Q4 2022 Harley-Davidson Inc Earnings Call
The parallel licensing and Harley Davidson financial services.
This strategy contributed significantly to the increase in our margin to 13, 9% at <unk> excluding <unk>.
Compared to seven 6% in 2019 with a three point margin expansion and a much more effective and efficient allocation of our resources.
Leading to an EPS growth of 18% to $4 96.
Despite all of the supply challenges that we have to face throughout the year.
As you know Harley Davidson is on a transformational journey and even though the economic environment continues to evolve we remain optimistic about the significant potential of the holiday business for 'twenty three and beyond.
I will briefly address our six hardware strategic pillars, and our delivery of them over the past year.
Profit focus.
We are committed to strengthening and growing our position in our strongest motorcycle segments and touring large cruiser and trike.
Not only are these segments, the most profitability and the market globally, but we also believe these segments of our potential to inspire more engagement, while compelling new customers and drive us to choose holiday.
Our 22 lineup, we build eight new modules each followed by the Milwaukee eight 117, the most powerful factory installed engine ever offered by holiday.
With the Hotwire, we also made the commitment to introduce a series of motorcycles that align with our strategy to increase desirability and to drive the legacy of Harley Davidson, namely through our enthusiast and icons offering.
We are especially excited about the future both collections within our product lineup as we enter the 120th anniversary of holiday.
Selective expansion and redefinition.
Aligned to Hotwire, we are committed to expanding where we have the right product to win and where the profit profile is right.
Delivering nutri score dry does as part of our objective to attract new customers to the brand. In addition to expanding the garage of our existing riders.
With this in mind in April we started a new chapter in Harley Davidson sports history with the launch of <unk>.
Building on the 65 year legacy of sports, we wanted to push both our performance and design capabilities, while ensuring the bike was an entry point to Harley Davidson Motorcycling and our brand.
We also grew our adventure touring retail sales globally by over 30% on the <unk> platform.
We continued to execute our hardware priorities across markets and regions.
Tequila, we emphasized profitable growth in EMEA, and Latam with a lesser reach and becoming profitable for the first time since becoming a standalone region.
We're also encouraged by the early results of our focus in APAC expansion with Japan now is our second largest market China at its highest volume ever and with other sub regions also delivering growth at attractive profitability levels.
Over the course of 'twenty two we also finalized the launch of our new riding Academy by the $3 50.
Despite will replace the Sunset Street, five funded and we breathe new life into our riding Academy program as we plan for its expansion and development in future years.
This program and the concerted follow up actions by our network of dealers represent a critical pipeline for new and returning riders.
In our May analyst and Investor meeting, we set out our ambitions and our growth beyond bikes pillar with an increased focus on apparel and licensing as a new key drybulk or Harley Davidson lifestyle.
Since then we've been building, our core apparel and licensing competency, including creating a best in class team to deliver on this ambition long term.
Riding gear must be a core competency of the company and brand.
We've been evolving our motor clothes offering executing a seasonal forward looking plan strengthening and modernizing the way in which we design develop and source our product.
The efficiencies through the business, while growing our motor close offering.
Holiday and lifestyle is where we see the overall apparel and licensing opportunity, especially as it relates to non writers, but also existing new brand aficionados.
By creating a unique Harley Davidson aesthetic taking inspiration from the past and evolving it for today's consumer we think we are able to bring more interest to people to the brand leveraging the unique power of the Harley Davidson lifestyle.
'twenty two we saw a 19% increase in our proud performance solid proof point that our strategy is working and that the investments we're making are starting to have a positive impact on our performance.
And we have lots of exciting developments in the apparel and licensing that we'll be telling you about this year.
Our parts and accessories business was negatively impacted in 'twenty, two due to supply chain challenges and lower retails, but still grew 7% on a per byte basis and exceeded our 2019 results.
Two main elements are driving our plan for future growth in P&A customization and service growth.
Customization, which is at the heart of motor culture is an integral part of the overall holiday for lifestyle.
PMA allows us to have a truly personal relationship with our customers and their bikes.
And service growth at the dealership with an emphasis on convenience expertise and value.
Our service business consulting program launched in 22 has grown P&A revenue through service and participating dealers by 14% well ahead of surrounding dealers.
We also took the first steps towards redesigning the service journey with the launch of an online service scheduled one HD dot com.
And lastly, we've changed the way we operate integrating <unk> into our motorcycle management function to continue to reduce complexity and focus the offering.
While fully aligning with our motive motorcycle lineup.
We are also planning new developments in our online 5 billion configuration integrated to the dealership to allow for improved customer inspiration in the east.
Integrated customer experience.
Delivering our growth ambitions requires us to provide experiences that exceed expectations for modern retail, while leveraging digital and physical channels as part of our dealer network.
This vision depends upon a modernized approach to inventory management.
Digital enablement of the customer journey and enhanced omnichannel capabilities.
There was not a competency of Harley Davidson in the past.
And 'twenty, two we enhanced our reservations and preorder assistance and piloted the new inventory management and distribution system, reducing fulfillment time, allowing for better availability without expanding in dealership inventory.
22 also saw the launch of our project fuel program, which will provide a much needed redesign Ford dealerships.
This program is in full swing globally and in North America of 15% of our network has already signed up.
As we ramp up and expand project Q. We are also embarking on an effort to redefine the Harley Davidson customer experience that leads the footprint transformation with particular emphasis on our brand and marketing integration and critical customer journeys.
But more on this as the program has established inclusive stakeholder management.
At the last quarter, we hinted at our plans to invest in our hometown Milwaukee and specifically our Juno campus.
Earlier this month, we announced a redevelopment at Juno, which will start with the community pop to serve the local community the people of Milwaukee and our employees.
Partnering with the Harley Davidson Foundation and internationally acclaimed designers have weak studio. We feel this project will deliver a big impact to our community.
Take a look at the plants online if you haven't seen them already and leading electric.
22, so the completion of our business combination between lifeline breeches impactful.
Like why are becoming the first the motorcycle company to list on the New York Stock Exchange.
This is the first quarter of LIBOR reporting independently.
I'm going to hand over to you Ryan Morris a precedent of Lifeway, it's run through some more details about LIBOR its performance and about what is on the horizon. Thank.
Thank you Ark and good morning, everyone.
122 was a banner year for LIBOR, many major milestones, including the completion of our listing on the New York Stock Exchange.
LIBOR is building on the energy of the September lifting brought to our brand and our organization.
Our teams continue to operate with the benefit of the full support of our strategic partners at Harley Davidson Kimco.
We finished 2022 above expectations delivering 97 motorcycles over the planned 500 units.
LIBOR one continued earned rave reviews as more and more riders are introduced to the LIBOR air experience.
As we move into 2023 investment into product development continues to be on the top of our priority list.
Our engineering teams are laser focused on advancing the technologies platforms and products that will further our position as pioneers in the industry.
In 2023, we expect to see the introduction of LIBOR at one for the European market and the launch of the <unk> platform.
Based on pre production build we expect to begin selling down more in the second half of 2023 behind our original plan for spring of this year.
Given the industry seasonality patterns, we expect this to have a meaningful impact on our originally planned 2023 units.
On the commercial front, we continue to build and mature our retail partner network in the United States with a physical location and 90% the top 40 metro areas all working as part of the Omnichannel model designed to meet and exceed the expectations of our riders.
Del Mar reservations in the U S has continued to grow building onto buzz created by our long tradition.
The team is excited to bring live wire to Europe in 2023 led by our new Vice President for Europe .
Our retailers across brands.
K, Germany, the Netherlands, and Switzerland are readying to bring livewire to their markets as they are riding season picks up.
The powertrain facility in Wisconsin, a tooling up and ready to produce the <unk> FC Powertrains that will then be assembled into live wire motorcycles in Pennsylvania on the same line, where we've been manufacturing livewire ones.
The support of Harley Davidson supply chain and manufacturing capabilities continues to be a differentiating strategic asset.
Finally, our <unk> brand continues to spread the electric experienced the Kid.
Delivered double digit year over year revenue growth.
192 saw the introduction of the new products the market is demanding for older Kids.
18% and 20 inch bikes began retailing with the strong customer response.
And now I'll hand over to Jean together to talk through the financial performance of Harley Davidson Livewire in greater detail.
Yes.
Thank you and good morning, everyone. As you all can highlighted we delivered a strong quarter and total fiscal year by staying focused on business fundamentals and executing on our hardware strategy.
Q4 marks the first time, we are reporting under our updated three segment structure of HCM.
H DFS and Livewire.
<unk> houses, our Harley Davidson branded motorcycle parts and accessories, and our apparel and licensing businesses.
H DFS provides motorcycle financing insurance and other services to our dealers and retail customers. They will continue to provide services to both <unk> and LIBOR here.
Library, the new segment housing that design marketing and sales of electric motorcycle and basic electric balance bikes.
Harley Davidson owned and 89% interest in <unk> and will continue to consolidate their results in our Harley Davidson Inc.
Fourth quarter results closed out a strong year with significant year over year revenue and operating income increases.
Pricing actions and cost productivity ultimately overcame the impact of the production suspension in Q2, resulting in three points of operating margin expansion versus prior year.
Looking at our financial results in the fourth quarter total consolidated revenue of $1 $1 billion was 12% higher than last year with growth within <unk> and Etfs and a decline in our library segment.
<unk> wholesale motorcycle unit increased 18% year over year and <unk> revenue was up 14% driven by the increase in shipments and continued strength in global pricing.
Harley Davidson financial services segment revenue was up 7% largely due to higher finance receivables.
And the library segment decline was primarily due to a strong comparison period in 2021 as the company built inventory across their expanded distribution network.
Total consolidated operating income of $4 million was $11 million better than prior year.
Total operating loss at <unk> of $32 million is that $50 million improvement versus prior years losses.
As a reminder, with the shifted a model year launch at the beginning of the calendar year Q4 included directly 40% to 50% fewer wholesale units compared to the other quarters.
<unk> operating income at $64 million declined by 32% and classes continue to normalize and higher interest rates resulted in a higher cost of funding.
And finally live wire operating loss of $29 million included a step up in product development and people cost in line with expectations.
Turning to full year 2022 results total consolidated revenue of $5 $8 billion was 8% higher compared to last year and total operating income of $909 million was 10% higher.
As Juergen mentioned full year earnings per share was $4, 96% compared to $4 19 tenths for the same period last year.
This 18% increase was driven by pricing and productivity offsetting the impact of the production suspension and cost inflation. We also had modest favorability in below the line items, which contributed to the accretion.
Global retail sales of new motorcycles were flat in a seasonally smaller quarter, where we typically retail less than 20% of the year's volume totaled.
Total 2022 retail sales ended down 8% globally, largely impacted by the Q2 production suspension and the timing of inventory replenishment to our dealers.
For the full year, a decline of 12% in North America was primarily attributed to the production suspension in Q2, which disrupted the flow of inventory tracking North American dealers during peak riding season.
APAC retail grew by 12% with double digit growth in Japan, and high single digit growth in China, driven by our focused investments in the region steady production as we closed out the model year resulted in more steady inventory flows into the dealer network and a sequential basis average inventory was relatively flat compared to last quarter.
And we continue to run about 40% less in 2019.
We ended the year in a healthier inventory position and are set up for a solid start to the riding season.
Throughout 2022, we realized strong pricing dynamics for both new and used motorcycles for the full year U S. New motorcycle transaction prices finished within our desired, though the threshold of plus or minus two percentage points of MSRP.
Yes.
Looking at revenue total H D&C revenue increased 14% in Q4 and increased 9% for the full year.
Guessing on the key drivers for the full year three points of growth came from volume driven by wholesale unit growth.
Seven points of growth from pricing and lower intent answer both global MSRP increases and pricing across the parts and accessories and apparel businesses.
<unk> contributed one point of growth as we continue to prioritize our most profitable models and markets and finally three points of negative impact from foreign exchange the dollar strengthened throughout the year.
Focusing in on margins annual gross margin for <unk> of 31, 3% compares to 28, 8% in the prior year.
John good volume and pricing more than offset supply chain cost inflation and the impact from the production suspension.
Additionally, in 2022, we lapped the unfavorable impact from the unexpected EU tariffs, which provided about one point of margin tailwind.
In total we continue to see supply chain costs stabilize with total inflation at 3% in the quarter lower than 5% inflation in the first half of the year and 10% in the back half of last year.
Deceleration in inflation continued to be largely driven by logistics, including lower expedited shipping expenses and to a lesser extent raw materials and the impact of metal markets declining from peak levels realized last year.
Overall annual supply chain cost inflation was approximately 4%, which was down one point versus last year.
For the year <unk> operating margin improved from 10, 6% in 2021 to 13, 9%. The improvement was driven primarily by the factors noted above.
As referenced back to our 2022 original guidance the combined operating margin for HDL C and Livewire finished at 12%, which is the high end of our guidance range.
Etfs operating income in Q4 was $64 million down 32% compared to last year and for the total year operating income of $318 million was down 23%, finishing in line with guidance expectations.
The annual decline was driven by a higher provision for credit losses, and an increase in borrowing costs in.
In Q4, <unk> annualized retail credit loss ratio of one 9% compared to a ratio of one 2% in Q4 of last year.
Total retail loan origination in 2022 was up eight 5%.
Strong growth in used bike origination.
We did see new bank originations growth three 9% in Q4 as dealer inventories were replenished.
Year end financing receivables were $7 1 billion.
Which was up eight 6% versus prior year.
2022 interest expense was up $25 million or 13% versus prior year. The increase was driven by higher average debt outstanding and a higher cost of funding. In addition, the retail allowance for credit loss is finished the year at five 1% up from 5% for the first three quarters of 2022 with the.
A slight uptick incorporating the current outlook on the macro environment.
LIBOR has finished its first quarter as a public company in line with our expectations.
First quarter segment revenue decreased by 28% to $9 million and full year revenue of $47 million with 31% ahead of prior year.
Annual increase was driven by higher unit sales of Wifi, or one and favorable product mix and basic bikes and total LIBOR sold 597 units in the year, which is about 100 units more than initial guidance.
<unk> revenue growth was driven by innovation behind two new balance like models and pricing for the full year. The operating loss of $85 million compares to a loss of $68 million in the prior year. The step up in loss was attributed to increased investment behind product development associated with the extra del Mar platform and the advancement.
Of its electric vehicle systems is the company ready for launch of its second electric motorcycle slated for 2023.
Additionally, 2022 includes investment in the Buildout of the Omnichannel retail network and planned expansion into Europe in 2023.
Wrapping up with Harley Davidson, Inc. Financial results and full year 2022, we delivered $548 million of operating cash flow, which was down from $976 million in 2021.
The decrease was driven by changes in working capital as well as higher net cash outflows related to wholesale finance receivables.
Total cash and cash equivalents ended at $1 4 billion.
Which was $442 million lower than the end of 2021. This consolidated cash number includes $265 million from Livewire.
In line with our capital allocation priorities in 2022, the company returned over $400 million to shareholders through dividends and share repurchases.
As it relates to our financial outlook for 2023, we expect <unk> revenue growth of 47%.
Growth forecast incorporates approximately two points of unit growth.
One to two points of mix as we continue to focus on our profitable core business and one to two points of pricing as we offset a more moderated inflationary outlook.
The more we continue to expect the parts and accessories and apparel and licensing businesses to accelerate top line growth in line with our hardware strategy.
We expect <unk> operating income margin of 14, 1% 14, 6%, we believe the anticipated positive impact from volume leverage pricing unit mix and our productivity efforts within supply chain will offset expected cost inflation and currency headwinds.
We expect <unk> operating income to decline by 20% to 25% this.
This decline is largely a result of the higher interest rate environment, causing our borrowing cost increase.
Given the macro backdrop, we are also expecting loss rates to rise about 2022 and are planning for losses between two and 2.25%.
For LIBOR are we expecting a unit forecast between 750 in 2000 units and an operating income loss range of $115 million to $125 million.
This forecast incorporates the updated launch timing and the new down my product.
And lastly for total HDI, we expect capital investments of $225 million to $250 million as we continue to invest behind product development and capability enhancements.
Set up an investment is primarily driven by core product innovation investments in manufacturing to automate and reduce costs as part of our productivity journey as well as planned investments of LIBOR.
In 2023, we are expecting more moderate inflation across the supply chain as logistics costs continued to stabilize in aggregate, we expect about two to three points of inflation compared to 4% in 2022 and over 5% in 2021 with labor cost is the primary driver of the increase this upcoming year.
And while we're not back to completely smooth sailing in terms of supply chain efficiency, we are experiencing and expecting less volatility than the previous two years.
One of our key initiatives identified as part of the hardware strategy is driving productivity to eliminate the $400 million of incremental supply chain costs incurred through 2020.
In 2022, we delivered approximately $50 million towards that goal and we are expecting another $140 million in 2023 with focused projects to increase production efficiency and eliminate complexity and waste. We also expect to continue to stabilize the supplier base and reduce expedited shipping costs.
We continue to make good progress on improving the profit per bike with 2022, finishing at roughly $3500 per unit.
And with the initiatives in place for 2023 to drive mix and cost productivity. We believe that we will continue to make progress in getting back to historical levels of profitability.
As we look to 2023 capital allocation, our priorities remain to fund growth of the hardware initiatives, which includes the capital expenditures as mentioned previously paying dividends and executing discretionary share repurchases.
In 2022, we bought back $8 4 million shares and we had $9 9 million shares remaining on our current board authorization.
Finally, we put in place a loan facility between Harley Davidson and Livewire given that the funds raised as part of the spin were less than expected, we do not expect LIBOR to draw on that facility in 2023.
In summary, we are very pleased to have delivered on our financial commitments in 2022 and are focused on achieving our targets in this upcoming year.
And with that I'll turn it back to you to wrap up.
Thank you Gina.
We continue to deliver on our hardware strategy and in May we detailed our ambition to capitalize on the early success of our strategy tuning the engine of our business for improved performance.
We believe that by focusing on almost six hardware pillars and related core initiatives.
<unk> bold moves in spaces, where we can win we can deliver not only further improvement, but also important month performance in the long run we continue to invest for long term growth within our most profitable markets and categories, where we see potential and we are building capabilities that will allow us to expand our customer reach and experience.
Timothy focusing on initiatives that create value for all our stakeholders.
Lastly, 2023 is an important year at Harley Davidson.
Since $19 three Harley Davidson's pioneered American motorcycle design technology and performance this year will be in marketing or 120th anniversary was a year long celebration.
We'll talk more about our recent model year 'twenty three release of 120th anniversary of product at the next quarter.
We are excited about what is going to be an uptick ethical milestone for the company.
But history culture, and community of Harley Davidson with arthritis, and reaching new customers and bringing more people to the brand.
We want to make Milwaukee, the ultimate destination for motor coach on the World with this anniversary, we are making a commitment to our hometown, but also to our community.
We hope to see you all there.
Thank you and now we'll take your questions.
Thank you as a reminder to ask a question. Please press star one on your telephone keypad.
To withdraw your question. Please press star one again.
We also ask that you limit yourself to one question and returns that you for additional questions. Thank you. Your first question comes from Craig Kennison with Baird. Your line is open.
Good morning. Thank you for taking my question I'm curious how would you interpret the demand signals you are seeing across your spectrum, whether it's from subprime consumers to more affluent consumers or if there is another way to suss out.
What the demand trend looks like it's a pretty difficult macro right now in our forecast.
Yeah.
Yes Johan here. Thank you for the question.
Demand signals are early right.
Haven't really entered the riding season yet.
Overall, what I can say that January has been performing in line with our expectations.
Uh huh.
Unfolds, obviously, we will be we'll know where demand sits right now we feel comfortable overall with the inventory that we have.
We feel comfortable with the demand signals that we're seeing.
But Tom.
Time will tell overall, we expect a flat to slightly positive retail growth for the year with the positive.
When it shows up to mostly.
In the second and third quarters simply because we had our.
Our core riding seasons and quarters. So overall, we do expect positive.
Positive retail growth and that's our anticipation.
And I hope that answer your question about demand signals, it's still early on the year, but overall, we are quite positive.
Just to follow up on that a positive go ahead, yeah sorry.
Good morning, I was just going to give you some color on that.
Asking about prime subprime and applications overall do you think that's still early days in January performing in line with expectations.
From a retail environment from an from a loan application standpoint, we're still seeing quite a bit of interest come in frankly across both prime and subprime. So our loan application volume in the month and really even in the back half of last year has continued to stay strong.
Yeah.
Great. Thank you.
The next question is from Robby <unk> with Bank of America. Your line is open.
Oh, hi, Thanks, I'm going to slip in just a quick follow up and then one different question just to follow up on the first question is would you guys expect retail.
In your shipments to sort of track in line in 2023 years there.
Some dealer fill in and then just on the dealer network, maybe yoga and could you kind of update us on how youre thinking about further consolidation of the dealers for 2023 and what dealer focused initiatives. You guys are most focused on for 2023.
Sure Robbie.
Yeah.
In terms of your.
The question about retail as Gina mentioned, we expect about a 2% unit growth for motorcycles for the year.
And that would include a slide.
Pipeline lift.
In addition to the retail guidance that I've, given so positive retail guidance and small pipeline pipeline filling would equate to the 2%. So it's a combination for both.
At this point in time.
And Gina I'm, sorry, Doug do you want to talk about the network.
Yes, Thank you and good morning, Ravi a couple of initiatives that are critical for us in this year as we return to a stronger inventory position and we face into the anniversary year. The first in European referenced it in his comments is around project fuel, which is the upgrade of our facilities.
Across the Globe. This is a program that is incredibly important we believe it is long overdue and it is proceeding at pace. It is a significant investment for our dealers, but it's one that we believe will pay off in terms of the opportunity for expanded growth and outreach to more and more diverse segments of riders. So thats one big priority for us the second one is to.
To emphasize the balance of desirability.
Unprofitability and there are a couple of initiatives that we're pursuing obviously, we will find opportunities as the year goes along and to continue to emphasize a message around affordability, but also restrained and I'm very very careful management of inventory for us is very important and some initiatives that we're driving in terms of our updated distribution system.
That allows for faster replenishment, but also a lot more control and.
In terms of how much inventory is out there is an important part of our value story, which is which is relevant to us to our dealers and to our consumers in terms of the.
Product holding it's value over time, and then the third initiative that I would highlight is of course this is our anniversary year.
It is very important not only for the for the bikes, but also for the apparel.
Early indications would say it has been extremely well received but also all of the activities around engagements and consumers that involve our dealerships as well as.
Okay.
Our headquarters and all of the activities that Johan mentioned in Milwaukee. So those I think are three big pillars that we will be pushing forward this year.
Sounds great. Thank you.
Okay.
The next question is from Fred Wightman with Wolfe Research Your line is open.
Hey, guys. Good morning. Thanks for the question I was hoping you could just unpack the dealer inventory numbers that are in the slides I know that you are still down pretty big versus 2019, but if we just look at that sequentially. It does look like a built in and you're obviously dealing with the model year changeover as well. So can you just sort of unpack.
Where units are where you saw that sequential build in and sort of how we should think about that going forward.
Yes.
So we have 34000 units in the network now.
Inventory level that's.
15000 more than in 'twenty, two which as you know was an extremely low level of inventory at the time.
If you look at this from a historic perspective that level is 60% of 2019, so pre pandemic, 60%. So it's still at an extremely healthy level thankfully, we have more inventory in the network right now and we are finally getting back to a bit.
Better sport. So overall I'd say we are.
In terms of inventory and that should help us to stop the lighting season in a healthier position than we have previous year.
The next question is from Joseph <unk> with Raymond James Your line is open.
Thanks, Hey, guys good morning.
I guess first question I'll come right to the chase a lot of moving parts here, but if you look at your guidance. This morning, I think it equates to roughly an.
EBIT guide for 2020, we have around $850 million to $875 million. So if you could if you could clarify that for us would be great and maybe maybe secondly on live wire.
You the estimate coming into this year or at least what you gave us back in December of last year 21 was about 7000 bikes youre looking at about call. It 2000 bikes. This year, while the slow start and and how quickly or how willing would you be able to kind of pivot. If you don't see demand start to.
I'll start to materialize in that business. Thanks.
Hey, Joe Good morning. This is Gino so on your first question here.
You're in the right zone on overall EBITDA guidance, when you kind of add up.
The three different segments, so I would say youre thinking about that generally generally right now.
Now I'll turn it over to Ryan for the <unk>.
LIBOR.
Yeah, Thanks, Joe on the LIBOR front to.
To your question on the units and the change in expectations. There. The majority of the 2023 units were expected to come from del Mar and as we've talked about in the opening comments.
We've changed the timeline on that bike.
So given the new timeline, we're now expecting sales to ramp up in the second half of the year for that motorcycle.
So we brought the units down accordingly taken the industry seasonality into account so by Kentucky's needs to look amazing we're laser focused on getting it to market, but the change in the timeline is what's driving that change in the units.
Okay.
The next question is from James Hardiman with Citi. Your line is open.
Hey, good morning.
No.
Wanted to hone in on that that I think you said flat to positive retail growth for the year maybe.
Maybe unpack, how youre thinking about the industry.
The broader motorcycle industry, which I know you don't entirely completed in all those categories.
Maybe touring and cruisers, how youre, how youre thinking about those segments.
Sort of based on what Youre seeing in the market right now and then sort of assumptions for market share obviously.
We don't know what's your product pipeline is but how do you think about how you are going to perform relative to the industry to get us to that flat to up retail number.
Yeah look we are not really looking at the industry at this point I'm just looking at what we think we can achieve.
As a company as a brand.
In the 9% in 2003, so unpacking retail if you look at our seasonality there as I said earlier, we would expect then in order to achieve.
Slightly positive retail growth.
Come in the quarters of the second of the third quarter with the first and fourth being flat to slightly down. So that's how the year unfolds, but in terms of the industry, we've been really focusing on all of our segments.
And we believe that we can we have an opportunity here to grow that said, we want to absolutely make sure that the desirability of our product MSRP in market.
Is that a good it is maintained.
Whatever the demand will bring we will adjust accordingly to protect our profit margin, but overall, what we're seeing now is good demand.
But it's very early so any demand techniques now cannot be taken as an indicative.
<unk>.
The demand signal for that for the coming months.
Hey, James This is Jim.
Just to provide a little bit more color there the flat to positive. So as you can said.
We don't really hone in and focus much on the share gains I mean, we are the categories. When you think about touring and cruiser. We are the market. When you look at what we delivered I think we had it in one of our size, we did deliver a share growth in those categories in 2022 within the U S. Also keep in mind that we are comping as we get into Q2 Q3 that.
Production suspension, so even though on the backend we were able to make up from a wholesale shipment standpoint in 2022, you really missed out on key riding season. So as you think about our retail growth next year overall.
Q1, and Q4, probably more muted where you really see the benefit is going to be within Q2 Q3.
Okay.
Makes sense. Thank you.
The next question is from David Macgregor with Longbow Research. Your line is open.
Yes. Good morning, everyone. I guess, just a quick one for the model on free cash flow coming off of $5 48 in 2022.
I noticed you haven't provided explicit guidance on free cash flow, but how should we be thinking about the general terms.
What's achievable in terms of working capital give up.
As a contributor to that number.
Good question, Jamie This is Gino so overall I would say our levels of cash flow as we head into 2023, So theres nothing atypical obviously in 2022, we had to live wire investment that we're making we will not have that as we move into 2023, So I would say similar levels.
Overall from a working capital standpoint, one of our big focus areas as we move into next year is just keeping our eye on that inventory number and making sure that we're mindfully kind of reacting to and bringing that down as we move through the year as we end the year always keep in mind right. We're building inventory on our balance sheet as we ended the fiscal year.
That starts to bleed out to the first part of the year. Both in terms of finished products finished motorcycles as well as all of the apparel and licensing and P&A that go along with them. So even though it looks high at the end of the year that that bleeds itself down to the first half.
Okay. Thank you.
The next question is from Gerrick Johnson with BMO capital markets. Your line is open.
Hi, Good morning, I had a couple of product questions first a $3 50 Bank you mentioned about.
<unk> Academy is that something that will be available for graduates to purchase when they do complete the course and then on the <unk>.
I know you've got one out now.
I think in the past you've kind of launched them all at the same time and that seems like a rolling rollout of the Cbo's can you just explain or talk about the strategy behind the CBO launches.
Yes, Scott so the $3 50 is not going to be available for purchase in North America, it's exclusively for riding Academy.
Aye.
As I said at our launch video.
A few things still up obviously, but obviously, we're very excited about the CBO is that we have already launched.
What might be coming later in the year would have to wait longer for that but.
They're all I think we have very strong product and the reception <unk> launch has been very strong already.
Okay. So no production delays to worry about it it's a conscious decision to launch these on a rolling basis.
Okay.
Not from not from today's perspective.
Good stabilization.
And our supply chain.
Certainly not yet.
Normal, but we feel confident that we are able to deliver the bikes.
At this point in time.
Okay. Thank you.
The next question is from Jamie Katz with Morningstar. Your line is open.
Hi, Good morning, first a clarification you guys noted historical levels of profitability is what youre looking to get back to you I want to make sure that doesn't mean peak level of profitability. So maybe mid teen operating motorcycle operating margins.
Versus high teen motorcycle operating margins and then.
The other question I have is on live wire I understand the issue with.
Units being pushed back in 2023, but does that still keep you on that 2024 trajectory to deliver more than 15000 units and if not does that derail your ability to eventually get to positive EBITDA in 2026, which was the initial outlook.
Outlook. Thanks.
Good morning, Jamie This is John I'll take the first part of that so in terms of historical levels of profitability.
You are headed in the right direction. When you say is it more of the mid teens, we are laser focused on getting back to what we committed to as part of our Investor day in may of getting getting that margin back to that and call. It 15%. So that's where that's where we're focused when we say historical peak.
Yeah, Jamie on your questions on LIBOR, a couple of thoughts there generally the.
<unk> discussion on del Mar and the events of 2023.
Don't have any impact on our vision of our long term strategy, our near term priorities.
We're continuing to see the long term direction of the vehicle markets and continue to have the strongest position to lead in two wheel with the help of our strategic partners.
So we're focused on 2023 today, but safe to say, we are continuing to focus on innovating in the core UV systems, the product portfolio and expanding our distribution.
And we think if you continue to look at the long term trajectory in the long term goals that we've set for the company. They continue to be the right one.
There are no further questions at this time this will conclude today's conference call. Thank you all for joining you may now disconnect.
Okay.
Yeah.
Hum.
Yeah.