Polaris Inc. Q1 FY2025 earnings call

• Sales were down 12% due to managing dealer inventory amidst a prolonged downturn in powersports and higher promotions. Margins were slightly below expectations due to elevated promotions. Tariffs didn't materially impact Q1 results. - Partially offset headwinds through operational savings. Adjusted EPS was negative $0.90 at the midpoint of guidance. - Snowmobile retail grew ~50% due to late season snow, RZR ridership and engagement remains strong. - Gained share in motorcycles and pontoons, lost modest share in ORV. - Implemented tariff mitigation strategy: four-pronged approach including supply chain diversification, cost control, pricing, and government advocacy. - Improved working capital, achieving highest Q1 operating free cash flow in nine years. - Dealer health: ranked #1 in sales and service, Net Promoter Score over 70.

In Q1, sales were down 12%. North American retail was down 7%, with utility business performing relatively better than recreational products. Off-Road sales were down 10% due to lower volume and higher promotions, but premium products like RANGER XP North Star had positive retail. On-Road: motorcycle market pressured, but Indian Motorcycles gained share. Marine sales were down 7% due to prolonged downturn, but Bennington M Series pontoon and new pricing were well received. Revenue contribution details: Specific percentages weren't explicitly stated in the transcript, but key segments were highlighted with their financial performance.

• Withdrew full-year guidance due to fluid tariff environment. - Q2 sales expected between $1.6 billion and $1.8 billion, assuming modestly lower retail year-over-year. - Estimated incremental tariffs will impact Q2 P&L between $10 million to $20 million. - Estimate net new tariff impact in 2025 post-mitigation and deferral to be less than $225 million.

• Tariff uncertainties with changing rates and new tariffs impacting competitive position. - Prolonged downturn in powersports and economic uncertainty affecting consumer spending. - Retail volatility with month-to-month swings and inventory management challenges from competitor promotions.

Q: Joe Altobello from Raymond James asked about tariff mitigation efforts and pricing in off-road.

A: Mike Speetzen said pricing remains as is through end of May, focusing on supply chain moves rather than price relief, and off-road is in later innings of inventory cleanup with expectation to regain share once inventory normalizes.

Q: Megan Clapp from Morgan Stanley asked about balance sheet and liquidity.

A: Mike Speetzen and Bob Mack said they're focused on cash preservation, working with lending group, reviewing CapEx, and considering dividend but prioritizing liquidity.

Q: Alice Wycklendt from Baird asked about retail volatility and warranty impact.

A: Mike Speetzen said retail volatility due to economic uncertainty and interest rates, warranty improvements will be a margin tailwind but not largest driver. Bob Mack mentioned promo including interest rate buydown affecting retail.

Q: Noah Zatzkin from KeyBanc Capital Markets asked about recession playbook and pivoting.

A: Bob Mack said focus on cash/liquidity, working capital progress, CapEx deferral, prudent headcount management, and innovation not being cut. Mike Speetzen said they're in good position to weather near-term storm.

Q: Alex Perry from Bank of America asked about tariffs and segment top line.

A: Bob Mack said offset from tariffs is difficult to forecast due to supply shifts and deferrals, and no dramatic change in segment top line outlook. Mike Speetzen said tariffs and retail are interrelated, focus on here and now.

Q: Tristan Thomas-Martin from BMO Capital Markets asked about non-Chinese sourcing and utility ORV demand.

A: Mike Speetzen said non-Chinese sourcing has varying costs and complexities, no substantial change in utility ORV demand from China's pause on agricultural products. Bob Mack added premium products performing well in utility ORV.

Q: James Hardiman from Citi asked about withdrawn guidance and incentive comp.

A: Mike Speetzen said withdrew guidance due to tariff fluidity, focus on here and now, and incentive comp discussed with Compensation Committee but focused on near-term management.

Q: Unidentified Analyst from RBC Capital Markets asked about utility ORV retail and Japanese OEM promotions.

A: Bob Mack said utility ORV weakness in February was anomaly, Japanese OEM promotions still a factor as inventory levels still high.