Polaris Inc.

Good day and welcome to the Polaris Third Quarter 2025 Earnings Call and Webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to JC Weigelt. Please go ahead.

Thank you, Chuck, and good morning or afternoon, everyone. I'm JC Weigelt, Vice President of Investor Relations at Polaris. Thank you for joining us for our 2025 Third Quarter Earnings Call. We will reference a slide presentation today, which is accessible on our website at ir.polaris.com. Joining me on the call today are Mike Speetson, our Chief Executive Officer, and Bob Mack, our Chief Financial Officer. Both have prepared remarks summarizing our 2025 Third Quarter, as well as our expectations for 2025. then we'll take your questions. During the call, we will be discussing various topics which should be considered forward-looking for the purpose of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projections in the forward-looking statements. You can refer to our 2024 10-K and other filings with the SEC for additional details regarding risks and uncertainties. All references to 2025 third quarter actual results and future period guidance are for our continuing operations and are reported on an adjusted non-GAAP basis unless otherwise noted. Please refer to our Reg G reconciliation schedules at the end of the presentation for the GAAP to non-GAAP adjustments. Now, I will turn it over to Mike Speetson. Go ahead, Mike.

Thanks, JC. Good morning, everyone, and thank you for joining us today. As we previewed a couple of weeks ago, we delivered strong third quarter results. Sales in the quarter were $1.8 billion, driven by stronger than anticipated shipments to meet improved retail and a solid mix of off-road vehicles, especially Ranger side-by-sides. Equally important, we made a significant strategic move with the announced sale of a majority stake in Indian Motorcycle. This move allows us to sharpen our focus on our core business, where we see the greatest potential for profitable growth across our portfolio. From more efficient plant operations to healthy dealer inventory and improved working capital, the Polaris team is delivering results in the areas we can control. This gives me great confidence that we will move through this stage of the current economic environment. Polaris is positioned to deliver strong earnings and higher returns for shareholders. Sales were up 7% driven by a richer mix of shipments in the off-road segment and higher shipments in marine, partially offset by increased promotions. Shipment volume in ORV were up approximately 5%, excluding youth product. North American retail rose 9%, led by strong off-road performance, resulting in approximately three points of market share gain in ORV. We led the industry by making a commitment over a year ago to reduce dealer inventory, and this last quarter marked a turning point. Dealer inventory is now down 21% year-over-year. Flooring expenses are materially lower for dealers, down over 50% in some cases, And day sales outstanding for Polaris inventory is as low as I can remember, excluding the pandemic era. Not only is our dealer inventory substantially lower, but it is also healthier, with age units and dealer inventory down approximately 60% relative to six months ago. This gives us confidence that dealers and Polaris are in a great spot to capitalize on growth and margin expansion when the market normalizes and improves. Adjusted EBITDA margin was under pressure compared to last year, driven by increased tariffs and normalized incentive comp. We continue to manage costs carefully and drive lean and operational efficiencies across our business to exceed our goal of $40 million in structural operational efficiencies this year. Some examples of these efficiencies include lower labor costs driven by lean activities that have increased efficiency and improved material flow in all areas of the plant. and lower raw materials and the elimination of a warehouse in Mexico driven by improved forecasting and demand planning as we see improved material flow. These are just a couple of examples of the many improvements we've seen throughout our plant network. We're still in the early stages of lean deployment, which gives me great confidence in the efficiencies we have in front of us. Adjusted EPS came in at 41 cents, driven by a strong mix in operational efficiencies, partially offset by tariffs and normalizing incentive compensation. As we look ahead to the remainder of the year, we're reintroducing full year 2025 guidance. We're closely monitoring consumer health indicators like unemployment, confidence, debt, and discretionary spending, as well as developing supply chain constraints resulting from global trade tension. Our Q4 expectations are for sales to grow sequentially. However, mix and operating expenses are expected to negatively impact sequential EPS, as is increasing tariff costs. Bob will walk you through the details shortly. Looking at the details from this last quarter, retail was up 9%, led by strong growth in Polaris Ranger and crossover vehicles. As expected, youth experienced headwinds due to our shift in production out of China. We anticipate youth will continue to be a challenge early in Q4 as we begin to build inventory throughout the quarter and into the holiday season. This summer, we reintroduced the Polaris Factory Authorized Clearance Program for the first time since 2019. It was a success with dealers and customers, driving growth without significantly increasing promotional spend. FAC was a powerful marketing tool that successfully reengaged customers and drove increased dealership visits, which resulted in a significant drawdown in our non-current dealer inventory. On-road was down mid-single digits as we lapped a strong comp with the launch of the new Indian Scout motorcycle in 2024. Within marine, pontoon retail in the quarter was down low double digits compared to last year. We gained share across off-road and on-road in the quarter. Within our off-road utility segment, our family of Ranger side-by-sides continue to grow and take share with the broadest offering of vehicles in the utility side-by-side category. From the all-new Polaris Ranger 500 to the extreme-duty Polaris Ranger 1500 XD, we have continued to create and redefine the category that remains unmatched by our competitors. Despite recent product launches from our competitors, the Polaris 1500 XD continues to be the highest performing utility side-by-side in the market. Why does this matter? Because our leadership and product allows us to take over five points of market share this quarter in the utility side-by-side segment, which is the largest category of vehicles in the ORV industry. Remember last quarter when I talked about the Polaris Expedition and how this product has helped shape the largest share capture story in ORV over the past five years? Well, we continue to write new chapters as we gained an estimated 10 points of share in the quarter within the crossover category. Again, despite recent product launches from our competitors, the Polaris Expedition continues to be the only product of its kind in the market. As the industry leader, Polaris sets the bar, and we continue to play offense, bringing innovation that is winning at dealerships. In addition to inspiring current customers to return to dealerships, innovation also brings new customers to the industry. An excellent example of this is the recent launch of the Ranger 500, our new entry-level utility side-by-side that launched in July. To date, over 80% of the customers who bought the Ranger 500 were new to Polaris. This tells us that this is the right vehicle at the right price to get customers into the dealership and in a Polaris vehicle. As you know, I regularly carve out time to get into the field and visit dealers and take part in dealer council meetings. This feedback we received during these meetings is instrumental in helping us keep a pulse on dealer sentiment across the industry. They share what's working, what's not, and what they're hearing from customers. Inventory levels have been a regular topic over the last two years. My recent takeaways are that dealers are more comfortable with their inventory positions in ORV and are embracing our North Star Reward Program in record numbers. Given these conversations with dealers and the data we have on dealer inventory, We believe we have reached a point where production, ship, and retail should be aligned. While there is still work to do in snow, which we believe will normalize this quarter, this is a big win for Polaris and our dealers. We continue to have an intense focus on winning at the dealerships with unmatched offerings across vehicles, PG&A, service, and financing. We are the global leader in power sports and take that responsibility seriously as we continue to push the industry forward while expanding the addressable market. One way to show leadership is through proven race performance. Recently, Polaris RZR factory racing solidified its dominance in desert racing with a third straight victory at the Baja 400, sweeping the UTV overall podium in a commanding performance. This dominance redefines what is possible in racing as we continue to raise the bar even when our largest competitor races their latest top-end performance vehicle. Another way to prove leadership is innovation. Our innovation pipeline is showing no signs of slowing with last week's second wave of 2026 ORV product launches. Leading the charge is the all-new Razor XPS. It is Polaris' most capable trail machine yet, engineered for riders who want to conquer wide-open terrain with confidence and style. With a bold 72-inch stance, 25 inches of usable suspension travel, and a rugged Razor Pro-S-inspired driveline, it is built to dominate the toughest terrains while delivering a smooth, responsive ride. We also introduced the largest display in the industry with a 10.4 inch screen for ride command on the Razor Pro R. On the utility side, we launched several limited edition Polaris Ranger XD 1500s with the North Star Texas and the North Star Mountaineer editions tailored to meet the specific needs of customers in key regions. In snowmobiles, we have a robust product pipeline of innovation that we will bring to market in the coming years, and in Marine, we just launched a full redesign of our flagship QX Bennington pontoon. The QX lineup blends timeless design with intuitive technology and thoughtful innovation, again, setting a new standard in the pontoon industry. Another example, and one that my family and I will be attending, is the upcoming annual Camp Razor event in Glamis. It is one of my favorite weekends of the year and an incredible opportunity to witness our customers' passion for riding and what the Polaris brand stands for. The energy and enthusiasm at Camp Razor is a powerful reminder of the deep connection our community has with our products, and it continues to inspire our team as we innovate for the future. One leaves Glamis feeling confident in who the true leader in power sports is and what a company's impact on the industry can mean. It's an honor to be part of such an amazing company that, as the global leader in power sports, continues to support the long-term health of the industry with the largest and best dealer network, a team that delivers rider-driven innovation, providing great customer experience, and a strategy built to generate shareholder value. Let's shift to the Indian Motorcycle transaction. We announced a definitive agreement to sell a majority stake in Indian Motorcycle to Carolwood, with the deal expected to close in Q1 2026. Indian Motorcycle will become a standalone business, and we will hold a small equity stake in the company. This move is expected to unlock the full potential for both Polaris and Indian Motorcycle. Kerwood brings strong capital backing and a commitment to investing for the long term, and they brought in an experienced leadership with their selection of Mike Kennedy as CEO. They are poised to take Indian to the next level. We built something incredible. The number two motorcycle brand in the U.S., the number one brand in customer satisfaction, over 600 dealers, over 900 dedicated and talented employees, and a strong lineup of motorcycles exemplified by being the market share leader in the midsize category. Now it's time for Indian Motorcycles' next chapter, and Carol Wood is the right partner. For Polaris, the decision allows us to focus on our most promising high-margin growth opportunities. Innovation is key, and we're doubling down, accelerating investment and devoting resources to critical priorities and initiatives, which is very exciting given the product pipeline we have in ORV, Snow, Marine, and Slingshot. The focus continues to be on enhancing the customer experience with rider-driven innovation. Shareholders should be excited as well. Post-separation, we expect the transaction to be accretive to adjusted EBITDA by approximately $50 million and to adjusted EPS by approximately $1.00. It's a win-win. Right now, teams are focused on standing up Indian Motorcycle to operate independently from Polaris, and we are committed to making this a smooth transition for Indian Motorcycle dealers and customers. I want to shift gears and talk about what we're seeing related to trade policy as it continues to evolve. Our gross tariff impacts for the year rose by 10 million since July, driven by international retaliatory policies and increased commodity exposure. Despite this, given deferrals and mitigating actions, we don't expect a material change to our 2025 P&L outlook and now expect the impact from new tariffs to be approximately $90 million. We're executing our mitigation strategies effectively with an urgent focus on our China spend with a long-term plan to drastically reduce our spend on all China parts and components. These efforts take time to find suppliers, tool production, and validate parts. By the end of 2027, we expect our actual China spend to be down by approximately 80% relative to 2024, which equates to less than 5% of our cost of goods sold coming from China. It's an aggressive strategy that will take time to show up in the financials, but I can assure you that we have a very capable team focused on these efforts and ultimately believe that we will have a more resilient and efficient supply chain because of the moves. I'm going to turn it over to Bob to provide you with more details on the financials.