Harley-Davidson, Inc. today reported first quarter 2022 results, which showed a slight decline in retail sales at dealerships compared to the year-ago period.
First Quarter 2022 Highlights and Results
Harley-Davidson, Inc. Consolidated Financial Results
|$ in millions (except EPS)||1st quarter|
|GAAP Diluted EPS||$1.45||$1.68||(14%)|
HDMC revenue growth of 6% driven by global motorcycle pricing and growth across Parts & Accessories and Apparel
HDMC Operating Income margin of 15.6%, which was down 2.9 points versus last year; global pricing was able to offset cost inflation, but margin was negatively impacted by lower shipments due to the ongoing semi-conductor shortage
HDFS Operating Income decline of -27 percent driven by the significant loss reserve release in 2021 and the normalization of losses in 2022 in-line with expectations
GAAP diluted EPS of $1.45; repurchased $248 million of shares (or 6.2 million shares) on a discretionary basis in Q1
Company reaffirms its full-year 2022 outlook
Merger transaction between LiveWire and AEA-Bridges Impact Corporation on track to close in mid-2022
First Quarter 2022 Results
Consolidated revenue was up 5 percent in the first quarter versus Q1 2021 driven primarily by HDMC revenue growth of 6 percent. Operating income decline of 16 percent is a result of higher supply chain inflation, production challenges due to semi-conductor availability and HDFS losses returning to normalized levels following record lows in 2021.
HDMC Results: Motorcycles and Related Products
|$ in millions||1st quarter|
|Motorcycle Shipments (thousands)||54.8||54.8||0%|
|Parts & Accessories||$166||$150||11%|
|Gross Margin||31.3%||34.1%||(2.8) pts.|
|Operating Margin||15.6%||18.5%||(2.9) pts.|
HDMC Revenue was up 6 percent during the first quarter primarily driven by favorable pricing and growth in P&A (+11 percent) and Apparel (+2 percent).
First quarter gross margin was down 2.8 percentage points compared to Q1 prior year. Global pricing contributed approximately 4 points of margin benefit and largely offset the cost inflation; however, gross margin was also negatively impacted by unfavorable motorcycle mix due to the inability to produce to demand given the semi-conductor challenges. First quarter operating margin was down 2.9 percentage points compared to Q1 prior year, due to negative mix and higher operating expenses for LiveWire.
Harley-Davidson Retail Motorcycle Sales
|Motorcycles (thousands)||1st quarter|
Global retail motorcycle sales in the first quarter were up 2 percent versus prior year, driven by growth in EMEA and Asia Pacific. North America retail performance (down 5%) was adversely impacted by production shortages, which resulted in significantly lower dealer inventories.
HDFS Results: Financial Services
|$ in millions||1st quarter|
HDFS' operating income decline of $32 million versus Q1 2021 was driven by an unfavorable comparison to the prior year quarter, which included a significant decrease in the allowance for credit losses. In Q1 2022, retail credit losses begin to normalize to historical levels resulting in a higher provision for credit losses, partially offset by lower interest expense. Total quarter ending finance receivables was $6.8B, which is +1% versus prior year.
Harley-Davidson generated $139 million of cash from operating activities during Q1 2022. Cash and cash equivalents were $1.4 billion at the end of the first quarter, down $927 million compared to the end of the prior year first quarter as the company continues to normalize cash balances back towards historical levels.
Tax Rate – The company's first quarter effective tax rate was 23 percent.
Dividends – The company paid cash dividends of $0.1575 per share in Q1 2022.
For the full year 2022, the Company reaffirms its initial 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%
Capital investments of $190 million to $220 million
The outlook assumes that logistics and manufacturing moderately improve in the back-half the year as we get beyond the peak levels of inflation experienced in 2021 and the semi-conductor supply stabilizes; the company now expects raw material inflation to continue through the balance of the fiscal year.
The company's cash allocation priorities are to fund growth through The Hardwire initiatives, pay dividends, and execute discretionary share repurchases.
Update on LiveWire Transaction
On December 13, 2021, Harley-Davidson and AEA-Bridges Impact Corp. ("ABIC") (NYSE: IMPX), a special purpose acquisition company with a dedicated sustainability focus, sponsored by executives of AEA Investors and Bridges Fund Management, announced a definitive business combination agreement under which ABIC will combine with LiveWire, Harley-Davidson's electric motorcycle division, to create a new publicly traded company. Its common stock is expected to be listed on the New York Stock Exchange under the symbol "LVW".
The transaction is on track to close in mid-2022 and is subject to the approval of ABIC shareholders and other customary closing conditions.