Polaris Reports Strong Quarterly Earnings for Q3 2014

Posted on October 25, 2014 by Marc Cesare

RZR XP 1000’s like the new 2015 RZR XP 1000 EPS Desert Edition helped drive sales.

Polaris reported an 18% year over year increase in revenue for third quarter 2014 driven by increases in their motorcycle, PG&A and Off-road Vehicle (ORV) divisions. ORV which includes side-by-sides and ATVs recorded a 17% increase. With another strong quarter, management raised their guidance for full-year results in 2014. Some highlights of the earnings call as it relates to Small, Task-Oriented Vehicles include:

ORV revenue up 14% year-to-date
Market share gains in the quarter for both side-by-sides and ATVs in North America adds to their #1 positions
ORV revenue was driven by side-by-sides that outpaced the industry believed to be growing at 10%
The 2 and 4 seat RZR XP 1000’s as well as the RZR 900 Trail are selling well
In the commercial UTV segment Brutus retail sales continue to grow sequentially and year-over-year for both Polaris and Bobcat
Commercial national accounts and fleet sales were strong
The Gravely Atlas UTV was launched in the quarter
Defense related ORV revenue was flat for the quarter but up 25% year-to-date with international sales of the MRZR contributing
The Small Vehicle division reported an 8% revenue increase in the quarter due to GEM and Aixam
Year-to-date Small Vehicle revenue is up 52%
GEM reported retail sales increase of 20% on action in B2B and GSA sales
While Aixam grew despite a weakening European market, Goupil revenue decreased with softness in the French economy, their major market
The Opole, Poland factory opened and will produce ORV and other products for the European and Middle East markets
International sales were helped by strong ORV sales in India and Australia
Currency issues provided some headwind in foreign markets

Learn more: Seekingalpha.com (earnings call transcript)

Comments: Despite some macro economic issues the Polaris juggernaut keeps on rolling as they continue to add market share despite increased competition in the side-by-side and ATV markets. Their large market share and subsequent production volume gives them an advantage in driving down vehicle costs and provides funding for their robust R&D budget and new model pipeline. The large number of models they market allows them to target specific sub-segments with specific vehicle capabilities and characteristics. In turn this makes it more difficult for competitors to match up on a vehicle to vehicle basis in each sub-segment.

Polaris Opens Manufacturing Facility In Poland

Posted on September 29, 2014 by Marc Cesare

Polaris’s new manfuacturing facility in Opole, Poland. (Photo: Business Wire)

Polaris announced the opening of their new 345,000 square foot manufacturing facility in Opole, Poland. The company will manufacture ATVs and utility vehicles at the site for Europe, Middle East and Africa (EMEA) region. Opole will also house research and design for the Europe, Middle East and Africa markets allowing vehicles to be tailored to local needs. The building features include a 2,500 meter product test track and energy saving paint systems. Products should begin shipping from the facility in early 2015. Learn more: Seekingalpha.com

Comment:

Polaris Industries continues to lead the small, task-oriented vehicle (STOV) industry in an aggressive and highly effective strategic vision. This could not be better demonstrated than by its groundbreaking initiative to put engineering and manufacturing assets in Poland and to tie Opole-based production to a logistics and marketing strategy for the entire EMEA region. Management has made increasing international sales a long term strategic goal and has steadily been taking steps towards that end over the last few years. The new facility is testament to the growth they have experienced in the EMEA region.

It has to be said that Polaris is, far and away, the leader in terms of strategic vision, implementation (in engineering, production, and distribution systems), and market development. Moreover, Polaris is not wedded to ICE technology. It’s acquisition of GEM Electric Vehicles, a company long-established, but treading water for years, constituted a strategic move into electric power (along with their investment in Brammo). Polaris immediately upgraded the look of the product line with the eM1400–and gave its dealers more flexible offerings with the gas-powered M1400 series.

Polaris Reports Record Quarterly Results – Gains Market Share

Posted on July 23, 2014 by Marc Cesare

Beauty shot of the new Sportsman ACE from Polaris.

The Sportsman ACE, one of the many different vehicles that helped drive record quarterly performance for Polaris.

Polaris Industries reported record second quarter results with sales of $1.014 billion and net income of $96.9 million. Sales increased 20% from Q2 2013 and net income 21%. Key drivers were an increase of 15% in North American retail sales with strength in ORV and motorcycle products. Management also raised their full year guidance to a 16-18% increase revenue. Here are some highlights from the earnings call with a focus on small, task-oriented vehicles:

ORV sales increased 13% for the quarter to $701.5 million
Guidance for full year: up 11%-13%
Side-by-side sales up low teens % and outpaced the market
Polaris gained market share in side-by-sides and ATVS
Sportsman ACE is selling well and customer data to date indicates that it is reaching a new market segment
New ORV models will be announced shortly
Promotion environment for side-by-sides remains aggressive
Small Vehicle sales increased 29% to 43.5 million
Aixam Mega sales up over 40% in Q2
GEM and Goupil sales combined increased 6%
New products will be announced in the second half of the year
Small Vehicle sales guidance for the year: up 25%-30%
In the commercial segment Brutus sales are below expectations as the company tackles the B2B sales process but Bobcat and National Account sales did well.
International sales increased 29% in Q2 to $170.5 million driven, in part, by side-by-side sales in many regions

Learn more: Seekingalpha.com (Earnings call transcript)

Comment: Polaris continues to operate on nearly all cylinders and will be shortly rolling out new products. Their only weakness appears to be in the commercial segment. It is telling that Bobcat and national accounts did well in the quarter but the Brutus retail sales, while improving, remained below expectations. This points to the continuing mismatch between the majority of Polaris’s distribution network and the commercial customer the Brutus is targeting. Most of their current dealers are accustomed to a different consumer-oriented sales process. Management is likely to pursue additional marketing partnerships in this segment to bolster commercial sales while trying to assist, train and bring more of their traditional dealers up to speed in this segment. But this is nitpicking, the company continues to roll in competitive markets and is even exceedng high expectations.

E-Z-GO Acquires Tug Technologies Corporation

Posted on May 5, 2014 by Marc Cesare

The TUG Technologies Corp. M1A tow tractor is used at airports.

E-Z-GO recently announced the acquisition of Tug Technologies Corporation, a manufacturer of ground support equipment for the aviation industry. TUG Technologies Corporation, based in Kennesaw, Georgia, manufactures ground support equipment servicing airlines, air-freight companies, ground handlers, government agencies and airports worldwide. TUG’s extensive product line includes cargo tractors, belt loaders, tow tractors, pushback vehicles, air-starts, ground power units, and mobile heating and air-conditioning units. The company was acquired from a New York based private equity firm but their manufacturing is based in Kennesaw, GA along with approximately 200 people. The terms of the acquisition were not released. Learn More: Marketwatch.com

Comment: The acquisition makes sense for E-Z-GO on a number of fronts. They already serve the same markets with E-Z-GO and Cushman vehicles but for different applications with minimal overlap and they are also both Georgia based companies. The greater resources that E-Z-GO has at it’s disposable in terms of product development, manufacturing expertise, sales force and existing relationships should help grow the company. Tug Technologies is a strong brand in their markets that can be leveraged for new products and new markets.

Polaris Posts Strong First Quarter 2014 Results

Posted on April 25, 2014 by Marc Cesare

The new Sportsman ACE from Polaris is one of the reasons for the company’s strong financial results for Q1 2014.

The following are some of the highpoints of the Polaris earnings call discussing their first quarter 2014 financial results with a focus on aspects relevant to the STOV market.

Polaris first quarter sales increased 19% to $888 million.
Net Income increased 7% to $80.9 million.
Management is raising their expectations for full year revenue and earnings to increases of 14%-16% and 17%-18% compared to 2013.
Off-Road Vehicle sales which includes UTVs and ATVs increased 11% and market share improved with good demand for the RZR XP 1000 and the new Sportsman ACE.
In North America management estimated that side-by-side sales retail grew upper single digits in an industry that grew similarly.
The new Sportsman ACE has gotten off to a good start.
PG&A momentum remains very strong with first quarter sales up 20%, parts accessories and apparel all grew strong double-digits led by strength in both ORV and Motorcycle related products.
First quarter Polaris commercial revenues increased by over 60% with sales to Bobcat Polaris national accounts and BRUTUS up notably year-over-year. Commercial segment has grown more slowly than expected by management but they will continue to put resources into this segment.
Small Vehicle first quarter revenue increased by 248% as all three brands, GEM, Goupil and Aixam grew year-over-year. The increase includes the addition of revenue from recently acquired Axiam, which also increased market share in Q1, and an increase of over 20% from the GEM product line.
International business had another strong quarter with sales increasing 44% led by nearly 50% and 60% growth in the EMEA and Asia Pacific regions respectively. Small Vehicles, PG&A and side-by-side sales all grew over 30%.
ORV is now expected to grow 9% to 11% in 2014.
Small Vehicles guidance is unchanged up 25% to 30% which includes the full year of the Aixam acquisition.
ACE orders in both North America and internationally have been better than expected with only minimal signs of cannibalization of either ATVs or side-by-sides.
There is broad based strength across many ORV products.
Management is seeing increased competitiveness and promotions in the side-by-side market.
Management is disappointed in Brutus sales into the commercial segment so far but expect to see improvement over the next 12 months as dedicated sales staff, partnership with Ariens and other efforts help them adjust to the longer B2B and B2G selling cycles in this segment.

Learn more: Seekingalpha.com (earnings call transcript)

Comment: The early signs that the ACE is not cannibalizing ATV and UTV sales is an indicator that Polaris is creating another vehicle category. More time will be needed to see how sales play out over the next 12 months to see if this theses remains true. It’s not only a question of cannibalization but how buyers are actually using the vehicles – what market segments, what applications, etc.

Polaris Partners with Ariens, an Outdoor Power Equipment OEM

Posted on January 2, 2014 by Marc Cesare

Gravely’s current UTV offering, the Treker

Polaris recently announced a strategic partnership with Ariens, a maker of outdoor power equipment. Ariens sells a variety of products under the Ariens, Gravely and other brands and is based in Wisconsin. The partnership will allow Polaris access to markets not as easily served through their network of powersports dealers. Under the partnership Polaris will be providing a “highly differentiated work vehicle” for the Gravely brand. The partnership is expected to create opportunities for some dealers for each of the companies. Learn more: Polaris.com

Comment: Growing revenue from adjacent markets, like small, task-oriented vehicles for commercial and work applications has been a long term goal for Polaris. They have already established a partnership with Bobcat and added the GEM line, which is primarily sold to commercial and institutional entities like colleges and municipalities. The challenge is that these markets require a more aggressive sales effort to get out and visit with potential buyers in-person as opposed to a powersports dealer that tries to generate interest and awareness and drive traffic through their door.

The Bobcat sales have developed slower than expected as the purchase cycle for commercial and institutional buyers is longer. I also think an issue with the Bobcat partnership is that Bobcat dealers might be more focused on selling their more expensive equipment offerings like skid steers. I have heard some doubts from GEM dealers that powersports dealers will not know how to sell the GEM into its traditional market. So I think this partnership with Ariens puts another iron in the fire as Polaris goes after the commercial and work segments. The Ariens partnership provides more exposure to work UTV markets and could produce some synergies with their expertise in snowblowers and mowers for the Polaris Brutus line of vehicles which take work attachments.

Polaris Suing Arctic Cat Over Side-by-Side Patent

Posted on December 31, 2013 by Marc Cesare

Image from patent no. 8,596,405, the basis of the Polaris lawsuit against Arctic Cat. See link below to patent for other images and information.

Polaris is suing Arctic Cat for alleging violating patent no. 8,596,405 which covers versions of the Ranger RZR side-by-side. The patent was originally filed in 2006, updated in 2010 and approved several weeks ago. The alleged violation relates to the Arctic Cat Wildcat and the patent appears to pertain to trail riding side-by-sides.

I’m no patent lawyer but the patent seems to be very broad, covering the basic design of a trail riding side-by-side. One key element of the vehicle design as described in the patent claims is the placement of the engine in the rear of the vehicle behind the seat. This lawsuit could have major implications for the UTV market and further enhance the dominant position of Polaris if they win. This is just another sign of how competitive this market has become, especially in the higher end trail riding/recreation segment. Learn more: Startribune.com

Polaris Patent (USPTO.gov)

BRP Announces Quarterly Earnings Results

Posted on December 19, 2013 by Marc Cesare

The Maverick XRS DPS as well as other Can Am Maverick and Commander side-by-side models helped power BRP earnings in the last quarter.

BRP Inc., manufacturer of Can-Am side-by-sides and other power sports products announced their FY14 third quarter results for the period ended October 31, 2013 (Figures in Canadian dollars). The management reported record quarterly revenues of $866.0 million, an increase of 18% compared to the corresponding period of FY2013 Net income of $48.2 million, an increase of 52% compared to the third quarter FY2013. Revenues from Year-Round Products increased by $2.2 million, or 0.9%, to $249.6 million for the three-month period ended October 31, 2013, up from $247.4 million for the corresponding period ended October 31, 2012. The increase is primarily due to higher wholesale and a favourable product mix in side-by-side vehicles, for an increase of approximately 38% compared with the corresponding period ended October 31, 2012. The increase was mainly offset by a 20% reduction in ATV sales. Other highlights from the earnings call with a focus on side-by-sides include:

Year-to-date, BRP registered growth of 13% in year-round products, primarily driven by significant growth in side-by-side, a market BRP only entered in late 2010.
Year-to-date, side-by-side revenue is up 35% driven by eight new models under the Commander and Maverick product lines.
Company remains on track for to add 35-40 new dealers in North America by the end of our fiscal year 2014, and continue to focus on the US South and Southwest regions. They are also on track for 200 to 300 new dealers over the next four years.
International revenues have grown 15% in large part to the increasing popularity of side-by-side products
The US side-by-side industry is up low-double digit thus far in season 2014, while BRP retail continues to significantly outpace the industry.
Management reports that they started deliveries of the Maverick Max in June; the Maverick XMR, the mud-ready vehicle, in October; and the XC model, Maverick XC model, also in October. “Then we have a very good momentum worldwide with our side-by-side business, and we are outpacing the industry every quarter, and we’re very happy with that.”
BRP continues to track on plan for our full-year revenue and normalized EBITDA guidance.

Learn more: BRP Earnings Call Transcript

John Deere Reports Q4 2013 Financial Results

Posted on November 27, 2013 by Marc Cesare

John Deere RSX850i utility vehicle

John Deere, manufacturer of the Gator utility vehicles, recently announced their quarterly earnings for the fourth quarter of fiscal year 2013. Net income attributable to Deere & Company was $806.8 million for the fourth quarter ended October 31, compared with $687.6 million for the same period last year.
For fiscal 2013, net income attributable to Deere & Company was $3.537 billion compared with $3.065 billion in 2012.

While it is difficult to isolate the sales figures for Gator utility vehicles because of all the other products the company sells, management reported that sales for the agriculture and turf division under which Gator sales fall decreased 4 percent for the quarter primarily due to lower shipment volumes and the unfavorable effects of currency translation, partially offset by price realization. However, sales increased 7 percent for the full year largely due to higher shipment volumes and price realization, partially offset by the unfavorable effects of currency translation. Operating profit was $996 million for the quarter and $4.680 billion for the year, compared with $931 million and $3.921 billion, respectively, in 2012.

For 2014 the industry retail sales of turf and utility equipment in the U.S. and Canada are projected to be up about 5% in 2014. Management reports that “Market conditions are improving in tandem with the slow economic recovery. Also the pent-up demand seen in late 2013 is expected to continue, mainly benefiting the riding lawn equipment and utility vehicle segments.”

Learn more: Seekingalpha.com (Earnings call transcript)

Arctic Cat F2Q 2014 Earnings Summary

Posted on October 28, 2013 by Marc Cesare

The new 50-inch Arctic Cat Wildcat is expected to ship in the second half of the fiscal year and help drive sales.

Arctic Cat sales increased a modest 4% for the quarter but side-by-side sales were strong. The following are some highlights from the earnings call with a focus on the side-by-side market.

Net sales for the second quarter increased 4% to 238.5 million from 229 million for the same quarter last year.
ATV sales, which includes ATVs and UTVs, increased 4% to 72.7 million driven by Wildcat and Prowler side-by-side sales.
Parts, garments and accessory sales decreased 1% to 30.4 million from 30.8 million.
Year-to-date net sales increased to 5.6% to 359.3 million from 340.3 million and net earnings increased 7% to 28.8 million from 27 million
Internationally Europe remains a difficult market but sales to Australia, Mexico and some of the Middle East and Latin American countries are up.
On a year-to-date basis ATV sales increased 4% to 149 million and parts, garments and accessory sales increased 2% to 52.3 million from 51.1 million.
For the quarter side-by-side retail sales increased by 23% driven by significant increases in the new Wildcat models, and the new Prowler HDX500 utility model.
There has been a net increase in the dealer network for Prowler and Wildcat product lines with the increase for the Wildcat line the largest.
Year to date R&D expenses increased 24% as management focuses on new product development, especially for side-by-sides.

Looking forward

Management expects sales to be in the range of 754 million to 768 million, an increase of approximately 12% to 14% versus fiscal ’13.
Arctic Cat will launch three new Wildcat side-by-sides in the next 6 months including the previously announced 50-inch Wildcat. Shipments for the other two new Wildcats are expected to begin in Q3 with dealer orders starting in November.
Off-road vehicles expected to be up 25% to 29% for the year.

Learn more: Seekingalpha.com

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