[Financial and Operational Highlights](index=1&type=section&id=FINANCIAL%20AND%20OPERATIONAL%20HIGHLIGHTS) Polaris reported significant Q1 2024 financial declines, gaining market share in some segments despite overall market challenges [Key Financial Data](index=1&type=section&id=KEY%20FINANCIAL%20DATA) Polaris's Q1 2024 reported and adjusted financial performance saw significant year-over-year declines across key metrics Q1 2024 Key Financial Data (Reported and Adjusted) | (in millions, except per share data) | Reported Q1 2024 | YoY % Change | Adjusted Q1 2024 | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Sales | $1,736.4 | (20)% | $1,736.4 | (20)% | | Gross profit margin | 19.0 % | -250 bps | 19.0 % | -248 bps | | Total operating expenses | $313.2 | (4)% | | | | Net income attributable to Polaris | $3.8 | (97)% | $13.0 | (89)% | | Net income attributable to Polaris margin | 0.2 % | -499 bps | | | | Adjusted EBITDA Margin* | | | 6.3 % | -459 bps | | Diluted EPS attributable to Polaris | $0.07 | (96)% | $0.23 | (89)% | [CEO Commentary](index=1&type=section&id=CEO%20COMMENTARY) CEO Mike Speetzen noted Q1 sales met expectations, adjusted EPS exceeded plans, and market share grew in ORV, motorcycle, and marine segments - First-quarter sales performance met expectations, with **adjusted EPS** exceeding plans, and **market share gains** achieved in **ORV**, **motorcycle**, and **marine segments**, driven by new product launches like RANGER and Indian Scout series[3](index=3&type=chunk) - Off-road vehicle business remained strong, but snow products faced challenges due to poor winter conditions, and trends in more recreational categories continued to be soft[3](index=3&type=chunk) - The company will continue to focus on solid execution throughout the year, including managing dealer inventory, meeting customer demand, driving ongoing operational improvements, and delivering profitable growth amidst an uncertain macro environment[3](index=3&type=chunk) [Performance Summary (Reported)](index=1&type=section&id=PERFORMANCE%20SUMMARY%20%28Reported%29) Polaris's Q1 2024 global sales and net income significantly declined, with North America sales falling more sharply than international sales [Overall Company Performance](index=1&type=section&id=Overall%20Company%20Performance) Polaris's Q1 2024 global sales decreased by 20% to $1.736 billion, with net income attributable to Polaris falling 97% to $4 million Q1 2024 Sales Performance | Metric | Q1 2024 Sales (Millions) | YoY Change | Share of Total Sales | | :--- | :--- | :--- | :--- | | Worldwide Sales | $1,736 | (20)% | 100% | | North America Sales | $1,444 | (22)% | 83% | | International Sales | $292 | (13)% | 17% | Q1 2024 Net Income and EPS (Reported) | Metric | Q1 2024 | YoY Change | | :--- | :--- | :--- | | Net income attributable to Polaris | $4 million | (97)% | | Diluted EPS attributable to Polaris | $0.07 | (96)% | [Key Factors Affecting Sales & EPS](index=1&type=section&id=Key%20Factors%20Affecting%20Sales%20%26%20EPS) Q1 2024 sales declined primarily due to lower volume and increased promotional activity, partially offset by a favorable product mix, leading to significant drops in adjusted net income and EPS - The primary factors impacting first-quarter sales were lower volume and decreased net pricing due to increased promotional spending, partially offset by a positive product mix[6](index=6&type=chunk) Q1 2024 Adjusted Net Income and EPS | Metric | Q1 2024 | YoY Change | | :--- | :--- | :--- | | Adjusted net income attributable to Polaris | $13 million | (89)% | | Adjusted diluted EPS attributable to Polaris | $0.23 | (89)% | [Market Share & Retail Sales](index=1&type=section&id=Market%20Share%20%26%20Retail%20Sales) Polaris gained market share in ORV, motorcycle, and marine segments in Q1, with powersports retail sales down 10% overall but up 3% excluding snow products - Market share increased in **Off-Road Vehicles (ORV)**, **motorcycles**, and **marine products** during the first quarter[6](index=6&type=chunk) - Powersports retail sales decreased by **10% year-over-year** this quarter, primarily due to a decline in snow products; excluding snow products, retail sales increased by **3%**[6](index=6&type=chunk) - Polaris North America ORV unit retail sales increased by **3%**, outperforming the estimated low-single-digit growth in the North America ORV industry[12](index=12&type=chunk) [Gross Profit Margin & Operating Expenses](index=2&type=section&id=Gross%20Profit%20Margin%20%26%20Operating%20Expenses) Q1 2024 gross profit margin decreased by 250 basis points to 19.0% due to increased promotions and warranty costs, while total operating expenses decreased 4% but rose as a percentage of sales Q1 2024 Gross Profit Margin | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Reported Gross profit margin | 19.0% | 21.5% | -250 bps | | Adjusted Gross profit margin | 19.0% | 21.48% | -248 bps | - The decline in gross profit margin was primarily driven by increased promotional activity and higher warranty costs, partially offset by favorable operating costs[8](index=8&type=chunk) Q1 2024 Operating Expenses | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | Change | | :--- | :--- | :--- | :--- | | Total operating expenses | $313.2 | $324.9 | (4)% | | Operating expenses as % of sales | 18.0% | 14.9% | +314 bps | [Segment Highlights (Reported)](index=2&type=section&id=SEGMENT%20HIGHLIGHTS%20%28Reported%29) Polaris's segments experienced varied performance in Q1 2024, with significant sales declines in Off-Road and Marine, while On-Road sales also decreased but improved gross margin [Off Road Segment](index=2&type=section&id=Off%20Road%20Segment) The Off Road segment's sales decreased by 16% to $1.3357 billion, with gross profit margin falling 339 basis points to 17.4%, driven by lower volumes and increased promotions Off Road Segment Performance (Q1 2024) | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | Change | | :--- | :--- | :--- | :--- | | Sales | $1,335.7 | $1,591.8 | (16)% | | Gross Profit Margin | 17.4% | 20.8% | -339 bps | - Sales were driven by lower snow and off-road vehicle volumes, partially offset by a **5% increase** in Parts, Garments, & Accessories (PG&A) sales[12](index=12&type=chunk) - Gross profit margin performance was driven by decreased net pricing due to increased promotional activity and higher warranty costs, partially offset by operating improvements[12](index=12&type=chunk) [On Road Segment](index=2&type=section&id=On%20Road%20Segment) The On Road segment's sales decreased by 14% to $277.2 million, but gross profit margin improved by 41 basis points to 21.8%, despite lower volumes and PG&A sales On Road Segment Performance (Q1 2024) | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | Change | | :--- | :--- | :--- | :--- | | Sales | $277.2 | $323.5 | (14)% | | Gross Profit Margin | 21.8% | 21.4% | +41 bps | - Sales were driven by lower volume, with PG&A sales decreasing by **8%**[12](index=12&type=chunk) - Gross profit margin performance was driven by a favorable product mix, partially offset by higher warranty costs and decreased net pricing due to increased promotional activity[12](index=12&type=chunk) - Indian Motorcycle North America unit retail sales achieved low-double-digit growth, outperforming the comparable motorcycle industry's low-single-digit growth[12](index=12&type=chunk) [Marine Segment](index=2&type=section&id=Marine%20Segment) The Marine segment's sales significantly declined by 53% to $123.5 million, with gross profit margin decreasing by 776 basis points to 15.5%, primarily due to lower volumes and net pricing Marine Segment Performance (Q1 2024) | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | Change | | :--- | :--- | :--- | :--- | | Sales | $123.5 | $264.4 | (53)% | | Gross Profit Margin | 15.5% | 23.3% | -776 bps | - Sales performance was driven by lower volume[12](index=12&type=chunk) - Gross profit margin performance was impacted by lower sales volume and decreased net pricing[12](index=12&type=chunk) [2024 Business Outlook](index=2&type=section&id=2024%20BUSINESS%20OUTLOOK) Polaris reaffirms its full-year 2024 guidance, expecting total company sales to decline by 5% to 7% and adjusted diluted EPS to decrease by 10% to 15% [Full Year Guidance](index=2&type=section&id=Full%20Year%20Guidance) Polaris reaffirms its 2024 full-year guidance for total company sales and adjusted earnings - Polaris reaffirmed its 2024 full-year guidance for total company sales and adjusted earnings[6](index=6&type=chunk) 2024 Full Year Guidance | Metric | 2024 Outlook (YoY Change) | | :--- | :--- | | Total Company Sales | Down 5% to 7% | | Adjusted Diluted EPS | Down 10% to 15% | [Non-GAAP Guidance Reconciliation Note](index=2&type=section&id=Non-GAAP%20Guidance%20Reconciliation%20Note) The company does not provide a reconciliation for adjusted EPS guidance to GAAP measures, citing the "unreasonable efforts exception" due to the difficulty in forecasting certain items - The company does not provide a reconciliation for adjusted EPS guidance, citing the "unreasonable efforts exception" due to the difficulty in forecasting items like restructuring and acquisition integration costs[12](index=12&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) This section defines and explains the use of non-GAAP financial measures, emphasizing their role in providing meaningful operational performance comparisons and understanding ongoing business performance [Definition and Use](index=3&type=section&id=Definition%20and%20Use) This press release uses "adjusted" non-GAAP financial measures to provide meaningful comparisons of operational performance and understand ongoing business performance - This press release and related earnings conference call include "adjusted" sales, gross profit, income before taxes, net income attributable to Polaris Inc., diluted earnings per share, EBITDA, EBITDA margin, and free cash flow, which management believes are useful for meaningful performance comparisons and understanding ongoing operational performance[13](index=13&type=chunk) - Reconciliations of GAAP historical measures to adjusted non-GAAP measures are included in the financial schedules of the press release, but these measures should not be considered substitutes for GAAP measures[13](index=13&type=chunk) [Earnings Conference Call and Webcast](index=3&type=section&id=EARNINGS%20CONFERENCE%20CALL%20AND%20WEBCAST) Polaris Inc. held a conference call and webcast on April 23, 2024, to discuss Q1 2024 results, with details available on the investor relations website [Event Details](index=3&type=section&id=Event%20Details) Polaris Inc. hosted a conference call and webcast on April 23, 2024, at 9:00 AM CT to discuss Q1 2024 results, led by CEO Mike Speetzen and CFO Bob Mack - Polaris Inc. held a conference call and webcast on **April 23, 2024, at 9:00 AM CT** to discuss Q1 2024 results, hosted by CEO Mike Speetzen and CFO Bob Mack[14](index=14&type=chunk) - The earnings presentation and webcast link are available on the Polaris investor relations website, ir.polaris.com, with conference ID 3619470, and a replay accessible via the same link[14](index=14&type=chunk) [About Polaris](index=3&type=section&id=ABOUT%20POLARIS) Polaris Inc. is a global powersports leader, established in 1954, offering a wide range of high-quality off-road vehicles, motorcycles, snowmobiles, and marine products [Company Overview](index=3&type=section&id=Company%20Overview) Polaris Inc. (NYSE: PII) is a global leader in powersports, dedicated to product breakthroughs and enriching outdoor experiences since 1954 - Polaris Inc. (NYSE: PII) is a global leader in powersports, dedicated to product breakthroughs and enriching outdoor experiences since its founding in 1954[15](index=15&type=chunk) - The company's product lines include RANGER®, RZR®, Polaris XPEDITION®, and GENERAL™ side-by-side off-road vehicles; Sportsman® all-terrain off-road vehicles; military and commercial off-road vehicles; snowmobiles; Indian Motorcycle® mid-size and heavyweight motorcycles; Slingshot® autocycles; Aixam quadricycles; Goupil electric vehicles; and pontoon and deck boats, including the industry-leading Bennington pontoons[15](index=15&type=chunk) - Polaris enhances the riding experience with a robust portfolio of parts, garments, and accessories, headquartered in Minnesota and serving nearly 100 countries worldwide[15](index=15&type=chunk) [Forward-Looking Statements](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section serves as a disclaimer, highlighting that forward-looking statements in the press release involve risks and uncertainties that could cause actual results to differ materially from expectations [Disclaimer and Risk Factors](index=3&type=section&id=Disclaimer%20and%20Risk%20Factors) Forward-looking statements in this press release, including "2024 Business Outlook" and "CEO Commentary," involve risks and uncertainties that could cause actual results to differ materially - Forward-looking statements in this press release, such as those in "2024 Business Outlook" and "CEO Commentary," involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements[16](index=16&type=chunk) - Potential risks include the company's ability to successfully implement manufacturing operations strategies and supply chain initiatives; timely procure necessary components; manufacture and deliver products to meet demand (including supply chain disruptions); identify and maintain optimal dealer inventory levels; accurately predict and sustain consumer demand; mitigate rising input costs through pricing or other actions; competitor product offerings, promotional activities, and pricing strategies that may make the company's products less attractive to consumers; the company's ability to make strategic investments in innovation and new products; economic conditions (including recession and interest rate changes) that affect consumer spending or consumer credit; manufacturing facility disruptions; product recalls and/or warranty costs; product rework costs; the impact of changes in Polaris's stock price on incentive compensation plan costs; foreign currency exchange rate fluctuations; environmental and product safety regulatory activity; weather impacts on the company's supply chain, manufacturing operations, and consumer demand; commodity costs; freight and tariff costs; changes in international trade policies and agreements; uninsured product liability and class action claims (including claims seeking punitive damages) and other litigation expenses arising from the nature of the company's business; uncertainties in the consumer retail and wholesale credit markets; the performance of affiliated partners; changes in tax policy; relationships with dealers and suppliers; and the overall global economic, social, and political environment[16](index=16&type=chunk) - Investors should also consider other risks and uncertainties discussed in the company's filings with the U.S. Securities and Exchange Commission, and the company undertakes no obligation to provide updates to any forward-looking statements unless required by law[16](index=16&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements, including statements of income, balance sheets, and cash flows, for the specified periods [Consolidated Statements of Income](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) This section provides the unaudited consolidated statements of income for the three months ended March 31, 2024, and 2023, detailing sales, cost of sales, gross profit, operating expenses, and net income attributable to Polaris Inc Consolidated Statements of Income (Q1 2024 vs. Q1 2023) | (In Millions, Except Per Share Data) | 2024 | 2023 | | :--- | :--- | :--- | | Sales | $1,736.4 | $2,179.7 | | Cost of sales | $1,406.1 | $1,710.5 | | Gross profit | $330.3 | $469.2 | | Total operating expenses | $313.2 | $324.9 | | Operating income | $39.0 | $161.1 | | Income from financial services | $21.9 | $16.8 | | Income before income taxes | $7.7 | $145.2 | | Net income attributable to Polaris Inc. | $3.8 | $113.4 | | Diluted EPS attributable to Polaris Inc. | $0.07 | $1.95 | [Consolidated Balance Sheets](index=5&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) This section presents the unaudited consolidated balance sheets as of March 31, 2024, and March 31, 2023, outlining assets, liabilities, and shareholders' equity Consolidated Balance Sheets (March 31, 2024 vs. March 31, 2023) | (In Millions) | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $318.8 | $322.9 | | Inventories, net | $1,952.8 | $1,947.2 | | Total current assets | $2,732.6 | $2,787.3 | | Total assets | $5,567.4 | $5,289.9 | | Current financing obligations | $54.0 | $553.6 | | Total current liabilities | $1,860.6 | $2,298.4 | | Total liabilities | $4,175.6 | $4,121.3 | | Total shareholders' equity | $1,378.1 | $1,152.1 | | Total equity | $1,380.6 | $1,154.8 | [Consolidated Statements of Cash Flows](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section provides the unaudited consolidated statements of cash flows for the three months ended March 31, 2024, and 2023, categorized by operating, investing, and financing activities Consolidated Statements of Cash Flows (Q1 2024 vs. Q1 2023) | (In Millions) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | $(105.4) | $124.2 | | Net cash used for investing activities | $(56.7) | $(89.1) | | Net cash provided by (used for) financing activities | $115.7 | $(41.6) | | Net decrease in cash, cash equivalents and restricted cash | $(49.2) | $(1.6) | | Cash, cash equivalents and restricted cash at end of period | $333.7 | $338.1 | [Non-GAAP Reconciliation](index=7&type=section&id=NON-GAAP%20RECONCILIATION) This section provides detailed reconciliations of GAAP to non-GAAP financial measures, including adjustments for restructuring, acquisition-related costs, intangible amortization, and litigation expenses [Non-GAAP Reconciliation of Results](index=7&type=section&id=NON-GAAP%20RECONCILIATION%20OF%20RESULTS) This section provides a detailed reconciliation of GAAP to non-GAAP financial metrics for the three months ended March 31, 2024, and 2023, including adjustments for restructuring, acquisition costs, intangible amortization, and class action litigation expenses Key Financial Metrics Non-GAAP Reconciliation (Q1 2024 vs. Q1 2023) | (In Millions, Except Per Share Data) | 2024 (Adjusted) | 2023 (Adjusted) | | :--- | :--- | :--- | | Adjusted gross profit | $330.7 | $469.2 | | Adjusted income before income taxes | $19.7 | $152.4 | | Adjusted net income attributable to Polaris Inc. | $13.0 | $119.0 | | Adjusted diluted EPS attributable to Polaris Inc. | $0.23 | $2.05 | | Adjusted EBITDA | $110.0 | $238.1 | | Adjusted EBITDA Margin | 6.3% | 10.9% | - Adjustments include acquisition-related costs, restructuring expenses, intangible asset amortization, and class action litigation-related expenses[26](index=26&type=chunk) [Reconciliation of GAAP Operating Cash Flow to Non-GAAP Free Cash Flow](index=8&type=section&id=RECONCILIATION%20OF%20GAAP%20OPERATING%20CASH%20FLOW%20TO%20NON-GAAP%20FREE%20CASH%20FLOW) This section reconciles net cash provided by (used for) operating activities to adjusted free cash flow for the three months ended March 31, 2024, and 2023, by adjusting for property and equipment purchases and finance affiliate distributions GAAP Operating Cash Flow to Non-GAAP Free Cash Flow Reconciliation (Q1 2024 vs. Q1 2023) | (In Millions) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | $(105.4) | $124.2 | | Purchase of property and equipment | $(72.1) | $(94.4) | | Distributions from (investment in) finance affiliate, net | $15.4 | $5.3 | | Adjusted free cash flow | $(162.1) | $35.1 | [Non-GAAP Reconciliation of Segment Results](index=8&type=section&id=NON-GAAP%20RECONCILIATION%20OF%20SEGMENT%20RESULTS) This section provides non-GAAP reconciliations for gross profit across Off Road, On Road, Marine, and Corporate segments, showing minor adjustments for the Corporate segment in Q1 2024 Segment Gross Profit Non-GAAP Reconciliation (Q1 2024 vs. Q1 2023) | (In Millions) | 2024 (Adjusted) | 2023 (Adjusted) | | :--- | :--- | :--- | | Adjusted Off Road segment gross profit | $233.0 | $331.6 | | Adjusted On Road segment gross profit | $60.4 | $69.2 | | Adjusted Marine segment gross profit | $19.2 | $61.5 | | Adjusted Corporate segment gross profit | $18.1 | $6.9 | | Adjusted total gross profit | $330.7 | $469.2 | - In Q1 2024, only the Corporate segment gross profit had a **$0.4 million** non-GAAP adjustment for restructuring[30](index=30&type=chunk) [Non-GAAP Adjustments](index=9&type=section&id=NON-GAAP%20ADJUSTMENTS) This section details the specific non-GAAP adjustments made by Polaris, including restructuring and acquisition-related costs, intangible asset amortization, and exclusions for 2024 guidance [Restructuring and Acquisition Related Costs](index=9&type=section&id=Restructuring%20and%20Acquisition%20Related%20Costs) Polaris recorded $5.7 million in restructuring and acquisition-related costs in Q1 2024 as non-GAAP adjustments, linked to efficiency-driven restructuring and the Walker Evans business acquisition - Polaris recorded **$5.7 million** in restructuring and acquisition-related costs in Q1 2024, which were treated as non-GAAP adjustments[32](index=32&type=chunk) - These costs are related to the company's efficiency-driven restructuring activities, including the divestitures of the GEM, Taylor-Dunn, and Transamerican Auto Parts businesses, as well as costs associated with the Walker Evans business acquisition in Q3 2023[32](index=32&type=chunk) [Intangible Amortization Related to Acquisitions](index=9&type=section&id=Intangible%20Amortization%20Related%20to%20Acquisitions) The company excludes intangible asset amortization from all historical acquisitions when calculating adjusted net income to better reflect ongoing operational performance, with $4.5 million excluded in Q1 2024 - The company uses adjusted net income, excluding intangible asset amortization from all historical business acquisitions, to better understand its operating performance and the ongoing performance of the underlying business[33](index=33&type=chunk) - In Q1 2024, Polaris recorded **$4.5 million** in acquisition-related intangible asset amortization, which was excluded as a non-GAAP adjustment[33](index=33&type=chunk) [2024 Adjusted Guidance Exclusions](index=9&type=section&id=2024%20Adjusted%20Guidance%20Exclusions) The 2024 adjusted guidance excludes approximately $8 million in pre-tax restructuring costs, $20 million in class action litigation-related expenses, and $18 million in intangible amortization from all acquisitions 2024 Adjusted Guidance Exclusions (Pre-Tax) | Exclusion Type | Estimated Amount (Millions) | | :--- | :--- | | Restructuring costs | ~$8 | | Class action litigation-related expenses | ~$20 | | Intangible amortization (all acquisitions) | ~$18 |

Financial Performance - Total sales for 2023 reached $8.9 billion, a 4% increase from 2022, driven by product mix and increased shipments [158]. - Net income from continuing operations attributable to Polaris Inc. was $502.8 million, a decrease of 17% from 2022, with diluted earnings per share dropping from $10.04 to $8.71 [159]. - Adjusted EBITDA for 2023 was $1,020.9 million, down 5% from $1,075.9 million in 2022, reflecting increased operating expenses and higher finance interest [161]. - Gross profit remained stable at $2.0 billion, but as a percentage of sales, it decreased to 21.9% from 22.8% in 2022 [158]. - Total gross profit for 2023 was $1,959.9 million, remaining stable compared to $1,959.5 million in 2022, with a gross profit margin of 21.9% [176]. - Comprehensive income for 2023 was $532.8 million, an increase from $437.0 million in 2022, showing improved overall financial health [264]. - Net income for 2023 was $502.7 million, an increase of 12.5% compared to $447.6 million in 2022 [270]. Sales and Revenue - Total sales for 2023 reached $8,934.4 million, a 4% increase from $8,589.0 million in 2022 [187]. - Sales in the United States increased by 5% to $7.1 billion, accounting for 80% of total sales [163]. - Off Road segment sales increased by 9% to $6,984.4 million, driven by increased shipments and a favorable product mix [175]. - On Road segment sales rose by 2% to $1,184.6 million, with a 5% increase in average per unit sales price [179]. - Marine segment sales decreased by 23% to $765.4 million, primarily due to decreased shipments [181]. - Wholegoods revenue reached $7,122.1 million in 2023, up from $6,945.8 million in 2022, reflecting a growth of 2.5% [324]. - The United States accounted for $7,122.2 million of total revenue in 2023, representing approximately 79.7% of total revenue [324]. Expenses and Costs - Operating expenses increased by 11% to $1,339.4 million in 2023, primarily due to higher selling and marketing and general and administrative expenses [161]. - Research and development expenses increased to $374.3 million in 2023, up from $366.7 million in 2022, reflecting a commitment to innovation [262]. - Depreciation and amortization expenses for 2023 were $258.9 million, compared to $232.8 million in 2022, reflecting an increase of 11.2% [270]. - The company incurred advertising expenses of $94.1 million, $87.6 million, and $90.8 million for the years ended December 31, 2023, 2022, and 2021, respectively [306]. Cash Flow and Investments - Cash provided by operating activities increased to $925.8 million in 2023, up from $534.5 million in 2022 [190]. - Total cash used for investing activities was $(462.0) million, an increase from $(319.3) million in 2022 [190]. - Net cash used for investing activities of continuing operations was $462.0 million, compared to $319.3 million in 2022, indicating a 44.6% increase [270]. - Cash and cash equivalents rose to $367.8 million in 2023, compared to $324.5 million in 2022, marking an increase of 13.3% [260]. Debt and Financing - The company had outstanding borrowings of $228.2 million under its $1.0 billion Revolving Loan Facility as of December 31, 2023 [195]. - In November 2023, the company issued $500 million in Senior Notes at a 6.950% interest rate, maturing in March 2029 [199]. - The debt to total capital ratio improved to 57% as of December 31, 2023, down from 65% in the previous year [201]. - Total borrowings under financing obligations were $2,770.0 million, a decrease from $2,987.5 million in 2022 [270]. - The weighted-average interest rate for total borrowings as of December 31, 2023, was 5.67% [346]. Shareholder Returns - The company declared a quarterly cash dividend of $0.66 per share for Q1 2024, marking a 2% increase and the 29th consecutive year of increased dividends [160]. - The company declared cash dividends of $2.60 per share in 2023, up from $2.56 in 2022, indicating a focus on returning value to shareholders [268]. - The company authorized an additional $1,185.1 million for share repurchases, having repurchased 1.6 million shares for $178.6 million in 2023, positively impacting diluted net income per share by 13 cents [202]. Assets and Liabilities - Total assets increased to $5,516.3 million in 2023, up from $5,217.9 million in 2022, reflecting a growth of 5.7% [260]. - Total liabilities decreased to $4,085.2 million in 2023 from $4,103.8 million in 2022, a reduction of 0.5% [260]. - Total accrued expenses increased to $1,123.6 million as of December 31, 2023, compared to $896.8 million in 2022, marking a rise of 25.3% [322]. Warranty and Liability - The accrued warranty liability increased to $181.1 million as of December 31, 2023, compared to $172.9 million in the previous year [210]. - The warranty reserve balance at the end of 2023 was $181.1 million, an increase from $172.9 million in 2022, with additions charged to expense amounting to $209.1 million in 2023 [308]. - The company reported accruals of $136.7 million for product liability claims as of December 31, 2023, up from $107.5 million in 2022 [211]. Currency and Foreign Exchange - A hypothetical 10% fluctuation of the U.S. dollar compared to the Euro could impact annual operating income by approximately $21 million, while the same fluctuation against the Canadian dollar could impact it by approximately $47 million [224]. - In 2023, foreign currencies negatively impacted net income compared to 2022, and a similar negative impact is expected in 2024 compared to 2023 [226]. Goodwill and Intangible Assets - Goodwill as of December 31, 2023, increased to $394.4 million from $386.2 million in 2022, reflecting a growth of 3.0% [355]. - Other intangible assets, net, decreased to $512.0 million in 2023 from $524.4 million in 2022, a decline of 2.5% [355]. - Total goodwill and other intangible assets, net, amounted to $906.4 million in 2023, down from $910.6 million in 2022, a decrease of 0.5% [355].

Financial Data and Key Metrics Changes - The company ended 2023 with share gains across all three segments despite facing challenges in the fourth quarter, including higher costs that impacted margin and EPS guidance [5][10] - Adjusted EPS fell 43% to $1.98, missing guidance due to increased product liability and warranty expenses [33][62] - The company generated over $500 million of adjusted free cash flow in 2023, returning $326 million to shareholders through dividends and share repurchases [7][43] Business Line Data and Key Metrics Changes - Off-Road revenue increased by 3%, driven by double-digit growth in utility, snow, and commercial-related products, but was offset by a 20% decline in recreational products [39] - The On-Road segment, particularly Indian motorcycles, achieved its first year of profitability in 2023, although sales were down 24% in the fourth quarter due to a challenging macro environment [16][41] - Marine sales decreased by 41% as the industry faced elevated dealer inventory levels and higher interest rates impacting consumer purchases [17][59] Market Data and Key Metrics Changes - North American retail was up 7%, primarily driven by utility and snow products, although overall snow performance was weaker than expected due to lack of snowfall [8][15] - The company gained share in both On-Road and Marine segments for the year, despite slight pressure in the fourth quarter [32] - Dealer sentiment worsened in the recent biannual ORV dealer survey, with concerns about the broader economy and high interest rates impacting consumer demand [12] Company Strategy and Development Direction - The company plans to maintain disciplined dealer inventory levels in 2024, balancing industry trends with the need for optimal inventory to maintain competitive positioning [13][20] - The focus for 2024 includes operational improvements, cost reductions, and maintaining a strong product portfolio to drive share gains [24][25] - The company aims for over $150 million in operational savings through lean manufacturing practices and capital investments [21][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that while 2023 had many positives, execution against financial commitments fell short due to manufacturing inefficiencies and higher operational costs [31][37] - The outlook for 2024 anticipates a challenging retail environment, with expected sales down approximately 20% in the first quarter due to lower snow shipments and channel refill [47][52] - Management remains optimistic about long-term growth, citing strong product innovation and a commitment to operational efficiency [49][88] Other Important Information - The company completed its inaugural investment-grade public senior notes offering, improving its debt structure with 68% fixed and 32% variable rate debt [19] - The company plans for product liability costs to remain at similar levels to 2023 as it works through case backlogs [46] Q&A Session Summary Question: Can you provide more detail on segment performance or margin performance for Q1? - Management indicated that the primary factors affecting Q1 are snow and Off-Road, with continued high promotional levels impacting margins [72][73] Question: What are the expectations for promotional activity in 2024? - Management expects promotional levels to remain elevated in Q1 but anticipates a more contained promotional environment as dealer inventory stabilizes [80][81] Question: How does the company view overall industry volumes and margins for 2024? - Management believes the industry will see modest declines, with volumes normalizing post-pandemic, and anticipates improvements in share and operational efficiencies [83][87]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-11411 POLARIS INC. (Exact name of registrant as specified in its charter) Delaware 41-1790959 (State or othe ...

Financial Performance - Polaris Inc. reported Q2 2023 sales of $2,216.6 million, a 7.4% increase from $2,062.8 million in Q2 2022[12] - Gross profit for Q2 2023 was $505.0 million, up 6.0% from $474.4 million in Q2 2022[12] - Operating income for the first half of 2023 reached $357.1 million, compared to $293.3 million in the same period of 2022, reflecting a 21.8% increase[12] - Net income attributable to Polaris Inc. for Q2 2023 was $134.3 million, a significant recovery from a net loss of $4.6 million in Q2 2022[12] - Polaris Inc. reported a net income of $247.9 million for the six months ended June 30, 2023, compared to $65.5 million for the same period in 2022, representing a significant increase[22] - The Company reported net income from continuing operations for Q2 2023 was $134.3 million, or $2.32 per diluted share, a decrease of 5% compared to $141.8 million, or $2.34 per diluted share in Q2 2022[88] - Adjusted EBITDA for Q2 2023 was $265.5 million, a 4% increase from $254.9 million in Q2 2022[88] - The company reported a 14% increase in total sales for the six months ended June 30, 2023, totaling $4,396.3 million compared to $3,844.3 million in the same period of 2022[91] - Adjusted EBITDA for the first half of 2023 reached $503.6 million, a 20.2% increase compared to $418.9 million in the first half of 2022[127] Assets and Liabilities - Total assets increased to $5,469.6 million as of June 30, 2023, compared to $5,217.9 million at the end of 2022, marking a 4.8% growth[11] - Current liabilities rose to $2,414.9 million from $2,328.6 million, indicating a 3.7% increase[11] - Total equity as of June 30, 2023, was $1,249.2 million, up from $1,073.6 million as of June 30, 2022, indicating a year-over-year increase of approximately 16.4%[20] - The Company’s total financing obligations amounted to $2,061.3 million as of June 30, 2023, with current financing obligations of $553.7 million[47] - The Company had borrowings under financing obligations of $1,350.4 million for the six months ended June 30, 2023, compared to $1,116.0 million for the same period in 2022[22] Cash Flow and Investments - Cash provided by operating activities of continuing operations was $347.9 million for the six months ended June 30, 2023, compared to a cash used of $39.9 million in the same period of 2022[22] - Total cash used for investing activities increased to $190.1 million in the first half of 2023, up from $102.7 million in the same period of 2022, primarily due to increased property and equipment purchases[130] - Cash, cash equivalents, and restricted cash at the end of the period were $355.4 million, compared to $339.6 million at the end of June 30, 2022[22] Shareholder Returns - The company declared a dividend of $0.65 per share for the three-month period ended June 30, 2023, compared to $0.64 per share for the same period in 2022[20] - For the six months ended June 30, 2023, cash dividends declared and paid per common share were $1.30, up from $1.28 in 2022, indicating a 1.6% increase[58] - The Company repurchased approximately 0.9 million shares of its common stock for $101.1 million during the six months ended June 30, 2023, with an additional $262.2 million authorized for repurchase[57] Research and Development - Polaris Inc. plans to continue investing in research and development, with R&D expenses for Q2 2023 amounting to $93.2 million, up from $86.8 million in Q2 2022[12] Segment Performance - Wholegoods revenue for the three months ended June 30, 2023, was $1,794.5 million, compared to $1,684.8 million in the same period of 2022, reflecting an increase of about 6.5%[36] - Off Road segment sales increased by 9% to $1,631.4 million for the quarter, driven by increased shipments and higher net pricing[114] - On Road segment sales rose by 21% to $361.6 million for the quarter, primarily due to increased shipments and a favorable product mix[114] - Marine segment sales decreased by 18% to $223.6 million for the quarter, attributed to decreased shipments and an unfavorable product mix[114] Other Financial Metrics - The effective income tax rate for Q2 2023 was 22.3%, up from 21.7% in Q2 2022[91] - The Company reported depreciation and amortization expenses of $120.5 million for the six months ended June 30, 2023, compared to $113.7 million for the same period in 2022[22] - The Company recognized $14.4 million in revenue from existing contracts during the three months ended June 30, 2023, an increase from $13.6 million in the same period of 2022[42] Market and Sales Trends - Sales in the United States increased by 9% in Q2 2023, contributing $1,745.8 million, which accounted for 79% of total sales[94] - Sales in Canada decreased by 6% in Q2 2023, totaling $137.5 million, primarily due to unfavorable foreign currency exchange rate movements[95] - Sales in other countries increased by 6% in Q2 2023, reaching $333.3 million, driven by a favorable product mix[96] Compliance and Risk Management - The company expects existing cash balances and cash flow from operations to be sufficient to fund operations and capital requirements for at least the next 12 months[129] - The company is in compliance with all debt covenants, maintaining an interest coverage ratio of not less than 3.00 to 1.00[137]

• Promotions returned, although still below 2019 levels • Net pricing was positive N.A. ORV Retail Trends Customer Trends and Insights ORV Dealer Insights o Year playing out better than initially expected P 3LARIS • All-new platform with rugged design and stronger chassis • 114 HP ProStar 1000 Gen2 engine • Largest accessory portfolio at launch ever (100+), including the all-new customizable Lock & Ride MAX cargo system Rider-Driven Innovation at a New Level 2016 - 2019 AVERAGE RETAIL & DEALER INVENTORY • 2 ...

Polaris Inc. (NYSE:PII) Q1 2023 Results Conference Call April 25, 2023 10:00 AM ET Company Participants J.C. Weigelt - Head of IR Mike Speetzen - CEO Bob Mack - CFO Conference Call Participants Fred Wightman - Wolfe Research Joe Altobello - Raymond James Craig Kennison - Robert W. Baird Robin Farley - UBS James Hardiman - Citi Noah Zatzkin - KeyBanc David MacGregor - Longbow Research Jamie Katz - Morningstar Gerrick Johnson - BMO Capital Markets Sabahat Khan - RBC Xian Siew - BNP Paribas Scott Stember - ROT ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-11411 POLARIS INC. (Exact name of registrant as specified in its charter) Minnesota 41-1790959 (State or other j ...

Financial Performance - The company reported record sales of $8.6 billion in 2022, a 15% increase from $7.4 billion in 2021[147]. - Net income from continuing operations attributable to the company was $602.9 million in 2022, a 22% increase from $496.2 million in 2021, with diluted earnings per share rising from $7.92 to $10.04[151]. - Total sales for 2022 reached $8,589.0 million, a 15% increase from $7,439.2 million in 2021[175]. - Operating income increased to $804.5 million in 2022, compared to $712.0 million in 2021, representing a growth of 12.9%[260]. - Comprehensive income attributable to Polaris Inc. was $437.0 million in 2022, compared to $474.9 million in 2021, indicating a decline in overall profitability[262]. - Polaris Inc. reported net income of $447.6 million for 2022, a decrease of 9.5% from $494.3 million in 2021[268]. Sales and Revenue Breakdown - Sales in the United States increased by 19% in 2022, accounting for 79% of total sales, driven by favorable product mix and higher pricing[156]. - Off Road segment sales increased by 15% in 2022 to $6,436.2 million, with an average per unit sales price increase of approximately 18%[177]. - On Road segment sales rose by 13% in 2022 to $1,163.4 million, with a 2% increase in average per unit sales price[179]. - Marine segment sales surged by 30% in 2022 to $989.4 million, driven by a 15% increase in average per unit sales price[182]. - Wholegoods revenue reached $6,945.8 million in 2022, up from $5,919.3 million in 2021, indicating a growth of about 17.3%[322][323]. - The Company’s revenue from the United States was $6,809.2 million in 2022, accounting for approximately 79.3% of total revenue[322]. Costs and Expenses - The cost of sales rose to $6.6 billion in 2022, a 17% increase from $5.7 billion in 2021, primarily due to higher warranty, labor, raw materials, and logistics costs[160]. - Gross profit for 2022 was $1.96 billion, representing 22.8% of sales, down from 23.5% in 2021, impacted by higher input costs and supply chain constraints[161]. - Operating expenses totaled $1.2 billion in 2022, a 10% increase from $1.1 billion in 2021, with a decrease in operating expenses as a percentage of sales[163]. - Research and development expenses rose to $366.7 million in 2022, up from $328.7 million in 2021, indicating a focus on innovation[260]. - Advertising expenses incurred by the Company were $87.6 million, $90.8 million, and $95.8 million for the years ended December 31, 2022, 2021, and 2020, respectively[305]. Cash Flow and Investments - Cash provided by operating activities increased to $534.5 million in 2022, up from $286.8 million in 2021[188]. - Net cash provided by operating activities was $508.6 million in 2022, compared to $293.7 million in 2021, reflecting a significant increase[268]. - Net cash used for investing activities increased to $319.3 million in 2022, primarily due to higher property and equipment purchases[191]. - Polaris invested $306.6 million in property and equipment in 2022, an increase from $282.8 million in 2021[268]. Shareholder Returns - The company announced a 2% increase in the quarterly cash dividend to $0.65 per share, marking the 28th consecutive year of increased dividends[152]. - The company repurchased 4.4 million shares for $505.0 million in 2022, positively impacting diluted net income per share by $0.33[200]. - The company has authorized an additional $349.1 million for share repurchases as of December 31, 2022[200]. Liabilities and Debt - As of December 31, 2022, the company's debt to total capital ratio was 65%, up from 60% in 2021[199]. - Total liabilities grew to $4,103.8 million in 2022, compared to $3,810.3 million in 2021, largely due to an increase in long-term debt[258]. - Borrowings under debt arrangements increased to $2,987.5 million in 2022 from $2,424.3 million in 2021[268]. - The fair value of long-term debt was approximately $2,070.3 million as of December 31, 2022, compared to $1,870.0 million in 2021[280]. Inventory and Assets - Total current assets increased to $2,767.6 million in 2022 from $2,559.0 million in 2021, driven by higher trade receivables and inventories[258]. - Inventories increased to $1,896.1 million as of December 31, 2022, from $1,510.7 million in 2021, reflecting a rise of approximately 25.5%[321]. - The Company’s accrued expenses totaled $896.8 million as of December 31, 2022, compared to $756.5 million in 2021, marking an increase of about 18.6%[321]. Currency and Foreign Exchange - Currency rate movements negatively impacted sales by 2% in 2022, while in Canada, sales increased by 6%[157]. - Foreign currencies negatively impacted net income in 2022 compared to 2021, and a similar negative impact is expected in 2023 compared to 2022[225]. - A hypothetical 10% fluctuation of the U.S. dollar compared to the Euro could impact annual operating income by approximately $20 million, while the same fluctuation against the Canadian Dollar could impact it by approximately $53 million[223]. Goodwill and Impairment - The company completed its annual goodwill impairment test in the fourth quarter of 2022, determining that goodwill was not impaired as each reporting unit's fair value exceeded its carrying value[214]. - The Company uses a discounted cash flow analysis and market approach to determine the fair value of reporting units for goodwill impairment testing[292]. Legal and Warranty Liabilities - The accrued warranty liability increased to $172.9 million as of December 31, 2022, from $132.9 million in 2021, indicating a 30.1% rise[207]. - Accruals for product liability claims were $107.5 million as of December 31, 2022, up from $70.3 million in 2021, marking a 52.9% increase[208]. - The Company had an accrual of $107.5 million for probable payments related to product liability litigation as of December 31, 2022[252].

Financial Data and Key Metrics Changes - Adjusted gross profit and EBITDA margins expanded, contributing to a year-over-year adjusted EPS growth of 57%, despite increased warranty costs, interest expenses, and foreign exchange headwinds [5][10][29] - Free cash flow increased over 800% year-over-year, with growth primarily in the second half of the year [10] - The leverage ratio stands at 1.6x, indicating a healthy balance sheet [10] Business Line Data and Key Metrics Changes - International sales grew by 7% year-over-year, despite a 9 percentage point drag from currency fluctuations [8] - Off-Road Vehicle (ORV) retail was down 4% year-over-year, while ATV and RANGER products saw low to mid-single-digit growth [24] - The On-Road segment experienced strong performance with market share gains, particularly in the motorcycle category [25] Market Data and Key Metrics Changes - The demand environment remains mixed, with stable demand expected in the utility space, which constitutes approximately 60% of the Off-Road business [24] - The marine segment is seeing healthy demand at premium levels, with inventory being the healthiest it has been in a long time [25] - Market share was down approximately 1.5 points year-over-year, but the fourth quarter was the best performing quarter of the year [23] Company Strategy and Development Direction - The company is focused on rider-driven innovation and enhancing customer experience, with significant new product launches planned for 2023 [16][41] - A meaningful investment in back shop capacity in Mexico is planned to bring outsourced activities back to historical levels, driving higher CapEx year-over-year [14][100] - The company aims to continue share repurchases while balancing debt pay down, with a focus on maintaining a healthy financial position [36][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 5-year financial objectives, despite challenges in 2023 [38][41] - The company anticipates a more normal cadence of earnings in 2023, with expected share gains across segments and strong cash generation [15][41] - Management acknowledged ongoing supply chain challenges, rising inflation, and warranty costs but remains optimistic about the company's ability to navigate these issues [26][39] Other Important Information - The company executed over $500 million in share repurchases, demonstrating a commitment to returning value to shareholders [9] - Operating expenses are expected to increase as a percentage of sales due to a return to normal advertising levels and in-person dealer events [13] - The company is investing over $300 million in CapEx and 4% of sales in R&D in 2022, indicating a commitment to innovation and growth [28] Q&A Session Summary Question: Retail forecast and economic downturn scenarios - Management has modeled various scenarios, indicating that the retail forecast is not predicated on a substantially better economy, with opportunities to regain market share in the utility space [44][46] Question: Impact of new product introductions on sales - New products are expected to serve new segments, potentially leading to some cannibalization but also appealing to different customer subsets [48] Question: Margin drag from increased promotional activity - The company expects pricing to be relatively flat, with promotional activities offset by carryover pricing from 2022 [61] Question: Retail sales dynamics and inventory replenishment - Retail sales are expected to return to more normal seasonality, with improvements anticipated in the spring and summer [138] Question: Market share data and competition from Chinese manufacturers - Market share data does not include some Chinese manufacturers, as they do not participate in trade organizations, but their impact has been noted [74]