Financial Data and Key Metrics Changes - Adjusted sales for Q4 2025 increased by 9%, with North American retail also up by 9%, excluding youth [9][10] - Adjusted EPS for Q4 was approximately $0.08, slightly ahead of the guidance provided in October [11] - Adjusted EBITDA margin contracted year-over-year due to $37 million in new tariffs and normalization of incentive compensation [16][24] Business Line Data and Key Metrics Changes - Off-road vehicle (ORV) sales rose by 11% in Q4, supported by higher shipments and a richer mix of vehicles [16] - Marine sales increased by 1%, with strong demand for entry-level Bennington models and redesigned flagship Bennington QX lineup [18] - On-road sales were up 4%, driven by positive mix within Aixam and Goupil, despite softness in Indian Motorcycle and Slingshot [18] Market Data and Key Metrics Changes - International sales grew by 9%, with all regions contributing, driven by double-digit growth in parts, garments, and accessories (PG&A) [15] - Dealer inventory was down 9% in ORV, and more than 40% in snow, indicating a healthy inventory position [17] - The overall dealer inventory is at the lowest levels outside of the pandemic, with a healthy mix of current versus non-current inventory [14][17] Company Strategy and Development Direction - The company aims to reduce its exposure to China-based spend from approximately 14% to below 5% by year-end 2027, which will lower tariff expenses and create a more localized supply chain [7][31] - The separation of Indian Motorcycle is on track to close by the end of Q1 2026, expected to be accretive to EBITDA margins and adjusted EPS [9][20] - The company is focused on maintaining leadership in the powersports industry through innovation and strong dealer partnerships [26][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in 2025, including tariffs and macroeconomic pressures, but highlighted the company's ability to deliver on its commitments [4][24] - The company expects total sales growth of 1%-3% for 2026, with a more challenging year-over-year comparison due to the absence of Indian Motorcycle sales [21] - Management remains cautious about the recreational segment but anticipates utility growth to offset ongoing pressures [30] Other Important Information - The company generated approximately $180 million in operating cash flow for Q4, translating into $120 million of free cash flow [19] - The company has reduced finished goods and improved working capital, with a focus on maintaining investment-grade metrics [19][20] - The company is committed to its dividend policy, having completed its 30th consecutive year of dividend increases [20] Q&A Session Summary Question: Revenue lift in 2026 from wholesale and retail alignment - The revenue lift increased due to a strong Q4, with flow-through expected to be closer to 40% when excluding tariffs [34][36] Question: Cost savings beyond the $30 million absorption - Cost takeout is complicated due to the Indian Motorcycle separation, but there are expectations for slight GP declines driven by TSAs [38][40] Question: 2026 free cash flow expectations - The company anticipates about $160 million in operating cash flow and $120 million in free cash flow for 2026, with a focus on working capital [44][46] Question: Tariff impacts and future expectations - The company expects approximately $215 million in tariffs for the year, with ongoing efforts to mitigate these costs through supply chain localization [71][72] Question: Inventory levels across the industry - The company feels confident about its inventory position, having reduced aged inventory significantly and maintaining a healthy mix [80][81]

Financial Data and Key Metrics Changes - Adjusted sales for Q4 2025 increased by 9%, with North American retail also up by 9%, excluding youth [9][15] - Adjusted EPS for Q4 was approximately $0.08, slightly ahead of the implied guidance [11] - Adjusted EBITDA margin contracted year-over-year due to $37 million in tariff costs and normalization of incentive compensation [16][24] Business Line Data and Key Metrics Changes - Off-road vehicle (ORV) sales rose by 11% in Q4, supported by higher shipments and a richer mix of vehicles [16] - Marine sales increased by 1%, with strong demand for entry-level Bennington models and the redesigned Bennington QX lineup [18] - On-road sales were up 4%, driven by positive mix within Aixam and Goupil, despite softness in Indian Motorcycle and Slingshot [18] Market Data and Key Metrics Changes - International sales grew by 9%, with all regions contributing, driven by double-digit growth in parts, garments, and accessories (PG&A) [15] - Dealer inventory was down 9% in ORV, and more than 40% in snow, indicating a healthy inventory position [17] - The industry faced pressure from higher interest rates and macroeconomic uncertainty, but Polaris maintained a strong market position [18][29] Company Strategy and Development Direction - The company aims to reduce reliance on China-sourced components to less than 5% of material costs by year-end 2027, which is expected to lower tariff expenses and improve supply chain responsiveness [7][31] - The separation of Indian Motorcycle is on track to close by the end of Q1 2026, expected to be accretive to EBITDA margins and adjusted EPS [9][20] - The company is focused on maintaining leadership in the powersports industry through innovation and strong dealer partnerships [26][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in 2025, particularly due to tariffs, but highlighted the company's ability to deliver on strategic milestones and share gains [4][24] - The outlook for 2026 includes expectations for total company sales growth of 1%-3%, with a focus on aligning shipments and retail [21][25] - Management remains cautious about the recreational segment but expects utility growth to offset ongoing pressures [29][30] Other Important Information - The company generated approximately $180 million in operating cash flow for Q4, translating into $120 million of free cash flow, and $605 million for the year [19] - The company has removed over $240 million in structural costs from its plants over the last two years, enhancing operational efficiency [27] - The company is committed to maintaining its dividend aristocrat status, having completed its 30th consecutive year of dividend increases [20] Q&A Session Questions and Answers Question: Revenue lift in 2026 from wholesale and retail alignment - The revenue lift increased due to a strong Q4, with flow-through expected to be closer to 40% when excluding tariffs [34][36] Question: Cost savings beyond the $30 million absorption - Excluding Indian Motorcycle, gross profit is expected to be down slightly due to accounting for transition service agreements (TSAs) [38][40] Question: 2026 free cash flow expectations - Free cash flow is expected to be around $120 million, with continued focus on working capital improvements [44][46] Question: Inventory levels across the industry - The company feels good about its inventory position, having reduced aged inventory significantly and maintaining a healthy mix [78][80]

Financial Data and Key Metrics Changes - Adjusted sales for Q4 2025 increased by 9%, with North American retail also up by 9%, excluding youth [8][14] - Adjusted EPS for Q4 was approximately $0.08, slightly ahead of the guidance provided in October [10] - Adjusted EBITDA margin contracted year-over-year due to $37 million in new tariffs and normalization of incentive compensation [15][24] Business Line Data and Key Metrics Changes - Off-road vehicle (ORV) sales rose by 11% in Q4, supported by higher shipments and a richer mix of vehicles [15] - Marine sales increased by 1%, with strong demand for entry-level Bennington models and redesigned flagship Bennington QX lineup [17] - On-road sales were up 4%, driven by positive mix within Aixam and Goupil, despite softness in Indian Motorcycle and Slingshot [17] Market Data and Key Metrics Changes - International sales grew by 9%, with all regions contributing, particularly driven by double-digit growth in parts, garments, and accessories (PG&A) [14] - Dealer inventory was down 9% in ORV, and more than 40% in snow, indicating a healthy inventory position [16] - The industry faced pressure from higher interest rates and macroeconomic uncertainty, but Polaris maintained a strong market position [17] Company Strategy and Development Direction - The company aims to reduce its exposure to China-based spending from approximately 14% to below 5% by year-end 2027, which will lower tariff expenses and create a more localized supply chain [6][32] - The separation of Indian Motorcycle is on track to close by the end of Q1 2026, expected to be accretive to EBITDA margins and adjusted EPS [8][19] - The company is focused on maintaining leadership in the powersports industry through innovation and strong dealer partnerships [26][30] Management's Comments on Operating Environment and Future Outlook - Management expressed pride in the team's ability to navigate a challenging year, achieving share gains and operational improvements despite tariff headwinds [4][10] - The company anticipates a flat retail environment in 2026, with utility growth expected to offset ongoing pressure in recreation [31] - Management remains cautious about the remainder of the snowmobile season due to variable weather conditions [12] Other Important Information - The company generated approximately $180 million in operating cash flow in Q4, translating into $120 million of free cash flow [18] - For 2026, the company expects total sales growth of 1%-3%, with adjusted EBITDA margin expansion of 80-120 basis points year-over-year [21][22] - The company is committed to maintaining its dividend aristocrat status, having completed its 30th consecutive year of dividend increases [19] Q&A Session Summary Question: Revenue lift in 2026 from wholesale and retail alignment - The revenue lift increased from $300 million to over $400 million due to a strong Q4, with a flow-through of around 40% expected [34][35] Question: Thoughts on 2026 free cash flow and working capital - The company expects about $160 million in operating cash flow and $120 million in free cash flow for 2026, with continued focus on working capital [44][46] Question: Financial leverage goals for the end of 2026 - The company aims to be under normal covenants in the 3.5 range by the second half of 2026, with long-term goals of achieving a leverage ratio of 1-2 [48][49] Question: Impact of tariffs and commodities on financials - The company anticipates a total of $215 million in tariffs for the year, with ongoing pressure from commodity prices [70] Question: Inventory levels across the industry - The company feels confident about its inventory position, having reduced aged inventory significantly and maintaining a healthy mix [78][80]