Polaris reports record sales and earnings in 2021

“Marking a strong finish to the year, we delivered record sales and earnings in 2021, propelled by the Polaris team’s dedication and tenacity as they capitalized on opportunities while navigating the macroeconomic-related headwinds. Innovation remained the cornerstone of our culture, supported by the introduction of several new category-defining vehicles this year. With interest in powersports continuing to grow and new customers increasingly entering our industry, we expect 2022 to be another record year for Polaris. Leveraging the company’s strengths and scale as the global leader in powersports, our refreshed strategy and new strategic objectives will guide our path forward to create greater competitive advantage, welcome new customers and grow the market, drive profitable growth, and deliver value for all our stakeholders.”

That’s how Mike Speetzen, CEO of Polaris, described the company’s performance in the fourth quarter and full-year 2021 today.

Among the highlights:

• Full year reported and adjusted sales increased 17% to a record $8.198 billion
• Full year 2021 reported net income was $7.88 per diluted share; adjusted net income for the same period was a record
• $9.13 per diluted share, exceeding previously issued guidance
• Fourth quarter reported and adjusted sales increased 1% to $2.170 billion
• Fourth quarter reported net income was $1.40 per diluted share; adjusted net income for the same period was $2.16 per diluted share
• PG&A and International reported strong sales increasing 24% and 34% for the full year 2021, respectively
• Market share improved during the year for ORV and Boats in North America; Internationally, market share improved for all powersports segments in 2021
• Expanded and strengthened the ORV, Snow, Motorcycle, and Boats product portfolios with over 30 new vehicles and nearly 500 new accessories in 2021
• GEM and Taylor-Dunn businesses divested during the quarter
• Polaris announced full year 2022 sales and adjusted earnings guidance with full year adjusted net income in the range of $10.10 to $10.40 per diluted share and full year sales up in the range of 12% to 15%

Here’s a closer look.

Polaris Inc. today released fourth quarter 2021 results with reported sales of $2.170 billion, up 1% from reported sales of $2.156 billion for the fourth quarter of 2020. The company reported fourth quarter 2021 net income of $87 million, or $1.40 per diluted share, compared with net income of $199 million, or $3.15 per diluted share, for the 2020 fourth quarter. Adjusted net income for the quarter ended Dec. 31, 2021 was $134 million, or $2.16 per diluted share compared to $211 million, or $3.34 per diluted share in the 2020 fourth quarter.

Gross profit decreased 19% to $445 million for the fourth quarter of 2021 from $550 million in the fourth quarter of 2020. Reported gross profit margin was 20.5% of sales for the fourth quarter of 2021, down 499 basis points compared to 25.5% of sales for the fourth quarter of 2020. The decrease in gross profit was driven primarily by higher input costs including logistics, components and commodity prices, as well as plant inefficiencies related to supply-chain constraints, partially offset by increased pricing and lower promotional costs. Adjusted gross profit for the fourth quarter 2021 was $447 million, or 20.6% of adjusted sales, compared to the fourth quarter of 2020 adjusted gross profit of $552 million, or 25.6% of sales. Adjusted gross profit for the fourth quarter of 2021 and 2020 excludes the negative impact of approximately $2 million of restructuring and realignment costs in each period.

Operating expenses were $303 million in the fourth quarter of 2021 compared to $304 million in the fourth quarter of 2020. Operating expenses as a percentage of sales, improved 16 basis points in the fourth quarter 2021 compared to the fourth quarter of 2020.

Income from financial services was $13 million for the fourth quarter of 2021, down 27 percent compared with $17 million for the fourth quarter of 2020. The decrease was due to lower retail financing income resulting from lower retail sales and lower penetration rates at our retail financing providers and a decrease in wholesale financing income due to lower dealer inventory levels.

Polaris Fourth Quarter & Full Year 2021 Results

Interest expense was $11 million for the fourth quarter of 2021 compared to $15 million for the same period last year primarily due to lower interest rates.

Other (income) expense, net, was $8 million of expense in the fourth quarter of 2021 compared to $1 million of income in the fourth quarter of 2020. During the quarter, the company recorded an impairment charge of $8 million related to an investment in a strategic partner that was associated with a divested business. Other (income) expense is also impacted by currency exchange rate movements and the corresponding effects on currency transactions related to the Company’s international subsidiaries.

Loss on sale of businesses was $37 million for the fourth quarter of 2021. The loss related to the divestiture of GEM and Taylor-Dunn during the quarter.

The provision for income taxes for the fourth quarter of 2021 was $12 million, or 12.3 percent of pretax income, compared with $49 million, or 19.9 percent of pretax income, for the fourth quarter of 2020. The decrease in the effective income tax rate is primarily due to the decrease in pretax income, as the beneficial impact of discrete items increased with lower pretax earnings as compared to the fourth quarter of 2020, favorable income tax benefits in jurisdictions with lower tax rates, as well as favorable income tax benefits from research and development credits.

Off-Road Vehicles (“ORV”) and Snowmobiles segment sales, including PG&A, totaled $1.431 billion for the fourth quarter of 2021, down 2% compared to $1.468 billion for the fourth quarter of 2020 driven by lower volumes due to supply chain constraints, as well as related component shortages, which impacted the cadence of shipments, partially offset by price increases. PG&A sales for ORV and Snowmobiles combined increased 12% in the fourth quarter of 2021 compared to the fourth quarter last year. Gross profit decreased 29% to $274 million in the fourth quarter of 2021, compared to $387 million in the fourth quarter of 2020. Gross profit percentage decreased 724 basis points during the 2021 fourth quarter compared to the prior year due to higher input costs related to supply chain constraints more than offsetting increased pricing and lower promotional costs.

ORV wholegood sales in the fourth quarter of 2021 decreased 7% percent. Polaris North American ORV retail sales decreased mid-20% for the quarter with side-by-side vehicles down mid-20% and ATV vehicles down about 30%. The North American ORV industry was down low-20% compared to the fourth quarter last year. ORV market share loss was due to the impact of supply chain disruptions to product availability.

Snowmobile wholegood sales in the fourth quarter of 2021 increased 2%. Polaris snowmobile retail sales were down approximately 30% during the fourth quarter of 2021 compared to the prior year while North American industry retail sales were down low-20% for the fourth quarter compared to the prior year.

Motorcycles segment sales, including PG&A, totaled $150 million, up 2% compared to the fourth quarter of 2020. Gross profit for the fourth quarter of 2021 was $3 million, or 1.7 percent of sales, compared to $1 million, or 0.8 percent of sales, in the fourth quarter of 2020. The increase in gross profit margin was driven by favorable product mix and lower promotions costs, offsetting higher input costs driven by supply chain constraints.

North American consumer retail sales for Indian Motorcycles decreased low-double digits percent during the fourth quarter of 2021 in a mid-to-heavy-weight two-wheel motorcycle industry that was up mid-single digits percent. North American consumer retail sales for Polaris’ motorcycle segment, including both Indian Motorcycle and Slingshot, increased low-single digits percent during the fourth quarter of 2021. North American consumer retail sales for the motorcycle industry including both two-wheel and three-wheel increased low-single digits percent during the fourth quarter of 2021. Indian market share loss was driven by a lack of product availability during the quarter driven by supply chain challenges.

Global Adjacent Markets segment sales, including PG&A, increased 23% to $174 million in the 2021 fourth quarter compared to $142 million in the 2020 fourth quarter driven by strong international and commercial sales during the quarter. Gross profit increased 14 percent to $47 million or 26.8 percent of sales in the fourth quarter of 2021, compared to $41 million, or 29.0 percent of sales in the fourth quarter of 2020. Gross profit percentage decreased during the quarter primarily due to higher input costs related to supply chain constraints, partially offset by improved product mix.

Aftermarket segment sales of $234 million in the 2021 fourth quarter decreased 2% compared to $238 million in the 2020 fourth quarter. Transamerican Auto Parts (TAP) sales of $178 million in the fourth quarter of 2021 decreased 5% compared to $186 million in the fourth quarter of 2020. The company’s other aftermarket brands sales were up 9% compared to the fourth quarter of 2020. Gross profit decreased 3% to $63 million, or 26.9% of sales in the fourth quarter of 2021, compared to $65 million, or 27.4 percent of sales in the fourth quarter of 2020. Gross profit percentage declined during the quarter due to lower sales volumes and increased input costs, partially offset by increased pricing.

Boats segment sales increased 12% to $180 million in the 2021 fourth quarter compared to $162 million in the 2020 fourth quarter, driven by sales growth in the Bennington and Godfrey brands. Gross profit increased 2% to $36 million, or 19.8% of sales in the fourth quarter of 2021, compared to $35 million, or 21.5% of sales in the fourth quarter of 2020. Gross profit percentage decreased during the quarter due primarily due to higher input costs related to supply chain constraints partially offset by increased pricing.

Supplemental Segment Data:

Parts, Garments, and Accessories (“PG&A”) sales increased 13% for the 2021 fourth quarter with all categories and business segments growing sales during the quarter.

International sales to customers outside of North America, including PG&A, totaled $278 million for the fourth quarter of 2021, up 4% from the same period in 2020 primarily driven by Adjacent Markets and PG&A sales.

2022 Business Outlook

The company announced its sales and adjusted earnings guidance for the full year 2022. Sales are expected to increase to the range of $9.215 billion to $9.455 billion, an increase of 12% to 15% over 2021 adjusted sales of $8.198 billion and adjusted net income is expected to be in the range of $10.10 to $10.40 per diluted share for the full year 2022, an increase of 11 to 14% compared to adjusted net income of $9.13 per diluted share for 2021.