Core Insights - Polaris faced significant tariff-related cost pressures, amounting to $37 million in Q4, which impacted adjusted gross margin and led to modest adjusted EPS of approximately $0.08 [1][6] - The company reported a 9% increase in adjusted sales and North American retail sales, excluding youth products, indicating a focus on more profitable segments [2][6] - Polaris anticipates a challenging 2026, with total sales growth projected at 1-3%, and adjusted EPS expected to be between $1.50 and $1.60, while facing a tariff headwind of approximately $90 million [5][22] Financial Performance - In FY2025, Polaris generated roughly $605 million in free cash flow and paid down about $530 million of debt, but expects lower free cash flow of around $120 million in 2026 [4][16] - The company achieved adjusted EBITDA margin expansion of 80-120 basis points year-over-year, despite the impact of tariffs [19] - Polaris expects operating cash flow of about $160 million in 2026, with the first half of the year anticipated to be challenging for covenant compliance due to tariff pressures [16][17] Operational Highlights - Polaris gained market share across all segments in 2025, including off-road vehicles and motorcycles, with strong retail trends in utility vehicles [3][7] - The company reported a healthy dealer inventory level, with "just under 100 days" across the network, and a 9% decrease in off-road vehicle dealer inventory [12] - Significant operational improvements led to over $60 million in savings in 2025, with a $25 million reduction in warranty expenses due to quality enhancements [13][15] Strategic Outlook - Polaris is in the final stages of shifting youth manufacturing from China to Mexico, which is expected to improve dealer inventory levels by 2026 [2] - The company plans to reduce its reliance on China-based materials from approximately 14% at the end of 2025 to below 5% by the end of 2027 [23] - Transition service agreements related to the Indian Motorcycle separation are expected to generate $30 million to $35 million in other income in 2026 [20]