Q1 2023 Polaris Inc Earnings Call

Good morning, and welcome to the Polaris, Inc. First quarter 2023 earnings Conference call.

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I would now like to turn the conference over to J C. Weigelt Vice President Investor Relations. Please go ahead.

Thank you Gary and good morning, or afternoon, everyone I'm J C Weigelt Vice President of Investor Relations at Polaris. Thank you for joining us for 2023 first quarter earnings call. We will reference a slide presentation today, which is accessible on our website at IR Polaris dotcom joining.

Joining me on the call today are Mike <unk>, our Chief Executive Officer, and Bob Mack, Our Chief Financial Officer, both have prepared remarks, summarizing the first quarter as well as our expectations for 2023, then we will take your questions.

The call, we will be discussing various topics, which should be considered forward looking for the purpose of the private Securities Litigation Reform Act of 1995 actual results could differ materially from those projections in the forward looking statements you can refer to our 2020 to 10-K for additional details regarding risks and uncertainties.

All references to first quarter 2023, actual results and 2023 guidance are for our continuing operations and are reported on an adjusted non-GAAP basis, unless otherwise noted.

Please refer to our Reg G reconciliation schedules at the end of the presentation for the GAAP to non-GAAP adjustments now I will turn it over to Mike go ahead, Mike.

Thanks, J C. Good morning, everyone and thank you for joining US today. This may be a little premature here in Minnesota, but I hope your spring and riding season has opened up from what seemed to be a prolonged winter, although I can't complain too much as it was helpful to our snowmobile business.

I consistently reinforced with my team that the key to a successful year as a strong start in our first quarter results reflect just that.

Sales were up over 20% adjusted EBITDA margin expanded 172 basis points and adjusted EPS grew 55% versus last year.

Sales growth was driven by strong mix and higher shipped volumes favorable net price, which is price net of promotions.

Increased share in off road on road and Marine is availability improved through the back half of last year and into Q1 and a great start in our commercial business and the balance of the restocking benefit mainly in off road that we discussed in January .

While north American retail was down 5% versus last year. It increased 14% versus 2019, our teams and dealers are seeing a return to more normal seasonality. The spring selling season, which continues for the next couple of months is going to be an important gauge for the remainder of the year.

April is off to a good start despite a delayed spring for most of the country given poor weather conditions in early March.

We saw gross profit and EBITDA margin expansion for the third consecutive quarter as we maintained our focus on process improvements and efficiencies that can drive us closer towards our long term target of mid to high teens EBITDA margins.

We executed margin expansion despite factory inefficiencies as a result of late deliveries from suppliers.

This gives me confidence in the margin improvement opportunity as we drive suppliers to more normalized delivery performance and continue to drive efficiencies in the factories.

I shared in January that 2023 is going to be an exciting year and we came out of the gate strong with the launch of the razor XP, where we made the industry's best selling side by side, even better with more horsepower stronger chassis redesigned ergonomics and added comfort.

Initial reviews of this all new raise are very strong and we're excited for deliveries to start later in Q2. We also started production of our first all electric Ranger X P kinetic which is now shipping to customers.

Our Mighty G PON tuna Godfrey pontoon designed specifically with an electric motor option of mine will be entering its first selling season and should do well given a very strong order book.

On road has its most competitive portfolio of bikes and slingshot ever with a fresh lineup of F. T ours. The debut of the Indian Challenger elite as well as our scout Indian pursuit lineup there.

There's certainly a lot to be excited about this year, given what we've launched thus far but we're not done I'm incredibly incredibly excited about the launches we have planned for the rest of the year So stay tuned.

Overall, we're off to a strong start in 2023 that said we are closely monitoring external factors that could impact our customers and we remain laser focused on being agile and adaptable should the demand environment change.

Now, let me share some thoughts related customer trends that we're seeing.

The demand story remains mixed and largely consistent with what we've been seeing over the past couple of quarters.

In off road demand for utility vehicles remained steady as the use case for these products is less affected by mild fluctuations in the macro environment.

Recreation remains soft and we expect this to be the case as we progressed through 2023 with share gains for us coming from new product launches.

We continue to see higher demand for our premium products, regardless of category, including Ranger Northstar and raise our pro are in terrible war.

Snow check for model year, 2024 hit our target, making it the third best snow check in the past 20 years.

And lastly April retail is off to a very good start.

Yeah.

For on road, we're just now entering the selling season in April has been very encouraging as spring has arrived and our dealers have an extremely competitive lineup of Indian motorcycles and slingshot. In fact, we believe our lineup of bikes has never been more competitive than where we are today.

In Marine it was a later than anticipated start due to weather, but the boating season is upon us and many parts of the country and inventory is finally healthy.

I was recently on the road visiting some of our marine dealers with our marine team and they told US they've had a successful boat show season, but the customers seem to be taking longer to make a decision about buying a boat given improved inventory levels like our other segments. The high end of the marine market continues to perform well.

In addition to customer trends, we also keep a close eye on credit and lending trends that we see with our customers in.

In general the metrics, we monitor remained consistent with past levels, if anything we're reverting closer to pre pandemic metrics as normalization within our retail finance continues to key metrics, we follow our average FICO scores approval rates and penetration.

Each of which has not deviated materially from data dating back to 2018.

Our information comes from our partner banks that are available to our dealers to provide credit to customers. These partner banks finance about one quarter of retail purchases and the information. We're sharing today comes from that piece of our business and our partnership with these key banks.

As you've heard me say many times our relationship with these banks are very important.

Because we do not have a captive financing arm, we have minimized credit risk and exposure. These partner banks are well established strong and well capitalized and we are appreciative of our relationship with them and their willingness to work so closely with our dealer network to help make consumer financing available. They are truly allies in our strategy to provide the best customer.

Experience.

Lastly, these key partner banks are telling us they want more volume and we're working with our dealers to make this happen.

Regarding dealer inventory I'm happy to say that we were in a much healthier position than we've been in a long time, we believe inventory is mostly at our targeted an optimal levels as we and our prime selling season we.

We do have a few exceptions and are working to optimize dealer inventory across all categories.

Year over year, the number looks staggering, but remember we're coming from a point in 2022, where dealers were starved of inventory given supply chain constraints and our inability to build and deliver enough product relative to 2019 inventory is down about 20%.

We're getting numerous signals from dealers and our own data shows that we're returning closer to a more normal seasonal trend as inventory levels improve.

When you look at the average North American retail for off road vehicles, excluding snowmobiles for 2016 through 2019. The first quarter is typically our smallest quarter and we anticipate this to be the case in 2023.

Historical performance and seasonality show that we typically see a sizable jump in retail sequentially from Q1 is the riding season begins and weather improves we expect this to be the case this year and our April performance supports this assumption.

The magnitude of the jump in Q2 is expected to be a bit more muted due to a strong start in Q1 as well as some of the macro headwinds.

As the chart shows history would suggest that we would see a sequentially similar third quarter, followed by a dip into Q4.

The bottom line is that our first quarter performance was in line with our expectations and April performance is trending consistent with our expectations. Although challenges remain our team remains focused on enhancing our internal processes and systems to improve efficiency and delivery.

We continue to see ourselves in a strong position to gain share as the year progresses with healthy inventory at the dealers and a big year for innovation and product launches.

We also remain vigilant as we assess consumer trends, while nothing has changed significantly compared to the past couple of quarters and our original expectations. Our team remains agile and committed to optimizing the business.

Finally, we remain committed to delivering on our five year strategy and plan to provide a comprehensive update on our progress during our recently announced institutional investor and analyst day on July 30th.

I'll now turn it over to Bob who will summarize our first quarter performance and provide additional details for the balance of 2023, including guidance and expectations Bob.

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

Our first quarter results kicked off what we believe is going to be a strong year for Polaris in regards to share capture new product launches and margin expansion all of which lead us Florida on the path to achieve our five year targets.

<unk> grew 22% driven by a number of factors, Mike mentioned earlier, including strong performance from our international business, which grew 16% year over year overcoming a five percentage point drag from currency on.

On margins, we saw all segments expand gross profit margins over 125 basis points versus Q1, 2022 with on road expanding an impressive 330 basis points as that segment continues to execute on its profitability plants.

Turning to our off road results sales rose, 19% relative to last year to $1 6 billion.

Whole goods increased 220 increased 25% with share gains across the board.

In snow, we recently concluded the 'twenty two 'twenty three season and gained about one point of share which exceeded our expectations given the recalls we had early in the season.

P. G&A results within off road were driven by stable retail accessories per unit.

Retail trends were consistent with last quarter, while actually actual industry performance was down in the quarter.

Our share gains were driven by outsized gains in Atvs and general side by sides.

With healthier inventory across our entire off road portfolio and our innovative offering of new products, we expect share gains to continue throughout the year.

Outside of utility and recreation, we saw double digit growth in commercial which continues to have a strong backlog.

Margin expansion drivers included higher net price and lower cost premiums offsetting higher warranty costs and finance interest.

Switching to on road, our third straight quarter of share gains were driven by our strong product portfolio healthy inventory.

North American Indian motorcycle retail was flat year over year, but up 11% relative to 2019.

International sales were bolstered by strong Indian motorcycle sales in Australia.

It's worth noting our European brands excellent manga appeal, both had record revenue quarter, and while facing while they face meaningful headwinds they continue to drive margin expansion.

On road gross profit margin was up 331 basis points, driven by favorable product mix and higher volumes.

Moving to our Marine segment inventory is healthy and we are operating in an environment that feels like pre pandemic times.

<unk> continued to be driven by consumer preference for more premium boats as well as the pricing actions, we took last year the.

The most recent data we have shows we gained share in marine during the first quarter.

Dealers believe it was a successful boat show season, and while they are optimistic about the upcoming retail season.

We are seeing a return to seasonality in terms of the timing of boat registrations and pickups.

Similar to off road. We are currently seeing increased promotional activity, which we believe can positively impact buying patterns as we enter the spring selling season.

Gross profit margin was up 129 basis points with higher net pricing and favorable favorable product mix being the primary drivers.

Moving to our financial position, we continue to see our balance sheet is a competitive advantage cash generation in the first quarter was strong relative to previous years and our net leverage ratio continues to be in a healthy spot at 1.6 X.

We believe we are set up well for a variety of scenarios in the broader market with our balance sheet and cash generation capabilities in 2023.

Now, let us move to guidance and our expectations for 2023.

Before giving more details you should know that our expectations today are the same as they were in January when we first provided 2023 guidance.

Broadly speaking, what we are seeing across our segments today is in line with our original expectations.

Our first quarter results reflect momentum in sales share gains and margin expansion, which should help us achieve our full year goals.

Regarding sales there continues to be a long list of opportunities to achieve our guidance.

<unk> continues to be a positive and is expected to remain a contributor given the launch cadence we have planned for the remainder of the year.

Today, our product launch calendar remains on track and we expect a bigger contribution in the back half of the year from mix as those new category category defining products enter the channel.

We expect to gain share throughout the year with the support of healthier inventory levels and new product launches.

So even though we anticipate flattish retail industry for the year, we expect to do a bit better as a share gainer.

As Mike mentioned earlier dealer inventory is near optimal levels, allowing us to realize the positive share impact we were expecting.

We also spoke about robust growth in our commercial business and expect that to continue throughout the year just as we saw in the first quarter.

Our international and P. G&A businesses are expected to be strong contributors to growth this year.

Offsetting some of these sales drivers are continued headwinds from FX and the return of promotions.

We are planning FX conservatively, given the volatility in the markets should FX rates hold at their current levels, we expect to see a tailwind versus our plan.

For margins, we expect modest margin expansion at the adjusted gross profit and EBITDA lines.

Drivers continued to include volume and mix, along with our expectation that input costs will decline throughout the year.

But most things are moving in the right direction, we are seeing input costs around steel and diesel rise, but at this point, they're not expected to have an impact on our financial plan for the year.

It is important to understand that there are many things going right operationally and with our supply chain, but it takes time and we expect this journey to continue throughout the year.

Adjusted EPS from continuing operations is still expected to be in the range of down 3% to up 3% with most of the potential drop through from margin expansion being consumed by a higher interest rate expense.

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

We are seeing seasonality return, but not yet in line with historical patterns, which usually translates into a sizable sequential ramp in shipments and sales in the second quarter.

We do not expect a material ramp in our second quarter sales sequentially. This year due to the timing of snowmobile shipments, which carried over into our first quarter.

Next history reflects that approximately 40% of our annual EPS is derived in the first half of the year and we expect this cadence to hold true this year the.

The negative hit from FX in the second quarter is expected to be in line with what we saw in the first quarter, if FX rates stay constant.

To wrap up Q1 results proved to be a strong start to the year.

Our expectations for the year remain consistent with our initial thoughts.

Although it is happening slower than we thought we are seeing the supply chain improve.

With our focus and investment on internal efficiencies and processes as well as continued progress in the supply chain. We believe there remains a real opportunity to drive margin expansion this year and beyond.

We remain excited about the product launches we have for the remainder of the year and believe they can contribute to growth this year as well as future years, we are taking share and are committed to winning through our ability to deliver high quality and innovative products to those that play and work outside.

Our teams remain agile as we entered the 2023 selling season and we are in a good spot with inventory.

We closed out the first quarter, we are grateful to be in this position and excited about the initiatives. We are focused on to help deliver our five year strategy.

With that I'll turn the call over to Gary to open the lineup for questions.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

Our first question.

Is from Fred Wightman with Wolfe Research. Please go ahead.

Hey, guys. Good morning. Thanks for the question I just wanted to touch base on the comments Bob made for two cube and sort of the first half of the year. It sounds like that 40 60 split as far as first half second half is still the right way to think about the year.

But that would also sort of suggests two Q numbers for the street need to come down. So can you sort of walk through maybe where we missed things it sounds like FX might be a little bit of a headwind, but I'm just sort of the <unk> outlook, and then sort of the implied stronger back half of the year given the macro environment.

Yeah sure if I am so right party. The 40 60 split is the right way to think about it you know when we started the year and got into the year, we had expected to ship, but a bit more of the snow volume in late.

In December more of it shipped in and was really a revenue recognized in January February because of some of the recalls we had it holds we add on product.

So that sort of knocked the cadence are off a little bit. So you know what you saw was heavier shipments and snow in Q1 with lower side by sides and then you'll see more side by sides in Q2, but you won't see because of the snow shipments that will mask a little bit of that normal normal ramp up. So you know I think as we look at it.

Now you know the the beat in Q1, I'm really offsets are you know.

Part of what we would have normally seen in Q2.

But it does take the hill to climb for the year down down a bit.

But that's really the dynamic that's at play the other thing I'm afraid to keep the mine is.

As I mentioned, you know the number of new products that we've got coming out and the timing of those deliveries really is more weighted into the back half and aside from the X P. The other products are not a what I would term as highly cannibalizing of our existing products, they really target new categories, and so that'll obviously be a big.

Part of that second half ramp up in deliveries.

Makes sense and then just to to ask about the retail financing landscape.

Slide that you guys provided it was super helpful. But I'm wondering if you gave this for one Q I'm wondering as you moved throughout the quarter did you see either FICO scores or approval rates or penetration sort of dip off in March or maybe if you could comment into April .

No I mean, it's the date has been a really consistent and consistent with the past and we've talked to all the banks about you know what.

Where they are with their lending standards Downpayments and it really that's all remain very consistent across the board. So you know I think you'll continue to see our penetration rates.

Return to kind of more normal.

30, plus percent levels, you know as if there's any slowdown in financing its more on the local bank side and that's why we have these partners you have in place to be able to step up and and fill that gap and they've all been very aggressive and are very interested in lending more money into the space you know in all our promo for it is.

You know largely aimed at doing rate buy downs to put things back into a more attractive category and you know you've got to step back and think about who our customers are and we track that you know they've they've done well over the past few years their income levels are up.

You know when you hear about layoffs and things that are going on in the economy right now they primarily tend to be centered around the tech.

Areas, which don't necessarily have a high correlation to our customer base. So at this point the customers remain healthy and you know as I talked about in my prepared remarks, you know once the weather opened up and we've heard this pretty consistently from all of our businesses. We've seen you know customers and the activity are really increasing so we think the weather.

Had a pronounced impact and you know I think youre going to see those customers coming in and that's why our retail finance partners are looking to to grab a bigger piece of the business.

It makes sense, thanks a lot.

The next question is from Joe also Bello with Raymond James. Please go ahead.

Hey, guys. Good morning, I, just wanted to get some more clarity on Craig's first question actually about.

Your implied guide for Q2, so I understand why did they leave snowmobile shipments from December to January .

That would be Q1, what I'm, a little unclear as to why that would impact Q2, I mean were there other pull forwards that you experienced in this quarter.

Now what what I was trying to say is that the snowmobile shipments. If you look at what would have been the normal seasonal ramp from Q1 to Q2, you'd see a bigger ramp but Q1 was you know to some degree unusually high if you were.

Normal seasonality relative to you know to history to sort of like a 19 compare.

Because of those snow shipments and so the the sales ramp just looks lower but the real dynamic is we'll ship more side by sides and more off road and motorcycles. In Q2, you just won't see as big of a revenue pop.

Because we had those snow units in Q1.

Okay, but it also implies earnings are going to be down year over year in Q2 as well.

Yeah, I mean Q2 last year, you know everything last year was really driven by our ability to ship. So our Q1 last year was significantly lower from a shipment standpoint than where we were in Q1. This year. So getting into riding season, you know we had a lot more inventory to try to make up and getting.

The channel in Q2, whereas this year, where we're sitting a little bit better because we had better shipments in Q4 and Q1 so.

That's the that's the dynamic that we just don't have as much of our inventory hole to make up in Q2.

And you know youre dealing with and you're dealing with you know the effects of foreign exchange and interest rates you know on top of that are there just pronounce that earnings.

A decline in the second quarter versus last year.

Got it and just one last one on April retail it sounds like you're pretty positive there maybe corner.

Could you quantify for us what that might have looked like.

[laughter], you know I'm not going to do that but I will just tell you that you know we've been watching it you know, we obviously watch what retail is doing on a daily basis, we would do it even more frequently if we if we could I know or business units do and you know as I mentioned earlier the weather really did.

Suppress things in the early part of March and once we saw things.

Improving we saw retail momentum picking up we've had a couple of dealer council meetings.

And that has confirmed that viewpoint are the dealers are playing back to us that you know once the weather improved our customers started coming back into the dealerships.

The the buying process is definitely a little bit different given that there's you know inventory availability and with higher interest rates, obviously consumers are going to make sure that they're making the right decision and you know I made the comment about what's going on in the in the boat business right. Now are you know, we're obviously financing plays a big part a and it's not that they won't buy but they're just taking their time.

They've got more inventory to pick from and we feel good about what we've seen so far through our through April .

Got it thank you guys.

But.

The next question is from Craig Kennison with Baird. Please go ahead.

Hey, good morning, and thank you for taking my question and we get a lot of questions from investors about guidance and really the expectation for retail to be flat you know, we've got potential recession, and we also have potential tighter credit, although you're not seeing it what gives you confidence.

And that flat outlook is are we underestimating the product cycle or are we underestimating the impact of product availability and your ability to actually fulfill demand in a bigger way.

Yeah, you know I would I'd say, it's a it's a few things Craig I mean, you know one the utility side of our business, which for off road makes up about 60% of the volume the demand there remains stable in fact on the commercial side, it's very strong.

And so that gives me confidence as we get availability into the channel. We are seeing those products retail out or sell through and so you know there's obviously an element there that you know as long as that market continues to hold up and frankly, we're not seeing anything that tells us anything differently that gives us confidence the second as you know we talked.

About it we're not expecting growth in our recreational category from the existing products. So you know, we're anticipating things to continue to be a little slow there just given that that's a far more discretionary purchase and consumers are obviously impacted by whats going on even if credits available the cost of credit is obviously.

A strong consideration.

I do think the new product elements, both both for recreational and utility that.

We have coming out later this year are probably we're being a bit underestimated.

They were largely not a cannibalizing products. So they're redefining segments are defining new segments and.

And we're really excited about what we believe that means for the business when you add on top of that.

You know we didn't talk about it but we had considerable growth in our international markets pretty much across the board are particularly strong in our Indian motorcycle brand, but even growth in off road.

And growth in P. G N a.

Comes as a result of organic but also with those new products. We are at the same time launching a number of P. G&A option. So for example, when we launched the all new razor XP. There were close to 100 accessories that came out literally at the same moment that vehicle did and so when you add all those factors together are we believe that puts.

US in a pretty good environment to at least execute on a flat retail environment.

The other thing to keep in mind is you know as you'd think about 'twenty two retail which is the you know the comp everybody's looking at you know 22 was still not a normal retail either year from it either a cadence perspective on inventory availability perspective, and it was a good bit lower than 2019. So.

You know we're not comparing if you think of 2019 is the last sort of normal cycle for this industry are the 22 comp relative full year comp relative to 19 is not a herculean number. So you know we're already kind of down from where we were pre pandemic. If you look at it from a unit standpoint versus 19.

Thanks, if I could just follow up.

Are you able to track sort of the average retail selling price and you know given the you always have to be sharper on their pricing are you actually seeing maybe the monthly payment for a like for like unit.

Kicked down given you know maybe a more competitive price from dealers.

Yeah. So you've got two dynamics at play there price, obviously and the interest rate that you know I would say that the increase in both promo across the whole industry as well as the you know dealers to your point, maybe sharpening their pencils, a little bit taken a little bit less margin.

Obviously during the pandemic people were doing pretty much full full pop margins.

That brings the finance rate down a little the finance them out down a little bit I, you know I would expect most of that good news is offset by kind of the rates that have ticked up kind of quarter by quarter. So I don't know that that's having a huge impact yet.

But if rates stabilize you know that will.

That will start to maybe have a small impact, but we don't get the feedback from dealers is that the.

The dollar per month isn't really the big driver. It's it's the headline shock of the rate.

When people are financing the products, they're just not used to seeing a rate you know that's kind of in the seven plus range and that's more the driver on People's hesitancy to buy yeah, and when you know when we were out with the marine dealers.

Were they were looking for some help from us not necessarily financial help but help and how do you articulate to consumers that you know that headline rate may be higher but the you know the impact from a monthly payment standpoint, you know really is not significantly impacted and so they're there they're having to think differently about how they are selling the other thing.

I'd point out is you know the comments that we've made around the high end of the business and that's true whether it's on road off road or marine that the customer remains very strong and you know are we don't talk about it really much anymore, but that that pre sold order book, obviously has come down from the heights that we had no that inventories better but it's still.

Up pretty significantly relative to where it was before the pandemic and I'm really that's centered around areas like the Ranger Northstar, where you know we're still not at optimal inventory levels and that just tells you that customers are you know still anxious to get that product. That's good for dealers because you know whether it's the turbo are the pro or the.

Northstar Ranger are the amount of discounting that they have to do is minimal.

And that tends to be a more fluent customer that you know maybe not as sensitive to the financing rates. So you know we feel that we feel pretty good about you know where those dynamics stand right now.

Great. Thank you so much.

But.

The next question is from Robin Farley with UBS. Please go ahead.

Great. Thanks, just to clarify a little bit I know.

The April retail up there. He asked you about I wonder if you could just indicate the weather when you say it's it strong is it a is it positive year over year or did you. Just mean that you were continuing to grow share and I guess thinking about that in the context of your expectation for retail to be flat for the year.

Like.

Kiwi.

He was going to be the quarter that would've been up modestly and so is there a quarter. Later. This year then I don't know if it would be Q2 here Q3, where you're now expecting to see that kind of that retail up here for a year.

Yeah, So I would I would say this april's tracking with our expectations. It is up versus last year.

And obviously, that's that's one of our three months that we've got to execute on so at this stage, we feel pretty good about it you know I think we're gonna probably steer clear of trying to make commentary around the quarters are on retail.

You know the first quarter the difference between what happened in and our expectations really there were a couple of things one as you well know.

We had a fair number of our recreational products on shipment holds a retail holds a we did clear those but you know as it happened later in the quarter I'm sure that there was some of that that was still caught up.

And getting the work done on them and then the second point that I made earlier is you know, we're still not where we need to be from a ranger AR inventory standpoint.

And so we know when we get that product and it retails and we know that that's an area, where we fell short of some of our expectations and it was purely around having that product.

At the dealers so theres a lot of timing effects that go in there, but you know I think the key messages weather cleared up a product availability in both correlate to improving retail and we've seen that continue to improve not only relative to our expectations, but also sequentially as we came out of the first quarter.

Great Yeah, that's very helpful color around Q1.

A quick follow up on.

The commentary about your retail financing partners.

Given what's going on in.

In the broader environment, you know there's concern about how.

How much.

Yeah, it wouldn't be available.

Thank you.

Annual contract with your retail partners there like a particular time of year when the terms of that we can't prove it but it didn't work.

<unk> had a change in view about how aggressive they want to land in different parts of the states, where you know there's new tariff will come into play.

Yeah, Robert It's Bob there are a I mean, there are four partners in there the contracts are all multi year, obviously, they they are expire and renew at different at different points.

But you know part of the benefit of having those four partners is that not only are they competing with the credit unions for business, but they are competing with each other and so you know I think that helps us keep our strong credit availability and.

You know solid approval terms in and the appropriate level of aggressiveness with the finance group and we meet with them all monthly our teammates are the more frequently than that but I mean, our monthly and our you know we we feel good about where they are you know they are not signaling any.

Lack of commitment to the market, they're not changing their credit standards. Our FICO scores have remained very consistent our average consumer earns well over $100000 and their income is up 16% versus 2019. So you know, it's a pretty strong consumer group to finance in the bank.

Like the business.

Robin you know we've talked about it before the thing I like about the setup, we have which we've obviously expanded from what we used to have with you know really only two partners.

Is there are thresholds in the contracts are that incentivize performance as well as the the separation as you've heard me say in the past of church and state. So that you know, we're not pushing them to go down a path that puts their balance sheet in a compromised position.

And they're not playing it too conservative we think it puts us in a very balanced a middle of the road and I think that's why you see them.

I'm picking up their penetration rates and it provides a really good opportunity for our customers.

Okay, great. Thanks, very much very helpful.

The next question is from James Hardiman with Citi. Please go ahead.

Hey, good morning, I had a question on the quarter and then and then maybe a question on the outlook I guess as I think about.

The retail performance and then the reported sales performance I was I was hoping you could maybe bridge that gap.

Particularly on board, either or off road right or be retail was down 10 reported whole goods sales were up 25, obviously, that's a pretty big gap, it's not apples to apples when he'd never is but but maybe sort of walk us through the big contributors to that maybe start with the E. S. P.

<unk> I think you mentioned snowmobiles, probably helped increased that gap as well and then there was obviously some channel fill I'm, assuming a good chunk of that call it $150 million with Omar because I just want to make sure I'm I'm not sort of missing any of the key components.

And with regard to that sort of gap.

Sure. This is Bob I'll take that a broad question and a couple of pieces here.

So if you think about the quarter and you'd think about retail relative to ship you know we've made up some ground are really on the on the ATV side.

We started shipping them.

We're just starting to ship now the new range.

Ranger is a new razors, but.

But we did make some progress on pro our turbo or getting some more inventory out there in those high demand vehicles in the quarter and as Mike said, you know we didn't make the progress we had hoped to make and so for.

Ranger shipments and and retail were relatively close made up a little bit of ground, but not not not a lot. So you know it's it's part of it is getting better our channel inventory out there getting that out there ahead of the season.

Ah I, primarily on a T v's and like I said, a little bit on Ranger you know the snow was was it was a piece of it a S piece or another chunk you know we had the most this is the quarter, where we have most of the carryover from last year. So our last price increase.

Major price increase was in.

Early Q2 of last year. So you know we do have more carryover on the pricing side. So the asps.

Are up double.

Double digits in off road and a mid single digits in the on road and Marine.

Great.

Yeah.

Okay. That's that's helpful and then maybe help us navigate in.

And you've touched on it Bob like the comparison or maybe all over the place.

If we just did the math or views were up 6% versus 19.

I think if we were to hold that relationship.

On a year over year basis, they would be up a lot in the second quarter I know, you're not sort of guiding retail, but you guys know on the love a good flight.

<unk> six I think it is where you talk about sort of Q2 retail versus the historical average well what is that telling us exactly I think it's telling us that maybe you know you don't expect Q2 retail to be above 19, but I just want to sort of understand.

Sure I'm I'm picking up while you guys are putting down here.

Well I mean.

Well, what we were trying to get across on that slide was was probably I mean, you did that trend for retail is a composite. So it was less about a specific comparison point and I think really the point was trying to demonstrate you know where we're at in terms of dealer inventory channel fill which as you rightly.

It out you know we've largely.

Completed that although you know we have pockets, where we still have inventory thats, probably lower than where we would like it to be and we'll keep working that but you know where the the point around returning to more seasonal, but we're not saying completely returning to seasonality.

We have those pockets, where inventory isn't where we'd like it to be but on the other side of that you know we're not ignoring the broader macro environment as we've talked about our ref business is definitely under pressure just given it's a more discretionary purchase so.

Again, I, you know I don't want to steer into talking about quarterly retail because you know it doesn't take much to.

To have movement between quarters, and then we spend an awful lot of time trying to help people understand that I think Q1 is a prime example that you know I think will will help us as we get into Q2, given some of the delays we had but at the same time you know we've got another couple of months to go and you know Theres a lot yet to play out from a.

Broader economic perspective.

Got it but just just to clarify if we were to sort of do the math of it you maintain plus six versus 2019.

That's probably going to get us to the wrong answer [laughter] or or maybe not.

Well if you if you use the math of plus six to 2019 and carry that through the rest of the year. It would definitely get you to the wrong answer since we're saying we're gonna be flat with 2022.

In 2019, it was a good bit 22. So you know I don't think you can say that that Ah seasonality in 'twenty two will be the same as it was in 19.

Not to say that there's a that that can't happen, but you know to Mike's point of the year.

Year is setting up a little different and it's still in certain segments of the market. It is still impacted by product availability and it's going to take a while to continue to work through that so and there's a dynamic like this I think also pointing out that youre.

You're seeing a higher level of utility sales relative to rec sales in 2023 relative to 'twenty two in 19 and that that season is a little bit different you know racket tends to do really well in the spring as people get ready for riding and you know, we're not anticipating rec to have.

You know a great year, given just the macro environment, so that utility versus rack VIX has that impact as well.

That makes a lot of sense. Thanks, guys.

Thank you.

The next question is from Noah is that skin with Keybanc. Please go ahead.

Hi, Thanks for taking my questions I guess first hoping you could provide some color on the elevated production costs, you called out and where that hit within O. R. V. And then somewhat relatedly as it relates to the kind of the redesigned Reser X P product I think you had mentioned more favorable margin dynamics related.

Kind of the modular approach.

Just wondering if the right.

Thinking about this year related to that product.

Well I'll let.

Bob can get into more specifics, but in general you know the the way I would characterize what happened in Q1 as you know we we largely got the units out that we were targeting the issue is is how we executed that.

Resulting in a lot of inefficiencies. So we were still building product into rework nowhere near the same magnitude that we've had historically.

Because suppliers are still delivering late now you know last year and the year before when we set a supplier was delivering late we were talking about you know weeks months, sometimes quarters now where we're talking about days and weeks. So what that means is we're we're still able to get the product out, but we're not doing it in an incredibly efficient manner and.

You know the teams are still working with that you know we're narrowing it down the number of suppliers that are late continues to come down and as that happens it improves our ability to get efficiency in the plant and that that really is largely what drove it and you know that's going to show up obviously in our gross margin performance within our within the off road vehicle business.

You know as we look forward you know, it's it's tough to say how and when those will play out you know we did add that to the list of assumptions that are essentially embedded in our guidance and you know obviously, we're going to continue to work that as aggressively as we can Steve Minto and his team are laser focused on making sure that we're driving efficiencies and in Huntsville.

And Monterrey as quickly as we can it's largely dependent on how suppliers deliver to us and we're working backwards to make sure that our.

Suppliers have everything they need to be able to deliver on time.

Yeah, I think you know in addition to the sort of operational inefficiencies, Mike just talked about you know what we saw in the quarter you know steel had been trending in a positive direction as we kind of exited Q4, there's been a bump in steel prices probably won't be long term, but you know that any benefit from.

Steel that we're expecting in Q1, and Q2 is sort of taken up by.

That change in the in the curve, but again, we think that will trend back towards normal same thing with diesel you know, it's coming down a little it's forecasted to start coming down we havent seen it but it's come down slower than we had anticipated there was a little bit of benefit on the on the ocean freight side those rates are turned a bit favorable in the quarter.

Sure. So you know some puts and takes on on the rest of the cost side, but overall, it's just a little more negative than we had expected, but nothing that's going to change our full year guidance.

And then on the new razor yeah, so that that vehicle benefits are to some degree from some of the modularity work, we're doing but that project was started.

It would have been nearly probably four years ago. So you know, it's not getting the full benefit I wouldn't consider that to be the first product, we've launched with our new philosophy, but given you now what Mike talked about the 100, new P G&A items and and multiple models across that you now have.

They get good better best sort of range of of product in the market, which we hadn't historically add we do expect to see some margin benefit from it.

Great. Thank you.

The next question is from David Macgregor with Longbow Research. Please go ahead.

Good morning, everyone.

Wanted to ask about the on road segment and clearly there's been a tremendous amount of progress made here over the past few years.

But 21.4% gross margin up 300 basis points, how much more upside is there to margins and maybe the more important question is just how sustainable are these margins given everything that's going on the mix or anything else.

But I'd say a couple of things you know one you know we've talked about obviously this segment includes Indian motorcycles slingshot, but also a couple of the businesses that we have over in France.

Good Pele, which both which have strong margin performance. So there's an element of that margin performance that you know those businesses continue to execute on I wouldn't suggest that theyre going to move you know meaningfully one way or the other the real opportunity for us is around Indian and slingshot and as we've talked about the path to profitability for both of those.

<unk> brands is a continued focus with Mike Dougherty and his team they've made really strong progress over the past couple of years and we expect that to be an opportunity as we go forward and when you think about the size of those businesses and the growth opportunity for bolt.

You know theres meaningful improvement that we think we can make there it's going to play out over time.

And as we've talked about in the past you know, we probably hadn't done a really good job.

With either slingshot or Indian you know these are essentially brand new businesses that we started from scratch and it takes time to get to profitability that the team is laser focused on that whether that's you know driving efficiencies in engineering now that we've got all the products that we essentially need out so that takes your initial platform investment down more.

Continuing to drive globalization, you know, we've got a meaningful presence in Vietnam. We look like we're going to continue to expand that for our in region motorcycle delivery. We've got a presence in Europe Europe is our fastest growing market for Indian and we've got assembly.

Operations in a poorly Poland. So all those things help as we continue to grow the business and we're really confident in our ability to continue to expand those margins.

It's impressive congratulations on the progress there.

Second question you just talked about are today about the commercial business and the contribution to growth I guess, it's been awhile since we really talked much about that can you just remind us in terms of the <unk>.

<unk>.

The profit contribution from that business.

Yeah, we don't necessarily get into the size you know Bob knows this business well he used to have operating responsibility for.

For it before we made all the changes over the past few years I. It's just it's turned out to be a great segment for the Ranger portfolio, where you know you've seen our press release that a United rentals came out and is but ordered a bunch of the new Ranger.

Ranger X P kinetics.

We continue to have a strong relationship with them and with several other operators in the space and we have some really strong partner programs.

That helped us as well and with the amount of infrastructure and commercial development that's underway in the contracts.

You know the order backlog looks great for this year and we're confident this business will continue to grow for at least the next couple of years.

Okay. Thanks, Mike.

The next question is from Jamie Katz with Morningstar. Please go ahead.

Hey, good morning, I have just one quick one you know one of your competitors talks quite a bit about new entrants in brand switchers and how that is.

Ported gross for the top line. So can you just give us a little insight into what you're seeing from your customer base, how that's evolving and.

What your ability is currently to sort of attract new entrants.

Based on brand switchers.

Yeah, you know I think you know we continue to see its obviously not at the levels that we had in the pandemic when new customers were in the you know call. It the low to mid seventies, but no new customers still represent about 60% of.

The incoming volume.

So you know we know that you know word of mouth family members friends are taking folks out on our vehicles is a big big selling point and we continue to leverage that but we've done a lot in fact, the management team and I were out at one of our players adventures locations in Arizona.

In the last month.

And it was just incredible to see the volume of people going through that particular location. It was a staggering.

And we're now starting to activate upon that so you know building a stronger relationship with those customers.

To either migrate them to our Polaris Adventures select which is more of a subscription program or into buying a vehicle and so we think that that's a really good opportunity to continue to open the aperture and bring new new people and.

We've done a lot around educating making sure you know with a lot of new people coming into the category, making sure they understand how to use the vehicles how to safely use the vehicles had a load them on a trailer all the different aspects associated with that so we've tried to make that that ownership experience are much better than it has.

He's been in and frankly, we've done a lot of work with our dealers to really get them to up their game in terms of how they interact with the customer we invested heavily in our website, which we just rolled out at the beginning of the year to make it an easier experience for customers to get on and get through the basics you know someone new to the category of trying to figure out what vehicles.

They need us at a two seater or foresee a those are all pretty challenging things and we want to help them get that worked through before they have to walk into a dealer, which can be an even more intimidating experience and we think we've done a really good job of doing that and then the last point I'd say is making sure. We have vehicles that cover the spectrum not everybody is going to come in at.

The high end of the segment. So you know we've done a lot of work to make a better more accessible lower cost entry level vehicles, and then you know the launch of players exchange was a big move I mean, we are the single largest source of used vehicles and we know that that becomes an important tool for dealers to have those used vehicles to bring people that are new.

The category that may not want to spend you know the the money you need to spend on a new razor XP or a pro our but getting out of use turbo S or or a pro X P. Maybe a good way for them to enter the brand and now with the introduction of players exchange that really gives the dealers a tool to get out that inventory and it does it in a more efficient way.

We're controlling it versus just selling those vehicles off to an auction.

Okay, and then actually I have one follow up I think there is some debt coming due later this year can you guys talk about whether you're thinking about renewing that I'm paying it down or does that sort of depending on what the capital allocation opportunities are.

Yeah, So the AR $500 million 360, corporate term loan that comes due late in the fourth quarter. We every role that the last couple of times. It's come do certainly believe that option will be available if we choose to take it.

But you know, we'll we'll look at that as we get through the year end and decide where do we think the best use of the capital is to either pay that off or two.

Refinance it and use the money for a.

Capex.

Share buyback or a targeted M&A, but that will unfold as the year progresses.

Thanks.

The next question is from Garrett Johnson with BMO capital markets. Please go ahead.

Great. Thank you.

This morning, I'd like to ask Bob can you can you quantify the floorplan interest impact what was that a contra as a percent of gross sales.

How does it look compared to last year was a change there and maybe the C for discounts and promotions how they impacted gross thank you.

Yeah. So the in terms of the the finance side of the retail finance side.

Impact.

You know last year versus this year was pretty minimal.

On the on the wholesale side.

The total was again.

Hey.

A few millions of about $5 million.

Okay.

$5 million.

Greater.

Okay Alright.

Alright, great and he was since we're always talking about the snowmobile shift maybe could you quantify what the amount was it shifted from four two to one two.

Foodmaker math, a little easier.

I would think about it in terms of a few thousand sleds.

Okay. That's helpful. Thank.

Thank you.

Yep. Thanks.

The next question is from Saba Hot Kahn with RBC. Please go ahead.

Great. Thanks, and good morning, you talked a little bit about the boats early I was just hoping you could provide a little more comment on just kind of the share situation in the pontoons and just generally speaking how do you expect that market to evolve over the course of 2023.

Do you think it is as much or less or more will dependent on the macro backdrop. Some perspective on maybe both in general and specifically the pontoon side things.

Yeah, I mean look you know I think we expect that there's probably going to be some challenges I mean, the opportunity for us was really getting inventory back up at the at.

At the appropriate levels, you know obviously, the the Ssi data you can digest that but you know pontoons were down in the 30% range on a relative basis I feel really good about where we're at I mean, the the work that's been done to bring Godfrey up over the last couple of years and be on a pretty consistent trajectory to gain share.

The work that's been done there is now being applied to Bennington, and we saw that coming through.

The March data, although you know, there's obviously a number of states that haven't are reported we did see a bennington back in a share gain position, which was really encouraging so.

You know, where we're going to run the business relative to what's going on from a broader market perspective, but I think you know weather, whether its just pontoons or even including the deck boat brand Hurricane we're in a really good position to gain share. This year right. You know we've lost share over the last couple of years and the Bennington brand. It's been largely at the lower end of the market the high end.

The market for US has been very strong and very strong from a share standpoint. So the opportunity is really for us to go reinvigorate some of those lower end boats and being a more.

Competitive position and we feel like we've got that laid out pretty well.

Okay, Great and then just one quick one on this graph on the right side of slide six I just want to understand kind of the details of dealer inventory here in units.

And it looks like it's back about in line with kind of pre pandemic levels, but I guess, there's this adjusted for sort of days of inventory I may not be reading it right, but you know just thinking a higher level of sales post pandemic as it just dealers are thinking a lower absolute level of an inventory makes sense at this point or how should we think about inventory days.

Yeah, I mean, it's a it's tough because each each of the businesses in a different spot I mean, you know as I mentioned, our Ranger AR business is still below where we think an optimal level would be but you know the the point that we made in the prepared remarks about the fact that you know relative to 2019, which is probably probably the best baseline.

That we've got before the impact of the pandemic that you know inventory levels down about 20%.

And you know broadly speaking, we see that is probably closer to optimal meaning we don't believe we're gonna have to carry near as much as we have in the past and that's a generic statement because there's going to be some areas, where you've got to carry.

Pretty similar level of inventory, but you know with the ability to deliver product quickly and as I mentioned around some of the pre sold stats you know theres still going to be a desire as people walk in to want to put you know more of a customized touch to the vehicle and you know through.

Through our factory choice offerings, and with a more stable supply environment, we should be able to do that for consumers and be able to get vehicles and in their hands on a relatively quicker basis than we have historically. So you know I think long winded way to say that you know the inventory levels are going to be lower than where they were before the pandemic and we think we're probably closer to <unk>.

Where are we should be right now.

Okay, great and if I could maybe squeeze just a quick one and just a bigger picture one obviously a press release out yesterday on kind of a new electric offering how do you think about the development of that entire side of your business is that you know macro dependent is that something you only continue if the macro volden or is.

Is that something because of the longer term opportunity, you'll continue to invest and regardless of what happens with the macro backdrop here over the next call. It one to two years.

Yeah, I'd say my answer to this is not just specific to EV. It's it's strategy I mean, I'm, making sure that we're investing in the long term for this business is absolutely essential and given the ambiguity Bob myself and our business unit leaders are being very cautious about where we're adding costs into the business.

But we're not compromising on making sure that we're pushing the strategic agenda forward, which obviously includes the investments we've got around electric but theres a lot of other great things from a technology as well as product development standpoint that are going on in the key for US is making sure that we're managing the business in a very surgical manner. So that we're not starting and stopping.

And then we keep our strategy execution on a pretty consistent cadence.

Alright, thanks very much for that.

Thank you next.

The next question is from Jan two with BNP Paribas. Please go ahead.

Hey, guys. Thanks for the question, maybe just another way to think about the REIT value you mentioned approaching typical seasonality last year in <unk>, you mentioned LRB retail is up about 13% quarter on quarter, but maybe that was still held back by some limited availability. So I guess thinking about this too.

Should the ramp the ramp should be steeper than last year, I guess is that kind of how we should think about it.

No the ramp so last year Q.

Q1 was relatively muted at poor relatively muted from a.

Both in retail and retail was okay and shipment was was tight you you really got to think about when we say, it's returning to seasonality.

It's not fully back to seasonality so comparing 'twenty two to 'twenty one it doesn't really tell you very much because it's it's purely related to you know what we shipped you know kind of in the quarter ahead in the early part of that quarter and that was all over the map from 'twenty through 'twenty. Two so you know normally Q2 would be significantly higher.

Other than Q1, because we'd be shipping right now racked product and.

On the Rec side of a T V razor that stuff into the channel for seasonality and then it would retail in Q2 as the season starts to open we think that's going to be a little more muted. This year just given the switch between utility and rack given that rec is you know relatively more pressured with the current macro.

Environment. So you know that changes it a little bit we had you know good retail as compared to 19, which would have been kind of a more normal season. In Q1. So it's you know we're being cautious as we look at Q2, just not knowing you know if that was pull forward or if it's a sign of a better retail to come. So you know I think.

The ramp will not be a I wouldn't think it would be steeper if that's how you're looking at it.

Okay got it and then maybe on gross margin.

If you can think about it by segment so off road maybe.

Maybe down a bit quarter on quarter, but it sounds like there was just some of these inefficiencies that might be a little bit more muted in off road. Meanwhile, on road was.

Quite strong so should we be thinking like an on road and off road, maybe flat to down or how do we think about the competition of the gross margin guide.

Yeah, I think that you know one thing to keep in mind. When you think about kind of Q1 versus Q4.

Q1 was while better while Q1 'twenty three was much better than Q1 'twenty. Two it was also much lower.

Then Q4, so part of the the difference in volumes Q4 to Q1 was really the gist of the difference in the size of the quarter and the mix was a was a bit different as well like we said it had.

A bit more snow snow tends to be lower.

Lower margins. So you know I think on road.

Q1, Q2 last year.

When we had this black paint problem. So you know shipments were relatively low so those shipments will improve in Q2 those margins, though are lower than our off road. So if you think about that that's a negative from an overall standpoint, but those margins.

We'll be we'll be the on road margins will be better and off road. We think will continue to improve through the course of the year it'll just be a little bit lumpy. As you know we worked through all the different supply chain challenges and sort of operational inefficiencies caused by those that Mike was talking about.

Okay very helpful. Thanks, guys.

Thank you.

Next question is from Scotts Denver with Roth M. P. M. Please go ahead.

Good morning, and thanks for taking my questions.

Good morning.

Looking at the P G and a business.

Particularly off road.

Flat versus up.

25% of our whole goods in the past few quarters ago, maybe there were some questions asked about what.

It could be a canary in a coal mine before you know retail trends and just the consumer not having as much money in their pocket to buy these units but.

What would you explain the a falloff didn't have anything to do with a shift away from recreation.

Products.

No. It's it's a primarily retail in the quarter and you know retail in Q1 was below 22. So that's part of it you know a P G and H tends to to float with retail as opposed to the wholesale ship.

We're also seeing on the on the P G and H side, it really on the accessories side, we're seeing a little bit of.

Slowing of inventory shipments as dealers rightsize their their inventory their dsos are kind of trending back towards normal they'd been a bit elevated as.

As we went through the pandemic just because of the lumpiness of shipments in our back orders as you know dealers wanting to make sure. They have the P G&A to attached to the units.

Units when they showed up so you know as we've worked through that in our back orders have come down we've seen dealers reef.

Refocus a little bit on their D. S. L. We think that'll mostly played out through the quarter, but probably had a little bit of negative impact that shipments what we have seen as you know retail the attachment rates to.

Two the units at retail during the quarter, where were solid and it actually trended up a bit. So you know we're not seeing what we would think would be a sort of a canary in the coal mine as you said related to accessories, and then you know parts and related work orders all those kinds of things, where all you don't realm.

It will be solid so I'm not seeing anything there either so we think that's a bit of a one quarter trend as the dealers sort of right sized what they had for accessory inventory and we expect that to return to normal growth and at least we expect PGA to actually outgrow, but for the year and Scott you know, obviously with with our ride command.

Penetration, we're able to get out and at least look at the.

Right activity for those vehicles, which we do know is up year over year and you know as we've talked to dealers are the volume in their service shops has stayed consistent the difference is they just don't have the backlog you know they were weeks and weeks out from being able to get to somebody's vehicle. In there you know again its like everything else is starting to return to a more.

Normal pattern and I think that's really probably more reflective of the fact that you know.

This whole work from home movement has proved to not play out as a lot of people thought two years ago and you know people are back to work, but I would say the writing activity continues to be good and it probably reflects more of a normalized pattern.

Got it and then a last question on the marine side.

You know the pontoon industry down high twenties, and you're talking about how I guess the high end of that market is performing well. The first question is.

Is that segment of the market actually up and you know the.

The other question is.

What is the divergence between the.

The low end and the high end it seems pretty high.

Yeah, I mean, we're not going to get into market share by categories, but.

We continue to see strong demand and backlog in the higher end products you know as we went through 'twenty two.

We're very focused on that so we really weren't shipping a lot of our smaller and more entry.

Series boats Who's got a lot of those out into the channel in a kind of late Q4 and in Q1. So we expect as the season starts to kick off.

We'll see that end of the market pick up.

I think marine is going to have a.

Or just overall growth of the industry I know everyone's expecting it to be a bit of a down year, but I think we've got a good opportunity to take back share in that low end of the or the kind of more smaller boat.

Entry price category and of the market you know, where we just weren't shipping product. The last couple of years through the course of the pandemic. So yeah.

We don't we don't view that as a negative we think that that'll give us opportunity to take some share back.

And we'll see how that plays out.

Alright, that's all I have thank you.

Thanks Scott.

The next question is from Brandon roll a with the D. A Davidson. Please go ahead.

Good morning, Thanks for squeezing me in here I just had a quick question on market share would you be able to comment on your North American RV market share exiting one to where you expect it to be at the end of 'twenty, three and maybe the market share market share growth opportunity in 'twenty 'twenty, four and beyond especially given some of your competitors are increasing capacity in may.

To be improving their inventory availability in the coming years. Thanks.

Yeah, I guess, what I would you know, obviously I don't want to get into all the specifics, but you know there. They are increasing capacity. So are we we have been I don't see that as as a factor in this.

What I will say is that you know the momentum for our off road business has been quite good for the past couple of quarters and a lot of that's been driven by availability and now we're gonna add the second punch to that which is the new products and the receptivity to the new razor XP Ah I would encourage you to look at the reviews have been incredibly strong.

Dealers loved it I was Bob and I were at the dealer meeting in Orlando, when we launch that vehicle and had the opportunity to talk to dealers and.

They were just are ecstatic about the improvements in quality.

And we have more coming this year from an off road standpoint, and as I mentioned, there you know what I would term category defining so I think you know Polaris is back playing offense when it comes to product innovation and you're seeing the start of that and I have a lot of confidence in where that can take us into the future.

Great. Thank you.

Thank you.

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