Polaris Inc.

Good day and welcome to the Polaris first quarter earnings call and webcast. All participants will be in listen only mode. Should you need assistance, please signal conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to J.C. Weigelt, Vice President of Investor Relations. Please go ahead.

Thank you, Jason, and good morning or afternoon, everyone. I'm J.C. Weigelt, Vice President of Investor Relations at Polaris. Thank you for joining us for our 2022 first quarter earnings call. We will reference a slide presentation today, which is accessible on our website at ir.polaris.com. Joining me on the call today are Mike Speetson, our Chief Executive Officer, and Bob Mack, our Chief Financial Officer. Both have prepared remarks summarizing the quarter 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 2021 10-K for additional details regarding these risks and uncertainties. All references to first quarter actual results and 2022 guidance are reported on an adjusted non-GAAP basis unless otherwise noted. please refer to our Reg G reconciliation schedules at the end of the presentation for the gap to non-gap adjustments. Now, I will turn the call over to Mike Beetson. Mike, go ahead.

Thanks, JC, and good morning, everyone. Thank you for joining us today. Just as the winter temperatures here in Minnesota have yet to relent, supply chain pressures persisted during the quarter and negatively impacted our results. While demand for our products remains healthy, ongoing supply chain disruptions continue to constrain vehicle shipments. As a result, our first quarter sales of almost $2 billion were flat versus last year, and North American retail sales were down over 20% against a difficult comparison to last year, where retail was up 70%. That being said, we continue to see positive momentum. Repurchase and pre-sale rates remain elevated. Our model year 23 snow checks sold out, and on-road is seeing strong interest with the launch of our new Indian Scout and Pursuit motorcycles. Compared to the first quarter of 2019, Retail is up 21%, which is encouraging and one metric that helps sort through some of the volatility we've seen through the pandemic. While our first quarter results reflect share loss, we believe this is largely the result of shipment timing versus fundamental competitive wins from new products. In this volatile supply chain environment, share gains and losses are expected to happen throughout the year and are likely to be highly correlated to a manufacturer's ability to get product out the door. Margins in the quarter were also negatively impacted by inflationary pressure, as well as manufacturing inefficiencies associated with supply chain challenges. As a result, adjusted EPS declined 44% versus last year to $1.29. We did benefit from favorable pricing in the quarter, a direct result from the actions we took in the second half of last year and early this year. In fact, we saw double-digit price increase across all segments of off-road, on-road, and marine. We expect positive price momentum for the remainder of the year, which will partially offset increased supply chain costs. I want to take a moment to highlight our five-year strategy that we unveiled at our Investor Day in February. Our strategy refocuses our investments in the core, both organic and inorganic, and drives margin expansion through improved productivity. This, coupled with our focused and balanced capital deployment execution, we believe will will grow our leadership position in power sports and drive significant value creation for our shareholders over the long term. Let me briefly review some of our recent highlights. During the quarter, we announced 165,000 square foot expansion to our Wilmington PG&A distribution center, along with plans to upgrade our paint operations in Roseau, Minnesota. These efforts build on last year's capacity expansion in Monterey, Mexico for our off-road business and our expansion in Indiana for our marine business. This investment in the core gives us the capacity we need for the near term. Our capacity constraints are completely driven by supply chain challenges, and once those abate, we have the capacity to raise throughput and generate improved manufacturing efficiencies in the near term. We also maintained our focus on rider-driven innovation with several new Indian motorcycle models and the launch of our model year 23 snowmobiles. We have received positive feedback regarding these products, and our portfolio of Indian motorcycles has never been stronger given the recent successful launch of the new Scout Rogue and Scout Rogue 60. In late February, we launched 24 new snowmobiles and two new snowmobile engines, an all-purpose lineup built to deliver the best experience on the snow. Led by the new Patriot 9R engine, we also introduced a four-stroke to our lineup with the ProStar S4. Polaris continues to lead the way with the best lineup in the backcountry and on the trails. We were also honored to be recognized as one of Fast Company's most innovative companies. Polaris and Zero Motorcycles were named to the list of the most innovative joint ventures. A true testament to our partnership aimed at delivering category-defining electric powertrains for power sports. The first vehicle born of this partnership was the all-electric Ranger XP Kinetic that many of you were able to ride and admired our investor meeting. We expect to continue leading from the front when it comes to rider-driven innovation and electrification. Big race wins in Razor and Indian Motorcycle highlight the performance aspects of rider-driven innovation. The Razor team took the overall win at the San Felipe 250 with the Razor Pro-R and swept the top three Pro-UTB classes. In addition to King of the Baggers, Indian Motorcycles secured its second consecutive win at the 2022 Texas Half Mile Flat Track Race. That win placed Indian Motorcycle and their team in the top two positions on the leaderboard for the season. Both wins showcase the capability of our products, and we could not be prouder of all the hard work by those involved to bring home these prestigious victories. We continue to see a healthy level of demand and customer engagement, as reflected in several key data points. ORV presold remain near peak levels, increasing sequentially, which supports a healthy demand level. Short-term and long-term repurchase rates are up, and ORV cancellation rates remain low, even with a price increase and delays in delivery. Polaris Adventure rides were consistent with last year, despite the fact that we could not meet snowmobile outfit or demand due to a lack of units being produced. The Polaris Adventures team is gearing up for their main riding season, Memorial Day through Labor Day, and continue to engage new customers in power sports through the recent expansion of our membership program, Polaris Adventures Select, to four more states in the Midwest. Lastly, PG&A attachment rates are at a record high, indicating that customers are looking to upgrade their vehicles, And PowerSports e-commerce continued to see strong growth. Broadly speaking, we remain encouraged given these demand trends. Additionally, dealer feedback continues to be positive around demand, and not surprisingly, more constructive around availability. We serve our dealer network each quarter, and there was one dealer comment that I felt summed up the current environment well. My business is thriving. Send us inventory, and we'll take care of the rest. This, to me, points to a healthy demand environment that is ripe for growth once we work through the current supply chain environment. North American dealer inventory remains at record lows with healthy demand further constrained by the persistent global supply chain headwinds, limiting any improvement in inventory levels. Further, given our strong pre-sold order book, most of the products we ship are already spoken for. While we expect inventory to remain below optimal levels for the remainder of 2022, We do anticipate modest improvement in the back half of the year and more profound rebuilding of inventory levels in 2023. Of course, that is assuming that we see the supply chain improve in line with our expectations. Given these dynamics, even if demand moderates, we believe there is runway for growth into 2023 as dealers get back to healthier inventory levels. As I mentioned, the supply chain challenges that exist globally, from component shortages to logistics challenges, are negatively impacting our production and shipping execution. Today, we have approximately 50 suppliers with component shortages impacting over 100 of our units, and while that supplier number has remained consistent over the past year, the number of units these suppliers have impacted has risen sequentially and year over year. Specifically, semiconductor shocks, displays, and wire harnesses are the areas where we are experiencing the most risk, and like many other industries, the root cause of these shortages remains logistics, materials, and labors. As we work to remediate the current situation, we are refocusing our lens that we look at the supply chain environment through. Specifically, we're taking a longer-term view and suspect that the supply chain will not likely see substantial improvements in the near term. As such, we are making design changes to work around challenging components, We have also reduced dozens of models to remove complexity to enable better delivery, and we are institutionalizing certain aspects of our organization in recognition of the near-term permanence of the supplier and logistic triage efforts. We believe these efforts will improve our ability to deliver, and as a result, we will begin to see the impacts materialize in Q2. Lastly, I want to express my gratitude to all of our employees who have worked tirelessly to meet the needs of our customers. I'll now turn it over to Bob who will summarize our first quarter performance as well as our expectations for the remainder of the year. Bob.