Harley-davidson, Inc. · NYSE:HOG
Harley-davidson — Bernstein Electric Revolution 2018 Conference
47 slides from Harley-davidson's conference presentation, Jul 30, 2018
Slide 1: Investor Communication, July 30, 2018
INVESTOR COMMUNICATION JULY 30, 2018 “We are enhancing and accelerating our strategy for growth to drive results and value more quickly and doing so in a way that is reinforcing all that we stand for as a brand and company.” - HARLEY-DAVIDSON, INC. APRIL 24, 2018 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation relates to the company’s “More Roads to Harley-Davidson” plan. The company intends that all statements in this presentation concerning the company’s plan, including without limitation, its plans, objectives and expectations, future financial and other res
Slide 3: By 2022…
By 2022… Our More Roads to Harley-Davidson plan will strengthen our existing business and enable sustainable growth. Growth opportunities will be funded internally while maintaining our current investment/return profile and capital allocation through 2022 Harley-Davidson will build the next generati
Slide 4: What, Why, How
WHAT More Roads to Harley-Davidson – Harley-Davidson’s strategic growth plan through 2022 ▪ Leverage core business, the brand and our strengths more fully; strengthen the company, brand and sport ▪ Invest in new growth opportunities ▪ Advance our long-term objectives and build the next generation of
Slide 5: Our 2027 Objectives
5 Our 2027 Objectives 2017 2018-2022 2023-2027 SHIFT accelerate MOMENTUM - Rider vs. motorcycle - Amplify our efforts to build new riders and retain - Ridership growth momentum - Embrace used motorcycles existing riders - Accelerated revenue growth and - Gain insights - Leverage our competitive adva
Slide 6: Serve today's riders and build new riders
▪ Stabilize and grow the business ▪ Invest significantly in product development and marketing focused on building riders ▪ Serve today’s riders and build new riders ▪ Increase profitability, maximize cash generation ▪ Invest to reinvigorate the U.S. business and accelerate the pace of international
Slide 7: Harley-Davidson Opportunities
sain? HARLEY-DAVIDSON aE OPPORTUNITIES
Slide 8: H-D's competitive fire power
H-D’s competitive fire power: ▪ World’s most iconic motorcycle brand able to command a price premium globally ▪ Dedicated retail network capable of delivering a great customer experience to existing and new customers ▪ Exceptional design capabilities and customer enthusiasm to expand beyond traditio
Slide 9: U.S. industry participation is flat; H-D ridership growing but slowing
U.S. Industry participation is flat. H-D ridership is growing, but growth is slowing PARTICIPATION OWNERSHIP % of 18+ Year Old U.S. Population Who Own at Least U.S. Motorcycle Owners – Number of Unique People One On-Highway Motorcycle with Registered Motorcycles (All cc+, On-Road/Dual Only, Unique P
Slide 10: Rider expectations are changing
Rider expectations are changing The global pace of change is ▪ Consumers are fully embracing online and accelerating, and competition is expecting an all-access retail experience; increasingly fierce ~70% of consumers shop online regularly ▪ Strong competitive pressure for consumer time and spend fr
Slide 11: Tailwinds in emerging, urban, non-core, electric and e-commerce
Tailwinds in Emerging & Urban Tailwinds in Non-Core Segments Motorcycle volume growth by segment U.S. Grand American Touring -2%-2 Avg. global Avg. 1 population 1% Global GDP 33% U.S. Adventure Touring/Traditional 7% Urban Emerging 5% 2 Europe Adventure Touring/Traditional population 2% markets GDP
Slide 12: New products, broader access, stronger dealers
Keep current riders engaged and Meet customers where they Drive a performance framework inspire new riders by extending are and how they want to to improve dealer financial heavyweight leadership and unlocking engage with a multi- strength and the Harley- new markets and segments channel retail expe
Slide 13: New products initiatives
• Innovate Touring and Cruiser products • Launch middleweight platform • Lead the electrification of motorcycles • Launch small displacement motorcycles for emerging markets 13
Slide 14: Motorcycle Product Opportunity Map
Motorcycle Product Opportunity Map through the eyes of the customer 14
Slide 15: Extend leadership in Touring and Cruisers
▪ Extend leadership in Touring and Cruisers in the U.S. and established markets ▪ Leverage technology to create an unmatched aspirational riding experience • Rider confidence & safety • Performance • Connectivity • Infotainment advancement 15
Slide 16: Middleweight segments: Europe and India
Segment / Sales Volume CAGR Displacement 2017 2017-20 Market trends Europe* Adventure Touring 163K ▪ Europe has strong appreciation of Streetfighter 75K Adventure Touring and Streetfighter 8% segments from young riders, women Standard 35K and new riders (601cc+) ▪ A growing middle class and product
Slide 17: Adventure Touring, Custom, Streetfighter/Standard models
Adventure Touring Custom Streetfighter / Standard Capability, functionality, durability Powerful, muscular, aggressive Speed, performance, thrill Commanding view from taller seat height Strength Naked or partial bodywork Versatility Momentum Pan America™ Name: TBD Name: TBD 2020* 2021* 2020* 2 model
Slide 18: Electric motorcycle market and opportunity
North America & Europe* Asia* Sales Gross Sales Gross Volume Margin CAGR Volume Margin CAGR Segment 2017 Est. Avg. 2017-20 2017 Est. Avg. 2017-20 Market trends ▪ Small, rapidly growing market; High <1K ~25% - - ++% increasingly competitive – mostly startups 50% Power who lack distribution and abilit
Slide 19: Electric vehicle momentum and customer interest
Global energy giants are moving to acquire Chinese regulators setting ▪ New residential homes and annual target of 2M electric commercial construction building EV EV charging network vehicles per year by 2020 charging infrastructure companies Global auto OEMs Electric motorcycles are announce they a
Slide 20: Bring electric products to market in new ways
Accessible power & LiveWire™ price point Lightweight urban 2 models 2019* 2021-2022* 2021-2022* Bring electric products to market in new ways ▪ Launch with impact to inspire new riders ahead of product availability and seed demand ▪ Meet customers where they are and how they want to engage ▪ Digital
Slide 21: Strategic alliance in Asia
We intend to enter into a strategic alliance in Asia to: ▪ Launch a 250-500cc motorcycle within 2 years in India, and into other emerging markets in Asia over time ▪ Expedite market entry and increase brand access and volume ▪ Product/displacement bridge to our larger motorcycles ▪ Leverage world-cl
Slide 22: Integrated retail, new retail formats, grow China
• Integrated retail experience • New retail formats • Grow China 22
Slide 23: Digital retail growth
▪ 99% of consumer retail growth in Retail revenue; $T the next 5 yrs. will come from $4.2 online or digitally influenced sales Retail growth 2016-2022 $3.4 2016 2022 ▪ Forecasted 57% of offline sales will be digitally impacted by 2022 >2x 1/4 of these consumers use their growth in number of people w
Slide 24: Elevate H-D.com and e-commerce alliances
Elevate H-D.com Create strategic alliance with global to flagship shopping and purchasing e-commerce providers. Expand access to H-D experience, reinforcing the H-D apparel directly to a broader set of mainstream experience consumers; accelerate apparel sales Improved Site customer redesign support
Slide 25: International apparel distribution and new storefronts
Expand international apparel distribution ▪ Expand G-III alliance model for on-line/offline shopping experience throughout Asia and into other regions Launch new urban and flexible format storefronts ▪ Introduce new storefront concepts globally ▪ Focus on new products and customer needs ▪ Examples i
Slide 26: Grow China
▪ Leverage expanded product portfolio ▪ Leverage Thailand mfg. plant ▪ Establish China Distribution Center ▪ Dealer expansion and improvement ▪ Increase marketing investment 26
Slide 27: Good-to-great dealers; expand international dealer network
• Good-to-great dealers • Expand international dealer network 27
Slide 28: H-D dealer network performance
H-D dealer network performance (U.S. data) Key Areas of Variation • Market share & operating margin • Customer conversion to sales − Marketing leads − Test rides − Riding Academy graduates • New-to-sport buyers as % of total We have opportunity to: ▪ Redefine what “performance” means for the company
Slide 29: Dealer performance framework
▪ Drive a performance framework to improve dealer financial strength and the Harley-Davidson customer experience ▪ Network management ▪ Dealer prospecting and succession planning ▪ Dealer incentives ▪ Performance oriented incentives ▪ Facility and methods modernization incentives ▪ Bar & Shield prog
Slide 30: New full-line dealer points
• Plan to open 25-35 new full-line dealer points per year based on market potential through 2022 • Primarily in emerging markets 30
Slide 31: Funding & Financials
FUNDING & FINANCIALS [HARLEY-OAVS0N
Slide 32: Investment focus
OUR 2027 OBJECTIVES INVESTMENT FOCUS Cash Flow Investment Returns Shareholder Distribution Leverage strong Invest in strong return projects to Deliver: Return all excess cash to shareholders business model and drive organic growth (revenue & • HDMC ROIC top $1,526* brand to generate margin) quartile
Slide 33: H-D's Growth Objectives
H-D’s Growth Objectives* 2017 vs. 2022 Revenue +$1 to $1.5 billion 5 Yr. CAGR 3.8 to 5.5% Operating income +$200 to $250 million 5 Yr. CAGR 5.9 to 7.1% Operating margin % +0.75 to 1.25 points *Represents the Motorcycles and Related Products segment. Growth objectives represent incremental business p
Slide 34: Cumulative operating and capital investment through 2022
Cumulative investments expected through 2022 Operating Investment Capital Investment* $450-$550 million $225-$275 million Retail Electric Retail Electric Middleweight / Small Middleweight / Small Displacement Displacement *Expect total H-D capital spending to range between $200 million and $250 mill
Slide 35: Funding Principles and Funding Strategy
Funding Principles Funding Strategy • Stabilize and strengthen existing • Improve cost competitiveness business – Sourcing – Optimize existing customer base – Design-to-value – Invest in growing new riders • Achieve overhead efficiencies • Enhance our premium brand – Reduce costs through prioritizat
Slide 36: Income and investment through 2022
Income Investment 2018 2019 2020 2021 2022 Expect $450-$550 million cumulative by 2022 Intense cost focus 2018 2019 2020 2021 2022 36
Slide 37: +$200-$250M in 2022
+$200-$250M in 2022 2018 2019 2020 2021 2022 37
Slide 38: Dividends per share and share repurchases
$1.46 $1.40 $1,526** $1.24 $1.10 $0.84 $0.62 $604 $0.48 $456 $459 $456 $218 $300 2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017 * Funded by $750 million HDI debt issuance 38 38
Slide 39: Free cash flow, ROIC and ROE benchmarks
39 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) Funded by $750 million HDI debt 27% issuance (1)Three year average is based on 2015-2017 calendar year information using
Slide 40: Measuring Success - Milestones
MEASURING " S U C C ESS HARLEY-DAVIDSON MILESTONES
Slide 41: Measuring Success - Milestones: new products
aga MEASURING SUCCESS — MILESTONES Our objective is to drive sustainable growth through 2022 as we seek to achieve milestones along the way 2018 2019 2020 2021 2022 NEW PRODUCTS Innovate Existing Touring & Cruiser # of Models New Middleweight Motorcycles Platform —_ pe a | Lead Electric Small Displa
Slide 42: Measuring Success - Milestones: broader access and stronger dealers
ize) MEASURING SUCCESS - MILESTONES <P BROADER ACCESS Integrated Retail E-commerce Penetration (% of Total) International E-commerce Expansion Urban Apparel Stores STRONGER DEALERS Good-to-Great Dealers Focus on Customer Conversion Improvement - Riding Academy - U.S. Demos - International Demos - Ma
Slide 43: Summary
entra Summary HARLE-DON
Slide 44: Building the next generation of Harley-Davidson riders globally
BUILDING THE NEXT GENERATION OF HARLEY-DAVIDSON RIDERS GLOBALLY OUR 2027 OBJECTIVES Build 2 Million New Grow International Launch 100 New Deliver Superior Grow our Business 1 Harley-Davidson 2 Business to 50% of 3 High Impact Harley- 4 Return on Invested 5 without Growing our Riders in the U.S. Annu
Slide 45: Sources of Information
Sources of Information This presentation includes a significant amount of estimates, information and data about markets, industry information and similar subjects. The estimates, information or data reflects the company’s beliefs based on estimates, information and data available to it. But, we have
Slide 46: 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 47: 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
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