Polaris (PII) Q4 2025 earnings summary

Executive summary

• Achieved strong Q4 and full-year results with market share gains in all major segments, supported by innovation, operational improvements, and portfolio realignment, despite significant tariff headwinds.

• Reduced China-based spend from 18% to 14% of material COGS, with over $100 million reduction and a target below 5% by 2027; generated over $60 million in manufacturing savings.

• Indian Motorcycle separation on track to close by end of Q1 2026, expected to be immediately accretive to EBITDA margins and adjusted EPS, with transition service agreements in place.

• Dealer inventory levels are healthy across ORV and Marine, with a strong mix and reduced aged inventory, supporting channel health and future growth.

• Year-end financial results exceeded original 2025 guidance excluding tariffs, with strong cash flow and improved net working capital.

Financial highlights

• Q4 adjusted sales were $1.9 billion, up 9% year-over-year; full year adjusted sales were $7.1 billion, flat year-over-year.

• Q4 adjusted EBITDA margin was 5.1%, down 448 bps; full year adjusted EBITDA margin was 5.7%, down 311 bps.

• Q4 adjusted EPS was $0.08, down 91% year-over-year; full year adjusted EPS was ($0.01), down $3.26 year-over-year.

• Q4 cash flow from operations was $179 million ($120 million FCF); full year free cash flow was $605 million; paid down $530 million in debt.

• Tariff headwinds of $37 million in Q4 and $82 million for the year, largely offset by operational efficiencies.

Outlook and guidance

• 2026 sales expected to grow 1%-3% to $7.2-$7.4 billion, with organic growth of 7%-9% excluding Indian Motorcycle.

• Adjusted EBITDA margin projected to expand 80-120 basis points, despite ~$90 million in incremental tariffs.

• Adjusted EPS guidance for 2026 is $1.50-$1.60, including $0.75-$0.80 benefit from Indian Motorcycle separation.

• Q1 2026 sales expected to grow over 10%, but tariffs to be a $45 million headwind and adjusted EPS expected at approximately -$0.45.

• 2026 adjusted guidance excludes $32 million in restructuring and integration costs, $33 million in class action litigation expenses, and $18 million in intangible amortization.