Polaris (PII) Q2 2023 Earnings Call Transcript

Polaris (PII 0.64%)
Q2 2023 Earnings Call
Jul 25, 2023, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Polaris second quarter 2023 earnings conference call and webcast. All participants will be in listen-only mode. [Operator instructions] Please note today's event is being recorded. I would now like to turn the conference over to J.C.

Weigelt, vice president of investor relations. Please go ahead.

J.C. Weigelt -- Vice President, Investor Relations

Thank you, Rocco, and good morning or afternoon, everyone. I am J.C. Weigelt, vice president of investor relations at Polaris. Thank you for joining us for our 2023 second quarter earnings call.

We will reference a slide presentation today, which is accessible on our website at ir.polaris.com. Joining me on the call today are Mike Speetzen, our chief executive officer; and Bob Mack, our chief financial officer. Both have prepared remarks summarizing the second quarter, as well as our expectations for 2023. Then, we'll take your questions.

During the call, we will be discussing various topics, which should be considered forward-looking for the purpose of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projections in the forward-looking statements. You can refer to our 2022 10-K for additional details regarding risks and uncertainties. All references to second quarter 2023 actual results and 2023 guidance are for our continuing operations and are reported on an adjusted non-GAAP basis, unless otherwise noted.

Please refer to our Reg G reconciliation schedules at the end of the presentation for the GAAP to non-GAAP adjustments. Now, I will turn it over to Mike Speetzen. Go ahead, Mike.

Mike Speetzen -- Chief Executive Officer

Thanks, J.C. Good morning, everyone, and thanks for joining us today. We hope everyone is enjoying their summer and the great outdoors with friends and families. For us at Polaris, summer certainly marks the peak of our riding season, and this year is especially exciting as we're welcoming our dealers back for our first in-person summer dealer meeting since 2019.

In conjunction with this meeting, we'll also host our capital markets day on July 31st in Nashville. Today's call will focus on recapping the quarter and current state of the business, and we'll save commentary on some of the longer-term strategy and future initiatives for the capital market day event, which is less than a week away. For those who cannot make it, the event will be webcast on our investor relations website. Turning to the second quarter performance, sales grew 7%, driven by positive volume and a higher net pricing.

North American retail was up 14%, with on-road up more than 50% due to strong demand and availability of our Indian motorcycle and Slingshot products. In off-road, it was encouraging to see positive retail trends for both utility and recreation. Our marine business did see some retail softness in the quarter. I'm proud of the team's performance and the fact that we gained share in off-road, on-road, and marine during the quarter.

As we progress through the back half of the year, we expect to hold share in on-road while gaining more share in off-road with a robust product lineup that includes recently launched and soon-to-be-launched vehicles. Margins were down modestly as we experienced near-term headwinds, including higher interest, foreign exchange, and snow warranty costs. We also continue to experience production inefficiencies due to challenges with supplier delivery, mainly wire harnesses, as well as tight labor markets in specific regions. Our team has been working hard to remediate these issues.

And while we have seen some progress in July on both fronts, we expected to take some time to improve our efficiency to pre-pandemic levels. Adjusted EPS was flat relative to the prior year with higher interest expense and foreign exchange headwinds, partially offset higher volume price and lower share count. The year is progressing in line with what we told you on our January call. Retail has improved, our product launches are on time and positive feedback from both dealers and customers, and inventory remains near optimal levels.

While both gross profit and EBITDA margins expanded over 60 basis points and 50 basis points respectively in the first half of the year, margins have seen increasing pressure from labor, warranty, and litigation costs, which we expect to continue in the back half of the year. With that being said, our teams remain focused on the five-year strategy we laid out last year, and margin expansion is a significant objective of that strategy to generate strong returns for our shareholders. Bob will provide more color on guidance shortly, but it's worth noting that with half of the year behind us, we have narrowed many of our guidance ranges. We are raising our sales guidance, but increased costs incurred during the year thus far.

And anticipated in the second half has us narrowing our adjusted EPS guidance accordingly. It's been an exciting year at Polaris, and many of you will get to feel the energy and drive that we have as an organization at our dealer meeting and capital markets day next week. We wear our passion on our sleeves and are driven to make Polaris stronger than ever before. Now, let me share some thoughts relative to customer trends we're seeing.

The demand story in off-road and on-road improved during the second quarter, while marine saw more challenges. Let me dive into off-road in more detail. Demand for our utility vehicles remains strong, and we expect this trend to continue as we progress through the year. Recreation improved during the quarter, and we expect share gains to continue as momentum builds around our recent RZR XP and Polaris XPEDITION launches.

Promotions are working, and our team is doing a great job of targeting these dollars to the right customers and geographies to drive quality leads and generate dealer traffic. And lastly, July retail is off to a good start for the third quarter. For on-road, Q2 retail was robust due to a combination of strong product line, easy comps, given a weak second quarter last year and improved availability. This is true across both Indian Motorcycle and Slingshot.

In marine, we did not see a recovery in retail during the second quarter. As a reminder, the selling season kicked off later than anticipated this year due to weather. Dealers seem a bit reluctant to take on additional inventory, given the combination of healthy inventory position, higher flooring costs, and soft retail. Our team is responding appropriately.

We have adjusted production schedules and are controlling our variable costs in the near term to protect profit. The bulk of the marine selling season ends in a few weeks, and we'll assess dealer sentiment and inventory levels at that time as we prepare for the 2024 season. But for now, the marine industry seems softer than our original expectations, and this is reflected in our revised guidance. Turning to what we've been hearing from dealers, our dealers are one of the greatest sources of feedback, and our biannual dealer survey provides great insights into how our dealers view working with Polaris, as well as their outlook for powersports.

This survey touches on many facets, including dealer satisfaction, sentiment, quality, and inventory, to name a few. We conducted the latest survey in mid-April for off-road with over 900 dealers responding. The results were certainly encouraging and gave me great confidence that we were focused on the right areas, and Polaris is poised to succeed. A few highlights include, we continue to rank No.

1 in dealer satisfaction relative to other OEMs. Sentiment around inventory strengthened as the supply chain improved. However, RANGER NorthStar supply continues to be an area of opportunity. Dealers expressed optimism about how promotions and product availability can positively impact retail, and our quality scores improved across all product lines.

Lastly, the team and I regularly visit dealers. Earlier in the year, some of us visited marine dealers in the southeast, which we talked about last quarter. And a month ago, we visited off-road dealers in the mid-Atlantic region. The two biggest takeaways from our most recent visits are that dealers told us Polaris is winning the innovation race.

From the launch of the Pro, RZR Pro R, and Turbo R, and RZR XP, to the more recent Polaris XPEDITION, we believe that we are at the forefront of rider-driven innovation and providing the best customer experience while expanding the market. Secondly, dealers noted their outlook on the year has improved relative to what they believed earlier in the year. Pressure remains at the low to mid end of the recreation market, but premium continues to perform well. And there's plenty of excitement around our new product.

As we indicated at the start of this year, 2023 is an exciting year for product innovation. And two of these launches are shipping now. The first is our completely redesigned RZR XP lineup. The multi-terrain category is the largest segment in the sport side-by-side segment, and the RZR XP has long been the best-selling sport side-by-side in the industry.

In March, we launched the next generation of RZR XP with class-leading durability, comfort, and performance that takes this lineup to the next level. This product hits at the heart of the market, and we expect it to continue to be our top-selling razor. Reception has been great, and many of you will get to see it in person for the first time at next week's meeting. The second product is the Polaris XPEDITION, which is hitting dealer floors during the summer.

Similar to how RZR in general pioneered new categories in the side-by-side market, we are on the path to do that yet again with this entirely new adventure side-by-side category. Targeting consumers who are into overlanding and have a destination in mind for camping, adventure, and exploration, the Polaris XPEDITION has added comfort and capabilities. Plus, it touts the industry's largest fuel capacity of any factory side-by-side on the market with a 200-plus mile range, making it stand out against any other side-by-side in the market. Rider-driven innovation is one of our core strategic tenets, and we are not done yet.

It's safe to say there's more yet to come this year. Regarding dealer inventory, we continue to be in a much healthier position relative to last year and are diligently working to get new products and more RANGER NorthStar to dealer sports. Relative to 2019, inventory is down about 25%. We view this level as near optimal, and dealers seem to agree.

While we occasionally hear feedback from dealers that their overall inventory is too high, they also tell us their Polaris inventory is in a good place, and their excess inventory is coming from lower-end OEMs they brought on during the pandemic to meet demand. On some of our recent dealer visits, we heard that dealers are working hard to sell those lower-end OEM products and evaluating the need for such OEMs now that vehicle availability has improved across the industry. We value our relationships with our dealers and continue to work with them to enable our mutual success. Switching to our Geared for Good strategy around a variety of ESG metrics, I want to recognize our recently published 2022 corporate responsibility report.

I love seeing this report and the compilation of stories illustrating our team's passion and commitment to be good stewards. One of the highlights from this year's report was around our environmental goals. We celebrated exceeding our original three environmental goals that we set in 2017 and announced seven new 2035 environmental goals. We continue to take a genuine approach to the strategy and are aligned at what needs to be done to meet these goals and are other Geared for Good initiatives.

So, here we are halfway through the year, and, thus far, it has played out very similar to how we initially expected in January. Innovation is back at Polaris in a big way, and we believe it will continue to drive retail growth and share gains across our business. Although some challenges remain, we have been working hard to remediate supply chain and labor constraints with positive momentum experience, thus far, in July. While uncertainty remains in the broader economy, we are executing on the matters we can control.

I'll now turn it over to Bob, who will summarize our second quarter performance and provide additional detail for the balance of 2023, including guidance and expectations. Bob?

Bob Mack -- Chief Financial Officer

Thanks, Mike, and good morning or afternoon to everyone on the call today. Second quarter results were encouraging on many fronts, including top-line growth of 7%; share gains in off-road, on-road, and marine; double-digit retail growth, and in the introduction of the Polaris XPEDITION. EBITDA margin for the quarter was down almost 40 basis points, driven by continued high labor costs and finance interest. We are also seeing some pressure from increased snow warranty expense and litigation costs.

Partially offsetting some of these headwinds was net pricing and lower cost premiums on items such as logistics in the quarter. And while margins were down a bit in the quarter, they remained ahead of the same period in the prior year on a year-to-date basis, and we continue to expect margin expansion for the full year. International sales continue to perform well, posting growth to 6%. PG&A grew 12%, driven by parts, healthy accessory attachment rates, and strong e-commerce growth.

In our off-road business, revenue increased 9%, driven primarily by side-by-side sales to both dealers and commercial partners. ORV retail was up 14%, and market share was up in the quarter. While we continue to see good demand in the utility space, it was great to see those same demand metrics improve across the recreation segment, which includes RZR GENERAL and our new Polaris XPEDITION. With regard to expected share gains in the back half of the year, we are now shipping both the new RZR XP and the Polaris XPEDITION.

Both have received positive feedback from our dealer network, and many sites were taking preorders for the Polaris XPEDITION. Plus, we are excited to share with you more product news at the dealer meeting and capital markets day next week. We expect these efforts to help us continue to gain share as we remain the innovation leader in powersports. Margins in the quarter were pressured by increased promotions, finance interest, snow warranty costs, and unfavorable mix as we shipped more snowmobiles versus prior year, which typically have a lower margin associated with them.

It remains an exciting time in our off-road business, and we expect the positive retail momentum we saw in Q2 to extend into the back half of the year. We have never let up on innovation, and history shows that innovation can lead to share gains, as well as growing the market. And we believe we are positioned to do so in the second half of the year. Switching to on-road, our fourth straight quarter of share gains was driven by our strong product portfolio and healthy inventory.

North American Indian Motorcycle retail was up over 40%, bolstering market share gains with share now over 13%. Our European brands, Aixam and Goupil, both had strong quarters with double-digit growth in sales and gross profit despite meaningful FX headwinds. On-road gross profit margin was up 480 basis points, driven by favorable product mix and higher volumes. We had another strong quarter in Indian Motorcycle and Slingshot.

Improving the profitability of these businesses is a key component of our five-year plan to expand company EBITDA margins to mid to high teens. For the first half of the year, on-road gross profit margins are up over 400 basis points. Moving to our marine segment, results were lower than we were expecting as the industry never fully recovered from a softer start to the selling season. While we believe the pontoon industry was down mid-single digits in the quarter, we have confidence that we gained some modest share in Bennington.

Dealers are telling us that consumers are hesitant to purchase boats due to continued concerns around the economy and higher interest rates. Plus, given healthy inventory levels, dealers are cautious about increasing inventory, given higher prices and floor plan interest rates. Gross profit margin was up 130 basis points with higher net pricing, and we are actively managing our variable costs to protect profits. As the primary selling season concludes in less than a month, we are closely watching inventory levels and talking to dealers to get a pulse on what is ahead for 2024.

We are not expecting any material turnaround in the back half of the year, thus results are likely to be pressured. While an inflection point is hard to peg, we are continuing to invest in innovation and expect to emerge from this current slowdown with a stronger portfolio of boats. Moving to our financial position, we continue to see our balance sheet as a competitive advantage. Cash generation in the first half was strong relative to previous years, and our net leverage ratio continues to be in a healthy spot at 1.5 times.

We repurchased almost 1 million shares during the first half of the year and are well ahead of our target to repurchase 10% of our outstanding shares before the end of 2026. We believe we are set up well for a variety of scenarios in the broader market with our balance sheet and cash generation capabilities in 2023. Now, let us move to guidance and our current expectations for 2023. Given how the first half of the year ended and our assumptions for the remainder of the year, we are adjusting guidance where it makes sense.

Regarding sales, given what we saw in the first half of the year, we feel it is prudent to raise our sales guidance from flat to up 5%, to up 3% to 6%. This increase is driven by the strong performance in off-road and on-road in the first half of the year, as well as narrowing the range with half the year behind us. We expect off-road to be the biggest contributor to our results in the second half of the year following the new products we have launched. Therefore, we are raising our off-road guidance for the year from low to mid single digits, to up high single digits.

We are holding on-road sales guidance at this time to up low single digits, and we are lowering marine sales guidance, given what we have seen thus far this year and expectations for the back half of the year. Marine sales guidance is now down mid-teens from flat sales for the year as we look to match dealer inventory levels and retail. Share gains are expected to continue in the back half of the year, given healthier inventory levels and new product launches. We also believe retail for the industry improved in off-road and, thus, are raising our assumption to call for modestly higher retail for the industry in 2023.

So, given our share gains and updated retail assumptions, we have greater confidence in our ability to outpace industry retail growth this year. Our international and PG&A businesses are expected to be strong contributors to growth this year. Offsetting some of these sales drivers are promotions and the downward revision in our expectations for the marine industry. For gross profit margins, we are holding guidance at 10 to 40 basis points expansion.

Although there are a number of moving pieces and timing impacts in aggregate, this is still where we believe we will land for the year. We have positive momentum with net price and logistics, but there are headwinds such as finance interest expense and warranty costs, all of which we expect to linger in the second half of the year. While improving over 2022, operationally, our plants continue to suffer from elevated production costs associated with component shortages and increased labor costs. The typical start-up inefficiencies associated with launching major new products are also a temporary headwind, particularly in Q3, as we start shipping Polaris XPEDITION and a second new category-defining ORV product.

On EBITDA margins, we are seeing elevated operating expenses that were not accounted for in our guidance. This is primarily driven by product liability litigation and settlement costs as courts continue to catch up on case backlogs and delays driven by COVID closures and higher demand creation spend to support the improved retail and share outlook. You can also see this in our revised outlook for operating expenses. On the flip side, we expect higher income from financial services given that improved retail outlook.

Therefore, we are lowering the top end of our EBITDA margin guidance by 10 basis points to up 20 to 40 basis points. We also narrowed the range for EPS from continuing operations to down 2% to up 3%, from down 3% to up 3%, with most of the potential drop-through from margin expansion being consumed by a higher interest rate expense. For the third quarter, a couple of things to note. We expect retail to be flattish due to pressure and seasonality from on-road and marine.

Recall last year, we had a very strong on-road business in the third quarter as the supply chain recovered, and we were able to ship product and fulfill pre-sold orders. Off-road retail is expected to be up modestly sequentially and up double digits versus the prior year. Margins are expected to be down modestly year over year as we navigate the build of new ORV vehicles this quarter, which, as I mentioned earlier, causes some initial inefficiencies. In addition, we have planned on continued higher labor costs.

These headwinds are partially offset by lower warranty costs as we lap recalls in the prior-year period. We have significant other cost headwinds from higher finance interest, debt interest, and foreign exchange that we expect will persist through the remainder of the year. Operating expenses will be higher in Q3 versus Q4 due to the cost of the dealer and supplier meetings we have next week in Nashville, and the timing of launch expenses for XPEDITION and other new products. Overall, we continue to be on pace for a great year.

Our teams remain focused on delivering strong results, which we have done consistently amid the puts and takes of the broader economy. We are on track to meet our guidance halfway through the year and have raised our outlook for sales while narrowing other metrics. We strive to deliver on our commitments, and we are doing just that with innovation, market share gains, and allocating capital to deliver strong returns. I am proud of what we have accomplished and look forward to what this team can do in the future.

With that, I will turn it back over to Mike to summarize our call today. Go ahead, Mike.

Mike Speetzen -- Chief Executive Officer

Thanks, Bob. We're pleased with the first half of the year and believe it sets us up for a successful second half to gain share and modestly expand margins. While we had estimated industry retail to be flattish this year, the results we saw in the second quarter point to a stronger environment than we had originally expected, and we're cautiously optimistic on retail. You're seeing firsthand why we've been so bullish on innovation with RZR XP and Polaris XPEDITION launches, and we look forward to sharing more with you next week.

It is certainly exciting to see these products come to life, and we're eager to get them in the hands of the best dealers and customers in powersports. While operationally the business is running smoother than the past couple of years, there remain opportunities to address efficiencies within the supply chain and our manufacturing facilities. We're focused on expanding margins and meeting all of our five-year targets. Next week's capital market day is going to be a great opportunity for us to update you on the progress to these targets while laying out what still needs to be done in order to deliver strong returns for shareholders.

We thank you for your continued support, and we look forward to seeing many of you in person in Nashville next week. With that, I'll turn it over to Rocco to open the line up for questions. Rocco?

Questions & Answers:

Operator

[Operator instructions] Today's first question comes from Craig Kennison with Baird. Please go ahead.

Craig Kennison -- Robert W. Baird and Company -- Analyst

Well, hey, good morning. Thanks for taking my question. I wanted to follow up on your Q3 retail guidance of sequentially flat. The math we do internally suggests that's going to be a very significantly positive number on a year-over-year basis.

Bob, I think you said something like up maybe low double digits, but we would get even a stronger number based on how we do that. Just wondering if you can put a finer point on what your expectations are on a year-over-year basis for Q3 retail and what is driving that?

Mike Speetzen -- Chief Executive Officer

Yeah, Craig, thanks for the question. You know, the comps year over year, we got a lot of dynamics that happened both in '22 and '21 in terms of product availability. So, you know, when I look at '22 from Q2 to Q3, our retail had actually dropped sequentially. So, there's an element of the compares when you hold flat this year in terms of 2023, Q2 to Q3.

We continue to baseline back against 2019. And it would say we're going to be relatively flattish relative to 2019 in the third quarter. And it's really being driven by our off-road vehicles. And, you know, one, it's the continued strength we're seeing in the utility market.

Recreation, although weak, you know, relative to where it had been, is still performing slightly better than we had expected. And then, I'll remind you, you know, we've got two new products. And, you know, we've hinted pretty strongly at yet another one to come. And that's going to be, you know, obviously helping us as we get into the third and then into the fourth quarter from a retail perspective because those are entering new market segments.

Craig Kennison -- Robert W. Baird and Company -- Analyst

Got it. Thank you, Mike.

Mike Speetzen -- Chief Executive Officer

Yup.

Operator

And our next question today comes from James Hardiman at Citi. Please go ahead.

James Hardiman -- Citi -- Analyst

Hey, good morning. So, I had a question on margins I wanted to dig into and then a question on inventories. A lot of moving pieces on margins. Maybe if you could quantify a couple of the things that you called out.

I think you said production inefficiencies a lot during the prepared remarks. Any quantification of how big you think that impact is? It doesn't sound like you think those are going to go away during the back half. But just trying to get a feel for sort of maybe what the opportunity is once those clear up. And then, a similar question on the opex side, you called out labor, warranty, litigation costs.

Any quantification there would be great.

Bob Mack -- Chief Financial Officer

Hey, James, it's Bob. So, a couple of things. I think on the cost side, you know, there's positives and negatives, right? We're seeing great progress on some of the ocean freight items. And we're seeing some stability on the labor side in terms of just people and being able to retain -- recruit and retain people.

That's improved the last several weeks. Where the challenge lies really is just getting the plants, you know, back to their more normal operating cadence as, you know, as we come out of COVID and as the rework starts to diminish. We still do have some parts shortages with some key suppliers. So, we're not 100% out of the woods there.

I think that feels like it's getting better sequentially month over month and quarter over quarter. But there's work to do to just get the inefficiencies out of the plants, some of the excess labor, some of the excess warehousing, you know, that's accumulated through the course of COVID. So, you know, in terms of dollars, you know, I think as you look at the second half of the year, you know, it's, you know, in the 40-plus million dollar range in terms of the headwind. On the opex side, you know, not as big of an issue.

The legal costs really are -- it's not so much that they're different relative to last year. It's more of a -- as we thought about laying out guidance, you know, we've got more cases coming through in the year in terms of things kind of hitting the court dockets than we had anticipated when the year started. That's not necessarily a bad thing. It's just the kind of natural unwinding of the court systems being closed during COVID.

You know, we feel good about where we are in terms of, you know, stability going forward on product liability. So, this is really just a catch-up of things that were sort of stuck in the system during COVID.

Mike Speetzen -- Chief Executive Officer

Yeah, James, and I'll just give you a little color. I mean, you know, I mentioned it in my prepared remarks around wiring harnesses. You know, when you look at -- you know, we had the same discussion with some of our dealers that we were out meeting with about a month ago. You know, when you look at the quarter, it looks pretty good.

We got the units out, but the reality of how we got them out still doesn't have the level of finesse that, you know, we've exhibited in the past. Our rework is down from where it's been the last couple of years, but it's still up significantly from where it was before the pandemic disrupted the supply chain. And for us, the wire harness issue is pretty significant from the standpoint of you can't really start the vehicle until you have that wire harness set up and ready to go. Now, the good news is that we've been working with our supplier that's caused the disruption.

We've seen significant sequential improvement. They continue to get better every day. And so, you know, we anticipate that headwind starting to dissipate. The issue is we still got to get caught up.

And so, we're working with the supplier to make sure that they're building an adequate of safety stock. But what that does is that creates a lot of inefficiency from a labor standpoint, and we're working to make sure that, you know, we're spending what we need to get the vehicles out because the demand level is there, the dealers need the vehicles, the customers want them. And, you know, as we indicated, it should start to get better sequentially. But relative to what we originally thought for the year, it's still going to be higher in the second half.

James Hardiman -- Citi -- Analyst

That is really great color. And then, I guess secondly here, as we think about inventories and ultimately shipments, we're about to lapse a period from a year ago where there was significant replenishment. Based on the numbers you gave us, I think it was 350 million in the third quarter and another maybe 250 million in 4Q, I feel like the answer to that question for some time has been sort of some of this new white space products that you haven't been allowed to talk about. But maybe now you are.

I guess the question is, could that -- namely XPEDITION, and I think you teased another sort of game-changing ORV product, could that fill that gap of replenishment from a year ago? Or is that still going to ultimately create somewhat of a bad guy as we think about the second half?

Mike Speetzen -- Chief Executive Officer

Yeah, so James, if you think about the second half of the year versus '22, you know, to your point, we had channel refill last year in the second half, which was about 600 million. You know, the offset to that in 2023 is, you know, is about 75% of it is new products. And that's the XPEDITION. The XP, you know, they're still you know selling on the XP that we launched a few months, the RZR, and then some other products that you'll see next week at the dealer meeting.

And then, there's also -- keep in mind, there's about $100 million worth of snowmobiles, additional in second half of the year, primarily in Q3. Versus 2022 -- if you remember, 2022, we really struggled to get snowmobiles out in time for snow season, and we shipped a lot of stuff in Q1 of '23. We don't intend to repeat that in '23. So, snow will go out in a more normal cadence in Q3, Q4, and so that's got an impact as well.

James Hardiman -- Citi -- Analyst

That's really helpful color. Thanks, guys.

Mike Speetzen -- Chief Executive Officer

Yup.

Operator

And our next question today comes from Noah Zatzkin with KeyBank Capital Markets. Please go ahead.

Noah Zatzkin -- KeyBanc Capital Markets -- Analyst

Hi. Thanks for taking my questions. Just one for me on the marine side. Obviously, top-line softer, called out challenges, you know, in the marine channel, but you guys were able to expand gross margins.

So, if you could just talk about, you know, some of the levers you pulled there and how you're thinking about margins on the marine side for the rest of the year, that would be helpful. Thanks.

Mike Speetzen -- Chief Executive Officer

Yeah, I think, you know, marine this year, we had good, you know, not what we had expected, but not really bad shipments in the first half of the year. We had good solid mix with some mix to higher-end boats, which helped us with margin expansion and then just, you know, some of the efforts we've had to continue to lean out the factories and bring some automation to the marine industry. Some of that you'll hear about at capital markets day to help drive better margins in the first half of the year. I think second half of the year, you know, with revenue being down, margins certainly will be challenged.

It is a very much a variable cost business. Labor's very flexible in Elkhart. And so, you know, we've adjusted our production schedules for what we think we're going to see in terms of retail and dealer inventory. Obviously, boat info came out yesterday, so everybody's still digesting that, but, you know, we did see some share gains on the Bennington side, which is important for us.

It's our biggest brand. You know, it's tough to say what it's going to look like in the back half of the year, but we're preparing for it to be soft. And as I said in my remarks, it's hard to kind of say exactly when that turns. And well, better sense as we get through our dealer meetings here in early August.

but we're prepared to take the necessary actions to try to protect margins in the second half.

Noah Zatzkin -- KeyBanc Capital Markets -- Analyst

Thank you.

Operator

Thank you. And our next question today comes from Fred Wightman with Wolfe Research. Please go ahead.

Fred Wightman -- Wolfe Research -- Analyst

Hey guys, good morning. You mentioned that dealer inventories are near optimal levels, and you also alluded to some elevated products at your competitors, particularly in the lower-entry level side of the business. So, can you sort of talk about how you think the RFM program's holding up, given all the moving pieces, from a year-over-year perspective, from a seasonality perspective, and then just the competitive dynamics?

Bob Mack -- Chief Financial Officer

Yeah, I mean, you know, overall, Fred, we, you know, spent time with the dealers that I referenced in my prepared remarks. And, you know, the feedback by and large was incredibly positive. A number of the dealers remarked that they felt we were doing a better job than most of getting product into the channel. And from an RFM standpoint, you know, the signals that we're getting is they retail unit, and being able to move forward with getting a unit ship to replenish that is working well.

Now, I'll caveat that with, you know, we're still struggling on the high end of the business. That's where we tend to have a higher-part content in the vehicles. So, any type of supplier disruption is going to delay delivery. And you can see that playing out probably largely.

The largest one you'll hear from the dealers is the NorthStar deliveries. You know, that super premium segment has become a larger and larger portion of the RANGER business. So, that has an obviously larger and larger impact. So, it's an area that we've got a heavy amount of focus on.

The other thing that you have to keep in mind is even though, you know, our inventory is down pretty substantial from where it was in 2019, the ASPs on these vehicles is up. And so, you know, when you combine that with the higher interest rates, you know, the dealers are definitely feeling it from a flooring standpoint. And then, it gets compounded where they have some of these lower end OEMs that, you know, really induced truck load buys and things like that, that the dealers are still trying to digest. And the issue is that the low end of the market is where there's the softest level of customer volume.

And so, you know, we heard that they're doing a lot in terms of trying to move discounting and trying to do everything they can to move those units, but I think they're, by and large, pretty frustrated with the lack of sophistication at that end of the market. And, you know, the higher interest rates and the low consumer demand is compounding that. So, you know, we're focused on doing what we can to get the high-end products into the hands of the dealers. We saw a pretty significant improvement in our ability to get RANGER NorthStar, and that's going to continue to improve as we get through the back half of the year.

Fred Wightman -- Wolfe Research -- Analyst

Makes sense. And then, just quickly on the cadence, I know you guys were expecting sort of 40-60, first half-back half. It looks like it's maybe a little closer to 50-50. Was there a pull-forward? Or are you just more conservative on the back half? Like, where was the biggest change?

Bob Mack -- Chief Financial Officer

Yeah, you know, I wouldn't say there was so much of a pull-forward in terms of revenues and shipments. You know, some of the mix was pretty favorable in the first half. You know, we did a better job of getting some of those higher-end vehicles Mike was just talking about out in the half. And, you know, net price promo was decent.

So, you know, just a little bit better financial results, more than a pull-forward.

Fred Wightman -- Wolfe Research -- Analyst

Great. Thanks, Bob.

Operator

Thank you. And our next question today comes from Joe Altobello with Raymond James. Please go ahead.

Joe Altobello -- Raymond James -- Analyst

Thanks. Hey, guys. Good morning. I guess, first question, maybe a little color on what drove the improvement in rec ORV demand in the quarter, maybe also the massive share gains that you guys saw at Indian.

Mike Speetzen -- Chief Executive Officer

Yeah, I mean, on the rec side, we saw strength -- continued strengthen our general, you know, the crossover category. The high end of the RZR category continues to be strong, and our delivery is improved as we work through some of the overhang from the recalls that we had relative to the fuel tanks late last year and into the first part of this year as we got the rework completed on those. So, you know, I think, you know, we're not seeing a significant change at the low to mid range of the market. I think it's -- the crossover category continue to hold up strong.

And again, I think some of that is because those vehicles are used for a multitude of things and that, you know, there's an element of that crosses more into that utility space in terms of those vehicles being handy around multi-acre homeowner property. And then, obviously, the high end of our categories pretty much across the board has been holding up strong, given employment levels remain favorable and, you know, income levels are strong.

Bob Mack -- Chief Financial Officer

Yeah, on the Indian side, we saw really good growth in both heavyweight and midsize, but midsize had the greater growth in the first half of the year. And it's a mix of -- you know, last year we had the problems with black-painted parts. And so, that inhibited dealer inventory, midsize tends to be more of an impulse purchase, new buyer, first-time buyer. And we get inventory midsize in the dealers first half of the year in the prime selling season, and that helped with the Indian growth.

Joe Altobello -- Raymond James -- Analyst

Got it, helpful. Maybe just a follow-up, in terms of the margin progression that you guys are talking about over the next several years, you'll probably address this next week, but how do you see that ramp looking like? Is that more of a back-end weighted margin improvement? Or is there some to come in '24?

Bob Mack -- Chief Financial Officer

I think there's some -- you know, we will talk about it next week, but, you know, we're -- we continue to drive both short-term and long-term activities that will improve margins. You know, we've got some headwinds. You know, obviously, FX has moved quite a bit since we set those targets, but we're working to overcome that and we're not changing our targets. But, you know, there's some near-term operational things as we continue to work through just the inefficiencies in the factories and get back on track and get that price-cost ratio correct.

We had a good year with Indian and Slingshot, and those profitability improvements really helped total company profitability. So, that's kind of the near-term stuff. And then, we'll talk about some longer-term things around factories and product design at capital markets day.

Mike Speetzen -- Chief Executive Officer

Yeah, I mean, Joe, when you think about foreign exchange, that hit us really hard. So, obviously, you assume foreign exchange kind of holds where it is today. And as you get out over the next couple of years, that impact gets more and more muted. But it's far more pronounced, you know, for the first half of the year.

It was just shy of a point of GP impact. So, you know, like Bob said, we're working to overcome that. It's overshadowing some of the good work we have. And then, clearly, as we get our factories running more efficiently, as the suppliers start to deliver at a stronger cadence, we'll obviously be able to work a lot of that cost out of the factory.

So, we're pretty optimistic about where we stand, and we'll have more to show you next week.

Joe Altobello -- Raymond James -- Analyst

Sounds good. Thanks, guys.

Operator

And our next question today comes from Robin Farley with UBS. Please go ahead.

Arpine Kocharyan -- UBS -- Analyst

Thank you. This is actually Arpine for Robin. Could we go back to July trends for a second? You talked about retail strength in Q2 or June having continued into July. Would that mean for ORV up so far year over year in July? And then, it seems you expected a share gainer in the back half and full year in ORV and outpace the industry, which it seems you're guiding up slightly.

Does that mean ORV retail for full year is up better than low single digits? I guess, what's the extent of that up guidance for ORV on a full year basis? And then, I have a quick follow-up.

Mike Speetzen -- Chief Executive Officer

Yeah. I mean, I guess the way I would characterize it in July, you know, we've continued to see strength in ORV, which would have us up not only versus last year, but up versus '19. For the marine segment, obviously, you know, we're continuing to see that be soft and on-road is just at its normal, starting to slow down from a seasonality standpoint. So, everything seems to be playing out pretty consistent.

You know, I think the simple answer is yes, we expect off-road to be up. We expect to gain share. The thing to keep in mind is, you know, we're adding in several new products that, you know, are new either replacement, strong replacement products like the RZR XP or category-defining like Polaris XPEDITION and the to-be-yet announced product that we've referenced a number of times. So, that's obviously going to drive incremental retail and so that's what we see driving the strength in our off-road segment.

Arpine Kocharyan -- UBS -- Analyst

Thank you. And in terms of lower-end OEM inventory, a dealer that you talked about, you know, one of the key feedbacks from dealers we talked is seems to be the profitability of those units versus Polaris. How do you think about that competitively sort of longer term, as we think about lower-end OEMs?

Mike Speetzen -- Chief Executive Officer

Well, I mean, I think they were able to get profitability because the lower-end guys were able to ship when we and the rest of the, I'll call it, mid to high end of the segment were not. And I would think that as you're talking to dealers, because I know I heard this a month ago, that margin dynamic is changing pretty significantly. They're paying a lot of interest on those units. They're moving really slow, and they're having to do a lot of discounting.

So, you know, we're confident with where we're at. You know, it doesn't mean that we're done continuing to look at, you know, the value and entry side of our business. We know that it's important in terms of bringing customers into the brand. And, you know, we're pretty confident with the product lineup we have and how competitive we are as we move forward.

Arpine Kocharyan -- UBS -- Analyst

Great. Thank you. And I'm sorry, one more clarification question, if I may. In terms of the production and efficiencies that you mentioned in off-road, could you quantify the impact of that and how temporary that is in terms of impacting margin?

Bob Mack -- Chief Financial Officer

Yeah, I think I answered that. We, it's about $40 million in the second half.

Arpine Kocharyan -- UBS -- Analyst

In the second half, OK, not on a full year basis. OK, thank you.

Mike Speetzen -- Chief Executive Officer

Thanks.

Operator

Thank you. And our next question today comes from Tristan Thomas-Martin with BMO Capital Markets. Please go ahead.

Tristan Thomas -- BMO Capital Markets -- Analyst

Hey, good morning. Just the 40 million, did you also say there was a one point of margin impact in the first half? So then, if I add it up, it's about 75 million full year impact. Is that right, or am I incorrect there?

Bob Mack -- Chief Financial Officer

Mike said there was one-point impact from FX in the first half.

Mike Speetzen -- Chief Executive Officer

Yeah, just under one.

Tristan Thomas -- BMO Capital Markets -- Analyst

OK. Got it. So, then the 40 was -- how much is the margin impact in the first half then? Likewise, is that 40 million --

Mike Speetzen -- Chief Executive Officer

It's not really -- it's not a huge impact in the first half because we'd assume that that inefficiency was there. It was really the improvement that we were expecting into the back half that's not materializing at the same rate we had expected, which is largely driven by the fact that our rework levels continue to be high. And as I mentioned, you know, we're seeing progress sequentially, primarily around that one supplier that I had mentioned. But, you know, that obviously we have to continue to see that momentum.

And we'll see improvements sequentially, but it's just not going to be at the same level that we had anticipated when we came out with guidance earlier this year.

Bob Mack -- Chief Financial Officer

Right. So, just to be clear, we are improving -- we have improved significantly versus 2022. We're just not seeing as much improvement in the back half of the year relative to where we thought we'd be when we did guidance.

Tristan Thomas -- BMO Capital Markets -- Analyst

OK, got it. And then, one more question. Can you break out any marine retail trends you're seeing at kind of the various price points?

Bob Mack -- Chief Financial Officer

Yeah, you know, through the first half of the year, I would say the higher-end products were really strong. As marine went into the selling season, and I haven't had a chance to go through the marine data, the SSI data that came out yesterday in a tremendous amount of detail. But what we saw so far in the kind of May-June timeframe was that some of the smaller boats were starting to come back stronger from a retail perspective or perform stronger from a retail perspective, which, I think, probably lends credence to the concern we're hearing from dealers is that it's just the high finance rates, given the longer tenures of boat loans and the higher cost of boats relative to some of the other products we sell that those finance rates are kind of biting more in marine, which would drive consumers probably toward the smaller-length sizes, just the cheaper boat less to finance. So, that's the only dynamic we've really seen that's changed a little bit in the last couple of months.

Tristan Thomas -- BMO Capital Markets -- Analyst

OK. Thank you.

Operator

Thank you. And our next question today comes from Dave MacGregor at Longbow Research. Please go ahead.

Dave MacGregor -- Longbow Research -- Analyst

Yes. Good morning, everyone. Mike, I wanted to ask you about recreational ORV. You noted the softer sales patterns in the low and medium segment of the line.

Is there less consumer interest, which I would guess would be reflected in lead generation, or are we just seeing credit constraints at work here?

Mike Speetzen -- Chief Executive Officer

No, actually the lead generation is very strong, both the organic and inorganic. I think there's two things driving the hesitation. One is starting to abate as the talk or the rhetoric around inflation probability starts to soften because I think, you know, it is a discretionary purchase. And when people are hearing the word recession thrown around every 15 seconds, that does cause a little bit of a pause.

So, that's number one. Number two is interest rates. You know, buyers at the low to mid range on that rec side are heavy financers. And the rates have moved up.

We are continuing to evaluate. You know, if you look at our promo spend, a good portion of it is directed at buying rates down. I would suspect we'll continue to be aggressive in that area. I think there's probably more that we'll talk about at the dealer meeting next week.

But that's the area we see the greatest opportunity to help consumers get over the bubble relative to the rates that, you know, just a year and a half ago that they were able to finance at. They're higher. And, you know, even though it's not a tremendous impact on the payment, it's still a little bit of a shock when the buyer gets into the showroom floor. So, you know, I think with hopefully what sounds like good news on the economic, broader economic front, I hope that starts to at least take some of the pressure.

And if we get a little bit of stability coming out of the Fed, where people feel less and less concerned about where the interest rates are headed, that could work in our favor, and we're certainly going to steer a promotion to make sure we're able to help consumers out.

Dave MacGregor -- Longbow Research -- Analyst

All right. Thanks for that. And the second question for me, just on promotions, how are you seeing consumers responding differently to promotions in, say, on-road versus off-road? Is there a notable difference there?

Bob Mack -- Chief Financial Officer

I don't think there's a notable difference. As Mike said, I think promo is starting to lean a little bit more toward finance promo and buying down rates than rebate offers. But I don't think we're seeing different consumer behavior on either side. I would say the one difference in on-road and off-road is that, you know, trade-ins play a bigger factor in on-road.

And so, you know, you still encounter some people that are that are upside down and stuff that they bought during the pandemic, you know, paying full retail plus dealer fees and things like that. I would say those stories, though, are a bit more -- you know, they're one-offs. They're not a huge driver, but the trade-ins has more of an impact in on-road.

Mike Speetzen -- Chief Executive Officer

I would -- you know, David, what I'd say is our behavior is continuing to evolve. You know, we're, I think, doing a better and better job of being far more directed at where we're spending money. You know, being -- we're doing tests to see if discounts versus buy-down of rates works. And, you know, we've spent a lot of money, over the past, several years in our, you know, CRM capability.

And so we're able to pinpoint and target customers far greater than we used to. So, doing targeted offers where we have a consumer who hasn't upgraded their machine in a while, rather than making a broad promo offer to a category where we're not going to induce maybe somebody new to come in. We're doing a lot more of that type of work. So, I think we're using the money better.

As a percentage of MSRP, promos are still down relative to where they were historically, which I think is a good thing, especially given how much we're having to push toward supplementing high interest rates right now.

Dave MacGregor -- Longbow Research -- Analyst

Got it. Thanks very much. See you next week.

Mike Speetzen -- Chief Executive Officer

See you next week.

Operator

And our next question today comes from Jaime Katz with Morningstar. Please go ahead.

Jaime Katz -- Morgan Stanley -- Analyst

Hey, guys. Good morning. I just want to touch on something that we haven't talked about in a while, which I guess is the direction of the EV business. Sort of how is the adoption of that going? What is the consumer interest? And, you know, how do you see that product line up evolving over time?

Mike Speetzen -- Chief Executive Officer

The receptivity is incredibly strong. We started delivering the XP Kinetic. Customer feedback has -- you know, obviously we've been staying very close to the customer, given not only that that's a new product, but given the category that it's in. Feedback has been incredibly strong.

I'd encourage you to go out, and there's a number of different independent reviews that were done that probably are some of the best reviews we've gotten. We're in the process of evaluating, opening up a second ordering window. We do know from talking with dealers that the consumer demand is very strong. We knew that we were oversubscribed when we came out with the first allotment.

So, we anticipate that when we open up the second order window, probably not in the too distant future, that, you know, we're going to see pretty strong demand. You know, I would anticipate that we're going to continue to focus in on this utility segment. It's proven to be the area that we need to focus in on. And so, we'll continue to evolve in that category, centered around the RANGER vehicle.

And obviously, given our other product lineup, you can kind of anticipate where that means we're going to go with the next vehicles we come out with. OK.

Jaime Katz -- Morgan Stanley -- Analyst

The other question I have is on snowmobiles. And I guess, you know, Yamaha has recently announced that it will be exiting the marketing. And although it has a pretty small market share presence at this point in time, is there any reason you guys wouldn't go after sort of their consumer base to incrementally bolster market share? Or is that something that could provide a little bit of lift over the next year or two?

Mike Speetzen -- Chief Executive Officer

Yeah, I mean, it'll certainly provide a lift. But, you know, we We're going to be talking to our board about it just, you know, given the recent -- recency of the news. They are such a tiny player in the market. There are broader implications to one of the other competitors as well, just given the relationship that they have.

So, we'll continue to watch it. You know, it's going to take a couple of years for them to phase out. I'm probably more excited about the direction that we're taking with our business. We had a great dealer meeting, where we talked a lot about the changes that we're making in the business, renewed focus around quality and simplification.

The team's done a great job of making sure that we're in a position to deliver the sleds to consumers ahead of the season. You know, we put a pretty big incentive on the back of that to prove how serious we were about it, and the team's living up to that commitment. And I'm really excited about what we have to offer. So, I think we're going to be in a great spot, regardless of what Yamaha does.

Jaime Katz -- Morgan Stanley -- Analyst

Great, thank you.

Operator

Thank you. And our next question today comes from Xian Siew with BNP Paribas. Please go ahead.

Xian Siew -- Exane BNP Paribas -- Analyst

Hi, guys. Thanks for the question. You mentioned the inventory's near optimal levels. I guess, I just want to clarify.

Are you thinking about that in terms of absolute units or relative to the 2019? I guess what I'm thinking is, in the slides, I think it's number six, you show how historically dealer inventory destocks in Q3. So, from here, do we expect a similar historical destock? Or is it units are holding from here?

Mike Speetzen -- Chief Executive Officer

Well, I mean, overall we're looking at unit. That's how we look at the dealer inventory measurement by category and by region. You know, the tough part is dealer inventory and on aggregate level, there's a lot going on in there. So, you know, we've got a couple of areas where, you know, the financing interest focus is probably going to be renewed as we move into the back half because the inventory is probably a little bit heavier than we'd like.

That said, we're still way below where we'd want to be on the premium utility side, the NorthStar, for example. And so, we'll continue to make sure we're rebalancing that. And then, you know, the inventory for the most part will follow a normal cyclical pattern, with the exception of we've got these new vehicles coming in to the market. You know, we obviously started delivering here in Q2, but there's going to be heavy deliveries as we get into Q3 and Q4.

We do anticipate a good portion of that's going to retail, obviously, but we're making sure that we're getting dealers stocked with those units, given that they are new category-defining vehicles.

Xian Siew -- Exane BNP Paribas -- Analyst

OK, very helpful, thanks. And maybe just to follow up, I think you mentioned, versus 2019, retail, you're expecting 3Q to be flat. Did I hear that correctly? Because I think 2Q was down like 5% -- I guess it's ORV, but down 5% versus 2019. So, is it kind of underlying improvement?

Bob Mack -- Chief Financial Officer

Yeah, I mean, as we, you know, we looked at 2022, even when we started the year, we thought we'd be relatively flat to '22. We think we'll be -- we think the industry will be better than that. And then, we'll continue to take share. '22 was about 10% below 2019.

And so, assuming that all comes to play in the second half of the year, we think for the year, the industry will be relatively flat to '19, and we'll take some share.

Xian Siew -- Exane BNP Paribas -- Analyst

OK, got it. Very helpful. Thanks.

Operator

And the next question today comes from Brandon Rolle with D.A. Davidson. Please go ahead.

Brandon Rolle -- D.A. Davidson -- Analyst

Good morning. Thank you for taking my couple questions. Just briefly on the on-road business clarification, did you say you expect a whole share in the back half of the year? 

Mike Speetzen -- Chief Executive Officer

Yes.

Brandon Rolle -- D.A. Davidson -- Analyst

OK. And obviously you guys gained some strong market share during 2Q, but what do you expect changes maybe in 3Q and 4Q or is it just a function of the better channel fill year over year in 2Q?

Mike Speetzen -- Chief Executive Officer

Well, I think it's better channel fill, obviously, made a difference in Q2. But I mean, we're going to move into more normal seasonality as we get into the back half. And at this point, you know, we're not expecting -- obviously, internally, we're going to target to continue caning share. But if you do the year-over-year comparisons that first half of last year for that business was the most challenged, given the black paint issue that we had.

And so, we just don't see those dynamics necessarily playing out as much as we move into the back half.

Brandon Rolle -- D.A. Davidson -- Analyst

OK, great. And just following up on that, just looking at the motorcycle industry as a whole, I know there's a view of the industry's in secular decline. Do you see that based on the underlying demand you're seeing in the market right now? Or any concerns about that materializing?

Mike Speetzen -- Chief Executive Officer

No, that's not necessarily what we're seeing. I mean, I think, you know, there's obviously one particular player that has such a large market share that moves things around. But we continue to see a tremendous amount of excitement around the various platforms that we have, and we're optimistic about what that means for the future of the business.

Brandon Rolle -- D.A. Davidson -- Analyst

OK. Great. Well, thank you so much.

Operator

The next question today comes from Scott Stember with ROTH MKM. Please go ahead.

Scott Stember -- ROTH MKM -- Analyst

Good morning, and thanks for taking my questions.

Mike Speetzen -- Chief Executive Officer

Good morning.

Scott Stember -- ROTH MKM -- Analyst

Mike, in the past you've said that PG&A could be considered a, I guess, the canary in the coal mine if there was anything to worry about. Maybe just talk about PG&A maybe by segment and by price point. Just trying to see how elastic things really are as you go down the food chain.

Mike Speetzen -- Chief Executive Officer

Yeah, I mean, you know the PG&A performance overall has continued to hold up. I mean, you know, the thing to keep in mind is, you know, we have increased the content on our off-road vehicles substantially. And a good portion of that is through what we call factory install, meaning that the vehicles are coming out with more and more accessories on them. You know, if you look at the RZR XP, you look at the Polaris XPEDITION, you look at the new vehicle that we'll be talking about next week, number one, they're coming with higher and higher accessory offerings, and they're coming with more and more factory install options.

And so, we continue to see that level increasing. You know, overall, we continue to see the PG&A markers that we watch, things like repair activity continue to hold up. We do know that the average miles that people are driving off-road vehicles is down a little bit year over year. But that doesn't necessarily point to anything other than, you know, folks -- as people are going back to the office and spending more time in the office probably aren't putting as many miles on.

But repair activity continues to hold up. Parts sales remain strong. And at this point, we don't see anything out there that has us overly concerned.

Scott Stember -- ROTH MKM -- Analyst

All right, and last question, just going back to the commentary about ORV and the production inefficiencies. If I heard correct, you pretty much were just saying that you are, at this point, for the back half of the year, and probably the full year, about $40 million lower than you originally expected of savings, right, or of abatement compared to what you thought at the end of the first quarter, is that correct?

Bob Mack -- Chief Financial Officer

Yeah, I mean, I think, you know, rough math, that's a good proxy to use. You know, like we said, we started the year expecting declines on a year-over-year basis in terms of the cost premiums and excess costs we were paying, We are seeing declines. We're just not seeing them at the rate that we had originally forecasted. And, you know, given that we kind of sloped it into the year, the impact is more noticeable in the second half than the first.

Scott Stember -- ROTH MKM -- Analyst

Got it. That's all I have. Thank you.

Mike Speetzen -- Chief Executive Officer

Thanks, Scott.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

J.C. Weigelt -- Vice President, Investor Relations

Mike Speetzen -- Chief Executive Officer

Bob Mack -- Chief Financial Officer

Craig Kennison -- Robert W. Baird and Company -- Analyst

James Hardiman -- Citi -- Analyst

Noah Zatzkin -- KeyBanc Capital Markets -- Analyst

Fred Wightman -- Wolfe Research -- Analyst

Joe Altobello -- Raymond James -- Analyst

Arpine Kocharyan -- UBS -- Analyst

Tristan Thomas -- BMO Capital Markets -- Analyst

Dave MacGregor -- Longbow Research -- Analyst

Jaime Katz -- Morgan Stanley -- Analyst

Xian Siew -- Exane BNP Paribas -- Analyst

Brandon Rolle -- D.A. Davidson -- Analyst

Scott Stember -- ROTH MKM -- Analyst

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