Financial Data and Key Metrics Changes - In Q2, sales decreased by 6%, reflecting the ongoing downturn in the power sports industry and increased promotions [7][20] - Adjusted EPS was $0.40, down year over year but above consensus expectations [9][21] - Free cash flow generated was approximately $290 million, marking a strong performance in cash generation [19][26] Business Line Data and Key Metrics Changes - Off-road sales declined by 8%, driven by lower whole goods volume and increased promotions [20][21] - Marine sales increased by 16%, supported by positive shipments of new boats, particularly the entry-level Bennington pontoon [25][100] - On-road sales were down 1%, with Indian motorcycles showing mid-single-digit growth [24][108] Market Data and Key Metrics Changes - Retail was flat year over year in Q2, with growth in Ranger crossover and Indian motorcycle segments [10][11] - Dealer inventory levels improved, with Polaris maintaining a DSO of around 110 days, well below historical norms [23][24] - The broader marine industry continues to face pressure from elevated interest rates and macroeconomic uncertainty [26][100] Company Strategy and Development Direction - The company is focused on innovation and operational efficiency, targeting $40 million in operational efficiencies for 2025 [9][38] - A new product, the Polaris Ranger 500, is being launched to capture a segment of customers looking for quality at a lower price point [33][34] - The company is actively working on a four-pronged tariff mitigation strategy to reduce exposure and maintain competitiveness [15][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertainty surrounding tariffs and consumer spending, which has led to the decision not to reinstate full-year guidance [9][10] - The company remains committed to navigating challenges and positioning itself for long-term success despite the macroeconomic environment [30][39] - There is optimism about emerging stronger from the current downturn, with a focus on cash preservation and operational efficiency [19][28] Other Important Information - The company has seen a significant reduction in expected tariff impacts, with gross tariff costs now estimated between $180 million to $200 million for the full year [15][29] - The company is targeting a 35% reduction in parts sourced from China by year-end, with nearly half of that already achieved [16][18] Q&A Session Summary Question: How is the company preparing for potential changes in USMCA? - Management is aware of the potential renegotiation of USMCA and is working to reduce sourcing from China while optimizing supply chains in the U.S. and Mexico [41][43] Question: Can the company win at lower price points given current trade policies? - The Ranger 500 is expected to have a better margin profile than its predecessor, and the company is confident in its ability to compete at lower price points [51][52] Question: What is the expected annualized tariff impact next year? - The company estimates an annualized tariff impact of around $230 million, with ongoing efforts to reduce this figure [61][62] Question: How is retail performing month to month? - Retail performance was stable throughout the quarter, with the utility segment holding up well, and management is optimistic about future sales as economic conditions stabilize [76][78] Question: What are the dynamics affecting promotional spending? - Promotional spending is expected to ease as inventory levels improve, but consumers are still looking for deals due to high interest rates [82][90]

Financial Data and Key Metrics Changes - In Q2 2025, sales decreased by 6% due to the ongoing downturn in the power sports industry and increased promotions [7][20] - Adjusted EPS was $0.40, down year over year but above consensus expectations [9][20] - Free cash flow generated was approximately $290 million, marking a strong performance [19][25] Business Line Data and Key Metrics Changes - Off-road sales declined by 8%, driven by lower whole goods volume and increased promotions [21] - Marine sales increased by 16%, supported by new boat shipments, particularly the entry-level Bennington pontoon [25] - On-road sales were down 1%, with Indian motorcycles showing mid-single-digit growth [24][25] Market Data and Key Metrics Changes - Retail was flat year over year, with growth in Ranger crossover and Indian motorcycles [11][12] - Dealer inventory levels improved, with Polaris maintaining DSOs around 110 days, below historical norms [23][24] - The company gained market share across all segments, including ORV, despite aggressive promotions from competitors [12][13] Company Strategy and Development Direction - The company is focused on innovation and operational efficiencies, targeting $40 million in operational efficiencies for 2025 [9][35] - A new product, the Polaris Ranger 500, is being launched to capture a significant portion of the utility vehicle market [31][32] - The company is actively working on a four-pronged tariff mitigation strategy to reduce exposure and maintain competitiveness [15][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating current challenges and positioning for long-term success despite macroeconomic uncertainties [10][29] - The company is monitoring tariff developments closely and will reevaluate guidance once there is greater clarity [10][11] - Management noted that while the macroeconomic environment remains uncertain, disciplined execution and strong cash flow generation position the company well [29][30] Other Important Information - The company recognized a non-cash goodwill impairment charge related to the On Road segment due to ongoing industry conditions [22] - The company has approximately $1 billion of liquidity available through its revolving credit facility [27] Q&A Session All Questions and Answers Question: How is the company preparing for potential changes in USMCA? - The company is aware of potential renegotiations and is working to reduce sourcing from China while increasing manufacturing in the U.S. and Mexico to align with USMCA [38][40] Question: Can the company win at lower price points given current trade policies? - The company believes it can maintain margins on the new Ranger 500, which is priced competitively and expected to attract new customers [47][49] Question: What is the expected annualized tariff impact next year? - The company estimates an annualized tariff impact of around $230 million, which could be reduced further through ongoing mitigation efforts [56][58] Question: How is retail performing month to month? - Retail performance was stable throughout the quarter, with the utility segment holding up well, and management is optimistic about future sales as economic conditions stabilize [70][72] Question: What factors are driving share gains in ORV? - Share gains are attributed to strong product offerings and improved inventory levels among competitors, allowing the company to capitalize on its innovative products [109]

Financial Data and Key Metrics Changes - In Q1 2025, sales decreased by 12% due to reduced shipments aimed at managing dealer inventory amidst a downturn in the powersports market [5][6] - Adjusted EPS was negative $0.90, aligning with the midpoint of the guidance range provided earlier [6] - Gross profit margin declined by 147 basis points, primarily due to increased promotions and a prolonged downturn in the powersports sector [32] Business Line Data and Key Metrics Changes - Off-Road sales were down 10%, influenced by lower volume and higher promotions, although a favorable mix partially offset this decline [31] - On-Road sales decreased by 20%, driven by challenges in the motorcycle market and timing issues with engine deliveries [34] - Marine sales fell by 7%, consistent with planned reductions in shipments, while the pontoon industry experienced an 11% decline year-to-date [36] Market Data and Key Metrics Changes - North American retail sales were down 7%, with better performance in the utility segment compared to recreational products [6] - International business sales dropped 16% due to weak markets in both off-road and on-road segments [30] - Retail trends showed volatility, with significant month-to-month swings, attributed to high inflation and economic uncertainty [85] Company Strategy and Development Direction - The company has withdrawn its full-year guidance due to the fluid tariff environment and its potential impact on consumer spending [9] - A four-pronged tariff mitigation strategy has been implemented, focusing on supply chain adjustments, cost control, market reprioritization, and government advocacy [21] - The company aims to emerge stronger by maintaining close relationships with dealers and focusing on cash preservation [9][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging operating environment, emphasizing the importance of navigating through tariffs and economic uncertainty [5][9] - There is optimism regarding the potential for retail demand recovery, contingent on inventory levels stabilizing and consumer confidence improving [56] - The leadership remains committed to long-term strategies that prioritize innovation and operational efficiency [30][46] Other Important Information - The company reported its highest Q1 operating free cash flow in nine years, reflecting effective working capital management [28] - Warranty expenses have improved significantly, contributing positively to customer satisfaction and expected future margins [33][89] - The company is actively engaging with government officials to address tariff-related challenges and advocate for U.S. manufacturing interests [15][24] Q&A Session Summary Question: What role will pricing play in tariff mitigation efforts? - Management indicated that pricing will remain stable through May, as raising prices in a recessionary environment is challenging due to inelastic demand [49][50] Question: Where does the company stand in terms of inventory cleanup among competitors? - Management believes they are in the later innings of the inventory cleanup process, with some competitors still facing significant excess inventory [54][55] Question: What is the expected annualized impact from tariffs in 2026? - Management refrained from providing a specific number, emphasizing ongoing mitigation efforts and the complexity of the tariff environment [62][63] Question: How is the company planning shipment levels in light of retail demand? - The company plans to ship fewer units than retail to manage dealer inventory effectively, adjusting based on future retail strength [95][96] Question: What does the recession playbook entail? - The recession playbook focuses on cash preservation, working capital management, and deferring non-critical CapEx projects [100][101]

Financial Data and Key Metrics Changes - In Q1 2025, sales decreased by 12% due to reduced shipments to manage dealer inventory amidst a downturn in powersports [7][9] - Adjusted EPS was negative $0.90, aligning with the guidance range provided in January [9] - North American retail sales were down 7%, with better performance in the utility business compared to recreational products [9][10] - Gross profit margin decreased by 147 basis points, primarily due to promotions and economic downturn [38] Business Line Data and Key Metrics Changes - Off Road sales declined by 10% due to lower volume and higher promotions, although a favorable mix partially offset this [36][38] - On Road sales fell by 20%, impacted by a challenging motorcycle market and engine delivery timing issues [39] - Marine sales decreased by 7%, consistent with planned reductions in shipments, while the pontoon industry saw an 11% decline year-to-date [41] Market Data and Key Metrics Changes - International business sales dropped by 16% due to weak markets in both off-road and on-road segments [36] - Retail trends showed volatility, with significant month-to-month swings attributed to high inflation and interest rates [92] Company Strategy and Development Direction - The company has withdrawn its full-year guidance due to the fluid tariff environment and its impact on consumer spending [12] - A four-pronged tariff mitigation strategy has been implemented, focusing on supply chain adjustments, cost control, market reprioritization, and government advocacy [26] - The company aims to emerge stronger by maintaining close relationships with dealers and focusing on cash preservation [12][34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging environment but expressed confidence in the company's ability to navigate through it [6][34] - The CEO emphasized the importance of innovation and dealer partnerships in overcoming current market challenges [17][34] - Management noted that consumer reluctance to spend on discretionary items is affecting retail performance, with expectations for modestly lower retail demand [92] Other Important Information - The company has seen improvements in warranty claims, indicating better product quality and customer satisfaction [39][98] - The company is focused on reducing working capital and has achieved the highest Q1 operating free cash flow in nine years [32] Q&A Session Summary Question: What role will pricing play in tariff mitigation efforts? - Management indicated that pricing will remain stable through May, as raising prices in a recessionary environment is challenging [56] Question: Where does the company stand in terms of inventory cleanup? - Management believes they are in the later innings of the inventory cleanup process, with improvements noted across the industry [61] Question: What is the expected annualized impact from tariffs in 2026? - Management refrained from providing specific estimates for 2026, focusing instead on current year impacts and mitigation efforts [70] Question: How is the company planning shipment levels in light of retail demand? - The company plans to ship lower than retail to continue reducing dealer inventory, adjusting as market conditions evolve [102][104] Question: What actions are being taken to preserve cash? - Management is focused on cash preservation, reviewing CapEx budgets, and maintaining liquidity through discussions with lending partners [78][84]