Executive Summary

Q4 2024 revenue fell 23% to $1.76B with GAAP EPS $0.19 and adjusted EPS $0.92; adjusted EBITDA margin was 9.6% as shipment cuts to reduce dealer inventory (ORV shipments ~-30% YoY) and a weak snow season pressured volumes and absorption .
Management met its ORV dealer inventory objective (down 16% YoY) and delivered >$250M of structural savings in 2024; adjusted gross margin edged up 9 bps to 21.1% on lean/operational efficiencies despite mix/absorption headwinds .
2025 outlook: sales down 1–4% vs 2024; adjusted EPS ~$1.10, with adjusted EBITDA margin down 170–200 bps; Q1 2025 adjusted EPS loss of $0.85–$1.00 expected; free cash flow targeted at ~$350M and capex in the “low $200s” .
Dividend raised 2% to $0.67 per share, marking the 30th consecutive annual increase—supporting income investors amid a cyclical trough; near‑term stock drivers include cadence of inventory normalization, promotional intensity, snow sell‑through, and tariff headlines .

What Went Well and What Went Wrong

What Went Well

Inventory and cost discipline: ORV dealer inventory down 16% YoY (goal achieved); >$250M structural savings vs $150M target; adjusted gross margin +9 bps to 21.1% despite negative mix/absorption .
- “We were relentless... resulting in continued innovation leadership..., a 16-percent reduction in ORV dealer inventory, and an operational efficiency savings goal that was exceeded by over $100 million.” — CEO Mike Speetzen .
Innovation and share pockets: Strong youth ORV retail (double-digit growth) and midsize motorcycles (Scout) share gains offset heavyweight softness; North America ORV retail flat vs industry up MSD, indicating stabilization in core .
Cash priorities and balance sheet: Expect ~$350M adjusted FCF in 2025; capex tapering to low $200s after footprint build; intent to prioritize debt paydown while preserving dividend .

What Went Wrong

Volume deleverage and promotions: Q4 sales -23% to $1.76B; negative absorption from shipment cuts (~30% in ORV) and elevated promo pressured margins/EBITDA; GAAP EPS fell 90% YoY to $0.19, adjusted EPS -54% to $0.92 .
Snow/marine end-markets: Two weak snow seasons led to elevated dealer inventory and >30% declines in snow sales/retail; marine industry -11% in 2024 with cautious 2025 outlook .
FX and mix: Strengthening USD and reduced premium mix (fewer NorthStar/XD channel-fill units) weighed on Q4 gross profit; 2025 mix headwind expected to persist, especially 1H .

Financial Results

Headline Results – Quarterly Progression

Metric	Q2 2024	Q3 2024	Q4 2024
Revenue ($USD Millions)	$1,961.2	$1,722.4	$1,755.4
Gross Profit Margin %	21.6%	20.6%	20.4%
Adjusted Gross Profit Margin %	21.8%	20.8%	21.1%
Operating Income ($MM)	$119.7	$66.1	$65.8
Adjusted EBITDA Margin %	10.1%	9.2%	9.6%
Diluted EPS (GAAP) ($)	$1.21	$0.49	$0.19
Adjusted EPS ($)	$1.38	$0.73	$0.92

Year-over-Year – Q4

Metric	Q4 2023	Q4 2024	YoY Change
Revenue ($USD Millions)	$2,289.2	$1,755.4	(23)%
Diluted EPS (GAAP) ($)	$1.81	$0.19	(90)%
Adjusted EPS ($)	$1.98	$0.92	(54)%

Segment Breakdown – Q4 2024

Segment	Sales Q4 2023 ($MM)	Sales Q4 2024 ($MM)	YoY	Gross Margin Q4 2023	Gross Margin Q4 2024	Δ (bps)
Off Road	$1,916.8	$1,437.2	(25)%	21.3%	21.4%	+9
On Road	$229.2	$180.8	(21)%	13.8%	9.9%	(391)
Marine	$143.2	$137.4	(4)%	17.9%	17.3%	(65)

KPIs and Other Data – Q4 2024

KPI	Q4 2024	Notes
North America sales ($MM)	$1,481	84% of total
International sales ($MM)	$274	16% of total
Powersports retail (total company)	-7% YoY	Weak snow season; subdued retail
ORV shipments	~-30% YoY	Tied to dealer inventory objectives
ORV dealer inventory	-16% YoY	Achieved midyear target
ORV retail (NA units)	Flat	Industry up MSD

Note: Non-GAAP reconciliations and 2024 adjusted free cash flow of $64.7MM are disclosed in the release .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Sales growth vs 2024	FY 2025	N/A	Down 1% to 4% vs 2024	Initial guide
Adjusted EPS	FY 2025	N/A	~$1.10	Initial guide
Adjusted EBITDA margin	FY 2025	N/A	Down 170–200 bps YoY	Initial guide
Segment – Off-Road sales	FY 2025	N/A	Down low single digits	Initial guide
Segment – On-Road	FY 2025	N/A	Shipments down (weak industry)	Initial guide
Segment – Marine sales	FY 2025	N/A	Up low single digits	Initial guide
Adjusted EPS	Q1 2025	N/A	Loss of $(0.85) to $(1.00)	Initial guide
Adjusted FCF	FY 2025	N/A	~ $350MM	Initial guide
Capex	FY 2025	N/A	“Low $200s”	Initial guide
Dividend	1Q25	$0.66 implied	Raised 2% to $0.67/share	Raised

Management also noted expected mix headwinds (especially 1H), lower production (negative absorption), reset of profit-sharing, modest price increases, and no change assumed for tariffs in guidance .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q3 2024)	Current Period (Q4 2024)	Trend
Dealer inventory management	Lowered 2024 guide to cut shipments; focused on dealer health	ORV shipments ~-30% YoY in Q4; ORV dealer inventory -16% YoY, goal achieved	Improving channel health; shipments to remain constrained near term
Promotional intensity	Elevated promos pressured net price and margins	Highly promotional environment persists; mix headwind continues	Persistent headwind
Lean operations/cost	Manufacturing/efficiency push; restructuring costs	>$250M savings vs $150M target; 2025 savings target ~$40M	Structural cost base lower; benefits masked by absorption
Product/innovation	Ranger/Expedition channel fill; Scout launch	Youth ORV strong; Scout midsize share gains; more value products coming	Mix shifting toward value; selective wins
End‑markets (snow/marine)	Snow and marine weak; 2024 outlook cut	Snow weak second season; marine cautious despite positive show sentiment	Continued soft demand
FX/tariffs	Noted cost/FX and tariff burdens	FX headwind in Q4; ~$60–$70MM Section 301 tariffs ongoing; watching policy risk	Ongoing risks; mitigation plans
Free cash flow/capex	Lower capex planned post-footprint build	2025 FCF ~$350MM; capex “low $200s”; focus on debt paydown	Cash generation inflecting

Management Commentary

“We reduced ORV dealer inventory by 16% year-over-year... [but] realized approximately $140 million in negative absorption from lower build levels” — CEO Mike Speetzen .
“We expect EBITDA margin to be down 170 to 200 basis points... Given these pressures, we expect approximately $1.10 for adjusted EPS this year” — CFO Bob Mack .
“We will... drive down finished goods inventory and generate more cash... We believe we can generate approximately $350 million in adjusted free cash flow this year” — CFO Bob Mack .
“Adjusted gross profit margin of 21.1% was up modestly... [but] adjusted gross profit and EBITDA were pressured by negative absorption” — CEO Mike Speetzen .
“We’re the only U.S. manufacturer yet we’re the only ones paying tariffs” — CEO Mike Speetzen (on Section 301) .

Q&A Highlights

2025 EPS bridge and drivers: Reset profit-sharing, mix/volume/absorption and FX imply ~-$3 EPS headwind vs 2024; guidance embeds lower production and mix pressure, partly offset by operational savings and modest pricing .
Free cash flow inflection: Capex falling to low $200s; finished goods to be worked down (targeting $150–$200MM reduction), driving ~$350MM adjusted FCF in 2025 .
Industry outlook: Overall powersports retail expected down LSD in 2025 (motorcycles/marine/snow weak); ORV likely more stable given utility exposure .
Tariffs risk: Current ~$60–$70MM burden from Section 301 lists 1–3; contingency planning continues though guidance assumes no tariff policy change .
Covenants/liquidity: Credit agreements renegotiated in Q4 (EBITDA-based coverage), with focus on debt paydown; management does not expect issues under current outlook .

Estimates Context

S&P Global (Capital IQ) consensus for Q4 2024 EPS and revenue was unavailable at the time of this analysis due to data access limits, so we cannot provide beat/miss versus Street for Q4 or trend versus Q3. Management did not explicitly frame results versus consensus on the call .
Implication: Given revenue (-23% YoY) and adjusted EPS (-54% YoY), Street models will likely need to reflect a weaker near-term profit trajectory and 2025 margin reset embedded in guidance .

Key Takeaways for Investors

Channel normalization is working: achieving -16% ORV dealer inventory and shipment discipline should position Polaris for cleaner sell-in in 2025–26, albeit at the cost of near-term deleverage .
2025 is a reset year: sales -1–4%, adjusted EPS ~$1.10, EBITDA margin -170–200 bps, and a Q1 loss guide reflect mix/absorption and reinstated profit-sharing; execution on lean and inventory reduction is critical .
Cash/capex pivot underpins equity support: ~$350MM adjusted FCF target and capex moderation to low $200s support debt paydown and the dividend (raised to $0.67), appealing to income-oriented holders during the trough .
Demand/mix risks persist: promotional intensity, snow and marine softness, and FX remain headwinds; watch youth/midsize motorcycle momentum and value product introductions to offset premium mix pressure .
Policy watch: Section 301 tariffs ($60–$70MM) and any USMCA/Mexico tariff changes could materially swing cost structure; management has sourcing migration plans but timelines are multi‑year .
Trading setup: Near-term prints likely remain choppy (Q1 loss), but credible inventory and FCF delivery, plus easing promo intensity or better snow/marine reads, could catalyze a re‑rating ahead of volume recovery .

Polaris Inc. (PII)·Q4 2024 Earnings Summary