Harley-davidson, Inc. · NYSE:HOG
Harley-davidson — Q2 2019 Earnings Presentation
30 slides from Harley-davidson's earnings presentation, Jul 23, 2019
Slide 1: 2019 Second Quarter Update
HARLEY-DAVIDSON, INC. 2019 SECOND QUARTER UPDATE July 23, 2019 | Conference Call Slide Presentation JULY 23, 2019
Slide 2: 2019 Second Quarter Update: Conference Call Agenda
2019 SECOND 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 f
Slide 3: Strategy
STRATEGY July 23, 2019 | Conference Call Slide Presentation 3
Slide 4: Business Perspectives
BUSINESS PERSPECTIVES MATT LEVATICH, PRESIDENT & CEO, HARLEY-DAVIDSON, INC. July 23, 2019 | Conference Call Slide Presentation
Slide 5: 2019 Q2 Snapshot
2019 Q2 SNAPSHOT Highlights VS. Prior year • Delivered GAAP diluted EPS of $1.23 per share • Repurchased $42.9 million of shares; paid dividends of $0.375 per share • Obtained regulatory approvals required to mitigate the majority of incremental EU tariffs • Completed key milestones in its manufactu
Slide 6: Ridership – U.S. Industry
RIDERSHIP – U.S. INDUSTRY Harley-Davidson U.S. Ridership has Never Been Higher or more Diverse Owners of at Least One On-Highway U.S. Motorcycle Owners – Number of Unique People Motorcycle with Registered Motorcycles (All cc, On-Road/Dual) as a % of the US (All cc, On-Road/Dual) Population 18+ Years
Slide 7: More Roads Progress in Q2
MORE ROADS PROGRESS IN Q2 LiveWire™ targeted for Thailand operations supported Stronger Dealers early success; September retail sales +77% in ASEAN expanding internationally Middleweight motorcycle in active testing– targeted 2020 • 59 Retail consulting visits; U.S. dealers’ new vehicle sales improv
Slide 8: LiveWire Powering Up
LIVEWIRE POWERING UP A blisteringly quick, gloriously rideable sport machine… – Dan Neil, The Wall Street Journal U.S. Charging Network July 23, 2019 | Conference Call Slide Presentation 8
Slide 9: Financial Results
FINANCIAL RESULTS JOHN OLIN, SVP & CFO, HARLEY-DAVIDSON, INC. July 23, 2019 | Conference Call Slide Presentation
Slide 10: Q2 2019 vs. Q2 2018 Results
Q2 2019 VS. Q2 2018 RESULTS REVENUE NET INCOME EPS $1.63 $195.6 $1.23 Billion Million Consolidated – Motorcycles and Related Products and Financial Services Segments (4.7)% (19.3)% (15.2)% Earnings impacted by: ▪ Motorcycles segment operating income down 25.8% ̶ Revenue down 6.0% on 5.3% lower shipm
Slide 11: Worldwide Retail Sales
WORLDWIDE RETAIL SALES vs. prior year Q2 ‘19 Motorcycles Q2 YTD Worldwide 71,846 (8.4)% (6.6)% U.S. 42,762 (8.0)% (6.5)% International 29,084 (8.9)% (6.6)% Source: Dealer reported data ▪ Q2 worldwide retail sales down 8.4% ▪ U.S. retail sales down – Weak U.S. industry; rate of decline tempered versu
Slide 12: U.S. Retail Sales and Inventory
U.S. RETAIL SALES H-D U.S. NEW RETAIL MOTORCYCLE SALES H-D U.S. NEW 601+CC RETAIL MARKET SHARE* (8.7)% (0.1) pts. (1.8) pts. (0.4) pts. (0.9) pts. (6.5)% SHARE (6.4)% (8.0)% RETAIL SALES ▪ Q2 2019 market share down vs. prior year – H-D gained share of Touring and Cruiser segments, but mix is shiftin
Slide 13: International Retail Sales and Opportunity
INTERNATIONAL RETAIL SALES H-D INTERNATIONAL NEW RETAIL H-D EUROPE NEW 601+CC MARKET SHARE* MOTORCYCLE SALES Vs. prior year Q2 YTD SHARE International (8.9)% (6.6)% - EMEA (12.5)% (8.0)% Soft retail sales through most western European markets ▪ Declines driven by lapping new Softail® models and RETA
Slide 14: Shipments & Mix
SHIPMENTS & MIX SHIPMENTS MOTORCYCLES SEGMENT Q2 ‘19 vs. PY YTD ‘19 vs. PY Total 68,757 (5.3)% 127,648 (6.5)% Touring 45.0% 2.2 pts. 43.8% (1.6) pts. Cruiser* 33.0% (0.5) pts. 33.8% 0.2 pts. Street / 22.0% (1.7) pts. 22.4% 1.4 pts. Sportster® 100.0% 100.0% * Includes Softail and CVO Motorcycles and
Slide 15: Motorcycles Segment Revenue
REVENUE REVENUE MOTORCYCLES SEGMENT ($ millions) Q2 ‘19 vs. PY YTD ‘19 vs. PY Motorcycle $1,128.1 (6.1)% $2,092.6 (9.9)% P&A 221.3 (4.2) 381.0 (4.8) General Merchandise 64.6 (5.8) 120.0 (4.2) Licensing 9.9 (4.8) 18.5 (1.5) Other 10.1 (25.5) 17.5 (19.8) Total Revenue $1,434.0 (6.0)% $2,629.6 (9.0)% M
Slide 16: Motorcycles Segment Gross Margin
GROSS MARGIN GROSS MARGIN MOTORCYCLES SEGMENT ($ millions) Q2 YTD 2018 Gross Margin $532.1 $1,005.9 % of revenue 34.9% 34.8% - Volume (24.7) (66.1) - Pricing net of cost 14.1 30.5 - Mix (14.3) (53.5) - Currency 0.8 (14.3) - Raw materials 1.2 (1.9) - Manufacturing / other (54.5) (98.4) 2019 Gross Mar
Slide 17: Motorcycles Segment Operating Margin
OPERATING MARGIN OPERATING MARGIN MOTORCYCLES SEGMENT ($ millions) Q2 YTD 2018 Operating Income $243.4 $416.2 % of revenue 16.0% 14.4% - Gross Margin (77.3) (203.7) - SG&A 12.7 41.4 - Restructuring 1.9 35.2 2019 Operating Income $180.7 $289.1 % of revenue 12.6% 11.0% Motorcycles and Related Products
Slide 18: Financial Services Segment Operating Income
FINANCIAL SERVICES SEGMENT OPERATING INCOME FINANCIAL SERVICES SEGMENT ($ millions) Q2 YTD 2018 Operating Income $80.5 $144.1 - Net interest income 7.7 9.6 - Provision for retail motorcycle loan losses (6.9) (11.8) - Provision for wholesale loan losses (0.6) (0.3) - Operating expenses (7.2) (14.4) -
Slide 19: HDFS Operations and Liquidity
FINANCIAL SERVICES SEGMENT HDFS OPERATIONS AND LIQUIDITY OPERATIONS LIQUIDITY ($ millions) Originations End of Q2 2019 New and used H-D retail motorcycle loans Cash & equivalents $364.2 Q2 $1.04B (1.8)% vs. Q2 ’18 YTD $1.73B 0.9% vs. YTD ’18 Availability YTD approximately 80%-85% prime Bank Credit F
Slide 20: HDFS Retail Motorcycle Loan Performance
FINANCIAL SERVICES SEGMENT HDFS RETAIL MOTORCYCLE LOAN PERFORMANCE 5% 4.50% 4% 3.53% 3.16% 3.25% 3.33% 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 Q2 '19 3% 2.04% 2% 1.71% 1.82% 1.50% 1.56% 1.06% 0.97% 1.08% Financial Services Segment 1% 0.58% 0
Slide 21: Harley-Davidson, Inc. 2019 vs. PY
HARLEY-DAVIDSON, INC. 2019 HARLEY-DAVIDSON, INC. VS. PY ▪ Cash & cash equivalents - $924.6 million vs. $978.7 million Q2 Consolidated – Motorcycles and Related Products and Financial Services Segments ▪ Operating cash flow - $496.2 million vs. $735.9 million YTD ▪ Capital spending - $83.2 million vs
Slide 22: 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 23: 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 $750 million HDI debt issuance Jul
Slide 24: Manufacturing Optimization
MANUFACTURING OPTIMIZATION Manufacturing Optimization Summary as of July 23, 2019 ($ millions) 2018 2019 2020 Actual Estimate Estimate Total Temporary Inefficiencies $12.9 $10-$15 - $23-$28 Restructuring $89.5 $30-$35 - $119-$124 Total Costs $102.4 $40-$50 - $142-$152 % cash ~70% ~70% NA ~70% 2018 A
Slide 25: Guidance: 2019 Expectations
GUIDANCE 2019 EXPECTATIONS as of July 23, 2019 212,000 to 217,000 Motorcycle shipments (Q3: 43,000 to 48,000) Gross margin % Down year-over-year Motorcycles and Related Products segment Lower year-over-year SG&A (Lower as a percent of revenue) Operating margin % 6% to 7% Financial Services HDFS oper
Slide 26: 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 23, 2019 | Conference Call Slide Presentation 26
Slide 27: 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 28: 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 29: 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 30: 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