Q1 2024 Polaris Inc Earnings Call

Operator: Good day, and welcome to the Polaris first quarter 2024 earnings conference call and webcast. All participants will be in listen-only mode.

Good day and welcome to the Polaris first quarter of 2024 earnings conference call and webcast.

All participants will be in most of the only mode.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key and then one on your telephone keypad.

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After todays presentation, there will be an opportunity to ask questions.

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Operator: To withdraw your question, please press stars 1 and 2. Please note, today's event is being recorded. I'd now like to turn the conference over to J.C. Weigelt, Vice President, Investor Relations. Please go ahead.

To withdraw your question. Please first started them too.

Please note today's event is being recorded.

Speaker Change: I'd now like to turn the conference over to J C. Weigelt Vice President of Investor Relations. Please go ahead.

J.C. Weigelt: Thank you, Rocco. And good morning or afternoon, everyone. I am JC Weigelt, Vice President of Investor Relations at Polaris. Thank you for joining us for our 2024 first quarter earnings call. We will reference a slide presentation today, which is accessible on our website at ir.polaris.com. Joining me on the call today are Mike Speetzen, our Chief Executive Officer, and Bob Mack, our Chief Financial Officer. Both of them have prepared remarks summarizing the first quarter as well as our expectations for the remainder of 2024. Then we'll take your question.

Speaker Change: Thank you Rocco and good morning, or afternoon, everyone I'm J C Weigelt Vice President of Investor Relations at Polaris. Thank you for joining US correct 2024 first quarter earnings call. We will reference a slide presentation today, which is accessible on our website at IR Polaris Dot Com joining me on the call today are Mike <unk>, our chief executive.

Officer, and Bob Matt, Our Chief Financial Officer, both have prepared remarks, summarizing the first quarter as well as our expectations for the remainder of 2024, then we'll take your questions. During the call we will be discussing various topics that should be considered forward looking for the purpose of the private Securities Litigation Reform Act of 1995 actual results could differ.

J.C. Weigelt: During 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. However, actual results could differ materially from those projections in the forward-looking statements. You can refer to our 2023 10-K for additional details regarding risks and uncertainty. All references to the first quarter actual results and 2024 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 Speetzen. Go ahead, Mike.

Speaker Change: Materially from those projections in the forward looking statements you can refer to our 2023 10-K for additional details regarding the risks and uncertainties all references to the first quarter actual results and 2024 guidance are for our continuing operations and are reported on an adjusted non-GAAP basis, unless otherwise noted.

Speaker Change: 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 Stevens go ahead, Mike. Thanks, J C. Good morning, everyone and thank you for joining us today.

Michael T. Speetzen: Thanks, JC. Good morning, everyone, and thank you for joining us today. First quarter performance was largely consistent with our expectations. You recall that headed into the year, we expected the first quarter to be one of the most challenging quarters, given the difficult year over year comparisons and our plan to actively manage dealer inventory, coupled with a more normalized production delivery of snowmobiles. Q1 also saw us focused on continuing to execute the early stages to improve delivery, increase efficiencies, and drive down operating costs in our larger manufacturing facilities. Sales in the first quarter were down 20%, which was in line with our expectations.

Mike Stevens: First quarter performance largely put out consistent with our expectations, you'll recall that headed into the year. We expected the first quarter to be one of the most challenging quarters, given the difficult year over year comparisons and our plan to actively manage dealer inventory coupled with a more normalized production delivery of snowmobiles.

Mike Stevens: Q1 also saw its focused on continuing to execute the early stages to improve delivery increase efficiencies and drive down operating costs and our larger manufacturing facilities.

Mike Stevens: Sales in the first quarter were down 20%, which was in line with our expectations and adjusted EPS came in above our expectations given better performance on cost management.

Michael T. Speetzen: An adjusted EPS came in above our expectations, giving better performance on cost management. While we're pleased with our financial performance, we did experience the worst snowmobile season we've seen in 13 years, driven by a lack of snow across much of North America. Overall, it was great to see our products take share in ORV, motorcycles, and marine. Our new product innovation is responding with customers, which will drive future share gains. That, coupled with our operational improvements, makes me very optimistic about the direction of the business. North American retail was down 10% driven by a weak snow season, but it was up 3% when you exclude snow.

Mike Stevens: While we're pleased with our financial performance, we did experienced the worst snowmobile season, we've seen in 13 years, driven by a lack of snow across much of North America.

Mike Stevens: Overall, it was great to see our products take share in or be motorcycles in marine our new product innovation is resonating with customers, which will drive future share gains that coupled with our operational improvements. It makes me very optimistic about the direction of the business.

Mike Stevens: North American retail was down 10% driven by a weak snow season, but was up 3% when you exclude snow.

Michael T. Speetzen: Utility off-road vehicles continue to lead the way with strong demand for the Ranger line. Recreation was down while on road was up for the quarter driven by strength in North American markets somewhat offset by the international market. Within Marine, we believe retail was flat during the first quarter using our internal registration data as we await the March data from SSI. We continue to play offense when it comes to innovation. Our Razor XP, Polaris Expedition, and Ranger XD products are at dealers and garnering much attention for their attractive features, cutting-edge technology with RideCommand+, and industry-leading capabilities.

Mike Stevens: Utility off road vehicles continued to lead the way with strong demand for our Ranger lineup.

Mike Stevens: Recreation was down while on road was up for the quarter driven by strength in North American markets somewhat offset by international market weakness.

Mike Stevens: Within Marine we believe retail was flat during the first quarter using our internal registration data as we await the March data from Ssi.

Mike Stevens: We continue to play offense when it comes to innovation.

Mike Stevens: Our razor XP Polaris expedition, and Ranger X D products, our dealers and garnering much attention for their attractive features cutting edge technology with ride command, plus and industry, leading capabilities and we really recently added to this launch with the new model year full size range of portfolio and the new Indian motorcycles scalpel.

Michael T. Speetzen: And we recently added to this launch with the new model year full-size Ranger portfolio and the new Indian Motorcycle Scout portfolio. Once again, we delivered industry-leading innovation, further reinforcing our position as the global leader in power sports. Following through on our commitment to actively manage dealer inventory, we've flexed inventory up in categories where we've seen consistent growth, such as off-road utility and new product models. We also reduced shipments to help better manage dealer inventory in categories that have been underperforming, such as off-road recreation and marine. I'd also remind you that we've been doing this for several quarters.

Mike Stevens: Polio once again, we delivered industry, leading innovation further reinforcing our position as the global leader in power sports.

Mike Stevens: Following through on our commitment to actively manage dealer inventory reflects the inventory up in categories, where we've seen consistent growth such as offered utility and new product models. We also reduced shipments to help better manage dealer inventory in categories that have been underperforming such as off road recreation and Marine I'd also remind you that we've been doing.

Mike Stevens: This for several quarters. This approach is driven by our ability to adjust the trends we've seen materializing over multiple quarters aided by our retail flow management system, which is one of the most sophisticated dealer inventory tools in the industry.

Michael T. Speetzen: This approach is driven by our ability to adjust to trends we've seen materializing over multiple quarters, aided by our retail flow management system, which is one of the most sophisticated dealer inventory tools in the industry, allowing us to quickly adapt our production and delivery system to current demand environments. The system gives us near real-time access to our dealer inventory by region, by product, by dealer. We use this data in conjunction with conversations with our dealers to actively manage inventory to enable dealers to have the right inventory to efficiently run their business. Adjusted gross profit margin was down 248 basis points, driven by elevated promotions that began last year as well as higher warranty costs.

Mike Stevens: Having us to quickly adapt our production and delivery system the current demand environment.

Mike Stevens: The system gives us near real time access to our dealer inventory by region by product by dealer. We use this data in conjunction with conversations with our dealers to actively manage inventory to enable dealers to have the right inventory to efficiently run their business.

Mike Stevens: Adjusted gross profit margin was down 248 basis points, driven by elevated promotions that began last year as well as higher warranty costs.

Michael T. Speetzen: Partially offsetting these headwinds was continued progress to improve our operation. This operational improvement enabled us to more than offset de-leverage in the quarter, given the lower volume. We're targeting $150 million of operational savings this year, and while it's still early in the year, our progress thus far aligns with this objective. During the first quarter, we saw meaningful savings on material costs and logistics, and our Huntsville manufacturing facility made tremendous strides in reducing indirect labor and rework costs and achieved significant improvements in execution against their build schedule.

Mike Stevens: Partially offsetting these headwinds was the continued progress to improve our operations. This operational improvement enabled us to more than offset deleverage in the quarter, given the lower volumes where.

We're targeting $150 million of operational savings this year and while it's still early in the year our progress thus far aligns with this objective during the first quarter, we saw meaningful savings in material cost and logistics and our Huntsville manufacturing facility made tremendous strides in reducing indirect labor and rework costs and achieve significant improvements in execution.

Mike Stevens: Against their build schedule.

Michael T. Speetzen: We are also seeing significant improvements in Monterey, where the production line that created significant issues for us in delivering Expedition and Ranger XD in the second half of 2023 is now operating at the targeted output rate, and we're seeing significant improvements in efficiency starting to materialize within the facility more broadly. In summary, it was encouraging to see results that were largely in line with or slightly above our original expectations, recognizing there were a number of headwinds we had entering the year.

Mike Stevens: We are also seeing significant improvements in Monterrey, where the production line that created significant issues for us in delivering expedition and Ranger XD in the second half of 2023 is now operating at the targeted output rate and we're seeing significant improvements in efficiency starting to materialize within the facility more broadly.

Mike Stevens: In summary, it was encouraging to see results that were largely in line to slightly above our original expectations. Recognizing there were a number of headwinds we had entering the year.

Michael T. Speetzen: As we proceed through the remaining three quarters of the year, we're expecting further share gains given the significant innovation we've introduced over the past few years, and we remain committed to actively managing dealer inventory and driving efficiencies within the business. I'm incredibly proud of our team's execution in the first quarter and want to thank them for their continued dedication and focus.

Mike Stevens: As we proceed through the remaining three quarters of the year, we're expecting further share gains given the significant innovation. We've introduced over the past few years and we remain committed to actively manage dealer inventory and drive efficiencies within the business I'm incredibly proud of our team's execution in the first quarter I want to thank them for their continued dedication and focus.

Michael T. Speetzen: Turning to more detail on retail. Broadly speaking, retail trends remain consistent with what we've seen over the past year, with the exception being snowmobiles. Recreational vehicles were down for the sixth straight quarter.

Mike Stevens: Turning to more detail on retail.

Mike Stevens: Speaking retail trends remain consistent with what we've seen over the past year with the exception being snowmobiles.

Accretion off road vehicles were down for the sixth straight quarter as we've shared previously we view the purchase of these vehicles is more discretionary and more sensitive to economic conditions, such as elevated interest rates.

Michael T. Speetzen: As we've shared previously, we view the purchase of these vehicles as more discretionary and more sensitive to economic conditions, such as elevated interest rates. Our utility portfolio, consisting of Ranger side-by-sides and ATVs, continues to see strength, as reflected in our mid-single-digit increase in retail. As a reminder, this category is far less discretionary and plays an important part in work applications for ranchers, farmers, owners of multiple acres of land, as well as in commercial settings, and makes up approximately 65% of our off-road segment sales.

Mike Stevens: Our utility portfolio, consisting of Ranger side by sides and Atvs continued to see strength as reflected in our mid single digit increase in retail.

Mike Stevens: As a reminder, this category is far less discretionary and plays an important part and work applications for ranchers and farmers owners of multiple acres of land as well as commercial settings and makes up approximately 65% of our off road segment sales.

Mike Stevens: As expected promotions were elevated across the industry during the quarter and we expect a higher promotional environment to continue through 2024.

Michael T. Speetzen: As expected, promotions were elevated across the industry during the quarter, and we expect a higher promotional environment to continue through 2024. This impacts each of our segments as the industry grapples with elevated interest rates. For Polaris and the industry, this impact is more noticeable within the marine and off-road recreational categories, where we've seen weak retail for several quarters, resulting in elevated inventory. Hearing from dealers, they continue to view all power sports inventory as too high and are actively looking for opportunities to manage inventory, with strategies ranging from reducing the number of OEMs they carry to adding additional promotional dollars from their own pockets, as well as taking fewer shipments from OEMs Every dealer is dealing with their own unique version of these industry issues.

Mike Stevens: This impacts each of our segments as the industry grapples with elevated interest rates.

Mike Stevens: For Polaris and the industry. This impact is more noticeable within the marine and off road recreational categories, where we've seen weak retail for several quarters, resulting in elevated inventory.

Mike Stevens: Hearing from dealers. They continue to view all power sports inventory is too high and are actively looking for opportunities to manage inventory with strategies ranging from reducing the number of Oems they carry to adding additional promotional dollars from their own wallet as well as taking fewer shipments from Oems.

Mike Stevens: Every dealer is dealing with their own unique version of these industry issues and while we can't influence other Oems. We do believe that in total we are doing our part to assist dealers, we're reducing shipments and product segments, most challenged and adding promotional dollars were necessary to assist them with moving product.

Michael T. Speetzen: And while we can't influence other OEMs, we do believe that, in total, we are doing our part to assist dealers. We're reducing shipments and product segments most challenged, and adding promotional dollars where necessary to assist them with moving products. Given the current trends in recreation and utility and the weak snow season, we have adjusted our manufacturing outlook for these lines for the remainder of the year. We've made some meaningful cuts in snow for the upcoming season, given the elevated inventory that is in the channel today.

Mike Stevens: Given the current trends in rec and utility and the weak snow season, we've adjusted our manufacturing outlook for these lines for the remainder of the year. We've made some meaningful cuts in snow for the upcoming season, given the elevated inventory that is in the channel today. We've also reduced razor side by side production as recreation retail has been down and we do not see it.

Michael T. Speetzen: We've also reduced RAZR side-by-side production as recreation retail has been down, and we do not see a near-term improvement given elevated interest rates impacting consumer purchasing decisions and the likelihood that rates will stay higher longer than originally anticipated.

Mike Stevens: Near term improvement given elevated interest rates impacting consumer purchasing decisions and the likelihood that rates stay higher longer than originally anticipated we've.

Michael T. Speetzen: We've also decreased production of slingshots, which have a higher mix of consumers who finance their vehicles. While it's early in the retail season, the marine environment is largely playing out as anticipated. In utility, we've made the decision to increase production of our Ranger side-by-sides given multiple quarters, strong retail growth, and healthy dealer inventory terms. Polaris continues to operate in a disciplined manner regarding our dealer inventory to ensure we have the right inventory in the field to maintain our competitive position while not burdening dealers with excessive flooring costs.

Mike Stevens: We've also decreased production of slingshots, which have a higher mix of consumers, who finance their vehicles, while it's early in the retail season, the marine environment is largely playing out as anticipated.

Mike Stevens: And utility we've made the decision to increase production of our Ranger side by sides, given multiple quarters of strong retail growth and healthy dealer inventory turns.

Mike Stevens: Players continues to operate in a disciplined manner regarding our dealer inventory to ensure we have the right inventory in the field to maintain our competitive position, while not burdening dealers with excess foreign cost. Our goal is to remain agile while being the partner of choice with our dealer to ensure a healthy relationship today and into the future.

Michael T. Speetzen: Our goal is to remain agile while being the partner of choice with our dealers to ensure a healthy relationship today and into the future. Moving to one of my favorite topics, innovation. We've had a busy couple of months with the launch of our new Indian Scout platform, the new 2025 snowmobile lineup, and the 2025 lineup of full-size Rangers. The Scout platform was first launched by Polaris 10 years ago and has quickly grown to become the best selling platform in the Indian motorcycle lineup.

Mike Stevens: Moving to one of my favorite topics innovation, we've had a busy couple of months with the launch of our new Indian Scout platform. The new 2025, snowmobile lineup and the 2025 lineup of full size Rangers.

Mike Stevens: The Scout platform was first launched by players 10 years ago and has quickly grown to become the best selling platform and the Indian motorcycle lineup.

Michael T. Speetzen: We're excited to carry on the tradition of this historically important bike with this new launch. Not only does the bike have a completely new engine, but it also adds highly sought-after tech features to enhance the rider experience. The Scout is an entry point to the brand with more than 90% of Scout owners being new to Indian Motorcycle and also serves as a pipeline for growth into the other parts of our lineup.

We're excited to carry on the tradition of this historically important bike this new launch now.

Mike Stevens: Not only does the bike have a completely new engine, but also added highly sought after tech features to enhance the rider experience.

Mike Stevens: Scouts, an entry point into the brand with more than 90% of scout owners being nude Indian motorcycle and also serves as a pipeline for growth into the into the other parts of our lineup.

Michael T. Speetzen: We've seen roughly 70% of our midsize riders move up to the heavyweight cruisers or our bagger and touring lineup with their next motorcycle purchase, further reinforcing the importance of Scout and the role it plays to drive further share. We also announced and started shipping the lineup of model year 2025 full-size Ranger side-by-sides. These new Ranger models have rider-inspired design enhancements, an upgraded transmission, and additional factory-install

Mike Stevens: We've seen roughly 70% of our midsize writers move up to the heavyweight cruisers or a bagger and Turing lineup with their next motorcycle purchase further reinforcing the importance of scout and the role place to drive further share gains.

Mike Stevens: We also announced and started shipping them a lineup of model year 2025 full sized ranger side by sides. These new Rangers have writer inspired design enhancements and upgraded transmission and additional factory installed accessories. The new lineup makes the best selling vehicle in the market even better Ranger is the number one side by side in the market and as the.

Michael T. Speetzen: The new lineup makes the best-selling vehicle in the market even better. Ranger is the number one side-by-side in the market, and as the utility market continues to grow, we're excited to bring more innovation to our core utility customers. Wrapping up my comments on the quarter, we executed well in what we knew was going to be a challenging environment. We gained share with a strong product portfolio, made even stronger with our recent new product launch.

Mike Stevens: Utility market continues to grow we're excited to bring more innovation to our core utility customers.

Speaker Change: Wrapping up my comments on the quarter, we executed well in what we knew was going to be a challenging environment. We gained share with a strong product portfolio made even stronger with our recent new product launches. We're working in partnership with our dealers to ensure they have the right mix and quantity of inventory to effectively manage their business and we continue to execute our plan to drive 150.

Michael T. Speetzen: We're working in partnership with our dealers to ensure they have the right mix and quantity of inventory to effectively manage their business. And we continue to execute our plan to drive $150 million in operating savings in 2024, consistent with our long-term path to drive EBITDA margin expansion. I'll now turn it over to Bob, who will summarize our first quarter performance and provide updated commentary around our guidance and expectations for 2024.

Speaker Change: And operating savings in 2024, consistent with our long term path to drive EBITDA margin expansion.

Speaker Change: I'll now turn it over to Bob who will summarize our first quarter performance and provide updated commentary around our guidance and expectations for 2020 for Bob.

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

Bob: First quarter sales were $1 7 billion down 20% versus last year. The decline was expected due to several factors we call that when we spoke in January these included.

Robert Paul Mack: Thanks, Mike, and good morning or afternoon to everyone on the call today. First quarter sales were $1.7 billion, down 20% versus last year. The decline was expected due to several factors. We called that when we spoke in January.

Bob: Eight seasons snowmobile shipments in Q1 2023, as a result of supply constraints, which did not repeat in Q1 2024.

Robert Paul Mack: These included late season snowmobile shipments in Q1 2023 as a result of supply constraints, which did not repeat in Q1 2024. The lapping of ORV and marine channel fill in the first quarter of 2023. Lower plan factory shipments to contend with elevated dealer inventory in off-road recreation and marine and lower net price given the high promotional environment versus Q1 of last year. Therefore, there were not many surprises on the top line, although the snow season was weaker than we expected, which in the quarter mostly impacted our snow whole good retail and related snow PG&A lines.

Bob: The lapping of RV and Marine channel fell in the first quarter of 2023, lower planned factory shipments to contend with elevated dealer inventory in off road recreational marine.

Bob: And lower net price given the high promotional environment versus Q1 of last year.

Therefore, there were not many surprises on the top line, although the snow season was weaker than we expected, which in the quarter, mostly impacted our snow whole good retail and related snow P G&A lines.

Bob: Despite this <unk> sales were up 3% with strength in our factory installed accessories and off road we.

Bob: We continue to view our P J ne business as a driver for both sales and margin throughout the year.

Bob: Adjusted EBITDA margin was down 459 basis points due to many of the same factors impacting sales such as volume and higher promotions. In addition, we are seeing slightly higher warranty costs in off road and continue to experience higher finance interest associated with flooring interest support for our dealers as expected foreign exchange was also a headwind.

Robert Paul Mack: Despite this, PG&A sales were up 3% with strength in our factory-installed accessories and off-road. We continue to view our PG&A business as a driver for both sales and margin throughout the year. Adjusted EBITDA margin was down 459 basis points due to many of the same factors impacting sales, such as volume and higher promotion.

Bob: Somewhat offsetting these headwinds was a positive contribution from operations. Despite the deleverage from lower volume and controlled operating expense spending.

Robert Paul Mack: In addition, we are seeing slightly higher warranty costs in off-road and continue to experience higher finance interest associated with flooring interest support for our dealers. As expected, foreign exchange was also a headwind. Somewhat offsetting these headwinds was a positive contribution from operations despite the deleverage from lower volume and controlled operating expense spending. One unique item to note is that our tax rate in the quarter was 49.3 percent, which was more a function of lower net income year-over-year versus anything structural, and we still expect our full-year tax rate to be between 21.5 and 22.5 percent. Adjusted EPS of $0.23 was above our initial expectations for the quarter.

Bob: One unique item to note is that our tax rate in the quarter was 49, 3%, which was more a function of lower net income year over year versus anything structural and we still expect our full year tax rate to be between 21, and a half and 22, 5%.

Adjusted EPS of <unk> 23 was above our initial expectations for the quarter.

Bob: In our off road business revenue was down 16%, mainly driven by factors already discussed such as the channel fill and the lapping of snow season shipments last year.

Bob: We shipped close to 6000 units of our new Polaris expedition, and Ranger X D. Combined during the quarter as we strive to meet customer demand for these category defining vehicles.

Bob: Data shows we gained share on a unit and dollar basis during the quarter in our RV on a dollar basis, which puts more weight on the premium side of the market versus the lower end and youth we gained more share in our nearly 50% of the RV market.

Robert Paul Mack: In our off-road business, revenue is down 16%, mainly driven by factors already discussed, such as channel fill and the lapping of snow season shipments last year. We shipped close to 6,000 units of our new Polaris Expedition and Ranger XD combined during the quarter as we strive to meet customer demand for these category-defining vehicles. Data shows we gained share on a unit basis and a dollar basis during the quarter in ORV. On a dollar basis, which puts more weight on the premium side of the market versus the lower end and youth, we gain more share in our nearly 50% of the ORV market.

Bob: We believe this illustrates our strength as a premium OEM OEM within the RV market versus inflating market share with youth in lower tier products.

The lack of snow across most of North America impacted both our retail and industry retail primary impact to US is a change in expected selling of snowmobiles for next season, given current dealer inventory levels I will cover this further in a moment.

Bob: Margins in the quarter were pressured by volume higher promotional levels and finance interest operational improvements within our plants were realized and are expected to contribute more dollars as the year progresses.

Robert Paul Mack: We believe this illustrates our strength as a premium OEM within the ORV market versus inflating market share with youth and lower tier products. The lack of snow across most of North America impacted both our retail and industry retail.

Bob: Thinking about the second quarter, we expect longer term trends to continue within utility and recreation.

Robert Paul Mack: The primary impact to us is a change in expected selling of snowmobiles for next season, given current dealer inventory levels. I will cover this further in a moment. Margins in the quarter were pressured by volume, higher promotional levels, and finance. However, operational improvements within our plans were realized and are expected to contribute more dollars as the year progresses. Thinking about the second quarter, we expect longer-term trends to continue within utility and recreation.

Bob: Promotions are expected to remain elevated and we believe our competitive position should only get stronger with the recent launch of our new Ranger portfolio as well as continued interest in the products, we launched last year.

Bob: On margins, we expect meaningful gross margin expansion as we continue to make progress on our operational savings strategy.

Bob: Switching to on road sales during the quarter were down 14% driven by weakness in slingshot and a soft international motorcycle market.

Robert Paul Mack: Promotions are expected to remain elevated, and we believe our competitive position should only get stronger with the recent launch of our new Ranger portfolio as well as continued interest in the products we launched last year. On margins, we expect meaningful gross margin expansion as we continue to make progress on our operational savings strategy. Switching to on-road, sales during the quarter were down 14% driven by weakness in the slingshot in a soft international motorcycle market. Indian motorcycles gained modest share during the quarter, driven by continued strength in the midsize category, which is an area of strength for us, especially with the launch of the new Scout.

Bob: Indian motorcycles gained modest share during the quarter driven by continued strength in the midsize category, which is an area of strength for us, especially with the launch of the new Scout.

Bob: <unk> gross profit margin was up 41 basis points due to strength from our European businesses exited <unk> appeal somewhat offset by higher promotions in the heavyweight category.

Bob: During the second quarter, we expect a modest but modest benefit from the new scout launch with offsetting pressure coming from slingshot and continued promotions.

Bob: In Marine sales were down 53% as the industry continues to deal with elevated dealer inventory levels and higher interest rates impacting the consumers decision to purchase.

Bob: Our shipments in the quarter were in line with our expectations given the trends we are seeing in the second half we were seeing in the second half of 2023, which resulted in lower volumes in the first quarter and a reduction of dealer inventory versus first quarter 2023.

Robert Paul Mack: En-ROAD gross profit margin was up 41 basis points due to strength from our European businesses Exim and Gupil, somewhat offset by higher promotions in the heavyweight category. During the second quarter, we expect a modest benefit from the new Scout launch with offsetting pressure coming from Slingshot and continued promotion. In Marine, sales were down 53% as the industry continues to deal with elevated dealer inventory levels and higher interest rates, impacting the consumer's decision to purchase.

Bob: Ssi data through February reflected a decline in year over year retail, although our internal data through March suggest our brands are going to be relatively flat year over year in the first quarter.

Bob: As we head into the spring selling season, and compare inventory levels to previous years, we feel that our position is much healthier than many of our competitors.

Bob: Gross profit margin was down 776 basis points, given top line pressures and lesser labor absorption at our plants. Our team continues to actively manage the variable components of our cost structure to help protect profits.

Robert Paul Mack: Our shipments in the quarter were in line with our expectations given the trends we are seeing in the second half, as we were seeing in the second half of 2023, which resulted in lower volumes in the first quarter and a reduction of dealer inventory versus the first quarter of 2023. SSI data through February reflected a decline in year-over-year retail sales, although our internal data through March suggests our brands are going to be relatively flat year-over-year in the first quarter.

Bob: We continue to see the industry challenge during the second quarter as dealers work through current inventory levels and consumer purchases are hampered by elevated interest rates.

Bob: Moving to our financial position, we knew the first quarter was going to be a quarter with minimal EBITDA and cash generation as is typically the case during the early part of the year with dealer holdback and employee bonus payments being made in Q1.

Robert Paul Mack: As we head into the spring selling season and compare inventory levels to previous years, we feel that our position is much healthier than many of our competitors. Gross profit margin was down 776 basis points given top line pressures and less labor absorption at our plants.

Bob: Therefore, we had limited share repurchase activity in the first quarter as we prioritize maintaining our net leverage ratio in the range that we have previously communicated.

Bob: For the full year, we expect to repurchase enough shares to offset dilution from stock based compensation plans and we remain well ahead of our 2020 such targets are reducing the basic shares outstanding by 10%.

Robert Paul Mack: Our team continues to actively manage the variable components of our cost structure to help protect profit. We continue to see the industry challenged during the second quarter as dealers work through current inventory levels and consumer purchases are hampered by elevated interest rates. Moving to our financial position, we knew the first quarter was going to be a quarter with minimal EBITDA and cash generation, as is typically the case during the early part of the year, with dealer holdback and employee bonus payments being made in Q1.

During the quarter, we used cash to support Capex investments and returned $53 million to shareholders in the form of dividends and share repurchases.

Bob: We remain confident in our financial position and our net debt to EBITDA ratio is expected to trend lower as we generate more EBITDA and cash as the year progresses.

Bob: We continue to expect strong adjusted free cash flow this year and believe our capital deployment priorities are aligned with our strategy to build shareholder value.

Robert Paul Mack: Therefore, we limited share repurchase activity in the first quarter as we prioritize maintaining our net leverage ratio in the range that we have previously communicated. For the full year, we expect to repurchase enough shares to offset dilution from stock-based compensation plans, and we remain well ahead of our 2026 target of reducing the basic shares outstanding by 10%. During the quarter, we used cash to support CapEx investments and return $53 million to shareholders in the form of dividends and share repurchases.

Bob: Now, let's move to guidance and expectations for 2024, we are not changing our full year guidance for Polaris at this time, but are making a minor adjustment at the segment sales level given the adjustments we have made within on road to account for current trends.

Bob: This updated outlook calls for on road 2024 sales to be down mid single digits versus our original guidance of flat year over year sales.

Bob: Recall the on road changes in response to weaker trends, we are seeing in slingshot and some additional pressure on motorcycles internationally.

Robert Paul Mack: We remain confident in our financial position, and our net debt to EBITDA ratio is expected to trend lower as we generate more EBITDA and cash as the year progresses. We continue to expect strong, adjusted free cash flow this year and believe our capital deployment priorities are aligned with a strategy to build shareholder value. Now let's move to guidance and expectations for 2024. We are not changing our full-year guidance for Polaris at this time but are making a minor adjustment at the segment sales level given the adjustments we have made within on road to account for current trends.

Bob: Well both of these markets are being impacted by higher interest rates, we have seen a more pronounced impact on slingshot retail and thus have adjusted our production schedule downward.

Bob: Promotions and finance interest are expected to remain at elevated levels, which continues to add pressure to our topline and margin.

Bob: We maintain our guidance for off road 2024 sales are down mid single digits and then off road. We are now expecting lower snow sales in the second half of the year given dealer inventory levels coming out of this past season.

Bob: Additionally, we have pulled back on recreation off road vehicles vehicle volume given retail and industry trends. These pullbacks have been offset by the added volume from continued strength, we see in our utility off road vehicles.

Robert Paul Mack: This updated outlook calls for on-road 2024 sales to be down mid-single digits versus our original guidance of flat year-over-year sales. We call the on-road changes in response to weaker trends we are seeing in slingshot and some additional pressure on motorcycles internationally.

Bob: Regarding dealer inventory, we are actively addressing areas with elevated inventory coupled with weaker retail trends, particularly in off road recreation and marine by reducing shipments of those products to help minimize flooring interest for our dealers.

Robert Paul Mack: While both of these markets are being impacted by higher interest rates, we have seen a more pronounced impact on slingshot retail and thus have adjusted our production schedule downward. Promotions and finance interest are expected to remain at elevated levels, which continues to add pressure to our top line in March. We maintain our guidance for off-road 2024 sales at down mid single digits. And then, off-road, we are now expecting lower snow sales in the second half of the year given dealer inventory levels coming out of this past season. Additionally, we have pulled back on recreation off-road vehicle volume given retail and industry trends.

Bob: We're also actively managing the mix of products in those segments to align trim levels with consumer expectations.

We target building inventory with new products and in growth categories. One such growth area is utility where dealers hold approximately three turns of ranger inventory, which is comparable to pre pandemic levels.

Bob: Indian motorcycles is also at similar turns versus pre pandemic levels.

Bob: We have a strong discipline around dealer inventory and understand the frustration of our dealers have with other Oems over shipping the channel or lacking a sophisticated inventory management systems.

Bob: We strive to be a business partner of choice for our approximately 4000 dealers globally and want to share in their success.

Robert Paul Mack: These pullbacks have been offset by the added volume from continued strength we see in our utility off-road vehicles. Regarding dealer inventory, we are actively addressing areas with elevated inventory coupled with weaker retail trends, particularly in off-road, recreation, and marine by reducing shipments of those products to help minimize flooring interest for our dealers. We are also actively managing the mix of products in those segments to align trim levels with consumer expectations. We target building inventory with new products and in growth categories. One such growth area is utility, where dealers hold approximately three turns of rager inventory, which is comparable to pre-pandemic levels. Indian Motorcycles is also at similar turns versus pre-pandemic levels.

Bob: As previously communicated our marketing margin guidance calls for expanding both gross profit and EBITDA margins with most of the expansion, resulting from savings and efficiencies at the gross profit level.

Bob: Total we are targeting over $150 million in operational savings with an even larger funnel of opportunity.

Bob: Foreign currencies remain volatile and I expect it to continue to be a headwind given the recent strength of the dollar we see additional downside pressure from FX now believe the negative impact on EBITDA for the year is about $30 million versus our original expectation of approximately $20 million.

Bob: For the second quarter, a few things to note.

Bob: As I mentioned on the January call, we expect sales in the remaining three quarters of the year to be relatively flat year over year, including the second quarter.

Bob: Our assumption is that industry retail is going to be down modestly for the year remains intact with Polaris gaining modest share through the year.

Robert Paul Mack: We have strong discipline around dealer inventory and understand the frustration our dealers have with other OEMs overshipping the channel or lacking a sophisticated inventory management system. We strive to be a business partner of choice for our approximately 4,000 dealers globally and want to share in their success. As previously communicated, our margin guidance calls for expanding both gross profit and EBITDA margins, with most of the expansion resulting from savings and efficiencies at the gross profit level. In total, we are targeting over $150 million in operational savings, with an even larger funnel of opportunity. Foreign currencies remain volatile and are expected to continue to be a headwind.

Bob: Hi, every year higher year over year promotions and finance interest continued to be headwinds operational synergies are expected to be larger and be reflected in margin expansion during the quarter.

Bob: Lastly, FX and interest expense continued to be unfavorable year over year.

Before I turn it back to Mike I want to emphasize how encouraging our recent operating review meetings have been the energy level around lean and operational improvements as clear while these improvements take time.

Mike Stevens: We believe we have the right team in place for the journey and we expect to begin seeing results and margin expansion in the second quarter.

Mike Stevens: Exciting time to be a Polaris and witness the innovation, we're launching and the passion from our team.

Mike Stevens: We have a lot of opportunities to improve our market share position margin profile cash generation capabilities, all of which I believe can lead to increasing value for our shareholders.

Robert Paul Mack: Given the recent strength of the dollar, we see additional downside pressure from FX. We now believe the negative impact on EBITDA for the year is about $30 million versus our original expectation of approximately $20 million. For the second quarter, there are a few things to note. As I mentioned on the January call, we expect sales in the remaining three quarters of the year to be relatively flat year over year, including the second quarter. Our assumption that industry retail is going to be down modestly for the year remains intact, with Polaris gaining modest share through the year.

Mike Stevens: With that I'll turn it back over to Mike to wrap up the call go ahead Mike.

Mike Stevens: Thanks, Bob the macro environment remains uncertain and given that we expect to remain agile regarding both production and dealer inventory.

Mike Stevens: We carried our north American market share gains from last year into the first quarter of 2024, our expectation is that we'll continue to take share this year with industry, leading innovation, a healthy partnership with our dealers and our strong value proposition to bring memorable experiences to our customers, who enjoy working and playing outside.

Robert Paul Mack: Higher year-over-year promotions and finance costs continue to be headwinds. Operational synergies are expected to be larger and be reflected in margin expansion during the quarter. Lastly, FX and interest expense continue to be unfavorable year over year.

Mike Stevens: Introducing new customers to power sports continues to be a focus for us as they make up a strong portion of the business. During the first quarter. We saw similar patterns with approximately 70% of our customers being new to Polaris vehicles. This is a great statistic to see as the market leader, we continue to grow this space and create awareness for the capabilities and experiences provider.

Robert Paul Mack: Before I turn it back to Mike, I want to emphasize how encouraging our recent operating review meetings have been. The energy level around lean and operational improvements is clear. While these improvements take time, we believe we have the right team in place for the journey, and we expect to begin seeing results in margin expansion in the second quarter. It's an exciting time to be at Polaris and witness the innovation we are launching and the passion from our team.

Mike Stevens: By our vehicles.

Mike Stevens: Operationally, we're on a journey that was encouraged with the progress we made at the largest facilities and I'm confident in our improvement plans for the year.

Robert Paul Mack: We have a lot of opportunities to improve our market share position, our margin profile, and our cash generation capabilities, all of which I believe can lead to increasing value for our shareholders. With that, I will turn it back over to Mike to wrap up the call. Go ahead, Mike.

Speaker Change: I believe our first quarter results, coupled with a focus to drive market share and margin expansion positions us well to deliver on our 2024 guidance. We thank you for your continued support and with that I'll turn the call back over for any questions.

Michael T. Speetzen: Thanks, Bob. The macro environment remains uncertain, and given that, we expect to remain agile regarding both production and dealer inventory. We carried our North American market share gains from last year into the first quarter of 2024. Our expectation is that we'll continue to take share this year with industry-leading innovation, a healthy partnership with our dealers, and a strong value proposition to bring memorable experiences to our customers who enjoy working and playing outside.

Speaker Change: Thank you and do you like to ask a question. Please press Star then one on your telephone keypad.

Speaker Change: If your question has already been addressed and they like to remove yourself from two please first of all of them too.

Speaker Change: Today's first question cultural kind of sudden with Baird. Please go ahead.

Baird: Oh, Hey, good morning, Thanks for taking my question I guess I wanted to get your perspective, Mike on the health of the dealer network given no feedback from dealers that inventory is just way too high.

Baird: And a lot of evidence that there's stress in the market caused by skinny margins and high floor plan expense.

Michael T. Speetzen: Introducing new customers to power sports continues to be a focus for us as they make up a strong portion of the business. During the first quarter, we saw similar patterns with approximately 70% of our customers being new to Polaris vehicles. This is a great statistic to see.

Baird: I feel like you're feeling you've done at all you've done it right, but your competitors have too much inventory and I'm I'm not sure that's exactly what I hear from dealers.

Michael T. Speetzen: As the market leader, we continue to grow the space and create awareness for the capabilities and experiences provided by our vehicles. Operationally, we're on a journey. I was encouraged by the progress we made at the largest facilities, and I'm confident in our improvement plans for the year.

Speaker Change: Yeah, No I look I appreciate it Craig and certainly in this environment, it's something we're spending a disproportionate amount of time on I can tell you.

Speaker Change: Different from many of our competitors are Bob and I and our GPU leaders spent a lot of time out in the field.

Michael T. Speetzen: I believe our first quarter results, coupled with a focus on driving market share and margin expansion, positions us well to deliver on our 2024 guidance. We thank you for your continued support, and with that, I'll turn the call back over to you for any questions. Thank you. If you would like to ask a question, please press star then 1 on your telephone keypad. If your question has already been addressed and you'd like to remove yourself from the queue, please press star then 2.

Speaker Change: With our dealers you know in January we were with our Indian motorcycle dealers and March Bob and I were out at Marine dealers in Michigan, which is the largest market and then we're headed back out with Steve.

Speaker Change: In may to talk to off road dealers on the West Coast.

Speaker Change: You know look they certainly are under stress I can tell you from sitting in those dealerships.

Craig R. Kennison: Today's first question comes from Craig Kennison with Baird. Please go ahead. Okay, good morning. Thanks for taking my question. I guess I wanted to get your perspective, Mike, on the health of the dealer network, given, you know, feedback from dealers that inventory is just way too high. And a lot of evidence that, [inaudible] That's exactly what I hear from dealers. Yeah, no, I look at it. I appreciate it, Craig.

Speaker Change: That the conversation is not just a simple you know five minute phone call its in detail.

Speaker Change: First and foremost I think we probably have the best grip on this across the industry. We've got incredible visibility that's enabled through the systems that we have the RPM process gives us essentially real time data.

Speaker Change: You know we are always going to be the largest part of the discussion because we are the market leader you have to add up a lot of the other Oems to even get close to our numbers. So they are typically going to have more inventory for Polaris and then do the others, but what but the Devil's in the details relative to the efficiency of the inventory and we know because we can see through the system.

Michael T. Speetzen: And certainly in this environment, it's something we're spending a disproportionate amount of time on. I can tell you that, unlike many of our competitors, Bob and I, and our GBU leaders, spend a lot of time out in the field with our dealers. You know, in January, we were with our Indian motorcycle dealers, and in March, Bob and I were out at Marine Dealers in Michigan, which is the largest market, and then we're headed back out with Steve in May to talk to off-road dealers on the West Coast. You know, look, they certainly are under stress.

Speaker Change: Through CDK, where we have visibility into about 70% of the inventory that we are either number one or top quartile. When you look at things like days sales outstanding 612 months at the dealership or you look at their mix of current inventory to non current inventory in that bucket. We are number one.

Michael T. Speetzen: I can tell you from sitting in those dealerships that the conversation is not just a simple, you know, five-minute phone call. It's in detail. First and foremost, I think we probably have the best grip on this across the industry. We've got incredible visibility that's enabled through the systems that we have. The RFM process gives us essentially real-time data.

Speaker Change: Just to give you a frame of reference Theres, an OEM that was shipping over 70% through the first quarter of the inventory into dealers that was for model year 'twenty three.

Speaker Change: And so that puts into perspective some of the dynamics that are going on at the dealers you know in my prepared remarks, I talked about the fact that dealers are taking things into their own hands. One of the things that became evident as we've met with the marine dealers is that they're trying to move out some of the smaller brands that they brought in during the pandemic when they were desperate just to get their hands.

Michael T. Speetzen: You know, we are always going to be the largest part of the discussion because we are the market leaders. You have to add up a lot of the other OEMs to even get close to our numbers, so they are typically going to have more inventory for Polaris than they do for the others. But the devil's in the details relative to the efficiency of the inventory, and we know because we can see through the systems, through CDK, where we have visibility into about 70% of the inventory, that we are either number one or top quartile when you look at things like day sales outstanding for six, 12 months at the dealership, or you look at their mix of current inventory to non-current inventory. In that bucket, we are number one.

Speaker Change: On boats, they still have inventory in those brands that they are trying to to move and theres a lot of focus and attention around that and financially it's a bit of a drag.

Speaker Change: Through our JV with Wells Fargo.

Speaker Change: Which is expanding to cover our marine segment.

Speaker Change: We have good visibility into each of our dealers we watch their financial health you know Bob's the chairman of the board for that JV.

Michael T. Speetzen: Just to give you a frame of reference, there's an OEM that was shipping over 70% of its inventory through the first quarter of the year into dealers that were from model year 23. And so that puts into perspective some of the dynamics that are going on at the dealers. You know, in my prepared remarks, I talked about the fact that dealers are taking things into their own hands. One of the things that became evident as we met with the marine dealers is that they're trying to move out some of the smaller brands that they brought in during the pandemic.

Speaker Change: We keep a very close eye that JV has been effective for well over 20 years and helping us make sure that we're working with the dealers.

Speaker Change: You know hopefully as the industry leader will get the rest of the Oems to follow suit and you know.

Speaker Change: Behave in a consistent manner, we can't control that so we're going to do everything we can to do our part.

Speaker Change: You know I look at things like our dealer inventory were up versus where we were in Q1 of last year. If you remember last year. We the channel was still very light inventory, but when I look at the models that are not moving quickly. So the models that we outlined whether that's marine or boats slingshots and agri.

Michael T. Speetzen: When they were desperate just to get their hands on boats, they still had inventory in those brands that they're trying to move. And there's a lot of focus and attention around that. And financially, it's a bit of a drag.

Michael T. Speetzen: Through our JV with Wells Fargo, which is expanding to cover our marine segment, we have good visibility into each of our dealers. We watch their financial health. You know, Bob's the chairman of the board for that JV, and we keep a very close eye on it.

Speaker Change: Again, we've taken those categories down 14% year over year.

Speaker Change: That's pretty significant and I think reflective of making sure that we're working with our dealers were not perfect, but we know where.

Michael T. Speetzen: That JV has been effective for well over 20 years, helping us make sure that we're working with the dealers. You know, hopefully, as the industry leader, we'll get the rest of the OEMs to follow suit and behave in a consistent manner. But we can't control that.

Speaker Change: Where the soft pockets are and we are actively pulling those inventory levels down we've adjusted our production schedules.

Michael T. Speetzen: So we're going to do everything we can to do our part. But, you know, I would look at things like dealer inventory. We're up versus where we were in Q1 of last year. You remember last year, the channel was still very light in inventory. But when I look at the models that are not moving quickly, so the models that we outlined, whether that's marine or boats, slingshots, in aggregate, we've taken those categories down 14% year over year. That's pretty significant.

The good news is given our ranger lineup and the concentration we have around utility, which is a market that remains strong.

Speaker Change: We're obviously recognizing the benefit that's good for our dealers those are high margin vehicles. They bring a lot of accessory accessories, along with them and so we're obviously pushing production up on that and we think that's going to go a long way. So I think the message is we don't look we're going to operate with an incredible level of discipline. We were clear when we gave guidance we reiterated it today.

Michael T. Speetzen: And I think that reflective of making sure that we're working with our dealers. We're not perfect, but we know where the soft pockets are, and we're actively pulling those inventory levels down. We've adjusted our production schedules. The good news is, given our ranger lineup and the concentration we have around utility vehicles, which is a market that remains strong, we're obviously recognizing the benefit. That's good for our dealers. Those are high-margin vehicles. They bring a lot of accessories along with them.

Speaker Change: You know as retail goes our business goes and we're going to make sure that we stay true to that and we're going to make sure that we keep our.

Speaker Change: Dealers healthy here in the near term, because we really value that long term.

Speaker Change: Our relationship and the health of the network.

Speaker Change: I think yeah, I think a couple of things to think about Craig you know like Mike said, obviously, we're the biggest in the industry, where I was going to have the highest box count we also.

Speaker Change: Put out more innovative product and then other folks and so we've got new product launches, which causes some level of channel fill.

Michael T. Speetzen: And so we're obviously pushing production on that, and we think that's going to go a long way. So I think the message is, you know, look, we're going to operate with an incredible level of discipline. We were clear when we gave guidance, and we reiterated it today that, you know, as retail goes, our business goes, and we're going to make sure that we stay true to that. And we're going to make sure that we keep our dealers healthy here in the near term because we really value that long-term relationship and the health of the network. I think a couple of things to think about, Craig, like Mike said, obviously, for the biggest in the industry, we're always going to have the highest box count.

Speaker Change: We do manage with our F. M. You know and if you really look at the Rec categories. You know Mike talked about how much we've taken that inventory down.

Typically Q1 to Q2, both in categories like razor and Marine you would build coming into the season, you would build a dealer inventory down mid to high double digit range.

Speaker Change: The range of 15% to 20% this year, we're down and razor were flattened marine and so you know we're not only did we constrained dealer inventory is in 'twenty three and in the first quarter of 'twenty four but we didn't we didn't see the typical build we would have gone into seasonality. So we're gonna hopefully use that seasonality to help keep those.

Speaker Change: Our inventory levels down in the categories that we see most challenged so you know I feel like we've been probably the most aggressive buy it by a large margin in terms of really managing dealer inventory armor.

Robert Paul Mack: We also, you know, put out more innovative products than other folks. And so we've got new product launches, which causes some level of channel fill. We do manage with RFM, you know, and if you really look at the REC categories, you know, Mike talked about how much we've taken that inventory down. Typically, Q1 to Q2, both in categories like Razor and Marine, you would build coming into the season, you would build a dealer inventory, you know, mid to high double digit range, you know, 15 to 20%. This year, we're down in Razor; we're even in Marine.

Speaker Change: Our marine inventory is very clean.

Speaker Change: In a challenging market.

Speaker Change: We talked about in the prepared remarks, I think it'll be relatively flat for Q1.

Speaker Change: Hopefully, we'll see some good good a response as the warmer weather shows up but you know we're not sitting on dealer inventory at our factories, we build to order and so we've managed that business with what we see as incoming dealer orders and so we feel like we're in a pretty good position compared to a lot of other Oems.

Speaker Change: Thanks, Bob.

Bob: And our next question today comes from those that's him with Keybanc capital markets. Please go ahead.

Robert Paul Mack: And so, you know, we're not only did we constrain dealer inventory to 23, and in the first quarter at 24, but we didn't, we didn't see the typical build we would have going into seasonality. So, you know, we're gonna hopefully use that seasonality to help keep those inventory levels down in the categories that we see most challenged. So, you know, I feel like we've been probably the most aggressive by a large margin in terms of really managing dealer inventory. Our marine inventory is very clean.

Speaker Change: Hi, Thanks for taking my question.

Keith: I guess, you kind of talk through this a little bit but in terms of kind of where you are on the RV side in terms of mix. What do you think that implies for promo levels relative to Q1, and then if you could just kind of talk through the operational improvements that you're realizing and the ability to offset promo looking ahead.

Speaker Change: And then second I'm not to pry too much but I think sometimes you give us some EPS color on the forward quarter. So just any any thoughts there would be helpful. Thanks.

Robert Paul Mack: You know, it's been a challenging market. We've talked about in a pair of remarks that we think it'll be relatively flat for Q1. Hopefully, we'll see some good, good response as the warmer weather shows up.

Speaker Change: Yeah on the Oh, Oh, RV mix in and promo implications.

Operator: But, you know, we're not sitting on dealer inventory or inventory at our factories; we build to order. And so we've managed that business with what we see as incoming dealer orders. And so, you know, we feel like we're in a pretty good position compared to a lot of other OEMs. Thanks, Bob. And our next question today comes from Noah Zatzkin with KeyBank Capital Markets. Please go ahead.

Speaker Change: When we talked about the year over year 24 versus 23, and we talked about you know the increase in promo most of that really happened in Q1 of this year and we expect those levels to essentially remain similar as we go into Q2, three and four but if you look back to last year promo who'd started ramping up through the course of the year. So.

Noah Seth Zatzkin: Hi, thanks for taking my question. I guess you kind of talked through this a little bit, but in terms of kind of where you are on the ORV side, in terms of mix, what do you think that implies for promo levels relative to Q1, and then could you just kind of talk through the operational improvements that you're realizing and the ability to offset promo looking ahead. And then second, not to pry too much, but I think sometimes you give some EPS color on the forward quarter, so just any thoughts there would be helpful. Thanks.

Speaker Change: You know, we think promo will be up it's probably going to be a little higher than we originally expected.

Speaker Change: Because we know that Theres a lot of non current inventory from some of our competitors out in the market, but as we look at how we've rebalanced production, we brought razor and slingshot snow down, but we're increasing our ranger to recognize the utility strength.

Speaker Change: We feel like those things all are somewhat a counterbalance, but we do think there'll be a little bit of a headwind from a promo standpoint, but that's.

Michael T. Speetzen: Yeah, on the ORV mix and in terms of promo implications, you know, when we talked about the year over year 24 versus 23, and we talked about, you know, the increase in promo, most of that really happened in Q1 of this year. And we expect those levels to essentially remain similar as we go into Q2, 3, and 4, but, you know, if you look back to last year, promotion had started ramping up through the course of the year.

Speaker Change: All well within the guidance range that we've talked about.

Speaker Change: You know I talked about the operational improvements I don't know that I would sit here and tell you that we're going to be able to push those higher than what we had I mean, we've got a pretty good slug.

Speaker Change: Slug of work in front of us that the team did an excellent job you know we talked in the call in.

Speaker Change: Late January early February about the progress we've seen coming out of twenty-three and that momentum is continuing into 'twenty four in terms of the underlying factory performance.

Michael T. Speetzen: So, you know, promo will be up, it's probably going to be a little higher than we originally expected because we know that there's a lot of non-current inventory from some of our competitors out in the market. But as we look at how we've rebalanced production, you know, we've brought Razor and Slingshot, Snowdown, but we're increasing Ranger to recognize its utility strength. We feel like those things all somewhat counterbalance each other, but we do think there'll be a little bit of a headwind from a promotion standpoint, but that's, you know, all well within the guidance range that we've talked about.

And essentially digging out of the hole, we had gotten ourselves into operationally.

Speaker Change: You know the cost improvement was relatively small in Q1 relative to the total bucket, but that was expected because it was our smallest quarter and the team is is driving that forward Bob talked about it in his prepared remarks, I mean, we've got a lot of rigor focused around making sure that we get our results to the bottom line.

Michael T. Speetzen: You know, I talked about the operational improvements. I don't know that I'd sit here and tell you that we're going to be able to push those higher than what we had. I mean, we've got a pretty good slug of work in front of us. The team did an excellent job.

Speaker Change: Coming out of this category.

Speaker Change: Bob talked a little bit about the EPS cadence.

Speaker Change: I mean, like we said revenue is going to be relatively flat quarter over quarter.

Speaker Change: Our year over year, the follow up remaining three quarters.

Speaker Change: We're not going to give EPS guidance by quarter, we don't do that but.

Michael T. Speetzen: You know, we talked on the call in late January or early February about the progress we'd seen coming out of 23, and that momentum's continuing into 24 in terms of the underlying factory performance and essentially digging out of the hole we had gotten ourselves into operationally. You know, the cost improvement was relatively small in Q1 relative to the total bucket, but that was expected because it was our smallest quarter, and the team is driving that forward. Bob talked about it in his prepared remarks.

Bob: I would say, you'll you'll see stronger operating improvements in the back half of the year just because you know every all the improvements you made kind of lag a quarter. So what we saw in Q1 really was result of a lot of the work that happened in Q4, and so those will build through the year in terms of our earnings but that that's all the guidance were going to give an EPS for the quarter.

Speaker Change: Thank you.

Speaker Change: Sure.

Speaker Change: And our next question today comes from Joe <unk> with Raymond James. Please go ahead. Thanks, Hey, guys. Good morning, So you mentioned earlier.

Joe: The earnings upside in the quarter really came from better than expected operational cost.

Joe: Much of that was timing related maybe realize some costs earlier than you expected and is there upside potentially to that $150 million number this year.

Robert Paul Mack: I mean, we've got a lot of rigor focused around making sure that we get results for the bottom line coming out of this category. I'll let Bob talk a little bit about the EPS cadence. Yeah, I mean, like we said, revenue is going to be relatively flat quarter over quarter. Thank you. And our next question today comes from Joe Altobello with the James, please go ahead. So you mentioned earlier that the earnings upside of the quarter really... (inaudible) Unknown Speaker, so much of that was timing-related; maybe you relied on costs earlier than you expected. And is there potentially upside to that $150 million?

Speaker Change: Yeah. Thanks, Joe.

Joe: You know I wouldn't say it was hugely time related you know just we got a little bit a little bit more and there were a lot of puts and takes in the quarter. So you know the operational improvements are on track with where we thought they would be they do they obviously build through the year I don't know that there is significant upside to the 150 million. It's a it's a lot of work to get there.

Joe: And like I said, a couple of times over the last few calls you know your your efforts the results lag the efforts by a solid quarter and so everybody is working really hard but you know we're focused on getting the $150 million. This year and then having a good exit rate that can carry into 25.

Joseph Nicholas Altobello: Yeah, thanks, Joe. No, I wouldn't say it was usually time-related, you know; just we got a little bit more. And there were a lot of puts and takes in the quarter. So, you know, the operational improvements are on track with where we thought they would be. They do, they obviously build through the year. I don't know that there's significant upside to the 150 million. It's, it's a lot of work to get there.

Speaker Change: But I wouldn't I wouldn't plan on a lot of upside to the $150 million as we sit here today.

Speaker Change: Okay. That's helpful and maybe secondly, the strategy behind shipping Molly or twenty-five Ranger here in April until early.

Speaker Change: Yeah I mean.

Speaker Change: They are the product obviously, we work on these products for a long time and the product was ready we're coming into season, we've got strong performance in the utility segment.

Speaker Change: And so we wanted to get that product in the hands of consumers, who made a lot of really good quality and drivability improvements that we think are responsive to what consumers have been looking for in that product.

Robert Paul Mack: And like I said, a couple of times over the last few calls, your results lag your efforts by a solid quarter. And so you know, everybody's working really hard. But you know, we're focused on getting 150 million this year, and then you know, having a good exit rate that you know, can carry into 25. But I wouldn't plan on a lot of upside to the 150 million as we sit here today.

Speaker Change: So with it being ready we decided to go with model year 'twenty five here in April it's all about leaning into the most favorable market right now Joe and I can tell you. They are excellent products. We've addressed a number of the things that you know were I'll call them.

Speaker Change: Sore spots with customers around shifting but also we spent a lot of time with consumers looking for ways to enhance what was already an excellent vehicle and so we were excited to get it out the team did an excellent job of executing the programs. So we were in a position to be able to ship and there's a lot of excitement around that that vehicle as is there.

Michael T. Speetzen: That's helpful. Maybe secondly, the strategy behind shipping Maliar 25. Yeah, I mean, the product, obviously, we work on these products for a long time, the product was ready, we're coming into the season, we've got strong performance in the utility segment. And, you know, so we wanted to get that product in the hands of consumers, and we made a lot of really good quality and drivability improvements that we think are responsive to what consumers have been looking for in that product. And so, with it being ready, we decided to go with model year 25 here in April.

Speaker Change: With all of the vehicles, we launched last year.

Speaker Change: Got it okay. Thank you guys.

Speaker Change: Thanks, Jeff.

Speaker Change: Thank you and our next question is also present.

Wolfe Research: With Wolfe Research. Please go ahead.

Wolfe Research: Hey, guys. Good morning. Thanks for the question I guess, just simplistically, you've given a handful of puts and takes and changes to sort of the <unk>.

Michael T. Speetzen: It's all about leaning into the most favorable market right now, Joe. And I can tell you, they're excellent products. We've addressed a number of things that, you know, we're, I'll call them, Sourcebots with customers around shifting, but also we spent a lot of time with consumers looking for ways to enhance what was already an excellent vehicle, and so we were excited to get it out. The team did an excellent job of executing the program, so we were in a position to be able to ship, and there's a lot of excitement around that vehicle, as there is with the vehicles we launched last year.

Speaker Change: Production make up our expectations for the rest of the year, but you guys did beat where you thought you would in one queue. What is sort of the offset is there something later in the year that you're more cautious on as far as why you didn't adjust the full year outlook.

Speaker Change: Yes.

Speaker Change: Well I mean, I, you know I think Fred I kind of hit on it a little bit earlier in terms of.

Speaker Change: The promo levels are slightly elevated from where we expected them to be or expect them to be for the rest of the year. I mean Q1 was pretty close to what we were thinking.

But as we look out through the balance of the year just given interest rates are likely to move you know we'd expected around three reductions for the balance of the year.

Joseph Nicholas Altobello: Okay. Thank you, guys. Thanks, Jeff.

Operator: Thank you. And our next question today comes from Fred Wightman with Wolf Research. Please go ahead.

Speaker Change: And in light of the inflation rate holding up and the comments that the feds made we're likely not to see three I think we're worried if we'll see any and.

Frederick Charles Wightman: Hey guys, good morning. Thanks for the question. I guess, just simplistically, you've given a handful of puts and takes and changes to sort of the production makeup or expectations for the rest of the year. But you guys did beat where you thought you would in one cue.

Speaker Change: So there's a little bit of that that'll likely play out in an higher promo rates as we continue to adjust through the rest of the year.

Robert Paul Mack: What sort of offsets that? Is there something later in the year that you're more cautious on as far as why you didn't adjust the full year outlook? Well, I mean, I think Fred and I kind of hit on it a little bit earlier. You know, the promotion levels are slightly elevated from where we expected them to be or expected them to be for the rest of the year. I mean, Q1 was pretty close to what we were thinking.

Speaker Change: Yeah, I mean, the interest cost isn't a we had planned them late in the year. So you know the the impact from a forecast standpoint is not particularly significant to Mike's point, you know I think.

Speaker Change: We think that consumers if theres a few rate cuts would start to feel a little better and that that might have some positive benefit to retail and promo and if that doesn't happen. Obviously, we're going to be in the same environment. We're in today. So we're sort of prepared for that.

Robert Paul Mack: But as we look out through the balance of the year, just given interest rates are likely to move, you know, we had expected around three reductions for the balance of the year. And in light of the inflation rate holding up and the comments that the Fed's made, we're likely not to see three. I think we're worried if we'll see any. And so there's a little bit of that that will likely play out in higher promotional rates as we continue to adjust through the rest of the year. Yeah, I mean, the interest cost isn't, we had planned it late in the year. So, you know, the impact from a forecast standpoint is not particularly significant.

And you know things were a little bit better in the first quarter, we made a little bit more progress than we thought we would but nothing that would.

Speaker Change: At this point cause us to change our view of the year.

Speaker Change: Fair enough, Thanks, and I guess, Bob you mentioned earlier, just that sequential build in dealer inventories that you normally see from for Q into one Q.

Bob: Didn't see that this year right. Because you guys are managing that closely I guess when you look at the embedded benefit that youre expecting for gross margins as we move throughout the year from some of the new products do you think that inventories where they are today should still support a portion of the gross margin expansion it was from mix.

Robert Paul Mack: To Mike's point, you know, I think we think that consumers, if there are a few rate cuts, would start to feel a little better. That might have some positive benefits for retail and promotion, and if that doesn't happen, obviously, we're going to be in the same environment we're in today. We're sort of prepared for that. Things were a little bit better in the first quarter.

Yeah, you know, where we are seeing good inventory build on an expedition and XD and the new products Ranger I mean, we launched the product I guess about a week ago. When we started shipping immediately I think they've started to hit dealers just in the last couple of days. So that was all factored in I mean, a lot of the cost improve.

Frederick Charles Wightman: We made a little bit more progress than we thought we would, but nothing that would, at this point, cause us to change our view of the year. Fair enough. Thanks.

Robert Paul Mack: And I guess, Bob, you mentioned earlier just that sequential build and dealer inventories that you normally see from 4Q into 1Q. Didn't see that this year, right, because you guys are managing that closely. I guess when you look at the embedded benefit that you're expecting for gross margins as we move throughout the year from some of the new products, do you think that inventories, where they are today, should still support the portion of the gross margin expansion that was from MIX?

Bob: <unk> is things that are either just the cost of operating the plants the efficiency in the plants. So that shows up a fairly immediately as those vehicles get into inventory and the same thing on materials. So yeah. You know we have that all still very aligned.

Speaker Change: Great. Thanks, a lot.

Robert Paul Mack: Yeah, you know, we're seeing good inventory build on Expedition and XD and the new products Ranger. I mean, we launched the product, I guess, about a week ago, and we started shipping immediately. I think they've started to hit dealers just in the last couple days. So, you know, we factored that all in. I mean, a lot of the cost improvement is things that are either just the cost of operating the plants, or the efficiency in the plants. So that shows up, you know, fairly immediately as those vehicles get into inventory. And same thing on materials.

Speaker Change: Yeah.

Speaker Change: Thank you and our next question today comes from Meghan Alexander with Morgan Stanley. Please go ahead.

Megan Christine Alexander: Hey, Thanks, very much just wanted to follow up on two counts Bob I think you did clarify you expect sales to be down year over year, you talked about significant margin expansion understand interest expense as a headwind.

Megan Christine Alexander: I understand you're not going to give an actual range, but then out of that does suggest earnings should be up year over year, I guess is that right.

Speaker Change: Yeah. So.

Speaker Change: Thinking about Q2, what we've said is we think revenue is going to be relatively flat.

Speaker Change: Year over year, so the revenue side of it will be a big positive or negative we will see the cost improvements from the work we're doing on the operation side.

Robert Paul Mack: So, you know, we still have that all very aligned. Great. Thanks a lot.

Megan Christine Alexander: And our next question today comes from Megan Alexander with Morgan Stanley. Hey, thanks very much.

Speaker Change: And which will which will then play out you know into into the earnings so we're not giving specific guidance.

Megan Christine Alexander: Just wanted to follow up on 2Q. Bob, I think you did clarify that you expect sales to be down year over year, you talked about significant margin expansion, and you understand interest expense is a headwind. You know, understand you're not going to give an actual range, but the net of that does suggest earnings should be up year over year, I guess, is that right? Yeah, so, you know, thinking about Q2, what we've said is we think revenue is going to be relatively flat year over year.

Speaker Change: But I think you know relatively flat year over year as a way to think about it.

Speaker Change: Okay understood. That's helpful. Thank you and then maybe a follow up you know on the RV retail in one queue that 3% can you just talk about maybe the cadence over the quarter and what you're seeing so far in April.

Speaker Change: Yeah, I mean, I you know what I would tell you is that the commentary I provided pretty much sums. It up you know the the rec market around razor specifically remain weak you know we've got now six quarters of that performance in the Ranger business utility is.

Megan Christine Alexander: So, you know, the revenue side of it will be a big positive or negative; we'll see the cost improvements from the work we're doing on the operations side, and which will then play out, you know, into earnings. So we're not given specific guidance, But I think, you know, relatively flat year over year is a way to think about it. Okay, understood. That's helpful.

Remained pretty solid pretty strong and so you know we did have to try and adapt within the quarter, but as we see those trends continuing through the year. We're as we talked about in my prepared remarks, we're making those changes are in.

Michael T. Speetzen: Thank you. And then maybe a follow up, you know, on the ORV retail in 1Q, that 3%. Can you just talk about maybe the cadence over the quarter and what you're seeing so far in April? Yeah, I mean, I, you know, what I would tell you is that the commentary I provided pretty much sums it up, you know, the rec market around Razor specifically remains weak, you know, we've got now six quarters of that performance in the Ranger business utility has remained pretty solid, pretty strong. And so, you know, we did have to try and adapt within the quarter.

Speaker Change: Production rates at Monterrey, and and in Huntsville to adjust for those trends that we see so you know we were.

Speaker Change: A little bit more hopeful that the rec would start to stabilize and I think you know the the fact that inflation at three 5% I think people are having to make a lot of tradeoffs you know gas is still expensive and with the hope of interest rate relief coming dimming mortgage rates hit an all time high I think you just see consumers.

Michael T. Speetzen: But as we see those trends continuing through the year, we're, as we talked about in my prepared remarks, making those changes in production rates at Monterey and in Huntsville to adjust for those trends that we see. So, you know, we were probably a little bit more hopeful that the recovery would start to stabilize. And I think, you know, the fact that inflation is at 3.5%, I think people are having to make a lot of trade-offs. Gas is still expensive, and with the hope of interest rate relief coming, dimming mortgage rates hit an all-time high.

Speaker Change: And to to be cautious and careful with how they're spending their money.

Speaker Change: And that just is going to prolong that replenishment cycle for our rec business. So at some point in time, we know who these customers are we know that they're driven by innovation once a little bit of relief comes you know, they're going to want to upgrade their vehicle in and we know that through our repurchase cycle. So.

Michael T. Speetzen: I think you just see consumers continuing to be cautious and careful with how they're spending their money. And that just is going to prolong that replenishment cycle for our retail business. So at some point in time, you know, we know who these customers are. We know that they're driven by innovation.

It's probably more of a delay now whether that's later this year or into next year is anybody's guess at this point.

Got it that's helpful. Thank you.

Speaker Change: Thank you and our next question comes from Alex Paris.

Alex Paris: Think of America. Please go ahead.

Alex Paris: Hi, Thanks for taking my questions here I guess just my first question can you talk about how much new innovation supported retail why has it been the feedback on the Ranger X Z 1500, and in the expedition and then any early reads you can give on the new Indian Scout lineup and in the new Ranger lineup as well. Thank you.

Michael T. Speetzen: Once a little bit of relief comes, you know, they're going to want to upgrade their vehicle. And we know that through our repurchase cycle. So, you know, it's probably more of a delay, whether that's later this year or into next year is anybody's guess at this point.

Megan Christine Alexander: That's helpful. Thank you. Thank you. And our next question today comes from Alex Perry at Bank of America. Please go ahead.

Speaker Change: Yeah, well I mean, you know I would say that new innovation, we look at the utilities segment.

Alexander Thomas Perry: Hi, thanks for taking my questions here. I guess just my first question: can you talk about how much new innovation has supported retail? What has been the feedback on the Ranger XC-1500 and the Expedition? And then are there any early reads you can give on the new Indian Scout lineup and the new Ranger lineup as well? Thank you. Yeah, well, I mean, you know, I would say that new innovation we look at the utility segment.

Speaker Change: And while it's not new the work that we did to introduce the Ranger Northstar and specifically around the call.

Speaker Change: Called the premium and the ultimate lines.

Speaker Change: Those have become incredibly popular they've moved into making up a high percentage of that.

Speaker Change: Utility revenue and so that coupled with the capabilities that we enable through ride command plus being one of the only connected vehicles out in the marketplace.

Great audio systems, all of that I mean, it really makes for an incredible value proposition. So you know when you look at the innovation, that's being driven in terms of retail and what we're doing in a range of business. That's why we've leaned in so heavy.

Alexander Thomas Perry: And while it's not new, the work that we did to introduce the Ranger Northstar, and specifically the premium and the ultimate lines, those have become incredibly popular. They've moved into making up a high percentage of that utility revenue.

Michael T. Speetzen: And so, you know, that coupled with the capabilities that we enable through Ride Command Plus being one of the only connected vehicles out in the marketplace, great audio systems, all that, I mean, it really makes for an incredible value proposition. So, you know, when you look at the innovation that's being driven in terms of retail and what we're doing in our Ranger business, that's why we've leaned in so heavy. And it's why we launched the model year 25 new Rangers. There's a lot of incredible commentary around those vehicles.

Speaker Change: And it's why we launched the model year 'twenty five new Rangers are there's a lot of our incredible commentary around those vehicles.

Speaker Change: Dealers are anxious to get their hands on them.

Speaker Change: This specifically around the things we've addressed that were some of the detractors that customers had and we'll have those vehicles out demoing and getting our visibility with Influencers, which is an important aspect of that of that business.

Michael T. Speetzen: Dealers are anxious to get their hands on them, specifically around the things we've addressed that were some of the detractors that customers had. And we'll have those vehicles out demoing and getting visibility with influencers, which is an important aspect of that business. You know, the XD is now making its way out into the marketplace.

Speaker Change: You know the XD is now making its way out in the marketplace receptivity has been very strong.

It is an incredible vehicle with incredible capability, the steel belt technology really affords a smooth writing vehicle that can handle workloads that are equivalent to some of the best pickup trucks out on the marketplace.

Michael T. Speetzen: Receptivity has been very strong. It is an incredible vehicle with incredible capability. The steel belt technology really affords a smooth-riding vehicle that can handle workloads that are equivalent to some of the best pickup trucks out in the marketplace.

Speaker Change: Expedition, specifically the higher end trims, the ultimate and the Northstar cabs.

Speaker Change: It's tough to keep up with demand on those are they are really serving the purpose that we have I would tell you that theres a little bit playing out in the lower end of that market in general in terms of customers trying to figure out if they want to go with a general or if they want to go with the.

Michael T. Speetzen: Expedition, specifically the higher-end trims, the ultimates, and the Northstar cabs, it's tough to keep up with demand for those. But they're really serving the purpose that we have. I'd tell you that there's a little bit playing out in the lower end of that market, in terms of customers trying to figure out if they want to go with a general or if they want to go with the lower-end Expedition. And so we'll continue to watch and monitor that, do what we do, and adapt to it as time goes on in the scout lineup. The team did an excellent job.

Speaker Change: The lower end expedition, and so we'll continue to watch and monitor that do what we do and adapt to it as time goes on.

Speaker Change: The scout lineup the team did an excellent job we started teasing that well ahead of the launch.

Speaker Change: There's a number of videos you can go watch in terms of Influencers, who have gotten their hands on those vehicles ridden them.

Michael T. Speetzen: We started teasing that well ahead of the launch. There are a number of videos you can go watch in terms of influencers who've gotten their hands on those vehicles, written about them, Bob and I, and the management team rode them late last year. They're incredible motorcycles.

Bob and I and the management team wrote them late last year they are incredible motorcycles.

Speaker Change: We know dealers are very excited we gave them a S.

Essentially a sequestered view back in January when Bob and I were with Mike Dougherty and team at the dealer meeting down in Arizona.

Michael T. Speetzen: We know dealers are very excited. We gave them an essentially sequestered view back in January when Bob and I were with Mike Dougherty and his team at the dealer meeting down in Arizona. So they were able to get an advanced view of the bikes, the launch campaign, and they were incredibly anxious to get those things out in the marketplace. So, you know, as I talked about in my prepared remarks, it brings in new customers to the Indian segment. It's the largest selling bike we have, and we know that it is a funnel into larger bikes and a lifetime of Indian ownership. So we're really excited about it. I'm proud of my team.

Speaker Change: They were able to get an advanced view of the bikes the launch campaign and they were incredibly anxious to get those things out in the marketplace. So you know as I talked about in my prepared remarks.

Speaker Change: It brings in new customers to our to the Indian segment.

Speaker Change: It's the largest selling bike, we have and we know that it as a funnel into larger our bikes in a lifetime of Indian ownership. So we're really excited about it I'm proud of the team. The innovation continues to exceed our expectations and we've now got a good solid three years of our incredible launches across just about every part of our business.

Michael T. Speetzen: The innovation continues to exceed our expectations, and we've now got a good solid three years of incredible launches across just about every part of our business, and I think that sets us up well for the long term. Perfect, that's helpful. And then just my quick follow up is, I wanted to ask what is embedded in terms of the guidance in terms of rate cuts? I think prior to this, they were contemplating three rate cuts; is that still the expectation? Or are you sort of waiting to see how things play out?

And I think that sets us up well for the long term.

Speaker Change: Perfect. That's helpful. And then just my quick follow up is I wanted to ask what is embedded in terms of the guidance in terms of rate cuts I think prior contemplating three rate cuts is that still the expectation where are you sort of waiting to see how how things play out. Thank you.

Robert Paul Mack: Thank you. Yeah, so we originally embedded three rate cuts. At this point, we're down to two, but we'll have them late in Q4.

Speaker Change: Yeah, So we had it.

Speaker Change: Originally embedded three rate cuts.

At this point, we're down to two but we've got them late in Q4. So there's no there's no meaningful risk to those rate cuts in terms of actual interest expense for the company your for dealer floor or for our share of dealer floor plan.

Robert Paul Mack: So there's no meaningful risk to those rate cuts in terms of actual interest expense for the company or for the dealer or for our share of dealer floor plan. You know, as we said earlier, the real impact is just, you know, we have a view that the rate cuts will at least provide some stimulus, maybe not actually financially, but mentally, to consumers. And, you know, if that doesn't happen, we'll be in the environment we're in, which is what we've got contemplated right now. It won't be meaningful either way for us.

Speaker Change: You know as we said earlier the real impact is just you know.

Speaker Change: We have a view that the rate cuts will will at least provide some stimulus.

Speaker Change: Maybe not actually financially, but mentally to consumers.

Speaker Change: And.

Speaker Change: If that doesn't happen we will be in the environment. We're in which is what we've got contemplated right now so.

That wont be meaningful either way for us.

Alexander Thomas Perry: Perfect. That's helpful. Best of luck going forward. Thanks. And our next question today comes from David MacGregor with Longwell Research. Please go ahead. Good morning, everyone.

Speaker Change: Perfect. That's helpful Best of luck going forward.

Speaker Change: Thanks.

Speaker Change: The next question today comes from David Macgregor with Longbow Research. Please go ahead.

David Sutherland MacGregor: Yes, good morning, everyone and thanks for taking my questions I wanted to just ask about the production curtailments, you've talked about taking down snow raise your slingshot Green you picked up range or.

David Sutherland MacGregor: Thanks for taking my questions. I wanted to just ask about the production curtailments. You talked about taking down Snow, Razor, Slingshot, and Green. You picked up Ranger.

Robert Paul Mack: How should we think about the impact of the production curtailments on 2Q as it relates to a comparison, maybe the first quarter? Well, I think Q2, so you know, we were down nearly 500 million in revenue for the full year, and most of that was in Q1. So, you know, Q2 looking relatively flat in comparison to last year will be a fair amount of volume. We took a lot of marine out of Q1, relative to last, particularly relative to the year before, but even relative to a normal year.

David Sutherland MacGregor: How should we think about the impact of the production curtailments on <unk>.

David Sutherland MacGregor: To compare to maybe the first quarter.

David Sutherland MacGregor: Well I think Q2, so we were down nearly $500 million in revenue for the full year and most of that was in Q1. So Q.

David Sutherland MacGregor: Q2, looking relatively flat in comparison to last year will be a fair amount of volume.

David Sutherland MacGregor: Took a lot of of marine.

David Sutherland MacGregor: Out of Q1.

David Sutherland MacGregor: Relative to lap, particularly relative to the year before but even relative to a normal year. So.

Robert Paul Mack: So, you know, marine will, will be, we'll start to pick up a little bit as we get into seasonality. And then, really, the ranger at the added ranger build helps offset, you know, a weaker razor build.

David Sutherland MacGregor: Marine will will be will start to pick up a little bit as we get into seasonality.

David Sutherland MacGregor: And then you know really the Ranger.

David Sutherland MacGregor: Yeah.

David Sutherland MacGregor: Add that the added Ranger belt helps offset a weaker razor built so.

Robert Paul Mack: So, you know, pretty much an even trade-off on their snow doesn't really come into play until q3 q4. And, you know, like we said in our prepared remarks, the snow build for the year will be down because either dealers are still sitting on a fair amount of model year snow model year 24 inventory that didn't sell this season given the lack of snow. You know, I think it will still play out the way we had originally guided, which was, you know, quarter over quarter revenue, year over year 23 versus 24, revenue being relatively flat through the remaining three quarters. And, you know, the only thing I'd add, David, is that it sounds relatively simple in terms of, well, we'll take Ranger up to offset Razor and Snow.

David Sutherland MacGregor: Pretty much an even trade off their snow doesn't really come into play until Q3 Q4.

You know like we said in our prepared remarks, the snow build.

David Sutherland MacGregor: For the year will be down because dealers are still sitting on a fair amount of model year snow model year 'twenty for inventory.

David Sutherland MacGregor: Didn't sell this season, given the lack of snow so.

David Sutherland MacGregor:

David Sutherland MacGregor: You know I think.

David Sutherland MacGregor: It will still play out the way, we had originally guided which was relevant.

David Sutherland MacGregor: Quarter over quarter.

David Sutherland MacGregor: Revenue year over year of 23 versus 24 revenue being relatively flat.

David Sutherland MacGregor: The remaining three quarters.

Speaker Change: And you know the only thing I'd add David as you know it sounds relatively simple in terms of well, we'll take ranger up to offset razor and snow.

Michael T. Speetzen: The operational teams who are already doing pretty substantial work. I mean, obviously, we don't make all those products in the same facilities. And so, behind the scenes, there's a lot of work being done to work within the confines of Roseau, Huntsville, and Monterey to work through how those impacts of rebalancing Snow, Slingshot, Razor, and Ranger are executed. And in light of the improvements that we made starting last year and gained momentum on in the first quarter, I have a lot of confidence in the team to be able to execute on those.

Speaker Change: The operational teams, who are already doing a pretty substantial work I mean, obviously, we don't make all those products in the same facilities and so behind the scenes. There's a lot of work being done to work within the confines of Roseau Huntsville in Monterrey to to work through how those impacts of rebalancing snow Slingshot razor and Ranger are <unk>.

Speaker Change: <unk>.

Speaker Change: And in light of the improvements that we made a starting last year and gained momentum on the first quarter of a lot of confidence in the team to be able to execute on that but.

Robert Paul Mack: But, you know, it is a change, but it's the right thing to do because not only does it lean into where we have strong retail, but it also recognizes where retail is softer and, you know, consistent with what we keep reiterating. It helps us manage that dealer inventory position with our network, and that's incredibly important to us. The other piece of dealer inventory management we haven't really talked a lot about, but it is a kind of reality in the market right now that we are focused on managing trim levels also. And coming out of the pandemic, there's been a lot of focus for consumers on sort of higher-end trim levels.

Speaker Change: You know it is a change but it's the right thing to do because not only does it lean into where we have strong retail, but it also recognizes where retail softer end.

Speaker Change: Consistent with what we keep reiterating it helps us manage that dealer inventory position with our with our network and that's incredibly important to us the.

Speaker Change: The other piece of dealer inventory management, we haven't really talked a lot about but as a kind of reality of the market. Right. Now is we are focused on managing trim levels. Also you know coming out of the pandemic. There had been a lot of focus for consumers on sort of higher end trim levels, and so I think really across all products and really across all.

Robert Paul Mack: And so I think really across all products, and really across all manufacturers, everybody was leaning into their highest trim level products, and that was true in the auto industry as well. And, you know, as the market started to change, consumers are looking for some more of the entry-level trims that they can, you know, accessorize later after their purchase to keep the initial purchase price a little bit lower. And so, you know, starting last year, we started adjusting those trim levels.

Speaker Change: Everybody was leaning into their highest trim level products that was true in auto as well and.

Speaker Change: As the market started to change consumers are looking for.

Speaker Change: Some more of the entry level trends that they can do accessorize later after their purchase to keep the initial purchase price a little bit lower.

Speaker Change: So starting last year, we started adjusting those trim levels and we continue to do that so it's not just having the right number of units, but it is having the right trim level of units in the field and we think we've made a lot of progress on that and it plays to our strength because we've got the biggest accessory business in.

Robert Paul Mack: And, you know, we continue to do that. So it's not just having the right number of units, but it's having the right trim level of units in the field. And we think we've made a lot of progress on that. And it plays to our strengths because we've got the biggest accessory business in the industry. And so, you know, if a consumer buys a vehicle that doesn't have as many accessories on it, we've got the most likely opportunity to sell them those accessories later at good margins. So it's a good switch for us. That makes sense.

Speaker Change: In the industry and so you know if a consumer buys a vehicle that doesn't have as many accessories on it.

Speaker Change: We've got the most likely opportunity to sell them those accessories later at good margins. So it's a good switch for us.

Speaker Change: Yeah that makes sense the.

Speaker Change: Second question I had was just regarding your cost savings program. The 150 million that you've talked about how should we think about how much of that it makes it to the bottom line in your guidance versus maybe being channeled into other investments.

David Sutherland MacGregor: The second question I had was just regarding your cost savings program, the $150 million that you've talked about. How should we think about how much of that makes it to the bottom line in your guidance versus maybe being channeled into other investments? Now the $150 million is embedded in the guidance as falling to the bottom line as cost improvement. I mean, obviously, you know, there'll be puts and takes on on other operational things like warranty and absorption with volumes as volumes move around, but the whole $150 million is true cost savings. And like we said, it's, it's it builds through the year.

Speaker Change: So the 150 million is embedded in the guidance is falling to the bottom line is cost improvement I mean, obviously.

Speaker Change: There'll be puts and takes on on our other operational things like warranty and.

Speaker Change: Absorption with volumes as volumes move around but the whole $150 million is true cost savings and like we said it's.

Speaker Change: It builds through the year, so it'll have a bigger impact.

Robert Paul Mack: So it'll have a bigger impact later in the year, but you'll see margins improve sequentially through the quarters. Yeah, I mean, I think when you look at the fact that we're talking about the year being down from a revenue standpoint, but pushing margins up. We're doing everything we can.

Speaker Change: Later in the year, but you'll see margins improve sequentially through the quarters. Yeah. I mean, I think when you look at the fact that we're talking about the year being down from a revenue standpoint, but pushing margins up.

Speaker Change: We're doing everything we can we're being prudent from an operating expense standpoint, but when we look at our manufacturing facilities and basically went back to 2019 and I'm not necessarily suggesting 2019 is.

Michael T. Speetzen: We're being prudent from an operating expense standpoint, but when we look at our manufacturing facilities and baseline back to 2019, and I'm not necessarily suggesting 2019 is the hallmark for us, but it's a good comparison point. There's a lot that we have to get out of those businesses. Some of that is tougher because things like commodities are, while coming down sequentially, still elevated from where they were. Labor rates are elevated, but there's a lot of other inefficiencies that crept into the facilities that we've got to get back to, and we're not saying that 2019 is the benchmark. We think we can be better than that, but that's the focus, which means we have to get all that to the bottom line. Thanks very much.

The hallmark for us, but it's a good comparison point you know theres a lot that we have to get out of those businesses. Some of that is tougher because things like commodities or you know while coming down sequentially are still elevated from where they were labor rates are elevated but theres a lot of other inefficiencies that crept into the facilities that we've got to get back to them and we're not saying that.

Speaker Change: 2019, as the benchmark, we think we can be better than that but that's.

That's the focus which means we have to get all of that to the bottom line.

Speaker Change: Thanks, very much good luck yep sure. Thanks. Thanks.

Speaker Change: Next question comes from James Hardie, who with Citi. Please go ahead.

James Lloyd Hardiman: Hey, good morning, guys.

David Sutherland MacGregor: Good luck. Yes, sure. Thanks. Thanks. And our next question comes from James Hardiman with Citi. Please go ahead.

James Lloyd Hardiman: I want to ask one more question on the inventory front so.

James Lloyd Hardiman: You've given us a lot of bread crumbs I think you said inventory was flat sequentially.

James Lloyd Hardiman: Hey, good morning, guys. I want to ask one more question on the inventory front. So, He's given us a lot of breadcrumbs. I think he said inventory was flat sequentially. Transcripts provided by Transcription Outsourcing, LLC. Any way to think about where we are in agri- Yeah, I mean, so like we said, we're flat, if you, if you exclude youth and the new products, we're down to, you know, if you think about razor, you know, we're down high single digits, quarter over quarter from Q4 total rec same way. I think I commented earlier that marine life is flat.

James Lloyd Hardiman: <unk> three turns for for Ranger and Caribbean for any way to just give us an aggregate where inventory you year over year or versus 2019, I can't believe we're still comparing thing for 2019, but it's at least some some reference point any way to think about where we are in aggregate.

Yeah I mean.

Speaker Change: So like we said were flat if you.

Speaker Change: Exclude youth in the new products were down too.

If you think about razor.

Speaker Change: We're down.

Speaker Change: High single digits.

Speaker Change: Quarter over quarter from Q4 total wreck same way.

Speaker Change: I think I commented earlier Marine is is flat and normally we would have built a lot of boats going into seasonality. So we feel good about where that is razor. We would've built you know kind of 15% to 20% going normally come in Q out of Q4 into Q1, you know headed into Q2 into seasonality.

Robert Paul Mack: And normally, we would have built a lot of both going into seasonality. So we feel good about where that is razor. We would have built, you know, kind of 15 to 20% normally coming out of q4 into q1, headed into q2 into seasonality, and even razor arranger ranger, rec is not up significantly. So we didn't it's not like we built tons of inventory there either.

Speaker Change: Even raise or a ranger ranger.

Speaker Change: You know rec is is not up significantly. So we didn't it's not like we've built tons of inventory there either and a lot of it is in the new products. So you know overall, we felt pretty good about where we are and.

Robert Paul Mack: And a lot of it is in the new product. So, you know, overall, we feel pretty good about where we are. And hopefully, that's enough to get you to. But just to clarify, Bob, those are all sequential numbers, right?

Speaker Change: Hopefully that's enough to get you to.

Speaker Change: But just to clarify those are all those are all sequential numbers right, which I think a lot of us sort of we don't normally think about it that way. So is there any way to.

James Lloyd Hardiman: Which I think a lot, a lot of us sort of, we don't normally think about it that way. So is there any way to put that in the context of last year? Well, I mean, the problem, James, is when you look at Q1 of last year, we were up 29%. But in Q1 of last year, you know, on average, the network had 80 days or less of inventory, which is well below where the industry's ever been; we were still in a restocking position. And so, you know, I think until we get ourselves worked through the year, the year of year comparisons, while they're interesting, they don't necessarily tell you a lot.

Speaker Change: Put that into context of last year.

Speaker Change: The problem the problem James is when you look at Q1 of last year were up 29%, but Q1 of last year. You know on average the network had 80 days or less of inventory, which is well below where the industry has ever been we were still in a restocking.

Speaker Change: Positioning so I think until we get ourselves worked through the year or the year over year comparisons while they're interesting. They don't necessarily tell you a lot I mean, what we're spending time on is the absolute levels of inventory by product.

Michael T. Speetzen: I mean, what we're spending time on is the absolute levels of inventory by product across the network by region by dealer. And we're looking at the measures that really matter in terms of how quickly is that inventory turning? What's the retail trend that we're seeing on it? What's the current non-current mix so that we can adjust.

Speaker Change: Across the network by region by dealer and we're looking at the measures that really matter in terms of how quickly is that inventory turning what's the retail trend that we're seeing on it.

Speaker Change: What's the current non current mix so that we can adjust and that's what's really driving us to make the corrections that we do and frankly the challenge for US is to ask everybody else just given the size and complexity of our business, but like I said when we look at the data that comes through CDK and we can see our performance relative to the other OEM.

Michael T. Speetzen: And that's what's really driving us to make the corrections that we do. And, you know, frankly, the challenge for us is to X everybody else, just given the size and complexity of our business. But like I said, when we look at the data that comes through CDK, and we can see our performance relative to the other OEMs, we are outperforming the group, and I'll continue to emphasize that because we have talked about this for the last couple of years. We don't just talk about it.

Speaker Change: Yes.

We're outperforming the group and I'll continue to reemphasize that because we have talked about this for the last couple of years, we don't just talk about it we're actually acting on it.

Michael T. Speetzen: We're not actually acting on it. A lot of folks are talking about it, but when we look at the data, they aren't acting on it.

Speaker Change: A lot of folks are talking about it but when we look at the data they aren't acting on it.

Michael T. Speetzen: And we take it seriously. We know that we're a big part of the dealers' business, and so it really is up to us to take the lead and, hopefully, they'll continue to put the pressure on the other guys or work them out of their dealerships.

Speaker Change: And we take it seriously we know that we're a big part of the dealers.

Speaker Change: Business and so it really is up to us to take the lead and hopefully they'll continue to put the pressure on the other guys.

Speaker Change: We're working out of their dealerships.

Speaker Change: Got it that makes sense and then.

James Lloyd Hardiman: And then, I think Mike, in your prepared remarks, you talked about what dealers are doing in response to some of the pressure you talked about. I think I wrote down reduced OEMs, fewer shipments, and then contributing their own promotional dollars. I guess first, is there any concern about the health of the dealer base? Could we see a pickup in dealer failures? But also, that reduced OEM seemed like a significant comment that I wanted to circle back on.

Speaker Change: I think Mike in your prepared remarks, you talked about what dealers are doing in response to some of the pressure you talked about.

Speaker Change: I think I wrote down reduced OEM fewer shipments and then contributing their own promotional dollars. I guess first is there any concern about the health of the dealer base could we see a pickup in dealer failures.

Speaker Change: But then also that reduced Oems seemed like a significant comment, but I wanted to circle back on.

James Lloyd Hardiman: I'm assuming we're talking about maybe some of the low-end players, but that feels like that could be a positive for you guys longer term if we're able to sort of rationalize the OEM space. Thanks.

Speaker Change: Assuming we're talking about maybe some of the low end players, but that yields like that could be a positive to you guys.

Longer term, if we're able to sort of rationalize the OEM space.

Speaker Change: Yep.

Speaker Change: Yeah, we so a couple of things from a health standpoint, obviously, we are we are concerned and keep a very close eye on this.

Michael T. Speetzen: Obviously, we are concerned and keep a very close eye on this. You know, within each of our businesses, we have a dealer management group. We get a lot of good data through the Wells Fargo JV.

Speaker Change: Within each of our businesses, we have a dealer management group.

Speaker Change: We get a lot of good data through the Wells Fargo JV.

Michael T. Speetzen: And if you look at the history of that JV, I mean, even during the 0809 time period, because of the proactive nature of how we manage it, the dealer failures were pretty small. Quite frankly, what does concern me is the behavior of some of the other OEMs because, obviously, with 70% of our dealer network shared, 100% of our boat network shared, it isn't just up to us. Hopefully, because of the behavior we exhibit, it helps the dealers put some of that same pressure on us.

Speaker Change: And if you look at the history of that JV I mean, even during the 0809 time period.

Because of the proactive nature of how we manage that the the dealer failures were pretty small.

Quite frankly, what does concern me is the behavior of some of the other Oems because obviously with 70% of our dealer network shared a 100% of our boat network shared.

Speaker Change: It isn't just up to us I'm.

Speaker Change: Hopefully because of the behavior, we exhibit it helps the dealers put some of that same pressure.

Michael T. Speetzen: When we've been out with the dealers, like I said in my prepared remarks, one of the things that during the pandemic, they were bringing in any OEM that had availability, even if those OEMs were delivering in a year a fraction of anything that we would, given delivery constraints, they were bringing that inventory in because people were coming in, and whether it was a wrecked vehicle or a pontoon boat, they wanted something But now as the market's shaking out, in a lot of instances, those short lines that they brought in did play more to the value lower end buyer who has really retreated in this marketplace. They're highly interest rate sensitive, discretionary income is much lower, and these are highly discretionary purchases, so they're getting low priority relative to the cost of living increases that they're contending with.

Speaker Change: When we've been out with the dealers like I said in my prepared remarks.

Speaker Change: One of the things that during the pandemic as they were bringing in any OEM that had availability even if those Oems we're delivering in a year a fraction of anything that we would given delivery constraints are they were they were bringing that inventory and because people were coming in and you know whether it's a rec vehicle or a pontoon boat they wanted something.

Speaker Change: But now as the market shaking out.

Speaker Change: A lot of instances those short lines that they brought in did play more to the value lower end buyer who.

Speaker Change: His really retreated in this marketplace, they're highly interest rate sensitive discretionary income is much lower.

Speaker Change: And these are highly discretionary repurchases, so they're getting low priority relative to you know.

Speaker Change: Cost of living.

Speaker Change: Increases that theyre continuing with so.

Michael T. Speetzen: So as we've talked with dealers, they've been pretty straightforward that one of the options that they're looking at is they've got to move the boats they have, or they've got to move the vehicles they have, but they don't plan to continue to carry some of those lines. And so we're not going to get into names and all that kind of stuff because, quite frankly, it varies by dealer by region, but I think it is reflective of the dealer understanding that moving forward, whether you look at our pontoon business, our off-road business, our motorcycle business, they are a disproportionate share of the market, and we're the player to really bet on as they go forward. That's a good call.

Speaker Change: As we've talked with with dealers they've been pretty straightforward that one of the options that they're looking at as they've got to move the boats they have but they've got to move the vehicles they have but.

Speaker Change: But they don't plan to continue to carry some of those lines and so you know, we're not going to get into names and all that kind of stuff because quite frankly, it varies by dealer by region.

Speaker Change: But I think it is reflective of the dealer understanding that moving forward.

Speaker Change: Whether you look at our pontoon business, our off road business, our motorcycle business. They they are a disproportionate share of the market.

Speaker Change: And we are the player to really bet on as they go forward.

Speaker Change: That's good color thanks, Mike.

Michael T. Speetzen: Thanks, Mike. Thank you. And our next question today comes from Tristan Thomas Martin with BMO Capital Markets. Hey, good morning.

Speaker Change: Okay.

Thank you and our next question today comes from Tristan Thomas Martin with BMO capital markets. Please go ahead.

Hi, good morning.

Good morning, one question on pricing looking at your range of 25 lineup.

Tristan M. Thomas: One question on pricing, looking at your Ranger 25 lineup, base models seem like there's been some price production on the premium models; I think they're higher year over year, but with added options. So how should we think about your overall Ranger 25 pricing? On average, across all your products. And then, the second part of the question, what's the margin difference between a factory installed accessory relative to one that you ship into the dealer channel?

Speaker Change: Models are it seems like Theres been surprise productions on the premium I think they are higher year over year, but without an option. So how should we think about.

Your overall 25 pricing.

Speaker Change: On average across all your products and then the second part of the question. What's the margin difference between the factory installed accessories relative to ones that you ship into the dealer channel.

Tristan M. Thomas: I'll answer the second question first: the margin differences are not significant. The bigger advantage to factory installed is that you, you don't, you get more. Typically, people buy more when they're, you know, when they're when they're shown a fully accessorized vehicle.

Speaker Change: I'll answer the second question first the margin difference is not significant the bigger advantage to factory installed is that you you don't you get more typically people buy more when there.

Speaker Change: When they're shown are fully accessorized vehicle and then also.

Robert Paul Mack: And then also, you know, you don't have to worry about a dealer or the customer selecting a non-Polaris accessory because it's already on the vehicle. So that's the bigger advantage. You know, I think the way to think about pricing is, There's been a lot of price noise in the market, you know, coming through the pandemic between MSRP increases, surcharges, and now, you know, increased promo. And so I think, you know, I think across the OEM space, you're seeing people as new model years come out, you know, sort of adjust that mix of MSRP surcharge and promo. I don't know that the impact on net price is going to be particularly significant. It's just where it shows up.

Speaker Change: You don't have to worry about the dealer or the customer selecting our non Polaris accessories, because it's already on the vehicles. So that's the that's the bigger advantage.

Speaker Change: I think the way to think about pricing.

Speaker Change: There's been a lot of price noise.

Speaker Change: In the market you know coming through the pandemic between MSRP increases.

Surcharges and now <unk>.

Speaker Change: <unk> promo.

Speaker Change: So I think you know I think across the OEM space Youre seeing people.

Speaker Change: As new model years come out sort of adjust that mix of.

Speaker Change: MSRP surcharge in promo I don't know that the impact on net price is going to be particularly significant it's just where it shows up that said I don't think the industry has got a tremendous amount of pricing power going into model year 'twenty five given just all the increases that have happened in the current state of the consumer.

Robert Paul Mack: That said, I don't think the industry's got a tremendous amount of pricing power, you know, going into, you know, model year 25, given just all the increases that have happened in the current state of the consumer. I think what you'll see us focus on, and you saw it well in Ranger, is, you know, we try to get the trim levels right so that, you know, the customer is comparing vehicles that are, you know, specced in the ways they want to buy them.

Speaker Change: I think what you'll see US focus on you you saw well in Ranger as you know we try to get the trim levels right. So that the customers comparing vehicles that are are specced in the ways. They want to buy them and sometimes that's taking stuff off on lower trims, and adding things on higher trims.

Robert Paul Mack: And sometimes that's taking stuff off on lower trims and adding things on higher trims. But that's something that we tweak every year to try to get the trim level, you know, right for what the consumer is coming into the dealership and asking for. Okay, thank you.

Speaker Change: But that's something that we tweak every year to try to get the trim level.

Speaker Change: For what the consumer is coming in the dealership and asking for.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay. Thank you.

Tristan M. Thomas: Thank you. And our final question today comes from Robin Farley with UBS. Please go ahead. Robin. Robin, your line is open. Are you on mute, perhaps?

Speaker Change: Thank you and our final question comes I think comes from Robin Farley with UBS. Please go ahead.

Robin.

Robin Margaret Farley: Robin Your line is open.

Robin Margaret Farley: Perhaps.

Robin Margaret Farley: Ah, yeah, thanks. You mentioned your expectation that you're gaining share through the year, but you also talked about how other OEMs have some more work to do than maybe some others. I don't know if that, I don't know if that was specific to ORV, but you mentioned that others may have more work to do in terms of clearing inventory. So, I guess, I mean, wouldn't that sort of suggest that it would be tough to grow share, not that share loss to another OEM that's clearing inventory is meaningful or long-term, but wouldn't that make it difficult to grow share if you're sort of saying others have more inventory clearing to do than Polaris has? Yeah, I mean, it's not helpful.

Robin Margaret Farley: Yeah. Thanks, <unk>. So you mentioned your expectation that yet.

Robin Margaret Farley: Gang here through the year.

Robin Margaret Farley: But you also talked about how other Oems have some more work to do that maybe some other I don't know if that way I don't have that with specifics how RV, but you mentioned that others may have more work to do in terms of clearing inventory. So I guess I mean, wouldnt that sort of suggests that it would be tough to grow share not that not that share loss.

Robin Margaret Farley: To another OEM, that's clearing inventory is.

Robin Margaret Farley: Our long term, but wouldn't that make it difficult to grow Sharon if youre sort of saying others have more inventory clearing to do than Polaris has.

Speaker Change: Yes, I mean, it's.

Speaker Change: It's not helpful and there's certainly our pockets I mean, when we talk about share.

Michael T. Speetzen: And you know, there certainly are pockets. I mean, you know, when we talk about share, the internal discussion is far more in depth by model by trim line, things like that. So there are areas that, you know, it has presented a far bigger challenge.

Speaker Change: The internal discussion is far more in depth by model by trim line things like that so there are areas that it has presented a far bigger challenge.

Robin Margaret Farley: We're not going to go crazy trying to protect when we're, you know, when we're battling someone who's clearing inventory that's a year or more old. The good news is that that eventually comes to an end. And we'll be on a better foot as we move forward. And, you know, as the last question indicated, we're making real-time adjustments between price and promotion to make sure that, you know, we're reflecting where the market is.

Speaker Change: We're not going to go crazy trying to protect when we're when we're battling someone who's clearing.

Speaker Change: Inventory, that's a year or more old. The good news is is that that eventually comes to an end.

Speaker Change: And we will be on a better a.

Speaker Change: Foot as we move forward and you know it was the last question indicated we're making real time adjustments between price and promo to make sure that we're reflecting where the market is.

Robin Margaret Farley: And given the innovation that we have around our products and the competitive nature, I stack us up number one relative to anybody coming after us, so I feel great. You know, I look at the new products. The new Ranger is going to be highly desired. The new Scout is going to be highly desired.

Speaker Change: And given the innovation that we have around our products and the competitive nature.

Speaker Change: Stack us up number one relative to anybody coming after us so I.

Speaker Change: I feel great you know I look at the new products, you know that new Ranger is gonna be highly desired the new scout is going to be highly desired. We're just now getting momentum around expedition and XD.

Michael T. Speetzen: You know, we're just now getting momentum around Expedition and XD. And then certainly, as some of the recreational markets come back around Razor with the new products that we introduced over the past several years with XP and the Pro-R, we feel really good about the position that we've got there. Within our marine business, we've refreshed a ton of the Godfrey line. We've refreshed, and are refreshing, a lot of the Hurricane models. We went after the low end of the Bennington.

Speaker Change: And then certainly as some of the rec markets come back around razor with the new products that we introduced over the past several years with the XP and the pro are we feel really good about the position that we've got there.

Within our marine business, we've refreshed a ton of the Godfrey line, we've refreshed and are refreshing a lot of the hurricane models.

Speaker Change: We went after the low end of the Bennington and obviously, we're going to continue forward on that so we'll have a lot of new models from our marine segments. So I feel really good about where we're at and we'll manage those competitive dynamics and make sure that we're staying disciplined around dealer inventory.

Michael T. Speetzen: And obviously, we're going to continue forward with that. So we'll have a lot of new models from our marine segment. So I feel really good about where we are.

Michael T. Speetzen: And we'll manage those competitive dynamics and make sure that we're staying disciplined around dealer inventory. Great, and just one follow-up: when you think about restocking and kind of what floor share will look like after everybody's gone through this inventory clearing, which it sounds like if you're expecting retail for the industry to be down modestly for the year, sounds like, you know, maybe Q2 will be the last big, big clearance.

Speaker Change: Great and just one follow up do you think about restocking and kind of what for sure will look like after everybody has gone through this.

Speaker Change: Inventory clearing which it sounds like if youre expecting retail for the industry to be down modestly for the year. It sounds like maybe Q2 will be the last kind of big big clearing.

Michael T. Speetzen: And when you think about dealers restocking, some dealers talk about some OEMs that are not as penetrated, right, in terms of dealer penetration. They can still charge, you know, close to MSRP, and so they can make money on them even though it's a lower-priced product than a Polaris product. And I guess, how do you think about competing for floor share when dealers are restocking? If they're saying, you know, they can make more on a different OEM price point, you know, but not have to, you know, kind of compete with other dealers carrying that same brand. Is there anything that you can sort of do to combat that dynamic?

Speaker Change: When you think about dealer restocking some dealers talk about.

Speaker Change: Some Oems that are not as penetrated right in terms of dealer penetration.

Speaker Change: They can still charge you know close to MSRP.

And so they can make money on even though it's a lower priced product in the Polaris product and I guess, how do you.

Speaker Change: How do you think about competing for floor share with dealers or restocking.

Speaker Change: They can make more on up.

Speaker Change: On a different OEM price point, but but not have to kind of compete with other dealers carrying that that same branches. There is there anything that you can sort of do to combat that.

Robin Margaret Farley: I mean, I'm sure there are some pockets of that, but I wouldn't say that it's on a large scale. You know, I think if you sit down and you spend time like we do talking with our dealers, it's evident that we are such a big part of the majority of our dealers. And that's important from a profitability standpoint, and they know, and they've seen what happens when they carry some of these smaller brands, and you get into difficult times, and they don't have as sophisticated inventory management. Any margins that they were making on those quickly get eroded because they carry too much inventory, and they're paying all the interest costs.

Speaker Change: <unk>.

Speaker Change: I mean I'm sure, there's some pockets of that but I wouldn't say, that's a large scale.

Speaker Change: You know I think if you sit down and you spend time like we do talking with our dealers I mean, it's evident we are such a big part of the majority of our dealers and that's.

That's important from profitability standpoint, and they know and they have seen what's happened when they carry some of these smaller brands and you get into difficult times and they don't have as sophisticated inventory management.

Speaker Change: Any margins that they were making on those quickly get eroded because they carry too much inventory and they're paying all the interest costs. So I think the good dealers that take a long term view understand that.

Michael T. Speetzen: So I think the good dealers that take a long-term view understand that and really want to make sure that we've got a strong relationship with them. And, you know, I think the dealer cultivation we do, whether it's in India or off road, or our marine business is really setting the bar high. And I have a lot of confidence that we'll continue to build those relationships. Yeah, and we've continued to evolve, you know, for most dealers, we are far and away the largest dollar profit contributor to their dealerships, our North Star rewards program that we use to manage our dealers. There's, there's a lot of criteria in that around floor space and how they how they need to present our brands. And there's real money tied to it.

Speaker Change: And really drive to make sure that we've got a strong relationship with them and.

Speaker Change: I think the Deere dealer cultivation, we do whether its in Indian or off road or our marine business.

Speaker Change: Is is really a setting the bar high and I have a lot of confidence that we'll continue to build those relationships.

Speaker Change: We've continued to evolve you know for most dealers, we are far and away the largest dollar profit contributor to their dealerships, our north Star rewards program that we use to manage our dealers. There is theres a lot of criteria in that around floor space.

Speaker Change: And how they how they need to present, our brands and there's real money tied to it and the dealers understand that and and we manage it. So you know I feel like we're in a good position to deal with that type of situation Robyn.

Robert Paul Mack: And the dealers understand that, and we manage it. So you know, I feel like we're in a good position to deal with that type of situation. Okay, great. Thank you. Thank you. Thank you. And this concludes today's question and answer session and today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Robyn: Okay, great. Thank you.

Speaker Change: Thank you. Thank you. This concludes today's question answer session and today's conference call. Thank.

Speaker Change: Thank you all for attending today's presentation you may.

Speaker Change: Now disconnect your lines and have a wonderful day.