HARLEY-DAVIDSON, INC. Q3 FY2024 earnings call

• Global market environment was challenging with big-ticket discretionary spend pause. Q3 global retail sales of new motorcycles declined 13%, North America down 10%, international regions down 18%. • In the US, the touring segment was up almost 10% and gained over 4 percentage points of market share. EMEA retail sales dropped 23%, Asia-Pacific down 16%, while LatAm was up 4%. • Focused on reducing dealer inventory levels; end of Q3 dealer inventory was down 13% relative to end of Q2. • HDFS performed strongly with higher retail and commercial finance receivables. • LiveWire adjusted to the EV environment, focusing on cost efficiencies, revising full year guidance to 600 - 1,000 motorcycle units and aiming to reduce cash burn by 40% next year. • Committed to Hardwire II ambitions, believing the new touring lineup and pipeline products will drive profitable growth.

In Q3, HDMC revenue decreased by 32% due to a 39% decrease in wholesale units shipped (27.5,000 units in Q3 2024 vs. 45.3,000 in Q3 2023). Year-to-date, HDMC revenue was down 9%. HDMC gross margin for the year-to-date period was 31.3% compared to 34.2% in the prior year. HDFS Q3 revenue increased by 10% driven by higher retail and commercial finance receivables, and year-to-date revenue was up 11%. HDFS operating income for the year-to-date period increased by 14%. LiveWire Q3 revenue increased due to higher unit sales of EV motorcycles, but year-to-date revenue was down 30%, with an operating loss of $83 million.

• Revised full year 2024 outlook: HDMC retail and wholesale units are now expected to be in the range of 149,000 to 153,000 units (previously 163,000 to 168,000 units), with revenue down 14% to 16% and operating income margin between 7.5% and 8.5%. • HDFS operating income guidance for the full year is revised upward to be up 5% to 10%. • LiveWire expects to deliver between 600 and 1,000 electric motorcycle units for the full year 2024, with operating loss in the range of $105 million to $115 million remaining unchanged, and capital investment unchanged at $225 million to $250 million.

• Macroeconomic and political uncertainty, along with high interest rates, impacted the industry and customers. • Slower - than - anticipated adoption of EV products for LiveWire. • External factors such as interest rate reductions and improved consumer confidence are needed to provide the industry with a tailwind.

Q: Craig Kennison asked about themes from recent dealer conversations and the message to dealers.

A: Jochen Zeitz said dealer profitability is a key concern, and the annual dealer forum in October showed support for 2025, with dealers rating the forum outcomes highly.

Q: Megan Alexander asked about the trend of retail in Q3 and the outlook for 4Q.

A: Jochen Zeitz said Q3 started strong in July but ended weaker than expected, influenced by macro, geopolitical uncertainty, and the upcoming US elections.

Q: James Hardiman asked about retail being in line with wholesale and destocking in 2025.

A: Jonathan Root said dealer inventory was down 13% relative to Q2, aiming to be down another 20% by the end of 2024, and prioritizing core categories.

Q: Joseph Altobello asked about retail cadence and inventory level.

A: Jochen Zeitz said not giving full 2025 guidance yet, expecting 150,000 - 153,000 retail units, and Jonathan Root mentioned the better quality of touring inventory.

Q: Robin Farley asked about the LiveWire business and reevaluation.

A: Jochen Zeitz said LiveWire is working to reduce cash burn by 40% next year, taking actions like centralizing the lab and reducing headcount.

Q: Fred Wightman asked about the 15% operating margin target.

A: Jonathan Root said cost productivity, leverage, portfolio changes, and operating discipline contribute to achieving the target.

Q: Alex Perry asked about HDMC gross margins in 4Q and promos.

A: Jonathan Root said Q4 margin would be challenged, and they are using rate promos.

Q: Noah Zatzkin asked about HDFS book health and next year.

A: Jonathan Root said HDFS consumer health was good, but 2025 outlook wasn't detailed yet.

Q: David MacGregor asked about weather impact and 2025 market share.

A: Jochen Zeitz said weather impacted Q3 retail, and they are working on gaining market share in the touring segment.

Q: Tristan Thomas Martin asked about more affordable bikes.

A: Jochen Zeitz said they are addressing with RevMax products, but prices would be revealed in 2025.

Q: Jaime Katz asked about market share and structural operating profile.

A: Jochen Zeitz said they gained market share in touring, and they are constantly evaluating the manufacturing footprint and cost productivity.