Thank you for standing by, and welcome to the Harley-Davidson 2021 Fourth Quarter and Year-End 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 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. Jochen, let’s get started.

Thanks, Shawn, and good morning, everyone. Thank you for joining us today. As we conclude the first year of the Hardwire, our five-year strategic plan to drive profitable growth, Harley-Davidson delivered a strong finish to 2021. We’re very pleased with our performance, especially in light of the many challenges that 2021 brought us. We’re particularly encouraged that the proof points of our delivery against the strategic pillars of the Hardwire are visible across the Board. We anticipate the momentum from a strong 2021 to continue into 2022. And I’m very optimistic about the great potential of Harley-Davidson in the coming years, especially when we look to what we achieved with Rewire and our delivery of our Hardwire milestones over the past year as part of the huge transformational journey the company is on. However, we’re mindful of the significant supply challenges that we expect to continue to impact the industry. With Rewire we realigned our organization, creating a culture of performance, efficiency, focus and speed. In unlocking this potential, we set the company’s foundation for success with around a completely new leadership team. And building on Rewire in February 2021, we launched the Hardwire. This positioned Harley-Davidson with capabilities, assets and the legacy unmatched by any competitor as the most desirable motorcycle brand in the world, backed by the leading positions in the most profitable segments. Rooted in desirability, the Hardwire continues to strengthen and build the brand, deepening loyalty, creating value and driving engagement across both existing and new consumers. I will briefly address our strategic pillars and our deliver against them over the past year. Profit focus. We are committed to strengthening and growing our position in our strongest motorcycle segments in Touring, Large Cruiser and Trike. Not only are these segments the most profitable in the market…

Thank you, Jochen. Fourth quarter results reflect continued demand momentum as evidenced by our strong wholesale unit growth and retail sales growth across North America. While we continue to deal with a challenging supply chain and inflationary environment, the actions that we took as part of the Rewire and Hardwire strategy throughout the year have resulted in a leaner cost structure and overall margin expansion. Looking more closely at our financial results in the quarter, total revenue of $1 billion was 40% ahead of last year behind increased motorcycle shipments, favorable motorcycle unit mix, pricing and growth across all of our other businesses, including general merchandise, parts and accessories. Total operating loss of $7 million was an improvement over last year, with gains across both of our reported segments. The Motorcycle segment, which includes our newly renamed apparel and licensing business, and parts and accessories products, delivered an operating loss of $102 million compared to a loss of $196 million last year. Remember that Q4 is impacted both by seasonality and lower wholesale shipments due to the change in our model year launch to the beginning of the calendar year. Fourth quarter GAAP earnings per share of $0.14 compared to a loss of $0.63 last year. When adjusted to exclude the impact of restructuring charges, our adjusted EPS was $0.15 and compares it to an adjusted loss of $0.46 per share last year. Turning to full year 2021 results. Revenue of $5.3 billion was 32% ahead of 2020 and operating income of $823 million was $814 million ahead of last year. Full year results reflect strong revenue and profit growth over the pandemic impacted results of 2020 as well as the positive impact to margin as a result of our cost reduction actions, improving to our unit mix and pricing.…

Thank you, Gina. To round out today’s presentation, I want to provide some highlights from our most recent launch event in January entitled Further Faster, which hopefully many of you were able to see. If not, please check out the content online. This year, we focus on our stronghold profitable segments unveiling a selection of powerful new Grand American Touring; Cruiser, and Custom Vehicle Operations, in short, CVO motorcycles for this year. This reveal consists of eight new models, each powered by the Milwaukee 8117, the most powerful factory installed engine offered by Harley-Davidson. In the Grand American Touring line, we introduced the Street Glide ST and Road Glide ST. For Cruiser, we introduced the more powerful low rider S and the low rider ST. And for CVO, we introduced four super premium models. The virtual event attracted over 1.5 million views on the launch page in Harley-davidson.com and over 540,000 views of the launch filming content. We also saw over 120,000 people sign up to the event, a 50% increase compared to 2021. Most notable was the response to the low rider ST, the latest in our cruiser lineup. Demand was so high for this bike that we sold out our first consumer allocation in 10 minutes. This is just one example that highlights the strong desirability that we’ve been able to build through our strategy for our brand and product. As ever, we look forward to bringing you more. So stay tuned for some more product news to come this year from Harley-Davidson and LiveWire. And just before we head to questions, I’m happy to announce that in May, we will be hosting an Investor Day for Harley-Davidson and LiveWire, updating you on our exciting road ahead. I hope you can join us in Milwaukee. Thank you for your time this morning. Now we’ll take your questions.

Thank you. [Operator Instructions] Thank you. Your first question comes from Craig Kennison from Baird. Your line is open.

Hey, good morning. Thanks for taking my question. It’s a big picture question on Hardwire. I know last year you provided guidance that EPS in 2025 would grow at a CAGR of a low double-digit pace, but we never knew what 2021 EPS would be now that we know 2021 EPS was $4.21. If we apply, let’s say, 10% to 12% CAGR growth on that, it would get to 2025 EPS guidance in this $6.15 range to $6.60 range. Am I doing the math right on the guidance you offered for LiveWire?

Aiming for Hardwire. Craig, this is Gina. The guidance that we guided…

Yes, Hardwire, sorry.

Yes, yes. So good – yeah, good question. When we initially launched the Hardwire targets, right, we said it was based on where we finished in 2021 and then we would grow from there. So as our performance this year was better than our original guidance, if you would apply the initial targets that we put out there last year, I think you’re doing the math right. As we kind of get towards an – the Investor Day in May, what you can expect to see from us is how pieces like LiveWire come to life differently as part of the Hardwire and how that accelerates the initial guidance that we put out for the Hardwire targets back about a year ago now.

Does that answer your question, Craig?

Yeah, generally. And I guess, can we endorse the $6.10 to $6.50 range, roughly?

Since we’re not changing our long range targets today, you’re doing the math correctly. What I’m saying though, is when we put out the targets last year, LiveWire, as it was envisioned, was not set up to be a standalone company. That is a material change to our outlook, that as we get towards our Investor Day in May, we’ll be helping you put together the pieces of how that updated outlook matches with going to be ice business to provide a new long-term projection.

So in short, Craig, then standby for updates in May.

Sounds great. Thank you.

Your next question comes from Robbie Ohmes from Bank of America. Again, your next question comes from Robbie Ohmes from Bank of America. Go ahead.

I’m sorry. Can you hear me okay?

Yes.

Yes, good morning.

Yeah. Sorry, not sure what happened there. So my question is on – good morning. My question is on motorcycle revenue growth outlook for 2022. Can you help us think through how – you’ve had really strong price increases supporting revenue growth in 2021. What’s the sort of – what should our thinking be on price increases? And also, what should our thinking beyond international unit sales returning to growth? Edel O’Sullivan: Hi. Good morning, Robbie. This is Edel O’Sullivan. Thank you for your question. So let me take the latter part of the of the question, and then I’ll turn it over to Gina for more specifics on the pricing element. So in short, we think that there is demand in the market that is both domestic and international. Obviously, this year, still continues to be impacted by actions, by this year, I mean, 2021 continued to be impacted by actions taken during the Rewire, particularly in our international markets. But we do expect as we look to 2022 and beyond, of course, subject to the realities of the supply chain, that we will be seeing some of that increase immensely in our international markets, as well and we’re seeing in our domestic markets.

And Robbie, this is Gina. On the pricing question, in 2021, our pricing was really limited to the surcharge that we put in market in the U.S.. As we move to 2022, pricing will be global and have both mechanisms of both surcharge as well as MSRP pricing, depending on the market. So we move from a very U.S.-based pricing mechanism in 2021 to a global pricing mechanism as we move throughout 2022.

Gotcha, that’s helpful. And so the 5% to 10% does include some pricing benefits. So the sort of unit volume assumption on the motorcycle side could be viewed as conservative.

When’s the last time that is viewed as conservative?

Yeah, it sort of implies that the unit volume growth would be less – obviously less than 5% to 10% in the motorcycle division, so could be viewed potentially as conservative for your unit assumptions, given the demand you’re seeing?

Well, what we said clearly is the supply chain issues are not going away. In fact, they intensify going into the year and hence our guidance is realistic from today’s perspective and what we’re seeing in the supply chain.

Got it. Thanks so much. That’s really helpful.

That’s said, we have solid demand for product and for those who witnessed our – the launch of 2022 model year has been exceptionally well received. So this is the question of supply and more the question of demand.

Your next question comes from Billy Kovanis from Morgan Stanley. Your line is open.

Hi, just to follow-up on the last question there. Can you give us your embedded assumptions for retail sales versus more of a production restock in 2022 for that 5% to 10% motorcycle revenue growth?

Well, it depends on the range of the guidance, right? If you assume price increases and the lower end of the range, then you would see small or little – more little unit growth. And as you move towards the higher end of the range, you would assume unit growth, and that would be captured in retail as well as in wholesale.

Yeah, Billy, this is Gina. Based on where our inventory position sits, you can – the unit assumption and the unit growth assumption for wholesale, pretty much is going to ladder up to what we’re – what we would say for retails as well.

Got it. Thank you. And just a real quick follow-up. On the margins, really strong outlook there, 11% to 12%. Can you just break that down a little bit further? How much of it is sort of operating leverage? How much of it is the EU tariffs being sort of mitigated? Any other expenses that you’re sort of taking out higher mix exiting unprofitable markets? Just any other color you can provide on the margins? Thank you.

Sure. I’ll start with the kind of the easy one. The EU tariff and removing that additional tariff is worth about a point. So as we moved from 2021 to 2022, about a point of that is tied up there. We also have a positive volume and mix and then the pricing component that we talked about earlier. That is a positive headwind that helps to offset more than us that was coming at us from a supply chain standpoint.

Got it. Thank you.

Your next question comes from Fred Wightman from Wolfe Research. Your line is open.

Hey, guys, good morning. I was hoping maybe it’s a question for Gina. But given the guidance is expecting some second half improvement. Can you just give us a little help on the cadence as we move through the year? It sounds like the supply chain got a little bit worse into the first quarter. But should we be expecting steady improvement as we move through the year? Is there really a step function increase in the back half the year? How does that sort of shake out from a timing perspective?

Yeah, good question. I would say that we improve as we move through the year, so our back half will be better than our front half just again, given what is coming at us from a supply chain standpoint. So when you think about our cost inflation environment, as we move through 2021, every quarter, we kind of saw more inflation. But the first half of 2021 was less than the back half of 2022. Now as we move in – or 2021, I’m sorry. And then as we move into 2022, we still have kind of another half of inflation that kind of matches up where we ended the year. So I would definitely see the cadence as being we accelerate as we move to the back half.

To emphasize that assumes an improvement in the supply chain in the second half. Visibility is relatively limited at this point in time. So that – that’s based on what we know today and that the supply chain overall see some – sees improvement in the second half.

Makes sense. And then just as the follow-up, could we walk through the bridge on the CapEx outlook, mid points over $200 million, you guys came in just over $140 million, I think this year. So any big projects or big things that sort of gets you from 2021 to 2022?

I think the biggest step change you’ll see is within LiveWire itself. So given and kind of the investment that we’re putting behind EVs, we’re also going to continue to build on our core innovation pipeline. And you’ll hear more about that as we’re moving through kind of this year and then we continue to invest in capabilities. As we’ve talked previously in calls about our digital ecosystem and building up things like the marketplace, our use platform, that type of investment continues to move through 2022.

Great. Thank you.

Sure.

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

Hey, thanks. Good morning. The first question I just wanted to clarify that you mentioned earlier, Gina, about wholesale and retail. It sounds like you expect wholesale and retail to be really equal this year, and so no pipeline sell opportunity in 2022. Is that correct?

I would say there’s going to be a limited pipeline sale capability just given the supply constraints that we have. So I see those two moving more in sync throughout 2022.

Okay. And then…

So I’d like to add to that..

Sorry, go ahead.

All right. Just to add to that, Joe, from the perspective of what is happening overall with inventory levels, I think you will see that our dealers, and indeed the entire network has become much more efficient in how we manage retail sales of inventory. So we have become, I think, much better at managing a level of retail sales that requires much less inventory in the system. And some of that is obviously the work of our dealers to support the sales and customer demand, but also tools that we have put in place like our preorder and reservation system that allow us to capture that demand much more efficiently. So I would expect as we go through 2022 and beyond that, we will continue to make some of those changes and innovations to allow us to support a retail sales growth with a very different position on inventory that would have been the case historically.

Very helpful. Just maybe on LiveWire, the slide that you gave us in mid-December showed a EBIT loss for LiveWire in 2022 about $111 million. I just want to confirm, is that what’s baked into the 11% to 12% margin for that segment?

Yes, yes, we have not changed our LIBOR assumptions.

Okay. Thank you.

Yep.

Your next question comes from Gerrick Johnson from BMO Capital Markets.

Hey, good morning. My question is on a tariff situation, it seems like inconsistent presentation over the quarters. So sometimes, it’s – excluded is a non-recurring items. Sometimes it’s not. It didn’t look like it was this quarter, but you did call it out. So that changes our starting points a little bit in relation to Craig’s question, as we roll forward a compounding growth assumptions. So should we go back and put all those tariffs back into our numbers for 2021 and 2020 EU tariffs?

No, this is Gina. No, I would not add them back in. And when you go back to our original Hardwire targets that we gave, we did not have tariffs built into there. You go back to the original guidance, all the way back a year ago that we gave on 2021, there were no tariffs included in the outlook, I should say, no additional tariffs included, and then the outlook that we gave for the next five years also didn’t include this additional tariffs.

Okay. All right. Thank you.

Your next question comes from David MacGregor from Longbow Research.

Yes, good morning, everyone. Thanks for taking the question. I guess I want to ask you about the Pan America and you referenced already the expectation that supply channel issues don’t improve, at least, significantly as 2022 rolls out. How are you thinking about availability on this product? And obviously, a lot of excitement, but need to get it into the hands of the dealer. So what are you looking at for 2022 there?

Well, availability overall has been constrained, and everything we’ve sold into the market that’s pretty much sold through. So – and we expect that to continue. That said, we had – we’re able to deliver a significant amount of Pan Am’s that made us the number one model in the Adventure Touring market already last year, and we expect to continue to deliver on solid amount of Pan America’s also this year. But everything from – everything taken together, Pan America just like other products, our supply constrained.

Does the availability inflect at some point throughout the year? Or is it just kind of a slow gradual improvement as the year unfolds?

Impossibly predict at this point in time. It’s literally a day-to-day evaluation of the components that you’re getting or not getting and adjusting your production accordingly. So it’s very hard to predict at this point in time.

I guess just related to that, Jochen, just thinking about the strategic value of light cruisers and obviously limited profitability opportunity. But it also gathers new riders into the brand. How are you thinking about like Cruiser’s longer-term?

Well, nothing to add to what we’ve said in the past. We’ll be commenting on new models when we launch them or if we launch them to the market. So I’d say stand by for more.

Okay, thank you.

Thank you.

Thank you. Your next question comes from Jamie Katz from Morningstar. Your line is open

Thanks. Good morning. I’m hoping you guys would be willing to talk about how you perceived the long-term growth algorithm for apparel and licensing, given the new hires behind the business and the fact that now looks like that might be something that grows maybe above historic levels. Thanks.

Thanks, Jamie. Well, as you know that I’m very positive about the growth beyond bikes, and that primarily includes apparel and licensing, in addition to parts and accessories. And we will be upping our game in both categories going forward. I’m not going to quantify it at this point, I’d say, stay tuned for more in May, we’ll be talking about that that will be part of our presentation. But we feel confident the brand has very strong appeal in different consumer groups, different age groups that we want to capture. And that’s why we’ve decided to strengthen the team now and make it a direct report as well, really tap into the potential in the coming years. It’s not something that will happen overnight, but it is really exciting if you apply a long-term perspective.

Okay. And then just as a housekeeping, I think we should see some sort of filing for the LiveWire offering. Can you give us any insight on the timing of that, just so we could get more detail?

That’s out today, so you’ll be able to access [Multiple Speakers]

Excellent. Thank you.

Happy reading.

Your next question comes from Ryan Sundby from William Blair. Your line is open.

Yeah. Hey, good morning. Thanks for the question. I guess with modeling, SKU count down about 40% since 2020. Is the reshaping of the portfolio work done here? And are there any opportunities where you see maybe areas to focus more, or maybe areas where you pull back too far, any color there would be great?

Definitely not too far. There’s always more opportunity to fine tune our product mix. I mean, going into the Rewire, it was just a lot of products out there that cannibalized itself and we took the reduction to 30%. If you remember, we talked about that back then and we saw further opportunity and took it to 40%. That said, it’s plus or minuses. Now, I wouldn’t say we are adding new models necessarily without taking others out. I’d say 40% is a good base going forward. But we continue to look at new opportunities. And we’ll always ask the question when and if we introduce a new model, if there’s another one that we could take out because it’s kind of lies in the overall portfolio. But the 40% is a pretty solid number that we initially didn’t actually think we would achieve, but we actually overachieved that number already last year.

That’s helpful. And then I guess just with the units up so strong in Q4 here. Was there any change in approach to the, like I said, the shipping cadence that you kind of laid out under Hardwire?

No. No, continue to – Q 4 is a suppressed kind of wholesale unit shipment just as we changed that model year launch at the beginning of the calendar year. No change.

Okay. That’s helpful. Thanks.

Yep.

There’s no further question at this time. And this concludes today’s conference call. Thank you all for joining. You may now disconnect.