Polaris Inc

Consolidated Results of Operations

The consolidated results of operations were as follows:

Sales:

The decrease in sales for the quarter was due to decreased shipments and lower net pricing driven by higher promotional costs, partially offset by product mix.

The components of the consolidated sales change were as follows:

The volume decrease for the quarter was primarily the result of decreased snowmobile, Marine, and ORV shipments. These decreases were partially offset by a higher sales mix of ORVs.

Sales by geographic region were as follows:

Sales in the United States decreased during the quarter primarily as a result of decreased shipments, partially offset by product mix.

Sales in Canada decreased during the quarter primarily driven by decreased snowmobile shipments. Currency rate movements had an impact of less than one percentage point on quarter-to-date sales.

Sales in other countries, primarily in Europe, decreased during the quarter, primarily driven by lower motorcycle, ORV, and snowmobile shipments. Currency rate movements had a favorable impact of one percentage point on quarter-to-date sales.

Cost of Sales:

The following table reflects our cost of sales in dollars and as a percentage of sales:

Cost of sales decreased during the quarter primarily due to reduced sales volumes and decreased labor costs.

Gross Profit:

Gross profit for the quarter, as a percentage of sales, decreased primarily due to lower net pricing driven by higher promotional costs. This decrease was partially offset by favorable operational costs.

Operating Expenses:

Operating expenses, in absolute dollars, decreased for the quarter due to lower selling and marketing and research and development expenses, partially offset by increased general and administrative expenses. Operating expenses, as a percentage of sales, increased for the quarter primarily due to decreased leverage of fixed costs as a result of reduced sales volumes.

Income from Financial Services:

Income from financial services increased 30 percent for the quarter, primarily due to higher wholesale financing income from Polaris Acceptance driven by higher dealer inventory levels.

Interest Expense:

Interest expense increased for the quarter primarily as a result of higher interest rates.

Other income, net:

Other income is primarily the result of currency exchange rate movements and the corresponding effects on currency transactions related to our international subsidiaries.

Provision for income taxes:

The increase in the effective income tax rate for the quarter was primarily due to the impact of unfavorable share-based compensation adjustments on lower pre-tax income generated in the quarter compared to the first quarter of 2023.

Adjusted EBITDA:

Adjusted EBITDA, in absolute dollars, decreased during the quarter primarily due to decreased shipments and unfavorable impacts from foreign currency partially offset by reduced operating expenses. Adjusted EBITDA, as a percentage of sales, decreased during the quarter primarily due to decreased shipments, unfavorable impacts from foreign currency, and higher promotional, warranty and finance costs, partially offset by reduced operating expenses.

Weighted average diluted shares outstanding:

Over the time period within and between the comparable quarterly periods, weighted average diluted shares outstanding decreased, primarily due to share repurchases and a reduction in the dilutive effect of share-based equity awards.

Cash Dividends:

We paid a regular cash dividend of $0.66 per common share on March 15, 2024 to holders of record at the close of business on March 1, 2024.

Segment Results of Operations

The summary that follows provides a discussion of the results of operations of each of our three reportable segments, Off Road, On Road, and Marine. Each of these segments is comprised of various product offerings that serve multiple end markets. We evaluate performance based on sales and gross profit. The Corporate amounts include costs that are not allocated to segments, including certain unallocated manufacturing costs.

Our sales and gross profit by reporting segment, which includes the respective PG&A, were as follows:

Off Road:

Off Road sales, inclusive of PG&A sales, decreased 16 percent for the quarter, primarily due to decreased snowmobile and ORV shipments, partially offset by increased PG&A sales. The average per unit sales price for the Off Road segment increased approximately four percent for the quarter primarily due to product mix.

Sales to customers outside of North America decreased 14 percent for the quarter as a result of lower ORV and snowmobile shipments.

Gross profit, as a percentage of sales, decreased during the quarter primarily due to lower net pricing driven by higher promotional costs and higher warranty expense, partially offset by operational improvements.

Additional information on our end markets for the quarter:

•Polaris North America utility unit retail sales up mid-single digits percent

•Polaris North America recreation unit retail sales down low-single digits percent

•Total Polaris North America ORV unit retail sales up low-single digits percent

•Estimated North America industry ORV unit retail sales up low-single digits percent

•Total Polaris North America ORV dealer inventories up approximately 30 percent

•Polaris North America snowmobile unit retail sales for the 2023-2024 season ending March 31, 2024 down low-twenties percent

•Estimated North America industry snowmobile unit retail sales for the 2023-2024 season ending March 31, 2024 down low-double digits percent

•Total Polaris North America snowmobile dealer inventories up approximately 115 percent

On Road:

On Road sales, inclusive of PG&A sales, decreased 14 percent for the quarter, primarily due to decreased shipments. The average per unit sales price for the On Road segment increased approximately one percent for the quarter primarily due to product mix.

Sales to customers outside of North America decreased 14 percent for the quarter primarily as a result of lower Indian Motorcycle shipments in the EMEA region.

Gross profit, as a percentage of sales, increased for the quarter driven by favorable product mix, partially offset by higher warranty expense and lower net pricing driven by higher promotional costs.

Additional information on our end markets for the quarter:

•Indian Motorcycle North America unit retail sales up low-teens percent

•Estimated North America industry 900cc cruiser, touring, and standard motorcycles unit retail sales up low-single digits percent

•Polaris North America motorcycle dealer inventories up approximately 5 percent

Marine:

Marine sales decreased 53 percent for the quarter, primarily due to decreased shipments. The average per unit sales price for the Marine segment increased approximately seven percent for the quarter primarily due to product mix.

Gross profit, as a percentage of sales, decreased for the quarter due to decreased shipments and lower net pricing driven by higher promotional costs.

Additional information on our end markets for the two-month period ended February 2024:

•Polaris U.S pontoon unit retail sales down mid-single digits percent

•Estimated U.S. industry pontoon unit retail sales down low-teens percent

•Polaris U.S deck boat unit retail sales down low-fifties percent

•Estimated U.S. industry deck boat unit retail sales down low-fifties percent

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income, excluding interest expense, income tax expense, depreciation and amortization, and certain other non-cash, non-recurring, or non-operating items impacting net income from time to time. For example, costs associated with certain corporate restructuring activities, such as acquisitions and divestitures, are included as non-GAAP adjustments. We use the non-GAAP financial measure of Adjusted EBITDA Margin, which is defined as Adjusted EBITDA divided by net sales. We believe that Adjusted EBITDA and Adjusted EBITDA Margin help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude from Adjusted EBITDA and Adjusted EBITDA Margin.

We believe that these measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics used by our management for financial and operational decision making. We are presenting these non-GAAP measures to assist investors in seeing our financial performance through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

Adjusted EBITDA has limitations and should not be considered in isolation from, as a substitute for, or more meaningful than, net income as determined in accordance with GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance. Our presentation of Adjusted EBITDA and Adjusted EBITDA Margin should not be construed as an inference that our results will be unaffected by unusual or non-recurring items.

The following table presents a reconciliation of net income, the most comparable GAAP financial measure, to Adjusted EBITDA for each of the periods presented:

(1)Represents amortization expense for acquisition-related intangible assets

(2) Represents adjustments for integration and acquisition-related expenses

(3) Represents adjustments for corporate restructuring

(4) Represents adjustments for certain class action litigation-related expenses