Q4 2023 Harley Davidson Inc Earnings Call

Operator: Thank you for standing by, and welcome to the Harley-Davidson 2023 Fourth Quarter Investor and Analyst Conference call. Please be advised that today's conference is being recorded. I would now like to turn the call over to Sean Collins. Mr. Collins, please go ahead. Thank you. Good morning.

Thank you for standing by and welcome to the Harley Davidson in 2023 fourth quarter Investor and Analyst Conference call. Please be advised that today's conference is being recorded I would now like to turn the call I would now like turn the call over to Sean Collins. Mr. Collins. Please go ahead.

Sean Collins: Good morning.

Sean Collins: This is Sean Collins, the Director of Investor Relations at Harley-Davidson. Today, you can access the slides supporting the call on the internet at the Harley-Davidson Investor Relations website. As you might expect, our comments will include forward-looking statements that are subject to risks that could cause actual results to be materialized.

Sean Collins: This is Shawn Collins, the director of Investor Relations at Harley Davidson.

Shawn Collins: Today, you can access the slides supporting the call on the Internet at Harley Davidson Investor Relations website.

Shawn Collins: I would expect our comments will include forward looking statements that are subject to risks that could cause actual results could be materially different those risks include among others matters. We have noted in today's earnings release.

Sean Collins: Those risks include, among others, matters we have noted in today's earnings release and in our latest filings with the SEC. With that, joining me this morning for the first part of the call are Harley-Davidson Chief Executive Officer Jochen Zeitz, also Chief Financial Officer Jonathan Root, and LiveWire Chief Executive Officer Kareem Dinesh. In addition, for the Q&A portion of today's call, Harley-Davidson Chief Commercial Officer Adele O'Sullivan will be joining us. With that, let me turn it over to our CEO, Jochen Zeitz. Jochen.

Shawn Collins: And in our latest filings with the SEC.

Yoga: With that joining me this morning for the first part of the call our Harley Davidson Chief Executive Officer Yoga tights.

Shawn Collins: Also chief Financial Officer, Jonathan Route and.

Shawn Collins: Life wire Chief Executive Officer Dennis.

Shawn Collins: In addition to the Q&A portion of today's call Harley Davidson, Chief commercial officer, Yellow Sullivan will be joining us.

Shawn Collins: With that let me turn it over to our CEO yoga.

Yoga: Okay. Thank you Sean good morning, everyone. Thank you for joining today's call.

Jochen Zeitz: Thank you, Sean. Good morning, everyone. Thank you for joining today's call. In 2023, the third year of our hardwired strategy, we made progress on some key elements of our strategic plan. Despite premium discretionary products being significantly impacted by the continued high interest rate environment and consumer confidence and affordability concerns, we continue to emphasize our core products and markets and invest in key priorities for the future. We expect that focusing on our most profitable categories and geographies, emphasizing innovation, and evolving the customer experience with our dealers, will continue to yield benefits to the business and have set us up for long-term value creation, as seen by our meaningful per unit profitability increase Looking at retail performance for Q4, retail came in better than expected, but down 11% versus the prior year. It is of note that we retail more than we wholesale globally, even accounting for the early release of 2024 units. This early shipment of 24 units for logistics purposes clears the way for an aggressive shipment schedule of our new touring offering in Q1, which is needed to start the season in force with a new model.

Dennis: In 2023, the third year for Hotwire strategy, we made progress in some key elements of our strategic plan.

Dennis: Despite premium discretionary products being significantly impacted by the continued high interest rate environment and consumer confidence and affordability concerns. We continue to emphasize our core products and markets and invested in key priorities for the future.

Dennis: We expect that focusing on our most profitable categories and geographies, emphasizing innovation and evolving the customer experience with our dealers will continue to yield benefits to the business and then set us up for long term value creation.

Shawn Collins: As seen by a meaningful per unit profitability increase of 2000 and $400 per unit or 185% since 2019.

Shawn Collins: Looking at retail performance for Q4 retail came in better than expected, but down 11% versus prior year.

Shawn Collins: It is of note that we retailed more than we wholesale globally, even accounting for early release of 2024 units.

Shawn Collins: This early shipping of 24 units for logistics purposes clears the way for an aggressive shipment schedule of our new Turing offering in Q1, which is needed to start the season with the new models.

Jochen Zeitz: Through Q4, we continue to outperform the market with share gains in our core categories, with touring reaching over 75% market share in the U.S. and with large cruisers coming in at over 80%. Despite perceptions to the contrary, we continue to have a commanding leadership position in these core profit-focused sectors, well ahead of all our competitors taken together and demonstrated by a strong gross margin performance. Revenue was down slightly for the year as we navigated macro conditions impacting retail and worked to manage dealer inventory and production challenges.

Shawn Collins: Through Q4, we continued to outperform the market with share gain in our core categories with Turing, reaching over 75% market share in the U S and with large crews are coming in at over 80%.

Shawn Collins: Despite perceptions to the country. We continue to have a commanding leadership position in these core profit focus segment well ahead of all our competitors taken together and demonstrated by our strong gross margin performance.

Shawn Collins: Revenue was down slightly for the year as we navigate macro conditions impacting retailers and work to manage dealer inventory and production challenges.

Jochen Zeitz: Despite this, our combined benefits of pricing and mix, inclusive of incentive spend, yielded 7 points of top-line growth leading to a 1% revenue decline driven by currency headwinds. We continue to maintain our focus on profitability, with an operating income margin of 13.6% in 2023 versus our starting profitability of 6.3% in 2019. 34,000 fewer motorcycle unit sales and 6% revenue growth over the period. We believe this is the clearest proof point of our strategic orientation and execution in the current environment, and is a function of our multi-year pricing and mix decisions across products and geographies, with core products reaching 84% of our mix, up from 78% in 2019, and a significant increase in average profitability per unit, as mentioned earlier. But more on that from Jonathan later.

Shawn Collins: Spite this hour combined benefits of pricing and mix inclusive of incentive spend unit separate points of topline growth leading to a 1% revenue decline driven by currency headwinds.

Shawn Collins: We continue to maintain our focus on profitability with operating income margin of 13, 6% and 23 versus a stocking profitability of six 3% in 2019.

Shawn Collins: 34000, less motorcycle unit sales and 6% revenue growth over the period.

Shawn Collins: We believe this is the clear proof point of our strategic orientation and execution in the current environment.

Shawn Collins: This is a function of our multiyear pricing and mix decisions across products and geographies with core products, reaching 84% of our mix up from 78% in 2019, and a significant increase in average profitability per unit as mentioned earlier.

Shawn Collins: But more on that from Jonathan later.

Shawn Collins: I will briefly address the selection of our hardware strategic pillars, and our delivery of them last year, starting with PD one profit focus.

Jochen Zeitz: I will briefly address the selection of our Heartwire Strategic Pillars and our delivery of them last year, starting with Pillar 1, Profitable. We continue to prioritize mix with growth globally in our core units of trike, CVO, touring, and softtail, outpacing overall retail performance. Last year, we also launched our new generation of road and street light CVOs.

Shawn Collins: We continue to prioritize mix with growth globally in our core units of strike CBO touring and Sofitel outpacing overall retail performance last year. We also launched our new generation of road and Street glide CBOE with this transformation of product we are delivering on our how do I promise of innovation as part of our focus on core categories setting.

Jochen Zeitz: With this transformational product, we are delivering on our hardwired promise of innovation as part of our focus on core categories, setting the stage for this year's Grand American Touring launch. Launching our icons and enthusiasts aligned to our profit focus, we've been building on our commitment to introduce motorcycles that align with our strategy to increase desirability through the legacy of Harley-Davidson. And we also continued our efforts to increase awareness of the King of the Baggers Racing Series with Moto America, now tapping into Performance Touring, our new product offering. Pillar 2 Selective Expansion: We continue to make progress on our global partnership, and our venture with Hero Motor Corp serves as a solid example of innovative participation models in geographies that matter as part of our selective expansion strategy. We've been very pleased with the exceptional reception to the venture, with over 30,000 reservations to date. We will continue to look at select markets for small displacement offerings. Pillar 3

Shawn Collins: Setting the stage for this year's Grand American touring launch.

Shawn Collins: And launching our icons and enthusiasts line to a profit focus we've been building on our commitment to introduce motorcycles that align with our strategy to increase our ability by the legacy of Harley Davidson.

Shawn Collins: And we also continued our efforts to increase awareness of the King was the biggest racing series with Motor America now tapping into the performance touring our new product offering.

Shawn Collins: And that too selective expansion.

Shawn Collins: We continue to make progress on our global partnership in our venture with Neuromotor call. This is a solid example of innovative participation models and geographies that meta as part of a selective expansion strategy. We've been very pleased with the exception of the reception to the venture with over 30000 reservations to date, we will continue to look at.

Shawn Collins: Select markets for small displacement offerings.

Shawn Collins: Military you need an electric.

Jochen Zeitz: Leading Electric. LifeWire continues to pioneer the EV segment through the S2 platform with Del Mar, as Karim will detail later. More than one year in, our decision to focus Livewire as a separate company in EV and focus Harley-Davidson on our traditional combustion segment is proving successful with a clear focus on segmentation and execution for both brands while utilizing joint synergies. Bill Fyfe, Customer Experience. With our dedication to enhancing the customer experience in line with our mission, in addition to our fuel program, we continue to invest in transforming our omnichannel capabilities and Additionally, we continued the evolution of our marketing approach specifically to drive dealership traffic and engagement and to improve alignment on key messages with our dealer channel, as exemplified by our open houses, dealer sweepstakes, and in-store rewards. We've made good progress on the execution of our distribution system modernization, with the first milestones around product visibility and recommended orders coming online this year. With our online platform, HD1 Marketplace, we are now the leading marketplace for used Harley-Davidson motorcycles in America.

Shawn Collins: <unk> continued to pioneer the EV segment through the <unk> platform with del Mar as Karim will detail later.

Shawn Collins: More than one year in our decision to focus live wire as a separate company in EV and focus I'll, let David stone, our traditional combustion segment is proving successful with clear focus on segmentation and execution for both brands by utilizing joint synergies.

Shawn Collins: <unk> customer experience.

Shawn Collins: With our dedication to enhancing the customer experience in line with our mission. In addition to our fuel program. We continue to invest in transforming our omnichannel capabilities and the pre and post purchase journey for the customers.

Shawn Collins: Additionally, we continue the evolution of our marketing approach, specifically to drive dealership traffic and engagement and to improve alignment on key messages with our dealer channel as exemplified by our open houses data sweepstakes and in store rewards.

Shawn Collins: We've made good progress on the execution of our distribution system modernization for the first milestones around product visibility and recommended orders coming online this year.

Shawn Collins: With our online platform HD one marketplace. We are now the leading marketplace for used Harley Davidson in America and lastly, we are pleased with the progress of our rejuvenating membership offering with over 700000 members on the new platform to date growing membership that had been declining for years by over 300000, new members in just seven.

Jochen Zeitz: And lastly, we're pleased with the progress of our rejuvenated membership offering with over 700,000 members on the new platform to date, growing membership that had been declining for years by over 300,000 new members in just seven months. We also successfully set up Homecoming as another core annual event to bring the brand closer to new and existing customers alike, like no other brand can do in the motorcycle market. Turning to 24, I would like to comment on our new model year launch and outlook for the year. The Grand American Touring Category was born out of a unique experience on the American highway and was invented by Harley-Davidson.

Shawn Collins: Months.

Shawn Collins: We also successfully stood up homecoming as another core annual event to bring the brand closer to new and existing customers alike like no. Other brand can do and the motorcycle market.

Shawn Collins: Turning to 'twenty four I would like to comment on our new model year launch and outlook for the year.

Shawn Collins: Grand American touring category was born out of a unique experience of American Highway was invented by Harley Davidson.

Jochen Zeitz: Few products are as iconic and as connected to one specific brand. Put simply, touring is the heart of Harley-Davidson, our mission of the timeless pursuit of adventure. Back in 2020, there was no plan for touring.

Shawn Collins: Few products is iconic and is connected to one specific brand.

Shawn Collins: Put simply Turing is the heart of Harley Davidson, our mission of timeless pursuit of adventure.

Shawn Collins: Back in 2020, there was no plans for touring.

Jochen Zeitz: We quickly took the decision to change that, and it became the first and one of the most important priorities of our new hardwire plan. As you saw from our launch in January, we are now excited to share what we believe is the most comprehensive product development on the Turing platform in well over 10 years. The Street Glide and Roll Glide models form the core of the Harley-Davidson Grand American Touring Motorcycle Portfolio for 24 and represent the future of the sector. Both models featuring the new Milwaukee 8117 are more powerful, comfortable, and lighter and packed with advanced technology, including a new infotainment system, all wrapped up in a dramatic new visual design that will redefine the Harley-Davidson Grand American Touring experience for years to come.

Shawn Collins: It took the decision to change that and it became the first and one of the most important priorities of our new Hotwire plan.

Shawn Collins: As you saw from our launch in January we are now excited to share. What we believe is the most comprehensive product development and the Turing platform in well over 10 years.

Shawn Collins: The streetlight enroll glide models form the core of the Harley Davidson Grand American touring motorcycles portfolio for 24 and represent the future of this segment.

Shawn Collins: Both models, featuring the new Milwaukee, eight 117, a more powerful comfortable and lighter in tact with advanced technology, including a new infotainment system all wrapped up in a dramatic new visual design that will redefine the Harley Davidson Grand American touring experience for years to come.

Jochen Zeitz: This latest lineup is not only the most advanced we've ever produced, but it also has the most customization potential that we've ever offered in touring. Additionally, for 24, to celebrate the 25th anniversary of our custom vehicle operations, or CVO, we added the CVO Road Glide ST and CVO Pan America to the lineup, complementing our new Road and Street Glide CVOs, first introduced during homecoming last year. Starting with the CVO Roadblood SD, the lightest, fastest, and most sophisticated performance bagger ever produced by Harley-Davidson, is taking Hot Rod Bagger performance to the next level while tapping into the performance trend that we started with the King of the Baggers Racing Series.

Shawn Collins: This latest lineup is not only the most advanced <unk>.

Shawn Collins: But also has the most customization potential that we've ever offered in jewelry.

Shawn Collins: Additionally for 2004 to celebrate the <unk> anniversary of our custom vehicle operation. So CBO, we added the CBO Road glide SD and CBO Pan America to the lineup complementing our New Road and Street glide CBO was first introduced during home coming last year.

Shawn Collins: Starting with the CBO Road glide SD the lightest fastest and most sophisticated performance ever produced by Harley Davidson is taking hotrod bag of performance to the next level, while tapping into the performance trends that we fused with the king of the Beggars Racing series.

Shawn Collins: The CV overall FTE represents a unique collection of components, providing high value of two performance minded providers combined with west coast custom style as seen in our low rider SD offering.

Jochen Zeitz: The CVO RoadLight ST represents a unique collection of components providing high value for two performance-minded riders, combined with West Coast custom style, as seen in our Lowrider ST offering. We also expanded the CVO family beyond Grand American Touring for the first time to include the Pan American CVO, highlighting another touring segment that we continue to innovate in, Adventure Touring. We've prepared and are investing in the 24 model launch and have ensured that we're getting motorcycles out into the network at the right time for the riding season. And although it's still early, having launched only two weeks ago, we've already seen a very positive initial reaction from the network, media, influencers, and consumers alike, with strong collaboration on awareness and traffic driving activities.

Shawn Collins: We also expanded the CVR family beyond Grand American touring for the first time to include a Pan America CBO highlighting another touring segment that we continue to innovate in.

Shawn Collins: Major touring.

Shawn Collins: We have prepared and are investing in the 'twenty four model launch and have ensured that we're getting motorcycles out into the network at the right time for the riding season.

Shawn Collins: And although it's still early having launched only two weeks ago, we've already seen a very positive initial reactions from the network media Influencers and consumers alike with strong collaborations on awareness and traffic driving activities.

Jochen Zeitz: As we look to the years ahead, we're excited about the potential of this lineup for the brand. We're fully focused on growing retail on the basis of these fantastic bikes, even in the current environment. That said, it is still early in the year, and it is hard to predict the extent of the positive impact that our new touring models can have in the current high interest and overall industry market environment.

Shawn Collins: And as we look to the years ahead, we are excited about the potential of this lineup for the brand.

Shawn Collins: We are fully focused on growing retails on the basis of these fantastic bikes, even in the current environment.

Shawn Collins: That said it is still early in the year and it is hard to predict the extent of the positive impact that our new touring models can have in the current high interest in overall industry macro environment.

Shawn Collins: As such while we are very excited by the early read of our new model year launch, we're providing broader guidance unusual to our outlook given the continued industry headwinds that affect our business.

Jochen Zeitz: We are very excited by the early read of our new model year launch. We are providing broader guidance than usual for our outlook, taking into account the continuing industry headwinds that affect our business. Furthermore, inventory management will continue to be a core part of our strategy to ensure that we have the right balance for both the network and customers. And as we look to the year ahead, we will manage inventory cautiously, recognizing that we believe we are close to the right levels in the network. Our goal will be to ensure that we manage wholesale based on retail potential so as to keep wholesale and retail in balance through a combination of retail levers and manufacturing adjustments, as required. To conclude, despite the challenges in the market, we believe that we have created the right product and solid foundations on which to deliver our future ambitions for the company. Thank you, and now I'll hand it over to Corinne to talk livewire. Turning it over to you. Thank you, Yohan. Good morning, everyone.

Shawn Collins: Furthermore, inventory management will continue to be a core part of our strategy to ensure that we have the right balance for both the network and customer.

Shawn Collins: And as we look to the year ahead, we will manage inventory cautiously recognizing that we believe we are close to the right levels in the network.

Shawn Collins: Our goal would be to ensure that we manage wholesalers based on retail potential so as to keep wholesale and retail in balance through a combination of retail levels and manufacturing adjustments Ethernet is required.

Shawn Collins: To conclude despite the challenges in the market. We believe that we have created the right product and solid foundations on which to deliver our future ambitions for the company.

Shawn Collins: Thank you and now I'll hand, it over to Corey to talk lifestyle.

Corey: Jim over to you.

Corey: Thank you Johan good morning, everyone.

Kareem Dinesh: We are happy to report that after a strong fourth quarter, LiveWire delivered a 21% increase in LiveWire-branded annual unit sales versus 2020. We will finish the year with both units and operating loss in line with our revised guidance. Considering the ramp-up required for all new, in-house, developed products, we are pleased with the stabilizing supply base, as well as the production of the F2 powertrain at Harley-Davidson's operations in Wisconsin and the assembly of the Del Mar in Pennsylvania. With a positive reception of the newly developed platform from the ground up, from both early customers and the media, 2024 promises to be an exciting year for LiveWire. Our development

Corey: We are happy to report that after.

Corey: Strong fourth quarter, <unk> delivered 21% increase in lightweight branded annual units.

Corey: Versus 2022.

Jim: We finished the year with both units and operating loss in line with our revised guidance.

Corey: Considering the ramp up required for all new in house developed products. We are pleased with the stabilizing supply base.

Corey: Whereas the production of the F. Two powertrain up Harley Davidson's operations in Wisconsin.

Corey: The assembly of the del Mar in Pennsylvania.

Corey: With a positive reception of the newly developed platform from the Guava, Tom both early customers and the media 2024 promises to be an exciting year for lifeway.

Corey: Our development teams at both <unk> and <unk>.

Kareem Dinesh: At both STASIC and LiveWIRE, we continue to work to expand our portfolio and bring more options to more riders. We believe these new products, along with our entry into new segments, position LiveWire to increase its unit sales without increasing spend over 2023. To accelerate the path to profitability, we plan to drive down the cost of our products and continue to carefully manage cash, which is reflected in our guidance. Thank you, and now I'll hand it over to Jonathan. Thank you, Kareem, and good morning, everyone.

Corey: Continue to work to expand our portfolio and bring more options to more riders.

Corey: We believe these new products, along with our entry into new segments.

Corey: Position LIBOR here to increase our unit Tam.

Corey: Without increasing spend over 2023.

Corey: To accelerate the path to profitability.

Corey: We plan to drive down the cost of our products and continue to carefully manage cash which is reflected in our guidance.

Corey: Thank you and now I'll hand, it over to Jonathan.

Jonathan Route: Thank you Cory and good morning, everyone I plan to start on page five of the presentation, where I will briefly summarize the financial results for the fourth quarter of 2023, and subsequently I will go into further detail on each.

Jonathan Root: I plan to start on page 5 of the presentation, where I will briefly summarize the financial results for the fourth quarter of 2023, and subsequently, I will go into further detail on each. At HDMC in Q4, global wholesale motorcycle shipments decreased by 13% as we remain mindful of dealer inventory and market conditions. In Q4, HDMC revenue was down 14% due to lower volumes, where an improved mix was offset by pricing and incentive spend. In Q4 and in 2023, as Jochen said, we continue to prioritize our focus on the core motorcycle mix of touring and cruiser motorcycles. We will cover further details of revenue when we turn to page 8. Turning to our consolidated results for the fourth quarter, total consolidated HDI revenue of $1.1 billion was down 8% compared to the same quarter last year.

Jonathan Route: At <unk> in Q4 global wholesale motorcycle shipments decreased by 13% as we remain mindful of dealer inventory and market condition.

Jonathan Route: In Q4, <unk> revenue was down 14% due to lower volumes were improved mix was offset by pricing and incentive spend.

Jonathan Route: In Q4 and in 2023 as Johan said, we continued to prioritize our focus on core motorcycle mix of touring and cruiser motorcycles.

Jonathan Route: We will cover further details of revenue when we turn to page eight.

Jonathan Route: Turning to our consolidated results in the fourth quarter total consolidated HDI revenue of $1 1 billion.

Jonathan Route: It was down 8% compared to this quarter last year.

Jonathan Root: The breakdown was at HTMC, as I mentioned, revenue declined by 14%. At HDFS, revenue grew by 15%. And at Livewire, revenue grew from $9 million in the fourth quarter of 2022 to $15 million in the fourth quarter of 2021. Total consolidated HDI operating income with a loss of $21 million, which compares to operating income of $4 million in the Q4 prior year period.

Jonathan Route: The breakdown was AT&T as I mentioned revenue declined by 14% at <unk> revenue grew by 15% and it live wire revenue grew from $9 million in the fourth quarter of 2000 $22 million to $15 million in the fourth quarter of 2023.

Jonathan Route: Total consolidated HDI operating income with a loss of $21 million, which compares to operating income of $4 million in the Q4 prior year period.

Jonathan Root: The breakdown for 2023 was, at HDMC, operating income was a loss of $44 million, which is markedly lower than the profitable first three quarters of the year, where Q4 is a quarter with significantly fewer wholesale units compared to the remaining quarters in the year. Results were adversely impacted by lower wholesale volumes and higher incentive spend in the quarter. At HDFS, operating income of $58 million declined by 10% on a year-over- And at Livewire, an operating loss of $35 million was in line with expectations. Fourth quarter earnings per share were $18,000.

Jonathan Route: The breakdown for 2023 was at <unk> operating income was a loss of $44 million, which is markedly lower than the profitable first three quarters of the year, where Q4 is a quarter with significantly fewer wholesale units compared to the remaining quarters in the year.

Jonathan Route: Results were adversely impacted by lower wholesale volumes and higher incentive spend in the quarter.

Jonathan Route: At <unk>.

Jonathan Route: <unk> income of $58 million declined by 10% on a year over year basis.

Jonathan Route: <unk>, an operating loss of $35 million was in line with expectations.

Jonathan Route: Fourth quarter earnings per share was <unk> 18.

Jonathan Route: Okay.

Jonathan Root: According to full year 2023 results, total consolidated revenue of just over $5.8 billion was 1% higher compared to last year, while total operating income of $779 million was 14% lower than last year. Full year earnings per share was $4.87 in 2023, which compares to $4.96 in 2022. We will talk further about each business segment's specific profits and loss drivers in greater detail in the next section. In Q4, global retail sales of new motorcycles, as mentioned earlier, were down 11% versus the prior year. In North America, Q4 retail sales declined by 9%, driven by the continued impact of a high interest rate environment on consumer discretionary purchase decisions. In addition, the discontinuation of legacy Sportster bikes at the end of 2022 continued to have an adverse impact on non-core unit sales. In EMEA, Q4 retail sales declined by 22%, driven by weakness in France and Germany. Overall, EMEA continues to be adversely impacted by overall macro conditions and sluggish economic growth. In Asia-Pacific, Q4 retail sales declined by 10%, driven by weakness in Australia and New Zealand, partially offset by strength in Japan and Thailand.

Jonathan Route: Turning to full year 2023 results total consolidated revenue of just over $5 8 billion.

Jonathan Route: Was 1% higher compared to last year, while total operating income of $779 million was 14% lower than last year.

Jonathan Route: Full year earnings per share was $4 87, and 2023 and compares to $4, 96% in 2022.

Jonathan Route: We will talk further about each business segment specific profit and loss drivers in greater detail in the next section.

Jonathan Route: In Q4 global retail sales of new motorcycles as mentioned earlier were down 11% versus the prior year.

Jonathan Route: In North America, Q4, retail sales declined by 9% driven by the continued impact of the high interest rate environment on a consumer discretionary purchase decision.

Jonathan Route: In addition, the discontinuation of legacy Sportster bikes at the end of 2022 continued to have an adverse impact on noncore unit sales.

Jonathan Route: In EMEA Q4, retail sales declined by 22% driven by weakness in France, and Germany. Overall EMEA continues to be adversely impacted by overall macro conditions and sluggish economic growth.

Jonathan Route: In Asia Pacific Q4, retail sales declined by 10% driven by weakness in Australia, and New Zealand, partially offset by strength in Japan and Thailand.

Jonathan Root: This is a marked improvement from what we covered last quarter. In Latin America, Q4 retail sales increased by 46%, driven by growth in both Brazil and Mexico. As the manufacturing environment continues to get back to a more normalized operation, product availability is much improved compared to the exceptionally tight levels of 2021 and 2022. As touched on earlier, dealer inventory at the end of Q4 was up approximately 50% from the end of Q4 in 2022. We believe current dealer inventory is in an appropriate position overall as we approach the spring 24 riding season and with the recent launch of new model year 24 motorcycles, especially our new Street Glide and Road Glide touring models. Looking at revenue, total HDMC revenue decreased 14% in Q4 and decreased by 1% for the whole year. In Q4, HDMC revenue declined largely due to lower wholesale unit shipments.

Jonathan Route: This is a market improvement from what we covered last quarter.

Jonathan Route: In Latin America, Q4, retail sales increased by 46% driven by growth in both Brazil and Mexico.

Jonathan Route: As the manufacturing environment continues to get back to a more normalized operation product availability is much improved compared to the exceptionally tight levels of 2021 and 2022.

Jonathan Route: As touched on earlier dealer inventory at the end of Q4 was up approximately 50% from the end of Q4 in 2022.

Jonathan Route: We believe current dealer inventory is at an appropriate position overall as we approach the spring 'twenty four riding season and with the recent launch of new model year 'twenty for motorcycles, especially our new Street glide and road glide touring models.

Jonathan Route: Looking at revenue total <unk> revenue decreased 14% in Q4 and decreased by 1% for the full year.

Jonathan Route: In Q4, <unk> revenue declined largely due to lower wholesale units shipped.

Jonathan Root: Looking closer at the key drivers for Q4, 14 points of decline came from decreased volume of HDMC as we reacted to the current market conditions. Supported Prudy Dealer Inventory Levels and prepared for the 2024 model year launch with Street Glide, Road Glide, new CDL models, and more. Seven points of decline came from pricing and incentive spend, where, given existing market conditions, we selectively promoted high-margin products to support our customers in the higher rate environment that they are facing. In addition, we made the decision to implement incentives that resulted in a reduction in revenue of approximately $40 million in Q4, which will support model year 2023 carryover motorcycles into calendar year 2024 as enhanced dealer support. We expect this will help drive retail performance in 2020.

Jonathan Route: Looking closer at the key drivers for Q4.

Jonathan Route: 14 points of decline came from decreased volume at HDL C. As we reacted to the current market conditions.

Jonathan Route: And prudent dealer inventory levels and prepared for the 2020 for model year launch Street Glide Road glide, new CDL models and more <unk>.

Jonathan Route: Seven points of decline came from pricing and incentive spend where given existing market condition. We selectively promoted high margin products to support our customers and the higher rate environment that theyre facing in.

Jonathan Route: In addition, we made the decision to implement incentives, which resulted in a reduction to revenue of approximately $40 million in Q4, which will support model year 2023, carryover motorcycles into calendar year 2024 as enhanced dealer support.

Jonathan Route: We expect this will help drive retail performance in 2024.

Jonathan Route: Mix contributed seven points of growth as we continue to prioritize our most profitable models in market.

Jonathan Root: Mixed contributed seven points of growth as we continue to prioritize our most profitable models and markets. And finally, Foreign Exchange contributed one point in Q4. For the full year of 2023, HDMC revenue declined by 1%, where the key drivers for the full year included seven points of decline, which came from decreased volume at HVMC, driven by an overall decrease in wholesale motorcycle unit shipments.

Jonathan Route: And finally foreign exchange contributed one point in Q4.

Jonathan Route: For the full year of 2023, <unk> revenue declined by 1% were the key drivers for the whole year included.

Jonathan Route: Seven points of decline, which came from decreased volume at <unk> driven by an overall decrease in wholesale motorcycle unit shipments.

Jonathan Root: Three points of increase, which came from pricing net of incentives through both global motorcycle MSRP increases and price increases across parts and accessories and apparel, and the aforementioned actions to help support retail in the 2024 calendar year for the remaining 2023 Model Year Dealer Inventory. Mix, which contributed four points of growth as we continue to prioritize our most profitable models and markets. And finally, foreign exchange, which resulted in one point of negative impact as the dollar strengthened for the full year. In Q4, typically our lowest gross margin quarter of the year, gross margin of 22.9% was down 360 basis points behind the impacts of lower volumes, pricing, and incentive spend, which I covered in my earlier comments, and manufacturing costs, more than offsetting the benefits of shipment mix and lower raw material costs. Operating income margin fell by 210 basis points due to the factors above, in addition to operating expense favorability of 18% in the quarter.

Jonathan Route: Three points of increase which came from pricing net of incentives through both global motorcycle MSRP increases and price increases across the parts and accessories and apparel businesses.

Jonathan Route: And the aforementioned actions to help support retail and the 2024 calendar year for the remaining 2023 among your dealer inventory.

Jonathan Route: Mix, which contributed four points of growth as we continue to prioritize our most profitable models in market.

Jonathan Route: And finally foreign exchange, which resulted in one point of negative impact as the dollar strengthened for the full year.

Jonathan Route: In Q4, typically our lowest gross margin quarter of the year gross margin of 22, 9% was down 360 basis points behind the impacts of lower volumes pricing and incentive spend which I covered in my earlier comments.

Jonathan Route: And manufacturing costs more than offsetting the benefit of shipment mix and lower raw material costs.

Jonathan Route: Operating income margin fell by 210 basis points due to the factors above in addition to operating expense favorability of 18% in the quarter.

Jonathan Root: We continue to experience more moderate cost inflation relative to what we experienced in 2022. In Q4, cost inflation came in at a rate between 1 and 2%. For the full year 2023, HDMC's gross margin came in at 32.3%, which was 110 basis points better than a year ago, despite lower volume. Mix and pricing were positive for the year and were partially offset by lower volumes, supply chain and manufacturing costs, and foreign currency. For the full year 2023, HDMC's operating margin came in at 13.6% and compared to 13.9% in the full year 2022, which is approximately 20 basis points lower after accounting for rounding. The small decrease in operating margins was due to the factors just mentioned and largely due to higher operating expenses from earlier in the year.

Jonathan Route: We continued to experience more moderate cost inflation relative to what we experienced in 2022.

Jonathan Route: In Q4 cost inflation came in at a rate between one 2%.

Jonathan Route: For the full year 2023, H DMT gross margin came in at 32, 3%, which was 110 basis points better than a year ago, Despite lower volume.

Jonathan Route: Mix and pricing were positive for the year and were partially offset by lower volumes supply chain and manufacturing costs and foreign currency.

Jonathan Route: For the full year 2023, H D&C operating margin came in at 13, 6% and compared to 13, 9% and full year 2022, which is approximately 20 basis points lower after accounting for rounding.

Jonathan Route: The small decrease in operating margin was due to the factors just mentioned and largely due to higher operating expenses from earlier in the year.

Jonathan Root: At Harley-Davidson Financial Services, in Q4, revenue increased by 15 percent, driven by higher commercial finance receivables and higher interest. HDFS operating income was $58 million, down 10% compared to last year and an improvement to trends seen earlier in the year. The Q4 decline was driven by higher borrowing costs, a higher provision for credit losses, and higher operating costs. These increased costs were partially offset by higher interest rates. Total interest expense was up $22 million, or 32% versus the prior year. The increase was driven by a higher cost of funds as lower interest rate debt matured and was replaced with current market rate debt. The provision for credit loss expense increased $6 million in the fourth quarter as a result of higher realized credit losses, partially offset by a favorable reserve change in absolute dollars.

Jonathan Route: At Harley Davidson financial services in Q4 revenue increased by 15% driven by higher commercial finance receivables and higher interest income.

Jonathan Route: Operating income was $58 million down, 10% compared to last year and an improvement to trends seen earlier in the year.

Jonathan Route: Q4 decline was driven by higher borrowing costs, a higher provision for credit losses and higher operating expenses. These increased costs were partially offset by higher interest income.

Jonathan Route: Total interest expense was up $22 million or 32% versus the prior year.

Jonathan Route: The increase was driven by a higher cost of funds is lower interest rate debt matured and was replaced with current market rate debt.

Jonathan Route: The provision for credit loss expense increased $6 million in the fourth quarter as a result of higher realized credit losses, partially offset by a favorable reserve change in absolute dollars.

Jonathan Root: For the full year 2023, HDFS's annualized retail credit loss ratio came in at 3%, which compares to 2.7% through Q3 2023. These levels compare to an annualized loss of 1.9% in full year 2022. The increase in credit losses was driven by several factors relating to the current macroeconomic environment and the related customer and industry dynasty.

Jonathan Route: For the full year 2023, <unk> annualized retail credit loss ratio came in at 3%, which compares to two 7% through Q3 23.

Jonathan Route: These levels compared to an annualized loss of one 9% in full year 2022.

Jonathan Route: The increase in credit losses was driven by several factors relating to the current macroeconomic environment and the related customer and industry dynamics.

Jonathan Root: In addition, the allowance rate for credit losses for Q4 remains flat at 5.4% from Q3, but up from 5.1% during fiscal 2022, as we prudently calculate our loan loss reserves in accordance with CECL methodology. Total retail loan originations in Q4 were down slightly by 1%, while commercial lending receivables were up 42% to $1.06 billion behind stronger product availability compared to the prior. Total quarter-end net financing receivables, including both retail loans and commercial lending receivables, were $7.5 billion, which was up 5% versus the prior. For the full year 2023, operating income at HDFS came in at $235 million, or down 26% relative to full year 2022, which compares to our financial guidance of down 20 to 25%. Through the end of Q4, we raised approximately $2.5 billion in the capital markets for all of 2023. Cash and Committed Bank and Conduit Facilities resulted in an HDFS liquidity position of $2.2 billion as of year-end.

Jonathan Route: In addition, the allowance rate for credit losses for Q4 remained flat at five 4% from Q3, but up from five 1% during fiscal 2022.

Jonathan Route: As we prudently calculate our loan loss reserves in accordance with seasonal methodology.

Jonathan Route: Total retail loan originations in Q4 were down slightly by 1%, while commercial lending receivables were up 42% to 106 billion behind stronger product availability compared to the prior year.

Jonathan Route: Total quarter end net financing receivables, including both the retail loan and commercial lending receivables were $7 5 billion.

Jonathan Route: It was up 5% versus prior year.

Jonathan Route: For the full year 2023 operating income at <unk> came in at $235 million or down 26% relative to full year 2022, which compares to our financial guidance of down 20% to 25% for the year.

Jonathan Route: Through the end of Q4, we raised approximately $2 5 billion.

Jonathan Route: In the capital markets for all of 2023.

Jonathan Route: Cash and committed bank and conduit facility resulted in an H DFS liquidity position of $2 2 billion.

Jonathan Route: As of yearend. This approach has put <unk> in a very strong position from both the funding and liquidity perspective.

Jonathan Root: This approach has put HDFS in a very strong position from both a funding and liquidity perspective. For the live wire segment, fourth-quarter revenue increased from $9 million in the fourth quarter of 22 to $15 million in the fourth quarter of 2023, due in part to higher unit sales of Del Mar Electric Motors. As Kareem mentioned, in Q3, Livewire began shipping Del Mar, the first motorcycle, on their F2 platform, and they are pleased with the successful rollout in Q4 with 482 units shipped. Their operating loss of $35 million in Q4 was in line with expectations and driven by planned development costs to advance EV systems and activities around them.

Jonathan Route: For the library segment fourth quarter revenue increased from $9 million in the fourth quarter of 'twenty $2 million to $15 million in the fourth quarter of 2023 due in part to higher unit sales of del Mar Electric motorcycles.

Jonathan Route: As Corey mentioned in Q3, <unk> began shipping del Mar the first motorcycle on there at two platform and they are pleased with the successful rollout in Q4 with 482 units shipped.

Jonathan Route: <unk> operating loss of $35 million in Q4 was in line with expectations and driven by planned development costs to event EV systems and activities around del Mar.

Jonathan Root: For full year 2023, the operating loss of $117 million was in line with guidance given the early stage nature of the business and the electric motorcycle market as a whole. Wrapping up with Consolidated Harley-Davidson Inc.'s full year financial results, we delivered $755 million of operating cash flow, which was up $207 million from the prior year. The increase in operating cash flow was due to positive working capital activity at HDMC, driven by a decrease in inventory in 2023 as compared to an increase in inventory in 2022. Total cash and cash equivalents ended at $1.5 billion, which was $100 million higher than at the end of 2022. This consolidated cash number includes $168 million from LiveWIRE.

Jonathan Route: For full year 2023, the operating loss of $117 million was in line with guidance given the early stage nature of the business and the electric motorcycle market as a whole.

Jonathan Route: Wrapping up with consolidated Harley Davidson, Inc. Full year financial results, we delivered $755 million of operating cash flow, which was up $207 million from the prior year.

Jonathan Route: The increase in operating cash flow was due to positive working capital activity at <unk> driven by a decrease in inventory in 2023 as compared to an increase in inventory in 2022.

Jonathan Route: Total cash and cash equivalents ended at $1 5 billion, which was $100 million higher than at the end of 2022.

Jonathan Route: This consolidated cash number includes $168 million from LIBOR here.

Jonathan Root: During the whole year 2023, as part of our capital allocation strategy, we bought back 10.2 million shares of our stock at a value of $350 million. This was greater than the $324 million we repurchased in 2022, and these years together amount to nearly $675 million worth of share buybacks over the last two years. This represents 12% of our shared output. We have also paid out $189 million in dividends over the last two years.

Jonathan Route: During the whole year 2023, as part of our capital allocation strategy, we bought back $10 2 million shares of our stock at a value of $350 million. This was greater than the $324 million, we repurchased in 2022 and these years combined amounts to nearly 675 million.

Jonathan Route: So worth of share buybacks in the last two years.

Jonathan Route: This represents 12% of our shares outstanding.

Jonathan Route: We have also paid out $189 million in dividends over the last two years.

Jonathan Root: These combined actions both demonstrate the strong cash flow generated by Harley-Davidson, Inc., as well as the commitment we have to returning capital to shareholders. As we look to our financial outlook for 2024, as Jochen discussed, we are excited about our new 2024 motorcycle line. But we recognize that the overall macro environment, including high interest rates, add complexity to our customers' decision to purchase discretionary products.

Jonathan Route: These combined actions both demonstrate the strong cash flow generated by Harley Davidson, Inc. As well as the commitment we have to returning capital to shareholders.

Jonathan Route: As we look to our financial outlook for 2024, and yoga and discussed we are excited.

Jonathan Route: About our new 2024 and motorcycle lineup.

Jonathan Route: But we recognize that the overall macro environment, including high interest rate add complexity to our customers decision to purchase discretionary products.

Jonathan Root: At HDMC, we expect retail units to be flat to up 9%, which results in 163,000 to 178,000 retail units. Currently, we believe dealers are appropriately positioned from an inventory standpoint. Thus, we expect that retail unit sold and wholesale unit shipments will move together on a balanced basis in 2020. This range would result in wholesale unit shipments to be down between 1% and 10% versus 2023, which equates to 163,000 to 178,000 wholesale units. This results in HDMC revenue coming in flat to down 9%.

Jonathan Route: At <unk>, we expect our retail unit to be flat to up 9%, which results in 163000 to 178000 retail units.

Jonathan Route: Currently we believe dealers are appropriately positioned from an inventory standpoint, but we expect that retail unit sold and wholesale unit shipments will move together on a balanced basis in 2024.

Jonathan Route: This range would result in wholesale unit shipments to be down between 1% and 10% versus 2023, which equates to 163000 to 178000 wholesale units.

Jonathan Route: This results in <unk> revenue coming in flat to down 9% we.

Jonathan Root: We expect HDMC operating income margin of 12.6% to 13.6% in 2024. This is flat to that by 100 basis points from the 2023 level. The drivers of margin include negative operating leverage due to lower wholesale, and foreign currency, which is expected to be a mix, which is expected to be slightly favorable.

Jonathan Route: We expect <unk> operating income margin of 12, 6% to 13, 6% in 2024. This is flat to down 100 basis points from the 2023 level. The drivers of margin include negative operating leverage due to lower wholesale volumes.

Jonathan Route: Foreign currency, which is expected to be a headwind mix, which is expected to be slightly favorable.

Jonathan Root: Pricing, which will be slightly down as we eliminate the surcharge and fine-tune our pricing strategy. Lastly, we expect some additional manufacturing costs as we realign factory processes in the initial year of production of the new Street Glide and Road Glide motors. At HDFS, we expect HDFS operating income to be flat to up.

Jonathan Route: Pricing, which will be slightly down as we eliminated the surcharge and fine tune our pricing strategy.

Jonathan Route: Lastly, we expect some additional manufacturing costs as we realign factory processes in the initial year of production of the New Street glide and road glide motorcycles.

Jonathan Route: At HFF, we expect <unk> operating income to be flat to up 5%.

Jonathan Route: We expect the business to stabilize as it comes the higher interest rate environment that began in 2022 with our borrowing cost moderating based upon the anticipated fed action.

Jonathan Root: We expect the business to stabilize as it comes to a higher interest rate environment that began in 2022, with our borrowing cost moderating based upon the anticipated Fed Act. We also expect the retail and wholesale portfolios to come into balance and be more in line with the higher rate environment as the retail portfolio resets, thus driving greater revenue. And we expect consumers to settle into the existing macro backdrop, and therefore, we expect the loss rate will begin to moderate in the second half of 2024 as compared to the second half of 2020. For LiveWire, we are forecasting unit sales between 1,000 and 1,500 units and an operating loss in the range of $115 million to $125 million.

Jonathan Route: We also expect the retail and wholesale portfolios to come into balance and more in line with the higher rate environment as the retail portfolio reset.

Jonathan Route: Driving greater revenue.

Jonathan Route: And we expect consumers to settle into the existing macro backdrop and therefore, we expect the loss rate will begin to moderate in the second half of 2024 as compared to the second half of 2023.

Jonathan Route: <unk> Library is forecasting unit sales between 1500 units and an operating loss in the range of $115 million to $125 million. This is consistent with the 2023 guidance range, while delivering between 50% and 125% more motorcycles.

Jonathan Route: And lastly for total HDI, we expect capital investments in the range of $225 million to $250 million. This is the same forecast as in 2023, where we plan to continue to invest behind product development and capability enhancements.

Jonathan Root: This is consistent with the 2023 guidance range while delivering between 50% and 125% more motor speed. And lastly, for total HDI, we expect capital investments in the range of $225 to $250 million. This is the same forecast as in 2023, where we plan to continue to invest in product development and capability enhancement. Our investment focus remains driven by core product innovation, investments in manufacturing to automate and reduce costs as part of our productivity journey, as well as planned investments for life. One of our initiatives, identified as part of the Hardwire Strategy, is driving productivity to eliminate the $400 million of incremental supply chain costs incurred since 2010. In 2022, we delivered approximately $50 million to WordBank.

Jonathan Route: Our investment focus remains driven by core product innovation investments in manufacturing to automate and reduce costs as part of our productivity journey as well as planned investments for library.

Jonathan Route: One of our initiatives identified as part of the hard wire strategy driving productivity to eliminate the $400 million of incremental supply chain costs incurred in 2020.

Jonathan Route: In 2022, we delivered approximately $50 million toward that goal and.

Jonathan Route: In 2023, we delivered approximately $70 million additional towards that goal, where we focused on reducing expedited costs among other actions.

Jonathan Route: 2024 is expected to deliver approximately $100 million incremental cost productivity towards this goal with a focus on production efficiency logistics network optimization and supplier cost optimization through consolidation and regionalization.

Jonathan Root: In 2023, we delivered approximately $70 million additional towards that goal, where we focused on reducing expedited costs among other actions. 2024 is expected to deliver approximately $100 million in incremental cost productivity towards this goal with a focus on production efficiency, logistics network optimization, and supplier cost optimization through consolidation and regionalization. As we look at capital allocation in 2024, our priorities remain to fund the profitable growth of the HireWire initiative, which includes the capital expenditures mentioned previously, paying dividends, and continuing to execute discretionary share repayments. As discussed previously, in 2022 and 2023, we returned nearly $865 million in capital to our shareholders. In 2024, at this point in time, we are planning to buy back a similar dollar amount of our common shares as we did in 2023. And with that, we'll open it up to Q&A. Thank you. Ladies and gentlemen, as a reminder to ask a question for today, please press the star followed by the number one on your telephone keypad. And to withdraw your question, simply press star one again.

Jonathan Route: As we look at capital allocation in 2024, our priorities remain to fund the profitable growth of the higher layer initiatives, which includes the capital expenditures mentioned previously paying dividend and continuing to execute discretionary share repurchases.

Jonathan Route: As covered previously in 2022 and 2023, we returned nearly $865 million in capital to our shareholders. In 2024 at this point in time, we are planning to buy back a similar dollar amount of our common shares as we did in 2023.

Speaker Change: And with that we'll open it up to Q&A.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, as a reminder to ask a question for today. Please press star followed by the number one on your telephone keypad and to withdraw your question simply press Star. One again, we ask that you limit yourself to one question. Thank you.

Speaker Change: Our first question comes from the line of Craig Kennison with Baird.

Craig Kennison: Your line is live.

Craig Kennison: Hey, good morning, Thanks for taking my question and Jonathan Thanks for the additional commentary that was very helpful.

Craig Kennison: My question goes to dealer sentiment.

Craig Kennison: It's a tough time to be a dealer got skinny margin in high Floorplan interest rates.

Operator: We ask that you limit yourself to one question. Thank you. The first question comes from the line of Craig Kennison with Baird. Your line is live. Hey, good morning.

Speaker Change: You all have had success with project fuel in some cases, but that capital investment is a very big ask for dealers that are struggling with cash flow. So.

Craig Kennison: Thanks for taking my question. And Jonathan, thanks for the additional commentary. That was very helpful.

Speaker Change: Just wondering with the leadership change and like how might you re imagine your relationship with the dealer and are there opportunities to <unk>.

Craig Kennison: My question goes to dealer sentiment. You know, it's a tough time to be a dealer. It's got skinny margins and high floor plan interest rates.

Speaker Change: With them in different ways.

Speaker Change: Thank you Craig.

Craig: Well as you said, we have to recognize that last year has been a tough year for dealers.

Jochen Zeitz: You all have had success with Project Fuel in some cases, but that capital investment is a very big ask for dealers that are struggling with cash flow. So, I'm just wondering, with the leadership change, like how might you reimagine your relationship with the dealer and other opportunities to partner with them in different ways? Thank you, Craig.

Craig: The overall interest rate rise that affected the demand.

Speaker Change: Certainly led to a much lower profitability.

Speaker Change: If you look at 'twenty, one 'twenty two we had record profitability in our network, which is what's great and at least it helps many of our dealers to buffer the decline that we had seen but we obviously take that into consideration with all actions and decisions. We take are in.

Jochen Zeitz: Well, as you said, we have to recognize that last year was a tough year for dealers. The overall interest rate rise that, you know, affected demand certainly led to much lower profitability. If you look at 21-22, we had record profitability in our network, which was great, and at least it helped many of our dealers to buffer the decline that we had seen. But we obviously take that into consideration with all actions and decisions we take in terms of new product launches, in terms of pricing, in terms of fuel and all the projects that we are putting into the network. That said, I would say, The dealer sentiment overhaul has improved significantly, and that is very much a result of a new product launch, and a model year launch that excites the network and the dealers.

Speaker Change: In terms of.

Speaker Change: New product launch in terms of pricing and in terms of fuel and all the projects that we are putting into the into the network that said I would say.

Speaker Change: The dealer sentiment overall has improved significantly and that is very much a result of a new product launch model year launch that excites the network and the dealers and as I had mentioned that it's already led to a quite positive feedback from the media from influences from customers that have come in early to buy the product.

Speaker Change: So we are trying to find the right balance here of making sure that facilities are being upgraded recognizing that many facilities have not been upgraded for 'twenty is sometimes even 30 years and there's never a perfect time to do this but we certainly take financial difficulties into consideration as much as we can.

Jochen Zeitz: As I mentioned, that has already led to quite positive feedback from the media, from influencers, from customers that have come in early to buy the product. So, you know, we are trying to find the right balance here of making sure that facilities are being upgraded, recognizing that, you know, many facilities have not been upgraded for 20, sometimes even 30 years. And there's never a perfect time to do this, but we certainly take financial difficulties into consideration as much as we can. For example, when it comes to the fuse facility or Upgrade. Overall, we've completed 20 facilities so far.

Speaker Change: Comes to the fewest facility.

Speaker Change: Or upgrade overall, we've completed 20 facilities. So far we expect about 75 to be completed by the end of 'twenty five we have over 100 dealerships in process across all levels of completion from agreement to full build in North America alone. So overall you could say good success.

Jochen Zeitz: Please recognize that this program.

Speaker Change: Be in place for over 10 years. So we don't expect all of this to happen. So some dealers are ready and willing to go and they come certainly first in line some might have a tougher time to do that and we would take that into consideration and it's a 10 year program. So we expect dealer profitability should be improving and Obama order.

Jochen Zeitz: We expect about 75 to be completed by the end of 2025. We have over 100 dealerships in the process across all levels of completion from agreement to full build in North America alone. So overall, you could say it's a good success. And please recognize that this program will be in place for over 10 years. So we don't expect all of this to happen. So some dealers are ready and want to go, and they will certainly be first in line. Some might have a tougher time doing that.

Jochen Zeitz: Sentiment has improved I think the model year launches certainly has helped and now we are preparing and ready for the riding season.

Speaker Change: Thank you.

Speaker Change: Thanks for your question.

Speaker Change: Our next question comes from the line of Alex Perry with Bank of America. Your line is life.

Hi, Thanks for taking my question here I just wanted to ask how we should be thinking about mix in 2004 do you expect to be heavier on touring and trike shipments this year and lower on sports <unk> and how long do you expect the promo and those headwinds that you saw in <unk> impacting motorcycle gross margin.

Jochen Zeitz: And we will take that into consideration. And It's a 10-year program. So we expect dealer profitability should be improving, and overall, sentiment has improved. I think the model year launch certainly has helped, and now we are all preparing and ready for the riding season. Thank you. Thanks for your questions. Our next question comes from a line from Alex Perry with Bank of America. Your line is live. Hi, thanks for taking my question here. I just wanted to ask how we should be thinking about mixing in 24.

Speaker Change: Thank you.

Alex Perry: Well, we've adjusted our pricing according to our new model year launch in particular in touring is important too.

Alex Perry: To make sure that the carryover products that our dealers have in inventory are priced competitively to our new products and which is why we've taken the action that Jonathan laid out in his presentation.

Jochen Zeitz: Do you expect to be heavier on touring and trike shipments this year and lower on sportsters? And how long do you expect the promotion and sales and headwinds that you saw in 4Q to impact motorcycle gross margins? Thank you.

Alex Perry: So we feel good about what we have taken in terms of actions so far and we just have to recognize that the consumer environment.

Alex Perry: Our industry with discretionary premium product has been challenged due to the high interest rates and we've taken action accordingly, So we feel the right.

Jochen Zeitz: Well, we've adjusted our pricing according to our new model year launch, in particular in touring. It's important to make sure that the carryover products that our dealers have in inventory are priced competitively with our new products, and which is why we've taken the action that Jonathan laid out in his presentation. We feel good about what we have taken in terms of action so far, and we just have to recognize that the consumer environment in our industry with discretionary premium products has been challenged due to the high interest rates, and we've taken action accordingly. So we feel the right price is, you know, the right price at this point in time, but obviously, we will be flexible to adjust whatever is required in the current environment. In terms of SMICs, our priorities, as you know, and we have emphasized as part of the Hardwired Stage 2 strategy, were to shift more towards the high-value products, from Cruiser to Trike to..., to touring, and the new product or the new model year launch, I think, is a clear indication of that. You know, Sportster, we still had...

Jochen Zeitz: The right pricing at this point in time, but obviously, we will be flexible to adjust whatever is required.

Jochen Zeitz: In the current environment.

Speaker Change: FEMSA Meeks our priorities as you as you know we have emphasized this part of the Hotwire stage two strategy was to shift more towards the high value products.

Jochen Zeitz: From cruiser to drive to.

Jochen Zeitz: Turing and the new product or the new model year launch I think is a clear indication of that.

Jochen Zeitz: <unk>, we still had.

Jochen Zeitz:

Jochen Zeitz: Decent amount of sports is in the network.

Jochen Zeitz: In 2003, we didn't ship any sports does.

Jochen Zeitz: To the end.

Jochen Zeitz: After 'twenty two so those should anniversary themselves out of the network pretty quickly, but we feel that with the pricing that we have in our entry price point products, such as the Knights, the and moving all the way up to a new.

Jochen Zeitz: Touring models, we are competitively priced and have an exciting product offering.

Jochen Zeitz: Market right now, but as I said, it's still early in the season, we'll have to see how things go we want to make sure that.

Jochen Zeitz: The network and then move to through the 'twenty threes as quickly as possible.

Jochen Zeitz:

Jochen Zeitz: Because we want to reduce the inventory in the deal in the dealer network, which is why we've emphasized that and we've taken according actions that will continue to do so if necessary.

Jochen Zeitz: Decent amount of sportsters in the network in 2023. We didn't ship any sportsters after 2022, so those should anniversary themselves out of the network pretty quickly. But we feel that with the pricing that we have in our entry price point products, such as the Nightstar, and moving all the way up to our new touring models, we are competitively priced and have an exciting product offering on the market right now. But as I said, it's still early in the season; we'll have to see how things go.

Speaker Change: Thank you that's very helpful best of luck going forward.

Speaker Change: Thank you.

Jochen Zeitz: Okay.

Jochen Zeitz: Our next question is from the line of Fred Wightman with Wolfe Research. Your line is live.

Fred Wightman: Hey, guys I just wanted to follow up on the dealer inventory commentary I understand that you feel like you're in pretty good shape at this point in the year, but can you just talk about the mix of sort of current versus non current products and how you see.

Fred Wightman: That unwinding in the face of the more meaningful touring for refresh for this model year.

Jochen Zeitz: We want to make sure that the network can move through the 23s as quickly as possible because we want to reduce the inventory in the dealer network, which is why we've emphasized that, and we've taken appropriate actions and will continue to do so if necessary. Thank you. That's very helpful.

Speaker Change: Good morning. Thank you for your question, Yes, as you say, we have we believe largely the appropriate level of inventory in our network that.

Jochen Zeitz: That is even accounting for some of the early release driven by the logistics considerations in Q1 as needed bumped up a major product launch of our <unk>.

Jochen Zeitz: Best of luck going forward. Thank you. Our next question is from the line of Fred Whiteman with Woolf Research.

Fred Whiteman: <unk> client and touring platform in general and that is also accounting for some delays in the arrival of the product in 2023 of which we have referenced in our previous conversation exactly as you know we believe that that inventory is important in Q1 to support retail obviously as well.

Jonathan Root: Your line is live. Hey, guys, I just wanted to follow up on the dealer inventory commentary. I understand that you feel like you're in pretty good shape at this point in the year, but can you just talk about the mix of sort of current versus non-current products and how you see that unwinding in the face of the more meaningful touring refresh for this model year. Good morning, thank you for your question.

Jonathan Root: Ramp up there is a period of time until we reach complete dealer fill ins.

Speaker Change: Inventory of 23, which is the majority at this time of the inventory in the network.

Jonathan Root: Yes, as you say, we believe we have, largely, the appropriate level of inventory in our network that is even accounting for some of the early release driven by the logistics considerations in Q1 as we ramped up the major product launch of our Street Glide and Road Glide and touring platform in general. And that is also accounting for some delays in the arrival of the product in 2023, which we have referenced in our previous conversation. Exactly as you note, we believe that this inventory is important in Q1 to support retail. Obviously, as we ramp up, there is a period of time until we reach complete dealer fill. So, the inventory of 23, which is the majority at this time of the inventory in the network, is appropriately used to support retail as we ramp up 24.

Jonathan Root: Is appropriately used to support retail as we ramp up 24th and then exactly I can also note.

Jonathan Root: As we move through the early part of the season and more of those 24th come online the priority for us and while we have directed our financial support.

Jonathan Root: Jonathan has mentioned working down dose levels of <unk> to create more than mobile for <unk>.

Jonathan Root: Think that 2016 will serve as an interesting entry price point also for customers that prefer some of the features of the older technology.

Jonathan Root: Role to play going forward and of course in general we are watching the levels of inventory, we think that will move through 2000, and all we want to keep it roughly a one to one balance also accounting for Floorplan cost dealerships.

Jonathan Root: And then, exactly as you also note, for us, as we move through the early part of the season, and more of those 24s come online, the priority for us, and where we have directed our financial support, as Jonathan has mentioned, is to work down those levels of 23, to create more and more room for 24s. We think that 23s will serve as an interesting entry price point for customers that prefer some of the features of the older technology, so they have a role to play going forward. And, of course, in general, we are watching the levels of inventory. We think as we move through 24, we want to keep it roughly in a one-to-one balance, also accounting for floor plan costs in our dealerships. So, overall, ensuring we keep a balance and that we work through those 2023s as more of the 2024s come online is such an important category for us as Grand American Touring comes online. Perfect, thank you.

Jonathan Root: Of all ensuring we keep a balance in that.

Jonathan Root: We'll work through those 2023 as more of the 2020 for such an important category for us as Brandon Noncontrolling come online.

Jonathan Root: Yeah.

Speaker Change: Perfect. Thank you.

Jonathan Root: Yes.

Speaker Change: Our next question comes from the line of Joe Alto Bello with Raymond James Your.

Speaker Change: Your line is <unk>.

Speaker Change: Thanks, Hey, guys. Good morning. So you did mentioned several H Dfc margin puts and takes in 2020 for I assume the negative operating leverage you are expecting is the biggest driver of that so if you could quantify how much of a drag that is on margins. This year and how much is the greater dealer support that you're expecting there.

Jonathan Root: This year as well, which I guess it was included in pricing.

Speaker Change: Sure. Thanks, Joe So I think as we as we take a look at what we saw for 2023 as we've talked about we put programs in place that certainly were a bit of a drag.

Jonathan Root: Our next question comes from the line of Joe Altobello with Raymond Jenk. Your line is live. Thanks. Hey, guys. Good morning.

Joseph Altobello: So you did mention several HDMC, you know, margin puts and takes in 2024. I assume the negative operating leverage you're expecting is the biggest driver of that. So if you could quantify how much of a drag that is on margins this year and how much is the greater dealer support that you're expecting this year as well, which I guess is included in price. Thanks, Joe. So I think as we take a look at what we saw for 2023, as we've talked about, we put programs in place that certainly were a bit of a drag on what we saw from an overall margin perspective. So obviously, we called that out in the script and the details of that.

Joseph Altobello: What we saw from an overall margin perspective, so obviously, we called that out through the script and the details of that so we have about $40 million that that hit 2023 that really benefits us as we work through kind of clearing the retail in 2024.

Speaker Change: And so obviously as we look forward with some of the actions that we have in the marketplace to drive retail in 2024, we made sure that we that we kind of matched up.

Speaker Change: The revenue associated with delivering those bikes in the marketplace to moving them in 2024.

Jonathan Root: So we have about $40 million that will hit in 2023, and that really benefits us as we work through kind of clearing retail in 2024. And so, obviously, as we look forward with some of the actions that we have in the marketplace to drive retail in 2024, we made sure that we kind of matched up the revenue associated with delivering those bikes in the marketplace to moving them in 2024. The other piece that I think is worth noting too is that as you take a look, I think Adele touched on this a little bit, but as you take a look at your... As you take a look at where we are from a retail perspective, I think Adele covered that nicely too in terms of the model year mix and what's in dealer inventory today. So obviously, more 23s are in the network today, and then we're shipping 24s in as we go. That's very helpful, Jonathan.

Jonathan Root: The other piece that I think is worth noting too is that as as you take a look I think the Dell touched on this a little bit but as you take a look at your.

Jonathan Root: As you take a look at.

Jonathan Root: Where we are from a.

Jonathan Root: Retail perspective, I think <unk> covered that nicely too in terms of the model year mix in Watson dealer inventory today. So obviously more 'twenty threes or are in the network today and then we're shipping 'twenty for us and as we go.

Jonathan Root: That's very helpful. Jonathan Let me just to follow up on that in terms of promotions and discounts how much elasticity that you see in a retail once you started to.

Jonathan Root: The increase.

Jonathan Root: The amount of spending.

Jonathan Root: Well if.

Jonathan Root: If you look at the fourth quarter in particular, we saw a nice.

Jonathan Root: Positive retail increase in the month of December while and then sequential improvement from October November through December and that is.

Jochen Zeitz: And let me just follow up on that in terms of promotion and discounts. How much elasticity did you see in retail once you started to increase the amount of spend?

Speaker Change: I'd say, partly correlated to the amount of promotions, we had in the market. So we see a reaction in the market. When when we are putting these promotions in and the key will be to have the right mix between carryover and new products, which we tried to accomplish and achieve as quickly as possible in aura.

Jochen Zeitz: Well, if you look at the fourth quarter in particular, we saw a nice positive retail increase in the month of December and sequential improvement from October-November through December, and that is, I would say, partly correlated to the amount of promotions we had in the market. So we see a reaction in the market when we are putting these promotions in. The key will be to have the right mix between carryover and new products, which we try to accomplish and achieve as quickly as possible already towards the end of January with the new model year launch, so that there's a good mix because not everyone is going to buy new. Some will buy used or carryover products.

Jochen Zeitz: Towards the end of January with the new model year launch so that this could make speakers not everyone is going to buy new some with bi.

Speaker Change: <unk> you.

Jochen Zeitz: Use or carryover products. So I think that dealer network is certainly well stocked too.

Jochen Zeitz: Fulfill any any requests from our customers and we hope to move as we said.

Jochen Zeitz: Those 23 motor you carry overs.

Jochen Zeitz: Quickly as possible and we have an aggressive shipping schedule for 24 hours. So very early in the year.

Jochen Zeitz: So I think the dealer network is certainly well stocked to fulfill any request from our customers. And we hope to move, as we said, to those 23 model year carryovers, to see in the night, and significant improvement which is testament to the new product and to our customers being excited about what we have to offer in the new model. You got it. Our next question is from the line of James Hardiman with Citigroup. Your line is live. Hey, good morning.

Jochen Zeitz: At this point in time, which is as I mentioned earlier like why our guidance is much broader than you usually would be.

James Hardiman: And the year started relatively modest for the industry as a whole and not just for us, but since we've shipped our new 24, so we've seen a nice.

James Hardiman: And a significant improvement, which is testament to the new product and to our customers being excited about what we have to offer and the new one with a new model year.

James Hardiman: Got it thank you.

Jochen Zeitz: Yeah.

Jochen Zeitz: Our next question is from the line of James Hardiman with Citigroup. Your line is live.

James Hardiman: Hey, good morning, Thanks for taking my question. So a follow up on the guidance and Jonathan really appreciate the added color on sort of the wholesale versus retail.

James Hardiman: Thanks for taking my question. So, follow up on the guidance, and Jonathan, I really appreciate the added color on sort of the wholesale versus retail. I think you said for retail in 24, flat to up 9%. Maybe help us with the major drivers there.

James Hardiman: I think you said for retail in 'twenty four flat to up 9%, maybe help us with the major drivers there I know, it's sometimes not very helpful to think about an industry number because you're such a big part of the industry in certain segments.

Jochen Zeitz: I know it's sometimes not very helpful to think about an industry number because you're such a big part of the industry in certain segments, but just trying to tease out the overall sort of how you're thinking about the demand backdrop relative to the benefit from what sounds like an unprecedented new product haul. And then maybe help us with some of the below-the-line items as well. Obviously, you don't guide to an EPS number, but tax and share count, maybe interest expense. I mean, I think we should be getting to an EPS number in the low to mid $4 range. But I don't know if that's quite right based on how you're thinking about the below the line.

Jochen Zeitz: Just trying to tease out the overall sort.

Jochen Zeitz: How youre thinking about the demand backdrop relative to the benefit from from what sounds like an impressive unprecedented new product Hall.

Jochen Zeitz: And then maybe help us with some of the below the line item as well, obviously, you don't guide to <unk>.

Jochen Zeitz: PFS number but.

Jochen Zeitz: Tax.

Jochen Zeitz: Share count maybe interest expense.

Jochen Zeitz: I think we should be getting to an EPS number in the low to mid $4 range.

Jochen Zeitz: I don't know if thats quite right based on how youre thinking about the below the line. Thanks.

Jonathan Root: Thanks. Okay, great. Thanks, James. I'll start with sort of some of your questions on what we saw from below the line. It would be helpful for Jochen or Adele to provide a little bit of commentary in terms of their perspective on retail for 2024. I think if we just start with below the line, obviously, we saw a lot of favorability in 2023 relative to some pension adjustments and things of that nature. So that's the primary driver in terms of what you see from that standpoint.

Speaker Change: Okay, great. Thanks, James I'll start with I'll start with sort of some of your questions on what we saw from below the line maybe helpful. For Yolked <unk> tried a little bit of commentary in terms of their perspective on retail for 2024, I think if we if we just start with below the line. Obviously, we saw a lot of favorability in.

Jonathan Root: 2023 relative to some pension adjustments and things of that nature.

Jonathan Root: So thats the primary driver in terms of what you see from that standpoint, obviously shareholders are benefiting from an EPS perspective with the focus that we have on on share buybacks that we kind of walk through.

Jonathan Root: Obviously, shareholders are benefiting from an EPS perspective with the focus that we have on share buybacks that we kind of walked through a little bit earlier today. So certainly for us, a pretty big consideration point, I think, for how we reward shareholders. Relative to retail, as you said, the flat to up nine kind of equates to $163,000 to $178,000. Jochen, you know, James, as you reflect back, kind of touched on the fact that that is a wider range than what we normally see for a variety of reasons. But Jochen, do you want to comment any further on that? Well, there is not much to add to what I already indicated earlier. It's early in the year,

Jochen Zeitz: A little bit earlier today.

Jochen Zeitz: Certainly for us pretty big.

Jonathan Root: Yeah.

Jochen Zeitz: Pretty big consideration point, I think for how we reward shareholders relative to retail as you said flat to up nine kind of equates to 163000 to 178000 Youll can.

Jochen Zeitz: James as you reflect back kind of touched a little bit on that.

Jochen Zeitz: The fact that that is a wider range than what we normally see.

Jochen Zeitz: A variety of reasons, but youll can do you want to comment any further on that.

Jochen Zeitz: Well not much to add to what I already indicated earlier, it's early in the year.

Jochen Zeitz: We really need to get closer and into the riding season at this point in time. You know, we believe we have an extraordinary product, and early reception is great.

Jochen Zeitz: We really need to get closer into the riding season at this point in time, we believe we have an extraordinary product early reception is great.

Jochen Zeitz: But the overall environment in terms of interest rates is certainly a headwind, which we experienced very much throughout the entire year of 23. And we'll just have to see how it all works out. And our retail guidance is a global guidance. It's not just the U.S. or North America guidance.

Jochen Zeitz: But the overall environment in terms of interest rates is certainly a headwind which we.

Jochen Zeitz: Very much throughout the entire year of 'twenty three.

Jochen Zeitz: And we'll just have to see how it how it all works out in our retail guidance. The global guidance, it's not just the U S or North America guidance touring why we've been able to shift the mix in the international markets, including profitability more towards our profit focused categories.

Jochen Zeitz: Touring, while we've been able to shift the mix in the international markets, including profitability, more towards our profit-focused categories, it has the most significance in the North American market. So that requires the U.S. market to pull a lot of weight when it comes to retail growth in 24. And we just have to see what's possible. Early indications right now with our new model year launch are positive, but it's way too early to really give more concrete guidance than what we've said. That's really helpful.

Jochen Zeitz: It has the most significance in the North American market, so that requires the U S market to.

Jochen Zeitz: Put a lot of weight when it comes to retail growth in 'twenty four and we'll just have to see what's possible early indications right now with our new model year launch a positive, but it's way too early to really give more concrete guidance than what we've said.

Speaker Change: That's really helpful. If I could just sneak in a clarification Jonathan is there any way to just think about the tax rate and the share count for 24, obviously those are.

James Hardiman: If I could just sneak in a clarification, Jonathan, is there any way to just think about the tax rate and the share count for 2024? Obviously, those could be some swing factors, and I just want to make sure everybody's on the same page. Yep. No, great question.

James Hardiman: So it could be some swing factors I just want to make sure everybody's on the same page.

Jonathan Root: Yes, no great question, and I think as we think about share count obviously.

Jonathan Root: And I think as we think about the share count, obviously, you know, we've talked through our commitment to looking at share buybacks consistent with what we looked at in 2023. So obviously, that cadence will come down over time. So from a share buyback perspective, we'd probably buy back throughout the quarters, obviously not in one big block at a time. But I think that's the piece that's worth factoring in, looking at share price movement, looking at the dollar target that we've set, and then just thinking through how that will impact us across the year. James, I've given Jonathan and the finance team the challenge to be able to give guidance on EPS as of next year. So mark your calendar.

Jonathan Root: Sure.

Jonathan Root: We've talked through our commitment.

Jonathan Root: Looking at share buybacks consistent with what we looked at in 2023. So obviously if that cadence will come down over time, so from a from a share buyback perspective, we've probably buyback.

Jonathan Root: Throughout throughout the quarters.

Jonathan Root: Obviously not in one big block of time, but I think that's the piece that's worth factoring in is looking at share price movement looking in the dollar target that we've set and then just thinking through how that will impact across the year.

Speaker Change: James I've, given Jonathan and the finance team the challenge too.

Jonathan Root: To be able to give guidance on EPS as of next year. So mark your calendar and we will hopefully be able to achieve that.

Jochen Zeitz: We'll hopefully be able to achieve that. Looking forward to it. Thanks guys. All righty.

Jochen Zeitz: Looking forward to it thanks, guys alright.

Tristan M. Thomas: Thanks James. Our next question is from the line of Tristan Thomas Martin with BMO Capital Markets. Your line is live. Hey, good morning.

Speaker Change: Alright, Thanks James.

Speaker Change: Our next question is from the line of Tristan Thomas Martin with BMO capital markets. Your line is less.

Speaker Change: Hey, good morning.

Jochen Zeitz: I just wanted to kind of get your thoughts on the model year 24 touring pricing. If I look at, for example, the 24 Street Glide, it's more expensive than a base Street Glide from 23, but I think the features are much more comparable to, let's say, like, a Street Glide Special, where a 23 is more expensive than a 24. So, just kind of wanted to get your thoughts on kind of some of these changes, the model consolidation. Is this just an overall way to address affordability without just straight up lowering MSRPs or getting too promotional? Well, we wanted to make sure that our new products were competitive, and we believe that we've accomplished that for sure, given the early reactions that we've seen in the market. And, as you rightly said, we included several key features and benefits that we previously had in our ST and special models in our mid-levels now and increased the price from the base level of our base models to reflect the additional content that now comes as standard equipment.

Speaker Change: I just wanted to kind of get your thoughts on the model year 'twenty four towards pricing. If I look at for example, 24th Street glide, it's more expensive than our base three club for 'twenty three but I think the features are much more comparable to let's say like a street glide special where 23 was more expensive than the 24.

Jochen Zeitz: So just kind of wanted to get your thoughts on kind of some of the changes the model consolidation or is this just an overall way to address affordability without just straight up lowering msrp's are getting too promotional.

Jochen Zeitz: Yeah.

Jochen Zeitz: Well, we wanted to make sure that our products are competitive and we believe that we've accomplished that for sure given the early reactions that we've seen in the market and as you rightly said we included several key features and benefits.

Jochen Zeitz: That we previously had in our S T and special models in our in our mid levels now and and.

Jochen Zeitz: Increased the price from the base level.

Jochen Zeitz: Our base models to reflect the additional content that now comes as standard equipment. In addition, we are offering a lot of P&A packages that allow our customer to to essentially get up to a product that is S T and special pricing level and and features level and that's what we've tried to.

Jochen Zeitz: In addition, we are offering a lot of P&A packages that allow a customer to essentially get up to a product that is at the ST and special pricing levels and features levels, and that's what we've tried to achieve by reducing, at this point, the overall complexity of our touring setup. I think it's the best of both worlds that we're achieving with our new pricing. It's competitive, but it's still $24,999, and while higher than our base models, it's lower than our STs and specials.

Jochen Zeitz: <unk> achieved by reducing at this point overall complexity of our Turing setup. So it's I think it's the best of all worlds that we are achieving with with our new pricing.

Jochen Zeitz: It's competitive, but it's still 24 990 999 and that's that.

Jochen Zeitz: While higher than our base models is slower than <unk> and special and again, if you look at the pricing actions that we've taken.

Jochen Zeitz: And again, if you look at the pricing actions that we took in the fourth quarter and our carryover products, that needed to consider the new pricing for our new models. So STs and Specials needed to give support and continue to give dealer support to price them accordingly in order to move them out and sell them. And I think that's essentially the key decision that we've made, and so far, it's proven very successful. www.youtube.com or www.facebook.com. Got it. Thank you for your questions. Our next question comes from the line of Noah Zatzkin with KeyBank.

Noah Zatzkin: In the fourth quarter, and our carryover products that needed to consider.

Noah Zatzkin: The new pricing for new models, so STS and special needed to we need to get needed to keep support and continue to need <unk> dealer support to price them Accordingly in order to move them out and sell them.

Noah Zatzkin: And I think that's that's essentially the key decisions that we've made and so far it's proven very successful in.

Noah Zatzkin: The comments that you would see in online forums people understand that there's a lot more key features and look more benefits that we've previously had in our <unk> and specialty now already incorporated in our mid levels.

Noah Zatzkin: Got it thank you.

Noah Zatzkin: Thanks for your question.

Noah Zatzkin: Next question comes from the line of Noah is that skin with Keybanc.

Noah Zatzkin: Your line is live. Hi, thanks for taking my question. Maybe just one on Livewire for me.

Noah Zatzkin: Your line is live.

Noah Zatzkin: Hi, Thanks for taking my question, maybe just one on live wire for me.

Kareem Dinesh: You know, looking out over the next several years, how are you thinking about the unit and profitability ramp there? And has anything changed in terms of your medium-term view for the business and the opportunity? Thanks. Thank you, Noelle.

Noah Zatzkin: <unk> out over the next several years, how are you thinking about the unit profitability ramp there and has anything changed in terms of your medium term view.

Kareem Dinesh: The business and the opportunity thanks.

Speaker Change: Thank you Noah.

Kareem Dinesh: Well, I guess when we look at LiveWire right now, our focus is really on product innovation and cost improvement. We want to reach profitability as fast as we can. So we're in a strong position to capture the opportunity as the market develops. And right now, we remain focused on our long-term vision of being the leader in the two-wheel EV industry, driven again by innovation and performance in the short term. A strong internal plan to reach profitability as soon as possible. For your questions, our next question is from David MacGregor with Longbow Research. Your line is live. Yes, good morning.

Kareem Dinesh: But I guess when we look at <unk> right now.

David S. MacGregor: Product innovation and cost improvement, we want to reach profitability as fast as we can so we're in a strong position to capture the opportunity as the market develops so right now we remain focused on our long term vision of being the leader two wheel EV industry, driven again by innovation.

David S. MacGregor: For months short term.

David S. MacGregor: Strong internal plan to reach profitability as soon as practical.

Kareem Dinesh: Thanks.

David S. MacGregor: Thanks for your question.

David S. MacGregor: Our next question is from the line of David Macgregor with Longbow Research. Your line is live.

David S. MacGregor: Yes, good morning, and thanks for taking my call my questions I guess I just wanted to follow up on the LIBOR discussion cream could you dig a little bit deeper into kind of the experience. This quarter consumer reaction to these two del Mar you shipped 660 bikes in 'twenty three could you talk about kind of retail sales and how that may have grown through the year.

David S. MacGregor: Thanks for taking my call. My questions: I guess I just wanted to follow up on the live wire discussion. Kareem, could you dig a little bit deeper into kind of the experience this quarter, the consumer reactions, the S2 Del Mar. You shipped 660 bikes in 23. Could you talk about retail sales and how that may have grown through the year? And you're talking about 126 dealers this year; what are you expecting to grow that to in 2024? Thank you. Yeah, thanks for the question and follow-up question.

Speaker Change: You are talking about 102006 dealers. This year, what are you expecting to grow that too in 2024. Thank you.

Kareem Dinesh: Yes. Thanks for the question follow up question when I look at this stage, we feel pretty good about the.

Kareem Dinesh: Well, look at this stage; we feel pretty good about the Q4 shipments because we have more orders in hand than shipments done so far. So we feel pretty good about retail and the conversion in the short term. Now, we are absolutely working really hard on creating a retail engine and supporting our dealers, which is why you saw that we reached 126 retailers globally. Obviously, when you look at the number of bags, it makes it a very attainable target for retailers to achieve at retail.

Kareem Dinesh: Q4 shipments because we have more orders in hand.

Kareem Dinesh: Shipments done so Paul so we feel pretty good about retail and the conversion in the short short term now we absolutely working really hard on.

Kareem Dinesh: Creating a retail LNG and supporting our dealers, which is why you saw that we reached 126 retailers globally.

Kareem Dinesh: Obviously, when you look at the number of bag. It makes me very attainable target for retailers to achieve.

Kareem Dinesh: So our goal is to essentially match retail with wholesale in 2024. So the team is hard at work to deliver on making retail momentum sustained and to support wholesale. Thanks, and good luck to them.

Kareem Dinesh: So our goal is to so essentially in 2024 much retained with wholesale.

Speaker Change: So what you mean.

Kareem Dinesh: That's work to deliver on.

Kareem Dinesh: Making retail momentum sustained and to support horseman.

Jaime Katz: Thank you. Our next question comes from a line from Jaime Katz with Morningstar. Your line is live. Hi, good morning.

Jaime Katz: Great Thanks, and good luck to them.

Jaime Katz: Thank you.

Jaime Katz: Our next question comes from the line of Jamie Katz with Morningstar. Your line is <unk>.

Jaime Katz: Hi, Good morning, I wanted to focus in on market share, which actually improved quarter over quarter.

Jochen Zeitz: I want to focus in on market share, which actually improved quarter over quarter. But I'm wondering, you know, where you guys are trying to structurally drive that to over time? Or is it something that this 40% level may be the new normal given the shift in consumer demand to other types of bikes? Would you help us think about that longer term? Thank you.

Jochen Zeitz: But I'm wondering where you guys are trying to structurally drive that you over time or is it something that maybe this 40% level is.

Jochen Zeitz: The new normal given the shift in consumer demand to other types of bikes could you help us think about that longer term. Thanks.

Speaker Change: Thanks, Jamie.

Jochen Zeitz: Well, our focus as part of this strategy has been very clear, you know, shifting the mix towards our core focus, our core categories, right? That's tri-cruiser, touring, and that shift has proven extremely successful. We've mentioned earlier, you know, our average unit profitability is up from $1,300 to $3,700. So, you know, not being obsessed by unit sales over the last few years served us well in terms of overall profitability, which has improved from 6.3% to 13.6%, so an extraordinary improvement. That said, obviously, we want to grow our business too. We believe that with our new model, year 24, we have that opportunity, we have the right foundation, but we also need a more accommodating economic environment. And when I say economic environment, I'm talking about our industry and high interest rates that, you know, are a tough challenge for many of our core customers.

Jochen Zeitz: Our focus as part of this strategy has been very clear.

Jochen Zeitz: Shifting the mix towards our core focus our core categories right. That's try cruiser touring and that shift has proven.

Jochen Zeitz: Bringing these successful we've mentioned earlier our average unit.

Jochen Zeitz: The abilities up from 13 100 to $3700.

Jochen Zeitz: So not being obsessed by unit sales over the last few years served us well in terms of overall profitability, which as you know.

Jochen Zeitz: Improved from six 3% to 13, 6% sort of extraordinary and improvement that said, obviously, we want to grow our business to we believe that with our new model year 'twenty four we have that opportunity we have the right foundation, but we also need to.

Jochen Zeitz: More accommodating economic environment, and when I say economic environment than I am talking about our industry and high interest rates that.

Jochen Zeitz: A tough challenge for many of our core customers. So.

Jochen Zeitz: So, I don't want to evade the answer to your question, but our focus is on growth and profitable growth. And that's how we will complete our Hardwire Stage 2 strategy at the end of 2025. What comes after that, we will address at the appropriate time. We do look at market shares, but we are not obsessed with market shares. I've never been, and I never will.

Jochen Zeitz: I don't know when a rate you had the answer to your question, but our.

Jochen Zeitz: Our focus is on growth and profitable growth and that's that's how we will.

Jochen Zeitz: Fleet, our hotwire stage two strategy at the end of 'twenty five what comes after that we will address at the appropriate time.

Jochen Zeitz: We do look at market shares, but we are not obsessed by market shares I've never been and never will but of course, it's pleasing to see that in this tough environment, especially in the fourth quarter, we were able to grow our touring share back to 75% large crews at 80%.

Jochen Zeitz: But, of course, it's pleasing to see that in this tough environment, especially in the fourth quarter, we were able to grow our touring share back to 75%, and large cruisers 80%. I mean, that's commanding. You know, give or take 5%, that's always the swing that you're going to see throughout the year. Also, on a rolling 12-month forward or backward. And I think that's, you know, likely where we're going to be. But we believe there's an opportunity to take market share, especially in touring and through our Trike offering, because we have a competitive and great product. And that should see a positive development certainly next year, if all our plans come to fruition. And hopefully, that will carry through in future years as well, at least until the end of our Hardwired Stage 2, which is at the end of 2025.

Jochen Zeitz: It's commanding.

Jochen Zeitz: Give or take 5% that's always the swing that youre going to see throughout the year.

Jochen Zeitz: Also on a rolling 12 month forward or.

Jochen Zeitz: Beckwitt.

Jochen Zeitz: I think thats.

Jochen Zeitz: We like where we are going to be but we believe there's an opportunity to take market share, especially in touring and through our <unk> offering because we have competitive great product and that should see a positive development.

Jochen Zeitz: Next year, if all our plans come to fruition.

Jochen Zeitz: And hopefully that will carry through in future years as well at least until the end of our Aqua stage, two which is at the end of 'twenty five the Turing platform as I mentioned as it has been in development since 2020, and it's the first refresh and in fact, it sort of refreshes the complete rebuild from the bottom up in every respect.

Jochen Zeitz: The Turing platform, as I mentioned, has been in development since 2020, and it's the first refresh, and, in fact, it's not a refresh; it's a complete rebuild from the bottom up in every respect, and I think the positive reactions give us that opportunity, but it's a little early to comment on how lasting that is going to be, but we feel very good about it.

Jochen Zeitz: And I think the positive reactions give us that opportunity, but it's a little early to comment how lasting that is going to be.

Jochen Zeitz: But we feel very good about it.

Jochen Zeitz: Thank you. And we have a final question for today from the line of Brandon Roll with D. A. Davidson. Your line is live. Thank you for squeezing in my question here.

Speaker Change: Thank you.

Brandon Roll: And we have a final question for today from the line of Brandon Rolle with D. A Davidson your line is live.

Brandon Roll: Thank you for squeezing my question here just.

Brandon Roll: Just a question on your margin guidance. I think you had called out additional manufacturing costs as being a headwind to guidance this year. Could you size up the amount of headwind from those additional manufacturing costs and then provide any additional color on feedback you're receiving for the model year 24 lineup?

Brandon Roll: Just a question on your margin guidance I think you had called out additional manufacturing costs as being a headwind.

Brandon Roll: Our guidance this year could you size up you know the amount of headwind from those additional manufacturing costs and then provide any additional color on feedback youre receiving for the model year 'twenty four lineup. Thank you.

Jonathan Root: Thank you. All right, thank you, Brandon. We'll start with your sort of question on what we're seeing from a manufacturing perspective and some of the noise that we have within there. So obviously, we've put a $400 million price target out there from a productivity perspective, and we walked through what we've seen over the last couple of years and where we anticipate 2024 landing. So, you know, about a hundred million dollars of positivity that lands in 2024 to help offset what we see from an inflationary perspective.

Speaker Change: Alright, Thank you Brandon.

Jonathan Root: We'll start with your we'll start with your sort of question on what we're seeing from a manufacturing perspective, and some of the noise that we have within there. So obviously, we've put a $400 million price target out there from a productivity perspective, we walked through what we've seen over the last couple of years, and where we envision 2024 landing.

Jonathan Root: So about $100 million of of positivity that lands in 2024 to help offset what we see from an inflationary perspective.

Jonathan Root: As you look at that movement over time, we obviously feel pretty positive about it. When you kind of talk through some of the headwinds that we see, if we take a look at what this means from a margin perspective, obviously, depending upon where we fall from an overall volume perspective with our fairly wide range, we want to make sure that we are looking at moving our retail and wholesale in concert with each other. We obviously have a lot that we have to pay attention to from a structural cost and as you think through sort of a leverage or de-leverage impact. And so I think from that standpoint, certainly a little bit of noise as we just try to work through what that could mean from an overall leverage or de-leverage impact.

Jonathan Root: As you look at that movement over time.

Jonathan Root: We feel pretty positive about that when you kind of talk through some of the headwind that we see as we take a look at what this means from a margin perspective, obviously, depending upon where we fall from an overall volume perspective, with our with our fairly wide range as we wanted to make sure that we are looking at moving.

Jonathan Root: Our retail and wholesale in concert with each other.

Jonathan Root: We obviously have a lot that we have to pay attention to from a structural cost and as you think through sort of a leverage or deleverage.

Jonathan Root: <unk>.

Jonathan Root: And so I think from from that standpoint, certainly a little bit of noise. As we just try to work through what that could mean from an overall leverage or deleverage impact.

Jonathan Root: And then as we think about manufacturing optimization, supply chain efficiency, as Jochen talked about, this is a transformative launch as you look at the significance of what we have with Street Glide and Road Glide, which are now hitting our dealers. Obviously, if you have sort of a very, very major change that occurs all the way from your suppliers through to what we end up moving into our dealership, there's a lot of change and a lot of variability that can occur with that. We feel like it's been a fairly smooth launch so far, but we certainly always want to make sure that we are living in a world where we're not over-promising to anyone. And I think beyond that, Jochen and Adele, do you have questions on, or, sorry, do you have some comments relative to the 25-model year reception, or 24? 24, I'm ahead of time, of your time. Well, look, there is not much more to add. Maybe overall, I would say...

Jonathan Root: And then as we think about manufacturing optimization and supply chain efficiency as Johan talked about this is this is a transformative launch as you look at that.

Jonathan Root: The significance of what we have with street glide and road glide that are that are now hitting our dealers.

Jonathan Root: Obviously as you have sort of.

Jonathan Root: Very very major change that occurs all the way from your suppliers through to what we ended up moving into our dealerships Theres a lot of there's a lot of.

Jonathan Root: Just a lot of change and a lot of variability that can occur with that we feel like it's been fairly.

Jonathan Root: Fairly smooth launch so far, but we certainly always want to make sure that we have.

Jonathan Root: Our living in a world, where we're not over promising to anyone.

Jonathan Root: And I think beyond that.

Speaker Change: And on the Dell, Jeff question on or I am sorry, you have some comments relative to the 25 model year reception.

Speaker Change: Thank you.

Jonathan Root: Are you ahead of time with your time.

Jonathan Root: 24, well look I'm not much much more to add maybe overall I would say this really positive reaction to our overall pricing strategy. When it comes to the carryover product in our new product I think that the decisions we've taken the fourth quarter.

Jochen Zeitz: There has been a really positive reaction to our overall pricing strategy when it comes to the carryover product and our new product. I think that the decisions we've taken in the fourth quarter will help us in 2024. And I think, you know, unilaterally positive reactions to our new Street Glide Road Glide, lots of excitement about our new CVO ST. You know, we started the trend with performance and picked up on a trend that we saw years ago, developing, especially on the West Coast, but in other parts of America as well. And we've, as I mentioned in my speech, we've tried to push that hard with our King of the Beggars So really bringing a performance aspect into our product is now shown with our CVO Road Glide ST.

Jochen Zeitz: <unk> will help it will help us.

Jochen Zeitz: In 'twenty four.

Jochen Zeitz: And.

Speaker Change: Thank you.

Jochen Zeitz: Unilaterally positive reactions to our to our new streetcar road glide lots of excitement about our new CV OSD.

Jochen Zeitz: We started the trend with performance and picked up on the trends that we saw years ago, developing especially on the west coast, but other parts of America as well and we've as I mentioned in my speech, we've tried to push that hard with all of the King of the Beggars race series and our array spikes so really bring it.

Jochen Zeitz: <unk> aspect into our product is now shown with our CBO Road glide is fantastic.

Jochen Zeitz: Fantastic product, very well priced, and lots of excitement. I've been riding. The Big Group of Influencers in Las Vegas, and I mean, there was just a lot of excitement around our touring and new touring bikes. I don't want to forget our first CVO ever outside of the touring category with our adventure touring bike, also a testament to our development on continuous focus on developing the adventure touring market. We feel good about it.

Jochen Zeitz: Fantastic product very well priced and lots of excitement I've been writing.

Jochen Zeitz: A big group of Influencers in Las Vegas, and I mean, it was just a lot of excitement around our touring new touring bikes.

Jochen Zeitz: Want to forget.

Jochen Zeitz: First CBO ever outside of the touring category with our adventure touring bike also a testament to our development.

Jochen Zeitz: Continuous focus and developing the adventure touring market. So overall.

Jochen Zeitz: We feel good about it and also the pricing into product nights.

Jochen Zeitz: And also the pricing in our entry product, Nightstar, that we've adjusted accordingly. A great product, especially for new riders as well as an entry bike, so we should see some positive developments overall in the year. But as I said, it's early days, and we don't want to get overly excited here. You know, 2023 was a tough year, and interest rates haven't changed, and the outlook certainly doesn't suggest that that's going to happen in the prime riding season. So we'll have to balance our excitement for the new product with the realities of the market. Thank you. And if I could just follow up on the manufacturing cost question, would you be able to break out the initial startup costs for the new touring production line versus just additional manufacturing costs throughout the year? I think all we can say is that this is the largest investment in a single platform that Harley-Davidson ever made.

Jochen Zeitz: We've adjusted.

Jochen Zeitz: Accordingly, great product, especially for new riders as well as an entry bike.

Jochen Zeitz: So we should see some positive developments that are in overall in the year, but as I said, it's early days, we don't want to get overly excited.

Jochen Zeitz:

Jochen Zeitz: 2003 was a tough year and interest rates haven't changed.

Jochen Zeitz: The outlook certainly doesn't suggest that that's going to happen in the prime the riding season. So we'll have to balance our our excitement for the new product with realities of the market.

Speaker Change: Thank you and if I could just follow up on the manufacturing cost question would you be able to break out the initial startup costs for the new <unk> production line versus.

Speaker Change: Additional manufacturing costs throughout the year.

Jochen Zeitz: I think all we can say in the largest investment in a single platform that Harley Davidson ever made.

Brandon Roll: Yep, and I think, Brandon, the good news is that you will hear more from us as we move through the year and talk about our financials and do our kind of year-over-year comp. So, in sort of our – in our standard fashion, we'll make sure that we're continuing to provide breakouts that we're seeing, you know, from a revenue perspective. We'll obviously, you know, walk through and talk through the P&L so that, you know, the promise that we do make is that throughout 2024, we certainly will be talking about this. And, you know, as you would imagine, 2024 is a little bit noisy when you look at some things quarter-over-quarter and some of the changes that we anticipate that we'll see in terms of things, you know, shipping units into the dealer network.

Speaker Change: Yes, but I think and I think Brandon the good news is that you will hear more from us as we move through the through the year and talk about our financials and do our kind of year over year comp so in.

Brandon Roll: Sort of are in our standard fashion, we will make sure that we're continuing to provide breakouts that we're seeing from a revenue perspective, we'll obviously well walk through and talk through the P&L. So that the promise that we do make is that throughout 2024, we certainly will be talking about this and as you would imagine 2000.

Brandon Roll: <unk> 24 is a little bit noisy when you look at some things quarter over quarter and some of the changes.

Brandon Roll: We envision that we will see in terms of in terms of things shipping shipping units into the dealer network.

Jonathan Root: And as, you know, Zeokin talked about throughout his prepared comments and I talked about in mine, obviously, getting that match between retail and wholesale is something that we feel is very important. But, yeah, we'll be excited to talk about that with you throughout this year. Great. Thank you. You're welcome. Thank you. Thank you. To close out today, I'd like to hand the call back over to CEO Jochen Zeitz for any closing comments. Yes, well, thank you again to everyone for joining us today. Before we sign off, I just wanted to take the opportunity to thank Adele O'Sullivan for her many contributions to the company over the past three years and to wish her very well in her future endeavors. So thank you very much, Adele, and thank you all for joining us this morning. Thank you, ladies and gentlemen. Thank you, and ladies and gentlemen, this does conclude today's conference call. Thanks for joining us. You may now disconnect. Have a great day! The Bulletproof Executive, 2013

Brandon Roll: <unk> talked about throughout his prepared comments and I talked about <unk> <unk>.

Jonathan Root: Getting that match between retail and wholesale is something that we feel is very important but yes, we'll be excited to talk about that with you throughout this year.

Jonathan Root: Great. Thank you.

Jonathan Root: Youre welcome. Thank you.

Jochen Zeitz: Thank you to close out today I'd like to hand, the call back over to CEO European sites for any closing comments.

Jonathan Root: Yes, well. Thank you again to everyone for joining us today before we sign off I just wanted to take the opportunity to thank you della Sullivan for her many contributions to the company over the past three years and to wish him very well on her future endeavors. So thank you very much Adele and thank you all for joining us this morning.

Speaker Change: Thank you ladies and gents.

Jonathan Root: Thank you and ladies and gentlemen, this does conclude today's conference call. Thanks for joining you may now disconnect and have a great day.

Jonathan Root: Yeah.

Jonathan Root: Okay.

Jonathan Root:

Jonathan Root:

Jonathan Root: Yeah.

Jonathan Root: Okay.