Harley-Davidson, Inc. 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 of 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% in Q3 vs prior year as production largely recovered from the previously announced unexpected production suspension in Q2
- HDMC Revenue grew 24% behind this profitable unit growth and global pricing
- HDMC Operating Income margin of 17.9% was up 9.5 points
- HDFS Operating Income declined 24% as the credit environment normalizes
- GAAP diluted EPS of $1.78 was up 70%
- 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 Sept. 26, the first day of fiscal Q4
Consolidated revenue was up 21% in the third quarter versus Q3 2021 driven primarily by HDMC revenue up 24%. 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%, reflected 164% growth at HDMC and a decline of 24% 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.
Global motorcycle shipments recovered strongly in Q3. HDMC Revenue was up 24% primarily driven by a 19% increase in wholesale shipments, favorable unit mix and continued global pricing strength. Parts & Accessories was down 2% 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.
Global retail motorcycle sales in the third quarter were down 2% 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%) continued to be adversely impacted by lower dealer inventories. Retail performance strengthened during the quarter as dealer inventories replenished.
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.
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%.
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)
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