Harley-Davidson (HOG) 27 Apr 222022 Q1 Earnings call transcript

Thank you for standing by, and welcome to the Harley-Davidson 2022 First Quarter Investor and Analyst Conference Call. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Shawn Collins. Thank you. Please go ahead.

you. Thank everyone. morning, Good Collins, of Shawn Harley-Davidson. Relations the is Investor Director at This to call. earnings QX Welcome XXXX our

You the at investor.harley-davidson.com. can the on access slides supporting call today's Internet

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

and Zeitz; Jochen Gina CEO, are morning this me CFO, Joining Goetter.

In O’Sullivan, Q&A. addition, will join Jochen, let's Commercial Officer, Chief Edel for get the started.

morning, Thank you, Shawn, Thank joining and good us today. everyone. for you

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revenue revenue driven that And work impact X% $X.XXX while the billion, the quarter important we growth. acknowledge improve we to consolidated year, in anticipate with challenges to had HDMC it's to our expect to to XXXX by are to primarily up that we was QX pleased during First the momentum industry. continue and significant supply the and through to start

improvements half on environment to year. supply the the optimistic cautiously in are second chain We of the

be the organization, foundation However, focus this more difficult journey Hardwire milestones delivery and as company's both stronger on. the success. a last of is brand remains update and Hardwire will provided That as set we getting comprehensive presenting May, the desirable certainty. In the speed. to culture Hardwire, the huge and including realignment our with to In this delivery a Rewire the long-term of our performance, efficiency, creating is potential, comprehensive continue the to company for against recap quarter, the of unlocking a we At strategy. we we of important transformational our our said, part predict of

address our delivery briefly I today, aligned them. and So to against quarter only from our pillars will focus. strategic some highlights the Profit

on our but market also with committed year Large these each and Harley-Davidson. profitable our a performance globally, have motorcycle we desirability with eight build model our to Further a reveal this context, Faster to new legacy our January Hardwire, our at the In to motorcycles With extra riders powered commitment and of segments strategy XX added Touring, segments; new of position in Harley-Davidson. most lineup to factory Milwaukee-Eight untapped world. to increase installed in models, and factory motorcycle potential ever these introduce the segments launch, Cruiser are made only in and compelling the the incredible custom for to but and the we strongest with know, that more strengthening riders Harley-Davidson best, on by in motorcycle inspire those the want we biggest powerful desirable customers and brand engagement, XXX, the the as are position Not Trike. building in in of you drive believe our most the As engine growing choose who series while nothing align offered the we style to most

of Growth and demand future on the a our transaction Low ahead, indicator and interest from good view. models motorcycle from untapped H-DX Harley-Davidson the desirability company's Rider ST, ST work we've we Street last Grand that in-person on the important and seeing able new its the to first are as premium brand Glide look and Low continues the in with the the Lead lifestyle the pandemic this be grow. mission and launch, asset sport at our LiveWire Experience are American Harley-Davidson to the build believe the our brand accessories, most and technology. from New as the CVO. success electric. to in bikes. grow We four is cruiser Touring consumer staying on company segments. we included these as offering been and is Line, to in we Financial remains to the we're forefront legacy customer a the one forward electric continues Malibu began. Services LiveWire models models to Harley-Davidson's parts performance-driven potential the beyond the S strong. in first committed and been Road for Center Glide the in building brand HDFS the ST to to listing powerful both the new markets. QX. we more drivers Operations, product. motorcycles brand licensing look desirable Electric Building our of Harley-Davidson are that our our announcement motorcycle has brand, performance-driven important We lineup response Since a point recently leader, opened marketplace, apparel of year, to Custom towards forward building electric super very revenue And Vehicle to EV Rider The world. widening awareness future the track and events look LiveWire since an to on as in and is global of base. providing to we and important HDFS And of market

interest offset losses in resulting begin This normalize quarter, higher credit by provision expense. credit lower seen a for to we've losses, retail partially

parts is saw from in North business believe look strong trajectory America. riders as to the culture long-term particularly area and for heart accessories, there Harley-Davidson theirs. make Harley-Davidson to strong and performance more accessories uniquely continue growth motor the the especially personalization and With that parts growth a we quarter and potential brand, at This of is

separate quarter growth The supply apparel business. the and in saw time This in we licensing against are our modest as a growth is business first licensing challenging unit. reporting and quarter a apparel backdrop strong

Report, of planet publication and management to inclusive achievements of some and Harley-Davidson And Looking power this ahead, saw globe. in the Management people, of grow the profit. the annual our across of brand the Stakeholder licensing, both the stakeholder the leveraging by key highlighting lastly, Inclusive context excited the we're company the quarter apparel that potential through

to brand prioritizing by it with and commitment brand, great evolve of great and planet profit Harley-Davidson to emissions stakeholder six to our for The to through Harley-Davidson place include our through of report only XXXX a into promoting to achieving emissions home creating We net path making our continue Milwaukee, and company work Hardwire XXXX, management redefine our carbon in and but through the inclusive LiveWire strategic neighborhood not a and Foundation's our visit. live preserving by reduce a for implementation one priorities. and zero as place highlights people the investment the social carbon

have sessions. you to numbers. forward to to to to before the the years proud our And to to We over looking in XXth through forward hand over to investor But on Inaugural now of that and ahead. hand May we're be I for LiveWire Gina to of Gina, welcoming I'll reiterate Milwaukee I the Harley-Davidson want many of run much much look

Thank you, Jochen.

reflect but in and results begin loss we a lapping year's last decline performance continue rates volatile release. to as supply lower result profit revenue quarter a operate as operating record and HDFS allowance and we First within year-over-year environment, growth inflationary the reserve of chain

material volatility, raw experienced deal constraints semiconductor higher We inflation supplier with consistent back at broad from what we with levels prices shortage, continue XXXX. to of half in and the resulting the with global the cost

by X% of accessories revenue ahead financial to more HDMC. in strong results Looking consolidated growth units billion was business. largely flat of on and increase at XX% driven year. the across year-over-year, being within parts our $X.X the revenue X% attributed global and last This apparel of was pricing revenue quarter, Despite growth closely and X% business growth growth motorcycle wholesale total was our

retail line Within compared the to income of XX% to Total segment, higher was was lending. X% up in million due Services down year, operating Financial expectations. $XXX revenue with last our

year, continues expectations. to year. normalize operating was loss is unit million, The income to mix. an versus from us prior income XX% and attributed production HDMC, was with At million, versus decline $XX down cost For achieving preventing line HDFS, down profit limitations the performance operating last $XXX optimal in inflation XX% as

North retail First per inventories. production noted. of sales in international significant lower America. X% of last in the Global share earnings in resulted markets with sales in year retail quarter, up were the by factors decline our last X% year, QX GAAP quarter driven with dealer already motorcycles were America $X.XX challenges to offsetting growth decline compares $X.XX North down the new a as versus

past by and driven majority roughly up the XX%. Rider continue and continue XX% outside XX% which part system reservations. moving unit up APAC declines dress up up was Asia were previous exits reservation and leading XX% Rewire. last the America program taken from markets dealer model the show product impacted Low and total introductions XX% was with as pruning of of Pacific, year, America, to have compared EMEA quarter. down reservation XXXX positively the of versus XXXX our year availability retail We with U.S. new to sales of the were XXXX. Reservations new and out versus new India, demand requests, in [ph]. which was the model last growth sales retail market motorcycles including network Worldwide year launch Special model retail Pan XX% QX participating North the and in to inventory which high is In Recent sports XX% with increased of greater to associated in in flat actions build ST, in the by our

throughout there average, XX from production, when new with challenges limited this was gaps floor the the two within the On more pricing staying prices significantly was XXXX strong weeks, which motorcycle like new with both pricing. U.S. historical motorcycles in for for QX pipeline weeks. sitting steady showroom points is of also continuing extraordinary used bike as two on and Given above the in we levels XXXX, market is than dynamics and to to held Overall, with see continue transaction QX prices fill. a The trend reduction narrow we used less did MSRP. an within

revenue, last total X% versus was up at QX Looking revenue HDMC year.

by North which from negative parts units foreign drivers limitations, and impact on of Seven mix from pricing predominantly points is select incentives coupled of finally, quarter, Two the came key which accessories due two growth growth negative unfavorable supply from our increases, from points a motorcycle apparel the impact volume, one Focusing America exchange. with of growth markets. in of surcharges combination price global and and touring the And in driven business. business. MSRP of impacted points the pricing flat to point and in

tough supply Focusing level $XX QX Besides last we to seen in XXXX new last million, expenses LiveWire. had drivers negative in aside The The and norm looking year-over-year move half of of rates QX last to QX the from last in base across ratio margin This year. year. in of last income million continues down is internal Recall up and in year inflation is year. we HDFS decline credit compared loss operating by the with retail point a consistent margin of finished offset allowance. impact the compared comparison year. experienced the and last and primarily versus the The in a XX.X% we on provided basis ramping cost versus through XX.X% XXX back of the Ending unfavorable the benefits slightly X% unfavorable QX individuals line we started and XXXX chain the and strong retail margin which as where was the expectations. already and was is $X.X margins, in by operating operating year. QX federal inflation the driven XXXX, loss by with the year, gross as back XX.X% X.X% versus benefit points both release at comps origination stimulus in driven increase past receivables the to in was billion, historical pricing for increase cost noted, were loss basis moved better were segment saw business, is under Services XX performance than behind higher package XXXX, motorcycle The year volume. HDFS' at we last QX continued XX versus QX Financial finance quarter inflation to in down throughout to largely revert low is significant in expectations. QX really the XX% year. up mix. originations used an to that in last motorcycle come from Setting accelerating credit

compared The cash In QX working bought approximately the year for and of and operating Inc. from operating repurchases equivalents the was unchanged cash And X% cash Wrapping in from million capital. million during QX with was in QX. addition, prior of delivered quarter, in the credit financial $XXX is X.X shares. billion, flow, we losses million the $X.X by retail Total we is at million Harley-Davidson, flow which cash results, which allowance at XXX ended down $XXX a XXXX. up to change end down back restarted decrease the driven share end of QX.

X% full impact the with challenges revenue XXXX, our to incorporates This growth what we HDMC rest forecast today growth As reaffirm terms of to outlook expect the look in revenue we we impacting of semiconductor to our where of year supplier the continue know business. and we XX%.

cost Furthermore, pricing to impacted our the offset and and revenue continue by accessories apparel expect positively be to annual the headwinds work as growth licensing to chain. the expect parts we actions We for we across global supply businesses. and

We pricing income operating leverage, margin unit positive of accreted P&A anticipated HDMC supply more believe impact a businesses inflation of to apparel across the growth. expect and additional margin of offset to XX% suspension contributes XX%. margin volume growth our the XXXX continue than point in with We will and combined the tariffs cost from expected across chain. Also, over in realized mix the EU

repurchases. Embedded LiveWire. and of as strategy. the and XXXX within behind expect support repeat continue mentioned, investments of Hardwire dividends execute the remain to likely December losses to product XXXX releases priorities is as to $XXX At decline We our we our invest time, decline Hardwire we We not credit continue million to development as previously capital pay operating includes the income XX% we expect capital committed lower continue and largely HDFS the discretionary for of we fund And capital by outlook which result a to to to $XXX remain is announcement. XX%. itself This allocation, to is enhancement capability XX favorable allowance our this part lastly, of to favorability our plan share to million that the we to growth in XXXX. initiative, finally, And of in believe expenditures XXXX. issued look guidance in

reflective guidance we we of logistics forecast peak that and at semiconductor assumes experienced XXXX improve half of repurchase in as that plan. Board get inflation the through manufacturing move and beyond million QX the We have This at time. XX share is supply the remaining on back the stabilizes. outlook supply will as levels the we of our financial this chain year, the end of updated This have approved shares

the QX. continue to of similar materials, supply Given balance at we raw component raw XXXX materials rates through will that now global and influencing factors the inflation believe inflation macro

about be half. is the we our As think revenue stronger than back for we front believe half growth to going our phasing year,

expect in take due teens supply in income to this mid the we your chain back the Additionally, high to turn stabilization, the of and margin to anticipated in our the be digits At in front the half to the mid timing half. operator to questions. operating be point, I'll to single back it

Instructions]. [Operator you. Thank

to one return to We limit yourself for questions. and to also additional you. the Thank question ask queue

first line Bank Your from comes the Ohmes from of America. of Robbie question

is Your line open.

my question. for actually Good It's taking thanks two. morning, and

could then in Gina, surcharges? color March color of Is just, give the better you. chain, given look timing through kind Was some offsets, gross there is you they has half I on the a give more first on shortfall some on on can on the margin Thank to shipment margin green color seeing said on changes that? little might there color year, thought make one gross you've be term a And -- supply in supply trended this think you side? more And of back the the some potential U.S. any some for first The and maybe how us give quarter? more the you for of that in but in that guidance things could terms related shoots could Polaris chain.

Robbie. for questions, morning, the Thanks plural. Good

of quarter. the our really definitely the to how balance the than and would shipments was moved our that first with worse earlier everything Let's start say I kind we impacted do with production throughout in supply this quarter. move quarter. chips had and how March they through of as And

we of that kind through. moved So see we production rate didn't slow as of

what seeing the availability, what first we balance and seeing year, improvements and of back looked is do similar we we in what the chips In supplier supply here the supplier year. what in half that will QX. the saw through we're in we're in of half And expect move But of chip we back very QX of the do volatility remain. similar here, quarter to terms see from last a some year. that we're the chain to very seeing as in

shoots within going in we that's move something for the what is our continue balance manufacturing improvement saw year. of are some we through environment. and Where the of within QX as green So we to logistics and see

that able to more produce. within So better becomes more competent, as and produce supply we're chip efficiently manufacturing,

And better with so you last in the the operation other much the in chips. down, slide we're the the that kind everything acute are in has run year. in that with not efficiently are worse QX. And that that going gets half is able Logistics of see we're we not we than our costs to manufacturing our as And year. can inflation here forecasting as have going rate though do that the had bit year, inflate inflation is year costs we but QX. that back Remember, we deck front to it's half of half saw much to shows the one are come as back of issue to saying to didn't in due how a it the of that

moved that of for kind really through QX QX. accelerating All picking of as logistics we kept started in inflation up QX, and

last quarter of and go quarters again, up quarter, the inflation. four reflects this the So higher

of margin. global help And how pricing. as half year. keep chain -- -- guidance, that from thinking too that the the up gives our margin that what whole we back that a into we're we're the step the and us about actions so us to terms we're competence cost we through supply what say we other remember of our have competence Pricing taking produce the the a on gives plus eye move perspective, phasing, of us better see on pricing in chip see that's an And supply we to we carries carries visibility overall because year able across how that and to

you. Thank

Altobello from the next of Our Raymond from comes line Joe James. question

line is now open. Your

quarter. just I You et in questions. due was Good morning. in and Thanks. of a in the between dichotomy internationally period compares? EMEA to trends retail the base better in couple mentioned guess, cetera. terms availability, A was first, of seemed like quick big But all it the U.S. difference it that QX, difference this

maybe So that a you saw curious internationally didn't U.S.? in see what from standpoint demand the I'm you

strong region. Joe, throughout the equally demand is

plant region, You Demand last strong to need difference. is in in comment first need that regions. to region we what all consider [indiscernible] EMEA market no we equally serves year with there especially additional the the compensating as bear in year, as quarter EMEA is the first drop a is our factoring from maybe this you as Also is mind quarter of Thailand serve an that but were demand well. we and of in had the

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Thank you.

Our next from Kennison question comes from Baird. the line of Craig

Your line is open. now

can taking and question. Good for trends how they a a your It's morning. likely of demand as is do we fight economy. challenges, focus a chain the looks for potential and lot prepare of your to trends the supply today? to recession? on you and demand the your mind, on ahead on more what see But as the get economy questions a Obviously, so. try Hi. guess Fed my rightly And Thanks do current that it. lot I to you get recession inflation in as for there's

as Thanks, trends mentioned. Gina and Demand strong, are signals Craig.

now XX% year. system. last leveraging XX% have dealer our our are network that up are Reservations We of reservation versus

bike than inventory above [ph] quantitatively been. that product that mentioned, also Market prices, actually at levels result down data categories profitable our it's and are Gina as the share that if look our or a you as in the and our for new Academy. demand through Riding And And dealers feedback small growing, transaction the we getting weeks is also MSRP. is demand is And qualitatively, it's are strong ever versus ever our I at riders more inventory prices levels our of spread XX%. as confirm So most used end very between mentioned strong. continues. from

right? see [indiscernible] extremely So anticipate you pipeline low they inventory will that is But our wholesales if we market goes into point can't and into would affecting that if recession, negatively. levels what help everything continues we a at have to some the allow that us suggest recession

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Thank you.

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Thank Good morning, you questions. your Jamie. for

tackle me first of it first part around inventory the think we where level. the Let optimal

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of So segments and represent the that opportunity there's year. rest certainly the I how core for would those mix will say throughout

you. Thank

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Hi. Good morning.

of about earlier. phasing phasing helped us how the for HDFS there Gina, play Is rest you And you provisions into that CECL some the the Sorry might co. of these that? help way any year? us can with motor with of the maybe

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as that not So in up year. of last point the rate down would year's this in big or results. was any lumpiness And at I reserve what we creating, expecting was really we're that move the swings the balance say, through

you. Thank

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for Good your morning. Thank you questions.

starting both and inflation apparel this taken we cost the into as accessories offset and this family So licensing. lines, we all an largely first on year as are parts ongoing and all so your across of motorcycles several seeing actions the Those pricing reference, last and have year have regions actions well as that part basis and year.

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you. Thank

the of Our from Blair. next line from question Sundby William Ryan comes

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we moved about the for seen of on schedule quarter. Thanks because we've last Could higher flip as in what question. and during morning. couple what maybe like like months? for Good there prices the the trends thanks the gas color the around through as quarter, Hi. the talk have particularly that you the here production look Gina, demand looked move

the Sorry, Ryan. faded What last was here. question? part You of your kind of out

Yes, sorry.

On demand trends.

here gas started with for that all? prices demand the moving consumer, has up Just at impact to

In short, no.

are that. that inflation No, current of seeing any demand. seen issues that on not acute have of impacting hitting our consumers, not we're We kind

So impacted biggest demand. produce was shipments our thing ability to yes, the in to the that our QX

you a to imagination, wasn't sense all that But the was everything from color -- So can produce. Edel any and of provide lens. more was our QX in ability it dealer slowdown some see commentary in it a

the speed the well relative of or find those out categories, we shipments, as positive. that rates weeks, Every sort that in Touring, the let some includes the some all maybe turning made look me dimension and Gina, points price Trike, reiterate in two preorders, demand more to that at we be also those the at those earlier. terms and Large growth add key of unprecedented to realization, Cruiser of data, inventory, of less and of as of you

other the to we sell Canada are the the the referenced, through demand, get consistent to markets is around, that price look metrics Gina and that also we that even students many third had U.S. factor Riding how versus coming in could in positive. and Academy new message of And our the other qualitative well at Some international used you them. very we monitor really the are gap from as feedback then I if more bikes, dealers, both as think

what in terms of are all us in we to that of giving think those contribute seeing I confidence So demand. factors

you. Thank

the comes question from Wolfe next Research. of Fred Wightman Our line from

open. is line Your now

the bit for a little just think used new Thanks we as Could But the for or more wanted that morning. to been into expect see comment next little that pricing. I follow bit? between time. year about gap something working It's Good we guys Should have a guys. really and it long gap whether later do question. to it's there Hi, about be just seasonality? this expand up on that year, how not trending? on you a you

this expect and of dramatically kind to is to side. in is balance good we through, fiscal, from of 'XX had to the happening not market. would used produce just I expect Fred, is not I Gina. We've that gap in supply in widen the what year create and next would new this what been XXXX too next would say going in I 'XX, able given -- move as in the just economics on we've

showing you. this At call remarks. I am to closing over questions. time, would Shawn the back to for turn no Thank further Collins I like

Great. call check us Thanks. Well, we questions. obviously day joining a have thanks for and with today's great any with everyone hope and in you

you for conference concludes participating. today's Thank This call.

now You may disconnect.