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PI

Polaris Inc. (PII)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 sales were $1.536B, down 12% YoY; GAAP diluted EPS was a loss of $1.17 and adjusted diluted EPS was a loss of $0.90, reflecting lower volume from planned shipment reductions and elevated promotions .
  • Management withdrew full-year 2025 sales and adjusted EPS guidance due to fluid tariff policy and macro uncertainty; introduced Q2 2025 sales guidance of $1.6B–$1.8B .
  • Adjusted EBITDA margin fell to 3.4% as promotions, FX, and volume headwinds compressed gross margin by 307 bps (adjusted −242 bps); operating cash flow was $83.2M and adjusted free cash flow was $54.9M, supported by working capital actions .
  • Tariff exposure is significant: gross 2025 tariff costs are estimated at $320–$370M, with net new P&L impact after mitigation and deferral targeted to be < $225M; Q2 incremental tariff P&L impact is estimated at $10–$20M .
  • Dealers and retail: powersports retail down 7% YoY; mixed share picture (gains in motorcycles and marine; modest ORV share loss) as promotions from competitors weigh on near-term dynamics; dividend of $0.67 per share was declared on May 1, 2025 .

What Went Well and What Went Wrong

What Went Well

  • “Results from this recent quarter were in line with our expectations, as we continued to prioritize supporting our dealer network and managing a prolonged industry downturn.” — CEO Mike Speetzen .
  • Quality/warranty improving: CFO highlighted warranty expense as a positive contributor and NPS scores at five-year highs, positioning margins to benefit in a normalized environment .
  • Premium product momentum: Polaris XPEDITION, RANGER XD and RANGER XP North Star saw positive retail in Q1, underscoring strength among cash buyers .
  • Working capital execution drove the “highest Q1 operating free cash flow in 9 years,” as finished goods were reduced and operations efficiency advanced .

What Went Wrong

  • Gross margin compressed to 16.0% (−307 bps YoY; adjusted 16.6%, −242 bps), pressured by elevated promotions and FX, partially offset by operational savings .
  • ORV unit retail down 11% in North America (industry down low-single digits), weighing on segment margins; on-road retail pressured in a discretionary market with heavyweight weakness .
  • International sales fell 16%, with off-road and on-road markets weak; overall powersports retail down 7% YoY .
  • Full-year guidance withdrawn due to tariff fluidity and macro uncertainty; Q2 guide includes tariff P&L hit of $10–$20M .

Financial Results

Consolidated Results vs Prior Periods

MetricQ1 2024Q4 2024Q1 2025
Sales ($USD Billions)$1.736 $1.755 $1.536
Diluted EPS (GAAP, $)$0.07 $0.19 $(1.17)
Adjusted Diluted EPS ($)$0.23 $0.92 $(0.90)
Gross Profit Margin %—20.4% 16.0%
Adjusted Gross Profit Margin %—21.1% 16.6%
Adjusted EBITDA Margin %—9.6% 3.4%

Notes: YoY gross margin change for Q1 2025: −307 bps (adjusted −242 bps) vs Q1 2024 .

Segment Breakdown (Q1 2025 vs Q1 2024)

SegmentSales Q1 2024 ($MM)Sales Q1 2025 ($MM)YoY %GP Margin Q1 2024GP Margin Q1 2025Change (bps)
Off Road$1,335.7 $1,198.6 (10)% 17.4% 16.0% −147
On Road$277.2 $221.8 (20)% 21.8% 16.1% −570
Marine$123.5 $115.4 (7)% 15.5% 12.4% −312

KPIs and Cash Flow

KPIQ1 2024Q1 2025
North America Sales ($MM)$1,444 $1,290
International Sales ($MM)$292 [derived from total and NA; not directly stated]$246
Powersports Retail YoY—−7%
ORV NA Unit Retail YoY—−11%
Operating Cash Flow ($MM)$(105.4) $83.2
Adjusted Free Cash Flow ($MM)$(162.1) $54.9

Notes: International sales Q1 2025 stated at $246MM; NA mix 84% ($1,290MM) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company SalesFY 2025Down 1–4% vs 2024; ~flat to modest decline Withdrawn Lowered/Withdrawn
Adjusted Diluted EPSFY 2025~65% down vs 2024; ~$1.10 Withdrawn Lowered/Withdrawn
SalesQ2 2025—$1.6B–$1.8B New
Incremental Tariff P&L ImpactQ2 2025—$10–$20MM New
Net New Tariff Impact (after mitigation & deferral)FY 2025$60–$70MM initially budgeted within original guidance < $225MM incremental (net) Increased exposure; mitigation underway
Gross Tariff CostsFY 2025—$320–$370MM gross; ~$35MM retaliatory tariffs ex-US New disclosure
Dividend per ShareQ2 2025 payout—$0.67 declared; payable June 16, 2025 Confirmed

Earnings Call Themes & Trends

TopicQ3 2024 (Prior-2)Q4 2024 (Prior-1)Q1 2025 (Current)Trend
Tariffs/macroElevated promo from competitors; inventory clean-up across OEMs FY25 guide excludes tariff changes; noted potential policy risk Guidance withdrawn; detailed tariff impact and mitigation; Q2 tariff hit $10–$20MM; net 2025 < $225MM Worsening visibility; active mitigation
Dealer inventory mgmtPlanned shipment cuts to reduce DSOs; target −15–20% ORV dealer inventory Achieved −16% ORV dealer inventory; plan to ship below retail in Q1 Continuing to ship below retail; finished goods reductions driving OCF Executing; stabilizing
Promotions/priceElevated industry promotions; Polaris selective Expect promo to remain elevated; neutral net price Elevated promotions persisted; pricing held through May segment-by-segment Persistent headwind
Product innovationLaunch cadence (Scout; RZR Pro; Bennington helm) Ongoing R&D and launches across segments Premium products posted positive retail; more launches expected Positive; supports mix over time
Quality/warrantyOperations efficiency and quality improvements Warranty tailwind vs prior year; NPS improved Warranty tailwind cited; five-year-high NPS Improving
Liquidity/capitalStrong cash generation targeted; capex moderation Target ~$350MM adjusted FCF FY25; capex low $200s $1.4B available liquidity; capex ~ $200MM; proactive covenant mgmt Solid; prudent posture

Management Commentary

  • “We’ve decided to withdraw our full year guidance… given the fluidity of the tariff environment… coupled with the potential impact to consumer spending.” — CEO Mike Speetzen .
  • “Adding together the new net impact from tariffs or mitigation efforts and the accounting deferral, we estimate the impact from tariffs in 2025 to be less than $225 million.” — CFO Bob Mack .
  • “Our first priority is cash preservation… we had good strong cash generation for the quarter… at the end of the quarter, we had $1.1 billion available on our revolver, plus another $300 million in cash.” — CFO Bob Mack .
  • “Premium products… had positive retail in the quarter… highlighting strength among cash buyers.” — CEO Mike Speetzen .
  • “We expect second quarter sales to be between $1.6 billion and $1.8 billion.” — CFO Bob Mack .

Q&A Highlights

  • Pricing approach: Management is reluctant to use price as a relief valve given inelastic demand and elevated industry promotions; guidance to dealers held pricing through end of May with segment-by-segment evaluation .
  • Promotions & share: Competitors (notably Japanese OEMs) continue aggressive promotions to clear aged noncurrent inventory; Polaris will not match extreme discounting; expects share to normalize as inventory cleans .
  • Liquidity & dividend: ~$1.4B available liquidity; dividend history important but liquidity prioritized; considering options including covenant flexibility and term loan extension; no immediate dividend change announced .
  • Tariff mitigation: Four-pronged strategy (supply chain/manufacturing, cost control, pricing/market reprioritization, government advocacy); targeted reduction of Chinese-sourced parts by ~30% in 2025, increasing USMCA qualification .
  • Shipments vs retail: Plan to ship below retail to maintain dealer inventory near current levels; ORV shipments targeted down; monitor retail softness dynamically .

Estimates Context

How results compared to Wall Street consensus (S&P Global):

MetricQ1 2024Q4 2024Q1 2025
Revenue Consensus Mean* ($MM)1,746.81,682.11,542.6
Actual Sales ($MM)1,736.4 1,755.4 1,535.8
Primary EPS Consensus Mean* ($)0.09190.9027−0.9061
Actual Adjusted Diluted EPS ($)0.23 0.92 −0.90
EBITDA Consensus Mean* ($MM)106.97175.4637.33
Actual Adjusted EBITDA ($MM)110.0 168.2 52.7

Interpretation:

  • Q1 2025: Revenue slightly missed consensus; adjusted EPS slightly beat; adjusted EBITDA beat materially versus consensus .
  • Q4 2024: Revenue and adjusted EPS modestly beat; adjusted EBITDA slightly below consensus .
  • Q1 2024: Adjusted EPS beat; revenue marginally below consensus; adjusted EBITDA near consensus .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term uncertainty dominated by tariff policy; management withdrew FY guidance and is executing mitigation (sourcing shifts, USMCA compliance, cost controls) targeting net 2025 tariff impact < $225M and Q2 impact of $10–$20M .
  • Structural actions (lean operations, warranty/quality, working capital) are real and ongoing; decrementals contained, setting up stronger incremental margins in recovery; Q1 OCF $83.2M and adjusted FCF $54.9M evidence progress .
  • Premium products and innovation remain bright spots (XPEDITION, RANGER XD, Bennington helm), supporting long-term mix; however, heavyweight motorcycles and marine remain macro-sensitive .
  • Promotional environment remains elevated as competitors clear aged inventory; Polaris is selective, protecting brand and margins over low-quality share; expect share to improve as channel cleans .
  • Liquidity is sound ($1.4B available), capex trimmed ($200M), and debt/covenants proactively managed; dividend maintained ($0.67) but management prioritizes liquidity amid uncertainty .
  • Q2 sales guide $1.6B–$1.8B signals cautious stance (shipping below retail, tariff deferrals); traders should watch tariff headlines and promotional trends as key stock catalysts .
  • Estimate revisions likely to reflect: weaker revenue trajectory from planned shipment cuts, margin headwinds from promotions/FX, and tariff timing; upside if mitigation accelerates and macro stabilizes .

Appendix: Additional Data Points and References

  • Geographic mix: North America 84% ($1,290M), International 16% ($246M) in Q1 2025; both down YoY .
  • Segment details: Off Road PG&A +1%; On Road PG&A −5%; Marine GP margin pressure from negative absorption .
  • Dividend: $0.67 per share payable June 16, 2025 to holders of record on June 2, 2025 .
  • Non-GAAP reconciliations: Adjusted EPS $(0.90); Adjusted EBITDA $52.7M; detailed adjustments include product wind-downs (FTR, Timbersled), restructuring, intangible amortization, class action litigation expenses .

Sources: Q1 2025 8‑K earnings release and exhibits ; Q1 2025 earnings call transcript ; Q4 2024 8‑K and transcript ; Q3 2024 call transcript ; Dividend press release .