Polaris Inc. · NYSE:PII
Polaris — Polaris Industries — Q3 2017 Earnings Presentation
28 slides from Polaris's earnings presentation, Oct 24, 2017
Slide 1: Third Quarter 2017 Earnings Results
Third Quarter 2017 Earnings Results October 24, 2017 POLARIS INDUSTRIES INC.
Slide 2: Safe Harbor & Non-GAAP Measures
SAFE HARBOR & NON-GAAP MEASURES 2 Q3'17 Earnings Except for historical information contained herein, the matters set forth in this presentation, including management’s expectations regarding 2017 & 2018 future sales, shipments, net income, and net income per share, and operational initiatives are fo
Slide 3: Q3 Non-GAAP Disclosure
Q3 NON-GAAP DISCLOSURE 3 Q3'17 Earnings Reconciliation of GAAP "Reported" Results to Non-GAAP "Adjusted" Results (In Thousands, Except Per Share Data; Unaudited) Key Definitions: Throughout this presentation, the word “Adjusted” is used to refer to GAAP results excluding: TAP integration expenses, i
Slide 4: Scott W. Wine, Chairman & CEO
Scott W. Wine, Chairman & CEO Third Quarter 2017 Earnings Results October 24, 2017 POLARIS INDUSTRIES INC.
Slide 5: Q3 Summary
Q3 SUMMARY 5 Q3'17 Earnings Q3 Exceeded Expectations – Raising Full Year Adjusted* Sales & EPS Guidance Operational improvements gained momentum in Q3 Record sales quarter, sequential improvement in operating income marginN.A. Retail sales strong in Q3; up 13% ORV up mid-teens % with RZR retail up h
Slide 6: North American Powersports Retail Sales
NORTH AMERICAN POWERSPORTS RETAIL SALES Polaris N.A. retail up 13% for Q3 2017 vs. Q3 2016Indian Motorcycle retail was up 16% - continued share gainsORV retail up mid-teens %; RZR up high-teensPromotional spend in-line with expectations and industry trendsNorth American Industry up low-single digits
Slide 7: North American Dealer Inventory
Polaris Q3 2017 N.A. dealer inventory down 7% vs. Q3 2016ORV down 12%, RZR down double digits %Motorcycles up as expected, all Indian; Slingshot flatSxS RFM implementation in processDealer inventory at year-end expected down modestly given recent retail strength Dealer Inventory Levels Appropriate,
Slide 8: Organizational Change
Organizational Change 8 Q3'17 Earnings Smooth Transition Expected Matt HomanPresident – Off–Road VehiclesPolaris: 2002 - 2017 Chris Musso President – Off-Road Vehicles/SnowmobilesEffective November 6, 2017 Highly successful 15 year career with PolarisHeld multiple senior leadership positions Head of
Slide 9: Polaris Strategic Objectives – Under Review
Polaris Strategic Objectives – Under Review Initial rollout – January 2009 (2010 – 2014)$3 Billion; 8% Net Income MarginPerformance exceeded expectations Current targets (2014 – 2020)>$8 Billion in Sales implied CAGR +14%>10% Net Income Margin implied CAGR +37% Q3'17 Earnings 9 Will Update 5-Yea
Slide 10: Mike Speetzen, EVP Finance & CFO
Mike Speetzen, EVP Finance & CFO Third Quarter 2017 Earnings Results October 24, 2017 POLARIS INDUSTRIES INC.
Slide 11: Q3 2017 GAAP and Adjusted Sales and Income
Q3 2017 GAAP and Adjusted* Sales and Income Q3 reported sales were $1,479 million, up 25% from Q3 2016; Reported net income was $82 million, up 153% from prior yearAdjusted* sales were up 25% finishing ahead of expectationsAcquisition of Transamerican Auto Parts (TAP) added $191 million of sales in
Slide 12: Full Year Adjusted Sales & EPS Guidance Increased
Sales Guidance by Segment (1) Adjusted* Earnings Per Share Guidance Q3'17 Earnings Total Company Adjusted* Sales Guidance Full Year Adjusted* Sales & EPS Guidance Increased 2017 FULL YEAR ADJUSTED* SALES GUIDANCE ORV market improving globallyOrganic** revenue expectations +6% to +7%TAP FY’17 = incre
Slide 13: Gross Profit Margin Guidance
GROSS PROFIT MARGIN GUIDANCE Adjusted* Gross Profit 2017 Guidance Gross Profit Q3 2017 GM Growth Drivers+ VIP+ One-time warranty+ Acquisitions+ Product Mix– Quality feature adds – Promos / Incentives Q3 2017 Gross Margin Improvement Driven Primarily by One-Time Warranty, VIP & Product Mix Q3'17 Earn
Slide 14: 2017 Other Full Year Expectations
2017 OTHER FULL YEAR EXPECTATIONS 14 Q3'17 Earnings Slight Improvement in Operating Leverage Given Strong Sales Growth Adjusted operating expenses: increase in the 50 to 60 bps range, as a percent of sales (slightly improved) Increased R&D – up ~20% excluding TAP; quality & innovationHigher variable
Slide 15: Off-Road Vehicles (ORV) / Snowmobiles
OFF-ROAD VEHICLES (ORV) / SNOWMOBILES Q3 2017 ORV/Snow Segment Sales ORV up 12% in Q3 2017 vs. Q3 2016RZR up significantlyGained share in ATVs and side-by-sides in Q3PG&A up 5%Average selling price for ORV up 6% in Q3’17; Snowmobiles up 2%2017 Guidance: Up mid-single digits % (increased)PII ORV impr
Slide 16: Motorcycles
7% 10% 5% 113% 10% Reported and Adjusted* sales down 14%**Motorcycles up 10% excluding Victory salesIndian shipments up; Slingshot sales lowerAverage selling price down 4% in Q3, excluding Victory 2017 Guidance: Down high-teens %*** (unchanged)On a comparable basis, motorcycle expectations is “Up mi
Slide 17: Global Adjacent Markets (GAM)
21% 16% GLOBAL ADJACENT MARKETS (GAM) Q3 2017 GAM Segment Sales GAM 17% due to Aixam and Goupil strong performance; increased Military and PG&A salesAverage selling price for GAM was up 3% in Q3’172017 Sales Guidance: Up low-double digits % (increased) Aixam, Goupil and Military Driving Increase in
Slide 18: Aftermarket
AFTERMARKET Q3 2017 Aftermarket Segment Sales TAP added $191 million to Q3 salesOther Aftermarket brands up 14%Total Aftermarket up 6 percent on a pro-forma basis quarter-over-quarter2017 Sales Guidance: Up significantly from TAP sales (unchanged) TAP Performance & Integration Meeting Expectations Q
Slide 19: 2017 Polaris Financial Position
2017 POLARIS FINANCIAL POSITION 19 Q3'17 Earnings Capital Summary September 2017 Cash Drivers Variance toSeptember 2016 Cash $ 132 +8% Debt /Capital Lease Obligations $ 920 +111% Shareholders’ Equity $ 896 -3% Total Capital $1,816 +33% Debt to Total Capital 51% -19 % points Operating cash flow up fr
Slide 20: Scott W. Wine, Chairman & CEO
Scott W. Wine, Chairman & CEO Third Quarter 2017 Earnings Results October 24, 2017 POLARIS INDUSTRIES INC.
Slide 21: 2018 Initial Thoughts
21 Q3'17 Earnings 2018 Initial Thoughts Solidify Execution Improvements; Deliver Another Year of Improved Sales and Profitability Economy stable, political landscape unpredictable; must remain flexible/adaptablePowersports industry trends unchanged: ORV stable, Motorcycles challengedPolaris ORV mark
Slide 22: Thank You – Questions?
Thank You Questions? POLARIS INDUSTRIES INC.
Slide 23: Appendix
APPENDIX Q3 2017 SUPPLEMENTAL SALES PERFORMANCE (PG&A / INTERNATIONAL)Q3 FINANCIAL SERVICESQ3 YEAR-TO-DATE NON-GAAP DISCLOSURE2017 GUIDANCE ADJUSTMENTS Q3'17 Earnings 23
Slide 24: Q3 2017 Supplemental Sales Performance
International** Core Parts, Garments & Accessories (PG&A)* 24 Q3'17 Earnings Q3 2017 SUPPLEMENTAL SALES PERFORMANCE Motorcycles Global Adjacent Markets (GAM) 6% Snowmobiles Motorcycles Global Adjacent Markets (GAM) Apparel LatinAmerica 40% 6% 6% 10% 6% 12% Q3 Sales 7% to 207 Million Q3 Sales 11% to
Slide 25: Income from Financial Services
Retail Credit Wholesale Credit PA Receivables 25 Q3'17 Earnings Income from Financial Services Portfolio Remains Healthy INCOME FROM FINANCIAL SERVICES Polaris Acceptance (PA) receivables down, trending with dealer inventoryQ3 income from financial services down – lower wholesale incomeFY 2017 Guida
Slide 26: Q3 YTD Non-GAAP Disclosure
Q3 YTD NON-GAAP DISCLOSURE Reconciliation of GAAP "Reported" Results to Non-GAAP "Adjusted" Results (In Thousands, Except Per Share Data; Unaudited) Key Definitions: Throughout this presentation, the word “Adjusted” is used to refer to GAAP results excluding: TAP inventory step-up purchase accountin
Slide 27: 2017 Guidance Adjustments
2017 GUIDANCE ADJUSTMENTS 27 Q3'17 Earnings 2017 guidance excludes the pre-tax effect of TAP inventory step-up purchase accounting of approx. $15 million, acquisition integration costs of approx. $15 million, manufacturing network realignment costs of approx. $10 million to $15 million and the impac
Slide 28: Q3'17 Earnings
28 Q3'17 Earnings