Harley-Davidson(HOG) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q3 2021 was $1.4 billion, a 17% increase compared to the previous year, driven by increased shipments and a favorable motorcycle unit mix [10] - Year-to-date revenue reached $4.3 billion, up 30% from 2020, with operating income of $831 million, significantly higher than last year [11] - Q3 GAAP earnings per share (EPS) was $1.05, a 35% increase year-over-year, while adjusted EPS was $1.18, up 12% [10][11] Business Line Data and Key Metrics Changes - The Motorcycle segment generated $98 million in operating income, an increase of $51 million from the previous year, while the Financial Services segment delivered $107 million, up $15 million [10] - Total Motorcycle segment revenue increased by 20% in Q3 and 36% year-to-date, with significant contributions from new models like Pan America and Sportster [14] Market Data and Key Metrics Changes - Global retail sales of new motorcycles decreased by 6% in Q3, with North America showing a 2% increase, primarily due to growth in the Grand American Touring segment [12] - The Pan America model captured a 16% market share in the Adventure Touring segment in the U.S., becoming the top-selling model since its launch [12] Company Strategy and Development Direction - The company is focused on its Hardwire strategic initiatives, aiming to profitably drive its core business and expand its market share in key segments [5][6] - The strategy includes targeting high-potential categories like Adventure Touring and maintaining long-term profitability through selective expansion [6][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain challenges impacting production and inventory levels, with expectations for these issues to persist into 2022 [7][8] - Despite these challenges, management expressed optimism about the brand's global potential and the health of the dealer network [8][40] Other Important Information - The company is lowering its capital expenditures guidance for 2021 to $135 million to $150 million, reflecting tighter cash management [22] - The Financial Services segment's operating income growth guidance has been increased to 95% to 105% for the year [22] Q&A Session Summary Question: Pricing outlook for next year - Management indicated that pricing actions taken in 2021 will be assessed for their impact moving into 2022, with a focus on managing profitability and desirability [42][43] Question: Progress on general merchandise program - The Chief Commercial Officer highlighted ongoing efforts to reshape the general merchandise business, emphasizing the potential for growth in apparel and lifestyle categories [46][49] Question: Impact of inventory shortage in Q3 - Management acknowledged some volume loss due to inventory shortages but noted that the reservation system aims to better align supply with customer demand [50][52] Question: Investment behind the Pan America model - Management expressed confidence in the strong demand for the Pan America and outlined plans to leverage this momentum in both the U.S. and European markets [56][59] Question: Capital expenditures and future projects - Management clarified that the revised capital expenditure guidance reflects timing rather than a reduction in planned initiatives for the Hardwire strategy [60][61] Question: Dealer inventory levels - Management stated that current inventory levels are lighter than desired due to supply chain challenges, with plans to align supply with demand moving forward [63] Question: Margin guidance for Q4 - Management maintained the margin guidance of 6% to 8% for the year, citing ongoing supply chain volatility as a factor [66][69] Question: Bright spots in the market - Management highlighted multiple bright spots, including successful product launches and effective execution of the Hardwire strategy [71]