Thank you for standing by, and welcome to the 2021 Third Quarter Investor and Analyst Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Mr. Shawn Collins. Thank you. Please go ahead, sir.

Thank you. Good morning, everyone. This is Shawn Collins, the new Director of Investor Relations at Harley-Davidson. You can access the slides supporting today's call on the Internet at investor.harley-davidson.com. 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, Gina Goetter. In addition, Chief Commercial Officer, Edel O’Sullivan, will join for the Q&A. With that, Jochen, why don't we get started?

Thanks, Shawn, and welcome to the team. I also want to thank Shannon Burns for his great work in Investor Relations over the past 3 years as we move to a new financial as part of our LiveWire division. Good morning, everyone, and thank you for joining us today. We delivered a solid quarter and are pleased with our year-to-date performance, where you see many proof points that our Hardwire strategic initiatives are setting up a solid foundation for future growth at Harley-Davidson. As part of the Hardwire strategy, we will lead our focus on profitably driving our core business. Through 2021, we've been encouraged by the recovery of the tooling market. Grand American Touring is at the core of our mission and our brand. We are committed to depending on expanding our share in this segment and see potential for future growth. By selectively targeting high-potential categories such as Adventure Touring with Pan America and Sport with Sportster, we are also maintaining our focus on long-term profitability and potential aligns to our brand and product capabilities. The increased demand that we are seeing across both our core and expanding categories underscores the momentum behind the Harley-Davidson brand and all extend for in the pursuit of Freedom and Adventure. We've also seen interest increasing across new riders with the marked increase in the participation in the Harley-Davidson Riding Academy. Through September, we've seen Riding Academy participation and completion increased 20% over 2019. In addition to our strategic changes as part of our streamlined market strategy, market headwinds including a variety of challenges from supply chain shortages to conjunction at sports and increased shipping times that is impacting our production and our other supplies in Q3, particularly in our international markets. Like the supply chain challenges are likely to continue into 2022, our team remains committed to managing the effects of the disruption, leveraging the scale of our global network and infrastructure to mitigate the impact on our business. That said, I'm very excited by the global potential of Harley-Davidson brands in the coming years. And as we focus on more profitable motorcycle unit as part of our strategy, we continue our journey towards a more efficient use of inventory. While we are below our intended inventory strategy, we've seen our dealer community adapts, improve their profitability and therefore, improve the overall health of our dealer network. I'll now hand over to Gina to provide more details on our financial performance for the quarter and year-to-date. Gina?

Thank you, Jochen, and hello, everyone. Third quarter results reflect continued demand momentum as evidenced by our strong wholesale unit growth and share performance across the market. As Jochen said, we did experience increased supplier volatility, which impacted our production and supply levels for the quarter. Despite this, our financial results demonstrate our agility in maximizing profitability, including the execution of a pricing surcharge in the U.S., optimizing production schedules to prioritize our most profitable models and market and enacting tighter operating expense controls. In the quarter, total revenue of $1.4 billion was 17% ahead of last year behind increased shipments and favorable motorcycle unit mix, primarily driven by the actions undertaken as part of the Rewire. Total operating income of $204 million was ahead of last year, with growth across both of our reported segments. The Motorcycle segment, which includes our General Merchandise and Parts & Accessories products delivered $98 million of operating income, which is $51 million better than last year. And the Financial Services segment delivered $107 million of operating income, which is $15 million better than last year. Third quarter GAAP earnings per share of $1.05 is $0.78 better than last year or up 35% year-over-year. When adjusting to exclude the impact of EU tariffs and restructuring charges, our adjusted EPS was $1.18 and up 12% year-over-year. Turning to Q3 year-to-date results. Revenue of $4.3 billion is 30% ahead of 2020 and operating income of $831 million was $701 million ahead of last year. Year-to-date results reflect the strong unit growth over the pandemic impacted results of 2020 as well as the positive impact from last year's Rewire actions. GAAP year-to-date earnings per share was $4.06, up $3.42 from a year ago, while adjusted earnings per share was $4.29, up $3.10 from last year. Global retail…

Thank you, Gina. As we pursue our Hardwire goals, we continue to enhance our organization and processes, focusing on alignment and efficiency. Underpinned by drive to win as a team, which is the basis for our culture, we will look to ensure that Harley-Davidson as a company and as a brand is getting stronger than ever and is positioned for long-term success. As ever, my thanks go to the whole Harley-Davidson team for all their hard work. By designing, engineering and building the most desirable motorcycles in the world reflected in quality, innovation and craftsmanship, we continue to further our legacy as the only American motorcycle brand with 118 years of uninterrupted heritage. As you know, desirability provides the framework for our Hardwire strategic plan, our 5-year road map to both enhance and grow our position as the most desirable motorcycle brand in the world. Desirability not only impacts those new to our sport and our brands, but also our dedicated community of riders and non-riders alike. As we recognize the post-pandemic conversations around the sport of motorcycling have changed, we also see a rider base that has a desire to escape, explore the outdoors and rediscover passion for riding, all of which sit squarely in the Harley-Davidson mission of delivering freedom for the soul in the pursuit of adventure. Desirability is also a motivating factor for getting people into the sport. We know there are plenty of people are interested in riding, but more importantly, interested in riding Harley-Davidson. The Harley-Davidson Riding Academy is an important way in which we build ridership and deepen our connection with our customers. Currently, we focused on North America. We have plans to take the H-D Riding Academy to high potential markets across the world, including China, where we see a high potential…

[Operator Instructions]. Your first question comes from the line of Robert Ohmes from Bank of America.

And congrats on a strong quarter and what is obviously a really tough environment for a lot of companies out there. My one question is on the pricing outlook. You spoke a lot about the average price promoter cycle obviously, has gone up maybe more than we were modeling in support of the quarter, the surcharges to dealers' you guys did. Can you maybe comment about what the pricing outlook could look like next year for Harley-Davidson with the new models, and will some of these surcharges become sort of a higher level of pricing going forward?

Thank you for the question. As you know, we took several pricing actions over the course of the past few months, and we are actively assessing their impact as we go forward. That is certainly part of what we are looking in 2022. We remain committed to managing the profitability and the desirability of our motorcycle. So certainly, that is part of the efforts across all our product lines as we look to 2022.

Your next question comes from the line...

Can I just add one comment to that question on pricing. Robbie, remember that our surcharges really were only effective in the U.S. So as we look beyond into 2022, the opportunity is to take that pricing surcharge model and look holistically across the portfolio.

Your next question comes from the line of Gerrick Johnson from BMO Capital Markets.

I was pleased to hear that Edel will be available for Q&A because I was going to ask something in her ballpark. Edel, can you talk about the progress in reshaping the general merchandise program -- and what's been going on with your SKU reduction? Are you getting better productivity? Just talk about where we are in that process. Edel O’Sullivan: Yes. Thank you for the question. So as you know, we're in a journey with our general merchandise business, which we think is an enormous untapped opportunity for Harley-Davidson as a whole. As Jochen has referenced in his previous commentary in previous quarters and as we talk about Hardwire strategy, the brand opportunity and the power that exists for Harley-Davidson as both an apparel business and more broadly as a lifestyle business is significant and one that we intend to tap into over the course of the Hardwire and beyond. In terms of action taken to date, you will note that we have increased our seasonal offering of products to bring more freshness into our dealer channel to drive more traffic into the dealership. We continue to invest in expanding our e-com capabilities so that we can offer more choice to our customers as they look across channels and how to engage with us. And going forward, we intend to both continue to expand on the range and the quality of the products and to grow what is a significant part of our business, inviting apparel, specifically, other motorcycle volume continues to grow and diversify over the coming years. So we see enormous opportunity linked directly to motorcycles and to riding apparel beyond that as we expand into lifestyle categories and we think about the potential of the brand overall and certainly continue to drive opportunities across channels so that our consumers have the most choice possible. So tons of opportunity in GM, and I think one that Harley-Davidson in particular is well suited to capture.

Your next question comes from the line of Craig Kennison from Baird.

And Shawn, congratulations on your new role. It has to do with this new reservation system that sounds promising. I'm wondering, if you have any way to estimate kind of the missed retail opportunity in Q3 because of the inventory shortage? Is there any way to frame maybe what's you lost there? And then as it relates to the reservation system, what are some of the dynamics there? Will consumers be expected to put money down in order to reserve a slot? Edel O’Sullivan: So first, let me take the second part of your question around the impact in Q3. And if we think that there has been a volume loss. It certainly is a question that is complicated by a variety of factors as we look back to maybe 2019 given that 2020 was such a unique year. There are lots of changes that have occurred as part of the Hardwire strategy. So Gina referenced some of these market exits and new product introductions, et cetera. And as well, there have been significant changes in the environment around us, how we think about inventory, how our dealers are operating more efficiently with the inventory that they have. And certainly, all of the challenges that have existed that continue to exist in terms of the supply. So if you look at our share position internationally, we certainly have lost ground. We have been most affected by the difficulty in shipping to those markets. In North America, our share position would indicate that we have somewhat managed to keep up with demand. But I think it is fair to say, as you look across the balance of all of those factors, and as you consider what we are hearing from our dealers that there is some volume loss that has occurred…

Your next question comes from the line of David MacGregor from Longbow Research.

I wanted to ask about the Pan American and obviously off to a very strong start. So congratulations on the early success there. Given that early success, how do you invest behind that at this point? And you talked about the European market for Adventure Touring. Can you just elaborate a little further on how you see that opportunity from a timing standpoint? And what your expectations would be to take advantage of that and generate penetration into that market?

I'm happy that -- I think, first of all, the launch has been extremely successful. And how we've marketed a new product like the Pan America for the first time, I think, has really resonated with thin riders and new Harley-Davidson customers. And the fact that all our marketed that all our marketing material is still available. It's accessible on YouTube that we've engaged with bloggers and others to review our bike and actually had riding academies with the bike immediately available, I think, helped us to build significant momentum. Overall, right now, you could say that pretty much every Pan America is sold out. We had another 50 in our inventory that is sold out within like 5 minutes just recently. So there's a very strong demand, and we feel how we are marketing the new product exactly the way to build excitement and get people into the brand. And what's also interesting is that we are seeing about half of the customers being existing Harley customers, but 50% -- the other 50% are actually new customers to Harley. So we are achieving exactly what we wanted to achieve with the bike. And that stands true also for our European market, for our Asian market, where we see the potential. As I mentioned in my speech, we think in the U.S., we can -- now based on the momentum we've built in the last 3 months grow the category and lead the category from here on. And in Europe, obviously, Adventure Touring is a much more significant market. We believe that we can tap into the market share of our competitors because we have a truly competitive product. We will do that by getting people to ride the product. That's the best thing we can do. Traditional advertising is not going to do the trick from our perspective, but really getting people to ride, get others to review our bikes is giving us exactly the type of response we want to see, in addition to us being able to uniquely customize those bikes and make them specifically Harley in a category that we haven't been in. So overall, I think we have a clear plan, and we want to execute on that plan and there's significant potential in terms of units going forward.

Your next question comes from the line of Jamie Katz from Morningstar.

This is Jamie. I have a question on CapEx and the revised spend. My understanding, and maybe this is wrong, is that this is a temporary step-down in CapEx. But that the Hardwire plan is still $190 million to $250 million a year. And if that's the case, what was pruned back in 2021 and has been that going to be pushed into 2022 for some of those projects?

Jamie, this is Gina. Thanks for the question. So from a capital standpoint, as we look out beyond '21, '22, getting into the Hardwire, we do not see that guidance changing at this point. The change that we made this quarter reflects, one, just some timing of when that cash flow is going to hit. So all of the initiatives are still in motion. It's just a reflection of when that timing is going to hit. As well as we think about capital versus expense dollars, there were just some kind of rejiggering of how that fell within the P&L. So initiatives still in motion for this year on Hardwire. And as we look beyond '21, the capital guidance has not changed.

Your next question comes from the line of Joe Altobello from Raymond James.

Just want to go back to dealer inventory. I think pre-COVID, you guys have typically had about 15 weeks or so in the channel. The intent, obviously, to bring that down, what you did. Even if we cut that in half, I think you're about 7 weeks right now, but seems to have overshot your target. What's the right level of inventory that you want to see in the channel? Is it somewhere in between, call it, 11 weeks going forward?

Well, we wouldn't want to comment on the specific levels as you say, there are a lot of factors that go into that. I would say that overall, we are certainly lighter than we would like to be. I think these ties into a question asked previously around our ability to meet the demand in the market. This is entirely driven by some of our challenges on the supply chain that have been noted and that is we expect to continue into 2022. We are working to align supply with demand. We do intend to be efficient going forward, working with our dealers, all that we have learned in 2021 of how we can best manage our inventory and do all of this in the framework of desirability. So it is certainly a question that will be important as we move into 2022. We believe that we are, as I said, a little bit lighter now than we would want to be, but something that we intend to manage as we align supply and demand into the new year.

Your next question comes from the line of James Hardiman from Wedbush Securities.

So a question on the guidance, specifically the margin guidance, maintained it at 6% to 8% for the year. Obviously, 3 quarters into the year. So the implied guidance for -- range for 4Q, you could kind of drive a truck through at this point. Is it at least safe to say that we're going to be at the high end of that range as we finish the year? And then on the supply chain front, I'm curious, I really like Slide 9 and sort of how you guys broke out all of the components of what's going on with supply chain, maybe bottom line that for us and help us sort of quantify just the magnitude of the impact that all that stuff is having on your margin for this year?

Perfect. James, this is Gina. I'm actually going to start with the second part of your question and then come back to how these plays into guidance. So as we move through Q2 to Q3, we did see the broad supply chain environment get worse. From a numeric standpoint, actually, the impact to our margin structure was relatively the same. So when you look at -- when we talked last quarter, we talked about call it, 5 basis points -- or 5 margin points of inflation that was hitting the P&L between logistics and raw materials. As we went into Q3, we saw that same kind of 5 points hit the P&L, but it was in different spots. So logistics got to take better and then the broader raw material inflation and supplier components piece of it got worse. From an operational standpoint, we saw the same thing. So we saw logistics start to stay equally tough. So no material improvement in the logistics environment, but there was also no significant degradation as well. But on the supplier side and what we saw going on with components, that became a tougher environment for our organization to manage through. I mean, our team is doing a fantastic job working hand-in-hand with all of our suppliers to make sure that we're getting the parts in and keeping our plants running. And to date, we have not seen any sort of material blackout plant shutting down, which is good news. But we did see that environment within the suppliers get tougher, and that impacted our production levels as we've talked about. So we do think as we move into Q4, we are stably in the same spot as Q3. So we're calling from a inflation outlook for Q4, we think it's going to play very similar to what we saw here in Q3. And as we think about the margin guidance then of 6% to 8%, that has been factored into that guidance. I'm not going to comment on if we think we're going to be at the higher end or lower end, we feel confident in our guidance that we're giving. But there is just still volatility that is within the supply chain today. So we're going to stick with that range for now.

Your next question comes from the line of Billy Kovanis from Morgan Stanley.

Two questions. One, Jochen, what are the sort of 1 or 2 areas of bright spots that you see that you have visibility on that the market may be missing, like 1 or 2 things that you're excited about? And then secondly, Gina, just a question on HDFS and sort of op income in 2022, are you able to just provide any color there on sort of the trajectory given the sort of growth this year of around 100% of the midpoint of your guide? Just where does that go next year?

Yes. Thanks, Billy. Good question. I keep asking myself that question. There are more than a few bright spots, I think, and I've tried to highlight them today and in the last quarter. I think we are executing extremely well as per our Hardwire strategy, at least on plan, if not even better. And as I said, I'm really excited about how everything is going in a tough environment. We have to bear that in mind. We have tactical challenges with supply, which are significant. But at the same time, we are executing really well on our longer-term strategies. I mentioned them. It's not just one or the other bright spot. I think there are several, including and in particular, with our new products that we've launched, with Sportster with Pan America, also our other model year products, our new Icons Collection, Marketplace, you name it, standing up LiveWire as a separate division, a lot has really happened in the first 9 months of the year. And I'm particularly pleased with the progress we are making. So I'd say not just 1 or 2 bright spots, I think, across the board, we are executing extremely well based on our strategy.

There are no further action at this time. I will now turn the call over back to Mr. Shawn Collins.

Well, thanks, everyone, for joining today's call. We really hope you have a great day.

This concludes today's conference call.

Thank you, everybody.

Thank you for participating. You may now disconnect.