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spk02: 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.
spk14: 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.
spk12: 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?
spk13: Thanks, Mike, and good morning, everyone. Mike summarized the year earlier, so my comments will be brief regarding the fourth quarter and full year, and we'll provide more details on our thinking around 2022 guidance. First, our fourth quarter results. Fourth quarter sales were up 1% on a gap and adjusted basis versus the prior year. ORV snow sales were down 2% given the supply chain constraints and the difficult comparison of a nearly 30% increase in ORV in the fourth quarter of 2020. Motorcycles, global adjacent markets, and boats all increased sales during the quarter. Aftermarket was down 2% again due to supply chain disruptions. Fourth quarter earnings per share on a gap basis was $1.40, which includes the loss on the sale of the Gem and Taylor Dunn businesses. Adjusted earnings per share was 216, down 35% from last year's strong performance, and negatively impacted by the increased supply chain pressures in 2021. For the full year 2021, sales were up 17% on a gap and adjusted basis versus the prior year. All segments were up for the full year 2021, driven by pricing and volume. Full-year earnings per share on a GAAP basis was $7.88. Adjusted earnings per share was $9.13, ahead of our expectations in spite of the supply chain challenges and driven by positive product mix and increased pricing, along with nearly 100 basis points of operating expense leverage. Turning to our segment performance. The ORV snowmobile and aftermarket segment sales declined during the quarter compared to 2020 as the supply chain shortages constrained our ability to ship to demand. GAM, boats, and motorcycle segments increased sales in the fourth quarter, primarily driven by product mix and pricing. The supply chain put pressure on all of our segments' ability to significantly grow sales. However, our adjacent markets' businesses did grow the number of units sold, primarily driven by Goupil and Exim in Europe. Reported fourth quarter segment sales were as follows. ORV snowmobile sales decreased 2%. Motorcycle sales increased 2%. Global adjacent market sales were up 23%. Aftermarket sales were down 2%, and our boat segment sales increased 12%. As I indicated, average selling prices were up for all segments for the fourth quarter, driven by price increases and the mix of products produced. On a full year basis, all segment sales were up on a year-over-year basis for both sales and units, sold given the continued strong demand for our products. International and PG&A sales, which were also strong, are embedded within each respective segment. International sales increased 4% in the fourth quarter and 34% for the full year 2021 over 2020. All segments and categories grew sales for the full year 2021. Our parts, garments, and accessories sales increased 13% during the quarter to 24% for the full year. The supply chain constraints was the theme you heard throughout my presentations in 2021, and unfortunately, you will hear that theme again in 2022. However, we will realize increasing benefit from the price increases in 2022 that we implemented throughout the back half of 2021, along with some anticipated slight improvement in the supply chain sometime in the back half of the year. which we expect to drive another record year of sales and earnings for 2022. Turning now to 2022 guidance. Total company sales are expected to be up in the range of 12% to 15% versus 2021. The 2022 sales growth includes the following assumptions. While consumer demand for power sports products is expected to remain robust in 2022, we expect the overall North American power sports market and Polaris retail sales to be relatively flat versus 2021, driven entirely from the ongoing supply chain constraints expected for much of the year. We anticipate share gain trends continuing for Polaris in 2022. The pontoon industry is expected to be flat to up slightly on a year over year basis, with our pontoon business expected to continue its share gain for the full year. We anticipate average selling prices will again be positive in 2022, as the price increases we implemented throughout 2021 provide a tailwind into 2022. We are prepared to continue to increase prices to match any further supply chain cost pressures, but anticipate that these costs have peaked and will begin to moderate in late 2022. Adjusted earnings per share for 2022 is expected to be in a range of $10.10 to $10.40, compared to the full-year 2021 adjusted EPS of $9.13, an increase of 11% to 14%. We anticipate that adjusted gross profit margins will be down 80 to 100 basis points for the year, with the first quarter realizing the most margin pressure as we have a sizable backlog of pre-sold orders that we purposely did not increase vehicle pricing on given previous communications to customers, along with purchased raw materials at the peak of commodity prices working their way through our factory inventory. Operating expenses are expected to improve as a percentage of sales down 90 to 120 basis points for 2022, primarily as a result of our ability to leverage our general and administrative infrastructure as the company grows revenue. Mike talked about the number of new products introduced in 2021, and we expect another wave of innovative product introductions in 2022. While operating expenses as a percentage of sales is improving, We are not backing off our commitment to being the leader in product innovation as our research and development investments are increasing on a year-over-year basis. The income tax rate is expected to be in the range of 23% to 23.5% for the full year 2022 as our rate reverts back to a more normalized level. Share count is expected to be down approximately 2% in 2022, which is a combination of expected dilution from compensation plans more than offset by the continuation of share repurchases given our strong liquidity position. I will talk more about our capital allocation priorities in a moment. In 2022, we are introducing a new metric that we will be tracking and reporting on each quarter going forward, which is familiar to all of you listening today, and that is earnings before interest, taxes, depreciation, and amortization. Historically, we have been giving you guidance on net income and adjusted earnings per share, and we will continue to do so in 2022, but we believe reporting EBITDA quarterly will give investors a greater appreciation of the baseline profitability opportunity at the company by removing the non-operating impacts unique to Polaris. For 2022, EBITDA is expected to be approximately 12% of sales, similar to 2021, and up 12% to 15% on an absolute basis. Given the unique events of 2020 and 2021, the quarterly sales and earnings cadence to which we are accustomed, has significantly changed. Historically, the first quarter is our lowest quarter in both sales and earnings, with the second, third, and fourth quarter being relatively equal in both sales and earnings per share. That said, the past two years have varied significantly from our historical cadence. 2022 is following a similar pattern driven by ongoing supply chain issues and the fact that ship and retail are so closely aligned. While the timing and magnitude of supply chain improvements remains challenging to forecast, I will give you our view on how we currently see the year playing out. The supply chain bottlenecks accelerated in the back half of 2021 as both costs and disruptions escalated. We believe that many of those costs have peaked, but they will take time to work through our raw material inventory, and we expect them to slightly improve on a sequential basis throughout 2022. Therefore, the first half of 2022 is expected to look a lot like the second half of 2021 in terms of earnings per share. Sales for the first half of 2022 are expected to be up in the high single digits percent to low double digits percent range, both sequentially and when compared to the first half of 2021. Earnings per share for the first half of 2022 are expected to be up slightly sequentially to the second half of 2021, although they will be down when compared to the strong first half of 2021, somewhere in the mid-teens percent range. The second half of 2022 is expected to be very strong on both a sequential basis from the first half of 2022 and when comparing to the second half of 2021 as pricing is fully implemented and the cost premiums realized in our P&L begin to ease. Before I provide our expectations for sales by segment, let me explain some changes we are making in our reporting segments beginning in 2022. As a result of the sale of JEM and Taylor Dunn, and to better leverage the activities occurring in each segment, we are eliminating the global adjacent market segment and moving the remaining businesses into other established segments in our portfolio. XM and Goupil will move into our motorcycle segment, and the combined segment will be renamed on-road. Government and defense in our commercial UTV businesses will be included in our ORV snowmobile segments, and that reconstituted segment will be renamed off-road. Polaris Adventures will be allocated into the respective segments based on the vehicles utilized. Our boat segment remains unchanged but is being renamed Marine to both better describe the current portfolio as well as broaden the segment should future products or services, both organic and inorganic, be added to the Marine portfolio. And finally, our aftermarket segment remains unchanged. We believe these revised segments will provide better focus and leverage resources for future growth and profitability improvement. They will also create a simplified reporting structure under our new strategic framework that Mike will cover shortly. We will provide some historical sales data under the new segment reporting structure for modeling purposes on our website later today. Now moving to our sales guidance by segment. We expect all segments to grow sales in 2022 as we drive to meet the ongoing strong demand and the supply chain volatility begins to slowly stabilize. The expectations by segment are shown on the current slide. Operating cash flow finished 2021 at $294 million, a 71% decrease over 2020, given the increase in inventory due to the supply chain disruptions and our deliberate decision to forward buy components to minimize the impact on plant operations. We anticipate 2022 operating cash flow will improve from 2021 in line with improved results and less cash needed for working capital. Let me summarize our capital deployment priorities and expectations for 2022. Our first priority is organic investments, which includes capital expenditures of approximately $350 million for 2022, a 17% increase over 2021. Approximately one-third of the $350 million is earmarked towards capacity expansion in 2022, including an expansion of the distribution center in Wilmington, Ohio, the completion of our Monterey, Mexico, facility expansion, and a variety of other capacity and capability improvements. These capacity investments, along with increased investments in research and development and tooling, will support new products and customer-centric innovation, including digital electrification and further demand creation. Our second priority is dividends. We obtained dividend aristocat status two years ago, which is defined as 25 years of consecutive dividend increases, which we are very proud of. We believe dividends are a critical part of the attractiveness of Polaris stock to our shareholders. Later this week, we are asking our board to approve the 27th consecutive annual dividend increase. We will announce any increase subsequent to board approval. And third, share repurchases and M&A in that order. We currently have $840 million remaining on the recent $1 billion authorization approved from the Board last year. As Mike noted earlier, we have returned over $600 million to shareholders in 2021 via the dividend and share repurchases, and we expect to return at least an additional $500 million in 2022 for a two-year total in excess of $1.1 billion in returns to shareholders. While we have no current plans for any acquisitions, we will consider small tuck-in transactions in our core segments if financially and strategically attractive. With that, I will now turn it back over to Mike for some final thoughts.
spk12: Thanks, Bob. During 2021, the management team and board spent considerable time evaluating the business, as well as looking forward in terms of what employers should strive to become over the long term. There were three critical questions we asked ourselves. What can we be best in the world at? What are we deeply passionate about? And what drives our economic engines? As a result, going forward and in line with our mantra of focused execution, we're refining our strategic framework to refocus our investments in the core, both organic and inorganic, improving productivity and expanding margins, and growing our leadership position in power sports. Along with this, we will embrace a balanced and strategic capital deployment strategy that provides for organic investment, portfolio alignment, and return of capital to shareholders. To drive this strategy, we've identified six strategic pillars for the business. best customer experience, inspirational brands, rider-driven innovation, agile and efficient operations, best team, best culture, and safety and ethics always. We believe these six pillars executed effectively will drive significant value creation. Best customer experience refers to providing our current and future customers with the best possible overall experience, including dealer interactions for service and delivery, the most desirable, most satisfying and trusted products and services in the industry, and providing a business model that encourages more diverse groups of people to experience the outdoors. By inspirational brands, I'm referring to brands our owners are not only proud to be associated with, but are excited to showcase and share with friends and family. Brands that continue to be viewed as authentic, unique, engaging, and just fun to experience, and support our Think Outside tagline. Rider-driven innovation means exploring new products, services, and experiences that matter to our customers. Electrification, connecting to users, Adventures, Adventures Select, and Ride Command are just a few recent examples of the opportunity we have here. Agile and efficient operations takes lean operations a step further by aligning processes, tools, and people to deliver the most responsive, customer-centric service levels in power sports while leveraging our scale to drive industry-leading productivity. And all of this is only possible by having the best team and best culture in the industry. We strive to hire, develop, and retain the best. constantly challenge them with new opportunities and high expectations, and reward those who achieve and exceed those expectations. And finally, and by no means last, safety and ethics always, which is core to our belief system and reflects our strong bias to protect our teams and resources while driving our stewardship of the industry for our riders and the outdoors through our Geared for Good program. I couldn't be more excited about the prospects of this great company. With Focus, we can grow our global leadership in power sports, and drive tremendous value creation for all of our stakeholders, customers, employees, and shareholders. We'll provide more details around these six key areas at our upcoming investor meeting in Las Vegas on February 24th, including a quantification of the financial opportunity we believe is possible over the next five years. Let me wrap this up. 2022 is expected to be another record year for Polaris, with revenues growing 12% to 15% and net income increasing at similar levels. That, coupled with our new and more focused strategy, provides incredible opportunities for growth and value creation. We anticipate demand to remain robust as customer interest in the category remains strong. That said, the supply chain will remain constrained at least through the first half, and any improvements after that are anticipated to be modest. Let me close by saying thank you again to the Polaris team for all that they have done and all that they will do as we forge ahead as the global leader in power sports. With that, I'll turn it over to Matt to open the lineup for questions.
spk02: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. In the interest of time, please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. I think we're good to go, Matt. Thank you. Our first question will come from Robin Farley with UBS. Please go ahead.
spk00: Great. Thank you for taking the question. And, Richard, I just want to say best wishes. It's been great working with you. I'm glad we'll get to see you at the Investor Day in a few weeks. So for my question, on the retail commentary, kind of expecting the industry and Polaris to be flat in retail because of supply constraints, Given what you expect to ship, how much inventory rebuild at dealers, will that get you sort of halfway there in terms of where dealer inventory needs to be, or kind of how does that shake out given the constraints? And it sounds like, you know, demand would be higher than flat if it weren't for those constraints.
spk12: Yeah. You know, our expectation is – pardon me. As I mentioned in my prepared remarks, we really don't anticipate dealer inventory moving up substantially. There will be some improvement. It will be relatively modest. At this point, as we look forward, as we talked about, we think the supply chain issues that we saw in the second half are obviously kind of carrying forward as we go to the first half. And then there's going to be some items that are going to continue to govern our ability as well as the rest of the industry and, frankly, into automotive and electronics, and it's around semiconductors. Semiconductors continue to be a significant issue. It feels like every time the industry takes a step forward, they take a step back by having a typhoon that hits and floods source factories and things like that. We just anticipate that there's going to be some aspects that are going to continue to limit our ability to ramp up. Now, the minute we see improvements in the supply chain, we can react very quickly. As I mentioned in my comments, our team has continued to outperform, and I'm confident that if we start to see green shoots that are better than we expect, we'll be able to leverage that into better performance. I suspect, though, given the strong demand that we expect and are seeing from consumers, that most of what would happen in terms of improvement would just improve retail, not necessarily improve dealer inventory.
spk00: Okay. No, great. And then my follow-up question was going to be about the supply chain disruption. You just mentioned a little bit about it with maybe not having great visibility on semiconductors. My question was going to be how much of this sort of improvement in second half is is actual visibility, and like you said, it's already getting better, and it just is the prices, the expenses that have to run through in your inventory, versus that you're sort of hoping it will be better in six months, but you don't necessarily have visibility, just to try and get a sense.
spk12: Yeah, I mean, it's tough to have visibility that far ahead, but I will say that we've learned a lot over the past, call it six to seven months. I think our ability to navigate the the current industry dynamics are better. And, you know, we do anticipate that things like logistics and some of the, you know, the labor shortages and things like that are going to start to improve because the industry simply has the time to deal with it versus this kind of happened pretty quickly in 2021. So, you know, we think there's definitely opportunities there. So we're basing it on markers that we're seeing today, but I'll keep reemphasizing it. We're not expecting a substantial uplift. You know, when we look at our offered vehicle business, we're not expecting a substantial improvement in year-over-year shipments, for example. So, you know, it is an improvement. It tends to manifest itself in a lot of our other businesses like boats, for example. But at this stage, you know, that's the level of visibility that we have. Bob, anything that you would add?
spk13: Yeah, I think you brought up a good point, Robin. You know, when you think about Supply chain improving, you kind of have to take it into two pieces. One is cost. One is actual availability of components. And as Mike said, the availability of components side, you know, we don't see meaningful, you know, we'll see slight improvement, we think, through the year. And the visibility there is not as nice as we'd like it to be. On the cost side, you know, a big part of the cost is commodities. And there is a little better visibility to that. And, you know, we do see that improving as we get, you know, through the inventory we purchased in Q4. And... burn through that, and then start buying commodities at lower prices in the back half of the year.
spk00: Okay, great. Thank you.
spk02: Okay, next question. Our next question will come from Craig Kennison with Baird. Please go ahead.
spk04: Hey, good morning. Thanks for taking my question. And Richard and JC, congratulations to you both. Mike, this is a bigger picture question for you ahead of your analyst day in February. I'm sure you're saving the numerical goals for that time, but I'm wondering if you could look back at the last several years. When you look at that EBITDA as a percentage of sales percentage, it was, I think you're saying 12%-ish in 2022, but that was 18% years ago. If you could diagnose what happened between then and now, at least to frame what the opportunities might be, that might be helpful.
spk12: Yeah, I mean, Craig, you kind of nailed it. I mean, you know, Bob and I spent a lot of time both internally and externally kind of working through the dynamics of what happened from the past. And, you know, it's not one particular thing. And we've talked in the past about, you know, you have an onset of things like tariffs or certain aspects of our portfolio that the profit truly ends up being dramatically lower than was originally expected. There's just a series of different things, but what I'll tell you is that we're surgically going after it. We talked a little bit about it in my prepared remarks. We're obviously looking at the portfolio, and we'll continue to work that aspect. That doesn't necessarily mean you jettison things out. It also means that you focus in on the areas that aren't demonstrating the level of profitability that they should. or that they need to, and you work those. Now, if we get to a point where they can't get to the levels we need, we'll make a different decision at that time. But there's a significant amount of focus. You know, the supply chain transformation work that we've been working on in earnest for the past several years, you know, we're starting to see pretty substantial savings come through. That helps us deal with whether it's the tariffs or the supply chain costs. And then just the pricing actions we've taken to help us at least be in a position to counter those. But as we look forward, we hope that those pricing moves that we've made will be able to retain a portion of them. Because if you remember, we didn't go after big price moves. We tried to do it in bite-sized chunks so that we weren't pushing consumers out of the market. And at the same time, we know we're starting to see things like the commodities come down. We know that over time, the logistics costs and some of the other expedite fees that we're paying are going to come down. And to the extent we can continue to hold on to the pricing, I think we'll be in a good spot. So it's It's going to be the levers inside the business. It's going to be dealing with the portfolio. And then, quite frankly, just driving growth in the business and being very focused on the success we've seen over the past several years in being able to drive the customer growth. And so what we'll talk about in Las Vegas is that combination of we need to get our margins up, that's our internal mandate, while continuing to grow our return on invested capital. And we think that's going to create a pretty compelling investment opportunity. Perfect. Thank you, Mike.
spk02: Thanks, Corey. Our next question will come from Brett Andrus with KeyBank.
spk08: Please go ahead. Hey, good morning, guys. Is there any way to frame up pricing a little more? I guess how much price did you end up passing on in 2021 in ORV, and then how much do you expect to take in 2022? Sure, Bob.
spk13: So the way you have to think about pricing, you know, our goal, as Mike said, we have been trying to drive price to cover the increased costs in the supply chain. A lot of our, you know, if you look at 2021, prices, costs for us escalated through, you know, from the first half through the second half. So our pricing actions lagged out a little bit. And then obviously, as I said in my remarks, the pre-solds, we haven't gone back and raised price on pre-solds. There's a bit of a lag there. So our last price increases came in November 1st. Those are starting, you know, you'll start to see that fully implemented in early 2022 in Q1. We'll work through the pre-sold in Q1. And so, you know, the price-cost dynamic starts to get better as you go through the year. But, I mean, basically, you know, we're pricing to cover our costs. We'll get a little bit more than that, but we're not getting the margin, and that's really where you see the hit to the GP. Got it.
spk08: Okay. And then I guess I think last quarter you called out, I think it was over 300 million. Maybe that number was closer to 400 million of supply chain input cost pressure that you expected in 2021. Do you have an updated number for 2022 as you think about the guide?
spk13: So for full year, it's close to 500 million versus 2020 if you look at 2022. So it continues to go up in 22 versus 21. And we see that starting to moderate as we get towards the end of the year as we can start bringing in commodities at the new lower prices that you're starting to see in the futures curves in the market. And we think some of the logistics costs will start to abate as well.
spk02: Thanks, guys. Our next question will come from Fred Whiteman with Wolf Research. Please go ahead.
spk05: Hey, guys. Good morning, and thanks for the question. I was hoping you could just sort of juxtapose or rationalize the comments that show up a few places in the release and the slides just about, you know, particularly on the pre-sold percentage. talking about an improvement in component availability towards year end, and then this notion that we won't really see a big uptick on the supply chain side until 3Q. So was there something specific in 4Q, and then why sort of this six-month lag until that really shows up on the earnings side?
spk12: Well, I mean, what we characterized, Fred, was that we expect the first half of 22 to look an awful lot like the second half. There were certain dynamics that happened in the fourth quarter Some relate to our snow business, so obviously that's a very seasonal business and you're not going to see that repeat after we get through the month of February, March timeframe. We're taking each one of these components at a time. As I said in my prepared remarks, it tends to move around. We'll get a good couple of weeks on shocks and then we'll start to have some issues and we'll have to pivot and refocus to get those caught up and then go work other areas like plastics, etc. You know, it's not one particular item, you know, and our suppliers are contending with all the same things we are in terms of the logistics and labor challenges and all the different things that, you know, ultimately impact our ability to deliver. So, you know, I think our view is that it's just, you know, it isn't going to get fixed overnight. You know, this supply chain issue onset over a period of time, and so it's going to take some time to work itself through the system. So, You know, there isn't one thing in particular, other than what I would say is semiconductors, which will continue to be a governing supply on the company, as it is with just about every industry right now. But aside from that, most of the other issues we're able to work constructively through with our supply base.
spk05: Great. You sort of touched on, Bob, I think the price account look for the year, but could you guys just give an update on sort of the promo and then the mixed tailwinds on the margin side?
spk13: Yeah, sure. So mix, similar to a lot of industries, mix is positive just because consumers are gravitating towards and dealers are ordering and consumers are ordering higher-end products given the scarcity of product availability. So that helps on the mix side. And promo, we don't anticipate significant promo, but we have factored in small amounts of promo returning in the back half of the year should – you know, we start to see the competitive environment change or supply chain, you know, improve. But right now, we think that'll be pretty minor.
spk05: Great. Thank you.
spk02: Our next question will come from Joe Altabello with Raymond James. Please go ahead.
spk07: Thanks. Hey, guys. Good morning. Just wanted to go back quickly to Robin's line of questioning earlier, and I know it's a tough question to answer, you know, at this point in early 2022, but would you expect dealer inventory levels to normalize sometimes next year, or does the resale opportunity extend possibly into 2024?
spk12: You know, tough to say, you know, because there's a lot of variables in there. You know, our view based on what we've seen through this whole thing is, you know, the consumer demand is going to remain solid. And so against that backdrop, you know, I would suggest it's probably going to be sometime into 23 before we're going to see the inventory levels get up. You know, we're not going to target getting inventory back to the levels we were before all this started when COVID initially onset. You know, we found ways to run the business more efficiently. So we're going to target inventory levels at the dealerships that will be below historic, but it's probably going to take us, you know, well into 2023 to get ourselves there. And, you know, it's early days, so it's tough to make a call on 23 or 24 at this stage.
spk07: Understood. And just to follow up on that, it looks like, obviously, gross margin pressures this year being offset by pretty nice operating leverage. It looks like most of that or all of that really coming from G&A. Where are the reductions in G&A coming from?
spk13: It's a mix. I mean, we've obviously, going through COVID, we looked hard at our cost structure in 2020 and made various staffing and spending reductions. And then just the growth, we've kept really those investments pretty flat and have been able to leverage that. We've done a lot of work to get the centralized central structure in the company to the right level and really pushed a lot more out into the GBUs, and we've benefited from that.
spk12: Joe, I think it allows us to do the things we've talked about, which is I'd rather spend the money – on new investment and R&D programs for the growth of the company. And so that's given us the ability through efficiency to be able to put ourselves in that position. And I think, you know, just the simple move of what we're doing with the segments speaks to that. You know, because every time you have a business, you've got infrastructure that has to support that. And I think to the extent we can keep things as lean and clean and as straightforward, it's going to make the cost structure lean. It's going to make our decision-making faster and our performance better.
spk07: Got it. Okay. Thanks, guys.
spk02: Thank you. Our next question will come from Garrick Johnson with BMO. Please go ahead.
spk06: Good morning. Thank you. I want to talk about Monterey and the expansion there. I think in the past you mentioned it could expand Razor and general output by 35% by the end of 22. Is that still the target and how is the ability to staff and supply that expansion?
spk12: Yeah, we were actually, Kim Grussell and Steve Bonetto and I were down there a couple months back, and essentially they were already running the first prototypes through the line. So the line's in good shape. The labor shed is very healthy there. Our Monterey facility is an excellent factory, great workforce there. So essentially it's attached to the same campus, so we're going to benefit from the great leadership that we have down there. So So it's on track, and there's going to be some really good products coming out of there. Obviously, the Pro-R and Turbo-R will be coming out of that factory, but there's other products that have yet to be announced that will be coming out of there as well.
spk06: Okay, great. Thanks. And then on off-road dealer inventory, are you still shipping incomplete units? And if so, what would the field inventory look like if those incomplete units actually had all the components in them?
spk12: Yeah, we actually did very few. Our snow business probably saw the most, maybe just over 1,000 units, where we had some strut and ride command modules that were coming in late. We wanted to at least get the vehicles to the dealership. And we obviously hold back the revenue recognition on that because we're not going to recognize when the unit is not capable. And we did have some ATVs that went out without a front brush guard. But, again, it was a very, very small population. We've actually, and we've had this discussion with our board a number of different times, we're here on the side of holding the inventory in our own hands so that we can affect the rework. We think that that's a better thing from a quality standpoint and, frankly, puts less burden on the dealer. And then we've got the ability to move those vehicles very quickly, like we did in the fourth quarter, and make sure we get them in the hands of the dealer and use the pre-sale process to make sure we keep the customer orders in track. I don't know, Bob, if you had anything to add to that.
spk13: Yeah, I mean, to Mike's point, I mean, we focused on the quality, making sure that the dealers are getting inventory they can sell immediately because it's, in our view, not beneficial to have inventory sitting at the dealer that, you know, the customer can see their product, but they can't take it because it's waiting on the dealers. And the dealers are busy, and they're struggling with labor, too. So, you know, we're trying to make it as easy on them as we can.
spk06: Okay.
spk02: Thank you very much. Thanks, Gary. Our next question will come from Jamie Katz with Morningstar. Please go ahead.
spk01: Hey, good morning. Congratulations on your retirement, Richard. I'm hoping you can help us size the opportunity you see for some of the new innovative products that are out there, like the ProR and the EV that just went out. And I know on the deck it says, you know, the it was limited edition and they sold out in a really short period of time. But is there some metrics you might be able to offer us to help us think about what the opportunity for either the high performance or the electric market is from your perspective?
spk12: Well, you know, we're going to talk a little bit more about it at the investor day. You know, I think on the high performance, you know, I think the category is, you know, it's, relatively well-designed. I think the key is that we're now back with what we believe is the best product in the market, certainly the most powerful, largest machine, most capable. It tends to be a little bit more of a halo product, quite frankly, but I think it's important in terms of the established reputation of Polaris as the industry leader and the REC side-by-side, for example. But I think it's indicative of the innovation that's yet to come throughout not only the rest of the recreation, but some of the potential categories that spin off of that. And so I think it just speaks to the things we're doing internally. And as I teased in my opening remarks, we have a lot more products coming in 2022. So I think that'll be industry-defining and a pretty good insight into how we're thinking about it. As far as the electric goes, You know, it's tough, and, you know, we've talked a lot about our focus, and we believe that there's a huge opportunity within the utility segment because the use case and the dynamics around that vehicle support an electric vehicle where there needs to be charging readily available, the use case in terms of the torque and the power that the vehicle has, a quiet vehicle, you know, whether it's someone working around a ranch or in a hunt environment. And essentially... You know, as we went out and put those vehicles on market, you know, we sold out within a couple of hours, and the camo package actually sold out first. So it really played to the desire from the hunt community that, you know, that there's a real desire for meat. And a large portion of the folks who bought, and these weren't dealers. These were customer orders coming through the dealers. A large portion of those who bought were actually new to Polaris. And so, you know, I think it demonstrates that there is demand there. We've got more work to do as we do, and the way we're approaching it is we're not just going to develop something because we can. We're going after what the specific customer needs are. So our teams are spending a lot of time talking to consumers, trying to find out what the issues are that they're trying to solve for, and then we'll create products around that.
spk13: Yeah, I think the other thing, Jamie, to think about is, you know, we're not sort of following the automotive preorder process where you can put a deposit on a vehicle and likely not get it for two or three plus years. which I think is proving to be frustrating to consumers. You know, we've limited these pre-orders intentionally, you know, as we look at our production capability and, more importantly, the supplier capacity. And, you know, as we see get through the first stage of production, you know, we'll continue to add to it. But we're trying not to frustrate consumers by having them wait for, you know, extended periods of time for something they actually put a deposit on.
spk01: Okay, and then as a follow-up, I think financial services income is slated to be down a bit in 2022, but retail sales are expected to be flat, and I would usually maybe expect them to trend a little bit more closely together. Is there some maybe part of the market that you're not participating in there, or has something changed, or can you just help us reconcile that? Thanks.
spk13: Sure. You know, what we've seen all year through 21 and even in late 20s You know, as consumers are waiting longer for their vehicles, they're taking the time to go out and, you know, shop the credit unions and other local sources. So our sort of the pen rates of our national programs has come down. So, you know, it's tough to say what that will look like in 22, given, you know, what inventory availability will look like. So we're expecting it to continue to be down a little. But we think as inventory normalizes, you know, we offer really competitive programs. We have our new partner from Octane, and we think that they're, you know, we're going to see those pen rates go back up as the market normalizes.
spk02: Thanks so much. Thanks, Jim. Our next question will come from Scott Stember with CL King. Please go ahead.
spk10: Good morning, and thanks for taking my questions. Thanks. With regards to your expectations for the power sports industry and Polaris from a retail perspective for next year or for this year, how are you thinking about interest rates as they go up and the impact on the consumer? What are you baking in?
spk12: Yeah, I mean, you know, we're anticipating the Fed's going to move. I mean, I think everybody, the market's been all over the place the last few days just anticipating what comes out here this week. But, you know, again, I'm just going to reemphasize, I mean, the consumer impact is minimal. When you look at the, I mean, interest rates are a historical low, and when you start doing the math on moving interest rates a quarter point or a half a point, you know, you're talking a matter of, you know, $10, $15 on a payment. And, frankly, what we've seen over the past several years is, one, people are shopping to get better, you know, financing offers and all that stuff, but we've also seen a lot more consumers just buying with cash. So, you know, I think consumers are still in a really good spot financially. You know, their investment accounts are up, their jobs are strong, especially when you look at the demographic that is buying our product. So I don't anticipate that's going to have a material impact on the company.
spk10: Got it. And just follow-up on TAP. Seems pretty much uneven performance throughout most of the year, and it looks like it finished out the year down 5%. Just talk about what's going on there and why. what you would expect for tap for 2022? Yeah.
spk12: I mean, you know, the unfortunate part is they, they source a fair amount out of, uh, out of Asia. And so, you know, the supply disruptions had an impact, a pretty substantial impact. And, you know, a lot of what we do with tap is, you know, we have customers come in and have a complete build on our vehicle. So they're doing a lift kit, wheels, tires. And so we've got a lot of, uh, customer orders there in kind of a partial state because we're waiting on either wheels or tires or a suspension component. You know, Craig and the team have done an excellent job of getting that business headed in the right direction. You know, we generated profit last year, so a big improvement from where we've been. They've leaned the business. They've got it incredibly focused. We've, over the past several years, essentially fired a lot of unprofitable customers, especially through our wholesale distribution business, to make sure that they're focused on being able to create incremental value. So I suspect as the supply chain situation starts to improve, that's obviously going to be very helpful to the forward parts business. So they're heading in the right direction, and we continue to give Craig and the team a lot of support for the improvements that they've made.
spk10: Got it. Thanks again.
spk02: Thank you.
spk10: Thank you.
spk02: Our next question will come from Billy Kovanis with Morgan Stanley. Please go ahead.
spk09: Hi, thank you. Just in terms of retail sales, there was some underperformance versus the industry in the fourth quarter for off-road and snowmobiles. You did flag some product availability and inventory factors for this. Just what gives you comfort that it's nothing else at this stage, no sort of competitive pressures there on promos or anything like that? And just in general, like your view on retail sales to stabilize in 2022 and 2023, any sort of leading indicators in the first few weeks of 2022 to suggest that things are sort of leveling out here? Thanks.
spk12: Yeah, I guess I'd start with the back part of that question. January retail has been quite good, you know, and I think that's indicative of the work that Steve Mineto and his team did to ensure we got the product out in the field. The share dynamics, without getting into a lot of detail, we had two smaller competitors who I think had struggled through the course of the year and kind of got caught up in the fourth quarter, which created a little bit of that inner quarter dynamic. But I'd still point you back to the fact that we ended up gaining over a point of share in ATVs and about a point of share in side-by-sides. And to put that in perspective, we're essentially delivering the number of products that all of our competitors on the side-by-side space are delivering. So that is not a small achievement when you think about the monumental supply chain challenges we've had, and I think it speaks to the fact that consumer demand for a Polaris product remains incredibly high. We talked to the dealers. The pre-sale program is in high demand and an effective way for us to ensure we're delivering that. So there was nothing about the fourth quarter that gave me any level of concern. I remain completely focused around the supply chain. Steve and his team, I think, are doing a great job of cultivating the customer demand, and from what we can see, consumer demand remains very strong for Polaris products. Great. Thank you. Thank you.
spk02: Our next question will come from David McGregor with Longbow Research. Please go ahead.
spk03: Yeah, good morning, everyone. I just wanted to go back to a question that Garrick had asked earlier. Are you able to quantify the number of ORVs and motorcycles that you have red-tagged and reworked waiting for a backlogged component? And if you were able to move all those units in 22, what would that add to your revenue year-over-year growth?
spk12: Yeah, we're not going to get into talking about that. I mean, that number, it moves around every single month. You know, unfortunately, we've gotten really good at creating an entire process and tracking around our rework, what I call our rework factories that we have supporting each of our main factories. And it really depends on the specific components. I think as I essentially kind of teased out a little bit, if we could see the supply chain stuff improve more than anticipated in the second half, we would have the ability to deliver substantially more equipment to the market. But At this stage, we don't see anything that would tell us that that's necessarily going to be where things play out, and we're going to continue to take it quarter by quarter, and I'll put this team up against just about anybody to be able to react quick and get product into the hands of our dealers.
spk13: Just to clarify one thing, we're not seeing the challenge some of the automotives are seeing where they've got months of inventory or old model year inventory. We're pretty focused on making sure that we're reworking things you know, aggressively and, you know, not letting anything get out of model year and things like that.
spk12: Yeah, that's a good point. We're not letting things age. That rework, you know, we don't have necessarily an official external turn metric that we would give, but we've been acutely focused on making sure that we're not going to let vehicles age and sit there. So they get priority in terms of new components coming in, so we're turning them on a pretty quick basis.
spk03: Got it. And the second question, Mike, you made reference to the fact that you're picking up new customers. I'm just wondering if you have any sense of what portion are buying their first ORV or motorcycle versus what percentage or portion may have previously owned a used product or a competitive brand and now are coming to Polaris.
spk12: You know, it's tough. You know, we get a lot of anecdotal. What I will tell you is, you know, when we talk about those new customers, we've got an awful lot of folks that are coming through avenues like Polaris Adventures and Adventures Select, that either have never ventured into the category or they did when they were young. In our Select program, for example, which is essentially a subscription program where they can become a member of Polaris, that is allowing folks that were involved with PowerSports at a young age, now they've got maybe a young family, they're living in an apartment or a home in a neighborhood where they can't store these, and financially they're just not ready to make that kind of commitment. But becoming a member of Polaris gives them access to an array of products at a location that they choose, and so that gives them a really good and fun opportunity. So, you know, what's encouraging to me is we're attracting a lot of folks in, and as I talked about, it's at a higher clip in 21 than it was in 20. And so, you know, I think there's pretty strong evidence that, you know, we can stop talking about a pandemic effect. I think there is a shift here, and I think we've done a really good job of providing a compelling opportunity opportunity to folks that isn't just about the vehicle itself. It's about all the experiences and the culture around being a Polaris customer.
spk03: Are those new customers coming in at opening price points, or are they coming up further up the mix?
spk12: Well, you know, to be honest with you, they're coming in kind of middle to upper because, you know, if you look at, as Bob made a comment earlier, the mix of products, you know, as we're making decisions about allocating scarce inbound components, we're, you We've got people that are coming in at good price points.
spk13: You're obviously seeing a lot of families, so you're seeing a lot of four-pass, as Mike said. That's also driving some of the mix in price side.
spk03: That sounds promising. Thanks very much.
spk14: Thank you. Matt, we've got a couple more questions we'll take, and then we'll end it. Go ahead.
spk02: Thank you. Our next question will come from John Hsu with BNP Paribus Exane. Please go ahead.
spk11: Hey, guys. It's Dion here. Thanks for the question. Just for the retail sales expectations of flats in 2022, maybe can you help us with the cadence, first half or second half? I think you mentioned January is off to a pretty good start. But, yeah, any color there would be helpful.
spk13: Yeah, I think the cadence really is going to tie more with shipment cadence. And, you know, we expect shipments in the first half to be relatively similar to shipments in the second half of 21 and then in the back half of 22 we expect to see improvement so you know as of right now given the low dealer inventory i think we expect retail will will track with those shipments um so it's kind of out of our normal cycle and you know if we see supply chain improvements as mike said you know we'll see increased shipments which are driving curious retail yeah and i you know the thing to keep in mind is q1 of 21 was kind of our last
spk12: huge year-over-year retail quarter. You know, we were lapping the first quarter of 20, which was obviously a pretty bad situation given the onset of the pandemic. So, you know, there's some numerical things in Q1 that will be challenging. As we look at our retail versus 20, for example, or even 19, the Q1 performance looks pretty good.
spk11: Okay. Yeah, that's really helpful. And then just on 2H, you show that chart, I think slide 14, the You know how price, as you mentioned, like volume is kind of flat in the first half versus QH21, and then it's all driven by price, and then you're starting to pick up volume in the second half. But maybe if you can help disaggregate the price versus volume in the back half, is the price increase the same as in the first half or something like high single digits?
spk13: So it's really not price increases in the second half. What it is is it's the impact of the price increases that have already rolled in really coming into full effect as we get through the pre-solds and get those fully implemented. So you see that sort of ramp up a bit through the year. And then on the margin side, you know, it's the commodities cost really coming down in the later part of the year relative to 2021, you know, that helps in terms of the profitability improvement. So the level of price in the retail growth is relatively consistent all year.
spk11: Okay. Got it. Helpful. Thank you.
spk02: Thank you. Last question? Our next question will come from Garrick Johnson with BMO. Please go ahead.
spk06: Hey, great. Thank you. I just wanted to circle back to the comment on building Indian motorcycles in Vietnam. Can you talk about that for a moment?
spk12: Sure. We started up a joint venture probably about four years ago with someone who had been a current supplier. and really with the intent of expanding the amount of inbound components that they were supplying for us, as well as in an effort to – they had really high quality, so we wanted to really build off of that. What we've seen is increasing interest in Asia and Australia for Indian motorcycles, and as you can imagine, building those in Spirit Lake and shipping them all the way over is not the most cost-effective way to do that. We went through a pretty thorough review, given the volume expectations in markets like China, and saw a good opportunity to essentially create motorcycle production for Asia in Vietnam, similar to what we did with Poland. And our startup there of the midsize bikes for India has gone incredibly well. We've used a lot of the same team and processes to get our Vietnam facility up. They literally sent pictures across a couple days ago of the first units coming out. And so we're optimistic it's going to give us the ability to be close to the markets and be able to serve them in a cost-effective way. It in no way impacts Spirit Lake. Our Spirit Lake business has got more than enough demand on it, and this will essentially allow it to be freed up and focused on serving North America.
spk06: Okay, so are you producing the product, or is this made on an outsourced OEM basis?
spk12: No, we're producing it through our joint venture, which we're majority owner.
spk06: Okay, thank you.
spk14: Okay, I want to thank everyone for participating this morning and look forward to seeing many of you at our investor event in Vegas on February 24th. We have a great event planned and some really good writing on some of our new products, so look forward to seeing many of you in Vegas. Thanks again. Goodbye.
spk02: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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