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.