Financial and Operational Highlights

• Second quarter reported and adjusted sales increased 40% to $2,117 million, a second quarter sales record
• Second quarter reported net income was $2.52 per share; adjusted net income for the same period was $2.70 per share
• Gross profit margin , reported and adjusted, for the second quarter was 26.0% and 26.1%, up 403 and 311 basis points over the prior year, respectively. The increase was primarily due to lower promotional costs and increased pricing, partially offset by increased input costs including supply chain constraints, logistic, labor and commodity prices
• North American retail sales decreased 28% for the quarter compared to uncharacteristically strong retail sales last year, driven largely by low product availability due to supply chain constraints limiting production. On a two-year basis, retail sales were up 14% over second quarter 2019 pre-COVID levels
• Market share improved during the quarter for ORV and boats
• Polaris repurchased approximately 0.8 million shares of Polaris stock during the quarter for $111 million
• Polaris increased its full year 2021 earnings guidance and now expects earnings to be in the range of $9.35 to $9.60 per diluted share. Full year 2021 adjusted sales guidance was narrowed and is now expected to be up 19% to 21% over the prior year

MINNEAPOLIS — Polaris Inc. released second quarter 2021 results with reported sales of $2,117 million, up 40% from reported sales of $1,512 million for the second quarter of 2020. The Company reported second quarter 2021 net income of $158 million, or $2.52 per diluted share, compared with a net loss of $235 million, or $(3.82) per diluted share, for the 2020 second quarter. The 2020 second quarter net loss includes a $379 million pre-tax, non-cash goodwill and other intangible asset impairment charge related to the Company's Aftermarket business, principally Transamerican Auto Parts (TAP). Adjusted net income for the quarter ended June 30, 2021 was $169 million, or $2.70 per diluted share compared to $81 million, or $1.30 per diluted share in the 2020 second quarter.

Ongoing robust retail demand requiring little or no promotional assistance, along with favorable product mix and pricing continued to drive improvements in the Company's performance.

Gross profit increased 66% to $551 million for the second quarter of 2021 from $333 million in the second quarter of 2020. Reported gross profit margin was 26.0% of sales for the second quarter of 2021, up 403 basis points compared to 22.0% of sales for the second quarter of 2020. The improvement in gross profit was driven primarily by higher volumes, lower promotional costs, favorable pricing and improved product mix during the quarter, partially offset by higher input costs including logistical costs, component costs and plant inefficiencies related to the supply-chain constraints and higher commodity prices. Adjusted gross profit for the second quarter 2021 was $553 million, or 26.1% of adjusted sales compared to the second quarter of 2020 adjusted gross profit of $348 million, or 23.0% of sales. Adjusted gross profit for the second quarter of 2021 and 2020 excludes the negative impact of $2 million and $15 million of restructuring and realignment costs, respectively.

Operating expenses decreased 46% for the second quarter of 2021 to $351 million from $654 million in the same period in 2020. Operating expenses decreased primarily due to the prior year non-cash impairment of goodwill and other intangible assets associated with the Company's Aftermarket segment, partially offset by an increase in total operating expenses to levels commensurate with the improvement in demand.

Income from financial services was $14 million for the second quarter of 2021, down 46% compared with $25 million for the second 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.

Interest expense was $11 million for the second quarter of 2021 compared to $18 million for the same period last year primarily due to lower debt levels.

Other (income) expense, net, was $3 million of income in the second quarter of 2021 compared to $1 million of expense in the second quarter of 2020. Other (income) expense is the result of currency exchange rate movements and the corresponding effects on currency transactions related to the Company’s international subsidiaries.

The provision for income taxes for the second quarter of 2021 was $49 million, or 23.4% of pretax income, compared with a tax benefit of $79 million, or 25.0% of pretax loss, for the second quarter of 2020. The decrease in the effective income tax rate is primarily due to favorable excess tax benefits related to share-based compensation on pretax income during 2021 as compared to the impact of deferred tax benefits arising from the significant pretax loss from the impairment of goodwill and other intangible assets in 2020, as well as the release of certain income tax reserves during 2020.

Off-Road Vehicles (“ORV”) and Snowmobiles segment sales, including PG&A, totaled $1,314 million for the second quarter of 2021, up 38% compared to $953 million for the second quarter of 2020 driven by broad based strength across ATVs, Side-by-Sides and Snowmobile sales. PG&A sales for ORV and Snowmobiles combined increased 31% in the second quarter of 2021 compared to the second quarter last year. Gross profit increased 45% to $365 million in the second quarter of 2021, compared to $252 million in the second quarter of 2020. Gross profit percentage increased 132 basis points during the 2021 second quarter compared to the prior year due to robust demand and historically low dealer inventories, which supported lower promotional and floor-plan finance spending, partially offset by higher input costs related to supply chain constraints.

ORV wholegoodsales for the second quarter of 2021 increased 38%. Polaris North American ORV retail sales decreased low-thirties percent for the quarter with side-by-side vehicles down low-thirties percent and ATV vehicles down high-twenties percent. The North American ORV industry was down mid-thirties percent compared to the second quarter last year.

Snowmobile wholegood sales in the second quarter of 2021 were $32 million compared to $12 million in the second quarter last year. Snowmobile sales in the Company's second quarter are routinely low as it is the off-season for snowmobile shipments.

Motorcycles segment sales, including PG&A, totaled $212 million, up 50% compared to the second quarter of 2020, driven by increased sales of Slingshot, Indian Motorcycles, and related PG&A. Gross profit for the second quarter of 2021 was $24 million compared to $4 million in the second quarter of 2020. The increase in gross profit margin was driven by increased volume and lower promotional costs, partially offset by increased input costs from supply chain constraints.

North American consumer retail sales for Indian Motorcycles increased high-twenties percent during the second quarter of 2021 in a mid-to-heavy-weight two-wheel motorcycle industry that was up mid-thirties percent. North American consumer retail sales for Polaris' motorcycle segment, including both Indian Motorcycle and Slingshot, increased low-twenties percent during the second quarter of 2021. North American consumer retail sales for the motorcycle industry including both two-wheel and three-wheel increased mid-thirties percent during the second quarter of 2021. Indian and Slingshot market share losses were driven by a lack of product availability during the quarter driven by supply-chain challenges.

Global Adjacent Markets segment sales, including PG&A, increased 98% to $154 million in the 2021 second quarter compared to $78 million in the 2020 second quarter driven by increases in demand in North America and EMEA. Gross profit increased 148% to $42 million or 27.1% of sales in the second quarter of 2021, compared to $17 million or 21.4% of sales in the second quarter of 2020. Gross profit percentage increased during the quarter primarily due to increased volume with lower promotional costs, favorable foreign exchange rates and increased pricing, offset somewhat by higher input costs related to supply chain constraints.

Aftermarket segment sales of $240 million in the 2021 second quarter increased 15% compared to $208 million in the 2020 second quarter. Transamerican Auto Parts (TAP) sales of $206 million in the second quarter of 2021 increased 9% compared to $189 million in the second quarter of 2020. The Company's other aftermarket brands sales were up 80% compared to the second quarter of 2020. Gross profit increased 32% to $63 million or 26.2% of sales in the second quarter of 2021, compared to $48 million or 22.9% of sales in the second quarter of 2020. Gross profit percentage improved during the quarter due to higher volume and increased pricing.

Boats segment sales increased 49 percent to $198 million in the 2021 second quarter compared to $132 million in the 2020 second quarter, driven by sales growth in all three brands, Bennington, Godfrey and Hurricane. Gross profit increased 155 percent to $47 million or 24.0 percent of sales in the second quarter of 2021, compared to $19 million or 14.1% of sales in the second quarter of 2020 due to increased volume and positive product mix partially offset by increased input costs related to supply chain constraints.

Supplemental Segment Data:

Parts, Garments, and Accessories (“PG&A”) sales increased 35C for the 2021 second quarter with all categories and business segments growing sales during the quarter.

International sales to customers outside of North America, including PG&A, totaled $311 million for the second quarter of 2021, up 64% from the same period in 2020. All regions realized significant sales increases year over year.

2021 Business Outlook

Given the 2021 first half results, and the expected continued solid retail demand and current dealer pre-order sales from consumers, the Company is increasing its full year earnings guidance and now expects adjusted net income to be in the range of $9.35 to $9.60 per diluted share, compared with adjusted net income of $7.74 per diluted share for 2020. Full year 2021 sales guidance was narrowed and is now expected to be in the range of $8,375 to $8,500 million, up 19 to 21%.