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Thank you for standing by, and welcome to the Harley-Davidson 2024 Fourth 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, sir.

Thank you. Good morning. This is Shawn Collins, the Director of Investor Relations at Harley-Davidson. You can access the slides supporting today's call on the Internet at the Harley-Davidson Investor Relations website. As you might expect, our comments will include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in today's earnings release and in our latest filings with the SEC. Joining me for this morning's call are Harley-Davidson, Chief Executive Officer, Jochen

Thanks, Jochen. Good morning, everyone. As we concluded 2024, LiveWire had an operating loss of $110 million and 612 revenue units, both within the range of our revised guidance. In the electric motorcycle segment, LiveWire's global retail performance grew by 46% year over year, with LiveWire maintaining a leadership position with a 65% market share in the US 50+ horsepower on-road EV segment. Despite the decrease in total unit sales in 2024, driven largely by reduced sales to third-party distributors, the US market saw significant growth. LiveWire recorded a 21% increase in US dealer sales and a 20% increase in US online sales. The cost-cutting initiatives implemented during the year enabled the company to achieve a cash burn below target for 2024. We expect these efforts to reduce 2025 total cash used by operating and investing activities by about 40%, which we expect to be $60 million or less. Looking ahead to 2025, LiveWire has entered the year with four models in the market, including three based on the S2 platform, and as announced at Tech Mahindra in Q4, plans for an electric maxi scooter in the first half of 2026, with a primary focus on the European market. The company's commitment to innovation and market expansion will be evident by planned new products in both the electric motorcycles and scooter segments, designed to appeal to a broader global customer base. We believe these initiatives position the company to enter new market segments and enhance its competitive edge. Now I hand it over to Jonathan Root.

Thank you, Karim, and good morning to all. I plan to start on page four of the presentation. I will briefly summarize the financial results for the fourth quarter and full year 2024. Subsequently, I will go into further detail on each business segment. Let me start with consolidated financial results for the fourth quarter of 2024. Consolidated revenue in Q4 was down 35%, driven mainly by HDMC revenue being down 47% and partially offset by HDFS revenue growth of 4%. Consolidated operating loss in Q4 was $193 million, which compares to an operating loss of $21 million in Q4 2023. This was driven by an operating loss of $214 million at HDMC, while HDFS operating income of $46 million was unfavorable by $12 million relative to a year ago. The operating loss at LiveWire was $26 million, which was in line with our expectations and $9 million favorable relative to a year ago. As a reminder, we expected the fourth quarter to be a reduced quarter from a profit standpoint at the Harley-Davidson Motor Company segment. This is a result of the intentional reduced wholesale shipments in Q4 as part of preparation for the new model year product launch in January of this year, and our commitment to not grow dealer inventory year over year. Again, I plan to go into further detail on each business segment's profit and loss drivers in the next section. In Q4, earnings per share was a loss of $0.93, which is down from a profit of $0.18 in Q4 2023. Turning to full year 2024 financial results, on page five. Consolidated revenue of $5.2 billion was 11% lower compared to last year, while consolidated operating income of $417 million was 47% lower than last year. Full year 2024 consolidated revenue performance was as follows: At HDMC, revenue decreased by 15%. At HDFS, revenue increased by 9%. And at LiveWire, revenue declined by 31%. Full year 2024 consolidated operating income of $417 million compares to $779 million of consolidated operating income in 2023. Business segment performance was as follows: At HDMC, operating income of $278 million was 58% lower than the prior year. At HDFS, operating income of $248 million was 6% higher than the prior year. And at LiveWire, operating loss of $110 million was 6% favorable. For the full year 2024, earnings per share was $3.44, and compares to $4.97 in 2023. Now turning to page six, on HDMC retail performance. As Jochen

Thank you. Our first question will come from Megan Alexander of Morgan Stanley. Please go ahead. Your line is open.

Hi. Thanks very much. Good morning. Thanks for taking our question. Jonathan, a lot of helpful detail there. So thank you. Appreciate it. I think you mentioned you're expecting an inventory reduction of more than 30% in the first quarter for touring as you did in 2024. So maybe a hard comparison on touring plus still taking some shipments out of the channel. So can you just maybe put a finer point on what that means for your expectations?

Sure. So we'll probably talk more, I think, in sort of front half and back half of the year rather than get into quarters specifically. But, Megan, your question is sure that you do have an understanding on, but is I think a really good one that we feel is important to make as we look at where dealer inventory globally kind of lands across 2025. We expect to end the year down 10% or a little bit over from a total dealer inventory perspective. As we think about what that looks like across the quarters, again, front half would be down a little over 30%. And so, obviously, as we flow through that and think about some of the dealer impacts related to that, we have dealers who run the year down probably about 35%, you know, call it a 35-ish percent average across the entire year. But, obviously, it kind of trails off because of the actions that we took in 2024 to bring down inventory in Q4. So with that, you see a more pronounced decrease in inventory in the front half than the back half. So 30% plus and then 10% plus kind of year-end. As we think about the wholesale related impacts to that, it does mean that front half of the year wholesale will be down in 2024, versus where we were. So front half probably down in the year, move toward the back half up quite a bit in the back half in order to make sure that we end the year appropriately positioned from an inventory standpoint.

Thanks.

Our next question comes from Joseph Altobello from Raymond James. Please go ahead. Your line is open.

Guys. Good morning. I guess, I try to squeeze in a couple of questions if I get. Where was the big margin surprise? Because revenue was in line. Shipments were maybe slightly below expectations. So first question is where the big margin surprise was in Q4, and then maybe to follow-up on that, the retail outlook for flat in 2025. Maybe you're...

Alright. Thanks, Joe. I can start with I'll start with the sort of margin piece from a Q4 perspective. And then between Jochen

Sure. I think if you look at the first and the second half of last year, we had a stronger performance in the first half versus the second half. Not just because or only because of the touring launch, but in general, we've seen a drop-off in the second half, which is pretty much in line with what other industries or related industries have seen. So therefore, we expect a better performance in the second half versus the first half. We also think from a macroeconomic point of view, it's probably going to be more choppy in the first half than the second half. You mentioned the touring launch. I think what's important to notice is that we have beyond touring a lot of innovation in our product lineup, which is reflected in our guidance. And then that the touring product that we've launched is still very new to many of our customers. We have 1.6 million touring riders just across the United States. With last year's sales of new touring bikes, we still have a customer base of the 95% that haven't looked or purchased our product. This means that's 1.5 million that can potentially upgrade to the new product platform. And if you look at previous launches that were not as comprehensive in terms of remodel as our touring launch now is, that benefit came over several years, not just the first year. And data shows that 30% of our customers are very aware of our new touring product features, but that makes 70% that are not fully aware yet. So there's definitely a lot of potential for the coming years to convince customers, and some are just holding off and don't want to buy the first generation and want to familiarize themselves more. So we still think Touring has opportunity for growth in the future for sure, and this platform should run for many years, given that it's all new compared to our Rushmore products in the past. But in terms of comps, certainly, we believe the first half is going to be slower than the second half.

The next question comes from James Hardiman from Citi. Please go ahead. Your line is open.

Hey, good morning. Thanks for taking my question. So maybe help.

The sort of margin bridge. You're guiding revenues to be flat to down modestly. But operating margin to be up. And it looks like on the OPEX front, sales. So I assume it sounds like that's going to basically track revenues, so maybe pretty flat as a percentage of we're to model gross margins to be up pretty materially in 2025. Now you gave us a lot of the negatives. Right? I think FX is going to be a negative. It sounds like mix is going to be a negative. I guess, how do we get to that motor company margin growth that you're guiding to. Thanks.

Alright, James. So I can start. So I think as we go through and we take a look from an overall volume perspective, obviously, as you talked about, we're pretty flat. So as we think about walking off of 6.7% for 2024, we end up with, you know, a relatively flat guide from a volume perspective. From a pricing standpoint, we expect a little bit of favorability that's in there as we look at the actions that we've taken across the portfolio. There's a little bit of a negative impact in 2025 from FX, so probably a little bit greater than the negative impact that you saw in the 2023 to 2024 walk. A little bit of a challenge from a mix standpoint because we have the new Softail that are hitting. Obviously, the touring are higher margin motorcycles. So there's a little bit of a mixed dynamic in there. We don't think that we're going to see sort of the same level of unfavorability from manufacturing and other. And then we think we have a little bit of favorability that falls in there from an OpEx perspective. Those are for the reasons that Jochen

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

Great. Thanks. I wanted to just clarify, this is your guidance for motorcycle revenue flat to down 5%. I think you said price would be positive for the year. So does that imply percent of unit down a bit more than that flat to 5%? And then just on retail, I know you gave some color sort of first half versus second half. But assuming that you're trying to clear inventory, you're shipping below your retail expectations. What should we kind of think about as the rough range of your retail expectation for the year just so we can kind of, as we move through the year, kind of see how it's tracking versus your guidance and, you know, maybe kind of adjust our expectations accordingly. Thanks.

Okay. Thank you, Robin. So I'll start with I think from a wholesale perspective, we probably think, you know, flat to down a little bit. So as we look at that, that's a little bit of the volume. You know, there will be a little bit of volume challenge in there. That is offset by the pricing piece that I talked about. And then I think relative to your question on retail, overall, for right now, from the commentary that we talked about, we think that retail is being flat in 2025. So certainly, a little bit difficult to predict as we think about the macroeconomic situation and where we are. But overall, we are thinking about an environment globally that gets us to flat retail, wholesale maybe off a little bit, and then pricing a little bit favorable. And, hopefully, that answers your question around how we manage through that.

Our next question comes from Fred Wightman from Wolfe Research. Please go ahead. Your line is open.

Hey, guys. Good morning. I was hoping you could just give us a sense for where the mix of current versus noncurrent product that dealers have on lots today stands. If we look back last year, you'd called out some incremental dealer support to clear through noncurrents. I think there was a $40 million number initially, and then you upsized that down the road. So about that. Are you assuming incremental dealer support year over year? Does that wind up being favorable? How do you sort of...

Alright. Thank you, Fred. So I'll start. And I think in terms of the mix, we obviously have started shipping in 2025 model year motorcycles. So literally just hitting within the last week or so. So as we look at dealer inventory in terms of what's out there, we've covered the fact that we're, you know, we're down a little bit from where we ended 2024. It's kind of the same period a year ago. As we look at how we're managing through inventory in 2025, we've covered sort of the conservatism that we expect in the first half of the year, how we're shipping pretty carefully from that standpoint. So we think that dealers are pretty well positioned from an overall inventory perspective. The other thing that is a tremendous difference in 2025 calendar year versus 2024 calendar year is the way that I would define it, this kind of quality of inventory. Right? So as we think about the mix of touring bikes that dealers have on their floor, they have redesigned the redesigned touring bikes that are out there. Jochen

Just to add one point, also please look at pricing. We've strategically priced our products going into 2025 versus 2024. So I think that is an important factor and has been perceived and received very positively.

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

Hi. Thanks for taking my questions here. I actually wanted to ask about LiveWire. So thinking about LiveWire, you know, more longer term, how do you think about managing that business and sort of managing the operating losses there? I guess, you know, if demand and adoption of electric does not materialize meaningfully over the next few years, how are you thinking about LiveWire longer term would be great? Thanks.

Right. Yeah. Alex, good question. I think, you know, we are continuously evaluating, you know, from a Harley-Davidson perspective, how to achieve the best performance for Harley-Davidson and for LiveWire. And we are obviously considering mid- and long-term perspectives in this evaluation. Beyond what we've said today, there's little to nothing that I want to comment on. But the first significant step Karim Donnez has already mentioned. We are reducing our operating losses from $110 million last year to, you know, $70 to $80 million. And cash burn by at least 40% or more to $60 million. So the team has taken, under Karim Donnez's leadership, a lot of significant actions to downsize the organization, refocus the product portfolio, and ensure that the cash burn and the operating losses are being reduced. So that is an indication of how we are streamlining the business in light of the new realities. Beyond that, I can't really comment, but rest assured that we are continuously evaluating the development of LiveWire from a Harley-Davidson perspective as well. The benefits it brings and all of the costs versus the costs that we incur by being invested in that business.

Our next question comes from David MacGregor from Longbow Research. Please go ahead. Your line is open.

Hi. Good morning. This is Joe Nolan on for David. Just briefly, I wanted to touch on your outlook for some of your international end markets, if you could provide any detail there.

Okay. Joe. So I think as we sort of take a look at where we are from an international perspective, probably looking back is a little bit of an important perspective in terms of trying to look forward. So as we think about 2024, there were some markets in international that were positive. The markets that were a little bit down. So as we think China and Japan proved a little bit of a challenge as we look back. Australia and New

Our next question comes from Noah

Hi. Thanks for taking my question. Maybe just a couple on HDFS. Guess, first, how are you feeling about the health of the book? And then in light of SOFR declining, I know you guys have variable rate debt, but what are kind of the big moving pieces on the expense or the income side that's driving the decline in the guide? And then, you know, is there some expected credit loss baked in there conservatism? I'm just trying to better understand that. Thank you.

Okay. Great. Thank you, Noah. So as we look at HDFS, I think overall health of the book, a couple of things. So as we think through some of the sort of historical originations, a little bit of pressure as we think about some of the variability in motorcycle values over time. So as we look towards the final quarter of 2024 and forward, we feel like, you know, if you remember, there was a tremendous rise up in used values in the period following COVID. There's a little bit of normalization. As we go through and we look at statistics and kind of performance over the last few months, we feel like there's probably stability in where used values are, so that's positive. From a consumer perspective, again, with recent originations, we've been originating at very, very high credit quality. So the overall kind of mix of the portfolio is looking pretty strong and pretty healthy. But I think that's a positive. When we kind of look at things in absolute dollar perspective, we feel good from a percentage standpoint and things pop out a little bit. So as we work with our dealer network to really bring down wholesale inventory levels, you see that reflected negatively in HDFS results. So that's a big part of what you're seeing on a year-over-year basis relative to what we guide wholesale asset levels from a year-over-year standpoint that come down. We also recognize that as we've had a little bit of a challenged sales environment, in comparison to where we were in kind of the year or years immediately following COVID, that puts a little bit of pressure on asset levels with those customers continuing to pay down their loans. So overall, I would say that we're pretty pleased with the health of the book. We feel like it's being managed in a way that's pretty positive. Percentages can throw things off a little bit just because of the numerator-denominator effect. And then when we think about Fed rate, as we look at the parts of our portfolio that are actually tied to a variable rate, that's the wholesale business. So our dealers will continue to see savings in wholesale rate between units that aren't being delivered at the same level and where Fed rates are going, but that does put a little bit of pressure on HDFS. So for the most part, it's a story of kind of assets, a story of some benefit that accrues to the dealers rather than the HDFS business. And then the other piece that we always consistently work to manage is that as we bring on any new debt, that's at a higher debt level than where we were three, you know, three, four years ago, we just have a little bit of sort of short-term normalization around that. But, overall, continue to be very pleased with that business.

Our next question comes from Tristan Thomas Martin from BMO Capital Markets. Please go ahead. Your line is open.

Hey. Good morning. Two kind of housekeeping questions. I believe you mentioned growing to an HDMC operating income margin target in the future. Is that still 15%? And just quickly following up on those questions. Was there any CECL accounting change embedded in the HDFS guidance? Thanks.

Yes, Tristan. As I've mentioned, we continue to believe the 15% target is achievable. And if we assume, you know, 2026 balanced retail production and wholesale business or shipments, and then think about achieving a double-digit margin in 2026, if we can achieve that with this year's outlook, the 15% target is still achievable, but, obviously, that requires us to get a slight volume growth that is supported, and that we believe is actually going to be supported through exciting new product that we are launching. I've mentioned in my opening remarks that we are also entering having an entry-level motorcycle in select markets starting next year and the small cruiser segments in following years. So supported with product launches, we believe the 15% is possible. But it's hard to give you a timeline on that other than the double-digit operating profit that we believe is achievable, assuming that we achieve this year's levels. So, yes, we feel comfortable. I think we are positioned well, but, obviously, we need some tailwinds and a slightly improved retail environment in the powersports industry, which we haven't seen now for two years in a row. So I think that has to happen. We need some tailwinds overall, not significant, but certainly not a depressed market as we've seen in all of power sports, RVs, marine, pretty much anything that is discretionary. So that will have to happen for us to achieve those 15% operating margins.

Really quickly, just to address Tristan's side, CECL change question. So from an HDFS perspective, we did adjust reserves up a little bit as we think about, again, to your point, lifetime loss evaluation, we did add a small amount to make sure that we are covered from that standpoint.

Well, I think the reason is to start with the outlook, and then I'm going to comment from a Harley perspective.

Yeah. Thank you, Jochen

Yes, Brandon. As I said, you know, we are evaluating the business performance of LiveWire very carefully. There are a lot of benefits that LiveWire brings on the electrification to Harley as well, but obviously, we are not achieving the targets that we've set out for many different reasons, EV adoption being a slower pace of EV adoption obviously being a contributing factor. So we will watch this very carefully. LiveWire needs to perform, and we've invested a significant amount of money, and that performance needs to happen. Otherwise, we'll obviously have to look at some optionality here. But we are committed to the business at this point, but we need to see improvements in the business performance. Based on what Karim Donnez has mentioned, I think reducing the losses continuously and really focusing hard on reducing the cash burn is critical, and then adoption and sales obviously need to show up, and this year, we'll need to prove that.

Our last question comes from Jaime Katz from Morningstar. Please go ahead. Your line is open.

Hi. Good morning. I just want to stay on that electric topic. I guess I'm thinking about this new product that you guys are launching. And given the strain or lack of support from a retail perspective or demand, I guess, what was the strategic purpose of rolling out a new product where there's low demand in the segment? And I guess where does the incremental investment lie with that? And what does the profit margin opportunity look like for that new unit? Just trying to think about that profit progression. Thanks.

Thank you. Just to clarify, are you talking about the Alpinestars Lounge that we just had on the S2 platform? The maxi scooter that I assume is going into the P&L of LiveWire.

Yes. It is correct.

Okay. Thank you for clarifying. So that scooter is expected to hit the market in 2026. We are right now working diligently on the development of that. This is a strategic rationale for it, which is pretty strong for us. It does leverage two key things. The first one is the S2 platform, which is fully developed in the market right now. And the know-how and expertise of our second-largest shareholder, Kymco, who are already in this market segment. So when you take the combination of the two, we feel like we have everything it takes to come and have a value proposition for this specific segment that would be extremely compelling, not only in terms of performance but in terms of market positioning as well. There is a push, and there is actually growth in this maxi scooter segment EV right now in Europe in particular. So we are clearly targeting this segment next year.

If I just may add from a Harley-Davidson perspective, LiveWire has not invested into a new platform but is using the existing S2 platform to launch new extensions, and that is one of the major reasons why we are also operating with a smaller engineering team at this point, not investing, which is the reason why LiveWire is able to reduce the operating loss significantly to between $70 million and $80 million and the cash burn as well. And therefore, the focus right now is really getting bomb costs down, reducing the cost of sales, and reducing the loss per bike. But as I said, we will have to watch this very carefully. With the mid- to long-term perspective in mind and look at the risk and rewards going forward to decide how the business is going to be positioned in the future.