Slide 1: 2018 First Quarter Update
HARLEY-DAVIDSON, INC. 2018 FIRST QUARTER UPDATE April 24, 2018 | Conference Call Slide Presentation APRIL 24, 2018
Slide 2: 2018 First Quarter Update: Conference Call Agenda
2018 FIRST QUARTER UPDATE THIS PRESENTATION SUPPORTS THE AUDIO CONFERENCE CALL CONFERENCE CALL AGENDA ▪ Introduction Amy Giuffre, Director, Investor Relations ▪ Business Perspectives Matt Levatich, President and CEO ▪ Financial Results John Olin, Senior Vice President and CFO ▪ Q&A All This presenta
Slide 3: Objectives and Strategy Through 2027
OBJECTIVES AND STRATEGY THROUGH 2027 April 24, 2018 | Conference Call Slide Presentation 3
Slide 4: Business Perspectives
BUSINESS PERSPECTIVES MATT LEVATICH, PRESIDENT & CEO, HARLEY-DAVIDSON, INC. April 24, 2018 | Conference Call Slide Presentation
Slide 5: Q1 2018 Highlights
Q1 2018 Highlights ▪ EPS of $1.03 ($1.24 excluding manufacturing optimization costs) ▪ Consolidated revenue up 2.7% ▪ HDFS operating income up 20.8%, year-over-year credit losses down ▪ Increased dividend 1.4%, repurchased 1.4 million shares ▪ Growth in international retail sales ▪ Manufacturing opt
Slide 6: Building Ridership
BUILDING RIDERSHIP We build riders ▪ Two New Sportsters ▪ Freedom Promise – Iron 1200 $9,999* – Reinforce value – Forty-Eight® Special $11,299* – Drive repurchase * US MSRP April 24, 2018 | Conference Call Slide Presentation 6
Slide 7: International Momentum
INTERNATIONAL MOMENTUM Harley-Davidson apparel store, Shanghai ▪ Retail sales growth Q1 yr./yr. ▪ Softail selling very well behind effective test ride program ▪ 7 new international dealer points added ▪ Brand apparel stores opened in China and India April 24, 2018 | Conference Call Slide Presentatio
Slide 8: Enhanced Strategy
STRATEGY Enhanced Strategy ▪ Bold new moves to deliver long-term objectives and accelerate performance through 2022 ▪ Refining plans, will announce details this summer April 24, 2018 | Conference Call Slide Presentation 8
Slide 9: Outlook: The Next 115 Years
OUTLOOK The next 115 years ▪ 2018 - Confident in our business plans and confirming guidance ▪ Will leverage significant potential and accelerate growth ▪ Celebrating 115 years of freedom, building the next generation April 24, 2018 | Conference Call Slide Presentation 9
Slide 10: Financial Results
FINANCIAL RESULTS JOHN OLIN, SENIOR VICE PRESIDENT & CFO, HARLEY-DAVIDSON, INC. April 24, 2018 | Conference Call Slide Presentation
Slide 11: Q1 2018 vs. Q1 2017 Results
Q1 2018 VS. Q1 2017 RESULTS REVENUE NET INCOME EPS $1.54 $174.8 $1.03 Billion Million Consolidated – Motorcycles and Related Products and Financial Services Segments 2.7% (6.2)% (1.9)% Earnings impacted by: ▪ Motorcycles Segment operating income* down 26.9% ̶ Revenue up 2.7% despite 9.7% lower shipm
Slide 12: Worldwide Retail Sales
WORLDWIDE RETAIL SALES Q1 ‘18 Motorcycles Vs. prior year Worldwide 51,086 (7.2)% U.S. 29,309 (12.0)% International 21,777 0.2% Source: Dealer reported data ▪ U.S. new retail sales down – Ongoing industry new motorcycle sales weakness – Market share down 0.9 pts. to 50.4% Motorcycles and Related Prod
Slide 13: U.S. Retail Sales and Inventory
U.S. RETAIL SALES H-D U.S. NEW RETAIL MOTORCYCLE SALES H-D U.S. NEW 601+CC RETAIL MARKET SHARE* 51.3% 50.4% 33.3 29.3 +0.4 pts. (0.9) pts. Motorcycles (thousands) SHARE (5.7)% (12.0)% Q1 '17 Q1 '18 RETAIL SALES ▪ Q1 market share down on limited availability and a highly competitive market Q1 '17 Q1
Slide 14: International Retail Sales and Opportunity
INTERNATIONAL RETAIL SALES H-D INTERNATIONAL NEW RETAIL H-D EUROPE 601+CC MARKET SHARE* MOTORCYCLE SALES 10.4% 9.1% SHARE Vs. prior year Q1 International 0.2% Q1 '17 Q1 '18 - EMEA 6.8% ▪ Market share gain behind sales of new Softail motorcycles RETAIL SALES Strong results across most of Europe INTER
Slide 15: Shipments & Mix
SHIPMENTS & MIX SHIPMENTS MOTORCYCLES SEGMENT Q1 ‘18 vs. PY Total 63,944 (9.7)% Touring 48.3% 7.3 pts. Cruiser* 33.7% (1.8) pts. Street / 18.0% (5.5) pts. Sportster® 100.0% * Includes Softail and CVO ▪ Q1 shipments down 6,887 motorcycles yr./yr.; in line with Motorcycles and Related Products Segment
Slide 16: Motorcycles Segment Revenue
REVENUE REVENUE* MOTORCYCLES SEGMENT ($ millions) Q1 ‘18 vs. PY Motorcycle $1,121.7 3.5% P&A 169.1 0.6 General Merchandise 56.6 1.4 Licensing 8.4 (9.9) Other 8.1 (31.0) Total Revenue $1,363.9 2.7% ▪ Motorcycles Segment revenue up 2.7% despite a 9.7% decrease Motorcycles and Related Products Segment
Slide 17: Gross Margin
GROSS MARGIN GROSS MARGIN MOTORCYCLES SEGMENT ($ millions) Q1 2017 Gross Margin $474.8 % of revenue 35.7% - Volume (43.5) - Pricing net of cost 8.8 - Mix 36.4 - Currency 15.5 - Raw materials (4.2) - Manufacturing / other* (14.0) 2018 Gross Margin $473.8 Motorcycles and Related Products Segment % of
Slide 18: Operating Margin
OPERATING MARGIN OPERATING MARGIN MOTORCYCLES SEGMENT ($ millions) Q1 2017 Operating Income $236.5 % of revenue 17.8% - Gross Margin (1.1) - SG&A (15.8) - Restructuring (46.8) 2018 Operating Income $172.8 % of revenue 12.7% Motorcycles and Related Products Segment ▪ Motorcycles segment operating mar
Slide 19: HDFS Operating Income
HDFS OPERATING INCOME FINANCIAL SERVICES SEGMENT ($ millions) Q1 2017 Operating Income $52.7 - Net interest income (1.9) - Provision for retail motorcycle loan losses 14.2 - Provision for wholesale loan losses (0.6) - Operating expenses (2.4) - All other 1.6 2018 Operating Income $63.6 Financial Ser
Slide 20: HDFS Operations and Liquidity
HDFS 2018 FINANCIAL SERVICES SEGMENT OPERATIONS LIQUIDITY (Millions) Originations End of Q1 2018 New and used H-D retail motorcycle loans Cash & equivalents $350.5 Q1 $650.5M (8.3)% vs. Q1 ’17 YTD approximately 80%-85% prime Availability Market share Bank Credit Facilities $503.0 U.S. H-D new retail
Slide 21: Retail Motorcycle Loan Performance
HDFS RETAIL MOTORCYCLE LOAN PERFORMANCE 5% 30+ Day Delinquencies - March 31 4.57% 4% 3.68% 3.31% 3.17% 3% 2.92% 2.88% 2.56% 2.66% 2.64% 2% Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Annualized Loss Experience 3% 2.83% 2.31% 2.15% 1.98% 2% 1.58% 1.56% 1.33% 1.00% 1.09% Fi
Slide 22: Q1 2018 Harley-Davidson, Inc. vs. PY
HARLEY-DAVIDSON, INC. Q1 2018 HARLEY-DAVIDSON, INC. VS. PY ▪ Cash & marketable securities - $753.5 million vs. $844.7 million ▪ Operating cash flow - $191.6 million vs. $159.9 million Consolidated – Motorcycles and Related Products and Financial Services Segments ▪ Capital spending - $28.4 million v
Slide 23: Cash Generation/Returns
CASH GENERATION/RETURNS Harley-Davidson leads in cash generation across multiple industries and consistently returned cash to our shareholders (2015-2017) 3-Yr. Avg. Free Cash Flow Conversion(1)(2) 3-Yr. Avg. Free Cash Flow Margin(1)(2) 3-Yr. Avg. ROIC and ROE(1)(3) 3-Yr. Avg. Cumulative Capital Ret
Slide 24: Shareholder Returns
SHAREHOLDER RETURNS Harley-Davidson has consistently returned cash to our shareholders Dividends Per Share Discretionary Share Repurchases $70.9 $65.1 Year-over-year $0.365 $0.37 $80 $0.40 $0.35 Millions $0.30 $40 $0.25 $0.20 $0 Q1 '17 Q1 '18 Q1 '17 Q1 '18 $1,600 $1,526* CAGR 21% $1.60 $1.46 $1,400
Slide 25: Manufacturing Optimization
MANUFACTURING OPTIMIZATION Manufacturing Optimization Summary as of 4/24/18 $ Millions (Estimated) 2018 2019 2020 Total Temporary Inefficiencies $20-$25 $15-$20 - $35-$45 Restructuring $100-$115 $35-$40 - $135-$155 Total Costs $120-$140 $50-$60 - $170-$200 % Cash Approx. 70% Approx. 75% NA Approx. 7
Slide 26: Guidance: 2018 Expectations
GUIDANCE 2018 EXPECTATIONS as of April 24,2018 Motorcycle shipments 231,000 to 236,000 Q2: 67,500 to 72,500 Down yr./yr. Motorcycles and Gross margin % (~flat excluding mfg optimization) Related Products segment Up yr./yr. SG&A (~flat as a percent of revenue) 9.5% to 10.5% Operating margin % (~flat
Slide 27: Building the Next Generation of Riders Globally
HARLEY-DAVIDSON, INC. BUILDING THE NEXT GENERATION OF HARLEY-DAVIDSON RIDERS GLOBALLY Disciplined to our strategies Focused investments, strong returns to grow the company for the long-term April 24, 2018 | Conference Call Slide Presentation 27
Slide 28: Non-GAAP Measures
NON-GAAP MEASURES This presentation includes financial measures that have not been calculated in accordance with U.S. generally accepted accounting principles (GAAP), and are therefore referred to as non-GAAP financial measures. The non- GAAP measures listed below are intended to be considered by us
Slide 29: Reconciliation of GAAP to Non-GAAP Amounts
RECONCILIATION OF GAAP TO NON-GAAP AMOUNTS This presentation contains non-GAAP measures related to earnings that exclude the restructuring expenses and the cost of temporary inefficiencies incurred in connection with the company’s manufacturing optimization plan. Reconciliations of non-GAAP amounts
Slide 30: Reconciliation of GAAP to Non-GAAP Amounts
RECONCILIATION OF GAAP TO NON-GAAP AMOUNTS This presentation contains performance measures calculated using non-GAAP amounts as inputs. These performance measures include: "3-yr. Avg. Free Cash Flow Conversion", "3-yr. Avg. Free Cash Flow Margin“, “3-Yr. Avg. ROIC and ROE”. Reconciliations of non-GA
Slide 31: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS The company intends that certain matters discussed in this release are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be
Slide 32: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS (xii) continue to manage the relationships and agreements that the company has with its labor unions to help drive long-term competitiveness, (xiii) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (xiv