Polaris Inc.

Good day and welcome to the Polaris fourth quarter and full year earnings call-in webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Richard Edwards, Head of Investor Relations. Please go ahead, sir.

Thank you, Matt, and good morning, everyone. Thank you for joining us for our 2021 Fourth Quarter and Full Year Earnings Call. A slide presentation is accessible at our website at ir.polaris.com, which has additional information for this morning's call. Mike Speetsen, our Chief Executive Officer, and Bob Mack, our Chief Financial Officer, have remarks summarizing the quarter and the full year. and our expectations for 2022, then we'll take some questions. 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. Actual results could differ materially from those projections in the forward-looking statements. You can refer to our 2020 10-K for additional details regarding these risks and uncertainties. All references to the Fourth Court in the full year 2021 and actual results and the 2022 guidance are reported on an adjusted non-GAAP basis unless otherwise noted. Please refer to our Reg D reconciliation schedules at the end of this presentation for the GAAP to non-GAAP adjustments. Now, we'll turn it over to Mike Spietzen, our CEO.

Mike? Thanks, Richard. Good morning, everyone, and thank you for joining us. Before we get started, I wanted to acknowledge that this will be Richard's last earnings call. Richard's been at the helm of Polaris' investor relations for 20 years, and I've had the privilege to work with him for almost seven of those years. It goes without saying that Richard has had an incredible and lasting impact on the company. You all will have the opportunity to see and talk to Richard at our Investor Day later in February. With Richard's retirement, we welcome JC Weigel to the team. JC brings a wealth of experience and will be working alongside Richard for the next several months to ensure a smooth transition. So welcome, JC, and thank you, Richard, for all that you have done for this company and me. You'll be greatly missed. From the start of my tenure as CEO, my mantra for Polaris has been focused execution. And 12 months in, I am proud to say that the team forged the path with dedication and ingenuity. While the supply chain disruptions dominated the headlines in 2021, we finished the year at record levels for both sales and earnings, and I couldn't be more appreciative of the effort the Polaris team made to achieve these results. And as Bob will discuss, our record performance is anticipated to continue into 2022. That, coupled with a refined and focused strategy, has me incredibly optimistic about the future of this great company. But before I go too far with the future, let's look back at the performance of 2021. 2021 saw Polaris achieve several meaningful performance milestones. We delivered record-level financial performance despite considerable supply chain headwinds, which impacted costs and our ability to deliver products. Our strong performance enabled us to return over $600 million to shareholders through our dividend and share repurchase. Despite the supply chain headwinds, our ORV business gained share, reflecting our strong brand innovation and the ability to deliver on continued strong consumer demand. Our PG&A businesses, which includes PowerSource aftermarket, exceeded $1.5 billion in sales for the first time ever. That's a 24% increase in 2021, and we've more than doubled the size of our PG&A business over the last five years. Our international business exceeded the $1 billion mark, which was an increase of 34%. And lastly, our efforts to drive customer growth continue to pay dividends, as evidenced by our customers expanding 16% on a two-year basis, representing a strong new customer growth, with more new customers added in 2021 than in 2020. And I'd also add that existing customers' repurchases remain solid. We introduced industry-leading customer and dealer-driven innovation and launched category-defining vehicles, We introduced over 30 new vehicles and nearly 500 new accessories in 2021. We didn't just incrementally innovate. We created and launched category-defining vehicles, reflecting our continued commitment to industry-leading innovation. The Razor Pro-R and Turbo-R reclaimed our leadership position in the wide-open, side-by-side category, delivering unprecedented performance straight from the factory. The Razor Pro-R leads the way in power with the industry's first two-liter factory engine, coupled with unmatched control with the all-new Dynamics DV, which is our dual-valve automatic adjusting suspension system. We pushed the industry forward with the introduction of our all-electric Ranger XP Kinetic, the hardest-working, smoothest riding, and quietest UTV ever built. It is safe to say we are just getting started, and I can't wait for you to see what we have in store for 2022. Our innovation doesn't end with our product. We introduced our industry-leading pre-sold order program, which has been highly successful in attracting and maintaining customers in the supply chain-constrained environment. The North Star Reward Dealer Incentive Program, where dealers are rewarded when they successfully apply the six critical activities of market performance, customer experience, education, PG&A, service, and dealer financial results, has driven improved dealer performance and profitability. Our Polaris Adventures business has grown tremendously and in 2021 completed over 400,000 rides through roughly 200 outfitter locations. And our subscription service, Polaris Adventures Select, has launched in four states with plans to add several more in 2022. And finally, during 2021, we added capacity and improved product quality and rationalized our portfolio. We added production capacity in Monterey, Mexico for ORV and Syracuse, Indiana for Bennington and Hurricane. and Wilmington, Ohio for PG&A distribution. All of these reflect our commitment to organically invest in the business to support growth. As I speak, we're starting up production of midsize Indian motorcycles in Vietnam to accommodate anticipated growth in the Asian and Australian markets. Our focus on quality drove improvements that resulted in higher customer and dealer quality ratings while reducing costs. And during the quarter, we completed the divestiture of Jim and Taylor Dunn businesses as we continue to strategically review our portfolio with a goal of business mix optimized for future growth and profitability. As a result of these divestitures, we are realigning our segments in 2022 and eliminating the global adjacent market segment. The remaining businesses that were in that segment will be aligned to other segments. Bob will give you further details shortly. 2021 was truly an all-around great year for Polaris. Through focused execution, we delivered industry-leading performance and continued to improve the fundamentals of the business. Building from those highlights, let me start by addressing demand. Overall consumer demand remains robust, with new customers entering the space at a steady rate and existing customers exhibiting strong repurchase intent. Unfortunately, supply chain impacts on product availability, not just for Polaris, but for also the broader industry, negatively impacted retail in North America. Our full year retail sales for North America finished down 13% for 2021, driven by the supply chain disruptions that impacted product availability. Our retail did end the year up 9% versus 2019, which further reinforces the point around continued strong interest in the category. And lastly, fourth quarter retail was down mid 20% and down mid single digits to 2019. Despite the headwinds, I couldn't be more pleased with our market share performance. ORV gained 120 basis points of share with side-by-sides up about a point of share for the year and ATGs up over a point and a half. It was a similar result for Poles, with our boat business increasing market share in North America, and our motorcycle business finished about flat to last year. You'll notice that we've added international to the page. As a global company, it's tough to talk market share without looking beyond North America. Given our strong focus on resulting retail performance, we gained over 100 basis points in ore and motorcycles, and about 60 basis points in snowmobiles. The continued interest in Power Sports, along with our expansive product lineup, puts us in an enviable position to drive continued strong performance into 2022. Dealer inventory levels ended the quarter down 30% on a year-over-year basis and down 70% compared to levels in Q4 of 2019. Sequentially, total dealer inventory levels improved by approximately 5,000 units in North America. That said, the majority of those vehicles shipped in the final days of the year were already spoken for under our pre-sold order process. Our current view is that dealer inventory levels will remain below optimal levels for all of 2022 with modest improvements in the second half. The improvements come from slightly improved supply chain and delivery as we anticipate demand will remain robust. Last quarter, I highlighted several modifications we made to our highly successful dealer pre-sold order process. We implemented a new online order tracker for dealers and customers that improved the transparency of order status, a new reservation program for high-demand premium products, and we added limitations on the number of presold orders for certain products to minimize delays from long shipping lead times. These changes have been favorably received by both dealers and consumers as we continue to manage through supply chain impacts to production and delivery. As we made progress in accelerating vehicle production and shipments during the fourth quarter, Pre-sold orders declined slightly from the third quarter. We anticipate that dealer pre-sold orders will remain elevated through the first half of 2022, with an opportunity to reduce that level beginning in the back half of the year as we see modest supply chains materialize. The pressure points from component shortages have not changed significantly from my last update. We continue to experience parts variability for various components, such as shocks, displays, certain plastics, seats, and semiconductors, among others. The reasons for these supply disruptions continue to be tied to logistics delays, labor shortages, and commodities, not unlike many other industries. We've developed a sophisticated process to manage through these pressure points, including forward buying for some long-lead components, giving suppliers improved visibility of our production forecast, establishing second and third sources for critical components where available, and assisting suppliers with accelerated payments and labor as needed. Predicting when the supply chain pressures ease remains critical. but our most current view is that modest improvements should start to materialize sometime in the third quarter of 2022. Regardless, the supply chain remains a top priority, and I continue to be impressed with our team's ability to learn, adapt, and execute, which has created a clear competitive advantage for Polaris. Earlier, I highlighted the launch of several category-defining vehicles, the Razor Pro-R and Turbo-R, and the all-new electric Ranger XP Kinetic. We are calling these vehicle category defining because we believe there is nothing like them in the market today. And while the initial production runs will be limited, interest around these products was phenomenal. The stats speak for themselves. 450 million plus impressions and 2.9 million video views for the Razors. And for the Ranger XP Kinetic, two times the press impressions compared to our entire model year 22 launch last year. And over 280,000 video views. Both product allocation limits will reach shortly after their respective launches. And this is just the beginning. Stay tuned for more exciting news to come in 2022. With that, I'll turn it over to Bob Mack, who will summarize our fourth quarter and full year 2021 performance and our expectations for 2022. Bob?