Harley-Davidson, Inc.

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

Thank you. Good morning. This is Sean Collins, the Director of Investor Relations at Harley-Davidson. Welcome to our Q3 2022 Earnings Call. You can access the slides supporting today's call on the Internet. at the Harley-Davidson Investor Relations website. As you might expect, our comments will include forward-looking statements that are subject to business risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in our latest filings with the SEC. Joining me this morning are Chief Executive Officer Jochen Zeitz, and Chief Financial Officer, Gina Getter. In addition, Chief Commercial Officer, Adele O'Sullivan, will join for the Q&A portion of today's call. With that, let me turn it over to our CEO, Jochen Seitz.

Thank you, Sean, and good morning, everyone. Thank you for joining us today. Harley-Davidson delivered a strong third quarter, and we're very pleased with our performance, despite the supply chain challenges we experienced especially early in the quarter due to the production suspension. We believe we are well positioned to achieve our guidance for this year and tackle and adjust to changes in the market environment to achieve our hardwire stage 2 plans. The strength and desirability of the Harley brand continues to grow, and in uncertain times, we believe it's the strong brands powered by strong communities that are able to deliver better results. Harley-Davidson is the epitome of a powerful brand as the most desirable motorcycle company in the world. In May, we laid out our ambitions for future growth, and we continue to deliver against our five-year hardware strategic plan, focusing on our pillars of profit, selective expansion and redefinition, leading in electric, growth beyond bikes, integrated customer experience, and inclusive stakeholder management. As you can see from today's results, HDMC posted revenue growth this quarter, with both profitable unit growth and pricing driving a 24% increase. Equally, we are very pleased with the strong operating income margin growth we've seen growing 9.5 points to 17.9% versus last year, which we believe is a solid indicator that we have the right strategy in place to deliver long-term profitable growth at Harley-Davidson. Additionally, shipments for the quarter were up 19% as we largely recovered from the unplanned production suspension experienced early in the summer. We believe that the success of our hardwire strategy with a focus on our core segments is evidenced by the per-unit profitability that Gina will talk about later. To deliver this, we believe that as the most desirable motorcycle company and brand in the world, we need to be shifting the traditional sole industry focus away from units to desirable and profitable revenue when compared to the past. We are particularly pleased with the profitability we were able to deliver in the quarter, aligned to the hardwire strategic focus. It's important to note that when looking at the results of the quarter, we believe that the demand we saw as the quarter unfolded displayed ongoing strength, and importantly, that our retails were impacted most by supply. As we were able to have inventory flowing more normally through the dealer channel, we saw overall retail begin to turn positive year on year for North America and other key geographies. Aligned to profit focus on our core segments and expanding from our successful product launch this spring, in August at the Sturgis Motorcycle Rally, we introduced a new offering of Apex Factory Custom Paint across select 22 Grand American Touring Models. Inspired by the century-old racing legacy of Harley-Davidson and paying tribute to the legendary Harley-Davidson XR750 motorcycle, Apex Paint is applied with exceptional skill by our in-house teams at York and Tomahawk, demonstrating the talent of our specialists here in the U.S. We've seen a strong riding community response to these bikes and will continue to evolve our paint offerings going forward. With a hard wire, we made a commitment to introduce a series of motorcycles that align with our strategy to create iconic motorcycles celebrating the legacy and leadership of Harley-Davidson. The icons collection presents one or two models annually with a single production run for each model. Production of that motorcycle will never be resumed or repeated. Building on the success of our previous icon, the Electro-Glad Revival, this September we launched the limited edition Lowrider El Diablo. Inspired by an American West Coast custom styling trend, the Lowrider El Diablo combines lean performance and sport touring versatility with a styling paneled hand applied paint scheme. We've seen a great response to the bike with it becoming our fastest selling motorcycle in the third quarter. We're excited about the future of the icons collection within our product lineup as we enter the 120th anniversary of Harley-Davidson next year. In our May analyst and investor meeting, we set out our ambitions under the growth beyond bikes pillar with an increased focus on apparel and licensing as a new key driver of our Harley-Davidson lifestyle. Since then, we've been building our core apparel and licensing competency, including creating the best-in-class in-house team to be able to deliver on this ambition long term. We saw a strong growth of the ANL function this quarter with 41% growth in apparel and 26% growth in licensing. And we remain confident that in the long term, we can continue to grow this part of our business, further driving the desirability of our brand and motor culture lifestyle for riders and non-riders alike. Over the course of the third quarter, we continue to make rapid progress on the evolution of the customer and dealer experience. In the U.S., we continue to expand our sole bike order process, which has grown 300% versus last year, with 98% of the network now engaged. Alongside this, as we work through supply disruptions to deliveries, we added new functionality to provide better visibility and communication to dealers and customers on the status of their bikes. As discussed earlier in the year at our investor day, we've started to pilot the modernized distribution system with faster access to product that will support growth with a more restrained inventory model, supporting profitability and improving the ability to meet customers' needs for a specific bike. As also said in the May investor day, we formally launched our facility upgrade program project Fuel Globally, with 10% of the North American network signed up to start in the first wave. This is a big investment plan for a global dealer base at a total value of approximately $2 billion in the US alone. But it is a truly critical effort that is long overdue and a testament to our combined belief in the health and profitability potential for our business across both existing and new customer segments and products. Additionally, we've launched service business consultants and a new service scheduler lead form to drive growth of in-network service activity. Importantly, Our focus was not just in North America. In APEC, we expanded our customization kits program, supported by a new digital experience with a 30% growth in the number of kits purchased by dealers. Finally, we continue to be enormously proud of the flexibility, adaptability, and partnership of our dealers as we work through a difficult year for supply and as we pilot new approaches. The ability to stay engaged with our most loyal and new customers to support demand late in the season Their strong service reach and technical expertise and their investment in experience and community demonstrate that we're the strongest and most effective network in all of power sports. As an integral part of our hardware strategy, in July, we celebrated the one-year anniversary of HD1 Marketplace, our pre-owned platform. Today, the site hosts more than 30,000 motorcycle listings, including over 2,000 Harley-Davidson certified bikes, making it the leading online platform for used Harley-Davidson motorcycles in the US. Since launch, we've seen nearly 3 million visits to the site, increasing the visibility into the pre-owned market for both our customers and our dealers. Two recent additions to the platform have been the inclusion of non-Harley-Davidson bikes, widening our reach, and pre-qualification, making it easier for our customers to find and finance their purchase. We will continue to invest in the site and enhance the offering, ensuring that with marketplace good position Harley-Davidson.com as the ultimate destination for customers and motorcycle fans across the globe. As I mentioned earlier, next year marks our 120th anniversary. We're going to be celebrating this landmark event like never before, kicking off an annual three-day rally with the intention to develop it over the coming years into one of the largest Harley-Davidson events and rallies in North America and globally. for our riding community, families, and fans here in our backyard, our hometown of Milwaukee. We know that the faster we move forward, transform, and innovate, the more important it becomes to remember where we came from. We want Milwaukee and our roots in Wisconsin, including Juneau, the Product Development Center, the powertrain operations, and Tomahawk, to be as relevant to us today and tomorrow as it's been in our past. And for our presence here to not only benefit our employees, but our community and customers alike. So stay tuned for more. We'll be announcing more details in the new year on our plans, including an investment that the Harley Davidson Foundation intends to make on the heels of our $10 million investment into our museum campus, focusing on our junior home and the near west side in Milwaukee. A core pillar in our Hardwire strategy is to lead in electric. In this past September, we achieved a key milestone in delivering this ambition. On September 27th, Livewire became the first all-electric motorcycle company to list on the New York Stock Exchange. Closing this transaction with a listing represents a proud and exciting milestone towards our ambition for Livewire to become the most desirable electric motorcycle brand in the world. We believe LiveWire is well positioned to define the two-wheel EV market, and we're excited about the future. We'll be telling you more about LiveWire at the fourth quarter with Ryan Morrissey, LiveWire's president, joining us to present. But now I'll hand over to Gina. Gina?