The 2015 Wildcat Sport XT, a recent addition to the Arctic Cat side-by-side lineup.

Last week Arctic Cat reported on their third quarter earnings for fiscal year 2015. For the quarter ending on December 31, 2014 net sales for the third quarter decreased to $193.7 million from $225.8 million for the same quarter last year and net earnings decreased to $7.5 million or $8.9 million as adjusted from $12.1 million. Year-to-date net sales increased 2.5% to $599.9 million from $585.1 million a year ago and net earnings decreased to $26.4 million or $32.3 million as adjusted from $41 million. Here are some highlights of the earnings call as it relates to utility vehicles.

• ATV and UTV sales for the quarter increased 7.3% to $83.9 million from $78.2 million as growth in Wildcat side-by-sides were offset by decreases in core ATVs.
• For the first three quarters to date sales of ATVs and UTVs decreased 4.3% to $217.3 million from $227.2 million. Strong sales of Wildcat side-by-side models were offset by lower than planned sales of core ATV sales to dealers in North America and international regions, including Russia.
• A $7 million charge in the 4th quarter will be taken related to reducing core ATV inventory.
• Wildcat models gained further market share in this category during the third quarter this year.
• For the calendar year sales of side-by-side Wildcats grew 34% versus the industry’s 17%.
• Three new Wildcat Sport models on a new 60-inch wide chassis were introduced. The new chassis’ width is a mid-sized option between the original Wildcat and the recently successfully introduced Wildcat Trail model, which has a narrower 50-inch stance.
• A new 2016 model year HDX Prowler will be announced in early February
• Arctic Cat signed an OEM agreement with a terrain company during the third quarter to build private label side-by-side vehicles for the commercial line equipment business. They expect to begin shipping products to this customer in March.

Learn more:  Seekingalpha.com (earnings call transcript)

Comment:  In search of growth many UTV manufacturers are looking to enter into other market segments either by adding new product lines or developing partnerships. Arctic Cat’s new Sport line and OEM agreement are more examples of this trend. From comments during the earnings call, the OEM agreement is with Toro. This will give Arctic Cat a distribution network into the commercial and turf markets. Their current powersports network of dealers is not the best match for tapping into the commercial market. For Toro, UTVs are a relatively small part of their business and development resources are probably better spent their core products, while they take advantage of Arctic Cat’s engineering expertise in the UTV market.