Harley-Davidson delivered good third-quarter results in 2022. This is good news for the company and signals a positive outlook for the rest of the year and the new year.
It will be interesting to see if Harley can keep up the positive momentum in 2023 and if HD can keep chugging along in the right direction.
CEO Jochen Zeitz has a plan and it seems like this plan is doing all the right things for the company. Check out the specifics below.
Harley-Davidson Official Press Release
MILWAUKEE, WI – October 27, 2022 – (Motor Sports NewsWire) – Harley-Davidson, Inc. (“Harley-Davidson”) (NYSE: HOG) today reported third quarter results.
“Harley-Davidson delivered a strong third quarter with solid growth for both revenue and operating income, aligned to our Hardwire strategic initiatives,” said Jochen Zeitz, Chairman, President and CEO, Harley-Davidson. “We are reaffirming our outlook for the year, and as we approach our 120th anniversary that we will be celebrating in our hometown Milwaukee and around the world, we are excited about the potential of Harley-Davidson, the most desirable motorcycle company in the world.”
Third Quarter 2022 Summary of Results
- Global motorcycle shipments grew 19 percent in Q3 vs prior year as production largely recovered from the previously announced unexpected production suspension in Q2
- HDMC Revenue grew 24 percent behind this profitable unit growth and global pricing
- HDMC Operating Income margin of 17.9 percent was up 9.5 points
- HDFS Operating Income declined 24 percent as the credit environment normalizes
- GAAP diluted EPS of $1.78 was up 70 percent
- The Company reaffirms its full-year 2022 outlook on HDMC Revenue, HDMC Margin and HDFS performance
- Merger transaction between LiveWire and AEA-Bridges Impact Corporation was completed on September 26th, the first day of fiscal Q4
Third Quarter 2022 Results
Harley-Davidson, Inc. Consolidated Financial Results
| $ in millions (except EPS) | 3rd quarter | ||
| 2022 | 2021 | Change | |
| Revenue | $1,649 | $1,365 | 21 % |
| Operating Income | $339 | $204 | 66 % |
| Net Income | $261 | $163 | 60 % |
| GAAP Diluted EPS | $1.78 | $1.05 | 70 % |
Consolidated revenue was up 21 percent in the third quarter versus Q3 2021 driven primarily by HDMC revenue up 24 percent. The increase in HDMC revenue was driven by a strong recovery in global motorcycle shipments after being adversely impacted by an unexpected production suspension in Q2. Consolidated operating income growth of 66 percent, reflected 164 percent growth at HDMC and a decline of 24 percent at HDFS. In line with expectations, the HDFS decline was a result of a higher provision for credit losses as the credit environment normalizes, and higher interest expense.
HDMC Results: Motorcycles and Related Products
| $ in millions | 3rd quarter | ||
| 2022 | 2021 | Change | |
| Motorcycle Shipments (thousands) | 57.1 | 47.9 | 19 % |
| Revenue | $1,437 | $1,161 | 24 % |
| Motorcycles | $1,134 | $886 | 28 % |
| Parts & Accessories | $201 | $205 | (2 %) |
| Apparel | $70 | $49 | 41 % |
| Licensing | $11 | $8 | 26 % |
| Other | $22 | $13 | 74 % |
| Gross Margin | 34.1 % | 26.7 % | 7.4 pts. |
| Operating Income | $258 | $98 | 164 % |
| Operating Margin | 17.9 % | 8.4 % | 9.5 pts. |
Global motorcycle shipments recovered strongly in Q3. HDMC Revenue was up 24 percent primarily driven by a 19 percent increase in wholesale shipments, favorable unit mix and continued global pricing strength. Parts & Accessories was down 2 percent driven by lower retail motorcycle volumes and offset by growth in Apparel & Licensing behind seasonal product growth.
Third quarter gross margin was up 7.4 points compared to Q3 prior year. Global pricing and mix contributed approximately 5 points of margin benefit and more than offset cost inflation. In addition, greater manufacturing leverage and lower tariffs contributed positively and more than offset existing foreign exchange headwinds. Third quarter operating margin improved to 17.9% from 8.4% in Q3 prior year due to the factors noted above. Total operating expenses were $20 million higher compared to Q3 prior year, due in part to the increased spend on LiveWire.
Harley-Davidson Retail Motorcycle Sales
| Motorcycles (thousands) | 3rd quarter | ||
| 2022 | 2021 | Change | |
| North America | 32.2 | 33.9 | (5 %) |
| EMEA | 9.1 | 9.4 | (4 %) |
| Asia Pacific | 7.6 | 6.5 | 18 % |
| Latin America | 0.8 | 1.0 | (27 %) |
| Worldwide Total | 49.6 | 50.8 | (2 %) |
Global retail motorcycle sales in the third quarter were down 2 percent versus prior year. Growth in Asia Pacific was driven by strong demand and a quick refill of dealer inventory coming out of the production suspension. North America retail performance (down 5 percent) continued to be adversely impacted by lower dealer inventories. Retail performance strengthened during the quarter as dealer inventories replenished.
HDFS Results: Financial Services
| $ in millions | 3rd quarter | ||
| 2022 | 2021 | Change | |
| Revenue | $212 | $205 | 3 % |
| Operating Income | $81 | $107 | (24 %) |
HDFS’ operating income decline of $26 million versus Q3 2021 was driven by a higher provision for credit losses and higher interest expense, partially offset by lower operating expenses. The increase in the provision for credit losses was due to actual retail credit losses continuing to move towards normalized levels, while the credit loss allowance rate remained consistent. Total quarter ending financing receivables were $7.3B, which was up 7% versus prior year.
Other Results
- YTD generated $575 million of cash from operating activities.
- Cash and cash equivalents of $1.7 billion at the end of the third quarter, down $331 million compared to the end of the prior year third quarter.
- The Company’s YTD effective tax rate was 23 percent.
- The Company paid cash dividends of $0.1575 per share in Q3 2022.
- In Q3 the Company repurchased $12 million of shares (0.4 million shares); YTD share repurchases total $324 million (8.4 million shares)
2022 Outlook
For the full year 2022, the Company reaffirms its guidance and continues to expect:
- HDMC revenue growth of 5 to 10%
- HDMC operating income margin of 11 to 12%
- HDFS operating income to decline by 20 to 25%
The Company now expects:
- Capital investments of $170 million to $190 million from a previously expected spend of $190 million to $220 million
Closing of LiveWire Business Combination
On September 26, 2022, Harley-Davidson and AEA-Bridges Impact Corp. (“ABIC”) (NYSE: IMPX) completed their previously announced business combination under which LiveWire EV, LLC, Harley-Davidson’s electric motorcycle division, combined with ABIC, to create a new public company. The combined public company now operates as LiveWire Group, Inc. (“LiveWire”) and its common stock and warrants began trading on the New York Stock Exchange (“NYSE”) under the symbols “LVWR” and “LVWR WS,” respectively, on September 27, 2022. Through this combination, LiveWire raised approximately $294 million in net proceeds after fees including Harley-Davidson’s contribution and became the first and only publicly traded all-electric motorcycle company in the U.S. to list on the NYSE. Following the close, Harley-Davidson has an equity interest in LiveWire of approximately 89.4% and will continue to consolidate LiveWire’s results, with adjustments for non-controlling shareholder interests.
Company Background
Harley-Davidson, Inc. is the parent company of Harley-Davidson Motor Company and Harley-Davidson Financial Services. Our vision: Building our legend and leading our industry through innovation, evolution and emotion. Our mission: More than building machines, we stand for the timeless pursuit of adventure. Freedom for the soul. Our ambition is to maintain our place as the most desirable motorcycle brand in the world. Since 1903, Harley-Davidson has defined motorcycle culture by delivering a motorcycle lifestyle with distinctive and customizable motorcycles, experiences, motorcycle accessories, riding gear and apparel. Harley-Davidson Financial Services provides financing, insurance and other programs to help get riders on the road. Harley-Davidson also has a controlling interest in Livewire, the first publicly traded all-electric motorcycle company in the United States. LiveWire is the future in the making for the pursuit of urban adventure and beyond. Drawing on its DNA as an agile disruptor from the lineage of Harley-Davidson and capitalizing on a decade of learnings in the EV sector, LiveWire’s ambition is to be the most desirable electric motorcycle brand in the world. Learn more at harley-davidson.com and livewire.com.
Webcast
Harley-Davidson will discuss its financial results and outlook on an audio webcast at 8:00 a.m. CT today. The webcast login and supporting slides can be accessed at http://investor.harley-davidson.com/news-and-events/events-and-presentations. The audio replay will be available by approximately 10:00 a.m. CT.
