, the we're decline me North was and Let Utility discuss sense. a recent to seeing. retail Off-Road, Within flattish, was go in quarter back strength driven American by RANGER by side-by-sides offset which

We ATV share of X-up Recreation of our balance and Sportsman believe RZR. back positive recent in with for year the will pick the the RANGER all-new to expect remains the half up launch within of the year. soft, remain particularly

North strength While the XPEDITION, quarter. share weak, especially in points over took during have vehicles. in We seen RZR the Polaris Star second continued X we we crossover the believe category has been of Edition

given industry recent On-Road by and retail heavyweight driven the was segment softness in competitive weakness. launches

the see In in of discretionary pulling Retail modestly impact on newly lineup. to Scout expensive more we launched On-Road as back we the to quarter Marine, the We expect continue Indian see consumers improve third purchases.

understand for of do for XXXX. during feedback a the meaningful Given boat-selling now, see to XXXX. we of behind But season dealers remainder from marine outlook us in improvement season is their we await the the ordering not fall more

shipping XXX shipping the all-new I pressure second on help In of because Off-Road, the versatility side positively quarter. and shipping and the recently unmatched business. recently work for Scout some both the impact products seeing one started do we offset and heavyweight late we Indian started built more of play the our space. time boasting in will the Sportsman the third in to we're The comfort, believe XXXX X-up new innovation XXXX that quarter want models touch began full-size new RANGER in and X-up, strength we should

lower lineup. product pricing year The new trim-level features other XXXX product are We completely as RZR redesigned watching well and as last off-road the XP enhancements [ year across this the worth should and and an the bringing models business the ]. accelerator when about be talk on to moving state it plans that innovation, product forward. the to foot our comes proof and this trim Again, remains all dealers of news is

Polaris our their noted in and with more choice of aggressive impact in flooring we're current a provide are As and to that to ensure at a inventory have targeting The of of a believe dealer margins, last dealers their year, are months aim on investment Overall, help dealers. business. collective reduction interest on the X% than we the dealers with our will successful. plans we updated success OEM we've worthwhile for SIOP decided this and We flooring increased believe start decision originally be to XX% of earlier, versus of targeted to a the free and but is inventory reduction XXXX dealer several decrease and such in have XX% dealers the offset to dealers production dropped negative working had our environment which sequentially, year. it's inventory we to long-term help impact

provides health recognize of our softer await discretionary a long-term recovery while this believe benefits we is a full we the prudent spending decision that this relief and a we negatively action year impacts patterns. bit cyclical of consumer channel in from retail the outlook, dealers While

second for turn expectations our our summarize to I'll who performance it Bob, around guidance XXXX. quarter provide will now commentary and updated Bob? and over

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

dollars to approximately impact spend. against versus Star. Second operational [indiscernible] the savings promotions, North our on last results offset due pressured volumes promotions, quarter to favorable in primarily with from partially million and strong lower a in products operational on the by promotional elevated to Gross savings the to and million like more related declined we Year-to-date, decline target X% to related of continued logistics margins XPEDITION realized and due of offset absorption. volume profit were a $XXX volume pricing our higher RANGER post sales XX% greater . Removing and than by in lower impact realizing of have net materials, plant $XX sales accessories growth year Polaris progress environment. PG&A

We the million industry which continue positive the be of to have a $XXX would work towards expected earnings impact conditions to normalize. target, savings Polaris power on once

RANGER as well XPEDITION volume ORV including with in by gains RZR to Off-Road, the in quarter. to OEMs driven mainly crossover. in provide Share in as tailwind this Polaris ATVs In were a subcategory ATV continues an to flat heavy and the headwind drive from side-by-sides, X%, with a saw sales crossover, channel the promotions. declines and in down was year-over-year category X-plus gain of during We to as on leading clear during inventory share helping this points work share promotions in quarter. losses elevated

point almost a of our ORV gain dollar However, reflects on basis. a data share

real see the margin factories overhead the factors to did impact making within I in quarter structure. the our remain to are that pressure from we the changes improvements cost pleased progress driven by volume are are already with mitigate While driving mentioned, our reductions. These from we helping unabsorbed

and decisions health quarter, we inventory expect in the made towards to third this given prioritizing environment. look challenging we levels around down shipment volumes dealer we have the be As meaningfully

are stimulate and clear as to inventory. remain elevated the to promotions demand Promotions industry continues expected noncurrent to use

further overhead particularly impact volumes On-Road. fundamental quarter driven the launches. during as Switching on We lost weakness stimulated by the the category. given to Motorcycles heavyweight the what pressure were industry in Indian by was believe and weaker quarter, experienced plant expect the in product segment. driven Sales on than competitive We lower in these margins lower retail by quarter was down consumer market shipments, absorption. XX%, share the during retail the industry heavyweight

at half shipping our our the these to share as June dealerships. Indian We improve the in and bikes year arrive Scout back began expect position in motorcycle new of

we expect the Scout with quarter, to around industry continues models. seems discretionary lower larger to a have consumer cut lot purchases. new grapples third the back as continue that the During to on of Indian retail be excitement a There

expected is industry this offset to However, only pressure. somewhat

higher consumer's In deal Marine, and the the sales decision with rates impacting levels industry elevated purchase. to continued were dealer inventory down XX% as interest to

levels, down continued retail as decline quarter baseline view with for while with down profit share and driving top in the viable May SSI a we in in dealer line Deck through to which XX% reflected year-over-year and shipments data line some a Our decline margin XXXX cost ago inventory less versus approximately year ceded Gross industry. the absorption. in in was we held fixed given pressures a share the Boats. Pontoons, we

the margins agile above significant We be demonstrated remaining costs, with continue to XX% in variable with reductions gross which is volume. despite

third levels fall environment interest data to and the continuing selling are We across point challenging into will dealers hampered by as we dealers ordering see decisions work a are this consumer the early XXXX inventory head through the rates. industry purchases begin to current during season. quarter when make big as elevated The come next

to financial Moving position. our

driving realigned use year our efficiencies on lowering are business cash period. this are With this generation performance. CapEx and to for update, expectations We cash due our updated during thoughts have we this our improve working our to capital of

in capital. expectations, working change the flush Given time take will to through volume it us

cash fourth quarter in cash performance As quarter. third to a generation the be the we expect in result, better than

programs stock-based basic of well remain by year, dilution and our target shares ahead reducing We of our XX%. from goal the of this outstanding compensation maintain offsetting we

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

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

to has year. retail product at the targets across that lowered start and deteriorated have macroeconomic of lines expectations financial the the all We given year our for a soft our relative climate trends

will lower to year. result to decided prioritizing health shipments be expected the the fourth dealer our absorption of The at quarter plants, shipping into and our our underscoring heading With play, this than third ongoing promotional have our of partners at to our rightsize increase more second results of commitment the decision efforts, impact these lower volumes to quarter. heavily half is leading the negatively factors which we

These Marine. in each taken reductions more however, in pronounced are and cuts Off-Road are already given they across happening On-Road segment,

year sales, XX% to For down sales be a we expect versus ago. to XX% now

from lower expected to than volumes, of we expect our as be to larger are both addition activity as which guidance. finance interest, well In headwinds promotional original

in from added elevated manage is relative inventory seeing they finance the due interest to noted, to higher Mike dealers the cost of few to our help carrying part value the past As are decision a years.

retail. we of As plan it curtail down certain in beginning to started that retail going dealers current to in trends in trends our Marine plan. of as with can Recall their plan, relates Within see to XX% year on decision to further, a of RZR at began the off this what our XXXX as on inventory reduction were and revised approximately We shipments top help well year we you channel the inventory versus we initial manage year, with shipments based macroeconomic targeting this this forecasts. assumptions and due to the were path last lower seeing our levels. current

expenses. have original our of further we shipments reducing we've year up elevated our to aid purchase in higher step seen plan. impacted coupled dealers made additional costs on hold flooring as larger dealers to forward with half them on discretionary are pressures our items. of today, with on ramped this, is consumer with have interest Based rates how and patterns the the now longer, one ticket our decision as have This stay with the and the feedback and dealers by the value in well from largest quickly the along Fast for flooring supporting which inflationary versus back proposition

year, down on inventories a now going dealers XX% the to to end levels footing can XX% expect dealer XXXX. better to that to our ourselves last into versus put drive We helping shipping and year

EPS. Moving to

in be adjusted of expecting $X.XX range to now and the down XX% are over to EPS $X. We

magnitude due drop the other costs. the dealing with we Importantly, fixed margins an at has plants overhead our on to lower impact of are and volume of absorption oversized

doing impacting net unfavorable various our headwind $X.XX Polaris these targeted power with The these From to EPS the are of the bright items are mix operational impact a macro The from a of side headwind. that overshadowing and the normal is positively negative sales pressures. volumes, $X.XX work seeing perspective, we on for operational of and promotions environment. efficiencies manufacturing such and to are additional absorption of tailwind teams EPS mitigate takedown represent a as efficiencies expected in $X great EPS accounting $X.XX earnings approximately the operating

we cut Additionally, completed within noncritical and necessary organization have as OpEx, for believe headcount earlier in spending July. these the we actions a in areas environment. reduction were current the rightsize We

before, noted perspective, nature growth impact the reduction As percentage is EBITDA EPS integral our From do note and significantly of debt due remain these and it of gross and profit interest. which than net revenue, cuts and depreciation relatively long-term in not an our reduction innovation, to income that important the strategy. investments percentage to more is to fixed

quarter, note. to the things third a few For

Given to a gain we innovation. impact have plan how cutting quarter third although more is expected Retail expected expect meaningful result is fourth to today, to modest to of with the share remain our down, looks shipments results quarter. versus

to as the many are near Mike, where or we and promotional emphasize from side-by-side elevated levels for and typically seen levels technology to not to expect historical specific of plant industry I turn in shipping dynamics. up I has in the associated at business digits. an and want grown historically back with retail. mid-single tailwinds macroeconomic new reasons innovation the headwinds We an Plus Current progression low growing it of in normal would our that environment industry with that as these ATVs. are well environment or many are absorption volume introduction typically factors operating mixes Before a to to

come Over we time, to we would see an opportunity down, benefit believe for these which margins.

impact are the expected earnings. to gains making have a Additionally, we still operational efficiency are on positive

our stronger including operations stockholders. employees the environment a we leaner outlook We and ultimate healthy current on customers, have challenging, emerging returns. interest cash with of today level at the future all is of innovation, are best decisions a positive are So the stockholder strong our in a pipeline of believe with making Polaris. intend stakeholders, delivering We while of dealers, the the robust of on and goal we powerports

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

to consumer the year, throughout performance the same issues and demand subdued expecting cautious We're macro quarter impacted resulting Bob. second that our network. dealer Thanks, persist a for in powersports

will through dealers vigilant we powersports, in help returns. For and move right the when well dealer emerge draw believe current second promotions inventory. of the as working while global our with to as combination that the half retail confident a inventory shipments seed strategic ensure . I'm Polaris' we're trends leadership to of lower strong stronger continue market returns. shareholder navigate to generating demand the year, We're to to strategy while on in path hard than these ever remaining down

well Our our recent confident category will and become those are to the customer metrics traffic shoppers point with to continued for organic search interest be of more buyers. to Polaris, we when and levels shopping feel site. elevated positioned in People

a remains and priority, we see our real begun have efficiencies operations. transformational to Innovation top within

unwavering mid-single mid-XXs margin to digits, ROIC to we by mid- might grow than So while business and this and the expand teens, digits. take the EPS passion targets are improve anticipated realize our EBITDA grow to to laid out, the to double financial originally journey determination high longer

power confident this powersports. generation you and will we've I'm work maintaining continued that, it And begun for and great emerge team our up over I'll cash leadership We already earnings line with in turn the for questions. to in support. also capability up stronger your open to set Rocco greater to with the while us thank

Joe Raymond comes question Altobello James. first from [Operator Instructions] And today's with

the require do on And baking that this is what cuts? think in outlook you sort of shipments of XX% XX% greatest What year. to segments product a in? question the reduction retail First

to but don't lot know anticipating the anticipated. the proportion we're a from of it's industry say going we to that category, where Obviously, Yes. into get lion's reduction the reduction. specifics, is the we that we're safe lot to environment to I The segment's had the meaning Obviously, of proportional off-road dynamics. retail down be. by somewhat thought a there's than of share be Polaris. to going of weaker is segment within was And

more Obviously, the REC heavily space impacted. is

around You has than although heard retail expected. specifically that generating up, prepared side, held from lower we is performance. RANGER my remarks It the utility still positive

So rec obviously, heavier the cuts bit obviously, which costs expect of obviously a on we dealers have proportion associated second deeper in having will and went that. some the little to the with what been side, retail the vehicles be half, we carry and a to some of as we ASP bit higher to a provide relief our that little to inventory

effort I Joe, we started RZR. and Marine year this Yes, mean last with

if versus versus the Marine Marine -- down. our little cuts plan, look year, So expected significant you at last a full at if the we had look are more you be to

So we'd RZR. already thing with same factored some of that,

all expectations, original look Mike pretty our proportionate to like relative across it categories. at said, if you it's the So

on Got Very just up that. to it. helpful. follow And

turn much on of Slide I 'XX how And of sort the As you're would think nature? which next onetime-ish 'XX, in probably how guidance at look and XX, come to cut of much If that happy we to you EPS page we year? the expect do. is back think about

through QX. of of But getting into we're around the that let I'll Bob emerged get some puts foremost, first the mean takes. and kind I our dynamics and Yes. bearings

is. environment, you to is on retail of low obviously, on snow the of shipping with away been hinge a we're volume operations. this took million stable this the we're if where the how And put much targeting beginning as And a more how so position line out. $XXX or successful because we we're . And back works operations reset there's the And the and cost. to going we're shipping in dynamics of know, brakes year a season retail, as very from that we're well more given where ultimately obviously, within we've at lot to on 'XX, little are we slow is the what of ways under the than that. a having positive that the retail So coming. about the as year. how retail that significantly now Obviously, talked We then environment

And a be we've so improvements that to partially year. this the able to annualize into from position to and start you structural made only get benefited

Yes.

we're is guidance if really to long So If this in going say Joe, . The were and way looking giving took it's some retail main we shipping goes. mix. if like flat, come think drivers obviously, to it's and going to shipping for would to -- mean, we -- about it, back come was I would mix hard We were volume you because that we XX, not what way the XXXX XXXX. a volume, But the lower X/X promo look here the back X/X depending cuts 'XX. yet. promotions, into that on to would retail, go of and volume, big year. retail the where you're I to if get about got elevated at are The Slide in

the is say to as winds much the flooring down. dealers the of there. have inventory don't the itself I goal Flooring help So to interest,

carry said, of you inventory versus when initial look much how it, depend XXX. forward and at where goes go. we a And on So will This then bridge that is our rates were as guidance. where Mike targeting

initial the the guidance So assumed XXX.

spend and incremental plant overhead material is this additional labor savings. So

various about lower obviously of half of so plant this will performance. the year to to operating. overcome carry $X.XX bonus effort a forward. how absorption there. given good the feel not We make it's come really by the enough to team significantly about because the be hit, progress [ as this company's to factories good are will Obviously, that think but ] offset then you it's should that. back And think We're good primarily related And I programs, about continuing which the OpEx,

to will but our it. tough. and then times back, in keep things that things. there, stuff do some the has the just from in meeting temporary carryover one normal headcount travel we'll come you other reductions So dealer And in have QX of thing some QX. for some when is get mind and There

meeting. So little QX be because dealer QX a than OpEx of higher will the

I reacted think, in year, back really your, XX% And Joe, chart pulling what chart. be short for our we pieces in after about volume we're out the come we through of more Bob aggressively at I the was because aggressively out base that the QX. would behind it want will that yes, term. to just you also went to structure. guidance second the right, pulled think quarter. we that's it's we we time although the right about the that the to certain -- took cost do That there And went are When

the point have the And And what I been encouraged to just rightsizing from that our of significant given environment, of really then not see focus I volumes. in sight of some on to operations work team we a hear And just -- we've getting we're from with team really the we drove we're lower is more terms got we've can indicated, with driving efficient only Bob and doing, line environment. opportunity. lean you truly already an But XXX efficiency. as to do really not business. But that the got have this I'm

to the and we're But really into more obviously, cost when market a that in ability volume our the gives positive us comes leverage back structure.

finally we're there's ability that cost structure about at our play, after 'XX, so for whether improvements feel how I that's but get long. factors we've about other of really the 'XX, to talked the and good So margin sizing a lot

question Megan comes Alexander next Stanley. And from with our today Morgan

maybe on follow to first Just there. question up bit a Joe's wanted

your I first like overall, so overall, far to expected in seems things in I in same. comments, don't it's on words it maybe down know a perspective, by to want half. look mouth. things your segment, bit the it the put some maybe But single necessarily it retail better like half just based So retail second but differs get high the a stay maybe little from share does digits some

your to down still kind which reason But of expectations. single -- worse digits, I be than retail high believe be guess high-single there's digits would original maybe could

your really it's -- understanding expectations? if on could little make retail is I'm shipments, a just segment. there would additional us kind want it's the the just help kind that Or you So in XX% be... just bit that of the But some I understand change in maybe of is just to sure depends context and implied destocking? it the the that cut maybe to additional of change to it

more Yes. I -- double bring I down when different it. very my prepared it is comments make to retail year, talking to we're we digits. you about of lot a XX%, remarks, that inventory we're and need signals which reduction move low play the to aggressive addition to in But now And It's XX% were basically in that mean, we've that, made business into these we more to the we has expecting taking we because kind got way sure know each as came position forward. defense offense about the think to and are a positioned segment dealer dynamics. seeing, this we

half second not we have that look herculean do as versus any improvements half, retail you we our in. I first at built will tell

We market customers know very the new will vehicle launch because been in some specific which the X-up, had areas the have long a the improve of We that in of know Scout. around something we we've that the is redesigned and time new looking midsized motorcycles first for. have ATV

bit some a up on that expecting got things below. are really like QX better not banking some We little had being been May, we've April, that really we little are still have June, a well massive better in in that, areas we the here improvement. ended We experiencing tough in small a bit environment but but

those adjust build us, that through tried it. you point as of markets. you're for much our as at in positive, on And meeting move our firsthand view day those before, well they're in we meeting the some in me pretty which council been not business the to that things, the the have playing overall, seasonality and what only is at to set think, window look calibrate. there We've as will REC motorcycles, boats I'm how and macro that like. I out. And forward how has on we'll where we with times We've feeling communicated to give going with to to the dealers next dealer a and that profiles, week The continue reaction the our be peak that based we'll but dealers new environment some missed dealer working represent top still about of being network. balance, with team is profiles new have

Yes. think in things HX about as keep to you A couple of versus timing other mind HX.

expecting snow. didn't really of more of year -- mean Normally, and of season. retail QX. a snowmobile retail has snow we're have in this didn't and the have any normal half of is in But we relatively is And because lot in -- year most QX. I any in a kind First QX, some we it's no really the

retail snow So of has there second the be one Marine the QX most that and first in marine And there's then retail in a the half. the reality of is lot wasn't in not segments, pressured half. there'll been

slows So Mike's got we've where we point, other the than in that negative new changes know of product to Herculean down. impact But kind we're industry. improvements expecting or not things some

up the -- maybe about of no will context just more it. ask in channel you'd be Off-Road to Marine, have more a cleaned today each definitely then if helpful. follow-up, pointed comment you the so then kind like each on-road, next promos, purchase of It view the like vehicles? appreciate a you year-end. on And guess, we most but position knowing that Is I question. market, your do, or kind consumer inventory Got would does end the to that idea And that. Bob, more how to maybe segment, there's versus the at do to still channel That's of where just work the comment How a seems willingness of be not confirming year. off-road,

that me expected the into off things I We even I backwards. pushed which or X the to we current mean, does far terms what that getting being depend being the by were we there more one have a rolling do portion as #X outstanding CDK the Yes. of resolved depends probably from macro XX QX, that let We hopefully. noncurrent through believe of guard know it is. #X data of each of in and the caught of do significant is also we and on than that was handled as that noncurrent covers in dealers healthiest Maybe months. QX channel. on of are But lot one, was well either the inventory and still was environment. competitive sales degree the at market. mean, start on days the a a there it work We the

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that. pretty it's And the I earnest with they've on most been the of reacting accurate. of of new point marine is business correction, side working corrections is lion's think given share your Motorcycles, think some and each that year, our largest that dealers, the make been probably really motorcycles needed around got. the in since industry, came obviously but as it's to environment. the magnitude the segments dynamics the as well line to weak the last we We've the I competitive there of the marine. Off-road with did current some have of products dealers appreciative although majority in. it Off-road

back But And we I'll moves. result, we're I'm of at needed it that's time, in as again terms around. most I that We it say time, best really data. make a said monitor where current-to-noncurrent the the the we this last know come to the mix going the to dealerships.

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

to going I Can question. in mentioned the bit were press hands-on follow-up term? on release leadership going just can longer for Maybe the forward. the the about little But you that that to last you see a just us how Mike, on a talk forward. being of ORV take know more managed you last plans going approach fill you a maybe week

talented that would an time folks time, I is, have incredibly with And a thing probably revenue look, company Yes. very team. I who strong I you of much with of level. been me a all think little the for long pretty team, given in mean, challenging we're can I it's I've that a What our XX% got corporate on corporate bad our for environment. and bit of tell spend our not at that it's rely a income, to

to streamline. staying off-road changes within And and number months. of I've close organizational several the past We've been very really made then a simplify the business, over

strong and very X business for who a defense -- of experience. commercial government ORV, lot very industry have We Snow, have leaders

opportunity organizational ultimately And we in to work And we'll means make. so what decide closely an terms need to more it the them. then of that road with will give me down that decisions any

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ASP some also then guys mentioned And planned Okay. product. That's fair. higher [ ] you to cuts

higher don't basis? unit-per-unit consumer? Or if just a really floor from it's matter product color any perspective kind dealers tapped sort higher-end plan the think of wondering a I'm want are a Bob incremental some that EPS pressure also baked headwinds on that mix and into seeing reduction. you're at signs of gave of the dollar if of on out I are that just

channel a little it's And would We products, lower more fill. end at I but the good at obviously slower high and the products. XPEDITION end retail's lot of the XD and been comment. a will second had those Yes. of say be it of those launched

think really So across trend industries, High buying [indiscernible] dollar And buying right? premium and still we're of to kind I a units well. they're that's tend do most buyers are NorthStar seeing product. cash

premium around And those carry expensive so to plan. on decision really, products more are for was floor our dealers also

to go good a that's to And correct so place inventory.

decent And that. so we chose there. But to strength seeing are do we

of well where of cut that's really a little the and back just have in and some stuff inventory what to the the mix some stuff that's is mix been selling out. they correcting the it's on And getting we shipments and pull slower,

own the it's delicate I share and we share quarter, And want overcorrect year-to-date balance. a a second and position can on we in side-by-sides. a we you gained we've share the to is and mean, held imagine, what fact where in our in that showroom put do as ourselves a standpoint floor start basis, don't seeding from

say it's current in significant actually to So being inventory our market, then and the financial we're the proud that battling around and pretty side-by-side, ground position able of gained some share. of dynamics discounts that and a specifically the frankly, I'm to against. think noncurrent you that that team about we to ourselves put held promos when like in

can gained by about I XPEDITION. we We and in -- mean see it with driven Yes. X talked crossover, XPEDITION. share, you of points that's

certainly, selling So is of product. People the reviews. end enjoying really high the getting are product well, XPEDITION great the really

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Craig comes question Kennison Bard. with And from our next

open inventory door promo I'm last floor up that show plan really you is how how you tie dealers. the a to made, specifically, that could competitors example, I to you want to stock less part the reorders. reducing the of you Mike, maybe flank, cost in know they coverage to do comment protect It's your discipline curious, for do that of follow-up, but

you balance. how curious that strike Just

lot that think a Yes. like in I the this, of they mean that I a always discontinue What in other dealers in is of role got an the they're details, seen of I align. into will our there's think going literally pressure. a going inventory putting lot environment I dealers that tell would where significant sure exposure. play making stuck a of space competitors, some it's that We've appropriate level I kind certainly And a of with or couple to you've heard there's good from mean, from -- without some marine of the things self-regulate. short that you are lines.

focus it on put it, obviously they to And move longer carrying in but the those a they're term no near brands.

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market Our in targets, several share, work over done sitting share of of the talking business dealers about they're lot through last that talked the meeting down, team has quarters, past they're the reviews where the health business. market we a

to those incredibly going serve well. think all are I us

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now. is on to like really a tariffs. to I just the question, if just doesn't in could read. race comments political sneak in But tough candidate right It And related seem another get an the your environment certainly, to anti-tariff there's topic different

yet really wondering haven't you changes to risk, I'm see respond the policy where you understanding that So can't most been made? formally

to more talked flank. down what single to a over to years Ultimately, I It past realized what's categories. innovation and talking I'm some I a I team the products. down second our because going for the be couldn't at of going prepared I all the our and protect going every things was that proud my introduced tactical about I'm in X and I'm comes like to impressed it to comes the to things. one actually go about question back act debate, Yes. specifically the That's remarks. of across prior of has

We've We've but of still cut you, done. on not got more over tell out. can we clear. coming we're this spending are I our R&D. I was X% in And revenue costs business, very

continue to an leader be going are standpoint. the innovation from We to

back so with pieces the dealerships. the that is end other foothold terms and while that's those the in going really business run And dealers, make the of sure where we innovation partnering interesting of to are how our in those keep we

I So just to that. want to come back

it's do There's As know it going to impacts come We're business. relates news that be to recently. out We tariffs, that's obviously of that our anyone's it. guess. the watching some nothing

of lot think I now elections. rhetoric awful an there's around right

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obviously any we've they and are, for from for we're planning some better things environment that where now get So to time. in not been

place, We've function react stays government top new have come everything. on to relations we'll of got that. then that into if a great obviously, And tariffs to

as where react we'll things are headed, we So accordingly. know soon as

comes question with Longbow Our next today from David Research. McGregor

Joe is Nolan David. for This on

a shipments the there also quarter. more into third impact on meaningful XQ, that benefit you of will lower continuing mentioned You Scouts have new from shipping be but the the

is then assume further we So -- of larger a remaining versus assume that fair million see of operational balance $XX savings benefit provide fourth quarter the to that just And year-to-date, in well? it to as the can third on with wondering if you the fair cadence quarter detail there's any there.

Yes.

the first part the take of I'll So question.

But the we will QX. Scout ORV. a Mike in start as cuts said, are did towards have yes, QX. little them shipping We bit So in weighted shipping

business going So lower going Scout. just to be of It's given it's be is motorcycles, sort to magnitude QX offset the of that to dramatically will relative -- benefit X lower. the next the just of of not that the quarters.

driven that's of shipments Snow Some QX. in by

helps. those In terms Scout half, of through more to embedded, ORV $XX was time guidance $XXX of all $XXX factories. second million take in talked flow we the plus than in the million was first through the we being on up actions And hurts the the as that $XXX of the the get be weighted little because embedded just down cost million a still margin, will the weighted about of original QX more XX overdrive that obviously, in savings, got half, that to we the additional the the million the than we're Slide work targeting terms being that other QX through system

had the had addition to related to OpEx we've well. headcount In then direct volume headcount and labor we've factories significant as labor the reductions standpoint, cuts from both as we've and the obviously, indirect in an reductions more gotten at efficient,

improvements takeout. of the purely So and it's part on we've then efficiency volume is some been just just it of working

little in lower going a quarter. than to think be beneficial more it's is we QX, QX, will impact that But which QX why bit be the

James Apologies, from comes James the question next with left our Citi. Hardiman looks queue. like And it

party Perry Our from next Bank is of America. Alex

sort the calling that incremental that sort is in some segment to run say of decelerated continues, have way the the the rate it upside then how And to any Any of may one. quarter? the say guidance retail it sort out And Is fair is of due of of had Just assumes it quarter? deviation worth by fair launch. retail throughout but out. to then contextualize to through sort played significant On-Road

it interesting. our watching And but of quarter. a where the that improved, in to April the And obviously, wanted well May really May we Yes. that retail obviously, industry improved seen was were through We've worsened it's to weather, And just season. in sometimes be, was -- because we weak. and underlying and again, it's sometimes before. seen QX was start intently. short June, pretty the late we've

to lot a playing of offense were in we obviously, So there improve retail.

plan started We May we a but I and the part the up saw looking share weakening. certainly think June, got production as of when real-time confidence, needed what the a of in big make. we that why to was into obviously, in it's into pretty to decisions to did, was industry and we the we at correlation late we with that's ended some position QX We promo. a turn we adjustments heavy were to making There sentiment. consumer going down with consumer on starting

were there just And of lot so factors. a

when that reality important go think I realize around time and was also also still back in to it's inflation persistent. the that, was

move customers And back higher view. the having X% the were remember, of started rate any I and from sheet X% we a longer starting really with dwindle. mantra Fed expectations kind think north of targeted standpoint. for reality The a into reality balance around prints stretched of interest that getting to You the come to were

those factors all the of of QX. So together came course kind through

the to give reacted down to of of the quickly we able team path to of corrections. I system out lot think credit, get be and shipments start heading a cost I the

I products by half in those earlier mean, where And late no those difference retail. we've get first I were really that being it some until new out, that then largest talked driven question, of first about As market into got the motorcycles QX, the difference create Scout would the that half any our answering dynamics we there second create the we really that snow between we I in dynamics retail. half half of into factors yes, talked was and didn't a June. to snow mean, about terms we are ATV around look business second Midsized

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

Maybe one internationally you channel of that's wondering and kind frequently, maybe hit how state on inventories speak provide on any to a of kind but trending overseas? the of if just could updates less retail bit kind is of

Yes. a little I'd were in say position. inventories better probably weak bit

fair But consistent some that a tell weak from recovered exactly every Not We of is haven't pretty we number board, much, the pretty you the not with it's but say, across of country had dynamics I but dynamics. fully broader would I the necessarily we've business. the seen would internationally. same,

international that part than company component is still our the is The of good less XX%.

vast of to have certainly So we North that seen but has majority correction well. we've seen come the have downshift international America, of the really as out

question. in Very laid of versus of about on slightly out, should helpful. terms kind kind of maybe And a you've $X.XX one But the walk the how we kind EPS maybe of that's differences that housekeeping $XXX of think the or there million categories and buckets? kind the

obviously, labor plant and we're and in million which -- the direct and that on really categories incremental lean between plant efficiencies incremental. direct over pretty are $XXX pretty Yes, The logistics, in similar, million spend actually. this $X.XX, things evenly $XXX material first driven overhead doing and really million, is is the was kind roughly labor, the of split the $XXX

It's in come really by spending just volume volume have that volumes down. overhead as able progress more nice controlling some think direct because materials, factory. able plants we've labor have -- taking we'll done going driven you And on there. be good on be to job logistics and out the the a But will less then made and to through overdrive and we have

in those $XXX a line just bit volume the out built little it, more impact million costs the is the drop. taking additional got first is and So volume I would efficiency probably with more say into related

Hardiman And James is question with from our Citi. next

And it focus as thinking I retail better with But to already have to exit honest. And that or any parts important Did be with about we may this. quarter. all the rate. my worse? worse? segments meaningfully Maybe bad, the of wasn't that's speak you can't should on ORVs the the answered X% moving right, for all portion most up So get because just to different any a be July down wanted segment. second keep brain these

it see we ORV short made, expectations, we was and we picked our to quarter. But of little No, bit the REC continued comments business, encouraged would what with a the were you, actually, what up we our We was through the with RANGER. of tell I with momentum from weakness. it consistent which what XPEDITION, saw and side were encouraged saw was from

a Obviously, the it still was spot, positive but quarter remaining below expectations. our through bright RANGER was

little move as look the I but it exception So couple to with move as bit snow back going we and mean, of relative assume what They're midsized is laid we've we performed more new into a seen kind of half, I it's out. really we as the of in not numbers things half. simple mean the ATV products they launch. and the how numbers, first substantially, to they're to going of motorcycles a the around

really I mean, James, go Yes. ahead.

dealer I for second XX%, being industry our the to the expectations about relative going half now big And has in shipments. the incremental it's adjustment XX taking story, a down that to inventory it half. of to But the a when dealer half whole and mean, and inventory it's think X-part second points year second an we full on X were being take also a bigger impact we're you year retail at down down, is down in looking It's right? with the retail, of As this down. driver the

it. that's segue to a my Got And perfect second question.

to also So down for company we are know ORVs, should whole thinking about of is there target. just was -- And it to are I is if inventories whatever sounds time. be for ORV accurate? whatever we a that that you're Inventories versus there is pre-pandemic, right? retail. than those more x way, zoom And assuming I to inventories it about to that any then think guess retail lot a XX% is down any XX% being that out is numbers going like think about versus down and way be range? in sort

place healthy to want sure we as in a this exit that year, Just to history. relative make we're

mean, pre-pandemic. below already I we're Yes. look,

that with be company. since probably we've the the I I've think, lowest been at will been, point We

inventory business. in to down further making are getting we're We're positioned. we perform the expect that pulling for sure what outlined. it's retail And We than reasons that this you

I the dealers, the you talk to them say, faster. like think go if to would like plan, we we'd they

make can. as best adjust can trying we're try we So obviously sure to we and

back we've we're that Obviously, lowest a upmarket our now a point got but in get we that can healthy, a to of outstanding are forward. perspective. point made number, play dealer we're down call days the faster sure going to and and a a this goal going that that than inventory we to But lot is dealers But sales long where a the the control it's been see going. position make reacted I'm at on moving lot in a not thing reacting a significant in we where because to a to an give retail have factors largely we're market number more in to time offense we've environment on defense

Yes.

where this like it most the model the environment better we takes once an the They sort the our get profiles hear of our right. of is in of truckloads. ships dealers. rest feedback from industry that orders just think I area We in versus RFM and ships model the better, just

you're is the down to be obviously, think with on can profiles us seeing then in we second that pandemic, So year. ship Mike quite dealer said, a the dealers, as really, would while of levels, resetting to, excluding impact the in half the what inventory what the get discussion the lowest and we of what the in

up or retail, growth inventory there's no and good at the even allow be muted should position. the that And comfortable with. level a exit and growth that us to we'll in we'll be everyone retail dealer the a year, year profiles if set to But shipping is with is, next

Sabahat next RBC with our comes Capital question Khan from And Markets.

philosophical cuts seeing. more be you're Maybe puts a how seen the of takes space. just a on you We've sort perspective. guess buffer into and So this? across the lot may guidance I think baked bunch much do you you of color of a shared from

not the consumer of a discussions a these given buffer trying of sort think year, the having you've unique on sort you're the how So backdrop you of when half an obviously, get of do back just built much macro a in But to phenomenon. here? understanding, uncertain in the

guess and take a simple. amount a see be a half And assessment and We've Well, we've very very to I where ATV. our if realistic a of of way. rightsized which second snow, headed. bit We different deliberate it room the retail. got it's structure. going clear is We've mean little inventory, dealer a we articulated around tried a believe more of that from midsized market after we us where variation come I'll been motorcycles small deeply I gives to that We're we versus half first see improvement at cost

mean, provide of and I happen not going here a to economy try interest look, and So and going the with is where I'm to headed. sit what's rates forecast

the business standpoint. with inventory, but believe a to we're protecting what the tirelessly work to to that We innovation got in seen. to beginning the position, the We going to on continue to we've from we've trying what we're gas us we are QX and do that the had deal true to It's that the keep going dealer sure to actions guided make stay said of year. we're going we're at trends good I that an in

between the get those to stabilizes, to back X, this it a a combination starts should of little of really bit put it good growth. market in once And position us

sort And some as a these the Okay. guess, to sort of Or -- is of costs. guess you of changes of can back you then initiatives are where we without add I those permanently Great. focused on that returns? operate the some market I think the about there cost undertook. of room reduction these And some

if trying the be Just and/or both optimize much evolving given needed. to macro? back there further if can you how some quickly understand need bit add to buffer is Like sides a

revised those guidance million original plants, guidance guidance of the continue cost continue is those would XXX in of and the permanent. And operating the -- improvements. will in forward. original efficiency guidance and of included some the that in $XXX The The efficiency ops

through labor you less because spend factory. volume-driven where the and Some of just have overhead less less it running is you're

there will a be will the that be talked And of will restructuring, where OpEx some be headwind. stay, will profit there'll year, then some not. the more So share carryover I which then next about from but

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

Slide I wanted XX. back to go to

of be Just line to just quarters. in of talked you the the bit And kind think think opening beyond for would top X remarks to expectations about I your mid-single rate manage because kind it a to long-term helpful next digits. about growth low being the

normalized year year XX% that get I but and rate XX% some know, that's optimistic, to don't this long-term just next cutting you're too we maybe if point. year, So at maybe to a back

X this are to like go that just mean the onetime some that volume Like to -- a get most here at to to plant that of expense expectations about of reasonable that think absorption, just won't these keep you're we cost don't only sort to kind if is that cut that growth of X absorption, plant in check? drop to just Does the words, of of XX get reasonable this getting a for the the actually X% you thinking points of points mix, Is expectation drags back you XX% necessarily of back? that other XX% sort when buckets of after is back not that reality lot kind in of look that like back. if you X%

absent next if so to that Robin, shipping shipping be we year's year, be off X% this would that think, to other inventory that to some flat thinking retail. we'll would back I got growth retail, dealer change assume would be -- Well, we of to X% in

And this shipping retail below pull well so down. we're inventory to dealer year,

were retail, that X% terms years. shipping because and would with yes, absorption volume X% this to would shipping mix then consistent growth, to we're prior have of levels at back we come the of lot if and So in be the we a

is promo The where piece to is hard guess term. that goes longer

things what the earlier, where Some in do market. of on to depend is go said competitors and just as that, going Mike

the think return The volume-driven those of of happens. we to if to we we going really I X% and grown is And has So expect happen will that once levels. expect costs to at come what what's that majority is I are Mike that don't look the that's going the said in that it's industry his remarks, we not to historic more normalize. question, to -- X% back know when at don't things unreasonable challenge timing that shipping as is, obviously, know mean, historically. like. The

drive lot substantial points mean to terms a them I as wider My eyes trying have I we of Robin, targeting we environment. we're our think, be is a factories the -- to that operational get to some opportunity relative lever in into improvements. able are Yes. would growth now really the were we to in of

specific. cost the coupled expenses, these back market plus we to that to surgical. with our come when very that leverage were fact So We reductions word I'll the the will the get returns, made volume we reductions operating that the

structure. I the tried in things. believe to that company we the I doesn't we've and we you we to forward. think That a you the off-road do structure reset this that that we've there, And as don't with really business live when of essentially response here around back to simplify small lot you that see out mean of move but growth, or have evidence complexity taken able we of get streamline will for that be cost organization cost had things

steady spot leverage get to volume of a put demonstrate back to I EBITDA that cadence in mid- target teens high get improvement And showing towards and EBITDA really that's got. a to us as think going to that pretty we've we

follow-up. Okay. as just a And quick then

But In seems elevated it of they're obviously terms XXXX of promotional year. like levels. similar to versus kind last levels,

level wouldn't this right? is of we pandemic, have been I sort should sort that So like kind normal since It actually think promotions going necessarily seems similar pandemic? the of, the to level of mean promotions the revert pre-pandemic? about as of that it's of a normal level we what forward during before to saw, this

on 'XX. not 'XX, fully least they're they to closer, that say levels but percent of would I the to closer at are getting a Yes. lot sales. getting promotion They're a were back

assuming the which to promotions industry pandemic, you'll that had all inventory, going level moderate. think I to out do the see the the at think forward, operating been a as I goal adjust I start that coming dealer industry think -- of of lower

lot inventory. there are models. out of certain lot to a still There XXXX of have a that manufacturers there's now, promo Right clear noncurrent

we have Some a have We out. lot cleared the cleanest believe inventory.

obviously going is there environment, dealer pretty No, I Sure. we're less industry. and stuff what's down, to it's happen? a the think Do promotions? comes know dynamic as one in player subsides inventory for that only opportunity because and an we

to think I I do 'XX But of are question, a think they on percent your close ] that [ to sales relatively

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

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