Thank you for standing by, and welcome to the Harley-Davidson 2022 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..

Thank you. Good morning, everyone. This is Shawn Collins the Director of Investor Relations at Harley-Davidson. Welcome to our Q2 2022 Earnings Call. You can access the slides supporting today's call on the Internet at investor.harleydavidson.com.

Our comments will include forward-looking statements that are subject to the 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, Gina Goetter. In addition, Chief Commercial Officer, Edel O’Sullivan, will join for the Q&A. With that, let me turn it over to Jochen..

Thank you, Shawn. Good morning, everyone, and thank you for joining us today.

It's been a few months since I last saw many of you at our Investor Day in our hometown Milwaukee, where we talked about the transformation we are on, where we're headed, what the opportunities are and how we are planning to accelerate as a company and brand, all with the ambition in mind for Harley-Davidson to be the most desirable motorcycle and lifestyle brand in the world, building upon the 119-year history and leading motorcycle culture into the future.

At our Investor Day, as part of our plans for future growth, we announced Hardwire Stage II, an acceleration plan, building on our Hardwire priorities, while tuning the engine of our business for improved acceleration and increased performance.

And despite the macro uncertainty, Forex and inflationary pressure and supply chain issues, we expect to deliver on our Hardwire ambitions. We believe that the Hardwire strategy is working. We're making significant progress in transforming our business and now it's the time to elevate our ambition beyond the current environment.

Before I provide some more detail on delivery of our strategic initiatives for Q2, I would like to comment briefly on the suspension of production and shipments that we experienced in the quarter.

The decision we took to temporarily close our production facilities and suspend vehicle shipments was taken out of an abundance of caution and related to regulatory compliance issue with the brake hoses provided by Tier 2 to our Tier 1 suppliers. We continue to work through the knock-on effect of this action.

We've ramped up production, and we believe that we'll be able to make up for the lost production throughout the remainder of the year. As Gina will explain in more detail, we are, therefore, not changing our guidance for the full year. Now I'd like to look at some of the highlights of the quarter.

As part of the Hardwire, we made the commitment to invest for growth within our core categories. Aligned to Pillar I profit growth, we are strategically investing into Touring, where we believe we can capture growth. This investment is driven by the opportunity in our stronghold categories and most profitable segments at the core of our business.

We expect to invest $300 million over the next five years in innovation to reinvent, reimagine and reinvigorate in key categories where we see the potential to grow our leadership, namely Touring, Cruiser and Trike. Within these core segments, we know that our community wants elevated design, performance and premium quality.

With our new enthusiast offering that we launched in June, we are delivering on all of these. The Enthusiast collection is an ongoing series of Harley-Davidson motorcycles featuring special edition paint, created to celebrate the unique backgrounds, stories and special interest of riders within the Harley-Davidson community.

Each Enthusiast collection design will be launched annually, available in limited quantities across a curated selection of motorcycle models. For '22, our debut Enthusiast collection features a Pan-America 1250 special G.I.

and a Tri Glide Ultra G.I., both showcasing an all-new paint color created especially for this collection, paying homage to the olive drab paint used on Harley-Davidson WLA models and completed with service inspired graphics.

The Enthusiast collections complements our Harley-Davidson icons as a limited edition collection designed to celebrate the unrivaled history and heritage of Harley-Davidson. Having a strong presence in Adventure Touring and Sports is a focus of Pillar II of our Hardwire strategy, selective expansion and redefinition.

And after our successful product launches this and last year, we will continue to focus on delivering long-term profitable growth with both Adventure Touring and Sports segments, utilizing our Rev Max platform. Sport is a great example of this strategy. With sport, we know that the category skews younger.

We're seeing a higher proportion of new-to-the-brand riders in this section, in addition to it playing an important role as an incremental buy for existing and new customers. Delivering new to sport riders is part of our objective to attract new customers to the brand, in addition to expanding the garage of our existing riders.

With this in mind, in April, we started a new chapter in the Sportster story with the launch of Nightster. Building on the 65-year legacy of Sportster with Nightster, we wanted to push both our performance and design capabilities, while ensuring the bike was an entry point to Harley-Davidson motorcycling and our brand.

Capitalized on market trends, taking inspiration from our community and recognizing our riders desire to make their Harley-Davidson uniquely theirs, with Nightster we created a canvas for creativity and personalization.

This was the theme of our launch campaign, Instrument of Expression, which for the first time ever in the history of the company presented 5 bike builders from around the world that put their incredible talent to work to showcase their individual artistic expression or a factory model at launch.

If you hadn't had a chance to see the launch video, I'd encourage you to take a look. It really demonstrates the level of personalization that can be experienced. Looking ahead, we plan to continue to tap into the Rev Max platform, using modularity to explore new segments for the company.

Leading in electric, Pillar III of our Hardwire strategy is another focus for both Harley-Davidson and LiveWire. In May at our Investor Day, we also reviewed the S2 Del Mar, a new addition to the LiveWire portfolio, and the first bike to feature the new S2 Arro architecture.

The launch featured an addition of 100 units built to order and serialized as the Del Mar launch additional models. The reception to the launch addition was exceptional, with 100 reservation deposits selling out in 18 minutes.

As part of the journey of LiveWire becoming the first publicly traded all electric motorcycle company in the U.S., yesterday, the SEC declared our S-4 registration statement effective.

Due to quarterly fiscal accounting, we now expect that LiveWire will go public on September 26th, which will be the start of both LiveWire and Harley-Davidson's fiscal fourth quarter. And as part of this process, we expect that AEA-Bridges will hold its shareholder meeting to approve the transaction the week of September 12th.

And now I'll hand over to Gina..

Thank you, Jochen. Second quarter results reflect a modest year-over-year revenue and operating income decline, largely attributed to the unexpected two-week production suspension. We continue to operate within an environment of high raw material prices and broad supplier volatility.

That said, as expected, we have begun to see cost inflation moderate, and we expect to see this moderation continue in the second half of the year.

And despite the headwind from volume, we were able to grow our HDMC operating income and operating margin in the quarter as we continue to stay focused on our most profitable categories and our cost structure. Looking more closely at our financial results in the quarter, total consolidated revenue of $1.5 billion was 4% lower than last year.

HDMC wholesale motorcycle units were down 15% year-over-year, and revenue was down to a lesser extent at 5% as a result of strong global pricing actions across the portfolio and growth within apparel. Financial services segment revenue was up 1% off of higher receivables and licensing revenue.

Total operating income of $278 million was down 1% compared to last year. For HDMC, operating income of $192 million was up 3% versus last year as pricing and cost productivity offset the impact of the suspension.

For HDFS, operating income of $86 million declined 9% versus prior year as the credit loss rate continues to normalize in line with expectations and the loss reserve rate remains steady.

Second quarter GAAP earnings per share of $1.46 compares to $1.33 last year, with the increase driven by the factors already noted as well as from favorability in below-the-line items, including other income due to lower pension expense, lower effective tax rate and fewer shares outstanding. Turning to Q2 year-to-date results.

Total consolidated revenue of $3 billion was flat to last year, and total operating income of $567 million was down 10% compared to last year. GAAP Q2 year-to-date earnings per share of $2.91 compares to $3.01 last year. Global retail sales of new motorcycles were down 23% in the quarter.

Overall retail results were negatively impacted by low inventory heading into the quarter and further exacerbated by the production suspension. Worldwide retail inventory of new motorcycles is at historical lows and Q2 inventory was down 13% versus last year. In the key U.S. market, retail inventory was down 35% and ended Q2 at less than 10,000 units.

Early in Q2, we were producing on average 4,500 motorcycles per week. We are now producing above that weekly output rate and are working to inventory levels across the network.

We continue to see strong pricing dynamics for both new and used motorcycles in Q2 as we did in Q1 and throughout 2021, specifically, within the U.S., due to new motorcycle transaction prices came in over 1% above MSRP, which is within the desirability threshold of plus or minus 2 percentage points.

On average, a model year 2022 motorcycle is sitting on the dealer showroom floor in the U.S. for less than 23 days. Finally, despite our share loss in the U.S. market, driven by unit availability, we continue to hold commanding shares within our largest and most profitable categories of Touring and Large Cruiser.

Looking at revenue, total HDMC Q2 revenue was down 5% in Q2 and flat on a year-to-date basis. Focusing on the key drivers in the quarter, 10 points of negative impact came from volume, 7 points of growth from pricing and incentives driven by global MSRP price increases, coupled with pricing surcharges in select markets.

In addition, we delivered strong price realization across both parts and accessories and the apparel businesses, 2 points of growth from favorable mix within motorcycles as well as SKU mix across the apparel business. And finally, 3 points of negative impact from foreign exchange as the dollar continued to strengthen throughout the quarter.

Drivers of the year-to-date revenue are relatively consistent with the positive impact from pricing offsetting the unit shortfall and headwind on FX. Focusing in on margins, Q2 gross margin of 30.5% was flat versus prior year.

Pricing and favorable unit mix were able to offset the deleverage cost headwinds associated with the production suspension as well as the higher cost inflation. Additionally, in Q2, we began to comp the unfavorable impact from the incremental EU tariffs, which provided an additional margin tailwind.

In total, supply chain inflation was 4% in the quarter, which is down from 8% in Q1 and 10% last year back half. The deceleration in inflation is primarily a result of normalization across logistics.

While logistics costs are still remaining higher than a year ago, we've not experienced as much volatile pricing as we did in the past year, and we continue to reduce our reliance on expedited shipping. Q2 operating margin improved from 14% in Q2 prior year to 15.1%.

The approximate 120 basis point improvement was driven by the factors noted as well as lower operating expense as we prudently manage spend commensurate with lower quarterly volumes. The Financial services segment operating income in Q2 was $86 million, down $9 million compared to last year.

The decline is largely driven by a higher provision for credit losses as actual losses normalize. Looking at the HDFS-based business, retail originations in Q2 were up 1% versus last year on strong used motorcycle origination volume. New motorcycle origination volume was down in line with lower-than-expected retail sales.

Total finance receivables in Q2 were $7.1 billion, which is up 3.1% from last year. In Q2, HDFS' annualized retail credit loss ratio of 1.4% compares to a ratio of 0.84% in Q2 2021 or 56 basis points higher.

We continue to see credit performance move towards normalized levels as we move beyond the COVID-related benefits, which included the federal stimulus payments and loan due date extensions. In addition, the retail allowance for credit losses at the end of Q2 was 5%, which is flat to the previous quarter. Wrapping up with Harley-Davidson, Inc.

financial results. Through the first two quarters, we delivered $244 million of operating cash flow, which is down from $644 million in the comparable period last year. The decrease in operating cash flow was driven by unfavorable changes in working capital as well as higher net cash outflows related to wholesale finance receivables.

Total cash and cash equivalents ended at $2.2 billion, which is $453 million higher compared to the end of the prior year Q2. The increase in cash is at HDFS following a securitized debt issuance in June of this year. During Q2, we continued to repurchase shares and bought back approximately 1.8 million shares in the quarter.

Cumulatively, through the second quarter, we have bought back 8 million shares. As we look to the rest of 2022, as Jochen said earlier, we are reaffirming our full year outlook, where we continue to expect HDMC revenue growth of 5% to 10%.

This revenue growth forecast incorporates the expectation that we recoup and wholesale the units we lost as part of the production suspension. It also includes what we know today in terms of the impact of the semiconductor and supplier challenges impacting our business.

We expect revenue to continue to be positively impacted by our global pricing actions as we work to offset the cost headwinds across the supply chain. We continue to expect HDMC operating income margin of 11% to 12%. We believe the anticipated positive impact from pricing will more than offset the expected cost inflation across the supply chain.

Also, the suspension of the additional EU tariffs realized in 2021 contributes over 1 point of margin growth. We continue to expect HDFS operating income to decline by 20% to 25%. This decline is largely a result of the favorable allowance releases and lower credit losses in 2021 that we believe are not likely to repeat itself in 2022.

And lastly, we continue to expect capital investments of $190 million to $220 million as we invest behind product development and capability enhancement in support of our hardware strategy. Embedded within our guidance for 2022 is LiveWire. At this time, we remain committed to the outlook from the Form S-4 filing with the SEC.

Finally, as we look to the 2022 capital allocation, our priorities remain to fund growth of the Hardwire initiatives, which includes the capital expenditures mentioned previously, pay dividends and execute discretionary share repurchases. This financial guidance includes the best cost forecast on supply chain that we have at this time.

It assumes that logistics and materials will continue to improve as we move through the balance of the year. In aggregate, costs will continue to be inflationary, but we will move beyond the peak levels realized in 2021. This guidance also includes an updated assumption for the back half FX rate for the euro, which is at $1.01.

A rough rule of thumb is that every penny difference in the back half is worth about $3 million of revenue. At this point, I'll turn it back to the operator to take your questions..

[Operator Instructions] Our first question will come from the line of Craig Kennison with Baird. Please go ahead..

It had to do with the production suspension and the impact on retail.

Are you able to quantify maybe the lost retail sales? And then how sure are you that you will get those sales back versus the customer moving on to do something else?.

Thank you, Craig. It's difficult to quantify the actual lost retail sales, but we believe that the demand out there is certainly well ahead of the product that we were able to deliver, especially in this period of no product being out there.

There are some pretty good indicators that confirm that -- Gina already mentioned a few with 23 days of a model being on the dealer's floor, strong dynamics in the new and used motorcycle with MSRP being up 1.3% overall and -- including our entry price products, which are even up higher.

The used market, in particular, in that period being extraordinarily slow because -- it's high actually strong, the used market and the pricing in the used market when there were no bikes in -- new bikes in the market, in the dealers, and that is an indication that the demand was there, but we just couldn't deliver the new bikes into the dealers.

So there was a big shift towards the used business in that time. And that obviously had -- didn't show up in retail. In terms of our confidence, I mean, that is all supply-related right now.

We feel confident that what we've seen since the suspension that our production volume is picking up, and we are able to start compensating some of the shortfalls that we've had due to the shutdown, so -- hence, our guidance that we confirmed for the rest of the year.

So we feel pretty confident about that, assuming, obviously, that there is no other extraordinary happening in the supply chain, which we don't foresee at this point in time..

Craig, this is Gina. I'll just add a few kind of numbers to Jochen's commentary. So before the suspension, we were running around 4,500 units per week that was our output. So being down 2, 2.5 weeks, we would say that was roughly, call it, 10,000 units to 12,000 units of lost production.

Given the speed with which product was moving from our inventory through the dealer through the customer, that kind of gives you a rough ballpark of retail. To Jochen's point, we don't predict or forecast retail, but that just gives you a quantity of kind of what we lost in terms of production.

In terms of how we feel confident in the back half, that 4,500 unit run rate, we are producing over that now. So as we work to recoup and kind of get the shipments into kind of this critical Q3 window, we are producing above that output rate. And so that is what gives us confidence in being able to confirm our guidance..

Our next question will come from the line of Robby Ohmes with Bank of America. Please go ahead..

Maybe just a follow-up on Craig's question. The -- so the dealers are -- have been kind of starved of units for a while. So I think they'd be happy to get a shipment shift into the back half, but it is kind of riding season is ending in a lot of regions.

But my broader question is, has there been any feedback from dealers of any slowdown more recently where, us analysts were seeing a lot of slowdowns, a sharp slowdowns in discretionary spending and other types of categories? I didn't know if you could speak to that.

And then also separately, maybe, can we get some color on sort of the international outlook for shipments versus U.S.? And were there any differences in how those regions -- how you managed international versus domestic with the production shortfall?.

Yes. Robby, thank you for the question. In terms of our dealers, they are seeing now a constant flow of new products into the dealerships, which we resumed in July after the suspension.

And what we are seeing since then is actually an accelerating performance in terms of our retail, which especially in July, if we think about this month, that is about to end, we saw a nice pickup in retail numbers as soon as the product became available and we can confirm that through our overall loan applications, which were actually positive if you look at used and new taken together.

So there are some good indications as the product is moving out. The new product a little bit later in the month, for example, because it took time to go through the system to get to the dealers, whereas use was strong in, especially the first couple of weeks of the month.

But overall, we are seeing good sell-through happening as the product hits the retailers. As for the international markets, obviously, it takes a little longer because those spikes are getting on a ship first, whereas in North America, they get on a truck. And those lead times are a lot longer.

So the production suspension will take a little bit longer to work its way through the system. And Thailand did start up a little slower than the U.S. market. But from a U.S. perspective, very strong recovery that we've been seeing and internationally, a recovery, but at a slower pace..

And just really quickly for Gina.

Is there anything for the back half, mid-single-digit HDMC op margin that you can remind us about sort of 3Q versus 4Q that we should be thinking about?.

Good question. I would say for the fourth quarter, remember, one, that our operating expense always kind of ticks up in the fourth quarter compared to the previous three as we get ready for new product launches and finish up product development for the next model year. So there's always an uptick in spend there as well.

But the other to keep in mind, two positives, I guess, as tailwinds; one is the impact of the incremental tariffs, that will be a benefit for us in Q4 because those were -- those went all the way through 2021; and then the second is when you think about our raw material inflation and when we really started to see that accelerate, Q3 was high, Q4 was higher.

And so we'll be comping that kind of those peak levels of inflation as we get to the back half of this year..

Yes, Robby, just one additional point. You mentioned riding season. Obviously, riding season is still in full swing, and there are markets that have their riding season starting later than September.

So even if some of the products will not get retail, the positive of that will be that it will start to replenish our staffed inventory in dealerships in a positive manner if we think about next year.

So I don't foresee the quantities that we are manufacturing to probably get us to the levels of inventory we want to be, but we would like to start the year healthier than we have before, which would be positive. So even if those bikes don't all retail, there will certainly not be an abundance of bikes in the overall network..

Your next question will come from the line of Brett Andress with KeyBanc. Please go ahead..

Going back to your comments on international retail, if I'm doing my math right, it looks like you actually built some inventory internationally, but retail there was still pretty weak.

So was the drag there less of an inventory impact? Or was that more of a demand impact, just trying to parse through that?.

Definitely, not a demand impact. Overall demand was strong pretty much across the board and -- but it's available bikes in the dealerships that was the concern..

Yes. And this is Edel. Just to add to that picture in international, I think it varies by region. Certainly, the dynamics in North America, as Jochen explained would indicate that there continues to be appetite for those motorcycles as they come back online and really it was a question of supply.

I think as you look at some of those international markets, we're very pleased with the performance in APAC, which despite those same challenges in terms of motorcycle availability, we had a very important quarter in terms of growth, and that is notwithstanding some of the impacts, like, for example, the COVID shutdowns in China, which certainly created a bit of a backlog on the retail despite the availability of the wholesales.

EMEA and broadly the European market has certainly suffered through several other factors that have been very significant. Obviously, the ongoing conflict in Ukraine as well as some other challenges with the euro FX rate are things that we believe have had an impact and will continue to have an impact.

It is also one of the reasons where it is the longest lead time for us to be able, as Jochen mentioned, to reactivate production and to flow supply. So certainly, it is a picture that for Q2, it was slightly different than for our domestic market. So overall, a little bit stronger.

But we expect that the back half of the year will have its own dynamics with hopefully ongoing strength in the APAC market, particularly as the China geography opens up again..

And Brett, just one final point on that. Remember that last year, in 2021, for international, in Q2, Q3, we really saw inventories get to very unhealthy levels there.

So there's just some element of that growth that is -- we're not -- we figured out the shipping thing differently this year than we did last in the height of kind of all the crates of logistics..

Your next question will come from the line of Joseph Altobello with Raymond James. Please go ahead..

I guess a couple of questions from me. First, are you seeing any evidence of softness among your core consumer, either maybe for trade down towards smaller, less expensive models, lower P&L attachment rates or maybe an increase in payment delinquencies? That's the first.

And then maybe second, you mentioned you curtailed some operating expenses in Q2 after the production shutdown.

Do those costs come back in the second half?.

Thanks for the two questions. So the operating expenses should not be coming back. I mean, we didn't need to create additional demand through stimulus -- marketing stimuli because there was not enough product out there.

So we don't believe that we will need to spend additionally these funds that we've essentially saved than in the back half of the year. So there should be positive from a cost perspective throughout the year. But I'll let Gina elaborate on that a little bit more. We do not see a softening among our core consumers.

P&L attachment was lower, but that was lower because there were no bikes to attach your P&L to. So that was not a reflection of P&L per se, but not enough new bikes in the market that you could accessorize accordingly.

If you look at credit apps, you could say there might be a slight -- in the Q2, a slight decline in sub-prime tier in terms of number of applicants, but that could also very well be due to the fact that we had the potential -- we had the shutdown of the manufacturing. So we can't attribute that at all to a decline in demand.

So overall, it's hard to really give good indications simply because product availability and low inventory levels just have made a very -- a clean read on the economy and the consumer very difficult.

But the signals that I've mentioned in terms of used to new are strong and the fact that retail is jumping back up as we're delivering more bikes to the consumer is certainly positive. But the next couple of months will show where the consumer is heading. But right now, we're reasonably confident..

Joe, this is Gina. So as we look at delinquencies and loss rates in particular, so in Q2, we had started to normalize, consistent with what we've been saying as we entered into '21 and that both the loss rate and the delinquency rate was going to normalize.

When we look at how those rates compare to, say, like a four-year rolling average or even like taking 2020, '21 out of it, we're still both from a loss rate and a delinquency standpoint underneath kind of below those historical rates. So we're not yet seeing it play through in just kind of the customer side from a payment standpoint.

On the operating expense, I agree with Jochen that these were -- these should not come back into the P&L primarily.

It was marketing and marketing not only kind of at the corporate center level but also very direct within our markets and within our regions that we just -- given that we didn't have products, we weren't going to spend on that lead gen..

Your next question will come from the line of Fred Wightman with Wolfe Research. Please go ahead..

I was hoping if you could just sort of justify or rationalize the Motor Company back half operating margin guidance. You have a step-up in sort of the sales contribution. I understand that you guys are running at higher output than you were in the first half.

But it looks like you're expecting to come in at the low end of that operating margin guidance in the mid-single-digit range. So what is sort of the bridge from that higher sales outlook with the softer margin performance? I would assume there'd be some fixed cost leverage there, but maybe not..

Yes. This is Gina. Yes, when we think about the back half, you're absolutely going to see some benefit from the leverage play through. Remember, last year in our back half, typically, we would run our back half relatively flat margins. So it's kind of zero margin as that deleverage plays through this year.

Our back half is going to be margin positive because of that deleverage because we have lower levels of inflation, still inflation, just coming off of the peak that we have seen. And then from an operating expense standpoint, we're continuing to stay kind of relatively in line with what we saw last year.

So those are the big things that drive that difference. But the fact that we had shipments moving from Q2 into the back half of the year is probably the single biggest change when you look kind of year-over-year..

I guess I just meant more relative to the outlook that you guys had provided last quarter. It looks like you're expecting mid-single digit now, but I think last quarter, that was mid-to-high single digits.

So why the lower outlook?.

I don't -- we'll have to follow up with you on that. I mean there really hasn't been a material change in our back half other than this production volume shifting..

Your next question will come from the line of Gerrick Johnson with BMO Capital Markets. Please go ahead..

I have two, if I may. You recently dropped price on Road King, Road Glide and Street Glide basic models and ABS an option as opposed to a standard feature.

So can you talk about that strategy?.

This is Edel, again. So that is actually not a price decrease, but is actually a change in the configuration of the motorcycle, given some of the supply challenges we have had, particularly as it relates to ABS.

So in order to continue to build what are sort of our highest demand and also our most profitable bikes, we have made the choice to create some options around less features, particularly around ABS and then price accordingly.

In fact, we are -- we have taken significant pricing in this category across the past year and continue to transact above MSRP when it comes to touring, particularly in Q2 to all of our families.

So this is more driven by accommodations, given the supply chain challenges and making sure that we are fair to our customers when those changes occur as opposed to any price decreases on the actual category..

And second, if the FTC order regarding warranty work goes through, Gina, what kind of financial impact could that have both directly or indirectly?.

There'd be minimal financial impact..

The final question will come from the line of Jaime Katz with Morningstar. Please go ahead..

I just had a couple of follow-ups on HDFS, primarily whether you guys are seeing any more consumers purchasing with cash rather than loans? And then whether or not you guys are financing about the same percentage of loans in the past? Or if that has changed? And I guess additionally, piggybacking on to that, is there some promotional financing cadence we should think about over the back half of the year that you guys have planned?.

Jaime, this is Gina. So I'll start with that second part of the question first. In short, no, we have no -- just given where inventory positions are sitting, there's very limited promo that has happened and is planned to happen the balance of the year.

As we look about the loan applications and what we're financing, relatively consistent, we're not seeing a material change. Total number of kind of loan originations relatively flat. We're seeing a little bit of uptick in new, obviously, and then used is a bit down. But overall, we are relatively flat.

When you look at the split two, between prime and subprime, again, you really have to squint to see a difference between where we've been historically in terms of that split of the business.

And when you look at kind of what is happening within the tiers, just given where inventory levels are sitting, it's really hard to discern if any of it is driven because of the broader macro factors or if it is just because inventory hasn't been available.

So right now, through Q2 and even through July, I would say we -- through three weeks of July, we have seen our total loan applications up. Our total loans actually kind of provided are up versus where we've been last year. So we're continuing to see the trends move in the right direction as the inventory availability..

And if I may just come back to the previous question on the FTC settlement, just to be clear, that was not a financial settlement. It was just a settlement concerning language used in our warranty and effectively clarifying the law. Just to be clear, no financial settlement with the FTC..

And there are no further questions at this time. This concludes today's conference call. Thank you all for joining. You may now disconnect..