Harley-Davidson, Inc.

Thank you for standing by, and welcome to the Harley-Davidson 2024 Second 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 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 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. Joining me for this morning's call are Harley-Davidson Chief Executive Officer Jochen Seitz, Also, Chief Financial Officer, Jonathan Root. And we have Livewire's Chief Executive Officer, Karim Denez. 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 for our Q2 2024 results. In Q2, consolidated revenue was up 12%, driven by revenue growth of 13% at HDMC and 10% at HDFS. Additionally, we saw a strong improvement in earnings per share to $1.63 for the quarter. Consolidated operating income in the second quarter was $241 million, up 9% from the prior year, driven largely by an increase of 21% at HDFS. In addition, HDMC operating income was up 2% and the operating loss of LIFOI was $4 million less than a year ago. Through the quarter, we saw the continued impact of the high interest rate environment affecting our industry, and in particular, big-ticket consumer discretionary sectors. That said, retail sales of new motorcycles in the U.S. were still slightly positive versus prior year, with a varying degree of performance from state to state. Turning to our global performance, it's important to note that we see a mixed picture also across our international markets. In EMEA, retail sales declined by 1%, with certain markets in Central Europe underperforming, while others overperformed. And in Asia Pacific, Q2 retail sales declined by 16%, driven by weakness primarily in China. North America, including Canada, was down 1%, and Latin America was flat. Looking ahead, we are narrowing our retail and wholesale expectations to reflect the current environment. We continue to expect that retail units sold and wholesale unit shipments will be balanced by the end of 2024. Dealer inventory should be at similar levels as at the end of last year. This implies a reduction in dealer inventory of approximately 30% versus current levels. This should allow our network to take advantage of opportunities in the market. Being mindful and supporting dealer health following the record levels of profitability in 2021 and 2022, we expect these shipment reductions to positively impact dealers' floor plan expenses. Our performance in the first half of the year continued to be aligned to our hardwired strategic pillar, profit focus, with strong mix and notable growth in touring, especially CVO models, despite the challenging market environment in the overall industry. Building on our commitment to invest in our core categories, we've been extremely pleased with the strong response to our new era of touring motorcycles with our 24 and Road Glide and CVO offerings. The product continues to receive a strong reception in the market from the industry, customers, dealers, and media alike as it grows awareness globally. Additionally, in the US, we saw strong gains in share in the 601 plus cc market, at the backdrop of an overall declining industry in Q2 and year to date, while Harley-Davidson Touring being up 5.3 percentage points in share and over 11% in unit growth. As we look at our customer, our insights tell us that performance is an increasingly important part of being a Harley-Davidson rider, with 44% of riders considering performance to be the most important feature when purchasing, 73% of owners thinking it's important to own a performance-related motorcycle, and over 80% of owners seeing an increase in attention paid to performance. Through our involvement in the King of the Baguette Racing Series, with Harley-Davidson riders holding the first and third place on the leadership for this season, we continue to celebrate and emphasize performance as a key differentiator for the Harley-Davidson lineup. This performance angle has continued to be popular with riders, as seen by the strong performance of our ST offering. In addition, we selectively focus on opportunities in segments that we believe have a path to in-market success and profitability, capitalizing on our brand's strength and product capabilities, and selectively complement with partnerships. Looking at our partnership with Hero, we continue to be pleased with the reception that the X440 has received since launch, and we look forward to exploring further opportunities. Livewire is pioneering the industry for EV motorcycles. However, we are realistic about the overall environment, especially in the US. As we detailed at the last quarter, we plan to continue to improve in our investments and driving cost productivity at Livewire, as you'll hear from Karim. That said, we're also further committing to support Livewire in lowering the breakeven point. We expect further cost reductions to adjust to the overall market environment and to reduce the cash burn of the business in the future. I also wanted to highlight the recent Department of Energy grant of $89 million that Harley-Davidson was awarded to invest in our facility in York, Pennsylvania, to support its overall operations, as well as the manufacture of EV motorcycles for Livewire. This grant is specifically targeted to strengthen and help expand Harley-Davidson's manufacturing facility in York, to incorporate new paint and assembly equipment, supporting the manufacturing of all of its motorcycles and training of our union workforce, all while providing meaningful community and workforce enhancements. We look forward to working with the Department of Energy to realize this investment into the York facility. Harley-Davidson Financial Services, or HDFS, delivered a strong quarter with a meaningful $23 million or 10% revenue increase in Q2. This was primarily driven by higher retail and commercial finance receivables, as well as higher average yields as the portfolio continued to reset over time. Thanks to growing penetration today, roughly 70% of new and used Harley-Davidson motorcycles are being financed through HDFS in North America. But crucially, HDFS allows us to understand our customers better through the unique insights and customer dynamics that we have access to. One of those insights that I'd like to call out today is our average age customer profile. As we look back through our HDFS data over the past, we are able to see that the average age of our customers purchasing a motorcycle, used and new, is about 45. This is a fact-based metric that stands in contrast to the narrative that has been perpetuated by some commentators. As you can see in the slide that we provided as part of this presentation, the average age has not moved significantly in the last 10 years and even much beyond. In addition, nearly 30% of HDFS loan originations in the past five years were made to customers 35 and younger, with 75% 54 or under. Given the average MSRP and the segments we compete in, we continue to expect our customer to age into our product while building brand awareness and desirability, starting at a much younger age, helped by all our efforts to build new and keep existing riders riding as part of our hardwire strategy. With that said, the hardware puts customers at the forefront of Harley-Davidson's products and experiences and defines customers as people who may dream of motorcycling or just learned to ride a Harley-Davidson motorcycle, all the way to riders who are deeply passionate about and invested in the Harley-Davidson lifestyle and community. Within Harley-Davidson experiences, we can recognize the important role that events play in bringing our community together. This is especially true with our Harley owners group. Earlier this year in Senegalia, Italy, we hosted the 30th European Hulk Rally. This exceeded all our expectations with an estimated 100,000 fans and Harley owners group members attending and over 20,000 motorcycles visiting from Europe and beyond. In addition to the many events happening in riding season around the world, we also had a significant presence at Laconia and Born Free, celebrating our customers that are typically younger than our average age. Today sees us kick off our second annual homecoming festival right here in our hometown. We're excited to welcome our community to Milwaukee. Events will be held across our footprint here in the city at our museum, product development center, and Juneau Avenue headquarters, including Davidson Park that the Harley Davidson Foundation formally unveiled just recently. With headliners including Jelly Roll and the Red Hot Chili Peppers performing at Veterans Park, it's going to be a weekend to remember. Now, before I turn it over to Karim, I'd like to comment briefly on our performance since initiation of the hardware and subsequent hardware too. Despite the challenging environment, we are pleased with the progress we've continued to make in executing our strategy as we progress towards generating value for our shareholders over the long term. We continue to believe there's meaningful growth potential for the company, and we remain focused on realizing that opportunity. We will continue to pursue delivery for our strategic pillars through peer focus with plans to drive significant productivity across the business in addition to evaluating and pursuing selective opportunities and continuous product innovation to drive growth and ridership. And through this process, we will continue to evaluate our decisions when compared to the wider focus on returning surplus capital to our shareholders. With that in mind and consistent with our capital allocation decisions to date, Today, we're announcing our plan to repurchase $1 billion in shares. Details were announced in our press release that went out earlier today. The dividend policy remains unchanged, and the company continues to expect the dividend for the remaining quarters of 24 to be in line with Q2 and Q1. And with that, I'll hand it over to Karim.