Good morning, everyone. I wanna again thank everyone for, coming and attending our, the ones that were here last night, the reveal, and then I'll this morning for the presentations. We got a full day. I know some of you are staying around for the the all day to ride this afternoon. Wyoming.
Some are gonna have to leave a little bit earlier, so that that's fine. We'll we'll give you some instructions, towards the end of the presentations, kinda on how we're gonna work that. So the bathrooms are just at the end of this hall. If you, need the need those, there'll be, you know, 6 presenters, this morning go relatively quickly. There's not gonna be a lot of numbers in this presentation, but, you know, the numbers that you will see, you should consider those, forward looking statements.
And, there are risks and uncertainties around those numbers. So, check out our 10 k and our queues just to make sure you know about the risks and uncertainties about those those numbers. We'll, the only other thing I'll mention is, there is a webcast in the room. There's little tents on the table. Yellow zone is the, the the the site you need to be looking for in this rubber duck, I think, is the, cold.
So you can, you can, go to that and you can download the presentation. So there's not handouts. You probably noticed that. But there is a PDF on the website, so you can download the the presentation. We'd prefer you not try to listen to the webcast here on your on your computers here in the room because there will be a little bit of a delay this has been webcast, just so you know, we'll have questions after each of the presenters.
A few questions, and then there'll be, additional q and a, time period at the end. Once we get through all the presentations. So with that, I will, turn it over to our CEOs, Scott White.
Thanks, Richard. And, good morning, everybody. I hope, if you were able to join us last night, you can see why we're so excited about the the future of Polaris As you know, with these analyst meetings, Mike and I have a pretty simple rule. You hear from us all the time, so there's no use from you. For you to hear too much from us today.
We'll be around for q and a. I will tell you a couple of things. First of all, we had our board strategy session last week, and I'm very fortunate to have a, a knowledgeable, engaged, and strong board of directors. And, we came out of those 2 days talking about board strategy, and they understood why we're so confident where the future is going. Not only this stuff, that that Ken's doing on the the manufacturing and productivity and supply chain standpoint, but what the brands and businesses are doing, what we're doing from an engineering and quality perspective, really the the whole company and hope you saw our confidence come through a little bit last night.
The ride, I I know some of you actually have jobs that you have to get back to, but I would strongly encourage you to change your flight. You ride this new Pro XP. You'll understand why we're so confident in what that platform means to us. You know, Chris will talk about the products. The Indian motorcycle continues to give us this huge opportunity for growth.
And, just across the business and our investments in technology and to make sure we're there for our consumer. This new think outside brand, for for many years, I I would sit in internal meetings and say that we suck at marketing. I can't say that anymore because I think we're finally starting to realize how we can leverage our brands, not only our individual product brands, but the Polaris brand itself. And the whole idea here as we've grown our company and grown the markets that we serve and the products that we offer, making it a more inclusive brand to bring more people into the category. And, as I was on the floor last night talking to dealers, the interest in Polaris Adventures, the interest in offering new ways for people to engage with our sport was pretty exciting.
So I'm gonna step down and, turn it over. We'll be here all day, but enjoy the morning. Thank you.
K. Next up is, Ken Pucel. He op he runs our operations and engineering team.
Morning, everybody. Hopefully, everybody is doing well. I'm gonna walk you through some of the inside mechanics of the company before we get to the business units. And you've probably seen this wheel before. This is how we communicate with inside the organization, the operation strategy, And in this center, you'll see the words that Scott talked about yesterday.
You know, winning as a com customer centric highly efficient growth company. So we take that. We say, what does the next 5 years look like? We set a series of aggressive targets, largely around occupational safety delivery, quality cost and new product introduction. And you see those goals that we set, for the 5 years here below.
In fact, we're gonna challenge ourselves to up these some of these targets because you'll see in the subsequent slides how our performance is we're starting to meet some of these only after a year of of working on it. So how are we doing today right now for, for for the calendar year 19? Let's break it down. Safety delivery, quality costs. Let's type occupational safety in the upper left.
This is when you walk into our facilities, how safe are the employees. And you'll see 15, 16, 17. We had a really nice decline, and then we bought TAP. We bought boats and we bought WSI. They weren't on our safety program.
We put them on the safety program and what happens. Grids a great safety program immediately. We drop it back down. Now when you say how good is that, if you were to put a dotted line on the top of this that showed best in class, we would be there. That's how good we are at.
Occupational safety. It's a big deal, and that's what we look at when we're running manufacturing operations. On the quality side, I like rework. As the metric. Rewark is the metric where all this stuff that happens upstream shows up on your manufacturing floor.
In terms of volatility. So did you get the supply chain right? Did you get your design right? Did manufacturing make it correctly? And you can see that we are now at a level of rework.
That's the best we've had in our recorded history. So it's coming down nicely. This is the hard work. Around the safety and quality operating system that we've been working on for so long and improvements in our product development process. On the delivery side, Chris Mussel mentioned this yesterday, we historically had been around a 60% on time delivery company.
So when we say we were gonna get it to the dealer, we got it to the dealer within that window at about 60%. These bars show that, with factory choice and RFM for side by sides, we increased our on time delivery greater than 90%. In fact, in fact, factory choice is 94%. So we really really like what we're doing here. And then in the lower right, you see our cost picture.
This is the gross profit walk between our 2018 and 2019, and you see that big headwind around tariffs. But what you'll also see is that green bar. Where we're seeing pricing and productivity really kick in and hit the hit, get some horsepower to ground for us. And you can see the power that's that's sitting there when the tariffs if the tariffs get remediated like we hope they're gonna do. Let's break it down a little bit more.
You saw us on a journey in the last 24 months to improve product quality and safety. We created a new organization. We hired really great leadership that came from the automotive side of the industry. And we focused on the post sale surveillance or how do we know what the products are performing like out in the field? And then we focused on the ingredients.
How do you design the product? What's your supplier development and what's your manufacturing controls? And from our benchmark where we drew a line in 2017, a lot of great work. Warranty claims per unit, which is the actual claims rate coming through right now down 45%. I already showed you the rework on the prior slide down 30% and supplier PPM the amount of defects that we see to iron out the volatility through our supply chain.
And one of the main reasons and enablers on why that delivery performance improved so much. So let's look at our manufacturing network. You can see in the upper right, although it's somewhat small print, you can see that we've continued to add capabilities in our ring network. And, and it's global. It's not just North America anymore.
In addition to Monterey, Mexico, we have a We've got a joint venture now in Vietnam. We've got a a small plant in Shanghai, China. So we we've got, increasing reach. Our utilization is 68% today. And as we increase efficiency in the plants and grow the business at the same time, over the next 5 years that'll increase to 85 percent utilization.
And the real message there is we don't anticipate needing to build a big plant in the near future. That's good. We're gonna be in the leverage window right now. So what are some of the things, the highlights? We added factory choice in the plants.
We bought a machining company in Monticello Minnesota called WSI which you're price familiar with. And we're nucleating new technologies. They're in in sourcing capabilities in in our power train machining. That's been a real win for us. We transferred our midsize motorcycles for Europe over to Europe as part of what we called the Genie Program.
We've also added some paint capacity in the bottleneck in Monterey, Mexico, which increased our Monterey, Mexico facility capacity 18%, which is a really good play for a low cost location. And we started a joint venture in in Vietnam, and we've increased the sourcing that we sent through that plant by by about a 100% from about $30,000,000. So that's some highlights in the manufacturing. Plant network. Now let's talk VIP Productivity.
How do you get from current margin performance up to challenge our historical peaks. Just a couple of highlights here. And I mentioned some of them already. Over 2770 projects completed in 2018, some are large, some are small, all contributing to gross profit improvement going forward. I'm gonna talk in the next two slides about our supply chain transformation.
Which we call sunburst and some of the highlights there. So we talk about sunburst or supply chain transformation. After 65 years of adding to our supply base, how do you go back and make sure that you're working with the best suppliers possible out in the industry? That's what's, Sunburst is all about. It's 4 waves over multi years, and we believe that there's over $200,000,000 of value there in cost savings when we execute, but not just cost savings, supplier rationalization, product quality performance.
It it runs the whole gamut. I'm gonna show you on the next slide. There are actually 64 different value dimensions that we're driving. So it's 4 waves total. Wave 1.
We're we're through 9 steps of 11 steps. We've identified The opportunities that we believe are in wave 1 and we're overachieving nicely what our original assessment was for value. We're also seeing a 40% reduction in supply base. So this is actually happening just like we said it was going to. Some of the mechanics.
I mentioned 11 step process. We're through 9 on wave 1. We're just now getting to the point where Mike Dunham who's sitting in the back, our CTO is gonna get the baton. We know the suppliers. We know the parts that are moving.
We know what we're gonna execute. And now our engineers are gonna take that and they're actually gonna validate the part changes through either new product year launches or off cycle validation. So that's all happening. On the right side of the slide is the actual list of the value dimensions that we drive with each supplier. And you'll notice number 64 is pricing, but there are several other dimensions.
And each supplier brings something unique and different to the whole discussion, whether it's how you do new product development or it could be supply chain rationalization and speeding up the the supply chain. All of these are in play every time we do out and do a sourcing. So a lot of great work going on on Sunburst. We just executed the supplier conference, which is our step 4 of the 11 steps for wave 2. So we're initiating the 2nd wave of 4 as we as we speak and it's going really, really well.
So in summary, we're working on those things you'd consider that we should be working on. Occupational safety, delivery, quality costs and new product launch excellence. So I'm I'm gonna pause there and ask for questions.
K. Any, any questions for Ken? We'll take a couple of questions at each of the end of the presentations. And then so, yeah, Craig.
Yes. So the question was, what are we doing to listen to the field to understand the product performance? A couple couple things. One of the things that we put in place we call it post sale surveillance. And, we didn't have a really formal post sale surveillance.
We got feedback always historically from the field but we didn't have a formal organization the way we have it now that that trends all the the feedback. We get social media feedback. We get part sales that we see. We have warranty. We have safety claims.
All of those come back to a group of people And then we apply some artificial intelligence trending over the top of that, and we're looking for changes or anomalies. So you've got computers looking at the data. You got people looking at the data, and then we ask ourselves, do we have a safety signal? That's the first thing we're looking for. And if we do, we act on it.
We'll always do that, or do we have a quality signal that we can improve on? Some of the things that we've seen front drive noise on Ranger. You see that. We feed that to the engineering people. The engineering people go after it.
So We've got a really good, capability there. The formal job responsibility is to listen to the field. It's it's solid.
Any, any other questions? Yep.
So the, so so the tariff question. So there are some things that we did. And, over 70 different actions to help mitigate the tariffs for us. You know, they they range from that genie transfer of mid sized bikes that we were making in Spirit Lake Iowa. We were always gonna make our mid size bikes in Europe, for Europe, and we accelerated that.
And so as that came through, that was one example. We bought WSI and Monticello as a machine capability It just so happens that it was nicely timed because when we went out and looked at the tariffs, the insourcing that we are doing into our own now inside machine center there is about $30,000,000 of additional value that came into the United States because of that. We're working with suppliers during negotiations. We are asking them to change their country of origin and some sometimes these Countries had a a Chinese plant in a Vietnam plant and a Mexican plant, and they were able to to change where they they, manufacture And all the way down to, we're making sure we don't have any shipments that are hitting US soil or if they are, they're through bonded warehouses. So we don't have any structural in, kinda inefficiency and how the tariffs fall.
So there's a whole list of things that we're doing over 70 inside, and we'll continue to have great ideas and and and, manage as we go forward. So we've taken a nice bite out of it. Mike, do you wanna talk about year over year? Yeah. Am I on?
Yeah. So the
Thanks, Richard.
Yeah. So the, the discussion that we had on the earnings call last week, I'd I'd just refer back to that. You know, a $110,000,000 to $120,000,000 this year. The list 3 being at 25%, adds $30,000,000 to $40,000,000. And then because of what we did with the motorcycle transition over into a pole a and 232 going away, we probably get another 10 to 20,000,000 of relief.
One of the things that Ken didn't point out is we have elements of our supply chain. We can't move out of China. There's literally nowhere else that produces the type of products. And there's even areas where we could transition out, but the tariff would have to move to, what, 40, 50%. To make it economically viable.
So, you know, if they remain, we're gonna continue to have that drag, but, you know, on a sequential basis, year over year, it becomes less of an impact year over year, and then we get to a point of steady state, in 2020.
I'll take I'll take second, maybe you wanna take the first one. Go ahead, Karen.
You know, eventually, we would hope that it would all go to the bottom line. Obviously, know, if that great event were to happen, we'd have to talk through, you know, we've got existing inventory. Ken's organization has really built up a strong capability around tariffs, unfortunately. And the team would have to go back, especially where, you know, where it's direct and coming in, we would see the price reduction immediately because we're just we're paying the tariff, through customs. It's the indirect, and we would need government guys to go back and make sure that we're getting the commensurate price reduction through the the materials.
And then, obviously, we'd have to bleed it through inventory. But we'd also look at it relative to the competitive environment. What's going on with promo?
I mean, we'd have a
pretty broad look, but, yeah, it would be a pretty significant impact to us.
So the second part of the question, our JV was with an existing supplier, but it was a Vietnam based supplier. And so it wasn't a China based supplier, but it was a Vietnam based supplier. And we were we were doing a nice chunk of business with them. They really have an a great array of metals based manufacturing technology. And we we talked through it and we said, well, let's do a JV.
We doubled the size of the value that going through there and sequentially, we'll start to step up the capabilities of that JV from parts to hopefully assembly of things and things like that going and so we've got a lot of runway there, and we like that one. That's a really nice, footprint over in Asia through JV.
Okay. We gotta end it there. Thanks, Ken. Mike?
Alright.
Good. Hey. Next up, Pam Kermish, vice president of customer experience.
Thank you. Good morning. So if you take a look at our strategy, one of the things that you're gonna see is that we are committed to being a customer centric, highly efficient growth company. So customers are at the heart of everything we do, and actually very critical to the growth that we hope to achieve. So what does customer centric mean?
Well, it starts with our current owners They are very important to us because, ultimately, we want their repurchase, we want their loyalty, and we need their advocacy. They're the most likely ones to go bring in the next customer. So we have invested quite a bit in a capability to make sure we can better understand our customers and we can activate against them, creating more personalized communications so we can be more relevant when someone's a brand new owner the messaging is gonna be very different. The content we offer up than someone who's an active owner or someone who's a lead may be kicking the tires on a potential purchase. Very important for us and something we continue to invest in.
What's really exciting is it's beyond the idea of each business being able to understand their customer is having an enterprise view. So now we can look at customers across the entire enterprise and understand where there's overlap, even better where there's not overlap and there should be, what about customer value and the insights and the opportunities that come from this are very exciting. Highly efficient for us as a company because we have such great diverse businesses. So when you look at the information that we've got just here as a couple of examples, 90% of our customers own 1 of our brands. We also know that in Power Sports, most customers own more than one category.
So this is a huge opportunity for Polaris. When you look at off road customers and you look at their five year average spend, specifically with off road, and compare those who own only our off road brands and those who own off road. And maybe they're also a tap customer or they're an Indian motorcycle customer. The amount they spend in off road is more. So there are insights we can mine and keep getting better there.
And from a growth perspective, We have had tremendous growth over the past 65 years and brought in a lot of new customers. And if you look at the lower blue line, that is our new customer that is our customer growth for today at 5,000,000 customers. And if we continue on the growth trajectory we have, which is respectable, You can see we have significant growth in the next 10 years. However, if we're able to add a little bit of diversity to that, younger customers, female customers, multicultural customers. You can see we can grow quite a bit more.
We aim to grow our customer base by nearly 50% in the next 10 years. So in order to know where we're going, it's important to understand where we are today. So we took a look at what about our existing customer base? What do we look like today? So the upper left shows the makeup of our customer base, and this goes back to the early 90s.
So some of the percentages may look different than today. But if you look at it, 75% of our customers are gen X Boomers. They're older. And then you look at from a diversity perspective, 10% are non white, and you look at from a female perspective, 15% Now I believe that's a little bit underrepresented because that's based on warranty registrations. So perhaps the husband warranty registers the female may ride, But regardless, you can see this very much reflects what powersports looks like today, but as the market leader, we are not gonna stick with the status quo.
We know we can do better. I'm gonna highlight a couple of examples across our businesses just to give you an idea of where we're already doing well organically and where we think we can lean in a lot more. So you look at razoring ranger, certainly dominated white and older. However, if you look at even the differences between them, razor has 10% of their customers that are non white versus Ranger at half of that. And the same thing with millennial customers.
We know on razor, there is something there already that is interesting to these other populations and on Ranger as a market leader, we know we can do better. Giving you a couple other examples. On Indian. We have opportunities across the board because there are there is quite a bit of diversity in the motorcycle market, and we under index there. When you look at Slingshot, 20 percent of our owners today are African American and Latino without us doing anything specifically to go after them.
We know that there's more opportunity there. And from a snow perspective, getting younger customers very important, and we believe we can do that. So what is our approach? You know, going after 86,000,000 millennials or 60,000,000 Latinos, there are other companies that have these great goals and don't really have a solid plan to get there. I'm confident because we have a very focused approach.
We're gonna start today with our existing diverse owners, and then we look at the diverse leads that we have that we are converting and why and continue to work those. And then we're gonna look at diverse people who already participate, maybe they don't own, maybe they own a competitive brand There's share to be had there. There's also people who participated that don't own today and get them back in. And then we're gonna look at people who look like those people. And they aren't in today.
So we're not talking about going after 86,000,000 people or 60,000,000 people. We're going after it in a very smart approach. And how. We look at each business. We look at the quantitative data.
We look at qualitative data. Figure out the right customers that we should be going after microtargets. For each brand. We look at geographies and we come up with a solid plan. At the end of the day, we know how to do events.
We know how to do advertising. We know how to do PR and social. We've done it for our other our brands. We haven't done it with these customers. And that gives me a lot of confidence.
This coming week, we're gonna be at an event called the National RoundUp in Gulfport, Mississippi, 25 to 30000 African American motorcycle riders. We've never been there. We're gonna be there. You look at something like the Latino Farmer Conference Ranger needs to be there, and we will be. And then you look at messaging.
So just having great brands doesn't mean it applies across the board. We need to understand the insights for the customers and how they think about category and what they how they see themselves with their lifestyle, and we need to have messaging that matches that. You look at Polaris Adventures. This was created to bring in new customers to powersports, and they are delivering. So you look at what their customer base looks like as opposed to our owner base.
They're bringing in more multicultural consumers, younger consumers, more women, more families, This gives me a lot of confidence in our ability to grow in powersports, bring the customer base up. And this is an enterprise wide effort. This is about inclusivity. And so if you think about it, this can't just be a marketing thing. This comes from product development.
And when we do research, make sure the right people are included as part of that process, and I'm seeing that happen across the company, and that is very exciting. And we know that that is gonna matter. Many of you saw our new Polaris branding last night. And what makes me really excited about this is that it's highly relevant to a lot more people. So if you think about it, the trends tell us that more people today are wanting to get outside and experience outside.
With friends and family. It's a very social activity for them, and they're looking to create these next level experiences. I am highly confident that we are advantaged to deliver better than anybody else in this space. Any questions?
Any questions for Pam? Yes.
Yeah. So
Yeah. So the question is on millennials.
They love experiences and they share. They do share assets, and we see that. And what I will tell you is, I do believe our next level experience is that we can deliver that they share with their family and friends. Absolutely. And Polaris Adventures is one way to do that.
I think as a company, we are constantly looking at what are different models that we should be considering down the road. And I I have a lot of confidence that over time, you'll if anyone's gonna be able to do it, it'll be Polaris.
Any other questions? No. Hi.
Yeah. So the question is, first of all, Gen Z is coming. So what do we think about that and what has been some of our surprises? You know, I think As we entered into this, there was a lot of questions internally. Can we do this?
Are we gonna be a believable and authentic as we go into the different communities because, frankly, look at what powersports looks like to people. And is that gonna turn people off? And I think our approach has been very thoughtful. And so as we think about partnerships with Black Girls Ride Magazine, that is a partnership we've had for 3 or 4 years already. So we didn't just wake up today and and start doing stuff without, having experts help guide us, right, and partnerships.
When I think about, relationships that we have with other events and have worked with them and had them teach us, right, and have us build authenticity, that's something we know we have to do. We can't just go bulldozing in and think we're gonna show up and everybody's been waiting for us to be there. It's gotta be natural. It's gotta be organic. It's gotta be authentic.
And frankly, many of our employees are extremely excited to participate in these types of events. And if anything, they've asked, is it okay if I show up if I look like me? And I think what we found is a lot of receptivity. For Gen Z, yes, they are coming, and they are even more digitally native and they even more want experiences. I think you'll see what the Polaris Adventure numbers, the fact that a lot of we already have that slice of Gen Z that we don't see on other businesses tells you people are bringing their families there.
The the people 22 and under are enjoying it, and I think we're gonna see them come back. The business model like Polaris Adventures, I think will help enable that as well as others that may come in the future.
Okay. One more one more here. David? Yeah. David.
Great question. So how do we get the dealers engaged? I will tell you from talking to our dealer council members. There is a lot of excitement and support And the biggest question is, how do we do this? How what do we do?
And so, actually, yesterday, we had 2 seminars at the dealer show talking about what dealers can do to help capitalize on this opportunity. And we got a lot of great feedback, but this is gonna be a journey. And frankly, across the base, I would say dealers are excited about the opportunity to bring more customers into their dealership. And if anything are looking for Polaris to help help them figure out what's the best way
to do it.
K. Thanks, Pam.
Thank you.
Alright. Next is, Steve Menneto, president of motorcycles. Thank
you.
Morning. So I'm gonna take you through a, I'll say a grounded, but very optimistic, conversation. And, grounded in the sense that we all know that we're we're challenged by the industries right now in motorcycles. This is North American chart over the last few years. You see where the trends are going.
And, we're very much aware of where they're going all down around mid single digits. 3 wheels up a little bit. That's due to Ryker, but when you look at our 3 wheel business, sleepshot really doesn't interact, very much with trikes and or Ryker. It's a kind of a really different product. So we understand on where we're at, and we have great opportunity to gain share.
And as we continue to do that, we're excited about what we see. We're still in the midst of rounding out our platform We'll talk about that when we get to the Indian section of this presentation, but we're able to gain share. And we're consistently seeing that we can makes, the products that consumers want. The brand has momentum, and we're also seeing our brand move for more of just being a motor motorcycle manufacturer to a lifestyle brand. And we'll talk about that as we get into the Indian side.
So we'll go down slingshot first. And again, I said grounded. And why we're grounded is you gotta step back. The one great thing about, polaris is we're a learning culture and then we counter measure like health. Right?
So We launched Slingshot. Saw all this excitement in the 1st year. Early adopters jumped on the rig, and it was like, oh, this is gonna be so cool. And then you start to see, well, quality wasn't really where we wanted to be in our product. Right?
We we didn't, stick shift is a challenge in our product, right, when you think about the United States right now, people who know how to, who drive stick. Edmund says about 11% of people know how to drive stick. If you look at the automotives in 2018, 1% of the of the cars of the vehicles sold were sick. K? So we we launched a product with Styx.
So it makes it kinda tough when you go through that way. Our brand, just because of the way we are built, it was all about performance. Well, when you listen to your customers, they want fun. It wasn't about huge performance. It was what this vehicle says about me, and what I could do would have fun with it.
And when we look at that over the the course of time, it's like, okay. Launch the product. Now we gotta self correct. Right? And that's what we'll talk about as we go through.
We sat with fifteen hundred people and said, who came in and and demoed a slingshot, but didn't buy. So why didn't you buy? And the first thing was is price value. They're saying, listen. It's a cool rig, but it's not at the level of quality that I expect.
The fit and finish wasn't there. It's not what I wanted to to to to enjoy too many noises. We had a rad issue, the rear angle drive issue, and noises, and so forth. So we have to go back and rework the the unit. 2nd, not a lot of onboard storage.
Well, you know, we have to stick under the 1750 unit, £50 restriction for a motorcycle. So we have to make sure every time we wanna increase storage, we have to take weight out of the vehicle to open up storage. K? So we're we're working through that. And then last is I'm not really, shopping this against the trike or a or a spider.
I'm shopping against other bigger items, k, boats, RVs, and so forth. So I want an opportunity to try it before I buy it and try it for a little bit more than a demo ride around the block. So that's where Players Adventure is one of the most popularly rented vehicles in Players Adventures right now, and it's really helping us get people to initiate into Slingshot. And it's a really good opportunity for us to build that brand. So we know that we had a quality challenge.
And over the last 5 years, Mike Donahue and have been doing a great job of getting that stepped up every year. And this latest edition that we'll launch, you'll see the video on is gonna be our best unit ever. And we're really excited about where that quality is gonna go. The pickup, we'll we'll look at this video right here. Got it again.
So we were able to show the dealers in a private showing last night, the sunshot dealers, and they are ecstatic about the new vehicle. And, and where it's gonna bring their business. And, we just have to, like I said, on stage last night, clean through some of the, the current inventory that's out in the field, and we'll do that. We have enough inventory to get us through the balance of the year and so forth. So we're ready to, to really take Slingshot to the next level with that.
But the challenge that we have sitting with some of our best dealers is even if it's a great product and you're not doing the right things in your dealership to retail the product, you're still not gonna drive to the growth that you can have. So, again, we sat with our best retailing dealers now and said, what are the things that drive success? And it was real simple. In five areas, we call them the 5 pillars is you gotta understand your customers. And as Pam said, is our dealerships are really kinda banking on the the the same old powersports customer coming through the door when there's a lot of opportunity with new customers coming to Polaris and coming to slingshot.
So we have to make sure we're doing that. When you show stock vehicles, it's just not exciting for the customer. These are folks who are look at me customers. So they wanna see all the bling They wanna see underglow. They wanna see wraps.
They wanna see all the fun stuff, the customization on these vehicles. Then they wanna demo it. Okay. And it's not just, hey, take a spin. It's an actual let me take it out for about 30 minutes or so.
Let me get the understanding and enjoy it. We have one deal in Cal in, Florida. Who actually takes the person on a demo and then stops a midway of the ride right in front of a mirrored glass on a furniture store and takes pictures of them. And he goes, it is a closing gem. He goes, they walk away with a big, picture of themselves.
And they, they come back and they say, this is for me. Right? So it's that kind of of attitude to mentality that folks are are looking at for Slingshot then we have to have ambassadors in the store who live and breathe this, type of lifestyle. And then after that, it's access. It's finance.
Right? It's getting to use it through Players Adventures. It's all the different things that we can do to make sure slingshot is spread around. And I was reminiscing with Scott last night, I was at DSM here in 98 when we launched, Ranger. And you saw the pictures last night, that old Ranger, we could not get the dealers to take 4 Rangers.
Just four Rangers when we first started. They were just so opposed to it. I'm not saying this is gonna be Ranger level business, but we're in that same mode. We've seen this before. We have to make sure we retrench and go after it with the right product, the right brand, and we get after it with the dealers and helping them.
And we see this in Spades. We have this dealer down in, Elmo Power Sports, Dave Sears. He came on to the business about a year ago. He's a new, general manager of the store. And they were only doing 6 units.
K? With the right steps, days at 45 units this year with a personal goal at 60. Of of Slingshots retail in 1 year. So it's not it's we see the proof points that Slingshot can work if we get it right with the right dealers executing the right plan. And the last slide on Slingshot, this is what it looks like.
It's not the stock units. We had an event in Huntsville, Alabama, about 250 slingshot owners showed up, and these are just mild showing of what they do to their rings. And it's so cool to see and so invigorating to see how much energy is around Slingshot and where it can go. So we'll switch over to Indian. And just kinda briefly going through where Indian's at.
We know that the industry is challenged. We understand that. We also understand what the demographics about the industry are. We understand their huge huge opportunities for Indian as a lifestyle brand in a motorcycle group. And we're excited about where we're going.
Over the last 6 years, you could see our growth both, North America and Internationally. And if you see, we we built from one platform to 4. Right? So we're still in that mode of filling out and rounding out bikes into segments that we can still play in. That's where we see our growth and then where we see our growth is acquiring more customers via through gaining share, but also as Pam spoke, acquiring more customers that are gonna come into the Indian brand that are non white.
So we have a lot of opportunities when we go forward with that. But real where we focus, where we can win is where how we take care of our customers. And we've gotten a data back, like I said, is we're at a 75 right now in in terms of Net Promoter Score. This is huge on what we wanna go after in terms of our customer obsession strategy is making sure not only did you buy an Indian, but you feel that you're we have a loyal customer, but you feel an organization that supports you in at every step of the way. If you if it's through the prospecting phase and when you buy in a dealership and then after you own.
And that's what we make sure we're doing it all the time. And then we wanna build a lifestyle brand. And you notice through this picture here, it's a lot of different things to capture a lot of different people. So it's not the same old same old. We still go to sturgess.
Right? We still go to Daytona bike week. We'll continue to do that. That's kinda antique for poker here in motorcycles. But evil live on the artist series, and we have sleigh, Indian motorcycle on tour and all the different hooligan things that we do and and different personalities is a way to continue to build that lifestyle brand around Indian.
And we do this, and it resonates around the world, and we continue to be more, innovative in this area. So we're not always the same old. Just going to the motorcycle shows and just trying to pedal motorcycles. It's about communicating a lifestyle for Indian with our consumers and prospects. And you see racing.
Racing is fun in Polaris's culture. Right? We love to win. As Scott said, we're extremely competitive, ridiculously competitive. And when we got into racing, it was cool to get that, but it was a way to promote our brand around the globe, and you could see the actual benefits beyond winning is where we get our impressions and what it's done for our brand globally.
Julian Racing And Fly Truck Racing has taken off over overseas, and it's really helped us in that sense and you get great personalities into the brand. And, again, it makes it closer to the consumer, closer to folks who can enjoy Indian. Then we talked about lifestyle brand. Actually, last week was the grand opening of our, Lynchburg store. And so we we petal, partnered with Jack Daniels.
To open up a store around our bottles and throttles don't mix. It's just a a non motorcycle, store that sells apparel and all the different things in Jack Daniels on their distillery gets about 500,000 people a year of which 30% are motorcycle riders because it's on a ride route. So those are the kind of things that we'll do to track more people into our brand. Of course, you saw it last night that we were gonna celebrate scout the 100th anniversary of one of the most iconic bikes it's gonna be so cool if you saw it last night. The pictures don't do this justice, but it's just another way to continue to scout platform.
It's another way where scouts attracting new riders to our brand and to the industry. So we're excited about where we're gonna take a scout, and there's a lot more to come in the midsize bike as you see with FTR and scouts as we go forward. And furthering that is we have to make scout a wider opportunity for customers. So you see some of the touring accessories. This has been an by a lot of our consumers is I love my scout.
It's powerful enough. It's big enough for me, but there's not enough bags. There's not enough. There's not a fairing and so forth. So Listening to our customers, turning that into product opportunities, where dealers can make more money, and we can satisfy more customers.
We got about 400 dealers around the globe. This is gonna be a big push for us over the next 5 years. We wanna do this smartly make sure that every same store sales are still profitable and growing, but we wanna make sure is that we're adding dealers, particularly in ride routes, where we have a service, we have to make sure that we're they have a lot of confidence in us in terms of the service infrastructure as they go out and ride. Lot of opportunities here in the United States as well as outside, to grow in our dealer count slingshot. We're about 3 75.
We think we need to be around, you know, 300 to 325 of the right dealers pushing that, selling that brand. And so we'll be working with our dealers, through that. But We think we're good on Slingshot, lot more growth in Indian around the globe. Kenneth, mentioned earlier, in motorcycles, we manufacture them basically 3 Three places, Spirit Lake, Apollo, and Huntsville. I gotta ask last night by one of the analysts.
We wanna make sure we're clear is we're only building motorcycles for Europe in Europe. We're not repatriating bikes back to the US. That's the point of clarity that we wanna make sure we we have. But great facilities. The teams are doing great.
High high quality coming out of the plants, very safe, and and a lot of opportunities for us to help on our overall profitability. And then last slide, talking about profitability, we are really aggressively driving our profitability in all these different areas. And one of the areas I wanna just pull out and talk about is design and value. It's a new, new capability that Mike Donahue and the team are working on with us. And, it's really driven off of making sure you get the customer insights right, the pricing insights, all the different design insights, and so for it to make sure you have the right plan and design before you go into making bikes and then making sure on the other end when you have the bikes that you've created enough value.
Right? It's kinda simple, but there's a process to do this well. And that's what we're following here as we develop our new bikes and, making sure in the future that we're we're growing the business very profitably.
K. Thanks, Steve. Question. Great.
Sure. So the question is is we saw about a $150,000,000 from Harley, in promo over the last trailing, 12 months. How's it impacting us, and is this the new normal? We hope it's not the new normal. This was, really outside as they were continuing to say, hey.
We don't promo they've always done that in their finance side of the house, but, we saw August 1st last year. They kicked into a different gear on promo where it was actually rebate dollars directly to consumers and then dealer cash. So what's nice to say is is that we gain share all through that period. So it's a challenge for us. We're not gonna play in that game.
It doesn't do us any good to be in that business. We'll do the right things And we see the values of trade ins and so forth while you see us introduce. We always have these trade in, cash for for the consumers because it's about working through their deal. To get them out of their old bike into the new bike. So we do that.
And then we do reasonable financing. We won't go chasing tier 4 and fives. As they're doing right now. So we're gonna continue to, play our game, and we think our brand is strong enough, and we think our products are compelling enough to overcome it. The, yeah, we, we can handle, we've done studies.
We can handle about $2000 $1500 to $2000 premium to Harley Davidson, and we're fine with with volume. Once it starts exceeding that, then that's where we see some challenges. We saw through the period in our midsize bikes. They they got kind of, really wild here in in sportsers. And, again, we just we decided not to chase it.
We think the scout's strong enough to, to to, fight that
off. ATM.
So the question is is you see us moving more to a midsized bike segment, how are you gonna attract and grow in that space, and and how it's pretty tough competitive fight. It is a tough competitive fight I think there's 3 things that we can do and we can do really well is, first off, it's American brand. And when we play the American brand, without thensity, which we can do in Indian, around the globe, it really works. And that's why you see it over in Europe when we go to Eichmann and so forth. It it works in spades.
They want American products. That number 2 is you have to have rate bikes. And I think when you look at scouting and FTR, they are phenomenal bikes. And, we have to make sure that we have those bikes, and we have to and it's really about financing. It's not about dollars off.
It's can they have access to finance and get them in? And then third is lifestyle. It is crystal clear to us with those customers coming in in that midsize segment and FTR and so forth. If you're not really, concentrating on how they use the vehicles and where they wanna use them and what you can do in terms of accessories, apparel, who you associate with, what events you're going to. We crush it in wheels and waves, which is in Brits, France.
And, the reason why we do this because we're the 1st American brand in there, and we're supporting that. So we have the playbook on what we know. We have the playbook on how we're gonna go after these customers and we're really confident that we can do it. We just think about it. We're just getting there.
I mean, FTR just came out. Scout came out about 3 years ago. Right? I mean, We're new to it yet, and we're still making great strides.
Okay. Jamie.
Possible. I'm not sure. So the question was is, if we have the the transmission, right, And then, you know, how how big is the market for Slingshot? And, we don't have a big number. Like, you know, we're gonna see this, you know, grow into thousands and, 100 of thousands of people wanting to buy slingshot like we did with Ranger.
But I think we have to go really learn about there's a great opportunity when you look at a corollary to motorcycles and so forth. You know, we can see ourselves being highly successful if we're in the mid teens you know, on these types of bikes, if it was, or on Slingshots, if we were if we were just solely selling it. But I think we gotta think about Slingshot in a different way. Is that when we go through rentals and we go through usage in in Slingshot and then it circles back to purchase and what we're seeing a lot of right now with our dealers who are in rentals. I think that's the opportunity that we have to get our heads around yet that we see, you know, if we're at 10000 to 15,000 units with that type of a business model will be highly successful at Slingshot.
So this isn't a quarter a million units, you know, Ranger business. We we're really clear on that. We're very grounded on that. But it is a fun opportunity that extends our brand that has some opportunities through both a different ownership model and then buying.
K. We have one more, Garrett, we'll take.
Conceptually, how are you thinking about electric? There's a there are 2 ways. I think it's still a slow burn. We're gonna be a fast follower in the electric. I think there's a long time before motorcycles get to electric at the price that people are willing to pay for and that that aren't we can make money The second piece is is that part of being the greater in the greater Polaris businesses, other parts of our business are working on electric, So our ability to fast follow is really fast because, you know, Horviv is developing it.
CGD may be developing and so forth. And, so we we think we're positioned well. But as we're growing Indian, we still have a lot of focus on growing out in other segments before we have to worry about getting to electric, but we know with confidence in the back, our our brother, and sister, divisions are already working on it. They'll help us get there fast.
K. Thanks, Steve. Thanks. Alright. Up next is, Mike Daugherty, president of international.
Thanks, Steve.
Alright. So, happy to share with you what we're doing around the, the world over the next 15 minutes. The international business, it's a it's a pretty reasonable part of our overall business. It's, about $800,000,000, which is top $800,000,000 last year. We started getting serious about international, about 20 years ago, when we established our first ever subsidiary.
So that's our own people overseas doing business with local dealers. And since that time, we've opened up, 14 other subsidiaries around the world, and that's where we see the most growth where we kind of decide that we're gonna invest in the business and invest in the dealer network and invest in our services. And that's really what's, that's where we grow the fastest. Now we have over 3000 employees over, outside the United States, including our factories. We have 6 main manufacturing locations, 2 different research and development facilities, over 1400 dealers outside North America.
And, and we do business in over a 120 different countries. And last year, we also tipped over the, 60,000 units, shipped overseas. So significance, significant business, and it's a little bit different mix than what we see in North America. Less than half of our business is actually off road vehicle. We have a a large global adjacent market business, primarily in Europe.
But motorcycles make up a big a higher percentage of our overall business, overseas. Than it does in North America. We've been growing the last few years. A couple years ago, we're about $650,000,000. Now we're up over 800 a million.
We expect to grow again this year. We're up about 5%, but we have a little bit of headwind right now with, with currencies. So in constant currency. It's up about 11%. You can see the large part of our business is, is in Europe, Middle East, and Africa.
We call it EMEA. I'll stand over here. And Asia Pacific's a growing part of our business, and Latin America is still the smallest, but again, a
growing part of our overall business.
I'll go through the various regions now. Europe, Middle East, and Africa, again, our biggest region, and also our fastest growing region, which is nice. We have strong fundamentals. We're direct in most markets throughout Europe, direct with our own subsidiaries. We have a headquarters over there.
And the motorcycle group last year, launched the FTR 1200 primarily for the European market, and that's really helped us out this year in, in growing our overall revenue and our motorcycle revenue. Indian's up 38% year to date in Europe. So while the motorcycle market is experiencing some down times in Europe right now, we're actually up and gaining quite a bit of share. Actually, in June, we sold motor motorcycles in Europe that we did ORV for the very first time ever. So We expect that trend to continue over time.
We've got a lot of runway for, the overall business in Europe for motorcycles. But ORV pays the bills for us. It's still our largest business. We have, a leadership position but there are challenges with our ORV business primarily from Asians coming into, the market selling lower priced stuff. We don't chase that, too often.
We try to focus on the the higher profit margins in the side by side business. Snow's been a good story for us. We've had good snow in, Scandinavia and Russia the last couple of years. We've been gaining share. The snowmobile group has given us more relevant products for the, for the Scandinavian customers.
And, so we're seeing nice growth on in that business. But the transformation of our motorcycle business to become more global focused on Europe. Now we're building bikes in, in Poland, as Steve mentioned, is really gonna transform our overall business primarily in Europe. Latin America is a good market for us. Mexico has been a huge success story over the last 5 years.
It's actually our most profitable market, and one of our fastest growing razors, the, the the key product for us in Latin America. So with the the new model year 20 announcement that Musos, showed last night We're super excited about what we can do in, in Latin America, in particular, Mexico. Brazil, the the revenue's down just a little bit, but the profit up in Latin America. We found, Brazil to be really just too difficult to do business in, for a motorcycle business. So Last year, we exit exited, the Indian business in, Brazil.
Once we kinda may maybe the regulations are a little bit easier, but the the taxes are just so high on the bikes there. And if you don't build motorcycles in Brazil, you just really can't compete. And we just don't have the scale yet to do that. So maybe sometime in the future, we can go back into it, but we're focused on our off road vehicle business primarily throughout Latin America. Asia Pacific.
We're gaining scale in Asia Pacific. For a long time, our primary business was an Australia, New Zealand. It was our largest, overall subsidiary, our 1st subsidiary. That's the largest off road vehicle market outside of, of Europe. It's also a pretty significant motorcycle market.
And, really, the last couple of years have been very challenging. Economically Australia has challenged, FX is challenged, and, the weather's been very difficult. So both the ORV business and the motorcycle business, the overall markets are down double digits for this is about the 3rd year that it's been down double digits. We've been growing our share but it's hard to grow the business when the market's down so much. Fortunately, we've, planted some seeds throughout the region.
And, and China is really starting to come, to life for us. So we launched motorcycles, I think, 3 years ago in not in China, but just heavyweights last year. And what we're seeing now is China is the fastest growing market for us. It's actually our most profitable market for us. For motorcycles.
And despite the tariffs and the, the challenges we have with trade with China, people love Indian motorcycles in China. They love the premium bikes. They're delivering us great quality, and, and we're seeing great results. So excited about, the future for motorcycling with Indian motorcycles in China. And, and, as Scott mentioned last night, We're setting up our new subsidiary in Japan, and, that's gonna be opened in the, the fourth quarter of this year.
Japan's the 3rd largest motorcycle market for our types of bikes, in the world, and we just really underperform there with a distributor. And so we're gonna go set up our own play, our own subsidiary, expand the dealer network, and, and bring great Indian products to a market. We expect to see significant growth in Japan over the coming years. And then we have a joint venture in in Vietnam, actually, in Hanoi that we set up a couple of years ago, and that could be an opportunity for us in the future to really unlock some potential for the southeast the southeast Asian market. So our long range plan is is to help build the power sports.
We partner with the business units. We try to enable their growth. Ranger is a critical business for us. The most consistent, the best profit. We think that has a lot of runway for us, overseas continue to win in snow.
Globalize the Indian brand and really drive PG And A penetration. That's where all the money's made. But we're gonna pursue new markets the company is very dynamic. We're doing a lot of different things. We have to make those things more global, and enable the growth for our smaller business units and the ones that growing fast.
We have an infrastructure now in most of the key markets outside North America, and we help these guys build the capabilities, over the time. But we're focused on profitable, both profitable growth. We've exited some of our, less profitable areas, less profitable initiatives and focusing on building the premium brands like razor in Indian, leveraging our operations and, and kinda doing a a shared services model where we can and, and leverage our infrastructure. That's it. $1,000,000,000.
I should say that, the plan is, right now, the plan is to get it in, 2022. But we're hoping to maybe pull that forward 1 year if things go our way.
Hey. Any questions for Mike? International?
Oh, there's one. Alright.
Last year we did just over 60,000.
Okay. Good. Thanks, Mike.
Thank you.
Next up, Steve Eastman, PG And A.
There you go.
Good morning. So, I'm gonna focus primarily on the power sports aspect of the PG and A and aftermarket business, and then Craig scanned them. We'll get up after after my presentation to talk Transamerican auto parts in particular. I'll hit a couple of slides that just illustrate how we think about the full portfolio. But just to start things off, we're in a really good place right now.
The PG and A aftermarket business has a lot of momentum particularly in the powersports piece, broad growth in PG And A dollar per unit penetration, that's the take rate. We pay a lot of attention to how we're performing there as whole goods, units, ebb and flow, and the mix changes to ensure that we're gaining market share. We have a significant portfolio second half new product introductions, and hopefully you got a chance to see some of that on the floor last night. It was highlighted in a in a few of the presentations, but When we accessorize these vehicles, we really show consumers all the different ways that they can use them, and we also address different segments. And we're we're really proud of the second half launches that we have.
We're making big strategic customer focused investments in distribution and digital. You've probably heard about the multi brand distribution Center. We just opened in Fernley, Nevada. I've got a slide on that in a little bit, but we're also making big investments in digital to connect our customer experience across our digital platforms. But also to enable e commerce.
We know consumers particularly in aftermarket. If they don't attach accessories during that initial purchase with their vehicle, often don't return to the dealer. We need to make sure we have the channel and the tools for those consumers to buy online. But we're leveraging our portfolio and our scale to end our competitive advantage. We have unique advantages over really all of our other competitors, and that's what this slide highlights.
The mix of OEM PG and A product lines and the things that we learn from those product lines in our aftermarket brand portfolio is unique in our industry. The access that we have to channels, obviously, our Polaris dealers and our ecom channel, but also other OEM dealers, business that we do for other OEM competitors in some cases, and, and access to warehouse distributors and traditional big box retailer gives us a unique competitive advantage. So what does that look like over the last 8 years, we've seen a a 22 percent compounded annual growth rate in the business. We're approaching a $2,000,000,000 PG and a and aftermarket business now over the next few years. The portfolio is diversified.
It's about half aftermarket and half OEM, and we've accumulated a tremendous amount of learning through the integration of the brands across the calendar at the bottom. We're using that learning to get better and better as we think about other organic and inorganic growth opportunities in the future. So how's the first half going? I mentioned momentum. You can see on this slide that we're seeing strong performance virtually across every aspect of our product mix Accessories is leading the way.
It's largely an accessory ORB and US story, but we have tremendous opportunities to grow across the globe and across all of our businesses, and we're seeing that momentum today. So as we look forward, the way we think about the business, the strategy that we're point is a flywheel model. Right? We've gotta make sure that we're thinking about every aspect of our business to ensure a great customer experience in we we gain market share in the process. So we look at brands, product leadership.
We look at all the different customer access and service mechanisms we have. And then, obviously, on the back end, we need to make sure particularly in parts that we can service our dealers and our customers exceptionally well to keep our customers riding. These are important to the overall brand perception for all of our whole goods brands as well. So on brands and product leadership, We have over 275 new accessories that we're launching essentially now at the dealer show. We also have a lot of momentum in our apparel business on one of the earlier sides I highlighted that our apparel business is running up 20%.
So we're really proud of that, and this is largely about you know, unique product innovation. We're using a lot of customer insights to get better. We're doing all of that in concert with our partners in whole goods. And we have the highest level of integration in our vehicles that we've ever had, which makes it easier for our customers and our dealers to attach and remove accessories in ways that are unique for Polaris. On the aftermarket side, Pro Armor Colpin, Premier OEM, 509 Trailtack and Climb are big powersports aftermarket brands, and they're pretty exciting things that we're doing here to leverage these brands.
For example, the TrailTech gauge here called the Voyager Pro, includes a ride command group ride feature. So it's compatible with ride command, which makes it possible for our riders, our owners who ride Polaris vehicles and have a ride command device to connect with their friends and families who may not be riding a Polaris vehicle and participate in their group ride. On the pro armor side with the launch of of the new pro XP yesterday, we also launched a whole line of pro armor accessories on the same day. The aftermarket's gonna take some time to catch up to us in that regard. On customer access and service, I should have probably changed the order of these from left to right Perhaps the most important part is what we're doing online.
Consumers increasingly are going online to get information to research and buy. The configurator, which we've built up over the last couple of years, generates about 54 50 percent more dollar per unit interest when they build a vehicle online, and that translates through our leads. When customers go into the retail stores, we need to make sure that the stores are stocked, that our dealers are stocked and we work very closely with our sales teams on the to do that including merchandising and packaging. And then on the left hand side of this slide on marketing, it's really important that we get catalogs in front of our consumer They're very inspirational. They show consumers what's possible, and they're organized in such a way that makes them helps them make the right fitment decisions for their vehicles.
But what we're doing in addition to giving these out in the dealers, when a customer registers a vehicle, we mail the catalog to their home immediately after. And we find that that drives a significant amount of traffic back to the website and back to the dealers. On back end efficiency and scale, We leverage category management. It's not a new model. It's not unique to us, but what we do with this is we invest heavily on the insights and analytics side to gain an edge.
To gain insights into what consumers are looking for and to make sure that we have those solutions built into our product pipeline. Product life cycle management allows us to execute at a very high level. And then, of course, as Ken talks about, we leverage VIP and lean to constantly find ways On back end efficiency and scale, the other big piece is our distribution network. We now have inclusive of the tap distribution about 1.7000000 square feet of distribution. More importantly, we're getting closer to the customer.
And opening up the new distribution center in Fernley, Nevada was a really important step in that regard. It's a big bet. We went live on July 15th. We started shipping our first orders. It's going very well.
And this allows us to service our Southwest and west dealers much faster than we've been able to in the past out of our Vermilion distribution center in South Dakota. We'll have probably close to 25, 30,000 part numbers in that distribution center by November. And, importantly, it's the 1st distribution center that does 2 things for us. 1 is it's multi brand. We built this distribution center and we built the infrastructure to support any one of our brands.
So instead of having unique distribution centers, this facility will be able to support all the brands as we cross pollinate across platforms. And we've also invested in goods to person automation to improve productivity and efficiency. So I'm gonna wrap up with just a video that highlights a little bit of an inside look at the MDC in Fernley, Nevada. Lots of growth for, lots of room for growth around the desert, outside of Fernley. And that's it for PG and a aftermarket.
Like I said, Craig will get up and talk about Transmark And Auto Parts, but I'm happy to take any questions that you have in the meantime.
K. James.
Yeah. And the question is, do we see an acceleration? And I think both vehicles and PG and A when we introduce new accessories. Is that per se, or are you referring to the excel the introduction on new vehicles.
Both. Yeah. The compounding effect of that's pretty powerful. Yeah.
And where we've seen the biggest lift is when we achieve new levels, breakthrough levels of integration, probably the biggest lift we've seen over the last couple of years is is in the area of cab systems when we integrated cab systems and the roll cage of the vehicle to accept cab systems more readily. But we're also doing that. You probably heard yesterday about the pulse electrical system as we introduce more electrical components, audio components, and so forth. It's really become plug and play. And that's a unique proprietary thing for us.
Winches, vehicles are now designed to be winch ready. Plow ready. So in general, when we achieve that level of integration, it's very hard for the aftermarket to match that and, and we see a much higher take rate. Yeah. The impact on margins is, is, is pretty constant, I would say, on gross profit in particular.
Obviously, we have a lot higher costs. And that fifty-fifty includes the Transamerican auto parts business where we're operating, you know, a mix of retail stores and so forth. So our operating costs are a bit higher there than it is on the OEM side. But we see the mix probably maintaining. It's at least organically maintaining what we see today, largely.
No reason to believe that all aspects of that business shouldn't grow. Commensurately. Can you can you repeat the question? Well, in general, we, you know, in the PG And A business, all of our customers are really quite profitable on the parts side and so forth. What we're seeing is a is a shifting dynamic of of accessories versus parts.
The business used to be weighted more to service parts, and we're actively trying to drive that where where it makes sense to do so. But, but the accessory business is where we see the biggest opportunity for growth. And when we connect with riders, really enthusiasts riser riders who who love our products, love our aftermarket brands, We see a tremendous amount of loyalty, and so we stay with them through their journey. We continue to market to them. We continue to go back to the installed base and showcase new products, new product introduct we'll invest quite a bit more going forward and going back to that installed base to make sure that we've got product news on the accessory side.
And as we do that, we don't see a lot of competition, frankly, in the aftermarket outside of what we own, and allows us to capture higher margins and hold retail.
K. Any other? Yeah. Laura.
Right.
Yeah. We are. We'll we'll learn. So we're working with thematic in particular in this facility. In all of our facilities, we've invested quite a bit more in in, automation, conveyor systems, material handling to gain efficiency and productivity where we can.
And, obviously, we we look at our lean processes. This is new for us. So the multi shuttle allow it's called a demonic multi shuttle allows us robotically to go and retrieve smaller parts and bring those to the operator. It's been up and running for 2 weeks. We're learning a lot.
It's going well, and we'll measure the productivity in in the effect, ultimately, on the customer experience, if we can service our dealers faster because we're more productive, more accurate, more efficient than distribution centers, that is something we would go and look at retrofitting. Okay. Thank you.
Thanks, Steve. Next up, Craig Scanlon, president of, Transamerican Auto Parts.
I ain't gonna need that clicker, Steve. Well, good morning. Waiting for the clicker. I clearly need to update my my photo. Is it being more of a aftermarket auto versus a off road kinda guy here.
So, first what I'm gonna do is I'm gonna take a little bit through the what the company is. What our competitive landscape is, and then kinda how we go to market and what the future will hold for Transamerican auto parts. So the company was founded in 1961, chess under 2000 employees, 95 retail locations. That's up 3 from just a couple months ago. 8 proprietary brands, 6 distribution centers, then we have one manufacturing and one engineering facility.
When we took over when I took over about 14 months ago, we had 2 manufacturing facilities. We recently consolidated 1st efficiency, so we'll talk a little bit about that in here, a 100,000 SKUs that we sell. We carry 700,000, but a 100,000 are the most important one, about 95% of our business. So We're the only vertically integrated multi channel truck and jeep aftermarket retailer. We do about 783 thou we did about $783,000,000 of sales last year, and that's about 65% for real parts, and the rest is in our Transamerican auto parts, our wholesale business.
So what do we wanna be when we grow up? We wanna be the industry leader in Jeep and truck accessories. How do we wanna do that? We wanna do that from industry leading go to market, whether that be in our retail go to market or wholesale go to market. And then we wanna do that through our proprietary brands, as well as our 3rd party brands that we offer.
To give you a little bit of an idea. About 33% of our sales are through our own proprietary brands. The rest are through 3rd party brands that that we that we sell. One of the big changes we've made, over the last 14 months is if you look at the retail side, 14 months ago, that was run by 3 different leaders. The retail stores were run by 1 liter.
E comm was run by 1 liter, and our DSI, which is our our dealer services business, was run by a a different leader. And each one of those leaders were fighting for the same sales. Now we have one integrated team that looks at it from a customer approach as to I don't care if I buy from floral parts, whether it be online in your store, or I buy online and I pick it up in your store, or I go to your store and buy it and you install it for me. The customer doesn't care, so we had to have one leader looking at the customer and not looking at, in, kind of, the in fighting sales there. Same thing, the same approach with wholesale.
Know, we have one leader over top of all wholesale. A big thing here is we're kind of moving from the approach of we'll sell to anybody. So now we're selling to people who have an investment in in wholesale and are selling to a and are selling to a retail customer. That's more profitable for us. In the past, any sale was was kind of a good sale.
Some of a competitive landscape, and you'll see from this presentation, maybe versus different presentations, we have select competitors as well as partners because as you go down to this list, there's a lot of people on this list that are both competitors, but also partners. I mean, if you look at just the the brands piece, Most of the people in that brand's piece, we are their largest retailer in North America, you know, ARB, Warren, Fox, PFG, we don't look at them as competitors, but, yes, we also make brands that compete with them. So that that's one thing that's one thing that's different from our business. It makes it a little bit more complex. But then when you go in down into the wholesale piece, once again, we sell the Keystone.
We sell the premier. We sell from Myers. But they also sell to our brick and mortar customers. So as we manage through some of the things in the future, those are things to contemplate, that are a little bit more complex than maybe just the if I was forward, I'm competing with Chevy. So One of the big things we had to do over the last 14 months and why I feel so good about the opportunity for growth is we've established the foundation.
We're not we're not sitting here today going, okay, this is what we need to go do. We went and did it 14 months ago, and now we're gonna be able to reap the benefits of it. So the first thing we had to do was develop a vision and strategy for the company, and it seems very simple. Well, it wasn't. There was about 15 different fighting, you know, initiatives going on.
We we kind of bolted down to 3 big things. 1, we have to grow four parts. Four parts is the one thing that we offer to customers that nobody in the world offers. We have a national chain of stores that allows you to either buy in store and take it home and do it yourself, buy online, pick it up in store and do it yourself, buy online, pick it up and start, come to the store, and we'll install it for you. You know, you can do so many different things to our affordable parts channel.
And it's one of the things we're most proud of and, a great opportunity for us. Second thing we need to do is expand our product port portfolio. When you start to look at what we do at rural parts and and what we do at the company is a lot of it is really gauged towards the Southwest. That's where our original stores were, and that we're most comfortable. We need to expand that.
When we open stores in Minnesota or or Maryland or Pennsylvania or Maine, we have to have products that are tailored to those customers. And it seems pretty simple, but, you know, 14 months ago, we didn't. Now we're getting closer and closer to that, but we still have a ton of opportunity there. And then the last piece is we need to strengthen our brands. In most cases, our brands have been the the case where it's a me too.
Right? And it's, and it's, we'll give you the best deal, instead of saying, we build the best winch in the market. Let's go market it and and sell it as a premium winch. So that's the 3 big things we're focusing on as a company. Once we've established that, we had to align the organization.
You know, so we did a restructure We have a lot of new leaders over the last 14 months that are in place now in operating at a high level. We needed to so we needed to consolidate four parts, like I said, before, We had also consolidated our b our B2B business under one leader, so we didn't have multiple people trying to compete on for the same wholesale customer. We created a category management structure. So in the past, it was brands. So the the Pro Comp brand would be competing with the Smittybilt brand instead of saying, okay, Smittybilt's gonna be our winch brand.
Procon's gonna be our suspension brand instead of having competing products and then trying to sell the same customer, but basically the same products with a different badge on it. Next thing we need to do is we need to centralize marketing. So before, all six of those channels have their own marketing teams. Likely not the most efficient way we could do it. So he created 1 centralized marketing team that is creating messaging across the whole entire company and is now, you know, assist a a place where The brands can go.
The stores can go to 1 integrated group that has that creates an efficient and also streamlined, marketing approach. And then we streamline marketing, like I told you before, we had 2 manufacturing facilities. We took the 2 manufacturing facilities, moved them into one manufacturing facilities, and then upgrade that manufacturing facility's capabilities through some some additional, tools for them to use. And then last, we needed to eliminate waste and engineering. What would happen a lot is is they would start projects.
They didn't have a PDP process, like, we had a flourish. So we just created some process in place and didn't keep the engineering teams moving in different directions all the time and said, this is where we're going and allowed the engineers to do what they do best. And then the next obviously, we had to strengthen the process and capabilities once we did all that, and we did we did that. The but the end all be all is we had to shift the culture. In the past, the culture was focused on sales at all costs.
Now we're focused on sales, but let's do it profitably and let's grow the company. So we took a we took a step back when we first took over 14 months ago, And now we're being mal now we're able to actually say, okay. Let's go let's get this thing moving forward in a really positive direction. So for all parts growth, that's a that's a massive undertaking for us, and it is a huge opportunity. We did it through through 2 different things here.
We have to transform the operating model, and then we also have to drive continuous improvement. I'm not gonna go through each one of these things on the screen. But but we can we can look at just established go to market planning. A year ago, We'd be sitting there in on in the middle of July and saying, what are we doing this weekend on retail promotions? 2 weeks ago, I was looking at August already.
In a month from now, I'm gonna be looking at November. That's how much better we're getting at it. And the beauty of that seems very simple. And, like, why weren't they doing that before? But the beauty of it is now you have the store folks who have to execute these programs, working with the promotions teams, and now working with the marketing teams.
So everybody's working together and coming up with integrated approaches. And now we're gonna launch a new program in August, and the marketing team will already have all all the training and all the materials in place to go and put that out in the marketplace for our customers. And then the store folks will already have training in place on August 1st to understand what they have offered to their customers. Seems simple, but that we weren't doing it before. We're doing it now.
This this second piece is driving continuous improvement. I'm not gonna go through all four of those boxes either, but one of the big things we we were doing in the past was if we had a store in California, and you went to the store in California, it looked exactly like the the store here in Brooklyn Park, Minnesota. Now I've lived in both places, I can guarantee you that the folks in Southern California aren't doing the same things that are jeeps and trucks as the folks in Minnesota. Along with that is the dynamic stocking and merchandising, really cool name for. If you sell a lot of this, make sure you have a lot of this.
If you don't sell a lot of this, make sure you don't have a lot of it. As well as the traffic store and ours. So they never we'd we didn't do door swings. We didn't know when people came to the store. We started tracking that about we added that about 6 months ago.
We now know when people go into our stores. They go in early in the morning. They go in at lunch, and they go in at night. And and if you had the stores open on a Sunday, they'd probably go on then too because we're a retailer. We've been testing out extended store hours.
We've been testing out Sunday hours, and we're also testing out how can we be more efficient with our staffs in the store because our staff in the store is a is a high spent. So how would we be more efficient with the people we have? And we're finding a lot of ways to to to make the stores operated in more efficient and better fashion to grow retail, but also be more efficient at the same time. From our wholesale piece, I would tell you, this is the area over the last 14 months that we've actually been kind of bringing it back down a little bit. So that we can grow it the right way.
If you look at the mix between where we are today and where we're going, it's quite different. Today, we sell through our brick and mortar stores. There's 10,000 brick and mortar customers across across the whole entire company. 1300 of a matter. 13 100 MR stores that have established businesses and and have an infrastructure in place.
The wholesale distributors are of the folks that we sell to that then to a brick and mortar store. So we sell to somebody, and then we compete with them to sell to a brick and mortar store. And then national accounts is is a place where we really don't play today. National Council won't go in any means, but they're large retail chains that probably can sell a lot of our proprietary brands that we don't sell to today. So as you look at in the future, the big focus is gonna be on the brick and mortar stores and servicing them in the right ways.
And then the second piece is growing our national accounts. There's a whole lot of a lot of bullet points there in the bottom, but but, we're gonna do a lot of it through, our our evolving the sales process. And enhancing what we do to be a better wholesaler to these folks, as well as making sure we actually don't just open doors every day and have a phone ready, that have people calling on them to to provide services that they need. From a marketing approach, 2 things we gotta do. We have to drive the lifestyle and build the brands and make people excited about floral parts, as well as our brands.
And then second, we're a retailer, so we have to build the drive traffic to our stores. A whole bunch of things on there. One thing we have to do is know the customer, you know, reach new enthusiasts develop, but, you know, dominant influencer teams that expand the the social presence. One of the big things we've done here is from four part studios. We trade our own studio group with our own filmers and our own producers and all that good stuff because as a retailer, we have to be able to move very quickly as as a as a chain that has a 100,000 SKUs.
It's not like Polaris where we can spend 6 months and film videos on on a new machine, we have to be able to turn real fast and get new content up online. That that allows us to do that. And then from the retail standpoint, like I said, we have to have the go to market materials in place and ready to go, at the store. So when somebody sees something online or on TV, when they walk in the stores, it says the same exact same thing. One example of this, just real quickly, of one of those sixteen boxes on that page, is what we've done from just a social and brand social following.
We've very quickly created a four wheel parts official team. We've grown our impressions by 221%. And we've grown our followers online by 21%. Doesn't seem like a big deal, but this is a massively efficient way to market. And it's just one of the one of the few things that we've done, and, you know, it's that we're very proud of.
So wrapping it up, What does the long term success for Transamerican auto parts and floral parts look like? We have to focus on the customer We gotta generate generate revenue profits, and we have to drive rigorous execution. What does that look like? That's for, for all parts growth, new product development and brand clarity on our on our products, excuse me, didn't mean to hit that. Category management aligns us to the customer And then we have to grow our b to b channel through, like we said, through our brick and mortar and, and also being a better being a better, wholesaler.
The next one is really, really important. We have to actually focus on the customer through through data and research. And being customer centric. In the past, the company had a lot of people that have been in for a long time, and it was great, but they relied on our guts too much. What we've what we've what we said now is one of our mantras at the company is brains and guts.
So have a gut instinct on something, but back it up with data. So we so we don't we don't fail as much, and then organizational capabilities to, drive engagement. What's the 2nd half looks like? We're gonna have excel accelerated growth we have to overcome some tariffs, which we've done in the first half, while driving DS, we have to grow our floral parts business while growing our DSI expansion, And then rapid ecomm growth, which we've had in the first half, and especially here, in the third quarter already, we have to manage out our wholesale disruptors while expanding our brick and mortar in in our in our distribution, around our distribution centers, excuse me, and then we could leverage investments, optima, optimization and cost down and outsourcing to make sure as we're growing all this stuff, we're doing it in a profitable way. So that's presentation.
If anybody has any questions, We'll open it up right now.
Yep. Thanks, Craig. Any questions? Great.
I
would tell you the beauty of this business is everything we do here is incremental, would be one thing. I also think the beauty of the business is that it's not the fact that has a huge addressable market. It's not the fact that it has all these great brands that we haven't really built out yet. It's not the fact that it has the stores, it's the ability to to to have our our our the ability to to develop our products or our third party products and then go strictly to retail. And control the whole process.
You know, if you think about what we've done at Polaris through the years, we have we have dealers, right, we could do a whole bunch of stuff here, and then we rely on the dealers and vice versa. Dealers rely on us. Here, if we if we do something great, we can it's so easy to go straight through the retail channel. And so fast, and we can and so that piece. I also think it's a marketplace where, you know, what we've done at Polaris for the years, and what they've done through the years by mixing those 2 cultures together and getting some great people from Polaris and getting some great people from TAP, we have a lot to learn from each other.
We can accelerate this and become a very tough competitor to marketplace.
Yeah, Joe.
No. Jesus, that's one of the the misnomers in the company is if you look at the total marketplace, Jeep, is about 7% of the total marketplace. You know, we we spend a lot of time focusing on Jeep and for the company. It it's it's, tough 20 some percent of the company. And I would say we were we were behind the the curve on the JL.
We are back up on the curve. By, you know, we we have everything you would need for a JL, either whether it be our own products or a third party. But I think, and to answer your question about, about the Gladiator. Yes. Are ready to go in the gladiator.
We had the we had won the first gladiators hit the ground in the country. We actually chank blew some good flew some folks who were or these coast picked up the first gladiator and drove it straight through the night back in in certain building products for it. But I would say, from a standpoint of the company, Jeep is is important, but we've also kind of gone too far with Jeep. If you look at the addressable market, midsize truck is far bigger than than Jeep. And, you know, we're adding a lot of new products and brands to go after midsize truck.
F-one hundred and fifty is a they'll sell more F-one hundred and fifty's this year than than we've than jeeps have sold in the last 6 years. So I would say, yes, to answer your question, we are absolutely up to speed on JL. I'd also say that the marketplace is looking at JL and saying, they're not seeing the upfitting on the JL, like we've seen on the JK, we will see that in JL in the next couple of years. I think what you need to do is you have to have those first customers come in and buy the JLs, Some of them will build the JLs right off the bat, but it's the second and third owners that really start putting money back into the into the JLs. So It's not just us.
We have a lot of third party vendors that sell products through jails, and everybody's a little slow on them.
Any other, questions for Greg? Yeah.
So there's 2 types of ecom. There's wholesale ecom that the ecom I was talking about, and there's our retail ecom. That's, our retail through marketplace, whether that be Amazon or, Walmart. Marketplace, and also our 4wp.comandah4wd.com websites. And we're we're excited about both of those, I I would tell you, the growth, the e the dropship ecom customers we're moving away from.
That's why when you saw on this slide, it say click and mortar, we're very excited about customers who have their own warehouses. And, you know, if you're an ecom customer like summit, our quadritech, we're very excited about their business because they have an infrastructure and they have an investment in and it and we love to sell to them. If you're gonna be somebody who's just gonna go and compete with us on the marketplace, all you're doing is driving down our our retail prices. So, we're moving away from those dropship customers and moving more towards anybody who has infrastructure and then moving more towards what we're selling to either you know, obviously, we we wholesale the Amazon. We were we're very excited about that business, but we also sell on Amazon.
So and both those businesses are are doing very, very well. In fact, our our, pickup in store in q 2 was up 33%. And for us, you know, and and we're doing some some install projects with Amazon. We've expanded that from 5 stores to to 20 stores. That's some really exciting business for us because what what you get there is you get the first and second bite on on your brand products, but you also get the the sale online, but then you get the opportunity to get that customer in store and either do install where we have, you know, high profit on the install and the service part.
But then a second shot at selling them, selling them more product. So we're pretty excited about that.
K. Thanks, Greg.
I'm here.
Up next, Bob Matt. President of, Boats And Global Jason Markets. Good morning. So I used to
get up here and tell everybody that I got to talk about all the slow unfun parts of Polaris, but, now I have the military business and the boats business. So my life's gotten a little bit better. So I'll start with adjacent markets. I think about adjacent markets really in three pieces. It's the commercial government defense business.
Exum and Polaris Adventures. So a little more detail on those. If you think about the commercial government defense business, it's really 4 big brands, Gem, Gupeel over in France, Taylor Dunn out in California. And then obviously, Polaris makes a wide variety of products, electric, gas, diesel, and sells to a wide variety of customers. Really mostly commercial.
We do a little bit of consumer jam, but most of that business is really commercial. We don't talk a lot about XM as a company, but, XM is a great business we have over in France. They make what's Scott referred to it last night in his presentation as a quadracycle. It's a vehicle that's sold under a standard called the L6 standard in Europe, sold to unlicensed drivers, we've owned this business for several years. It grows fairly well.
We're the market leader, and, it gives great financial returns. So really good business. Just not something that we talk a lot about here in the US. And then Polaris adventures. Polaris adventures are really our first foray into the sharing economy.
We'll talk a little bit more about it later in the presentation. We started this in 2016, and it's been just a great effort. So a couple things to talk about. Things are moving well. We had a good first half of the year.
I feel good about where we are. Our government business, we don't talk about a lot, but, John Olsen in that team that that run that. Done a really good job selling package rangers to police departments, fire departments. You'll see them around here in Minneapolis. But that's been a really big growing business for us, and our vehicles are really uniquely suited for it.
So that's been kind of fun to see. We launched a new diesel work vehicle that we sell to the rental company. Think, Kirk, United, people like that, partnered with Kubota on a new engine. That's been really well received. Couple years ago, we combined the Taylor Dunn Factory in California, We moved production out of, out of one of the Polaris factories on Jem, moved it in with Taylor Dunn.
I will freely admit that has not been the most positive experience for the 1st couple years. But that's on track now. Ken and the team jumped in and really helped us, and, that's factories becoming a really good performing asset for us. So if you look at it by product, fairly balanced, XM is the biggest piece, but, you know, in total, pretty good diversity across the across the products. By region, kind of interesting, most of Polaris tends to be a little bit North American centric.
Mike alluded this to this a little bit in his presentation too, we're at this business about Half North America and Half Europe, but we do have a lot of opportunity in Asia Pacific and Latin America. There's good, good room for these products in those markets. We just need to upgrade our Salesforce in partnership with Mike. And then also we have opportunities across the segment. So we make great products at Gupeel in Europe, we don't sell those products in the United States.
Jem and Taylor Dunn make great products in the United States. We sell very little of that product in Europe or in Asia. So we've got some things to do internally that'll help us drive some more growth. So you look at the business, what we're really focused on these top 4, you know, urbanization, sustainability, electrification, and autonomy, those are things that that make sense. You think about what's going on in the world this is kind of the direction things are going.
I'll give some examples of these. The last two are a little bit different. Deployability Scott talked last night, and I think Chris did too about the, drone that was shot down by the military vehicle. That's really an example of deployability. Everybody took took my, took all my thunder for today.
I finally had a good story. It, it rolled out last night. But, the mrazer has become sort of the ubiquitous light tactical vehicle for the military. And, lots of companies, I believe it was a Lockheed Martin system on that, on that vehicle that took down the drone. Lots of companies are using it to test new weapons and to, help the military put new weapons in a place where they can do good.
So pretty cool that you shoot down a drone with a vehicle on the back of the ship. And then the sharing economy, again, Polaris Adventures, something new for us the last couple of years. So Gupeel, Gupeel's vehicle business we've owned since 2011 over in France. Gupeel has really a range of 3 main vehicles. So this is a G Four This is our partner picnic.
They deliver groceries to your home in the Netherlands, and they're expanding around Europe. These are all lithium ion powered vehicles. This year, we launched a smaller version of this vehicle called the G Two. And, next year, we'll launch a bigger version called the G Six. And picnic is actually partnering with us on the G Six because they want more capacity and, more speed for their delivery.
So really good model. In Europe, you're seeing a big move to electric vehicles and city centers. And, Imperial has a great brand around the around the region, and it's been a great business for us. And then government defense. We talked about the mrazer This is the mrazor X.
Mrazor X is a, diesel electric hybrid hybrid, version of the razr, m razr. And, the military ran a competition called Esmet. And what they're trying to do is get to the next generation of tactical vehicle. So these vehicles had to be autonomous, had to be a bill able to be driven by remote control. They had to be electric, and they had to be, you know, mobile, certain size, things like that.
We have the only real optionally manned vehicle, and that turned out to be really good because, you know, if you talk to the seals and the and the different special forces guys, they don't really have a lot of interest in something that if there's a fire fight, they can't jump on and drive. Because when you wanna go, you wanna go. And getting out of electric vehicle that's doing five miles an hour, really not where you wanna be. So so pretty cool because we did this where it's autonomous. It's electric, but it's still got the same diesel engine that the standard product has.
This thing will do seventy miles an hour and you can get out of the fire fight. So this program's kind of the the testing phase of it's winding down. They'll pick a production partner, and we feel pretty good about where we are. Adventures, as I said, we started this business in 2016, started it with 2 locations. So this model is we rent, vehicles to owners of outfitters, we call them, people that that are at Trail heads or at Resorts, and they rent vehicles to customers like you, or they're on vacation.
If you've had that experience in a lot of places, it's not great. Vehicles are old. The, outfitters aren't well run. So we thought there was a better way to do this. And so we'd work with these folks to develop a model where we provide the software.
We provide the booking. We do all the waivers. We provide insurance. We provide the service, and obviously, we provide the vehicles. And we've built a great network.
So in two years, we've gone from two locations to 120 We've done 65,000 rides already this year, and our net promoter score is 82. That's a really high score. So people really like this model. It's growing fast. We really like it.
It's kind of a start of our strategy to expand alternate access to our products. Pam talked about how, how much more diverse that product or the those, users are. So it's been a really great model, and the team's done a great job. So now we'll talk about boats. I think this will run a video.
K.
So a lot of people ask, why did we get into boats? It's actually been interesting. I, left here last night, went to a restaurant and had a group of dealers who sat around where my wife and I were sitting And they asked me that when I introduced myself, because they all had Blair shirts on, they asked me, well, why did you go into boats? Well, I'll tell you why. So a few things.
Boats is a good market. As Scott said, 70% of the world is covered by water, and we weren't in in anything marine. So in terms of expanding the customer base, that's something, to focus on. But also when you looked at the opportunity, the business we bought Bennington Godfrey Hurricane Rinker was the largest privately held boat company, $631,000,000 2018 revenue. So a great entry point if you were going to get into the market, great brands.
Bennington's a super brand. We'll talk more about those in a minute. The pontoon business model is actually really attractive. You source your engines from outside people, so you're not inventorying those. It's mostly assembly.
It's built to order. So the inventory is low. The working capital is low. The asset base is fairly low because It's not intensive manufacturing. So it's a it's a business model that makes sense from a cash standpoint.
It's also a little more resilient from a downturn standpoint because so much of the business is direct labor. You have the ability to fluctuate that as, as you move up and down production. So we thought from a boat standpoint, that was an interesting segment to get into. We got a great team, Jake Vogel, and the team were here last night. So the Bennington folks that were running the business are still running the business.
They report to me. But we've left that team in place and supplemented it with some folks from Polaris. So that's gone really well. There's also a lot of customer overlap. We don't have great data on this, but but we know more than 50% of the people that own, off road, vehicle or motorcycle also own a boat.
So something there that we we really think we can grow. Those of you that follow the marine industry, you've seen this graph probably a million times, you look at the parts of the the marine segment that are growing. Pontoon is one of the fastest growing segments. Has been, obviously, this year hasn't been, as fast as the last few years, but we've taken some share. So we feel pretty good about where we are this year.
But if you're gonna be in the boat industry, this is a good place to be. Think about our brand. So Bennington obviously is the premier. You know, you see that boat out in the lobby, that's a $200,000 pontoon boat. That is the the Showcase Bennington product.
I probably got that question 25 times last night, walking around out there. That's the the top of the top end of what we make. Great boat for boat shows. You get people in the door. When you really look at the market, you know, the average boat buyers buying a 35, $40,000 boat.
But, but Bennington covers the whole range. Number 1, pontoon in the market, and a great legacy. Godfrey is kind of interesting. I'll talk a little bit this a bit more a couple of slides from now, but, Godfrey actually started the pontoon business. So, say sell under 3 brands, Sweetwater, Aquapadio, and sand pan, and we're we're moving that back to kind of more under Godfrey with those being series instead of individuals or brands.
But a great company that sort of was neglected. They were owned by private equity for a while, Had some tough times, but a really good history to build on. Hurricane, if you're familiar with deck boats, hurricane is the inventor of the deck boat, team calls it the clinics of the deck boat. When people think about a deck boat, they think about hurricane. But it's been under invested in, and we're changing that.
Rinker, and I'll kinda talk about this on the next slide. What Rinker gives us is a really good factory in Syracuse, Indiana. And we've been able to take that factory. We're working on Rinker. It's a good legacy brand.
But also at the end of last year, we bought the, assets of Larson, and Stripeper from Erwin Jacobs. And we've been able to take some of those boats and put those into the Syracuse facility and start to build them and bring those bands back. So having that facility really has allowed us to do that. Great group of people, really good boat building legacy. So what are we focused on?
When we did our long range plan, we talked about what are the things that Polaris does, that powersports does, And how does that look versus the boat industry? And I think in general, what you'll see, towboat guys aside, towboat guys, saw a high end product and they're pretty good at what they do. If you look across the rest of the industry, the boat dealers, the boat manufacturers, a lot less sophisticated, what you see here in powersports. So we benchmarked a lot of different areas and said, how do we leverage Polaris to move faster and and do better things with our boat business? I'll talk about a couple, web and digital.
We launched a new Bennington website 2 weeks ago, following the Polaris model using a lot of that technology. We'll, We'll expand that to Godfrey Hurricane Rinker Larson by end of the year. We're also leveraging our lead management. So rather than going out and building a whole new infrastructure, we take all the great things the Chris and the, Indian team have done, and we'll we'll bring those into boats. So we get a lot of acceleration, learning from Polaris.
We're also doing that on the innovation and lean side, all the process, all the capability Kenstein has. We can put that into, Bennington. So Godfrey, this is a dealer meeting show, John, for Boats, and we just came last week from the Godfrey Hurricane meeting. This was the 1st on water dealer meeting they've had since 2006. We do the Bennington dealer meeting on water.
It's in 2 weeks. They'd never done that at Godfrey. They hadn't done it in years. So we took all those assets, and we said, alright. We'll do Godfrey at the same facility.
Brought the Godfrey dealers in 8 new Godfrey's 6 new hurricanes. So really good product. Dealers were really excited about it, and we had a really good reaction. So I think that bodes well going into next year.
Questions?
Sure. The question was How much of the slowdown you've seen in boats do you think is weather related? And then how do we look at inventory coming out of the season? So I'll take that in a couple pieces. I think the majority of the slowdown is weather.
I think there are some economics. We had really tough weather pretty much around the country in June. We had tough weather here in the Midwest. Going up through May. And, so it's, did that part's been tough?
I will say what we saw when we had good weather was great sales. So it was sort of unbelievable to watch. You know, you'd you'd sit and you'd look at the retail numbers coming out of the weekend. And if you looked around the country and you looked at a weather chart, if it was warm, we sold boats like crazy. If it was cold and rainy, we didn't sell anything.
And and it didn't matter the region, you know, if it was warm in Minnesota 1 weekend, it was a great weekend if it was cold, or what? You look at going through June. June was tough for the whole industry. July has been really good. So a lot of what didn't happen in June got delayed into July, which tells me it's more weather than economy.
I won't say there's no economy impact. I think, you know, people with the tariffs and just general tone of the news, there's a little bit of trepidation. But what we heard from buyers coming in, like, over 4th July weekend, the dealers, which say, why are you here now? I've been talking to you for 2 months. And they said, it's warm.
It's warm, and I want my boat. And, so we feel good about where we are. I think the July retail for at least us, I can't speak for the industry. Helps us get to where we want to be from an inventory standpoint. And we've also, I think, and I think the industry's done this.
Everybody's pulled down production as the sales weren't materializing in May June. We certainly did. So we feel good about where we sit today and coming out of the dealer meetings. A good sense on where we're going next year. So I don't we don't have a specific, you know, adventures needs to get to this level by this year.
I will tell you that, when We have the opportunity to grow it, and I need people or resources. Scott might give them to me. So we're not putting any throttle on Polaris Adventures. You know, we've been adding, adding people and, and, and, capability at a pretty good clip. My personal goal is, you know, there are a hundred top riding locations, a hundred top resorts, and, I wanna have mall.
So I'm pushing the team really hard in that direction. We're also expanding it. You know, we took it to Indian to do rentals, this year. We're doing some of that with ORV, at dealers. So we're we're kind of pushing the boundaries of adventures.
But it's a good platform. It gives us something to things to build on for other new models. Second question. Conversion. Conversion.
So we target we're targeting a 1% number. You'll see higher. You'll see lower. We don't have a great feel for that yet. We're working with Chris's team and, Steve's team on how do you better promote to that person, right, how do you drive that conversion?
What do you what's the activity that makes them convert? And as we build out our CRM systems and the investments we've been making on technology, it's getting a lot easier for us to track that. Joe. I mean, some of it's engine dependent, but I would say 6 weeks. Yeah.
Yeah. I mean, some models, the value stuff you get faster. But that's why the dealers the great thing about Bennington in particular is the dealers, you know, they're stocking now for starting to stock for next spring season. So we don't struggle too much for orders, even in the transition into the new models.
Robert?
Those questions about, what is what drive boats demand going forward?
Yeah. I think it's, like a lot of these industries, I think it's it's demographics, boat owners are older than you might think. That said, if you look at the dynamics of the boat fleet in the United States, the replacement rate on boats had historically been 3%. It's it's been running just above 2, really, the last several years. So there's a there's a view that the fleet is getting old.
I think the average boat age is 21 years right now. So we we think that's gonna that's gonna provide some, kind of cushion in terms of, even a slowdown, because the boats out there are just getting older. And then I think the other thing that really drives boats is you really look at what parts of the boat industry are doing well. It's pontoons and it's ski boats. And the reason is family.
Right? Both of those things are a family oriented activity. And so people are, as the millennials are having children and and building their families, you're seeing people move into one of those two segments, and we think that will continue to benefit us. Yeah.
Yep.
K. Wow. Okay.
I don't know. You know, I don't know if you need a response to PwC, but the Freedom
Okay. So, sure. So personal watercraft, I mean, obviously, Polaris was in it this, you know, obviously, we've looked at it. It's a it's a market a lot of our dealers are in. It's a crowded market.
And if you really look at the product that's successful, It's the $6000 spark in the $6000 Yamaha EX, which is the competitor of the Spark, and that's where all the growth is. And I'm not sure coming in as a repeat entrant into that is probably gonna be the most financially rewarding strategy. So it's not something we're too focused on right now. That meet your answer. It's Freedom Boat Club.
So Freedom Boat Club. Boat Club's in general is a really interesting market, right? So we sell. We actually Freedom's a big customer of ours. And, as are a lot of other boat clubs, we do pretty well with boat clubs.
Adventures, has actually experimented, running the back office software some boat clubs. And so is it something we could do, certainly? We have to be measured in how we do it. I think Brunswick will have some of this challenge, right, they're a engine manufacturer, a boat manufacturer, and now you're a boat club owner. There's some things you could step into there that could be challenging.
So we are very aware of what's going on in Boat clubs. We spend a lot of time with them, and, it's certainly something that we're we'll look at, and we could leverage the Adventures model.
Yeah. What's the third one?
Oh, engines.
Ins.
So engines, probably the most commonly asked question I got when we joined the boat industry was guys gonna make an outboard engine? And the answer is, nope. You look at the space. Right? You got great suppliers, Yamaha, Mercury Suzuki, Evinrude.
We sell all of them. We're an engine somewhat agnostic. We have a big partnership with Yamaha, from a marine engine standpoint. But if a customer wants to put a different brand on their boat, that's fine. Dealers really drive a lot of the choice of engines.
You'll see, I think we have 3 different engines pliers out there on the boats, today. So I don't see us going into that space. It just doesn't seem like there's enough financial opportunity.
Alright. Alright. One more and then we gotta move on.
So, it's a lot of its color. We will let you build your pontoon. Some folks have in the room have done it. You can build a pontoon at a very detailed level on our website if you are if you want to do that. So you can customize color, tubes, engine, different options, color of canvas, type of of, of seeding, all the audio.
And so kinda like Chris talked about with factory choice, we're already at factory choice. Every boat we build is a custom It was either configured by a dealer or by an actual end customer. And that's what drives the time is getting the if you want seats with orange trim. We're gonna figure out how to do that, and and and it just takes time to get the seat manufacturer to make them.
Yeah. Thanks, Bob. Alright. Up next, Chris Musso, president ORB.
Good morning, everyone. Just, so I can level set how many of you were able to be there last night at the show? Alright. Great. So a lot of you saw, I was, it it was a great show.
I thought Scott and Steven had ordered a great job. I thought my team did a really nice job of building everything. And it was so fun to see the dealer reaction of new products. And so excited to be here and be be talking about it with you more this morning. I thought it might be useful for you just to for me to give you an overview of the, off road vehicle industry to start out with.
So utility side by side is the biggest segment by far. About 43% of the units, and our estimate for industry is about 47% of revenue. And this does not include accessories. And if you included accessories on this chart, everything gets accentuated. Alright.
Next, ATV about 35% of the units and a much smaller portion of the revenue. And it's in a it's in decline low single digits, but it is declining. And then you've got, rec side by side. About 15% of units, a larger portion of revenue, and the same thing with crossovers. Crossovers and rack over the past 3 years have both been very good growers right now.
Crossover is outgrowing rec pretty, pretty significantly. I also thought it'd be useful for you to see the customer demographics. And this is kinda just to make the auto guys jealous. We're excited about our customer demographics. It's a younger crew than you see in most of auto.
And it's also a higher income crew. But let me just give you a picture of who these people are. So the average rec or the typical rec consumer might be a concrete contractor in Arizona Works hard all week, plays hard all weekend, usually in one of our razors, and they live for it, right? The crossover customer, kind of a little bit older, dentist, in Minneapolis. Right?
That's the way to think about it. Lives in Suburban. Minneapolis takes their family out, goes in the crossover, and and does it. Utility customer, bit older yet, either a multi acre homeowner or a rancher or a farmer, and more and more hunters that are going out, they use this thing to work, they use it to, to just We we say they measure their day by what gets done, and this gets the stuff done for them. Right?
And so they they love the machines that do that. And then ATV, the ATV customer kind of my age, and typically grew up riding 3 wheelers and 4 wheelers, right? They love that straddle handlebar experience. And, somebody asked me last night, like, why would you pay this kind of money for an ATV when you could get a side by side? And I'd say, why would you ever buy a motorcycle and you can get a sports car?
When you buy a motorcycle, because it gives you a different experience, and it's the same thing with ATB. These people love ATVs, and they've They typically are where there are trails. Right? Northwest has lots of narrow trails, and that's where they tend to ride. And just to show you a little bit on ORB owners, this is now more Polaris data, We've got about 3,000,000 customers.
We look at lapsed, and then last name, they haven't bought, I think, for 10 years and then our active owners, and we get about 4% repeat, buy every year. And that's a big competitive advantage for us and is that that customer base. And, overall, the off road industry is very healthy. It's got a deep customer base, and we're excited about where he is. And to give you an overview of where we are, number 1 in all the segments that you saw last night, we had about twice the installed base versus others.
Honda is the, Honda's the second, and they've got a lot of lapsed customers, a lot of the customers like me who used to ride when they were young, got about 90 international sales locations. We're excited about the growth that's happening in international. Lots of new products that we've been launching. And, a great side by side volume year to date in 2019. We're excited about the growth in the business.
We're excited about the way the business has been growing. We think continue to grow it as we introduce new product as we spend time with our dealers, Krishna. I also wanted to give you a little more color on a competitive situation. You heard Scott talk, but I heard Scott and Mike talk about it on on the earnings call in that, it's been a tough competitive year, right? So let me let me take them I mean, you've got different competitive dynamics by the categories.
So in utility, the main competitors there, the biggest competitors are Deere and Kawasaki. And then you got Can Am and and, this year we started CCF Moto in there quite a bit more. The competitive environment is aggressive, but not as aggressive as rec is. And, you know, you see K and M driving quite a bit of promo. Weather's been a challenge this year.
We think we've probably lost a couple points of growth this year because of weather. And, what happens is, is particularly in utility. Remember a lot of farmers and ranchers buying, we've seen farmers that didn't plant until very late in the season And when you when you haven't planted, buying a a new utility vehicle may not be at the top of your list. Right. And so we saw some challenge there.
In recreation, recreation environment has gotten much more aggressive over the course of this year. And, and You can see up there, Can Am has been driving, been very, very aggressive with promo. And they've also introduced a new trail offering, which got them into a segment that they weren't playing in, and then Honda Talan entered in, and they entered into the 64 inch space, which I talked to you about last night, and they've been able to sell some units as they've gone in there. Crossover has been more stable. Yamaha's come up with a new entry.
It's been the fastest growing segment lately, and, we're excited about crossover. And in ATV, you see, Honda has in the past a long time ago been pretty aggressive in ATV. They hadn't for a while, and then lately, they've gotten aggressive again at the very low end. The big bore space, it's been pretty attractive. So the products we introduced last night have been pretty attractive.
And so overall, our share is down to flat, depending on the segment. And, a lot of the share loss that we've had has been in youth in low end, right? As you saw on the previous page, we did raise our price, and and we knew that when we raised our price, it would damage some of our value offerings, but that's allowed us to focus our promo on more premium offerings, and that's driven the business we've done forward. And we think that one of the big advantages that we have is our complete product line. And so when I say that, we have the broadest product line in off road by far.
We've got a complete product line, an ATV, complete product line, an entry, exciting product line, an entry, and a fabulous product line in print. And what that's allowed us to do, you know, particularly as we face the tariffs and some of the other challenges we've had. Is it's allowed us to move our focus, to focus on more of the premium, to, to move our promo, let me say that, to focus on some of the more premium segments so that we can continue to grow. But that does not mean, and I wanna be very clear that does not mean that we're abandoning value in any way. We continue to compete well in youth we continue to compete well in the value segments, and we use those.
We maintain those, and we use those to enter customers in. And then we're finding more and more. I mean, the story used to be that you'd enter an ATV and then you go to side by side and eventually you'd end up in a razor. And that's still the story to some degree. But we're seeing more and more customers coming through used and more and more customers coming through, entry side by sides.
And as we do that, that gives us more opportunity to take advantage of this, broad product line that we have. So our goal was to meet the customer needs at all levels and then to attract them to move up market because as we move up market, as you saw last night, on the, the premium side by sides. Not only do we get better margin and better growth, but the accessory dollars are just fantastic in that space. Alright. So this is the same strategy that I showed you last year, and it's one that sits very consistent, right?
Customer centric approach, product innovation, we want to be the best partner to our dealers, and then we're entering into new markets. As last year, I'm not gonna talk to you too much about the new markets, but know that they're there and know that they're pretty exciting as we go. Right? But this highlights our strengths. And when I say it highlights our strengths, that customer centricity, when we've got 3,000,000 customers out there, and, and frankly, 3,000,000 customers that really are pretty passionate about Polaris.
They're, yesterday, when I was driving down here, I was behind a, you know, red Chevy pickup that had the vinyl lettering, Polaris on the back. And I see that all the time. They love it. They love the brand. And so we we can know them better, and we can activate them better and grow better.
The product, you know, you've seen the product got a really broad product line. And in partnership, we've got, we've got dealers that are big and a lot of them that we can leverage and get to know better. So as we do this, we we get to know better, or we get to we're able to continue to grow. We saw this yesterday. We just like to put it up there because we remain very excited about being number 1 in all these segments.
We're gonna continue to defend that as we go. And let me talk to you about the customer centric approach. And I'm not gonna spend a ton of time on these things, but but three things. Right? So one, the brand is true, Nora, I hope you noticed last night the difference in how the brands feel.
As you saw the videos, those brand videos, the one with the Ranger with the doors opening, it just it always gives me goose see it because I think it does capture the customer. The razor line says then there's us and it's got that razor jumping off. They're very different customers, different people, And, sometimes people will own both machines, but often, you know, they're they're passionate to raise their or to Ranger. And so the way that we message, the way that we develop products, the way that we activate them digitally, that's all different by brand. Second is deep customer insights.
So we have lots and lots of sources of customer insights just like, you know, you would expect from a company like us. We also have millions of customers. We also have dealers who are just unbelievably passionate about our machines who are constantly giving us feedback and we have a team that's deeply experienced here that we can leverage. And so you take all that and we can get, you know, we we can sense and we can feel needs in the market that others can't. And that allows us to, that allows us to create products and messages that that work that resonate better than others.
And then the last one is personalized journey. So We've invested quite a bit in understanding better our customers and understanding who they are and kind of what their digital journey is, and there was a big hole at the dealer site, the dealer website. And so your customers are spending more time now online than they are in the dealer which is a big shift over the last couple of years when they're shopping for one of these machines. And, they they had been spending more time on the OEM side, but now they're spending more time on the dealer side. And, as they'd go to that dealer side, it would kinda turn into a black box for us.
And so now that we have the dealer web out there, we're able to understand how customers are acting on dealer web. We're able to create new leads, and that's driving a lot of growth. But that also allows us to personalize the messages so those customers own much better way that we before. So imagine if you're a customer who's owned a machine, you know, financed a machine, you're 33 months into your to your loan, and we send you out a very specific promo that says, Mr. Smith, you're 33 months into your loan.
If you want to maintain the same $400 left payment, here's promo to help you offset that down payment and get brand new razor. It's very effective as we've been doing, and our dealers are doing a great job of following up on that. So we're excited about where we can take customers, and we're excited about where we can take personalization. On innovation, you saw some breakthrough products last night. I mean, what we try to do is we try to find the bounce try to find the boundaries, and then we just try to push on just a little bit.
So imagine like a, imagine a person inside a ziplock bag, kind of trying to punch out and how the ziplock bag keeps stretching. That's how we see the market. Right? We're there, and we're pushing it, and we're stretching the market as we go. So you saw that with sports, we saw it with Bryce or South Ranger.
Factory Choice is a gigantic step, and you wanna make sure that you guys understand it because it's taken a lot of you know, Ken Prussell and his team have stepped in and it's taken a lot of, effort, a lot of investment on our side to make our factories capable to do factored but it completely changes the game. And on the surface, obviously, it changes the game for the customer because it makes it so that the customer can get the product that they want. But it really changes the game for the dealer. Because what that allows them to do is to have unique inventory. We learned this from Chris Wolf from what he drove in SnowChat.
That when a dealer has unique inventory, they're able to really sell that value to customers, and they're they're able to drive margins, accessorization, everything around Factory Choice. And it really is a game changer, and we're very excited about it. And then, of course, accessories, Steve Eastman, is, you know, one of my heroes, because I watch what he does in the accessory space. And, you know, we've we've been closer together than ever. As we've been launching this razor and as we've been launching the Ranger, trying to just drive the hell out of accessory uptake, and our dealers get it, and it's worth it.
So just to give you, a little bit more overview on, Pro XP. I hope you had a chance to crawl around in it. You're gonna have a chance to ride it today. And just just watch how you feel when you drive this machine, because I think you're gonna find out that this creates analyst heroes. And it's pretty fun to drive in these things as you go.
So some of you guys have asked me, I I just wanna hit this one head on. Some of you have asked me, about the 181 horsepower. So just to be clear, one of our competitors came out with 190 or has announced a 195 horsepower machine. Now, we haven't driven this machine Our racers have raced against it. They believe, right?
I mean, we can't obviously take their, your competitive machines apart, but the racers believe they've been racing against the powered up machine. And that our 168 horsepower with the transmission and clutch upgrades that we've got in this machine has been smoking it. Right? And so we're we're excited about that, but here's how I think about it. I mean, obviously, it's inconvenient for us not to have the claim around the biggest horsepower, but in a turbo engine like this one, really what you're looking for is you're looking for drivability.
So you can tune it so that you can get a bunch of e course power. But it's very hard to drive and you don't get the speed of it. And so what we did on this one is we have more horsepower for sure, but we have way more torque, and we have a way flatter torque curve. And so when you drive it today, when you get it into a corner, just tap it a little bit, coming out of that corner, and you'll see that that thing will just shoot right up because you've got the power where you need it. So think about Ford when they introduced the, the V Six with the twin turbos versus the V Eight.
It was a huge gamble that they took. But the take rate on a V6 is very high because everybody realized that even though the horsepower is not quite as high as it was in the V Eight, the overall driveability and the overall torque is much better. It creates a better machine. And that's what we're going for in this one. This is a much better machine in every way than the last one.
I love the turbo s. I mean, I really love the turbo s. But if I get if I get into this one and then I get into a turbo s afterward, It's just a whole different level. So it's a great machine. The Ranger 1000, this one, we aimed at the heart of the market just like we did on the razor, by the way.
Mean, we we shot for that 64 inch extreme part of the market. On the Ranger 1000, we aimed at the heart of the market, and this one's all about comfort. It's all about utility because remember, that's what this customer wants. And so you can carry more. You can spend your day working in this thing.
You get home at night and you steal you still feel good. That's what we were going for, because that's what makes a Ranger. When we talk about a Ranger, we talk about ride, we talk about handling, we talk about the ability to do work because we want somebody to be able to do everything that they want to do, and then do everything that they want to do in their personal time too. And this machine does a phenomenal job at that. So when you drive this one, Watch the way the throttle fitment works.
Watch just watch how smooth everything is as you drive the machine because it really does change the game as well. So in all of these things, we've been able to really engineer accessories. So we from the beginning of our development process, We, we're developing accessories. A bunch of the auto guys have reached out to us over the past, year. So, guys, can you teach us about accessories.
Can you teach us how to do it? Cause we believe that Polaris is doing a great job at it? I mean, you look at the numbers there, the PG and A dollar per unit, up 48%. Over the last 3 years. That is a staggering number.
48%. So that means that our dealers are doing better. That means our customers are happier. That means our investors are happier because this is a great business. But Steve and his team have done a great job, and, and we're trying to, you know, work very closely with them so that we always market it this way.
And I think you've heard me last night, fellow dealers, that I never want to see a Bear razor again, that I hope that at the show, that's the last time anybody sees a Bear razor, because we wanna sell it with accessories, and our customers, when they buy it with accessories, they're happier as well. Alright. Let me shift gears and talk to you just a little bit about snow. Obviously, it's not season, but we don't get a chance to talk to you too much about it. Like off or like wreck off road, snow pivots around innovation.
And we introduced some great stuff this year. So Steven and his team, or, Steven and his team, introduced, two products that help, drive our leadership in the mountains, those RNKs, the chaos and the Evo. And then also that driving in the in the performance flat land with E and D. We're really excited about what's happening in product innovation. So our customers.
The next one is around personalization. So Snow is doing factory choice as well, but their factory choice is like factory choice on a whole lot of steroids. Right? So you can get to really specific products. Like, you can change the colors of the spindles and the colors of the arms and the the colors of your graphics.
On these machines in addition to a bunch of the performance, upgrades. And what that's driven is that's driven presales through SnowCheck way up. And so our snow check sales are up on average. If you look at the average of last 2 years versus the average in previous eight, they're up by 66%. And what that does is that takes out a lot of the risk of what happens with weather that you go forward because these things are presold, and it keeps customers talking about.
It keeps it excited. It it's amazing to talk to a snow guy, a snow customer who's ordered snow check-in March because then they spend the next, like, 5 months on the configurator and on the accessory website, figuring out exactly what they're gonna do when they get this machine because they're so excited about it. It's a Snow Chex a great model, and that's what's led to to Polaris being the only company that's gained share over the last couple of years in Snow. I also wanna talk for a second about international. That snow check that we saw in North America has also killed in international.
We feel great about that. We've introduced some products, introduced a new Ranger Diesel in Australia in March, March, April, a few months ago, we introduced, Ranger diesel. It's a much better, diesel than we've ever had before in partnership with Kubota, have a Kubota engine in that But the big thing is we we changed, like, the bearings and everything, and it's that thing. It's just a monster workhorse. So the Ranger diesels, they see a lot of lot of use in, like, a New Zealand Berry, where you're driving up around, people put these scraping cages around them, when they ran their cows, and they did it through all kinds of stuff.
That you can't really imagine with it, but it's a really heavy machine, and it's it's made for and it's selling great. We've also done a bunch of LEDs in Mexico, which, and in Scandinavia, which have been really excited, really great uptake. And now as we drive a Pro class with Pro XB, we're gonna see good uptake there as well. We talked to you last night about being the most preferred partner. We're excited about where we are, humbled but we got a long way to go.
I mean, we want to be even better, and dealers have been pushing us hard on profitability. And so the reason I was late this morning is because I was in our dealer business about 2500 dealers, talking to them, talking to them about our plan around, profitability. What you see up here is the 4 Ps of Polaris dealer profitability. Different than the ones you all learned about in business school, but, but fitting for fitting for our market. Right?
So the first is product, right? And when I talk product, we talk about innovation and hold goods because we know that's what gets people through the door. We also talk about innovation in accessories. Because I can't tell you how good accessories are doing for us and how good CVs and his team are doing on accessories. We really are doing everything we can to drive it.
And we also talk about factory choice. I can catch you afterward and tell you about how I shop for vehicles before I join Polaris. Cause it involved calling a bunch of the dealers around me and asking them if they had the product and how cheap somebody could sell it to me. But Factory Choice is a very different story. You call the dealers and you ask for the product, and then the dealers will say, Well, I can't get that product, or, you know, you realize how limited it is, but it's exactly, but when you find the dealer who's got it, you rush up there and you buy that machine.
And so it's selling faster. It's just it's doing great, right? So we're excited about product, and our dealers are excited about where we are on the personalization piece, this ties into promo. Dealers would tell you in in very consistently on surveys. They'll tell you that we're the most efficient and effective at promo for them.
And, we're excited about that. But if you really wanna get efficient and effective in promo, you've gotta do it personalized, right, So you've gotta send it to just the customers that are gonna be incremental because otherwise you've given promo with everybody, right? And so we're really focused on using this personalization that I talked in promo, and dealers are excited about that. In the programs, introduced 2 new programs to him this afternoon, or this morning, The first is a dealer certification program, and that's Silvergold Platinum, asking them to do, really to do the activities that help them to drive 5 profit center activity. And, the way that we're, the way that we're doing it is we're not just asking.
We're actually paying them to do it. So we changed the holdback structure so that as a dealer becomes platinum, they're able to make considerably more money. Like, an average dealer might make $50,000 a year more. By doing this. And so, so we're excited about where we can go with the, with the certification program.
We also introduced a new rental program today. And the rental program is designed to be able to do dealer demos and also to be able to do, service loaners in addition to rental. And so dealers are gonna take this, and some of them are gonna take it, and they'll just do they'll do demo and they'll do, service loaners, and then they'll get good use inventory at the end, kinda like you get from a Mercedes service, department. Others are gonna take it. They're gonna rent the heck out of it, and they're gonna turn it into the 6 profit center.
And then the last one, well, I guess I should mention that that policy We continue to have the industry's tightest map policy, but, we did change it a little bit so that we gave a little bit more leeway on value models. So that they can use those to get to get traffic going. Because one of the advantages of having the broadest, industry lineup is that you can have value models that get people through the door and profit models up on top that they can use to be able to continue to drive profit. And then the last one is your primary market. We don't we we don't sell franchises.
We don't have exclusive territories or anything like that. And in fact, we we think it's better for our dealers to be able to compete a bit in a market. What we don't want is we don't want them selling a thousand miles outside of their area. Because when they do that, we can't give the customer service that we want. Right?
We can't give the customer experience that we need because if anything goes wrong with that machine, nobody wants to drive back a thousand miles and try to get this. And so, we're introducing a new primary market program. We're gonna do it in the even handed in fairway with with our dealers as we go, but we'll be rolling that over, out over the course of the next 18 months. So I introduced it for the first time just 45 minutes ago. My phone's lit up with texts from dealers since then, and the basic message is this is exactly what we needed.
One of them wrote and said, Hey, my team and I, it was one of our bigger dealers. My team and I wanted to stand up and applaud because this is light years ahead of our competition, and this is exactly what we need. And so we're excited about it, and, we think it's we think we can really drive better dealer profitability as we go. But at the end of the day, with Polaris, what you've gotta do is you've gotta drive profit all five profit centers for a dealer to really be profitable and, we're gonna help them to do that. So in in summary, we think ORV continues to be a great opportunity.
As I said, we're number 1 in powersports. We're number 1 in the brands that we've got. We've got products that, that will be all competitors. I mean, if you bring them in, and you put them head to head, we shy away from no one here. Right?
We've got the largest customer base. We're building loyalty. You heard me last night talk about stadiums full of customers. That's exactly how I think about it. As we do our job right, we're gonna need bigger stadiums, and we're gonna need more stadiums because we want these customers again, and we wanna keep them moving.
And then we're really focused right now on being the best dealer partner, and, we're gonna drive that. So with that, let me take some questions.
Okay. We'll take some questions for Chris, and then we'll go into general. So okay. Job. Yep.
Mhmm.
Yeah. So let me tell you. The average side by side buyer who buys a machine typically goes on and rides with somebody else and feels it first. Right. And so they arrive with somebody who knows how to drive and then they see they see what they've got.
And, I think as they feel it, that'll drive it. Right. And so I'm not as worried. I think if you just come in, if you're a complete newbie and you're, like, side by side looks cool, then maybe you're looking and saying, I just wanna buy the highest horsepower. But, you know, by and large, it's gonna be they will have ridden in something.
And as word-of-mouth gets out around this, that'll help with. But if you look at what we emphasize, I mean, don't think for a second that we couldn't have made a much higher horsepower range. Obviously, we could. If you look at what we emphasized in this machine, we emphasize rider comfort, we emphasize versatility, we emphasize capability. And, this machine just blows everything else out of the water with that.
So, yeah, you know, I'm glad you got that nuance. I probably should have said it better. Thanks for the question.
Alright. Greg.
Yeah. Okay. 2 things. Alright. So Yeah.
The question is the value segment now, the new Ranger 1000. To piece.
Okay. So in value segment, to be clear, we're still the biggest in value segment, right, and we're we're we're not gonna let that go. But, we can't bring ourselves to just, like, I don't like to lose share, but I like to lose money even less. And as we look at what people are doing, mean, we know how much they cost, obviously. Right?
They are losing money to be able to buy share in the value segment, and that's not, that's not our approach we've been willing to take. Right? We will defend it as appropriate, but we've really we've really been disciplined as we've been gone. Right? And so I I'll I'll leave it at that, but just know that, we're being disciplined with our investors' money as we go through this while continuing to be able to support our dealers and continuing to be able to grow.
The Ranger 1000 is not necessarily a value product. Right. So we've got the 570. It's our value product. And in fact, the XP 900, which the Ranger 1000 is replacing, that's continued to sell very well through the space.
The Ranger 1000, it it is a more price conscious customer. We say the customer who, respects the value of a $100 but still needs to get the job done. The value product is not going to be able to get the job done at the same level as the 1000. And so we don't necessarily think of it as a value entry per se. That said, I think it is an extraordinary value for the customers to buy it because it it just it can do so much when people, when I talked to dealers last night, they were like, really?
For $13, you're gonna give them that much. Yeah. We are. And, we think we think we're gonna see a bunch of migration from the value 7 up to that segment because we're gonna see what it can offer. And so do you remember last year when I told you how I felt like some of our competitors were really well disciplined and really you know, they were following that.
Something changed. Like, somewhere in the beginning of this year, we saw a switch flip and we saw some behavior move from where it had been in the past to much more aggressive do everything that we can to take share. And so, you know, certainly if we think something's getting way out of line, we'll step in and help it get back in line. But we call it to blow our brains out, promo plan. We choose not to do that.
Right. So yeah.
K. Yeah, David.
Well,
the question is is currency having the impact on
So we, we do think currency has new back end promo, and, we do think the strong dollar is probably driving some of it. The problem is all of that assumes like a very rational set of behaviors. Across the industry. And as Scott said last time, some of the stuff that we're seeing is baffling us. So to be clear, when you when you think about promo, you gotta realize that promo, when you apply promo, I think of it kind of as a fixed cost and variable Right?
The the fixed cost is across the stuff you would have gotten anyway, and the variable cost is across the units that you're getting. And so when we think about promo, we say we we don't wanna apply so much promo, but for the incremental units that we're getting, it becomes unprofitable. And if you take that same formula, again, some of the behaviors that we're seeing out there, it it is not in play. And so I guess what what I'm saying is, you know, Given the behavior that's happening right now, it doesn't seem profit maximizing to us, and so we're not sure what would happen in the dollar environment.
K, James.
Yeah. Are we gonna sure.
The question is how do we how does the lineup compete in the different sub segment of, laser.
Look, so 50 is a pretty clear segment. The 50 inch segment, people buy the 50 inch segment because they're trying to get through posts on the trail. Like, the trail has 2 physically big posts, and if you're not under 50 inches, you can't get into the trail. Right. So 50 is kind of its own segment.
60 tends to be a value segment. That that tends to be where people come and buy. And so and both us and our competitors. That's that's your price segment. 72 inch, we originally designed it and and Canon came out when they did theirs.
They went for the desert, and the machine is designed specifically for the desert. You can tell everything about that one. And, when we came out with ours, we did a little bit more of a 72 inch athlete, it's very good in the desert, but also good in other areas. But one of the limits of 72 inch mile limitations is when you try to throw it into, really tight corners. It's hard to do.
And so we find that 64 inch buyers are people who are wanting to be able to use that machine, both on trails that'll be that'll have the tighter corners and then in other areas. And so it does tend to be a pretty specific area. I think if somebody comes in with a cheaper 72 inch, mean, we we've got the Turbos velocity hot right there, and then Cam just dropped by 4800 bucks that, their 72 inch machine so that it can be right there with the velocity. But, that that will take some, but we found it. It doesn't take much.
And so it it really is kind of a kind of segment that's protecting stuff.
Okay. That's smooth. Thanks, Chris. So that's that's it for a ORB. So let's move into just general q and a.
So, Mike's Pizza. Obviously Scott Wine is here. Some of the other presenters are still here. So we'll still take questions on any topic, but, this is kind of more of a general open Q and A. So
You know, dealer profitability, and last night, I got cornered by a couple of folks talking about it. The same people, and Chris sent a text that he got to one of these dealers after the presentation went. It's a big issue for our dealers. But what we've done, we do a really, really detailed dealer surveys. So you guys get yours, but we get a much more granular level.
And we're seeing that come around. One of the things we've seen is as we sell more accessories, they do better. We do not try to win on the whole good margin on every product. I mean, that's just we get beat there. We don't even try.
But every dealer, when they look at their entire portfolio with its volume, whether it's accessories. It's all of the different u units they have, the service that they get, they win with Polaris. And that's why we're the most preferred OEM. That said, that's not enough to rest on our laurels. That's why Chris is making this investment in MAP.
That's why this making this investment in primary market areas. And I think you're gonna see all of that start to manifest itself in everybody realizing, not that they've they've always made a little bit more money with players because we're somewhat bigger. They're gonna make more money by a significant margin with us going forward. And that's a pretty exciting place to be. So the question was next year's election year, how do we think that's gonna play out on, Mark?
The one thing we know is uncertainty is not helpful. For anyone. There's likely to be added uncertainty because of that. I will tell you that, as I've known from some of my comment on tariffs, most of our customers are trump supporters, to be honest. So I think, as he's gonna be out there promoting his brand and whatnot, it's probably gonna be helpful to us in some in some regards.
Where the election falls out, I have no idea, but, you know, we think the the economy is likely to stay good through the first half. I think I'm a little bit worried going into the second half of next year what happens to the overall economy, but, we'll we'll be ready for it.
James?
So James asked me why I'm so dumb that I'm going out to help our competitors with, with tariff relief. And quite quite honestly, We felt like it was better from an argument perspective to help more people. I mean, ultimately, This is about American Manufacturing jobs. If you think about the stated goal of the administration, it is to protect and enhance American Manufacturing jobs. I talked about last night, we've got 9000 employees in the US.
I talked about that we spend $3,500,000,000 every year bringing our products to market United States. We're the most American company. So providing relief to the powersports industry helps us probably about 80% of what happens. We we get 80% of the benefit. So I don't mind giving up that 20% and just creating a playing.
But what I'm frustrated about and why I'm spending so much time in Washington making our case is it is a tremendously unlevel playing field benefiting those that don't invest and reward people in the United States. And I think we're we're getting a receptive audience that we just need them to actually do something.
Any other, any questions? Any additional? Yep.
You know, we're really proud of our military business, but it's still relatively small, still below a $100,000,000. I mean, we keep thinking we're gonna great breakthrough moment. You know, as Bob talked about it, some of these technology opportunities we have, we're making great progress. We're still I mean, ultralight Utility means almost a 100% market share, but we haven't gotten, these big programs of record. And if you look at what happened, I'll take Oshkosh as an example.
You know, they were mostly a commercial business. They got a huge program of record and then their their defense, business balloon. So we're close on some of those. And if we get 1, we think it'll really propel us into a whole another level, but, right now, it's in sort of a niche business. It really does help us a lot with technology.
I mean, really, we take a lot of the technology, our partnerships with DARPA, that we can do to bring things better to the, especially the special operations command, and take it to other levels, but it's still a relatively small business. Steve, do you wanna any attachment rates you're willing to disclose? Well, yeah, but they can't hear you online, so that doesn't
What I would say is that the the attachment rates in in general on, on the off road vehicles is the largest attachment attachment rates we have across the portfolio. Rangers is the highest attachment rates we see overall. When you think about factory choice, we're seeing uptake that's, a couple multiples over what we see a la carte in the dealership. So factory choice, delivering a vehicle to the dealer that's fully accessurized, drives higher attachment rates. And then as Chris highlighted yesterday, we still see significant uptake on a la carte accessories in the dealerships.
So factory choices lifting the total accessory attach rate for the business.
Yeah. So let me lay out. I'll do retail by week. For the balance of the year. And then I'm just glad you asked me a question.
I was kinda feeling awkward. I don't know if you're yeah, I mean, you know, we went through the the split and, you know, the sales breakdown between the two quarters is is relatively the same. So you can kinda do the math there. We do have in Q3 a heavier spin from an engineering standpoint. You know, Ken, And, Scott, last night, you talked about our Project Sunburst.
There's a lot of engineering validation that's happening in the third quarter, given the supplier changeover that we've got. And then obviously the expense of this dealer meeting, which is not cheap. And then we do have some mix of products between the two. You know, Chris, I think, went through and showed the shipment schedule so you can get a good sense of, you know, what we're expecting in terms of when the new products are gonna start to ship and when we'll see those going through, the channel. And, you know, I think we've got it laid out in a way that, you know, we've tried to accommodate for what we saw from a weather impact.
You know, Scott talked about it on the earnings call that we're not anticipating a bunch of that to come back. So we have fully adjusted, you know, the factory build schedules, to reflect what we saw in terms of the retail miss. We've projected through the balance of the year and still feel good about what we've got laid out.
Yeah. Go ahead.
You know, question is what happens if Craig actually what he says he's gonna do and get capped around and be successful. We're really confident that he's gonna do that. As he talked about, it has been a tough slog. There was a lot that needed to be fixed fundamentally there. It is tremendously meaningful from a profitability standpoint.
Is that continues to make progress. Yeah, it it's not a rounding error by any stretch of imagination. You'll feel And it and what what's interesting is because of the retail stores are starting to perform, you know, one of the things that's best for me about this whole event is you get to see how strong the leadership team What you don't see is that next level down. So Evan Keller who went out with Craig to run that four wheel parts business, he's just killing it. And it's just the gift that keeps on giving And as they continue to make these fundamental improvements, it's gonna get better.
And and we think it could be a very strong, very profitable part of our portfolio. And I think, you know, Steve Eastman, what if you just look at what he's done, with our parts, governments, and accessories business, then our power sports aftermarket brands, it's really following that same model. It doesn't. It's not an overnight success story, but it's a a fundamentally sound, long term, profitable growth strategy. And, I I'm very confident that that Craig with Steve's leadership is really gonna continue that path.
Laura.
That's what you get for sitting close to Tim's long questions.
Okay. So the question is looking at all of the customer growth opportunities, how do we figure out where do we prioritize? Is it Latino or Millennial or Women? What I would say is that we go category by category brand by brand. And so we've actually done extensive analytics and qualitative research to understand for each business where is the best opportunity?
So even as I look at off road and side by side in particular, certainly there's opportunity with sportsmen, but when we look at the side by side, razor's profile today is different than Ranger. And so right there, that tells us something. But when we do the, qualitative research and understand the attitudes and beliefs and who's leaning in, We're picking very specific micro segments. So when you look at the off road customer, it's not the same for every brand. And so the same is true for each business.
So you might say, on Raiser. We're gonna focus on Latinos And Millennial. And on Indian, frankly, women riders, the MIC came out and said 19% women ridership, and I believe ours is around 10. So right there, you can see for each business, we gotta go business by business and we can't just blank it. Across Polaris.
Here's our objective. So we've got a team focused on each brand, each category and doing what's right for them working very closely with the businesses. Because long term, this is their adoption of this, an inclusion that's gonna drive it forward. And in terms of the dealers, look, our goal is We've gotta drive the traffic to the dealers. We want our dealers to treat customers right and give them an awesome customer experience and bring them back.
And that way, They don't have to figure out when someone walks through the door. How do I talk millennial? How do I talk female? They're gonna give a great customer experience, and we're gonna work with them on doing that. And then We drive the traffic.
They convert and create great experience.
The the the follow on question was where's the biggest opportunity across all of our business units? It's undoubtedly with off road vehicles just because it's such a big part of our portfolio. And it's the one except for razor, which does reasonably well. The rest of the portfolio doesn't. And I think, you know, Chris is really engaged with Pam and her team and and they're starting to look at those opportunities.
And I think that's the biggest short term and long term opportunity. Because pans work so closely with Steve Menneto, they're already making really good progress with Slingshot in India, and I think that will continue to grow. But, Pam and did I get that right?
Joe, and then Mark.
So I I think if I understand your question is why are so many people entering this offer vehicle space? Is that
You
know, it's interesting, as you can imagine, we pay really close attention to this. You know, John Deere made a huge push in the side by side space and then kind of backed off and reconfigured it and it took a little bit of a different, a more measured approach. The others, I think it just a natural that the Honda was gonna enter the the sport rack space. They did it somewhat conservatively. Like, they do almost everything, but they're red and they're Hondas and they're very durable, and they're gonna do reasonably well.
I think the market people are recognizing, there's a lot of opportunity here in this space. As Chris said, we're not backing down from anybody. We feel really good about our portfolio, our brands, and our ability to compete and win, going forward. I don't I do think that there is going to be a reckoning when there's ultimately an economic downturn, that people it takes money to invest to to play. I mean, you look at the snowmobile industry for an example.
There used to be, I don't know, several dozen snow wheel manufacturers. And then it got whittled down because it takes so much to compete and win. And ultimately, that same kind of ability to canoe and to invest and bring new products and new customers into the market is gonna narrow it down. Again, I feel good about our ability to compete. Just a quick thing on the horsepower comment, just a reminder that, just to how this hole, it's ultimately horsepower to the ground.
And Chris Wolf really proud of his team. For 2 years, our 800 RMKs competed in hill climb races against the competitor that in 850. Mean, so for 2 years, we were 50, CCs down and we never lost a race. So we kinda know how this works, and I think, really confident when you ride the product, as Chris said, you'll realize that it's it's not a horsepower play. I if I look back a couple of years in my, you know, 11 years now, a couple of times we've made mistakes.
I mean, one time we made a mistake, we had a 1000 cc Ranger, and we didn't the the it was a busy year of product news And we decided to hold it and Honda launched the 1000 cc, and it really hurt us from a market share standpoint. So we try to be very thoughtful about what else is going on. It's our product planning is a long range product plan. It's not short term, so it's about a 5 year look. When we went through all of the recall stuff, we spent a lot of engineering resources to, address some of the issues and make sure that we had the the most safe, most reliable products we possibly could.
So we got a little bit behind. I think what you saw last night and what you'll ride today is an example that we're back to playing offense. And when we're playing offense, I feel really good about where we are. A lot of times, it's, powertrain and chassis, and it's a it's a long term, cycle. So we cannot be reactive.
We can't speed things up, so we're just on the profile that we're on. I mean, we, as you know, we lose a lot of trail market share right now. But we can't short term redirect our product planning and get that turned around. But so we're gonna be methodical and make sure when we come back, we've got exactly the right product and portfolio. But we feel like we're back on offense and plan to stay there.
Okay. Maybe one more. If there's one more question, otherwise, we gotta we gotta wrap it up here.
K.
Alright. Thank you for coming in. Enjoy the ride today.