Polaris Inc. (PII) Earnings Call Transcript & Summary

All right. Good morning, everybody here in Nashville. I'm J.C. Weigelt, Vice President of Investor Relations. First off, I want to thank all of you that made the trip to Nashville to spend the day with us -- last night with us. Hopefully, you had a good time. I thought it was really exciting. I have a very busy day for you, exciting day. Hopefully, a lot of value added. Also thank you for those online that are joining us. Good morning, good afternoon, wherever you are. So we -- again, J.C. Weigelt, Investor Relations. Safe harbor, I guess, there are some risks associated with some things we're going to say today. They're noted in our most recent 10-K so please visit that for those. There will be some forward-looking statements made as of today. Please appreciate those. There are some reconciliations in the back of the presentation for some adjusted numbers. Today's agenda is pretty busy. Like I said, we're going to hope to wrap up before noon, but we have Mike Speetzen, going to kick it off with business and strategy update. We have each of our business unit leaders here to speak about what's going on in their business, and then Bob is going to wrap it up and then we'll have some Q&A. So with that, I'm going to hand it over to Mike to get us kicked off. Thank you.

All right. Thanks, J.C., and thanks to everyone for making the trip out. And for those of us -- for those of you online, thanks for joining us. It was an exciting night. I don't know about you, but the [ straw ] blades and smoke that we had going on for the XD was pretty incredible. The feedback that we got last night, Steve and -- Mike Dougherty, Steve Eastman and I were talking was incredibly positive. It feels like dealers are in a really good spot, and it's good to have us all back together. So I appreciate you all making the trip. I think it's good for you to see that firsthand. Really, I'm going to focus my discussion on a mantra that I've talked about since I stepped into the job, focused execution. We're going to talk about focus and we're going to talk about execution. And then I'm going to talk about how we look going forward. And then I'll turn it over to the guys to walk through each of the businesses. That will be a good opportunity for you to hear from each of the business unit leaders. And then Bob will do a little bit of a wrap-up and talk more about how we're going to achieve the financial goals that we've got out there and the progress that we're making so far. For those who were at the reveal last night, I talked about the best team in powersports and it starts with this leadership team. This entire team, with the exception of our General Counsel, Lucy, who had a prior engagement with her daughter's vacation. This is the leadership team. And I talked about the fact that this team rides. And that was an important distinction to make with the dealers last night because there was a view that over the years because we were starting to think about diversifying the company and doing all these things that we were getting away from being riders and experiencing what our customers are going through and having that firsthand interaction with the products. And so we made sure we're very deliberate about the fact that we are riders. And we don't go out and just ride every once in a while, we try and get out pretty frequently. It's a fun aspect of the job, but it's an important one because it allows us to experience everything. This picture was taken in Sedona, Arizona. We actually went to the Polaris Adventures that's located there, and it was a great experience for us not only being in our own products. but also to go through the adventurous process. And there were a lot of great aspects to it. And frankly, there were some things that we saw that we could do differently. We got to experience some of the local issues firsthand, which was great. So that we could help the operator improve, and we were there to actually experience it and feel it versus being told about it on a PowerPoint. So best team in powersports, we talk a lot with our Board about the number of years of experience. I mean we have folks who have only been with the company for 4 or 5 years. We have people that have been with the company 25 that brings a lot of depth and breadth and that's really important in terms of running the company. So I want to make sure that we reinforce that. If you remember, when we had our last Investor Day, of course, we had a lot of world events going on, unfortunately, at the same time. But we reframed our strategy and what we said was, what are we entitled to be the best at? What are we passionate about? And what drives the economic engine of the business? And that was really important. And it was something that the leadership team and I spent a ton of time wrestling through to make sure that we got ourselves refocused because we knew that there were implications to the portfolio, and I'll talk about that here in a second. And so we came up with this strategy, saw me put this up there with the dealers last night. I'm not going to walk through all the different elements, we did that last time and talked why it's so important. But those 6 strategic pillars in this strategy are not going to change. There was a big part of the presentation last night that was about me reinforcing that with our dealer networks -- dealer network, really important. And as I talk to folks afterwards, they appreciated that. Their comments, where we really do like the focus. We do really like the fact that you guys are back in it, you're leaning in because it's their livelihood. And when we were off foraying into different things, that gets them nervous. And frankly, that opens a window for our competitors. And so it's really important for us to continue to reinforce it, and we're going to continue to do that. And the best thing we can do to show them is not talk about it, but is to do it. And so we're going to talk a lot with you today about the progress we're making around executing against this strategy. I can tell you that we've reoriented our processes inside the company. So we've separated the day-to-day discussions we have around the quarter. And we give ourselves time as a management team to think about strategy, talk about the progress, go deep in areas that either are going well and we may want to accelerate or areas we're struggling in, and it's a really important part of the process. We also spent time with our Board talking about -- at every Board meeting, the progress we're making against the strategy. We go deep in our October meeting and the discussion I had with our Board just last week was, look, our strategy discussion is really going to be about execution progress. There's not a lot of new stuff that we've got to talk about and providing some feedback around the new products that are coming out, those are going to be important aspects but also showing them how we're doing on the journey against margin improvement, the investments we're making back into the business when I talked about agile and efficient operations last night. The things that we're doing to make ourselves run better and those are really important aspects. And so the key message for you all is we're not going to mess around with this. We're going to go execute against it and we believe this is going to make this an incredibly valuable company, and it's going to make us better at execution, and it's going to reinforce the #1 player in powersports. So the first thing I want to do is talk about focus. Obviously, we spent the last couple of years getting the portfolio right. We divested about $1 billion in revenue. And you can see it had a pretty impactful move on our EBITDA margins and that was part of the story when we talked about getting our EBITDA margins mid- to high teens. So getting the portfolio right was incredibly important for financially, but it's also important in terms of focus. Because it allowed us to step back and look at our business in a simpler way. And think about it, we're almost 3x the size we were when I joined the company but we've made it a lot more simple. We used to have 5, 6 segments that we were trying to deal with and that dilutes you financially, but it also dilutes you in terms of management, time and attention. Bob and I spend a lot of time allocating capital amongst these pillars, and it's easier when you've got this level of simplicity. Now each one of these businesses is incredibly complex and the GBU leaders do a really good job of boiling that down and help us understand it from the right angles. But so much of our job is to make sure we're putting capital into the right areas. We're not going to go out and create another column on this chart. We're going to stick to these. We think there's a lot of room organically within all these segments, but there are some inorganic opportunities that, over time, we may take a look at, but they're going to have to hit all the right financial criteria. They're going to have to be consistent with strategy. Those are going to be tough to come by. So a lot of what we're focused on is really just deploying the capital back into the business, running the business better and continuing to grow profitably. So let me talk about execution. So it will be a good opportunity to kind of talk about where we're at with each of our segments as well as some of the emerging capabilities that we talked about at the last Investor Day. So if you look at our Off-road vehicle business, I mean, I think it's clear after you watched last night. It was our final big product launch that we had all been pretty anxious to get out in front of our dealers and customers. But you think about what we've done over the last couple of years, started with the Pro R and the Turbo R, the RZR XP, Polaris XPEDITION and then last night with the XD. And I was talking to the team that I got into the very hot elevator in the G building. And as I was riding down, a dealer and his wife got on board and we started talking, they're from Missouri and he's been with us since the early '90s, and so he's seen a lot of the evolution of the company. And he's like, I got to tell you, we love you guys, your products over the last couple of years are just nailing it and you're getting easier and easier to do business with. And so that Off-road business has made a lot of progress. Now we still have a journey in front of us. Steve will talk about that. Quality continues to be an incredibly high level of focus for us. We've made a lot of inroads. We heard it when we were out talking with dealers, but we know that there's more to do, and we've set some very high aspirations. We could ultimately be the best in quality and the best in performance. We can do both of those. And that's really what we're trying to do right now is to continue to evolve the business. And it starts all the way back at the beginning when we start thinking about what the customer wants, how are we going to design the product all the way through manufacturing and every step along the way and making sure we're getting that right and dialed in. It also means that we're taking a really hard look at our suppliers. Now, in a couple of days, we're going to have suppliers in here. We're going to have our first in-person supplier conference in quite a while. And a big part of that is to, one, reinforce the consistency of the strategy. They haven't heard from us in a while. But the second thing is to talk to them about the amount of innovation that we have, where we're headed as a company and the growth trajectory and set expectations. That we need them to live up to their commitments. We need them to be investing in the business to make sure that they can keep up with that growth, and they have to be high performing. And we, right now, are working through couple of suppliers that have let us down, and they've let us down consistently, and they're not going to be our suppliers anymore. So we're sending some very distinct messages. This is, again, something that happens when you get very focused in your business, you can deal with the issues that are in front of you, and you can make those critical decisions and move on them as quickly as you can without disrupting the business. We're really proud of the portfolio we have here, #1 in all of our categories. We've regained some of the share movements. The last couple of years have been really tough. Share was largely being driven by availability of product. And early in the pandemic, we were great, and then the supply chain really hammered us and we're now on an improvement trajectory. And we know that as we get product in the hands of our dealers. I heard it first hand from a number of them last night that we're going to win the competitive sale. And so Steve and the team have done a nice job in our continuing focus. We actually just talked to our Board about our On-road segment, specifically around Indian and Slingshot and the path to profitability. This is a commitment. We've talked about it as part of the EBITDA margin expansion story. Bob will fill in a lot more details later. But Mike and his team have done a terrific job of not only getting themselves in a better position financially. We turned EBITDA positive in the first half of this year but also continuing to grow market share, continuing to expand distribution in a very deliberate, careful manner and continuing to reinforce the brand. I mean when we came out with the Chief, which kind of completed the lineup of bikes between midsize and heavyweight. And then we launched the Sport Chief here recently, it is clear that, that bike is a home run. And it's not only a strong profit-generating bike, but it's also one that's gaining share and is just an incredibly competitive bike. So a lot of great work here, building the brand, building the product, making sure we got the right distribution and now moving in the right trajectory from a profitability standpoint. It's an exciting moment. Bob and I have talked that we probably didn't do a good job of explaining when Indian was bought that we didn't buy a business. We bought a brand and we had to rebuild and create a business. And we've invested a lot of capital. And now we've got to see that return generated in. Mike and his team have us moving in a really strong direction. Our Marine business, right now, we're getting a lot of attention. We talked about retail being weaker than we expected. We had -- Ben and the team had to take our manufacturing down, but that's one of the things we talked about when we bought the business was that, it can adjust and it can adapt very quickly and we saw that playing out. We started getting signals and Ben and the team were able to adjust schedules and do it in a way that, yes, we had to impact a few employees, but we did it in a way that was very careful, methodical and we don't have to do it a bunch of times. We can reset the business and get on a better plan. But as we look at how this business has performed since we bought it, in the outlook of this business, it's been spectacular. It's done better than our acquisition model. It's returned a ton of cash to the company. I love seeing $500 million of cash against what we paid for this business in the amount of time we're talking about. I don't think there's many acquisitions that perform like that and Ben will talk a little bit more about that when he goes through. From a brand standpoint, I mean, Bennington is the pinnacle. One of the things that we recognize, though, was that Bennington hadn't been invested in at the level that it really needed to be. And Ben had come in and spend a lot of time investing in Godfrey and Hurricane to get those brands back up, and now those things are out there. Monsters. We've got incredibly beautiful boats, positive movement market share, better profitability and we're going back and doing the same thing with Bennington. Starting with the value line of the boats and moving on up. And so I'm really excited about what that means. It's the pinnacle of the Pontoon category. And when you combine that with Godfrey, we're 20%, 25% of the market. So really important spot for us to be. The Hurricane business, we found that we can take that into other areas that we don't currently play in, and we're really looking forward to seeing that brand continue to grow and gain share. The other thing I would tell you is with the Marine business we've integrated it into the company. And what I mean by that is we haven't Polaris-ized it. So we haven't tried to co-mingle them with operations and things like that. They stand alone like they should. But what we've done is we've brought certain things that as a company, we do pretty well, things like PG&A. And granted, it's small right now, but we're starting down that path of having PG&A offerings across that category. We've integrated the Marine portfolio into our Polaris Adventures and we now have -- I think it's about 10 sites up and running that offer boats as one of the offerings. And we know that, that is incredibly attractive as people think about wanting to go get an experience now they can do On-road, Off-road and Marine, and that's a great part of it. And then there's a lot of things that we're doing. We're -- we've imparted some of our product development process and Ben's taken that, adapted it to the Marine portfolio. So really, really good stuff there. This category is obviously an opportunity for us inorganically as well. I wouldn't say that we're hot to try it right now. We're trying to see where the market is. But it's an attractive category. We have great brands, and the threshold for us doing anything in this area is going to be pretty high. It's got to have the best brands. It's got to fit with the business, it's got to have great financials. And those are tough things to come by. But we love this portfolio, and it's done great. Our Parts, Garments and Accessory business has grown rapidly. One of the things that we did is, we implemented factory choice where essentially customized vehicles can be ordered coming out of the factory, and we've seen that rate grow, grow, grow. And so that's been incredibly successful. The other thing is that the attachment rates and thinking about the accessories that are offered, we've really gotten more aggressive with our dealers working to make sure they understand how the accessories interact, making sure that that's part of the selling process if somebody hasn't ordered a customized vehicle directly from the factory. We have some of the best brands. You heard us talk about Lock & Ride MAX which if you haven't had a chance, I know you were around some of the vehicles, but being able to play around with those attachments, I mean, is phenomenal because you've got the ability to customize and customers love that. And when you think about the number of different accessories that we offer, it's staggering. And in fact, one of the things that we have to continually do is make sure that our accessories are interacting with each other because we have so many of them. So lot of opportunity for us there. We've made great progress in e-com. We've integrated with our configurator to make sure that if someone is building a vehicle, they can see all the different accessories that go on it. I'm really, really happy with how that business is doing. Very profitable. Spare parts are a big part of that business. We've made it a lot easier for people to be able to get on and figure out what they need. We have a lot of people who like to work on their vehicles on their own. The challenge is knowing all the different components you need to buy. And so we invested time and energy a couple of years ago to make that experience easier and more seamless, and that's a really important part of that growth strategy. We also have a lot of aftermarket brands, and you can see those on display out on the floor. And those have improved as time has gone on in terms of profitability, integrating back with the business, Pro Armor is an incredibly strong brand and being able to offer a lease on our off-road vehicles makes us very unique in the industry, but we're also providing product to a lot of our competitors through those aftermarket brands. So it's a good opportunity for us to capitalize on the broader powersports market. So let's talk about -- we talk about from an opportunity to grow in powersports. And I think what we did with Polaris Adventures 4 or 5 years ago, really got us on the right path, and that has continued to grow. I mean you can see that we're up to 240 locations between Polaris Adventures and Indian rentals, but essentially that is how we think about internally when we think about Polaris Adventures. How many rides we've given, the experiences. And one of the things that we didn't do out of the gate, that we're now working on is figuring out how to capitalize on that and turn those customers into customers buying new vehicles. We didn't do it initially on purpose because what we didn't want people to think was that we were trying to do that. We wanted people to get experience on our vehicles. We wanted it to be a great first time interaction with our vehicles. We had looked at the rental companies out there. The products looked horrible. They weren't maintained. First thing was we wanted to make sure that they were seeing the best of what this company has to offer. The intent was as we got close to 2020 that we would then start to work the CRM process and start enticing the customers at Polaris Adventures to start thinking about buying a vehicle. Well, pandemic hits, we don't have any vehicles. We can't keep up from a production standpoint. So we pushed those plans off intentionally. We were having a hard enough time just keeping vehicles in the adventures fleet because we were not able to deliver to paying customers. So now we're reorienting. So we're running some pilots where we're doing test offers and things like that. And the thing that we've seen is that it works. So we're going to be very careful because you can't do it in a way that people look at it and go, "God, it's a hard sales pitch every time I want to go try and rent a vehicle." But there is an opportunity there. We know that the propensity to buy is much higher as someone comes in and rents. And then we can track if someone's come in a second or a third time. Then we can start having a discussion with them around, hey, maybe they ought to go into Select as a member or maybe now we need to entice them with an offer. So really happy with what we have here, continues to be a growth component and something that we can experiment with and gives us a great opportunity. It's also an opportunity for us, and I'll talk about Xchange, Polaris Xchange later, but it's a great opportunity for us to feed used vehicles into a very controlled and managed network, and that's really important as well. New buyer mix, you can see pretty much on every dimension, we're becoming more diverse and this is a direct reflection of all the effort that we've made to make the brand more appealing, to broaden the aperture, to think differently. A big part of this is just the experience people have when they get into a dealership. Obviously, everything starts when you're online, and you'll see that when we talk in a minute about just a high percentage of people experience the company and the brand online. But going into a dealership and trying to make that less intimidating for someone who's not used to the powersports category, making a better experience. You can see that out on the display room floor. Steve and the team spent a lot of time thinking about from an Off-road standpoint, what the dealership needs to look like. Our Indian brand, I would say, is probably one of the most receptive and warm feelings when you walk in. If you haven't had a chance to go into an Indian dealership, I'd encourage you to do that. And in the boat category, you have a lot of different models out there. And for the most part, I think when somebody stepping on to a boat dealer lot, they're pretty much already in the right frame of mind and probably have some level of boating experience. So it's a little bit different animal. But we're happy with where we've gotten. We know that there's a tremendous opportunity to continue to broaden this. Steve, in his presentation last night talked about the number of new customers that we're going after. Obviously, each one of our businesses has that same type of objective. And as part of that, it's really about continuing to see ourselves diversify and bring more and more unique riders into the segment. So I mentioned it earlier. The digital experience was really important. It was one of the things when I first stepped into the job, I hated our website. It didn't invoke excitement. You'd pull it up and it could have been a website for e-commerce company, it could have been a website for just an industrial manufacturer. And so one of the things that we asked the team to do is go back and not only make it more energizing, but make it easier to navigate, and we're making good strides. I used trying to buy a cooler as an example, and it was not an easy process to go through. It's getting better. And we know that there's so much interaction that happens right there before people start to go to maybe a dealer website, or start to go to a forum or all these different avenues to learn about products, they're going to start at polaris.com. And so making sure that we made that a great experience was really important. We shifted it over, starting with our Off-road business. We're methodically going through the other categories. And you can see that the underlying measurements that we use to check how that's gone, are all doing quite well. We launched Polaris Xchange. It's still in its infancy, but the fact that we've had so many unique users come in. The fact that we've had so many leads generated, we've moved quite a few vehicles through there, like I mentioned, we are the single largest source of used vehicles between Polaris Adventures, Indian rental as well as the vehicles we have within the company, checkout units that employees use, sales units, demo units, those types of things. And in the past, those units just kind of found their way to auctions randomly, which one doesn't control where they're going; and two, is expensive, and somebody else is making money on that. And so we saw this as an opportunity. And when you look at the capabilities that we have, they rival anybody else out in the marketplace. And so we've got this in essentially a pilot phase with our dealers on a free trial basis. And we're continuing to watch this, monitor it, get feedback, adapt and learn so that we can roll it out beyond just our Off-road business because we think there's a huge opportunity here. When you think about a dealer's profitability, the used side of the business, for Off-road, it's smaller, but as you get into, obviously, On-road and Marine that becomes a bigger and a more important aspect of their business, and so we think this is another tool that can help them grow their business, drive profitability and make them stronger as a dealer. We talked about electrification at the last Investor Day, and we've continued to make great progress. We're excited now that we've got Kinetic out in the marketplace. Steve can share a lot more details, but overall customer sentiment is better than we could have expected. We spent a lot of time making sure that we had this vehicle engineered the right way. Safety was paramount. I think we've all seen some of the issues with batteries and the things that can happen thermal-wise. And so we put this thing through extended levels of testing to make sure we had the safest vehicle out there as well as the best-performing vehicle out there. We spend a lot of time training dealers from a service capability standpoint because obviously, this is outside of what they normally do. But as we look at the portfolio, we've actually made quite a bit of progress. I mean, you can see that we launched Kinetic, the mighty G Pontoon, Godfrey Pontoon boat that has the capability to have electric motor. I think we had about 10% of those boats sell with an electric powertrain, which -- that doubles the price of the boat. So we've seen that there's an opportunity in areas where lakes have restrictions on gas engines or horsepower, and things like that as a growth category. Obviously, you saw on the floor, Super73 is here. We created a partnership with them around the Hooligan bike that's available online as well as at our Indian dealerships. But we have them here because there's a potential that why wouldn't our Off-road dealers think about carrying that type of bike? One of the things that when -- Steve and Bob and I were out meeting with dealers, all of them had an e-bike. Now some of them had an Indian store so they had the Hooligan but a lot of these guys were carrying e-bikes that don't look anywhere near as rugged or as cool as Super73, and so we wanted to get them here. So the dealers will get broad exposure. We also thought it was important for Super73, they're a young growing company, to see the type of event that we put on because they play in so many of the same type of categories. And so I really encourage if you had a chance to stop by and take a look at the booth. And then you can see that we've electrified in a lot of other categories. We've talked about the fact that we're going to test broadly, we're going to improve capability, but we're going to be very careful about commercializing because the electric razor is a hell of a lot of fun but I'm pretty sure there's not many people that would buy it. It doesn't have a lot of range, where the heck you're going to charge it when you're out in the Dunes, which would be the area it probably have best applicability. It's heavy. You don't have a lot of storage capacity. So there's some things that are very real. And it doesn't mean that we're coming up with excuses not to go there. It means that we understand some of the barriers, but we also understand where customers want to go, and we're going to let the customer guide how we go about this. We're going to continue to test, but we're going to be really careful about how we commercialized. We have partnerships. I've talked about the fact that we'll continue to look at technology as an area, whether it's partnering, sourcing, potentially acquiring, that's going to be an area that we continue to look at to build our capability. And the thing we've learned is, as we've written along with some of our partners, is we're developing capability inside the company. And that's really important because it gives us the ability to have sustainability as we go forward in key technologies. And I think everybody is realizing all this stuff is moving really quick, and it's evolving. And so it allows us to adapt and figure out where do we really need a partner versus areas that we could go it alone and really build our own capabilities. So excited about where we're at. There's a lot more to come. I think the Kinetic is a home run and is going to be a really important growth platform for us. We are the leader when it comes to not just the RIDE COMMAND presence in the vehicle, but now RIDE COMMAND+. And on here, we talk about the user benefits, and there's a lot. I mean, most of us have an app for our car that we can check things, tire pressures. It gives us alerts if maintenance is due. My GMC truck allowed me on a recall to use an over-the-air update. So I didn't have to take it in a dealership, which I thought was incredibly valuable. And that's really where we're headed with these vehicles. You add that to the safety and security of RIDE COMMAND and things like group ride where you've got the ability to track and know where the people in your group are. And if there's a problem, you can send a message. I can tell you when we were in Sedona riding, it's a busy area, and we got broken apart. and it was kind of cool to sit there and watch the RIDE COMMAND on the group ride popping up with messages. When -- I think it was Ken Pucel was looking for Mike Dougherty and Lucy, and so it really was a real life example of being able to, hey, let's stop, somebody's dot dropped off, let's figure out where people are so we can turn around and make it a good experience as opposed to you don't know that, that happened for 2 or 3 hours. So a really important thing. But the right side of this chart is really important as well. And I think this is an area that, as a business, we're starting to realize and see more and more value in terms of being able to see how customers are using the product, being able to troubleshoot things, all of a sudden, you'll start to see error codes, check engine lights. Things like that popping up that we wouldn't have seen other than a customer either ignoring it, never telling us or a customer taking it into a dealership and getting really frustrated with the fact that the check engine light code isn't on when they take it into the dealer, and they now have to trailer the vehicle back and then as you would know, that it would pop right back on the minute they go back out to the vehicle. So it gives us added insight and it's going to help us be better from a cost standpoint. One, it's going to allow us to be more effective at pushing over-the-air updates if we see things, performance characteristics of the vehicle. Frankly, if there's some sort of a recall that qualifies for an over-the-air update. But it's also going to allow us to learn what customers are doing. We had a recall not too long ago where we had a bunch of clutch failures. And it was really -- because people were doing launches with the vehicle, standing on the brake, hammering the gas and then letting off the brake. Well, if we had connected vehicles, we would have been seeing what was going on with our customers. This wasn't new behavior. It was just behavior that finally found a way to break something that we had. But had we been connected years ago, we would have been able to watch and see that, and our engineers would have been able to say, okay, let's adapt. You're not necessarily -- you could tell consumers not to do it, but they're going to do it. So how do we adapt? How do we build a stronger drivetrain so that they can handle that type of activity? Well, this is going to give us that added insight, and that's going to be really important. And we're still in the early innings. We've got good partners. We're moving from having a connected from a plug-in to actually having a TCU mounted in the vehicle. And this will pretty much span both On-road and Off-road. For us now, it's just a question of how far do we go in each of those categories? Clearly, your mid- to high-end products really lend itself well to being connected. The question is, you get down that value chain, you get as much value. So we're working through a lot of that. But a great opportunity for us to add customer value, but also to help us better manage the business and, frankly, make better products as well as save money. I talked about this last night with the dealers, which probably a lot of people are like, why was he talking about investing in factories? It was important for them to hear that we are investing back in the company. I can remember one of my first dealer visits when I got to the company, and they pointed at a GEM vehicle, and they started asking all sorts of questions. Well, I've been with the business for probably all of 2 months. So I hadn't quite got my bearings. But it struck me how the dealers were focused on worrying about what we were going to do as opposed to running their business better and being better partners with Polaris. And so it's encouraging to see that people are getting more and more comfortable that we're not going to surprise them, that we're not going to go out and put a bunch of things in the portfolio and then tell them they have to sell it when they don't really understand it. But the flip side of that is making sure that they know that we're taking that money and we're reinvesting in the company. When I went up to Roseau with the team a couple of years ago, and I saw the state of the paint system there, I mean it was just -- it was horrifying on a lot of different levels. And it really opened my eyes to the fact that we were really not putting money back into the core of the business because we want to use it for a bunch of other stuff. So we've been doing this. You've seen us expand our Wilmington distribution center. We put new paint systems. We're in the process of putting new paint systems in a couple of our facilities. We added tremendous square footage, as Steve talked about last night to accommodate the new vehicles that we have coming out down in Monterrey. We're going through and adding more square footage in Monterrey right now to be able to handle a lot of the in-sourcing because we got so cram worth of capacity, we outsource things at a mix that was not favorable to the company. And I'll talk about it when I start talking about the moving forward, but the thing you have to remember is the complexity and size of our products has changed a lot. And so that gobbles up capacity. So when you hear us and others talk about adding capacity, sometimes it's not about getting more units out. It's about getting bigger, more complex units out. But I'll talk more about that as well, Bob. But we've done a lot here. You probably picked up on the fact that we acquired Walker Evans a couple of weeks ago. That was an important step for us. We still obviously have a very strong relationship with FOX. They are our premium level shock provider. But Walker Evans was a company that was really important to our snow business and to some of the lower-end models of our Off-road vehicles. And we knew that they were at a point where the ownership needed to transition, wanted to transition and there wasn't really a good next step. And so for us, it became a vertical integration play. There's obviously some potential opportunities there for the aftermarket, Walker Evans racing, some of the brand strength that's there. But -- this is really about making sure we had continuity of supply in our -- the core of our shock business. And then we've done some other things. We've got cruise seating on here. We've got ownership in a small company in Elkhart that gives us another avenue for seating options, and it also gives us the opportunity to start experimenting, and Ben is doing some of that now with some of the new boats that we have coming out with different technologies around seating that's really important for comfort, look and appeal of the boat. But a lot of money going back into the business, we spent a lot of time talking about this not only internally, but also with our Board because obviously, there's some pretty big investment in infrastructure moves that we're doing. One of the things I tried to hit on last night was just the inspiration that's around our brand. And you heard me, obviously, you saw some of our ambassadors there. The Diesel Brothers, I thought did a great job, and we just have so many people who just are emphatic about the brand, and then the brands themselves. But we talked a little bit about some of the events. I'm going to play a video. I think a little bit of this is going to be repetitive last night, but there was a large portion of our management team that was at Camp RZR because it was our first time being back live, which was really important. But again, stressing the importance of this team being out, experiencing our customers and experiencing how our products do in different environments. And so it was a really important time. The team did a great job, and it was a lot of fun. [Presentation]

Really cool event. I'd encourage you if you get the chance to make the trip out. Customers really appreciate it because it's a chance for us to really thank them. We do a lot of cool stuff like free service areas where they can come in and get some basic stuff done on the vehicle, and it's just a really fun and great time. The last thing I want to hit is best team, best culture -- actually the last two things. Best team, best culture. You heard me talk about best team in powersports, being the 16,000 employees that we have. You can see we got a lot of positive recognition on the right-hand side. We don't do what we do to get that, but it's nice to see that the way we run the company is recognized. Most recently, the most ethical company which just reaffirms what I think many of us already knew, which is we run a really, really good, sound, high integrity company. It's good to see that. And the last thing I'll mention on here is, one of the things that makes us unique is the fact that it's an employee-owned company. Granted, it's down to about 2%, but every person in the company gets stock, all the way down to the factory floor. We have an employee stock ownership plan, we give them money towards retirement. We think it's important for them to have ownership in the company on top of 401(k) and match and all those types of things. This makes it unique. So when the company has got a challenge in front of it, we got a lot of employees who are doing what they have to do to make sure the company succeeds. Oh, sorry. So geared for good. I talked a little bit about this with the dealers. I'm not going to run through this, but we put markers out there, we did better than those markers. We knew that we needed to have more sophisticated goals, but we spend a lot of time because one of the things that I get really frustrated about was watching airlines come out with zero carbon and carbon neutral, which we all know is just not going to happen, and so what we did is we sat down and said, look, our goals are going to be beyond when many of us are with this company. So let's make sure that we put goals and objectives that are the right level but are achievable. And if we look like we're on a path to do better, that's fine. We can up the goal, but let's start moving in the right direction and I want it to be authentic and genuine because the environment does matter. Our products are used in every aspect of the environment. So why wouldn't we care? But let's make sure we do it in a way that's genuine. So you see us spending a lot of money with Forestry Foundation, with trail grants, just making sure that everything we do is about improving the environment because we need to make sure things are kept pristine so that our products can be used there. So a really important aspect for us. Bob is going to spend more time, but I'm happy with the trajectory we're on. We're dealing with some foreign exchange headwind, which this year is pretty frustrating because I think we'd be talking about EBITDA margins approaching 14%, which is a very different world than we've been in over the past several years. But I'm happy. I feel like we've got all the right areas of focus. This year has been particularly challenging relative to getting the inefficiencies out of the business. They're coming down. They're just not coming down fast enough. And the reason they're not coming down fast enough is, one, we've got to get better at focusing on lean inside the business. But we are still contending with some suppliers that while they're not as late as they used to be or as challenging as they used to be, they're still presenting us with challenges because when you have things like wire harnesses, you can't start a vehicle. It's the nervous system of the vehicle. It's like the spinal cord. You're not going to start that. So that puts us into -- happen to reshuffle schedules and deal with resetting lines, and that is not efficient. So we're still reworking a lot of vehicles given some of the other suppliers who are a little bit late delivering, but there's a big opportunity for us there. When you think about the strength of the business right now and the margins that we are generating. And then you think about the fact that we are not running efficient. That just means opportunity because the one thing we know is, operationally, we're able to go after it. We can get after those types of things. We're working with suppliers right now in an aggressive manner. They're moving in the right direction. Things sequentially every day are getting better. So I'm really encouraged. But on a great trajectory, and Bob is going to spend some time talking about that. We talked -- I'm not going to go into a lot of detail here. I think just reinforcing, we see a ton of opportunity for growth, not just in the core, but as you get out into addressable and you start thinking about other lifestyle categories, and you saw that really coming through in the material that the Off-road team went through last night. Yes, we're still talking about RZR and XPEDITION and General and Ranger but we're talking about it through a different lens, and that's really important because we're taking more of a customer perspective on everything we do. And that's how things like Polaris XPEDITION came to be because we started thinking outside of just innovating a product and sort of thinking about, what are our customers out there doing? What customers doing that should be our customers? And how can we help them do the things that they want to do? And that has become a really important aspect in a lens that I love every time we talk more and more starts with the customer, and that's where this journey really has to start. I talked about this earlier. The category has evolved. I talked to 1 of the dealers last night from North Dakota, and he was talking about the fact that the new XD is going to be really popular up in that area and over into Montana. And I asked him about the price point. And he said, it's funny a couple of years ago, as these things got more and more expensive, I thought at some point in time, we're going to get to a point where customers are going to walk away and he goes, hasn't happened. And if you think about it, it's true of everything. I look at the pickup truck that I drive. It costs twice as much as a pickup probably 7, 8 years ago, cost. Now it's got more features, capability. It's a cooler rig, and that's true of everything you see here. The vehicles have evolved. And it will be a point that we're going to keep driving because we've had this come up time and time again about there's so much capacity being added in powersports. That means that the market is going to get flooded and we're going to have some massive tipping over. I can't emphasize this point enough. The nature of the vehicles has changed in a way that we have to add capacity. The unit growth in the category for the industry has not been huge. Bob will talk a little bit more about that but the sophistication of the vehicles has. You think about when we now launch -- when we launched the RZR XP, we didn't just launch a 2 seat. We launched a 2 and a 4 seat with a ton of accessories. Well, there's more complexity that comes about as a result of that. And we've got to be able to have our factory as that product subsumes the prior XP 1000, there's more complexity there. It's a different product. There's more to it. And so those are some of the things that we've got to contend with as we go forward. As we look forward, innovation is going to be the key. You heard me talk about this, the fact that we're spending a ton of money. The thing I love is not only we're spending a lot of money, we're spending it far more efficiently than we have historically. And that's really important because making sure that we're getting more of that horsepower to the ground, making sure that we're not working on a bunch of projects that are never going to come to fruition. And that starts with my team, sitting down and making sure that the innovation pipelines that we're all aligned were all clear so that when people are off working on projects, they're not spending time and money on something that we're never going to do. And I'll tell you, a couple of years back, we had that problem. And we've got better alignment that can always improve, but we've got better alignment. We're going to be going through our long-range plan and our long-range product plan here in about a month, 1.5 months, which is an exciting time because you get to see everything that's out there, but it's also an alignment opportunity for our teams because we only have so much money, and the teams know that. And we're getting better at being disciplined about, okay, how do all those LEGO blocks fit together because you've only got so many things you can do and you got to make sure that they work. We'll continue to Make powersports more accessible. You heard me talking about the models that we have, and it's everything from Polaris Adventures, making sure that we've got the experience on the website. The products themselves we know that there's opportunities for us to have better entry and value products. And I think you'll see us focusing on that. We focus really good on the high end and the heart of the market. There's more that we're working on when you start thinking about somebody coming into the category. Some of that starts with Polaris Xchange, having a really good experience for someone to get a used vehicle. But we also know that there's an opportunity for new in that category. So making powersports more accessible will continue to be a big focus for us. And then as I close up, really, it's about coming back to what I started with, which is just reaffirming. We have our strategy. We know what we need to do. We know what the financial measures that we've put out there are. We're making good progress against that. You should not think about us coming in and surprising you because that's not going to happen not on my watch, not on this team's watch. We're excited about the opportunity in front of us. I'm excited about the fact that you're going to hear from all of our business leaders. Last time, we really focused heavy on Off-road just given some of the challenges and opportunities we had. But now you're going to get to hear from each of the business unit leaders. They're impressive veterans of the spaces that they play within. And so I'd really encourage you to take the opportunity when we get to Q&A to hear more from them versus coming at Bob and I. So with that, I'm going to turn it over to Mike Dougherty, President of our On-road Business. [Presentation]

All right. Hi, I'm Mike Dougherty. I'm the President of the On-Road business and also International. I've been with the company for over 25 years now, and yes, I'm the dot that fell off the Ride Command screen, couldn't keep up on the team ride. It was really dusty out there, though, it was really dusty. But anyway, so I'm excited to share with you the progress. The On-Road business has made over the last few years and really the trend that we're on, which is pretty exciting. The On-Road business is over $1 billion. You can see the breakout there. Majority of the business is Indian and Slingshot. We're going to talk about that today but we also have a couple of businesses in France that are On-Road, which really makes us a really global part of the business. You can see the breakout of sales of On-Road a good percentage is overseas, and Indian actually has a really big opportunity for the growth internationally. We'll talk about that going forward so. On-Road in numbers, we've been growing our business, gaining market share, growing volume. A lot of that is attributed to the recent product launches that we've had. Mike mentioned the Chief that's probably been our most significant volume and share grower over the past couple of years. We're building on that. That's exciting. From a dealer perspective, dealer count perspective, we have about 900 On-Road dealers with -- actually, the international dealer network being the biggest, there's about 350 Indian motorcycle dealers outside North America. Slingshot has about 325, all of those are really within North America, and then we have about 225 Indian dealers within the U.S. and Canada. We have 4 global manufacturing plants. The Slingshots are built down in Huntsville, Alabama. Spirit Lake, Iowa builds all of our U.S. bikes and all the heavy weight for the world. And then we have a couple of years ago, we expanded our operation in Poland, where we had been building Off-Road vehicles, and we started building our midsized bikes there. Scout and now Chief. Those bikes go to our Europe, Middle East, African customers. That has been really helpful to lower the logistics cost and to get to the bikes into the market quicker. And more recently, we've opened up an assembly operation in Vietnam, primarily for our midsized bikes and all for the Asian marketplace. Our gross profit margin in 2022 was 18%. It's lower than the other business units. We got work to do, but we're definitely trending in the right way. So that's good. And our sales are growing. Almost 10%, 9% CAGR so that's exciting. But probably the best number helping our bottom line is the PG&A sales. We're growing that faster than the whole good sales, and that's really driving our gross profit and the performance on the bottom line. And Steve launched Indian. Built the business for -- we started about 10 years ago actually now, and it's pretty amazing how far we've come, and we're #2 in North American market share for our segments, cruiser, bagger, touring, and it's a very strong #2 position, and we're growing. So that's exciting. So we're growing share. We're growing retail volume compared to last year and compared to 2019 as well we're really in a pretty healthy spot in the marketplace right now. Our channel has never been in a healthier spot. The Indian motorcycle dealers, I mentioned, we got 225 in the U.S. and about 350 overseas. But we're growing that now. COVID kind of put a pause to that. But there's a lot of demand to become in Indian dealership. We've got to get the right partners and we're growing between 10 and 20 a year, and we should be able to do that for the next 5 years or so as we find the right partners in the right markets. And that -- and another really key part is we really want our dealers to be profitable. We've got them in a very healthy spot right now. I would say the dealer channel is healthier now than it's really ever been with the terms of the number of vehicles that are at the dealership and the types of vehicles that are there. It's more current, it's the more on spec, the ones that are selling the fastest, they have the most of -- so we feel really good about where Indian is right now from a channel perspective. Slingshot as well is in the best spot that it's been. We have seen the number going down of Slingshot dealers. It's actually a good thing for us. We're trying to optimize that network and make sure that each of the dealers have a Slingshot can sell, enough Slingshot to have a dedicated person on staff for it. They can make money because then it just gives a better ownership experience and they're committed like we are to growing that business. The channel is super clean from a product standpoint, from a noncurrent current and also total volume. I don't think the Slingshot business has been in a better place than it is right now. So executing our On-Road plan. We got to gain market share. We'll talk about that. It's a product-driven category. We're winning on the product side. International is super important for the company, but specifically for Indian motorcycles. We'll talk about that and ultimately, the margin expansion. So we're executing on gaining market share. We have to gain market share to grow our business significantly. We've done a nice job. Each time we enter into new segments. We seem to take another chunk, but we're also continuing to gain in places like Scout that we've been competing in for a long time. So our share gains on a global basis are growing, say for last year when we couldn't get the bikes out to our dealers on time, in season, on spec, and we really kind of fell backwards last year. But we're back to growing. We expect to be at record or near record levels by the end of this year. Product excellence and innovation. Mike pointed out the Sport Chief. Chief has been a home run platform for us. Customers love it. It's really the right part in our product line. People can move up from a Scout to a Chief now. Otherwise, they had to jump all the way up to one of our -- even larger motorcycles. And this is our first derivative, the Sport Chief. People love its performance aspect, and it's muscular styling. It's really done well, especially on the West Coast. It's been great, really around the world though. The Indian Challenger we launched about 3 years ago. People love that bike. It's our primary bike in our bagger category. And they love it, but they really love the ultimate trim levels. And so we have elites that we sell. There are probably our fastest selling motorcycle within that category, and it's nice because they're also the most premium. So these are customers that want the best and we give it and they've been home runs for us. And Slingshot partnered up with Roush and did a limited edition this past spring, and it's been our fastest selling slingshot and Slingshot retail has been up 40% year-over-year and has really been driven, not all by the Roush addition, but it's one of those things that is really added to the momentum that Slingshot has had and it's a real head turner. It's been a fantastic launch for us. International growth and international motorcycles -- or Indian motorcycles, sorry, more than 1/3 of our sales for Indian are outside the U.S. and I would say the opportunity outside the U.S. for growth, we have a lot of opportunity to grow in North America for sure. But we can do as much or more outside of North America. So it's an important initiative for the business. We have a bunch of dealers throughout the world, but our core business is really in Europe right now. France and Germany, our 2 largest markets in Europe, but we're doing really well in many parts of the world. In particular, Mexico is the first market or one of the first markets, I should say, where we achieved the #1 market share. So not #2, but #1 in Mexico, that was a really cool achievement for the Mexican team, for our team. They do awesome in Off-Road vehicles but now they're killing it for us in motorcycles as well. But Asia represents the largest opportunity. We've been doing business in Australia for a long time. We were big with Victory down there. Indian has been a nice business for us in Australia and New Zealand as well. We've got a strong presence in China. We're excited about that but we're relatively underserved in many of the other Southeast Asian markets and Japan. And so this expansion of our capabilities in Vietnam is going to enable us to compete more effectively and really address the customers' needs in a better manner and allow us to grow in Asia, which is probably our biggest growth opportunity. Margin expansion. We've done a nice job over the past few years of kind of watching where we spend, leveraging the investments in the platforms that we've had. I mentioned the Chief platform, in particular, has allowed us to kind of double our margins in some of our platforms. And as we've kind of managed that and launched premium bikes in their segments, our mix has gotten a little bit better. So most of our margins, gross profit margins on most of our platforms are up double over the past 3 years, which is really driving a lot of this improvement. The international expansion has allowed us to lower our logistics costs and also lower our duties in Europe and in some places in Asia. So that's been important to expand margins. But scale helps and our volumes going up and our share growth is going up. And so that's helping our overall bottom line significantly. So last slide. We're doing pretty well on the On-Road Business. We have really strong brands, in particular with the Indian, but we're growing the brand of Slingshot. It's an exciting business for us for sure. Our network has never been healthier. We're going to keep it that way moving forward. We know this is a product-driven category. We've got great products that are out there right now, world-class products, and we're excited about the portfolio moving forward. We got a very strong pipeline coming. And the investments we've already made and are currently making and our global capabilities, we expect to pay dividends going forward and allow us to compete and grow the business and gain market share and continue to expand margins. We've got a ways to go to get up to the company average, but we think we can get there. So overall, On-Road is on a roll right now, and we're excited about where the future goes. All right. I'll turn it over to Steve Eastman. [Presentation]

We're super excited about this new Lock & Ride MAX. I'll talk more about that in a little bit. Good morning. My name is Steve Eastman. I'm the President of the PG&A and Aftermarket business. Excited to talk to you about the state of the business. Looking at the sales, we had another record year in 2022. The business is absolutely on a roll, I'll talk a little bit more on the next slide about some of the numbers behind that. But you can see that our highly innovative Accessory portfolio is really leading the way now with -- representing 60% of our business. We're seeing great growth across all of our business segments. All elements of the PG&A business are performing well. Over the last 5 years, this is a very resilient business. As I highlighted on the bottom, we do have a substantial owner installed base that regardless of economic conditions, continues to ride and enjoy our products, service them, update them, customize and so forth, and that's led to a 14% compounded annual growth over the last 5 years. More recently, 2022, some of the performance behind that result that we had last year was Accessory dollar per unit grew 34%, and our e-commerce channel continues to be especially important. The growth there is driven by traffic and conversion. We're just seeing a lot more engagement online. And while the revenue online is important, it's a really important source for customers as part of their overall shopping experience and discovering what they can do with their vehicles. So a very profitable business, 40 -- roughly 40% gross margin. We have a large logistics responsibility to help support our dealers with their service business. We shipped over 18 million parts last year, and we're very proud of fueling this accessory strength that we have with over 500 new accessory introductions in 2022. So I'm going to talk about, in the spirit of focused execution, 4 areas of the business that we think are especially important, highlight them here. I'll get into each of them on the next few slides. So product innovation and partnerships. As you saw in the video, Lock & Ride MAX gives our customers a really unique and highly flexible way for them to accessorize their vehicle to meet their individual unique application needs and so forth, farmers, ranchers and so forth, have a lot of ways that they can leverage Lock & Ride MAX to do their chores on their property and so forth. It's a really -- so really unique, we think, industry-leading platform for us that's going to drive a lot more accessory growth in the years to come. In addition, we partner -- we're increasingly partnering with brands that have a lot of resonance with the consumer. And Rhino-Rack is one of those. It's one of the leading storage solutions for Off-Road enthusiasts in the automotive space. We partnered exclusively with them. It works with our Lock -- interchangeably with our Lock & Ride MAX system. And then in audio, we're partnering with the likes of Rockford Fosgate in our recreational category and Slingshot, and we're partnering with JBL and our utility category to give our riders really premium audio experience is something that they're all asking for from our Accessory business. And our Aftermarket portfolio is really important to us. It gives us a lot of unique competitive advantages. Our apparel business, KLIM and 509, KLIM is located in Rigby, Idaho, and they now serve as a center of excellence for us to help develop premium, high-quality custom apparel solutions for our riders across all of our brands. Pro Armor located in Corona, California allows us to do some really unique custom vehicles, particularly in the Southwest, but then businesses like our Wheels & Tire business. When you're on the showroom floor, check out the Pro Armor Wheels and Tire display. Wheels & Tires are universal. And our dealers love the fact that we have an offering like this that they can sell to all of their brands across their entire portfolio allows us to capture a greater share of the addressable market. And then brands like Kolpin has been around for 75 years, allow us to lead as category captains in the utility accessories space in retailers like Bass Pro Shops, Tractor Supply and allow us another way to access consumers on Amazon marketplaces. So really important brands to us as we target a large addressable market opportunity. The customer shopping experience is especially important in PG&A. We have literally tens of thousands of SKUs, far more than any dealer can support in their dealership. So we've got to have great ways for customers to discover and research and buy product online, and that starts with a great digital experience. As Mike highlighted, we transformed the digital experience, thanks to Pam and her leadership last year. That's leading to even better results and deeper integration throughout all of our brands. We saw over 16 million visits to the site last year and we have a strong bias towards intermediating our dealers in that online shopping experience. So we now ship free product to dealers over 600 dealer locations today, and we'll continue to find ways to intermediate the dealer in that experience. Advanced accessorization is just a term that we're using as we think about some of the limitations of accessorizing a broad portfolio like that in the dealer, how can we continue to inspire riders with vehicles upstream and how can we make attachment of accessories and easier experience for our owners and for our dealers alike. And some of that is creating plug-and-play accessory attachment solutions like our Pulse electrical system, installing accessories upstream based on customer input at the factory allows us to deliver limited additions and derivatives to the dealers that are contented with a great offering of accessories like the Polaris North Star Ranger. And then customer-driven customization for our snowmobile business and our Slingshot business. And then finally, at the retail location, we've got to make sure that we have great integration through point-of-sale and other tools for our customers in the dealership to discover what's available on the PG&A site, how it works with their vehicles, how it helps them solve their solutions. And so significant investments in the retail experience, and you'll see that on the showroom floor as you get out there later on today. Delivery performance and experience is important for us. And like all of the businesses, we experienced supply chain issues last year, far less of a headwind for us going forward. We've reduced back orders in PG&A through the end of 2022 by 72%, and that continues through 2023. We're getting back to much more normal levels of availability, really important to ensure that our riders are able to ride. Average time to clear just as important, is about 14 days. So when we do see a back order, we're clearing those back orders much faster. So it has much less impact on our dealers. And we're investing significantly in DC capacity. And we talk about the capacity, but this is also important in our ability to serve our dealers and our customers faster. We have 3 distribution centers, primary distributions and 2 specialized distribution centers supporting businesses like apparel. And we plan to add a distribution center in the near future in the South Central part of the U.S., likely down in Texas. As Mike mentioned, we're making significant capital investments in our DCs as well, investing in goods-to-person automation with solutions like Bastian goods AutoStore, which you see here. and significant conveyor and goods-to-person automation in our distribution centers that help improve our efficiency and service to our dealers. So wrapping up the PG&A business, this is a sustained and highly profitable growth driver for Polaris across all of our businesses. We have a substantial large addressable market opportunity. Our aftermarket brands give us access to customers that we don't have access to in our dealer channels. We're highly integrated across all of the businesses. The PG&A teams worked very closely with our whole goods partners and our engineers to develop the industry-leading solutions that you'll see tomorrow or on the show floor today. And we're making strategic investments in capability and capacity to continue to fuel our distribution capabilities and innovation on the product side. So I'll wrap up with that, and I think we're going to head J.C. into a short break, correct? Okay. Thank you. [Break]

All right. Welcome back. We're going to get started with the second half. We're going to start with Ben Duke, who is President of our Marine business. Thank you.

Good morning, everybody. It's nice to be here with you. Just wanted to talk a little bit about last night that reveal. I brought a couple of my team members with me the leader of Bennington and the leader of Godfrey and was a great opportunity to show them what a launch could be in a huge way. When we do launches in the marine space, it's generally on a quiet lake. So it's frowned upon to bring lasers out and smoke, but I think they're starting to think now. When we take a look at the business over the last few years, last year was a record year for us. The pontoon and the decks's boat -- and the deck boat space is unique in the fact that you can put a lot of people on these boats. It's a place where you can bring your family and friends and do water sports or you can float around the lake and have a sunset cruise. And we look at and can play in every aspect of the market. From the $20,000 pontoon that's smaller and for smaller lakes, all the way up to the $400,000-plus Bennington, twin 10 wide that we customize and becomes really the jewel on that lake and a talking point for those owners. Hurricane is a deck boat, so it's fiberglass if you aren't familiar with it. And it's a boat that can be smaller, but put a lot of people on it and has a wonderful following in the U.S. and now starting to grow around the world, along with Bennington. So when we take a look at the business by the numbers, one of the really big things that we're working on is launching new models. So when you take a look at pontoon specifically, furniture layout, color schemes, furniture, material, new technology, the screens upfront. That's really important to us to make sure that we're on the leading edge of that innovation. So every year, we're launching new models. We're spending a lot of time with our dealers and our customers. We're doing a lot of voice of customer to make sure that we're hitting where they need us to in new models and new innovation. So in '22, we launched 30 new models. We're going to be launching more this year. We're not going to get deep into the new models we're launching because in just a couple of weeks there is a dealer meeting for the marine business and my product managers and general managers when we started putting slides together, got that panic look on their face of we have to wait for our dealer meeting, but we'll give you some views into what's coming. Our dealer base is really our strongest portion of our business. We have the best dealers in North America and now quickly around the world that is starting to grow. We measure that through consumer surveys, through the size of the dealerships, through the training that they're doing, and it continues to grow. Three manufacturing facilities, 1 in Syracuse, Indiana and the rest in Elkhart, the really good portion about that is our supply base is very close. So through the pandemic, we can literally drive to our suppliers, talk to them, understand where they were, how we could help. That kept us going through the pandemic. But what we did see during COVID was that we had to pull back on certain models so that we could focus on what our dealers were looking for. Gross profit, as you can see there, and the sales CAGR over the last 5 years has been significant. And we are the #1 market share when we take all of our brands together in Marine. So were we a strategic fit? Culture. That's really 1 of the biggest things. I've seen a lot of M&A happen in my career. And some work, some does not. And culture normally is what drives that failure other than just coming in and trying to push too much of the larger company into the smaller company. That didn't happen here. Mike has done a great job of really looking where we need to integrate and where we don't, which is more important. So strategically, it has been a great fit. The teams work well together. And we're very proud of how much cash we've returned to the business in the last 5 years, and that continues. When we take a look at how much we're -- how much we're focused on that. It's been important to us to run the business like it was prior to acquisition. So executing on our plan. We're focused on market share growth within strong segments. Product excellence and innovation. We need to continue to innovate as we have and really focusing now on the Bennington brand. So we brought in PDP, product development process. We brought that into Godfrey hurricane, and it's worked brilliantly. Now we're bringing that in quickly to Bennington, and this year's dealer meeting will be one of the largest launches we've ever seen. And then expanding the plant's efficiencies and capabilities in a smart way. So one of the biggest strengths we have is being nimble. If the market goes up, we quickly can grow our capacity and boats per day and if the market contracts, we can equally pull that back and still stay a very profitable business. Market share. So you can see the dip there for Bennington during '21 and '22. So we had suppliers ramping up as quickly as we can. We do share some suppliers with the [ RV ] industry in Elkhart, and we couldn't get everything that we needed. Again, the nimbleness of the business, we were able to focus on high-end boats. That's what our dealers wanted. That's what customers wanted. But to build a high-end boat may take to low-end boats, the space down the line. So we focused on that and really showed that showed our dealers that we could respond when they needed something specific, and that's what we did. Godfrey and hurricane were able to come through that. Their dealer base uniquely is not the same as Bennington. We have very little overlap between the Godfrey and Hurricane dealers and the Bennington dealers. So that gives us a nice total space across the U.S. and North America and now globally to really focus on markets that are specific to those brands. So again, executing on our plan. When you take a look at where we're positioned, pontoon is the second fastest growing category, deck boats is down a little bit to the right. And as you look at the deck boat, we really are the majority of the deck boat market with 30-plus percent market share in that space. So all the brands are positioned well and growing very quickly. When you look at the why of pontoons, the ease of the overall use getting on and off the boat from a dock. So as people get older, initially, they were looking at that. Now as our age demographic is starting to come down. That's why we're getting new designs, performance, the running surface. I had a boat last year with Twin 400s with a joystick on it. People were just amazed when they walked on the boat, said, this is a pontoon. It's a pontoon that will do 60-plus miles an hour and has an amazing stereo and it redefined the space. Again, talking about our dealer base, this is one of our biggest assets. So 550-plus dealers globally. We're expanding globally into Australia, New Zealand up through Europe and now Mexico. And the boats are quickly finding a home. People think that the boating market is different globally. But just a few years ago, pontoon was new here in the U.S. as well. And as we're introducing pontoon globally, it's getting accepted quickly. Hurricane at the same time, a deck boat is not -- hasn't been known around the world. And as we're introducing those into the current or into local markets, they're quickly getting accepted. Again, it's a smaller boat on the hurricane side, but you can put a lot of people into it. Now we don't just know our dealers are the best. CSI is the survey company that we use. We have the #1 ranked dealer base in North America. So we watch those dealers. We add where we need to, we take away where we need to, but we really curate that dealer base because that is the lifeblood of obviously how we get product in the market. So product excellence and innovation. So this is where it is, right? We have to be leading the market on design, color schemes, performance. When we have the conversation with folks that have never been on a pontoon they think it's just 3 logs as they often say and you float around the lake. Well, that couldn't be further from the truth. The design of those -- of the pontoons, the strikes that are on there, whether they're a lifting strike, whether they're when you talk to engineers, they get really excited about the running surface. So what Polaris has brought to us and the innovation they brought is we're doing full fluid dynamic modeling on all of our pontoons now. Our water management in the rear of the pontoons is the best in the industry. The color, the design, all that we've taken from the corporate, the mothership, and we've pulled that down into the business and what you're seeing are boats that are really game-changing in the space. You can see the XP on the left-hand side here. The unique thing about that boat, other than it's just gorgeous. I think it has the best stereo sound system I've ever heard in my life on a boat. But when we built that, we went into our hurricane plant, and we said, okay, we want to build everything on this boat in this plant. Initially, the manufacturing facility was like, I'm not sure if that's going to be a great idea, but we build fiberglass boats every day. So after that initial meeting, this boat was designed and the pieces of that boat that are coming out of hurricane are coming into this, and now we've opened a center of excellence. So we're going to start building more and more of our fiberglass parts internally so we can control the design, the quality, the color, all of those different things. On the Bennington in the middle there, you see some of the new layouts and new S and SV that's going to be launched at our dealer meeting. So that's our entry-level boat. So we're excited to be touching that boat. And in the future, we're going to be touching everything in Bennington. So we're going to go through the line logically and update, refresh new seating configurations new material. We have a new black vinyl that you can sit on in Miami, and it won't burn you. It's pretty amazing. And if you want to see something striking a silver boat with a black interior, it's really -- it will catch your eye. And then on the right, hurricane with the 2,600. The 2,600 was really the first step into a luxury sport boat for hurricane, and that's going to continue as we expand hurricane's market. So we've invested in the plants. We've invested in the technology, and this has been a big deal. So if you take a look at the capital investment that we've made into marine, it's significant. But what you also see there is the EBITDA expansion or the profit as we've grown this. So we're making smart investments in the business and on the next slide, you'll see robotic tube manufacturing. This seems like something that would be really easy to do and everyone's done it. If we're not the first, we're very close to the very first manufacturer ever to do this. And when you're selling a pontoon boat at a show, it's lifted up. One of the first things you see there is the welds. So we want a quality weld. We want it to be beautiful. And frankly, it's very difficult to get good welders. We have a lot of them, but it's a very expensive part of our business. And when we can automate and take those people and put them in other parts of the business for welding, that works out perfectly for us. And there, you can see the robotic weld cell, the first one to come online for us. Crew seating, as Mike had said, this is a business that started up just last year. It gave us an opportunity to get into the furniture business and take that supply base, which we had a single source and open that up. So not only can we experiment with them, we get an amazing new partner that we can watch how the process goes. And then we can also help a business startup correctly from the very beginning with an ERP, engineering, engineering drawings, all those things that we really want, and they're doing an amazing job for us. So finally, closing, we're really focused on new products. Bennington especially, we want to keep this flowing. We want to keep our dealers excited. And frankly, we want to be on the leading edge of innovation, design, color schemes, furniture, the furniture material. We're going to continue to invest in the business. We're going to do it in a smart way. So there's no reason to add capacity just for capacity's sake as you all know. But what we're doing is making sure that it still fits within the guidance that we can be nimble in any market condition. We're making sure that we're driving the innovation in a safe way. So we've done -- we've basically laid out all of our plans in a new way, bringing safety to the height of that has ever been. And then were we a great addition to Polaris, I think the cash return, the cultural fit, the dealers. We're now starting to move into some Polaris dealers that want to be in the marine space. So that's been a good fit. Polaris Adventures, that's been a good fit as well. So where I stand, it's been a great investment. [Presentation]

Good morning. Hopefully, you had a good time last night. You saw some of the excitement in the showroom we'll walk you through the off-road business here and talk to you about what we're really focused on. But you can see the business is broken up in the 3 areas, utility, rec and snow. And hopefully, you really got an understanding that side-by-side aren't side-by-side, the lifestyle of side-by-side in the workspace, the utility space versus the rec space, quite different. And it's really exciting what types of products we can bring to the marketplace, how we can continue to grow the business. So when you look at the business by the numbers over the last couple of years, 10 new products, including our snow business as well and real exciting products, big platforms that we can grow off of. Our dealer network continues to be a strength of ours, over 2,500 dealers around the globe. And as we continue to make products that are widely accepted, we just continue to work with our dealers, continue that growth and really, really satisfy our customers. 5 manufacturing facilities, Monterrey, Roseau, Huntsville, Opole, Poland, and in Shanghai. So supporting the global off-road business is really a great opportunity for us to continue to expand our footprint. Margins, we're a pretty healthy spot, but we have an opportunity to get better. Teams working on doing that. We'll talk about that as a focus of ours. And of course, our sales have been really strong and healthy over the last few years. And as Steve said, PG&A is just such a huge additive to our business really for the dealers as well for the consumers on how they can personalize their vehicles and really enjoy all the aspects of the vehicles through the parts, garments and accessories. Take a little deeper dive into utility, #1 share player in utility. You could see how it spans not only in just Ranger in ATV, but also on the commercial side, we supply United Rentals, Sunbelt Rentals for the commercial side with XD. And the -- in the course of the tactical side in military, we're delivering on our Marine Corps contract there. So smaller aspects of the business, but just as exciting to be able to service those customers as well. When you move into the Rec side. Rec side as you know, a lot was around razor and youth, but we've added this venture section, this crossover with general still being healthy and strong. We're selling those. XPEDITION is going to be great. We see the trailing 12 months low single digits. That's where a lot of that had to deal with the clutch issue on the recall where we were in the stop sales event, but we were able to fix that, get ourselves back going. So we'll be able to correct ourselves there. But a nice #1 position for share. Snow business continues to be strong for us, during #2. A lot of good improvements in the snow business. We are struggling over the last few years to get our sleds out on time with the supply chain. Last year was no different there. But this year, we're excited. Jenny has got the business in a nice spot. We're ahead of scheduled shipments. We're getting our snow checks out and going. Customers and dealers are actually feeling that and communicating back that they like this. So we're getting the snow business back to where it should be as kind of the thing that started at all. So really excited about that. So when you look at where we've taken the business, of course, it's always about gaining share, but gaining share through product-driven innovation versus the old just rebate the heck out of things, right? So a lot of new products that drive our share growth. Safety and quality focus is going to be at the forefront. So we can be that leader in safety and quality with our products. Best customer experience and, of course, an agile operations agile and efficient operations. So you saw last night and you've heard this over and over again about the products. What's cool about these products, a lot of them recently just launched. A lot of them have been constrained due to supply chain. We're out and we're moving forward. Kinetic, as an example, I always get asked, you're going to get more of those. We're going to go for another order window here in about a month. So we'll open that back up and continue to grow Kinetic but all the other stuff just hitting the market now. So the power of what we can do with share growth is just in front of us, and we're excited to do that. When you look at safety and quality, we're learning a lot. We listen a lot to our customers. Listen to our dealers, like I said, from the stage. We have a lot of data coming in now. We work with a team where we are surveilling everything that's going on. We learned from it. If there's a necessary recall, we want to keep our riders safe. So we don't like them, but we'll do it for the right reason. And we want to make sure that we're always -- safety is always at the forefront of what we do with our products. But nice system industry-leading system. We're very, very sophisticated in how we think about and learn about our products. That drives the next 3, right? How we design better products for the future, not only in the corrective actions that you have to take, but future products. How we talk and work with our suppliers on supplier quality. A big part of that, right? And we're learning all the time from them. They're integrated into us as we do our engineering. So we're becoming better and better at supplier quality. And then finally manufacturing. When you use the technology like neural networks and so forth to really look at how that works, DC tools to really understand torque and all that kind of stuff, we are doing a better job now in manufacturing. So if you think about all the future products get the benefit of that. And as we turn over our fleet year after year, our quality will continue to improve. So it's a journey. It doesn't get the -- we don't flip a switch on quality day 1, but we're excited about where we're going. Best customer experience, working with our dealers, we sell through our dealers, and they are telling us right in the top corner is that we're actually getting the #1 OEM to work with. And from their satisfaction. That's the healthiest part to start with, right? If the dealers aren't happy with us, it's hard to have them focused on our customers as well. So together, we're working well to create these great experiences. We have a NorthStar Rewards program that helps them with their margins, pay for performance, if you think about that. Our international dealer base is growing. And then this morning, we just launched our Dealer Advantage strategy that we'll be talking with our dealers where are we taking our dealer network over the next 10 years. And of course, we start -- that starts with how we brand inside the store. What are we looking for square footage inside the store, all the different things to be that anchor brand for most of our dealers around the globe. We talked about agile and efficient operations, new plants, upgrading paint facilities, making our own -- doing the assembly with our battery packs in Osceola and then adding more square footage into the footprint, which allows us, as it was discussed this morning, the complexity of our vehicles, the size of our vehicles and also the volume of our vehicles. We're having more capacity, the more sophistication of our lines and so forth. They are making high-quality vehicles. If you really sat inside the XD last night and saw the fit and finish in that vehicle, just step function change in cab systems and so forth. That's not only part of our engineering, but it's also credited to our manufacturing and operations. So we're really excited about where we're going. Going after more -- better margins I showed you this a couple of years ago, the profit drivers on the left were not changing. We stay focused on that. We're giving you a couple of examples about platforming. We have 10 different exhaust systems on ATVs. We're trying to get that 10 down to 2. Think about just the simplicity that, that drives the efficiency that drives not only in reducing the cost of the vehicle because you're platforming more, but also Steve doesn't have to carry 10 years of 10 different exhausts. Manufacturing doesn't have to have all that going to the line. So there are real, really nice efficiencies when you platform. Modular design is thinking about vehicles a little differently, right? So that's not about just commonization. It's about designing vehicles kind of in 3 sections. Front side of the vehicle, the mid-side middle of the vehicle on the backside. And can you interchange those and make compelling vehicles while reusing systems. So think platforming is commonization of components, modular design, commonization of systems. That's kind of how we think about it. And then as an example in those 2 areas is when you think about the snow engine, we're starting to look at different componentries in the snow engines, different systems. Allows us to save about $1 million a year on how we're commonizing there. And then something as simple as nuts and bolts, fasteners. We had not been that focused on getting those -- but when you get it down to commonization of just simple fasteners, not only do you just save $1 million a year, which is pretty cool. But when you think about efficiency of supply chain, what goes on in the manufacturing line, right? How do you think about material flow in the plant. Those things come to life when you really embrace platforming and modular design, that's what we're doing. Again, another journey takes time as you kind of move through your vehicles, move through your systems this will be a constant improvement opportunity for us and a focus for us as we go through the years. So summing it all up, we really like where the off-road business is. We've got a lot of opportunity to grow. A lot of opportunity to get more efficient, and we're going to continue that through great products, right? So we're going to grow share, keep safety and quality at the top of our business, expand through more new products that are going to be coming. We'll be investing in our growth as we have been over the years, and then we're going to continue to drive that margin improvement. Thank you.

I thought that's what we're all going to learn about today. I know I was excited. Talk about exciting. For how many people is it the first time you were at a Polaris reveal last night, raise your hand? It's a hell of a thing in it. It was great to be back last night. So much fun to see all the dealers, actually hard for us to get around the display room last night because we're getting bombarded by dealers with questions and just staying high and reconnecting. But really a lot of fun and excited to be back here. So about, I guess, 1.5 years ago, we kind of was on this same stage in Vegas, and we talked to you about what our plans were. And so today, I'm going to update you on where we are and what the progress is. But one thing you're not going to hear, you're not going to hear any changes. You're not going to hear excuses. You're not going to hear a different path. We are doing what we said we were going to do 2 years ago. And I hope that comes through today. So before we talk about where we are, let's talk a little bit about where we've been. This company has grown tremendously. From 2017 to 2022, $4 billion in growth. That's nearly double the size and that includes taking out TAP, which was another $1 billion. EBITDA margins have gone down. Some of that is tariffs, it's FX. It's mix of product. We dealt with the portfolio issues like we talked about. It's investments in brands like Indian buying marine, but that's a big focus area. We'll talk more about it today. And then on EPS, we've made progress. I'd say it's been a little muted interest rates. Have been a headwind. But we're pulling the levers that we have. We've executed on our share repurchase. We're heavily focused on our tax rates. So we're doing the things we can to offset the interest rate changes that really we can't do a lot about. The other thing that's really changed is the products. So a lot of the presidents have talked about this. It came up last night. Steve talked about it a few minutes ago. Products have gotten bigger. So if you look at what was being built in 2017 and what's being built today, you see a big change in the mix. The side-by-side industry has really taken over in off-road and so the mix of side-by-side to ATVs is really shifting towards side-by-side. So we expect that's going to continue. You're also seeing in that market a shift from kind of basic vehicles to passenger, not a lot of options, to 4 passenger, 6 passenger, lots of accessories, higher-end trims. So what does that drive? It drives a lot more vehicle, a lot more parts, so a 95% increase in the parts per vehicle on average a lot more labor hours, and it takes a lot more manufacturing and warehouse space. And we've made those investments as a company. Mike talked about last night, we have a 5,500 acre proving grounds in Texas. Our old proving grounds, 300 acres. We run vehicles 24 hours a day, 7 days a week to make sure we can deliver the best quality vehicles in the industry. We've invested in our factories. Monterrey and Huntsville are our 2 primary off-road factories, and those are up nearly 2.5x in terms of warehouse space and factory space. And we're continuing to make those investments. So we're doing the things we need to do to deal with this added complexity that's come into the market as the products get bigger and more sophisticated. So where are we on our strategic plan? From a revenue perspective, we're doing great. That's a lot driven by mix, by price coming out of -- through COVID, we had a lot of price increase to deal with a lot of cost increase, better mix to these higher content vehicles like you saw last night with XPEDITION and the XD 100. And that's going to continue. The price part, I think, will start to sort of normalize. There was a lot of price the last few years. I think '24 will be relatively muted across the industry as people look at price going into the new model year. Promos up, but it's lower on a dollar per unit basis than it was historically. And it's about the levels we thought it was going to be when we started the year. I think that will normalize over the next few years. Promo will probably continue to run about where it is. Price will kind of come back to its normal annual increases. We're getting more efficient. Steve talked about promo, Mike talked about it. We're really good at targeting who needs promo, where it's going to be most effective. We do a lot of testing, so that will continue, and I think we'll get better. But I think that will all normalize. From an EBITDA margin perspective, we've made progress. We did the things we said we were going to do. We divested TAP. Now we're focused on kind of the hard part I'll talk a lot about that later. So I won't go into it too much here, but we've got a lot of work to do in our factories with our supply chain and with our designs to get those last 3 to 5 points. And then on EPS, again, negatively impacted by interest rate. We've got about $1 of EPS headwind. If you look back to '21 when we started this plan, end of '21 as the jump-off point to now, we've got about $1 of headwind from interest rates, but we're making a lot of that up with share buyback. We're ahead of our plan, tax and other things we can control. And we'll continue to look at interest in what we do with our debt and how we can manage that. Long duration. So first, let's talk about growth. Where is the growth? Across the industry, across our product lines, we think we're going to see kind of mid-single-digit growth, which is in that 5% range that we talk about where we want to be. The outliers there really are ATV, which will be lower. As I talked about, the industry is shifting away from ATVs more to side-by-side. I think that continues. ATV will still be a good market, but we think we'll see a little bit lower growth. And then on Indian motorcycles, we think we'll see a little more growth -- we've got a big share opportunity at Indian. Mike's team is doing a great job taking that share. And so we think for the next few years, we've got a little bit more opportunity for growth in Indian just because of that share. We expect international to continue to be a strong part of our business. And if you think about PG&A, we have the largest PG&A business by a fairly large degree in the powersports industry. We'll continue to leverage that. It will grow at least at kind of the same rate as the rest of the business. So let's talk a little bit about gross margin opportunities. So it starts really with getting better at what we're doing every day. COVID was incredibly disruptive. There's the whole supply chain, the factories, we carried a lot of excess inventory. We had a lot of build schedule changes. We brought in a lot of extra people to manage that, both salary people to try to manage suppliers, hourly people to manage logistics and moving things around the factory, we had a lot of temporary labor, so big headwinds. We made progress in 2023. We talked about on the earnings call it's not improving at the rate we had hoped when we started the year. So it's like a $40 million-ish headwind in the second half, not because it's getting worse, but because it's not getting better as fast as we thought. The other piece though, to keep in mind is while we were doing all that, you're sure -- we were trying to survive every day. So if you were in the factory, you were focused on, do I have the parts to build what I've got in front of me today. You weren't focused on lean. You weren't focused on getting out ahead of the next problem. You weren't focused on how can we make this area more efficient and better. And so we've got to get back to that. As we continue to exit this kind of supply challenged environment, we've got to get back to our basics around continuous improvement, lean and just getting better every day. And I think we can do that. And we're finally getting to a level of reasonable stability. So we've got a lot of opportunity to build from here. If we talk about EBITDA. First, you have everything I just talked about in terms of gross margins. And then these are the categories we talked about 1.5 years ago out in Vegas. So I'll give you a little bit of color on how we've made progress on those. So manufacturing optimization, we talked about, modular designs and platforming Steve talked about, and those are longer-term things. So when we sat here in Vegas, we knew those weren't going to happen '22, '23. But as we roll through '24 to '26, you'll start to see the benefits of those really come through both as we launch new products and as we do product refreshes. Portfolio optimization Mike talked about, we've done that. But what I'll tell you is we continue to look every day across our portfolio, for things that are maybe smaller, but aren't performing well. And I think we've shown we have the discipline that if we find those things, and we don't think there's an opportunity to improve their profitability, we don't think they fit. We're going to go deal with it. So we're very focused on making sure we understand profitability at a detailed level across this whole company. In terms of motorcycle profitability, Mike talked a lot about that. It's a big driver. And his team has done a great job. We've made a lot of progress, both with Indian and Slingshot, getting to profitability, and that path is going to continue. People ask all the time, where do you think it can get? Well, I personally think it can get to where we need to be from an average company profitability standpoint. But you got to work it in increments. So you got to get to breakeven, then you got to get to 5, then you got to get to 10 and then we'll talk about where exactly we're going to land. But we're focused on it every day. It's a big important driver to profitability, but it's a great business. We're building a $1 billion motorcycle brand. It doesn't happen overnight. It doesn't become profitable overnight. But if we get to where we want to go, it's a very valuable business and a major contributor to this company. So we're going to stay at it. Tariff mitigation, nobody expects tariffs to change a lot. I'm not sure there's a political calculus right now that would say either side takes tariffs away. I also don't think there's a huge risk that they get worse. I think we're kind of at a level of status quo right now. So our focus now that we know these are going to be around is what can we do to make them better, to reduce our -- the impact on our company. And so we continue to work that as we look at the supply chain can we increase things in Mexico? Can we increase in Vietnam. As Mike Dougherty talked about, we've got a factory in Vietnam. We're adding to that factory. We're adding supply chain capability there. So I think we're doing the right things. Vertical integration and in-sourcing, we haven't talked about a whole lot, but it's another big part, and it's another piece that kind of comes in, in the later part of this plan. We've announced in Mexico that we are adding an engine assembly facility at our current factory in Monterrey. That will allow us to assemble powersports engines at the site where they go into the machines. That's a lot more efficient than doing the [indiscernible] constant and shipping them to Mexico. So that capability will really help us from a profitability standpoint. And then we're also adding a new facility at a different site where we're going to in-source plastics, tube fab, welding, some things that we outsource during the pandemic as our ability to produce went down. And as the vehicles got bigger and our mix got more towards those larger vehicles, we just got to an imbalance in our in-source, outsource. And so that allows us to bring that stuff back in-house, which makes us more profitable. So those facilities start to come online in '24 and you'll see the benefits in the later part of this plan. Foreign currency, we're saying it's impacted and it has. It's hit us hard. If you look at when we set this plan in 2022, the impact of foreign currency right now on EBITDA is about $90 million. So it's almost a full basis point. So if you think about that, what we gained from getting rid of tap GEM and Taylor-Dunn, we gave back in foreign currency. That's our issue to go overcome. We got to do more localization. We got to work at it. We certainly hedge it as much as we can, but we're still going to get to these targets even having to overcome that obstacle. We have a strong balance sheet. We're very lucky. It's an asset for the company. And I think we've done a great job of managing it the last few years. CapEx is up, and that's because of these new factory investments, the paint investment, some of the things Mike talked about. We're going to invest in the company, and that's going to help us grow our margins. We do have strong cash flow generation. We're dividend Aristocrat, 28 years of raising the dividend. We do have a $500 million term loan due in the fourth quarter. And we'll take a look at that. You should expect to hear more about that in Q3 as to what we plan to do. We do target investment-grade metrics. We do not have public debt rating but we run the company as if we're investment grade rated, and that's our plan to continue. Working capital is a strong point for Polaris. We have a really good business model when it comes to working capital. We get paid for most of our shipments from our Wells Fargo, our JV with Wells Fargo, Polaris Acceptance and from our other JV or our other working dealer floor plan providers. So we get paid very quickly. So our DSO was really low, our days in inventory really took a hit during COVID as we had to keep changing schedules, and we were short on supply. That's gotten significantly better and is returning more towards kind of where it was pre-COVID. And then our free cash flow yield is also headed back towards its pre-COVID levels. This isn't really good enough, though. We've got work we can do to be better here. And again, it's sort of like the factory optimization as we thought through COVID and all the challenges, we haven't had the ability and resources to focus on some of the day-to-day optimization, and we're going to get back to that over the next 12 to 24 months. Capital deployment. Really pretty consistent. You can see coming out of the Investor Day in '22, we leaned pretty heavy into share repurchase. We got ahead. We said we wanted to buy back, reduce the basic share count by 10%. We got ahead on that in '22 and continuing into '23. And that's because we hadn't done a lot of for the years ahead of that. So the kind of 2018 to '20 period, we were kind of low relative to peers and where we probably should have been as we focus more on M&A, less on buyback. As we get out into the next 3 years, I think you're going to see a little more balance. We'll continue on the buyback. We're going to hit that commitment. We'll do better if the opportunity is there and the share price makes sense for us to do that. But we're going to pay ourselves first. We're going to invest in R&D. We're going to invest in CapEx. That's what drives this company, and that's going to be our #1 priority. Our second priority is going to be continuing the dividend. I wouldn't expect significant increases, but we will continue to be in Aristocrat, and we'll focus on an increase every year. And then when you think about share repurchase and M&A, what I'll say about M&A is kind of what Mike said, you should not expect to be surprised. You will not see us go do something that distracts from the mission that we've talked about today. We are focused on improving our EBITDA margins. We are focused on executing on this plan, and we are not going to go buy things that distract from that, that don't fit with that or they take us off those financial targets. So wrapping up, why would I invest in Polaris? I think for the same reasons I said last year in Vegas. We've got a -- we're #1 in powersports. We've got a great competitive moat. We've got a focused plan. We're executing on the plan. We're doing what we told you we were going to do. And I think we've got the team to go win. So I'm excited to be the CFO for the next 3 years of this plan. And I know we've got -- we're headed down the right path and that we can win. With that, I think we're going to move to Q&A.

[Operator Instructions] All right. Just give us one more second. All right. Can we start with the first question, please?

Joe Altobello, Raymond James. I guess first. For Bob, in terms of the EBITDA margin improvement you see over the next 3 years or so, can you just kind of walk us through what that cadence looks like. Is it back-end loaded or not? And maybe second question on that. A lot of the improvement is coming from On-Road. Maybe give us a little more insight into where that's coming from?

Sure. So on the first question, I think the -- I think what you'll see is the cadence will accelerate through those next 3 years as these new facilities in Mexico come online, as Steve's business gets more into the modular design and the platforming. And so that stuff all kind of comes in increments. So next year, we'll be probably the smaller of the 3, and then I think you'll see it fairly even through '25 and '26. In terms of On-Road, Mike can jump in on this. So this is not like, oh my god, we need to go get tons more volume in India. Volume helps. There's no question. But this is -- we've got the bikes that we need in terms of the product line, Chief and Pursuit. So it's taking the focus from having to do a whole new platforms to doing derivatives of those platforms that drive a lot of customer value to drive profitability and then also continuing to improve our cost position as we source those components and assembly things like Vietnam, Poland, really getting to assemble in region which takes away some of the tariffs makes us a lot more competitive. So it's a mix of things, but it's not -- when we had Victory, it was always this discussion of you got to get to a certain volume. And with Indian, part of the reason we exited Victory and stayed with Indian was we knew the Indian brands had the potential to get there, whereas Victory, we didn't -- weren't really convinced it did. And so we've got the volume. Now we just got to continue to work on the cost and driving different bikes to drive better price.

Yes. I think you said it perfectly. And then Slingshot is going to help too. We got nice volume on Slingshot, and we got stuff in the product plan that's going to help drive our margin expansion in that business, which is $200 million, $300 million right now. So I think the combination of both of those things is going to have a significant contribution to the bottom line going forward. And the new platforms we have are just way better from a profitability standpoint. So the derivatives that are going to be coming, we're really excited about.

David MacGregor from Longbow Research. I guess a couple of things. First of all, on the EBITDA goals, is there any way you can help us dimensionalize just the gross margin progress versus the SG&A leverage, the operating expense leverage and how those -- the composition of that EBITDA target, how you get there that way? And then secondly, as I think back, maybe we're talking now about 2017 and 2018, there was a lot of talk about the value improvement process, the Polaris value improvement process at the time that was discussed as being a $500 million opportunity. Obviously, COVID hits, Bob, as you said there was a lot of disruption, a lot of moving parts. But I guess I'm just trying to get a sense of how much of the opportunity that's part of you right now from creating better efficiencies in production. It really just stems back to that VIP program. If that's the case, is there an established road map in place for achieving that as a consequence we should think of as a lower risk opportunity.

Sure. I'll start with the OpEx sort of versus gross profit question. OpEx has come down as a percent of revenue pretty significantly over the last few years. And I feel like we're at a pretty decent level from a REIT standpoint. So I don't -- I think the majority of the improvement in EBITDA will come really from improving gross profit margins. There'll be some OpEx leverage, obviously, if we're growing the top line at 5% to 7%, we obviously target growing the OpEx spending at a lower level than that, make sure we get some leverage. But I would say the bulk of the opportunity really comes on the gross profit side. In terms of VIP, as we've evolved, we focus on continuous improvement. It's just a bit of a change in terminology as opposed to VIP. So we've sort of been off that path because of COVID and all the things we had to deal with. And so as we get into the next 3 years, it's really encompassed and lean and continuous improvement is really what we've historically called VIP. And so we'll focus in the factories and in other activities of driving lean. And then as we look at product design, product sourcing, all of that will be focused on getting continuous improvement in margins year-over-year. So it's not a loss of the program. We just haven't been using the VIP term as much internally, so I didn't use it today.

Yes. I mean, David, the way I would characterize it is you think over the past 2.5 years, I mean, we added a lot of cost into the business. I don't want to say we manufactured at any cost to get customer product into the field, but it was pretty close. And so I think there's near-term opportunity. But as evidenced by what's happened this year, it's challenging to get after it. I heard in another business discussion, a team talking about the fact that they had to get back to teaching their sales force how to sell again because they were able to just move product without any -- well, I mean there's a little bit of that going on in the factories. For 2, 3 years, our factory -- everybody from the managers down to the workforce have spent their time trying to figure out how to work in a suboptimal environment. And there's a little bit of losing that muscle memory around lean and how to drive for efficiency every day. And so I wouldn't want to characterize it as low-hanging fruit because that makes it seem like it's really easy just to grab it and go. And I think this year has proven that suppliers are in a much better spot, but there's still more that has to and we've got to get better. But the opportunity is there, and it's up to us to go execute against it. So I think it's a pretty fertile opportunity. And really, it's about us making sure we've got alignment. We're reconfiguring internally. We've got lean teams now deployed at our 2 biggest factories, working on specific issues. The nature of the issues are different. If you think about Monterrey, we've got 2, 3 new products coming out of that factory. That's a lot to contend with from a manufacturing standpoint and making sure we're doing that efficiently. And then in Huntsville, it's really about continuing to refocus on lean and now that the workforce is more stable than it had been, how do you continue to work for a better flow of components out of the back shop to the line and get things off the line with first pass yield high -- so there's plenty of opportunity there for us to work on over the next couple of years.

Sort of a big picture question for me. You guys are in a unique position to be able to speak to the various categories, right, ORVs, Marine and then On-Road. One of the questions I get all the time is how do we sort of tease out the cyclical pressures relative to sort of the secular opportunity? So I don't know who wants to take this, but maybe if we could go through those segments and think about where you would most want to invest in. I'm sure the answer to some degree is all of, yes. How you think about the long-term trajectory of those industries and I get that you're going to gain share in all of them. So you have to create your own growth. But how do we think through cyclical versus secular?

No, I'll come at it from a higher level and then obviously, the guys can chime in. We think there's opportunity in all the segments, and we talked about the attractiveness. If I look back over the last few years, it's been interesting because each of the businesses has gone through sub cycles, meaning -- we talked about it last year in Q3 that the rec part of the off-road business had already started to kind of slow down because consumers were seeing higher interest rates, the talk of recession, it's a discretionary product, but the utility piece held up. If you look at Marine, we struggle to get capacity given component shortages. So we focused on the high end of the market. Well, obviously, as interest rates creep up, there's still demand there, but it starts to slow, you start pivoting to the lower end range of the categories, so you can meet the demand. You look at the On-Road business, India motorcycles, we've seen that lower end category scouts slow down a bit. That customer tends to be a heavy financer and they're very sensitive to the interest rates. So the business is all -- the thing I like about the portfolio is we're counterbalancing within powersports. I think there used to be a view that powersports was cyclical. Well, I mean there's a lot of different markets. I mean you can see that playing out in our Off-Road business, utility versus REC. And even within REC, there's different segments that tend to move in different timing. And so I think that helps. And then when you layer on top of that, the PG&A component, where if people aren't trading in a vehicle is frequently, well, they're going to have to do work on it. So there's parts opportunities. And more than likely, they're going to want to accessorize because we continue to have more and more cool things that they can put on the vehicle. So there's a lot of those different components. And then I think the team does a really good job. Back to the chart I showed where we're scanning the environment and looking for those opportunities to take our existing business into the right categories where we can play at the things we do best, but touch on these new segments. And I think the Polaris XPEDITION, is a prime example of that, where we hit into a category where people would have to figure out how to get a cheap or something like that. And that's not a cheap proposition. You'll hear it when you hear more discussions around the XD it was the focus of Chris Judson's video around a lot of the work that, that vehicle can accomplish was being done using full-size pickup trucks which do a lot more damage to the land, 9 times out of 10, it's also their primary vehicles. So they're obviously potentially putting their primary mode of transportation at risk. There's just a whole slew of things that the vehicles start to take on different role in purpose. And that's why I like the focus. It allows us to really think openly about where we're at as opposed to trying to think broadly about diversification and countercyclical and all those types of things. But I don't know if, Steve, you might?

I'll just add geographically as well. We've had some compliance challenges down in Australia with ATVs, change in what they were allowing, and then Australia just expanded the RANGER business where we're #1 in Rangers and really growing that business tremendously. So to add to what Mike is saying, we also look at the geographic markets around the world to see where we can get leverage and so forth.

Yes, just to jump off of the geographic. That's exactly where we are in marine. We have so much growth around the world. So even if there's a cyclical event in North America, the plan now is to have that around the world to insulate and then with PG&A, which we haven't played in historically. So you're building different parts of the business up so that if there is one event in one region, you've got the other parts of the business to insulate it.

Scott Stember from ROTH MKM. Before you mentioned Walker Evans, the purchase of the shop business there. Can you talk about what was the thought process behind that? Was it supply chain driven? And should we expect more moves with you guys looking at buying suppliers?

Yes. That move, Walker was exactly as Mike described it, the management team, the ownership team of Walker was wanting to transition out. We were looking at continuity of supply to make sure that we we're about upper 90% of their business. So we had to make sure that, that was protected for our value end of our side-by-side and into our snowmobiles as well. So it was just the right move for them and us to that transition, and it's the right thing to do. We'll look at other opportunities in the business if it presents ourselves. I mean, continuity of supply, we learned resiliency as a tough lesson over the last 3 years. And I think we look at it differently now, and we've learned a lot, and that was the part of going through the COVID stress test, right, is how do you improve your business? And Walker is an example of doing that. So we'll look for other opportunities if it presents itself.

But the inside baseball that I give you is this wasn't, hey, we've got a problem, let's go buy them and we're done and over with it in a couple of months. We've actually been wrestling around with this Walker Evans situation for years. And the early onset of the supply chain disruption had a huge impact on the Walker Evans team in terms of being able to produce consistently. And rather than just saying, okay, let's just go buy them and fix it. We actually sent teams in there. And we got their performance up to a very acceptable level. But then what became clear because we got close to them was they had a continuity of ownership problem, and we needed to figure out if we could help them, similar to what we do with our dealerships. We go out and try and cultivate and find ways for a dealer to sell their dealership to somebody who's going take it and make it even better. But it became apparent that, that wasn't going to be the trajectory. So we quickly moved into thinking about how do we acquire them and we do it in a way that, as Steve said, we get the continuity of supply, but we do it in a way where there's an opportunity for us to be even better as a company. So it's a pretty disciplined process. We've talked to the Board about it a couple of times. Went through all the different scenarios. So I don't want to leave you with the feeling that we're just out trying to find suppliers to buy. It's always an option if it's somewhere that is critical to the business, it's something we think is going to competitively differentiate us. And that's just kind of how it worked out in this particular case.

Robin Farley with UBS. I have a question, I guess, for Bob. When you talk about where margins are going to go between now and 2026, you have that slide. It's got a lot of different color plus signs on it. But I wonder if you could help quantify for us a little bit. I'm assuming like FX and tariffs you're not counting on to do anything for you. But can you help us think about how many basis points or just in broad terms, does not getting down to tens of basis points, but how much will come from the motorcycle profitability improving, how much from moving labor to shifting labor to Mexico? Just sort of some of the broad categories so we can kind of quantify that big move between now and '26.

Sure. Yes, so you're right on FX and tariffs, right? We expect those to at least tariffs kind of stay where they are, maybe marginally improve as we look at moving sourcing. FX, it's a bit harder to say. It's -- it's been pretty bad. So I'm hoping it gets better from here, not worse. But with the kind of slowdown in the rate environment, with all the central banks sort of getting to a point where people are starting to pause, I think you'll see the currencies sort of normalize over the next few years. I'm not sure it's going to continue to be a big impact. So yes, the big drivers really are just the improvement in the performance of the plants, and so that's the biggest near-term driver. And then in terms of real kind of more game-changing drivers, it's Steve's focus on platforming and modularity. The Mexico, New Mexico facilities, the in-sourcing that we're doing there as well as the engine assembly. Those are the 2 biggest. Motorcycles, The improvement in profitability in motorcycles. It's going to be a gradual improvement over the next few years. So it's -- it's a driver, but it's -- I would say it's more on -- in the same vein as the driver of just improving general profitability in the plant. So the 2 big drivers are really the modularity in platforming and then the sort of production facility changes in capacity in Mexico are probably the 2 bigger ones.

He's not going to give you the translator for plus equals. I know that's what you're looking for.

Tristan-Thomas Martin from BMO. A question about ORV market share is the expectation to kind of get back to the level you were at 5 or 6 years ago? And then maybe just a hypothetical question. New products are theoretically can drive more market share kind of recapture. But if a competitor comes in is very promotional, if you're going to try to chase them? Or would you be happier at a higher margin with a less market share?

Well, we're never happy with losing market share at all. So we're always going to strive to gain market share. The new products and innovation, I think, over the time, if you looked really drove market share gains. 5 to 6 years ago, look at the competitive base, we were probably pretty much by ourselves in a lot of areas. So we have a lot of competitors. So we're going to always move to get back to those big numbers. It's going to be a tough haul. But I think when you look at the team in terms of look at our scale, the brand strength, the dealer network, not just the product but also the product innovation. We're going to put up a pretty hell of a fight to not only regain our share, but go further there. But the -- we have a lot of competitors. We have a lot of people trying to get in. And we have a lot of folks who fast forward our innovation. So the pressure is on us to continue that. And I think our team is up for the task to do that.

[indiscernible] You mentioned the dealer advantage strategy. Maybe just go a little more in depth to kind of what's about that and what do you think the deal networks going to look like 10 years from now?

Yes. I think the dealer advantage strategy, we've talked with dealers about it. We've done a lot of work over the last year, getting into smaller groups of dealers, focus groups with our dealers. This is where we want to go. So basically, the dealer advantage strategy is starting to look at multiple rooftops of operators owning multiple rooftops to create their efficiencies in the marketplace contiguous rooftops. So there's areas of strength. And so they get to leverage their infrastructure. They have a better recruiting opportunity for talent and labor. That's going to be one of the challenges we'll work with them on the service side. But it's really a structured way we look at it and think about all the good dealers that have been around who are ready to retire and exit. So they're looking transition point as well. We have a lot of opportunities of dealers who want to add to their size of their rooftops, number of rooftops. And so we're just trying to formalize that and really show where we're going to take the brand, the level of customer service that we want at the level of servicing our products. So and think about the complexity of our products, as we all talked about, you really got to improve your game on how you're supporting the consumer through your dealerships. And that's what's exciting about that strategy, and we have a lot of positive feedback from our dealers who want to grow with us in that manner.

The other thing I'd add, Steve and Bob and I were out with dealers every year, we're out meeting with them. And Steve has the dealer council that essentially is 30 representatives that try and balance out the view from the network. I think the thing that, that group is doing better than it has in a long time is really listening to what the dealers were saying and looking for the trends. It was encouraging when we were out. We asked a lot when we're on the road and we're pretty clear with dealers. We don't want them to sugar code it and they don't. But they -- the NorthStar program was kind of the first step in that journey and the feedback has been incredibly strong. They gave us some thoughts around how to simplify it. And Steve and the team took that feedback and I think that's going to be a theme you're going to hear more and more of is we are treating the dealers like partners as opposed to a second step in the distribution channel. And that's a big deal because we typically are the largest presence in the showroom, and we want to not only maintain that, but we want to see that expand. And that's a really important part of the journey. And Steve and the team's focus around dealer advantage is critical.

Noah Zatzkin from KeyBanc. In terms of the margin benefits related to platforming and modularity is there a way to think about the cadence of improvement beyond next year? Meaning, should we expect a kind of larger step-up in '25? Maybe any color on the number of products that will be impacted by improvements in modularity and platforming over time? Just any color there would be helpful.

Yes, I'll start and then Steve can jump in. I mean it certainly ramps the program really started in '22. So it just takes time to get it through the engineering validation, supply chain process. So there's been some benefits in I think you'll see them continue at a similar level in '24, and then it ramps up more significantly in '25, '26, just as it takes time to sort of get through the process, get those, if it's subsystems to get them into a variety of vehicles. And if it's all new vehicles, new modules, obviously, that only comes when you sign new vehicles. But Steve?

Yes, not hit it right is I think about every time we want to change a part of a subsystem, we just don't do it. We have to align with the suppliers to make sure it's validated, tested and so forth. So it's a methodical approach. So as Bob says, you kind of have to put a lot of energy in from '22 over the next couple of years and then the past will start rolling after that.

I had 2 small questions. The first was just for when you're talking about EBITDA guidance, just curious, especially with the step-up in CapEx, while you're not talking EBIT at a company level? And then my second question just relates to the Walker Evans. I mean I don't want you to -- I know you just bought it, but I'm curious if your philosophy with going in with suppliers like this, where there's a view that you might sell it once it's kind of on its own you feel that you really need to control that as a long rate?

Sure. I'll start with the second one. So as we think about something like Walker Evans, we bought it as Steve said, it's -- the first focus was just stability of the transition because the impact to us, if they sold it and the transition didn't go well, it would be fairly significant. That said, we wouldn't -- we might have looked at a different structure if we didn't think there were other benefits to us. So Fox will continue to be our partner at the high end of the shock range. But as we look at sort of the products where maybe the branding isn't quite as important as sort of like a Pro or something where that customer really wants that Fox brand. We think the Walker Evans brand is strong. We think that there's benefit to us having involvement with that engineering as we're developing products. It's a tighter relationship and then also quality. And so we feel like we can drive better quality just with the integration with design and then testing and quality of the factory. So we feel like there's a lot of benefits. So I don't see us buying it and then exiting it. I wouldn't say never, but it's -- it was bought with the intention of keeping it, continuing to improve it and integrate it into our process. In terms of EBIT versus EBITDA, I guess I would say, first of all, this company has never really given guidance really below between anything between gross profit and EPS. So EBITDA was a big step. And we focused on EBITDA. When Mike and I kind of came into these roles, we spent a lot of time with some of our outside bankers, with our Board, and really talked about what in this industry is the -- has the best correlation in terms of drivers to stock price and EBITDA margins was the #1 correlation. And so that's been our focus. I think the reporting and the discussions will continue to evolve over time. But we felt like based on that, based on the nature of the business and just sort of what we see across our peer set that the discussion on EBITDA was the right place to start. And you'll see that reporting evolve over time.

But I mean we're also focused on ROIC which is a primary indicator of are we deploying that capital back into the business and getting the returns and sustaining the returns and those types of things. So we're trying to keep it as balanced as we can.

Megan Alexander, Morgan Stanley. Just had a question kind of about the price/cost dynamic maybe a bit more in the near term. You had a slide that showed cost per unit up price per unit upbeat. So can you help us kind of contextualize how much of that cost per unit is driven by temporary things like freight and maybe you talked about having to add extra labor, where we sit in terms of recovering that, especially Bob, I think you talked about more muted pricing next year. So how we should think about. Mike, I know you said you don't want to talk about low-hanging fruit, but maybe some low-hanging fruit to recover some more transient factors?

Yes. I mean if you think back to sort of how things evolve during the pandemic, we were pretty clear that we were raising price to cover our cost, but we were not getting margin on price. And so that's what drives that dynamic of kind of average price up 8% and it cost up 9. The timing of all that is not perfect because you can't raise price every day. And so we tried to limit the number of price increases and just to help the dealer channel manage through that volatility. So as we're coming out of that, the costs didn't come in, in sort of some nice linear fashion and unfortunately, were not coming out that way either, either. So the things like freight, ocean freight comes out pretty fast. As you renew the contracts, the freight comes down. So ocean freight, I would say, has returned to normal levels. Commodities lags a fair amount actually because. We have contracts with our suppliers that have price adjustments related to commodities. Some of those adjust monthly, some adjust quarterly, some adjust twice a year. It all depends on the sort of size of the supplier, sophistication of the supplier and what we think the impact is to our financials. We also hedge commodities, steel primarily, and diesel to try to sort of blunt that impact. So as those things change around, they don't immediately hit the P&L. There's a lag. They got to get to buy the parts, they're going to roll through inventory. And then the factory side is really where the opportunity is. To Mike's point, I don't want to get into low-hanging fruit. But look, we haven't seen the performance we would like to see. We said that we thought the cost we got come out kind of in a more of a sloped fashion through the course of the year. We're not seeing that slope where we want it in the second half of the year. We're not giving up. We've deployed a lot of resources on the lean side to both Monterrey and Huntsville. I can promise you that's a regular conversation between Mike, myself, Steve, Ken, rest of the team. And so we're trying to impact that slope faster. But it's complex. And the other piece of it, too, is while the supply chain is starting to normalize, as like I said, it's not perfectly normal yet, we do get hit by certain things. And labor continues to be less of a challenge but not back to pre-pandemic levels. Right? It's still -- the turnover in direct labor is still higher than what it was previously. So we're still continuing to fight through that, and that makes attacking that curve a little bit more difficult.

Xian Siew from BNP Paribas. As you think about the outlook for revenues over the next couple of years, I think mid-single digits, how much do the new products that we just saw the XPEDITION the XD. How do those factor into that? Are they a big contributor? Or is it kind of more conservative first and then maybe some side to the ramps?

Yes. Certainly, it will be more outsized contributor in the first -- second half of this year as those things start to ship for the first time. Over time, I think if you look at the 2 products, XPEDITION really is a game-changing product. It is in the general kind of crossover category, general being our product, not the general category. And so it's kind of the next step of that category, but it I don't know that there's a lot of people that if they were going to buy general, they're all of a sudden going to buy an XPEDITION. They are somewhat different vehicles with different capabilities. XD, there will be certainly some cannibalization of sort of the top end RANGER buyer who might step up to that. So that one, I think there's a little more to play out. I think there'll be strong contributors. But as we look out over the next 3 years, we're not done. You'll be here next year, and there'll be lots of cool stuff up on that stage. I think what I would take away is the focus we have in the business is allowing us to invest in the things that are going to drive continued gains in market share and continued growth of the market, and that's what we're going to go do. And so you should expect innovation will be a driver. It just won't be only these new products.

To that last point, Bob. And I promise I think this is going to be the last time I asked a question about inventory replenishment. You had the big number from last year, and I thought you guys did a great job on the call explaining how you bridge the gap between $600 million in the second half of this year. Primarily, the answer is white space product. And I think you just made the point that we're going to be back here next year and there's going to be more new products. So I guess my question is, are we ever going to get to the place where that is a hole that we have to fill or is the expectation that there will continue to be sort of incremental white space replenishment to offset that in future years?

Yes. I think the lumpiness of channel, Phil will be behind us as we really get into 2024. So we're back to normal inventory levels across most products with the exception of NorthStar, Ranger, and some of the other high-end Ranger products. So there's a little bit of more channel fill to happen there. But that point the channel kind of have the vehicles in it that it needs to sort of manage through any lumpiness in retail. And I don't think we'll have a hole to fill it just innovation will just continue to drive this industry. I mean that's customers seeing new products gets customers to turn over their vehicles faster, creates a better used market and allows the whole industry to grow because it brings new participants into the space. And some of these white space vehicles also attract new customers. So that, to me, is what fills sort of that channel fill bump that we had in 2022. So I don't really see that being an issue going forward.

Well, I think the point that we were trying to get across is it's not just one thing, right? We're working a lot of different avenues. Now certainly, we've got a lot of new stuff that hit this year. The XP is really a replacement product for the existing category. It's really the [ HD ] or the XD and the XPEDITION that are kind of new category defining. And we'll certainly get the benefit of that as we lap into next year and so on. But you think about the new customers that we continue to draw in the derivatives we do off of those products those are not going to be the only products in that category. I mean you see what we do in every other category we go into. So there's just so many opportunities for us. And the more differentiation we have in those product categories that we're playing and the more we learn from that and the more that we can extract as well as then it gives us ideas about other avenues that we can go into. So we look at it as it's a flywheel, and we're continuing to gain that momentum. And the thing I like is we know where we're going to play, and we're going to stick to that, and there's a lot of opportunity within there and it keeps us really focused.

Just another question on guidance. Are you assuming any FX improvement over the course of that plan? And then are you assuming a higher accessory attach rate for the XP and the XPEDITION, maybe some of your existing products?

Yes. So I'll let Steve answer the attachment rate question. But as you can see from the products last night, obviously, they're heavily accessorize. And I think that's a general trend across our products, even if you look at the XP launch. We launched that with -- I think it was 70 or 80 accessories. At launch, and that's kind of new for us. In terms of FX, right now, we're just assuming relative stability. It's been a little bit better this year. it's worse than last year, but a little better than we had expected, maybe a little more stable. And right now, you can't really plan that much for FX. So we try to look at the business sort of outside of FX and just go execute on the things control.

On the attachment rates for XD, we are expecting higher attachment rates, but we're expecting higher attachment rates really across the entire portfolio. Lock & Ride MAX is a big driver of that. I mean there's just a lot more that consumers can do with the vehicle. Again, I encourage you to get out to the showroom floor and look at what we call rack. And we've got some great examples and applications of how we can leverage that. So we think that's a catalyst for the portfolio going forward as we integrate Lock & Ride MAX into future models.

The thing I would add to that is, but it's an immediate PG&A play. Whereas if you think about everything we've introduced over time, it's 2 seats, then we come out with a 4 seats, some accessories more. We -- it's a thud you've got big vehicle, all the attachments ready to go. And so it really puts you on a different trajectory, and that's how we'll do it going forward.

Alex from UBS. I don't know if you mentioned it, but what's implied within your U.S. industry expectations for the Marine business or the boat business itself? For the full year, that is.

For 2020 -- for this year? Down mid-teens. Midteens. For the Marine business. So we think the market will be down mid-teens will be down a little less because we'll take some share. And that's generally in line. I mean the SSI boat report came out right before our earnings call, but it was relatively where we thought it was going to be. So I don't think it's going to be any different than that.

Yes. Just a follow-up. You mentioned you've got your supplier conference coming up here shortly. So I don't want you to sort of get out ahead of yourself in terms of you're going to cover there. But I guess what can you share with investors in the sense of your ask from your suppliers at this point? Is it that they need to commit more capital? Is it more of a process improvement? What is it as a general observation across the broader population of suppliers where -- is it that they need to do differently...

Yes. I think the supplier conference, it will be a similar format to this. They're going to hear from me. They're going to hear from Bob. They're going to hear from each businesses. There's a few things we're trying to do. I mean one is we haven't had our suppliers together since before all this unfolded. Which means I'm in a different role, Bob's in a different role. And it's important for them to hear what you guys have heard a number of times around the refocused strategy and where we're headed and how we're investing in the company. There's an element of, look, 90-plus percent of our suppliers did a hell of a job during COVID. And there's an element of thanking them for being there and doing what they were supposed to. So it isn't an intended, let's go beat on these guys for the supply chain issues. I think everybody, even the ones who fell down, we're working hard to try and get back up. So it's an element of acknowledging that. It's making sure they understand the strategy and where we're headed and making sure that they understand our expectations of them, and it's also us laying out for them that it's our commitment to be in a partnership that we're not looking to go out and try and change suppliers all the time. We really want to create a partnership. But on the flip side, that means that they've got to be investing to keep up with our growth. They've got to have the quality systems to be able to hold up to our standards and make sure that we don't end up being their quality department, making sure that they understand the commitments they make to us, we expect them to live up to that. And there will be changes. We've talked about it. It's not a ton. It tends to be a pretty involved process for us to make supplier changes. But it's an element of just making sure there's alignment. We talk a lot about creating a partnership. It's no different than what we do with our dealers in a lot of ways, and making sure that they understand where we're headed. We're not going to throw any curve balls. We have expectations of what they need to do and making sure that we start that in a strong way. We figured the timing was great, because it gives them an opportunity to see some of the new stuff that just launched. And we've got the team here, and we can talk to them about strategy in a very active environment.

Any other questions today?

Okay. Well, I want to say thanks for making the trip out. As Bob said, last night was one hell of an event. So hopefully, you had the chance to see it and make sure you walk the floor, if you haven't. Enjoy the rest of the time and safe travels to home. Thanks again.

Thank you.