Q1 2024 LiveWire Group Inc Earnings Call
Operator: Thank you for standing by, and welcome to the Harley-Davidson First Quarter 2024 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.
Thank you for standing by and welcome to the Harley Davidson first quarter 'twenty 'twenty four 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.
Shawn Michael Collins: Thank you. Good morning.
Thank you. Good morning. This is Shawn Collins, the director of Investor Relations at Harley Davidson.
Shawn Michael Collins: This is Sean Collins, the Director of Investor Relations at Harley-Davidson. You can access the slides supporting today's 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 materially different. Those risks include, among others, matters we have noted in today's earnings release and in our latest findings with the SEC.
Can access the slides supporting today's call are internet, 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 materially different.
Those risks include among others matters, we have noted in today's earnings release and in our <unk>.
<unk> filings with the SEC.
Shawn Michael Collins: Joining me for this morning's call are Harley-Davidson Chief Executive Officer Jochen Zeitz. Also, Chief Financial Officer Jonathan Root. And we have Livewire's Chief Executive Officer, Kareem Dinesh. With that, let me turn it over to our CEO, Jochen Zeitz.
Speaker Change: Joining me for this morning's call are.
Yoga: Harley Davidson Chief Executive Officer Yoga.
Yoga: Also chief Financial Officer, Jonathan groups.
Yoga: And we have libraries, Chief Executive Officer Corinne Dennis.
Yoga: With that let me turn it over to our CEO Yoga tights yoga.
Jochen Zeitz: Thank you, Sean, and good morning, everyone. Thank you for joining us for our Q1 2024 results. Harley-Davidson delivered a good start to the year in line with our expectations. Looking at retail for the quarter, we are pleased with our delivery of 6% growth in North America, our largest and most important retailer. In Q1, we continue to see the impacts of the high interest rate environment on both consumer confidence and affordability. However, it is positive to see customer enthusiasm for motorcycles despite this challenging environment. Outside of North America, both European APEC regions were soft, mainly due to regional macroeconomic conditions.
Yoga: Thank you Sean and good morning, everyone. Thank you for joining us for our Q1 2024 results.
Yoga: Harley Davidson delivered a good start to the year in line with our expectations.
Corinne Dennis: Looking at retail for the quarter, we are pleased with our delivery of 6% growth in North America, our largest and most important region.
Corinne Dennis: In Q1, we continued to see the impact of the high interest rate environment on both consumer confidence and affordability.
Yoga: However, it is positive to see customer enthusiasm for our motorcycles. Despite this challenging environment.
Yoga: Outside of North America, both the Europe, and APAC regions with soft mainly due to regional macroeconomic conditions.
Jochen Zeitz: However, it is also worth noting that our 24 product only started to arrive in the international regions in March and is just now making its way into most international markets. And as the riding season is starting to get into gear, we are excited for our riders and fans both inside and outside of North America to get to experience the next era of Harley-Davidson Touring Motorcycles. As usual, I will now briefly address select Hardwire strategic pillars and our delivery of them, starting with Pillar 1, ProfitFolk.
Yoga: It is also worth noting that our 24 product only started to arrive in the international regions in March and it's just now making its way into most international markets.
Yoga: And Thats the riding season is starting to get into gear. We're excited for a variety of defense, both inside and outside of North America to get to experience. The next era of Harley Davidson touring motorcycles.
Yoga: As usual I will now briefly address select hotwire strategic pillars, and our delivery of them starting with below one profit focus.
Jochen Zeitz: When we announced our Hardwire strategy back in 2021, we made a commitment to invest in our core categories. And building on that commitment, this year, we ushered in a new era of motorcycle touring by reimagining two of the most iconic motorcycles in history, the Harley Davidson Street and Road Glide, with the most comprehensive product redevelopment in well over 10 years. Overall, we are very pleased with our new model year launch and, in particular, our new touring line-up, which is being received very positively by customers, dealers, and media alike. One outlet summarized the launch particularly well.
Yoga: When we announced our hardware strategy back in 2021, we made a commitment to invest in our core categories.
Yoga: And building on that commitment this year, we ushered in a new era of motorcycle Turing by re imagining and two of the most iconic motorcycle in history.
Yoga: Davidson Street and road glide with the most comprehensive product redevelopment in well over 10 years.
Yoga: Overall, we're very pleased with our new model year launch and in particular, our new Turing lineup, which is being received very positively by customers dealers and media alike.
Yoga: One outlet summarize the launch, particularly well.
Jochen Zeitz: The motor company took the motorcycling world by surprise with the release of the re-vent versions of the Road Glide and Street Glide, completely different from their predecessors, a more modernized approach that made them superior to the previous generation in nearly every aspect. The all-new Street Glide and Road Glide models have set a new standard for the industry and the future of touring and adventure on two wheels with exceptional performance, cutting-edge innovation, and bold new design, representing the largest investment made by the motor company into a single platform.
Yoga: The Motor company took the Motorcycling work by surprise with the release of the revamped versions of the road glide and street glide completely different from the predecessors more modernized approach that made them superior to the previous generation in nearly every facet.
Yoga: Okay.
Yoga: The all New Street glide and road glide models have set a new standard for the industry and the future of touring and adventure two wheels with exceptional performance cutting edge innovation and bold new design, representing the largest investment made by the motor company into a single platform.
Jochen Zeitz: We believe that by elevating every aspect of performance, technology, comfort, and style, we have without question created the most enticing touring motorcycles ever offered by Harley-Davidson. We continue to see significant positive feedback for the product across the network and are excited for our riders to have full access to the lineup as the riding season gets underway. Included in our 24-launch and designed to celebrate 25 years of custom vehicle operations, our CVO lineup expanded with the introduction of the all-new CVO RoadLight ST, representing the pinnacle of back-up performance, and the CVO Pan America, fully kitted out for extraordinary adventure.
Yoga: We believe that by elevating every aspect of performance technology comfort and style. We have without question created the most enticing touring motorcycles ever offered by Harley Davidson.
Yoga: We continue to see significant positivity for the product across the network and are excited for a ride us full access to the lineup as the riding season gets underway.
Yoga: Included in our 24 launch and designed to celebrate 25 years of custom vehicle operations. Our CBO lineup expanded with the introduction of the all new with CDO Road glide S T representing the pinnacle of performance and the CBO Pan America fully kitted Alpha extraordinary adventures.
Jochen Zeitz: The CVO Road Glide ST is the lightest, fastest, and most sophisticated performance beggar ever produced by Harley-Davidson. Taking from our popular Lowrider ST offering, the CVO Road Glide ST combines West Coast custom style and performance trends that we've been fueling with the King of the Beggar racing series.
Yoga: The CBO road glide St's lightest fastest and most sophisticated performance ever produced by holiday.
Yoga: Taking from our popular low rider S T offering the CBO road glide SD combines west coast custom style and performance trends that we've been feeling with the king of the beggar racing series.
Yoga: To quote another outlet.
Jochen Zeitz: The CV-OST is the best motorcycle Harley-Davidson has ever put out. For 2024, we also repriced both the CVO Street and Road Glide models that we introduced during Homecoming last year in exciting new color options. The CVO Pan America is another new vehicle in the CVO program's first adventure touring motorcycle. All of the features that have made the Pan America 1250 special a leading choice among discerning global adventure touring riders have been retained, with the CVO Pan America being kitted out with an additional host of rugged accessories selected to enhance the journey.
Yoga: OSB is the best motorcycle Harley Davidson has ever put out.
Yoga: For 'twenty four we also reprised both the CBO Street in road glide models that we introduced during homecoming last year, an exciting new color options.
Yoga: The CBO Pan America is another new vehicle and the CPO programs first adventure touring motorcycles.
Yoga: All of the features that have made the Pan America, 12, 50, especially leading choice among discerning global adventure touring riders had been retained for the CBO Pan America being kitted out with an additional host of rocket accessories selected to enhance the journey.
Jochen Zeitz: With the Hardwire, we also made a commitment to introduce a series of motorcycles that align with our strategy to increase desirability and drive the legacy of Harley-Davidson. With that in mind, this February during Daytona Bike Week, we revealed the latest additions to our limited edition Harley-Davidson Icons and the Limited Run Enthusiast Collection. For the 24ICONS models, this year we launched the Hydra-Glide Revival, celebrating the 75th anniversary of this iconic motorcycle.
Yoga: With the Hotwire, we also made a commitment to introduce a series of motorcycles that align with our strategy to increase desirability and to drive the legacy of Harley Davidson.
Yoga: With that in mind. This February during Daytona bike week, we revealed the latest additions to our limited edition holiday Davidson icons and the limited run enthusiast collection.
Yoga: For the 24 icons models. This year, we launched the hydro applied revival celebrating the 75th year of this iconic motorcycles.
Jochen Zeitz: The release was inspired by the look of the motorcycles written in the area of the upcoming film, The Bike Riders, which follows the rise of a Midwestern motorcycle club as seen through the lives of its members. Coming to your screens this summer, the film is scheduled to be released in the United States on June 21st.
Yoga: The release was inspired by the look of the motorcycles written in the area of the upcoming film the bike riders, which follows the rise of a Midwestern motorcycle club as seen through the lives of its members.
Yoga: Coming to your screens. This summer of the film is scheduled to be released in the United States on June 21.
Jochen Zeitz: For the 24 Enthusiasts offering, we celebrated both music and motorcycles with the release of the Tobacco Fade Enthusiast motorcycle collection available across three models, the Low Rider ST, the Ultra Limited, and the Tri-Glide Ultra. Again, we've seen a very positive response from customers to these offerings just in time for the spring season to get well underway. Pillar 3, Leading in Electric.
Yoga: For the 24 enthusiasts offering we celebrated both music and motorcycles with the release of the tobacco fate enthusiasts motorcycle collection available across three models the low rider S. T. The ultra limited that Tri glide ultra.
Yoga: Again, we've seen a very positive response from customers to these offerings just in time for the rising season to get well underway.
Yoga: Pillar three leading in electric.
Jochen Zeitz: Livewire continue to pioneer the EV segment with the launch of the S2 Mulholland, the second bike on the S2 platform. The bike has been met with a very positive response in the industry, as Karim will detail shortly. We're also very pleased that Livewire has become the market leader for on-road EV motorcycles in the U.S. this past quarter. And with the company increasing its focus on vehicle and operational costs, it will also consolidate its operations in Milwaukee at Harley-Davidson's historic headquarters on Juneau Avenue. Turning to pillar four, growth beyond buy.
Yoga: Lifewire continue to pioneer the EV segment with the launch of the <unk> Mulholland all new electric cruiser.
Yoga: Back on the <unk> platform.
Yoga: The bank has been met with very positive response in the industry as Karim will detail shortly.
Yoga: We're also very pleased that lifeway has become the market leader for on road motorcycles in the U S. This past quarter.
Yoga: And with the company increasing its focus on vehicle and operational costs. It will also consolidate its operations in Milwaukee at Harley Davidson's historic headquarter at Juno Avenue.
Yoga: Turning to pillar for growth beyond bikes.
Jochen Zeitz: In February, through HDFS, we launched Harley-Davidson FlexFinance. For the first time in our history, this innovative loan option provides an alternative way to purchase a Harley-Davidson motorcycle. By combining the benefits of attractive monthly payments, shorter terms, and greater flexibility throughout the loan period, the product offers customers the ability to return the motorcycle at the end of the term, ready to replace or upgrade to their next Harley-Davidson purchase. We are committed to putting customers at the forefront of our products and experiences.
Yoga: In February through H, DFS, we launched Harley Davidson flex financing.
Yoga: For the first time in our history. This innovative loan option provides an alternate way to purchase a Harley Davidson motorcycle.
Yoga: By combining the benefits of objective monthly payments shorter terms and greater flexibility throughout the loan period. The product offers customers the ability to return the motorcycle at the end of the term.
Yoga: Ready to replace or upgrade into the next Harley Davidson purchase.
Yoga: We are committed to putting customers at the forefront of our products and experiences HD flex does just that while providing them with another innovative financing option to make Harley Davidson motorcycle ownership fit their individual budget and lifestyle.
Jochen Zeitz: HDFlex does just that by providing them with another innovative financing option to make Harley-Davidson motorcycle ownership fit their individual budget and lifestyle. Pillar 5, Customer Experience. We are just under 100 days to go. Our second annual homecoming event will be taking place July 25 to 28. Last week, we announced the full roster of performers, with headliners including the Red Hot Chili Peppers, Jelly Roll, and Hardy.
Yoga: Pillar <unk> customer experience.
Yoga: We have just under 100 days to go our second annual Homecoming event will be taking place July 25 to 28.
And last week, we announced the full roster performance with headlines, including the retrofit Chili peppers jelly roll in Hardy.
Jochen Zeitz: Tickets are now on sale, and we look forward to coming together with our community of fans, riders, and their families to celebrate our brand of motor culture and music. And, lastly, on Pillar 6, Inclusive Stakeholder Management, we are looking forward to formally unveiling the new community park at our Junior Avenue headquarters on June 24. The project, which has been pioneered by the Harley-Davidson Foundation, will look to further connect the company, our brand, and our employees to the local community, reinforcing our commitment to our hometown Milwaukee. We could not be more excited to show you our neighborhood on the near west side.
Yoga: Tickets are now on sale and we look forward to coming together with our community fence writers and their families to celebrate our brand of motor culture and music.
Yoga: And I hope to see many of you there.
Jochen Zeitz: And last year until Essex inclusive stakeholder management, we're looking forward to formally unveiling the new community pocket, Our Junior Avenue headquarters on June 24.
Jochen Zeitz: Project, which has been pioneered by the Harley Davidson Foundation will look to further connect the company our brand and our employees to the local community reinforcing our commitment to our hometown Milwaukee.
Jochen Zeitz: We could not be more excited to show you our neighborhood on the new west side.
Jochen Zeitz: Before I hand over to Karim to cover Livewire, I would like to cover our outlook for the rest of the year. As we said earlier in the year, for HDMC, we expect retail units to be flat to up 9%. From an inventory point of view, we believe dealers are appropriately positioned with the riding season getting into full swing, and we continue to expect that wholesale unit shipments will move together with dealer retail sales on a balanced basis by the end of 2024.
Jochen Zeitz: Before I hand over to Karim to cover Lifewire I would like to cover our outlook for the rest of the year.
Jochen Zeitz: As we said early in the year for <unk>, we expect retail units to be flat to up 9%.
Jochen Zeitz: From an inventory point of view, we believe dealers are appropriately positioned with the riding season getting into swing and we continue to expect that wholesale unit shipments will move together with dealer retail sales on a balanced basis by the end of 'twenty four.
Jochen Zeitz: This range would equate to wholesale unit shipments being down between 1 and 10% versus the prior year. This would result in HTMC revenue coming in at flat to down 9%. We expect HTMC's operating income margin of 12.6% to 13.6%, which is flat to down 100 basis points from the 23 level. Let me mention the specific drivers of this again, negative operating leverage due to low wholesale volumes, foreign currency, which we expect to be a headwind, NICs, which we expect to be slightly favorable, and pricing, which we expect to be slightly down as we eliminate the surcharge and fine-tune our pricing strategy.
Karim: This range would equate to wholesale unit shipments being down between one and 10% versus prior year.
Jochen Zeitz: This was the result in <unk> revenue coming in flat to down 9%.
Jochen Zeitz: We expect <unk> operating income margin of 12, 6% to 13, 6%. This is flat to down 100 basis points from the 23 level.
Jochen Zeitz: And let me mention the specific drivers of this again.
Jochen Zeitz: Negative operating leverage due to lower wholesale volumes foreign currency, which we expect to be a headwind mix, which we expect to be slightly favorable.
Jochen Zeitz: Pricing, which we expect to be slightly down as we eliminated the surcharge and fine tuned our pricing strategy and.
Jochen Zeitz: And lastly, we expect some additional manufacturing costs as we realign factory processes in the initial year of production of the new Streetlight and Roadlight motorcycles. At HDFS, we expect operating income to be flat to up 5%, reflecting retail and wholesale portfolios and customers settling into the existing macroeconomic backdrop. As you will hear from Karim now, for the full year, Livewire is revising its Operating Loss Guidance and now expects an improved Operating Loss of $105 to $115 million from previous guidance of an Operating Loss of $115 to $125 million.
Jochen Zeitz: And lastly, we expect some additional manufacturing costs as we realign factory processes in the initial yield production of the new Streetlight and road glide motorcycles.
Jochen Zeitz: At H DFS, we expect operating income to be flat to up 5%, reflecting retail and wholesale portfolios in customers settling into the existing macroeconomic backdrop.
Jochen Zeitz: As you will hear from Karim now for the full year Lifewire is revising its operating loss guidance and now expect an improved operating loss of $105 million to $115 million from previous guidance of net operating loss of $115 million to $125 million.
Jochen Zeitz: Lastly, I would like to reinforce our commitment to returning access-free cash flow to our shareholders. We plan to continue to optimize our returns through share repurchases and appropriate dividend payments. You can see our commitment to capital returns since 2022 on page 15. Since the beginning of 2022 and through Q1 2024, we've bought back $773 million in shares and paid out $214 million in dividends. This equates to almost $1 billion in capital return to shareholders since 2022 and a share buyback amounting to 14% of our outstanding shares. We are planning to remain on a similar trajectory to this annualized rate throughout 2024. Thank you, and now I'll hand it over to Karim.
Karim: Lastly, I would like to reinforce our commitment to returning excess free cash flow to our shareholders.
Karim: We plan to continue to optimize our returns through share repurchases and appropriate dividend payments.
Karim: You can see our commitment to capital returns since 2022 on page 15.
Karim: Since the beginning of 'twenty, two and through Q1, 'twenty four we bought back $773 million in shares and paid out $214 million in dividends.
Karim: This equates to almost $1 billion in capital returned to shareholders since 2002, and the share buyback amounting to 14% of our outstanding shares.
Karim: We are planning to remain on a similar trajectory to this annualized rate through 'twenty four.
Karim: Thank you and now I'll hand, it over to Corey.
Karim Dinesh: Good morning, everyone. We are happy to report on the successful launch of the S2 Moorholland in both the United States and Canada. This is the second motorcycle built on the LiveWire developed S2 platform, following the S2 delta. This brings our lineups closer to feedback, pending the choices available to LiveWire riders. The response from the market has been positive, with riders, retailers, and media responding to the Mulholland styling and the option to choose a bike with a lower riding position. In the first quarter, Livewire reported sales of 117 units, an 86% increase over the first quarter of 2025.
Karim: Thank you Johan.
Karim: Good morning, everyone.
Karim Dinesh: We are happy to report on a successful launch.
Karim Dinesh: The <unk> multiple and in both the United States and Canada.
Karim Dinesh: This.
Karim Dinesh: Is the second model cycle based on the live wire developed two platform.
Karim Dinesh: Following the <unk>, Denmark.
Karim Dinesh: The brain power lineup.
Karim Dinesh: Feedback.
Karim Dinesh: Pending the choices available to library our riders.
Karim Dinesh: The response from the market has been positive with guided.
Karim Dinesh: Retailers and media.
Karim Dinesh: Responding to the mood hall, and timing and the option to choose a bike with a lower arriving position.
Karim Dinesh: In the first quarter <unk> reported sales of 117 unit and 83% increase over the first quarter of 2023.
Karim Dinesh: Our retail sales outpaced wholesale.
Karim Dinesh: Our retail sales outpaced whole sales as Del Mar made its way into the channel, making, as you have mentioned, Livewire the number one on-board electric motorcycle in the U.S. In Europe, we began shipping S2 Del Mar to our four priority countries at the end of the quarter, with products now available across our network in the region.
Karim Dinesh: <unk> made its way into China.
Karim Dinesh: Making as Johan mentioned live via the number one onboard and it creates more of a cycle in the U S.
Karim Dinesh: In Europe, we began shipping <unk> to <unk> 12.
Karim Dinesh: Our four priority countries at the end of the quarter.
Karim Dinesh: With product now available across our network in the region.
Karim Dinesh: We have similar plans for Stasic, with the first bikes being shipped to Europe as we speak. Meanwhile, while we plan to expand our market leadership, our teams are working on design, engineering, and sourcing initiatives to reduce the cost of our products. We are also planning to reduce spend and closely manage cash across the operation to get the most out of our strategic investment. To that effect, we will centralize all of our operations on Juneau Avenue in Milwaukee, including the relocation of LiveWire Lab operations from California to enable synergy and efficiency.
Karim Dinesh: We have continued our plans both basic with the first bag being shipped to Europe as we think.
Karim Dinesh: While we plan to expand our market leadership, our team are working on design engineering and sourcing initiatives to reduce the cost of our product.
Karim Dinesh: We are also planning to reduce spend and closely manage cash across the operation to get the most out of our strategic investments.
Karim Dinesh: To that effect, we will centralize all of our operation in Juneau Avenue in Milwaukee, including the relocation of our library, our lab operations from California to enable the energy and efficiency.
Karim Dinesh: We will take this opportunity to streamline and revisit the organization structure to achieve simplicity in everything we do. While we maintain the output for the revenue unit, we now expect a $10 million improvement in operating loss while continuing to focus a larger portion of expenses on product innovation and market development. Livewire is fully committed to electrifying the sport by building the best products and delivering an unmatched customer experience. Thank you, and now I'll hand it over to Jonathan.
Karim Dinesh: We will take this opportunity to streamline and revisit the organization structure to achieve simplicity in everything we do.
Jonathan: While we maintain the outlook for the revenue unit.
Jonathan: We now expect.
Jonathan: $10 million improvement in operating now.
Jonathan: <unk> to focus the larger portion of expensing on product innovation and market development.
Jonathan: <unk> will be committed to the electrification of the sport by building, the best product and delivering an unmatched customer experience.
Karim Dinesh: Thank you and now I'll hand, it over to Jonathan.
Jonathan R. Root: Thank you, Kareem, and good morning to all. I plan to start on page 5 of the presentation, where I will briefly summarize the consolidated financial results for the first quarter of 2024, and subsequently, I will go into further detail on each business. Consolidated revenue in the first quarter was down 3%, driven by a HDMC revenue decrease of 5%, which was partially offset by HDFS revenue growth of 12%. Consolidated operating income in the first quarter performed in line with our expectations and was down 29%, driven by a decline of 29% at HDMC, a decline of 8% at HDFS, and an operating loss of $29 million in the Livewire sector.
Speaker Change: Thank you Cory and good morning to all I plan to start on page five of the presentation, where I will briefly summarize the consolidated financial results for the first quarter of 2024, and subsequently I will go into further detail on each business segment.
Jonathan R. Root: Consolidated revenue in the first quarter was down 3% driven by H DMC revenue decrease of 5%, which was partially offset by <unk> revenue growth of 12%.
Jonathan R. Root: Consolidated operating income in the first quarter performed in line with our expectations and was down 29%.
Jonathan R. Root: Driven by a decline of 29% of <unk>, a decline of 8% at <unk> and an operating loss of $29 million and the LIBOR air segments.
Jonathan R. Root: Consolidated operating income margin in the first quarter was 15.2%, representing a 545 basis point decline versus Q1 of 2024. The lower consolidated margin is largely due to a lower Q1 margin at HDMC, driven by lower volumes, pricing, and associated throughput. I plan to go into further detail on each business segment's profit and loss drivers in the next section. First quarter earnings per share was $1.72.
Jonathan R. Root: Consolidated operating income margin in the first quarter was 15, 2%, representing a 545 basis point decline versus Q1 of 2024.
Jonathan R. Root: The lower consolidated margin is largely due to a lower Q1 margin at <unk>, driven by lower volumes pricing and associated throughput.
Jonathan R. Root: I plan to go into further detail on each business segment profit and loss drivers in the next section.
Jonathan R. Root: First quarter earnings per share was $1 72.
Jonathan R. Root: In Q1, global retail sales of new motorcycles were flat versus the prior year. In North America, however, Q1 retail sales were up 6%, driven primarily by the redesigned and all-new Street Glide and Road Glide touring motorcycles, which were introduced at the end of January. In EMEA, Q1 retail sales declined by 11% due to weakness in Germany and France. Overall, EMEA continues to be adversely impacted by macroeconomic conditions and geopolitical uncertainty, which has led to sluggish economic growth.
Jonathan R. Root: In Q1 global retail sales of new motorcycles were flat versus the prior year.
Jonathan R. Root: In North America, Q1, retail sales were up 6% driven primarily by the redesigned and all New Street glide and road glide touring motorcycles, which were introduced at the end of January.
Jonathan R. Root: In EMEA Q1, retail sales declined by 11% due to weakness in Germany, and France. Overall EMEA continues to be adversely impacted by macroeconomic conditions and geopolitical uncertainty, which has led to sluggish economic growth.
Jonathan R. Root: In Asia-Pacific, Q1 retail sales declined by 12%, driven by weakness primarily in China. This is the third quarter in a row where we have experienced declines in the region after six sequential quarters of solid year-over-year growth in Asia-Pacific. In Latin America, retail sales experienced modest growth in both Mexico and Brazil; dealer inventory at the end of Q1 was up approximately 26% as compared to the end of Q1 in 2023.
Jonathan R. Root: In Asia Pacific Q1, retail sales declined by 12% driven by weakness primarily in China.
Jonathan R. Root: This is the third quarter in a row, where we have experienced declines in the region. After six sequential quarters of solid year over year growth in Asia Pacific and.
Jonathan R. Root: Latin America Q1, retail sales experienced modest growth in both Mexico and Brazil.
Jonathan R. Root: Inventory at the end of Q1 was up approximately 26% as compared to the end of Q1 in 2023.
Jonathan R. Root: We believe current dealer inventory and product availability are in healthy positions overall as we approach the spring 2024 riding season. This is important with the recent launch of new model year 2024 motorcycles, especially with the positive reception of our new Street Glide and Road Glide Touring models.
Jonathan R. Root: We believe current dealer inventory and product availability are in healthy position overall as we approach the spring 2020 for riding season.
Jonathan R. Root: This is important with the recent launch of new model year 2020 for motorcycles, especially with the positive reception to our New Street glide and road glide touring models.
Jonathan R. Root: Looking at revenue, HDMC revenue decreased by 5% in Q1. Focusing on the key drivers for the quarter, seven points of decline came from decreased wholesale volume at HDMC, largely due to the fact dealers were rebuilding dealer inventory in Q1 2023 after the lows they experienced following the pandemic. Motorcycle shipments in the quarter, while below prior year, were slightly ahead of 2021 and 2022 levels. Three points of decline came from pricing, which includes the impacts of the pricing surcharge elimination, other pricing actions on the 2024 model year, and sales incentives. Mix contributed four points of growth as we continue to prioritize our most profitable models and markets. And finally, foreign exchange was slapped into Q1 of the previous year.
Jonathan R. Root: Looking at revenue <unk> revenue decreased by 5% in Q1.
Jonathan R. Root: Focusing on the key drivers for the quarter seven points of decline came from decreased wholesale volume at <unk> largely due to the fact dealers we're rebuilding dealer inventory in Q1 2023 after the lows they experienced following the pandemic.
Jonathan R. Root: Motorcycle shipments in the quarter, while below prior year, we're slightly ahead of 2021 and 2022 levels.
Jonathan R. Root: Three points of decline came from pricing, which includes the impacts of the pricing surcharge elimination other pricing actions on 2020 for model year and sales incentives.
Jonathan R. Root: Mix contributed four points of growth as we continue to prioritize our most profitable models and market.
Jonathan R. Root: And finally foreign exchange was flat to Q1 prior year.
Jonathan R. Root: In Q1, HDMC's gross margin was 31.2%, which compares to 35.8% in the prior year. The decrease of 450 basis points was driven by lower operating leverage and the revenue factors I just spoke about, as well as continued modest cost inflation of 1 to 2 percent. The majority of the units shipped in the first quarters of 2024 and 2023 were produced in the preceding fourth quarters in advance of the new model year launch.
Jonathan R. Root: In Q1, <unk> gross margin was 31, 2%, which compares to 35, 8% in the prior year.
Jonathan R. Root: The decrease of 450 basis points was driven by lower operating leverage and the revenue factors I just spoke about as well as continued modest cost inflation of 1% to 2%.
Jonathan R. Root: The majority of the units shipped in the first quarters of 2024, and 2023 were produced in the preceding fourth quarters in advance of the new model year launch.
Jonathan R. Root: Production volumes were down 24% in the 4th quarter of 2023 compared to the 4th quarter of 2022, which resulted in a higher fixed cost per unit on motorcycles shipped in Q1 of 2024 compared to Q1 of 2023. However, the unfavorable impact of lower operating leverage was offset by other productivity savings related primarily to logistics during the quarter. HDMC's operating margin came in at 16.2%, which is above our full year expectation and in line with expectations for the quarter.
Jonathan R. Root: Production volumes were down 24% in the fourth quarter of 2023 compared to the fourth quarter of 2022, which resulted in a higher fixed cost per unit on motorcycles shipped in Q1 of 2024 compared to Q1 of 2023.
Jonathan R. Root: The unfavorable impact of lower operating leverage was offset by other productivity savings related primarily to logistics during the quarter.
Jonathan R. Root: <unk> operating margin came in at 16, 2%, which is above our full year expectations and in line with expectations for the quarter.
Jonathan R. Root: At Harley-Davidson Financial Services, Q1 revenue increased by $26 million, or 12%, driven by higher retail and commercial finance receivables, as well as higher average yields as the portfolio resets over time due to higher base rates, which are driving higher interest rates. HDFS operating income was $54 million, down $5 million, or 8% compared to last year. The Q1 decline was driven by higher borrowing costs, a higher provision for credit losses, and higher operating expenses.
Jonathan R. Root: At Harley Davidson financial services, Q1 revenue increased by $26 million or 12% driven by higher retail and commercial finance receivables as well as higher average yields as the portfolio resets over time due to higher base rates, which are driving higher interest income.
Jonathan R. Root: <unk> operating income was $54 million down $5 million or 8% compared to last year.
Jonathan R. Root: The Q1 decline was driven by higher borrowing costs, a higher provision for credit losses and higher operating expenses. These.
Jonathan R. Root: These increased costs were partially offset by higher interest. Total interest expense was up $15 million, or 21% 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. In Q1, HDFS's annualized retail credit loss ratio was 3.7%, which compares to an annualized retail credit loss ratio of 3.2% in Q1 of 2023. The increase in credit losses was driven by several factors relating to the current macroeconomic environment and related customer and industry dynamics.
Jonathan R. Root: These increased costs were partially offset by higher interest income.
Jonathan R. Root: Total interest expense was up $15 million or 21% versus the prior year the.
Jonathan R. Root: The increase was driven by a higher cost of funds is lower interest rate debt matured and was replaced with current market rate.
Jonathan R. Root: In Q1, Hff's as annualized retail credit loss ratio was three 7%, which compares to an annualized retail credit loss ratio of three 2% in Q1 of 2023.
Jonathan R. Root: The increase in credit losses was driven by several factors relating to the current macroeconomic environment and the related customer and industry dynamics.
Jonathan R. Root: In addition, the retail allowance for credit losses for the first quarter remained flat at 5.4% from Q4 of 2023. Total retail loan originations in Q1 were up 2%, while commercial financing activities were up 22% to $1.5 billion.
Jonathan R. Root: In addition, the retail allowance for credit losses for the first quarter remained flat at five 4% from Q4 of 2023.
Jonathan R. Root: Total retail loan originations in Q1 were up 2%, while commercial financing activities were up 22% to one 5 billion.
Jonathan R. Root: Total quarter-end net financing receivable, including both retail loans and commercial financing, was $7.9 billion, which was up 4% versus the prior year. For the Livewire segment, electric motorcycle revenue decreased in the first quarter of 2024 compared to the prior year period, despite higher unit sales in the quarter. The lower revenue was due primarily to product mix and a one-time adjustment relating to a change in their retail partner strategy. Selling, engineering, and administrative expenses remained relatively flat compared to the prior year.
Jonathan R. Root: Total quarter end net financing receivables, including both retail and commercial financing was $7 9 billion, which was up 4% versus prior year.
Jonathan R. Root: For the Library segment electric motorcycles revenue decreased in the first quarter of 2024 compared to the prior year period, Despite higher unit sales in the quarter.
Jonathan R. Root: The lower revenue was due primarily to product mix and a one time adjustment relating to a change in their retail partner strategy.
Jonathan R. Root: Selling engineering and administrative expenses remained relatively flat compared to the prior year.
Jonathan R. Root: As expected, basic revenue was down compared to Q1 of 2023, primarily due to a reduction in third-party brand and distributor volume. The Livewire operating loss of $29 million was in line with our expectations as Livewire continued to invest in new motorcycle models and actioned initiatives to reduce EV costs. In addition, SG&A was flat to the prior year. Wrapping up with Consolidated Harley-Davidson Inc. whole year financial results, we delivered $104 million in operating cash flow in Q1, which was up from $47 million in the prior period.
Jonathan R. Root: As expected basic revenue was down compared to Q1 of 2023, primarily due to a reduction in third party branded distributor volumes.
Jonathan R. Root: Likewise, our operating loss of $29 million was in line with our expectations as live wire continued to invest in new motorcycle models and action initiatives to reduce costs.
Jonathan R. Root: In addition, SG&A was flat to prior year.
Jonathan R. Root: Wrapping up with consolidated Harley Davidson, Inc. Full year financial results, we delivered $104 million.
Jonathan R. Root: Operating cash flow in Q1, which was up from $47 million in the prior period.
Jonathan R. Root: The increase in operating cash flow was due primarily to lower net cash outflows for wholesale financing and favorable changes in working capital compared to Q1 of 2023. Total cash and cash equivalents ended at $1.5 billion, which was $97 million lower than at the end of Q1 of the previous year. This consolidated cash number includes $141 million at Livewire.
Jonathan R. Root: The increase in operating cash flow was due primarily to lower net cash outflows for wholesale financing and favorable changes in working capital compared to Q1 of 2023.
Jonathan R. Root: Total cash and cash equivalents ended at $1 5 billion, which was $97 million lower than at the end of Q1 prior year.
Jonathan R. Root: This consolidated cash number includes $141 million at live wire.
Jonathan R. Root: Additionally, as part of our capital allocation strategy and in line with our commitment to return capital to our shareholders, we bought back 2.5 million shares of our stock at a value of $98 million in Q1 of 2024. As we look to the rest of 2024, we remain excited about our new 2024 motorcycle lineup, and as Jochen discussed, we are reaffirming our full-year guidance with the exception of the improvement noted in Lightwire Operating Law.
Jonathan R. Root: Additionally, as part of our capital allocation strategy and in line with our commitment to return capital to our shareholders. We bought back two 5 million shares of our stock at a value of $98 million in Q1 of 2024 as we look to the rest of 2024, we remain excited about our new 2020 for motorcycle lineup and as.
Jonathan R. Root: <unk> discussed we are reaffirming our full year guidance with the exception of the improvement noted in light layer operating loss.
Jonathan R. Root: I would like to put some unit numbers on our 2024 outlook that Jochen cited earlier, and these are in line with what we said on our last earnings call, which took place in February. At HTMC, we expect that retail units sold and wholesale unit shipments will move together on a balanced basis in 2024. We expect $163,000 to $178,000 in retail and wholesale. This results in HDMC revenue coming in flat to down 9% versus the prior year.
Jonathan R. Root: Would like to put some unit numbers to our 2024 outlook. The yocum cited earlier and these are in line with what we said on our last earnings call, which took place in February.
Jonathan R. Root: At <unk>, we expect that retail units sold in wholesale unit shipments will move together on a balanced basis in 2024.
Jonathan R. Root: We expect 163000 to 178000 retail and wholesale.
Jonathan R. Root: This results in <unk> revenue coming in flat to down 9% versus prior year.
Jonathan R. Root: Last I'll touch on a couple of additional items in terms of capital investments and capital allocation.
Jonathan R. Root: We continue to expect total HDI capital investments in the range of $225 million to $250 million.
Jonathan R. Root: Last, I will touch on a couple of additional items in terms of capital investments and capital allocation. We continue to expect total HDI capital investments in the range of $225 to $250 million. As we look at capital allocation in 2024, our priorities remain to fund profitable growth of the hardwire initiatives, which includes the capital expenditures mentioned previously, paying dividends, and continuing to execute discretionary share repurchases. And with that, we will open it up to Q&A.
Jonathan R. Root: 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.
Jonathan R. Root: Paying dividends and continuing to execute discretionary share repurchases.
Jonathan R. Root: And with that we will open it up to Q&A.
Jonathan R. Root: If you would like to ask a question. Please press star followed by the number one on your telephone keypad.
Jonathan R. Root: Our first question comes from Craig Kennison from Baird. Please go ahead. Your line is open.
Speaker Change: Hey, good morning, Thanks for taking my question and congratulations on the touring momentum I'm wondering if you can speak to the health of the dealer network.
Operator: If you would like to ask a question, please press star followed by the number one on your telephone keypad. Our first question comes from Craig Kennison from Baird. Please go ahead; your line is open.
Craig R. Kennison: We've seen kind of across our power sports and marine coverage that dealers have been struggling with too much inventory and.
Craig R. Kennison: Hey, good morning. Thanks for taking my question and congratulations on the touring momentum. I'm wondering if you can speak to the health of the dealer network; we've seen kind of across our power sports and marine coverage that dealers have been struggling with too much inventory, skinny margins, and then rates are moving against them as well, which hurts on the floor plant side. There's nothing really unique to Harley-Davidson, but there is a lot of macro stress. I'm just wondering how you feel about the health of the dealer network and whether you're hearing anything different from your new chief commercial officer, Luke Mansfield. Thanks.
Craig R. Kennison: Skinny margins and then rates are moving against them as well, which hurts on the Floorplan side, nothing really unique to Harley Davidson, but.
Craig R. Kennison: There is a lot of macro stress I'm just wondering.
Craig R. Kennison: How you feel about the health of the dealer network and weather.
Craig R. Kennison: You are hearing anything different from your new Chief commercial officer Luc Mansfield. Thanks.
Speaker Change: Hey, Greg Jonathan Thank you for your question I'll start.
Craig R. Kennison: And so I think relative to dealers if we look at dealers today, certainly certainly from a Harley Davidson perspective, there is enthusiasm for what's out there and I think a recognition that customers are showing up taking a look at our new Street glide and road glide motorcycles and then obviously the other 24 model years.
Jonathan R. Root: Hey Craig, it's Jonathan. Thank you for your question. I'll start.
Craig R. Kennison: So as you as you look at the start to the year I think we're pretty pleased with what that looks like and I think the dealer sentiment generally goes with that the one concern that probably is worth being open and honest about is that in an environment, where interest rates have moved up a little bit that certainly has an impact on dealers and dealer health so for.
Jonathan R. Root: And so, I think you know relative to dealers, if we look at dealers today, certainly from a Harley-Davidson perspective, there's enthusiasm for what's out there and, I think, recognition that customers are showing up, taking a look at our new Street Glide and Road Glide motorcycles and then, obviously, the other 24 model years. So as you look at the start of the year, I think we're pretty pleased with what that looks like, and I think dealer sentiment generally goes with that.
Jonathan R. Root: From our perspective, we do pay a lot of attention to kind of the position that our dealers are in the health of the entire network, we think thats something to be very important to key in on.
Jonathan R. Root: The one concern that probably is worth being open and honest about is that in an environment where interest rates have moved up a little bit, that certainly has an impact on dealers and dealer health. So from our perspective, we do pay a lot of attention to the position that our dealers are in and the health of the entire network. We think that's something to be very important to key in on.
Jonathan R. Root: And so from their perspective, a little bit of concern around what they see from a floor plan perspective for us as you heard Youll can talk about on some of his introductory comments, we are paying attention to that balance between what we're putting into the channel in retail over the course of 2024.
Jonathan R. Root: So we are supporting them through paying attention to that as you know we do also have some selective interest rate subvention for customers on customer facing programs.
Jonathan R. Root: And so, from their perspective, a little bit of concern around what they see from a floor plan perspective. For us, as you heard Jochen talk about in some of his introductory comments, we are paying attention to that balance between what we're putting into the channel and retail over the course of 2024, so we are supporting them by paying attention to that. As you know, we do also have some selective interest rate subvention for customers on customer-facing programs only for 2023 model year products.
Jonathan R. Root: Only for 2023 model year product.
Jonathan R. Root: At this point that obviously helps drive dealer traffic that helps attract the more rate sensitive customers and really help them move through their inventory and then obviously as an organization. We make sure that we have some dealer facing programs that are out there that really support and bolster their overall health.
Jonathan R. Root: And so from that perspective, I think something that we do stay attuned to something that we certainly make sure that we take a look at and something that.
Jonathan R. Root: At this point, that obviously helps drive dealer traffic, that helps attract the more rate-sensitive customers and really helps them move through their inventory. And then, obviously, as an organization, we make sure that we have some dealer-facing programs that are out there that really support and bolster their overall health. And so from that perspective, I think something that we do need to stay attuned to, something that we certainly need to take a look at, and something that, you know, I think we need to make sure that, as an industry, we're sensitive to as we move through 2000.
Jonathan R. Root: I think we need to make sure that as an industry, we're sensitive to as we move through 2000.
Jonathan R. Root: <unk>.
Speaker Change: Thanks, Jonathan just as a quick follow up do you have any metrics to share on how fresh or current your inventory as compared to prior periods.
Jonathan R. Root: Okay.
Speaker Change: Sure So as we take a look at.
Jonathan R. Root: As we take a look at the mix that we have from a unit perspective. It does look a little bit different as you look across the across the globe.
Jonathan R. Root: Some some different answers I think that.
Jonathan R. Root: They're very when you look at North America versus EMEA versus Asia Pacific and Latin America. So obviously as we rollout the new model year, It hits, our North American dealers before before it sort of touches the international dealers.
Jonathan R. Root: Thanks, Jonathan. Just as a quick follow-up, do you have any metrics to share on how fresh or current your inventory is compared to prior periods?
Speaker Change: So if we look at where we were in North America. For example, about 35% of dealer inventory was comprised of 2023 model year or non current model year bikes.
Jonathan R. Root: Sure, so as we take a look at the mix that we have from a unit perspective, it does look a little bit different as you look across the globe. So some different answers, I think, that vary when you look at North America versus EMEA versus Asia Pacific and Latin America. So obviously, as we roll out the new model year, it hits our North American dealers before it sort of touches the international dealers.
Jonathan R. Root: As you sort of move around the globe it looks a little bit different so from an EMEA perspective, we get the 2020 fours into market because of shipping times, Homologation et cetera, a little bit later, so from an EMEA standpoint, it would look more like.
Jonathan R. Root: 70, <unk> same thing with Asia Pacific and Latin America. So they are probably more like 70%, 75% at the end of Q1 that are that are 2000.
Jonathan R. Root: So if we look at where we were in North America, for example, about 35% of dealer inventory was comprised of 2023 model year or non-current model year bikes. As you sort of move around the globe, it looks a little bit different. So, from an EMEA perspective, we get the 2024s into the market a little bit later because of shipping times, homologation, etc. So, from an EMEA standpoint, it would look more like 70 – same thing with Asia-Pacific and Latin America.
Jonathan R. Root: 2023 of prior so obviously there is sort of a cadence that flows around the globe, but probably if you are talking with North American dealers is there probably is a little more conversation. There you would see that it's somewhere around a third.
Jonathan R. Root: Our 2003 and older.
Speaker Change: That's great. Thanks, Jonathan Yes, correct.
Johan: Johan here.
Jonathan R. Root: A little bit more color, yeah, we expect our model year 'twenty three to be more or less gone by the end of the second quarter the rate with which the 'twenty threes are selling down in the U S.
Jonathan R. Root: So, they're probably more like 70, 75 percent at the end of Q1 that are 2023 or prior. So, obviously, there's sort of a cycle that flows around the globe. But probably, if you are talking with North American dealers, there probably is a little more conversation there. You would see that it's somewhere around a third that are 23 and older. That's a great thing, John. Yeah, correct, Jochen here.
Jonathan R. Root: As planned and as Jonathan said with the new product coming in.
Jonathan R. Root: The 20 threes are reducing nicely so by the end of the second quarter, we should be.
Jonathan R. Root: Pretty much I don't want to say out of there is always going to be one or two liquid dealer, but a significant portion of the 20 threes will be going based on what we are seeing now.
Jonathan R. Root: And as you look at how we expect wholesale and retail to move obviously in the first quarter getting ready for riding season.
Jonathan R. Root: We shipped more motorcycles and we retailed in advance of the riding season.
Jochen Zeitz: Yeah, Craig, and Jochen here. Just a little bit more color here. We expect model year 23 to be more or less gone by the end of the second quarter. The rate with which the 23s are selling down in the US is as planned, and as Jonathan said, with a new product coming in. The 23s are reducing nicely, so by the end of the second quarter, we should be, you know, pretty much out of them. I don't want to say out of, there's always going to be one or two left per dealer, but a significant portion of the 23s will be gone based on what we are seeing now.
Jonathan R. Root: We expect Q2 be Q2 to be more in equilibrium retail wholesale and then in the second half we would expect retail to overtake wholesale so it just sort of a little bit of kind of how we expect the year to unfold.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Joe <unk> from Raymond James. Please go ahead. Your line is open.
Speaker Change: Hey, guys. Good morning, just wanted to follow up on Craig's question, not so much inventory, but more retail if I look at North America. The retail growth of 6% you had in the first quarter could you give us a sense for how that might have broken down between.
Jochen Zeitz: The model year, 'twenty threes versus the new model year 'twenty fours.
Jochen Zeitz: Okay.
Speaker Change: Sure. So thank you Joe good question.
Jochen Zeitz: Obviously as you as you look as you look throughout the first quarter and you think about the impact that.
Jochen Zeitz: <unk> had on sort of sales.
Jochen Zeitz: And as you look at how we expect hotel and retail to move, obviously, in the first quarter, getting ready for the riding season. We ship more motorcycles than we retail in advance of the riding season. You should expect Q2 to be more in equilibrium between retail and wholesale, and then in the second half, we would expect retail to overtake wholesale. So just sort of a little bit of how we expect the year to unfold.
Jochen Zeitz: Trajectory in sales path.
Jochen Zeitz: As you as you started the quarter.
Jochen Zeitz: In January we were heavily 2023 since we didn't get the 2024 is out there until we got into <unk>.
Jochen Zeitz: Partway into Q into Q1.
Jochen Zeitz: So from a January perspective, it was probably in the range of 75%, 80% that were 23 or prior and then as we moved through the quarter that percentage increased to the the majority by March where obviously 2024 related.
Operator: Our next question comes from Joe Altobello from Raymond James. Please go ahead; your line is open.
Joseph Nicholas Altobello: There is also a little bit of a difference as you look at some of those dynamics by family. So as we look within within touring for example.
Joseph Nicholas Altobello: Thanks. Hey guys, good morning.
Joseph Nicholas Altobello: Thanks. Hey guys, good morning.
Joseph Nicholas Altobello: Just wanted to follow up on Craig's question. Not so much inventory, but more retail. If I look at North America, you know, the retail growth of 6% you had in the first quarter, could you give us a sense for how that might have broken down? The Model Year 23s versus the new Model Year 24s.
Joseph Nicholas Altobello: Somewhat higher percentage of customer interest in North America that was focused on the all new <unk>.
Joseph Nicholas Altobello: Three Gladden road glide motorcycles.
Joseph Nicholas Altobello: From the commentary that we just talked about if you look outside of the US Is certainly was it was a significantly smaller percentage of 20 fours and then as you would imagine and we see that increasing meaningfully as we get into Q2 and beyond.
Jonathan R. Root: Sure. So, thank you, Joe.
Jonathan R. Root: Good question. Obviously, as you look, as you look throughout the first quarter, and you think about the impact that the model year had on sort of sales, trajectory, and sales path. As you started the quarter in January, we were heavily 2023 since we didn't get the 2024s out there until we got into, you know, partway into Q1. So from a January perspective, it was probably in the range of 75, 80% that were 23 or prior.
Speaker Change: Very helpful. Thank you just a follow up on that maybe sort of give us a sense for how how trends progressed throughout the quarter. Maybe here in April I know January was a tough month from a weather perspective, and the model year 'twenty for us haven't launched yet, but what are you seeing so far as to whether its getting warmer and.
Jonathan R. Root: And I guess just to kind of clarify was flat global retail in Q1 in line with what you guys were expecting going in.
Jonathan R. Root: Yeah, Yeah yeah.
Jonathan R. Root: Yes.
Jonathan R. Root: Based on the fact that as Jonathan and I mentioned earlier.
Jonathan R. Root: Only get our international 24 model year into markets starting in March some reach in some margins some.
Jonathan R. Root: And then as we moved through the quarter, that percentage increased to the, you know, the majority by March were obviously 2024 related. There's also a little bit of a difference as you look at some of those dynamics by family. So, as we look within touring, for example, a somewhat higher percentage of customer interest in North America that was focused on the all new 3-glide and road-glide motorcycles. But, from the commentary that we just talked about, if you look outside of the US, it certainly was a significantly smaller percentage of 24-inch wheelbase motorcycles. And then, as you would imagine, we see that increasing meaningfully as we get into Q2 and beyond.
Jonathan R. Root: Markets only even got the 24th at the end of March. So if you now look at the U S market on North America January the first three weeks were very little Rosemary Little actually no no new product in market and overall it was a <unk>.
Jonathan R. Root: Poor start to the quarter.
Jonathan R. Root: As we had already highlighted in our February call.
Jonathan R. Root: With the new product flowing into the into the market, we saw a significant uptick which continued through throughout March.
Jonathan R. Root: And we are expecting that we see positive impact of the new model. We are now flowing into the international market, while recognizing that the touring segment has.
Jonathan R. Root: While it's important is not having the.
Jonathan R. Root: The same impact on overall, so as it does in the United States, where it's the dominant category.
Jonathan R. Root: Looking into April early days, but I would say all things considered overall I would call. It so far so good and certainly a lot better than what we've seen at the beginning of the first quarter. So we are overall positive for the quarter and that's also reflected in our unchanged guidance.
Jonathan R. Root: Very helpful. Thank you.
Jochen Zeitz: Just to follow up on that, maybe sort of give us a sense for how trends progressed throughout the quarter, maybe here in April. I know January was a tough month from a weather perspective, and the model year 24's haven't launched yet, but what are you seeing so far as the weather's getting warmer? And I guess just to kind of clarify, was FLAC Global Retail and Q1 in line with what you guys were expecting going in?
Speaker Change: Okay, great. Thank you guys.
Jochen Zeitz: Our next question comes from Fred Wightman from Wolfe Research. Please go ahead. Your line is open.
Speaker Change: Hey, guys. Thanks for the question I just wanted to ask another one about the difference as far as 20 <unk> versus 24 as I know in the past you guys have targeted sort of plus or minus 2% in terms of MSRP realization is what youre seeing for 'twenty four is sort of in line with that so far.
Jochen Zeitz: Yes, based on the fact that, as Jonathan and I mentioned earlier, we only get our international 24 model year into markets starting in March. Some regions, some markets only even get the 24 at the end of March.
Speaker Change: That is correct yes.
Jochen Zeitz: Okay.
Jochen Zeitz: Know that you guys had made.
Jochen Zeitz: So if you now look at the US market or North America, three weeks was very little, actually no new product in the market, and overall, it was a poor start to the quarter, as we had already highlighted in our February call. However, with the new product flowing into the market, we saw a significant uptick which continued throughout March. And we are expecting that we will see a positive impact of the new model year now flowing into the international market, while recognizing that the touring segment, while it's important, is not having the same impact on overall sales as it does in the United States, where it's the dominant category.
Jochen Zeitz: <unk> for dealer support at the end of last year I think it was $40 million is that still.
Jochen Zeitz: Something that you think is sufficient to clear through the rest of those 20 threes.
Jochen Zeitz: Yeah.
Speaker Change: Yes so.
Jochen Zeitz: Fred This is Jonathan good question, so as we as we take a look at financials relative to.
Jochen Zeitz: Support to move through those units at retail obviously the majority of the dollars were reserved for in Q4, there were some select segments, where we where we made the offer a little bit more attractive from a rate standpoint.
Jochen Zeitz: With that we took a we took.
Jochen Zeitz: Okay.
Jochen Zeitz: The dollar amount that hit our Q1 financials.
Jochen Zeitz: Of about $18 million in Q1, and that's reflected as you take a look at our price locks that we put out there.
Jochen Zeitz: Looking into April, it's early days, but all things considered, overall, I would call it so far so good, and certainly a lot better than what we saw at the beginning of the first quarter. So we are overall positive for the quarter, and that's also reflected in our unchanged guide.
Jochen Zeitz: But overall, we feel like the majority of the dollars obviously have been reserved and then from what we talked about in the prior question is that inventory.
Jochen Zeitz: Sales through and moves down obviously from our perspective, the exposure decreases as the units decrease.
Jochen Zeitz: Okay, great. Thank you, guys.
Jochen Zeitz: So the impact you should expect in the first quarter and the units are now going down so that is reduced.
Operator: Our next question comes from Fred Whiteman from Wolf Research. Please go ahead; your line is open.
Frederick Charles Wightman: Majority has been budgeted for an anticipation.
Frederick Charles Wightman: Hey guys, thanks for the question. I just wanted to ask another one about the difference as far as 23s versus 24s. I know in the past you guys have targeted sort of plus or minus 2% in terms of MSRP realization. Is what you're seeing for 24s sort of in line with that so far?
Frederick Charles Wightman: Perfect. Thanks, a lot.
Frederick Charles Wightman: Our next question comes from Alex <unk> from Bank of America. Please go ahead. Your line is open.
Speaker Change: Yes, hi.
Frederick Charles Wightman: I think maybe a follow up on that last question, but could you just talk about how <unk> gross margins played out versus your expectations. When you sort of put all the pieces together.
Jochen Zeitz: That is correct, yes.
Frederick Charles Wightman: And I guess as we move through the year would you expect to start to see year over year expansion in <unk> gross margins or.
Frederick Charles Wightman: Okay, and I know that you guys had made a reserve for dealer support at the end of last year. I think it was 40 million dollars. Is that still something that you think is sufficient to clear through the rest of those 23s?
Frederick Charles Wightman: How much should we be expecting from pressure from pricing and incentives. Thank you.
Jonathan R. Root: Yeah. So, Fred, this is Jonathan.
Speaker Change: Yes, I'll, let Jonathan take that take the take.
Jonathan R. Root: Good question. So, as we take a look at the financials relative to support to move through those units at retail, obviously, the majority of the dollars were reserved for in Q4. There were some select segments where we made the offer a little bit more attractive from a rate standpoint. And with that, we took a dollar amount that hit our Q1 financials of about $18 million in Q1. And that's reflected as you take a look at our price walks that we put out there.
Speaker Change: I'll explain the details but overall.
Jonathan R. Root: First quarter played out the way we expected it.
Jonathan R. Root: And we held our margin guidance.
Jonathan R. Root: The firm so we feel that the next quarters will go also as expected with improvements in gross profit margin.
Jonathan R. Root: Along the line. So overall, we there's nothing that surprised us in the first quarter. The way that gross margin played out and we think we can achieve our targets that we've set.
Jonathan R. Root: Terms of guidance Jonathan.
Speaker Change: Okay. Thank you okay.
Jonathan R. Root: But overall, we feel like the majority of the dollars, obviously, have been reserved. And then, from what we talked about in the prior questions, as that inventory sells through and moves down, obviously, from our perspective, the exposure decreases as the units decrease.
Speaker Change: Alex just to add a little bit more color on on your question I think in Q1 gross margin came in at 31, 2%, which compares to $35 eight in the prior year. So obviously as you look at that a decrease of about 450 basis points that was driven by lower operating leverage and the revenue facts.
Jonathan R. Root: The biggest impact you should expect in the first quarter, and the units are now going down, so that is reduced, and the majority has been budgeted for in anticipation. Perfect. Thanks a lot. Our next question comes from Alex Perry from Bank of America. Please go ahead, your line is open. Yeah, hi, um, I think maybe a follow-up to that last question, but
Alexander Thomas Perry: <unk> that we walk through on page seven in the deck. So we have some more materials on that we obviously as we look at the gross margin.
Alexander Thomas Perry: As we move forward, we do envision modest cost inflation, something thats around 2%.
Operator: Our next question comes from Alex Perry from Bank of America. Please go ahead; your line is open.
Operator: So.
Alexander Thomas Perry: Where we were last year, maybe up a tiny bit from a from an inflation standpoint, certainly down pretty meaningfully from 2022.
Alexander Thomas Perry: I'll let Jonathan explain the details, but overall, the first quarter played out the way we expected it, and we held our margin guidance. Firm, so we feel that the next quarters will go also as expected with improvements and gross profit margin along the line. So overall, there's nothing that surprised us in the first quarter the way that gross margin played out. And we think we can achieve our targets that we've set in terms of guidance John. Okay, thank you, Okin.
Jonathan: Hang with me here as I explained some of this but the majority of the units that we ship in the first quarters. So think about 2024 and 2023 those were produced in the preceding fourth quarters in advance of the new model year launch.
Jonathan: As we as we sort of try to put this into perspective production volumes in the fourth quarter of 'twenty three we're down about 24% compared to the fourth quarter of 2022, which results in a higher fixed cost per unit on motorcycles that end up getting shipped in the respective quarters.
Jochen Zeitz: Okay. Thanks, Jochen.
Jonathan R. Root: Alex, just to add a little bit more color on your question, I think in Q1, gross margin came in at 31.2%, which compares to 35.8% in the prior year. So, obviously, as you look at that, a decrease of about 450 basis points. That was driven by lower operating leverage and the revenue factors that we walk through on page 7 in the deck. We have some more materials on that.
Jonathan R. Root: That unfavorable impact of the lower operating loss.
Jonathan R. Root: Lower operating leverage is offset through productivity savings in the latest quarter were primarily related to logistics.
Jonathan R. Root: Also a little bit of mix noise in this quarter between motorcycle PNA and AML and so the kind of complexion of makeup between motorcycle PNA and anl causes some some uniqueness as we analyze the dollars so favorable dollars and an unfavorable percent they really expresses.
Jonathan R. Root: We obviously, you know, as we look at the gross margin as we move forward, we do anticipate modest cost inflation of something that's around 2%. So, you know, about where we were last year, maybe up a tiny bit from an inflation standpoint, certainly down pretty meaningfully from 2022. Hold on here as I explain some of this, but the majority of the units that we ship in the first quarters, so think about 2024 and 2023; those were produced in the preceding fourth quarters in advance of the new model year launch.
Jonathan R. Root: The additional dollars from the motorcycle mix with a decreasing mix from <unk>, which have typically favorable margins. So good question I think a unique situation in terms of where we are and then as Johan touched on when we sort of flow that gross margin guidance all the way.
Jonathan R. Root: As we sort of try to put this into perspective, production volumes in the fourth quarter of 23 were down about 24% compared to the fourth quarter of 2022, which results in a higher fixed cost per unit on motorcycles that end up getting shipped in the respective quarters. That unfavorable impact of the lower operating leverage is offset through productivity savings that, in the latest quarter, were primarily related to logistics. There was also a little bit of mixing noise in this quarter between motorcycle P&A and A&L.
Jonathan R. Root: All the way through to sort of Oi margin than what we envisioned on that front.
Jonathan R. Root: We came in at 16, 2%, which is above our full year expectations and as Johan touched on in line with expectations for the quarter.
Speaker Change: So hopefully a little more color probably than you asked for but hopefully that helps helps explain where we are.
Speaker Change: Perfect. That's really helpful best of luck going forward.
Speaker Change: Thank you.
Jonathan R. Root: Our next question comes from James Hardiman from Citi. Please go ahead. Your line is open.
Speaker Change: Hey, good morning, I wanted to dig just a little bit more on the retail front and sort of how the first quarter players into the full year.
Jonathan R. Root: And so the kind of complexion or makeup between motorcycle P&A and A&L causes some uniqueness as we analyze the dollars, so favorable dollars and an unfavorable percent that really expresses the additional dollars from the motorcycle mix with a decreasing mix from A&L and P&A, which have typically favorable margins. So good question, I think a unique situation in terms of where we are. And then, as Jochen touched on, when we sort of flowed that gross margin guidance all the way through to sort of OI margin and what we anticipate on that front, we came in at 16.2%, which is above our full year expectations and, as Jochen touched on, in line with expectations for the quarter. So hopefully, a little more color, probably than you asked for, but hopefully that helps explain where we are.
Jonathan R. Root: Obviously worldwide retail flat for the first quarter.
Jonathan R. Root: Your full year guidance is based on your NII I think a lot of us.
Jonathan R. Root: Or at least the way I thought about it.
Jonathan R. Root: Launching new products in the first quarter easy comps there and there are a lot of promotional dollars.
Speaker Change: So I sort of assume that the first quarter would be the strongest of the year, maybe walk us through how you guys think about the quarterly cadence of what retail is.
Speaker Change: Ultimately go.
Jonathan R. Root: What sort of needs to look like.
Speaker Change: Got it.
Jonathan R. Root: Do you need any macro help to sort of yet.
Jonathan R. Root: Where do you think you need to be.
Jonathan R. Root: Yes.
Operator: Our next question comes from James Hardiman from Citi. Please go ahead; your line is open.
Speaker Change: Thanks James.
Jonathan R. Root: <unk>.
James Lloyd Hardiman: It is always hard to predict retail threat.
James Lloyd Hardiman: I think one factor in the first quarter to consider is the 24, it's not coming into the international markets I am too.
James Lloyd Hardiman: Hey, good morning. I wanted to dig just a little bit more on the retail front and sort of how the first quarter plays into the full year. Obviously, worldwide retail flats for the first quarter; your full year guidance is based on zero to nine. I think a lot of us, or at least the way I thought about it, was that you had a bunch of new products in the first quarter, easy comps there, and then a lot of promotional dollars.
James Lloyd Hardiman: Late in the quarter or not at all in some markets as I mentioned earlier and that should help.
James Lloyd Hardiman: Some of at least the EMEA region.
James Lloyd Hardiman: Out of the negative that we've seen in the first quarter to something that's more balanced going forward. So that's helpful. I think if you look at the Asia market with the weakness in China.
James Lloyd Hardiman: Though we expect some improvement.
James Lloyd Hardiman: So I sort of assume that the first quarter will be the strongest of the year. Maybe walk us through how you guys think about the quarterly cadence of what retail is ultimately gonna look like, what it sort of needs to look like to get to your guide, and do you need any macro help to sort of get to where you're going?
James Lloyd Hardiman: I would say that's.
James Lloyd Hardiman: Likely to turn significantly positive, we'll have to see how that pans out, but I'm more skeptical about the Asian market wherever we budgeted Accordingly, Latin America has been positive in the U S. If you look at the second quarter comp versus prior year is a little tougher than the back half of the year.
Jochen Zeitz: Thanks, James. It is always hard to predict retail but I think one factor in the first quarter to consider is is the 24th not coming into the international market until very late in the quarter or not at all in some markets as I mentioned earlier and that should help pull some of at least the EMEA region out of the negative that we've seen in the first quarter to something that's more balanced going forward so that's helpful I think if you look at the Asia market with the weakness in China although we expect some improvement I would say that that's unlikely to turn significantly positive we'll have to see how that pans out but I'm more skeptical about the Asian market but we've budgeted accordingly Latin America has been positive and the US if you look at the second quarter the comp versus prior year is a little tougher than the back half of the year so you should possibly expect that the North American market you know we don't know if it's going to be positive or how positive is we feel really confident about the market but if you just look at comps the back half is much simpler easier comps than the second quarter, I hope that helps a little bit to contextualize, but in the first quarter, we certainly didn't have any help with the exception of Latin America that was positive, albeit in small numbers from the international market.
Jochen Zeitz: So.
Jochen Zeitz: You should possibly expect.
Jochen Zeitz: The North American market.
Jochen Zeitz: We don't know if it's going to be positive about how positive is we feel really confident about the market, but if you just look at comps that back half is.
Jochen Zeitz: It's much simpler easier comps than the second quarter.
Jochen Zeitz: I hope that helps a little bit too to contextualize, but in the first quarter. We certainly didn't have any help with the exception of Latin America that was positive.
Jochen Zeitz: It's in small numbers from the international market, we hope that that changes at least in EMEA and we are confident for the for the rest of the year, which is but we also have to recognize that we are really just entering the riding season as we speak now and a lot depends on the second quarter, which is why we have not changed our guidance at this point in time.
Speaker Change: Other than confirming our zero or flat two 9%.
Jochen Zeitz: But we feel comfortable about that and hopefully we will have more to say at the end of the second quarter.
James: That's great color and maybe just a point of clarification. So is it safe to assume that given the <unk>.
Jochen Zeitz: Turing focus of the new products that the U S market is.
Jochen Zeitz: It's going to outperform the rest of the world pretty pretty meaningfully in any way to think through that.
Jochen Zeitz: We hope that that changes, at least in EMEA, and we're confident for the rest of the year. But we also have to recognize that we're really just entering the riding season as we speak now, and a lot depends on the second quarter, which is why we have not changed our guidance at this point in time, other than confirming our zero or flat to 9%. But we feel confident about that, and hopefully, we'll have more to say at the end of the second quarter.
Jochen Zeitz: For the year.
Jochen Zeitz: I don't want to predict what the international markets.
Jochen Zeitz: Going to say.
Jochen Zeitz: Are able to deliver but.
Jochen Zeitz: I would say there's likely some outperformance in North America for the entire year I think that that's realistic to assume.
Speaker Change: Got it appreciate the color.
Speaker Change: Our next question comes from Tristan Thomas Martin from BMO Capital markets. Please go ahead. Your line is open.
Jochen Zeitz: That's great, Culler. Maybe just a point of clarification. So is it safe to assume that given the touring focus of the new products, that the US market is going to outperform the rest of the world pretty meaningfully? Any way to think through that?
Speaker Change: Good morning.
Speaker Change: Just two questions. One just kind of curious I know, whether it seems like in some dealer checks.
Jochen Zeitz: Had some impact in dealers in some regions and some regions that had better weather. So anything you can maybe call out there in terms of just kind of overall normalized good weather retail and also just curious about flex financing have you seen any adoption and do you have any targets for that.
Jochen Zeitz: Well, I don't want to predict what the international markets are going to say or are able to deliver, but I would say there's likely to be some outperformance in North America for the entire year. I think that's realistic to assume.
Jochen Zeitz: Yeah.
Jochen Zeitz: Yes, good weather retail I'll put that into my.
Jochen Zeitz: Vocabulary, that's a good one unfortunately, there's never all good weather retail Im afraid and we've certainly seen some of the bad weather.
Jochen Zeitz: Got it. Appreciate the call, you guys. Our next question comes from Tristan Thomas-Martin from BMO Capital Markets. Please go ahead, your line is open. Good morning.
Jochen Zeitz: Throughout.
Tristan M. Thomas: Throughout the quarter in oil markets tend to take California. As an example, it's been terrible weather with floods and rains pretty much throughout the quarter, so that hasn't helped.
Operator: Our next question comes from Tristan Thomas-Martin from BMO Capital Markets. Please go ahead; your line is open.
Tristan M. Thomas: California into gear.
Tristan M. Thomas: And then.
Tristan M. Thomas: Sporadically winter storms and everything haven't had either but I don't want to sort of play the weatherman here I would say overall, it certainly not being supportive.
Tristan M. Thomas: Yeah, good weather retail. I'll put that into my vocabulary. That's a good one.
Jochen Zeitz: Unfortunately, there's never all good weather for retail, I'm afraid, and we've certainly seen some of the bad weather throughout the quarter in all markets. Take California as an example. It's had terrible weather with floods and rain pretty much throughout the quarter. So that hasn't helped to kick California into gear. And then sporadically, winter storms and everything else haven't helped either. But I don't want to sort of play the weatherman here. I would say, overall, it's certainly not been supportive.
Jochen Zeitz: And that's why now really counts in terms of riding season. We are pleased that the overall, where there was good weather, we saw strong momentum and we hope that that momentum continues.
Jochen Zeitz: But overall I don't think its been supportive.
Jochen Zeitz: When the weather was bad but the numbers were not that great. When the weather was good the numbers were great. So.
Jochen Zeitz: It certainly played out that way throughout throughout North America in the first quarter.
Jochen Zeitz: And that's why, you know, now really counts in terms of the riding season. We are pleased that overall, where there was good weather, we saw strong momentum, and we hope that momentum continues. But overall, I don't think it's been supportive. And when the weather was bad, the numbers were not that great. When the weather was good, the numbers were great, and it certainly played out that way throughout North America in the first quarter. Yeah,
Jochen Zeitz: Yes interesting I'll take your question on HD Etfs flex financing so from a flex financing perspective, we recognize that as we rollout anything thats significant from a product perspective, it does sort of require an entire retraining of the dealer body and the sales process and so as we think through.
Jochen Zeitz: That.
Jochen Zeitz: Our expectations are fairly fairly muted in terms of the impact that that would have on 2024, and we really think it will take US 12 to 18, even up to 24 months to kind of get the full dealer network.
Jonathan R. Root: Yeah, and Tristan, I'll take your question on HDFS flex financing. So from a flex financing perspective, we recognize that as we roll out anything that's significant from a product perspective, it does sort of require an entire retraining of the dealer body and the sales process. how to have the right conversation with the customer. So we want to be sensitive to the fact that we don't want to prolong the sales experience for our consumers, but we do want them to understand optionality.
Jonathan R. Root: Behind it fully embracing and then salespeople across the entire United States really understanding how to insert that into the sales process how to have the right conversation with the customer. So we want to be sensitive to the fact that we don't want to prolong the sales experience.
Jonathan R. Root: For our consumers, but we do want them to understand the Optionality I think the good news is that it is a triple number a triple digit number of dealers, who have who have already executed one of those one of those products and kind of sold that through to the consumer so uptake will take some time, but we're pretty pleased with what we're starting to see.
Jonathan R. Root: I think the good news is that it is, you know, a triple number, a triple digit number of dealers who have already executed one of those products and kind of sold that through to the consumer. So uptake will take some time, but we're pretty pleased with what we're starting to see and the response that we're getting so far from the dealer body.
Jonathan R. Root: And the response that we're getting so far from the dealer body.
Operator: Our next question comes from Noah Zatzgen from KeyBank. Please go ahead; your line is open.
Jonathan R. Root: Okay.
Noah Seth Zatzkin: Thank you.
Noah Seth Zatzkin: Our next question comes from Noah is that skin from Keybanc. Please go ahead. Your line is open.
Noah Seth Zatzkin: Hi, thanks for taking my question. Most of my questions have been asked and answered, maybe just one on HDFS.
Noah Seth Zatzkin: Alright, Thanks for taking my question most of my questions have been asked and answered maybe just one on each DFS.
Noah Seth Zatzkin: How are you feeling about the health of the book and then in terms of the annualized retail credit losses during the quarter? Any reason to believe retail credit losses wouldn't kind of track with kind of normal seasonality from here? And then just anything to consider in terms of the allowance with those losses tracking where they are? Okay, thank you.
Noah Seth Zatzkin: How are you feeling about the health of the book.
Noah Seth Zatzkin: And then in terms of the annualized.
Noah Seth Zatzkin: Retail credit losses during the quarter.
Noah Seth Zatzkin: Any reason to believe retail credit losses wouldn't kind of track with kind of normal seasonality from here.
Noah Seth Zatzkin: And then just anything to consider in terms of the allowance.
Noah Seth Zatzkin: With those losses tracking where they are.
Jonathan R. Root: Okay, thank you. As we take a look at the HDFS business, we certainly, you know, we certainly recognize the uniqueness of that. The seasonality within our financial services business is certainly a little bit unique as you look across financial services. Overall, we actually feel like it's following the curve that we expected that it would from a loss perspective. As we think a little bit about the, trying to answer your specific question on what we are thinking by...
Speaker Change: Okay. Thank you.
Jonathan R. Root: As we take a look at the <unk> business, we certainly.
Jonathan R. Root: We certainly recognize the uniqueness of that the seasonality within.
Jonathan R. Root: Our financial services business.
Jonathan R. Root: It is certainly a little bit unique as you look across financial services.
Jonathan R. Root: Overall, we actually feel like it's following the curve that we expected that it would from a loss perspective.
Jonathan R. Root: As we think a little bit about the.
Jonathan R. Root: Trying to answer your specific question on what are we thinking by.
Jonathan R. Root: Certainly something for us to watch pretty carefully in terms of a number of dynamics. So, as we look at that portfolio, we factor in a whole bunch of characteristics, right? As we think about customer delinquency, the percentage of those customers who end up moving through to loss, and some other statistics that surround that, overall... We feel like that is tracking in the way that we would expect it to. So the first quarter looks a little bit more, a little bit higher as you move into Q2, Q3.
Jonathan R. Root: Quarter, we do think it is going to look pretty normal from a seasonality perspective. So as you would expect Q1 being the highest quarter and then you start to see it come down in Q2, Q3, and then pop back up in Q4, so that sort of normal curve is something that we would expect that we will end up that will end up seeing throughout the year.
Jonathan R. Root: <unk>.
Jonathan R. Root: As you move that across to what does that mean from a from an overall loss provision perspective, certainly something for us to watch pretty carefully in terms of a number of dynamics. So as we look at that portfolio we factor in.
Jonathan R. Root: A whole bunch of characteristics right as we think about customer delinquency the percentage of those customers, who end up moving through the loss and some others statistics that surround that but overall.
Jonathan R. Root: You see sort of normalization that follows that period, and then as you flow out of the year, you know, we expect that we're well-reserved from an overall loss provision perspective. So we feel confident with that, and that sort of helps us inform and hold the guidance that we've provided previously for HDFS.
Jonathan R. Root: We feel like that is tracking in the way that we would expect it to so first quarter it looks a little bit more a little bit higher as you move into Q2 Q3.
Jonathan R. Root: Sort of normalization that follows that period, and then as you flow out of the year.
Jonathan R. Root: Yeah.
Jonathan R. Root: We expect that we're well reserved from a from an overall loss provision perspective.
Operator: Our next question comes from Megan Alexander from Morgan Stanley. Please go ahead; your line is open.
Megan Christine Alexander: So we feel confident with that and that sort of helps us inform and hold the guidance that we've provided previously for Etfs.
Megan Christine Alexander: Hi, good morning. Thanks very much. Similarly, most of my questions have been answered, so maybe just..., a bit of a housekeeping one. I know you don't guide EPS. You did have some nice favorability below the line versus at least what I think Street was expecting. So can you help us at all with just kind of how to think about some of those lines, tax rate, interest income going forward? Is 1Q the right run rate for a lot of those, or was there some timing benefit with any of those? Any help you can give us would be great.
Megan Christine Alexander: Okay.
Speaker Change: Thank you.
Megan Christine Alexander: Our next question comes from Meghan Alexander from Morgan Stanley. Please go ahead. Your line is open.
Megan Christine Alexander: Hi, good morning, Thanks, very much. Similarly, most of my questions had been answered so maybe just a bit of a housekeeping. One I know you don't guide EPS you did have some nice favorability below the line versus at least what I think.
Megan Christine Alexander: The Street was expecting so can you help us at all with just kind of how to think about some of those lines tax rate.
Megan Christine Alexander: Interest income going forward.
Megan Christine Alexander: <unk> the right run rate for a lot of those or is there some timing benefit with any of those any help you can give us would be great.
Jonathan R. Root: Okay, I can I can start, and Megan, welcome. So I think I think we're, we're pleased to have you beginning to cover us. So welcome, welcome to Team Harley-Davidson.
Speaker Change: Okay, I can I can start and Megan welcome. So I think I think we're we're pleased to have you beginning to cover us. So welcome to welcome <unk> team Harley Davidson.
Jonathan R. Root: As we take a look and we think about the below-the-line items, we certainly had some tax favorability from a Q1 perspective. So as we think a little bit about what that complexion looked like, a little bit of favorability in Q1, we probably won't run quite that favorable from a tax rate perspective all year, so a little bit of caution around that. I think you saw that it was, you know, 2 to 3 points below where we were last year.
Speaker Change: We take a look and we think about the below the line items. We certainly had some tax favorability from a Q1 perspective, so as we think a little bit about what that complexion looked like.
Jonathan R. Root: A little bit of favorability in Q1, we probably.
Jonathan R. Root: We probably won't run quite that favorable from a tax rate perspective, all year, so a little bit of caution around that I think you saw that that was two to three points below where we were prior year.
Jonathan R. Root: And then, as you look at other items within there, certainly, as we think about the assets that we have to support retirement and some of that other sort of thing, that ends up in that below-the-line item. Higher interest rates and higher for longer could end up being a little bit more favorable than what we originally budgeted. And so we'll see how that plays out based upon the course of action that the Fed takes. But those are probably the biggest, kind of the two biggest drivers within that space.
Jonathan R. Root: And then as you look at other items within there certainly as we think about the.
Jonathan R. Root: The assets that we have to support retirement and some of that other sort of thing that ends up in that below the line item of higher interest rates and higher for longer could end up being a little bit more favorable than what we originally budgeted.
Jonathan R. Root: So we'll see how that plays out based upon the course of action that the fed takes but those are the those are probably the biggest kind of the two biggest drivers within that space.
Jochen Zeitz: And Megan, welcome from my side too, and on behalf of Jonathan, I promise that as of next year, we will give EPS guidance.
Speaker Change: And Meghan and welcome from my side too and on behalf of Jonathan I promised that as of next year, we're giving EPS guidance.
Megan Christine Alexander: Thank you very much. Maybe just to put a finer point on that, I guess you know so maybe net net, the impact on 1Q was neutral, and one, you know tax rates are going to move in one direction going forward, but you know the pension stuff might be a little bit more favorable than you thought.
Speaker Change: Thank you very much maybe just to put a finer point on that I guess, so maybe not that high.
Megan Christine Alexander: The impact of <unk> was.
Megan Christine Alexander: Troll and one tax rate is going to move in one direction going forward, but.
Megan Christine Alexander: And the pension stuff might be a little bit more favorable than what you thought.
Jonathan R. Root: Yes, so we think there could be a little bit of an impact from that standpoint. Okay, thank you so much.
Speaker Change: Yes, so we think there could be a little bit of an impact from that standpoint, yet.
Speaker Change: Okay. Thank you so much you are welcome.
Jonathan R. Root: Okay. Thank you so much. You're welcome. The last question will come from Jamie Katz from Morningstar. Please go ahead, your line is open.
Jonathan R. Root: Last question will come from Jamie Katz from Morningstar. Please go ahead. Your line is open.
Jaime M. Katz: Hey, good morning, I'm, hoping you guys can give us a little bit of an update on the change in the operating loss expectation from live wire <unk> with as expected what is expected to be better.
Operator: Hey, good morning. I'm hoping you guys can give us a little bit of an update on the change in the operating loss expectation from last week.
Jaime M. Katz: Over the rest of the year.
Karim Dinesh: Good morning, Jamie. So with the relocation of the lab from California to Milwaukee, we're going to centralize all of the livewire operations in Wisconsin. And this is going to deliver a fair bit of synergies and efficiencies across the business. So we're anticipating being able to remove about 10% of the headcount and 15% of the related employees. So all of these will essentially support the revised operating loss, which would be improved by $10 million in terms of guidance for the rest of the year.
Karim Dinesh: Good morning, Jamie so with the.
Karim Dinesh: The relocation of the lab from California to Milwaukee, we're going to centralize all of the library, our operations in Wisconsin, and this is going to deliver <unk> synergies and efficiencies across the business. So we're anticipating being able to remove about 10% of the head count and 15% of the.
Karim Dinesh: Sure.
Karim Dinesh: Cost.
Karim Dinesh: Related to employees. So all of these would essentially support the revised operating loss.
Karim Dinesh: Which would be improved by $10 million.
Karim Dinesh: In terms of guidance for the rest of the year.
Karim Dinesh: Yes.
Jamie: Okay, and then I know the one of the Union contracts was just ratified is there any information on what we should expect for increased labor costs or anything like that going through the SG&A line.
Karim Dinesh: Over 2024 and ahead. Thank you.
Jochen Zeitz: Well, the contract is more or less in line with what we've planned and hoped for, and overall, we're really pleased that this passed on the first round, which shows really broad alignment with our union leadership and workforce. It's a five-year contract, so nothing out of the extraordinary that we didn't anticipate. So we are pleased with the outcome and with the ratification of our new contract in York last year and this year now in Wisconsin, with Tomahawk and PDC, we're all set for five years.
Jochen Zeitz: Well the contract is more or less in line with what we've planned and hoped for in the overall, we're really pleased that this past on the first round, which shows really broad alignment with our union leadership and workforce. Its a five year contract. So nothing out of the extraordinary that we didn't anticipate.
Jochen Zeitz: So we are pleased with the outcome and.
Jochen Zeitz: With the ratification of our new contract in Europe last year, and this year now with Wisconsin with Tomahawk and PTC, We're all set for.
Jochen Zeitz: So we're very pleased with that outcome, and again, that this union vote passed on the first pass. We're very pleased with that, but nothing unexpected, I think, and that really shows broad alignment with our union leadership in our workforce, which is great.
Jochen Zeitz: Five years, so we're very pleased with that outcome and again that this.
Jochen Zeitz: Union vote passed.
Jochen Zeitz: On the first pass were very pleased with that but nothing.
Jochen Zeitz: Unexpected I think that really shows that broadly alignment with our union leadership in our workforce, which is great.
Operator: We have no further questions. This will conclude today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: Thank you.
Operator: Okay.
Operator: We have no further questions. This will conclude today's conference call. Thank you for your participation you may now disconnect.
Operator: Okay.
Operator:
Operator: Yeah.