Q2 2024 Harley Davidson Inc Earnings Call

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Operator: Thank you for standing by, and welcome to the Harley-Davidson 2024 Second Quarter Investor and Analyst Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Shawn Collins. Thank you.

Thank you for standing by and welcome to the Harley Davidson 2024, second quarter, Investor and Analyst Conference call.

Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to Shawn Collins. Thank you. Please go ahead.

Shawn Michael Collins: Thank you. Good morning. This is Shawn Collins, the Director of Investor Relations at Harley-Davidson. 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 and in our latest findings with the FDA. Joining me for this morning's call is Harley-Davidson Chief Executive Officer Jochen Zeitz. Also, Chief Financial Officer Jonathan Root. And we have Live Wire's Chief Executive Officer, Karim Donnez. With that, let me turn it over to our CEO, Jochen Zeitz. Jochen.

Thank you. Good morning. This is Shawn Collins, good 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 filings with the SEC.

Speaker Change: Joining me for this morning's call are.

Jochen Zeitz: Harley Davidson Chief Executive Officer Yoga insights.

Jonathan R. Root: Also chief Financial Officer, Jonathan groups.

And we have <unk>, Chief Executive Officer Corinne Dennis.

Yoga tights: With that let me turn it over to our CEO Yoga tights yoga.

Jochen Zeitz: Thank you, Shawn, and good morning, everyone. Thank you for joining us for our Q2 2024 results. In Q2, consolidated revenue was up 12%, driven by revenue growth of 13% at HDMC and 10% at HDFS. Additionally, we saw a strong improvement in earnings per share to $1.63 for the quarter. Consolidated operating income in the second quarter was $241 million, up 9% from the prior year, driven largely by an increase of 21% in HDFS.

Speaker Change: Thank you Sean and good morning, everyone. Thank you for joining us for our Q2 2024 results.

Jochen Zeitz: In addition, HTMC operating income was up 2%, and the operating loss of LIFOI was $4 million less than a year ago. Through the quarter, we saw the continued impact of the high interest rate environment affecting our industry, and, in particular, big-ticket consumer discretionary sectors. Said differently, retail sales of new motorcycles in the U.S. were still slightly positive versus the prior year, with a varying degree of performance from state to state. Turning to our global performance, it's important to note that we see a mixed picture also across our international markets. In India, retail sales declined by 1%, with certain markets in Central Europe underperforming while others overperformed.

Jonathan R. Root: In Q2 consolidated revenue was up 12% driven by revenue growth of 13% at H, D&C and 10% at H DFS.

Jonathan R. Root: Additionally, we saw a strong improvement in earnings per share to $1 63 for the quarter.

Jonathan R. Root: Consolidated operating income in the second quarter was $241 million up 9% from the prior year driven.

Jonathan R. Root: Largely by an increase of 21% of HD vest.

Jonathan R. Root: In addition, <unk> operating income was up 2% in the operating loss of LIFO was $4 million less than a year ago.

Jonathan R. Root: During the quarter, we saw the continued impact of the high interest rate environment affecting our industry and in particular big ticket consumer discretionary sectors.

Jonathan R. Root: That said retail sales of new motorcycles in the U S was still slightly positive versus prior year with a varying degree of performance from state to state.

Jonathan R. Root: Turning to our global performance, it's important to note that we see a mixed picture also of course, our international markets.

Jonathan R. Root: In EMEA retail sales declined by 1% with certain markets in central Europe underperforming, while others over performed.

Jochen Zeitz: In Asia-Pacific, Q2 retail sales declined by 16%, driven by weakness primarily in China. North America, including Canada, was down one percent, and Liz Numerical was stressed with numbers. We continue to expect that retail units sold and wholesale unit shipments will be balanced by the end of 2024, and dealer inventory should be at similar levels as at the end of life. This implies a reduction in dealer inventory of approximately 30% versus current levels. This should allow our network to take advantage of opportunities in the market, being mindful and supporting dealer health following the record levels of profitability in 21 and 22.

And in Asia Pacific Q2, retail sales declined by 16% driven by weakness primarily in China.

North America, including Canada was down 1%.

Latin America was flat.

Jonathan R. Root: Looking ahead, we are narrowing our retail and wholesale expectations to reflect the current environment.

We continue to expect that retail units sold in wholesale unit shipments will be balanced by the end of 'twenty four.

Jonathan R. Root: Dealer inventory should be at similar levels as at the end of last year.

Jonathan R. Root: This implies a reduction in dealer inventory of approximately 30% versus current levels.

Jonathan R. Root: This should allow our network to take advantage of opportunities in the market.

Jonathan R. Root: Be mindful and supporting dealer health following the record levels of profitability in 'twenty, one and 'twenty two we expect the shipment reductions to positively impact either slow and expensive.

Jochen Zeitz: We expect these shipment reductions to positively impact dealer floor plan expenses. Our performance in the first half of the year continued to be aligned to our hardwired strategic pillar, profit-focused, with strong mix and notable growth in Turing, especially CVO models, despite the challenging market environment overall. Building on our commitment to invest in our core categories, we've been extremely pleased with the strong response to our new era of touring motorcycles with our 24 and Road Glide and CVO offering.

Speaker Change: Our performance in the first half of the year continue to be aligned to our hardware strategic pillar profit focus with strong mix and notable growth in touring, especially CB old models, despite the challenging market environment and the overall industry.

Jonathan R. Root: Building on our commitment to invest in our core categories. We've been extremely pleased with the strong response to a new era of touring motorcycles with our 24 and road glide and TV offerings.

Jochen Zeitz: The product continues to receive a strong reception in the market from the industry, customers, dealers, and media alike as it grows awareness globally. Additionally, in the US, we saw strong gains in share in the 601 plus CC market at the backdrop of an overall declining industry in Q2 and year to date, with Harley-Davidson Touring up 5.3 percentage points in share and over 11% in unit growth. As we look at our customers, our insights tell us that performance is an increasingly important part of being a Harley-Davidson rider, with 44% of riders considering performance to be the most important feature when purchasing.

Jonathan R. Root: The product continues to receive a strong reception in the market from the industry customers dealers and media like as it goes awareness globally.

Jonathan R. Root: Additionally, in the U S. We saw strong gains in share in the 601, plus cc market at the backdrop of an overall decline in the industry in Q2 and year to date.

Jonathan R. Root: While Harley Davidson touring being up five three percentage points in share over 11% and unit growth.

Jonathan R. Root: As we look at our customer our insights tell us that performance is an increasingly important part of being a Harley Davidson rider with 44% of riders considering performance to be the most important feature when purchasing <unk>.

Jochen Zeitz: 73% of owners think it's important to own a performance-related motorcycle, and over 80% of owners see an increase in attention paid to performance. Through our involvement in the King of the Baggage Racing series, with Harley-Davidson riders holding the first and third place in the leadership for this season, we continue to celebrate and emphasize performance as a key differentiator for the Harley-Davidson line. This performance angle has continued to be popular with riders, as seen by the strong performance of our ST-Off.

Jonathan R. Root: 73% of owners thinking it's important to own in performance related motorcycle and over 80% of own are seeing an increasing attention page to performance.

Speaker Change: So our involvement in the King of the Beggars Racing series with holiday to light is holding in the first and third place and the leadership for the season.

Speaker Change: Continue to celebrate and emphasize performance is a key differentiator for the holiday lineup.

Jonathan R. Root: This performance annual has continued to be popular with riders as seen by the strong performance of our S T offering.

Jochen Zeitz: In addition, we selectively focus on opportunities in segments that we believe have a path to in-market success and profitability, capitalizing on our brand's strength and product capabilities, and selectively complement with partnerships. Looking at our partnership with Hero, we continue to be pleased with the reception that the X440 has received since launch, and we look forward to exploring further opportunities. Livewire is pioneering the industry for EV motorcycling.

Jonathan R. Root: In addition, we selectively focus on opportunities in segments that we believe kind of the path to in market success and profitability capitalizing our brand strength and product capabilities and selectively complemented with partnerships.

Jonathan R. Root: Looking at our partnership with Hero, we continue to be pleased with the reception that the export <unk> received since launch and we look forward to exploring further opportunities.

Speaker Change: Life wire is pioneering the industry four <unk> motorcycles.

Jochen Zeitz: However, we are realistic about the overall environment, especially in the U.S. As we detailed in the last quarter, we plan to continue to be improving our investments and driving cost productivity at Lightwire, as you'll hear from Karim. That said, we're also further committing to support LiveWIRE in lowering the breakeven. We expect further cost reductions to adjust to the overall market environment and to reduce the cash burn of the business in the future.

Jonathan R. Root: However, we are realistic about the overall environment, especially in the U S.

Korea: As we detailed at the last quarter, we plan to continue to be prudent in our investments and driving cost productivity is lifewire as youll hear from Korea.

Jonathan R. Root: That said, we're also committing to support lifeline lowering the breakeven point.

Korea: We expect further cost reductions to adjust to the overall market environment and to reduce the cash burn of the business in the future.

Jochen Zeitz: I also wanted to highlight the recent Department of Energy grant of $89 million that Harley-Davidson was awarded to invest in our facility in York, Pennsylvania. This grant is specifically targeted to strengthen and help expand Harley-Davidson's manufacturing facility in York to incorporate new paints and assembly equipment, supporting the manufacturing of all of its motorcycles and training of our union workforce, all while providing meaningful community and workforce enhancement. We look forward to working with the Department of Energy to realize this investment in the York facility.

Speaker Change: I also wanted to highlight the recent department of energy Grant of $89 million at Harley Davidson was awarded to invest in our facility in York, Pennsylvania supported overall operations as well as the manufacturer of EV motorcycles for Lifeway.

Jonathan R. Root: This grant is specifically targeted to strengthen the health expand holiday manufacturing facility in Europe to incorporate new paint and assembly equipment supporting the manufacturing all of its motorcycles and training of our union workforce.

Jonathan R. Root: While providing meaningful community workforce enhancements.

Jonathan R. Root: We look forward to working with the department of energy to realize this investment into the opportunity.

Jochen Zeitz: Harley-Davidson Financial Services, or HDFS, delivered a strong quarter with a meaningful $23 million, or 10% revenue increase in Q2. This was primarily driven by higher retail and commercial finance receivables, as well as higher average yield as the portfolio continued to reset over time. Thanks to growing penetration today, roughly 70% of new and used Harley-Davidson motorcycles are being financed through HDVS in North America. Crucially, HDFS allows us to understand our customers better through the unique insights and customer dynamics that we have access to.

Speaker Change: Harley Davidson financial services, or <unk> delivered a strong quarter with a meaningful $23 million or 10% revenue increase in Q2.

Speaker Change: This was primarily driven by higher retail and commercial finance receivables as well as higher average yields as the portfolio continued to reset over time.

Speaker Change: Thanks to growing penetration today, roughly 70% of new and used Harley Davidson motorcycles are being financed to HD vest in North America.

Speaker Change: But crucially HD vest allows us to understand our customers better to the unique insights and customer dynamics that we think sets too.

Jochen Zeitz: One of those insights that I'd like to call out today is our average age customer profile. As we look back at our HDFS data from the past, we are able to see that the average age of our customers purchasing a motorcycle, used and new, is about 45. This is a fact-based metric that stands in contrast to the narrative that has been perpetuated by some commentators. As you can see in the slide that we provided as part of this presentation, the average age has not moved significantly in the last 10 years or even much beyond. In addition, nearly 30% of HDFS loan originations in the past five years were made to customers 35 and younger, and 75% were 54 or under.

Speaker Change: One of those insights that I'd like to call out today, our average age customer profile.

Speaker Change: As we look back through our HD state over the past, we're able to see that the average age of our customers' purchasing a motorcycle used and new it's about 45.

Speaker Change: This is a fact based metric that stands in contrast to the narrative that has been perpetuated by some commentators.

Speaker Change: As you can see in the slide that we provided as part of this presentation. The average age has not moved significantly in the last 10 years and even much beyond.

Speaker Change: In addition, nearly 30% of HTS as loan originations in the past five years, we've made to customers 35 and younger.

Speaker Change: With 75% 54 or under.

Jochen Zeitz: In the average MSRP and the segments we compete in, we continue to expect our customers to age into our products while building brand awareness and desirability, starting at a much younger age, helped by all our efforts to build new riders and keep existing riders riding as part of our hardwired strategy. With that said, the Hardwire puts customers at the forefront of Harley-Davidson's products and experiences and defines customers as people who may dream of motorcycling or just learned to ride a Harley-Davidson motorcycle, all the way to riders who are deeply passionate about and invested in the Harley-Davidson lifestyle and community.

Speaker Change: Given the average MSRP and the segments. We compete in we continue to expect our customer to H into our product while building brand awareness and desirability starting at a much younger age helped by all our efforts to build new and keep existing riders riding as part of our <unk> strategy.

Speaker Change: With that said the hotwire puts customers at the forefront of Harley Davidson's products and experiences and defines customers as people who've made dream of Motorcycling or just learn to ride the holiday motorcycle all the way to riders, who are deeply passionate about and invested in the holiday to lifestyle and community.

Jochen Zeitz: Within Harley-Davidson Experiences, we can recognize the important role that events play in bringing our community together. This is especially true with our Harley owners. Earlier this year, in Senegalia, Italy, we hosted the 30th European Hulk Rally.

Speaker Change: Within holidays and experiences we can recognize the important role that events play in bringing our community together.

Speaker Change: This is especially true with our Holly owners group.

Speaker Change: Earlier, this year and Senate gallium, Italy, we hosted the 30th European Heart really.

Jochen Zeitz: This exceeded all our expectations, with an estimated 100,000 fans and Harley-Owners Group members attending, and over 20,000 motorcycles visiting from Europe and beyond. In addition to the many events happening during riding season around the world, we also had a significant presence at Laconia and Born Free, celebrating our customers who are typically younger than our average age. Today sees us kick off our second annual Homecoming Festival right here in our hometown.

Speaker Change: This exceeded all our expectations with an estimated 100000 fans and Harley owners group members attending over 20000 motorcycles visiting from Europe and beyond.

Speaker Change: In addition to the many events happening in lighting season around the World. We also had a significant presence at Laconia born free celebrating our customers that are typically younger than our average age.

Speaker Change: To date <unk> kick off our second annual Homecoming Festival Ikea in our hometown.

Jochen Zeitz: We're excited to welcome our community to Milwaukee. Events will be held across our footprint here in the city, at our museum, product development center, and Juneau Avenue headquarters, including Davidson Park, which the Harley-Davidson Foundation formally unveiled just recently. With headliners including Jelly Roll and the Red Hot Chili Peppers performing at Veterans Park, it's going to be a weekend to remember.

Speaker Change: We're excited to welcome Mala community to Milwaukee.

Speaker Change: Events will be held across our footprint here in the city at our.

Speaker Change: Museum product development Center in Juneau Avenue headquarters, including David can talk that the holidays. The foundation firmly on via just recently.

Speaker Change: With headline is including jelly roll in the Red Hot Chili Peppers, performing at Veterans Park, it's going to be a weekend to remember.

Jochen Zeitz: Now, before I turn it over to Karim, I'd like to comment briefly on our performance since initiating the hardware and subsequent hardware, too. Despite the challenging environment, we are pleased with the progress we continue to make in executing our strategy as we progress towards generating value for our shareholders over the long term. We continue to believe there is meaningful growth potential for the company, and we remain focused on realizing that opportunity.

Speaker Change: Now before I turn it over to Corinne I'd like to comment briefly on our performance since initiation of the hardware and subsequent talk about it too.

Speaker Change: Despite the challenging environment. We are pleased with the progress we've continued to make in executing on our strategy as we progressed towards generating value for our shareholders over the long term.

Speaker Change: We continue to believe there is meaningful growth potential for the company and we remain focused on realizing that opportunity.

Jochen Zeitz: We will continue to pursue delivery of our strategic pillars through clear focus, with plans to drive significant productivity across the business in addition to evaluating and pursuing selective opportunities and continuous product innovation to drive growth and wider. And through this process, we will continue to evaluate our decisions when compared to the wider focus on returning surplus capital to our shareholders.

Speaker Change: We will continue to pursue delivery of our strategic pillars through focus with plans to drive significant productivity across the business. In addition to evaluating and pursuing selective opportunities and continuous product innovation to drive growth and leadership.

Unknown Executive: Through this process, we will continue to evaluate our decisions when compared to the wider focus on returning surplus capital to our shareholders.

Speaker Change: And through this process, we will continue to evaluate our decisions when compared to the right a focus on returning surplus capital to our shareholders.

Jochen Zeitz: With that in mind and consistent with our capital allocation decisions today, today we're announcing our plan to reach one billion dollars in shares. Details were announced in our press release that went out earlier today. The dividend policy remains unchanged, and the company continues to expect the dividend for the remaining quarters of 2024 to be in line with Q2 and Q1. And with that, I'll hand it over to Karim.

Unknown Executive: With that in mind and consistent with our capital allocation decisions today, we are announcing our plan to reach $1 billion in shares. Details were announced in our press release that went out earlier today. The dividend policy remains unchanged, and the company continues to expect the dividend for the remaining orders of 24 to be in line with Q2 and Q1.

Speaker Change: With that in mind and consistent with our capital allocation decisions to date today, we are announcing our plan to repurchase $1 billion in shares.

Speaker Change: Details were announced in a press release that went out earlier today.

Speaker Change: The dividend policy remains unchanged and the company continues to expect the dividend for the remaining quarters of 2004 to be in line with Q2 and Q1.

Karim Donnez: And with that, I'll hand it over to Karim.

Speaker Change: And with that I'll hand, it over to Karim.

Karim Donnez: Thank you, Jochen. Good morning, everyone. We're happy to report that LiveWIRE continued to attract new riders with a triple-digit increase in LiveWIRE-branded unit sales compared to the second quarter of 2020. Retail sales, which outpaced wholesale again in the second quarter, made Livewire the number one on-road electric motorcycle retailer in the U.S. for the first half of 2025. Our market presence continued to grow steadily, especially in Europe, with two models, LiveWire1 and DELMAR, now in the market. We also launched a basic electric balance bike in the EMEA market to broaden our product offerings and reach new customer segments. Additionally,

Karim Donnez: Thank you, your hand. Good morning, everyone.

Karim: Thank you Joe and good morning, everyone.

Karim Donnez: We're happy to report that LiveWire continuing to attract new riders with a triple-digit increase in LiveWire branded units compared to the second quarter of 2023. Retail sales, out-based wholesale again in the second quarter, making Live-wire the number one on-road electric motorcycle retailer in the US for the first half of 2024.

Karim: We're happy to report that LIBOR youre, continuing to attract new riders with a triple digit increase in LIBOR are blended unit.

Karim: Compared to the second quarter of 2020.

Karim: Retail things outpaced wholesale again in the second quarter, making light what are the number one on road electric motorcycle retailer in the U S for the first half of 2024.

Karim Donnez: Our market presents to grow steadily, especially in Europe, with two models live-wire one and they are now in market. In late June, we also launched a specific electric balance bike in the EME market to broaden our product offerings and reach new customer segments. Additionally, live-wire the purring route improves by 12% compared to the second quarter of 2023, underscoring the company's approach in reducing costs while expanding its product line and market presents.

Karim: Our market presents continued to growth steadily.

Karim: Especially in Europe, with two modems lightweight Juan and Neymar now in market.

Karim: In late June we.

Karim: We also launched basic electric balanced bank in the EMEA market to broaden our product offerings and reach new customer segments.

Karim: Additionally, <unk>.

Karim Donnez: The Library of the Purding House improved by 12% compared to the second quarter of 2023, underscoring the company's approach to reducing costs while expanding its product line and market presence. Our Cascading Wishes are not just about reducing expenses. They are about driving efficiency and ensuring that we allocate our resources to the areas that matter the most as we continue to work on offering the best value proposition to all our stakeholders, considering the current market environment, in the second half of 2024.

Karim: <unk> operating loss improved by 12% compared to the second quarter of 2023.

Karim: Underscoring the company's approach in reducing costs, while expanding its product line and market presence.

Karim Donnez: Our cash trading measures are not just about reducing expenses. They are about driving efficiency and ensuring that we allocate our resources to the areas that matter the most, as we continue to work on offering the best value proposition to all our stakeholders, considering the current market environments. In the second half of 2024, Live-Wire remains committed to continuous improvement and innovation from our product development to our manufacturing processes. We are focused on finding smart and effective ways to operate while reinforcing growth, profitability, and category leadership as priorities.

Karim: Our cost cutting measures.

Karim: Just about reducing expenses.

Karim: They are all about driving efficiency and ensuring that we allocate our resources to the areas that matter most as we continue to work on.

Karim: The best value proposition to all our stakeholders considering the current market environment.

Karim: In the second half of 2024.

Karim Donnez: LiveWIRE remains committed to continuous improvement and innovation, for my product development, and for the manufacturing process. We're focused on finding smart and effective ways to operate while reinforcing growth, profitability, and category leadership as a priority, as mentioned by Jochen. We are also planning for a significant reduction in cash flow next year, with stronger business fundamentals in place, and expenses aligned with market reality while continuing to drive awareness and demand. Thank you, and now I'll hand it over to Jonathan. Thank you, Karim.

Karim: <unk> remains committed to continuous improvement and innovation.

Karim: From a product development to our manufacturing processes.

Karim: We are focused on finding smart.

Karim: And effective ways to operate while reinforcing growth.

Karim: Profitability and category leadership as priorities.

Karim Donnez: And, as mentioned by Johann, we are also planning for a significant reduction in cash borne next year. With stronger business fundamentals in place and expenses aligned with market reality, while continuing to drive awareness and demand.

Karim: And as mentioned by Johan.

Johan: We are also planning for a significant reduction in cash burn next year.

Johan: With stronger business fundamentals in place and expenses aligned with market from ADT, while continuing to drive awareness and.

Karim: And demand.

Karim: Thank you and now I hand, it over to Jonathan.

Jonathan R. Root: 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 second quarter of 2024. And subsequently, I will go into further detail on each business segment. As Jochen already commented, consolidated revenue in the second quarter was up 12%, driven by HDMC revenue growth of 13% and HDFS revenue growth of 10%. Consolidated operating income in the second quarter was $241 million, up 9% from the prior year period, driven largely by an increase of 21% at HDFS.

Jonathan R. Root: Thank you Karim and good morning to you all I plan to start on page five of the presentation, where I will briefly summarize the consolidated financial results for the second quarter of 2024, and subsequently I will go into further detail on each business segment.

Karim: As Johan already commented consolidated revenue in the second quarter was up 12% driven by <unk> revenue growth of 13% and H GFS revenue growth of 10%.

Karim: Validated operating income in the second quarter was $241 million up 9% from the prior year period, driven largely by an increase of 21% at H DFS.

Jonathan R. Root: In addition, HDMC operating income was up 2%, and the operating loss at the live wire segment was an improvement of $4 million compared to a year ago. The consolidated margin in the second quarter was 14.9%, which compares to 15.3% in the prior year period, where HDMC's operating income margin was down 155 basis points year over year, and HDFS operating margin was improved by 254 basis points. I plan to go into further detail on each business segment's profit and loss drivers in the next section. Second quarter earnings per share were $1.63, up 34% and compared to $1.22 last year.

Karim: In addition, <unk> operating income was up 2% and the operating loss at the <unk> segment was an improvement of $4 million compared.

Karim: Compared to a year ago.

Karim: <unk> margin in the second quarter was 14, 9%, which compares to 15, 3% in the prior year period <unk> operating income margin was down 155 basis points year over year and Hcr's operating margin was improved by 254 basis points.

Karim: I have to go into further detail on each business segment profit and loss drivers in the next section.

Karim: Current quarter earnings per share was $1 63.

Karim: Up 34% and compares to $1 22 last year.

Jonathan R. Root: As we flip the page to first half results, total consolidated HDI revenue of $3.3 billion was up 4% compared to last year. The components of this were at HTMC, revenue increased by 3%, at HDFS, revenue increased by 11%, and at LiveWire, revenue declined by 25%. Total consolidated HDI operating income was $504 million, which was $87 million lower than the prior year.

Karim: As we flip the page to first half results total consolidated <unk> revenue of $3 3 billion was up 4% compared to last year. The components of this were at <unk> revenue increased by 3% at <unk> revenue increased by 11% and at LIBOR revenue declined by 25.

Karim: <unk>.

Karim: Total consolidated HDI operating income was $504 million, which was $87 million lower than the prior year.

Jonathan R. Root: The components of this were, at AQMC, operating income of $436 million, 18% lower than the prior year, reflecting an operating margin of 15.4% in the first half of the year. At HDFS, operating income of $125 million increased by 7% in the first half of the year. And at LiveWire, an operating loss of $57 million was in line with our expectations. Year-to-date earnings per share were $3.34, up 2%, and compared to $3.27 last year.

Karim: The components of this were at <unk> operating income of $436 million was 18% lower than prior year, reflecting an operating margin of 15, 4% in the first half of the year.

Karim: At <unk> operating income of $125 million increased by 7% in the first half of the year and at Libre or an operating loss of $57 million was in line with our expectations.

Karim: Year to date earnings per share was $3 34.

Karim: Up 2% and compares to $3 27 last year.

Jonathan R. Root: Let me turn to slide seven, and I will aim to be brief here as Jochen earlier provided commentary on both Q2 retail performance by region and recent market share figures. Dealer inventory at the end of Q2 is up from the levels at the end of Q2 2023 and just slightly down versus levels at the end of Q1 2024. We believe current dealer inventory and product availability are in largely healthy positions overall, as we are in the midst of the important summer riding season in North America and Europe. We continue to prioritize availability and inventory of touring, trike, soft fill, and CVO motorcycles and ensure our dealers have an appropriate supply.

Speaker Change: Let me turn to slide seven and I will aim to be brief here as yoga earlier provided commentary on both Q2 retail performance by region and recent market share highlights.

Speaker Change: Dealer inventory at the end of Q2 and up from the levels at the end of Q2, 2023, and just slightly down versus levels at the end of Q1 2024, we believe current dealer inventory and product availability are in largely healthy positions overall as we are in the midst of the important summer riding season in North America.

Speaker Change: In Europe.

Karim: We continue to prioritize availability and inventory of touring trike, Softgel and CDO motorcycles and ensure our dealers have an appropriate supply.

Jonathan R. Root: We will talk further about our expectations for both retail and wholesale motorcycles in just a few minutes. Looking at revenue, HTMC revenue increased by 13% in Q2, focusing on the key drivers for the quarter. 11 points of growth came from increased wholesale volume at HTMC, where motorcycle shipments in the quarter were ahead of last year by 16%.

Karim: We will talk further about our expectations for both retail and wholesale motorcycles in just a few minutes.

Karim: Looking at revenue <unk> revenue increased by 13% in Q2, focusing on the key drivers for the quarter 11 points of growth came from increased wholesale volume at <unk>, where motorcycle shipments in the quarter were ahead of last year by 16%.

Jonathan R. Root: Whereas Q2 2023 shipments were adversely impacted by an unplanned production suspension at our U.S. manufacturing operation, four points of decline came from pricing, which included the impacts of the pricing surcharge elimination, other pricing actions on the 2024 model year, and sales incentives for only our model year 2023 motorcycle. Mix contributed seven points of growth as we continue to prioritize our most profitable models and markets. And finally, one point of negative impact came from foreign exchange. In Q2, HDMC's gross margin was 32.1%, which compares to 34.8% in the prior year.

Karim: Whereas Q2 2023 shipments were adversely impacted by an unplanned production suspension at our U S manufacturing operation.

Karim: Four points of decline came from pricing, which includes the impacts of the pricing surcharge elimination other pricing actions in 2020 for model year and sales incentives for only our model year 2023 motorcycles.

Karim: Mix contributed seven points of growth as we continued to prioritize our most profitable models and market.

Karim: And finally, one point of negative impact came from foreign exchange.

Karim: In Q2, <unk> gross margin was 32, 1%, which compares to 34, 8% in the prior year.

Jonathan R. Root: The decrease of Approximately 270 Bases was driven by lower overall pricing, inclusive of the impact of surcharge removal, higher manufacturing and other costs, and adverse impacts from pouring. This was partially offset by positive impacts from volume, improved mix, and lower raw material price. Let me provide some color on a few of the specific drivers.

Karim: The decrease of approximately 270 basis points was driven by lower overall pricing inclusive of the impact of surcharge removal higher manufacturing and other costs.

Karim: And adverse impacts from foreign exchange. This was partially offset by positive impacts from volume improved mix and lower raw material prices. Let me provide some color on a few of the specific drivers.

Jonathan R. Root: Pricing had the biggest adverse impact on margins, where we priced the all new touring motorcycle strategically, and we had additional incentive or promotional spend in Q2 centered on interest rate assistance to consumers on model year 2023 motorcycle goals. Improved mix had the biggest positive impact on our margins, where we prioritized the shipment of touring and CBO motorcycles. Lastly, foreign exchange exposure was unfavorable in Q2, with the largest impact seen on the Japanese yen and euro.

Karim: <unk> had the biggest adverse impact to margin, where we priced the only touring motorcycles strategically and we have additional incentive or promotional spend in Q2 centered on interest rate is that the consumers on model year 2023 motorcycles only.

Karim: Improved mix had the biggest positive impact on our margin, where we prioritize the shipment of touring and <unk> motorcycles.

Karim: Lastly, foreign exchange exposure was unfavorable in Q2 with the largest impact seen in the Japanese yen and euro.

Jonathan R. Root: In addition, we experienced around 2% cost inflation on an annualized basis in Q2. On the operating expense side, expenses were $12 million higher relative to the prior year due to higher spend on regional marketing and warranty costs. In addition, we had some employee exit charges associated with recent select headcount reductions, primarily in operating expenses. These moves were made in an effort to increase future OPEX productivity. HDNC's operating margin came in at 14.7% in Q2 from 16.2% in the prior year.

Karim: In addition, we experienced around 2% of cost inflation on an annualized basis in Q2.

Karim: On the operating expense side expenses were $12 million higher relative to prior year due to higher spend on regional market and warranty costs. In addition, we had some employee exit charges associated with recent select headcount reduction is primarily at the operating expense level.

Karim: These moves were made in an effort to increase future opex productivity.

Karim: <unk> operating margin came in at 14, 7% in Q2 from 16, 2% in the prior year.

Jonathan R. Root: For the first half of the year at HDMC, gross margin was 31.7%, which compares to 35.4% in the prior year's period. Operating income was $436 million, which was $94 million, or 18% lower than the prior year. HDMC's operating margin of 15.4% through the first half was 3.8 points lower than the prior year. The decrease was due to less favorable pricing, manufacturing, and foreign exchange. These effects were partially offset by improved mix and a modest increase in volume.

Karim: For the first half of the year at <unk> gross margin was 31, 7%, which compares to 35, 4% in the prior year's period.

Karim: Operating income was $436 million, which was $94 million or 18% lower than prior year.

Karim: <unk> operating margin of 15, 4% through the first half was three eight points lower than prior year.

Karim: The decrease was due to less favorable pricing manufacturing and foreign exchange.

Karim: These effects were partially offset by improved mix and a modest increase in volume.

Jonathan R. Root: In addition, the lower year-to-date margin reflects the deleverage we experienced in Q1 as a result of the Q1 2024 wholesale product which was produced in Q4 of 2023, where fixed costs per unit were higher due to lower production. Lastly, in the first half, operating expenses were $13 million, or 3% higher, in line with the previous discussion. Before we turn to the next slide, let me give a brief update on our productivity cost program, one of the initiatives identified as part of the hardwire strategy, where we are driving improvement in productivity to eliminate the $400 million of incremental supply chain costs incurred since 2020.

Karim: In addition year to date lower margin reflects the deleverage we experienced in Q1 as a result of Q1 2024 wholesale product, which was produced in Q4 of 2023, where fixed cost per unit were higher due to lower production.

Karim: Lastly, in the first half operating expenses were $13 million or 3% higher in line with previous discussion.

Karim: Before it returned to the next slide let me give a brief update on our productivity cost program. One of the initiatives identified as part of the hardware strategy, where we are driving improvement in productivity to eliminate the $400 million of.

Karim: The incremental supply chain costs incurred in 2020.

Jonathan R. Root: To simplify and provide more transparency, we are now excluding leverage from productivity while still holding our previously communicated multi-year target of $400 million, which originally included a benefit from leverage of between $50 and $70 million. Maintaining the $400 million target without the positive impact of leverage is a testament to the confidence we have in our cost reduction program.

Karim: To simplify and provide more transparency, we are now excluding leverage from productivity.

Bill: <unk> Bill holding our previously communicated multiyear target.

Karim: $400 million.

Karim: Which originally included a benefit from leverage of between 50% and $70 million.

Karim: Maintaining the $400 million target without the positive impact of leverage is a testament to the confidence we have in our cost reduction programs.

Jonathan R. Root: Excluding leverage, we delivered approximately $24 million in 2022 and $123 million in 2023. In 2024, we delivered $50 million through Q2. Turning to slide 11 now and the financial services. At Harley-Davidson Financial Services, Q2 revenue increased by $23 million, or 10%, driven by higher retail and commercial finance receivables, as well as higher average yields as the portfolio continues to reset over time due to higher base rates caused by Fed rate expansion, which is driving higher interest. HDFS operating income was $71 million, up $12 million, or up 21% compared to last year.

Karim: Excluding leverage we delivered approximately $24 million in 2022 and.

Karim: $123 million in 2023 and.

Karim: In 2024, we've delivered $50 million through Q2.

Karim: Turning to slide 11, now and the financial services segment at Harley Davidson financial services future revenue increased by $23 million or.

Karim: Or 10% driven by higher retail and commercial finance receivables as well as higher average yield as the portfolio continues to reset over time due to higher base rates caused by fed rate expansion, which we're driving higher interest income.

Karim: <unk> operating income was $71 million up $12 million or up 21% compared to last year.

Jonathan R. Root: The Q2 increase was driven by higher interest income and lower provision for credit losses, which were partially offset by increased borrowing costs and higher operating costs. Total interest expense was up $8 million, or up 9% versus the prior year.

Karim: <unk> increase was driven by higher interest income and lower provision for credit losses, which were partially offset by increased borrowing costs and higher operating expenses.

Karim: Total interest expense was up $8 million or up 9% versus the prior year.

Jonathan R. Root: 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 Q2, HDFS's annualized retail credit loss ratio was 3.1%, which compares to an annualized retail credit loss ratio of 2.6% in Q2 2023. The increase in credit losses was driven by several factors relating to the current macroeconomic environment and the related customer and industry dynamics. In addition, the retail allowance for credit losses for the second quarter came in at 5.4%, up from 5.3% a year ago and at the same level as 5.4% at the end of Q1 2024. This reflects our best estimate of the current and future retail lending environment. Total retail loan originations in Q2 were down 4%, while commercial financing activities were up 52% to $1.4 billion.

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

Karim: In Q2, <unk> annualized retail credit loss ratio was three 1%, which compares to an annualized retail credit loss ratio of two 6% in Q2 2023.

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

Karim: In addition, the retail allowance for credit losses for the second quarter came in at five 4% up from five 3% a year ago and at the same level as the five 4% at the end of Q1 2024.

Karim: This reflects our best estimate of the current and future retail lending environment.

Karim: Total retail loan originations in Q2 were down 4%, while commercial financing activities were up 52% to $1 4 billion.

Jonathan R. Root: Total quarter-end net financing receivables, including both retail loans and commercial financing, were $8 billion, which was up 7% versus the prior year. Turning to slide 12, and the first half results at HDFS, first half revenue increased by $49 million, or 11%. HDFS operating income was $125 million, up $8 million or up 7% compared to last. The first half increase was driven by higher interest income, which more than offset higher borrowing costs, higher provision for credit losses, and higher operating costs. For the live wire segment, as Karim mentioned, electric motorcycle revenue increased in the second quarter of 2024 compared to the prior year period due to higher unit sales of EV motorcycles in the quarter.

Karim: Total quarter end net financing receivables, including both retail loan and commercial financing was $8 billion.

Karim: Which was up 7% versus prior year.

Karim: Turning to slide 12, and the first half results at H DFS.

Karim: First half revenue increased by $49 million or 11%.

Karim: <unk> operating income was $125 million up $8 million or up 7% compared to last year.

Karim: The first half increase was driven by higher interest income, which more than offset higher borrowing costs higher provision for credit losses and higher operating expenses.

Karim: For the library or segment as Karim mentioned electric motorcycles revenue increased in the second quarter of 2024 compared to the prior year period due to higher unit sales of EV motorcycles in the quarter.

Jonathan R. Root: At Stasek, the electric balance bike business, revenue was down compared to the prior year, which was expected due to a reduction in third party branded distributor volume; selling, engineering, and administrative expenses were down 3 million, or down 9%, in Q2 compared to the prior year. Livewire's operating loss of $28 million, $4 million less than a year ago, was in line with our expectations, as Livewire continued to invest in new motorcycle models and also implemented initiatives to reduce the overall cost of sales for EV motorcycles.

Speaker Change: They think the electric balanced bike business revenue was down compared to the prior year, which was expected due to a reduction in third party branded distributor volume.

Speaker Change: <unk> engineering, and administrative expenses were down $3 million or down 9% in Q2 compared to the prior year.

Speaker Change: <unk> operating loss of $28 million $4 million less than a year ago was in line with our expectations. As LIBOR are continued to invest in new motorcycle models and also actions initiatives to reduce the overall cost of sales for EDI motorcycles.

Jonathan R. Root: For the first half results at the LiveWire segment, revenue was $11 million, down 25% from the prior year, as a result of lower revenue at STASIC, the electric balanced bicycle business. For the first half of the year, LiveWire sold 275 electric motorcycles, which is a triple-digit increase over the prior year period. For the period, LiveWire's operating loss was $57 million, which was in line with our expectations.

Speaker Change: For the first half results and the LIBOR Air segment revenue of $11 million down 25% from the prior year as a result of lower revenue its basic electric balanced bicycle business.

Speaker Change: For the first half of the year LIBOR are sold 275 electric motorcycles, which is a triple digit increase over the prior year period.

Speaker Change: For the period Libre, our operating loss was $57 million, which was in line with our expectations.

Jonathan R. Root: Wrapping up with the consolidated Harley-Davidson Inc. financial results, we delivered $578 million of operating cash flow in the first half of 2024, which was up from $411 million in the same period last year. The increase in operating cash flow was due primarily to positive changes in working capital during the first half of 2024 compared to the first half of 2020, driven by a decrease in inventories during 2020. These positive impacts were partially offset by higher net cash out, related to wholesale findings. Total cash and cash equivalents ended at $1.8 billion, which was $327 million higher than at the end of Q2 last year.

Speaker Change: Wrapping up with consolidated Harley Davidson, Inc. Financial results, we delivered $578 million of operating cash flow in the first half of 2024, which was up from $411 million in the same period last year.

Speaker Change: The increase in operating cash flow was due primarily to positive changes in working capital during the first half of 2024 compared to the first half of 2023.

Speaker Change: By a decrease in inventories during 2024.

Speaker Change: These positive impacts were partially offset by higher net cash outflows related to wholesale finance receivables.

Speaker Change: Total cash and cash equivalents ended at $1 8 billion.

Speaker Change: Which was $327 million higher than at the end of Q2 prior year.

Jonathan R. Root: This consolidated cash number includes $113 million at LIBOR. Additionally, as part of our capital allocation strategy and in line with our commitment to return capital to our shareholders, In Q2, we bought back 2.9 million shares of our stock at a cost of $102 million. This brings our total amount of shares bought back in the first half of 2024 to 5.5 million shares of Harley-Davidson Common Stock at a total value of $200 million.

Speaker Change: This consolidated cash number includes $113 million at LIBOR here.

Speaker Change: Additionally, as part of our capital allocation strategy and in line with our commitment to return capital to our shareholders. In Q2, we bought back $2 9 million shares of our stock at a cost of $102 million.

Speaker Change: This brings our total amount of shares bought back in the first half of 2024 to $5 5 million shares of Harley Davidson common stock.

Speaker Change: The total value of $200 million.

Jonathan R. Root: This compares to 4.1 million shares at a total value of $156 million in the first half of 2020. We see 2024 not only as a year to balance retail sales and wholesale shipments but also as a year to improve balance sheet efficiency. As it has become clearer that volume will be toward the lower end of our original expectations, planned production cuts in the back half of the year will be more aggressive than the reductions we envisioned for retail sales and wholesale shipments.

Speaker Change: This compares to $4 1 million shares at a total value of $156 million in the first half of 2023.

Speaker Change: We see 2020 for not only the year to balanced retail sales and wholesale shipments, but also at the year to improve balance sheet efficiency.

Speaker Change: And it has become clear that volume will be towards the lower end of our original expectation plans production cuts in the back half of the year will be more aggressive than the reductions we envisioned for retail sales and wholesale shipments.

Jonathan R. Root: This produces a gross margin headwind in Q3 and Q4 that is greater than we originally estimated, but we believe it positions the company more appropriately for 2025, frees up additional cash, and reduces obsolescence risk on an ongoing basis. We continue to expect that retail units sold and wholesale unit shipments will be balanced by the end of 2024. And we now expect retail and wholesale sales to be in the range of 163,000 to 168,000 units.

Speaker Change: This produced a gross margin headwind in Q3, and Q4 that is greater than we originally estimated but we believe position of the company more appropriately for 2025.

Speaker Change: Frees up additional cash and reduce because obsolescence risk on an ongoing basis.

Speaker Change: We continue to expect that retail units sold in wholesale unit shipments will be balanced by the end of 2024, and we now expect retail and wholesale to be in the range of 163000 to 168000 units.

Jonathan R. Root: Retail to be in the range of flat to up 3% for the full year. Wholesale shipments to be in the range of down 7% to down 10% for the full year. As we look to guidance for the year, there are a number of elements that remain unchanged from the prior quarter, but there are some changes for HDMC, and that is where I will go. We now expect revenue to be down in the range of 5% to 9%, and this has been narrowed from our previous flat to down 9%.

Speaker Change: Retail to be in the range of flat to up 3% for the full year.

Speaker Change: Wholesale shipments to be in the range of down 7% to down 10% for the full year.

Speaker Change: As we look to guidance for the year. There are a number of elements that remain unchanged from the prior quarter, but there are some changes for H D&C and that is where I will begin.

Speaker Change: We now expect revenue to be down in the range of 5% to 9% and this has been narrowed from our previous flat to down 9%.

Jonathan R. Root: Operating income margin is now projected to come in between 10.6% and 11.6% rather than the 12.6 to 13.6% range that we had previously guided to. The downward revision is primarily due to production and wholesale reductions and the impact of leverage.

Speaker Change: Operating income margin is now projected to come in between 10, 6% and 11, 6%.

Speaker Change: Other than the 12, 6% to 13, 6% range that we had previously guided to.

Speaker Change: <unk> revision is primarily due to production and wholesale reductions and the impact of leverage.

Jonathan R. Root: At HDFS, guidance for the full year 2024 remains unchanged, where we expect operating income to be flat to slightly positive. At Livewire, guidance for the full year 2024 remains unchanged, where we continue to expect to deliver between 1,000 and 1,500 electric motorcycle units and an operating loss in the range of $105 to $115 billion. And we continue to expect capital investment in the range of $225 million to $250 million. As we look at capital allocation in 2024, our priorities remain to fund profitable growth of the hardwired initiative, which includes the capital expenditures mentioned previously, paying dividends, and continuing to execute discretionary share repurchase.

Speaker Change: At Hff's guidance for the full year 2024 remains unchanged, where we expect operating income to be flat to up 5%.

Speaker Change: <unk> guidance for full year 2024 remains unchanged, where we continue to expect to deliver between 1500 electric motorcycle unit.

Speaker Change: And an operating loss in the range of $105 billion to $115 billion.

Speaker Change: And we continue to expect capital investment in the range of $225 million to $250 million.

Speaker Change: As we look at capital allocation in 2024, our priorities remain to fund profitable growth of the hardware initiatives, which includes the capital expenditure mentioned previously paid.

Speaker Change: Paying dividend and continuing to execute discretionary share repurchases.

Jonathan R. Root: As Jochen touched on, and this can be seen from our press release earlier today, we are announcing a new plan to repurchase $1 billion in shares through 2026. We feel this highlights our operating discipline, overall cash flow generation, and long-term earnings power, and is supported by our continued commitment to deliver a 15% operating income margin by the end of 2025. And with that, we'll open it up to Q&A. Thank you. As a reminder, to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again.

Speaker Change: As Youll, Kentucky Derby and this can be seen from our press release earlier today, we are announcing a new plan to repurchase $1 billion in shares through 2026.

Speaker Change: We feel this highlights our operating discipline overall cash flow generation and long term earnings power and is supported by our continued commitment to deliver 15% operating income margin by the end of 2025.

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

Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone keypad to withdraw your question Press Star one again.

Speaker Change: I also ask you limit yourself to one question and return to the queue for additional questions. Thank you.

Operator: We also ask you to limit yourself to one question and return to the queue for additional questions. Thank you. Our first question comes from Craig Kennison from Baird. Please go ahead. Your line is open. Hey, good morning. Thanks for taking my question. I guess it's a two-parter.

Speaker Change: Our first question comes from Craig Kennison from Baird. Please go ahead. Your line is open.

Craig R. Kennison: First, what does guidance assume for retail in 2024? And then, secondly, the bigger picture here, this was a big year for innovation for Harley-Davidson, and all the product reviews have been really exceptional, but just not seeing the volume flow through like you might have hoped. What's your bigger picture assessment of where your consumers are that given, you know, you've really offered a very good product. It hasn't moved the needle as much as maybe, Yes, Craig, Jochen, I'll take the two questions.

Craig R. Kennison: Hey, good morning, Thanks for taking my question I guess, it's a two parter first what does guidance assume for retail in 2024, and then secondly bigger picture here. This was a big year for innovation for Harley Davidson in all the product reviews have been really exceptional but just not.

Speaker Change: Seeing the volume flow through like you might have hoped.

Speaker Change: What's your bigger picture assessment of where your consumers that given you've really.

Speaker Change: Offered a very good product.

Speaker Change: Does it move the needle as much as maybe you would like.

Jochen Zeitz: In terms of retail guidance, we expect 0 to 3% full year guidance. In terms of innovation, I think it has very much moved the needle. If you look at how the market has developed, the overall industry has developed in the second half with, you know, most industry players being down high single to mid-single digit declines, with us in the US being slightly positive. It certainly has moved the dial significantly. So the innovation is working, just like with any new motorcycle.

Craig: Yes, Craig.

Craig: I'll take the two questions.

Craig: In terms of retail guidance, we expect the zero to 3% full year guidance.

Speaker Change: In terms of innovation I think it is very much moved the needle if you look at the.

Craig: How the market has developed the overall industry has developed in the second half with most industry players being down high single.

Craig: Mid single digit declines with us in the U S being slightly positive.

Craig: Italy has moved the dial significantly so the innovation is working.

Speaker Change: Like with any new motorcycle it takes time for customers to know about it we think that about 30% of our engaged Harley Davidson owners are now very aware of our new product, but that leaves about two thirds of the owners that are not quite well aware over the new bikes yet.

Jochen Zeitz: It takes time for customers to know about it. We think that about 30% of our engaged Harley-Davidson owners are now very aware of our new product. But that leaves about two-thirds of the owners that are not quite well aware of the new bikes yet.

Alexander Thomas Perry: And so this product will help our business in years to come, which we're very pleased with. And, as you said, the reception has been extraordinarily positive. And the product differentiates significantly from our previous touring bikes, and we also have a strong product portfolio innovation platform for the coming years as well. So, as I think I've said many times before, these bikes that we introduced were initiated with the start of our Hardwire Stage 2 strategy and the beginning of more products to come over the coming years.

Speaker Change: And so there's that.

Speaker Change: Product will help our business in years to come which we're very pleased with them. As you said the reception has been extraordinarily positive.

Speaker Change: It is.

Speaker Change: The product differentiate significantly from our previous touring bikes and we also have a strong product.

Speaker Change: Portfolio.

Speaker Change: <unk> platform for the coming years as well so.

Speaker Change: As I think I've said many times before these spikes that we introduced.

Speaker Change: Initiated with the start of our hardware stage to the strategy and the beginning of more products to come over the coming years.

Alexander Thomas Perry: But overall, exceptional reception, which I think is showing up already considering the industry and how it's fared in the second quarter. Thank you. Our next question comes from Alex Perry from Bank of America. Please go ahead.

Speaker Change: But overall exceptional reception, which I think is showing up.

Speaker Change: <unk> already considering the industry.

Speaker Change: And how it has fared in the second quarter.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Alex Perry from Bank of America. Please go ahead. Your line is open.

Jonathan R. Root: Your line is open. Hi, thanks for taking my question here. The HTMC operating margin came in nicely despite the gross margin pressure in the quarter. Can you just talk about sort of the, you know, second half gross margin assumptions? Should we continue to expect pressure from pricing and sales incentives? And then, it looks like you managed the SG&A expense line quite well. Just maybe talk about sort of what you're doing in the back half there and what we should expect there. Thank you. All right. Hi Alex.

Alexander Thomas Perry: Hi, Thanks for taking my question here.

Speaker Change: The <unk> op margin came in nicely. Despite the gross margin pressure in the quarter can.

Speaker Change: Can you just talk about sort of the <unk>.

Speaker Change: Second half gross margin assumption should we continue to expect pressure from pricing and sales incentives and then it looks like you managed the SG&A expense line quite well just maybe talk about sort of what youre doing in the back half there and what we should expect there. Thank you.

Jonathan R. Root: So I'm happy to take that. So, from an up-margin perspective, overall, we are certainly pleased in terms of where the company is performing, particularly in light of where we are from a production volume perspective. I think we've talked with you a little bit about that previously. As we think about some of the actions that we've taken as a company, we certainly are making sure that we're kind of moving through the P&L, looking at places that we can make sure that we are intelligent in taking costs out of the business in a way that doesn't do anything to harm the long-term nature of the business and really allows us to maximize current results. We certainly have kind of instituted a little bit of a belt tightening for 2024.

Speaker Change: Alright, Hi, Alex So I'm happy.

Speaker Change: To take that so I think from an op margin perspective overall, we are certainly pleased in terms of where the company is performing particularly in light of where we are from a production volume perspective, I think we've talked with you a little bit about that previously.

Speaker Change: As we think about some of the actions that we've taken.

Speaker Change: As a company, we certainly are making sure that we're that we're kind of moving through the P&L looking at places that we can make sure that we are intelligent and taking costs out of the business in a way that doesn't do anything to harm the long term nature of the business and really allows us to maximize current results.

Speaker Change: We certainly have kind of instituted a little bit of belt tightening.

Jonathan R. Root: You saw that through the employee-related costs that we talked about. As we move through the back half of the year, you obviously see some of that benefit begin to unlock from an OPEX perspective. And then, in addition, we have a number of investments that we've made on the manufacturing and cost of sales side in order to make sure that we are working collaboratively with suppliers to reduce and remove costs for motorcycles in a way that is obviously transparent from a consumer perspective.

Speaker Change: 2024, you saw that through the employee related costs that we talked about as we move through the back half of the year you, obviously see some of that benefit begin to unlock from an Opex perspective, and then in addition, we have a number of investments that we've made in manufacturing and cost of <unk>.

Speaker Change: Sales side in order to make sure that we are working collaboratively with suppliers to really to reduce and remove costs from motorcycles in a way that obviously is transparent from a consumer perspective and so.

Jonathan R. Root: And so as we look at all of that, you know, that's where we updated our overall guide from an OI perspective. And so you see that flow into the decision that we made and what we updated. Perfect. That's really helpful.

Speaker Change: So as we look at all of that that's where we updated our overall.

Speaker Change: From an Oi perspective, and so you see that flow into the decision that we made and what we updated.

Speaker Change: Perfect. That's really helpful best of luck going forward.

Speaker Change: Thank you.

unknown: Best of luck going forward. Thank you. Our next question comes from James Hardiman from Citi. Please go ahead, your line is open. Hey, good morning.

Speaker Change: Our next question comes from James Hardiman from Citi. Please go ahead. Your line is open.

James Lloyd Hardiman: Hey, good morning.

James Lloyd Hardiman: A couple of retail questions. How did that trend over the course of the quarter? I think we saw it across power sports.

James Lloyd Hardiman: So a couple of retail question.

James Lloyd Hardiman: How did that trend over the course of the quarter I think we've seen across power sports.

James Lloyd Hardiman: Some sort of tipping point where consumers seem to be pushing back even more so than they were earlier in the year. And I guess, in the context of your guidance, I think year-to-date your retail is down about 2%, and yet the full year guidance, I think you just said, Jochen, is flat to up 3%. So that seems to imply retail growth in the second half. Help us understand why you feel comfortable with that assumption, particularly as we get further away from the model year 24 launch. Yeah, good morning, James. I'll take the first question.

Speaker Change: Some sort of tipping point where consumers.

Speaker Change: Seem to be pushing back even more so than they were earlier in the year.

Speaker Change: And I guess in the context of your guidance I.

Speaker Change: I think year to date your retail is down.

Speaker Change: <unk>, 2%.

Speaker Change: And yet the full year guidance I think you just said.

Speaker Change: <unk> III.

Speaker Change: So that seems to imply retail growth in the second half.

Speaker Change: Help us understand why why you feel comfortable with that assumption, particularly as we get further away from the model year 'twenty for launch.

James Hardiman: Good morning, James. I'll take the first question. The trend over the quarter was extraordinarily consistent; if I look at the U.S. market, we did not trend throughout the quarter in any month negative, so very consistent if you look at the three months of Q2.

Jochen Zeitz: The trend of the quarter was extraordinarily consistent. If I look at the US market, we did not trend negative throughout the quarter in any month. So very consistent if you look at the three months of Q2. Sure, James, I can talk a little bit about our back half view. So as we go through and we take a look at how 2023 developed and then kind of how that flows into 2024, from a year-over-year comp perspective, our toughest comp, as we kind of look back on last year, was really around the way that we performed at retail in Q2.

Speaker Change: Good morning, James I'll take the first question the trend over the quarter was extraordinarily consistent.

Speaker Change: Consistent if I look at the U S market.

Speaker Change: We did not trend throughout the quarter and the month negative.

James Lloyd Hardiman: So.

James Lloyd Hardiman: Very consistent if you look at the.

James Lloyd Hardiman: Three months of Q2.

James Hardiman: Sure, James, I can talk a little bit about our back half view. So, as we go through and we take a look at how 2023 developed and then kind of how that flows into 2024. For my year-over-year comp perspective, our toughest comp, as we kind of look back on last year, was really around the way that we performed at retail in Q2. As we move into Q3 and Q4, we feel pretty confident in light of just refreshing our guidance and putting that out there. We're pretty pleased that the reaction that we've had from a CBO perspective, certainly pleased with kind of consumer and dealer reaction to Road Glide. We have good availability of inventory, with trice and things of that nature, so overall we actually feel like we're pretty well positioned.

James Lloyd Hardiman: Sure James I can talk a little bit about.

James Lloyd Hardiman: Our back half view, so as we as we go through.

James Lloyd Hardiman: Take a look at how 2023 developed and then kind of how that flows into 2024 from a year over year comp perspective, our toughest comp as we kind of look back on last year was really around the way that we performed at retail in Q2.

Jochen Zeitz: As we move into Q3 and Q4, we feel pretty confident in light of just refreshing our guidance and putting that out there. We're pretty pleased at the reaction that we've had from a CBO perspective, certainly pleased with the kind of consumer and dealer reaction to Road Glide. We have good availability of inventory with trikes and things of that nature. So overall, we actually feel like we're pretty well positioned.

James Lloyd Hardiman: As we move into Q3 and Q4, we feel pretty confident in light of.

James Lloyd Hardiman: Just refreshing our guidance and putting that out there we're pretty pleased that the reaction that we've had from a CBO perspective.

James Lloyd Hardiman: Certainly pleased with kind.

James Lloyd Hardiman: Consumer and dealer reaction to road glide, we have good availability of inventory with.

James Lloyd Hardiman: With Trikes and things of that nature. So overall, we actually feel like we're pretty well positioned if you recall about 12 months ago, we were talking through some challenge that we had from a production disruption standpoint, we're really pleased with the work thats being done within our manufacturing and supply chain team, we have a lot of consistency from a.

James Hardiman: If you recall about 12 months ago, we were talking through some challenges that we had from a production disruption standpoint. We're really pleased with the work that's being done within our manufacturing and supply chain team. We have a lot of consistency from a manufacturing perspective. That certainly wasn't the case a year ago, so the level of confidence that we have, as we look at the comps, and then as we look at the way that we're kind of running internally, you put all of that together, and with the dealer network, we have a lot of confidence in the numbers that we put forward and what we think that that half of the year will produce.

Jonathan R. Root: If you recall, about 12 months ago, we were talking through some challenges that we had from a production disruption standpoint. We're really pleased with the work that's being done within our manufacturing and supply chain team. We have a lot of consistency from a manufacturing perspective, but that certainly wasn't the case a year ago.

James Lloyd Hardiman: <unk> perspective.

James Lloyd Hardiman: That certainly wasn't the case a year ago, so the level of confidence that we have.

Jonathan R. Root: So the level of confidence that we have, as we look at the comps, and then as we look at the way that we're kind of running internally, you can put all of that together. And with the dealer network, we have a lot of confidence in the numbers that we put forward and what we think the back half of the year will be.

James Lloyd Hardiman: We look at the comps and then as we look at the way that we're kind of running internally. If you put all of that together and with the dealer network, we have a lot of confidence in.

James Lloyd Hardiman: The numbers that we put forward and what we think the back half of the year will produce.

James Lloyd Hardiman: Yes.

Unknown Executive: Data, thanks, guys.

Speaker Change: Got it thanks guys.

Robin Farley: Our next question comes from Robin Farley from UBS. Please go ahead; your line is open. Great, two questions relating to retail. One is it looks like you're touring market here, maybe it was down sequentially in Q2 versus Q1. If you could give us a little color on what's going on competitively there. That may have cost that shift, and then just follow up on your comments about retail and Q2, if it was sort of consistent. Given how much disruption there was for sort of the last two months of June of last year and June of the prior year, it seems like June should have had a much better performance year over year than maybe the other two months.

unknown: Thanks, guys. Our next question comes from Robin Farley from UBS. Please go ahead, your line is open.

James Lloyd Hardiman: Our next question comes from Robin Farley from UBS. Please go ahead. Your line is open.

Robin Farley: Great. Two questions related to retail. One is, it looks like your touring market share maybe was down sequentially in Q2 versus Q1. If you could give us a little color on what's going on competitively there, that may have caused that shift. And then just a follow-up on your comments about retail in Q2, if it was sort of consistent. Given how much disruption there was for sort of the last two months of June, like June of last year and June of the prior year, it seems like June should have had a much better performance year over year than maybe the other two months. So does that concern you that you didn't see that in June and what would have been, you know, probably one of the easiest comps of any month that Harley's had? Thanks. Yeah, Robin, thank you. Welcome.

James Lloyd Hardiman: Yes.

Robin Farley: Great two questions related to retail one is it looks like Youre touring market share maybe it was down sequentially in Q2 versus Q1, if you could give us a little color on what's going on competitively. There that may have caused that shift and then just a follow up on your comments about <unk>.

Speaker Change: Retail in Q2 is sort of consistent.

Speaker Change: Given how much disruption there was sort of the last two months.

Speaker Change: June of last year and June of the prior year.

Speaker Change: It seems like.

Speaker Change: You should have had a much better performance year over year and maybe the other two months.

Robin Farley: So is that concern you that you didn't see that in June, and what would have been probably one of the easiest comps of many months that Harley had?

Speaker Change: Does that concern you that that you didn't see that in June and would have been.

Speaker Change: Probably one of the easiest comp for many months that <unk> had.

Jochen Zeitz: In terms of market share, our touring market share was very strong in the second quarter. We had a significant increase, as I had mentioned in our press statement and in my speech. So, significant growth in the overall touring segment in Q2. I'm talking US right now, but I'm talking globally. We have to consider that touring motorcycles only started flowing into the international market in May. So they had less time to settle in, and the touring segment internationally is only 25% of the total, while in the US, it's significantly higher than that.

Speaker Change: Thanks.

Robin Farley: Yeah, Robin, thank you. Welcome. In terms of market share, our touring market share was very strong in the second quarter.

Speaker Change: Yes, Robyn Thank you welcome.

Speaker Change: In terms of market share our touring market share was very strong in the second quarter, we had a significant increase as I had mentioned in.

Unknown Executive: We had a significant increase, as I had mentioned in our press statement and in my speech, so significant growth in the overall touring segment in Q2.

Speaker Change: In our press statement in my speech, so significant growth in the overall touring segment in Q2, I'm talking U S. Right now I'm talking globally, we have to consider that the touring the inventory motorcycles only started flowing into the international markets in may So they had less time to settle in in the touring segment.

Unknown Executive: I'm talking US right now that talking globally, we have to consider that the touring, the new touring motorcycles only started flowing into the international market in May, so they had less time to settle in and the touring segment internationally only 25% of the total while in the US. It's significantly higher than that.

James Lloyd Hardiman: Internationally.

James Lloyd Hardiman: Only 25% of the total while in the U S. It's significantly higher than that.

Jochen Zeitz: In terms of the, as Jonathan mentioned, our comms in Q2 were, you know, much higher. We're in the second quarter of last year. So we're comparing a, you know, a strong quarter, and the production disruption that we've seen pretty much materialized mostly in July of last year. So the effect of the closure of the manufacturing facility didn't really impact our shipments significantly in the second quarter or in June of

James Lloyd Hardiman: In terms of.

James Lloyd Hardiman: The U S.

James Lloyd Hardiman: As Jonathan mentioned, our comps in Q2 were much tough.

Jonathan R. Root: Tougher than in the back half because we had positive retail in the in the second quarter of last year. So we're comping a strong quarter in the production.

Speaker Change: Disruption that we've seen pretty much materialize, mostly in July of last year. So the effect of the closure of a manufacturing facility didn't really impact our shipments significantly in the second quarter in June of last year. So we wouldn't have expected.

Jochen Zeitz: So we wouldn't have expected that to have materially impacted our comps versus the previous year. So overall, if you look at the entire quarter, it's, you know, you always hope for more, but considering where the industry is, we are very pleased, and we've taken significant market share in the touring segment, and I think that's a real positive. Yeah, and Robyn, the only piece that I would add is that we are pretty pleased with what we're seeing in terms of total touring and total CBO volume.

Speaker Change: To have materially impacted our.

Jonathan R. Root: Our comps versus the previous year. So overall, if you if you look at the entire quarter.

James Lloyd Hardiman: It's.

James Lloyd Hardiman: You're always hopeful more considering where the industry is.

James Lloyd Hardiman: We are very pleased and we've taken significant market share.

James Lloyd Hardiman: In the touring segment.

Jochen Zeitz: And I think Thats a real positive.

Robin Farley: Yes, Robin the only piece that I would add too is that we are pretty pleased with what we're seeing in terms of total touring and total CDO volume.

Jochen Zeitz: So from our perspective, we feel pretty confident in where we are for all of the elements that Jochen talked about, all of the reasons that he talked about, and the share gains that we're seeing. I think one interesting statistic that I'd be happy to throw out here. We talked about average age, right, the 45 on the slide that we provided in our deck. If you look at the HDFS data and the average income.

Robin Farley: So from our perspective, we feel pretty confident in.

Robin Farley: Where we are for all of the elements that Johan talked about all the reasons that he talked about and the share gains that we're seeing.

Speaker Change: I think one interesting statistic that I would be happy to throw out here, we talked about average age right. The 45 with the slide that we provided in the.

Robin Farley: And now a deck.

Robin Farley: If you look at the HD.

Robin Farley: HD vest date, and the average income.

Jonathan R. Root: We've actually seen continuous growth in average income per Harley user, so that's a positive sign. And if you just look at new, not just new and used, the new customer sort of average income is actually 15% higher than five years ago, at over $100,000. So we are seeing a trending increase in the overall average income of our customers, which we consider to be positive. Great, thank you. Our next question comes from Joe Altobello from Raymond James. Please go ahead.

Robin Farley: We've actually seen a continuous growth in average income.

James Lloyd Hardiman: Holly.

Speaker Change: User so that's a positive sign in.

Speaker Change: And if you just look at new not just new and.

James Lloyd Hardiman: And use the new <unk>.

Speaker Change: Customer sort of average income is actually 15% higher than five years ago with over $100000. So we are seeing trending up in the overall average income of our customers, which we consider to be positive.

Speaker Change: Okay. Thank you.

Speaker Change: Hi.

Joseph Nicholas Altobello: Our next question comes from Joe <unk> from Raymond James. Please go ahead. Your line is open.

Joseph Nicholas Altobello: Your line is open. Guys, good morning. So earlier, you mentioned that you expect dealer inventory to come down, I think you said 30% in the second half and about flat with last year when you talk to your dealers. Would they like that number to come down even further? Because I'm sure that the dollar value of their inventory is higher than it was pre-COVID, particularly on a pro-dealer basis, and interest rates are obviously much higher.

Joseph Nicholas Altobello: Thanks, Hey, guys good morning.

Joseph Nicholas Altobello: So earlier, you mentioned that you expect dealer inventory to come down I think you said, 30%.

Joseph Nicholas Altobello: Second half and about flat with last year, when you talk to your dealers.

Speaker Change: Would they like that number to come down even further because I'm sure that the dollar value of their inventory is higher than it was pre COVID-19, particularly on a per dealer basis.

Joseph Nicholas Altobello: So I'm curious what you're hearing from dealers if they want that number to come down even further in 2025. Well, most of our dealers are only starting to see the shipments that are starting to flow into the dealerships in the third quarter. But I'd say overall, we've had minimal pushback. And if there was a pushback, we would reallocate that product elsewhere. The 30% is a global average.

Speaker Change: And interest rates are obviously much higher so im curious what youre, what youre hearing from dealers.

Joseph Nicholas Altobello: Want that number to come down even further in 'twenty five.

Speaker Change: Well most of our dealers are only starting to see the BEC.

Speaker Change: The shipments that are starting to flow into the dealerships in the third quarter, but I'd say overall, we have had minimal pushback and if there was a pushback we would reallocate that product elsewhere.

Speaker Change: 30% is a global average.

Jochen Zeitz: We actually expect the inventory in the US to come down by approximately 35% versus year to date towards the end of the year. So US dealers will actually see a further reduction. From our perspective, this is pretty significant.

Speaker Change: We actually expect the inventory in the U S to come down by approximately 35% versus year to date towards the end of the year. So the U S dealers, we will actually see a further reduction from our perspective.

Speaker Change: This is pretty significant.

Speaker Change: And I think the dealers would feel that also.

Jochen Zeitz: And I think the dealers will feel that also, starting now, that the shipments are actually going down significantly. That said, we wanted to be well prepared for our peak season in the coming couple of months, and we are well prepared. We've had no production issues, and no significant production issues at all.

Speaker Change: Starting now that the shipments are actually going down significantly that said, we wanted to be well prepared for our peak season, and the coming couple of months and we are well prepared we had no production issues significant production issues at all and.

Jochen Zeitz: And so the deal is well stocked. Obviously, floor plan is a consideration given the higher interest rates and the higher dollar values, which thankfully HDFS is also able to finance. But overall, we think that the reductions that we have implemented already that are going to be visible to our dealers going forward are pretty significant with a 35% decline versus the current state.

Speaker Change: So the dealers well stocked obviously floor plan is.

Speaker Change: As a consideration given the higher interest rates and the high dollar values, which thankfully HD vest is also able to finance.

Speaker Change: But overall, we think that the reductions that we have implemented already going to be visible to our dealers going forward.

Speaker Change: A pretty significant with a 35% decline versus current state.

Jochen Zeitz: Very helpful. Maybe just to follow up on that, the outlook for retail growth in the second half, maybe give us an idea of what you're seeing in July. Yeah, I mean, we've looked, I don't want to really comment on current trading with three weeks in and months, although in the second quarter, everything was pretty consistent, and we also were lapping the production closed down in July of last year.

Speaker Change: Got it very helpful. Maybe just a follow up on that the outlook for retail growth in the second half maybe give us an idea of what youre seeing in July.

Speaker Change: Yes.

Speaker Change: I don't want to really comment on current trading with three weeks and months, although in the second quarter and everything was pretty consistent.

Speaker Change: We also were lapping.

Speaker Change: <unk> closed on in July of last year.

Speaker Change: Everything that we're seeing now has been factored into the into our full year guidance.

Jochen Zeitz: You know, everything that we're seeing now has been factored into our full-year guidance. And but, I prefer from here going forward not to really talk about current trading, because, you know, it is overall quite volatile, but rest assured that current trading has been incorporated into our full-year guidance. Okay, thanks. Our next question comes from Brandon Rollet from D.A. Davidson.

Speaker Change: But I'd prefer from here going forward not to really talk about current trading because it is overall always quite volatile, but rest assured that current trading has been incorporated in our full year guidance.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Brandon Roll: Our next question comes from Brandon <unk> from D. A Davidson. Please go ahead your line is open.

Brandon Roll: Please go ahead. Your line is open. Good morning.

Jonathan R. Root: Thank you for taking my questions. First, just on your dealer network, we picked up on some more dealership closures throughout the quarter. Can you talk about where you feel like your dealer network is right now and how these closures will impact overall future profitability for HDMC? Thank you. Sure. Thank you, Brandon.

Brandon: Good morning, Thank you for taking my questions.

Speaker Change: First just on your dealer network, we picked up on some more dealership closures throughout the quarter can you talk about where you feel like your dealer network is right now and how these closures will impact overall future profitability for <unk>. Thank you.

Jonathan R. Root: So I'll start. And I think from a dealer closure perspective, we certainly look to make sure that we are working to refine the dealer network, get locations set up in the right way, and do that in a manner that really allows the surrounding dealers, all of our entrepreneurial partners, to be profitable and really generate a business return that makes sense for them. So as we look, I think a couple of things.

Speaker Change: Sure. Thank you Brandon So I'll start and I think from a from a dealer closure perspective, we certainly look to make sure that we are working to refine the dealer networks get locations set up in the right way and do that in a manner that really allows us.

Speaker Change: Surrounding dealers all of our entrepreneurial partners to be profitable and really generate business return that makes sense for them.

Speaker Change: So as we look I think a couple of things one from a Harley Davidson Motor company Harley shareholder standpoint, we certainly are thoughtful and making sure that we have the right locations in place that we're reaching the consumers that we need to and that we have a path toward.

Jonathan R. Root: One, from a Harley-Davidson Motor Company and Harley shareholder standpoint, we certainly are thoughtful in making sure that we have the right locations in place, that we're reaching the consumers that we need to, and that we have a path toward a profitable business return, while ensuring that we're fulfilling the needs of our customers and our riders. And then we also look from a dealer lens and really think through it from a dealer partner perspective. Are we building a network that's profitable, sustainable, and there from a long-term standpoint?

Speaker Change: Ensuring that we're fulfilling the needs of our customers and our riders and then we also look from a dealer lens and really think through from a dealer partner perspective.

Brandon: Are we building a network that's profitable sustainable and there from a long term standpoint.

Jonathan R. Root: And we feel pretty good about the way that we're partnering with the dealer network and the way that we're allowing them to generate returns over time. So overall, I think you'll continue to see us be opportunistic in finding the right path from an overall dealer network design standpoint. And we will make sure that we do that in a way that doesn't negatively harm Harley-Davidson shareholders. So we are ensuring that we are really developing the optimal distribution footprint.

Brandon: We feel pretty good about.

Jonathan R. Root: The way that we're partnering with the dealer network and the way that we're allowing them to generate returns over time.

Brandon: So overall I think yes, youll continue to see us be opportunistic in and finding the right path from an overall dealer network design standpoint.

Brandon: And we're making we will make sure that we do that in a way that that doesn't negatively harm Harley Davidson shareholders. So we are ensuring that we are really developing the optimal distribution footprint and then we do that with our dealer partners in mind too to ensure that they are generating a return that makes sense for their investment.

Jonathan R. Root: And then we do that with our dealer partners in mind, too, to ensure that they are generating a return that makes sense for their investment. Great. And just one more question. You know, we receive a lot of incoming questions about maybe your ability to keep innovating. Obviously, this was a big refresh this year within the touring lineup.

Brandon: Okay.

Jochen Zeitz: But what gives you confidence, or what can you leverage from what you've learned this year to continue innovating and providing new lineups that resonate with your core consumers? Thank you. Yeah, I mean, we have a product portfolio plan that spans many years, which we initiated in 2021 with a hardwired strategy, and that is going to flow into the market in the coming year. So we feel very good about it. Most importantly, this touring launch is significant because you know that the previous platform had not been updated for well over 10 years. And this product is distinctively different from anything out there.

Speaker Change: Great and just one more question.

Speaker Change: We receive a lot of incoming questions about maybe your ability to keep innovating. Obviously this was a big refresh this year within the Turing lineup, but what gives you confidence or what can you leverage from what you've learned this year to continue.

Speaker Change: Innovating and providing.

Speaker Change: New lineups that resonate with your core consumer thank you.

Speaker Change: Yes, I mean, we have.

Speaker Change: Robot portfolio plan that spans over many years, which we've initiated.

Speaker Change: <unk> 21, with a hardware strategy and that is going to flow into the into the market in the coming year. So we feel very good about it most importantly, this touring launch.

Is significant.

Jochen Zeitz: I know that the previous platform has not been updated for well over 10 years and this product is distinctively different to anything out there. So it makes everything out there that is not our new touring bikes look look David and we believe that that will help us in years to come but that said, there's more innovation coming.

Jochen Zeitz: So it makes everything out there that is not our new touring bikes look dated. And we believe that that will help us in years to come. But that said, there's more innovation coming over the next few years. So we feel quite good about the pipeline that we have in place. Great. Thank you. Our next question comes from Noah Zatzkin from KeyBank Capital Markets. Please go ahead.

Jochen Zeitz: Over the next few years, so we feel quite good about the pipeline that we have in place.

Speaker Change: Great. Thank you.

Unknown Executive: Thank you.

Noah Zatzkin: Our next question comes from Noah Zatzkin from KeyBank Capital Market. Please go ahead; your line is open. Hi, thanks for taking my questions. Maybe just first on HDFS, how are you guys feeling about the health of the book? And then our annualized retail credit loss is kind of where you expected them to be right now.

Noah Seth Zatzkin: Our next question comes from Noah <unk> from Keybanc capital markets. Please go ahead. Your line is open.

Noah Seth Zatzkin: Your line is open. Hi, thanks for taking my questions. Maybe just first on HDFS, how are you guys feeling about the health of the book? And then our annualized retail credit loss is kind of where you expected it to be right now. And then second, if you could just kind of touch on maybe any market dynamics that you're seeing that differ overseas. I know APAC was a bit softer; I think some of the other regions were pretty similar to North America. So any color there would be helpful.

Noah Seth Zatzkin: Hi, Thanks for taking my questions, maybe just first on <unk>. How are you guys feeling about the health of the book.

Noah Seth Zatzkin: And then our annualized retail credit losses kind of where you expected them to be.

Noah Zatzkin: And then second, if you could just kind of touch on maybe any market dynamics that you're seeing that differ overseas. You know, a pack was a bit softer. I think some of the other regions were pretty similar in North America. So any color there would be helpful.

Speaker Change: Right now and then second if you could just kind of touch on maybe any market dynamics that youre seeing that differ overseas I know APAC was a bit softer I think some of the other regions were pretty similar to North America. So any color there would be helpful. Thanks.

Jochen Zeitz: Thanks. Yeah, that's fine. Sorry, I'm starting from the back. So market dynamics, I mentioned Asia, obviously, that one outlier there in terms of retail decline significantly impacted by China. Asia was growing six quarters in a row; now it's the fourth quarter down. Obviously, I'm not pleased with that, but I can with certainty attribute it to the overall difficult market environment, in particular in China and in some Southeast Asian markets.

Unknown Executive: Yeah, let's go ahead. Thank you. Sorry. No, that's fine.

Give us the.

Speaker Change: Go ahead go ahead sorry.

Unknown Executive: So I'm starting from the bank. So market dynamics, I mentioned Asia obviously that one outlier than in terms of retail decline significantly impacted by China. Asia was growing six quarters in a row; now it's the fourth quarter down. Obviously not pleased with that, but that I can with certainty attribute to the overall difficult market in mine, in particular in China and in some Southeast Asian markets. So I think that's the if you look at the retail data, that's the one regional role that has had a much tougher time, but also had seen significant growth was before that decline happened.

Speaker Change: Im sorry, I missed that is on the back up so the market dynamics I mentioned Asia, obviously that one outlier there in terms of.

Speaker Change: In terms of retail decline.

Jochen Zeitz: Significant significantly impacted by by China Asia was growing six quarters in a row now it's the fourth quarter down obviously, not pleased with that but that with certainty attribute to the overall difficult market environment in particular in China, and then some southeast Asian markets. So I think thats.

Jochen Zeitz: So I think that's the, if you look at the retail data, that's the one region overall that has had a much tougher time, but it also had seen significant growth well before that decline happened. Okay, all right, Noah, and then on to the HDFS side of things.

Jochen Zeitz: If you look at the retail data.

Jochen Zeitz: One region overall that is.

Jochen Zeitz: It had a much tougher time, but also had seen a significant growth well before the decline happened.

Jonathan R. Root: So from an overall HDFS health perspective, you've seen where we are from an overall allowance standpoint, you can compare that back to where we were at the time of Cecil, and you can see that we're pretty, You know, we think that we're pretty thoughtful and in a good position from an overall reserve standpoint, and well positioned on that front, as we think about what we're seeing on the delinquency and loss side of the You know, overall consumer delinquency is a little bit higher than where we would optimally like it to be, but we feel that the HDFS team is doing a great job of really controlling delinquency and then working with customers.

Speaker Change: Yeah.

Unknown Executive: Okay, all right.

Noah: Okay, Alright, and then on to the <unk> side of things. So from an overall Hff's health perspective, you've seen where we are from an overall allowance standpoint, you can compare that back to <unk>.

Unknown Executive: Now, and then on to the HDFS side of things. So for an overall HDFS health perspective, you've seen where we are from an overall allowance standpoint. You can compare that back to where we were at time of seasonal, and you can see that we're pretty. You know, we think that we're pretty thoughtful, and it's in a good position from an overall reserve standpoint and well positioned on that front as we think about what we're seeing on the delinquency and the last side of the equation. You know, overall consumer delinquency is a little bit higher than where we would optimally like it to be, but we feel that the HDFS team is doing a great job of really controlling delinquency and then working with customers. And then as you kind of look at how that translates through to an overall loss perspective.

Jonathan R. Root: Where we were at time of seasonal and you can see that we're pretty.

Jonathan R. Root: We think that we're pretty thoughtful and in a in a good position from an overall reserve standpoint.

Jonathan R. Root: And well positioned on that front as we think about what we're seeing on the delinquency and loss side of the equation.

Jonathan R. Root: Overall consumer delinquency is is a little is a little bit higher than where we would optimally like it to be but we feel that the <unk> team is doing a great job of really controlling delinquency and then working with customers and from <unk> and then as you kind of look at how that translates through to us overall.

Jonathan R. Root: And then as you kind of look at how that translates through to an overall loss perspective, losses are broadly in line with sort of a seasonality curve that we would often see, particularly in sort of this credit environment.

Jonathan R. Root: Loss perspective losses are broadly in line with sort of a seasonality curve that we would often see.

Unknown Executive: Losses are broadly in line with sort of a seasonality curve that we would often see, particularly in sort of this credit environment when we go off and compare to auto lenders and do some benchmarking there. We actually feel pretty good about the way that the HDFS team is performing, the way that the portfolio is performing. The other piece that we always make sure that we take a look at for an HDFS standpoint is how are our things like losses and reserve moving relative to revenue and so overall. Again, we remain pleased with how the HDFS business in total is performing, and you see that from our guidance where we, you know, affirmed or confirmed our guidance that we've started the year with so broadly in line with where we thought the year would unfold.

Speaker Change: Particularly in sort of this credit environment, when we go off and compared to auto lenders and do some benchmarking there we actually feel pretty good about the way that the HFF team is performing the way the portfolio is performing the other piece that we always make sure that we take a look at from an H GFS standpoint is.

Jochen Zeitz: When we go off and compare to auto lenders and do some benchmarking there, we actually feel pretty good about the way that the HDFS team is performing, and the way that the portfolio is performing. The other piece that we always make sure that we take a look at from an HDFS standpoint is how are things like losses and reserves moving relative to revenue? And so overall, again, we remain pleased with how the HDFS business in total is performing, and you see that from our guidance where we've, you know, affirmed or confirmed our guidance that we started the year with, so broadly in line with where we thought the year would unfold.

Jochen Zeitz: How are how are things like losses, and reserve moving relative to revenue and so overall.

Jochen Zeitz: We remain pleased with how the <unk> business in total is performing and you see that from our guidance where we are.

Jochen Zeitz: Affirmed or confirmed our guidance that we started the year with so broadly in line with where we thought the year would unfold nothing no I'll just to add onto what I said earlier on.

Unknown Executive: I think no, just to add on to what I said earlier and to answer your question about what I was seeing in various markets. I mentioned in my speech that we. There is no consistency across markets. We have, if you take me as a region, some markets that are particularly strong, such as Spain, Italy, Portugal, and you have some markets that are not doing so great, such as Germany and France. And so there's not, and then in the US there's also, you know, very deeply, some markets are up significantly, other markets are down, so there's no consistency overall where every market sort of performs equally, which is quite interesting to see that. And much of that we believe also has.

Jochen Zeitz: And I think, Noah, just to add to what I said earlier and to answer your question about what we are seeing in various markets, I mentioned in my speech that there is no consistency across markets. We have, if you take EMEA as a region, some markets that are particularly strong, such as Spain, Italy, and Portugal, and you have some markets that are not doing so well, such as Germany and France.

Speaker Change: To answer your question about what are we seeing in various markets I mentioned in my speech that we.

Jochen Zeitz: No consistency across markets. We have if you take EMEA as a region you have some markets that are particularly strong such as Spain, Italy, Portugal, and you have some markets that are not doing so great such as Germany and France.

Speaker Change: And so there is not and then in the U S. Is also varying degree some markets are up significantly other markets are down so theres no consistency overall aware every market sort of.

Speaker Change: Performance equally which is quite interesting to see that and much of that we believe also has.

Unknown Executive: It's a route in the economic development in some of those markets and states as well.

Jochen Zeitz: It has its roots in the economic development in some of those markets and states as well.

Noah: Very helpful. Thank you.

Jochen Zeitz: And so there is not, and then in the U.S., there are also, you know, varying degrees; some markets are up significantly, other markets are down, so there's no consistency overall where every market sort of performs equally, which is quite interesting to see that has its roots in the economic development in some of those markets and states as well. Very helpful. Our next question comes from Tristan Thomas Martin from BMO Capital Markets. Please go ahead. Your line is open. Good morning.

Speaker Change: Our next question comes from Tristan Thomas Martin from BMO Capital markets. Please go ahead. Your line is open.

Jochen Zeitz: Yeah.

Speaker Change: Good morning.

Tristan M. Thomas: I was wondering, can you provide a breakdown of how much of your channel inventory is model year 24s versus 23s? And then I was also kind of wondering what promotional levers you have for the rest of the year if you do need to provide a little juice to hit your inventory decline targets. So, as you have probably seen, we are not promoting our 23 model year with the exception of our 399 promotion, which is basically something we've had on the market for, you know, quite some time.

Speaker Change: I was wondering can you provide.

Speaker Change: A breakdown of how much of your channel inventories model year 'twenty fours versa 20, threes and then I was also kind of wondering what promotional levers you have kind of for the rest of the year. If you do need to provide a little juice to hit your <unk>.

Speaker Change: Inventory declines targets. Thanks.

Speaker Change: As you have.

Tristan M. Thomas: Probably seen we have not we're not promoting our 'twenty three.

Tristan M. Thomas: With the exception of our 399 promotion, which is basically something we've had in market for quite some time.

Tristan M. Thomas: And so there are no more promotions. And the reason for that is because there are minimal levels of inventory of 23s in the market that, you know, some dealers actually want to have for bringing customers into that dealership.

Speaker Change: And so there are no more promotions and the reason for that is because the minimal levels of inventories of <unk> <unk> in the market that some dealers actually want to have to bring in customers.

Tristan M. Thomas: The dealership, but we've stopped promoting model year 'twenty three for that reason.

Jochen Zeitz: But we stopped promoting model year 23 for that reason. We are pretty much the only company out there that does not promote 24s. I'm sure you've noticed that as well. We're not going to comment on what's going to happen in the second half.

Speaker Change: We are pretty much the only company out there that does not promote 24th I'm sure you can always that as well, we're not going to comment on what's going to happen in the second half.

Jochen Zeitz: We are watching things carefully but.

Jochen Zeitz: We're obviously watching things carefully, but, you know, at this point, there are no promotions active for model year 24. Okay, and then if I could just kind of sneak one in there, the average age chart you posted, is that in line with where you want it to be? And kind of, if we look at a couple years from now, how do you think that's going to trend? I think, yeah, as an average, I think that's, you know, quite healthy, considering that, you know, as we've always said, or I've always said, you kind of age into the brand, right? I mean, when I started riding at 16 or 18, I was dreaming of owning a Harley-Davidson, but I couldn't afford it.

Jochen Zeitz: This point is no promotions active for more than 2004.

Jochen Zeitz: Alright, and then if I could just sneak one in there the average age chart you posted as that.

Speaker Change: In line with where you wanted to be and kind of if we look out a couple of years, how do you think thats going to trend.

Jochen Zeitz: I think yes, as an average I think thats.

Jochen Zeitz: Quite healthy considering that.

Jochen Zeitz: As we've always said, though I've always said with your kind of H into into the brand right. I mean, when I started writing 16 or 18 with streaming from owning a Harley Davidson medical and afford it and so it comes later in life.

Jochen Zeitz: And so it comes later in life; it's, you know, even if the profile in the US might be a little bit different, and you come in a little bit earlier in the US market, but the consistency, I think, is fine. We're happy with that, based on the data we have, that makes us even younger than some other brands in the market, established brands in the market. And the fact that the average income has gone up is also positive. That said, you know, 35 and younger, that's 30% of our loan origination volume, that's considerable. And, you know, 75% of our customers are under 54. That is not the issue from our perspective.

Speaker Change: Even if the profile in the U S might be a little bit different and you come in a little bit earlier.

Jochen Zeitz: In the U S market, but the consistency I think is fine we're happy with that based on the data we have that makes us even younger than some other brands in the market established brands in the market.

Jochen Zeitz: And the fact that the average income is going up is also a positive that said.

Jochen Zeitz: 35, and younger that's 30% of our loan origination volume Thats considerable 35 and younger.

Jochen Zeitz: And 75% of our customers.

Speaker Change: On the on the 54 so.

Jochen Zeitz: <unk>.

Jochen Zeitz: That is not the issue from our perspective, you always wanted to trend Yano, but you also have to recognize.

Jochen Zeitz: You always want to trend younger, but you also have to recognize we're a premium motorcycle manufacturer with the highest MSRP in the market. And obviously, that has an effect in terms of phase affordability and what someone can afford at what life stage. And that's what automatically leads you to a higher average age, also considering that our bikes are big bikes, 601 plus cc. So this is not something you necessarily need to ride when you're 18, if you can afford it.

Speaker Change: Premium motorcycle manufacturer with the highest.

Jochen Zeitz: MSRP in the market and obviously that has also an effect in terms of the Facebook affordability.

Jochen Zeitz: Someone can afford at life stage and Thats what automatically leads it leads you to a higher.

Jochen Zeitz: Higher average age also considering that our box a bit by 671 plus cc. So this is not something necessarily right when you're 18.

Jochen Zeitz: So I think the consistency in itself, and you know, if I expanded that data beyond 10 years, it would actually, that curve would stay pretty flat, even well beyond the 10 year horizon. You know, I think it's important information for the market that we thought we would share with you. Got it. Thank you. Our last question today will come from Fred Wightman from Wolf Research. Please go ahead; your line is open. Hey guys, good morning.

Speaker Change: If you can't afford it so I think the consistency and itself and if I can.

Speaker Change: <unk> the data beyond 10 years, it would actually that would stay pretty flat, even well beyond the 10 year horizon.

Speaker Change: I think it's an important.

Jochen Zeitz: Important information for the market that we thought we would share with you.

Jochen Zeitz: Okay.

Unknown Executive: You got it. Thank you.

Speaker Change: Got it thank you.

Fred Wightman: Our last question today will come from Fred Wightman from Wolf Research. Please go ahead; your line is open. Hey guys, good morning.

Speaker Change: Our last question today will come from Fred Wightman from Wolfe Research. Please go ahead. Your line is open.

Frederick Charles Wightman: I'm wondering if the updated operating margin guidance is really just reflecting the deleverage from a production and a fixed cost absorption perspective, or if you're actually earmarking or planning for some incremental dealer support costs. I know you've given some specific numbers earlier in the year for dealer support for non-currents, but I'm wondering if the plan is that, you know, the updated margins could include some incremental promotion from Yeah, okay. So Fred, I'll take that one.

Frederick Charles Wightman: Hey, guys. Good morning, I'm wondering if the updated operating margin guidance. If that is really just reflecting the deleverage from a production and a fixed cost absorption perspective, or if you're actually earmarking or planning for.

Fred Wightman: I'm wondering if the updated operating margin guidance, if that is really just reflecting the deal average from a production in a fixed cost absorption perspective, or if you're actually earmarking or planning for some incremental dealer support costs. I know you've given some specific numbers earlier in the year for dealer support for non-currents, but I'm wondering if the plan is that you know, the updated margins could include some incremental promo from here too.

Frederick Charles Wightman: Some incremental.

Frederick Charles Wightman: Dealer support costs I know, you've given some specific numbers earlier in the year for dealer support for non currents, but I'm wondering if the plan is that.

Speaker Change: The updated margins could include some incremental promo from here too.

Fred Wightman: Yeah, okay, so Fred, I'll take that one. And I think, guys, so great question. Thank you for the question. You go through and you look at the impact from an AI margin perspective; it is primarily due to the impacts of leverage. So, as we think about where we are from an overall production perspective, as we talked about, we did make sure that we adjusted guidance for where we're going. We are also being extremely thoughtful in overall inventory levels that we're running. And so we're working hard to make sure that we're actually kind of moving through company inventory in a way that makes sense, thinking about where dealer inventory fits, ensuring that our dealers are well positioned to take advantage of retail. But we want to make sure that we are very thoughtful in the level of inventory they have in light of Fed base rates.

Jonathan R. Root: And I think, great question. Thank you for the question. As you go through and you and you look at the, impact from an OI margin perspective, it is primarily due to the impacts of leverage. So as we as we think about where we are from an overall production perspective as we talked about We did make sure that we adjusted guidance for where we're for where we're going We are also being extremely thoughtful in overall Overall inventory levels that we're running and so we're working hard to make sure that we're actually Kind of moving through Company inventory in a way that makes sense thinking about where dealer inventory fits Ensuring that our dealers are well positioned to take advantage of retail But we want to make sure that we are very thoughtful In the levels of inventory they have in light of Fed base rates.

Fred: Yes, okay. So I'll take that one and I think so.

Speaker Change: Question. Thank you for the question as you go through and you look at that.

Jonathan R. Root: Impact from an Oi margin perspective, it is primarily due to the.

Jonathan R. Root: The impacts of leverage.

Jonathan R. Root: So as we as we think about where we are from an overall production perspective, as we talked about we did make sure that we adjusted guidance for where we are for where we're going.

Jonathan R. Root: We're also being extremely thoughtful in overall overall.

Jonathan R. Root: Overall inventory levels that we're running and so we're working hard to make sure that we're actually.

Jonathan R. Root: Kind of moving through company inventory in a way that makes sense thinking about where dealer inventory third ensuring that our dealers are well positioned to take advantage of retail, but we want to make sure that we are very thoughtful in the levels of inventory. They have in light of fed base rates and so as you kind of take that all the way back.

Fred Wightman: And so, as you kind of take that all the way back to sort of the direct answer to your question, it really is production volume; the impact from leverage that really drives our AI performance. Again, as you heard us touch on too, we actually feel very, very confident in our long-term AI margin and where we're going. And so you saw our commitment to that from a long-term standpoint, too.

Jonathan R. Root: And so as you kind of take that all the way back to sort of the direct answer to your question, it really is production volume and the impact from leverage that really drives our OI performance, again, as you heard us touch on too. We actually feel very, very confident in our long-term OI margin and where we're going, and so you saw our commitment to that from a long-term standpoint. Perfect, thank you.

Speaker Change: Sort of.

Jonathan R. Root: The direct answer to your question. It really is production volume the impact from leverage.

Jonathan R. Root: That really drives our Oi performance again as you heard us touch on two we actually feel very very confident in our long term Oi margin and where we're going and so you saw our commitment to that from a long term standpoint too.

Unknown Executive: Perfect. Thank you. You're welcome.

Speaker Change: Perfect. Thank you.

Jonathan R. Root: You're welcome. Thank you. There are no further questions at this time. This concludes today's conference call. Thank you all for joining. You may now disconnect. Thanks for watching!

Unknown Executive: Thank you. There are no further questions at this time.

Speaker Change: Youre welcome. Thank you.

Speaker Change: There are no further questions at this time.

Unknown Executive: This concludes today's conference call. Thank you all for joining. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you all for joining you may now disconnect.

Jonathan R. Root: Okay.

Jonathan R. Root:

Jonathan R. Root: Yeah.

Jonathan R. Root:

Jonathan R. Root: [noise].