Harley-Davidson, Inc.

Thank you for standing by and welcome to the Harley-Davidson 2023 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.

Thank you. Good morning. This is Shawn Collins, the Director of Investor Relations at Harley-Davidson. You can access the slides supporting today's call on the internet at the Harvey 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 findings with the SEC. With that, joining me this morning for the first part of the call are Harley-Davidson Chief Executive Officer, Jochen Weitz, also Chief Financial Officer, Gina Genner, and we also have LiveWire President, Ryan Morrissey. In addition, for the Q&A portion of today's call, we will have Harley-Davidson Chief Commercial Officer, Adele O'Sullivan, and we will also have Harley-Davidson seeming to be interim chief financial officer, David Viney. With that, let me turn it over to our CEO, Jochen Zeitz. Jochen?

Thank you, Sean, and good morning, everyone. Thank you for joining us today for our Q1 2023 results. Ali Davidson delivered a solid start to 23, the third year of our hardware strategic plan, with consolidated first quarter revenue up 20% to $1.789 billion driven by HDMC. We're pleased with our start of the year and with the execution of our strategic plan through the quarter. In this, our 120th anniversary year, we anticipate momentum to build over the year. However, we maintain a measured outlook on the wider economic picture. Harley-Davidson continues on its transformational journey. As we've said before, through the foundational work of the rewire and the execution of the hardwire, We've changed our overall approach and focus as a business, from prioritizing unit growth at all costs to a more holistic view on profitable growth. The Hardwire emphasizes stronghold categories that we believe are the most profitable motorcycle segments globally, as well as selective expansion opportunities, placing an overriding focus on desirability that reflects the premium nature of our brand and product. As we navigate the evolving macro environment, we will remain committed to these principles instead of a chase for volume for volume's sake in our core categories. We also remain confident in the innovation pipeline that will power our future. We continue to work with our dealers to ensure our activities and fares are aligned to healthy demand generation, especially in the current consumer environment. The programs we have designed and are implementing share four goals. generate demand and traffic toward dealerships and digital properties, provide tools and options to address concerns around affordability, ensure proper management of inventory and its lifecycle, and reinvigorate sales effectiveness after a couple of years of lower product availability. Desirability remains at the heart of our strategy. We believe a highly promotional approach would negatively impact profitability in our most premium categories, So we continue to focus on activities that motivate the customer to engage with our dealers to find the right bite for them. Our season opener on March 25th, which saw over 90% of the network participating, is a great example of this. And we intend to continue to focus on marketing, lead generation, and messaging that is aligned with our strategy. Now I'll highlight select pillars of the strategy, starting with pillar one, profit focus. With the Hardwire, we made a commitment to strengthen and grow Harley's leadership in our strongest motorcycle segments, namely Touring, Large Cruiser, and Trike. Not only are these segments the most profitable in the market globally, but we also believe these segments have a potential to inspire more engagement while compelling new customers and riders to choose Harley-Davidson. Aligned to this focus in January, we kicked off our 120th anniversary with the first reveal of our 23 lineup, celebrating 120 years of Harley-Davidson pride and craftsmanship. This initial release included the CBO Road Glide Limited Anniversary model and six additional Limited Edition motorcycles featuring exclusive 120th Anniversary commemorative paint finishes and details. The release also included a refreshed Harley-Davidson Breakout Performance Cruiser, the exciting Road Glide 3 trike model, a new NYTSA Special Middleweight Sport motorcycle, and a restarted 3-wheeler trike model. We also made a commitment to introduce limited edition motorcycles that align with our strategy to increase desirability and to drive the legacy of Harley-Davidson. With that in mind, for our second reveal of the year, I'm excited to announce that next week we will be launching additions to our icons and enthusiast collections. Stay tuned for more. At the same time, we retired the EVO Sportster in North America. a model that was cherished over the last 65 years but has been carrying negative margins for the motor company for many years. It is important to note that the phase-out of Sportster and the cadence of CVO model rollout throughout the year has created a different retail unit volume dynamic in 23 versus prior years. And while RevMax will be able to compensate in part for the Evo Sportster, we need to consider the different price and overall positioning. The company also continues to selectively focus on opportunities in segments aligned with the company's product and brand capabilities that demonstrate a path to market leadership and profitability. In redefining our geographic footprint, we made a commitment to strategically drive target markets to their full potential by developing custom product and go-to-market approaches. With that in mind, we have been encouraged by the reception of our HDX 350 and 500 bikes available currently in APAC. We believe this launch is a new vector for growth in select markets for a new customer, and we're excited for future opportunities. Under our Growth Beyond Bikes pillar, we know that parts and accessories, apparel and licensing, and Harley-Davidson financial services are important components of the company's future success as a global lifestyle brand and provide untapped potential to grow our customer base and add to customer lifetime value. For parts and accessories, despite lower retail volume, we continue to drive meaningful P&A metrics, and so growth in the service ROs in our dealerships as part availability improved, with gross margin expanding in Q1. For apparel and licensing, in January, we successfully launched our 120th anniversary collection, and in February, we introduced HD collections, a grouping of lifestyle apparel lines defined by the heritage and craftsmanship synonymous with Harley-Davidson. Bringing together the many facets of motor culture while paying tribute to our heritage, we are focused on building the Harley-Davidson apparel and licensing business while gradually increasing and expanding the overall lifestyle apparel offering of our brand. To improve customer experience, we remain committed to major strategic priorities in dealer facility upgrades, enhanced omnichannel offerings, and revamped motorcycle distribution capabilities, which we expect to roll out through our 23 and 24, as well as a renewed focus on HD experiences for our riding community and brand aficionados as we ramp up our 120th anniversary celebrations. But more about that later this year. In summary, while overall patterns of traffic and demand as well as other metrics of consumer health showed some restraint in Q1, we believe that we can deliver on our expectations in year three of our hardware strategy and are excited for what lies ahead for our company and brand. We remain committed to our strategic focus on innovation and profitability and a broader banner of desirability as a premium brand in the sector. Before I hand over to Ryan, in January at our model year launch, I also said that everyone should stay tuned for more. As we committed to innovate in our core categories as part of our new strategy, I'm pleased to highlight yesterday's kickoff of a new era of CVO touring bikes, the subject of huge amounts of internet intrigue already. Building on our commitment to invest in our core categories, yesterday we started teasing the next generation of our CVO touring motorcycles that will lead us into the future. In 1969, Harley-Davidson introduced the Batwing fairing to the ElectroGlide, a spark that would ignite a new generation of Harley-Davidson motorcycles that would define the grand American touring category and the lineage of motorcycles cherished by generations of riders that followed. The legacy lives on today, with two of Harley-Davidson's most iconic motorcycles in history, the Street Glide and Road Glide, whose DNA can be clearly traced back to the 1969 Electric Glide. Over the decades, Harley-Davidson designers and engineers have thoughtfully evolved these motorcycles, introducing incremental improvements to further enhance the riding experience, while carefully respecting the heritage and position as icons within the hearts and minds of enthusiasts around the world. Since 1999, the most aspirational of these models have been forged from Harley-Davidson's customer vehicle operations, CVO, a collection of limited production motorcycles that deliver the ultimate in refinement of styling, design, craftsmanship, and attention to detail, along with top-of-the-line performance. With the introduction of the all-new CVO Streetlight and CVO Roadlight, we've completely re-imagined two of Harley-Davidson's most iconic motorcycles, and we've redefined the boundaries of CVO in the process. By rethinking these two models from the ground up, we are ushering in a new era of innovation, design, engineering, and technology while expanding the definition of Harley-Davidson CVO and taking the grand American touring experience to another level. The new CVO Street Glide and CVO Road Glide break the mold and reset the bar for the pinnacle Harley-Davidson riding experience. We'll be sharing more about these motorcycles at our official launch in June. Now I will hand over to Ryan Morrissey, president of Livewire, to provide an update on the quarter at Livewire. Ryan.