Harley-Davidson, Inc.

Thank you for standing by and welcome to the Harley-Davidson fourth quarter and year end 2022 earnings conference call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Sean Collins. Thank you. Please go ahead.

Thank you. Good morning. This is Sean Collins, the Director of Investor Relations at Harley-Davidson. 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 Harley-Davidson Chief Executive Officer Jochen Zeitz, In addition, Chief Financial Officer Gina Getra is with us, and also Livewire President Brian Morrissey. In addition, Harley-Davidson 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 Zeitz. Jochen?

Thank you, Sean, and good morning, everyone. As we conclude the second year of the Hardwire, our five-year strategic plan to drive profitable growth, Harley-Davidson delivered a strong finish to the year. We are pleased with our performance for 2022 with the execution of our strategic pillars driving an 8% increase in revenue and a 14.1% increase in total HDI net income. Through the foundational work of the rewire and the execution of our Hardwire strategic plan, we have changed our overall approach and focus as a business, from prioritizing unit growth at all costs to a more holistic view on profitable growth of motorcycles, parts and accessories, apparel and licensing, and Harley-Davidson financial services. This strategy contributed significantly to the increase in our margin to 13.9% at HDMC, excluding Livewire, compared to 7.6% in 2019 with a three-point margin expansion and a much more effective and efficient allocation of our resources, leading to an EPS growth of 18% to $4.96, despite all the supply challenges that we had to face throughout the year. As you know, Harley-Davidson is on a transformational journey, and even though the economic environment continues to evolve, we remain optimistic about the significant potential of the Harley-Davidson business for 2023 and beyond. I will briefly address our six hardware strategic pillars and our delivery of them over the past year. Profit focus. We are committed to strengthening and growing our position in our strongest motorcycle segments in touring, large cruiser and trike. Not only are these segments the most profitable in the market globally, but we also believe these segments offer potential to inspire more engagement while compelling new customers and riders to choose Harley-Davidson. Our 22 lineup revealed eight new models, each powered by the Milwaukee 8-117, the most powerful factory-installed engine ever offered by Harley-Davidson. With the Hardwire, we also made the commitment to introduce a series of motorcycles that align with our strategy to increase desirability and to drive the legacy of Harley-Davidson, namely through our enthusiast and icons offering. We're especially excited about the future of both collections within our product lineup as we enter the 120th anniversary of Harley-Davidson. Selective expansion and redefinition. Aligned to Hardwire, we are committed to expanding where we have the right product to win and where the profit profile is right. Delivering new to sport riders is part of our objective to attract new customers to the brand in addition to expanding the garage of our existing riders. With this in mind, in April, we started a new chapter in Harley-Davidson's sports history with the launch of Nightster. Building on the 65-year legacy of Sportster, we wanted to push both our performance and design capabilities while ensuring the bike was an entry point to Harley-Davidson Motorcycling and our brand. We also grew our adventure touring retail sales globally by over 30% on the modular ResMax platform. We continue to execute our hardwire priorities across markets and regions. In particular, we emphasize profitable growth in EMEA, in LATAM, with the latter region becoming profitable for the first time since becoming a standalone region. We're also encouraged by the early results of our focus on APEC expansion, with Japan now as our second largest market, China at its highest volume ever, and with other sub-regions also delivering growth at attractive profitability levels. Over the course of 2022, we also finalized the launch of our new Riding Academy bike, the 350RA. This bike will replace the sun-setted Street 500 and will breathe new life into our Riding Academy program as we plan for its expansion and development in future years. This program and the concerted follow-up actions by our network of dealers represent a critical pipeline for new and returning riders. In our May Analyst and Investor meeting, we set out our ambitions under our 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 a best-in-class team to deliver on this ambition long term. Riding gear must be a core competency of the company and brand. We've been evolving our motor clothes offering, executing a seasonal forward-looking plan, strengthening and modernizing the way in which we design, develop, and source our product, driving efficiency through the business while growing our motor clothes offering. Harley Davidson lifestyle is where we see the overall apparent licensing opportunity, especially as it relates to non-riders, but also existing and new brand aficionados. By creating a unique Harley Davidson aesthetic, taking inspiration from the past, and evolving it for today's consumer, we think we are able to bring more interested people to the brand, leveraging the unique power of the Harley-Davidson lifestyle. In 2022, we saw a 19% increase in our apparel performance, a solid proof point that our strategy is working and that the investments we are making are starting to have a positive impact on our performance. And we have lots of exciting developments in apparel and licensing that we'll be telling you about this year. Our parts and accessories business was negatively impacted in 2022 due to supply chain challenges and lower retails, but still grew 7% on a per bite basis and exceeded our 2019 results. Two main elements are driving our plan for future growth in P&A, customization and service growth. Customization, which is at the heart of motor culture, is an integral part of the overall Harley-Davidson lifestyle. P&A allows us to have a truly personal relationship with our customers and their bikes, and service growth at the dealership with an emphasis on convenience, expertise, and value. Our service business consulting program, launched in 22, has grown P&A revenue through service and participating dealers by 14%, well ahead of surrounding dealers. We also took the first steps towards redesigning the service journey with the launch of an online service scheduler on HD.com. And lastly, we've changed the way we operate, integrating our P&A team into our motorcycle management function to continue to reduce complexity and focus the offering while fully aligning with our motorcycle lineup. We're also planning new developments in our online bike builder and configurator, integrated to the dealership to allow for improved customer inspiration and ease. Integrated customer experience. Delivering our growth ambitions requires us to provide experiences that exceed expectations for modern retail while leveraging digital and physical channels as part of our dealer network. This vision depends upon a modernized approach to inventory management, more digital enablement of the customer journey, and enhanced omnichannel capabilities. Something that was not a competency of Harley-Davidson in the past. In 2022, we enhanced our reservations and pre-order systems and piloted a new inventory management and distribution system, reducing fulfillment time, allowing for better availability without expanding in dealership inventory. 2022 also saw the launch of our Project Fuel program, which will provide a much-needed redesign of our dealerships. This program is in full swing globally, and in North America, 15% of our network is already signed up. As we ramp up and expand Project Fuel, we are also embarking on an effort to redefine the Harley-Davidson customer experience that leads the footprint transformation with particular emphasis on our brand and marketing integration and critical customer journeys. But more on this as the program is established. Inclusive stakeholder management. At the last quarter, we hinted at our plans to invest in our hometown Milwaukee and specifically our Juneau campus. Earlier this month, we announced the redevelopment at Juneau which will start with a community park to serve the local community, the people of Milwaukee, and our employees. Partnering with the Harley-Davidson Foundation and internationally acclaimed designers Heatherwick Studio, we feel this project will deliver a big impact to our community. Take a look at the plans online if you haven't seen them already. And leading electric. 22 saw the completion of our business combination between LiveWire and AA Bridges Impact Core. with Livewire becoming the first EV motorcycle company to list on the New York Stock Exchange. This is the first quarter of Livewire reporting independently. I'm going to hand over to Ryan Morrissey, president of Livewire, to run through some more details about Livewire's performance and about what is on the horizon.