POLARIS INC earnings calls

Incremental margins next year

Q (Joe Altobello · Raymond James): How will incremental margins play out next year given tariffs, commodities, and factory improvements? Also, will promotion intensity hurt margins?

A: Management said third-quarter costs hurt incremental margins, tariffs and commodities are headwinds, and factory efficiency and moving supply from China will help but it is early to forecast next year. They said promotional pressure should be limited by new products and keeping dealer inventory balanced.

"The, you know, the incremental margins were pretty heavily impacted in the third quarter." — Michael T. Speetzen (CEO)

2027 growth and tariffs

Q (James Hardiman · Citi): Are your views that tariffs will be roughly a wash and can you grow reported sales next year given commodity and efficiency offsets? Also, how did retail and October look?

A: Management said tariffs may be roughly flat absent new actions, but 301 excess manufacturing is an unknown. They feel good about top-line growth from new products and utility/commercial demand, and said October retail was low single digits, aligned with expectations.

"I do think the estimates are high next year and I think part of that is we know a number of analysts have not backed the IEPA refunds out." — Robert Paul Mack (CFO)

Quarter timing and inventory moves

Q (Gerrick Johnson · Seaport Research Partners): How much revenue shifted between Q3 and Q4 from early snowmobile and Ranger shipments, and why did dealer seasonal inventory decline?

A: Management said about a split of the revenue timing: roughly $30 million from snow and a bit more from Ranger. They explained dealer inventory fell because they cleared old-model snowmobiles early and shipments of Ranger and Expedition channel fill changed timing, and dealers welcomed earlier snow shipments.

"So Gerrick, if you think about the snow and the ranger timing from a revenue perspective, it is about split." — Robert Paul Mack (CFO)

Consumer and parts usage trends

Q (Craig Kennison · Baird): What do Ride Command, surveys, and parts data show about consumer usage and parts/accessory demand? Any differences for commercial users?

A: Management said usage remains strong and tracked parts consumption is up in the low- to mid-single digits, which builds on last year's higher ridership. For commercial users, they said vehicles are used much harder and in different conditions, with faster parts wear and varied redeployment patterns.

"We continue to see parts consumption, oil consumption, wheels, tires, for the vehicles that we can track riding, we are up in the kind of low to mid single digits which is encouraging and that is building on last year, which last year was critical because we saw ridership up above pre COVID levels." — Michael T. Speetzen (CEO)

Margins next year adjusted for refunds

Q (Arpine Kocharyan · UBS): If you adjust for tariff refunds this year, should margins be flat or better next year?

A: Management said tariffs will likely be generally flat year over year unless a new 301 tariff appears. They warned operational efficiencies are a tailwind while commodities remain a headwind and they will give more detail in January.

"I think tariffs will be generally flat year over year unless there is a new 301 tariff, which we certainly do not know in hard to anticipate what that could look like." — Robert Paul Mack (CFO)

Drivers of EPS and operational beats

Q (Noah Zatzkin · KeyBanc): You pulled $0.30 of volume from Q4 into Q3 but raised full-year operational EPS and sales — what drove those increases? And how big are structural operational benefits?

A: Management said the EPS and sales increases are driven by utility strength, with $0.15 of the Q3 beat flowing through and $0.20 in Q4. They said operational improvements are strong — factories, quality, and supply changes — and that without tariffs EBITDA margins would be nearly 2 points higher.

Competition and product priorities

Q (Molly Baum · Morgan Stanley): Are you seeing competitor changes in pricing or moves into value/commercial segments, and where are you prioritizing new product innovation?

A: Management said they have not seen major competitive shifts or widespread heavy discounting, and both top players have healthy inventory which limits others' promotions. They said competitors follow some of their product moves and that Polaris will lead with new products, to be discussed more at investor day.

"You know, I think the there is a lot more responsible acting today than there was, say, a couple of years ago." — Michael T. Speetzen (CEO)

Medium-term margin potential

Q (BOA): How should we think about medium-term normalized EBITDA margins given tariffs, refunds, and operational progress — is 7.5% a good baseline?

A: Management declined to give a numeric forecast but said they will walk through the path to mid-cycle targets at the February meeting. They said current full-year EBITDA will be about 8.5% and operationally around 10% if you factor out tariffs and refunds.

"We are going to end this year at about 8.5% EBITDA." — Michael T. Speetzen (CEO)

Commodity hedging and timing

Q (Anthony Bonadio · Wells Fargo): How and when do you hedge commodities for 2027, and if prices improve or worsen how much benefit or pain is locked in?

A: Management said they typically try to be about 50% hedged going into the year but were not yet at that level and will decide based on commodity curves through Q4 and early next year. They said benefits from falling commodities would likely show more in the back half of the year due to existing hedges and purchased inventory.

"Yeah. I mean, we typically try to be about 50% hedged as we go into the year" — Robert Paul Mack (CFO)