Harley-Davidson, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the 2020 first quarter earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Director of Investor Relations, Mr. Shannon Burns. Thank you. Please go ahead.

Good morning, everyone. You can access the slides supporting this call at investor.harleydavidson.com. Click the earnings materials box in the center of the page. Our comments will include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in our latest earnings release and filings with the SEC. Harley-Davidson disclaims any obligation to update information in this call. Joining me this morning are CEO Jochen Seitz and CFO John Olin, and we are dialed in from multiple locations. Jochen, let's get started.

Thank you, Shannon, and good morning, everyone. Today, I'll share with you my observations, initial actions, and the direction in which I plan to take Harley-Davidson. Before I do, I want to acknowledge the historic time we are in and how honored I am to be part of an organization that has shown such incredible spirit in the face of adversity. Harley-Davidson is deeply rooted in community, and we honor those who are sick, providing care and relief, and working tirelessly to end this terrible pandemic. This crisis has impacted us all, but I know we will prevail. I'm confident that with the right focus and changes that I intend to implement swiftly and diligently, we will emerge stronger. From my observations over the last two months, it is clear we are at a critical time in our history that requires significant changes to the company. My key insights are as follows. First, COVID-19 has dramatically changed our reality for the foreseeable future, and the crisis has added to an already challenging environment. We have a robust plan in place to protect our customers and employees and to be prudent with our resources, and I'm proud of our team's response. We're taking actions across the following areas. For most, we continue to act quickly and in alignment with government efforts to protect the well-being of employees and the Harley-Davidson community. We've implemented restrictions, enhanced sanitation practices, and canceled events. Our closure of facilities and temporary suspension of manufacturing operations enabled us to install workplace protections and develop a comprehensive plan incorporating precautions and guidance from public authorities to protect employee health. We are gradually resuming production in a measured way that is safe for employees and will continue to require all employees enrolled that allow them to do so to continue to work from home to minimize the number of people in each facility. the wider community our foundation donated to the ignited ways covet 19 relief fund and through our united we will write efforts we are donating the proceeds of a custom live wire auction and leveraging our channels to connect riders with relief opportunities that allow them to make a difference in their communities last week jason momoa helped us kick off these efforts with a powerful video launching our covet 19 relief efforts second This year, we are preserving about $250 million in cash by reducing capital and non-essential spending by freezing hiring, reducing salaries, and eliminating merit increases. We also implemented other cost management efforts, such as retiming the launch of new products. Additionally, we have suspended discretionary share repurchase and reduced our Q2 cash dividend to $0.02 per share, down from $0.38 per share in Q1. We believe these are prudent actions given the uncertainty of the COVID-19 crisis. Third, we maintain a strong liquidity position with nearly $2.5 billion in liquidity at the end of the quarter. Recently, we increased our cash position, amended our $1.42 billion in credit facilities, extended our 364-day loan facility, and are also in discussions with major U.S. banks to secure an additional $1.3 billion of liquidity. And finally, in response to the COVID-19 crisis, it's important that we help ease the burden on dealers and riders. We're providing dealer support based on the unique needs of each region, including financial support for motorcycle inventory, extending certain credit payment due dates, and adjusting requirements for warranty and training. While these actions offer near-term relief to dealers, we do expect the network to contract through the crisis. As a consequence, we will work to optimize the network and improve dealer profitability going forward. For our riders, many dealers remain open for service support, and we continue to sell parts and accessories and general merchandise online. We, along with our dealers, are enabling home delivery of new motorcycles where it is permitted. Also for riders who are impacted by COVID-19, HDFS is helping keep them on the road. After a significant number of conversations with our management, employees, and other stakeholders, several other things have also become clear to me. First, we have tremendous strength in our products, our riders, and our dealers. However, we have challenges to address that have become more apparent in this crisis, including the high level of complexity across the organization that needs to be minimized. Our team is talented and hardworking, but leadership has become somewhat isolated and overly centralized, and as a result, slow to respond. The speed of decision-making needs to increase. I've observed that after multiple rounds of cost cuts and reorganizations over the past years, morale has suffered. There is frustration as some cost-cutting initiatives have tried to improve efficiency of things that are fundamentally inefficient. As a result, we need to reignite our Harley-Davidson soul and culture. Additionally, our organization has become accustomed to over-committing and under-delivering. We need to set achievable plans and realistic goals. As I reviewed our strategy, I know that elements of the More Roads plan are good in principle, but it is clear that our strategy needs to be refocused to better align with our capacity and capabilities and also updated given our new reality. We'll continue to expand beyond traditional products and markets. However, we have over-indexed on new liners and new market growth and lost focus on critical profit sources. We made progress with our product line and to some degree our customer base, but progress is lagging and expectations are unreasonable, especially given the economic environment that we are likely to encounter as the COVID-19 ripple effects will likely be with us for some time. We continue to move forward with the highest potential elements of more roads, but our strategy must be reassessed. As a result of my observations and assessment, I've concluded that we need to take significant actions and rewire the company now in terms of priorities, execution, operating model, and strategy to drive sustained profit and long-term growth. We are calling it the rewire. And it's our playbook for the next few months leading to a new five-year strategic plan, which we will share when visibility to the future returns. I'll highlight some of the key elements of the rewire. First, we'll enhance our core strength and better balance expansion into new spaces. It's more important than ever to return focus and strength of our brand and company, starting with our dealers, customers, and our stronghold products and committed employees around the world. HDFS is also a strategic advantage with a track record that will help us navigate through this crisis. We'll reevaluate our strategies to reach new riders and build ridership. Second, we prioritize the markets that matter. We'll invest in the markets, products, and customers that offer the most profit and potential. This includes building on our strong position in the U.S. We'll narrow our focus, time, and energy in the most critical countries and market segments that can move the needle for us today. We'll also diligently play the long game by identifying select strategic markets that may not contribute to enterprise profitability in the near term but are critical for our future. We'll also simplify the market coverage model and take costs out of the process. Third, we'll reset our product launches and line up for simplicity and maximum impact. launches our six to 12 months to reflect our new reality and to allow our launch calendar for the first time in our recent history to align with the start of the riding season. We'll simplify launches over time to better suit the capacity of our dealers and company resources to support them. From here, we'll expand our profitable, iconic heritage bikes to excite our existing customers. We also remain committed to adventure touring Street Fighter and advancing our efforts in electric. We will continue to be guided by the voice of our customers and dealers as we bring new focus to our offerings to optimize value and profit delivery. Next, we'll build our parts and accessories and general merchandise businesses to full potential. We're developing a comprehensive strategy across these businesses that focuses on assortment and distribution opportunities, maximizes channels, improves e-commerce capabilities and gross revenues and margins for both the company and dealers. We will align this strategy with our motorcycle strategy for holistic presentation to the market. And finally, we'll adjust and align our organization structure, cost structure, and operating model to set the organization up for stability and success. We are designing a framework for success, an organization that is more focused and nimble, aligned with an appropriate cost structure, adjusted to the new realities of the market post-crisis. We will also reset our operating model to increase empowerment, diversity, and accountability for critical decisions. Essentially, our refreshed organization will be less complex, with a sharper focus, and able to make faster decisions. We are creating the right central and new regional structures that are commercially led to establish the right focus on dealers and selling. We will also elevate the role of motorcycle management within the organization and sharpen our marketing strategy and execution to enable a bigger impact with an improved go-to-market process. The rewire is underway and we've taken actions across each of these key elements of the playbook and more are in development. I've mentioned some of the significant actions that we've already taken to allow the organization to move forward. Other recent actions include setting the organizational superstructure, with three new senior management members appointed to key roles. We are promoting talent who know the company, our dealers, and our customers. To bring the appropriate sales focus, we've created a new commercial entity, including a simplified regional sales structure, as well as refreshed parts and accessories and general merchandise businesses. To leverage expertise and historical insight as we hone our strategy, I've engaged our senior leaders beyond the executive team and establishing a CEO roundtable comprised of select dealers and former Harley-Davidson leaders. The team is hard at work re-energizing the business, and we will share more about our progress during our Q2 update. In closing, to accomplish what lies ahead, it is important that we continue to rally together. Today, we're united as a Harley-Davidson global community in support of our families, friends, and fellow riders through a time of crisis that we hope will end soon. I offer my gratitude to our family of employees, dealers, and riders for doing their part to stay safe and healthy. Their well-being is, above all, the most important thing. While the end to this pandemic is uncertain, what defines Harley-Davidson endures. It's a welcoming beacon that shines beyond this time that we're in. I see this as an incredible opportunity to rewire the company and set ourselves on a path for great success in the future. We are addressing our realities with conviction, and I believe we will come out of this stronger than ever. We will reignite Harley-Davidson. And we will rally around our newly stated mission, more than building machines, we stand for the timeless pursuit of adventure, freedom for the soul. And now I'd like to turn over to John to discuss the financial results of the quarter.