Polaris(US:PII)2025-10-28 15:02Financial Data and Key Metrics Changes - Sales for Q3 2025 were $1.8 billion, representing a 7% increase driven by stronger shipments and a solid mix of off-road vehicles [4][21] - Adjusted EBITDA margin was under pressure compared to last year due to increased tariffs and normalized incentive compensation [7][22] - Adjusted EPS came in at $0.41, influenced by a strong mix and operational efficiencies, partially offset by tariffs [8][22] - Operating cash flow for the quarter was $159 million, with year-to-date cash flow exceeding $560 million [22][25] Business Line Data and Key Metrics Changes - Off-road vehicle (ORV) sales rose 8%, supported by a richer mix of vehicles and strong commercial volume [22] - Marine sales increased by 20%, driven by positive shipments of new boats, including the entry-level Bennington pontoon [24] - On-road sales decreased by 3%, impacted by ongoing softness in the motorcycle market [24] Market Data and Key Metrics Changes - North American retail rose 9%, leading to approximately 3 points of market share gain in ORV [5][23] - Dealer inventory decreased by 21% year-over-year, with aged units down approximately 60% relative to six months ago [6][23] - International sales grew by 2%, led by strength in Europe [21] Company Strategy and Development Direction - The company announced the sale of a majority stake in Indian Motorcycle to focus on core business areas with the greatest potential for profitable growth [4][16] - The strategy includes enhancing customer experience through rider-driven innovation and maintaining a strong dealer network [17][32] - The company is committed to reducing reliance on China for parts, aiming for an 80% reduction in China spend by 2027 [20][43] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current economic environment and expects to deliver strong earnings and higher returns for shareholders [4][8] - The company is closely monitoring consumer health indicators and anticipates sequential sales growth in Q4, despite challenges in certain segments [8][28] - Management highlighted the importance of operational efficiencies and innovation in driving future growth [7][32] Other Important Information - The company expects the Indian Motorcycle transaction to be accretive to adjusted EBITDA by approximately $50 million and adjusted EPS by approximately $1 post-separation [16][18] - The gross tariff impacts for the year rose by $10 million since July, with an expected total impact of approximately $90 million [19][20] - The company remains committed to maintaining investment-grade credit metrics and balancing investments for growth with debt paydown [27] Q&A Session Summary Question: What drove ORV retail strength and share gains in the quarter? - Management attributed the strength to right-sized inventory, a broad product offering, and improved quality leading to lower warranty costs [35][36] Question: Any early thoughts on fiscal 2026? - The Indian Motorcycle deal is expected to significantly impact revenue and EBITDA, while tariffs are projected to increase in 2026 [39][42] Question: What is the consumer profile for the RANGER 500? - The RANGER 500 appeals to new customers, including those who previously used golf carts or other brands, providing an entry point into the Polaris product line [46][47] Question: Concerns about demand pull-forward from the FAC program? - Management indicated that the FAC program did not drive significant incremental spend and noted continued strength in retail for October [54][55] Question: What are the expectations for tariffs in 2026? - Tariffs are expected to exceed $200 million in 2026, with ongoing efforts to mitigate costs through reduced sourcing from China [57][58]