Harley-davidson, Inc. · NYSE:HOG
Harley-davidson — Investor Day (May 2022)
57 slides from Harley-davidson's investor day presentation, May 10, 2022
Slide 1: Investor Day
Investor Day MAY 10, 2022
Slide 2: Forward-looking statements notice
OUR COMMENTS WILL INCLUDE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO RISKS THAT COULD CAUSE ACTUAL RESULTS TO BE MATERIALLY DIFFERENT. THOSE RISKS INCLUDE, AMONG OTHERS, MATTERS WE HAVE NOTED IN OUR LATEST FILINGS WITH THE SEC. HARLEY- DAVIDSON DISCLAIMS ANY OBLIGATION TO UPDATE INFORMATION IN T
Slide 3: Forward Looking Statements & Sources of Information
FORWARD LOOKING STATEMENTS & SOURCES OF INFORMATION This presentation relates to the company’s strategic plan, The Hardwire, including Hardwire Stage II. The company intends that all statements in this presentation concerning the company’s plan, including without limitation its plans, objectives and
Slide 4: Mission Vision Ambition
Mission More than building machines, we stand for the timeless pursuit of adventure. Freedom for the soul. Vision Building our legend and leading through innovation, evolution and emotion. Ambition Harley-Davidson as the most desirable motorcycle & lifestyle brand in the world, building upon a 119-y
Slide 5: Key Investment Highlights
KEY INVESTMENT HIGHLIGHTS 1 One of the Most Powerful and the Most Desirable Motorcycle Brands in the World 2 Evolving as a Global Lifestyle Brand Rooted in Moto- Culture, Growing Beyond Motorcycles 3 Executing Hardwire Stage II – Our Strategy for Growth and Profitability 4 Projecting Strong Financia
Slide 6: The Harley-Davidson Brand – Rooted in Desirability
THE HARLEY-DAVIDSON BRAND – ROOTED IN DESIRABILITY 6
Slide 7: Our Consumer Is Multi-Dimensional and Diverse
OUR CONSUMER IS MULTI-DIMENSIONAL AND DIVERSE Our Consumer is multi- dimensional but is underpinned by two things – a love for the Harley-Davidson Non-Traditional Traditional brand and a desire to be part Non-rider Core of the Harley- – Passion for the brand and – Connection to the authenticity of t
Slide 8: Consumer Personas Have Changed the Way We View Our Opportunity
CONSUMER PERSONAS HAVE CHANGED THE WAY WE VIEW OUR OPPORTUNITY Non-Rider Aspirational Rider Rider Inspired by Harley-Davidson Values of Freedom and Adventure and… …May engage with Harley- …Engage With Us Today – Might …Ride a Motorcycle Davidson in the future become a Rider Someday (any brand) today
Slide 9: Multiple Demand Drivers for Growth
MULTIPLE DEMAND DRIVERS FOR GROWTH Most Desirable Expecting our most profitable More people are riding segments and markets to Harley Davidson Motorcycles Motorcycle & Lifestyle grow in the U.S. than ever before Brand in the World We are seeing growth in Our new market introductions Sales of our mos
Slide 10: Fundamentals of Motorcycle Demand
Fundamentals of Motorcycle Demand
Slide 11: Expect Global Market for ICE Motorcycles to Grow
EXPECT GLOBAL MARKET FOR ICE MOTORCYCLES TO GROW Global New & Used 2-3 Wheel Motorcycle Sales (In Thousands) 2012 – 2021 2021 – 2030 Used New CAGR CAGR 774 3% 2% 767 720 612 652 507 561 2,257 2,378 2% 3% 1,952 2,111 1,876 1,611 1,562 2012 2015 2018 2021 2024E 2027E 2030E New to 3.2 2.8 3.2 2.9 2.9 2
Slide 12: Expect Our Most Profitable Segments and Markets to Grow
EXPECT OUR MOST PROFITABLE SEGMENTS AND MARKETS TO GROW Global New TAM 2-3 Wheel Global New TAM 2-3 Wheel Sales Forecast by Vehicle Type Sales Forecast by Region (In Thousands) (In Thousands) ROW North America Other Touring c.2% c.3% CAGR 162 CAGR 325 137 258 612 515 449 394 2021 2030E 2021 2030E To
Slide 13: Harley-Davidson Ridership at All-Time High
HARLEY-DAVIDSON RIDERSHIP AT ALL-TIME HIGH U.S. Ridership – All New & Used H-D Motorcycles Harley- (millions) Davidson Riding 3.136 3.101 3.095 Academy 3.036 ~450K 2.959 2.983 Riders trained 2.932 since 2015 <40 Average age 2015 2016 2017 2018 2019 2020 2021 Source: S&P Global Ridership Data 13
Slide 14: More New and Returning Riders Entering Than Aging Out
IN THE U.S. MORE NEW AND RETURNING RIDERS ARE COMING INTO THE SPORT THAN ARE AGING OUT +~5.7M ONLY +~3.0M ~30-35% of riders age out (~3.2M) of the sport ~3.7M ~3.1M 2.9M (~2.0M) (~1.8M) (~800K) 2015 New & Exits with Riders 2021 New & Exits with Riders 2030E Base Returning Potential Aging Out Base Re
Slide 15: Desirability Strategy Reflected in Improved Price Realization
DESIRABILITY STRATEGY REFLECTED IN IMPROVED PRICE REALIZATION U.S. Touring Motorcycle Pricing vs. MSRP 5.0% U.S. Touring Touring Above/(Below) MSRP % 0.2% 0.3% 0.5% (0.1%) Transaction prices 0.0% (1.2%) (0.7%) have been +/- 2% (2.2%) (2.7%) (2.0%) (2.8%) of MSRP for 12 (3.2%) (5.0%) (5.7%) (4.3%) st
Slide 16: Our Transformation Journey
OUR TRANSFORMATION JOURNEY 2020 2021 2022 Accelerating core Hardwire initiatives and adding bold moves in spaces Rewire Hardwire where Harley- Setting a new course Resetting our Davidson can win. business with focus for our success on immediate-term through 2025 – leading profitability, cost and wit
Slide 17: Hardwire Recap
Hardwire Recap Video Sl v
Slide 18: The Hardwire Plan Is Working
THE HARDWIRE PLAN IS WORKING Evolving Driving Building how we view our consumer core motorcycle market back desirability for our products opportunity to growth and our Brand Improving Transforming Changing the health of our our business beyond the way we work and Dealers motorcycles investing in new
Slide 19: Introducing: Hardwire Stage II
INTRODUCING: HARDWIRE STAGE II 2020 2021 2022 Accelerating core Hardwire initiatives and adding bold moves in spaces Rewire Hardwire Hardwire where Harley- Setting a new course Stage II Resetting our Davidson can win. business with focus for our success Accelerating core on immediate-term through 20
Slide 20: Hardwire Stage II Pillars
HARDWIRE STAGE II PILLARS 1 2 3 Profit Selective Lead in focus expansion & electric redefinition 4 5 6 Growth Integrated Inclusive beyond Customer stakeholder bikes Experience management 20
Slide 21: Key Hardwire Stage II Initiatives
Key Hardwire Stage II Initiatives
Slide 22: Accelerating Growth in Core Categories
PI LLAR 1: PRO FI T FO CUS ACCELERATING GROWTH IN CORE CATEGORIES Touring Cruiser Trike Reinventing the Reinvigorating the Improving UX platform platform & Styling CVO Icons Collection Enthusiast Collection Re-establishing Celebrating H-D’s Celebrating CVO rich history our Riders 22
Slide 23: Building Leadership in the Most Profitable Markets
PI LLAR 2: SELECTI VE EXPANSI O N AND REDEFI NI TI O N BUILDING LEADERSHIP IN THE MOST PROFITABLE MARKETS North America LATAM EMEA APAC – Preserve unrivalled – Prioritize profitability – Play to win with our most – Emphasize growth of leadership position of over volume premium motorcycles premium in
Slide 24: Strategy to Build Momentum in Adventure Touring and Sport
PI LLAR 2: SELECTI VE EXPANSI O N AND REDEFI NI TI O N STRATEGY TO BUILD MOMENTUM IN ADVENTURE TOURING AND SPORT The role of the Adventure Touring The role of our Sport portfolio portfolio is to… is to… – Conquest market share – Grow ridership in younger people globally – Grow brand reach in EMEA –
Slide 25: RevMax
RevMax Video S| sz
Slide 26: Product Innovation and Design
PI L L AR I I Benefits of RevMax Engine Architecture – [To Come] – [To Come] Product Innovation – [To Come] and Design Placeholder slide for Brad – one full screen design image Footer 26
Slide 27: Harley-Davidson Electrification
PI LLAR 3: LEAD I N EV HARLEY-DAVIDSON ELECTRIFICATION Market Technology Infrastructure Expansion Advancement Development 27
Slide 28: P&A a Driver of Profitability Through Customization and Engagement
PI LLAR 4: G RO W TH BEYO ND BI KES P&A A DRIVER OF PROFITABILITY THROUGH CUSTOMIZATION AND ENGAGEMENT Opportunity – Inspire more top Large Dealer – Spends on average ~$1,600 / bike spenders Parts & Loyalists per year, up to $8,000 for top – Capture more Accessories (top 40% Customer spenders Shar
Slide 29: Levers to Capture Parts & Accessories Opportunity
PI L L AR 4 : G RO W TH BEYO ND BI KES LEVERS TO CAPTURE PARTS & ACCESSORIES OPPORTUNITY Grow Increase Maximize Leverage Enable with Incremental Accessorization Opportunity with Service as a Key Growth through New and Used MC on New MC Used MCs Growth Driver Digital Volume and Purchases Maximize Sha
Slide 30: Break
PI L L AR I I Break
Slide 31: Apparel & Lifestyle
Apparel & Lifestyle Video 31
Slide 32: Appeal of Harley-Davidson Brand
PI L L AR 4 : G RO W TH BEYO ND BI KES APPEAL OF HARLEY-DAVIDSON BRAND 32
Slide 33: Plan to Accelerate Growth in Apparel and Licensing
PI LLAR 4: G RO W TH BEYO ND BI KES PLAN TO ACCELERATE GROWTH IN APPAREL AND LICENSING Evolve H-D Motorclothes – Execute seasonal and 3-year line plan – Modernize aesthetic – Create min assortment & sell thru KPI’s Licensee Strategic Alignment Harley-Davidson: One Brand for Create & Scale H-D Lifest
Slide 34: Brand Opportunity for Riders and Non-Riders
PI L L AR 4 : G RO W TH BEYO ND BI KES BRAND OPPORTUNITY FOR RIDERS AND NON-RIDERS H-D Collaborations Lifestyle High-touch partnerships, authentically rooted in 1 motorcycle culture H-D Originals Moto-culture/Lifestyle 2 Authentic Harley-Davidson heritage replicas H-D Motorclothes Motorcycling & Lif
Slide 35: Evolving the Customer Experience
PI L L AR 5 : I NTEG RATED CUSTO MER EXPERI ENCE EVOLVING THE CUSTOMER EXPERIENCE Customer Experience Integrated through Digital and Physical Enabled by – Online Inventory search – Bike Builder – Pre-Selling – Transaction simplification – Online Research – Online – Right selection in – Service E
Slide 36: Significant Improvement in Dealer Health
PI L L AR 5 : I NTEG RATED CUSTO MER EXPERI ENCE SIGNIFICANT IMPROVEMENT IN DEALER HEALTH Strongest network across the powersports landscape, with both unique reach and High degree of H-D Higher price ...Historically high ...Future growth from exclusivity realization, inventory dealer profitability,
Slide 37: Investment in Our Dealership Experience
PI L L AR 5 : I NTEG RATED CUSTO MER EXPERI ENCE INVESTMENT IN OUR DEALERSHIP EXPERIENCE NEARLY $2B expected investment by U.S. Dealers over the next 10 years to Opportunity for Harley- upgrade and modernize facilities Davidson and Dealers to invest in further optimizing Modernized Dealer Facilities
Slide 38: Dealer of the Future
Dealer of the Future Video 38
Slide 39: Evolution of Our Dealer Network
PI L L AR 5 : I NTEG RATED CUSTO MER EXPERI ENCE EVOLUTION OF OUR DEALER NETWORK 2021 2025 Today • Transaction based sales with • Experience based sales with Transaction Based Customer siloed processes across product, integrated processes across products, Sales Process Experience services servic
Slide 40: Financials
ials az} c c = Le
Slide 41: What We Achieved with the Rewire and Hardwire
WHAT WE ACHIEVED WITH THE REWIRE AND HARDWIRE HDMC Revenue ($ millions, includes EV) $4,969 $4,573 $4,540 $3,264 – Restructured the company – Simplified the portfolio & footprint 2018 2019 2020 2021 – Restored profitability & delivered $135M of cost savings HDMC Operating Margin (Includes EV) – O
Slide 42: Confirming 2022 Harley-Davidson, Inc. Guidance
CONFIRMING 2022 HARLEY-DAVIDSON, INC. GUIDANCE 2022 Outlook – 2022 on track to original guidance Motorcycle Segment Revenue Growth (HDMC) +5 – 10% YOY Growth – Trends from Q1 have persisted in Q2 Motorcycles Segment Operating Income Margin (HDMC) 11 – 12% – Logistics and Manufacturing % of Revenue s
Slide 43: Accelerating from Strong Foundation
ACCELERATING FROM STRONG FOUNDATION Improved Investing Business Fundamentals for Growth Across our Most Profitable Segments & Markets Building Creating Capabilities Value for All Stakeholders 43
Slide 44: Hardwire Stage II Targets 2021–2025E
HARDWIRE STAGE II TARGETS - 2021 – 2025E HDMC HDFS LiveWire +5 to 7% -3 to -5% ~53K Revenue CAGR* Op Income Growth** Annual Units by 2025 2021 – 2025E 2021 – 2025E 15% +3 to 5% +140% Operating Margin Op Income Growth** Revenue CAGR*** by 2025 2022E – 2025E 2021 – 2025E EPS: Low Double Digit Growth *
Slide 45: Expect ICE and EV Global Retail Unit Sales TAM to Grow
EXPECT ICE AND EV GLOBAL RETAIL UNIT SALES TAM TO GROW FROM 2021-2030E ICE TAM* EV TAM** (Units, Retail) (Units, Retail) c.2% CAGR ~765k ~775k ~7.5M ~720k c.20% CAGR ~650K ~5.4M ~3.6M ~1.4M 2021 2024E 2027E 2030E 2021 2024E 2027E 2030E * Source: Management Estimates ** ICE Tam data represents 601cc+
Slide 46: Expect Revenue Growth Across All Divisions
EXPECT REVENUE GROWTH ACROSS ALL DIVISIONS HDMC Divisions Growth Low End Motorcycle Building to 5-7% of Range growth through Parts & Above 2025 +5 – 7% Accessories Segment Revenue Apparel & Above CAGR Licensing Segment Membership & Above Experience Segment 46
Slide 47: Path Back to 15% Operating Margin
PATH BACK TO 15% OPERATING MARGIN +2.2 pts 15% +1.1 pts +1.2 pts +1.5 pts 9% 2021 HDMC LiveWire Incremental Volume & Pricing & 2025E HDMC Operating Margin EU Tariffs* Mix Productivity** Operating Margin * Assumes an extension of EU tariff suspension, which is currently expected to expire 31 December
Slide 48: Targeting $400M of Cost Productivity by 2025
TARGETING $400M OF COST PRODUCTIVITY BY 2025 Manufacturing Logistics Supply – Footprint optimization – Reduce expedited freight – Realign supply base to – Invest in automation – Lane & mode optimization support network – Enhance inventory visibility & – Re-engineering for value management with deale
Slide 49: HDFS Is a Strategic Asset That Supports Our Success
HDFS IS A STRATEGIC ASSET THAT SUPPORTS OUR SUCCESS Steady Strategic ~21%* *Return on performance advantage to Equity through the HDMC and our business cycle Dealers ~14% Debt to Equity Ratio Cash generative New opportunities business that self and capabilities to funds and generates excess support
Slide 50: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES Ç√ Grow Organic Business & Invest in Hardwire Ç√ Dividends & Share Buybacks Ç√ M&A and Strategic Initiatives 50
Slide 51: Disciplined M&A Approach
DISCIPLINED M&A APPROACH Expand Retail Presence / Accelerate Omni Capability Selective Enhance Fill in Product M&A Business Model Gaps 51
Slide 52: Hardwire Stage II Targets Ahead of Original Expectations
HARLEY-DAVIDSON INC, HARDWIRE STAGE II TARGETS AHEAD OF ORIGINAL EXPECTATIONS Hardwire Hardwire Stage II 2021 - 2025 2021 - 2025 Revenue: HDMC + LiveWire + Mid Single Digit +9 – 11% 12% Operating Margin: HDMC + LiveWire Steady Margin Growth By 2025 HDFS + Double Digits -3 to -5% $250 - $3
Slide 53: Closing
Closing
Slide 54: Inclusive Stakeholder Management
PI L L AR 6 INCLUSIVE STAKEHOLDER MANAGEMENT – Develop an inclusive and diverse workforce, management and board of directors – Establish progressive and sustainable work environments, policies and practices People – Increase the diversity and inclusive mindset of the global dealer network – Establis
Slide 55: Thank You
Thank You 55
Slide 56: Q&A
Q&A
Slide 57: Harley-Davidson
HARLEY —- DAVIDSON