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Performance exceeded expectations driven by double-digit growth in the utility RANGER line and commercial business, offsetting continued weakness in the recreational category.

Gross margin expansion of 389 basis points was achieved through favorable product mix, net pricing, and lean manufacturing efficiencies, despite a 240 basis point headwind from tariffs.

Management attributes the 14% organic sales growth to a strategic focus on the utility segment, which now represents 70% of Off-Road Vehicle (ORV) revenue.

Operational improvements are linked to the 'lean journey,' with factory utilization increasing toward 70% and structural savings reaching over $240 million.

Market dynamics showed a mid-March retail dip correlated with geopolitical tensions and oil prices, followed by a return to growth across most categories in April.

The earlier-than-expected closure of the Indian Motorcycle separation has allowed management to refocus on its core Powersports and Marine segments, with the separation expected to be accretive to adjusted EBITDA.

Guidance assumes a relatively flat retail environment for the remainder of 2026, with production and shipments strictly aligned to retail demand to maintain healthy dealer inventory.

The tariff mitigation strategy aims to reduce China-sourced material costs from 14% to below 5% by the end of 2027 through supply chain localization.

Financial results are expected to return to historic seasonal patterns, with the second and third quarters projected as the highest revenue and EPS periods.

Management is maintaining a prudent outlook due to external uncertainties, including potential changes to USMCA and Section 301 trade policies and volatile consumer sentiment.

The Indian Motorcycle separation is expected to be accretive by approximately $50 million to adjusted EBITDA, with impacts weighted toward the second half of the year.

Total tariff costs for 2026 are projected at approximately $215 million, with recent Section 232 changes effectively offsetting benefits from the IEEPA ruling.

A $22.5 million one-time adjustment was recorded to support a distressed supplier through bankruptcy to ensure component continuity and protect future margins.

Commodity headwinds, specifically in steel and diesel, are expected to double from initial $20 million estimates to over $40 million for the full year.

Polaris intends to seek refunds for approximately $125 million in IEEPA tariffs paid previously, though this potential benefit is excluded from current guidance.

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Management confirmed that a $40 million benefit from the IEEPA ruling was almost perfectly offset by a $40 million headwind from new Section 232 tariffs.

The impact of Section 232 is felt almost immediately because dealer inventory has already been recognized as revenue and is being replenished daily.

Management believes there is limited price elasticity remaining in the market following significant post-COVID price increases.

The strategy focuses on product innovation and market share gains rather than aggressive pricing maneuvers to offset competitor cost structures.

Management views the current recreational slowdown as cyclical rather than structural, noting that vehicle usage metrics like oil and parts consumption remain high.

The 'want' nature of recreational products makes consumers more sensitive to macro stability, leading to an extended replenishment cycle that management expects will eventually normalize.

Approximately $30 million in operating expenses were pulled forward into Q1 due to the timing of corporate costs and higher incentive compensation accruals.

Management expects these costs to normalize over the remaining three quarters, keeping full-year OpEx within original guidance ranges.

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