HOG - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to today’s Harley-Davidson 2020 fourth quarter investor analyst conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during this time, you will simply need to press star then the number one on your telephone keypad. We ask you to keep your questions to one at a time.

to one, like in jump would queue. the you ask please another back If

any please go recorded. further be require of call you If assistance, Burns, Shannon today’s like turn Manager call over now to advised Relations. press conference is would being Please I Investor to the ahead. that Please zero.

Shannon Burns

this Good Today are we morning webcasting call. everyone. the slides for

slides access can the at investor.harleydavidson.com. also You

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

our us Officer, be Chief will also Joining Q&A. for Hund Commercial Zeitz, this me are and CEO Larry joining morning let’s Jochen get Jochen, started. Goetter, CFO Gina

Jochen Zeitz

then like today’s shareholders, valued of Shannon. welcome extended to results, We’ve are before you financial Thank year the extraordinary plan, XXXX our with who first Hardwire. XXXX to all stakeholders challenges. We strategic new an to discuss would and dealers, our most lifetime. rose review challenges our community, our not was call order in companies outsized I in today. employees, us our seen those for the financial joining to

team COVID-XX savings. and community impacts, significant wellbeing keeping achieving at Our cash managed liquidity the forefront, protecting

through Rewire. the company entire the overhauled successful also We

starting $XXX we result, year. million approximately a expect As this of gross to ongoing savings deliver cash

a dealers, approximately approach driving substantially significant reducing our by network of reshaped and us setting put We deliver season, place on Just XX XX%, of effort. streamlined company, and The next inventory tighten the motorcycle phase timing supply focus increases reset transformation. results of sharpened aspects forth the closer strategy about launch dealer potential I’ll Throughout to our planned the network, the but and all I our our XX%, the to structure, exited the much together later, progress to dealer a name We we for XXX model year, optimized desirability. solid few portfolio riding the improved more by and and with additional key in put pulled metrics. by helped will tremendous management footing start results talk leaders, towards team highest initial product of value markets our higher inventory total review right at in perform on enhancing this entire to ask for to now we the year financial also our Rewire, XXXX. to markets, Gina? level. Gina made net

Gina Goetter

indeed success actions was XXXX our for Harley-Davidson. Jochen. company you Thank We an through for the reset future our and pandemic significant actions extraordinary Rewire year response. to took

results well impact reflect inventory our reset deliberate model the the year QX from execution supply new continued approach as quarter fourth and of Our as QX management our to of year. each

timing. launch income to of charges reset declines, $XX XX% quarter consolidated for basis, operating strategic ago of in $XX provision down by credit the operating was a by revenue revenue delivered primarily another with also restructuring of QX driven and a lower million, we $XX the On these full unit year up total losses. support driven motorcycle tariffs. earnings Rewire $X.XX, per of restructuring is a and income down brand year $X.XX. our year per share totaled restructuring and excludes for is Adjusted which full the Fourth full in which were margin our were million $XXX model the resulting million year. impact earnings versus of share shifts, impacted services for expectations Financial costs the but With exceeded investments quarter. results by XX% internal quarter significantly and had new year strong million,

In million. for and our lowering we result new cost restructuring approximately of these sales cost motorcycles share a reset our effectively $XXX year, structure, global the reflecting Harley-Davidson of dealer and compared of base new U.S. internationally. down QX market retail and XX% down XX% the motorcycles year, full was retail actions, right in inventory As launch. by our last to in inventory shift a timing of the retail year network, and were model Across

year basis, a unfavorable and segment. sales accessories dealers. motorcycle incentives, inventory used decrease We the impact used for year XX% motorcycle see was management increased sales and as in from successful to driving touring negative with impact supply a model through our quarter. revenue impact revenue On QX strong supply our the motorcycle supply by stronger XX% our decreased cruiser a positive segment customers These to changeover line and inventory shift motorcycle improvements business was XX%. a Complementary on was the the by parts network in dealers the and decline approach down motorcycles across management of of and in anchored mix our down due The in from fundamental management. increase partially XX% An creating actions full contribution mix of transaction inventory was was for our performance offset new related by of prices contribution versus to year-over-year continue ongoing motorcycle Motorcycle fewer revenue a value XX% related efforts. to and both to business models of in offset and XXXX are and and quarter the and in was on shipment the shipments higher efforts. slightly pricing are the

support in year product unfavorable manufacturing. COVID the to needed ahead to Marketing Moving The favorable for gross year XXXX. both partially was in company segment the investment million as motorcycle we up the materials, model offset incremental as onto execute pricing, properly new an executed to and margin launch Hardwire the were by exchange. quarter loss lower full currency Rewire tariffs operating and within with and the actions fourth down finished position and headwinds navigated in QX $XX These invested margins, raw quarter year the lower full was we plan. absolute early foreign and shipments, to the due mix,

solid segment million losses by high QX values customers the reflects financial unfavorable SG&A Despite volume primarily the partially for on credit a the well in was XX% for increase credit as a with Retail was the the to interest savings. $XX year, decrease loss end Net economic and losses at of The half qualified debt performance. total lifetime year. in actual driven costs to in XXXX, lower in of challenges as Financial down COVID-related loan the due offset company’s were earlier the rate losses We favorable improved result provision managed was to allowance the up smaller average the services provision expenses for used last lower year auction. conditions For in versus of to pandemic. year. compared the prior losses as last a estimated represents over our to last for realized last quarter as of very million, we restructuring as year. and down losses year, due services the motorcycle liquidity remaining operating credit million Operating in change versus outlook charges. year be overall delivered $XX income appropriately delinquencies compared the by receivables to proactively we full a the segment extensions about higher The continued of portfolio due credit payment outstanding the at was reserve aggressively income $XXX QX driven QX credit in year, to believe finance managed by during ongoing of year.

market for New retailer financing were QX versus remained new share last U.S. retail but in originations down strong. year, X.X%

New were partially down used offset new on retail originations. higher motorcycle availability, motorcycle lower retail inventory originations sales by

bank from within in originations as results, cash and operating market $X.XX as just financial share facilities, basis equivalents the of demonstrating face in levels flow the the debt $X.XX continues point elevated uncertainty. were XX delinquency The of due of had is to delinquency was and year. favorable conduit The volume expiration billion and the of with accounts compared year, higher the up extended quarter was remained economic prudently to credit $X liquidity lower Full that back XX cash dates manage available than over nearly of we The payment under HDFS improved year wholesale of extensions and liquidity liquidity HDFS For majority and HDFS’ flow at rate least on At over loss the time. ratio and effects made Cash the year, maintained with day-plus cash and billion retail down due their its strong do period X. a ongoing a the year. basis ended inventory cash Inc. cash to no quarter equivalents loan through cash we last XXXX. normalize ratio COVID-related points at the available equivalents $X.XX total had expect despite XX billion we well fourth and HDFS equity quarter, rate a last a largely of the $X.XX the debt end XXX impact of through billion between hold challenging a X.XX%, delinquency in and to $X.XX year. vast we the was high positive prior cash billion. retail X Harley-Davidson pandemic. the to loan billion, over payment finished improvement and XX%. of Key of X historically during for performance cash times the extension X.XX%, of the after Rewire will XX% drivers credit one also high to financing. retail covenants Shifting at of favorable

finishing efforts managed tightly XXXX. $XX of part we our down the expenditures preserve capital year to as cash, versus million our Additionally,

company pre-tax recorded the favorable benefits year. driven tax an benefit tax during by recorded the income discrete a during loss XXXX income Finally, and

five-year Now, who back take us strategic through plan. our will I’ll turn to it Jochen

Jochen Zeitz

Thank you Gina.

a strategic leading and high together Rewire We’ve development completed Now We’ve principles. the we leadership by will playbook culture a on aspects rigorous strategic clear plan across as our about for and talk H-D#X, the efficiency, we future, forward let’s will This that since that our five-year by the results. all journey believe world focus based of months powered XX this drive to the guide speed future. to Hardwire was comprehensive into defined be XX yield Harley-Davidson our been of clearly winning conducted performing, started also will review It’s the look business significant pandemic. the Hardwire. successfully path a gripped

Our Hardwire in rooted strategic desirability. plan is

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we’ve believe we strategic that we is to critical until said that first XX-XX-XX, attractive a we’ve of Returning close are segments cards keeping They provide America, us history. the profitable both and and opportunities largely for new untapped deliver you growth. I evident with it categories new participation selectively of and by experience winning will the to is the compete America Harley-Davidson high also As largest we XX and natural launch America, combination the Adventure before, It’s fit. we’re built attractive touring set focus With exciting our we’re our European segment on on bikes. our for balanced product stronghold America, conditions. effectively market and to balanced only believe February margins markets product, in our with invite we in the focus In margin in also our potential, line the transform This potential of of two part many aligned adventure the with criteria, be a that them and right the and intention Pan and with our win, allocation expanding that a join we a space. in brand, well on is in our they of excited new with By supported are segment we focus will clear: will our in rooted This narrowing segment combination time language a are by deliver touring ability leadership. reveal. investments Pan a go-to-market touring product to meet right make North opportunities energy, an in unlocks our clear those the deeply and capabilities on is brand Harley-Davidson. our to these path capabilities. and volume, Pan plan.

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also our Hardwire. Harley-Davidson a With making my to is in over to the close it company, Hardwire benefit to are history will contributions This A factory shareholders in of employees hand before succeeds. I to final align workforce Gina and financial and outcomes. of wins. out our first our discuss the the approximately workers few executives, employees, acknowledging the successful. on this everybody company important grant our the We with of remarks employees when rewards the to our offering at approach, start of X,XXX everyone closely to All expanded equity an want from the words

Harley-Davidson Our to team over-committed new in able and in build intent and confidence is we’ve trust under-delivered. to what our achieve. In past years, the is

is committed realistic now we and everything. that are to expectations know We setting execution

H-D#X As competitive performance, has the culture and define new of a shown, level our Rewire new spirit. accountability, will capability,

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financial you Gina Now through will take targets. our

Gina Goetter

Through Jochen. are expectations performance. dimensions, follows. the on they In our and targets profitable will targets five-year progress as our continual the believe historical XXXX step commitment from are Hardwire, set target several and XXXX, of you a we with our critical Thank to XXXX through recent demonstrate change line our growth, to realistic term

the are general in and expectations solid annual merchandise. segment, For growth we accessories, digit growth mid-single motorcycle parts revenue targeting and with motorcycles,

structure. SG&A motorcycle the expect we also improvement driven and from our year, XXXX, cost as We steady segment by across efficiencies lean operations operating to recent margin maintain a show leverage our most increased within comparable

back in anticipated brand business included have growth investments In we continue targeting digital will updated and operating platform. are the of grow XXXX double financial optimization XXXX the to We invest and and to margin through profile. services, the our segment our motorcycle in digits income into behind

and be the We million capital It well families. $XXX separate defined build EV includes out ecosystem. expect investment behind the division each $XXX product Hardwire needed innovate year This digital includes core million as to investments. spending to across to capital also required supporting initial as between enhanced capital our an

are growth targeting XXXX we double-digit EPS XXXX. Finally, through low

motorcycle margin XXXX, than the a past. to at targeting levels leading look are steady we segment As improvement our year-over-year operating through recent margin healthier we

talked as I of and primarily Rewire. and the driven in costs of operating the part negative the As by actions COVID the margin was incurred XXXX restructuring about earlier, impacts

will electric, our most businesses, across require current As growth structure. capabilities, we our of and digital investment The innovation and a our investment, look on Hardwire cost lean of outsized margin notably which focus be reflected brand are enhancement most SG&A we our product combustion optimization projections. in significant fueled believe motorcycle margin steady forward, categories, will by profitable our and maintaining complementary growth operations, across our

we allocation, two to Turning moving cash have priorities forward.

that brand Hardwire operating will and growth drive fund we capital investments First, through and our and double-digit we will expected our believe XXXX. income EPS plan

reserve return are shareholders through significant repurchases time, framework. we top dividends, cash in second share share priority unlock Hardwire At We announced press upside this high two these morning. reward growth QX to for prioritize is Our priorities. that within our this release cash $X.XX investment starting for the remaining a accelerate to of plan and opportunities, not dividend cash with to planned we as per

our shareholders deliver will of recognizing industry results beyond seeding the investments to with that for business and shareholder are long-term right our that the is objective provide XXXX. Our also future commensurate while value our growth for returns

execution, Hardwire the impact to expect our For the and to ongoing through our manage revenue first uncertainties year brought to and we plan chain. of continue on COVID supply the by

the of versus XXXX revenue X%, million benefit as X% savings of guidance which XX% of year delivered Rewire cost the as Our and $XXX initiative. for margins to with motorcycle follows: XX% growth is between operating last includes part segment

expect million restructuring actions. we the $XX of Additionally, to incur in early to charges Rewire approximately XXXX related

expenditures between are financial total growth XX% last planning capital million. we and services and million year, income $XXX expect XX% lastly versus operating $XXX We between and for

Now Jochen. I’ll to it hand back

Jochen Zeitz

Gina. Thanks

me summarize. Let

and a as on our committed to and building We’re H-D#X, a mission that desirability being our fully and will continue world-class company aligned is vision talent brand. team, with as unique journey cultural leadership and

future customers, strategic and a planet where the journey, into Our deliver finally across is and and focus will winning electric lifestyle, is Harley-Davidson redefine growth of profit. market segments our profitable strategic priorities, riders business, solid Hardwire how and segments enhance think in both the we and we grow on complementary management prioritize strongest Maintaining of customize our offering, these and our innovation steps in stakeholder part drive the the non-riders believe plan have and critical businesses, that six expand and all and experience for built six in returns. which we inclusive invest of product believe all around invest motorcycle selectively we profit, people, about priorities:

for opportunity upside with the new I one in leadership plan transform of will Our and most This the the the team. an performance priorities team are the is and to brands a Hardwire. to to highest new strategic unlock and recognized challenge iconic strive world bold, further within exciting and time

We’re sharing as forward Hardwire playbook execute we looking more about to plan. the our

your let’s questions. take Now

Operator

first instructions] comes Wedbush James [Operator question Your Securities. from from Hardiman

Your is open. line

James Hardiman

Hi, color around to the of Really obviously. new Hardwire digest plan. good all Lots appreciate morning. here, qualitative the

to I the I a think of sense the to into the maybe of street, in, goals lot of aspects all dig make wanted quantitative this. but of some

what me do and the basically earnings low guidance XXXX. pretty guidance XXXX which the I I mid range, good we earnings, You’ve simple you range, $X gets the get here which basically low math under-promising plan where get and did of is basically into in sort double-digit for were maybe $X the is obviously idea I some to and Tell of sure is third of I’m essentially trying have me low the and like in but I basically given math. last the then understandably which here that seems where that XXXX. to conservative, make is goal it over-delivering, understand term longer I’m on the we year. of the off

Gina Goetter

getting in now, model. after right But said said to we’re in terms and build it, are so year not historically you planning wanted No, purposely right as committed, very I on finding we and delivering, in sustainable his a we a get and year, your how slowly a growth over-deliver then to setting and are we the those, as we’ve Jochen into where baseline that confident guidance. is spot, remarks, delivering that year ways nice I’d for think generally math what that on set of been say to back high expectations is company after

James Hardiman

a in got in versus for have guys the plan, but doing margins it, just it step Am operating and improve--consistently XXXX, non-GAAP, operating then or XXXX I Hardwire the of margins a way, from but - little mixing basically in I that’s it maybe actually thinking or that to the GAAP about I are operating bit way? non-GAAP XXXX. XXXX. you I seems I some forget X% call wording a clarification, X% XXXX a mid-X% like then was to a it maybe right margin improve versus back am

Gina Goetter

I what say it. that on slowly building and improved XXXX year plan. is of we the GAAP through would be then levels, Hardwire basis, will Got Yes, our after course the year a versus

James Hardiman

to X% for and Slowly improving GAAP, sort XXXX X% so GAAP is a basis? of the and XXXX go-forward both

Gina Goetter

correct. Correct,

James Hardiman

Got thank Excellent, it. you.

Operator

Shawn Your next Citigroup. question from Collins will from come

open. is line Your

Shawn Collins

Hi and you. with nice speak Great. Shannon. to morning, Gina Jochen, Good

Gina Goetter

morning. Good

Jochen Zeitz

Hello.

Shawn Collins

reaction new your about a ago, far, a that to you you that. and know product just, to I wanted guys, Hey talk I ask launch so what had ask--I just if week half wanted could to been think, has I the and

Larry Hund

Sure, this is Shawn. Larry Hund,

Larry this on--Shawn, is quick a Hund. Just comment

launch. pleased that, quick we of so response are dealers comment with so weeks. then forward looking of on a Just the obviously to reveal Good a ’XX here in and response good the couple customers, America far, from from Pan

Shawn Collins

insight. Great, helpful. that’s time and the you Thank for

Operator

come Gerrick Capital will from Markets. from question next BMO Johnson Your

Your line is open.

Gerrick Johnson

thank you. morning, Good

cruisers, Thank bringing getting sportster America, new new from at without large riders about depth I understand going talking segment, lure in and Harley. investing investing than are at Pan same to brands, get do have displacement bikes? level, do in no more so and which it seems in plan like say, other the to to you. but riders, bit if plan riders to how the longer entry the a you them into difficult to How choose them your the new is you committed that can on core you compelling touring ecosystem. more little smaller you’re but You’re be you discuss more time to, you’d

Jochen Zeitz

an part large are as in opportunities existing the be and expanding as our segments example, XX% would entering segment existing be new and in includes cruisers, there which cruisers, construct, XX-XX-XX other segments. Yes, of I middleweight sportsters. addition would and include would touring, profitability said and new The to the touring adventure segment

also in through the cruisers. believe, as bring riders should part XX% the they so large touring are and segments and at going new looking an premium partnerships, As displacement us low into all of segments I enter us primarily markets before of forward includes said, see these to critical sport enable I we Hardwire the where opportunity,

Gerrick Johnson

thank right, you. All

Operator

from next come Baird. Kennison from will Craig question Your

Your open. line is

Craig Kennison

from function course that of a in sell then network? revenues well. benefit direct Hey, benefits are indirect What It’s able just as it are the and Harley-Davidson of is your prices, good my the economics program. CPO program, used taking question on certified the being brand there or bikes to morning. any Thanks dealers for that of for gets pre-owned higher and from

Jochen Zeitz

There are and direct obviously. indirect, benefits,

that the by sound, mechanically those the all, available included support, inspected, see of exclusively verified benefit at warranty, more mark-up so our There pre-owned for of complementary driver is be First growth professionally a dealers. experience HDFS of that overall profitability the so and - further of program business, are HDFS Harley-Davidson well. as will obviously we a and a backed HDFS dealerships, participating will for the customer as that’s enhance as XX-month limited

motorcycles a Harley-Davidson certify future. in our only actually because of else entire focus the get in Just come ecosystem, that of bit [indiscernible] total come older, to are service those background, through our ones so years look customers to is Harley-Davidson and highest being we might than little with also use the to which you also rather who going believe competitive an customers at be million for additional potential a new move, essentially X seven a Harley-Davidson if motorcycles, for about third anybody the five the motorcycles or a is to It dealers focus, we these dealerships that miles. engaged XX,XXX on we them are great and the with than older to have benefit a Harley-Davidson, and years than there’s opportunity a that should see that no will program have no certify can That is more bikes the motorcycles, motorcycles.

Craig Kennison

you. thank it, Got

Operator

Katz question will nest come from Your Jaime from Morningstar.

Your line is open.

Jaime Katz

growth on between and and expectations. for the bit morning. can price hoping you maybe whether motorcycles Thanks. little Hi, bisect you I’m a that good elaborate XXXX can volume revenue

Gina Goetter

off we’re time, giving of this guidance, of revenue XX% to growth so giving At XXXX. out we’re not the Jaime. that XX% guidance Hi

Jaime Katz

Okay, you. thank

Jochen Zeitz

the add think previous more years, has of particular important in that’s That not bikes of pricing, note might in so or we’ve our I terms we help you. can changed our is What kept to pricing less constant. pricing to really

Jaime Katz

has think there’s but are you. to us been we that, and not you a then of to It about to where multi-year channel that Thank through channel, or optimally XXXX else in something fill persist right-sizing, if the seems sure something Okay. normalizes? want thinking. of sort is we’ll if sort can be, of this dealer the get On top will you maybe I’m help that when inventory like guys

Larry Hund

Larry. is Jaime, this

and on make Just while to motorcycles doing or and fundamental comments we results and to that say key management we isn’t on It’s are we’re desirability. inventories a I’d actions action essentially to most the and really dealer value eliminated XXXX We going the how our the with drive a drive we measure. a a inventory. are we supply the inventory continue term brand, in tightly pleased couple in short continue to of world, temporary very forward. change really focused products manage of strengthening on to the desirability. and create business taken sure dealer that discounting approach so intend our It is focused and we’ve that in initiatives promotions and desirable

Operator

Greg question Research. Wolfe next from come Badishkanian Your will from

line open. Your is

Fred Wightman

that good we market terms guys, Greg. It’s probably to talk way about just you’ll end early about on share at period, gets it it think that should of the look thinking in to or ’XX be of XXXX that If you think Fred - guidance gave about what Is period, that Hey get the morning. line share? to for for you actually differently? you Wightman figures guys you top XXXX, the the ’XX ’XX we by market back can

Gina Goetter

So we--when we think about--

Larry Hund

Gina. ahead, know--go You

Gina Goetter

ahead. ahead, go Larry. No, Go

Larry Hund

and building focused are world. most that be motorcycle we for say to focus know, most obviously to on continuing brand going brand on not--you in market but was share, we the I desirability we are importantly desirable the the really

took brand on we at the on retail close motorcycle we’re seen used know, said, at pricing in we retail. I in have and activity, we wholesale pricing, past increases both we building. motorcycle spending not actions have seen--you We’ve promotional obviously spending MSRP, are this As year, to seen increases

to We for new in used but market primarily so late brand fairly the between obviously focused market share about we been look and building customer motorcycles the share and great are and have experience. seen that model we desirability tightest gap it’s level years, the providing care close significantly at on

Jochen Zeitz

said, line, stable, market also and internal focus From and Larry will desirable impacting Commenting by so as well. that stay around really share market high metrics obviously being will don’t we our a share but market our promoting and reset brand great how products view, are profitable are is know about we of that’s because the on it we’ve our how we that the in sure really it and values develops. whatever market not it. share, decline, world, that if sure and more considerate is top our gives obviously market on button us, at share looking share our for making terms market point and market on products increase, button much will on other so through--the market also not we focus our keeping share the of not bikes as of be the We

Fred Wightman

Great, thanks.

Operator

RBC will Capital Your from come Markets. from next Spak question Joseph

is line Your open.

Joseph Spak

discretionary your suffered is know pulled the years. then part you power talk job of activities, expected over obviously year, to this dollars you that but or demand that were some was bit actually Thank was considering other forward, you question over everyone and you like much. product or bit your have was very the dollars other because investment you year. little to would that planning as seem well year that, period. a you happened out, real retail it’s wondering difficult wondering makes if think would did pulled gone concern industry elsewhere, missed little Harley-Davidson gone a if there this Gina, to be forward may what on helpful might here for of The have retrospective more it it maybe especially you destocking; call if if if manufacturers I’m this think could I many about true I’m because total give sports maybe coming demand about you that and it think the can the just other quite to was

Jochen Zeitz

to of reset good increased have over missed the to the I in look to past up, and well, overall years out, need up business is We the has going prices that us model but success missed you brand, the out the thing of on important future. do, profitably. was what dealer do - important. essentially the and the demand market, necessity, it because believe close was with of the have from not with demand pandemic right desirability also increased achieved that also a new the there dealer which and is and because so reduce as product, strong through with year profitable for levels been has strategically believe wrongs we’ve helped our some to We able of products in was year to MSRP was we We the the aligning a We to think that were retail really, a anything, inventory our up would was right been out don’t pandemic overall that’s pushed this previous a market to able we grow successful but course don’t bike that’s those network, models obviously have network, some our Sure, and if at flush our Used set strategically that been years, our overall question. discounted able and of would build dramatically. will we have season. gone, pricing. riding the what through flush to and we’ve and have logical so dealers, that the it’s has were we gauge the the our our and do able is thing thing we significantly of happened bring in an been previous profitability been new out healthy fact of it of with some to model into

Gina Goetter

life the the going there may be The a the of that throughout core our north guidance $XXX million initial giving of capital in that be $XXX be In that. Hardwire, investment will against there could question so segments investment of digital our $XXX on as of most years million, year, over our to ecosystem. well terms five of are the those the are as some your investments profitable years some million is that bit primary little a investments platform, EV business, the of business, we’re

Joseph Spak

investment opex capex, associated with that’s there’s no So it? all

Gina Goetter

marketing gave. guidance That There additional opex. is There is embedded that the brand is in embedded. margin op investment we and that’s

Joseph Spak

around any there framework is that? And

Gina Goetter

guidance No, not we’re direct providing on that.

Joseph Spak

Okay, thank you.

Operator

Your next question will from Altobello come from Raymond James. Joe

Your line open. is

Joe Altobello

morning. Thanks. Hey guys, good

of first, years? growth mid-single digit is industry baked independent growth it things. Just of a terms assumption your industry revenue target, I that’s in the couple there clarify five an next to into wanted that is growth of guess over completely or

Jochen Zeitz

different It’s market growth years. we It’s really not next feel based independent comfortable expect of at what feel internal the evaluation in our and to and industry we be. on looking the We what market the what with guidance, enters but comfortable Obviously matter seeing happens. story; massive if believe that fine world into we no what a the that a recession, we’re we’re with seeing that’s now, our estimates.

Joe Altobello

it. got Okay,

wholesale keeping year? rebuilding fairly ’XX, anticipate or to this back do in see dealer begin you and consistent question. go Do retail inventories to to Jaime’s opportunity wanted the you Just

Larry Hund

last say continue year, going overall that. the I I to be think approach would demand, tight are feel of very to inventory throughout but so we said consistent the closely. continue is the with watch end fairly I that a with half inventory year, think just to managed which to we at we the about we line good going of way Inventory our little second are in is earlier, was manage what to and going bit we

Jochen Zeitz

went retail through certainly in we gone in low, the not as inventory that has fourth where in replenish. those particular will pockets, we quarter, sales overall as around above particular world, in short some particular where and company. an But certainly we’ve adjust our because needed sales, in the gone that feel but that are in pockets will expectations a we the over-achievement There fourth quarter

Joe Altobello

So it’s a total not a selective rebuild. rebuild,

Jochen Zeitz

Correct.

Joe Altobello

got Okay, you. Thank it.

Operator

David question MacGregor come Longbow from next from Your will Research.

Your open. line is

David MacGregor

good morning everyone. Yes,

ask to wanted bike about the business. Just electric

think in can price points division division? what of products you electric models time You noted need guess a you’ll delivering for the the you or but for metrics dashboards, development, you trying discuss years, how a number this a to you. you’ll few having goals progress just with I’m next begin of bike focus get dashboards. the is terms or much establish dashboard mentioned performance technology to timeline do specific on Thank I of and business are dedicated your over sense of on bikes new some your electric vision Also, the relatively to cadence market? for What steady a for electric of bikes?

Jochen Zeitz

you to our talking the to gives just fully important that bit little because revealing talk have and as else, electric year, not in a year, said for model need Yes, is said, it we would setting committed significant I’ll apply a have Everything the ask electric autonomy think about a about you opportunities, is division, to that and you you When very that company than universe, the will patience I flexibility up electric we really to what of combustion. something be in model because the electric move and is it’s to it I about. the to are strategy a more later considering so invest be the in business different that. separate I unfortunately of

really in different launch we product, terms you make, expecting segment, launched You other to do automatically year, be launch are later about about product so not new talk that’s because model line space touring a in a as new adventure market then focus and technology, a combustion electric on a technological you’re electric we how and - technology new that shouldn’t certainly product model plus talk be new products. one time also and now. have categories, a you in The right that product distinctly said, That’s as year, they I about to we the our launched categories, we you also in by about one products, application then focus was those on one we of don’t the a our change terms year. same that reasons we talk how as you But of offer into addresses the at will the will why talk aging model new we’ve customer, not the go the in your market core of middleweight, electric. not

has the really and that a It goes it each organization. entire of metrics dashboard, has as operate how obviously brand In terms metrics, overall company, across function also includes and we internal electric. for dashboard desirability the that an it’s

what planning between are at. in We metrics and new to something metrics bikes, prices our of obviously course are mentioned are I retail publish my gap MSRP we’re not versus but the that used speech looking are, that bike

than also very segments, in all that company functions, have based we we accordingly. our It’s at our the market goal the incentivize of and our differentiated dashboard We how our profit we’ve align share, is allow the manage centers, a all that but looking on what look them established, are certainly overall all a with team and also company, the past. very entire to different that will had

David MacGregor

Jochen. thanks Okay,

Operator

Your next with will William Blair. question come from Ryan Sundby

open. is line Your

Ryan Sundby

taking everyone XX think more morning talked thanks in and Previously top on on markets. talked then and Good you markets, hi. think today concentrating the about the focusing about the XX Yes, I for you I question. my release potential highest

about is top markets Just involves this the wondering means Thanks. of the then this what that what right the XX. a if a for market, are focus non-focus market you can versus maybe number, to focus and XX why outside talk

Jochen Zeitz

go-to-market. Yes, good XX markets focus localizing even approach XX are we operating year. obviously The intact markets XX exited on of and last We further would still out but top or by have XX our markets that the XX question. that we like to is - in markets, require we

that Overall do Out attention priority in terms XX might Hardwire product can’t our special where Harley-Davidson they of terms market, of we markets every get to get differentiated of market. execution, that feasible. overall. how planning, XX, our those go of markets is strategic in You universe our for in terms

That local markets focus in just will most we every on acting global, specific in place, these doesn’t senior but special are focus special apply and leadership those working new markets. now to actually respect. they of these emphasis have get thinking All those of also XX, from adjustments, and mean priority management, so

Ryan Sundby

Thanks.

Operator

Stanley. come Billy Your Kovanis next from from question will Morgan

Your open. line is

Billy Kovanis

a your color to back both, provide $X XXXX for of medium wanted or just around Thank back there’s profitability? Is the as whether you some Thank in to can and margins you team EBIT XX% is to term. priority get management motorcycle to ask on if billion? detail get path revenues the you. call. path about I growth a levels, a the it If motorcycle it’s to when there were

Gina Goetter

where hit our growth, you of that been the be we as the well two think plan. to profitable recent top over terms we’ve history, Hardwire the after way I right We line in our margin our profitable course overall as growth will know back were words, of the building both structure. sustained in

Jochen Zeitz

that on said, certainly the as unlocking going we on targets a we years is it’s there unlocking long time Five as what achieve, And that’s matter our hit as goals, are that’s progress, got from to will years, at underperformed want time, and what great and our to on focus our we’ve certainly, you confident the we’ve we we beyond numbers can clear, potential five every and then our We potential. the what, and commit will I being. we is so beyond focus feel financial over-committed single no well, time deliver and for that’s projections and and stop. look deliver past if and never to further

Billy Kovanis

Appreciate you. to expectations. it. Understand of sort need it, Got thank reset the

Operator

Your Capital Johnson will from next Gerrick BMO come Markets. question from

is open. line Your

Gerrick Johnson

maybe bit I probably but a of biggest for dealer here. thanks Hey, investments your little the - the curious asset, was second about updating out question in date. it’s network

only. in to have you mostly continue network or sell Will exclusions the Thank else to to something will so, to Your you. exclusive to dealers wintertime? is it Harley be grant

Jochen Zeitz

that everything, provide the to upgrade. to a about digital it’s want we selling, past and for Harley-Davidson that about strategy, network. a lot a that future maintain believe as the that [indiscernible] our making sure experience They have just future. Well, enough omnichannel there It’s we that requirements in something dealers carrying Like exclusivity marketplace. be are our so I is even but exclusive and brand on the and not there exclusively entire is not have along short the sure and long-term at drives Updates about our the of and a direction fully the over journey jointly into basis, will make strategic they with adjusting that of customer. our digital a a is pretty looking physical have future an We cohesive that should future. that about they should sell, experience. profitable about plan focus and dealers of retail we our will everything Hardwire so had in to needs dealers of a talk dealerships, much experience certainly our more continue talked the want the an is are, really clear, time, the so to opportunity ecosystem have to we than that to network integrated, other then purchases that to happen

Gerrick Johnson

I XXXX the there can or off about that motorcycle is What’s - for base you’re or segment? of, XXXX? building digit the and Okay, off revenue the of XXXX growth mid-single ask

Gina Goetter

is XXXX be talking you versus and guidance XX%. the revenue up ’XX growth ’XX XX% For we’re growth, gave about through then is mid-single that to we to Hardwire, for revenue digit XXXX that going

Gerrick Johnson

building off are then so digits of that we Right, that, mid-single of off number--

Gina Goetter

Correct, yes.

Gerrick Johnson

Okay.

Gina Goetter

Yes, yes.

Gerrick Johnson

Okay, great. Thanks.

Operator

Securities. James from Hardiman is question Wedbush Your next from

open. line is Your

James Hardiman

from a couple me. follow-ups Hey,

notion the secondly, we improvement think and Then that here guess January to held said this had and today, into it, has to with echoed any versus else year drop that the much shipments a lack the very I I January, - off apologize talk inventory. extent questions that every course be in over more meaningfully position declines did that better in in still retail there, the You’ve XXXX questions, look channel about I’ve somebody I think ’XX the here. used guess pick that’s I as a of not see retail going back we do I is picked model think assuming dealer you full with to benefits inventory being ’XX, by the the full if to in due significantly asked the fourth see like channel, How but maybe Two of the quarter? for heard, in saw two minute in year, up for that I some you’re inventory, looking to will that seen that? doesn’t build what disproportionate from we’re don’t ’XX the we benefits of a I the year. so but inventories in of have brunt been to--and up where number are the demand the of it full would in retail has

Larry Hund

but far. both new January January, sales, our XXXX market weeks, couple we specifically customer things. A say so in I’ll on are we response won’t with comment They’ve just dealer only pretty I and to pleased good the a been few models about that. feel

go as we’re half have I’ll some to second similar know, this fourth for not building thing sure markets going where some that absolutely markets, benefits what said them, supply than we markets through to do stronger year it all year. strategy, we Jochen tight, were, couple due to with we a Europe, those desirability make earlier, to as going that but are and example, will re-fill of of XXXX. the our we sales and quarter--you any to second do over-supply in of regarding properly come we The look continue to did the call inventory we this over to that to inventory, the want below expected parts have We on manage focus inventory

Gina Goetter

the on about build you of front as think we we inventory color the and you year, of fill give in see where our will as I’d we half year the piece additional a one James, depletes, exited build pipeline, the of have back half season, the the riding get down that inventory missing back at our and year. your we bikes ready demand, point on will demand. then in the the to for To comes dealers meet back

James Hardiman

give retail and I’m want but guide because do about down a retail, you the I XXXX think embedded was lot question avoiding I’m out retail the XXXX there. retail so was trying I asking to in figure don’t what’s Okay. guidance know how obviously about to demand on but not,

Larry Hund

to used the retail, we of in going the think if continue some good about in the a we know, trend continued to our Certainly that combined trends continue positive, we and we feel they we so positive is the into in were XXXX. saw quarter, sales some that. going that you half fourth take and think XXXX there is last look of second year, to--you year, that new at think are and market

bikes since available our going about said, a done we ability Gina as first As XXXX of to would introduced, supply U.S., new the supply. into we’ve and our the that lot I to retail were pretty good feel into good obviously shipments the XXXX have go in and models particularly so of half about the and we market motorcycles, ability new in say we feel of year, those

Jochen Zeitz

built new you has model. look future, think versus gap gone supplemented having healthy I well a year not MSRP to the that’s at done flood the and the bike actual push market past not more up the on we’ve the the been was just this, a but on last prices delivered as believe That’s into to and business up been you that excess at product to to. they because into dramatically based become our the that and in we the used now inventory add of market the been ourselves last and wrongs When and demand obviously setting that’s has they’ve for products if and good year, that just that referred part thing pushed by do. was gone and indicator. supply-driven look used of that the the dramatically, for past we’ve what a desirable not That gotten model we demand, used bodes a - bikes, corrected corrected a up, older closed that well were we have of year, then

James Hardiman

Got it. Thanks everybody.

Operator

from will from Collins Shawn Your come next Citigroup. question

Your line is open.

Shawn Collins

the possibly know Jochen, involved to that your ask I strategy, is it commentary know - electric I day second might Thanks Jochen, big as you thanks electric electric taking auto I electric virtually but in down. Livewire been again. Can strategy. I Gina in Shannon the instead possible some question. it’s about Harley-Davidson since wanted new evolving, one. know turning as at industry have on you be still not on industry the whole? Is of offer for that motorcycle Great, down, can my on helpful. which is any and a you autos, potential In turns Thank the of the motorcycle comment or whole you. space industry upside a upside thoughts priority

Jochen Zeitz

you Shawn. Thank

performing for what First I of last company. That’s out absolutely the there. and product extraordinary quarterly well an I one year all, important. electric couldn’t a of extremely better our product. said would best in Livewire - asked It’s I is to calls It’s reiterate experience have from very the like coming

pleased electric well who that very and starting it bike, very working into about that’s foray own fantastic a having point. it, Our are in is those of a terms

Harley-Davidson, for you electric what - packs, a setting The arrive is into we’re you know, yet not cater long it invest of differentiated opportunities will between that less is about essentially division to now Harley-Davidson, what a will on I’d in the need longer there talk touring required, today to in the When a electrification the future town. of have it will are because differentiate call you motorcycle product you’ve the core to the very take for you to when where and for and absolutely happening much in space that a to meet much segment, for the where simply term because I that, it’s and need essentially us you order I important, take is and mobility core that particular what longer and will around will the that we battery approach get exactly segment around where segment, motorcycle segments. up range, centers industry, the Having if prepare terms that that’s faster. to so simply world range technology less expectations segments and time. Harley-Davidson, in a see electric at quicker bikes mobility products separate look think touring happen In space range critical time. said to for high take faster for in ourselves said based doing. about as becomes urban electrification exist lot having That’s When a technology think customer and to the

Shawn Collins

is helpful. that Great, you. Thank

Operator

MacGregor come Your Longbow will from next David from Research. question

open. is line Your

David MacGregor

the Yes, I for to about follow-up. thanks ask wanted just HDFS.

would for expand Does indicated XX markets and you’re HDFS motorcycles, doesn’t with question XX an to thinking what in you your the loans? mean I sort not more of overall, You’d those increase guess were bikes an confidence accompanying gives it that globally. you the HDFS in that you’ve presence be markets plans global scale can of terms sustain underperforming that in identified tracking and geographic and if

Jochen Zeitz

markets others very focused It the XX-XX-XX without expanding - our a Yes, have I risk-reward looking we portfolio with be credit yourself. will and always on in, will we certain into will we it’s opportunities, will and so that sure that’s where doesn’t comes looking doing and healthy saying, mean, making also that it goes be priorities, well, it as be overall company when might partnerships always our carefully to very in at align be focusing apply the focusing that beginning. HDFS we with mean

David MacGregor

you. Thank

Operator

over today’s the closing of to Q&A I Shannon remarks. session. back now call end Burns for would the turn to us brings That

Shannon Burns

to all-new Pan for Okay, today, February you the please joining remember I and us touring want here America join XX. then. thank of on motorcycle adventure See us everyone reveal for our to

Operator

This will conclude you Thank call. everyone. conference today’s

You disconnect. may now

Harley-Davidson (HOG) 2 Feb 212020 Q4 Earnings call transcript