Polaris Inc. (PII) Earnings Call Transcript & Summary

All right. Thank you, everybody, for joining us today. My name is J.C. Weigelt, and I am Vice President of Investor Relations. Today, we are hosting our 2025 Capital Markets Day. Thank you for those that are joining us here in Montana. And for those that are joining on the webcast, apologies for the later hour, I guess, for a Capital Markets Day. But again, we are in person doing this on a Mountain Time Zone. So appreciate you participating at this time. Here's our agenda for today. We have Mike Speetzen that's going to come in and talk for a bit about our strategy overview. And then we have Marc Suarez, who heads up our ops and supply chain for our Off-Road division. That's going to give some evidence of Lean, which we've been talking about for over a year now. And then Bob Mack is going to finish it off with a financial overview. And we will have plenty of time for Q&A at the end of this. Last but not least, forward-looking statement. 10-K went out a bit ago. So please review the updated risk factors in there. There will be forward-looking statements today. Those don't necessarily mean that they're going to come true. There are a lot of factors that go into that. So just please respect that when we present those. And with that, I will hand the mic over to Mike Speetzen.

Okay. Thanks, J.C. Thanks to everybody in the room for making the trip and for everybody who's listening in. I'm going to cover a few things. I'm going to talk about the current market environment that we're in because it does -- it requires some context. But what I want to do is spend more time talking about the progress we've made against our strategy. I'm going to talk through a number of the strategic pillars and some of the proof points in terms of the things we laid out and the progress we've made. And then I want to talk about how we're looking through the near term to the long term and the focus that we've got there. And then I'll wrap it up by just talking through each one of our business segments, some of the progress and dynamics that we're dealing with within each of the categories. And just to reemphasize what J.C. said, we sent the invite back in September. We felt like it was a good opportunity to provide an update. We weren't necessarily thinking about the current environment. We knew that we were going to have a challenging macro heading into that. The point of this discussion is really to reinforce the strategy and talk more long term and the setup that we've got going for the company, which we think is really strong. When we talk about this down cycle that we're in, they define a recession as 2 successive quarters that are down. You look at each one of our segments, we're well past that. And I know that's no surprise to the majority of you in the room and listening to this. And there's been a lot of fallout from this. When you look at the number of competitors who are either exiting categories, shutting down completely or have filed for bankruptcy and gone through that process, it's a bit staggering. I like to look at how we're positioning the company as we are the best house in a recovering neighborhood. And we're really trying to work on making sure that this company is positioned incredibly well so that when the recovery comes, we're going to be positioned better than anybody else to really take advantage of that and grow the company. One of the things -- we get a lot of questions around promo. Yes, it is elevated. We've got consumers who are stressed from a debt perspective. Interest rates are high. But we also have a lot of competitors who haven't managed their inventory with the level of discipline that we have, and that puts a lot of pressure into the market. Some of those instances, we are not responding because it doesn't make any sense. And they're moving really old stuff, and we're not going to discount some of our newer technology. And quite frankly, that's not sustainable share. So we're trying to be as disciplined as we can and really make sure that we're pointing promo in the right areas, whether that's targeted offers to specific consumers, broad offers on categories, getting aggressive around financing given that interest rates are likely to stay high for longer. And then EV is a category we talked about at our last Capital Markets Day. I still feel good about the positioning that we took. If you remember back to that time, I did make the statement that I don't think EV is going to move rapidly through powersports. There's a lot more challenges within the powersports category. And in fact, that's what made us different than most. We really went out and listened to customers and let that guide where we went. We've got XP Kinetic, incredibly successful vehicle. But it's a small, small piece of our RANGER business, and we knew that going in. We knew that there was a niche of customers who were looking for that type of vehicle for specific applications, whether that be an area that they needed something quiet or they wanted the enhanced performance. And that vehicle really has hit the mark. We're obviously not investing at the same levels that we were thinking we would at this point just given how much slower that market has developed. But we are continuing to make advancements. And to be honest with you, we learned a lot through this. Relative to connected vehicles, we've been able to really watch and see how consumers are using that. And that's feeding back into how we're thinking about development of the next generation of vehicles. And we also -- as most of you know, we partnered with Zero Motorcycles to get our powertrain up and running quickly. We've since modified the relationship with them. We purchased a lot of the intellectual property, and we've brought a lot of that development in-house, where we've now got the expertise and capabilities. So we think we've got a good setup there if and when that time comes for that category to reemerge. So definitely dealing with a tough market, tough dynamics. We are really trying to not get distracted, stay focused on the things that we can control and navigate through it as best we can. I lead off every meeting I have with -- whether it's with our senior leadership team or with an all hands meeting or if I'm in one of our manufacturing facilities, which is that slide has not changed. Our strategy is staying consistent. We believe in what we're doing. And when I talk through the strategic pillars here in a minute, you'll see the progress that we're making. So we're not going to get antsy. We're not going to get distracted by the next shiny thing. We're sticking to this, and we're going to continue to execute against it from a business perspective. What we have done is we've adapted to the current environment. The example I give is a couple of years ago when we realized that agile and efficient operations needed a lot more work than we thought it did, we pivoted and driven hard into that category. And Marc is going to talk more about that. But when you look at the company, we changed our structure. When Steve Menneto left last year, we used it as an opportunity to really rethink how we run the company, and it allowed me and my management team to get a lot closer to the businesses. It's been a great opportunity to develop some of the talent we have down in the organization. It allows me to spend a lot more time on product decisions, getting out and meeting with dealers, spending time in the factories. And those are all important things that I think really are where management should be putting its time. It allowed us to take a lot of cost out. We took about 10% of our salaried workforce out. About 20% were reductions in Vice President level. So that really shows how we flatten the organization. And that's going to allow us, as the recovery comes, to keep our operating expenses down and really put ourselves in a position to leverage that as we go into the future. Unwavering commitment to the dealers. Like I said, I spend a lot of time. In fact, I'm going to -- Bob and I are going to be with dealers in Nashville in a couple of weeks for a dealer council meeting. We're going to take them down to our Huntsville plant, walk them through a lot of the stuff we're doing with Lean. They've got a lot of curiosity around that. We are listening to what they are talking about. We take it seriously. We want to be the OEM of choice. I've got a slide in here where I'll talk about some of the stats and the things that we're doing to make sure that we really work hard to improve that relationship. For us, it was about getting the dealer inventory down. Given how rapidly the market moved down, that was a challenging thing for us to accomplish. Dealers were initially like, hey, just stop sending anything in, let the dealer inventory drift down and then we're good. The reality is we're running an awfully big company, and we've got supply chains that are in motion. We had materials that were on the ocean 4 weeks out. We've got factories that we've got to manage. We've got employees we've got to contend with in terms of making sure we're managing that capacity. So we downshifted through the course of the year. We helped during that transition period by providing things like extended flooring. We did things like providing additional promo to help dealers navigate through that challenging time period. And I'm proud of the fact that we got inventory down 16%. And I think in many ways, we led the industry in making sure that we held firm to that commitment. We've had a lot of questions about inventory in '25. There are still pockets that we have to make adjustments to. I mean clearly, the lack of snowfall during season in the flatlands has put a lot of pressure on our Snowmobile business. So we've cut build. That was in our guidance to make sure that we get inventory down. We're making a few minor tweaks in the Marine segment. And then within Off-Road, we're bringing the REC side down a little bit more just given persistent weakness in that category and pulling the utility side up given it remains stronger year-over-year than the REC side of the business. So feel really good about that. And then the last thing -- last 2 things. We remain committed to innovation, and we're going to keep making the investment. We've had a lot of questions around, hey, why not take a deeper cut in R&D? We are not going to do that. We learned a lot through the last downcycle, and the reason that Polaris became #1 is because we kept investing. And we outpaced all of the Japanese and overtook them all, and we're not going to back off of that. And I'm going to talk through innovation. I'm going to talk through the products we've come out with over the past 4 years. It's pretty impressive but it's not going to stop. And that is going to be the key because once this starts to recover, we want to have the right products that customers are going to want, and we think we've got ourselves well positioned to do that. And then the last is the targets that we put out. Obviously, there's been a lot that's happened since we started the discussions around our strategy. We remain committed to these targets. The targets are probably more like a mid-cycle when we've got better recovery efforts underway and the market is in a better position. You look at our financial performance right now, it's because we're dealing with such a significant downturn in the market. We've taken as much variable cost out as we can, but we've got a bunch of fixed costs that we don't want to go start taking capacity out because we know that when the market turns, we're going to need that. What we're doing, and Marc will talk about, is making that capacity a lot more efficient. So when the market comes back, this business is so much better positioned than it has been historically, will generate better incremental margins, better returns and be in a really good spot. So staying committed. What I want to do is walk through a few of the areas and talk about the proof point. So talk about best customer experience. Think about things like safety and quality, the partnership we have with our dealers, access to powersports. If you look on the right-hand side and see the progress that we've made, we brought in over 1 million new customers since before COVID. That's pretty impressive. When you think about the fact that powersports is a business where we see a high amount of recurring repeat customers, the fact that we brought in 1 million -- over 1 million new customers, I think, speaks to the strength of the brand. I'm really happy with where we're at with warranty. I'm happy with the progress. I'm not happy with where we're at yet. Warranty is at the best spot it's been in 10 years. I would argue to say it's probably ever in terms of the new products that we have coming out. We are highly committed. We're going to make sure that we're not just addressing some of the issues we had in the past, but we are going to have the best products out in the marketplace, fit, finish, performance, durability. And we're starting to see that come through, and I'm really proud of the work that the team has done. And then overview ridership. We talked about this a little bit on the call. We've had a lot of questions. The lingering question is, hey, did people buy a bunch of stuff during COVID, had fun with it? Now life is kind of back to normal, and they're not using it. Ridership is up 10% compared to the time period before COVID. And that's a great indicator for us. Now a lot happened from pre-COVID to where we are today. We saw a surge in demand in '20, '21, '22. We also saw a surge in ridership during that time period. Starting in '23 and tailing off into '24, we saw ridership come down. And I think that correlates pretty heavily to people going back to the office for work, correlates to people going back to traveling international, getting back to doing all the other things in their lives that they didn't have time to do before, they didn't have the ability to do. The good news is we're turning back to more normal performance, and that's a good thing. And we see that showing up in the miles that are put on the vehicles. We see it showing up in new part sales. We see it showing up in oil consumption, tires, all these different indicators. So people are using the vehicles, and they're using them more than they did before, which is a really good sign and a good marker for us that there may be a delay, but those repurchase cycles are going to start to kick in, especially on the REC side because we know that people are driven by the next coolest thing. When you're out on the snowmobiles getting that experience, snowmobile riders, really passionate ones, like to get a new sled every couple of years. Well, when you couple troubling economic environment, high interest rates and in the snow business, the lack of snow, those replenishment cycles don't happen the same. But we know those customers are out there because we're watching registrations. We're looking at rider data, all the things that allow us to sit back with a level of confidence to say, hey, look, tough current environment. But we know that the ridership is still there. The interest in the category is still there. Inspirational brands. I couldn't be happier with where we're at. The biggest thing, the mantra I drive inside the company is genuine and authentic. We are not going to do anything to try and make somebody else happy. We're going to do what makes sense for our business, and that's for our employees, the dealers, the customers. And I think it comes through here. You look at the partnerships, I think what the team came up with on Call of Duty is one of the coolest things, and there's more to come with that. So safe to say there'll be more Polaris products showing up. Look at engaged fans. There are so many spots on YouTube where our products show up, and there's not a lot we do. A lot of these people are just fanatics for our product, and they have another part of their life that they want to display, and our products become a part of that. And it's really, really neat to see. Exciting activations, Camp RZR. I'm looking forward to being back out there this October. There is no better way to see the passion around our brand then to go out in the desert, which is not a convenient place to be, and just see how committed people are. And it's not just about people out doing high-performance riding. In fact, I'd argue 90% of the people there may not even venture into the dunes or go very far. It's about being with family and friends and just the whole rider experience, being able to show off the uniqueness of their vehicle. And we absolutely dominate in terms of the number of vehicles that are out there. And then the last is around racing leadership. I had the opportunity to go to King of the Hammers and watch Brock win a race we hadn't won in 6 years, which was pretty damn cool. I stayed really close to The Mint 400. Brock was not supposed to win, at least the betting odds, and he did. And in fact, I was exchanging Instagram messages with him before I came down, congratulating him on the win. He is just such a great young man and so dedicated to Polaris, as are the rest of our race team. And it's just such a cool thing. And it's important. RZR isn't the biggest part of our business, but it shows the passion. Snowmobile isn't the biggest part of our business. But when we're out dominating the races, it shows the passion. It shows our commitment to the category, and it shows the innovation and performance, what's capable. And it creates a halo around the company. And that's a really, really important part. So I think we nailed it from an inspirational brand's perspective. Rider-driven innovation. So when you look at it, whether it's new categories, redefining categories or listening to our customers and making enhancements, I think it's safe to say we've set the bar. You look at the top, the XD RANGER, we saw a need from farmers and ranchers where they were using their main primary pickup trucks to do a bunch of stuff. Now they don't have to do that. When you look at XPEDITION, people are trying to use a RZR or a GENERAL to go do overlanding activity, and it wasn't an optimal vehicle, we listened and we created a vehicle that met that. There's nobody else in the marketplace that has vehicles that have that capability. They've got to catch up. And that's what it's about with us, is we're going to get back out and front like we demonstrated this last couple of years, and we're going to lead the way on innovation and force our competitors to have to keep catching up with us. You look at how we've redefined the categories. The next generation of Indian Motorcycles that launched starting last year has been met with such positive receptivity. You look at what we continue to do with our pontoons. You get inside one of our pontoons. I know Craig and several others had the opportunity to see inside the dash of the pontoons. We had the Miami boat show. Full glass cockpit, probably one of the slickest things you've ever seen. We are going to continue to redefine, whether that's the fabrics, the layouts, the performance of the vehicles. So really exciting what we've done there. And then the last one is it's probably the less glitzy part of innovation, but it's about listening to customers. Example I give you is Slingshot. Cool vehicle, looks great, gets a lot of attention. But the automated manual transmission didn't shift as great as it should. The fit and finish probably wasn't where it needed to be. We heard a lot of that from customers. We've addressed a lot of that in the model year '25. I can tell you these things are slick. The materials, the way -- the feel of the vehicle, the performance of the vehicle, we have addressed what we heard from customers. We heard from customers, you have too much front driveline noise. We've gone after that aggressively to pull that down, something that's really important as you think about more and more cab vehicles being out in the marketplace. This is the lifeblood of the company. If we don't continue to be the leader here, there's no way to maintain that #1 share position. And we are entirely committed to it. That's why I keep reemphasizing no matter how tough the financial conditions get, we are not going to cut back on innovation. We will meter it. We will be smart. I talked about slower evolution of EV. So we obviously metered out our investment there. But we're not going to just shut things down and kind of hunker in and ignore what we need to do to make sure the long-term viability of the company is there. And then the last one I've got is agile and efficient operations. And I'm not going to steal Marc's thunder, but I'm really proud of the progress we've made. I think back over 2 years ago, we were sitting on calls talking about the fact that we were having trouble getting 40% of what we said we would get out in volume out of our factories. We were reworking more units than the entire rest of the industry produced, and we were doing it at much, much higher cost. Now we haven't fixed all of that. But as Marc will go through, we are getting better volume performance. I don't worry -- Bob and I don't worry anywhere near as much as we used to about, hey, this is what we said we'd be able to produce and we're going to be able to get there. Problems do come up. You're always going to have one-off supplier issues, things like that. We can handle those in a way that we have never been able to handle before. We've implemented some technology to get much better how we forecast within our Off-Road business, how we work that back into the supply base, how we work it forward into the factories so that we've got the right planning that allows a lot more stability. We have a lot more on this journey, but the progress we've made, it's almost difference of day and night relative to our underlying performance. And we did it in an environment where volumes were coming down rapidly, which isn't too dissimilar from when volumes were going up because that just breeds inefficiency because you're kind of scrambling around. Things are changing rapidly. The team put the right processes and discipline in. Marc will walk through a lot of the metrics. And we did that while achieving record levels of safety performance in our factories. We were already well better than the benchmarks, but we were even better this past year. So the team has done a really good job here, and Marc is going to spend some time talking about that. So switch gears. Clearly, the short-term market dynamics aren't great. You think about consumers. Bob and I have talked a lot about this. They took on a lot of debt during the past 4 or 5 years, bought a lot of stuff, a lot of installment loans, second homes. Interest rates are now up, and that's created some fatigue. And the cost of living is higher, and wages haven't kept up. And so that has created a lot of pressure. It's my last bullet point, but the tariff situation really makes that much worse because people are worried because they're not sure if their daily life is going to go back to being more expensive. The report today that inflation came down a tick and was a little bit better than people expected at 2.8%. But every article I read said, but this doesn't have anything obviously that the tariffs could potentially impact. And I think you have consumers stepping back saying, you know what, I'm not sure if daily life is going to go back to be any more expensive. I don't know if I've got certainty around my job. And is now the right time to go and take a big purchase on? And so those are some of the dynamics that we've got. And it shows up in the consumer sentiment performance that we've seen here more recently. Dealer inventory is going to continue to be a big focus as we navigate through these choppy waters. And that means the promo environment is going to be dynamic. Bob and I met just yesterday with our Off-Road team. We had rolled out some promo around finance interest rates. We met yesterday to make additional tweaks to that. And the message to the team has been we have to remain agile. We can't just back in a stable environment, put a promo plan together for the quarter and then look at it every month or 2 and adjust if we see anything. This has to be -- this is a daily thing that we've got to manage in the business. So that's something that is a result of where we're at right now. And then from a tariff standpoint, we're not going to provide any perspective. I gave you some very high-level trade flows, but it literally changes by the hour. And anything that we would say today is probably going to be wrong tomorrow, probably 2 or 3x. And so what I can tell you is internally, we're spending a lot of time looking at where we do business, where we make parts, what those trade flows are. And as we get information, we're reacting to that in a way around how do we triage that, how do we contend with it, how do we deal with it. And so we're also spending time thinking through our government relations strategy. We've got some activity so that we can start to have a greater voice in Washington to at least provide a lot more local context around how this actually impacts business and put it in the context of an American powersports company that competes against the Canadian, Chinese and a bunch of Japanese and where this could end up disadvantaging us relative to our competitors. And so we're working through that. Hopefully, we'll have more to say by the time we get to the earnings call in April. But at this point, we're sticking with what we've got. As we look long term, I think the key is we've got to get away from the noise in the current environment. We feel really good about the long term. And it's not just because ridership is up 10%. But we've seen this shift to the outdoors. We've seen a move from urban to rural. And people make an investment in a boat or side-by-side. These are not things that just get used a couple of times and then left. They become an integral part of what people do. And so -- and we see that showing up in the stats. The dealer sophistication partnership is going to be really important as we look at over the long term. That's why we're working so hard in the short term to protect our dealers. Because we want them to remember that. We want them to be arm and arm with us and understand the true partnership of what we're trying to do as we move forward. And I can see that. I can see it showing up in how we have tailored programs. We've simplified programs. We've worked really hard to make sure that, that partnership is coming through in a very genuine and authentic way. And then the last piece I'd make is our demographics reflect that our riders are getting younger because we've done a really good job of bringing all these new riders in, and Gen Z riders. And that's important because what we don't want to do is take a really good care of an aging set of riders and not worry about those coming in. Now that does mean we got to make sure we're thinking about our strategy. And you're going to hear me talking a little bit about we're doing a lot more at the entry level of our business because it's important to be able to cultivate. If we bring somebody in who spent time playing Call of Duty, then they go out and they rent a vehicle of Polaris Adventures, but then the step from there to one of our vehicles is to buy a $30,000, $40,000, $50,000 vehicle, that's probably not going to work. So making sure we get the right entry points that are still attractive financially but provide really cool products and a true Polaris experience is important. And you're going to see -- you've seen that coming from us. You saw it in the Indian business with the Scout Sixty. You've seen it in our Bennington business with the SV lineup that they came out with at the lower end -- or the entry end of the pontoons. And you're going to see it in our Off-Road business later this year. The key for us regardless of this short term, we believe in the long term, and the focus for us is really around how do we expand margins and how do we continue to grow share in the category. And that really comes with the benefit of generating more cash, and we got to reinvest in innovation. And so that's the big focus there. You're going to see those 2 themes remain consistent regardless of me talking about the short-term focus that we have to get through the next year or so, the medium and the long term. That's going to continue to remain a consistent part of what we're doing. So we -- when we talked to our Board, we framed up a lot of the strategic activity that we have into 3 buckets. So you got refocus. It was kind of the near term. We're dealing with the downturn in the market. There's a lot of very tactical things that we have to do, but we got to keep our eye on the ball relative to the strategy. Then there's reinvent, which starts to move into a more mature phase, and then the revolutionize, which is where we really continue to get out in front and lead the category. And when you look at those 3 categories, margin and market share expansion remain consistent themes. So every one of these slides, you'll see that same set of buckets. What's in each one of those horizontal pillars is what we're going to focus on during those particular time periods. And you can see in the refocus area, this is about getting ourselves refocused on Lean. You're going to hear Marc talk more about that, but it's not just in manufacturing. It's in the design process. So Tony, our CTO that's here today, he's working with how do we make our product development process more lean. And we've had a couple of really good examples. One of them I mentioned in terms of a product that's coming out later this year in more of the entry space, where we've demonstrated an ability to move a lot faster, more efficient and come out with a better product. So it's about how do we take Lean and start to push that into other parts of the business. Strengthening process and tools. This company used to take a lot of pride over the past couple of decades that we had the lowest IT expenditure in the industry. Well, that came back to bite us, and we saw that during COVID because we could not react anywhere near as fast as we should have. We're addressing that. Now we're not going to do it all at one time. We've been putting in a lot of edge solutions in the business. That have helped us tremendously. Our ability to execute in our Off-Road business has been directly impacted by the fact that we actually put Blue Yonder in to help us manage the sales, inventory operations and planning process. And we've done a lot more around how we plan demand, where we're using sophisticated AI tools, things that are pulling in so many different data points a human couldn't even begin to use them in a constructive way. And those are the things we're starting to do to make the business perform better. And we've seen forecast accuracy even in a volatile environment like this has improved pretty substantially. And then continuous improvement in quality. I like the improvement, but we got a lot more to do, and we've got to see that really taking hold as we get through this year. You look at long-term share. For me, it really comes to we've got to continue to take care of our dealers. So that's going to be a big -- continued big focus in 2025. We got to make sure that they got the right inventory so that we can support their retail efforts. They got to have the right promotional programs. And we've got to be there as the OEM of choice to make sure that we help them execute and do so in a profitable way. And then it's really around innovation in products. We have not -- we have no room to take the foot off the gas. We have got to continue to push out the best products in the industry. We've got to keep the competition on their toes. They've got to continue to try and catch up with us, and we're committed to doing that. When we look at the reinvent, it's really about maturing a lot of the areas that I just talked about. So for Lean, it's about end-to-end, which means taking it beyond just, say, engineering and operations and supply chain but taking it into the administrative areas of our business. The key behind that for me is we've got the ability to continue to grow the company without having to add cost. This is about how do we get more output off the factories without having to put a lot more input in. That's going to drive the incremental margins that we expect to get as we move into the future phase of the strategy. Get into more modern tools. So that gives us the ability -- is that static on there? Yes. Get into more modern tools and AI applications. We're doing a lot of testing with this. We want to be careful before we go too far. But I think there's going to be a huge opportunity for us to really leverage AI in a way that does more than just help us plan demand but take some of the routine work out what people do that allows them to focus on some of the higher value-add activities. And then sustained quality delivery. Take it away from being episodic to that is how we do business. It is how we run the company. And we've got a consistent level of quality performance. And then when you look at long term, deeper relationships with the dealers, deeper customer relationships. We've done a lot with our customer relationship management process. There's more that we can do. We really want to create a tight ecosystem where once you're a Polaris customer, you're a Polaris customer for life, and it makes it really tough to leave that system. And part of that is that quality and innovation that I talked about. Having the highest-quality products, the best innovation in the marketplace, that's really going to create a tight ecosystem for our customers. And then really, it comes down to product, continuing the innovation, making sure that we're doing everything we can to stay out in front and lead from a product standpoint. And then revolutionize is just about how do we even take this to the next level. We start talking about things like creating new product categories, doing the things that we've done historically and really taking full advantage of the setup that we have within the company. And I'm really excited. We're doing a lot of work inside the company where we're starting to envision rather than the incremental steps you take in a product, how do you go out 10, 20, 30 years and think about what would that product potentially be, what would the use case be, and you work yourself backwards. A lot of the best automotive companies do that. And that really drives a significant amount of innovation in the near term, but it allows you to have a really well-thought-through path. And I would tell you, those aren't things that we would have done historically. And those are the types of things that get me really excited when you couple that against us just running the business a lot better. And you'll hear a little bit from Marc on some of the early stages of the work we're doing to get that underway. I talked about dealers earlier, and I thought it was important to spend some time here. On the right-hand side, you get the stats. What I take a lot of pride in is we work with the dealers not just on the selling part. That's important. We also work on the back end of the business. So think about the service operations. That's really important when you're in an environment like we are right now where maybe they're not selling as many new vehicles, but customers are out riding, which means customers need service, and making sure that we're there to support them and do everything we can. Training 7,500 dealer technicians is a big deal. Dealer technicians are in short supply. And we work in each of the local markets to try and partner with our dealers to get them tied in with vocational and technical schools so that we can get feeder program. Some of these start with getting kids in when they're in high school to work at a dealership, changing oil, refueling and then working them up through more master technician training as they get into vocational training. So proud of the progress we've seen there. We've seen the partnership with our dealers show up in the ratings that we get when we go out and do our dealer surveys. NPS score of 70 coming in. And then you look at the ranking of our sales team and our service team, and that's against all the other OEMs. So this is the fundamentals of beginning to build that strong partnership with the dealers. And we know this isn't going to happen overnight. And we've got to stay consistent. And it's not just being consistent with good promo or being consistent with the right inventory level. It's also about being consistent with all the other things that don't get as much attention in terms of how we run the relationship with our dealers. On the left-hand side, I've got a couple of the key points, which I hit a number of them on the right-hand side. But I'll come back to the proactive dealer relationship. I can tell you the meetings that we spend -- that Bob and I spend talking with our dealer council, and then we'll be out on the road here in a couple of weeks, meeting with marine and off-road dealers, so much of that time is really talking about, hey, how do we improve how we're reacting and interacting with each other. I think we get high points for listening and taking that feedback and modifying programs but then also articulating to them what our long-term vision of what our dealer network will look like. And that's important because these dealers, some dealers are getting ready to think about turning their business over. And maybe they don't have a son or a daughter who's interested in taking the dealer, and they've got to think about a buy/sell. We get actively involved in that, and we really cultivate that. I spend time each month with our team talking through the number of buy/sells we have. We're thinking about larger groups, think about people like RideNow or the Karl Malone Group out in Salt Lake City and how do we get them involved to help bring a higher level of sophistication to our dealer network as well as how do we get the right regional pockets covered. So we're spending an awful lot of time really thinking through that. The dealers are going to play an important part well into the future of our businesses. It's such a critical component. And we want to make sure that we get away from thinking as a transactional and truly treat it as a partnership, and I think the stats speak for themselves. What I thought I'd do is -- before I wrap up is just kind of talk through each of our segments and just talk about a few highlights within each of the segments. Within Off-Road, if you think about the ORV vehicles, REC has continued to be soft. A lot of the factors I talked about in here today. The good news is utility has remained relatively strong. When we look back and show -- look at the pre-COVID level of powersports sales and we look at where the industry is now, it's down about 8%. What's interesting is when you dig into the details, it's really on the On-Road side, primarily motorcycles as well as Marine. When you look at Off-Road, it's about flat. REC's down, but our Utility business is up, which is primarily our RANGER business. So I feel real good about that positioning that we have as a company. You think about RANGER is a disproportion portion of ORV, and so those dynamics bode quite well. I mentioned it earlier. The new categories we have proven to be very successful, both in the XPEDITION and the XD. We've done far better there than we had expected. Race dominance. You can tell I love the progress we've made. I think it just reflects the image and the character of the company. So -- and then the Lean focus has really allowed us to address a lot of the underlying issues and start to really push them to the surface. And for me, what it's done is it's highlighted that there's even more opportunity than I thought in terms of the improvements we can make in the business. So really excited about that. Snowmobile business. Those of you in the room are going to get to experience our exciting products that we have out in the parking lot. Should make for a really fun day. I couldn't be happier about the progress that Jenny and Cal and the team have made in this business. This business was a problem for us. Bad quality, a ton of recalls. We had overinvested in segments that weren't paying off. Jenny and the team have really brought a lot of discipline. The products that we have coming out -- I'm really proud of the products that just got launched, but the products that we have coming out in the next couple of years are going to really demonstrate why we have the best sleds out there. It's going to demonstrate the benefits of platforming. There's just -- there's a lot of exciting elements that come with it. What makes me most proud is we've turned what was our weakness into a strength. We are now top of the charts when it comes to reliability and the performance of our sleds. We took it serious. We're not going to back off, and we're going to continue to lead from an industry standpoint. And so that's a really important thing because when you think about -- and you'll get a little bit of this when you're out tomorrow. When you're out in the middle of nowhere on a sled, you want to make sure that sled is going to get you home. And we want to make sure customers feel like they can guarantee -- or guaranteed that the Polaris is going to get them there. So the business has been a little bit challenged, obviously, with the lack of snow. We spent time talking to our Board to reinstill the confidence around the fact that nobody is walking away from the snow category. We track registrations. The registrations have remained pretty stable. So people are riding if they can. What they're not doing is going out and spending 16,000 to 20-some-odd thousand on a new sled when the snow conditions come late in the season. The good news for us is when we did see snow hit the flatlands very late in the season this year, we did see our sled sales picking up. We saw oil pick up. We saw garments and parts pick up. So once the snow is there, they're ready to go. We've had 2 bad years. We're trying to position inventory to be in a really good spot. If we have a good snow season or even a moderate snow season as we head into next year, we should be in a really, really good spot. Government, Defense & Commercial, a small part of the company. Gov't, Defense, big part of our heart. We employ a lot of veterans. We're proud of the relationship we have with the U.S. military, special operation forces in terms of the MRZR and our ATVs as well as our allied forces. And it's an important mission and something that we take a lot of pride in and get a lot of credit from the military for the approach we take with the partnership. And then on the commercial side, we've really grown that business significantly. We position ourselves really well with the top rental companies like United and Sunbelt, and that's really good in an environment like this where there's a lot of infrastructure build going in, in the U.S., whether that's commercial building, building out fabs or just infrastructure build. We tend to take advantage of a lot of that. So Off-Road is really well positioned. We've got some new products coming out later this year that are really going to take us into a whole new category at the entry level, and we're excited about what opportunities that provides. On the On-Road side, India Motorcycles, we refreshed the lineup. We continue to get the highest marks in the industry. I think we have the coolest bikes. I think our customers think we have the coolest bikes. Our focus in Indian right now is about improving profitability. Obviously, with a challenged market, that's a tough position to be in. The team has done a lot to reposition the manufacturing base. We now have a manufacturing facility at Vietnam, where we do bike assembly as well as engine assembly. So we're really working hard to try and get this thing positioned so that as the market comes back, we'll be able to improve the underlying financial performance, and we think that's going to provide a good uplift in that particular business. Slingshot, clearly, our most diverse business. We learn a lot from this in terms of changing demographics and new customers that we bring in. The big focus here was for us to freshen up the product as well as deal with a lot of the underlying product issues. We're proud this is our 10-year anniversary. It's funny because I'm also hitting my 10-year anniversary with the company. And I remember coming to Polaris, and I think it was our second earnings call with Slingshot being out in the market. So it's come a long way, and we're proud of it. It's a neat product. And we've got a focus here around improving profitability with this business. So I think pay off really well for us. And then Aixam and Goupil. We don't spend a lot of time talking about these 2, smaller businesses over in France and a little bit in Italy. We don't have to spend a lot of time on them, but I'll tell you they generate a lot of income and cash. So we like them from that standpoint. They're really solid stand-alone businesses. And they marry up well with the On-Road category over in Europe. Marine. Ben and his team have done a lot with Bennington and Godfrey. Bennington is #1 market share. Godfrey is #3. Together, we make up anywhere from 20% to 25% of the pontoon market. Godfrey was the first pontoon. So we've got a lot of legacy here. We have refreshed the entire lineup across Bennington or almost the entire lineup. And we've seen incredible feedback in the changes that we've made. I talked about the all-digital dash. Godfrey needed a complete revamp. It hadn't been touched in a number of years and the same with Hurricane, which is our deck boat business, the #1 position in the marketplace. The neat thing about the Hurricane business is we just launched 2 boats that take us into completely new segments. So we've got a 24-foot Center Console, and we got a 32-foot dayboat. We had those boats at the Fort Lauderdale and the Miami boat show. Receptivity was incredibly strong. A lot of great feedback. What I like about these boats is we went out and looked at all of our competitors. We talked to their customers. We looked at the things they do well, and we heard all the things that they don't do well, and we made sure we did better on the good things and addressed all the problems. And I think that means these boats are going to do really well relative to the competition. They're pretty slick. So if you get a chance, if you're at a boat show, encourage you to jump on one. They're pretty nice boats. And then the last thing for me before I wrap up, PG&A. We don't spend a lot of time talking about it, but I'll tell you what, such an important part of the company. Steve Eastman just retired, and we recognized him at our Board meeting in January. And one of the things I talked about is Steve got to the company and our PG&A business was $400 million. And it was primarily thought of as a parts business, an oil business and some accessories. And Steve really revamped the whole thought process and has turned this thing into a powerhouse, $1.7 billion. You look at the number of products that we offer, the fact that over 80% of our vehicles leave a dealership with accessories on it. And I'll tell you, a large portion of that 80%, we've moved it to putting the accessories on when they come out of the factory. So these vehicles are already coming into a dealership ready to go. That's great for the dealers. They make a lot of margin on it. We make good margin on it as well. But it's important from a customer standpoint because it allows them to customize the vehicle to meet the needs they have or just to look different than everybody else. The other thing that we have is we have some great aftermarket brands. So think outside of the Polaris moniker. We've got things like Klim, 509, Pro Armor, and there's some really exciting things that we're doing. I can tell you, I've got 3 Pro Ars that are Pro built. So they've got a bunch of the Pro Armor equipment on it. It's part of our business that we're really starting to focus on. It allows people to make the Pro Ar, which is already a high-performance vehicle, even higher performance and look very different, a lot cooler than anybody else. And these give us a lot of weapons to go out there and play with. And in a time like this, when the OEM side of the business is challenged, we make up some distance here. Parts business does really well. People have a vehicle for a little bit longer. They want to put accessories on it. They're using the vehicles. So they're replacing tires, doing oil changes. So all those things work well. And to have this as a big part of our portfolio, I think, really makes us a differentiated player in the industry. So the last thing I'm going to talk to before I turn it over to Marc is just to reemphasize the strategy. And for us, it's just plain and simple about focused execution, and it's focusing in on executing against the strategy with the main goal of improving margins and improving market share. And we're going to keep it that simple. There's going to be a lot of headwinds. Trust me. We've been dealing with them for the last 1.5 years. I'm not sure how this tariff stuff is going to shake out, but we're going to work ourselves through it, and we're going to control everything that we can. I think we're positioning this company to create tremendous shareholder value once we get into a market recovery. It's going to be run better than it ever has been. It's a lot more focused than it has been. And it's going to have better financial characteristics than it ever has been. So with that, I'm going to turn it over to Marc.

All right. Thank you, Mike. Good afternoon, everybody. My name is Marc Suarez. I have been with Polaris now 16 months, and I'm the Vice President of Operations for Polaris, overseeing primarily the Off-Road production as well as Snowmobile production. I also lead the global supply chain and global materials planning and logistics. So when I got to Polaris, I spent the first, let's say, 60 days just assessing what's happening here, where is the opportunities, what are the issues. And I quickly identified 4 key themes that needed to be addressed. The first is that our complexity had outrun our process capabilities. So we needed to put a tremendous focus on improving our processes. The second is we weren't doing a very good job launching our new products into production. We were struggling with a lot of rework and failing to hit rate as we launch those products. So that process needed to be addressed. Our supply chain was over-indexed to Asia, giving us a very inelastic supply chain. And I'd say they had a COVID hangover of costs that we had to get out of the business. And then lastly, we said we were a lean company. But if you went out onto the shop floor and watched the vehicle being built, it was clearly evident that we had a long way to go in our lean journey. So those were the areas of opportunity identified. So I brought my team together into a multi-day off-site jointly with engineering and other cross-functional members. And we brainstormed what do we need to do in 2024 to fundamentally improve the business and take cost out. And we came up with what we call our 5 operations transformation pillars. And those that are there on the left, they are to treat our operators like our most valuable asset, which is a paradigm-breaking concept. We want the entire enterprise to think that way. It is the assembler assembling our vehicle that is actually our most valuable asset, and we need to treat them that way. I'll talk more about that coming up. We wanted to create a nonnegotiable culture of quality. I'll talk about that more. Again, I mentioned we have a lot of rework. When you rework vehicles, that causes quality problems, and we needed to address that. We were already implementing sales, inventory and operations planning journey. We felt it was very important that we continue that and we mature that throughout the year of 2024. We wanted to take our supply chain and put an emphasis on total cost, not just bill of material part cost, but the total cost as it affects the enterprise. And we also wanted the sourcing organization to focus on how the parts come in, how they're ultimately presented to the assemblers. So that ties nicely with the treating our assembler or our operators like our most valuable asset. And then lastly, again, we said we were lean, but we really wanted to embark on a journey of true lean implementation. So a lot of work went into that throughout the year, and it paid off. And you can see on the right, some of the numbers of what we were able to generate, over $200 million in structural cost improvement for the business that carries forward. So I'm going to give 3 examples here of what it is I'm talking about in more depth so you can really understand what we're talking about here. So treating our operator like our most valuable asset. A year ago, we were bringing in operators off the street into a role, an assembly role at one of our plants. And they would get, at most, 1 day of training. And in that 1 day of training, they would get 6 hours of PowerPoint lecture on HR policies and some safety briefing. And then maybe they'd get 2 hours of here's the tools we use, here's how we put the vehicle together. And then we would pair them up with an assembler the next day out on the assembly line who would shadow them for an hour or 2. And they would have to learn 4 to 6 minutes of cycle time on the operation they're doing. And they would struggle, and it was a sink or swim. That was just how we did it. We have completely revamped that. Now we've invested in what we call training dojos, which are just training centers for our assemblers. And we are bringing them in for 5 full days of training. They still get half a day of PowerPoint on HR policies. But then they spend the rest of the week actually assembling mock vehicles, disassembling, assembling, disassembling, learning how to use the tools, learning what the tricks are for some of the difficult assembly so that we are sure that when they go out on the assembly line the following week, they are ready to go. And we pair them up with a coach. We put them out on the assembly line with a coach. We get the feedback on how to improve our training for future 5-day training sessions. The feedback from the operators has been overwhelmingly positive. What we're anticipating is we will see improved quality of build because the assemblers being better trained will make fewer mistakes on the assembly line. That will reduce our cost. It will improve our efficiency. And we will get improved retention of the operators because they're no longer being sent out to sink or swim and frustrated and resigning. Now they actually feel like we are investing in them, and they are part of the team, and we're going to put the effort in to make them successful. The next step of this journey is skills enhancement. So we're going to do that this year, but it is to take this concept and say, okay, you want to be a certified welder, we'll take -- you want to be a welder. You're an assembler. You want to be a welder, we'll teach you how to weld. You want to become a group leader, we're going to teach you how to become a group leader. So those are the next steps in that journey. But it's all about treating the operator like they are, in fact, our most valuable asset. The next one, nonnegotiable culture of quality. When I arrived, one of the biggest issues we were having, we were launching our new platforms, our XD 1500 and our crossover platform. And we were struggling to hit rate, and we were struggling to build clean. And when we reflected back on why, why were we having so many issues with that, it was because we and operations did not partner well enough with engineering early on in the design process to give them the feedback to make sure that their designs were something that we could assemble. And part of the reason we hadn't given that feedback is we didn't have a really good place to do pilot builds. So we invested $8 million across 2 plants, Monterrey and Huntsville, to build dedicated new product introduction, pilot build areas. Those are now fully operational. We can mimic all of the assembly processes, all of the quality checks that the vehicle will see in actual production. We bring the engineers on site with the actual assemblers to work together and identify. The assembler can say, hey, this is a blind assembly. This doesn't work for me. Could we reroute this harness this way? It would be easier and faster. That is now happening. And when we go to launch these new products, the launch is going to be much more successful and be able to get to rate and build cleanly much, much faster. And then lastly, Lean at the plants. We took the approach instead of saying, we're going to go full blast and hit Lean at all the plants across the board. We're taking the approach of creating a model line at our main factory. So Huntsville and Monterrey, we implemented in 2024 a model line. We brought in former Toyota employee consultants that are working with us on the floor, teaching our people how to really build a lean culture and having this one assembly line that is really world-class. That has gone really, really well. And I'll just use a simple example here. You can see on the before and after picture that the operator used to turn away from the vehicle, walk 10 steps, bend over into a giant gaylord, pull out a part, take the plastic, cover off the part, walk 10 steps back to the vehicle and then assemble it. That's the before. Now the assembler turns around, grabs the part that's sequenced in production. The plastic's already off. They can turn right back around and assemble it because the material handler did all that nonvalue-added work, periodic work. A much more efficient lean way to build, and we're doing that across the model lines. So now I'm going to talk briefly about some of the metrics that we use to monitor our progress. Mike mentioned, we have a pretty good history with safety. Safety is the #1 most important metric I've got. It's the one I treat as my most important. And to be clear, when I got here, we were already world class. The metric that is most commonly used for safety would be total recordable incident rate, also known as OSHA recordable rate. I would say any company with 0.50 or better or lower is world class. In 2023, we were 0.30. So we were well under world class. In 2024, we delivered 0.17. So we improved that by over 40%. And this year, year-to-date, we're operating at 0.15. So we're doing a great job with safety for our employees. Quality. A couple of metrics here. We typically look at a whole good warranty, but that's a very lagging metric. It's hard to be actionable real time on that metric because it happened in the past. So we look at clean build. As a company, historically, the best we've ever done was about 80%, even looking back 15 years. That means 20% of our vehicles are being reworked after the vehicle has been built. About half of that, 10%, gets reworked within the same day. But the other 10% have to get moved to another area, and maybe it's a day to 7 days before those vehicles get rebuilt. Inevitably, you're going to have quality issues when you do that over time. Just statistical. It's a fact. So what is world class? Automotive, 95% to 98%. I'd say 95% average. They're better factories, 98%, clean build. So we know it can be done. The question is, how do we get there? So we introduced a new metric called rolled first pass yield, and that is a much tougher metric, which is to say, are we building it right every step of the way from assembly operation 1, operator 1, assembly operator 2 and so on, all the way down the line. We are monitoring every single operator. Are they building it right the first time? When we launched that metric, we were pretty close to 0%. By the end of the year, we were in the mid-30s across our plant network. I haven't even told Mike this yet, but I just got an e-mail right before this, that in Monterrey, my site leader there informed me that yesterday, we achieved 99.54% clean build in 1 day. Okay. It's 1 day. But we're on that journey, and they did that with 54% rolled first pass yield. So it's all a journey, but we're going to get to world class, and world class is 98% rolled first pass yield. Delivery and cost. I would say when I got here, we were focused on delivering at any cost. Now we are focused on delivering efficiently. And so I introduced a metric. It's called critical process yield. But essentially, it's a measure of efficient build attainment. And we have improved that significantly, which has allowed us to take our plant variable costs down. And as a result of our SiOP processes, we have taken inventory down. So we're making very good progress on both of those. Now I got my team back together at the end of 2024 and said, what do we need to do in '25 to keep on this journey and keep improving? We came up with 6 pillars of operations transformation. A few of them are the same because it's a long journey. We are going to keep treating our operator like our most valuable asset because that is important for the entire enterprise to wrap their heads around. I need engineering as an example, and they are being great partners in this, that they need to be thinking of not how do I design something for BOM cost but how do I design it so that the operator can assemble it, design for lean manufacture. So that's going to remain a very key priority. Nonnegotiable culture of quality. I just talked about that. We are still on our journey to 98% rolled first pass yield and same with clean build. We're going from maturing SiOP to leveraging SiOP. So we've spent a lot of time and effort implementing sales, inventory and operations planning. Now it's time to get the payback. So we are going to leverage the fact that we are improving our forecasting ability, and therefore, we're able to operate the plants more efficiently and drive inventory turns improvement. NPI maturity. I already talked about the new product introduction, pilot build areas. We're going to leverage that moving forward. Continue our journey on true lean. We had a line in Huntsville, a line in Monterrey. In January, we kicked off a Lean model line in our Roseau facility, our Snowmobile line. And later this year, we will be rolling out a Lean initiative in Opole, Poland as well. And then the last one is one that's near and dear to my heart. It's operations business process excellence. That's something that we're going to be piloting in the operations area, for every one of my functions to identify 3 to 5 key business processes, document the standard work for those processes, figure out how to measure those processes and then get feedback from the internal customers of those processes with the goal of improving our performance on those processes. So a lot more to come. We expect to achieve at least $40 million in additional savings. So we made progress in 2024. The results are very much real. We're continuing the journey of building a Lean culture. And we have our priorities set for '25. With that, I'm going to turn it over to Bob to talk financials.

Okay. And so we focused on process improvement. The benefit of what we were doing in the slowdown in the business is it did give us a little bit of breathing room. We come out of COVID where we were just hammered down, trying to get product out into the field, get inventories built back up. So we took advantage of a little bit of this slowdown in the industry and really got focused on process, all the stuff Marc has been talking about. So if you look at the industry, right, there's been a tremendous amount of change. If you look pre-COVID, the industry is relatively flat with where it was pre-COVID. But the change has been pretty significant. So ORV, flat to up a little bit if you just look at ORV and side-by-side and ATV. But what you've seen is a pretty big mix shift from recreation -- sorry, lost my train of thought -- recreation into utility. And that's been good for us, right? We're good at utility. It's a big part of our business. We have a really strong product line in RANGER. And the RZR market, you think of '17 to '19, that's kind of the heyday or the late part of the heyday of RZR. And RZRs really slowed down. That product category, that high-performance REC has really slowed down. So while the industry is -- the ORV industry is up about 4%, there is a pretty big change in how the makeup is. What's really stark is the decrease in Snow and in Motorcycles. So they're both down about 30%, and that's thousands of units. And so you see some of that coming through in the financials because those are really big drops and it creates a lot of absorption issues and challenges at the factory. It's hard to cut the fixed cost to deal with that level of a drop. Now with Snow, it's been kind of seasonal. We just have not had good snow in the flatlands. In Motorcycles, it's been this kind of continuing trend to the negative side in the motorcycle industry. And there was some pickup in COVID and all of that, but if you look at it kind of long cycle, there's just been this general decrease in the motorcycle space. And so that's something we're really focused on. Our riders are younger. Scout has been good at bringing people into the industry, but that is -- there's definitely a structural challenge. Marine obviously is down, but Marine is a more cyclical business. And so we're kind of at the bottom part, we think, of the marine cycle. And so we think that will start to recover. So with the industry being challenged, it really has had an impact on production. So if you look at '22 and '23, we're coming out of COVID. We're trying to rebuild dealer inventory. When we got into '22, we had almost no dealer inventory. And '23, we still were really rebuilding. Got into '24 and in the first half of the year, we were continuing to build. We handle a lot of new product, XPEDITION, XD, all those things. And then the industry started to slow down. And so we took significant production cuts in '24, and it was the first time in several years where ship was lower than retail. And that's the only way to really take out dealer inventory. And so we took those aggressive actions to get the dealers into a better place, particularly in ORV. When you think about '25, we've talked about, on our last call, we think in ORV retail and ship will be relatively close. There'll be some change between recreation and utility, but in general, the category will ship to retail. In Marine and in Snow, we're going to ship less than we retail. And again, that's because to make sure we get dealer inventory in the right place, kind of for different reasons. Snow is obviously a seasonality thing in these 2 bad seasons. We really cut our snow builds to make sure we could drive inventory out of the dealers and out of the channel in the next snow season even if it's not a great season. Marine, we actually feel really good about where our dealer inventory is. We're down 35%, 40% from where kind of where we were, and we're below actually 2018 levels. So we're in a good spot. What we're trying to do in Marine is make sure we sort of force the channel to keep the inventory current because there are a mix of '23s and -- or '24s. Not a lot of '23s but '24s and '25s out there. So when we get into shipping model year '26, which will be this like Q3 this year, we want to make sure that we don't overship and we kind of force the sale of all the stuff that's out there to make sure we can just really get clean from a model year standpoint. So obviously, that had a big impact on margins. The biggest impact, obviously, is just the loss of volume. Marc's team did everything they could to make up for that. We had a lot of mix and price-related things. Promo obviously started to get more aggressive. We did our cost cuts, both on the OpEx side and in the factories. So we did a lot to help ourselves. And then strength of the dollar. Since I became CFO, we have been nothing -- FX has gone nothing but against us. And that's driven by the fact that the U.S. has, through all this economic crisis, been the strongest currency. And just given the structure of our manufacturing and where we sell, the fact that we're a U.S. company and we translate those results back into dollars, obviously, what we do in Europe and Canada and places like that with the weakness of those currencies has really hurt us. So let's talk about 2025. Obviously, our focus is going to be on agile and efficient operations. I hope that listening to Marc, you've got some sense that this is serious. These are real plans with real actions and real effort behind them and really driving our EBITDA margins back up towards those better levels. Now that's not going to happen in '25. You obviously see that in the guidance. But over time, we're going to continue to see the benefits of the productivity investments we make. We're going to continue to see benefits from innovation, and we do see the industry turning back towards more normal volumes. There's a huge group of people who bought units in 2021, even '22, who, in a normal part of the cycle, would have traded those units in by now or at least go on and bought another unit and parked it next to the one they had. And that's just not happening. And it's because of this crisis the consumer has right now in terms of debt, interest rates, uncertainty about the job market, uncertainty with tariffs and all the other things that are going on right now. When I was in front of dealers in July, I said, hey, the best thing that can happen politically is the election's over in November. Well, I got my wish. I didn't quite contemplate the level of unrest and disruption that was going to happen with all the tariff stuff and just what's going on. And I think it just -- even if people though aren't directly impacted right now, they feel it. And it just creates concern. I mean you get up. You watch the news. It dominates the conversation. And when that happens, it sort of distracts people for making purchasing decisions on the kind of stuff that we make. But over time, as Mike talked about, we are seeing volumes -- or seeing volumes in terms of like oil and part sales and all of those things. That stuff is really strong. So people are riding. So there's no reason to believe they're not going to come back in the market and replace those vehicles they bought 3, 4 and 5 years ago. It's just a delayed cycle. So we do see that turning around at some point. So our big margin improvement driver is obviously volume. Volume is going to -- we think it will start to trend back, as we talked about. But innovation drives volume. Going into new segments, we've talked about looking at some of these value products. Our products have gotten expensive. And some of that was us. We focused on developing things like XPEDITION and XD and really delivering that premium experience to our customers. And that's been great. That customer has the money. They love that product. They're not necessarily finance buyers. So they're not -- the interest rates aren't as impactful to them. They're cash buyers. That's been really good for us. But as we went through COVID and as costs accelerated, the lower end of our products gotten kind of expensive. And there's a big segment of customers out there that they want the quality, the dealership service, the brand that Polaris brings, but we're just not at that right price level. And so we're focused on that, and we're going to start to introduce some products this year that give an offer to that customer who might otherwise choose something else. And we think that will help us grow the market and get back towards some more volume. The Lean. Marc obviously hit all this. We've got a fair amount of capacity. We added capacity in Mexico over the last few years. A lot of it was back shop, but some of it's assembly because we added assembly for the new products. And so we've kind of got to grow back into that. So it's not like we have unabsorbed, but it's -- we are absorbing what we budgeted to absorb. We just have capacity, and then we'll get good leverage, and we need to leverage that capacity. The work Marc is doing with Lean will really help us in that journey, and I think we'll see better incremental margins than we would have historically in this company. And then price. Price has been a bit of a moving target lately. Coming out of the end of last year, obviously, dealer inventory is down. Some of what we were seeing in promo was really being driven by that higher dealer inventory because all the manufacturers were driving a lot of promo to try to get dealer inventory down. So 2 ways to impact dealer inventory, ship less, retail more, and that's what we were trying to drive. As we got through that, we expected to see some kind of normalization of promo. What we're seeing is, as Mike has talked about, there are some manufacturers who still have heavy amounts of inventory in certain segments of the market. And they've been heavily promoting to get rid of kind of older products or products that aren't selling well where they're heavy on inventory. But we're also starting to see a more aggressive environment where everybody is just trying to drive volume because the industry has just struggled through this noise post-election, and so everybody is trying to drive volume to keep factories running. So it's a little bit tough to say where the promo environment is going. There's been very little price taken in this industry since COVID. So we kind of all had the price increases during COVID. But the last couple of years, price has been really pretty flat on an MSRP basis. And then with promo, it's down. So I don't know that I see other than select price adjustments. Where we get price is innovation because when we launch new products, we bring stuff to market that other people don't have, there's an opportunity to get a premium. And so that's where we talk about we're not going to back off on innovation because that's how we can drive margin and value. So I've showed this chart before. When we did our Capital Markets Day, I think we showed it for the first time. We tweaked it a little bit. We still think that in mid-cycle for this industry, we can be mid-teens. I actually think if things go our way, we can be better than mid-teens. But there's just so much noise right now. It's really hard to sort of figure out how your -- how some of these things are really going to play out. So we've hedged that a little bit. But if we just start to see some normalization, you've seen us perform in the 14s in quarters from an EBITDA margin perspective. There's a clear opportunity to get back to that low teens as we start to get some normal volume back. So if you really look at the top 3, that's kind of where most of the money is. And they're all linked together, right? It's getting to normal volume, leveraging the structure we have. So with the Lean work Marc's done in the plants and what he continues to do and his team and what we've done on the OpEx structure, we can add a lot of volume to this thing and not have to add much cost. There'll be some variable costs in the factory, sure, because you'll run machines more and you'll have to move more material around. But we won't need to add any fixed cost. Our CapEx is really low than this year, and I expect that to continue for the next few years. And on the OpEx side, we didn't just reduce the headcount. We changed the structure. And we feel like we have a structure now that can be leveraged. And as volume comes back, we won't need to add people and headcount on the operating side. So we really think those 3 are, in the short term, where the most impact is going to be. The modular design and platforming, that stuff is going really well. Tony is around. You can certainly talk to him tonight and tomorrow. Marc's involved in that, too. We're starting to see some really good wins and progress and change of culture there. We go to a meeting now on product, and the engineers can't wait to tell Mike and I and Tony and everybody else how much part reuse there is or how much commonality there is in a new product. That never used to happen. That was never a discussion. In fact, I think they were afraid we were going to ask that question. Now they volunteer the answer, and they're proud of it. And so it really is changing how we are engineering products, and it's going to allow us to get better volume, more simplicity for the operator because it's the same parts, faster product development, cheaper product development, less testing and verification because the stuff is already tested. So really good benefits. That will phase in over the next few years. So that's a bit longer term. Price. Again, I think it's going to really depend on what happens with promo, and that's really going to be, I think, economically driven. If the industry stays in a tough place, promo is going to continue to be hot. We were -- if we start to see some normalization, it won't be inventory driven anymore. It will be really retail driven. But hopefully, we start to see some improvement there. Flooring. It's not a massive cost. It is coming down. Our typical dealer right now, it's 100-plus days of inventory from a day sales outstanding standpoint. Depending on where they are in our programs, we're paying 60 to 90 days of that. And so their flooring costs have definitely come down. Interest rates come down about 1.25 points, and we've obviously taken their inventory down a lot. So that's starting to be felt by the dealers. And obviously, we have a piece of that, too, because we're paying flooring. Foreign currency and tariffs. I'll talk about tariffs here in a couple of slides. Foreign currency, like I said, it's a bit of a mixed bag for us. But it has been a struggle being a U.S. dollar-denominated company in the last few years because the U.S. dollar has been so strong. Cash flow. Cash flow has been a big focus. It's going to be a big focus in 2025. We're going to drive about $500 million of free cash flow. We'll invest in the business in terms of CapEx. We're going to keep our dividend, and then our focus is going to be on paying down debt. We want to keep -- if you look at the lower left, we want to keep our EBIT -- debt-to-EBITDA ratio. Our goal is to be 1 to 2. Obviously, we're higher than that right now given just the fall-off in EBITDA. But when we return to a normal part of the cycle, that's where we want to be. So we'll look to be paying down debt this year before we do anything else with the cash. Return on invested capital, obviously, impacted by the earnings. But we believe the model still will be a very high return model. And actually, with the Lean work Marc is doing and the better leverage, I actually think we'll get to higher numbers than we've had historically. That's just going to take getting that volume back. And obviously, we've got to get that earnings recovery. And I think we've got some opportunity on working capital. We've made good progress on our raw material inventory. This year, we're going to actually produce less than we ship, which we have not done in my time here at Polaris. And that's because we built some finished goods last year and as we were kind of winding and slowing down the factories. And so this gives us an opportunity to get that finished goods through the system. And I think as we continue to focus on lean, we'll be able to run the enterprise on lower inventory levels, which is really the biggest part of our working capital. Obviously, in our Polaris acceptance model, we get paid pretty quickly, so we don't carry a lot of receivables. So we have an opportunity to have a very efficient working capital structure. And I think we've got opportunities to continue to drive that. I don't think you'll see us do any big M&A anytime soon. We are focused on fixing the house we live in and driving the most value out of that. If things improve over the long cycle, obviously, we'll get back and look at that and how we can continue to grow the company. But right now, we're going to be focused on investing in ourselves and debt paydown. So really 3 big strategies. Invest in the business. We're going to maintain our dividend aristocrat status. It's important to a percentage of the investors. It's a good yield right now, which has brought some people into the stock, and we're going to pay down debt. Tariffs, obviously a dynamic situation. I was looking at my phone before I walked up here, and there's been like 3 new crazy announcements that we're trying to parse out between Europe and Canada and retaliatory and what's going to be in where. There's really some major buckets we're focused on. Obviously, China, which we've talked about, we were already subject to the China tariff. We source about $500 million of components and parts out of China. Half goes to Mexico. Half goes to the U.S. That has come down actually fairly substantially since the tariffs originally came in, in 2018, but we've got work to do. We've got plans in place to take a pretty good WACC out of this in 2025. And we continue to look for opportunities where we can develop suppliers here in the U.S., in Mexico, near where our manufacturing is to try to continue to drive this number down. But as Mike and I have talked about, these supply chains have been built over decades. It's not that easy to just unwind them. There's a lot of quality testing. There's a lot of verification, and there's a lot of supplier development. There are things that are mostly supplied out of China that really are very hard to find anywhere else in the world. That's just where the supply chain has gravitated, so it's not that simple to just move it. And so we obviously understand the dynamic of the tariff, and we're going to focus on that, but there's -- it does take some time. And it was very difficult to do that during COVID because you were trying just to get supply. So there really was kind of a stalling of the move of supply base out of China from sort of 2020 to 2023. And so we're back on the gas, and we're working hard on that. The Canada situation is complex. It's -- the retaliatory tariffs don't exempt USMCA, which is sort of interesting, given that the products are -- a lot of the products they're tariffing are USMCA compliant. And so I suspect that's going to draw some interest from the U.S. government. And so -- and they've kind of announced lists. Stuff got put out yesterday, pulled back yesterday. I've been here all day, so I haven't seen a whole lot today. But that one's tough to get what the real impact is going to be. We don't source a lot from Canada. Obviously, we sell to Canada. We have a lot of inventory there now. So I think this will be relatively muted, at least for a while, and we can see how this plays out. Europe is -- launched one list, and they've got another list that they've got out there. We kind of know what's on it because they've used it before. That may have some impact on Motorcycles. But again, it's kind of early to tell. So our original guidance included $60 million to $70 million of tariffs. It will certainly be higher than that given what we know about the China tariffs. Like I said, we're working really hard to try to avoid as much of that as we can. But I expect there'll be some impact of that. USMCA is also complex. There are parts and components and things that come in and out of the country, and this impacts all the manufacturers that -- they may be USMCA compliant, but they didn't have to be before. So there's a lot of scrambling going on to figure out what parts are and are not and what we can do and make them USMCA compliant. So there's a lot of work on this one, but it's something that we are trying to manage through. So it is extremely dynamic. We have a team that's all they're doing. I'm spending a lot of my time. Mike is obviously as well. And so know that we're working really hard to understand the impacts to be able to communicate the impacts, but it is such a dynamic environment right now that it's really hard to say exactly what those are going to be. We're also obviously very focused on lobbying. This impacts the auto industry significantly. Their structures aren't that different than ours. And so that's obviously going to be a big push for them. And it impacts all of us a little bit differently. If you're a Japanese manufacturer and you're shipping parts from Japan, normally, you're not paying a tariff. Steel and aluminum derivative tariff will likely impact you if you -- on parts. If you are a Chinese manufacturer, well, now you're paying at least the 20% tariff plus whatever base tariff you were paying. And then Mexico gets complicated because of where stuff's made and how it's imported and where it goes. So it is an extremely complex situation, but we are actively working on it, and we'll continue to advocate for the company and for what makes sense for us and our U.S. workers. So we're focused on a volume recovery. We're going to be ready for it when it comes. We're going to be as agile and efficient as we can. Focus is on margin. That will drive from that agile and efficient operations and the leverage we can get, driving cash flow and our capital allocation, which is going to be a pretty simple strategy this year, focused on debt paydown, investing in our plants and paying our dividend. And with that, I think we're going to move to Q&A.

All right. Can you hear me? Okay. So I have a mic. We ask that you raise your hand, I'll walk around with the mic for Q&A. We'll have Mike, Bob and Marc available.

Craig from Baird. Maybe for Marc and Mike, I heard AI planning, which seems to be improving your ability to forecast. I also heard discussion of your SiOPs. And I'm wondering how that affects RFM. It feels like this industry had an issue overstuffing the channel. You have RFM, which is, I think, a better signal for your production plants. Do you think RFM will be better? And if so, do you still worry that the industry will not have the same discipline?

Yes. It's interesting that you asked that because we actually had a pretty lengthy meeting about that yesterday. RFM, there's going to need to be some changes made to RFM, and there were changes that we made during the pandemic time period because of the horizon for lead times from suppliers and the continuity. And so we're looking at the order window. We've gone and benchmarked against some of our competitors in terms of nobody does it with the level of frequency we do. So we will maintain that component and the replenishment. But building in more flexibility to be able to pivot between, say, a 2-seat and a 4-seat vehicle or a 3-seat and a crew, some of that is dependent on the work that Marc and the team are doing so that we can build in the flexibility in our manufacturing process so that if we have a change that happens within the lead time window we have with suppliers, that we can do that without completely throwing the factory into a tough spot. The fact that we're having those kind of conversations is really encouraging to me because the conversations we were having 2 years ago was what is going on with the supply base, why can't we get the product through without having to rework half of it. We're now talking about, hey, how do we evolve to RFM 2.0, where we can get feedback from dealers, modify what they already feel is a pretty good system and then build in a little bit more flexibility that allows for adaptation to what we're seeing in the current market. I think the AI tools and the forecasting process that we're doing helps us because then we -- because we're going to get the forecast a lot closer. So then the variation is a lot smaller. And so if we can build those 2 together, then I think we're going to be in a lot better spot with dealers. I think -- I don't know that anybody's system would have seen the precipitous drop that we saw that happened in the industry. And I think RFM, the result of an RFM system yielded that we're the best when it comes to current versus noncurrent. We're the best when it comes to days sales outstanding. And what we want to do is improve on what is already a really good system.

I guess the only thing I would add, maybe less about the AI part of SiOP maturity, although that is important. Part of our journey of driving SiOP maturity is building out a really capable team, and we've done that. And that team came to me with a proposal to increase a certain amount of safety stock to give us a lot more flexibility to do exactly what Mike just said, which is pivot much more quickly, be much more agile to meet market demand shifts. So it's all kind of together, but we've really built out a powerful SiOP team.

Just as a brief follow-up, is there -- I don't know, Marc, if you ever meet with dealers on the trips that Bob and Mike take, but is there ever a plan to reengineer how you distribute product and maybe keep product in a warehouse so dealers aren't suffering so much from the overstocking issue?

Yes. So there's a couple of things. We've looked at would we be better served instead of using our vehicle holding centers and distributing straight from like a distribution center. We had our logistics team spend a lot of time, and that team works for Marc. We came back, and effectively, we feel like we've got a pretty good distribution process. We've got a couple of enhancements where we're probably going to introduce rail for some of the longer hauls, and that should improve the efficiency of that. As it relates to dealers, when I'm talking about working in partnership, one of the things that the team is working through is how do you get a dealer to be more contiguous within an area as opposed to a dealer buys something in Memphis, Tennessee and then they go and buy something in rural Ohio. There's very little synergy they can get between those 2 locations, whereas where we've seen things work well, and you can see it in areas like Texas and Arizona, where you have dealers that are within a certain MSA and they own the rooftops, then you can start to preposition inventory in a warehouse that they can draw from. Right now, it's doing a lot of piloting around this concept. And that allows -- there's a couple of benefits. One is they don't have to carry as much. They've got more efficiency in that inventory level. The other is they don't have a dealership stock full of this stuff with a consumer coming in and going, boy, you got an awful lot there. I got negotiating power. And the other thing we've heard is our vehicles are -- all the industries' vehicles are getting much, much larger, and they're running out of space for these things. And so looking for those opportunities. So when we talk about working in partnership with the dealers, it's how do we cultivate that relationship so that when a buy/sell happens -- and we've got some very live examples that will be good for us to bring back and show how working with a really good dealer to help them then take over a dealer in a neighboring county or MSA allows that efficiency to come through. And so I think that's where 100 days of inventory, or maybe that goes lower in a future model, isn't going to disadvantage us. It's just going to allow the dealer to have a more efficient operation.

Last year, you started the new model year in April, I think, for ORV. And it sounded like, Bob, that you said maybe that's going to go back to being Q3 this year. And my question is if that was for everything or if you would still have some things in April. And then I was going to ask if you got that over the border yet, if that's sitting in a warehouse in Texas, some model year things. And then just to add to that also, how much can you get across between now and April 2 so we can think about, if you have 100 days at the dealership, how much more time do you -- can you get yourself before April 2?

Yes. I mean obviously -- a couple of things. I'll start with the model year first. Last year, we had -- coming out of COVID, like we had -- I think it was RANGER. We launched early because it was done. And it was a really good enhancement to the product, and we wanted to get it out in the marketplace and get it out in time for the season. So we kind of pulled that model launch earlier. But we still launched a lot of stuff in the fall like we normally do or late summer. What I was talking about model year, I was talking about marine, there is always like July, August. The date moves around a little bit. So model year, it used to be everything launched at the same time. And what we found was that actually wasn't very efficient from a marketing standpoint. It was hard on the dealers because there was so much change, and they were sunsetting old model years and bringing in new model years all at the same time across the entire category. And it was hard on Marc's team because we were doing massive model year changeover day. And so we've started staggering launches, and it's a little bit more we try to launch products when they're ready, or sometimes we'll hold them a little bit and launch them going into season. So there's not -- we're not holding big model launches in April that will really be tariff impacted. There's not any big model launches set for this April. We have stuff more in our normal cadence because we're kind of back on our normal cadence for product development. In terms of what we can get over the border, I would say a couple of things. When the first tariff deadline was there, we shipped sort of everything we had that was shippable or needed minor rework across the border to Laredo. We'll continue to do that. I mean, our regular course, we ship almost what we produce pretty much every day. So we don't hold a bunch of inventory in Mexico. We're obviously looking at what we can do to accelerate certain models to get better supply. But if you actually look at the Federal Register for the USMCA exemption, it actually does not say April 2. I don't know that, that means anything. But what was actually published doesn't have an April 2 deadline in it. But what that means and what the President will decide to do, I think, is anyone's guess. We are acting as if it's the USMCA exemption will end April 2. The reality is 30 days is not enough time for any manufacturer to have made any progress on moving production back to the United States. So I know this all started with the car companies. They're not moving one vehicle of production back to the U.S. in 1 month, unless they had the supply base, all the tools, all the jigs, everything sitting here, which I think would be pretty unlikely, unless maybe they had just moved it to somewhere else. So I'm not sure what's going to happen, but we'll be as positioned as we can be, but we can't bring unlimited inventory back into the U.S.

So that 100 days at the dealers, you're saying that's pretty much -- you're not necessarily able to add to in your own warehouse?

No, we have inventory in our warehouses in the United States. So there's more than 100 days in the country at any given time. It's 100 days at the dealers. But we can't make enough in a month and find places to put it to -- we can't buy ourselves 6 months. And you'd have to close the factory in Mexico because you can't build -- you can't just keep building inventory. There's no place to put it there either. So somehow, this is all going to have to work out. And like I said, it's going to impact the car companies a lot more that they make 4 million cars in Mexico and 1.5 million in Canada. So they're going to be pushing really hard on this one.

The other thing I'd tell you is when the first deadline hit, we were actually at the Miami boat show. And there were some investors who were like, boy, this must be a windfall for you guys because dealers must be running in to try and get as much inventory on their lot that's pre-tariff. It was actually the opposite because I think dealers are looking at this going, this is not going to be good for my business. So forget whether the unit has tariff or no tariff on it. I'm just worried about the consumer. And the last thing I want to do is pull that much more inventory in, especially after just having gone through reducing inventory pretty dramatically. And I think to me, that's just -- they've got the pulse of the customer, and they're hearing it firsthand in terms of all the things that Bob and I outlined around concerns about am I going to have a job, costs going up. The last thing they want to do is go buy an expensive side-by-side. And the last thing a dealer wants to do is overposition themselves. So if anything, it's kind of just kept things tight from that standpoint.

I just want to follow up on the market share conversation. And I get that that's sort of a medium-term goal or priority. But Mike, how do we sort of think about the triangulation between trying to grow share, trying to keep dealer lots relatively lean, right, to lower their interest burden and all this uncertainty, but then also some of the competitive dynamics from dealers, right? Like what is largely a multiline dealership model?

Yes. It's an evolving and complex triangle, I guess, I would say. And we've seen it play out in Marine. We're seeing it play out in Off-Road. And we've had this discussion with dealers because the immediate concern is, hey, when we're being a lot more efficient with inventory and player B, C and D or not, they are creating more focus from a dealer on their products, which is true from a short-term perspective. And in a lot of instances, as we've certainly seen both in Marine and Off-Road, the products are typically lower end. They are not as desirable as our products. So the consumer that they're attracting, they're putting huge discounts on them. They're aged inventory, and they're pulling a consumer in that in most of the conversations with our dealers, they're like, I'm not sure those people would've ever bought your product. They're coming in because it's $10,000 off. And they're not necessarily going to be a repeat customer because they're not going to be able to buy things at that price. The second piece, the dealers start to make decisions about whose product they're going to carry. And I can tell you, we know it for a fact with Marine where during COVID, they brought in all these other businesses, smaller manufacturers because they actually could produce a boat. And so they were like, okay, we're going to bring these things in. Well, those same people continue to shove inventory in when things slowed down. So yes, the dealer pivoted, put a lot of emphasis on them. But as they clear that inventory out, they're thinking, you know what, I'm not bringing them back in here. So they're getting rid of short lines. We've had the same discussion with our Off-Road dealers. In fact, when we had one of our largest dealers in 2 weeks ago, they told us how many lines -- no, they're not all Off-Road because they carry other products. But they were trimming significant numbers of manufacturers that they carry the product of. To me, that's the payoff, is we remain the disproportionate or a large portion of their business. And it sets a tone because, yes, they're still paying a lot of inventory interest because they carry more Polaris than anybody else. But when they have to go over and focus on a unit that's 3 years old and has $10,000 off and it dissuades them from being able to pull in and spend the time on a higher-end customer, they don't like that. And so from my standpoint, we could have chased it. It's a short-term game. And it's a chase to the bottom as opposed to, look, we'll chase when it's appropriate, if it's a segment that we want to protect. But we're going to do what's in the best interest of the dealer. We're going to make sure we keep that front and center with them and have those discussions. But ultimately, the payoff is they're going to get rid of some of those bad actors as time goes on or the bad actors are going to take themselves out of the equation as we've seen.

Yes. And then just one more. The -- I feel like we've gotten some differing views on the February consumer confidence reading from some leisure vehicle players. Do you guys think that that's like a big deal, medium deal, not a big deal, something to monitor? Just -- I mean it was a pretty precipitous drop.

I would say it's -- I think it's reflective -- I think it's reflective of what everybody is feeling. I think different segments of the population feel it differently. I'm not sure that the low to middle end of our customer set cares much about the movement in the stock market, but that's definitely impacting the psyche of our hiring customers. Higher end still remains relatively good. But when you have the stock market drop in 2,000 points within a short period of time, that's going to impact that. I think in that low to mid-range, they're paying attention to the uncertainty the tariffs are creating. I think the interest rate pause, that is likely to happen if inflation is not coming down. And then just all the uncertainty around tariffs and what that could do from an employment standpoint, it's just too much -- it's an overwhelming amount of noise that creates a negative sentiment. And I think that's what you see playing out. And certainly, our dealers are playing that back to us in terms of what they're seeing in door swings coming through the dealerships. And I think what we're going to see is we're going to see a choppy layout. I think we're going to see a January, okay. February is awful. March, we'll see. And I think that's -- I mean it's -- Bob was joking about it, but it's a little bit of the news cycle we're in. I mean it's -- every couple of hours brings something new. Sometimes it's good. Sometimes it's bad. Or -- and I think that impacts people.

Yes. I mean that's what we're hearing. I mean we talk to a lot of economists. We talk to the dealers. And it is this moving day by day, what's happening. Like Daytona, we just finished Bike Week. Daytona was okay. Attendance was good. We did a lot of demos. There was a lot of interest in the product. Retail was okay. Not mind blowing but okay. And so you say, okay, well, that's a good sign. But then you'll have a few days where retail is really choppy. And it's just very hard to get a read right now as to what the consumer is feeling. And I do think it's -- as Mike said, it's just because there's this day-to-day cycle. And so people are sort of hanging out, trying to figure out what's going on here in the U.S.

Will Staudinger, BMO Capital Markets. You mentioned a 10% reduction in your workforce, 20% at the VP level. Is the expectation when the industry, your business as a rebound that these costs will come back? Or is the goal to really remain at that lean level?

No, it is not going to come back. And that's why we went through the process we went through. It was a very surgical -- I've worked at enough companies that when tough times come, they do a 10% reduction in force and then just go through, and they take 10% of the people out. And most people cop out and take out newer, lower-level employees. And we went business by business with a mandate around we're going to run the company in a different way than we ever have. And the cost -- I mean first of all, when you take 20% of your VPs out, that's a lot of money. And then really, the rest of what we did followed suit as a result of that, meaning we were collapsing org structures. We were pulling things together. We can scale the business. Just because I'm pumping more RANGERs out of Huntsville or more RZRs out of Monterrey or more snowmobiles out of Roseau, I may need some more hourly people to be able to do that. I mean we did take 22% or 24% of our hourly workforce out, which was directly related to volume, but also the activities that Marc did around indirect. Some portion of that is going to have to come back. But there's no reason I have to go add a bunch of salaried people. And what we found was nothing really dropped. In fact, we're -- Tony and I were talking about this on the flight out. Our decision-making process is so much faster now. It's refreshing, and that is how we're going to run the company going forward.

Noah from KeyBanc. I guess in terms of like mid-cycle dynamics, what do you think needs to go right to get back to mid-cycle? Is it rates moving lower? Is it consumer confidence improving? I guess my question is, like do you think there's an affordability issue in terms of like the pricing that's been taken since pre-pandemic to now? I know you commented that maybe later this year, you'd be trying to hit some of the entry-level price points on ORV. So like basically, how do you think about what needs to go right externally? And then what's in your control to get to move back towards mid-cycle?

Well, I mean I think external, I mean, if I can put my wish list together, all this tariff stuff goes away. The fact that inflation is starting to move down -- I mean I was listening. Eggs are $2 cheaper a carton, which is really good. Let the inflation stuff drift down. That means interest rates come down. You start to get the consumer more confident. I do think big geopolitical things, like if I think that this Ukraine-Russia war can get drawn down and the geopolitical noise comes down, I think if the economic uncertainty in the U.S. comes down, things that are kind of being self-induced for all the right reasons, but we get those things under control, I do think you're going to come into -- whether it's the second half of this year or into next year, consumer confidence is going to build because everybody hate -- the stock market is the big measure of it, obviously, but everybody hates uncertainty. And it's just playing out. And I think to the extent we can take that uncertainty out of the equation for the consumer, and I think as inflation comes down, the interest rates are going to adjust. They're never going to go back to where they were, but they're going to come down to more meaningful levels. And for people who qualify for our financing, the payment differential once they start to come down is negligible. And so I don't think it's going to -- and a lot of our people finance their vehicles. So I don't think the price point of the vehicle is as much of the problem. For us, it's going to be about making sure we got the inventory position, and we can see that coming before it's already upon us. And I think we're putting a lot of the tools in place. But I think -- I don't worry. I do think having lower-priced vehicles is helpful. It's not that somebody who buys a $25,000 RANGER is going to go, oh, I'm going to go buy that $9,900. That's not the case. But you may have someone who waits and maybe is buying a used vehicle or now says, well, wait a minute, I can buy a Polaris and get it at an attractive entry point. And we know we're moving them up to scale. And that's why we're doing that. I don't think it's going to mean that there's some huge mix shift in the business. I just think we're actually going to continue to grow the pie as it relates to bringing more customers. But I think there's just too much noise externally for people to be comfortable. And that's why you see all of our REC categories weak you see utility holding firm because the utility where the vehicle is used for more than just recreational purposes, and it's an important part of what they do on a farm or a ranch or a big property.

Yes. I mean I think we talked about how the segment grew and the shift from cities to rural and you had a lot of people that they're on 2 acres, 5 acres. They don't need a RANGER NorthStar. And we just haven't had a great sort of entry-level product that meets the need of that customer, and that customer segment has actually grown. And so they're using it to haul some firewood and tow their garbage cans up to the road and move some things around their property. They might ride it down to the pool or the club if they're in a kind of mountain community. And so we're looking at how do we make some products that provide great Polaris quality, our ride and handling, the things we're good at, that dealership support because a lot of the other stuff that's out there is -- there's no dealer support. There's no -- they're not good products. So we think there's an opportunity kind of in that middle ground, and that's what we're focused on. But to Mike's point, I don't think it's going to drive some huge mix shift.

And Mike, you mentioned like the $9,900 price point. Like would it be that much lower than your kind of existing product?

Just using that as an example. You'll see later this year.

So just on the mid-cycle margin target, it seems like most of that's going to be driven by volume normalization. So given what you said about ORV flattish to pre-COVID, whereas the other segment is down more significantly, do you expect most of that margin improvement to come from those other segments? And then any color you can provide on what those mid-level margins look like on the segment level would be helpful, too.

Yes. I mean obviously, we don't -- we only give EBITDA total company, but I think the challenge in Motorcycles and Snow, the margin degradation has been fairly steep because of the big fall-off in volume. And so if those normalize, they will trend back to their historic margins, probably somewhat better. Certainly, in Snow, Jenny is doing a lot of work on leaning out the product line. The stuff she's got coming in the next few years, highly platform will be better, which will help a lot, but some volume will really make a difference because we're just so far down that you're getting -- you're running the plants at a really inefficient level. Indian is no different. New products are great, but you're just in this very inefficient environment. Off-Road is down less, but it's also far and away our most profitable segment. So any recovery in Off-Road dwarfs any benefit we can get from Motorcycles or Snow. That's just how the math of the company sets up. So the driver of those mid-cycle margins is going to be primarily recovery in ORV, the work Marc is doing in the plants, the fact that we aren't going to, as Mike said, grow the OpEx base. And so we should get tremendous leverage on any new volume we can get. We will get, certainly, tailwind from Snow and Motorcycles trending back towards their normal levels. But really, the driver is Off-Road.

Mart Mitela here from Raymond James for Joe Altobello. One of your largest competitors is selling their Marine business. But as you pointed out last week, they're burning cash, whereas you guys are making a profit off of it. Does this disturbance in any way shift your strategy when you approach Marine? And what kind of long-term benefits are you getting from being in that segment?

No. I think if anything, it reaffirms the approach we took. Our competitor tried powersports, ice, the Marine business, and that's part of the problem. We had looked at one of those businesses, and it was a well-run business, and we had expressed interest in it back in the original acquisition time frame. And the Marine business, the thing we recognized, and Bob obviously had responsibility for the Marine business shortly after we bought it, it is a different model. Now there are common points. I mean it goes through a 2-step distribution and all those things, but the season, the way you sell in, the way you do model your rollover, how you interact with the dealers is very different. And what we have not done is gone in and tried to take what works in our Polaris model and said, okay, this is what you're going to do in Marine. Now they benefited from some of the things that we've done like Tony's product development process. We ported that over, but we modified it for a Marine business. So there were certain pieces of that didn't apply. Marine buys all of its powertrain, whereas we make ours. So there's differences in how the product is developed. And so what we tried to do is say, look, if there's common points that we can leverage without destroying the essence of the business, that's what we're going to do. And when our business is in a normal cycle, we're hitting the mid to high teens EBITDA. We're in a very low point right now, and we're still making a lot of money in that business. We've paid the -- not paid the complete amount that we paid for the business. We've paid a lot of it back now. And at the end of the day, we focused on investing in the Hurricane and Rinker business -- Hurricane and Godfrey business, which had been under-invested in, and we're now to a point where we're making money in those businesses. And so I think we've tried to listen to the people who know how to run a business like that and really allow them to do it the right way. We also made decisions on things that weren't working. The Rinker business, the Larson business just didn't have the brand strength. They didn't have the distribution. And when COVID hit, we made the hard decision to prune those off, which I think in the end was the right thing to do because it allowed us to funnel investment back into those 3 core brands. And that's paying off for us right now. As it relates to -- I think what's in your question, would we ever do more M&A in that segment? I don't know, potentially. We like the Marine segment. But not any time soon. Bob, I think, pretty well articulated our capital deployment strategy. And quite frankly, we're employing a lot of the same approach that we have in powersports, which is our best payoff is when we do something organically. And we're now moving down that path with the 24-foot Center Console and the 32-foot day boat that we've got in Hurricane. And I think those are going to be really important test cases for us to say, okay, now we're going to extend the brand outside of its normal -- the area that it would typically play in with a SunDeck or some of the smaller fiberglass boats. And as that strategy works, I think we're going to feel more confident about how do we move into these new segments. And that gives us the opportunity to organically grow and really leverage the investment we have. And then if we do look at M&A down the road, I mean, it's got some pretty high hurdles that it's got to get over because our -- the financial characteristics of our Marine portfolio are very strong. So we feel good about it. We like the business, and we're sticking with it.

Just I had a question on how you -- really, if there's anything we should be keeping an eye on with regard to used inventory over the next few years just from the fact that we sold a lot of new vehicles in 2020, 2021. Do those maybe entering the used base like help liquidity on trade-up? Is there anything that you're worried about with those vehicles maybe coming into the used market? Just anything you're keeping an eye on with...

We actually see the -- there's a couple of things. We can watch the used market through really kind of 2 barometers. One is there are some reports that come out on the used market pricing. And then we are the largest aggregator of used powersports as it relates to side-by-side with Polaris Xchange. Part of that is because we are probably the largest source of used vehicles because of Polaris Adventures, where we maintain ownership of the bulk of those vehicles. So once we're done with the term, we bring those back in and we put them into exchange as well as the used units that come out of -- whether it's our management units, our sales units, those types of things. We had historically just taken these things and pushed them off into NPA, into the auction houses and realized, you know what, we're creating a competitive environment that we're not benefiting from, and we're not controlling the inventory. And if you haven't had a chance, I'd encourage you go look at Polaris Xchange because it's pretty cool in terms of the health diagnostics and things that you can do on a vehicle. But the way that works is it allows our dealer network to get in and have the opportunity to bid on these vehicles. We're not paying a third party anything. It's between us and them. And they know what they're going to get, and it encourages them to have that as an important profit pool. Some of our dealers have seen the value in that. We've had a significant number of our dealers sign up for Polaris Xchange, which says a lot in tough economic conditions. But I think they see the value of that. We have not seen anything coming through Xchange that would tell us that there's some kind of impending glut of vehicles. And I think you would have probably started to have seen that the minute the ridership data started to slow down. And we kept a close eye on that because what we didn't want to have happen is people saying, hey, look, I'm not riding and I'm going to put this unit on craigslist or whatever. And it's encouraging now that we see the ridership data coming back and actually stronger. We watch the used prices that are coming through. They've stabilized back where they were historically. So we haven't really seen anything that's got any concern written on it, but it is an area that we do keep a close eye on, and quite frankly, we play in pretty heavily.

Yes. I think one of the things we're going to see is what we typically see with RANGER on the utility side is those don't come back. I mean they might come back if they're like -- if we sell them, that they were a demo unit and they're a year old, sure, those will sell instantly. And smart dealers have made a lot of money buying those and reselling them. But typically, if you're -- if the vehicle is owned by a farmer or a rancher or whatever, they kind of use it for 7 to 10 years. And they park it and they let the kids use it or the ranch hands. Or it's there as a spare. They don't really trade them in. You don't see a lot of 5-year-old RANGERs coming back. On the REC side, you used to see and you would see 3-year-old RZRs. Now this stuff is nearly 5 years old. And if somebody has been riding a lot, a 5-year-old RZR is pretty beat up. And if you're a hard rider, I know if I had a RZR for 5 years old, it would be pretty beat up. Mike's would be really beat up, not because he's a bad driver, but because he rides -- mine would be beat up because of what I've hit. But -- so I think by the time those start to come -- those buyers come back, I think those units aren't going to be a big trade thing. They might -- they'll sell them for a little bit of money if they want to sell them, but I don't think they're going to have a huge impact on the new market.

All right. Are there any more questions today? Else, we'll wrap it up. Okay. Thank you.

All right. Well, with that, we're going to wrap up Capital Markets Day. We appreciate everybody who made the trip out. I also appreciate those who have dialed in or are listening to this once it's been posted. And again, I just want to reiterate, we are working hard to navigate through choppy waters and position this company for the long term. And I think we've got this business set up to be an incredible value creator once we get out to the other side of this current volatile markets. So if you have any questions, feel free to reach out to J.C., and we'll make sure we get back to you. Thanks for the attendance today.