Harley-Davidson, Inc.

23 fourth quarter investor and analyst conference call. Please be advised that today's conference is being recorded. I would now like to turn the call over to Sean Collins. Mr. Collins, please go ahead.

Thank you. Good morning. This is Sean Collins, the Director of Investor Relations at Harley-Davidson. Today, you can access the slides supporting the 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 risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in today's earnings release and in our latest filings with the SEC. With that, joining me this morning for the first part of the call are Harley Davidson Chief Executive Officer Jochen Zeitz, also Chief Financial Officer Jonathan Root, and Livewire Chief Executive Officer Kareem Dinez. In addition, for the Q&A portion of today's call, Harley-Davidson Chief Commercial Officer Adele O'Sullivan will be joining us. With that, let me turn it over to our CEO, Jochen Zeitz. Jochen?

Thank you, Sean. Good morning, everyone. Thank you for joining today's call. In 2023, the third year of our hardwired strategy, we made progress in some key elements of our strategic plan. Despite premium discretionary products being significantly impacted by the continued high interest rate environment and consumer confidence and affordability concerns, we continue to emphasize our core products and markets and invested in key priorities for the future. We expect that focusing on our most profitable categories and geographies Emphasizing innovation and evolving the customer experience with our dealers will continue to yield benefits to the business and have set us up for long-term value creation. As seen by our meaningful per unit profitability increase of $2,400 per unit or 185% since 2019. Looking at retail performance for Q4, retail came in better than expected but down 11% versus prior year. It is of note that we retail more than we wholesale globally, even accounting for early release of 2024 units. This early shipping of 24 units for logistics purposes clears the way for an aggressive shipment schedule of our new touring offering in Q1, which is needed to start the season in force with the new models. Through Q4, we continue to outperform the market with share gain in our core categories, with touring reaching over 75% market share in the U.S., and with large cruiser coming in at over 80%. Despite perceptions to the contrary, we continue to have a commanding leadership position in these core profit focus segments, well ahead of all our competitors taken together and demonstrated by our strong gross margin performance. Revenue was down slightly for the year as we navigated macro conditions impacting retails and worked to manage dealer inventory and production challenges. Despite this, our combined benefits of pricing and mix inclusive of incentive spend yielded seven points of top line growth, leading to a 1% revenue decline driven by currency headwinds. We continued to maintain our focus on profitability with operating income margin of 13.6% in 23 versus our starting profitability of 6.3% in 2019. on 34,000 less motorcycle unit sales and 6% revenue growth over the period. We believe this is the clearest proof point of our strategic orientation and execution in the current environment. This is a function of our multi-year pricing and mix decisions across products and geographies, with core products reaching 84% of our mix, up from 78% in 2019, and a significant increase in average profitability per unit, as mentioned earlier. But more on that from Jonathan later. I will briefly address a selection of our hardware strategic pillars and our delivery of them last year, starting with pillar one, profit focus. We continue to prioritize mix with growth globally in our core units of trike, CVO, touring and soft tail outpacing overall retail performance. Last year, we also launched our new generation of road and street light CVOs. With this transformational product, we are delivering on our hardwired promise of innovation as part of our focus on core categories, setting the stage for this year's grand American touring launch. Launching our icons and enthusiasts aligned to our profit focus, we've been building on our commitment to introduce motorcycles that align with our strategy to increase desirability by the legacy of Harley-Davidson. And we also continued our efforts to increase awareness of the King of the Baggers Racing Series with Moto America, now tapping into the Performance Touring, our new product offering. Pillar 2. Selective Expansion We continue to make progress on our global partnership and our venture with Hero Motor Corp. serves as a solid example of innovative participation models in geographies that matter as part of our selective expansion strategy. We've been very pleased with the exceptional reception to the venture with over 30,000 reservations to date. We will continue to look at select markets for small displacement offerings. Pillar 3, Lead in Electric. Livewire continued to pioneer the EV segment through the S2 platform with Del Mar, as Karim will detail later. More than one year in, our decision to focus Livewire as a separate company in EV and focus Harley-Davidson on our traditional combustion segment is proving successful with clear focus on segmentation and execution for both brands while utilizing joint synergies. Pillar 5, Customer Experience. With our dedication to enhancing the customer experience in line with our mission, in addition to our fuel program, we continue to invest in transforming our omni-channel capabilities and the pre- and post-purchase journey for the customers. Additionally, we continued the evolution of our marketing approach specifically to drive dealership traffic and engagement and to improve alignment on key messages with our dealer channel as exemplified by our open houses, dealer sweepstakes, and in-store rewards. We've made good progress on the execution of our distribution system modernization for the first milestones around product visibility and recommended orders coming online this year. With our online platform, HD1 Marketplace, we are now the leading marketplace for used Harley-Davidson in America. And lastly, we are pleased with the progress of our rejuvenated membership offering with over 700,000 members on the new platform to date, growing membership that had been declining for years by over 300,000 new members in just seven months. We also successfully stood up Homecoming as another core annual event to bring the brand closer to new and existing customers alike like no other brand can do in the motorcycle market. Turning to 24, I would like to comment on our new model year launch and outlook for the year. The Grand American Touring category was born out of the unique experience of the American Highway and was invented by Harley-Davidson. Few products are as iconic and as connected to one specific brand. Put simply, touring is the heart of Harley-Davidson, our mission of timeless pursuit of adventure. Back in 2020, there was no plan for touring. We quickly took the decision to change that, and it became the first and one of the most important priorities of our new Hardwire plan. As you saw from our launch in January, we are now excited to share what we believe is the most comprehensive product development in the touring platform in well over 10 years. The street glide and road glide models form the core of the Harley-Davidson Grand American Touring Motorcycle portfolio for 24 and represent the future of the segment. Both models featuring the new Milwaukee 8117 are more powerful, comfortable and lighter, and packed with advanced technology, including a new infotainment system, all wrapped up in a dramatic new visual design that will redefine the Harley-Davidson Grand American Touring experience for years to come. This latest lineup is not only the most advanced we've ever produced, but also has the most customization potential that we've ever offered in touring. Additionally, for 24 to celebrate the 25th anniversary of our Custom Vehicle Operations, or CVO, we added the CVO Road Glide ST and CVO Pan America to the lineup, complementing our new Road and Street Glide CVOs first introduced during Homecoming last year. Starting with the CVO Road Glide ST, the lightest, fastest, and most sophisticated performance bagger ever produced by Harley-Davidson is taking hot rod bagger performance to the next level. while tapping into the performance trend that we fueled with the King of the Beggars Racing Series. The CVO Road Light ST represents a unique collection of components providing high value to performance-minded riders, combined with West Coast custom style as seen in our Lowrider ST offering. We also expanded the CVO family beyond Grand American Touring for the first time to include a Pan America CVO. highlighting another touring segment that we continue to innovate in, Adventure Touring. We've prepared and are investing in the 24 model launch and have ensured that we're getting motorcycles out into the network at the right time for the riding season. And although it's still early, having launched only two weeks ago, we've already seen a very positive initial reaction from the network, media, influencers and consumers alike, with strong collaboration on awareness and traffic driving activities. As we look to the years ahead, we are excited about the potential of this lineup for the brand. We are fully focused on growing retails on the basis of these fantastic bikes, even in the current environment. That said, it is still early in the year and it is hard to predict the extent of the positive impact that our new touring models can have in the current high interest and overall industry macro environment. As such, while we are very excited by the early read of our new model year launch, We're providing broader guidance than usual to our outlook, given the continuing industry headwinds that affect our business. Furthermore, inventory management will continue to be a core part of our strategy to ensure that we have the right balance for both the network and customer. And as we look to the year ahead, we will manage inventory cautiously, recognizing that we believe we are close to the right levels in the network. Our goal will be to ensure that we manage wholesales based on retail potential, so as to keep wholesales and retails in balance through a combination of retail levels and manufacturing adjustments, even as required. To conclude, despite the challenges in the market, we believe that we've created the right product and solid foundations on which to deliver our future ambitions for the company. Thank you, and now I'll hand it over to Karim to talk live wire. Karim, over to you.