Harley-Davidson provides Q2 financial results
Harley-Davidson has released its second quarter financial results today.
“Reaffirming our guidance for the year, despite the production suspension, demonstrates the effectiveness of our Hardwire strategy and the power of our brand.” said Jochen Zeitz, Chairman, CEO and President of Harley-Davidson. “Now with the suspension being behind us, we are fully focused on mitigating the impacts of the volume loss with the ambition to deliver on our Hardwire II goals, in year two of our five-year strategy.”
Summary of Results
- Global motorcycle shipments were adversely impacted (down 15 percent in Q2) by the approximately two-week production suspension caused by a regulatory compliance matter at a third-party supplier.
- HDMC Revenue down 5 percent with global pricing and growth within Apparel offsetting much of the negative impact from the temporary production suspension.
- HDMC Operating Income margin of 15.1 percent, was up 1.2 points versus last year; pricing, lower operating expense and lower EU tariffs offset the impact of the suspension.
- HDFS Operating Income decline of 9 percent was driven by the continued normalization of credit losses in-line with expectations.
- GAAP diluted EPS of $1.46 was up 10 percent vs last year; Harley-Davidson repurchased $64 million of shares (or 1.7 million shares) on a discretionary basis in Q2.
- The Company reaffirms its full-year 2022 outlook.
- Merger transaction between LiveWire and AEA-Bridges Impact Corporation now expected to list at the NYSE in late September.
Harley-Davidson, Inc. Consolidated Financial Results
| $ in millions (except EPS) | 2nd quarter | ||
| 2022 | 2021 | Change | |
| Revenue | $1,469 | $1,532 | (4 %) |
| Operating Income | $278 | $280 | (1 %) |
| Net Income | $216 | $206 | 5 % |
| GAAP Diluted EPS | $1.46 | $1.33 | 10 % |
Consolidated revenue was down 4 percent in the second quarter versus Q2 2021 driven primarily by HDMC revenue down 5 percent. The revenue decline was driven by the production suspension in the second half of May. Consolidated operating income decline of 1 percent reflects 3 percent growth at HDMC and a decline of 9 percent at HDFS due to an expected higher provision for credit losses as the credit environment normalizes.
HDMC Results: Motorcycles and Related Products
| $ in millions | 2nd quarter | ||
| 2022 | 2021 | Change | |
| Motorcycle Shipments (thousands) | 48.2 | 56.7 | (15 %) |
| Revenue | $1,266 | $1,332 | (5 %) |
| Motorcycles | $940 | $1,030 | (9 %) |
| Parts & Accessories | $215 | $223 | (4 %) |
| Apparel | $77 | $56 | 39 % |
| Licensing | $12 | $9 | 33 % |
| Other | $23 | $15 | 56 % |
| Gross Margin | 30.5 % | 30.6 % | 0 pts. |
| Operating Income | $192 | $186 | 3 % |
| Operating Margin | 15.1 % | 14.0 % | 1.2 pts. |
Global motorcycle shipments were adversely impacted by the production suspension. HDMC Revenue was down 5 percent as a result, with global pricing across Motorcycles, Parts & Accessories, and Apparel partially offsetting the decline in wholesale shipments of 15 percent.
Second quarter gross margin was flat compared to Q2 prior year. Global pricing and mix contributed approximately 6 points of margin benefit and more than offset cost inflation; Second quarter operating margin improved to 15.1% from 14.0% in Q2 prior year. The +1.2 points improvement was driven by global pricing, lower EU tariffs and reduced operating expenses.
Harley-Davidson Retail Motorcycle Sales
| Motorcycles (thousands) | 2nd quarter | ||
| 2022 | 2021 | Change | |
| North America | 34.9 | 48.2 | (28 %) |
| EMEA | 8.7 | 10.2 | (15 %) |
| Asia Pacific | 6.0 | 6.0 | 1 % |
| Latin America | 0.8 | 0.9 | (8) % |
| Worldwide Total | 50.5 | 65.3 | (23 %) |
Global retail motorcycle sales in the second quarter were down 23 percent versus prior year, results were adversely impacted by lower inventory and the production suspension.
HDFS Results: Financial Services
| $ in millions | 2nd quarter | ||
| 2022 | 2021 | Change | |
| Revenue | $203 | $201 | 1 % |
| Operating Income | $86 | $95 | (9 %) |
HDFS’ operating income decline of $9 million versus Q2 2021 was driven by a higher provision for credit losses. The increase in the provision was due to actual retail credit losses moving towards normalized levels. Total quarter ending financing receivables were $7.1B, which was up 3% versus prior year.
Other Results
- Harley-Davidson generated $244 million of cash from operating activities year-to-date. Cash and cash equivalents were $2.2 billion at the end of the second quarter, up $453 million compared to the end of the prior year second quarter. The increase was primarily from increases at HDFS following a securitized debt issuance in June 2022.
- Tax Rate – The Company’s second quarter effective tax rate was 22 percent.
- Dividends – The Company paid cash dividends of $0.1575 per share in Q2 2022.
- In Q2 The Company repurchased $64 million of shares (or 1.7 million shares); YTD the Company repurchased $312 million of shares (or 8.0 million shares)
2022 Outlook
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 continues to assume that manufacturing, logistics and material costs moderately improve in the back-half of the year as overall operations performance stabilizes and we get beyond the peak levels of inflation experienced in 2021.
The Company’s cash allocation priorities are to fund growth through The Hardwire initiatives, pay dividends and execute discretionary share repurchases.
