Polaris Inc. 2026 Q3 Earnings Call

Weigelt. Please go ahead. Thank you, Chad, and good morning or afternoon, everyone.

I am J.C. Weigelt, Vice President of Investor Relations at Polaris. Thank you for joining us for our 2026 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 Speetzen, our Chief Executive Officer, and Bob Mack, our Chief Financial Officer. Both have prepared remarks summarizing our 2026 third quarter results, as well as our expectations for the remainder of 2026. Then we will 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 2025 10-K and our other filings with the SEC for additional details regarding risks and uncertainties. All references to 2026 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 at the end of our earnings deck for the GAAP to non-GAAP adjustments. Now I will turn the call over to Mike Speetzen.

Go ahead, Mike. Thanks, J.C.

Good morning, everyone, and thank you for joining us. We delivered another strong quarter with results exceeding our expectations and demonstrating that the actions we have taken over the past several years are making Polaris a stronger, more focused, and more profitable company. We are the global leader in powersports with leading share and the largest U.S. manufacturing footprint in the industry. Our portfolio serves all who play and work outside, and today, over half of our sales come from customers who buy their vehicles for work, from farms to ranches to commercial job sites, as well as government agencies and the military. I am proud of how the Polaris team continues to execute. They have stayed focused and have done a great job navigating a dynamic environment. As a result, our dealer inventory remains healthy.

We gained share in ORV for the sixth consecutive quarter, and once again, we delivered industry-leading innovative products that were launched at our dealer shows in August. While the consumer environment remains dynamic, we continue to focus on what we can control. That focus is driving share gains, translating into stronger operating performance, and we believe positioning us to deliver our full-year outlook in mid-cycle targets. Third quarter reported sales increased 11%, and excluding Indian Motorcycle from Q3 of 2025, sales grew 17%. Sales growth was driven by high single-digit growth in ORV, double-digit growth in PG&A, and high double-digit growth in commercial, government, defense, and marine, as well as over 100% growth in seasonal. Our growth was driven by growing end markets and share gains in ORV. Strong growth in large capital projects such as data centers, increasing the need for our commercial products.

Given the level of infrastructure investment we are seeing, we believe this business has a long runway for growth. Growing government defense demand, supported by increased defense spending across the U.S., Canada, and NATO, with U.S.-manufactured utility and snow products contributing to that growth. Robust ridership leading to higher parts and accessory sales, meaningful innovation across ORV and marine, and healthy dealer inventory levels, which allowed us to ship in snowmobiles ahead of the season. Growth this broad in a soft consumer market shows the strength of a portfolio built for both utility and recreation. Turning to margins, adjusted EBITDA margin improved 118 basis points to 8.8%. Positive contributors to margins were volume, net price, and operational efficiencies. As expected, offsetting these gains were higher commodity costs driven by elevated prices for steel, diesel, aluminum, and logistics.

Our lean work in our manufacturing facilities helped offset more than half of the commodity pressure. We also recorded $10 million in IEEPA tariff refunds and related interest during the quarter. As we did last quarter, we have removed these refunds from our adjusted financial metrics and will refer to them as operational adjusted results on today's call and our earnings materials. Excluding these refunds, our operational performance drove margins higher by approximately 85 basis points. We delivered adjusted earnings per share of $1.08, which includes the pre-tax $10 million in tariff refunds. Excluding these tariff refunds, operational adjusted EPS was $0.95 compared to $0.41 last year and was well above our expectations.

In July, we noted that our earnings split between the third and fourth quarter could shift with the timing of fall and winter shipments, which is a portion of the Q3 overperformance given higher than expected shipments in snowmobile and utility. This year, with snowmobile dealer inventory in good shape, we shipped a portion of those units in the third quarter to ensure dealers had inventory to meet early-season consumer demand. Bob will walk through the details in his remarks. As a result of our third quarter performance and the momentum we are seeing across the business, we are raising guidance for the third time this year. Excluding tariff refunds, we now expect operational adjusted EPS of $2.40-$2.50, up from our prior guidance of $2.05-$2.15. And while uncertainty remains, October retail is tracking in line with expectations.

We still have work ahead of us, but the business is on increasingly solid footing, and we remain confident that our focus on innovation, disciplined inventory management, and operational execution is positioning Polaris well as we head into 2027. Moving to our retail performance, total company retail was flat for the quarter. ORV North American retail was up 2%, outperforming the industry and gaining share for the sixth consecutive quarter. This growth was even more impressive as we were comparing against a very strong third quarter of 2025, where North American ORV retail grew 9% on the heels of a successful FAC event. Trends within ORV remain consistent with recent quarters, with utility growing and recreation seeing pressure from external factors.

Because we serve customers who use our vehicles for work as well as for fun, utility growth more than offset softness in more discretionary recreational markets, resulting in ORV retail growth. ORV utility continues to be the biggest driver for our business, as it represents over 60% of Polaris Powersports sales. From the value tier RANGER 500 and Sportsman 500 to the new RANGER cab units, the premium NorthStar lines, and RANGER XD 1500, we give dealers and customers a broad and innovative utility portfolio. Six straight quarters of share gains reflect that strength. Additional data points that demonstrate our leadership position in ORV include this quarter marked our highest third quarter ORV share in the industry since the third quarter of 2019. The RANGER 500 helped our midsize portfolio of RANGERs gain more than 10 points of segment share in the quarter.

Our RANGER cab units gained multiple points of share in the quarter and still represent over 50% of our RANGER sales. Cab units with comfort features such as AC and heat continue to grow faster than the broader industry. For Polaris specifically, we have seen over 70% growth in utility cab units since 2023. We are shipping three new vehicles to dealers in the fourth quarter. The first is the Polaris XPEDITION with NUMATIX. This is our second generation XPEDITION, while competitors have yet to launch a product that we believe is comparable. The second is the RZR Pro R Boost, the industry's most powerful side-by-side with a leading 275 horsepower and 223 pound-feet of torque. And third is our new value tier ATV, the Sportsman 500.

Our close relationships with dealers is paying off as our survey work reflects an improvement in dealer sentiment over the last two years, with the recent data set showing us tied for the lead. And finally, our commercial government defense businesses deserve mention. Commercial demand is tied to infrastructure and data center construction, and these construction contractors rely on our purpose-built vehicles and our parts support to keep their projects running. In government defense, we're seeing growth across a range of customers and applications, supported by increased defense spending across the U.S., Canada, and NATO. These customers buy on government budgets and project schedules rather than on consumer confidence. That gives these businesses a different profile through the cycle than recreation. A highlight of the quarter for me was attending the ORV and Marine dealer shows and product launches in August.