Slide 1: 2018 Second Quarter Update
HARLEY-DAVIDSON, INC. 2018 SECOND QUARTER UPDATE July 24, 2018 | Conference Call Slide Presentation JULY 24, 2018
Slide 2: Conference Call Agenda
2018 SECOND 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 present
Slide 3: Business Perspectives
BUSINESS PERSPECTIVES MATT LEVATICH, PRESIDENT & CEO, HARLEY-DAVIDSON, INC. July 24, 2018 | Conference Call Slide Presentation
Slide 4: Q2 2018 Results Highlights
Q2 2018 RESULTS Highlights ▪ EPS of $1.45 ($1.52 excluding manufacturing optimization costs) ▪ HDFS lower year-over-year provision for credit losses; full-year outlook improved ▪ Dividend up versus prior year, repurchased 0.9 million shares ▪ Growth in international retail sales ▪ Manufacturing opti
Slide 5: Building the Next Generation of H-D Riders
BUILDING THE NEXT GENERATION OF H-D RIDERS We build riders ▪ 4.5 million visits to HD.com – a 29% increase ▪ 36.7 million social media impressions from #MotorcycleMonday @HDSPACECOWBOY @DONT_BROCK_THE_BOAT @THECHARLIEBLOG @SOLAEXPLORA ▪ 9.8 million social media views of #FindYourFreedom interns cont
Slide 6: Strategy
STRATEGY ACCELERATED STRATEGY ANNOUNCEMENT ON JULY 30, 2018 Information will be announced in a press release and additional materials will be posted on our website Accelerated strategy to build the next generation of Harley-Davidson riders globally through: Keep current riders engaged and Meet custo
Slide 7: Financial Results
FINANCIAL RESULTS JOHN OLIN, SENIOR VICE PRESIDENT & CFO, HARLEY-DAVIDSON, INC. July 24, 2018 | Conference Call Slide Presentation
Slide 8: Q2 2018 vs. Q2 2017 Results
Q2 2018 VS. Q2 2017 RESULTS REVENUE NET INCOME EPS $1.71 $242.3 $1.45 Billion Million Consolidated – Motorcycles and Related Products and Financial Services Segments (2.9)% (6.4)% (2.0)% Earnings impacted by: ▪ Motorcycles Segment operating income* down 23.3% ̶ Revenue down 3.3% despite 11.3% lower
Slide 9: Worldwide Retail Sales
WORLDWIDE RETAIL SALES vs. prior year Q2 Motorcycles Q2 YTD Worldwide 78,428 (3.6)% (5.1)% U.S. 46,490 (6.4)% (8.7)% International 31,938 0.7% 0.5% Source: Dealer reported data ▪ Q2 Worldwide retail sales down 3.6% – Sequential sales rate improved from Q1 2018 ▪ U.S. new retail sales down Motorcycle
Slide 10: U.S. Retail Sales and Inventory
U.S. RETAIL SALES H-D U.S. NEW RETAIL MOTORCYCLE SALES H-D U.S. NEW 601+CC RETAIL MARKET SHARE* 83.0 48.5% 48.4% 49.6% 49.2% 75.8 (7.9)% Motorcycles (thousands) (8.7)% (1.0) pts. (0.1) pts. (0.4) pts. (0.4) pts. 49.7 SHARE 46.5 (9.3)% (6.4)% Q2 '17 Q2 '18 YTD '17 YTD '18 RETAIL SALES Q2 '17 Q2 '18 Y
Slide 11: International Retail Sales
INTERNATIONAL RETAIL SALES H-D INTERNATIONAL NEW RETAIL H-D EUROPE NEW 601+CC MARKET SHARE* MOTORCYCLE SALES 10.4% 9.5% Vs. prior year SHARE Q2 YTD International 0.7% 0.5% - EMEA 3.6% 4.8% June YTD '17 June YTD '18 Strong results across ▪ Market share gain behind strong Softail sales RETAIL SALES we
Slide 12: Shipments & Mix
SHIPMENTS & MIX SHIPMENTS MOTORCYCLES SEGMENT Q2 ‘18 vs. PY YTD ‘18 vs. PY Total 72,593 (11.3)% 136,537 (10.5)% Touring 42.8% (2.0) pts. 45.4% 2.3 pts. Cruiser* 33.5% 2.6 pts. 33.6% 0.6 pts. Street / 23.7% (0.6) pts. 21.0% (2.9) pts. Sportster® 100.0% 100.0% * Includes Softail and CVO, PY includes S
Slide 13: Revenue
REVENUE REVENUE* MOTORCYCLES SEGMENT ($ millions) Q2 ‘18 vs. PY YTD ‘18 vs. PY Motorcycle $1,201.5 (4.0)% $2,323.1 (0.5)% P&A 231.0 (2.3) 400.1 (1.1) General Merchandise 68.7 8.9 125.3 5.4 Licensing 10.4 3.5 18.8 (2.9) Other 13.5 (11.6) 21.8 (20.1) Total Revenue $1,525.1 (3.3)% $2,889.1 (0.6)% Motor
Slide 14: Gross Margin
GROSS MARGIN GROSS MARGIN MOTORCYCLES SEGMENT ($ millions) Q2 YTD 2017 Gross Margin $573.0 $1,047.8 % of revenue 36.3% 36.1% - Volume (61.5) (105.0) - Pricing net of cost 11.9 20.7 - Mix 26.5 62.9 - Currency 0.2 15.7 - Raw materials (5.2) (9.4) - Manufacturing /other* (12.8) (26.8) 2018 Gross Margin
Slide 15: Operating Margin
OPERATING MARGIN OPERATING MARGIN MOTORCYCLES SEGMENT ($ millions) Q2 YTD 2017 Operating Income $317.4 $553.9 % of revenue 20.1% 19.1% - Gross Margin (40.9) (42.0) - SG&A (20.7) (36.5) - Restructuring (12.4) (59.2) 2018 Operating Income $243.4 $416.2 % of revenue 16.0% 14.4% Motorcycles and Related
Slide 16: HDFS Operating Income
HDFS OPERATING INCOME FINANCIAL SERVICES SEGMENT ($ millions) Q2 YTD 2017 Operating Income $81.9 $134.6 - Net interest income (6.3) (8.2) - Provision for retail motorcycle loan losses 5.9 20.1 - Provision for wholesale loan losses 1.4 0.9 - Operating expenses (1.3) (3.6) - All other (1.1) 0.3 2018 O
Slide 17: 2018 Financial Services Segment Operations and Liquidity
HDFS 2018 FINANCIAL SERVICES SEGMENT OPERATIONS LIQUIDITY (Millions) Originations End of Q2 2018 New and used H-D retail motorcycle loans Cash & equivalents $351.0 Q2 $1.06B 7.2% vs. Q2 ’17 YTD $1.71B 0.7% vs. YTD ’17 Availability YTD approximately 80%-85% prime Bank Credit Facilities $217.7 Market
Slide 18: Retail Motorcycle Loan Performance
HDFS RETAIL MOTORCYCLE LOAN PERFORMANCE 5% 4.50% 4% 3.53% 3.16% 3.25% 3.09% 3% 2.68% 2.75% 2.68% 2.71% 2% Q2 '10 Q2 '11 Q2 '12 Q2 '13 Q2 '14 Q2 '15 Q2 '16 Q2 '17 Q2 '18 3% 2.04% 2% 1.71% 1.50% 1.56% 1.06% 1.08% 0.97% Financial Services Segment 1% 0.80% 0.58% 0% Q2 '10 Q2 '11 Q2 '12 Q2 '13 Q2 '14 Q2
Slide 19: Harley-Davidson, Inc. 2018 vs. PY
HARLEY-DAVIDSON, INC. 2018 HARLEY-DAVIDSON, INC. VS. PY ▪ Cash & cash equivalents- $978.7 million vs. $988.5 million Q2 ▪ Operating cash flow - $735.9 million vs. $627.1 million YTD Consolidated – Motorcycles and Related Products and Financial Services Segments ▪ Capital spending - $69.3 million vs.
Slide 20: Cash Generation/Returns
CASH GENERATION/RETURNS Harley-Davidson leads in cash generation and consistently returned cash to 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 Return/Market Capitalization(1)(4)
Slide 21: Shareholder Returns
SHAREHOLDER RETURNS Harley-Davidson has consistently returned cash to shareholders Dividends Per Share Discretionary Share Repurchases $0.74 $234.1 $0.73 $250 Year-over-year $200 $163.2 $150 Millions $103.3 $0.365 $0.37 $100 $38.2 $50 $0 Q2 '17 Q2 '18 YTD '17 YTD '18 Q2 '17 Q2 '18 YTD '17 YTD '18 $1
Slide 22: Manufacturing Optimization
MANUFACTURING OPTIMIZATION Manufacturing Optimization Summary as of July 24,2018 $ 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 ~70% ~75% NA ~70% 2018 Actual R
Slide 23: Guidance: 2018 Expectations
GUIDANCE 2018 EXPECTATIONS as of July 24,2018 Motorcycle shipments 231,000 to 236,000 Q3: 45,500 to 50,500 Down yr./yr. Gross margin % Motorcycles and Related (~flat excluding mfg. optimization and tariff impact)(1) Products segment Up yr./yr. SG&A (~flat as a percent of revenue) 9% to 10% Operating
Slide 24: 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 July 24, 2018 | Conference Call Slide Presentation 24
Slide 25: 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 26: 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 27: Reconciliation of GAAP to Non-GAAP Amounts
RECONCILIATION OF GAAP TO NON-GAAP AMOUNTS This presentation contains non-GAAP measures related to guidance for our 2018 Motorcycles gross margin percent and operating margin percent that excludes (i) restructuring expense and the cost of temporary inefficiencies incurred in connection with the comp
Slide 28: 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 29: 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
Slide 30: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS In addition, the company could experience delays or disruptions in its operations as a result of work stoppages, strikes, natural causes, terrorism or other factors. Other factors are described in risk factors that the company has disclosed in documents previously filed wi