Harley-Davidson (HOG) 20 Apr 212021 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Group 2021 First Quarter Investor Analyst Conference Call. At this time, all attendees are in a listen-only mode. [Operator Instructions] Thank you. And now I would like to welcome Mr. Shannon Burns, Manager of Investor Relations. yours. is floor the Sir,

Good morning, everyone.

the You investor.harley-davidson.com. the this at supporting the can page. earnings of access Click center materials call the slides box in

call. Our noted materially the any different. are risks include, filings statements could comments with matters SEC. actual latest Those include obligation we earnings others, information risks and have cause be disclaims to in our to that that to results among today will in Harley-Davidson this subject update forward-looking release

this CEO, Officer, Goetter; O’Sullivan us are me and our get will joining Gina Joining Zeitz; CFO, let's morning Jochen be Jochen, Chief Edel for started. Commercial Q&A. also

us Thank welcome and today. our you, dealers, to valued employees like all community, I Shannon. shareholders, of the joining stakeholders would financial our are who

remains the strategy our pace and recovery our financial results to remember XXXX. strong the this As to quarter. numbers was that across of by it the of with am, new year, we however, pleased reflecting as positive business I demonstrated look important the we've seen very unprecedented XXXX, implementation

challenges, global effects manage to and continue iconic we continue at COVID-XX efforts the extraordinary world's the the delivering community team, mode impact We've able safety our the most of motorcycles. global forefront. disruption, overcome We ensuring with of keeping chain wellbeing the of supply employee through adeptly were to managing and shipping that building and

business through impact Hardwire particular leading parts can signs you due Rewire, execution returning, of we've positive region. having are see We taken American optimism As see COVID-related of consumer if and to the already lockdowns results, vaccination continued the on a and excitement today, lagging the delayed the the efforts. in world important reshape of initial the are early still to even in most North into our months the our actions can

one I'd ruling efficient taken Hardwire our hand a you organization. of we tariff the leaner, faster five-year European unfair, start EU. strategic XXXX more later, is but about Hardwire, and line to we more continue by stage delivering with I'll improving The to significantly amended made disadvantage I deliberate Harley-Davidson address and confident to HD in the talk competitive to in announcement the and one plan, regarding our yesterday EU culture. And the number exit is against attempt decision we As like I'm over create the the a by is to competitors. unprecedented, a before our Gina,

our we on the from legal in the to We Europe are to we as now bears of therefore men a immediate believe hands for and remains Every engineering, in repeating and our our It have should investing Pennsylvania. in of in are big tariffs we leading women are and an huge research, which bike be and committed firmly Instead, the innovation, American of our original if that America comes hardworking Wisconsin jobs overturned. at recovering tariffs, sell fighting launched challenge facing it war, ruling making. and we threatening our BOI the expert potential, in not correct, straight trade manufacturing. electric be not world advanced design facilities, could

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inventory motorcycle and Motorcycles share Harley-Davidson from $XXX with up unit year million, families versus a in with behind of lower had million $XX economic lapping last shift of $XXX The we XXXX. ahead first was was all year Inventories to of year, stronger Touring of on the important no supply our lower our at ahead product results the riding shift improve up of $XXX deeply, versus income, management COVID last driven in behind in segments segments. season. we $X.XX, mentioned, by the was up year declines profitability a versus inventory motorcycle increases on we both year provision. TAM impact are as to With our than growth across segment dealers XX% last under and reduction and materially strategic build launch work by which the better XX% or most of management. well improved $X.X of billion QX $XXX better Services strategic shutdowns a by delivered taken Jochen countries Cruiser due challenges. growth the to dynamics X% taken shipping QX, ago outlook. restore within which back key Total were of large related of and remember restructuring that to of and XXXX expense growth U.S. delivered is motorcycles operating for million actual year, transaction in and earnings new strengthened was down with within markets. retail the motorcycle the quarter. those and portfolio across through and The good of timing, stay-at-home network, loss year the core income in Touring strong units, price number ahead by retail an inventory than We coming QX with to sales a new with families, delivered the more United and our inventories year model start product a the in operating shift net XX% It's significant adjustments continuing Rewire million pricing stronger the in motorcycles are revenue favorable Operating year, a our Cruiser XX% of million dealer last inventory will losses last than demand COVID as Across driven in our segment result is MSRP. As to being reflecting year, States worldwide This to portfolio and profitability behind mix, as ago. our model of shift quarter start demand many work were charges product networks severely lower were protocols fiscal COVID-related reported pricing over new lower QX strained thanks Financial a our remained per product Internationally, Global mix near driven averages. and felt the of historical

incentives, from points small gross year. to versus and margin of QX. was as And XXXX lapping by on as at discounts points the unit the prior increased Looking offset new XX% more contribution from and of products. Cruiser driven we our of the volume, units volume we've was models. Motorcycle shutdown. Three our segment the of from accessories, pricing desirability Touring, profitable One Absolute revenue, mix realized the brand QX heavier percent rebuild we from six this corporate points the favorable declines came total the finally as the up incentives growth mix promotional up of parts than the as from less year, of of eliminated the stronger model and and launch of Hardwire last in revenue and and XX.X COVID point part and motorcycle lapping growth growth in X.X benefited in year periods of retiming came strategy of

our appropriately stimulus liquidity outstanding adjustment decreased from lower provision interest COVID-related end supply the $XXX estimated at able last was in logistics outlook and down of was an be driven in $XX proactively investments. higher result savings do losses to quarter, The extensions as The of was continue lifetime by year expense we payment tied continued qualified credit loan quarters. reflects of our margin customers. result Total our operating to XXXX, to Financial realize already as losses as well The of million improved last supported total levels credit represents a due noted as Services for QX federal offset losses back expect of Hardwire $XX of were we actual while losses in -- in elevated did to income operating was We the be As credit versus an down as year. the million, the some a the portfolio significantly versus granted and of related the Rewire The segment retail lower we decrease allowance customers due realized the retimed the packages the ongoing income debt economic shifts with timing and in initiatives other spent lower year, favorability to compared across the $XX spend Hardwire were prior up operating million to up executed in million pandemic. last provision recent to over QX average million. chain. an higher manage delinquencies, anticipated, quarter. XX.X% year expense. driven $XXX these actions drivers to subsequent Actual quarter during by Net lower by and

remained of to and QX, volume. seven on retail retail ratio rate under billion. were as made down accounts committed payment a at XXX of available over and favorable HDFS' majority The plus availability no sales, extension strong normalize to QX improvement first performance to of debt point XX-day had higher the total X.X%, and continues levels, assistance XX year. XXXX as HDFS' within approximately equity facilities COVID-related to well last motorcycle Focusing basis stimulus at as basis business, in one approximately for million retail in $X.X and of At their hand on ratio due one. federal year. motorcycle back for least XX.X%. was from but to of in delinquency levels levels. last cash $X.X the equivalents manage to and approximately retail extended after loss is The debt and vast end between Cash were also quarter the share QX, favorable XXXX pull behind at of in covenants and gradually elevated largely up X.XX%, well credit was U.S. credit have down the HDFS new cash XXX liquidity conduit expiration billion its $X.X XX.X% than strong delinquency year period. its compared HDFS cash five points The originations new the extensions. Market $XXX last higher base of down times versus equivalents used financing new elevated, billion we cash origination remain

conditions, the time the up over remain influx prior we stimulus We balances ended which equivalents and normalize we expect net improved the year. do cash rates improved end Wrapping the first of million worked While inventory higher economic last million given through year. but cash QX of levels. income of QX Harley-Davidson $XXX $XXX Cash cash at than the results. funding the million, were that XXXX, $X.X with year, delinquency Key most higher Inc. million financial over the the improved drivers the could $XXX lower cash operating quarter face in quarter billion, delivered flow the of flow it's losses likely down held as than of pandemic. were up low of and and $XXX gradually less is

Finally, QX income XX%, the QX, tax slightly was rate lower company's effective than XXXX.

number over the factors Looking our the had in the us up taking a previous year, guidance forward to estimate. the given quarter that balance confidence of in occurred of

impacted outlook our to with we improved in headwind U.S. First, continued rollout. federal numbers, Also, on economic the a cost and vaccine in have built is newly supply we unemployment our the on ability the stimulus significant original clarity progress the COVID falling had challenges in and plan. approved chain a the much as which adapt, global better

our motorcycles, to most XX better for of Tutoring model segments we Cruiser. a able than much Finally, demand anticipated, get which year read and new we in our on had also large been is have particularly stronger profitable profitable

growth our revenue XX%. As of from be an to XX%, to increase XX% are factors, range XX% the previously a of raising these result we growth Motorcycle to communicated segment

range X%. is situation, EU improved to supply onto of This of the ability outlook from increase Motorcycle headwinds. communicated X% updated chain segment point and the to up basis a guidance global X% an Moving tariff operating our reflects regarding the outcome a to our income X%, range confidence successful continue navigating in assuming demand margins, XXX previously through

to The communicated impact resolution if previously are original to to XX%, unable operating segment us X% the we of range from guidance primarily the back X%. is bring additional to our income increase loss of tariff, XX% However, reach EU growth the to provision Services guidance would Financial an adjustment. driven XX%, XX% now by negating the

$XXX of guidance $XXX million. Lastly, guidance original remains to our capital million expenditures flat to

launch year a be this model we shift that tricky. the can Given our cadence, guidance of acknowledged modeling out bit

revenue split. we've help and that, how profit transparency is on our Given XX margin provide to slide added

to of approximately year come our XX% revenue the the the first as of half expect year our season. momentum ride We model through in riding the we of launch

we'll As the from back factories the into QX in XX. come model and production down will start we get to inventories QX, we half, the change begin in to see on over peak year

against will shipments progress of we XXXX. Finally, of Rewire the face took savings and of will it cost experienced to the turn be executing take in remember what half impact Hardwire through our and back that who in to in will back similar lapping actions the I'll our us we begin on plan. initiatives Jochen, QX. The patterns inventory we pandemic beginning the strategic our savings

set changes we to believe you, that here. us have not Thank We will up rest Rewire implemented with and the win, Gina. substantial

additional is speed, implemented strategic as continue the We organizational continue alignment to will we plan explore deliver and Hardwire efficiency. opportunities and to as

capabilities we first model These a As and decision manifested strong the in willingness Harley-Davidson principles on coincide been reinforce organization our changes move the winning and team pandemic by start we've to of powerful see significant our quarter, Harley-Davidson. growing new history. number are can year the and for and this in of with that riding Through high-performing first our time we is leadership mission the close seen we've the over to This quarter, our first quarter past of the results one, year. defined based course and through XX this the powered of win. season first of to into the pillars vision transformation modern journey

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strong increase strong a to the and and program. and potential of words demand logistics to summarize. our to the our quarter, in the supply in increase as the full year. associated an them to despite the performance deliver riders That guidance, chain more In expect we overall confidence Certified will supply pandemic recognize an HD would addition, related motorcycles, customers our for to the challenges and drive enhance unprecedented us allowing customer level and with well special financial risks QX We the the connectivity experience, Harley-Davidson support of invitation access with to Harley-Davidson engagement into their financing rates community. few be available purchase confidence through believe providing HDFS have to the and added an Gina The continue year. mentioned, the challenges said, chain performance, into gives A

one to close up before. we through recognized other this to has ever and iconic brand globally. craftsmanship With is XXX the comes is been of design, stronger and be most Harley-Davidson. uninterrupted powerful than We've change, significant years but us unique. Our I believe heritage, brand it No of set are change even

rest we take not will we We do. your are best-in-class I everything in until will now questions.

Thank Your from question the and line of is Craig Kennison first Blair. you. from [Operator William Instructions]

open. is line Your

heard certainly We've taking feedback frustration. It's from Hi. on are Baird. good Thanks but satisfied of model, dealers lot the Yeah. for availability that Craig the you the on model? my a of desirability with of We've question. America. It's Pan particular from heard

that it's get I among incredibly product dealers hot on just can't it. think they an saying that their hands

Just or trying for to whether get in the struggling plan the channel. you're that's part of bikes whether to figure enough out scarcity

-- at we No. said that are of always launch launch Not quite we've decoupling the actual our bikes. online opposite. struggling all, the But delivery from the the

in it because the will May and So, bikes the launched delivered the product. ship the particular, our June markets of excitement as -- U.S. we out in the independently our results test the of feel to actually press the We we be test we get want around bikes -- as international and to in And we've bikes. before there build wanted dealers markets.

an amount everybody wanted from launch ready actual of have said, the we XXX% pre-orders We we decouple quite marketing are launch. a already, delivery But and as get of for bikes our we astonishing and to the ready.

So, with of happy shipping we're dealers as month. product very that. and are -- the the next And

you. Thank Okay.

is Robby line America. Bank the Ohmes of from next of from question Your

line is Your now open.

for dealer talk could in thanks my I Jochen, feedback morning. Good question. general. about taking And you was hoping

going right initiatives many on got now. You've so

timing change. You've got the year model launch

feedback this some got on feels happened So so now that which the -- far. to dealer quarter, so how you've

You've electric. got

out. rolling program certified the got You've

so response the thought what got the far. many You've how these you has -- really just same And the been create you've about good that issues? been about you you're just under initiatives maybe icon not if time, good so far got have dealer maybe at a pushing Can lot now what's could broadly and dealers models. from talk

change need change mean, the change a change profitability year, icons, whether But our programs, all Dealer I positive heard And programs, with just Thanks heard America, personally positive is company, to us. the of we now. And we but Yeah. our are Pan I've dealers up as significantly. model only news. feedback. question. I launching speak it's nothing for lot like have the the and that's certified as a of literally we

talking first guys dealers time, know we you we Obviously, getting mean, issues feedback. in the the that I you're So, so supply quarter. to had the are chain all

had a and had in stressed raw It because had of we Coast challenge. bikes on and are transportation just networks. was but bad high material shortages. the the severely where call we out February, -- demand. East the the in bikes We also getting manufactured bit So it a weather Texas, historically perfect was component significant We not storm

and together. those night, that switching posed companies to we then made certainly trucking we logistics we've at overcome the firm the weekends put decision. You'd believe the challenges. but challenges, And get right a new over And trying to come to its on

if through, would the at you So, market feedback. overall, and But, course, it but deliveries working. our say, results positive the shows very share look retail challenged, were our sell measures our of and I that are

so Thank you Terrific. much.

Sure.

from is the Sir, Citigroup of next Your is Research. Shawn question open. line Collins your from line now

Yeah. Great. morning. and Good Edel Hi, Shannon. Jochen and Gina,

Morning.

Europe. and supply in transport commentary about severe things there how of retail ask of model Suez helpful. wanted for roughly is Obviously, Hey, I XX% upon maybe chain your more Europe? and changes type delays in might incident shipping congestion, know be down but I volumes. global updated of lockdowns mentioned just what and shipping the of And Thank kind Europe. color -- Europe? to you. Canal also sales quarter, Harley touch Obviously, the some COVID in any delays strategy new you was a Retail XX%. in Harley these were about Can -- on and soft you provide XX

question. So, and you this to take is Edel. Nice happy meet to your

situation in globally. containers Europe Canal of from exactly mentioned shipping the disruptions, quarter well the you as our also other It than starting that made think Hardwire were our as part Suez changes important availability the just and Euro shipping for by the the the factors lineup, some X the be lower availability driven well as some COVID X, all was of strategy terms that in to you Euro volume I in which levels. of is the mentioned the Sportster compliance, from QX, of lockdowns, note continue certainly that of of to historical as the first as

in for XXXX think And a it's in about important very as the much and and as of for as Pan the platform for allow actions we which middleweight taking all we're will be small that impact European on that positive size. Revmax America, I forward, well, the potential way to market also think competitive us and Cruiser, extending our product the the about region, And excited of beyond. have Jochen new Looking incredibly an new launch a will third the that mentioned, to we're a overall in Europe.

very fronts, the So, opportunity but for a a QX forward continent. of stressed a certainly of variety going on combination

Great. helpful Gina. That's

walk narrative mentioned through development you industry, with kind developments the I'm surprise this quick Thanks. me. up staying just but yesterday, was for to the of Obviously, of tariff yesterday? a EU this a newer Can news us to follow-up, Europe. some and the you that leading Just

I which relocation put something I'd will import like we from X% of and the at we that's assuming to essentially higher accept. XX%, The that press mean, the tariff, tariffs manufacturing an like release Brussels, us the we that into to to And yesterday. five at obviously Yeah. to important And the our make -- the had EU, mean, withdrew I total international June Europe. not lead that refer our in into total of BOI is the from X% effect request then Europe a was revoked. come XX%. Europe out BOI, and a increase to essentially obviously will U.S. you unacceptable the allowed products and region of would that and the an uncompetitive in between to

our statement mind, don't So, to you what and said news, refer more press for I'd to like if I to earlier.

Okay. you and Great. the insight. Thank for time

from the Morningstar. of Your line next Jaime question from Katz is

is open. line now Your

Good morning.

can that the us share sort repealing date? on back piggybacking before a sort with start like June and what of of probability what this question, is timeline you of the looks for it being stepped tariff, Just

will be of lower appeal that's soon allow don't so point. as we asking import disclose ruling to really us But process, for the communicate all much more. at but an But until we its as are as a launching is temporary import this relief, too lawyers a say can certainly which will we are more know we at on can't Well, will it rate The point. at essentially we know, essentially final know -- takes being this the we until from continue in And to speak. cause, we charge made. would there we

you of called in Thanks. the out prior stimulus been as curious helper. you I I'm Okay. offerings. if And And magnitude or help potential quantify that a think can stimulus what remind us might've

I a but and allocate the have effect on an by overall have Well, that exact received customers economy. stimulus had consumers, we think the positive been number, obviously can

assume we actually for quantify to So, impossible. the consumer, the same but case is is our that

you. Thank

Securities. Your the from next line Hardiman question is from of James Wedbush

open. now Your is line

you are my do to commentary part question. you Hey, some that ultimately? it had XQ good says, units like inventories there more It's for domestically talk that seems hand. the answer -- I how is when over of guys you you get and question answer however how to taking right inventory around It see And about that or quarter, had is, do complicated yourself for they both if done, obviously, to by of coming and you channel? maybe they finishing bit Thanks the better want seasonality the dealer but get it's every inventory on see of amount so My do dealer morning. drawdown the sort idea Whether was is XXXX a this, internationally. like also the more the which bikes. think the you year? question, XQ, certainly sounds sure could do what days think you we and ask where exactly that not And you'll bikes, sell for to yet but

the and retail result, has earlier, in modified especially a Well, our numbers, speech my first, we've strategy. obviously, in as said I demand production strengthened, as March pick up

running now maximum QX. in at capacity are available We

are We quarter model in support be of to QX. mind the we the increase fourth early in Bear next model third that opportunities the assessing the year. production will in current in production to and changing year though our

capitalize we're in growth said, And working So, then. happening seeing that within been those chain compromising in of on strong process through has I without can so the our today, timing preps the right XXXX. demand but challenged. obviously now, be supply That we we said, global the will as the that are

I retail getting extraordinary. missed they're selling they way don't taking into we they more, think QX our the the numbers you is pre-orders as sell dealers to more we in getting reflected out sure make the And bikes the and that want continue see we've and of that desirability that more, soon an the can sales we I And them. brand is where quite they think the of strong extent dealers believe are are came consideration to in taken those are that those as quarter.

you're you maybe there retail up comparison, brought like towards numbers. the sort quarter? really apologize. end seeing it And in I retail obviously -- a But trended quantify, an just to clarification, of sounds was there easier what But of was the how Obviously, March. the maybe is Can it than you March that. pickup within more

over compare relative you course but the the to quarter. XXXX, strength don’t maybe know I to want it to speak the if So, of

other as don't compare XXXX or really I in of I we to March than We're pushed with can't think seeing values can -- or actually XXXX, we we below we the the bikes mean, demand lot we it transaction XXXX, into still market well I a XXXX, push compare or MSRP. and actually XXXX, of you had can -- Yeah. because were the the that. in model where compare -- know. not MSRP

significantly. great. values up seeing are prices new or spike -- MSRP, which near, seen is We've We transaction at

strategy consumers for buy retail of well that significant that but that And earlier, in a March. and we two model our our saw because to Better So pickup said, expected and weather of the we've January, in -- in for increased the significant not enhance our -- comparison had an And to parts obviously giving saw than package we we saw guidance and America. adjusted February, which guidance, March effects. incentive stimulus year. hitting accordingly but as mentioned in I as many uptake in are with monthly March production year we

everybody. Thanks Jochen. you, Thanks it. Got

Capital the from line Joseph is question next from Spak of Your RBC Markets.

open. now is line Your

Thanks the question. Gina, just maybe for housekeeping. taking some

and back? maybe for then Hardwire that at will and help? logistics that You quarter to how from some did similarly, And that when you we headwind supply mentioned related the expect the lower quantify much some expense investments. least come And this How should chain be? helped much can shift year, timing

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balance OpEx, will look Rewire our say would be to it, the quarters. and the is in favorability you year. through of subsequent of half stick -- associated initiatives play it through with retimed will I that the about For saw at is it the as you quarter roughly half of And

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potentially you you If to then lose or Europe, decision, would rates. that And other in you're in case appeal, you can a still at paths import worst you take? mean where are current scenario exit potential the look could does there

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Okay. Thank you.

from Gerrick question open. next Johnson is Sir, now BMO Markets. Capital line line Your from of your is the

the dynamics that might partnership choose. right there, Okay. in coming what Thank certain dynamics as Asia you so know many. So, the be well profitable The exiting QJ are markets where about what's from there? not I the don't impact to Asia-Pacific? through now? How as

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Yeah.

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from from James. the question of Altobello line next Raymond Your Joe is

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take the part to first happy of the I'm Certainly. question.

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Research. is from Your line next Badishkanian Greg of question from Wolfe the

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is of last question from Stanley. Morgan Your from the line Kovanis Billy

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quarter. the on Congrats

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primary I of that earlier our of all all said think is -- I as So, is built which the around desirability, strategy. driver

please go Mr. ahead. Burns, Shannon

for have for Thanks a All call That's and our right. Thank you us, everyone today. hope joining day. you fantastic everybody.

Thank you everybody.

And with Thank conference that, attending. for this call. you concludes today's

may You now disconnect.