Polaris Inc. · NYSE:PII
Polaris — Polaris Industries — Q1 2018 Earnings Presentation
28 slides from Polaris's earnings presentation, Apr 24, 2018
Slide 1: First Quarter 2018 Earnings Results
POLARIS INDUSTRIES INC. First Quarter 2018 Earnings Results April 24, 2018
Slide 2: Safe Harbor & Non-GAAP Measures
SAFE HARBOR & NON-GAAP MEASURES Except for historical information contained herein, the matters set forth in this presentation, including management’s expectations regarding 2018 future sales, shipments, net income, and net income per share, operational initiatives and impact of tax reform are forwa
Slide 3: Scott W. Wine, Chairman & CEO
POLARIS INDUSTRIES INC. First Quarter 2018 Earnings Results Scott W. Wine, Chairman & CEO April 24, 2018
Slide 4: First Quarter 2018 Summary
FIRST QUARTER 2018 SUMMARY Financial results exceeded expectations; record first quarter retail sales for ORV N.A. retail up 3%; ORV’s up mid-single digits %; Side-by-side’s up high-single digits % Indian motorcycle up low-single digits %; continued share gains All segments reported increased sales
Slide 5: North American Powersports Retail Sales
NORTH AMERICAN POWERSPORTS RETAIL SALES Polaris Retail Sales Q1’18 Retail Sales by Business (vs. Q1’17) Year-Over-Year Retail % Change (units) POLARIS INDUSTRY +3% (+5% excl. snow) Motorcycles Off-Road Vehicles mid-single digits % low-single digits % (estimated) ORV Side-by-Sides high-single digits
Slide 6: North American Dealer Inventory
NORTH AMERICAN DEALER INVENTORY Polaris N.A. Total Dealer Inventory Q1 Total N.A. Dealer Inventory Year-over-year % Change in Units Rolling 4 Qtrs Ending Q1'17 +5% +1% +6% Rolling 4 Qtrs Ending Q1'18 +6% +6% +1% -6% excl. snow Q2 Q3 Q4 Q1 Q1 2017 Existing ORV New ORV Snowmobiles Motorcycles Q1 2018
Slide 7: Organizational Changes
ORGANIZATIONAL CHANGES Craig Scanlon Julie Gilbert President – Transamerican Chief Customer Engagement Auto Parts (TAP) and Growth Officer (newly created function) Effective April 9, 2018 Effective April 12, 2018 15+ years with Polaris 20+ years growing brands & businesses Vice President – Chief Mar
Slide 8: Multi-Year Strategic Sourcing Project
MULTI-YEAR STRATEGIC SOURCING PROJECT WAVE #1 ~$1 Billion Annual Spend COST SAVINGS TARGET >$200 Million (annual gross savings at maturity) Supplier Conference Site ALLIANCE Profiles Evaluation Research Visits AGREEMENT SIGNIFICANT SUPPLIER March 2018 RATIONALIZATION COMPLETED IN-PROGRESS Fall Q1 Q4
Slide 9: Innovation
INNOVATION R&D Investment ($ in millions) Up ~10% $238 $166 $185 5.0% % of 4.4% ~4.6% Sales 4.1% 3.5% +25% $65 2015 2016 2017 Q1 2018 2018 Expectations RANGER XP® 1000 Jack Daniel’s® Limited Edition RZR® RS1 Crew 6-Passenger Indian Scout® Bobber Youth RANGER® 150 EFI 850 Patriot Engine 72” RZR XP® T
Slide 10: Mike Speetzen, EVP–Finance & CFO
POLARIS INDUSTRIES INC. First Quarter 2018 Earnings Results Mike Speetzen, EVP–Finance & CFO April 24, 2018
Slide 11: Q1 2018 Financial Results
Q1 2018 FINANCIAL RESULTS $ in millions, except EPS SALES NET INCOME EPS GAAP $1,297 $56 $0.85 ($/% Change) 12% N/M N/M 12% 43% 41% $1,297 $69 $1.06 $1,159 $48 $0.75 ADJUSTED* ($/% Change) Q1 2017 Q1 2018 Q1 2017 Q1 2018 Q1 2017 Q1 2018 Strong ORV, Adjacent Markets, PG&A & International sales growth
Slide 12: Off-Road Vehicles (ORV) / Snowmobiles
OFF-ROAD VEHICLES (ORV) / SNOWMOBILES Q1 2018 ORV/Snow Segment Sales* RZR® RS1 ($ millions) MSRP $13,999 Snowmobiles 15% Off-Road 28% $833 Vehicles $724 PG&A 17% 5% MILLION Q1 2017 Q1 2018 All ORV categories grew sales and market share New product demand strong Promotional spending down vs. last yea
Slide 13: Motorcycles
MOTORCYCLES Q1 2018 Motorcycles Segment Sales* Indian® Chieftain® Elite ($ millions) MSRP $31,499 9% 4% Indian & $125 $132 $131 Slingshot PG&A $120 5% Flat MILLION Q1 2017 Q1 2017 Q1 2018 Q1 2018 GAAP* Adjusted* GAAP* Adjusted* Indian sales up double-digits; Slingshot shipments down Both Indian and
Slide 14: Global Adjacent Markets (GAM)
GLOBAL ADJACENT MARKETS (GAM) Q1 2018 GAM Segment Sales MRZR® D4 ($ millions) MSRP ~$43,000 Commercial, 24% $113 Gov’t/Defense, PG&A $92 & Aixam 19% 25% MILLION Q1 2017 Q1 2018 Growth driven by Aixam, Goupil and Government/Defense business Order backlog solid Polaris Adventures entering first full r
Slide 15: Aftermarket
AFTERMARKET Q1 2018 Aftermarket Segment Sales Transamercian Auto Parts ($ millions) 1% $220 TAP Other $218 1% Aftermarket 22% MILLION Q1 2017 Q1 2018 TAP wholesale sales down due to soft industry light-duty truck sales; sales at its retail stores remained strong year-over-year Other Aftermarket bran
Slide 16: International
INTERNATIONAL Q1 2018 International Sales* ($ millions) 27% EMEA ORV / Snow Motorcycles +38% $211 20% 42% (cc +25%) $166 $163 GAM $118 Motorcycles MILLION Global ORV / Snow Adjacent Markets Q1 2017 Q1 2018 Q1 2017 Q1 2018 32% All categories grew sales and market share in Q1 Polaris #1 in market shar
Slide 17: PG&A
PG&A Q1 2018 Core Parts, Garments & Accessories (PG&A) Sales* ($ millions) Sales by Segment 5% $188 ORV / Snow Motorcycles $179 5% 8% Adjacent Markets MILLION 19% Q1 2017 Q1 2018 GAAP GAAP Sales by Category Accessories Apparel Strong accessory $/unit growth 14% 9% International PG&A up mid-teens % M
Slide 18: Full Year 2018 Guidance
FULL YEAR 2018 GUIDANCE GROSS OPERATING SALES PROFIT MARGINS EXPENSE TAX RATE EPS $ millions, except EPS (% of Prior Year) (% of Sales) ($ & % of Sales) 2017 Actuals $5,428 25.9% $1,008 30.1% $4.85 Adjusted* (18.6% of Sales) 2018 4% to 6% 40 to 60 bps 40 to 60 bps ~23% $6.05 to $6.20 Guidance** (pre
Slide 19: 2018 Full Year Guidance by Segment
2018 FULL YEAR GUIDANCE BY SEGMENT ORV/Snowmobiles Motorcycles Global Adjacent Markets Aftermarket ($ billions) ($ millions) ($ millions) ($ millions) mid-single digits % Increased $3.6B PG&A mid-single PG&A high-single high-single digits % Snow digits % Snow Unchanged digits % Lowered $574 $885 PG&
Slide 20: Gross Profit Margin Guidance
GROSS PROFIT MARGIN GUIDANCE Gross Profit Margin Q1 2018 Adjusted* Gross Profit Margin 2018 Guidance Increase up 40 to 60 bps 25.4% 24.9% 25.4% Unchanged 21.0% Q1 2017 Q1 2017 Q1 2018 Q1 2018 FY 2018 Adjusted GAAP* Adjusted* GAAP* Adjusted* Guidance VIP F/X Commodities/Freight VIP F/X Commodities/Fr
Slide 21: Q1 2018 Financial Position & 2018 Expectations
Q1 2018 FINANCIAL POSITION & 2018 EXPECTATIONS Cash Drivers Capital Summary March 2018 ($ millions) ($ millions) Variance to March 2017 +$116 +$24 $166 $138 Cash $ 166 +21% -$3 -$15 Debt /Capital Lease Obligations $1,029 -13% -$38 Shareholders’ Equity $ 973 +16% -$56 Total Capital $2,002 -1% Cash Op
Slide 22: Scott W. Wine, Chairman & CEO
POLARIS INDUSTRIES INC. First Quarter 2018 Earnings Results Scott W. Wine, Chairman & CEO April 24, 2018
Slide 23: Closing Comments
CLOSING COMMENTS Good early momentum established for the year Commodity, freight and tariff cost increases more challenging Core markets remain competitive; innovative new products driving success Closed a chapter of intense – but warranted – scrutiny from regulators International business growing n
Slide 24: Thank You – Questions?
POLARIS INDUSTRIES INC. First Quarter 2018 Earnings Results Thank You QUESTIONS?
Slide 25: Appendix
APPENDIX NON-GAAP RECONCILIATIONS NON-GAAP RECONCILIATIONS - SEGMENTS 2018 GUIDANCE ADJUSTMENTS Q1'18 Earnings 25
Slide 26: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Reconciliation of GAAP "Reported" Results to Non-GAAP "Adjusted" Results (In Thousands, Except Per Share Data; Unaudited) Three months ended March 31, 2018 2017 Sales $ 1,297,473 $ 1,153,782 Key Definitions: Throughout this presentation, the word “Adjusted” is used to Victor
Slide 27: Non-GAAP Reconciliations - Segments
NON-GAAP RECONCILIATIONS - SEGMENTS Non-GAAP Reconciliation of Segment Results (In Thousands, Unaudited) Three months ended March 31, Three months ended March 31, 2018 2017 2018 2017 SEGMENT SALES SEGMENT GROSS PROFIT ORV/Snow segment sales $ 832,564 $ 724,103 ORV/Snow segment gross profit $ 243,561
Slide 28: 2018 Guidance Adjustments
2018 GUIDANCE ADJUSTMENTS 2018 guidance excludes the pre-tax effect of acquisition integration costs of approximately $10 million, supply chain transformation costs of approximately $10 million to $20 million, network realignment costs of approximately $5 million and the remaining impacts associated