Jochen Zeitz - Chief Executive Officer John Olin - Chief Financial Officer Shannon Burns - Director of Investor Relations.

Ladies and gentlemen, thank you for standing by and welcome to the 2020, First Quarter Earnings Conference call. At this time all participants are in a listen-only mode. [Operator Instructions]. Please be advised that today’s conference is being recorded. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Director of Investor Relations, Mr. Shannon Burns. Thank you. Please go ahead..

Good morning, everyone. You can access the slides supporting this call at investor.harley-davidson.com. Click the Earnings Materials box in the center of the page. 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 our latest earnings release and filings with the SEC. Harley-Davidson disclaims any obligation to update information in this call. Joining me this morning are CEO, Jochen Zeitz; and CFO, John Olin, and we are dialed in from multiple locations. Jochen, let's get started. .

Foremost, we continue to act quickly and in alignment with government efforts to protect the wellbeing of employees and the Harley-Davidson community. We have implemented restrictions, enhanced sanitation practices and cancelled events.

Our closure of facilities and temporary suspension of manufacturing operations enable us to install workplace protections and develop a comprehensive plan incorporating precautions and guidance form public authorities to protect employee health.

We are gradually resuming production in a measured way that is safe for employees and will continue to require all employees enrolled that allow them to do so, to continue to work from home to minimize the number of people in each facility.

For the wider community, our foundation donated to the United Way's COVID-19 relief fund and through our "United We Will Ride" efforts, we are donating the proceeds of the custom LiveWire Auction and leveraging our channels to connect riders with relief opportunities that allow them to make a difference in their communities.

Last week, Jason Momoa helped us kick off these efforts with a powerful video, launching our COVID-19 relief efforts. Second, this year we are preserving about $250 million in cash by reducing capital and non-essential spending by freezing hiring, reducing salaries and eliminating merit increases.

We also implemented other cost management efforts such as retiming the launch of new products. Additionally, we have suspended discretionary share repurchase and reduced our Q2 cash dividend to $0.02 per share down from $0.38 per share in Q1. We believe these are prudent actions given the uncertainty of the COVID-19 crisis.

Third, we maintain a strong liquidity position with nearly $2.5 billion in liquidity at the end of the quarter. Recently we increased our cash position, amended our $1.42 billion in credit facilities, extended our 364 day loan facility and are also in discussions with major U.S. banks to secure an additional $1.3 billion of liquidity.

And finally, in response to the COVID-19 crisis, it’s important that we help ease the burden on dealers and riders. We are providing dealer support based on the unique needs of each region, including financial support for Motorcycle inventory, extending certain credit payment due dates and adjusting requirements for warranty and training.

While these actions offer near term relief to dealers, we do expect the network to contract through the crisis. As a consequence, we will work to optimize the network and improve dealer profitability going forward. For our riders, many dealers remain open for service support and we continue to sell Parts & Accessories and General Merchandise online.

We along with our dealers are enabling home delivery of new Motorcycles where it is permitted. Also for riders who are impacted by COVID-19, HDFS is helping keep them on the road. After a significant number of conversations with our management, employees and other stakeholders, several other things have also become clear to me.

First, we have tremendous strength in our product, our riders and our dealers. However, we have challenges to address that have become more apparent in this crisis, including the high level of complexity across the organization that needs to be minimized.

Our team is talented and hardworking, but leadership has become somewhat isolated and overly centralized and as a result, slow to respond. The speed of decision making needs to increase. I've observed that after multiple rounds of cost cuts and reorganizations over the past years morale has suffered.

There is frustration as some cost cutting initiatives have tried to improve efficiency of things that are fundamentally inefficient. As a result, we need to reignite our Harley-Davidson soul and culture. Additionally, our organization has become accustomed to over committing and under delivering. We need to set achievable plans and realistic goals.

As I reviewed our strategy, I know that elements of the More Roads plan are good in principle, but it is clear that our strategy needs to be refocused to better align with our capacity and capabilities and also updated given our new reality.

We’ll continue to expand beyond traditional products and markets; however, we have over-indexed on new riders and new market growth and lost focus on critical profit sources.

We made progress with our product line and to some degree our customer base, but profits is lagging and our expectations are unreasonable, especially given the economic environment that we are likely to encounter, as the COVID-19 ripple effect would likely be with us for some time.

We’ve continued to move forward with the highest potential elements of More Roads, but our strategy must be reassessed.

As a result of my observations and assessment, I’ve concluded that we need to take significant actions and rewire the company now in terms of priorities, execution, operating model and strategy to drive sustained profit and long term growth.

We're calling it The Rewire and is our playbook for the next few months, leading to a new five year strategic plan which we’ll share when visibility to the future returns. I'll highlight some of the key elements of The Rewire. First, we’ll enhance our core strength and better balance expansion into new spaces.

It's more important than ever to return focus and strength of our brand and company, starting with our dealers, customers and our stronghold product and committed employees around the world. HDFS has also a strategic advantage with a track record that will help us navigate through this crisis.

We reevaluate our strategies to reach new riders and build ridership. Second, we prioritize the markets that matter; we’ll invest in the markets, products and customers that offer the most profit and potential. This includes building on our strong position in the U.S.

We’ll narrow our focus, time and energy in the most critical countries and market segment that can move the needle for us today. We’ll also diligently play the long game by identifying select strategic markets that may not contribute to enterprise profitability in the near term, but are critical for our future.

We will also simplify the market coverage model and take costs out of the process. Third, we’ll reset our product launches and line-up for simplicity and maximum impact. Launches out six to 12 months to reflect our new reality and to allow our launch calendar for the first time in our recent history to align with the start of the riding season.

We’ll simplify launches over time to better suit the capacity of our dealers and company resources to support them. From here, we’ll expand our profitable iconic heritage bikes to excite our existing customers. We also remain committed to Adventure Touring, Streetfighter and advancing our efforts in Electric.

We will continue to be guided by the voice of our customers and dealers as we bring new focus to our offerings to optimize value and profit delivery. Next, we’ll build our Parts & Accessories and General Merchandise businesses to full potential.

We are developing a comprehensive strategy across these businesses that focuses on assortment and distribution opportunities, maximize its channels, improves e-commerce capabilities and gross revenues and margins for both the company and dealers. We will align this strategy with our Motorcycle strategy for realistic presentation to the market.

And finally, we’ll adjust and align our organization structure, cost structure and operating model to set the organization up for stability and success. We are designing a framework for success, an organization that is more focused and nimble, aligned with an appropriate cost structure adjusted to the new realities of the market post crisis.

We will also reset our operating model to increase empowerment, diversity and accountability for critical decisions. Essentially our refreshed organization would be less complex with a sharper focus and able to make faster decisions.

We are creating the right central and new regional structures that have commercially led to establish the right focus on dealers and selling. We will also elevate the role of Motorcycle Management within the organization and sharpen our marketing strategy and execution to enable a bigger impact with an improved go-to-market process.

The Rewire is underway and we've taken actions across each of these key elements of the playbook and more are in development. I've mentioned some of the significant actions that we've already taken to allow the organization to move forward.

Other recent actions include setting the organizational superstructure with three new senior management members appointed to key roles. We are promoting talent who know the company, our dealers and our customers.

To bring the appropriate sales focus we have created a new commercial entity, including a simplified regional sales structure, as well as refreshed Parts & Accessories and General Merchandise businesses.

To leverage expertise and a historical insight as we hone our strategy, I've engaged our senior leaders beyond the executive team and establishing a CEO Roundtable comprised of select dealers and former Harley-Davidson leaders. The team is hard at work, reenergizing the business and we’ll share more about our progress during our Q2 update.

In closing, to accomplish what lies ahead, it is important that we continue to rally together. Today we are united as a Harley-Davidson global community in support of our families, friends and fellow riders through a time of crisis that we hope will end soon.

I offer my gratitude to our family of employees, dealers and riders for doing their part to stay safe and healthy. Their well-being is above all the most important thing. While the end to this pandemic is uncertain, what defines Harley-Davidson endures. It’s a welcoming beacon that shines beyond this time that we are in.

I see this as an incredible opportunity to rewire the company and set ourselves on a path for great success in the future. We are addressing our realities with conviction and I believe we’ll come out of this stronger than ever. We will reignite Harley-Davidson and we will rally around our newly stated mission.

More than building machines we stand for the timeless pursuit of adventure, freedom for the soul. And now I'd like to turn over to John to discuss the financial results of the quarter..

First, preserving cash and second, securing additional liquidity. We are focused on preserving cash and increasing liquidity to weather the storm. We entered the pandemic with a very strong balance sheet and 12 months of liquidity.

We’ve taken a number of specific actions to preserve cash, including first and foremost reducing non-essential costs and lowering our 2020 capital spending. We have done this while prioritizing investments in our New Motorcycles, including Adventure Touring, Streetfighter and Electric. We are also extending cash outflows where it makes sense.

At the same time, we are working to secure our supply chain and parts availability in order to ensure we can get the plants up and running as soon as possible. Regarding liquidity, we maintained $2.47 billion in total liquidity, including $1.47 billion in cash.

We are currently in discussions with two major banks to secure an additional $1.3 billion of liquidity with one transaction targeted to be complete by the end of this week. In addition, we anticipate executing transactions in capital markets in the upcoming weeks.

As of the close of business on April 24, we have an estimated $2.28 billion of consolidated liquidity. As we look forward, we have two MTN's maturing over the remainder of the year, one for $450 million in May and the other for $350 million in June.

Assuming no motor company revenues and without any additional liquidity or mitigating actions, we believe we have sufficient liquidity to operate through the end of the year. The company's credit ratings all remain investment grade and we maintain access to commercial paper markets.

Also as we have experienced in the Great Recession, HDFS tends to be a source of cash for the company when motorcycle sales are falling. Over the last six weeks HDFS has had a net cash inflow of approximately $200 million. We are also well within our debt covenants. Our HDFS covenants require debt-to-equity to be no higher than 10:1.

As of Q1 our debt-to-equity ratio was 6.6:1. We believe our balance sheet and strong cash and available liquidity will allow us to address the COVID-19 driven adversities. Thank you. And now let's take your questions. .

[Operator Instructions] Your first question comes from Greg Badishkanian with Wolfe Research. Your line is open. .

Great! Thank you. You know a two part question. The first one is, you know retail sales were strong if I read right, 6.6% positive prior to the COVID outbreak. You know it would have been one of the best quarters in years.

So what drove that performance, what can you utilize going forward post COVID? And did I miss – I didn’t hear a quarter-to-date U.S. for April. I’m just wondering how those trends were for you, because I think some of the other you know power sports like Polaris I think seem to have gotten a bit better in April.

I’m wondering if that was the same for you?.

Thanks Greg, this is John. Yeah Greg, through – you know the quarter was a tale of two quarters right; first, a 10 week period and then a three week period. Through the first 10 weeks we were doing very well in terms of retail sales and as we had mentioned, the U.S. was up 6.6%.

Greg a lot of that was driven by the activities that we've been pursuing over the last year, under stronger dealers and those have continued to take hold. We see more dealers adopting and certainly strong results coming out up on those actions.

The second thing is, as we also brought several products to market in the first quarter, a lot of it late in the quarter, but they also drove a fair amount of sales. When we talk about - so the last three weeks we saw a precipitous fall-off of retail sales for obvious reasons, and that was a lot, that was led Greg by the closure of dealers.

So we started the month of March, there was about 4% of our dealers who were closed and that considerably escalated by the end of March, it was 55%. And through April where we sit today, about 59% is closed. So we are starting to see the dealer closures plateau for sales of new motorcycles, but with that retail sales are down.

They are down a fair amount in the month of April. However, they are not down to the same extent the dealer closures are. So retail sales are outperforming our dealer closures and with that, we’d suggest that dealers that are open are selling near year ago levels. .

Greg, if I may add – Jochen here. You mention new model introductions in the first quarter. We had four new models that were all focused around the core of our business with the 30th Anniversary Fat Boy, Softail Standard, Eagle Eye and Patriot and then that certainly helped to boost our sales in the first couple of months. .

I appreciate that..

Our next question comes from Felicia Hendrix with Barclays. Your line is open. Felicia Hendrix, your line is open. Your next question comes from Craig Kennison with Baird. Your line is open. .

Hey, good morning. Thank you for taking my question. Really a multipart question related to the CEO search. But Jochen, first of all as you meet with dealers and what are they seeking in a new leader at Harley Davidson.

And second, how should investor’s interpret the decision to really pursue a five year plan before you actually hire the permanent CEO, and does that mean you're a candidate? Thank you. .

Thanks Craig. In terms of the CEO search, there's really nothing to report at this point. I'm focusing clearly on the developing and the implementation of the plan to deal with the crisis and make sure that we get through the stronger with The Rewire plan, which I'm also planning to implement and develop obviously as we're in the middle of that.

So there's nothing really to add at this point in time in terms of the CEO search. .

In terms of what dealers are seeking in a new leader?.

Well, I don't know what dealers are seeking. We know what we are seeking as a Board and those criteria have been established.

So I think there's nothing to add to that and I think in developing a five year plan is always part of a CEO’s job, acting on not, and I've made it very clear in the beginning that I'm not an interim-CEO, but an acting-CEO and as we are doing our rewiring process and playbook, we obviously have to also look at our existing strategic plan and see what's still valid and what is not.

So my duty is also to develop a new five year plan, and that's what we're focusing on at the same time. .

Very helpful, thank you. .

Your next question comes from James Hardiman with Wedbush. Your line is open. .

Hey, good morning. Thanks for taking my call. So I wanted to dig into HDFS a little bit. I think I generally get what's going on with CECL. But maybe give us an idea, the increased reserves, that $36 million number, what would that have looked like if we weren’t using the CECL standard? Obviously that's getting amplified there.

And I guess my bigger question is as we look forward how do we think about HDFS? I would assume that that $8.9 million higher actual credit losses is something we're going to be dealing with over the next few quarters, but that – you know assuming credit metrics don't get significantly worse, that we shouldn't be worried about that $36 million number repeating going forward.

How should we think about that?.

One is just the higher reserve, which is about a 50% increase as to what changes would have been in the past, and the other piece is a seasonality adjustment, which is new as well. So the seasonality was actually favorable in the first quarter and we’d expect to see some of that reverse out in the second and third quarters.

So when we look at the $36 million in that reserve, that was set at the end of March and at that time we look at all the data that's available and that includes such things as the expectation of recession, the severity of recession and the duration.

It also looks at other economic data such as unemployment, GDP and certainly used bike values, all of that is taken in at that point on March 31, run through the models and that came back and suggested that we needed to increase the reserves by $36 million.

And if everything held at those assumptions, we would have expected that that would be all that we would need to do and that would cover the issues that COVID has driven.

However I will tell you James that since March 31 there has been a deterioration of that economic data, between March 31 and today, certainly in terms of unemployment, GDP expectations, the severity of the recession coming out of this.

And so we don't know what's going to happen by the end of the quarter when we have to mark again, but if the economic stay as they are today, we would expect that there would be another increase in the reserves at HDFS at the end of the second quarter.

Again, we'll have to wait and see with regards to that and that could also have an impact on the credit losses, that $8.9 million that you had mentioned. We are watching it closely. HDFS is being very proactive in their actions.

They have made changes to the underwriting standards which include restricting LTVs and tightening payment to income, tightening maximum amounts financed and increasing proof of income, and also tightening underwriting in oil patch areas.

So they are all over it, but we will continue to read the economy and make the adjustments that we need to as we move forward. .

Really helpful, thanks John.

And just to be clear, that $8.9 million, even if assumptions stayed consistent with where they were on March 31, that's something we would have to deal with for the next three plus quarters?.

No, I'm not completely sure I understand James. The $8.9 million is what we've written off..

Right..

Those are our loans that we do not expect to collect. We will continue to try to collect them, but they are written off and they are behind us. They have nothing to do with us going forward. .

Okay. And so we shouldn't assume that that level of actual loss increases would happen in future quarters. That's already been accounted for in the increased provision..

While those specific loans have been written off, we've got a lot of other loans and next quarter we will look at which ones of those would go to write off right, and those are predicated on our customers’ ability to repay, unemployment and all those other factors that we mentioned. .

Got it. Okay, thanks John. .

Thank you, James. .

Your next question comes from Felicia Hendrix with Barclays. Your line is open..

Hi! Can you hear me now?.

Yes Felicia. .

Okay. It’s time to get a new phone I think, sorry. So just kind of staying on that line of questioning and good morning, John I did have a question for the kind of CECL related question in the credit loss provisions.

Just by the way that we're calculating things, the $45 million increase in the credit loss provisions just looks a little bit you know low. It's only a $10 million increase from last year, so can you just talk to us about the assumptions behind that change given the new CECL accounting standards? We thought it would be higher.

And then just also wondering what percentage of your customers are currently on an agreed upon forbearance plan at all and would that be included in your 30-day delinquency and annualized loan loss metrics if that is the case?.

Thanks Felicia. The $45 million provision, you had mentioned up $10 million, you would have expected more. The provision is up on a year-over-year basis by the $45 million, so that is made up of two pieces.

One is the write offs that we've taken of $8.9 million and then the increased reserve which is made up of the COVID crisis, as well as a kind of a booster with regard to that CECL accounting provisions. So that is….

So John sorry, just – I'm sorry, I should have worded it more clearly. The increase in credit loss – I’m sorry, the $45 million increase in the credit loss provisions, that's what you thought was well, with the increase. .

Yes, and so that is the little bit what we had talked about. At the end of the quarter we marked everything as of the data that was available on March 31, and given the data that we had, $45 million was the right number to book.

Since then we have seen a significant deterioration in the economic data and the economy, unemployment, GDP forecast and all those types of things. So Felicia, we would expect that if things ended where they are today, the second quarter, we would have to take another increase in that provision and reserve more money at the end of the second quarter.

.

Okay, and then on the forbearances if there are any?.

No, we don't necessarily have a look at forbearance. What we do have is what we call customer extensions and as customers come in and they have issues paying because of COVID-19, we will look to extend the loan. It's a common practice that we follow and we followed it in areas that are impacted by hurricanes and other natural disasters.

We're following that same process here and it allows the consumer a little bit of time to get themselves squared away and certainly helps our writers. So we are offering some extensions with regards to that. I don't know, when you talk about forbearance, if you're talking about on the wholesale side.

We haven't seen any losses in terms of the wholesale side actually in years, but in the downturn 10 years ago we lost some dealerships and we lost – had some write-downs of those, and as you'll see in the financial results that we set aside $7.3 million of reserves on the wholesale side too, as we would expect losses going forward there as some of our dealers can't make it through this crisis.

.

Okay, thank you..

Your next question comes from Joe Altobello with Raymond James. Your line is open..

Thanks. Hey guys, good morning. So, I got a couple questions on Rewire.

You know first, why do you think you guys are falling short in adding net new riders in the past, and what do you intend to do differently you know to increase the participation at the end of the quarter?.

Thanks Joe. Well, that's a good question. I mean you know the numbers of riders that we've created in 2019 and ’18. We had about $3.1 million Harley riders in the U.S. in 2019 at the end of the year. 55,000 more total riders than in 2018, but we also – June, basically a year of lost riders and that led us with the net of 24,000 more than before.

I can't really tell you why that is the case that we weren’t able to create riders.

You know we've been testing for initiatives to help drive bigger increases in total ridership to focus more on designing to accelerate the journey to becoming a committed rider, which includes providing access to motorcycles and individual training and that to others, through other initiatives were designed to retain existing riders and include trading epic riders and rewarding existing riders for miles riding and bring new people to motorcycling.

We will evaluate those four initiatives as soon as we can. Obviously not now, because they are on hold, and then determine as part of the Rewire program, what we can do good and better to not only increase ridership by creating new riders, but also making sure that those are – those who are in this board will be retained.

So I hope to be able to give you more details in the future as we define the Rewire program and as we can start testing again. .

No, that’s pretty helpful. Just a question to follow up on that for you, because you know this is probably not how you wanted to be – see your tenure as a CEO start during a pandemic, but here we are.

So with that said, are you considering moving the acting monitor at some point and taking on the CEO role permanently?.

Well, as I said Joe, you know at this point there's really nothing to add to what I said earlier. I'm you know focusing on developing and implementing the plan, and then also you know getting The Rewire program and playbook defined and implemented as we are looking to redefine our next new five year strategic plan.

You know I knew pretty well what it was getting myself into, so no worries there, although nobody could have predicted the severity of the COVID-19 crisis. When I agreed to take on this role, I assumed this would be a tough right and – but I'm used to it, so. .

Okay, great. Thank you. .

Your next question comes from Gerrick Johnson with BMO Capital Markets. Your line is open..

Good morning! Thank you. Jochen Hi! You mentioned optimizing the dealer network. I know in the last couple of weeks there's been at least four dealership closures that I know of.

So what's the plan to rationalize the dealer base? What does the new dealer base look like and what actions do you guys need to take to get there?.

You know, as you said, in fact we had five underperforming dealers in the U.S. that closed in the first quarter; we had 20 closures internationally. We don't know what this picture is going to look like as we get out of the COVID-19 crisis, so it's very hard to say. In the Great Recession we had about 100 dealers closing, but we had no prediction.

Obviously we had some on watch, close watch and we do that on a daily basis.

And then you know as dealers exit, there may be opportunities to merge dealerships as some might be bored up by existing dealer, some will go away, and as I said dealer optimizations will be important as a result, so that we can improve profitability of the dealers that are going forward.

Other than that, I can’t really shed much more light on that, but we are looking at this very actively and we have good systems and plans in place to make sure that the dealer network will be strengthened in the future coming out of this..

Okay, let me put it this way, prior to COVID was there a plan in place to rationalize the dealer base or is the optimization of dealer base a reaction to the COVID-19 crisis?.

It's a combination of both. Obviously you always need to improve your dealer network when you look at your mapping and existing sales, which change from year-to-year.

So there was an ongoing plan, but that is being revised and fine-tuned and you know there are also opportunities that we need to look at that are you know allowing our dealers to sell online, which we've created as part of this crisis mitigation or our ability to deliver bikes you know with dealerships that are being closed.

So there are also other ways to optimize the opportunities of existing dealers to sell, and that's what we’re also doing in the crisis. .

Your next question comes from Joseph Spak with RBC Capital Markets. Your line is open. .

Thank you very much. I guess you know with respect to rewire, this program sounds like a much narrower focus versus more of which was certainly I think trying to be broader and more exclusive and you certainly had a lot of build out in international growth, at least to this it sounds refreshing.

But I'm wondering you know, you spend a lot of money over the prior years trying to broaden out the base. I mean how much of your – the investments that you’ve already made you think are sort of reusable or re-purposeable here as you begin to embark on The Rewire strategy..

Yeah, it’s a good question. I think narrower for sure, but that does not mean as I said in my in my speech that elements of the More Roads plan will not be incorporated in our new plan going forward. A lot of it will depend on the crisis itself and The Rewire program that we are developing and as we go along in the development also implement.

We will certainly ensure that a lot of the investments made you know will have a positive effect, but I'm not able or willing at this point to give any details.

What I did say though is that our launch into Adventure Touring and Streetfighter segments and into Electric, those three segments we are committed to in the future and those took up a significant amount of our product development costs. So those will continue.

The launch timing of those however as I also mentioned has been impacted by the crisis and we will make sure that we are ready with a very strong go-to-market process for each of them. .

Your next question comes from David MacGregor with Longbow Research. Your line is open..

Yes, good morning everyone and thanks for taking the question.

Jochen, I wonder if I could get you to go back to some of the comments you made around The Rewire in your prepared remarks and in the press release, and in there you make reference to a cost structure that's adjusted to the new realities of the market post crisis, which obviously is a cost that should be addressed here, but it seems a little vague and I’m wondering if I could get you elaborate a little further and just exactly what it is you're trying to accomplish there.

And I guess you know maybe as well, asking you to sort of offer some view based on your history as a member of the Board, but how do you think about what these assets should be generating in terms of target levels of profitability or return on capital. .

Yes, thank you.

I mean obviously this crisis has an impact on our sales and that will have an impact on our cost structure, and while we cannot really define right now how big that impact is going to be and I understand that you know everyone would like to get us to give some guidance, but we simply do not have enough visibility to provide a forecast and therefore I can’t really answer your questions at this point.

Hopefully with the second quarter we will be able to – assuming that we have better visibility than we have now and we’re starting to get out of these crisis, we can start focusing again, but we will certainly not do that until we have a clear view and that also you know applies to your last question in terms of target levels.

All of that will be a part of the rewiring program and playbook and obviously our new five year strategic plan. So with that, we will then give you a clear guidance as to what we expect in terms of return on capital and so on. .

Your next question comes from Brett Andress with KeyBanc Capital Markets. Your line is open..

Hey, good morning. Just a clarification on the greater than 30-day delinquency rate that you reported. You mentioned softer trends at the end of March.

So can you give any color on what that rate is right now, either here in April or what it was at the end of March? And then the second part of that question, is have you seen any increase in the less than 30-day delinquency rate as well. .

Thanks Brett, this is John. Brett, on the 30-day delinquency rate we were very pleased to see that come down by 36 basis points.

But remember a lot of that was due to what happened a year ago, and if you go back to 2018, I think we are still up about seven basis points, and that's probably mainly explained by CECL – I'm sorry by COVID and the last couple weeks of payments that got extended.

There is no way to come out and do perfect do to on that, but over a two year period of time we are down a little bit and the biggest driver of that would be what we're seeing in the COVID crisis.

The other piece of it is when you look at what's happening in less than 30-day delinquencies, what we are seeing is more of those extensions that I mentioned earlier.

So we're seeing a lot of prime customers coming and saying that you know I need a little bit more time to pay because of COVID and then some of those were extending the time for that piece of it. So that's what we're seeing under 30-days, but I do not have an inter-period delinquency measure either on less than 30-days or on the 30-day plus. .

Understood, thanks. .

Your next question comes from Adam Jonas with Morgan Stanley. Your line is open..

Hey everybody! Jochen I’m going to try a third time, do you want to be CEO of Harley if the Board wants to remove acting? Are you an option? If you don't want to answer then it's a problem, because given the scope, you know this is probably the – that release in that strategy is so refreshing and must be a huge relief for your dealers, your employees, stakeholders, your investors.

I know you've been on the Board since 2007 so I’m preaching to the choir, but that is a huge, huge open ended area and I just – and I'm not asking for you to break new ground here, but are you even an option?.

I take it as a compliment, thank you very much, but as I said, nothing to add at this point in time. But I will – I have hit the ground running and there's a lot to be done and we are very, very focused on implementing our plan and developing a new plan for the next five years. So you should be confident about that. .

Well, I guess and I don't have any other questions. It's just that, I hope you sympathetic to why that is potentially very frustrating and that by the time the second quarter is an opportunity for you to share more information on the plan, that it's fair at all stakeholders that there is a more permanent solution for leadership.

And I hope, I hope and I hope that you're using everything and I'm sure you are, by 2Q at least we can be in a better position to answer these questions. Thank you. .

Certainly! Thank you. .

Your next question comes from Tim Conder with Wells Fargo. Your line is open. .

Thank you. That was on my list, so I'll echo those things. But multi-part question here, on the retail, John any color on how very recent, let's call in March, on things have looked coming out of the oil patch areas, oil and gas just given the collapse we've seen there.

And then, I did want to ask Jochen, any additional color you can give on the market refocus? It sounds like maybe Asia to style back and is it permanent or temporary change in your launch schedule of your – the annual new products. Thank you. .

I'll start out with the first question Tim. On retail sales, you know it's really difficult to tell now, everything is down a lot. Almost 60% of our dealers are close, so everything is down. It's hard to tell apart what we're seeing in oil patch areas.

We're still – we are certainly back into looking at it right, and that was several years ago we had a similar issue and certainly it had an effect on the motorcycle industry and Harley-Davidson sales.

Folks that work in the industry and in those areas are very good customers and we understand where oil prices are and that there may be a knock on effect of COVID, but also on the lower oil prices. And as I had mentioned, some of our underwriting changes that we're making are taking those learning’s from several years ago and applying them here.

But I can't separate out, because of dealer closures and whatnot, where we're at in oil patch states versus others. .

Yeah and to your other two questions in terms of refocusing on markets, I mean definitely I will strongly believe we need to tie the focus on our core markets and as I had mentioned, you know there are some markets that our biggest profit drivers. U.S. need more focus going forward.

Some of the international market, not just from a profitability point of view, but from a potential point of view and I think there will certainly be some deemphasizing in order to create increased focus.

I mentioned earlier, you know it's about speed, it's about focus, it's about reducing complexity, which will help us to you know set our organization up for a really profitable future and that means focusing on key markets as well. In terms of the timing of our launch schedule, that is a permanent change.

As I’ve mentioned, we've retimed our model year changeover from August to early Q1 in order to allow a launch calendar for the first time in our history to align with the start of the riding season. That made all the sense to me and I don't see any reason why we should go back to the old schedule, so that's a permanent change. .

Your next question comes from Sharon Zackfia with William Blair. Your line is open. .

Hi, good morning.

Hey John, I might have missed this, but could you talk to us about what your current weekly cash burn rate is and then separately on the $250 million that I think you guys are targeting in the terms of preserved liquidity, can you break that out between CapEx versus what’s going through the P&L?.

Thanks Sharon.

When you look at our overall cash burn, less the $250 million that we took out, we are in the range of anywhere between $80 million and $100 million a month, right, and that's pretty simple too as you take $1 billion of SG&A and divided it through and take-off a couple of hundred million dollars and we’ve got the fixed cost in the plants to run the plants that are running through cost of goods sold without the dividend; the dividend significantly being reduced.

And we’ve got some interest payments in there of – I don't know, $15 million a quarter.

So on an overall burn rate of somewhere in the $80 million to $100 million a month and again as I had mentioned, given the liquidity that we have now, the debt that we have that will be maturing in the near future and again Sharon, based on assumptions that we have absolutely no revenue.

Our revenue is down very significantly in the first 3.5 weeks of April, but we still have revenue. So with those assumptions, we've got enough runway to make it to the end of the year and a little bit into next year. So we feel very good about that. We haven't broken out the $250 million into its pieces, but it is predominantly made up of SG&A expense.

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Your next question comes from Jaime Katz with Morningstar. Your line is open. .

Hi, good morning. I'm not sure if you guys have this bifurcated out, but not all states have shelter and place orders. So could give us any insight into how the dealers are doing and shattered versus non-shattered space if there’s any information to share there. Thanks. .

Jamie, it’s pretty difficult you know to piece that out. When we look at it in totality, we can see that the dealers that are selling are outperforming the dealer closures that we have.

And again as we sit here today, 59% of our dealers are closed, however our retail sales in the first 3.5 weeks of April are not down that much, so that does suggest that the dealers that are open are selling at year ago levels. But we don't have an analysis or we don't have anything to share with regards to exactly which states they are. .

Alright, thanks everyone. The audio and slides for today's call will be available at Harley-Davidson.com or for the audio call 855-859-2056 or 404-537-3406 until May 12. The ID is 772-6817. .

And thanks Shannon and John, and thank you for your time this morning; for your interest and investment in Harley-Davidson. As the pandemic persists, we will continue to protect the wellbeing of our people and the strength of our business.

I'm confident that Harley-Davidson Rewire will result in a company that is less complex, which is sharp and focused and makes decisions faster. I look forward to sharing more during our second quarter update. Stay well everyone. .

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..