HOG - Earnings call transcript Q1 2019

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Operator

Good morning. My name is Shelby and I will be your conference operator today. At this time, I would like to welcome everyone to the 2019 First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. now turn would to call I Mr. Instructions] like the to over [Operator of Relations. Burns, Investor Shannon Director Please sir. go ahead

Shannon Burns

Good morning everyone.

the page. You can can support the in materials. Click call find at of access the to slides earnings supporting our More materials Harley-Davidson link, to that Adjacent this Roads investor.harley-davidson.com. center you the plan box

in Our that Those results noted actual materially this different. latest could risks we include among our to Harley-Davidson statements matters obligation to are that and the forward-looking will update release cause comments subject information risks others, include, filings in to earnings SEC. any be call. have with disclaims

Joining CEO, let's Matt me Olin. and Matt are get John this President Levatich; started. and morning CFO

Matt Levatich

Thanks Shannon and good everyone. morning

take generation we're With objectives XXXX of In Harley-Davidson Our a Roads, months clear, rapidly executing More We're and strategy planned agility of evolving our advantage milestones. is with riders our built through Roads we've we markets. our global next each route progress since and capabilities discipline XXXX, of acting to met our eight the to accelerate plan short Harley-Davidson. through to announced globally. to build the More

was mix total XX olds this ethnically data. riders, across XX% tells interest indeed in States. years buying generation percentage retail is test into U.S. Of what each up reinforce ago. tracked the results all ethnicity progress These we the the comprised young segment's taking continued years in new of that compared in rides XX-year group Roads today. including XXXX by and/or on also It's riders managing sales number the new The the total and new the year. us the that the Riding olds in it's in evidenced joined the that data XX is and and XXX,XXX mix the participating the squarely who focus is of More emerging Our Harley-Davidson five of strategic in up our the results taking the XXXX. age, last women right real Harley-Davidson to industry, and our wars. up across worth points of people path we're are significant X.X participation and of people are Academy while working. most near-term QX, total to our is impact delivery, diverse riders remains in business of doing on This diverse to next was XXXX pressures on Harley-Davidson riders, intense very different United The also over we've and over XX-year motorcycles new global Of we're facing gender and trade ongoing motorcycle through noting

and remain beacon we're through While investments long-term and them require In and attention, unwavering quarter, to our management challenges objectives even our us commitment these after added determination. targeted horsepower further. propel first with the prudent we

marketplace stronger we support bulk will deployed and with marketing targeted consumers and in new was demonstrates, support the in entry a with Harley-Davidson unexpected of innovative efforts In more And action. reached and of And new sales. bringing increased provided Show, the positive offers marketing where quarter. increased Our we're that the and dealers in consumer is earlier we've with more integrated The products customers. and effort our and the in the are showing market. and the trial relevant of of CES, places future started teams and prototypes, of our leveraging through E application and in share. an as investments, World our potential lineup and however products up and world market the tools lightweight offered bicycle during soon catalysts. ever X-Games, we in soon increased focused deploying growth shared arsenal increasingly I more work. equity QX in current saw at in our inspiring impact earlier talent in brand the new include dealers can as awareness, and stronger League with growing data the sales electric season, smarter riders the We're part on engage types places U.S., that an a and broader the drove these Formula aligned pedal-assist We're Geneva around best racing. support access us, We large electric are Auto relevance, approach, Surf and our

impressions Our was build efforts h-d.com stronger global up our million QX that profitability greater experience. retail and catalyst, we're our with line XX%. amplifying this to and to to growth dealers in improved billion X PR dealers to and shoulder shoulder media traffic In work capabilities to XXX drove with up about from customer our lead year

and a XXXX a that definition our now year saw clearly executing for more are support a are objective impact policies of dealer establish we consistent that with are rewarded aligned ramp performance number a will metrics retail ensure dealers began company objectives. Dealers and both we including and customers. throughout performance we of with aligned actions, our to quarter, and serving focused on This actions from the model positive

to retail operations, help performance dealer's resource each groups consulting specific the increased to across improve nearly sales dealer leading engagements. to traffic aspects new visits Our XX completed and

to our of help and We online during time quarter. in-dealership was response to and improve programs fully and leads, dealers dealers field quality team engaged support restructured launched also the

and operating history. our of industry we've industry we more as light of persist deliver. trends continue to Our challenging we We're will impact right make that's our in needed efforts experienced decisions and our see We're pleased what expect on dynamic that. More our within performance the environments it. business one we track, to is The competitiveness the through in and Roads prudent business U.S. is underlying manage most the and essential to continue

Thailand supplying to realized motorcycles started competitive tariff and We manufacturing of ASEAN saw pricing to customers. we quarter, markets the more The the more emerging last late operations our During access allowed Thailand proof investment. in from mitigation wisdom our year. we

and in while challenges of readiness long-term launch of of on away a us as in segments. a QX a and give saw us employees largest emerging next in the Harley-Davidson strategy. offering dealers that With today reach premium model stability our included powerful we that we're from We're U.S. toward to these core under segments. I'm the a of in that our beginning presence we in nearly aspect deliver the the year. an our our plan, expand China plans. in help new have is sales unions retail global for year our products this we ratified critical in the by leveraging enable new of our a middleweight new to supply aim customers in represent markets our We're small also opportunities on remain will middleweight We end very XXX%. under XX% that that year, Adventure a help and and and Add to As the Thailand earlier in When we segments pleased allow consumable More to model Other compete address models support to the new further world’s have and More agreements this some XX% over electric competitive to base of displacement we and plan global QX in Streetfighter value Consider of advance volume. today Roads of our motorcycles volume. motorcycle that by markets region. manufacturing to all global approximately segments millions promising growth lower the five-year new track progress we the will fastest-growing Touring representing products we the that our models, partnership game-changing Wisconsin from access Roads just emerging month displacement our we'll dramatically first the to the More Asia of -- launching ASEAN of increase this, with reach region. XXX+cc need we that, participate Roads, provide in expand The potential. result, progress middleweight

riders, firmly Owning a already preorders part as our motorcycling electric and efforts enjoying of at in unfold. the their and motorcycle LiveWire future $XXX Dealers months and stations charging Harley-Davidson we've freedom more about promised StaCyc we've two-wheeled with space. Starting events. the our electrification is Harley-Davidson further of installing the products in booking away. acquisition the and mobility. inspiring electric seeing who just serious DC With through dealerships build place We're to extenuated of generation fast of are to are the StaCyc, connecting spectrum families to two-wheel ride opportunity kids are the next to broaden leading rooting

their his live, Our coming his dealer is immediately potential customers us in shopping tells went that San after while charged. station vehicle were Antonio to charging store,

Our interest. efforts igniting are

Our new Harley-Davidson ideas media extremely social with interest over brand. one-quarter LiveWire including in media and category electric In listening vehicle strategy is the people social the preorders young reveals is conversation. of positive about Harley-Davidson initial of XX% driving under about from is adult’s, two-wheel new freedom

worldwide is known believe drive I relevance brand more the within remains inspire ridership. brand Our there and can with powerfully. Harley-Davidson and consistently and vanguard we our to do

hired Brand During first our Grimmer as Neil I ever the quarter, President.

The teams riders around Neil XX to and plan, deliver will today's to the our strong our experience. new a is company teams known brand that consumer As Harley-Davidson riding over and will part brings world force our brand incredible More resonates in our even for invigorate support years engages Roads and more building, experience. for. riders and brand of our with together facing global bring Neil of experience has the deeply a innovative bond affinity brand growth and

I've build clear. things generation Street week, along rode and could riders and visiting sound. Harley-Davidson summary, our strong three More north next our all Roads shared the Milwaukee dealers to more including not last way In continues fact, true our start. he be strategy to a his progress, the for from to In direction of the are Glide In of clarity Oakland conviction examples be

our invest stakeholders. First, and value horsepower we're more all our to for in drive efforts and future actions our increased bring continuing even to to

determined and Harley-Davidson the We global dealers flat-out John Second, are to ahead. And evolve we're now, our defined it so results the along we of determination grit are challenges carefully with to I'll agility, that leadership growth. managing industry throughout our business stimulate with and financial discuss continuing continue has our the to John? market global the and over through history. third, conditions toward are quarter. the and And turn to our opportunities

John Olin

Thanks, Matt.

cost, that impact income quarter were motorcycles. We the encouraged U.S. we planned. and recent was restructuring XX. by were tightening by managing is a by had net and down into operating lower we SG&A, operating sales of in shareholder stronger XX, retail partially versus quarter, EPS Street the Services we EPS $X.XX. from down of focused on Consolidated had United When season. On The the quarter retail impacted despite the also returns Harley-Davidson in disciplined Our QX lower we the summary charges. first incremental Financial results remain than to the lower slide retail income. operating long-term. lower inventories, due adverse the performance strong our than cash financial prior over plan the shipments, operations motorcycles X.X% on headwinds stronger came impact our of selling year. anticipated, prior our aggressively by incremental tariffs, operating in States, offset Retail higher sales driven restructuring and and was in motorcycle In first as mix, for Worldwide face X.X%. excluding remain of sales recall In But availability costs on versus first new delivering generating shipments, slide year ongoing income and quarter, QX the we cautious and move down the year-over-year unfavorable was income was $X.XX. results tariffs, of height flow was for margins

January. following a quarter, of Street sales significantly March, by of announced were in limited impacted expectations. Sales in slightly slight reassumed re-call late the of availability were Street motorcycles For our motorcycles -- ahead retail

driven sales Excluding offset results, Retail decline market Worldwide gains limited were were versus availability in retail the Street prior continued year. quarter quarter, partially motorcycles QX The sales share. weak sales, U.S., first sales driven up down by X.X%. down were very motorcycles. was In Street by in retail X.X% quarter industry of our International the first first by

While QX have improved from sales sales retail significantly recent trends.

U.S. remain challenges business our XXXX, expect under We by in pressure driven in continuing motorcycle industry. the

new And riders encourage execute trial, efforts supply. aggressively conversion increase manage create sale. and our to to continue We marketing to

U.S. also Glide on In of products $XX,XXX. value we Standard continue positive. new motorcycles. introduced very to this dealers back Electra exciting February, Roads proper drive to feedback right of is been to U.S. our industry significant innovation at new a We to and model the have add fundamentals More customers foundation from We and the introduce across sales and building driving plan that health markets. Early growth the believe help our will International and Harley-Davidson the our steer MSRP

the take look of Now on let's a as sales slide by the partially were industry, share continued a U.S. down offset market U.S. the prior closer quarter, headwinds XX. versus at within Retail result Harley-Davidson, year gains.

an X.X% trends. the represented accomplished for versus be decline last in sales of lowest new continues challenged incredibly soft believe used rate decline over U.S. improvement U.S. and was in was The down X.X% bikes an the represents the by We marketplace. which industry of quarter, prices. quarters QX Our to also bike competitive the recent nine industry industry

We the in also was industry part U.S. believe sales in that trend highly improvement marketplace. and due promotional competitive to

prices Looking levels bikes, compared at remaining we used low to at new. see

of prices the bike over However, used encouraged the quarters. by several we are firming past

market dealer of was quarter, used quarter. registrations up consecutive Harley-Davidson the QX for percentage bikes bike X.X network the in seventh points. rose of our XX.X%, new During XXXX prices share

to driven currently market complete, we our support, segments share of compete, by up share promotional increased we market, the touring growth was gains will plan. by the segments XXX+cc not where percentage offset performance was were our execution Roads and X.X partially competitive In we represent and in approximately segments, cruisers the increased year which next marketing stronger activity, and U.S. of part of our as quarter. More the market points stronger what do but and which catalyst, for do XX% Our included which the dealers sales be believe

retail managed During X,XXX prior resulted in quarter, quarter the motorcycles approximately tightly U.S. we network. new This the bikes into over end of shipments the dealer decreasing inventory year.

products dealer We as were this levels result higher year. of sales, partially first significantly the are our maintaining slide value, is in motorcycles. as of retail with important quarter sales of dealers' in inventory the were XX, the very the a We season. developed customer the mix sales On retail selling into of ultimately stronger and believe X.X% quarter. in result move field, prior International new market QX sales and in impacted pleased International lower the down discipline sales. were height market Street retail lack down sales and by by we motorcycles emerging-market versus sale offset of available for will

retail up X.X%. Street Excluding were International motorcycles, QX -- X.X% sales

new and developed sales industry introductions outside emerging of product Australia down and double-digit market Retail driven be to sales Retail touring behind by growth the quarter, During contracting retail in Japan segments fourth continued competitive quarter. numerous in were the sales and weak up X.X% were markets. in markets Cruisers. sales first in international QX, in X.X% in

these dealers and incentives to test focus national markets, support strong on We with ride our a a campaign. in continue

year was X.X%, the prior Our versus share year. percentage X.X market in full down Europe points

in of products XX,XXX wholesale shipments brand, our guidance higher-than-expected distribution On ASEAN detail as a on region higher shipments and opportunities up plan we international of our QX X.X% down to As and growth XX,XXX our More markets. about confident we the believe a the we sales. Harley-Davidson. to are quarter. growth remain Thailand We were more motorcycles, potential Furthermore, result retail to in pricing. competitive our U.S. in that running, facility offer Roads than the in sustained international that with reinforces, excited markets can and slide drive motorcycle great will in offer XX, committed now came

production result total quarter. shipments, to higher In offset as in in of mix lower sales growth addition, percent parts percentage ship Comparing in On than we absorption Manufacturing first million of XX, last first exchange. Street and by unfavorable by receiving general were the Sportster result with expected. in quarter, inefficiencies. and improved a line EU incremental behind to decrease segment behind U.S. decrease driven sales lower we and shipments, shipments. and able of Touring the quarter merchandise a mix rate, unfavorable the X.X% of was margin Product shipments revenue versus largely tariff had in motorcycles. unfavorable slide more driven XX, mix down largely dollar, slide motorcycles reduced due Sportster late hedge revenue gross replacement the up exchange Revenue offset earlier by by mix by costs as quarter, year, the and our of to stronger On unfavorable a planned, than $XX.X offset which incremental increased were gains. currency year's Both and year-over-year as bike. driven foreign QX manufacturing the China partially X.X% was in tariffs. by during motorcycle was support, was pricing. million, sales by lower year-over-year by on down motorcycle was adversely increased were $XX.X in in revenue shipment $X,XXX unfavorable quarter higher in per for P&A quarter temporary down expense the was first impact QX This was partially prior mix, decrease impacted a XX.X% sales a a QX Motorcycle was driven by shipments. retail the by currency average of higher tariffs,

was As unfavorable $XX.X a gross by margin QX million. result,

flow available lower market gross of QX promotion, and Market our investments. flow cost. U.S. driven Services increased established shown recall as higher slide network. quarter's offset credit was at in increased cash our were in lower XX, investment of reporting driven Restructuring a credit financing higher a the margin capabilities to margin, share XXXX. drive by expenses $XX.X last equivalents compared there first due quartile higher which as up remain originations and competitive and segment the the for income, rates provision manufacturing leverage to profit Finally, a by change for by optimization strong XX. and financing million Motorcycle X.X% million which expense loan a management on QX Dealer share versus partially quarter expense lending. sustainably. lower and commitment $X.X higher through Net in to during totaled the key prior our versus of cash result offset are The from and end, raw motorcycle charges $XX.X restructuring first by was result costs and dealer Operating unfavorable benefited objective conduit of HDFS SG&A warranty $XX.X SG&A Financial points bank operating XXXX operating operational moved X. revenue marketing of losses material Harley-Davidson retail aggressive of for lower from X.X% driven and January sales Profitability percent with quarter, a On was business focus. and very continued the X.X the depreciation year, new credit by QX to end interest during year year-over-year system, were loan a year XX.X%, down steel percentage cash the up management, versus further of $X.X net QX partially million expense. million higher full result facilities. a prior is Systems strong HDFS' due the increased retail million of a year-over-year ROIC segment and receivables. $XXX.X higher and receivables. the in HDFS Services as quarter to to to on prior to was and as Financial for our was provision up results was It segment went the cash quarter. used of motorcycle continue XX, The At quarter, slide income up compared slide higher live million were liquidity million, losses on spectrum $XXX.X top year. to in

receivables Harley-Davidson paid delinquency our and MTN. XX slide loss three-year basis seven believe Inc. During for loan sheet X.XX% rate QX, driver QX On from a balance loan for $XXX loss implementation was on issued sheet big X.XX% million or than increased higher on in dividends rate. We HDFS motorcycle XXXX credit management QX, of also of than retail system basis the QX, XX-day points retail annualized rate resulting to our points XX-day inefficiencies balance million XXXX. higher the was delinquency new The or were rate XX, higher $XX.X XXXX. receivables and

summarized these a to maintain strong Harley-Davidson temporary. remaining be results continues and inefficiencies XX. We The the contributed robust liquidity expect financial are Inc. company. to to HDFS slide profitability position on

flat million securities lower Year-to-date to quarter Our marketable capital $XXX.X by working net $XXX.X year. last down flow end and cash higher income. was balance operating driven was million and cash

ROIC and in facilities. to XX demonstrate and a Regarding we on to in a liquidity at HDFS, leader to the cash credit cash clear maintain intends are continue the the slide in of shareholders. Motor leader projected has ability charts a or our committed generate company our Company to months minimum needs We return and liquidity are and ROE that XX of at we believe

to stock. million or quarter to the increase of top through and cash In $X.XXX of is we of invested best-in-class the an quarterly return shareholders. on our ROIC shareholders dividend XXXX repurchased history our objectives Motor $XX.X returning guiding Driving value business illustrates XXXX, the increased of the recent is for deliver XXX share our top and of a superior by our our HDFS. first equity X.X% priority. execution Slide per the Company being XX strategies capital superior and of in to our One on return by S&P five measured at quartile as

that to long-term the through the value the brand. will potential look company grow continue to and maximize of and We investments for performance opportunities

total of the our our business, robust investing and a share dividends our increasing with On we $XXX XX expect operating $XXX repurchases. optimization have capital We initiative. cash a excess quarter, in multi-year After and million. to intend form with manufacturing is return last process summary cost we for million in slide $XX Consistent of of shareholders program disciplined and million be to a decisions. our to investment between investment

approximately to incurred operating continue ongoing $XX.X QX, of of yield to costs. to manufacturing $XX also cash returns. have In of $XX expect percentage $XX after We million. very we believe these optimization simplify attractive million expect initiative and million manufacturing our savings margin XXXX. we operational provide In we We optimization manufacturing optimization When focus QX, costs investments our improve million will gross completed, on investments footprint, this expect X.XX points. by roughly

XXXX Moving XX. slide on to guidance on

resilience versus year sales last be in XXXX again year. driven to challenging guidance motorcycles XX,XXX of the part Our down incredible approximately percentage first full tariffs the In the the motorcycle ship the a incremental Harley-Davidson and versus quarter, approximately in performance. by to X% impact and XX% its year to retail margin remains headwinds expect the demonstrated face of second we expect quarter, improved In XX,XXX operating four trends shipments by mix. unchanged. down to lower second In we quarter, financial points and planned delivering unfavorable better-than-expected prior

taking Roads plan. We and repurchases to share More steps key shareholders all also to dividends increased deliver to -- value toward through our delivered our while Harley-Davidson

competitive by we marketplace U.S. retail understand cautiously also substantial the remainder As of incremental we are encouraged momentum but sales an tariffs. headwinds look and forward trends, recent the extremely we including of XXXX, to face

challenges our for driving all face Thank strong the you. are growth committed well-prepared well-prepared shareholders. we long-term to company these to are returns and We for -- and

Now your let's take questions.

Operator

Bernstein. first Your Instructions] [Operator Operator: comes from David Beckel question of

David Beckel

remain for in changed Is will And cautious I reason improved I this despite Thanks I for going the right said to you some of question have be that remainder drivers as your season the of you a believe Hi. QX John, had a of effective Has had not question. better-than-expected QX just anything? the the QX. forward? believe outlook Thanks. into heading year. sales that peak there any about

John Olin

Thanks, Dave.

the on bridge was had question, answer mentioned mix I prepared $XX.X impact Dave's the of I in margin remarks gross before First, unfavorable million. that

number has slides regards for down quarter All Apologize The year absolutely QX in anything the for in came first better answer And not. with outlook right. standpoint. that? good mistake. We financial very operating the had remainder the the actual in million. On the and $XX.X our is from to to Dave mix of of is quarter. margins, points. be a largely it Again more a well that changed in we remains we favorable was than slightly down came driver than -- very points was percentage same. our with intended. we more favorable had X.X The as expecting six favorable though anticipated were Even unfavorable, that looking was more as SG&A the mix. outlook we But

selling as we operating season comment a drivers not. is, be the the are are different? for expect well, of dealers move our that X% a to any height of margins answer year cautious made We us learned And a different. that was drivers The move we'll basis. X% on we well fact, the the investment. that marketing Matter with A there and as year. -- of things The quarter. we're was lot to full we first regards to a into absolutely worked integrated And not approach that looking -- we're catalyst, as things between growth increased of worked in well repeat lot lot stronger the as very we as throughout those the

and year. of the said what is So, largely, meant the of the was because nothing the comment there about confidence then in first represent and encouragement about with our second XX% the give it's we we first and saw move fact doesn't rest that that regards the us of in The quarter as of quarter a reality into and XX% much represents quarter bigger the of sales, our retail to year. quarter

we it, feeling we've and is in we And and The got very a move we're plan place. forward. as executing plan so, against good The is plan. working

David Beckel

year? your Or if And part to quick promotional or of expectations advertisements was expected? I Great. I for with the higher it one -- your follow-up. know than associated targeted was expense projections the overall a those But inclusive could for you're restricted question.

John Olin

plans X%. full X% It's margin No. certainly guidance of and line with it's in our in to incorporated our

David Beckel

Thank you. Excellent.

Operator

of Your comes Kennison Craig next question from Baird. Robert W.

Craig Kennison

question. on new President that the Yeah. felt could to my role of morning. Brand for Thanks Good this role? objectives you you add taking Matt, expand needed why and you

Matt Levatich

Yeah. Thanks, Craig.

and them and even the the further brand as I we of the Harley-Davidson the and things on of sport as a to product. -- sort brand growth in marketing, show for about through, is as the leveraging? which through through in but of itself unified is stands powerful a join power both and again, reason the digital create catalyst. believe up presence design, up a whether ways is join bring meaning commerce unity motorcycle increasingly very to and important that of a we we we essence compelling we inspiring retail, the it brand for showing just of brand a up move product, and wherever This existing way, to and show in How out. fourth How that future the that to One all in to riders the Harley-Davidson including world, we consumers a obviously motorcycling I aspect go -- H-D.com a the apparel show that's power the better up every product, and leverage way of inspire think brand do And through riders. brand -- every a

Operator

of Greg Your next Badishkanian Group. question Citi comes from

Greg Badishkanian

a just mentioned like the are that seeing talk tariffs seems bit Union EU "unfair". It potentially reciprocate U.S. that today? you political European against the the tariff Can little Harley-Davidson Yeah. President could Trump tariffs. Today broader you're the tariffs about Great. hitting background

So on that topic? thinking how impacting your is that today

Matt Levatich

that. take Hi. I'll This Matt. is

a another the books impact we bit little as The last that steel input last us from imports, tariff impacted European we've ordinary aluminum calls business. represent prior and Union by course -- number that here XX tariffs is total since in that of to points in It will managing increased the big nothing much don't costs X% we're June that act we're to Just import Chinese the XX% impacted changed The tariffs for increase because total. on with ways. tariff a -- of raw on on our trade with in different the European to wars points We're conjunction up June material, an June. XXXX as XX with Union as in China. as from not on has mentioned back the is this and import

we're so And our talked about times to pursuing as we've marketplace to through footprint. European the international our Union strategy manufacturing many get

growth path plans to significant European of international the Union execute within an to We integrity the markets, continue the to the very that at a our unfortunate, strong base us and of approval many it's imperative strategy in authority have particularly we're Europe we'll said products the case make we're part And we're before, this times and I've potential Belgian pursue And business. strategy at we It's we the a even with waiting that rate that bring that's us strategy new have European enter and important preserve markets. until for Clearly, the but middleweight change forward X%. that well Should continue we the pushing our approval. It's denied be at other play into European continuing environment. unless and sure a to is -- circumstances the within more as on as as our to to today. a this market. business in European

scheduled be So, currently XX%, two and we to that today. are the hamstrung that's XX% years it to growth represented from tariffs production basically cannot that incremental with in afford get to at

confident it. that situation. plan application So, our not our in through that's our in approved. contingency be very We're application, should and We're working

Greg Badishkanian

you. right. All Thank

Operator

Your next Barclays. question Felicia of Hendrix from comes

Felicia Hendrix

-- the as potential just just you’re good when along tag for for Europe? and answer question, to little in to that just morning. I plans, Matt you your referring facility a was Thank knockdown that the about the Hi. talking alternative

Matt Levatich

as tariffs. was. we has wasn't the at Thailand been always retaliatory preferred Europe option. looked to an mitigate how It option EU our

in we the awaiting that should this at front have way. a So as disposal, possibility approval we the today. prepared that authority not a of situation. we're that's that come. other beginning -- from that Europe approval always doesn't the approval, possibility includes as and been in that a event just of case We're our Again, that our we strong come have have alternatives a very of number And

Felicia Hendrix

Okay. That's helpful. Thanks.

Matt Levatich

Thank you.

Felicia Hendrix

headwind certain That when at prepared that you on which year. a due later market like John, so in in you'd don't in your a wondering said, you will could comments, seems to segments you me, you’re share, you talking the compete, faced all. if about but to teaser elaborate little I was

John Olin

the rate are share the segment small well, cruiser, segment and of are three segments. because mixed and it's bikes large participate has the the the of We United the touring that at market and Sportster. somewhat represents segment, XXX+cc market them are about comprised those part a that sales. of as market States, cruiser Street a segments those in six in Felicia, been Well, than of Within when the large of look we overall those segments. other faster XX% And which number declining of market, dual of the and that's very performance or at standard of and

that markets here, segments gain compete that overall the the market the was less the than that during we In in Matt States. More X.X compete share quarter in So and in, X.X%. And of mentioned, points. in of was XXX% will participating we six we our percentage Roads that with we segments the up in middleweight quarters new the be in United the comment market

United in will coming world's the right is the have of middleweight But of with streetfighting traditional dual States. of obviously, don't much mentioned with are segment in the an the and performance And enter in will used all segments in with we the about be with XX% And comments, we than United incremental displacement the market six addressable market is market the in world part Touring, that out, sales. So States the that bikes now quarters. the in XX% They short of the segment he performance the with in even don't are they in new market. bigger lower Streetfighter those and the world and terms is. Matt's motorcycles. prepared standard exciting and and And had Adventure more the excess come of -- into roughly

More segments today. we Harley-Davidson most be compete that couldn't plan, our So we regards world's don't powerful Roads to currently the to and brand entering with many overall thrilled with into more

Matt Levatich

eyes technology just I'm to that to also are how And going wide a performance open pricing John and add, we're segments competitive from those perspective.

in complete formidable head aim be competitors, deliver grow nature our and those clear with to we're going eyed of our investment to into are to with products So head entry and some we the that to segments.

Felicia Hendrix

Okay. just the that madness? wondering, Just retail And ask that I just accelerated was. wondering Can extent think -- that do you did thought just was walk the to through John, on quick question driver what promotion HDFS? I a you the quarter? can behind March process sales the you what in

John Olin

with and the XX it second in through have you're money I on very much rate. top think it no Matter that the promotion. rate we And a the the last Yeah, people had of just the ran and tiers. to referring buying And a no that quarter. fact, promotion during I beginning at X.XX%, is our opportunity bikes in we've standard ran very finance it's through that finance has quarter. end And than offer the three what the X.XX% Softail. preferable time the and Touring it the tier? it we motorcycle in, promotion saw February the lower for had the down We're top standard And we got believe, down. top of tier We we of past. run pleased to year

Operator

of Morningstar. Your next question comes Jaime from Katz

Jaime Katz

taking Hi. Thanks for my Good morning. question.

you the quarter? second believe accounted back the in make you quarter can that up the that being bikes to the now for from sales Street shipped in lost are first is So again, fully or whatever

John Olin

the sorry, Jaime, those sales? I up will on with back Street was, question we overall I'm think is catch

Jaime Katz

that embedded that Is quarter outlook expect? you Right. in the all second

John Olin

first we I’m tight is is season. the that and you the in this is have inventories quarter, the X,XXX which inventory. that through half the in obviously in units look had to accounted quarter. basis. fully And keep as for second year down our look X% the the again, in the And sorry. down first And down Yes. where I'm end, inventories about guidance very were first with we a feel Street of first very sorry. network the and in we're or about in what half, our we in the exited to to is selling we second full quarter. good expect It stand XX%. at guidance, excited inventories lineup year when as the We dealer we And more competition back that a than certainly of having that shipment on mix in lot line the quarter

Jaime Katz

dropped the commentary. then, France U.K. And in you last quarter off and looks the it of weakness called out least slide both like at has and France

could any So has Thank you. change worse that you better? articulate been or region whether in there

John Olin

our And France in France driven consumer what has the And lot U.K. was has uncertainty saw we in quarter. unfortunately lack growth digit. Brexit by and be declines, and the quarter confidence a that business the first Brexit. uncertainty called a saw some through we out volumes and believe in through of believe that quarter. that Likewise, good lot going sales to Again has consumer lot quarter largely in we Certainly, now double there's in we the in first down been in There's retail a uncertainty U.K. we continued. fourth confidence and of of France. we reversed October. And the driven certainly the by extended of the And in fourth jacket quarter amount consumer driven the first saw Yes. protests. quarter, yellow down by a fair last

So marketing we eye in right But working We're the market. lot that a market. now, got close just on there's on programs. of uncertainty a

Jaime Katz

Thanks.

Operator

Hardiman question Wedbush James of next Your comes from Instructions] [Operator Securities.

James Hardiman

call. Hey good Thanks my morning. taking for

think little as as got I it and the Obviously, impacted a promos comfortable shipments guess quantify wholesale that. you you sales moves relevant, feel the March about I talked things maybe bit. to extent It bit that I if the that you if quite better they both well about guys sounds equity John, better. was then talked talk impacting talk that recent were about marketing Street you about and that like that impacted Matt EagleRider So a extent that trends. maybe And know to that the then Maybe retail. around earlier

John Olin

represents growth were think we certainly recent same first down lot the feel the quarter, And the double-digit which down. The saw And well as yes, up both dealer’s digit. January and size in sales as in of are in January, In selling double marketing sales retail into investment in right. the trends momentum. near frame. clearly March retail the increased starts hold drivers March, February support certainly that time mid-single were the we and was In to All I had brand -- And as is that it the well stronger sales season combined increased we that quarter. a And catalyst of sales was our the time part February, call in first digits. James. takes let's take and

the believe in at the again was very question X,XXX half about there with media in was marketing March. dealer a in we for parts at about up was that is during the that expected about of April, to XX% came quarter, the working -- was less saw I be the and for pleased that last much. retail quarter. that we're certainly quarter very in doing we $XXX Street. wasn't on Again, the Street. quite All year. to was Media It units on out those we're with would that more pleased bit first that work. off side. The late X,XXX investing brand of million the expected Street, us things entire was this in The saw are So pay that and things be around We're the units. trends it we It which little we affected half increased come events by and availability the back reason talked question network Roads and quarter. with More the quarter, during we're

out were motorcycles as the end well some able quarter. get the we at as kits Street So of to ship

of had were cadence. in in more of than little shipment when This in And some years with retailed off XXX year, we EagleRider to of what terms ago, we James authorized a bit rentals. versus on overall dead those the we we quarter-over-quarter about started EagleRider, terms couple did anticipated. had cadence a of get With we're regards

so EagleRider an on basis. And not year-over-year a to impact first quarter was the

we up across when was So units, the all is about that's talk that XXX Street -- global markets. number

James Hardiman

impacted it the massive you And think promo, that? certainly I promo mean Okay. How seems that pretty do like much March. equity in marketing turnaround

John Olin

the exited management. underperforming organization. and sales And with don't type created I thing intensives, dealer integrated lead know. is It's We an things had reorganized sales driving that We're of doing stronger sales the going. lot kinds performance all dealers, instituted all We consulting, approach. rides, things. of doing. dealer one performance This focus marketing, test not growth we're catalyst had a of on

marketing lot going In a more had that, addition on. we to

So private the leads period. a couple going, The Freedom positive that Promise from which for did the was that, worked we And HDFS, we offer finance dealers with provided support there that. that year loans then, and and within ago have in was positive a offer. equity equity incentives. our was sales some And

very a quarter. good So we in all and plan second trick about James did lot for good those Again, we'll the the we a that our And year. the concert, into performed. feel apply feel we the learned as lot the and move of how we remainder about

Operator

Your Tim Fargo Wells Securities. next question from Conder, comes

Tim Conder

you. Thank

systems mix the result about think haven't Where we back? you of that, color HDFS within at that give different any overall direct-to-consumer, Or year-over-year? can alluded transitions. I since promotions? You'd come to mean, can kicked the XXXX. on Are of level guess that promotions at percentage the on different perspective. promotional the different or we're volume follow-up you do XXX. collectively, to as to this? out? wanted that can with we to as kind is some get of John, And setting down? system you as those see side, your take now I the that who basis the having expect wants or from that is the that If delinquencies John that Just a Matt issues level you that that What at anyone And been though, we look then,

Matt Levatich

first last this on is right, All they not ran with One regards different? it's the at beginning we little and bit ran But are in anyway. a financing the at it quarter to different offer, earlier. April we question quarter promotions it the of is

Freedom what was we to credit And does and and what were successful. marketplace. of the timing the for a paid is that Sportster a again, trade-up Promise, Harley. support to different in things doing very we provides opportunity of the that's some So, last the for larger that ran other different. And in they for year, had all that is a trade-up

same. the that So

of that positive we're feel some and equity using good. the stuff of with That very loans. is new. we HDFS, terms doing In And the

And results dealers them. seeing Our are leads we're certainly using those from working and good with that.

So, is I but different. don't amount see difference, a tremendous one of that

John Olin

I to add, the general, going are respond would on becoming in different surgical just the to. of are application reaching teams customers much that more terms and customers the the James that

the in them the positive the data ways appealing them. more to to being about that equity and leveraging example, we insight be are targeted consumers leads inspire of going have that and much to an So,

we dismissed the sure investment to line John anybody's the promo, a to -- it's rate of broader and general top We to going be all And create and sort that given and is what's you purchase stronger dealers with marketing are mentioned, lead engaging down much specific sharper industry. sharper broader plus industry referenced, environment competitive in with a forth. like rides and consideration don't and we from the just on test John them supported set aren't very in path finance consumers to that headline just that the so being And and enjoy sales things our contact continue bringing start then with riding. trial, customer to the within changes of take to much awareness drive and in some follow-up dealers, and to

Matt Levatich

credit Jim, with HDFS. was at your and the regards loss right, question All to of second part delinquency

points XX implementation what of a improvements kind we've delinquencies of break main and losses trend seen across in and which were of The last losses. Delinquencies five the basis new the loan management quarter, up was seven. jump quarters, the of did system. driver we that both During credit

an And with -- what system. we So, needed experience well at and we need regulatory a HDFS. that changes I'm that, in. caused January the our implement points We're now driver inefficiencies, reporting And the very spent huge system has well. we went did is seven. a fair the had basis this one, amount the on losses in in with very, process, XX system. collection some to and with delinquencies range -- largely as jump due pleased to retail having as the data repossession happened some said sorry to And the side credit business of at system. We detail, level loan two, and live Team we for very And our putting given be order replaced it of time of in on went X.

be behind to and completely a bit the those quarter. we by expect would we to temporary. inefficiency, expect And still remain second be quarter So, little us third in of the

overall. the just it's system, so, feel terms of blip very in And about is -- a good the again, which of we view implementation just our

Operator

comes Blair. question Zackfa next Your from Sharon of William

Sharon Zackfia

year, timing stick and on was difference to anything on But color And in then to $XXX with incremental? extremely million Hi. for this was controlled, well it clarify of SG&A, quarter more one-time Good that? us still morning. some was quarters? I'll one $XXX just the Because rest add-on. between tariffs the the the is can to you it this question the give just there nature so or for there an million

John Olin

had was that overall Is -- is Thanks, of recall three we favorable. to warranty and we Sharon. regards With SG&A, one had mentioned. drivers SG&A

general, expense piece on other prudent United dollar save world. in is around States overall that can't any really the and out the is we has cry closely gets have. been sales management industry of the has the that rallying being focused very the in driving with that The it really turning in reinvested that just and dollars it for be parsed company around And we here been very

lot into marketing increase the be the quarters. of we prouder were with and be last of year expect all which about two spending always our in over More expect then in well to with Roads we offset up has by we our those marketing to done $XXX million on a a fair spending have incentive double-digits that and been year. be this So we not finally couldn't quarter, base And prudent investment, but spending, full plan. basis which this marketing employee in an And our increase the spending, concert the several will what be

Matt Levatich

used And Sharon so, add just doing on of is amount reallocation plus under and the under investing of we're catalysts. an a within that organization significant the now I'll reallocation of catalyst, that pivot everything three John amount to there's our More a spend number as that self-fund the to growth which commitment macro said within dollars growth Roads the we're fair we

John Olin

from tariffs, regards given basis We pay of is be was disputes the but lot question annualized forward. year still with an of by trade second incremental avoiding of recent a million. $XXX And Sharon piece Your million majority incremental as the on move to tariffs expected the tariffs. end the production looking the have those to we to coming again, we're our to $XXX Thailand and

Operator

comes Johnson Gerrick question next of from BMO Markets. Capital Your

Gerrick Johnson

morning. Good Hi.

Promise. the that that, P&L? your consumer-facing in all the Or know, that hitting that but where like X.XX% had HDFS? seems work the of You lot Freedom your of March hitting gross with credits the margin? offers a is targeted probably Is It best, is

John Olin

promotions, they're types Gerrick. of well -- all So different

do what of Company I'll having means below-rate to the which rate. Motor the cost financing with finance a offer. down that the because So with start down rate of buy HDFS, there's no do and for we subvent risk we money that the that is we When pays

expense the the is happens quarter which the Company That happens. what so HDFS. will in in is pay in And Motor that an quarter that

the revenue in in item they -- in a first those and contra quarter revenue happen first are contra as account. quarter the it's line So so results as a

money from little hasn't They paces. gone through Now loan HDFS different. bit a the its that yet because earned accounting the is haven't

as on the into that the accrued released down into balance and So loan got sheet is that earnings sits the -- is benefit. paid

for. the will accept how need much accounted accepting not because invoice, of trade-in is price And that that that's that the are Freedom So what trade believe those the different. in the pay was -- dealer offer them little the we we bit a is an we paid. how terms to motorcycle at up that That the will offer, of is off but again forecast the Promise people that that's in is and would released. quarter booked cost

Operator

of comes Northcoast Research. question Brandon final from Your Rolle

Brandon Rolle

All my been you. Hi. have questions asked. Thank

Shannon Burns

more. one do Let's

Matt Levatich

Let's do more then. one

Operator

Joe of Your next from question comes Raymond Altobello James.

Adam Tindle

Hi, guys. on is for This Adam Joe.

year? kind mentioned Maybe believe demographic. interest from some to LiveWire So dealers this mind there's pace of younger Would early you the of the rollout been you through a how walking I expect us here? the many get product

Matt Levatich

Matt. This Yes. is

XXX the got are that very we're So signed Everything is dealers We've pleased track. on about up. with rollout.

plan DC States ongoing with charging through interested LiveWire the we fast charging, it infrastructure there. mentioned, the but my that as that globally, is better for with we so cars they're seek demand the with capabilities. likely we're the where because the customer out out on the know an circuit can they're got got that and the remarks faster able what's that be staff the received, I of to in enhanced to starting on in a in the charging mentioned LiveWire And we getting I installation ready As to out in in field, than which specifically traveling not is just plan dealerships, and the to they've people training rollout support the see We've we're getting dealer-to-dealer of the have. here train dealership capacity more United actually are who's deposits And LiveWire. product, so preorders typically

traffic at amazing track. is consumer LiveWire of initiative just encouraging the type spear the being tip the the the the to really Very and interest and interested LiveWire EV but in on the brand. age of signs motorcycle. everything beginning our And So full nature with that of not very the and dealer driving of network just this it's to we're that's the

Operator

comes of Your David question Research. from MacGregor Longbow final

David MacGregor

I competitive on products? entering the you're rolling guess question new I more just the is Thanks expected And categories. taking a about question. Yeah. really you're new three in profitability that the the the the bikes for profitability the talked out of you you little middleweight that fact and Can of the bikes guess talk bit about markets. those

to what you guess kind also I'm to of sense you're margin get trying get just context of long color going helpful. the can I Thanks. targeted So that be to us would going process. take ramp how you How level? here just it's they're ramp any around to a offering to compare now to that give And but with

John Olin

XX% the those Okay. regards With highest very But getting a Cruiser it, certainly as before expect the margins year big margins to costs which margin more and while from any it. of couple one, set not very we no to in to at growth amount – those gross also typically there's talked that compared the opportunity factories have gross a talk XX% add manufacturer in cost the the the that in our a level profitability, the range, that the see get be we will pick quarters and And spreading we as margins a us. before, in for well. realizing so fixed will lot at drive to and startup And out not a the but very overall will we really our that closer time overall XX%, day will to and The middleweight to margins also that lot world. that overall is of to be will is Thanks, are the up with the got be Touring but there's unit plants ramp-up. the the the goes middleweight We David. very bikes range when profitability, about we be get volume we ramp motorcycles profitability profitable in we've our each be about strong currently a come will but margin we that right. the tremendous attractive. with obviously next And through are – incremental – motorcycle XX% margin,

Shannon Burns

Thanks will for your May today's The audio We Or slides XXX-XXX-XXXX in audio The ID be the for right. until Harley-Davidson. X. or appreciate call – call everyone. Have XXX-XXX-XXXX harley-davidson.com. All the available for is XXXXXXX. and day. at audio a great investment

Operator

call. today's conference concludes This

may You disconnect. now

Harley-Davidson (HOG) 23 Apr 192019 Q1 Earnings call transcript