Slide 1: 2019 First Quarter Update
HARLEY-DAVIDSON, INC. 2019 FIRST QUARTER UPDATE April 23, 2019 | Conference Call Slide Presentation APRIL 23, 2019
Slide 2: 2019 First Quarter Update - Conference Call Agenda
2019 FIRST QUARTER UPDATE THIS PRESENTATION SUPPORTS THE AUDIO CONFERENCE CALL CONFERENCE CALL AGENDA ▪ Introduction Shannon Burns, Director, Investor Relations ▪ Business Perspectives Matt Levatich, President and CEO ▪ Financial Results John Olin, SVP and CFO ▪ Q&A All This presentation includes fo
Slide 3: Strategy
STRATEGY April 23, 2019 | Conference Call Slide Presentation 3
Slide 4: 2019 Q1 Snapshot
2019 Q1 SNAPSHOT Highlights VS. Prior year ▪ GAAP diluted EPS of $0.80 per share, ahead of company expectations ▪ Encouraged by U.S. retail sales performance; Harley-Davidson U.S. market share up ▪ Global dealer inventory down, well positioned for spring selling season ▪ Intensified brand focus; hir
Slide 5: Business Perspectives
BUSINESS PERSPECTIVES MATT LEVATICH, PRESIDENT & CEO, HARLEY-DAVIDSON, INC. April 23, 2019 | Conference Call Slide Presentation
Slide 6: Building Riders
BUILDING RIDERS ▪ 2018 ▪ 278,000 new riders joined Harley-Davidson in 2018 in the U.S. This group is the most diverse across age, ethnicity and gender in all of the years Harley-Davidson has tracked this data* ▪ Of the total mix of new riders, 18-34 year-olds, women and/or ethnically diverse riders
Slide 7: Q1 Marketing Highlights
Q1 MARKETING HIGHLIGHTS LiveWire® at CES Global H-D.com Traffic: +29% Riding Academy participants skewed younger April 23, 2019 | Conference Call Slide Presentation 7
Slide 8: New Products
NEW PRODUCTS Launched Electra Glide® Standard Acquired StaCyc Adventure Touring planned to launch in 2020* Future Electric Concepts* *Art depicting future product concepts shown. Production model features may vary. Not yet available for sale. All future models shown may not be available in all marke
Slide 9: More Roads Plan – Q1 Progress
MORE ROADS PLAN – Q1 PROGRESS Accelerating our strategy to build the next generation of Harley-Davidson riders through: • Innovate Current Product • New Retail Formats • Good-to-Great Dealers • New Electra Glide® Standard, • Four new urban apparel stores • 50 dealer consulting $18,999 U.S. MSRP • In
Slide 10: Financial Results
FINANCIAL RESULTS JOHN OLIN, SVP & CFO, HARLEY-DAVIDSON, INC. April 23, 2019 | Conference Call Slide Presentation
Slide 11: Q1 2019 vs. Q1 2018 Results
Q1 2019 VS. Q1 2018 RESULTS REVENUE NET INCOME EPS $1.38 $127.9 $0.80 Billion Million Consolidated – Motorcycles and Related Products and Financial Services Segments (10.2)% (26.8)% (22.3)% Earnings impacted by: ▪ Motorcycles segment operating income down $64.5 million ̶ Revenue down 12.3% on 7.9% l
Slide 12: Worldwide Retail Sales
WORLDWIDE RETAIL SALES Q1 '19 Motorcycles vs. PY Worldwide 49,151 (3.8)% U.S. 28,091 (4.2)% International 21,060 (3.3)% Source: Dealer reported data ▪ Q1 worldwide retail sales down – Adversely impacted by limited availability of Street motorcycles – Q1 worldwide sales up 0.4% excluding Street motor
Slide 13: U.S. Retail Sales and Inventory
U.S. RETAIL SALES H-D U.S. NEW RETAIL MOTORCYCLE SALES H-D U.S. NEW 601+CC RETAIL MARKET SHARE* (12.0)% (4.2)% (0.8) pts. +0.6 pts. SHARE RETAIL SALES ▪ Q1 2019 market share up vs. prior year – Execution of stronger dealers growth catalyst and ▪ Q1 retail sales impacted by: increased marketing and s
Slide 14: International Retail Sales
INTERNATIONAL RETAIL SALES H-D INTERNATIONAL NEW RETAIL H-D EUROPE NEW 601+CC MARKET SHARE* MOTORCYCLE SALES Vs. prior year Q1 SHARE International (3.3)% - EMEA (0.6)% Weak consumer confidence in U.K. ▪ International market share down in the quarter - Asia Pacific (4.0)% RETAIL SALES Continued softn
Slide 15: Shipments & Mix
SHIPMENTS & MIX SHIPMENTS MOTORCYCLES SEGMENT Q1 '19 vs. PY Total 58,891 (7.9)% Touring 42.5% (5.8) pts. Cruiser* 34.7% 1.0 pts. Street / 22.8% 4.8 pts. Sportster® 100.0% * Includes Softail and CVO ▪ Q1 shipments down 5,053 motorcycles year-over-year Motorcycles and Related Products Segment ▪ Shipme
Slide 16: Motorcycles Segment Revenue
REVENUE REVENUE MOTORCYCLES SEGMENT ($ millions) Q1 '19 vs. PY Motorcycle $964.6 (14.0)% P&A 159.7 (5.5) General Merchandise 55.4 (2.1) Licensing 8.6 2.6 Other 7.3 (10.4) Total Revenue $1,195.6 (12.3)% Motorcycles and Related Products Segment ▪ Q1 Motorcycles segment revenue down 12.3% on 7.9% lower
Slide 17: Motorcycles Segment Gross Margin
GROSS MARGIN GROSS MARGIN MOTORCYCLES SEGMENT ($ millions) Q1 2018 Gross Margin $473.8 % of revenue 34.7% - Volume (41.4) - Pricing net of cost 16.4 - Mix (39.3) - Currency (15.1) - Raw materials (3.1) - Manufacturing /other* (43.9) 2019 Gross Margin $347.4 Motorcycles and Related Products Segment %
Slide 18: Motorcycles Segment Operating Margin
OPERATING MARGIN OPERATING MARGIN MOTORCYCLES SEGMENT ($ millions) Q1 2018 Operating Income $172.8 % of revenue 12.7% - Gross Margin (126.3) - SG&A 28.7 - Restructuring 33.2 2019 Operating Income $108.4 % of revenue 9.1% Motorcycles and Related Products Segment ▪ Q1 Motorcycles segment operating mar
Slide 19: Financial Services Segment Operating Income
FINANCIAL SERVICES SEGMENT OPERATING INCOME FINANCIAL SERVICES SEGMENT ($ millions) Q1 2018 Operating Income $63.6 - Net interest income 1.9 - Provision for retail motorcycle loan losses (4.9) - Provision for wholesale loan losses 0.3 - Operating expenses (7.1) - All other 4.9 2019 Operating Income
Slide 20: HDFS Operations and Liquidity
HDFS 2019 HDFS OPERATIONS LIQUIDITY ($ millions) Originations End of Q1 2019 New and used H-D retail motorcycle loans Cash & equivalents $365.2 Q1 $685.3M + 5.4% vs. Q1 ’18 Q1 ‘19 approximately 80%-85% prime Availability Market share Bank Credit Facilities $352.1 U.S. H-D new retail motorcycle sales
Slide 21: Retail Motorcycle Loan Performance
HDFS RETAIL MOTORCYCLE LOAN PERFORMANCE 5% 4.57% 4% 3.68% 3.73% 3.17% 3.31% 2.92% 2.88% 3% 2.56% 2.66% 2.64% 2% Q1 '10 Q1 '11 Q1 '12 Q1 '13 Q1 '14 Q1 '15 Q1 '16 Q1 '17 Q1 '18 Q1 '19 3% 2.83% 2.31% 2.15% 2.22% 1.98% 2% 1.58% 1.56% 1.33% 1.00% 1.09% Financial Services Segment 1% 0% Q1 '10 Q1 '11 Q1 '1
Slide 22: Q1 2019 Harley-Davidson, Inc. vs. PY
HARLEY-DAVIDSON, INC. Q1 2019 HARLEY-DAVIDSON, INC. VS. PY ▪ Cash & marketable securities - $759.6 million vs. $753.5 million Consolidated – Motorcycles and Related Products and Financial Services Segments ▪ Operating cash flow - $32.7 million vs. $191.6 million ▪ Capital spending - $35.3 million vs
Slide 23: Cash Generation/Returns
CASH GENERATION/RETURNS Harley-Davidson leads in cash generation and consistently returned cash to shareholders (2016-2018) 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 Return / Market Capitalization(1)(
Slide 24: Shareholder Returns
SHAREHOLDER RETURNS Harley-Davidson has consistently returned cash to shareholders Dividends Per Share Discretionary Share Repurchases Year- over- Consolidated – Motorcycles and Related Products and Financial Services Segments year * CAGR 18% Multi- Year *Funded by $750 million HDI debt issuance Apr
Slide 25: Manufacturing Optimization
MANUFACTURING OPTIMIZATION Manufacturing Optimization Summary as of April 23, 2019 ($ millions) 2018 2019 2020 Actual Estimate Estimate Total Temporary Inefficiencies $12.9 $10-$15 - $23-$28 Restructuring $89.5 $40-$45 - $129-$134 Total Costs $102.4 $50-$60 - $152-$162 % cash ~70% ~70% NA ~70% 2018
Slide 26: Guidance: 2019 Expectations
GUIDANCE 2019 EXPECTATIONS as of April 23, 2019 217,000 to 222,000 Motorcycle shipments (Q2: 65,500 to 70,500) Gross margin % Down year-over-year Motorcycles and Related Products segment Lower year-over-year SG&A (Lower as a percent of revenue) 8.0% to 9.0% Operating margin % (~flat versus 2018 excl
Slide 27: Building the Next Generation of Harley-Davidson Riders Globally
HARLEY-DAVIDSON, INC. BUILDING THE NEXT GENERATION OF HARLEY-DAVIDSON RIDERS GLOBALLY Focused investments, strong returns to grow the company for the long-term April 23, 2019 | 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 use
Slide 29: Reconciliation of GAAP to Non-GAAP Amounts
RECONCILIATION OF GAAP TO NON-GAAP AMOUNTS This presentation contains non-GAAP measures related to net income and diluted earnings per share that exclude restructuring plan costs and the impact of incremental tariffs. Reconciliations of non-GAAP amounts to reported GAAP amounts are included below. I
Slide 30: Reconciliation of GAAP to Non-GAAP Amounts
RECONCILIATION OF GAAP TO NON-GAAP AMOUNTS This presentation contains non-GAAP measures related to Motorcycles segment operating margin that exclude restructuring plan costs and the impact of incremental tariffs. Reconciliations of non-GAAP amounts to reported GAAP amounts are included below. In tho
Slide 31: 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 32: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS The company intends that certain matters discussed in this presentation 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 general