Harley-davidson, Inc. · NYSE:HOG
Harley-davidson — Q3 2022 Earnings Presentation
19 slides from Harley-davidson's earnings presentation, Oct 26, 2022
Slide 1: Q3 2022 Financial Results
Q3 2022 Financial Results Wednesday, October 26, 2022
Slide 2: Call Participants
Q3 2022 FINANCIAL RESULTS – EARNINGS CALL Call Participants ▪ Jochen Zeitz, Chairman, President and CEO ▪ Gina Goetter, Chief Financial Officer ▪ Edel O’Sullivan, Chief Commercial Officer ▪ Shawn Collins, Director Investor Relations 2
Slide 3: Q3 2022 Performance Headlines
Q3 2022 PERFORMANCE HEADLINES • Global motorcycle shipments grew 19 percent in Q3 as manufacturing largely recovered from previously announced unexpected production suspension in Q2 • HDMC Revenue grew 24 percent behind profitable unit growth and global pricing • HDMC Operating Income margin of 17.9
Slide 4: Consolidated – Q3 2022 Results
CONSOLIDATED – Q3 2022 RESULTS Q3 2022 Results Total HDMC1 HDFS2 ($ millions, except earnings per share) HDI3 Revenue $1,437 $212 $1,649 % vs PY +24% +3% +21% Operating Income $258 $81 $339 Margin % 17.9% 38.3% 20.5% % vs PY +164% -24% +66% Net Income $261 Margin % 15.8% Diluted EPS – GAAP $1.78 % v
Slide 5: Consolidated – YTD 2022 Results
CONSOLIDATED – YTD 2022 RESULTS YTD 2022 Results Total HDMC1 HDFS2 ($ millions, except earnings per share) HDI3 Revenue $4,007 $606 $4,613 % vs PY +8% +2% +7% Operating Income $652 $253 $906 Margin % 16.3% 41.8% 19.6% % vs PY +28% -21% +9% Net Income $700 Margin % 15.2% Diluted EPS – GAAP $4.68 % vs
Slide 6: Worldwide Retail Sales and Inventory
WORLDWIDE RETAIL SALES AND INVENTORY Retail Sales Average Dealer Inventory Units Retail Motorcycle Sales of H-D Motorcycles (vs. PY) H-D Worldwide Dealer Inventory Units (Thousands)2 Q1 Q2 Q3 YTD ‘22 North America -5% -28% -5% -14% -49% vs. Q3 2019 EMEA +28% -15% -4% -2% 60 Asia Pacific +16% +1% +18
Slide 7: HDMC Revenue
HDMC REVENUE Q3 Motorcycles Segment Revenue Bridge 24% 17% 8% 4% -4% Volume Pricing Mix FX Total YTD Motorcycles Segment Revenue Bridge 7% 8% 2% 1% -3% Volume Pricing Mix FX Total 7
Slide 8: Q3 2022: HDMC Operating Income Margin
Q3 2022: HDMC OPERATING INCOME MARGIN Operating Income Margin1,2 Q3 2021 Op Income Margin 8.4% $98M Volume3 +2.9 Pts $45M 17.9% 16.3% Motorcycle Mix +1.1 Pts $21M Pricing +5.0 Pts $88M 8.4% Supply Chain Costs +1.9 Pts $26M 4.4% 4.8% Operating Expenses -1.4 Pts -$20M Q3 2019 Q3 2020 Q3 2021 Q3 2022 Y
Slide 9: HDMC Unit Profitability Expected to Return to Historically Healthy Levels
HDMC UNIT PROFITABILITY EXPECTED TO RETURN TO HISTORICALLY HEALTHY LEVELS HDMC Unit Profitability1,2 ~$3,700/Unit Key Drivers Since 2019: • ~23,000 fewer Wholesale units driven by market exits and model pruning ~$1,300/Unit • Improved profitability through reduced incentives, pricing more than offse
Slide 10: Financial Services Segment – Q3 2022 Results
FINANCIAL SERVICES SEGMENT – Q3 2022 RESULTS Summary Financials Q3 +/- % Change PY ($ millions) 2022 PY Revenue $212 +$7 +3% Interest Expense $61 +$16 +36% Provision for Credit Losses $37 +$25 nm1 Operating Expense $33 -$9 -21% Total Expenses $131 +$32 +33% Operating Income $81 -$26 -24% Margin % 38
Slide 11: Financial Services Segment – YTD 2022 Results
FINANCIAL SERVICES SEGMENT – YTD 2022 RESULTS Summary Financials YTD +/- % Change PY ($ millions) 2022 PY Revenue $606 +$11 +2% Interest Expense $150 +$1 +1% Provision for Credit Losses $95 +$90 nm1 Operating Expense $108 -$14 -11% Total Expenses $353 +$77 +28% Operating Income $253 -$66 -21% Margin
Slide 12: Financial Services Segment Performance
FINANCIAL SERVICES SEGMENT PERFORMANCE Realized Retail Credit Losses1,2,3 Retail Finance Receivables & Allowance Annual (FY) / Annualized (Q) Receivables ($ mm) Allowance Percentage Average annual loss rate 1.9% 5.9% 1.9% 5.0% 5.0% 5.0% 2.0% 1.8% 4.4% $6.9 1.8% $6.8 1.5% $6.5 1.4% $6.4 $6.3 1.2% FY
Slide 13: Consolidated YTD 2022 Results
CONSOLIDATED YTD 2022 RESULTS H-D, Inc. Operating Cash Flow ($ millions) - YTD YTD 2022 – H-D, Inc. Financial Metrics $926 ▪ YTD Capital Investments1 – $104 million ▪ YTD Dividends Paid – $70 million $575 ▪ YTD Discretionary Shares Repurchased – $324 million (8.4 million shares) ▪ YTD Effective Tax
Slide 14: 2022 Harley-Davidson, Inc. Guidance
2022 HARLEY-DAVIDSON, INC. GUIDANCE ▪ 2022 on track to original guidance; 2022 capital investment slightly lower2 Outlook ▪ Expect balance of Q2 wholesale unit Motorcycle Segment Revenue Growth (HDMC) shortfall to be made up in Q4 +5 – 10% YOY Growth ▪ Expect Supply Chain to continue to Motorcycles
Slide 15: Supply Chain Outlook
SUPPLY CHAIN OUTLOOK 2022 Cost Inflation: Realized and Forecast 2021 Cost of Sales 2021 Q1 Q2 Q3 Q4 $3.2B Actual Actual Actual Actual Estimated Tariffs, Duties, Other Logistics >100% ~+50% +7% -5% -1% to -2% Manufacturing +3% +7% +3% +6% +6% Materials +5% +4% +4% +3% +2% to +3% 15
Slide 16: HDMC – Q4 '22 Considerations
HDMC – Q4 ‘22 CONSIDERATIONS ▪ Production cut-over to MY23 planned for end of October ▪ Expect Operating Income Margin to be impacted by lower wholesale volume shipments in Q4 ▪ Plan for Q4 capital and expense spend to be higher than YTD run rate for development costs, marketing & other MY23 launch
Slide 17: 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 17
Slide 18: Forward Looking Statements
FORWARD LOOKING STATEMENTS Cautionary Note Regarding 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
Slide 19: Forward Looking Statements Continued
FORWARD LOOKING STATEMENTS CONTINUED The Company’s ability to sell its motorcycles and related products and services and to meet its financial expectations also depends on the ability of the Company’s dealers to sell its motorcycles and related products and services to retail customers. The Company